I declare my interest with Commerzbank, which is declared in the Register of Members' Interests, and I took advice on the content of the debate before I sought it. Commerzbank is a German bank that already accounts in euros. The debate therefore does not specifically and directly affect the body in which I have a registered interest, but relates to the Government's policy to change the national currency, which would affect everyone who uses the pound. The Government specified that five tests must be completed before a referendum would be called. Their position used to be that we would join when we had satisfied all five.

In The Observer on 6 January 2002, a senior Treasury source said:

"There can only be a referendum if there's a government recommendation to join. There'll only be a recommendation to join if the five tests are met. If not, there won't be a referendum."

On GMTV's Sunday programme on the same day, however, the Minister for Europe said:

"The government will form a view on the basis of the economic assessment, so if you like, it's a political judgment on the basis of an economic assessment."

Gus O'Donnell was right when he said in The Times on 4 January 2002:

"Economics can never be clear and unambiguous. Ultimately it will be a political decision."

The waters were muddied further when the Chancellor said that the economic case must be clear and unambiguous. He put his party in an impossible situation that needs clarification. I have included the dates because Gus O'Donnell's statement came before the Chancellor reiterated that there could be a referendum only when the economic case was clear and unambiguous.

Today, we are trying to find out what the Government really mean. The problem is that the five economic tests are flawed and some members of the Government at last recognise that. I do not believe that the case for the euro can be made successfully, that restrictions on free markets will deliver greater economic success, or that the loss of the right to determine our interest rates will deliver greater stability. The loss of our right to make economic decisions is a loss of freedom and responsibility. It can never be dressed up as a long-term economic benefit. The decision is political and it is spin to suggest that the five economic tests could prove otherwise.

In support of my hon. Friend's contention, if he had nothing better to do on new year's eve, he might have heard the interview on BBC 1 news with the President of the European Commission, Romano Prodi. In response to a question about the launch of the euro and whether the project was political, he said with a smile:

"This is not economic. This is…a pure political process."

I did not hear Romano Prodi say that, but I agree with the gist of the message. The problem is that the five economic tests no longer make economic sense. The first test is convergence and it should be the most important. Cyclical convergence data suggest that our economy is more in tune with the United States than with the rest of Europe. The correlation of the cycles between the United States and the United Kingdom tends to be higher than between the United Kingdom and Germany.

Clearly, there has been almost no correlation between Britain's economic cycle and that of the eurozone in the past decade. The structural convergence differences are significant and have altered little since October 1997. There are many differences, of which a principal one is trade. The eurozone accounts for only 43 per cent. of British trade, and the figure of 60 per cent. that the Prime Minister mentioned is too optimistic. United Kingdom exports to the far east have grown twice as quickly as those of other EU members. High levels of home ownership make Britain more sensitive to interest rates. Britain's pension situation is the opposite of that of the rest of Europe. As the number of European pensioners grows, the problem gets worse. The economic tools for dealing with the pension debt could have a disastrous effect on Britain.

My hon. Friend makes a powerful point about different patterns of trade. The Prime Minister is considering the trade of goods: a more favourable comparison. Does my hon. Friend agree that the economic relationship that requires closer co-operation is mutual investment? Mutual investment is in evidence far more with the United States of America: we get little investment from Germany or France.

I agree with my right hon. Friend and one of the tests deals with investment.

The solutions to the pension debt are either an increase in taxation or higher inflation to erode its value. Either of those solutions would damage Britain. Britain is the only net exporter of oil in the European Union; therefore, its reaction to a shift in the price of oil is the opposite of other EU countries. That emphasises another problem: would including Britain in the euro destabilise the currency further? It may be worse for the euro than it is for us.

The second test is flexibility. Flexibility in the labour market and the tax system are needed, but the eurozone is deficient in both. Without added flexibility or the safety valve of currency movement, the single currency is effectively a straitjacket. Dr. Otmar Issing, the chief economist at the European central bank, described that lack of flexibility as an almost lethal threat to monetary union. The second test would be better if the onus was on the eurozone to make markets more flexible to compensate for the inflexibility of a single monetary policy. The flow of labour is not the same as that of capital, which can cross borders easily. Social, cultural and economic barriers remain. The Financial Times said that the EU has labour markets that are six times less mobile than those of the US.

The other crucial element of flexibility is in fiscal policy. About 45 per cent. of US federal taxes, which are 19 per cent. of GDP, are used to iron out imbalances. The EU budget is only 1.27 per cent. and has no structure for transferring money to compensate for the problems of monetary union, nor the political backing for it. Neither the eurozone nor Britain would be any more flexible than it was in 1997, when the tests were deemed to have been failed.

The hon. Gentleman mentions fiscal transfers that help iron out problems among different countries in the euro zone. Does he accept that fiscal transfer mechanisms will be retained in sovereign member states, which will help adjustment?

I hope that that may be the case, but it is not at the moment. It does not seem that it will be the case: there is no will or political backing for it.

The third test is investment, which was touched on by my right hon. Friend the Member for Wokingham (Mr. Redwood). Business investment as a share of GDP is higher than at any other time in the past 40 years. It is higher in the United Kingdom than in the US, France or Germany. We should think twice before undertaking a fundamental change in macro-economic policy: strong investment is dependent on macro-economic stability. The Government are forever boasting about the achievements of the independent Bank of England. Do they want to take credit for an independent central bank or its abolition? It would be replaced by a seat on the monetary policy committee in the European central bank.

The fourth test concerns the City, which shows few signs of struggling outside the eurozone. Its interests may be jeopardised by joining the euro. London is the largest centre for foreign exchange trading and the euro presents few problems. The number of EU financial institutions has increased from 238 in 1998 to 350 in 2001: an increase of about 50 per cent. The real threat to the City lies in membership of the euro. The UK position outside the eurozone is its strength, with less pressure for tax harmonisation. If the UK had been inside the eurozone, it might have given way on the withholding tax argument.

The fifth test is the effect on jobs and British prosperity as a whole. If we take the four previous tests together, it is clear that the euro is unlikely to promote higher growth stability and a lasting increase in jobs. It is impossible to make the case that joining the euro would have a clear unambiguous benefit; it would be easier to argue that it would have clear unambiguous costs.

Since the creation of the eurozone, there is no evidence that Britain's decision to remain outside has cost our economy any jobs, even in the manufacturing sector. The Government say that they are proud of our unemployment rate and low interest rates. On 7 March 2001, the Chancellor said:

"I can also report that manufacturing—despite the euro-sterling exchange rate—grew last year by 1.6 per cent. Manufacturing productivity grew by 4.4 per cent., manufacturing exports by 11.8 per cent., and it is to the credit of thousands of British companies that overall British exports grew by 7.4 per cent."—[Official Report, 7 March 2001; Vol. 364, c. 296.]

That puts in perspective manufacturers' claims that foreign exchange insurance is a significant cost to their competitiveness.

The arguments in favour of joining the euro are speckled with expressions such as "one market, one money" or "Britain will lose jobs and investment". That is clearly not the case. The political argument about lacking influence is probably the weakest. The concept of exchanging total control over our interest rates for a place on the European central bank monetary policy committee seems a bad bargain. The argument about making policy for our European neighbours instead of setting an example for them to follow is weak. It implies that any sensible suggestions will be ignored unless we are a member of that gang and that only by being a gang member will we have respect. What a childish and unworthy gamble to take with our nation's prosperity.

In a meeting with the Governor of the Bank of England, I asked why he did not intervene more in the currency markets to buy euros and sell sterling. He replied that although he was allowed to intervene, he did not feel that that was necessary. I also asked why, when buying the weak euro seemed a bargain and an investment that would make British goods more competitive, he showed a remarkable lack of confidence in the euro, which surprised and worried me. He wanted to know when it would strengthen and he is not alone.

A single currency is, as I said, an economic straitjacket. Although people may say that it is in the country's best economic interests, it cannot compete with free movements and free-floating international markets. The currency is a safety valve, allowing or forcing countries to adjust their economic situation safely. It also acts as a warning light and confidence indicator. The currency price is determined by people who are prepared to consider all the variables and to put their money where their mouth is. Efforts to curtail that activity consistently end in disaster. Every time that a Government try to improve on the free market, they lose, as in Argentina, where people pegged themselves to the US dollar, or in Britain when we were expelled from the ERM. We must learn from our mistakes and emulate countries such as Canada, which can live alongside its trading partners without adopting their currency.

The Government need to tell us the rate at which they want us to join. That would be far more useful than the five economic tests. It would give us a monetary target that would give clear guidance to businesses, letting them know what their longer-term competitiveness would be. Of course, one rate will not suit all businesses because one size never fits everyone. It cannot and will not fit all, whether we are talking about interest rates, exchange rates or even clothing. We should be asking ourselves, with all due diligence, not whether we are good enough to join the euro, but whether the euro is good enough for us to join and, all things considered, whether it would benefit from our joining. The answer is no.

With Germany fast approaching debt levels of about 3 per cent. of gross domestic product, I accept that there may be concern for the euro's long-term stability, so perhaps this is a good moment for the Government to bow out. The purpose of this debate is to get a clear view from the Government about how they intend to proceed with their referendum. As I showed, none of the five economic tests holds up to close inspection, and now that notes and coins have been introduced, what is holding the referendum back?

The criteria for calling the referendum are entirely political. They are based on a socialist dream of one enormous European state, perhaps founded on a natural dislike or distrust of America, or perhaps based on the communist theme of collectivism. The reasons for joining are no longer economic and never will be. As the ulterior motive is exposed, what is holding the Government back, apart from almost certain defeat?

Seriously, let us stop pretending that this single currency is a good idea and let us move on. If the Government will not abandon their determination to join, perhaps now is the time to step up to the plate. Call the referendum now. It is time to let the people have their say. Using a hard-headed assessment of Britain's economic interests, one is bound to conclude that Britain can never be guaranteed a long-term improved economic position through adopting the euro. Therefore, it is time to admit defeat and either call the referendum or throw in the towel and start dealing with the crisis in health and transport.

I congratulate the hon. Member for Leominster (Mr. Wiggin) on securing this useful debate and on his excellent summary of the case against joining the euro. I was sitting with my head held desperately in my hands just to stop myself from nodding in agreement with most of what he said. The hypothesis on which he based his speech is accurate. Government policy on this issue is absolutely clear. I am, unusually for me, totally in agreement with it. It is a third way between the two extremes. One extreme is that we may go in but on the other hand we may not, and the other extreme is that we may not go in but on the other hand we may. Government policy sits right there in the middle, happily watching what is going on with vacuous good will, saying, "God bless her and all who ail in her."

I see no need to change that policy, particularly since we have now had that so-called great event, the arrival of the notes and coins of the single currency. It demands no great skill to fill thousands and thousands of ATMs with paper currency. I imagine that forgery would be fairly easy with new notes, but I am sure that the details will be kept quiet and we will only know whether prosecutions result after some time. Nor will we know immediately about the price hike that the new currency will obviously allow. People will round up prices. There will be an inflationary effect. It might necessitate an increase in interest rates in euroland, but we will not know that until the figures come out. The immediate consequences are non-existent. We are therefore left with the basic issues of why it may not work and why we should not think about joining it. There are three paramount reasons for that, apart from the arguments advanced by the hon. Member for Leominster.

First, there will be clear and strong political tensions in the coming year. Germany desperately needs a reduction in interest rates and perhaps a more competitive, that is to say lower, euro. France and Germany both have elections this year. Both will therefore press Mr. Duisenberg, the great deflator, to reduce interest rates and exude some confidence and happiness to the electorate. That will produce uncertainties and public arguments and pressures that will not be good for confidence in the euro. There is a possibility, therefore, that confidence will be affected and the euro will go down again. We must bear that in mind in the coming months.

Secondly, as the hon. Gentleman pointed out, the system does not include any machinery of redistribution, which it needs if it is to produce convergence. One interest rate cannot possibly cover the very different circumstances of the Irish, Spanish or German economies. The German economy is now in its third quarter of zero growth. It is technically in a recession. In that situation there has to be some means of redistribution to help the economies that are adversely affected by the single currency.

A nation state can redistribute about 40 per cent. of its gross domestic product to the regions, but that cannot be done in euroland, which suffers from a single economic policy. Only about 1.5 per cent. of Europe's GDP can be redistributed, and in the long term that will produce stresses and strains in the system, or even break it.

Thirdly, there is the problem of Maastricht's requirement and the stability pact. In a recession, Germany will be knocking close to the ceiling of 3 per cent. of GDP in the public sector deficit. It might well break through that ceiling this year, because as unemployment increases there is more social security spending and less tax revenue. The stability pact will therefore require sanctions. Will they be imposed? Germany wanted sanctions to ensure that budgetary integrity was maintained, but they would be a worrying blow to confidence and would affect world confidence in the euro.

We do not yet have solutions to those long-term problems, which I fear will produce difficulties for the euro. We need to sit back and wait and see what happens rather than rush to join the euro now, with the headlong enthusiasm of a bunch of impetuous Liberal Democrats.

The crucial, unspoken, issue is the sixth test—the Chancellor's codicil—or the exchange rates. At what exchange rate can we begin to envisage or talk about going in? It was confidential, but I can now reveal that I have a secret role in Government that is similar to Lord Birt's. I am coming out in support of Lord Birt because he has been unfairly and unnecessarily attacked for his role, which is similar to mine. I send periodic memos to the Chancellor, the Prime Minister and the Governor of the Bank of England advising them on economic policy. It is not so much blue sky thinking as grey North sea, or sludgy, thinking, which lacks Lord Birt's brilliance. However, my memorandums have much in common with Lord Birt's, in that they are never published and never read. My memos to my right hon. Friend the Chancellor emphasise the importance of the exchange rate issue, and my hon. Friend the Economic Secretary has replied to many of them. The replies are beautifully written and make interesting reading; I am having them set to music by Andrew Lloyd Webber. However, they do not respond to the crucial argument about the exchange rate.

Sterling is substantially over-valued, especially against the euro. We came out of the exchange rate mechanism because we could not maintain the relativity of DM2.95; the last exchange rate figure before the deutschmark disappeared was about DM3.20. The Liberal Democrats tell us that we went into the exchange rate mechanism, which they enthusiastically urged us to do, at an over-valued rate. I remember when the right hon. Member for Berwick-upon-Tweed (Mr. Beith) took large, enthusiastic, Liberal crowds into Downing street, where they chanted, "Move to the narrower bands now." They tell us that the exchange rate then was over-valued, but they wanted to lock us into that over-valuation of DM2.95 by moving to the narrower band.

The pound is over-valued. We can argue about whether that is due to a rise in the pound—in some respects it is—or to the 20 per cent. fall in the euro since it was inaugurated, which it has not yet made good. However, to go in at that exchange rate would damage our shrinking manufacturing base, set it in concrete and make this country permanently uncompetitive.

Therefore, we must know the rate at which we would consider going in and whether we can achieve it. The Government have made it absolutely clear that they will not manage sterling down to a competitive rate. If sterling fell, the Bank of England would be eager to intervene to put up interest rates to stop any further fall. It is a kind of doomsday scenario.

Has the hon. Gentleman seen recent press releases from the Commission—they appear to be authentic—that say that we would have to join the exchange rate mechanism and suffer penal servitude for two years before being admitted to the euro? Is there not an even stronger case that there would be automatic devices for deflating Britain when the Commission thought it right? Under the exchange rate mechanism, 4 million are out of work in Germany. How many will be out of work in Britain?

I am grateful for the right hon. Gentleman's intervention; his comments are correct. I have always assumed that, under treaty requirements, we would go in at the exchange rate and have to sustain relativity for two years before entry.

The exchange rate is far too high. It has been maintained for a long period, and there is no sign that it will come down; there is an insistence on market rates. Unless the other countries are desperate to get us in, it is unlikely—impossible—that they would give us a special deal. The question is insoluble. Until the Government think their way through it, there is no point in even talking about entry, referendums or the benefits and disadvantages of the euro. We cannot go in at the given exchange rate.

A further fact is illustrated by Anatole Kaletsky's article in The Times business news today. We are, and have been for some time, doing better outside the euro than those countries that are in it, yet the euro is supposed to bring advantages.

The strongest economies in the European Union at present are Denmark, Sweden and Britain. Is it a coincidence that they are all outside the euro?

I am grateful for my hon. Friend's comments. I hope that his disloyalty does not bring retribution and that his true and irrefutable statement is not seen as criticism of Government policy. We should bear it in mind when we consider going in. My hon. Friend the Member for Nottingham, North (Mr. Allen) has introduced a Bill to make the euro legal tender in this country, but he has not explained who would pay the exchange rate costs.

There is much fuss and hoo-hah about referendums, going in at an early date and expressing our enthusiasm for Europe. It gives the Liberal Democrats something useful to do, which is a valuable service; it takes them off the streets and away from paving stones. The newspapers have something to write about—I particularly admire the efforts of Polly Toynbee. Every time the euro is mentioned, out comes a huge gush of euro enthusiasm, and the media conspiracy is furthered. All that keeps my hon. Friends and I happily arguing the other side, but it is a total distraction from the real job of governing, which is to shape and build the strength of the British economy and to serve the purpose of the people. Membership of the euro would be deeply damaging to that process.

In my usual way, I have some friendly advice for the Government. They are in a hole: they would love to hold a referendum but think that they cannot win it, so they have hesitated to announce a referendum. They now suggest that the issue is one of economics, whereas their advisers occasionally let slip that it is not primarily about economics but big politics.

A single currency is, fundamentally, about who runs the country's economy and sets the rules. It is about which politicians and officials make which decisions. I compare joining the single currency to taking out a bank account with the neighbours. I get on pretty well with my neighbours and our relations are cordial, especially over Christmas and new year, when we exchange gifts and drinks. However, I do not feel that our relationship would be strengthened by pooling sovereignty—as it is inadequately described—and having a joint bank account. I would always be worried about whether they or I were putting more in and whether the overdraft was available when I needed it or they had already used it.

I like the idea.

Uncharacteristically for a shadow Chief Secretary, my hon. Friend is implying that he would be spendthrift and draw out money rather early. If we had a joint bank account, I would be the mug who would be doing the saving and ensuring that we met the bank's requirements.

Would the right hon. Gentleman pool sovereignty with his neighbours on anything?

I would be very careful about pooling sovereignty. It is indivisible, and we either have or do not have it. It is better to keep it and conduct friendly negotiations and relations with people. I want to be friends with our partners in Europe. I want to trade and work jointly with them when it makes sense, but it is better to keep the main decisions in our own hands.

I should have said that I have declared my interests in the register.

The right hon. Gentleman is clear that he is not keen on giving away sovereignty on any issue. Would he advocate pulling out of the European Union, NATO or any international institution in which the UK has pooled sovereignty?

No, the hon. Gentleman misunderstands the point about negotiation, agreement and compromise-reaching with treaty proposals that make sense while keeping the right to make our own decisions, which is what NATO implies, and giving away our powers to make important decisions about our future, which is what the Liberal Democrats seem to think life is all about. I suppose that having been out of power for so long, they are casual about the powers that this country has to govern itself. Most of my electors are not casual about that. They elect people to the House and expect us to make decisions in their interest. They do not always get the overall team that they would like, but they know that they can have another go at a subsequent general election. They can hold the Government to account through the electoral process. What is the point of doing that if all the crucial decisions are taken elsewhere by unelected bureaucrats and officials?

Is not the crucial difference between the single currency and NATO that a country can withdraw from NATO, as the French have done in the past, whereas we could not withdraw from a single currency without the most catastrophic consequences? That fundamental difference totally escapes the Liberal Democrats.

