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Sir Gerald Kaufman (Manchester, Gorton) (Lab):
In welcoming the right hon. Gentleman's tough line on the middle east peace process, may I inform him that last
week I led a delegation of Members of Parliament and Members of the European Parliament from several European countries to visit four refugee camps in Lebanon? I saw there the worst conditions I have ever seen in refugee camps-including even those in Gaza-and especially in Bourj al-Barajneh, which is a hell on earth. May I put it to the right hon. Gentleman that being bred in those refugee camps is an anger and bitterness against Israel-with huge numbers of children living in squalor of the worst kind-which will place in jeopardy the future existence of the state of Israel unless a settlement is reached soon?
Mr Hague: I am grateful to the right hon. Gentleman for those reflections on his visit. The Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire visited the same location in June, so we are well aware of the circumstances that the right hon. Gentleman describes. Part of the discussions I have with the Israeli Government leaders involves pointing out that the long-term trends are against the strategic security of Israel and make that harder to guarantee in the future, unless it is possible in the near future to make a breakthrough on peace talks with the Palestinians that then unlock the potential of a comprehensive peace in the region, with a fair settlement for refugees, which is an important aspect. To find determination in the Israeli Government as well as among the Palestinian leaders to drive that forward in the coming months must be one of our prime foreign policy goals.
Mr Gary Streeter (South West Devon) (Con): My right hon. Friend will be well aware of the significant contribution made by the Westminster Foundation for Democracy in the states of eastern Europe-countries with no history of democracy-during the 20 years since the Berlin wall came down. May I assure him that we are well able to play our part in the exciting events in the middle east and north Africa, and will stand ready to do so at the invitation of the peoples of those countries?
Mr Hague: I welcome what my hon. Friend has said. A couple of weeks ago I announced an increase in funds for the Westminster Foundation for Democracy, which I consider to be part of the mixture of support for civil society and the development of political parties when that is appropriate and agreed with the countries concerned. I very much hope that the foundation will be able to play a role in both Tunisia and Egypt.
Mr Denis MacShane (Rotherham) (Lab): Does the Foreign Secretary share my dismay that the first act of the new military rulers in Egypt-the generals and colonels who are now in charge there-has been to ban strikes and, in effect, prevent trade unions from functioning? Are we not in danger of seeing an agreement between men in uniform and the Islamist Muslim Brotherhood that will leave no space for secular democracy, which must allow a degree of social justice and the right of Egyptian workers to organise freely?
Mr Hague:
It is indeed very important for secular democratic parties to be given space in which to develop. That is one of the issues on which I exchanged comments with the right hon. Member for Paisley and Renfrewshire
South (Mr Alexander) a moment ago. The military council has made many announcements that we should welcome-I listed them in my statement-but that does not mean that we agree with everything that it says or does. One of the things that we are encouraging the Egyptian Government to do, which I discussed with the Egyptian Prime Minister and Foreign Minister yesterday, is continue to "reach out", as we would say in the jargon, to opposition groups in Egypt-including, of course, trade unions and small opposition political parties-and ensure that they feel included in the process that is taking place. I am sure that that is the soundest approach.
Nicholas Soames (Mid Sussex) (Con): I congratulate the Foreign Secretary on the return of a wise and distinctive British voice to the middle east, and warmly endorse the wise words of our right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind). Does the Foreign Secretary agree that it will be extremely important to work closely with the organisation set up by Lady Ashton in the European Union, which has so much to contribute to ensuring that institutions in Egypt are financed and assisted as they walk towards democracy?
Mr Hague: Absolutely. That is important and urgent work, and my hon. Friend the Under-Secretary of State met Lady Ashton on Friday to discuss it in detail. It is one of the main ways in which we can assist in Egypt. The taskforce is doing its work in Brussels, and the United Kingdom will be very much part of that. I believe that we will be able to co-ordinate what we are doing across the European Union to give a serious measure of support to the process of change in Egypt.
Mr Ben Bradshaw (Exeter) (Lab): I congratulate the Foreign Secretary on what he has said today and, indeed, on what he said on the eve of his regional tour last week about the added urgency that the happy events in Egypt give to restarting the middle east peace process, but can he reassure the House that the American Administration share his analysis and, more importantly, are prepared to put on Israel the requisite pressure which, as we know from our experience of the past 20 years, is the only thing that will lead to a lasting solution?
Mr Hague: I discussed that with Secretary Clinton yesterday. I think that we should salute the efforts that she and former Senator George Mitchell have made in recent times. I am very conscious from all the meetings and discussions that I have had with them since May last year of the sheer energy and time that they put into trying to ensure that direct talks continued after September, when they unfortunately came to a halt.
The position that I have said that the United States and all of us should take is not yet the position of the United States, but I have informed the House openly that it is what we are advocating. I should have liked the statement on parameters to which I referred to be part of the Quartet statement issued in Munich just over a week ago. It was not part of that, but we will continue to advocate it, and I hope that it will become part of the approach of the whole Quartet, including the United States.
Dr Andrew Murrison (South West Wiltshire) (Con): I congratulate my right hon. Friend on the tone he has struck with emerging and potential Administrations in north Africa, but there are countries in the wider region that are embarked upon a process of political evolution, not revolution. What can Her Majesty's Government do to help them?
Mr Hague: We do, of course, work closely with those Governments. The evolutionary approach is a much wiser one, and, indeed, had the Egyptian leaders taken that approach in recent years-or even recent months-I think they would have been in a much stronger position over the past few weeks. That point has not been lost around the region, and some nations have introduced important political and economic reforms. Jordan is one of them, as I mentioned earlier, and Bahrain is another; it has already held three sets of national elections. That is not to say everything in all these countries is exactly as we would desire it, but they are embarked on a process of evolution and developing more open political systems, and we should welcome and support that.
Dr William McCrea (South Antrim) (DUP): I welcome the Foreign Secretary's statement. What further steps can be taken to pressurise Iran to comply with United Nations Security Council resolutions and give the people of Iran the right of free expression?
Mr Hague: We are currently embarked upon the search for those measures, so I cannot give the hon. Gentleman the specifics of the answer, but as I am calling for an intensification of measures of peaceful pressure on Iran, it is clear that we are looking to intensify some of the economic sanctions that have already been agreed and put in place. I will have to return to the House with more details on that when we have discussed it with our international partners.
On a subject that the shadow Foreign Secretary, the right hon. Member for Paisley and Renfrewshire South (Mr Alexander) raised, although I do not think I answered him, we continue to speak up for human rights in Iran at every opportunity. Our ambassador has sometimes been roundly abused for doing so, but he does not shrink from doing so, and I have taken the opportunity to do so again today. We do so regularly through the Foreign Office website and other means of communication, and Iranians are able to hear some broadcasts and communications, such as those from the relevant BBC channel. We will continue to stick up for human rights.
Iain Stewart (Milton Keynes South) (Con): Although I agree with my right hon. Friend that the current situation can, and should, give fresh impetus to the middle east peace process, there is considerable concern in Israel about the country's future security. Will my right hon. Friend reassure me that he will do all he can to guarantee that the new regime in Egypt honours its obligations under the 1979 treaty?
Mr Hague: As I mentioned in my statement, we strongly welcome the statement of the military council in Egypt over the weekend that international obligations and treaties are to be upheld, and the United Kingdom will strongly put the case to any future Government in Egypt that that should be their starting position in foreign policy.
Richard Burden (Birmingham, Northfield) (Lab): Given what the Foreign Secretary has said about the middle east peace process, which I endorse, does he share the view of the Israeli newspaper, Yediot Ah aro not, which said today that it is a little worrying that a country that refers to itself as the only democracy in the middle east should apparently feel so uncomfortable at having a democracy next door? As Gaza still suffers under blockade, can the Foreign Secretary tell the House what is happening with the blockade in the light of recent events, what Israel is doing and what is happening at the Rafah crossing?
Mr Hague: It is important for us all to have some faith in democracy. Instability on its own is, of course, a danger to the success of the peace process, but democracy itself is not a danger. We must have faith in what we practise in this country and believe in for others, and we should give that advice to Israel as well. We look to Israel to implement fully the commitments it has entered into about access to Gaza. We welcomed those commitments when they were made some months ago, but I do not think that the flow of materials in and out of Gaza has yet met the prospect that was held out at the time. We consistently raise that with the Israeli Government. We have consistently raised our view that the blockade of Gaza is unsustainable and unacceptable. We continually look, therefore, for improvement-building on some very small improvements so far-in access to Gaza.
Robert Halfon (Harlow) (Con): Given the continued belligerence of the Iranian nuclear programme, the strengthening of Hezbollah in Lebanon and of Hamas in Gaza, and the possible Islamisation of Egypt, does my right hon. Friend agree that Israel is now surrounded by Iranian allies or proxies? Does he have an assessment of the security threats to Israel and of the peace treaty?
Mr Hague: Of course there are many security threats to Israel, but the way for Israel to chart its way forward away from those threats is to seek urgently the resumption of the direct talks with the Palestinians and to find the two-state solution that would ensure that many of those threats fell away. As I say, it is important to be positive about the change and the prospects in Egypt. It is important for Israelis to be positive and welcoming about that as well, because expressing excessive fears about Islamisation in Egypt-I hope that they become excessive; of course, I cannot know what will happen-may become a partly self-fulfilling prophecy. So we should take a more positive attitude than that, and the way forward is the reinvigorating of the peace process.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op): Just over a week ago, a group of Egyptians blew up a pipeline taking gas to Israel and Jordan. Were the Israelis right to be concerned about that?
Mr Hague:
Yes. We do not yet know what exactly happened in that incident, but it rightly caused concern in Israel and Jordan. I know from visiting Jordan last week that the extra energy costs resulting from the incident were several million pounds a day, in an economy that can ill afford it. That underlines the need for a rapid return to a state of affairs in Egypt that allows its economy to recover and provides stable security, which
is why we have argued for an orderly transition and now the implementation of what the military council has pledged itself to. So, yes, people were right to be concerned about that, but the answer to that is stability and democracy in Egypt.
Neil Carmichael (Stroud) (Con): In welcoming everything that the Foreign Secretary has said, may I ask him whether he has been in contact with the French Foreign Minister to discuss the situation in Algeria and Morocco?
Mr Hague: Yes, we are in discussion with all of our allies. I had an extensive discussion on north Africa and the middle east during my previous meeting with the French Foreign Minister, and we also discussed these matters at the Foreign Affairs Council on 31 January in Brussels. The situation in Algeria is also uncertain; a demonstration took place there at the weekend and its Government have announced certain reforms, including better media access for opposition groups, and economic and social reforms. That is a further illustration of how Governments across the region are noticing that they need to embark on those things to give better hope and prospects to their populations.
Mark Durkan (Foyle) (SDLP): I welcome the strength and balance of the Foreign Secretary's tone on the middle east peace process. He says that the Government are friends to both Israelis and Palestinians, but does he believe that that statement is believed and understood equally by Israelis and Palestinians? What confidence can he give those who have cause to doubt based on experience?
Mr Hague: I hope that it is believed and understood. It is meant sincerely, by not only the Government but the previous Government and hon. Members from right across the House, that we want security and prosperity for all Israelis and Palestinians for the future. We want a secure Israel living alongside a viable, contiguous Palestinian state. Of course, every time one makes a policy announcement or expresses a preference for talks to resume in certain conditions, that can be seen as taking sides in some way, but that should not hold us back from advocating those things. This country believes these things and means them very sincerely, so let us all underline that fact.
Andrew Bridgen (North West Leicestershire) (Con): May I congratulate the Foreign Secretary on his recent visit to Yemen-the first by a British Foreign Secretary since 1996? As my constituency includes East Midlands airport, I am well aware that instability in Yemen can lead to serious security risks in the UK.
Mr Hague: I am grateful to my hon. Friend for those comments. As I have said, our diplomats and aid workers do a terrific job in Yemen, so I thought it important to visit that country to see what they do and to talk directly to the President of Yemen. The security concerns that my hon. Friend mentions were right at the top of the agenda and I asked the President further to reinvigorate and strengthen the efforts that the Yemeni authorities are making to take on and defeat al-Qaeda.
David Cairns (Inverclyde) (Lab): Quite understandably, events in Egypt overshadowed the announcement made by the Israeli Government on 4 February, which was welcomed by the Quartet the following day, of significant security easement on the west bank and-a little contrary to what the Foreign Secretary has just said-some easement of the blockade on Gaza. Does he accept that although those actions are not a substitute for final-status negotiations, in which both parties must engage, they are progress? As well as talking tough with Israel, which he seems to be specialising in these days, should he not congratulate Israel when it does the right thing and encourage the progress that we have seen in the past few days?
