House of COMMONS









Tuesday 8 February 2005


Evidence heard in Public Questions 1 - 162





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Oral Evidence

Taken before the Liaison Committee

on Tuesday 8 February 2005

Members present

Mr Alan Williams, in the Chair

Mr Peter Ainsworth

Mr Richard Allan

Tony Baldry

Mr A J Beith

Derek Conway

Jean Corston

Mr John Denham

Mrs Gwyneth Dunwoody

Mr Bruce George

Dr Ian Gibson

Mr David Hinchliffe

Mr Jimmy Hood

Mr Michael Jack

Mr Robert Key

Sir Archy Kirkwood

Mr Edward Leigh

Mr David Lepper

Mr John McFall

Mr Michael Mates

Mr Peter Pike

Dame Marion Roe

Mr Barry Sheerman

Mr David Tredinnick

Sir Nicholas Winterton

Tony Wright

Sir George Young



Witness: Rt Hon Tony Blair, a Member of the House, Prime Minister, examined.

Q1 Chairman: First of all, welcome again, Prime Minister, and may I give a special welcome as well to the Speaker of the Pakistan Parliament who has come to observe this session. You are very welcome. As the public probably know, there are three themes and the Prime Minister has been notified of those three themes, but he has not been told any of the questions. The themes we intend to follow today are: firstly, Iraq post-election; secondly, the economy and public services; and, thirdly, climate change and the G8 Presidency. Before we start, this may be the last of these sessions before an election and no doubt during the morning you will tell us whether that is so or not! Before we start, can I ask a rather masochistic question, masochistic in the sense that the more enthusiastic your answer is, the worse news it means for us and our performance. From your experience of these sessions, and we have had five sessions, so of the five you have been to so far, from your perspective, has this process added anything meaningful to parliamentary accountability or has it just been another showpiece?

Mr Blair: There is certainly only one diplomatic answer to that question, but actually, no, put it like this, it has certainly been an experience I have found extremely tough. I hope it has been of advantage in helping people to understand some of the issues; it is very rare you get the opportunity to explain things at length. Also, by its very nature, the trouble with Prime Minister's Questions is it is very, very adversarial and it is almost like a debating joust every week with obviously the focus particularly on the Prime Minister and the Leader of the Opposition and the Leader of the Liberal Democrats. I think with this way of doing things, you are able to get what is undoubtedly a series of tough questions, but be able to discuss issues at greater length and with the right degree of formality, but, nonetheless, also I think doing it in a way that I hope exposes some of the issues to greater public understanding.

Q2 Chairman: I will be a bit mischievous and ask you how it compares with your sessions with the lobby, but I do not want them to be upset, so I will not ask you that question.

Mr Blair: That would be right.

Chairman: Before we turn to Iraq and Sir George Young, I bumped into Ann Clwyd who was observing in Basra during the election and she was telling a story of this one polling station where the insurgents started shelling and then the women inside, and there was a nearly 80 per cent turnout apparently at this centre, the women inside started singing and she asked her interpreter what they were saying and he said that it was a song of defiance. I thought, thinking of all the threats they face, that was very humbling. We will move over now to Iraq post-election.

Q3 Sir George Young: Prime Minister, we want to divide our session on Iraq into three sections: firstly, what are the lessons we can learn so far; secondly, where are we; and, thirdly, what happens next? On the first, the action against Iraq was portrayed as a crusade against tyranny and against terrorism and it was carried out in the name of the United Nations Resolutions. Are you not disappointed that more of the countries that might have wanted to be associated with that in the event did not take part either in the military action or in the nation-building thereafter?

Mr Blair: We would have liked a bigger coalition, but there were countries obviously that felt very strongly against the action in Iraq. On the other hand, there were some 30 countries that joined us.

Q4 Sir George Young: Of those who joined us, of course some are now pulling out. Ukraine, Portugal, Poland, the Netherlands and Hungary have said they are going to withdraw their troops while we are putting more in. There is no sign of Germany, France or Russia joining the multinational force and NATO is non-operational. Has there not been diplomatic failure in spite of the military triumph?

Mr Blair: No, I think that would be unfair because for a lot of those countries you just mentioned that are taking out their troops, they continue very strongly to support the presence of the multinational force there; it is just that they are bound by certain parliamentary votes to take their troops out after a certain period of time and in some cases after the elections and they only went in on that basis. In other words, it is not that they have changed their mind and are now withdrawing; they are withdrawing in accordance with a stipulated pre-condition. I think you may find that at the NATO meeting at the end of February we get an agreement on help for training the Iraqi security forces and it is for those other countries to speak, but I hope that that will see some of the countries, which have not been involved in either the conflict in Iraq or its aftermath, join that training exercise.

Q5 Sir George Young: You want to see a broader coalition. Can we go on to the preparations that were made before we went to war for nation-building. A former Labour Foreign Secretary said this: "The failure of George Bush and Tony Blair to plan wisely to ensure the maintenance of law and order in Iraq after the successful military invasion is a tragedy for which many people are still paying a high price". Fair comment?

Mr Blair: No, I am afraid I do not agree with that. You would expect me to say this, but I think that in truth the degree of the insurgency and, in particular, those people that came from outside of Iraq in there, outside terrorists, al-Zarqarwi most notably, I think that was something that was difficult to foresee and difficult to plan for. On the other hand, I think even if we had been able to foresee absolutely everything that happened, it was still going to be very tough and very difficult because you had got people who were absolutely determined to prevent democracy taking hold in Iraq. In the end in one sense removing Saddam was one part of the conflict and it then entered into a different phase with the necessity of defeating the insurgents/terrorists who are not that large in number, I do not think, and certainly do not have popular support, and the elections have demonstrated that very, very clearly indeed, but, on the other hand, are reasonably well financed, reasonably well armed and are prepared to kill any number of people.

Q6 Sir George Young: Can I just press you on that a bit more. Before we went to war, I actually asked you a question about the preparations for post-war nation-building and this is what you said on January 21 in this room: "If we come to changing the regime, if we come to removing Saddam as the only way of dealing with the issue of weapons of mass destruction, then I think it is extremely important we make the most detailed preparations and work within the international community as to what happens afterwards". Did that actually happen? Was there not actually more chaos than there need have been after the war was over?

Mr Blair: No, again I think there is a great deal of misunderstanding over what people thought at the time with the risks that we would have to face. The biggest risk, the thing that we spent most time focusing on, was the possibility of a humanitarian disaster as a result of the conflict. Indeed, there were a lot of stories coming out before the conflict took place and its immediate aftermath where people were saying that there were going to be large numbers of people displaced, you may have difficulty getting food to them, there may be a tremendous problem with refugees and so on. Essentially, we managed to plan and guard against that eventuality. We then had reconstruction plans that we basically rolled out. The thing that has been most difficult has been this terrorism/insurgency and the reason that has been difficult is that what these people have done, and it is astonishing almost in its wickedness actually because it is wicked because were they to stop doing it, Iraq could make progress very, very quickly, but what they have actually done is kill anybody or disrupt anything that might make the country better. Now, that is something, frankly, you can foresee and try to plan against, but if there are people carrying out these actions, the only thing you can do is to get after them as quickly as possible and to build up the intelligence about them and their activity, and that is what we have done.

Q7 Sir George Young: We may want to press you a little bit more on that later, but can I just ask a question about Fallujah. The assault on Fallujah dispersed the Sunni insurgents throughout the rest of Iraq and we now hear from the CIA that it is a recruiting ground for anti-Western terrorism. Was that managed as well as it might have been?

Mr Blair: Well, again there is a dilemma in relation to Fallujah and the advice very strongly from the Iraqi Government, even though there were people within the Iraqi Government who themselves were in two minds about this, but the dilemma was perfectly simple and it was this: that they were using Fallujah as a base of operations, they were effectively taking over and were running Fallujah as a city, and the local tribal leaders, incidentally, were wholly opposed to these insurgents and terrorists operating out of there, but could do nothing about it. The question is: did you leave them there with all the dangers of that or did you take action to remove them? Now, we were never under any illusions at all; removing them was going to be difficult and bloody, indeed it has been, but, on the other hand, we took the view, and I think, in retrospect, this judgment actually has been proved right not wrong, that it was absolutely necessary to show to the Iraqi people that there was going to be no no-go area for the Iraqi forces and the multinational force and their support. There is a very basic, simple thing here, George. What is happening is that you have got, as I say, probably not that many and probably without much support even locally, but they are well armed and they are well financed and they are prepared to kill anybody. Now, in those circumstances, the most important thing for Iraqis is to have the elections, to demonstrate to these people that the vast majority of Iraqis want to make progress and become a proper democracy, and, by a combination of the political process and military pressure, to weed them out and destroy them because that is the only thing that is going to allow us to make progress.

Sir George Young: On military pressure, perhaps I can now hand over to Bruce George to continue the theme of questioning.

Q8 Mr George: Prime Minister, however many insurgents there are, a combination of the largest army in the world and probably one of the very best armies in the world should maybe have had a greater impact on the insurgents. Now, is there a possibility that the coalition approach to the insurgency and perhaps counter-insurgency tactics have not been really up to the mark? I am thinking of the fairly poor co-ordination between the US military and the Iraqi police forces where the army do not appear to be in the loop, so I wonder whether there is time even at this stage to review the whole ethos of our presence for as long as it is going to be and the strategy and tactics we are using against the insurgents.

Mr Blair: That is a perfectly reasonable point. We do review constantly the tactics that we are employing. The problem is this: that the most effective way ultimately of dealing with the insurgents and terrorists is to build up the Iraqi capability itself. It is when the Iraqis are able to go into cities and towns and run the security themselves that the insurgents and terrorists have the least traction on the Iraqi population, so what we have to do is to try and build their capability. Now, we are doing that, but we are starting, and have started, pretty much from scratch. It is difficult. There was no proper police force of any nature or civil defence. The army, yes, there was an army, but there were all sorts of problems obviously to do with the former Ba'athists and so on connected with it, so what we are trying to do is we are trying to build that Iraqi capability. Now, to be fair, in the elections the Iraqi forces acquitted themselves pretty well, but at the moment they still need the multinational force there in support. I hope that over the next few weeks, as the picture emerges more clearly and we get a new Iraqi Government come into being, I hope we can then set out for people exactly what we then think is the way forward for the Iraqiisation of security, for outreach to some of, in particular, the Sunni areas where I think there are people who maybe have not participated in the elections, but who also have now seen the election process at work and may be prepared to work with others in Iraq for the future.

Q9 Mr George: One of the problems or two of the problems is whether we are going to be asked to remain by the new Government, so have you any inkling as to what they might do and, if we are asked to remain, up until what point? I understand an American general, General Luck has produced a document. We have not seen it. I am sure you have, Prime Minister. Is there any indication from that document and existing thinking as to our future presence in Iraq and in what numbers?

Mr Blair: What we always say is that we will remain in Iraq for as long as is needed, but, as I have said before, it is our desire, it is the Iraqi Government's desire and it is the Iraqi people's desire that we go from Iraq as soon as is possible. The question is: what is as soon as is possible? As soon as is possible means when the job is done, and the job is building up that Iraqi capability. Now, in the paper that I hope we can publish, because we are still looking at it and considering it now, that General Luck and his colleagues have drawn up, I think we will be able to give some idea of what the next steps and over what period the Iraqiisation of security will take place because there is a need obviously for quantity in terms of police and army, but there is also a need for quality, for crack troops and forces that are able to go in and handle the insurgents. I think the other thing it is just worth pointing out is that when you have got people who are prepared to be suicide bombers and when you have got terrorists who are prepared to kill innocent civilians, as we know to our own cost here in this country when even at the height of the Irish troubles, I do not know how many people exactly were in the IRA actively, but probably not that many and yet with everything that we had at our disposal, it was very difficult to deal with it, that is why the political process going alongside the action against the insurgents is so important.

Q10 Mr George: The imminent return of the bodies of those soldiers who were killed on election or polling day in Iraq raises questions as to whether the British Government is doing enough to compensate financially those who are left behind, whether there is adequate compensation for soldiers and military personnel who have been injured, and the Defence Committee has been pretty irritated at the pension and compensation arrangements. Have you had the opportunity to review whether something is maybe done differently to give assurance to those who go out and if they are injured that we are more prepared to look after them and their families should they be killed?

Mr Blair: Well, we have studied very carefully what the Defence Committee has said about this and, as you know, we are reviewing the situation now and I hope that we will be able to say something about that in the days and weeks to come. I would once again like to state my sympathy and condolences to the families of the RAF and the other people that have died in the Hercules crash.

Q11 Mr George: Well, Adam Ingram is appearing before the Defence Committee tomorrow, Prime Minister. Maybe you can have a word with him to clarify a bit further what you have been saying. I doubt it, but we can hope.

Mr Blair: I do not think we will have to wait very long for it, but there are various issues that need to be decided there, but we do want to make sure ----

Q12 Mr George: Will it be a new package of some kind?

Mr Blair: I hope it will be a new package, yes.

Q13 Chairman: If the new Iraqi Government asks us to leave before we think it is an appropriate time, who is going to prevail?

