I am sure that the whole House will join me in sending our profound condolences to the family and friends of the three servicemen killed in Afghanistan in the past few days. They were Marines Neil Dunstan and Robert McKibben from the UK Landing Force Command Support Group, and Colour Sergeant Dura of the 2nd Battalion of the Royal Gurkha Rifles. We owe them and all those who have given their lives in conflict a huge debt of gratitude.

I should like to make a statement on the Washington summit on financial markets and the world economy. This was the first ever G20 leaders’ summit, which I attended this weekend with the Chancellor of the Exchequer. In just over six months, the world has seen a 40 per cent. collapse in global share values, while global financial institutions have written off losses approaching $1,000 billion and world oil prices have peaked at nearly $150 a barrel and then sunk 60 per cent. We have seen a fall in global expectations for growth in the world’s industrialised countries from 2.5 per cent. in 2007 to below zero for 2009, with all the impact that that has on families and businesses and all the worries about mortgages, jobs and family security in Britain and around the world.

What is making this a fully worldwide crisis is that in recent weeks a problem that started in America has extended to emerging markets and developing countries, some of which are facing bankruptcy. These unprecedented global events call for unprecedented global action. While the economic problems of the 1970s created the G5 and then the G7, it is right that for the first time leaders from developed, emerging and developing economies, which are responsible for 85 per cent. of global growth, met and agreed on the urgency of common and concerted, and where appropriate co-ordinated, actions to address the financial and economic crisis.

To put the long-term challenge in context, in the next 20 years it is expected that the world economy will double in size. This will mean a doubling of opportunities for British business and new opportunities for British workers and families. However, to make the transition to, and secure the benefits of, an open and inclusive globalisation, we have to deal with three other consequences that that brings. Those are, first, the need for restructuring of industries and services, not least resulting from the rise of Asia; secondly, increased competition for resources as long-term demand for oil, food and commodities from the newly emerging economies threatens to outstrip supply; and, thirdly, now that we have global flows of capital, the need to ensure a global framework for financial services as a precondition for prosperity and security.

As epitomised by the sub-prime crisis, which started in America, at the root of the banking crisis was a failure by banks to manage risk, to understand increasingly opaque and complex financial products and to make transparent a developing shadow banking system—[Interruption.]

Order. I am always on the record as saying that I want Ministers, including the Prime Minister, to come to the House to make statements. That does not give hon. Members, including hon. Ladies, a licence to shout anyone down.

Thank you, Mr. Speaker.

In Washington, we agreed first of all fundamental reform of the way the financial system is supervised around the principles that Britain has been promoting. They are greater transparency, responsibility, integrity—to avoid conflicts of interest—better banking practice and international co-operation. That includes establishing international colleges of regulators; bringing transparency to tax havens by including them within the scope of the financial system; convergence of accounting standards; reviewing executive compensation schemes that encourage excessive and irresponsible risk-taking; full disclosure of toxic assets; and reform to end conflicts of interest in credit-rating agencies. We set a clear timetable, tasking our Finance Ministers to prepare immediate measures for implementation by 31 March, and to report back on progress with the full action plan at the next meeting.

The summit also agreed that the recapitalisation of the banking system was the right course of action. The action that we have taken in the United Kingdom to buy shares in banks has now been followed in every continent of the world, and guarantees have been introduced to allow banks to raise the money needed to continue to support the real economy, as they must, through lending to businesses and families.

We agreed that, against the background of economic conditions worldwide, a broader policy response was needed immediately, based on closer macro-economic co-operation. Importantly, we made it clear that, within our commitment to fiscal sustainability, the broad and international policy response would need to encompass both monetary and fiscal policy action. Although it is for independent central banks to make their own decisions, we recognised the importance of monetary policy to the restoration of growth. Some contended that it was impossible to cut interest rates in Britain for fiscal reasons, but, in fact, the Bank has now, in two successive months, made two cuts worth in total 2 per cent. and the Government have stated clearly that there is scope for further action. A measure of the level of international co-operation that has already resulted is the extensive currency swaps put in place between central banks and the co-ordinated cut in interest rates across Europe, Asia and America a few weeks ago.

Crucially, and for the first time, our Washington statement agreed a broad and concerted international macro-economic policy response in fiscal policy, meaning measures to support families and businesses now. First, we agreed that fiscal policy has an essential role to play alongside monetary policy in sustaining demand, with quick-acting measures to encourage a rapid impact with help for households and businesses. Secondly, we agreed that the benefits of fiscal policy action will be greater for each country if all countries can act in a concerted way.

This imperative is shared internationally. In recent days China, South Korea, Australia and Germany have joined other European countries, including Spain and France, in considering new fiscal stimulus packages. The European Union has already said that the flexibility in the stability and growth pact to recognise exceptional and temporary conditions will be used. President-elect Obama has already stated that a new fiscal stimulus package in the United States is both necessary and urgent. Most previously published forecasts have assumed the absence of co-ordinated fiscal action, but the downturn can be shorter and less deep if Britain takes action, and if that action is matched elsewhere.

It is for individual countries to make their own announcements, as we will do in due course, but the more co-ordinated the action, the greater the benefit to each country will be. I believe that the emerging consensus across the world—from the International Monetary Fund itself, from Governments of left and right, and from political parties, with only a few exceptions, in developed and developing countries—is that we should take rapid, co-ordinated and concerted action through the use of budgetary measures.

Over the past year, the central problem facing the global economy and the UK economy was inflation, driven by a sharp rise in international commodity prices and allied to a credit crunch, which left fewer options for Governments. This year, the reality is the sharp falls in commodity prices that are now taking place, while the credit crunch is leading to contractions in bank lending. The risk in this new environment is not stagflation but the impact on the economy of close-to-zero inflation at the time of a downturn, so it makes sense for Governments to support interest rate cuts with fiscal action. That is giving real help to families and businesses now, and I believe that, in addition to the announcements already made, we will see in the next few weeks many countries following with expansionary measures founded on that agreed international position.

The third central message of the summit is that in taking action, we must resist all forms of protectionism. These threaten to slow down and eventually to stall world trade, thus denying us the benefits of one of the great engines of new growth. So, uniquely, all nations signed an agreement that over the next 12 months they will resist pressure and refrain from raising new barriers to investment and trade. The key to confidence in open trade is, of course, the signing of the world trade agreement, on which talks have stalled since the summer. We cannot allow that impasse to continue, and I welcome today’s new agreement—following Saturday’s summit—to work towards a ministerial meeting in December. To ensure that the trade round is truly a development round that benefits the poorest countries, it will be accompanied by an agreed $4 billion aid-for-trade programme for infrastructure in developing countries. In discussing the issues facing poorer countries, the summit reaffirmed the importance of meeting the millennium development goals—an importance of applying the same common purpose to the challenge of alleviating poverty.

Some have argued that as long as the trade talks remain deadlocked on specific issues, no deal can be agreed, but the G20 was explicit about the action that we have to take: for the first time we have instructed our Trade Ministers to agree, by the end of the year, the outlines needed for a successful conclusion to the Doha agreement.

Finally, the G20 leaders have also agreed that the next summit will allow us to review, and to make decisions on, the wholesale reform of the international economic architecture—built in 1945 but no longer adequate for the challenges of 2008. In agreeing on the need for reform, we also set down the agreed changes that we believe are already essential: a greater voice and representation for emerging and developing countries; an urgent expansion, with broader membership, of the Financial Stability Forum; and, better identification of vulnerabilities and anticipation of potential stresses, with swifter action in crisis response.

