I am most grateful for the opportunity to speak about the needs of small businesses and the burden of regulation that they bear. I initiated the debate for three reasons. First, I spent the whole of the past 10 years running my own business, before coming to this place in June, so I hope that I can bring a practical rather than a theoretical or academic approach to the subject of the needs of small firms. If I have learned one thing, it is that small businesses are not so much about the bottom line, the economy and finance; they are essentially about people. That difference is crucial.

My second reason for securing the debate is that, in my constituency, small businesses generate a much larger proportion of the local wealth and jobs than is usual in most constituencies. In most of the market towns and villages in my constituency, the small firms, entrepreneurs and local tradesmen provide the goods and services on which most of my constituents rely. That is one reason why I established the East Hertfordshire Business Forum at the beginning of last year, with the express intention of providing practical help for local businesses. I am pleased to say that one of our initiatives, the prompt payment commitment, is directly tackling the scourge of late payment of bills.

My third reason for raising the issue of small businesses is that we need to speak up for small businesses now, more than ever. We must reduce bureaucratic burdens and lower financial hurdles, because it is at a time such as this, as the economy falters, that those enterprises will help us avoid a long and lasting recession.

Those who refer to small business may be unclear in their mind as to what it is. All politicians and all members of the media happily use the phrase to cover a wide variety of enterprises and work. The first example that I shall give of a small business is that of someone who is self-employed, a sole trader or a freelance. There are now 4 million self-employed people in Britain. Sadly, the Government's determination to push through the IR35 proposal has badly undermined their expectations about working in this country. In the few days since the announcement of the debate, I have received dozens of e-mails, letters and representations about the concerns of that group. One of my constituents, Mr. Paul Granger of Hovecraft Services, based in Bishop's Stortford, cites the iniquity of the tax burden placed on him by IR35. He concludes:

"we do not want employment rights or any special treatment—we want to be left alone to get on and run our companies, many of which are at the cutting edge of technology."

My second example of small business is the microbusiness. Such businesses are usually partnerships or companies that employ up to 10 staff. They make up the vast majority of the shops and local tradesmen upon which we all rely. For them, the marginal cost of employing people is critical in determining whether they can survive as a business. Another example from my constituency is that of Mrs. Moy, a newsagent in Hertford—we have many excellent newsagents—whom I met. The new regulations regarding rights for part-time staff have effectively doubled her staffing costs; however, she has no prospect of being able to recoup those costs.

Once we have talked about the self-employed and microbusinesses, it is only then that we come to what most people think of as a small business: a limited company, usually employing between 11 and 50 people, which is often a family business in manufacturing or the service sector. All those forms of enterprise—whether self-employed, microbusiness or small, and whether they operate as a limited company, partnership or sole trader—are distinct. The failure of Governments, at all levels over the years, to distinguish accurately between the different types of enterprise is one reason why so many Government policies, well intentioned or otherwise, prove disastrous in practice.

Small businesses in all their forms are vital to the economy and community. They provide almost half of all private sector jobs and many local services, particularly in deprived or rural areas where large companies will not venture. They often create the innovative approach to a market, a good example being Mr. James Dyson and his attempts to revolutionise the vacuum cleaner market when other companies saw it as mature and stale. Small businesses offer also a message of hope. It does not matter who people are, their background or education, their colour, creed or race; if they have the ability, ambition and will to work, they can be their own boss and make their own way in the world. Looking at what the organisations that represent those firms have said, that message is one to which an increasing number of people aspire.

Sadly, today small businesses are struggling. The result is that our national competitiveness is falling away rapidly. In 1997, we were the ninth most competitive nation in the world; today we are the 19th, and I believe that that position is under question. Why is our nation's economy failing to compete? Whenever I talk to my constituents and small businesses, or examine the regular surveys by the Federation of Small Businesses, the Forum of Private Business or the Small Business Bureau, I conclude that the answer is always the burden of regulation. We are facing a rising tide of regulation domestically and from the European Union. Last year alone, a record 3,865 regulations were passed. The sheer volume of those rules, the systems that underpin them and the time and money costs of implementation mean that small businesses are struggling to keep ahead.

It might be said that one year of record regulations is not the end, but the problem is not just one year. It followed on from a £15 billion cost of additional red tape, which the British Chambers of Commerce cited as the cost of Labour's first four years in government. If the volume of regulations were not bad enough, the Government compound the problem by the way in which they are introduced. There is often little warning or preparation time. Several businesses in my constituency cited just three weeks as the time that they had in which to deal with all the national minimum wage information. The rules are sometimes contradictory, and now we find that small businesses are no longer expected simply to abide by regulations and rules, but are expected to administer them.

As I was a small business man, I know that we have been unpaid tax collectors for many years—for value added tax, for example. Now we are expected to be the unpaid benefits office, given the raft of new payroll regulations. The stakeholder pension scheme has a recurring administrative cost of £15 million, and the working families tax credit scheme has an annual cost of £105 million. The student loan repayment scheme has recurring costs of £210 million, and the national minimum wage has costs to business of £330 million, not including extra money that goes into people's pay packets. Those are not my figures; they are not even the figures of the British Chambers of Commerce. They are the Government's figures. I shall take one example from that list to explain how small businesses are directly affected. When the Government originally costed the working families tax credit, they allowed £40 million for one-off set-up costs, followed by £105 million per annum for recurring costs to business. Some people said that those were quite small, and reasonable costs compared with those of the European social chapter, although I was not convinced.

However, the Government and some experts failed to recognise that payroll compliance costs always hit the smallest firms hardest. Indeed, the Government's own better regulation taskforce said not only that the scheme directly hit small firms' cash flow—the lifeblood of any business but £25 million of compliance costs fell on the smallest firms, which employ just one to four people.

Perhaps worst of all is the fact that, according to Lord Haskins's report,

"only £10m of the estimated … £25m cost to the smallest businesses … is related to those employers who will actually employ a WFTC applicant. The remaining £15m represents the time spent by the 90 per cent. who will possibly not have to deal with a WFTC applicant but will still have to spend time reading—

and complying with—

"the guidance."

Last week, I sold my car. While waiting to receive payment for it, I chatted to the person running the small car company to whom I had sold it. He said that he spent less than 10 per cent. of his time buying and selling cars; the rest was spent managing his business. The largest part of that management involves the administration of all the new regulations of which he has to be aware, even though the company has, I believe, fewer than four employees.

I am grateful to my hon. Friend for that classic example of the way in which small businesses that are trying to make a contribution to their local communities find the burden of administration too much. It is a good example, which reinforces the fact that Government policies, intentionally or otherwise, disproportionately affect small businesses, diverting them from creating wealth and providing efficient services. Given that such businesses generate 37 per cent. of our gross national product and employ 44 per cent. of private sector workers, the burden of regulations directly impinges on the efficiency of our national economy.

However, there is also a social dimension. I have long been a strong supporter of citizens advice bureaux, and my constituency is fortunate enough to have several excellent bureaux. I was particularly concerned to read the national association's report back in February, which explains, worryingly, how the working families tax credit has backfired for many of the more vulnerable applicants:

"In the worst cases employers have sacked workers entitled to the pay boost or cut their hours because they want to avoid the red tape of paying it through the wage packet. In other cases life at work has been made more difficult and people are less secure in their jobs."

Mr. David Harker, the chief executive, concludes that

"it makes no sense that the scheme that sets out to make work pay is making it more difficult for some people to stay in their jobs, and leaving some families worse instead of better off."

I am aware that the Government have appointed Mr. Patrick Carter to review payroll regulations and make them more effective and less costly. I understand that Ministers have had Mr. Carter's report for a little while, so I urge them to publish the findings, or at least bring them to the House's attention, to allow us to debate them quickly, not least because it is important to make changes as quickly as we can as the economy declines.

There are several solutions to the problem. In the United States, for example, small companies are able to retain a percentage of the sales tax that they collect on the Government's behalf. In some ways, that compensates companies for the administrative costs.

Does the Minister agree with the taskforce that the working families tax credit disproportionately hurts small businesses? Will he accept that it reduces their productivity and therefore national competitiveness? Does the Minister recognise the potential impact on jobs if red tape deters microbusinesses from taking on people such as Mrs. Moy in Hertford and thousands of others like her? Most important, will the small business Minister and his colleagues heed my call to recognise, financially or otherwise, the burden that the scheme places on small businesses?

Sadly, the working families tax credit will not be the last subject for employment-related regulation. Others expected in the next few months include entitlements to enhanced maternity, paternity and adoption leave, the EU White Paper on environmental liability and the EU directive on the exposure of workers to vibrations. Business is rightly sceptical of a Government who promise support and help, for they seek action, not words.

We wish the new Minister well and we hope that he will succeed, because the future of small businesses is in my mind in this debate. I hope that the Minister will answer my questions today.

The Minister is up against the culture of governance; there is little contact with or understanding of small businesses and family firms, let alone the self-employed. For example, the IR35 measure passed by the Government represents twice the annual budget of the Small Business Service for which the Minister is responsible. In truth, our regulatory culture is, as Lord Haskins, said, inherently autocratic, inflexible and remote. Mr. Digby Jones of the Confederation of British Industry said yesterday that even big companies are now feeling the pressure.

On Friday Mr. Rupert Murdoch, with whom I believe the Government are familiar, complained about red tape and said that Britain

"is not a country that encourages success…our executives have to spend at least half their time dealing with lawyers and regulators and they would do a whole lot better if they didn't have to cope with this constant harassment."

If a multi-million pound business is struggling, what hope is there for family businesses and small firms in my constituency and those of other hon. Members?

In the long term, we seek a complete change of culture in government. They should recognise that what enterprise needs is not a better regulation taskforce but less regulation. What we need is not more means testing but a simple, efficient tax system; we want not to collect taxes or run the welfare state on the Government's behalf, but to be free to create jobs and wealth, without which there would be no Government.

It is customary for hon. Members seeking to catch the eye of the Chair to rise in their places.

I declare an interest: I am part-owner of a family microbusiness, which has self-employed people and which negotiated in respect of IR35 with the Inland Revenue on behalf of our sector of industry. The business employs a lot of part-time staff and casual staff.

I have listened to the debate with the utmost incredulity. I considered intervening to ask that the support for, and success of, small business under the last Tory Government be compared with that under Labour Governments since 1997. I set up my business under a Labour Government and the issue of regulation and red tape is a puzzle to me. I am a member of two chambers of commerce and I speak regularly with business in my constituency and beyond. Businesses tell me of subjects on which they would like to press the Minister—and, indeed, the Chancellor—and I shall discuss those in a moment. Regulation, however, is not an issue that comes up regularly.

I want to deal with the specifics, so let me deal with vibration, which is a wonderful example because regulation has not yet been introduced. Historically, the largest industry in my constituency has been coalmining. The next largest is manufacturing. One of the areas that I have been forced to specialise in is vibration white finger. Many compensation claims arose as people went to court retrospectively to sue their employers for failing to recognise a health and safety hazard.

The regulations that have impacted on my business include precisely those health and safety regulations kindly introduced between 1992 and 1997. I have no criticism of the major ones—such as the Manual Handling Operations Regulations 1992, which are fundamental in protecting small businesses against potential compensation claims from employees, casual or permanent. The raft of legislation on electrical installation—part of our business—is another protection for the employer against bad practice by both employer and employee. It was introduced between 1992 and 1997 and continued subsequently by successive Governments. Once again, I applaud that. The bulk of the regulations introduced in this country over the past decade are entirely right and proper.

The working families tax credit is another example. Some employers tell me, somewhat tongue in cheek, that it supports the employer. Why? Because if someone is paid such a low wage that they are entitled to the working families tax credit, the employee, having received additional finance from the state, is more likely to stay with the company. The one criticism that could be made is that it is subsidising the poor-paying employer, precisely the small business person who, at great expense of time, effort and finance, is trying to build a successful business. Representatives of businesses tell me that the working families tax credit is a major bonus to such employers, and they are right.

A third example—

The hon. Gentleman is missing the point. It is not whether the working families tax credit is good or bad, but whether the method that the Government selected for paying it—using businesses as unpaid welfare delivery mechanisms— is the right or wrong way to deliver that benefit.

I must disagree with the hon. Gentleman. Whether the working families tax credit is a good thing is the main issue. By definition, the tax credit supports working, not non-working families. The linkage with the employer is coherent and sensible.

The national minimum wage is a third example. My business and the vast majority of businesses welcome the national minimum wage. It was welcome in my industry because we were sick to death of cowboy employers paying next to nothing—cash in hand if they could get away with it—undercutting us on the minimums. The national minimum wage has allowed our industry to push rates up. The largest sector of small business that I deal with regularly is hairdressing and associated professional bodies. In that sector, the introduction of the minimum wage is raising standards—we have the best hair designers in the world—but in the past it has been a low-skill, low-pay, low-cost industry comprising more than 70,000 different small businesses. The national minimum wage is raising standards so that our role as world leaders in design capability translates into the product delivered to the customer. For the first time, those paying the national minimum wage and above are on a level playing field.

The real issue is the significant improvements that the Government could continue to make. I shall list four of them. First, the Government have, rightly, increased VAT thresholds at least twice since 1997. If that trend continued, it would be a major asset to the growing small business. I hope that the Minister conveys that message to the Chancellor, as it is a critical issue for consideration.

The second improvement that the Government could make concerns capital allowances, which, in the current tax regime for small businesses, are not as fundamental as they were because, with the 10p starting rate and the cut in small business tax, a significantly greater amount is already available—as the profits of my company demonstrate over that period. Nevertheless, the link between paying tax, available resources and capital investment exists in the mind of the small business person. The Government should make far greater use of capital allowances of the type used for computer and IT equipment, with 100 per cent. write-off, to encourage small business capital investment. I hope that my hon. Friend the Minister will also convey that message to the Chancellor.

The third improvement that the Government could make concerns rate rebates for small businesses. They have slowly begun to have a major impact, particularly in the rural sector, where I live. What does the Minister propose to do to ensure that the existing arrangements are properly communicated to those who run businesses? My experience is that we have a raft of good policies for the rural small business—which is all too often not aware of them. To save time, Mr. Deputy Speaker, I will not cite examples of those policies, although there is a raft of them.

On a point of order, Mr. Deputy Speaker. Could you confirm the correct way in which we should address you?

The correct form of address to the Chair at the moment is "Mr. Deputy Speaker". Chairmen who are not Deputy Speakers of the House are addressed by name or as Mr. Chairman, as will be made clear at any changeover.

Thank you, Mr. Deputy Speaker.

My final point is the most fundamental for small business. I thank the hon. Member for Hertford and Stortford (Mr. Prisk) for initiating the debate and raising the issue of the Government's small business culture. One fundamental change is required for small business: a change to the culture of the banking system. The greatest barrier to the establishment and success of small businesses is the culture whereby banks refuse to take rational decisions. Yesterday I filled in a questionnaire that asked me to comment on 10 banks. They are all the same. In my experience, they are all as bad as one another. There is no good example among them. How does the Minister propose to tackle the culture whereby banks rip off businesses for short-term profit, at the expense of the longer-term growth of the British economy and of the banking system?

Thank you, Mr. Deputy Speaker, for giving me the opportunity to speak on this important subject.

We all know that actions speak louder than words. One reason why politics lacks credibility today is the perception that politicians say one thing and do another. A good example of that is the fact that there is no shortage of pro-business speeches and noises from the Government, yet they continue to make life difficult for business, especially small business. I should declare an interest because I am a small business man.

We heard from my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) that, according to British Chambers of Commerce figures, red tape costs have increased by £15 billion during Labour's first term. There is no getting away from that fact. Industry itself is complaining about the burden of red tape, regardless of what the hon. Member for Bassetlaw (John Mann) just said. As the Federation of Small Businesses has made clear, the burden of red tape always falls disproportionately on small firms. Figures from the Institute of Chartered Accountants show that the cost to small businesses of implementing new legislation doubled in the period 1999 to 2000. That is a meaningful cost to small businesses.

Regulation and red tape have hit small businesses hard. Entrepreneurs in my constituency are concerned about that. We should be too, because small businesses are the lifeblood of the economy, accounting for something like 99 per cent. of all businesses and nearly half of all employment, as my hon. Friend intimated. If we strangle enterprise in the small business community, we inhibit the prosperity of the country as a whole. Indeed, one of the main reasons why I am a Conservative is that I believe that the relief of poverty should be one of the key objectives of politics. That can be better brought about if we foster personal freedoms within the rule of the law, encourage enterprise and allow businesses—especially small businesses—to breathe and thrive.

Such an approach will create a more prosperous economy and create more wealth from which the Government can take their rightful share to help the truly disadvantaged in society. That will not happen if the Government pile regulations and costs on to businesses as that will hinder enterprise and eventually our ability to help those most in need. Yet the Government continue to make life difficult for entrepreneurs. The rising tide of regulation and red tape originates essentially from two sources. A good chunk is home grown and results from a natural tendency of politicians and bureaucrats to try to solve all problems with more and more regulation. The second source is the European Union. That situation will get gradually worse with the spread of majority voting. I should like to focus on that second danger for a moment or two.

To illustrate the growing danger posed by the EU's obsession with uniformity, I would highlight the prospectus directive because of the immense damage it could cause our small growing companies. That directive will harmonise listing rules across Europe, ensuring that issues of shares, bonds and derivatives should be accompanied by a prospectus. The fear is that the additional red tape could add something like £70,000 to £100,000 to the listing cost of each company, no matter how small. That would particularly hit small businesses, as their cost of raising capital would be increased significantly.

Prior to being elected to this place in June, I was a fund manager in the City, often investing in small businesses that raised capital in the financial markets, and I can vouch for how important it is for small businesses to have access to cheap capital from flexible financial markets. Meanwhile, as reported in the Financial Times, there is also a fear that in seeking to raise the disclosure standards of all companies, the directive could hit second-tier markets such as the London stock exchange's AIM and OFEX markets. Those markets have lower disclosure requirements to encourage young companies without extensive trading histories to raise capital.

They have been phenomenally successful in achieving that goal. AIM is the London stock exchange's market for growing companies and is obviously aimed at the smaller end of the market. Since its launch in 1995 it has helped something like 750 companies raise nearly £7 billion of equity capital. It has become a vital part of the UK economy in channelling public equity capital to younger companies. That market would not survive this directive. That is the view of private industry itself.

The problem is that the directive is the product of an EU Commission which has not consulted widely on the proposal and which did not take full account of the reality of how Europe's capital markets work. It is little wonder that private industry is unhappy, yet the response from the authorities to complaints about the directive has been disappointing, to say the least. In August, representatives of the London stock exchange, Barclays bank, OFEX, AIM, Brown Shipley merchant bank and the Quoted Companies Alliance attended a meeting at the Treasury to voice their concerns. They were hoping to meet senior officials but, instead, were met only by a junior official. As reported in The Daily Telegraph, one representative said:

"We were very disappointed. This is a serious issue. Aim has been very successful and, if it is abolished, it will increase the cost of raising capital for small companies considerably."

