With permission, I wish to make a statement—[Interruption.]

Order. Will hon. Members please leave the Chamber quietly?

After the meeting that my right hon. Friend the Prime Minister and the Taoiseach had with the parties at Hillsborough on 4 July, he said that we would reflect on what had been said about continuing levels of violence in Northern Ireland and consider what could be done to restore confidence in the political process.

As my right hon. Friend said, there can be no acceptable or tolerable level of violence. The principles of democracy and non-violence, which were laid down by the international body under Senator George Mitchell in 1996 and formed the basis on which the political negotiations took place, are as relevant now as they were then. As a signal of shared purpose in eradicating violence, I have today written to all the parties asking them to reaffirm their total and absolute commitment to those principles.

In recent weeks, in particular over last weekend, we have seen serious disturbances that have brought violence to the streets of Belfast and elsewhere, culminating in the appalling murder of Gerard Lawlor by so-called loyalists early on Monday morning—a young man who was barely in his teens when the peace talks started, and not out of them when his life was so cruelly taken. I am sure I speak on behalf of the whole House when I send our sympathy and condolences to his family and our deep regrets to all the families of the injured and murdered in Northern Ireland. [HON. MEMBERS: "Hear, hear"] That was not an isolated incident. Over the previous 72 hours, there had been five attempted murders, eight shootings and five other violent attacks. Those disgraceful events benefit no one, and have been a source of anguish to victims, families and all those who live in the areas concerned.

I said recently that we would oppose by all means those who remain wedded to violence. The security forces are bearing down on the paramilitaries to deny them the freedom to operate in order to prevent murders, shootings and pipe and petrol bomb attacks. More than 250 additional police officers and soldiers have been brought in to dominate the interfaces in north Belfast. They are stopping and checking the movement of individuals and vehicles to prevent armed gangs entering and leaving the area. Known paramilitaries are being kept under close surveillance.

This means that more police and Army resources are now deployed in north Belfast than at any point since the beginning of the ceasefires in contrast to routine patrolling elsewhere in Northern Ireland, which has been dramatically reduced. The Police Service of Northern Ireland is pursuing a variety of proactive and reactive methods to disrupt paramilitary movement in the area. I am sure that the House will give its total support to the arduous and courageous task that it is fulfilling.

Since violence flared in Belfast at the beginning of May, the police have made a number of arrests of terrorists, and for public order offences ranging from riotous behaviour to possession of petrol bombs. Since 4 May, in north and east Belfast, 21 loyalists have been arrested, with 15 charged. Over the same period, 12 republicans have been arrested and all were charged.

The police are determined that the perpetrators of the violence should be brought to book and will pursue them by every means available to them. I share that aim. I have asked my noble Friend the Attorney-General to lead an examination of police powers, bail arrangements and the scope for additional criminal offences. He will also examine whether any changes in the criminal law could be made to facilitate successful prosecution for acts of terrorism, violence and organised crime. All that would complement not only the enhanced activity of the police and the Army, but the Proceeds of Crime Bill, which we hope will receive Royal Assent today and which will give us a powerful weapon to hit paramilitary finances and the greed of individuals.

However, security measures alone will not solve the problem. That is why I also said recently that we would work in partnership with those who wanted to engage in local dialogue. Following the meeting at Hillsborough, I met several of the political parties, and encouraged closer and more systematic dialogue at local level.

In the light of recent events, at my request, the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne), has initiated further urgent discussions with local representatives, including those with links to paramilitary organisations, in an attempt to develop the kind of local partnership structures that will help prevent such disturbances in future. We are willing to spend as long as it takes with those who want to work in partnership with us and with each other. Those who do not want to do so should face the full force of the law.

I cannot emphasise too strongly that it is essential now that things should calm down, and that we should have a settled summer. It would be intolerable for the political progress on which the future well-being of Northern Ireland depends to be held to ransom by the murderous activities of paramilitaries of either side. It would be equally intolerable if the progress valued by the many in Northern Ireland were to become hostage to the few who are still committed to violence.

People want us to face up to these problems honestly. It would, I believe, help us and the public in Northern Ireland to have more transparent information about the involvement of paramilitary groups in such activities, and the general pattern of paramilitary activity in the community. On the related area of the involvement of paramilitaries in racketeering and organised crime, I have already asked Professor Ron Goldstock to assist me in assessing the scale of the problem. He brings to that task his experience as a former head of anti-organised crime activities in New York state.

I can see a case for doing something similar, to shine a light on levels of paramilitary violence in the community, both loyalist and republican, and to supplement the judgments that I make about the ceasefires. I will consult widely about the idea and how it might best be done, and make my views known after the summer break.

It is now four and a half years since the second IRA ceasefire. The ceasefires have made a huge contribution to political progress in Northern Ireland in addition to reducing the appalling human cost of the conflict. This is the 30th anniversary of the worst year of the troubles, when 470 people lost their lives. Even 10 years ago, the annual figure was nearly 100. Last year it was 16; so far this year, six people have lost their lives. We should never forget in the midst of all the problems that we face, and in all our debates in Parliament, just how far we have come. Nevertheless, six is still too many. Of course things are a lot better than they were, but that is not the only test. The real test is whether things are as good as people in Northern Ireland have a right to expect them to be.

The people expect of all paramilitaries and all parties that they contribute to improvement, but there is a particular responsibility on any party participating in the government of Northern Ireland. They must appreciate that operating jointly in government, as the agreement requires, calls for a measure of responsibility and trust, and trust depends on confidence that the transition from violence to democracy continues apace, has not stalled, and will be completed without delay.

The recent statement by the IRA acknowledging the grief and pain of the relatives of those who died at the hands of the IRA—

Non-combatants.

Order.

That statement, which also reaffirmed the IRA's commitment to the peace process, was a welcome step in the right direction. There may be those hon. Members who reject any overture of any nature, but I think that it would be unwise of the majority of us to do so. However, we also have to acknowledge that more than four years after the agreement was concluded, welcome though it is, it is simply not enough for paramilitary organisations on ceasefires to have brought an end to their terrorist campaigns.

Confidence in the process requires confidence that there will never again be a return to those dark days, in particular that preparations are not going on under the surface for a resumption of a terrorist campaign, and that paramilitary organisations will be stood down altogether as soon as possible. Whatever their real intentions—and in the case of the IRA I share the assessment of my right hon. Friend the Prime Minister that it has never been further from a return to its campaign—nothing could be more damaging than the sense that the options were being kept open in that way.

The judgments I make about ceasefires have to be made in the round, taking account of all relevant factors, including those which the statute obliges me to take into account. That is what I will continue to do, but with the passage of time it is right that those judgments should become increasingly rigorous. In reviewing the ceasefires, I will, as the Prime Minister said, give particular weight to any substantiated information that a paramilitary organisation is engaged in training, targeting, acquisition or development of arms or weapons, or in any similar preparations for a terrorist campaign in Northern Ireland or elsewhere. I say to the House, lest there be any doubt on the matter, that I will not hesitate to use the powers Parliament has given me if the circumstances require it.

There is also still a threat from organisations, both loyalist and republican, that are not on ceasefire. The Irish authorities have already had some notable successes against the dissident republicans. Separately and together, we will continue to counter those who cling to violence, using all the resources at our joint disposal.

I hope that I have made it absolutely clear that violence is unacceptable. This is not the first time that I have said that, but I repeat it lest there is any illusion in any quarter. I pledge once again that the Government will do all in our power to achieve the elimination of violence, but I will not pretend to the House that it is within the Government's power to solve all the problems on our own, or by security measures alone.

That is why we must keep in mind the enormous benefits that the political agreement has brought and will continue to bring as we contemplate its implementation. Those benefits include government of Northern Ireland by the people of Northern Ireland, with local elected representatives in a cross-community Administration.

The stability of those institutions is not a concession to paramilitaries or paramilitarism. On the contrary, it provides a platform for putting their activities in the past, where they belong. The steps that I have announced today [HON. MEMBERS: "What steps?" are most definitely not intended to threaten the democratic institutions, but to buttress democracy against violence. We should never forget how much we have to lose, and it is essential that the political representatives on all sides who have done so much to create and sustain the agreement should, by reaffirming and observing their commitment to exclusively peaceful and democratic means, ensure its continuation.

I have, despite the interjections, set out a range of measures in response to the violence in Northern Ireland. However, the success of the peace process will require courage, patience, endurance and a willingness to compromise from everyone involved. It will be a long and, at times, a difficult haul, but that could not be otherwise in what is an historic attempt to end what is at heart an ancient conflict.

I thank the right hon. Gentleman for his courtesy in letting me have a copy of his statement just before Prime Minister's questions. I fully associate myself and the entire Opposition with his comments about the appalling cold-blooded murder of Gerald Lawlor, and the other acts of violence that the right hon. Gentleman has listed. The statistics that he has given the House give us a clear impression of the depth of the crisis that we face. None of us should have any illusions about that.

Precisely for that reason I want to make a desperate effort to be as positive as I can in responding to the Secretary of State. Nevertheless, will he accept that I cannot in all honesty avoid expressing the profound sense of disappointment that I feel, and I believe so many people will feel in Northern Ireland, throughout the rest of the country, in the Irish Republic, in the United States and elsewhere, at the extraordinary vacuousness of the right hon. Gentleman's statement.

The statement was full of fine words with which no one would want to disagree for a moment, but in terms of actual decisions or action, the bravest thing that the right hon. Gentleman seems to have done this afternoon was to repeat words which the Prime Minister used four years ago, and to say that he might in certain circumstances be prepared to use powers that he has never used but which have been available to him for four years.

I shall remind the House of what the Prime Minister said on 14 May 1998 at Balmoral by way of defining the ceasefire and the agreement. He said that the ceasefire would be

"an end to bombings, killings and beatings, claimed or unclaimed; an end to targeting and procurement of weapons; progressive abandonment and dismantling of paramilitary structures actively directing and promoting violence"

None of those things has happened. What is more, there have been spectacular breaches exactly of the sort that the Prime Minister mentioned—targeting, for example, and procurement of weapons. Nothing whatever has been done about it by the Prime Minister.

The Prime Minister said four years and two months ago in Belfast on the same matter—exactly the same words were used this afternoon—

"These factors provide evidence upon which to base an overall judgment—a judgment which will necessarily become more rigorous over time."

It has not become more rigorous over the past four years. We can only pray that the Government will genuinely now become more rigorous at the eleventh hour. It is indeed the eleventh hour.