Mr Hague: Of course I agree with that; we put out a statement welcoming those measures. The Quartet's envoy, Tony Blair, played an important part in bringing about those confidence-building measures and I pay tribute to him for that. We certainly welcome those measures, but, nevertheless, the overall assessment of the situation in Gaza is as I described in answer to the hon. Member for Birmingham, Northfield (Richard Burden). It is important to make more significant compromises than have been offered by the Israelis or Palestinians in recent months in order to have real hope that direct talks can take place and succeed.
Andrea Leadsom (South Northamptonshire) (Con): Does my right hon. Friend have a view on the way that social networking sites have affected the direct action in Egypt and Tunisia? Does he think that that is an unmitigated good or is there a risk that rumours and false information could be spread in that way and worsen the problems in the middle east?
Mr Speaker: The Foreign Secretary's views on philosophy are interesting, but we are also concerned about policy.
Mr Hague: Yes, there is no doubt that social networking sites have played an important role, particularly in Tunisia. That was very apparent from the young people I met and talked to there, many of whom, especially the young women, had taken part in the revolution on social networking sites rather than out in the streets. They were very proud of the way that they had co-ordinated their messages in the days before the revolution in order to intensify the action and demonstrations that took place. Those sites have played an important role and it is something that we should be positive about overall. The world is changing in a very significant way: people of all ages have access to communicating in that way and it is important that their freedom to do so is preserved. One way in which the Egyptian authorities have gone wrong in the past couple of weeks has been in trying to suppress access to the internet and misuse mobile telephone networks. People now have the right to use those things in a relatively open way.
Jeremy Corbyn (Islington North) (Lab):
Is the Foreign Secretary aware that there is a real need to review the whole policy strategy towards the middle east and north Africa? We have had 30 years of US aid pouring into Egypt with no discernible improvement in human rights and we have EU trade agreements with a number of countries that include a human rights clause that has not been enforced or effected. Is it not time for us to
look again at the whole strategy for the region? Mubarak was in effect supported, particularly by the US, and it was the people of Egypt who got rid of him, not international diplomacy or pressure.
Mr Hague: Clearly, there are changes taking place in the policies of this country and our allies towards the middle east. Several of the things I have referred to in my statement today are changes in policy towards the middle east. On the specifics of the hon. Gentleman's question about human rights clauses not being observed, there is a case, which my right hon. Friend the Prime Minister raised at the recent European Council, for strengthening the conditionality of such clauses and for the European Union's becoming more insistent on the proper observation of those clauses. We will be discussing that further in the EU.
Keith Vaz (Leicester East) (Lab): May I join the hon. Member for North West Leicestershire (Andrew Bridgen) in welcoming the Foreign Secretary's visit to Yemen-the first by a British Foreign Secretary since reunification? I am sorry that he was not able to get to Aden on this occasion.
On discussions on poverty and security, I note that it is not this Government who have failed to deliver on our pledges but other donors. Will the Foreign Secretary ensure that they are encouraged to pay up as they have promised to do? On security, we need to do better. It has taken us six months to get one scanner to Sanaa airport, but in order to help defeat al-Qaeda, we need to do things much faster.
Mr Hague: We are helping with airport security. The right hon. Gentleman is right about that, but it is not always quite as simple as it may look to put these things in place. On the question of international donations, those donations will be available, provided the international community is convinced that the development and poverty reduction plans are sufficiently detailed and credible, and that we can organise some of the aid through the multi-donor trust fund of which I spoke. There will, I think, be a generous response, provided that those plans are credible. That is what we have to establish at the next meeting of the Friends of Yemen, which I hope will take place within the next couple of months.
John McDonnell (Hayes and Harlington) (Lab): It is immensely important that the Foreign Secretary has raised again and has consistently raised the matter of human rights in Iran and the plight of political prisoners. The internationally renowned film maker, Jafar Panahi, has been released from prison but is now facing a further six-year sentence. He has been banned from travelling abroad, even to pick up film awards. He has also been banned from film making for 20 years by the regime. Could the Government add their voice to the calls for freedom for Jafar Panahi and other political prisoners?
Mr Hague: Yes, the hon. Gentleman is right to raise the case-one of too many cases. We could make a long list of such cases. It is another example of the unacceptable and arbitrary nature of what passes for justice in that country, so I echo his call. We will pursue that case in the future.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): The Foreign Secretary is right when he says that democracy is about more than elections. There are two things that he could do in a concrete way. One he has already done-increase the funding for the Westminster Foundation for Democracy. The second is to increase the funding of the World Service, rather than cutting it.
Mr Hague: Of course, it would be nice to have the budget to do everything that everybody demanded. As the hon. Lady knows, we do not have the budget to do that. On the World Service and the Arab world, I stress that satellite television is watched almost ubiquitously through the Arab world and was of course much resented by the Egyptian authorities during recent events. That includes the BBC. BBC Arabic is continuing on medium wave, and the shortwave service is being continued for the most sensitive areas in Sudan and the Arabian peninsula, so the BBC will continue to have a very strong representation in the Arab world.
Mr David Winnick (Walsall North) (Lab): Is it not important that the Egyptians are not cheated of their remarkable victory in the past few days, and that there will be continued pressure for democratic elections to be held and the decisions accepted? May I tell the Foreign Secretary that I have heard successive Foreign Secretaries over many, many years telling us in the Commons about the need for a Palestinian-Israeli settlement, but as long as the settlements on occupied land remain with Israel illegally and continue to be built, is it not clear that there can be no genuine settlement? It is up to the United States above all to put sufficient pressure on Israel to see sense. Possibly the evacuation of the settlements would lead to a settlement.
Mr Hague: The settlements are illegal under international law. We are clear about that, and the previous Government were clear about that. There is no question about it. The issue of the settlements can be finally resolved only with a settlement on borders, which in our view, as I said, should be based on 1967 borders, with land swaps. That would have implications for some of those settlements. The United States has made valiant efforts to bring the parties back together on the basis of a continued Israeli moratorium on settlements, but sadly did not succeed in doing so. We all feel strongly about the issue. The hon. Gentleman is right to feel strongly about it. What we now need to find is a practical way to get both parties talking again, and that requires both of them to be ready to make the compromises necessary to do so.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): What was the Foreign Secretary's specific purpose in visiting Bahrain, and did it meet his objectives?
Mr Hague:
My purpose in visiting Bahrain was to discuss the situation in the region with Bahrain's leaders, which I did with his Majesty the King, his Royal Highness the Crown Prince, the Foreign Minister and the Prime Minister, so I had extensive discussions- [ Interruption. ] No, I did not have time for any leisure, despite the aspersions of those on the Opposition Front Bench. I also visited the British maritime component of the military command there, which conducts counter-terrorism and counter-piracy operations, and saw some of the valuable work that our Navy is doing, based in Bahrain.
I also met human rights activists there, because the British Government have given a great deal of support to their activity, recognising that many reforms have taken place in Bahrain in recent years, but also that improvements could be made in its human rights record.
Hywel Williams (Arfon) (PC): Egypt is often seen as the cultural powerhouse in the Arab world, not least because of the production of films and books in Alexandria. What steps can the Government take to promote those valuable cultural activities and so indirectly shine a light on other closed societies in the middle east?
Mr Hague: That is a valuable point. I hope that we can do more in the cultural area as we work with that country in the coming months. I hope that we can do more in promoting not only civil society and the building blocks of democracy, but educational and cultural co-operation. That is part of our programme for elevating relationships throughout the middle east, so we will attend to that in this case as well.
Michael Dugher (Barnsley East) (Lab): The Foreign Secretary last week visited a number of non-democracies for reasons that we understand and that he has set out before the House, but does he feel that in that context, with the benefit of hindsight, it was helpful, sensitive or even fair to describe the democratic state of Israel as belligerent?
Mr Hague: I think it right to warn against belligerent language on all sides in this situation and not to describe any country as belligerent, but to warn against that and call for a reinvigoration of the peace process. I think that that was widely appreciated and perfectly well understood in the region.
Mr Andy Slaughter (Hammersmith) (Lab): May I, like many Members on both sides of the House, welcome what the Foreign Secretary said about the basis for a just peace between Israel and Palestine, especially on borders and refugees, although I am not sure about land swaps? I also welcome what he said about the expropriation of funds from Egypt, but will he go a little further, because the Business Secretary said yesterday that he was not aware that Mubarak had substantial assets in the UK? I will tell the Foreign Secretary who does know that: the Egyptian diaspora in this country, who are horrified about criminals coming over from Egypt, and the UK banks. Will he talk with both groups to ensure that we freeze and seize those assets?
Mr Hague: I cannot at this point add to what I explained earlier. We cannot do these things on a whim or a suspicion. The Proceeds of Crime Act 2002 requires us to receive a request from another country in order to take action immediately to freeze assets. If we want to initiate an investigation by the Serious Organised Crime Agency, we must have evidence of criminal activity or be faced with some emergency, such as a direct threat to our national security. We must operate within the law, but we are already acting on the request we have received from the Egyptian authorities today and are discussing what we can do more widely across the European Union as a whole, so I am satisfied that at the moment we are doing everything we can on the issue.
John Woodcock (Barrow and Furness) (Lab/Co-op): The Foreign Secretary is of course right to focus on the potential of the extraordinary change in Egypt to kick-start the middle east peace process, but given the recent comments of the Iranian Foreign Minister and the leader of Hezbollah, what more can Britain do to ensure that Egypt's future is one of peace towards its neighbours?
Mr Hague: I think that we have to do all the things we have discussed over the past hour to support the building of civil society and democracy in Egypt and to fill the moderate, sensible political space so that it neither is fanatical or extremist on the one hand, nor brings more authoritarian government on the other. I think we can fairly conclude that the prime motivation of the people who demonstrated in Egypt was not foreign policy or hostility to other nations, but their seeking of the economic opportunities and political rights that we consider normal in our country. If that is the case, and I think it is, then that is the reason why we should have some faith in the development of openness and democracy in Egypt; and we should do everything we can to support that.
Afghanistan
5.5 pm
The Secretary of State for Defence (Dr Liam Fox): With permission, Mr Speaker, I will report to the House the Government's assessment of progress towards UK objectives in Afghanistan.
Before I begin my statement, I regret to have to inform the House that two British soldiers from the Royal Logistics Corps died early this morning at Camp Bastion. An investigation is under way into their deaths, but early indications suggest that they were caused by a fire. Their families have been informed, and I am sure that I speak for the whole House when I say that our thoughts and prayers are with them at this very difficult time.
International forces from 48 nations, including the United Kingdom, are in Afghanistan to prevent terrorists, including al-Qaeda, from again using Afghanistan to plot and launch terror attacks. The contributions of each nation to the international security assistance force are listed in the supplementary written information that I have provided for Members.
Meeting our objectives requires working with Afghanistan's neighbours, and that includes helping Pakistan to tackle the problems on its side of the border. We are acting to provide the security space required for indigenous security and governance to grow, and we are supporting that growth through diplomatic, developmental and military means. The goal is for the Government of Afghanistan to provide, on a sustainable basis, the capability and governance required to manage their own security.
Although international military forces have been in Afghanistan since 2001 and significant gains have been made, it is only since August last year that we have had the number of troops and the right level of equipment to fulfil the strategy set for them. The challenge lies in having the patience and will to see the mission through.
The Foreign Secretary reported to the House in October. In this quarterly report, I will concentrate on the security progress being made in central Helmand, where the majority of UK forces operate. That is represented by the shaded area on the map of Helmand province that I have provided to Members.
Afghanistan has 401 districts, but 60% of the violence occurs in just nine of them, and eight of those nine are in Helmand and Kandahar. So we need to remember that Helmand is not representative of Afghanistan as a whole, and that there are many places where progressively a sense of normality and security is returning. Before I turn to general progress, in keeping with our undertaking to keep Parliament better informed as far as operational restrictions allow, I should like to update the House on current force levels.
The previous Government announced on 30 November 2009 that they had increased the endorsed UK force level to 9,500. It will not surprise the House to hear that that core number of 9,500 does not fully account for the actual force numbers we have deployed, given the complex and highly dynamic current situation on the ground. As the previous Government acknowledged, a sizeable contingent of our highly effective special forces operates in Afghanistan. In accordance with long-standing practice, we do not specify the scale or nature of their activities,
but, if we take them into account with the enabling support that they need, we see that they take our numbers to more than 10,000.
