House of Commons Hansard Debates for 5 Apr 1995

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favourite airline. It carries more international passengers than any other carrier. It is a real success story. Back in 1979, the hon. Member for Glasgow, Garscadden (Mr. Dewar) described British Airways as "a potential pantomime horse" of capitalism. How wrong he was. The hon. Lady talked about British Steel. In 1979, it was making losses of £1.7 billion. It is now an industry in profit.

The hon. Lady should reflect on the costs to the country's export position if the Government had adopted what I believe to be her rather short-term view of public ownership. We have heard something today about the wider cost of full public sector services. The hon. Lady mentioned local authorities. Compulsory competitive tendering and privatisation mean that homes and businesses can buy services at competitive prices instead of subsidising them through taxation. That has been of much greater importance to United Kingdom businesses and their customers that the hon. Lady realises.

I shall illustrate my argument by talking about telecommunications and energy supply, which are two key services to virtually every home and business in the country. Telecommunications account for about 2 per cent. of gross domestic product. Electricity and gas together account for a further 2 per cent. The services that they provide are crucial to the competitiveness of each and every business. If telecommunications and energy providers perform badly, other industries feel the pinch. If they are free to charge too much for too little, millions of individual customers pay over the odds for a second-rate service. It is they who suffer.

Privatisation has led to vastly improved investment levels and service standards. Before privatisation, it was the taxpayer who inevitably underwrote investment. After privatisation, companies facing competition and regulation had to shape up their act. The hon. Lady bandied a few figures about. Let us consider some more. British Telecom has invested a massive £22 billion since privatisation. Mercury has invested £2.7 billion. Mobile phone companies have invested a further £2.6 billion. Investment by British Gas has tripled in real terms in the seven years after sale. The water companies have invested over £12 billion in the five years since privatisation, 75 per cent. more in real terms than in their last five years in the public sector.

Increased investment has clearly had an impact on quality. Everyone now has a real choice of telephone service. People no longer wait to be connected to a telephone service. British Gas now responds quickly to faults. In virtually all cases, supply is restored within 24 hours. No longer must busy customers wait in all day when they would rather be about their business. All utilities now offer timed appointments. Britain's water is now among the cleanest in Europe, despite being cheaper than water in most other European countries. Let us consider what investing for quality has cost the consumer, and perhaps pause over some of the telling interventions of Opposition Members in previous debates. For example, we were told that 16 million British Gas customers could expect only one result--increased gas prices, higher than the rate of inflation. That was not a startling new Government announcement. It was a forecast made by a Labour Member. It was just a little bit out: since privatisation, the average household gas bill has fallen by 20 per cent. even after inflation. We were told that a minimum estimate of the cost of privatisation to the

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consumer in terms of increases was 20 per cent. That was said by a Labour Member in the Opposition's haste to oppose electricity privatisation. Wrong again: privatisation has brought down the cost of electricity to the domestic consumer by 9 per cent. in the past two years, even after taking inflation into account.

If hon. Members want to make a phone call when they leave the House to go on a well-earned recess, I am happy to tell them that the three-minute local peak rate call now costs less in cash terms than it did on privatisation. They will find a phone box much more readily, and when they do, it will be working.

The House may recall the scaremongering of the right hon. Member for Salford, East (Mr. Orme). He said in 1983 that the public telephone box could be threatened by extinction. That was a far cry from reality. The number of BT call boxes has increased by over 50 per cent. to 127,000, and 96 per cent. of them work at any one time, compared with about 75 per cent. back in 1987.

It is tempting to tease the hon. Lady about her party's record in getting figures right. The serious point is that her attack on privatisation is narrow and misinformed. At the beginning of her speech, she talked about costs. On average, each privatisation has cost only 2.8 per cent. of the proceeds that have been raised. Those narrow figures belie the knock-on benefits to consumers of which I have spoken. As my hon. Friend the Member for Hendon, South reminded me, privatised industries are contributing about £50 million a week to the Exchequer in taxes and dividends. That is surely relevant. The criticisms that we have heard about the privatisation programme have ignored improvements in quality, reductions in price and improved service. They ignore the new export potential that privatisation has brought to the country. They ignore also the fact that privatisation has underpinned London's position as the premier centre for financial services and privatisation expertise, which is now being exported throughout the world.

