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Royal Marine Commandos

14. Michael Fabricant (Lichfield): If he will make a statement on the future role of Royal Marine commandos in the war against terrorism. [66971]

The Secretary of State for Defence (Mr. Geoffrey Hoon): The Royal Marines of 45 Commando are returning from their successful deployment in Afghanistan and will be having a period of rest and recuperation. The vast majority will have returned by 19 July and the remainder, mostly logistics personnel, will return as soon as possible thereafter.

As I told the House on 16 October last year and most recently on 20 June, this is not a conventional campaign and it will vary in pace and intensity. Any future deployment of the Royal Marine commandos will depend on the situation at the time and the specific capabilities required.

Michael Fabricant: I am relieved that 45 Commando will soon enjoy some rest and relaxation. The Secretary of State knows that 40, 42 and 45 Commandos have been operational in the past few months. What consideration will he give to a change in the order of battle to create a fourth commando, given the current circumstances and the fight against terror?

Mr. Hoon: The hon. Gentleman is right. Elements of 40 Commando remain at Bagram to provide essential support to UK forces that remain in Afghanistan. However, its next role will be to act as the lead commando group for the joint rapid reaction force. The Ministry of Defence and I are always prepared to consider proposals for augmenting the excellent work of our Royal Marines. The hon. Gentleman's suggestion may be one way forward.

Glenda Jackson (Hampstead and Highgate): Surely a successful prosecution of the war against terrorism depends on more than the undoubted bravery of Royal Marine commandos. If the British Government support the US Government and engage in a pre-emptive strike against Iraq—an action that many of my constituents

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believe to be illegal and immoral—would not it shatter the international community's current response to the war against terrorism?

Mr. Hoon: I have already answered that question, not only today but at previous defence questions. To avoid doubt, I repeat that no decisions have been made about military operations against Iraq.

Russia and NATO

15. Mr. David Atkinson (Bournemouth, East): If he will make a statement on steps he is taking to improve the relationship between Russia and NATO. [66972]

The Secretary of State for Defence (Mr. Geoffrey Hoon): The United Kingdom, especially my right hon. Friend the Prime Minister, has taken a leading role in the recent historic transformation of NATO's relationship with Russia. The UK will continue to work to make the new partnership a success. Indeed, the fact that I am leaving for St. Petersburg this afternoon to meet my opposite number, Sergei Ivanov, shows the importance that I personally attach to developing the relationship with Russia. We are building on the existing range of successful bilateral contacts and initiatives, including ship visits, our military resettlement programme, and our contribution to Russia's chemical weapons disposal programme.

Mr. Atkinson: Does the Secretary of State recall that, less than three years ago, NATO was rightly condemning Russia for using disproportionate brutality in the second Chechen war? Does he agree that, for Russia's relations with NATO to become ideal, Russia must be required to hold to account those responsible for such war crimes, and to introduce a political solution that will restore peace, democracy and human rights to Chechnya?

Mr. Hoon: One of the advantages of having a mature and sophisticated relationship with Russia is that a range of issues, including the situation in Chechnya, can be properly and effectively discussed. I am sure that the hon. Gentleman, with his knowledge of Russia, will recognise that it is much better to talk to Russia about these issues than simply to have the kind of stand-off that was characteristic of the cold war.

Mike Gapes (Ilford, South): Does my right hon. Friend know that, last week, a number of Members had the pleasure of hearing Mikhail Gorbachev speaking in Committee Room 10? Does he not agree that it is fantastic that the vision of a common European home that Gorbachev was putting forward in 1986 is at last beginning to be established through the good relations between NATO and Russia?

Mr. Hoon: I, too, had the privilege of meeting Mikhail Gorbachev, and it is certainly my view that he has never been given the credit that he deserves internationally for the efforts that he made at the time of the collapse of the Soviet Union. He is also a man who is not properly

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regarded in his home country, and perhaps he has had to come here to the United Kingdom to receive the recognition that he rightly deserves.

Andrew Mackinlay (Thurrock): Before my right hon. Friend visits St. Petersburg, will he discuss with the Foreign Secretary the problems relating to Kaliningrad? What is being proposed by the European Union is equivalent to United States citizens travelling from Alaska to Oregon, and needing to have a visa to go through Canada. Does my right hon. Friend not realise that that is quite unacceptable, grossly unfair to the Russian federation, and needs to be addressed with some urgency if we are to promote good relations with our friend, the Russian federation?

