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Housing Reform

4.29 pm

The Minister for Housing and Local Government (Grant Shapps): Today, the Government have published “Laying the Foundations: A Housing Strategy for England”. The Government inherited a situation in which house building had fallen to its lowest peacetime level since the 1920s, house prices virtually doubled in the 10 years to 2010 and nearly 3 million households who wanted to own their own home and to have that sense of independence and pride were struggling to get a foot on the ladder. Indeed, under the previous Administration, the number of first-time buyers collapsed to its lowest level since the 1970s. Lenders are not lending, builders are not building and buyers are not able to buy.

Of course, the credit crunch is responsible for some of the slow-down, but I have no doubt that the problem was compounded by a centralist and bureaucratic approach to housing that made it harder and more expensive to build those much needed homes. This Government will get Britain building again by working with communities and industry, not against them. Instead of forcing homes on communities, we are giving them reasons to say yes with the new homes bonus. Instead of dictating to industry, we are addressing the barriers it faces. We have already seen some promising signs—house building starts are up by a quarter during our first 18 months in office—but we are in no doubt about the scale of the challenges ahead and we are ready to take decisive action to get our country building again.

To get builders building, we need to get buyers buying, which is why we are helping those who aspire to own. Today, I am announcing support for an industry-led indemnity scheme to provide help for first-time buyers in particular. It will help up to 100,000 people to buy new-build homes with a 5% deposit. That means that, instead of an impossibly high deposit of, say, £40,000, a typical first-time buyer would need only around £10,000 in deposit, putting ownership within the reach of the many. It is also a low-risk scheme for the taxpayer, with the deposit from the homeowner and the liability for the builder coming first.

We are reinvigorating the right to buy. Nothing did more than the right to buy to promote social mobility, home ownership and mixed communities, but I am afraid that the previous Government made vindictive cuts to that successful scheme. We are on the side of every family who wants to get on and do well, so we will raise the discounts available to social tenants who wish to buy. For the first time, we will take the receipts from additional right-to-buy sales and use them to support new affordable homes on a one-for-one basis—for every home sold, a new one will be built.

In the current tough conditions, direct support from the Government can get things moving again. Across the country there is a large number of what I describe as shovel-ready sites complete with planning permissions, but a lack of immediate support has stopped development in its tracks. Therefore, we are launching a new £400 million get Britain building fund. It is the injection needed to get building going and has the potential to support up to 32,000 jobs. [ Interruption. ] I hear chuntering from the Opposition Front Bench, but I can confirm that that money has not been raided from another budget. We all

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remember the previous Government’s habit of returning to the Dispatch Box to reshuffle money around. This is new money for the housing sector.

Alongside that support, a new £500 million growing places fund will support the large-scale infrastructure needed for housing and economic growth. Today we are also providing £150 million, which I think the whole House will welcome, to bring many empty houses back into use.

Of course, quality matters, not just quantity. That is why the new homes we are going to build will be well designed and meet high environmental standards, and why we have asked the Design Council to help advise on building better homes.

The Government can also help by making more public land available, so we are freeing up public sector land with the capacity to deliver 100,000 new homes, many of those on brownfield sites. It is also time to recognise that many of the local deals struck during the height of the boom—the so-called section 106 agreements —placed unreasonable demands that simply do not make sense in today’s economic climate. It is quite right to ask developers to work with communities to make sure that development is viable, and no one has any objection to that, but it is self-defeating if the demands are so stringent that as a result there is no development, no regeneration, no community benefit and, ultimately, no houses are built.

In addition, we will provide support for local areas that want to deliver large-scale new development to meet the needs of their growing communities, so we are putting the incentives in place. Alongside the new homes bonus, we are reforming the community infrastructure levy, so local communities will have a proper say over how their neighbourhoods are developed and improved.

We are also supporting self-build, a revolution in the making, with a custom-build homes programme. We will put in place up to £30 million to fund this country’s ability to match what happens overseas and build many more homes through self-building by people who want to develop for themselves. Last year, the largest group of builders in this country was self-builders, with some 13,000 homes, and we want to see that figure double over the years to come.

Rented housing continues to have a vital part to play in meeting our national housing need and supporting mobility, so we will work with local authorities to tackle the worst private rented properties and the worst private landlords who drag the reputation of the sector down. Satisfaction in the sector is 85%, and we want to see it grow.

Members will know that we are reforming social housing, too. Under the previous Government, housing waiting lists almost doubled, so building more affordable homes is absolutely vital, and we are introducing the new affordable rent model, making sure that vulnerable people get the support that they need, while those who can pay, pay a little more and make a fairer contribution.

It has to be easier for social tenants to move for work or to be closer to family, so we have just introduced the national HomeSwap Direct scheme, which will support them in their moves and create excellent mobility—in strong contrast to the failed scheme that no Opposition Member wants to talk about any more. One or two Members will recall it: it was called MoveUK, a scheme

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that the previous Government disastrously mishandled and, eventually, shut down. That was their idea of social mobility.

We have introduced new flexibility to the tenancies that can be offered to new social tenants. When councils want to continue to offer lifetime tenancies, that is fine—if it is in the best interest of their tenants. When councils want to do something more flexible, they will have that flexibility in order to manage their stock much more effectively and to give hope to the millions of people languishing on the record waiting lists that have developed over the past 13 years.

Today, I have also issued directions to the social housing regulator as a vital step towards putting all these various social housing reforms into effect. Alongside that, I am completely committed to protecting the most vulnerable and helping to prevent homelessness, and Members should be aware that I have established the first ever cross-ministerial working group, which brings together eight Departments and will help to solve the problems of homelessness.

We have already published our first plan, which is in place and will help prevent street homelessness, with the “no second night out” nationwide pledge meaning that, for the first time in this country, nobody should ever sleep on the streets for a second night—[ Interruption. ] I hear the right hon. Member for Greenwich and Woolwich (Mr Raynsford) say that homelessness is going up, and he is right, but the reason why is that we no longer fiddle the rough sleeping count, which his Government resolutely failed to do anything about, even though people pointed out that it was preposterous to claim that there were only—get this—424 rough sleepers, as his Government wanted us to believe, in the entire country. It was untrue, and we are tackling the issue. I have reconvened the ministerial working group, and we are producing a second report—on ending homelessness—which can be expected in spring 2012.

The measures in the housing strategy published today come from a Government who are committed to thinking in the long term about a stable housing market that works to the benefit of everyone. Taken together, these various different measures will provide a much needed boost for the housing industry, give 100,000 buyers the chance to own new properties and get their foot on the housing ladder for the first time, and lay firm foundations for housing growth in this country by creating the right legacy for future generations. I commend this statement to the House.

Jack Dromey (Birmingham, Erdington) (Lab): Housing matters. Good housing can make a world of difference to people’s lives, but bad housing harms health and holds back kids at school.

Britain is gripped by a growing housing crisis. Does the Minister accept that he makes his statement on a day when the figures show that house building is down, homelessness is up, we have a mortgage market in which people cannot get mortgages, and rents are soaring in the private rented sector? Does he also accept that the extra £400 million to build only 16,000 more homes is but a 10th of last year’s cut to housing investment of £4 billion?

Some of today’s announcements are not without merit. The mortgage indemnity scheme is something that we have called for and was pioneered by Labour in

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Scotland. However, the Government must get this right. So I ask the Minister: how many lenders have signed up to the scheme? On the sale of council houses, can he guarantee today that, for every house sold, one will be built? Will local authorities be able to keep 100% of the receipts from right-to-buy sales, and will the new council homes be let at the so-called higher, affordable rent linked to market prices? Does he not accept that we cannot have a combination of falling stock and rising rents when the need for good council housing has never been greater? The announcement on the use of public land is welcome. However, does the Minister agree that it is nothing new? Press releases from his Department about where such schemes are happening demonstrate that such things were taking place back in 2006 under a Labour Government. Does he accept that this is the fifth time that the same initiative has been announced?

That goes to the heart of the problem. Today, much has been promised—much has been repeatedly promised—but, in 18 months under this Government, there has been a sorry saga of false dawns, failure and broken promises. The Minister boasted that he would beat Labour hands down when it came to house building, yet new homes are down 6% and housing starts are down 7%. Does the Minister accept his Department’s figures? The Prime Minister once said that homelessness was a disgrace and, together with the Minister, he committed to tackling the issue. Since the general election, homelessness has risen by 10%, yet under Labour, it fell by 70%. Does the Minister agree with Crisis that his policies will make that situation worse?

The Secretary of State for Communities and Local Government has said that he wants to see more young families able to buy their first home, as he did. Yet research by Scottish Widows demonstrates that the average age of the unassisted first-time buyer will increase by seven years, from 37 to 44. However, one promise will be kept. When the Minister for Housing was the shadow Minister for Housing, he said:

“it’s easy for a housing minister to catch your eye with a headline, but much harder to deliver more homes.”

He has been true to his words. After 137 housing announcements, the facts are clear: on every measure, this Government are failing to deliver on housing. The contrast with Labour in government could not be more dramatic. There were 2 million new homes, including 500,000 affordable homes; 1 million families buying their own homes; 1.5 million social homes brought up to standard through the decent homes programme; and tenants’ rights were protected.

Urgent action is needed now. Will the Minister accept that we should repeat the bankers’ bonus tax, so that we can build 25,000 new affordable homes and create 100,000 jobs for our young unemployed to kick-start the economy? Will he support our proposal for a 5% cut to VAT on home improvements, as that would mean that more homes were in a better condition?

There is a human cost to this growing housing crisis: the damp flat where the baby is always ill; proud parents desperate because the kids they love cannot get a mortgage; small construction companies struggling to stay afloat; unemployed building workers desperate to get a job. Those people have had enough of false dawns, grand plans and press launches followed by broken promises and a failure to deliver. Sadly for them, a decent home at a price they can afford has never been further away than it is today.

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Grant Shapps: I am very grateful to the hon. Gentleman for welcoming at least some sections of this policy—and, indeed, for laying claim to inventing some sections of it, I note from him and his colleagues in Scotland. When he says that these measures add up to £400 million in the get Britain building fund, he forgets that we have also announced £500 million for infrastructure projects; a multi-billion pound fund in the new homes bonus, and I do not notice any of his colleagues sending funds back to the Department as we distribute this year, we think, more than £400 million through that alone; and numerous other spending commitments, including the empty homes programme for £150 million—oh, and £4.5 billion to build more social and affordable homes. I am grateful to him for counting up the 137 measures, but it is a little disingenuous to take one of them and claim that that is the summary of the document. It is, as he rightly says, one of many measures.

The hon. Gentleman asked some specific questions, so let me try to answer them. He asked how many lenders have signed up to the mortgage indemnity programme, and I can tell him and the House that 80% of lenders have done so. That is a good deal better than the scheme that many of us will remember from our time in opposition. The then Prime Minister came to this Dispatch Box and launched a scheme, and that was the first time many of the lenders who were supposed to be participating in it had heard of it. So yes, the scheme is being widely welcomed, and I am pleased that he is welcoming it himself.

The hon. Gentleman asked whether the right to buy will be a one for one, and the answer is that it will. That is possible because of affordable rent and our having put that scheme together. [Interruption.] Opposition Members ask how. The simple answer is that affordable rent relies on money coming in from the private sector and from the housing associations to help to fund those homes. It is not simply the case, as with old-fashioned social house building, that the state is putting the money in. We have seen this work with affordable rent. That is why our programme to build 150,000 social and affordable homes was over-subscribed, and we are now producing 170,000 homes from it. We know that there is still latent demand in that programme, and we will use the receipts from the right to buy to make sure that we can build more.

The hon. Gentleman mentioned homelessness, for which he says that the figures are higher. I want to challenge his figures. For one thing, the Council of Mortgage Lenders confirmed only last week that repossessions are lower this year than was projected—and, indeed, lower than the previous year as well. That is made possible by the record low interest rates that are possible only because we have managed to set out a credible plan to control the deficit. I should also point out to the hon. Gentleman, who has not been in the job for all that long—by the way, he is the eighth Labour shadow Minister I have faced—and will not have the track record to recall this, that there are fewer people in temporary accommodation this year than when Labour was in power.

