It remains the Government's view that commercial agreements between the relevant parties provide the appropriate long-term basis for the funding of racing. However, in the light of a judgment by the European Court of Justice last September it has become clear that the British Horseracing Board is not in a position to proceed immediately with its plans to fund racing by the sale of database rights in place of the current statutory levy. Following consultations with the Horserace Betting Levy Board, the British Horseracing Board and the Association of British Bookmakers, I have therefore accepted the interim recommendations made by the independent review group, chaired by Lord Donoughue, that more time is needed to develop the commercial options and that it is in the public interest in the well-being of the sport that the levy arrangements should therefore remain in place for a further limited period. We will accordingly be making an order under part 2 of the Horserace Betting and Olympic Lottery Act 2004 to end the levy on 31 March 2009, and to close the levy board six months later.

I welcome the agreement of the parties that Lord Donoughue's group should continue to explore the commercial options, considering all areas relating to the funding of racing which it believes are relevant to establishing appropriate post-levy arrangements, with a view to preparing a final report this autumn. It will then be for the British Horseracing Board and the other parties to work towards putting agreed arrangements in place to meet the above timescale.

In the meantime it is important that racing continues to take forward the modernisation of its structures, with priority being given to the establishment of an independent regulatory authority.

It is also important that, both now and after the ending of the levy arrangements, there continues to be proper financial support for the advancement of veterinary science and education and for the improvement of breeds of horses, which are the levy board's other statutory purposes. I have therefore made clear the Government's wish to see the board, while it continues in being, take over the funding commitments previously given by the British Horseracing Board in respect of the Equine Fertility Unit and the equine genome project; to maintain support for veterinary science and education at 2.5 per cent. of levy income and for breed societies at no less than current levels; to take forward consideration of the establishment of a university chair in the field of equine veterinary science; and to complete the grant to the National Stud, for which budget provision was previously made, on the stud's proposed re-establishment as an independent charitable trust.

I wish to place on record my appreciation of the work of the members and staff of the levy board, who have been contending with an extended period of uncertainty, and of their commitment to running the levy arrangements effectively for longer than had previously been expected.

I am aware that other sports, particularly football, have also been affected by the ECJ judgement. I have met with representatives from the football industry and I look forward to working with them, as I have done with racing, as they develop their own solutions to the funding difficulties arising from this ruling.

Charges to cover the costs of local enforcing authorities in regulating processes which are subject to part I of the Environmental Protection Act 1990 (Local Air Pollution Control (LAPC)) were introduced in April 1991. Interim charges for installations which are subject to the Pollution Prevention and Control Act 1999 (Local Air Pollution Prevention and Control (LAPPC) and Local Authority—Integrated Pollution Prevention and Control (LA-IPPC)) were introduced in August 2000.

With the approval of the Treasury to the extent required, and following consultation with local authority associations and industry, myself with my right hon. and noble Friend the Minister for Farming, Food and Sustainable Energy have made revised schemes in respect of the Environmental Protection Act and in respect of the Pollution Prevention and Control Act. The schemes specify the scale of fees and charges to take effect from 1 April 2005.

There will be a 37 per cent. increase to the LA-IPPC application fees (plus any increase in the EA fees for 2005–06) and a 5 per cent. increase to all other LAPC, LAPPC and the LA-IPPC fees and charges for 2005–06. The basis of these increases is set out in the regulatory impact assessment which is available on the Defra website: http://www.defra.gov.uk/environment/airquality/lapc/charges/default.htm.

Some minor amendments to the schemes have also been made in the light of consultation with local authorities and industry.

The schemes have been laid today before both Houses and copies placed in the Libraries.

On 21 January 2005, the European Commission proposed terms for the continuation of the Gibraltar exempt companies scheme under certain conditions leading to its phasing out by 31 December 2010. These terms have been the subject matter of intensive negotiations and agreement between the Commission, the UK Government and the Government of Gibraltar.

The terms are as follows:

The total number of exempt companies will be 8,464.

Existing exempt companies will be able to continue to benefit from their tax exempt status until 31 December 2010.

Existing exempt companies that change legal or beneficial ownership and/or activity between 19 February 2005 and 30 June 2006 will be able to benefit from their tax exempt status until 31 December 2007.

Existing exempt companies that change legal or beneficial ownership and/or activity after 30 June 2006 will lose their tax exempt status.

New exempt companies can be formed up to 30 June 2006. This will be on the following basis:

In 2005, the number of new exempt companies that can be formed shall not exceed 60 per cent. of the number of exempt companies leaving the regime in 2005, or in any event, 823.

From 1 January to 30 June 2006, the number of new exempt companies that can be formed shall not exceed 50 per cent. of the number of exempt companies leaving the regime during that period, or in any event the number of exempt companies admitted in 2005.

