I have been moved to secure this debate not as someone who has a particular interest in or detailed knowledge of higher education support, but as a citizen of the United Kingdom who is alarmed by the disparity of treatment of my fellow citizens—a disparity that is based on place of residence in the UK. I am concerned by the threat that such disparities—and such unjustified discrimination—pose to the consensus that underpins the survival of the United Kingdom in the face of challenges posed by devolved government.

From the enactment of the Education Act 1962 until 1997, students in higher education throughout the United Kingdom were treated broadly equally in the matter of financial support. One uninstructed in the ways of the new Labour Government could be forgiven for expecting that to continue. Indeed, only three weeks before the general election, the right hon. Member for Sedgefield (Mr. Blair), then the Leader of the Opposition, told the electorate that

"Labour has no plans to introduce tuition fees for higher education",

and the right hon. Member for Livingstone (Mr. Cook) said:

"We are quite clear that tuition fees must be met by the state."

The rules of parliamentary language make it difficult for me accurately to characterise such statements, because, three months later, those who made them were respectively the Prime Minister and the Foreign Secretary in a Government who had announced the introduction of tuition fees for students in higher education. Mountains of material are available to any hon. Member who wishes to hold an Adjournment debate on that U-turn.

Would it not be simpler and more tactful, especially as there are overtones of the auld alliance, to describe such statements in the words of our late colleague, Alan Clark, as being economical with the actualité?

My hon. Friend puts it very nicely; he has considerably more experience than I of skating across the thin ice of parliamentary language barriers.

It is not my purpose in this debate to revisit the rights and wrongs of the Government's butchery of the Dearing report recommendations, despite the fact that the Government claimed that they were implementing them. That was one of the earliest examples of the Government saying one thing while doing quite another. My purpose is to consider discrimination and inequality in the educational context and in the wider setting of our constitutional settlement. The Government have used the language of one nation and social inclusion, but have introduced a series of policies that are divisive and exclusive. Those policies are driven by short-term political considerations, without regard for the long-term damage that they will do to our United Kingdom.

As soon as the tuition fee proposals were scrutinised, it was apparent that fees for the fourth year of four-year Scottish degree courses would be a problem. The legitimate question was not about Scottish students, but about Scottish universities and the cherished four-year degree course. The Unionist response to that would have been clear and simple: to implement a fee structure that imposed an equal burden on all students, regardless of the length of their courses or where in the United Kingdom they undertook them, thus maintaining equality of treatment and access throughout the United Kingdom.

Tellingly, instead of such a simple and pragmatic response, the Labour Government chose to play to a narrow Scottish audience by exempting Scottish students—but not English, Welsh and Northern Irish students—from fourth-year tuition fees when attending Scottish universities. That was a radical departure from the 1962 settlement, which had effectively created a single market in higher education throughout the United Kingdom, and resulted in English, Welsh and Northern Irish students comprising as much as 45 per cent. of the student body in leading Scottish universities.

Such a decision in itself was shockingly divisive from a Government who claimed to be committed to preserving the Union, but insult was added to injury when they were forced to admit that, because of the rigours of European Union law, foreign students from EU countries would have to be accorded the privileged treatment that the Scots enjoyed if attending Scottish universities. We therefore faced the absurdity of relegating English, Welsh and Northern Irish students to second-class citizens in their own homeland—forced to pay fourth-year fees while studying alongside not only non-paying Scottish students, but non-paying EU students, whose parents had not contributed to the United Kingdom tax base over the years and who, in the great majority of cases, would not be likely so to contribute after their graduation. Such EU students are treated better than those whose families have worked and contributed all their lives in the United Kingdom.

It would have cost the Government a mere £2 million to remedy this shameful discimination, but such was—and is—their arrogance that they refused to acknowledge that they had made a mistake, and created circumstances that, for the sake of a tiny amount of money, were bound to engender bitterness and resentment among non-Scottish UK students and their families.

The matter does not end with that grotesque act of discimination by the United Kingdom Government. With the help of its fellow travellers, the Liberal Democrats, the Labour party determined to make matters worse through the medium of Scottish legislation. It was clearly inconvenient for the Government in London and the Labour party in Scotland that all parties except Labour fought the Scottish election principally on the abolition of tuition fees.

Before the hon. Gentleman moves on to discuss Scotland, I should like to ask him about his use of the term "fellow travellers". Does he accept that the Liberal Democrats stood four square against the Labour Government's introduction of tuition fees in 1997, even in our manifesto, while his party prevaricated over whether to support tuition fees and did not rule them out in its manifesto?

My party made it absolutely clear that it supported the Dearing proposal to maintain the maintenance support system for students, which had served generations of students and, indeed, many hon. Members, extremely well. I am surprised by the hon. Gentleman's intervention, because, as I shall show, his party's record on the matter north of the border has been rather less than honourable.

If the hon. Gentleman's support for the student maintenance grant was so emphatic, why was he happy for the Government whom he supported to cut it by 50 per cent. before the last election?

As the hon. Gentleman knows, the previous Government introduced arrangements for student maintenance that depended on a mix of loans and grants. We have never supported the proposals that this Government have implemented to abolish the maintenance grant. As I shall discuss later, it is clear from the recent panicked actions of the Secretary of State for Education and Employment that the Government have realised that, exactly as we suggested in 1997, the total abolition of the maintenance grant would work greatly to the disadvantage of the poorest students in England and Wales.

Before my hon. Friend moves from that subject, will he recall that the number of students virtually trebled under the mix of loans and maintenance grants implemented by the previous Administration? That suggests some success of the policy.

My hon. Friend is right. We were rightly proud of the great flourishing of higher education in this country under the previous Administration. However, I should like to make some progress in dealing with the situation that has developed north of the border since the Scottish elections.

Labour's failure to achieve control in the Edinburgh Parliament forced it to treat with the Liberal Democrats, who had campaigned unambiguously on the abolition of tuition fees as the "non-negotiable" centrepiece of their manifesto. Both parties faced a dilemma: Scottish Labour was anxious not to embarrass the Government in Westminster by conceding outright abolition of tuition fees, while the Liberal Democrats were greedy for the spoils of office for the first time in many decades but were hampered by the inconvenience of their non-negotiable policy on tuition fees. The response of putting the issue into deep freeze for a few months by ordering an inquiry is a tried and tested fallback for this new Labour Administration. For the Liberal Democrats, the abandonment of "non-negotiable" pledges is simply another twist in the wind.

The publication of the Cubie report and the Scottish Executive's response to it has been the immediate stimulus for my seeking the debate. Far from dealing with the issue, the proposed solution would deepen the discrimination against English, Welsh and Northern Irish students and institutions.

The proposed ending of up-front tuition fees for Scottish and foreign European Union students in Scottish universities—but not for English, Welsh and Northern Irish EU students alongside them, or for Scottish students who have the temerity to want to broaden their horizons by studying south of the border—represents blatant discrimination against institutions and individuals in the UK and the EU. Not only do some EU citizens seem more equal than others in Labour's new order, but the EU seems able to intervene to protect some of its citizens from discrimination yet cannot protect those who happen to be citizens of both the EU and of England, Wales or Northern Ireland.

Apparently, the UK Government have an unfettered right to discriminate against their own citizens, notwithstanding their seeming embrace of the nondiscriminatory principles of the European convention on human rights. However, they cannot prevent the EU from intervening to demand privileged treatment for everyone else in the EU who wants to take advantage of the UK's generous system.

Let us be clear. A student from Birmingham or London whose parents have worked in the UK and paid taxes to the UK Treasury all their lives would pay fees if he sought to study at Edinburgh university. A Scot studying alongside that student would pay no up-front fees, and nor would a Belgian, a Spaniard, an Italian or a Finn. A student from Newry in Northern Ireland could expect to pay £4,100 in tuition fees during a four-year Scottish degree, but his neighbour a couple of miles across the border in Dundalk would pay nothing. Surely even this Government, with their arrogant disdain for our traditions and rights, must see that such a situation is not sustainable.

If it were not for the intervention of the European Union, Scottish students would have been studying alongside English and Welsh students at English and Welsh universities but, unlike their fellow students, paying no fees. As it is, Scottish students are effectively to be frozen out of United Kingdom universities, with serious implications for the diversity of those institutions and the potential insularity of future generations of Scots, who are now much more likely to be educated in Scotland.

Is the hon. Gentleman not missing the fundamental concern of the Government and, to some degree, to give them their due, of the Liberal Democrats in Scotland, that those who come from less well-off homes are given priority? In the examples that he has given, those from lower-income homes and 37 per cent. of Scottish students studying in English, Welsh and Northern Irish universities will not pay fees.

That is right, as far as it goes. I am happy to concede the wisdom of a system that is biased in favour of the poorest students, whom we know need to be encouraged to access our higher education system. The discrimination that I am addressing is one based on the country of origin within the United Kingdom—a discrimination that works against the interests of English, Welsh and Northern Irish citizens in a way that, as I shall detail, may have serious consequences.

It is proposed that a Scottish student studying in Scotland will pay no tuition fees but will be expected to pay a contingent £2,000 tuition tax at some point. A Scottish student studying in England on a three-year course can, at current rates, expect to pay £3,075 in tuition fees, while a student from England, Wales or Ulster studying in Scotland will pay £4,100 in tuition fees. Inevitably, decisions on place of study will be made partly on financial, not academic, grounds. That cannot be good for our higher education system, on either side of the border, or for the free exchange of ideas and the development of a sense of unity in the United Kingdom. It will surely foster insularity among the Scots and among other UK citizens, at a most important and formative time of their lives.

Most importantly, having different financing systems is extremely bad for the United Kingdom. It is perhaps the first test of the devolution settlement—and it has failed. Labour said that devolution would strengthen, not weaken, the Union, but this sort of farce will, beyond any doubt, weaken the United Kingdom.

Surely the hon. Gentleman's point is that, if electors in a devolved Scotland cannot vote for something that they deem an improvement on the prevailing system in the rest of the UK—which may act as an incentive for people to invest, study, get hospital treatment or be tried in Scotland, since our criminal justice system has always been different—then nothing, even at county council level, can be done on a devolved basis because it will seem to create insularity.

The hon. Gentleman raises an interesting point. He and I have debated such issues in the context of health matters, where there seems to be a tension between the Government's expressed desire for local determination of issues and for uniform national standards. If he will be patient for a moment, I will come to the issue of diversity, as opposed to discrimination.

The package of changes in maintenance arrangements for Scottish students were announced in the Executive's response to the Cubie report. The Department for Education and Employment subsequently made a panic response in announcing a range of initiatives in England and Wales, including the reinvention of the maintenance grant that the Government had just killed off, having realised what we told them at the time: the demise of the maintenance grant would have a damaging effect on the poorest students. Those changes created a raft of variations in the treatment of students north and south of the border. The unfairness of the evolving system will not be lost on the people of England, Wales and Northern Ireland.

I say to the hon. Member for Oxford, West and Abingdon (Dr. Harris) that, of course, there is room for diversity. That is part of the point of devolving government, whether to local institutions in England and Wales or to a devolved Parliament in Scotland. However, let us consider what happens when diversity becomes code for blatant discrimination against groups of United Kingdom citizens who have paid the same taxes and met the same obligations to their country, and when it becomes code for the relegation of some United Kingdom citizens to second-class status, while other European Union citizens, who have made no contribution to this country, are given privileged treatment. The hon. Gentleman must accept that, when diversity becomes code for such a raw deal, it is dangerous for the consensus that underpins the survival and strength of the Union. When the favoured treatment of Scottish citizens over English citizens is supported by a system that levies taxes throughout the United Kingdom, but distributes them unevenly between the countries of the United Kingdom, such consensus becomes more delicate.

Although we pay into the United Kingdom tax pot together, it has been a matter of consensus for years that public spending per capita is higher in Scotland. However, if English taxpayers are to have their noses rubbed into the difference between public funding north and south of the border by such blatant and unjustifiable discrimination in higher education funding support for students, that consensus may not prove to be durable.

I am conscious that the hon. Gentleman wants to make progress, but how does he justify the discrimination of one beleaguered species, the English Conservative, against an even more beleaguered species, the Scottish Conservative, given that the Tories in England support Dearing, who wants flat-rate tuition fees for everyone, but the Tory manifesto in Scotland called for an end to tuition fees? That is diversity. I do not condemn it; he seems to be condemning a split in his own party.

There is not a split in our party. The hon. Gentleman knows very well that the Conservatives in Scotland campaigned on a package of measures, which would have kept a mixed model of maintenance support for students in Scotland. As for endangered species, the hon. Gentleman might look to his own party north of the border following its blatant volte face.

Does my hon. Friend concede that one of the most unacceptable parts of this shambles is the discrimination between Scottish students studying in Scotland and Scottish students studying in England, where the fees regime is different? We are talking not about unity of treatment in the constituent parts of the United Kingdom, but about clear disparities and anomalies—even within the Administration.