The International Monetary Fund’s ability to assist countries facing problems as a result of the current shock depends on its reserves of $250 billion. We welcome the announcement from Japan to lend up to $100 billion, but that may not be enough, and we agreed to review the IMF’s facilities to ensure that it has the flexibility to give countries the help that they need. The World Bank agreed that it would make new commitments of up to $100 billion over the next three years to protect the newest, the poorest and most vulnerable countries, and $30 billion-worth of new facilities specifically to help address the problems faced by the private sector, including recapitalising banks and providing trade finance.

At this unique moment in our economic history, we are seeing the world come together to find global solutions to what are the global problems that we face. Over the next few weeks and following consultation, Britain, as the incoming chair of the G20, will lead the preparations for the next summit, working alongside past and future chairs. We will set out the schedule of events, meetings and papers that will take us to the next conference, the date and venue of which will be announced next week. In the run-up to the conference, we will monitor, following the recapitalisation of banks, the barriers to the resumption of funding, because this summit and the meetings that will follow are about the real challenges of everyday life: the need for people to have confidence in the banks that hold their savings and their mortgages; and the need to know that everything possible is being done to help them in their jobs. We pledge that with national and international action together—real help in difficult times—we will take people fairly through this downturn. I commend this statement to the House.

I join the Prime Minister in paying tribute to Colour Sergeant Dura and to Marines Neil Dunstan and Robert McKibben, who were all killed in Afghanistan. As the Prime Minister said, they were serving our country, and we honour their memory.

Everyone welcomes the fact that the summit was of the full G20, involving countries such as Brazil, India and China. It discussed the immediate response to the recession and proposals for the longer term. I shall start with the longer-term reforms. On trade, after so many false dawns, does the Prime Minister believe that this time there is a real prospect of agreement on Doha? On financial reform, there are the Basel accords, which govern bank lending. For a year, we have been arguing that the rules should be made counter-cyclical, but does the Prime Minister agree with me that international action should be combined with action at home, such as the debt responsibility mechanism that we have proposed for the Bank of England to call time on debt? On international institutions such as the IMF, does the Prime Minister agree with me that genuinely sharing global leadership with countries such as India and China means giving them a larger say in how these organisations are run?

The section in the communiqué on the IMF includes talk of early warnings. Is it not also vital that countries listen to the warnings that they are given? The IMF warned Britain last year that household debt was rising rapidly, that our financial institutions were vulnerable and that, as a result, we faced a potentially severe impact. In future, will the Prime Minister listen to these warnings?

Next there is the failure of the regulatory system, particularly concerning credit rating agencies and complex derivatives. The G20 rightly talks about the importance of co-operation, but can the Prime Minister be clear about what is actually proposed? It does not mean detailed international regulation, but international co-operation over regulation. The G20 communiqué rightly states explicitly:

“Regulation is first and foremost the responsibility of national regulators”.

It is quite damning about national failure. It says—this is the communiqué that the Prime Minister signed up to—that

“some policy makers did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.”

For the past 10 years, the Prime Minister was the economic policy maker in Britain, so what responsibility does he take for those failings here?

I turn to the recession, about which the Prime Minister makes two claims. The first claim is that Britain’s economic situation is all imported from abroad. He has said that it started in America so many times that it is starting to sound ridiculous. Can he answer this—[Hon. Members: “It’s true.”] If it is true, he is going to have to answer this question. If Britain is so well prepared, can he explain why the IMF believes that the British economy will shrink faster next year than any major economy in the world? Can he explain why the European Commission says that we face a deeper recession next year than anywhere in the EU except for Estonia and Latvia? Far from being well prepared, Britain faces a deep recession. Is that not why in the past few months our currency has fallen more sharply than any major currency and more sharply than ever before in our recent history?

“A weak currency arises from a weak economy which in turn is the result of a weak Government”—

[Interruption.] I do not know why the hon. Gentleman is pointing at me; that was not my hon. Friend the Member for Tatton (Mr. Osborne) this week, but the Prime Minister when he was shadow Chancellor. As the hon. Gentleman was talking, I shall read the quote again. It says that

“a weak currency arises from a weak economy which in turn is the result of a weak Government”—

[Interruption.] I am so pleased to have made the Prime Minister smile.

The Prime Minister’s second claim is that there is universal support for a fiscal stimulus paid for by additional borrowing. Yet of the 3,500 words in the G20 communiqué, just 21 were about the fiscal stimulus, and they included the condition that the stimulus should be “appropriate” and “conducive to fiscal sustainability”. The real international consensus is that only the countries that have been fiscally responsible are best placed to act now. Is that not why the OECD recommended a fiscal stimulus for those countries that had consolidated their public finances? Is that not why the European Central Bank said that if a country has borrowed more than 3 per cent.—as we have done—it should not borrow even more? Even this weekend, what the head of the IMF actually said is that a fiscal stimulus should take place only

“where it is possible…where you have some room concerning debt sustainability.”

How can our Government claim that our debt is sustainable when our borrowing this year, before the recession has properly started, is among the highest in the developed world, and when we have just spent £40 billion on a bank rescue?

The Prime Minister keeps citing China, but China, like Spain, the Netherlands, and Australia—like half the OECD, in fact—has a budget surplus. In Britain, our Prime Minister used the good years to build up the biggest budget deficit in the industrialised world. Is that not why, in Britain, more discretionary borrowing now, without knowing where the money is coming from, is bound to mean higher taxes later? Is that not what the Employment Minister admitted last Tuesday? Is that not what the Chancellor admitted last Wednesday? Is that not what the Business Secretary, not known for admitting anything, admitted this morning, when he talked about

“a medium term adjustment some years ahead”

and a

“structural adjustment later on”.

Translated into English, does that not mean higher taxes under Labour?

Is it not the case that Labour’s borrowing bombshell will soon become a tax bombshell? Let us be absolutely clear about what this means: borrowing £30 billion now will mean an income tax bill for the average earner of nearly £1,500 later. Everyone knows the Prime Minister is planning a Christmas tax giveaway, but tax cuts should be for life, not just for Christmas. We need real tax cuts, not Labour tax cons.

Just two years ago, the Prime Minister said:

“No political party will be trusted if it promises stability in one breath and unfunded tax cuts in the next”.

Let me remind him of what he said. He pledged solemnly:

“To make unfunded promises, to play fast and loose with stability… is… something I will never do and the British people will not accept.”

So now that he has broken that promise—now that he is promising a borrowing bombshell—will he start his response by being straight with the British people? Will he admit that by borrowing more now, he will have to tax more later? Just for once in his life, can he give us a straight answer—do not his borrowing plans today mean higher taxes tomorrow?

Let me start with a quote from the Leader of the Opposition:

“I always think Leaders of the Opposition have to be careful not to… talk down the economy. You know there are some strong fundamentals in the British economy and we should celebrate those and point them out.”

That was his position a few months ago. He has changed his position today. A week ago, he said he favoured borrowing out of the crisis. Now he is against it altogether. Even the Americans agree that the financial crisis started in America. As for the regulation of banks, mortgages and pensions, it was his financial competitiveness working party that recommended the deregulation of pensions and mortgages only some time ago.

I have listened on many occasions to the Leader of the Opposition and to the shadow Chancellor, and I have come to the conclusion that they do not understand what is happening in the world economy. I do not think that the Leader of the Opposition realises that while last year, and in the last few months, the problem has been inflation—we have had inflation combined with a credit crunch—in the next year, the problem is deflation and the problem—[Interruption.] Inflation close to zero.