Mr. Hoon: As I said earlier, I will be going toSt. Petersburg this evening. The Foreign Secretary is somewhere in the far east—in India, I think—at the moment, so I cannot give my hon. Friend the assurance that he requires just at the moment. The Foreign Secretary and I discuss these matters, however, and I have certainly had the opportunity to discuss Kaliningrad during my visits to each of the Baltic states. I recognise that there are issues still to be resolved, not least in relation to whether the Baltic states may enjoy membership of the European Union.

Conflict Prevention

16. Mr. Mark Hendrick (Preston): If he will make a statement on the contribution of his Department to conflict prevention. [66973]

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The Minister of State for Defence (

Mr. Adam Ingram): The Ministry of Defence contributes to the Government's interdepartmental conflict prevention strategy, in collaboration with the Foreign and Commonwealth Office and the Department for International Development. We provide military training to support the reform of the armed forces of partner countries, and to develop their capacity to take part in peace support operations. We also provide training and education, and both military and civilian expertise, to support wider security sector reform. The Ministry of Defence also contributes forces to operations in support of conflict prevention and peace-building. In the past year, these have included deployments in Sierra Leone, Macedonia and Afghanistan, as well as continuing commitments in a wide range of locations, from Bosnia and Cyprus to the Congo and Georgia.

Mr. Hendrick: Given the devastation that conflict has caused the peoples of Africa, especially in Sierra Leone, is not it essential that we continue with the pooled arrangements for conflict prevention if we are to prevent a conflict in countries such as the Republic of the Congo?

Mr. Ingram: My hon. Friend makes a good point. He will be aware that there has been increased recognition of the extent of the problems in sub-Saharan Africa and in other parts of Africa. Considerable effort is being made. Sierra Leone was a good example of where we contributed to the stabilisation of the country. We must be conscious of our successes, and also of any other problems close to countries that we have helped to bring back to full stability. I thank my hon. Friend for that question.

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Spending Review

3.30 pm

The Chancellor of the Exchequer (Mr. Gordon Brown): The long-term funding that we announce today for Britain's public services is possible because the bills of economic failure in unemployment and debt have been radically reduced; the state of our public finances is strong; and, despite uncertainties in the global economy, inflation is under control, interest rates have been low and stable, and employment and growth continue to rise.

In this period, with global financial markets of greater instability, our task and our determination, as always, is to remain vigilant and committed to sustaining monetary and fiscal stability, with the strength to take the right long-term decisions for Britain.

I can tell the House that, over the economic cycle, we will not only meet all our fiscal disciplines and rules, but we are on track to meet our fiscal disciplines and rules with a margin for prudence even on the most cautious case—[Interruption.]—and even on the most cautious assumptions. Indeed, it is so that we can steer a course of monetary and fiscal stability across the economic cycle that we have reduced net debt from 44 per cent. of national income in 1997 to 30.4 per cent. last year, which is in contrast to 41 per cent. in America, 53 per cent. in the euro area and almost 60 per cent. in Japan.

As we set out in the Budget, Britain's debt has been reduced to the lowest level of national income in the G7, and the lowest of all our major European competitors. Having last year paid off more debt in one year than all previous Governments in the last 50 years, I can report that this year debt interest payments will be lower as a share of national income than they have been at any time in the last century, since the first world war.

Twenty years ago, debt interest payments consumed 4 per cent. of our national income. Debt interest is now half that, at 2 per cent., which is a saving worth £20 billion a year. Those extra resources have made it possible to recruit more nurses, more doctors, more teachers and more police than at any time in the past two decades.

Twenty years ago—indeed, 10 years ago—1.6 per cent. of national income was spent on the costs of unemployment. Today, I can again report that this year we will spend just 0.4 per cent.—savings worth a further £10 billion a year.

It is through maintaining a steady hand on the public finances at all times that we are able to meet our fiscal rules and match our reforms with new resources, so that efficient, strong public services play their part in delivering a modern Britain of greater opportunity and greater security not just for some, but for everyone.