My hon. Friend is right. Discrimination against English universities will result in far fewer Scottish students attending them for financial reasons. That will be damaging not only to English institutions, but to the Scottish young people who may have attended them.

Last week, on the Floor of the House, I apparently upset the hon. Member for Banff and Buchan (Mr. Salmond), who took issue with what I said about health funding in Scotland, England and Wales. He considered that my comments were unhelpful in drawing attention to the difference between national health service funding of £900 per capita in Scotland and of £746 per capita in England and Wales. That difference translates into a significantly larger number of consultants, GPs and nurses per 100,000 population in Scotland.

Despite the hon. Gentleman's interpretation of my comments, I was not attacking Scottish health care; my comments were an attempt to draw attention to the problems of health care in England. This debate is not an attack on Scottish higher education or Scottish students; it is an attempt to draw attention to the disparities between and unfairness in the treatment of English, Welsh and Northern Irish students. It is an attack on an unprincipled Government who say one thing and do another—a Government who say that they will strengthen the United Kingdom but who, by their actions and those of their client Government in Edinburgh, weaken it. The Government claim to be inclusive, but set out policies that drive wedges between different parts of the country and between different groups of its citizens.

We are trying to defend the principle of equality for all citizens of the United Kingdom in the United Kingdom. Whatever gloss the Government try to put on it, the blatant—almost farcical—discrimination between citizens of the United Kingdom and outsiders from other European Union countries, whose rights are protected by law, will only highlight for the average Englishman, Welshman and Ulsterman the damage that the Government's ill-thought-through devolution policies threatens to inflict on the integrity of the United Kingdom. It is a grotesque and absurd affront to common sense that those who work and pay taxes here should find themselves reduced to the status of second-class citizens, less well supported by the state than visitors from foreign lands whose families have never paid a penny in income tax to support this country's public spending.

We said that devolution would undermine the United Kingdom; the Labour party said that it would strengthen it. This is perhaps the first practical test on that question, and it is clear that the Government have failed it. We said that a changed electoral system would lead to weak coalitions and shabby deals, and that is what we are seeing in Edinburgh—unprincipled short-termism that will create rifts between the constituent parts of the United Kingdom, and back-room deals between Labour and its Liberal Democrat fellow-travellers, who are busily negotiating away the fundamentals of their "non-negotiable" election pledge in an attempt to cling on to the spoils of office on the coat-tails of their Labour masters. Back-room deals, broken Labour promises on tuition fees, broken Liberal Democrat pledges on tuition fees, empty Government pledges on strengthening the Union through devolution, nine tenths of the population of the United Kingdom reduced to the status of second-class citizens in their own land—such is the legacy of three years of the Government's policies on support for students in higher education.

Devolution is the Government's creature, but they cannot control it. Events in Cardiff and Edinburgh are overtaking the Government and threatening to undermine their policies in England—the creature has bitten its creator. The Government have no choice but to admit what is obvious to everyone else: the Scottish electorate has called their bluff on tuition fees. The price that the Government will pay for this shabby compromise to save the coalition in Edinburgh will be either a wholesale retreat on student support in England and Wales or a long-term and fundamental undermining of the Union, as the Government abandon the principle of equality of access to public services and support throughout the United Kingdom.

I shall respond briefly to the comments of the hon. Member for Runnymede and Weybridge (Mr. Hammond). There have always been differences in public services and access between Scotland on one hand and England and Wales on the other. If we want to talk about discrimination, why not point out the discrimination for many years under Conservative Governments, whereby students in Scotland had access to four-year degree courses, but those in the rest of the United Kingdom had access only to three-year degree courses? I do not recall a single example of a Conservative Member challenging or criticising that differential.

The hon. Gentleman is surely not suggesting that only Scottish students had access to the four-year degree courses at Scottish universities. Indeed—if my memory serves me correctly—20,000 English students are currently enrolled at universities in Scotland.

Yes, but by dint of the cap on access, only a proportion of students had access to those courses in Scotland. There was a differential in the university system, the health service and the legal system between the provisions in Scotland and those in the rest of the United Kingdom. I am interested in all the arguments put forward by the hon. Member for Runnymede and Weybridge, but I am still not clear whether he prefers the system chosen by the Scottish Parliament or the system that applies in the rest of the United Kingdom. That leads me to think that his concerns are not universities, students and student finance; rather, he is attempting to use the issue to revisit an argument that the Conservative party lost at the general election and during the referendum on Scottish devolution.

I was completely clear and open when I said initially that the focus of my interest was the disparity between different parts of the United Kingdom and the threat that they pose to the future of the Union. I hope that my hon. Friend the Member for Daventry (Mr. Boswell) will speak in more detail about the education aspects of the issue later.

The hon. Gentleman still has not answered the question from the hon. Member for Oxford, West and Abingdon, who speaks for the Liberal Democrats: if his concern is about different provisions in Scotland and Wales, why did the Conservatives in Scotland campaign on a manifesto and a set of commitments on university provision and student financial support different from those that they used in the rest of the United Kingdom? If we still had a Conservative Government, or if the election result for the Scottish Parliament had been different, the same differential and discrimination would still exist. It is nothing new. The differences are perfectly logical and permissible in a system of devolved Government. The Conservative party lost that argument at the general election and in the referendum on Scottish devolution. If it now wants to revisit the issue, it will not make substantive progress.

Part of the reason why the Conservative party—including the hon. Member for Runnymede and Weybridge—is raising the issue is not because of the merits of the argument, but to try to create an impression among the public, especially students, that the Conservative party is on the side of students, when nothing could be further from the truth.

Will the hon. Gentleman concede that the Labour party fought the general election and the subsequent referendum on the argument that devolution would strengthen the United Kingdom? That argument remains to be proven. The point of my speech was that a policy that was so divisive between different parts of the United Kingdom would weaken, not strengthen, the institutions of the United Kingdom.

Of course the argument remains to be proven in the long run, as it will be a long time before that judgment is reached. However, I am confident on one issue: had the Conservative party been re-elected at the last general election, when it emphatically refused to consider any change in the overall constitutional settlement, that would have led to a split in the Union much sooner. There would have been no Scottish Parliament, and people would have felt that their views could not be heard through the national Parliament.

The hon. Gentleman and the Conservative party have not addressed in any way the fact that we had no alternative but to introduce a new system of student finance and student funding after the general election. To put right all the problems in the system, such as the cap on student access, student poverty and the reduction in per capita student finance that had taken place over a 10 to 15-year period, would have cost the equivalent of 3p on the standard rate of income tax. The idea that any Government would levy such a charge and then use all the proceeds on universities and students simply does not reflect the politics of government in the real world. I hope that the hon. Member for Oxford, West and Abingdon will face the fact in the debate. The Government are dealing with such issues. They are removing the cap on access and beginning to restore university funding.

My final point is threefold. First, the argument that the hon. Member for Runnymede and Weybridge advanced is partly driven by the usual Conservative party obsession with all matters European. It is clear that his real animus is against the fact that European students will have access to a new system in Scotland, whereas those in England and Wales will not. We take the view that students in this country will have access to European systems. If Conservative Members have a problem with the fact that the law as it applies throughout the European Union necessitates the kind of access arrangements that are being put into place in Scotland, they should argue for a change in those arrangements instead of using the debate, as usual, to make a case against the European Union in support of eventual withdrawal—which is what more honest members of the Conservative party have in mind.

Secondly, the hon. Gentleman's argument reflected the repugnance on the part of many Conservative Members for any form of partnership politics. I wholly reject that view. Where political parties agree with each other and can reach a sensible accommodation, they should do so. The British public are fed up with the kind of yah-boo sucks politics in this country, which takes the view that "Everything you do is wrong, and everything we do is right." That issue is now being resolved in the Scottish Parliament.

Would the hon. Gentleman's views extend to parties that fight elections with a manifesto centrepiece that is described as "non-negotiable", and then negotiate it away in the immediate aftermath of the election?

Negotiations and compromises occur in politics under all electoral systems. Under the first-past-the-post system, they are made before the election. Under a devolved system of government, with a different electoral system, positions are taken and, if one party does not achieve an overall majority, a sensible and open discussion then takes place about how a compromise, and a way forward, can be achieved. That is how people operate in the real world in other walks of life. It is a pity that for too long our system of government and politics in this country has not done so.

Thirdly, the Conservative party's real problem is its failure to come to terms with the new system and style of politics that is represented by the devolved settlement. It has repeatedly lost the argument on that, and has failed to come to terms with the fact that partnership and government by consent is not only possible, but desirable. Although it sometimes results in what may appear to be messy compromises, that is far preferable to the non-compromising certainty of years gone by. For example, the poll tax was a clear manifesto commitment, on which there was no fudging or compromise, but ultimately the British people lost out.

I will now call Valerie Davey.

indicated dissent.

In that case, I call Dr. Evan Harris.

I come to this debate in the good position of not needing to defend the proposals of the Scottish Executive, because Liberal Democrat Members have a settled view that Liberal Democrats in Scotland, in using their devolved powers in the Scottish Parliament, can have different opinions from those of Liberal Democrats in the rest of the United Kingdom, in Westminster or the Welsh Assembly. Conservative Members have clearly taken that view on board, because they have different policies north and south of the border. Their position at the general election was different from their current position south of the border, and very different from their position north of the border at the time of the Scottish Parliament elections.

I do not need to defend the proposals of the Scottish Executive, but, having read them and considered their effect, I am happy to do so—although, in the context of the debate so far, that does not seem to be necessary. In his speech, the hon. Member for Runnymede and Weybridge (Mr. Hammond) did not attack the proposals and their effects, but concentrated purely on artificial arguments about disparities between students from Scotland and those from the rest of the United Kingdom studying at Scottish universities.

The core of the hon. Gentleman's argument is that those disparities are unfair and constitute unjustified discrimination. However, the only unfairness and discrimination is that students and others in this country with a vested interest in good higher education do not benefit from Liberal Democrats in government. In Scotland, Liberal Democrats have provided a package for students that is fair, promotes access and delivers on offers made at the general and Scottish Parliament elections.

The hon. Member for Runnymede and Weybridge must understand that it is the electoral system that is not fair. A party can get elected on a minority vote and implement a policy that was not included in its manifesto, which is what the Labour Government did in 1997. Students must rely on policies promulgated by that minority Government, and suffer the imposition of tuition fees, which have curtailed access and damaged student welfare.

Does it not trouble the hon. Gentleman even a little that a student from Northern Ireland who attends a Scottish university will pay full tuition fees, but his close relative, who lives a couple of miles across the border in the Republic of Ireland, will pay none?

No, that is the nature of diversity in the European Union. The hon. Gentleman should be troubled that students from England do not benefit from the enlightened policy that the Scottish Executive coalition has agreed. Under the policy that the Westminster Labour Government have introduced, students from England, Wales and Northern Ireland who study at Scottish universities will pay exactly the same fees as before.

The hon. Gentleman is arguing that those disparities are unfair. However, the root cause of that unfairness was not the democratic decision of the majority of Scottish people to vote for parties that supported the proposed abolition of fees by the Scottish Executive, but the electoral system in the rest of the United Kingdom that cannot deliver changes to policies that are rightly anathema to the majority of people. Labour Members will remember that the poll tax, with which we had to put up for far too long, was imposed by another minority Government who did not command majority support even within their own party. Tuition fees, which the Labour party imposed through a tightly whipped vote, were opposed by its own members in the House of Commons and the House of Lords.

The hon. Member for Runnymede and Weybridge made a fair point about the anomaly of fourth-year tuition fees for UK students of Scottish universities who are not resident in Scotland. That decision, which was taken by Parliament before devolution, discriminates against some of our own constituents, and the hon. Gentleman will know that Liberal Democrats led the rebellion in the House of Lords against it. Now that devolution has given Scottih people their say, we must recognise that circumstances are very different.

To some extent, the hon. Gentleman may have just anticipated my question, but will he explain the difference between discrimination in respect of fourth-year fees for English students in Scotland and discrimination in respect of recent Scottish Parliament proposals on the repayment of fees and charging tuition fees? As a lay person, both would seem to me to constitute discrimination, yet the hon. Gentleman finds one form acceptable.

What the hon. Gentleman calls discrimination is a diversity of policies that have been voted for not only by an outright majority of voters in Scotland, but by a majority of Members of the Scottish Parliament, who were democratically, fairly and proportionately elected, when they voted for the Scottish Executive's proposals following the Cubie report. That is different from the situation in Westminster. The intervention of democracy in political decisions may be of little or no consequence to the hon. Gentleman, but I assure him that, according to my postbag, and, indeed, the postbags of my colleagues north of the border, the electorate applaud the way in which democracy can—sometimes inconveniently for the Conservatives—intervene in decision making.

Will the hon. Gentleman confirm that it would be right for the electorate at the next general election to regard any non-negotiable manifesto pledges that the Liberal Democrats make as negotiable in the event of their seeking to form a coalition with the Labour party?