Mr Blair: The Iraqi Government is sovereign. I made that clear, I think, at the time that the United Nations Resolution was passed that gave authority to the new Iraqi Government, that the new Iraqi Government is sovereign. My own very strong view of this, talking to all sorts of different people in Iraq, is that their view is that we need the multinational force for as long as the Iraqi capability is not sufficiently well trained and equipped and capable, but that capability is building the whole time. As I say, the elections were a very big test for the Iraqi security services. They acquitted themselves extremely well, they came out, they performed, even when under fire they did not retreat, there were people who actually sacrificed their own lives from the Iraqi security forces rather than yield up polling stations to the terrorists and insurgents, and I think those are all very hopeful signs for the future.

Sir George Young: That brings us very neatly to Alan Beith who wants to look ahead.

Q14 Mr Beith: Prime Minister, I think it is perhaps a good time to assess where we are up to in the War on Terror, by which I mean not our domestic protection, but going after terrorists in their safe havens. We are still necessarily committed in Afghanistan and you opened up a new front in Iraq, which is now a major crucible of terrorism. What other countries are you worried about?

Mr Blair: First of all, I should say that I do think one of the most important things at stake in Iraq is the defeat of this global terrorism through the defeat of terrorism in Iraq. I think if Iraq is able to ----

Q15 Mr Beith: It cannot be defeated in Iraq alone, can it, because they have many other havens?

Mr Blair: That is true, but I think we all know that this, what I would call, 'new form of global terrorism' recruits on the back of propaganda against the West, against America and against countries like ourselves. I think Afghanistan and democracy coming there was a big blow to them, I think democracy in Iraq would be a big blow, I think progress in the Middle East and over the Palestine/Israel issue would be a big blow to terrorism, and I think the interesting thing is that nobody, and this includes, in particular, the United States, now believes that this terrorism can be defeated by security or military methods alone and it has also to be defeated by progress on democracy, on human rights and on bringing freedom to people, so I think that is also at stake in Iraq. When you say what other countries are we thinking of, I do not think we are thinking of any other countries, but we are continually trying to make sure that the opportunities for terrorism to exist, to get access to weapons and finance are shut down. I think one of the benefits of the action in Iraq is that we have actually had significant progress and movement on WMD issues, with Libya giving up its WMD ----

Q16 Mr Beith: That raises a question though. What is the priority - democratisation or removal of WMD programmes? In the case of Libya, we reached an agreement which did not involve any change in the Libyan political system; it was an agreement designed to secure the ending of a nuclear programme.

Mr Blair: Well, I think you are trying to do both the whole time. Obviously it is important to get co-operation. Even if you have a regime that is not democratic, to get co-operation over WMD is important. That is why it was important to make sure that the Libya programme was shut down. It has been important, for example, that the network of A Q Khan has been shut down, it has been important that Iran is back in dialogue at least with the Atomic Energy Authority and that North Korea is back in six-party talks. Now, none of that means, however, I think, that ultimately the situation will be stable. I think that one major lesson that we are learning is that wherever there is repression, wherever there are failed states, those are places where terrorism can breed.

Q17 Mr Beith: Do you think Iran is either a failed state or, in President Bush's words, "the world's primary safe sponsor of terror"?

Mr Blair: Well, it certainly does sponsor terrorism, there is no doubt about that at all, and I hope very much, if we can make progress in the Middle East, that Iran realises it has got an obligation to help that, not hinder it.

Q18 Mr Beith: But is the construction approach the British Government has up to now taken and your view likely to prove effective in dealing with what you always said was the most dangerous threat of all, one which did not actually turn out to be the threat in Iraq, the combination of accumulating nuclear power and being prepared to hand it over to terrorists?

Mr Blair: Well, I hope it does work. I think it is a good sign that Europe and America are working together over it. I think it is a good sign that France and Germany, with whom we have disagreed over Iraq, are working very closely in relation to Iran. Iran has now been given a set of obligations that it has got to fulfil and I hope they fulfil them.

Q19 Mr Beith: Just going back to the implication of that for Iraq, I presume that it is a major objective of the British Government to try and get the Sunni Muslims in Iraq to support the legitimacy of government there. Is that effort going to be undermined by the delicacy of the relationship between Iran and the Shi'ite population of Iraq?

Mr Blair: That is an interesting question. My assessment is this, and this is only from talking to people about it, but also talking to the United Nations staff in Iraq when I was there before Christmas: that in respect of Sunnis in Iraq, certainly the UN view was that the vast majority of them would have voted if they had been able to vote, in other words, the numbers that were prepared to boycott as a matter of principle were very, very small. In respect of Iran, again I think that the majority view, as far as I can make out, from Iraqi Shias is that they want Iraq run by Iraqis, not by any outside power, including Iran.

Sir George Young: On Iran, I think Edward Leigh has a question to put to you.

Q20 Mr Leigh: You spent two years, Prime Minister, coming to Parliament saying that Iraq had weapons of mass destruction, which it did not. If you were now to come to Parliament and you told us that we should take action against Iran because she has weapons of mass destruction, would anyone believe you?

Mr Blair: Well, first of all, I am not saying that. Secondly, I think it depends what the evidence base is. I do not think it is disputed that there is an issue to do with Iran and nuclear weapons capability. That is why France and Germany have been working with the UK over it. I would just point out to you in relation to Iraq and WMD that people have been over this ground many, many times before.

Q21 Mr Leigh: No, I am not asking you about the past. We know what you said in the past. We are talking about the future and the most important power of the Prime Minister is to declare peace or war and the most important commodity is trust. If you told us that Iran had weapons of mass destruction, therefore, we would take action, after your record in Iraq, would anybody believe you, Prime Minister?

Mr Blair: Yes, but that is why, since you are putting it at issue, my record in the past, I think it is only fair that I should be able to answer the question. What the Iraq Survey Group actually found was that Iraq was indeed in breach of UN Resolutions, that the weapons may have been removed or destroyed and, therefore, there were not actually deployable weapons at the time of invasion, but that Iraq retained the teams of scientists and the laboratories necessary to start up production again as soon as the inspectors were out of the country. I simply say that in order to say that the position in relation to Iraq and WMD is somewhat more nuanced than your question suggests. In respect of Iran, it depends what the evidence is.

Sir George Young: Can we move on to post-conflict reconstruction.

Q22 Tony Baldry: Prime Minister, if one looks post-conflict reconstruction anywhere else in the world, such as Afghanistan, one sees the United Nations in the lead, UN agencies, like UNDP, working hard and bringing together international donors, NGOs, et cetera. In Iraq that is not happening because the US see the UN as being unhelpful and not being as partners. How are we going to patch up relations between the US and the UN?

Mr Blair: I think those relations are getting patched up. Over the elections, there was a very strong statement in support of them by Kofi Annan, a strong statement before, a strong statement afterwards. My assessment actually is that relations are improving and also, let me say, I would pay real tribute, as I am sure the US Administration would, to the work that the UN staff did in Iraq for these elections. I actually do not think the problem, Tony, on the reconstruction side is relations between the UN and the US. The problem is the simple problem that we have got which is security - simple to describe, complicated to tackle.

Q23 Tony Baldry: Prime Minister, the problem is this, is it not: that most of the money for reconstruction is coming from the US who are largely concerned with large-scale projects and not with employment-creating, quick-impact projects? They are not doing any classic development and reconstruction, as DFID or any other donor agencies will, because they are primarily concerned with the interests of American big business.

Mr Blair: I think that is an extraordinary thing to say. I honestly do not think that is true at all.

Q24 Tony Baldry: Well, Prime Minister, if you look at the money which the US are spending in Iraq, most of it is going on large-scale projects. Practically none of it is going on impact projects creating employment and enabling Iraqis to see a daily improvement in their lives.

Mr Blair: Well, they are doing that too. If you take an area like Najaf, for example, where we have been able to get the security situation under control, Najaf is a real success story. After all, we were told that that was a city that welcomed these militants into it and there was a safe haven for them. Once they were cleaned out, and actually cleaned out with the consent of the local people, they actually are rebuilding and reconstructing there and the American money is working well there too. I really do not think that is the issue. We have precisely this same problem down south and the problem is that you need two sets of reconstruction ----

Q25 Tony Baldry: And down south DFID, since about December, have started doing work on quick-impact projects, and let's all be clear, that DFID is probably one of the best development agencies in the world, but in the rest of Iraq we are not seeing proper development being done; we are just seeing ad hoc initiatives by the US where they feel it is in the interests of their big industry. That is what is actually happening and if DFID were allowed to share some of their knowledge with other parts of Iraq, I think we would all be in a much better position.

Mr Blair: I do think that is extremely unfair to those that are working very hard in Iraq in the difficult parts where the security is a real problem. It is true, incidentally, that there are long-term, big reconstruction projects the US are committing money to, although even that money it is difficult to disperse at the moment, but those long-term projects to do with power and water and so on are absolutely necessary. The short-term projects, the job-creation projects we are doing in the south, it is easier to do because of the security situation, but even there, frankly, we have had problems. However, having said all that, I mentioned earlier that we were reviewing what we needed to do in a military sense, but we are also reviewing what we need to do in a development sense as well with the Americans and I am sure that they are keen to learn the lessons of that too. Believe me, the central problem on reconstruction and development is not really to do with American big business interests; it is to do with getting the security situation under control. Where you can get it under control, then you can employ people and you can do the reconstruction projects relatively easily, but if what happens is that someone gets a reconstruction project underway and then the three people organising it are assassinated, the next day you do not find many people turning up on it, and that is what has been happening. It is a tough situation, but I think these differences either between the UN and the US or between the US and ourselves on development are hugely exaggerated. If we got the security situation under control, I think you would find Iraq develop remarkably quickly.

Sir George Young: We move on now to security being under control.

Q26 Mr Tredinnick: Prime Minister, is it not a fact that reconstruction costs are spiralling out of control? What is your estimate of the cost to the British taxpayer and where is the money coming from, please?

Mr Blair: Well, I think the Treasury have given the figure on the costs both in relation to the conflict and so far in relation to reconstruction. I think the Treasury figure that they gave was just over 2 billion, and that is for us. The reconstruction costs are not spiralling, as far as I am aware. What is happening, however, is that we are not able to disperse the money as quickly as we want because of the security situation. Now, as that eases, then it will be easier to do.

Q27 Mr Tredinnick: But, Prime Minister, has not one of the problems been lack of controls? The coalition provincial inspector general's report showed clearly that there was widespread lack of control in the provincial administration and, more importantly, misuse of Iraqi oil assets. What has that cost the British taxpayer, please?

Mr Blair: Well, I do not know that any of the money that we have been putting out in Iraq has been misappropriated. We have strict controls in relation to doing it. There is an issue which is difficult from time to time which is that, and I think you face this situation in any country where you are putting money in for development following a conflict, there is a conflict sometimes between the necessary bureaucracy for accountability and the speed with which you want the money to come out and occasionally there can be problems that result from that. The money that we are putting into Iraq we are satisfied is being well and properly used.

Q28 Mr Tredinnick: On that, Prime Minister, how much money actually has been pledged to Iraq? The Americans have pledged US$18 billion and only US$10 billion has been allocated. How much money have we promised or pledged and how much of that has actually reached the Iraqis and the Iraqi administration? Is there a gap there?

Mr Blair: Well, there is a gap and that is the very problem.

Q29 Mr Tredinnick: What is it?

Mr Blair: I cannot be sure of the exact sums of money. I think overall US$30 billion have been pledged, the Americans have pledged US$18 billion and I think US$10 billion have been allocated, as you say, of the American money. I suspect of that money which has been allocated there will be a significant part of that, I cannot tell you exactly how much, that will not yet have been spent because it is waiting for the projects to be able to be done as a result of the security issues that arise. My very, very strong view of this, and greatly reinforced by talking to people out in Iraq before Christmas, is that once we get the security situation under control, this money will be used reasonably quickly and the prospects for Iraq are enormous. The development of the port that we are engaged in down in the south, that will become a major, major commercial gateway for Iraq to the whole of the world. The potential of the country is absolutely enormous, but obviously we need the security under control.

Q30 Mr Tredinnick: The only problem with your answer, if I may say so, is that we are not getting an idea of the costs and these are generalisations. I think, on behalf of the British taxpayer, we need a clearer idea of what the costs are going to be. We have got money that is pledged and money that is going, but can you give us an overall figure now of how much money you see being spent on these very large projects?

Mr Blair: Well, as I say, I think overall there has been US$30 billion that is set aside by the international community, and I think that was the pledge. I cannot say over exactly what timescale that is going to be spent. What I can say is that the money we are spending from Britain is well spent, but most of it is, frankly, on the Armed Forces.

Sir George Young: In order to bring this section to a conclusion, I wonder if I can ask Tony Wright to put his questions about the role of Parliament in what has been going on.

Q31 Tony Wright: In your first answer, Prime Minister, you talked about other countries being bound by parliamentary votes. Well, of course we had uniquely a parliamentary vote at the time of the military action two years ago and at that time the Foreign Secretary said, "I am glad that we have set that precedent for the future", that is, Parliament voting on such occasions. You said in the Commons on 19 January, "It is not right to constrain the prerogatives that exist at the moment", so I just want to know really, is the Foreign Secretary telling us there is precedent established or is that not the case?

Mr Blair: Well, I think, following the decision that we took and, as I think you pointed out at the time, it was the first time that Parliament had been asked specifically in that way to have a vote before troops were committed, I think that if you can do that, in other words, if the urgency of the situation does not demand otherwise, then I suspect that is what will happen with future conflicts, but I do not think that is setting a constitutional precedent strictly. I think it is setting a practical precedent in that if people could see things building up towards military action, I think people would probably want, in the way that we did over Iraq, to have a vote on it.