Privatisation has brought solutions, ideas, innovation and investment. I can assure the hon. Lady that the Government will continue down that road. We shall proceed with privatisation--the hon. Lady mentioned British Rail-- and take forward the private finance initiative. We shall bring the private sector into areas previously thought to be the preserve of the public sector. We shall continue to apply principles of quality and service in the heart of government and to local services.

A great wave of reform has swept the public sector over the past 15 years. That has set the framework for UK excellence at home and abroad. The Government are proud of their record. We are not complacent, and the process will go forward.

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Estate Duty

1.57 pm

Sir Mark Lennox-Boyd (Morecambe and Lunesdale): I am most grateful to Madam Speaker for allowing me to raise this matter today. I am grateful to my right hon. Friend the Financial Secretary for attending to respond on behalf of the Government. I make no apology for adding to his work, for I am about to talk about a glaring injustice in our tax system.

The advantage of Adjournment debates is that a Minister can be asked to consider an injustice. Where it is correctible, as this one is, he can correct it. We all know that Ministers are so busy--I sympathise with every busy Minister--that it is hard for them to find time to examine difficult cases in detail. An Adjournment debate causes them to do just that. I feel sure that my right hon. Friend has carefully considered the matter and will agree that I am highlighting a glaring injustice in our tax provisions.

Estate duty was abolished more than 20 years ago, but, amazingly, it lives on in a few areas. I shall not list them all. The only one with which I am concerned is the vexed question of taxation of reversionary interests. It is in that area that an appalling anomaly occurs, because of two facts: first, rates of estate duty in the past were very much higher than rates of inheritance tax today; and secondly, there has been appalling inflation over the past three or four decades. I am not in any way arguing that the law has been incorrectly applied in this case, because clearly it has not. The objection of my constituent, Mrs. Findlater, is not that the law has been incorrectly applied but that the law itself is completely without justice.

Fortunately, the Government are contemplating making changes to the law affecting inheritance tax. My right hon. Friend the Prime Minister made a speech on Saturday in which he said:

"I also hold dear the belief that people should be able to hand on security to their children, cascading wealth down the generations. Over the last decade we've doubled the threshold at which inheritance tax becomes payable. It's been difficult to go further in the last two or three difficult years. But I'm committed to doing so as soon as we can afford it."

My right hon. Friend the Prime Minister has said similar things on earlier occasions about wealth cascading down the generations. I very much agree with him.

The timing of my debate is opportune. I hope that if my right hon. Friend changes the law and rates for inheritance tax, he will solve my constituent's problems as well. I shall now explain the problem. It really is very simple.

In 1957, Mrs. Findlater's mother died. Mrs. Findlater inherited, under her mother's will, a reversionary interest in another estate, which was subject to a life interest but which did not expire until 1990, when the beneficiary who enjoyed the life interest died. In much simpler language, and putting it bluntly, although Mrs. Findlater inherited the money in 1957, she could not get her hands on it until 1990. Because she could not get the money when she inherited it, she sensibly opted--as any reasonable person would if they were allowed to under the law, and Mrs. Findlater was- -to defer paying the tax that was due on it until she did get the money.

That event--getting the money--occurred 33 years later. An innocent observer might think that, with all the inflation that we have had in those 33 years, what Mrs. Findlater

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would have paid, had she not exercised the option to defer, would not have been very much in today's money. So why is she so upset? Well, because the law is not like that. The law in this area is the proverbial ass. It operates in an outrageous, unjust and utterly perverse way. In 1957, the relevant part of the estate about which I am speaking was worth about £10,000. Because of other funds making up the whole estate, at that time the relevant part would have attracted duty of 12 per cent.--some £1,200. By 1990, that £10,000-odd estate had grown to £124,139. No one should think that that was because of skilful investment. It was because of inflation, and inflation is the responsibility of Government. Indeed, as we all know, it is caused by Government. That £124,139 has borne tax, not at 12 per cent. but at 50 per cent.--£62,069.

I hope that my right hon. Friend and every other hon. Member in the House is wincing. I certainly am. Tax at 12 per cent. in 1957 had risen to 50 per cent. in 1990. Furthermore, the capital transfer tax office also made a demand for interest--all within the law--of £3,404. What a business! I must point out that, in its generosity, the capital transfer office has been good enough to make a remission of part of that charge. I suppose that we should be grateful for the crumbs that fall from the high table.

