Thank you, Mr. Cook, and a happy new year to you and everybody. Thank you, in particular, for coming to rescue us today by taking the Chair. It is regrettable that we are starting 13 minutes late. I know that many hon. Members want to speak and so would like the debate to go on for the full one and a half hours. I will take the matter up with Mr. Speaker.

The Government have done much that is good in the NHS. There has been major investment and change such as nurse prescribing, the national service frameworks and the National Institute for Clinical Excellence. In Swindon we have a new hospital and a walk-in centre, and NHS dentistry has returned. Before Christmas a diagnostic and treatment centre on our new hospital site was approved. We would not have seen those improvements under the Tories. There is no question of the Government's commitment to creating an NHS of which we can all be proud. I, as a supporter of the Government's NHS agenda, and a Co-operative party member, am keen to look at the Government's proposals on foundation hospitals. However, I am not convinced that it is the right reform or the right time for reform.

The Government are aware that there are problems with organisational change. They describe the changes already taking place in the NHS as the biggest organisational change since it was set up. When much of that has hardly settled, more reform needs to be considered with great caution. The NHS plan is hugely ambitious; my constituents in Swindon want the maximum waiting time of six months by 2005 for all in-patients to be delivered sooner than that. It will be a massive improvement on what we experienced under the Tories. If the Government believe that more can be done for the NHS, delivering quicker and better treatments should be the priority. Will more organisational change best deliver the improvements in patient care? It is boring to keep existing targets and it may not create news headlines, but is not what is wanted a determination to deliver what patients need?

I want to deal first with some of the Government's reasons for proposing the introduction of foundation hospitals. The first motivation described by Ministers is the need to give incentives to the best trusts; I have dealt with some of them for many years and they have not cried out for incentives. There is no better incentive than delivering the best service possible for patients and spreading good practice elsewhere in the NHS.

The second motivation cited by Ministers is that the creation of foundation hospitals will stop the Tories privatising the NHS. That is a good motivation, but the Government do not need defensive policies; if the Tories were determined to privatise, although it is true that proposed legislation for foundation trusts would prevent privatisation, they could do so.

May I say categorically that the Conservative party never has had and does not have any intention whatever of privatising the national health service?

I am pleased to hear the hon. Gentleman say that, but many statements from the Tory party give one severe doubts. However, my point is that if a future Tory Government wanted to do so, we could not stop them pushing through legislation to allow trusts to be privatised. It is not as if they do not have experience of getting unpopular privatisations through the House.

The NHS is all about care services, but not just for the best hospitals. Why did the Government come up with the idea of foundation hospitals just by talking to the best and not consulting the middle and the worst hospitals, MPs, GPs, social services and others?

A third motivation is that Ministers say that everything cannot be run from Whitehall, but that leads to a strange feature of these proposals. If the organisational changes are needed to improve the efficiency of some hospitals to allow initiative and flair to be shown, why are not the same changes being made in all hospitals? The fact that foundation hospitals are proposed initially for three-star hospitals only, brings me to the first major concern, which is that they could be divisive—why only three-star and not zero-star hospitals? If the proposal is to work, it needs to work in all trusts and we cannot expect three-star hospitals always to stay as such. We assume that Nigel Crisp, chief executive of the NHS, is good at his job. From 1993 to 1997 he was chief executive of what is now the Oxford Radcliffe, which one would expect to have been a top performing hospital, but only five years later it is a one-star trust. Good trusts can turn out not to be so good.

Paragraph 4.1 of "A Guide to NHS Foundation Trusts" states that foundation trusts will not be subject to performance management by the Department of Health or strategic health authorities, but will be held to account by the commissioning process. We must ask by what levers; if a hospital is not performing, commissioners can threaten to move patients elsewhere, or actually move them, but that is not necessarily the best solution. Should not the Government allow themselves the ability to step in and support change management in foundation trusts, as they do in others? In some cases, it will be the quickest and most efficient way of turning a trust around. If the Government think that the commissioning process alone is the best way of achieving the changes needed, there is even more reason to say that all trusts should be foundation trusts, not just the three-star ones.

The Government say that hospitals must have a track record to deliver on foundation status. They say that there will be no cap on the number of foundation trusts, but it is not clear whether that means that all trusts will be able at some point to become three-star trusts and therefore foundation trusts, or whether the Government will, in the next round or a future round, allow two-star trusts to become foundation trusts. It would be helpful if that were clarified.

If public involvement helps to deliver faster improvements in patient services, surely it is even more important that the public are involved in zero-star hospitals than in those with three stars. The Government say that they cannot give those freedoms to poorly performing trusts, but ownership and freedoms are different. The one-star trusts could be given ownership, with the promise of freedoms when standards improve. That would be less divisive.

The logic of the Government's argument that not everything can be run from Whitehall is that the giving of more freedoms should apply to all. If enterprising managers and clinicians are prevented from doing good work, that will happen in three-star and zero-star hospitals, and in community services. Would it not be better to pilot for all the giving of freedoms from directives and then to widen those freedoms, rather than giving many freedoms to some? Should there not be help for the many, not the few? In any case, there are well and badly managed departments in all trusts. A simple one-star or three-star rating hides many variations within hospitals. Should not the good parts in all hospitals be rewarded?

Let us consider how the policy fits in with the new patients voice mechanisms. Foundation trusts will not have to set up their own patients forums. That suggests that the Government think that that type of central direction from Whitehall should be avoided, but they introduced that initiative only recently. I remember my hon. Friend the Minister ably defending the new systems at the Dispatch Box. She secured agreement to many of the changes in a way that many others would not have achieved, but if the new ways of involving patients are not necessarily right for all trusts, why was that not said at the time?

One of the freedoms proposed for foundation trusts is the freedom to pay additional rewards on top of national agreements. That could be hugely divisive and is understandably opposed by unions. Will it be reconsidered? The Tories tried to set up local pay to set one hospital against another; this Government cannot want to recreate that.

The Royal College of Nursing points out that such a system is wasteful in terms of bureaucracy, as local trusts have to have hyped-up human resource managers to negotiate individually with trade unions, and staff representatives have to spend time negotiating, rather than caring for patients. I remember the newspaper articles of 1996 saying that specialist nursing and therapeutic staff had to take time away from patients to negotiate pay deals. Recreating that system sounds illogical when a major new national pay agreement has just been announced.

Ministers will say that protections will be built in to ensure that foundation trusts do not undermine the ability of other NHS trusts to meet their obligations to provide NHS services. I take that to mean that the Government do not want foundation trusts to pinch staff from their neighbours, but how strong will the protections be? Will the neighbouring trusts have to sign off any pay differentials from the nationally agreed "Agenda for Change" deals? If the Government are serious about fairness in pay, should not the neighbouring trusts have the power to do so? I hope that the Minister will say exactly what is intended.

The next freedom for foundation trusts is the freedom to borrow, but from within the overall NHS capital allocation as agreed with the Treasury. The overall capital allocation for the NHS will be divided into two: a foundation pot and a pot for other trusts. However, we know that the Government want foundation trusts to succeed, so a suspicion will be created that such trusts will be given an unfair proportion of NHS capital in a way that does not put clinical needs first. Will there be a safeguard against that, such as an agreement on the allocation by Parliament rather than by Ministers? Given that any private borrowing for foundation trusts is counted against the same capital pot, that could lead to private money replacing NHS capital with no added gain for the NHS.

Is my hon. Friend aware that in transport we have already seen what happens in exactly those circumstances? If private firms are brought in, they bring with them consultants and enormous overhead costs, and the money goes into totally unnecessary contractual deals, rather than into good services.

I thank my hon. Friend for her intervention. I am well aware of those concerns. It is important to learn lessons from other Departments so that we get the best as government policy is developed. I am sure that Ministers do not intend private capital simply to replace NHS capital, but will the Minister confirm that? If all borrowed capital comes from a fixed NHS pot, how will the Government ensure that that does not enable the Treasury to save on NHS capital?

Paragraph 1.32 of "A Guide to NHS Foundation Trusts" says:

"Subject to an overall duty to achieve value for money…capital schemes will not be subject to individual project by project approval by the Independent Regulator".

If so, how can the Government be sure that foundation trusts collectively will keep within their overall capital limit? What does value for money mean in this context? If a trust could borrow at 20 per cent. for a five-year pay-back scheme, could it take the loan even if it was known that NHS funding would produce a better result for the public purse?

Similar arguments can be made about the freedom to keep surpluses and to dispose of assets, so why should foundation trusts be given more freedom to keep surpluses when clinical need might dictate that other trusts need those surpluses more? What if a local commissioner would prefer a neighbouring trust, rather than the foundation trust, to keep its surplus?

Foundation trusts' freedom to invest is also bureaucratic. It means that finance directors are rewarded for extra responsibilities, but then have to get extra advice on investment. Surely that is not a good use of time? Rather than hundreds of finance staff investing small sums of money throughout the country, it would be better to leave surplus funds with the Chancellor of the Exchequer for him to look after until they were needed. A fundamental problem with creating different rules for different trusts on pay, keeping surpluses and the ability to invest is that the effect is divisive, impacts on morale throughout the NHS and ultimately sets hospital against hospital.

I hope that the Minister will tell us about the other freedoms that the Government propose to give to the foundation trusts, which will be subject to the same standards and inspections and will still have to supply information centrally so that parliamentary questions can be asked and health committee analysis carried out. They will still have to adopt all the central strategies, such as those on information and sexual health, although the Minister may tell us that that is not the case. What will be the position of foundation trusts on the medical royal college recommendations, which sometimes delay or prevent recruitment for medical posts and seem to be an unnecessary barrier to expanding services? The proposal will be welcome if such a barrier can be removed, but that should be done for all trusts.

Will foundation trusts have to adopt policies such as family-friendly policies and zero tolerance of violence towards staff? Will maternity services have to provide women with the ability to choose where to give birth, and will the collection of maternity data have to be improved? Will the foundation trusts have to adopt catering standards such as providing halal meat, or comply with safety directives such as on the use of disposable instruments? I presume that they will have to follow all the standard directives, so which of the usual policies and directives will foundation trusts be free to vary or ignore? It would help our debates if the Minister clarified what those freedoms will be; answers given today could inform the debate to be held tomorrow on the Floor of the House.

However, the proposals include one major restriction alongside all these freedoms. Unlike many Members on the left, I support the treatment of private patients in NHS facilities. It is clear that in many trusts the treatment of private patients in NHS rather than private hospitals generates significant income for the NHS, which improves NHS care. Restricting the proportion of income from private patients to within existing limits will be a major disincentive for trusts to become foundation hospitals. Specifying a rigid limit on the proportion of private work could create extra problems for some hospitals.

I invite hon. Members to imagine a trust having its NHS income cut because a commissioner is moving work elsewhere. It would have to make a corresponding cut in its private patient income at a point when it is under pressure to cut budgets to make up for the lost NHS income to keep within the limit of private patient income as a proportion of total income. That would put further pressure on its budgets and would require it to create a fair system to decide which consultants have to cut back on which work. What purpose is served by this additional restriction on foundation trusts? This all seems a long way from a pragmatic, undogmatic approach to "public good, private bad". I thought that the Government were committed to pragmatic local decisions in the interests of NHS care.

It is interesting that the Under-Secretary of State for Health is leading the debate today. I suspect that she has been selected to speak about this newly emerging policy because she is one of the most eloquent and persuasive Ministers. However, when the logic of public health is to pursue community initiatives to stress the importance of primary care facilities and partnerships, where it might be easier to justify foundation status, it is odd that the creation of foundation trusts will start with acute and specialist hospitals. Thus the focus will be on acute care, rather than on the real public health goals of the Government's NHS.

I concur with my hon. Friend's remarks about our spokesperson on the Front Bench.

Does my hon. Friend agree that, if we seek mutuality in health care, we will need bottom-up rather than top-down solutions? Many of us would be happier if more effort were made in that area.

I certainly agree with that.

I suspect that the Minister will say that fears about a two-tier service are unfounded, because there are already differing standards across the country, and there is currently a multi-tier service. That is true, but that multi-tier service has not been created in legislation. The Government are rightly trying to achieve consistent, high standards across the NHS. Foundation trust legislation would create two different structures for NHS hospitals, and Ministers have made it clear that one is considered to be better than the other. That raises concerns about unnecessary competition and divisiveness in the NHS.

I spoke earlier about the additional bureaucracy that will be created in pay structures. The reorganisation of the trusts and their commissioners involves extra bureaucracy that must be justified, because the time of civil servants and NHS staff could be better spent on other things, such as ensuring that the NHS plan is delivered for my South Swindon constituents as soon as possible.

Government documents show that extra support will be given to foundation trusts to pay for legal help for commissioners, who will have to arrange different contracts for the foundation trusts. We are spending time on the Floor of the House today and tomorrow debating the issue. Can we justify taking that time away from the delivery of quality services across the country? [Interruption.]

I am concerned that there is a bureaucracy creation machine in the Department of Health, a unit that wants change for change's sake, wants to ensure that there is always work for management consultants, and wants to keep the focus on organisational structures rather than on quality patient care. I know that Ministers care about the latter, but I wonder whether the former is getting the better of them. If so, the change for change's sake unit must be found and culled.

Will the Minister clarify the areas on which the commissioners will be negotiating with foundation trusts? Paragraph 1.34 of "A Guide to NHS Foundation Trusts" states that there will be longer-term, legally binding service agreements. I would like to know what period those agreements will be longer than, and what would happen if the commissioner did not want a longer-term agreement.

Finally, let us examine the response to the Government's proposals. I am sure that a number of trusts will be keen to take up this Government challenge. I am delighted that 40 per cent. of the three-star trusts are in deprived areas. However, the creation of foundation trust status only for three-star hospitals does not help my constituents in Swindon, whether or not they live in a deprived area. The Government may say that the new freedoms will give us an incentive to improve in Swindon, but we do not need further incentives. Swindon's NHS is full of hard-working individuals who want to improve patient services.

The NHS Confederation, representing the managers' point of view, is concerned that decentralisation for the few could detract from the more important task of decentralisation for all, and that the proposals will move the focus away from acute care. The Labour party reaction is cold. The RCN is hinting, politely, that it is against the proposals, and the British Medical Association has raised many of the concerns that I have discussed today. There appears to be no support for the pay proposals.

I hope that the Minister can answer the questions that I have posed. There is much good in what Labour is doing for the NHS—massive investment, sensible reforms and a willingness to take the tough decisions that are sometimes needed. However, there is a danger that the reforms will be a major distraction from the main work of delivering the NHS plan. It would be easy for the Government to obtain consensus in Parliament and across the NHS on reducing control of the NHS by Whitehall. Why not make the reforms focus on more freedom for all, not just for the few?

rose—

Order. First, I thank the Committee for treating my embarrassment over the mobile phone with such good humour. Clearly, I had failed to depress the button for the required two seconds: I am sorry. Secondly, the Committee will have noted my entry with a stick. Had I known that we were to debate foundation hospitals, I would have used crutches; my theatrical entrance was not intentional.

On a serious point, we have lost 13 minutes of debating time. Thanks to both Opposition spokesmen, who have agreed to cut their contributions by half, I am able to make an extraordinary rule to extend the debate by five minutes at the end, which could mean problems for subsequent debates. I therefore appeal to all right hon. and hon. Members to restrict comments to what is necessary, to avoid repetition, to make interventions in a sparing fashion and to conduct the debate in the constructive manner in which it has commenced. Only some of the hon. Members present have given me prior knowledge of their intention to contribute. For the moment, I call Mr. Lansley.

I am grateful for the opportunity to contribute and I congratulate the hon. Member for South Swindon (Ms Drown) on securing the debate. As suggested by the choice of Opposition debate in the House tomorrow, the subject is timely. We all agree that it is important to debate this crucial subject early in the new year before legislation is introduced.

I represent two hospitals in South Cambridgeshire—Addenbrooke's, twice judged a three-star hospital in the performance ratings, and Papworth, a specialist cardio-thoracic trust. Specialist hospitals have been subject to the performance scheme only once and Papworth was given a three-star rating. The Commission for Health Improvement gave Papworth the highest rating of any hospital and singled out its excellent corporate and clinical governance.

By contrast with the constituents of the hon. Member for South Swindon, mine can see directly where the benefits lie if foundation hospitals, starting from a high base, deliver substantial increases in capacity and higher standards. My purpose is not to ask questions with a view to damning foundation hospitals with faint praise, but to make some points to ensure that foundation hospital policy works in the long as well as the short term.

I agree with the hon. Lady that it is not all about two-tier status. The NHS has different tiers, but the real question is how best to increase capacity and raise standards. Should it be done by moving everyone at the same pace, or should we accept that different hospitals have different attributes and that those with the strongest corporate and clinical governance should be given the first chance to introduce new approaches?

Several hon. Members may have been present at my Westminster Hall debate on nurses' pay two months ago. Taking Addenbrooke's as an example, I know that "Agenda for Change" is much sought after as a means of increasing pay flexibility and offering opportunities to adapt pay to labour market circumstances and the changing needs of the health service. Addenbrooke's wants to implement such a policy as early as possible.

I am not going to dwell on membership and the ownership of foundation hospitals. The issues are complicated. I certainly hope that good hospitals such as Addenbrooke's and Papworth, which already involve patient groups and the local community, will be able to do so more extensively under the new arrangements—but without excessive burdens. Some risks are associated with mutualisation, which could lead to substantial additional burdens.

It seems to me that the key issue is what the freedoms of foundation hospitals mean. Are they real and an end in themselves, or a means to an end? I submit that they are not real, that they should be extended over time and that they are not an end in themselves but a means to an end. We need to be aware of the end and to be able to adapt the whole system of foundation hospitals beyond the initial extension of freedoms from some bureaucratic controls.

I confess that, like the hon. Member for South Swindon, I am not sure how real the freedoms are. The establishment of an independent regulator is a new structure, but one that seems substantially to translate many of the controls that the Secretary of State might exercise over foundation hospitals into a different set of hands. The commission for healthcare audit and inspection, when it is established, will have similar controls. Complying with national clinical and quality standards does not give people in the hospitals that I represent any concern, but it does not necessarily mean bureaucratic reductions as a consequence. The control of private services is a new control, and I suspect that the freedom to borrow, to which I will return in a moment, is a little more rhetorical than real.

The freedoms are not as great as they should be and could be made greater. I will not make a long series of points about that, but it is important that we do not see the NHS in isolation. We should look beyond it to what our experience tells us about the process of trying to stimulate enterprise in what have hitherto been monopoly services. Although we do not necessarily have to break up organisations to make them compete among themselves, by translating bureaucratic, Government and political control to independent regulation, as we have observed in other industries, we can achieve that aim if the independent regulator—whoever he or she may be—has a clear set of duties that point to stimulating enterprise and allowing freedoms to emerge over time. Experience of other fields of activity demonstrates that if the independent regulator is focused not on compliance but on standards, independent regulation outside political control with predictable, consistent decision taking that is transparent to those who are regulated can offer substantial benefits.