Q32 Tony Wright: So a precedent, but not a constitutional precedent?

Mr Blair: I am slightly reluctant to go and bind whatever future governments may do, but we took the decision over Iraq because, frankly, we could. In other words, you could not really say that the urgency of the situation was such that Parliament could not have a say beforehand, and I suspect, for political rather than constitutional reasons, that will be more like the norm in the future, provided it can be done. I think you have got always to have the ability, as a government, to take immediate action if that is necessary, which is why I do not actually myself favour changing the constitutional prerogative.

Q33 Sir George Young: Prime Minister, thank you very much. That has been a very useful session. I think we would like to see this paper from General Luck, if we could, which I think you have seen, but we have not.

Mr Blair: Can I just say to you that I have seen a draft that is still under discussion, so it is not that there is a finished article that has not been published. When there is a finished article, it will be published.

Q34 Chairman: Before we move on, early in your replies you said that it was difficult to foresee the insurgency. Surely that is not correct. With the first President Bush, and I remember the discussions, as probably you do, at the time in the press and politically, one of the reasons why the first President Bush did not press on into Iraq from Kuwait was because of fear of insurgency and we have more recently had the experience of Afghanistan where we have seen the ability of the Mujahideen to be rapidly internationally mobilised and sent to areas of conflict, so surely all the evidence was there, that you were going to have insurgency?

Mr Blair: What I really mean by that is that you cannot foresee the particular nature of the insurgency and actually its link with international terrorism. Yes, obviously there was going to be resistance and obviously some of that resistance would continue, but I think I would make an additional point as well, that whether you foresee it or you do not foresee it, you have still got to tackle it and the only way of tackling it is the methods that we have employed. I would just make this one other point: that what has happened with the Iraqi elections is a major step forward, there is no doubt at all, and all the information we have had since the elections is that inside Iraq people have been surprised and greatly uplifted by the success of the elections, but I do not think there is any doubt either that we have to build on this very quickly and we have to build on it with the security plan for the Iraqiisation of the security situation so that they can take their own responsibility for it. We have got to build on it in reaching out to some of the Sunni people who will not have participated in the election and we have got to build on it by reviewing and putting back together a reconstruction plan that actually works. Now, I think that all those things, together with getting more international partners involved, have to happen, so I am not the slightest bit foolishly optimistic about it, it is still a very, very tough situation there, but the election has changed it and I think the terrorists and insurgents, whatever damage they can do, and they can do that, frankly, irrespective of the planning that you have, they are doing it with a very clear view now inside Iraq and outside that they have no real popular support.

Q35 Chairman: You say outside, but Iran and Syria, having been named very recently and focused on as part of the axis of evil, they actually have a direct motivation to allow terrorists to cross their borders now because the more the Americans bleed in Iraq, the less chance there is that they will take on more opponents.

Mr Blair: I think if they were to make that calculation, it would be a very severe miscalculation. What we have said to both Iran and Syria constantly is that this is now a United Nations agreed process inside Iraq, it is important that they as well as everyone else support it, and whether they do or not is up to them.

Chairman: We will now move on to the economy and public services section.

Q36 Mr McFall: Prime Minister, good morning. I want to look at the UK economy. The consensus view for the economy, as the IMF put it, is that the outlook is favourable for the UK. What significant risks can you see over the next couple of years that we ought to be wary of because of the derailed domestic growth prospects?

Mr Blair: The most important thing is to keep a very tight grip on the stability of the economy. There are obviously external potential risks that are there from Europe or America and any downturn in the world economy, but we are reasonably optimistic about our forward growth.

Q37 Mr McFall: House prices, oil prices, the US current account deficit or the UK labour market, do any of those cause you concern?

Mr Blair: All of them potentially could be a problem. On house prices, it is important to increase housing supply in the south but to do it in a planned way, which we are doing by setting aside four specific areas for housing growth. In respect of the labour market, I think we have got to keep the labour market flexible and help as many people off benefit and into work as possible. I think oil prices are a potential issue, although I think it is remarkable to anyone who lived through the period of the 1970s how this rise in oil price has taken place and not had a bigger economic impact on growth prospects.

Q38 Mr McFall: Many independent economists suggest that one risk to the growth outlook is growing evidence of the labour market tightening. Given that the UK already has a much higher labour market participation rate than the euro‑zone, I think ours is about 74.9 per cent, it is almost the same as the Americans, are you confident that initial success of the trials, such as the Pathways to Work initiative, in getting people back into the workforce can be maintained as they are rolled out nationally?

Mr Blair: Yes, I do. The Pathways to Work programme has worked for people moving off incapacity benefit and into work. I think we have got to do more on that, as we explained last week. I know this is politically controversial, but I think the New Deal programmes for young people, for lone parents and for the over‑50s have helped hundreds of thousands of people into work and been extremely successful. The great blessing that we have had in the UK in terms of our economic management over the past few years has been that we have managed to grow strongly with low inflation, low mortgage rates and high employment. When I was growing up the problem was that every time unemployment started to fall inflation started to rise. We have avoided that, but I think we have avoided it in part by very active labour market measures.

Q39 Mr McFall: Let us look at the fiscal rules. Just recently the Governor of the Bank of England, Mervyn King, said that meeting the fiscal rules was not an optional extra, it is an integral part of the overall macro‑economic framework. I presume you agree with that, do you?

Mr Blair: I do, absolutely.

Q40 Mr McFall: The Pre‑Budget Report projected that the Golden Rule would be achieved with a margin of just 8 billion, that is 0.1 per cent of GDP. Most outside experts who came before the Treasury Committee thought that this was an inadequate safety margin and that the Government is more likely than not to break its fiscal rules. Is that not quite a dangerous position for the credibility of fiscal policy?

Mr Blair: The best test of the credibility of the fiscal policy has been the Treasury forecasts up to now, which have been proved more robust and right than some of the critics. We have got strong growth. We have got the revenue figures that came in on 21 January which were strong and indicated receipts were up significantly. We believe that we will meet both the Golden Rule and the Sustainable Investment Rule. The Chancellor explained that the margin has been tighter but then we forecast borrowing to start falling in the years to come.

Q41 Mr McFall: When you started the Golden Rule in the late Nineties there was quite a surplus, I think it was about 2 to 3 per cent on GDP and we are now down to 0.8 per cent. Given that the cycle has almost finished and we are starting a new cycle, you will be starting the new cycle with nothing in the cupboard. Is there not a legitimate debate to be had around the issue of tax increases?

Mr Blair: No. I think the debate we need to have is what is the likely path of the economy for the future and are the Treasury forecasts right because it is correct that the surplus has come down over a number of years and that is not unnatural because there has been an economic slow down and now the economic growth starts to pick back up again and the forecasts over the next few years are obviously different and better. I would point out that I think the debt to GDP ratio that we have in this country now and are forecast to have over the next few years is lower than in 14 out of the 18 years of the previous Government. I think we are still in a very, very strong position and we have managed to have a number of consecutive quarters of growth. I cannot remember the exact figure but it is very, very strong.

Q42 Mr McFall: It is 50, just one more than Arsenal!

Mr Blair: I do not think we will get into that.

Q43 Mr McFall: You mentioned the issue of Treasury forecasts and the Treasury Committee looked at that in the Pre‑Budget Report and noted that tax receipts have under‑shot Treasury forecasts for four consecutive years, but the Government's forecast still assumes the next two years will see the fastest growth in receipts since 1997, even faster than through the dot com bubble. Is there not a danger that the Government's fiscal strategy rests on some inherently implausible assumptions about tax revenues?

Mr Blair: That is why I thought it was interesting when you saw the figures come through on 21 January because those were extremely strong. The spending that we have is all taken account of in the planned Government expenditure. There are always possible difficulties in any forward economic prediction, but if you take the past seven to eight years in the Treasury forecasts and you look ahead at the likely growth we are going to get, I think the position is pretty robust, we believe the Golden Rule and the Sustainable Investment Rule will be met.

Q44 Mr McFall: Is there not a case here for assuming that the Government have under‑estimated the damage done to balance sheets and pension funds since the bursting of the bubble in 2001? We have had that accompanied by the fact that the corporate sector has not been paying sufficient corporation tax. That is not just a problem for the UK economy, it is a worldwide phenomenon and so you are again starting with a negative background.

Mr Blair: That is true. The Chancellor changed part of his calculation precisely for those reasons. I think in his Pre‑Budget Report he specifically took account of the fall in corporation tax receipts. Obviously we have then factored that into the forward projections.

Q45 Mr McFall: I think you are still up against it in terms of corporation tax receipts. That has been disappointing.

Mr Blair: There is a continual debate about this. There is the IFS report and there are others like Goldman Sachs who say you will meet the Golden Rule, but I think those receipt figures in January were reasonably significant.

Q46 Mr McFall: The Treasury Committee's inquiry into the Pre‑Budget Report highlighted the effect that judgments in the European Court of Justice could have on the UK's ability to raise revenues through corporation tax. One of our witnesses from PriceWaterhouse Coopers estimated the amount of revenue risk in such judgments could be as much as 20 billion, I am talking here about the Marks & Spencer's case. The implication of that case is that if companies like that win then they will be able to put their profits in low tax countries and put their losses in high tax countries. If that happens then what we need is a European‑wide policy on that issue and coordination of that. Would you agree?

Mr Blair: Obviously the Treasury are watching and tracking the situation very carefully, but you are right, if the judgment was to be adverse then we will have to look and see what can be done on a European‑wide basis. At the moment it is not clear what will happen.

Q47 Mr McFall: You will realise that that takes you into the debate about a harmonised tax system in Europe.

Mr Blair: You know our position on that, which is that we are very strongly opposed to it.

Q48 Mr McFall: There is a tension there.

Mr Blair: I do not know there will be because it is one thing to harmonize tax rates, but it is another thing to look at how you can make sure people do not avoid tax that they should be paying.

Q49 Mr McFall: That is one for the future. The Pre‑Budget Report highlighted that UK workers work 14 per cent longer hours to produce the same output as German workers and 29 per cent longer than French workers. Are you not disappointed that our productivity remains pretty poor internationally?

Mr Blair: Every time I am asked for the figures on this and study the statistics you get some rather confusing things being said.

Q50 Mr McFall: This information came from the Treasury.

Mr Blair: Even from the Treasury occasionally. I think we have narrowed the gap or even closed the gap with France and narrowed it with Germany and Japan. I think it is the case that we probably work longer hours here, that is true.

Mr McFall: I can assure you that that is the case, Prime Minister.

Q51 Sir Nicholas Winterton: You will be more than aware of my total commitment to manufacturing industry. Can I ask whether you consider manufacturing industry, both traditional and high‑tech, to be an important priority sector of the United Kingdom economy?

Mr Blair: I do.

Q52 Sir Nicholas Winterton: In terms of costs per unit of output, why has this risen at the fastest rate since October 1995 in the last three months and manufacturing employment fallen during the last quarter at the fastest rate since October of 2003, and is industry itself expecting the fall in unemployment to continue during the coming months? Can you therefore explain these ONS figures and indicate what action, if any, the Government intends to take to reverse these trends?

Mr Blair: I think it would be very bold to say that you were going to be able to reverse all the manufacturing job losses that have occurred going back many years. As you know, we have lost several hundreds of thousands under this Government in manufacturing, I think there were a couple of million lost under the previous Government, but we are not alone in that and I think we have to disaggregate some of these problems. As far as I am aware virtually every major industrialised economy in the world has lost jobs, certainly the US, France and Germany have lost manufacturing jobs. The issue for Government policy is two‑fold: first of all, stability, and secondly, investment in skills, in science and in technology and in support for things like research and development tax credits and support for small businesses in manufacturing. I think those are the things that Government can do. I think it would be a very unwise thing to suggest that we were going to be able to reverse all those trends that have built up over many, many years in terms of job switching from manufacturing into services. You would probably acknowledge that there are points now at which whether something is in the manufacturing sector or the service sector becomes slightly more difficult to determine.

Q53 Sir Nicholas Winterton: Perhaps we may concentrate on input costs. The Chief Economic Adviser of the CBI has commented that Government carries some of the blame for these input costs rising at the fastest rate for nine years and firms and companies in this country only being able to pass on a fraction of these cost increases through rising prices, so profit margins are under pressure. If I may paraphrase a quote, you yourself have stated that we need to end the "gold plating of European regulations and reduce bureaucracy". How are you going to do that? Do you mean we must not gold plate European regulations and add to the bureaucracy that costs industry so heavily?

Mr Blair: I suspect the one aspect of the unit costs is also the rise in commodity prices that has hit manufacturing here and in other countries around the world because of the sharp rise in commodity prices. Insofar as that is due to regulation, I would hazard a guess that this is as much to do with European regulation as it is to do with domestic regulation. There are two things that we are doing here. The first is that with all regulation that now comes from Europe we have made it clear there should be an end to gold plating regulation. For example, in the End of Life Vehicles Directive which is just coming into force we have very specifically worked with industry in order to minimise the impact of the regulation that came out of Europe to do with recycling costs. In addition, we are working with the new European Commission, and I think the new President of the Commission has made a good start in this regard, to make sure that Europe itself introduces what we have already introduced in this country, which is a regulatory impact assessment on any new regulation coming out. In respect of the regulation part of this, I totally agree with what the CBI is saying, but we need action on a European‑wide basis.