The answer is, as everybody has said at this international conference, that we combine monetary policy with fiscal action so that we have the best impact on growth in the economy. The Conservative party seems to be the only party that is now standing against what is a consensus developing across Europe and across the world: unless we take the fiscal action that is necessary now, and help businesses and families now, we will be undoing any benefit that can come from monetary policy and cuts in interest rates. I hope that the Conservatives will think again.

The right hon. Gentleman sometimes quotes Canada. The Prime Minister of Canada has just said, at the end of the meeting—[Interruption.] The Prime Minister— [Interruption.]

Order. I expect better from you, Mr. Soames, than shouting across the Chamber. [Interruption.] Order. The hon. Gentleman should be setting a good example.

The Prime Minister of Canada said:

“There’s a view coming out of this meeting, very strongly I can tell you… that monetary policy alone will not be sufficient to take the global economy through this crisis. There will have to be fiscal action, and there will have to be additional fiscal action.”

That is what almost every country is now saying as a result of what is happening around the world. It is the Conservative party that is out of touch. Then, there is Mr. Dominique Strauss-Kahn, the managing director of the International Monetary Fund, who said:

“What countries do you think should have it?”—

that is, the fiscal stimulus.

“I want to answer your question candidly. Everywhere where it’s possible. Everywhere where you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made.”

Let us also be clear about debt comparisons: France 55 per cent. of GDP; Germany 56 per cent.; Italy 101 per cent.; Japan 94 per cent.; the USA 46 per cent; the United Kingdom 37 per cent.

The Opposition have been wrong on every single matter concerning this downturn: they were wrong to oppose the nationalisation of Northern Rock; they were wrong to say that we should not act against shares speculation; they were wrong to say that we could not cut interest rates because the fiscal position was in a bad state; they were wrong to say on Sunday that we could not persuade the rest of the world of the need for a fiscal stimulus; they were wrong with their fuel duty stabiliser that would put fuel duty up by 5p now; they were wrong with the employment policy last week, which was dismissed by the Small Business Federation not as an incentive to employment but, after spending £2.5 billion, as a disincentive to employment. They have been wrong on every single occasion when they have turned their minds to economic policy. They are not only outside the national consensus, but outside the international consensus as well.

What, then, is the answer of the Leader of the Opposition? It is to bring back the right hon. Member for West Dorset (Mr. Letwin). That is what he means by “time for a change”. Everyone is tested by the economic circumstances we face: Governments are tested and Oppositions are tested. This Opposition have been tested and found wanting.

I would like to add my own expressions of sympathy and condolence to the—[Interruption.]

Order. Mr. Luff, you should calm down—[Interruption.] Order. The hon. Gentleman should calm himself, or is he telling me that I am not chairing the proceedings properly? I do not think that he would want to do that.

I would like to add my own expressions of sympathy and condolence to the family and friends of Colour Sergeant Dura and Marines Neil Dunstan and Robert McKibben who tragically lost their lives in Afghanistan this week.

I thank the Prime Minister for his statement. I, too, think that it was good that this was a G20 summit, which included new powers such as India, China, Brazil and others. I hope that that will be a precedent for the future because global governance can no longer be a stitch-up of the old powers alone.

I also strongly agree with the Prime Minister’s words on the danger of protectionism. The lesson from the 1930s is indeed that narrow nationalism and trade barriers will only make matters worse. Speaking as one who was at the inception of the Doha development round in 2001, I feel strongly that we must seek to trade our way out of this recession.

British exports, of course, will be boosted after the recent fall in the value of the pound after a long period of over-valuation. In my opinion, the shadow Chancellor was well within his own rights to talk about the falling pound, even if he made almost no sense at all. Does the Prime Minister agree that this sudden desire for currency stability is a bizarre U-turn from a party that once referred to the euro as a “toilet paper currency”?

The Prime Minister spoke a great deal today about a fiscal stimulus, and it is rumoured that he wants to borrow money for a temporary tax rebate. In my view, it is right to give money back to people on low and middle incomes who are more likely to spend some of that money, but instead of borrowing for a one-off tax cut, the Prime Minister could pay for a big permanent tax cut by ending unfair loopholes for the very wealthy. Would not that be fair? The right thing to borrow for is not short-term cash bribes, but long-term capital investment in infrastructure which the country needs in any case. Does he agree that extra borrowing can be justified only to fund green energy, sustainable transport and the homes we need for a sustainable economic recovery?

The Prime Minister still seems incapable of differentiating between good public spending and bad public spending. Why in the teeth of this recession, does he still want to waste £13 billion of the public’s money on an NHS computer system that will not work, £12 billion of it on a surveillance database that no one wants and £5 billion on ID cards that no one needs?

I know that in the past the Prime Minister has struggled to distinguish between cutting public spending and redirecting it as we want, but does he now accept that my party’s plans to redirect wasteful spending to things that people really need in a recession—such as homes, child care, education, training and fairer taxes—are the right thing to do?

The Prime Minister has spent several weeks jetting around the world. Will he now focus on three key steps that will help people here at home: permanent fairer taxes, borrowing only for long-term investment, and redirecting public spending towards the things that people really need in a recession?

The first thing that I should say to the right hon. Gentleman is that it is important that we do not cut capital investment at this time. The capital investment that we are making in homes, education, the health service and the environmental technologies of this country is capital investment that we will continue. I hope that the right hon. Gentleman will be able to support us when we say that it would be totally wrong, at a time when we are preparing for the next stage of the world economy, to cut capital investment in those areas.

I must also say to the right hon. Gentleman that we have removed tax loopholes in every Budget since 1997, including the loopholes removed by the Chancellor in the last Budget. I see no evidence from my reading of the Liberal Democrats’ policy document that they can find the billions that they say are to be found in the cutting of tax loopholes, and I believe that, when subjected to rigorous examination, their policy once again does not stand up.

I have to tell the right hon. Gentleman that if he cuts public expenditure and says that that constitutes savings, as he is doing, he is still cutting public expenditure by £20 billion.

I welcome my right hon. Friend’s statement, and particularly welcome the international backing for the actions that he has taken. I think we all recognise that he has a difficult task to perform in ensuring that sustained public expenditure maintains our economy at an appropriate level and, at the same time, helps hard-working families. Can he assure me that he will resist the siren voices on the Opposition Benches calling for the introduction of a fuel duty stabiliser?

In the heat of the summer, to gain a bit of publicity, the shadow Chancellor announced that he had a fuel duty stabiliser. The problem with the fuel duty stabiliser is that the minute petrol prices fell to 97p a litre, the right hon. Gentleman would have been bound to put the price up by 5p a litre. I do not think that, even with his bluster, he can deny that that is the case.

This is just one of the Conservative ideas that were launched in the morning, were found wanting in the afternoon, and are never talked about now. The right hon. Gentleman had exactly the same problem with his proposed employment measures last week. His proposal to spend £2.5 billion on employment, one of the biggest outlays of public expenditure, was rejected by the Federation of Small Businesses as a disincentive. I think that the Conservatives will have to go back to the drawing board, but I do not think that the right hon. Member for West Dorset (Mr. Letwin), who lost them the 2001 and 2005 elections, will be of much help to them.

Will the Prime Minister not confess that he went to the summit to obtain cover for the short-term borrowing on which he intends to embark as much for electoral as for economic reasons? Does he not accept that the summit statement stresses debt sustainability, which he noticeably omitted from all his own statements, and that if he goes ahead with adding to the level of debt that will, I hope, be revealed in full next Monday, he will merely build up impossible problems for the Government who must follow, and must sort out the mess that he has created over the 10 years of his stewardship?

