It is a pleasure to serve under your chairmanship, Mr. Atkinson. I am most grateful to have secured the debate, but I shall limit my comments, because I know that a number of right hon. and hon. Members feel very strongly about certain aspects of today’s racing scene and I want to give them, if possible, an opportunity to speak.

It is unfortunate, but in a way apposite, that the House is discussing this issue today—the day of the funeral of Sir Tristram Ricketts. Sir Tristram, who devoted his working life to the racing industry, was chief executive of the Horserace Betting Levy Board and a previous chief executive of the British Horseracing Board. Nobody, or few people, contributed more to our industry or worked harder on behalf of British racing. I know that some hon. Members have been unable to attend the debate because they will, quite rightly, be attending his funeral this afternoon.

I share hon. Members’ enthusiasm for this, first and foremost, great sport. However, racing is not just a sport but a thriving industry, encompassing bloodstock, race course businesses and, of course, betting. British horse racing is the envy of the world, but the whole industry needs to come together, perhaps as never before, if racing is to flourish. The overall news is positive. For the first time in 80 years, a new race course will open at Great Leighs. According to the British Horseracing Authority, the industry now employs 88,000 people. In 2007, there have been 9,000 races—it seems at times as though there are almost as many bodies representing different parts of racing as there are races. A total of £10 billion is bet annually at off-course bookmakers.

The following is not a party political point; I hope that the Minister will agree. I shall come to the party political points shortly, so I hope that he will not be too disappointed. What racing does not need is the dead hand of Government, but regrettably this Government’s procrastination and successive blunders mean that the Government are now more involved in racing than ever.

I am a Member of Parliament for a rural constituency—albeit sadly one without a race course, although Exeter and Newton Abbot are temptingly close across the estuary—where racing and associated businesses provide valuable local employment as well as much-loved recreation in the south-west. It is worth remembering that half the 59 race courses in this country are in rural areas and play at times a perhaps disproportionate role in the local economy.

With your permission, Mr. Atkinson, I shall debate two main issues this morning: the Tote and the future of the levy.

I just want to make a point before the hon. Gentleman moves off the issue of the local economy. He may be aware that Musselburgh race course is in my constituency, and it is a small and classy course. It creates employment and is great for the local economy in terms of tourism and the like. Does he agree that any reduction in the levy would destroy my local race course and British racing?

The hon. Lady has quite properly secured her press release for today. If she will bear with me and allow me to develop my thoughts on the levy, I think that I will answer her and she will not be disappointed.

Pitch positions—a very important issue—were covered comprehensively in recent Westminster Hall debates, two of which were instigated by my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), whom I am pleased to see with us this morning, and one by the hon. Member for Livingston (Mr. Devine), who is also present. The issue is now the subject of a hearing of the Select Committee on Culture, Media and Sport, so I will not rehearse the arguments this morning. However, I would like to ask a couple of questions relating to pitch positions.

Does the Minister now admit that before the Gambling Act 2005, list positions were guaranteed by certificates of approval as issued by the levy board? Does he agree that that Act enabled the Racecourse Association to make its announcement on 14 March this year to refuse to recognise on-course bookmakers’ list positions? Was that an intentional consequence of the legislation?

The Government’s nationalisation of the Tote was profoundly wrong, and what has happened since has been nothing short of a farce. The Government at the time—it is good to see the previous Minister for Sport, the right hon. Member for Sheffield, Central (Mr. Caborn), present as well—gave cast-iron assurances that racing would not lose out from the sale. Initially, Ministers promised that the Tote would be sold only to the Racing Trust for £50 million, but later they gave a pledge that, in the event of its being sold to another buyer, racing would receive half the proceeds from the sale. However, either by conspiracy or cock-up, it transpired that such a move would contravene EU state aid rules. I now understand that PricewaterhouseCoopers, which is advising the Government, has reviewed racing’s latest offer of £320 million for the Tote and advised that it risked again being blocked by Brussels. Is that the case? If so, what contingency plan does the Minister have in case the Tote is again not sold? How will the Government honour their manifesto commitment to benefit racing? What compromises have they tried to broker? The Government must now decide the future of the Tote, and an indication from the Minister this morning, setting out once and for all the endgame and a timetable, would benefit all.

When licensed betting operators were legalised in 1961, it was with the proviso that a mechanism should exist to recycle some of the proceeds to racing. The levy, it should be remembered, had two criteria: to meet racing’s needs and to take into account the bookmaking industry’s ability to pay. As hon. Members are aware, the European Court of Justice ruling on data rights in 2004 prevented an alternative revenue stream for racing from the sale of pre-race data to bookmakers, which might have offered a credible alternative to the levy.

The Government then commissioned Lord Donoughue’s future funding of racing review group, which concluded in 2005 that a commercial alternative to the levy would require the Government’s intervention to ensure that any sale of picture and pre-race data rights did not fall foul of competition law. Many of us believe that the levy, in its current form, is not the most desirable or even a desirable way of funding racing, but we are where we are.

The Minister must now make a determination for the 47th levy so that racing can plan for its future. He will be more than aware of the robust discussions going on between the bookmakers and the race courses about the levy. Does he share my view that Turf TV is a commercial decision divorced from the levy and does he believe that it would be wrong and not in the best interests of racing if his decision on the levy had the net effect of competition not flourishing? Hon Members will be aware that the major bookmakers believe that the introduction of Turf TV will lead to an increase in their costs. Does the Minister agree that the rationale used by the bookmakers for a £50 million reduction in the levy, from £85 million a year to £30 million a year, was based on the extra costs associated with receiving Turf TV?

I congratulate the hon. Gentleman on securing the debate and I agree with what he is saying. I am sure that he will agree that a reduction of that proportion in the levy will not only affect prize money in elite racing, to the detriment of the sport, but be very detrimental to medium-sized race courses, such as Wincanton in my constituency, and there will be a knock-on effect on training yards, which will not be able to stable the same number of horses in the future.

The hon. Gentleman makes a good point. Perhaps, if he is lucky enough to be called by the Chairman, he will speak further on it. The number of races has risen, and stakes and prizes are a serious issue. I do not think that a reduction of the nature that I mentioned would be in the best interests of racing, by which I mean race courses and bookmakers alike.

Has the hon. Gentleman calculated how many of the 57 race courses would close down in a period of five years if the levy became a commercial transaction?

The right hon. Gentleman brings much more experience to this debate than I. Maybe he has made that calculation; I have not. Suffice it to say that I think that a number of race courses would be left vulnerable if the levy were reduced in that way.

What conversations has the Minister had with the Advertising Standards Authority regarding the initial leaked findings, reported in the Financial Times on 6 November, disputing the basis of the bookmakers’ figure? Turf TV believes that its product should cost £4 million extra a year for all bookmakers, whereas Satellite Information Services believes that the cost is closer to £50 million. Does he have a view on that?

As I said, the Minister must now decide the level of the 47th levy. Does he not agree that the best thing for racing would be to leave the levy at the same rate? That would undoubtedly fail to please bookmakers and race courses alike, but it would be a credible position for the Government at this time. Once he has made the new determination, will he redouble his efforts to bring all interested parties in racing together to modernise the levy in order to ensure more equitably racing’s long-term future? It is an aspiration that should unite us all.

I congratulate my hon. Friend the hon. Member for East Devon (Mr. Swire) on securing this debate. I say “Friend” deliberately, because when I first came to this place, we served on a Committee together, and he was generous and kind. He has been very helpful in the short time that I have been here. On a personal basis, I think that he is a big loss to the Opposition Front Bench.

That has done for the rest of my career.

Absolutely. It is ruined now.

I want to deal with the poor put-upon pitch bookmakers, but first—recognising the subject of the debate and the fact that a court case is taking place on which we cannot comment—I shall refer to an article written by Barry Dennis, the well-known bookmaker from Channel 4. He pointed out in The Sun on 13 October that he had bet £20,000 with Betfair on a photo finish, the outcome of which he already knew. Within minutes he had earned nearly £2,000. The House needs seriously to look into such practices. Barry Dennis describes them in his article as fraud, and I do not think that that is an unfair description.

I speak in defence of on-course bookmakers, who happily relieved me of all my money at a recent meeting in Ayr. My good friend Frank Carroll managed to pick winners at 33:1, 25:1, 18:1 and 16:1, but sadly I did not listen to him. Bookmakers are important to the colour of horse racing. It is an enjoyable sport. My predecessor Robin Cook said that there were two thumps that he liked: one was the thump of a ballot box on the night of an election, and the other was the thump of horses’ hooves at a race meeting. He was well known as a friend of racing, not just in this place but throughout the United Kingdom.

On 14 March this year, the Racecourse Association announced that it would confiscate assets from on-course bookmakers to which the race courses had never before expressed a claim. It was a bolt out of the blue. It was commercial opportunism, and I shall explain why. Since 1958, through various regulatory regimes, it has always been understood by all interested parties that list positions were assets held in perpetuity subject to the existence of the race course in question. The letter of 14 March was the first that on-course bookmakers, the National Joint Pitch Council, the body responsible for the administration of list positions as of 1998, or the Horserace Betting Levy Board, the statutory board responsible for awarding certificates of approval—I agree with the hon. Member for East Devon that there are too many bodies in racing—had heard of the Racecourses Association’s intention to cease to recognise list positions.

The chairman of the NJPC said on 13 November in a Culture, Media and Sport Committee oral evidence session that he was stunned by the announcement, and the levy board representative declared that he was surprised. Neither body could understand the justification for the RCA’s announcement. It had been understood by all parties involved that list positions were held in perpetuity. Not only was it a shock for the bookmakers, but it threatened their livelihood, their retirement and their families. Before the RCA’s announcement, the NJPC valued list positions at £70 million. After the announcement, it valued them at £40 million and falling daily. Those assets, bought in good faith, will be rendered worthless by 2012.

Does not the hon. Gentleman find it strange, as do I and perhaps many sitting in this Chamber, that those pitch positions were traded from day one of the NJPC’s existence without the Racecourse Association commenting at any point that people were trading positions of which they had no ownership? The Government should make it clear that it was never their intention to allow the race courses to take away an absolute right that was being traded.

I agree totally. The right hon. Gentleman and I have both been involved in previous debates on the matter in this Chamber, and I think that our views are as one.

Why was the RCA’s announcement so surprising? In 1998, the outmoded system of transfer through inheritance, or dead man’s shoes as it was called, was replaced by a trading system. On-course bookmakers could finally buy and sell their assets. The post-1998 system was approved and adhered to by all parties involved, including the RCA, which was consulted at every stage of discussions and assented fully to the regime’s establishment. Indeed, the race courses benefited from the system, as substantial sums from the commission and sales of list positions were spent on race course improvement. Everybody benefited.

Interestingly, at the Select Committee’s oral evidence session on 13 November, the RCA said that it was the only party involved in the post-1998 trading system to believe that list positions bought by on-course bookmakers were not assets held in perpetuity.

Would not the hon. Gentleman strengthen his argument further by reminding the Chamber that in 1998 a certificate of approval required that list positions be acknowledged and accepted?

The hon. Gentleman makes a good point, which I may not have included in my speech. It adds to my argument, and I am grateful for it.

The NJPC, the levy board and, most importantly, bookmakers—both buyers and sellers—thought that list positions were held in perpetuity, but the RCA said that it did not. That cannot be so. At the time, race courses had to recognise list positions to receive a certificate of approval from the levy board. The RCA could not have predicted a change in that arrangement. Like all other parties involved, it must have based its decisions on the assumption that the regime established in 1998 would continue. The only change that it might have predicted relates to the five times rule—the rent—which is an entirely separate issue. That is an important point. Furthermore, as Tom Clarke, the chairman of the NJPC, said, the RCA did not mention a time limit or raise the issue of list position tenure until the 88th meeting between all the parties involved. I repeat that it was the 88th meeting before the issue was first raised.

At the meeting on Wednesday 7 November between the Federation of Racecourse Bookmakers and the RCA, held under the Minister’s auspices, the FRB asked the RCA to explain the timing of its decision. It asked why the RCA had waited until March 2007 to make the announcement given that, until then, the race courses had been perfectly happy with the status quo—the post-1998 system—and had never questioned the tenure of list positions. Something must have changed. In response to that question, one of the RCA representatives explicitly stated that the decision was made in March 2007, just after the new regulations came into force in February. If that is not an admission that the proposed theft—that is what it is—of bookmakers’ assets had been facilitated by the Gambling Act 2005, then I do not know what is.

It is clear that the Select Committee was thoroughly unimpressed at the Racecourse Association’s evidence. Although the other parties that gave evidence, including the NJPC and the levy board, understood that bookmakers held their list positions in perpetuity, the RCA said that it did not, despite having representatives on all statutory bodies. That does no credit to the race courses that are members of the RCA.

The RCA’s chief executive disingenuously referred continually to property rights with regard to list positions, despite knowing full well, because he had been told on a number of occasions, including in front of the Minister, that on-course bookmakers had never argued that list positions conferred a property right. It has been explained to the RCA on numerous occasions that list positions are assets held in perpetuity, subject to the existence of the race course in question. Furthermore, I remind the House that the dispute is over the status of list positions—bookmakers’ assets—and not the rent. It is important to make that point because of attempts to cloud the issue.

Issue 10 of the RCA’s update for racecourses states that the proposal to move the five times rule to commercial arrangements between racecourses and bookmakers was originally made by the Government in March 2003. That statement disingenuously failed to recognise that the position papers of the Department for Culture, Media and Sport had recommended movement to commercial arrangements only from the five times rule. The Government’s position on list positions, as stated in paragraph 2.6 of the DCMS paper, was that we had already seen the removal of the “dead man’s shoes” on horse race courses and a move to fully commercial sale arrangements for pitches. Again, highlighting that point shows that the argument is flawed.

The RCA is effectively advocating the move to fully commercial arrangements, with all the implications that it would involve for racing. I am sure that the House will agree that it is an interesting proposition, as it totally undermines its argument. We already have fully commercial sale arrangements—on-course bookmakers buy and sell their list positions. The only problem for the RCA is that the race courses are not directly involved in those transactions. They want to be involved. They want more money. That is what they mean by commercial arrangements. However, although wanting more money is acceptable, it does not justify theft.

The RCA is disingenuously attempting to use the umbrella term “commercial arrangements” to refer to both rent and assets when they are, and should, remain entirely distinct and separate. As the Select Committee pointed out again and again, it is extremely difficult to understand why the race courses could not recognise bookmakers’ list positions and at the same time undertake negotiations over the rent. That is what should have happened. On-course bookmakers have always been willing to negotiate over the rent. However, they also want their pitches back. Rent and assets are separate issues. We should not let the Racecourse Association muddy the water.

I call upon the race courses to disassociate themselves from the comments and actions of the chief executive of the RCA. I call on the RCA fully to recognise the list positions of on-course bookmakers. Failing that, the Government should bring in secondary legislation that invests the duty of preservation in a statutory body.

I congratulate my hon. Friend the Member for East Devon (Mr. Swire) on securing this debate. I have initiated a number of debates on horse racing, and I know that there is tremendous interest in the sport and thus in the debates. I therefore congratulate my hon. Friend on securing a 90-minute debate, which allows a few more hon. Members to make a contribution.

My hon. Friend mentioned that holding the debate today is appropriate but also slightly difficult, given that the funeral of Sir Tristram Ricketts is taking place this afternoon. I pay a brief but personal tribute to Sir Tristram, who was well known throughout the sport. He always had time for everyone; he always had a smile, a joke, a word of wisdom for people. He will be sadly missed not only by the sport but by his many friends. I hope to set off for the funeral immediately after the debate. I suspect that I will have to stand outside, as so many people will be there. Nevertheless, it is important to be there. In that respect, it is a sad day.

My hon. Friend was right to say how important horse racing is to the country and to rural communities. He was right also to say that it is a magnificent spectacle. There can be no doubt that it is the envy of the world. It is my great privilege to represent what I consider to be the greatest race course in the world. Cheltenham race course at Prestbury Park falls within my Tewkesbury constituency. Of course, racing is equally important to those who represent tracks such as those at Hereford and Worcester—and, Mr. Atkinson, the smaller tracks such as Hexham—as that is where horses start their racing careers. They do not start at Cheltenham, although those that are lucky may end up there.

A great process has to be gone through in order to reach the top. All race courses are important. Whatever happens, and whatever decisions are taken, I hope that we retain 59 race courses—and possibly one or two more.

rose—

And Aintree, of course.

Although I am fond of Cheltenham, even the hon. Gentleman would have to confess that Aintree in my constituency is probably the premier race course.

I agree with a lot of things that the right hon. Gentleman says, but I cannot quite agree with that comment. However, I may return to the point later. It says something about me that I know Members more by the race course that they represent than by their constituency.

Racing is a fantastic sport, and it is the envy of the world. Much of it is right and going in the right direction. The quality of the racing at Cheltenham this weekend was tremendous. However, there are problems. To highlight those problems is not an attempt to run the sport down; it is a refusal to be complacent about the future of the sport, which is probably what motivated my hon. Friend to hold this debate. It certainly motivated me to speak today. My comments are meant not to be negative but to act as something of a wake-up call to the industry’s problems.

One problem was mentioned by my hon. Friend. There are so many different parts to racing—the horses, the owners, the jockeys, the trainers, the stable staff, the race courses, the bookies and the bodies that control racing. In a sense, that is its weakness, because all those elements are indispensable. If one removed jockeys there would obviously be no racing, and if one removed trainers there would be no racing either. Each element is extremely important, yet the industry seems unable to come together and progress in the right direction.

There are a number of current disputes, one of which relates to the emergence of Turf TV. I do not say that Turf TV is a bad thing in itself, but the emergence of a second provider of pictures to betting shops is causing difficulties, and a dispute on that is the last thing that racing needs. I do not want duplication of costs, because it will have a knock-on effect. My hon. Friend the Member for East Devon was absolutely right to say that, technically and legally, the dispute is nothing to do with the levy, but in the real world money has to be considered, and the fact is that there is only one pot, so something will have to give. If only half of race courses are featured in bookies in future, less money will be bet on racing in those shops, which means that less money will pass through the levy system. That brings us back to the same point: less money for race courses, and difficulties for them.

We need to look at things in the round. We cannot say that the levy is irrelevant, even if that is legally and technically correct. When bookmakers come to the Minister and tell him that they want to pay £35 million instead of £90 million, he will have to take everything into account. I hope that he will not reduce the levy payments, because that would have a negative effect on race courses, but the trend for the levy is downward.

I am emphatically not asking the Minister to scrap the levy; I am saying to racing that it should look beyond the levy, because the levy has had its day. We have to reach commercial agreements and find commercially realistic ways of funding racing.

Does the hon. Gentleman agree that, although a longer-term solution is needed, we first need a resolution of the current negotiations and of the position on the levy?

The hon. Lady is right. The Minister will have to decide this year’s levy, and I hope that he will do so shortly and without there being too much acrimony over the decision. I am not saying that the levy should be scrapped next year, or even the year after that. I am not saying anything at all to the Minister on that point. My comments are directed instead at the racing industry, because it must not be complacent and assume that the levy will remain for ever, or that it will always remain at its present level. As I have said, the recent trend has been downward, so industry representatives should not come to us saying, “The levy is not enough, long live the levy,” because that argument will not be sustainable for too much longer.

I know that Lord Donoughue produced an important and impressive report whose interim conclusion was that there might be difficulties in finding commercial solutions and appropriate further arrangements. Nevertheless, those solutions must be found. I am not aware that football, cricket, tennis or any other sport in this country is financed by a tax, which is what the levy is. Nor am I aware that the Minister has power to intervene in football transfers or in Wimbledon prize money. That is not his role, and nor is it the role of any member of the Government. I want racing to change so that it grows in confidence and can create more income of its own, and there are ways in which it can do that.

One of the problems has been the European Union—that wonderful organisation that does British business so much good.

It is always a problem.

Indeed. The EU stepped in and stopped the sale of pictures and data en bloc, but the same EU laws exist for other sports, so I do not think that racing can say, “There you are, Europe would not let us do it.” We must look beyond that, and one possibility is singular selling, which replaces sale as a whole with individual sales.

We have all been at race courses in the rain and found ourselves unable to get a decent cup of tea or a decent meal in proper facilities. That is not true of all race courses. It is not true of Cheltenham, for instance, but it happens at an awful lot of other race courses, and they could gain much more income if they marketed themselves better and provided better facilities. I have heard the complaint that some young people will not go to a certain race course on a wet Monday afternoon. Why should they? They will go to race courses where there are proper facilities, and providing such facilities would give other race courses the opportunity to raise more money themselves.