That is right. Another powerful distinction is that NATO does not have a supreme court that judges the actions of Her Majesty's Government and this Parliament and tells us whether we are doing things correctly. NATO proceeds by agreement, and we do not have to send our forces to fight if we do not want to. NATO has been an amicable and successful treaty organisation since the second world war, and has done a lot to keep the peace in western Europe and the rest of the world. It has been a singular success story, which the EU has not yet proved to be, and is trying to take ever more power from us. The EU is probably best known for its common fisheries and agricultural policies. Many people in Britain feel that those policies have not worked in our interest and could have been improved.

I want to give the Government some advice. If they are serious that this is an economic issue to be judged by five economic tests, they can prove it with their actions. The Minister today, or the Chancellor shortly when he has prepared the ground, should tell us exactly how the tests will be assessed. Most of them could provide quantitative answers. Using the figures available, we could assess whether our growth rate is getting closer to or more distant from those of Germany and France, how our inflation rates are doing and how our financial services industry is faring outside the euro. We could assess how flexible our labour market is compared with those of Germany and France by examining, for example, unemployment figures and job placement rates.

Will the Government set out exactly how the tests will be judged, stop the pretence that the work is so secret and important that it can be done only by Treasury officials in private and give us a quarterly statement to bring us up to date on whether we are closer to or further away from meeting the five tests? I agree with my hon. Friend the Member for Leominster (Mr. Wiggin), who said in his excellent opening speech that we are moving further away from meeting the tests, and closer in many major respects to the United States economy than to the German or French economies. If the Treasury disagrees, will it set out how the tests are to be judged and publish quarterly figures so we can assess the position?

Is not the need for a continuing assessment underlined by the verdict of PricewaterhouseCoopers that on no fewer than five counts—growth, output, unemployment, short-term interest rates and the current account—convergence is expected to be further away in 2002 than in 2001?

That is very likely: it is my understanding of the position. The European Union is also capable of carrying out the analysis, and has published some good reports that show how the British economy diverges, whereas others in euroland are coming closer together. The Government should explain how the tests are to be assessed and provide regular bulletins on how well we are doing.

The Government should also explain how current economic policy is designed to bring us closer to qualifying under the five economic tests. We have received no statement of principle from the Government. They tell us that their policy is to join the single currency, and that it will be achieved by moving closer to the euroland economies and satisfying the five tests. Will they please make a statement to explain how they are tailoring policy to achieve that?

My worry is that the Government are not doing anything because they are split. Some Ministers want never to join the single currency but are quiet about it in public; some are sceptical about joining; some are desperate to join as soon as possible at any rate and whatever the consequences; and some others, who were brilliantly described by the hon. Member for Great Grimsby (Mr. Mitchell), will go along with whatever the Chancellor and the Prime Minister agree—if they ever do—and take a different view according to the twists, turns and spinning of the day. A wide spectrum of opinion exists within ministerial ranks, and an even wider one within the ranks of Labour Back Benchers.

The Government do not know what to do about the splits, so they pretend to settle the matter in private under the five economic tests in the hope that by some miracle the party will come together and present a political opportunity. My next piece of advice to the Government is that parties do not come together if divisions are allowed to carry on, but only when there is strong leadership, as we proved on the issue of the euro. We had far more difficulties as a party when, like the present Government, we did not take a clear view; we now have no problems because, under the previous and the present leader, we have adopted the clear position that we oppose joining the euro. Our party has come together, and the Government should offer some leadership to their own party and to the country on this crucial issue.

My next piece of advice mirrors what other participants in the debate have said. If we are going to buy something—even a pig in a poke—we should know its price, but we have not been told the price at which the Government want to buy the euro. It is the most crucial matter in the whole scheme. Why cannot the price be named when it is so critical?

When people from both ends of the political spectrum and the business community who urged the Conservative Government to enter the exchange rate mechanism discovered how bad it was, they often argued that it was because the rate was wrong. They did not say so when we entered the ERM: that was left to a minority inside the Government such as myself, but we were overridden by a huge consensus across the parties, in the media, among fashionable commentators and others who thought it was right to go in and did not worry about the price. If those people have learnt any lesson and now understand that the price was crucial, why are they not now saying that we must debate the price of entry into the euro as a first priority before we go any further with the scheme?

I fear that going in at the current rate would be damaging to large chunks of our manufacturing industry, which is already under pressure as a result of current interest rate and currency exchange rate levels and policy. If those conditions became permanent, it would be difficult to offer hope to such businesses. The Government should give us some information on what assessment they have made for a safe entry rate. Assuming that that safe entry rate is considerably lower than the current rate, they should then tell us how they plan to get there, and when they intend to enter the exchange rate mechanism.

It is quite clear that our European partners and the Commission believe that the treaty sets out very clearly that we have to join the exchange rate mechanism. If the Government are not of that view, will they tell Parliament when they intend to negotiate with our European partners and the Commission yet another special deal for Britain to allow us to enter without spending two years in the exchange rate mechanism? Would the Government at the same time negotiate the entry rate, because it would be of considerable interest to our partners? Although many people would like a lower exchange rate, many of our partners want to keep our rate very high, for obvious competitive reasons. When will the Government try to negotiate an entry rate?

I advise the Government, as a long-standing and consistent opponent of the exchange rate mechanism, inside and outside Government, that if they are serious about the euro, they should join the exchange rate mechanism, because it is clearly a very necessary preparation for a single currency. Although I believe that being in the exchange rate mechanism would be damaging, at least we could get out of it. If the Government have still not learnt the lesson, they should spend time in the exchange rate mechanism so that they discover that European currency schemes do not work for Britain. It may be better to do that than to go straight into the single currency and discover over a long period just how much damage it can do.

I do not believe that the Government are serious about holding a referendum. I do not believe that they will hold a referendum in this Parliament. I believe the referendum is entirely about politics. I think that Ministers across the Government are divided and hold a range of different views, which is exactly what happens when there is no consistent and clear leadership in favour of a particular policy.

We need to know the price of entry and when the Government are going into the exchange rate mechanism, and we need some sensible statements on how the economic tests will be judged. If the Government do none of those things, we will be right to conclude that they are not serious about this matter.

It might be helpful if I announce that wind-ups will commence at 10.30 am. I shall allocate 10 minutes to each speaker.

I am pleased to have the opportunity to speak in this debate, and I congratulate the hon. Member for Leominster (Mr. Wiggin) on raising this important subject. I would also echo many of the points made by my hon. Friend the Member for Great Grimsby (Mr. Mitchell), who speaks so much sense. I hope that my right hon. Friend the Chancellor takes his advice to heart.

I was encouraged by the tone of caution in the Prime Minister's recent comments, which I draw to the attention of hon. Members. Yesterday, in The Daily Telegraph, he said:

"Membership of the Euro is not inevitable".

That is a very good point. He also said that it would be judged on the economic criteria, which would not be fudged. He has even said that life outside the euro is possible. I would go further and suggest that life inside the euro will be uncertain and difficult. Indeed, I think it is a bus that we would do well to miss, because it is going in the wrong direction.

Another encouraging comment from this side of the political fence was from Commissioner Kinnock, who said that we do not need to make a decision for another five years. I do not mind when the decision is made, as long as we make the right decision.

The story of the eurozone so far is not a happy one. Despite all the europhoria, the euro has depreciated by 30 per cent. against the US dollar, which is hardly indicative of confidence. The eurozone has been performing poorly in economic terms, especially compared with the United Kingdom, which in spite of the relatively high value of our currency, has still been doing remarkably well. That suggests that there is more confidence in Britain than there is in the eurozone.

Let us look at Germany, which is the largest and most powerful economy in the eurozone, and the one that has to work if the eurozone is to succeed. Germany has had something like 1 per cent. growth this year—that is the present rate—and there is very high unemployment there. Chancellor Schroder is facing a difficult general election, which he may well lose as a result of Germany's failure to perform economically during his term of office. Chancellor Schroder initially said:

"Membership of the Euro will insulate against external economic shocks."

That is an interesting thought. More recently, he blamed Germany's poor economic performance on the US downturn. He cannot have it both ways: either the euro insulates the economy from what happens in the US, or it does not and the US can affect it.

Fixed exchange rates and single currency systems have inherent problems. There are difficulties in entering at the right exchange rate and it is difficult to maintain a single currency if different parts of the zone perform differently. If there is no scope for fiscal transfers and the other features that one would expect of an integrated economy, there will be differential economic growth throughout the eurozone, which will eventually lead to strain between member states.

When considering countries that have tried fixed exchange rate systems, or have tied their currency to another, Argentina springs to mind. This week it elected a president described as "left wing", which is comforting to me. He floated the peso, which devalued by 40 per cent. on the first day of trading. The alignment of the currency to the dollar was mistaken and had a terrible effect on the Argentinean economy. Argentina was one of the strongest economies not only in the Americas, but in the world. It is now on its knees.

Russia experienced serious problems when it fixed its currency at an over-valued rate against a hard currency. It began to recover only when the rouble was floated downwards. It was hardly an advert for capitalism that the Russian economy halved in the 10 years after the failure of communism. That was a disaster for the notion of a fixed exchange rate system.

More recently, Malaysia provided an example of good practice. During the problems in the far east several years ago, Malaysia was told by the International Monetary Fund and the World Bank not to devalue its currency. It ignored the IMF, imposed exchange controls, devalued its currency and bounced back in a year. It did what any sensible country would do: it managed its macro-economic criteria according to its economic needs. That did not damage the world economy because the collapse of Malaysia would not have helped the far east.

We have our own experiences of fixed exchange rate systems. One was the gold standard period of 1925 to 1931. It was Churchill's decision, but he was pushed by the economic establishment to appreciate the currency and adopt the gold standard. That led to the 1931 disaster, which had the unexpected effect of destroying the Labour Government. It was not a deep-laid plot, because the Conservatives had not anticipated that Labour Government. The devaluation after 1931 led to gradual recovery throughout the 1930s.

A more recent UK example is the exchange rate mechanism period: 1990 to 1992. Conservative Members may regret that because it was the major factor in destroying the Conservative Government's credibility, which led to Labour's victory in 1997. I was pleased about that, but it was not sensible economics. The significant depreciation after that gave an enormous kick to the economy, which has grown steadily since. The enormous growth that took place after that depreciation allowed us to sustain a high exchange rate. If the UK entered the eurozone at the present exchange rate, we could have a 1931 or 1992 on our hands, but this time there would be no escape route.

Exchange rates are significant. When I was growing up, Germany was cited as the economic miracle of the post-war era. At school, everyone complained of the low value of the deutschmark that gave the Germans an unfair advantage. Germany used that advantage for several decades to build up its economy. That was deliberate because the west wanted to ensure that West Germany succeeded economically so that the communists could not point the finger at a failing economy. The difference in performance compared with East Germany was obvious to everyone, and eventually led to reunification.

Reunification was interesting because again there was an exchange rate problem. One ostmark was exchanged for one deutschmark, which was a massive over-valuation of the East German currency that led to the East German economy being almost annihilated overnight. The problem was overcome by vast fiscal transfers from wealthy West Germany that had built up surpluses during the economic miracle. There was no problem because it was a single country that had the possibility of massive fiscal transfers. The eurozone is not in that position.

The hon. Gentleman has mentioned Germany several times. An implication of the single currency is that it will eventually lead to a single taxation system. Only a few weeks ago, Hans Eichel, the German Finance Minister, argued for a single taxation system throughout the eurozone. Does the hon. Gentleman believe that a single European taxation system would be in the interests of the United Kingdom if we were part of it?

I understand that our Government, and many others, argue that there will be no single taxation system. Only this week, my hon. Friend the Economic Secretary said that we would not harmonise duties, let alone income tax or other forms of taxation, and I support her argument. Even if taxes were harmonised, that would not necessarily provide scope for the vast fiscal transfers that would also be needed. Tax can be one way, but we must have a universal tax and benefits system. The McDougal report suggested that regional transfers might have to be multiplied by 14 or 15 before fiscal transfers were sufficient. The question is whether the rich zones will tolerate multiplying regional transfers by 15 and having a universal tax and benefits system so that rich Germans or French people pay taxes for poor Welsh people. That is not on the cards, but it might cause some political stress in some richer countries.

On 6 January 2002, The Observer published an article by Faisal Islam in which he described a worst-case scenario. He also outlined a best-case scenario, which is less credible and which I have not had enough time to read. He wrote:

"The German economy fails to improve, but Euro-area interest rates cannot be pushed too far down, because of relative buoyancy in the rest of the Eurozone. Pressure mounts on the German government to boost its economy through tax cuts and spending increases funded by increased borrowing. The European Commission and the ECB join together to lobby for a strict application of the provisions of the Stability and Growth Pact. German public opinion turns against the idea of Europe."

He went on to suggest that as a result, we might lose a referendum, which would seriously damage the credibility of the euro, and eventually the people of Europe would turn against the idea. I believe that we are in the early stage of that scenario, and I applaud the recent caution of the Prime Minister and the Chancellor towards our possible entry into the eurozone.

I hope to bring some balance to the debate. I appear to be in a time warp to the 1970s, when the Labour party constantly tore itself apart over whether we should be involved in Europe. The situation is the same today, although there appears to be unity among hon. Members on both sides of the Chamber. It is important that we look at where we are and understand that several problems must be addressed. That is why the economic tests must be examined, as they have been this morning, and why a referendum is essential. If we have a referendum, we can have that debate in public. Informed debate is essential. We seem to be forgetting that, on 1 January 2002, 12 countries accepted the euro. They had decided to move into a common currency that they believed was beneficial, and that I also believe would be beneficial, provided that the economic tests are met.

There was not unanimity across Europe, and people were concerned. A young Spanish man is living in my home at the moment, and he was saying before Christmas that his mother and father, who have businesses in a small village in north Spain, were concerned about the transition to the euro. He believed that they would continue to use their national currency. He went home for three weeks and came back with the message that there was no problem because of the preparation that had been done. That is one of my concerns. If we wait and only talk about whether to enter the euro, rather than making the proper preparation, we will be left behind the rest of Europe, and we cannot afford that.

In my brief contribution, I want to emphasis the benefits that exist in Europe. Some of the comments from the official Opposition were a bit rich. They have claimed that every Budget over the past four years was the wrong way to go and would lead to recession and job losses. I have heard that story continually from them, and the opposite is true. We have low interest rates and unemployment levels, and we have growth. We should note also that The Financial Times yesterday had the results of a MORI poll, which had surveyed the 500 leading businesses in the UK, showing a one-third increase in support for joining the euro, up to 59 per cent. of those top businesses.

We must have a balanced debate. I do not think that we have had that this morning, and I urge the Government to examine seriously the preparation for the euro, based on the need to move forward. When the arguments are put, we can win a referendum.

I congratulate the hon. Member for Leominster (Mr. Wiggin) on securing the debate. Given that this is the first chance that the House has had to debate the subject since the recess and the momentous events of 1 January, it is particularly welcome.

I thank particularly the hon. Member for Hamilton, South (Mr. Tynan) for beginning to restore some balance. As I sat here listening to today's speeches, it was as if 1 January had not happened. The hon. Member for Great Grimsby (Mr. Mitchell) referred to it, but he dismissed the convergence and changeover as a trivial matter that was just about filling some ATMs throughout the high streets of continental Europe. It was a significant change, showing what can be achieved practically and the change of the climate and psychology around, and the attitude to, the single currency. It is a real and not a virtual currency now and is becoming accepted in wallets and tills throughout continental Europe.

We should celebrate that success in this Parliament and send a message of congratulations to our continental partners. I hear laughter from the Conservative Benches. I thought that the Conservatives were now wishing the project well, and I was pleased to see their leader doing just that, and welcoming the success of the changeover. I hope that Conservative Members will continue that message, because it is in our interest that the process succeeds. I know that some Eurosceptics believe that it is in their interest for it to fail, but 1 January sent a clear message that it will work, because it has a political backing. The right hon. Member for Wokingham (Mr. Redwood) was right: this is a political as well as economic project. It has political support in continental Europe, and we should celebrate its success.

This debate focuses on Government policy on the single currency, and there are some interesting issues. As I understand it, the Government have said that they are in favour in principle, and that there are five tests with which they will make an assessment within two years of the last general election. There will then be a referendum and in the meantime, they are making preparations. That is Government policy in a nutshell. It is good that they are in favour in principle—it is nice to see that they have one principle. I just hope to see efforts made towards enacting that principle, which would be a start of sorts.

However, as we all know, the five tests—convergence, flexibility, investment and the effects on the City and on jobs—are a fig leaf to keep the Government and the Labour party together on these rocky political waters until they decide that it is politically right to join.

I believe that the Liberal party, unlike the Government, did some interesting work on entry rates and concluded that we should enter at a considerably lower rate against the euro than the current 62p. What rate has the hon. Gentleman in mind and how would we get there? How would we need to change economic policy to reach an entry rate that the Liberal party would think acceptable?

I am grateful for that intervention; I shall deal in some detail during my remarks with the right hon. Gentleman's points. He is right in referring to the report entitled "Britain's Adoption of the Euro" from the expert commission established by my right hon. Friend the leader of the Liberal Democrats. It had various eminent economists, former members of the MPC and people such as Martin Weale from the National Institute of Economic and Social Research, Richard Portes and John Williamson. He is a leading macro-economic expert on exchange rates and the inventor of one of the three main economic theories on exchange rates—fundamental equilibrium exchange rates.

The commission produced a long and detailed report, which dealt with the issue under discussion. It suggested the rate of 1.45 euros to the pound, which is significantly lower than the current rate of 1.62. It also said, however, that if relative productivity trends changed in the meantime, there might be a case for a slightly higher rate. My colleagues and I agree with the substance of the report. I believe that such a rate would be competitive and would enable us to enter the single currency successfully. Clearly, however, the rate has to be negotiated, and I shall come to that point in due course.

Let me focus on the Government's tests, because they are a bit of a smokescreen. Publications from Her Majesty's Treasury will no doubt try to make out that the tests are terribly important, but the reality is that most of them have been met, more or less, and it is difficult to get clear measurements for them anyway. That is why the Government have to set up a process to work out how to make the assessment. If the tests were obvious and easy to quantify, there would not have to be such a long process to work out how to do the assessment. However, as the right hon. Gentleman and other hon. Members have said, the problem with the five tests is that they miss out the key test—the test of the exchange rate.

A debate about what would be a sustainable exchange rate is needed, and the Government have a duty to lead it. The hon. Member for Great Grimsby has been an ardent fan of promoting such a discussion over many years. I have been involved with economic debates in and outside the House in which he has mentioned the exchange rate and the need to devalue. He has argued for devaluation from three or four different exchange rates over that time. It should always go down in the hon. Gentleman's view, but that argument could be valid in particular circumstances. The key is how we go about generating a consensus in the wider economic establishment and the markets about what would be a sustainable long-term exchange rate for the country. We have seen no leadership on that from the Government, which is a huge omission.

I argued for a competitive exchange rate—that was the essence of my argument—not a process of continuous devaluation. The real question is not the Government's position but how the Liberal Democrats propose that we reach their exchange rate of 1.45. Should we intervene in markets or should there be a process of benign neglect? If the country signifies that it wants to enter, will the rate suddenly fall to the requisite level, because the force is with the Liberals?

The hon. Gentleman makes a good point, and I have two points in answer. First, if the markets believe that a consensus is emerging in this country and with our European partners about a certain rate, there will be a certain glide path in the markets as they underpin a particular rate with credibility that Britain will join. We saw that with the lira when the Italian Government decided to join in 1996. It was interesting that for a few days after the Labour Government were re-elected, the markets assumed that there would be a greater commitment to joining the single currency and the pound depreciated quite substantially. The Treasury and the Bank of England had to talk up the pound, saying that there was no intention to join within the next few years, that the five tests would be difficult and that the British people must be persuaded. There was a concerted effort to shift the markets back.

