I have to notify the House, in accordance with the Royal Assent Act 1967, that Her Majesty has signified her Royal Assent to the following Acts:

To ask the Chancellor of the Exchequer what his policy is on the use of the private finance initiative. [138323]

Since 1997, total investment in public services has grown from £23 billion to £40 billion, with private finance initiatives contributing £4.6 billion of that this year—around 10 per cent. to 15 per cent. in any one year. We now propose to extend by pilots the PFI into provision for prisons, urban regeneration, social housing and waste services. I can also announce to the House that I will present my pre-Budget report on Wednesday 10 December.

Virtually all major capital expenditure is now being funded by PFI schemes through off-balance-sheet debt. In my constituency, a proposed hospital scheme would mean increased repayment costs of £20 million a year more than the local health economy can afford. When I asked the Treasury in a written question what the repayment costs are for existing schemes, it could not answer the question. Does the Chancellor know the true cost of the debt that he is building up for the nation through these off-balance-sheet schemes?

The figures are published at table C20 of the Budget report, and I refer the hon. Gentleman to that. First, I congratulate him on his reappointment to the Conservative Front Bench, and all 88 Conservative Members who are now joining the slimmed-down Opposition Front Bench. We look forward to debating with the 20 Conservative Front-Bench Members who are now responsible for economic affairs. The Conservatives cannot complain any longer about public sector job creation.

On the future of PFI, the hon. Gentleman and his colleagues are completely wrong about the unfunded liabilities. We follow exactly the same rules as were followed by the previous Government, except for one thing—we tightened up the accounting standards. We follow exactly the same rule for disclosure, except that we give every aspect, including maintenance, in the disclosure of figures in table C20. The Conservative party is now in the amazing situation in which it is against public investment and now appears to be again st PFI. It will spend nothing on hospitals and schools—how many hospitals and schools would close under the Conservatives?

Can I refer my right hon. Friend to the private finance initiative in Stoke-on-Trent, which after decades of Tory deprivation has resulted in nine new primary schools being built and every school in Stoke-on-Trent being refurbished? One of the strengths of this successful private finance initiative has been that not a school building or a single member of staff was transferred to the private sector. Will he revisit this successful scheme to see what lessons can be learned for the future?

On the question of employment, we are discussing with the various parties concerned how we can secure the proper employment conditions for people who move from the public sector into PFI projects, as well as new recruits for PFI projects, just as we are doing for best value in local government. My hon. Friend is absolutely right the Conservatives said that we would never increase the PFI when we came into government. We are now spending in total £35 billion on PFI projects. It is costing £4 billion to £5 billion a year on the balance sheet, which is exactly how it should be. It is 2 per cent. of annually managed expenditure, and perfectly affordable. I find it amazing that the people who urged us to support PFI in the first place have now walked away from it entirely.

May I first congratulate the Chancellor and Mrs. Brown on the birth of their son? I hope that it will lead to benign views towards those of us who have many children to look after.

The Chancellor will be aware that many large businesses have off-balance-sheet liabilities—I assume that that is, in part, where he spotted the opportunity for the Government. He will also know that auditors are quite rightly urging businesses to take those liabilities into account in the prudent management of their overall finances. What account has he taken of £100 billion of off-balance-sheet Government liabilities, which represent the present value of total PFI payments for the next 30 years and the guarantees given on behalf of Network Rail and London and Continental? What account will he take of them in his plans to address the rapidly deteriorating public finances?

I thank the shadow Chief Secretary to the Treasury for his good wishes. If I am to have sleepless nights, I fully intend that the Opposition should have some as well. As for the figure of £100 billion that he cited in a speech yesterday, it is totally bogus and completely wrong. Fifty-seven per cent. of PFI projects are on balance sheet, not off balance sheet. He is trying to count every PFI commitment from now to 2030. What is more, most of the PFI commitments are in relation to maintenance and repair rather than construction programmes.

I find it amazing that the Conservative party will not spend money on public investment and now will not spend money on the PFI. The new shadow Chancellor's policy is to cut public spending to 35 per cent. of gross domestic product a £50 billion cut. How on earth could the Conservatives finance any hospitals or schools? There are 110 hospital developments in this country and 20,000 schools have been upgraded. We have extended PFI to transport so that we can also invest in roads and railways. If the Conservatives are now saying that they oppose public investment and PFI, they are telling the electorate that they would close down hospital projects and schools.

May I tell my right hon. Friend about the Jews Free school in my constituency, which was completely rebuilt using the PFI process? Some £47 million of investment went into the infrastructure of one of the best schools in the country. That is exactly the sort of thing that such oppositionist policies would stop.

Eighty per cent. of all PFI projects are on time and on budget as a result of the controls that have been brought in. We have reviewed PFI projects over the past few months and decided to drop information technology from the project list because of uncertainties about IT funding. We are not doing PFI projects of less than £20 million, but I shall announce today the areas in which we will pilot further work on the private finance initiative. I find it quite amazing that the first announcement from the new Opposition Front Bench is that they no longer believe in PFI and they do not believe in public investment. How could we possibly finance the development of our public services if that policy were pursued by the Opposition?

rose

Order. I am going to move on to Question 2. I think that we have had a good airing of the failings of Her Majesty's Opposition, and we must get answers to the questions.

What assessment he has made of the impact on the housing market of the increase in interest rates. [138324]

Despite the recent rise in interest rates, Britain still has the lowest interest rates for 40 years and the lowest mortgage rates for 40 years. At around 5 per cent., mortgage rates contrast with British rates of about 10 per cent. or more during the last world downturn. We estimate that households pay 7.5 per cent. of their disposable income in interest payments, which is half as much as 10 years ago. At all times, our policy is to maintain economic stability.