The hon. Gentleman rightly asks about the number of new homes and points out, rightly, I believe—there is no reason to doubt this figure—that 1 million new homes were built during Labour’s 13 years. He forgets to mention, though, that 2 million new people were coming into the country, so we ended up with a huge

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housing shortage. In any case, the net result in terms of social housing was a net reduction, with 200,000 fewer social homes.

The hon. Gentleman mentioned Labour’s plan—it is, as far as I know, its only housing policy; we have spotted or detected no others so far—which is that old chestnut, the bankers tax. Forgetting that we have already raised the bank levy to £2.5 billion a year for 10 years, the Opposition want to raise this money again and to spend it, I have calculated, for the 10th time over. With it, they will produce just 25,000 homes. I suggest that he spends this evening and perhaps this week reading the document. These 137 measures go well in excess of 25,000 homes. VAT was the other big ask. To add to the debt when we have a debt crisis by lowering VAT would be economically inept.

Finally, the one thing that has kept people in their homes more than anything else that any Government could do, as has been demonstrated in Italy, Ireland, Spain, Portugal and Greece, has been keeping interest rates low. This country’s plans to reduce the deficit have been received as credible, meaning that we enjoy all-time record borrowing levels. It is that which will help more people to own a home in the future.

Several hon. Members rose

Mr Speaker: Order. A large number of right hon. and hon. Members are seeking to catch my eye, which means that there is a premium on brevity, an object lesson in which is invariably provided by Mr John Redwood.

Mr John Redwood (Wokingham) (Con): Will the Minister tell us what receipts he plans to get from all the sales that he has identified?

Grant Shapps: This is a large document and the receipts will come in many forms. The money that we are announcing for things such as the get Britain building fund will be recycled into building more homes, as will the money from the right-to-buy sales. I will write to my right hon. Friend with a more detailed note on precisely what we expect the receipts to be.

Mr Nick Raynsford (Greenwich and Woolwich) (Lab): May I draw attention to my interest as declared in the register? The Minister claimed that housing starts are up by a quarter under this Government. The opposite is true. In the past 12 months, the number of new homes started in England is below 100,000 and is 7% lower than the level over the previous 12 months. As the Minister has such a tenuous grip on what is actually happening in the market, why should we believe a word that he has said today?

Grant Shapps: I am sorry to have to challenge the right hon. Gentleman on this issue, but housing starts are up by 24% under the coalition compared with the comparative period under Labour. I have the figures here for each quarter. I will not stretch your patience, Mr Speaker, but I will happily drop the right hon. Gentleman a note on those figures. If one compares the period that we have been in office—roughly 18 months—with the same period before, housing starts are up by 24%.

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Simon Hughes (Bermondsey and Old Southwark) (LD): I welcome the statement warmly. Will the Minister assure me that his Department is continuing to talk to the Treasury about further incentives to ensure that land that is held sterile because developers will not develop it is brought back into use for housing, particularly in urban areas where it is needed?

Grant Shapps: I can definitely reassure my right hon. Friend that that is exactly the intention of our housing strategy. A number of our recommendations and policies will lead to that conclusion. It is important to get work moving on land that is available, particularly where planning permission has been granted. That is exactly what we intend to do.

Jeremy Corbyn (Islington North) (Lab): Some 30% of constituents in my inner-London constituency live in private rented accommodation without security of tenure and with very high rents. Many of them are threatened with eviction because of the Minister’s changes to housing benefit. Does he not think that it is important to bring about real changes in the private rented sector by giving longer-term tenancies at fixed rents, and at the same time to deal with the problem of homelessness in London by building more council housing as quickly as possible?

Grant Shapps: I agree with the hon. Gentleman that the answer to many of these problems is to build more homes. That is why “Laying the Foundations” puts such a big emphasis on that. He might also be surprised to hear that I agree with him that we need to ensure, as the private rented sector has expanded from 8% to 16%, that the quality is of a sufficiently high standard. I will be doing more work on that in the coming months and will report back. I should also say to him that satisfaction levels in the private rented sector are about 85%, which compares favourably with the social sector, where the satisfaction level is 81%. I take his points and will certainly reflect on them.

Mr Stewart Jackson (Peterborough) (Con): I warmly welcome my right hon. Friend’s strategy and statement. In particular, I welcome the mortgage indemnity scheme and the undertaking to produce guidance and regulations on housing allocations for armed service personnel from December 2012. May I impress upon the Minister that there must also be assistance for local housing authorities that want to prioritise in their housing allocation those with a local link, poorly paid workers and those who make demonstrable efforts to improve their community?

Grant Shapps: I can tell my hon. Friend that I have today issued new directions to the social regulator that cover each of the points that he has raised. In particular, I know all Members will join me in the belief that it is essential that this country properly and correctly honours the sacrifice of those who have been out and fought for this country. That is explicit in the new directions, as is much more flexibility to take into account, for example, whether somebody is working, and whether that should be considered a positive attribute in gaining access to social housing.

Diana Johnson (Kingston upon Hull North) (Lab): A year ago today, the Government axed a £160 million

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scheme to build new houses in my constituency to rent and buy. Will my constituents see the benefit of any of the money that has been announced today?

Grant Shapps: I think that is a reference to the housing market renewal areas. [Interruption.] Perhaps the hon. Lady would like to drop me a note, because I may have misunderstood which funding she was referring to, and then I will be very happy to respond in detail.

Alok Sharma (Reading West) (Con): The new homes bonus has been welcomed by councils up and down the country that are delivering new house building. Does my right hon. Friend agree that incentivising local communities and councils in the right way is absolutely the right approach to deliver new house building?

Grant Shapps: That is right. More than 40% of local authorities report that the new homes bonus is making it easier to propose and introduce new housing in their local areas, which is very important. Last year, nearly £200 million of new homes bonus was paid out, and this year we expect to pay out more than £400 million. Incidentally, there will be a boost of another £19 million for the affordable social housing that has been included in the scheme. That approach is very important indeed.

Sheila Gilmore (Edinburgh East) (Lab): The Minister has made it clear that the one-for-one promise on council house sales appears to depend on higher rents. How does that square with the Government’s intention to keep housing benefit down?

Grant Shapps: As with the general affordable rent programme, what will typically happen is that people will be brought out of the private rented sector and into the affordable rent sector. Rather than paying 100% rent, people will be paying affordable rent, which in London, for example, is just 65%. That does indeed keep the pressure on housing benefit down.

Nigel Adams (Selby and Ainsty) (Con): Will the Minister explain at exactly what stage the taxpayer will become liable under the mortgage indemnity scheme should there be a default on a mortgage?

Grant Shapps: Yes, I certainly can tell the House a little more about the mortgage indemnity scheme. It has principally been worked up by the Council of Mortgage Lenders and the Home Builders Federation. They had hoped to produce it on their own, without Government backing, but that was not possible.

First, the home buyer will put down a deposit of at least 5%. That is the first chunk. Secondly, the home builder will put money into an indemnity fund. It will stay there for seven years, and they will not be able to touch it. They will get it back after that period. Only after those two mechanisms have failed will the Government step in to back the mortgage. Lenders will pay a fee to be part of the scheme as well, so overall we believe it will be excellent value for money for the taxpayer.

Austin Mitchell (Great Grimsby) (Lab): Is this not going to lead to two-class housing development? For those who can afford to buy, which is to say the first

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class, there will be subsidies and support. For those who cannot, who are a large proportion at current prices, the choice will be either council and social housing, which will be treated like a transit camp and will shrink as it is flogged off at knock-down prices, or a private rented sector that is unregulated and in which there is no security of tenure, rents will be rising and housing benefit will be cut. Is not the only answer to build more public housing for rent?

Grant Shapps: I am sorry, but I think the hon. Gentleman has misunderstood some of the principles behind the scheme. Unlike when the previous Administration were in office, we are not going to have declining social housing stock. We are going to build one-for-one replacements for every home that is sold through the right to buy. Of course, he is right that there are different types of housing for people who purchase and those who rent through intermediate rent, affordable rent and social housing. That is why we are proud to have put £4.5 billion to date, before this housing strategy, into building more affordable and social homes in this country.

Sarah Newton (Truro and Falmouth) (Con): The 20,000 people living in Cornwall and waiting for a home to rent will welcome today’s news. Does my right hon. Friend agree that villages and towns in my constituency and across the country should get a plan in place now, so that local people decide the number and type of houses that their communities need?

Grant Shapps: I absolutely agree with my hon. Friend, who is right that all our plans, including the national planning policy framework, the Localism Act 2011 and the housing strategy document, lead towards local communities having far more say. Of course, the first thing that they should do is set out their own plans with their local population.

Joan Ruddock (Lewisham, Deptford) (Lab): Will the Minister accept that, in an area such as Lewisham, where there are below-average incomes, a lot of unemployment and very high house prices, finding a deposit of £10,000 is absolutely impossible? What time frame would he put on housing the 17,000-plus families in my borough of Lewisham into affordable and decent homes?

Grant Shapps: The only answer for the right hon. Lady’s constituents is for us to build more homes and to get a more flexible, dynamic and mobile housing market in this country. She is absolutely right, and I have every sympathy with her constituents. Throughout London, the average deposit is something like £60,000—it is completely unattainable. However, I hope she will join me and—I think—her Front-Bench colleagues in welcoming the indemnity scheme, which means that from now on, deposits will come down to £15,000 from £60,000.

Bob Russell (Colchester) (LD): Bob the builder welcomes this statement. It is a statement of fact that the previous Labour Government in 13 years built fewer council houses than the Thatcher Government achieved in 10 years. The Minister has said that the Government can help by making more public land available, but will he

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specifically consider sites such as Severalls hospital in Colchester, which the previous Labour Government left to rot for a duration greater than that of the combined total of two world wars?

Grant Shapps: My hon. Friend is absolutely right about our burning ambition to ensure that we out-build—in social houses as well as in houses generally—anything that happened in the previous decade or two. He is also right that building on public sector land is an ambitious programme. I can update the House by saying that we have identified sufficient land for about 82,000 homes so far. That is without going through all Government Departments and arm’s length bodies. Indeed, we have not gone through the smaller sites—those for less than 40 homes—that could be used fruitfully to build houses. I am not familiar with the site that my hon. Friend has mentioned, but I would be very happy to discuss it with him.

Mr Michael Meacher (Oldham West and Royton) (Lab): How can the Minister justify encouraging home buyers to raid their pension pots to pay down their deposit, which would be a reckless running down of limited pension savings for retirement? Will not mortgage indemnification lead to losses of millions for taxpayers when home buyers are forced in their thousands to default as a result of prolonged and deepening recession and rising unemployment?

Grant Shapps: I do not see it that way at all. For a start, it is not clear that people who are saving for a deposit are at the same time using the same money to save for the pension funds, as the right hon. Gentleman has described. Secondly, it is obviously a lot easier to save £8,000 or £10,000 than to save £35,000 or £40,000, which is the average deposit today, so I do not think that what he says is true. We do not think that the Government will be widely exposed through this scheme for the reasons that I have already described—I will not labour the House by describing them again.

Jeremy Lefroy (Stafford) (Con): In Stafford, we have more than 500 long-term empty houses, which has been the number for many years. I welcome the announcement of the £150 million, but will the Minister kindly advise us when that will be forthcoming and how it can be applied for?

Grant Shapps: I am pleased to let my hon. Friend know that in addition to the £150 million in the housing strategy, which will be delivered quickly—the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove (Andrew Stunell) has been working on that scheme and will announce more shortly—we have delivered, through the new homes bonus, which Opposition Members often deride, 16,000 empty homes in just one year back into proper use.

Stephen Pound (Ealing North) (Lab): The Minister will be aware that today the right to buy involves not the Parker Morris street freeholds—they are long-gone—but high-rise, tower-block leaseholds. What steps is he taking to warn potential purchasers of such leaseholds that they will incur considerable and significant future costs for management, maintenance and structural work?

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Grant Shapps: The hon. Gentleman makes a reasonable point. There have been issues for leaseholders, and I spend much time considering that and working with them. Each of us tends to characterise what we think is left of the social housing stock—by the way, there are 4 million social homes, nearly 1.8 million of which are in the council and ALMO sector—and to think that the homes that we know are representative of them all. In my constituency, by and large we have street houses rather than tower blocks. Around the country there remains great diversity in the sorts of homes available, and I am sure that the renewed right to buy will be really popular.