I can report to the House that, holding strictly to the total spending envelope I set out in the Budget, we are raising departmental spending from £240 billion this year to £263 billion next year, £280 billion in 2004–05, and £301 billion in 2005–06—in total, by 2006, there will be £61 billion a year more for improved public services.

Ten years ago, only 50p of every pound of additional expenditure—50 per cent.—went to the public services, the rest having to be spent on debt and social security, whereas in this review almost 80p in every additional pound is going directly to improving public services, and

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of the remaining 20p—20 per cent.—most is being spent not on debt interest and unemployment, but on improved pensioner and children's benefits.

In each area of service delivery, from housing to education, from policing to defence, we are tying new resources to reform and results, and developing a modern way for efficient public services, which includes setting demanding national targets; monitoring performance by independent and open audit and inspection; giving front-line staff the power and flexibility to deliver; extending choice; rewarding success; and turning round failing services.

I can also tell the House that over the next three years, as we reverse the backlog in investment, our projections from 2006—other than the commitments to health paid for by national insurance—are based on real-terms increases in spending on public services at 2½ per cent. a year.

With this review's decisions we will not only continue to address past decades of chronic underinvestment in education, health, transport and housing, but rise to new challenges in a changed global environment—international challenges including the essential duty of fighting terrorism, and challenges here at home as global economic competition brings vastly increased opportunities but also increased insecurities. The role of Government is— by expanding educational, employment and economic opportunity, and by encouraging stronger communities—to enable and empower people to make globalisation work for their families and their future.

First, to respond to global insecurities and the new fight against terrorism, the Secretary of State for Defence is announcing that the budget for our armed forces, who have served our country overseas with courage and distinction not only in Afghanistan but recently in Kosovo, Macedonia and Sierra Leone, will rise from £29.3 billion this year to £32.8 billion by 2005–06. That rise of £3½ billion a year is the largest sustained real-terms increase in defence spending for 20 years.

Since the tragic events of 11 September, international co-operation and, led by the Prime Minister, Britain's international engagement have assumed a new importance, so the Foreign Office's and Foreign Secretary's budget will rise from £1.3 billion this year to £1.5 billion by 2005–06. Within that budget we will strengthen the work of the British Council, whose budget will rise from £157 million a year to £185 million by 2005–06. The budget for the BBC World Service, whose 160 million-a-week audience is now its largest ever, will be £38 million a year higher by 2005–06.

When it comes to meeting the urgent moral challenge of combating international poverty, the question for us is how a strengthened commitment by our country can inspire a step change in aid from all the richest countries so that we can fulfil the millennium development goals: to halve world poverty, cut child mortality by two thirds and deliver primary education for every child. The Secretary of State for International Development is announcing a rise in United Kingdom aid from the £2 billion that it was in 1997 and the £3.3 billion that it was last year to £4.9 billion by 2006. That is the biggest ever rise—a 35 per cent. real-terms increase since 2001, and a 93 per cent. real-terms increase since 1997. By raising the contribution figure of 0.26 per cent. of national income that we inherited and today's 0.32 per cent. figure

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to 0.4 per cent. by 2006, and by untying aid and targeting aid on the poorest countries, we are ensuring that more money goes towards tackling poverty than has gone towards it at any time in the history of British aid.

Starting with our dialogue with churches and non- governmental organisations next week and proceeding to September's Johannesburg summit—at which the Prime Minister and the Deputy Prime Minister will be present—and the International Monetary Fund and World Bank meetings later in the month, we want this new finance from our country to be an engagement and a signal for a new $50 billion international financing facility involving all rich countries: a new alliance against poverty which recognises that by meeting our moral obligations to the poorest of the world we advance opportunity and security for all the world.

At the heart of our spending decisions this year is a set of major economic reforms that will expand our national wealth so that Britain can become more productive and prosperous, and we can make the most of the new opportunities of the global economy. Invention and innovation are the key to long-term national competitiveness, so in partnership with the Wellcome Trust—which I thank—we will create and fund a new national centre for excellence in science teaching. After a rigorous selection of priorities within the industry budget and a move away from the old loss-making subsidies of the past, I can announce a 10 per cent. real-terms annual rise in the science budget and, by 2005–06, an extra £1¼ billion a year for British science.