When the right hon. and learned Gentleman was Chancellor, debt was 44 per cent. of GDP. At the moment, according to the IMF, it is 37 per cent. of GDP. That is debt sustainability: it means that we can build on a level of debt that is lower than the 1997 level to take the action that is necessary.

I went to the summit because, unlike the Conservatives, I believe that co-ordinated international action is possible. I believe that we can work with the rest of Europe and the rest of the world to take specific and decisive action to deal with the financial crisis, and I believe that we can work together not just on financial sector reform but on fiscal policy.

Despite saying a few weeks ago that borrowing was necessary, the Leader of the Opposition has today set his face against the fiscal stimulus that is necessary in this economy and other economies. He will find himself outnumbered by every major country in the world. He will find that America will have a fiscal stimulus in the next few months; he will find that the rest of the European Union will also agree to a fiscal stimulus; and he will find that the rest of the world will want that to happen. But if the Conservative party has not woken up to the fact that we have near-to-zero inflation coming up next year, and that fiscal stimulus is the necessary way in which to get around it, I do not think that the party will ever begin to understand the modern economy.

Will my right hon. Friend stick to the policies he has been outlining and give the fiscal stimulus that is necessary, and ignore the juvenile approach of those on the Tory Front Bench, whose Members apparently believe that borrowing is all right for bailing out bankers, but that when it is intended to make sure that people and small businesses all over the country have jobs and stay in business it is not acceptable?

Yes, if we had taken the Conservative party’s advice, the price of petrol would be going up by 5p per litre. It cannot deny that; that is the policy it announced a few months ago. Is this the right time for us to be increasing the price of petrol by imposing a 5p per litre rise? That is the Opposition’s policy, and it would harm people at this time. The Conservatives seem to be unable to understand that if inflation is falling substantially and there is a downturn and a credit crunch, we need the power of Government action to give a fiscal stimulus to the economy. I suspect that, under the influence of the right hon. Member for West Dorset, the Conservatives are lurching back to a monetarist policy such as that which failed in the past.

I welcome the G20 declaration, especially the section stating that its

“work will be guided by a shared belief”

in

“economic growth, employment, and poverty reduction.”

Given that tens of thousands of people employed in the financial sector around the UK are fearing for their jobs, not least in HBOS, is the Prime Minister confident that mistakes in regulation are not now being repeated with the abandonment of competition rules?

The hon. Gentleman opposes the action we took on competition rules in relation to HBOS and Lloyds TSB, but if we had not taken that action HBOS would have collapsed as a banking institution. The idea that the Scottish National party is putting around Scotland about HBOS being basically a healthy institution that came under fire because of London speculators is complete nonsense. It had a bad business model and it lost a great deal of money because of that bad business model. That has to be corrected, which is why Lloyds TSB has been given the support of Government with the share issue for the new HBOS-Lloyds TSB. The hon. Gentleman should stop peddling myths around Scotland about the viability of HBOS in its present form.

Will the Prime Minister ignore the bumbling opportunism of “boy George” and the Conservatives, and instead learn the lessons from Keynes that they have clearly failed to learn, by recognising that to avoid a 1930s-type slump it is necessary to borrow to invest and to cut taxes of the kind he is advocating? The alternative advocated by the Conservatives would result in a prolonged slump in Britain.

I fear that the shadow Chancellor said on Sunday:

“Gordon Brown told us before going to Washington that it was all about getting a global agreement for a fiscal stimulus package. He has not done that.”

How out of touch are the Opposition.

Does the right hon. Gentleman agree that the trigger for all of this was a catastrophic failure of regulation of the financial services sector in the United States, but does he also agree that as London had become the world financial centre, it had an even greater need for competent regulation of the financial sector, and that the regulatory regime he put in place has failed abysmally?

First, I am pleased that the hon. Gentleman has acknowledged what the Leader of the Opposition has failed to understand: that the problems started in the United States of America. As long as the Conservatives do not understand how the problem started, they will never begin to understand how to solve it. When even the Americans agree that the problem started in America, it ill befits the Leader of the Opposition to try to mislead people about how the problem started. On regulation, we created the Financial Services Authority; we brought together all the different regulators to do so. The only policy the Conservative party has put forward on regulation in the last year or two is a policy to deregulate pensions, mortgages and the financial system. It should be ashamed of that policy.

The Prime Minister may recall that when he was in opposition he used to say that the strength of a currency was a reflection of the strength of its economy. Notwithstanding the fact that the world is going into recession, does he not think that the precipitant fall in sterling is down to the fact that the international community believes that we enter this recession in a worse state than almost anybody else?

First, I think that the former Leader of the Opposition should think twice about what he says about the currency at this stage. I have never, whether in opposition or government, given a running commentary on the currency, as the Opposition seem to want to do. I think that it is highly irresponsible for them to do that in the present circumstances. May I say that, in 1989, Lady Thatcher complained—[Interruption.] They have no respect, even when it comes to listening to the words of Lady Thatcher now. She complained of people

“trying to help the speculators and talks sterling down in the most unBritish way.”—[Official Report, 15 June 1989; Vol. 154, c. 1119.]

Can my right hon. Friend assure the House that any fiscal action he takes in the next few weeks will be to fight the problems that our constituents face, whether on homes and mortgages or in the workplace, and not fight the next general election?

We are trying to help people in difficult situations with their mortgages. That is why we are bringing in changes from 1 January to help people who are unemployed pay for their mortgages. We are trying to speed up social housing provision, so that we can replace the loss of private house building in the economy. On jobs, my right hon. Friend will note that we have enhanced the new deal that is available to help people moving from one job to another, and we have enhanced the ability to launch a rapid response in communities that are facing redundancies—that is how to help people in difficult situations. The way ahead is not to abolish the new deal, as the Opposition would do, but to enhance it.

As the Prime Minister considers his approach to dealing with all these issues, will he instruct Her Majesty’s Revenue and Customs to be as sympathetic as possible to those employers who are temporarily experiencing problems with cash flow, in the hope that jobs that will be crucial to the future recovery of the economy can be safeguarded for the future?

That is what we would try to do in these circumstances, and I assure the hon. Gentleman that HMRC will do what it can.

Relative to the fiscal stimuli throughout Europe, is it not a fact that Germany is in recession, the eurozone is in recession and, come January, the United States may be in recession? Following on from the point made by the Leader of the Opposition, may I say that even the G20’s communiqué referred to fiscal stimulus? Should that fiscal stimulus cover tax cuts, interest rate cuts above the 2 per cent. and spending plans, such as those for Crossrail? Is that not what the British people wish—or do they wish for the woeful and curmudgeonly approach of the Opposition?

I am surprised that the Opposition think that they have such genius that they can stand out against the opinion that is being expressed by right-wing and left-wing Governments and right-wing and left-wing economists. If the Opposition put themselves in a situation in which, facing a world downturn and the prospect of inflation reducing—as it will over the next year—and when we have interest rate cuts, they are unprepared to use the fiscal weapon, people will believe, as they will then conclude, that the Conservatives see no role for government in sorting out those problems. That is a big mistake that the Conservative party is making.

May I assure the Prime Minister, putting aside for one moment his heavy personal responsibility for the very serious situation in which we find ourselves, that I think he is right to continue here in Britain the overdue reduction in interest rates—as I am sure he intends to do—to boost consumer demand, which I hope will be done by a serious cut in VAT, and to increase investment in public works? More controversially on the Conservative Benches, and speaking as a Keynesian, may I say that he is right to fund that by further borrowing and to watch, as I am sure he hopes to do, the next two Governments trying to pay off the bills from an office in the International Monetary Fund?