Am I to take it that the hon. Gentleman would like to recreate within the NHS the high standard of organisation and service that we find in the railway industry?

The hon. Lady does not tempt me to speak about the transport industry; I want to speak about the NHS. My experience is less of transport than of other industries such as energy and telecommunications. My trade and industry background takes me in that direction.

Energy—there is a good one.

I will not go down that route at length, but I can tell the hon. Lady that, in my experience, at different times in different industries the transfer from national ownership with direct control and intervention over matters such as borrowing to independent regulation where free companies are in a position to attract private capital in a more predictable structure of regulation has clearly been of benefit. It has allowed enterprising companies to deliver better services and greater capacity. The telecommunications industry in this country was transformed after 1984 as a consequence of telecommunications regulation as opposed to national ownership. I will not go further down that path.

My point is that the freedoms should be regarded as a starting point. When the Bill is published, the key issue for me will be the independent regulator's duties and whether they are structured in a way that drives towards the stated purposes and allows the independent regulator, if the foundation hospitals create and maintain high standards and improve on them, to progressively reduce bureaucratic compliance requirements. That is the issue, but the change is not an end in itself, as it concerns capacity. It seems to me that the foundation hospital structure is being created around the current necessity to build new capacity, rather than an attempt to create competition in the NHS. That is fine at the moment. We cannot create competition in a structure where demand substantially exceeds supply in most circumstances.

Does the hon. Gentleman then believe that the way forward for the NHS is more competition under a market-style mechanism?

The hon. Lady is trying to anticipate my argument.

No, I am asking a question.

All right, I will answer it. In the long run, the way forward for the NHS is to deliver social enterprise. That will happen where enterprising providers are allied to a system directed not by monopoly purchasers, but by patient choice. That does not necessarily mean a market, and it certainly does not mean privatisation. [Laughter.] If the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) will forgive me, I will explain, but briefly because other hon. Members want to speak.

I want NHS funding to be allied to NHS standards of service, which providers will have to meet, and I want patient choice and enterprising providers to be brought together. Developments will need to be handled properly, and much more needs to be clearly set out, but foundation hospitals are developing in a way that will allow providers that get the private sector behind them to add capacity and be more enterprising.

At the same time, however, we still have monopoly purchasers, and we must think harder and more long term about that. If we merely end up with local primary care trusts making five-year agreements with monopoly purchasers in their area, what opportunity will there be to exercise patient choice? What opportunity will enterprising providers have to vary what they provide? Local communities will be told that they own the hospitals, but what opportunity will they have to vary provision?

The issue is how we introduce patient choice into the system. If we introduce it alongside a diversity of providers who have the freedom to take an enterprising and innovative approach, we can create an NHS that not only adds capacity, but improves standards. That relationship between choice on the part of patients and enterprise on the part of providers will deliver higher standards.

rose—

Order. Five hon. Members are seeking to catch my eye. There are only 28 minutes until I must call the Opposition Front-Bench spokespeople to begin their winding-up speeches. I therefore appeal to every hon. Member to make their remarks concise and pertinent.

Mr. Cook, I shall be extremely brief. I had intended to go on at considerable length, because foundation hospitals are probably one of the worst ideas that the Government have come up with, and that inspires an articulate response in me.

We should congratulate my hon. Friend the Member for South Swindon (Ms Drown) on setting out, in considerable detail and very concisely, the objections to foundation hospitals. I hope that the Government will think again. My hon. Friend thinks that a unit somewhere in the Department may be eternally looking for change, but I think that the problem is worse than that. Why do the Government persist with this bizarre idea when they are faced with the appalling example of what is happening in the transport industry, where services work only if they are planned in a proper and co-ordinated way? One can only assume that someone somewhere has a quite disastrous commitment to encouraging private medicine in this country. The Government are talking not only about attracting long-term private sector schemes but about planning to put out to tender only to certain foreign companies services that must remain in the NHS.

I want to say just one thing this morning. I originally came into contact with the NHS through my family 30 years ago, when there was a real division between teaching hospitals, specialist hospitals and district general hospitals. The level of care is now infinitely better, and the quality of services is nothing like what we could have envisaged 30 years ago. None the less, we consistently run the service down and say that it is poor and unacceptable. If that is the case, we should not introduce more divisive measures, which is what the creation of foundation hospitals is. We should not divide one group of staff from another by introducing an absurd bureaucracy that makes each hospital fight for the terms, conditions and wages of its staff. We should not suggest that there is somehow a halfway house between private medicine and the national health service, such that foundation hospitals will not be able to earn so much money that they will in effect be fully privatised units.

We should also say strongly that the people of this country do not want large surgical factories, which push them through and out the other side, like so many sausages. People do not want a system in which some hospitals can attract staff, money, investment and support, while the others are allowed to sink into a mire of disillusion and abandonment. Very simply, they want high-quality diagnostic centres that provide high-quality services. People want involvement with their local community, but do not think that that is provided by the old-style, local committees that I remember from my youth, on to which anyone with a title was allowed, whereas anyone who had been locally elected was regarded as a totally unacceptable candidate.

People want a national health service for which new forms of development are considered, but not those that entail division, an absurd bureaucracy, or contract procedures that require management consultants, hangers-on, accountants or anyone who happens to come along. In the transport industry, one can see what that means, in terms of expenditure, inadequacy and poor services for the public. At some point, I shall make a long speech on foundation hospitals, but this morning I am grateful that we are beginning the debate.

I do not know who in the Government is pushing private medicine and relationships with private firms abroad, or who thinks that we have anything to learn from private, American medical centres, but such people need to be disabused. There are some things that the ordinary member of the Labour party will not accept: such proposals are pretty high up the list.

I congratulate the hon. Member for South Swindon (Ms Drown) on securing the first debate of the new year. It is interesting to have the year rung in, as it were, by mobile telephones, Mr. Cook.

The debate started somewhat tardily. In the spirit of keeping my remarks short, I shall skip most of my speech and start where it says, "I shall return to governance". I intended to say that I supported some of the measures, although we shall have to take a radical look at how services are provided in the new hospitals, if they proceed. In particular, I draw hon. Members' attention to the fact that the Government's guidelines stress that local stakeholders should be given

"real opportunities to influence the overall stewardship of the Trust and its strategic development."

One in five people in this country now use complementary and alternative medical—[HON. MEMBERS: "Ah."] Yes, it is predictable that I should raise that subject. I accept that point. If there is to be more local input and less top-down management, it is inevitable that more people on those boards are going to demand such services.

The thrust of my argument is to say to the Under-Secretary of State for Health, the hon. Member for Salford (Ms Blears), that it now behoves the Government to develop a strategy that will enable foundation hospitals to deploy more effectively many of the therapies that can not only reduce the bill of the health service but give doctors greater freedom, give patients better services, and build on some of the work that has already been done, not least by the Minister of State, Department of Health, the right hon. Member for Barrow and Furness (Mr. Hutton). He uses complementary medicine himself and has recognised the positive contribution made by such therapies. He—I think it is he, unless it is the Minister—has been instrumental in introducing NICE guidelines for next year and setting up the Sheffield study, which is examining how such therapies work.

Ministers like to wax eloquent, sometimes in response to debates that I have initiated, about the King's Fund project, led by Westminster university, to create a network of primary care trusts that will use complementary therapies based on good governance. What they have not mentioned is that the clinical director of the school of integrated health at Westminster university is Dr. David Peters, a distinguished doctor who is also involved in the Marylebone health centre, which has pioneered an integrated health service and published a book for doctors explaining how to integrate complementary therapies into primary care. That practical guide for health professionals was produced by several distinguished doctors, who considered all aspects of how complementary therapies could be integrated.

Perhaps I shall be able to develop my point further in tomorrow's debate, if I am lucky enough to catch the Speaker's eye. However, the fact that there is now a working model that can be deployed in new hospitals makes the Minister's task so much easier. I encourage her to look at the work being done at Marylebone health centre and to consider ways of applying it in the new foundation hospitals. On that point, I rest my case.

I wish you a healthy new year, Mr. Cook, and want to say how pleased I am that this debate is taking place because it gives us the opportunity to flag up issues of importance to Parliament. I am as disappointed as anyone that we have so little time to give the speeches that many of us have prepared. Westminster Hall is rapidly becoming the place where important issues are raised. The Under-Secretary of State for Health, my hon. Friend the Member for Salford (Ms Blears), knows my constituency well and understands the health inequalities that we face in north Staffordshire. My hon. Friend the Member for South Swindon (Ms Drown) made an authoritative, courageous and fully informed speech, and I ask my hon. Friend the Minister to consider all the issues that she raised because I suspect that, if the truth be known, what she described is mirrored in constituencies around the country.

I appreciate all that the Government have done to improve health care. If improvements are needed anywhere, they are needed in Stoke-on-Trent, North. There are prospects of a new training centre and a new hospital in my constituency, but there is considerable progress to be made following the years of under-investment by Conservative Governments. How do we take forward the huge improvements that we have already seen? I do not believe that foundation hospitals, in precisely the form that has been put to Parliament, are the way forward. On Sunday, I spoke to a constituent who told me about her five-month wait for a cataract out-patient appointment, followed by a further four-month wait, which meant that she decided to spend virtually all her life savings on having the operation done privately and, even then, had only one cataract operated on.

My priority and that of my constituents is to take forward the agenda for change and modernisation and to ensure that we build on the real commitment of all our NHS workers to improve health care in the secondary sector, in our hospitals, in primary care and in services ancillary to medicine. I understand the point that has been made about complementary therapies. We must look to see how improvements in public health and healthier lifestyles, as well as all the Government's attempts to deal with poverty and inequality, can underpin and reinforce the work that is done in hospitals and in the primary care sector. That is where Ministers' priorities should be, whether they are Treasury or Health Ministers. They should be working with PCT staff to ensure that they know what is needed and can cut through red tape and bureaucracy. Mutual ownership should be introduced locally in the way that my hon. Friend the Member for Stroud (Mr. Drew) mentioned, so that we can make progress. Foundation hospitals are not the way forward. I hope that the debate will comfort my hon. Friend the Minister and strengthen her negotiating position in further discussions within the Government.

I am full of praise for the three years' work that has been done in respect of "Agenda for Change". Many hours have been spent in drawing up a new negotiating position for our national health service workers. Speaking as a member of Unison, I do not want to see that work undone or lack of agreement on it because of the Government's position on foundation hospitals. Will the Minister address the points about pay that were made by my hon. Friend the Member for South Swindon? Have the Government considered the possible consequences of equal value claims? Will we really allow foundation trusts to pay whatever rates they want to? How will that link in with the good work of the three-year "Agenda for Change" process, under which, with a few exceptions, negotiated positions have been reached? I look forward to the Minister's response.

I congratulate my hon. Friend the Member for South Swindon (Ms Drown), who has brought her long experience to bear on an issue that is of concern to all of us. She mentioned the huge strengths of the NHS, the public support for those who use or might need to use it, the public service commitment of those who work in it and the value to the public purse of that ethos. She also mentioned weaknesses, such as the inequalities that my hon. Friend the Minister and I have to address in our constituencies. A man from the inner-city part of Plymouth, Sutton is likely to die 10 years earlier than a man from the leafy suburbs. She also mentioned the frustrations of dealing with red tape and bureaucracy.

This morning, as this year's chairman of the Co-operative group of MPs, I want to advance the case for the mutual model and to show how, through foundation hospitals, we can build on the strengths and address the weaknesses of the NHS. There is a saying, "Tell me, I'll forget. Show me, I'll remember. Involve me, and I'll understand." My hon. Friend the Member for Stroud (Mr. Drew) mentioned the importance of a bottom-up approach. Mutual models provide frameworks that allow local people to be involved on a much more meaningful scale than they are now. My hon. Friend the Minister has a clear and broad understanding of the track record, strengths and potential of mutual models through her service on the Co-operative Commission. I congratulate her on her contribution to the Mutuo publication "Making Healthcare Mutual—a publicly funded, locally accountable NHS." I hope that she will forgive me if I particularly recommend to those who are less familiar with the development of 21st century mutual models the contribution of Cliff Mills in the third part of the document.

Is my hon. Friend aware that recent history shows us that mutual societies are not in any way sacrosanct and can be destroyed by the activities of others?

I understand my hon. Friend's point, which I will address in a moment, but I am talking about new 21st century mutual models.

I am sure that my hon. Friend the Minister will draw fully on her experience of the mutual sector through the Co-operative Commission. Will she address four matters in particular? First, new mutuals need special skills backed up by advice from established mutual societies who know what works and what does not work as regards governance structures and development, elections, elected member training and mentoring. Secondly, will she consider the application of mutual models to organisations that are not success stories? Mutuals have a strong track record in phoenix rescues of failing organisations—both social and business enterprises. Thirdly, will she consider the application of mutual models and principles to other parts of the health community? By doing that in primary and preventive health care, we can empower individuals to play more effective roles in corporate governance. Fourthly, my hon. Friend the Minister is enthusiastic about expert patient schemes, and I hope that she will draw on one of the richest traditions in mutual principle and experience—that is, education—by linking the NHS academy proposals to the experience of the Co-operative college, which has, for instance, developed NVQ 1, 2 and 3-level distance learning packages for housing management.

I look forward to hearing my hon. Friend's response. Her constituency faces many similar challenges in relation to regeneration and inequalities, and no one is better placed to tackle them through the mutual models that I have described.

I shall be brief to allow time for the concluding speeches. I congratulate all hon. Members on their presentation of the case, and I want to add a few points. We should be able to move away from the rather sterile debate on whether we should rely on the traditional NHS model or privatise it, because, as my fellow Co-operator just said, there is a different way.

We have considered trusts and acute hospitals in relation to the potential mutualisation of some aspects of health services.

Does my hon. Friend agree that the most interesting area for developing such an approach is not acute hospitals but primary care trusts?

I agree entirely. Some in the Co-operative movement have said that we should have started by considering the application of mutual models to PCTs.

It is possible to see in the Government's document some of the principles of co-operation, including the devolution of power and practical models of public service delivery, which is what all Labour Members should be about. For 13 years, I have been involved in a site in my constituency—Standish hospital, which delivers acute facilities in the county of Gloucestershire. It will close in 2004; I shall not reopen the debate on whether it should close. With colleagues, I have recently worked on a mutual solution by which the site could be taken on by a community land trust to provide a different type of health care—not only for the immediate area but for the whole region. I shall approach the Minister and her colleagues in the Department to discuss specific matters such as alternative and complementary care, which was mentioned by the hon. Member for Bosworth (Mr. Tredinnick), diagnostic and treatment centres, intermediate care, and services for older people with behavioural problems.

When an NHS site becomes available it is analysed and evaluated. More often than not it has no potential use in the NHS, so it is put up for sale. I am challenging that in respect of this site. We would like to look at mutual solutions. I hope that the Government are allowing that to happen, rather than coming up with top-down solutions. Let the community see whether new models could be brought forward within the NHS, because the NHS should be the main provider on a site such as that in my constituency. We should also consider how that could—dare I say it—link with the private sector. That is my plea.

I have already said that our spokesperson is a great Co-operator. The debate is in danger of becoming a graveyard, and I hope that we can move away from that and open up opportunities. That will, however, take time. The NHS is not good at considering alternative solutions—that is its greatest weakness. I am beginning to get some interest from the NHS community, but it has been a devil of a job. Many doors have been shut. If I were not a Member of Parliament, they would have been not only shut but bolted and I would be outside the loop for ever and a day.

We must encourage people in the NHS to think about different ways of delivering the service. I intend to introduce a proposal on that in my constituency. I hope that my hon. Friend will take the opportunity to visit us and listen to what we are trying to do. That might provide a better way forward and it might be better than having what I regard as a rather sterile debate.

rose—

Order. I shall be looking to the Minister to commence the Government's response at five minutes to the hour and conclude by five minutes past. I therefore expect the Opposition Members who wind up to split the time equally.

I am aware of the time issue. This is the first of two Opposition debates on this subject and we will have the opportunity to speak further tomorrow. [HON. MEMBERS: "No thanks to you."] That is the point. One debate has been initiated by a Labour Member and the other by the Conservative party. As we shall see, a curious feature of the direction of the Government and the Conservative party is that there is very little between them.

The Government should take note that senior Back-Bench opposition to the proposals goes beyond the usual suspects. It is, however, reasonable to say that the hon. Member for South Swindon (Ms Drown), whom I congratulate on securing the debate, is not a usual suspect. The hon. Lady has generally been loyal and she is also an experienced finance director. I know that she is a tough negotiator. I found that out when I was on the opposite side of the table to her during talks on junior doctors' hours. Her expertise is respected in many areas of health, including maternity services. The Government should take note of that.

The Under-Secretary of State for Health, the hon. Member for Salford (Ms Blears), is not only eloquent but capable of packing that eloquence into 10 minutes, which is better than some others. I do not have her ability to do that, but I want to respond to the points that were raised by the hon. Member for South Swindon. I apologise to other hon. Members because I will not have a chance to comment on points that they have made in this excellent debate.

The hon. Lady mentioned the Government's motivation for bringing in these measures. First, they want to use financial incentives to improve the NHS. I agree with the hon. Lady that in that they fundamentally misunderstand the motives of NHS workers. Those people do not do their best so that a trust may be more financially successful; they do their best within their professional competence for patients. It is disappointing, to say the least, that the Government take that view. The second motive is, allegedly, to stop the Tories privatising the NHS. The Government and, in this respect, the hon. Member for South Swindon have missed the point. The private provision of NHS services is not the greatest threat to the NHS. No matter who provides it, the NHS stands for a service that is free at the point of delivery, which is paid for through general taxation and is comprehensive, regardless of the ability to pay.

The issue is not whether there are more private or voluntary sector deliverers, or whether there is increased private commissioning and purchasing in the NHS. I disagree with the hon. Member for South Swindon on pay beds in the NHS. Those are more of a threat because they use vital capacity for people who can afford it, rather than for those who cannot. The Conservative party has suggested previously that patients should be charged.

Does the hon. Gentleman agree that people's reservations and opposition to privatisation are based also on profits, which go outside of the NHS?

Indeed.

Will the hon. Gentleman give way?

The hon. Gentleman will have a chance to rebut me later in his speech.

On that point—

No, I cannot give way now. The hon. Member for South Swindon said that foundation hospitals would be able to keep the income from land sales. That seems unfair, given that they may be sitting on land in a way that other hospitals are not. Since they did not inherit the land by dint of being managers of a foundation hospital, the income should be shared more equally.