Our position was clear: at the Scottish parliamentary election, we stood on a platform of abolishing tuition fees. Labour party policy in Scotland and in the UK was to maintain such fees. Tuition fees are to be abolished in Scotland; even Labour members of the Scottish Executive say that tuition fees have been abolished. Andrew Cubie says clearly in his report—most of which, particularly on the abolition of up-front tuition fees, has been accepted by the Scottish Executive—that tuition fees are seen to be discredited. The Executive's proposals will abolish them. Therefore, it is a figment of the hon. Gentleman's imagination to suggest that our pledge to abolish tuition fees has not been carried out in Scotland.

It is not only my imagination. The hon. Gentleman may have seen the article in The Independent on 25 January, which quoted a Liberal Democrat Back Bencher in the Scottish Parliament as saying:

"We have not got everything we were looking for but it is enough to prevent us losing face in front of the people who voted us in."

Is that not a cynical approach to democratic politics?

Absolutely not. If we had had everything that we wanted, we would have expected to be a majority in the coalition. That is how coalitions work. The hon. Gentleman is experienced enough to know that in local politics Conservative parties are engaged in joint administration with the Labour party—and with the Liberal Democrats, where we can bear it. He will find that, under a negotiated settlement, not every Conservative policy for those areas is, thank goodness, implemented. The same applies in any coalition agreement.

If the hon. Gentleman is against coalitions at all costs, even though a first-past-the-post election can deliver no party a majority—as happened for much of the time under previous Conservative Governments—that is a major new policy statement from the Conservative party. It implies that it will always want instability and minority rule in an attempt to get every part of its policy through.

We realised that we would not be able to achieve all our proposals unless we were elected in a majority, but in Scotland we said that the abolition of tuition fees was our No. 1 aim in this area.

I thank the hon. Gentleman for giving way one more time. Does he recognise that to set out in a manifesto certain areas of policy as non-negotiable would precisely define for the electorate the areas that would not be vulnerable to compromise in the event of coalition negotiations?

The hon. Gentleman is providing me with no problems. If he looks at the manifesto, he will see a list of significant proposals for education, many of which have been carried out, including the doubling of hardship grants and more help for mature students and those in further education. We said clearly in the election campaign that our fundamental objective was to get rid of tuition fees. We have achieved that even by the admission of the independent chairman of the Cubie inquiry and the Labour Members of the Scottish Executive who have courageously performed a U-turn on their policy.

Although I accept the hon. Gentleman's tortuous argument, does he agree that the endowment fee is a fee by any other name?

I do not believe that the graduation contribution is such a fee: it is not up front and many students are exempt from it. I am happy to defend it, even though I do not have to do so, because it is not Liberal Democrat policy in this Parliament. The hon. Lady must understand that the funds raised by the graduate contribution will be payable only on graduation rather than up front.

Students who drop out—sadly, many do—will not be worse off. The total debt will be less than currently, and the repayment will be at the same level as current loans, and, in most cases, at a lower level. Those funds will be used to provide much needed maintenance bursaries for less advantaged students entering higher education. On that basis, it is a sensible and ingenious approach, which the Liberal Democrats in Scotland have little problem defending.

The hon. Member for Runnymede and Weybridge cannot have it both ways. He cannot claim, as he did, that the Labour party in Scotland has made a U-turn on keeping tuition fees, while claiming that the Liberal Democrats in Scotland have made a U-turn on abolishing tuition fees. That is not worthy of the hon. Gentleman's ability. I know, from previous encounters, that he has a precise mind, and he will recognise the inconsistency of his argument.

The Labour party recognised correctly that it was important to increase access in the UK, especially for the least well-off students. However, its proposals to do so were crazy. Those policies included introducing fees, abolishing the grant, continuing to deny poor students access to benefits, introducing means testing and continuing parental contributions, which resulted in many students assessing that they would have to drop out. That has had an impact on access, as shown by the figures, especially for the first year after the introduction of tuition fees for mature students. That was especially sad because the Government commissioned research on whether mature students would be deterred by the imposition of tuition fees. That research found that they would be deterred, although the Government's objective was to improve access for less well-off people and encourage lifelong learning. The Government initially refused to publish the research, and it took many months before it was dragged out of them and placed in the Library.

The Government's policies have damaged access and increased student poverty—as shown by high drop-out-rates, whether because of parental contributions not being received or higher and higher debt. Students who cannot access sufficient, or any, hardship funds, are forced to drop out. Indeed, some students have to work to support themselves through university, and may fail their exams as a result.

Despite policies designed to raise money for higher education, even at the expense of damaging access, increasing student poverty and promulgating student drop-out, the unit of funding in higher education has dropped under this Government. It is projected to continue to drop, even with the continuation of tuition fees. For all those reasons, voters in Scotland decided that they wanted no more of such a policy. On mature reflection, Labour Members of the Scottish Executive recognised that that policy could not continue.

The hon. Gentleman is delivering a critique with which I do not agree. He called for substantial public funding increases to abolish tuition fees and restore the student grant. Unless he says where that money would come from, his argument is less than coherent, and less than credible. Given that the extra penny for education has already been spent many times over in other areas of Liberal Democrat manifesto policies, will he explain clearly where that money will come from?

The hon. Gentleman knows that that is not our policy. He creates a false scenario and challenges me to fund it. Our policy at the previous election was clear and costed—we did not propose the reintroduction of grants. Our policy was to treat those aged 18 as independent. We argued that it was wrong for students to be means-tested on parental income. Failure of parents to make contributions is one of the leading causes of student drop-out and the high drop-out rate.

Our manifesto did not have to say how we would fund the introduction of grants, because that was not a commitment. I recommended that the hon. Gentleman read that manifesto and our costing supplement—we were the only political party to provide one—which explains how we would use the income that would be raised from an extra penny in the pound on education. We estimated that about £2 billion would be raised, and our policy did not involve the introduction of tuition fees. The Government's introduction of tuition fees meant that the money that we would have raised by adding an extra penny on income tax—we called for that in Budget debates—could have been used to offset tuition fee costs. The hon. Gentleman should study our costings, which are available in the Library, and which show how we would fund the abolition of tuition fees.

The hon. Member for Runnymede and Weybridge, who initiated this debate, is a Conservative Member, and I want to discuss the Conservative party's record. Its policy at the previous election was to wait for the Dearing report. In his charming but rather disingenuous way, the hon. Gentleman said that his party's policy at the previous election was back to Dearing—but Dearing had not reported at that date. There was a conspiracy between the then Government and Opposition to ensure that the Dearing report appeared only after the general election. That allowed the then Government to avoid having to explain how they proposed to introduce tuition fees, which was Conservative party policy.

We learned what Conservative party policy was only when the Dearing report came out. However, Hansard makes it clear that Conservative policy was all over the place. The line that was adopted from the Back Benches by the right hon. Member for Charnwood (Mr. Dorrell), who is a former Minister, was completely different from that adopted by his colleagues on the Front Bench. The Conservative party's national policy was to retain tuition fees, but the Scottish Tories proposed their abolition, at a cost of £37 million. To be fair, the Scottish Tories explained how they would raise the money: they would use not a fair means of taxation, by which people would contribute according to their ability to pay, but an approach that involved recouping the money from poorer students by doubling the interest rate on loans to commercial levels. That may be the most regressive policy that has ever been dreamed up. It takes a particular species of beleaguered creature—the Scottish Tory—to come up with such a regressive approach.

To make the point in the round, the hon. Gentleman should mention that my Scottish colleagues also proposed making Saltire scholarships available to meet the needs of students in Scotland.

The proposals of Scottish Conservatives have become lost in the mists of time. The hon. Gentleman, who I hope will speak presently, should explain the confusion. Is he happy for Scottish Conservatives to campaign for a policy that would introduce diversity—the hon. Member for Runnymede and Weybridge may call it discrimination—into the United Kingdom and for Conservatives in the rest of the country to campaign for a different policy? The hon. Member for Runnymede and Weybridge has not established that democratically approved diversity is undesirable.

Thanks to the intervention of Liberal Democrats, the Scottish Executive proposed a scheme that will have huge benefits, as the Scottish people recognise. A speech by a Member of the Scottish Parliament, George Lyon, made it clear that mature students will no longer have to pay tuition fees. They will benefit from additional free support worth £10 million, which will be worth an average of £2,000 or more to many students. Those students will be exempted from the graduate contribution—I hope that that reassures the hon. Member for Bristol, West (Valerie Davey)—and they will retain their entitlement to full loan support. That means that students will receive extra cash to the value of £2,000 and that they will not incur a penny extra in debt.

Students with a family income of less than £10,000, whom we need to encourage to enter into higher education both north and south of the border, will not have to pay tuition fees. They will benefit from £8,000 in free maintenance grants and they will receive in cash £2,000 more to live on than they would have received under the current loan scheme. Their debts when they graduate will be £4,000 lower.

I could continue to preach the virtues of the proposals—

As the hon. Gentleman is preaching the virtues of those proposals, is he urging his friends in the Labour party to implement such proposals not only in Scotland but in England, Wales and Northern Ireland?

That is a reasonable point. The Liberal Democrats will look at that policy at a federal level. We have a democratic way of making policy, and it is not for me to change our party's democratically agreed policy on the strength of a seductive intervention.

There are clearly enormous benefits to be gained from the Scottish Executive's proposals. At the next election, we may well change our policy from the good one that we now espouse to the one proposed in Scotland. The Conservatives will have to address that issue. Indeed, the Labour Government will also have to decide whether they can go into the next election continuing to propose an unfair tuition fee system that damages access, creates student poverty and does not provide the expansion of funding on a per-student basis that is much needed in this country.

This has been an interesting debate and I congratulate my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) on introducing it with characteristic clarity, elegance and moderation.

It is right to draw attention to the disparities in student support throughout the United Kingdom. I found the two intervening contributions highly revealing—and I have a soft spot for both contributors. The hon. Member for Harlow (Mr. Rammell) resembles a stock medium-pace bowler who flings a few balls down the wicket in the hope that, somehow, an incautious batsman will get an edge. The hon. Member for Oxford, West and Abingdon (Dr. Harris) reminds me of an extremely slow left-arm bowler, who, by guile and confusion, seeks to winkle the batsmen out.

To stay with the metaphor of the game, both hon. Gentlemen are batting on a sticky wicket in trying to defend the indefensible—as, I suspect, will be the Minister, when he replies to the debate. Although one might promulgate a degree of partnership, or even consensus, in politics—towards which purpose this Chamber is to some extent directed—it is unacceptable to defend the indefensible under these slogans. The hon. Gentlemen have sought to do so today.

The simple approach to these matters is the biblical one. Despite all the tergiversations and excuses, the system is unsatisfactory. By their fruits ye shall know them. This is not right. In raising these matters, we should not stray beyond our narrow remit into debating the principle—or refighting the battle—of devolution, let alone, according to the wilder assertions of the hon. Member for Harlow, the principle of our membership of the European Union, to which I, and, more significantly, the Leader of the Opposition, are firmly committed.

We are concerned here with the little local difficulties experienced by Labour and the Liberal Democrats in Scotland, where both parties have had to reinterpret election pledges in a way that no reasonable voter could have anticipated from their manifestos. Also at issue is the interaction with European law that has created and added to those anomalies. In practice, the result is a shambles across the United Kingdom. That shambles was defended by Scotland's First Minister, the right hon. Member for Glasgow, Anniesland (Mr. Dewar), on the "Today" programme on 4 February. He described the proposals as

"An imaginative, a brave and a very Scottish solution."

I accept one of those observations. It is a Scottish solution for a Scottish problem.

I also note that—in a parody of the self-restraint that we have sometimes wished on Scottish Members, post-devolution—no Scottish member of either the Labour party or the Liberal Democrats has attended this short debate to justify or explain the decisions of the Scottish Parliament. That has been left to English Members. It is a Scottish solution, but is it imaginative and brave, as the First Minister said? If so, I should like to see what he would consider a cynical and timid compromise, which is what I believe it to be. Let us not be mealy-mouthed about it. When discussing whether tuition fees and graduate contributions are the same thing, I am reminded of nothing more than the children's joke, which asks, "When is a door not a door?" The answer, of course, is, "When it is ajar." The answer to the question, "When is a graduate contribution not a tuition fee?" is "When it is deferred for long enough to provide a tissue of excuses for not so describing it." A graduate contribution is effectively a tuition fee, even if it is deferred—assuming that it is practical to collect it.

Our criticism of this hotch-potch is threefold. Unusually—and, remembering how the French tend to put their arguments, in the spirit of the auld alliance—I shall move from the general, and the remarks of my hon. Friend the Member for Runnymede and Weybridge on education, to my particular worries. I start with what I believe to be the greatest real-world problem, which is the threat that those ramshackle arrangements pose to the integrity of the British higher education system.