That makes my point for me: if the markets think that Britain is going to join they realise that we cannot join at the current rate. As the hon. Member for Great Grimsby argued, it is overvalued. The markets will help us do the job if they believe that there is a credible commitment to joining. The hon. Gentleman is also right to say that policy changes are needed. One of this Government's problems is that by not enunciating that key test—the test of the exchange rate—they are not giving any direction to policy to try to bring about convergence to a long-term sustainable exchange rate. That is a huge omission.

The hon. Gentleman raises some interesting points. He now proposes a devaluation of about 11 per cent. from today's level. Given that about a third of the things we buy in the shops are imported or are influenced by import prices, he is looking at an inflation of 4 per cent. as a direct result of the devaluation. Under the present rules, the Bank of England would have to hike interest rates to stop that happening. Would he want to override the Bank of England rules to allow the inflation?

As the right hon. Gentleman would no doubt agree, it is possible to depreciate exchange rates without inflationary consequences, as happened when we left the exchange rate mechanism. It does not follow that depreciation immediately results in higher prices because that is, using the economist's term, ceteris paribus. I thought that the right hon. Gentleman said in his opening remarks that the pound was overvalued. It should therefore follow—

Order. I call the hon. Member for Buckingham (Mr. Bercow).

I congratulate my hon. Friend the Member for Leominster (Mr. Wiggin) on securing the debate and on his clinical dissection of the Government's policy. I thank everyone who took part, but I pay particular tribute to the hon. Member for Great Grimsby (Mr. Mitchell), who made a characteristically coruscating speech, to my right hon. Friend the Member for Wokingham (Mr. Redwood) and to the hon. Member for Luton, North (Mr. Hopkins), whose prospects for advancement have not been greatly assisted today, but whose reputation for sound sense and personal integrity now stands at an all-time high.

Ministers in all parts of the Government are arguing like ferrets in a sack not about whether to abolish our national currency—they are agreed about that—but about when to do so and why. The debate got under way early in the new year. On 2 January the Minister for Europe told The Guardian—who else?—that he doubted

"that it is possible to run a sort of parallel currency economy".

The next day his right hon. Friend the Foreign Secretary disowned him, saying:

"I just ask people to calm down."

The former Foreign Secretary, who has been feeling somewhat sore of late, obviously could not resist joining the fray. The Leader of the House, the right hon. Member for Livingston (Mr. Cook), declared on 6 January on "Breakfast with Frost":

"If we want to continue with that very strong powerful leading role within the European Union it is going to be more challenging to do that if we are outside the inner club".

He was promptly slapped down by the Prime Minister in an interview in La Repubblica, which was reproduced in The Sun on 8 January. He said:

"I am convinced that Great Britain can be an essential partner, if we wish, a leading partner in Europe on fundamental issues such as defence, economic reforms, protecting the environment and other matters."

He said that entry into the euro is "another issue altogether". The internecine conflict raging at the heart of the Government is unedifying to observers and undignified for participants but, above all, it is a betrayal of the people on an issue of vital national importance.

I want to be fair to the Government. Let us start with the Chancellor's declaration of the Government's position on the European single currency:

"To sum up, we believe that, in principle, British membership of a successful single currency would be beneficial to Britain and Europe; the key factor is whether the economic benefits of joining for business and industry are clear and unambiguous."[Official Report, 27 October 1997; Vol. 299, c. 588.]

The problem with the position that he articulated four years and three months ago is that it has been shot to pieces by the head of macro-economics at the Treasury, who is the director of the assessment team charged with determining whether the five criteria have been met. Gus O'Donnell famously—perhaps infamously, depending on one's point of view—said:

"Economics can never be clear and unambiguous."

In such circumstances, the best and most honourable course for the Prime Minister, who has stuck to the absurd "clear and unambiguous" line for the past four years, would be to give up the unequal struggle. He would earn brownie points by acknowledging that the policy of the past four and a half years is rudderless and that it has been comprehensively discredited; it was based on a false premise. He could drop any further plans to take Britain into the euro. He could apologise for wasting people's time and withdraw from the fray.

An expression springs to mind about pigs flying. Hell would freeze over before the Prime Minister treated us to such a refreshing outburst of candour. However, we must ask why a clear and unambiguous case on economic grounds cannot be made for British membership of the euro. The explanation relates to the essence of the euro. The euro is not only about the seamless, or otherwise, introduction of notes and coins but about who sets the interest rate for members of the eurozone. The Governor of the Bank of England, Sir Eddie George, who is a respected authority, said on the BBC World Service "World Business Report" on 4 January:

"The risk is that single interest rates, which has to go with the single currency, is not going to be appropriate for all the member countries at the same time."

Two weeks earlier, on 22 December 2001, he said in The Daily Telegraph that the one-size-fits-all policy represented

"a disadvantage and a special risk".

We do not have to gaze into a crystal ball when we can read the book.

Is it not the case that present interest rates in the eurozone are too low for Ireland and too high for Germany?

The hon. Gentleman is almost always correct, and this occasion is not an exception. He anticipated my comments. The European Commission undertook a report in 2001 on the European economy. Chapter 2 devotes a substantial section to the difficulties. Specifically, it reports on page 69 that no fewer than seven member states have suffered excessive demand pressures. It refers to the particular circumstances of Germany and France and their need for lower interest rates.

We have already heard of the danger that the European Commission will insist on British membership of the exchange rate mechanism as a prerequisite for entry to the single currency. We should listen to and heed the European Commission's report, which states:

"Monetary conditions in a single member state can be inappropriate considering the cyclical conditions, as the single euro-area interest rate may not be in line with the individual needs."

It then goes on, rather prosaically, but helpfully, to point out that

"for individual member states, the creation of a single currency area implies the loss of monetary adjustment mechanisms in response to economic shocks."

In straightforward terms, what does that mean? It means that if the economy was in a mess, we could not cut interest rates to reflect the domestic circumstances. We know the desperate damage that can be done because we know about the repossessions, bankruptcies and loss of jobs that occurred in our own economy when we were in the temporary but horrendous straitjacket of the exchange rate mechanism. To go from that to permanent incarceration in what my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) legendarily described as a burning building with no exits does not seem to be indicative of much common sense in the Government.

How can we have the same interest rate policy as Germany with its 4 million people unemployed and Holland with its inflation touching 5 per cent? It is so transparently absurd that only an extraordinarily clever and sophisticated person could fail to see this obvious point. It leads one to the conclusion that the euro is not really about economics but about politics.

I said that the best course was for the Prime Minister to withdraw and not go forward with the project. The other option would be simply to say, "Yes, I am hell-bent on dragging Britain into the euro with a cost I cannot calculate, for a benefit that I cannot enumerate, and at a risk to the self-government of the country that I dare not admit. But I want to get on with my partners, I fancy being President of the European Commission, and I am going to try and cajole, bully, brow-beat and harangue the British people into accepting the project."

It is time that we ceased to have a Government policy mired in contradiction, deception, humbug and superficial thinking. We are owed an explanation of what the Government are really about. The place for that explanation is here, the time for it is now. I look forward, with eager anticipation and bated breath for the response of the Minister.

I am delighted to be here again with you, Mr. O'Hara, in the Chair for this very important Adjournment debate. I congratulate the hon. Member for Leominster (Mr. Wiggin) on securing the debate. It is interesting to note that the new intake of Conservative Members of Parliament are just as preoccupied with Europe as the older hands. I thought that the public had already made a judgment on the Conservatives' attitudes to Europe not just once, but twice, but it is very useful to have this debate.

I should put on the record, in a nutshell, the Government's policy towards the single currency. The Government's policy on the membership of the single currency remains as set out by the Chancellor of the Exchequer in October 1997, and as restated by the Prime Minister in February 1999:

"In principle, the Government are in favour of UK membership of EMU. In practice, the economic conditions must be right. The determining factor underpinning any Government decision on membership of the single currency is the national economic interest, and whether the economic case for joining is clear and unambiguous. If it is, there is no constitutional bar to joining."

As the Chancellor said in his October 1997 statement:

"the five economic tests will define whether a clear and unambiguous case can be made."

The Government are, of course, committed to carrying out a comprehensive and rigorous assessment of those economic tests. We will not, under any circumstances, take any risks with our hard-won economic stability. I note with interest that the hon. Member for Leominster first argued that the economic tests were flawed and then used them as more or less the entire content of his speech. I take that to mean that he agrees with Government policy on the five tests that they are the appropriate tools to carry out an assessment. I am not terribly surprised. The IMF, an independent commentator, stated in its 2001 report on the UK economy that the five tests were

"consistent with the economic considerations which would be important for the decision to join a monetary union."

My inquiry is simple: how can the Government expect to achieve what the director of the assessment team says can never be achieved?

The IMF made it clear that the five tests were the appropriate way of making the assessment. I am about to explore those tests in greater detail and to explain, in response to the right hon. Member for Wokingham (Mr. Redwood), how we intend to carry them out.

The first of the five tests is sustainable conversion between Britain and the economies of the single currency. The second is whether there is sufficient flexibility to cope with economic change. The third is the effect on investment, the fourth the impact on our financial services industry, and the fifth the effect on employment. The Chancellor has said that the Treasury will complete an assessment of the five tests within two years of the start of this Parliament. The assessment has not yet started, but the necessary preliminary analysis—technical work necessary to allow us to undertake the assessment as promised—is under way.

The right hon. Member for Wokingham asked how the tests would be carried out. As he knows, the preliminary work that will underlie and inform the assessment is already under way. The scope of the preliminary technical work was set out in the 1997 assessment. Although new developments have occurred since then, the underlying issues to be analysed remain the same, and the five tests remain unchanged.

Can the Minister tell us when she expects the initial work on assessment to be completed?

That would be premature. Important issues have to be gone through to ensure that we have the right framework to underpin any assessment. As I said, the analysis will be comprehensive and rigorous.

The Minister has maintained this morning that the Chancellor's policy—that the outcome depends on analysis of the five tests—is paramount. Will she explain the recent comment of the chairman of the Labour party that, as economists rarely agree, the economics do not really matter, so it is ultimately a political decision? Who is correct and what is Labour policy?

The hon. Gentleman will be interested to know that the Chancellor and the Prime Minister are completely at one about Labour policy on the single currency—we are in favour, in principle, of joining monetary union, but we must, in practice, meet the five economic tests. I am about to explain how we intend to carry out those tests and how our preliminary work will inform our assessment.

Will the Minister give way?

The hon. Gentleman should allow me to expand my point.

The preliminary and technical work will update our analysis of the cyclical behaviour of the UK economy relative to the euro area. It will assess relative responses to economic shocks, the mechanisms by which product, labour and capital markets adjust and how well and quickly they work. Other relevant considerations are the impact of the single currency on the costs and availability of capital, macro-economic stability, the stability of the real effect of exchange rate and the location, quality and quantity of investment. The effect of the single currency on financial services, including the changes in the sector that have occurred in the UK and the euro area since 1997, and its impact on trade, competition and productivity are also relevant.

That list is by no means exhaustive, as preliminary work continues to evolve to take account of the latest technical research and analysis. More detail is provided in the Treasury note issued in November last year, which deals with the content and timing of the preliminary and technical work. Hon. Members will find a copy in the Library.

I can tell the right hon. Member for Wokingham that the Government have no intention of providing a running commentary on either the preliminary work or the five tests. The assessment will be carried out within the first two years of this Parliament, which is what the Government are committed to. It does not make sense to try to update that information daily, weekly or monthly.

I am sorry to contradict the Minister, but it is evident that members of the Government are giving a running commentary on the process. Barely a day goes by without members of the Government contradicting each other in public. Perhaps she should have a word with her colleagues. We are greatly amused by their running commentary.

The hon. Gentleman is wrong. No one in the Government has given a running commentary on the five tests. I shall respond to the points made about them, especially about the level of the exchange rate, if hon. Members will allow me to do so.

The Government said that the exchange rate at which sterling would enter the single currency must be consistent with economic fundamentals in the United Kingdom and compatible with sustainable convergence between the UK and other euro area economies. It is not a sixth test; that is the Government's policy, which we have set out. The Government believe, as several European Councils have recognised, that what matters for a stable economic exchange rate, are sound economic fundamentals. The Luxembourg Council stated in December 1997 that

"in general, exchange rates should be seen as the outcome of all other economic polices."

That is why I fundamentally disagree with the Liberal Democrat spokesman, the hon. Member for Kingston and Surbiton (Mr. Davey). The Government should not try artificially to massage down the level of the exchange rate, which is properly the outcome of sound economic fundamentals. That is why we put in place measures such as the new fiscal rules, the monetary framework and the independence of the Bank of England.

rose—

It may pre-empt the question that the right hon. Member for Wokingham is about to ask when I say that the Government have no intention of rejoining the exchange rate mechanism—

indicated assent.

I am glad that the right hon. Gentleman assents.

Would the Minister be happy for us to go in at 62p? Is she saying that the economic tests would take place against the background of that fairly stable exchange rate in recent months of 62p to the euro? Is that the preferred entry rate?

I am certainly not going to give a running commentary on the level of the exchange rate, or on any of our economic assessments. As I said, the best and soundest way to determine a strong exchange rate consistent with economic fundamentals is as the outcome of other sound economic policies. I give way for the last time to the hon. Gentleman.

In the light of what the Minister said about there not being a running commentary on the policy on the euro, my sound advice to her is that she should watch her back and reflect on who is now sitting behind her.

I shall not take any notice of the hon. Gentleman on that matter. Our policy is clear.

My hon. Friends the Members for Great Grimsby (Mr. Mitchell) and for Luton, North (Mr. Hopkins) raised the issues of pension liabilities and the stability pact. I greatly enjoyed my hon. Friends' speeches, which I found most entertaining. British taxpayers will not make payments to the Community and to other member states to pay for other countries' pension liabilities, whether or not we join the euro. Rules on excessive deficits and on the stability and growth pact mean that participating member states will not be able to finance their pension liabilities through economic borrowing; they will have to cut spending or raise contributions. There is no bail-out option for countries that do not take the appropriate action to reform their economies and to ensure that they have a sustainable fiscal position. I do not want to start a discussion about the situation of other countries, but we will play our part in the debate in Europe on the sensible interpretation of the stability and growth pact.

As time is short, I shall again set out our position: in principle, we are clearly in favour of joining the euro, but in practice the five economic tests must be met before the Government take a decision. The Cabinet will make a recommendation to Government, who will put the decision to the people. The final decision will be determined in a referendum of the British people.

I am grateful for the opportunity to debate the political situation in the middle east. Difficult though it may be at the best of times, I shall take a balanced and bipartisan approach to the debate. I hope that many colleagues from the Labour Friends of Israel and the Labour Middle East Council will participate in the debate. I am a member of both organisations, and I look forward to hearing contributions by Members of equivalent organisations in the Opposition parties. In taking a bipartisan approach, I run the risk of pleasing no one and offending all. I hope that hon. Members will take the opportunity to correct any imbalance that may inadvertently colour my introduction, as well as stating more boldly the case from either side of the Palestine-Israel divide.

One advantage in taking a middle way in discussing the Arab-Israeli conflict is that it is easier to resist the temptation to suggest that we can resolve the conflict by putting pressure on either side. I see no prospect of a return to the peace process unless the consent of both sides is freely given. One purpose of this debate is to explore what possibilities exist for moving Israel and Palestine away from conflict and back on to the path of peace. That will not be achieved by applying external pressure or by pulling levers of influence. The internal dynamic of the relationship must change.

We must recognise however, that the middle east peace process is in crisis. That is not just a matter for the Israelis and the Palestinians but a threat to international security. We must constantly dedicate ourselves to doing what we can to get the middle east peace process back on track. The situation in the middle east is explosive. One need only think of what might happen if there were another terrorist outrage along the lines of 11 September, and the risk of regional spill-over is very real.

We must recognise that relations between the Israeli Government and the Palestinian Authority have deteriorated markedly. Without dialogue, no negotiation is possible. Not just the prospect of a lasting settlement in the middle east is at stake, but the possibility of any kind of peace process at all.

I have called the debate, because I refuse to accept, and I do not believe our Government should accept, a counsel of despair. Despite the temptation to back away from the issue in the face of escalating violence and extremism, I believe that it is imperative for Britain, Europe and the international community to engage constructively with the middle east. I do not wish to focus on how we got to the present impasse or spend time looking at who is to blame. We must try to dissect the true nature and depth of the present crisis and examine the role that Britain, the EU and the international community can play in moving forward the agenda about the future of the middle east.

The elements of the present crisis in the middle east are clear. There is a humanitarian crisis on an unprecedented scale, even for a region where bloodshed has been the constant companion of century-long conflict. Since the start of the second intifada, in September 2000, more than 1,000 people have been killed, many of them women and children, and 80 per cent. of them Palestinian. The number of Israelis killed in the conflict has increased three times since Ariel Sharon became Prime Minister of Israel. The death rate is higher than at any time in the contemporary period of the conflict.

As the number of deaths increases, so does the record of physical, economic and social damage on both sides. The number of Palestinians who live in absolute poverty on less than $2 a day has more than doubled and, according to the latest World Bank figures, is more than 50 per cent. of the population. Some 100,000 Palestinian jobs have been lost in Israel, and 60,000 jobs have been lost in the West Bank and Gaza strip because of the closures policy. One in five Israelis now live below the poverty line, a figure that has increased by 10 per cent. from last year. Unemployment in Israel has risen to nearly 10 per cent. as the Israeli economy slows down in the face of global recession and as a direct result of the political and security crisis.

The political and security crisis is the most important element of the current crisis. The Israeli deputy head of military intelligence, Brigadier-General Yossi Kuperwasser, visited the House of Commons yesterday with Rear-Admiral Meshita, head of naval intelligence. I asked him whether he had abandoned all hope of peace. He said that he had not, but that no peace could be made with Yasser Arafat. However, Arafat more than anyone symbolises, and even personifies, to the international community Palestinian hopes and dreams for a Palestinian state. He told me that Arafat ordered the Karine A boat directly from Iran in collaboration with Hezbollah. That serious allegation threatens to escalate further the violence and the security crisis in the middle east.

Sadly, I could not attend the meeting, but I received the report, of Shimon Peres's visit to the House of Commons last July. He asked us what Israelis could do in the face of such terrorist atrocities and to stop the suicide bombers. Even before the atrocities of 11 September in America, none of us had a reply. One more Palestinian, Raed Mahmoud Karmi, was killed in a car bomb explosion yesterday. He was accused of having killed six Israelis. Another Israeli was killed yesterday, and so the cycle repeats itself. However, the outcome of the Israeli reprisals is to push Hamas increasingly into the mainstream to the point at which they seem to enjoy support of almost 40 per cent. If the strategy continues, Hamas may become the leading element in the Palestinian territories. The Palestinians fear that that is the Israeli Government's political objective. They believe that Israel knows that the international community will line up against Hamas but will not do so against Arafat. If that is the Israeli agenda, the prospect of a further deterioration in the security situation is great.

The nub of the political crisis is the crisis of leadership and the corresponding crisis of confidence on both sides in each other's leaderships. In the face of this crisis, the European Union External Relations Commissioner, Chris Patten, said in a statement to the European Parliament on 12 December 2001:

"We need to focus our efforts on how to prevent the death of the peace process itself".