Mrs Anne Main (St Albans) (Con): I welcome much in my right hon. Friend’s statement, but I have concerns about how the indemnity scheme will work. In an area such as St Albans, which is ringed by green belt, which does not have shovel-ready sites but which does have high house prices, what hope can he give to constituents of mine who would like to access the starter homes that are old period houses? We will not build loads of brand-new starter homes in an area such as St Albans.

Grant Shapps: My hon. Friend and I share a boundary between St Albans and Hatfield. That area used to be an aerospace site and is now available for quite a lot of house building, but that aside—I make no apology for this—we consider it important that we focus our efforts on building new homes. Every home built supports two jobs, which is important for employment and gross domestic product growth. We are therefore focusing on new homes, not just for first-time buyers but for anybody who wants to buy a new home.

Hazel Blears (Salford and Eccles) (Lab): The Minister and the Secretary of State will be well aware that the people of Pendleton have been waiting many months for the conclusion of their £150 million private finance initiative project, which will result in 800 new homes, 1,200 refurbished homes and hundreds of construction jobs. When will the Minister sort this out? The people of Pendleton need hope for the future, and if he could do it in time for Christmas, it would be extremely good.

Grant Shapps: The right hon. Lady has been a doughty champion for her residents, and it will not be too long before I can deliver further news.

Richard Graham (Gloucester) (Con): I welcome the Minister’s announcement, particularly on his indemnity scheme, which will stimulate the housing market in general and, more specifically, accelerate sales for the development of Kingsway in Gloucester, triggering badly needed infrastructure, such as a new surgery. Does he agree that the growing places programme is well suited to resolve section 106-related hold-ups to brownfield site developments, such as the one at the former Van Moppes chemical site on the Bristol road, which he visited with me some time ago?

Grant Shapps: My hon. Friend is absolutely right. Between the growing places fund and the get Britain building cash announced today in the housing strategy, there is ample room to get some of these stalled and stuck sites, such as the one I visited in his constituency, building again.

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Mr Andrew Love (Edmonton) (Lab/Co-op): I want to press the Minister on the one-for-one policy: the Government are increasing the discounts to 50%, and in return the affordable rent policy is meant to make up the difference. Will he guarantee the one-for-one policy? If it does not happen, what action will he take?

Grant Shapps: I would not have the confidence in this policy had we not already launched the affordable rent programme and discovered that it was over-subscribed. So we already have the contacts with councils and housing associations saying, “We want to do this, and we have a site to do it”. However, the Government did not have enough money to allow it to happen. We know from the size of the receipts that we will have sufficient money left over, after paying down the housing debt, to replace on a one-for-one basis.

Mr David Nuttall (Bury North) (Con): I remind the House of my interest in the Register of Members’ Financial Interests. Does my right hon. Friend agree that a central plank of any housing strategy must be a thriving and vibrant private rented sector, which should not be restricted by even more regulation, as suggested by the Labour party?

Grant Shapps: The private rented sector is absolutely vital, as my hon. Friend suggests. One of my predecessors, whom I shadowed, suggested putting rent controls back in place. However, it is instructive to consider that when rent controls were in place, the private rented sector shrank from more than 50% to just 8%. Once they were removed, it doubled back up to 16%. It is important not to burden the private rented sector with too much red tape. Having said that, however, it is also important to ensure that the quality is sufficiently high, as I said a few moments ago, and we will be doing more work in that regard.

Alison Seabeck (Plymouth, Moor View) (Lab): I make my usual declaration of an indirect interest. I received an e-mail this morning from the Minister for the Armed Forces that listed the Ministry of Defence sites in my constituency that were going into the public land pot. I made some inquiries, and the Minister should hear the answer to them. The MOD is slowing down the submission and is in no hurry to bring forward development on the site. Indeed, it is acting completely against the e-mail from the Minister for the Armed Forces, to the extent that we are now considering removing the housing element of that site. Does the Minister have any certainty that his Government’s left hand knows what their right hand is doing on this?

Grant Shapps: I am grateful to the hon. Lady—my seventh shadow Housing Minister—for making that point, which I would be happy to look into in more detail. The instruction to ensure that government land is properly used and distributed for housing has come straight from No. 10, and I will ensure that I follow up on that request.

Andrew Selous (South West Bedfordshire) (Con): I draw attention to my declaration in the Register of Members’ Financial Interests. May I encourage my right hon. Friend to keep putting families at the front and centre of his policy? More than 15% of UK families

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face over-burdensome housing costs, and many couples are putting off having children because of the high cost of housing.

Grant Shapps: My hon. Friend is right, and today’s housing strategy is very much about putting the family front and centre. We have already done a number of things, such as scrapping the density targets, which led to too many flats and not enough family homes. Today’s announcement, and in particular the mortgage indemnity, will be widely welcomed by families across the country.

Mr David Hanson (Delyn) (Lab): Hansard will show that the Minister was clear that this is new money, rather than recycled money. If that is the case, will he say what the consequential is for Wales, Scotland and Northern Ireland, otherwise we might believe that the money is perhaps not new but recycled? Secondly, are builders in the indemnity scheme building simply in England rather than nationally?

Grant Shapps: On the first point, the Barnett consequential formula will apply, which means £400 million for England. On the second point, there will now be discussions with the devolved Administrations to see whether they are interested in the indemnity scheme.

Geoffrey Clifton-Brown (The Cotswolds) (Con): I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I welcome my right hon. Friend’s announcement this afternoon of measures to reduce the 738,000 empty houses, which are a shocking waste of our built environment. Can he say what effect he thinks that those measures will have? He might also be interested to know that there were as many empty houses at the beginning of the 13 years of Labour Government as there were at the end.

Grant Shapps: I am grateful to my hon. Friend for that second statistic, of which I was not aware. Those empty houses are indeed a scandal, no matter who they have remained empty under. The Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove will lay out more details of the new, enlarged fund to tackle the empty homes. It is important that we tackle them not only through some of the traditional methods, but by taking people who may be unemployed and reskilling them, using apprenticeships and much else, to ensure that we bring as many homes as possible back into use.

Graham Jones (Hyndburn) (Lab): Satisfaction among people in the private rented sector is certainly way below 85% in my constituency. The Minister talks a good game about the private rented sector and tackling some of the worst rented properties. However, may I remind him that he is the Minister who rolled back regulation on houses in multiple occupation, did away with Labour’s register of private landlords and is about to introduce a universal credit direct payment to landlords, none of which will help my constituents in poor housing? Can he give me some examples of what he will do to deal with the private rented sector in the next year?

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Grant Shapps: Yes. I have had a good look at the range of powers available to the hon. Gentleman’s local authority, and I hope that he will join me in ensuring that it is properly using them to ensure that tenants in the private rented sector are getting a better deal. I know that his work, joined with mine, will help to make their lives a lot better.

Mark Field (Cities of London and Westminster) (Con): I fully support what the Minister has said about aspiration and today’s first-time buyers taking advantage of something that he and I—as almost-baby boomers—took for granted. However, does he understand some of the unease about the idea of using potentially billions of pounds for a Government guarantee in this area? At what point does the inflated housing market have to fall for that to come into play?

Grant Shapps: I am grateful to my hon. Friend for describing me as part of the baby boomer generation. As I have described, this is not a multi-million pound exposure for the taxpayer. In actual fact, a number of things have to happen before the taxpayer experiences any loss—not least because the lenders are paying for the scheme, because the people building the homes are paying into a pot and, of course, because there is a deposit that has to be paid first. We are carrying out a wide range of modelling, which we will release shortly as part of the consultation for the scheme. I know that my hon. Friend will take a great deal of interest in those numbers.

Ian Mearns (Gateshead) (Lab): The Minister may be aware that my borough of Gateshead already has significant unmet need, and we anticipate that something like 6,000 households will be forced to seek alternative accommodation when the housing benefit changes kick in. Will the Minister guarantee that to tackle this impending crisis, Gateshead will get more than the £68,000 new homes bonus that we got last year?

Grant Shapps: In many ways, it is entirely in the hands of the hon. Gentleman and his local authority. The more homes that are built, the more money that will flow. We have made the system disproportionately advantageous to local authorities with lower-than-average council tax banding, because we have used the national average, which favours authorities with below-average rates.

Iain Stewart (Milton Keynes South) (Con): Is my right hon. Friend aware that the National House-Building Council, which has its headquarters in my constituency and celebrated its 75th birthday last week, has widely welcomed this package of measures? In particular, it thinks that the indemnity scheme will go a long way to unlocking the supply of mortgages.

Grant Shapps: I am grateful to my hon. Friend for pointing that out. The NHBC is important, as it guarantees the quality of new homes with its own insurance scheme. Clearly, if the indemnity scheme is to work, it will require all the different partners in the sector to work with the NHBC. I am grateful for its comments and for my hon. Friend’s.

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Stephen Gilbert (St Austell and Newquay) (LD): As possibly the only Member to have been elected last year while still living at the hotel of mum and dad—[Hon. Members: “Aah”]—I welcome much that is in this ambitious document. I want to press the Minister on land disposal. How much public land has been identified by the Government and what impact will below-cost disposal have on the assumptions in the comprehensive spending review?

Grant Shapps: I am sure that my hon. Friend will be delighted with the indemnity scheme—or perhaps he has missed the boat already. The public sector land disposal programme has, I think, identified 83,500 potential plots, and I should add that that comes from only five different Departments. We still have arm’s length bodies, there are still the other Departments and plots with fewer than about 40 homes have not been taken into account at all, so we are confident of being able to go a lot further. My hon. Friend asks about the receipts. The simple answer is that if these pieces of land are not being used and are unlikely to get used under the current programme, things such as the build now, pay later scheme can unlock the land and improve the profile of receipts to the Treasury and taxpayer rather than worsen them.

Martin Vickers (Cleethorpes) (Con): The Minister will be aware that as a result of changing shopping patterns, many of our towns have boarded-up empty shop properties, many of which are substantial buildings that could easily be brought back into housing use. Will he explain what plans he has to do that? In the case of my constituency, this would provide a better and more attractive environment for the town and attract more visitors, which would boost the tourist trade.

Grant Shapps: I appreciate that there might be times when the mix is wrong. Having said that, we want to ensure that we do not destroy vibrant potential business areas. I confirm that we are looking at use class orders, for example, and we will have more to say about that shortly.

Oliver Colvile (Plymouth, Sutton and Devonport) (Con): I declare my entry in the Register of Members’ Financial Interests. Will my right hon. Friend spell out what he proposes to do about the misuse of tenancies?

Grant Shapps: My hon. Friend is right to mention the misuse of tenancies. There is considerable detail in the proposals about some of the plans that we intend to take forward. Housing fraud and abuse cost this country something like £5 billion to £10 billion a year. That covers everything from high-income, six-figure-salaried tenants taking up council housing that is meant for vulnerable people to people sub-letting homes when they already have their own home and people getting homes even though they have a home here or somewhere else. There is a wide range of abuse, and my hon. Friend will be pleased to see some of the detail in our housing strategy.

Andrew Percy (Brigg and Goole) (Con): I feel that I should declare that I do not have an interest.

During my 10 years as a city councillor I observed that the top-down approach helped to slow down house building in many areas, and I therefore welcome the

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proposed changes. I particularly welcome the commitment to build more social housing, which is much needed in my part of the world. However, may I press my right hon. Friend on the section 106 reforms? During my time as a councillor, I observed that section 106 could deliver some very good community benefits, but that it could also hold up developments. Will my right hon. Friend assure us that when there is development in a local community, that community will benefit from it in some way?

Grant Shapps: I think it enormously important for communities to benefit, and I know that Members in all parts of the House share my view. The community infrastructure levy, the new homes bonus and, indeed, section 106 all play their part in that. What concerns us, however, is that some of the deals negotiated during the boom times are now preventing developments from going ahead. It is better to have housing than to have no housing, so we are inviting people to take part in “pre-April 2010” negotiations in order to unlock some of those sites.

Mr Peter Bone (Wellingborough) (Con): The Minister has been very good at the Dispatch Box today, just as he was very good in the radio studios this morning when he was grilled by journalists. Is it not a shame that he did not make his announcement to the House first?