Q54 Sir Nicholas Winterton: Does this pressure on profits not lead to inadequate and reducing investment which is so vital to industry's success? Are you aware that capital investment per worker is 50 per cent higher in the United States compared with the UK while manufacturing investment in the UK has fallen by 40 per cent since 1998 and that the United Kingdom is less productive than all the other G7 countries except Japan?

Mr Blair: On these productivity figures, you get various figures coming out in respect of it. I had actually thought we had narrowed the gap with France and Germany on productivity. There is an issue to do with manufacturing competitiveness but I think that that is as much to do with European regulation as it is with British regulation. This trend away from manufacturing employment is not just in Britain, it is worldwide and it has not just started in the last few years, it has been going on for a long period of time. I think that regulation is an issue, I do not dispute that at all, but I think that the two most important things Government can do is to maintain the economic stability and make sure that Government is putting money into the things it should be putting money into and I would put skills and apprenticeships and so on right at the forefront of that. Many manufacturers in this country would also say that a relationship with education and the university sector is a major part of forward manufacturing as well.

Q55 Sir Nicholas Winterton: Would you accept what David Cairns of the British Chambers of Commerce has stated, which is, "The plain fact is that manufacturing has stagnated in the past year"? Bearing in mind what John McFall said about a reduction in corporate taxation, that means industry is making less money. What can your Government do to help the United Kingdom industry rectify what is a very sad developing situation? It is important to maintain a strong manufacturing base in our country. Would you not agree?

Mr Blair: It certainly is. If you look back over the last 25 years, the single biggest falls in manufacturing investment, in jobs and production where when the country went into recession and so the most important thing is to avoid that and to make sure that the economic stability, the high levels of growth and the high levels of economic success that we have enjoyed in this country over the past few years are maintained. As you know, the DTI have got a manufacturing strategy, they are working on it sector by sector with manufacturing, but manufacturing is subject to a lot of intense global competitiveness pressures at the moment. The best thing to do in the long term is to invest in science (there has been a huge uplift in the science budget), to investment in technology, to make sure that we have the skilled workforce that we need and to keep, above all, the economy as stable as possible.

Q56 Mr Sheerman: Prime Minister, I want to continue the theme of skills and productivity. Is it not the case that we have a very good educational system for about 50 to 60 per cent of the people in this country? Forty per cent have a much rougher deal. We have a very poor stay‑on rate after 16. There are a lot of people out there who just have not got the skills to climb out of the minimum wage trap. Is that not the problem?

Mr Blair: I think over a long period of time that has been the problem. It is getting better but I think it has got to get better still. The Ofsted report published the other day, although it was basically highlighted for what it said negatively, said for the first time I can remember that they thought the education system now was getting geared to educating all children well, not simply the top echelon.

Q57 Mr Sheerman: In Europe we have an almost unique system where a child leaves school at 16 and goes into employment, perhaps stacking shelves, doing unskilled tasks with no guarantee of education or training. Surely in the 21st Century that cannot be acceptable.

Mr Blair: It is not, which is precisely why we are changing it. The Education Maintenance Allowance will help about 400,000 kids stay on at school after the age of 16. That has been piloted and rolled out across the country. We have trebled the number of apprenticeships, it was 75,000 when we came to power and by the end of year it will be 250,000. In the new vocational education proposals we will be giving kids the opportunity at the age of 14 to go on a more acceptable path of vocational education so that they are not forced down the academic route if that is not what they want.

Q58 Mr Sheerman: My Committee looks at this sort of issue all the time and we have made some pretty positive comments on government policy sometimes, but that does not get away from the fact that I can see no end to a 16‑year old child leaving school and going into employment with no guarantee of training or education. Surely that is something that your Government should be able to do something about?

Mr Blair: We are doing something about it, which is why I have just said what I have said. I agree that we need to do more and we intend to do more. I would like to get to the point where every child after the age of 16 either has proper training or an apprenticeship or is at college or university.

Q59 Mr Sheerman: You could make it illegal. Why do we not make it illegal?

Mr Blair: You could make it illegal, but if the places were not there and the system and the infrastructure were not in place it would not really be very fair. I think this is an achievable goal to say that every young person should either be in training or in a recognised apprenticeship or at college or university between the ages of 16 and 19. I think if we were able to do that as a country it would be a huge step forward.

Q60 Mr Sheerman: Is the sort of recommendation that came out of the Tomlinson report the sort of way you want to move, which would be a total change between the academic and the vocational routes, especially for 14 to 19 year olds, right the way through? Are you still committed to Tomlinson?

Mr Blair: Absolutely. This is entirely the way to go. The weakness of the British education system for over 100 years has been the absence of a proper strong vocational skills route. At the age of 14 kids need to be able to have the option, if they do not want to go down the academic route, of developing a really strong vocational skill base and doing subjects that are different from those that are the traditional academic route, but there is a huge change in the system that needs to be put in place in order to do that. I think we can do it, that is what the Tomlinson report recommended and in the next few years we will be publishing proposals as to how we are going to implement that, but it is a big change for the British education system.

Q61 Mr Sheerman: These changes are all very well, but you and I know that our mantra in the new Labour Government from 1997 was "For the many, not for the few". Are you not disturbed by the sorts of reports that are coming out from the London School of Economics Institute through the Sutton Trust that show social mobility in our country rather than increasing is actually slowing down? Surely you and I came into politics to see a society where more people can move up rather than less people moving up in the social scales.

Mr Blair: That is absolutely true. All I would say is that I think there are real improvements being made. I think some of the policies, things like Sure Start and free nursery education, will take a long time to feed their way through. They are very long‑term investments in the future but I think ultimately they will make a real difference. A lot of children in our country need to start getting the opportunities very early on and I think the Sure Start programme really has made a big difference in many communities, but it will be another Government that sees the fruits of that in years to come.

Q62 Mr Sheerman: When you have the money to continue the reforms that you have put your hand to and the Government has put its hand to then we are going to need more taxpayers' money to continue those reforms. The other worrying reports that have been coming out, especially in light of the Government's commitment to the many and not the few have been that wealth has not been distributed in a fairer sense but less fairly. Surely if an increasing number of people own more of the resources of our budget then we ought to have higher taxation on the wealthy. One of your advisers in Number 10 said yesterday that that is what he thought we should have.

Mr Blair: Did he now? If you just give me five minutes, I will just go and sort that out!

Q63 Mr Sheerman: It is in the Financial Times this morning.

Mr Blair: It is a very strong paper of record. I am not in favour of raising the top rate of tax, which is what is often talked about in this sense. Sometimes these figures can be a bit misleading in the debate about the gap between the wealthy and the poor. Let us be clear, there have been hundreds of thousands of children and almost two million pensioners lifted out of acute hardship, there are people benefiting from the Working Families' Tax Credit and from the minimum wage. If you take London schools for example, whereas seven or eight years ago there would have been several London boroughs with an average of only 25 per cent of kids getting five good GCSEs, now I do not think there is any London borough that is below 40 per cent of kids. Forty per cent is not nearly good enough but it is a darn sight better than what it was. It used to be just over half of the kids would leave primary school with the proper results and it is now 75 per cent. These are big changes. Do we need to do more? Yes, we do. That is why you have got to continue the programme of investment and reform, but I do not think we should dismiss the progress that is being made. The other thing that is happening, which is a very much bigger discussion, is that there are a group of people who if you are not careful transfer their poverty literally from generation to generation, they may end up in poor circumstance themselves, they have a family early and you can perpetuate this through a cycle of generations and as people become more wealthy and as more and more people become middle class or better off then I think there is a risk that you leave a core of people behind who really need special work and special attention in many of the communities of the country, but that is why programmes like Sure Start were introduced.

Q64 Mr Sheerman: Would you agree if it was 40 per cent of our population that do not think they are getting a fair crack at getting out of the minimum wage, to get into skills, to get into social mobility, then that is not a very good situation that we are in?

Mr Blair: We need to do a lot more. I am in total agreement with that. All I would say is that I think the policies that we have put in place so far have worked, but this is a long business.

Q65 Mr Sheerman: So the question I asked you six months ago you would give the same response to, ie this Government has not yet run out of steam?

Mr Blair: I am pleased it is consistent with what I said six months ago. It is always alarming when people put those things in.

Q66 Chairman: Prime Minister, a few weeks ago we had a hearing of the Public Accounts Committee on inheritance tax and what became clear was that now larger numbers of people are moving in at the bottom housing bands and are being subject to it. What is more important and why you will never solve the gap unless you make a change at the top end of inheritance tax is because they are the super wealthy, they do not keep their money as cash, they keep it in works of art and things that can be party to access agreements, so they are able to slide the wealth, which is already going up in value, between the generations. The rest of us do not have that opportunity. Are you going to do something about closing that gap?

Mr Blair: I do not mean to be uncooperative in answering a question like that, but I think I should say that any issues to do with inheritance tax or potential for tax avoidance are best left to the Chancellor in the Budget.

Q67 Chairman: Have a word with him.

Mr Blair: Okay.

Q68 Mr Denham: Prime Minister, let us turn to pensions. I am sure it is not a coincidence that we will not know the result of Adair Turner's work until after the General Election. He has already said that it is widely known that if we want decent pensions we are going to have to work longer or save more or pay more tax or quite possibly all three. He also said there was a fourth option, which was to muddle through, making the odd change here or there but not really getting to grips with the pensions system. If we look at the history of pensions policy in this country over 25 years, is there any reason to believe that muddling through is not the most likely outcome because is that not what we have really had for the last 25 years?

Mr Blair: It is a fair enough point. We took certain risks in setting up that Commission, especially with someone like Adair Turner in charge of it. I do not think he will be saying his chief recommendation is to muddle through. He is likely to give us some fairly hard edged solutions to this and that is certainly what we want. I think the question then will be whether you can establish a broader consensus about it given that I think everyone knows this is a very, very difficult long‑term issue.

Q69 Mr Denham: We have an election coming up and pensions is bound to be a hotly contested issue. If you are a 25‑year old today looking at your income in 40 years' time, you know the Government will change party to party several times probably over the next 40 years. Prime Minister, how can you go about getting the sort of consensus on pension policy which means that there will not be a sudden disastrous change as we had between the mid‑Seventies and the mid‑Eighties when there was a change of Government before?

Mr Blair: The best way is to set up an independent Commission, which we have done, and then to use the outcome of that Commission as a springboard for a properly informed public debate. That is the reason I set it up. I set it up very deliberately in order to try and get somebody objective to set before people what are the difficult options and questions. I do not know whether we will be able to achieve a consensus on it. Obviously it is more difficult to do that when you have got potentially a very heated political debate coming out. In a period of calm and reflection I think it will be important to have this debate and to have it on a basis where hopefully you can establish some rules that will stand the test of time because I agree with you, I think it is very, very difficult for any younger person in employment today or anybody to work out exactly what the forward path of pension policy is likely to be and to work out what their best options are. If you were advising someone on a relatively low income what would you advise them about their pension possibilities? I think it is very, very difficult.

Q70 Mr Denham: Adair Turner's report was seen by everyone as very good but there is nothing in it that was not already in the report that Tom Ross and the Pension Provision Group published for this Government five or six years ago, yet nobody grasped the nettle then, nobody sat down with the other political parties and said "Here is the nature of the crisis". What can you tell the Committee so that when we get Turner's report there will be a different approach that actually takes it from being the pages of an informed report into serious consensus long‑term policy?

Mr Blair: I can simply give you my commitment that I will do my best to do that and to achieve it on the basis that such a policy would survive a change of Government since I think the point that you are make is absolutely right, that unless you do get a policy that has a significant buy‑in from more than one side of the political spectrum then that is difficult to sustain.

Q71 Mr Denham: If we look to the future, I know detailed answers need to await Turner's final report, but you were talking earlier about younger people not knowing what to do. If we carry on with current policies, the increase in the value of pension credit, the changes that are taking place in occupational schemes and so on, then the vast majority of young people today will end up on means tested benefits when they retire, if they are about 25 today. When you think about what the pensions system should look like in 25 years from now, do you think that is the way we will be going, with most people retiring on means tested pensions, or are you looking to a future where we will manage to reduce the number of people who retire on to means tested pensions?

Mr Blair: Obviously, as we have often said, you do not want a situation where the majority of people are on means tested pensions, but the reason for the pension credit is particularly to deal with pensioner poverty and pensioner poverty today. As I think Alan Johnson and the Chancellor have said, how this then develops over time is one of the very things we want Adair Turner's report to look at and there are really difficult questions in respect of that, but the reason why we went for pension credit over the past few years has been as a response to the immediate concerns about pensioner poverty and to try and also reward those people who have had some savings and on the whole it has been remarkably effective in doing that and in reducing pensioner poverty.

Q72 Mr Denham: So your own view, looking at it in the medium to long term, is that we should be aiming for a system that reduces dependence upon means testing?

Mr Blair: What you want is to get to the stage where there is a proper partnership between state and citizen and one that recognises that what the state puts in it takes from existing taxpayers and therefore you have got to have a contract between the generation that is working and the generation that is retired that is fair all ways round. The difficulty, as you rightly say, is that at the moment what you have as a situation is one where people are living longer, people are often retiring earlier and they want a high standard of living when they retire. What is more, the income of different pensioners is becoming more varied than it would have been 30 or 40 years ago and that will increase over time. I do not think these things are anything other than immensely difficult. The fact is that it will all come back to money and who pays it in the end.