Britain must not make the mistakes in science education in the next generation that we made in the last, and so to fund a new generation of young British scientists, we will implement the Roberts report—which means on average, a £4,000 rise in science post-doctoral Research Council pay, with the average stipend for Research Council PhD students rising to more than £13,000 by 2005–06. Even after inflation, that figure is twice what it was in 1997.

We will encourage a third role for universities beyond teaching and research—the commercialisation of new discoveries. The higher education innovation fund will rise to £90 million a year by 2005–06, to ensure that more British inventions become British manufactured products, creating British jobs.

To remove barriers to productivity growth in the north and in the south of our country, the Deputy Prime Minister will this week announce reforms to our planning system, including new business planning zones to ensure development and to create jobs in high-unemployment areas. He will also announce new funds and plans for meeting housing needs south and north—throughout the country—ensuring that we make good use of the space in our existing towns and cities, while protecting valuable countryside around them.

Because a successful rural economy is vital both to rural areas and to our entire economy, the Secretary of State for Environment, Food and Rural Affairs is announcing today that she will implement the core recommendations of the Curry report to promote sustainable farming. To make this possible, and to improve Britain's flood defences, her budget will rise

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from £2.5 billion this year to £2.9 billion in 2005–06—an annual average real rise of 2.7 per cent. a year after inflation.

To secure balanced development in every region—tackling regional weaknesses, and building on regional manufacturing and industrial strengths—we must decentralise decision making out of Whitehall. I can announce that our nine regional development agencies will now have a strengthened local role in transport, tourism and housing. To pilot further devolution from Whitehall for services to small businesses and adult skills, and to reverse decades of indifference and neglect of our regions in this country, the budgets for RDAs will rise from £1.6 billion a year to—by 2005–06—£2 billion a year, as local people make more of the decisions about meeting local needs.

Addressing the long-term underinvestment and neglect of transport is vital both to economic prosperity and to the quality of life. To deliver the 10-year transport plan, the transport budget will rise from £7.7 billion this year to £11.6 billion in 2005–06—in total, over the next three years, a 12 per cent. real-terms increase. The Transport Secretary will also consult on the long-term need to increase airport capacity in our country.

To secure a more competitive environment and to root out anti-competitive practices, the budget of the Office of Fair Trading will increase from £34 million this year to £55 million by 2005–06. We are determined that everything is done to ensure the highest corporate standards, and next week, in the light of Enron, the Secretary of State for Trade and Industry will put before the House the interim report on accounting and auditing reform.

There are now 1.5 million more men and women in work than there were in 1997. Unemployment in Britain is today lower than in Japan, lower than in America, and lower than in every other major European country, and for the first time for 50 years Britain has the lowest unemployment of any major industrialised nation. However, because we will never be complacent as long as people who can work are out of work, we need further reforms that match rights and responsibilities to help people acquire more flexible skills and new jobs, so that they can succeed in the changed global economy.

Having ensured in the last five years that 1,750,000 men and women have benefited from the new deal, the Secretary of State for Work and Pensions will roll out nationwide by 2006 the successful Jobcentre Plus one-stop service that will help young and adult unemployed, lone parents and the disabled who are seeking work to find the jobs that they need.

Having already raised further education student numbers to 4 million and raised modern apprenticeships from 75,000 in 1997 to 220,000 today, the Secretary of State for Education and Skills will announce new money and tough targets to reform further education, improve workplace skills and expand modern apprenticeships to more than 300,000 young people in 2004. To ensure that British business has the skills it urgently needs today, the Home Secretary will expand the work permit system for key workers from 50,000 in 1997 to an expected 175,000 next year.

While, overall, there are 60,000 more small businesses than there were in 1997, even more British people should have the opportunity to become self-employed and to start

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their own firm. So the corporate tax cuts in the Budget and the stamp duty exemptions for high unemployment areas are matched in this review with new help for start-up businesses by raising the Small Business Service budget and by extending and increasing the phoenix fund from £100 million to £150 million.

To meet our long-term aim that in every area of the country every school pupil is introduced not just to the world of work but to the world of business, we will fund an expansion of enterprise education from less than 1,000 schools today to all our 3,500 secondary schools.