I agree with my hon. Friend. However, does he agree with me that it is now much more expensive for race courses to lay on a day’s racing? They have all the pressures deriving from the regulatory burdens that apply to all industry, including the working time directive. They do not have the critical mass that other sports have, so the situation is tougher for them. In cases where a race course is failing to provide any sort of decent service to the public, I agree with my hon. Friend’s comments, but the vast majority are trying their best and having a tough time of it.

My hon. Friend makes a good point. We have all been at race courses where the racing has been held up because a second ambulance was not available. I am not saying that a second ambulance is unnecessary, but that is a small example of the health and safety difficulties. The extent of other regulations is a difficulty too, as are add-on costs. Nevertheless, some race courses could do more for themselves, and I think that they will have to.

While the levy has been in place there has always been an excuse not to look beyond it, and to avoid self-help. I agree that the levy should be continued for the foreseeable future, but the industry should try to generate more income for itself and possibly become less reliant on the bookmakers. The share of bookmakers’ takings in betting offices is falling; I think that it is now about 50 per cent., but for greyhound racing it probably used to be 100 per cent. when betting shops were first licensed. The levy removes the incentive on bookmakers to promote racing, because they pay a levy on racing whereas they do not pay any levy on football bets. I say to the Minister that he should carry on with the levy but consider how racing can look beyond the levy and help itself. In 1998, I introduced a ten-minute Bill to try to deregulate race courses so that they could do more on non-race days, and that idea should be revisited, because race courses constitute a huge asset that is rarely used outside of racing days.

I turn to the situation on the Tote. I make no criticism of the current Minister, who was not in his job at the time of the recent legislation. His predecessor, the right hon. Member for Sheffield, Central (Mr. Caborn), has unfortunately left his seat, but I make no criticism of him either. When the Gambling Bill was being passed, an unusual aspect of it was that it did not include any stated purpose on the Tote. One purpose of the Bill was to transfer the Tote to a racing trust, and a shadow trust was set up which was chaired by Lord Lipsey, so the intention to transfer existed. Amazingly, however, that purpose was not stated in the Bill. Notwithstanding that, the Bill mentioned nationalisation, because the Government did not own the Tote so, before they could transfer it, they had to deal with the ownership position. However, the Bill did not deal with transfer to the trust. A number of us pointed out at the time that that was potentially difficult, and that has proved correct.

My hon. Friend the Member for East Devon is right that the figure for the transfer discussed at the time was £50 million. I argued that that was too much, because the Government did not own the Tote and no Government had put any money into it. The taxpayer was not owed anything, so I did not see why the Government should take any money out of the Tote—or rather, not out of the Tote but out of racing, as there was nowhere else for it to come from. We now find that the transfer figure is something like £400 million. If £50 million was unjust, £400 million is obscene. My speech is not party political, but the Government need to provide some answers on that.

At the time of the Bill’s passage, our friends in Europe got involved yet again. The same old European Union said, “No, you cannot transfer it for that amount of money”—whatever figure applied at the time—“because that would be state aid.” I really cannot see why that should be the case. How many civil servants did the Government employ? Did none of them see that coming when the 2005 Act was being drafted? I shall be kind and not blame the Government, but I think that Parliament has failed the Tote.

I believe also, however, that the increasing strength of the Treasury over the last 10 years has played its part in this. Yes, we can blame Europe—if there is an opportunity to blame Europe, I shall be there—but the man who was Chancellor for 10 years was so strong and powerful that he became Prime Minister, as we all know, and now £400 million is being quoted. No Government would willingly throw that away.

The hon. Gentleman keeps talking about the sums of money, but has not yet addressed—I hope that he will in a second—where that money will go. He will recall that although it is not mentioned in the Gambling Act 2005, the then Minister, the right hon. Member for Sheffield, Central (Mr. Caborn), gave a clear undertaking in Committee that a 50:50 split would enable 50 per cent. of the sale to go back into racing. Does he share the view that it would be very helpful if the Minister could confirm that on the record today?

Yes, I hope that the Minister will confirm that. However, I am still concerned about the £400 million. Although the hon. Gentleman makes a very good point, my speech is more concerned with what will happen to the Tote. However, he is right and makes a very important point.

As I understand it, the consortium being put together is not coming up with the money that the Government—either because the Treasury needs it or because the European Union would object if it was any less—require. If that is the case, will the Minister give the Tote time for reflection? I am well aware that it has been years since the then Home Secretary, now Secretary of State for Justice and Lord Chancellor, came to the Tote annual general meeting and pledged that it would be handed over to the Racing Trust. I am not asking the Minister to delay it for a few more years—far from it! However, if we have gone so long and so far down the road, can the Tote not be given perhaps just two or three months in which to reflect on the situation and perhaps consider other options? I say that for this reason: the Tote was set up in 1927 in order to benefit racing. I fear that if it is put on sale on the open market, it might cease to exist. That is unthinkable. Would the Cheltenham gold cup still exist? Would the Tote’s financial contribution to racing still exist? That goes for many other things, too.

We have talked about the financing of racing and we recognise the pressures. The last thing that we need is for the amount that the Tote puts into racing to disappear simply because Parliament has botched the sale. If an agreement cannot be reached during the current negotiations, will the Minister please allow a period of reflection, so that we can look at what is going on, have discussions and decide on the way forward? Given that it has taken years to get to this point, I do not think that another three months or so is asking too much.

The hon. Member for Livingston (Mr. Devine) talked at length about the pitch dispute. I do not want to get into that too much, other than to say that racing does not need yet another dispute, and I hope that it can be resolved. However, I must say that it cannot be a case of dead man’s shoes—we must move on from that. I have every sympathy for the bookmakers who felt that they had bought the right to a pitch, but legally I do not think that they had. We must move forward commercially. I hope, however, that that can be done sensitively and with some recognition that people felt that they had bought a right to a living. However, the jobs for life, the dead man’s shoes and the seniority that existed in the past are from a bygone age, and we must move on.

I thank you for your time, Mr. Atkinson. I apologise for having gone on for perhaps a little too long, but I think that there are some very important points to be discussed. However, I shall finish by echoing the words of my hon. Friend the Member for East Devon: racing is a fantastic sport and an absolutely wonderful spectacle. And long may it continue to be so.

I congratulate the hon. Member for East Devon (Mr. Swire) on securing this very important debate. I agree with him that Turf TV has immense implications throughout the industry. I would like to return, however, to the matter mentioned by my hon. Friend the Member for Livingston (Mr. Devine) although his exposition of the problems of pitch bookmakers was so full that there is very little that I can add. However, I feel that I must add my weight to his cause, particularly in the interests of constituents of mine such as the Morrill family and Adrian Pariser.

Surely the current situation that many in the trackside betting industry find themselves in was never intended when the Gambling Act 2005 was first proposed, and it is important to look at the specific matter of trackside list positions and their future allocation. Obviously, the gambling industry as a whole has undergone immense change over the past few years. I disagree with the hon. Member for Tewkesbury (Mr. Robertson) because I think that it is completely different from the inherited system that has damaged the livelihoods of constituents of mine and of the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) who has done so much to highlight the problems in recent years.

Throughout the many changes, however, the horse racing industry has shown a willingness to reform. Outmoded practices, such as the notion of an inherited seniority being handed down from parent to child have now given way to the trading of assets in a free and open market. The opening of trade in pick-list positions has led to much-needed fresh blood and new investment in the racing industry, but that fresh blood itself is feeling let down and abandoned by the industry, because those people are now being told that the pick positions, in which they invested so much money, are no longer theirs. Most in the industry would agree that changes made in recent years to modernise it have been of immense benefit to all parties concerned, until now perhaps.

The RCA will continue to argue, of course, that because it owns the physical asset, it is up to it to determine, by whatever means it sees fit, who trades there. However, we must say also that the pick position is merely the order in which a bookmaker can choose their position of trade on the race course, and not an actual physical pitch position. That distinction is obviously important to the RCA, but I suggest that the argument is deliberately two-dimensional in its thinking. An asset does not need to be physical. For example, a CD manufacturer does not own the music that it presses on to plastic. Already, we have agreed on, and spent many hours debating in this place, the concept of intellectual property. I argue also that there is such a thing as moral property, which is what the bookmaker owns.

The RCA clearly recognises the accrued value of a bookmaker’s position on a pick-list, otherwise why would it be attempting to wrestle the control of the pick-list away from the bookmakers? Although it has always been acknowledged, ever since the 2001 gambling review report, that negotiations would take place on admissions charges for bookmakers to race courses, as my hon. Friend the Member for Livingston has mentioned, the tenure of list positions was never in question until March this year, despite numerous—88—meetings on the subject. It has always been understood by the buyer, seller and administrator that list positions were to be held in perpetuity.

The decision of the RCA to lay claim to the commercial benefits to be gained by the auction of valuable pitch positions has, as we have heard, stunned the National Joint Pitch Council, which set it up in the first place. It is quite disingenuous for the RCA to argue back in 2001, and then in 2003, that the Government advocated a change in the arrangement for pitch allocations and a move to commercial arrangements. It is a short-term smash and grab. I believe that the Government had no such intention, and that that is an interpretation of the 2005 Act, which serves only to increase the commercial gain of the RCA, at the expense of the very people and businesses without which there would be no trackside betting industry—in other words, the very people and business that, together with the trainers and jockeys, give the entire industry its flavour and value.

Indeed, the Government’s recommendations went only as far as a change to the five-time rule. That refers to the rent of the pitch, not to the asset itself—the moral property. There is no reason why commercial arrangements by the RCA about the rent cannot take place while recognising the bookmakers’ list positions, as it has always done. The RCA, again disingenuously, is attempting to use the umbrella term “commercial arrangements” to refer to both the rent and the assets, when, in fact, they are, always have been, and should remain entirely distinct and separate.

We are talking essentially about the livelihoods of hundreds of people in our gaming sector, but particularly about the family bookmakers, as we heard during the Select Committee on Culture, Media and Sport sittings, which many Members present attended. The family bookmakers have spent generations in the industry, and my constituents who trade under the name, Taffy, have been hit by a triple whammy: first, over the father-child rule, secondly over pitch allocations and sales, about which I cannot go into detail because of actions taken by the right hon. Member for Chingford and Woodford Green, and finally, over losing the last thing that they possess—their pitch position. The family have been hit three times within one generation, but the measure will affect small rather than large bookmakers. Large bookmakers will also be damaged, but they have large assets, and we are discussing small, family firms.

Trackside bookmakers are asking for nothing more than clarity about the assets that they have accrued either through generations of hard work or by commercial acquisition. Let us not forget that some bookmakers in the south-east have spent more than £1 million buying something that they believed they would hold in perpetuity. We want those assets to continue to be recognised as the industry standard, as all concerned have always understood them to be—that is until suddenly last March when the bombshell was dropped on the bookmakers.

For the RCA to use the period of transition between the passing of the Gambling Act 2005 and its implementation as a means to wrest control of the assets of hundreds of trackside bookmakers is a blatant misinterpretation of the Act as it was intended. We have it in our power to set out in clear guidelines for both the RCA and the bookmakers precisely which areas are open to reform under the new legislation, and which areas are not. We, as legislators, have a responsibility to take any misinterpretation of legislation on board and clarify it, not leave it entirely up to the industry. Until the guidance is made clear, the trackside betting industry will remain at an effective standstill. Until we clearly define the parameters of the 2005 Act, many in the industry will not know whether their most important commercial asset, which involves the future of their children and their business, is to be rendered entirely worthless. The situation is entirely unacceptable.

I agree wholeheartedly with the hon. Lady. As somebody who sits on the Culture, Media and Sport Committee, I recognise the position that she outlines, but if the RCA decides to press on and the Government will not intervene, does she at least agree that the bookmakers concerned should be compensated for the loss of their assets? If she agrees, does she think that the compensation should come from the race courses or from the Government?

I agree that should the RCA continue in that way—and I sincerely hope that it will not because it is not a moral route—it should compensate the bookmakers to an amount equivalent not to their current value, but to their value before the bombshell was dropped on them.

I am mindful of what my hon. Friend the Member for Shipley (Philip Davies) says, but the money for the pitches never went to the race courses in the first place; it went up and down families, or they bought from friends or associates. The National Joint Pitch Council is more responsible than the race courses, is it not?

I am going into the details not about responsibility, but about what the RCA plans to do. We must look to the future rather than to the past. However, the RCA is taking the assets. Whatever the responsibility in the past, the RCA will benefit; it is taking a commercial property away from families who have owned it for generations. Therefore, the RCA is entirely responsible. We should all do everything in our power to ensure that the commercial trading of pick-list positions remains where it has always been—not taken in a short-term smash-and-grab raid. It should stay in the hands of the bookmakers themselves.

rose—

rose—

Order. Two Members wish to catch my eye, and I propose to call the winding-up speeches at half-past 10. Will they bear that in mind?

Thank you, Mr. Atkinson, I shall therefore be brief. I shall reflect on the state of the Tote, but first perhaps I should declare an interest. My wife was a working member of the Tote at its headquarters in Wigan, so I had a peculiar insight into the process.

It is time that the Government brought forward their plans for the Tote, because they opened up the process. My colleagues on the Culture, Media and Sport Committee and I have, over the past two years, consistently asked for an update, but we have consistently received the reply, “It’s all right, it’s just about to happen. Don’t you worry,” mainly from the Minister’s predecessor, the right hon. Member for Sheffield, Central (Mr. Caborn)—almost like a bad joke during an after-dinner speech. The replies have continued, but nothing else has.

I remember that way back there was support for the sale of the Tote because of the Government’s assurance that it would be given to racing. However, while we are in a position of paralysis, it is important to consider the advice in 1996 given by the Home Office, when it was under my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), when it reflected on the problems that any change in the Tote’s status would produce. The first point was that the Tote was not large enough for public flotation, and it would be exposed to competitors that would pull it apart. We know that that is still a real fear. Sale by competitive tender, the advice continued, could not be ruled out, but would raise difficulties because of the need to guarantee that the Tote continued to support racing to the extent it had hitherto, which is exactly the case today.

Finally, the advice stated that the option of vesting in a racing body would require examination of whether the grant of an exclusive licence to operate pool betting on horse racing would be appropriate, and that such a licence would have to ensure that the Tote’s profits were applied in the best interests of racing and with the minimum disruption to the Tote and race courses. However, that raised difficult competition issues. If we had only listened 11 years ago to that advice, we would not be in this position.

Anyone who has ever gone to the European Commission or to many other European Union organisations will have had a working relationship with the directorate-general for competition. In my previous job, I had to have a working relationship with that directorate-general, with the Commission and with UKRep—the United Kingdom Permanent Representation to the European Union—which is of course there to battle for Whitehall’s interest in such cases.

Oh, yes.

Exactly.

It is clear that the team from the Department for Culture, Media and Sport, which the Government put to task in UKRep, was wholly inadequate. The Treasury team has competition expertise; the DCMS team in UKRep was worse than amateur. That is the situation today. Even my wife, who is much brighter and more qualified than me, pointed that out to a board director and to the former Minister, but she was told, “Don’t worry your pretty little head.” I can remember that, and I am sure that the ex-Minister is now worrying his pretty little head.

We must analyse the utter incompetence that has delivered such uncertainty to the marketplace. What will happen to all those workers in Wigan, to the future contributions of the Tote and to that excellent body itself? As a Conservative, I believe that if it ain’t broke, don’t fix it, but we are in a wholly self-created mess with the Tote, and we should not forget the relevant manifesto commitment.

Where do we go now? Looking back at the options that have been on the table, I believe that Viscount Astor’s proposals in 1999, or slightly later, could certainly give us one way out by mimicking a national lottery-style licensing of the operation. We must consider whether to take up that idea or retain the status quo. However, it is time for the Government to produce answers on the Tote.

I congratulate the hon. Member for East Devon (Mr. Swire) on securing the debate, and all right hon. and hon. Members who have contributed to what has been a stimulating discussion. I also join many of those who paid tribute to Tristram Ricketts. He will be sadly missed by racing. Were he with us today, he would remind us how important racing is to the economy, that almost 20,000 people are employed directly by it and that if we take all the satellite industries, including betting, into account, the figure rises to almost 100,000 people. He would also, no doubt, remind us of the study by Deloitte last year, which demonstrated that its contribution to the economy overall is nearly £3 billion, and of the nearly £300 million that is paid annually in taxation into the Treasury’s coffers. More importantly, he would point out how popular racing is with the people of this country. It is the second most popular sport to football, with some 6 million people attending race courses last year alone. Of course, he would remind us that we are the envy of the world because we undoubtedly have the best racing. Eight of the 12 top races are held in this country and even today the nation stops for some of those races—for example, the grand national.

Racing is critical. However, we are talking about the future and, in that respect, it is important to recognise that we have a new regulatory body. I am delighted by the work that has been done in such a short time by the British Horseracing Authority, which is working on some innovative ideas for the timetabling of racing that will be of enormous benefit to the betting industry: if there are more races, there is more opportunity for it to make profits. That should be borne in mind in some of our future debates.

The BHA has also been building on work that has been done, including work to improve the security and integrity of the sport. We should not forget the huge costs borne by the racing industry in terms of guaranteeing the integrity of racing. Some £24 million a year is spent in that particular endeavour. However, many other activities are engaged in, including—importantly, but so far not referred to—education and training and the welfare of jockeys, as the hon. Member for Hove (Ms Barlow) mentioned.

We have to bear in mind that racing has huge costs, and it is important to take that into account when considering issues such as the levy or the future of the Tote. If we want a bright future for a sport that is already successful, we have to ensure that it has the resources coming into it to enable it to develop and grow and to deal with issues including securing the integrity of the sport and increasing prize money, as well as other things that hon. Members mentioned. That is why I am disappointed that the proposal to roll the levy forward for another 12 months—to give another opportunity for debate about streamlining and modernisation to take place—has not been possible and that the bookmakers have forced it to determination.

We are now in a situation whereby the Secretary of State, for the first time since the 41st scheme back in 2002-03, has to decide how to proceed. I urge him and the Minister to make that determination as quickly as possible. The current scheme runs out on 31 March 2008. Everybody knows that in planning the future of a significant business, time is needed to get the financial planning right. An early determination, enabling us to know what sum is coming in through the levy, is crucial. It is critical that we get a quick determination by the Secretary of State.

Does the hon. Gentleman agree that a reduction in the levy would hit Scotland disproportionately hard? Most of the horses are trained in the south of England, which involves transport costs to Scotland, particularly to the race course in Perth in my constituency which is the most northerly in the UK. If there is a reduction levy, there will be a reduction in prize money, which might be a massive disincentive for horse trainers and owners to come to race courses like the one in Perth.

The hon. Gentleman makes a valuable point that I was not aware of. I am grateful to him for drawing it to my attention. No doubt, had he had more time, he would have said how wonderful the race courses in his constituency are, as other right hon. and hon. Members have done. I put on the record how wonderful Bath race course is, lest that be forgotten.

The hon. Gentleman is right. That is why my second plea to the Minister, in respect of his advising the Secretary of State on the determination, is that something is done to ensure that we have a fair settlement. The Minister will be well aware that a determination under the 41st scheme suggested a figure of somewhere between £90 million and £110 million coming in. If that were rolled forward in respect of inflation alone, it would be brought up to some £130 million, which is what is needed.

I hope that the Minister will not listen to the siren voices talking about the woes befalling the betting industry because of the row between Satellite Information Services and Turf TV. As the hon. Member for East Devon so rightly said, that is a separate commercial argument that must be sorted out on that basis and should not, in any way, influence the Secretary of State’s decision. Like many others, I am enormously worried that the legal battles going on between those two companies could end up costing some £5 million, which will be taken away from racing. That is to be regretted.

In making the determination, I hope that the Minister will look carefully at betting exchanges—a new phenomenon—which are not making a fair contribution to racing because of how they are taxed under the current regime. The most important thing of all is time. A quick determination is critical.

The money issue also raises the problem with the Tote. A quick determination on that is equally important. I hear what the hon. Member for Tewkesbury (Mr. Robertson) says about the need for a bit more time—he suggests three months—but if there is very much more time, there is unlikely to be a Tote worth selling, because a large number of people are now leaving it, it is having difficulty recruiting new people and some of its senior staff are leaving. It is critical that there is a relatively quick outcome. I accept his point about getting the deal right, but it must be done fairly quickly.

The matter needs deciding pretty quickly. My point is that if the Tote is sold on the open market, the jobs that hon. Members have mentioned, including some 500 jobs in Wigan, could all go. All I am saying is that we need a three-month period just for reflection.

If the Tote goes to the open market and one of the major firms buys it, the hon. Gentleman is right: there could be a huge loss of jobs, particularly in the north. I hope that a deal can be found under which it is sold as was originally intended—he and I served on the Committee dealing with the Horserace Betting and Olympic Lottery Bill—and goes to a racing consortium so that it is kept within racing. That is what we were promised and what we understood we were signing up to. As I mentioned in an intervention, if it is at all possible I want the Minister to give a commitment that at least 50 per cent. of money from the sale of the Tote will go into racing.

