Commons Sitting of 29 July 1997

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRIVATE BUSINESS
  KING'S COLLEGE LONDON BILL [Lords] (By Order)
  Read the Third time, and passed.

  LEVER PARK BILL (By Order)
  Order for Second Reading read.
  To be read a Second time on Tuesday 28 October.

Oral Answers to Questions
  ENVIRONMENT, TRANSPORT AND THE REGIONS

    Mobile Homes
    Mr. Dawson: To ask the Secretary of State for the Environment, Transport and the Regions what plans he has to review the Mobile Homes Act 1983. [9346]
    The Minister for Local Government and Housing (Ms Hilary Armstrong): My Department is currently considering a number of concerns raised by mobile home residents relating to mobile home legislation. It is too early to say what will be the outcome of those considerations.
    Mr. Dawson: I am delighted to hear that the matter is under active consideration. Does my hon. Friend agree that, although park home living can be a comfortable, peaceful and safe way of life for elderly people in their retirement, there are significant difficulties with the legislation due to severe loopholes within which poverty and exploitation can exist? I am pleased that my right hon. Friend is considering the legislation. Will she also examine the role of local authorities in the inspection and registration of park home sites? Does she agree that the way forward is through a clear partnership between the sensible and able parts of the industry, park home owners, local authorities and a reforming Labour Government?
    Ms Armstrong: I agree with my hon. Friend. I have been learning a great deal about park homes as they are now called, or mobile homes as most of us know them. I look forward to meeting the all-party group later in the year to consider some of the issues that he has raised.
    Mr. Viggers: If the hon. Lady reviews the law relating to mobile homes, will she take care not to diminish
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    excessively the rights of site owners to control the sites, because in areas such as my constituency, where Kingfisher park has a central location, a site could deteriorate rapidly if site owners did not have their current powers to control the site and maintain high standards?
    Ms Armstrong: Of course we are concerned to support the overwhelming number of reputable site owners. However, we are also concerned about a number of disreputable site owners. We want to achieve the correct balance so that site owners and those living on the sites feel safe, secure and able to work together for the betterment of all.

    Regional Development Strategy
    Mr. Sheerman: To ask the Secretary of State for the Environment, Transport and the Regions what plans he has to involve a comprehensive range of expertise in developing his proposals for a regional development strategy. [9347]
    The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): We are conducting wide-ranging consultation with all the main stakeholders nationally and in the regions on our proposals for regional development agencies involving stakeholders.
    Mr. Sheerman: I congratulate my right hon. Friend. I know of his long interest and campaigning zeal for regional development since the early 1980s. Will he take great care to make sure that all the stakeholders are involved? If the regional development strategy seems to be in the ownership of local authorities, we shall lose enormous expertise from the private sector, co-operatives and—very importantly—the universities. I hope that all the stakeholders will be at the forefront of implementing the policy and making sure that it works.
    Mr. Prescott: I very much agree with my hon. Friend about those matters, which we are discussing with all the parties that he has mentioned. We would need public-private partnership operations to be reflected in the development associations and agencies, as they have been in Scotland and Wales—another successful innovation of a previous Labour Government.
    Mr. Dafis: Will the Secretary of State tell us something about the Government's proposals in relation to integrating environmental policy into regional development policy? Does he have proposals, for example, at regional level to build on local Agenda 21s so that we have regional sustainable development strategies? How does he envisage that linking with the development of regional government in England?
    Mr. Prescott: We very much support what the hon. Gentleman has said. Indeed, it is reflected in today's announcement of proposals for the Greater London authority, which see a strategic role for the environment in London as much as in any other region. It is important that sustainable development means that economic and environmental considerations are taken together, which is often to the benefit of the prosperity of the regions involved.
    Mr. Blizzard: May I say how much businesses and local authorities in East Anglia are looking forward to the

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    establishment of a regional development agency? When my right hon. Friend considers the siting of the agency's headquarters, will he consider the economic impact that it could have, and consider siting it in the less prosperous parts of the region rather than in parts which always seem to be used by the Government for offices?
    Mr. Prescott: I have never had any doubt that every region wanted a development agency. The tours in which my hon. Friend the Minister for the Regions, Regeneration and Planning has been involved have convinced us all the more of that. I recall that, before the previous Government came to power, they proposed in their manifesto to abolish the Welsh and Scottish agencies. They chose not to do so as soon as they saw the very valuable work done by the agencies.
    With regard to the second point made by my hon. Friend the Member for Waveney (Mr. Blizzard), we must be very careful, in the name of decentralisation, not to centralise in the regions themselves. That applies as much to the development agency as it does to political accountability. We are very sensitive to that.
    Sir Norman Fowler: Is the right hon. Gentleman aware that the welcome for regional development agencies about which the hon. Member for Waveney (Mr. Blizzard) talked is not remotely shared around the country? Is it not a fact that the new regional development agencies will not only have exceptionally wide powers, from acquisition of land to financing of business, but that every member of the boards of the RDAs will be appointed by the Secretary of State? Rather than reducing the power of quangos, as he often claims, is he not in the process of creating one of the most powerful new quangos that the country has ever seen?
    Mr. Prescott: It is a bit of a cheek for any Opposition Member to talk about the role of quangos, since they created many thousands of them—involving billions of pounds—which were not accountable to the ordinary electorate. We intend to make our agencies accountable. Today's statement on London showed that. When we have completed the consultation and the White Paper is published, the right hon. Gentleman will see—if he waits—the conclusions of those discussions. He belonged to a Government who did not believe in a directly elected mayor. I see that they have changed their position in opposition. Perhaps he will change with the consultation.