New exempt companies will be able to continue to benefit from their tax exempt status until 31 December 2007.

Regular reports shall be submitted to the EC Commission certifying compliance with the above.

The UK Government (as the member state responsible for Gibraltar's external affairs) accepted these terms on behalf of the Government of Gibraltar on 18 February 2005. On the same day the Government of Gibraltar issued a press statement indicating how it would implement the appropriate measures. Copies of this press statement are being placed in the Library of the House.

On 30 November 2004, Official Report, columns 24–27WS, I announced the publication of an implementation framework for reconfiguring the Department of Health's arm's length bodies (ALBs) and achieving its three overarching objectives:

A 50 per cent. reduction in the number of ALBs

A saving in expenditure by ALBs of £0.5 billion by 2007–08; and

A reduction in posts of 25 per cent in the same period.

The ALB change programme is part of a wider programme to improve efficiency and cut bureaucracy in the management of the National Health Service. The aim of these activities is to reduce the burden on the front line and free up more resources for the delivery of front-line services to patients and users. This wider programme is to ensure that the increased investment in the NHS—42 per cent. in real terms from 2003–04 to 2007–08—is accompanied by modernisation that cuts out waste.

Today I am announcing the achievement of a further milestone towards the ALB change programme's key objectives. In November 2004 we made the following commitment as a first step towards our savings target on ALB expenditure:

"Even with these new functions, which bring new costs, we will be setting the 2005–06 budget for the ALB sector so that it will cost about £100 million a year less to run than in 2003–04."

I am pleased to report that I am today setting budgets for the operating costs of ALBs for 2005–06 which will reduce Department of Health funding by in excess of £150 million compared with 2003–04. This is despite the fact that in 2004–05 the ALB sector assumed new functions agreed by Parliament that increased the sector's costs substantially. A significant proportion of the savings generated in Department of Health funding will be redeployed for investment in front-line healthcare. We have additionally provided some £50 million to fund one-off identified costs in ALBs. This includes initiatives which will deliver savings in future years and enable us to continue the downward trend in operating costs for the ALB sector when we set budgets for 2006–07 and 2007–08.

In setting the 2005–06 budgets, we have:

Invested in ALBs which deliver front-line healthcare, like the National Blood Authority (an increase in Department of Health funding of more than £38 million over 2003–04), or carry out crucial work to protect public health, like the Health Protection Agency (an increase in Department of Health funding of more than £36 million over 2003–04).

Achieved the greatest savings in ALBs which provide central services to front-line NHS organisations. The reduction in Department of Health funding for this group of ALBs comes to more than £220 million compared to 2003–04 and provides a lower cost-base for overheads in future years.

Met our commitment that spending on ALBs undertaking inspection and regulation will not exceed 0.4 per cent. per cent. of the national spend on the NHS and social care, and made progress on our policy of full cost recovery for work relating to the independent health and social care sector.

Alongside these savings, we are also on course for ALBs to generate very substantial savings for the NHS front line by improving the efficiency of the services they provide centrally on behalf of the NHS.

We expect to generate further savings of over £100 million in 2005–06 from new national framework agreements let by the NHS purchasing and supply agency (PASA) alone. This follows savings of over £25 million in 2004–05. PASA is on target to achieve savings of £240 million per annum by 2007–08 for the NHS. Work is also under way to deliver efficiencies in the services offered by other ALBs. Taken together, this puts us well on course to meet or exceed our commitment to deliver £250 million to the front line by the end of 2007–08 through efficiencies generated by ALBs, as promised in the 30 November 2004 implementation framework.

The major reconfiguration of individual ALBs is also on course. The total number of ALBs will have reduced from 38 in 2003–04 to 34 on 1 April and is on course to reduce further to 31 by 1 October this year. The changes are:

The Family Health Services Appeal Authority (Special Health Authority) (FHSAA—SHA) will be dissolved on 1 April and its functions absorbed by the NHS Litigation Authority (NHS LA).

The Health Development Agency (HDA) will be dissolved on 1 April and its functions absorbed by the National Institute for Clinical Excellence (NICE).

The National Clinical Assessment Authority (NCAA) will be dissolved on 1 April and its functions transferred to the National Patient Safety Agency (NPSA).

The NHS Information Authority (NHS IA) will be dissolved on 1 April and certain functions transferred to the health and social care information centre (HSCIC) and to the National Programme for IT (NPfIT).

The National Radiological Protection Board (NRPB) will be dissolved on 1 April and its functions transferred to the Health Protection Agency (HPA).

The Public Health Laboratory Service (PHLS) will be dissolved on 1 April and its functions transferred to the Health Protection Agency (HPA).