The Chancellor commented in his Budget speech in 1997 that stability would be the hallmark and central plank of the Government's housing market policy. How does he square that with the Governor of the Bank of England saying that we will see a return to negative equity and some correction in the housing market? Where does that put the Chancellor's central plank of stability in the housing market?

That is not what the Governor of the Bank of England said yesterday. He said that consumer spending is around trend and house price growth is moderating. He said, and he is absolutely right, that people should be vigilant about their debts. He also said that debt service payments are at a far lower level then they were 10 years ago in the last world downturn.

The hon. Lady should look at what we have achieved in stability. Since 1979, house prices in her region rose by 9 per cent. a year. Since 1997, they have risen by 8 per cent. a year. There are 75,000 more homeowners in her region and 1 million more homeowners in the rest of the United Kingdom. The reason for that is not just economic stability, but employment growth as well. Unemployment in her constituency is 1.2 per cent.—indeed, only 11 young people are unemployed in her constituency. It is about time the Opposition recognised the obvious: that we have economic stability.

May I ask the Chancellor about the report that he commissioned from Professor David Miles into long-term fixed-rate mortgages? Does he agree that if we move to such a system it will take the volatility out of the housing market? He is aware of the interest of the Treasury Committee in that matter. Will the report be published before the pre-Budget report so that we can discuss it with him when he comes before the Committee?

As my hon. Friend, who chairs the Treasury Committee, knows, two reports are being prepared on housing. One is on housing supply, which is being produced by Kate Barker, the former economic director of the Confederation of British Industry, now a member of the Monetary Policy Committee. At the same time, there is the report by Professor Miles on the housing market generally. We have not yet received his report, so it is too early to reach any conclusions, but interim reports will be produced at the time of the pre-Budget report. The reports cover big issues about the housing finance market and how it operates. I hope that the House will await the publication of them before drawing conclusions about the future system of housing finance.

We will always remain vigilant about the need for stability in housing, the mortgage market and the economy in general. It would be foolish, however, not to recognise the achievements of economic stability, which have given us the lowest inflation and lowest interest rates for 40 years. At the same time, they have meant that our economy has grown while other economies have been in recession.

May I add my best wishes to the Chancellor and his family? I also extend a welcome to the new Conservative Treasury spokesman, with the personal hope that he has a happier fate than an earlier commuter from Rothschild's to the House of Commons, Norman Lamont.

On the housing market, is not the brutal truth that with investment, exports and manufacturing output stagnating or falling, the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level? If the Bank of England is correct in its expectations of a market correction and rising interest rates, what action will the Chancellor take on the problem of consumer debt, which is rapidly rising, with 8 million annual visits from the bailiff?

The hon. Gentleman has been writing articles in the newspapers, as reflected in his contribution, that spread alarm, without substance, about the state of the British economy. As the Bank of England said yesterday, consumer spending is returning to trend. The Governor said:

"there is no indication that the scale of debt problems have… risen markedly in the last five years."

He also said that the fraction of household income used up in debt service is lower than it was then.

I suggest that the hon. Gentleman look at the overall picture of the British economy. Yes, during the period of world downturn, when the rest of the European economy was not growing at all, it was necessary for both consumer spending and public investment to contribute to the growth that we have achieved in Britain; but he can see that business investment and manufacturing output are starting to return and that the export position will improve over the next period. What the Bank of England said yesterday about the prospects for growth, compared with what people said when we gave our Budget forecast in April, suggests that we have been right about the prospects for growth in the British economy, and the hon. Gentleman has been wrong.

It is generally accepted, and I agree, that it was a good idea by the Chancellor to hand control of interest rates to the Monetary Policy Committee, and I congratulate him on that. It is clear that the MPC's decisions have a considerable effect on house prices, but does the Chancellor agree that it cannot be expected to control the level of exports, the rate of productivity growth, the level of employment or, indeed, the general balance of the economy?

That is why getting the fiscal and monetary balance right is the policy that is being pursued by the Government. I hope that in the spirit of cross-party agreement the right hon. Gentleman agrees not only that it was right to make the Bank of England independent, but that the policies we have pursued since 1997—which, uniquely among all the major industrial economies, have secured growth while other economies have experienced recession—are right.

Let me welcome the shadow Chancellor to his new post—we will enjoy our economic debates with him. We were sorry that he mysteriously disappeared during the election campaign of 2001, so we welcome him back.

I think that that was a yes, so perhaps the Chancellor could now tell the House what aspects of his policies, other than the MPC's interest rates, have been responsible for the fact that at a time when house prices are rising rather fast, household debt is now roughly the same size as the entire gross domestic product; that we have lost 700,000 manufacturing jobs; that we have a ballooning public sector deficit; that productivity growth has halved; and that we have the biggest traded goods deficit since 1697?

The shadow Chancellor will have to get the economy in proper perspective. He is trying to imply that the only economy that has grown consistently over the past six years is facing fundamental problems—he is absolutely wrong. The reason we have managed to grow and others have failed to do so is, first, that we decided to make the Bank of England independent; secondly, we set down monetary rules; thirdly, we went for a symmetrical inflation target, which the previous Government refused to adopt; and fourthly, we have a medium-term fiscal strategy, which has shown that we can cut debt to a sustainable level and still secure the rises in public investment that are necessary while meeting our fiscal rules. The problem, however, is that on each of those policies the Conservatives either oppose us or, alternatively, they wish to reverse the policy, as is the case with fiscal policy. The right hon. Gentleman must answer the question of how Britain could possibly have avoided a recession with 35 per cent. of GDP spent on public services.

I am sure that the House will sympathise with the fact that the Chancellor has formed the habit of deploying a rather belligerent tone in his dealings with the Prime Minister, but I believe that our fellow citizens expect us in the Chamber to engage in a more rational discussion of issues, such as house prices and the balance of the economy, that closely affect people's lives.