A pessimistic Palestinian view is that there seems to be no Israeli Government agenda for negotiation and peace. Instead, the agenda seems to be to undermine Arafat and the Palestinian Authority as a precursor to undermining the idea of a Palestinian state. However, it is Arafat himself who embodies the aspiration for a Palestinian state. The existence of a Palestinian authority keeps alive the prospect of achieving that state through negotiation. To lose sight altogether of the dream of a future Palestinian state or to destroy the organisation—the Palestinian Authority—that could negotiate a lasting peace with the Israelis would plunge the Palestinian territories into a permanent state of anarchy, the middle east into a permanent state of war and would massively compromise Israeli security for years to come. If that is where the process is leading, it is leading towards the edge of an abyss.

From the Israeli side, a pessimistic view would say that Arafat has no game plan. Moderate Israelis feel let down; they hold Arafat responsible for encouraging support for extremist groups not just in the Palestinian territories, but in Israel as well. Moderate Israelis have lost faith in Arafat as a leader and potential partner in peace. They insist that he must go and that the international community should apply pressure on him to do so. They accept that Arafat may be under effective house arrest in Ramallah for years. If that pessimistic view prevails, it will be damaging from the point of view of trust. There will be more bombs, and the only people to gain will be the extremists.

I have tried to present the bleakest scenarios from both the Israeli and Palestinian sides. I want now to turn to the question of whether it is possible to take a more optimistic view. That is not to take an unrealistic view, but to tell the story with a more optimistic sense of the potentialities that may yet be developed. Can we dare to believe that there is a way of going from a lose-lose situation back to a win-win situation? To put it another way: is there a way back to the peace process?

We can take some heart from the recent example of Pakistan. General Musharraf has impressed the Indians and increased his own credibility not just with what he has said as leader, but with what he has done and how he has behaved. Can we learn from that recent experience in trying to de-escalate a conflict and reduce violence, and apply that lesson to the middle east? A second reason to be optimistic is based on the idea that there is widespread consensus, even in Israel, about what the end point of the peace process should look like. Israel must have complete security guaranteed within its borders, and Palestinians must be able to live in peace and dignity within their own state, which will incorporate most of the West Bank and have shared sovereignty over Jerusalem. Most people agree that security for Israel and justice for all the historic peoples of the middle east are the essential building blocks for stability and peace.

One reason why many people, even on the Israeli left, do not trust Arafat is because they believe that he has talked too often about deals and temporary measures rather than fundamental reform. The Israelis do not believe that Arafat can deliver reform, and now is the time for him to show that he can. That will be difficult to do as he is under effective house arrest in Ramallah and does not have the authority and resources needed to carry out effective action. The little authority and resources that he has are under continuous attack. The Israelis and Sharon must understand that the policy of prevention is not working. Since Sharon has been Prime Minister, three times as many Israelis have been killed in terrorist attacks. Sharon talks again and again about making pacts with leading Palestinian families and producing a village league system, but that will never come about because of the strong and indestructible sense of Palestinian national identity.

Sharon must show flexibility. He must release Arafat from house arrest. Arafat must show that he can restrain the suicide bombers and bring about a cessation of violence and a complete disbanding of all terrorist organisations. He will need to go further. We should examine textbooks and the approach to the curriculum in Palestinian schools, and look to revise history books to accept the existence of the state of Israel. We must monitor Palestinian television and media to ensure that suicide bombers are no longer glorified.

It is not easy to put pressure on either Arafat or Sharon and, in current circumstances, we are right to be cautious of doing so because it might have perverse effects. However, we must encourage Arafat and Sharon to realise that the way forward lies in their hands. Pakistan and India further illustrate the point. It is in the interest of both sides to de-escalate the conflict. Only then can we start to find a way back to the Mitchell process and the road to peace.

One of the most positive aspects of the Mitchell plan was that it linked Israeli security with the idea that Arafat needs a political lever to get out of this mess. The lever in Mitchell was to be the lifting of closures and a freeze on settlement building—in other words, an end to taking any more land. The political levers to de-escalate the conflict are not yet in hand, but we must look for them or try to create them.

In the final part of my speech, I wish to comment on the role that Britain, the EU and the international community can and should play in creating the levers to help resolve the present crisis. Difficult though it is to act, the fundamental case for the international community taking action is clear. As I said, we should be cautious about the pressure that we seek to apply, but we should also resist the temptation to stand back completely.

Since the November suicide bombings, the international community has tended to pull back from engagement. We must resist, for that way lies a counsel of despair. It is not easy to know what we should do in such a crisis, but it is far better to act. The key issue is how, not whether, we should get involved. The crisis in the middle east is a threat to international security, not just an issue between Palestinians and Israelis. Other states—such as Jordan, which has 40 per cent. of the refugee population, and Lebanon—may get sucked into the conflict. If there were another terrorist atrocity in the west, the situation could get much worse.

We should recognise that Britain has not just a humanitarian duty, but a strategic interest. If things go wrong, it may damage, perhaps irreparably, the international coalition against terrorism. We also have historic ties through the former exercise of the British mandate and through our role in the treaties that reshaped the middle east at the end of the first world war.

The Prime Minister has been active in the middle east in the autumn through his shuttle diplomacy. Since the latest waves of suicide bombings in November and early December, it has become more difficult to play that role, but it is important not to give the impression that our middle east policy is being blown off course by contradictory winds that seem to blow from Europe, America or indeed the middle east itself. We must show consistency and coherence. How can we expect Palestinians and Israelis to do so if we are not prepared to do the same?

The Israeli Government would like to see Britain play a bigger role in putting pressure on Arafat. As Foreign Minister Peres has said, speaking on Israeli radio on 6 January:

"We would like a united front, worldwide, that stands against terror. If instead of choosing terror (as the target), we shall choose Arafat, we shall never have a united front."

A common Israeli complaint about the EU is that Europeans fail to understand Israel's need for a cast-iron security response and a security guarantee before it can act. It is not difficult to see why the Americans are left to play the leading role at the present time, and we should support General Zinni in his mission. However, the engagement of Britain and the European Union is essential to producing a balanced response from the international community and the influence of Britain and Europe could be the key to making the optimistic view that I have outlined prevail.

Part of the difficulty is that the EU is simply not seen as having the clout to influence the peace process or a return to it. It can be the financial backer of the Palestinian Authority, but only the US is seen as able to push things through politically. Despite the EU's economic might, it has not generally been thought to have enough political muscle to pull any levers in the region. Nevertheless, the EU has been trying, through the work of External Affairs Commissioner Chris Patten and the EU's High Representative Solana, to play a constructive role in retrieving the achievements of the Oslo process and bringing the parties back to the road to peace as outlined in the Mitchell report. It has sought all the time to take a balanced approach.

The Council of Ministers has called on the Palestinian Authority to dismantle Hamas and Jihad and to bring those who commit terrorist acts to justice. It has also called on Israel to withdraw its military forces, end the extra judicial killings, lift the closures and restrictions on Palestinian people and end the bombing of property and infrastructure. However, its calls, especially to the pro-Palestinian side of the declaration, fall on deaf Israeli ears. There is nevertheless a lot the EU can do and has done in economic terms. In recent months, more than 108 million euros has been given to the Palestinian Authority, in addition to more than 3 billion euros that was invested in the West Bank and Gaza Strip since 1994. The EU has also recognised the importance of backing the Palestinian Authority as the only structure capable of providing basic services and a minimum of security guarantees, and the only alternative to anarchy and increasing support for Hamas and Jihad.

The EU has done more than anyone else to promote elections, the fight against corruption and the rule of law in the Palestinian territories. It is right, especially at this time of acute crisis, that it should continue to seek to promote moderation and pluralism, trying not to let the Palestinian Authority collapse and to fall into the hands of terrorists and extremists. The EU is a strong and benign influence in the area, but it lacks political clout. EU political influence would be greatly strengthened if Britain took more of a lead in shaping EU policy and initiatives in relation to the middle east. It would help to make the EU a player in middle east affairs and not just the organisation that helps to pay.

I want to leave plenty of time for other speakers to take part in the debate. There may be many points that hon. Members wish to make, both about the EU and Britain's role. I hope that they will also wish to make points about the role of international organisations and the international community. We have seen in the past that international observers and the fact-finding missions that were undertaken by the European Union under the Sharm el-Sheikh fact-finding initiative can play a particularly useful role. They can give a clearer, more objective analysis of what is going on in the middle east. Indeed, while they may not put direct pressure on the parties to the negotiation, they can shape the parameters of that negotiation.

The international agreements that have been made are just that: they are not simply agreements between the Palestinians and the Israelis. Not only do we have a stake in the outcome, but we are deeply involved in the process. The international community cannot walk away from that process. There may be calls for greater respect for international conventions by the Israelis as well as the Palestinians. Indeed, there may be calls for international observers to try to de-escalate the violence and to find the road to peace.

I have concentrated on the enhanced role which I believe the EU can play under British leadership, especially given the key role that Britain can play by linking European and American initiatives. I hope that colleagues will comment on the wider international dimension.

Perhaps I might conclude with the words of Henry Siegman, a respected middle east expert and senior research fellow at the Council of Foreign Relations in New York. In December, he wrote in the International Herald Tribune:

"An Israeli strategy of countering terrorism that relies solely on counter-terrorism and greater repression will not produce greater security for Israel's citizens. To the contrary, such a limited strategy will predictably produce only greater loss of Israeli lives. Policies which reinforce the despair of Palestinians by killing their hope for an end to the occupation will inevitably fuel escalating violence."

The Government must push to keep the present crisis in the middle east at the top of the international agenda; the international community must remain engaged. We must think creatively and for the long term about what we in Britain, in Europe and across the world can do to shape the conditions and parameters that will help the Palestinians and Israelis find the road back to peace. Nothing short of that will secure stability, human rights and justice in the region. Thank you, Mr. O'Hara, for allowing me to initiate the debate.

I congratulate my hon. Friend the Member for Wimbledon (Roger Casale) on securing the debate and allowing us to discuss an issue that most of us have spent all of our political lives trying to deal with. Listening to my hon. Friend trying to be even-handed, I was reminded of my party, which has always alleged that its position is even-handed and balanced. However, we are dealing not with two rights and two wrongs, but only with one right and one wrong. Israel has occupied the West Bank and Gaza since its invasion in 1967. It is breaking international law. Until Israel ends its occupation, there can be no peace; that is as clear as the nose on anyone's face. All the attempts to try to talk around that fact and find some other way forward are nonsense.

Part of the problem has been that successive Governments, including previous Labour Governments, have tried to be balanced. One cannot be balanced with a country that does not accept the application of international law. We could spend hours reviewing and arguing about various events that have taken place since 1967: assaults, terrorist attacks, resistance to occupation, closures, demolition. However, Israel does not accept that it is breaking international law; therein lies the problem.

Unless and until we have an American Administration that will tell the Israelis in blunt terms that they must end their illegal occupation of the West Bank and Gaza, there will be no peace in the middle east. We all know that; it is time that we said it. The events of the past few months have demonstrated that we will not make progress unless we speak honestly in this place.

The Minister for Europe has more experience than most of us in arguing such a case. He comes from South Africa, a country in which grave injustice existed, and he grew up fighting the apartheid movement. If he were released from the chains that bind him, his comments this morning would be much more helpful to the Israelis and the Palestinians. However, the realities of his office mean that he will attempt to be balanced. There is no way that we can have a balanced debate.

The only occasion on which Israel has ever done what the international community recognised as right was when James Baker, the then United States Secretary of State in the Government of President Bush's father, told it in no uncertain terms what it had to do. He made it clear to an American-Israeli committee that there would be no $10,000 million for a housing programme unless the Israelis entered negotiations with the Palestinians, so we had the Madrid negotiations. The Israeli leadership who went to Madrid had no intention of making them successful, but at least they were forced to go by the American Administration's clear determination not to give that money otherwise. That forced the Israelis to accept some form of reality.

We should be trying today to point the way forward. Can there be peace? Yes, but only if Israel accepts the Palestinians as cultural, political and practical equals. The imbalance in the argument is overwhelming: Israel is the fourth or fifth ranked military power in the world. We see F16s used against a civilian population and the demolition that results. We see the Israelis' capacity to break into zone A areas, which were allegedly under the Palestinian Authority's control, with impunity. They used to roll through the United Nations Interim Force in Lebanon—UNIFIL—in southern Lebanon with the same excuse.

The Israeli Prime Minister has a history, which we all know. He was in charge of Israeli defence forces when Israel invaded the Lebanon in June 1982, and it is worth reminding people of what happened. In a debate at the United Nations, Israel claimed that the Palestinians were responsible for 150 infractions or activities against Israel, despite the fact that George Shultz, the then American Secretary of State, had an agreement with the Palestinians that there would be no incursions into Israel from Lebanon. Despite the fact that there had been no incursions, Israel invaded Lebanon. What was the purpose of the invasion? As the leopard has not changed his spots, so the purpose was to try to get rid of the Palestine Liberation Organisation and Arafat and to leave the Palestinians, who were living under occupation, without a body that could negotiate on their behalf.

That action did not succeed in 1982 and it will not succeed today. Yasser Arafat is the elected leader of the Palestinian people, whether Ariel Sharon or, indeed, we like it or not. To our credit, we have always made it clear that any attack on Arafat would not have our support, but we are not doing enough to sustain his position. Picking up on a point made by my hon. Friend the Member for Wimbledon, how can Arafat exercise control over militants in the Palestinian community if he is locked up in Ramallah? Listening to Foreign Office spokesmen, however, we might imagine that he has a magic wand that he can wave. When the security forces that Arafat employs are attacked and the Israeli defence forces indicate that anyone seen in a uniform will be shot, how can he exercise control over the Palestinian people? The whole idea is nonsense.

If there is to be peace, the Israelis must start treating their Palestinian opposites as equals. They need to sit down seriously and allow them to negotiate. Only then will peace be possible. The minimum action required to bring peace is an end to occupation. We need a clear statement from the Israelis, not one about some mythical land for peace that means that they want to retain large parts of the West Bank. We need a real determination to end occupation in its entirety. If the people who live in the settlements now want to stay there, the Palestinians would be happy for them to live there in a Palestinian state, but the Israeli Government must tell the settlers that either they come back to what we all accept and recognise is the state of Israel, or they will have to live in a Palestinian state, with all its implications.

The Israelis will have to stop the settlement building. Even Colin Powell, in his speech in Kentucky on 19 November, recognised that settlement activity has severely undermined Palestinian trust and hope. He said:

"Israeli settlement activity has severely undermined Palestinian trust and hope. It pre-empts and prejudges the outcomes of negotiations and, in doing so, cripples chances for real peace and security. The United States has long opposed settlement activity. Consistent with the report of the Committee headed by Senator George Mitchell, settlement activity must stop."

Yet it is not stopping; all sorts of reasons are being found for the existing settlements to be expanded. The settlements must end.

As anyone who is honestly trying to tackle the issue knows, the third and most difficult part for the Israelis is to recognise the right of Palestinian refugees to self-determination as laid down in resolution 194, the right to say that they want to return to the place that they came from. Our side has been trying to help the Israelis to understand that recognising the rights of Palestinian refugees is not such a big threat to them.

I recommend the report "Right of Return" that the joint parliamentary middle east Committees sent to all hon. Members. It quotes verbatim the words of Palestinian refugees in Lebanon, Syria, Jordan and Palestine; they accept that Israel exists and that some of the homes to which they want to return are in the state of Israel. However, the report also makes it clear that the Palestinians understand their rights as refugees; they want to live in peace but they want Israel to recognise their rights. I recommend the publication to colleagues who are members of the Labour Friends of Israel group and to other hon. Members; I ask them to listen to the voices of Palestinians living in the most abject conditions saying that despite many years as refugees, they want to live in peace with their Israeli counterparts. If an Israeli Government were brave enough to accept that, we could look forward to discussions taking place, and a settlement in the middle east peace process, which many of us have worked for for most of our political lives.

I congratulate my hon. Friend the Member for Wimbledon (Roger Casale) on securing the debate and on his approach to the subject.

I have been to the part of the world that we are discussing several times in the past few years, most recently in October last year, when Israeli tanks were on the streets of Bethlehem, and I saw the devastation of homes and businesses. In Gaza, where olive groves once stood but which is now wasteland, I saw the contrast with the lush green Israeli settlements beyond. My party was mobbed by children in the town of Khan Yunis, where they lived and played in the wreckage of bullet and shell-scarred buildings that were once Palestinian homes. That never fails to shock me; however often I go there, I am not immune to it. It is strange for a politician to say it, but I was lost for words when people there asked me what we were doing to stop what had been happening to them, not for weeks or months, but for decades. When we come back to this country, we come back to the west. We know that it is important, but strangely the debate changes. The human tragedy, the actual effect on real people seems to diminish in importance, and it suddenly becomes a matter of high diplomacy, of what is possible and what is not possible among leaders. Remembering a Palestinian woman who asked, "What are you actually doing about it?" one becomes very humbled.

My hon. Friend is right when he says that, for an agreement to come out of this, both sides need to want it. I am reminded of the comment of the well-known Israeli peace campaigner, Uri Aunery, who was in Parliament a few weeks ago and who said that the trouble was that one either has a monologue or a dialogue. A monologue is where one person talks to himself, and a dialogue is where two people talk to themselves. That is a problem that has often blighted this conflict. We must grasp the issue of balance, which my hon. Friend the Member for Dundee, West (Mr. Ross) mentioned, and he was right to do so. We have not adopted a balanced approach to the crisis. In trying to adopt a position that is conventionally regarded as balanced, the fundamentally unequal situation is not balanced at all. It allows oppression to go on.

In an article in The Guardian in October, Polly Toynbee picked up the matter and compared the different treatments of two brutal and appalling assassinations: one by Israeli security forces of Abu Ali Mustafa, the leader of the PFLP, and one of Israeli Cabinet Minister, Ze'evi. Both were extremists, both were uncompromising and both were prepared to use violence. However, one was described as a human tragedy. Ze'evi may have been an extremist, but he had a family. He was a human being. As Polly Toynbee put it, he had a hinterland. When it came to the PFLP leader, however, he was just a political leader. The focus was not on him—no one knew whether he had a family or a wife—but on the political impact.

Stalin once said that one death is a tragedy, but a million deaths is a statistic. That is the problem with that part of the world: people on both sides have been responsible for appalling levels of violence. Let us work out the scale of that. Since the start of the intifada, 911 Palestinians have died. As a proportion of the population of the West Bank and Gaza, that is the equivalent of 16,000 people dying in the United Kingdom, or 75,000 people dying in the United States.

My hon. Friend the Member for Wimbledon rightly says that this issue should not be put on the back burner. But are we honestly saying that if 16,000 people died in this country, or 75,000 people in the United States, we would regard it simply as an issue of high diplomacy rather than as something that needed to be tackled urgently? We must be clear about such matters.

It is right that we call for an end to violence, but we need to say clearly to Israel that it cannot call for an end to violence on one side while continuing with an assassination policy—another assassination occurred yesterday. It is unacceptable and it undermines opportunities for peace. As my hon. Friend the Member for Wimbledon said, the actions of Sharon, and all too often the actions of groups such as Hamas and Islamic Jihad, are each other's best recruiting sergeants.

Israel has an unconditional right to live in peace within secure borders. However, the international community must insist that Israel cannot demand that unconditional right for itself while assuming that it has discretion over whether anyone else has rights in that part of the world. Just imagine the outcry if a Palestinian group went into Israeli Government buildings in Jerusalem and took Sharon hostage at gunpoint in his office, and then said that they would not allow him to move out of that office unless he arrested those responsible for the assassination of Palestinian leaders. What would the international response be to that? Yet, is it acceptable, or is it not that Israel holds in virtual house arrest President Arafat with tanks at the door of his Ramallah offices?

