May I begin by saying how grateful I am to have secured the debate, given the competition with other hon. Members for debates in Westminster Hall? I am particularly grateful, as this is an opportune time to debate the subject.

In case anyone in the room does not know what a Tobin tax is, perhaps I had better briefly explain that it is a shorthand way to describe a tax on foreign currency exchange. It is named after Senator Tobin, a Canadian who devised the idea some years ago. I have tabled a parliamentary question on the subject, so I know the Government's view: they reject the idea on the grounds that

it would be almost impossible to achieve a global coverage, and there would be huge scope for avoidance.—[Official Report, 15 March 2000; Vol. 346, c. 188W.]

However, I am not sure whether the advisers in the Treasury are familiar with the work of some highly qualified people who believe that the proposal should be considered, as it is workable and could create enormous benefit worldwide.

A highly regarded economist and former adviser to the Canadian Government, Dr. Rodney Schmidt, recently attended a series of War on Want-sponsored meetings. He argued that, due to changes in technology and banking practices, a Tobin tax would be relatively easy and cheap to impose. He said that the tax could be applied to all deals through the settlement system, which tracks every trade and would be unavoidable. Evasion of the tax and the establishment of Tobin tax havens would be impossible. Dr. Schmidt's paper is available from War on Want. Even if his case were incorrect and the tax were not totally unavoidable, it would be largely unavoidable and should be explored.

An international group interested in the Tobin tax met in Cologne at the G8 summit in June. It heard that a more sophisticated version of the tax with a variable rate could be used to put a stop to the kind of speculation that undermined the south-east Asian tiger economies in 1997–98. A loose grouping of nongovernmental organisations and campaigning groups has set up an electronic bulletin board that will allow future research and co-ordination of activities. There are now many international Tobin tax websites, and War on Want can supply a list of those that it considers best informed.

The tax has political support. In this country alone, about 100 Members of Parliament from all the major parties have expressed support for it, and I congratulate my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) on his activities on the subject. The Trades Union Congress backs the Tobin tax, and a fringe meeting with my right hon. Friend the Secretary of State for International Development at last year's Labour party conference attracted more than 200 delegates. Thousands of War on Want members and supporters are keen on the idea, and it is no wonder that people are so interested. Levelled at a modest rate—say 0.25 per cent.-it could raise the astonishing figure of $250 billion a year to help fight poverty and calm down volatile markets.

Who would be upset if the tax were imposed? Apparently, HSBC, NatWest and Barclays are major players in the currency trading markets. Pension funds, hedge funds, insurance companies, trans-national groups and some rich individuals play the currency market. It would be interesting to know what profits are made from currency speculation. By way of a few examples, however, I learnt that NatWest made £432 million profit from currency trading in 1998 and that the Hong Kong and Shanghai bank claimed £2.3 million profit a day from currency speculation.

The volume of foreign exchange trading has grown over the years and far outstrips the amount necessary for trade. Up to $2 trillion a day is traded, but only 5 per cent. is necessary to finance trade in goods and services. If asked to consider the matter, most people would not believe that; they would think that currency speculation was to do with buying goods and services. However, very little of it is, and the rest of the $2 trillion represents speculative activity. In 1975, 80 per cent. of foreign exchange transactions were trade related.

Those who are busily engaged in mopping up so much money for no productive effort could easily cope with a small universal tax on their transactions. The banks already levy pretty hefty charges. The margin between buy and sell rates for foreign exchange is a sight more than 0.25 per cent, as we can see for ourselves next time we go on holiday and buy pesetas or drachmas. If banks can get away with that, why is it so difficult for Governments to tax currency speculators by a tiny amount? One argument is that the tax could reduce international trade by increasing costs. However, trade is an essential activity, so a small tax is unlikely to kill it. War on Want recommends a very modest rate of 0.25 per cent., but the level would be up for discussion if the principle were agreed.

Let us consider avoidance and evasion. At present, 84 per cent. of all foreign exchange transactions occur in only nine countries. We would not, therefore, need worldwide accord to create a workable tax regime. War on Want recommends that the tax should be created through an international agreement backed by national legislation and the national central bank should collect it when transactions occur. The setting up of a global settlement bank—the continuous linking settlement bank—in mid-2000 will make such taxation simpler to carry out.

It is hardly reasonable to argue that the tax will fail because speculators will find ways around it. Our current taxes present the same problems, but the fact that big businesses attempt to evade or avoid corporation tax does not prevent us from imposing it. If people were determined to evade a microscopic tax such as the Tobin tax, they would have to go to the considerable expense of carrying out their transactions in a non-Tobin tax country, which is likely to be more costly than the tax itself. It is a matter of finding the right level of tax, so that we have an effective deterrent against such a strategy. Besides, the money involved in evading the tax must come back into official world markets, and it could be taxed more heavily as a deterrent against such a ploy.

The Treasury's view is that there are already high transaction costs on speculation. The Government are taking measures to redesign the international financial architecture, but there is concern that the Tobin tax campaign could detract from them. In that case, we need to hear more about those measures and what they are intended to do. If they involve a tax, the Treasury has presumably found a way to overcome at least substantial avoidance and evasion; if they do not, what are they? Would they promote stability better than a Tobin tax? Would they raise a large sum as cheaply and easily as a Tobin tax? Could they help to create a substantial fund for international development and to support countries through disaster relief? If the Treasury's proposed measures are all those things, I hope that we shall soon hear about them; if they are not, I wonder what reasons it has for introducing them.

Granted, there may be technical difficulties with the Tobin tax, but the issue remains whether the tax would offer a nation or the globe greater net benefit than leaving the problem unaddressed. Has a better alternative somehow escaped our attention? The European Union funds its infrastructure through a supranational VAT collected by each member state, with each state keeping 10 per cent. of the revenue that it collects. If that can be done, why is a Tobin tax so difficult? It probably comes down to this: do we believe that we should have an international economic order based on openness, multilateralism and co-operation? If so, how will we create it? Global wealth is increasing by hundreds of billions of dollars every year. The funds and the knowledge exist to end absolute poverty and conserve our planet. Will we allow the greed of the few to override the needs of the many?

On that subject, I will quote from an article sent to me by Mr. Gary Brisley, a senior currency trader at NatWest for several years, in which he says:

Speculation does not arise because of market consensus about economic fundamentals. That is just a fantasy story created by the markets to disguise the ugly truth of what they really do. In fact, the majority of traders have very little economic expertise at all. What dealers have is a gambler's instinct for a one-way bet and a quick profit. To be frank, they would be equally at home plying their trade in a Las Vegas casino…A speculation tax would be the first step on the road to restoring some sanity to a global economic madhouse run by a minority for a minority.

To conclude, it is always possible to find reasons not to do things. If we want to find reasons to explore the Tobin tax, we are not short of them: there is massive world poverty and there are huge environmental problems. Millions of dollars in relief are required to cope with disasters. If another way exists to raise money globally for such endeavours, let us hear it. However, we should not dismiss out of hand a proposal that has a huge amount of expertise behind it. For that reason alone, the Tobin tax demands serious investigation.

I congratulate my hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) on securing a debate that is of key significance and importance, and I am pleased to take part in it. I approach the subject as someone who has been fortunate enough in recent years to make Commonwealth Parliamentary Association visits to sub-Saharan African countries Zimbabwe, Malawi, Tanzania and Ghana. We can observe nations and developments from afar, but visiting places, meeting people and seeing the circumstances in which they live are of vast importance in shaping people's attitudes about what needs to be done in the modern world.

However, I will start by mentioning Arthur Schopenhauer, a 19th-century German philosopher, who became known as the philosopher of pessimism. He subverted Leibnitz's phrase and said that everything is for the worst in the worst of all possible worlds. If Schopenhauer were alive today, he would find plenty in third-world nations that would allow him to add to that analysis of despair, such as the floods in Mozambique and the horrors experienced by people trying to survive in those circumstances, starvation in Ethiopia, and ethnic cleansing and its consequences in Kosovo. Those are just today's recent problems that we have all observed on television screens in our living rooms.

However, the media misses and never observes much suffering elsewhere. For example, last year's massive problems in Somalia did not hit our screens. There is poverty, exploitation and environmental deterioration in much of the third world. Because of its extreme poverty, few trees are left in Malawi. It has no source of fuel and is open to environmental devastation as well as serious economic problems with its future energy supplies.

Adverse economic and social conditions lead to collapse and conflict throughout the world, even in slightly more advanced nations than the third world. I am sure that economic problems and international indebtedness were major factors in the break up of Yugoslavia. The problems in Northern Ireland could surely be tackled more readily if there were an improvement in economic and social conditions. Nation after nation in sub-Saharan Africa is caught up in indebtedness and we are thankful that the Government have taken a lead in tackling international debt. Christian Aid and others rightly want the Government to go further and their campaigns should be noted carefully by the Treasury. The Government can pick up and run with the Tobin tax and take the moral lead. They can tackle the problem of indebtedness.

Third-world nations suffer adverse terms of trade in, for example, coffee or timber—or even gold, in the case of Ghana. When its price falls on world markets, masses of people in the gold mines near Kumasi become unemployed. When one job goes in a gold mine, six other jobs within the community disappear. We always said that if one job went in a coal mine here, two other jobs would go, but, given the nature of African society, the loss of one important job will lead to all sorts of other consequences for supply and services.

The International Monetary Fund and World Bank programmes insist that there should be privatisation, balanced budgets in third world nations and free trade, although free trade may destroy indigenous commercial developments and result in the need for protection. They are called structural adjustment programmes and are forced on Governments who, surprisingly, are often still dominated by parties that previously ran a one-party command economy, as in Tanzania. Such programmes have been operated in extreme circumstances outside the control of those Governments, and are now being driven into other areas. We should be more careful about that.

Unlike Arthur Schopenhauer, we should not just throw up our hands in despair and horror, and say, "That is the nature of life and it is how things will be. One problem will be built on another." It is time for the politics of optimism. That has been shown by the Government's response to the Jubilee 2000 campaign on dealing with debt. At the very least, we need to consider ways of raising massive resources to tackle environmental, economic and social problems in the third world. Those nations should be allowed to facilitate their own development, unhindered by the problems that the more advanced section of the world has sometimes created for them.

The Government should seriously investigate the possibilities of the Tobin tax—I hope that they take that message from the debate and put the issue on the agenda. There is no ready-made solution, and we do not know all the ins and outs of how the tax would work. The principle is worthy of investigation and serious study, however, and our Government, in association with some of their partners around the world, should consider it fully. A lead should be given on accepting the tax and international agreements should be made to ensure its operation.

An increasingly wide range of commentators and politicians across the political spectrum argue that a relatively small tax of 0.25 per cent. on currency trading—the figure mentioned by my hon. Friend the Member for Maryhill—could dampen currency speculation and raise enormous revenues. If it dampened that speculation entirely it would obviously not raise those revenues, but we cannot realistically believe that it could achieve that. We are not ready to overcome speculation in the modern world, but let us draw on it for resources to help the poorer nations to whose destruction it contributes.

War on Want, which leads a campaign for the tax, estimates that even such a small tax would raise up to $250 billion a year. Those revenues could be used to tackle global poverty and environmental crises. Eradicating the worst forms of poverty in the world and providing basic health care, nutrition, education, water and sanitation would cost $80 billion a year. A further $125 billion a year could be used to address environmental problems. The Guardian has estimated that providing universal primary education would cost only £8 billion a year. We are committed to advancing basic educational provision throughout the world.

The implementation of the Tobin tax would not all be plain sailing. We would need an acceptable international organisation to distribute the resources. Some have mentioned the United Nations in that context. The IMF, despite its problems, is another possibility. We will need a universal regime to prevent traders from migrating elsewhere. There is the rub, however. Traders use sophisticated computer systems to prevent their partners from ratting on deals, and those procedures might be adapted to prevent tax evasion. Furthermore, 80 per cent. of the speculation is undertaken in seven countries, and most transactions take place in a few large institutions. Respectable banks and brokers' houses might not wish to buck a popular tax, which is seen as a tax on sin and undue speculation.

It is probably naive to believe that there could be total enforcement, but that is a problem with all taxes and laws. The most important issue faced by Tobin advocates is the resistance to it from international capital, and the need for an international political organisation to roll in the speculators. We should have the will to do those things and press for them. The Government should view Tobin's aim as a noble one, which can uplift and encourage younger generations to believe that a decent, honourable world can be built. Those of us fortunate enough to live in the richer parts of the world should play our full part in that.