If the Chancellor does not want to deal with a string of inconvenient facts, let us focus on just one of them. When he told us that instead of setting interest rates he would focus on productivity, which he described as

"a fundamental yardstick of economic performance",

did he in fact mean that it was his intention to halve the rate of productivity growth, or did he make some kind of mistake?

The right hon. Gentleman is wrong and ought to be corrected. First, productivity growth is rising by 2 per cent. and more at the moment. Secondly, manufacturing productivity is rising by 5 per cent. Thirdly, we have bridged the gap with the Japanese economy, we are now catching up with the German economy, we have reduced the productivity gap with the French economy, and we are making inroads into the very large productivity gap that we inherited with the American economy.

The right hon. Gentleman should look at the facts on productivity, and he will see that we alone of recent Governments have had productivity rising every year, and that will continue to be the case. As for house prices and the housing market, if he wants to repeat what the shadow Chief Secretary said in a speech a few days ago and somehow predict a housing shock and a threat to the stability of the economy, I must remind him that at every point in the past six years the Conservative party has predicted that there would be a recession.

If we take house prices, then yes, they have risen as a percentage of income. If we take house prices as a percentage of wealth, that is not the case, because household wealth has risen by 50 per cent. in Britain over the past six years under a Labour Government. If we take the debt servicing payments that people have to meet for their mortgages, under the Conservative Government, at certain points, people had to pay nearly 30 per cent. as new homeowners, but under the Labour Government it is 17 per cent. In respect of the housing position, the right hon. gentleman is wrong, and wrong again.

To ask the Chancellor of the Exchequer what recent discussions he has had on tax incentives for private health care. [138325]

I have met BUPA and others. We estimate the cost of tax relief for private medical insurance at a billion pounds, almost all of which will go to those who are already on private medical insurance.

I thank my right hon. Friend for that answer and add my congratulations to those of others in the Chamber. What is my right hon. Friend doing to provide resources to ensure that the national health service remains free at the point of need?

When we came to power, we had to take difficult decisions on the uses of public expenditure. One of the decisions that we made was to abolish tax relief on private medical insurance for over-60s. That was a difficult decision. but all the evidence showed that in the nine years in which private medical insurance existed, a billion pounds had been spent and there had been no appreciable growth in the numbers of people on private medical insurance, but that the state was subsiding people who already had such insurance in the first place.

I cannot see how we can continue to finance both the development of the national health service and build the capacity in hospitals, with doctors and nurses being employed, and at the same time finance with a billion pounds of deadweight cost private medical insurance tax relief for people who already have such insurance. I suggest that the country has a choice—we can have a health service that is free at the point of need, where we invest in capacity, or we can spend money on private medical insurance. We will, at the same time as investing in the national health service, keep to the policy that puts the national health service, and not private medicine, first in this respect.

Since the Chancellor announced the decision in 1997 to withdraw tax relief for older people in respect of private health insurance, can he tell the House how many older people have come off such insurance and what the costs to the NHS in current and capital terms have been in providing for those people in the public sector?

I will write to the hon. Gentleman with the figures. There was no appreciable growth in the numbers of people who took out private medical insurance when the tax relief was in place. I may say that the former Chancellor, Lord Lawson, said that the relief was not good value for money and merely meant health service inflation. He was opposed to it all along, as those on the Conservative Front Bench should be.

To ask the Chancellor of the Exchequer what recent representations he has received about the operation of the Barnett formula. [138327]

My right hon. Friend the Chancellor receives periodic representations about the operation of the Barnett formula. The Government have no plans to change the formula.

My right hon. Friend will no doubt have seen the recent report of the Select Committee on the Office of the Deputy Prime Minister that recommended a review of the formula. The way in which the formula operates is politically indefensible on the doorsteps of voters in north-east England. Given that the formula is named after a former Labour Chief Secretary, will he not take the opportunity to introduce a new Boateng formula that is a great deal fairer to the nations and regions of the United Kingdom as a whole?

I must resist that temptation, although I appreciate the kind thought. I know that my right hon. Friend takes a great interest in this matter. However, while I respect her view and that of the Select Committee, I do not share her analysis. The Barnett formula is transparent and well tried. There is no consensus about alternative funding arrangements, and existing arrangements have delivered to the north-east the second highest level of identifiable public spending in England. I think that that is something to be welcomed and appreciated by all.

Has the Chief Secretary had an opportunity to look at the latest edition of the Holyroodmagazine? If he has done so, he will have found that the Secretary of State for Scotland has conceded that the Barnett formula is indeed a convergence formula. Does he agree with his right hon. Friend the Secretary of State, and does he believe that the best way of ending this futile debate about the formula would be to give the Scottish Parliament responsibility for collecting its own expenditure and to make it fully accountable for how it is spent?

I cannot agree with the hon. Gentleman, who knows that examination of the figures shows that Scotland has done rather well out of the Barnett formula, as spending is 20 per cent. higher in Scotland. The reality is that the formula provides Scotland with a population-based share of comparable English increases. That can hardly be regarded as unfair. I would have thought that he would welcome that on behalf of his constituents.

Obviously, the northeast would welcome a change in the Barnett formula, but may I reassure my right hon. Friend that in the north-west we would benefit simply from its extension to cover both the north-west and north-east, so that we not only reap the same benefits, but do not end up with top-up fees?

My hon. Friend is always a reassuring figure, but there is normally a sting in the tail, as on this occasion. I fear that I must resist his blandishments, too. The Barnett formula is delivering to all the regions and to the kingdom. If Conservative Members have any alternative—he Letwin-Flight formula, perhaps—we should hear about it, because it would be about slash and burn and cuts, cuts, cuts; and we are not having that.