    Recycling
    Mr. Canavan: To ask the Secretary of State for the Environment, Transport and the Regions what steps he is taking to encourage recycling for environmental reasons. [9350]
    The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Angela Eagle): We are looking carefully at both existing measures and at possible further measures to increase recycling. Recycling makes sense only if it represents the best practicable environmental option for a particular waste stream.
    Mr. Canavan: As the foundry industry is a recycling industry, will my hon. Friend support its strong case that
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    the greensand that it uses should be treated as inactive waste and therefore subject only to the lower rate of landfill tax of £2 per tonne rather than the higher rate of £7 per tonne? Now that the Environment Agency has commissioned a special study into the matter, will the Department make appropriate representations at the appropriate time to ensure a fair outcome for the foundry industry and those employed in it?
    Angela Eagle: As my hon. Friend will know, the landfill tax has been in existence for less than a year. We plan to look at how it operates this autumn, and I shall ensure that his comments are passed on to the people responsible for doing that. We shall see whether we can ensure that greensand has been properly classified for the purposes of landfill charge.
    Sir Sydney Chapman: Have the Government accepted, and are they implementing, the strategy set by the previous Government, aimed at recycling one quarter of all household waste by 2000 AD?
    Angela Eagle: We certainly hope to achieve the targets set by the previous Government, and perhaps even to improve on them. However, the mechanisms that they put in place for achieving the recycling targets are totally inadequate. As yet, only 6.5 per cent. of material is recycled and 12.5 per cent. recovered. The previous Government were good at setting the target but not so good at examining ways to achieve it. We shall consider issues such as recovery, waste minimisation, recycling, and the effects of the way in which the landfill tax works, so that we can introduce better incentives for reaching the targets that the hon. Gentleman mentioned.
    Mrs. Anne Campbell: I welcome the progress made towards increasing the recycling of glass, but will my hon. Friend examine ways of encouraging manufacturers to recycle bottles, which is common in other countries, as a means of making further energy savings?
    Angela Eagle: As my hon. Friend will know, the markets for recycled material are only just beginning to be established, and because of the large fluctuations in prices for such materials, they are not yet stable. My hon. Friend will be aware of the waste packaging regulations that have just been introduced, and we are assessing how those work. The Government are not only examining ways of encouraging the creation of markets for recyclable materials, but thinking about what we can do to encourage a more stable atmosphere, in which people can recycle.
    There is overwhelming evidence that individuals wish to recycle. In response to a Gallup poll, 95 per cent. said that they wanted to do so. We want to create stable conditions in which it is easy for people to recycle, so that the streams of recyclable materials now being produced can be put to proper use, rather than ending up wonderfully separated but back in the landfill.
    Mr. Bob Russell: On the basis that Governments should lead by example, is the ministerial team happy with the record that it inherited, especially with regard to Government Departments? What steps do Ministers plan to take to improve on the previous Government's record?

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    If the Minister would like an example, may I direct her attention to the excellent record of Colchester borough council?
    Angela Eagle: We are more than anxious to examine best practice at local authority level and in other areas. The Government can learn a good deal from some of the innovative schemes that local authorities have put in place. However, only 8 per cent. of local authorities are approaching even the targets that the previous Government set. Clearly, we must look to our own behaviour, which is why I recently hosted a conference on green procurement.

    Decentralisation
    Mr. MacShane: To ask the Secretary of State for the Environment, Transport and the Regions if he will ensure that the English regions are not excluded from forthcoming decentralisation legislation. [9351]
    The Minister for the Regions, Regeneration and Planning (Mr. Richard Caborn): A Bill to provide for regional development agencies was announced in the Queen's Speech and will be introduced in the autumn. That will be a first step towards decentralising decision taking in the British regions.
    Mr. MacShane: I thank my hon. Friend for his answer. Is he aware of the welcome in the country for Labour's moves towards handing some power back to the people, after the years of corrupt Tory rule during which the Conservative party treated the state as its private property, ruled from London? As a fellow South Yorkshire Member of Parliament, is the Minister aware that, in a year or two, when we have a Scottish Parliament, a Welsh Assembly and a mayor in London, the 7 million people of Yorkshire might say, "What about us?" What plans does he have to continue the process of ensuring that the voice of the British regions is heard, and that they have more accountability and more control over the decisions that affect their daily lives?
    Mr. Caborn: I thank my hon. Friend for the due modesty that he always shows in asking supplementaries. I assure him that we fought the election and won it handsomely on a major constitutional change; we shall follow that through. As I said in my answer, the first step is to get regional development agencies into being and then to encourage the formation of chambers. We shall then move towards elective regional assemblies when that has been determined by the people in the regions.
    Opposition Members are obviously living in the past. I can assure them that the Confederation of British Industry, the chambers of commerce, the Trades Union Congress, local authorities and academia, through the Committee of Vice-Chancellors and Principals of the Universities of the United Kingdom, all support the move towards regional development agencies. I suggest that the Opposition should come into the 20th century, let alone the 21st century.
    Mr. Nicholas Winterton: I recognise the importance of local government and I am personally sad that many duties and responsibilities were removed from local government in recent times. I speak as somebody who
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    served in local government, and that is why I am so supportive of it. It is, however, important that government functions be taken as close to the people as possible because what affects people is government functions and responsibilities. Is it not right, in decentralising and moving in the way that the Minister has suggested, to tell people how much the change will cost and what existing local authority levels or authorities are likely to be reduced or abolished in the movement towards what the Minister described as regional agencies and regional assemblies?
    Mr. Caborn: The hon. Gentleman has asked an interesting supplementary. We are dealing here with regional development agencies. I know that the hon. Gentleman is extremely interested in manufacturing.
    Mr. Paice: That is not an answer.
    Mr. Caborn: There are three parts to the question which I have answered already, as the hon. Gentleman would know if he had listened.
    The regional development agencies are intended to address the weaknesses in the competitive base of this nation. I know that the hon. Member for Macclesfield (Mr. Winterton) understands that as well as I do in terms of the northern region. We shall bring the local authorities together—we have made that clear commitment in our manifesto—but we shall move to regional assemblies only when that change has been determined by a referendum in each of the English regions. Those referendums may take place at different times. That is the commitment we gave in our manifesto, and that is what we were elected on.
    Mrs. Ellman: Will the Minister consider giving official recognition to regional chambers that already exist through voluntary means? In the north-west five years ago, for example, the public, private and voluntary sectors came together to form the North-West Regional Association and the North-West Partnership, which have brought public, private and voluntary sectors together to develop strategies for the region. Will my hon. Friend consider giving official recognition to such bodies pending the setting up of new ones?
    Mr. Caborn: We shall look carefully at the consultation document. As my hon. Friend knows, it went out a few weeks ago and it will conclude on 5 September. We shall reflect on all the 10 English regions in response to the document and we shall then give a considered reply. I hear what my hon. Friend said, and her point will be taken into consideration when we review the position.
    Mr. Simon Hughes: I say to the Minister, the Secretary of State and their team that the Liberal Democrats greatly welcome the honouring of the manifesto commitment to produce a Green Paper on London government. We look forward to others for the other regions of England.
    Will Ministers make two points clear? First, will they ensure that the policies and finances of regional government are made much more important than the personalities? In other words, we should not get into personality politics, but should concentrate on the policies. Secondly, Ministers should make it clear that the Government have an honestly open mind in terms of