On the list pitches, I agree with the contributions of the hon. Members for Livingston (Mr. Devine) and for Hove. Everybody to whom I have talked is convinced that that was a separate issue, with the rent on one hand and the asset on the other. There was no understanding that the asset was being given up or that the five times rule was going, with people saying, “Yes, that was understood. It’s time to prepare for it.” There was no understanding that the asset was going. I welcome the Minister’s trying to knock heads together to find a solution. I know that the Culture, Media and Sport Committee is also considering this issue. I hope that he can give us some information as to what progress is being made. It is critical that we get a solution to that dilemma as well.

Racing is critically important to this country. It is loved by millions and it has a bright future. However, a number of vital issues have to be resolved. The Minister has got a big job on his plate, because a lot of the decisions fall to him. I wish him the best of luck, but I hope that he will take racing’s interests into serious consideration in making his determination.

It is a pleasure to follow the hon. Member for Bath (Mr. Foster), who, as always, spoke with expertise on the matter. I congratulate my hon. Friend the Member for East Devon (Mr. Swire) on securing this timely debate, which has been interesting and stimulating. I join him in paying tribute to Sir Tristram Ricketts, who played such an active role over four decades in the very subject that we are talking about.

My hon. Friend summed up with clarity the challenges facing the industry. I am grateful for the deluge of material that many of the organisations and parties whose representatives are sitting at the back of the room have sent my way in the past few days. Of course, it is not I who is in a position to resolve the issues but the Government, who have not gained a reputation for decisive action. I am reminded of Shakespeare’s famous horse quotation from “Richard III”, of which everyone will be aware. At the battle of Bosworth, Richard III wants to continue the battle and is willing to trade his kingdom for a horse. In contrast, today we have a Minister who wants to avoid the battle completely and runs away from anything to do with horses. The consequences of that have allowed the British horse racing industry to enter a protracted period of confusion. I am, of course, being entirely disingenuous to the current Minister, who has worked hard to get on top of his brief and been approachable and friendly, but it is his watch now and he needs to make amends for the errors of his predecessors.

The Tote has been with us in one form or another since 1928, when it was the Horserace Totaliser Board, to give it its full name. It operates as a bookmaker and offers pool betting on horses. It has been the Government’s intention to sell the Tote for some time; we first got a inkling that it might happen way back in May 1999. It was an election pledge in June 2001 and in May 2005, and I am sure that it would have been an election pledge in November 2007 had we had an election. I wonder what the odds are against its appearing again in a manifesto in June 2009 or whenever the election is.

There have been more than seven years of briefing versus counter-briefing, bids agreed then scuppered, prices confirmed then rebuffed, and Government announcements and then retractions. As we have heard, the Opposition fully support the sale of the Tote, but in a timely fashion, as reiterated by my hon. Friend the Member for Lancaster and Wyre (Mr. Wallace). I asked the Minister in a parliamentary question only two months ago whether the Tote would be sold in the next three months. His reply was that the Government were in advanced stages of discussions. Two months on, will he update us? What are those advanced stages, what value is the Tote now set at, who is leading the consortium to buy it and how much of the money will go back into racing? I understand that Lord Davies of Oldham said in the other place in July that the cost of trying to sort out the sale of the Tote had already climbed to £2 million. Will the Minister confirm exactly what the cost to the taxpayer is? I am sure that it is in our interests to find out.

The horse racing levy is the agreed annual amount paid by bookmakers to race courses, and it goes towards such things as prize money, the grass roots of the sport, veterinary skills and so forth. It is valued between £85 million and £90 million. As was stated in Lord Donoughue’s study for the Department for Culture, Media and Sport, which has been referred to several times, all sides agree that the levy should eventually be phased out and replaced with a commercial alternative. Unfortunately, by the deadline of 31 October, racing and the bookmakers had failed to reach an agreement on the 2008-09 levy, meaning that determination now falls to the Secretary of State.

The sticking point, as we have heard, is commercial television rights. Traditionally, horse race footage has been beamed into betting shops by SIS, which is predominantly owned by a number of the large bookmakers, including William Hill and Ladbrokes. Turf TV, a new race course broadcaster, has been established and signed up to by about half the race courses. That means that bookmakers must now have two contracts, with SIS and with Turf TV, if they are to show the full complement of racing on offer in the UK.

The two sides of the argument have been well rehearsed: one either supports the levy and says that it should be reduced to compensate for the funds earned by Turf TV, or says that it should remain and that broadcasting rights are separate from any discussions about the levy itself. Sadly, Lord Donoughue could not find a solution, but it was established that all parties agreed to the long-term aim of abolishing the levy and replacing it with a commercial alternative. I was pleased to hear from the British Horseracing Authority in meetings yesterday that it agreed to a wider modernisation review of the levy.

My hon. Friend the Member for Tewkesbury (Mr. Robertson) reiterated the points about the duplication of costs. Does the Minister agree that, with a long-term commercial solution required, running two broadcasting systems needs to be reviewed if funding to support the racing industry is to be maximised while bookmakers are offered an attractive deal? Alternatively, does he believe that horse racing can receive the critical financial support that it needs with the broadcasting monopoly broken up? I look forward to his response, as I understand that he is already starting talks with an independent organisation to mediate between the groups. What are his views on the short-term requirement to sort out the levy for this year and the long-term challenge of resolving and removing it?

The final act in the Government’s three-ring circus of equine confusion, if I may call it that, is the issue of bookmakers’ course pitches at race meetings. For many years, bookmakers had assumed that their pitches on race courses were theirs to use or sell on. Their value hinged on the so-called list system, reflecting the greater choice of pitches for people higher up the list. Location is critical, as it is linked directly to the amount of revenue that a bookmaker might receive. Charges to bookmakers were limited to five times the entry fee of the course, which changed in 2003 following a position paper from the Department. The change modernised the charges but there was no agreement on changes to list positions, which had been traded for some value for many years. Along came the Gambling Act 2005, which removed the responsibility for track betting licences from the Horserace Betting Levy Board and gave it to local authorities, with no longer any mention of list positions. That was the fundamental flaw in the 2005 Act.

The Racecourse Association was quick to announce that, by 2012, bookmakers’ list positions would no longer be recognised. There seems to be no official documentation showing that pitch ownership was ever to be in perpetuity, but conversely I understand that there is also no official documentation showing that it was not. That is a complete legislative nightmare. How on earth did we get there? It certainly seems that the sport of kings is being managed by a Ministry of court jesters.

What action is the Minister taking, and what time scale is he adopting? What parties and intermediaries are being involved? Does he believe, for example, that race courses should take a small percentage of bookmakers’ profits provided that there is a fairer charge, linked to earnings, so relinquishing the need to interfere with the list? Will he be using section 151(2) of the 2005 Act, which allows the Secretary of State directly to influence the form and contents of premises licences?

We have heard a number of eloquent speeches, and everyone has joined in supporting the industry. We can rightly be proud of horse racing in the UK, and certainly of its role in the economy. It is a multi-billion pound industry with more than 9,000 races a year, including eight of the top, world-class races. However, that position is not guaranteed. We need better co-operation within the industry and stronger leadership from the Government. I hope that the Minister will not duck his responsibility to help to resolve the concerns that we have debated, which affect the horse racing industry.

It is a pleasure to serve under your chairmanship, Mr. Atkinson. We were formerly two Whips together and worked closely in the dark arts of the Whips Office.

I welcome this important debate, secured by the hon. Member for East Devon (Mr. Swire). I add my support to his views on Sir Tristram Ricketts. Today is a sad day, as racing has lost somebody who had such a sharp mind. I met him on only a couple of occasions, but he had a great love for racing and wanted to ensure that it succeeded. He will be sadly missed and I pass on my condolences to his family.

The debate and the spirit in which hon. Members have contributed to it have been important. I was particularly pleased by the contributions by my hon. Friends the Members for Livingston (Mr. Devine) and for Hove (Ms Barlow), and by the hon. Members for Tewkesbury (Mr. Robertson) and for Lancaster and Wyre (Mr. Wallace). We need to consider how we can move forward together. We heard some thoughtful comments about the impact on racing and its future.

Like the hon. Member for Bath (Mr. Foster), we should start by celebrating horse racing and its impact on the economy. Horse racing is healthy and buoyant, and is second only to football in British sport in terms of attendance at fixtures and revenue earned. Total race course attendance in 2006 was just under 6 million, the total having been on a significant upward trend since 2000, when 5.1 million people went racing. The current figures are the highest since the 1960s. The appeal of racing is universal: it appeals to people of all ages, backgrounds and socio-economic groups.

Not only do more people attend racing; many more people watch it on TV. The average TV audience for racing is 1.3 million for BBC 1 and 774,000 for BBC 2. Some 9.5 million people watched the grand national, and the 2007 Derby attracted 3 million viewers. In 2006, 197 meetings were broadcast terrestrially—151 on Channel 4 and 46 on the BBC. Channel 4 has the successful “The Morning Line” programme that attracts an average audience of 658,000 to racing, and has an hour-long programme dedicated to racing. At The Races is available in more than 9 million homes, and Racing UK, which is owned by 31 leading British race courses, has around 50,000 subscribers.

The economic facts speak for themselves. The racing and racehorse breeding industries are together directly responsibly for 18,800 full-time equivalent jobs. As the hon. Gentleman said, a report by Deloitte in 2006 found that racing employs more people than any other sport in Britain. Taking into account the secondary employment in the betting industry that he mentioned—it is impossible to imagine racing thriving without on-course bookmaking—the figure rises to 88,000.

Racing on Britain’s 59 racecourses—with a 60th soon to open in Essex—generates some £300 million in tax revenues for the Government each year, and has an overall economic impact of £2.86 billion. Total prize money reached a record of £104.1 million in 2006, compared with £71.7 million in 2000. There are about 9,500 active racehorse owners, and 50,000 people are involved in racehorse ownership through various types of co-ownership. About 14,500 horses are in training, and 1,415 fixtures have been programmed in the current year, with over 9,000 races.

As for betting, £10 billion is bet off-course on horse racing every year, most of it in the 8,500 licensed betting offices in Britain, with a further £120 million bet on-course through the Tote. Bookmakers’ profits on British racing alone are more than £1 billion a year, and the levy board received some £98 million from off-course bookmakers and the Tote in 2006-07. Those figures show not only that racing is a deeply engrained pastime and part of our national sporting life, but that it makes a strong and growing contribution to the economy of the country, including in some of the more deprived areas that we have heard about.

I know that the welfare of racehorses has been of concern to many people over the years. The Animal Welfare Act 2006 came into force earlier this year, and we believe that it is a significant step forward, as there is now a positive duty on owners and keepers of animals to promote welfare. I was sad to see that two horses were killed at Cheltenham at the weekend, and I send my condolences to all those involved.

We have the 2006 Act in place, and we have a particular position on racing. It is not the case, as the hon. Member for Bournemouth, East (Mr. Ellwood) said, that the Government want to abdicate their responsibilities. I do not think that I have avoided any battles; in fact, I got involved in a few battles very quickly in my role as the Sports Minister.

On the specific issues, the chairman of the Horserace Betting Levy Board has, to our regret, again asked my right hon. Friend the Secretary of State to determine the level of the annual horse race betting levy.

I thank my hon. Friend for giving way and for meeting me during the summer recess, when he expressed a hope, and perhaps even an expectation, that the industry would be able to manage its own affairs. Sadly, that has not proved to be the case. He knows that although the Ayr racecourse has thrived in recent years, the investment would definitely be put at risk if the levy were reduced in any way. Does he agree with the levy board chairman, Mr. Hughes, who said:

“I don’t think you can mix statutory payments with commercial elements, particularly where they may be seen to involve inducements”?

Does he agree that any matters relating to Turf TV are separate from the negotiations on the levy?

I understand and share many of my hon. Friend’s concerns. Let me set out the Government’s position. We do not want to pre-judge what the determination will be, but we hope to announce it early in the new year to meet the requests of hon. Members. The levy has only just gone to determination, and we have not yet appointed consultants to assist the Secretary of State in his deliberations. However, my predecessor and my officials have followed the levy board’s discussions closely and we are fully aware of the importance of having fair and timely outcomes for the racing industry.

I confirm that, in line with the recommendations of the future funding of racing review group, which my noble Friend Lord Donoughue chaired in 2005, we still plan to review the workings of the levy scheme to see whether there is any way in which the machinery can be streamlined and simplified. I hope that the levy board will share the burden of that work with my Department. Obviously, that review can happen only when the 47th levy is determined. As my predecessor, my right hon. Friend the Member for Sheffield, Central (Mr. Caborn), told the House late last year, we have no plans to abolish the levy until a viable commercial alternative emerges.

I share the opinions of many hon. Members in the Chamber today about the importance of the levy to race courses such as mine in Great Yarmouth. The betting industry provides up to £130 million of investment through the levy and other things, and there is sponsorship on top of that. Has there been any indication from the industry that it wants to reduce that amount, or is it prepared to keep the money as it is?

Again, that will be determined during the discussions on the determination. I do not want to get drawn into those arguments today. We will make the determination, we will consider everything that has been put to us, and we will try to work in the best interests of racing.

The determination will take place and we will look at the future of the levy system, as we have outlined. I agree with the hon. Member for Tewkesbury that it is important that racing looks to its future as well. Clearly, there are many sides that contribute to racing, and we have to ensure that they look to the future, too. I want the Government to remove themselves from the detail, although we will carry out our responsibilities.

Time is against us, so I want to concentrate on some of the major issues. On the sale of the Tote, I accept that there have been difficulties, including those in relation to the 500 jobs in Wigan. We must ensure that we do this properly. We have been chided about the role of Europe, but Europe played a big part in preventing the sale from taking place. We want to sell to racing, but we are considering the offer that has been made, and we need to make a quick decision. We must ensure that we go through the due process and look at the detail of all the bids. I can give the assurance that the hon. Member for Bath was looking for regarding what will happen if we do not sell the Tote to racing and it goes on the open market. The agreement was that 50 per cent. would go to the horse racing industry, and I am happy to put that on the record.

If it is not possible to sell the Tote to racing—it is almost certain that any sale will be challenged in the European Court—does not the hon. Member for Lancaster and Wyre (Mr. Wallace) have a point when he says if it ain’t broke, don’t fix it? Will the Government consider leaving it exactly as it is or having a licensing system like the lottery? There was no manifesto commitment to sell the Tote on the open market.

That is an important point. First, let us make the determination. We need to do that quickly for the reasons that have been outlined. Again, I agree with the hon. Member for Tewkesbury: we ought to look at the options that are available to us if that is not successful. I am happy to give the commitment that we will do that.

The Select Committee is looking into pitch tenure. I want to resolve the matter. We have set up a working group with an independent chair. We want to ensure that all sides of the argument, including the race courses and bookmakers, benefit from such a group. It is important to do that rather than going to law. People in racing tend to go to law very quickly, whether it be Turf TV or because of pitch tenure, which incurs huge cost. However, that money could go into racing, and we want to ensure that it is spent wisely for the future of racing.

Hon. Members raised a number of points that I cannot respond to in the time left. However, I will put in writing to those who have attended the debate the details on the questions that were asked. I urge that there are more debates on horse racing, that we look with interest at the work of the all-party group on horse racing and that we try to meet the challenges together. I accept that politics sometimes comes into play, but I hope that that will not prevent us from working together for racing’s benefit.

I am grateful for the opportunity to open this debate on customs and security at Welsh ports. I am not sure whether the Minister will regard it as a respite or yet another irritation amid the maelstrom of bad news that has descended on her Department in the past 24 hours, but I hope that it will be a useful opportunity to engage with her on an important and pressing matter. I am grateful that she is here and that she has agreed to wind up the debate by about 25 minutes past 11 to enable me to get to the Chamber, where I have the first question on today’s Order Paper.

I shall try to save some time to allow the hon. Member for Ynys Môn (Albert Owen) to say a few words about the situation in north Wales. Like me, he is a strong friend of his local ports and enjoys good working relationships with the port management. He, too, would like to raise some concerns this morning.

This is a timely debate, given the wider discussion on national security and the integrity of our borders in the context of the challenges posed by terrorism, organised crime and illegal immigration. There is a specifically Welsh dimension to the problem as the ports of Wales together form an important entry point into the UK. Perhaps they do not have the same significance as the ports of south-east England in terms of overall passenger numbers and freight volumes, but if ports such as Dover, Folkestone, Felixstowe and Harwich and the airports at Heathrow, Gatwick and Stansted are the front door to the UK, the ports of Wales are the back door. They need securing and protecting as well, and that is what this debate is about.

My county of Pembrokeshire in west Wales is home to two major ferry routes to Ireland from Fishguard and Pembroke Dock, both of which carry thousands of passenger and commercial vehicles each week. The port of Milford Haven in my constituency is also one of the UK’s major energy ports. It has two large oil refineries and one of Europe’s largest fuel storage depots, and next year two large liquefied natural gas import terminals will come on stream. Further afield in Wales, the ports of Holyhead in north Wales and Swansea in the south, with their major links to Ireland, are also very important. The ferry ports of Wales together account for around 15 per cent. of the entire volume of ferry traffic arriving in the UK every year.

If terrorism, trafficking in narcotics and persons, and illegal immigration form the strategic context for this debate, the deep and severe cuts in customs cover that have taken place at Welsh ports in recent years form the operational context, and the move to an intelligence-led, risk-based system of deployment is the policy backdrop. Overarching all that is a question of resources that simply cannot be ignored.

Since 2003, the number of front-line uniformed customs officers in south Wales has been reduced by nearly 75 per cent. That strategy, which was embodied in the law enforcement business plan, included the complete withdrawal of permanent customs cover from the ports of Swansea, Newport and Pembroke in 2003. Those customs officers were responsible for the major docks, ferry ports and airfields across the region. I understand that an operational team covering north Wales, which was based in Chester, was also removed. Its role was to be taken over by two small teams based in Cardiff and Holyhead, which were to be supplemented by mobile teams that could be deployed anywhere in Wales or the wider customs region on an intelligence-led basis. In reality, the brigade teams have relentlessly focused on the midlands and the south-east at the expense of Wales.

Does the hon. Gentleman agree that public perception is very important, and that the notion of a roving team of Customs and Excise officials based in the midlands that comes periodically—very periodically—to Wales is no substitute for permanent staff in inspiring confidence in the Customs and Excise service?

The hon. Gentleman raises an important point about perceptions and the need for people in Wales to feel that they are being adequately covered, but the matter is even more important than that. It is about operational effectiveness, and I want to get to the heart of that in the next few minutes.

I have been told that no checks whatsoever are now carried out on commercial traffic through Pembroke Dock, which is a major Welsh port and a main route for Irish and European traffic wishing to avoid the long journey through France. The chances of non-commercial traffic being stopped have become exceptionally slight. Overall, there has been a 50 per cent. reduction in permanent customs cover for Wales. The withdrawal also means that there is now practically no permanent front-line uniformed coverage from Cardiff to Holyhead—some 500 miles of coastline.

It is not scaremongering or an exaggeration to say that that approach to detection and enforcement at ports of entry is creating a situation whereby Welsh ports risk becoming a soft touch for those who would seek to use them for the illegal movement of freight and persons. In his report last year on the review of counter-terrorism legislation, Lord Carlile said that

“in my view their intelligence-led ‘brigading’ system of deployment leaves some potentially vulnerable ports of entry without Customs officers at times. Probably they simply do not have enough officers to provide the sort of cover that could be regarded as best practice.”

He also warned that customs officers are so thin on the ground that they are “no discouragement to terrorists”.

I am grateful to the hon. Gentleman for giving way on that important point. Lord Carlile visited the port of Holyhead in my constituency and spoke to the port authority there. He was happy with the overall security measures, because although there has been a reduction in the number of customs officers on the front line—most of them went when the area became a common travel area—the numbers of police officers and port security officers employed by the port authority have gone up. When Lord Carlile went to Holyhead, he assessed the whole security issue and not just Customs and Excise.

That is an important intervention. The hon. Gentleman is absolutely right that we should not see customs cover as ultimately separate from the wider security arrangements. If Lord Carlisle made that judgment about Holyhead, I am very pleased, but the police and customs officers to whom I spoke said that there was significant concern about ports across Wales generally and the weakness of customs cover at them.

What are the practical consequences of this state of affairs? First, at the same time that customs cover has been eroded, there has been a fall in the overall volume of drugs seized by customs. There is no evidence to suggest that the decline in seizures is because of a decline in the overall trade. The success of the Serious Organised Crime Agency last May in preventing what would have been the largest ever shipment of cocaine across the Atlantic into Wales via the Pembrokeshire coast is a stark warning of the scale of the threat that still exists.