There we see why such indignation has been caused to that family. The fund is valued on its present rather than its historic value, but tax is charged according to estate duty scales that were in force in 1957, under, I may add, a tax law that was abolished for normal purposes in 1975. The amount of tax taken, which would have been 12 per cent., was in fact 50 per cent. in 1990. As must be clear to any impartial observer, my constituent has been punitively taxed on an inflationary gain.

As I have mentioned, there are clear signs that the Government are thinking of relaxing further the impact of inheritance tax. If my right hon. and learned Friend the Chancellor is able to do so in his autumn Budget, I very much hope that he will address the problem of Mrs. Findlater and others in a similar position. There cannot be many people in such a position, and it should be of little cost to the Exchequer to rectify the problem.

I must point out to my right hon. Friend the Financial Secretary that, if the Government relax the impact of inheritance tax but fail to address the problems of Mrs. Findlater and people like her, the sense of injustice felt by such people will be deep and abiding. The equitable solution to the problem is to tax such a fund at its present value, by applying present rates as well, not at the historic rate, which leads to such manifest unfairness.

I look forward to the next Budget, confident that the timing of this debate must be right, for my right hon. Friend the Financial Secretary must, now that the Finance Bill is nearly law, be about to consider matters such as inheritance tax for our right hon. and learned Friend's next Budget. I wish my right hon. Friend well. I invite him to see that justice is done and I look forward to seeing the promises of my right hon. Friend the Prime Minister put into effect. Mrs. Findlater, too, wants to see wealth cascading down the generations.

1.58 pm

The Financial Secretary to the Treasury (Sir George Young): I congratulate my hon. Friend the Member for

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Morecambe and Lunesdale (Sir M. Lennox- Boyd) on securing the debate. I know that he has taken a keen interest in Mrs. Findlater's case for some time. I pay tribute to the way in which he has pursued this case on behalf of one of his constituents; I read every letter in the file that was placed before me. I can understand the distress and indignation of Mrs. Findlater and her family, which my hon. Friend so eloquently conveyed to the House. In my reply, I shall deal with the general principles behind the liability to estate duty that Mrs. Findlater has had to face, and then touch on some of the other points that my hon. Friend made.

Estate duty was one of the forerunners of the present inheritance tax regime. It lasted from 1894 until 1975. The last Labour Government abolished estate duty, replacing it with capital transfer tax, which combined an estate tax with an immediate tax charged on lifetime gifts.

Since taking office in 1979, the Government have reformed the taxation of estates significantly, consistent with our stated objective of allowing individuals to pass on more of their wealth to the beneficiaries of their choice, free of the burden of taxation. We replaced capital transfer tax in 1986 with inheritance tax, abolishing the immediate charge on lifetime gifts in the process. Estate duty was a tax on property passing on death. It included the deceased's own assets, any trust property in which the deceased had an interest in possession--for example, a life interest--and gifts made shortly before death.

In some respects, the estate duty and inheritance tax regimes are similar, but there are some important differences, one of which involves the treatment of interests in expectancy. It may help if I briefly explain what that is. Essentially, it is the right to receive property or an interest in that property at some future date. It is most commonly encountered in settlements and will trusts. For example, a husband could provide by will that a capital sum be settled on his wife, so that she may enjoy the income from the settled fund for the rest of her life, and on her death the capital would pass to their son. In this example, while the wife lived, the son has an expectant interest in the capital.

Interests in expectancy are usually of some value, so they can be bought and sold in an open market like any other asset, and this does indeed occur. Under estate duty, it was considered appropriate that an interest in expectancy passing on a person's death should be taxable on the death.

I have already mentioned that the treatment of inheritance tax differs. Nowadays, we no longer generally tax an interest in expectancy in this way. We will usually do so only if the interest was purchased by the deceased. Since 1975, the way in which we tax settled property generally has changed, and we now believe that trusts are adequately taxed without having to include most interests in expectancy.

I will not detain the House by arguing the pros and cons of the estate duty regime. Suffice to say that at the time it was thought appropriate to levy tax on an interest in expectancy but, as I have said, that is generally not so now.

Under estate duty law, the executors or administrators of an estate had a choice concerning payment of duty on an interest in expectancy. They could either pay it straight away, with the duty on the rest of the estate or, alternatively, they could elect to postpone payment until the interest fell into possession.