We welcome any improvements in police powers, in bail arrangements and in increasing the number of available criminal offences for the police to use against perpetrators of violence. However, may I again say how disappointed I am that after all this time, after several weeks of hype—Hillsborough, before Hillsborough and after Hillsborough—all that the Secretary of State can do is to promise to look at these matters. Even these matters are not promises.

If the right hon. Gentleman really wants to do something to improve policing and law and order in Northern Ireland, would it not be a better idea to accept the proposal that I put to him last Tuesday in our debate, that the Government should make a commitment to prevent police numbers falling further? Police numbers are falling the whole time. Would it not be a better idea to remove the uncertainty surrounding the future of the full-time police reserve in Northern Ireland, by making a commitment to continue with that reserve as long as is necessary?

On the vital matter of the peace process, on which all our hopes for the future of Northern Ireland depend, does the right hon. Gentleman accept that there will be profound disappointment that all he said was that in future he would not hesitate to use powers that he has had and never used, despite blatant abuses of the ceasefire and breaches of the agreement? Does he not owe the House an explanation of why he did not use those powers when there were spectacular breaches, such as Florida, the FARC and Castlereagh, to name three? Does he accept that he has a real credibility problem, and that the only way he can overcome it is to answer clearly now the questions that his statement this afternoon raises?

First, what criteria will the Secretary of State use in future to trigger those powers? Will he accept the Chief Constable's determination that a breach has occurred? So that there is no doubt in the mind not only of the House, but of the people of Northern Ireland that the Government are turning over a new leaf, will the right hon. Gentleman tell us that if, in the future, events such as Florida, the FARC, Castlereagh and the targeting about which we heard in March and April come to light, those incidents would fall within his definition of breaches of the ceasefire and would in future, though they did not in the past, trigger his use of the powers which, up till now, he has left unused?

Secondly, if the right hon. Gentleman uses those powers—he is referring to introducing a motion in the Assembly to exclude from the Executive a party which is associated with a paramilitary organisation in breach of the agreement—what will he do if he does not get cross-community support in the Assembly? I asked him that question last Tuesday. He is depending on the Social Democratic and Labour party and Sinn Fein, for example, to exclude Sinn Fein. What will happen if they do not support him? Will he give up and say, "Well, I did what I could. There is nothing more I can do", and go back to the state of indecision and funk that we have had for far too long?

Thirdly, will the Secretary of State now explicitly reject the revolting idea that there is some difference between violence perpetrated by paramilitary organisations on their own communities and violence directed at, for example, policemen, soldiers or politicians? Will he reject that? Will he state clearly that all violence is equally unacceptable, and all violent breaches of the ceasefire and the agreement will equally qualify to trigger the powers that he has belatedly promised to use?

Fourthly, will the Secretary of State deal with another question left untouched by his statement? What will he do when breaches of the ceasefire or the agreement, or threats to peace in Northern Ireland, come not from organisations connected with parties in the Executive, so the idea of excluding the party concerned from the Executive would be an irrelevance? What will he do to gain greater leverage over such organisations?

I revert to the point that I made in our debate last Tuesday: will the right hon. Gentleman urgently concert, as I asked him to do, with the Irish Government and the American Government to put in place real financial and other penalties for any organisation that he may specify as being in breach of the agreement and the ceasefire? At present, as he knows, the entire specification system is a paper tiger—a sword of clay, I called it the other day. That is not good enough. Will he do something about it? [HON. MEMBERS: "This is not very positive."] I wish I could be more positive. I was hoping desperately for some real decision, for some real new move forward, for some new boost to the peace process. It is disappointing to us all that we have not had that.

Finally, in a spirit of constructive co-operation, I put five proposals to the Secretary of State last Tuesday, and we got no response at all to any of them. The Secretary of State was not able to refute the good sense of any of those proposals, but he was not willing to take them on—perhaps because of the "not invented here" syndrome. If he will not accept my proposals, does he accept the Taoiseach's suggestion—which the Taoiseach referred to as a determination—that decommissioning should be completed by next May? Will the right hon. Gentleman state unequivocally that no party will be allowed to serve in the Executive after the legislative elections next May if it has not fulfilled its obligations under the agreement or if it is associated with a paramilitary or other organisation that is in breach of those obligations?

The Opposition have always said—I repeat it now—that no peace process can succeed anywhere unless two fundamental principles are observed. First, there should be balance, fairness and even-handedness between the parties. There should be no perception that one side is getting all the benefits and the other is being taken for a ride. Secondly, there should be a proper and rational structure of incentives. Rewards should follow performance. If there are breaches, there should be penalties, which should be enforced. I believe firmly that we have been right all along to state that the peace process will make no progress except on the basis of those principles.

I take comfort from the fact that there have been moments this afternoon when the Secretary of State sounded as though he accepted the good sense of that approach, at least in theory. More is required than to accept those principles in theory. They must be put into practice, which requires real toughness, sustained political will and a robustness that we have not seen from the Government over the past four years. That is why we are in this terrible position. I hope and I pray that at this eleventh hour and 59th minute the Government will show those qualities from here on.

If that is the hon. Gentleman speaking in a spirit of constructive co-operation, I would not like to see him when he is trying to be bombastic and pompous. He used the word vacuous. I listened carefully to his proposals, and I am afraid that vacuous would be too substantial a word to describe them. I did not pretend that I could solve this problem, but he omitted to mention that I made a number of proposals. He may not accept some of them, but they included new security measures, more troops on the streets, additional bearing down on armed gangs, the investigation of new legislative powers, a political initiative at a local level, the mechanism for shining light on paramilitary activity in the community, and an attempt to clarify the items that would be considered in a judgment on ceasefires. He may regard those proposals as inadequate, but they hardly bear comparison with his own suggestions, which as far as I could make out were to discuss matters with the Irish.

The hon. Gentleman's most offensive accusation concerned our promise and belief that the peace process would bring an end to deaths. It is true that there has not been an end to deaths. There have been six deaths this year, and that is six too many, but to act as though that is no different from 106 or 406 does not do justice to the people of Northern Ireland or to their achievements.

The hon. Gentleman asked me about police numbers. I wish he would study the facts. I have increased police recruitment by 60 per cent. above the envisaged target. I would increase the numbers even further if we had the physical and training capacity to do so. He also asked about the full-time reserve. He should understand that part of the process is to pass decision making to people in Northern Ireland. The Policing Board is discussing with the police a complete human resources strategy.

What the hon. Gentleman wants us to do with the Policing Board, however—which is to overrule it, and dictate—is exactly what he wants us to do with the membership of the Assembly itself. He does not seem to understand that the decision on exclusion lies with the Assembly, not with the Executive and not with the House of Commons. He suggested that we should simply ignore and overrule the Assembly.

I am empowered by Parliament to require the Assembly to consider the relevant motion on the holding of ministerial office—a point that has been put to me continually by the leader of the Ulster Unionist party, the right hon. Member for Upper Bann (Mr. Trimble). Following a breach of the ceasefire by the IRA, I would be ready to use that power as a means of enabling the Assembly to address these matters. I wish that the contribution of the hon. Member for Grantham and Stamford (Mr. Davies) had been slightly more constructive and slightly more related to reality.

Let me make two final points. First, I omitted to congratulate the hon. Gentleman on being reappointed to his position on the Front Bench, and to tell him that that probably brought me even more joy than it brought him. Secondly—this is a more serious point—I wish that he would remember that part of the reason why we have been successful in the peace process, in so far as we have been, is the bilateral way in which Members have supported it.

People will recall the days when, in the midst of a terrorist campaign and murder and mayhem on the part of the IRA, the last Conservative Prime Minister, John Major, conducted secret talks with the IRA. He denied that in the House. It would have been easy for the Labour party to make mischief on a parti-pris basis, which the hon. Gentleman sometimes gives the impression of doing. We did not do that. The magnitude of the project on which we are embarked is such that all of us should do all we can to keep partisan political point-scoring quite separate from genuine criticism. Not for the first time, I think that the hon. Gentleman failed to do that.

Order. Before I call another Member, let me ask for calm. I well understand the difficult situation and the emotions that we feel about Northern Ireland, but I ask for calm.

There was one sentence in the statement with which I particularly agreed. The Secretary of State said,

"People want us to face up to these problems honestly."

I think it would be a very good thing if there were frankness, openness, honesty and transparency in the Government's approach. In particular, although it is an uncomfortable fact for him, the Secretary of State must understand and appreciate that there is and will be no credibility—certainly in the Unionist community—in any judgment by any Secretary of State on whether there has or has not been a breach of the ceasefire. If such judgments are to be credible, we definitely need another mechanism. The Secretary of State has hinted that there may be one. A provision is essential to introduce an objective element, and to enable an audit of paramilitary activity to be conducted at regular intervals. I hope that the right hon. Gentleman will undertake to propose such a provision as a matter of urgency.

The Secretary of State told the hon. Member for Grantham and Stamford (Mr. Davies) that in the event of a breach of the ceasefire by the IRA he would use his power to require the Assembly to consider a motion for the exclusion of Sinn Fein. I want the Secretary of State to reiterate that, and indeed to link it, as he should, with matters that he mentioned in his statement. He said that he would give particular weight to any substantiated information that a paramilitary organisation was training, targeting, or acquiring or developing arms or weapons. I ask him for a clear, unequivocal undertaking that if there is substantiated information about such activities, he will send the Assembly a motion of that kind to consider.

How many police officers have had to be relocated under the special purchase of evacuated dwellings scheme because of a terrorist threat arising out of the Castlereagh incident? How many have been relocated in the past couple of months? Is the figure not now well over 100? Were they not relocated because there was substantiated information on targeting? I ask the Secretary of State to respond specifically to that.

On police numbers, is it not for the Secretary of State to decide on the future of the full-time police reserve? Will he give an undertaking that, if he gets a request from the Chief Constable and from the Policing Board, to prolong the full-time police reserve, he will immediately and unequivocally respond positively to that request and continue the police reserve? I am fairly confident that he will get such a request.

The right hon. Gentleman asks four questions. I will take them in reverse order.

Precisely because I ultimately have the decision on the full-time reserve, I cannot say that I will always do everything that I am asked by the Policing Board. If the police and the Policing Board agree on a given course of action, I, as Secretary of State, would extremely rarely take exception to that action. That has applied in every instance that I can think of since the Policing Board was formed. I see no reason why there would be imminent exceptions to it. I hope that that gives the right hon. Gentleman some reassurance on the way in which I would view any recommendations from the Policing Board.