To ask the Chancellor of the Exchequer what recent representations he has received on his policies on taxation in relation to residential property. [138328]

As with all tax issues, the Government consider representations that are received as part of the normal Budget process.

Does the Minister understand that since this Government came to power in 1997, their polices have been absolutely devastating for the hard-pressed homeowners of this country, with a 60 per cent. average increase in council tax and a devastating increase in stamp duty? When will the Government introduce policies that encourage, rather than discourage, home owning?

As my right hon. Friend the Chancellor said, there are I million more homeowners in the United Kingdom since this Government came to power in 1997.

Bearing in mind the Government's energy efficiency commitment, will my hon. Friend look again at the charging of VAT on refurbishing older properties and on do-it-yourself energy-saving products?

My hon. Friend is a passionate and long-standing advocate of energy efficiency measures, and he will be aware that we are arguing with the Commission and our partners in the European Union for greater freedom to allow a reduced rate of VAT on energy-saving materials that people use on a DIY basis. We are still constrained by European rules that prevent some of the measures that my hon. Friend would like.

Over the past five years, the Government have clobbered homeowners with massive increases in stamp duty that have resulted in a nearly fivefold increase in the total yield to more than £3.5 billion a year and hit many people's main source of saving. A few weeks ago, the Government ruled out taxing capital gains on first homes— a seemingly enormous pledge that I welcome. Will they now rule out further increases in stamp duty, at least for the forthcoming Budget?

I sometimes wonder whether Conservative Members are living in the real world. As I said to the hon. Member for Romford (Mr. Rosindell), the Chancellor considers representations and makes decisions on tax as part of the Budget process. As for tax rises—[Interruption.The shadow Chancellor is shouting "60". The Tories treat this like a maths test for a seven-year-old. They go through our Budget documents looking for the plus signs and add them up, but they do not take into account the cuts in income tax, the pension credit, the working families tax credit or the child tax credit. The personal tax and benefit changes that have been made since 1997 have had a direct impact on householders, who are, on average, £775 a year better off: the poorest and those with children are better off still.

Does my hon. Friend agree that council tax is fundamentally a regressive form of taxation because it was introduced by the Tories to replace Mrs. Thatcher's poll tax and is closely related to it? Will my hon. Friend the Minister consider making it more closely related to ability to pay, perhaps by extending the banding so that wealthier people in wealthier areas pay proportionately more?

Questions about council tax bands and the ratios between them will form part of the analysis and decision making in the revaluation of council taxes that starts in 2005 and will affect bills from 2007.

I emphasise to my hon. Friend and Conservative Members that the average council tax per dwelling this year under Labour councils is £818, whereas under Liberal Democrat councils, it is £934 and £1,008 under Tory councils.

To ask the Chancellor of the Exchequer how many euro roadshow events he has attended in the past month. [138329]

Ministers have held a variety of meetings to discuss the euro in the past month. In addition, Treasury officials have held more than 150 meetings with opinion formers in Britain and Europe since the Chancellor's statement on 9 June.

I gather from the Financial Secretary's answer that the Chancellor attended no roadshow events in the past month, unless one includes the radio interviews that he did last week. That is slightly surprising because the deal that he stitched up with the Prime Minister was that he kept the pound and the Prime Minister launched a roadshow. Where is it? Why does not the Financial Secretary simply admit what we all know—that the roadshow does not exist?

I was going to congratulate the hon. Gentleman on his appointment to the Front Bench. However, given his preoccupation with Ministers' diaries and who answers the question rather than the substance of the issue, perhaps he has already decided that he prefers to answer questions from the Back Benches.

Perhaps I can clarify a couple of points. Ministers continued to meet last month. Indeed, my right hon. Friend the Chief Secretary addressed a meeting in Scotland and I filled in for my right hon. Friend the Chancellor, who was taking paternity leave, at a meeting in London. As the hon. Gentleman knows, Treasury officials have been deeply engaged in continuing discussions with stakeholders in the past month as in previous months.

I invite the Financial Secretary to meet my constituents who have shown since at least May 1997 that it is possible to hold an open, balanced and rational debate about the euro and Britain's membership of the European Union. When she does that, will she remind them that a benefit of joining the euro would be the ability to lock in the economic stability that a Labour Government have created in this country and that entry would almost eliminate the risk of a return to the 15 per cent. interest rates that pertained when the Conservative party was in power?

I know that my hon. Friend takes a great interest in those matters and of course I would be willing to meet his constituents. We have to put the national economic interest first—that is why we set up the five-test procedure. We shall review that at the appropriate time in the Budget.

To ask the Chancellor of the Exchequer what plans he has for changes in the taxation of business. [138330]

My right hon. Friend the Chancellor is considering representations on business tax, including corporation tax, and will make his pre-Budget statement in due course.

Did the right hon. Lady read the CBI's comments about the 19 new business taxes in the previous Parliament and the decision to drive up national insurance contributions, which destroy business competitiveness and productivity? Last year, business investment fell by more than at any other time in the past decade. Will she undertake not to introduce the Government's proposed new taxes on businesses?

I am sure that the hon. Gentleman is fully aware of all the international comparisons with tax levels for businesses in the United Kingdom. He also knows that the Government have undertaken huge reform of the corporate tax regime to support businesses through provisions on intellectual property rights, the research and development tax credit and intangible assets as well as through lowering corporation tax for large and small companies. All the comparisons show that the United Kingdom is the best place in which to do business. Digby Jones, director general of the CBI, echoed that when he said:

"I would much rather be doing business in Britain than anywhere else in Europe… We are still the most successful economy in Europe."

That shows that the Government's policies are correct.