Support for the Tobin tax has been growing in the past decade. There is an increasing ferment of support in France, with about 14,000 people signing up to a campaign in the past year and organising demonstrations. The Canadian Parliament and the Finnish Government back Tobin, as does the Socialist International, together with many MEPs, whose recent motion on Tobin in the European Parliament failed by just four votes. A French parliamentary committee is investigating Tobin and two of its members have come to the Commons to discuss the issues with me. I am pleased by those developments.

My hon. Friend the Member for Maryhill referred to early-day motion 312 on the Tobin tax, signed by 101 Members of Parliament from all political parties and none. Several ex-Ministers have also signed it. The Tobin tax is clearly understood and has much going for it in the Commons. I hope that we shall hear more about the campaign, which is being led by War on Want, just as we heard more and more about the Jubilee 2000 campaign.

The Tobin tax is not a panacea, but progressives should raise their sights and seriously consider the fact that it would kill two birds with one stone by curbing a certain amount of currency speculation and tackling global poverty and global warming. I hope that the Government will take a lead on this key issue, at least by pursuing a full investigation so that, in the concluding words of the early-day motion, they

discuss the concept with its partners in international organisations such as the World Trade Organisation, the IMF, G8 and the European Union with a view to drawing up an internationally coordinated and feasible tax regime for currency speculation.

My hon. Friend the Member for Maryhill said that she had received a parliamentary answer saying that the Government did not favour the tax because they feared that there would be massive evasion. When I took a delegation of MEPs and representatives from War on Want to meet the Economic Secretary, we heard another argument: that the Treasury is engaged in an alternative programme to tackle currency speculation. That is welcome, but it is mistaken to claim that the Tobin tax would cut across and destroy such alternative measures.

It is obvious that a lot of work would have to be done before there could be a Tobin tax and serious agreements would have to be reached. That is some way in the future. Although the Government's programme of tackling currency speculation is an important step, we all know that ways will be found around it, as ways will be found around Tobin. Tobin could block those avenues and be additional and complementary to the Government's intended measures, not in conflict with them.

I hope that the Minister will respond positively today, because this is one of the most worthwhile measures that the House can consider. We are talking about an improved international order and a world of greater prosperity and improved trade. That is obviously in our interests too. However, Tobin should be initiated not for those reasons, but to tackle the manifest problems in the third world and to prevent the increasing occurrence of such hideous scenes. Having taken the lead in tackling international debt, and with the Department for International Development's good record, the Government should be at the forefront of these measures.

I add my thanks to the hon. Member for Glasgow, Maryhill (Mrs. Fyfe) for introducing this useful debate. The Tobin tax is in danger of becoming a bit of a mantra, so the arguments should be properly set out and debated. I have mixed feelings about it. I normally sign most of the early day motions that come from development lobbies, but I have not signed this one as I have genuine concerns about what it means. I am not sure that the tax is a good successor to the Jubilee 2000 campaign.

As the hon. Member for North-East Derbyshire (Mr. Barnes) pointed out, Jubilee 2000 was a powerful movement. It brought together a strong moral purpose with a practical mechanism that everyone recognised debt reduction and helping poor countries to revive growth through the Paris club and official aid write-offs. The new campaign is not in the same league. It is tantalising. We are talking about vast sums of money that could be mobilised, but the mechanism is illusive. I may be damning the proposal with faint praise, but I am concerned about the idea simply running without being properly thought through.

I have a little bit of background on this. I worked a few years ago with the world Commission on Global Governance, a body set up by the Secretary General of the UN. It appointed Ingvar Carlsson, who was then Prime Minister of Sweden, and Sonny Ramphal, who was the head of the Commonwealth, to bring together a group of people to look at how the multilateral system could be sustained and financed in the long term. One of the ideas that was thrown up was the Tobin tax. There was a great deal of enthusiasm for it initially, but as we began to rub up against the practical problems, the strongest conclusion that emerged was that it should be studied further. I am a little concerned that five years further down the track we are still at the same level of argument.

How far are the views that the hon. Gentleman is expressing the views of the Liberal Democrat party? He is presumably here to speak on behalf of his party. I had understood that the Liberal Democrats were likely to take a lead on the Tobin tax and were coming out in favour of it, in line with the arguments that my hon. Friend the Member for Maryhill and I have presented.

I am speaking as my party's spokesman. We had a good debate on the issue as part of a wider discussion on the problem of globalisation at our conference a few months ago. The Tobin tax concept was on the agenda as being worth considering, but we do not advocate it as a hard-area policy. I do not want to be destructive or to knock it down, but I shall set out its practical problems, although if someone can show me how those problems can be overcome, I shall be happy to advocate the tax.

The first difficulty is the rationale of the proposal as it relates to the workings of the foreign exchange markets. Tobin's original proposal emerged from the confusion and chaos after the breakdown of the Bretton Woods system and the collapse of the dollar in the early 1970s. It was necessary to find another, stable alternative to the exchange rate system that had operated for most of the post-war period. However, for most of the following quarter of a century we have staggered from one type of system to another, with many episodes of speculative capital damaging national economies: the history of the Asian crisis is one example.

The lesson from experience, after reflection on the history of the period, is that in a modern, globalised world where capital flows easily, only two types of system work. The first is irrevocably fixed exchange rates, such as those in the European monetary union, where there is no speculative capital, because there is nothing to speculate on. The advantage of that system is complete stability and predictability, because foreign exchange rates are not volatile. That is the future of the EMU.

The alternative is the other extreme: allowing currencies to fluctuate in the market, as the yen, the dollar, the euro and sterling do at present. For those currencies, a large liquid market for foreign exchange is an advantage. "Speculators" is a pejorative word, but those who buy and sell foreign exchange in such a market contribute to a stable environment in which speculators are not given a one-way bet, as they were when sterling was pegged, or in the Asian market.

The Liberal Democrats believe that there are serious problems with the sterling exchange rate, because sterling is seriously overvalued. It is not unstable; sterling is extremely stable compared with its main competitors. Speculators are not creating problems for sterling on a day-to-day basis. The problem must be tackled by considering Government policy, interest rates, intervention and so on.

Other countries are also worried that they will have insufficient currency if their currencies are driven up to unsustainable levels by what is misleadingly called the Tobin tax. Chile is often cited as an example of how a tax on the inflow of foreign exchange can have a beneficial effect. Chile intervened to stop inflows of capital; it is true that it imposed a tax, but it was a tax not on foreign exchange transactions as such, but on the inflow of capital, which is different. The Germans and the Swiss also imposed such a tax for a while, but they, too, had to abandon it because it could not operate within the system of exchange control freedom.

The fundamental practical problem is how to operate a Tobin tax, especially in OECD countries, when there are no exchange controls and traders are not required to record their business. There is thus no paper trail and no links connecting countries' central banks with foreign exchange transactions.

The hon. Member for North-East Derbyshire made a brave attempt to describe how the settlement system could be used as a base for calculating the tax. I am not sure how that would work, because foreign exchange dealings, more than any other, are very mobile. If there is the slightest difficulty in the market, the transactions are simply moved to the Cayman islands, Luxembourg or somewhere else. Even if the Bank of England were somehow to get hold of and tax the transactions in London's foreign exchange markets, it is not clear how such a system could be made to stick. In the past few years, we have moved from paper-based trading to electronic trading, which is even more difficult to track, and even if one accepts that it is fundamentally undesirable for people to buy and sell foreign currency, it is difficult to understand how the system would work. Could somebody plausibly explain how it could be made to operate?

I will not embark on a dissertation on precisely how the system would operate—no doubt to the hon. Gentleman's great relief. Does he accept that people with enormous expertise have believed for years that the tax can work and have argued for it? All that my hon. Friend the Member for North-East Derbyshire and I ask is that the proposals be given thorough consideration. Let us hear the arguments and not push them aside because they seem difficult. We should have a proper debate and examine the proposals made by people who are convinced that they will work.

Put like that, the hon. Lady's argument makes a lot of sense and we have much common ground. I, too, would like the proposals to be studied properly. The hon. Member for North-East Derbyshire described a world in which settlement systems could be monitored and made subject to a sort of stamp duty. It would be interesting to find out whether that proposal could be described in practical terms and be shown to be operable in Britain in co-operation with other countries. I have no wish to slap down the idea of further research, because it is desirable. If that results from the hon. Lady's initiative, I shall be delighted.

My concluding comments support her arguments a little more. I accept one of her basic propositions, that people who make much income from foreign exchange should be taxed on it. However, there are different ways of taxing. The capital gains tax regime is meant to tax people on their large capital gains winnings from dealing in foreign exchange or from other activities. Equally, banks that make substantial profits should pay tax on their income. Those who have read the Cruickshank report will know that he defines excess profits in the banking system. Maybe that should be taxed additionally. I have no quarrel with the idea that income generated from foreign exchange business represents a taxable base, although that is not exclusive.

I am not particularly opposed to the other avenues of taxation described, but is not the problem with that argument that capital gains tax and other taxes would be pulled in by each nation's Treasury? They would not create a pool of funds for international institutions to use, as the Tobin tax would.

The hon. Gentleman raises a valid point, and I will conclude on that issue. Clearly, additional resources are needed for development assistance and multilateral initiatives, which could include peacekeeping and policing the global commons, the oceans and the Antarctic, which are not the property of any country. However, the Tobin tax argument worries me, because it creates the impression that there are vast sums of money out there that can easily be captured for a global body, whereas it is very hard work for us to raise money for aid. I am strongly in favour of countries raising their levels of aid to match a figure such as the United Nations target. It would be desirable for some of that money—I would argue for a high percentage-to go towards general global initiatives from bodies such as the World Bank.

There is no shortcut round the hard political task of persuading people in rich countries that they should take such decisions and make painful trade-offs against other public expenditure. The Tobin tax debate gives the impression that there is an easy option—a vast sum of rent waiting to be collected—and a shortcut to avoid the political necessity of raising capital for aid, for which I would argue strongly.

I am sorry to intervene again, but I am curious about the dismissal of the notion that there are vast sums of wealth out there. The hon. Gentleman may remember that I mentioned that the Hong Kong and Shanghai bank claimed, in 1997, that it was making £2.3 million profit each day from currency speculation. Those who benefit to such a huge extent are better able to pay towards the reduction of international debt and meeting UN targets than, for example, a Govan shipyard worker.

That may be true, but the Tobin tax is not necessarily the best way forward. If it is true that the Hong Kong and Shanghai bank is making vast profits, there is a way of taxing it. As a British bank, it will pay British corporation tax and its British shareholders will pay income tax on their dividends. Moreover, if, as the Cruickshank report says, British banks are making excess profits, a case exists for the Financial Secretary and his colleagues to find a way of taxing them. However, that is a different argument from that of the Tobin tax.

I accept the necessity for additional resources for worthy causes. Aid given through national aid budgets and multinational agencies is important and must be supported. Although it is a little further down the track and more difficult, an argument also exists for raising money for the United Nations system in a less precarious way than the current means of funding peacekeeping and other international agencies. One of the proposals that has been considered—like the clever way devised by the Treasury to auction mobile phone licences—is to derive a modest amount of income for the UN by auctioning licences for the geostationary orbit, for high-orbital televisions stations. Those fall outside national jurisdiction—they are a genuine global commons—and the income could be used for multilateral purposes. I do not know whether that is more practical than the Tobin tax, but such proposals could be used to realise income for international agencies such as the UN, the IMF, the World Bank and the World Trade Organisation. I do not discount putting the Tobin tax into the pot of ideas and researching it seriously, but I am cautious about whether it is an easy option, or whether it is ready for a substantial campaigning initiative. We have not reached that stage. I apologise to the hon. Member for Maryhill if I seem to be damning her with faint praise. I agree with much of what lies behind her proposal, but the practicalities and some of the economic reasoning appear, at first sight, to be seriously flawed.