Here we have a voice from the Conservative party saying that there should be a fiscal stimulus—[Interruption.] The Leader of the Opposition suggests that the hon. Member for Louth and Horncastle (Sir Peter Tapsell) was joking, but I think that he was serious. He wants to see a fiscal stimulus because he understands what Conservative Front Benchers have decided they do not want to understand—that fiscal action is necessary in the circumstances that we face. Indeed, two weeks ago the Leader of the Opposition said that there had to be more borrowing: now he says that there should not be more borrowing. The Opposition cannot make up their mind in any given circumstances. The only change they represent is that they change their mind every week.

Will my right hon. Friend take no lessons from those who talk the pound down today and who sent the pound down 16 years ago with a disastrous exit from the exchange rate mechanism, which caused a record number of bankruptcies, a record number of people losing their homes, and record unemployment? Some people never learn.

I hope that the Opposition will reflect on what they have said about sterling. It is one thing to get a cheap and quick headline: it is another thing to take responsible action on behalf of the British economy. These are the people who said at their party conference, when they were in another particular predicament, that they would work with the Government and we would have all-party agreement on economic policy—[Interruption.] Does the Leader of the Opposition deny saying that? That is what they said then, but now they want to change their mind every week on policy, simply to get a headline. As one of their documents said a few days ago, the most important thing is getting a headline and it does not really matter what is said.

Why has the pound collapsed? That is a perfectly reasonable question to ask a Prime Minister.

A year ago, the dollar was at a low level. This year, the pound is at a lower level. Currencies change—[Interruption.] If Conservatives want to give a running commentary on sterling, they are not even responsible enough to be in opposition.

I welcome my right hon. Friend’s commitment to the introduction of international regulation for the credit ratings agencies next March. However, I urge him not to listen to the Opposition about light-touch, or even no-touch regulation, and ensure that the proposals are robust and provide real confidence for institutions and individual investors.

We will do that, and the policy to be set out by the Chancellor will ensure that.

Is it not often the case that in a major conflagration the arsonist is spotted in the crowd watching the fire brigade at work? Does the Prime Minister still not accept any responsibility for the fact that five of our 10 biggest banks were allowed to over-lend under a system of supervision that he set up, and that the public finances were hopelessly over-borrowed under his chancellorship?

This is the Conservative party that was saying a few months ago that it wanted less regulation in our banking system. This is the Conservative party that produced a document saying that it was time for deregulation of mortgages. This is the Conservative party that cannot now claim that it has the answers to a crisis that it has no idea what to do about.

My right hon. Friend will know that Members’ memories tend to be very short. Perhaps he can jog our memories and tell us whether any one of the leaders at the conference suggested that they thought that it was inappropriate to borrow to provide a fiscal stimulus in their country or in any other country of the G20.

My hon. Friend is absolutely right: a consensus is developing across the world. The G20 is a group of emerging markets and developed countries. It represents every continent in the world and a consensus is developing, from China to the US, to Canada, across Europe and over to Asia, that the way through this period of unique circumstances—a downturn, a credit crunch and falling inflation—is a fiscal stimulus. I do not think that, on reflection, many Conservatives would disagree. This is the right thing to do, and I hope that they will go back to the drawing board and think again.

Why did the Prime Minister ignore the strong advice that we gave him in the economic policy review, which he often quotes, to give powers back to the Bank of England and to concentrate regulation on capital adequacy because there was a credit boom under way? He should not in any way imply that we were ignorant of that fact. We warned him before Northern Rock went down, and if he had taken our advice we would not have had to nationalise a single bank.

Because in his document he said that it was time to deregulate the mortgage market. He must face up to the fact that that was his recommendation.

My constituents understand that doing nothing is not an option. They know what a depression is because they lived through one 18 years ago, and so they welcome intervention in the market. When my right hon. Friend chairs the G20, does he intend eventually to wrap the G8 into the G20? If the G20 is to become a financial regulator, what will happen to the IMF and the World Bank?

The reform of the international institutions that include the International Monetary Fund, the World Bank, the G8 and the G20 will be very much the subject of discussion at the next meeting of the G20. We have put forward our proposals for reform and other countries will put forward theirs. I believe that we will come to recognise that in the new world economy decisions cannot be made about the future unless the Asian countries and a wider spectrum of representation are included in discussions about the big macro-economic decisions. That is why I think that there will be general agreement about the need for change and I hope, on this occasion, that we will have support from all parties in the House when that change happens.

The Chancellor, I mean the Prime Minister—he is doing both jobs, I think—is talking as though the economy is not already receiving a huge fiscal boost. The Government will run a deficit this year of £50 billion or £60 billion. If we add all those American banks that went wrong, such as Northern Rock and Halifax Bank of Scotland, it must come to well over £100 billion. The recession has to take its course—[Interruption.] Just listen. Bad debts have to be written off, bad investments have to be written off and people and businesses need to repair their balance sheets. The Prime Minister knows that, even if some of his Back Benchers do not. If that does not happen, there will not be a solid base for recovery. He risks endangering that base for recovery with a massive increase in Government borrowing that will leave a legacy of debt and taxes into the future.

Now we have a new position from the Conservative party, which I think people will reflect on: the recession has to take its course and nothing can be done about it. We have heard three positions from the Conservative party: the hon. Member for Louth and Horncastle (Sir Peter Tapsell) says that there has to be fiscal action; the hon. Member for Stratford-on-Avon (Mr. Maples) says that nothing can be done; and those on the Front Bench are dreaming up initiatives every day, all of which fail before they even reach the scrutiny of the afternoon. The Conservative party will have to think about whether it has a responsible economic policy at all.

I congratulate my right hon. Friend on the leadership that he has shown in trying to deal with this worldwide economic crisis. Will he tell the House whether anyone was prepared to argue the case for deregulation at the G20 summit? Is there anybody of any note, other than the Opposition, who is arguing that line?

Well, because the Conservative Front Bench was not represented at the G20 conference, nobody was arguing the case for deregulation. I suspect that if Conservative Front Benchers continue to argue the case for deregulation, they will not be at any other conference for a very long time.

The Conservative party wants to deny the truth that this was a downturn started in America with the financial sector problems, as acknowledged by one Conservative Member, the hon. Member for Bournemouth, West (Sir John Butterfill) and that it cannot be sorted out by national action alone and needs international action, including that action within Europe that the Conservative party would not support. The international downturn needs monetary policy to be allied to fiscal action, and the Conservative party cannot contemplate that. On every major issue it is out of touch not just with national opinion but with international opinion, too.

The G20 will no doubt have considered how to restore public confidence in political and financial institutions and how to reassure the public that they are not simply being offered a false prospectus of jam today and pain tomorrow. In view of that, and bearing in mind the pain and trouble that has already been caused, will the Prime Minister assure us that he is leading international consensus to ban from use anywhere the phrase, “No return to boom and bust”?

This country had 10 years of economic growth under a Labour Government and 3 million more jobs—something the Conservative party never achieved. Given that we now know that the Conservative party does not even have a policy to deal with the downturn, people will understand that they are better off with the leadership they have.

Many people around the world know that the measures being taken today are to defend their jobs and ensure that they have a future. For small businesses in the UK, that is incredibly important, so will my right hon. Friend in his leadership of the G20 take to them the message that small businesses in the UK and around the world are the backbone of our economies and need to be supported? What will he do to support them around the world?

