[Relevant document: Sixth Report from the Defence Committee on the future of the Married Quarters Estate, House of Commons Paper No. 424 of Session 1995–96.]

Madam Speaker

I have selected the amendment standing in the name of the Prime Minister. I have to limit the speeches of Back Benchers to 10 minutes during the debate.

4.8 pm

Dr. David Clark (South Shields)

I beg to move, That this House notes that the Government proposes to sell all Ministry of Defence married quarters in England and Wales, including those occupied by service families as well as empty properties, to developers; further notes that this will leave service tenants dependent on a declining number of properties leased back for 25 years; notes that most of the properties can be exchanged by the developer with a neutral arbitrator, rather than the tenants or the Ministry of Defence, deciding whether or not exchanges are permitted; notes that the arbitrator will have to base his decision on set criteria which are vaguely worded, so that developers with expert legal advice will be able progressively to cream off the best estates; notes that steep rises in rents and the downward ratchet on the number of homes leased back, embodied in the proposed scheme, will progressively reduce and break up married quarter estates; notes that, especially at a time of overstretch. and poor recruiting and retention, these estates play a vital role in maintaining the morale of service families and the maintenance of the regimental system; and calls on the Government to dispose of surplus estates, to provide homes for civilian families but, before selling any estate with service tenants, to consult the tenants on the estate, to report to Parliament on the outcome of the consultation and to table an affirmative resolution in both Houses. Today's debate is the first occasion on which hon. Members have had the opportunity to consider the sale of our armed forces' family homes, something that has caused distress and concern to service families. Government and Opposition Members have voiced their concerns, including 20 Government Members who recognise the damage of the Government's proposals, and what they will do to the morale of the armed forces and to the security of their family homes. As they are honourable men and women, we have every confidence that they will join us in the Lobby tonight.

As the Prime Minister reminded us recently, the sale has been under consideration for a number of years".—[Official Report, 25 June 1996; Vol. 280, c. 149.] The Secretary of State's immediate predecessor wasted £5 million on financial advisers in an abortive attempt to sell off the houses. On 28 November 1995, the present Secretary of State announced out of the blue his master plan.

That date is significant, as it was Budget day—which gives the game away. The Government have never seriously attempted to deny the fact that the sale was not concerned with the long-term interests of our service men and women: the scheme was concocted solely to raise finances for the Treasury coffers—which the House will recall is the Secretary of State's old hunting ground.

One question that comes immediately to mind is: why has this scheme succeeded in interesting the financial markets when all the others have failed? The answer is quite simple: this scheme is extremely financially rewarding for them, at the expense of the taxpayer and the service men and women and their families. The deal is breathtaking in its short-termism. The Government hope to raise about £1.5 billion by selling 58,000 forces family homes to a single purchaser—any one of four foreign financial institutions.

The MOD then plans to rent back the houses in order to meet our forces' housing requirements. However, it will retain responsibility for repairs, maintenance and management of the estates. It has guaranteed the purchaser market-based rents on shorthold tenancies and sweeteners far in excess of the money invested. Well within a decade, the speculators will have got back their cash and more, and will also own all defence rnarried quarters and the associated land. The MOD gets to keep all the responsibility and none of the power over how the estate is run—all the bills and none of the proceeds from the estate.

They are the facts as the House and our forces' families know them to be. What devil lurks in the detail of the scheme, which the MOD has consistently refused to disclose to hon. Members or to service families? Instead of allaying the very real concerns of hon. Members on both sides of the House and of service families, the MOD's obsessive secrecy has increased them. We know where the details are, but we are not allowed to see the prospectus.

The Government's lack of confidence in the plans is so great that they have refused numerous requests to see the "Married Quarters Estate Information Memorandum". In the past three weeks, representations have been made to me by a number of parties who have a financial stake in the sell-off. As a result of those meetings, I now understand why the scheme is so attractive to them—indeed, it is widely known as the "goldmine of the decade".

Under the terms of the contract as set out in the "Married Quarters Estate Information Memorandum", the MOD will transfer 58,400 houses to the purchaser. Some 2,700 of them—the surplus estate—will be disposed of immediately by the purchaser for a quick profit. The remaining 55,700 houses—the retained estate—will be transferred to the purchaser on 999-year leases, with breaks every 25 years, and rented back by the MOD.

The MOD will have to pay a guaranteed sum to the purchaser in order to rent the properties back. The sum will run into tens of millions of pounds every year; for the first year, the figure will be roughly £112 million. Over 25 years, that annual guaranteed payment alone will amount to many times more than the £1.5 billion to be raised from the sale. Market-rate rent rises will add to the sum to be paid by the MOD, while the purchaser will enjoy the attractive bonus of receiving progressively more empty houses, with which he can do what he chooses.

The key is the 25-year period. Under the terms of the 25-year master agreement, there is a guaranteed release of further units. As well as the 2,700 surplus houses to be sold immediately by the purchaser, the MOD has promised to release further units each year. The first 695 family homes must be released within two years, with a minimum of 2,780 within five years, and a minimum of 13,360 will he released over the 25 years. That represents a quarter of the entire estate as it stands today. I can only assume that such a drastic cut in the size of the estate reflects the Government's plans further to reduce the strength of our armed forces.

Sir Peter Hordern (Horsham)

The hon. Gentleman will, of course, be aware that the MOD housing estate has been the subject of Public Accounts Committee recommendations for at least 10 years. At no time during that period have there been fewer than 12,000 empty homes, and at times the total has reached 15,000. Can the hon. Gentleman really defend such a state of affairs?

Mr. Dennis Skinner (Bolsover)

It is this Tory Government.

Sir Peter Hordern

I assure the hon. Gentleman that that was the case sone years back, into the Labour Government as well. It has been the most disgraceful and incompetent performance for many years, and the hon. Member for South Shields (Dr. Clark) seems to want to perpetuate it. I can only tell him that the figures that he is now releasing do not even begin to match the number of homes on the MOD housing estate that have remained vacant for probably a quarter of a century and more.

Dr. Clark

I cannot accept responsibility for the mismanagement of Army houses over the past 18 years. I must point out that it is possible to sell off the houses without this financial rip-off of a scheme.

Mr. Bernard Jenkin (Colchester, North)

Will the hon. Gentleman give way?