For many years, UK forces have contributed to the protection of Kandahar airfield. In December 2009, it was expected that they would hand over that task to another ISAF partner within a matter of months. That did not happen, and we still have almost 200 extra troops protecting Kandahar airfield. That is constantly under review. Additionally, in September 2010, we announced the deployment of 200 personnel from the Allied Rapid Reaction Corps to ISAF Joint Command for 12 months. They will return by February 2012.
To maintain operational flexibility, we also approve temporary deployments, or surges, of additional personnel to meet specific and time-limited tasks. These include personnel to provide key headquarters functions or to prepare infrastructure for the rigours of the Afghan winter. From time to time, we also deploy the Theatre Reserve Battalion. The number of UK military personnel on the ground in Afghanistan also fluctuates from day to day, reflecting the number of personnel on rest and recuperation breaks, as well the changes that occur as we hand over responsibility between units during the twice-yearly reliefs in place. So the actual number of military personnel currently in Afghanistan is regularly well over 10,000.
We keep our force levels under constant review, and some reductions this year may be possible, dependent on conditions on the ground and implementation of the security transition process. I want every member of our armed forces deployed in Afghanistan to get the credit for the incredible job that they do, and I know that all those in the House will want to join me in paying tribute to their selfless courage and hard work.
The efforts of our armed forces are supported by the work of many hundreds of civilians from the Ministry of Defence and other Departments, including staff in our embassy in Kabul, in our taskforce headquarters and provincial reconstruction team in Lashkar Gah, in district stabilisation teams across Helmand, and in units and facilities outside Afghanistan. Again, I am sure that the House will want to join me in acknowledging the valuable work that they do and their devotion to duty.
In central Helmand, as General Petraeus has said, we have not yet seen success or victory, but we are seeing progress. It is fragile and not irreversible, but it is progress. The increase in Afghan and ISAF forces has enabled us to take the fight to the insurgency and, understandably, this has led to an overall increase in the number of violent incidents. But over the past three months, although the number is still higher than in previous years, we are seeing a trend of falling security incidents. For example, in the Marjah district of Helmand province, security incidents have fallen from a high of around 25 a day at the height of summer to just three or four a day at present. There is a seasonal pattern, as many insurgents, especially those fighting for financial rather than ideological reasons, return to their homes for the winter. This year, however, with the unusually mild weather and with winter arriving late, and the increased activity by ISAF and the Afghan national security forces, the fall in the number of incidents is more likely than in previous years to be an indicator of progress. However, I have to say to the House that casualty numbers are once again likely to rise in spring this year as insurgent activity increases.
This year will be just as difficult as 2010, but there will be distinct differences. The increased number of ANSF and ISAF forces allows us to arrest the momentum of the insurgency in more areas. Afghan forces will also begin to take the lead for security as the first districts and provinces begin the process of transition. There are now over 152,000 Afghan national army and 117,000 Afghan national police. This is on schedule to meet the October 2011 growth target to deliver 305,600 Afghan national security forces. But as the quantity increases, quality must not be neglected. One example is improving literacy to ensure that orders can be communicated in writing as well as orally, so that there is less scope for misinterpretation. Currently, around 85% of ANSF recruits are illiterate on entry. Literacy training is now mandatory for all recruits. The training is to be conducted by Afghan teachers, creating employment and boosting the economy, and significant progress is being made.
Progress has also been made in implementing the Afghan local police initiative. This is a temporary programme of village-owned security aimed at providing a security effect in areas with limited or no ANSF presence. The programme, established by presidential decree, comes under the authority of the Ministry of the Interior. Fourteen sites have been established, and 2,800 ALP have been recruited. Once the necessary security and capacity are established, these local forces will be integrated into the regular ANSF.
In Helmand, our bilateral police mission has focused on training Afghan national police at the Helmand police training centre, from which the 2,000th officer graduated in December. The UK Government have funded the building of six new police stations in Helmand in the last six months, with 10 more in construction and 28 more in design.
Following the Lisbon NATO summit, the transition process is on track. The joint Afghan-NATO transition board is set to deliver recommendations this month on which provinces will enter the transition process. President Karzai has confirmed that he will announce the first phase of transition on 21 March.
The UK Government's development programmes work with the Government of Afghanistan to build capacity to direct and deliver their own development. Real progress is being made at the local level across Afghanistan. UK-funded teams from the provincial administration in Lashkar Gah have begun to create a district community council in Marjah, which this time last year was an insurgent stronghold. In Musa Qala, the newly elected council is developing a district plan for the Afghan Government to deliver with support from the UK. At national level, action plans have been developed for the Afghan Government's national priority programmes, and we have seen encouraging progress in some areas. For example, revenue collection has increased by 32% compared with the same period last year, albeit from a low base. That is 9% above the International Monetary Fund target and brings Afghanistan a step closer to self-sufficiency.
The newly elected Afghan Parliament was inaugurated last month, with frictions between the Executive and legislature resolved democratically. However, we remain very concerned about levels of corruption, and in particular about the disturbing allegations about the Kabul Bank. We will continue to press the Afghan Government to translate their anti-corruption commitments into action.
The Afghan Government are taking further steps towards peace and reconciliation for all Afghans. The High Peace Council has toured Afghanistan to publicise the Afghan peace and reintegration programme. It is early days, but in some areas of Afghanistan, particularly in the north, increasing numbers of insurgents are seeking a way out of the cycle of violence. The High Peace Council recently visited Pakistan to take forward dialogue on peace and reconciliation.
Three hundred and fifty-six British servicemen and women have died on operations in Afghanistan- 15 since my right hon. Friend the Foreign Secretary last reported progress to the House at the end of October. In the face of such sacrifice, we should be in no doubt about the importance to our national security of the mission and our support for it. We have seen progress over the past few months but the need for strategic patience remains. To paraphrase the US Defence Secretary, we need to stop pulling up the tree by its roots to see if it is growing. There is still a great deal to do, but I believe there is also cause for cautious optimism.
Mr Jim Murphy (East Renfrewshire) (Lab): I welcome the chance to respond and I thank the Secretary of State for his update and for advance sight of it. This is the first opportunity I have had to put on record my thanks and those of the leader of my party and the shadow Foreign Secretary to all who facilitated our recent visit to Afghanistan.
The Secretary of State is right to say that as we go about our proceedings, more than 10,000 fellow Britons go about the business of making the UK more safe by making Afghanistan more stable. As I have reflected before, the courage of our forces is surpassed only by their modesty. I also put on record our appreciation of the efforts of our diplomatic and development staff in Kabul and throughout Afghanistan, many of whom we met. Theirs is a tough job and they combine professionalism with more than a little bravery. We remain committed to a cross-party approach to a cross-government strategy. The Secretary of State should know that our default position is to support the Government's efforts in Afghanistan.
The Secretary of State is right to pay tribute to those who died earlier today and those who have died in recent times. No words said in this House can halt the suffering in the family homes of those who have been lost, but those families will know that across the country, there is immeasurable respect for them. They remain in all our thoughts and many of our personal prayers.
The House will be grateful for the right hon. Gentleman's update on the security situation and it will be glad to hear about the progress being made. I wish to ask him two sets of questions: the first about security and the second about diplomacy. On security, he rightly said that violence is concentrated in the south, but there are also concerning reports that violence is increasing in previously peaceful areas, most notably in the north of the country, where the Islamic Movement of Uzbekistan is said to be operating and strengthening the Taliban's ability to attack. How is the coalition, and in particular nations other than the UK and the US, responding to those worrying developments?
The ability of Afghan forces to take ever greater responsibility for their own country will be an incremental process towards 2014, with the most significant recent development, alongside the US military surge, being an Afghan surge of locally recruited forces. In that context, I am pleased to hear the Secretary of State's comments about the Afghan national police being on track to meet its final recruitment targets this year.
We had the opportunity to visit the excellent police training centre in Helmand involving British police forces, which is so important to the literacy and numeracy that the Secretary of State spoke about. He will be as concerned as I am, however, about the assimilation of national police within local communities. A recent UN report showed that in the south, the popularity of the police has dropped over the past year. It strikes me as unsustainable to have a national police force that is only 3% southern Pashtun. How are recruitment practices being modified to ensure that the police force is more reflective of the areas that it is charged with securing? Will the Secretary of State undertake to keep the House informed on a regular basis of the Afghan national security forces' ability to operate independently of ISAF?
Turning to the political process, it is increasingly acknowledged that there will not be a military-only solution in Afghanistan. Although there have been, and will continue to be, military successes, we also need a diplomatic surge to match the military surge. As we moved to the agreed withdrawal date of 2015, a political settlement is not a prerequisite for our withdrawal, but it is undoubtedly a condition for lasting peace.
Many people make comparisons with the peace process in Northern Ireland, including some of the Afghans whom we met in Kabul. Although I believe the similarities are limited, one thing that Northern Ireland teaches us is that the process can be painstaking, even though there were fewer domestic and international actors there and a clearer sense of central authority-conditions that we do not currently have in our favour in Afghanistan. Will the Secretary of State share with the House how he foresees diplomatic efforts within Afghanistan and with her neighbours progressing over the forthcoming year? What are the benchmarks by which the House will be able to judge short-term success?
There are many other major issues that it will be important for Afghanistan to overcome to enjoy lasting peace. There are innumerable financial challenges, with rising unemployment and high levels of poverty fuelling recruitment to the poppy trade and the Taliban. There are rising numbers of internally displaced people, and corruption remains a real problem. I therefore ask the Secretary of State to confirm to the House that he will raise those matters at the Bonn conference, particularly a plan for further support for the Afghan economy. Will he provide an update on negotiations between the Afghan Government and the International Monetary Fund on the Afghan support fund?
On returning from Afghanistan, it struck me that over the past year or so, there had been a shift from a collective feeling of reluctant international pessimism to a sense of cautious optimism. Nothing in the Secretary of State's statement today led me to change my opinion. On behalf of Labour Members, I continue to look to work with him on a bipartisan basis on this most important of issues.
Dr Fox: I am extremely grateful not only for the content of the right hon. Gentleman's response, but for its tone, and I am very glad that the Government were able to facilitate a successful visit to Afghanistan. It is fair to say that we are lucky in this country, because unlike some countries involved in the international coalition, we have a generally unified political position, from which we can give support to operations and to the morale of our armed forces. I am very grateful to the Opposition for that.
On security, the right hon. Gentleman is right that there are small pockets in the north and east where we continue to see trouble-and in some cases exacerbated trouble-but Afghanistan is still most violent in the south, which is where we face the greatest violence from the insurgency. I had the opportunity on my last visit to go to regional command north to discuss the situation with General Fritz. I went there from Helmand, so being able to go out and walk freely in the streets, visit a university and do a small press conference, was quite a contrast. We need to be clear that the difference across Afghanistan is huge. We tend to look at Helmand as the typical experience and extrapolate from it, but we need to try to remember that there is a wider Afghanistan too.
It is clear that the Afghan local police will supplement the ANSF. It is also clear that the Government in Afghanistan recognise the need for a bottom-up as well as a top-down approach to policing, and the need to supplement the ANSF where required. If I may say so, the right hon. Gentleman perhaps got his figures mixed up, because the southern Pashtuns are better represented in the Afghan national police than in the Afghan national army, but everybody is aware of that problem.
On the political settlement, all of us, and especially those who have visited Afghanistan recently, have recognised that we are moving into a settlement that is based on the political space and not just on the military space. It has always been the case that both will be required. It is also worth pointing out that we cannot expect a clean-cut settlement, to which the right hon. Gentleman alluded. The settlement will be Afghan-based, Afghan-focused and Afghan-dependent, and it is unlikely to be anything other than messy to those who look at it from the outside. However, we have always said that we need to look both to those who are reconcilable to the Afghan constitution and the concept of democratic government, and to those who are irreconcilable and who need to be dealt with by military means.
Finally, the right hon. Gentleman made an important point on the concept of a regional settlement. Too often, the discussion on Afghanistan is in terms that it is some sort of vacuum, but we must consider its northern neighbours, the relationship with Pakistan, the complex interaction between Pakistan and India, and increasingly, the relationship between Pakistan and China. We need to understand all that in the context of the settlement, and the long-term implications of the settlement in the region. I discussed some of those issues with General Kayani and President Karzai only a week and a half ago. There is an increasing awareness among Afghanistan's neighbours that the countries surrounding them need to play a constructive role in Afghanistan if any of the gains for which so many sacrifices have been made are to be sustainable.