International law needs to be respected in that part of the world as elsewhere. My hon. Friend is right to say that that means an end to occupation. It also means that, while occupation is in existence, the provisions of the fourth Geneva convention need to be respected. The convention forbids collective punishment of people, yet the demolition of 58 homes in Rafah last week breaches that convention. Article 49 of the fourth Geneva convention prevents an occupying power from transferring parts of its civilian population to occupied territory. The settlements contravene that convention. The UK is a high contracting party to that convention, and in December some high contracting parties met, although the meeting was boycotted by Israel and the United States. It was good that most parties met and that they said that the breaches of the Geneva convention must end. However, non-governmental organisations were disappointed and argued that there is no enforcement mechanism. We must address that urgently.

I would like to address my last point to my right hon. Friend the Minister for Europe. Israel has preferential trade relations with the European Union, under the EU-Israel Association agreement. It imports into the EU goods, under preference, produced in settlements in the occupied territories: settlements that are illegal under international law. That breaches the EU agreement, as Ministers have acknowledged several times. When Israel has been questioned about those imports, it has not answered fully requests for information from the EU. I have tabled several questions to my right hon. Friend and other Ministers about that agreement. In November, the EU-Israel Association Council met to consider those matters. I know that my right hon. Friend and the EU are concerned about the matter, but what are we doing about it? If Israel is refusing to answer questions fully, what are we doing to monitor what is coming into the EU that may be illegal under the agreement? If it is not possible to monitor that process properly, and it relies on the co-operation of a state that is prepared to breach the agreement in such a flagrant manner, the EU should consider whether the EU-Israel Association agreement can continue. I hope that my right hon. Friend will address that matter when he sums up.

I congratulate my hon. Friend the Member for Wimbledon on securing the debate. The matter is of huge importance to world peace, and to our credibility in large parts of the world. If we want to bring about a just peace, it is time to move on from simply demanding talks and an end to the violence. We must do that, but we must also call a spade a spade. We must consider the essential elements of peace, and apply to the middle east the sort of standards that we apply to many other parts of the world.

My hon. Friend the Member for Wimbledon (Roger Casale) began the debate by questioning whether there was a way forward. I agree with the last two speakers. We cannot move forward as long as the Israeli Government have a political agenda to destabilise the Palestinian Authority and Yasser Arafat—they have done that by labelling him as a terrorist and refusing to allow him to visit Bethlehem last Christmas.

In the short term, everyone wants an end to violence and a willingness to return to talks, but that will not happen as long as peace moves are accompanied by impossible demands or artificial timetables—for example, saying that talks will not begin until seven days without violence have passed, in the knowledge that assassinations will continue regardless. If we had taken that approach to Northern Ireland and said that we would not enter into any political discussions as long as there was violence from whatever source, we would still not have started negotiations or made political progress.

Something may be gained in the short term from trying to persuade both sides to accept international observers in the occupied territories. My hon. Friend the Member for Dundee, West (Mr. Ross) was right to say that the United Kingdom must be plain about the possible terms for any long-term settlement. Simply saying that we need to return to the terms of the Oslo agreement is not the basis for a long-term agreement. That long-term agreement would have to be on the basis of UN resolutions and international law, and is not just about an end to settlement building.

We are still at the stage of talking about the need to end the expansion of settlements. However, we need to return to the fundamental fact that every settlement in the West Bank and Gaza is illegal. There are only two options: either those settlements go or, as my hon. Friend said, their inhabitants live in a Palestinian state and under the control of that state rather than that of some occupying army that believes that it can walk in at any time and do what it likes.

Anyone who has visited the region, seen the settlements on the hilltops in the West Bank and the water that is being taken, and has contrasted that with what happens in Gaza and the conditions there, knows that peace will not happen while those conditions prevail. There have been suicide bombings, but much of the fighting and many of the killings over the past few months have occurred around those settlements in the West Bank and Gaza. They are the focus of the problem.

The other big issue that must be addressed in the long term is refugees. My hon. Friend and I were involved in the report to which he referred. People have lived in refugee camps in Lebanon and Gaza for years and see no prospect of getting out of those terrible conditions. It is evident that unless something is done to deal with the problem, there will be no lasting peace. We must recognise the imbalance. It is no good saying that we will be even handed in a situation that is not even handed by its nature. Rather than talking simply about what is needed in the short term to get negotiations going again to achieve a ceasefire—we are doing too much of that—we must speak plainly about what is needed in the long term.

I thank my hon. Friend the Member for Wimbledon (Roger Casale) for securing the debate at a crucial time. The Government must address the injustices that empower those who use political extremism and violence to advance their cause. The Taliban's defeat does not make the world a safer place. The poverty and injustice that fuel terrorism remain. It beggars belief that at a time when the United States, Britain and the west build alliances to counter terrorism, the Israeli Prime Minister has reacted with brutal force against the Palestinian people.

Since the tragic events of 11 September, there have been widespread violations of basic human rights by Israeli security forces against Palestinians. Settlements continue to be developed on disputed land, while tanks have rolled into Gaza and the West Bank. Since 1967, Israel has continued to contravene the United Nations charter and resolutions, but successive US Administrations have ignored it. It is the single biggest obstacle to peace in Palestine, with American policy causing resentment and fuelling terrorist violence and bloodshed.

In the west, we rightly criticise nations with no respect for human rights, but are reluctant to criticise Israel. Last month, young children died in Israeli missile attacks aimed at a Palestinian extremist wanted by Israel. Ariel Sharon has exercised force with no concern for casualties among the wider population. Innocent bystanders are always the victims, whether they are caught in the latest missile attack on the Gaza strip or trapped by a suicide bomber on a bus or in a cafe. My right hon. Friend the Foreign Secretary assured us that Britain would remain even handed. To achieve that, our Government must not remain blind to the Israeli abuses exposed in recent weeks.

Amnesty International has shown the clear failure to halt torture of Palestinian prisoners, and the United Nations children fund—UNICEF—has expressed concerns about 160 children held in Israeli jails who regularly suffer violence. I fully support the condemnation of the sickening suicide bombers, but it should not be followed by a grudging acceptance of Sharon's actions. Will the Minister assure me that the Prime Minister's goal of recognition for a Palestinian state existing peacefully alongside Israel remains a genuine aspiration for the Government and not one that has been shelved?

Palestinian leaders are vital allies in the struggle against terrorism. By offering no support at this vital time, Britain and the US help only those who seek to marginalise and weaken Arafat. That is not only Sharon and hardliners in his Administration, but the violent extremists among the Palestinians and wider Arab communities. We are fast losing the trust of the Palestinian people, and rebuilding that trust will require swift action and genuine gestures of support. We must tackle injustice in Palestine and elsewhere. It is patently obvious that sanctions on Iraq have not been successful. The Iraqi people have been weakened, but Saddam Hussein has been strengthened. How can sanctions benefit any of us when their impact bolsters a dictator while children suffer and die in poverty? The continuing dispute over Kashmir presents a real threat to peace and stability. It must be addressed by not only India and Pakistan but the wider world. My hon. Friend the Member for Wimbledon commented about the leadership of President Musharraf. He is right; President Musharraf has taken a bold step—

Order. The hon. Gentleman is straying far beyond the scope of this debate at the moment.

Thank you, Mr. O'Hara.

We will never win the hearts and minds of the oppressed people in any of those countries without facing up to our responsibilities as a key partner of the United States and a leading nation in Europe. The Western allies let down people in the middle east after the Gulf war, and they must not be let down again. The consequences will be terrible if Britain and our allies in the west fail to engage fully with nations in the region.

Key allies of the US such as Egypt and Saudi Arabia are growing increasingly frustrated at the United States' failure to exert pressure on Israel to implement UN resolutions 242 and 338. Crown Prince Abdullah stated that Saudi Arabia stood at the side of the US around the globe, but recently told President Bush that he had made no effort to rein in Israel. I welcome the Prime Minister's renewed commitment to tackle terrorism and its causes, but urge our Government to redouble their efforts where injustice fuels violent extremism and threatens us all.

Like other hon. Members who have spoken, I congratulate the hon. Member for Wimbledon (Roger Casale) on securing this debate on a crucial issue at a crucial time. He made a thoughtful contribution and explained the development over time of the many intricacies of the conflict. We have heard passionate contributions from hon. Members who have taken issue with the notion of even-handedness, and have made powerful arguments about the difficulties that have befallen the Palestinian communities in the middle east. I hope that I shall not depart from an even-handed approach as I develop my brief thoughts and set out the Liberal Democrat position on the current crisis.

We have witnessed a cycle of despair, hope and renewed despair over many years with gruelling regularity. Over the weeks, months and years, the cycle has a familiar ring to it. The latest reports have struck a depressing note. The optimism felt before Christmas when Yasser Arafat's clampdown of 16 December was announced has given way in the past couple of weeks to more killings and revenge. It seems a long way from the hopes expressed by the Mitchell commission and the Oslo agreement before it.

On the face of it, the Mitchell commission did not seek very much. It saw the restoration of trust as essential, and wanted an unconditional cessation of violence and the resumption of security co-operation with cooling-off periods and confidence-building measures. Confidence on either side is now at a low ebb. Even-handedness has taken a pasting in the debate, but it is essential. The Government of Israel should recall that it was agreed at the Mitchell commission that all settlement activity, including the natural growth of existing settlements, should be frozen and that the Israelis should stop destroying homes. Equally, the agreement made it clear that terrorism was reprehensible and that the Palestinian Authority should make a 100 per cent. effort to prevent terrorist operations and to punish perpetrators. As we heard this morning, that has not come without difficulties.

The difficulties facing all sides seeking a peaceful solution to the middle east crisis are not insignificant. We heard earlier about how many deaths have accompanied the crisis: more than 600—some say more than 800—Palestinians and nearly 200 Israelis have died. Those are shocking figures, both proportionately and absolutely. The trust mentioned by Mitchell clearly does not exist.

In recent months the international position has exerted an increasing influence. The cloud of 11 September still lingers, and the events of that day have been used by both sides to exploit middle east politics. The tragedy of 11 September was not the cause of conflict in the middle east, but has been used as an excuse and makes the need for a solution all the more pressing.

Concern remains about the spread of the conflict beyond Afghanistan and the middle east, perhaps to countries such as Iraq. As my right hon. and hon. Friends have said, we must make it clear—especially with our Government standing shoulder to shoulder with the United States—that we would disapprove of any extension of the conflict beyond Afghanistan in the absence of incontrovertible evidence, particularly of the consequences for the middle east.

In the sharp focus of the Israel-Palestine conflict, the prospects for peace might seem blurred. However, for all the worries about it, proper dialogue is the only solution. In seeking peace, we should consider the steps set out by Senator Mitchell. Peace should be based on core principles and United Nations resolutions. We must recognise, as must the combatants, that Israel has the right to live in peace in secure, recognised boundaries, free from threats and acts of force, and that the Palestinians are entitled to justice, land and a viable state.

We have heard requests for plain speaking, which is vital with Israel. Israel must freeze settlement building and desist from armed incursions into Palestinian areas. If we are to resolve the murderous disputes, Israel must not continue to undermine Arafat. For its part, the Palestinian Authority must sustain efforts to root out terrorists in its own areas and put its own house in order. The responsibilities for those outside the middle east are enormous, and the international community must not lose sight of that.

In the past, expectations have been raised, only to be dashed. The primacy of international law has been proclaimed in Afghanistan, but has often been ignored in the middle east. After the Gulf war, significant progress was made. After 11 September, it was hoped that more progress would be made, but in recent days that optimism has faded away. Our Government, acting with EU partners and in alliance with the United States, have a responsibility to ensure a return to dialogue and to keep striving for peace.

I thank the hon. Member for Wimbledon (Roger Casale) for securing the debate. It reflects well on the House that Members take an interest in a vital region: the greatest of Gordian knots in foreign affairs. I agree with much of what the hon. Gentleman said.

I come to the debate having worked for 20 years in the oil trade, conducting extensive business in the Arabian Gulf and Pakistan. Members will find a full list of my past connections in the Register of Members' Interests. More recently, I spent the new year in Oman as a guest of the Government, and I discussed the present middle east situation with many prominent Ministers, catching the end of the Gulf Co-operation Council meeting, which was held in Muscat. My background puts me in the unusual position of being a Front-Bench spokesman at severe risk of knowing what he is talking about.

The deterioration in relations between Israel and the Palestinian Authority last December turned the eyes of the world once again to a dispute that is the backdrop to all middle eastern affairs. It is a dispute with energies and passions that we would prefer to see channelled into efforts for peace and stability. Millions of Palestinians feel humiliated and stateless; millions of Israelis feel threatened and insecure. We must address that reality and look across the Arabian peninsula to a groundswell of dangerous resentment against regimes unwilling to adapt to the Times. In our attitude towards Israel and Palestine, we must beware of taking up entrenched positions that we refuse to revise subsequently. We must find a way of diluting the polarisation of opinion between pro-Israelis and pro-Arabs. In a world where conflict resolution should be a top priority for us all, it is not nonsense to declare that one is pro both when faced with a choice between Israelis and Arabs. If one is pro peace, there is no alternative. Such a view is in no way incompatible with condemning violence by whichever side against innocent civilians.

In December, the Conservative party and President Bush condemned the sickening suicide bombings in Israel. We called on Yasser Arafat and the Palestinian Authority to act swiftly, not only to detain those directly responsible for terrorist acts, but to ensure that all suspects were immediately brought into custody. We did so because such terrorist actions can only put the peace process at risk. The de-escalation of terrorist attacks after Yasser Arafat's call to militants on 16 December shows that he still has influence, which he must be committed to wielding. The Palestinian Authority must accept its responsibilities and show that it will not hide behind a smokescreen of excuses for inaction. Similarly, there can be no progress without security for Israel within clear and internationally recognised borders, an unreserved recognition of the state of Israel's right to exist, and a Palestinian willingness to place the Palestinian right of return to Israel on the agenda for reconsideration and modification. There can be neither progress nor peace without a halt to the suicide attacks and terrorist outrages or a genuine will to make concessions and build trust.

The events of 11 September were tragic, and the horror echoed around the world. However, we may find some good in that day if we learn the lessons. We must strive to persuade those who feel deeply disillusioned and resentful that radical terrorist groups, such as Islamic Jihad or Hezbollah, are not the answer. They are perversions of Islam, not spokesmen for it. We must address perceived Arab grievances and respect Arab opinion. There can be no lasting prosperity and security in the middle east until a compromise is brokered between Israeli and Arab positions, mutual fears are met with confidence-building measures, and the legitimate aspirations of the Palestinian people are met for a viable Palestinian state. Anthony Zinni and Javier Solana are two respected envoys and able negotiators who are on the ground to press the case for peace. A framework is also embodied in former senator George Mitchell's peace plan that has been agreed by all sides.

I want to make the Conservative party's position clear in relation to the proposals. George Mitchell urges Israel and the Palestinians to

"reaffirm their commitment to existing agreements".

He calls for an immediate and unconditional ceasefire, for Palestinians to crack down on terrorism and for Israel to freeze all new construction of settlements. The plan has a framework for peace and progress. I have already stressed the vital importance of the guaranteed security of Israel, but in recognising the need for a Palestinian state we must make it clear that the process is two-sided.

All too often, Palestinians feel humiliated and stateless. Israel's frequent incursions into Gaza and the West Bank make them feel powerless and vulnerable. The Palestinians are a proud and historic people, and there can be no long-term peace until that wrong is put right. Self-determination was mentioned earlier, and is often touted as the answer to easing concerns. However, without a clear definition of what a viable Palestinian state would entail, self-determination risks becoming meaningless.

The hope that was evident on 16 October, when Israeli Prime Minister Ariel Sharon said that he would agree to an independent Palestinian state if Israel's security was guaranteed, has faded. I have no intention of apportioning blame, as that would serve no purpose. Instead, I look forward with hope that such proposals will resurface and that steps will be taken to define such a state. A viable state is one that is sufficiently large to meet the needs of its people, with a guarantee of sufficient resources from its neighbours, if not from within its own borders. Thus, Israel would have to make a commitment to maintain water and power supplies. It also means a state with maritime access, which, in this case, can only be through Gaza. The issue requires careful thought. Similar proposals were proffered at Camp David, and I hope that they are still in the minds of all parties.

However, a debate cannot begin until a full ceasefire is in place. Only that would provide the minimum level of trust needed for a peace process to recommence. The Palestinian Authority cannot renege on its responsibility to rein in terrorists who choose not to recognise Israel's right to exist and who choose not to allow Israel the security from neighbouring states that it has a right to expect.

I commented earlier on the potential instability of the Arabian Gulf. We should remember that the term "middle east" includes the Gulf. The states are all geopolitically linked, and instability in one part destabilises the entire region. The backdrop of Arab-Israeli conflict is fundamental to political opinion in all the states. Regimes across the Arabian peninsula find that their capacity and readiness to change is outpaced by the relentless change in the wider world, which is sowing seeds of perilous instability within their borders. Some are attempting to change, but the process is painful and slow.

Iran is undergoing a transition, but it risks being messily derailed if the United States and the west misinterpret its progress and provoke a retrograde turn of events. We must be critical when necessary and continue to press for human rights, but we must also welcome attempts at Modernisation and progress that could lead to Iran's becoming a stable and unthreatening neighbour in the region.

By comparison, Iraq is led by a tyrant who, in addition to subjugating his own people, seems determined to threaten others. We must not flinch from tackling terrorism wherever it exists, but we must be wary of provoking instability and the possible disintegration of Iraq in a post-Saddam Hussein era. We must always be mindful of the strategic balance in the Gulf between a weakened Iraq and a resurgent Iran.

My experience of the Gulf Co-operation Council reveals a growing sense of the need for economic unity and freer markets to access the political and economic benefits of prosperity in the Gulf countries. Economic stability is vital to political stability in the region, and the uneven distribution of economic reward must be addressed, especially for a growing younger generation.

We must recognise Israel's right to exist; we must detail its recognised borders and guarantee its security. For the Palestinians, we must have a proper debate about what would constitute a viable Palestinian state and accept its right to exist. Only when deep-rooted grievances are tackled will the stability that is so vital to every country return to the middle east. It is up to our Government, as much as any other, to do everything that they can to further the process.

The Minister will reply to this important debate.

I very much welcome the contribution of the hon. Member for Rutland and Melton (Mr. Duncan). It is the first time that I have had the pleasure of agreeing with everything that an Opposition spokesman says. Along with my colleagues, I am grateful to my hon. Friend the Member for Wimbledon (Roger Casale) for initiating the debate. Sadly, we have all seen the cycle of violence and bloodshed in the middle east during the past 16 months, and my hon. Friend the Member for Birmingham, Northfield (Richard Burden) spoke eloquently about its tragic consequences. There have been far too many funerals, broken families and shattered lives. Unfortunately, both Israel and the Palestinian Authority have contributed to the crisis, and both have the responsibility to take steps to end the violence and resume political negotiations towards a permanent settlement. We, our European Union partners, the United States and the United Nations are trying to help them take the steps towards a comprehensive, just and lasting settlement, not least because, as my hon. Friend the Member for Wimbledon rightly said, the crisis represents a threat to international security.