Grant Shapps: As you will know, Mr Speaker, I issued a written statement at 9.30 am in addition to my oral statement. However, my hon. Friend is right to point out that we deplore those who deliberately leak Government policy. Such leaks often happen because, in the case of documents such as this, it is necessary to work with third parties—there is no way round that. We always encourage them not to send out details of what is inside the documents, but unfortunately we are not always successful.

Alec Shelbrooke (Elmet and Rothwell) (Con): My constituents will be overjoyed about the document tonight, not least because it will take the pressure off greenfield sites all over my constituency. Thousands of permissions have been granted on brownfield sites in Leeds. Does my right hon. Friend agree that the document gives developers nowhere to hide, and that those brownfield sites need to be developed?

Grant Shapps: I look forward to visiting my hon. Friend’s constituency, where people will no doubt be dancing in the streets this evening. Local authorities and local people must make delicate decisions about where it is right to build and where they do not want building to take place. The Government are proud to have returned those powers to local communities. That is absolutely the right place for them, as the housing strategy confirms.

Amber Rudd (Hastings and Rye) (Con): I particularly welcome the release of public sector land to boost housing construction, but will the Minister assure me that the build now, pay later scheme will mean that taxpayers have an IOU ensuring that, when the houses are eventually sold, they will get the money back?

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Grant Shapps: Yes, I can give my hon. Friend that assurance: obviously the taxpayer must get the money back in the end. Indeed, I can go one step further in saying that we will impose conditions on how quickly developments are created and houses are built. We can get things moving faster by using that mechanism.

Jason McCartney (Colne Valley) (Con): Given that there are 11,000 long-term and short-term empty properties in my Kirklees council area and 350,000 empty properties in the country as a whole, does my right hon. Friend agree that, while today’s announcements are welcome, we need to give councils and communities greater incentives to bring those empty properties back into use?

Grant Shapps: That is absolutely true. Without putting too fine a point on it, it is a scandal that 700,000 or 750,000 properties are empty when so many people are in desperate housing need. As the hon. Member for Birmingham, Erdington (Jack Dromey) has rightly pointed out, the housing strategy takes account of all the decisions that have been made to date and then presents new proposals. We concluded that we wanted to add another £50 million to the £100 million fund for empty homes that already existed. We shall certainly want to work with my hon. Friend’s local authority and indeed with everyone else, including social enterprises, to ensure that those empty homes are returned to use.

Robert Halfon (Harlow) (Con): I refer Members to my entry in the Register of Members’ Financial Interests.

Will my right hon. Friend confirm that, under the reforms, housing money raised in Harlow will be spent in Harlow, and that we really will have Harlow housing money for Harlow people?

Grant Shapps: Our intention is to ensure that where there is demand, we can create the housing. The money will cease to be transferred via the centre and then be paid out again. That is what has happened for many years through the housing revenue account, but we are reforming that system. We have confirmed that today in the housing strategy, and as a result about £30 billion of debt will be reallocated around the system and in future be spent locally.

Annette Brooke (Mid Dorset and North Poole) (LD): How will the Government monitor whether their welcome promise to build a new social home for every one sold under the right to buy is fulfilled, and how will they ensure that if there is a clear and overwhelming need for family homes, the new properties will not be two-bedroom flats?

Grant Shapps: My hon. Friend is right that we must know what is going on with these sales, and I will set that out in more detail in a further document shortly, so she will be able to study the details and provide feedback.

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Broadly, we know where a house has been sold, so it is not too difficult to track that money and make sure that another property is built, and we will ensure that that happens.

Andrew Bridgen (North West Leicestershire) (Con): My constituency has a huge interest in there being a healthy house building industry, as we are home to not only many large and small construction companies, but many companies that supply materials to the house building sector, including the largest brick factories in the country. Does my right hon. Friend agree that our newly unveiled housing strategy will start to transform opportunities for hard-working people in North West Leicestershire and across the country?

Grant Shapps: I am grateful to my hon. Friend for his question, because he is absolutely right. Lenders are not lending; builders are not building; people cannot buy; and the whole construction industry supply chain has effectively ground to a halt. This strategy is designed to deliver precisely what he has called for. We want to make sure that jobs are created again in those sectors to support more house building in this country.

Stephen Mosley (City of Chester) (Con): May I press my right hon. Friend a little further on a question that he answered a few moments ago? He said new houses will be built on a one-for-one basis. Will they also be built on a like-for-like basis, so that, for instance, if a three-bedroom family home is sold, it will be replaced by another three-bedroom family home, not a one-bedroom flat?

Grant Shapps: My hon. Friend will recognise that some of the homes in question will, of course, have been built a long time ago, and current housing needs might be different from what they were in the past. That can work in both directions, as it were, and I will consult on the best way to implement this measure, as there is no point in building homes where they are not required. For instance, people might want to buy homes in an area that is currently experiencing depopulation, so there is nobody on the waiting list who wants a new home there. We will examine such issues very carefully, and I will welcome my hon. Friend’s comments in the consultation.

Mr Marcus Jones (Nuneaton) (Con): I am encouraged by the success of the Firstbuy scheme, which is helping many first-time buyers get on to the housing ladder, and I am sure that the new build indemnity scheme that my right hon. Friend has announced today will be equally successful. Can he tell the first-time buyers in my constituency when that scheme will be up and running?

Grant Shapps: We aim to have the scheme in place by spring next year.

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Points of Order

5.28 pm

Hilary Benn (Leeds Central) (Lab): On a point of order, Mr Speaker. Once again, a major policy announcement from the Department for Communities and Local Government has appeared in the newspapers before a statement has been made to the House. I refer in particular to the report on the Financial Times website on Saturday 18 November on the details of the mortgage indemnity scheme, and the front-page report in The Times of the same date about both the mortgage indemnity scheme and right-to-buy discounts. Mr Speaker, you have been consistently clear that statements about policy should be made to the House before they are made anywhere else. What can now be done, given that this is the third occasion when that has not happened in respect of a policy statement from this Department?

The Secretary of State for Communities and Local Government (Mr Eric Pickles) rose—

Mr Speaker: Order. Before I respond to the point of order, the Secretary of State is seeking to catch my eye, and I shall listen to him.

Mr Pickles: Further to that point of order, Mr Speaker. I want to give an assurance to you, Mr Speaker, that what appeared in the Financial Times and The Times on Saturday was not authorised by my Department or by any other Department. As my right hon. Friend the Minister for Housing and Local Government has explained, putting together policy statements necessarily involves talking to third parties, and it is a matter of some considerable regret that this information was released before we intended. It was our intention to release everything today.

Mr Peter Bone (Wellingborough) (Con): Further to that point of order, Mr Speaker. We regularly saw

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leaking under the previous Government, which was wrong, and I thought that things were going to be put right. Leaks may occur, but that does not explain why Ministers appear in the media and are grilled by journalists before they come to this House. I wonder whether that can be looked at.

Mr Speaker: I am grateful to the hon. Gentleman, the Secretary of State and the shadow Secretary of State for the point of order. Let me respond as follows. I was interested but concerned to hear the Minister for Housing and Local Government explain the position by saying that, though regrettable, it was not his doing and that those entrusted with the information had let it slip. It is not, I am afraid, a satisfactory excuse for a Minister of the Crown to say, “It wasn’t us but those to whom we gave the information.” Ministers are going to have to think rather carefully about the people to whom they entrust information in future. If they cannot be confident that the confidence will be respected, perhaps they ought not to divulge the information. I know that in these circumstances there is a tendency, particularly among old hands, for there to be a certain amount of smirking on the Front Bench but, frankly, it is not good enough—it is a rank discourtesy to the House of Commons and an abuse of Parliament. That is the reality. I deprecated this under the previous Government, but what happened in previous decades or under earlier Governments does not concern me. What I am concerned about is trying to bring about an improvement now.

Secondly, I say in respect of the point made by the hon. Member for Wellingborough (Mr Bone) that Ministers of course must make judgments about when they appear in the media, but they certainly should not allow themselves to be drawn into the pertinent matters that are to be addressed in the statement. If they now and again felt able to restrain themselves from appearing in the media until after they have addressed the House, I doubt whether either they or the nation would suffer.

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Intelligence and Security Committee

[Relevant documents: The Government’ s Response (Cm 8168) to the 2010-11 Annual Report from the Intelligence and Security Committee is relevant. The Justice and Security Green Paper (Cm 8194) is relevant in so far as it relates to the Intelligence and Security Committee.]

Motion made, and Question proposed,

That this House has considered the matter of the 2010-11 Annual Report from the Intelligence and Security Committee (Cm 8114).—(Mr Dunne.)

5.32 pm

Sir Malcolm Rifkind (Kensington) (Con): I am privileged, as Chairman of the Intelligence and Security Committee, to introduce this debate on not only the Committee’s annual report but the work of our intelligence agencies over the past year. It has been a particularly interesting year, in which we have seen a sea change in our intelligence agencies and the role that they play in the public debate of the nation: not only has the Justice and Security Green Paper been published by the Government, but only last week the Foreign Secretary, for the first time in our history, gave a lecture on the record—a public lecture—on the role of intelligence in foreign policy; over the past few months, the heads of the various intelligence agencies—the Secret Intelligence Service, the Security Service and GCHQ—have either given lectures or been interviewed on television or in the press about the work of their agencies and the role of intelligence; and the Intelligence and Security Committee has said in its annual report that we look forward to having, at least on one or two occasions, public sittings, for the first time in the history of the Committee, and we know that the Government see that to be appropriate. The fundamental reforms that we will be discussing today on the nature of the Intelligence and Security Committee and on the wider question of intelligence oversight mark a fundamental departure from the practices of the past.

Some might be entitled to ask, “Does this mean that secrecy is not as important as it used to be?” They might suggest that our secret services do not have to be as secret and that the secrets themselves do not require the same protection. Anyone who had that view would need correcting quickly and comprehensively. Of course there are secrets, and the basic role of these agencies is to carry out secret activities on behalf the nation as a whole.

Keith Vaz (Leicester East) (Lab): I welcome what the right hon. and learned Gentleman has said about this important matter. When the Select Committee on Home Affairs has sought evidence from the head of MI5 in the past, we have had to travel to its headquarters for a private briefing, sometimes with darkened windows. I welcome what he said about the fact that the heads of those agencies will be giving evidence to his Committee in public so that they can be cross-examined. Does he know when the first such sitting might be?

Sir Malcolm Rifkind: The heads of the agencies have been travelling to the Intelligence and Security Committee to give evidence—albeit in secret, not in public—for a good number of years, so precedent is not being broken. Some thought is being given to holding public sessions,

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and I certainly hope that will prove possible over the next few months. I cannot give an absolute commitment to that effect, but it is certainly what I would expect.

The nature of secret operations remains as crucial as ever. A much more mature approach is being taken to what Britain needs to remain secret and what is a legitimate question of public debate, even if the intelligence agencies are involved. When I first entered this House, and right up until the 1990s, the very existence of the intelligence agencies was never officially declared or admitted and those who led the agencies were very private figures whose identities were never revealed. Much has changed since enactment of the Intelligence Services Act 1994, but to this day some aspects of that approach remain very much in our eye. The question that must be asked is whether that is acceptable in a modern society. We have three intelligence agencies that collectively receive some £2 billion of taxpayers’ money each year. That is serious money that inevitably needs not only private scrutiny but a degree of public scrutiny, too.

Secondly, the very fact that they are secret agencies in an open society means that there is a need for Parliament and the public to take a serious interest not only in the private but, where possible, in the public way in which the agencies operate. Of course, there is a third consideration, which is that as the very activities of the agencies involve the power to intercept communications or carry out operations that, without the authority of a Secretary of State, would be unlawful, they have a privilege that is not available to the rest of the community. If one thinks that this debate is taking place in the middle of a hacking inquiry when exactly that kind of interception was carried out by those who did not have lawful authority, one can see a clear illustration of why the needs of the agencies should be subject to a degree of transparency.

Mr David Winnick (Walsall North) (Lab): The Chair of the Committee mentioned that before 1994, there was no debate—or at least no acceptance and acknowledgment by the Government of the day—of the security services. Does he accept that during the 1980s some of us pressed for parliamentary scrutiny and used every opportunity in debates to say that there should be such scrutiny by Members of Parliament?