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    ensuring that we have electoral systems for the regions that make sure that, once we establish them, no Government who are against them can take them away.
    Mr. Caborn: I thank the hon. Gentleman for that question. It is a bit rich for Opposition Members to protest when we are honouring manifesto commitments, but I know that they have great difficulty in understanding that we are doing so.
    Finance is one of the matters considered in the discussion document, and we shall reflect on that point after 5 September. The electoral system will be discussed when we decide to have a referendum, which will be some time down the road before we move to regional assemblies. The electoral system will be a point of discussion before we enter that debate.

    Devolution (London and the Regions)
    Mr. Rhodri Morgan: To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on his consultations on devolution in London and the regions of England. [9352]
    The Minister for London and Construction (Mr. Nick Raynsford): As my right hon. and hon. Friends said, we have consulted on our proposals for setting up regional development agencies in England. Comments are invited by 5 September. As regards London, my right hon. Friend has today laid before the House copies of the Green Paper "New Leadership for London; the Government's proposals for a Greater London Authority". We shall consult on those proposals between now and 24 October.
    Mr. Morgan: I welcome progress on this issue, because it shows that the contagion of devolutionary democracy has spread from the banks of the Taff to the banks of the Thames, and even to the Tyne.
    Mr. Raynsford: I am grateful to my hon. Friend for welcoming the Government's response to the clear and legitimate wish of the people of England for effective action on more devolution and a more effective say over their local economies. We are interested in delivering for the people of London and the regions of England.
    Mr. Clifton-Brown: Will the hon. Gentleman confirm that that extra layer of unwanted and unwarranted bureaucracy, which will work alongside county councils, district councils, town councils and parish councils, will inevitably reopen the debate on unitary authorities?
    Mr. Raynsford: As the hon. Gentleman will no doubt be aware, in our proposals for London we are sweeping away a large number of unaccountable quangos that were set up by the previous Government, and in their place we are creating a streamlined, slimline authority. That has been warmly welcomed by those people who understand the needs of London government.
    Mr. Gunnell: In his announcement today, my hon. Friend proposed a new strategic authority for London with an elected mayor. That may be welcomed by the people in London who were distressed at the abolition of the
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    Greater London council. When we discuss the regions, we shall consider the proposals for a new strategic authority. Will an elected person act as spokesperson for the entire region or will my hon. Friend recommend that English cities in the regions consider the possibility of an elected mayor? If so, how will that fit into the current system of unitary authorities?
    Mr. Raynsford: As my hon. Friend will know, the framework that we propose for London includes a directly elected mayor working with a directly elected assembly. It is interesting to note that the Conservative party, having previously opposed that concept, has recently begun a somersault. In our proposals for the regions, we shall be keen to encourage democratic innovation. A Bill will be introduced in the other place to allow innovation in local government arrangements, including the possibility of directly elected mayors in English councils. The framework that we propose for regional development agencies will allow a good measure of discretion locally on how those arrangements can best work.
    Sir Norman Fowler: Will the hon. Gentleman confirm that, under his proposals, London will have not only a mayor, but a new Greater London authority with 32 members and a London regional development agency? Does that not create an unnecessary and expensive bureaucracy? Will he tell the House what new charges the Government are considering in order to finance that bureaucracy?
    Mr. Raynsford: In today's Evening Standard, Simon Jenkins said that there is a clear need for the new mayor of London to be subject to a framework of democratic accountability. The Government are providing that in the form of the mayor and the assembly. We are streamlining the administration of London government and establishing a framework that will ensure that Londoners will be able to get better and most cost-effective services. There is no substance whatsoever in the allegation that charges will be substantial increased to pay for that. It will be a streamlined authority that will be cost-effective and will deliver value for money for Londoners.

    Devolution (The North)
    Mr. Cousins: To ask the Secretary of State for the Environment, Transport and the Regions whether it remains the policy of the Government to work towards the objective of a democratically elected regional government for the north; and through what stages they intend to reach that objective. [9353]
    Mr. Caborn: It remains our aim that the people should be able to decide, region by region, whether they want directly elected regional government, but that is a long-term goal. In the meantime, we are committed to supporting regional chambers established by local authorities.
    Mr. Cousins: Does my hon. Friend agree that many of us in the north want to set a course towards democratic regional government and regard the proposed regional development agency as very welcome but only the first step? Does he further agree that there must be a regional representative body to accompany the agency and that

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    when the Lord Chancellor said at the weekend that there was no evidence of demand in the north for regional government, he was not speaking for the Government as a whole?
    Mr. Caborn: Our position on democratic accountability is laid out clearly in the manifesto and we have made it clear that regional chambers, based around local authorities, will be the first step towards that long-term objective. To the best of my knowledge, the Lord Chancellor was not speaking on behalf of the Government when he expressed his personal opinions in a wide-ranging article in the Observer. The manifesto commits us to regional chambers and, in the long term, to elected regional assemblies.
    Mr. Forth: As well as considering devolution within England, have the Government given any thought to devolution to England? Is it not time that thought was given to an English Parliament or Assembly to follow the precedent that the Government are setting for Scotland and Wales? When will the people of England have a proper voice in the matter?
    Mr. Caborn: The right hon. Gentleman is the last person who should lecture us on democracy. We have to dismantle the wholly undemocratic quangoland that he and his Government set up. We shall address the longer-term issues when we have sorted out all that lot.