The right hon. Gentleman asked about the number of police officers. He will forgive me if I cannot give him an exact number—I will write to him. I can say only that I think he is around the right mark. The last figures I heard were around 90, but they may have moved up to over 100. There is a range of reasons, but the right hon. Gentleman is absolutely correct: they are directly related not to substantiated evidence but to the main line of inquiry that has been followed into the break-in at Castlereagh and the—[Interruption.] I know that the hon. Member for South Antrim (David Burnside) is keen to speak. I am keen not to respond to all his sedentary comments. If he will encapsulate them in a question, I will respond to him.

The issue is connected with the line that has been pursued by the police. The major line of inquiry remains that the break-in was committed by republicans.

The right hon. Gentleman asked me two other questions, one on the ceasefires and the other on sanctions. On the ceasefires, I think that I have been as plain as I can today in outlining the circumstances under which these judgments are made. They have to be made in the round. By definition, they have to take account of information, sometimes information that has been upgraded to intelligence—there is a difference. Sometimes, for very obvious reasons, that information cannot be made public because it would put other lives at risk.

Obviously, a number of unforeseen factors have to be taken into account, but I have made it plain today, lest any clarification were needed or anyone were under any illusions, that I will take into account subjects such as targeting, weapons acquisition, development and the others that I outlined.

If there were evidence that a ceasefire had been broken, the right hon. Gentleman asked me whether I would be prepared to put a motion, as I am empowered to do by this House, before the Assembly. I have said that in those cases my general aim is to let the institutions flourish, to give them stability—that is my purpose; I am sure it is the right hon. Gentleman's too—but obviously the breach of an IRA ceasefire would constitute very grave circumstances indeed. Under the Belfast agreement it is for the Assembly to decide who sits in the Executive, but I am empowered by Parliament to require the Assembly to consider the relevant motion on the holding of ministerial office. In circumstances in which I decided that the IRA had broken the ceasefire, I would be ready to use that power, and to place such a motion before the Assembly to require it to address the matter.

Many Labour Members will have welcomed the statements—made in measured terms—by my right hon. Friends the Prime Minister and the Secretary of State. In particular, we welcome the fact that not many new hoops have been created for pro-agreement parties to jump through to prove their bona fides. Will the Secretary of State explain what he means when he talks about "local political initiatives"? Are they coupled with his writing to the parties, and has he considered asking them individually—and collectively—to meet him to discuss how stalling can be prevented, and how they can co-operate to show the great advantages that have been achieved in Northern Ireland as a result of the agreement?

Yes, the two things are separate. It is not the only action that we are taking, but I thought that, in view of the debate and discussion that has occurred, the simplest way to begin was to write to everyone, asking them to offer reassurances in unequivocal language about their commitment to the principles on which they entered into the agreement.

My hon. Friend also mentioned trying to get local politicians, particularly at the interfaces, to establish a structured partnership or process, so that there are fewer surprises, earlier warnings and attempts to restrain both communities. That is a political local initiative, which I have asked the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne), to undertake. He began that process several days ago. It will be long and difficult because, whenever acts of violence are committed—whether here or in other difficult conflicts abroad—it is difficult to get people to speak to each other. However, it is worth undertaking that process. A level of good will exists on the ground among all the parties, and I hope that all parties that have committed to seeing the peace process work will be involved.

Will the Secretary of State accept the Liberal Democrats' continuing and, as I hope he will agree, consistent support—as a critical friend, but a supporter all the same—for the Good Friday agreement and the Government's sincere efforts to try to make the peace process work? Does it not strike him as curious that the Conservatives are taking such a hard line, given that their time in government proved unequivocally that they made significant progress only when they showed considerable flexibility in terms of their public comments and private actions?

Does the Secretary of State agree that the recent outbreak of violence and the deterioration of the situation in Northern Ireland should concern us all? He said that six deaths were too many. but I am sure that he will agree that one is too many, and that to that extent we have urgent and pressing business to attend to. Although it is of course sensible to deploy police and Army resources in areas of greatest difficulty and stress, does he accept that doing so nevertheless puts particular strain on those forces, particularly the police, who feel overstretched in other areas? Is he willing to listen to further representations—I know that he has already received some—about the police's resourcing requirements, in order to maintain overall and normal, as we might call it, policing of Northern Ireland in these difficult times?

Does the Secretary of State accept that, although there is always a strong case for increasing police powers, bail arrangements and so on, simply increasing the reach of the law will not in itself directly address the problem? In effect, it deals with the symptoms but not the underlying cause. Will he consider the fact that dialogue in the local communities of which he spoke is much more likely to address attitudinal difficulties? In the eyes of many who are motivated by those views, and the individuals who promote violence, the answer lies much more in the local communities, which are not being listened to, than in simply increasing the reach of the law.

On racketeering, will the Secretary of State consider increasing resources to prevent organised crime—for example, the ongoing haemorrhaging that is affecting the legal fuel industry in Northern Ireland as a result of illegal racketeering from the south, which unquestionably does, in large part, fund the paramilitary activities that he has been describing? Will he acknowledge, as I have, that the IRA statement—the so-called apology—limited though it was, was nevertheless an important statement? Does he agree that there are grounds for reciprocity in de-escalating a situation that has remained tense with little variation since the signing of the Good Friday agreement?

In that context, does the Secretary of State agree that trust and responsibility are extremely important, not only in this House but among the parties in Northern Ireland and that hon. Members have a responsibility not to destabilise the situation by trying to score cheap or opportunistic party political points? [Interruption.] If no party is guilty of that, why did Conservative Members start shouting when I made that point?

Finally, the Secretary of State said that he had written to the political parties in Northern Ireland to secure their commitment to the principles that he outlined. Would it be possible for him to share a copy of the generic letter that he sent to them? Fundamentally, does he agree that the letter and the response will have real teeth only if people and organisations in Northern Ireland are clear that they are not able to push this matter indefinitely and beyond unspecified parameters? In that context—

Order. The hon. Gentleman is trying the patience of the House. I must be fair. There is another statement and only a few Members have participated in questions on this one. I ask the Liberal Democrat spokesman to leave it at that and to let the Secretary of State reply.

I shall do so as quickly as possible, Mr. Speaker.

It is true that all of us have a responsibility in this matter. I pay credit to the hon. Member for Montgomeryshire (Lembit Öpik) for the contribution that he has made not only publicly but privately, behind the scenes, in a helpful manner. As far as the police are concerned, we are always open to representations and my hon. Friend the Minister with responsibility for security will no doubt be able to discuss that subject with him. On racketeering, he will know that the organised crime taskforce has scored some significant successes under the chairmanship of my hon. Friend the Minister. We have tried to supplement our efforts by bringing in Professor Goldstock. We have the police, the organised crime taskforce and Ron Goldstock, but if the hon. Gentleman has any ideas I am sure that my hon. Friend the Minister would be happy to receive them.

The hon. Gentleman is right to say that despite all the measures that we could introduce, security on its own will not solve the problem, nor will everybody in this House solve it. It has to be addressed by the parties in Northern Ireland, at a leadership and community level. If people such as me could solve the problem by going across that stretch of water and telling people what to do, it would have been solved a long time ago. I know my limitations, but I am committed to do what I can, as are the Government.

Finally—with your indulgence, Mr. Speaker—on paramilitary attacks, it is important, as the hon. Gentleman said, to recognise the level of violence on both sides of the community. Since the signing of the Good Friday agreement, there have been about 1, 100 attacks of one nature or another, more than 700 of which have been committed by loyalists. It is essential to say that it is loyalist and republican paramilitaries who are involved and, very often, dissident republicans as well. It is wrong to give the impression that this is only a problem of the IRA. It is not. It is also wrong, however, to forget that the republican movement is in government in Northern Ireland. It therefore has an even greater responsibility than others to tackle this within its own movement, for its sake as well as for the benefit of the community in Northern Ireland.

I wish to join in the Secretary of State's message of sympathy for the bereaved family from north Belfast. I also welcome the right hon. Gentleman's statement today and the limited measures that he is capable of introducing to address the problem in Northern Ireland.

I endorse the answer that the Secretary of State has just given—that, primarily, the resolution of conflict in Northern Ireland is up to the Northern Ireland parties. That resolution will not be furthered or helped in any way by the fall of the democratic institutions in Northern Ireland. Does the Secretary of State agree that a threat to bring down the institutions that we have so carefully nurtured in Northern Ireland, on the basis that to do so would in some way assist security and the abolition of violence, is inexplicable? I endorse the increased forces being sent to the interface, because the people need some assurance that the terror that they suffer every evening will be ended. They need to see that the perpetrators are being pursued, and that it will result in prosecutions by the security forces.

The people of Northern Ireland are looking to the House today for a message of hope. The abandonment of the bipartisan approach and the debate that we have had today will do nothing to address the problems that we have. Will the Secretary of State ensure that our people can more easily believe that the Government treat loyalist and other paramilitary activity for what it really is? He said in his statement that he wanted action to be increasingly vigorous and more transparent. If that happens, it will provide an additional measure of confidence. I hope that today's deadline of 24 July and dissatisfaction—for good or bad reasons—with the Secretary of State's answer will not herald the collapse of the institutions that we have carefully built up in Belfast.

On the last point, I hope that it will not, because my purpose in saying what I have said today—with all the limitations that any Secretary of State must have—was not to undermine the institutions. My purpose was to buttress democracy. Herein lies a paradox that frequently confronts everyone who is involved in politics in Northern Ireland. Demands are made for more information, greater scrutiny, transparency and honesty and for the placing in the public domain of more information on levels of violence and paramilitary involvement. Although all violence is intolerable, it is at the same time feared that people will think that any incidence of violence should have the same consequence. It is difficult for people to address the issue, because they fear that the consequence for any act of violence would undermine the very institutions that were meant to replace the violence.

Several hon. Members have raised the issue of greater transparency, including the right hon. Member for Upper Bann (Mr. Trimble), the leader of the Ulster Unionist party, and I read in the papers that that is considered a sop to Ulster Unionism. In fact, the same matter has been raised by the leader of the SDLP and the leader of the Alliance party. Therefore, I was saying today not that I would substitute my judgment—which, ultimately, only I can make—but that I would try to find ways to place further information in the public domain that will allow the public in Northern Ireland to know exactly what is going on, in so far as we can do that.