The failure of the current strategy is borne out by figures that were provided to me by the Public and Commercial Services Union. They show a strong correlation between the decline in the amount of drugs seized by customs in the past three years and a fall in the street prices of various popular drugs during the same period. The amount of cocaine seized last year was less than one third of that seized just three years previously: 5,800 kg in 2005-06 compared with more than 20,000 kg in 2003-04. Over the same period, the per gram street price of cocaine dropped sharply. The figures for heroin, cannabis, ecstasy and crack cocaine all show the same relationship.

Those drugs are having a devastating impact on many communities in Wales. The police tell me that they are particularly concerned about the cheap heroin flooding into south and west Wales. We need to be careful about implying that a correlation means causation, but there is no doubt in my mind that the drop in customs seizures as a result of the removal of permanent customs cover at Welsh ports is allowing a greater flow of illegal drugs into Wales through Welsh ports, and that that is a contributory factor to the overall drugs problem in Wales.

In the past year, we have marked the bicentenary of the Act abolishing the transatlantic slave trade. There has been a strong focus on human trafficking as one of the modern forms of slavery that needs to be stamped out. We know that the UK, with its booming illegal sex industry controlled by criminal gangs, is now a major destination for girls and young women being trafficked from eastern Europe, south-east Asia and north and west Africa. We should not engage in the fantasy that the victims of this grotesque trade are to be found only in London. A recent report on trafficking by Amnesty International suggested that Wales is now also home to a “sophisticated and extensive” trade in humans. Amnesty estimates that there are some 60 to 100 victims in Cardiff at any one time and, in a series of major police raids on massage parlours in Cardiff, Swansea and Bridgend last year, the vast majority of prostitutes discovered were illegal immigrants. There was a strong suspicion that many had been trafficked. It is obviously hard to quantify numbers because the trade is hidden, but outreach workers assisting sex workers in Cardiff report that about 50 per cent. of the girls and women they meet are foreign, and they believe that many of those girls have been trafficked.

There is little strong evidence to suggest or to prove that many of those girls are being trafficked through Welsh ports as opposed to reaching Wales via England, but I have spoken to police and customs officers who tell me that they are concerned that girls and young women are being trafficked through Welsh ports. It was suggested to me that the route into the UK from Europe and North Africa via northern Spain and Ireland into Welsh ports is increasingly seen by traffickers as a less risky route than the traditional route from the continent via the south-east ports.

This is a timely discussion, given the Prime Minister's announcement last week of a new UK border agency. His promise of an integrated system is welcome, but restructuring institutions and reshuffling personnel is not the whole story, and the resourcing issue must be addressed.

I opened my comments by referring gently to the calamitous news that broke yesterday about the missing child benefit claimant records. It would not be right for me to score cheap points about that—

Tempting, but not right.

Tempting, indeed.

The vast merged agency created by the merger of Revenue and Customs is a sprawling, cumbersome organisation that is beset with operational difficulties. The theoretical efficiency gains from the merger have become lost in a huge drive to slash the head count as part of the Government’s wider efficiency drive to reduce civil service jobs. With tax credit problems, disastrous proposals for decimating the network of tax offices in Wales, lost computer records, and the crazy and bewildering increase in the number of internal UK flights taken by senior Her Majesty’s Revenue and Customs managers, a picture is emerging of an organisation with serious problems, and our debate today about customs cover should be considered in that context.

My hon. Friend the Member for Sevenoaks (Mr. Fallon), who is Vice-Chairman of the Treasury Committee said yesterday that there have been

“persistent rumours that all is not well at Revenue and Customs.”

A senior member of HMRC told me privately last week that the Department is in a state of “utter shambles”, and I understand that an internal survey this summer showed that just one in five HMRC staff was satisfied with the Department. The chairman of HMRC behaved honourably yesterday—that happens far too infrequently in public life—when he took responsibility for operational failures, but the problem also concerns policy.

I shall end with a series of questions, which I hope the Financial Secretary will be able to answer today, or in writing later if she does not have the information to hand or if there is not enough time. Are current arrangements for customs cover at Welsh ports adequate and effective? Is there any research showing that the erosion of permanent customs cover at Welsh ports has not led to an increase in the overall supply through those ports of illegal drugs or trafficked people? If she does not have such research, can she provide an assurance that processes are in place to review the effectiveness of the current arrangements in Wales in the light of those challenges? What assurance can she provide that the priorities of customs teams are not being distorted by centralised targets, and that the more difficult challenges of trafficking in drugs or humans are being addressed as seriously as matters such as tobacco smuggling? Will the new Border and Immigration Agency lead to an overall increase in resources specifically for detection and investigation at ports of entry in Wales, or are we merely rebranding the current customs mobile detection teams which, as the hon. Member for Ceredigion (Mark Williams) said, rarely appear in Wales? With customs inspections at an all-time low in Wales, with access to cheap class A drugs on the streets never easier, and with fears of an increase in trafficked young women and girls, Welsh ports are at risk of becoming a soft touch for traffickers. Wales is a wide-open back door to the UK, and needs better security arrangements.

It is a great pleasure to be here this morning debating security at the Welsh border. I am grateful for that opportunity, because it allows me to put on record at the outset not only my experience of working with HMRC during the past four months, but my long experience of working with it in Northern Ireland. It performed a critical role, with other law enforcement agencies, in assisting us to bring the Northern Ireland organised criminal networks under serious and sustained attack to the extent that real progress was made, and continues to be made, in combating organised crime. The Chamber should understand the central role played by co-ordinated work with other agencies—including intelligence work and work with special branch and the police—in the success of HMRC in dealing with the threats that it faces and the complex range of tasks that we ask it to perform.

rose—

My hon. Friend indicated that he would like to intervene, and although it is a short debate I shall give way to him on this occasion.

I was hoping to contribute to the debate at greater length and in detail, but this is an intervention.

I am grateful to the hon. Member for Preseli Pembrokeshire (Mr. Crabb) for securing this debate. He claims that Wales could be a soft touch and a back door, but I do not accept either of those statements. First, it is a front door, because Holyhead is one of the busiest ports in the United Kingdom. It is also a major ferry port—the third largest in the United Kingdom and the largest on the western seaboard—with more than 2 million passengers a year.

Co-operation between the different agencies is an issue, and while the hon. Gentleman is right to say that drugs seizures by HMRC have fallen, police seizures have risen considerably, because they are compensating in a common travel area for much of HMRC’s work.

My hon. Friend makes an interesting point. The quality and nature of the work and the co-operation between different agencies obviously need to be kept under constant review, and that is taking place.

I noted the point made by the hon. Member for Preseli Pembrokeshire about having to leave early. Rather than trying to wind up the debate early, I shall probably need the full time available, but I shall not take offence if the hon. Gentleman leaves, although I am not sure how you feel about that, Mr. Atkinson.

Order. This debate continues until half past the hour, so the Financial Secretary has the Floor until then.

If the hon. Member for Preseli Pembrokeshire (Mr. Crabb) runs, he will, taking Prayers into account, get there in time.

I have talked about the challenges that HMRC faces, and the requirement constantly to review those challenges and to work in co-operation with other agencies. I will look up the point that my hon. Friend raised.

The hon. Member for Preseli Pembrokeshire said that there was concern about the drop in the street price of drugs as a result of reduced numbers of seizures. I am sure that he will appreciate that there is no simple correlation between the two. The number of seizures and the street price are not directly related, and the matter is extremely complex.

There is a correlation in the specific meaning of the word. I said that we should not just assume that correlation means causation. There is a range of factors, but the drop in the number of seizures, which are not fully compensated for by an increase in police seizures, is a contributory factor.

That is a fair and valuable point, and we want to monitor that, but the matter is of equal concern because the organised criminal networks that traffic in drugs and people are the same. They simply turn their hand to whatever is the easiest commodity to traffic at the time. Seizures of cigarettes in 2004-05 and 2005-06 were 2.3 million and 2.7 million respectively, and seizures this year remain broadly in line with the two previous years. That evidence confirms that there is a continuing risk in Wales, but resources are being deployed appropriately and in line with the current threat.

I want now to make several more general points about the way in which HMRC is working before talking about the border agency, if I have time. I will, of course, undertake to write to the hon. Gentleman if I do not answer all the questions that he has raised.

About 7,000 HMRC staff are employed on activities that touch on the border, and the majority of detection staff—about 4,500—are deployed at ports, airports and inland. Such uniformed customs officers, who are familiar to us all at ports and airports, have to help with and support detection work, with their highly effective dogs, which can search out class A drugs, cash, animal products and tobacco.

HMRC has also invested heavily in new technology and has extensive state-of-the-art X-ray and scanning equipment, some of which is at Cardiff and much of which is mobile, being used at ports and airports throughout the UK. It also has a five-strong fleet of modern, world-class cutters and crews, who are continually active off the UK’s more remote coastal locations, including the south-west approaches. The cutter fleet has a highly sophisticated monitoring capability and forms an integral part of HMRC’s anti-smuggling strategy. It is a pleasure to be able to spell out some of the really good work that HMRC is doing. The whole organisation is saddened by the announcement that we have had to make and the events that led up to it, but it has some extremely professional and highly skilled people, who are doing a terrific job, and I pay tribute to them.

To meet the challenges that we have discussed and make more effective use of its resources, modern equipment and assets, HMRC has changed its tactics in recent years and become more intelligence-led and less predictable. It is critical that it does so, and that is an important change. Fixed teams of officers at every port and airport, who are engaged on routine, less productive duty patterns, are not the most efficient and effective way to tackle or deter today’s organised, sophisticated and well-resourced criminal gangs, who are determined to breach the UK’s border controls. Experience shows that flexible mobile teams allow Customs to deploy in larger numbers, less predictably and with greater impact to any area of the UK where intelligence identifies a risk, and I am sure that the hon. Member for Preseli Pembrokeshire would want Customs to do so.

As a result of building a highly skilled, highly mobile and better equipped force and working more closely in partnership with the police, the Border and Immigration Agency and anti-terrorist agencies, HMRC is today better able to tackle modern-day criminals and others intent on breaching our border controls. Through its investment in intelligence, data acquisition, which is important in such work, and new information technology, HMRC is better placed to target criminals and disrupt their activities before they cause harm.

When the new single agency is up and running, it will encompass UKvisas. That is not applicable to the Welsh ports, because they are a common travel area, but it is applicable to bringing together immigration and Customs. However, I am still concerned that there needs to be a proper framework, including liaison with the police. At present, the work that we are discussing draws on territorial police, and local resources are used for port security. All that comes out of the central budget. Could that be looked at in the future?

That will obviously be part of the thinking that goes into developing the new border agency. It is clear that the police will not be part of that agency, so the discussion that my hon. Friend describes will have to be taken forward. However, the border agency has been set up precisely with the objective of strengthening UK borders, and a significant majority—hon. Gentlemen may wish to hear this—of the detection staff based in Wales are likely to transfer to it. The combined detection skills of the BIA, as it is called at the moment, and UKvisas will strengthen the UK border. The new agency will have a combined work force of about 25,000 staff. We envisage that it will be able to join up the powers and skills of HMRC and the BIA, giving us even greater expertise in controlling the borders in Wales.

Let me put things into perspective and spend a minute or two talking about what happens at present. Current intelligence continues to indicate that the flow of illicit goods into the UK, such as counterfeit tobacco and class A drugs, will not come through small ports or airports, contrary to the fears of the hon. Member for Preseli Pembrokeshire, although these things obviously need to be kept under close watch. Current intelligence indicates that they enter through the major ports and airports, which are principally in the south and east of England, and that they use commercial modes of transport. That view is supported by local operational intelligence, which indicates that the M4 corridor and west midlands are used to get supplies of illicit tobacco into Wales. That means that HMRC can best protect the communities of Wales from the threat posed by such commodities by tackling this major flow at the point where it enters the UK. Of course, basing Customs resources solely in major ports and airports cannot be the full answer, but if there is a perception that that is where the work is intensifying, that is for very sound operational purposes.

If there is virtually no full-time uniformed Customs presence at the Welsh ports, who is gathering the evidence to suggest that they are not a major point of entry for the illegal products that we are discussing?

HMRC not only has its own means of gathering intelligence, but co-operates, as I said, with other law enforcement agencies. It draws on and pools intelligence, which is an absolutely necessary prerequisite for successful team working. That is the way forward, and the lesson that we are learning around the world is that the greater the co-ordination and co-operation, the more effective the different agencies involved. However, I take the point that HMRC needs to remain alert and responsive.

I have talked about HMRC’s investment in intelligence, and given the co-operation of shipping companies and airlines, HMRC today has a comprehensive and up-to-date picture of all freight and passenger movements through Welsh ports and airports. I hope that that provides some reassurance to those Members who have participated in the debate.

That intelligence picture enables HMRC to deploy to best effect the 59 front-line detection staff based in Wales. They are not based statically at ports—that would be a weakness—but in different, flexible ways, which is more appropriate to the risks that we face. If necessary, teams are sometimes mobile and sometimes draw on teams based in the west midlands, as well as the national strike force and the cutter fleet.

Specific intelligence-led operations periodically draw on other national resources. For example, in May and June this year, Operation Faun involved more than 50 officers from across the UK, including specialist cash detection teams from London and Gatwick, who worked with Welsh colleagues at Holyhead, Fishguard and Pembroke ports to test the risk of criminal cash being smuggled through those ports.

HMRC has changed its tactics, and its intelligence-led, risk-based and less predictable approach has proved successful. The facts speak for themselves: Treasury statistics indicate that the illicit market in cigarettes, which was 20 per cent. and rising in 2002, has been driven down to about 13 per cent. However, HMRC is not complacent. It is intelligence-led and will continually adjust its response to the changing threat. Through its professionalism, flexibility and unpredictability, it aims to continue to provide a good level of protection for the UK’s border.

11.29 am

Sitting suspended until half-past Two o’clock.

I am pleased to see so many Members present. I realise that some would prefer the debate not to take place, but I do not think that any area of public policy, particularly those relating to expenditure, should not be open for the debate in the House.

I first became acutely aware of how sensitive the subject was when I tabled early-day motion 402 in the last Session. Essentially, it said that the House was worried that support for the Union between England and Scotland was falling, as was seen in an opinion poll of the time, and, potentially, one of the causes of that was the Barnett formula, which should therefore be reviewed. That remains my position: I am in favour of the Union between England, Scotland, Wales and Northern Ireland, but I believe that the United Kingdom would be stronger if the distribution of public money was seen to be carried out in a fair and equitable manner.

rose—

I shall give way on that point. I am aware that many people would like to speak, and I like to give way, but I do not want to do so too often.

If the Barnett formula was reviewed and if Scotland and Wales ended up with less money, does my hon. Friend believe that that would weaken or strengthen the Union?

I am not attacking Northern Ireland, Wales or Scotland. I wish to see public expenditure, which is directed on a per capita basis towards a person in Glasgow, Cardiff or Belfast when it comes to health or education, determined on the same basis in all four home countries.

Having tabled early-day motion 402, I found out that an official from No. 10 Downing street was going round to signatories and, without telling me, was asking them to withdraw their names from the motion because of the sensitivity of the issue. That was a profoundly wrong way for No. 10 officials to behave; such issues are better aired in public debate.

The Prime Minister has said on a number of occasions that he does not believe in a review, but I hope that we can change his mind. I listened carefully to his answer to the question on the Barnett formula today, and I am not sure in what sense he meant that the formula applied to England. It was based either on an obtuse understanding of the Barnett formula or he missed the point. Effectively, the formula applies at the margin and is based on an increase in expenditure in England, not previous expenditure, which is multiplied by a comparability factor of the population. I do not see what the Prime Minister meant when he said that the formula applies to England, apart from the fact that the calculation starts with England. My hon. Friend the Member for Blyth Valley (Mr. Campbell), who asked the question, pointed out, as I shall, that the English regions end up disadvantaged because of how the money is allocated.

The Chief Secretary to the Treasury said, as the Prime Minister had, that there would be no review. However, Wendy Alexander MSP and leader of the Labour party in Scotland—

No she is not.

rose—

I shall give way to my hon. Friend.

May I advise hon. Members that Wendy Alexander is the leader of the Labour party in the Scottish Parliament? The Labour leader in Scotland, as in the United Kingdom, is my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr. Brown).

I am grateful to my hon. Friend for clarifying that, but we were talking about the same person. In The Daily Telegraph on 12 September, Wendy Alexander said that the time might now be right for a review of the formula.

It is excellent to be able to talk to the person who is potentially the greatest living source on the Barnett formula—my noble Friend Lord Barnett. I shared a taxi with him on Monday, and he is clear that the Barnett formula has lasted for much longer than he intended. He is looking to set up an ad hoc Lords Select Committee to examine how money should be distributed between the four home countries, so the debate will continue. That is unfortunate for those who do not like the debate, but it is healthy to have it.

There is actually a large constituency of support for review of the formula, but does the hon. Gentleman recognise that those of us from Wales assume that any kind of needs-based formula would increase rather than reduce the amount given to Wales?

The hon. Gentleman makes an interesting point—I was going to come to it.

Any distribution of public money should be based on equity and fairness, and it should be transparent. Preferably, given the relationship between the four countries, it should have a legislative basis, so everybody knows where they stand. The Barnett formula does not have such a basis.

It is known and recognised, even at street level, that the formula is unfair to the English regions. It is less well known, as the hon. Member for Montgomeryshire (Lembit Öpik) said, that if we were to apply the normal fiscal needs basis to Wales—it might include distribution of population, road length, crime, unemployment, substandard housing and health issues, and the things that are considered in most needs-based formulas—Wales would require more money than Scotland. In actual fact, Wales gets nearly £500 a head less. It is often thought that reviewing the Barnett formula is a matter for the English regions only. It is a matter for the regions, but not exclusively; a review would look for a fairer basis on which to spend money within the United Kingdom.

The debate is about the Barnett formula and I do not wish to get dragged into constitutional conundrums—at least not much—but there are constitutional issues that relate to the formula. People in the English regions feel that they suffer a double whammy: first, they do not get the same level of funding and, secondly, they have less immediate local control over many of the services that the Welsh Assembly and Scottish Parliament control away from Westminster.

My hon. Friend knows that I share much of his analysis of the situation. However, is it not really a triple whammy, because there are huge disparities between English regions, which strengthens the force of his argument?

Hon. Members on both sides of the House appear to have had sight of my speech even though I was still writing it half an hour ago. I am coming to my right hon. Friend’s point, but I shall first go through some of the issues that illustrate the unfairness. I could spend the rest of the debate going through the figures, some of which are in the Library debate pack and the Library guide to the formula, but I shall not go through them all.

Last year, disposable household income in Scotland was £11,753, which is £1,000 greater than in the north-east of England. However, when it comes to public expenditure, the north-east of England receives £600 less per capita than Scotland, and the north-west of England receives £800 less per capita. Overall in England, the per capita level of expenditure is £1,000 less.

Just for the record and the sake of correctness, will the hon. Gentleman confirm that he is talking about identifiable public expenditure? He is talking not about total public expenditure, but about identifiable public expenditure.

I accept the hon. Gentleman’s point. The reason why I do not want to go through a lot of similar statistics is that they do not illustrate as well as real examples why in many English regions and certainly in Manchester, people do not talk about the Barnett formula, but they do now talk about its impact. I shall give the best illustration that I can. It has not been a happy week for my right hon. Friend the Chancellor of the Exchequer, but unfortunately I will have to use him as an example.

When the Crossrail project was agreed, the Chancellor issued a press release that said that Scotland would benefit indirectly from the £16 billion Crossrail project in London. That is not happening on any basis of need and it is particularly annoying for people in Leeds, Manchester and Liverpool, because when the Chancellor was Secretary of State for Transport, he cancelled either tram extensions or trams in those cities. If we work out the so-called Barnett consequentials of that £16 billion—I do not think that they have been made publicly available yet; I have just tabled a parliamentary question to quantify them as exactly as possible—we see that that would have bought at least one tram set for Leeds or Liverpool and possibly two.

We are talking about a Scottish Secretary of State for Transport who cancelled tram systems in England even though he could not affect the debate on whether trams were on the streets of his own city of Edinburgh. Now, when he is Chancellor and there is huge public expenditure on a London project, he boasts that it will benefit Scotland. As my children say, is that really fair?

Does the hon. Gentleman take the view that others might think that that situation should disbar any Scottish MP in this place from being Secretary of State for Transport, the Home Secretary, the Secretary of State for Health or the Secretary of State for Education? I should be interested to know the hon. Gentleman’s views and those of his colleagues.