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If payment was postponed, for the purpose of determining the estate duty on the rest of the estate, a discounted or actuarial value of the interest at the date of death was adopted, and the estate duty on the interest itself was charged according to the value of the interest at the time when it fell into possession, taking into account the value of the rest of the estate as previously ascertained.

The facility for deferment of duty on interests in expectancy essentially recognised the relatively illiquid nature of the asset, as in the example described by my hon. Friend. There were other cases where payment could be postponed for similar reasons. Deferment was also available for woodlands, recognising the long-term nature of forestry enterprises, and heritage quality chattels included in an estate were exempted from duty conditional on appropriate undertakings being given concerning the retention and preservation of the chattels. That recognised the importance of preserving our national heritage.

Reverting to interests in expectancy, the executors had to elect, on delivery of their account of the estate to the Inland Revenue, whether to pay estate duty on the interest at once or, instead, when the interest fell into possession. If they elected to pay at once, duty was assessed on the market value at the date of death of the right to receive the capital sum at a future date.

If they elected to defer payment until the estate receives the interest, estate duty is payable on the open market value at that time of the actual assets accruing to the estate. The rate of duty is ascertained, as my hon. Friend explained, by the aggregation of such value with the value of the rest of the estate as previously ascertained. If, as usually happens, the value of the accruing assets is greater than the value of the expectant interest at the date of death, it bears a higher rate of duty than the rest of the estate--again, as in the example given by my hon. Friend. That is because estate duty had progressive rates, dependent on the size of the estate, rather than a single rate as we now have under inheritance tax.

The option on payment of duty on an interest in expectancy is not considered to have been exercised until the grant of representation has been obtained. Until then the election can be made even though the person with the prior interest may have died in the meantime. Moreover, in practice, the option is not treated as finally exercised until the accountable person pays what purports to be, and is accepted as, full duty in respect of the rest of the estate. Having explained the background to the claim to estate duty, I come to the particular case that my hon. Friend has raised today. Mrs. Findlater's uncle died in 1952 and by will left his residuary estate on trust to his widow for life, or until remarriage, and on her death the capital was to be divided between his two brothers absolutely. The father of Mrs. Findlater was one of the brothers. He also died in 1952 and left his entire estate, including the interest under the will trust, to his widow. She assigned that interest in 1953 to her daughter, Mrs. Findlater, and died in 1957. Since the gift of the interest in expectancy was made within five years of her death, it became liable to estate duty on her death.

As the executrix of her mother's estate, and the person accountable for the estate duty on the interest in expectancy, it was Mrs. Findlater who had the option of either paying the duty on the interest in 1957, with the

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interest being valued at that time, or when the interest fell into possession, and valued at that later time. In the event, no duty was paid on the interest in expectancy in 1957, as the second option--to defer payment--was exercised. I understand that Mrs. Findlater was professionally advised.

The life tenant lived on for another 23 years. As my hon. Friend said, she died in 1990, which event triggered the estate duty liability that had been deferred since 1957. The will trust fund created by Mrs. Findlater's uncle had, not surprisingly, increased in value significantly over those 23 years, so the value of the interest gifted to Mrs. Findlater was worth a lot more now than the expectant interest would have been in 1957.

The enhanced value of the interest and the estate duty rate structure in force in 1957 meant, as my hon. Friend pointed out, that the deferred charge was much higher than the original charge on death would have been. That is, I think, the crux of the matter raised by my hon. Friend. Mrs. Findlater, and indeed my hon. Friend, are asking whether it is right that an asset which would have been charged at a relatively low rate--6 per cent --in expectancy, in fact ends up being charged at nearly eight times that rate--50 per cent--in possession. That is the nub of the dilemma that my hon. Friend has put before the House.

I have to say to my hon. Friend that, whatever one now thinks of the rates of duty which existed in 1957, Mrs. Findlater exercised the option to defer the duty with the benefit of professional advice, and in the full knowledge that duty at the appropriate rate would have to be paid at a later date. That is, if I may say so, the chance that one takes by deferring a tax liability for an undetermined period free of interest.

I believe that Mrs. Findlater does not dispute the legal basis of the claim for estate duty, and nor does my hon. Friend. But they believe that there is a moral basis for reducing the charge. I have to say that to do so would be unfair to the vast majority of taxpayers in identical circumstance whose interests have already fallen into possession. It must be right that all those who deferred their liability in the full knowledge of the consequences should be treated in the same way.