The hon. Lady said that the Government's other motivation was their desire not to run everything from Whitehall, or at least to give the appearance of not doing so. I believe that it is a matter of appearance. She drew attention to several worries, most of which I share. The measures are divisive. The ridiculous star-rating system is not based on sensible clinical outcomes; it often runs contrary to the more reasonable measures of performance such as the in-depth studies undertaken by the Commission for Health Improvement.

The measures are a way in which to create a league table to enable the Government to allocate blame for failures in the health service to those who are at the bottom of the table. As I know from the excellent five-star hospital in my constituency, failure is due not to poor performance or incompetence but to inadequate capacity, the inability of social services to place people and a shortage of nurses. That is why no-star trusts are found in areas where there is a shortage of staff, which delays discharges.

The hon. Lady said that she was concerned about the absence of performance management. However, she can be reassured because the Government are not letting go; foundation hospitals will still be subject to targets. Commissioners will have to commission according to targets and through the Commission for Health Improvement, which is not independent because it must inspect according to the Government's targets.

As for local pay, the Government are seeking to be all things to all people. At the same time as saying that local pay will be flexible, they say nonsensically that there will be no poaching. We have many worries about the proposals. They are based on continued structural change, not real reform. They concentrate too much on the side of the providers rather than commissioning in respect of democratisation. They are divisive and attempt to devolve blame, not freedom.

I congratulate the hon. Member for South Swindon (Ms Drown) on initiating this important and timely debate. In many ways, it is the hors d'oeuvre for the main banquet tomorrow. In what was an elegant speech, I congratulate the hon. Lady on the clever way in which she walked the neat tightrope between outright rebellion and seemingly constructive criticism of her Government's actions.

It has been fascinating listening to all the contributions to the debate, but particularly those from Labour Members. The illustrious and formidable hon. Member for Crewe and Nantwich (Mrs. Dunwoody) gave an extremely interesting, robust speech. I hope that she will catch Mr. Speaker's eye tomorrow when she will have a greater opportunity to elaborate her views. With one exception, it was noticeable that no Labour Member seemed to support the Government's action. We must bear it in mind that the hon. Member for Plymouth, Sutton (Linda Gilroy) is a Parliamentary Private Secretary in the office of the Deputy Prime Minister, unless she has recently resigned or been replaced.

The hon. Gentleman is right, but I am here today in my capacity as the current chair of the strong parliamentary Co-operative group.

However much the Government have modernised matters in other ways, I assume that the code of conduct for Parliamentary Private Secretaries is the same as under previous Governments and that they are bound by collective responsibility. One would not expect them to criticise their own Government's policies in a debate, because Parliamentary Private Secretaries are linked into that responsibility, as are Ministers.

The Opposition support the general principle of foundation hospitals and the freeing of hospitals within the NHS. However, we have considerable difficulties with the way in which the Government seek to move that agenda forward. We will have a better opportunity tomorrow to analyse the policy in greater detail. We believe that hospital freedom should be a priority because the most important factor within the NHS is to ensure that it thrives to provide the highest and best quality care for patients. I emphasise, so that there can be no misunderstanding or slurs from the Liberal Democrats, that that care must be free at the point of use for patients. That is what I have always supported and will continue to support in my future political career—if I have one.

I part company with the Government on one issue, however. As the hon. Member for South Swindon rightly said, in the early stages—which tend to be rather long—the Government will restrict the opportunity of foundation hospital status to three-star hospitals. That is a significant and fundamental error. It will create a two-tier health system, regardless of what Ministers within the Department of Health may say.

The Government should have been bold. At the Labour party conference last year, the Prime Minister himself said that the Government were best when at their boldest. They are not being bold: they are being timid, which is a weakness. I suspect the reason for that timidity. We must not forget that foundation hospitals are the brainchild of the Prime Minister. However, as always with this Government, a shadow is cast over No. 10 from the neighbour at No. 11.

We know that the Chancellor of the Exchequer is not at all keen on the Prime Minister's big idea or on the Secretary of State for Health's pursuing it. One gets the impression that the Chancellor would like to emasculate the policy at birth. The policy is in the best interests of the NHS and enhanced patient care, but I urge the Government to extend it from the outset to all hospitals. All should have the opportunity to be foundation hospitals, rather than some getting the fast-track treatment because they have three-star status and the vast majority being excluded. That will create a two-tier system.

Time does not allow me to go into the minutiae, but in December the Government published "A Guide to NHS Foundation Trusts", in an attempt to flesh out details of the Government's proposals in the absence of published legislation. The trouble is, as the hon. Member for South Swindon highlighted in a series of relevant questions, that the document raises more questions than it answers. Statements, proposals and ideas in the document directly conflict with what the Secretary of State said in previous statements when announcing the movement forward on foundation hospitals. Due to the time constraints, I cannot reiterate the concerns, conflicts and outstanding questions that require answers, but the hon. Member for South Swindon did so. I hope that the Minister will use the time that she has available to her to treat the debate with the relevance that it deserves, and that she will answer as many of the hon. Lady's questions as possible rather than simply read out a brief, as I fear that she will, that tells us how wonderful foundation hospitals—as the Government propose them—will be for our health.

I am delighted to respond to the first debate of the new year, which I congratulate my hon. Friend the Member for South Swindon (Ms Drown) on securing. I have never been referred to as an hors d'oeuvre before, but we shall have several opportunities to discuss these important issues both over the next few weeks and when the legislation comes before the House. I am genuinely pleased that we have started that process. My hon. Friend raised a series of important points, and I shall endeavour to reply to as many as I can. However, I can tell every hon. Member who made a contribution that I shall take on board all points that were made as the debate unfolds and the policy develops.

First, I want to set the context of the changes. We all have to acknowledge that we have had the biggest ever increase in investment in the national health service and that improvements are starting to come through on waiting, getting more staff and equipment and reducing deaths due to cancer and coronary heart disease. All those things in the NHS plan, to which my hon. Friend the Member for South Swindon referred, represent an incredibly ambitious programme for this country's health service. All Labour Members have made it clear that they welcome the investment and the changes that are going on, and recognise the contribution made by NHS staff in delivering the improvements. That is the context in which we are introducing foundation trusts and extending new forms of ownership and social enterprise in the health service generally.

My hon. Friends the Members for Stroud (Mr. Drew) and for Plymouth, Sutton (Linda Gilroy) made the important point that the policy is not limited to the acute sector of the NHS. I hope that it will permeate everything that is done in the NHS during the months and years to come. There should be a broad range of providers, and we should encourage enterprise in local communities so that we can provide services that are more responsive and accessible to patients whom we serve.

We must have reform to go with that massive investment if we are to ensure that we get maximum value from every single extra pound that we put in. If the Government ask the public to pay extra money to fund the NHS, it is our responsibility to ensure that the investment has the maximum impact. The public should see increased capacity and a reduction in waiting times. My hon. Friend the Member for Stoke-on-Trent, North (Ms Walley) said that she had talked to a constituent who had had to wait for a cataract operation. The public's top priority is waiting and, therefore, the challenge that we all face is creating extra capacity and new ways of doing things. We must spread modernisation throughout the system so that patients can move through the system more quickly while still receiving high-quality services. The proposed reforms come from a need to increase capacity and treat patients more quickly.

Until 1997, we did not have the kind of national health service that we are trying to create. We talk glibly about the NHS as if it was a national uniform service. However, most hon. Members recognise that before 1997 the service was a collection of organisations that functioned differently, as my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) said. Since 1997, we have introduced the National Institute of Clinical Excellence, the Commission for Health Improvement, national service frameworks and the NHS plan. My hon. Friend the Member for South Swindon asked whether this was the right time to go forward with further reforms. I absolutely believe that it is, because a series of national standards is in place for the first time, meaning that people up and down the country know that they are all entitled to the same level of service. We have shifted the balance of power, and have given power to the primary care trusts; that will provide security of long-term commissioning. Those are the foundations that had to be put in place, and it is the right time to proceed apace with faster, more radical and deeper reform.

Foundation trusts give us the chance to have the best of both worlds. They give us national standards together with local community-based ownership. That, as my hon. Friend the Member for Stroud says, is a means of getting away from the sterile, polarised and adversarial arguments either that the existing system is good enough or that it is not and there must be outright privatisation. Things do not have to be that way; we can have national standards with local community ownership. That will unleash creativity and innovation within the service and keep a key local connection not just with communities but with the rest of the NHS.

The new foundation trusts will be under a duty of partnership to work with every other part of the NHS, including primary care, social care, and the public health service. The foundation trusts will not be free-floating entities somewhere up in the ether; they will be connected to the rest of the service. They will also have a duty to exercise their freedoms in a way that does not undermine or damage the rest of the NHS. The foundation trusts will be drawn into the same system, but will have freedom and flexibility to push forward with the modernisation and change that all hon. Members recognise is needed if people are to be treated more quickly and given a higher standard of service.

My hon. Friend the Member for Plymouth, Sutton referred to the models set out in the guide. Those models build on co-operative themes and principles and on mutual traditions. I was a member of the Co-operative Commission for 12 months, during which we explored not just the successes of the Co-operative movement but, crucially, its risks and its failings. We are not going into the project with rose-tinted glasses. We know that mutual models can present difficulties and need special support. If local people are to be involved, there must be a great deal more emphasis on education, training, citizenship, governance, and working with the Co-operative college. I take all those points on board, and those are issues that we want to pursue.

I want to make two distinctions between our policy approach and that of the Conservative spokesman, the hon. Member for West Chelmsford (Mr. Burns), and the Liberal Democrat spokesman, the hon. Member for Oxford, West and Abingdon (Dr. Harris). The Tories should be open and honest about their view; however, the hon. Member for Woodspring (Dr. Fox) has been a little too honest for his comfort. The hon. Member for South Cambridgeshire (Mr. Lansley) made a reasoned argument, and the hon. Member for West Chelmsford wanted to put on record his personal commitment to a service free at the point of use, but the hon. Member for Woodspring is on record as saying that he wants to raise money—perhaps by means of health insurance—through self-pay.

Hon. Members should be under no illusion; their agreement with the foundation trust principle is about keeping the NHS connected to local communities and within public community ownership. The Tories' agenda is very much about self-pay and making sure that there are a variety of purchasers, and would lead us back to a two-tier system. That is the first distinction.

The hon. Member for Oxford, West and Abingdon seems to want localism and diversity at the expense of all national standards. The policy has to proceed in the context of national standards. People pay for a national health service; they want to know that they can get the same services wherever they are. Diversity and decentralisation must be married with good national standards and a national framework. That is the second distinction between our approach and that of the Opposition.

Concerns about a two-tier system are at the heart of the issue. Our policy on foundation trusts is about being on a journey, not about a destination for a few, leaving behind the rest of the system. The policy is about saying that in time we want everyone to have the freedoms, flexibility, innovation and creativity that the system will set in train. It is absolutely right that we should start with the best performers, because that way we can manage the risk of this very big change—make no mistake, this is a bold policy. It is right to want to manage that risk in an incremental way.

Organisations that are not yet at the level of the best need extra help. We want to be able to concentrate on supporting them in order to bring everyone up to the standards of the best. Our policy is about promoting excellence for everybody, not about setting hospital against hospital. It is about having a duty of partnership, but getting energy, creativity and dynamism into the system, so that we can make a significant change for the people who pay for, use and work for the services, and who, at the end of the day, will be running and owning them too. That is an exciting prospect, and I look forward to the debate continuing.

Before I begin my speech, I wish to draw hon. Members' attention to the fact that I am a director of an economics consultancy, as is set out in the Register of Members' Interests.

Regional issues have moved up the political agenda over the past two years, so it is fitting that we are discussing regional policy so early in the new Parliamentary year. Since the previous Parliament the Government have radically redefined their position on regional policy. Three years ago the Prime Minister, armed with a Cabinet Office report, declared that the very idea of a north-south divide was misleading and misplaced—but since then the Government have had to accept the undeniable evidence that there are significant regional economic disparities, and they have even set themselves the target of reducing those disparities over the long term. It therefore came as a surprise to read that Mr. Ed Balls of the Treasury was back in regional divide denial mode. Just before Christmas, he told a conference in Leeds that there were vacancies in every part of the country: in Sheffield, Wakefield and Bradford—and, no doubt, in Pontefract and Castleford. However, I hazard a guess that the vacancies in Leeds, North-West, Halifax and Hull, North were at the forefront of his mind.

Most Members present would accept—at least in private—that the United Kingdom economy is deeply divided and that those divisions are widening. That was all but admitted in a remarkably candid Treasury publication produced at the time of the pre-Budget report of 2001, which set out what the Government have dubbed their new regional policy. The Government are more honest about the regional divide than ever before, and more focused on it. They have even talked about bridging the growth gap by the time of the next general election. However, the problem is that the policies that have so far been espoused neither bear any relation to the scale of the problem nor offer any realistic hope of providing a solution to it. In other words, the Government have willed the ends without willing the means, and I wish to explore that contradiction.

To put the matter in the simplest terms, the northern half of the UK is poorer than the south, and it is getting still poorer. According to the OECD, the UK has a higher level of inequality of prosperity between its territories than every other OECD country except Mexico. That prompted the TUC to claim that the UK was suffering greater regional equality than parts of the third world. Even the Government's own figures, from the Office of the Deputy Prime Minister's state of the region tables, the Department for the Environment, Food and Rural Affairs' regional quality of life indicators and the Department of Trade and Industry's regional competitive index, all point to a persistent gap between the economic performance of northern regions and the UK as a whole.

Until the mid 1970s regional inequality was diminishing. However, that gap has grown again over the past 25 years, and has become a gulf. The figures are startling: in the mid 1970s no British region had GDP levels lower than four fifths of the south-east average, but by 1999 no British region outside the prosperous inner core had value added levels as high as four fifths of those in the south-east. In the north—the north-east and north-west taken together—GDP per head fell from 86 per cent. of the south-eastern level in 1975 to only 70 per cent. in 1999; in Wales it fell from 81 per cent. to 66 per cent.

In 1997 it was widely thought that the incoming Labour Administration would adopt a more redistributionist approach to economic policy that would help to slow, if not arrest, the growing disparities in wealth and economic performance between south-east England and the rest of the UK—but the opposite has been the case. A recently published competitiveness index for the UK shows that the three best performing regions—London and the south-eastern and eastern regions—have widened their lead over the three worst by more than 30 per cent. since 1997, and that the gap between London and the north-east has grown by more than 35 per cent.

It is true that regional differences in claimant count unemployment have narrowed, and they are now at their lowest levels for 30 years. Ministers have often used that as evidence that the UK has solved its regional problem, and the north-south divide is dead. That is a deeply flawed and dishonest argument, because, as Labour knew all too well in opposition, the claimant count data seriously underestimate the true extent of joblessness in the economy as a whole, and in the weaker regions in particular.

As the recent study by researchers at Sheffield Hallam university and the university of Warwick has shown, the official unemployment count excludes about 2 million people who were parked on sickness benefit, pushed into retirement or prevented from claiming jobseeker's allowance. Hidden unemployment masks a more severe north-south divide than that which shows up in the official figures. The rate of real unemployment in Liverpool, Glasgow, and parts of the north-east and south Wales is running at more than 20 per cent., compared to about 3 per cent. in the south. The scale of the challenge is clear. The question remains whether the policies are sufficient to the task.

The so-called new regional policy is based on the idea of indigenous development and at its core has been the creation, in England, of the regional development agencies, which have been given the task of raising the regions from below. However, regional policy was not, classically, a matter of raising regions from below, or of their lifting themselves up by their bootstraps. It was a matter of redistributing wealth and activity between regions. If the new regional policy is based on what Ed Balls famously dubbed post-neoclassical endogenous growth theory, the old regional policy was social democratic and Keynesian. Its focus was on the ideal of territorial equity.

The Government's commitment to that ideal remains unclear, because they reject classical regional policy, which they say was based on subsidy and failure. It may have been crude, and it was certainly expensive, but regional policy in the 1960s and 1970s was certainly no failure. In a relatively short time a new layer of industry was grafted on to places such as the north-east of England, south Wales and central Scotland, along with motorways, new towns and other infrastructure to support them. That process created hundreds of thousands of jobs in the areas of greatest need.

Many of the firms that were diverted into the assisted areas in the late 1940s, or in the 1960s and 1970s, are still there today. Morgan Marine in my constituency was attracted to Llandybie in 1967 and is now the largest private sector employer in the area. The end—or, as I like to think of it, the beginning—of the M4 is the last place where a supplier of prefabricated sheds for utility companies, often requiring a police escort for delivery, should be located. It is there as a direct result of what Mr. Balls has disparagingly called ambulance chasing, but I prefer to see as intelligent intervention.

Unfortunately, the policy of active relocation of industry was one of the early victims of the oil crisis, and latterly of Thatcherism. Between 1975 and 1995 the real value of UK regional aid was reduced to less than one ninth of its 1975 level, and it has remained at that level ever since. Solving the regional problem outright would have required three times the number of jobs that were actually created in the 1960s. However, at least a serious attempt at convergence was made, with funding on a scale far better than anything in new Labour's new regional policy. It worked for a while—but then the mechanisms were dismantled and the north-south divided opened up again.

The Government have set themselves a target of closing the growth gap, but, apart from the rhetoric, no formal policy or sustainable strategy is in place for achieving that ambitious objective. The new regional policy does not deal with the north-south divide. It could well exacerbate, rather than alleviate, the disparities, precisely because it is designed to raise regional growth across the board, rather than to make improvements in the north relative to the south. If the new regional policy were really intended to bridge the divide, regional development agencies would have been created only in the north. The same would be true of the regional venture capital funds.

The fact is that the Government will not acknowledge in clear and unambiguous terms the need for explicitly discriminatory measures to encourage development in regions that are lagging behind. If the issue were not so serious, it would be comical to suggest that depressed regions could somehow regenerate themselves from within, against the backdrop of the overwhelming economic dominance of the south-east.

London and its dormitory regions have captured the science base and the trained human capital that are the key drivers of competitiveness in the knowledge economy. Proportionately, London has three times as many graduates as the north-east. In the east and south-east, spending on research and development is about 3 per cent. of regional GDP, but in the north-east it is only 1 per cent. That is partly due to the fact that there is currently no Government research and development expenditure in the north-east. Wales fares little better.

This is a "winner takes all" economy. Successful regions in the south can continually add to their existing advantage by attracting more, and better-qualified, workers, while poorly performing regions are locked into a vicious circle of underdevelopment. Adopting a policy of refusing to intervene in the location decisions of firms condemns those of us who live in the separate countries and the regions of the north, not to the status quo, but to a worsening spiral of decline.