I regret the drift away from bipartisan support for the agreement. One week we are told that the Opposition are supporting us in a bipartisan spirit, and the next week we are told that they are not. Another time we are told that they support the peace process as a whole, but that they object to all the bits of it.

This morning, I stood in the home of my constituents, Mr. and Mrs. Lawlor, whose son Gerard was murdered in the early hours of Monday morning. Yesterday, I had the sad job of standing in the home of Mrs. Morgan, the widow of William Morgan, who was done to death by sectarian killers in the Tigers Bay area of my constituency.

I welcome the Secretary of State's comments, and the Prime Minister's earlier, joining us in sending condolences and sympathies to those families. It is only by the grace of God that some of the other victims of shootings in north Belfast were not murdered.

Does the Secretary of State agree that people look to Government in north Belfast and throughout Northern Ireland for leadership on what will happen to paramilitary organisations, and that they look not only for words but for tough and effective action? They will look today at this statement and hear these words, and there will be grave disappointment, even despair, throughout Northern Ireland, at the lack of any effective action to deal with the corruption of government in Northern Ireland, whereby a signal is being sent that it is all right to be democrats by day but to murder and be on the streets causing disturbance by night.

Does the Secretary of State further agree that it is incongruous to have a Government—an organisation, Sinn Fein-IRA—who refuse to support the police? I welcome the extra resources for the police and the Army, but that organisation refuses to support the police, refuses to recommend that information be given to the police, and refuses to condemn attacks on the police—the other day, its national chairman refused to condemn a murderous attack on a recruit to the Police Service of Northern Ireland. Does the Secretary of State accept that all those reasons render Sinn Fein-IRA unfit for government in Northern Ireland?

I agree with the hon. Gentleman's opening comments, and the whole House shared the condolences and sympathies for Gerard Lawlor, and for the others who have been injured or murdered or who have suffered family pain.

On the question of leadership, yes, it does take leadership. Leadership is not always saying no. Leadership is not always shouting at the highest decibels. Indeed, in my experience, the effect and influence that one has is often in inverse proportion to the decibel level of the rhetoric that one uses.

I would venture to suggest to the hon. Gentleman that, since Gladstone, no one has given more time and leadership on this issue than my right hon. Friend the Prime Minister. I truly think that when the books are written, however much we may succeed or not, they will say that he gave a gigantic measure of leadership.

The hon. Member for Belfast, North (Mr. Dodds) is a leader himself. He is a Minister; he is a Member of the Assembly as well as a Member of Parliament. I cannot remember whether he is a councillor, but he certainly has at least a duopoly, if not a triopoly, of capacity to lead. One of the great things about leading is that one must reach out beyond one's own base in order to lead, and it is unfortunate that the hon. Gentleman, by the way he puts his arguments, sometimes gives the impression that he would want Sinn Fein excluded from government, not as a consequence of anything but as an objective of his own politics. I believe that when that is posited in that fashion, it is an abrogation of leadership in the context of Northern Ireland.

Is my right hon. Friend aware that, despite all the setbacks, it is very disappointing indeed that the negative critics refuse to recognise the amount of progress that undoubtedly has been made in the past four years, and the number of people alive in Northern Ireland who would not be if no agreement had been signed in 1998? Does he agree that it is unfortunate that the negative critics always harp on the negative, not the positive?

Does my right hon. Friend accept that there is an obligation on all the parties in Northern Ireland, including Sinn Fein, to denounce violence from whatever source it comes and to do so on every occasion, and to do so in practice?

I certainly hope that they will do so, and I agree with my hon. Friend. We can all complain that the rose bush has a thorn, but sometimes we should just rejoice that the thorn bush has a rose. On Northern Ireland, we have to appreciate just how far we have come, as my hon. Friend pointed out.

However, that is not the real test. As I said earlier, the real test is not, "Are we better?" because, for all the rhetoric that we sometimes hear, everyone in their senses knows that we are in a better position than we were once in. The real test is, "Are we in the position that the people in Northern Ireland have the right to expect us to be in?" They should have a right to expect, if we have not arrived at the destination, that we will at least still be travelling, and be seen to be travelling, towards the destination that gives them the same comfort, security, rights, equality and way of life as those that the rest of the people of the United Kingdom have.

Will the Secretary of State reflect that his statement was a woefully inadequate response to a desperate situation, not least because all the measures that he announced should have been common practice all along? Will he further reflect that the Government's failure to act decisively against paramilitaries and their political representatives can only increase the despair and disillusionment of law-abiding citizens in Northern Ireland?

Well, I will certainly reflect on what the hon. Gentleman asks me to reflect on. If he asks me for my instant reflection, I would say that, however bad the situation is just now, if it is a commentary on the inadequacy of the Government, then when we were 10 times worse in terms of killings and injuries, it must have been a fairly critical commentary on the Government whom the hon. Gentleman supported for almost 20 years.

Is not the honesty that we need about the situation in Northern Ireland the recognition that there are clear sides to the coin? On the one hand there are all the achievements that have been put in place since the Belfast agreement, and on the other, there is the continuing paramilitary activity, which is degenerating even further into Mafia-type activity. Perhaps all of us should try to ensure that we do not use a one-sided die of examples to push one matter or the other. Is not one way in which we can advance the principles involved in the Belfast agreement and ensure that peace is finally established in Northern Ireland action to cut off paramilitary funding? The House will consider the Proceeds of Crime Bill later today, and there is the work of the organised taskforce. That type of work shows that we are being tough on terrorism and taking action that should satisfy or bring on board those who are disgruntled with the developments that have taken place.

I agree with every word my hon. Friend said, and I do not need to add anything at all to it.

This statement may offer security measures, and I welcome that, but in political terms it offers absolutely nothing new. There is no proposal in this statement to deal with the political crisis in Northern Ireland—and it is a crisis.

The Secretary of State says that there is no acceptable level of violence, yet he ignores Colombia, he ignores Castlereagh and he ignores the violence on the streets of Northern Ireland when he decides that the IRA ceasefire is still intact, so clearly there is some acceptable level of violence if the IRA ceasefire is deemed still be to be intact. So what confidence can we have that the Secretary of State will make a ruling in the future that the violence that has occurred, or that may occur in the future, represents a breach of any of the ceasefires? I must say personally that I do not have the confidence that the Government will act.

The Secretary of State says that he has written to all the political parties asking them to reaffirm the Mitchell principles. Can I ask the Secretary of State what the Ulster Unionist party, the Democratic Unionist party, the Social Democratic and Labour party or the Alliance party have done that requires us to reaffirm the Mitchell principles? Why is he putting those parties on a par with the paramilitary-related parties? That is an insult to the integrity of the democratic parties in Northern Ireland, which have forsworn violence and opposed violence at every turn. Why does he need us to affirm or reaffirm the Mitchell principles?

On the second point, no one is questioning the integrity of the hon. Gentleman or his party, but he will know that, throughout this process, we have used a combination of individual and collective approaches to problem solving, to overcoming challenges and to putting forward new proposals. On this occasion, it seemed sensible to do things collectively. I have no doubt that a reaffirmation for everyone committed to the principles would be a useful starting point.

As regards the hon. Gentleman's other comments, I will be quite honest with him. I owe that to him, as he owes it to me. Nothing I said today short of putting Sinn Fein out of government would have satisfied him. He has made that absolutely plain, as have several of his colleagues. His solution to moving the republican movement away from violence and into politics is to exclude them from politics. That is not to me intuitively a position that should be pursued at all times, given all the consequences that it has. I respect the hon. Gentleman's position—we have a disagreement over it but I do not question his integrity in reaching that judgment and I hope that he does not attack my integrity in reaching mine.

Does the Secretary of State not think that there should be some form of independent mechanism that would examine breaches in the ceasefire? Given the increasing violence in parts of Northern Ireland, does he not think that he should be sending out a message today that the full-time reserve will be maintained, and that that would be a very big confidence boost?

On the first question, my answer is no. I have the duty and the obligation to make the decision on the ceasefire. It will be my decision—I will maintain, not abrogate, that duty. As regards whether we can find a mechanism for putting into the public domain further information on these matters, that is another question on which I said I would consult. On the question of the FTR, the Police Service of Northern Ireland is already in consultation with the Policing Board. I have no intention of overruling the Policing Board, pre-empting it or taking away those rights—we have waited almost 80 years to get a cross-community board of elected representatives, and I will not pre-empt their decisions.

Will the right hon. Gentleman pause for a moment and consider—if he wishes to buttress democracy and to increase confidence in the peace process, in which I wish him well—appointing at least an advisory committee on the ceasefire, consisting of Privy Councillors and perhaps chaired by somebody like Lord Bingham, the former Lord Chief Justice, who would bring an objectivity and a credibility to this whole process?

Having paused and reflected on the matter, were I to have such a committee, the hon. Gentleman would be a marvellous chairman. I am afraid, however, that I will not abrogate that decision. I will make the decisions, either de jure or de facto, as the law prescribes, as empowered by Parliament, and as obliged as Secretary of State for Northern Ireland.

I congratulate the Secretary of State on the measured way in which he has approached the subject. I also congratulate him on the amount of work that has been done. I find it disappointing that the Opposition take an opportunist attitude in relation to what has happened. As someone who has been to Northern Ireland on several occasions—the last occasion was just over a month ago—I have met many of the victims, including Omagh victims. I would suggest two or three small measures that may be of help.

The Prime Minister gave a pledge that he would meet the victims of Omagh after the bombing there. During the recess, during these difficult times, that promise could be kept. That may be a way forward. The people of Northern Ireland feel isolated—on the one side, there is a community who want a united Ireland, and on the other, a community who feel betrayed, for whatever reason, and who feel that the Government have let them down. I do not believe that that is the case, but during the recess, my right hon. Friend the Secretary of State and the Northern Ireland team, who have done a tremendous job, should pool all their resources to make sure that the people of Northern Ireland know that as long as they wish to remain British, they will continue to remain so.

If things deteriorate during the recess—I have a sense that things are very difficult at present—the House should be recalled. That is an important move that would identify—

Order. I call Dr. Reid.

I thank my hon. Friend. I agree with many of his points. He makes a point of which it is worth reminding everyone. Northern Ireland is not only part of the United Kingdom but a greatly valued part—[Interruption.] Sorry about the distraction, Madam Deputy Speaker. I repeat that Northern Ireland is not only a part but a greatly valued part of the United Kingdom. That is one reason why I want all the representatives from Northern Ireland taking part in the debate here, which is where it should be held.