My hon. Friend is absolutely right. Working with small businesses in her constituency, she does a great deal to promote the local economy. Interest rates have come down to 3 per cent., which will help small businesses. Having recapitalised the banks we have to persuade them that it is necessary to lend, and to remove the aversion to risk that exists in many banking institutions. Those who have been recapitalised by the Government signed up to stringent procedures—that they will make capital available for small businesses at 2007 levels—and we intend to work with them to ensure that happens. I hope that there will be all-party support for these things, but I am afraid that we cannot see it in the Conservative party today.

Can the Prime Minister confirm whether the mark to market rule was discussed at the summit?

We are looking at that very issue through the Financial Stability Forum and it will be one of the issues addressed in the report on 31 March.

My friend mentioned tax havens. Is there anything we can do unilaterally or perhaps at EU level, or must it await multilateral action?

I believe there is now a genuine desire for international action to deal with the problems of offshore centres that do not respond to the normal regulatory rules that exist in the rest of the world. We can see from the communiqué that there is a determination to take action where it is necessary. Again, that is one of the subjects for debate after the recommendations on 31 March.

The Prime Minister noticeably did not answer the question that was just put about action at EU level. He answered only in the international context. During the statement, he repeatedly used the word “co-ordination” when in fact the declaration on the summit repeatedly uses the word “co-operation”. He knows perfectly well what the difference is—at least I think he does—so will he please tell us?

I am referring to the statement made after the summit by the President of the European Union, President Sarkozy, when he called for concerted action and coordination. There is general agreement that Europe must work together to deal with these problems. Unfortunately, the policy that I think the Conservative party is trying to put forward is a rigid form of the growth and stability pact. The Conservatives oppose it in Europe but seem to want to apply it in Britain.

Is it not the case that in previous recessions the bulk of Government borrowing had to go on funding a massive bill for unemployment benefit? Will my right hon. Friend join me in rejecting the Pontius Pilate approach of Opposition Members who want to wash their hands of responsibility for tackling the problems, and will he make sure that we have fiscal stimulus that will protect our constituents from the misery that mass unemployment would cause?

Last week, the Conservative party announced a proposal for employment that would cut employers’ national insurance and spend £2.5 billion on it. It was immediately—[Interruption.] The right hon. Gentleman says he knows that we have been looking at it. It was immediately rejected by the chambers of commerce and by the national Federation of Small Businesses because as usual—[Interruption.] The CBI welcomed it, but it was designed to help small businesses and the national Federation of Small Businesses says not only that it is a bad policy but that it would be counter-productive. The Conservatives spent £2.5 billion on that great initiative and got all their figures wrong as usual. It was confused, contradictory and ill thought out, and I predict we will not hear much about it from the Conservatives again.

The Prime Minister talks about jobs in this country, yet over 11 years he has added £66 billion to the burden for businesses in this country through regulation and additional costs. That is the burden that business is facing and that is what he can do something about, but he fails to do so. I challenge him today not to go ahead with the 1 per cent. increase in corporation tax due to come into effect next April, on the basis that business needs all the money it can get to protect the jobs it is providing at this very moment.

When we came to power, corporation tax was 33 per cent.; it is now 28 per cent. I fear that the hon. Gentleman is reading from the old script when he complains about regulation. I think that everybody understands the necessity for regulation in the financial sector to protect small businesses and savers.

Did my right hon. Friend have any discussions in the United States with his colleagues about the motor vehicle industry? Does he agree that we need sustained investment in that industry, particularly in newer technologies? That will have a much more positive effect than talking down the economy, which is what some people believe in doing.

That is why we have already made available additional money for investment in new technology for cars, to allow different motor manufacturers to adapt to new technology.

Car tax?

Conservative Members ask about car tax; if they had their way, they would put up fuel duty by 5p in the pound. That is the Conservatives’ policy for fuel duty. That is what they call the fuel duty stabiliser. It would mean an extra 5p, and they cannot deny that that is their policy.

The Prime Minister will know that interest rates are a double-edged sword, because low interest rates mean cuts in the value of savings, of pension funds, and of annuity rates. In his pre-Budget statement, will he take action to help at least elderly people, who may be the most vulnerable, by suspending the present annuity rules that can lock people into a punishingly low rate of return as they grow older?

There is more than one alternative for pensioners at the age at which the question of an annuity arises, but I have to say to the right hon. Gentleman that as far as pensioners are concerned, the winter allowance is going up to £250 for all households of people over 60, and to £400 for households of people over 80. We recognise that for the vast majority of pensioners, the issue is their heating bills over the winter months. That is why we have raised the winter allowance.

On a point of order, Mr. Speaker. For Opposition Back Benchers, today felt like a particularly poor day in the history of shameless failures to answer questions. May I ask—

Order. I am not going to extend the statement. As for the word “shameless”, we should try to use temperate language when discussing such matters.

On a point of order, Mr. Speaker. It is helpful for Back-Bench Members to have a copy of a Minister’s statement once the Minister has made it. On this occasion, copies of the statement quickly went around the Government Benches, but they were very late arriving on my Bench, and that makes things a little difficult for Back Benchers.

I will look into the matter, and I thank the hon. Gentleman for drawing it to my attention.

The Minister for Schools and Learners gave a disappointingly short introduction to the motion. I hope that he will have a chance to explain the motion to the House. It relates to the fee-charging provisions in what is now clause 97, which enables Ofsted to charge fees for inspections of schools in the independent sector. The explanatory note to the Bill as originally drafted says:

“The Government intends to use the power…to set fees for inspections that are no higher than is necessary to recover some or all of the costs associated with the inspections.”

As the fee recovers costs and no more, there was no need for a Ways and Means motion to be passed by the House. The memorandum of delegated powers, which the Government published at the same time as the Bill, said that the clause

“extends the power currently contained in s164(9) of the Education Act 2002 to require payment of inspection fees.”

The aim of the power is to limit the burden of inspection of independent education institutions on the public purse. Lords amendments Nos. 81 and 151, passed in another place, went further than that: they changed the wording of the clause so that it is now possible for the fees charged to exceed the cost of the inspection. That potentially changes the nature of the fee so that it is closer to a tax. That, of course, is why a Ways and Means motion is now necessary.

Lord Adonis was uncharacteristically opaque about the reasons for these changes when he introduced the amendments in another place, saying merely that they

“ensure that the Government’s policy in relation to the setting of inspection fees…can be implemented.”—[Official Report, House of Lords, 21 July 2008; Vol. 703, c. 1600.]

Can the Minister confirm whether the statement in the original explanatory notes that the fees will be

“no higher than is necessary to recover some or all of the costs associated with the inspections”

is still true? If it is no longer true, why is he using these fee-charging provisions as a way of raising revenue or cross-subsidising other aspects of Ofsted’s work? If, in his view, it is still true, why does he think that this Ways and Means motion is necessary?

The motion in the name of my right hon. Friend the Financial Secretary to the Treasury is necessary in order to take forward the purpose of clause 97, which is to allow inspection fees to be paid annually and in advance of inspections carried out by the chief inspector. It carries forward and extends provisions already in place in the existing legislation.

As the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) said, amendment No. 81 will enable the Government to carry out their stated policy aims in relation to fees for the inspection of independent educational institutions. I think that this is the explanation that he is after. We propose that an annual inspection fee will be paid by all independent educational institutions, which will spread the cost of an inspection every three years, and that fees may be charged in advance of the inspection. One or more fees may be charged in relation to an individual inspection. That will allow for a fee to be paid each year where an inspection takes place every three years. This approach replaces the inspection fee system whereby schools were expected to pay their fee either in a lump sum immediately after inspection or in two instalments. Allowing institutions to spread the cost will help small institutions and those with limited budgets who may struggle to pay under the current system.