Apparently, a Treasury spokesman responded and said that it must be accepted that the policy will go ahead.

The EU's response has been extremely disappointing. After it was criticised for producing its "one size fits all" prospectus directive without consultation, a spokesman for Frits Bolkestein, the EU Internal Market Commissioner, said, again courtesy of The Daily Telegraph:

"We just did not have time to go for full consultation as we have a deadline to implement this by 2003."

That last statement beggars belief. We seem to have faceless, unaccountable bureaucrats setting deadlines on policies, irrespective of what harm they will do to small businesses and secondary markets, while the Government look on. It confirms to many that London's interests come a poor second to the EU Commission's quest for Euro-uniformity.

I now return to the difference between words and actions. Both the Prime Minister and the Chancellor recently expressed admiration for the success of American enterprise as characterised by low taxes, low regulation and individual initiative. In reality, however, we are moving towards a high-tax, high-regulation EU model which is run by bureaucrats. The language is that of American enterprise; the reality is EU regulation. As my hon. Friend the Member for Hertford and Stortford said, the adoption of the EU model is beginning to have a detrimental effect on our economic performance. Productivity growth has slowed. The United Kingdom has fallen in the world competitiveness league table and, meanwhile, economic growth is slowing down and the balance of payments is showing a record deficit. That does not bode well for the future.

I urge the Government to do all that they can to block the prospectus directive and to re-examine their approach to regulation in respect of small businesses. We should be moving closer to the American model, not the EU model. Actions speak louder than words and we must act now to ensure that we do not stifle Britain's entrepreneurial spirit and, with it, our prosperity over the longer term.

I agree almost four square with the philosophical outlook of my hon. Friend the Member for Billericay (Mr. Baron). He summed up the position nicely by saying that we should be moving towards the United States model rather than a European-type model in respect of small businesses. As a former small business man, I do not need to make a declaration because, within a few months of the general election in June, I was bought out of the business that I set up eight years ago. The Minister may think that it is curious that a phalanx of small business people who want to extol the virtues of such a wonderful life have now decided to go to the public sector, courtesy in part of the electorate. None the less, that means that we have a strong contribution to make to such a debate. Furthermore, ours will be an on-going contribution in the months and years ahead.

I want to concentrate on the more practical aspects of this important issue. No one wants to talk us into a recession, but clearly matters will be a little more difficult in the next few years than they have been in the past half a decade or so. I agree with my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) who said that, as the economy begins to struggle and turn down, we need to speak up for—without overly interfering with—small business. He had statistics, such as the fact that there are 4 million or so sole traders and microbusinesses, at his fingertips as well as details of small businesses such as the one that I ended up running. I set it up with a partner, and by the time that I left it, about eight years into running it, we had a dozen staff and a turnover of a little more than £2 million. I identify with some genuine anxieties, especially in the final two or three years, relating to payroll issues and that of the unpaid tax collector, to which my hon. Friend the Member for Hertford and Stortford referred. Many small business people feel that they are long-term Government employees in that respect.

I calculated that for every pound that I brought into the economy, 64p went in tax—if all taxes were counted, including value added tax, corporation tax, my slug of income tax and the employer's national insurance stamp. A significant amount is involved. For every pound that a small business man earns, he can keep only 36p, with more or less two thirds going elsewhere. That tax regime was in place before 1997, as I am sure that the hon. Member for Bassetlaw (John Mann) would be the first to remind me, and I welcome some of the measures introduced in the past four or five years. We now have a more sensible capital gains tax regime, although it has recently become rather more complex. I hope that many Opposition Members would agree with some of the actions of the Chancellor of the Exchequer and, by extension, of the Minister's Department.

One of the main concerns at a practical level that many people in small business now share is that we should strike a balance between, on one hand, achieving a work-life balance and considering small business issues in terms of employee rights—to which the hon. Member for Bassetlaw alluded—and on the other, introducing what they would regard as red tape. We must achieve a balance as far as possible, and in my view there has to be a demand for less regulation.

There is a perception that, in my constituency, Cities of London and Westminster—the constituency in which we are today—all the industries are large multinationals. My hon. Friend the Member for Billericay discussed some of the largest institutions in the City of London and some of their anxieties. Equally, however, there are many small, often family-owned businesses based in the constituency, and they have many common small business concerns. Obviously, they have some London-based anxieties relating to congestion and the sheer cost of housing, which means that attracting employees can be an issue, and some fundamental infrastructure issues are involved, especially in relation to transport. Nevertheless, some genuine worries are close to the hearts of people who run businesses here. Payroll issues, in particular, have become ever more prevalent in recent years, as a result of the Employment Relations Act 1999 and the fact that, increasingly, smaller businesses do not have the infrastructure for a large marketing department or, perhaps, even a human resources or payroll department, yet have to deal with complex specialist paperwork.

My business was a classic in that mode. We were not sufficiently well off to employ people full-time, and we had to take consulting advice on payroll aspects. Ultimately, however, much of the burden fell on me and my fellow director. I shall be honest about this: there were concerns. We had a small and relatively young business and, given that at one time two of our four female employees were on maternity leave, it had to make us think twice about whether we could employ more youngish women who might well be considering having a family. Obviously, the increasing amount of paternity leave is an on-going concern, especially for smaller businesses, as employees can be out of the picture for some six months. Long-term plans cannot be made about employing a replacement, lest the employee decides to return. We wanted to employ graduates, but it was very much a factor in our mind that, as the payroll aspects of graduate tax provision were being put back in the hands of small business people, doing so really would have totted up costs.

I do not suggest that there should be a moratorium or free rein in this respect for small businesses. I understand that, as the Minister would rightly say, it would give companies at the cut-off point of, say, 20 or 25 employees a strong disincentive to grow if suddenly they faced new regulation from which they had previously been exempt. The point was well made by the hon. Member for Bassetlaw. He placed the blame for many of the woes of small businesses on the banking system, and more concerns would arise with regard to that if the economy were to enter a recession. Many banks would react to that situation by looking after their own interests and by watching what other banks were doing. If they responded in that manner, they would be reacting in a rational economic way, rather than misbehaving, but important concerns might arise with regard to cash flow. Assistance, such as tax exemptions, or allowing for certain taxes and rates to be paid on a longer-term basis, would be well received, especially in respect of smaller, relatively new, start-up businesses.

The debate has been useful, and I congratulate my hon. Friend the Member for Hertford and Stortford on raising the issue under discussion higher up the political agenda. However, time is running out, and those in the Chamber will now wish to hear from the Minister.

I thank the hon. Member for Hertford and Stortford (Mr. Prisk) for providing us with another opportunity to discuss small businesses, which are an integral part of every community. I still run a small business—that interest has been fully declared. My practical experience gives me a special understanding of many of the issues under discussion—I am sure that other hon. Members who have business connections will agree with me about that—and I hope to be able to share some of my knowledge with the Minister.

Several issues that were raised by the hon. Member for Hertford and Stortford have been addressed in the debate. I was glad that he mentioned the important matter of the prompt payment of bills. The Government's introduction, a few years ago, of regulations on that matter was welcomed by many hon. Members, but how well they have been implemented has always been a concern. However, I am glad to learn that, locally, the matter has been taken on board.

The hon. Gentleman is right to state that that is an important issue. One of my concerns about the Government's proposals is that it is not enough simply to pass legislation. The problem for small suppliers is that, if they have a large customer, they will not want to upset that relationship. Consequently, they will not use the Government's legislation, as has been shown by the evidence to date. In that regard, the legislation misses the point. I would welcome the hon. Gentleman's comments on that issue.

That is a fair point. However, if legislation were never introduced, one would never make a start down the right road. The legislation has led to a gradual change in culture. I do not know precisely about the current situation, but I believe that large companies should be required to declare their record on the payment of bills, as should the Government. I spoke when the legislation was introduced, and even then I was disappointed that the Government were trailing behind. Essentially, the Government were telling companies what to do while failing swiftly to implement their own legislation. As hon. Members have said, local government is particularly guilty of that practice.

The issues that have been raised with regard to rural areas are important, and there is still a lot of work to be done on them, particularly following the foot and mouth crisis. Other issues, such as of sub-post offices, also need further attention. Hon. Members are increasingly looking to the Government to deliver through the regional development agency system. Ministers are talking about investing more money in the system next year, or the year after, and increased investment in regional development agencies would be welcome because they did not receive enough funding when they were established. In future, like many other hon. Members, I shall be looking to the regional development agencies to introduce more initiatives to help rural areas.

The hon. Member for Bassetlaw (John Mann) made some good points. He mentioned, for example, the working families tax credit, which we all welcome. However, we also look to the Government to do something about the burden that they have placed on the small companies that must implement the credit. The initiative is good and worthwhile, but we want help for business to be implemented by the Government rather than by business.

The hon. Member for Bassetlaw also mentioned business rates, an issue that is important and high on the small business agenda. I wait with increasingly bated breath for the Government to bring forward a scheme to help small businesses with business rates. I do not know whether my breath will continue to be bated today or whether I will get satisfaction. I ask the Minister to respond here and now to the programme that the Liberal Democrats have proposed: a business rate allowance that is easy to implement with no red tape and that leads to an immediate reduction in small businesses' business rates. If the Minister does not know the full details of the proposal, I shall send them to him. I cannot understand why such a worthwhile initiative cannot be adopted.

The hon. Member for Billericay (Mr. Baron) made some good points on the prospectus directive. I am in touch with the rapporteur in the European Parliament on the matter, and he has taken on board the points that I made and those of the type mentioned by the hon. Gentleman. We hope that the directive will bed down as a reasonable regulation.

We all know the important role that small firms play in our society, economically and socially. It does not take much to figure out that it is in the Government's interest and in all our interests to ensure that small businesses are allowed to fulfil their potential without being weighed down by excessive regulations. I disagreed with the hon. Member for Bassetlaw when he said that that matter was not a high priority for many people. Respected surveys by bodies such as the Federation of Small Businesses, the Forum of Private Business and the Institute of Chartered Accountants state time and again that the matter is problematic.

The Government pledged to think small first. We plead that that pledge should lead to real action, rather than simply being a pious hope. There is still some way to go before small firms cease to be strangled by regulatory red tape, which prevents them from getting on with the business of running their business. A recent survey by the Institute of Chartered Accountants said that, since last year, the average compliance cost for microbusinesses had increased from £3,600 to £4,100. That is a discernible increase. In the small business sector as a whole, the average cost has increased from £8,000 to more than £10,000. We must respect those figures and the Government must take them into account.

Given the Government's record, it is unsurprising that small businesses remain unimpressed by their rhetoric. Seventy-five per cent. of respondents to the Institute of Chartered Accountants survey said that the Government had not done enough to encourage enterprise culture.

The hon. Gentleman is probably as familiar as I am with the fact that huge numbers of small businesses in his constituency run tourist-driven activities, such as bed and breakfasts and small hotels. Given that the money available for tourism has been disproportionately spread to Scotland and Wales, does he lament, as I do, the Government's lack of funding and support for struggling small businesses that are trying to attract tourists to England—especially to the seaside—in the aftermath of the foot and mouth crisis? I hope that he will support me in asking the Government to divert more funds to increase funding for tourism support.

I happily support the hon. Gentleman in that request, although Conservative Members have not produced a significantly better programme on the issue than have the Government. However, I shall raise those issues with the Minister for Tourism, Film and Broadcasting when he comes to Weston-super-Mare on Thursday.

There is a fine line between achieving good standards for employees and not putting too great a burden on the employer. The annual report of the better regulation taskforce states:

"Any regulation decided on should be designed to deliver its objectives efficiently and cost-effectively without impairing the liability and competitiveness of good and especially small businesses."

That is a definitively important statement, which the Government should observe when dealing with business. That is what all regulation should be about, as Lord Haskins said in his report. However, if we use that test to judge some of the regulations that the Government have introduced, we find that they have failed to meet it time and again.

Do the provisions for stakeholder pensions, for example, fulfil the objectives to which I referred? No, they certainly do not. In a recent written answer, the Secretary of State for Work and Pensions admitted that, by the end of August, only 146,950 employers had designated a scheme for their employees out of a total of up to 400,000 employers that were in line to do so by 8 October. The take-up rate has been decidedly low because of concerns about the scheme and its past performance. The Government seem resigned to the fact that there is concern about stakeholder pensions. The Department for Work and Pensions announced another pensions review just two weeks before employers could have been fined for not having a stakeholder pension scheme in place. That is an important point for the Minister to bear in mind.

The new regulations on the issue also fall short of the good regulation test because they place an impossible burden on smaller employers—the microbusinesses— who must identify a scheme and administer it through the payroll. Once again, small firms are carrying out the work of Government and being forced to undertake roles that should never have been placed within their remit. I ask the Minister to consider that important point. The point applies also to the working families tax credit, which I mentioned earlier.

No small business owner would dream of asking the Minister to mind the counter of his shop—although it might be a good idea if the Minister were to do so. Instead of grandiose schemes whereby people work for Shell for a couple of years and enjoy all the benefits of such big companies, the Minister, Members of Parliament and especially civil servants should get down to the nitty-gritty and work for two, three or four days in a small business—a garage, for instance—slog away and go home late at night to calculate VAT.

The climate change levy is another important issue. Many firms of all sizes are concerned about it because it is complicated and cumbersome. I also draw special attention to the lack of consultation on the working time regulations. Although those regulations are supposed to be extended and better operated, that has not yet happened.

I seek several reassurances from the Minister on behalf of small businesses. A key to achieving regulation that complies with the model set out by the better regulation taskforce is to understand the needs of small firms. The Minister would do well to read, on the British Chambers of Commerce website, the comments made in reply to its campaign to cut red tape. A gentleman called Henry, for example, runs a business that is based on the internet and e-commerce, and his comments on the website neatly summarise the way in which many people have been affected by the IR35 legislation.

Many small firms have no idea of the regulatory requirements facing them. I ask the Minister to ensure that the communication process between small firms is improved, perhaps by using the Small Business Service. What action are the Government considering to ensure the effectiveness of legislation passed by the House? I ask the Minister to press for an immediate review of legislation that places unnecessary burdens on small firms. I would also like him to guarantee that further legislation will not be introduced to the detriment of small firms, particularly as we look ahead to the tax credits coming on line in 2003. Finally, when will the Minister respond to the detail of the Competition Commission report on banking, which has been on the table for nine months? We have yet to hear a response.

I congratulate my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) on securing the debate. He is eminently qualified to raise the subject of small business and so too, it appears, are other hon. Members who have contributed this morning. I declare my interest as a director of two companies, both of which, I think, would qualify as small businesses under the official definition.

I want to set the subject in a wider context. Over the past couple of months, political focus has been on wider issues: foreign affairs and our country's ability to defend itself. Before that, the political flavour of the month was public services and an agenda for making them better and more effective. Those legitimate activities of Government and the social state critically depend on the ability of our productive enterprises to generate the wealth that underpins them. Business is critical to the success of our society and small businesses play a significant role in our economy.

Already, we have heard about the 3.7 million enterprises that exist in this country. More than 99 per cent. of those employ fewer than 50 employees. Some 44 per cent. of all non-governmental employees are in the small business sector and 37 per cent. of private sector turnover is generated in that sector. The sector not only represents a significant proportion of the total economy but performs an important role in delivering flexibility to the economy That is the reason for the concern about the burden of increased regulation on small businesses.

The term "small businesses" embraces a range of enterprise sizes, as my hon. Friend said. Clearly, some small businesses are growing and seeking to accumulate capital; they may, in time, become medium enterprises. However, a large number of small businesses will never be anything other than just that. Many of them are one-man, self-employed enterprises. They, in particular, deliver a swing capability to our economy that is vital to the fast-moving responsiveness that we need if we are to continue to be flexible.

I am sure that the Chancellor would recognise that as the economy and the fortunes of firms move, they must be able to adjust the costs that they bear. The one-man business is uniquely able to adjust its cost in response to the changing environment: it makes more money one year, less the next. Typically, such a business will not require large streams of investment capability, so it can absorb changes in the environment in a way that larger and more structured businesses cannot. The price that small enterprises pay is a much higher rate of enterprise failure than is seen among larger enterprises, which is balanced by a faster rate of enterprise creation. We need to focus on the flexibility that microbusinesses and small businesses deliver because they provide a unique adjustment factor in the economy. One reason why the Government's IR35 initiative has been so damaging and destructive is the fact that it has hit at the most flexible part of the economy.

The Chancellor, whom I am happy to quote again, always talks about improvements to productivity being the key to our future success. I have been struck by a report by a New York organisation called the Conference Board, which analyses the productivity gap from the United States perspective. I shall quote from the executive summary—I could not afford the full report because it costs $1,000 and parliamentary resources do not stretch that far

"To realise the potential efficiency gains from IT in Europe and Japan, businesses must make the most of expanded investment opportunities, but they must also support reforms that enable the restructuring of firms and transfers of resources. Regulatory rigidities inhibit reallocations of labour and capital to their most productive uses, reducing the benefits to be obtained from investment in new technologies.

Labour markets in the US have been subject to fewer restrictions on the redeployment of workers within and across production units than in many other OECD countries."

In other words, the report points out that industry's flexibility to adapt its working practices and reallocate labour and capital is a critical factor in obtaining the huge gains in productivity that the development of IT can offer. That is precisely where the regulatory burdens that are being imposed on business may impair our ability to realise those productivity gains.

I thank the hon. Gentleman for giving way. I apologise to you, Mr. Cook, for my late arrival. That was occasioned by my attendance at a sitting of the Select Committee on Deregulation and Regulatory Reform, where we are trying to deal with the issue of the regulatory burden, which seems to have been a theme of Opposition Members' speeches today. I should like to ask the Opposition spokesman where he would lighten the regulatory burden. There have been comments on the working families tax credit, hints about the minimum wage and talk about stakeholder pensions. Will the hon. Gentleman give us specific examples of ways in which he would lighten the regulatory burden on small businesses?

If the hon. Gentleman will allow me to make my remarks, I shall make several specific suggestions, to which I hope that the Minister will respond.

Many burdens that we have discussed this morning obviously affect businesses of all sizes. However, as has been said, some burdens will affect small businesses and larger businesses differently. Smaller businesses have limited manpower resources and, because of the indivisibility of individual units of labour, they cannot afford to have specialists dealing with all the different areas of regulation that the Government impose on them, so the issue becomes particularly acute for them.