Dr. Clark

No, I must press on. Many hon. Members wish to speak, and I said that I would be as brief as I could.

Let me list one or two of the other benefits gained by the lucky purchaser. An aspect of the sale that has received considerable attention is the site exchange option, which provides the purchaser with the right to require the MOD to hand over properties in exchange for substitute sites. In a desperate attempt to placate service families, the MOD introduced a number of vaguely worded criteria that must be met by the substitute sites, relating to, for instance, travel-to-work time, suitability and standard of dwellings, security considerations and prime rates. Importantly, the criteria do not include access to employment for dependants of service personnel, which concerns service families very much.

That means that there is no guarantee for the families. The MOD has lost control of the transfer. If there is a dispute between the MOD and the purchaser, it will go to an arbitrator who will make the final decision. The military needs of this country will not be the criterion on which that decision is made. That directly contradicts the Prime Minister's assurance, given to the leader of the Labour party: It will not mean service personnel being moved against their will."—[Official Report, 25 June 1996; Vol. 280, c. 148.] He was wrong, and we know that he was wrong, because the Minister of State for Defence Procurement told us later that, under the terms of the contract, service families could be moved against their will, but would be forced to do so only if comparable accommodation was offered. What is comparable is a matter for debate.

Service families are used to being moved regularly. They often have to move at least once a year. I recently met a Royal Air Force widow who told me that, during her first years of service, her husband had to move eight times in two-and-a-half years. We all know of people in the military who move at least once a year. They accept that, because they know that they are being moved for military reasons. In future, however, they may be moved at the whim of property developers. The speculators will call the tune, not military demands.

The Government claim that one of the benefits of the scheme will be an influx of £100 million over five years to improve married quarters. That is because, under the proposals—

Mr. Frank Cook (Stockton, North)

Over seven years.

Dr. Clark

I stand corrected. On the basis of seven years, the Government's case is even worse.

Under the Government's proposals, the MOD will still have to pick up bills for repairs and maintenance. Last year alone, the MOD spent £126 million on repairs, and £40 million on upgrading the estate.

In a recent parliamentary answer to the hon. Member for Romsey and Waterside (Mr. Colvin), we learned that, in the past five years for which figures are available, about £198 million was gained from the sale of surplus properties. That is almost twice the amount that will be spent on reinvesting in the estate. It is fair for us to ask the Secretary of State why the moneys from sales were not used to improve the quality of housing of our service men and women. Where has the money gone? If the houses are in such a poor state of repair, what have the Secretary of State and the Government generally been doing for the past 18 years?

For 25 years, the speculators will have a guaranteed income and receipt from sales. There will be a guaranteed cash flow. The principal attraction, however, is that, after 25 years, they will gain control of the married quarters estate. The memorandum to which I have referred gives the MOD the right to retain possession of the remaining houses after 25 years unless the landlord wishes to redevelop the properties.

Late in the day, the MOD realised the shortcomings of the scheme, and introduced what it thought was a cunning scheme, in the form of a ministerial certificate related to the future operational effectiveness of the relevant establishment. Tragically, the so-called ministerial veto is virtually worthless. The legal experts retained by the would-be purchasers believe that the MOD would have the utmost difficulty in making its case in the courts. The ministerial veto is useless. After 25 years, it will be necessary to go cap in hand to the purchasers to retain the married quarters estate for military purposes.

Mr. Bill Walker (North Tayside)

As for intervention by Ministers, I trust that the hon. Gentleman will bear it in mind that, during times of hostility, the Government take special powers and can do almost anything.

Dr. Clark

There are much easier ways of trying to safeguard and protect our service men and women, and maintain their morale, than starting to wage a war so that the Government of the day can introduce emergency legislation. I am surprised that the hon. Gentleman, who has shown so much interest in defence matters, is prepared to betray the interests of service men and women.

Given the facts that I have laid before the House, it is no wonder that our forces' families are so deeply concerned by the Secretary of State's proposals. Put simply, they feel betrayed and deserted by the Government. The House may not want to take my word for it, but, in a press statement on 30 May, the Royal British Legion declared that Ministers have not thought through the long term consequences of the sell-off … in short"—

Mr. Winston Churchill (Davyhulme)

Of course they have.

Dr. Clark

The hon. Gentleman says, "Of course they have," but the Royal British Legion knows a little bit about this. I suspect that, over the years, it has accumulated information, and this is its opinion. It said: in short the proposals pose a threat to the ethos of Service life and demonstrate ignorance of Service people's real needs. What an indictment. It is small wonder that the Legion went on to demand that the sell-off should be postponed, pending a thorough review.

Some of the most critical public statements against the proposals have come from the Army Families Federation, which declared that it was speaking out to make the public aware of what irretrievable damage will be done to Service life if the Government sells off Service homes. The Defence Select Committee's report came out today. It is an excellent report. It analysed the problems, in the brief time that it had at its disposal, and concluded that, until such time as detailed proposals from the prospective purchasers have been communicated to it and assessed, it will not be in a position to reach a firm conclusion on the merits of the sale. As far as the Committee was concerned, the case was "not proven".

In evidence before the Select Committee, the Army Families Federation said: We know the Government was well aware of the concerns not only of the families but of if the three Services themselves, yet it appears to have ignored our warnings of the effect the sale will have on the morale of the Services, on recruitment, on retention and subsequently on the operational effectiveness of our Defence Force. That strength of feeling cannot be ignored. My office has been inundated—as, I am sure, have the offices of many right hon. and hon. Members—with calls from concerned service families. Such feelings have been widespread. Indeed, they were expressed in a full-page open letter in the Evening Standard under the headline, "Mr. Portillo, you are betraying us", written by the wife of one of the our service men.

I believe that today the whole House should put our armed forces and their families first. It is easy to praise them from these Benches for their dedication and the sacrifice they make for this country. We all do it. But words are cheap. Words are not enough. The armed forces must know that they are valued and treated fairly by the House.

I hope that I have clearly demonstrated that this ill-thought-out plan makes no long-term economic sense, and will cost the British taxpayer severely in the future. It will continue to cause untold uncertainty to our service families, who rightly feel badly betrayed. Sometimes, the House has got to do something. Today is one of those occasions.