Does my right hon. Friend agree that we need to encourage the vehicle industry to invest in future technologies, some of which have a long gestation period? Does she also agree that, as part of that, it is important that we show our commitment by continuing to give support to interim technologies?

I am sure that my hon. Friend is fully aware of the importance of the research and development tax credit for innovation in any industry, and that its extension to the small and medium-sized enterprises has been crucial in ensuring that those ideas continue to be funded and developed. We keep the R and D tax credit continually under review, and the definition of it has reduced the maximum expenditure necessary to qualify for that tax credit. I will continue to look closely at its operation, to ensure that industry is rewarded for innovation and development and that the tax system encourages that.

Is the Minister aware that Digby Jones also said recently:

"Ministers cannot keep siphoning off company funds without damaging investment, productivity and competitiveness. That will reduce the ability for the government to invest in public services—the money will simply not be there."?

Which part of that statement does the Minister not understand?

We are not siphoning off funds, as the hon. Gentleman puts it. [HoN. MEMBERS: "It was Digby Jones."' The Government, in whose consultations Digby Jones is an active participant, want to reform the tax system to support growth, encourage stability, create investment and jobs, allow our businesses to grow and maintain the competitiveness of the British economy. All those things are being done, with stability at the heart of them, and Digby Jones agrees with that.

To ask the Chancellor of the Exchequer if he will make a statement on progress the G7 Finance Ministers are making in tackling world debt. [138331]

Twenty-seven countries are receiving debt relief that will be worth $70 billion. Of the other 10 and more that are eligible, most are in conflict.

Given the relative success of the debt relief talks, and the relative failure of the World Trade Organisation negotiations at Cancun, can my right hon. Friend see any possibility of convergence of the twin-track talks in order to benefit post-Cancun negotiations?

I am grateful to my hon. Friend, who I know takes an interest in these matters. He is absolutely right: the prospects of the developing countries depend not only on debt relief and adequate aid but on their ability to participate in the global economy. What comes out of the world trade talks is therefore crucial to their future. When we met at the International Monetary Fund and World Bank meetings in Dubai a few weeks ago, it was agreed that we should try to do everything that we could to remove the barriers to the resumption of trade talks. That will require Europe to make a move forward on the competition and investment clauses that were preventing agreement and progress. It will also require countries to look very carefully at their proposals on agriculture. I hope to meet the head of the WTO, Dr. Supachai, very soon to discuss what other things can be done by Governments in Europe and elsewhere to help to progress the talks forward, but I agree with my hon. Friend that we must ensure that they resume.

I welcome the Chancellor's response. Could he tell us to what extent some of the debt has not been dealt with because of the recalcitrance of the Governments in certain countries about coming up to standard? Does he agree that, at a time when many people live in poverty even in the developed countries, we should not forget that those in the developing countries are much worse off?

I am grateful to the hon. Gentleman, and I know how much he does in Africa, working with the churches to help countries there to solve some of the problems that are preventing them from delivering decent health and education services to their people. The main reason debt relief has not progressed beyond the 27 countries is that most of the countries that would be eligible are in conflict, about to come out of conflict, or have made a decision to come out of conflict but not yet achieved it. I would bring debt relief up to $100 billion, which was our target, but we cannot sustainably give debt relief at a time when we have no clue as to how those resources would be used.

If countries come out of conflict, we are prepared to work with them on a restructuring plan so that they can rebuild their infrastructure and, at the same time, get rid of their debts. Conflict is the major barrier to debt relief. Of course we require transparency, and corruption in countries that are eligible for debt relief is a major issue. That is why, at all the recent meetings of the World Bank and the IMF, the emphasis has been on developing countries pursuing an anti-corruption, pro-stability policy to enable them properly to participate in the world economy.

One way in which the developed world causes debt in the third world is by exporting heavily subsidised agricultural products, which devastates farming in those countries. Would it not be a good idea to stop exporting surpluses, start buying more of those countries' food, and begin to seek the abolition of the common agricultural policy?

Agricultural issues are complex, but the basic problem is that agricultural protectionism cannot continue if the countries of which my hon. Friend speaks are to develop. That is why it is incumbent on the European Union and the American Government to make progress by liberalising agriculture and removing what are, in effect, subsidies worth $350 billion—seven times the amount given to the poorest countries in development aid.

My hon. Friend is absolutely right. We need to push further in the agriculture talks. Agricultural protectionism serves the poorest countries badly, as well as being bad for the environment and bad in other ways. We also need to press on with the international finance facility plan to meet the millennium development goals. In return for countries' opening up to investment and pursuing stability policies, we must help them to deal with major health and education problems.

To ask the Chancellor of the Exchequer whether building societies and other financial mutual organisations will be providers for the new child trust funds. [138332]

Any firm with a relevant Financial Services Authority authorisation will be able to enter the market subject to meeting the requirements of the child trust fund regulations. We expect a wide range of providers to offer accounts.

When setting any price cap for child trust funds, will the Government take account of the cost of administering savings for children and the need to raise awareness of the importance of saving? In particular, will they encourage providers to ensure that all families, particularly those with low incomes, benefit from the opportunity to save for their children?

I agree with my hon. Friend. When I decided to allow all FSA-authorised firms to enter the market, I paid careful attention to the impact on financial mutuals and building societies and decided to allow them to participate as well.

My hon. Friend is right to mention the price cap. In view of the factors she cites, I have commissioned independent research from Deloitte Touche on the impact of the cap and its interaction with the target market. I shall publish it in due course.

How much consultation is going on with other Departments? Is it true that the Home Secretary is even less enthusiastic about the Chancellor's proposals than the Chancellor is about his proposals for identity cards?

I think the hon. Gentleman has completely misinterpreted the Home Secretary's position. He is a firm advocate of child trust funds. Indeed, I shared a platform with him in Downing street to discuss the merits of the proposal. We have a once-ina-generation chance to open up opportunities for poor children as well as those from wealthier backgrounds.