I readily acknowledge that there is a problem for Government in dealing with smaller businesses. It is difficult for an organisation of the scale of the Government to engage with the vast array of different interests and agendas that smaller businesses will have. I welcome some of the Government's moves to encourage and foster enterprise in small business, and in particular the changes to the capital gains tax regime. Much of the Government's agenda focuses on delivering to businesses support services such as the Small Business Service, yet they continue to impose increasing levels of burdens through regulations. The Labour approach is based on lots more regulatory burden dealt with by lots more intervention in the form of innovations such as the Small Business Service. I should prefer a lighter-touch approach that does not try to counter the effects of regulatory burdens but tries as far as possible to avoid imposing new burdens and frees up businesses to create wealth rather than to administer a bureaucratically defined regime.

We have already heard a little about the Government's record. Some 3,800 new regulations were introduced in 2000.

rose—

I shall make some progress, if I may. The Government imposed £26 billion of additional business taxes and £15 billion of regulatory burdens during their first term in office, so it is perhaps unsurprising that Britain has been sliding down the international competitiveness league table.

The burdens that have been imposed fall into three broad categories. Some arose from the signing in 1997 of the social chapter. At the time, the Prime Minister promised us that that would not open the floodgates to a raft of European Union social legislation and that Britain would be able to shape the legislation flowing from Brussels. However, 24 sets of new or amended employment regulations were introduced in the previous Parliament, and the Government have clearly failed to stem the tide. We have seen the working time directive, the parental leave directive, new maternity and paternity leave arrangements, the part-time workers directive, the prospective temporary agency workers directive and, most recently, the notorious information and consultation directive, in respect of which the Government cannot even persuade their own MEPs to vote for the position that they are pushing in the Council of Ministers.

I want to deal with the charge, which rather stung me, that was made by one of the Minister's colleagues during Trade and Industry questions last week—that is, that what we call burdens on business are in fact legitimate moves by the Government to protect the rights of employees. Having tried to analyse that argument, it seems to me that anything that protects the rights of employees by adding to the non-wage costs of employment must come from the pot of resources that is available to pay those employees. As a result, by regulating, and thereby increasing the non-wage cost burden on business, the Government are, in effect, dividing up the pot between non-wage benefits—which are enjoyed in the form of greater employment protection, greater rights to maternity leave, and so on—and money wages. They are thereby redistributing the product of labour between different individuals. For example, non-parents will earn less than they might otherwise earn, owing to the imposition of non-wage costs on business to support parents. That is a subject for a serious debate. Simply to say that burdens on business are the flip side of employee rights is not the whole story—it must be thought about a little harder.

European legislation, apart from the social chapter, imposes a raft of further burdens on British businesses. Our European colleagues would no doubt see that as levelling the playing field, but our productivity gains do not allow us to absorb such burdens.

The third leg of the stool comprises home-grown burdens such as the Employment Relations Act 1999, student loans, the working families tax credit, the Child Support Agency, stakeholder pensions and other measures to which hon. Members have referred.

Will the hon. Gentleman give way?

I will not, because I want to give the Minister plenty of time to respond.

I want to make a few suggestions to the Minister. He should put the interests of British business first and recognise that they are also the interests of British employees. He should not give away our relative advantage—the flexibility enjoyed by our small firms and microbusiness sector. If we make our economy look more like the European economies, but without achieving a huge rise in labour productivity, we will all suffer. I ask him to implement with less zeal the stream of legislation from Brussels, recognise the special burdens that those regulations impose on small business, use all possible small firms derogations and ask for more from the Council of Ministers. I ask him to control the Labour MEPs, at least, in Brussels to ensure that they support the Government in those efforts.

The Minister should introduce independent cost-impact assessments of all new regulations and go for better regulation, not more. He should introduce sunsetting and, above all, slow down. He should put the brake on the torrent of legislation and regulation that has flowed in the past four years. I ask him to give business an opportunity to digest such measures and give the Government a chance properly to measure their impact on the economy, so that we may move forward at a pace that everyone is capable of sustaining.

I am pleased to represent the Government today on this important issue. I congratulate the hon. Member for Hertford and Stortford (Mr. Prisk) on securing the debate and I thank other hon. Members for their thoughtful contributions.

Reducing the regulatory burden is a key component in achieving our vision of making the United Kingdom the best place in the world to set up and run a business. That is why, for the fifth consecutive year, the number of small and medium-sized enterprises has grown, with the new SMEs outstripping those that are winding up. I know the value of the SME sector, and the present Government have taken, and will continue to take, key actions to minimise unnecessary burdens on business and to ensure that we achieve our vision.

I want to illustrate those practical examples of action later, but first I shall briefly paint the debate on to a broader canvas that takes in the totality of regulation, rather than just the narrow vision of burdens. Regulations and other Government formalities are introduced for many different and worthwhile reasons: for example, to provide consumer protection, to protect employees from unfair employment practices, to ensure safe work practices and to protect the environment. Last year, 180,000 people were injured and 160 killed in the workplace, and more than 30,000 consumers were harmed by faulty products. In light of those figures, it is easy to see why Governments have to regulate. Regulations are also introduced that create real benefits for business, setting pro-competition frameworks, ensuring that small businesses are paid on time and giving consumers confidence in certain markets through consumer protection legislation.

We all know that regulations can impose costs on business. We must take care to ensure that those costs are not disproportionate and do not impede innovation, competitiveness and growth. The present Government are well aware of that, and have taken a number of strong actions to ensure that burdens are minimised.

Does my hon. Friend agree that Conservative Members are trying to rewrite history? Was it not the former right hon. Member for Henley, now Lord Heseltine, who imposed record increases in regulatory burdens when the Conservatives were in office?

I was keen to avoid party politicking, but my hon. Friend makes a very good point. From 1994 to 1996, the then Government introduced more than 10,000 regulations. The hon. Member for Tiverton and Honiton (Mrs. Browning), who was a Minister in the previous Conservative Government, said in a Queen's Speech debate:

"We would be the first to say that we did not do very well"—[Official Report, 19 November 1999: Vol. 339, c. 250.]

The hon. Member for Hertford and Stortford quoted Mr. Rupert Murdoch, but I can bring him a little closer to home. The right hon. Member for Kensington and Chelsea (Mr. Portillo), the former shadow Chancellor, noted on 5 July that

"after three years of Labour Government relatively we are less taxed and less regulated than under our Continental partners on average".

That is a telling and welcome admission.

Will the Minister give way?

No. I want to make progress and answer some of the many points that have been raised.

We have taken action to improve the preparation of future regulations, to address the problems that former Conservative Ministers recognised—as do we. We also want to make it easier to deal with the stock of existing regulations, such as the 10,000 that I mentioned a moment ago. Such action demonstrates that we are working right across the spectrum of regulation to ensure that regulations are well designed and easy for businesses to comply with.

We have put in place strong guidance on preparing regulatory impact assessments for new regulations, and published guidance on how those should be carried out. We have established the ministerial panel for regulatory accountability, a strong body which has the power to simplify existing regulations and ease regulatory pressure on business. It does that by providing a strategic overview of the Government's regulatory plans and by calling Ministers to account over regulatory proposals.

Last April, we established the Small Business Service, a key aim of which is to ensure that the concerns of small businesses are properly considered in the regulatory process, and that Departments think small first when designing regulations. We have also ensured that regulations currently in preparation are prepared under appropriate processes. Last November, we introduced a new code of practice to ensure better consultation. From the beginning of this year, consultation periods have, in most cases, been at least 12 weeks. We now require Departments to issue guidance on legislation at least 12 weeks before it comes into force. The SBS has recently issued guidance on that, helping other Departments to draft their guidance in a way that businesses can clearly and easily understand, to help them to comply with policy.

The Regulatory Reform Act 2001 will help to reform outdated and over-burdensome regulation. I have asked business organisations to suggest areas where that Act can be used. However, we are not working just on the design of regulation. We are also ensuring that clear and timely guidance is available to businesses to enable them to comply easily with regulation. We are working hard on practical examples that will make it easier and less costly for business to comply with Government regulations.

I have come especially to listen to what the Minister has to say, but we have heard all this before. May I remind him that, two years ago, the previous Secretary of State, the right hon. Member for Tyneside, North (Mr. Byers), gave a

"guarantee that we will not allow regulation to stifle enterprise"?

The Minister has spoken glowingly about the Cabinet Office Committee. In March, the then Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster said:

"We have taken active steps to ensure that what regulations are introduced are necessary, simple, and easy to understand and implement…I call Ministers to come to the panel and justify their proposals if the panel thinks that they do not meet its criteria." —[Official Report, 19 March 2001; Vol. 365, c. 23.]

However, for the past two years we have seen record introduction of regulation—an example of saying one thing and doing another. How can we be sure that what the Minister is now telling us about will work?

The hon. Member for South-West Hertfordshire (Mr. Page) obviously missed the point that I made at the beginning. We are now in the fifth consecutive year when the net number of SMEs has grown. That is partly because we have been putting in place a better, more favourable regulatory framework. We recognise that there are problems—otherwise, we would not be having today's debate. I am pleased that Patrick Carter's review of payroll administration, which several hon. Members have mentioned, will result in real benefits for business in the areas that have been discussed today.

The time saver initiative will save time for business by making it easier and faster for business to comply with Government administration. The enforcement concordat is ensuring that local government enforcement officers are working with good businesses, not against them. I recently delivered a speech at the local business partnerships conference, which was held to encourage and promote the network and provide a discussion forum for issues affecting businesses. The conference was another example of how the Government are taking practical steps to help business by bringing together leading enforcement officers, beacon councils and businesses that are affected and can best inform us.

Will the Minister give way?

No; I will make some progress and cover other points that were raised.

Last week, I held a conference with leading representatives of small businesses to discuss the strategy of the Small Business Service regulatory team. That strategy was strongly endorsed, and the meeting proposed several actions that the Government could take to help business. We will hold a similar event in the new year to assess progress. We are not resting on our laurels, but continually searching for ways to make life better for business.

Will the Minister give way?

No.

We have taken concrete action on many other matters, by working with businesses to limit the burdens on them. At the same time, we have responded to the needs of small businesses to provide a better regulatory format. For example, small businesses asked for more regulation on late payment of debt, and that regulation was included in the total, and yet we were castigated for the number of regulations. The ability of small businesses to charge interest on debt has brought about considerable reductions in the average time that it takes larger firms, in particular, to settle with smaller ones.

Will the Minister give way?

No.

It is vital that all Governments make life easier for business and take practical action to achieve that result. We recognise that the health of small businesses is important for our economy and that small businesses contribute £1 trillion in output to our economy and employ about 12 million people, which is a considerable proportion of our work force. While the motivators and drivers of the last century were undoubtedly the big corporations, in this century the drivers for progress, innovation, employment and keeping the UK ahead in international competition will be small businesses.

We have taken practical steps to ensure that regulation, when required, is well designed and minimises the burden on business, while still achieving the policy intent. We have taken practical steps to ensure that good guidance is available and that it is easier for business to comply with regulations. We will continue to minimise the burdens on business and ensure that we achieve our vision of making the UK the best place in the world to start and grow a business.

The Minister told us that the number of small and medium enterprises had grown over each of the past five years. That is simply a reflection of the economic cycle. Does the Minister expect the number of small and medium enterprises to grow over the next two years?

The hon. Gentleman reminds me of economic cycles. We have not brought the country out of the boom-and-bust cycle of the past several Governments to let the benefits fritter away.

The hon. Gentleman asked me to make a prediction that I will not make in the light of circumstances after 11 September. No sensible Minister of any Government in the world would make predictions about the future of business based on the events of 11 September and compare them with predictions on 10 September. It is clear that our economy is in a much better position to weather the downturn than almost any other economy in the world. That has come about not by chance, but by the practical measures that have been taken since 1997 to give us a stable economic framework. That framework helped small businesses thrive in the past four years, and helped the Government get to grips with regulation, which, as the quotations that I made from the words of previous Conservative Ministers show, was in danger of running out of control. Our policy strategy is focused on those attempts to get to grips with those regulations. Only about 4 per cent. of the plethora of regulations impinge on small businesses in terms of costs.

Order. We come to the next topic for our consideration.

I am delighted to win the opportunity of holding the debate this morning—[Interruption.]

Order. I request hon. Members leaving the Chamber do so quietly, to enable our business to proceed.

I have been trying to win the chance to hold this debate since the start of the year, and it has finally come through—on my birthday. Unaccountably, the card from my right hon. Friend the Minister for Sport has not arrived yet, but I am sure that it is held up at the post office. My delight at winning the debate was slightly tempered when I discovered in Edinburgh yesterday that I had to get up at 3.50 am to catch a plane to get here today.

The topic is of vital importance to my constituency. For hon. Members who do not know the constituency of South Thanet, I should explain that we have a wide variety of gambling interests that will be directly affected by the Budd report. We are first and foremost a seaside resort, and the thrust of my comments will be about the impact of the report on the seaside. We are also a permitted area, so there is a casino in Ramsgate, and another in Margate, in the constituency of North Thanet—I see that the hon. Member for North Thanet (Mr. Gale) is in his place.

In addition, we have several social clubs and two significant suppliers of gaming machines. We also have two world-leading manufacturers of the type of seaside arcade gaming machines that are sometimes called "pushers" but which the industry prefers to call "penny falls". For those who do not know what they are, I should explain that they are machines into which one puts a 2p piece and a little platform moves backwards and forwards, knocking off another couple of coins; young children are delighted when they win a few coins and adults are delighted that their children are so easily amused for a few minutes on holiday. Those machines are directly threatened by some of the recommendations in the Budd report.

I shall concentrate on seaside issues. I know that other hon. Members will comment on some of the other aspects of the report on which I shall touch only briefly.

Like all the other hon. Members present, I cannot see into the Strangers Gallery; nor may we speculate about who is present there, but it would not surprise me if business men who between them employ several hundred people in my constituency were listening to the debate. Those people also represent other business men from my constituency who employ several hundred more constituents. For us, this is a vital business. It is not something that anyone takes lightly. The industry is one of the mainstays of our local economy.

I do not expect the Minister to make firm commitments today. The consultation period on the Budd report has recently ended. He has said that he is still prepared to accept representations, and I know he will be reflecting on what he has been told. However, it is vital that he realises that some of the recommendations of the report are causing considerable blight to the industries in my constituency.

My right hon. Friend the Minister for Sport has not yet commented on the recommendations one way or the other. No one knows what is in his or the Government's mind, or whether the recommendations, which are already having a significant effect on our local economy, will be accepted. The sooner he can comment about what he is and is not considering, the better it will be for us.

The report was thorough, touching on many aspects of gambling, and many of its recommendations have been widely accepted; there appears to be a consensus that they are good and sensible ideas. In a different world, where the sky was always blue or there was no gambling, and we were starting with a clean sheet of paper and deciding how to organise gambling, some other aspects of the report would be sensible. In our world, however, they are barmy and simply will not work. They will have a practical impact not only on employment but on problem gambling, social factors and crime. My right hon. Friend must sift those aspects out of the report before he accepts it.

I started to talk about blight. My right hon. Friend will be fully aware that all businesses have business plans based on the regulatory system in which they work today. That is the only way in which a business can plan. When a report is published that completely cuts away the foundation on which those plans were written, the consequences must be serious for those businesses and the economy that they support. That is exactly what has happened.

We can see that with the recommendation covering social clubs. During parliamentary questions yesterday, the Minister said that he had received 1,500 representations from a variety of not-for-profit organisations including political clubs, working people's clubs and other social clubs, so I know that he has been heavily lobbied on the subject. That will not have surprised him, because the Budd report effectively takes away the main plank of such clubs' business plans. We cannot expect to do that suddenly without its having devastating effects.

There has been less lobbying for other some businesses of which we need to be aware. Many are in seaside areas, and I call them marginal businesses. They include small hotels that are not making considerable profits, but perhaps are just breaking even. The presence of a small-prize gaming machine in such a hotel is the difference between the business carrying on and closing down. At a time when we are trying to regenerate seaside economies and hoping that they will recover, we cannot afford to lose any businesses, and the little gaming machines that Budd just sweeps away, almost with a stroke of the pen, are vital to marginal businesses.

Other businesses are less marginal because they have considerable assets. They are established businesses such as seaside arcades in areas of town that suit them, and the local authority—through planning permissions—and others are happy to accept such establishments in those locations.

If one recommendation in the Budd report—I think that it is number 43—is accepted, local authorities will have the power to decide that gaming will not be allowed in certain areas of their towns or districts. If Budd is applied literally, they will have that power retrospectively. In other words, someone whose business is currently thriving and worth a considerable amount of money could be left with no business. That creates a blight on the industry, as the Minster will readily appreciate. The recommendation is a sword of Damocles hanging over those businesses.

The blight on pubs and social clubs will affect every constituency. As far as I can see, Budd makes all those proposals without the slightest scrap of evidence that there is a gambling problem caused by that sector.

Does the hon. Gentleman agree that one of the Budd report's recommendations is to reduce the number of machines in pubs to two per public house? The Licensed Victuallers Association has estimated that if the proposal were implemented, the effect in Weston-superMare would be a tremendous loss of staff and facilities in pubs, many of which are struggling already.

I agree. The Budd recommendation was made on the premise that the presence of a gaming machine has a corrupting effect on children. If machines have such an effect, it does not matter whether there are two of them or 20. Surely it should be for the licensee to decide how many machines there should be to entertain his customers in a licensed premises. Whether it loses or gains him business should be a matter for him, not for regulation, which will have a devastating effect on many businesses.

Does my hon. Friend agree that many of the Budd report's recommendations are based on anecdotal evidence and speculation? There is little statistical, accountable evidence for its findings, the results of which could have serious effects on seaside resorts such as Blackpool, part of which I represent, and my hon. Friend's constituency?

My hon. Friend is right. I would call the evidence on which the report is based not even anecdotal, but blind prejudice. It expresses a view of small-stake gambling that neither I nor, I think, my constituents share.

We are trying to encourage families to use pubs and other licensed premises because the family has a civilising effect on them; it is nonsense to suggest that the presence of a gaming machine will have a corrupting influence. We do not assume that because children are allowed into pubs and see adults drinking alcohol, which they themselves will be allowed to do only when they reach the age of 18, it will turn them into alcoholics; we take the opposite view—that it will help them to understand social drinking. Why do we not take the same position on gambling?

The blight will not stop there. One of my main concerns is the effect on amusement-with-prize machines—the type found in seaside arcades. I hope that my right hon. Friend will not say that I do not need to worry about such things because the Budd report says that there will be some research and there may be another view of the matter in five years' time. That just means that the sword of Damocles would be hanging over those businesses, and they would be blighted, for five years or even longer.