4.27 pm
The Secretary of State for Defence (Mr. Michael Portillo)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'supports the Government in its determination to improve the quality and management of service housing; notes that the proposed sale of the married quarters estate in England and Wales will release £100 million of new funding to upgrade married quarters throughout the United Kingdom, and enable the Ministry of Defence to dispose more efficiently of surplus properties; notes that the sale will have no bearing on the charges service personnel pay for their quarters; recognises that the interests of the services and service families have been properly protected; and accepts the judgment of the Government and the Chiefs of Staff that the sale offers the right basis for real improvements in service housing which are long overdue.'. Nothing is more important to me than the welfare of our armed forces and their families. The Government must provide proper homes in which our service families can live, and take care of their families. That is not just a matter of bricks and mortar. Families provide each other with support and understanding, and it matters to service families to be secure and to be surrounded by friends.

I take this opportunity to pay a whole-hearted tribute to service families and wives. They do not often receive the public recognition that is their due. In times of turbulence and great activity, still today they keep the home fires burning.

It is vital for the soldier, sailor or airman on active service to know that the family is decently housed and properly looked after. Given Britain's present high levels of military activity, I thank the service wives and families for their patience, courage and stoicism. They are an absolutely integral part of service life.

Mr. A. J. Beith (Berwick-upon-Tweed)

rose—

Mr. Portillo

I want to get a little further.

A number of my hon Friends have expressed concern about our proposal to find a new owner for the married quarters. I am not surprised that it has been Conservatives who have raised the matter as it is the Conservative party that cares about defence and knows the issues that are of interest to service families.

I welcome the attention that the subject has received. It has helped me to improve the scheme that I am proposing. I welcome the representations that we have had from the organisations of service wives and I also welcome the report from the Select Committee on Defence. The matter has aroused anxieties among service families who have had to cope with change and who fear that the proposal might bring more changes. I am pleased to set out today why the policy is a good one and why people should not be anxious.

It is clearly good for morale and for peace of mind if service men and women who are posted are accompanied by their families. Our duty to provide married quarters for their families will continue indefinitely and we will meet the demand for them, where they are needed and when they are needed. But, in future, I propose that the Ministry should do so by renting, not by owning.

The Ministry has not been good at owning houses. In too many cases, their quality has fallen below the standard that service families have a right to expect and, legitimately, service families—like the rest of our community—have rising expectations. We now need to refurbish more homes more quickly. The sale of married quarters will provide the Ministry with an extra £100 million, which it would not otherwise have had, to spend on extra refurbishment. Over five years or so, we shall raise the quality of the houses we occupy to grade one condition.

If we do not proceed with the sale, I cannot imagine how, with all the pressures on public finances, we could hope to complete that programme of improvements. We would condemn a large number of service families to go on living in poor conditions.

The Ministry will do better and service families will benefit by our giving up ownership. Owning so many houses has its cost in that capital—taxpayers' money—is tied up unnecessarily and unproductively. Through the sale, that money can be released for better purposes, including meeting the many other demands for public sector capital investment.

Several hon. Members

rose—

Mr. Portillo

I am surrounded by hon. Members who would like to intervene. I think that the hon. Member for Stockton, North (Mr. Cook) was first on his feet.

Mr. Frank Cook

The Secretary of State said that the money could be released for better purposes. Would he care to enlighten the House as to the specific purposes that he has in mind?

Mr. Portillo

I gave an example straight away, but I think that the hon. Gentleman was on his feet before I had finished the sentence. I referred to other demands for public sector capital investment. This money is not tied up productively at the moment; it can be put to better use. I now give way to my hon. Friend the Member for Davyhulme (Mr. Churchill).

Mr. Churchill

My right hon. Friend spoke about the costs of ownership of armed forces' houses, but how far have the Government truly considered the cost of the proposed lease-back scheme? My right hon. Friend will be aware that over the past five years, comparative rents in the private sector have been increasing three times as fast as the cost of living. What will be the impact on the public finances at the five-year intervals when the service rents are ratcheted up to market levels? What guarantee can he offer that any increased cost will not, at the end of the day, be sought by the Treasury from the defence vote rather than being borne by the Treasury, which properly should bear it, given that it will be receiving 15 times as much benefit from this deal as will the armed forces?

Mr. Portillo

My hon. Friend made many points. I do not want to detain the House too long. I do not recognise my hon. Friend's figures for the rise in rents of shorthold tenancies. My figures show that rents have risen by 14 per cent. between 1990 and 1996. My understanding with the Treasury is that the defence budget will not be left worse off through making rental payments. Indeed, we will be better off because the Treasury will meet the rental payments. The Ministry of Defence can give up the hidden costs that I have mentioned and exchange the uncertainties of ownership for a more certain stream of rental payments. What is more, as I have just said, the Ministry will be compensated by the Treasury for the rents paid.

We have been bad owners in another way. We have a large number of empty houses, to which my right hon. Friend the Member for Horsham (Sir P. Hordern) referred. Today, there are 12,000 of them in England and Wales alone. We have to pay to secure and maintain those houses out of the defence budget, and we are rightly criticised for not releasing houses in which civilian families could live.

Mr. John Home Robertson (East Lothian)

Why not sell the empty houses?

Mr. Portillo

It has not been for want of trying to sell them. Some of them are difficult to sell, so they remain on our hands, empty and expensive. Once there is a new owner, the Ministry can release surplus properties to him. Instead of having to search for a buyer ourselves, we will just need to give six months notice of leaving a site. From that moment, the property becomes the new owner's responsibility and the defence budget is relieved of the cost.

The MOD alone will determine what houses will be given up—not the new owner, not anyone else—and it will be our clear policy to release them in discrete groups that do not break up the integrity of the service patch. There is absolutely no right for the new owner to cherry-pick or infill. We will be able to improve in that respect on recent experience. I recognise that, in some instances, the pressure on service housing managers to sell surplus property may have led them to release the most sellable houses, even if it risked breaching the integrity of the patch. My hon. Friend the Member for Portsmouth, South (Mr. Martin) has made that point to me. In future, we will be free to release only the properties that we do not need and are not central to a service community. There will be no more mixing of civilian families among service homes. Communities will be kept intact to maintain the security and mutual support of the patch.