Would my hon. Friend consider allowing parents who are eligible for the savings gateway to pay top-up amounts into the trust funds on the same terms?

We have considered how to maximise the benefits for children from poorer families. We have decided both to make the policy universal—every child born after a certain date will have access to an endowment—and to concentrate Government resources on those who need them most. We have introduced a two-level endowment, which will apply at birth and when the child reaches the age of seven. Up to 40 per cent. of children will be able to benefit.

Can the Minister answer a question that seems to be causing some confusion among her officials? Will the trust funds be taken into account in the calculation of benefits, and will they affect those benefits?

We have made it absolutely clear that in the assessment of family benefits for the purpose of calculation, child trust funds will be disallowed.

To ask the Chancellor of the Exchequer what discussions have been held with Departments regarding their sustainable development objectives in the forthcoming comprehensive spending round. [138334]

Departments will be required to consider sustainable development as part of the 2004 spending review process, as they were in 2002.

I am sure that my hon. Friend will study very carefully the Environmental Audit Committee report entitled "Greening Government", which was published earlier today. One of its key observations is that the public service agreements in Departments other than the Department for Environment, Food and Rural Affairs have hardly any environmentally related targets at all. So will my hon. Friend and the Treasury put pressure on other Departments to increase the number of such targets in the next comprehensive spending review?

I pay tribute to my hon. Friend's work on the Environmental Audit Committee, and to the work of the Committee itself. I should point out that we already have 14 departmental PSAs, deriving from the 2002 spending review, that incorporate sustainable development. But I shall indeed study his Committee's report carefully, and I will consider the case that he makes about targets. I shall of course then respond to the Committee, in full, in the normal way.

To ask the Chancellor of the Exchequer what recent discussions he has had with African Finance Ministers on debt and the millennium development targets. [1383351]

To meet the millennium development goals, which include primary education for all by 2015 and the halving of poverty, we propose, in addition to the debt relief that we have given, the creation of an international finance facility that will provide $50 billion in additional finance per year. I am grateful to all parties in this House for their support for this proposal.

Many of my constituents especially value my right hon. Friend's commitment to this aspect of his work. Will he further explain the extent of the Government's support for development projects in Africa?

My hon. Friend takes a very keen interest in this issue and I thank her for that. We will raise aid to Africa to £1 billion a year, and that will be achieved before completion of this spending review, as the International Development Secretary announced last week. So more of the aid money that is being raised anyway is going to Africa, and more is going to antipoverty programmes such as tackling illiteracy and tackling ill health. I believe that the partnership for Africa initiative is the right way forward, whereby, in return for African countries tackling corruption, pursuing policies for stability and opening up to investment, we provide the resources to enable them to tackle their problems. At the moment, the chances of meeting the millennium development goals are slim, unless we get the additional finance that we are proposing, through the international finance facility. So I hope that not only politicians but the churches, non-governmental organisations and others interested in the future of Africa will look at this proposal very carefully.

Following on from that point, if I may, I shall paraphrase one of the millennium goals, which is to stabilise world population growth by choice. The Chancellor will be well aware that the funding levels were agreed at the Cairo international conference on population action, in 1994. In the eyes of many, insufficient funding is going into population programmes; what is more, the question arises of whether it is going to the right agencies. Will the Chancellor undertake to review this matter, so that the millennium goals can be achieved?

This is not strictly a matter for the Treasury, as the hon. Gentleman knows, but I will report what he says to the International Development Secretary, who speaks for us on these matters. But whichever way he looks at it, the hon. Gentleman must know that population is going to rise. It is our duty to make sure that there is growth in African countries and in other developing countries by working with them to achieve the conditions for that growth. Such conditions include tackling corruption, ensuring macro-economic stability, and opening up to trade and investment. That is what the Monterrey consensus was all about, but it will be achieved through partnership. In return, we must help those countries to solve the problems of HIV/ AIDS, tuberculosis and malaria; indeed, 2 million people a year are dying from tuberculosis, and 1 million are dying from malaria.

Such problems are soluble, but those countries need the capacity to build health care systems, and in the end, they need the money that only the richest countries can provide at this stage. That is why the international finance facility— supported enthusiastically, I hope, on both sides of this House —can be useful not only if we can persuade other countries around the world to adopt it, but if we can work with Africa to implement it.

On my right hon. Friend's discussions with African Finance Ministers, what is his assessment of the priority that they are giving to the need to ensure that every child in Africa gets at least primary-level education?

I am grateful to my hon. Friend, who has taken a huge interest in these matters. I met many African Finance Ministers only a few weeks ago under the chairmanship of the French Finance Minister, Mr. Mer. There will also be a meeting of African Finance Ministers in Paris in February to discuss the international finance facility. The priority attached to primary education is shown by the fact that 65 per cent. of the money released from debt relief is going into education and health. Uganda, for example, has made primary education free, which has increased enrolment by more than 50 per cent. in recent years. There are 120 million children around the world who do not go to school, but that problem can be overcome with an investment of about $10 billion a year, which is not a huge sum if the international community acts together. I believe that we should be prepared to make that finance available.

This is a very important question, and I am delighted that the Chancellor of the Exchequer is answering it. Could he advise the House and me what particular discussions he has had with African Ministers about the deteriorating and highly serious problem in Zimbabwe, not least because it is currently excluded from the Commonwealth? Dreadful problems are occurring in that country, and debt is rising. Could he tell the House what we are seeking to do to help the hard-pressed people of Zimbabwe?