We are encouraged by the engagement of the US in recent weeks. We support the vision of a two-state solution that was detailed by President Bush and developed further by US Secretary of State Colin Powell on 19 November. We welcome the strenuous diplomacy of US envoy General Anthony Zinni with both parties. His recent mission from 3 to 6 January opened up the opportunity for progress and raised some cautious optimism among those who have been closely involved. We have urged the US to continue its efforts. The Foreign Secretary and the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Exeter (Mr. Bradshaw), are urging the parties to do everything possible to prepare for the next stage, which is the implementation of the security plan proposed by CIA director George Tenet, as agreed by both parties. The Foreign Secretary has been in almost constant touch, by telephone and in person, with other Foreign Ministers throughout the world during the past few weeks, including during the Christmas and new year break.

We were concerned by the evidence that Palestinian officials were involved in the smuggling of weapons on the boat, the Karine A. However, it is important that the parties do not allow that affair to deflect them from consolidating the progress of recent weeks. We were concerned also by the recent attack by Hamas on Israeli soldiers on the edge of the Gaza Strip, although it is vital that that act does not lead to the renewal of the cycle of violence that we have seen hold the region in its bloody grip for most of the past 16 months.

While I accept that we cannot use the activities of Hamas as a reason to retrace our steps, will my right hon. Friend restate our Government's position that the Palestinian Authority should be doing more to clamp down, arrest and detain the extremists who are causing so much terror in the region?

Yes. I will come to that point in a minute, but I am grateful for my hon. Friend's intervention.

Israelis entitled to ensure its own security, and Israelis must be able to live their lives without fear. However, Israel's actions must be proportionate to the threat. We urge it to act with restraint and look beyond the desire for revenge to a vision of a region at peace, which can be achieved only through negotiations. We urge Israel to resume such negotiations soon, and—this is the point made by my hon. Friend the Member for Eastwood (Mr. Murphy)—the Palestinian Authority should at the same time deliver on its promise to end the violence and create the conditions for peace.

I realise that that is difficult. My hon. Friend the Member for Dundee, West (Mr. Ross) spoke about the problems faced by the Palestinian Authority, and he has selflessly promoted justice for the Palestinians over the decades. However, the Palestinian Authority must make a 100 per cent. effort to prevent further instances of violence. It must degrade the terrorist infrastructures of Hamas and the Palestinian Islamic Jihad, properly detain suspected terrorists and remove the threat that they pose to the stability of the region. Terrorism is unacceptable and must be rooted out. As the Prime Minister said, our efforts to counter terrorism worldwide must be accompanied by parallel and sustained efforts to reinvigorate the search for peace in the middle east.

There is a recognised route back to the negotiating table, which we and our European Union partners support. Despite all the setbacks of the past eight months since the publication of the Mitchell committee report, it remains the best and, indeed, only option. Both parties have accepted the recommendations of the Tenet security plan and Mitchell committee report, and they should be implemented without delay. Ultimately, peace between Israel and the Palestinians will come only through a political process on the basis of UN Security Council resolutions 242 and 338, and the principle of land for peace. That would deliver security for Israel within recognised borders, end the occupation and allow the emergence of a viable, democratic and peaceful Palestinian state.

I am happy to give the assurance requested by my hon. Friend the Member for Glasgow, Govan (Mr. Sarwar): the British Government remain unequivocally committed to an independent and viable Palestinian state, on which the hon. Member for Rutland and Melton (Mr. Duncan) argued.

As my right hon. Friend the Prime Minister said, we are fully engaged with the United States and our European Union partners in diplomatic efforts to move the peace process forward. The Prime Minister's special envoy, Lord Levy, has been involved in tireless diplomacy. He visited the region in December, and my hon. Friend the Under-Secretary of State is there now.

European efforts are energetically led by Mr. Solana, the EU High Representative, who followed the Zinni mission with his own visit to the region between 6 and 9 January. He works within the framework of the Laeken European Council declaration, which reaffirms the package approach. It calls on the Palestinians to deliver on their commitments to end the violence and make arrests, and on Israel to cease actions such as the attacks on Palestinian infrastructure, which undermine the Palestinian Authority's ability to deliver.

My hon. Friend the Member for Walthamstow (Mr. Gerrard) called for international observers, and we, the US and our EU partners believe that third-party monitors could help to overcome obstacles to the implementation of the Mitchell committee recommendations. For monitors to be successful, both parties would have to agree to their presence, and we hope that they will do so.

We are under no illusion about the enormously difficult issues that need to be resolved in negotiations. I re-emphasise that we have repeatedly called for a freeze on Israeli settlement activity in the occupied territories, including natural growth, under the terms of the Mitchell report. As my hon. Friend said, the settlements are illegal under international law and a real obstacle to peace. We also oppose Israeli closures in the occupied territories, which cause severe economic hardship and unemployment, in turn fuelling hatred and violence and making a comprehensive settlement much more difficult to achieve.

It has been suggested that we should have suspended the EU-Israel Association agreement because of concerns on rules of origin and human rights. My hon. Friend the Member for Birmingham, Northfield asked what we were doing. We have repeatedly raised our concerns with the Israeli Government on political, legal and humanitarian grounds. We did so again with our EU partners at the EU-Israel Association council on 20 November in Brussels. There is evidence that goods from settlements are imported as of Israeli origin. With our EU partners and Israel, we have been working for a speedy and comprehensive solution to that issue in a way that is compatible with European Community law.

We have called on Israel to end its policy of incursions and declare an end to its practice of assassinations, which are illegal under international law and promote tension on the ground. I am sure that we all agree that that is not in Israel's long-term interests. Under the terms of the Tenet plan, Israel is required to end proactive security operations in the Palestinian Authority, and we hope that it will do so.

My hon. Friends have raised a number of issues that divide the two parties and that will need to be resolved in the final status negotiations, leading to a settlement that allows the emergence of a viable Palestinian state and that provides security for Israel. As I have said, two states existing peacefully alongside each other are the two pillars of any solution. The issues still to be resolved are many and include the status of Jerusalem, the right of return for refugees, and borders and natural resources.

This has been a sombre and serious debate, befitting the deadly seriousness of the issues. When I listen to or participate in such debates, I think that in our domestic politics we use words such as "emergency" or "crisis" rather too easily, compared with the awful difficulties encountered by people trying to resolve the problems of violence in the middle east. The Palestinian and Israeli people have suffered from violence and fear for far too long. Sooner or later they must return to the negotiating table, as the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) said. That is the only means of creating peace in the region and ending the terrible violence that blights lives and guarantees that generation after generation will grow up with a sense and feeling of hatred.

I am glad to be able to hold this debate in Westminster Hall. I have applied for it many times. My purpose is to ensure the preservation of a tax credit scheme that has been responsible for improving the lives of people in my constituency in south Oxfordshire in all sorts of unexpected and unsuspected ways and has acted with great sensitivity to local needs and interests. I see that the Annunciator says that Mr. Alan Johnson is speaking. I take no offence. For the purposes of this debate, Mr. Winterton, I am Alan Johnson. You may call me Alan, if you so choose.[Interruption.] Oh, there I am now.

The wonderful landfill tax credit scheme dates back to 1996 and those halcyon days when the Conservatives were in power. They set up the scheme, which works broadly as follows: people dumping huge quantities of waste in holes in the ground in Oxfordshire pay £12 per tonne of waste dumped, rising to £15 per tonne in 2004 for what is called putrescible or household waste. The dumper can recover 20 per cent. of that money if it is spent on various worthy environmental projects. There has been a wide interpretation of the schemes that may be so funded.

The Trust for Oxfordshire's Environment has been able to scatter plenty o'er a smiling land. Lychgates have been repaired; a Norman church in Crowmarsh Gifford has had its roof fixed; two magnificent play parks have been constructed in Berinsfield; a bridge has been built at an accident black spot; disabled access has been supplied at Sonning Common village hall and at several other village halls. Sometimes the sums involved can be considerable, such as the £50,000 that went to the fabled watercress beds at Ewelme; sometimes it is just a few hundred pounds. In all, TOE has spent £1.2 million in south Oxfordshire on more than 100 projects during the past four years.

It is a testimony to the popularity of the scheme in my constituency and in Oxfordshire generally, and the value that local people attach to it, that my constituents have been alarmed to hear that it might be under threat. I have received a great many letters asking whether TOE can continue to scatter its plenty. That is the question that I should like the Minister to answer.

The Government, I am told, would like 65 per cent. of this money to go towards recycling projects. There is great merit in that. We in Britain have a poor record on recycling. We lag far behind our European friends and partners. We tend to dump far more into tips and holes than them, and some of the statistics are terrifying. Whatever hon. Members may think of the newspapers, which I sometimes write for, they may not know that it takes 50 years for a newspaper to rot away in a landfill site. It takes 500 years for a disposable nappy to disintegrate completely. That statistic is particularly bloodcurdling, when one considers that 4 per cent. of household waste is nappies.

We all support the proposition that the country should recycle much more than it does, but we cannot meet our obligations under the EU landfill directive by plundering the landfill tax credit scheme. Ernst & Young calculates that we would need £7 billion of capital infrastructure investment in new, sophisticated incinerators to cope with the national waste strategies. The landfill tax credit scheme was worth only £ 109 million last year. There is no reason why 65 per cent. of the scheme's money should not go towards waste management and recycling, given that the total income of the scheme is likely to increase with the increase in the amount of money taken in landfill tax.

I have spoken briefly, but I hope that others will want to speak on this important subject. I hope that the lychgates and water meadows of my Oxfordshire constituency and others will not be sacrificed for the sake of compliance with some European directive—not that I have anything against its being European; perhaps I should refer rather to some bureaucratic desire to comply with the terms of a recycling measure.

The Trust for Oxfordshire's Environment has done a good job, as representations from all over my constituency confirm. It would be a great shame if its functions were taken over and subsumed by local authorities; I fear that in that case the money would not be truly additional and that schemes that benefit local people and greatly please many of my constituents would cease to be funded as they have been in the past.

My message to the Minister is, "Do not get rid of the Trust for Oxfordshire's Environment." In other words, "Don't step on TOE," if I may feebly go for a soundbite.

rose—

Order. Before I call the hon. Member for Huddersfield (Mr. Sheerman) I inform hon. Members that the ownership of the debate lies with the hon. Member for Henley (Mr. Johnson). Ownership is normally exchanged between the hon. Member who secured the debate and the Minister. It is the custom of the House that if other hon. Members wish to take part in the debate they clear it with the hon. Member concerned, with the Minister and with the occupant of the Chair. I shall call the hon. Member for Huddersfield because he has done so.

I may use my discretion to call the other hon. Gentlemen who are seeking to catch my eye, but it is important that the Minister should have adequate time to reply. He will let me know in the next moment or two how long he would like to reply, and whether he is happy for hon. Members who have not cleared it with him to participate in the debate.

Thank you, Mr. Winterton. I congratulate the hon. Member for Henley (Mr. Johnson) on securing such an interesting debate and I thank him and the Minister for giving me permission to contribute to it.

I declare an interest. I chair an organisation called Urban Minds, which is one of the largest not-for-profit environmental groups in the United Kingdom. We carry out larger projects than those concerned with church roofs, lychgates and the other excellent work that is done with some of the money from the landfill tax credit scheme. We received £500,000 from the scheme for an innovative investigation into how brownfield land can be reused for other purposes. An expert team spent two years finding out how to reclassify brownfield land for reuse, which is an important step in helping the Government and others who want that land to be brought back into use.

Urban Minds also creates new, profit-making businesses in the private sector that use waste as a raw material. Instead of regarding waste as rubbish, Urban Minds sees it as a new raw material that flows from our towns and cities, which should be used as a raw material, rather than digging holes in the earth's crust and using virgin material.

In terms of the history, I have been around from the very beginning. I saw what they called the Brown-Gummer plot, which was used to introduce this taxation. It was a break with the tradition of great hostility in the Treasury to hypothecating taxation. It was innovative, new, creative and very exciting. I agree with the hon. Member for Henley that it would be a great shame if it came to an end. It would in fact be the end of a bold and innovative experiment.

The tax has had enormous positive effects; for example, many community organisations have done wonderful things to enhance the beauty of the environment. As a result of the tax, many new wetland areas for wildfowl and birds have been established, as well as some high-class research and development partnerships with universities. The tax, and the way in which it is distributed, have resulted in people building partnerships. Universities, local authorities, the private sector, and community groups have done so many creative, small and very bold things.

The tax is not only innovative; it is tough. As with all innovative and new things, mistakes have been made and there have been problems. Some landfill operators and landfill tax credit distributors have done the wrong thing—there is no doubt about that. That is true of all legislation and regulation, however. We can learn from those mistakes. I certainly see a strong case for modifying the present administration system—improving it, but not abolishing it.

If we are going to meet the strict EU targets and the Government's statutory targets on local authorities, this tax has to be used wisely and well. It has to be used to help local authorities to meet those targets. I have no objection to having 60 or 65 per cent. targets for recycling—that is good—but I urge the Minister not to put his faith in local authorities. They are notoriously poor at delivering in these innovative areas. Many of the groups that I am talking about today have been at the cutting edge of the innovative work that local authorities have dragged behind in.

We know of the Minister's reputation for being innovative, but we want this tax to be built on. If 20 per cent. of the landfill tax is good enough to be put into environmental purposes, why not have another 20 per cent. go to local authorities, another 20 to research and development for universities and other research institutes, and another 20 to starting up environmental businesses? That would be a bold way of saying that this is a radical Administration and that it is more radical than its predecessor. I believe that that is the way the Government should go.

The crucial point about the landfill tax credit scheme is that if £10,000 is given to my organisation—or any organisation—it becomes £100,000 through landfill tax credit; it is a wonderful accumulator. If one can then get a European resource, the amount can be doubled to £200,000. Through the landfill tax credit, some people can make that original £10,000 into £400,000 or £750,000. That is the accumulator working for the environment.

If the funds available from the scheme become Government money, they cannot be used for such funding. I ask the Minister to think carefully before he makes changes. I ask him to realise that the universal demand from environmentalists, from the waste management companies, and from everyone else, is that he must face the real fact that landfill tax is half of what it should be. It should be boldly and rapidly put up to a decent level that is comparable to that charged by our European neighbours.

rose—

Order. I will call all three of the hon. Members who are seeking to catch my eye. They must limit themselves to two minutes.

Thank you, Mr. Winterton. I congratulate my hon. Friend the Member for Henley (Mr. Johnson) on securing the debate.

I support the landfill tax credit scheme, which has been a great success in my constituency. It has supported the Wychwood way, which is a walk around Wychwood forest, the Rollright stones and countless woodland and other projects. I have been inundated with letters asking me to lobby the Minister, which I have done on countless occasions through letters, to keep the scheme. Like my hon. Friend the Member for Henley, I support recycling, not least because I live next to a tip, around which I want to reduce the traffic.

I agree with the Trust for Oxfordshire's Environment in that, although I accept that 65 per cent. of funding should be directed to projects that deliver sustainable waste management, I am anxious to see the remaining 35 per cent. remain as a source of funding for good-quality projects that improve the local environment and address wider sustainability issues.

I caution the Minister against replacing the landfill tax credit scheme with, as some have suggested, a public spending scheme. The beauty of the scheme is that it is multi-point to multi-point, which means that lots of people are handing out money and lots of people are applying for it. If it became a public spending scheme, it would become one body and one person's decision, and we would lose, to mix my metaphors, the thousand points of light, which would be a mistake. Again, I congratulate my hon. Friend the Member for Henley on raising the matter, and I look forward to hearing the Minister's response.

Thank you, Mr. Winterton. I agree with everything that has been said so far.

The landfill tax credit scheme is excellent, and it should be simplified, not scrapped. The Government should consider two issues. First, they should entrust the scheme's regulator with the task of ensuring that sufficient funds are allocated to waste management. If the scheme were abolished, the cost of financing projects by other means would be too high for most volunteers.

Secondly, the Government should consider whether their aspiration to divert 65 per cent. of resources to waste management will ultimately remain an aspiration. As the Environmental Services Association has observed, the landfill tax credit scheme makes a positive contribution, but it will never be large enough to pay for the £7 billion of new infrastructure needed to deliver compliance with the national waste strategy, or to bring the £1.5 billion annually spent on British municipal waste management services up to the £3 billion spent in France, an EU member state with an economy and population similar to the UK's.

I strongly suggest that a new scheme—I echo the remarks made by the hon. Member for Huddersfield (Mr. Sheerman)—is needed to aspire to waste management, but we should keep the current landfill tax credit scheme so that other environmental initiatives can be encouraged in the community. As we have heard from my hon. Friends, many valuable environmental schemes will disappear if the landfill tax credit scheme is scrapped.

Thank you, Mr. Winterton. I shall be extremely brief because I want to allow the Minister time to respond.

The first priority must always be not creating waste in the first place. The second must be to recycle the waste that is created. The last thing that one wants to do with rubbish—I say this as the Member of Parliament for Mid-Bedfordshire, where there are many holes in the ground that are filled with lots of rubbish, including London's rubbish—is to dump it in a hole in the ground or to burn it. The priority for any environmental scheme must be not to create waste in the first place and to recycle what is produced. Historically, we have a poor record on recycling. Much more of the money that is collected by the landfill tax credit scheme should go on recycling because that would be better both for my constituency and for the country as a whole.

I congratulate the hon. Member for Henley (Mr. Johnson) on an excellent and well-subscribed debate. He gave us a tour de force in which he shared the delights of watercress beds and church halls in his constituency. He also shared with us the startling fact that it takes 50 years for a newspaper to become biodegradable, while it takes 500 years for a baby's nappy to achieve the same state. That begs the question how long it would take for a newspaper graced by a column from the hon. Gentleman to biodegrade? Would it be 75 years, 100, 450 or maybe even 10? Nevertheless, he has shared with us real knowledge of and sympathy for the organisations that benefit from the landfill tax credit scheme, as have the hon. Members for Witney (Mr. Cameron), for Banbury (Mr. Baldry) and for Mid-Bedfordshire (Mr. Sayeed) and my hon. Friend the Member for Huddersfield (Mr. Sheerman), who has a long-standing knowledge of this subject, and whose contributions to debates and Question Times in the House are eagerly looked forward to by myself and my colleagues.

We need to recognise the importance of this scheme to local communities. It dates back, as was said, to 1996. It represents the outcome and the product of a tax that forms a key part of this Government's strategy to reduce the environmental costs of landfill and encourage waste producers to consider more environmentally friendly alternatives such as minimalisation, reuse and recycling. The hon. Member for Mid-Bedfordshire is right to stress the primary importance of the first of those. We all share a belief that reuse and recycling have an important role to play.

One consequence of the arrangements put in place for the landfill tax credit scheme is that the contributions count as tax forgone, so they do not count towards public sector spending. The scheme can therefore support projects that improve local communities around landfill sites, reclaim contaminated land or support research and education into more sustainable waste management.

The path down which my hon. Friend the Member for Huddersfield urges the Government—to use 80 per cent. of the tax for environmental schemes—is a radical solution. I shall count it as his contribution to the consultation. He will understand, as will other hon. Members, why I do not intend during this debate to pre-empt the outcome of that consultation. However, I assure all hon. Members, especially the hon. Member for Henley, who put his case passionately, that we do not come to the consultation process with any foregone conclusions. We want to see more environmental bodies supporting more recycling projects. We are looking at ways of improving the performance of the scheme by encouraging contributors to target their funding at more strategic actions.

We are anxious that more of the available money should go into sustainable waste management. Last year we set an indicative target of 65 per cent. of landfill tax credits to be allocated to sustainable waste management projects, with at least a third of those to be allocated to recycling projects. Initial indications are that the industry has made significant progress towards meeting that target, which is warmly to be welcomed.