    North-west England (Environmental Audit)
    Mr. Jack: To ask the Secretary of State for the Environment, Transport and the Regions if he will conduct an environmental audit for the north-west of England; and if he will make a statement. [9354]
    The Minister for the Environment (Mr. Michael Meacher): A number of such audits have already been undertaken locally, including those conducted by Lancashire, Cumbria and Cheshire county councils, and the quality of life and sustainability audit recently completed by the north-west region of the Association of Local Authorities.
    Mr. Jack: I thank the Minister for that answer. Will he consider again the question of an audit? If he were to carry one out, he would find that, in early July, there was a release to atmosphere of an extremely noxious substance that came in the direction of Fylde and caused great upset to many of my constituents, 300 of whom rang Transco to complain about what they thought was a major gas leak; it turned out that there was a sulphurous release from an oil and gas development operating in Liverpool bay. Will the Minister make early investigations into the matter? What specifically does he intend to do to prevent such noxious substances from reaching the atmosphere again?
    Mr. Meacher: I think that the right hon. Gentleman is referring to a release from Broken Hill Proprietary—BHP—and I am certainly concerned about that; we are following it up and considering what action we can take, including prosecution.
    I am also concerned about a further incident last Saturday—I am not sure whether the right hon. Gentleman was also referring to it—and both the Health
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    and Safety Executive and the Environment Agency have made extensive inquiries of Transco and all the chemical and petrochemical companies along the Mersey estuary, but we have still not been able to discover the cause of the leak. It may have been caused by an offshore facility—we are checking that option—or by a leak from a road tanker, but the police and the HSE have received no official report to that effect.
    I am seriously concerned about such incidents, not least because the HSE already has in place a rigorous programme of proactive inspections of gas transporters such as Transco, precisely to ensure that there is compliance with the law and such incidents do not take place.
    Mr. Kaufman: In considering any environmental audit in the north-west, will my right hon. Friend pay special attention to the land known as Kingswater park, which is the only open countryside that my constituents can reach on foot? Will he note that, at a public meeting at Fairfield golf club on Friday evening, hundreds of local residents expressed their total and angry opposition to any attempt by North West Water to ruin the land with its greedy and vandalising fingers?
    Mr. Meacher: I am very concerned about North West Water on a number of counts—not least because the north-west has a far worse record than any other part of the country in adhering to the bathing water directive. I am also concerned about the issue raised by my right hon. Friend; if he would care to give me details, I will take the matter up personally with North West Water and, indeed, call the company in.
    Mr. Yeo: Does the right hon. Gentleman agree that the process of environmental audit could usefully be extended to enable consideration of how the target of building 60 per cent. of new homes on previously developed land can be achieved? Or do the reported threats of the Minister for London and Construction to cover green-field sites with concrete mean that the Government have abandoned planning policies that protect the countryside and the green belt—notably, in such places as Uxbridge?
    Mr. Meacher: The Green Paper to which the hon. Gentleman refers, which was issued by the former Secretary of State in the last Government—or perhaps I should call it the not-so-green paper—proposed that, initially, 50 per cent. of all houses should be built on green-field or countryside sites. The proposal was subsequently changed to a 60:40 split. That split comes from the last Government; it certainly does not come from us.
    We are still considering the responses to the Green Paper and assessing the degree to which housing can be built on previously developed land. That is still the main intention. We are still very concerned about protecting green-field and countryside sites. I certainly will not take any lessons from Conservative Members, because it was they who put us in this position in the first place.

    London Underground
    Mr. Ottaway: To ask the Secretary of State for the Environment, Transport and the Regions what steps he intends to take to increase investment in London Underground. [9375]
    Mr. Prescott: We are urgently looking at various options for public-private partnerships to increase

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    investment in the underground, and we recently appointed Price Waterhouse to examine the financial implications of a range of options. The aim is to achieve our manifesto commitment
    "to improve the Underground, safeguard its commitment to the public interest and guarantee value for money for taxpayers and passengers".
    Mr. Ottaway: Given the now glaringly obvious success of railway privatisation, and given Labour's willingness to change its mind about projects such as the Birmingham northern relief road, will the right hon. Gentleman now take up one of the options that he left lying around in a "Panorama" studio and admit that privatisation of London Underground is the best way forward?
    Mr. Prescott: I must make it clear to the hon. Gentleman that we have inherited an underground system whose investment programme was slashed by the last Administration, along with the overrun of the Jubilee line extension project. Already, there is a shortfall of more than £700 million. The answer to the long-term investment problems of the underground is to appoint the financial advisers whom we have appointed to examine public-private partnerships. We entirely reject the outright privatisation solution of the Conservative Government.
    Mrs. Dunwoody: Anyone using public transport in London will welcome my right hon. Friend's views, but I hope—in fact, I am sure—that he will look carefully at the real costs to the taxpayer of privatisation before there is any suggestion that too much private company money is put in. Does my right hon. Friend agree that—as the privatisation of the railways shows—privatisation is a way of making money for the companies, but certainly not a way of improving services for the consumer?
    Mr. Prescott: My hon. Friend makes a very important point about some of the previous contracts on privatisation. I have been appalled on seeing some of the previous contracts arrived at between the private sector and the Department. We are looking carefully at some of those deals to avoid the mistake of giving over completely to the private sector, at the direct expense of the public sector and a poorer-quality service.
    Mr. Simon Hughes: If I were to tell the Deputy Prime Minister that my Liberal Democrat colleagues, on questioning hundreds of commuters who use the three underground stations serving the people of Uxbridge, found that they were overwhelmingly of the view that London Underground should remain, in the majority, in public ownership, what would he say to them, and will he give an undertaking today that will happen?
    Mr. Prescott: We would obviously say, "Vote Labour," and I hope that people will do so in large numbers to get an underground system that meets their needs and requirements. We are looking at all those options, as we have spelt out in a previous reply to a question in the House.