One of the greatest challenges of the future is to protect and safeguard our environment through sustainable development and to advance towards the 2010 targets—20 per cent. less carbon dioxide emissions, 10 per cent. of electricity from renewable sources—the spending review will, in addition to financing the £100 million fund for the development of renewable technologies, provide in 2005–06 an additional £38 million for sustainable energy initiatives.

Let me now turn to the public service investments this spending review makes to help those who contribute through public service to build stronger, more secure communities. We know that an enterprising economy with opportunity for all requires a fair society where there is security for all. But we also know—those of us who believe in the importance of public services—that we have a special duty to ensure that public money is spent wisely and efficiently and we are as determined to secure value for money as we are to secure money for our services.

So, first, the Government are today publishing new public service agreements setting out agreed outcome targets and reforms for each Government Department. Secondly, with independent audit and statutory inspection, Departments and agencies will be fully accountable for performance against targets: so, in addition to the new police standards unit, we are creating the health and social care inspectorates and a reformed criminal justice inspection regime and a single housing inspectorate.

In each service area, the review's decisions promote choice and devolve responsibility, authority and flexibility from the centre out to local and regional decision making—down to primary care trusts, which this Labour Government created, to head teachers and governors in schools, to police commanders on the front line, and to local service providers. One essential feature of this year's spending decisions is that voluntary, charitable and community organisations will also receive significantly increased funding to support their chosen role in delivering local services. Just as sustained economic growth demands responsibility in setting private sector pay, so too a sustained commitment to better public services demands responsibility in setting public sector pay.

When a service is underfunded, or when it is underperforming, people are let down. So while public service providers who perform well will be given more resources and more authority to innovate, in this review Departments have set as a condition for more resources that failing institutions will be dealt with early and decisively. Poor-performing schools will be subject to takeover by new leadership or by a neighbouring school, or closed and reopened as a new school. Failing local education authorities will be subject to takeover by high

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performing authorities. Poorly performing colleges will be subject to loss of funding from learning and skills councils, with provisions for necessary college mergers. Poor-performing social services and housing departments will have new directorates and senior managers. Poor-performing local authorities will first be subject to a recovery plan to tackle bad performance and, if that is insufficient, subject to new managers or takeover of functions. Just as my right hon. Friend the Home Secretary is taking power for police reform, prisons that underperform will need to improve or face new management drafted in. However, in every case, at the same time, we will incentivise and reward success with high-performing institutions receiving new resources and greater autonomy—new freedoms and more flexibility.

So just as in the Budget resources for health were matched by reforms in health, so too behind each decision we are making today—from housing to crime, from urban renewal to education—the Government's standard is clear: for more given in resources more is required in results. This is the vision for public services, and on that basis I can announce new investments that will improve our services and strengthen our communities.

After long decades of persistent neglect that have left Britain's housing stock inadequate and substandard, since 1997 we have increased our investment in housing from £2.3 billion to £4.8 billion this year. And now, as the demand for new and better housing grows in a growing economy, it is time for a step change with the most sustained rise in housing investment for 25 years.

On Thursday, my right hon. Friend the Deputy Prime Minister will make a statement to the House on his reforms: new homes for social tenants and key workers—including low-cost home ownership in London and the south-east—and plans to tackle homelessness and upgrade old properties in all regions where housing need exists. To pay for this, we will by 2005–06 invest £5.9 billion a year in housing. Since 1997, this will mean a 105 per cent. real-terms increase in the housing budget over and above what the previous Government did.

Neighbourhood renewal is not just about bricks and mortar. It is about renewing community life, and this depends upon more economic activity, more businesses and more jobs. Having raised investment in economic and social regeneration in 88 hard-pressed neighbourhoods of our country to £300 million this year, we will increase the neighbourhood renewal fund to £525 million a year by 2005–06.

As we sign public service agreements with our local authorities to match resources to reform, my right hon. Friend the Deputy Prime Minister will set out details on Thursday of an annual real-terms rise for local government of 4.2 per cent. a year over and above inflation—well above the average settlements until 1997.