On the subject of regulation and crime, we forget at our peril that the gaming legislation was introduced by a Labour Government to get the gangster out of gaming; it was designed to stop the Kray twins dominating the gaming machine industry in London, and it was extremely successful in doing so. The industry is now well regulated. We have evidence of what will happen if the Budd report's recommendations are introduced, as it suggests a return to what happened in the 1960s. Why does the Minister not expect the same consequences as were seen in the 1960s?

If my right hon. Friend wants more evidence, he should consider what is happening in France. I quote from an article in Coin Slot International about an underworld war currently raging in France over illegal fruit machines, which

"claimed its latest victim when the body of a man was found riddled with more 9 mm bullets than could be counted."

That is what happens if there is no legal regulated way for people to operate in an industry and provide gaming machines. If all the gaming machines that offer significant jackpots were forced into casinos—as has happened in France—organised crime would take over the provision of those machines.

For further evidence, look at this country: machines with small prizes are usually regulated by local authorities, which are allowed section 34 certificates. Section 34 certificates govern where machines can be placed, and the local authorities monitor them. That works extremely well in an area such as Thanet, in which the machines are monitored carefully and thoroughly. Machines are not put in places where children can have access to them. However, other local authorities have a blanket ban. As a consequence, the only access to gaming machines in those authorities' areas is through an illegal source. Gaming machines can be found in taxi waiting rooms and cafes—places where children can get access to them—and organised crime is involved. If my right hon. Friend wants evidence of that, I suggest that he take a walk around the area that we are in now, because it is one of the areas in which gaming machines are largely associated with criminal activity. The ban proposed by Budd would not be effective.

I find other parts of the Budd report baffling—for example, the comments about the national lottery. PricewaterhouseCoopers has estimated that the effect on the national lottery—the loss to the good causes during the lifetime of the second licence—could be as high as 1.3 billion if the Budd report were accepted. It is nonsense to set up a lottery that provides useful and substantial amounts of money for good causes, but then to allow a big chunk of the money to be taken away from those good causes and fed into the gambling industry for no good reason.

I accept many of the Budd report's recommendations on casinos, with which it deals in considerable depth. Casino advertising and the abandonment of the 24-hour rule are long overdue, but I would be a bit worried if we were to allow gambling on credit cards. I hope that my right hon. Friend will consider that issue. Of course, there is nothing to stop someone in a casino walking down the road to the bank machine and using a credit card to get money, which they then gamble in the casino—but, if they do that, at least they have a breathing space to cool down and think about what they are doing.

I like the idea of resort casinos, but they are successful in the United States because they work on the basis of high turnover and low margins. The gambling industry in this country tends not to work on that model, so those who think that huge resort casinos will be built on the Las Vegas or Nevada models are probably engaging in wishful thinking.

I have a personal concern about the ending of permitted areas: I admit to a vested interest, in that Thanet is a permitted area and would be opened up to considerably more competition if permitted areas were to be abandoned. However, I am also concerned about what we put in place to control the growth of casinos if we do not have permitted areas. Everyone agrees that something has to be put in place, so until someone comes up with a decent idea about what that something is, I suggest that we stick with the permitted areas.

The Minister could implement most of the report's recommendations about casinos through regulation. I do not believe that primary legislation is needed, so he could move forward quickly with the positive recommendations.

The recommendation that many of the machines in seaside arcades should be limited to 18-only areas would completely devastate the atmosphere of the seaside resort. I took my little girl to the arcades when I was on holiday with my family in Torquay—I see some west country colleagues in the Chamber today. My seven-year-old went into many of the arcades on the seafront with her little handful of 2p pieces to play pusher machines—all of which, I was delighted to see, were made in my constituency. It did not have a corrupting effect. She has not become a problem gambler as result—and if she became one in adulthood it would have nothing to do with the fact that she went into an arcade and had an exciting and enjoyable half-hour playing on pusher machines. People play pusher machines not to gamble but to buy time, to buy fun in an atmosphere of lights and excitement and to while away an hour while they are on holiday.

While we are talking about families enjoying the traditional seaside experience, does my hon. Friend agree that many of the businesses that we see along our seafronts, as at Scarborough, have been put together by families? They understand what families want. My hon. Friend referred earlier to blue skies, but sadly, we do not get permanently blue skies, even in places like Scarborough and Whitby. Families can go to arcades and have a good experience at the seaside. That is probably what is at risk as a consequence of the Budd report.

My hon. Friend is right. In Scarborough and Whitby the skies usually are blue, although not quite so often as they are in Ramsgate, Margate and Broadstairs—but he has made an important point. Arcades provide an all-weather facility for people on their holidays. They are harmless fun and no more than that. It is nonsense to take cranes out of the seaside arcade or to class those small pusher machines, the so-called "penny fall" machines, and the wheel-them-in machines, as gambling that will have a corrupting influence on our youth.

Does my hon. Friend agree that the particular problem that the report tries to address is under-18 gambling? What it does not recognise is that holidaymakers come to seaside resorts for only a week, or two weeks, at a time. Does he not agree with the sentiments of one of my constituents, who says that a visit to an arcade is a big part of a family holiday, and an experience that people probably have only while on holiday? How would under-18s become addicted on a one or two-week holiday?

My hon. Friend is absolutely right. Budd recognises that fact when he says that fairgrounds should be allowed to have those machines. Travelling fairgrounds can have them because they do not stay in one place for long, so will not corrupt anyone. It is nonsense to suggest that they have a corrupting influence. Economically, such a ban would be pretty much of a disaster.

Clacton-on-Sea is sunny and has very blue skies; it is on one of the best sunshine coasts in the country. I think that we should commend many of the seaside resort arcades for their self-discipline. My arcades in Clacton-on-Sea now have separate areas for adults only, and when children are found in arcades when they should be at school they are sent out and their names are taken. The arcades have strong disciplinary codes, and we should commend them.

My hon. Friend is right. The arcades in my constituency are rigorously policed. Children who play there when they should be at school are sent out. I have seen children trying to get into the over-18 areas; I had thought that operators might turn a blind eye, but that is not the case. I would also be perfectly happy with a recommendation that we use CCTV in such areas to ensure that there are further controls.

The economic impact of the Budd report has been estimated by the Henley centre. The report hints that it would like to review the situation in five years' time and introduce a complete ban on gaming machines in seaside arcades. Without a complete ban, the cost would be £20 million per annum in lost profits and 1,500 jobs. With a ban, the cost would be £117 million in lost profits and 5,000 lost jobs. The loss to the Treasury would be approximately £14 million in licence duties, £51 million in VAT, £29 million from national insurance, and £19 million from rates—a total loss to the Treasury alone of £113 million if the ban were implemented.

I can tell my right hon. Friend that the publication of the Budd report has already cost jobs in my constituency. Some local manufacturers have taken a pessimistic view of the future and allowed staff to go. There is usually a seasonal loss of staff, but that has been exacerbated by the Budd report creating uncertainty in the industry. Nobody will buy pusher machines until they know what my right hon. Friend intends to do.

Before I conclude, I shall refer to some research done by one of my local employers—a company called Crompton's—that sent out survey forms through Coin Slot International magazine to other operators. There were about 500 responses from operators of seaside arcades or family entertainment centres. To the question "Do you think that the proposed changes will affect jobs?", 91 per cent. of companies said yes. To the question "Do you believe that the public will be entertained enough by just casinos?", 98 per cent. said no. To "Do you currently experience any problems with under 18's?", 81 per cent. said no. To "Do you get more or less families than 5 years ago?", 40 per cent. said that more families were using their premises. If my right hon. Friend is interested, I could let him have the other statistics from the survey. Overall, the industry clearly believes that the Budd report will lead to substantial job losses. The losses have already started to take effect because of the blighting effect of the report, and they will continue until my right hon. Friend feels able to give the industry some comfort.

Will my right hon. Friend consider making a statement in the coming weeks? He could say that if recommendation 43 were accepted, local authorities would not be allowed to introduce changes retrospectively. We are all aware that the control of local authorities changes from time to time, and a new council can have a different attitude to gaming from that of the previous council. My right hon. Friend could make it clear that once an area has been designated for gaming and a business has been built there, the council will not be able to take a retrospective decision to close it down.

Seaside machines—coin-in, coin-out machines, penny falls and cranes—could be treated as trivial amusement-with-prize machines, which is what they are, and my right hon. Friend could make it clear that they will not be attacked, either now or in five years' time.

A snippet in The Times this morning suggests that my right hon. Friend has already decided to exempt social clubs from the Budd recommendations. I am not sure whether that is true, or a misreading of what was said yesterday, but I hope that he will provide the necessary statement in the near future.

My right hon. Friend could also move ahead on making changes to casinos, which do not require primary legislation. He could also break down the Budd report into its separate components and implement each separately on a different time scale rather than handle it all at once.

I can assure my right hon. Friend that if he introduces the Budd recommendations as written, he will be responsible for giving organised crime a fillip and closing down many social clubs and pubs. He will also find it difficult to get a drink anywhere in these islands, and he will be responsible for closing down most of the seaside. I would not like to be the politician responsible for that.

I am grateful for having had the opportunity to make these points, and I hope that my right hon. Friend will be able to respond positively to them.

rose—

Order. Having seen how many hon. Members are seeking to catch my eye, I advise the Chamber that it is the usual convention to start the first of the three winding-up speeches 30 minutes before the termination of the debate. At least eight hon. Members want to speak, so I appeal to those in the Chamber to keep their remarks pertinent and concise, which will be helpful to me.

I shall continue to follow the thinly veiled threat of the hon. Member for South Thanet (Dr. Ladyman) to the Minister. Regular readers of the Isle of Thanet Gazette and the Thanet Times—that means most people in the Chamber—know that he and I have a reputation for not always agreeing with each other. Indeed, some people say that we never agree with each other. However, I shall not rain on his birthday parade and I take this opportunity, because it is cheaper than buying a stamp, of both wishing him a happy birthday and congratulating him on securing an important debate for seaside towns. I agreed with literally every word of his speech.

As the hon. Gentleman said, two of the country's foremost machine manufacturers are located in Thanet. One is run by Jim Crompton. I think that it was founded by him or his dad, the doyen of the manufacturing business and the inventor of the penny pusher machine. Such companies employ a significant number of local people and many outworkers and contractors use the United Kingdom as the test bed for those machines, which are world brand leaders. Having been tried out and any problems ironed out in the United Kingdom, machines are sent to the far east and other countries where their sales have been massive. They are worth a great deal of money to the local, national and international economy. That such firms are facing serious difficulties is not a state secret. It is happening because of the instability in the industry that has been caused by the Budd report.

As the hon. Gentleman said, the business is suffering acutely from blight. Banks are examining seriously the finances of the companies. They are querying whether they will survive because they wonder whether their customers in the seaside towns of the United Kingdom will survive. The Minister must take that point on board. I am not scaremongering, but if such a serious problem is to be resolved, it must be dealt with now, not in six months or six years. Otherwise, the companies will not survive.

I return unashamedly to the value of the arcades to seaside towns. It is fashionable in some quarters to say that amusement arcades are bad. Lurid pictures of arcades in Piccadilly and rent boys spring to mind. However, in the main, the arcades in Britain's seaside towns are policed well. They are well regulated and operated responsibly. They provide considerable facilities for the holidaymaker in the United Kingdom. God knows that with the tourist industry suffering as it is because of foot and mouth disease and the events on 11 September, we need every facility we have to encourage people to take holidays in the United Kingdom.

It is well known that Thanet seaside towns enjoy 12 weeks of unbridled sunshine throughout the summer months with scarcely a cloud in the sky. However, occasionally there is drizzle and the arcades provide shelter and amusement for people who have nowhere else to go and little to do if it is bucketing with rain. The removal of amusement arcades will destroy the golden mile, the golden half-mile and the golden hundred yards in seaside resorts. Herne bay in my constituency has Cain's amusement arcade. The whole of Margate seafront is interspersed with amusement arcades, pubs and fish and chip shops. The three are interrelated and killing one kills all three.

Amusement machines with prizes do not constitute a grim gambling den designed to fleece young people of their last four pence of pocket money. They are and were designed to be fun. Remove modest gaming machines and what remains? A few kids could either bring their electronic machines with them or play at home. The vital ingredients of the seaside resort will die.

There are two reasons why the Minister must act quickly to scotch the ill-thought-through elements of the Budd report and reintroduce stability to a vital sector of a vital industry—tourism. The Budd report is not all bad. Those of us with casinos in our towns welcome many of its recommendations on casinos. It is nonsense that someone who joins a club that is a member of a chain of casinos and travels from, say, Margate to Blackpool, must join another club and wait 24 hours before he can use his membership card to game in what is effectively the same establishment. That is rather like saying that a member of affiliated clubs may be a member of Margate Constitutional club or the British Legion club but cannot drink in an affiliated club in another seaside town. That is nonsense. I welcome anything that can be done not to relax the control, responsibility and need to police gambling, but to knock some sense into a nonsensical system, and on that basis I welcome much of what Budd has to say on those issues.

Mr. Cook, you asked us to be brief, and I shall be. I want finally to touch on an issue that I am sure that colleagues in the House will want to mention—the effect that the proposed restrictions on gaming machines are likely to have on clubs. I am sure that we are all, rightly, wearing poppies. I doubt that there is a Member in the House who is not. [HON. MEMBERS: "You are not."] Am I not? I have dropped it. How embarrassing! It has fallen out. All of us should be wearing poppies today.

The hon. Gentleman can borrow mine.

I shall borrow the Minister's. It is quite all right. I have bought three, but I shall go and buy a fourth.

All of us have received representations from the Royal British Legion. Most of us will have received representations from Conservative clubs, and one or two will have received representations from Labour and Liberal clubs, too. Social clubs, British Legion clubs and Royal Air Force Association clubs will all suffer immeasurably and possibly, in some cases, to the point of extinction if the measures are implemented. Those are three good reasons why the Minister must act quickly and positively to end the blight and lay the ghost to rest once and for all.

I congratulate the hon. Member for South Thanet (Dr. Ladyman) on having secured this important debate. I intend to keep my contribution brief.

I, too, welcome the review that the Government have set up. Many of our gaming laws are outdated. It is important to protect children and young people. There is much to commend in the Budd report, but in some instances its conclusions are wrong.

As a representative of the seaside towns in my constituency, I fully endorse the comments that hon. Members have made about seaside towns. However, I shall limit my comments to recommendation 70, which refers to the availability of up-to-£250 jackpot gaming machines in private clubs.

My constituency contains many private clubs, most of which are social clubs or continue to call themselves, in a wonderfully politically incorrect way, working men's clubs, although their membership extends much more widely than that description implies. As hon. Members know, such clubs are an important part of the local community and are to some extent part of the heritage of the north-east. They are not-for-profit organisations, mutual organisations or co-operatives and they are exactly the type of organisation that the Government should encourage, rather than undermine. They play an important role in the market, give choice and variety to consumers, and keep down beer prices in the local economy. In my experience, they are usually well-policed and, indeed, self-policed. Most members of or visitors to clubs would not dare to cross either the secretary or members of the committee. Under-18s cannot become members of clubs, admittance of under-18s is remarkably rare and, anyway, there is a law to deal with under-age drinking on such premises. We must set against that the useful role that clubs play. They often allow over-18s access to an environment in which they can be socialised into moderate consumption and behaviour on licensed premises. Sadly, that is often lacking in our pubs.

Our clubs have a difficult time. They face competition from public houses which can often access investment that is denied to many clubs. Their survival often depends on the local economy and that can fluctuate. There is a longer-term problem of a stay-at-home culture. Wine consumption is rising while beer consumption is falling. That says something about the way in which society is moving. Many of our clubs—and, indeed, pubs—face competition from duty-free imports that are beyond their control. Income from jackpot gaming machines is crucial to the survival of many clubs. They already pay their way in terms of their gaming licence and value added tax. Many clubs welcomed the changes in the 2000 Budget and wonder why they are apparently under threat.

Clubs use profits from gaming machines to keep down beer prices and annual membership subscriptions. However, many spread the benefits of those profits more widely. For example, North Shields Catholic club in my constituency does not operate £250 jackpot machines; it operates £75 jackpot machines, which would be affected if the changes were made. The machines return a profit of between £6,000 and £7,000 per year. Part of that subsidises beer prices, but some returns to the local community to help people suffering from Alzheimer's disease and multiple sclerosis, and people who have received hip replacements. A Friday luncheon club for the infirm is also held.

North Shields Catholic club hosts meetings of the North Shields branch of the North East Pensioners Association. The secretary of that branch said that the club

"do not charge us for the use of the facilities and they are extremely kind to us. They would find it difficult to run the club without the revenue from the bandits and we would be without our meeting place."

There we have the matter in a nutshell. The recommendation is to tackle a problem that might not exist; it probably came from someone who had not frequented such clubs and does not understand how they work.

The secretary continued:

"I cannot understand a Labour Government even contemplating such a move."

Quite frankly, neither can I. The Government have the opportunity to avoid making a mistake and I hope that they take it.

I congratulate the hon. Member for South Thanet (Dr. Ladyman) on securing the debate. As someone who departed at an unearthly hour from even further north than Edinburgh, I understand how he feels this morning.

I am not a gambler. I have never been to a bookmaker in my life, and I must be one of the few people to visit Las Vegas and not even play a slot machine. However, I have received a substantial postbag about the matter and I dug out the report to allow further investigation. I shall concentrate on the effect on clubs, to which the hon. Member for Tynemouth (Mr. Campbell) referred. I represent a rural constituency, which is made up largely of small towns and villages. All have sports clubs, pensioners clubs and other clubs and many will be devastated if the proposals are introduced.

The annual accounts for 2000 of a bowling club in a village in my constituency showed a surplus of £3,300. Its gaming machines earned £4,700 and, clearly, if it lost that income, it would be plunged into deficit. That would make it difficult—if not impossible—for the club to survive. It has searched for ways to deal with such a drop in income but if it were to increase its membership fees, many of its members—and, in particular, the elderly ones—would have to leave the club because they would be unable to pay their subscriptions. Falling membership and finances would lead to a cycle of decline, which would be particularly difficult to reverse in a rural area where the pool of potential members is relatively small. If the bowling club fell into that cycle of decline, it might lead to its demise. As the hon. Member for Tynemouth has stated, such clubs provide a focus for many communities and that would be lost, along with many of the other activities that are carried out at such clubs.

I also want to point out that golf clubs in particular, but also other sports clubs, such as cricket clubs—cricket is still played in Scotland—run youth development programmes. If they lost the income from gaming machines, many of them would be put in jeopardy. A golf club in Carnoustie provides a good example. Hon. Members will be aware that golf is very important to the economy of Angus and particularly to Carnoustie. The Scottish Executive is seeking to ensure that every nine-year-old child should have access to the sport of golf within the coming few years, but its work could be put in jeopardy if golf clubs do not have enough money.