I discuss that matter regularly with Finance Ministers around Africa, but the hon. Gentleman will understand that the precise policies pursued by the Government are a matter for the Foreign Secretary, who will discuss these matters with the rest of the Commonwealth very soon. I met the South African Finance Minister only a few weeks ago and that subject was on the agenda. One significant problem is that HIV/AIDS affects the whole of the southern part of Africa—24 million people in Africa either are infected or are likely to be infected. Some initiatives, including one through the WTO, have been taken on pharmaceuticals, and have proved beneficial. The hon. Gentleman knows that there is a long way to go, and we

need all-party co-operation here and the help of other countries so that we can increase the resources and the capacity of health care systems to cope.

To ask the Chancellor of the Exchequer if he will make a statement on new agreements arising from the annual World Bank and International Monetary Fund meetings to allow greater diversity and representation of poor countries on the boards of (a) the World Bank and (b) the IMF. [138336]

The Government welcome recent developments at the Dubai annual meetings, when Ministers committed themselves to improve the capacity of developing country representatives and asked the World Bank and the IMF to look further at those countries' level of representation within those institutions.

I thank my right hon. Friend for his reply. However, does he agree that, if the IMF and World Bank are to take decisions that best reflect the development needs of the world's poorest nations, there is a need for a better balance between richer and poorer nations in the voting structure? The WTO, for example, allows for equal votes, and the voice of the developing nations is now being heard loud and clear.

My hon. Friend, who takes a close interest in these matters, makes a very fair point about the balance of representation. That is why we are working to achieve a consensus in that regard, building on the pledge in our White Paper of 2000 and on the progress made at Monterrey. Building consensus is not easy, but we believe that a 25th seat on the IMF and the World Bank's board for sub-Saharan Africa is an option that ought to be explored and given serious consideration. We are working hard to that end.

My right hon. Friend will know that at the present rate of international aid, six out of eight of the millennium development goals are unlikely to be met until half way through the next century. What conversations have taken place at the IMF and World Bank to give support to the Chancellor's initiative for an international finance facility, which would boost immediate assistance and help to get those targets back on track?

My right hon. Friend the Chancellor works closely with others on those issues, not least with the faith communities, which have a crucial role to play.

That is why the recently announced support of the Vatican and His Holiness for the IFF was a particular help in taking that agenda forward. The issue was discussed recently with leaders of the World Bank and the IMF in Madrid. As a result of my right hon. Friend the Chancellor's initiative, the World Bank and the IMF are carrying out studies and we are hopeful of increasing recognition on the part of donor nations that we have to do more and that the IFF is our best hope of achieving that. The example that this House sets of genuine bipartisan support for that mechanism is one that other nations, especially donor nations, might well follow.

Treasury Ministers have an outstanding record in helping developing countries, but is that record being damaged in any way by the increasing commitments to Iraq and, in particular, are the reports—

Order. My apologies for interrupting, but we have arrived at question 15. The hon. Gentleman should ask the Minister for the reply to that question.

I take the point that the Father of the House makes and—

Order. On the Order Paper, we have reached question 15. Question 14 has been withdrawn.

To ask the Chancellor of the Exchequer pursuant to his Answer of 30th October to the hon. Member for Nottingham, South (Alan Simpson), Official Report,column 311W, on Iraq, when he expects to be able to provide the total cost of the military campaign in Iraq. [138340]

The Chancellor announced in the Budget that £3 billion has been set aside to cover the cost of operations in Iraq. It would be premature to anticipate the total cost of the military operations at this time.

Is it true that the commitment to the Amazon rainforest and other developing country commitments have been seriously damaged by an increasing commitment to the finances for Iraq?

No, the project that we are funding will be completed, as my right hon. Friend the Secretary of State for International Development has made clear. No announcements that we have made in relation to Iraq, and the funding of operations there, will affect the UK's firm commitment to increase aid in poor countries. That we are determined to do and are doing. I welcome the support of the Father of the House for that objective.

I must draw the attention of the House to the fact that privilege is involved in Lords amendment No. 157. If the House agrees to the Lords amendment, I shall ensure that the appropriate entry is made in the Journal.

I beg to move amendment (a) to the Lords amendment.

With this we may discuss Government amendments (b), (c), (d) and (e).

I invite the House to agree the to the Government amendments to the Lords amendment. We are trying to preserve the spirit of the Lords amendment while, at the same time, using language that is suitable for a piece of UK legislation. We are concerned about the information that an incoming Part 1 warrant should contain. In the Government's view, the Bill is explicit about that, but in another place Members took a different view. In particular, they decided to import wording from the framework decision on the European arrest warrant into the Bill. We have no objection to that in principle, but it is much more sensible to use language that can be readily understood by people in this country, and which has been prepared by our expert parliamentary counsel.

We therefore propose to remove the requirement that the warrant should contain details of the nature and legal classification of the offence, as well as the applicable statutory provision, replacing it with any provision of the law of the category 1 territory under which the conduct is alleged to constitute an offence. Basically, what does the requesting country think that the person has done, and how is its law applied? I am sure that hon. Members will recognise that that is a slightly neater and more straightforward formulation. I should also make it clear for the avoidance of doubt that there is already a separate requirement to give details of the sentence that could he passed.

Similarly, we are replacing a description of the circumstances in which the offence was committed with details of the conduct alleged to constitute the offence. It is important that the person's acts, not the reasons why he or she committed the offence, should be clear. The term "circumstances" could lead to confusion. The requirement is therefore expressed more neatly and clearly and in keeping with the way in which our legislation is usually drafted.

We are seeking to remove one part of the Lords amendment without replacing it—the requirement that the warrant should contain information about the degree of participation in the offence by the requested person. I am not sure that I understand what that means or why it is relevant. For extradition purposes, it does not matter whether the person is the ringleader or an accomplice, provided that they are alleged to have committed an extradition offence. For example, it does not matter whether someone was waving a sawn-off shotgun at the bank teller or driving the getaway car— it is the offence that is important. Clearly, the nature of participation may be an important consideration in the eventual trial and determination of sentence, but for the purposes of extradition to another EU country it is not relevant.