I also want all the representatives here to consider whether they should go to Northern Ireland to discuss matters with people locally. I know that my hon. Friend has done that, as have many Labour Members. My hon. Friend the Member for Hamilton, South (Mr. Tynan) has been across, and I hope that Conservative Members will also continue to make visits. Not only is that good for the House's knowledge of events in Northern Ireland, it is good for the people of Northern Ireland to see that representatives in the House exercise a continuing close interest in their affairs.

May I gently put it to the Secretary of State that, in the light of the level of paramilitary violence in both communities in north and east Belfast and following the robust comments again from the Prime Minister a few minutes ago, it is inevitable that there will be great disappointment that no concrete proposals have been made this afternoon? We should particularly bear in mind the fact that the very limited apology that we had from the Provisional IRA last week took us only a tiny way forward with its weasel words about non-combatants. Does the Secretary of State agree that it should have said that the war was over? Then we would be making real progress.

Of course I would like the IRA to say that the war is over. I suspect, however, that the British Secretary of State demanding that would make it rather less likely to happen than the other way about. None the less, we would welcome such a statement. I welcomed last week's statement because of the strength of the apology and, if it was not an apology, it was at least an acknowledgement of the suffering of what it called the non-combatants. It is a step in the right direction.

Many little steps are being taken in Northern Ireland, including by the republican movement and by the loyalists. I am disappointed that, after the no-first-strike statement and my visit to speak to a Loyalist Commission audience, the events of the weekend should have happened. They were dreadful, and I am sure that everyone else regrets them.

If that process continues, it will bring lots of disappointments to lots of people, and I will perhaps be one of those who has my fair share of them. Finally, I thank the right hon. Gentleman for approaching me "gently" for the first time in his parliamentary career.

Was my right hon. Friend as sickened as I was by the comments attributed to the so-called Ulster Freedom Fighters that the murder of Mr. Lawlor at the weekend represented a measured military response? Was it not, in reality, a brutal and blatant attempt to wreck the peace process and the Belfast agreement? Is it not the responsibility of every democratic politician to work in a quiet, statesmanlike and calm way to ensure that such groups do not succeed?

I agree entirely. It was, to use the words of an Ulster Unionist Member, an act of pure naked sectarianism. It was an appalling act, and several appalling acts were committed over the weekend by the loyalist organisation that my hon. Friend mentioned or, in the case of another shooting, possibly by the Irish National Liberation Army. All were dreadful acts and they were motivated by the cancer of naked sectarianism that so often afflicts Northern Ireland society.

The Secretary of State will be aware of the promise in 1998 that was given in my constituency, and I know just how folk have reacted to the failure to live up to it. The right hon. Gentleman paid tribute to the Prime Minister by comparing him to Gladstone, but to whom would that give comfort in Northern Ireland?

May I press the Secretary of State specifically on the statement which talks about preparation for a terrorist campaign in Northern Ireland or elsewhere? In a recent answer that I received from the Prime Minister, I was told that home-bred terrorism is not looked upon as international terrorism. International terrorism is just al-Qaeda. Does "elsewhere" refer only to the United Kingdom or to those who are engaged in sharing as they prepare for campaigns in other places?

First—the hon. Gentleman may have misheard me—I did not compare the Prime Minister to Gladstone. Even I would not be as sycophantic as that. I said that my right hon. Friend had shown more leadership on this issue than any Prime Minister since Gladstone. I can see how the hon. Gentleman's mind is working: Gladstone—home rule; Blair. I must clarify the point that I did not compare them.

On terrorism at home or abroad, I have been as clear as I can. What has been suggested, not least by the hon. Gentleman's colleagues, is that the Government have been encouraging a belief in certain quarters that certain types of activity would be acceptable. The reason why we made today's statement—which I hope gives him a little more confidence—is that my publicly declaring my position means that anyone who required clarification or had suffered from any illusions in the past need do so no longer.

The Secretary of State referred to Back Benchers who have recently had the chance to visit Northern Ireland, of whom I am one. I visited Stormont to speak to members of all the parties and visited the police. I also visited both sides of the divide in east Belfast to speak to community activists and representatives. Having been involved in community activity in my constituency in Scotland, I was very much taken by the need and ability of those people enthusiastically to discuss the prospects for peace in both their communities.

Does the Secretary of State agree that there is a wider role for Back Benchers of all parties in visiting Northern Ireland, taking the message of peace, acting as a catalyst for discussions and encouraging people from the parties that are represented by Members here at Westminster—irrespective of whether they take their seats—to act as a joint body to discuss the prospects for bringing the two communities together by building bridges instead of sheltering behind the peace barriers, which actually separate them?

My hon. Friend illustrates how much he has benefited from not only taking an interest in, but visiting, Northern Ireland. It is beneficial to the House when hon. Members can bring to it the experience that they have gained from doing so. It is also reassuring to people in Northern Ireland that, having achieved the principle of consent in deciding their constitutional status, and being a valued part of the United Kingdom, hon. Members take the time and trouble to visit Northern Ireland as they would other parts of the United Kingdom.

With permission, Madam Deputy Speaker, I should like to make a statement about the interim report of the co-ordinating group on audit and accounting issues, which my right hon. Friend the Chancellor and I are publishing today.

The world's capital markets rely on timely, true and fair financial reporting, underpinned by high standards of auditing and accounting. We have all been shocked by the major corporate failures in the United States at Enron and WorldCom. It is incumbent on the Government to be vigilant and to take the necessary action where required.

Audit and accountancy standards in Britain are different from those in the United States: different and, as is now widely acknowledged, in some respects better. That is partly the result of changes made here following the UK's own corporate scandals of the late 1980s. However, there is no room for complacency. The millions of people who invest in our companies, whether as individuals or through their pension funds, look to the Government to ensure that our own financial reporting regime is as transparent and effective as possible.

That is why the Chancellor and I set up a co-ordinating group on audit and accounting issues in February, chaired by the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), who has responsibility for competition, consumers and markets, and by my hon. Friend the Financial Secretary, and comprising the principal regulators. The interim report shows clearly what needs to be done to build on the strengths of the current system. The Government welcome the group's proposals.

We are extremely grateful to the group for its hard work in producing the interim report, copies of which have been placed in the Libraries of both Houses.

In responding to the interim report, let me stress that this is not about piling unnecessary regulation on the vast majority of companies that are honestly and properly run. But the actions of a few are damaging the reputation of all, and by taking sensible steps to strengthen corporate governance and financial reporting, and thus to restore investor confidence, we will benefit business and our economy as a whole.

I turn now to the proposals contained in the interim report and the Government's response. A key recommendation is for tougher mechanisms to reinforce auditor independence.

First, the group proposes, and we agree, that we must strengthen and enhance the role of audit committees. The audit committee should act more clearly on behalf of the shareholders. It should make recommendations to the shareholders on the appointment of the auditors, and underpin auditor independence; for example, by approving the purchase of non-audit services from the auditor. We welcome the work that the Financial Reporting Council will oversee to develop improved guidance in the combined code.

We need to ensure that audit committees are effective and can act independently of the executive directors. Audit committees should therefore be made up entirely of independent non-executive directors. Derek Higgs's review of non-executive directors is obviously crucial in that respect. We need also to develop the competence of audit committee members; for example, by developing available training.

Secondly, we agree with the report's conclusion that the principle of audit partner rotation should be extended to other senior members of the audit team and that the time scale for rotation of the audit partner should be cut from seven to five years. On the rotation of audit firms, the Treasury Committee, whose report was published yesterday, argues that there is a strong case for the mandatory rotation of audit firms, as well as audit partners and teams. We, and the group, will want to consider its report very carefully. The Chancellor and I are therefore asking the group over the next few months to look more closely at audit firm rotation, including the possible implications for competition in audit services, and to report by around the end of the year.

Thirdly, the group says that we need to look in more detail at the need for a further tightening of the rules governing the extent to which auditors can provide non-audit services to audit clients. We agree, and I have asked for recommendations on that important point in the group's final report. I have also asked my Department to consult on changes to regulations under the Companies Acts to improve the disclosure by companies of the nature and value of non-audit work provided by their auditors.

The group also wants to see much greater openness and transparency by the major accountancy firms in relation to their own processes, practices and structures. We agree with that too. One approach under serious consideration is to make such transparency compulsory for those audit firms undertaking the statutory audit of major companies. We will consider that with the recognised audit supervisory bodies by the end of the year.

We also agree with the group that there should be an early review of the way in which the accountancy industry as a whole is regulated, including the role of the recently established Accountancy Foundation and its related bodies. Despite the efforts of Lord Borrie and his colleagues in the Accountancy Foundation, the new arrangements have not progressed as rapidly as we had hoped. The Chancellor and I have therefore decided to conduct an immediate review of the regulatory arrangements to see whether there are sensible structural improvements that should be made. That will include the question of future funding arrangements for the foundation and take into account the work to be undertaken by the review board on the arrangements for monitoring the work of auditors.

The group also highlights the importance of proper international accounting standards. Given the increasing globalisation of capital markets, it is essential that our own Accounting Standards Board works closely with the international board to improve the transparency of company reporting. It is particularly important that such standards are developed to address share options and other share-based payments systems, which have played a significant role in the current concerns. That issue can be dealt with only at an international level, so I welcome the fact that the international board is giving priority to developing such standards.

Of course, standards, whether national or international, must also be effectively enforced. I agree with the group that the financial reporting review panel should develop a proactive role as well as simply responding to complaints. I know that the panel is already looking at such a change, and we fully support moves to develop current practice. The group suggests that the Government should consider the adequacy of the current enforcement arrangements more widely, and we will do that as a matter of urgency.

Finally, the group recommended, and we accept, that the Department of Trade and Industry and Treasury consider with the Office of Trading whether there are any competition implications arising from the high concentration in the market of audit and accountancy services for the largest firms, and whether any of the other proposals in the report have competition implications.

I also remind the House of the important provisions contained in the Government's White Paper on company law reform, which my hon. Friend the Under-Secretary published last week. In particular, we have decided to introduce a statutory statement of directors' general duties; to require large companies to provide an operating and financial review, covering non-financial areas also, such as strategy and risk; and to place a legal obligation on directors to volunteer relevant information to the auditors and to give auditors the statutory right to ask for company information from employees and certain contractors.