Mr. David Nicholson (Taunton)

On how many occasions in recent years have the Opposition decided to use one of their Supply days or half a Supply day to discuss bad management of MOD housing? On the medium and long-term siting of service and married quarters, will my right hon. Friend confirm that the arrangements will not prevent the moving of service quarters to parts of the country that are less under pressure from civil housing developments and that the geographical arrangements are not absolutely set in concrete?

Mr. Portillo

We will require the houses where the Ministry of Defence needs to do its work. We will need houses where our people have to be. Those locations may well change—certainly over 25 years and even more so over 200 years. The arrangements give us the flexibility to acquire houses where we need them and to give up easily houses where we no longer need them. It seems much more sensible to achieve that by renting than by owning. I do not recall any occasion on which the Opposition used their Supply days for the purpose to which my hon. Friend referred.

Mr. Beith

I assure the Minister that I have asked many questions about the management of RAF housing. He may be confident about the arrangements, but if a service man is on an unaccompanied tour in, for example, the Falklands islands, and receives a letter from home saying that the family home is in question because it is one of those that may be exchanged as part of the development deal, the kind of picture that the Minister wanted to portray earlier of giving service men confidence will not be that portrayed at all. Service men overseas will be extremely worried when the news comes to them.

Mr. Portillo

As the right hon. Gentleman may be able to imagine, I shall come to that issue later, and I shall address his point then.

Several hon. Members

rose—

Mr. Portillo

This is a short debate and I am therefore under pressure, but I realise that hon. Members want me to give way.

Sir Teddy Taylor (Southend, East)

As my right hon. Friend the Secretary of State appears to have said something very significant and reassuring, will he give us an assurance on the integrity of the site that there will be no question of purchasers being able to put their tenants in a military area? As he is well aware, many of us are very concerned about the integrity of service areas. Will he further give an indication about the security of houses in military establishments? Will they be treated differently? They are terribly important matters. The Secretary of State has raised a significant point. It would be reassuring for it to be included in the contract.

Mr. Portillo

My hon. Friend can be entirely reassured. The new owner would have absolutely no right to put civilian tenants into military communities. As I said a moment ago, the properties that we give up are entirely a matter for the Ministry of Defence. They have nothing whatever to do with the new owner. The change affects the title to the properties. It does not affect their maintenance, security or any other aspect. I shall explain the special arrangements for the 11,000 properties that are behind the wire. Apart from that, we have no intention of giving up our responsibilities, nor do the civilian police have any intention of giving up their responsibility for security in married quarters simply because the title to the houses may have changed hands.

Several hon. Members

rose—

Mr. Portillo

I shall give way to my hon. Friend, but the House will recognise that I am constrained by time.

Sir Michael Grylls (North-West Surrey)

Does my right hon. Friend agree that the freehold of those properties is better off in the hands of professional property managers whose sole business is looking after property and who understand it, rather than in the hands of the Ministry of Defence, and that the resulting standard should be very much higher? He mentioned the £100 million to be spent on improving the properties. Will he ensure that the work is carried out by professional people rather than by the Ministry of Defence? Perhaps he should consult the new owners to make sure that we achieve good value for that £100 million.

Mr. Portillo

Most of the improvements to our housing are carried out by private contractors. That has always been the case. No doubt it will continue in future. We have not done well in maintenance in the past. We now have a new organisation in charge of maintenance—the Defence Housing Executive. I shall explain the improvements that we have made in that respect.

Mr. Nick Ainger (Pembroke)

rose—

Mr. Portillo

I shall give way to the hon. Gentleman, who has been attempting to intervene, but then I must make substantial progress.

Mr. Ainger

The Secretary of State has told the House about the ease of disposal of MOD properties either to the single buyer or afterwards—if the purchaser wishes to dispose of them. Has every property that he has mentioned—all 58,000 plus—been cleared through the Crichel Down regulations? Many of them must be covered by those regulations. He is well aware of the problems at Trecwn, just outside my constituency, where properties that were declared surplus at the beginning of 1994 still have not been disposed of because of the Crichel Down regulations. Will he assure the House that each property that he says can be easily disposed of can be sold?

Mr. Portillo

I have engaged excellent legal advisers. I am not aware of any problem in that respect and I have great confidence in the Government's title to all the properties that are being disposed of.

Dr. David Clark

My hon. Friend the Member for Pembroke (Mr. Ainger) has made an interesting point. Although I heard what the Secretary of State said, may I ask him to assure the House that the principles that guided the Crichel Down ruling will apply to the freehold sale of the land currently held by the MOD which is involved in the memorandum? Will the Government adhere to those principles?

Mr. Portillo

Ministers are anxious to explain every point. I shall ensure that that point is covered fully by my hon. Friend the Minister of State for Defence Procurement in his reply to the debate.

The Ministry will be the tenant of the new owner and a most exceptional one at that. The Government will retain responsibility for the maintenance of the homes. We shall be renting more than 50,000 properties and we are the most reliable tenant in the country. That enables us to rent at a discount of more than 50 per cent., guaranteed for the first 25 years. At the end of that period, the rents will be renegotiated, taking account of the size of our lettings, our responsibility for the maintenance and our reliability as a tenant. I cannot imagine that any other tenant will be as attractive to the owner and I have no doubt that we shall again be able to secure an excellent deal.

As the Select Committee said, we shall need to do better on maintenance. The chief of the Defence Housing Executive is a professional in housing management and he will expect his staff too to obtain the proper qualifications. As now, those who occupy the houses will pay their accommodation charges to the Ministry, not to the new owner. What they pay will be set by the independent Armed Forces Pay Review Body as it is now. The review body will take no account of the rent paid by the MOD to the owner.

Service families will continue to enjoy a subsidy that will push their rents well below market levels. That subsidy is deserved because service families move house frequently—each time they are posted. They do not have the choices or the rights enjoyed by civilian tenants, such as security of tenure or the right to buy. Although the pay review body recently increased rents, it increased pay by much more so as to leave service men clearly better off overall.

Sir Michael Shersby (Uxbridge)

By how much?

Mr. Portillo

In respect of a corporal, for example, rents were raised by £22 a month between April 1995 and December 1996 and pay rose by £66 a month. The occupiers of married quarters will have no dealings with the new owner. They will see few differences from the sale except the better programme of home improvements.