The mark of a decent society is the dignity that it accords to its elderly, so my right hon. Friend the Secretary of State for Work and Pensions is announcing the extra resources necessary to deliver, from October next year, the pension credit to nearly half of all pensioner households. This will be worth up to £14 extra per week for single pensioners. It is a measure for which I hope there will soon be all-party support. Following the Pickering and Sandler reports, a consultative Green Paper on pensions will be published in the autumn, and my right hon. Friend the Secretary of State for Health will

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announce how the extra 6 per cent. real-terms growth in social services budgets will improve community care for the elderly.

Britain's disabled need and deserve a better deal too, so I can also announce that having created the Disability Rights Commission to oversee and enforce the rights of disabled men and women, we will raise its budget to 2006 by 14 per cent. in real terms.

I have said to the House in the past that our children are 20 per cent. of our population but 100 per cent. of our future. So, to realise our goals of nursery education, better child care and a sure start for the very young, we are announcing today, after a major interdepartmental review, details of a new integrated budget for children for child care and early years learning. It will be worth, by 2005–06, a total of £1½ billion a year. Following the review, there will be new ministerial arrangements for child care policy.

By October 2004, every three and four-year-old who needs it will have a nursery school place. We are also expanding the successful sure start experiment to meet the needs of up to 400,000 children. We will now increase investment in child care with funding for an additional 250,000 child care places.

Parents have said to us that communities are far stronger and children far more secure where there is a focal point in a community for a wide range of children's services, so I can announce that we will fund the creation of children's centres across the country, providing services for an additional 300,000 children by 2005–06.

At the heart of the next stage of children's services are voluntary and community partnerships, which are increasingly a vital link between the needs of children and the help that they receive. In each of our constituencies, there are hundreds of voluntary and community organisations. Throughout the country, hundreds of thousands of volunteers help millions of people, giving everyone in Britain, at different times in our lives, the chance to serve, and to get the balance right between what we can do for our country and what our country does for us.

To enable the vitality and independence of the charity, community and voluntary sector to grow and flourish, the Chief Secretary is announcing details of a new three-year fund of £125 million for voluntary organisations to draw on for their public service work. I can also confirm that the budget for the children's fund—helping volunteers and charities that assist vulnerable children—will be £200 million a year to 2006. There will be an additional £25 million over three years to support the growth of local parental support, and we are also extending the £20 million support to community amateur sports clubs, not just for one year, as we have announced previously, but for each year to 2006.

Since museums were opened free to the public, attendances have risen by 75 per cent. The Secretary of State is announcing a budget increase for culture, media and sport—including additional funds for tourism—and the budget will rise from £1.3 billion in total this year to £1.6 billion by 2005–06. With this increase, Britain will maintain free access to national museums, invest in regional museums, and expand local creative arts partnerships. To open up sport to all, not only will there

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be additional support for sports clubs but funds for much-needed investment in school sports facilities and new finance for extra sports coaching in the years up to 2006, in time for the next World cup. Similar allocations are necessary in Scotland, Wales and Northern Ireland.

Stronger communities must be safer communities, where rights are matched by responsibilities. We are therefore committed to getting more police out on the streets and to making crime fighting more effective. With his new reforms in place, the Home Secretary will announce details of the rise in the Home Office budget from £10.7 billion this year to £13.5 billion by 2005–06—an increase of nearly £2.9 billion a year by 2005–06 to ensure that, in addition to police numbers rising next year to 130,000, reforms to speed up the asylum system can be made, internal security will be strengthened, and the criminal justice system can tackle both crime and the causes of crime. The long-term vision for the criminal justice system—how we match policies for opportunity with policies for security—will be set out by the Home Secretary when he publishes the criminal justice White Paper.

Ministers in the devolved Administrations will make separate announcements outlining their plans to allocate the additional £4.1 billion a year set aside by 2005–06 for all devolved functions in Scotland, the £2.3 billion a year more by 2005–06 for Wales, including continued funding to 2006 of objective 1, and the £1.2 billion a year more by 2005–06 for Northern Ireland, including funding of the European peace initiative.