Sir Malcolm Rifkind: I not only acknowledge that but can say that both the activity of the hon. Gentleman and many representations from other hon. Members and those outside this House led in the 1990s to the Government changing the situation. I was Defence Secretary at the time and was involved in the discussions within Government that led to the 1994 Act, which set up for the first time the independent oversight machinery. We are now trying to discuss and consider the radical modernisation of that machinery, which has existed since 1994.

It is worth also making the general point that at the end of the cold war there was a debate about whether we still needed intelligence agencies and whether they needed the funding, powers and resources they had been allocated during the cold war. The famous phrase about its being the end of history was quoted at that time. I have always been sceptical of that phrase; I prefer an alternative view, which is that as one door closes another slams in your face.

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Mark Field (Cities of London and Westminster) (Con): Although we accept that some radical change is clearly overdue, which will, we hope, be put in place, and accept that the change will be fluid because of the fluid international world in which we live, will my right hon. and learned Friend reiterate the importance of remembering that there will always be a need for certain information to remain secret? We do not want to throw everything out with the bathwater. There will always be a need for certain things to remain secret, even within this transparent 24/7 media world.

Sir Malcolm Rifkind: Yes, there are crucial requirements and anyone will understand why that is the case. The identity of intelligence officers can never be revealed. If it were, not only would they not be able to carry out their proper responsibilities but their very physical safety would be in danger. Intelligence operations and the ways in which intelligence is obtained, processed and dealt with should not become public knowledge. If they were, they would be available to our enemies and would cease to be available in that way in future. There would be no benefit in having intelligence agencies unless that fundamental secrecy applied—that covers all the areas that are relevant to the operational work they do and the benefits they provide for our society.

In the years since the end of the cold war, we have had the 7/7 bombings in London, which were very traumatic. Those terrible actions led to some deep soul-searching within the security and intelligence agencies. The perpetrators were British citizens who had been born in this country, but the agencies had not anticipated that event. In addition, there are problems with nuclear proliferation and cyber attacks, which might be aimed at Governments but cover a wide range of economic intelligence that is sought by foreign Governments and industrial interests. That is a matter of great significance.

Those new demands led the intelligence agencies to operate rather differently, which is a welcome development. The most significant point is that the intelligence agencies now work together far more than ever before. If one went to GCHQ on any day of the week one would probably find officials from the Secret Intelligence Service who had been seconded there for a significant period. The same would apply to the SIS and to each of the agencies in reverse. That is happening not because of some doctrinal view but because of the practical requirements of getting the best use of intelligence in this modern world and ensuring maximum public benefit. It is not too dissimilar to the way in which the Navy, Army and Air Force have increasingly realised that operations will involve all those services, or two of the three services, with joint activity becoming the norm rather than the exception.

The other big change, which I very much welcome, as does the Committee, has been the creation of the National Security Council. Not only does it provide an opportunity in general terms for strategic thinking, strategic planning and proper consideration under the Prime Minister, but for the first time the heads of the intelligence agencies attend meetings as of right and are able to ensure not only that they hear what is being said but that the intelligence they are providing is much more easily fitted into the requirements of Government so that the practical benefits of the intelligence is of much greater value.

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Mr Tobias Ellwood (Bournemouth East) (Con): My right hon. and learned Friend talks about the change in attitude and style in the work of our security services. Does he agree that after 9/11, in a bid to counter the asymmetric threats, the clandestine services lost their way for a period? I think of such things as Guantanamo Bay, water-boarding, rendition, dodgy dossiers and so forth. Does he agree that with the freedoms that were given to those services in a bid to try to find Osama bin Laden and hunt down the enemy we lost the moral high ground for some time and that it has taken a while for us to redeem ourselves?

Sir Malcolm Rifkind: I certainly agree that serious issues came to prominence during those years, some of which were the responsibility of the agencies and some of which were more the responsibility of government. However, I think we should get this into perspective. So far as I am aware, not a single British intelligence officer has ever been accused of personally being involved in water-boarding, torture or maltreatment of an individual. The issue—and it is a very serious issue—is whether they were aware of those matters and whether they might indirectly have colluded in such activity. I do not wish to diminish the seriousness of these matters but it is very important to make that point and get things into perspective because the same is not true of many other countries around the world. That is an important point that has to be made.

I want to speak briefly about four points in the report and then say something about the issues in the Green Paper, particularly about what is called the control principle, with regard to the handling of intelligence. Finally, I shall address the reform of the Intelligence and Security Committee. I shall try not to detain the House too long. The first of the four points in the report I want to address concerns the single intelligence account—the £2 billion that goes to the intelligence agencies. They have had a very large increase over the past few years but a cut is now being imposed—and understandably so—of 11% if one takes account of inflation over the next four years. The Committee has said:

“It is essential—given the fundamental importance to our national security of the Agencies’ work—that the settlement is kept under review and that there is scope to adjust it if there is a significant change in the threat.”

I know that every single recipient of Government funding would like to be able to say that, but I hope there is no dispute that when we are dealing with the fundamental issues of national security, if the threat were to change in a material way, it would not be acceptable to say that those resources could not be reviewed by a Government because that might in some way contradict public expenditure decisions. I have no reason to believe that the Government would take that view, but it is important to make that point, and that is what the Committee would like to stress.

The second point is the security that will be needed for the Olympics. The director general of the Security Service—again, I quote from our report—

“told us that he considers the Service to be well placed to manage the risks that the Olympics will bring.”

However, he added that

“the effort required to cover the Olympics will inevitably divert resources from the Service’s other work.”

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The Committee would like to emphasise that the National Security Council must take such steps as are necessary to minimise that risk. Although we understand that the Security Service is not at present making representations and feels that the task can be handled effectively, it is too early to be certain that that will remain the case and it must be kept under consideration.

The third point relates to cyber security. In its reports of 2008 and 2009, the Committee drew attention to the increasing risks this country faces from cyber attacks. The Committee welcomes the fact that the Government have said that cyber is now a tier 1 interest in our national security strategy and have provided more than £600 million in new resources for that purpose.

The Committee’s concern is not those sums but the potential over-interest within Government in cyber matters. We note in our report that there are 18 units with responsibilities in this field across the three agencies— two law enforcement bodies and five Government Departments—and express our concern, which the Government share, about the risk of duplication. It is extremely important that these matters are looked at to ensure that, with such large sums and so many elements of Government involved, we do not do mischief to our own objectives.

Mark Field: I entirely endorse what my right hon. and learned Friend says. We feel strongly that there is a risk of duplication, with 18 bodies having some say in cyber security. We are grateful for the Government’s commitment and provision of certainty of financing over a four-year period—the £600 million to which he referred. However, if in 2007 we had asked about the importance of cyber, it would have been largely off the radar. Does my right hon. and learned Friend agree that we must be aware that if this becomes a much bigger problem not just in governmental and military terms, but in commercial terms, by the end of that four-year period considerably larger sums might be required, along the lines of the provision for the Olympics?

Sir Malcolm Rifkind: I thank my hon. Friend for his contribution to the work of the Committee. He and I visited GCHQ and saw at first hand the increasing threat from cyber that this country faces from a number of sources. I therefore very much endorse his comments.

Mr Philip Hollobone (Kettering) (Con): I am enjoying my right hon. and learned Friend’s speech immensely. In his Committee’s report, in recommendations K and E, the Committee identifies a wider technological problem facing our security services. In recommendation E the Committee says:

“We are concerned about GCHQ’s inability to retain a suitable cadre of internet specialists to respond to the threat”,

and in recommendation K it states:

“The Committee recognises that the Security Service needs IT specialists in order to deliver its major technology projects. However, spending on consultants and contractors continues to increase at a significant rate.”

Does my right hon. and learned Friend share my concern that although his Committee has identified this as a problem, the Government are not yet up to speed in providing the answer that his Committee seeks?

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Sir Malcolm Rifkind: I very much welcome what my hon. Friend says. It is timely, because the Intelligence and Security Committee some months ago commissioned its own investigator to carry out a study of the use of contractors and consultants in the intelligence agencies. We found that they were used to a very high order and we have a number of recommendations, which we are analysing and will subsequently put to Government. I hope that many of them will be made public. Contractors and consultants can be very expensive and are not always the best way of using the resources available, but sometimes they have skills that the agencies could provide only at disproportionate cost to their wider interests. I very much welcome my hon. Friend’s comments.

Geoffrey Clifton-Brown (The Cotswolds) (Con): Does my right hon. and learned Friend agree that the situation with cyber attacks is likely to get worse, rather than better? There are clear examples around the world of such attacks significantly disabling military installations and operations, so the Government must continue to regard that as a high-level threat. In contrast to what he has just said, it is the consultants working on this on the front line around the world who are likely to know the latest technologies, rather than those who have been employed by the intelligence agencies for some time.

Sir Malcolm Rifkind: There may be some truth in what my hon. Friend says, and obviously these matters must be taken on board. Given his comments, I will make the general point that we should realise that cyber technology can be a threat and an opportunity for this country and others. One need only think of the use of what has become known as the Stuxnet malware, which temporarily prevented the Iranians continuing with uranium enrichment, which might lead to nuclear capability. If that happened—obviously, the information available is limited—it is a positive example of how such technology might prevent military conflict or a war ever taking place. Technology is not peculiar to one side of the debate or the other, but we must protect our secrets and our information. I strongly endorse my hon. Friend’s comments.

Richard Graham (Gloucester) (Con): Will my right hon. and learned Friend confirm that ministerial responsibility for cyber-security will be with the Cabinet Office and that that will in no way detract from the Foreign Secretary’s overall responsibility for GCHQ?

Sir Malcolm Rifkind: That is one of the great dilemmas that Governments have faced and, I suspect, continue to face. It is not for me to comment on what the conclusion will be, but there has been some confusion on that. My hon. Friend will be aware that Baroness Neville-Jones at one stage had some responsibility for that within the Home Office, but she is no longer in government. It probably makes sense that the Cabinet Office has some sort of lead responsibility, but many loose ends still need to be addressed. If the Home Secretary or the Minister has any thoughts on those matters, I am sure that the whole House will be delighted to hear them when they reply to the debate, as it would deal with a problem that has been present for a considerable time and to which our report refers.

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Dr Julian Lewis (New Forest East) (Con): For the sake of clarity, before some reporter’s pen runs away with him, will my right hon. and learned Friend confirm that there was no suggestion in his remarks that UK intelligence services were responsible for the Stuxnet virus?

Sir Malcolm Rifkind: Even our worst enemies have not suggested that, as far as I am aware. I of course entirely confirm that.

My final detailed point on the report relates to a part of our intelligence community that is hardly even mentioned in this House or anywhere else: Defence Intelligence. It is part of the Ministry of Defence, but its contribution and role is greatly underestimated, if not entirely unknown, in the wider world, a point we draw attention to on page 51 of the report:

“Defence Intelligence provides the largest single all-source assessment capability within the UK intelligence community.”

As it is part of the MOD, it has perhaps been more subject to resource reductions than the other intelligence agencies. The report states:

“The prospect of further cuts—combined with the impact of cuts to BBC Monitoring, on which DI relies heavily—therefore has potentially very serious long-term consequences for DI’s ability to support military operations”,

which everyone tends to know about,

“and for the UK intelligence community as a whole.”

I hope that the Government can give some careful thought to how Defence Intelligence’s unique contribution to the UK’s overall assessment capability can be properly protected. I suggest that it perhaps needs a higher profile and status in the intelligence community than it has traditionally had so that there can be wider awareness of the benefits it brings to the national interest.

I deal now with the intelligence aspects of the Government’s Green Paper, particularly the control principle and the ISC itself. As far as the control principle is concerned, many Members attending the debate will be aware that what I am referring to, and what the Green Paper refers to, is how we deal with intelligence received from other friendly intelligence services. Anyone who has any awareness of the intelligence situation will know that that is crucial to the UK, particularly our relationship with the United States. If the special relationship means anything, it means a dramatic amount of intelligence, which has continued for around 60 years and benefited the UK enormously. However, it concerns not only the United States; to a lesser degree, we share and receive intelligence from other friendly agencies as well. Fundamental to the system is the deep principle that intelligence shared with another intelligence agency will not be made available to any third party without the consent of the agency that gave it in the first place. That principle has overwhelmingly been respected, but there have been individual exceptions that caused great concern. Following the Binyam Mohamed case, the Court of Appeal decided that such information should be released in a limited set of circumstances, and that caused great concern in the United States and elsewhere. I and the Committee greatly welcome the Government’s determination to deal with the matter in a way that strikes a proper balance between the national security requirement and the interests of justice, because that is the crucial debate in these matters.