In preparing its interim report, the group was mindful of the fact that high standards of financial reporting and audit regulation are promoted in the United Kingdom in a number of ways, ranging from statutory or independent regulation to self-regulation, voluntary codes of best practice and market pressure. The effectiveness of the UK's arrangements must be judged by considering the combined effect of those various elements. The group's recommendations, too, must be seen in the same light, as a package of measures.

This is only an interim report. The Chancellor and I have asked the group to carry on its work and to deliver a final report around the end of the year on progress made in all those areas. For our part, the Government will act quickly in response to the recommendations that fall to us to take forward. But success will require action from everyone—from the regulators and the profession. I also challenge UK companies to make a difference, and welcome the fact that many are already doing so.

As the co-ordinating group and, indeed, the Treasury Committee have both said, the status quo is not an option. The measures that I have announced today will ensure that the UK has the best possible regulatory regime that will benefit our companies, our capital markets and our economy alike.

I welcome this early opportunity to address some of the issues that have recently caused great concern on both sides of the Atlantic. I am glad that the Secretary of State decided to announce the publication of the interim report by way of an oral statement to the House, a practice that I hope she will continue to follow wherever possible. I am also grateful for a copy of the statement, which I received about an hour ago, and for the chance to glance at the report. I have obviously not had time to read the report from cover to cover but, from what the Secretary of State said, I am sure that there is much on which we will agree. I welcome the broad tenor of those aspects of the report to which she referred.

For the sake of clarity, will the Secretary of State confirm that what she said today refers only to listed companies? I hope that before long she will be able to say whether the Government accept the need to raise the turnover threshold above which unlisted companies are required to undertake an audit to a more realistic level.

Events in the United States have inevitably caused anxiety in Britain among employees, shareholders, creditors, customers and the general public. I agree that our accounting and auditing practices are sufficiently different from those followed in the United States to give us confidence that the problems that have arisen there are less likely to occur here. The vast majority of British businesses are honestly run and the vast majority of audits are responsibly conducted. We should not proceed on the assumption that the actions that occurred at Enron, which are the subject of criminal investigations in the United States, are widely practised in Britain.

It is right, however, to review matters from time to time. We should never be complacent about the risk of uncovering a damaging financial scandal in this country. The restoration and maintenance of full trust in accountancy, reporting standards and audit procedures is important to ensure that business continues to have access to the funds that are needed to sustain growth.

The overriding need is for the response to the current anxieties to be proportionate to the risks involved. It is important to distinguish between the more onerous requirements rightly imposed on listed companies and other categories of companies which, although subject to audit, do not need to meet similar demanding standards.

On the specific issue of audit firm rotation, we should proceed with caution in considering the Treasury Committee recommendations.

I have reservations about the idea that firms should be compulsorily rotated after a relatively short period. The costs would be substantial and would fall on the businesses concerned, and therefore on their shareholders and customers. Furthermore, an audit firm taking on an audit for the first time is not necessarily better able to scrutinise the operations of its client. However, rotation of audit partners and senior staff is a very different matter, and, subject to proper recognition of the special or different circumstances of smaller accountancy firms, I welcome the report's recommendations.

I agree with the concerns that have been expressed about separating audit work from consultancy. It is important that there should be a clear statement, breaking down into individual categories of work the fees that are received for non-audit work, which are paid to firms that act as auditors. I hope that the Secretary of State will give her support to that.

With reference to the Secretary of State's decision to conduct a review of how the accountancy industry is regulated, will she indicate its likely terms of reference and the timetable that she envisages for its completion?

On the development of international accounting standards, does the Secretary of State accept that however desirable that may sound, Britain should not abandon our principles-based approach in favour of a rules-based system merely in pursuit of harmonisation? I would welcome a review of the accounting treatment of share options, however, and I hope that that would reflect the fact that share options are effectively a form of employee remuneration.

Giving audit committees more responsibility seems sensible, although perhaps the Secretary of State could enlarge her comments about training for non-executive directors.

Where the employees of an audit firm wish to join their client's payroll, proportionality should again be the watchword. It is clearly right that partners in charge of the audit should he subject to a cooling-off period before being able to move across to the former client. Restrictions on more junior staff who have worked for an auditor would not be justified.

On the question of whether there is sufficient competition between accountancy firms, I am sceptical about the value of an OFT inquiry. It would be expensive, time consuming and possibly unproductive. Will the Secretary of State say whether her Department has received any complaints from businesses about the alleged inadequacy of competition between accountancy firms?

The Secretary of State rightly distinguished between the United States' approach, which is rules-based—as long as all the boxes have been ticked the requirements appear to be satisfied—and the British approach, which requires the auditors to present a true and fair view. Does she agree that the Chancellor of the Exchequer has adopted the United States' rules-based approach in his concealment of substantial public liabilities arising from PFI and PPP schemes? That dishonesty and off-balance-sheet accounting sits ill with the Chancellor's consistently repeated claims that large sums of public debt have been repaid. Surely the British people as shareholders in all public projects, however financed, deserve to be treated in at least as open a manner as shareholders of the companies about which the Secretary of State has spoken.

More generally, the loss of trust in the audit process, whether in the public or the private sector, weakened confidence when financial markets were already vulnerable. The effects of that weakening of confidence range widely, extending to pensions, jobs, endowment mortgages and many other matters. Nevertheless, despite those risks, our response should always be in proportion to the dangers involved. The essence of what is now needed is not necessarily more regulation but better regulation.

May I begin by welcoming the hon. Gentleman to his new portfolio on the Conservative Front Bench? I am grateful for his general support for the statement.

On the issue of large versus small companies, some of the proposals that we are making apply only to large companies—for instance, the proposal for an operating and financial review, which will really apply only to the 1, 000 largest companies. Of course, the greatest impact of the proposals that I have announced this afternoon will, rightly, be felt by the listed companies. I remind the House that a few years ago we raised the threshold for statutory audit to exempt a large number of small firms from that onerous requirement.

I strongly agree with the hon. Gentleman that we do better to have a principles-based approach to accountancy standards than the detailed check list of rules that has been adopted in the United States. I think that the United States is likely to move more in our direction in that respect, but I agree that we should not sacrifice our own approach even if doing so would achieve greater international harmonisation.

The hon. Gentleman is right to say that there are arguments for and against rotation of audit firms. I observe that the Australian and the Irish Governments, who recently reviewed that issue, both came down against proposals for mandatory rotation of audit firms, but, as I said, we will consider that in more detail before arriving at a final view.

I hope that I made it clear in my statement that I entirely agree with the hon. Gentleman about the need for much greater transparency about the purchasing of non-audit services from the audit firm. We will consider that matter further, but I think that the proposal that we have already accepted—that audit committees should approve the purchase of non-audit services from their auditors—will be helpful.

When reviewing the regulatory framework we shall look at the entire structure. I shall in due course publish more detailed terms of reference, but we want to conduct that review as quickly as possible, building on the work that is already being done by the various bodies. I hope to be able to report on that piece of work around the end of the year.

Of course, share options should properly be regarded as part of the pay package of employees and directors of a firm, but it would be wrong of our country to act in isolation in that respect. That is why I welcome the fact that Sir David Tweedie and his colleagues at the international board have said that they will deal with the issue and propose appropriate standards.

The hon. Gentleman raised the specific question of skills and training for non-executive directors. As part of his wider review, Derek Higgs is to consider the skills required for non-executive directors and how we can widen the pool of appropriately qualified people. However, it is disturbing that there appears to be no properly agreed definition of the competences that are required of members of audit committees in particular. That is certainly a matter to which the regulatory and professional bodies should pay attention.

On the issue of competition, the Office of Fair Trading will, naturally, want to consider both the report published today and the Select Committee's report published yesterday. As far as I am aware, no complaints about lack of competition in the market for audit services have been made to my Department.

On the hon. Gentleman's final point about broader Government issues relating to accounting practices and public finances, let me make it clear that since he became Chancellor of the Exchequer, my right hon. Friend has ensured that, for the first time, the assumptions that underpin each year's Budget are independently audited by the National Audit Office. Public-private partnerships are properly accounted for in line with international best practice. When it comes to transparency and robustness of the fiscal framework, we are among the best in the world, and I am sorry that the hon. Gentleman—in an otherwise welcome response—did not acknowledge that.

I welcome the statement, as far as it goes—which is not all that far—in making proposals on the tightening up of audit and accounting practice, especially the tentative moves towards rotation of auditors and separation of audit and consultancy practice. However, does the Secretary of State agree that if changes such as rotation are to be meaningful, there must be far more competition? It is impossible to envisage real competition in an industry dominated by only four companies. I welcome the move to the Office of Fair Trading reference, but does the right hon. Lady agree that the only logical outcome that would increase competition is the break-up of one or more of the large accounting companies? Is that an outcome that she would welcome?

I welcome also the move to strengthen the independence of audit committees in companies. Does the right hon. Lady agree that for that to become effective, there must be much more far-reaching reform of independent directorships following the Higgs review? Does she agree also that at present the largely self-selecting group of non-executive directors means that a few individuals hold far too many directorships and are unable to provide the focus and professional supervision that companies need?

The right hon. Lady has not referred to fraud. Is she consulting the Law Officers on how to introduce a tougher approach to real financial fraud? Are there not still too many cases, such as Allied Carpets a few weeks ago, where crooked directors who steal from their shareholders are treated far more leniently by the criminal justice system than criminals who rob the same amount from a bank? There must be a tough and consistent approach.

Finally, I turn to international standards. If it is correct, as the Secretary of State says, that British standards of practice are exceptionally high, how does she intend to protect those standards when harmonisation takes effect in 2005? Will she explain why it is, if British standards are relatively high, that in the months that have passed since the Enron crisis, the FTSE index in London has fallen even more precipitately than the Dow Jones index in New York?

We shall reduce the period for audit partner rotation from seven years to five, and extend the requirement of rotation to other senior members of the audit team. Those are two specific and, I believe, thoroughly desirable actions that we are taking as a result of the interim report.

On competition, the hon. Gentleman will be aware that the Office of Fair Trading recently conducted a review of the market for audit and accountancy services. It reported on that in its report on competition and professions. As I am sure the hon. Gentleman will acknowledge, it found that small and medium-sized companies in the United Kingdom have an extensive choice of auditors and accountants. As the hon. Gentleman and the OFT acknowledge, there is much less competition in the market for large company audit and accountancy services. However, there was no indication in the OFT report that that produced a problem of inadequate competition.