Q73 Mr Denham: Obviously one of the ways of reducing dependence and means testing is to increase the value of the state pension system. A few months ago, I think in a speech in Germany, you suggested that we might find money for the state pension system by reforms to incapacity benefit. We saw those reforms last week and I think there was a pretty widespread welcome for them, but it is also pretty clear that there is not some instantly accessible pot of money from those reforms and that we are going to have to invest money before we can start saving it. If there is not going to be an immediate flow of money from incapacity benefit, where else can you look in order to put extra support into the state pension system?

Mr Blair: You have to look over time at how you are going to reconfigure your welfare spending to get more money into pensions. I think that is precisely the issue that the Turner Commission has got to look at and then give us a series of options for. I certainly never meant to suggest that you could do an easy switch from incapacity benefit into pensions. What I was saying is that if you are going to put more money in from the state ‑ and it is the taxpayer that puts that money in ‑ then you have also got to make sure because this is part of the social contract that keeps the whole system together, that those that can work and who are able to work are actually helped into work.

Q74 Dame Marion Roe: Prime Minister, I am sure that you are aware that the Pensions Commission found in their report in 2004 that the private pensions system is not developing to offset the state's retreating role, instead it is in significant decline. I am sure you are also aware that in total 11.3 million people in work are not making contributions to any private pension scheme. Why in seven years has Britain gone from having one of the strongest pension provisions in Europe to one of the weakest, and what steps will the Government take to reverse the decline of funded pensions?

Mr Blair: I do not accept the situation was quite that rosy when we came in. I think all the problems that have come to beset us now were there then and they are becoming more and more obvious as we continue. I think there are people who could be part of occupational pension schemes who should be in them. However, there are a larger number of people on relatively low incomes for whom the rules are immensely complicated at the moment, which is why we are introducing simplifications to them. Even if you do all of that, you are still left with the basic issue, which is that for someone on a relatively modest income to invest the sum of money they would need for a decent retirement is a big call on their resources.

Q75 Dame Marion Roe: Prime Minister, do you now regret endorsing Gordon Brown's policy in his 1997 Budget to remove the right of pension funds to reclaim dividend tax on the equities they owned, thus taking out 5 billion a year from the private pension funds? Is it not this action that triggered the present day occupation and private pensions crisis as well as reducing pension fund investment in the stock market with a devastating detrimental knock‑on effect?

Mr Blair: No is the short answer to a nicely put question.

Q76 Dame Marion Roe: No regrets, Prime Minister?

Mr Blair: No, I do not. I would say, also, it is important to realise, as indeed we said at the time, we cut corporation tax by several billion pounds a year and the main problem we have had with the Stock Market is not to do with the change in the dividend tax credits, which was something begun, in fact, under the previous government, admittedly carried through to its logical conclusion by us, but I do not think that is the issue, the issue on pensions has been an issue building for a long period of time and we are in no different situation from any other country, probably a better situation than many, because the fact is the money has to come either from companies, employees or from the general taxpayer, there is no way out of that. As people live longer, retire earlier and want a higher standard of living so the constraints financially on your system become more intense.

Q77 Dame Marion Roe: My final question, Prime Minister: will the Government publish its proposals before the next General Election so that the electorate will be able to compare the Government's plans with those of the other major parties? Surely the electorate needs to know where it stands on this very critical issue before votes are cast and not await the conclusions, if I might say, of the Commission's consultative programme which is going on at the moment? After all, recent research does show that millions of workers face cuts to their pensions after a 50 per cent rise in the cost of providing traditional final salary schemes? I am sure you are aware that pensioners of tomorrow are very, very concerned indeed about their financial security and the quality of life in old age which they can expect.

Mr Blair: We will publish proposals on pensions. Obviously they will be subject in part to what comes out of the Turner Commission. On the other hand, there is a record on the pensions that we have and that we are very proud of. In particular I look forward to debating the withdrawal of the pensioner credit and the state second pension which I think, Marion, if I can introduce a slight note of political controversy, you will find difficult to justify yourselves. Anyway, we will wait for that moment to arise whenever the election comes.

Q78 Sir Archy Kirkwood: Prime Minister, Peter Pike has some very important questions about the tension that is now mounting between private and public sector pensions but I wonder if I could ask you a very brief supplementary in the interim on a wider longer term issue about ageing. I think that it could be said that, whether it was right or wrong, your Government had been very active in the child age group with childcare and SureStart and all the rest of it and, indeed, as well in the working age population with an active labour market policy. It is beginning to be quite noticeable, not to mention astonishing, that you particularly have never, to my knowledge, in the course of your term in office as Prime Minister, ever addressed the wider issue of ageing. The demographics are dramatically changing, and it is not just an issue of pensions, it is not just an issue of health, it is an issue of where we are going to get the workforce in the future, how we are going to construct society in ten, 15, 20 years' time and you have been silent on the issue. Do you not think that is something you need to address rather quickly?

Mr Blair: Address in what sense?

Sir Archy Kirkwood: Is it saying something about yourself, about what you think the problems are? Do you think there is a problem? There are a lot of people saying the demographic change in the Western World, never mind the countries, is one of the most dramatic political challenges of the age and yet you seem to be deaf on the subject, dumb on the subject, deaf and dumb.

Q79 Mr Mates: Nothing personal.

Mr Blair: One of the issues we have just been discussing is pensions. I think you have to get to specifics. There is not much I can tell you about ageing that is not perfectly obvious, indeed very obvious when you look at me.

Q80 Chairman: More obvious for me.

Mr Blair: I think it is in the issue of pensions this is most clearly a problem.

Q81 Sir Archy Kirkwood: I do say to you we will be looking at this very carefully. Pensions, of course, are an element of that, and getting the certainty and the confidence which does not exist at the moment. Prime Minister, I do promise you there is a much wider agenda. I do not want to spend a lot of time because we have not got time this morning to go into it in great detail but I do urge you to look carefully and I think a statement from you looking at some of the longer term wider dimensions for this problem is something that is very much needed now. I hope you will go away and think about that.

Mr Blair: I can give you even better news than that, Archy, there is in fact to be a Government paper published on the very issue of ageing and the ageing society in the coming weeks.

Q82 Sir Archy Kirkwood: Okay. We will look forward to that.

Mr Blair: I have said things about the impact of an ageing society in the past but you will find this said in ringing terms in a few weeks' time.

Sir Archy Kirkwood: I will look forward to reading this with interest.

Q83 Mr Pike: Prime Minister, I want to raise three issues about local government. The first one links in on the pensions because we have dealt with the normal state pension system, we have dealt with the private sector pension system, I want to refer to the public service in local government. We have got teachers, police, firefighters on the local government pension service and we are seeing some changes there. All these funds have got major deficits in them at the present time. With the recovery of the Stock Market to some degree obviously that has been narrowed a bit again but there are still major problems there. These funding gaps would cause major problems to the council tax or major cuts in local services unless we have a consensus or a Government willingness to meet these deficits. How do you see the way forward? They are all causing controversy. I am sure you receive letters, Prime Minister, from local government workers and others, just as every other Member in the House does.

Mr Blair: Absolutely, but the problem, as we explained to our colleagues in the local government unions, is very simple. What you have got is an actuarial report that there is a 400 million shortfall, you have got to deal with that in some way. We have put forward a series of options but we need to discuss those options with the local government trade unions and try and find a way forward. We have said that provided we can deal with this situation now that in the time to come we hope we will be able to put forward a better and more sustainable package for people. It all comes back to the same thing, which is sometimes what I find about the pensions debate, there is an agreement about the problems and the issues that arise but a sort of unwillingness to accept that in the end it comes to money. You need to put more money in because people are living longer, and that is what it comes to.

Q84 Mr Pike: All those pose a problem but obviously the local government pension scheme is different from some of the others that I have referred to because they are not all funded schemes. With the pensions that the workers in those particular fields expect to get, there has to be funding there to meet them and at the end of the day that has to come from the public whether it is national taxation or local taxation.

Mr Blair: The other option is that you try and deal with some of the rules in the scheme which are more difficult to justify in the modern age, like the 85 year rule.

Q85 Mr Pike: There has to be discussion on these issues.

Mr Blair: There does, you are absolutely right, Peter. I should say to you we have made it clear we will sit down with the local government unions and try and work a way forward for them and with them. There is no getting round the fact that we cannot properly ignore the fact that we have got actuarial advice saying there is a 400 million shortfall.

Q86 Mr Pike: Can I move on to the second point which is a point I have raised on previous occasions. Large sections of local government expenditure are now met from short term funding and, again, wherever MPs go we find people are bidding to get their next lot of funding because time is running out. Prime Minister, you referred to the importance of SureStart, most of those schemes are short term funded, Neighbourhood Warden schemes play a vital part, and I could list a whole number. Do you see at some stage that these things really should be transferred to main core traditional local government funding rather than this short term? If SureStart is as good as you say it is, and I believe it is, then really we should not have to bid to ensure the schemes continue.

Mr Blair: We are looking at this now. You are absolutely right, there is SureStart, there are things like Neighbourhood Wardens, Community Support Officers, and so on which it is extremely important you keep the funding for and there is a guarantee of those. You have then got a whole series of regeneration schemes which fall into maybe a slightly different category but we are looking at this now.

Q87 Mr Pike: We do need to take decisions on it.

Mr Blair: Yes.

Q88 Mr Pike: My third and last point is council tax. Obviously for understandable reasons we want to see a ceiling of five per cent, and I support that. At the end of the day we inherited a seriously flawed system that was rushed through after the Ribble Valley by-election in 1991. It is flawed, we have got reviews, when are we going to implement a system that is fairer and more workable than the council tax system that we have got? We keep getting told it is under review, we have been in Government now nearly eight years, when are we going to see a new system?

Mr Blair: When the review comes back and reports.

Q89 Mr Pike: When is that going to be?

Mr Blair: Within the next year is what the ODPM's department have said. Let me just say this about this reform of council tax, because everyone likes to leap up, including us, and say "The council tax is an unfair tax, we want a change" but it will come down to money in the end. What there is not, which is what we all look for in politics, is a way of getting rid of a particular tax which raises money which leaves you still with the money but without the tax. I am on the constant look-out for such a policy proposal. You can change it to local income tax, as some people say, but you run into a whole lot of problems with that. I remember with the rates, some of us remember when we grew up with the rates, everyone was always saying "That is a terrible system, you have to get rid of that". There was then the poll tax, that is true, that was not supremely popular either. The council tax at the time was announced as the great way through and the trouble with that is the gearing which means that any increase in spending ends up with a quite disproportionate council tax. I hope this year we will have council tax under five per cent. This is what the Government wants, we have made every effort to do it. I think we have got a good chance of achieving that. We have said we are prepared to use the capping powers and so on. Whatever system you put in place you will come back with the fact that here are the local services and we need to raise the money to fund them.

Q90 Mr Pike: At the end of the day we have to deal with that problem as well.

Mr Blair: Correct.

Q91 Mr Leigh: We are not supposed to be too party political in this magnificent Committee so let us accept for a moment that whoever is in charge central government administration is inherently wasteful. The Treasury accept National Audit Office figures that even by narrowly accepting the Public Accounts Committee recommendations they save about half a billion pounds a year. Would you be prepared to give an undertaking today that you would encourage the Treasury and Government to accept those recommendations more widely into Government as a whole?

Mr Blair: I would have to study it recommendation by recommendation. Of course we are on the look-out to save money and try and cut down on bureaucracy and waste, which is why Sir Peter Gershon's proposals will save something like 21 billion over the next few years. They are very much as a result of the introduction of new systems, new technology and changes.

Q92 Mr Leigh: Let us look at two or three examples. You have mentioned Gershon, a lot of what Gershon has been talking about we have been recommending for years. Central government procurement, you spend about 30 billion a year on goods and services every year, but only a quarter of your central procurement staff are professionally qualified. Again, that is an example of where there has been waste year in, year out. Can you get a grip on it? Can you make Whitehall more commercially astute?

Mr Blair: This is exactly what we are doing and one of the reasons why we are changing a whole lot of things in the senior Civil Service. We are recruiting more people in from outside, people who are finance directors with actual experience of being finance directors, there is a whole system change that is going through here and the Gershon proposals are part of that. Do not under-estimate - I am sure you do not, Edward - each one of these things will be difficult and you will find as each of these procurement contracts changes there will be somebody out there who will be saying "Those are our jobs or our money being taken from us". Now we have to do it because we have to cut our costs and reduce the burden on the general taxpayer but it is a difficult thing to engineer which is why we brought in Peter Gershon from outside and, I think, for the first time as a Government said "Right, here is somebody who is going to provide us with an objective plan that we can carry through".

Q93 Mr Leigh: It is a fact that Peter Gershon was the only permanent secretary in Whitehall who has ever run a project. Nothing ever changes in Whitehall, this is the problem with all this talk about tackling waste. There was a report in 1995 which found that sickness absence cost the Civil Service more than 400 million, that was in 1995, by 2003 nothing had changed. In one department - Work and Pensions - they are spending 100 million on sickness absence of civil servants. What can you do to make sure that all these productivity gains that you have promised with Gershon have any meaning at all or stick or are deliverable, given that you are dealing with the Civil Service?