My hon. Friend asks whether it was right that such a large amount of estate duty should now be levied. He put the proposition to the House that we should now extinguish those outstanding claims. Alternatively, he may have in mind some form of indexation relief, or a lower scale of rates of duty, to reflect the lower tax rates applying to deaths that occur today.

My hon. Friend asked us to reflect on his proposition, but one must put one or two counter arguments. During the period that we are discussing, no account of inflation was taken for any direct taxes, but this was before the days of hyper-inflation under the 1970s Labour Government.

Indexation for capital gains tax purposes was introduced by the Government in 1982, by which time estate duty had already been abolished for more than seven years. It was therefore unnecessary to consider indexation for estate duty purposes, and I think that the same applies now.

Sir Lennox-Boyd: The portion of the estate fell into possession in 1990--there was inflation throughout.

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If there is to be indexation for capital gains tax from 1982, why cannot people in those situations be helped too? It is monstrously unjust.

Sir George Young: My hon. Friend has to reflect on whether he would extend the same treatment for which he is asking on behalf of his constituent to everybody who in 1957 deferred payment, subsequently paid duty and is, in effect, in exactly the same position as his constituent. If he is to advance the case for his constituent, in fairness he must offer that same retrospective opportunity to everybody who, under estate duty, was offered the same decision that Mrs. Findlater was offered. There are severe consequences if one is to do that. If one does not do that it would be wholly unfair on those estates where a duty has already been paid with or without the deferment option. It would also be unusual if we were now to try to revise tax legislation which had been repealed decades ago.

Abandoning the remaining deferred claims for estate duty on expectant interests, as advocated by my hon. Friend, would also lead to pressure for, and an expectation of, similar concessions in relation to the other deferred estate duty charges that I mentioned earlier, in particular those for heritage property.

In any event, my hon. Friend is well aware of the well-established conventions regarding retrospective reliefs. Even if some form of concession applying solely to interest in expectancy were possible, it would not be possible to apply it equitably in accordance with the spirit of the taxpayers charter.

I understand from my hon. Friend's body language that my remarks have not been wholly welcome, but I hope that they have helped him to understand the basis for the

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estate duty charge and persuaded him that, in the case of his constituent, the charge was consistent with both the relevant law and the treatment of other taxpayers.

At the end of his speech, my hon. Friend mentioned inheritance tax. In recent years the Government's aim has indeed been to reduce the burden of taxation, thus allowing our citizens to pass more of their wealth to their chosen beneficiaries and simplifying the tax system. Since the introduction of inheritance tax in 1986 the Government have doubled the threshold in real terms: at £154,000 for 1995-96, it is more than twice the average price of a house in the United Kingdom. We have also abolished the immediate charge on lifetime gifts, and effectively exempted family trading businesses and farms from inheritance tax.

I am pleased to say that, as a result of that and other improvements that we have made, fewer than one in 30 of all estates now pay any inheritance tax. The vast majority of people can leave their homes, savings and other possessions to their children, or other beneficiaries of their choice, without having to worry about those inheritances being taxed.

We stand by our commitment--of which my hon. Friend reminded us--to reduce the burden of inheritance tax still further. We are, of course, mindful of what my right hon. Friend the Prime Minister said at the weekend, and we shall seek in future to make such improvements as are consistent with the prudent management of the economy.

2.21 pm

Sitting suspended.

2.30 pm

On resuming--

It being half past Two o'clock, the motion for the Adjournment of the House lapsed, pursuant to Order [19 December].

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Health Services (London)

3.30 pm

Mr. Peter Brooke (City of London and Westminster, South) ( by private notice ) asked the Secretary of State for Health if she will make a statement on the health service in London.

The Secretary of State for Health (Mrs. Virginia Bottomley): The decisions that I announced yesterday follow four separate statutory consultation exercises about hospital changes in south and east London and around Barnet and Edgware. In each case, the decisions measure up against the Government's key objectives for improving the health service in London- -to strengthen specialist services by concentrating them in centres of excellence; to preserve and enhance medical teaching and research in the capital; to provide more modern acute hospital services closer to the major centres of population; and to release money to increase investment in family doctor and community health services which are badly needed in parts of the capital.

Those key elements of the Government's strategy will be familiar to the House. I set them out in a statement at the time of the publication of the Tomlinson report, and again when I announced my response. They have been frequently debated. I said on those occasions and I say again: the objectives of this strategy enjoy widespread support within the clinical and academic worlds and from independent commentators such as the King's Fund. The need for change in London is widely recognised, and widely recognised as long overdue.