The scheme has much to commend it. It has raised some £450 million for spending on the environment, which represents a large amount of landfill tax forgone—over £100 million last year. The amount forgone is likely to grow in the coming year, as we are committed to increasing the rate of landfill tax. Therefore, it is right and proper that we should look closely at the way in which the funds are put to use. In the 2001 Budget we announced our intention to replace all or part of the scheme with a public spending programme directing resources towards Government priorities on sustainable waste management. That is a priority. We are seeking to consult widely on how best to achieve it.

The scheme has been successful at directing money to local community improvement projects. A number of them have been described—new church roofs, revamping of parish halls, nature reserves, playgrounds and other local amenities. The recipients of the funding are often small local bodies that may have difficulty in accessing other forms of funding. I take to heart the point made by my hon. Friend the Member for Huddersfield about the innovative approach embraced by the local schemes. They add value that would not necessarily be there if local authorities alone were the providers. That is an important point to bear in mind.

Will the Minister deal with the position of ENTRUST? As he knows, that organisation runs a scheme involving some 11,000 projects with only 26 staff. Does he think that such a large scheme can be managed with so few staff?

I have met people at ENTRUST and shall do so again. I am satisfied that they are up to the job and delivering a quality service.

There are some positive signs that the waste management industry is responding to the Government's challenge to divert more contributions into sustainable waste management projects, and we welcome that. However, there are areas for improvement. The Exchequer forgoes a large amount of revenue each year. It is important that a national strategy for waste management should receive some benefit from the operation of the scheme. We have adjusted the categories of project that may be funded under the scheme. Devolving control over the funds from the tax credit means that judgments about value for money remain in the hands of contributors. That is not a problem for small schemes delivering local benefits, but it can be a problem in terms of delivering the wider strategic vision that has to be in place to develop sustainable waste management.

There are other matters that it would be wrong for hon. Members to neglect. Various Committees of the House have expressed concerns about transparency. Arrangements for funding projects can become extremely complex. Relationships between contributing site operators, environmental bodies, local authorities, any other third party contributors and those who ultimately benefit from the project can be very close. That can be for the good, but it creates issues of transparency that must be addressed. I am satisfied that ENTRUST and others recognise the importance of so doing.

We want to make sure that the network of relationships produces the right outcome. Sometimes it does so in a rather convoluted way that requires close and effective regulation, for which ENTRUST is responsible. The goal of delivering a better environment is one that we share with the communities that are most intimately affected by landfill and other means of disposal. I well recall, as will you, Mr. Winterton, the contribution that was made to our consideration of these matters under a Conservative Administration, long before it became fashionable, by the former Member for Hornsey and Wood Green, Sir Hugh Rossi, who chaired the Select Committee on the Environment. I remember visiting some of the sites in mid-Bedfordshire at that time, when we learned a lesson about the importance of making sure that we better protect the environment and, within that, the importance of better regulation and of enabling and empowering local communities to deal with the concerns that most affect them.

The hon. Member for Henley made an important point in describing the strength of feeling among the environmental trusts that serve his constituency and those of several other hon. Members in the Chamber. The great benefit of those trusts is that they are locally based and represent local opinion. The great benefit of schemes and projects such as those described by my hon. Friend the Member for Huddersfield is that they are directly accountable to those who are living with the problem, and provide a framework and context for innovative and imaginative approaches to tackling local needs. That is something that any new scheme must reflect.

This is an open and genuine consultation and I believe that today's debate, although short, has helped to further it. All the points made by my hon. Friend the Member for Huddersfield and other hon. Members will be taken into account in the course of that consultation, in order that we may better protect the environment at the end of it.

We all thank the Minister for his reply.

It gives me great pleasure that the Under-Secretary of State for Health, my hon. Friend the Member for Salford (Ms Blears), is to respond to the debate. She knows Rossendale only too well. Some years ago, she had the good fortune—some may say the misfortune—to work at the town hall there.

My hon. Friend the Member for Hyndburn (Mr. Pope) would have been here, but he is engaged in important Select Committee business this morning. He very much wishes to be associated with the debate because the town of Haslingden, in the borough of Rossendale and very much part of the Rossendale valley, falls within his parliamentary constituency.

The lack of national health service dentists in Rossendale has been a growing problem in recent months. It is not confined to Rossendale. A recent survey of 91 health authorities in England and Wales claimed that only half of all adults are registered with an NHS dentist. The situation in Rossendale is especially acute and now demands urgent attention and special treatment. It has been raised with me by several of my constituents, of whom I mention one or two.

Mrs. Sheila Charleson of Loveclough wrote to me recently about her family's experience. She said:

"Today I have spent over an hour on the telephone trying to acquire a dental appointment for my son with an NHS dentist. This task has proved impossible despite the fact that the whole family, including previous generations have worked all their lives and paid tax and national insurance contributions! The family were all previously patients of Wood and Duffy at Waterfoot but they now only see private patients and my son cannot afford to pay for private treatment nor indeed afford the insurance premiums required to offset some of the dental expenses

It would appear that within the whole of Rossendale there is not one dental practice taking on NHS patients, a situation I find deplorable and totally unacceptable. I have been informed that the nearest dentist with an NHS list is in Accrington and his list is apparently closed until at least January 2002!

After much frustration and hard work I managed to secure him an appointment at Waterfoot for emergency treatment next Monday 19th November but this will only be for his immediate pain problem and further check-ups and treatment will have to be done elsewhere (where that might be seems to be anyone's guess!)

Something needs to be done immediately about this unacceptable state of affairs as I am sure my son is not the only person faced with this disregard for the health and welfare of the hard working citizens of East Lancashire."

Another constituent whom I would particularly like to mention is David Walsh of Newchurch, whose experience was very sad indeed. He wrote:

"Dear Janet,

On Boxing Day I had to walk from my home here in Newchurch…to the nearest NHS Walk In Centre outside the Rochdale Royal Infirmary. I had a huge tooth abscess. I set off at 7.10 in the morning on foot and I got to the Rochdale Infirmary (the NHS Walk In Centre is just opposite the Accident and Emergency) at 9.50! The dentist was amazed that I'd walked so far to get his help…p.s. I had to walk to Rochdale on Boxing Day because there was no public transport and I cannot drive or ride a bike."

What are the reasons for that situation? They were recently clearly outlined to me by Dr. J. G. Whittle, the consultant in dental public health at the East Lancashire health authority. He told me:

"The underlying problem with NHS dentistry in East Lancashire is the shortage of dentists willing to come and work in this part of the world. The problem has been compounded by the reduction of dentists in training since the 1980s. The introduction of vocational training in the 1990s means that the first job for many dental graduates is close to the university where they train and this gives the practices involved in that training an advantage in obtaining new dentists

It is true that the number of registered dentists has grown considerably in recent years. However, this is mainly because of dentists from overseas coming to work in Britain. This has not helped East Lancashire because these dentists want to work in the major metropolitan centres which they hear about at home. East Lancashire Health Authority has advertised for dentists in Europe but with no success for this reason

For these reasons our practices have been unable to attract new dentists to the area and their present dentists have been struggling to cope with large lists of NHS patients. Last year the three large practices (in Haslingden, Rawtenstall and Waterfoot), all owned by the same partners, decided that the only way to reduce their workloads was to privatise. The knock-on effect of this has been to overwhelm the other six practices to the point where they are unable to take on any new NHS patients

When we submitted our expression of interest in providing a Personal Dental Services (PDS) pilot for Rossendale in 2001 we requested a dentist for five sessions a week. A few months later when we came to writing the full proposal we increased this to 10 sessions. The PDS we have set up at Haslingden and Waterfoot now provides 11 sessions

However"—

this is perhaps the most disturbing point—

"recent figures from the Dental Practice Board, show that during the quarter ending 30 September 2001, the number of patients (adults and children) registered with East Lancashire dentists fell by 15,358 from 241,873 to 226,515."

I was astonished to learn that

"ninety per cent. of that fall was accounted for in Rossendale where the number of registered patients fell by 13,765 over the three months. At the same time the Emergency Dental Service which was set up to provide care for up to 20 patients a session in the evenings and at weekends is regularly having to cope with 40 patients and more

We have therefore worked with Rossendale PCG and the Burnley Trust to develop proposals for a much larger PDS pilot in Rossendale. We have identified vacant accommodation at both Rawtenstall Health Centre and at Rossendale Hospital. Refurbishment of either would create a unit containing four dental surgeries. Subject to recruitment of dentists this unit could provide up to 40 additional sessions of dental treatment each week. Our first estimates of the costs of such a service are set up funding of approximately £259,000 and recurrent expenditure of about £442,000 per annum

Experience of setting up a PDS in Rossendale has shown that there are some, but not many, dentists who would prefer to work in such a system rather than the general dental service. Therefore, even if we got the funding, it might take some time until it was fully staffed."

Dr. Whittle ends with these thoughts, which I commend to the Minister, on how the Government could help to improve access to dental services in east Lancashire. They could

"introduce fluoridation of the public water supplies in the area. This would reduce dental decay by up to 50 per cent. and reduce the demands on dental services."

They could also

"increase the provision of salaried dental services in Rossendale by supporting the PDS proposal described above",

and

"train dental graduates in Lancashire. The Cumbria and Lancashire Strategic Health Authority Area will be the only one in the North of England without a dental school."

Lastly, and perhaps most important, the Government could

"direct dentists to under-dentisted areas for their vocational training."

So, in the Rossendale valley at the end of September last year, nearly 14,000 fewer of my constituents were registered with an NHS dentist than were registered three months earlier. That is a staggering statistic, and the situation is likely to be even worse now. As health watchdogs have warned, serious health problems can arise if people stop seeing a dentist altogether. Problems such as cancer of the mouth may not be detected before it is too late.

I hope, therefore, that the Minister can offer some comfort to my constituents by acknowledging that the Government understand the serious situation now facing us in the Rossendale valley and will take urgent steps to put matters right.

I congratulate my hon. Friend the Member for Rossendale and Darwen (Janet Anderson) on raising this extremely important issue. I have no doubt that her constituents will be pleased that she has raised them in such detail. She has also pointed the way forward with some practical suggestions about action that the Government can take, with local health organisations, to ensure that the problem is eased for her constituents. As she rightly says, I know the Rossendale area quite well. It is a beautiful area that has a lot going for it, but I recognise that her constituents have particular health problems and need a good service.

The whole of east Lancashire has had long-standing problems in gaining access to NHS dentistry. Throughout the 1990s, not just in east Lancashire but in many parts of the country, the NHS dentistry system went through a great deal of strain, with many dentists deciding to opt for private practice instead of concentrating on work in the NHS, as many of them had done previously. That was partly due to some dramatic changes in the remuneration system for dentists and the contractual situation, which meant that working in NHS dentistry became a much less attractive proposition for many dentists. Since the Government were elected, we have tried to take practical steps to draw dentistry back into the NHS, by looking at remuneration and extra incentives for dentists who do a greater proportion of their work in the health service and by training young dentists and involving them in communities across the country.

We must recognise that dentists are independent contractors and can therefore choose whether to practise in the private sector or in the national health service. This may be one area where the Government have fewer levers to direct what happens and must therefore be more imaginative in creating a climate in which dentists want to be part of the national health service. That is a challenge that I face and am enjoying trying to meet.

In September 1996, the Government cut the maximum period allowed between visits so that patients could retain their registration with an NHS dentist. Originally, the period was 24 months between visits. It went down to 15 months and, as a result, hundreds of thousands of people were removed from the registers of their NHS dentists. We saw a dramatic fall in the number of people registered and thus the number of people who can get on-going care rather than the emergency care to which my hon. Friend referred. In 1993, 21.6 million adults were registered in this country. That had fallen to 16.8 million in 1999—a dramatic reduction. My hon. Friend is right that in east Lancashire now, and particularly in Rossendale, a worryingly low number of dentists are prepared to take on new NHS patients.

The health authority runs an emergency access service, which is open every night of the week, so that patients can get emergency care. I understand that it is in Accrington, about six or seven miles from Rossendale. At present, 30 to 40 patients a night seek access to that service, so it is clear that the demand exists in the community for dentistry services.

In trying to address those issues, the Government published "Modernising NHS Dentistry-Implementing the NHS Plan", which is part of the overall NHS plan. That document commits us over the next few years to ensuring that everybody can have access to an NHS dentist and to raising the level of oral health, particularly in children, to reducing the massive inequalities in oral health between different communities, and to improving the quality of service offered by NHS dentists. In addition to the plan, the Prime Minister pledged in 1999 that by the end of September 2001, although not everyone would necessarily be registered on a long-term basis, they would at least be able to find a dentist, which they had not been able to do before, by phoning NHS Direct. That system is working in the constituency of my hon. Friend the Member for Rossendale and Darwen and people are being signposted by NHS Direct to dentists who are taking on new patients. However, people often have to travel some distance from their homes for that access.

During the past 18 months, £100 million has been spent on introducing the strategy to increase NHS dentistry. We have tried to be innovative about the way in which that money has been spent to give patients the maximum value. Every health authority had to produce a dentistry action plan to identify gaps in its community and areas in which people were least well served, and produce practical solutions.

The health authority in east Lancashire has come up with a plan to provide dentistry in the community and has set standards that state that people should be able to get routine care within a 10-mile distance, urgent care within 18 miles and emergency care within 12 miles. Those are long distances for people to have to travel, so we would like to improve on the standards. However, it is important to secure a base framework for an NHS service. The plan identifies areas with particular problems such as Burnley, Pendle and Rossendale. The situation is slightly better in Blackburn, Hyndburn and the Ribble valley, but gaps exist there, too.

The health authority plans to introduce incentives into the system to encourage NHS dentists to increase the proportion of its practices devoted to NHS patients; payments are now available to dentists for that. We have given £50,000 to the dental care development fund to incentivise dentists, to which the health authority added £20,000. That is a fair-sized fund, which means that an extra 11,000 people can be registered in the area. I take note of my hon. Friend's worry about the dramatic decrease that has happened during the past three months. That has arisen from a decision of three major practices in her constituency to privatise their service and move towards a Denplan system. Those practices are owned by the same dentist, but a decision of such magnitude in a relatively small community can have a disproportionate impact on services available to local people.

The health authority has also put almost £500,000—a significant amount—into the Modernisation fund for distribution to general dental practitioners. In his letter, Dr. Whittle highlighted the difficulties of staffing and the fact that, despite extra funding, it is not always possible to convince young dentists that they want to work in Rossendale, Darwen or other areas away from major metropolitan centres in which those at the beginning of their careers often think they will receive the best practice.

I am pleased to tell my hon. Friend that, in 2001–02, seven dental practices in east Lancashire have been approved as vocational training practices and can take on new trainees. It is hoped that young trainees will get to know the community, become settled in the area, appreciate the benefits that Rossendale and east Lancashire have to offer them and their families, and develop practices. The fact that seven practices participate in the vocational system should draw new dentists into the area. New finance will help to establish new practices and the NHS will help to support the costs of establishing dentists in an area—we want to do everything we can to draw them in. We hope that, at the end of their vocational year, the dentists will stay in the communities where they have got to know the patients and the health service.

Another creative way in which we have tried to provide services is through a fourth-wave personal dental services pilot. Salaried dentists are employed by the health authority to provide services to local people. Funding of £360,000 went to a third-wave pilot based in three areas: Rossendale, Burnley and Pendle. The one in Rossendale, in my hon. Friend's constituency, operates at Haslingden and Waterfoot on Mondays, Tuesdays and Fridays, and is well used. My officials will discuss the proposals to extend that personal dental services pilot with the health authority and local people to see whether we can expand the service to provide a greater range of sessions for local people to attend. I do not pretend that that will be easy, because of the staffing issue, and if a service is set up, we must be sure that we can attract the dentists, dental therapists and hygienists so that we obtain value for the money invested. I am more than happy to give the assurance that my officials will explore the prospects for expanding the fourth-wave dental services pilot in my hon. Friend's constituency.

I recognise that some access problems are fuelled by higher-than-average levels of dental disease in people living in my hon. Friend's constituency. As Dr. Whittle said, water fluoridation offers the most effective means of reducing inequalities in oral health, but, as hon. Members know, that is very controversial. We responded to concerns about the safety of water fluoridation by commissioning research into the evidence of its effect not just on oral health but on health generally. The Medical Research Council undertook a review that should be completed within the next couple of months and we shall review our policy in the light of the MRC's findings.

In the meantime, I am pleased to confirm that east Lancashire is included in the areas involved in the national "brushing for life" scheme, which I was delighted to launch last autumn. In the scheme, families with young children are given packs containing fluoride toothpaste, a toothbrush and a leaflet on oral hygiene. Health visitors show children how to brush their teeth almost before they have teeth and help them into a habit of good, early oral health care and of regularly brushing their teeth, which can help to reduce some of the problems that arise later in life. I am delighted that east Lancashire is included in that scheme. There will also be regular checks on children's teeth and oral health with lots of encouragement.

We are not encouraging a nanny state telling people what to do; we are making a genuine attempt to persuade people into good habits early in life because what we learn then tends to remain with us for many years. I hope that my hon. Friend will see the scheme in action in some of the schools and child health clinics in her constituency. I am pleased to offer my hon. Friend the comfort that we are trying to direct dentists into her area.

Another matter that Dr. Whittle raised was training. He said that there is no dental school within the Lancashire and Cumbria strategic health authority area and that it is the only strategic health authority in the north-west without a dental school. However, two dental schools—in Liverpool and Manchester—are fairly close to the area and of the 28 strategic health authorities throughout the country, only 10 have dental schools, so Lancashire and Cumbria are not unique in not having a dental school in their immediate area. I accept that, when training young dentists, we must encourage them to spread their wings a little wider than the conurbations of Manchester and Liverpool. That is important for the residents of the whole north-west region.

I hope that I have provided some comfort to my hon. Friend. It is impossible to spirit dentists out of the air. They must be trained and encouraged to work within a national health service that recognises their skills and values their contribution, and in which we have a proper dialogue with them. In recent years, the dental service may have become a little detached from the NHS as a whole. In my negotiations with dentists and in discussions with their professional and representatives groups—I have met them on many occasions—many of them have said that they want to change the way they practise. They want to be part of the NHS, but they want their skills to be properly value and rewarded. We want a national health service in which dentists feel that they are a key part of the primary care team rather than simply drilling and filling, and in which they use their skills to advise on improvements to young people's health in particular. They will then have the satisfaction of seeing people's teeth gradually improve with less need for emergency care and the sort of pain relief required by my hon. Friend's constituent, Mr. Walsh, who had to go through such a gruelling and terrible experience on the day after Christmas. I cannot imagine anything much worse than his experience. I hope that in future we can ensure that generally, if not on Boxing day, he has access to an NHS dentist. That is what most people want to find for themselves and their families.

I am pleased to say that the rewards for the profession have been appreciated in recent years. We have paid in full the Doctors and Dentists Remuneration Review Body pay awards. They have not been staged. This year the basic pay increase is, I think, 3.6 per cent., which is above inflation. I hope that that will show dentists that we value the services that they provide. We have incentives to try to make them increase the amount of NHS practice that they do. The more dentists we can involve in improving the teeth and oral health of everyone in the country, the better. This is not simply about teeth, but about such matters as oral cancers and general health. Good early dental examination can make a real and significant difference to people's health.

I am delighted that my hon. Friend the Member for Rossendale and Darwen has raised the issue. I am sorry that my hon. Friend the Member for Hyndburn (Mr. Pope) could not be with us, but I fully appreciate his concern about the matter on behalf of his constituents. I shall certainly endeavour to do whatever I can, through my officials, to ensure that NHS dentistry in Rossendale improves in the months to come. My hon. Friend the Member for Rossendale and Darwen has done us all a service by raising this important issue here today.