I shall not be precise about dates, but when the Minister for School Standards and I graduated, there was a simple, integrated system with a common support mechanism, although it was delivered in rather different administrative ways. For example, the Scots centralised the payment of student maintenance, perhaps sensibly so, long before the English considered doing so. When I graduated, universities throughout the United Kingdom were expanding. Friends of mine became lecturers in various universities in the UK, irrespective of the nation; one went to Coleraine in Northern Ireland and is still there, and others went to Scotland. Until his recent retirement, a cousin of mine, who is a Scot, worked for the whole of that time at Glasgow university, but he has always considered it to be part of a United Kingdom system.

The hon. Gentleman waxes eloquent about the past perfect, but before he continues, he should recognise the vast discrepancies that existed when he and I and other hon. Members were at university, which depended on whether one went to Oxbridge or Keele, or took a four-year course in Scotland. Few of us had any concept of being part of a European system of higher education. However, we are now part of Europe, and there is a mix and match of youngsters going between European and UK universities.

Unfortunately, in the earlier part of the debate, we did not develop the analogy of the inadequacies of provision for post-16 students with the better provision that is now being made in Scotland and England for 16-year-olds. The concept of being part of further and higher education—

Order. This is a very long intervention. I had sought to call the hon. Lady to speak, but it appears that she is making a speech and not seeking to intervene. Would the hon. Lady bring her intervention quickly to an end?

I apologise, Mr. Deputy Speaker. I simply challenge the hon. Gentleman's concept that we do not have a better, more integrated system in Europe than we had then.

I have some sympathy with the hon. Lady's comments. It was a Conservative Government who dramatically expanded student numbers. It was also a Conservative Minister—myself—who negotiated the last Erasmus programme, which hugely expanded British participation in European higher education. I was about to make that point, but first, to avoid doubt and to save time after that intervention, I may refer, as if in shorthand, to English students. It may be assumed that I include Welsh students—my wife is Welsh—and Northern Ireland students, to whom my hon. Friend the Member for Runnymede and Weybridge has referred. The anomalies lie between England, Wales and Northern Ireland on one hand and Scotland on the other.

Although I would not claim that the situation in the 1960s was ideal—we have evolved since then—the integrity of the system is now under real threat. Moving into a European structure under the umbrella of European law—the Gravier judgment bears particularly on those issues—we find, as a matter of course, that our student children now want to go to Europe. It is odd that they find themselves discriminated against not when they move from England to Belgium, for example, but when they move from England to Scotland. That is a retrograde step and it has wider implications, because if we create barriers to the natural movement across the border into Scotland, there will be repercussions for academics, courses and the integrity of the British higher education system.

There are concerns, on which I shall not expand now, about research selectivity, which has a different principle and rigour in Scotland. That may damage the Scottish research universities. All that is gradually prising apart what has always been an integrated system. There is nothing wrong with an English student wishing to study Gaelic, for example; he or she would have to go to Inverness or to Glasgow to do that. I looked at the UCAS website the other day and saw what subjects were available, from A to Z: there is authoring, or communication, authoring and design, at Coventry university and, under "zone", coastal zone and marine environment studies at the university of Glamorgan. A Scottish student wishing to study those subjects has to face a new hurdle. There is differentiation between English and Scottish students in Scotland and a whole raft of subordinate discriminations. However it may be justified, such discrimination is sheer injustice. Such discimination is not all one way: some of the rules under the modified version of Cubie that has been adoped in Scotland require repayment at £10,000 a year of income, which is more rigorous than the British system. The Minister's announcement on hardship funds in England, which has not yet been fully analysed, may well mean that some individual English students do better than their Scottish equivalents. However, there is substantive discrimination against English students going to Scotland. There is also discrimination against Scottish students moving to England, paid for out of their block grant. European students are discriminated against according to whether they go to England or Scotland and European students in Scotland may well benefit from the fact that the tuition fees—now renamed graduate contribution—cannot be collected from them if they move outside the jurisdiction.

There is therefore an overall threat to the British higher education system, which has successfully functioned as a whole for many years. The anomalies, which cannot be justified under any terms, are a threat to the decisions and the welfare of individual students.

Finally, there is the threat of legal challenge. The Mininster and his officials will know that the Department for Education and Employment has in certain respects taken the lead in the matter of judicial review. A senior legal adviser there, who has now moved elsewhere, wrote an admirable book, "The Judge Over Your Shoulder", to which all senior officials and Ministers should have regular recourse. I am not a lawyer but, partly fired by that document, I take an interest in those matters. So, clearly, do the Government because the original intention of the Scottish Executive was to rebate the fees for all Scots, wherever they were studying, including the 6,000 Scots studying at English, Welsh or Northern Irish universities. However, the Commission's legal services put a spanner in the works by pointing out that that would discriminate against European students studying in England, of whom there are perhaps 90,000, and that the privilege would have to be extended, under the best treatment or the no-detriment rule, to all those students. So the Government backed down and produced their compromise, which is more favourable to Scottish students in Scotland than in England, even if they cannot find in Scotland the courses that they want to study. Having tacked in that direction, perhaps the Government will succeed in avoiding European Union law, although my colleague from the east midlands, Mr. Chris Heaton-Harris, a Member of the European Parliament, is in active communication with Commissioner Reding as to whether the discrimination is acceptable.

The only way in which EU law can be avoided is by a solution that the European Commission's legal spokesman described as being

"discrimination internal to a member state".

That would concede the point that such a solution would be discriminatory. If it is, I suggest that Ministers ought to consider the fact that they have signed up to the European convention on human rights. It already has force in Scotland and will shortly do so throughout the rest of the United Kingdom, so Ministers should consider long and hard whether their obligations under it are being adequately discharged through such ramshackle arrangements.

As my hon. Friend the Member for Runnymede and Weybridge said, the plain fact is that the solution is wrong and will be seen as wrong by students and universities throughout the United Kingdom. I predict that the matter will end in tears.

We have had a useful debate, and I thank the hon. Member for Runnymede and Weybridge (Mr. Hammond) for choosing the subject. I also thank the hon. Members for Oxford, West and Abingdon (Dr. Harris) and for Daventry (Mr. Boswell), who made use contributions, as did my hon. Friends the Members for Harlow (Mr. Rammell) and for Bristol, West (Valerie Davey).

The hon. Member for Runnymede and Weybridge used an extravagant vocabulary in his introduction. I make no complaint about that. It is early in the parliamentary day, but his speech included the words "grotesque", "fellow travellers", "arrogance", "panicked" and "back-room deals", and made much mention of second-class citizens. I hope that he will excuse me if I approach the issue in a calmer manner. In part, the debate has been about the public policy implications, as illustrated by the important case of higher education, that result from our United Kingdom's devolution and changing nature.

While listening to the hon. Gentleman, I could not quite remember whether his party had done a U-turn on the issue of the Scottish Parliament and Scottish devolution. I think that I am right in saying that the Conservative party now accepts the logic of a Scottish Parliament. If it does, it must recognise that, on some important matters, devolution can lead to diversity and differentiation. To judge from the hon. Gentleman's contribution, the Conservative party is clearly having problems with that.

I have checked my sources to confirm that the U-turn on devolution took place. The hon. Gentleman might find it useful if I quote from the Scottish Conservative party's schools pack, which seeks to explain the party's position on devolution. It states:

"The Scottish Conservative and Unionist Party has had to travel a difficult constitutional road in the course of the last year. We have had to evolve our policy of staunch opposition to the creation of a devolved Scottish Parliament in both last year's General Election and the devolution referendum, to being one of persuaders for the Union through the medium of the Scottish Parliament.

We now wish to see the Scottish Parliament succeed and we shall be working constructively in a wide range of ways to ensure that it does."

Rather tellingly, it concludes:

"To an uninformed observer, these standpoints may seem to be logically inconsistent and incompatible. That is an entirely understandable reaction."

In travelling the road, the hon. Gentleman is taking only his first steps. He clearly does not accept the logic of devolution and the Scottish Parliament: from time to time, it will lead to differences between our two systems, which we must accept.

The key phrase that the Minister quoted was "persuaders for the Union" in the new settlement. We accept the new settlement, but does he accept that there is tension in the Government between the desire for matters to be settled locally, for reasons of democratic accountability, and the desire to impose national standards? In England, the Government have increasingly tried to tackle the problem by ring-fencing grants to local authorities and controlling what local authorities can do. They do not have that power over Scotland simply because they do not control the Scottish Executive.

The balance to be struck between national policies and strategies and local diversities is a feature of democratic politics, which we are now witnessing on a grander constitutional scale in the United Kingdom. However, as my hon. Friend the Member for Harlow pointed out, there have always been evident differences between the Scottish university system and the English and Welsh system. Indeed, even before higher education, England and Wales have A-levels, while Scotland has highers. The four-year degree is more a feature of the Scottish system than of the English and Welsh system. We must accept diversity.

Does the Minister agree that the record of their evolution shows that the British education system and student support were designed to minimise such differences for the student and to enable students easily to move around the system, rather than creating barriers to such movement, which is the substance of our anxiety?

The hon. Gentleman, like his party, is in difficulty: he cannot say that he supports a Scottish Parliament but he always become angry when it proposes a different system from that of England and Wales. If no differences were involved, a Scottish Parliament would not have been necessary. As one of my hon. Friends pointed out, the system also gives British students the right to study in universities elsewhere in Europe and to benefit from national arrangements in other countries. Students' rights in Europe consitute one of the exciting aspects of education in the 21st century.

We had to tackle the system that we inherited. The hon. Member for Daventry did not mention the fact that, between 1989 and 1997, unit—or per student—funding for higher education decreased significantly, by 36 per cent. In expanding higher education, we shall not take the cheap option of allowing standards to decline. We want quantity and quality to march hand in hand. Under the previous Administration, quality declined.

We had to tackle the student funding system because, inevitably, at the moment, it tends to be people from higher socio-economic groups who benefit from higher education. Under the old system, which did not involve tuition fees, we essentially asked most of the population, who had not benefited from university education—including some rather poor employees—to pay for the tuition fees of the minority. It was time to introduce some fairness into the system, and that is what we are doing.

As we all know, people who gain a degree are, on average, financially far better off than those who do not. By their early thirties, graduates earn about 20 per cent. more than people with A-levels, and far more than people with even fewer qualifications. It is not unreasonable to ask that group to make a contribution—only a small proportion—to the cost of their teaching at university. We introduced the loans system to enable people to maintain themselves. It is a fair system, given the funding implications for students, parents and universities.

I should emphasise that, because of the nature of the income test, those from low-income backgrounds do not have to pay tuition fees. By 2001–02, about 50 per cent. of students will not have to pay fees and only 30 per cent. will pay the full contributions. It is important to highlight that repayments will start only when salaries reach about £10,000 a year. Below that threshold, no repayments are required. For example, someone on an income of £12,000 will pay back £180 in one year. That is fair, and it will become a major way in which to fund the university sector. Indeed, income from student contributions to tuition fees alone will reach £460 million a year in 2001–02.

The Minister's argument is interesting, but does he believe that it is right that, with all the new opportunities to which he refers, a student from England, Wales or Northern Ireland can go to any other country in the European Union, except Scotland, and he treated in the same way as a resident of that country, but if he goes to Scotland, he will be discriminated against?

The hon. Gentleman is struggling to understand the logic of devolution and of enabling the people of Scotland to elect their own Parliament and have their own Scottish Government. In Scotland, such choices are made and, inevitably, there will be differences and diversities. If he has not understood the logic of his own party's U-turn on devolution, he should discuss it with the Leader of the Opposition.

There is evidence that student numbers are holding up well; they are increasing. Concern has been expresed about the decline in the number of mature students entering the system. That may have something to do with the buoyant labour market, but we are encouraged by the fact that the number of part-time students is increasing.

We have a new student support package, designed mainly to help mature students, many of whom, we recognised, were in difficulty. We have listened to them. Some are lone parents and have particular problems with child care. That is one of the reasons why we are introducing at some cost a new bursary of £1,000 a year for mature students, dependent on income. We are also doing more to help with child care costs and to assist mature students who have children with the costs of school meals. We are also trying to ease access.

We asked Sir George Quigley to look into four-year fees for students, in accordance with the Teaching and Higher Education Act 1998. Sir George has delayed his report to take account of the Scottish Executive's response to Cubic, but his findings will be with us by April. The system that we have arrived at for England and Wales is right. Where it needs modification, we will listen—hence our package for mature students and for students from poorer areas. If we are to expand the university system, it must be fair to students, taxpayers and parents, as it is to universities.

Hundreds of millions of pounds are now coming in under the system. By 2001–02, income from tuition fees and loan payments will total £710 million. Are Opposition Members really saying that we should find from other resources the hundreds of millions of pounds that it will cost to move towards the Scottish system? Would it be raised by cutting nursery education or funding for the national health service or primary schools? I am not sure whether the Conservatives are making a pledge. If we are serious about the quality of higher education, we must be rigorous about the funding element. We believe that the student support system is fair and efficient: student numbers are increasing, the number of our young people going to university is increasing and quality standards are being maintained. Opposition Members must understand the logic of devolution.