I wondered why the Budd report made the recommendations. Its terms of reference state that it wants to secure protection for children and vulnerable persons, but it also claims that it will take account of the wider social impact of the recommendations and paragraph 1.26 defines what it means by that. It states:

"We take this as referring not only to the risk of increased problem gambling but also to the broader effect on communities."

One such broader effect might be the loss of clubs that have a huge part to play within communities. That would be disastrous for rural areas, many of which are already suffering from the fallout from foot and mouth, as well as from the loss of tourism and the general downturn in agriculture.

The Budd report makes some reasonable recommendations, such as those regarding machines in cafes and taxi offices. Many local authorities have already passed resolutions and taken action, especially in Scotland, to remove such machines from fish and chip shops, cafes and similar premises.

The main basis for the recommendation in respect of clubs appears to be in paragraph 23.38, which states:

"the 1968 Act does not prohibit children from playing on jackpot machines, and there is anecdotal evidence to suggest that they do. We are anxious to ensure that children are not exposed to high stake/high prize machines and our preferred option would be to remove jackpot machines from private clubs."

The reference is to anecdotal evidence, as hon. Members will note and as has already been stated. Nowhere in the report is detailed evidence given. It is a running theme throughout the report that more research is required into gambling and it would be a travesty if clubs were to be decimated on the basis of merely anecdotal evidence.

In many such clubs the chances of youngsters playing the machines are lower than on other premises. The machines are almost invariably located in bar areas where staff are on the look-out for people's ages. The staff in a club are more likely to know their ages and to notice when junior members are attempting to play the machines. I asked about that in a survey of clubs in my constituency and all of them were clear that they had strict rules preventing youngsters from playing the machines. It seems bizarre to crack down on that when anyone over 16 can go into their local supermarket or newsagent and buy as many national lottery scratch cards as they wish. Given the jackpots on those cards, they are much more likely to be addictive than jackpot machines. It also seems slightly strange that we are trying to encourage sport with substantial funds from the national lottery, which is, after all, a form of gambling, while considering a proposal that would severely restrict the funds raised by sports and other clubs.

The proposal has the dubious merit of uniting almost every age group in opposition to it—even those who, like me, previously had no interest in gambling. I accept that gambling can lead to misery and personal ruin for many individuals, but we are not proposing an end to gambling. As has been said, in many ways this argument mirrors the argument about the licensing and sale of alcohol. I appreciate that the consultation process is only just ending and no doubt the Minister has a huge number of submissions to wade through. However, I ask him to take the matter on board, put clubs out of their misery and announce quickly that the recommendation will not be accepted.

Thank you, Mr. Cook, for giving me the opportunity to participate in this morning's important debate. I congratulate my hon. Friend the Member for South Thanet (Dr. Ladyman) on securing it.

There is no doubt that Sir Alan Budd and the other members of the review body were given a difficult task: to modernise the regulation of gambling in the UK. British gambling has long been regarded as among the best in the world, and I hope that when the Government respond to the report, UK gambling will establish itself as the best in the world. I shall confine my remarks to one or two specific recommendations in the report.

This morning, we have heard a travelogue about British shores, primarily the seaside resorts. I should now like to move into the hinterland of south Yorkshire. As every Member knows, the sun shines a lot brighter in Barnsley and Doncaster than in Rotherham and Sheffield.

In private, one or two Members have said that the Budd report should be shoved where the sun does not shine. That could include my constituency, which is probably the furthest from the coast. Does my hon. Friend accept that there is much concern among clubs and associations in Northampton, whether Royal Navy clubs, working men's clubs or political clubs, that it is estimated that 20 per cent. of those clubs might close if the recommendations are approved?

I thank my hon. Friend for making a telling point, with which I concur and on which I would like to enlarge.

I want to speak against the inclusion in the report of recommendation 70. The Minister has already referred to the fact that he received a great deal of representation on the issue. In fact, he referred to 1,500 representations from clubs in his response to an oral question in the House yesterday, and rightly so. Following on from the comments of my hon. Friend the Member for Tynemouth (Mr. Campbell), I can tell the Minister that my constituency has 41 clubs, many of which depend on jackpot machines for their financial survival. Many of those clubs have written to me and the Minister. Ten years ago, there probably would have been about 80 such clubs, but many of them closed as a direct consequence of the pit closure programme undertaken by a previous Government in the early 1990s. In addition, as a result of changing social habits, people do a lot more of their entertaining at home, rather than in the formal setting of a club atmosphere. The closure rate underlines the great difficulty in surviving, which many clubs face even without the removal of jackpot machines.

Many clubs in former mining communities are not just places to enjoy a drink and have a good night out; they form the heart of many local communities, as has been said. Many clubs support local sports organisations, local dance groups and local music groups. The most famous example in my constituency is the long association between Grimethorpe miners' welfare institute club and the world-famous Grimethorpe colliery band. Some even act as outreach centres for local colleges, which is an important initiative to help former miners back to work. We should not underestimate the regeneration initiatives that the Government have implemented in, for example, working men's clubs. Many clubs have a children's section that raises money for annual trips to seaside resorts such as Skegness, Bridlington, Scarborough and Whitby.

What about Great Yarmouth?

Great Yarmouth is a bit too far away, but we should include Blackpool. We should not underestimate the impact of these initiatives on local mining communities. For many children, the local working men's club trip is their only annual holiday. Likewise, many clubs have an old folks section that raises money for a Christmas party and allocates cash to elderly members to help them enjoy Christmas. Many clubs also support local charities. I attended a recent event held by my own local club—Brierley social club—which raised more than £1,000 for Grimethorpe St. John Ambulance brigade. Many clubs also raise funds for the purchase of special equipment by local hospitals, and for organisations such as Macmillan nurses.

Many clubs are under severe financial pressure. If recommendation 70 is implemented, I guarantee that it will lead directly to the closure of some clubs in my constituency and the constituencies of other hon. Members. I suppose that I should declare an interest: I am a member of the CIU, my father worked as club steward of Brierley British Legion club for more than 25 years and I lived on the premises for at least 10 years before I got married. I know exactly what it is like to be at the centre of a local community.

I know that the Minister will not be able to tell us in his concluding remarks that recommendation 70 is dead and buried, but it would be nice if he could say that we will shortly receive an invitation to its funeral.

I shall deal with the report's other recommendations briefly as I am conscious of time and that other hon. Members want to speak. One main recommendation—to set up a gambling commission as the single regulatory authority to oversee all gambling in the United Kingdom—appears to have been well received by all sections of the gambling industry and I share that view.

Recommendation 103, which would allow betting on the UK national lottery—on which other Members have briefly touched—is a major concern of Camelot. It said in its submission to the review that, if implemented, the recommendation could have a detrimental impact of up to £400 million a year on returns to the Exchequer and to good causes. I do not know whether Camelot is scaremongering, but I am not convinced of the need to allow betting on our lottery. After all, the bookies already have their own numbers game and take bets on the Irish lottery. Camelot says that 20 per cent. of Irish lottery sales have been lost to betting since the provision was introduced in Ireland.

In conclusion, I congratulate Sir Alan Budd and his team on producing an excellent report. It has given us all food for thought, and we eagerly await the Government's response to its recommendations.

I shall try to be brief, but I should first congratulate my hon. Friend the Member for South Thanet (Dr. Ladyman) on securing this debate. I agree with virtually everything that he said—apart from his slightly dismissive attitude towards the concept of resort casinos. In my Blackpool constituency, casinos are seen as providing an enormous opportunity to regenerate the resort.

Like my hon. Friend's constituency, mine already has casinos, amusement arcades and social clubs—the three main types of establishment that will be affected. The recommendation to abolish the 24-hour rule and allow advertising will impact on our existing casinos, but it will also offer the opportunity to develop casinos as a tourism product. The millions of people who visit Blackpool are looking forward to that. The idea enjoys widespread support in the local community, because it could provide many more jobs and regenerate tourism in the town.

However, one or two people have certain reservations, especially with regard to safeguarding the interests of children, young people and—as has been mentioned—those who are addicted to gambling. When my right hon. Friend the Minister considers the proposal, I hope that he will take account of the opportunities and reassure those with genuine concerns so that a balanced response can be reached.

I agree with the comments of all hon. Members on amusement arcades. However, in response to my hon. Friend the Member for Barnsley, East and Mexborough (Jeff Ennis), who represents the South Yorkshire hinterland, I must say that the seaside sector is a special case. If one message comes out of the Budd report, it is a lack of understanding of the whole concept of seaside amusement arcades and how much families enjoy visiting them. A recent MORI poll showed that 72 per cent. of people are in favour of, or not opposed to, fruit machines in pubs, clubs and amusement arcades. We must take into account that consensus of opinion.

The amusement arcades that I have visited are careful about how they police their business. They do not want young children coming in and misusing their premises or parents complaining about such behaviour—they want a family atmosphere in which mums, dads and grandparents can have a cup of tea. Although the sun shines for 99 per cent. of the time in Blackpool, hon. Members who have attended party conferences there will realise that it rains occasionally and people visit amusement arcades to benefit not only from the amusements, but from some of the other facilities on offer. Let us appreciate the importance of traditional amusement arcades and the contribution that they make to tourism in seaside towns.

I support everything that has been said about working men's clubs, social clubs, the British Legion and Royal Air Force Association clubs. I have even had a letter from a Conservative club. Everybody is united in the view that the proposals could have a devastating effect on such clubs, which are often the centre of their local communities. The Budd report has good elements—it is a shame that we are concentrating on those with which we disagree—such as recommendations on safeguarding the needs of young people, stricter enforcement, and monitoring the qualifications of those who work in gaming establishments. However, we must be aware of the dramatic and disastrous effects that it could have on seaside towns and social clubs.

I welcome the debate and congratulate the hon. Member for South Thanet (Dr. Ladyman) on securing it. I also welcome the Government's decision to review arcade gambling rules. The Budd report makes some welcome proposals, but it has serious flaws, which I hope that the Minister will deal with in framing his response to it.

The hon. Members for South Thanet and for North Thanet (Mr. Gale) gave useful expositions of the potential impact of the suggested changes on our seaside resorts. I represent Ilfracombe, Woolacombe, Croyde, Combe Martin and Lynmouth, and the points that were made about the interrelationship between arcades and other parts of the tourism industry were correct. We should be wary of embarking on actions that would have knock-on consequences across the tourism industry, which is already seriously ailing, if not reeling.

Gambling is a significant industry, which should be handled with care. It contributes £42 billion a year to UK plc, of which it retains a relatively small £7.3 billion. Although we probably do not like to think of ourselves as a nation of gamblers, 72 per cent. of us have gambled in the course of the past year, with an average expenditure of £3.50 a week.

The overall thrust of the review is welcome—it has a largely deregulatory theme, although it is peppered with some reactionary proposals. I also welcome the fact that it recognises the problem of gambling, calling for more research to be done in that area. It suggests the establishment of a new gambling commission with new and wider powers. That is a welcome proposal, and the commission should take on some of the challenges of addressing the problems of addictive gambling. In a sense, the new body is the Gaming Board in all but name, but it has a wider remit and broader investigative powers. They are welcome, but must be used with caution.

The report also suggests that local authorities should have the power to institute a blanket ban on all or certain types of gambling premises within their area. That would have to be carefully examined. I welcome the idea of local authorities having the discretion to make final decisions, but I think it essential that they should look at all applications and licences on a case-by-case basis, rather than imposing a blanket ban. It would also make sense for the same authority to be dealing locally with gambling, liquor and entertainment licences.

Many hon. Members have rightly referred to the impact that the proposals would have on social clubs. Many of those, from all over the country, have been writing in to us because they often rely on the income that they make from jackpot machines to be economically viable. There is currently no provision for Gaming Board inspectors to have the right to enter private clubs. That may be one reason for the proposals in the Budd report. The police, similarly, have no right of entry unless they have grounds for suspecting that an offence is being committed in the club.

It would make more sense to allow investigations into clubs than to ban the use of the machines altogether. I have communicated in written representations to the Minister my view that private clubs should be allowed to continue to operate jackpot machines on their premises. The stakes on such machines, already relatively high, act as a deterrent to children. The proposed doubling of the stake to a pound would provide a further disincentive. Proposals to allow registered clubs to use all-cash machines as an alternative, as pubs and other licensed premises do, should be examined cautiously.

It is clearly anomalous that the Gaming Board has no right to enter clubs to look into such things. In representations from the pub trade, it has been pointed out that the playing field is not level because pubs are not allowed to have jackpot machines. Minors are rarely, if ever, allowed to enter a pub unaccompanied by an adult, as they are in some clubs. Penalties for those running pubs are considerable if that is found to be happening. If we were simply setting out to have a level playing field, it would make more sense to allow those machines in pubs than to get them out of clubs.

Hon. Members have referred to casinos. Some of the proposals for those are welcome, such as ending the rule on permitted areas, which is long overdue, and repealing the rule on 24-hour membership. However, the idea that employers should be required to obtain a certificate from the Criminal Records Bureau each time a person is promoted or changes employer seems bureaucratic, time-consuming and potentially expensive.

The suggestion that casinos should have a minimum floor size is interesting but, in my view, flawed. The measure would be more useful if it were applied to the total space in the casino rather than just to the table space. I can see that the measure aims to prevent the proliferation of casinos, but it is essentially illiberal. Where demand exists for gaming tables, why should it not be filled, providing that any new facility meets statutory requirements? There was some confusion in that passage of the report. The Government should examine it carefully before arriving at conclusions.

In the short time that I have, I would also like to comment on the proposals on lotteries and the impact that they would have on the national lottery. There are many concerns about the deregulation concerning the rules governing lotteries, especially given the success that the national lottery has had in raising money for good causes. In opening the debate, the hon. Gentleman referred to the PricewaterhouseCoopers estimate that £1.3 billion could be lost annually to good causes. Of all the proposals in the report, that is one of the ones that will have the most profound impact, and the Government must examine it with the greatest caution. Out of every pound spent, the lottery contributes up to 44p to the Government's revenues. I should have thought that they, or at least Treasury Ministers, would think cautiously about that. The national lottery has been an outstanding success, and allowing a proliferation of lotteries, some of which would not be as well run and would have uncertain outcomes and impacts, is potentially dangerous.

I welcome the fact that the Government set out upon the review. The report contains several useful suggestions, but some of them would have a profound and damaging impact on many different areas, not least social clubs and seaside resorts. The Minister will be unable to show his hand completely, but many people are waiting on tenterhooks for some welcome signs that the Government will pick up the report a la carte, and not take it up lock, stock and barrel.

I add my congratulations to the hon. Member for South Thanet (Dr. Ladyman) on securing this debate—and I wish him many happy returns on his birthday. I also look forward to hearing the Minister conclude what has been a positive debate.

In my view, and in that of the official Opposition, the Budd report is a step in the right direction. We welcome its deregulatory thrust. Moving licences from magistrates courts to local councils would be fine if the Government were simultaneously prepared to issue planning policy guidance to prevent the NIMBY syndrome. Several hon. Members referred to the issue of permitted areas, to which PPG would be pertinent. Many of us with rural constituencies such as those in north Yorkshire find that magistrates courts are few and far between. As for retrospection, we should like to see the removal of retrospective powers.

With jackpot licences, there should be a safeguard for under-18s, but we are concerned that the impact on youths has been insufficiently considered in the Budd report. What specific research have the Government undertaken following the limited consultation process? This is the first major review since 1978, and it is important to put on record the fact that the 1978 review took two years to reach its conclusions; the Budd report has taken only one year.

About 33 million adults in this country—72 per cent. of the population—have participated in gambling in the past year. More than half the population have gambled in the past week—not as high a proportion as in the United States, where 63 per cent. have gambled, or in Sweden, where nine out of 10 adults gamble. The suicide rate is significantly higher in Sweden than in Britain, but I do not know whether we should draw the conclusion that that is a result of the higher incidence of gambling in Sweden.

The Budd report recommends deregulation for adults, which we support, but it also recommends tightening regulations for children, which is why we should like to know about the Government's research.

Will the hon. Lady give way?

No, I have only eight minutes.

Several hon. Members have expressed their concern about recommendation 70, which is something that I support. In the article in The Times, the Government were reported to have alluded to a possible exemption for social clubs. Perhaps the Minister will put on record today whether that is a leak of Government policy.

I have several questions for the Minister. If he cannot reply to them today, perhaps he will be able to respond in writing. The idea of a single regulator in the form of a gambling commission is welcome, but will he respond to hon. Members who have raised questions about fruit machines in pubs? My experience is that they are an accepted institution in pubs and places of leisure, and I question the Government's assessment of the impact of their removal on pub incomes. That could have a dramatic impact in seaside towns and rural constituencies.

On the question of seaside amusements, can the Minister say what impact has been estimated in areas particularly hard hit by the collapse of tourism? No one has yet mentioned the recommendation, which, I suggest, will be difficult to police. How will the Government ask police to prevent people under 18 from gambling on the internet? The recommendation is that operators should prevent such gambling, but how can age be proved online? As for the licensing of premises and the role of local authorities, I repeat that we believe that it is right for local councils to be the planning authority, subject to the removal of blanket retrospection and to the Government's agreeing to issue planning policy guidance.

I do not believe that retrospection is in keeping with the broadly regulatory thrust of the Budd report. Budd's proposals for casinos would permit the development of resort casinos. As a result, will Harrogate or Edinburgh become the Las Vegas of the north? The report states that whether a particular location should be granted a monopoly right to provide a gambling centre is a matter of public policy and outside Budd's terms of reference. Can the Minister indicate the Government's thoughts on such a public policy matter? Can he also tell us what impact the more liberal and less regulated market envisaged by the report will have on Camelot as the national lottery operator?

I am immensely grateful to the hon. Member for North Devon (Nick Harvey) for placing on record the impressive contribution, particularly to good causes, made by the national lottery, which was set up by the last Conservative Government. Has the Minister assessed whether that contribution could be jeopardised by the Budd conclusions? Will the Government consider publishing a White Paper on their proposals for legislative change before introducing a Bill? I ask that because the Budd report has been concluded in just over one year. More than 200 memoranda of evidence were received and there were 20 sessions of all evidence, but there has been no pre-consultation period prior to the Budd report, so it is incumbent on the Government to offer a White Paper. That would be welcome indeed.

On seaside gambling and section 34(1) machines, we urge the Minister to put Budd to one side and leave the law as it stands, pending further research into child gambling, and the implications for change in seaside tourism that we have heard about this morning. Will the Minister see fit to amend the law to prohibit those under 18 from playing section 34(5)(e) and section 31 machines, wherever situated? The official Opposition support the proposals for deregulation of casinos generally, but in the context of casinos' no-minimum-stake, no-maximum-prize machines, will the Minister undertake to review the impact on attitudes to casino expansion, and other gambling premises? I agree to the licensing by local councils, subject to the withdrawal of blanket retrospection and the issuing of planning policy guidance. We await the Minister's response with bated breath.