I also congratulate the hon. Member for Glasgow, Maryhill (Mrs. Fyfe) on securing a debate on this subject. It raises separate issues, which do not necessarily follow each other. One is whether developing economies should raise and direct more money for international aid, to relieve the economies and suffering of countries that are insufficiently developed economically. Other questions are whether a Tobin tax on exchange rate transactions would be effective in producing a more stable currency regime, whether it would have undesirable side effects and whether it is practical. The two parts of the argument do not hang together. If it were practical to levy such a tax, it would be necessary, as many people have pointed out, for each country in which the tax applied to agree that the revenue raised would be placed in an international pot. In the event of genuine differences, they could agree to using any tax revenue—even, perhaps, VAT. There is nothing magic about revenue on foreign exchange dealings.

Mr. Winterton—

Order. The occupant of the Chair in Westminster Hall is called Mr. Deputy Speaker or Madam Deputy Speaker.

I apologise, Mr. Deputy Speaker.

I declare an interest in that, in 1988, I wrote a book with the rather pompous title "All You Need to Know About Exchange Rates", which nevertheless sold 15,000 copies worldwide. It was a history of exchange rates, explaining how they operate under floating regimes. At business school 30 years ago, heralding the end of Bretton Woods, my major was on how businesses manage their exchange rate exposure. In 1980, I pioneered the concept of the managed currency fund for use by individual investors, which manages a basket of currencies much like a central bank manages its currencies.

To some extent, every Member of Parliament has an interest, in that we all have beneficial interests in the House of Commons pension scheme, which, like every other pension scheme, is a major activist in foreign exchange markets. Every time it buys or sells investments in other parts of the world, it enters into a foreign exchange transaction, as it does for every dividend that it receives on such investments.

The argument that 5 per cent. of such activity is trade and the rest is speculation is inaccurate. The great bulk of such activity arises from the fact that investments, whether they are United States, UK or Dutch pension funds, are now managed and invested internationally. Every activity associated with pools of financial assets that are managed internationally results in a foreign exchange transaction. That represents much of the activity in financial markets.

The standard argument against the Tobin tax that has been echoed by the Secretary of State for International Development and two recent Economic Secretaries to the Treasury, including the current one, is that it would not be practical. The broadly accepted points that follow from that argument are that such a tax would need to be global and to cover all instruments. I shall not repeat the arguments advanced by the hon. Member for Twickenham (Dr. Cable) about the need for such a tax to be global, but covering all instruments would be tricky. In today's world of derivatives, it is easy to cover currency positions without buying currency or an instrument denominated in a foreign currency. That is a practical issue to which few people have given thought.

Tobin's proposals appeared following the end of the Bretton Woods era. Some people look back on the end of that era as a terrible event, but in fact its breakdown was inevitable. Bretton Woods was a crude system that worked okay after a major world war, when economies were essentially closed and relatively unsophisticated and undeveloped, but it could never have sustained what has happened since. Indeed, as the hon. Member for Twickenham said, all respectable economists have ultimately concluded that the only choice is between a currency bloc—such as the dollar bloc, which extends well beyond the United States, or the euro bloc—or freely floating exchange rates.

When people refer to the emotive subject of currency speculation and profits made by the Hong Kong and Shanghai bank, the biggest bank in the world, some misunderstanding is involved. Ultimately, there are no net winners. If someone makes money out of buying a currency that increases in value, someone else has lost. If everyone in the participating arena is included and costs to central banks are taken into account, there are no net winners resulting only from exchange rate movements. The banks' profits derive mainly from the margins—often small margins—that they add when they enter transactions with clients. That is not necessarily an argument against the tax, but the perception that pots of gold can be had from currency speculation around the world is not accurate. Some win and some lose, but the net effect is no winners through changes in exchange rates alone.

Will the hon. Gentleman clarify whether he is in favour of the principle of taxing currency speculation if all the difficulties could be ironed out? Or does he wish to draw attention to numerous difficulties in order to prevent any such tax being levied?

I thank the hon. Lady for her point. I was about explain that I have more fundamental objections of principle to the tax proposals. It is perhaps a nice but impractical socialist idea that echoes back to Harold Wilson and the days of the gnomes of Zurich. Reading between the lines, the Treasury has the same view. It may give polite reasons why it is not practical, but it does not believe in the idea.

I shall explain why I am uncomfortable in principle. The two objectives of Tobin were to make exchange rates more stable in order better to reflect economic fundamentals and to support the autonomy of nations in the running of their monetary and economic affairs. On the first issue, a Bank of England study on stamp duty arrived at the conclusion that the effect of a Tobin tax would be neutral. A US study further suggests that the larger the markets and the greater their liquidity, the better the stability. If a Tobin tax substantially reduced the volume of transactions, it could increase the scope for volatility.

What does the hon. Gentleman think about the size of the Tobin tax? A tax of only 0.25 per cent. might not have the impact that he fears, or is he arguing that it is the thin end of the wedge—that once the tax is introduced, it will be increased later?

My point arising from the Bank of England study on stamp duty was that a marginal tax might have little or no impact. If there were a discernible impact, as a result of either a low tax level or subsequent increases, my point of principle was that reducing the volume of transactions—Tobin's objective—would not lead to greater currency stability.

I wish to deal with studies of the UK's membership of the exchange rate mechanism and of what happened in Asia. Before I do, let me repeat that the participants in foreign exchange transactions are not a limited number of rich individuals and banks who sit around gambling all day. They are mainly the huge volume of savings funds, pension funds, corporate moneys, companies covering their assets as well as their trade, and so forth. During the bounce back in Asia last year, Asian central bank reserves increased by about $80 billion over just a few months. As I said, there is an inaccurate conception of what the currency world is about.

Under floating exchange rate regimes, there is reasonable stability until something gets seriously out of line. That is when substantial speculative activity occurs. The change in the exchange rate is a steam valve that corrects things that have gone wrong economically. A classic example is 1992, when we were getting into a worsening recession because our membership of the ERM meant that we had to have rising interest rates when we needed falling interest rates. Germany needed higher interest rates because of the post-unification boom. Hon. Members will recollect that that was a painful period—businesses were going bust, people were losing their houses and so forth. On what some people describe as black Wednesday and others describe as white Wednesday, sterling broke out of that straitjacket as a result of massive speculation, bringing huge economic relief to this country. The economy recovered strongly from that day onwards, and we were rescued from something that was causing us grave economic damage.

In the wake of the Asian crisis, many fine development economists came up with theories suggesting that it was a tragedy that should not have happened and asking what we could have done about it. However, Asia has bounced back completely in the past two years, with growth rates of 8, 9 and 10 per cent. Like the UK, Asia got into an impossible position by having managed exchange rates and not allowing its currencies to float up and down according to economic pressures. In the early 1990s, the Asian economies should have allowed their currencies to strengthen to ward off overheating pressures, and in the mid-1990s they should have allowed markets to weaken their currencies. The mistake of trying to manage exchange rates led to participants in the Asian economies borrowing heavily and relatively cheaper in dollars, depositing the proceeds in their local currencies, making a large interest rate margin and believing that they could go on doing that for ever without trouble. Of course, that was nonsense. The banking, lending and Government systems were not on top of the situation, but the explosion that occurred is leading to a considerable correction of the problems. We no longer hear calls for a change in the system of floating exchange rates, because Asia has recovered. Good has come out of a crisis that happened, mechanistically, at a peak period of currency speculation.

The crucial issue is whether one wants to raise more taxes. There is potentially an argument for the Tobin tax as a source of raising tax. That would no doubt appeal to the Government, who have thought of many new ways of raising tax. It is also argued that, if the tax were modest, its impact might not be too detrimental to the effective working of currency markets. However, the big issue is whether this country and the world want to raise tax revenues in this area. As the hon. Member for Twickenham argued, and as Ministers have noted previously, the question is whether the proposal is practical and whether one could have a wholly global tax-raising system in the world of today's electronics.

Paper currencies are no more than the common stock of the economic areas—the countries—that they represent, and there is no more of an argument for taxing transactions in that asset than there is for other stocks. There is a good argument for taxing transactions in commodities, as commodity markets work in a similar way to exchange rate markets. That is also increasingly true of labour, especially highly skilled labour, which is a global commodity that buys and sells itself, not only through pay remuneration, but with transfer fees.

There is a point of principle—why tax one stock and not others? The closest comparison is with ordinary securities, for which stamp duty acts as a turnover tax. As the Minister will be aware, there is growing pressure to end United Kingdom stamp duty on security transactions, because they can be undertaken without stamp duty in other parts of the world, including Germany. The revenue will dwindle to nothing if stamp duty continues. I do not argue the case for or against stamp duty, but economic forces tend to be against measures such as stamp duty and withholding tax.

The concept has been debated on and off for nearly 30 years and has had support from time to time in the wake of exchange rate crises and from those who believe that economies should be controlled and managed by Government, so it is not new. It has not been taken up, largely because of its impracticalities. Moreover—this is my underlying point—why should we put a turnover tax on one commodity and not do so more widely? The Government will argue that it would be nice, but it is impractical. There are much more effective ways for the United Kingdom's people and Government to assist the developing world. Currencies are a common stock; countries that have problems with their currencies have badly managed economies and bad systems of law and banking. We must do something about those fundamentals. Money will not help by itself. Pulling together to do more for developing economies is a decent and Christian cause, but it does not emerge out of the Tobin proposal. The Tobin tax runs the risk of spreading the illusion that there is a pot of gold of immoral speculative profits that can be tapped to answer the developing world's problems. The reality is not like that at all.

We should not continue without remembering that the Conservative Government failed to match the United Nations target for aid and allowed our aid budget as a percentage of GDP to fall. Far from exploring what useful alternative there could be to a Tobin tax, they showed that they were not interested.

I thank the hon. Lady for her comment. A great deal was done in the voluntary sector during the years of Conservative Government. I am not aware that this Government's record has been significantly different. Encouraging the voluntary sector is the most effective method of helping to develop economies, but we are arguing not about party politics, but about the principles of the Tobin tax.

In conclusion, the Tobin tax would be unacceptable to the United States. Whatever we or Japan may think, unless the US changed its views, the tax could not become a practical reality.

I shall be brief. I apologise for not having been here at the start of the debate. I was on a minor mercy mission—I saw a dog locked in a car in the car park and thought I should find someone to open a window for it.

I agree with almost everything that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said. The Tobin tax is almost certainly wholly unworkable. Even if it were not, it would be unattractive, because it is not clear that a reduction in the total amount of exchange rate flows would result in decreased exchange rate volatility; it might increase volatility. Many of the advocates of the tax also seem confused about whether they are seeking to create a tax base or to reduce exchange rate volatility.

The hon. Member for Glasgow, Maryhill (Mrs. Fyfe) spoke about aid flows. Aid is more or less irrelevant to the development of most of the third world. The key issue is total trade and investment flows. Investment flows have rocketed as a consequence of globalisation and huge parts of the third world have experienced massive increases in GDP per capita over the past 20 years on the back of those increased capital flows. That has had nothing to do with state aid or activity. That is not to say that I oppose an aid programme. I support one, but we should not think that such a programme has much to do with long-term economic development and prosperity. For most of the countries involved, it is at best peripheral. I even have sympathy with some points—others of their points are confused—made by the demonstrators who were waving banners against the World Bank in Washington this week.

The only point on which I disagree with my hon. Friend the Member for Arundel and South Downs is on exchange rates as a pressure valve. They are a pressure valve only in that they can absorb short-term asymmetric shocks. All too often, advocates of free floating argue for exchange rate adjustments that then become a substitute for more fundamental adjustments—in real factor prices rather than in nominal terms—in the real economy that should have taken place anyway.

My point was that exchange rate crises force adjustments as well as correct an incorrect exchange rate, but the forcing of adjustments is the important point.

They may force or they may delay adjustments. As we saw in the UK during the 1960s and under the Bretton Woods system, devaluations are often a substitute for real economy adjustments that would inevitably have to take place anyway.

I shall be interested to hear how much the Treasury deviates from the line predicted by my hon. Friend the Member for Arundel and South Downs that, although it may wring its hands a little, it is as opposed to the Tobin tax as the Opposition are.

It has been an interesting debate with several thoughtful contributions. I will do my best to emulate the high standard that we have heard.

I congratulate my hon. Friend the Member for Glasgow, Maryhill (Mrs. Fyfe) on securing the debate, which has allowed discussion of a subject that is currently of widespread public interest.