No, I absolutely do not take that view. Not for the first time is a Conservative party proposal unworkable. It does not deal with the real issue, which is that the situation of people living in Leeds or Birmingham, in terms of their influence on local policies on health and transport, is very similar to that of people in Scotland. Rather than creating a completely unworkable situation in the House of Commons in which there are different classes of Members, it would be better to devolve issues down to local democracy. I do not accept the point that the hon. Gentleman makes.

The example that I have given illustrates the fact that the English regions are not just competing with London, Scotland, Wales or Northern Ireland for resources, but are left out of the complete calculation. That is why, when I walk down the streets in Manchester, although people do not say that the Barnett formula is wrong, they do come up to me and say, “Why does my daughter have to pay tuition fees in England, whereas if we lived in Scotland, she wouldn’t?” They go through a series of issues—hon. Members will be aware of them—from being able to get cancer drugs in Scotland that are not available elsewhere, to the care of the elderly—[Interruption.] I hear hon. Members saying from a sedentary position that that is to do with the Scottish Parliament, but the fact is that the Scottish Parliament, without raising a penny in taxes, can spend money at a higher rate than is the case in England. The whole basis of this debate is to ask for a review so that there is an equitable basis for funding.

I am part of a campaign, with a number of hon. Members from all parties, to try to secure a referendum on the Lisbon treaty or reform treaty or whatever the European constitution is called at the moment. The basis of that is trust: what people say to the electorate should be carried through. What is often not talked about is that in national elections, there is a corrosive effect, certainly within the three major parties, in terms of how they campaign at national level and in the different countries.

I have searched through the manifestos of the Conservative party, the Lib Dems and the Labour party, and there is no mention in the last three manifestos of all those parties for the United Kingdom—in the Great Britain manifestos, to be precise—of the Barnett formula, with one exception. In 2001, the Lib Dems came out against the Barnett formula and were in favour of a review and a fairer basis for funding.

I have two points. The variations in policy cannot all be ascribed to the Barnett formula; there are political distinctions to be made there. However, the most important point is that the hon. Gentleman should accept that the Liberal Democrats have been campaigning for a change in the Barnett formula—for slightly different reasons from the ones that he is giving—for many years. Indeed, we made that a key point in the 2005 general election in Wales and in the most recent Assembly elections, because we think that a needs-based formula, which I think he is calling for as well, is absolutely the right way to go. Even Joel Barnett, who invented the formula, seems to agree that the current formula is bankrupt.

I take the hon. Gentleman’s point. Of course, the nature of devolution is that there will be policies at elections in Wales, Scotland and Northern Ireland that relate to those countries, but where there are issues of taxation and expenditure, there is no doubt that the Barnett formula applies to England and has consequences in England. It is very strange, unhealthy and corrosive that it was possible for the previous Prime Minister to go to the Lighthouse in Glasgow on 13 April and say what a great thing the Barnett formula was, whereas it was not mentioned in our 2005 manifesto. That is the real point I am making. There is a level of unintended dishonesty, in that the Conservative party, the Lib Dem party and the Labour party would not campaign hard on what a great thing the Barnett formula is in England, and that needs exposing.

I thank my hon. Friend for being so generous in giving way. He perceives that there is an injustice, an inequality, in funding between various countries of the UK.

And regions.

Indeed. Has my hon. Friend also considered the unequal way in which the defence budget is divided up around the UK? I tabled a parliamentary question seven or eight years ago for per capita figures, and it turned out that the north-east did well; Wales did not do too well; and the south-west did well. These issues need to be considered in the round.

The way in which parts of the Government’s expenditure are allocated around the country is clearly worthy of debate. I know that all hon. Members fight very hard for their constituencies and I accept the point that sometimes too much goes to one area rather than to another. I wanted to initiate a debate and keep it going about how one aspect of how spatial public expenditure is allocated seems to be fundamentally unfair.

Will my hon. Friend give way?

I will, but for the last time. I want to give other hon. Members time to speak.

My hon. Friend is a fine fellow, particularly in his views on the European constitution. However, does he agree that it is important to ensure that any review of spatial expenditure does not focus on the Barnett formula alone? Also, we need a review of expenditure not only within England—I completely accept that we need one here—but in Scotland. It is clear that my area of Glasgow is grossly underfunded in comparison with many other parts of the country, which receive far greater public expenditure although they have far less need.

I am sure that my hon. Friend will accept that there are great similarities between post-industrial cities such as Glasgow, Manchester and Leeds in terms of deprivation, health problems and having double the usual level of unemployment. One can go through the statistics. Glasgow, Leeds, Birmingham. Manchester and the other industrial cities should be dealt with similarly—I accept that—but one of those cities should not be dealt with better just because it is north of the border.

I am asking for a review for equity. I understand what some hon. Members are asking: will it mean less for Wales or Scotland? Not necessarily, because time could be taken to make things fairer—one comes to rates of increase when talking about such matters. But if we do not change things, we are accepting that the English regions—I gave what I think is the best illustration, transport policy—will be permanently disadvantaged. I know that some hon. Members in this Chamber, although I am not one of them, believe that it would be a good thing if the English regions were disadvantaged, because it would add to the arguments against the Union. I want the review because I am strongly in favour of keeping the countries in the United Kingdom together.

This debate has not been primarily about the constitution, but about how, rather than the Conservative solution to what is clearly an unfairness, decisions should be taken at a different level in Wales, Scotland and Northern Ireland. I do not think that the House of Commons should be divided into Members of different status, but I think that a serious look should be taken at how local democracy can be given back many of the powers and resources to make decisions that only 50 years ago, within living memory, were taken by county councils and major cities.

rose—

Order. May I say to hon. Members present that I intend to call the wind-ups at half-past 3? Seven Members have indicated in advance that they wish to speak. If I am to get them all in, they will have to speak for approximately five or six minutes each. I ask Members to bear that in mind as it will make the debate fairer for everybody.

I thank the hon. Member for Manchester, Blackley (Graham Stringer) for bringing this debate into the open. It has been hidden for too long. I speak on behalf of a borough that is regularly listed among the 10 most deprived areas in Britain and has been so for a long time. The needs-based formula must be debated; it is no good hiding from it. The Welsh Assembly Government recently voted that that should happen, and we should take our lead from them.

In Blaenau Gwent, one of the poorest boroughs, we also have one of the highest rates of council tax in Wales, if not the highest. Once a borough is poor, it is extremely difficult to escape from that position. Settlements come down from either London or the Cardiff Government, but our uplift is also among the lowest in Wales. The spiral of deprivation, in which a borough continues to be poor, is difficult to escape. A needs-based formula might have to be based in part on population, but to hide from the debate is not the answer.

The Government introduced European objective 1 funding, which was seen as a means of lifting people out of poverty. The problem is that it cannot be used for statutory responsibility, so the funding does not help to lift boroughs out of their real problem, which is statutory funding and statutory responsibility. European funding is also project-based, not long-term, and that is another worry—it can disappear as quickly as it is given. It is important that we consider the needs of every area and region in this country, and not in isolation.

If a review goes ahead and Wales gets less money under a revised Barnett formula, does the hon. Gentleman think that Blaenau Gwent will get more money or less?

The feeling in Blaenau Gwent is that we could not be any worse off. In our opinion the review, if it is based on need, can mean only that we will be better off. As we are in the bottom 10, the only way is up; in that respect, we have nothing to lose. Whatever the outcome, a review must be held. It must be open and honest, and everyone must have an input. I urge all hon. Members to push for that, because the fair distribution of moneys throughout this country is vital to areas such as mine. European funding is under threat again. Convergence funding could be taken away in one or two years’ time. We are still left with no definite funding. I urge everyone to support the call for a review.

I think that I secured the last debate on the Barnett formula, in 2001. I called for a cross-party group from the House of Lords and the House of Commons to review the formula and said that whatever its conclusions, it should start from the premise that it would take 10 years to implement the changes. I stand by that.

Three issues concern me. One is that only three regions in the United Kingdom actually have a positive GDP—the east of England, London and the south-east. Why is that? Why are the others negative after so much investment since the second world war? Is it something fundamentally wrong with the structure in our regions that makes them negative? Secondly, the formula is clearly a concern. I detect distinct nervousness in this Room in Welsh, Scottish and Northern Irish Members, and I can understand that. Thirdly, to say that there is no constitutional implication is foolish. There will be constitutional implications.

I suggest to the House—I hope that the Minister will take this seriously—that we are in government together. Our constituents are concerned about the Barnett formula. I should like to see a Joint Committee of the House of Lords and the House of Commons, and I should like it to have three purposes. One is to understand better why only three regions of the United Kingdom make any money for us. I propose that the reason is the university structure and the number of patents that are exploited. Without considering that, we will not get underneath the issue. The second purpose is to consider the funding formula, and the third the constitutional implications. A Joint Committee of both Houses, challenged to consider those three things, would come back with the most profound findings about what we must do to be a modern 21st-century country.

I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on securing this important debate. The issue has been fraught with significant controversy since 1978, when the Barnett formula was introduced, although preferential funding treatment for Scotland goes back to the end of the Victorian era and Lord Goschen. The problem became particularly strong in the aftermath of devolution, during the past eight years. However, it seems that the public at large often labour under a number of misapprehensions. [Interruption.] We all know what game the Scottish nationalists are playing. They want the whole thing shaken up; they would love nothing more than an aggressive cut in the Barnett formula, as it would allow them to play to the gallery at home. We are not going to play that game, and I hope that the same applies to Labour Members.

There is a perception that the Barnett formula is set in stone, but it is a convention that could be changed at will by the Treasury. There is also a sense that England gets an unfair deal, and that applies not only to the English regions, but in my part of London. I accept that it gets a fair amount of public expenditure. Indeed, the hon. Member for Manchester, Blackley referred to the protected £16 billion being invested in Crossrail, but as the hon. Member for Sittingbourne and Sheppey (Derek Wyatt) rightly pointed out, London is still a net donor.

When identified spending is factored into the equation, London secures more money than Scotland. What does the hon. Gentleman have to say about that? I do not ask him to accept it, but he should at least conclude that a debate is to be had about it.

We could doubtless debate statistics at both ends of the argument, but there was a tacit acceptance of the Barnett formula by the Conservative Administration between 1979 and 1997, who relied on only a small minority of votes and seats in Scotland. That is one reason why it was maintained. I disagree with the hon. Member for Manchester, Blackley. My view is that after 1997, and particularly after devolution in 1999, it ceased to be a question of economics. It is now a matter of raw constitutional politics.

The formula fails to provide for the proper fiscal independence of the devolved Governments in Scotland and Wales. Even with its own Parliament, Scotland has to work within a total sum over which it has absolutely no control, although it does have some discretion. That is unacceptable. I have always been more relaxed than many of my party colleagues and many people across England about the effects of devolution. I believe that localism should be properly respected. One of the interesting things about my constituency—the seven square miles of central London that I represent—is that it is actively cosmopolitan.

It is rich.

Of course, it has pockets of great wealth. It also has pockets of great poverty. I would happily go with the hon. Gentleman to literally within 200 yd of here, down to Abbey Orchard estate, and to Pimlico and Bayswater. It is much more mixed. The point is that even in the midst of a cosmopolitan constituency, there is a great passion for localism—for the idea of local residents associations and amenity societies. One of the big challenges of politics is trying to marry the fact that although we live in a global economy and a globalised world, it is one where local issues matter.

However, the postcode lottery was implicit in what the hon. Member for Manchester, Blackley said. Scotland, of course, has preferential treatment for university fees, for the long-term care of the elderly, and more recently for prescription charges. I congratulate the right hon. Member for Banff and Buchan (Mr. Salmond) on his clever political role on prescription charges, because the postcode lottery has a particular effect in relation to the health service. The nationalised health service is one subject that most people in the United Kingdom feel strongly about, and more so than about the postcode lottery or other elements of expenditure.

The hon. Gentleman is right about the policies of the Scottish National party, including the reduction in primary school class sizes, the cancellation of student debts, the hiring of 1,000 new police officers and free prescriptions. The only difference is that they have not been delivered—neither are they likely to be delivered—and they will blame us for it if they are not.

I shall not get into such localised debates, but the hon. Gentleman has put his concerns on the record. The move by the Scottish National party’s Administration at Holyrood to drive a new wedge into the area of health spending is clever politics, for it stokes up resentment on the subject that is of most concern in relation to the postcode lottery. It is a trap into which those who truly support the Union should not fall.

I have to say that my party’s view that we should support English votes for English laws is unworkable. It is absurd that we should have to go through a health Bill, saying that clause 13(7) can be voted on only by English Members but that clause 13(8) can be voted on by all Members. That is nonsense. Nor do I support the notion of an English Grand Committee. It will allow those who wish to do so to suggest that we are somehow trying to put the Union at risk. However, we must have transparency in matters financial. I hope that we will be galvanised by considering all the facts.

At least since devolution, I have preferred the idea of having an English Parliament with exactly the same rights as the Scottish Parliament. I am the only Conservative Member who voted in favour of getting rid of the House of Lords. I would have the Lords as a UK Parliament, with a unicameral system, and have English, Welsh, Scottish and Northern Ireland Parliaments with exactly the same powers, but allowing foreign affairs, defence and a certain amount of fiscal policy to be made by a UK Parliament.

We shall surely return to these matters many times. Make no mistake, however, that any move to recalibrate the Barnett formula would have political and, above all, constitutional implications well beyond the merely financial and fiscal elements that make up what is to many a somewhat mischievous mechanism.

I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing the debate. At least for its duration we will set aside the war of the roses. I thank my many colleagues and friends from Northern Ireland, Scotland and Wales for supporting us in this debate.

I strongly support the Union. We will continue to have greater international influence as a United Kingdom than if we Balkanise Britain into a number of smaller states. However, I believe that the Union is challenged on three fronts. First, and openly, it is challenged by Scotland’s First Minister, whose target is independence. Secondly, it is challenged indirectly by a groundswell of English resentment, because we in England pay the same taxes as those in others part of the United Kingdom but get a smaller share of public expenditure per person. As a consequence we in England pay for some public services—residential care, prescriptions, university student fees—that cost less or are free in others parts of the United Kingdom.

Thirdly, the Union is challenged indirectly—I will be kind and say unintentionally—by the Conservative-led clamour for English votes for English laws. The idea that Members of the House of Commons should be divided into two categories—those from England with rights to vote on all matters, and those from Scotland, Wales and Northern Ireland who are treated as second-class MPs without full voting rights—would be a serious blow to the concept of the Union.

Would it not be even more complicated than that? It would not be English Members and everyone else. The Scots would be able to vote on some things; the Welsh would be able to vote on different things; the Northern Irish would be able to vote on some things that the English did not vote on but which the Welsh may have done; and within England there would be some things that the London Members could not vote upon that other English Members could. There would be six categories of Members. Perhaps I can also ask my hon. Friend whether he supports the idea of “one Lord, one lamp post” when reforming the House of Lords.

I strongly agree with my hon. Friend’s earlier remarks.

The biggest difficulty would be to determine which issues can be voted on by each of the many electoral factions that would be produced by the Conservative proposal. More seriously, it would be an attack on the British tradition of Cabinet government. Under our system, the leader of a majority party in the House of Commons appoints a Cabinet, which is bound by collective responsibility and which remains in office while it retains the support and confidence of a majority of our House. The proposition for English votes for English laws would, in the words of Peter Riddell, writing in The Times earlier this month, “destroy the coherence” of Cabinet government.

The Barnett formula was created in the mid-1970s as a short-term fix, to prevent the annual feuding between the Treasury and the three territorial Secretaries of State. It may have made sense then, but it is no longer appropriate. As we heard from my hon. Friend the Member for Manchester, Blackley, it has been disowned by Joel Barnett himself. It has also been disowned by Lord Sewell, the Scottish Office Minister who took the Scotland Act 1998 through Parliament. Writing in a Smith Institute pamphlet recently, he said:

“Barnett served the UK well prior to devolution and was important in enabling a smooth transition to be made to devolved government…It has now outlived its usefulness.”

I first became aware of the difficulties and inappropriateness of the Barnett formula in the winter of 1997-98, when I was the Parliamentary Private Secretary to my right hon. Friend the Member for Holborn and St. Pancras (Frank Dobson), who was then the Secretary of State for Health. The incoming Labour Government were determined to avoid the winter pressures—the winter beds crisis—that we had witnessed in the previous few winters under the Conservatives. As hon. Members will remember, we were tied to the John Major Government’s spending plans for our first two years in government, but my right hon. Friend managed to negotiate an additional £269 million for England to avoid a winter beds crisis in that first winter under the Labour Government. There was no prospect of a beds crisis in Scotland, Wales or Northern Ireland, because they had had none previously and had the resources to avoid one that winter. Nevertheless, they received £17 million, £10 million and £18 million respectively in additional health expenditure under the Barnett formula. Just recently, the Prime Minister announced £16 billion for the Crossrail project in London, but that will deliver another £500 million of expenditure for Scotland. That is not an efficient use of public money.

The consequence of Barnett 30 years on is that people living in Yorkshire receive £1,400 less per year on average than people living in Scotland. However, the percentage of people living in poverty is greater in Yorkshire than in Scotland, at 22 per cent., as opposed to 20 per cent., according to the latest households below average income survey. In 2005—the latest year for which we have figures—gross disposal income per head was also lower in Yorkshire than in Scotland, at £12,200 per head, as opposed to £12,600.

On deprivation, my hon. Friend will also be aware that seven of our 10 most deprived areas are in Scotland.

I accept that there is poverty in Scotland and that there are additional costs from rurality in the highlands of Scotland, but there is also poverty in Yorkshire and the Humber, and there is rurality in my part of North Yorkshire.

We should use the same criteria to assess need and the same basis for apportioning public expenditure in all parts of the United Kingdom; if we do not, we will undermine the basis of the Union. I therefore support the proposal by my hon. Friend the Member for Manchester, Blackley that there should be a transparent needs-based review of the Barnett formula.

 I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on raising this vital issue and on the careful and measured way in which he developed his case. There is a growing consensus that we need a review of the way in which we raise and distribute resources in these islands, and that consensus embraces the nationalist parties in the three nations, some of the Unionist parties and the Alliance party in Northern Ireland, dissident Labour MPs, MSPs and AMs and the Liberal Democrats, although we are not quite sure about the Conservatives.

The hon. Gentleman put his finger on why there is a consensus about the fact that it is high time for a review: Barnett is a headcount formula, and injustice was almost written into it from the very start because it did not take need into consideration. Nuffield college, for example, has estimated that the absence of a needs-based formula may have led to a shortfall of £1 billion in Wales. The last time the Treasury conducted the needs-based assessment across the UK for which the hon. Gentleman is calling was 1976, and it is surely high time, after 30 years, for it to conduct a review. We do, however, have one needs-based formula in the UK: the Big Lottery Fund. Using a semi-official needs-based formula, it allocates 6.5 per cent. of the fund to Wales, rather than the 4. 9 per cent. that we get under Barnett.

The injustice is, however, getting worse, because Barnett is a convergent formula over time. In 2000, for example, Wales was 9 per cent. above the UK average for health expenditure per head, with a figure of 109 per cent., but we are now down to 104 per cent., and the figure is falling further, even though we have a similar sickness profile to the north-east of England. The north-east rightly deserves more money because of the legacy of heavy industry, but it has now overtaken Wales, and we currently have no mechanism to reflect the chronic ill health in our community.

The hon. Gentleman was right to raise this issue for another reason. One of the problems with the Barnett formula is that it is not statutory, so there is a lack of consistency and transparency about the way in which it is applied. We saw an example of that in the comprehensive spending review when the Treasury implemented a change in the baseline for the English Departments. As a result of money not being spent and the baseline being shifted—jiggery-pokery, effectively—Wales lost £260 million. What Barnett giveth, Barnett can apparently take away, and we saw such a reverse Barnett formula applied in the comprehensive spending review.

The other problem is what is and is not included in calculating the Barnett formula. I have with me the statement of funding policy—the bible of the Barnett formula—which is published every three years. It makes curious reading, because a number of things are excluded from the formula as a result of being categorised as benefiting the UK as a whole. That is fair enough, but such things are often principally for the benefit of England and, in many cases, one part of it—the south-east.

For example, the Government have spent £552 million on the channel tunnel rail link this year alone, but that is excluded from the Barnett formula. When the Conservative Government made the original decision to build the channel tunnel back in the 1980s, high-speed one would come into London, and high-speed two and three would go into Wales and the west of England and link up the north of England and Scotland. That was fair enough, because it was a UK project, and we would all benefit, with connections across the UK and to the European mainland. Then, however, high-speed two and three, which would have connected the rest of the UK, were cancelled, so the high-speed rail link now begins and ends in London and we are no longer talking about a UK project. None the less, it is excluded from the Barnett formula.