Mr Blair: Because I think we can see that we can deliver changes, it is possible to deliver changes, provided the system is re-engineered properly and that you are able to introduce the people who have the expertise to push it through. For example, we are saying on defence procurement that we believe we will be able to save around about 1 billion through the Gershon reforms. Now they have set out how we can do it and we think that can be delivered but it has to be done as a proper business would do it, and this is the change that has happened with Gershon. We have a business plan that is based on deliverability and that can deliver those changes. For example, in the DWP as a result of changes - although there are still far too high levels of fraud and mispayment of payment - we introduced in 1998 we have saved around a billion pounds. It can be done.

Q94 Mr Leigh: You mentioned DWP, I was just coming to that. The accounts are going to be considered next week. We are still spending 2 billion a year in that department on fraud and error alone, 2 billion a year is pouring out of taxpayers' pockets. You are making, I am afraid - I do not blame you because all previous prime ministers have found this an impossible nut to crack - woefully slow progress.

Mr Blair: We are not making the progress as fast as we would like, it is true. You are right to say, also, that it is probably what every prime minister has said or would have said if he or she had appeared in front of the Committee. On the other hand, I think with Gershon we do have a chance for the first time of making the changes. We are putting through a programme in the DWP now of a reduction of staff of something like 30,000 which will happen. It is difficult when we have the trade unions being very angry about it, for reasons which are perfectly understandable, but we will make that happen, we will do it.

Q95 Mr Leigh: One last question. Let us just take one example of where you think a subject is really important, truancy. You spent a billion pounds of our taxpayers' money on trying to tackle truancy. We find that when it comes to unauthorised absence there has been virtually no change at all on the ground in the schools. That is 1 billion down the drain, not delivered by Whitehall, are these the people you have to work through?

Mr Blair: This is not correct. I think if you look at it very carefully you will find the billion pounds that people keep saying is spent on truancy is spent on all behaviour issues in the school system. The vast bulk of that money goes for excluded pupils in the pupil referral units which we have doubled the number of so schools do not have to put up with unruly or difficult children. One of the things which astonished me when we came into office was that kids who were excluded permanently from school often ended up with only two or three hours full time education a week, and this was completely absurd. We have doubled the numbers of kids, therefore, in those pupil referral units - I think there are now 13,000 in them - we have made sure, also, they are there for a full school day.

Q96 Mr Leigh: I am not asking about excluded pupils.

Mr Blair: The billion pounds is ---

Q97 Mr Leigh: You are very good at answering what I was not asking about. What I am saying is you put this money in, the fact is that 50,000 pupils every day are playing truant. How much of that billion pounds has gone into that, a very significant proportion. You accept you have not made an impact. It might not be your fault but you are working through a Civil Service that cannot deliver.

Mr Blair: The reason it is important to deal with the billion pounds is that obviously if you had spent a billion pounds on truancy alone and nothing had happened, it would be a billion pounds which you would be asking us some very serious questions about. The vast bulk of that has gone on the issues that I am talking about where we have made a difference. School exclusions are down and the pupils who are excluded are getting proper education. You are right, however, we have got to do far more on truancy. It is true that school attendance is now at record levels but I do not say that as an excuse, the fact is we do have to do more on truancy. We have introduced, incidentally, the power of schools and local education authorities to put fixed penalty notices on parents whose kids are playing truant and in areas where the schools are using these the very threat of them is making the parents bring their children to school.

Q98 Mr Leigh: All right. You are absolutely right, it is not a billion pounds, the actual figure is 885 million spent on truancy.

Mr Blair: No, it is not.

Q99 Mr Leigh: It is; these are National audit Office figures agreed by your own Treasury. I will not ask you any more questions.

Mr Blair: I am sorry, you may not ask any more questions but I am going to answer it nonetheless because the 885 million is what is spent on the behaviour issues within schools.

Q100 Mr Leigh: That is truancy.

Mr Blair: No, it is not simply truancy.

Mr Leigh: Okay. We will pass on that.

Q101 Mr Allan: Prime Minister, do you accept you will not meet your Gershon Review efficiency targets unless Government dramatically improves its ability to purchase the large IT systems it requires?

Mr Blair: The IT systems are a vital part of it, yes.

Q102 Mr Allan: Given the performance to date on systems like the Child Support Agency, is this something which is up there on your public services agenda that you receive regular reports on?

Mr Blair: It is. Some of the IT projects do not go well and some of them do go well. Funnily enough, if you look at the comparison between public and private sector on IT projects it is not very much different.

Q103 Mr Allan: You have something of a reputation of being a technophobe on a personal level, is that fair?

Mr Blair: I am afraid that is fair actually, yes.

Q104 Mr Allan: It is. Have you ever visited the multi-million pound central government website that you have set up to get us all to use these new electronic government facilities?

Mr Blair: I think that is a very unfair question. The answer is no.

Q105 Mr Allan: Do you know the address of this multi-million pound project?

Mr Blair: No.

Q106 Mr Allan: Your head of e.government, Ian Watmore, would be able to tell you all about it.

Mr Blair: That is exactly why delegation is such an important part of the job of a prime minister.

Q107 Mr Allan: Finally, can you tell us when you last met with your head of e.government and how often you do?

Mr Blair: Yes. I cannot remember the exact date but we have regular meetings on this. The use of the new technology is a very, very important thing for Government. Online, for example, people are able to do far more than they ever used to. Some of the self-assessment on tax, there are now lots of people doing that online.

Q108 Mr Allan: Not the Prime Minister.

Mr Blair: There is not me doing it online, no, I have to say. I apologise for that, I have a few other things on my plate.

Q109 Mr Hinchliffe: A key part of the public service agenda is of course choice, and we are all in favour of choice. In terms of the health service and the directive on PCTs to purchase a proportion of their treatment within the private sector from a certain date, has the Government looked at the impact on local hospitals if the purchasing is made instead from the independent sector? We had last week, as you know, John Reid saying he was perfectly prepared to see the closure of local NHS hospitals as a consequence of choice but where does that leave the people who would choose to go into their local hospital and do not have the ability to travel to some private hospital?

Mr Blair: Of course if they want to choose to go to the local hospital they can.

Q110 Mr Hinchliffe: If it is shut, they cannot.

Mr Blair: I do not think John was meaning to suggest that you can have vast numbers of local hospitals shutting, they are not, they will not. What he is really saying is this: you cannot force somebody to go to the local hospital if they think they can get a better service elsewhere. I know there is a lot of controversy about this, David, but if you look at the choice projects which are being run by Government at the moment, they have worked, they really have. In cardiac care, it has had a dramatic effect, giving people the choice to go elsewhere. I would like to see that extended. The six month project, I think it has seen somewhere in the region of 60,000 people opt to have their treatment elsewhere.

Q111 Mr Hinchliffe: Can I press you briefly on a PFI scheme for hospital building, and the impact of choice. I am very grateful for the fact that in my area there will be a new hospital starting very shortly. It is a good achievement and everyone is delighted about it. One of the concerns I have got is if you look at the income stream for a PFI scheme, that income stream is clearly very detrimentally affected by the purchasing of health care in future in the private sector. Is there any truth in the rumours I am getting from various sources that my new hospital, other new PFI schemes, might in fact have a private wing where the requirement to purchase from the private sector will be met by the PCTs?

Mr Blair: I do not know.

Q112 Mr Hinchliffe: Would you accept that as an option?

Mr Blair: I cannot really answer that without looking at the details of it. I do not feel that is the purpose of it. The purpose of it is simply to be in a situation where we are opening up the system so that within the NHS it is possible to get private or voluntary care in circumstances where people are not satisfied with the care they are getting in the traditional part of the sector. I think that is a good thing. We were talking earlier about the difficulty of Government really making things happen but the only time we began to get waiting lists making big falls was when we introduced the diagnostic treatment centres and said "Look, people can go elsewhere if they are having to wait too long." The result of that has been that the waiting lists have come down dramatically, the waiting times have come down. I know people - because I meet them, lots of them - who are able to get better and quicker treatment. We are doing it now with cataracts, it is having a big impact. People used to wait 18 months or more in the National Health Service sometimes to get their treatment, they are not doing that anymore and that is great. Choice is one important part of it. I agree with you, David, there are difficult issues which come about because if people do not want to go to the traditional provider then the traditional provider has got a problem but maybe the traditional provider should have a problem and should be asking themselves why people do not want to go there.

Q113 Jean Corston: If we can go back to issues that were raised earlier by John Denham and Marion Roe, Prime Minister, and look back 50 years rather than 25 years with the state retirement pension. One of the difficulties is that it was based on the notion that the man earned and the woman stayed at home. The consequence of that for us in 1997 was thousands of very poor elderly women who were pensioners. The Minimum Income Guarantee has done a lot to help them but take-up will not always be 100 per cent. Is this cycle not going to be reproduced in the future in that most women take some time out of work to have children or to care for parents and then their contribution record will never equal that of men? Would it not be better, therefore, administratively and in terms of justice, to move from a National Insurance contribution base to a residence test?

Mr Blair: That gets you into the argument about the citizen's pension. You have to look the cost issues that flow from that. The basic point about the difficulty for women in respect of pensions is undoubtedly true. The state second pension helps because of the changes that we have made to it but even so there is a problem, and particularly a problem for today's pensioners. It is one of the things that we are looking at but we have to balance the cost of that too.

Q114 Mr Jack: Prime Minister, in response to a question from John McFall earlier about tax you expressed confidence in the Treasury's forecasting techniques. The Treasury publishes the economic model as to how it works out which way the economy is going. Many people use it. Can you explain to me why the Treasury have steadfastly refused to publish the equivalent tax predictive model because it does exist, ministers do get projections as to what the tax revenue should be, and if we are to understand how the economy is going, and if tax projections are on track, surely in this day of Freedom of Information that information should be available publicly?

Mr Blair: Has the Treasury ever published that?

Q115 Mr Jack: It has never been asked. Certainly when I was in charge nobody ever asked but I am asking.

Mr Blair: Can I say that is a severe reflection on the opposition at the time. I think the reason is the same that has always been given, which is that you end up with a whole lot of misconceptions about what people are saying.

Q116 Mr Jack: If you can publish a model about how the overall economy is going into which tax revenues are plugged as an integral part, surely you can make available now the model/mechanism by which the Treasury calculates the predictions of what tax revenues are going to be? It is not a question of what people are saying, it is a fact as to what are the mechanics of the operation.

Mr Blair: What the Treasury do is they publish their forecast of what the budget situation is and the fiscal position will be. They have their own internal workings, why should they not have them? What they do is publish their fiscal forecast for the future, and I think that is the way it has been done traditionally and the way we will continue.

Q117 Mr Jack: If we have a model for the economy as a whole, why can you not have a model for the tax revenue part as part of that exercise? Can you find out for me why it cannot be published?

Mr Blair: I will get them to look out what is no doubt a traditional answer and send it to you.

Q118 Chairman: Will you let us have a note on it and we will circulate it to all colleagues.

Mr Blair: Yes.

Chairman: To wind up this section, John McFall.

Q119 Mr McFall: Due to the spirit of cross-party support I have asked that very question since Michael Jack asked me to ask the Treasury. I have had no success, Prime Minister, so I am looking forward to you having greater success.

Mr Blair: In the spirit of cross-party government, I could not refuse it.

Q120 Mr McFall: Prime Minister, whatever we do to improve public services, that needs to be accompanied by a competitively growing economy as well as a relatively low tax base. Now you have mentioned a few times this morning that we are about to be in a period of heated political debate. Let us look at the issue of skills and immigration. Several experts have told the Treasury Committee that inward migration, particularly from the new accession countries in the EU, has played a key role in relieving skill shortages and allowing non inflationary growth in recent years. Do you believe that inward migration has had a positive effect on the economy overall?

Mr Blair: That is the view, I know, of the Bank of England also. That is why it is extremely important in this whole debate on immigration that we recognise it is different from the debate on asylum and in respect of immigration you need to have strict rules and strict controls but they need to be ones which work in the interests of the country, in the interests of Britain, and do not end up putting at risk our own economy, which they could if we go down the wrong path.

Q121 Mr McFall: Can we assume, Prime Minister, that in terms of unskilled people, it will be unskilled people from outwith the EU who will be kept out of the United Kingdom in future and the skilled people in the EU, particularly from the accession countries, will be welcome if they have increased skills?

Mr Blair: One of the reasons why we are changing the system is because as you have got a greater number of people from the accession countries who are entitled to come and work here now, it is part of the European Union, then you have got a reduced requirement for unskilled worker schemes from outside of the European Union. I think that the changes that we have announced will be important in tackling abuse, in making sure we only have people here who we really need but doing it in a way which does not damage the economy. One of the things which will be helpful about this whole debate actually is if people do understand part of the complexity of it because there are real issues to do with the way our economy functions and our labour market functions which need to be borne in mind.

Chairman: We now move to the final section: climate change and the G8 Presidency. Peter Ainsworth.

Q122 Mr Ainsworth: Prime Minister, you will know that last week there was a conference on climate change in Exeter sponsored by the Government, a welcome development. It would have been more welcome had it not concluded that the problems seem to be more severe and serious than anybody thought previously. I do not know whether you have had a chance to read any of the reports from the conference but the worst case scenarios involving huge increases in the levels of sea water, melting glaciers, breaking up of Antarctic and Greenland ice sheets, profound and permanent changes to the climate in parts of the world which are habitable and the social consequences of that internationally, all of these things look deeply worrying, not least for our generation but possibly even more for people of our children's age. It is right, therefore, that you put this whole issue at the top of the agenda for the G8 Presidency. I noticed in the speech that you gave in Davos the other day you said you were committed to using the UK's G8 and EU Presidencies to try to make a breakthrough on Africa and climate change. Could you say in relation to climate change what you would regard as a breakthrough?