We are all aware of the damage caused by recent turmoil on the Asian markets, referred to in the characteristically well-informed contributions of the hon. Members for Twickenham (Dr. Cable) and for Arundel and South Downs (Mr. Flight). The scale of poverty in large parts of the world was tellingly described by my hon. Friend the Member for North-East Derbyshire (Mr. Barnes). It is no surprise that James Tobin's 1978 proposal has been the subject of such widespread new interest. We have been talking about it for 22 years, rather than the 30 years mentioned by the hon. Member for Arundel and South Downs, but it has certainly been around for a long time.

As my hon. Friend the Member for North-East Derbyshire said, we have taken a lead in addressing world poverty. We have a markedly different record from that of the previous Conservative Government, to correct the point made by the hon. Member for Arundel and South Downs. The aid budget will rise by 28 per cent. in real terms over three years between last year and next year. We are now seen as a pace setter in international development. I greatly welcome public debate of such matters, of which today's debate is an instance.

The turmoil in Asian markets highlighted some weaknesses in the global financial system. We share the aspiration for more stable capital markets, which are better placed to deliver the economic growth and development that so many nations are crying out for. The key question is how best to achieve that.

It has become fashionable to disparage globalisation. However, we should remember that the increased cross-border activities during the second half of the previous century—trade, capital flows and foreign direct investment—went hand in hand with rapid rises in global output and wealth. In the past 20 years, annual world trade rose from $2,000 billion to $5,500 billion a year, world foreign direct investment inflows rose from $55 billion to $640 billion and world GDP increased from $10,000 billion to $30,000 billion.

The benefits of globalisation cannot be ignored. What is disappointing is that they have not translated into sufficiently large falls in poverty. The hon. Member for Chichester (Mr. Tyrie) was rather complacent on that point. The proportion of people in developing and transitional economies living in abject poverty has declined—and we should not forget that—but the falls have not been large enough. More needs to be done to ensure that the poorest benefit. I shall say more about that in a moment, but retreating from globalisation is not the answer. We need to make it work better, but it would be wrong to deny the poorest countries in the world the development opportunities from which we have benefited.

Globalisation has transformed the world economy. The relatively sheltered national economies from the Bretton Woods era are gone and have been replaced by a global marketplace. In the new economy, national Governments depend for investment funds on day-to-day confidence among international investors. Governments must therefore pursue consistent and credible policies that provide stability.

Faced with financial crises in 1998, the G7 countries took rapid international action. As G7 president, the UK took a leading role and we have started to put in place new, long-term disciplines to promote greater stability—a new framework of rules that meet the demands of the global marketplace. Over the past 18 months, we have worked hard in the G7 to reform the international financial architecture. My hon. Friend the Member for Maryhill asked me what we have done on that front, so let me outline progress in four key areas.

First, we have produced a framework of internationally agreed codes and standards to be implemented by all countries that participate in the international financial system. Secondly, there is global financial regulation to make the international and national bodies who are responsible for financial supervision work together more effectively. Thirdly, there is a new framework for crisis prevention and crisis resolution. Fourthly, there is a framework of new social principles allied to our initiatives for immediate debt reduction. I shall sketch out where we have reached on each of those four reforms, which should provide a backdrop for today's debate.

Those reforms will deliver the stability objective of the Tobin tax more effectively. First, the codes and standards will deliver transparency and accountability. By taking the right actions in their own jurisdictions, Governments can help to deliver financial stability at a global level, but they need to set out clear objectives and to put in place open and transparent procedures. That is crucial for investor confidence; without transparency or proper procedures, investors will not make the long-term investments that are needed. We are working internationally to put in place the surveillance machinery needed to monitor the implementation of those codes and standards and to ensure that they are effective.

Secondly, global financial markets require proper national supervision and the innovation of global financial regulation. The responsible national and international bodies must work together more effectively, so we propose to bring together the IMF, the World Bank and key regulatory authorities in a new permanent committee for global financial regulation, charged with delivering a stable financial system. The financial stability forum has now been established and has made a successful start on its work. In time it can become the world's early warning system for regional and global financial market risk.

Thirdly, the financial crises of the past two years were deep and protracted. Better mechanisms are needed to prevent and resolve crises, so we have developed a new approach, in which both the public and private sectors contribute to maintaining stability. At the summit in Cologne last June, the G7 agreed a new framework for private sector involvement in crisis resolution, which will shape private sector expectations of how crises will be handled in the future and guide policymakers' responses. We are working to ensure that that framework is implemented as soon as possible.

Sound economies also depend on welfare and social systems that build social cohesion and trust. The World Bank and the UN have been asked to develop principles of good practice in social policy, which will be used by the IMF and the World Bank to design adjustment programmes. They will ensure that the burden of adjustment is not placed on the poorest people in the world. Those programmes are not just for use in times of crisis; they will also be used in normal times to assist countries to put in place the strong social systems and mechanisms necessary to help the poorest people.

Fourthly, we are committed to reducing the debts of the poorest countries; the heavily indebted poor countries agreement reached in Cologne set out to cancel $100 billion of developing countries' debt. We are working for faster, wider, deeper debt relief. That is the reason for our initiative to give 100 per cent. debt relief to every country that qualifies under the HIPC initiative. The challenge now is to implement it. We remain at the forefront of efforts to persuade our international partners to meet the agreed targets and to go beyond the level of debt relief agreed to provide 100 per cent. relief on the commercial debts owed by HIPC countries.

What is the attitude of the United States to international efforts? Is it co-operating?

There have been some encouraging developments on debt relief, not least President Clinton's announcement on the subject. There are good grounds for optimism about the United States in that respect.

My hon. Friend listed measures that will improve stability. We are familiar with the debt relief steps taken by my right hon. Friend the Chancellor of the Exchequer; everyone thinks that they are great. Does the Treasury object in principle to having a tax on currency speculation that could be used in beneficial ways as an addition to the existing funds, or does it think that a currency speculation tax would cut across those initiatives?

The Tobin tax has a twin objective: first, to promote stability—the measures that I set out address that objective—and, secondly, the fund-raising effect, which I shall explain. It is an interesting idea, but it has a number of serious likely or possible drawbacks. First, it could introduce serious economic distortions to the international financial system. International currency transactions bring huge economic benefits by facilitating trade and investment flows. Restricting currency exchanges through taxation could have quite serious economic side effects. It might endanger economic growth in some of the least well-off countries.

Some currency transactions undoubtedly reflect pure speculation and contribute to financial crises, but others help economic adjustment and market stability. Currency transactions, as my hon. Friend the Member for North-East Derbyshire put it, are not all sinful. They are not all speculative. A Tobin tax would not distinguish between the two. By slowing the adjustment of financial markets, the tax would slow recovery from a crisis. Artificially slowing market adjustments to genuine price shocks would have a higher economic cost than rapid adjustment.

Secondly, and perhaps more tellingly, it is not certain that a modest tax would have much effect in a crisis. It might hit routine, day-to-day transactions, but it is unlikely to prevent the high volume flows seen at times of crisis. As Oxfam's thoughtful paper from last May put it

Economists are divided as to whether a currency transaction tax significantly reduces systemic instability in foreign exchange markets…the beneficial effect of the tax on its own should not be overstated.

There is a good argument, which has been advanced in this debate, that a Tobin tax might increase volatility by reducing liquidity. Liquid markets are more efficient and price transparent. That argument is borne out by what has happened in some emerging markets. Their transaction costs are already high compared with those in the City of London. It could be said that that amounts to a tax on capital flows, yet those are precisely the markets that have suffered from serious currency instability and capital flight.

rose—

I do not think that I can give way in view of the short time that remains.

Thirdly, a Tobin tax would be practically impossible to implement effectively. That point has been well made in the debate. It is probably a show-stopping practical means for achieving what my hon. Friend seeks. The UK has been leading the fight against international tax evasion and avoidance. We have taken a number of important steps in that regard, but we simply do not live in a world where taxes can be set and enforced at an international level. Every country jealously guards economic sovereignty on tax. Are we ready to cede our authority over tax matters to an international body? I do not believe that we are.

Whatever we think about financial secrecy havens and offshore centres, we must acknowledge their existence. Most of them are sovereign nations exercising exactly the influence over their tax affairs that the House and the UK Government exercise over tax matters in the UK. No international mechanism—not the G7, the IMF or the UN—is in a position to secure the agreement of all the countries in the world, or even those with a significant financial centre, to impose a Tobin tax, but that would be required to make the tax workable.

Currencies can be traded anywhere. We know how quickly capital markets can move. Traders would simply move their activities to regimes without the tax, with the likely result that the market would become less well regulated. We currently host about a third of the world's currency transactions—worth $637 billion a day. If a tax were imposed on foreign currency traders, they would move their activities to somewhere with less regulation. Driving the markets offshore to poorly regulated centres would add to the instability of the financial system at the cost of substantial job losses in the UK. Even it were possible to achieve the universal agreement that would be needed, there would still be huge scope for avoidance.

A large body of academic study is available on the Tobin tax; some support the idea and others oppose it. No one has successfully answered the concerns that I have set out. We must draw policy conclusions in the context of the practical realities of our wider international financial responsibilities. There is no multilateral mechanism for establishing a tax, and little international appetite for it.

We are pleased that organisations such as War on Want and Oxfam are engaged in the international debate about how we can ensure the stability of the international financial system and how we channel resources to the poorest countries. As Oxfam has said, the more visionary the proposals for spending tax revenue, the harder it may be to gain political acceptance for the tax. The best strategy seems to be to promote the less controversial suggestions regarding use of revenue and try to increase the allocation to development over the longer term.

Thank you, Mr. Deputy Speaker, for allowing the debate to take place. I also thank the Minister for giving up his valuable time. I would have preferred not to have the debate today, but in the circumstances I had no choice other than to raise the subject of Chorley police station.

The relationship between Chorley police, the local authority and local groups has been good, and all parties working together have produced some good initiatives. It is disappointing that we will end up discussing the closure of the police station, or its possible closure between 12 midnight and 8 am, but we will deal with that later.

Good work has been done. A scheme was started in Anderton and Adlington to put in place new security arrangements at bungalows where old people live. That is important. Only last month, the Home Secretary visited the area and was impressed with the scheme. It has ensured that crime has fallen greatly, which was what we wanted.

It is also important that Chorley is receiving more closed circuit television money. Chorley was a pathfinder with its mobile CCTV unit, which has been the envy of many other areas. Many police authorities have visited the town to see it and it will certainly be copied. We can be proud that it came out of Chorley.

A major campaign is under way to ensure that Clayton village has a police station. The population of the village is 15,000, but there is no police station. That is another campaign that we have taken on board. The community groups and I have been discussing the matter with the police.

The decision of the police to close Chorley police station between 12 midnight and 8 am undermined all those new initiatives. The real problem is that there was no consultation. Earlier in the year, the police decided to close the custody suite at the police station. As the local Member of Parliament, I was not consulted. The local authority, the police forum and other groups that we thought would have been consulted, were not. That closure raised concerns about the future of the police station.

The divisional commander and the chief constable of Lancashire constabulary guaranteed that the police station was not under threat and that they would consult any relevant bodies in the future. That was crucial. The chief constable sent a letter to the local authority on 11 February stating that the policy station would not close.

The decision to close the station was taken with no consultation, no notice and no warning to the local authority or myself, as the Member of Parliament. In fact, the local press stumbled on the note outlining the decision to close Chorley policy station. At 5.30 pm last Tuesday, I received a telephone call from the local press who said that they would respect my comments and asked for my view on the closure of the police station between 12 midnight and 8 am. I was absolutely flabbergasted; I had no inkling whatever about the decision. After everything that we had achieved by working well together, I was disappointed that that decision was taken with total disregard for everyone else.

The claim is that the station was closed for only one night, but it is the fact that it closed without any consultation that is important. Lancashire police authority's policing plan outlines the corporate strategy. The key part concerns partnerships. Lancashire constabulary prides itself on consulting local representatives, the police and community forum and community groups. Clearly, it did not do so, which has caused the problems. How could it have made such a decision without consulting or even informing relevant groups? That is the major worry. Budgets may be devolved and the local inspector may be allowed to take decisions, but such a lack of communication is unacceptable. It is not the way forward and it is not the way to run the police in a modern society. To go forward, we should work in partnership. Concerns will be raised if current practice continues.