The hon. Gentleman is developing his thesis. Is it not a problem that the competition rules of the European Union, of which Britain is an integral part, work against the kind of strategy that he suggests?

There is a debate at the moment about renationalising regional policy, but that would bring its own set of problems. During the Thatcherite period, European regional policy provided us with an alternative and some degree of alleviation, and I am keen to protect that possibility. As I understand it, we are way below the level of state aid to regions that would be allowed under European rules. There is significant scope for the budget available for regional aid to be increased radically. I will return to European competition policy later.

My case may be dismissed in some quarters as special pleading, but the reality is that regional disparities hurt us all. As the Treasury has pointed out in its report on the new regional policy, regional inequalities can exacerbate macro-economic volatility. With economic growth so heavily focused in the south-east, firms run into bottlenecks and that leads to inflationary pressures. That happened in the United Kingdom in the late 1980s, when an inflated property market and high levels of debt in the south-east and London turned an expansion into a severe recession. Hon. Members will be forgiven for feeling a frisson of déjà vu.

The same spatial disparity explains the two-speed economy of service boom and manufacturing bust that we have experienced over the past six or seven years. Inflationary pressures generated in the overheating south-east have prompted higher interest rates and a higher exchange rate, which have limited output in the under-heated northern economy. We all remember the public relations gaffe made by the retiring Governor of the Bank of England, who said that higher unemployment in the north was a price worth paying to keep inflation in the south under control.

London itself has a price to pay. The capital may have cornered the market in top-paying jobs, but it cannot provide a matching quality of life. The rising cost of accommodation forces people to make longer and longer journeys, and staff shortages in the public sector have an impact on the general quality of life. Without an active regional policy, there will continue to be an inexorable tilt of population and resources towards an already overcrowded region in the south. That in turn will add to congestion, increase the pressures for greenfield development, push up house prices even further and overload an already overstretched public sector.

That is the crux of the matter. The difficulty with traditional regional policy is that it does not take account of the fact that regions are not homogeneous. My region, the south-west, which on paper is one of the better-off regions, contains Cornwall, which has the lowest GDP per head in the country. Surely regional policy has to reflect that situation by moving resources within regions. I accept that the south east is a particular problem because its economy is overheated, but because we cannot move resources from the south-east to the north we need to be more sophisticated within the regions. Surely that is what the hon. Gentleman should be talking about.

Those options are not mutually exclusive. I agree with the hon. Gentleman that the data prove that disparities both between regions—the north-south divide—and within regions are growing. That is why we need a combination of regional economic planning and local economic development strategies. Wales is a national microcosm of exactly the same problems. The overheating in the south-east of Wales, which is caused by a concentration of economic activity, is to the detriment of other regions. Disparities occur between regions and within regions, and we need both sets of policies.

Throughout the history of regional policy, it has been axiomatic that the problems of underdevelopment and overdevelopment are two sides of the same coin. The Barlow commission was set up just before the second world war to prevent unbalanced development and to investigate those issues. It concluded that the congestion problems in London and the south-east and the limited opportunities in other regions were two parts of the same problem. Its core concept, which provided the rationale for the regional policies that had such an impact in later years, was to control growth in the south-east and to direct it to other areas. Barlow was to territorial equity what Beveridge was to social justice. It is arguable that the present Government have killed off both Beveridge and Barlow—but at least Beveridge, unlike Barlow, has been given a decent burial.

The Crow report on regional planning guidance in south-east England, which set out the agenda to let growth rip regardless of the consequences for either sustainability in the south or deprivation in the north, is the praxis for regional policy to date. It is scandalous that the Government are considering building more than 1 million houses in southern England when cities such as Liverpool and Manchester are clearly underpopulated. Building houses to ease house prices in the south-east is like easing traffic by building extra lanes on the M25: in the end, one ends up with greater congestion, greater environmental destruction as new homes are built on the green belt, and traffic nudging closer to gridlock. In George Monbiot's words, the Government seem to have resigned themselves to setting Britain's regional inequalities in stone by letting the south-east build the towns required to house the north's economic refugees.

The argument for redistribution is as strong today as it was in the 1940s because unequal economic growth across the UK regions is a major factor in economic instability and environmental damage. Balanced growth is the key to achieving the Government's stated aim of sustainable growth, but that assumes that they practise joined-up thinking as well as preaching it. The chances of denting the north-south divide are remote when they are planning to build a fifth terminal at Heathrow, and those chances will be remoter still if their regional policy sticks to the principle of treating unequal regions equally. The key issues are whether they are prepared to embrace a policy of positive discrimination in favour of the most deprived regions, and the form that such a policy would take.

The Government's defence is that we operate in a global economy, so if one contains growth in Brighton it will go not to Bridlington but Barcelona. Nobody is suggesting, however, a return to the old policy of doling out licences and industrial development certificates. We advocate a policy of inducing business investment away from the affluent south-east to outer Britain through a powerful package of incentives.

In response to the point made by the hon. Member for Caerphilly (Mr. David), I might add that Britain is near the bottom of the European league for regional spending aid, to which we devote half as much money as France and one sixth of the sum spent by Germany. In the heyday of regional aid, which was 25 years ago, more than £3 billion a year at today's prices went in regional aid to the poorer regions, but regional selective assistance is now down to about £400 million a year. We need to ratchet it up to what it was under Labour Governments in the 1960s and 1970s. We also need to return to a system of automatic rather than discretionary grants, in order to send a clear signal to firms that they will receive financial support for investing in certain areas.

I am following the hon. Gentleman's argument with great interest and with feelings of solidarity, if I may use a social democratic term. Does he agree that the public sector should provide an example? One of the most important consequences of the Barlow report was the relocation of public sector activity to less favoured regions. My own region is one of the greatest recruiting grounds for the British armed forces, yet it has no civilian Ministry of Defence employment. That is a very good example of something that could be done without worrying about what the European Union might say.

Absolutely. The hon. Gentleman anticipates my concluding point very well. Government is a key driver, through employment and procurement policy.

If that is the hon. Gentleman's final point, perhaps I might raise an issue that he has not mentioned. He talked about service boom and manufacturing bust. Surely the cause of that is an uncompetitive exchange rate. Would not some of the problems be solved if we were to adopt the single currency?

I am not minded to test the patience of the Chair by delving into that debate.

Before I deal with the issue that the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) raised, I wish to discuss tax incentives. The Chancellor can play an important role. He created the stamp duty exemption and the community investment tax credit, but they are fairly small measures, given the current state of play. The Basque country and Navarre very effectively use their power to lower corporation tax rates, as part of the regional economic strategy for regions in north-west Spain. There is no reason why the nations—and, in time, the northern regions of Britain—should not be allowed to do the same, provided that the powers are devolved to meet European Union competition rules.

Automatic grant aid on the scale of the 1970s, together with the use of tax incentives, would have a dramatic effect on jobs and investment. However, such measures are designed to compensate for one thing: the hugely distorting effects of the concentration of wealth in London and the south-east. No other European state is as centralised as Britain. London is not only the administrative capital but the financial, media and corporate capital as well. In almost every field of endeavour, people have to come to London to reach the peak of their profession. London is by far the largest net gainer of graduates, and it is draining the brains from the rest of Britain.

In such circumstances, it is astonishing that instead of using public funding as a counterweight to the concentration of private capital, we do precisely the opposite. An army of half a million civil servants, as well as the headquarters of virtually every public body, are based in London.

Another example is provided by the media, as Phil Redmond argued recently. Channel 4 and Channel 5 could have been set up in the regions, as could satellite broadcasting and facilities for the recently awarded BBC digital licences. Without directives from the Government, it is always more convenient for such companies to centre themselves in London, close to the rest of the media. At the same time, ITV, which is the one truly regional broadcasting structure, has been allowed to merge into what is virtually a national broadcaster. If the Government cannot come up with an answer to the north-south divide, at the very least they should not compound the problem.

I have a very simple—some would say simplistic—and radical suggestion. Let us move the capital north. Economists suggested it 30 years ago, so it is clearly long overdue. Moving out of London would be the greatest single contribution to the regeneration of the regions that the Government could make.

Will the hon. Gentleman give way?

I would like to make some progress, if I may.

All other major English-speaking states have their political capitals away from their biggest cities, and the Japanese and South Koreans are currently discussing moving their capitals. If the capital moved from London, property prices there would become more realistic, and roads and railways a little less clogged. London would still be a great global city—indeed, it is arguable that it would become an even greater one, because it would work better. It could remain the capital of England, and Westminster might one day become an English Parliament. There would be costs, but they would be dwarfed by long-term savings such as lower office costs, cheaper housing, cheaper child care, no need for London weighting and next to no commuting.

Liverpool has nine of the 20 poorest postcodes in the UK, so let us reverse life's location lottery and put the UK Parliament there, in an anglo-celtic city that is ethnically diverse and infectiously inclusive. The Treasury could do its bit by relocating to Bootle. Jobs would spread, as they have in the south, from the north-west to other regions, including Wales and the midlands. And why stop there? What better way to enshrine the independence of the Bank of England than to send it to Newcastle? We might then get policy decisions that hurt the north a little less and help manufacturing a good deal more.

Moving the capital would signal unequivocally that the Government take the north-south divide seriously. It would regenerate the north, take pressure off the south and symbolise a reformed and genuinely decentralised Britain. It would do nothing but good—which is why it will probably never happen.

The Government must do something in their power to break the southern-centric bias. As has been mentioned, they could give serious consideration to relocating quangos and whole Departments, as part of an explicit policy of redistributing Government employment to the regions.

The hon. Gentleman talks about moving the capital of the United Kingdom. Would he extend his thesis and suggest moving the capital of Wales north from Cardiff? In particular, I can think of no better place for it than the valleys of Caerphilly.

There are those who would call Caerphilly an outer suburb of Cardiff—but I am certainly not one of them.

The Wilson Government adopted just such a policy following the 1963 Flemming report and the 1973 Hardman review. As a result, the Driver and Vehicle Licensing Agency went to Swansea, the Department of Employment to Sheffield, the social security records office to Washington—[Interruption.] Washington in the north-east of England, that is. The administrative functions of the Inland Revenue moved to Cumbernauld and Bradford. So far, new Labour's major achievement in that regard is the relocation of its offices from Millbank to Sheffield—although one wonders whether necessity was the mother of reinvention in that case.

History and international experience show us that regional economies are not entirely at the mercy of the market. Policies of regional redistribution, whether of private or public sector employment, can and have had positive effects. Central Government's role is crucial. Although local needs for regeneration are best determined locally, and regional development agencies and the devolved Administrations have a vital role, we can start to tackle regional disparities only if we have a judicious mixture of top-down and bottom-up policies.

Regional inequalities are substantial, and reversing them will require considerably more than the new regional policy currently offers. As the recent Institute for Public Policy Research report argued, the fact that these disparities have persisted for decades, and have been ignored and even denied by UK-wide institutions, exacerbates the sense of injustice. Those to whom injustice has been done now look to the Government to discover how the wrongs of the last century can be righted in this century.

rose—

Order. It might help Members if I say that it is desirable for the winding-up speeches to start at 12 o'clock. Members wishing to speak may gauge their contributions accordingly.

I congratulate my hon. Friend the Member for East Carmarthen and Dinefwr (Adam Price) on securing this debate on regional policy. As nationalists, we are rather more interested in national policies for economic equity, but let us not quibble over nomenclature this morning.

This debate is not on regional policy only as it relates to Wales, although the situation in Wales is especially instructive, but on regional policy per se. My hon. Friend has already referred to the Government's welcome, if belated, recognition of the deep regional economic divisions in the UK, divisions that extend to all manner of fields—wealth, housing, health and employment as well as economic activity. No one would deny that there are divisions within, as well as between, the regions as the hon. Member for Caerphilly (Mr. David) mentioned earlier. One reason why the "region" of Wales has cause to be glad that it has a National Assembly is that body's early decision to produce a proper index of multiple deprivation in Wales. Using measures that are appropriate to Wales—especially rural Wales—that index has exposed disparities that were previously masked or disregarded. They include accessibility of services, quality of housing and proper appreciation of the drain on family finances that running one car can cause, let alone two, as is often the case in rural areas.

Areas in my constituency hitherto regarded as rural idylls have emerged as areas of deep and real deprivation. That was dramatically exposed recently by research undertaken by Gwynedd county council. It showed that in the Llŷn peninsula, which has some of the worst housing conditions in Wales, there is pressure on prices in housing markets from comparatively rich outsiders from the overheated regions mentioned by my hon. Friend the Member for East Carmarthen and Dinefwr. The price pressures combined with low local incomes meant that no one on an average wage could buy any property that was advertised locally. Some 20,000 local people on average wages could not access the local housing market.

Does the hon. Gentleman recognise that that is also a problem in London and large areas of the south-east? It is not confined to rural Wales.

I agree with the hon. Gentleman. However, the point I am making is that prior to that small piece of research, the problem was not as apparent as it now is.

One of the most telling lessons of that thorough examination of deprivation in Wales is that regional disparity within our country has lessons for us. It startlingly mirrors divisions in the United Kingdom. Many of the south Wales valleys and the south-west and north-west of Wales are in an objective 1 area, so defined by the European Union because of the low GDP in the area. The areas that do not come under that definition are the south-east and the north-east, which are the areas that have experienced huge Government investment in infrastructure, industry, research and development, and in the case of Cardiff a glut of Government jobs and a growth in GDP.

The effects of that direct investment are clear: the overheating of the local economy, labour shortages, huge house price inflation and pressure on infrastructure. The investment is directed—and I use the term "directed" advisedly. The choice is not between regional investment or no such investment, but between investing in the poorer regions or investing in the rich south-east. That is, in part, an economic decision, and the effect of relying on the economic imperative is quite clear. For example, I was interested in the autumn to see a report from the Venture Capital Association that revealed that 48 per cent. of all venture capital investments were in the south-east of England. Wales, Scotland, Northern Ireland and the regions of England did not get the share that they would expect on a per capita basis, let alone on a needs basis.

Investing in the poorer regions or in the rich south-east is a political choice. As in all political matters it is a question of priorities and, as my hon. Friend has shown, the Government's priority is far from redistributionist. The case of Wales is instructive for the UK as a whole, where the not-so-hidden hand of Government favours the rich south-east of England. The south-east of England is massively rich and has a declining environment, making it difficult for people on average incomes to live there.

To move on to a further constructive point, politicians from Wales and Scotland—and elsewhere in the UK—are often accused of whinging, complaining and always rattling the tin, so I want to describe the positive effect of a proper regional policy. The regions have something positive to offer to the great pensions debate in addressing the so-called demographic time bomb. We all get very worked up in the pensions debate about the dependency ratio—the proportion of those in work to support those in benefits. That ratio has been falling for many years and is one of the grounds cited in the arguments for pensions reform. However, the contribution of regional policy to that debate has been largely ignored.

I refer to an interesting exception: the recently published Catalyst report, "The Challenge of a Longer Life—Economic Burden or Social Opportunity" published in December 2002. Briefly, it points out the scope for increasing economic activity rates among older people. The regional element is clearly illustrated by the fact that in the period March to May 2000, the activity rates among men aged 50 to 64 and women aged 50 to 59 was 61.3 per cent. in Wales compared with 76.8 per cent. in the south-east of England. That suggests that any effects of greater prosperity leading to earlier retirement are outweighed by the strong demand for labour, which keeps older people in jobs. The report concludes that:

"Given a strong demand for labour and the greater willingness to employ older people, it is not difficult to envisage sufficient increase in activity rates to maintain the current ratio of workers to non-workers across the population as a whole".

Not only would a proper and successful regional policy tackle regional inequality, the gross waste of human resources and the issues of poverty, health and housing that I referred to, but it would have the utility of being part of the answer to one of the most pressing problems of social policy.

I begin by congratulating the hon. Member for East Carmarthen and Dinefwr (Adam Price) on securing this debate. It is vital that we focus on the development of a coherent regional policy in this country, and I agree that that has not attracted sufficient attention, at least in the recent past. I am delighted that he supports my campaign to have the capital city of Wales moved north from Cardiff into Caerphilly. That would be a positive step forward for the economic development not only of Britain, but of Wales.

I have some reservations about some aspects of the thesis that the hon. Gentleman developed at length. There are no absolutes in this debate—it is not a question of black and white alternatives. Regional policies are, of their very nature, complex economic instruments, and it is often a question of where one places the emphasis. I have reservations about the notion that regional policy can be based on the idea of redistributing resources from rich regions to poor regions—today's world is far too complex to allow a policy based on such a premise. We are in a new situation, with the development of the internal market, which will increasingly become more integrated, especially if we join the single currency. In addition, the process of globalisation is having a profound effect on the nature of our economies, and that effect will become even more profound in the near future. It is therefore essential that we develop new policies, not simply policies that are based on the assumptions of the past.

I agree with the hon. Member for East Carmarthen and Dinefwr that regional policies such as those pursued by Labour Governments in the 1960s and 1970s were effective, but it is wrong to assume that such policies can work in this new century. Rather than a strategy that is based solely on redistribution and on the idea of attracting footloose investment into less prosperous areas, we need a new kind of regional policy. Emphasis must be placed on developing indigenous entrepreneurship. The hon. Gentleman might be dismissive of such terms as "endogenous economic growth", but it is nevertheless true that the poorest regions in the United Kingdom lack entrepreneurial activity. That is an historic problem that cannot be solved overnight, but it must be addressed in our regional policy.

The development of the entrepreneurial action plan in Wales points the way forward. It is vital that we pursue a cultural change in many of our older industrial regions, but our approach to economic development is rooted in our educational system and lifelong learning. It has as its end result a change in the cultural attitude to growth and economic development.

Does the hon. Gentleman agree that the poorer regions of Great Britain and of Wales in particular have often been sold to potential investors as low-wage economies with low unit costs? We should take a more positive approach by improving skills and infrastructure, so that they are better places in which to do business, rather than places with low wage rates.

I agree absolutely—in fact, that was my next point. Rather than rely simply on attracting inward investment to less well-off regions on the basis of low wages and, often, poor health and safety standards, we should aim to create an economy that is based on high added value and high skills—on the quality of the people and the work force. That is where the emphasis of regional policy should lie.

Following on from that is the need for a regional policy that addresses fundamental weaknesses not only in the economy, but in the nature of our societies. The hon. Member for East Carmarthen and Dinefwr referred to the high levels of economic inactivity in many of the poorest areas and he was absolutely right. The question facing us is one not only of unemployment levels, but of how many people are economically active.