    Bull Bars
    Mr. Flynn: To ask the Secretary of State for the Environment, Transport and the Regions what proposals he has to ban bull bars on vehicles used on public roads. [9376]
    The Minister of Transport (Dr. Gavin Strang): Unfortunately, progress on the European initiative to control bull bars has been slow and we are therefore reviewing other available options to tackle the bull bar issue effectively. My noble Friend the Minister for Roads will be making an announcement on how we intend to take this forward.
    Mr. Flynn: Does my right hon. Friend agree that one of the major improvements in road safety in recent decades has been the redesign of vehicles, resulting in vehicles that absorb and reduce the shock of collisions by crumpling objects or by deflecting the objects or people that are hit? Bull bars reverse that trend and concentrate and multiply the force of a collision, often at the level of a child's head or vital organs. Was it not a disgrace that the previous Parliament and the former Minister for Transport in London talked out a Bill to reform and to ban bull bars, despite support for the Bill from 250 hon. Members on both sides of the House? When will this Government do better?
    Dr. Strang: I agree with my hon. Friend that the redesign of vehicles has certainly enhanced driver and passenger safety. Furthermore, I pay tribute to my hon. Friend's determined campaign on this issue. We intend to ensure that it reaches a satisfactory conclusion—if we cannot get European action, we will take national action.
    Miss McIntosh: On that point, is the Minister prepared to consult with the European Commission? Does he accept that unilateral action to ban bull bars in this country will be strictly illegal under the terms of the European treaty and our membership of the European Union?
    Dr. Strang: No, I do not accept that. Of course we will maintain a dialogue with the European Commission. The hon. Lady will be aware that the previous Government had a rather long dialogue, not only with the European Commission but with other members of the Council. We are determined that action will be taken. Of course European action would be better and more effective, but if we cannot get it, we believe that there is scope for national action.

    Crossrail
    Mr. Gapes: To ask the Secretary of State for the Environment, Transport and the Regions what plans he has to revive the crossrail project. [9377]
    The Minister for Transport in London (Ms Glenda Jackson): We are awaiting Railtrack's views on crossrail. We shall consider the project in the light of those views, once received, and of our own examination of transport priorities for London.
    Mr. Gapes: Will my hon. Friend give urgent further consideration to the Montagu report on crossrail,

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    which concluded that crossrail was economically important and viable, and to the views of London Pride that an east-west rail link across London is the first priority needed to improve transport links?
    Ms Jackson: I am aware of both the report and the representations made by London Pride on this issue. It is vital that we prioritise London's transport needs strategically. I am sure that my hon. Friend and the organisations he mentioned will welcome the publication today of our Green Paper on an assembly for London, which will include strategic responsibility for transport and traffic in London.
    Mr. Pickles: Even given the Green Paper, crossrail will need, at a reasonable estimate, a guarantee of some £3.5 billion. How can the Minister square that with the idea that a London assembly will not have special fund-raising powers? Is she saying that, despite its needing £3.5 billion, crossrail will receive a high priority in an integrated transport policy?
    Ms Jackson: How could the hon. Gentleman sit quietly by while the previous Government spent £150 million of taxpayers' money on a feasibility study for crossrail, £126 million of which was paid to consultants on a daily rate of pay for three and a half to four years? It is a little late for him to express concern about the overall cost of crossrail when the previous Government did nothing to bring it about.
    Mr. Chope: Who would have the ultimate political responsibility for priority decisions on crossrail—the elected mayor, the assembly, or the Government? Or would it be a mixture of all three, which is exactly the same chaos that we have now?
    Ms Jackson: The ultimate political responsibility rests with the people of London and whomever they vote for.

    Birmingham Northern Relief Road
    Dr. Lynne Jones: To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on his Department's proposals for the Birmingham northern relief road. [9378]
    Dr. Strang: Before replying to my hon. Friend, may I refer to yesterday's written answer on this subject? It had been my clear intention that the material would be made available to hon. Members at 3.30 pm. Unfortunately, the arrangements failed and the material was late. I apologise to you, Madam Speaker, and to the House.
    May I now respond to my hon. Friend's question? As she will know from the announcement that I made yesterday, we have decided to accept the recommendation of the public inquiry inspector to authorise the Birmingham northern relief road.
    Dr. Jones: As my right hon. Friend will know, I do not agree with his decision. Can we at least agree that the relief road will not solve the traffic problems in the area and that that can be done only by reducing the number of vehicle movements on the road? How does my right hon. Friend plan to do that?
    Dr. Strang: I agree with my hon. Friend that one private toll road in isolation will not solve the transport
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    problems of the west midlands. We need a properly integrated transport strategy so that the people of the west midlands have choice. The new strategic through route that will be provided by the BNRR, along with a refurbished west coast main line, and local authority transport packages, will help us to provide an enhanced transport system in the west midlands. In particular, the BNRR will provide access to a new rail freight terminal at Hams Hall. Furthermore, with the policies that will be set out in our new White Paper next year, we shall move forward to a more effective transport system and better policies for the west midlands.
    Mr. John M. Taylor: I never thought that I would hear myself say this, but I congratulate the Government and the Minister on their courageous and important decision, which will greatly benefit the north-west, the west midlands and the country. Many Conservative Members will back the Minister to the hilt in seeing the BNRR scheme through. It is about the most important thing that the Government could do in transport—well done.
    Dr. Strang rose—[Interruption.]
    Madam Speaker: Order. Time is passing and this matter is very important. The Minister may be terribly embarrassed, but he should try to reply.
    Dr. Strang: I thank the hon. Gentleman for his remarks. I too believe that the importance of that strategic through route goes beyond the west midlands. It is important not only for the west midlands but for the north-west of England and Scotland.
    Dr. Tony Wright: I understand the difficulty that my right hon. Friend experienced in coming to his decision in this case. Even those who are in favour of the road are incensed by the previous Government's behaviour in pulling the plug on the previously publicly funded road. The road would now be open and operating if that had not happened.
    When I asked a question a few weeks ago about the penalty clauses if it was decided not to proceed with the road, I was told that the risk lay with the concessionaire. What kind of risk is it if a private concessionaire can get a road, if it is developed, or get £30 million in compensation, if it is not developed? Is it not a disgrace to the planning process if roads are approved not on their merits but because of the cost involved in not approving them?
    Dr. Strang: I understand—[Interruption.] I am not sure how Opposition Members want to play it. This is an important matter, and I can tell that it is important to my hon. Friend. I understand the stand that he has taken, and he has identified a particularly important point. Obviously, the decision to go ahead with the road was based on strategic transport considerations, but my hon. Friend points out a failure on the part of the previous Administration. Risk was involved. Had the Government