The annual fee, which we expect to be paid in October each year, will be calculated on the basis of the head count contained in the preceding annual return. Pupil numbers may fluctuate upwards or downwards, which means that in some cases the cost of the inspection may not reflect the fee paid. However, fees will be recalculated every October to take account of the latest available pupil numbers taken from the January annual return. That will minimise any under-charging or over-charging. In effect, the explanatory notes are right, but there is that small margin for error. It would not be practical to look at pupil numbers more than once a year for the purposes of setting that year’s annual fee, as the January annual return is the only source of pupil numbers. I know that the hon. Gentleman is a great champion of reducing burdens on independent schools.

Does my right hon. Friend agree that independent schools already get a very generous subsidy from the taxpayer through tax benefits arising from their charitable status?

My hon. Friend must be careful to be fully cognisant of the whole range of independent schools, not only those that might be members of the Independent Schools Council, for example. The Charity Commission is ensuring that independent schools that have charitable status are earning it, and I am happy to see the difference that the new head of the commission is making in that regard.

There may also be a very small number of cases in which an institution, having paid fees in advance, closes before the periodic inspection takes place. Amendment No. 81 contains a power that will allow fees paid in such cases not to be refunded. This policy is to prevent institutions from exploiting the system by temporarily closing before an inspection is due. If refunds were made, institutions could then apply to re-register and pay only the initial registration fee, which we propose would be £500. In the majority of cases, that sum would be considerably lower than the fees refunded. There would be nothing to stop an institution continuing to exploit the system indefinitely if refunds were allowed.

I should reiterate that overall we intend to use the powers in order to set fees that are no higher than is necessary to recover some or all of the costs associated with inspections. I hope that with that clarification the House will be happy to approve the motion.

Question put and agreed to.

Education and Skills Bill (Programme) (No. 3)

Motion made, and Question put forthwith, pursuant to Standing Order No. 83A (Programme motions),

That the following provisions shall apply to the Education and Skills Bill for the purpose of supplementing the Orders of 14th January and 13th May 2008 (Education and Skills Bill (Programme) and Education and Skills Bill (Programme) (No. 2)):

Consideration of Lords Amendments

1. Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption at this day’s sitting.

Subsequent stages

2. Any further Message from the Lords may be considered forthwith without any Question being put.

3. The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—[Steve McCabe.]

Question agreed to.

I draw the House’s attention to the fact that privilege is involved in Lords amendments Nos. 1 to 23, 28, 32, 40, 81 and 151. If the House agrees to any of these Lords amendments, I shall ensure that the appropriate entry is made in the Journal.

Clause 22

Financial penalty for contravention of section 21

Lords amendment: No. 1.

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

With this it will be convenient to discuss Lords amendments Nos. 2 to 23, 33 to 39, 174 to 177 and 191.

I would like to speak first to amendments Nos. 1 to 23, and 38. I welcome the careful scrutiny that the Select Committee on the Constitution gave to the Bill. I also welcome the Committee’s detailed and helpful comments on duties on employers, related sanctions and rights of objection and appeal. The enforcement powers that local authorities have in relation to employers will be used only as a last resort, and would always be preceded by informal engagement with the employer. We will also consult employer organisations to develop clear guidance for employers to ensure that they fully understand what is expected and do not risk facing enforcement action. However, should enforcement provisions need to be used, the Government agree it is important to be absolutely clear that employers have rights of objection and appeal. These amendments ensure that this is the case.

Amendments Nos. 174 and 176 give effect to one of the recommendations of the Delegated Powers and Regulatory Reform Committee. They ensure that any regulations setting the amount of the financial penalty that a local authority can impose on an employer who has failed to comply with their duties would be subject to the affirmative procedure, except where those regulations reduce the amount of the penalty. The Committee recommended that the affirmative procedure would be needed only for the first use of the regulation-making power, and for any subsequent regulations that raised the amount of the penalty by more than inflation. However, as it proved difficult to link the provisions to inflation in this way, we have gone beyond the Committee’s recommendation and proposed the affirmative procedure for every use of these regulations, except where they reduce the amount. I am grateful to the Committee for its careful scrutiny and constructive recommendations.

Amendments Nos. 33 and 34 clarify that the duties on employers in chapter 3 apply in relation to employment in this House and in the other place. It is right that that employment should count for the purposes of the duty to participate, and that the duties to check that a young person is in education or training and release them to attend should apply, to ensure that young people can participate in the necessary learning. But, as is the custom, it would not be appropriate for local authorities to have powers of enforcement against this House or the other place, so the amendments clarify that the provisions in chapter 3 relating to enforcement do not apply. Amendment No. 35 is a consequence of the previous amendments, and the relevant definition is included in the new clause and can therefore be deleted from this one.

Amendments Nos. 36 and 37 are minor and technical amendments to aid interpretation of the Bill. Amendment No. 36 replaces the definition of a member of the House of Commons staff in the Bill with a reference to the existing definition in the Employment Rights Act 1996, and amendment No. 37 makes provision for who is to be treated as the employer in relation to House of Commons staff.

We discussed questions relating to Wales on Report in this House, and my hon. Friend the Member for Ogmore (Huw Irranca-Davies), the then Under-Secretary of State for Wales, committed that we would

“ensure that the Bill is drafted in such a way that it enables all aspects of the policy to be capable of application in Wales in future”.—[Official Report, 13 May 2008; Vol. 475, c. 1287.]

My hon. Friend now occupies the office that I used to occupy in the Department for Environment, Food and Rural Affairs—and it a very comfortable one. I am pleased to see my hon. Friend the Member for Caerphilly (Mr. David), the new Under-Secretary of State for Wales, in his place. I take this opportunity to congratulate him.

Amendments Nos. 39, 175, 177, and 191 enable the duties on employers in chapter 3 of part 1 to be applied to Wales in future, should the Assembly Government, having studied the impact of the legislation in England, decide to acquire the legislative competence to raise the participation age in Wales and bring forward a measure to do so. We think it important that duties on employers on either side of the border should be the same if the participation age is the same, so that the system is easy to understand and potential burdens on employers are minimised. The amendments ensure that should the participation age be raised in Wales, and should the Secretary of State use his power to apply the provisions in chapter 3 to Wales, any order he made would be subject to the affirmative procedure, and that Welsh Ministers would need to be consulted first.

I hope that hon. Members will agree that this group of fairly technical amendments improves the Bill, and I commend the amendments to the House.

I am grateful to the Minister for that clear explanation of the group of Lords amendments. He cited the House of Lords Select Committee on the Constitution, but I do not believe that he mentioned the letter of 11 June from my noble Friend Lord Goodlad.

Given that Lord Goodlad was a former Chief Whip in this House, I was already convinced that everything he said in that letter was true. However, I was even more convinced once I had read it. Lord Goodlad makes the important point of principle that

“where the executive branch of government is given powers to impose penalties, minimum standards of administrative justice should be in place to safeguard people from wrongful impositions of demands for compliance or payment of financial penalties (whether because of a factual mistake or legal error on the part of the public authority). ”

He refers to the common law principle of audi alteram partem. As one of the last generation of state-educated pupils to learn Latin, I can tell the Minister that that means “Hear the other side.” It leads Lord Goodlad to ask why the Bill contains no express obligation to hear the employer’s side of events before a compliance or penalty notice is imposed. He goes on to ask, in English, why the Bill contains no express provision for reviewing enforcement and penalty notices.

The next matter of concern that my noble Friend raised relates to appeals. He said:

“In situations where an executive branch of government is empowered to impose sanctions, especially financial penalties, it is of great importance that accused persons have access to an independent court to question the legality of a penalty.”