Inspector White said that the closure was on health and safety grounds and was to protect police officers. If the police inside the station must be protected, what about the public outside, who need the police? In London, thugs pursued an Asian gentleman, who had to lock himself in a mobile toilet, where he then used his mobile phone to summon the police. People could be running down the street to the police station, only to find that they cannot enter because the doors are locked. They would then have to pick up the mysterious phone. Who would answer? At present, Chorley police answer, but soon calls will be re-routed to Hutton. That is centralisation, because the headquarters of the Lancashire police are in Hutton.

People must man those phones. Could there be 10 phones, but only five people to answer them? What would happen if all 10 phones rang at the same time? If there were one person per phone, why could one person not be put in Chorley police station? That would be more beneficial. The plan is not good politics or good policing and it could make people who have been able for many years to enter the police station, and who have always thought that a police station of that size would be open 24 hours a day, more vulnerable. We must reinstate such provision. It is important to remember the purpose of the police station.

Inspector White should reconsider his comments, because people feel more vulnerable when they believe that the police must be protected within their own police station. He has sent out the wrong messages. The closure of the police station is a worry, because Chorley is unique. It is not a little town centre, but a big area of 80 square miles. Chorley has a population of more than 100,000 and 27 parish districts surround its centre. It should have a 24-hour police station, because it is no ordinary district. It is a large, varied area that goes from the moors and the hills to the plain of Lancashire. A 24-hour police station is the least that we should ensure for the good people of Chorley.

As centralisation and the movement towards Hutton continue, we must consider the fact that Chorley is on a county boundary. Greater Manchester police force operate on one side, but they will not work in Lancashire, so we can only go further north or west for services. There is no access across the Pennines and Greater Manchester police cover the south. It is important to recognise that the police stations that will back up Chorley are some distance and I know that the Minister will take on board that important matter.

Centralisation and the fact that we were not consulted or informed before the station started to close its doors have caused problems and worry.

The response times to criminal activity in Chorley will increase because of the need to travel further, which will also raise costs. There are more arrests in Chorley than South Ribble, yet all the people arrested in Chorley are booked in South Ribble. That takes up more police time. It has now been recognised that the custody suite in Chorley may have to be opened at weekends, because Chorley is a busy town. People from all around visit it, and that means disturbances. Taking those people to a much quieter place is not feasible, especially if numbers cannot be catered for when custody suites are needed at the weekend. The plan needs to be re-jigged and reconsidered. Nothing more should happen before consultation. Public perception will be bad, as the closure sends out all the wrong signals about crime and the future of the police station.

People suffer not merely from crime, but from fear of crime. Their fear will continue if they believe that the doors are locked and that sometimes no police officers will be in the station. It is another big worry when the police are called out and no one is left in the station. It is crucial to ensure more police resources in Chorley.

The hon. Gentleman mentioned resources. Does he agree that the problem in Chorley reflects wider resource pressures on the Lancashire police force? It also reflects the fact that 6.6 per cent. of the Lancashire police are either ill or on light duties. Pressures on resources and manpower are also manifested in the Ingol ward of my constituency, which cannot sustain more than one community beat officer. That relates to the hon. Gentleman's theme of the fear of crime.

I agree that there is a problem in Lancashire. Police numbers are down and too much time is lost through sickness. It is important to deal with that. Police resources are undoubtedly a major concern for many Lancashire people. I recognise that the Government have taken that into account and intend to deal with funding issues.

I shall provide some statistics. Public satisfaction about the perceived level of foot patrols in Lancashire fell from 19 per cent. in 1997–98 to 14 per cent. in 1998–99. Satisfaction with perceived mobile patrols during the same period fell from 53 per cent. to 42 per cent. Closure of police stations during the night will not improve public perception. It will only add to people's worries. Public confidence is crucial to good policing.

Another key objective of the Lancashire constabulary's strategy is to maintain satisfaction among commuter groups and the public, but that is not being achieved. I have with me a copy of the Chorley Guardian, with the headline, "Locked Out". It is right for the local paper to draw attention to the public's anxieties. The article states:

Insp White also admitted that when the planned move of the station's communications room to police HQ in Hutton takes place later this year. calls from the phone at the bottom of the station steps will be routed through there rather than into the Chorley station.

People dashing to a phone may find that their calls will not be answered because so many calls are coming in from all over Lancashire. If that is allowed to continue, there is a real danger of this policy being copied elsewhere.

The Minister must answer some key questions. Are further resources available to ensure that Chorley has a 24-hour police station? Can resources be directed differently to keep the police station open? What pressure can the Minister apply on Lancashire constabulary to keep the police station open full time? That is what the people of Chorley expect and what they deserve. Will the Minister ensure that Lancashire constabulary consults local representatives and other relevant bodies before taking such important decisions in future? Will he initiate a review of the role of police authorities in response to recent events, because the police are taking decisions that affect thousands of people without giving them the elementary courtesy of informing, let alone consulting, them?

The local newspaper in Chorley discovered what was happening out of the blue when someone left a notice on the board saying that the police station was to be closed between 12 midnight and 8 am. No one knew about it, no one was advised about it and no one was consulted on it. That is not the way forward; it is through partnership and consultation. We must urgently deal with the fact that Chorley was denied any partnership or consultation.

The situation may have changed a little, as the Home Office has phoned up responsible individuals. Some people may rightly be jumping about, demanding to know who took such a decision and how it could have happened. The point is that it did happen. The Minister may have received some flannel from police HQ and may have been told that it was a one-off problem resulting from staffing on a particular night and that the station was not closing. However, the inspector admitted in black and white that it was closing. If nothing else, the fact that we are having the debate today has ensured that our police station will remain open for the near future to allow consultation to take place. The bottom line, however, is that the measure was going to be sneaked through under the door without anyone knowing about it—that is the crucial point.

Reports on the knock-on effect may be filed away somewhere. I know that reports are not good in other areas in which they have lost their 24-hour police stations. People may say that only one person a night visits the station and that person may only be a drunk. If we consider only that small statistic over a short period, we do not take into account what happens the year round and what will happen. Chorley has a growing population—a new town has been built in the region and before long there will be a new village with 2,000 houses. The area is growing, not declining.

The closure took place without consultation and we must keep the station open in the future. New licensing laws may be introduced—there may be a 24-hour alcohol licence. We will not be able to close the police station at midnight, because everyone will not be put out into the town centre at 11 o'clock. Far from it, there will be a busy time around 1.30 am to 2 am or 2.30 am, when people may cause trouble. A handbag or a car may be stolen, or someone may be attacked, but when the victims go to the police station they will find that huge, eight-storey building in the town centre closed. With the changes in the licensing laws and patterns of behaviour in town centres, people should feel that the 24-hour station is a refuge to which they can go if they have a problem.

Civilian staff have always worked at the station, but that has suddenly become a health and safety problem. Why is it supposed to be a problem only from midnight to 8 am? Surely, if there is a problem, it must be for 24 hours a day?

Let us be honest: such closures are not good policing. I look forward to the Minister's speech because I am sure that he will take on board my arguments and will recognise that the people of Chorley are important.

I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on obtaining the debate on police funding in Lancashire as a whole and in Chorley in particular. He has already achieved part of his ambition by ensuring that the subject receives local and national airing.

Let me set the context for the debate. The House debated and approved the Government's proposals for police funding for 2000–01 on 3 February 2000. Under those proposals, Lancashire constabulary's Government-supported funding for that year will be £185.3 million, an increase of 4 per cent., which represents an extra £7 million over the previous year—that 4 per cent. contrasts with the national average of 2.8 per cent. Lancashire police authority has set a budget of £189.6 million, with a 4.6 per cent. increase in net revenue spending. The south Lancashire devolved budget is £26.7 million, which means an increase of 12.7 per cent in that region in the past year. Those figures contrast with an average of 4 per cent. for England and Wales as a whole.

Lancashire is, therefore, a relatively well-funded force. Audit Commission figures published in March show that the force spends nearly £121 a year per person, compared with a national average of £118. As the right hon. Member for Fylde (Mr. Jack) said, there are fewer police officers in Lancashire than there were when the Government took office in 1997. In September 1999, there were 3,221 police officers—27 fewer than there were in March 1997. I should set that figure in context, however, as in contrast to that reduction, in the same period the number of civilian support staff employed by Lancashire constabulary increased by 90.

As the House will understand, many of those extra civilians will undertake operational support jobs that were once the preserve of police officers such as scenes of-crime officers. Their recruitment makes it possible for the operational front line to be maintained. It is a means of ensuring that best value is obtained from the available resources and that police officers do the jobs that we expect of them—patrolling our streets and working towards the reduction of crime.

On police numbers, I remind the House that in September my right hon. Friend the Home Secretary announced a new crime fighting fund, which will be used to recruit 5,000 police officers over and above the number that forces would otherwise have recruited in the three years from April 2000. About a month ago, on 27 March, my right hon. Friend announced how the £285 million that my right hon. Friend the Chancellor provided in this year's Budget was intended to be used. The first deployment of that money will be to enhance the crime fighting fund, which will be brought forward to deliver those 5,000 officers in two years rather than three, and at least to double the number to be recruited in the first year. In the next two years, Lancashire constabulary will receive sufficient funding from the crime fighting fund to enable the recruitment of 126 extra police officers over and above the number that the force would otherwise have recruited.

It is important to pay tribute to the work of Lancashire constabulary, the chief constable and her force. They have made impressive inroads in the reduction of crime. In the 12 months to September 1999, crime fell by 10.8 per cent. That is a substantial achievement. It is the biggest single reduction in crime achieved by any force in the country. From the way in which my hon. Friend the Member for Chorley is acknowledging my remarks, I know that he would want to join in that tribute.

I gather from the Lancashire policing plan for this year that the crime rate in Chorley is about half that recorded in some other local authority areas, making south Lancashire statistically one of the safest places to live in the country. I also gather that the priority anxieties in Chorley include drug and alcohol misuse, personal safety, fear of crime—to which my hon. Friend referred—vehicle crime and road safety. All those anxieties are significant, but they have been prioritised on the basis of generally good crime figures compared with the rest of the country and, indeed, the rest of the county.

My hon. Friend mentioned partnership, which is the core of the Government's approach in such matters. It is important to acknowledge, as he did, that partnerships can mobilise community resources at every level to prevent and reduce crime and the impact of offending. I understand that my hon. Friend was instrumental in the partnership between the police and Chorley borough council's housing department, which targeted vulnerable sheltered housing in the Anderton and Adlington areas. More than £90,000 of local authority money was used to improve security. I am told that that partnership has been a great success, with no reported crime since the works were carried out, and I pay tribute to my hon. Friend for that work.

I also understand that Chorley borough council has for some time led the way locally in developing CCTV systems, to which my hon. Friend referred. The Government have awarded £2.4 million to 11 CCTV systems in Lancashire, including a £271,000 scheme for Chorley town centre car parks, and £120,000 for a mobile system covering urban and rural areas in Wyre.

The key point, and the core of my hon. Friend's speech, is the future of Chorley police station. I hope that he will not mind my explaining the general context because it is important to set the decision in the overall context of the force.

My hon. Friend was clear about consultation. I acknowledge that and will deal with some of his arguments. I assure him that he will not get any flannel from me on the matter. It is for the chief constable, Mrs. Clare, to decide, and ultimately she must take operational responsibility.

The chief constable informs me that she has no intention of closing Chorley station and wants that explicitly on record. I gather that the station is part way through a £300,000 refurbishment programme, which it would obviously not be if the intention were to close it. However, my hon. Friend is right to mention proposed changes in the use of the station. As he said, the new police service radio communication system, PSRCP, will be based at police headquarters and, as he knows, Lancashire will be one of the first forces in the country to use it. The communications room at Chorley will therefore be closed. It is important to emphasise that the migration of the communications system to the force headquarters will have no effect on the operation at or the policing of Chorley. The purpose of PSRCP is to increase police activity in the area being policed, instead of officers having to remain in the police station.

The migration of the communications rooms at Chorley and other police stations to the Lancashire force headquarters will reduce the staff available to reinforce custody suites at short notice. Therefore, for the health and safety reasons of short notice that my hon. Friend gave, the force advises me that it has had to reconsider the number and location of custody suites in the force area. As a result, Chorley custody suite was closed on 1 April and Leyland police station became the main custody facility for the southern division of the Lancashire force. The chief constable stated her belief that those changes would not affect the policing of Chorley. However, I understand why my hon. Friend makes his points and shall respond accordingly.