It is worth stressing that when we talk about this relatively concentrated market, we are talking about the largest firms—some national, but most of them international—that increasingly buy their audit and accountancy services from multinational firms in an increasingly global marketplace. It is not an issue for the United Kingdom alone, but one which the OFT will be examining and which I and my colleagues in the Treasury will be discussing with it.

I agree with the hon. Gentleman about the need to broaden the pool from which companies recruit their non-executive directors—far too few are drawn from too narrow a pool. That is precisely why my right hon. Friend the Chancellor and I invited Derek Higgs to conduct a review of the role and recruitment of non-executive directors. We await his findings with interest, and I shall return to the House on the matter in due course.

As for fraudulent, criminal behaviour by a small minority of company directors, my Department acts with great vigour in investigating complaints that are brought to us, or of which we have become aware. Where necessary, we disqualify directors whose behaviour makes them unfit to hold such office. In the past two years, we have disqualified a couple of thousand company directors in pursuit of our powers.

The hon. Gentleman referred to international standards. Our own Accounting Standards Board is already working closely with the international board, and with our partners on that board, to ensure that we get the best possible standards at an international level so that companies in the UK, in an increasingly global and interdependent economy, have the benefit of best-practice standards at an international as well as a national level. In this global and interdependent economy, although the problems on which we are particularly focused have arisen in the United States, the shock waves are felt in stock markets right across the world, and despite the underlying strength of our own economy here in the United Kingdom our own stock market is not immune from those shock waves.

I thank my right hon. Friend for her statement. It is important that we all recognise that the Government are being seen to try and restore a sense of confidence and trust in a profession that has taken, perhaps, an undeserved battering, but a battering none the less in recent months.

On the rotation of auditors, we must also take account of the audit office with only one client. Over-dependence on the one office was part of the problems of Enron, apart from the illegality involved. In Italy, firms are rotated for auditing purposes, but often the staff remain the same, because in a particular location there are not the people to undertake the work. We must be sensitive to the problem. It is not just a matter of partners and senior staff; there must be a more comprehensive look at the issue to avoid that situation.

Lastly, does my right hon. Friend hope to incorporate in the new companies legislation, which has been circulated in draft form, the constructive proposals that will come out of the consultative process? Is it intended that before this time next year, we may have a companies Bill nearing Royal Assent, which will include the very creditable proposals that she made in her statement today?

I am grateful to my hon. Friend for those comments. On audit rotation, he is right to draw attention to the practical difficulties, in some cases, and the competition implications of the proposal for compulsory firm rotation. That is why we want to consider that and have the group consider it in more detail before we make a final decision. In any case, it is very important that commentators do not get fixated on one particular item that is being considered, when there is a package of measures that needs to be considered as a whole, because that is how it will have its effect.

On the companies Bill, the Minister with responsibility for competition, consumers and markets, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), published the White Paper last week, including 200 or so draft clauses for a future companies Bill. We will, of course, examine closely the responses to that consultation and we will move ahead as speedily as we can to publish further draft clauses for what will be a major piece of law reform—certainly, one of the largest Bills that my Department or probably any other Department will have introduced. My hon. Friend will understand that I cannot pre-empt future Queen's Speeches, but I can say that we are determined to introduce that Bill as soon as we can, and to make that law reform in this Parliament.

There is much to welcome in the right hon. Lady's statement. She will be aware of the report of the Select Committee on the Treasury this week, and its proposals on audit committees. We proposed that audit committees should be required every five years to consider whether the audit firm should be rotated, and that if the audit committee decided that there should be no such rotation, the reasons for that decision should be made clear to shareholders in a statement. Is the Secretary of State attracted to that proposal, and if not, why not?

I am grateful to the hon. Gentleman for his welcome for the statement. He is a long-standing member of the Select Committee. We will want to respond in detail to the Committee's report, which was published yesterday. I noticed in particular the proposal that the audit committee should consider rotation of the audit firm after five years and should report fully on why, if it does not do so, it has chosen not to do so. That seems a helpful and practical suggestion, and I have no doubt that the group will consider it carefully, as we shall.

I welcome my right hon. Friend's statement, and I am pleased that she has found time to read the Treasury Committee's report, as it has only just become available. We took important evidence from Sir David Tweedie, who chairs the International Accounting Standards Board, especially on the way in which the industry is financed, which is by raising income from companies. He gave examples of companies that have tried to put pressure on accounting firms, because they are paying the fees for the operation. That led us to conclude that an alternative structure for financing the accountancy industry should be examined, and we suggested that it be done on a similar basis to that which applies to the Financial Services Authority. Has my right hon. Friend had time to think about that recommendation?

I am grateful to my hon. Friend for those comments. We shall closely consider the Select Committee's proposal. I shall certainly not make a snap judgment on it, any more than I would on its other proposals. The Select Committee drew an analogy with the FSA. As I said, we will consider the funding arrangements for the Accountancy Foundation as part of the review of the regulatory structure.

Does the Secretary of State accept that her proposals are greatly welcomed in the round by Conservative Members, but company law reform is a matter of enormous importance for capital markets and for the true value that can be placed by shareholders and others on the public interest. Does she agree that, in reviewing the duties of directors, auditors and others, it is imperative that an arrangement is made in company law to protect those people? They know what is going on inside a company at a given time, and they know in good time what is going wrong. They should be protected and insulated if they whistleblow and tell shareholders or the public in general what is going on. That was the key problem with Enron. Accountancy firms often have an intrinsic interest in the fee structure, and the Secretary of State could reflect on that. Would she be good enough to give me a response?

The hon. Gentleman raises an important point. A crucial part of our proposals for company law reform is to spell out in statute the duties of directors. One of the deeply unsatisfactory features of current company law is that it is almost impossible for a non-executive director to find out what his or her legal duties are, because they are buried in several different statutes and in case law. We are also proposing that independent directors should be able to get advice from Companies House about the application of those duties.

On the hon. Gentleman's specific point about how we protect directors who are whistleblowers, we will consider whether the legal protection that we have already put in place for whistleblowers needs to be strengthened through company law.

Is it generally true, or is there a soupcon of special pleading in relation to small auditors, that if non-audit services are divorced from auditing, the cost of auditing goes up not marginally but significantly? That problem affects many small companies.

I am not sure whether the provision of non-audit services is an issue for small audit firms. It has been raised as a matter of concern in relation to large audit companies that can secure substantial fees for non-audit services to clients for whom they also provide audit services. I am not sure that the same concern applies to small audit firms, which tend to concentrate on purely audit and accountancy services.

The Secretary of State is right to eschew complacency, but does she accept that doubts will persist for as long as the accountancy profession is effectively judge and jury in relation to complaints made against it, meeting behind closed doors so that there is no opportunity for the quality and extent of investigations to be evaluated?

Will the right hon. Lady accompany her rather timid proposals with an undertaking to consider more radical ideas for reform, including the establishment of a fully independent regulatory system, a complete separation of audit and non-audit practice, making the issuing and audit of defective accounts an offence in law, and the imposing of fines commensurate with the financial costs of malpractice—to be paid to those affected rather than, as is currently the case, to accountancy bodies themselves?

I have already made plain our approach to the separation of non-audit from audit services. As for the investigation of complaints and breaches of the disciplinary rules, following the creation of the Accountancy Foundation we have seen a strengthening of the independence of the investigatory system. Nevertheless, I am not satisfied with the present position, which is why I announced this afternoon that we would review the entire regulatory structure. One option that may be considered is a move to the fully independent regulatory system that the hon. Gentleman suggests.

I draw the House's attention to my entry in the Register of Members' Interests as a member of the Chartered Institute of Public Finance and Accountancy.

May I congratulate my right hon. Friend on her statement, and on the priority she is giving to driving up standards in corporate governance and financial reporting? However, following the remarks of the shadow Secretary of State for Trade and Industry—a preface that I never thought I would use in this place—I think there is a case to answer in relation to the treatment of the private finance initiative and public-private partnerships. I think that the question of the National Audit Office, and that of the international standards of best practice that my right hon. Friend mentioned, need to be re-examined.

Of course it is a bit rich for the Conservatives to talk of something that originated in the dying days of the Major Administration when they had lost control of public borrowing, but—as is made clear in early-day motion 1668—there is great unease in the profession, which fears that this is a device to wipe legitimate Government debts from the Government balance sheet. If we are to have a greater effect on the matters that my right hon. Friend has cited, our own house ought to be clean and clear.

Public-private partnerships are not, as my hon. Friend seemed to imply, a way of trying to keep public sector debt off the balance sheet. PPPs are designed to add private finance to infrastructure investment where it is badly needed, and to introduce more innovation in the provision of public services along with better management of, in particular, large-scale infrastructure projects.

Complications arise when it comes to assessing the risk-sharing that takes place in PPPs, but I think we are getting better at that. I entirely endorse the principle of transparency commended by my hon. Friend, which is precisely the principle that my right hon. Friend the Chancellor has adopted.

Increasingly, PPPs are fully reflected on the public-sector balance sheet. The Office for National Statistics, which helps to audit the risks and the accounts, has been placed on an independent footing by the Government.

I do not think that that will do. Everyone who has looked into the matter knows that the treatment of the PFI and PPPs in the public accounts is manifestly inadequate. Everyone knows that a number of contingent liabilities should almost certainly score in the accounts, but they do not. Following the many letters of comfort that have already been written, surely some value should be placed on them and they should score above the line, as they would in many cases in the private sector. When I raised this matter with the Chancellor, he said "We are following best private-sector practice." The obvious rejoinder was "We have just had some Enron economics."

In every other respect, unfortunately, I rather agree with what the Secretary of State has said. I thought her statement excellent, and I feel able to support it. My only question is this: a number of the proposals will involve a substantial increase in the compliance burden on firms so when the proposals are presented, will the Government publish a rigorous assessment of the full compliance burden?

I simply do not accept the hon. Gentleman's remarks about the standards of public accounting. The fact is that we are one of the very few countries that fully comply with the international, generally accepted accounting practice standards for public-private partnerships. We are following international standards and international best practice in that respect.

On the hon. Gentleman's other point, which was rather more relevant to my statement, we are looking and will look carefully at the compliance costs. But I repeat what I said in my statement, and I hope that he will accept it: a more robust regulatory framework and a system of financial reporting in which people can have full confidence is hugely to the benefit of our businesses, our investors and our capital markets alike.