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Some might imagine that the Binyam Mohamed case was a one-off and that the Green Paper is an overreaction to the problem. With all respect, the Committee’s view is that it is not an overreaction. Although the Court of Appeal’s verdict might have been different in that case, we are today dealing with a situation that is very different from that which existed in the past. Information on this is given in the Green Paper, so I will share briefly with the House what the Government say. The Green Paper refers to judicial review, and not simply with regard to intelligence, but more broadly how it has increased over the years:

“Recourse to judicial review has increased significantly in recent decades, from 160 applications in 1974 to 4,539 in 1998. By 2010 the number of applications had reached 10,548.”

Judicial review and the overruling of the Government’s view—perhaps rightly in many cases—have become a major part of our judicial process, rather than an exception.

The raising of intelligence matters in court has also been transformed dramatically in recent years. The same page of the Green Paper states that

“in the first 90 years of the Security Service’s existence”—

meaning MI5—

“no case impacting directly on that Service’s work reached the House of Lords. In the last 10 years there have been 14 such case in the House of Lords or the Supreme Court.”

That is no longer an exception, but increasingly something we must be aware of and decide whether the previous balance is the appropriate one in the wider national interest.

Another point of interest, and one I was unaware of until recently, is that one of the circumstances in which these matters are being raised is not the release of sensitive documents to help in UK legal cases, as sometimes happens, but often the request for the release of this information to assist legal proceedings in other countries. The Green Paper states on page 7:

“The Government has strained key international relationships and risked compromise of vital sources and techniques in no fewer than seven court cases in which the applicants sought sensitive UK Government-held but very often foreign government-originated information for disclosure into foreign legal proceedings.”

Of course, Binyam Mohamed was such an example, because his appearance before a United States military commission led to the application in the first place.

Against that background and as the report states, I and the Committee very much welcome the Government’s proposals to modernise the procedure and their recommendation that the United Kingdom use the closed material procedure and involve special advocates, as already occurs in several areas, to deal with such cases. The only alternative, traditionally, has been the public interest immunity approach, but that is a blockbuster approach, and if one secures such immunity one finds that none of the information can be seen by anyone.

At least under the special advocate procedure, the special advocate—someone who has been vetted to be able to inspect such sensitive material—will have the opportunity to see it on behalf of his or her client, and, although they will not be able to reveal detailed information, they will be able at least to take it into account when advising their client on judicial proceedings.

That is greatly welcome and a step forward, but the Committee wants to make this point. If these proposals are implemented, the situation will improve considerably,

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but they do not provide an absolute guarantee that no information can ever be released at the insistence of the court, a fact that the Government acknowledge. Page 21 of the Green Paper states that closed material proceedings, involving a special advocate,

“reduce the risk of damaging disclosure of sensitive material.”

Such proceedings do not remove the risk; they reduce it. Likewise, on the following page, the Green Paper states that a decision to allow a special advocate to be available can

“be reviewable by the trial judge on judicial review principles if the other side decides to challenge the Secretary of State’s decision.”

We are therefore dealing with a very curious situation. If the Government’s proposals are accepted, the balance will change, and that is good and healthy, but the significant possibility will remain that in very special circumstances a judge might take a different view on such matters and the information could be released, with all the consequences that might flow from that.

Those who take the interests of national security very seriously indeed, as I certainly do and I am sure everyone here does, accept that, at the end of the day in a country that believes in the rule of law, the courts—in most circumstances, if not all—have to have the final word. I wonder, however, whether the Government ought to consider the argument that the provisions in the Green Paper need to be further strengthened: a belt and braces approach, which would not be inconsistent with the rule of law but would certainly provide added reassurance.

The Government have been good enough to refer in their Green Paper to the way that approach might be taken, and paragraph 2.78 on page 33 states:

“It would be possible for Parliament to provide the courts with clearer guidance in statute”.

The proposal refers to public interest immunity cases, but it could apply to special advocate cases, and the Government go on to state in the next paragraph:

“One such presumption”—

written into statute as a “rebuttable presumption”—

“would be against disclosure of sensitive”—

national security—

“material owned by foreign governments, obtained via intelligence relationships working on the basis of the Control Principle.”

That is exactly what we need seriously to consider. It would not be inconsistent with the rule of law, because at the end of the day it would be a rebuttable presumption, and the court would determine whether the presumption were rebutted.

As we have always known, the courts, when they interpret the legislation of this House, not only look at the words of an Act but try to identify, if they can, Parliament’s intention in passing it. If the statute stated that there were such a presumption against the disclosure of intelligence received from a foreign, friendly Government, the court would be able at least to take that into account before it reached a final decision, so I and the Committee hope that the Government give that proposal serious consideration.

One of the main parts of not only our report but the Government’s Green Paper concerns the future of the Intelligence and Security Committee, and although I note that it is a major issue I will not detain the House

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for long, as I hope to conclude my remarks in at most another 10 or 15 minutes in order to allow everyone else who wishes to speak the chance to do so. It is, however, a crucial matter.

Over a period of some 17 or 18 years, the Intelligence Services Act 1994 has become outdated: it no longer accurately describes how the Committee operates. That is part of the problem; another part of the problem is that the Committee, if it is to conduct its oversight effectively, needs additional responsibility and power.

It is worth remembering that when the 1994 Act was passed, the intention was not only that oversight would be provided for the first time, but that the public would be reassured that it was independent oversight—and to some degree that reassurance has not yet been achieved. The public, when they look at the Act, see a Committee that is not a Committee of Parliament, although it is a Committee of parliamentarians, because we are all appointed by the Prime Minister, we report to the Prime Minister, and only through the Prime Minister do our reports eventually reach the House. That obviously calls our independence into question.

Mr George Howarth (Knowsley) (Lab): We are all nominated by the Prime Minister, but it is important to note that this House has to endorse the names of the Committee’s members before the Committee is formed.

Sir Malcolm Rifkind: The House has to give its view, but I say to the right hon. Gentleman, who also serves on the Committee and has done so even longer than I have, that the Prime Minister has the last word. Although Prime Ministers have in practice never overruled the view of the House, they have the statutory power to do so. The House gives its advice, thus illustrating the difficulty in terms of the public’s view. That is the first problem.

The Committee, in its report, recommends—we are delighted that the Government have accepted it in principle—that the Committee become a Committee of Parliament. It is a joint Committee of the House of Commons and House of Lords, with two distinguished Members of the House of Lords, Lord Butler and Lord Lothian, but we recommend that its appointment procedure be very similar to that used by the Standards and Privileges Committee or by all Joint Committees of Parliament. Names would be presented to Parliament, but Parliament would be able to veto them if it disapproved. If it disapproved, the names would have to disappear, and only when Parliament was satisfied with the recommendations would appointments be made. Parliament would have—in a way that it does not, and has never had—the last word on both the Chairman of the Committee and its members, and it would properly be a Committee of Parliament, albeit obviously required to operate under slightly different procedures because of the secret information that we deal with. That is the first reform of a fundamental kind.

On the second reform, the 1994 Act states that the Committee has responsibility for policy, resources and administration, but it does not mention operations, a subject in which there is overwhelming public interest and in which, on a simple literal reading of the Act, we appear to have no involvement. People who ought to know better have recently asked, “How can the Committee operate effectively if it cannot even look at operations?”

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In reality, it has been looking at operations over the past few years, whether on the treatment of detainees, the Binyam Mohamed case or the use of intelligence during the Iraq war.

The Committee has been able to look at the raw material and to question agencies about operations, but that role does not appear in the Act. That needs to be revised. We suggest that, instead of listing the issues that the Committee can look at, the Act should be reformed and simply state that “the Committee should have oversight responsibility for all the activities of the intelligence agencies”, thereby including operations.

Dr Julian Lewis: On operations, does my right hon. and learned Friend agree that practice in the past has been—and is likely to be in the future—for the examination of particular operations to be retrospective and that there are very good reasons for that?

Sir Malcolm Rifkind: My hon. Friend raises a very important point. In making our recommendations to the Government—the matter is important to them as well—we acknowledge that we do not seek the level of responsibility that exists in the United States, where certain senior members of Congress have to be consulted in advance of an operation regarding what the intelligence agencies will be doing. They do not have the power to stop an operation, but they are informed about it, as they were, for example—so we understand—of that involving Osama bin Laden.

The ISC can see no public interest in such an approach. Having power without responsibility is bad enough, but to have responsibility without power is even worse. Our responsibility is to provide retrospective oversight, and the Government appear in principle to have accepted that, as long as we are dealing—as we agree we should be—with matters of significant national interest. That is right and proper. Many discussions will be needed about how that will be handled in practice, but the principle is of profound importance.

Geoffrey Clifton-Brown: I have been thinking carefully about what my right hon. and learned Friend said regarding a change in the procedure for electing his Committee. Would a constitutional issue arise if Parliament summoned either him, as Chairman of the Committee, or a member of his Committee to give information that they knew but felt they were not entitled to reveal? What would happen in such a case?

Sir Malcolm Rifkind: I can give my hon. Friend a very straightforward answer: all members of the Committee are subject to the Official Secrets Act. We see the most secret information and we have therefore all been considered suitable for that purpose. Like any other United Kingdom citizen, we cannot reveal information that is in breach of the Official Secrets Act, which is an Act of this place and must be respected. In the unlikely event of the circumstances to which my hon. Friend refers, that would be the response.

The third major reform relates to the fact that the 1994 Act states that the Committee may “request” information from the intelligence agencies. If the Committee has the power to request, the agencies have the power to decline. I have to be fair and say that the agencies have never used that power, but they are able to decline and

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that is no longer acceptable. Our view, which we have recommended to the Government, is that the Committee should have the power to require information to be shared by the intelligence agencies, and only the Government, not the agencies, should have the power to override that if, for example, a Secretary of State or Prime Minister believe there is some overwhelming national interest in doing so. That would have to be reported to Parliament.

The power to require information is not just a change of words. At the moment, if the Committee wants information we request it and the agencies, which sometimes have massive files, produce a summary of the information. I am sure that they do it in good faith, but we are allowed to see only that summarised version. The power to require information will mean that we will have our own staff who can have informal discussions in a constructive and positive way with the agencies and see all the available information. Ultimately, they will decide what summary we might wish to see, which will enable us to put questions to the agencies if we decide to take evidence from them. That is a much more sensible procedure, which I am sure will work. However, it is obviously a very important change compared with previous practice.

Hazel Blears (Salford and Eccles) (Lab): The right hon. and learned Gentleman has talked about balance in relation to the Green Paper. If there are to be more closed proceedings, is it not absolutely essential that there should be more rigorous parliamentary oversight? The Committee should therefore have more resources, not to aggrandise itself but to do properly the job that the Government are asking us to do

Sir Malcolm Rifkind: Yes. The right hon. Lady is a very senior member of the Intelligence and Security Committee. In the Green Paper, the Government have combined enhanced oversight with proposals for reform of the control principle precisely for the reason she mentions. In addition, even if there had not been a Green Paper and there were no Government proposals, I am sure the Committee would have taken the view that the time had come for a fundamental root-and-branch reform of oversight, and would have been making the recommendations we are discussing today to the Government. I do not know—and we will never know—what the Government’s reaction might have been. That would have been a different situation.

The final major change we are recommending relates, again, to the 1994 Act. The Act states that we have oversight of the Secret Intelligence Service, which is MI6; the Security Service, which is MI5; and GCHQ. That is all that is mentioned but, as the House will be well aware, the intelligence community is considerably wider than that. I mentioned defence intelligence a few minutes ago, and there is the Joint Intelligence Committee and the new National Security Council, which has a role partly concerned with intelligence. The reality is that, over the years, these additional agencies and parts of government have voluntarily subjected themselves to scrutiny by the ISC. That is right and proper, but it is time that the legislation caught up with the formal position. That has also been accepted by the Government.