Mr Bernard Jenkin (Harwich and North Essex) (Con): I thank my right hon. Friend for his statement, and particularly for his last few words on involving the international players around Afghanistan in a final settlement. Can he say more about who will lead the political settlement around which we hope stability will be maintained as British and American troops withdraw later in this decade? May I point out that cautious optimism represents painfully slow progress 10 years after this war started, and that a lasting settlement is possible only if there is a political settlement that involves talking to our enemies?
Dr Fox: It is very clear that it is unlikely that a single political initiative will bring all the players into a final settlement, so there are a number of ongoing initiatives. The Prime Minister's role has been very important in having a dialogue with the Government of Pakistan and the Government of Afghanistan on a trilateral basis, and a similar initiative is being undertaken by the US. We must all understand that the key player is Pakistan, which is so important to a successful outcome.
If I may make a plea to the House, a lot of criticism is levied at Pakistan when things are not going right, but it would do us all good to be much more welcoming of the positive measures that are being taken there. Pakistan is in a very difficult situation, but it is still able to assist us. It does us no good constantly to criticise a key ally, or to fail to praise it, when it is making important contributions.
David Miliband (South Shields) (Lab): I thank the Defence Secretary for the open way in which he conducts these quarterly reports. I hope that we can have a longer debate on Afghanistan, because there is a danger that it will become the forgotten war-as we can see from the relatively few Members in their places.
With permission, Mr Deputy Speaker, I have two questions. First, on security, the Defence Secretary did not mention the annual and respected UN security assessments. They were reported in The Wall Street Journal in December and showed that security deteriorated across the country in 2010. I wonder whether he will commit to publish those assessments, or a summary of them, because the maps were very clear.
Secondly, I wish to follow up the important comments by the hon. Member for Harwich and North Essex (Mr Jenkin). The regional engagement is central, and I was pleased to hear the Defence Secretary reflect on that. However, a year and a bit on from the London conference we are no closer to the council for regional stability or anything like it, which could put on to a structured basis the regional engagement that he and I know is so important for any political settlement in Afghanistan to have sustainability and confidence.
Dr Fox: The right hon. Gentleman makes several important points. There are few things that would give me more pleasure than trying to persuade my right hon. Friend the Leader of the House to have a debate on Afghanistan. It is very important that Members get more time than is available when simply responding to a quarterly statement. I think many hon. Members would wish to take time to explore in more detail some of the more nuanced issues than is possible in the response to a statement.
If I am not able to get the full assessments published and placed in the Library, I will certainly ensure that summaries are available. On the issue of deteriorating security, we need to be careful about we measure that. If we are getting a larger Afghan national security force and ISAF taking on the insurgency in more places and challenging them for ground in more places, we are likely to get a rise in the level of violence, but that level is not a good measure of the security situation. It is better to find a way to measure the safety of the population and ensure that we have a balanced view of what security means.
I take on board the right hon. Gentleman's point that we need to make more progress in regional co-operation and involving the regional leaders, but I may be able to provide one moment of optimism. At the Munich security conference just two weeks ago, more than at any time previously I felt a growing awareness of the need to see Afghanistan in its regional context, given the complexities surrounding it. That is something that my right hon. Friend the Foreign Secretary and I want to push forward as quickly as we can. I entirely agree with the right hon. Gentleman that the regional aspect is key to the long-term sustainability and viability of the Afghan state.
Mr James Gray (North Wiltshire) (Con): The whole House will have been saddened by the death of the two young soldiers in Camp Bastion this morning. The return of their bodies to the UK will mean a total of three repatriation ceremonies in a fortnight through RAF Lyneham and Wootton Bassett. Is the Secretary of State yet ready to tell us or make a statement about what will happen to repatriation ceremonies as we move towards the closure of RAF Lyneham? I know that the statement is imminent: when will it be ready?
Dr Fox: I am not able to give those details today, although my hon. Friend is correct to say that we will do so shortly. I am sure that the House would agree that it is not so much where we honour our war dead, but how we do so. Wherever those ceremonies take place, it is essential that those who have made sacrifices are treated with all due respect and honour.
Mr Jeffrey M. Donaldson (Lagan Valley) (DUP): May I, too, pay tribute to the soldiers serving in Afghanistan? I recently had the privilege of meeting some of them when we were there with the Defence Committee, especially those of the Royal Irish Regiment based at Nad Ali, who are doing an excellent job in driving back the Taliban. Perhaps not enough is said in public about the success that our armed forces are enjoying. That sadly is not matched by the political progress that is being made and I echo the comments of the Opposition spokesman. More could be done on the political side of things, especially the Afghan Parliament. We in Northern Ireland, who have some experience of negotiating political arrangements and taking care of the rights of minorities, would be happy to sit down with our Afghan counterparts and share our experience with them.
Dr Fox:
I am grateful for that offer. I have often thought about how, through our development aid, we are willing to give advice on economics and bureaucracy
but still seem to expect people who have never had experience of political life suddenly to be able to be politicians. I would have thought-if I may say-that one thing we have plenty of in this country is ex-politicians. We should be trying to find a way of using our experience at all levels of government to assist with the skills level necessary for politics in Afghanistan to succeed. Why do we assume that people require professional assistance in every other walk of life, but that somehow people can learn instantly to become democratic politicians? There is room for improvement in that area.
Dr Andrew Murrison (South West Wiltshire) (Con): What confidence does my right hon. Friend have in the principal overland supply route from Karachi, particularly given the recent unwelcome attention of the Pakistani Taliban and on occasions-sadly-the attitude of Islamabad? Furthermore, what alternatives is ISAF planning to the north and the west on the extremely colourful map with which he has provided us?
Dr Fox: Sadly, being colour blind, I cannot share in the enthusiasm on that last point. However, I say to my hon. Friend that we always have to consider the wider security picture to ensure that we can maintain our supply routes. As he correctly said, there have been problems recently with the southern supply route, and certainly the Americans are increasing their dependence on the northern route. Along with our ISAF partners, we will consider what changes we might have to make in the balance between those supply routes to ensure that we never compromise the essential links on which our armed forces in Afghanistan depend.
Mr Geoffrey Robinson (Coventry North West) (Lab): May I, as others have, compliment the Secretary of State on the considered tone of his statement? However, little was said in it about the prospect of a political settlement involving all the parties, including the regional ones. Although it might be impossible for him to include a section on that, given the dire security implications, will he bear it in mind that his view is shared throughout the House and the country? We are not seeking a military victory-one is not possible-in this set of circumstances. Furthermore, a political settlement will be protracted and difficult, so the sooner we get on with it the better, and the more he will be able to tell us about it.
Dr Fox:
The hon. Gentleman is correct that increasingly attention will be focused on the political element of a settlement in Afghanistan. Those who have visited it recently will have been struck by the fact that on the ground, at a tactical level, we are certainly making gains. The security picture on the ground is improving, in some cases beyond recognition. However, the problem remains at the political level. It remains this: how do we persuade those in Afghanistan that there is a better future for them under a democratic constitutional Government? This year we have a major opportunity. One of the Taliban's great propaganda weapons has been to say that the international community will be leaving in July 2011. However, when it becomes clear not only that we are not leaving, but that we are building up the Afghan national security forces, we might deny it one of its best cards. We should be preparing, therefore, for a political push in the second half of the year on reconciliation
and reintegration. That is when we will find that we have a better following wind than in recent times. We will pay a high price if we miss that window.
Alec Shelbrooke (Elmet and Rothwell) (Con): Drawing on my right hon. Friend's comments about the situation about Pakistan, I ask him to update the House on his assessment of what would happen to the stability of Pakistan were we to withdraw our troops in the very near future.
Dr Fox: There would be a real risk of instability in the whole region. Again, I go back to the issue of Pakistan. When one talks to the political or military leaders in Pakistan, one finds an increasing understanding that they cannot simply deal with the Pakistan Taliban and not deal with the Afghan Taliban, because ultimately there is a threat to the stability of the Pakistani state itself. The concept that we must fight a common threat together is one that is increasingly understood in Islamabad. Although we will have criticisms of what might not be done in Pakistan, we should also welcome political and military activities there that are helping in what is increasingly regarded as a common fight.
Mrs Madeleine Moon (Bridgend) (Lab): The Select Committee on Defence was able to see first hand how the training of the Afghan national security forces is improving and how the investment is paying dividends. However, Afghanistan has a very small air force-an excellent air force, but a small one-and will never be able to provide its own strategic air cover. What role does the Secretary of State see Britain's RAF playing in providing that air cover, in the way that it did over Iraq for the Kurds? Does he see that as part of our ongoing commitment, and is he happy that we will have the capacity, in pilots and planes, to carry that through?
Dr Fox: Strategic air cover for Afghanistan is some way down the line, but it will be required when there is a stable state able to maintain its own security. That, of course, is some way in the future, but given that Afghanistan's capacity will be small, as the hon. Lady said-at the moment it is well behind where it needs to be-how arrangements for that process are put in place will be a matter for the whole of the international community, not just the United Kingdom.
Mr Adam Holloway (Gravesham) (Con): There are many Afghans outside the ruling clique who believe not only that the exit strategy will not work in the long term, but that it is fatally flawed and in fact cannot work. General Petraeus's strategy has been described as "Fight, then talk". Does the Secretary of State think that we ought to be fighting and talking, and that this should include talking to all modes of the insurgency?
Dr Fox:
History teaches us that in any insurgency or conflict, we inevitably move from a military phase, taking on the violence of insurgency, into a phase where there is both military contact and diplomatic activity, and hopefully from there into a phase of diplomatic resolution on the political stage. I think that we are at a point where, as I said earlier, we will increasingly be looking not simply at the military position or the security situation on the ground, but at the political level. What
has come across in the House this afternoon appears to be an increasing view on both sides that the political arena will be increasingly important. That is in no way to diminish the importance of the security environment within which those political talks will take place, but without the success of the political element the security gains will not provide a stable and secure Afghanistan.
Mr David Crausby (Bolton North East) (Lab): Following today's announced cuts in RAF training, which will deny us the use of pilots who are virtually qualified, what guarantees can the Secretary of State give on the impact on heavy lift supplies to Afghanistan, which the Afghans will never deliver themselves, and the delivery of helicopter support to both our troops and theirs on the ground? Surely he realises that the Government must not impose an increasing burden on a diminishing number of our pilots.
Dr Fox: There were in fact no cuts announced today, other than in some of the newspapers, which were catching up on some of the announcements in the SDSR. No changes that were made in the SDSR will have any impact on operations in Afghanistan.
Penny Mordaunt (Portsmouth North) (Con): I also recently visited Afghanistan and can testify to the excellent job that our armed forces are doing in carrying out their duties. I do not believe that the same can be said of President Karzai or Members of the Afghan Parliament, and this is not just a capacity or knowledge issue: there is also too little focus on human rights and the quality of life of the Afghan people. Does the Secretary of State agree that we must address the political deficit, to ensure that in the long term the blood and treasure that this country is spending for the benefit of both our countries will not be in vain?
Dr Fox: I agree with my hon. Friend, but I think that the signs are perhaps more optimistic than she suggests. Certainly, those who have had regular meetings with President Karzai will recognise that, since the Lisbon summit, he has become less worried about the time lines of 2011 and the summer deadlines that he previously believed to be extremely important. He is now more focused on the 2014 transition. That has had a beneficial effect on the ability of the Afghan politicians to look at the wider range of issues, and we will continue to stress the need for that in our ongoing engagements with President Karzai and other members of the Afghan Government.
Mr Denis MacShane (Rotherham) (Lab): Will the Secretary of State confirm that the small country of Georgia has actually lost more soldiers in Afghanistan than NATO nations such as Belgium, the Czech Republic, Hungary, Latvia and even Turkey? Will he also confirm that Georgia has more soldiers serving there than NATO countries such as Belgium, the Czech Republic, Greece, the Netherlands, Portugal, Slovakia and Slovenia? Will he pay tribute to Georgia for that? Georgia cannot join NATO because we now have to be nice to Moscow, but I know that the Secretary of State likes his travelling, so will he find time to pay a short visit to that country to say thank you for the sacrifice it is making?