The Human Tissue Authority (HTA) will be created on 1 April and work closely with the Human Fertilisation and Embryology Authority (HFEA) ahead of the merger of the two bodies to form the Regulatory Authority for Tissue and Embryos (RATE) which requires new legislation.

The Health and Social Care Information Centre (HSCIC) will come into being on 1 April to co-ordinate information requirements across health and social care more efficiently.

The National Programme for IT (NPfIT) will become an Agency on 1 April.

The NHS Modernisation Agency and NHSU are due to be dissolved by 31 July 2005 and some of their functions taken on by the new NHS Institute for Learning, Skills and Innovation which is due to be set up by the same date.

The National Blood Authority and UK Transplant will be merged and become NHS Blood and Transplant by 1 October 2005.

NHS Estates is being wound down and will be dissolved no later than 1 October.

Following is a table showing the 2005–06 recurrent operating costs budgets for 33 of the ALBs which will exist on 1 April this year. The total of those budgets includes £1,107 million grant in aid from the Department of Health, as well as income from other sources, such as fees charged to industry. The total grant in aid provided by the Department in 2003–04 was £1,265 million. Therefore the 2005–06 grant in aid is over £150 million less than that included in 2003–04 operating costs. We have additionally funded £50 million one-off costs in order to enable further recurrent savings in later years.

These changes are only the first part of our plan for reconfiguring the ALB sector. Over the coming year we will:

Drive forward further major reconfigurations of ALBs so that total numbers in the sector are reduced to 24 by April 2006.

Maintain momentum towards releasing at least £0.5 billion for the front line by the end of 2007–08 through further reductions in overall ALB budgets in 2006–07 and continued savings in the central services which ALBs provide on behalf of the NHS.

As part of this, put in place firm plans for delivering further savings of £35–40 million a year by 2007–08 through efficiencies in ALB overheads (for example back office services and accommodation), in line with the expectations set out in the Gershon Review.

Make further reductions in the proportion of national spend on the NHS and social care which goes on inspection and regulation and make further progress on full cost recovery.

Take forward the commitment in Wednesday's Budget announcement to bring together the Healthcare Commission and the Commission for Social Care Inspection by 2008.

The ALB budgets we are setting for 2005–06 will reduce Department of Health funding by more than £150 million compared with 2003–04. The resulting savings will contribute to our overall investment in NHS front-line healthcare. Taken together with growing efficiencies in services provided by ALBs to the wider NHS they place the sector on a firm footing to achieve the target of £500 million savings by the end of 2007–08.

ALB Recurrent Operating Costs 2005–06

Notes:

1. Operating costs exclude capital charges but include income from other sources, such as fee income, as well as DH funding.

2. NHS Estates to be dissolved by 1 October 2005—one-off DH funding of £17.9 million. Operating costs are transfers to other ALBs.

Lord Carlile of Berriew QC has agreed to perform the role of independent reviewer of the operation of the Prevention of Terrorism Act.

I am grateful to Lord Carlile for accepting this invitation, and for his continuing work as reviewer of the Terrorism Act 2000.

I have decided to reappoint Bryan Gray as the chair of North West regional development agency, for a second term.

The appointment will begin on 1 April 2005 and will expire in 13 December 2008. I have placed further details of this appointment in the Libraries of both Houses.

The appointment was made in accordance with the code of practice of the commissioner for public appointments.

Today the Department for Work and Pensions announces the outcome of the retendering exercise for the provision of medical services.

The current contract for provision of service expires on 31 August 2005 with the replacement contract beginning 1 September.

A contract notice was dispatched to the Official Journal of the European Union (ref 2003/S 182–164829) on 11 September 2003. The procurement was conducted in accordance with negotiated procedure under the European Community Services Directive Article 11 (2) (b) and (c), as implemented in the United Kingdom by the Public Services Contracts regulations 1993, regulation 10 (2) (b) and (c) (the "regulations").

Three service providers were short-listed:

Atos Origin (the incumbent)

Capita

Vertex

Throughout 2004, all three short-listed providers were afforded extensive due diligence and equal opportunity to develop innovative solutions for an improved service.

Following a comprehensive evaluation of bids, which balanced proposed operational solutions against value for money considerations, the replacement contract has been awarded to Atos Origin.

The contract duration is for 10 years with an option to break at year seven in the event of unsatisfactory performance by the contractor. The overall contract value is approximately £666 million over 10 years (net present value).

Under the terms of the replacement contract a number of service improvements have been secured including: faster turnaround times for medical assessments; improved quality of information to decision makers; proposals to recruit and retain additional medical resources—including use of appropriate health care professionals; and improvements for customer contact.

An experienced contract management team is in place who will work collaboratively with Atos Origin to secure improvements and service delivery for customers.