There are two special features to the sale regarding site exchange and redevelopment which have raised concerns. I shall set out the safeguards and propose some changes. Neither proposal applies to service homes behind the wire, and that cuts out 11,000 houses straight away.

Provided that whoever buys the houses initially keeps them and does not sell them on, the owner may propose exchanging the houses that we rent from him for a new site. If so, what he offers must be comparable or better. There are detailed contractual safeguards to ensure that.

We make that comparison by reference to five broad categories backed up by 21 detailed criteria. That ensures that we shall consider a broad range of factors: the distance between the houses and the military facility, the distance to leisure facilities, schools and churches and, of course, the quality of the houses—right down to room sizes.

Sir Jim Spicer (West Dorset)

On comparability, my right hon. Friend will know that a large number of service families accept the need for additional expenditure to improve the properties. In respect of the exchange of properties—for example, if an estate is closed down and sold off—will there be a total guarantee of comparability so that service men and their families are not moved into houses that are inferior in any way to those that will have been improved out of the £100 million that my right hon. Friend mentioned?

Mr. Portillo

Comparability will apply to houses as they are at the time of the proposed exchange. It will be measured by reference to the five broad criteria and the 21 more specific criteria that I set out just a moment ago. In response to suggestions from my hon. Friends, I have already added an extra provision that job opportunities for families should also be taken into account.

That list of criteria makes it unlikely that many such exchanges will occur. It is a demanding list, it is tightly drawn up and it is binding. If for any reason, however, we cannot agree with the owner about whether our criteria are met, arbitration—based on the rules that we have set—provides a quick and inexpensive way to resolve the issue.

The second special feature allows the owner to propose, after 25 years, that a whole site should be returned to him for redevelopment. At that stage—who knows—that may be the best option from our point of view. The houses will be 25 years older than they are now. The armed forces may no longer wish to be in that location and it may be best to obtain new accommodation.

If, however, we need those houses for operational reasons, we have the power to veto redevelopment. The Secretary of State of the day can rule it out by issuing a certificate. That is the ultimate safeguard. I simply do not recognise the legal advice quoted by the Opposition spokesman as I think it has no basis in fact.

Sir Michael Shersby

At paragraph 49 of its report, the Select Committee drew attention to the concern of service families that a site exchange might involve a change of school for their children which could affect children who might be in the middle of a GCSE course, for example. Can my right hon. Friend assure me that, in considering the scheme, he has at the forefront of his mind the quality of education for service families?

Mr. Portillo

Yes, and I shall make a specific point on that issue in a moment.

Mr. Menzies Campbell (Fife, North-East)

May I ask the Secretary of State about arbitration on comparability? If there is arbitration, it will take place only because there is no agreement between the parties. Even if the criteria on which the arbiter is to make his decision are those laid down by the Ministry of Defence, it is at least possible that he will find against the Ministry, in which case any guarantee offered will be only as strong as the Ministry's case at arbitration.

Mr. Portillo

The hon. and learned Gentleman is being rather petty. We have a clear contract. The criteria are clear, numerous and specific, and have been drawn up by very good lawyers. There are contractual obligations. Nevertheless, of course it is possible that we may have a dispute. If we do, either we can take it to law, with all the expense and unpleasantness that that involves, or we can have the simpler system of appointing an arbiter. I believe that the second is the simpler and better way.

The hon. and learned Gentleman must recognise that over any contract there may be a dispute; no one can guarantee that that will not happen. So what we want is a good way of resolving such disputes. [Interruption.] I seem to have carried the hon. and learned Gentleman with me, and I am pleased about that.

Mr. James Couchman (Gillingham)

My right hon. Friend has said that the houses will be of comparable or better quality, that schools and employment factors will be taken into account, and that an exchange would not require people to travel greater distances. Will he reassure the House that distance will be measured in terms of travelling time to and from the establishment to which the houses are linked?

While my right hon. Friend is answering that question, will he also assure the House that if an exchange were made, the estate given up would not be fragmented into a number of much smaller units?

Mr. Portillo

There is no question of fragmentation. We would measure distance according to how long it took people to arrive at their destination—that is, the military establishment where they work.

Several hon. Members

rose—

Mr. Portillo

I want to press on to the end of my speech now, because if I do not it will be an abuse of the time of the House.

As I said, I have valued the suggestions that I have received for improvements. I have already acted on a number, some of which were important to the chiefs of staff and some of which were made to me through Members of Parliament. Today I want to act on three more.

The first two relate to the option for site exchange—the proposal that we might swap one site for another. The Army Families Federation has asked us to include among the criteria for comparing one site with another not only the closeness of schools to the new site but the quality of the schools near the site. Education is of huge importance to parents, and I shall happily add that criterion to the list.

Secondly, there have been calls for consultation with those who might have to move. Such moves will be rare. And of course, moves to new accommodation in mid-posting already occur today, as we improve our use of the houses that we own. Moreover, it must be recognised that an exchange may take a long time to organise, and many families may have moved on anyway between the time of the proposal and the time of the change.

None the less, all that having been said, it is certainly reasonable to ask the occupiers of the day their views on how the two estates compare, judged by the criteria. I undertake that we shall consult them. We shall wish to accept a new site only if it is as good as what we have, or better—and we shall check our view with the views of the service people who have been living on the original site.

The consultation cannot be a veto, but it can be effective because it will be taken into account by the Government in reaching their view on how the estates compare. In the event of an arbitration, the occupiers' views will be given to the arbitrator and he will have to weigh them as a factor that he is obliged to consider. That is an important change. I have made it because I believe that it meets a point in the minds of several of my hon. Friends, and because it can be done without cutting across the chain of command.

The third change is this. If after 25 years we receive any proposal to redevelop a whole site, we shall stipulate that the Government must be given a minimum of four years' notice, as well as two years' free rent, so that we can be sure to have the alternative houses ready in good time.

Mr. Nicholas Winterton (Macclesfield)

Will my right hon. Friend give way?

Mr. Portillo

I was heading for home—but yes.

Mr. Winterton

My right hon. Friend will know that I am not a soft touch. Despite approaches and persuasions, I have not yet removed my name from the early-day motion. But will my right hon. Friend accept it from me that, having been in close personal touch with him and with my hon. Friends the Minister of State for Defence Procurement and the Minister of State for the Armed Forces, and having had several meetings, I fully accept the new proposals and I am happy to support the Government?