There are other examples. Some £29 million was spent on the botanic gardens at Kew, but there was not a penny in a Barnett consequential for the national botanic garden in Wales, which is in my constituency, so I should declare an interest. Nor does the royal botanic garden in Edinburgh get a penny, although I seem to remember that it predates not only the Barnett formula, but the botanic gardens in Kew—it was actually created first.

There are loads of these anomalies. Some £17 million has been spent on cycling, but we do not get anything, even though I seem to recall that we do actually ride bikes in Wales and Scotland. There is also £72 million for sustainability and renewable energy, which are big issues in Wales and Scotland, but not a penny comes to us. The list goes on and on.

Then there are the negative Barnett consequentials, which take money away. For some reason, for every pound that the Government receive from the Dartford toll crossings, 11p is taken from the Scottish public services block and 6p from the Welsh one. Can anyone explain why the Government’s receipts from the Dartford toll crossings have anything to do with the level of expenditure that we should have on public services in Wales and Scotland?

There is also the issue of prescription charges. Income from prescription charges is included as a negative in the Barnett formula. Some £450 million is raised in prescription charges in England, but Wales and Scotland take a hit for every pound that is handed over in prescription charges. There are therefore all kinds of anomalies in the way in which the formula currently operates.

There are also some quirky things in there. Some £90 million is spent on nuclear non-proliferation and subscription to international organisations. Low and behold, the National Assembly for Wales and the Scottish Parliament get a 100 per cent. consequential on that. When Scotland’s First Minister wrote to the 178 embassies and consulates asking for observer status for Scotland on the nuclear non-proliferation treaty, he was attacked by the Scotland Office, which said that that was outside the competence of the Scottish Parliament. It should have had a word with the Treasury, because apparently that matter is part of the responsibility of the Scottish Parliament and the National Assembly.

The Barnett formula is anomalous; it is an anachronism; it is unfair; and it lacks transparency. That is the case across these islands, including for the English regions, such as the south-west, that suffer from it. It is not fit for the era of democratic devolution. We are being treated as branch offices of Whitehall. What of the language that is used—“consequentials”? Decisions are made about English expenditure, which then bind our democratic institutions in Wales and Scotland. That is no way to reflect the era of democratic devolution. We need real accountability. We need a needs-based formula and, yes, we need elements of fiscal federalism as well.

To conclude, I want to ask the Minister whether the Treasury will commit itself to co-operating fully with the first official review of the Barnett formula since it was created, which was announced by the Labour-Plaid Cymru “One Wales” Government, so that we can finally get clarity on the issue, and a clear picture of who, if anyone, gains from the formula and who, including Wales, loses.

I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing the debate. I sometimes wonder, when the Barnett formula is mentioned, where I should be coming from, but I think of the old “Carry On” film with Kenneth Williams, when he came out with the line, “Infamy! Infamy! They’ve all got it in for me!” That would apply to every hon. Member who has spoken in the debate. They have all told us that they live in the poorest area of the world or the universe, that they are hard up and that Scots people are well off. Yet by my figures six of the poorest constituencies in the United Kingdom are in Glasgow. My hon. Friend the Member for Glasgow, South-West (Mr. Davidson) represents one of the poorest areas in the United Kingdom. Yet we are told that everyone else’s constituency is just as poor as ours, or worse off. My hon. Friend the Member for Vale of Clwyd (Chris Ruane) mentioned the uneven circulation of money allocated by the Ministry of Defence. Some areas benefit much more than others, including in Scotland and Wales, yet when we talk about the Barnett formula we want to argue about who is the poorest, who is the richest, and who gets money for what.

The agreements were arrived at for a reason. I do not want to give everyone a history lesson, but perhaps I may explain exactly how the Barnett formula came about. The Barnett formula followed on from another formula, which was put in place in 1888, called the Goschen formula. It was based on population, which is why the Barnett formula took a similar approach. Other national characteristics were also taken into consideration. The figures for Scotland traditionally gave a higher level of spending. Why? Scotland contains a third of the British land mass, with isolated islands and rural communities. More than 60 per cent. of the UK coastline is in Scotland. Of the 10 areas with the worst life expectancy in the UK, seven are in Scotland, and six of those are in Glasgow. I have great respect for the hon. Member for Cities of London and Westminster (Mr. Field), and have spoken in many previous debates with him on many Bills, and I apologise for the time when I said that everyone who worked in the City was a crook—it is probably only half of them. But when he speaks of being able to show us poverty only a few hundred yards from here my reply is that I will take him to Glasgow and show him real poverty. We can compare things and see who has it worst.

We appear to have an unholy alliance—[Interruption.] It is disappointing.

Would the hon. Gentleman say that about the Irish nationalists?

The hon. Gentleman is saying things from a sedentary position, but I would just remind him of the saying about people in glass houses.

My hon. Friend the Member for Paisley and Renfrewshire, North (Jim Sheridan) made a good point. I do not remember a Labour Government, months into their tenure, being called liars and cheats, and being accused of hoodwinking people to win an election, as has happened with the Scottish National party. I do not remember any party getting that kind of treatment only a few months into its tenure. Promises are promises; we do our best and try to work to them. Obviously, that applies only to certain parties in this House, and I am glad to say that mine is one.

Will the hon. Gentleman give way?

Certainly. I cannot wait.

Would the hon. Gentleman care to remind us what the 2003 Labour party manifesto said about council tax rebanding? Did it happen?

The hon. Gentleman has obviously caught me at a loss. He may carry the Labour party manifesto about; good luck to him. He obviously gets a lot of knowledge from it. I do not carry every one of our manifestos around, but I do know whom I represent, what a lie is, and what the truth is. I shall stand up for that. Unfortunately, it appears that his party, north of the border, cannot do that these days. [Interruption.] I hear from a sedentary position that this is scandalous. I am sure that if I were doing anything scandalous you would tell me to sit down, Mr. Atkinson. If I were telling a lie I am sure that the Scottish National party would want to take me to court.

Order. I was about to get to my feet to remind the hon. Gentleman that we are debating the Barnett formula.

Thank you, Mr. Atkinson; that is what I am talking about. The Barnett formula was an agreement made between Parliaments down here. When I make an agreement with someone I like to stick to it. If we had stuck to it, and merging had taken place over time as was supposed to happen with the Barnett formula, we would not be having this discussion. However, the Conservative party—whose spokesman will unfortunately speak later—let go of the formula from 1979 to 1992 without doing anything about it. If merging had occurred as was supposed to happen, the Barnett formula might have converged by now, or at least we might be contemplating that in the near future. Once again, a political party unfortunately did not do what it was supposed to. It wanted votes north of the border. Well, it got the votes it deserved, with two Members in the last three general elections. That says it all.

As a trade unionist, which I have been all my working life, I have been expected, by the members whom I have always looked after and supported, to deliver as I have said I would. Those expectations extend to the Barnett formula. The fact is that Scotland delivers quite a lot to the United Kingdom. We also have added problems that other areas of the United Kingdom do not have. We have talked of the rural areas and the highlands and islands, and the poverty in some of our inner cities, which is as great as in any inner city in the world in a nation that professes to be a civilized part of western democracy. However, there is at present an alliance between the Conservative party, which I now call the English national party, because that is what it now is, the Scottish National party, which is well known north of the border as the tartan Tories, and the Welsh nationalists, who, I am informed by my hon. Friend the Member for Vale of Clwyd, who is not in his place at the moment, are called the daffodil Tories. That speaks for itself. [Interruption.]

I am somewhat disappointed in nationalist Members. I sat in silence while the Plaid Cymru spokesman did his eight minutes and I never interrupted him with a word. All that they have done this afternoon—and this is a shining example of how the nationalists conduct themselves throughout the country—is shout people down when they do not agree with them.

Order. I remind the hon. Gentleman that we are discussing the Barnett formula and that we should start the wind-ups quite shortly.

I think the wind-ups have started. [Laughter.]

Order. Has the hon. Member for Glasgow, North-West (John Robertson) finished?

No, I was about to give way to the hon. Member for Foyle (Mark Durkan).

I thank the hon. Member for Glasgow, North-West (John Robertson) for not naming my party in the unholy alliance. We are in an age in which the Government talk to us about the importance of evidence-based policy, in which we are told that the focus must be on outcomes rather than just inputs, and in which the Government’s priorities are based on equality, equity and meeting need. Does the hon. Gentleman not accept, therefore, that the Barnett formula indeed needs reviewing? It was not agreed between different Parliaments; it was agreed inside one person’s head in Whitehall. In terms of providing policy accountability, it does no justice to this Parliament to defend a policy that neither stands the test of time nor meets the needs of people throughout the country whom this Parliament serves.

Order. The hon. Gentleman should allow the hon. Member for Glasgow, North-West to continue.

The hon. Member for Foyle speaks a lot of sense. In view of the time, let me conclude by saying that, although the Barnett formula might not be the panacea for all this country’s ills, it certainly should not be used as the tool to split it up.

It is a pleasure to serve under your chairmanship, Mr. Atkinson. I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on securing the debate, which has created great interest, as the attendance shows. I compliment him on the way in which he developed his arguments, and it is a pity that the debate has not followed his example and that it has degenerated into a debate on other matters.

We await the remarks of the hon. Member for Runnymede and Weybridge (Mr. Hammond), but a consensus is developing among a number of hon. Members that it is time to review the Barnett formula and the way that it works. That review should consider not only whether the formula should apply to the devolved nations and Administrations but whether it should apply to English regions as well. We in this Chamber can debate whether we represent the richest, the poorest or the most needy communities, but the key issue is not that but our determination to ensure fairness and transparency in the way in which the Westminster Government distribute money.

As has been said, the Liberal Democrats have been in favour of reform of the formula for a number of years. Reform was mentioned in our 2001 manifesto and was included in the Welsh Liberal Democrats’ manifesto as well, so support for reform is not confined to English Liberal Democrats in Westminster but is found among Liberal Democrats in Wales and Scotland.

The formula contains an inherent unfairness in that it is based on population, and further unfairness in that the last needs-based assessment took place in 1978, since when things have moved on considerably. Changing populations and population proportions in England, Wales, Scotland and Northern Ireland have implications for the money that is available for the different Administrations. My understanding is that the population of Wales is increasing, but not as quickly as that of England. Consequently, the factor that allows calculation of the formula figures for Wales has decreased in recent years from 5.94 per cent. to 5.84 per cent.

I am listening closely to the hon. Gentleman’s arguments. He is right that populations change, but there also are significant demographic changes within populations that can create more demand, especially if there is a large elderly population. If there were a review, there is every likelihood that no extra money would actually exist. Does he therefore recognise that there would be winners and losers if there were a complete review of all aspects, and is that what he thinks should happen?

I absolutely accept what the hon. Gentleman says. The thrust of today’s debate has been about fairness, and I accept that there will be winners and losers. However, if government is about anything, it should be about fairness, rather than showing undue preference. My understanding is that the Scottish population is actually decreasing.

No, it is going up.

Well, it has been decreasing in recent years, and the increase in the English population has an effect on the Barnett consequential.

We have heard examples relating to many places in the south of England, and especially London. If there was a redistribution of a fixed amount of money to areas of dependence, we would have to ensure that places in the south of England that already receive money would not get an increase. Does the hon. Gentleman agree?

I accept that point. Whenever a formula is devised, whether for distribution of grants to local authorities by the Welsh Assembly or for distribution to English local authorities, people will debate whether it is just, which factors are relevant and how much emphasis should be put on each of them.

The hon. Member for Carmarthen, East and Dinefwr (Adam Price) made some very telling points. The key is transparency. As he pointed out in great detail, consideration of the bible for the Barnett formula reveals some extraordinary inconsistencies in what is included and what is not. Will the Minister say whether there is any possibility of simplifying the formula’s workings, so that there is more transparency and so that people can understand the formula better?

Although the debate is about the Barnett formula, the thrust of the speech made by the hon. Member for Carmarthen, East and Dinefwr was that there should not be a Barnett formula for the English regions, but that there should rather be a proper and just formula for those regions. That is what my party is aiming for in terms of a formula for the devolved nations.

My constituency adjoins that of the hon. Member for Blaenau Gwent (Mr. Davies), and I know the problems that that area faces. At the moment, the Welsh Assembly is planning to set up a national commission to review the Barnett formula. I asked the Secretary of State for Wales whether, if the commission recommended a change, he would press for implementation by the Government or would act as a Government apologist and go back to Wales to explain why review was not possible.

With regard to the setting up of a steering committee to define the commission’s terms of reference, it is interesting that the only people on the steering committee are Labour and Plaid Cymru Assembly Members and MPs. Given the “One Wales” approach to government, it would have been better if members of other parties had been included.

I was hoping that the hon. Gentleman would tell us how the Secretary of State for Wales replied.

The Secretary of State said that he could do both jobs. We are left guessing as to where he placed the most emphasis, however. Was he Wales’ representative in Westminster or the Westminster apologist in Wales?

The hon. Member for Sittingbourne and Sheppey (Derek Wyatt) suggested that a Joint Committee of Lords and Commons should undertake a review. That could be a very productive way forward, but a consensus is growing that something needs to be done to ensure that Westminster money is spent responsibly and fairly, with due consideration to everybody’s needs.

I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) and all Members who have spoken in this debate. In raising this issue, I recognise that he is representing genuine concerns held by his constituents. I would like to say also that it is a pleasure to have witnessed for the second time in a week a display of fraternal relations on the Labour Benches.

The Conservative party recognises the damage that the perception of unfairness is doing to the cause of the Union. However, let us be clear on what we are talking about. As hon. Members have spelt out already, the Barnett formula was introduced in the 1970s and is still based on a measure of relative need that was last assessed in the 1970s, but since then there have been very significant changes in the structure of the UK’s economy and society.

Originally, the formula was an interim measure; there was no legislative scrutiny, and it has no statutory force or democratic mandate behind it. Given that it applies only to increases in public expenditure, its effects are magnified by any acceleration in such expenditure and will also, of course, be emphasised by a deceleration in the growth of public expenditure, as we are now seeing in the comprehensive spending review. Nevertheless, the formula has worked reasonably well for many years.

In my judgment, two things have contributed to the renewed political salience of this issue. The first is that, in the post-devolution world, the money in the block grants that goes particularly to Scotland is able to support visible policy differences, rather than just a different level of funding to United Kingdom-wide policies. The different levels of funding were largely invisible for many years, but a series of announcements on clear differences in entitlement and treatment have tended to inflame that sense of injustice.

There is more than a suspicion that the Scottish National party is now exploiting that sense of injustice to try to ferment separatist sentiment in England. We have seen policies on tuition fees, nurses’ pay rises, more generous residential care provision for the elderly, free dental and eye checks, and access to drugs and treatment that are not available on the NHS in England. All of those are “in-your-face” reminders to English electors of the effect of the Barnett formula. The fact that specific commitments in England—Crossrail has been cited—automatically give rise to additional contributions to the Scottish, Welsh and Northern Irish blocks does not help the situation. Secondly, undoubtedly, the broader political questions around the sustainability of the devolution settlement and the imbalance between England and Scotland in the political settlement exacerbate the sense of injustice.

The hon. Gentleman said that the effects of the Barnett formula are exaggerated when increases in spending accelerate. However, because the base line in Scotland for comparable Departments is higher to begin with, and because there is a fixed amount of money, based on the percentage of English increases, going to Scotland, the percentage increase in Scotland is actually reduced because it is an absolute amount. Does he not recognise that, over the long term, that is a convergence formula?

We could probably have a complicated debate about the mathematics, but I do not think that this is the time or place to do that given the time available.

Clearly, there is a legitimate question here that cannot simply be ignored, and it is more complex than some people, such as Ken Livingstone, sometimes like to present it. Let us get the matter into perspective. The figure often quoted in the media is for a £1,500 gap between England and Scotland, but almost certainly that exaggerates the effect, because if we exclude spending on social services, which is not subject to the Barnett formula and is intrinsically need-reflective, the difference is less than £1,000. Furthermore, any alternative system almost certainly would have to be based either on fiscal autonomy—Scottish taxes for Scottish spending—or on an updated needs-based formula applied to all four countries.

It is not at all clear that a needs-based distribution formula would eliminate the differential between England and Scotland, as some appear to suggest, and spending in the English regions, as has been mentioned by a number of hon. Members, varies enormously already, with public sector activity accounting for nearly 60 per cent. of the economy in the north-east, but little more than 30 per cent. in the south-east. So for those of us who wish to strengthen the Union and who are wary, therefore, of the fiscal autonomy solution, it is not clear that a revision of the formula on a needs basis would produce the results that the hon. Member for Manchester, Blackley and others seem to assume.

Let me be clear where the Conservative party stands. We are not considering changes to the Barnett formula, but we recognise a growing body of opinion that questions the settlement. It is legitimate to ask whether the formula, which has served the UK well, is best suited to dealing with the distribution of public spending in the future. That is a long-term question that might well need to be addressed. However, it must be placed in context, which I shall come to in just a moment.

Will the hon. Gentleman tell us whether it is Conservative party policy to review the Barnett formula?

I have just told the Minister that we are not reviewing the Barnett formula, but that we recognise that a legitimate question is beginning to arise about whether it will remain the best formula for the distribution of resources within the UK.

I am trying to understand where the Labour party stands. In Scotland, apparently Wendy Alexander recognises the need to reconsider the Barnett formula. In Wales, the hon. Member for Carmarthen, East and Dinefwr (Adam Price) has told us that the Labour-Plaid Cymru coalition in the Welsh Assembly is conducting an official review of the Barnett formula. In England, the Prime Minister acknowledges that the formula allows Scotland

“to spend more on schools and hospitals”,

but apparently he does not believe that a review is necessary.

The Minister will probably tell me that that is the inevitable consequence of devolution, but to some people it will look suspiciously like one party with three different policies, depending on which electorate it is addressing—something that we are more familiar with from the Liberal Democrats. Will she clarify the position of the Labour party in England, Scotland and Wales, and will she answer categorically the question from the hon. Member for Brecon and Radnorshire (Mr. Williams) about what the Government’s response will be to any recommendation from the Welsh Assembly Government on the Barnett formula?

There is no doubt in my mind that the wider need to forge a sustainable constitutional settlement between the four countries of the Union, and the asymmetry of the current arrangements, have exacerbated the perception of this problem. English voters feel not only fiscally, but now also politically, disadvantaged. There is a clear need, therefore, for a constructive Unionist solution to the West Lothian question. My right hon. Friend the Member for Witney (Mr. Cameron) has made it clear that the Conservative party is committed to delivering such a solution; and a working party under my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) will bring forward policy recommendations in due course.

A proper, sustainable constitutional settlement would go a considerable way towards reducing the sense of injustice felt by English voters, and would provide a long-term context for a rational discussion about the future allocation of resources. Do the Government recognise the contribution of the West Lothian question to the sense of injustice felt towards the Barnett formula, and does the Minister recognise that the constitutional settlement within the Union represents unfinished business that needs addressing?

Clearly we will have a debate on that. The hon. Member for Manchester, Blackley, and others, will ensure that we do. We ought to ensure at least, therefore, that it is a well informed debate. To that end, will the Minister explain why no new four-nation needs assessment has been made since 1977? Does she recognise the need for such an assessment in order to inform a sensible debate, and will she give us any hope that something will be done on that front? Will she make a commitment on behalf of the Government to publish data on the comparable block grant spending in England so that we can have an official figure that would be the basis of proper comparable figures between the four countries?

We Conservatives recognise the concerns raised by the hon. Member for Manchester, Blackley; those concerns are legitimate and they are not going to go away. However, ours is a Unionist party and we believe that we should seek solutions to the political and economic question within the family of the Union, solving problems and not using them as a lever to split the Union apart. We reject the approach of those who seek to exploit this debate to promote the cause of separatism. I urge the Government to recognise and embrace the case for a lasting resolution of the West Lothian question as a critical first step to achieving a sustainable, enduring constitutional settlement within which the issues that we have been discussing can be considered calmly without being overshadowed by the spectre of separatism at the table.

It is a great pleasure to be here today to discuss this extremely important issue. The Government are committed to improving economic prosperity in all our regions and within them, too, and in the devolved countries. The Government have a public service agreement target to increase growth in the poorer regions and to try to get more growth in areas that have lagged behind in the past. To some extent, I have a great deal of sympathy with some of the points that my hon. Friend the Member for Manchester, Blackley (Graham Stringer) made about productivity and differences between regions.

The longevity of the Barnett formula is a tribute to its effectiveness in determining the allocation of funding expenditure in Scotland, Wales and Northern Ireland and it continues to have some substantial advantages. We have debated some of the disadvantages, some of which are perceived and some real. However, no formula is perfect or above criticism. The Barnett formula has produced distributions of public funds over the period since it was introduced that have been perceived as generally fair and broadly acceptable. The formula has been used by both Labour and Conservative Administrations and it also underpinned the devolution settlements, which were supported by referendums in Scotland, Wales and Northern Ireland.