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    rejected the inspector's report, we could have been legally liable for substantial costs incurred by the private company.
    Mrs. Spelman: Will the Minister tell us whether the Government accept the principle of road tolling?
    Dr. Strang: That is an important issue. We will almost certainly want to consider it in the context of our important White Paper on an integrated transport strategy, which we shall publish next year.
    Mr. Burden: Does my right hon. Friend agree that, if it were possible for us to start with a blank sheet of paper, many Labour Members would not have come up with the proposed scheme for the road or the method of financing it? I agree that the importance of the Birmingham northern relief road goes well beyond the west midlands. Ninety per cent. of exports from the north-west travel through the west midlands. Although extra road capacity is not the complete solution to the problem, does my right hon. Friend agree that we need extra road capacity in that part of Birmingham in the west midlands?
    Dr. Strang: I am grateful to my hon. Friend. As I believe the House understands, it is our policy to encourage the movement of more freight by rail, but the reality is that at present less than 10 per cent. of all freight in this country moves by rail; it is moved on the road.

    BAA
    Dr. Cable: To ask the Secretary of State for the Environment, Transport and the Regions when he proposes to review the regulatory regime for BAA with particular reference to the formula for landing charges. [9379]
    Ms Glenda Jackson: The Civil Aviation Authority, as the airports regulator, determines the regulatory regime for the three London airports of BAA plc and last autumn fixed the price cap to apply to charges on airlines using these airports for the five years through to 2002.
    Dr. Cable: I thank the Minister for her factual reply and suggest to her that the system of regulating the privatised utilities that she inherited is deeply flawed. Is it not outrageous that world airlines should land at one of the busiest and most congested airports, pay nothing to the taxpayer for the right to land and pay landing charges that are way below the economic and environmental cost that they cause?
    Ms Jackson: The hon. Gentleman will be aware that the issue of airport charges is linked not only to international agreement but to the arm's-length regulation of the CAA. It is not correct to say that the charges at Heathrow are artificially low; in effect, they are higher than the charges at Gatwick and Stansted.
    Mr. MacShane: Is my hon. Friend aware that planes are now landing as early as 4.30 am, adding hundreds, if not thousands, of early-morning landings to the number contributing to noise pollution levels? Will she consider
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    increasing landing charges before 7 am, so that the people of London, from Pimlico to the west, can get a night's sleep?
    Ms Jackson: The setting of airport charges is the responsibility of the regulator—the Civil Aviation Authority. Neither it nor my Department has any powers to review the existing levels until 2002.

    Bridges
    Mr. Quinn: To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on progress towards ensuring that all bridges within the United Kingdom meet maximum axle loading requirements for freight transported by road. [9380]
    Ms Glenda Jackson: We are confident that all bridges in England carrying trunk roads will be capable of bearing the heaviest lorries that will be permitted from 1 January 1999. The Government do not believe that it is necessary for all bridges on local roads to be able to carry such traffic. Local authorities are concentrating on ensuring that bridges on roads of greatest importance to such lorries are able to bear them.
    Mr. Quinn: I thank my hon. Friend for that reply. I have spent most of my professional life building bridges. Does my hon. Friend agree that bridges are an important part of transportation and that the forthcoming review of transportation and the move towards an integrated transport system should take account of the needs of both freight and passenger traffic? Does she agree that all bridge authorities throughout the country should be allowed to participate fully in that debate?
    Ms Jackson: My hon. Friend will be aware that it is the Government's overriding priority to see more freight moved by rail. That is why we hope to improve the freight grant scheme in order to ensure that the annual budget is fully spent. As part of the integration of the Departments of the Environment and of Transport, we hope that the planning regime will prevent the sale of land that could be used for freight terminal facilities.
    Mr. Sayeed: Will the hon. Lady confirm whether the Government will pay all local authority costs for assessing both these road bridges and those owned by Railtrack?
    Ms Jackson: As to bridges owned by Railtrack, that is an issue for local authorities and Railtrack to negotiate between them. Local authorities will have to make bids regarding the costs to them, as they did under the previous Administration.
    Mr. Stevenson: Does my hon. Friend agree that the introduction of the 44-tonne juggernaut in a few years will not only possibly have a detrimental effect on bridges but certainly have a detrimental effect on principal roads and other roads that are used for transporting goods to customers? Will she take account of that point when assessing that very complicated and important issue?
    Ms Jackson: My hon. Friend may be aware that it is the opinion of several that 44-tonne lorries will not cause greater damage to roads and bridges by virtue of the

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    additional axles and the reduced weight of those individual axles. I repeat what I said to my hon. Friend the Member for Scarborough and Whitby (Mr. Quinn) earlier: it is of primary importance to the Government that we see a real shift to alternative modes of freight transport, not least to our railways.