Order. We must now move to the next debate.

In December 1998, when I went to Baghdad with the former Taoiseach, Albert Reynolds, who is really the father of the peace process in Northern Ireland and a deeply serious man, we were invited by Tariq Aziz to his house for supper. I think that we were the first people to be invited to his home since the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) all those years ago. One of the things he said to us was, "You may think that Saddam Hussein, the revolutionary council and I are extremists. This is a general view in the west. If sanctions go on and there is continued military action, we will be succeeded by people who are far more extreme than us." I have to say that I believed him. There is a real crisis.

I know that there are those in the Foreign Office who suspect that I am sympathetic to the Iraqi regime, but on the contrary, it is a very brutal regime. So are others. The middle east is a very brutal place and others are now beginning to take the same view. Toby Dodge, writing with the authority of Chatham house, said:

"The rapid and externally driven decline in living standards and social structures since 1991 could produce an alternative scenario—the rise of militant nationalism. The widespread state inspired credo of Arab nationalism has historically found support amongst a population convinced that their country is unjustly treated by the West and wider international society."

One has to go to Iraq to understand the intense feeling. They ask why this is being done to those who were the west's shields during the Iran-Iraq war. Dodge goes on:

"The present situation heightens such perceptions. There has also been a dangerous polarisation of society between those reduced to poverty and those elevated to the ranks of the super rich. Sanctions, whilst impoverishing the majority, have helped create a small group of nouveau riche profiteers associated with the inner circle of the ruling elite. Their wealth is a conspicuous target for resentment."

From observation, I do not believe that that applies to all the ruling elite. Dodge continues:

"These two factors may coalesce in demands for a militant, active nationalism focused on re-establishing Iraq as a regional power. The potency of such a movement—comparable in some ways to post Soviet Russia or Weimar Germany—would be enhanced by fondly re-imagined memories of when Iraq was strong and could take care of its population."

Incidentally, in the 1970s Baghdad got a prize for being the cleanest city in the middle east. Dodge goes on:

"If this took hold, a populous government in Baghdad would find it relatively easy to mobilise a population already angry and alienated from the international community. The widespread dislike of the post Gulf War border settlement with Kuwait could serve as a potent rallying call with which to reassert power within the region."

The Chatham house paper goes on:

"Just what will emerge from a post Saddam or post sanctions era is a crucial issue of geostrategic significance that goes far beyond the Gulf and the wider Middle East. Since 1991, United States and British policy has been focused on the more immediate goal of removing, or at least containing, Saddam Hussein. But after ten years of coercive diplomacy, the regime in Baghdad appears to be as strong or indeed stronger than at any time.

Pre-occupied with more pressing issues, policy makers in the five permanent United Nations Security Council member states appear to have paid scant attention to the very problem of what type of Iraqi state and society will emerge in the medium to long term. The post 1991 stalemate has enforced dramatic and widespread suffering on the population through no fault of its own. Inside Iraq, if not elsewhere, the blame for this has been placed on the governments of the United States and Britain.

The danger that seems to have escaped serious consideration among western policymakers is that of an angry population, mobilised by ten years of suffering, venting its ire either on the institutions of the Iraqi state itself and attempting to destroy it, or turning its frustration onto the external forces the regime has blamed for their dire situation. Either way, on the anniversary of the beginning of the Gulf war, surely it is time to think about the possible future of Iraq, for the sake of the Iraqi population, the stability of the wider Gulf and the West's relations with the Middle East."

That is exactly the situation that Albert Reynolds and I saw in 1998, even more clearly than when I went in 1994 with John Smith's retrospective approval.

I talked over the weekend by phone, when preparing this debate, to the former UN co-ordinator, Dennis Halliday, in Ireland. He talks now about "intellectual genocide".

Halliday is a heavyweight. He was not even seen by Foreign Office Ministers when he was here, though he went to the Prime Minister, President and Foreign Minister of France. I gather that it is also the considered view of Hans von Sponeck, who is being rubbished. I was very impressed by von Sponeck. His evidence to the Select Committee has still not been published, heaven knows why. These are very serious people, who have the gravest of doubts.

Perhaps the most recent visitor was the journalist Felicity Arbuthnot, who I know is not popular in the Foreign Office. She was in Edinburgh on Saturday at the Quakers. She talks about the devastation that she sees, of the pre-industrial age, of women too malnourished to breast feed—chronically malnourished. The calorific value in whole areas of Iraq is now lower than in Mali. One third of the children are suffering. When asked whether it was worth the death of 500,000 children—those are the UN figures—to get rid of Saddam Hussein, Madeleine Albright replied yes. If I may say so without being personal, those are simply not the values that my hon. Friend the Minister of State had for so many years of his active political life.

The radiation in Basra is 10 times higher than it should be. We went to the presentation by Doug Rokke, whose views are known to the Foreign Office. He was a medic in Vietnam, and is a patriotic American from the southern states. However, one can see in his person the effects of depleted uranium. He is a leading expert on the matter. His reaction in Basra was simply, "Oh my God."

Felicity Arbuthnot, who recently returned, describes a society that is breaking down. People are selling all their possessions—even their marriage presents. There is no work for all the talented engineers. The trauma caused by the bombing is felt every single day. Iraqi children are the most traumatised on earth. Those should not be the effects of a Labour Government's policy. What is the point of bombing flocks of sheep? All we succeeded in doing was letting loose rockets and killing a few shepherd boys. What is the long-term object of it all?

The article by Robert Corzine in yesterday's Financial Times states:

"UN officials say Iraq has received less than $300m (£180m) in oilfield equipment out of a theoretical $1.5bn".

How can they achieve anything without the supply of what is necessary for the oilfields?

Finally, I want to touch on what is possibly the most serious question of all—the water in the dam. I received two separate briefings: one from Balfour Beatty—a firm with which I have had good relations in the past in constituency matters—and the other from those who predict up to a 45 per cent. reduction in the flow of the Tigris over three years. When I was in Baghdad, I was told that the Tigris was lower than it had ever been in recorded history, and in 1994 I saw that the Euphrates had become little more than a trickle. Balfour Beatty argues that the dams are just for hydro-electricity, and that the flow will be unaffected, but I am not sure. I do know, however, that a proposal exists for another dam at Cizre, in the south. That could take off a great deal of water, which, apparently, is to be used for irrigation.

There are real problems, and many people will be extremely interested in the Government's comments.

I am grateful to my hon. Friend the Member for Linlithgow (Mr. Dalyell) for the opportunity to debate the important subject of Iraq. He has taken an expert and informed interest in Iraq over a number of years, and I have never questioned the integrity of his views or his genuine humanitarian concerns about the plight of the Iraqi people. I share those concerns.

First, we should remind ourselves why the United Nations Security Council imposed sanctions on Iraq in the first place. They were imposed following Iraq's brutal and unprovoked invasion of Kuwait in 1990. At the end of the Gulf war, in 1991, Iraq accepted the terms of United Nations Security Council resolution 687—the so-called ceasefire resolution. That resolution, and others implementing it, imposed a series of obligations on Iraq, including accepting the destruction of its weapons of mass destruction under international supervision, submitting full details of locations, amounts and types of weaponry, undertaking not to use, develop, construct or acquire weapons of mass destruction in the future, and co-operating with UNSCOM in carrying out those obligations.

Resolution 687 also set out the circumstances in which the Security Council would lift the sanctions imposed on Iraq. The resolution provides that sanctions will be lifted following compliance by Iraq with its weapons of mass destruction obligations, and following a review by the Security Council of Iraq's policies and practices, including its implementation of all relevant resolutions. By persistently avoiding compliance with its undertakings under resolution 687, Iraq, not the international community, has prolonged the sanctions regime—which was originally envisaged as lasting for only a period of months—for over nine years. Iraq is responsible for the fact that the sanctions are still in place.

I shall give some examples of Iraq's poor record on compliance. More than 600 Kuwaitis detained by Iraq during the Gulf war are still completely unaccounted for. That represents about 0.1 per cent. of the Kuwaiti population, which would be the equivalent of 50,000 British citizens. Eighty-seven per cent. of the Kuwaiti missing are civilians, some of whom are elderly. To date, Iraq has provided sufficient information to close just three of those 600-plus cases. Meanwhile, the families of those who remain unaccounted for continue to live under a cloud of uncertainty over the fate of their loved ones.

On weapons of mass destruction, because of Iraq's persistent evasion, obstruction and mendacity, the obligations under resolution 687—which could have been completed within just a few months if Iraq had cooperated fully with the weapons inspectors—have still not been met. That is not just our judgment; it is the judgment of an independent United Nations panel which met last year. Until those obligations are met, Iraq will remain a threat to regional peace and stability.

Let us not forget that Saddam Hussein has used his weapons of mass destruction before, with devastating results. We remember in particular the Kurdish town of Halabja, where Saddam ordered the use of chemical weapons, including nerve agents, killing 4,000 to 5,000 civilians and injuring perhaps 10,000 more. Saddam also used chemical weapons against Iran during the Iran-Iraq war. We are not prepared to run the risk again that he will use those weapons.

This is part of the difficulty. When I went to Iran on holiday, I saw the war memorials, which are like our first world war memorials. Although the Iranian people suffered terribly during that war, the Iranian Government's official view—as expressed by the Foreign Affairs Minister when he visited this country—was that sanctions should be lifted, because they strengthen, rather than weaken, Saddam Hussein's regime. That is the view of people who have suffered from it.

What I find interesting about the deployment of that argument is that nobody—including my hon. Friend—has suggested an alternative policy to the lifting of sanctions.

rose—

Perhaps I could just finish this point. We all share the concern about the humanitarian situation in Iraq. However, it is not right to blame sanctions for that suffering; nor would the situation necessarily improve if sanctions were lifted.

I suggest that as a first step the Foreign Office should talk to some of the former distinguished ambassadors, such as Sir Stephen Egerton, Sir John Moberly and Sir Harold Walker. There is a good case for starting to talk to the Iraqis.

I am happy to talk to former ambassadors; indeed, we talk to them and to others. The suffering of the Iraqi people is caused by the policies of Saddam Hussein's regime. The evidence is there for all to see, and I am surprised that my hon. Friend does not take account of that. The latest report by the Secretary-General on the implementation of the oil for food programme notes that a quarter of all medical goods delivered to Iraq since the programme began have not been distributed. In the meantime, basic items such as antibiotics remain in short supply. That is the Iraqi regime's responsibility.

Iraq claims that the problem is caused by lack of vehicles, but thousands of vehicles have been authorised by the sanctions committee since the start of the oil for food programme. The real problem is the Iraqi regime's lack of commitment.

In February 1998, the United Nations Secretary-General recommended a daily food ration of 2,463 calories. Iraq responded not by accepting that, but by setting a lower ration of 2,200 calories and failing to order sufficient food to make up even that reduced level. The Secretary-General's latest report on the oil for food programme notes that Iraq is ordering insufficient quantities of pulses and dairy products and not including sufficient protein. At present, the average daily food ration is just 1,993 calories, which is significantly less than the ration that was set.

The Secretary-General also recommended targeted feeding programmes aimed at a population of just under 2 million. After considerable arm-twisting on the UN's part, Iraq allocated only $9 million—a fraction of the sum available—to those programmes. The Secretary-General called on Iraq to increase funding for targeted nutrition, so that children's nutritional status could be expeditiously improved.

Iraq's distribution plan for the oil for food programme allocates insufficient funds to key areas such as food and medicine, but allocates $10 million for the purchase of bank note counting machines. How will that assist humanitarian relief? The Secretary-General has refused to approve that allocation.

Iraq is also exporting humanitarian goods. We know that it has sold food to Syria and tried to sell food to Jordan. If it had any concern for the humanitarian plight of its people, it would not do so. Several vessels exporting goods from Iraq have been intercepted in the Gulf.

During the past few days, evidence has come to light that Iraq is exporting oil outside the oil for food programme. That oil could, and should, be exported within the programme, thereby attracting humanitarian relief. By exporting oil illegally, the regime is depriving the programme of revenue and the Iraqi people of humanitarian relief. The revenue goes straight into the pockets of Saddam Hussein and his cronies, and the Iraqi people see none of it.

Some argue that the oil for food programme is inadequate. It may not be perfect, but we firmly believe that, while sanctions remain in place, it is the best way in which to address the humanitarian needs of the people of Iraq. According to the Secretary-General's most recent report, the implemention of the oil for food programme is making a difference to the humanitarian situation in Iraq. It has delivered 12 million tonnes of food, and medical supplies worth more than $700 million, but, as Kofi Annan himself has noted the programme's potential impact is far greater. Unfortunately for the Iraqi people, it is not being realised because the regime appears indifferent to their suffering. It is no coincidence that the oil for food programme has had a substantially greater impact on the humanitarian situation in northern Iraq, where the regime is not involved in implementing the programme, than in Baghdad-controlled Iraq.