A great problem in many of the older industrial areas is the large number of people who are physically ill. It is vital that that issue is linked to the welfare to work debate. As part of the regional policy concept, we must consider ways of improving the health of large sections of the population. In some wards in parts of south Wales, for example, as many as one in four of the working age population is economically inactive owing to illness. If we are serious about increasing the GDP of such areas, we must improve the health and well-being of those people, so that they are potentially able to enter the labour market and eventually secure employment. That is one crucial element that we must consider.

Such ideas were not seriously considered 20 or 30 years ago. It is vital that we are not concerned simply with turning the clock back and looking at what Barlow said or what previous Labour Governments did. We must address the situation as it exists in our country today and plan for the future. As I said, this is not an either/or question. We need an holistic approach that pulls together the best of our experience and creates a vision for the future. That is what I hope our regional policy will consist of in this new century.

I congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) not only on securing the debate, but on an outstanding speech. In its breadth, it was a model of its kind. My contribution will be more modest, but given that the debate has a distinctive Welsh flavour, and in the week that Michael Vaughan was voted the man of the Ashes tour, I thought that a contribution from God's own county would be appropriate—[Interruption.]—especially in view of the constituency represented by the Minister.

I shall take as my text just one line from the regional economic strategy document prepared by Yorkshire Forward. This year's report says:

"The over-arching target of above European average growth in Gross Domestic Product per head is being achieved, but the gap with London and the South East is widening and strong growth in services contrasts with a shrinking manufacturing base."

I am a fan of Yorkshire Forward's work, but I shall point out three different issues relating to Yorkshire—there may also be implications for countrywide policy—on which a difference could be made in respect of reducing the gap.

First, one of the big challenges in regional policy in Yorkshire over the next year will be the closure of the Selby coalfield in my constituency. That has implications not only for my constituency, but for the whole of Yorkshire. According to the report by Lord Haskins, it will involve 2,000 jobs directly and about 5,000 indirectly, spread out across 600 firms in West, South and North Yorkshire. One of the great challenges in formulating Yorkshire's regional policy is to see whether the coalfield can close in a different way from the way in which coalfields closed in Yorkshire and throughout the country in the 1980s and 1990s.

I briefly draw hon. Members' attention to Lord Haskins' report, in which he says that the economic "shock" of the closure of the Selby coalfield, which was due in spring 2004 but now looks as though it could happen at the end of the year, will amount to £160 million. Lord Haskins has produced a package of measures and asked for £11 million of new Government money to attract inward investment, retraining and so on. I urge the Minister—a young man with good connections—to urge the Secretary of State for Trade and Industry to reply quickly to the report. The matter is urgent and we want the taskforce's recommendations to be implemented speedily.

The hon. Member for East Carmarthen and Dinefwr characterised the Government's regional policy well when he said that, rightly or wrongly, it built on the strengths of the existing economy. He talked about the importance of science in reducing regional disparities. I bring to the Minister's attention an example in the grain of the regional policy in Yorkshire—the European spallation source project. I will not go into great detail, but the project is currently Europe's leading scientific project. It involves a neutron particle separator that will be the Hubble telescope of condensed matter.

Last year, it was my duty to ask a local parish councillor in Selby whether they fancied a European spallation source next door to them, as there is a site in Burn in my constituency. Yorkshire Forward's No. 1 project is to attract that facility to Yorkshire, which will build on the strengths of the White Rose Consortium of Leeds, Sheffield and York universities. As I said, the Minister is a young man of impeccable contacts, and I urge him to secure a meeting between the Yorkshire universities, Yorkshire Forward and Lord Sainsbury to discuss the project. At the moment, Lord Sainsbury says that it is too early to determine how the process would work throughout Europe, but it is never too early to discuss such matters. The bid for the project is the equivalent for Yorkshire of an Olympic bid, and I hope that we can secure a meeting to discuss it.

I add to the comments made by the hon. Member for East Carmarthen and Dinefwr by stressing the importance of regional media. In a debate on regional assemblies, the right hon. Member for Richmond, Yorks (Mr. Hague) said that we did not need a regional assembly in Yorkshire as we had a cricket team and an attitude. I do not agree with his conclusion about regional assemblies, but the remark about the cricket team and the attitude is true. However, we also have Yorkshire Television. Regional media are terribly important to a sense of identity and to the economy, and Yorkshire Television has produced a fascinating document outlining all its contributions to the local economy.

I draw hon. Members' attention to early-day motion 260 in my name, to which there are almost 80 signatories, to strengthen the Communications Bill by strengthening regional television. According to the Producers Alliance for Cinema and Television, the number of regional opt-out slots on ITV has decreased from 8,700 hours to approximately 6,600 hours over the past year. The number of regional productions on the BBC has increased slightly to a total of 5,300 hours. My early-day motion would strengthen the requirements for regional production on the ITV network and allow the ITV companies to be regarded for the first time as independent companies in bidding for the BBC's independent quota. London luvvies—companies based around London—currently dominate that quota. ITV companies such as Border and Yorkshire should be able to bid for that national quota.

Finally, the Regional Assemblies (Preparations) Bill is now in the House of Lords. It would be enormously strengthened if transport were placed entirely under the auspices of the new regional assemblies. There is much strategic planning in the Bill, but the regional assemblies do not have a sufficient job to do. Transport is the most obvious sector with which regional assemblies should deal. We should not continue with passenger transport executives and authorities in Yorkshire. It is ridiculous to have a passenger transport authority in both West and South Yorkshire and a regional assembly to deal with the strategic planning of transport. Only one body is required across the region, which would allow a regional travel pass and perhaps a concessionary pass for pensioners. We should popularise the idea of having a regional assembly.

Finally, the Minister referred to consultation on the timing of referendums. I am a supporter of regional government and I know that the level of support in Yorkshire is different from the level in the north-east, for example. Business supports a regional assembly more in the north-east and the north-west than in Yorkshire, so the county should not be in the first wave of referendums for regional government: the other regions should go first.

I came here for the previous debate and initially had no intention of participating in this one. However, I am moved by the excellent contribution of the hon. Member for East Carmarthen and Dinefwr (Adam Price) to make my own contribution.

My hon. Friend the Member for Selby (Mr. Grogan) rightly stressed the importance of contextualising regional policy within the wider debate. Greater interest might follow from understanding the importance of the economic redevelopment of regions. People might see more clearly the need for political and administrative improvement. I have always supported some form of regional government because otherwise we end up with unelected quangos freewheeling and taking decisions off their own back, which is neither acceptable nor fair. We can advance the regional debate only when we reconnect economic decision making to the political aspect of governance, which is the proper starting-point. I disagree with the hon. Member for East Carmarthen and Dinefwr on his historical analysis of regional policy. We need to look within regions as well as between them.

Rural deprivation is strongly connected with agricultural decline. It is difficult to see in terms of the aggregation of numbers, because the agricultural industry in this country is small, but many Labour Members are worried about agricultural decline. We must not just talk about diversification, but make sensible and cogent arguments for it. Rural decline is nothing new: it has been with us virtually for ever, dating back to the agricultural revolution. It has been heightened by the more difficult and rapidly accumulating problems that the industry faces today.

I am a little surprised that the decline in manufacturing has not been emphasised. I would link regional decline clearly with the decline of our manufacturing base. It will be felt more harshly in regions where manufacturing has traditionally been more important. We may be clouding the issue too much. A proper regional policy should be running alongside a proper manufacturing policy. Whereas I am critical of our inability to deal with our agricultural decline, at least we have a policy across Europe, through which resources are channelled into the industry—perhaps in the wrong way and insufficiently, but we are trying to deal with the problem.

It is one of the European Union's greatest weaknesses that it has a policy supposedly based entirely around competition rather than support. That is foolhardy in various ways, most clearly because it is not working—if it is working, why is manufacturing decline taking place throughout this country, Europe and the developed world? Some may say that such decline is inevitable because, as my hon. Friend the Member for Selby mentioned, companies will always seek out low-wage economies whether we like it or not. However, that does not excuse us from examining policies to deal with manufacturing.

The daftest element of all the daft things done by the EU is the idea that we cannot intervene in manufacturing decline because it would be a form of state aid, which is contrary to competition policy. We know that that is blatantly unrealistic and dishonest. All countries intervene, but some do it more covertly and cleverly than my own Government. I wish that we were more overt and said that we were going to intervene, and why and how we would do that. My argument is that the regional policy debate cannot be masked by one that avoids the inevitable need for a proper debate on where we want manufacturing in this country and the rest of western Europe to go. Surrendering and saying that the decline is all down to the market is not acceptable. It is time that we recognised that sensible, strategic planning, proper use of infrastructure investment, and support for what could be called losers, as well as the winners, to turn them into more successful companies can achieve our aims.

Regional development agencies can help in that process. I speak highly of the South West of England Regional Development Agency, because it has intervened in my constituency in a big way by taking on a site in Dursley in which to reinvest and regenerate. That is a model for action that could be taken elsewhere, although it is always against the background of the threat of the European Commission's declaring such action to be unacceptable and anti-competitive. However, we cannot pretend that we can run a country with any manufacturing basis unless we have that level of intervention. We should be open and honest. We should encourage the debate initially and then encourage action; otherwise, regional policy will become irrelevant as we see a massive decline of core employment. I am not a believer that an economy can be run on that basis. That was the greatest fallacy of Thatcherism—

Order. I understand that the hon. Gentleman is aware that the winding-up speeches start at 12 noon.

I, too, congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on securing the debate and giving a wide-ranging and entertaining speech. Hon. Members should be made aware that he has been sharing his views on moving Parliament to Liverpool with Derek Hatton on Radio Wales in recent days, so he has some interesting allies for his proposals.

The hon. Gentleman spent a long time highlighting the problems, and although his solution has some attraction in principle, it is a little simple. He avoided some of the more obvious problems that are creating the disparities that he highlighted so well. I will not try to repeat what he said about those, but one subject that he avoided, which is pertinent to the issue, is the comparative strength of the pound and euro. The disparity has hit manufacturing, farming and tourism, which are key component industries of the north, Wales and Cornwall.

We cannot escape the fact that the disparity exists, and if we were in the euro, we would not assume the same disparity in economic growth between London and the south-east and the rest of the country. The hon. Gentleman's party has the problem that it would probably prefer a separate Welsh currency—a Glyndwr, or something similar—which would have problems of its own. He omitted to mention the exchange rate, which is a key component of the debate, and which has probably resulted in the loss of about half a million manufacturing jobs since Labour came to power. Much of the blame for that can be laid at the door of the Government's reluctance to call a referendum on the single currency.

The hon. Member for East Carmarthen and Dinefwr rightly highlighted a number of other problems, and I will draw attention to a couple more of the issues. The hon. Gentleman spoke about housing, and there is no doubt that there is a great housing problem in London and the south-east. However, a housing needs survey that has just been carried out in my own constituency, in South Shropshire district, just on the English side of the Welsh border, revealed that for anyone on average local wages, there have been no houses available to buy for the past six months. The reason why that situation is different from that in the south-east is that we are punished by the property values in the south-east. People retire to Shropshire, and that drives up the house prices, so people who work in the area can no longer afford to live there. As has been highlighted, Cornwall and other areas face the same problem.

More worryingly, there is an acceleration of the regional divide in issues such as broadband. Because there is a high population density in London and the south-east, as well as many businesses that use a great deal of money, organisations such as BT will fall over themselves to provide broadband in those areas. However, in the less economically active and more sparsely populated areas, the unit cost of installing broadband is greater, and BT will be reluctant to do so. In my own area, Advantage West Midlands is doing wonderful work in trying to get broadband into rural areas, but it remains a struggle, and we are years behind. The availability of broadband will encourage business growth in London, the south-east and the major economic centres, and the Government must address that issue in a way that will help the other regions of the United Kingdom.

The hon. Member for East Carmarthen and Dinefwr mentioned that there was some attraction in moving parts of government out of the south-east. I will not discuss further what those parts of government might be. There are, however, other solutions that must be considered.

A key issue is the need for a proper regional government policy for England, and the need to strengthen regional government in Wales. One of the ironies of the proposals being put forward for regional government in England is that the regional governments will in effect have a tax-varying power. Wales would then be the only place in the UK that did not have such a power. The Government have not commented on that, but I assume that they will eventually realise that that situation cannot continue, and will address it—but there are different views within the Government as to how they might deal with the issue.

If regional government is to be set up in England, the lesson to be learned from Wales, compared with Scotland, is interesting. The Scottish Parliament was given substantially more powers than the Welsh Assembly, and has probably been more successful because of that. I support the Welsh Assembly and the work that it does, but it has not performed as well as the Scottish Parliament, probably because it does not have the same powers. The same thing will happen in England. The proposed regional assemblies will have almost no powers at all. They will have an overview of the quangos that already exist, but will not be able to control them.

I will give two examples. The regional assembly will be able to decide on its preferred regional transport strategy, but the decision whether that strategy will be implemented will be made at the centre, because central Government will decide which schemes are funded. The money will not go into a big pot for the regions to decide where to fund schemes. The regions will come up with the idea, and Ministers will make the final decisions on whether to proceed. The same will be true for health: there will be a regional health adviser, but he or she will be appointed by the Minister.

The regional assemblies are in danger of being toothless—a fact that was touched on many times in Committee on the preparatory legislation. I do not want to go into too much detail, but there is an issue in some parts of England about the boundaries of the regions, which were set by the Conservatives for administrative purposes. We tease them about "their" regions—but that is why they were set up, and they are now being used to set up regional elected assemblies. There are problems in parts of the south-west, the south-east and the west midlands, which do not feel that they belong in the Government's current regions. We must address the boundary issue before we are likely to get a popular, referendum-winning solution.

The hon. Member for East Carmarthen and Dinefwr avoided mentioning the Barnett formula, which is 20 years out of date. We cannot carry on pretending that it does not exist; it needs to be properly reviewed by a commission, although I do not pretend to know all the answers that may come out of such a review. We need radical housing policies in the south-east and in other parts of the country, to allow houses to be built by means of shared equity, renting or golden share schemes to keep them out of the open market. That is what is needed to keep the economy going.

The problem is that the Government do not have a firm idea of their regional policy—that is the title of the debate. They have a tentative approach to regional assemblies; they do not understand that they mean decentralising from Westminster, moving civil servants away from London to the regions and giving those regions power over things that are currently decided in Westminster. That is what real regional policy would do; that is what would help to drive the economy in the regions and bring lasting benefit to people throughout the United Kingdom, including those in London and the south-east who suffer from the negative aspects of the Boom—the housing and transport problems, and the congestion. A positive rather than a tentative approach from the Government would be welcome.

I, too, congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on securing the debate. I confess to having been puzzled when I saw the title "Regional Policy" standing in the name of a Welsh nationalist Member. I wondered whether the debate would be about English regional policy, or what I might call old-fashioned regional economic policy. I congratulate the hon. Gentleman on having carefully crafted his arguments to keep the debate in order.

I have much sympathy for the hon. Gentleman's argument about the north-south divide, and I see it as two sides of the same problem, as my constituency is in a part of the country that suffers from the problems of economic overdevelopment. However, the hon. Gentleman and I are not likely to agree on the solution. Neither my party nor I are attracted to the Gosplan approach that he favours, of redirecting investment. One or two hon. Members fell into the trap of talking as if the vast bulk of investment were public investment, whereas in our economy most investment is private. Private investment can be coaxed, persuaded and incentivised, but it cannot be directed.

The hon. Gentleman looked back with nostalgia to the '60s and '70s and proclaimed that the era of direct subsidies was "no failure". However, he readily acknowledged that when the direct subsidies dried up in the '80s and '90s, the regional economic disparities reappeared—thus neatly putting his finger on the problem with using direct subsidy as a solution. I would argue that the measure of the success of regional economic development funding is the achievement of long-term, sustainable, self-generating growth within a region.

I would argue, too, that as we move from an economy with a regional pattern largely based on the existence of natural resources to one overwhelmingly based on human resources, the infrastructure and skill deficit must be addressed in any effective long-term regional policy. We must ensure that we improve transport infrastructure in a way that delivers immediate effects. This is a chicken-and-egg problem. Although everyone would like railways and airports in their regions that will help to generate economic development, such transport investments depend on volume and critical mass to deliver effective services. I am afraid to say—because it flies in the face of much Government thinking—that only roads, as a form of transport infrastructure, are likely to deliver the short-term immediate benefits to the regions where economic development needs kick-starting.

The hon. Member for Ludlow (Matthew Green) picked up on one of the most important issues—communications infrastructure. As our economy is transforming into a human resource and service-based economy, the broadband revolution held out the prospect of removing the problems of isolation and remoteness, and creating an equality that could not have been dreamt of even 30 or 40 years ago. Unfortunately, the Government failed to deliver on their ambitious targets for the introduction of broadband. Local loop unbundling has been a miserable failure, with the result that genuine broadband is a big city phenomenon and ADSL is a large town and suburban phenomenon. Even where I live, just 26 miles from the Palace of Westminster, we do not have ADSL, and there is no prospect of getting it in the near future. The Government have compounded the problem by taking £20 billion that would otherwise have been available for investment out of the telecom sector, through the third generation telephone licensing round. That has meant that technologies that might be able to deliver in remoter areas, such as wireless local loop technologies, remain undeveloped.

Does the hon. Gentleman propose that the Government should give some of that money back?

I do not suppose that the Chancellor of the Exchequer would be keen to do so, given the predicament in which he currently finds himself, having adopted a tax-and-spend policy and then discovered that tax receipts will be somewhat lower than expected. That is certainly an interesting suggestion, however. Perhaps the Minister would care to put it to his colleagues at the Treasury.

The hon. Member for Caerphilly (Mr. David) identified one of the key issues that must be addressed in any effective regional strategy: the development of entrepreneurship in regions that, because of their industrial past, do not have strong traditions of entrepreneurial development. I hope that regions, both in England and beyond, in the devolved Administrations, will build on their advantages and regional strengths and promote clustering as a way of developing self-sustaining local indigenous growth. The EU-funded science project in Selby is just such an example, which has a genuine prospect of securing an effective self-sustaining local cluster.

Of course, the Government's approach is that elected regional assemblies are a vital part of securing regional economic growth and balancing regional economic development. We see no evidence of that. Indeed, the Scottish example seems to suggest the opposite. Since devolution, growth in Scotland has lagged behind growth in the United Kingdom. There is no evidence that an extra tier of politicians and bureaucracy will narrow regional differentials, and throughout the European Union, inequalities between regions have been growing during the past 15 years, despite the fact that many EU countries have strong traditions of regional economic growth.

Even the director general of the CBI is sceptical. He says:

"Business doesn't believe that regional assemblies will deliver. We feel that they won't make people's lives better. If anything, we believe that there is a real danger they could make a bad situation even worse."