Dr Fox: I can reassure the right hon. Gentleman, because I was in fact able to make our thanks known directly to the President of Georgia when I met him last week at the Munich security conference. The great benefit of such conferences is that they diminish all our travel while enabling us none the less to engage in the necessary diplomacy. The right hon. Gentleman makes the important point that some of the small nations that have been involved in Afghanistan have set a wonderful example to some of the larger ones-those that I might characterise as the sleeping giants. Some of those small countries, including Georgia, Estonia and Denmark, have made a disproportionate contribution. They should be extremely proud of what they have done, and all democratic politicians in the House should be willing to thank them whenever we can.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con): In the past, my right hon. Friend has mentioned the fact that 11,000 of our troops have been in Afghanistan, which is a very high number. Would he be willing to confirm that that is the case? Will he also join me in paying tribute to 3 Commando Brigade, which is soon to go to Afghanistan, and in wishing it Godspeed and hoping it comes back safe and sound?
Dr Fox: It is always the wish of Members on both sides of the House that our troops should come back with the minimum of loss, given the wonderful job that they do on our behalf. As I have said today, the number of our forces in Afghanistan is regularly above 10,000. It has, on occasions, reached the 11,000 mark, but that is not the case at present. That is inevitable, however, given the complexities of the reliefs in place, the rest and recuperation changes and the temporary surges that I described earlier. I hope that I gave the House a proper description of what is happening on the ground. I think that it is better to make it transparent when we deploy increased numbers, so that the House and the country can thank every one of our service personnel for the level of sacrifice that they are making.
John Woodcock (Barrow and Furness) (Lab/Co-op): The Secretary of State has made it clear today that troops "may" begin to be withdrawn this year, depending on the conditions. However, the Prime Minister has previously stated that troops will begin to be withdrawn this year. Did the Prime Minister inadvertently mis-speak, or has the position changed?
Dr Fox: The Prime Minister has made it very clear that, although we would like to see British troops coming home as soon as possible-which family of any member of our armed forces would not want to see that?-that will happen when conditions on the ground are appropriate. As I said today-I repeat the Government's position-it may be possible to see some troops coming home this year, but that will be dependent on the conditions on the ground.
Dan Byles (North Warwickshire) (Con): It is sometimes easy, when talking about regional geopolitics, to forget the individual soldiers sweating on the front line. Is my right hon. Friend now satisfied that the troops have the equipment that they need to do the job?
Dr Fox: I am not sure that I am the best person to arbitrate on that question. From discussing the issue with our troops on the ground and their commanders, I know they will say, particularly since the American surge, which has made a difference to the whole dynamic in Afghanistan, that there has been a change in the overall level of equipment. I think that since our engagement in Afghanistan started, there has been an ongoing improvement and refining of personal equipment-the individual equipment-for our armed forces. I think that that will continue to change as circumstances change. One thing that is very clear is that the Government remain absolutely committed to ensuring that our troops on the ground have what they need to do the job.
Paul Flynn (Newport West) (Lab): Still optimism after 10 years! That is a longer period than the first world war and the second world war combined-a period throughout which our British soldiers have been dying in Afghanistan. There are 356 dead-twice the number killed in Iraq and three times the number killed in the charge of the Light Brigade, an event of similar futility. The Secretary of State's optimism is based yet again on his being in denial of the reality. Would he like to tell us about the army and the police in Afghanistan-not the numbers joining, which he has told us about again and again, but the numbers of those dismissed or who have deserted since his last statement?
Dr Fox: If the hon. Gentleman wants always to focus on the problems we face, there is a long list from which to choose. To say that we are in denial of the overall position, however, is simply not to be in full command of the facts. Anyone who has visited Afghanistan will be well aware that there is a big improvement in the security position on the ground.
Dr Fox: If the hon. Gentleman has the manners to let me answer his question, I will do so.
There is undoubtedly still a problem with the capability of the Afghan national security forces-it is not just a matter of the numbers in the Afghan army and the Afghan police, but they are improving. The ability to train them in specialist tasks is also improving. If there is a weakness in the case, it is the fact that not all the partner nations are contributing to the extent that they could in the NATO training mission in Afghanistan, which would provide some of the wider ranges of skills. The improvement in literacy is driving up the standards. Given the cynicism that the hon. Gentleman brings to these debates, let me point out that General Karimi cited one young soldier who said:
"The Taliban want to keep me in the dark. My army will teach me to read and write so I can come into the light and make my own decisions."
Who are we to want to turn that light off?
Mr Peter Bone (Wellingborough) (Con):
I thank the Secretary of State for making his statement and also, on behalf of the House, for giving us the back-up information and for announcing in advance on the Order Paper that this statement was to be made. I would like to echo his tribute to our special forces, who are not often mentioned
but who do a terrific and excellent job. How does my right hon. Friend propose to wake up the sleeping giants so that they contribute more to the operations?
Dr Fox: With difficulty, but persistence. The former Foreign Secretary, the right hon. Member for South Shields (David Miliband), is no longer in his place, and I am thinking of the discussions we had when we were in opposition. This has been an ongoing problem. It is simply a matter of continuing to press the idea that if we all want the collective benefits of a stable Afghanistan, we all have to contribute to making it happen. I know that the Foreign Secretary, the Prime Minister and I never waste an opportunity to remind all our partners in Afghanistan that everyone must play a maximal role if we are to achieve the success we want-particularly, in view of the deficit we still face, in the NATO training mission. We are short-290 short at the moment-of police trainers. If anyone is listening to our exchanges in any of the countries mentioned, they might want to take note.
Budget Responsibility and National Audit Bill [ Lords]
5.54 pm
The Economic Secretary to the Treasury (Justine Greening): I beg to move, That the Bill be now read a Second time.
Fiscal responsibility is the overriding priority of this Government. In May, within 24 hours of taking office, we published a coalition agreement setting out our agenda for government. Fiscal responsibility was the very first item on the very first page of that agreement. It read:
"deficit reduction and continuing to ensure economic recovery is the most urgent issue facing Britain."
Let me remind the House why we chose that as our priority. We inherited the largest budget deficit in our peacetime history; we inherited a budget deficit forecast to be the largest in the G20; and we inherited the largest structural deficit in the whole of Europe. We simply could not ignore the mountain of debt that was casting a shadow over our economy and our people, so we set ourselves an ambitious task-to bring order back to the nation's finances. The Bill aims to do exactly that.
Mr Mark Field (Cities of London and Westminster) (Con): Will the Minister add one more criterion to her list-that a moral case needs to be made for ensuring that we do not pass on to future generations the debts that have been racked up for the consumption of the generations alive today?
Justine Greening: I agree absolutely. Far too often we fail to make the point that the penalty for not dealing with the deficit today will be to hand on even bigger debts to our children tomorrow. They will not thank us, and should not thank us, if we fail to address the urgent crisis that we have come into government to tackle.
Before I get into the detail, I would like to set out again the Government's broader fiscal objectives. This coalition Government believe that fiscal policy should ensure that the national finances are sustainable. As I have just said, sustainable public finances mean that future generations will not need to pay for the services enjoyed by all of us today. Sustainable public finances mean that the economy can expand and grow without the fear of tax hikes and spending cuts in the future. Sustainable public finances also mean that monetary policy can operate effectively and stabilise the economy, when needed. With that in mind, we have taken decisive action since taking office.
In May, we had immediate reductions to in-year spending, which bought us much-needed breathing space in the sovereign debt storm raging across Europe. The emergency Budget in June was the moment when fiscal credibility was restored. At the Budget, my right hon. Friend the Chancellor set out the Government's fiscal mandate. Our first goal within the mandate is to balance the structural current deficit by the end of a rolling five-year forecast period.
Mr William Cash (Stone) (Con):
My hon. Friend may remember that before the election, a number of us took grave exception to the fact that the Government were not telling the truth about the full extent of the
debt. Will she give us an assurance that this Government will tell the truth to the British people, in line with the National Audit Office and Sir Michael Scholar, so that they know what the Budget deficit really is?
Justine Greening: My hon. Friend makes an excellent point. The way to provide that guarantee and certainty is to pass the Bill before us today, which sets up the Office for Budget Responsibility-but does so, critically, as an independent organisation that will make its own forecasts. In so doing, it will contribute to being independent of Governments and provide credible official forecasts for the first time in our country. That will give us the certainty we need. I will come on to explain later how we ended up needing official forecasts to be done independently, referring to the problems that had arisen prior to this Parliament.
Mr Edward Leigh (Gainsborough) (Con): The Government have a serious political difficulty, to which the Justice Secretary referred over the weekend, giving rise to a considerable amount of publicity. All over the country, local authorities are loading cuts on to front-line services, yet we read today that scores of local authority executives earn more than the Prime Minister. What is the Minister's message to local authorities? Will she insist that they deliver real efficiency savings to avoid these cuts in front-line services, which are so politically damaging?
Mr Deputy Speaker (Mr Nigel Evans): Order. I would be grateful if the Minister answered that question in relation to the Bill before the House.
Justine Greening: No doubt my hon. Friend will be encouraged to learn of our belief that our efforts to cut back-office costs and protect front-line services in Whitehall should be replicated in town halls.
Key to understanding progress against the Government's fiscal mandate are strong, credible, independently conducted official forecasts. Our first goal is to balance the structural current deficit by the end of a rolling five-year forecast period; our second is to see the public sector debt ratio fall at a fixed date in 2015-16. The measures that we set out in the Budget, along with the departmental allocations that we set out in the spending review, constitute a four-year plan to meet that fiscal mandate. We are currently on track to meet the mandate one year early, in 2014-15.
Kate Green (Stretford and Urmston) (Lab): I understand the Government's objective to reduce public debt over a fixed period, but what flexibility does the Minister feel needs to be built into the system to take account of unexpected economic circumstances and shocks?
Justine Greening:
I have just defined that flexibility. Although we want to balance the structural current deficit by the end of the rolling five-year forecast period, we are, as I have said, on track to meet the mandate one year early. We are clearly ensuring that we will achieve our overall objectives. By the end of the current Parliament we will have completely eliminated the structural current
deficit, and the debt ratio will be falling. That is our four-year plan for restoring order and stability to our nation's finances, which has been praised by the international community and welcomed by the financial markets.
Sajid Javid (Bromsgrove) (Con): The Minister refers to praise from the international community. If she was referring to the International Monetary Fund, I welcome that praise. She will also be aware that the IMF's independent evaluation office reported last week that it had felt intimidated and bullied by the Treasury in which the current shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), and the Leader of the Opposition played a key role between 2004 and 2006, and that it had been forced to water down its criticism of United Kingdom fiscal policy. Will she reassure the House that, as the IMF has praised this Government's plans for the OBR, it seems that we did not intimidate it as the last Government did?
Justine Greening: I hope that we will have an altogether more constructive relationship with the IMF. In fact, it has already commented on the background to the need for this Bill. In November last year, it stated that the recent crisis led the UK to suspend its two national fiscal rules-golden and sustainable investment rules-at the end of 2008, and that the credibility of the national rules as effective constraints of policy action was weakened well before the crisis. It went on to say that the rules failed to prevent a worsening of the fiscal balance in the years leading up to the crisis, leaving insufficient buffers as the economy entered the downturn, and that while in place the golden rule was often criticised because it provided insufficient monitoring, transparency and accountability of fiscal policy. That was the IMF's assessment of the previous fiscal mandate, and I think that it demonstrates clearly why it was so ineffective in tackling the problems that our country experienced. In many respects, it provided the ground on which those problems were able to prosper and grow.
Claire Perry (Devizes) (Con): Does the Minister agree that the problem when the Treasury sets rules of that kind is that such rules can be broken, manipulated and "gamed" for entirely political reasons? Following the establishment of the OBR, for the first time we will have a Treasury that focuses on real control of the public finances and value for money for the taxpayer, rather than a policy-making, press release-driven organisation.
Justine Greening: My hon. Friend makes an excellent point. We cannot allow the Treasury to be judge and jury. That was the problem under the last Government. The Institute for Fiscal Studies said recently:
"If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards."
We believe that the OBR can have a real impact on the Government's financial and fiscal management.
We are clear about the fact that we need to put our country's public finances back on a sustainable footing. Both the IMF and the OECD went from issuing warnings and cautions about the UK's economy and public finances to describing the measures introduced by the coalition Government as "essential" and "courageous". Only a couple of weeks ago the Secretary-General of the OECD
urged the British Government to stay the course, and we will. Our bold action has taken Britain out of the financial danger zone, but we must not forget that none of this would have been possible without the crucial first step of increasing the credibility of our fiscal framework. The Bill will put on a statutory footing our reforms of the way in which fiscal policy is conducted in this country.