I hear and understand the concerns that have been expressed, not least by right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke). We considered very carefully the points made during the consultations, including those made by right hon. and hon. Members in their meetings with the Minister for Health and me. In particular, I was struck by the points made about the pace of change and the extended time scale of some of the announcements yesterday respond to those points.

Let me make it absolutely clear that no accident and emergency facility, or indeed any other, will close until Ministers are satisfied that the alternative facilities are not only available but capable of providing an improved service for patients.

My right hon. Friend asks specifically about the financial implications. The changes announced yesterday will be backed by £400 million of capital investment. That is on top of the £210 million that we are already spending on improved primary care. That is a substantial investment in a modern health service.

That money will buy, among other things, a new NHS hospital for Greenwich, an upgraded hospital in Barnet, complete with a state-of-the-art accident and emergency department and a world-beating centre for neurosciences and neurosurgery at King's. It will support the changes at the Royal Hospitals trust and Guy's and St. Thomas's, which will develop them as centres of supreme excellence in treatment, teaching and research. In addition, we are investing substantially in other hospitals such as the Homerton, Lewisham, King's and the Royal Free.

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Aside from the direct clinical benefits, we expect those changes to lead to substantial revenue savings which we estimate will be of the order of £75 million each year once the changes are complete. That is money which can and will be invested elsewhere in the health service, both in community health services in London's areas of greatest need and outside the capital.

I say to the House that, at the moment, rather than getting £75 million out, we are putting in £28 million each year, supporting the duplication and fragmentation of services around the four areas covered by my announcement. That must be a good exchange by anyone's standards.

For St Bartholomew's and the Royal London, capital investment will total nearly £240 million. It is expected to deliver revenue savings of £30 million a year; the current subsidy for the trust is about £8 million a year.

Let me say to my right hon. Friend that the changes that I announced yesterday, which take our strategy forward, are not primarily about finance. [Interruption.] These changes are about improving the quality of care. They are about better specialist services, where medical expertise is enhanced by bringing clinicians together to benefit from each other's ideas; they are about better teaching and better research, and about linking world-class hospitals to multi-faculty colleges; they are about equipping modern hospitals to respond more flexibly to the pressures that they face, and harness the awesome advances in medical technology; and they are about providing more health care where Londoners need it most badly--in their communities, their doctors' surgeries and the streets where they live. It is on that basis that I made my decisions.

Change is never easy, but to fail to deal with the need for change in London would be to fail to deal with the needs of Londoners. I am determined that, as a result of these changes, we shall have a health service in London that is fit for the 21st century, in which we can all take great pride.

Mr. Brooke: I thank my right hon. Friend for answering my question. Her policy of rationalisation and the concentration of specialties in London enjoys considerable support among Conservative Members; against that background, will she answer a number of specific questions about Bart's?

First, can my right hon. Friend tell us anything about the current state of negotiations with the City corporation about a continued health service on the Bart's site? Does she recognise that Bart's is a national--and, indeed, international--asset, and that, in a post-industrial society, such assets are of great importance in communicating British medical excellence to the world?

Secondly, can my right hon. Friend outline as far as possible--I recognise the difficulties--her plans to ensure that the national asset to which I have referred is protected and enhanced in the merger at Whitechapel? What will be the future deployment of the historic site at Smithfield? I use the word "historic" in a living rather than a heritage sense.

Mrs. Bottomley: I appreciate my right hon. Friend's recognition of the need to rationalise and concentrate services. That message has been repeated time and again over the past 80 years, but with increasing intensity in recent years.

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My right hon. Friend asked what stage had been reached in discussions with the City corporation. I am glad to say that a memorandum of understanding is likely to be agreed between the corporation and the local health authorities next week. Their ideas have been based very much on the Newchurch report, in the hope of a practical response to the present-day needs of the local community. My right hon. Friend referred to the national and international significance of the hospital's ethos and work. I said explicitly in my statement yesterday that I wanted that ethos and culture to be preserved and enhanced during the move--albeit a move to the Royal London. That tradition is important, and, as my right hon. Friend knows, I fully appreciate the long history of St Bartholomew's; but other hospitals have been able to move successfully.