Mr Blair: Because we are trying to negotiate this, there is a limit to how specific I want them to be but I hope we can establish these things. I hope we can establish a clear sense of direction of travel, in other words that there is an international consensus that climate change is an issue that has to be tackled. Now some may say it has to be tackled for reasons of security of supply as well as climate change but an agreement that we do have to tackle it, an agreement that this is an issue upon which the international community has got to come together. The second thing is to work out a process then by which we can bind in the major developing economies to this process, because China and India, in the future, are going to be the two major players in this whole argument. The third thing is to take certain specific measures in relation to things like energy efficiency, science technology, which will allow us to make immediate progress.

Q123 Mr Ainsworth: What sort of specific measures do you have in mind? This all sounds a bit vague.

Mr Blair: Those are the things I think we have to sit down and agree with people, that they would include, for example, how we make sure that we drive forward the research into things like carbon sequestration, renewables, how we encourage within our own industry and economies greater attention to energy efficiency. Now there will be issues there, specifics, that we are engaged in discussing at the moment with people; I do not want to go into greater detail about that now, I hope I can do that a little bit later. I think the single most important thing which could come out of it is an agreement that we are going to tackle it and that we are going to come to a new set of international agreements with the developing countries in particular, China and India, at the centre of it.

Q124 Mr Ainsworth: They are obviously critical but what type of shape do you want these agreements to take? Are you in favour of some sort of global tax regime, the use of international fiscal measures? Are you in favour of an international regulatory environment to deal with this or some sort of international voluntary code? It is very difficult to get a feel for what you want precisely to get out of this process.

Mr Blair: It is, except that I think given where we are now, what we have got is Kyoto but without major players in Kyoto. At the moment it may be that Kyoto is ratified but, first, Kyoto, even if it was implemented, only reduces greenhouse gas emissions by one per cent or something, whereas we need far more than that and, secondly, it does not have major players in it, notably America but not only America. As I said at Davos, we should not set an over-ambitious target for ourselves. I cannot negotiate the whole of a new international agreement through the G8 but contrary to what people perceive at the moment, which is that America and others stand out from an agreement, that this is a major issue we need to tackle, if we agree that it is, we agree a process forward, and we agree certain key specifics on issues to do with science and technology, I am not saying that would solve the problem but it would be a big step forward. Incidentally, it would be tough to achieve, even in its own terms.

Q125 Mr Ainsworth: I do accept that none of this is easy and does involve difficult choices, and obviously a clear sense of leadership. Do you accept that we may not have much time on this? I take it that we are still holding to the notion that a two degree rise in temperatures could trigger a whole lot of catastrophic problems? Are you still wedded to the two degree rise position that was signed up to in the EU?

Mr Blair: Yes, absolutely, that is the EU position. We want to limit it to the two degrees because anything over that triggers a whole series of changes to climate which are immensely worrying and damaging. As I say, obviously that is an EU position, it is not a G8 position. Certainly we are signed up to that, and I think it is true that the more you read the science and read what is happening on the glaciers and the ice cap, the more worried you become. I think people know there is a real issue here. There is a residual debate: is this part of an actual cycle or not? It seems to me the evidence is so clear now I have described it as the biggest long term challenge the global community faces and I think it is.

Q126 Dr Gibson: It is refreshing to hear you talking about the science and the acceptance of the results that science brings forward. You will know that the scientific arena is where policy is decided. Foot and mouth was helped by the science advice you got. For example, President Mbeki said that Aids was not caused by a virus until Nelson sorted him out on that one, and that had a big effect on policies there. Of course, in the United States there is the burden of creationism which is putting Charles Darwin - Andrew Marr's favourite character incidentally - on the back foot in terms of education. Science can be used both ways. What I really want to know is are you wedded to the evidence? In your Davos statement you say, "... the evidence is still disputed. It would be wrong to say that the evidence of danger is not clearly and persuasively advocated by a very large number of entirely independent and compelling voices. They are the majority. The majority is not always right; but they deserve to be listened to. They are right, are they not, the science is done?

Mr Blair: I think they are right, yes. All I was pointing out - the remarks were misconstrued in certain quarters - was that the reason why you have still got an issue in certain quarters is that there are people who will still dispute it, but I think they are an increasingly small number, isolated in their disputation. My own personal view is that there is little or no doubt about it. Also, I think, incidentally, even if there was a residual doubt, any sensible precautionary policy would say "well the consequences of it being right are so severe that it is best to change behaviour". I think that the other thing which happens is people have a natural intuition that a massive amount of pollution cannot be good. Now, the reason why I place such emphasis on China and India and a dialogue with them is that you have to get China and India into the right type of dialogue for those countries because, after all, they are going to be saying "Well, look, it is all very well for you people who have been polluting and growing and causing this issue to tell us that we have suddenly got to switch to clean technology but how do we do that and how do we do that without sacrificing the benefits of economic growth which we want for our people?" I think one thing which has been very heartening is particularly the Chinese who have been participating in discussion with us and are prepared to take a real lead on this, and it is greatly to be welcomed.

Q127 Dr Gibson: Do you accept that this increase is caused by human activity and it is not a natural force, like a tsunami, for example, which devastated and killed people? Do you accept many people are dying now of global warming and it is not a natural force and there are human events going on which flood areas and kill people as recorded by the WHO?

Mr Blair: There obviously is that. There are a lot of people who died, many thousands who died, in 2003 in the heat wave. You can argue about cause and effect and so on. I think it is an active issue for us now, and I think the really shocking thing is that the estimates that we have made and the European Union make are that we would need actually a 60 per cent reduction in greenhouse gas emissions by the year 2050. Given that Kyoto is, as I say, a 1 per cent reduction, it shows you the scale of the problem we face. I believe myself that science and technology is the only way through this, there needs to be action taken; they are the instruments for us being able to combine economic growth and thriving industry with environmental sustainability.

Q128 Dr Gibson: I will pass it on in a minute but I noticed that when you talked about China and India you left a very prominent nation out of that, the USA. You will know their political position is anti-all the scientific evidence, even though the most prominent scientists in that country are arguing the way you are arguing, but the politicos over there are absolutely against it, and perhaps we will go into the reasons why they are because you mentioned economic development. If I could add at this point, Sir Digby Jones has threatened us in this country with moving industry from one country to another if we penalise them in some way in terms of trying to cut down CO2 emissions and other gases as well. He has said that. You said earlier you supported the CBI, will you condemn the CBI for that position?

Mr Blair: This is where you need to steer a careful line because the climate change levy which we introduced we have introduced basically with the consent of business. We have a difficult negotiation at the moment with the European Union over our emissions trading. I hope that people understand it is in the interests of us all that we tackle this problem, but it cannot be done by Britain alone, that is for sure. Incidentally, America of course is a separate problem, but the problem with China and India is different because they are going to engage in vast economic expansion in both countries, and the question is can they do so in a way which is environmentally sustainable. That is where we need the dialogue, because they need access to the best science and technology to do that.

Q129 Mr Jack: Prime Minister, can you refresh my memory, who is actually in charge of the climate change programme in the United Kingdom?

Mr Blair: It is in the Department for the Environment and Rural Affairs, but in relation to the G8 I am actually doing this negotiation myself.

Q130 Mr Jack: If you and Margaret Beckett are doing this, can you explain some of the seeming inconsistencies within our own policy? We have had the disappointing news that we are not going to meet the Government's ambitious target for a 20 per cent reduction in CO2 compared with 1990 levels by 2010. On the one hand, for example, Defra advocate the development of a UK bio-fuels policy, on the other hand, the Department for Transport are cutting out, together with the DTI, things like the Power Shift Programme which is designed to move vehicles to less polluting fuels, and we have the DTI seemingly arguing the case for the cap on UK emissions trading to be raised beyond that which was put into the national allocation programme. It is a picture of inconsistency. Why is there not consistency in Government policy in this area?

Mr Blair: I think there is consistency. The reason for the national allocation plan being changed is very simple, the facts changed, so we have to resubmit a different proposal to the European Union because otherwise we will do unnecessary damage to our business.

Q131 Mr Jack: But when that plan was submitted it went in as a sort of temporary kind of plan which was then taken by the European Union to be the final plan, and when I spoke to Commissioner Dimas last week he said, "Mrs Beckett is a very nice person and has been very friendly to me but there is no way we are going to change the cap, because Britain has no new arguments to put on it."

Mr Blair: I do not agree with that, which is why we submitted the plan as provisional in the first place, as you rightly indicate.

Q132 Mr Jack: The Commissioner made it entirely clear when my Committee saw him last week, as did his lead official, that there was no change. Coming back to the point I am making, Defra for argument's sake are saying, "We do need a UK bio-fuels policy because in the sector of transport greenhouse gas emissions are rising", we have had the benefit of gas-fired power stations which has enabled us to at least meet our Kyoto targets, but by virtue of missing our own higher domestic target something is on the increase and transport is one of them. Why, in one area where you could make a difference, does the Government not have a policy of introducing a UK bio-fuels industry, because clearly the steps you have taken so far have not delivered?

Mr Blair: Yes, but let us be very clear about this. First of all, we will meet our Kyoto targets. It is true that the CO2 emissions have risen slightly in the past couple of years as a result of very strong industry growth, but on the other six greenhouse gas emissions actually we have achieved reductions. So I think we can be very proud of what we have done, and I can assure you from the conversations I have with different people from different parts of the world, the UK is very much regarded as a market leader in this field. In respect of things like renewables, for example, we have got very bold and ambitious proposals with a lot of money behind them.

Q133 Mr Jack: It is important, if you are going to take world leadership, that we are able to hit the targets we have put forward. Let us move on to the question of the existing housing stock. There are a lot of measures beyond, if you like, energy-saving light bulbs which could be introduced, but many of them have very long pay-back periods and therefore the individuals are not encouraged to make such investments. What proposals do you have to encourage for the existing housing stock an improvement in their energy performance?

Mr Blair: The Energy Efficiency Programme that we are running does help people make energy efficiency savings. There is a limit to what Government can do, frankly. In respect of new buildings, of course, and I think it is in the new building regulations, there is something like a 25 per cent increase in energy efficiency but I can get you ----

Q134 Mr Jack: I am talking about the existing housing stock, not new build. I acknowledge those regulations have improved. For example, in the place where you live, Downing Street, what measures have you taken to improve its energy efficiency?

Mr Blair: In the whole of Government, not just Downing Street, we see the whole time whether there are odd things, like in respect of lighting and electricity there are measures we can take, and do take there.

Q135 Mr Jack: What have you done?

Mr Blair: If you look as Government as a whole ---

Q136 Mr Jack: No, I asked about where you lived, not Government as a whole.

Mr Blair: Where I live, for example, in Downing Street, we make sure for example in respect of things like lighting, where we can use electricity bulbs which are of a greater life then we do that; we actually take very great care. One of the reasons why we are trying to look now at how we reconfigure the electricity and power in Downing Street is in order to save energy. There are energy efficiency savings which I can give you details of which go right across Whitehall, that is true. If what you are asking me is in respect of people's homes, we have energy efficiency programmes we run for old age pensioners, which actually are a very large part - if you do not mind me saying so, Michael - of the Sustainable Communities Plan which you guys want to reduce expenditure on, but these will do a great deal for pensioners in our country in reducing their energy expenditure and also help with energy efficiency. But there is a limit to what Government can do for people in their existing houses. There is a limit to the degree to which I can simply say to people, "You have to do this, you have to do that, in terms of your own domestic situation." As I say, in Government we try to do what we can where we can.

Q137 Mr Ainsworth: Could I suggest one of the things you have tried to do is you have set yourselves a target for reducing carbon emissions from Government buildings, and your target is to reduce them by 121/2 per cent by 2010 from a 2000 base line. Last year you were 3 per cent above the base line, Prime Minister. It is not working.

Mr Blair: We still believe we will hit the 2010 target. Some of the changes we are making will make a difference in that. Let us be clear, Peter, we are the first Government to set these targets for us and, yes, some of them will be very challenging. Michael mentioned earlier the CO2 emissions one. When we publish the climate change programme, we hope we will still be able to meet that but it is very, very stretching and challenging. Let us be quite clear about this, we had this problem when we put through the climate change levy. I remember when we introduced the climate change levy your party, and you personally probably, voted against it. That was very tough for business and industry, they battered our door down and said, "We do not want this climate change levy, thank you very much, it will do damage to business", but nonetheless because of our concern for the environment we pushed it through, but there will always be difficult trade-offs in this area.

Q138 Mr Ainsworth: Can I come back on this point and press you a little further about the national allocation plan, and I know you have discussed it just now. Who actually took the decision to increase the UK allowance?

Mr Blair: The UK allowance was based on provisional estimates of what business would emit.

Q139 Mr Ainsworth: But who actually took the decision to put in for a higher allowance, the decision which has so upset the Commission and caused a row?

Mr Blair: The decision to put in for a higher allowance was taken on the basis that the figures that we had got in ----

Q140 Mr Ainsworth: Who actually took the decision?

Mr Blair: The Government takes the decision.