    Road Passenger Transport Services
    Sir Sydney Chapman: To ask the Secretary of State for the Environment, Transport and the Regions what measures he proposes to encourage more people to use road passenger transport services. [9381]
    Dr. Strang: Encouraging greater use of public transport is a key objective in developing an integrated transport policy. Our White Paper, which will be published next year, will help to identify how best we can achieve that.
    Sir Sydney Chapman: I agree with the Minister's comments, but does he not think that his aspirations sit somewhat oddly with those of the Chancellor of the Exchequer who, earlier this month, imposed a swingeing 9.3 per cent. increase in diesel tax? As the Minister has been singularly unsuccessful in persuading the Treasury to the Department's point of view and policy objective, will he ask his right hon. Friend the Deputy Prime
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    Minister to use his influence to ensure that the Chancellor does not achieve his declared aim of increasing the tax on diesel fuel by 6 per cent. in real terms in every subsequent Budget?
    Dr. Strang: As the hon. Gentleman knows, increasing fuel duty is not unique to this Government—on the contrary, the previous Administration raised that duty each year. I assure the hon. Gentleman that bus travel is very important—he hints at that in his question—and we are examining how best to encourage greater use of buses. That means making bus services as economical as possible. We want people to choose to travel by bus and to leave their cars at home because buses provide such a good service.
    Mr. Barnes: Is there not a large, mainly untapped, market for bus passenger transport for disabled people, who have difficulty in getting on buses and in being able to travel? If passenger authorities in various areas were encouraged to face up to that problem, they could make money out of that market. That would benefit everyone.
    Dr. Strang: My hon. Friend raises a very important point. That is one reason why we want the fastest possible introduction of low-level buses: it will be much easier for disabled people to get on to a bus. Undoubtedly, throughout this country, there is great scope for increasing the use of buses by disabled people and by people who are not disabled.

Companies (Millennium Computer Compliance)
3.30 pm
Mr. David Atkinson: I beg to move,
That leave be given to bring in a Bill to require companies to conduct an assessment of the capability of their computer systems to deal with calender dates after 31st December 1999; and to report both on those assessments and on the actions their directors propose to take in consequence.
This is my second attempt to introduce such a Bill. The first, which the House gave me leave to introduce last December, was given an unopposed Second Reading, was amended in Committee, but had not completed its Report stage when Parliament was dissolved for the general election.
The Bill's aim is to avoid much of the widespread chaos and confusion that are being increasingly predicted to occur throughout the world at the turn of the century—in just over 29 months' time. I am grateful to those hon. Members from all parties who have again been so willing to sponsor the Bill.
The cause of the doomsday predictions is the inability of the majority of computer systems to recognise the year 2000. They use, as we all do, two digits for the year of the date instead of four. Thus, today's date is written 29/07/97 rather than 29/07/1997. Unless they are properly reprogrammed, computer systems will recognise the year 2000 as 1900, or simply reset to some other date. That will mean that they will no longer deliver what they are programmed to deliver. Because so much of Government business and daily life has come to rely on information systems, the result will be, to use a tabloid word, "catastrophe", which must be a matter of urgent concern to the House.
When the matter was first raised on the Floor of the House in my oral question to the then Prime Minister in December 1995, it was greeted with expressions of ridicule and disbelief from all sides. I suggest—or at least I hope—that most, if not all, hon. Members are now aware of the issue and realise that there is a serious problem which must be addressed. That is referred to in the updated Parliamentary Office of Science and Technology note No. 98, "The Millennium Threat—an Update", which was issued last month. It is in the Library, and I recommend it as essential background reading.
The briefing note forecasts the dangers of failure to ensure that computer systems are millennium-compliant. They include payroll systems collapsing so that workers cannot be paid; financial records losing track of investments; invoicing systems failing to generate bills or charging 100 years of interest; telecommunication networks failing; the halting of the supply of utilities such as gas and electricity; the unpredictable behaviour of embedded microchip systems in items such as elevators, bank vaults or medical equipment; and the disruption of Government systems such as those responsible for benefit payments, criminal records, medical records and revenue collection. All that has been confirmed in the report to the Cabinet by the National Audit Office, entitled "Managing the Millennium Threat", which was published in May.
In response to my Adjournment debate on the issue in June last year, the then Minister for Science and Technology, my hon. Friend the Member for Esher
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and Walton (Mr. Taylor), referred to the action that his Government were taking on the computer systems for which they were responsible in the public sector. He announced the establishment of TaskForce 2000, involving the private sector in raising awareness of the problem in industry and commerce, and he warned that failure to deal with it could lead to commercial collapse—a warning which I believe his successor has repeated, as has the President of the Board of Trade.
My Bill is designed to avoid such commercial collapse in the private sector of British business. It will give the owners of British companies—the shareholders—the information to which they are entitled about the security of their investment at the turn of the century. It requires companies to conduct an assessment of the capability of their computer systems to deal with calendar dates after 31 December 1999 and, in the annual report to shareholders, to report on that assessment and on the actions that their directors propose to take as a consequence.
It has been suggested that my Bill would impose new and unnecessary regulation and red tape on business, which, to their credit, the Government, like the previous one, have said they are determined to avoid. Not only is that response misleading, but it seeks to avoid the unique nature of the issue. Far from imposing new burdens on business, the Bill merely clarifies for company directors and their auditors an existing duty to give shareholders a true and fair assessment of the company as a going concern in the foreseeable future.
The Bill will help to protect the businesses of those who have acted responsibly from those who would not otherwise have acted without pressure from their shareholders, because computer systems that are millennium compliant will also fail if they are linked to those that are not.
Critics of my Bill have complained that the action that it requires businesses to take will be too costly for them to bear. My Bill imposes no such costly action; it merely obliges directors to report on their action—or inaction, as the case may be. Of course, in many cases, the cost of inaction will be the biggest burden of all—bankruptcy.
If I needed any further justification for the Bill, it came from the press conference held by TaskForce 2000 at the Department of Trade and Industry in February 1997. It was to report the outcome of a second survey, eight months after the first, to find out how British business is responding to this millennium time bomb. The very same companies that were approached the first time were approached again and asked the same question. The answers are revealing and worrying.
Whereas only 15 per cent. of senior mangers were aware of the problem last year, today 28 per cent. are. But whereas 8 per cent. of companies had completed an assessment last year, that figure has gone up to only 9 per cent. That is not a rate of progress which can or should satisfy anyone. It confirms my view that there is now no alternative but to legislate.
The Bill has received encouraging and widespread support from the top 100 companies that I consulted and whose amendments are now incorporated in it. I hope that the Government will recognise the Bill for what it seeks to achieve and that it will be given a swift enactment. If so, it might be sufficient, together with a fully supported TaskForce 2000 and other initiatives by the

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computer industry itself, to avoid for Britain much of the incalculable chaos and catastrophe that are being predicted if not enough is done.
Nevertheless, it remains a race against time. Only 630 days remain in which to take action. This is one of the greatest challenges facing British business today. Like the change in the millennium itself, it cannot be postponed. That is why I hope that the House will give me leave to introduce the Bill today.
Question put and agreed to.
Bill ordered to be brought in by Mr. David Atkinson, Mr. David Amess, Mr. Frank Cook, Mr. Tam Dalyell, Dr. Lynne Jones, Mr. Nigel Jones, Mr. Charles Kennedy, Mr. Robert Sheldon, Rev. Martin Smyth, Mr. Stephen Timms, Mr. John Townend and Mr. Dafydd Wigley.