Mr. Portillo

My hon. Friend's happiness is as nothing compared with my own. I told my hon. Friends that I would listen carefully to what was proposed. M y hon. Friend the Member for Macclesfield (Mr. Winterton) made a specific proposal, and I was happy to accommodate that; it was the second proposal that I announced today.

Mr. Quentin Davies (Stamford and Spalding)

May I also thank my right hon. Friend, and my hon. Friend the Minister of State for Defence Procurement, for having listened carefully to representations made by my hon. Friends and myself and, most importantly of all, to representations made by representatives of the service families.

There is no doubt that the three additional measures that my right hon. Friend has just announced change the balance of the whole package considerably. I think that there was an implicit assurance in what he has just said, but will he give an explicit assurance that when the Government consider proposals for site exchanges, they will interpret and take account of the results of the consultation exercise in accordance with the criteria that he set out at the beginning of his speech—that is, that the Government's first priority in the matter is to ensure that the reasonable interests of service families are defended, and that the Conservative party will always take its stand on that subject?

Mr. Portillo

Yes, indeed. I am grateful to my hon. Friend. I assure him that every word of my speech has been considered, and that all the words should be taken together.

Mr. David Martin (Portsmouth, South)

As my right hon. Friend knows, the Army and the Royal Air Force have consultative bodies—the Army Families Federation and the Association of RAF Wives—to represent them when matters concerning families arise. Will he give sympathetic consideration to setting up a naval services families association, or something similar?

Mr. Portillo

I have certainly benefited greatly from my contacts with the Army Families Federation and with the Association of RAF Wives. I have not come across any organisation representing Royal Navy wives. 'There is none, on a national basis, but if there were one I. should happily meet its representatives. Whether such an organisation should be set up is not properly a question for me, but I should certainly be happy to recognise and deal with one if it came into existence.

Mr. John McWilliam (Blaydon)

rose—

Sir Patrick Cormack (South Staffordshire)

rose—

Mr. Portillo

No, I think I must finish now, because otherwise I shall have taken too long.

We have devised a scheme that brings benefit to—

Sir Patrick Cormack

Will my right hon. Friend give way?

Mr. Portillo

indicated assent.

Sir Patrick Cormack

I am grateful to my right hon. Friend for giving way.

Mr. McWilliam

On a point of order, Mr. Deputy Speaker. Is the Minister not displaying grave discourtesy to the House by giving way only to his hon. Friends?

Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

That is not a point of order for me. The Minister is responsible for his own speech, and for choosing whom to give way to.

Sir Patrick Cormack

May I ask my right hon. Friend to address himself to one important point before he finishes? I understand that several organisations have expressed an interest in the purchase of the estate. Will he make it plain to the House that he will give strong preference to a British purchaser?

Mr. Portillo

I am pleased to say that, so far as I am aware, all the bidders have a British element to them. None of them is exclusively British.

Does the hon. Member for Blaydon (Mr. McWilliam), who was so upset, want to intervene?

Mr. McWilliam

Would the Minister care to enlighten the House on how large a British element there is in these bids?

Mr. Portillo

No, because although details of the bidders have been published, it is not for me to say who they are.

We have devised a scheme that brings benefits to our armed forces and their families and, for that reason, I have received the support of the chiefs of staff, for which I am extremely grateful. The sale underlines some lessons that we have learnt in 17 years of Conservative Government. For the Government to provide a service, they do not have to own that service. Indeed, time and again we have seen that Government ownership has led to inefficiency and poor service.

I have no doubt that we can provide service families with the homes they need by renting them. Indeed, we can do it better than now. We will free our housing managers from the distractions of designing, building and trying to sell houses, and we will focus them on retaining and acquiring houses of good quality that are fit for service families.

The Government have a clear political philosophy. We look to a dynamic private sector to provide most of our needs. That is not a matter of dogma, but is because the private sector does most things better and can help us to improve the quality of services. We believe that the Government should not own things where it is unnecessary, and that we should reduce public sector borrowing where we can. It is worth remembering that people pay taxes in order to pay the interest on the Government's debt. That money could be better spent on other things.

The policy that I have described today improves housing for the services, but it also cuts public sector borrowing and releases money. The fact that it does so is a point in its favour, not a point against.

Over the coming years, I expect housing standards in our country to go on rising, and service families will want to share in that general improvement. As they see civilian standards rise, service families too will want something better. If we are to recruit and retain enough good people, we will have to provide more high-quality housing than we have in the past, and keep it in better condition.

I am committed to improving the quality of life for service families, and this scheme gives me the chance to make rapid progress towards that goal. I believe in the values, ethos and traditions of service life. If I believed that this sale would undermine them in any way, I would be fighting it—not proposing it.

Mr. Deputy Speaker

I must remind the House that Madam Speaker has placed a 10-minute limit on speeches for the rest of the debate.

5.1 pm

Mr. Bruce George (Walsall, South)

The Secretary of State's introduction was a syrupy eulogy of the service wives who had been browbeaten into surrender. Then we saw the ritualistically self-defensive party of defence yet again being holed below the water line. The bugles sounding surrender are amusing and deafening, and those who did not surrender two weeks ago have done so now. The family silver is gone—now the Government have got down to getting rid of the bricks and mortar.

I have been a member of the Defence Select Committee since it began in 1979. In the 200 or so reports that we have produced, the Committee has borne witness to endless foul-ups that have become routine. I have seen many stupidities—indeed, I have seen them in superabundance—and I have seen party advantage elevated above public interest. It is unusual for all three to coalesce into one measure, as they have in this measure.

The Government are proposing to transfer the ownership of the married quarters estate in England and Wales to the private sector in a series of long leases, and then rent back the accommodation by paying a guaranteed annual sum. Was that the only way to do it? Of course not. The Ministry of Defence has been the owner of housing for two centuries—not a very good owner, I might add. But the Government have been in charge for 17 years—long enough to put housing on a proper footing. It is an appalling indictment of the way in which they managed the housing estate that they must flog it off at the earliest opportunity available to the Secretary of State.