Any reasonable person watching news unfold during the Christmas recess will have been truly shocked at two cases in which farmers had their barns invaded by so-called "revellers" and very little action was taken. It might be recalled that, in the Lincolnshire case, the farmer said that he felt more like a farmer in Zimbabwe than in part of the United Kingdom. In the Essex case, outrageously, when the farmer cut off the electricity to the barn, he was arrested by the police and held in his local police station until 5 o'clock in the morning. My right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) is taking that matter up with both the police and Ministers at present.

It might be hoped that those incidents were unusual and isolated, but I regret to report that that is not the case. I want to illustrate what has happened twice in my constituency during the last six months. With your indulgence, Mr. Winterton, I shall read some correspondence that illuminates a serious problem.

The first invasion took place on town council playing fields in Bracknell. I shall read from the experienced and well-regarded town clerk Barbara Rumbold's letter to our chief constable, Sir Charles Pollard, dated 27 July. She says:

"On the evening of 10th July gypsies with six caravans moved onto the Wildridings Playing Field, one of our many sites for football pitches in the town. Notice to remove themselves from the site was issued at 9.30 am on the 11th. This group was joined by a further eleven caravans on Saturday the 14th. During this time several requests were made to Bracknell Police to remove them from the site either under Section 61 of the Criminal Justice and Public Order Act 1994 or under the Byelaws for the site granted by the Secretary of State in 1983… Whilst occupying this land they chased my own staff off the playing field and made it difficult for any local people to enjoy…their own open space.

As the local police were not prepared to move them, quoting their reluctance in view of the Human Rights Act, we instructed Common Law Bailiffs and the gypsies moved off the site at 7 pm on Tuesday 17th. They moved only across the dual-carriageway to our Ringmead Playing Fields—also football fields. I rang the Bracknell Station when I learnt of their apparent destination and was informed that Officers had been despatched as the caravans were blocking an adjacent bus lane. Your Officers then allowed them to occupy the playing field that is of sufficient size only for one football pitch that has suffered considerable damage

Again more phone calls to Bracknell station failed to result in any action to remove what soon became a much larger camp site, eventually growing to thirty-three caravans when they were evicted by Bailiffs at 8pm on Sunday the 22nd. The Ringmead encampment became particularly offensive as it was so close to local residents."

I would add that I spoke to several local residents who contacted me in fear of their property and safety. Mrs. Rumbold goes on to say:

"The whole site was badly contaminated when vacated, the gypsies having defecated indiscriminately anywhere on the site and having left a particularly foul mess all along the shrubs adjacent to the fence of one particular house

My staff have cleared this disgusting mess consisting of both human and canine excrement, dirty nappies, toilet paper. clothing used as toilet paper, female sanitary goods, bags of vomit, general household waste, heaps of concrete, soil and other building materials from the site. It would appear from what we collected that washing had been stolen and goods taken from shops as some of the clothing was still on hangers.

My Council and the residents of both Wildridings and Great Hollands feel that they should have expected better service and co-operation from the local police. Nothing was done to ensure that the local community could peacefully enjoy their own playing fields for which residents pay their Council Tax.

We have Byelaws in Bracknell…that are routinely enforced against the local residents to prevent the fouling of land by dogs yet the gypsies were able to foul the land without penalty.

If local residents had indecently exposed themselves on open ground as the gypsies did they could very well have been arrested.

Local motorists and pedestrians were put at risk by the manner in which the gypsies drove on and off the site and on local roads with little regard for the safety of others.

Harassment took place in local shops and neighbourhood centres.

Whilst we appreciate that some form of dialogue has to be kept open with the gypsies, it was particularly galling for my staff to see the friendly way in which the gypsies were approached by your Officers.

As a minor local authority, this Council has no responsibility whatsoever for gypsies but will incur considerable costs for the two actions so far undertaken for us by the Bailiffs, to say nothing of the clean up costs. The gypsies are still in this area and have been observed checking out more of our football grounds. To the best of my knowledge since January the Bracknell Forest Borough Council have moved gypsies on some twenty-two times. The cost to the local Council Tax Payers is unwarranted and unnecessary.

As you very well know, there is little point in erecting fences, gates, height restriction barriers etc., as these are no deterrent to gypsies who are determined to enter land. They simply remove them or cut the padlocks on gates required for our own access and such criminal damage is ignored. Bracknell is obviously now known as a soft touch where the Police will take no action. You have the powers to remove them but will not use them. It is much easier to keep telling residents that it is down to the local authority to remove them.

My Council, on behalf of the residents of Bracknell is seeking your assurances that you will issue instructions to local Officers to ensure that gypsies will be promptly removed in future using your powers under the Criminal Justice and Public Order Act 1994. Also that whenever possible they will be deterred from entering local parks and playing fields.

Local residents would…prefer that the Police went back to being a 'Force' and enforced the law as there is little evidence of 'Service' being offered to the local community."

I, too, made representations to the chief constable, as I was shocked and appalled at these events. The reply from his superintendent of specialist operations, Stephen Evans, beggars belief. On 16 August, he wrote to me to say:

"Our policy is based on relevant legislation and the Code of Practice issued by the Home Office in conjunction with the Department of Transport and the Regions. I am sure that you will be aware that the Code of Practice quite clearly sets out considerations that should be taken by all relevant Authorities when dealing with traveller encampments. Our approach to traveller encampments is aimed at being lawful, proportionate and within the guidelines set out in the Codes of Practice. Your letter suggests that we were slow to act"—

in this particular case. He continued:

"This is not the case. Our officers attended these encampments as soon as they were established and made an assessment as to the appropriate course of action. At two of the three encampments, our judgement was that it was not appropriate to invoke our powers under Section 61 of the Crime and Disorder Act. This is of course a subjective decision, but it is made in accordance with our policy guidelines and it takes into account all relevant factors, including the codes of practice. Having made such a decision we do not walk away from the problem. Our policy is to continue to monitor traveller encampments, to provide high visibility reassurance patrols, to deal with incidents".

That is hardly reassuring to my constituents.

Stephen Evans then makes the following outrageous statement:

"Travellers are an extremely emotive issue and a decision by us not to invoke our powers under Section 61 is rarely greeted favourably by local people. However I am sure you would agree that it would be cavalier to misuse this power in inappropriate circumstances or to act outside of recognised good practice. If circumstances are such that in our judgement Section 61 should be used then we will not hesitate to use it. However we will be equally robust in not exercising this power if the circumstances are not appropriate. You mention in your letter the issue of Human Rights, which is one of the factors that we will consider. My interpretation of the Human Rights Act is that it applies equally to all groups and sections of society and it is within those parameters that we must operate."

The Minister will not be surprised to learn that my constituents, the town clerk and others were deeply angered by that totally inadequate response.

Just one month ago, a further incident occurred on public property that also cost council tax payers a lot of money. In his letter to me of 14 December, Mr. Bob Lewin, the highly respected principal and chief executive of Bracknell and Wokingham college of further education, said:

"I am reluctant to bring you a problem but I hope you will understand my concerns in this case

At about 6.00pm on Thursday 6 March a large group of travellers was required to leave the town centre car park on Bull Lane, Bracknell. They drove out of the car park, straight into our student car park off Bull Lane which serves our Wick Hill Centre. The attached report prepared by our site manager gives some details."

He proceeded to outline the following concerns:

"This is the second time this year we have had travellers on this site. They are no respecters of property or people's sensitivities (e.g. students aged 11–90 use the footpath from Bull Lane to the Garth Hill School and to the College. The travellers' vehicles were parked across the path on both occasions. You can imagine the threat to their security this causes would-be users of the footpath).

Why on earth should we have to put up with this? Being a public sector organisation we cannot of course resort to the methods private land owners use to rid themselves of unwelcome visitors.

The police took no action to stop the travellers entering our site. They were there; their comment was 'they have to have hard standing'. I happened to be at the Wick Hill site that evening and witnessed the chaotic situation as we helped our students move their cars from the student car park to the much smaller staff car park off Sandy Lane. No student would have considered it safe to leave their car in the car park—which in the event was completely filled by the travellers' cars, vans, caravans and lorries. See also my site manager's comments. The impression he gained was that the police wanted the public car park cleared for the Saturday market and Christmas shopping and the College was somehow expected to cope with the travellers.

As the enclosed report shows, the travellers caused damage and left an appalling mess. The College has to meet the cost of clearing this up and replacing damaged property.

We lose students of course on these occasions as they are scared away by the travellers.

You should know that we cannot use permanent barriers on the site (which in any case I suspect the travellers would destroy): we allow parents of the Sandy Lane Primary School to use the area as a drop off point when driving their children to school and we have thousands of students who are eligible each year to use the car park; the issuing of tickets (or any other control system) would be impractical therefore. The entrance to the car park does have a gate. We could not close and lock this on Thursday as this would have trapped our students and their cars. We will be installing a height barrier. After our last invasion we had to erect bollards around the site as the travellers broke through a hedge to gain access. This all costs us money, of which we do not have enough."

I shall quote in part from the report to which he refers, from the site manager Stan Wears. He says:

"I asked if he"—

that is the police inspector—

"could stop the rest of the travellers who were still on Albert Road car park, but I didn't get any support and he seemed to be wanting them all on our site rather than splitting them up, which seems to the College quite bewildering.

I explained we had parents bringing in children during the day to our nursery and Sandy Lane Infant and Junior school, and naturally our own students who would feel threatened by the situation, to which he offered police officers to monitor the situation the next morning.

While we were talking all of our students came down…and removed their cars… The Bracknell Forest Borough Council officers seemed to be more supportive than the Police and as Sites Manager I was quite perplexed by the Police and their lack of support in the situation.

Our staff felt threatened on the Friday and naturally I had to keep going to the site on a regular basis especially during Saturday and Sunday… I arrived at Wick Hill on Sunday…to find the site empty but in a disgusting state, rubbish strewn all over the site, rubbish bags, boxes, gas bottles, rubble and children's toys some usable, some broken. I checked the nursery area and found the hut/storage unit had been broken into over the weekend, which explained the toys all over the site. The grass area had also been used as motorbike run and was cut up and damaged.

The College will have to bear the costs for extra staffing hours regarding security, cleaning and two skips (£250) to remove rubbish. I had to spend late Sunday pm cleaning the car park to make it usable for Monday am. Assistant site managers have also had to be used to help clear up the mess.

We also had Priestwood Families"—

Priestwood is the neighbouring council estate to the car park—

"asking us why the travellers were there and that they felt intimated by their presence."

Naturally, I again made representations to the police. This time, I had a reply from the assistant chief constable, territorial policing, Mr. Steve Love, who said:

"Our local police commanders often feel caught between a rock and a hard place on this issue. Although the police have a power under section 61…to order travellers to quit land, they have no power to direct them where to go when they do quit—they can simply drive down the road onto somewhere else. Nor do they have the power to stop somebody entering onto land in the first place—I myself have stood, without police powers, watching vehicles drive past me onto a recreation ground.

The law and the guidance then require them to balance the human rights of the travellers with the occupier of the land. Because, temporarily at least, the land represents the home of the travellers as soon as they have arrived on it, any eviction of them represents potentially quite a serious infringement of their human rights."

It is the same story again.

Not surprisingly, the excellent Mr. Bob Lewin, principal of the college, was not impressed with the deputy chief constable's inadequate response. In a letter that I received today, he says:

"Whilst I suppose the human rights of College staff were not infringed when the travellers moved onto our car park, our ability to go about our lawful business most certainly was curtailed! I believe that in Scotland, the Police or the local authority can impound sound systems if they are used in such a way as to annoy neighbours. Is there a basis here for a way of dealing with trespassers—'if you don't move on, we'll impound your lorry'?… As you may be aware, a group of travellers moved onto the borough's car park off Bull Lane last week. My caretakers maintained a twelve hour guard on the entrance to our Bull Lane car park for three weekdays and carried out additional surveillance at the weekend until the travellers had moved on—to ensure they did not move into our car park at times when we could not have the gates locked."

The cost to the college of further education, which is already hard pressed, is huge. The cost to council tax payers, where there are natural budgetary restraints, is great. Ordinary, innocent people—hard-working, normal, straightforward people who live around Bracknell—want to get on with their lives in peace, but they want protection under the law when they are invaded by this scum. They are scum, and I use the word advisedly. People who do what these people have done do not deserve the same human rights as my decent constituents going about their everyday lives. Either the police are not doing a proper job, in which case I hope that the Minister and the Home Secretary will issue directives to police constables to take appropriate action, or Parliament in general and the Government in particular have inadequate legislation.

I return to Assistant Chief Constable Steve Love's letter of 3 January, in which he states:

"There are a number of things which could be done at your own level without which we are unlikely to make much more progress. These include"—

I should be interested in the Minister's comments on these suggestions—

"a legal power, when the police or a local authority directs travellers to leave land, to also direct that they will not return, that nobody else will enter that land, for a period of, say, 12 months, and a minimum distance that they must go having left that land."

His second point is that he needs

"a positive statement that would stand up in law to the effect that there will be a presumption that the human rights of the occupier or owner of land will outweigh the human rights of someone who parks a caravan on it and claims occupation."

Thirdly—I appreciate that this goes beyond the Minister's remit, but I sympathise with the point—he says that he needs

"direction to the Inland Revenue to really take a grip on the 'cash in hand—no overheads' economy, which underpins a lot of traveller activity."

I am not convinced as to who is in the wrong, but I know that my innocent constituents, the residents of Bracknell, are in the right. I initiated this afternoon's debate to establish how they can be properly protected. It must either be for the police to carry out their duties properly, directed by the Home Secretary, or for us as a Parliament, and for the Minister representing the Government, to strengthen the law so that the police can carry out their duties. We cannot have a situation in which ordinary decent people's lives are made a misery, they are under threat, their environment, their homes and their family's lives are ruined for a time and where the cost to individuals, taxpayers and hard-pressed organisations such as Bracknell and Wokingham college have to be met out of their own funds.

I shall be fascinated to hear what the Minister has to say. I appreciate that most of this will be new to her, but as she does not have long to wind up I would also appreciate a more detailed written response from her or the Home Secretary, because it is vital that this matter is tackled once and for all.

I am grateful to the right hon. Member for Bracknell (Mr. MacKay) for raising the issue of trespass with particular reference to the difficulties caused by unauthorised camping. Unauthorised camping is a serious matter, and in many areas it is a challenge to balance the problems that the right hon. Gentleman has graphically described.

It would be a good idea if I began by confirming that travellers are part of our society, and they should be accorded the same rights and dignities as others: they have equal human rights to the settled community. However, human rights also extend to the settled community, and travellers' behaviour and the expectations of that behaviour should therefore be the same for those in the travelling community and the settled community. Anyone who thinks that that is not the case is profoundly wrong. The minority status of travellers and gypsies should not allow them to indulge in crime or antisocial behaviour; nor should it excuse that behaviour. The law should be enforced equally on them.

The right hon. Gentleman might be interested in a recent case in the High Court in which section 61 of the Criminal Justice and Public Order Act 1994—the part that encompasses police powers—was challenged and found not incompatible with the Human Rights Act 1998. I hope that that is another reassurance that he will take away with him. Each operation by the police is subject to challenge on the same grounds, so the police must bear the Human Rights Act in mind. However, within the context of what I have just said—that all people's rights are equal in our society—if people behave in an antisocial or criminal way, or in some of the ways that the right hon. Gentleman outlined, the full force of the law can and should be brought to bear.

A variety of legislation is in place to tackle the issue of unauthorised camping. Section 61 of the 1994 Act allows a

"police officer present at the scene"

of an unauthorised camp to direct people to leave if he or she

"reasonably believes that two or more persons are trespassing on land…with the common purpose of residing there"

and reasonable attempts by the landowner to get them to move have been unsuccessful. There must also have been some

"damage to the land or to property",

and the right hon. Gentleman clearly outlined some of that. The travellers must have been "abusive" or "threatening" towards the landowner or agent trying to get them to move, or have brought "six or more vehicles" on to the land.

Once those conditions are fulfilled, a direction can be given to the travellers to leave the land and remove their property from it. When evicted from a place under section 61 of the 1994 Act, travellers cannot return to that place within three months. If given a direction to leave, the refusal to do so carries the power of arrest.

That is a discretionary power, and I suspect that that is the nub of the matter. How that power is used operationally is a matter for the chief constable and the local police commander. The legislation does not refer to land forming part of a highway—another loophole, which the right hon. Gentleman did not mention, but which has become obvious to people trying to use the powers.

If the police have any knowledge of any large-scale incursion into an area, they can apply to a district council for an order prohibiting trespassory assemblies for a specified period, under section 14A of the Public Order Act 1986. Once such an application is received, the council may with the Home Secretary's consent make an order banning such assemblies. It is then an offence to assemble in breach of that order. The offence also carries a power of arrest. The police may direct people away from travelling towards such a gathering if an order is in place. That is a more preventive power that exists under current legislation.

Local authorities also have powers, under section 77 of the Criminal Justice and Public Order Act 1994, that enable them to direct any unauthorised campers to leave land where they are camped without consent. It is an offence not to leave as soon as is reasonably practical thereafter.

We have noticed in the operation of the 1994 Act that there is not always sufficient co-ordination between local police and local authorities over whether section 61 or section 77 is appropriate. The legislation works best where there is a proactive association and on-going co-operation between the local authority and police to try to deal with those issues and decide which of the two sections should be used. In the worst examples, the local authority expects the police to use section 61 and the police want the local authority to use section 77, so not a lot of progress is made.

The right hon. Gentleman referred to the good practice guidance, "Managing Unauthorised Camping", which featured in the letter from the chief constable that he read. It suggests more proactive co-operation between local agencies, not just the enforcing agencies, to ensure an appropriate response when incursions occur and cause nuisance, criminal damage and other serious disruption. Magistrates courts have powers under section 77 of the 1994 Act to order eviction, so there must also be a good and co-operative relationship with the courts to enable fast action to be taken. Part of the key to dealing with the matter appropriately and quickly when an encampment is causing problems is to persuade those organisations to work together instead of one expecting the other to take action. The good practice guide suggests that.

A landowner may take certain measures for the recovery of land under the civil procedures rule. Sections 1 to 5 of the Public Order Act 1986 and common law give the police powers to deal with a variety of other antisocial behaviour, such as public nuisance and breach of the peace. Again, creative and proactive action has often been proved to work when an unauthorised encampment exhibits such behaviour.

The legislation is discretionary and it is not for me as the Minister to interfere in operational decisions by the police and local authorities. However, the Government have made it clear—not least in asking the Association of Chief Police Officers to revise its guidelines on how to work with the legislation—that police powers can be used at an early stage if necessary. If the right hon. Gentleman looks at the way in which the legislation is framed, he will see that it allows early intervention to prevent large-scale incursion, especially if there is evidence that it is being organised.

I suggest gently that the legislation could be used more proactively and imaginatively than in the past to have a preventive effect. I am happy to write to the right hon. Gentleman about the detailed points, particularly on strengthening the law, but I am not giving a commitment that it will be the Home Office's top priority and he would not expect me to do so.

New work is being done between the Home Office and the Department for Transport, Local Government and the Regions to update the guide in the light of experience. Human Rights Act concerns exist, but I assure the right hon. Gentleman that if people are treated equally and have their human rights accorded to them, the police are not powerless to take action when criminal damage is done, there is breach of the peace and other laws are broken. I expect that to be taken into account appropriately by local forces. Laws exist that allow a proactive and sometimes preventive approach to the issue, but experience shows that they are more likely to be successful if there is open co-operation between local agencies that allows the law to be used to its maximum effect.