The chief constable has informed me that she is considering the possibility of ending the current 24-hour status of Chorley police station. That is a matter for Mrs. Clare and the police authority.

Is the Minister aware that the chairman of the police authority did not know that the decision had been taken?

I was not aware of that. My hon. Friend has put the matter on the record.

I was informed that the reason for the chief constable's decision is that surveys conducted by the Lancashire police have found that, on average, only one person visits police stations between midnight and 6 am. It is maintained that closing the station to public access does not affect the policing of Chorley precisely because of the availability of modern telecommunications. By ensuring that police are on the beat instead of in police stations, new telecommunications systems will result in a higher police profile. The chief constable has reached a decision on the basis of the limited need for public access late at night, which is why she is considering Chorley's future as a 24-hour station. She proposes to reduce its hours of business when the radio communications facility moves to headquarters. I should emphasise that she intends to consult the local community on the process before making a final decision. My hon. Friend—and his local paper—can therefore take some satisfaction that, in raising this issue in this Chamber and more widely, he has secured part of his ambition to ensure proper consultation on the matter before a final decision. However, I reiterate that, ultimately, it is an operational decision for the chief constable. That is the fact.

My hon. Friend also referred to whether restricted hours for Chorley police station would affect the force's involvement with partnership. The chief constable has asked me to inform this Chamber that there is no question of the police's commitment to the Chorley partnership being inhibited by such decisions. That is an important point.

I have answered a number of my hon. Friend's questions about consultation. He also raised the important issue of response times, with which police are wrestling throughout the country. Call centre systems are becoming more efficient at dealing with incoming calls, instead of a whole range of local calls in different circumstances. The purpose is to reduce rather than increase response times. I do not have the figures for Lancashire, but I can assure my hon. Friend that he should not be worried on that score.

On further resources, I cannot help my hon. Friend with his request. As I said, the Lancashire force is relatively well resourced in comparison with other forces and that is an operational matter for the chief constable. I know that the hon. Gentleman will discuss his concerns with her.

This has been a useful debate, which has raised several important issues. I emphasise that Lancashire is being well policed and that crime is falling.

The Berwick and Berwickshire areas received a bitter blow just over a week ago. As is often the way these days, we read the news in a newspaper on Monday morning, in advance of an announcement made in the House on Monday afternoon giving further details, that we were to be excluded from the assisted areas map. As speculation had suggested, the Berwick town wards of Edward, Elizabeth, Shieldfield, Seton, Spittal and Tower were excluded, with the rural wards of Belford and Beadnell, and the Islandshire ward, which includes rural and urban areas. A total population of about 17,000 was removed from the list of areas eligible for tier 2 status. In adjoining Berwickshire, the ward areas of Burnmouth, Foulden and Hutton, Eccles and Leitholm, and Edrom, Swinton and Whitsome were also dropped from the tier 2 map. Those areas, on two sides of the national boundary, are clearly connected—many people travel to work across the boundary.

We were pleased to be included in the draft map when it was published last year and assumed that we had been included because of the problems caused by the loss of more than 250 jobs with the closure of the Pringles textile factory. A total of more than 800 jobs have been lost from the town's textile industry since 1996. The over-reliance on the textile industry was acknowledged by the establishment of the Berwick task force, with the encouragement and participation of the Department of Trade and Industry. Berwick was also included in the last months of the European Retex programme, but that gave time only for studies and programmes to be prepared rather than for regeneration work.

The proposals of the Northumberland Strategic Partnership for assisted area status for Northumberland noted that

20 per cent. of the workforce in Berwick on Tweed borough were employed in manufacturing in 1996… unemployment in Berwick shows a strong seasonal pattern… Berwick is a strategic site, being capable of attracting substantial inward investment.

Regional selective assistance is the main instrument of the Government's regional industrial policy. It is designed to create and safeguard jobs, to attract and retain mobile investment and to improve the competitiveness of disadvantaged areas. However, regional selective assistance is the key factor that is lost by removal from tier 2 status. The wards that are being removed include those that contain sites where just such selective assistance could be used—sites such as large factories, where substantial opportunities for promoting employment can be pursued.

I offer the right hon. Gentleman my sympathy for the plight in which his constituency finds itself. I have an analogous problem in my constituency, where one ward that forms half of a new deal for communities pathfinder because it is in the top 5 per cent. of the local deprivation index and includes industrial sites capable of modernisation—where tier 2 status can be used to promote significant employment—has been replaced by a town centre ward that is so heavily developed with houses that not even a garden shed could be added to it. One could not possibly spend the money there. I am frustrated and puzzled. Does the right hon. Gentleman have an idea of what is going on?

I hope that the Minister recognises that that problem was brought about by the changes in the map. In several places, the very wards in which industrial development could take place have been taken out, while those in which it could not conceivably take place have been put in. That is the situation in Northumberland and other parts of the country.

Let us consider the index of deprivation, which includes factors such as unemployment and economic activity. There are 119 wards in Northumberland and three of the excluded wards—Edward, Tower and Spittal—are in the worst fifth. However, wards much lower down the index of deprivation have been added to the list.

One of the list's eligibility criteria is that areas should be "compact and contiguous". Berwick and the adjoining Berwickshire wards are, indeed, compact and contiguous and they contain the employment sites and the people who would benefit from the opportunities created by regional assistance. About 87 per cent. of people in the Berwick area who travel to work do so within the Berwick borough. That is a fairly unusual figure and it is far higher than elsewhere. Cross-border travel is primarily from the immediately neighbouring area of Berwickshire, which is represented by my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood). The area is, of course, isolated—that is part of its problem, not a reason for denying it the help that it needs.

The unemployment rate in Berwick town is 7.1 per cent., which is up from 5.7 per cent. in 1998. In some wards, it is dreadfully high—9.4 per cent. in Seton ward and 7.3 per cent in Elizabeth and Spittal wards. Those figures are well above even the north-east average of 6.8 per cent., let alone the UK average of 4.6 per cent. Two hundred and fifty jobs were lost at Pringles in 1998–99 and 50 jobs were lost at Libris Computing and other firms. Northumberland as a whole is unable to keep up with the job losses and more than 2,000 jobs have been lost, while only 800 have been gained.

Manufacturing accounted for 20 per cent. of the employment sector in Berwick in 1996. About 93 per cent. of women employed in manufacturing work full time. Equally, 16 per cent. of all the unemployed in Berwick were plant and machine operators—the largest group among the unemployed. However, the rate for the creation of new firms is well below national figures—6.09 per cent. as opposed to 8 per cent. for Northumberland and 11.6 per cent. for England.

We could also consider the decline of VAT-registered businesses in Berwick. The number dropped by 6.5 per cent. in 1994–97. The figures for vacant premises show that 23 per cent. of Berwick's industrial premises were vacant in 1998. The economic activity rate is in the lowest quarter for all English regions.

Let us, however, consider the future. The prospect of tier 2 status in July 1999, when the map was first published, led at least three local companies to draw up plans, which would have meant approximately 100 new jobs. Those proposals will not now be eligible for the reduced rate of assistance through tier 3 enterprise grants and are in jeopardy because of the revisions to the map. They were at the heart of the work of the regeneration task force. When a comparison is made with the incentives available in other areas, exclusion from tier 2 will weaken the case for relocating firms to Berwick. We have a single regeneration budget programme, but it cannot deliver enhanced competitiveness by itself. There will be a significant negative impact on the programme, which does not have the resources to deal with it.

I have concentrated on the problem in the Berwick town wards, where the major industrial expansion can take place. However, there are also problems in some rural areas. Sea houses, which has its own small industrial estate, has been excluded from the beginning. The Minister wrote to me on 11 August, before last week's announcement, to say that the Sea houses case could be re-examined if the map had to be reconsidered. Nevertheless, Sea houses has been left off the map and the community does not have access to the help that it needs.

In 1999, a harbour regeneration study called for extra funds to be targeted at the infrastructure of the harbour, which lies at the heart of the village's economic viability. In March, the harbour was refused a single regeneration budget grant. Now assisted area status is denied. A pile of reports and studies keeps showing the need for help, but not the means for its delivery.

I understand the right hon. Gentleman's natural disappointment, but does he accept that my right hon. Friend the Minister had to do a difficult job as best he could? A reduction was required. The right hon. Gentleman may know that my constituency did rather well out of the redrawing. There will inevitably be some winners and losers. Is that not one of the points of a review?

I am sure that the hon. Gentleman's constituents will be pleased by that news, but I would like him to come to Sea houses to explain to a community that is desperately in need of such help why it should be denied to it. I appreciate the Minister's difficult task, but suggest that he could have handled the matter differently.

rose—

I must limit the interventions that I allow, or I shall not be able to give the case that my constituency needs presented.

The Belford area became nationally famous a week or so ago with the closure of a Barclays bank. That community is engaged in active regeneration projects and has been dropped from the map this time round. I would like the Minister to suggest whether the third tier of assistance—more limited assistance for small and medium-sized firms—will be made readily available to those more rural communities. If it is not, I do not see how they can achieve the needed regeneration. That tier of assistance may be available on only a limited scale. The funds may not go round all the areas now dropped from the map and would not support the relevant industrial projects in Berwick.

I shall suggest some ways in which the Minister can consider the matter in the remaining consultation period. I am puzzled that the Government have not appealed against the refusal of the map that they first proposed. That may be because of the time—probably about six months—that it would take to appeal. The process itself will also take some time. The original proposals were subject to extensive consultation, involving more than 350 responses and 40 meetings throughout the country. When the Government proposed the original map, surely they were satisfied that it met the European Commission's guidelines and the local circumstances, so far as possible, on the basis of the consultation. Now the map is completely different. Some areas have been removed and others have been added that have not been subject to such consultation. Would it not have been better to have appealed against the European Commission's objections to the original map, as the Government had the power to do?

The Government's first proposals did not include the limit to populations of 100,000. Areas with populations of less than that figure could be included, with the penalty that they would be counted as having populations of 100,000 for the purposes of the overall figure. It is worrying that the Commission seems to be moving the goalposts. If its doing so excludes the Berwick area, the Government must deal with that.

If the Commission insists that the areas must have a population of 100,000, the logical consequence is to put all the border areas hit by the decline of the textile industry together and treat them as a single area. As the Minister knows, that decline has spread across the borders. What consultation has there been with Scottish Departments and those with responsibilities in Scotland about the implications? Berwick is part of a border economy more than a north-east economy, so it would have been logical to have joined it to the chain of wards that has been affected by the devastating decline in the textile industry. My hon. Friend the Member for Roxburgh and Berwickshire will refer more to the matter in a moment.

There are two more weeks of consultation and the Minister will receive representations. In my view, a disastrous mistake has been made in an area in which the Department of Trade and Industry recognised that a task force and regeneration programme had to be implemented because there was a serious problem. If Ministers are serious about the regeneration of the Berwick economy, they cannot deny it the regional assistance that I described. I therefore plead with the Minister to restore the Berwick area to the map when the consultation period ends in two weeks' time.

:The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) has sought the permission of the right hon. Member for Berwick-upon-Tweed, the Minister and Ito take part in the debate. I call the hon. Member for Roxburgh and Berwickshire.

I am pleased to be able to make a brief contribution to the debate. I am pleased, too, to support the eloquent and telling case made by my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith). He is absolutely right to say that throughout my parliamentary career he has been telling me that there is no national boundary between the economies of north Northumberland and the coastal communities and those further west, north of the border in Scotland. There is much social intercourse between the areas and many people travel to work across the national boundary—facts of which the administrative proposals take no cognisance whatever.

My right hon. Friend is also right to say that there is anger and confusion about the changes to the July 1999 map. The amendments are severely deleterious and prejudicial to the community served by Berwickshire and the town of Berwick-upon-Tweed. The area was recognised recently by the Scottish Office as a regional economy in dire need of special assistance. Indeed, a ministerial working party was set up to make cogent proposals to tackle some of the issues. If the amidst to the map are implemented, they will severely damage any prospect of development in places where there are real opportunities for doing so. My right hon. Friend is right to underscore that point.