While, for its own propaganda purposes, the Iraqi regime allows the people of Iraq to suffer, the international community has sought to protect them from the effects of the embargo and the regime's cynical policies. Britain has consistently taken a lead in those efforts. Our most recent initiative was resolution 1284, a comprehensive resolution which was adopted after months of painstaking and intense negotiation. That was an excellent result and a remarkable achievement for British diplomacy. The resolution provides a new platform for the Security Council's dealings with Iraq on matters such as weapons of mass destruction, and humanitarian and Kuwaiti issues. The creation of UNMOVIC, a new disarmament body, represents a real opportunity for Iraq to make rapid progress on the remaining disarmament issues. That, in turn, would trigger the suspension of sanctions, for which my hon. Friend the Member for Linlithgow has consistently argued. If Iraq implements the resolution, the opportunity will exist for sanctions to be suspended.

The resolution also implements a range of humanitarian measures that provide for a bigger and better humanitarian programme—including the immediate abolition of the ceiling on the amount of oil that Iraq is permitted to export under the oil for food arrangements—and the speeding up of UN sanctions committee procedures.

Our priority is implementation. We welcome the appointment of Dr. Hans Blix as executive chairman of UNMOVIC. Work is well under way on the implementation of humanitarian provisions. We are very encouraged that all members of the council, including those who abstained in the vote on the resolution, voiced their commitment to its implementation. Meanwhile, Iraq's refusal to accept and implement the resolution yet again cynically denies the Iraqi people the prospect of relief from sanctions for which my hon. Friend the Member for Linlithgow so eloquently argues.

My hon. Friend also raised the question of the no-fly zones over Iraq. I would first like to record our gratitude for the invaluable role played by the RAF air crews who have risked their lives for eight years to protect Iraqi civilians from repression. The no-fly zones were established to protect innocent Iraqi civilians from persecution at the hands of the Iraqi air force. Although 1991 may seem a long time ago, it is still vivid in the minds of those Iraqi Kurds, Assyrians and Turkmen who fled their homes in fear as Iraqi helicopter gunships attacked their villages. That was not the first time that those villages had suffered. In the 1970s and 1980s, Iraqi forces destroyed more than 3,000 Kurdish villages. That is never referred to by the critics of our policy in the debate on sanctions.

On the question of the chemical weapons attack on Halabja, I recently met Professor Christine Gosden of Liverpool university. She has expert knowledge of the awful medical conditions suffered by the people of that town: infertility, miscarriages, congenital abnormalities, and cancers. They also suffer from respiratory problems caused by the inhalation of mustard gas. These dreadful illnesses continue to afflict people born in those areas even today.

Anyone who has seen the effects of such attacks on innocent civilians will want to ensure that such atrocities can never happen again. That is what our pilots do in the no-fly zones over Iraq. They patrol the zones every week, as they have for the past nine years, to deter Iraqi air attacks on Iraqi civilians. That happens not only in the north. RAF aircraft have also patrolled in the south since the establishment of the southern no-fly zone in 1992, to limit the repression of the Shi'a Muslims.

My hon. Friend mentioned water issues. He will recall the devastation wreaked by Iraqi forces in the southern marshlands. They burned houses and fields, demolished homes with bulldozers and deliberately drained the marshes, destroying a vast regional wetland for ever.

I have made an unannounced visit to the marshlands at Querna, and I do not believe that having seen the area with my own eyes.

I am surprised by the hon. Gentleman's statement. As well as causing grave environmental damage by diverting water flows and burning large areas of reeds—[Interruption.]

Order. If the hon. Member for Linlithgow wishes to intervene, he must do so in the proper way and not from a sedentary position.

As well as carrying out the damage that I have just mentioned, Iraqi forces did much to destroy the way of life of the marsh Arabs. The persecution continues today. In March last year, Iraqi firing squads summarily executed a number of alleged demonstrators from Basra, who had already been tortured while in detention. Afterwards, they were buried in a mass grave. Why is no attention focused on that?

We must not forget what happened in the years leading up to the creation of the no-fly zones, nor should we ignore the repression that continues on the ground.

Security Council resolution 688 called on Iraq to end its repression. The zones were set up in support of that resolution. Since December 1998, Iraqi forces have maintained a sustained campaign to try to shoot down our aircraft, which are defending the rights of Iraqi citizens. Iraqi forces have shot at, or otherwise threatened, UK and US aircraft more than 630 times. Those threats are real, and our forces have responded in a proportionate manner, in self defence. That is their right under international law, and their safety must be paramount.

I must make it clear that we do not target civilian infrastructure. All defensive action is strictly limited to responses against Iraqi weapons and facilities that pose a threat to our forces. Our forces make every effort to minimise the risk to civilians when responding to threats. I urge hon. Members to treat Iraqi reports of civilian casualties with great caution. As my hon. Friend is aware, the Iraqis have, in the past accused us of killing civilians on days when we have not even been flying, and of damaging buildings later shown to be intact.

My hon. Friend also raised the question of the Ilisu dam. We have received representations from the Iraqi and Syrian Governments about that project. That is reflected in the four key concerns that were listed by my right hon. Friend the Secretary of State for Trade and Industry in his statement on 21 December. One such concern involves the need to ensure adequate downstream flows to neighbouring states. It is worth nothing in this regard that the construction in the 1980s of the Anatolian gap project on the Euphrates by Turkey has had no demonstrable effect on Syria's water supply. The Ilisu dam is a hydro-electric project, not an irrigation project, and there should therefore be no disruption to downstream flows along the Tigris. No decision has yet been taken about cover from the Export Credits Guarantee Department—

Order. We must move on to the next debate.

I appreciate this opportunity to raise this issue. You will be aware, Mr. Deputy Speaker, that I have sought for some time to raise it in the House of Commons. It is opportune to raise it today—it comes in the midst of a visit by the President of Indonesia and by journalists and politicians from Indonesia. It is a privilege that the Minister of State, Foreign and Commonwealth Office will respond to the debate—I am aware of his interests and commitments in this regard.

Perhaps I should explain my interest in this matter. Why should an hon. Member who represents Belfast, South be interested in developments in Indonesia? Some might wonder whether I do not have enough problems at home. I am a minister of the Presbyterian Church in Northern Ireland, which for years has enjoyed fellowship with the Indonesian Church, especially in Halmahera. When I became a Member of Parliament, I discovered that one of my constituents, who is currently the moderator of the Continuing Church in Australia, was a theological professor in a college in Halmahera. He has been in touch with us about this debate. The moderator of the Indonesian Church had to flee from Ambon by boat to get to Jakarta to try to represent his people and to deal with the tremendously serious situation in which the Indonesian Government are involved. Our eyes have always been on East Timor, but problems were developing in other parts of Indonesia, which is the largest country in the world with a significant Muslim community. It is a vast country with a vast population, and it is made up of a huge network of islands.

Tragically, the situation has escalated since the election. Throughout 1999, incidents led to the deaths of at least 1,500 people. I say "at least" because I am aware that different people exaggerate casualties. I am also aware that those from the Islamic community claim that many more than 2,000 Muslims have been slaughtered by Christians, although there is no evidence to support that. Tragically, those from the Christian community have retaliated—some have sought vengeance, and some, who were defending their local situation, were involved in the deaths of their fellow citizens. I seek not to defend all the actions of Christians but to deal with the tragedy in the Moluccan Islands, which some may know better as the Spice Islands. Historically, there is a strong trade connection between our country and those islands.

The situation in eastern Indonesia is grave. Recent violence in the region—it is the one province of Indonesia's six provinces that contains a non-Muslim majority or only a slight Muslim majority—has been perpetrated largely by Muslim extremists against a Christian community in the province, in which Christians slightly outnumber Muslims. Since the violence began in January 1999, more than 1,500 people have died and thousands have been made homeless. Various figures have been presented. They show that 100,000 have been displaced in Maluku and about 50,000 in Sulawesi. Figures supplied by the Department for International Development show that more than 200,000 people have been displaced. That gives us an idea of the extent of the crisis and the needs.

Not only have people been made homeless, but many churches have been destroyed. Five mosques have also been burnt and Christian-owned property destroyed. We are aware of the report of the Jubilee Campaign United Kingdom, which has been involved over the years with British parliamentarians and raises human rights issues throughout the world. Its report confirms the situation outlined in numerous media reports.

I have recently noticed a more balanced presentation in the United Kingdom media, but I was concerned, in early January, to see some of our press reporting as if the Christians were attacking the Muslims. When we tried to find out what lay behind that, we discovered that the head of the Indonesian news agency is an extreme Muslim, appointed by the former President, Mr. Habibie. We must remember that even countries such as ours with a free press must balance reports, because most papers have their own emphasis. We should treat with caution some of the reports that come from the Indonesian news agency. It seems clear that widespread human rights abuses are being perpetrated by Muslim extremists, aided and abetted by army elements. As hon. Members will be aware, I have already tabled early-day motion 294 on this subject.

I find it somewhat ironic that over the past week the Government and the European Union have sought to isolate Austria on the ground that its democratically elected Government have formed a coalition with a party whose policies they find repugnant—as a child of the 1930s, I can understand some of the reasoning behind that—yet they appear unwilling to use influence to compel the Indonesian authorities to end the violence in the region and ensure the protection of life, property and freedom of religion. I recognise that it is looked on as an internal conflict, but that was the case in Austria, too. If people in a democracy vote in a certain way, they have a right to be represented in that way. That is not the case in Indonesia, where the election went against the extreme Islamic people. The national ideals of Indonesia, over the years, until Suharto came in, allowed tolerance.

We have seen the tradition of "pila", which allowed communities to co-exist with one another, set aside. One of the messages that I get from Muslims and Christians in Indonesia is that they long to go back to that tradition. In the struggle in Ternate, the sultan and the moderator of the Presbyterian Church, representing their communities, appealed for peace, restraint and co-existence.

The nature of the violence is such that it appears to be organised and directed by those in positions of authority. It is open to question how far it is an Islamist plot, led by former President Habibie, Islamic elements in the Indonesian army and Islamic militants, to establish an Islamic nation and to control the major international trade routes in that part of the world.

In a report in the Jakarta Post of 3 February, President Wahid mentioned attempts by hard-line generals and Muslim militants to destabilise the country. I can refer to no higher authority than the President, who lends support to my reading of the situation. It is certain that elements of the army, particularly Muslim units from the island of Java, have been guilty of siding with Islamic extremists. Indeed, one army group so involved is the Kostra unit, which has clearly taken an offensive position against the Christian community rather than fulfilling a peacekeeping role and trying to restore law and order in the community.

We must press home that question. Have the Government made representations to the Indonesian authorities about accepting a team of human rights observers to evaluate and balance reports of what is happening there, so that the world at large might have an objective view of it?

I can understand those who say that I am not speaking objectively but, speaking as a Presbyterian minister who has sympathy for the Christian population in Indonesia and the Moluccan Islands. I speak also as one who over the years has had Muslim friends in my home and elsewhere, so it is wrong to suggest that I speak only on behalf of the Christian community. However, it is true that it is the Christian community that is suffering most.

Will the Government urge the Indonesians to implement measures to prevent inflammatory statements and material being distributed? I know how difficult that can be. I know that the underground press works differently in different countries. I know that slogans are posted'and that mobs get carried away, but we should restrict the media from publishing such slogans, as they can give the appearance of credibility and reliability, and, if necessary, measures should be taken to punish those found guilty of incitement to violence.

Have the Government made any attempt to encourage and facilitate reconciliation betwen the Muslim and Christian leaders in the Moluccan Islands, to allocate funds for reconciliation efforts and to offer British Government expertise in policing sectarian conflict? I realise that that can be done only by invitation, but our people are always standing by to provide such help if it is requested. We are part of a global village, and we cannot stand apart from issues that cause others to suffer.

It is important to ask the authorities in Indonesia to act swiftly and impartially to provide humanitarian aid and assistance to those displaced and in need, and to investigate, identify and prosecute those responsible for provocation.

I shall come to a close so that the Minister has time to respond. I remind him that it took the world 25 years to come to the aid of the people of East Timor. I understand that that was a separatist conflict, and that East Timor was never recognised as part of Indonesia. However, the law-abiding Christians and Muslims of the Moluccan Islands cannot wait for 25 years.

It is many years since the House of Commons debated Indonesian matters, so all hon. Members will be grateful to the hon. Member for Belfast, South (Rev. Martin Smyth) for raising the subject. It is a great tribute to him as the representative of Belfast, South that, even in the circumstances that he has had to deal with, he has called our attention to suffering communities in Indonesia and has made them a priority of his work in the House. We are grateful that he has retained his personal contacts and been able to share his detailed experience with us. His speech in this Chamber is an important part of the formal records of the House of Commons. The speech and my reply will be read by others and by other Governments, including that of Indonesia.