In conclusion, the House might think, “Well, that’s all very well. We know what the Government’s view is and we know what the Intelligence and Security

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Committee’s view is, but what about the agencies themselves? How comfortable are they with these proposals?” I cannot speak on their behalf, but I can say that our relationship with the agencies is very positive and that they have sometimes publicly said that it is time for reform.

The agencies have taken an entirely constructive approach to the kind of issues we have been discussing today. Of course, there is a very good reason for that. Not only are the agencies great national servants operating in the national interest, but one of the big developments in intelligence oversight over the past 16 years has been that a Committee such as ours, whose primary role may seem to be to criticise agencies or the Government if something goes wrong, has also occasionally been the agencies’ champion if we conclude they are being unfairly attacked either in the media or elsewhere and are unable to defend themselves.

The obvious example of that is the 7/7 bombings, when serious representations were made that because the names of the people responsible for the bombings were on the Security Service’s files, what happened could surely have been stopped and it was all a disastrous mistake. I was not involved in that investigation, but our predecessors looked into the matter in enormous detail. It is significant that the conclusion they came to was in all material respects the same as that the coroner came to a few months ago: although various criticisms could be made, the Security Service was being unfairly accused on the central question of failing to stop that terrible event in the circumstances. The agencies have trust in the Committee partly because it has operated in a mature and sensible way. Although on many occasions the Committee may have criticised things the agencies have done, we are also prepared to speak on their behalf in public and private if we think the facts justify it.

Intelligence has been a hugely important issue for the United Kingdom for many years. The single most important intelligence achievement was Bletchley Park during the second world war, which had a material impact on our winning the war. More recently, how intelligence operates has changed fundamentally. However, the crucial aspects of intelligence remain the same: our national interest requires that intelligence agencies remain secret in their most crucial activities. That is how I started and that is how I conclude my comments. On behalf of the Committee as a whole, I commend our report to the House.

6.18 pm

The Secretary of State for the Home Department (Mrs Theresa May): I am grateful to my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind) for introducing his Committee’s report with his usual eloquence. I thank him and all the ISC’s members, a good number of whom are in the Chamber today, for the work they do throughout the year in overseeing our security and intelligence agencies. They play a very important role. Obviously, I will come on to the proposals to enhance the Committee’s role but, first, I would like to say that it plays an important and largely unseen role in overseeing the agencies. We are grateful to it for that. The quality of the Committee’s annual report underlines the unique and valuable role that it plays in the parliamentary oversight of the security and intelligence agencies.

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We continue to face a number of serious threats to our national security. As the Committee’s report rightly sets out, those threats come from a range of sources. Foremost among them are international terrorism, particularly from al-Qaeda and its affiliates. We also face an ongoing threat from residual terrorist groups linked to Northern Ireland, from serious organised crime, and from traditional espionage against British interests. Added to those long-standing threats, we must now address the growing threat to our cyber-security from cybercrime and cyber-espionage.

On international terrorism, it is worth stressing that, despite the death of Osama bin Laden, al-Qaeda remains a threat. It is true that the organisation is now weaker than it has been at any point since 9/11. US military and intelligence operations, work by the Pakistani military and, of course, the enormous contribution that UK forces have made to the international effort in Afghanistan have all been key factors. I am sure that the whole House will want to join me in praising the contribution of our armed forces, who are fighting so bravely many thousands of miles away in order to secure our streets back home from terrorism. However, threats from al-Qaeda, and from other groups that subscribe to its global jihad ideology, remain. We continue to arrest very significant numbers of people for terrorist offences—over 650 in the past two years alone.

Hazel Blears: The right hon. Lady is detailing the nature of the threat that we still face in this country. On that basis, she will recognise that the Olympic games is an area where there is clearly a heightened threat. Will she, even at this late stage, consider delaying the implementation of terrorism prevention and investigation measures, so that people who have been relocated out of London, who are some of the most dangerous people in this country, do not have the possibility of returning to London before the Olympic games?

Mrs May: The right hon. Lady is right to say that the security of the Olympic games is obviously a key concern and a key issue that we will be addressing over the coming months; indeed, it has been addressed by significant work that has been taking place over the past few years, since the bid was won. We all want to ensure that we provide a safe and secure Olympic games where people are able to endure—I am sorry, I mean enjoy; “endure” is probably more like the athletes enduring some pain during the games—the sporting achievements. We have been clear about our reasons for introducing TPIMs. We have been clear, as well, that the introduction of TPIMs, as the right hon. Lady knows, is accompanied by increased funding for the Security Service, and for the police in their counter-terrorism capacity, in order to provide for extra surveillance alongside TPIMs, which ensures that we are able to be reassured about the level of security that we can provide in relation to individuals who will be under those measures.

The leadership of al-Qaeda continues to plan operations in the UK. It attracts people for training, it has sections dedicated to overseas operations, and it radicalises and recruits. Even as its command and control infrastructure has weakened, al-Qaeda now seeks to inspire lone acts of terrorism organised and conducted without its guidance or instruction. We must now also pay more attention to the groups in Yemen and the horn of Africa, in particular,

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which are affiliated to al-Qaeda or support its ideology. These groups have independent capability. They can radicalise people in this country. Britons, Americans and Europeans are travelling to fight in Somalia with al-Shabaab and to train in Yemen with al-Qaeda.

Keith Vaz: Is that not why the National Security Council is so important? It brings together Cabinet Ministers and others—those who have domestic responsibility and Ministers such as the Foreign Secretary—in dealing with a country such as Yemen. What happens on the streets of Sana’a today may well affect what happens on the streets of London and other cities tomorrow.

Mrs May: I am grateful to the right hon. Gentleman for making that point. It is indeed the case that the National Security Council is able to bring together all the Government Ministers with an interest in matters relating to our national security—not only me and my right hon. Friend the Foreign Secretary but the Secretary of State for Defence and others. The right hon. Gentleman is absolutely right to point out that in looking at our national security we must also look at issues that arise abroad. As I have been saying, we must pay attention to the countries where people from the UK have the opportunity to travel to be trained and then to come back, perhaps to plot attacks here in the UK. What happens elsewhere matters for us on our streets, and he is absolutely right to say so. Indeed, when he intervened I was about to say that, of the people who are abroad in these areas, we know that some aspire to conduct terrorist attacks back at home.

The emergence of such groups is a stark reminder that the threat picture can change rapidly and that the factors that drive the terrorist threat to this country have not gone away. Recent attacks in Nigeria demonstrate the range of places around the globe in which western interests, including British interests, are now under threat. We also face a significant and ongoing threat from terrorism in Northern Ireland. There were 40 such attacks last year. That threat has obviously required increased effort and resources from the security and intelligence agencies.

The tragic events in Oslo this summer have also made us reconsider the threat from the extreme right. That is much less widespread and systematic than terrorism associated with al-Qaeda. However, contrary to some reports, our counter-terrorism strategy—CONTEST—already addresses that threat; that was a major change that we made to the strategy produced by the last Government. After Oslo, we will be allocating further resources to that work.

Traditional espionage continues to pose a threat—to the commercial sector, as well as to our diplomatic and defence interests. The foreign intelligence services operating in this country seek to obtain a wide range of classified and privileged information in the fields of defence, politics, government, energy, and science and technology.

The final threat that I want to mention is cyber-security. The national security strategy assessed cyber-security to be one of the highest-priority risks we now face. It is important to stress that this is not simply a risk for the future. Cybercrime is hitting British people, and cyber-espionage is hitting the British Government and British business, on a daily basis, right now.

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All these threats must now be faced at the same time as we prepare for the London 2012 Olympic and Paralympic games and the challenge of providing security for 10,500 Olympic athletes, 21,000 media and broadcasting personnel—double the number of athletes, I note—and the holders of some 10.8 million Olympic and Paralympic tickets. A question was asked earlier about the responsibility for cyber-security. That rests with the Cabinet Office, although that in no way detracts from the role of the Foreign Secretary in relation to GCHQ. The Cabinet Office is looking at a wide range of issues across Government in relation to cyber-security.

Mr Ellwood: My right hon. Friend is right to say that the Cabinet Office leads on that, and that co-ordination is welcome news. However, do we not all have a responsibility to understand cyber-security? A generation is now growing up that is using Facebook, is yet to own a credit card, and has very different liberal values when it comes to using the internet. Some small and medium-sized businesses are perhaps reluctant to pay for the addition of cyber-security because it is a little costly and times are difficult. We all have a responsibility for this, not just the Cabinet Office and Government.

Mrs May: My hon. Friend makes an extremely important point. There is an onus on all of us who are using the internet to ensure that we are aware of the responsibility that we have for our own security. One problem is that many people are unaware of what is available to help them to increase their own personal security in relation to these matters. That is a challenge that we all need to face and to rise up to.

All these threats require active and highly competent security and intelligence agencies to tackle them—and fortunately, in this country, that is exactly what we have. We should be proud of the agencies and of the work they do alongside their police colleagues. They work tirelessly, day in and day out, often at great personal risk to themselves, to keep the British public safe. They do this work without public thanks or public recognition, and we owe them an enormous debt of gratitude. As the Committee’s report notes, those working in this field continue to excel at a very challenging task. I am sure that the whole House will join me in sending them our thanks and our praise.

As the Foreign Secretary set out last week, those agencies not only defend us from threats to our national security and to the lives of British citizens but provide vital support to British military operations and diplomatic intelligence, which gives us a key national advantage in foreign and security policy. But it is precisely because of the importance of the agencies’ role, and because much of it must be kept away from the public gaze, that their work should be properly scrutinised. It is also important that, where there are any allegations of misconduct by the agencies, public confidence can be assured and retained by rigorous independent parliamentary oversight. That is why the oversight provided by the ISC is so crucial.

We sought in our Green Paper on justice and security to strengthen, clarify and modernise those oversight arrangements. For many years, successive Chairmen of the ISC have called for reform. We will answer that call. We therefore propose to formalise the role of the ISC, making it a statutory Committee of Parliament and allowing it to report to Parliament as well as to the

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Prime Minister. It will also be given a formal remit for oversight of the wider intelligence community. Crucially, our proposals will for the first time give the ISC the power to require information from the agencies.

I want to stress that, although the Green Paper proposes that we should consider the extent to which the ISC should oversee the operational activity of the agencies, no decisions in that area have yet been made. We need to consider carefully the consequences of creating such a broad power, including the impact on the operational effectiveness of the agencies and the additional resource burden that would be placed on them.

We are also looking at wider changes. We propose to consult on giving the intelligence services commissioner an expanded remit to monitor compliance with agency operational policies. We will also consult on more far-reaching proposals such as the introduction of an inspector- general to provide oversight of all agency business.

Separately, we have strengthened decision making on national security issues by creating a proper National Security Council, as was referred to by the Chairman of the Home Affairs Committee, and appointing a National Security Adviser. Those are important and profound changes to the national security and intelligence machinery at the heart of Government and I am grateful that the Committee has welcomed them.

Robust oversight and accountability are not the sole requirements of effective intelligence agencies. They also need to be able to keep the public safe, without the risk of vital intelligence or essential international intelligence-sharing relationships being compromised. For that, they need a proper legal framework that allows them to present their case in the courts and to defend themselves properly. It cannot be right that at the moment sensitive material is excluded altogether, meaning judgment is not reached on the basis of the full facts. That is why the Green Paper proposes reforms to allow the right balance to be struck between protecting sensitive material and giving the courts the access to the material that they need to allow justice to be done.

The Green Paper makes proposals, to which my right hon. and learned Friend the Member for Kensington referred, to allow closed material procedures to be more widely available to the courts, to enhance the special advocate system, and to ensure that sensitive material, sources and techniques are protected. The overall aim is to allow cases involving national security to be heard fairly, fully and safely in our courts. I am pleased that the Committee welcomed those proposals and that there was cross-party support for them. I note that the right hon. Member for Blackburn (Mr Straw)—not always one to praise this Government’s decisions—called them “elegant solutions”.

I stress that those are just proposals at this stage. I note the encouragement of my right hon. and learned Friend to strengthen that aspect of the Green Paper. We will consider other ideas if they come forward. However, our aim is and must be to strike the right balance between protecting sensitive material and protecting the fundamentals of British justice.