I congratulate my hon. Friend the Member for South Thanet (Dr. Ladyman) on securing the debate, which is part of the on-going process of consultation; hon. Members' contributions this morning have been very helpful to me, and to my officials. The comments have been objective—slightly more objective than weather forecasts in the United Kingdom. I wish my hon. Friend many happy returns and I will see him in the bar later.

The fact that so many hon. Members are present and that they have argued so forcefully shows the concerns felt in their constituencies. It is not in our interest for industries, whether they are in manufacturing or tourism, to be damaged by Government action.

The 1978 royal commission was mentioned, but the last real review of gambling was in the 1960s, and things have changed dramatically since then. Although the debate has rightly focused on specific issues, we are discussing an industry that is worth tens of billions of pounds and makes a major contribution to the nation's well-being and enjoyment. We want to ensure that we get things right.

Several changes since 1960 have forced the review. The internet and interactive television are increasingly important gambling media throughout the world. There is a much bigger picture to consider, and I give credit to my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth), for taking the initiative in setting up the important gambling review when he was a Minister.

My Department is responsible for the gambling industry; it is a major and well-respected employer and we must ensure that its integrity is maintained when we consider legislation. As the Budd report reflects, with the introduction of the national lottery, gambling has become a mainstream recreation and leisure activity, rather than being seen as rather seedy. We must be careful how we approach the issue, and take account of all the risks involved. The debate has focused on the Budd report, the risks of deregulation, problem gambling and young people's access to gambling machines.

No one has argued that there should not have been a review; indeed, the prospect of a review was broadly welcomed. Sir Alan and his colleagues took evidence from a wide range of people. We published the report in July and asked for comments, and we shall take the points made in the debate into consideration.

The consultation ended on 31 October. We received more than 2,000 comments, which we are going through carefully, and I am mindful of what has been said today. We considered the experience of countries where the laws were changed—Australia, for example—and where fundamental mistakes were made, as it is difficult to claw back if there are errors. We must be cautious and prudent as we proceed.

Blight is a strong word, but as I said when I was at the Department of Trade and Industry, uncertainty is an expensive commodity in business. I still believe that, and I will try to apply the principle of getting decisions made as quickly as possible. We intend to review all the responses, and I hope that we will be able to make some announcements early in the new year about how to take the process forward. I am mindful of what has been said today, and we must get the Government's position clear. There will be further discussions about that, including more Adjournment debates and questions in the House, which is right. When we come to a decision, we will then have to find out how we can manage the change and see it through.

I cannot answer many of the questions—indeed, I would not answer them, even if I could. I have asked people to examine the Budd report, which is a serious piece of work that took a lot of time to take evidence and come to conclusions. We respect those conclusions and want them to be debated properly. Equally, we want to ensure that we go through the process thoroughly, in the knowledge that there are industries that want us to do that as expeditiously as possible. I assure hon. Members that we will do that. There are many and varied ways in which we can manage through change. It does not all have to come as one big bang, and after we have made our decisions, we will think about a management strategy for delivery.

Will the Minister examine the age at which gambling can take place? At the moment the age limit is 16 for the national lottery, but the proposals would maintain 18 as the limit for every other form of gambling. Will he consider that carefully, discuss with other Departments the need to review the age at which people attain their right to gamble, and decide whether to reduce that universally to 16?

Several people raised that question in their submissions for consultation, and it will be part of the review.

We have had many representations. Of the 2,000 representations, about 1,500 were about gaming machines, especially the recommendation that members clubs, including sporting, social, community and political clubs, should no longer be allowed to install jackpot slot machines. I have a vested interest, as I am a member of the CIU. Four of its secretaries met me one Sunday evening in my club, the Sheffield Trades and Labour club—but I can assure hon. Members that they were not there to buy me drinks. I took their points and told them that they could make representations via the Ministry, and that if they wanted to put their thoughts in writing rather than verbally, it would be helpful. They did not resort to the vernacular.

The 1,500 clubs that have written to the Minister are emphatic in assuring him, and our Government, that they are capable of policing gaming machines in their own clubs. I speak as the acting chairman of the all-party parliamentary group on non-profit-making clubs. There are 200 members from this House and the House of Lords, and the Minister will know that they are all urging him to drop recommendation 70.

I am aware of those representations, and we take them on board. We do not want to do anything that would affect the social infrastructure of the surrounding areas. I told the House yesterday that about £250 million goes into clubs' finances, according to the information that has been passed to us.

Slot machines in pubs and other licensed premises are at present allowed a maximum prize of £15. The gambling review body recommended that members' clubs and pubs should both be limited to machines with a maximum prize of £25. Underlying that recommendation was the review body's serious concern that the present law does not sufficiently protect children and vulnerable people in relation to gambling machines. I accept what has been said this morning, and we will examine the matter seriously. If the clubs took steps to ensure that concerns were met, that would be extremely helpful for the Government in reaching a decision.

As a result of evidence from this country and overseas, the review body vas worried that gaming machines potentially involved a hard form of gambling with addictive characteristics. It noted that most countries do not allow children to play slot machines. As far as I know, we are the only country in the western world that allows young people to play slot machines, even at the seaside. That is a characteristic of the UK and something that we have to take—

Order. I regret that I must bring this important debate to an end, but I have no alternative. We now move to the next debate.

I welcome the opportunity to raise the issues of employment and unemployment in— [Interruption.]

Order. Will those who are leaving Westminster Hall please do so silently to enable the hon. Gentleman to be heard by the Chair?

Thank you, Mr. Winterton.

I welcome the opportunity to debate employment and unemployment in south Devon. The title of the debate mentions employment because I wanted to touch on low pay and the social deprivation that that causes, as well as on the rise in unemployment in south Devon.

First, I have to dispel a couple of myths. I am sure that most hon. Members have spent time on holiday in Devon and that they remember thatched cottages, white cobbed walls, little streets and sandy beaches. We all have those happy childhood memories, but the reality is far harder, as many people know. Devon is not just a picture-postcard area; there is also social deprivation and poverty.

If we consider how tourism has changed in the last 30 years, we can appreciate some of the dramatic social changes that have occurred. People no longer flock on to trains down to Torquay and Teignmouth and into the South Hams; they go to Luton airport and fly abroad. The tourism industry in Devon has declined. Tourist establishments have been converted into residential care homes, which are now being turned into flats. As they become residential, employment opportunities are lost. There has been a structural decline in what we might call the mainstays or props of the traditional south-west industry.

The other great prop for the south-west, including south Devon, was agriculture. As we all know, it, too, has declined in the last 30 or 40 years. It has been mechanised, which means that fewer people work on the land. Of course, agriculture has had two particularly bitter blows in recent years; the BSE crisis in the 1980s and 1990s and the more recent tragedy of foot and mouth.

Tourism, agriculture and other traditional mainstays of the area are low-income industries. The average income in south Devon is still £100 a week less than the UK average. According to the latest figures that I could find, about 15 per cent. of Berkshire's population pays higher-rate income tax, whereas the figure for Devon is less than 3 per cent., placing it fourth from bottom of the list. That gives us an idea that vast amounts of money are not floating around. Without those high incomes, it is harder for small industries, newsagents and corner stores to flourish.

We would all agree that national unemployment levels are low compared with those of the 1980s and early 1990s. We are grateful for that change, but low unemployment does not mean that an area is wealthy. Low unemployment may mean that many people work for very little money, and it may conceal social deprivation. Low unemployment should not be used as an excuse for saying, "Well, everything is all right because everyone has a job." People may have a job and still be struggling. They may not claim benefits because they have been self-employed; Devon has a high percentage of people who have been self-employed. When one is self-employed—I speak from experience because I used to work for myself—one does not sign on when work dries up, because one cannot. One struggles, gets by and borrows money until one gets a little more work. In the meantime, the debts and the problems get bigger. Repairs to the house are not done; one does without.

That reality is often little understood. Public policy is concentrated on areas of high unemployment and city deprivation. The Government have done work on inner-city deprivation but they need to look at social deprivation in rural and other areas, in addition to those that are more obvious or, to use the current expression, more "in your face". Such deprivation is increasing in south Devon. Torbay, a neighbouring area, has had a 10.9 per cent. increase in unemployment over the past year. Totnes, another neighbouring constituency, has had a 7.4 increase in unemployment over the past year.

Teignbridge has had a slight decline in unemployment of 1.4 per cent. However, there are increasing redundancies in the Torbay area, the Teignbridge area and south Devon genersally. In my constituency, Centrax, a company that makes parts and settings for jet engines and gas turbines, has just announced 250 job losses. The clay extract company Watts, Blake and Bearne announced earlier this year 60 losses in headquarters staff by reorganising, and recently announced another 50 losses. In addition, Devon Desserts, a successful company that is in the process of liquidation and is being bought out, has lost 16 managers; 400 jobs are hanging in the balance.

It has long been recognised that low-income areas need the introduction of high-skilled jobs. My region has had successes. We had the success of Centrax, for example, which was established in Newton Abbott by Robert Barr, who worked with Frank Whittle on jet engines. It has gone from strength to strength. There is also Nortel, a company in a neighbouring constituency that employs many of my constituents. It has been very successful in the telecommunications industry and in manufacturing mobile phone sets and other linked equipment. However, it has just announced 4,000 job losses. If 4,000 job losses occurred all at once in any major city, everyone would say, "This is dramatic. It is a great loss." However, I do not hear statements decrying these job losses; the Prime Minister is not saying, "Oh, that is a great disaster." Nor do I see the interest in doing something about it. I am sure that, in other contexts and places, that would have occurred.

Centrax has suffered a double blow. Its 250 job losses are occurring as a direct result of the events of 11 September. The jet engine components that it makes go to Rolls-Royce, which makes jet engines for the American executive jet market; people are no longer ordering such jets. The airlines have cut back. That is understandable and cannot be helped but the company has also been affected by direct Government policy.

Centrax also makes gas turbines. It is affected badly by the climate change levy that has been applied on combined heat and power units and also by the new electricity trading arrangement. The NETA agreement means that companies with combined heat and power are charged and penalised if they put electricity into the grid at the wrong time, rather than being able to sell their spare electricity at any time. The result of that has been a 60 per cent. downturn in the CHP sector and, whereas Centrax might have expected to build five or six turbine sets during the next six months, they will build only one. The Government could take direct action.

I have a general request, and several specific points. My request is that the Government examine how grants are given; what assistance is given and how does it work? The job transition service and the rapid response fund were mentioned in item 4.36 of the November 2000 pre-Budget report, stating:

"The service will provide help for people made redundant to move into new jobs".

The Government might help people to move into new jobs but if such people want skilled work, they will have to look in other areas. We in south Devon cannot afford to lose our skills base. If those people stay in south Devon, they may have to move from high to low pay. As I indicated, that has a knock-on effect on other industries and on smaller shops, which are still struggling in my part of the country.

Aid could be given to the aerospace industry by Government contract, although that would not necessarily have an immediate effect on Centrax. However, if the Government were to bring forward military programmes, that might help. If the Government reconsidered their investment in research and development, that might help. I ask the Minister to consider those specific points and pass them on to her colleagues in those Departments responsible for such matters.

The Government's policies directly affect CHP. The climate change levy could be cut for CHP units. We could ensure that the NETA is revised so that small providers are not penalised, and so that it is environmentally friendly and links in with the Government's stated intentions on sustainability. That would promote joined-up government.

Finally, with respect to agriculture and tourism, there is no reason why the Government should not support Devon county council's recovery programme and ensure that it is fully funded. I ask the Minister to do that.

It is good to have the Minister with us. We wish her well.

Thank you for those good wishes, Mr. Winterton. I believe that this is the first Adjournment debate for the hon. Member for Teignbridge (Richard Younger-Ross). I wish to congratulate him on securing it, and on raising issues that I know are of concern to his constituents and which I share.

The hon. Gentleman spoke about the difficulties that he and his constituents are facing, partly because of changes in the local economic base and partly because of job losses. I will concentrate on some of his points more than others. My parents have lived in his constituency for the past 20-odd years, so I know the area somewhat and can speak with some knowledge of its attractions and the difficulties that it faces. I have first-hand experience as a regular visitor who enjoys the tourism opportunities that the area offers.

Torbay is not in the hon. Gentleman's constituency, but it is worth noting that Torbay is described as the UK's premier tourist resort. He mentioned that there are still many successes and many good things happening in that area. I was pleased to hear that Torbay had a successful summer season and that it continued to do well into the autumn. There are good aspects of what has been happening in that part of the country.

I do not believe that the Government appreciate for one minute the impact of the loss of 4,300 jobs in Torbay since February. The increase in tourism was a direct result of good weather this year, but it in no way begins to negate the impact of those job losses. If those loses had happened in one go in other parts of the country, they would have made the national news. The Minister cannot dismiss the impact by saying that we had a good tourist season.

I was trying to open with some remarks about tourism and I was going to move on to the job losses. If the hon. Member for Torbay (Mr. Sanders) holds his fire for a few minutes, he will see that I will address those issues. I have a little bit of time, so it is worth addressing some of the points that have been raised.

Tourism is still a force to be reckoned with and is still a major part of the economic base of the area. There have been some good tourism stories, even this year, as well as difficulties. I take the point that the hon. Member for Teignbridge made about the relationship with low pay and how people can have a rosy view of what the countryside represents and the difficulties that it faces. We recognise that. Much of the Government's activity increasingly focuses specifically on policies that address the issues facing rural areas all around the country, including the south-west. One of our major changes that will have had a major impact in areas where there is a tradition of low pay is the introduction of the national minimum wage, which I am sure has benefited many in both Torbay and Teignbridge.

The hon. Member for Teignbridge spoke about the difficulties that he and his constituents face because of the loss announced in late October of up to 250 jobs in the aircraft engines sector, which is about a quarter of the work force at Centrax in Newton Abbot. He also explained the impact more widely on Devon, including the job losses in various constituencies; these losses also affect his constituency to a degree. We regret those job losses and local agencies are working closely with the companies to provide the help needed by the employees affected.

The job losses in the telecommunications sector are not a problem specific to south Devon or even the UK, but reflect a sharp downturn in the global telecommunications markets after a period of rapid and sustained growth, from which south Devon benefited considerably. There has been a huge increase in jobs in this sector, although I appreciate that numbers have dropped down to pre-1998 levels. Paignton remains by far Nortel's largest global manufacturing operation for its lasers, amplifiers and related components used in optical systems for telecommunications. It is also an important centre of research and development. I entirely understand the points that the hon. Gentleman made about the need to keep the skills base in the area and to build on it.

The Employment Service and Benefits Agency locally are in close touch with Centrax in Newton Abbott about the number and timing of the job losses proposed, so that they are in the best possible position to provide the advice and support that the employees affected will need, particularly to find another job. I am sure that hon. Members share my understanding that future employment is the first thing on people's mind if they face job losses. There will be an application for large-scale redundancy status.

It is not simply a matter of finding alternative employment, but of finding a comparable salary. It is no good for someone who is earning £300 a week one week to earn £100 the next. People have mortgages, cars and hire purchase agreements which are lost if they have to downgrade. People tend to move away and that is what I fear will happen.

Yes, that was exactly what I meant a moment ago when I spoke about the importance of sustaining centres of research and development as a means of sustaining higher-skilled and better-paid jobs in the sector.

At Centrax, there will be an application for large-scale redundancy status, which will provide immediate access to jobsearch and training programmes, usually available only to the long-term unemployed. Officials in the Department of Trade and Industry remain in close dialogue with companies in the aerospace sector and with the Society of British Aerospace Companies to monitor and evaluate developments. The current reduction in air travel following the tragic events of 11 September is having an inevitable knock-on effect for companies, as the hon. Gentleman recognised, at all levels in the aerospace industry.

Initial discussions with the industry suggest a reduction of production in line with the airlines' capacity reduction of about 20 per cent., but the position is evolving and no reliance can be placed on those provisional numbers. In the longer term, the sector is optimistic about returning to growth. The UK aerospace industry is an excellent example of what the Government hope to achieve in our drive towards a knowledge-intensive, high-productivity economy. Large orders have recently been placed for Airbus. There is still good news nationally in the aerospace industry.

I should like to deal with the redundancies at Nortel Networks, Paignton and JDS Uniphase, Torquay. All the local agencies—including the Employment Service, the regional development association and the Government Office for the region—have been working closely with the companies and the local authority throughout the year to ensure that the necessary specific help is delivered. I emphasise that we are succeeding in working effectively across all those agencies to formulate a programme involving large-scale redundancy status, which provides immediate access to the various Government jobsearch and training programmes.

Is the Minister aware that the contract given to Devon training for skills to offer training to people who have not yet been unemployed for six months has, for some reason, been cancelled? Many of my constituents have contacted my office in the past two weeks to inform me that their training programmes are no longer available. Will the Minister investigate that problem and correct it?

I shall certainly ask my departmental officials to examine the problem and to discuss it further with him. We shall see what we can do about it.

The Employment Service and the Benefits Agency have continued to try to meet the needs of affected employees. The Government rapid response funding of £250,000 is providing training and support to help back into employment those employees made redundant by Nortel and JDS Uniphase in Torquay. Such help can be accessed for up to 12 months after redundancy. So far, 475 individuals have been supported, with 365 securing employment as a result. I accept that the employment might not be comparable, but it is good news that 365—slightly more than three-quarters—have secured jobs.

South Devon has many advantages to offer, including a beautiful environment and a skilled work force; qualities that have attracted high-tech companies to the area. The current employment difficulties do not alter that attractiveness in the medium and longer term. It is important that the area is marketed effectively to attract the right sort of investment when market recovery comes. That is a job for Invest UK and the regional development agency, working in partnership with the local authorities. The regional development agency is working closely with Nortel as part of its inward investor aftercare programme and Invest UK is in touch with inward investors whenever possible to market existing facilities and skills within the UK.

Invest UK, the Department of Trade and Industry's communications and information industries directorate, the Government Office for the region, the Employment Service and the regional development agency are to meet the hon. Member for Torbay on 13 November to discuss the support that is available to Torbay and the help that is being given through a local task force to help to market Nortel's vacated building to potential inward investors. We hope that we might be able to get a comparable operation to come into the area. Everyone is working with that objective in mind, and I appreciate the support of local Members in trying to achieve it. The chief executive of Invest UK is to visit Devon on 19 and 20 November to discuss inward investment with businesses, the RDA, the Government Office for the region, and Torbay, Plymouth and Devon councils. Much is being done to try to pick up the threads and ensure that jobs of a comparable nature are created. South Devon should not look simply to inward investment as a means of increasing employment opportunities and diversifying its economy. A close look should be taken, with all the local partners, at the opportunities for encouraging and supporting business growth locally, including the expansion of businesses, building on potential cluster strengths and opportunities and developing the capacity for entrepreneurship.