The Government have watched the spread of violence through the Moluccan Islands with great concern, and all hon. Members will join me in deploring the violence that has brought pain and suffering to the communities there. We deeply regret the loss of life and the inter-communal violence that has taken place since the troubles began early last year. Communities that have lived in peace for many years, despite that long tradition of peaceful co-existence, are now sadly shattered with tension, conflict and fear.

We must exercise caution in rushing to a quick-fix solution. We know from conflicts much closer to home that rebuilding trust and peace is usually a long and painstaking process. Before we begin that process, we must understand the situation's roots and causes. The Moluccan Islands lie 1,700 or more miles from the Indonesian capital, Jakarta, and there are more than 1,000 of them in an area some three and a half times the size of the United Kingdom. When we look at the globe, I sometimes fear that we underestimate the size, scope and space taken up by the islands that compose Indonesia. The population of 2.1 million speaks about 150 different dialects.

In October 1999, the then Maluku province was divided into North Maluku and Maluku, the capitals of which are Ternate and Ambon respectively. Taken together, about 59 per cent. of the inhabitants of those regions are Muslim and 41 per cent. are Christian, although the proportions vary according to province and island. For example, Christians are in the majority in Ambon. That approximate balance is rare in Indonesia but has existed in the Moluccan Islands since the 16th century. The two communities lived in close proximity. Traditionally, inter-faith relations were protected by a twinning system that linked Christian and Muslim villages.

The balance between Muslims and Christians has shifted, over recent decades. President Suharto implemented a transmigration policy forcing many to move from one part of Indonesia to another. The Church in Maluku has stated that the transmigration policy favoured Muslim rather than Christian migration to Maluku.

The two communities had lived peacefully side by side for many years before the outbreak of hostilities in and around Ambon in January 1999. Since then, sporadic outbreaks of violence have occurred in different parts of the territory, most recently in the northern province.

Although the violence between the two communities has been described in religious terms, the origins are more complex, as I know the hon. Gentleman recognises. Nobody can say with certainty why the violence broke out when and where it did. To a large extent, it should be seen as the product of the economic crisis of 1998–99 and an adjustment to the end of 30 years of authoritarian rule.

A combination of political changes at the national level in Indonesia, migration issues, local rivalries, land disputes, as well as religious differences, have all contributed. There are also rumours of provocateurs from outside the region. All those factors provided the tinder that ignited the violence.

The official death toll, as of 16 January 2000, since the break-out of violence, is 1,902. However, since mid-December 1999, more than 1,000 people are thought to have been killed in fighting in North Maluku which began between two opposing Muslim communities. The immediate trigger appears to have been an incident on Boxing day when a Christian bus driver ran over a Muslim, but there was sporadic violence throughout December involving both Muslim and Christian communities. Although it is difficult to obtain clear and reliable information—which the hon. Gentleman emphasised—about the situation in the islands, it is apparent that both Christian and Muslim communities have suffered many deaths and casualties. Both sides have been accused of committing attacks and of committing atrocities against the other, and property and places of worship on both sides have been targeted and destroyed in two waves of violence, the first in January and February 1999, the second beginning last August. In addition to the large number of deaths, many tens of thousands of inhabitants from different villages across the Moluccas have fled their homes. Official Indonesian figures suggest there may now be as many as 205,000 internally displaced people who have fled as a direct result of the violence, while the joint assessment report issued on 6 February suggests a total of 370,000, including 123,000 who have escaped to Sulawesi.

The most recent violence took place on Halmahera and Haruku islands up to the weekend of 5 and 6 February. Ambon, which has seen some of the worst incidents, has been relatively calm since the deployment of large numbers of fresh troops in January. Although there have been reports of over-reaction and partisanship from a few police and military units, generally speaking, the reports suggest that the police and military have played a positive role in trying to calm the situation. The death toll would now be far higher if police and troops had not been deployed or had been withdrawn from the province. However, we will take account of the hon. Gentleman's well-made points about partisanship.

We welcome the positive steps that have been taken recently to address some of the key problems. The policy of sending troops who have no personal connection with the region, as well as a more careful religious balance among the troops, has helped the situation. The regional military commander is a Christian and the chief of police is a Hindu from Bali. They have succeeded in stemming the violence in Ambon and are taking steps to stop the shipment of arms into the Moluccas and to prevent troublemakers travelling from island to island to stir up trouble. The security forces are reported to have sheltered thousands of displaced people. Restoring some security to the troubled islands is an essential first step that only the military can take.

I am interested in the points made by the Minister. Will he confirm that those who say that it is separatist battle are wrong? Will he also confirm that, although it is true that the situation has tightened up recently, some 1,000 white-clad jihad warriors have arrived in the area by boat?

I do not know the details of those allegations, but they should be registered. I do not mean "allegations" pejoratively, because the hon. Gentleman's comments and the reports have to be taken seriously. The reform of the military is a key theme for the new Indonesian Government.

The role of the Indonesian Government will be crucial in finding a just and long lasting solution to the troubles in the Moluccan Islands. My right hon. Friends the Prime Minister, and the Foreign Secretary and I discussed the situation in the Moluccas with President Wahid when he was in London last week, following the delegation to me, led by the hon. Gentleman. President Wahid reaffirmed his commitment to secure lasting peace between the two communities. We have no reason to doubt his sincerity to find a solution, and will support him vigorously in his efforts. However, we should be under no illusion about the enormity of the challenges facing the new president. He has inherited a country of huge diversity and huge problems, as the hon. Gentleman acknowledged. Separatism in Aceh, Irian Jaya and Riau, serious inter-community violence in the Moluccas, and extensive poverty in other territories present a host of regional problems. The Indonesian economy, which has been hit extremely hard by the Asian economic crisis and corruption, has yet to begin a sustained recovery. President Wahid took over a country with a poor human rights record, the legacy of authoritarian rule with which he is now trying to deal.

We are just catching up with the changes. A quiet, peaceful, democratic revolution has taken place in Indonesia. President Wahid is the first democratically elected president. In his short time in power since October he has released all political prisoners, appointed a civilian Minister of Defence, the first for more than 40 years, a Human Rights Minister, who is Acehnese, and an Attorney-General who is a committed human rights campaigner and an activist himself. Indonesia has renounced its claim to East Timor and withdrawn its troops from the territory.

The biggest challenge remains taking the military out of politics and establishing full civilian control over the military and the police. President Wahid has made important moves in doing that, such as signing a decree to retire Cabinet Ministers who are serving military officers from their military positions, which will take effect from 31 March, and appointing an admiral as head of the armed forces, an appointment that used to be held by the army.

We welcome those moves and the publication last week of the United Nations commission of inquiry report and of the Indonesians' own national inquiry into the appalling human rights violations in East Timor. The perpetrators of those crimes must be brought to justice, and we are pleased that President Wahid has shown such a strong determination to establish a credible domestic judicial process. We believe that President Wahid's democratic Government are fully committed to finding a fair and lasting solution to the regional troubles in the Moluccas and elsewhere in Indonesia, and we want to help that process in any way possible.

Like Indonesia, in Britain, we understand the tragedy of sectarian violence, and we have had to learn the painful lessons of fostering reconciliation between deeply divided communities. During the President's visit to London, the Prime Minister offered to share with Indonesia our experience of that process and of inter-communal relations in some of our major cities and urban areas. We can work together to share inter-faith dialogue, for example.

The hon. Member for Belfast, South has suggested previously that the answer to the violence in the Moluccas may lie in the establishment of a UN peace-keeping force to separate the two communities. As he acknowledged, however, no clear parallel can be drawn with East Timor, because the international community never accepted that East Timor was part of Indonesia, whereas the Moluccas clearly are part of Indonesia. Therefore no legal basis exists for international intervention in the Moluccas. As the hon. Gentleman said, intervention would have to be invited. Nor should a request necessarily be expected. In investigating lasting solutions to help the democratic Indonesian Government tackle the problem, we can work as friends of Indonesia, offering help when it might be useful to support the process, especially of community reconciliation. To that end, we fully support the efforts of the UN development programme, which recently conducted an initial mission to Maluku and North Maluku with the Indonesian Government, and this week presented a full needs assessment to the international donors.

Our ambassador in Jakarta, Sir Robin Christopher, accompanied the UN mission. The report was released only yesterday, and we shall now work with the Indonesian Government to assess what we can do to carry it forward. By agreement with the Indonesians, we shall build on earlier work done by the British Council in training community leaders in the Moluccas in reconciliation and conflict resolution techniques and in training the local and national Indonesian media, to which the hon. Member for Belfast, South referred, in reporting the conflict truthfully, fairly, and responsibly and without fanning the flames.

A group of Indonesian parliamentarians and journalists are in Britain this week as guests of the Government. The journalists attended a British Council seminar in Cardiff, and they and the parliamentarians are spending a week studying in detail the operation of the House, if not the Chamber. I spent some time with them yesterday, discussing the role of the media, the need for fair and truthful reporting and the relationship between the media and a modern democracy.

A key element in formulating a solution to the problems will be encouraging reconciliation between the two deeply divided communities through an inter-faith dialogue. We have been encouraged by President Wahid's determination to promote that. His own experience as leader of the world's largest Muslim organisation will be invaluable. He is widely respected as an Islamic scholar, as is his Foreign Minister. When they visited London last week, the need to raise an inter-faith dialogue internationally is something to which we could all contribute, not least because of our experience of British inner cities.

I welcome the opportunity to introduce a short debate on councils in negative subsidy and, in particular, the impact that the move to resource accounting for housing revenue accounts will have on those councils. Unless the current proposals are amended, they will have a dramatic and disproportionate effect on several councils whose stability will be threatened, as will their ability to cope with the programme of change and modernisation that the Government and local communities want to take place in local government. I am not having a general whinge that central Government are not doing enough for local government, but as someone who was a local councillor for 12 years until 1 May 1997, I can see the difference in what is happening now.

My local authority in Harlow has, for the first time, a local government settlement that has not led to central Government-directed cuts. It has seen the phased release of capital receipts and the replacement of compulsory competitive tendering by best value. All such measures have been welcomed; all of them were campaigned for by local government for a long time and all of them have been delivered by this Labour Government. Yet now, with the proposed move towards resource accounting, all those changes could be undone. It could, I fear, lead to cuts on a cataclysmic scale, and it is no exaggeration to use such terminology.

I shall describe the impact of the proposals on my local authority. If they were implemented unamended, there would be a cut of £3.1 million from Harlow's annual general fund budget of £12.4 million—a 25 per cent. reduction, leading to a slashing of services or a 55 per cent. increase in the council tax. I could not justify such a reduction or such an increase in the council tax. It is not as though my local authority and others in a similar position have had it easy over the past 10 to 15 years and have much fat and inefficiency to trim from the system.

Before the capping regime was introduced to small district councils when the de minimis provisions were abolished in 1992–93, Harlow had a budget of £24 million. Today, that budget is £12.4 million. I know of no other local authority in the country that has seen such a proportionate reduction in its budget. Having gone through the pain of that experience, difficult decision making, the impact of such action on the community because of the loss of services and the impact on the staff with significant numbers of redundancies and, finally, having felt that with a new Government we are on an even keel and we can go forward, now to be faced with the prospect of a further 25 per cent. cut in council services would be intolerable and unachievable.

I am not making a case for every council in negative subsidy, but I am making a case for Harlow and similar new towns, which, because of the nature of such communities, are in such a position. It is worth examining why such areas will be affected so dramatically by the proposed changes. I understand that the major part of the reason why Harlow is in negative subsidy derives from what the council did with some of its housing capital receipts in the 1980s. Some were used to reinvest in the ageing infrastructure of the new town in non-housing projects.

Why did Harlow and other new town authorities undertake such action? First, they had the money available from the sale of council houses. Secondly, there was no guidance from Ministers or civil servants that there was anything wrong in using the money for that purpose. In fact, the reverse was the case. The use of the money for that purpose was actively encouraged. Thirdly, new towns that have to consider that kind of approach face a particular problem. Unlike other communities, such towns are not masters of their own fate in terms of disposing of land and reinvesting the proceeds in regeneration. Major elements of our local communities are owned not by local councils but by the Commission for the New Towns—now CNT and English Partnerships—which has a specific mandate and direction from the Treasury to maximise the financial return on disposable assets. That generates £150 million for the Treasury per annum, largely without the community gaining. For those three reasons, councils did not have an alternative to what they did in the 1980s. It is therefore hardly surprising that that is how they spent those resources.

The nub of the problem is that that expenditure, and the on-going transfer of the interest from the notional use of capital receipts from the general fund to the housing revenue account, is a major part of Harlow's negative subsidy. That constitutes £1.4 million of the £3.1 million that I mentioned earlier. Without that statutory transfer, the problem would not be of the scale that we face today.

I assure the hon. Gentleman that that problem does not affect only new towns. I thank him for raising the issue on behalf of many other authorities, including my own in Runnymede, which are affected by the problem.

I am aware that it it not only a problem for new towns. New towns, however, have a special problem.