If the management were inadequate, surely the Government should have given the organisation that they have just set up—the Defence Housing Executive—time to do its job. It is qualified to do so, and the Government should have allowed it to manage the housing estate effectively. If the Government wanted reform, why did they not proceed with the announcement that they made a few years ago to set up a new non-profit organisation to take care of the ownership and management of the married quarters? Why did they not follow their 1993 manifesto commitment to set up a non profit-distributing housing trust"? The Defence Select Committee said: We are dismayed that an apparently arcane disagreement between the Treasury and MoD on the classification for statistical purposes of the proposed new Housing Trust should have obstructed a course of action embarked on some time ago. There is no evidence to suggest that the private sector would have been less willing to invest in the originally proposed trust than it will be in the recently proposed private company: merely that the transaction would be reflected as an increased PSBR figure rather than as a privatisation". The report continued by stating that there was no significant public or parliamentary opposition to what the MOD had tried to do after the 1993 manifesto commitment, and added: We are not convinced that the only way to reduce the number of empty quarters and fund required improvements is by selling the bulk of the estate. The report noted that the MOD had already sold nearly 7,000 married quarters. If the Government want to get rid of the excess, they can carry on doing what they have done—selling the estates if it is necessary to do so.

Sir Teddy Taylor

As a lot of people outside will be watching, listening to and reading this debate, would it not be helpful if the hon. Gentleman, or perhaps his Front-Bench colleagues, would make clear that, under a Labour Government, there would be no question of military housing being sold as a unit to the private sector?

Mr. George

I have no authority to give that assurance, but I trust that my Front-Bench colleagues will do so.

Why was it necessary to sell the houses? Were they all elderly, or stock that should be got rid of? No. The Government clearly had other intentions. The Select Committee report said: We note that the fact that the majority of the estate is in generally good condition was confirmed by an independent stock condition survey commissioned by MD to assist prospective purchasers. So the idea that the houses are being sold off because they are dilapidated is nonsense.

Some £100 million given to the new authority set up by the Government would largely solve the problem. Why go through the pantomime of selling all the properties—potentially to the Nomura bank of Japan—when MOD Ministers should go to the Treasury and say, "We want £100 million to upgrade the accommodation because we owe it to our service men and their families"? The Minister of State told the Select Committee that we do not just go to the Treasury and get £100 million out of them but they should try to do so.

Everyone knows that the real motive is not to improve MOD housing, but to improve the Tories' election prospects. The British service man has made many sacrifices, but rarely for such a base and undeserving group of people. Families who are to be turfed out of their properties, who may have some headbangers located next door or across the road and whose service ethos is shot through will remember who imposed the scheme upon them.

Why is this scheme being carried out? It is bananas. "Surely," we are told, "the MOD will gain." But it will not. Although the MOD is to dispose of the assets, the Treasury will get £1.5 billion. The MOD will retain the responsibility for managing, providing social services and maintaining the security of the estate, but it is getting nothing out of it. The gainers will be the Tory party and the property speculators. The MOD will not get the dosh, because it is going to the Treasury.

The Government are the short-termers, whose eyes can rise only as far as the next election. They do not know or care what will happen in five or 20 years. It is "tax cuts now, stupid"—that is the cry. The morale of service men, already low, will plummet even further. This is being done unnecessarily.

The MOD argues that the chiefs of staff endorse its action, but chiefs of staff who have endorsed a deterioration of defence expenditure from 5 to 2.6 per cent. of gross domestic product are unlikely to worry too much about 60,000 houses. Those who argue that this action has been endorsed by the Army Families Federation should note its statement that it was reluctantly withdrawing from public opposition. That is hardly a ringing endorsement.

Mr. Portillo

I think that I heard the hon. Gentleman, who is a member of the Defence Select Committee, being pretty insulting to the chiefs of staff. As the record of the debate will be read, I wanted to give him an opportunity to reconsider what he has said.

Mr. George

I thank the right hon. Gentleman for giving me the opportunity to reconsider but I shall move on to the identity of the buyers. That is secret. I was not present when the Minister of State for Defence Procurement reluctantly divulged to the Committee who they were. I read details in the newspapers. It is all hush-hush. I received a video from one buyer today so perhaps it is not really so hush-hush.

I am not xenophobic, but I do not like the idea of housing for which the MOD is responsible being bought by the Nomura bank. If the Japanese win contracts, many people will be insulted. I asked the Secretary of State whether the Japanese would be able to demand name changes on the housing estates, perhaps removing references to Montgomery or the Chindits. I was told that that was over the top but we must not forget what happened in County hall, whose new Japanese owners refused to permit British service men to honour their war dead until public pressure forced them to do otherwise.

Our report was the best that could have been produced in the circumstances. We could have produced a much better one if we had had adequate information. Our conclusion used the words We have sought to be satisfied". We did not say, "We have been satisfied".

This action is being taken at the direction of the Treasury and, perhaps, of Smith square. It is being done for the wrong motives. The Government, those who supinely follow them, and those who will be dragooned into following them will reap the whirlwind. We have ample information about the threats against hon. Members who were seen to be opposing the Government. I hope that the Government will relent because I do not want service men to be inconvenienced and their family homes sold, potentially to foreign owners.

Mr. Deputy Speaker

Order.

5.12 pm
Mr. Michael Colvin (Romsey and Waterside)

I pay tribute to the hon. Member for Walsall, South (Mr. George) for his speech and for his contribution to the Defence Select Committee, on which he has served for so long. On defence matters, he knows what he is talking about.

My intervention will be brief because although the Defence Select Committee, which I chair, set out our preliminary conclusions on the sale of the married quarters estate in our sixth report of this Session, which was published this morning, it is, as the hon. Member for Walsall, South said, inconclusive. I apologise to the House for its interim nature. It is incomplete because much of the information that we would require to finalise it is commercially confidential: hence all the stars in some of the evidence-taking sessions. They do not refer to expletives deleted but to confidential information.

We felt a duty to report in advance of the debate on the Floor of the House, which was bound to take place before the House rose for the summer recess. I pay tribute to our staff, to our special adviser and to the Committee, who have enabled us to meet the deadline and to have the report available for this debate. We felt that there would be such a debate, either because the other place would have approved the amendment to the Housing Bill or because the Opposition would use a Supply day for it.