As well as robust oversight and the right legal framework, the other thing that the security and intelligence agencies need to do their job is, of course, resources. I am pleased with the Committee’s conclusion that the agencies

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have been given a fair funding settlement in the spending review. Like the rest of the public sector, the agencies will seek to make savings in their support functions and corporate services. Collaborative working across the three agencies is the key to that. What is clear is that the agencies have the funding that they need to maintain their current range of operational capabilities and to invest for the future. For example, much of the £650 million of funding for our transformative national cyber-security programme will fund activity by the agencies. There is no question of allowing our national security to be diminished to make savings. Although the agencies face pressures, as they always do, like the ISC, the Government remain confident in their ability to meet those challenges.

It is important to note, with the Olympics approaching, that the agencies’ plans for meeting the significant additional challenge of securing the games remain on track and that the Olympics security budget is protected.

The first duty and the overriding priority of any Government is the protection of the British public. Although great progress has been made in counter-terrorism and other areas in recent years, serious threats to our national security remain. That is why it is so vital that we have security and intelligence agencies that can continue to reduce those threats and help keep us all safe. Their work is among the most important carried out by anyone. It is right that there should be robust oversight, which is why we are modernising and strengthening the oversight arrangements. I warmly welcome the Committee’s latest annual report. Its recommendations are informing change as we speak. I look forward to future annual reports being even more useful in helping our world-class intelligence and security agencies to get even better at the valuable work that they do to protect the public.

6.34 pm

Yvette Cooper (Normanton, Pontefract and Castleford) (Lab): I, too, welcome the Intelligence and Security Committee’s annual report and the work that the Committee has done this year, which was comprehensively set out by the right hon. and learned Member for Kensington (Sir Malcolm Rifkind).

It is 13 years since I last spoke in a debate on a report by the Intelligence and Security Committee. That was before the attacks of 9/11, before the London bombings of 7/7 and the damage done by al-Qaeda, before the most recent military engagements in Afghanistan and Iraq and at a very different stage in the Northern Ireland peace process. There have been dramatic changes since then in the nature of the threats that Britain faces and in the nature of the work of the intelligence and security agencies to keep us safe. However, many of the principles that we debated then, such as the importance of accountability and managing the tensions between liberty and security and between democracy and secrecy, remain as valid and as pertinent now.

I join the Committee and the Home Secretary in paying tribute to those who work in the intelligence and security agencies, and I place on the record the gratitude of the Opposition and those we represent. Our intelligence officers and agents are not known. By its very nature, their work must go unsung. Some have even died in the course of their work and have been laid to rest quietly with no public tribute. They work tirelessly, sometimes

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in dangerous conditions, to find a piece of a jigsaw that will never be fully complete, but which could yet save lives.

In this debate, we must pay tribute from the Front Benches to the work of the ISC, as the Home Secretary has done. Its members take extremely seriously their responsibility to provide accountability, even though they cannot discuss or debate in public many of the issues that they pursue privately. There is a long tradition of cross-party working and consensus in the Committee, as indeed there should be, on many issues to do with intelligence and our national interest. I congratulate the Committee on its latest report. I also thank those who represent the Opposition on the Committee, my right hon. Friends the Members for Salford and Eccles (Hazel Blears), for Wythenshawe and Sale East (Paul Goggins) and for Knowsley (Mr Howarth), for their hard work on behalf of this side of the House and Parliament as a whole.

As the Committee and Ministers have made clear, the security risks that we face have become more diverse and technologically advanced than at any time in our history. Hostile attacks in cyberspace by other states and terrorist groups have the potential to cause serious damage to the security and prosperity of the UK. The Home Secretary has set out the continued threat from al-Qaeda and rightly paid tribute to the work of our armed forces. The work on international terrorism and counter-proliferation are becoming more closely connected. We are also dealing with new challenges, such as helping new states to emerge from the Arab spring. The older and more established threat from groups in Northern Ireland is now a growing concern.

Our security and intelligence agencies have expanded their work substantially over the past decade, supported by increased resources that were rightly provided over many years to keep Britain safe. The right hon. and learned Member for Kensington was right to point to the increasingly mature debate on security and accountability. As a result, there are large areas of agreement across the Committee and across the House on security and our national interest.

The Committee has rightly welcomed the work done by the Government through the National Security Council and the growing focus on cyber-terrorism. It is right that the Government and the agencies are increasing investment and action in that area. I also welcome the ISC’s continued scrutiny of the Prevent and Contest strategies, which we have discussed on the Floor of the House.

Like the Committee Chair, I welcome the Government’s attempts in the justice and security Green Paper to address the difficult issues of the control principle and the use of sensitive material in civil cases. Those are not easy problems to solve, but they are extremely important given the chilling effect on international intelligence arrangements if sensitive material is at risk of being disclosed. I noted the important points that the right hon. Gentleman made about the detail, practicality and workability of measures, and we stand ready to work with the Government to get that right, because it is hugely important.

We welcome, too, the Gibson inquiry, which is important for maintaining confidence in the work of the intelligence agencies. The Committee may wish to look further at that matter in advance of the Gibson inquiry beginning its work, while there remain legal delays, to ensure that the inquiry can achieve its aims.

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A number of concerns are raised as a result of the Committee’s report. In particular, in the face of the ever-changing threats, the Committee’s scrutiny of resources is extremely important. The report rightly identifies areas in which the agencies could make greater savings by, for example, exploring a consolidated approach to vetting. The Home Secretary should also take seriously the Committee’s concerns about the scale of the real-terms cuts that the agencies are facing, particularly in Olympic year. The increases in inflation since the spending review have increased those real-terms cuts. Ministers will be aware that the chief of the Secret Intelligence Service told the Committee:

“It’s quite hard to…maintain the capability of the Service when we face a 10% reduction in staff”.

Clearly all Departments and agencies need to make their share of efficiencies, but in the current circumstances it is vital that the Government accept the Committee’s recommendation that

“Given the importance of national security work, it is essential that the Spending Review settlement can be adjusted if there is a significant change in the threat.”

We are also concerned about the particular pressures surrounding the Olympics. According to figures from the Library, the real reduction in the single intelligence account next year alone will be £60 million. Next year is the year in which the eyes of the world will be on us for the Olympics, and the Home Secretary rightly discussed the Olympics in her speech. The evidence quoted in the Committee’s report shows the pressure that the agencies will face. The Security Service chief has said that

“there will be a large diversion of resource from other things into the Olympics. But I don’t think we’ve got any option about that.”

The Secret Intelligence Service chief has said that the Olympics

“will certainly have an impact on our intelligence operations and intelligence coverage of other targets during that period.”

The Home Secretary and the Foreign Secretary must take seriously the Committee’s warning that it is

“nevertheless concerned that this will inevitably divert resources from the Service’s other work during this period, and thus expose the UK to greater risk.”

At a time when thousands of police officers are being lost, the Home Secretary and the Treasury should take the opportunity to review the level of resources available for security and policing next year to ensure that they are sufficient for the threats that we will face.

As a result of the Olympics, there is also an additional reason for the Home Secretary to re-examine counter-terror powers, which my right hon. Friend the Member for Salford and Eccles has raised. The Home Secretary is aware of our deep concern that she is removing the ability to keep terror suspects out of London in Olympic year through control orders. The director-general of the Security Service told the Committee that under the Terrorism Prevention and Investigation Measures Bill and with additional resources,

“there should be no substantial increase in overall risk.”

Frankly, however, it is very hard for the House to understand why the Home Secretary should want any increase in overall risk, let alone one that is entirely a result of her own policies. The Committee is right to warn the Government about that and to raise the concern that the new regime does not offer the same level of assurance as control orders.

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We know that the Government have themselves admitted that there are issues to consider in that regard. Indeed, the Home Office has recently written to the House of Lords to say that the transitional period between control orders and TPIMs will be extended from 28 days to 42 days in an amendment to be tabled in the Lords in response, I understand, to resourcing concerns raised by the Metropolitan police. However, would it not be wise to delay the implementation of TPIMs altogether, at least until after the Olympics have taken place? Frankly, it is simply not responsible for the Government to reduce counter-terror powers, as well as resources, at a time when we know the pressures are growing. I urge the Home Secretary to examine the Committee’s report carefully and think again.

Turning to the ISC’s proposals for its own reform, the current Chair called for those reforms even before he was appointed, and I welcome his continued commitment to them. The Committee has certainly evolved since the 1994 Act, as he rightly pointed out. It started with no investigatory resource, which changed after the debates in the late ’90s. Over the years, increasing levels of detail have been provided to the Committee, and also by the Committee to the public, including more information about overall budgets and information from other Departments and organisations. Although many people in the agencies viewed the Committee with a certain suspicion and anxiety in its early years, I believe most now agree about its importance and the benefits that the agencies are provided with by having accountability and independent scrutiny. The Committee can bust myths and counteract attacks on the agencies as well as challenge and explore problems without putting security at risk in any way.

However, it is time to go further, and both the ISC and the Government are right to want reform now. The Government are right to consider strengthened executive accountability and greater scrutiny of the agencies through the executive and judicial routes, and they are right to consider options such as an inspector-general, although I understand that considerably more work will need to be done on that approach. For many years, the tradition of the agencies was one of very little executive oversight. Ministers would decide the overall framework, but they did not have clear accountability for how operations took place. That executive accountability has increased over the years, with the roles of the different commissioners being strengthened, but I do not believe it is yet on a sensible long-term footing, and the Government are right to explore that further.

It is also right that we look further at parliamentary oversight. I believe that we should have gone further on that under the previous Government. It is right to consider creating a statutory Committee of Parliament with much stronger access to information. Of course, the Committee will always have to operate in a different way from other parliamentary Committees. The principle of its operating inside the so-called ring of secrecy is integral to much of its work, so it requires additional safeguards, including on how Committee members are selected. However, I believe that the Government could still go further.

The Home Secretary said that the Government were still cautiously considering the proposal that the Committee’s work should cover operations. Of course,

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it is not for the Committee to second-guess operations in advance, which is not what the ISC is proposing, but there needs to be parliamentary scrutiny of not only the policies and good intentions of the agencies, but operations. Ministers and the agencies actively resisted that when the Committee was first established in 1994, but in fact the Committee has already gone further in practice than was originally intended in legislation. It is important to support it now and give it the proper underpinnings that it needs to be able to examine operations properly and thoroughly where it is appropriate to do so, and where the Committee believes that a significant issue needs to be investigated. I urge the Home Secretary to make progress in that area and accept the principle of the Committee’s recommendations.

I also believe that there is a strong case for the Committee, or at least its Chair, to see more detail on individual cases. I have seen no convincing reason to deny the Committee, or its Chair, access to the full oversight reports on the agencies by the various commissioners, including the annexes, which are currently often withheld.

It would help the House, too, for the ISC—or, again, at least for its Chair—to have access to the detailed papers on individual control order cases as, for example, the commissioner currently does. Again, that would not be to second-guess current cases, but so that the House could reflect on the implications of those cases for legislation. For example, we may be asked to introduce emergency legislation on TPIMs or on extending pre-charge detention, yet it is a genuine problem for Parliament that the only person who has seen all the cases that justify changing legislation is the Home Secretary who proposes the new legislation. There are too few checks and balances in that system, which is bad for democracy but ultimately also bad for the Home Secretary and for confidence in national security. It would be far better for Parliament and for the Home Secretary to have another independent voice that can come to judgment on the basis of the evidence and advise Parliament. Stronger counter-terror powers can be justified, but I would like stronger checks and balances alongside them. The Opposition would prefer to retain control orders, especially in Olympics year, but we would also prefer greater scrutiny of the control order regime by Parliament, including the ISC.

Finally, I am astonished to find myself in agreement with the hon. Member for Stone (Mr Cash), who in last year’s debate argued that the ISC Chair should be an Opposition Member. There are significant advantages to the ISC following the example of the Public Accounts Committee, the Chair of which is a senior Member of the Opposition. That is not to cast aspersions on the current ISC Chair, who would make an admirable Chair any time in opposition, nor is it—perhaps more importantly —to cast aspersions on my right hon. Friends who did admirable jobs as ISC Chairs when Labour was in government. They would make excellent ISC Chairs now, but perceived independence and credibility is even more important for the ISC than for other Committees.