South Devon has a range of programmes to help the local economy and to improve skills and employability, including the new European objective 2 programme in the south-west, which is worth £108 million in European grant over seven years. That does not cover the Teignbridge constituency. However, objective 3, the new deal and the new DTI enterprise grant are all opportunities to be grasped.

I am pleased that two major projects by Torbay council and Paignton zoo to regenerate Torquay's harbour area are close to receiving formal offers of support from the objective 2 European regional development fund. Business units are included as part of that scheme. I understand that the total European grant could be worth more than £3.6 million and that those projects have been the focus of Torbay's attention so far. I hope that it will now be possible to consider more widely the potential for objective 2 to support economic development opportunities in the area. There are travel-to-work areas around Newton Abbot and in the Teignbridge area, including Exeter; many people are relatively mobile and can move around locally. Regardless of the specific area for which objective money is available, it can create jobs in neighbouring areas.

So far, little advantage has been taken locally in south Devon of the opportunities that the European social fund provides through the objective 2 and objective 3 programmes to upskill and retrain the labour force. It should be possible to make linkages—for example, between capital projects to provide new employment opportunities such as business units using the European regional development fund and training and retraining support through the European social fund—to ensure that local people have the right skills to access job opportunities.

The hon. Lady mentioned capital projects. Does she include the Kingskerswell bypass?

I know that that has been campaigned about for a long time, and I am sure that local Members will continue to do so. As the hon. Gentleman knows, it is not a matter for my Department.

This year, 640 young people in south Devon have left the new deal, 64 per cent. of whom have gone into jobs. Of those, 80 per cent. remain in sustained jobs. That is better than the national average of 75 per cent. The DTI has made nine offers of enterprise grant to small and medium-sized enterprises in south Devon, totalling nearly £0.4 million towards project costs of £2.6 million. That accounts for almost 30 per cent. of the enterprise grant offered in the eligible areas of the south-west as a whole. However, only two applications—both successful—have been made by businesses in Torbay and only one in Teignbridge. No bids were made by Torbay in the first year. That is a missed opportunity. There is scope for more bids to be made using the support that is already available to business; I am sure that hon. Members will now be egging people on to do so.

The local regional development agency has been supporting, with more than £5 million, projects worth more than £9 million of investment in south Devon, some of which are completed. Torbay is one of the RDA's five priority areas for regeneration in the southwest. The RDA is, for example, supporting the phase two development of Long Road business park, in Paignton, and the Torquay Living Coasts project to revitalise the waterfront. It is also investing £125,000 from the skills development fund to increase skills for supporting tourism business competitiveness in Torbay.

The Government are trying to help in every way that they can, and to mitigate the effects of 11 September on the economy of south Devon. I am sure that we will continue to do all we can to assist local businesses and local employment. However, I conclude by saying that the news is not all bad and that there are many items of good news for south Devon.

I am grateful for the opportunity to raise an issue that is important to my constituents.

As a society, we are judged on our system of justice. It is important that we balance punishment of offenders with their rehabilitation. Punishment is important to show that our society does not approve of what has happened. It should also act as a deterrent to others, so that they see what happens if they break the law. Punishment should also enable the victim of the crime to feel that what was done to them has been paid for. However, rehabilitation is equally important in ensuring that people who have committed a crime can get on with their life once they have paid for their crime.

I apologise, Mr. Winterton, if it seems that I am going back to the first principles of the judicial system, but doing so will prove important to the debate. My constituency includes the centre of Reading—in fact, it reaches some way west of the centre—and covers almost the entire night-time economy. When I moved to Reading in 1984, it had the night-time economy of the smallish market town it then was. However, in the intervening years it has changed massively. It has grown into a larger, dynamic, thrusting city aspirant. It has changed from the home of the three Bs—beer, bulbs and biscuits—to the centre of the Thames valley high-tech service area. It is home to many international companies, such as Microsoft, and is a regional shopping centre. Of the three Bs, only the brewing of beer remains.

As Reading has grown, so has its night-time economy. When I moved to Reading, people who lived there used to go out at weekends to pubs and restaurants in villages nearby. There were just a few town centre pubs and restaurants, and they had a rather unsavoury reputation. However, in the past few years a large number of attractive pubs and restaurants have opened. Reading now draws in thousands of people every weekend. They travel some distance—sometimes from areas such as west London—for a night out in Reading.

As a result, more people are walking the streets of Reading at night, which has helped to make it a safer place. As a woman, I now have no fear of walking around central Reading at night on my own. However, one downside of growth has been an increase in crime, particularly drink-related crime, which usually involves violence. In the past few months there have been fatalities in the Minster street area of central Reading that were entirely the result of drink-related crime.

I believe that some of these problems are connected to the drinking culture that our licensing system encourages. I will continue to work for the modernisation of our licensing system, so that we can reduce the problems that it creates. I will also work to help reduce the need for a massive police presence on the streets at 11.30 at night, and again at 2.30 in the morning, to deal with the thousands of people who are simultaneously ejected from venues.

I have talked about Reading's night-time economy because it provides the background to the substance of today's debate: electronic tagging. A constituent of mine who was out at night in Reading with his friends got involved in some trouble with others and was arrested. He was found guilty of actual bodily harm and on 20 July he was sentenced to three months' imprisonment with a further three months suspended. He was imprisoned in Reading young offenders institution—more famously known as Reading gaol in Reading town—about which a beautiful poem was written by one of Reading's more famous, if less willing, residents, the genius Oscar Wilde.

I shall not name the constituent involved, at the request of his family. He had been serving his three months' imprisonment on a home detention curfew, which extended until 19 October this year. The curfew ran daily between 7.15 pm and 7.15 am. Home detention curfews were introduced on 28 January by the Crime and Disorder Act 1998. Prisoners sentenced to custody of three months or more are eligible to be released on home detention curfew. Prisoners must be over 18 on their release date; they are required to be at a specific address for at least nine hours a day, where they are monitored by an electronic tag. All eligible prisoners must pass a risk assessment and have a suitable address before they will be granted a home detention curfew, and the final decision is made by the prison governor.

Someone released on home detention curfew is subject to the same supervision as someone released early. Anyone released on home detention curfew can be recalled if they break the terms of their curfew. That can happen if they go out, if they present a danger to the public or if there is a change in their circumstances. They can also be recalled if it proves impossible to monitor them or they are charged with a new offence.

Curfew orders are a welcome addition to the judicial system. They balance the punishment and rehabilitation aspects of the system to which I referred earlier, with the balance probably favouring rehabilitation. A curfew order allows someone to try to rebuild their life while punishing them for what they have done. For example, it is possible for a curfew to be established in such a way that someone can work during the day but cannot go out at night, making it an appropriate punishment in my constituent's case. Every night when he could not go out with his friends, he was reminded about his previous behaviour.

It is important that people who transgress have the chance to get their life back on track, and work is an important part of that. The curfew order's success depends on the monitoring of the person against whom it is made. This involves the offender wearing an electronic tag, which, in combination with equipment located at the curfew address, monitors when the offender is at the address. If the offender leaves the address during curfew hours, or attempts to move or damage the equipment or tag, the private companies that monitor the schemes are alerted.

I was visited at my surgery at Whitley advice shop on Monday 15 October by my constituent's parents. When his parents visited me, four days of his detention order remained. At the surgery, they presented me with a letter that set out the following situation. At 4.30 pm on Friday 12 October, the sentencing unit at the Home Office revoked my constituent's licence on the grounds that it had been breached. The alleged breach took place during the 12-hour period between 11 October and 12 October. At 7.30 pm on 12 October, my constituent was arrested by Thames Valley police and returned to Reading young offenders institution. The case appears straightforward because the order can be revoked at any time if it is breached. However, my constituent's parents were adamant that the order had not been breached and that their son had been at home on the night of the alleged breach. They were also worried because their son had been offered a job, which he was due to begin on15 October. His father rang up the firm to say that his son would not be in that day and was worried that his son would lose the job.

When. I returned to my office, I passed the matter on to my caseworker, who telephoned Reliance Monitoring, the firm responsible for monitoring the scheme, and was referred to a named member of the electronic monitoring team at the Home Office. My caseworker telephoned the electronic monitoring team but no one was available, so a message was left on the voice mail. On the next day, we had still not received a reply so we rang again. This time, my assistant spoke to the named member of the team, who seemed very cagey and promised that she would ring back because she was looking into the matter. When my office was called back, we were told that there was a question mark over the electronic tag, as Reliance Monitoring had found it to be dormant. Upon asking questions to gather further information, specifically about whether the tag was working, my office asked for the situation to be put in writing. The following conversation took place. The electronic monitoring team said, "Why do you want it in writing?" My caseworker replied, "Because my MP would like to discuss it and make representations to Ministers." The electronic monitoring team then asked, "Is she Conservative or Labour?" My caseworker said, "She's Labour." My caseworker then received an e-mail setting out the situation in writing. My caseworker did not know whether the e-mail would have been different had I been a Conservative. I am at loss as to why that question was asked.

The e-mail said that the Home Office electronic monitoring team was informed by Reliance Monitoring on the afternoon of 16 October that the tag was in dormant mode—it had shut down and had stopped transmitting for an unknown reason. The e-mail said that that could have occurred for a number of reasons and that Reliance was to have faxed that information to the sentence enforcement unit on the afternoon of 16 October in time for an appeal by my constituent. It was suggested that my office contact the sentence enforcement unit. The e-mail also said that my constituent had failed to answer the telephone between 7 and 8 pm and had not responded to a knock on the door between 1.20 and 1.30 am on 12 October. It stated that it is the offender's responsibility to let the monitoring company have access to investigate a suspected violation at any time of the night. This is noted in the release licence, or in words to that effect. It is also the offender's responsibility to answer the telephone.

There is some lack of clarity as to what Reliance Monitoring did. In discussion with my office, Reliance staff originally said that they called at my constituent's house at 10.30 pm, finding the lights off and no one home. The statement was later altered to say that they called at the house at 2.30 am. I have not been able to establish whether they called to gain access to the house or, upon seeing that the lights were off and no one, apparently, was home, did not try to gain access. Reliance claims to have made the required telephone calls to my constituent, who failed to answer and return the calls. My constituent acknowledged that he missed the calls but that he had thought nothing of it.

On arriving to arrest my constituent, Thames Valley police checked with Reliance Monitoring to see if it could pick up a signal from the tag. No signal was coming from the tag, but the officers had no choice but to arrest my constituent; as the licence had already been revoked, they had no discretion over the matter. My office then phoned the sentencing enforcement unit. The home detention curfew manager explained that my constituent would need to go through an appeal. I faxed a letter of support to the home detention curfew manager and contacted the Home Office which was happy to help. but the time scale meant that the appeal hearing could not physically be speeded up.

My constituent's appeal was heard and he was released on Thursday 18 October. The home detention curfew plays an important role in the criminal justice system, but we must have confidence that it works. I would like assurance from my hon. Friend the Minister that we can be confident that technical malfunctions will not cause United Kingdom citizens to spend days, possibly longer, in prison when they should not be there. Is there any information about how many tags have so failed, causing the problems suffered by my constituent? The importance of allowing monitoring should be made clear to offenders, including the importance of answering the telephone. I do not believe that that is made clear to everyone released in this way.

The system is important and I support it, as do other hon. Members, but we must be confident that it works properly.

I am grateful to my hon. Friend the Member for Reading, East (Jane Griffiths) for raising the case of her constituent who was released under licence on home detention curfew. I am also grateful for the help she gave her constituent and the liaison that she undertook with officials to help sort out what was going wrong with that case. On the issues that she has raised, I will take up any matters that I can to ensure that the system is working as well as possible.

Inquiries suggest that this was an isolated case. I will explain why in a moment. As my hon. Friend said, her constituent's licence was revoked when it appeared that he was absent for an entire curfew period of 12 hours. As a result, he was recalled to prison. He appealed against that decision, the monitoring equipment was tested and found to be faulty, and he was released. I share my hon. Friend's concern at what happened, and want to tell her about some of the steps that we have taken to prevent a recurrence.

I will first explain how the home detention curfew scheme and electronic monitoring works in general, and then set out the facts in this case and the action that we have taken in response. The scheme was provided for by the Crime and Disorder Act 1998, and began to operate in January 1999. As my hon. Friend recognised, the scheme's aim is to ease the transition of prisoners from custody to the community by enabling short-term prisoners to serve up to the last two months of the custodial part of their sentence in the community, subject to an electronically monitored curfew. Most prisoners serving sentences of between three months and four years are eligible for release under the scheme. As my hon. Friend said, the prison governor decides on behalf of the Secretary of State whether a prisoner can be released on HDC. The decision is made on the basis of a stringent, robust risk assessment that takes into account the risk of harm to the public, the risk of re-offending during the curfew period and the likelihood of compliance with the curfew.

The law requires a minimum curfew of nine hours a day for released prisoners. In practice, as was the case for my hon. Friend's constituent, the curfew is normally 12 hours, typically running from around 7 pm to 7 am. I think that it was 7.15 pm to 7.15 am in this case. The electronic monitoring of those under curfew is carried out by private sector companies, such as Reliance, under contract to the Home Office. They provide a complete service, supplying and maintaining tagging equipment, monitoring compliance with the curfew and following up any breaches. Those are reported to the Prison Service's sentence enforcement unit, which exercises on behalf of the Secretary of State the power to revoke a licence and recall a curfewee to prison.

On the day of release from prison, the contractors visit the released prisoner at the curfew address. They fit a tag, usually around the offender's ankle, and install a monitoring unit at that address. The tag sends a signal to the monitoring unit at frequent intervals. The signal is sent down the telephone line to a central computer at the monitoring centre, also operated by the contractor. The tag is calibrated to the monitoring unit, so that if the person goes out of range—in practice, goes outside the house where the unit is located—the signal is not received. The monitoring staff are then alerted to begin enforcement procedures. As standard practice, those involve a telephone call and a visit if necessary. If the available evidence suggests that the curfewee has breached the conditions of the licence, it can be revoked and the curfewee recalled to prison.

I turn from the general position to my hon. Friend's constituent, who was released on home detention curfew on 4 September to an address in Reading. His curfew was due to expire on 19 October. In accordance with procedure, staff from the monitoring company visited him on 4 September to fit the tag and install the monitoring equipment. That was completed successfully, and the equipment at that stage—and apparently for most of the licence period—was working properly.

On 11 October, at the start of the curfew period at 7.15 pm, the computer at the monitoring centre recorded an absence of signal from the tag. The contractor's staff tried to telephone my hon. Friend's constituent at 7.24 pm and 7.47 pm, but there was no answer. A visit was scheduled to the curfew address. Records indicate that that took place between 1.20 am and 1.30 am on 12 October. The staff were unable to enter the premises. I take my hon. Friend's point—it is a matter that I will follow up—that it is unclear exactly what occurred during that visit: whether the door was knocked and there was no answer, or whether further efforts were made. I think that the door was knocked but I am not clear whether anything else was done.

The central computer continued to record an absent signal until the end of the curfew period at 7.15 am on 12 October. The contractor reported that to the sentence enforcement unit. Inquiries were made of the prison from which the person was released, the probation service, the contractor and the police. The inquiries showed that the absence was not authorised and the licence was revoked that day in accordance with the law. My hon. Friend's constituent was arrested that evening and transferred to prison the following day. He subsequently appealed against the revocation.

On 15 October, the contractor's staff retrieved and tested the tag that my hon. Friend's constituent had been wearing from the prison to which he was returned. They discovered that the tag was in dormant mode. That is the mode in which the tag operates when it is not in use to monitor people, and when it has been removed from one person before being fitted to another. That prevents the accumulation of unnecessary data and means that the tag does not send a signal to the monitoring unit. The tag resets itself from time to time as a precautionary response to any possible interference with its power supply, although it is programmed to continue normal operation. As far as we are aware, this is the first occasion that a tag has reset itself to dormant mode, rather than being programmed to do so by the contractor's staff when it is not in use. We do not yet know why that happened in this case, and the contractor has asked the manufacturers to examine the tag.

The contractor notified the sentence enforcement unit of the tag's fault. That cast doubt on the safety of the revocation of the individual's licence and, consequently, his appeal was upheld and he was released from prison on 18 October.

The malfunction of even a single tag of the many that are fitted is a matter of concern. We discussed that with the contractor and relevant operating procedures have changed as a response. In future, on all occasions when a tag resets itself, the contractor's staff will visit the curfewee to replace the tag and return it to the manufacturer. That will ensure that a tag cannot reset itself to dormant mode and continue to be worn by a curfewee.

I realise that that will be of little consolation to the individual in this case and to his family. However, as I said at the outset, the incident seems to be isolated and action has been taken to prevent a recurrence.

Over the past 12 months, the sentence enforcement unit received 71 appeals against revocation of licences. That is 10 per cent. of the 700 revocations that were made during the same period. We conducted a manual sift of all appeals, which revealed that only eight of the 71 prisoners who appealed claimed that the breach arose because of equipment failure. Only eight people claimed that the breach was technical. All eight cases were investigated fully. In only one case—unfortunately that of my hon. Friend's constituent—was the breach found to have arisen from a fault in the equipment. The most common finding in the other seven cases was that the tag had been deliberately damaged or cut off by the person himself. I accept that such information is not necessarily helpful to the person under discussion, but I am confident, because of our subsequent inquiries, that this is the only case in which the tag was responsible for what seemed to be a breach that resulted in the consequences described.

On a more general note, my hon. Friend is aware, notwithstanding the unfortunate circumstances of the case, of what an important role home detention curfew plays in enabling offenders to make the transition from custody to the community more effectively. More than 40,000 people have been released on home detention curfew, with only a small minority—less than 5 per cent. —having their licences revoked for one reason or another. Indeed, within that 5 per cent., the number of people whose licences have been revoked because of a serious issue, such as committing an offence, is smaller still and is less than 2 per cent.

The system has a success rate of more than 90 per cent. It helps prisoners to make the transition, which is important if we are to resettle offenders effectively back into their families and communities and help them to resume life without further offending.

I am grateful to my hon. Friend for raising the issue. I shall investigate whether we can clarify procedures and make them as robust as possible. We want contractors to telephone or make contact in response to an apparent breach. I hope that she accepts that we have followed up her point systematically.

Can my hon. Friend assure me that the obligation on offenders to answer telephone calls and to allow access is made clear? It has become apparent in my investigations that such a procedure has not been made clear to those on release.