Let me remind the House of the origins of the Office for Budget Responsibility. Within a week of taking office, we had set up a new independent body to return credibility to official forecasts. Until then, the final decision on official Government forecasts had always been made by the Chancellor and his advisers-one of whom is now shadow Chancellor-rather than by independent experts. Over the past 10 years, the last Government's forecasts for growth in the economy have been out by an average of £13 billion, and their forecasts of the budget deficit three years ahead have been out by an average of £40 billion. Unsurprisingly, those forecasting errors have almost always been in the wrong direction.
Alec Shelbrooke (Elmet and Rothwell) (Con): The transparency that the Bill brings to finances is part of an overall package of transparency. My hon. Friend mentioned budgets that have overrun. Does she agree that the Bill will help to prevent Departments from losing control of their budgets in the way that was described recently by a senior civil servant?
Justine Greening: My hon. Friend is right. The fact that, for the first time, official forecasts will be prepared by a body that is independent of the Treasury is critical. It will not only return credibility to the assessment of whether the Government are on course to meet their fiscal mandate, but will make that more likely to happen. I believe that Governments will be reticent about introducing policies that seem to take them off course. There is a clear distinction between the responsibilities involved. The fiscal mandate and the policies will continue to be determined by Ministers. It is not for the OBR to do that; what it must do is assess the economic and fiscal forecasts in the light of those policies, and in the light of their likelihood of meeting the fiscal mandate.
Katy Clark (North Ayrshire and Arran) (Lab): Does the Minister agree that growth is key to economic recovery, and that the recent negative growth figures have destabilised the Government's economic policy? Is it not worrying that the OBR has already revised its growth forecast from 2.6% when the Government took power to 2.3% following the emergency Budget, and to 2.1% following the spending review?
Justine Greening: I think that demonstrates the value of the OBR. For the first time we shall have a set of entirely independent forecasts to which Members can refer.
The hon. Lady has strayed on to the detail and implications of the policy, and I think that it is perfectly fair for her to do so. We have always said-I believe that Mervyn King, the Governor of the Bank of England, said the same last year-that the recovery would be choppy. It is not at all unusual for an economy emerging from recession, particularly a recession as long and severe as the one that we have undergone, to experience at least one instance of either flat or negative growth.
I do not want to be called to order, Mr Deputy Speaker, so I shall move on. Let me simply say to the hon. Lady that she has confirmed my point that benefiting from independent forecasts for the first time will be key to holding a good-quality, informed political debate about the Government's economic policy and how it is progressing, and that the OBR has also said that we are on course to achieve our fiscal mandate.
Mr Peter Bone (Wellingborough) (Con): Will the Minister clarify something for me? If the OBR says that growth will be x in the next year, must the Chancellor abide by that? Obviously, measures in his Budget may encourage growth: he may cut taxes, for instance.
Justine Greening: The OBR makes an independent fiscal forecast and assessment of the economy. The Treasury may or may not agree with that forecast and assessment, but the point is that it is done entirely independently of the Government. Rightly, however, it will remain the prerogative of Ministers to decide policy. That is the clear distinction we have set out throughout the Bill.
We needed to make sure that we have official forecasts for the economy that the public can trust, even if that means we end up giving away some of our powers as Treasury Ministers. As my right hon. Friend the Chancellor has said, we need to fix the Budget to fit the figures, not fix the figures to fit the Budget. That is why the OBR was established, and the Institute for Fiscal Studies has said it is a "welcome" innovation.
To enable the OBR to get to work immediately, it initially operated on a non-statutory basis. It was headed by Sir Alan Budd, a highly respected fiscal and macro-economic expert in our country. The interim OBR produced an independent assessment of the economy and public finances both ahead of, and at, the Budget in June. We gave it direct control over that forecast, with full access to all the data, assumptions and economic models. It made all the key judgments and decisions underpinning the economic and fiscal forecasts. Great strides were also made in transparency. More information was published than ever before. That fact was noted by both the Treasury Committee and the IFS.
Andrea Leadsom (South Northamptonshire) (Con): As a member of the Treasury Committee, may I say that it was incredibly valuable to be able to challenge the OBR members who were present and Government Ministers? From our point of view as representatives of Back Benchers, the process was very useful.
Justine Greening: I welcome that helpful intervention. My hon. Friend will no doubt be aware that the Treasury Committee inquiry into the OBR described Sir Alan Budd as an "exemplary" witness. In putting together this Bill, we took on board the Committee's points, and I am sure my hon. Friend will be happy about the unprecedented role the Committee will play in appointments to the OBR.
The final task of the interim office was to provide advice on how the permanent, statutory OBR should be established. I am happy to report to the House that the Bill is designed in line with the detailed recommendations made by Sir Alan Budd in his letter to my right hon. Friend the Chancellor. We have now moved to permanent
arrangements. This Bill enshrines in statute provisions to ensure the OBR's independence. Robert Chote has been appointed as the OBR's first permanent chair. His appointment was confirmed by the Treasury Committee. He is supported by Graham Parker and Steven Nickell, whose appointments were also confirmed by the Committee.
The permanent Budget responsibility committee led on the production of the OBR's economic and fiscal outlook, published in November. In addition, the resources made available to the OBR have been increased. There has been a transfer of technical forecasting capacity from the Treasury to the OBR, and a transparent, multi-year funding settlement has been agreed for the spending review period. The OBR has also moved to a new external location outside the Treasury building.
Let me now turn to the detail of the Bill. We debate this Bill after the constructive scrutiny the other place has given it. The other place welcomed the Bill. Part 1 includes provisions on the new framework for fiscal policy. Clause 1 sets out the need for the Treasury to produce a charter for Budget responsibility setting out the formulation and implementation of fiscal policy. In particular, the charter will set out the Government's fiscal objectives and the fiscal mandate, and a draft of the charter is available to Members alongside the Bill.
Clause 2 requires the Treasury to produce a Budget document on an annual basis. The detail of exactly what needs to be covered within the annual Budget document is set out in the charter. The Bill also repeals the legislative aspects of previous Governments' fiscal frameworks, including the Fiscal Responsibility Act 2010, a pointless piece of declaratory legislation that would have made no improvement in fiscal planning, instead merely setting up another set of targets that Ministers would assure us they were going to meet right up until they missed them.
Clause 3 provides for the existence of a statutory body called the Office for Budget Responsibility. Clause 4 sets out the main duty of the OBR, which is to examine and report on the sustainability of the public finances. This is a broad remit, which means that the OBR will not be limited to forecasting alone. At a minimum, the remit of the OBR means it must produce the following: assessments of the likelihood that the Government will meet their fiscal mandate alongside each forecast; a sustainability report at least once a year; a report on the accuracy of its forecasts at least once a year; and full economic and fiscal forecasts at least twice each year. Beyond these tasks, the OBR will be able to undertake any research and analysis pursuant to its remit.
Clause 5 describes how the OBR is to fulfil its duties. Crucially, it includes a set of principles-objectivity, impartiality and transparency-to guide the OBR in fulfilling its remit. It also requires that the OBR must not analyse or develop non-Government policies. Analysis is rightly the domain of the OBR, but, as I have said, policy making is the responsibility of publicly elected Ministers. These principles protect independence. Clauses 5 and 9 also put in place explicit provisions for the OBR to have complete discretion over the way it carries out its statutory duties, giving it full access to the information it requires to do so. The remaining clauses in part 1, as well as schedule 1, set out further detail of the operation and governance of the OBR.
We have sought to reflect the theme of independence in the constitution and governance of the OBR. In line with the recommendation of the International Monetary Fund, the OBR is established with its own legal personality and will operate at arm's length from Ministers as an executive non-departmental public body. The OBR's executive functions will be undertaken by a three-person Budget responsibility committee. The members of this committee will be appointed by the Chancellor. To support independence, the Bill makes provision for the Treasury Committee to veto all appointments and dismissals. That statutory veto bestows on the Committee more power than it has over any other public appointment. The Chancellor has said that he is giving the Committee this veto to ensure that there is no doubt that the individuals leading the OBR are independent and have the support and approval of the Committee.
A chairman will lead the BRC and run the OBR. All staff will report to the chair, and that person will control the "hiring and firing" of the staff. The staff will be civil servants, ensuring the OBR can recruit from the widest possible pool of expertise. There will also be at least two non-executive members, to provide support and challenge to the OBR. The non-execs will report on how the OBR performs its duty. They will also commission expert peer review of the OBR's forecast and analysis.
The OBR will report directly to Parliament, with its forecasts and reports laid directly in the House, as was the case with the autumn forecast in November 2010. Written questions from Members will be passed to the OBR to respond to, and the members of the BRC will be available for Select Committee scrutiny.
The provisions in part 1 represent a permanent improvement to economic policy making and the transparency of government. Britain is now one of the first advanced economies to have an independent fiscal agency that produces official fiscal and economic forecasts. It is therefore no surprise that these reforms have attracted praise from the IMF, and they put us at the cutting edge of international best practice. I hope that the world will look with interest at our policy innovations.
Part 2 modernises the governance of the National Audit Office. The goal of the NAO is to maintain effective independent oversight of spending. The Bill's provisions will strengthen the NAO at this critical time of scarce public resources. Members will be aware that very similar provisions were included in the previous Government's Constitutional Reform and Governance Bill, which passed through this House with cross-party support. However, there was no time for the other place to consider those provisions at the end of the last Parliament, and this Bill represents the earliest opportunity to bring them back before Parliament. The provisions are aimed at implementing the recommendations made by the Public Accounts Commission following its review of NAO corporate governance.
As a result of this Bill, the office of the Comptroller and Auditor General will continue to exist; the CAG will be an independent officer of this House and will be limited to a single 10-year term. The NAO will be established as a new corporate body in its own right. I do not propose to go into great detail on those provisions, given that when they were discussed during the passage of the Constitutional Reform and Governance Bill the then Chairs of both the Public Accounts Commission and the Public Accounts Committee supported
them. I also understand that the new Chair of the Public Accounts Committee has indicated that she is content.
In summary, the provisions in this Bill will bring confidence and responsibility back to our country's fiscal framework, with stronger institutions and improved governance. They are as crucial for the long term as they are for the short term, and I commend the Bill to the House.
6.20 pm
Ms Angela Eagle (Wallasey) (Lab): The Bill makes changes to the responsibilities exercised by the Treasury in fiscal policy making, establishes the interim Office for Budget Responsibility on a permanent statutory footing and modernises the governance arrangements of the National Audit Office. I wish to make it clear at the outset that we support the sensible changes to the governance of the NAO which, as the Minister pointed out, are proposed in parts 2 and 3 of the Bill. We do so not least because they were our reforms. As she was good enough to observe, we set them out in the Constitutional Reform and Governance Bill towards the end of the previous Parliament. As someone who has served three times as a member of the Public Accounts Committee-once in opposition, once in government and once as a Treasury Minister-I am glad to see the reforms getting on the statute book, despite the extra obstacle presented by the intervention of a general election. I also wish to thank the Minister and the Government for the open mind that they showed to Labour amendments during the passage of the Bill in the Lords. I hope that she will show a similar approach to the amendments that we will table in Committee.
The creation of the OBR seeks to apply to one narrow part of the UK's fiscal institutions some of the autonomy that Labour brought to monetary policy when we made the Bank of England independent-of course, we took steps to make the Office for National Statistics independent too. As the House of Commons Library has pointed out, there are examples of similar bodies in other countries. Austria, Belgium, Canada, Denmark, Hungary, Holland, Slovenia, Sweden and the USA all have some arrangements for independence in forecasting and analysis of the national fiscal situation.
The reform was initially sold by the Chancellor, with much fanfare, as one that would take the politics out of economic forecasting. In doing that, he gave the entirely false implication that previous Ministers had somehow been instructing hapless officials in the Treasury to produce incorrect but politically convenient forecasts. The reality is that the previous Government published a range for gross domestic product growth, and in all the years before the crash on only two occasions did growth fall below the range that the Treasury published. In the other years, the figure fell either within the range or above it, thus showing that we were exercising caution. We were not fiddling the figures. That level of accuracy is about all that any of us can expect from economic forecasting, which is a notoriously unreliable art rather than an objective science. Let me share a quote with the House:
"Economic forecasting, by its very nature, is subject to uncertainty. Our judgement is that, at this stage of the economic cycle, the outlook is even more uncertain than usual."
That was the OBR's comment on its forecasts in June 2010.