As I have tried to suggest, we have sought to accept the spirit of the amendment made in another place, while ensuring that the drafting is as clear and effective as possible. I invite the House to accept the Government amendments.

As I said earlier, only this week did the Government say that they were prepared to start to climb down in the face of the defeats that they suffered in another place. Even though it was a last-minute concession, or at least a meeting of the Opposition parties halfway, it was nevertheless welcome. I do not hold the Minister responsible in any way. Her predecessor, the hon. Member for Coventry, North-East (Mr. Ainsworth) was very intransigent in Committee, but he has now resumed his role as the Government hard man or deputy Chief Whip. Baroness Scotland met my noble Friend Baroness Anelay of St. Johns, who is my party's spokesperson in another place, only on Tuesday afternoon, and discussed the climb-down that the Government were proposing to make.

We have found that the Government are meeting us about halfway on this matter. Even though that is welcome, we have said throughout the proceedings on this Bill and in Committees in both Houses that the warrant relating to the extradition of a British citizen to a category 1 country should include detailed and specific information. Of course, the Opposition still have fundamental objections to the concept of the European arrest warrant and the way in which minor administrative judicial officials in other countries, working as investigators, juges d'instruction or the like, may be able to require the extradition of UK citizens, while the British courts will be unable to look behind the warrant. We maintain that objection.

Yesterday, the Home Secretary referred in his statement on identity cards to the distinguished writer Frederick Forsyth and told us that he regarded him highly as a writer, but not as a political commentator. I regard Mr. Forsyth highly in both capacities, however, and I refer my hon. Friends and those outside the House who take an interest in these matters to his trenchant and accurate comments on this issue. I was reminded of his prescience in looking at the European arrest warrant, as well as the Government's proposed amendments to allow more to be included on the back of it, when I was stuck in traffic yesterday listening to a recording of one of his brilliant Saturday morning Radio 4 essays, which were broadcast before the BBC revealed its bias and took him off the air.

Unfortunately, despite the strong views on this matter that we expressed in Committee and in another place, the rules constraining today's proceedings allow us to debate only the matters coming from the Lords and the way in which the Government are responding to the defeats that we inflicted on them there. The Government's halfway house proposal is an attempt to soften the blow by ensuring that the warrant contains some details about what the requesting country alleges against the UK citizen. We hope that that may enable challenges if requesting countries make inappropriate requests and the warrant is clearly defective because it does not provide what amendment (a) will require.

I should stress, however, that that does not entirely allay our fears, and I wish to refer briefly to what my noble Friend Lord Lamont and some other noble Friends said yesterday in another place in furthering the concerns expressed by distinguished jurists and commentators such as Leolin Price, QC, and Torquil Dick Erikson, who have helped us a great deal. Lord Lamont spoke about the difficulty that may arise if British citizens find that they are being summoned abroad on the basis of code Napoleon and corpus juristype requirements. At column 1412 of Hansard,he expressed concern about the way in which British citizens' rights may be trampled on by people investigating matters rather than prosecuting them.

None the less, the European arrest warrant will now have to contain the details that we regard as equivalent to the legal classification of the offence in question, as set out in the original Opposition amendment and in the European framework decision. We will discuss the list of offences later in respect of Lords amendment No. 236. I understand why the Government do not feel able to include reference to the degree of participation, as we suggested in the original amendment, on which we defeated them. They believe that there is a danger that the question whether somebody was a ringleader, as the Minister puts it, or one of the hangers-on in an offence might cause confusion and create a loophole.

That is why we have agreed, however reluctantly, to accept the Government's halfway house, but we still feel very strongly that, because extradition cases may now be much more common, as my noble Friend Lord Lamont said yesterday in another place, there may still be occasions on which somebody is arrested and brought before foreign courts without the degree of protection that British citizens have previously been able to expect.

We have had confession and forgiveness from the Minister, and now we apparently have repentance, even though it has come at the eleventh hour, as the hon. Member for Surrey Heath (Mr. Hawkins) said. None the less, the Liberal Democrats welcome that repentance, which represents a significant improvement. Indeed, it is a tribute to the manner in which business is done in another place. I should like to observe in passing, however, that it is regrettable that one sometimes has to debate such matters in this place four times before the argument is finally accepted and that it is sometimes not the force of argument, but the force of timetabling, that seems to carry the day.

1.45 pm

As I said, the safeguards that are being introduced are important and should be included in the Bill. The one significant change that the Government seek to make to the Lords amendment is the exclusion of the reference to the degree of participation. I agree with the hon. Member for Surrey Heath that that represents an improvement to the amendment, which strays from what we wanted the warrant to include and relates to what is properly a matter of evidence. It is important that such distinctions are maintained.

I commend the Government for having taken the point that was made and improved on it.

I welcome the support of the hon. Members for Surrey Heath (Mr. Hawkins) and for Orkney and Shetland (Mr. Carmichael). We try to show that we are a listening Government and ensure that the process of scrutinising legislation—in the case of extradition, it is very detailed legislation—is seen to work, and I commend my noble Friend Baroness Scotland for all her endeavours in that regard.

Obviously, we want to introduce legislation that clearly respects the rights of British citizens while recognising that the European arrest warrant has huge benefits in terms of securing effective arrests and a more open and transparent way of ensuring that nobody who commits a crime can escape the consequences by crossing a border. The measures in the Bill and the tightening up provided by the amendments will further reassure people about the way in which the European arrest warrant, and consequently extradition, will be applied.

I beg to move, That this House disagrees with the Lords in the said amendment.