The Barnett formula has existed for many years, as hon. Members have said, but it is regularly updated. The most recent update was in the comprehensive spending review in October. That version of the formula uses the latest Office for National Statistics population figures produced in the summer, so changes in spending in the CSR reflect the latest changes in population relativities between countries.

The point of the Barnett formula in the first place was to avoid the need for detailed, line-by-line negotiations between Treasury Ministers and their counterparts in Scotland, Wales and Northern Ireland during public spending reviews, which happened before it was introduced. It has provided a transparent, endurable and fairly simple rule for reaching spending settlements without direct negotiation. As hon. Members have pointed out, the formula is written, in all its glory, in “Funding the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly: a statement of funding policy”, which is available as published by Her Majesty’s Treasury.

There is a widely held impression that the formula is responsible for determining the level of spending per head on services in Scotland, Wales and Northern Ireland. Some colleagues have used those levels as an argument to say that there is unfairness, but that is not so. The formula is a device to allocate to the devolved Administrations a relative population share of changes in planned spending on comparable UK Government Department programmes. It is not used to determine the initial baselines because, as hon. Members have pointed out, they are inherited from the past. It is only used to determine the overall increase in the budgets of the devolved Administrations, and it is for those Administrations to decide how to allocate their budgets to individual programmes.

The Barnett formula does not determine annually managed expenditure, such as devolved spending funded by council tax and business rates, and, for example, social security, which is why sometimes the figures on public spending per head give a false impression of the actual spending. My hon. Friend the Member for Manchester, Blackley argued for a shift away from a population base for public expenditure under the Barnett formula to one based on needs, but failed to recognise or acknowledge that the annually managed expenditure parts of public spending are already needs based, be they allocated through local government grants, national health service expenditure or, crucially, in poorer areas, through social security spending. So a considerable part of the expenditure of public money regionally, which appears in the figures that are often quoted, is already needs based.

Can the Minister tell me what English regions benefit from the Barnett formula?

The Barnett formula seeks to allocate increases in what are known as departmental expenditure limits based initially on English departmental allocations and it seeks to ensure that the increases in DEL, rather than annually managed expenditure, are conveyed fairly on a per-population basis to the devolved authorities, which are allocated their spending through a block grant. In England, each part of public expenditure that is departmentally limited is allocated departmentally rather than on a block basis. [Interruption.] I have explained that annually managed expenditure, such as social security, that is allocated on a demand basis is not part of the Barnett formula. The formula allocates Department expenditure-limited moneys that are in some ways devolved or not devolved, as the case may be, to Scotland, Wales or Northern Ireland. It is a needs-based formula for financial allocation.

The Barnett formula does not determine annually managed expenditure; its needs-based allocations are included in the limits, which hon. Members used to say that there was unfairness, whereas it distributes only part of total managed expenditure, which is known as DEL, rather than annually managed expenditure.

I accept my hon. Friend the Minister’s analysis, but does she think it fair that a huge capital project in London transfers money on no basis of need whatsoever to Scotland, Wales and Northern Ireland and not to the English regions?

In respect of the Barnett formula, the issue is whether such moneys are devolved or not and, if they are, by what percentage they are devolved. That is the technical mathematics involved in all this. If money is distributed, it is because the policy is nationally determined and therefore the devolved Administrations are allocated their percentage of it on a population basis. It is purely about whether it is a devolved matter or not. Crossrail is not a devolved matter, which is why the distribution was made.

In relation to Crossrail, it is also important to stress that a significant proportion of the money will come from the private sector and another part of it will come from the London council tax payer. However, I recognise what the hon. Member for Manchester, Blackley said, which is that there seems, at least on the surface, to be some perversity: moneys find their way to the devolved nations, but not to other parts of the UK. It is important that that £16 billion is a headline figure but a significant proportion of it will be coming from London taxpayers and businesses.

The hon. Gentleman’s point is well made.

The point of this debate is to try to improve the economic performance of all areas of the country, rather than to argue that there is unfair distribution between different regions and countries in the Union. When there is differential need within as well as between regions, the Government are far more interested in improving the economic performance for everybody to ensure that we can maximise economic opportunity. That is why it is important that at the same time as we publish the pre-Budget report, we publish a review of sub-national economic development and regeneration in England, which devolves significant economic power in order to improve economic performance regionally. That has been improving faster in the poorer regions than in the others so I hope—

Order. We must move on. In fact, we have a timely Division.

I am pleased to have the opportunity to debate housing in Northampton, which is the largest town in the UK and one of its most successful. It is in the Government growth area and has a successful economy, an incredibly high level of employment and a high level of home ownership. Most people in Northampton aspire to home ownership, and until recently house prices were low enough to make it a realistic option for almost all working families. Government plans for the growth area include the provision of 37,000 more homes, one third of which are to be affordable and a quarter to be social housing. All that is successful and should continue to be so, with people buying decent quality homes and building solid communities in which to bring up their families. That is what makes my constituency so special and puts the values of people there at the core of our country’s success.

What I wish to deal with in the debate is different, however: the provision of social housing by Northampton borough council—some 13,500 housing units in total, including a big block of new town housing from the previous big planned growth in Northampton in the 1970s. As every hon. Member knows, good-quality social housing is central to the well-being of some of the more disadvantaged people in our constituencies. All of us deal with housing issues at our advice surgeries and visit the estates in our areas. We all know the hardship caused to people if they are homeless, if their homes are in disrepair, if they do not get the aids and adaptations that they need or if their estates become plagued by antisocial behaviour.

In my constituency, over 12 years of campaigning first as a candidate and then as an MP, I can honestly say that I have seen a real deterioration in the quality of life of many of my constituents in council housing. That has been despite the Government’s commitment to the decent homes standards and to driving up council performance, and it has happened under all types of political control. When I first became an MP, we were in control at the Guildhall and there were some difficulties. Then in 2003, the Conservative party got minority control of the council and, to my surprise, things went downhill seriously. In the most recent elections, the Liberal Democrats got majority control, and things have got considerably worse to the extent that housing now far outstrips everything else in my constituency case load.

I wish to emphasise that the problems are not because of the shortcomings of individual staff, who mostly do a good, straightforward job, but because of the council’s strategic management and leadership. I am sure that my hon. Friend the Minister will point to the most recent comprehensive performance assessment report, which shows some improvements. However, the main improvement is what the report calls “stronger political leadership”, which, to be honest, is to a great extent an obvious result of having a majority party administration as the result of one party getting an outright majority at the council elections.

The reality for my constituents, who depend on the council’s housing services, is that things have got much worse. Over 10 years, the council’s housing stock, which should have improved under the national decent homes programme, has simply got 10 years more dilapidated. Homeless people have been driven into the inadequate private sector of rented housing; people with special needs, such as domestic violence victims or those waiting for aids and adaptations, have gone unheeded; and antisocial behaviour, which is the ultimate plague of badly managed housing stock, has made life a particular misery on some estates. The most recent assessment of housing services by the Audit Commission found that Northampton provided a poor housing service with uncertain prospects for improvement. Uncertain the prospects were indeed, because they have not improved.

On disrepair, the council’s housing stock condition survey found that about a third of the borough’s housing was in need of improvement to bring it up to the decent homes standard. However, the CPA’s overall assessment of the council’s performance found that although it had identified funds to bring the properties up to standard, there was a “very high risk” that the council will fail to meet the decent homes standard by 2010. It also found that although the council had made regular statements that its ambition is to achieve the decent homes standard, they amount to aspirations and not realistic, robust and deliverable objectives.

Between 2004-05 and 2005-06, the number of council properties that were deemed unfit fell by only 3 per cent. from 28.7 to 25 per cent. By my reckoning, therefore, it will take a further eight years to achieve the decent homes standard, which well misses the Government’s targets. That does not take into account the fact that some of the property is deteriorating at a substantial rate without receiving any kind of planned maintenance check from the council.

We are now less than three years away from the 2010 decent homes target. The experience of my constituents, which is reflected through my advice surgeries and my visits to their homes, is that some properties are deteriorating very quickly. The upgrading programme taking place up and down the country, which my hon. Friend the Minister must see when he looks at housing programmes, is simply not happening in Northampton. People come to my advice surgeries carrying plastic bags with belongings covered in green mould. On one estate, a woman, her husband and two children are unable to use one of their two bedrooms because of the damp and have had to throw away clothes affected by mould.

I cannot tell you the number of times, Mr. Atkinson, that I have visited homes to see the extent of the disrepair to find water pooling on floors and walls covered with mould. On one estate, I found little stalactites and stalagmites growing in the walkways as a result of long-term structural disrepair. In one home, I knelt down on the carpet to look at some mould on the wall in a corner of the room. When I got up, my clothes were soaking wet, as the carpet was completely sodden. Some properties are permeated by the smell of damp, and parents complain that their children have chest infections.

On one estate, partially completed repairs programmes had left serious holes and disrepair that had not been dealt with for many years. In the eastern Newtown district, major improvements are needed to housing that was not particularly well built to start with and that has deteriorated markedly in the past decade. Substantial reconfiguration is also needed.

In other parts of the country, it has been well recognised that estate design can contribute greatly to problems of crime. Steps have been taken to remove rat runs, block off walkways and provide people with defensible space around their homes. Recently, councillors have been told that emergency repairs only will be carried out because of the need to focus on reducing the number of voids. Emergency repairs are extremely inefficient because they mean that planned maintenance does not get done. If they are dealt with on a call-out basis, they are also extremely expensive, which leads to a reduction in the number of repairs that are completed.

Another big problem is that of homelessness. The CPA assessment of the housing department commended the council’s housing and money advice service. Indeed, I used to refer homeless constituents to that service. Unfortunately, it was closed down, and homeless applicants now simply get referred to a general one-stop shop. The results for people with some of the most complex needs are truly appalling. Women who are fleeing domestic violence do not want to set out their concerns over a general counter in front of whoever else happens to be there. Therefore, they do not get the priority that they should be accorded under our homelessness legislation, which was hailed as such a milestone in supporting homeless people and in tackling real social problems.

Housing options interviews, which should be carried out after needs assessments to see if people can be housed in the private sector, are being used crudely to direct people into private sector housing that they cannot manage. For example, a pregnant and homeless 16-year-old girl who had spent a week applying for housing and being sent off to stay with friends for the night was then put into a bed-and-breakfast hostel in the red-light district. However, the hostel did not provide breakfast and the girl had a packet of Coco Pops in her little room, which she ate before she set off for school. She was then offered a two-bedroomed private rented flat, but her housing benefit would not cover the rent. I do not know how a young girl, newly homeless and pregnant and still at school, was supposed to manage a six-month tenancy without security of tenure and without the necessary money to pay the rent. There appeared to be no joint working with other agencies, so the girl’s midwife had no idea where she was. Her school, which could not get any response from the council, contacted me.

Recently, a young girl who had fled domestic violence with her child applied for housing and was told that she was intentionally homeless. She did not know how to get a review or how to appeal the decision. She moved in with her parents and has now ended up in a six-month tenancy with her parents having to pay the deposit and about a third of the rent each month. That type of position is not financially sustainable and puts the young woman and her child in a revolving door of homelessness.

People suffering racial harassment have an equally difficult time in getting the type of professional support that I had thought was now routine. For example, a woman of Somali origin has had her car attacked and has been followed to the shops by a gang of youths who shouted racist abuse at her and her eight-year-old child. When she went to the council, she was told that it would be years before she could get a move.

I note that the 2006 inspection report criticised the housing department’s record on diversity, yet with an increasingly diverse community, it is even more important that systems are in place to ensure that this dimension of housing is given due attention. That includes the need to provide proper support for people with disability needs. I recall one woman who came to see me because she had been promised a stair lift, two years before, so that she could get upstairs to the bathroom. Meanwhile, she was still sleeping in her front room in which she had a commode, and she washed in the kitchen sink.

We all know that estate management contributes to antisocial behaviour. An area that is run down, in which the planting is not maintained, the footpaths are not cleared and graffiti is left in place, attracts vandalism and crime. That is especially true in the eastern district of my constituency, where there is a major need for improved estate management, particularly of tree growth. The enthusiastic landscape planners who designed the estates planted too many trees and the wrong type of trees. They have confessed to that now. The result for many people is not enough light coming into their homes, and damp and damage from tree roots. In one instance, a branch fell on to a family’s home and demolished a child’s bedroom—fortunately during the daytime. It also means there are a lot of overgrown areas that harbour vandalism and antisocial behaviour.

On the Blackthorn estate in my constituency, the residents campaigned to get improvements and got the then Labour-controlled council to set up a special multi-agency project to tackle antisocial behaviour. That included blocking off rat runs, providing play areas in empty spaces and managing some of the more difficult tenancies. They found that a quarter of all local crimes were committed by children from one single family. People should not have to tolerate that type of severe antisocial behaviour from council tenants without the council taking action to enforce the tenancy conditions and ensure that people behave in a reasonable manner towards their neighbours. What happened on the Blackthorn estate shows what can be done if action to tackle antisocial behaviour is taken by all the agencies, not just the police, particularly on housing management. In cases in which a service is deteriorating, people plead a lack of resources, yet there are wasted resources in the council’s area.

There are three hostel-type units for single people in my constituency. They are completely counter-productive. Local authorities have a responsibility to advise and assist but, ultimately, not to house single people unless they are in some other way vulnerable. The duty is to house people who are vulnerable, in particular families with children.

The three hostels have become havens for some of the most appalling antisocial behaviour, drug dealing and violence. In many of the bedsits, the single tenants have long since become families. It is not unusual to find a couple and their child or even children living in a tiny bedsit. Successive council administrations have failed to take action over the hostels, in particular to convert them to family housing.

We are now 10 years into a Labour Government and just under three years off the target date for the decent homes standard programme, yet the reality for many of my constituents in Northampton who are dependent on the council for housing is that they find themselves trapped in steadily decaying housing stock. Those who look to the council, as they are perfectly entitled to do, for support and help and also housing find that they are turned away or life is made very difficult and they are refused help.

Over the years, the council has shed many of its responsibilities. It lost its road maintenance service, which was taken back by the county council because of the borough’s poor performance. It lost its planning functions to the West Northamptonshire Development Corporation, which now also manages regeneration. It seems recently to have lost two of its major public events to the local rugby club. Housing is one of the few functions remaining to it, and it is easily the one that is most critical to the well-being of my constituents. I therefore ask the Minister to ensure that the regional office intervenes quickly and decisively to get improvements in housing services for my constituents.

The window of opportunity for large-scale public sector investment in social housing is likely to close without my constituents seeing any benefit at all. The target date for the decent homes standard programme will have come and gone, but the council will still be arguing over whether repairs and housing services should be run from one depot or another. My constituents cannot continue to wait indefinitely. The excuses have been that elections were just coming up, or that a new chief executive was just starting, yet two council elections have come and gone with changes of control, and two new chief executives have come and gone.

Frankly, I do not think that my constituents should have to wait any longer. In 21st century Britain, it is completely wrong that people should have to live in homes where green mould grows on their belongings, where they cannot walk across the estate without their child being called all the racist names under the sun, or where they have to go for months without a bath because they have no way of getting upstairs. I completely recognise that it is down to the council to deal with such problems, but, at the end of the day, the Government also have a responsibility to ensure that people get decent housing, as is their right. In this case, the council either cannot or will not get its houses in order, so I ask my hon. Friend to ensure that the regional office intervenes in the interests of my constituents.

As a fellow north-eastern MP, it is a pleasure to serve under your chairmanship, Mr. Atkinson. I congratulate my hon. Friend the Member for Northampton, North (Ms Keeble) on securing this vital debate and on continuing to raise this crucial matter. Her commitment to housing in Northampton is shown by the fact that she has chosen to raise it for the second time this year. She had a debate on the topic in the House in March. I welcome the fact that she is a dedicated and assiduous Member of the House on behalf of her constituents.

My hon. Friend raised graphic—indeed, distressing—points, and I hope to cover many of them. Frankly, her first-class contribution also raised many wider issues about national policy, which I also hope to address in the time available.

Only last week we introduced the Housing and Regeneration Bill, which will help to deliver the Government’s pledge to build 3 million new homes in mixed and sustainable communities by 2020. My hon. Friend used the expression “solid communities”, which is a good turn of phrase. I shall continue to use it from now on, because it is very appropriate.

The Bill will help to address the shortage of affordable housing for first-time buyers and families, make new housing greener to tackle climate change and give social housing tenants a better deal. It will establish the new homes and communities agency, remove barriers to councils building their own social housing and make rating against the code for sustainable homes mandatory for new homes.

The Bill will also give tenants more choice and a stronger say over how their homes are managed by establishing a new social housing regulator, Oftenant, which will give tenants a stronger say in stock transfer decisions by making a tenant ballot mandatory and by giving local authority tenants greater powers over options for the future management and ownership of their homes.

I appreciate that, as the Bill stands and as we take it forward, there will be no provision for the social housing regulator to take on board local authority-owned stock, but the direction of travel set by the Government is clear on that. We hope to move towards it within two years. It is not in the Bill because of the differing performance management frameworks and the need to consult, but I hope that my hon. Friend will take some reassurance from the direction of travel and from the provision for tenants to take greater action over failures to manage property. That is a good step.

The Bill will also implement changes to improve the way in which housing services are provided, including creating a level playing field for members of the armed forces applying for local authority housing, and improving the operation of the right-to-buy scheme. Many of the proposals will have a direct effect on my hon. Friend’s constituents in Northampton, North, and I hope that the Bill will be the background to future housing improvements in the town.

Another vital policy area that is already having an effect on my hon. Friend’s constituents and that now falls within my direct responsibility is the Milton Keynes and south midlands growth area. Indeed, I attended my first meeting of its inter-regional board in my new role as chairman only last week. It was held in Bedford. Through that role, I look forward to getting out and about in the sub-region. I hope that I will be invited to my hon. Friend’s constituency to meet people on the ground and hear about their experiences. I shall take the opportunity to find out about their growth plans, see what they are delivering and hear about the challenges that they face.

It is vital that local authorities, regional assemblies, regional development agencies, local delivery vehicles and all the other partners in the sub-region work together on common problems to find common solutions and make the best case for the area. In my time as chairman, I will support the board but also challenge it to provide the housing that the people of Northampton and the wider area need and deserve.

At the meeting last week, I was impressed by the amount of energy, ambition and positive feeling that I witnessed. Such ambition is needed to ensure that we create places where people will want to live. I am keen to ensure that growth has a positive effect on the lives of the existing residents in areas such my hon. Friend’s constituency.

Tomorrow, I shall speak at the second annual Milton Keynes and south midlands conference in Kettering. I will take the opportunity to emphasise the challenge that faces the sub-region, and to pledge my support to champion what people in the area seek to achieve. This is a time of great promise and opportunity for Northampton, North. I want to ensure that my hon. Friend’s constituents have housing that is as decent as possible.

On the specific issues raised by my hon. Friend, I thought that it might be useful if I provided an update on the progress made in the areas that my right hon. Friend the Minister for Housing promised to look into during the debate in March. On the wider question of the supply of decent homes, the authority is being encouraged to take a broader view and to use the opportunity and resources provided by the growth agenda to help invest in existing stock. An event to look at the wider picture afforded to the authority by Government policy in the post-Green Paper agenda will be held in December.

On the subject of Northampton borough council’s review of its own stock, it has commissioned an asset management strategy to look in detail at the stock condition and the wider factors for each separate area of the town. I understand that good progress has been made in preparing that strategy, and that work will be used to develop the repairs programme for the next three years. It will be introduced at the beginning of the next financial year, and is, as my hon. Friend rightly said, vital for her constituents.

My right hon. Friend the Minister for Housing also tasked the Government office to work closely with Northampton to improve its housing services before the next Audit Commission inspection, so I was particularly concerned to hear about the failure to improve housing repairs. I understand that since the March debate, Northampton borough council has commissioned an independent report into the efficiency of its direct service organisation, which includes the housing repair service. That will inform changes to the service, and the housing sub-board—I shall come to that in a moment—has continually emphasised the need for improvement in that area. A number of immediately implementable improvements were identified during the report’s preparation, and I understand that they have been implemented.

I understand that just this week the council agreed to do only emergency repairs, which is catastrophic in trying to obtain proper, sustained improvement to housing stock. It is also a big waste of money.

I agree. My hon. Friend is right to say that we should focus more on planned maintenance, as opposed to emergency maintenance, for a range of reasons. It provides greater reassurance to tenants, and is better value for money. If I may, I shall take that away and see what is going on with the emergency repair service.