However, I have found evidence of one occasion when a Chancellor overruled the Government's forecasters, and the House may be interested to hear about it. In 1996, the then Chancellor, who is now the Secretary of State for Justice, was reported to have increased the growth forecast from 2.5% to 3% in order to make way for pre-election tax cuts. The chief forecaster he overruled was, by some odd coincidence, Sir Alan Budd, the curiously short-lived first head of the interim OBR.
Matthew Hancock (West Suffolk) (Con): I am sure that the hon. Lady was not about to move on from talking about forecasts having spoken only about growth forecasts and having omitted to speak about the previous Government's dreadful record on fiscal and deficit forecasts.
Ms Eagle: The important thing to note about forecasts, particularly those on the tax take, is that it is difficult to be accurate with them. When I served on the Treasury Committee prior to becoming a Treasury Minister, there was comment on how accurately the Treasury was able to forecast the tax take. Clearly, it is more art than science, so the House would be mistaken to believe that, because something has been forecast, it is automatically an objective certainty. Those of us who deal with these issues, on both sides of the House, know that forecasting the economy can be as uncertain as forecasting the weather-Michael Fish found out how uncertain that can be one night. Forecasts are what they are; they can sometimes be wrong and sometimes they can be accurate. I honestly think that, in general-I am not making a party political point-the Treasury has a reasonably good record on forecasting.
Jacob Rees-Mogg (North East Somerset) (Con): I entirely agree with the hon. Lady on the difficulty of forecasting, as even the best economic forecasters get it wrong, but I wonder whether she was as shocked as I was to read in the Financial Times about the bullying of the International Monetary Fund by the Treasury and the Financial Services Authority. Was that not a pretty disgraceful way to have behaved?
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. We are in danger of going off into past subjects. The hon. Lady may be tempted to answer, but we have to deal with the Bill before us and not with speculation in a newspaper about bullying. I think that we will stick to the Bill.
Ms Eagle: Thank you, Mr Deputy Speaker.
Let me be the first to say that the Opposition support an independent OBR, so long as it is indeed independent. In that respect, the OBR has some ground to make up and some points to prove after its very difficult start in life. Initially it was located a few doors down from the Chancellor in the Treasury and consisted entirely of Treasury civil servants. Its much vaunted "independence" was utterly compromised in June last year when it was unwisely bounced into the politically convenient early publication of employment forecasts, suspiciously just ahead of Prime Minister's Question Time-the Minister did not refer to that incident. The forecasts themselves turned out to be controversial and the OBR ended up looking more like an offshoot of the propaganda machine inside Conservative central office than an independent and trusted forecasting organisation. Sir Alan Budd,
the interim head of the OBR, announced his shock departure shortly afterwards. We may well have to wait until he writes his memoirs to find out exactly what really happened.
Ms Eagle: I will give way in due course.
The OBR must work hard to establish a reputation for independence after that extremely shaky start, and I look forward to its new head, Robert Chote, demonstrating major improvements in that respect.
Andrea Leadsom: The hon. Lady may be aware from reading the Treasury Committee's report into the original independence of the interim OBR that colleagues on her own side quizzed Sir Alan Budd and others very closely on that point. The Committee's report makes it very clear that there was nothing to answer, that the OBR had indeed acted independently and that it had not been in hock to the Government.
Ms Eagle: Nevertheless, independence has to be perceived to be there too. No matter what individuals behind the scenes know, part of consistency and the whole point of such independence is that it is accepted across the political spectrum and in the country as a whole. If that is not the case, the organisation does not have the credibility that the reform creating it sought to establish. That is why I look to Robert Chote, who has moved out lock, stock and barrel from the Treasury, to begin to establish that reputation.
Justine Greening: It is only right that I should put on record the comments of Sir Alan Budd, in his report on the progress of the interim OBR, on the issues that the hon. Lady has raised-budget forecasts and interference. On the fact that some Treasury officials perform both roles of giving advice to the Chancellor and helping the OBR to produce the forecasts, he clearly said in paragraph 31:
"We do not believe that this involved any conflict of interest."
In relation to how the OBR should operate and the issuing of forecasts, he said in paragraph 44:
"We are also able to state, without reservation, that there was no ministerial involvement in the forecasts at any stage."
The hon. Lady uses Alan Budd as an example of someone who was somehow manipulated, but does she accept that his comments do not bear that out? Perhaps she would like to withdraw her comments.
Ms Eagle: This concerns those who allowed the bringing forward of estimates of job losses caused by the Government's decisions on fiscal consolidation, which happened to be published just ahead of a Prime Minister's Question Time at which that was to be a point at issue. Clearly, the relevant people should have realised the effect that that coincidence would have on the OBR's reputation for independence when it had only just been set up.
On the Minister's point about whether the OBR should use Treasury forecasters, Lars Calmfors, the chair of the Swedish fiscal policy council, has contrasted the arrangements in the Bill with those in Sweden. He
said that it is very difficult when the OBR is working very closely with Treasury civil servants and other forecasters:
"one cannot have it both ways-the OBR cannot be both an independent watchdog and an in-house provider of input into the Treasury's work."
We shall certainly want to explore in greater depth in Committee that aspect of the arrangements for our OBR which differs from the Swedish arrangements.
In addition to concerns about independence, we want to raise in Committee issues of the OBR's accountability to Parliament. We wish to explore how independent the OBR will really be, given that close co-operation with the Treasury will be needed to access the information to generate the forecast in the first place. There is also the issue of its budget-I accept the comments that the Minister made about the transparent five-year budgeting process, but there are examples of similar bodies in other countries having had their budget cut as a result of displeasing the Government with whom they were working. The governance arrangements will need further scrutiny, as will issues of accountability, not just in relation to the Treasury Committee veto on appointments, but regarding the OBR's accountability to Parliament.
Although the Bill is about who makes forecasts, the reality is that independent forecasting is no substitute for sound Budget judgements. The Government will not be judged on the accuracy of their forecasts, but they will be held to account for the consequences of the choices they have made in the circumstances they were confronted with and the forecast that the OBR had given them. Our dispute is with the Government's plans and choices, not with the independence of their forecasting machinery.
When we left office, unemployment was falling, growth was forecast to be 2.3% this year, inflation was lower than it is now and was falling and, according to the OBR, borrowing had come in at £20 billion lower than had been forecast in 2009. When the previous Government delivered their last Budget in March 2010, UK growth was faster than in Germany, Italy and the eurozone as a whole, but the current Chancellor has chosen to prioritise rapid deficit reduction over any other policy goal and he has slammed the brakes on growth. Without an electoral mandate, the Government have chosen to launch a risky experiment with our economy and our prosperity.
Justine Greening: I completely disagree with much of what the hon. Lady says, not least given that her Government left unemployment 400,000 higher. She mentions electoral mandate, but surely she does not think that the previous Prime Minister had one, because he was never voted in as Prime Minister.
Ms Eagle: We do not have a presidential system: we have a prime ministerial system and the leader of the governing party tends to be asked by Her Majesty the Queen to form the Government. That is what has always happened and if the Minister wishes to change that, perhaps we need to take a larger look at our constitutional arrangements even than that planned by the Deputy Prime Minister.
Mr Mark Field:
Although the hon. Lady makes a fair point about explicit mandate, it is surely also the case that there was absolutely no explicit mandate for any of
the actions taken by the erstwhile Government after 2008 given the situation that we found ourselves in.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. We are getting tempted once again. If Members stick to the Bill, that will be helpful.
Ms Eagle: There is a difference between having an economic policy that is put into place directly after a general election, when manifestos said one thing and the Government did another, and responding to a crisis that very few people saw coming and that threatened the entire infrastructure of the global banking system. There are obviously differences between those situations, but I respect the hon. Gentleman's expertise in financial matters, particularly regarding the City.
The Government have chosen to cut public expenditure faster and deeper than any other country in the industrialised world except for Iceland and Ireland. They have chosen to announce the deepest cuts in public spending in the UK since the second world war. Nine months into the life of this Government there is still no sign of any plan for jobs and growth, but sensible people know that without a plan for jobs and growth it will not be possible to get the deficit down as the OBR predicts it should come down. Meanwhile, the cuts are beginning to bite and the OBR has forecast that more than 330,000 public sector jobs will be lost. Some 10,000 police jobs have been announced as going so far and there are reports that 250 Sure Start centres will close. Unemployment, which had begun to fall, is now rising again and inflation, which was low and falling when we left office, is now rising. All that is before the effects of the Government's ill-advised decision to increase VAT. Growth has stalled.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Hon. Members have been tempting us away from the Bill, but I am sure that the hon. Lady wants to stick to it. We do not want to be tempted through further interventions, so if she will keep to the Bill, that will be helpful.
Ms Eagle: The important issue is how the independent forecasts interact with what happens in the economy and how that can change and be affected by the Government's economic decisions.
Matthew Hancock: I enjoy debating with the hon. Lady, so I am extremely grateful for her giving way. She has just prayed in aid the OBR, saying that it had forecast that the deficit would fall, but she has also said that under the Government's plan the deficit will not fall. The OBR's forecast is based on the Government's plan, so does she agree with herself or not?
Ms Eagle: This is how we can get into difficulty with forecasts, which are static when they are made but apply to a dynamic situation. The hon. Gentleman knows, for example, that our debates in the House are, in part, about the effects on growth of a drastic fiscal consolidation. Our contention has always been that cutting too far too fast will suppress growth to such an extent that the deficit reductions that were hoped for will not come about. That is an essential part of the economic debate that, as far as I can see, we have been having since the Budget in June last year.
Forecasts can be affected by subsequent events and by Government policies. That demonstrates that what matters most is not forecasting for its own sake, but the judgment of the Chancellor of the Exchequer and the Government, and the extreme fiscal choices that they have made.
Alison McGovern (Wirral South) (Lab): Does my hon. Friend agree that we have another independent forecaster, the Bank of England, which was made independent in 1997? What lessons from the interaction between the Treasury and that independent forecaster ought to be applied to the relationship between the Treasury and the OBR?
Ms Eagle: In order to fulfil its duties, the Bank of England produces its own forecasts, which do not always agree with what were previously Treasury forecasts and will now be OBR forecasts. There are also a number of independent forecasters out there with their own view of the situation. Forecasts range from optimistic to pessimistic, and those of us who watch these things learn to take account of them. Regarding OBR forecasts or forecasts of the Bank of England as statements of the unvarnished truth will quickly get us into difficulty.
Andrea Leadsom: I am grateful to the hon. Lady for giving way again. On a point of clarification, the issue of multiple forecasts came up in the Treasury Committee review, and it was made clear that the OBR takes the Bank of England's monetary forecasts on interest rates and uses them as its own for its fiscal forecast, so there is no duplication or overlap. One is forecasting the state of interest rates and the other is stating the fiscal forecast.
Ms Eagle: Yes, but the Bank of England will also forecast for its own use growth and other aspects which it needs to assess in formulating monetary policy.
OBR forecasts predict that by the end of this Parliament, 110,000 more people will be on the dole under the Government's plans, compared with our previous plans. Under Labour, the economy was forecast to grow by 2.6%, compared with only 2.1% under the current Government's plans. The consumer prices index would have been at 1.6%, rather than 2.8%. So the OBR has decided that there would have been higher growth, more jobs and lower inflation under Labour.
Justine Greening: May I ask the hon. Lady a straightforward question? The Office for Budget Responsibility assesses that we have a greater than 50% likelihood of hitting our fiscal mandate, which is to eliminate the structural deficit by 2014-15 and achieve our broader fiscal mandate on debt ratio. Does she welcome that or not?
Ms Eagle: It is important to see what the forecasts are and what they mean at this stage of economic recovery. Of course, I want to see the economy recover and grow, unemployment coming down and inflation being controlled. Unfortunately, that is not what the signs that we have been picking up since the Government's decision to cut so deep and so fast tell us about the real economy. We will see as time goes on how the OBR adjusts its forecasts to take account of the monthly and quarterly statistics from the Office for National Statistics.
The shock GDP figures before Christmas strongly imply that the Chancellor will suffer the embarrassment of his growth forecasts being downgraded by the OBR in his self-proclaimed Budget for growth, which is due to be unveiled next month. We will wait and see.
We on the Labour Benches support a genuinely independent OBR but, as I said, we will explore in Committee the practical extent of that independence and suggest amendments to the Bill to shore it up a little more. We will need to explore the viability of the arrangements to produce, rather than comment on, the fiscal forecasts, as many other fiscal councils do. We will need to explore the extent of the OBR's remit and whether the close co-operation with civil servants required to produce the forecast will lead to behind-the-scenes negotiations that will compromise at least the perception of independence.