The problem was also created by the commuting of CNT debt in 1996. My local authority, and others, were not engaged in an activity of which the Government were not aware. The Minister wrote to the chair of Harlow's housing committee as recently as December 1998 on the issue of the transfer of the surplus created through negative subsidy from the housing revenue account to the general fund. He stated:

"the transfer from the HRA to the General Fund is intended to benefit the authority by recognising that its overall ability to spend in a particular year should increase by the amount of the surplus."

It is clear that, as recently as a year ago, Ministers and civil servants were aware of the practice, and, on the basis of that letter, endorsed it. The sudden removal of that ability, under resource accounting, would contradict what Ministers have said and done under this and the previous Government. I acknowledge that the Government understand that there is a problem. They have already talked about transitional protection, which is welcome. Given the scale of the problem that we are facing, however, that does not go far enough.

It is also worth while arguing the case in terms of the Government's objectives in moving to resource accounting. Their motives are contradicted by the way in which capital receipts in the 1980s would be treated under the proposed system. As I read the Government's intentions, they want subsidy for local authority housing to be regarded as a national programme. Assumed surpluses in subsidy calculation would be pooled and redistributed to authorities in assumed deficit. That would involve transferring resources from councils with less relative need to those with greater relative need.

The fact that negative subsidy exists is not an accurate indicator of lack of need. It is obscured and masked by the previous use of housing capital receipts for non-housing capital purposes in the 1980s. If Harlow had not used the money for that purpose in the 1980s, its negative subsidy would be reduced by more than £1 million. Under the proposed new system, therefore, the redistribution from Harlow to other local authorities would be reduced by more than £1 million. That distortion means that the system does not accurately reflect housing or other need.

It is easy to criticise a set of proposals. However, I am arguing that there should be more than transitional protection for those local authorities that have been affected substantially. A distinction should be made between local authorities that are affected substantially and those that are not. The Government's consultation paper identified a cumulative total of about £100 million in respect of councils with negative subsidy, but I have analysed the way in which that figure breaks down, and for local authorities that are substantially affected, the amount is much less than £100 million. For example, if the system were so amended that any local authority could not lose more than 10 or 15 per cent. of its general fund standard spending assessment, the cost to the Government would be much less than £100 million.

I would argue for a maximum percentage loss as a percentage of local authority standard spending assessment, and the Government should respond favourably to that. Clearly, it would have to be provided on an on-going basis through a permanent compensatory grant.

On the specific problem of the treatment of capital receipts in the 1980s, I urge the Government not to maintain the current statutory requirement of an item 8 statutory credit transfer for councils with negative subsidy. The Government should allow the notional interest gained from the use of those capital receipts to go to the general fund, rather than the housing revenue account. In my local authority, that measure alone would resolve £1.4 million of £3.1 million, and other new town local authorities would derive a similar benefit.

Substantial transitional protection must be provided for a number of years. The changes, which will occur in just one or two years, will have a huge impact on local councils and cause major problems. This might seem a rather arcane issue, but to judge by the number of hon. Members in attendance it has given rise to considerable concern. I hope that, in the long term, the Government's response will be positive, but I am saying on my constituents' behalf that we need help on this issue. The local authority in Harlow and authorities elsewhere are not to blame. They were simply doing something that the system had enabled them to do for many years. Ministers knew that they were doing it, and they were actively encouraged to do it in the light of circumstances. I see no reason why those local authorities—and, more importantly, their communities—should be penalised in such a dramatic way.

Good government is about pursuing sensible reform, and this Government are demonstrating that in a number of different areas. Sometimes, Mr. Winterton, sensible reform—

Order. In this Chamber, there are four hon. Members to whom reference should be made not by their names but by the titles, Madam Deputy Speaker or Mr. Deputy Speaker. I have hestitated to draw that to hon. Members' attention but, whether or not we merit those titles, that is the decision of the House.

I ask for forgiveness, Mr. Deputy Speaker. That goes to show that I should not listen to the radio programme "Yesterday in Parliament". According to last week's report on proceedings in Westminster Hall, an acting Deputy Speaker said that Deputy Speakers should be referred to by name. I apologise for my confusion.

Perhaps I can help hon. Members. On certain occasions, in addition to the four hon. Members who have been appointed as additional Deputy Speakers, senior members of Madam Speaker's Chairmen's Panel may also chair sittings in Westminster Hall. They are addressed as "Chairman" or by their surnames.

I thank you, Mr. Deputy Speaker, for that information. I am duly put in my place.

I was saying that good government is about pursuing sensible reform. Some kinds of sensible reform, which are otherwise perfectly desirable, may have unintended, adverse and dramatic consequences. The move towards resource accounting, and the impact on councils in terms of negative subsidy, is an example of that.

Is my hon. Friend aware that the council that stands to lose most in this respect is Dacorum borough council? Because of its huge overhang of commitments, almost every worthwhile project in my area is on hold, possibly for ever.

I am aware of that, and my hon. Friend makes a telling point. The change is like a sword of Damocles hanging over local authorities that are affected. It puts a stop to the kind of long-term planning and modernisation that I know that the Government want to see in local councils. How can we begin to undertake such modernisation processes if such large cuts, or increases in council tax, are to be borne as a result of the proposals?

I understand much of the rationale behind the Government's move towards resource accounting, but I hope that they recognise the unintended consequences that may result in terms of the scale of cuts that would affect my local authority and many others. I strongly urge the Minister to reconsider the matter and amend the proposals.

I congratulate my hon. Friend the Member for Harlow (Mr. Rammell) on his success in securing the debate, and his courage in raising the subject of housing finance, which is highly complex, as hon. Members who have been involved in it will be aware. He expressed those complex issues well, and it is right and timely that matters of concern to his constituency and elsewhere should be aired.

As my hon. Friend knows, I cannot give a complete or final answer to all his questions today, because we are currently consulting on the proposals, and it would be wrong for us to come to any decision before all those who feel that they will be most affected—such as his constituents—have had an opportunity to comment, and we have been able to consider their responses. However, I hope that I can respond to some of his concerns about the impact of our proposals on Harlow and other authorities in terms of so-called negative subsidy.

One of the problems with the present system of local authority finance is that it no longer meets the demands that are placed on it. We recognise that, and are committed to reforming it. Last year, my right hon. Friend the Minister for Local Government and the Regions announced proposals to improve the system. We propose to introduce resource accounting into the housing revenue account, and to change it to a purely landlord account. As always when such a change is being considered, it is the details, and how the details will affect people, that have to be worked through. We accept that. Concern about the effects of those details has been well expressed by my hon. Friend.

The purpose of the housing element part of the housing revenue account subsidy is to bridge any shortfall between notional income and notional expenditure in each authority. It covers expenditure on maintenance, management and debt charges, and other miscellaneous expenditure. The housing element also takes account of rental income and interest received by an authority on mortgages and investments. When we do the calculation, we find that some authorities have a notional surplus on their housing element, while others have a notional deficit. That means that there are more resources in some parts of the country than would be needed to provide a standard level of service, and too few resources in other parts of the country. In other words, there is an inequity in the distribution of resources.

We need a mechanism to allow us to transfer those resources to where the housing need is greatest. The mechanism that we currently use reduces another subsidy stream—the rent rebate subsidy—by the amount of any surplus, so there is an offset. That does not entirely work in the case of Harlow and about 60 other local authorities, because their notional surpluses are so large that they still have a surplus even when the whole of their rent rebate subsidy has been taken into account.

Authorities go into negative subsidy when they have very low debt or significant assumed investment income. Some authorities, for example, have a small number of properties in their HRA and there is perhaps significant income, often from the assumed investment of the set-aside resources generated by the transfer. Other authorities have a large and active HRA, but very little debt, and a below-average proportion of tenants available for rent rebate subsidy. As my hon. Friend said, authorities such as Harlow took responsibility for property from the Commission for the New Towns when it was wound up, but the debt that was transferred was commuted in 1996, so such authorities have relatively little debt. That is what creates the equation for them.

There is a legislative requirement for authorities in negative subsidy to transfer the amount of their remaining actual surplus into the general fund. The sums involved, as we have heard today, can be quite substantial for some of the 60 authorities. Nationally, we expect that about £100 million will be transferred from housing revenue accounts into authorities' general funds.

Those transfers can make a major contribution in individual cases to the amount of money that is available in an authority's general fund, which will either allow the authority to spend more than it could otherwise afford or allow the level of council tax to be held down. We expect some £3.3 million to be transferred in the case of Harlow in 1999–2000.

Our proposals for the changes to the housing finance system will also do away with that system. We believe that it is wrong that local authority tenants, who are for the most part among the poorest in the community, should subsidise the generality of council taxpayers in an authority. Such a cross-subsidy cannot in principle be right. I take my hon. Friend's point about the way in which that situation has developed over many years in constituencies such as Harlow, but that is not a justification for not doing anything about a cross subsidy.

In principle I accept my hon. Friend's argument, but will she bear in mind the fact that the 50-plus legislative change introduced during the last Conservative Government created a stack of cards? The problem that the Government face is that councils responded by pulling out one card. That has many dramatic knock-on consequences.

I accept that the situation of some authorities, such as Harlow, has arisen because of the actions of the previous Government, and that the authorities acted in good faith. Nevertheless, it is not right that a cross-subsidy should effectively be paid for by some of the poorest members of the community. My hon. Friend's arguments cannot be used as a reason for doing nothing. That is our starting point.

We intend to make two changes to the housing finance system that will first reduce and later end this cross-subsidy. The first step will be introduced in April 2001. From that date we intend to pay authorities an additional subsidy as part of their housing element, which will be called the major repairs allowance, the MRA. It will help to focus scarce resources on local authority housing repairs to maintain the value of those assets, and we hope that it will provide a more stable framework for housing authorities. We do not yet know how much money will be available for MRA—that depends on the outcome of the spending review—but it will substantially reduce the assumed surpluses on authorities' housing element. In particular, it will reduce, and possibly in some cases extinguish completely, the transfers that authorities in negative subsidy would otherwise continue to make to their general funds. We are consulting separately on the MRA.

Even when the MRA is paid, some authorities will continue to cross-subsidise council tax payers. That problem will be solved by the more effective mechanism that we plan to introduce to capture and recycle all housing element surpluses. We are consulting on that mechanism now. To introduce it would require primary legislation. Our objective is to pool the assumed surpluses on the housing element across all authorities, so that they can be distributed according to need. The change will mean that authorities in negative subsidy will no longer be able to transfer resources to their general fund; instead, they will transfer the resources to the pool for redistribution to other housing authorities.

Criticism may be made that those pooling mechanisms are not in principle correct and that surpluses are local resources that should remain with the authority. That may be at the root of some of my hon. Friend's points. We take the broader view that local authority housing is not a purely local service, although it is managed locally. It is a national resource and needs to be considered as such, not least because it is funded extensively by the taxpayer centrally. The financial structures must reflect that.

Does the Minister envisage that councils that are forced to transfer to the pool will keep their rents static and gradually allow the surplus to be eroded over time?

No. The equation that will produce the notional surplus or deficit for any authority will take into account not only rents, as it does now, but the proposed changes, including the major repairs allowance. It will be a different way of calculating whether an authority is in surplus or deficit. We need a system that can ensure that the best use is made of national resources that can be devoted to the housing sector. That means finding a way of allocating those resources to take account of relative need.

We realise that the introduction of the major repairs allowance and, in the longer term, the pooling mechanism, will have a significant effect on the finances of some authorities, such as Harlow and Dacorum, which will remain in negative subsidy even after the introduction of MRA. My hon. Friend the Member for Hemel Hempstead (Mr. McWalter) has explained some of the difficulties. To end the cross-subsidy from housing to council tax as soon as we introduced the new measures would cause difficulties for the authorities concerned. We want to address those difficulties.

As I have said, we are consulting on our detailed proposals for the changes to the housing finance system. As part of that consultation, we asked whether transitional arrangements should be introduced for negative subsidy authorities. I cannot pre-empt the results of the consultation, but my hon. Friend the Member for Harlow has made some important points and suggestions for that process. I know that a number of authorities have expressed concern that transitional measures would not be available from April 2001, but only at the second stage when pooling is introduced. I assure my hon. Friend that we have not ruled out the introduction of transitional measures from April 2001, when the MRA is paid for the first time. We need to consider both the form that such measures might take and the authorities to which they might apply, a point that my hon. Friend made clearly. We would consult on our detailed proposals for the transitional measures in due course.

I assure my hon. Friends that the Government are aware of the difficulties that they have raised. We have not ruled out transitional measures in the first phase of the introduction of MRA, but want the transitional arrangements to soften the impact as far as possible. Because of our longer-term objectives to produce a fairer housing finance system that relates national support to the areas of greatest need, this is a process on which we must embark. However, I am grateful to my hon. Friend the Member for Harlow for providing me with the opportunity to make the position as clear as I can. I assure him that we shall listen to the points that he and others have made and shall consult on them particularly on the arrangements for transition.