The debate in the other place was interesting. Most of the speeches opposed the Government's scheme for selling married quarters until there had been more consultation and a resolution of both Houses in favour of it. However, most of the votes were in favour of rejecting that proposition and letting the Government proceed as they planned. Surprise, surprise.

Mr. McWilliam

I attended that debate and I have never seen the other place more crowded. They must have brought them out of the woodwork.

Mr. Colvin

The House will have noted that with interest and a certain amount of agreement.

The proposed sale of the married quarters estate has sparked off a lively debate in the House and outside—and quite unnecessarily. If the Government had handled the operation with more care, many of the anxieties of service men and women and their families would never have arisen. The House can agree on that.

The married quarters estate has been badly managed and maintained. There is an urgent need for better management and an enormous injection of funds to upgrade properties. Further, there is no good defence reason for the MOD to own between £1 billion and £2 billion in bricks and mortar. The money to upgrade the properties was not going to come from the shrinking defence budget; it had to come from the Treasury. As we know, there are Treasury pressures on all spending Departments and the defence budget is most certainly not immune to those threats from the Treasury.

We hope that the recently established Defence Housing Executive may improve management and maintenance—provided that it recruits the right people and is properly funded on an on-going basis. We also note that more than 2,700 quarters are surplus to requirements and 20 per cent. of the total stock of 60,000 dwellings is empty. In defence terms, in today's uncertain world, the turbulence of service life and the pressures on service men and women—and, therefore, on their families—will increase. The quality of life necessary for recruitment and retention will be more difficult to achieve. We can also agree that the cohesion and ethos of the married quarters estate—the so-called patch—is a vital part of the welfare, and therefore the morale, of service men and women.

The charges for accommodation for married quarters had fallen behind the market and the Armed Forces Pay Review Body had taken overdue but necessary action to bring them more into line with the charges for council housing, housing association dwellings and the private sector generally. We can also agree—and even Ministers might acknowledge this—that the Government have made a rod for their own back by their appalling timing in the setting up of the Defence Housing Executive, the introduction of new, increased accommodation charges through the Armed Forces Pay Review Body and by the announcement of the current proposal on Budget day, which made the insistence of my right hon. Friend the Secretary of State that this was not a Treasury-led operation rather incredible.

As our inquiry continues, the Committee will need to be satisfied, first, that the concept of the sale is in the public interest; secondly, that the method of sale is appropriate; and, thirdly, that the needs and expectations of service families are properly protected and that defence interests are being respected. We already feel that the Defence Housing Executive needs to be strengthened if it is to do its job properly. It must be assured of an adequate allocation of cash each year from the proceeds of sales to guarantee the proper maintenance and repair of all MOD housing.

The £100 million mentioned by Ministers works out at approximately £2,000 per dwelling. Bearing in mind that we have been told that upgrading is likely to include new kitchens, double glazing, new window frames and decorations, I cannot believe that £2,000 per dwelling is anything like enough. That money will be made available over five years and the House needs to be reassured that money will continue to be made available for that purpose beyond that period direct from the Treasury, rather than from the defence budget.

Mr. Tim Smith (Beaconsfield)

As my hon. Friend's report says that the majority of the stock has been well maintained and is in generally good condition, surely the money will be directed to the 19 per cent. of properties that are in poor condition?

Mr. Colvin

I thank my hon. Friend for that intervention. That is true but there is bound to be an on-going demand. The money that has been promised will not go far to maintain and upgrade properties. I am sure that if his wife asked him for a new kitchen, she would not get one for £2,000.

The House and service families need to be reassured that the sale will have little or no immediate effect on service families' housing other than to improve it, and that the safeguards recently offered by the Ministry of Defence in the site exchange option scheme and the absence of any link between housing charges and the sale will be accepted universally.

Mr. Nicholas Winterton

My hon. Friend heard the Secretary of State announce three specific proposals. I think that the proposals are excellent. Before my hon. Friend finishes his speech, will he comment on those proposals?

Mr. Colvin

For a ghastly moment I thought that my hon. Friend had changed his mind or had second thoughts. I am glad that he used that opportunity only to endorse what he has already said, and I agree with him.

Whereas rents paid by service families will be fixed by the Armed Forces Pay Review Body, I remind the House that rents paid in future by the Ministry of Defence to the purchaser of the married quarters estate is, we have been told, likely to be calculated on an assured shorthold tenancy basis. If that is so, have Ministers modified their projections of the rent that they will have to pay to the purchaser in the medium term? The House needs to be assured that if the rent that the MOD pays the purchaser is increased, the Treasury will fund that amount for at least 25 years.

Any reader of our report will see that it raises as many questions as it answers. Until such time as the prospective purchasers' detailed proposals have been made public and assessed, we will not be in a position to reach a firm conclusion on the merits of the sale. Our Committee intends to re-examine this issue when all the necessary information is available.

Our Committee was very impressed by the quality of the evidence presented to us. Undoubtedly the star of our sessions was Mrs. Cherry Milne, the chairman of the Army Families Federation. But I should also say that, considering the sticky wicket on which he was batting, my hon. Friend the Minister of State for Defence Procurement carried his bat very well. I am pleased that he is in the Chamber today for a second innings.

We must ensure that our service men and women and their families have the housing that they deserve, because we owe it to them. As they comprise the best forces in the world, they should have the best housing.

5.21 pm
Mr. Menzies Campbell (Fife, North-East)

If the speech of the Secretary of State had been set to music, certainly the early parts of it would have owed rather a lot to Vaughan Williams and to William Walton. As he came towards the end of his remarks, however, it was rather more reminiscent of the childhood ditty "10 Green Bottles". One after another, those who had so bravely held out before suddenly found themselves converted to his position, because of the nature of the concessions that he was able to make. If concessions on the proposals were necessary even in the course of this debate, they have been hardly indicative of the type of intellectual rigour that one would be entitled to expect—[Interruption.]

The hon. Member for Macclesfield (Mr. Winterton) makes a lot of noise. He is not always listened to, and he must ask himself why he has been particularly successful on this occasion. It is less than a week since he was talking about matters being obscene and wholly unwarranted—relating to the vital consideration of car mileage. Possibly he will be more successful when he adopts rather less dramatic language, and perhaps he will bear that in mind in future.

We would respect Ministers rather more if they were