For example, St George's moved to Tooting, although that took 21 years. I do not think that 21 years of indecision would benefit my right hon. Friend's constituents, or the eminent professionals who work at this distinguished hospital.

As for the site, I announced yesterday that a project team would look for practical options fitting to the site on which there has been such a history of excellent medicine over many hundreds of years. I can inform the House that Sir Ronald Grierson has agreed to chair that committee. I hope that Lord Rees-Mogg will also be a member of the committee as well as a number of other distinguished academics and clinicians.

Mr. Peter Shore (Bethnal Green and Stepney): The right hon. Lady should know that her announcement of the closure of Bart's and the London Chest will be greeted with dismay and anger in east London. We do not expect our services to improve; we are fearful that they are deteriorating.

When the right hon. Lady says that there is widespread acceptance for the plans, is she not aware that, apart from what the first King's Fund report said and Tomlinson backed up, a succession of reports since then have revealed that, far from being over-bedded, London is short of beds in a major way?

When the right hon. Lady speaks of having gone through a consultative process, is she not aware that, at every stage in the consultation, her proposals have been resisted by the people directly concerned and by the community health councils? Is it not becoming a farce to speak of consultations which have no effect whatever on the area authorities, the regional authorities or the Secretary of State herself?

Mrs. Bottomley: It is my task to make sure that decisions are taken only when, after careful discussion, I am satisfied that they will lead to improvements in health care. As the right hon. Gentleman knows, I know his part of London extremely well. I know the dearth of primary and community services and the benefit to his constituents of the £210 million being invested in primary care in London. As for beds, all reports have reinforced the dilemma of excessive duplication of specialty beds. The difficulty is that the specialty beds are in units below the size necessary to gain the full benefits of research teams and managing a modern health service.

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When the right hon. Gentleman considers the specialty reviews chaired by eminent clinicians, many of them leading members of the royal colleges, he will see time and again the message repeated--as it was in the King's Fund report and the Tomlinson report-- that the duplication and fragmentation of the specialty units mean that we do not get the maximum benefit from the substantial professional and financial commitment that we are putting into health care in London. To achieve precisely that excellence and quality of care, it is necessary to take those decisions.

Sir John Gorst (Hendon, North): Does my right hon. Friend accept that democratic politics is about delivering to people what the majority want, and not about telling the majority of people what they should have? Does my right hon. Friend not accept now that she is doing the wrong thing, in the wrong way, at the wrong time and in the wrong place? Finally, now that my right hon. Friend has had time to reflect on her precipitate decision, which she clearly took after seeing my colleagues and myself with a weekend intervening, will she recognise that perhaps the decision was the wrong one? Will she now reconsider it?

Mrs. Bottomley: I well understand my hon. Friend's strong commitment on behalf of his local hospital and the service it has provided to his constituents. I also heard my hon. Friend saying that he has had 25 meetings on the issue.

The need for modernising the health service and bringing together state-of- the-art accident and emergency departments is repeated time and again by clinical standards advisory groups and the teams of professionals, who time and again argue about the better clinical outcome of a consultant-led service. I know that my hon. Friend felt strongly about questions of timing, transport, the ambulance service and the improvement in primary care. I hope that he will feel that, in my announcement yesterday, I have indeed considered all those elements of his requests. He knows that the health authority will be consulting about what further uses could be developed at the Edgware hospital, to fit the needs of the community not only for today, but for the next century.

Mr. Simon Hughes (Southwark and Bermondsey): Does the Secretary of State accept that she made a grave mistake by not coming to the House to make her announcement? It is the national health service, not the Secretary of State's health service, so should not serious weight be given to the public's views about the proposals on which she consulted? If, for example, in relation to Bart's, Guy's or any other hospital, 1 million-plus people take one view, and, as in the case of Guy's, 23 people take a different view, and if the right hon. Lady then takes the view of the 23, would it not be wrong to say that she has listened to the public consultation?

The right hon. Lady said that accident and emergency units would close in five years' time, on the assumption that the remainder of the health service in London could provide an alternative. What guarantee can she give that there will not be just as much need then for the units that are in place now?

How much of the money that the right hon. Lady has announced is new money? Is it not the case that none of the capital money is new money? In view of her letter to the chairman of the South Thames regional health authority, it appears that the local commission's bid for another £29 million as the minimum needed to make the

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changes viable will have to be met from the regional budget, not by any additional Government money being provided as a result of her announcement yesterday.

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