The work that my right hon. Friend challenged after the March debate has been carried out through the involvement of the Government office in the housing sub-board, a group that was set up to support and advise housing staff as they implement their improvement plans. The board is made up of a chair with experience of working with registered social landlords, a chief housing officer from a neighbouring authority, and representatives from the Government office for the east midlands and the housing inspectorate. The group has instigated a number of initiatives, including a comprehensive service improvement plan. Since the last debate in March, seven meetings of the housing sub-board have been held to measure progress and to challenge the performance of the authority.

The initiatives in the improvement plan include a review of the services provided on housing estates—my hon. Friend rightly mentioned the importance of that—the previously mentioned asset management strategy, and the development of monthly performance clinics. At those clinics, individuals in the housing service are challenged on performance and results are reported back to the sub-board. Throughout the meetings, the board has emphasised the need for the authority to increase the pace of change to improve services for tenants, and will continue intensively to support and challenge them. I understand that a further Audit Commission inspection has now been scheduled for May 2008.

I am conscious of the time, Mr. Atkinson, and do not think I can get through all the points that I want to cover. If my hon. Friend will allow, I will write to her setting out the clear framework that I understand is taking place.

My hon. Friend made an interesting point about homelessness. Northampton has used a homeless prevention fund to stabilise clients at risk of homelessness, and to underpin joint working to help people retain their homes. A proportion of that fund underpins their work with victims of domestic violence, as she rightly pointed out. That sanctuary scheme enables people to make informed choices about their future plans and to feel safe while retaining their family homes if they choose to do so.

Helping people to move through supported housing to independent living has been identified as an area in need of improvement, as my hon. Friend said. The council and its partners are working with my Department’s homelessness directorate and its officials, and will meet on 6 December to finalise the action plan and to formalise the joint working that is necessary to improve the service. The event will look specifically at youth homelessness and clients with mental health and complex needs as those groups are particularly at risk of repeated homelessness. The Department will also share best practice with Northampton.

When the Minister considers youth homelessness, will he also consider young women, particularly those who are pregnant?

I take that on board, and will instruct my officials to do so.

I want to comment briefly on my hon. Friend’s point about the request to intervene. As she said, we are on to the third new chief executive, who is providing better organisational capacity and is improving the morale of staff, who are hard working and hard pressed. We must allow time for that to be done. She made an exceptionally fantastic point about the dire need for strategic political leadership. That is not being provided in the council, but I pay tribute to her work as the Member of Parliament for that area to ensure that the strong political leadership that her constituents deserve is provided.

It is a pleasure to serve under your chairmanship, Mr. Atkins, after what has been a marathon day for issues affecting Wales.

It has been Welsh day in Westminster Hall.

Indeed, it has been Welsh day in Westminster Hall with debates on Welsh ports, the Barnett formula and now the critical issue of police funding as it affects Dyfed-Powys. I am delighted to have secured this debate as we move towards publication of the policing grant report.

It would be inappropriate to comment on the sudden retirement of the force’s chief constable on Monday evening because investigations are continuing, and I do not propose to go down that route, however much the media might suspect my motives for the debate.

I pay tribute to the continuing success of Dyfed-Powys police in providing a widely respected police presence. It is assessed as performing well in challenging circumstances, and in particular it has established a reputation in UK policing as a leader on child protection issues, and that deserves recognition.

The Minister does not need reminding of the area covered by the force, and the number of Members on the Benches around me indicate that it covers the largest police territory of any force in England and Wales. It covers Brecon and Radnorshire, Montgomeryshire, Carmarthen, East and Dinefwr, and other constituencies. That is more than half of Wales’s land mass, and parts of the area are sparsely populated. Despite that challenge, the latest police performance assessment gives Dyfed-Powys police an “excellent” mark in three out of seven categories, and a “good” mark in a further two categories. There is no doubt that the force has a record to be proud of. It is ranked joint 3rd-4th of all forces in England and Wales, and comes top of the family of rural forces. It has the highest detection rate per 1,000 population of any force in the UK, and the lowest crime rate.

One of the force’s excellent marks is for the category of resources and efficiency, in recognition of its impressive work in modernising its work force, ensuring that civilian staff rather than officers handle the more administrative side of the force’s work. Much remains to be done, but the force has made great progress. The force was at the forefront of the move to employ civilians to run custody suites under the management of a custody sergeant, and the local feeling is that that has been successful. Civilian staff at its communication centre are complemented by six officers working in different sectors, in contrast with other forces where a much greater proportion of officers work in call centres.

The force is ahead of the game in many ways. It has engaged in collaborative projects with other Welsh forces, so that, where appropriate, resources can be pooled and efficiency savings made. The four Welsh forces have a formally constituted committee, the Police Authorities of Wales, which provides governance for a range of collaborative activities. On serious and organised crime, and on counter-terrorism, the four forces are already sharing information and practices. The Tarian centre is well known for its effective work. The point is that while there may be opportunities for efficiencies in support services, they are limited in comparison with efficiencies that other forces might make, because they have already been made.

In providing the background to the debate, we must not underestimate the huge expense and manpower commitment that the four Welsh forces were forced to undertake following the Government’s abandonment of their plans to merge those forces into one. According to figures provided by the Police Authorities of Wales, when that policy was abandoned in July last year, some 30,000 hours of police officer work had been wasted in preparation, and, according to Rhodri Morgan, the First Minister, about £1.5 million was spent in the process. There are other cost pressures on the force. For instance, the Assembly Government’s decision to phase out the rural relief scheme and to replace it with a small business scheme will mean extra costs of some £100,000 for the force.

The Minister will agree that Dyfed-Powys has a remarkably successful history of participating in the fight against serious and organised crime and in counter-terrorism through collaborative work, while keeping its focus fundamentally on good-quality rural policing. The police have done good work on developing their neighbourhood strategies, the problems of which are compounded by the huge challenges of rurality. When I talk to police officers, as I did in my constituency in Aberystwyth on Monday, I hear of the vast distances that neighbourhood police officers have to cover. The fear—the perception on the ground—is that, far from delivering neighbourhood policing more effectively, the police will have to retreat from it.

I concur with my hon. Friend on the police’s work and on neighbourhood beat officers—similar things are developing in my constituency. The one disappointment is that we do not have enough community support officers. They were promised to the force, and people would have more confidence that they could go about their daily lives without fear of interruption if more officers were visible.

I am grateful for that observation. There are limitations to the kind of services that such officers can provide—in my constituency, they cease work at about 10 o’clock at night—but they can make an immense contribution, particularly to public perception because of their visibility on the streets and lanes of our constituencies. Certainly, there is a perception within the Dyfed-Powys police authority that it was short-changed to the tune of around 15 officers. Approaches were made to the Home Office, which, to its credit, gave more money, but it was not enough and there is still a significant shortfall.

The comprehensive spending review has frozen the Home Office budget in real terms—there is no doubt that there is a tight settlement. If the funding grant were calculated this year as it has been in previous years, the authority would undoubtedly have to make some tough choices. We are arriving at the central reason that I organised this debate, namely, to question whether, in the context of such a tight spending round this year, it is the right time for the Government to propose changes to the police funding formula that could remove vital funding lines for rural services for forces such as Dyfed-Powys. A Department for Communities and Local Government consultation proposes folding the rural police grant into a general grant and tapering the floor grant over the CSR period. The authority estimates that, taken together, those things will mean a loss of £6.5 million per annum by the end of the review period, which is equivalent to 150 police officers.

The hon. Gentleman will recall that when the Dyfed-Powys police authority came here to brief the region’s Members, it expressed concern about how the consultations had taken place and the fact that the Welsh police authorities were initially left out. It was also concerned that some of the changes were proposed because data were not available and were not factored into the Welsh figures. That is no fault of the Welsh police authorities, it is simply that there are no statistics.

We might not be in the same party, but we were at the same meeting and share the same concerns. Dyfed-Powys perceived that it had been marginalised in the process, which is ongoing, and we expect a report fairly soon. Some of the data and criteria for judging those matters are inapplicable to the areas that we aspire to represent.

The authority is concerned at the loss of 150 police officers. Given that the authority has only limited scope to make further efficiency savings, there could be a problem for rural policing in Wales. When the rural policing grant was introduced in the late 1990s, there was cross-party acceptance of the need to recognise additional cost pressures faced by rural forces. Let me assure the Minister that those cost pressures still exist—indeed, because of rising fuel prices, for instance, the pressures are greater still. If the rural policing grant is removed, rural forces, of which Dyfed-Powys is the largest, will find themselves in a dire budgetary position. In all the scenarios presented before the ongoing consultation, Dyfed-Powys would face major deficits.

Does my hon. Friend agree that it feels almost as if Dyfed-Powys is being punished for having such a good record on keeping crime down? Does he also agree that people who live in sparsely populated areas have every right to expect their service to be maintained, whether in Montgomeryshire or Ceredigion? At the end of the day, their demands are not great, and they have been well satisfied until now, but they are concerned that services will be cut back even from their current levels.

I use the term “rural entitlement”. Whichever part of Wales we work or live in, we have the same rural entitlement in principle. Frankly, I am fed up with my constituents complaining to me about alleged operational decisions that are forced on Dyfed-Powys police force by the inadequacies of current funding, which, if things continue, will become far worse.

The floor grant was introduced in recognition of the fact that the current funding formula was unfair and in need of review. If a taper is introduced in the context of such a tight settlement, it will increase the difference between funding for different forces. The exemplar provided in the DCLG document revealed that shire police authorities in England would lose between £4.3 and £10.7 million, which indicates the scale of the loss that Dyfed-Powys would face.

That brings me to the wider point made by the hon. Member for Carmarthen, East and Dinefwr (Adam Price) about the inadequacies of the consultation with Welsh police authorities. The fact that I must look at exemplars referring to the English shires rather than practice in rural Wales is of great concern. There is a statutory requirement for Government to consult police authorities on any change in formula grant distribution, but copies of the consultation were not sent to Welsh authorities, and the exemplar work excludes Wales. That cannot be right.

When Dyfed-Powys queried the matter with the Home Office, it was told to send submissions directly to the Home Office as opposed to DCLG. Wales has been totally overlooked throughout the process, and I hope that the Minister will recognise that and ensure that it never happens again.

In the face of what are expected to be no better than flat-rate increases for UK police forces overall, expected efficiency targets and substantial cashable efficiency targets, Dyfed-Powys is likely to face significant budgetary pressure. Unless the authority gets increases of more than 4.5 per cent per annum, it predicts that baseline services will be reduced.

The Minister and the Department have in the past acknowledged the need to reform the police formula funding methodology, which I would support. We need a more transparent, open and wholesale review of the process, involving all police authorities in England and Wales. Such a review would look at the accuracy and appropriateness of indicators, which relates to the point made by the hon. Member for Carmarthen, East and Dinefwr. It should ensure that the data it uses are available across England and Wales. For instance, the log of bars per hectare measure discriminates against a rural area; why not use a log of bars per 100,000 population? Indicators on economic migration are also inadequate. In my village, just north of Aberystwyth, the population multiplies by five in the summer months. That needs to be factored in.

In previous years, the council tax precept has borne the brunt of budget shortfalls. In 1998, the precept made up 15 per cent. of Dyfed-Powys’s budget; it now makes up 35 per cent. of the funding needed to maintain the force.

Those problems exist without the proposed funding formula changes. I might be repeating myself, but it is critical to ask whether, in the context of such a tight spending review, it is time to scrap the rural policing grant and taper floor support following such minimal and inadequate consultation with Welsh forces.

Dyfed-Powys police authority has told me that the scale and impact of the proposals will be completely devastating to the force—a force with such an impressive record. On that sad and sobering note, I look forward to what the Minister has to say.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing the debate and on the measured but powerful way in which he made his case, which was extremely helpful. He has some of the other Welsh Members from the area with him, including the hon. Members for Carmarthen, East and Dinefwr (Adam Price) and for Brecon and Radnorshire (Mr. Williams). May I also say how much I welcome the hon. Member for Montgomeryshire (Lembit Öpik)? He and I have spent many hours together in various Northern Ireland Committees and on various pieces of Northern Ireland business. I am very pleased that all those hon. Members are present. They are all assiduous in campaigning for their constituents. Whatever the political differences between us, the reason that they are all here this afternoon is to do what they can to ensure that their constituents have the best possible service. I commend them for that, particularly the hon. Member for Ceredigion.

I shall start by setting out the context and the existing situation. Since 1997, the Dyfed-Powys police force, like every other police force in England and Wales, has received substantial and significant increases in Government grant. In the past decade, Dyfed-Powys has seen a 20 per cent. increase in real terms in central Government grant. That is a huge investment in local policing. Dyfed-Powys police force is receiving £51.8 million in general grant this year—an increase of 3.6 per cent. from 2006-07. That is in line with the broadly flat rate increase of 3.6 per cent. for all forces in England and Wales. On top of the general grant, Dyfed-Powys will receive about £13 million from a range of other Government funding.

I appreciate that the hon. Gentleman recognises that the product of that significant investment from both central and local resources is clear. On 31 March this year, Dyfed-Powys had 1,177 police officers, compared with 1,005 10 years ago—an increase of 172, which is 17 per cent. The number of support staff had grown from 322 to 594—an increase of 272, which is virtually 85 per cent. All those extra support staff help to release more officers for front-line duties, where we all want to see them. They are also supported by 77 police community support officers.

I very much welcomed the intervention by the hon. Member for Brecon and Radnorshire. PCSOs will do sterling work not only in the constituency of the hon. Member for Ceredigion, but in constituencies in the rest of the Dyfed-Powys area, the rest of Wales and, indeed, in England. We need to demonstrate continually our support for them. They do a different job from that of police officers, but they do an excellent job, for which I am sure that most of our constituents are very grateful, so I am pleased that the hon. Gentleman intervened on that point.

Let us not focus just on inputs. In 2006-7, total recorded crime was down, violent crime was down and burglary was down from the year before. Like the hon. Member for Ceredigion and the other hon. Members, I pay tribute to all those in Dyfed-Powys police whose efforts have contributed to that.

Dyfed-Powys police have been supported by the funding floor for many years to ensure that they have had year-on-year increases in grant. This year, Dyfed-Powys police are receiving £4.5 million more than their strict police funding formula allocation. Part of that additional money comes from grant that would otherwise go to South Wales police, but the vast bulk of the support for Dyfed-Powys—£3.6 million—comes from additional money provided by the Home Office from outside the general grant settlement.

I have set all that out to establish the context and to make clear the situation of Dyfed-Powys. However, I know that the hon. Member for Ceredigion is keen to look to the future. As the hon. Member for Montgomeryshire will know, normally I try to answer specifically the questions that are raised, so I apologise that I cannot be as specific today as I would normally be in such a debate. I hope that the hon. Member for Ceredigion will find in the future that when I answer questions as a Minister, I actually try to answer the question. However, I cannot do that at present, for which I apologise. He will appreciate that we will be announcing very shortly details of the police funding settlement for the next three years, so I cannot give details today, much as I would like to pre-empt that announcement. Obviously, he would like to know about all of that.

I very much hope that the spirit of the debate is a continuing dialogue between Dyfed-Powys, the Home Office and hon. Members. Would the Minister be prepared to accept a delegation from Dyfed-Powys police authority and perhaps a cross-party gathering of the MPs for the area to express concerns and hear some of the straight-talking answers to which he has referred? We would very much appreciate such a dialogue with him.

I am always happy to meet hon. Members and their constituents. I shall talk to my right hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing about that, but certainly I would be prepared to meet the hon. Gentleman, his parliamentary colleagues and some of his constituents to discuss these matters.

The hon. Gentleman referred to the three-month consultation on formula grant distribution that took place over the summer and closed in mid-October. The consultation was preceded by several meetings of the police allocation formula working group, a Home Office-chaired group that includes representatives from the Association of Chief Police Officers and the Association of Police Authorities, which considered possible changes to the funding formula. I will say, slightly defensively, that one member of the group was the director of finance and resources for Dyfed-Powys, so the hon. Gentleman can be sure that the interests of his local force were properly represented in that forum.

We received responses from most police forces or authorities, including from three of the Welsh forces, which I hope provides some reassurance that the consultation included consultation with and representations from Welsh forces. We have considered very carefully the representations from all police stakeholders received in response to the public consultation. That includes the representations from the Welsh forces, including those from the former chief constable of Dyfed-Powys. We have noted his concerns, particularly about sweeping rule 2 grants, which are specific to rural policing, into the general pot. As the hon. Gentleman pointed out, the Dyfed-Powys police force has a particular interest in the rural policing fund. That is not surprising, because with 4,225 square miles, it covers the largest area of any force in England and Wales.

Let me be clear: the purpose of the consultation paper was not to disadvantage rural authorities. Our intention was to take the views of the police service on a range of options. One of those was to ensure that we were using the most up-to-date data in calculating the police funding formula. The hon. Gentleman and his colleagues talked about ensuring that we use the correct data.

The other option concerned ways to convert funding from specific grants, which can be used for a specific purpose, to general grant, which can be spent at the discretion of police authorities. As the hon. Member for Brecon and Radnorshire said, there is a tension between grants for specific purposes, which in many respects people like because they say that the money goes to an earmarked pot—a specific thing—and the representations that we often receive from the APA and chief constables that that money should not be ring-fenced, and that it should all be put in a general pot so that it can be used in the way that they feel is appropriate in their local area. There is a balance to strike between those two positions.

The Minister will understand that there is a particular concern in a rural area such as that covered by Dyfed-Powys police. We are worried that if we do not have that ring-fenced money we will lose out overall. We tend to feel a bit discriminated against for being rural. With huge areas being covered by a few police officers—from Welshpool to Machynlleth in my case—we think that we will continually have to cut back without that money. What assurances can the Minister give us that that will not be the case?

The only reassurance that I can give the hon. Gentleman is that we have heard the point about the importance of the specific grant for rural policing for the huge areas of Dyfed-Powys and of some other forces in England and Wales. We have heard the representations, and we are considering them alongside others.

Hon. Members will have to wait until the police funding settlement announcement for the Government’s conclusions on the matters about which we consulted. However, in order to reassure the hon. Gentleman, we are not going to implement changes that would jeopardise the stability of the entire finance system for police authorities. As in previous years, the settlement announcement will be followed by a six-week consultation period, and that may be when we should have the meeting that was referred to earlier. We will, of course, take account of any further representations that he or his hon. Friends may wish to make; there will be a further opportunity for the hon. Gentleman to represent his constituents.

I know that the hon. Member for Ceredigion is interested in the impact of local tourism, and that he recently tabled parliamentary questions about the use of a tourism indicator. There is little more I can add. The current formula was consulted on in the summer of 2005, and introduced in 2006-07 after a comprehensive review in which representatives from ACPO and the APA were involved. The review concluded that there was no accurate measure of tourism impacts, and it therefore did not include them in the new formula. Dyfed-Powys benefited from the revised formula changes, and its position was further protected by the application of a virtually flat-rate grant increase for all police authorities for both 2006-07 and 2007-08.

One of the real successes of recent years has been the roll-out of neighbourhood policing, as I am sure the hon. Gentleman knows. However, Dyfed-Powys was one of three forces that were inadvertently disadvantaged by the decision to alter the funding arrangements for community support officers and neighbourhood policing in 2007-08, which was announced in a written ministerial statement by my right hon. Friend the Member for Harrow, East (Mr. McNulty) when he was Minister for Policing, Security and Community Safety. The three forces had not previously been able to commit to early acceleration in the roll-out of neighbourhood policing, so made representations that they needed further help to complete neighbourhood policing coverage in their areas. We were pleased to be able to find some money to help them get back on track. For Dyfed-Powys, it amounted to £186,000 towards the cost of an additional 12 PCSOs.

Finally, I want to say something about force efficiency, to which the hon. Member for Ceredigion referred. Dyfed-Powys has a good record of delivering efficiency gains over and above the targets set since 1999-2000. However, over the coming years, increasing efficiency and productivity will become more important. Forces will have to work together and across communities, and take every opportunity to deliver services more effectively. I take the point made by the hon. Gentleman about good collaboration between the four police forces in Wales and the way in which they are trying to develop that relationship into an ever-closer partnership. Many forces have already gained from working in that way.

I conclude by saying that I am happy to meet the hon. Gentleman and his hon. Friends in due course. The best time will probably be after the settlement has been announced, when they will be able to see the figures and what has happened. He can then make further representations if he wishes. I say again that Dyfed-Powys has received significant additional money. There will always be a debate about whether more resources are needed and about how they should be deployed.

I am happy to join the hon. Gentleman in congratulating Dyfed-Powys police on its excellent record in financial management and in fighting crime and making people feel safer. Today’s debate has been an important contribution to that, and I congratulate the hon. Gentleman and his hon. Friends on the measured and constructive way in which they put their case.

Question put and agreed to.

Adjourned accordingly at fourteen minutes past Five o'clock.