Finally, I turn to education. What happens in our schools in this decade will shape our society and our economy for much of this century. We cannot equip children for the 21st century in classrooms built in the 19th century. Capital investment to modernise our schools, which was raised from £680 million in 1997 to £2¼ billion last year, will therefore be raised again—to £4½ billion a year by 2005–06. That represents a 400 per cent. real terms increase since 1997, backing up our additional 20,000 teachers in the classrooms.

The increased funds for investment, improved access and excellence in further and higher education—including our universities, and building on the 100,000 extra students since 1997—and the reforms essential to meet our targets will be announced by the Secretary of State for Education and Skills, but we can achieve our goals for further and higher education only if we persuade more young people to stay on at school. Thirty years ago, the school-leaving age was raised to 16, but Britain cannot reach its full potential as long as nearly a quarter of 16 to 19-year-olds are not in education or training, and Britain, for decades, has suffered the worst drop-out rate from school of any industrialised country.

The Secretary of State for Education and Skills has set out her reforms to the curriculum for 14 to 19-year-olds. We must ensure now that no one is prevented, through lack of income, from staying on for the qualifications that they undoubtedly need.

Already in a third of England, income-related education maintenance allowances have substantially raised staying-on rates at school. So I can announce that, from September 2004, we will extend this successful experiment to all the country, with education maintenance allowances worth up to £1,500 a year for those who stay

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on and study. We will fund this major advance in educational opportunity from savings that we have made from our success in reducing unemployment and debt.

Demanding the highest standards is the modern route to realising opportunity. Those of us seeking improvements in education are determined that the numbers in the education budget are matched by the reforms necessary to secure better results in schools all across the country. As we said in detail in our 1997 manifesto, resources and reform are equally important—one cannot be achieved without the other.

Having helped teachers and children achieve a step change in standards in our primary schools—today, we have 75 per cent. of children achieving the expected literacy standards at the age of 11 compared with just 57 per cent. five years ago—the Secretary of State for Education and Skills will tomorrow announce reforms to raise standards, enhance choice and diversity and to tackle poor pupil behaviour in our secondary schools so that schools can develop the talents of all. We will back these reforms with new resources.

In the 2000 Budget, the Government introduced a single payment direct to schools starting at £15,000 that year for primary schools. I can announce that to help deliver schools reforms, the details of which will be set out by the Secretary of State for Education and Skills, the typical primary school will receive £50,000 next April—£10,000 higher than this year—and will receive £50,000 each April for each of the next years to 2005–06.

Head teachers of the typical secondary school, who this April received a payment of £115,000, will receive next April a payment of £165,000. That is £50,000 more and it will rise to £180,000 in the next April and for each of the following years to 2006. Over three years, for the typical secondary school, a total of £500,000 in direct payments will be paid to every head teacher to be used for each school's priorities.

We must also back the good leadership that is raising achievement levels in the most challenging areas and we must help schools that are behind to catch up, as we set minimum targets for improved standards at 14 and 16. So, for 1,400 secondary schools, we will match demanding new performance targets with an extra annual payment of an additional £125,000 direct to each school and head teacher.

For these 1,400 schools, combining the leadership incentive grant and the direct payments that I have already announced means that the budget for head teachers will rise to £300,000 a year. Over three years, that is almost £1 million to allow our schools to replace weak leadership, to attract the best teachers and to improve their facilities.

For this Government, reform and resources go together, and we know that to demand reform when one would deny resources is a betrayal of our children. So I can announce the total new resources for education. Compared to growth of less than 2 per cent. a year in the 18 years to 1997, there will be a real-terms rise for education in England, even after inflation, of 6 per cent. a year for each of the next three years. That is the biggest sustained rise in education spending in a generation. The education budget for England, which was £29 billion in 1997 and is £45 billion this year, will rise year on year over the next three years to £49 billion, then £53 billion and then £58 billion: education, education, education. By

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2005–06, this means £15 billion more a year for UK education; £13 billion more in England. Spending per pupil, which was just £2,700 a year in 1997 and £3,500, last year, will rise to £4,900 per pupil by 2005–06 which, after inflation, is 50 per cent. more per pupil than in 1997.

I challenge anyone in this House to claim that public services are their priority and then to say that £4,900 per pupil is too much to invest in our children and our country's future. We have presented a Budget for the health service and a spending review for education: as we promised, schools and hospitals first. I commend this statement to the House.

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