I particularly welcome what my right hon. Friend said about strengthening the rules on the consultancy work that auditors can undertake, at least in the case of larger companies. I urge her to give guidance to the working group to make those rules as strong as possible and to move to a position where the general rule is that auditors should not carry out consultancy work for the firms for which they carry out an audit. Does she accept that there will always be a problem with public confidence and a risk of conflict of interest when an accountancy firm receives large fees from a company to act as an auditor while receiving fees for non-audit services whose very continuation depends on the audit wing of the firm giving the company a clean bill of health?

My hon. Friend makes an important point. Some principles are already in place, in particular the rule that auditors should not make management decisions or audit their own work, but I think that the group's approach is sensible. It will look at a much more careful definition of the kind of non-audit services that it would not be acceptable for auditors to provide—those that do not cause any threat to the independence of the audit and those that may be acceptable but only with proper safeguards. A more careful analysis of the different kinds of non-audit services that may be provided by audit firms will provide the basis for much better and more transparent decision making in the sector.

As a chartered accountant who qualified through the Institute of Chartered Accountants in Scotland, I support the proposals in so far as they are set out here today. Does the Secretary of State agree that regulation of the profession is the key to restoring public confidence in financial statements? Does she accept that the current situation is a mish-mash—not even the accountancy bodies and professionals understand how it operates—and that until we have Government-sponsored regulation, the confidence of those who use accounts will not be regained?

I agree with the hon. Gentleman that the current situation is pretty complicated. That is one reason why we are taking a fresh look at the whole structure of the professional oversight of accountancy, the regulatory framework and the oversight of that regulatory framework. I am not particularly attracted by the idea of the Government becoming, presumably, the sole supplier of audit regulation, but we will look at that as part of the review of the regulatory framework that I have announced this afternoon.

Will the proposals to have only independent non-executive directors on audit committees apply only to companies on the full list of the stock exchange? Generally speaking, I am concerned about the consultation period, in so far as it looks as though the proposals are being to some extent bundled up with the companies Bill. That Bill was sent out for consultation for several years and I am sure that it will be a lot better because of that. There is concern that the time in which these complicated issues will have to be reviewed by the profession and by other stakeholders will not be adequate.

Obviously, the proposals relating to audit committees will apply only to those firms that have to have audit committees, and clearly that does not include every firm.

On the speed of decision making, as I have said before, we should not rush into knee-jerk reactions to a problem that has arisen in the United States, where there is a somewhat different framework. At the same time, it is important that we build on the work already done—in some cases, over a significant period—by the various existing regulatory and professional bodies. Where there is a clear recommendation from our co-ordinating group that action is desirable, we should take it. The measures that I announced this afternoon fit well within the much broader framework of company law reform that we are pursuing, and which was preceded by extensive consultation.

Some have suggested that a WorldCom or an Enron could never happen here. It is instructive to note that the further away the proponents of that proposition were from the City of London or from company management, the more certain they were of it. I am less sanguine. Does the Secretary of State accept that accountancy standards bodies should look at the treatment of goodwill and capital asset valuation, particularly by those companies that have grown through multiple acquisitions?

Does the Secretary of State understand that an accountancy firm acting as an auditor has a principal responsibility to the shareholder, whereas an accountancy firm acting as a consultant has a responsibility to the company and its directors? As the interests of directors and shareholders often diverge, I am disappointed that she has not made rather more clear the view that there should be a separation of those two provisions.

I agree with the hon. Gentleman's first point—we certainly should not be complacent about the situation here. We are not, and that is why we are taking the action and commissioning the further work that I announced this afternoon.

The issue of how goodwill and capital assets are valued has not so far been raised in the reviews, but I am certainly happy to look further at it. On audit and non-audit services, it is precisely the different interests and responsibilities, and the conflicts that can arise between them, that give rise to people's concerns about the fact that audit companies are making so much money from selling non-audit services to their audit clients. There are arguments on both sides of this complicated issue. Not every non-audit service necessarily raises a conflict of interest with the provision of audit services as well. That is why we have asked the group to look at the matter in more detail and take further evidence before we make a final judgment on whether there should be tougher regulation.

Further to the question raised by my hon. Friend the Member for Chichester (Mr. Tyrie), does the Secretary of State agree that the Government should lead by example on transparency of audit? Is she aware that the National Audit Office and the Public Accounts Committee, on which the Financial Secretary sits, are both very concerned about the fact that Network Rail's huge liabilities do not appear on the Treasury's books? When it comes to stamping out Enron-style accounting, should not the Government practise what they preach?

As the hon. Gentleman will doubtless be aware, the judgment of the Office for National Statistics—which recently looked at precisely this issue in respect of Railtrack—has been backed by Eurostat, an independent international body.

Does the Secretary of State accept that, contrary to the impression given in the press and in her statement today, the Treasury Committee came out in favour not of mandatory rotation of audit firms, but of the principle of rotation, saying that the decision should be left to strengthened audit committees? Is that not precisely the sort of third-way solution that should appeal to the Government and to her?

Of course it is already open to audit committees to choose to rotate audit firms but, as I said, there are strong views for and against mandatory rotation of audit firms. There is, on the one hand, a suggestion that some of the worst problems arise in the early years of a new auditor; on the other, there is the assertion that one finds what is going wrong with a new auditor or financial director.

It would be sensible for us, through the co-ordinating group, to look at the evidence more fully before judging whether to make the rotation of audit firms mandatory as well as the rotation of audit partners and senior audit teams, on which we have already decided.

On a point of order, Madam Deputy Speaker. I wish to raise an issue of which I have given prior notice to Mr. Speaker. I have also given prior notice to the hon. Member for Strangford (Mrs. Robinson), in contrast to her attack on my right hon. Friend the Member for Upper Bann (Mr. Trimble) in her speech on Monday night.

On 18 July this year, the Newtonards Chronicle published an article entitled, "Robinson lashes Belfast agreement in Commons", in which she also attacked my right hon. Friend the Member for Upper Bann, the leader of the Ulster Unionist party. The piece began:

"Strangford MP Iris Robinson has addressed the House of Commons on the Opposition day debate on the Northern Ireland peace process."

I was most confused when I read those words because, having attended the debate, I had no recollection of the hon. Member being called. In fact, a later close inspection of the Official Report confirmed that she had not been.

The hon. Member for Strangford did speak in Monday evening's summer recess Adjournment debate. Another inspection of the Official Report revealed that her remarks were almost identical to the speech that the Newtonards Chronicle obviously believed she had delivered to this House almost a week ago.

Madam Deputy Speaker, I seek your ruling on two specific matters. First, do you consider it appropriate for an hon. Member to claim to have delivered a speech in this House when that was not, in fact, the case? Secondly, is it not a serious breach of parliamentary convention for an hon. Member to release to the press a word-perfect copy of their intended remarks to the House in advance of them actually being delivered—at least four days in advance, in this case?

On behalf of the Speaker, I thank the hon. Gentleman for giving Mr. Speaker notice of his point of order. Mr. Speaker has inquired into the matter.

It appears that the speech quoted in the press was given in the House after it had been printed in the newspaper. What is published in the press is primarily a matter for the newspaper and for the hon. Member for Strangford (Mrs. Robinson). But this is not a practice that the Chair would encourage.

On a point of order Madam Deputy Speaker. This is further to a point of order that I raised yesterday about an incident in which a written answer to me was read out by a Minister in another place before it had been delivered by the Department to me. Baroness Ashton has written me a letter of apology, which I fully accept—I do not regard her as in any way responsible. None the less, may I seek a ruling from the Chair that such conduct is unacceptable and that Departments are expected to achieve a better standard in dealing with answers to right hon. and hon. Members?

It is most unfortunate that the terms of the answer to the hon. Gentleman's question were given in the other place in the way that he described yesterday, before the question had been answered in this House. As he has said, he received a holding answer to the question on 22 July and the Department is to reply fully today. The Minister concerned has written to the him. May I suggest that he leaves it at that?

On a point of order, Madam Deputy Speaker. It has been reported in the press that a number of questions tabled by right hon. and hon. Members have been lost, mislaid or just not answered by Ministers. Will you inquire of the Government during the recess how many questions are outstanding and check that all those questions have been answered by the end of the recess?

I regret to inform the hon. Member that that is not a matter for the Chair. Perhaps hon. Members who have outstanding questions will pursue that with the Departments or the Table Office.

On a point of order, Madam Deputy Speaker. May I draw your attention to the increasing practice of releasing unfortunate announcements on the last sitting day? There are 170 planted questions on the Order Paper today. One of them is the announcement of the loss of 400 jobs in the defence industry, including 100 at West Freugh in Scotland, 150 at Aberporth in my constituency, and the closure of Llanbedr in the constituency of my hon. Friend the Member for Meirionnydd Nant Conwy (Mr. Llwyd). The arrangement of the business has been such that we do not have a motion for the Adjournment of the House today under which we could raise the announcements that the Government like to release on the last sitting day. Is it in order to describe that arrangement of the business and the way in which that announcement—which will affect 150 of my constituents—has been made today as a despicable act?

I am afraid that the hon. Gentleman will be disappointed with my reply, because I must tell him that the practice is entirely in order.

On a point of order, Madam Deputy Speaker. The Chancellor announced the outcome of the comprehensive spending review on Monday last week and I presumed that "comprehensive" meant that it covered the whole of Government spending. Following the statement, on Tuesday the Secretary of State for Education and Skills said next to nothing about spending on higher and further education. I tabled a written question for answer on Monday of this week asking how much spending was expected in the HE and FE sectors for the current year and next year according to the previous CSR, and for the next three years according to the new CSR. On Monday, the Secretary of State's answer was the standard one that she would reply as soon as possible. This afternoon, on our last sitting day, I received a further answer, which gives the figures according to the previous CSR, but says that figures for the present CSR will be announced later. Neither part of that answer can conceivably have been unknown to her when the answer was provided on Monday. Moreover, the actual figures that she says will be announced later must have been calculated long since. Is it acceptable for the Secretary of State to refuse to give out figures in response to a Member's written question simply because it would be embarrassing for her to do so at this stage and because she would rather hide them until a time of her choosing?

I am somewhat pleased to say that the content of answers from Ministers is not the responsibility of the Chair, but I note that the Secretary of State is in her place and has no doubt heard the hon. Gentleman's comments.