The Government are politicising the current RDAs by grafting a tier of elected oversight on to them. They hope that that will provide a panacea, but it will have the opposite of the desired effect.

If I am to give the Minister 10 minutes in which to reply, I can speak for only one more minute, so I shall make just one more point. I rather expected a Welsh Member to mention the availability of match funding, but no one has done so. Such funding would allow full use to be made of the EU structural funds that are allocated to Wales for 2001–06. Where do the Government, and in particular the Deputy Prime Minister, stand as regards the Barnett formula?

In an interview under the heading "Scots and Welsh face subsidy axe", which was published in The Guardian just before the last general election, the Deputy Prime Minister said that the forthcoming review of local government finance, which was promised soon after the election, would

"include a detailed examination of funding throughout the UK."

He promised that there would be "blood on the carpet" as a result of the review. Are the Government committed to retaining the Barnett formula, which might be seen as disadvantaging Wales, given the measures of genuine deprivation there? On the other hand, are they now prepared, as the Deputy Prime Minister suggested, to take on the Scottish lobby and risk the tartan backlash by revisiting the formula as part of their review of regional distribution in England?

I have only a short time to respond to the debate, which has generated several intriguing ideas. First, I congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on proposing the subject. The debate has been very wide-ranging, moving from an exposition on the single European currency by the hon. Member for Ludlow (Matthew Green) to issues such as broadband communications. All those issues are relevant, but I shall try to restrict my contribution to matters that fall within my ministerial responsibilities, and those that relate more directly to regional policy.

The Government take regional policy very seriously. We recognise that the need to increase our regional focus on economic development is not only about fairness and prosperity but about ensuring that there is strong cohesion between all parts of the United Kingdom. We want to work hard to ensure that that objective is taken forward and that regional and national prosperity goals are fully integrated into all our delivery mechanisms.

The hon. Member for East Carmarthen and Dinefwr recognised that the Office of the Deputy Prime Minister, together with the Treasury and the Department of Trade and Industry, has responsibility for a public service agreement target specifically on regional economic performance. Our target is to make sustainable improvements in the economic performance of the English regions and, over the longer term, to reduce the persistent gap in growth rates between them.

My hon. Friend the Member for Selby (Mr. Grogan) highlighted the fact that that would be a particular challenge in certain parts of the country, including our home territory of Yorkshire, which we are both proud to come from. He mentioned the coal industry, and said that the Government's response to the taskforce must be strong and relevant. He also mentioned the campaign on the location of the spallation facility in Yorkshire, and I will examine any representations closely.

The gap in economic growth rates has persisted for many years and under all Governments. Now, for the first time in a generation or more, we must focus on tackling some of the disparities in economic performance between the regions and nations of the United Kingdom. We must all focus on creating the conditions for growth. The Welsh Assembly, the Scottish Executive—I will make sure that I get my brownie points by being the first person to mention that—and the Northern Ireland Administration, similarly, focus on economic performance.

I am not entirely convinced by the solutions that the hon. Member for East Carmarthen and Dinefwr would pursue. He mentioned, for example, his opposition to building new homes in areas where pressures are high and workers—particularly public sector workers—face significant difficulties. When he talks about redistribution, I suspect that he really means telling people where they should and should not live. I am not sure that that approach is possible. We cannot have an approach that constrains, smothers or suppresses prosperity. My hon. Friend the Member for Caerphilly (Mr. David) rightly highlighted the need for a more sophisticated approach appropriate for today's environment, rather than looking back at previous policies. We need to stimulate demand and growth where those are lower than their full potential.

The hon. Member for East Carmarthen and Dinefwr and others touched on the issue of location in the public sector. His argument was about moving the capital to Carmarthen. Some may argue that the capital should be in Bradford—but although I might see the moral argument for that, it is not the Government's policy.

We will take further steps to improve our regional policy, such as ensuring that awareness of regional devolution features strongly in civil service training and development, with the aim of increasing the mobility of civil servants between headquarters and regional offices. Whitehall Departments will also be encouraged to consider the balance of their staff between the centre and the regions, in terms of effective policy design and implementation. In particular, Departments will have to demonstrate the case for not locating new streams of work outside London and the south-east.

Hon. Members are familiar with the idea of the north-south divide, but they should not be surprised to hear me say that that notion is a rather simplistic and possibly inaccurate way to describe the imbalances in economic performance in the UK. I do not deny that there are such imbalances between regions, although it should not be forgotten that differences in economic performance within regions can be even more marked than those between them. We are committed to tackling disparities wherever they occur. We must make sure that we consider the imbalances both between and within regions, and create the conditions that reduce the gap in growth rates between the south-east and the east, and the other six regions. We must tackle disparity and disadvantage wherever they occur.

The office of the Deputy Prime Minister is not the only Department that has the objective of reducing such disparities; that objective is built into the whole range of the Government's policies. The Government set the framework, but from the centre, we can only do so much. When it comes to revitalising a region, we accept that Whitehall and Westminster do not necessarily know best. We were elected on a platform that included bringing devolution to Scotland and Wales, and we set up regional development agencies as strategic drivers of economic development in England. Their work has been successful so far. They are already tackling the causes of low economic development in regions. Firms are being helped, neglected neighbourhoods are being regenerated, and regional strengths are being augmented. Hon. Members may have seen, for example, the contribution of the North West Development Agency in transforming east Manchester, during the recent coverage of the Commonwealth games.

Many hon. Members representing Wales have spoken. Although it is outside my ministerial responsibility, I think that we have a proud record of devolving responsibility for economic development to the National Assembly for Wales. That has helped the successful economic approach that the Welsh Assembly Administration have taken. The First Minister has taken a personal role in assuming responsibility for northern Wales. Such approaches have helped to lead to success in a number of ways.

Much as I would love to talk about the Conservative party's record on regional government, I am running out of time, and it would not be right to let the debate pass without mentioning the move towards elected regional assemblies for England, to which my hon. Friend the Member for Stroud (Mr. Drew) alluded. They could be crucial to the success of the regions by making sure that the politics links with the economic policies for the future. Our vision is that the UK will perform more strongly; all our regions and nations will have to improve their economic performance if we are to succeed. The Deputy Prime Minister has consistently championed regional policy, and I am proud to have the opportunity to work alongside him.

Thank you, Mr. O'Brien—or, to judge from your name card, Mr. O'Hara. Has your name changed over Christmas?

I want to debate the cost of the common agricultural policy, because those of us who believe in Europe, and I count myself very much in that camp, are mocked by it every day. Its financial cost is high and in the view of those who want to further the European project, its political cost is even greater.

I hope to hear more from the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Scunthorpe (Mr. Morley), about the Government's proposals for CAP reform. More importantly, I want to know what the Government are doing to promote the reform proposals both to the British electorate and to the Governments and electors of other European countries. I hope that by the end of the debate we will be in no doubt that fundamental reform of the CAP is a vital British foreign policy interest, essential to Britain's future in the European Union and to the future and credibility of the European Union.

About half the EU budget is spent on agriculture. Many people—certainly in my constituency—could be forgiven for feeling that we belong to a common agricultural union rather than the European Union. Some of us would like more emphasis on the advantages of EU membership than on agricultural subsidy.

The common agricultural policy is almost wholly without merit. Its beneficiaries are rich farmers and giant agribusinesses, special interest groups, bureaucrats and, sadly, fraudsters and organised criminals. Its casualties are the citizens of Europe who must pay the bills for the CAP, both as consumers and as taxpayers, as well as the third world, the environment, wildlife and farm animals throughout the EU, law and order throughout the EU and, not least, public confidence in the integrity of the EU.

According to the Consumers Association, the common agricultural policy adds more than £16 each week to the average shopping bill of a typical British family. Our food is twice as expensive as, for example, that in New Zealand. New Zealand is well favoured agriculturally, and New Zealanders, unlike Europeans, do not labour under excessive subsidies and tariffs. The CAP costs the taxpayer £50 billion a year. If my right hon. Friend the Chancellor of the Exchequer put 2p on income tax, there would be an outcry, yet that is what the CAP costs every UK taxpayer.

Whatever its failings for Britain, one might feel better if the CAP helped the poorest farmers or rural communities in Europe. It does not do that adequately; 70 per cent. of payments end up in the pockets of the richest 20 per cent. of farmers in the UK and the EU. According to the Catholic Agency for Overseas Development, the CAP awards £500,000 to that horny-handed son of toil, the Duke of Westminster.

Even worse is the effect of the common agricultural policy on the third world. Many warm words come out of this place about the third world, but the CAP denies export markets to third world countries and destroys their home markets by dumping surplus foodstuffs on them. In doing so, it benefits bad Governments and middlemen in the third world and destroys the price structure for local farmers, perpetuating debt and poverty. Of course, the EU is not alone in dumping produce on the third world, but the CAP makes nonsense of our hopes that the EU might offer it a new and better pathway out of poverty and support the superb work that is being done by my right hon. Friends the Secretary of State for International Development and the Chancellor.

Not content with dumping food on the third world, the CAP dumps tobacco there as well. That tobacco is low in quality and high in tar and is rejected by Europeans. The same EU that rightly tries to protect its citizens from such tobacco is happy for it to be used to kill African and Asian people at the European taxpayer's expense.

Because of the CAP, each cow in the European Union receives a subsidy of $2.20 a day, according to CAFOD, an income greater than that of half the world's population.

In Europe, the CAP has done more to harm the environment than two world wars. It has promoted intensive farming—a better name for which is perhaps chemical farming; it has destroyed hedgerows and habitats; it has poisoned land, rivers and streams; and it has killed wildlife across Europe. Since 1970, the European Union has suffered a 40 per cent. loss in farm birds—an issue that is, I know, dear to the Minister's heart. That is the fastest known loss of species. If Shelley were alive today, he would write not an ode to the skylark, but an elegy. I shall seek another Adjournment debate specifically on the loss of bird life in the United Kingdom.

The CAP is a magnet for fraud, racketeering and organised crime, and if the scale and consequences of that fraud were not so terrible, it could form the basis of a new generation of Ealing comedies. One of the most memorable examples is the great olive saga. Realising belatedly that most of the CAP's £1.5 billion olive tree subsidy was being spent on non-existent olive groves, the EU used a £130 million satellite to spy on claimants. However, the technology was foiled when the claimants filled their bare fields with plastic olive trees. That may be yet another blow to the environment from the CAP.

Above all, the CAP has created a climate of cheating and corruption across Europe. For millions of European people it has become normal, even praiseworthy, to steal the resources that belong to all the people of Europe. Through the CAP my constituents not only pay higher prices and taxes, but finance crime.

The problems that I have outlined are well known and deep-seated. I do not say that there should be no regime to support agriculture. However, the regime should be open, honest and clear. Of course we need to protect our farmers and ensure that a proper food supply is maintained. That is a central tenet of any Government or union of Governments. Nevertheless, our current way of proceeding does not fulfil those objectives; rather than giving credibility to the wider concept of Europe, it undermines it. The problems will probably deepen when Europe broadens and expands, with the accession of new member states from eastern Europe, bringing millions of new agricultural claimants.

In Poland alone more people are dependent on agriculture than is the case in the United Kingdom, Italy and France put together. There is some optimism—although I hope that the Minister will not reply over-optimistically—about the possibility that enlargement will force the EU to reform the CAP. I am afraid that at the moment there is little evidence of that. Indeed, the French and Germans effectively kicked reform into touch until 2006. The accession states are being promised a rising percentage of payments from the CAP year on year up to 2013. I am afraid that it is far more likely that the accession states will create new allies and opportunities for opponents of CAP reform. While the Minister is battling away in Brussels for sensible CAP reform, the forces against his and the Government's efforts are not diminishing, but increasing.

We need a broader campaign. We must support our Minister, our Department and our national objectives on a wider scale. We can achieve that if the Government as a whole exert stronger pressure for CAP reform. I have no doubt that the Government are committed to reform, but that commitment must be more visible and voluble.

I have the greatest of respect for my hon. Friend as I have known him for many years and know the hard work that he puts in. Even so, the Prime Minister must take a strong personal lead in support of reform and make it part of his commitment to reform the European Union so that it has greater credibility among the people.

I would like our proposals on CAP reform to be accompanied by an unprecedented diplomatic and political offensive. I want every Government and every citizen of the EU, present and future, to be aware of a prime ministerial plan for European agriculture—a Blair plan, if I may call it that. I want the Blair plan to influence the political agenda of every country in the EU because I am convinced that citizens throughout Europe have as much to gain as we do in the United Kingdom.

Of course, 5 per cent. of European Union voters make their living from the land and agriculture, but 100 per cent. of EU voters are consumers and are waiting for a lead. Let us tell those voters why and how the Blair plan would mean lower food prices and lower taxes. Let us tell them why and how the Blair plan would help their small farms and rural poor, rather than the giant agribusinesses and racketeers. Let us tell them why and how the Blair plan would save their environment and their irreplaceable wildlife and give them healthier, happier animals and food of better quality. Let us tell them why and how the Blair plan would improve living standards and create new opportunities for some of the poorest people in the world and make a difference to them. All such things can move European voters as well as our own, and I am sorry that a Blair plan was not sold in such a way to the voters of France and Germany during the run up to their elections last year.

Let us waste no more time winning over every possible supporter for European reform of the CAP. The Government have everything to gain from a high-profile crusade for CAP reform, and it is a worthy cause for my right hon. Friend the Prime Minister, who is invariably at his best when he sees and expresses an issue in clear moral terms. This issue lends itself to that form of expression.

It is not only a practical necessity, but a moral duty, for the Governments of the EU to reform the CAP. It is a wasteful policy with wicked consequences, and nothing would do more to restore faith in the European Union throughout the UK and the EU than CAP reform. If I may veer into crude politics, it would also do my right hon. Friend a great deal of good in terms of the domestic political agenda. Indeed, I go further and suggest that CAP reform is essential if the Prime Minister is to win a referendum on the euro. If the EU remains incapable of running a successful common policy on agriculture after 40 years, why should anyone believe that it is capable of running a common currency and a common economic policy? As I said at the outset, the costs are not merely financial and to do with the waste of the common agricultural policy; there will also be heavy political costs if we fail to address the issue and fail to ensure that half of current spending in the European Union has the credibility that it deserves.

I hope that the Minister will address some of those issues. I am sure that the topic is on his agenda and that he works hard on it; however, it will not go away, and assumes greater significance as we approach a closer union, not merely in terms of the euro but in terms of the European project as a whole. Much rests on fundamental reform of the common agricultural policy.

I congratulate my hon. Friend the Member for Nottingham, North (Mr. Allen). He makes a powerful case on all that is wrong with the common agricultural policy and on the kind of problems that our Government—every European Government—face in terms of the pressing need for the reform of the common agricultural policy. He is right in identifying the costs of the scheme; it currently costs about €45 billion in direct support. It is calculated that there is an additional €50 billion effect in relation to higher prices, which are due to protectionism through the interventions of various regimes. That has put prices up for the consumer. On top of that, member states' exchequers pay another €15 billion for a range of support for the agricultural sector. In the United Kingdom, that works out at some €15,000 per farmer per year, but as my hon. Friend rightly stated, there are distortions to that sum because of the structure of agriculture in our country.

The common agricultural policy has not been very successful for the consumer, the environment or, importantly, farmers. In many cases, the CAP, which is some 1.4 per cent. of the EU's gross domestic product, distorts markets. As my hon. Friend rightly states, the CAP has an impact on developing countries with agrarian economies, particularly when we very expensively support agricultural production with intervention prices and, to add insult to injury, dump surplus products on to international markets at subsidised prices. That simply depresses world prices, which in turn distorts proper world trade and has an impact on developing countries. It also has an impact on our producers, particularly those who are not subsidised under the CAP but have to compete with sectors that get those subsidies.

My hon. Friend is also right to say that the CAP has led to intensification in a range of agricultural production. That intensification has, in many cases, caused environmental damage. It is often pointed out that farming shapes and maintains our landscape, and that is true. In many cases, it maintains a landscape that people think is particularly important and valuable. However, it is also fair to say that the intensification of agriculture has shaped our landscape in negative ways, too. One impact has been the decline in farmland birds, plants and insects. There has also been a loss of a range of fragile habitats, such as traditional hay meadows, flower meadows, and wetlands, which subsidies have made it worth while to convert for different forms of agricultural production. In some cases that change is driven more by the subsidy than by market demand and consumer requirements.

My hon. Friend is right to say that there is clear potential for fraud in all countries. There is also a costly infrastructure to administer. Farmers often complain about regulations and bureaucracy; the Government understand and have some sympathy, but if large-scale payments are to be made through public funds, there must be accountability and traceability, and that requires enormously expensive infrastructure. He is also right to say that the enlargement of the World Trade Organisation is driving reform. I agree that the Prime Minister and the Government have a role in terms of arguing the case for reform. Indeed, it is important, from an EU position, to argue the case for reform and to explain the potential benefits for the agricultural sector and its importance for consumers and society in general.

Does the Minister agree that the one thing that is least likely to bring reform of the common agricultural policy is a Blair plan that is couched in the kind of moralising terms that we have just heard and which describes the whole CAP as a caricature of corruption? If the United Kingdom wants reform, would it not be better to cease talking that kind of language and begin talking in more practical language about how to help farmers, consumers, the environment and people generally, instead of saying how wicked the whole thing is? The CAP was put together by intelligent politicians for a reason.

The right hon. Gentleman is being a bit hard on my hon. Friend the Member for Nottingham, North, whom I did not think used that tone. I understand exactly the right hon. Gentleman's point. The CAP and its structures are rooted in a 1945 policy made during austerity and food shortages, when the priority was to maximise food production in a post-war world. In that context it was successful.

The right hon. Gentleman understands these issues and I agree with him that the CAP and its structures have outlived their usefulness. We are moving into another dimension in relation to food production, distribution, supply and agricultural support. There is more interest these days in environmental support, in how food is produced, in the quality of food and what is imported, in the treatment of animals and animal welfare. There has been a shift in attitudes and opinion. Of course, as my hon. Friend pointed out, and as the right hon. Gentleman knows, the WTO dimension regarding enlargement cannot be ignored. If the EU is to be enlarged, a move that the Government and I support, the CAP must also be reformed. I know that the right hon. Gentleman was making a point about how that should be discussed, but there is no disagreement on the need for that reform and for the case to be made.

Certain changes have been made. At the European Council in October an agreement was made to fix market support—pillar 1—expenditure for 2007 to 2013 to the levels set in 2006 plus 1 per cent. per year. That is an important restraint on EU expenditure, especially in respect of enlargement, and it must accommodate the phasing in of direct payments in new member states and the financing of further reform. That will not be open ended in relation to the kind of enlargement and changes that we are discussing.