I assure my hon. Friend that I shall check that the offender's responsibilities are clearly understood and that there is a proper procedure whereby we can ensure that we have a record of individuals having the process fully explained to them so that there is no misunderstanding. I thank my hon. Friend for helping us to improve a successful system even further.

Thank you, Mr. Winterton, for giving me the opportunity—for the second time, at your feet—to raise in Parliament the developments taking place in the health service in mid-Sussex. I am grateful to the Minister for giving up her time to respond to the debate today. My constituents have understandable anxieties about the plans. I had the chance to debate the matter with the Minister's predecessor on 29 November last year. At that time, I drew the then Minister's attention to the wholly unsatisfactory proposals of the Central Sussex Partnership Programme document, "Modern Hospital Services for Central Sussex—A challenge for us all".

My constituents and I believe that those proposals were reckless, foolish and wholly lacking in common sense. I pay tribute to the way in which the responsible authorities, the Minister and her Department paid careful attention to a tidal wave of public opinion. The proposals that were put forward subsequently in the second document, entitled "Strengthening Hospital Services in Central Sussex", contain much good sense and much that we accept needs to be developed for the future.

At the time, I made it plain to the Minister that some services would need to be shuffled between the Princess Royal hospital in Haywards Heath and the Royal Sussex county hospital in Brighton; that I would support such changes, provided that the professionals deemed them sensible; and that, inevitably, neither institution would be likely to have exactly what it wanted.

I reinforced that in my letter of 18 October to the present Minister, in which I further emphasised the requirement to consider the proposals in conjunction with the wider review that was taking place in east Surrey and north-west Sussex. Indeed, as the Minister knows, in light of the consultation now taking place, there is a serious debate about the location of, for example, breast care services, a matter that is, naturally, arousing a good deal of anxiety. There are and will be other areas of uncertainty as the plans are revealed.

The Princess Royal is a modern acute hospital with 328 beds in Haywards Heath. Under the proposals, the accident and emergency department—which was, ludicrously, threatened with closure—will be strengthened, which we all welcome. The decision has produced welcome reassurance locally. The department dealt with more than 30,000 patients last year, a number that has steadily risen since the late 1990s. Elderly people are expertly cared for on specialist wards, and the hospital also provides comprehensive surgical and orthopaedic surgery, including for all emergencies.

During the past year, 8,729 patients were admitted to the Princess Royal as emergency cases, and 3,673 were admitted for treatment as planned patients and stayed one or two nights. Last year, the busy out-patient department dealt with 75,258 patients. The hospital directly employs 49 consultant medical staff, 427 nursing staff. 218 technical support staff, 65 midwives, 71 junior medical staff and 343 support staff. The Princess Royal employs a total of 1,173 worthy and excellent people. As the Minister will appreciate, it is a busy and popular local hospital.

The Government's main proposal is, effectively, that the Princess Royal hospital and the Royal Sussex county hospital in Brighton, supported by other local services, merge. The effect would be one major university hospital trust, centred largely on the Royal Sussex county hospital and including the Princess Royal. The plans would place all acute hospital services under one management and would bring together doctors, nurses and other clinical staff to work in a more joined-up and coherent way. All of us would welcome that, and although some understandable reservations about the proposals have been expressed, in making a judgment in the interests of my constituents, I generally support the plan. However, I draw the Minister's attention to genuine and increasing anxieties about the present and future funding of the merged trust, given the especially pressing current financial difficulties.

The Royal Sussex county hospital in Brighton failed in all its published performance targets, and it is said that there is some doubt about the state of its finances; and, indeed, some of its management. In the run-up to the proposed merger, the Princess Royal, through no fault of its own, projects a year-end deficit of £3.3 million. It has been consistently inadequately funded not only by the present Government, but by the previous one. As a result of the challenging level of demand and the ad hoc arrangements in several areas, it spends at least £538,000 a year on beds for which it has received no funding. That is clearly unsustainable for the future. As I said when the Minister kindly received a delegation that I led from my area, delayed transfers create a significant problem, and the continuing cost of treatment and nursing adds a further burden of at least £500,000 to the budget.

The Government have recently given some extra money to cope with the problem, for which we are grateful. However, the problem remains serious throughout the south-east and elsewhere, and the future looks unclear and worrying.

To the more than £1 million that I have mentioned, one can add a further £1 million of unfunded cost pressures that the trust has identified, which are not resourced by an already hard-pressed West Sussex health authority.

In addition, the Princess Royal hospital has to pay further sums to nursing agencies. The cost of agency nurses to the NHS—as you will know, Mr. Winterton, from your experience on the Select Committee—can be truly outrageous. During the August bank holiday last year, it was necessary for one ward to obtain a D-grade nurse for a 12-hour shift. The agency charged £1,019 for a single shift. Last year, the trust spent £310,000 on agency staff. At the end of this current financial year, it is predicted to spend £620,000 on such staff. Clearly, that is wholly unacceptable, unaffordable and symptomatic of the great difficulty in nurse recruitment and retention throughout the south-east. That is of special concern to my constituency.

Because of a consistent failure by the health authority to invest in the nursing infrastructure, the Princess Royal hospital has very low levels of funded establishments on many wards compared with other hospitals in the south-east. Indeed, while the Princess Royal employs 0.84 of a nurse per bed, the Royal Sussex county hospital employs 1.1 nurses per bed. Putting it bluntly, the Royal Sussex employs 20 per cent. more nurses than the Princess Royal. The Princess Royal estimates that increasing staffing levels at the hospital by 10 per cent., and providing adequate care and reducing agency nursing costs, would cost at least £1.5 million. Given the West Sussex health authority's increasingly difficult financial situation, it appears unlikely that that will be funded. I know that the Minister realises that steps will have to be taken to cover those obligations, which cannot long continue to be fulfilled without significant damage to patient care.

Some of the existing cost pressures have been funded, but not sufficiently to meet, for example, the iniquitous European Union working time requirements and the onerous current service demands. Furthermore, the regulation covering junior doctors' working hours has resulted in an additional eight posts across medicine, general surgery and trauma. To achieve compliance, the posts will cost a further £420,000 in a full year. Then there is the cost of additional work undertaken to meet the in-patient waiting time target—a further £750,000— and, as the Minister will see, there is a read-across to the cost of delayed transfers. There are also particular difficulties in the Princess Royal's excellent special baby care unit, where the nursing establishment is only just barely adequate to maintain a rota. Indeed, our heroic midwives are staffed at a level that is well below that of comparable units in Sussex.

The position is clear. While I cannot comment on the finances of the Royal Sussex, the Princess Royal is consistently and persistently seriously underfunded, probably to the tune of £4.5 million or £5 million annually. That is at the heart of the debate and must now be resolved. It is neither prudent nor sensible for the merger to take place without the financial affairs of both parties to the proposed merger being put straight. As the Minister may know, the newly merged Surrey and Sussex trusts started with a £4 million deficit, from which they have never recovered. It is grossly unfair to the managers of the hospital trusts, and the patients, that the deficits are not removed, as it puts everyone at a disadvantage from day one. I want the Minister to understand—I am sure that she does—that it would be improper and a serious failure of public policy for the merger to be launched without being fully funded, and thus unable to undertake the demanding tasks that it faces.

I would go one step further. Given the Government's rhetoric, much of which is admirable, on the health service, and their failure to deliver on the reform of much of the public service, it would be a grotesque deceit on Mid-Sussex and my constituents—and other constituents—for such matters not to be dealt with properly and honourably.

I congratulate the hon. Member for Mid-Sussex (Mr. Soames) on securing the debate about the funding of the Princess Royal hospital. I am aware of the concerns about health services in Mid-Sussex, and I am slightly better informed about them as a result of a visit that I received from the hon. Gentleman, local councillors and representatives of the local community health council. That meeting was informative, and gave me an insight into the situation on the ground in the community. That is important; it is easy for Ministers to look at papers and submissions, and to fail to have a sense of the practical issues.

The hon. Gentleman's choice of subject has pleased me—although he might not think that that is the case—as it gives me an opportunity to outline some of the additional funding that has been received by the Mid-Sussex NHS trust and the West Sussex health authority, and to explain some of the reforms that the Government are seeking to make to ensure that that extra investment has the maximum impact. The hon. Gentleman has generously acknowledged that his region has received additional support, and I understand his wish to secure an even better position for his local health services.

The funding allocation received by the West Sussex health authority has dramatically improved over the past few years; since 1997, there has been an increase of £231 million. That is a huge amount of extra investment in health for that community. The Government have also been able to provide health trusts such as the West Sussex health authority with three-year spending plans, providing forecasts and a degree of stability. That enables them to plan the growth that they intend to implement, instead of their being stuck on the annual revenue merry-go-round that previously made it difficult for organisations within the health service—and in the public sector in general—to try to plan the way forward.

However, the Government are acutely aware of the concerns that have been raised about the general funding formula in the health service. A wide-ranging review is underway, examining the formula used to make cash allocations to health authorities and to primary care trusts. As a result of the shift in the balance of power, primary care trusts will, in future, spend about 75 per cent. of the entire health service budget. Ensuring that we get the funding allocations right at the level of the primary care trust will be crucial to securing the delivery of acute services and specialised services at tertiary level. If we do not get things right on the ground floor, they might go wrong later on.

The hon. Member for Mid-Sussex acknowledged not only the increases in funding, but the need to try to ensure that the extra finance is accompanied by reform so that the way in which the whole system in our hospitals works can be improved. He has highlighted particular issues with regard to underfunding, but some of the comments that he has made also have more general application.

It is acknowledged that the health service throughout the country has a problem with the recruitment and retention of its staff, its most important resource. That problem is particularly acute in London and the southeast. There are several reasons for that, not the least of which is the buoyant economy in that region. Spiralling house prices make it difficult for public-sector workers of any kind, but nurses and therapists in particular, to get access to the housing market and, therefore, to take up jobs locally.

A daughter of a constituent of mine qualified as a nurse from Edinburgh university, and then arrived in Brighton and applied for a job there. Her application took three months to deal with and it was six months before a job was offered to her, by which time she had found employment in the private sector. I took that matter up with the West Sussex health authority, as the process of recruiting nurses in Brighton did not seem to me to be as efficient as it might have been. At a grassroots level, that is worth investigating.

The hon. Gentleman makes an important point and I shall look into the matter. Our procedures need to be as efficient as they can be if we are to maximise people's skills and talents.

I am pleased to tell the hon. Gentleman that despite the difficulties of recruitment and retention, there are 17,000 more nurses working in the health service than there were in 1997; we are making considerable progress, but there is a great deal more to do.

I am pleased to be able to tell the hon. Member for Mid-Sussex that as part of the working lives initiative— a raft of measures to try to recruit and retain more staff—West Sussex health authority received £400,000 to enable it to pay the cost-of-living supplements for nurses in the area. That has made quite an impact in keeping people in the service. The initiative is at the forefront of the new schemes to provide affordable housing for key public sector workers. Mid-Sussex has 10 places on starter homes schemes, which means that staff earning less than £35,000 a year can get on the first rung of the housing market, something that everyone will welcome. I am pleased that Mid-Sussex is at the forefront of those new and innovative schemes.

We introduced an organisation called NHS Professionals 12 months ago to try to deal with the widespread use of agency nurses. It is the national health service's in-house agency, providing work for people who want to work on a part-time, temporary or casual basis, and at different times of the week, perhaps to fit in with childcare responsibilities. NHS Professionals provides extensive services, especially in the south-east, so that trusts do not have to meet exorbitant costs, as in the horrifying example quoted by the hon. Member for Mid-Sussex. NHS Professionals is an innovative way of plugging the gaps at times of peak demand when the service needs greater capacity.

The hon. Gentleman is convinced that the trust is under-funded, but at the beginning of the year it forecast a break-even financial position. It is not under-funded in an ongoing, systemic way; the problems can be addressed by the recovery plans now being put in place, although there may have been some weaknesses in financial controls in the in-year management of the budget. There may perhaps have been some weak monitoring of the in-year cost pressures on the system. We must be rigorous and robust in ensuring that the performance improvement arid recovery plans agreed with the region are monitored and followed through; if there are issues that are completely beyond the control of the trust, we must ensure that we address them.

We cannot allow cost pressures to arise in any system without trying to bear down on them and to explore whether different ways of providing and organising the service can give equally high quality NHS services to local people.

The hon. Member for Mid-Sussex was generous in saying that he supports some of the inevitable service reconfigurations that will result from the merger. They will enable the trust to achieve better standards in each of those sites than it does now. They will also enable some doctors to specialise more in their particular expertise, and they will raise NHS standards for local people.

The financial picture is more complex than it appears. In the past year, there has been a lot of investment to increase capacity at the Princess Royal hospital. There is an extra consultant psychiatrist, gastroenterologist, orthopaedic surgeon, anaesthetist, radiologist, accident and emergency consultant and additional diagnostic facilities and staff. There is a commitment to ensure that the Princess Royal can offer top-quality services to the local community. As the hon. Gentleman said, there is confirmation that full accident and emergency services will be provided 24 hours a day, seven days a week on that site, which has reassured the local community.

Extra resources have been allocated this year to Mid-Sussex from a couple of nationwide schemes. Last week, the Secretary of State announced the strategy on reforming emergency care, which is designed to deal with some of the pressures at the front end of our accident and emergency departments, which are operating under tremendous pressure. The members of staff are doing a marvellous job, but we believe that if organisational changes were made to care delivery, they would be able to see more patients and give them the right care at the right time in the right place.

Reorganising accident and emergency into streaming systems will mean that patients' ailments are cared for by appropriate and relevant staff, so that more simple matters are dealt with by nurse practitioners and more complex matters by consultants, so we can get through the waiting list much more quickly. That strategy is backed up by a considerable amount of money; £118 million will be invested nationally, and the West Sussex health authority will receive an additional £780,000 from that to help it implement the changes.

Pressures creep through the whole hospital system once people move on from accident and emergency departments. The hon. Member for Mid-Sussex raised the question of delayed discharges, which have caused huge problems throughout the national health service in the past year. He will be aware that, three weeks ago, my right hon. Friend the Secretary of State announced an extra £300 million over the next three years to deal with the problem. It is a problem not simply for the hospital service that beds are occupied by people who no longer need to be there, but for the people in those beds. Once their acute medical care has finished, it is not in their best interest to remain in an acute hospital. More appropriate care should be found, whether that is in the nursing home or residential care sector, or through support with domiciliary care packages that maintain patients' independence at home. The programme is important, both in terms of freeing up capacity in hospitals and ensuring that people get the right care in the right place.

I am delighted to be able to inform the hon. Gentleman that, because of West Sussex's particular problems, it has received a disproportionate amount of the £300 million to be allocated. That recognises the particular challenges that it faces. Some £300,000 has already been invested to transfer patients into nursing homes and residential care, with a further £100,000 being made available immediately; more allocations will be made as the year goes on. Those two schemes have already had the combined effect of releasing 22 beds in the hospital, which represents a 50 per cent. reduction in the number of blocked beds. I am sure that the hon. Gentleman will agree that that is a welcome development.

The challenge for us is to sustain that position and ensure that the number of delayed discharges does not rise again, which is why the money is also connected to a rigorous cash-for-change programme. There must be a change in the way the system works; otherwise we will simply return to the same position year after year. Unless we reach a position in which local social services work hand in hand with the health service to put in place domiciliary and residential care packages, the changes we are making now will not be sustained. That will be in no one's interests; whether that is the acute patients who need their elective surgery or those who need more appropriate care. I hope that the hon. Gentleman will accept that the increased investment must he followed by changes to the system to ensure that we maximise our investment.

I am grateful to the Minister and I acknowledge that considerable extra sums are being invested. However, that was not the point that I was trying to make. It is true that a number of new posts have been established, but that merely reflects the demand with which the Princess Royal hospital has to cope. I agree that the trust's affairs must be properly run and the value must be got from every pound. Does the Minister agree that it would be wrong to launch the merged trust even with extra investment in people, facilities and everything else? The Princess Royal hospital has been underfunded over the years, although it may now have received more money. However, does she agree that it would be wrong to launch the merged trust without addressing the yoke of considerable deficits that hang around the necks of both parties to the transaction? If that is not dealt with, there will inevitably be a bad start.

Much as I would like to agree with the hon. Gentleman, I cannot agree that wiping the slate clean must be a precondition of the changes that must occur in the health community. The service reconfigurations, which the hon. Gentleman acknowledged will bring improvements, will mean that the trust works more effectively and efficiently, and in the best interests of patients. There will be savings because of the reconfiguration, but that is not the prime motive, which is to raise standards and to ensure that the right services are in the right place in the local community. We should not have a precondition of removing the deficit completely. It is important that we can achieve the recovery plan that was agreed with the region; that shows a clear way forward in ensuring that the trust breaks even and balances its books while not compromising the services available to patients. Over the next few months, we must ensure that the plan is monitored. If unforeseen pressures that are not in the recovery plan cannot be dealt with, that is a matter for reconsideration. The trust can get off to a good start by implementing some of the changes.

The hon. Gentleman performed a great service by raising these matters so that they are in all peoples' minds. It is challenging—an overused word in this place—and realistic to manage our way through and to ensure that extra investment does not create further problems down the line, but instead improves the service imaginatively and creatively and reduces in-year pressures. That can be done and it will result in better services for the hon. Gentleman's constituents. That must be the overriding concern of all hon. Members'. Any process changes that are put into effect should not just shuffle pieces on a draughtboard but improve the outcome and services for local people.

I am aware that the hon. Gentleman raised a wide range of matters, including staffing and new investment. He also mentioned compliance with junior doctors' hours; that is a further pressure on the health service, but it is right. The Mid-Sussex NHS trust has worked towards compliance and recruited eight additional doctors in general medicine and general surgery. A further four grade F nurses have been recruited and trained. They perform some duties that medical staff performed previously. That is a new way of working to get maximum benefit. Those nurses are perfectly capable of carrying out such duties and enjoy the full support of doctors and consultants when performing them. We want more value from our investment. The Mid-Sussex NHS trust is taking on board the new agenda that people can work in different ways, have a wider skill mix and undertake duties that we would not have previously dreamt of being undertaken by nurses. However, nurses do that well, with full regard for their patients' safety and security.

I am optimistic that the trust can go ahead with its proposals. It is important to examine the proposals in the context of the wider review, which the hon. Member for Mid-Sussex forcefully impressed on me. I shall ensure that the matter is not dealt with simply in isolation. The whole community must feel that its health services are the best that can be provided for local people. It must have confidence and trust and feel that people listen to its point of view when making fundamental decisions. I give a commitment to ensure that we do that, that we take on board all of the issues that the hon. Gentleman raised and that we try to ensure that finances reflect the true situation.