Let us be under no illusion that the existence of the OBR, which we support in principle, can in any way protect us from the misjudgments of the present Chancellor or any other. The OBR must assume, as the Minister said, that the Government's plans are a given. It cannot comment on the fiscal mandate or on wider fiscal policy in general. It is prevented from doing so. All it can do is calculate the probability of the Government being able to achieve their stated plans. The OBR therefore cannot protect the country from the mistakes that the Chancellor makes, or from the mistakes that he has made already. It is no panacea and it should not be regarded as one. Our dispute-
Sajid Javid: Will the hon. Lady give way?
Ms Eagle: No, because I am about to finish. Our dispute is with the Government's plans, not with the OBR's forecasting. We look forward to closer examination of the Bill in Committee. We will subject it to detailed scrutiny.
6.47 pm
Mr Mark Field (Cities of London and Westminster) (Con): Thank you, Mr Deputy Speaker, for calling me so early in the debate. As you know, I have to attend a constituency engagement for which, unbelievably, I am not well enough attired, for it is a black tie dinner in the City of London. [Hon. Members: "Ah!"] I am supposed to be protected from that lot, Mr Deputy Speaker, so do your level best, please. I apologise that I shall not be here for all the winding-up speeches.
Listening in the House to Budgets and autumn statements over much of the past decade has been, at times, a somewhat surreal experience. Year after year the erstwhile Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), rattled out cascading figures for growth and public deficit reduction. As the hon. Member for Wallasey (Ms Eagle) rightly pointed out, the growth figures proved, at least until the middle of the previous decade, to be uncannily accurate, even often defying so-called expert opinion. However, the deficit numbers were always hopelessly, devastatingly inaccurate.
Almost comically, although this can scarcely be regarded as a laughing matter, every single Budget between 2001 and 2007 forecast that the public finances would move
back into surplus in about three or four years. As time wore on, the debt and annual deficit rose inexorably as the Treasury employed smoke and mirrors to conjure the illusion of fiscal stability.
Matthew Hancock: The hon. Member for Wallasey (Ms Eagle) cast aspersions on the ability of my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), now the Justice Secretary, to forecast, saying that in 1996 he forecast more than 2.5% growth. Information has reached me that in 1997 growth was more than 3%, so it turns out that he was right. What does my hon. Friend make of that?
Mr Field: My hon. Friend makes an extremely good point. In the one case in which the hon. Member for Wallasey (Ms Eagle) tried to argue that there had somehow been untoward behaviour by the last Conservative Government, events have proven, if anything, that they surpassed what had been expected.
Ms Angela Eagle: Will the hon. Gentleman give way?
Mr Field: I fear that we are going to go over old ground, but let us do it.
Ms Eagle: Having conceded that point, the hon. Gentleman now seems to be saying that the best solution is to have the Chancellor make the forecasts personally, which does not seem to be the point of the Bill.
Mr Field: As I recall it, the point was conceded by Opposition Members, not by those on this side.
The relevance of all this to our current economic woes should not be underestimated. With global investors buying into the fiscal assurances made by the erstwhile Government, the rosy forecasts played their part in making it easy for Britain to borrow money during the past decade, and borrow we did, even in the good times. We all now know the disastrous consequences that came to pass.
This salutary experience provided the genesis of the idea for an office for budget responsibility. I must confess that when the Chancellor first mooted the idea in late 2008, when shadow Chancellor, I was sceptical and thought that it sounded like the ideal proposition to be made in opposition and then quietly forgotten. I believe that it is to his great credit that the notion saw the light of day so soon after my party reached government.
My other fear was that it might be an overly inflexible straitjacket to constrain freedom of manoeuvre. Again, the Chancellor has addressed this point up front, as has the Economic Secretary. The Chancellor desires and even relishes such a restriction on himself and, I suspect, on his successors. Although it might not prove to be quite as revolutionary as the Treasury would have us believe, I accept that it is still an important step towards transparency and accountability in forecasting budgetary numbers.
My only reservations are relatively small and relate to issues of practice, rather than of principle. I fear that the real strains and potential limitations of any office for budget responsibility will unfortunately come at the point in the economic cycle when we most need
prescient and instinctive judgment. At such times of crisis or near crisis in any economic phase, we require a robust willingness to stand up against the conventional wisdom of the day.
In the run-up to the 2008 financial crisis, for example, no forecasting organisation saw the crash coming. No one in this House, not even the Secretary of State for Business, Innovation and Skills, despite all that is now said on his behalf, really foresaw precisely what would happen. That includes all the independent bodies, such as the Institute for Fiscal Studies. Let us wonder how the OBR, had it been established, might have acted only three or four years ago. Had it not shared the outlook of other forecasters, would it have had the mettle or the strength in 2007 to tell the previous Government that they were living far beyond their means? How would it have been viewed if it alone had advised the Government at that stage to hold back on their spending plans or, indeed, increase the tax burden? I believe that the true test of its effectiveness will come only when it is required to deliver such unpalatable news in future.
Similarly, what if the OBR had concurred with the forecasts of other organisations at the time but a more responsible Chancellor had been in place who instinctively viewed the economically clement weather as only a mirage? Might the perceived infallibility of an OBR forecast have restricted his or her ability to take measures that went against the common wisdom? To that extent, I have some sympathy with what has been said by those on both Front Benches, because we do not know how forecasts will pan out. Even as recently as the emergency Budget on 20 June 2010, many predictions for growth and certainly for unemployment were made at the time that even I thought were slightly too optimistic. The OBR's notion was that unemployment would reach a peak during the current tax year. We hope that that will be the case, but that will not be down just to Government policy, by any stretch of the imagination. I think that the way the economic cycle has worked out globally means that unemployment is likely to be somewhat higher during 2011-12 and perhaps even higher still the following year.
I believe that there are some unavoidable conflicts in the OBR's operation. Organisational independence is absolutely vital to its working and credibility, as the Economic Secretary noted in her contribution. However, it must necessarily rely on a close relationship with the Treasury in order to understand its methods and have access to its data. Members have already mentioned the blurring of those boundaries between the Treasury and its new independent conscience that led to the first hiccup last summer-the argument that spilled over from the release of the OBR's unemployment forecast, which happened to bolster the Prime Minister's argument when he was under fire later that day in Prime Minister's Questions.
One must accept that there will almost inevitably be an ongoing tension and an inherent potential for a conflict of interest, but I hope that that has been eased now that the OBR has been able to move out of its Treasury offices and acquire an important physical independence. Without the trust that stems from such autonomy, the OBR is absolutely nothing. Nevertheless, there is also a danger that it will be seen as perhaps too credible and as a panacea in its own right.
Sajid Javid: My hon. Friend will note that in her closing remarks the hon. Member for Wallasey (Ms Eagle) told the House not to see the OBR as a panacea. Did he notice the irony of that statement, because it was the previous Government who passed the Fiscal Responsibility Act 2010 and presented that as a panacea to the nation, pretending that it is possible to legislate and bring down the deficit without taking any tough decisions?
Mr Field: I do not want to go too far into the past, but my hon. Friend is absolutely right. We now recognise the hubristic foolishness of the notion of ending boom and bust and that an economic cycle had somehow been put to one side. We have all now learned that lesson, and this generation of Members will be much more sceptical of any such panacea that is proposed in future.
As I have said, no organisation, not even those without links to the Government, forecast the scale of the economic crisis. Ultimately, economic forecasts are just that, and if we place blind faith in the independent projections, potential risks might also be ignored. Therefore, part of the OBR's continuing role must be constantly to remind us all of its own fallibility and advise on a range of possible outcomes, pointing out not only to politicians, but to financial markets, the longer-term threats to our economy in the event that the markets, in particular, prove too forgiving.
Putting aside those concerns, which are relatively minor in comparison with the entirety of what we are trying to achieve, there is a great deal to welcome, particularly with regard to transparency and accountability. Furthermore, if the OBR works as it should, it is likely that any unofficial tinkering by the Treasury will be flagged up early and properly scrutinised by Parliament, returning some long-lost gravitas to the Treasury Committee and to Parliament itself.
As I have said in this House before, the restoration of confidence to our economy was always going to depend largely on rebuilding trust. The establishment of the OBR marks an important milestone in encouraging us to place our faith once again in the financial and political systems of our nation. We must of course be alert to the potential pitfalls in its operation, but it also represents an important check against a hitherto unchecked Treasury, and as such the OBR must now be treated as a credible new fixture in this fresh financial landscape.
6.58 pm
Mr William Bain (Glasgow North East) (Lab): It is a pleasure to speak in this debate. In giving the Bill's proposals qualified support, Opposition Members view the creation of the OBR as part of the direction of reform started by the previous Government, with the creation of the Monetary Policy Committee of the Bank of England to decide on monetary policy and the establishment of the Office for National Statistics. The International Monetary Fund has said that the OBR's proposed mandate is
"broadly consistent with established best practice for independent fiscal councils."
Placing the Office for Budget Responsibility on to a statutory basis is an important stage both in its development and in securing its greater independence from the Treasury, but Opposition Members will continue to scrutinise the
Bill's provisions closely to ensure that the OBR is as genuinely independent from the Government as it can be, and sufficiently accountable to the House.
It would be unacceptable if the OBR's independence were compromised by insufficient access to its own resources, or if it were subject to excessive intervention by the Treasury. The OBR is due to receive £1.75 million per year in funding until the end of the current spending review period, but higher than expected CPI inflation might see that financial support fall in real terms. The Institute for Fiscal Studies recommends, on page 56 of its green budget, that
"the OBR should be as transparent as possible about what meetings have been held, and when and how all key assumptions made in its forecasts were decided upon".
Internationally, it has been established that fiscal councils can undertake four main roles in connection with economic policy: first, provide objective macro-economic forecasts on which Government budget proposals can be based, as carried out by the Centraal Planbureau-CPB-in the Netherlands and by the Economic Council in Denmark; secondly, cost various Government policy initiatives, as performed by the Congressional Budget Office in the United States, the CPB in the Netherlands and the Parliamentary Budget Office in Canada; thirdly, evaluate whether fiscal policy is likely to meet its medium-term targets, as the Fiscal Council does in Hungary; and fourthly, analyse the long-term sustainability of fiscal policy, with examples being the CPB in the Netherlands, the CBO in the US, the Government Debt Committee in Austria, the Fiscal Council in Hungary and the Fiscal Policy Council in Sweden.
Of those functions, the OBR appears to cover only the first and third. Fiscal councils are less likely to engage in normative analysis of economic policy; only the Austrian Government Debt Committee, the Danish Economic Council and the Swedish Fiscal Policy Council appear to carry out that role.
The OBR's role includes responsibility for preparing the Government's economic and fiscal forecasts and issuing them alongside fiscal forecasts with the Budget. That is clearly helpful to the Government, but it means that Ministers are able to prepare in detail for any consequences of a Budget before the OBR makes its assessments public. Without safeguards, that could lead to concerns about the extent of private consultations between Ministers and the OBR prior to publication-the perceived problem during the release of unemployment data last summer.
As Lars Calmfors, chair of the Swedish Fiscal Policy Council, wrote in The Guardian on 28 July last year:
"It might be better if the OBR provided a post-evaluation of the budget as an input into the work of parliament (in addition to a forecast before the budget)."
The IFS also concludes in its green budget that there is a case for the OBR
"to take as much advantage as possible of the required end-of-year fiscal report to conduct and communicate detailed analysis of how and why outcomes deviated from the forecast."
As my hon. Friend the Member for Wallasey (Ms Eagle) said, there are also questions about the use of different forecasts by the Treasury, the OBR and the Bank of England. The Bank already produces macro-economic forecasts. As the IFS again concludes:
"Those produced by the OBR will be used when deciding fiscal policy, while those produced by the Bank of England will be used by the MPC"-
the Monetary Policy Committee-
"when deciding on monetary policy."
That might lead to a situation in which fiscal and monetary policy is not sufficiently well co-ordinated.
On fiscal forecasts, progress has been made to underline the OBR's independence in reaching its conclusions, but it needs to make as much data as possible, as well as the details of its financial models, available to the public. In evidence to the Treasury Committee recently, Professor Tim Besley recommended that the OBR should be able to communicate with key international bodies such as the International Monetary Fund, the EU and the OECD.
The OBR's mandate will not in itself generate higher growth, and that brings us to the proposed charter of fiscal responsibility to be created through clause 1. The aim of the charter as stated is to create
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