We are also embarking on the mid-term review, to which Franz Fischler is committed. I have attended the Agriculture Council and I know that Franz Fischler has made it clear that decoupling is essential if we are to make progress in the WTO negotiations. We must move away from our present rigid agriculture support. We expect formal legislative proposals on the mid-term review on about 22 January. We support Commissioner Fischler's aims to secure agreement by the end of the Greek presidency in June 2003, although we recognise that that is a somewhat challenging timetable.

We think that the mid-term review is going the right way on the main points. There will be much negotiation on and examination of the detail, but we welcome the essential commitment to decouple payments from production, because that removes immediately some of the perverse incentives to over-produce that exist in the present system.

We are also interested in the cross-compliance and farm audits, which the Commission has proposed. As with everything else, the devil is in the detail—I shall press that point strongly.

Ordinary people must be persuaded of a couple of things and they need to be won over if we are to enhance the current European project. First, the careful detail that my hon. Friend has put forward must not be overturned by two or three important leaders getting together late at night and stitching up a deal. We must show people that we are working towards something that Her Majesty's Government have laid out and they must be able to see progress. Secondly, they also need—as I do—such things to be explained in clear, ordinary language. I understand why the Minister's explanation is technical, but to convince people about the reform pathway for the common agricultural policy, the argument must be put across to people. Some of us may understand the language—the distinguished Chairman of the Select Committee on Environment, Food and Rural Affairs, the right hon. Member for Skipton and Ripon (Mr. Curry), in particular may understand the terminology, although I do not pretend to—but we need to find a way to bring people along with us.

My hon. Friend is quite right again. Those of us who work in these areas tend to get absorbed in the jargon and take it for granted that people understand the points being made.

Before the Minister starts on decoupling, let me say that the hon. Member for Nottingham, North complained that the CAP directed the largest amount of money towards the richest farmers. Will the Minister confirm that the Government's policy in the mid-term review is to defend the direction of money pro rata to farmers irrespective of the size of their farms and to oppose the Commission's proposal to place a financial ceiling on the amount that individual farmers can receive?

Yes, I can confirm that the right hon. Gentleman is correct, but I should explain why. There is a proposal to put a ceiling on payments, and our problem with that is that our farms are bigger than the European average and the effect would fall disproportionately on the United Kingdom. There is also a practical problem: once one introduces ceilings on farm sizes, it is not difficult for people to split up holdings and register them in other family names, which would cause all sorts of management difficulties.

We want to move away from subsidies. We want to decouple completely, and we do not want to get involved in any proposal about ceilings because that, as far as we are concerned, would merely tinker with the system. We are committed to a more fundamental review. Although the right hon. Gentleman's comments are accurate, they should not be taken as a Government commitment of support for the big farmer against the small one, because that is not what we do.

We have enlarged and increased the English rural development programme by applying modulation in the UK, which no other member state currently does, although it is likely that others will follow. It could be argued that the biggest and wealthiest farmers contribute the most by putting money back into the scheme. Modulation takes a proportion of the subsidies—currently about 4.5 per cent.—and puts it into the rural development programme. That increases the finance available for schemes such as countryside stewardship, which is popular with farmers—it has a great deal of support in relation to applications—and with consumers because, given a choice between supporting environmental management or production payments, the vast majority will choose the former.

Countryside stewardship is a way of supporting farmers who provide benefits for the funds that they receive and is a far more targeted, transparent and productive way of using the money than at present when commodities are sometimes produced for which there is no real market.

My hon. Friend is generous in giving way again. He has little time left. Does he agree that the credibility of some of the wider European issues is being undermined by failure to reform the CAP?

I accept that point absolutely. It is also well recognised by the Prime Minister. If one wants to argue for big changes such as adopting the euro, one must address what my hon. Friend rightly describes as an embarrassment. The problem provides a rich seam to mine for those hostile to the concept of Europe and of member states working together. As my hon. Friend said, all sorts of nonsensical policies and potential frauds are involved, which tends to undermine European institutions. Therefore, reform is essential not only for farmers, consumers and the environment but for the credibility of the European Union.

In 1996 and 1997, there were two serious petrol leakages from underground storage tanks in my constituency. Those incidents occurred at Bontddu near Dolgellau and at Llanrwst. Different things happened in each incident, but I wish to refer briefly to what happened in Bontddu.

Details of that pollution incident were received by the Environment Agency locally on 19 September 1996, but some of the villagers at Bontddu had complained of petrol odours to Gwynedd council's trading standards officers in the previous week. It is reasonable to conclude that both were linked, and that the discharge had begun several days before 19 September.

It was subsequently found that there had been a leakage from underground tanks at Bontddu service station into a stream that flows into the Mawddach estuary, which is one of the most environmentally sensitive areas in Wales. The quality of the stream was severely impaired; there were high fish mortalities and some estuary invertebrates were also affected.

During the initial investigation, the Environment Agency ascertained that a volume in excess of 30,000 litres of petrol had leaked from the underground tanks and drained from the immediate vicinity of the site. A meeting was convened on 27 September 1996 between the Environment Agency staff, the garage proprietor, Liquid Cargo Management—an oil recovery specialist—and officers of Gwynedd trading standards and environmental health departments. Certain remedial works were agreed—for example, booming off the river, excavation of the tank in question and flushing the contamination from the ground. By now, the leaked volume was estimated to be in excess of 60,000 litres—twice the original estimate. Families were then evacuated.

Things were proceeding very slowly. The Health and Safety Executive was reticent about becoming involved. Eventually—in November—the HSE was dragged to a public meeting that I chaired; its representative said that it could not become involved unless there was a risk to public safety. With a spillage of 60,000 litres of the most flammable products known to man, it might have been reasonable to conclude that there was a risk—but that was not the case, according to the experts. The HSE continued to say that there was no risk until the first explosion occurred.

The situation dragged on—seemingly interminably—for several months. It became obvious to me—and to many others—that too many players were involved in this drama. The local councils—Gwynedd in the Dolgellau example and Conwy in the Llanrwst example—the HSE and the Environment Agency were all wringing their hands and running around, but none of them were able or willing to take control of the situation. It appears that although there is abundant legislation, none of it gives any authority a lead role; consequently, the whole situation is a bit of a mess.

When I refer to the abundant legislation, I am not exaggerating. For example, there is the Petroleum Spirit (Motor Vehicles etc.) Regulations 1929, the Petroleum (Mixtures) Order 1929, the Petroleum (Compressed Gases) Order 1930, the Petroleum (Liquid Methane) Order 1957, the Highly Flammable Liquids and Liquefied Petroleum Gases Regulations 1972, the Petroleum (Regulations) Acts 1928, the Petroleum (Consolidation) Act 1928, the Petroleum Spirit (Plastic Containers) Regulations 1982, and many others.

Given this plethora of legislation, it is incredible that when leakage occurs the HSE will not become involved unless there is a danger to the public. Most people would consider that a danger arises as soon as highly flammable liquid escapes. However, as I have said, that is not the view of the HSE. A senior fire officer from Gwynedd decided that my warnings about the situation being dangerous were without foundation. In my absence, he convened a meeting of local councillors and interested people at Bontddu: he threw a lighted taper into a ravine to show that there was no danger, but caused an explosion and ran for his life. I do not know whether he has now been promoted, but he probably has. That incident shows that danger is occasioned as soon as the liquid escapes.

Despite the fish kill and some birds being killed, too, the Environment Agency did precious little. The situation dragged on for many months, ending up in costly litigation for some families. On 19 November 1997, I raised such worries in an Adjournment debate, in response to which the hon. Member for Bridgend (Mr. Griffiths), the then Under-Secretary of State for Wales, stressed that under the Water Resources Act 1991 a criminal offence was committed when pollution was caused in controlled waters. Reference was made to the Government's intention to bring into force the provisions of that Act, thus enabling the Environment Agency to require that anti-pollution works be undertaken. That was a useful suggestion. The then Minister also referred to the Government's intention to impose a duty through regulation to make safe all tanks and pipes that were no longer in use. He said that the Government intended to lay such regulations, supported by new guidelines, before the House towards the middle of 1998.

No one would deny that such suggestions were useful, but given the scale of the problem that we will undoubtedly encounter in the next five to 10 years, might it not be better to adopt a proactive stance by assisting retailers to upgrade their tanks now, before the inevitable happens? Financial assistance is a must for many independent retailers. Access to expert advice would be helpful, too. The last thing anyone wants is an acceleration of the already critical rate of closure of independent petrol retailers, especially in rural areas, where the garage is often a general store as well.

I do not want to create panic, but we might be sitting on an environmental time bomb. I was advised in a parliamentary answer in 1997 that from January 1995 to 1997, the Environment Agency had recorded 55 incidents of water pollution from underground petrol storage at filling stations in England and six such incidents in Wales. By contrast, it is estimated that the London fire brigade registers 70 to 80 seepages per annum. In 1994, Shell UK suggested that up to one third of all underground tanks—as many as 10,000—may be faulty. Indeed, most of the United Kingdom's buried petrol storage tanks have already exceeded their original design life. There are major leaks from underground storage tanks each year. In the past few years, most major oil companies and several supermarkets have been fined and forced to pay high clean-up costs. Today, The Independent reminded us of the fine of £50,000 that was imposed upon British Petroleum for that reason.

It would be better to be proactive, not reactive. It is all very well to say that the polluter pays and so on, but steps can be taken to deal with the problem before it hits. Margins in the petrol retail market are currently low, so tank owners are reluctant to replace or upgrade tanks. In the past 10 years, the number of UK sites has dropped by almost 35 per cent. More will close if regulatory burdens are increased. I am in favour of a strong regulatory regime to control the underground storage of petrol—a regime that will protect public health and the environment—but any changes must, of necessity, recognise the fragile nature of the industry. The Government's proposal is to remove the licensing of petrol stations and replace it with a system that puts more responsibility on station owners to assess their own risks and to implement improvements. That is a cause of great concern. The new system could lead to greater risks to the public and the environment or to more service stations closing, neither of which would be a good outcome.

The Department for Environment, Food and Rural Affairs has published the approved code of practice, "Groundwater Protection Code: Petrol stations and other fuel dispensing facilities involving underground storage tanks". Under the Groundwater Regulations 1998, the owner of an underground tank would have to provide documentary evidence to demonstrate to the agency that they were following the code, or risk legal action to prevent them from storing fuel underground. If tank owners adopt the recommendations of the code, they can prevent leaks without incurring crippling costs. The main concern, however, is that the agency does not have the resources effectively to enforce the code.

The Environment Agency recently published internal guidance on the design and decommissioning of tanks and it has established a small team to provide guidance to agency staff and to promote better practice in the industry. The 1998 regulations require the agency to check that adequate surveillance is put in place where groundwater may be affected, but many pieces of anecdotal evidence suggest that its enforcement of the regulations is patchy. Most of its staff rely on an ad hoc arrangement with petroleum operatives for day-to-day monitoring of any risk, because they have not resolved the conflicts of interest that have been generated. For most service stations, the only protection against leaks is regular monitoring of fuel stocks. The agency is concerned that most site owners and managers do not have the necessary skills or resources adequately to carry out that task. It is preparing guidance and encouraging training, but until that has an effect, there is a real risk of environmental damage.

On 15 November, the Health and Safety Executive promoted a new set of regulations entitled the Dangerous Substances and Explosive Atmospheres Regulations 2002. The first part will remove the licensing of retail petrol stations, but the main effect will be to bring operational practice into line with the principles of risk management that are common in other areas of health and safety legislation. However, problems could occur when the licensing regime is removed, probably next year.

Current proposals suggest that all stations will be given automatic approval based on their existing licensed status and will be required to ask for permission only to make major changes. That might be a disincentive to operators who are planning to invest in their sites to reduce the risk of leaks by installing corrosion protection tank pipe monitoring. It is possible that a conscientious owner trying to reduce risks would be charged by local authorities to obtain permission, but an owner ignoring the problem would avoid scrutiny.

The DEFRA code is welcome, but better co-ordination between the Environment Agency and the Health and Safety Executive is required and greater priority must be given to enforcement. The Government's proposals would create a fairer system, but possibly one with weaker enforcement. The changes could result in an increased risk of environmental damage or harm to human health.

I respectfully put some solutions before the Minister and ask him to respond in writing, if he is not able to do so in this debate. We should consider establishing an agency or appointing an individual to co-ordinate the activities of the Environment Agency and the Health and Safety Executive in this field and to provide an annual report to the appropriate Ministers. We should research the condition of underground tanks to quantify the cost of cleaning up leaks and the potential risk to human health. A condition audit could be attached as a requirement of any new licensing regime. Soft funding should be provided to small independent retailers to help them to upgrade their tanks and pipework, as was the case in Scotland under the old regime before devolution, and continues to be so post-devolution. We should increase resources to train enforcement officers and to strengthen the quality control standards required for wet stock monitoring, and regulate companies providing an off-site service, which is what happens in the United States. Most of those recommendations were incorporated in early-day motion 389, which I tabled and which was well supported.

The Minister is interested in environmental matters, and I am sure that the issue is of concern to some of his ministerial colleagues, too. We are sitting on a large time bomb: in five to 10 years, we will see regular leakages occurring in every locality and the current regulations will not provide any assistance. It is much better to deal with the problem before it occurs than to react to it. It is surely time that the Government took a proactive stance, rather than leaving matters until crises, which will have to be dealt with in haste, inevitably occur.

I congratulate the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) on securing the debate. He made some sensible suggestions on the important subject of the environmental management and control of underground storage in this country. I understand the problem in his constituency and the severe consequences that stemmed from it. It is an example of why it is important to ensure that we have proper control.

I appreciate the hon. Gentleman's point that there are currently some 14,000 petrol stations in England and Wales containing 60,000 to 70,000 underground storage tanks. In addition, there are underground tanks at commercial, industrial and domestic properties, airfields, ports, vehicle fleet depots and a variety of other sites. The issue is important and we need to take it seriously. Given the large number of underground storage tanks, the overall environmental record is good, which is largely because of the stringent regime.

I can assure the hon. Gentleman that there are no proposals to remove the licensing of underground tanks, which will remain within the regime. Of course, we recognise that we cannot be complacent. The Government, the Environment Agency, the Health and Safety Executive and petroleum licensing authorities need to ensure that the risks are minimised and that the points that he raised are taken seriously and addressed properly.

The hon. Gentleman mentioned the Groundwater Regulations 1998. They came into force in April 1999 and enhance the groundwater protection afforded by the Water Resources Act 1991. They make it an offence to allow hydrocarbons to enter groundwater, and provide the Environment Agency with powers to prohibit or control activities, including the storage of hydrocarbons, which could pose risks to groundwater.

I understand the hon. Gentleman's point about lead responsibility, and he mentioned the idea of establishing an agency to co-ordinate activity. The Environment Agency is, however, clear that groundwater pollution, along with any other kind of pollution, is its responsibility. It works closely with the Health and Safety Executive, local authorities and petroleum interests to develop codes and to make sure that the issues are addressed. Co-ordination is therefore quite good, but I shall make sure that the hon. Gentleman's suggestions get the detailed replies that they deserve.

The regulations also allow Ministers to approve codes of practice. The hon. Gentleman mentioned, rightly, the recently produced groundwater protection code, 2,000 copies of which have been distributed to all the main trade organisations. I am sure that he has a copy of it because he referred to it, but he is welcome to have the one that I have brought with me. The code was launched in July 2002 by my right hon. Friend the Minister for the Environment. It sets out principles for groundwater protection, along with relevant advice to help those involved with underground petrol tanks.

The hon. Gentleman pointed out that there are a lot of independent petrol retailers. Like him, I represent a rural area and understand the pressures on rural petrol retailers, whom I do not want to be overburdened by costly regulations. Practical guidance is a good idea because it gives people advice on how to address particular issues.

The code also lists four main principles for environmental protection that would apply to all fuel dispensing facilities involving underground storage tanks. First, there must be a suitable environmental risk assessment, which should identify site-specific risks and indicate the appropriate engineering and operational controls required to protect groundwater. Secondly, appropriate engineering measures identified by the risk assessment should be implemented as soon as is reasonably possible.

Thirdly, management systems and controls should be in place and should include leak detection, environmental monitoring and the keeping of records on site operation. Fourthly, emergency plans and procedures should be in place and should include an appropriate pollution incident response plan, which should form part of the environmental management system. Those four important basic principles are the framework for a successful risk-based approach to groundwater protection. They are also in line with the type of measures necessary to protect health and safety.

In addition to those four principles, the code sets out the key considerations necessary at each stage—commissioning, operating and, importantly, decommissioning—in the life cycle of an underground storage tank and its related facilities. The section on commissioning facilities provides advice on issues to be addressed during planning, design and construction and emphasises the need to avoid problems in the first place, rather than ironing them out through engineering and operational solutions.

Installing tanks is a lot easier than it was because there is very clear guidance about new designs of tanks and about tank linings. For instance, there is guidance about double-skin tanks, which have detection equipment within the skins so that leaks can be detected straight away. There is a better and wider range of available technology to minimise risk than there used to be.

I am following the Minister's argument, and I understand the current guidelines and what is being done in relation to newly commissioned sites. My great concern is about the old sites—the small independent sites in particular. At such sites, people may not know whether there is a leak until it is too late.

I quite agree, and I was going to come to that point. I was just emphasising that the standards for new-build sites are much higher and the risks are therefore much lower. The hon. Gentleman is right: there are a lot of existing tanks, some of which are becoming quite old.

Another aspect of the code relates to advice on delivery, storage, dispensing, drainage, maintenance and leak detection. The preferred approach in environmentally sensitive areas is to use controls that detect leakage immediately, before it has any significant environmental impact. The assessment of the minimum detectable leak that can be identified by the leakage detection system should be addressed in the environmental risk assessment for the facility. The guidance for existing tanks, particularly in environmentally sensitive areas, is that leak detection procedures should be in place and equipment should be there to monitor that.

The third section of the code relates to decommissioning when tanks have reached the end of their useful life. The code includes advice on emptying and removing tanks and pipework and making safe any tanks that remain in the ground. Finally, the code provides references to more particular advice on, for instance, training and engineering. This is a practical code for existing operators.

The Government have a range of ways of enforcing the provisions. If there is any suggestion of a problem, the Environment Agency can consider whether to issue a prohibition notice under the groundwater regulations. In making its decision, the agency has to take into account sensitive aquifers and the proximity of drinking water sources, rivers and other receptors. The agency has produced groundwater vulnerability maps, which have been helpful in relation to risk-based assessments and risk-based enforcement. So the agency has that information with which to work.