Q141 Mr Ainsworth: Did it go to a Cabinet sub-committee? Was it a DTI decision or a Defra decision?

Mr Blair: In this instance it has gone to a Government sub-committee, because it is important we try and make sure we have all the facts and figures there ---

Q142 Mr Ainsworth: Who chaired that sub-committee?

Mr Blair: If I could finish what I am saying. The DTI and Defra have been working on this together and the reason why the allocation we have submitted has gone up is because business has come back to us with estimates which indicate they will emit more than we thought because of strong economic growth. I am simply saying to you that I have to be careful with British business as well. I cannot have a situation where British business is going to be unfairly penalised vis--vis the rest of Europe when actually British business and Britain has probably more on climate change than any other country.

Q143 Mr Ainsworth: Prime Minister, who actually took the decision? Was it you in the end who had to resolve the row?

Mr Blair: All Government decisions are taken by me. It was not a row between Government. DTI and Defra are fully agreed about this, because the original allocation plan which was put in was put in on the basis of an estimate which was provisional. It is very important, Peter, if I can say this, that we do not send a signal to Europe that there has been some disagreement within Government over this because there has not. In the end we both understand what we have to do, whether it is from Defra or DTI, is to make sure we put in an allocation plan which is consistent with what business will actually be doing.

Q144 Mr Ainsworth: The problem, as you will understand, is that the signal you are sending out is that we are asking for special deal for our businesses ----

Mr Blair: No, we are not.

Q145 Mr Ainsworth: It is a 3 per cent increase in the allocation, which is in practical terms probably neither here nor there anyway, at the same time as going round the world telling people to get their act together on climate change.

Mr Blair: I am sorry, that is wrong. I am sorry to be so sharp about it but it is important that we do not send that signal out to the European Commission. It is not that we are asking for some special deal on behalf of Britain, on the contrary every country put in provisional estimates, the reason why our estimate has changed from the provisional estimate is that the facts have changed. If the facts change about British business and British industry, it is our job to put forward those changed facts. The actual "business as usual" reduction that we are asking from our business would actually increase, so we have a very, very strong case for saying, perfectly consistently with our obligations and our determination to tackle climate change, we have got British business with changed estimates as a result of changed facts. When the facts change, it is right our estimate changes. I think it would be wrong and damaging for our industry, quite apart from the case we are making to the Commission, if people thought either there was some dispute about the change in estimate which had happened or that we in Britain were asking for some special deal over the rest of Europe. On the contrary, Britain has a record second-to-none in relation to this issue in Europe.

Q146 Mr Jack: Prime Minister, one simple question, what actually have you said to President Bush about the lack of United States' engagement in this matter? Has he actually offered to do anything to recognise the problem and bring the United States as a country, as opposed to the action of individual states, on board to make a contribution? Because it seems to undermine the whole approach if the world's biggest polluter is not on board.

Mr Blair: Of course, which is why it is so important we get the United States back into a dialogue again.

Q147 Mr Jack: How are you going to do that? Tell us.

Mr Blair: That is the very task for the G8. I think it is possible to get the United States back into a dialogue on this.

Q148 Mr Jack: How?

Mr Blair: By patient and successful diplomacy and negotiation, Michael. Before you do something like this, the worst thing you can possibly do is have a discussion where you have everything out and talk about it before you get to the point where you think you can get an agreement. I happen to believe we can get an agreement on this. I think it will be very difficult, but I think the United States is ready to come back into dialogue on this question. I think they do not want to be left out of that dialogue, they recognise that it is an issue, they recognise it partly for reasons of security of energy supply as well as climate change, but it is not sensible at this stage of the negotiation to start talking too much about the details of it.

Q149 Dr Gibson: In this country, if we could convince business by growing renewable technologies we would get new business, new jobs and so on, what a shining example that would be to the United States. We could introduce technology jointly, whatever, in this area.

Mr Blair: I totally agree with that, Ian, it would be very welcome indeed. The other thing to remember about the United States is that this argument is shifting there. The argument about Kyoto has not shifted, and let us be absolutely blunt about that, the Senate voted I think it was 100 to nothing against Kyoto. It is very convenient sometimes for people to say it is the Bush administration, in my view whatever administration was in power, Kyoto would not be passed. However, if you look at what is happening in individual states in the United States, if you look at legislation now being brought forward by individual senators, some of whom are Republican, there is a changing debate going on in the US and we should make use of that and see if we cannot mould that to a greater consensus.

Q150 Mr Key: Prime Minister, I bring you a solution. Why do you not phone up Arnold Schwarzenegger and tell him to have a word with the President about the progress which is being made in California.

Mr Blair: That is a brilliant suggestion!

Q151 Mr Key: Thank you very much.

Mr Blair: Thank you.

Q152 Mr Key: I make no apology for coming back to this question of new house building and standards in technology, because after all 25 per cent of our carbon emissions are caused in the domestic sector. You referred earlier to the increase in housing supply in the South in four areas, but the building regulations have actually reduced standards of insulation in social housing. Incidentally, the building regulations refused to allow any impact on noise between buildings; they reflect the ambient noise from motorways, aircraft and roads, but most of the trouble with anti-social behaviour is neighbour disputes, and yet there is nothing in the building regulations on insulation for noise. Coming back to the energy thing in particular, why is it that we have had two Treasury consultations on fiscal incentives to improve household efficiency in energy but nothing has happened as a result of those two?

Mr Blair: I would like to come back to you and to set out in detail for you on the building regulations, because my understanding is we had actually set quite tough new energy efficiency requirements for those. On noise and so on, you may be right, I just do not know but I would like to check it out, if I may; there may be reasons for it. The biggest incentive you can give is in building regulations. If you have to build a new home with, I think I am right in saying, a 25 per cent increase in energy efficiency - but I will check that figure for you - that seems to be quite a significant step forward.

Q153 Mr Key: I admired your candour in answering Richard Allan's question about technophobia, which is a problem lots of people have, and I would not ask this if I had not been able to tick the boxes myself. What are your own family actually doing to change your own lifestyle to help change the planet? For example, do you have a hybrid car?

Mr Blair: No, but if you will forgive me I do not think I will get into my family and what we are doing on global warming. I know I am responsible for ----

Q154 Mr Key: It is very important.

Mr Blair: There may be certain newspapers which would headline it, "Blair finally admits he is responsible for global warming"!

Q155 Mr Key: But it does matter what we do with our own lifestyles. Do you have a green electricity tariff?

Mr Blair: If you will forgive me, I am not going into what my own family do. Sorry.

Q156 Mr Key: Okay, let's move on. Do you believe the rapid growth in cheap international air travel with tax-free aviation fuel, the impact at home of needing new runways and all of that, the impact the other end of environmentally-damaging tourist resorts and the damage to the atmosphere in between caused by high level emissions of carbon, is really sustainable? Do you think it is really acceptable?

Mr Blair: I think it is a very good reason why the science and technology needs to be explored; aviation fuel in particular. I also think, and it is something I said in Davos and I repeat and I know people think it is not the right thing to say but I believe it is true, hands up around this table how many politicians facing, let us say or not say, a potential election at some point in time in the not too distant future, would vote to end cheap air travel? Right. None. Oh, Richard!

Mr Hinchliffe: He is not standing!

Q157 Mr Key: It is really not a question of ending it, is it?

Mr Blair: It is not, but that is why I say this is what is important, if we are realistic about this, then the only way through is to take a hard-headed look at what the science and technology offer us. For example, the new Airbus we went down to Toulouse to celebrate is actually on fuel efficiency far more fuel efficient than the current airliners, and that is the sort of thing you need to be looking at and I think that is the only way through it. I do not think you are going to have any political consensus for saying, "We are going to slap some huge tax on cheap air travel", unless you think differently.

Q158 Mr Key: But that is a bit defeatist. We cannot just say, "Okay, it is terrible but we will do nothing."

Mr Blair: I am not saying do nothing, but the way through it is to focus on, for example, on aviation fuel how we would improve the environmental sustainability of that, and that is what is happening with the whole hydrogen fuel cell debate in relation to cars in America. Incidentally, America is putting probably the largest sum of money into science and technology in these things of any country around the world.

Q159 Mr Key: Can I finally ask you a question about good governance. Lots of people still do not believe in climate change, they do not trust us, the politicians, they do not trust journalists, they do not trust the scientists, some of them might trust a pressure group or two, but in the interests of good governance how can the Government and Parliament raise the quality of knowledge and debate about all these difficulties, whether it is the low carbon economy, nuclear power, GM crops, stem cell research? You have been there, Prime Minister, over GM. What are we doing about this anti-science culture in this country, so we can come to more rationale assessments of different risks and find a sensible way forward?

Mr Blair: I think that is a very good question.

Q160 Mr Key: What is the answer?

Mr Blair: The answer is, and I do not think it is just my responsibility to have the answer to this, to try and engage in a genuine, sensible debate about science and about risk, and I think those are two separate but related issues which are very difficult. I faced this over the GM issue, I faced it over MMR, for example. There are issues to do with mobile phones which you can see coming up where again, if you are not careful, you can have a debate that ends up being not entirely rational in terms of the evidence there actually is, and I think we do need a far greater exchange between the scientific community, the media and politicians, and that is politicians of all political parties. The other thing is risk, which I think is one of the biggest things which faces modern political decision-makers. You can spend vast sums of money protecting yourself against quite small risks, but if there is a sufficient campaign which gets behind it, you end up coming under enormous pressure to do it. I think one way is doing it, for example, on food, and we have the Food Standards Agency and I think that has helped somewhat, but I think the other thing is to try and get a sensible, rational discussion about science in the country.

Q161 Mr Key: So we are back to education, education, education in schools from Key Stage One?

Mr Blair: It is in part, but it is also about people like us going out there and being prepared to have a proper, sensible discussion about it. These things are very, very difficult and I certainly faced this over the GM issue. It is the most popular thing you can ever do, rush out and say, "I'm banning this and banning that" but it is not always the most sensible.

Mr Key: Absolutely.

Q162 Tony Baldry: Prime Minister, your other priority for the G8 is Africa, and I think on that you will probably have broad support right across both Houses and we all look forward to seeing what proposals the Commission comes forward with in March. The Chancellor has been working extremely hard on the International Finance Facility on volumes of aid and he managed to get some 34 countries supporting him, including support in principle from France and Germany, but last weekend at the G7 Finance Ministers the US Treasury Under-Secretary, John Taylor, was barely off the aeroplane before he was bludgeoning the IFF and saying it was not appropriate for the United States and not needed. My Select Committee last week were in Darfur, and I have to say there were some pretty grim scenes of camps as large as any one of our constituencies, and Hilary Benn made it clear at the weekend he thought those responsible for those war crimes and crimes against humanity should be brought before the International Criminal Court. Saddam today is before the Security Council, where I am sure there will be a recommendation for a reference to the International Criminal Court which I suspect the United States will block. Going back to what Michael Jack said about Kyoto, is not the simple truth this: we are always the first to be amongst the coalition of the willing supporting the United States, but whether it be on the International Finance Facility, Kyoto, climate change, the International Criminal Court, we have to make it clear to the United States we expect them to be amongst the coalition of the concerned and support us as much as we support them.

Mr Blair: I do not agree that there is a sort of quid pro quo here. I happen to be part of the coalition with America in respect of Afghanistan and Iraq because I believe in it on its own terms, but I also think it is important of course that we engage in dialogue with America. I think on Africa you will find America willing to come along with the international community. Indeed there is an American on the Africa Commission. I think Kyoto and climate change is a different issue; there has been a real disagreement. My own view is that the Africa Commission and what it comes out with should not just be about the amount of money or debt relief, it should also be about conflict resolution and governance. The Sudan is a classic example where, if you had what I would like to see in terms of the capability of Africa in conflict resolution and peace-keeping, you would not have these camps in Sudan at the moment. The reason you have them is you had no outside intervention capable of keeping the peace.

Q163 Tony Baldry: Prime Minister, you and I both know one of the key issues for development is volumes of development aid. The Chancellor has been working his butt off actually on this one, a Marshall Plan for Development as he calls it, going up and down the country making speeches, working very hard with other Finance Ministers, and that whole bit of work on Africa has been completely blown out of the water by the United States. Taylor did not even have the courtesy to turn up to the G7 meeting. Even before he got there ---

Mr Blair: Tony, the American position on the IFF has been well established. No one was expecting the Americans to change their position and sign up to IFF, and it is not necessary for the Americans to do so to take the IFF forward. There are different ways of ---

Q164 Tony Baldry: You would at least expect courtesy and for them to be willing to be part of the international community in considering it. I am sorry.

Mr Blair: The issue which will arise from the Africa Commission is increasing aid. How they do that, for example whether the Americans decide to do it through their own Millennium Challenge Account, whether you do it through some of the ideas President Chirac has put forward, whether you do that through the IFF, is an open question. Countries may find different ways of getting to this. We do not really have time to get into this discussion now about America but I do sometimes think it is almost as if the American alliance was a sort of impediment to us which we put up with. I happen to think the American alliance serves this country well, and I think occasionally we should come out and actually support and strongly defend it. There are disagreements, but I think we have seen with the developments in the Middle East peace process today why it is quite important we have it.

Q165 Chairman: Thank you, Prime Minister. It has been quite a tour de force. Because of the bell you still have not answered my question about the date of the election, so will you drop me a note please?

Mr Blair: I will drop you a note at some point!

Chairman: Thank you.