The towns in Berwickshire in my constituency that will be particularly prejudiced are Eye mouth, especially the Gunsgreen industrial estate, and Chirnside, where there are substantial manufacturing employment opportunities. Further west, the electronics industries in wards 7, 11, 12 and 16 would benefit from significant and sustained future development. As my right hon. Friend said, in all those areas projects are in the pipeline—they were encouraged, worked out and are ready to go. The amendments to the map will put the kibosh on them and render the projects nugatory.

Competition is an important issue. As my right hon. Friend said, if Berwickshire is not eligible, firms there will suffer severely from competition from companies in other parts of the United Kingdom that are eligible for area aid.

I hope that the Minister will accept my right hon. Friend's offer of serious consultation with his colleagues north of the border to bring some coherence and sense to the proposals. I endorse my right hon. Friend's plea that the deletion from the map of the town of Berwick-upon-Tweed and its surrounding areas and areas in Berwickshire should be urgently and seriously reconsidered. Account must be taken of the long-term future and prosperity of the entire area.

I have listened carefully to what has been said and will take it into consideration in the consultation period, which ends on 2 May. If right hon. and hon. Members want to submit further evidence, we shall consider it.

I commend the right hon. Member for Berwick-upon-Tweed (Mr. Beith) for the force with which he put his case. I know that he feels strongly about the matter. I am sure that he appreciates that in July last year, when the Government submitted the original proposals for the assisted areas and the structural funds objective 2, we recognised the needs of that area. Indeed, I know that the right hon. Gentleman and the people of Berwick are disappointed that we have not been able to deliver what we put forward in the July proposals. We listened carefully to the views of the local and regional partners and that included the regional development agency. We also worked closely with the Scottish Executive and the National Assembly for Wales.

We found it hard to maintain the July proposals in our negotiations with the Commission. Indeed, the amendments that we announced last week were solely to meet the Commission's concern about those proposals and not because we do not recognise the case that has been put forward today. As the right hon. Gentleman appreciates, the British Government do not have a free hand. Under the EC treaty the Commission has sole competence in this area. We cannot pay any regional state aid without an assisted area map approved by the Commission. We have, therefore, been faced with some hard choices.

Will the Minister give way?

No, I had better reply to the outstanding questions first.

Could the Minister just confirm that it is not simply a question of wanting another place to be given assisted area status? There are circumstances in which people, such as those in my Grindley lane investment area, would want themselves to be taken out, having examined the structure plan.

I am coming to that matter. I am just explaining how the maps are drawn up.

We were first faced with hard choices because of the criteria that were applied much more stringently by the Commission. We could either make the changes to meet the Commission's concern about the July map or, as the right hon. Member for Berwick-upon-Tweed said, we could take that challenge. We are trying to get clearance for these maps before the summer. That would then backdate to 1 January when a number of indicative offers were made to people who have made applications that we cannot pay.

Some of the Government's indicative offers have gone through the due procedure for regional selective assistance; others have not. If we delayed and went through the procedures of article 88(2) of the treaty the process would go on for at least another six months and the outcome would be doubtful. We therefore decided to submit the revised map to the Commission. We made those amendments to ensure that 16.5 million people who will be covered by the new assisted areas are not disadvantaged.

We have made two principal changes, we have had to reduce the population covered by our proposals by a third of a million people and we have had to show that the areas proposed are more compact and self contained. Both of those changes have had an impact on our proposals for Berwick and Berwickshire, but we could not simply extend coverage up the coast to Berwick-upon-Tweed and across the Scottish border into Berwickshire, as we did in the July proposals. The areas proposed in July were not sufficiently compact to secure the Commission's approval. Under the new constraints that the Commission has imposed, we would have had to include much of Northumberland to ensure coverage of Berwick, and most of the Scottish borders to include Berwickshire. That approach would have been expensive in terms of population and would have had to be taken for other parts of the UK.

Overall, the coverage of the north-east has increased by 10 per cent. on the July proposals and a further increase to allow the coverage of Berwick-upon-Tweed could not have been accommodated within the overall reduction in population coverage imposed by the Commission. The alternative would have been to exclude another area of the north-east to allow the inclusion of Berwick-upon-Tweed. Similarly, within Scotland, the inclusion of Berwickshire as part of the wider Scottish borders area could have been achieved only at the expense of other areas.

The Government are conscious of the needs and concerns of the people of Berwick and Berwickshire and I stress that the assisted areas are but one part of a package of measures that the Government have put in place to meet regional needs and tackle the problems of Britain's most needy areas.

We inherited an uncoordinated and disjointed set of regional bodies with no overall strategy to bring together regional activities and we have tackled that problem. With devolution in Scotland and Wales and the establishment of the regional development agencies in England, we have put in place a framework to ensure that all parts of Britain share in our future prosperity.

The regional economic strategies that the RDAs produced last October are a significant milestone and provide the basis for promoting development and competitiveness in the regions. The Government are working with the RDAs to ensure that those strategies are delivered. Indeed, we are committed to delivering an integrated package of support for the regions to tackle poverty and unemployment and to support regional developments. As the right hon. Gentleman will know, the Budget introduced a £100 million regional venture capital fund to help to finance small and medium-sized companies, a £60 million package to help small firms to get online, a new £50 million regional innovation fund to provide support for business clusters and incubators and an enterprise grant to offer assistance to small and medium-sized enterprises.

The right hon. Gentleman will be aware that £3.4 million from the Northumberland strategic partnership's award of £15.6 million under single regeneration budget round 5 has been allocated to Berwick district for its action for communities programme. The measures that have been identified for support include increasing the competitiveness of local companies, providing work space and developing Berwick docks.

The right hon. Gentleman will also know that, two weeks ago, the European Commission approved the UK's objective 2 fund map, which included Berwick and Berwickshire. That will ensure that many of the most needy areas in the UK benefit from the £3 billion of European regional funding for the next seven years. The north-east, including Berwick, will benefit from more than £400 million of objective 2 funding in the next seven years. In Scotland as a whole, the total value of objective 2 is about £500 million.

I assure the right hon. Gentleman that recognition of the amended assisted areas proposals, together with the new objective 2 maps, will mean that all but 1,000 people in his constituency are covered by tier 2 and tier 3. That cover has been achieved at a time when our assisted areas are being cut by a fifth and our objective 2 areas are being cut by a third. The right hon. Gentleman will agree that his constituency has got a pretty good deal.

I hope that the Minister will recognise that the largest industrial project that might be mounted in the wards of Berwick that contain the industrial estates is the one that I fear will fall between the spaces in the policies that he has described.

We will consider those matters. The right hon. Gentleman must understand that we are acting under constraints that have been imposed by the European Commission, not Whitehall. Given that context, we have got an extremely good deal. I am sure that the right hon. Gentleman and many of his colleagues in Cornwall, the north-west and south Yorkshire understand that if my right hon. Friend the Prime Minister had not got the two thirds safety net in relation to objective 2 in Berlin 12 months ago, we would not have got such a good deal. Our coverage in terms of structural funds would have been considerably less—about 50 per cent. of what my right hon. Friend achieved. That coverage, the assisted areas map and what we are doing in the round for regional development agencies represent a mature approach to sustainable economic regeneration. The RDAs are considering the issue in a strategic way and that is the right way.

We could do what the previous Administration did, which was to chuck a few bob at the problem—a few crumbs off the master's table—and let areas scramble for them. However, those days have gone; our approach is about partnership and a sensible approach. We cannot deliver anything but, on this occasion the northeast has probably got an extremely good deal. I know that it will use the resources effectively for longer-term sustainable regeneration.

The consultation is open to 2 May and we will seriously consider all proposals. We want to do the best that we can for UK Limited, within the constraints that the European Commission imposes on us.

Order. We move on to the last debate in Westminster Hall this morning. It is initiated by the hon. Member for Brent, North (Mr. Gardiner) and the title on the Order Paper is "Regulatory supervision of the transfer of domestic utilities supplies".

One of the great privileges of being a Member of Parliament is our link with constituents. Constituency casework can be onerous, especially on top of Select Committee work, but occasionally the two come together in unexpected ways. In those circumstances, the experience of constituents can reinforce parliamentary investigation, grounding the statistics of Government Departments and the National Audit Office in the genuine experience of what it feels like to be on the receiving end of Government policy.

It was precisely such a coming together of theory and practice that prompted me to initiate the debate on the regulatory supervision of the transfer of domestic utilities supplies. I apologise for the length and clumsy nature of that title. I had originally suggested "Doorstep fraud in the sale of gas and electricity", but the Table Office thought it a trifle blunt.

Some 20 million domestic customers in Britain spend around £6 billion a year on gas. Between April 1996 and May 1998, competition was introduced to the domestic gas market and customers can now choose the company that they wish to supply their gas. By February last year, 25 new companies were selling gas and more than 4 million customers had switched from the old monopoly supplier, British Gas Trading. Since April 1996, British Gas Trading has cut its price to the average consumer from £348 to £300 at 1999 prices—a reduction in real terms of £48. That is before factoring in the present Government's reduction in VAT to 5 per cent. on domestic fuel. I welcome that good news.

New gas companies have done even better. Customers who switched saw their annual bills fall not by £48, but by £78 in real terms. That shows competition working to the public benefit. Once again, I welcome that. It has meant a global reduction in customers' bills of £ 1 billion per year. I should like immediately to acknowledge the role of Ofgas—or Ofgem, as it is now—in driving costs down, partly through price controls, partly by nurturing competition.

The House will be aware that on 12 May last year, the National Audit Office published a report—House of Commons paper 403, 1998–99—entitled "Giving Customers a Choice—the Introduction of Competition into the Domestic Gas Market". The report broadly welcomed the introduction of competition, but highlighted certain issues about quality of service. It reported that in 1998 Ofgas and the Gas Consumers Council received 45,000 complaints from the public about gas transfers from one supplier to another.

In paragraph 13, the Comptroller and Auditor General says:

One of the main areas concerning customers in complaints received was certain aspects of doorstep selling technique. A number of customers complained that attempts had been made to trick them into entering into contracts and others complained that salesmen had provided misleading information.

The report continues:

In the light of these concerns, Ofgas modified the suppliers' licences to include rules covering marketing, which they then enforced after earlier attempts to secure effective self-regulation by the industry failed.

That seems to be reassuring. Ofgas acted to modify the companies' licences and set minimum standards.

Not until 45 pages later do we read the more damning follow-up:

We found, however, that Ofgas carried out very limited monitoring of the new gas companies' compliance with their licence conditions. Ofgas explained that they had given priority to rolling out competition and now this was achieved they would give more attention to monitoring companies' compliance with their licence conditions. The Director General of Ofgas has indicated that he is committed to increasing the attention that gas suppliers give to their social obligations and to improve Ofgas monitoring of their performance in this area.

When the director general was brought before the Public Accounts Committee on 7 July last year, many hon. Members were keen to press him on that point. My hon. Friend the Member for Liverpool, Garston (Maria Eagle) asked him directly:

Can you explain to the Committee how it is that somebody who has never signed any piece of paper can have their gas supply transferred to a different supplier?

Mr. McCarthy responded by saying:

There are a number of possible explanations for incorrect transfer. Sometimes it is because there has been either an incorrect address or an incorrect individual meter number recorded. Sometimes it is because there has been a clerical mistake.

The innocence is almost touching. However, to give the director general his due, he added, almost as an afterthought:

I think sometimes in the early days of this marketing, it was undoubtedly dishonest marketing.

Undoubtedly, but not only in the early days. At the Public Accounts Committee meeting, the director general agreed with me that one of the reasons why error transfers took place was that no proof of contract was required by the supplier. All a supplier needs to do is to provide Transco with a meter reference number, or an "S" number, as it is known. When asked how many error transfers occurred each year, Mr. McCarthy conceded that there were

something in the order of 100,000.

However, when asked why Ofgas had not done anything to tackle the problem, such as using its position as the industry regulator to insist that some proof, such as a signed contract, should be supplied to Transco before a transfer could be effected, Mr. McCarthy responded:

Because I am not persuaded that the additional cost and delay that such a requirement would impose on the system would justify such action.

I have no doubt that Mr. McCarthy understands the gas industry better than those 100,000 people whose interests he is supposed to be protecting. However, what those 100,000 people do not understand is why the director general of Ofgem, the supposed regulator, thinks that mis-selling is a thing of the distant past and why, even when they draw his attention to specific cases of blatant abuse and downright fraud, Ofgem seems to be unable even to respond within three months.