The agency has also identified groundwater protection zones around abstractions used for sensitive purposes such as water supply or food and drink manufacturing. That is relevant in relation to planning permission for future developments, although I appreciate that the focus of the debate is on existing provision.

The agency has also been developing contacts with individual petrol companies and the Petrol Retailers Association to ensure that the need for environmental protection is clearly understood. The Environment Agency has that range of tools at its disposal in dealing with the existing situation and has other powers under the Water Resources Act 1991. It can serve notices that require preventive or remedial works to be carried out if it considers water to be polluted, or at risk of pollution. The agency will prosecute polluters wherever serious pollution is caused and there is adequate evidence to support the case.

One of the points that the hon. Gentleman raised concerned financial support for certain retailers or owners that have tanks requiring such work. That is a difficult issue, and I will respond in more detail in my promised letter. For his information, the Government are guided in general by the "polluter pays" principle. The general rule for potential polluters is that the costs fall on the individual or company concerned. However, local authorities that have the lead responsibility in dealing with contaminated sites may receive financial support. I appreciate that that is not quite what the hon. Gentleman was talking about, but I will give him a more detailed response after the debate.

In addition to the groundwater measures, the Government have brought into force part 2(a) of the Environmental Protection Act 1990, which creates a regime for dealing with contaminated land. That regime supersedes the previous statutory nuisance powers for land contamination issues and places responsibility for identifying and remedying contaminated land on local authorities. That will allow a single operator—normally a local authority—to deal simultaneously with land that is affecting, or is likely to affect, controlled waters. That creates a focused and co-ordinated approach to contaminated land, which also relates to the hon. Gentleman's point.

As well as the new environmental measures, the Government have brought into force the Dangerous Substances and Explosive Atmospheres Regulations 2002. Those regulations are a safety measure aimed at protecting workplaces in which dangerous substances may be present and explosive atmospheres may occur, such as petrol stations. The main requirements are risk assessment, measures to eliminate risk, accident and emergency planning and suitable training. As was mentioned in the previous debate referred to by the hon. Gentleman, the HSE is also carrying out a review of the petrol licensing regime with the aim of modernising the regulatory framework, and his concerns will be fully taken into account in that review.

The result of those measures is a modern, good practice framework for managing environmental risks and safety. From the perspective of petrol station owners and operators, there is nothing fundamentally new in the good practice framework. I expect that many of them are applying it as a matter of course, because they are well aware of the risks. Besides issues of safety and contamination, the fact that petrol is not a cheap commodity guides their desire to ensure that tanks do not leak into the ground what they have bought and want to sell for profit. There is a powerful incentive for the petrol retail trade to ensure that the tanks are in good condition. That applies to any other organisation buying fuel or chemicals that are held underground; they are generally an expensive resource. It is in those organisations' interests in terms of good business management to ensure that such tanks are in good condition. That is a powerful incentive.

However, we are not complacent. There will be problems in any system, and there will always be a small minority of people who do not apply the standards in the way one expects. Therefore, we need a dual approach of advice and support through the statutory codes with the back-up of enforcement action if necessary. In that framework, the measures should enhance standards and reduce risk to health and safety and the environment. I appreciate that that is the underlying theme of the hon. Gentleman's remarks. Not only did the incident involve a risk to his constituents, but I can see from his comments that there were severe implications for the environment. Although we recognise the need for such activities as part of legitimate business practice, it is important to have standards.

I congratulate the hon. Gentleman again on raising the matter. I assure him that we take it very seriously. I have listened carefully to his points, and I shall reply to his specific questions in detail. I appreciate the positive and constructive way in which he has raised this debate and put forward his case.

Since the House last met in late December, the number of Britons who have died from smoking is twice the number who were killed in the terrible attack on the twin towers. We have a dreadful toll of 120,000 deaths every year, and we are not reducing that number. The last report of the National Institute for Clinical Excellence on Zyban and nicotine reduction therapies tells us that the number of people smoking has not decreased since 1997, and has probably increased. Some 25 per cent. of 15-year-olds now take up smoking.

The Government are to be congratulated on many of their initiatives. They have plenty of conviction, have made resources available and are determined to reduce that toll. Looking at past records, there is a little room for optimism. This Government will be the first to ban tobacco advertising. The ban will have a substantial effect in terms of discouraging new smokers, although the maximum change will probably be 2 or 3 per cent. fewer new people taking up the drug. There is another good campaign for nicotine replacement therapies, which is imaginative and resourced, and will have an effect. The Government will campaign, advertise and provide education programmes more energetically than previously.

However, one example of a campaign shows what the Government are up against. It is likely that many campaigns, unfortunately, will fail because of the enormous power, resourcefulness and greed of the mendacious lobby from the tobacco industry. It will stop at nothing to sell its products. A campaign in Wales in the mid-1990s, known as Smokebusters, was designed to reduce smoking among young people and was judged a success at the time. It was very energetic and involved a lot of initiatives. Many young people were contacted, and the general feeling of those who launched the campaign was that it was a great success.

Unfortunately, a 50 per cent. increase in smoking among teenage women coincided precisely with that campaign. I have told that story in various countries, as a member of the European Health Committee of the Council of Europe. The response each time—in Malta, Ireland and Canada—has been that there was a similar increase in smoking among teenage women in those countries at that time. The reason was not that campaigns had failed or been counter-productive, but that young women were taking up smoking because they were presented with the idea that smoking was good because it helped them to slim. Peer pressure and role models gave them that ideal of smoking.

We have seen that Governments, with all the best intentions in the world, have had very little success in reducing smoking levels. I can tell the Government that I read their policies and agree with all that they are doing, but we must look at what is happening elsewhere, including an example that has been largely unknown or disregarded: the extraordinary experience in Sweden during the past 20 years of a product almost unique to that country. Known as snus, it is a form of moist snuff. It is interesting that snuff is the only form of tobacco that we are offered freely in this House. It is available from the Doorkeeper, although now little used.

The amazing result of that product has been an extraordinary reduction in smoking in Sweden and an equally extraordinary reduction in cancers and other health results of smoking. To understand why, we must challenge our preconceptions about the effects of tobacco. Tobacco is not a killer—nicotine is about as dangerous as caffeine. It becomes lethal when we set fire to it. As Martin Jarvis of Cancer Research UK said, 300 lethal toxins explode in a cocktail of carcinogens when a cigarette is lit. The smoke causes problems in our lungs and the carcinogens cause difficulties such as bronchitis, heart disease and so on.

A method that would take nicotine into our bodies and deliver the fix that smokers want without the health risks would be the holy grail. A solution seems to have been found by accident—not by some genius working it out—in Sweden. The result is that the number of male smokers in Sweden has dropped from 36 per cent. In 1980 to 17 per cent. —a bigger reduction than any other country has achieved. However, Sweden still has a level of tobacco use similar to that of other countries because 19 per cent. of males use snus. There is very little use of snus by women in Sweden. On examining the statistics, we find that the level of nicotine-related cancers among males in Sweden is half the European average, while the level for women is almost exactly the same as the European average.

Everyone who studies the effects of moist snuff comes up with the same conclusion. Two distinguished American researchers from the university of Alabama, Brad Lodu and Phillip Cole, have taken a pessimistic view of the health consequences of snus—no product is entirely safe—yet have calculated that the life expectancy of someone who uses snus from the age of 35 would be reduced by only 15 days, whereas the life expectancy of someone who smokes from 35 onwards would he reduced by eight years. The smoker might live to 73, but a non-smoker or a snus user would have a life expectancy of 81.

We cannot ignore the extraordinary evidence from Sweden. For good reasons, the European Union believed that snus should be banned because of the risk of mouth cancers. It seemed a logical and persuasive argument. However, the matter has now been investigated at great length. A Swedish researcher found one case of mouth cancer among 200,000 snus users. Other researchers make similar claims for similar tobaccos in America. It is absolutely certain that the incidence of mouth cancers among smokers and drinkers—alcohol can cause mouth cancer—will be far higher than among snus users. It is significant that those who use moist snuff run virtually no risk of other health ill effects such as lung and larynx cancer, emphysema and all the other problems that result from smoking. Every report on the matter comes up with the same conclusion.

As I said, the EU banned snus because of the risk of mouth cancer. Even if we wanted to, we could not use it. When Sweden joined the EU in 1995, it was given a special derogation to allow the continued use of snus. Every year, more Swedes use snus because of its health benefits.

The problem that smokers and ex-smokers face is the virulently addictive nature of tobacco. Many people can give it up, but their bodies and brains are dependent on the fix that it provides. The main reason for returning to cigarette smoking after quitting is to reward oneself for having given it up in the first place. Unfortunately, many people who give it up for short periods return to it. If they could experience the same feeling of satisfaction and gratification from other sources by causing the endorphins to work in the brain in the way that they do when they get a shot of nicotine, and could avoid the health problems, that would be fine. That is what all the independent research indicates is happening in Sweden. However, Britain is in the extraordinary position of allowing the almost unfettered sale of tobacco.

The Select Committee on Health referred to the controls on the sale of tobacco as pitiful. Almost anything can be put into tobacco, including addictive substances. Tobacco kills almost half the number of regular users. If there is a case for banning anything, it should be tobacco. We also allow the sale of other chewing tobaccos. Several relatively new tobaccos of questionable provenance have joined gutkha and paan from the far east in being legal and on sale. Snus, however, is banned. There can be no sense in banning a substance that has a proven record of reducing health problems and deaths.

The Government have followed the simple policy of "quit or die": one must carry on smoking or give up altogether. There is a "third way"—to coin a phrase—that has been effective. There is a case currently before the European courts that snus should be removed from the list of banned tobaccos, which is a decision that the British Government and other Governments will have to take. I discussed this at some length with Swedes who have an ambivalent view of what is happening in their country. They are not naturally attracted to the idea of harm reduction but take an absolutist line in many of their policies on drugs. However, we cannot afford to do that when there is a possibility of achieving the sort of health improvements that the Swedes are achieving. Most of the organisations in the field in this country and throughout the world support renewed consideration of the ban and new ways of reducing the problems caused by tobacco.

On 10 December, the Royal College of Physicians produced a report in which it joined the call made by the Health Committee in 2000 for a regulatory authority to protect public health from the problems associated with tobacco. We are failing to give smokers sufficient protection from cigarettes, and there is much to be done. However, we are banning what is probably the safest form of oral tobacco, and allowing other forms of tobacco into the country that potentially are far more dangerous.

We need a body to decide which of the tobaccos on offer are the most carcinogenic and toxic and to give advice. It may be necessary to ban some chewing tobaccos, but the difference between snus and the others is that snus is absorbed in a way that does not involve chewing and so does not cause the lesions inside the mouth that other forms of tobacco might cause. It is taken in a safe way in which there is no direct contact between the skin and the tobacco.

The Royal College of Physicians says that tobacco is a uniquely dangerous consumer product that kills more than 120,000 people a year in the United Kingdom when used as intended by the manufacturer, yet it is not as highly regulated as are prescription drugs and food. It recommends a regulatory authority, as it did in its report "Nicotine Addiction in Britain", and complains that the Government largely ignored that recommendation. It also says that new reduced-risk cigarettes and smokeless tobacco are being designed. How will the Government handle issues such as relative risk, analyse the claims of such products and decide what information would be helpful to smokers? We need to encourage the development and production of new nicotine products. They face much stricter regulations than cigarettes. How can that make sense? How can it be rational to turn our back on the terrible dangers of cigarettes in many cases and allow them to be freely sold? They are available even to young people. Yet we still have a ban on a product that could well be a lifesaver for half the present smokers in the country.

I am grateful to Action on Smoking and Health, the organisation that has done so much over the years on this issue. It takes a line that is similar to the one that I want to present today. It has courageously taken on the smoking lobby over many years and achieved many victories against them. I have no commercial axe to grind on this or anything else. A company is manufacturing this product and although we would not necessarily want Britain to become involved in Swedish Match's products, we should learn the lesson from this. When we look ahead we must realise the truth of all our anti-smoking campaigns. A hard core of millions of smokers cannot and will not give up. They will be addicted to tobacco to their early graves. We can offer them an alternative of using a form of tobacco that will spare them that early grave and will give them the same type of life expectancy as non-smokers.

The evidence is overwhelming. I hope that the Government will take it into account. What will they do when Swedish Match seeks a judicial review of the ban that can no longer be defended? When it comes to court, the European Union, or other countries in the EU, must defend why snus should be so uniquely difficult, poisonous, and carcinogenic that it must be banned while other products are not. I believe that no case can be made on those lines.

Will the Government act now to do what many organisations, including the Royal College of Physicians, have suggested and set up a regulatory body that will decide on the toxicity and carcinogenic properties of all forms of tobacco? Close members of my family died tragic premature deaths as a result of smoking: my father was 43 and my brother was 57. Others will have had similar experiences. We owe it to all those who are smoking now to give them all the alternatives that are available, so that they can escape from the tyranny of their addiction and into using products that will guarantee them a normal full lifespan.

I welcome the opportunity to speak today on the health aspects of smokeless tobacco. I recognise the efforts of my hon. Friend the Member for Newport, West (Paul Flynn) in highlighting this serious subject. On his last point, my father died from throat cancer caused by the effects of tobacco. I have felt this personally. My hon. Friend refers specifically to the case that is currently before the UK courts. He will understand the conventions of this House and why it would not be appropriate for me to comment on the specifics of that case or to put the Government's position here.

My hon. Friend spoke passionately about the Swedish snus, but I should like to talk more generally about oral tobacco. It would be remiss of me if I did not put the Government's case and declare our commitment to tackling tobacco addiction. Tobacco has been with us for about 400 years and it remains with us for the simple reason that nicotine is addictive. There are many ways of taking nicotine, but smoking is by far the most efficient and the most dangerous. As the 1998 White Paper starkly put it, "Smoking kills". It is as simple as that.

In any one year smoking is responsible for about 120,000 deaths in this country—one in five of all deaths. It is the principal cause of inequalities in death rates between the rich and the poor. The treatment of its consequences is staggering: it costs the national health service £1.5 billion a year. The addictive properties of nicotine and the range of cancers and respiratory diseases associated with smoking are universally acknowledged. If cigarettes were to be introduced today, I have no doubt that their production and sale would be banned without delay. Unfortunately, with a 400-year history of social acceptance we cannot seriously consider doing that. However, we will continue to make every effort to warn people of the dangers of the habit and to help those who are addicted to break free.

Much that my hon. Friend is suggesting would mean that the Government would take a step-down approach to nicotine, but we should take a step-off position. We want people to break the addiction or not to take up the habit in the first place, and that is where we should concentrate our efforts.

The addictive properties of nicotine ensure that tobacco users find it difficult to break free from its influence, but the crux of the debate is that the delivery route—the tobacco itself—presents the health dangers. There might appear to be benefits in persuading tobacco users to switch from smoking, the most dangerous manifestation of the habit, to the less dangerous, oral tobacco, but no form of tobacco is completely safe. We firmly believe that the only sensible course is to persuade people to give up tobacco and to provide them with the help and support necessary to do so. It must be right for the Department of Health to be in the business of health promotion.

I am not sure that it is correct to suggest that there are no known health consequences of oral tobacco. We are spending a considerable sum on a comprehensive programme designed to inform the public of the damage caused by smoking and to provide a range of services helping those smokers who want to give up. The services include free telephone helplines, counselling and support and the provision of nicotine replacement therapy and Zyban on NHS prescription. We began those services in the poorest communities and they are now available nationwide. Our approach is not just about getting people to quit smoking but ensuring that people, especially the young, never start.

The £59 million that we have invested in the past four years in anti-smoking advertising is making a difference. Seven in 10 smokers say that they want to quit and it is our job to help them to do so. After years of obstruction in the courts and in Europe, we now have legislation banning tobacco advertising and promotion. From the middle of next month, press and billboard advertising of tobacco will be a thing of the past in this country—a fact which we should all be proud of and grateful for. By October next year, all cigarette packets will carry new and much starker health warnings on the front and back. The misleading doublespeak of "mild" and "light" will also disappear.

My hon. Friend gives the Government some credit in this regard. We have more than good intentions. The financial investment that we have made suggests that, as do the early results.

I should like to measure the Government's ambition with regard to their policies. They say in their response to the Health Committee's report that their ambition is to get smoking levels among males in the poorest areas down to 26 per cent. by 2010, but in Sweden currently the level of smoking among males is down to 17 per cent. as a result of the use of snus. How on earth can we say that we are doing the right thing or the only thing when, even by our own ambitions, we will not get anywhere near the improvement that has been achieved in Sweden over the past 20 years?

I am grateful to my hon. Friend: he makes the case for me. Sweden is unique in Europe in having the very specific habit of using oral tobacco. That has been the case since the second world war.

For centuries.

My hon. Friend corrects me: the Swedish habit of using oral tobacco has existed for centuries, whereas we in this country have smoked tobacco. The banning of advertising and our investment in smoking cessation—Zyban is available on the NHS to help people to stop smoking—are relatively new. In fact, it is a two-and-a-half-year programme, but we are on the journey. My hon. Friend will forgive me for wanting to allow the efforts being made to bed down and for questioning ever so slightly—I do not want to put this too strongly—the emphasis on what is happening in Sweden, when that has gone on for some considerable time. As I have suggested, cultural habits in Sweden are different from those in this country. Here, only coal miners, who could not smoke in the pits, and some seafarers were in the habit of using oral tobacco. That is relevant.

Let me return to our achievements. Smoking rates have fallen, and the fall has been greatest among those in manual occupations. The newly established NHS cessation services have helped almost 220,000 smokers to kick the habit for good. Let us consider the figures for England in the past year. The figure for teenage girls is now 11 per cent. vis-à-vis 15 per cent. in 1998, and the figure for boys is 8 per cent. vis-à-vis 18 per cent. in 1998, so things are moving in the right direction.

Many smokers recognise the dangers of a smoking habit, but either have no wish to give up nicotine or find it too difficult to do without it. They have therefore sought alternative means of delivery of the drug. That search has resulted in various forms of smokeless tobacco—tobacco products that are designed to be chewed or sucked. In this country, the phrase "oral tobacco" used to mean simply the old-fashioned chewing of tobacco, normally in the form of a plug.

Another category consists of products that are available in the south Asian communities, to which my hon. Friend drew attention. Tobacco is mixed with a number of other substances to produce paan. Those products vary in content and presentation, and some, which masquerade as sweets, appear to be designed to appeal to younger members of the community. I assure my hon. Friend that that is the subject of an inquiry by trading standards officers, and the Government are keeping a close eye on it. Although legal, all those products carry health risks, such as various oral and dental disorders and, most seriously, cancers affecting the jaw, tongue and oral cavity. We are therefore developing particular strands of our tobacco information campaign to address the various ethnic differences.