Lord Adonis, in his response of 1 July, replied that, as the fine would be a civil penalty, recoverable through the county court, the employer would have the opportunity to put his case and effectively provide an appeal. However, Lord Goodlad said:

“We believe that as a matter of principle there ought to be express provision for an appeal to enable the person subject to a penalty to challenge the factual and legal basis on which the penalty has been imposed.”

He went on to cite the express appeals provision in clause 39 of the Pensions Bill, which creates a right of appeal to a tribunal.

Lord Adonis’s response was:

“We did not think it desirable to provide for rights of appeal because this would mean establishing a new body to hear such appeals. Unlike the Pensions Bill where there is a natural body to hear appeals (the Pensions Regulator Tribunal) we would have to create a new independent body to hear such appeals which did not seem justified in the circumstances”.

It is therefore slightly odd that the amendments, especially amendment No. 4, create an appeal to the first-tier tribunal.

Conservative Members agree that, following the letter from the Select Committee, it is important to provide a right of appeal. However, it would be helpful if the Minister explained the discrepancy between the point in Lord Adonis’s letter that a new body would have to be established, and the amendment, which states that the appeal is to be made to first-tier tribunal. Which first-tier tribunal? Lady Morgan, the Minister in another place, provides no explanation. Perhaps the Minister could let us know during the debate.

I am baffled—as a result, I am sure, of my ignorance of the new arrangements for the tribunal service—about to which of the various chambers and tribunals an appeal could be made. Would it be to the social entitlement chamber, which covers the asylum support tribunal, the social security and child support appeals tribunal and the criminal injuries compensation appeals panel? Would it be to the war pensions and armed forces compensation chamber? The most likely candidate is the health, education and social care chamber.

Let me relieve the hon. Gentleman of his pain. The appeals would be heard by a general regulatory chamber of the first tier. One of the aims and advantages of the new tribunal system is to avoid a multitude of small chambers. Given the small number of appeals likely, we do not think we need a chamber specifically for such appeals.

I am grateful for that response, which is on the record and will be helpful to those outside.

Let me return to Lord Adonis’s comments in his letter of 1 July. In that letter he said:

“the enforcement system against employers is not a criminal one, and would culminate in a financial penalty recoverable through the County Court”.

The point to note is that we are talking about a civil penalty. For employers, the punishment for not complying with the Bill—that is, for not providing training or time off for training—is a civil one, whereas the punishment for the 16 or 17-year-old who does not participate is a criminal one. It is the fact that the Bill seeks to criminalise young people that has raised so many concerns. We all share the aspiration of increasing participation in education or training to the age of 18, but how will it help a young person if he or she sets out on their career saddled with a criminal record?

The Children’s Rights Alliance for England, the British Youth Council and the Association of School and College Leaders all oppose the provisions that introduce criminal sanctions, even though they might support the general aims of the Bill. The Prince’s Trust, which has vast experience of helping the very group the Bill is principally aimed at, is concerned about criminalising young people. In her evidence to the Public Bill Committee, Martina Milburn, the trust’s chief executive, said:

“the bulk of the 40,000 people who we worked with last year had issues with drugs and alcohol. What do you do with a young person who is already going down the path of taking too many drugs and drinking too much and who just says, ‘I’m not going to do it’ and disappears?...Do you increasingly criminalise young people…or do you find some way of trying to reach them and sort out some of their issues?”––[Official Report, Education and Skills Public Bill Committee, 22 January 2008; c. 16, Q36.]

My noble Friend Lady Morris fought valiantly in another place to try to find a way for the Bill’s objectives to be achieved without recourse to criminal law. On Third Reading she said:

“while we share the Government’s ambition to see each and every 17 and 18-year old receive the best education or training to help them realise their full potential…Our desire in all this was to ensure that no young person received a criminal record simply because they were disaffected with the system, especially at such a critical age and stage of their life, when a criminal record could be disastrous.”—[Official Report, House of Lords, 11 November 2008; Vol. 705, c. 556.]

The Government have argued that penalties cannot be imposed except by using the criminal process, but it seems that civil penalties can be imposed on employers, whether they be individuals or companies. The Government say that the civil procedures are not designed for those under the age of 18, but again, I am not sure whether that is true. The county courts are very used to dealing with rent and money issues affecting 16 and 17-year-olds. The Government also say that if a civil penalty is not paid, the ultimate sanction is jail, which the youth court process that the Bill uses cannot resort to. However, most civil penalties are enforced through attachment of earnings orders. It cannot be beyond the wit of parliamentary draftsmen to ensure that those are the only remedies in law for ensuring the payment of civil penalties of £200 or less in such circumstances.

On the provisions concerning parliamentary staff, which the Minister mentioned and which the amendments would change, it is clearly right that all the duties and rights that young employees generally have should also apply to staff in the House of Commons and another place. As Lord Adonis said in Committee in another place:

“It is right that this employment should count for the purposes of the duty to participate—and the duties to check that a young person is in educational training…However, it would not be appropriate for local authorities to have powers of enforcement against this House or another place.”—[Official Report, House of Lords, 17 July 2008; Vol. 703, c. 1424.]

I take the point, but it might be helpful if the Minister could explain why that would not be appropriate. Does that also mean, for instance, that the House of Commons authorities cannot be prosecuted for breaches of health and safety regulations or for the standards of hygiene in the kitchen? It would be helpful to have an answer to the latter point before 8 o’clock this evening or before any of us pops out for a cup of tea and a muffin in the canteen.

I rise briefly to speak about criminalising young people. It is in the nature of things for 16 and 17-year-olds to be disaffected and to baulk at participation. There is a great feeling that the Government have not done enough to find a way around the problem of criminalising them. We currently have too big a Government, with too much interference in people’s lives and too much of a nanny state. I urge the Minister—he is a good man who understands these things clearly—to look at the problem again and find an innovative way round it.

We will return to those points in the next set of amendments, so I will deal with them then, rather than now.

I am grateful to the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) for pointing out Lord Goodlad’s letter and the importance of audi alteram partem, meaning “Hear the other side”, which is what we have been doing throughout the process in the Lords. We will be debating the various ways in which we have been listening to the other side throughout today’s debate.

The hon. Gentleman underlined the reasons why we believe that the principle of having appeal is right, on reflection. I believe that I answered his question on the first tier of the new tribunals system that is in place thanks to the Tribunals, Courts and Enforcement Act 2007. To some extent, when the Bill was originally drafted and scrutinised in the Commons, the measures that are now in place in respect of that Act were not in place. It is therefore appropriate that we now take cognisance of them.

The hon. Gentleman asked questions about civil versus criminal sanctions. I suspect that when we deal with the next set of amendments we will probe in a little more detail whether criminal sanctions are appropriate for young people on top of the range of things that are in place to encourage them to participate. However, it is appropriate that we have civil and not criminal sanctions for employers. The enforcement system for employers is not criminal. It culminates in a financial penalty that is recoverable through county courts, in which employers have the opportunity to present things from their perspective having used the right of appeal, if they so wish. That is appropriate, and we will discuss in a minute whether the measures for young people are appropriate. In essence, as the hon. Gentleman knows because we have discussed the matter at some length both in the Chamber, in Committee and in private, I believe that the youth court, because it is specifically designed to deal with training and sanctions for young people, is the appropriate body to deal with those matters for young people.

On the basis of those explanations, which I hope are adequate, I hope that the House will support the amendment.

Lords amendment agreed to.

Lords amendments 2 to 23 agreed to [Special Entry].

Clause 44