On 27 October last year at 6.30 pm, my constituent Mr. Thrale of Kingsbury answered a knock at his door. I shall now give his account of what happened:

It was a man who said he was from Eastern Electricity. He had not been invited by me or any other member of my household.

The man asked if I had heard about electricity competition. I said I had. He said that, as I had not moved to another supplier from Eastern Electricity that they would like to write to me about their services and deals. When he asked if I would like them to do that, I said yes (this impressed me as each and every representative from the other half-dozen or so companies that have knocked on my door have all declined to send me any details about their services and company).

The man asked for my address. I offered to write it down for him on his form. To save him, and me, time, I did so and returned the form and clipboard to him. He asked for my telephone number. I declined to give him this information. He said that his boss expected him to get this. Again I declined.

He asked me to sign the form. I asked him why and he said that it was so that they could send me the information. I replied that my signature was not necessary for that. They could send me information without it. He said that he must legally get it to send the information. I replied that this was nonsense and that the law of the land said that anyone could—and do—send me marketing information.

By now I was suspicious. I looked at the form whilst he was talking and saw the word "contract" on it. I asked to see the form and took the clipboard. It was clearly a contract and I noticed a box had been pre-ticked next to the small print statement I would like Eastern to supply my gas. I told him that I was being lied to.

I challenged him about this and he said that I shouldn't worry about that. It was a mistake. I took the contract and asked him to leave. Since then I have examined the form more closely and seen that the payment method of cheque/cash has also been pre-ticked. I enclose a photocopy of the form, of which I still possess the original.

Mr. Thrale sent that account in a letter of complaint to Ofgem and to me on 28 October. His letter began,

I wish to report a criminal offence.

Ofgem sent his letter to the eastern regional office, which sent it to the Gas Consumers Council, which sent it to Eastern Electricity. By 21 January, more than three months later, Mr. Thrale had received no response to the issues that he had raised. On that date, in response to my second letter, Eastern Electricity wrote to me advising that

Eastern Electricity, as one of the UK's largest integrated energy suppliers, demands the highest standards of professionalism from every sales adviser who works on our behalf. Immediately following Mr. Thrale's complaint, the sales adviser involved was suspended pending investigation by our marketing department. They have since informed me that the adviser involved has been re-trained, and will be monitored in future to ensure similar complaints do not arise. Furthermore, I confirm that we have cancelled any and all supply agreements relating to the above address.

There never were any supply agreements relating to that address.

I wrote back to Eastern Electricity saying that I was astounded that the salesman had been allowed to remain a member of its staff and had simply been asked to go through a period of retraining. I pointed out that in my original letter I had asked that Eastern Electricity check all the other contracts sold by the salesman, as it was unlikely to have been his only misrepresentation. Eastern Electricity did not say whether it had carried out that check or whether any other bogus agreements had been discovered. I said that I was sending a copy of its response to Ofgem to ask it to investigate Eastern Electricity's handling of the matter. That was three and a half months after the original issue of doorstep mis-selling.

Ofgem's response is lengthy, containing 10 long paragraphs over three pages of dense writing, but it amounts to little. It seems to parrot what Eastern Electricity has told Ofgem, stating:

As a result of Ofgem's initial intervention, Eastern suspended and investigated the agent concerned.

We knew that. It continues:

Eastern state that the agent was then retrained and was due to be subjected to close monitoring in order to prevent further such incidents.

We knew that. It goes on to say that,

At the time of receiving Ofgem's initial complaint on behalf of Mr. Thrale, Eastern state that they had not received any previous complaints about the agent concerned; and for that reason they did not take sterner action against the agent at that time. However, since then Eastern have received further complaints regarding this agent, and as a result, have dismissed him.

Further complaints had been received, yet Eastern Electricity had not checked that every contract signed up by the agent had been done properly. The letter goes on in an unsatisfactory fashion.

I shall pass from the case of Mr. Thrale to the even more confusing case of Mr. and Mrs. Dolan. I pay tribute to my office staff—my case worker, Cathryn Evans, and my researcher on the issue, Brad Perilman—because it was a complicated situation. Seeboard thought that it had signed the Dolans up from Eastern Electricity and British Gas for its electricity and gas. It believed that it had a contract with Mr. Dolan, but he had no recollection of signing up with Seeboard. He could not have done so even if he had wanted to, because, according to British Gas, Mrs. Dolan had signed up with it from Eastern Electricity for the electricity supply. Therefore, it was no longer possible for Seeboard to sign up Mr. and Mrs. Dolan from Eastern Electricity. None of the parties knew that, however, because Mr. and Mrs. Dolan were not aware that they had entered into an agreement.

Mrs. Dolan is an elderly lady who has recently suffered a stroke and is still receiving medical attention. She was relaxing in her garden one afternoon, trying to recuperate from her illness, when a charming young man presented himself over the fence and started chatting to her. Apparently, on the basis of that conversation and without anything being signed, her supply was transferred. Mr. Dolan wrote to me in high dudgeon, stating that he could not understand how his supplies had been transferred to Seeboard. When people from Seeboard eventually responded to my calls they produced, after much pleading, a transcript of the conversation, which they said showed that a verbal contract had been entered into. What it showed in fact was that Mr. Dolan was extremely confused about the nature of the conversation that he was having with the person from Seeboard.

Ofgem, the regulator, is supposed to protect people such as the Dolans. Mr. Thale, an acute and intelligent young man, saw what was going on and took action. It took the regulator three and a half months to fail to do anything about compensation, or to investigate that case. The situation for Mr. and Mrs. Dolan is a lot worse. Let us not forget that 100,000 such error transfers happen every year. People may simply be confused about which company they have said that they might like to go with. When asked whether they know that there is competition and that they may be able to get gas and electricity more cheaply, they say, "Oh yes, we know that." They find out a few weeks later that they are being billed by a different supplier.

The Government must press Ofgem to do its job properly and to ensure that written evidence of a contract is required, so that there are no more cases of telephone conversations with confused, elderly individuals being adduced as the reason for a transfer of supply. Ofgem has done a good job in pressing for competition in the market and in trying to reduce the price of gas and electricity. However, it must take seriously its role of protecting the consumer and ensure that what has been a great boon—cheaper gas and electricity—does not become a nightmare for the 100,000 people every year who fail to understand why they are paying money to people of whom they have never heard.

I congratulate my hon. Friend the Member for Brent, North (Mr. Gardiner) on securing the debate and recognise the passion that he feels in relation to the cases that he has described. I have seen the correspondence relating to the case of Mr. Thrale, but not of the Dolans. I undertake personally to pursue the cases of Mr. Thrale and the Dolans, and I will ensure that the director general of Ofgem receives a copy of my hon. Friend's comments from this morning, to ensure that appropriate action is taken.

My hon. Friend began by saying that it is often a happy happenstance that one's roles as a constituency Member of Parliament and as a member of a Select Committee coincide. I have read his interrogation—if I may call it that—of the director general, and I recognise that his questioning came from a specific angle.

It is also a fortunate occurrence—perhaps happy is the wrong word—when as a Minister I handle issues that I confront as a constituency Member of Parliament. Few Members of the House will not have had cause to consider instances of doorstep mis-selling—not only of gas and electricity, although in those cases the issues involved are still fresh. Many of our constituents remain puzzled about how gas and electricity can be supplied by several different companies, because they are confused about whether the gas has to come through separate pipes. I understand that confusion, on which some people play.

My hon. Friend alleges criminal behaviour. It is important that companies pursue criminal action when there is clear evidence that agents acted in a particular way. I am sure that my hon. Friend recognises that in the first instance that is a matter for the Director of Public Prosecutions. I should like the DPP to prosecute in such cases, but it is not for me to say where the priority should lie in that department.

It is vital that action is taken. The issue has featured in many consumer television programmes. "Watchdog" made an interesting and rather frightening investigation into some of the selling techniques employed on the doorstep. As a consumer, I would not want to be confronted with some of the aggressive selling techniques that have been applied on the doorstep.

We should put the matter in context. I am grateful to my hon. Friend for drawing attention to the extent to which competition in gas and electricity supply has driven down prices. He and I are of a similar ethnic origin, and are well aware that people who look after the pennies find that the pounds look after themselves. Consumers can be something like £20 better off as a consequence of increased competition in gas and electricity supply. In the vast majority of cases, no problems are experienced in the transfer. However, today we must consider cases in which problems are encountered. Sometimes, such problems are the result of error, and we all recognise that errors are made. However, when I hear of cases such as those of Mr. Thrale and Mr. and Mrs. Dolan, it becomes more pressing to ensure that instances of unacceptable mis-selling are probed much more aggressively.

I am not trying to mitigate or pass the buck for the difficulties experienced by my hon. Friend's constituents, but we are introducing a Bill on the regulation of utilities that focuses on the consumer's role. Until the Bill receives Royal Assent, the legal requirement on the regulator continues to focus on the shareholder before the rights of the consumer. The Utilities Bill will change that, giving the consumer pride of place. A new Gas and Electricity Consumer Council will be created, which will have a much closer relationship with the regulatory authority.

Interestingly, my hon. Friend referred to the regulator by name. That is perfectly understandable, as at the moment the regulator is a single individual. Mr. McCarthy is a talented and experienced gentleman who has taken his work extremely seriously, as have other regulators. However, it is important to depersonalise regulation. The Utilities Bill will create a regulatory authority that will be responsible for consumer interests, backed up by and working with the Gas and Electricity Consumer Council. My right hon. Friend the Secretary of State for Trade and Industry will impose social and environmental guidelines that will dictate the work of the regulatory authority.

My hon. Friend is aware that by changing supplier—even if they did not know that they were doing so—Mr. Thrale and Mr. and Mrs. Dolan might have had an opportunity to benefit from lower tariffs. Sadly, many poorer consumers cannot benefit from better tariffs. My hon. Friend and I share a commitment to ensure that stories such as those of the Thrales and the Dolans should not discourage poorer people. The regulator should be able to help the fuel poor to benefit from competition by driving down their bills.

My hon. Friend will want concrete evidence of how the regulator and the Government can help constituents such as Mr. Thrale and the Dolans. In November last year, my right hon. Friend the Secretary of State for Trade and Industry announced an inquiry into gas and electricity competition, not least because the amount of switching that we had anticipated had not occurred. Other reasons were the lack of balance and the opportunity to examine instances of mis-selling. Ofgem extended its market licence conditions for a further two years and is currently considering responses to its proposal to develop the existing licence conditions for companies. Measures under consideration include a requirement for domestic gas and electricity companies to have effective management of the sales agents who act on their behalf. In some cases, Mr. Winterton, they are sub-contractors—

Order. The chair is addressed as Mr. Deputy Speaker or Madam Deputy Speaker.

I apologise, Mr. Deputy Speaker. I am used to seeing you in another setting, in which you are always extremely helpful. I shall return to referring to you as Mr. Deputy Speaker.

The consultation will look at ensuring that gas suppliers provide customers who have entered into contracts over the telephone with a copy of the terms and conditions of the contract, which is along the lines that apply for electricity customers. It will also consider extension of the coverage of conditions to sales undertaken in public places, such as shopping centres and over the garden fence, which is relevant to Mrs. Dolan's case. Extension of the conditions will also cover certain aspects of internet sales. Ofgem has continued to seek supplier compliance with the marketing conditions and good market practice by suppliers.

In addition to monitoring performance, Ofgem has been engaged in an active programme of review meetings with suppliers, identifying lapses in suppliers' arrangements and highlighting best practice. A recent industry workshop linked general electricity regulation with overall consumer regulation. That protects the consumer, not least by providing an opportunity for a cooling-off period on contracts that may be signed. Ofgem intends to put into the public domain data on consumer complaints against individual suppliers. That will be done on a monthly basis and for the year to date. It will allow customers and others to establish the relative performance of gas and electricity suppliers. If there is to be proper competition and effective operation of the market, information must be available about how companies conduct themselves. That is a powerful way of ensuring that they behave properly. In another setting, I found it to be of considerable use in concentrating companies' attention on customers with whom they are not dealing properly. A good experience of competitive gas and electricity markets is important in the first instance, which is often on the doorstep. It would be unacceptable if people were deprived of their rights, or lost out on the benefits of competition. I shall consider my hon. Friend's points, and I congratulate him on his contribution.