Companies (Millennium Computer Compliance)

  COMPANIES (MILLENNIUM COMPUTER COMPLIANCE)
  Mr. David Atkinson accordingly presented a Bill to require companies to conduct an assessment of the capability of their computer systems to deal with calendar dates after 31st December 1999; and to report both on those assessments and on the actions their directors propose to take in consequence: And the same was read the First time; and ordered to be read a Second time upon Friday 28 November, and to be printed [Bill 58].
  Mr. Tam Dalyell: On a point of order, Madam Speaker. As one of the sponsors of the Bill proposed by the hon. Member for Bournemouth, East (Mr. Atkinson), and having served on the Committee stage of the previous Bill, I want to warn you not to make arrangements to be in an aircraft on new year's eve 1999 or the House of Commons could be looking for a new Speaker because the computers may have gone wrong.
  Seriously, when a Member moves a very important ten-minute Bill, should not there be some Government response as soon as possible, so that, when the House returns in October, we will know the state of play on this vital subject?
  Madam Speaker: On the hon. Gentleman's first point, I very much appreciate his warning. I shall put it in my diary as soon as I get back to my office.
  The hon. Gentleman is a long-standing Member and he knows that a ten-minute Bill is simply an application for leave to bring in a Bill. A Bill is not actually being brought in, although the public often think that it is—hon. Members are simply asking the House for leave to do so. The House has today graciously given the hon. Member for Bournemouth, East (Mr. Atkinson) such leave.

Orders of the Day

  Finance Bill
  [2ND ALLOTTED DAY]
  [Relevant documents: The Minutes of Evidence taken before the Treasury Committee on Monday 21st July, Tuesday 22nd July and Wednesday 23rd July (HC169- i to iii).]]
  Not amended (in the Committee), and as amended (in the Standing Committee), further considered.]

Clause 19

  PENSION FUNDS NO LONGER ENTITLED TO PAYMENT OF TAX CREDITS
  3.40 pm
  Mr. Peter Lilley: I beg to move amendment No. 16, in page 11, line 38, after 'made', insert 'from 6th April 2004'.
  Madam Speaker: With this, it will be convenient to discuss the following amendments: No. 17, in page 11, line 41, at end insert—
  '(lA) Any claim made under section 231(2) for payment of the amount of a tax credit if or to the extent that the qualifying distribution to which the credit relates is income of a pension fund shall be made to the extent mentioned in Column 1 of the Table below if the distribution is made on or after the date in Column 2 and before the date in Column 3.

  TABLE

  Column 1

  Column 2

  Column 3

  Percentage of the amount or value of the distribution

  21

  6th April 1999

  6th April 2000

  17

  6th April 2000

  6th April 2001

  13

  6th April 2001

  6th April 2002

  8

  6th April 2002

  6th April 2003

  4

  6th April 2003

  6th April 2004

  No. 20, in page 12, line 42, at end insert—
  '(4) The Treasury may by order provide for the suspension of the operation of this section if it has reason to believe that it has had or will have adverse effects upon the number of individuals expected to opt out of the State Earnings Related Pension Scheme (SERPS) or upon the number of individuals in contracted—out pension schemes who are expected to opt back into SERPS.
  (5) An order under subsection (4) shall be by statutory instrument and shall be subject to approval by resolution of the Commons House of Parliament.'.
  No. 18, in clause 23, page 15, line 5, at beginning insert '(1)'.
  No. 19, in page 15, line 6, at end insert—
  '(2) The Secretary of State may by order provide that any person providing a pension shall include in any annual statement to policyholders an assessment of the impact of the provisions in that Schedule upon the policy concerned.
  (3) Any order made under subsection (2) shall be by statutory instrument and shall be subject to approval by resolution of each House of Parliament.'.
  Mr. Lilley: We consider the tax to be introduced under this clause to be the biggest of the 17 breaches of promise

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  by the Labour Government in their Budget. Before the election, we received the clearest of assurances from the then Leader of the Opposition that:
  "We have no plans to increase tax at all."
  Subsequently, he said:
  "Our proposals do not involve raising taxes. If we have any such proposals we will make them clear before the next election."
  It was therefore extraordinary that the Government should bring in a Budget containing 17 tax rises, the biggest of which involves a £5 billion a year recurring tax on pension funds.
  However, what I did not realise until recently was that it was a breach not only of a general pledge, but of a specific pledge. I understand that on 21 October last, the hon. Member for Southampton, Itchen (Mr. Denham), who is now the Under—Secretary of State for Social Security, addressed a meeting of the Institute of London Underwriters in Leadenhall street. Someone present at that meeting has written to me saying:
  "As Deputy Chairman of the Trustees of Lloyd's Superannuation Fund, I was concerned that taxing pension funds, many of which have substantial surpluses, would be a relatively painless way of raising significant revenue, so I asked him"—
  the hon. Member for Itchen—
  "to give an undertaking that any future Labour government would not seek to raise taxes from these surpluses. He replied that it was no part of his proposals that Labour would touch them."
  I have subsequently spoken to another person who was present at that meeting and who took notes. He confirms that his notes show, more or less word for word, that that Labour spokesman, before the election, solemnly gave an assurance that Labour had no plans or proposals to tax pension funds or their surpluses.
  As we know, the primary justification that the Government have subsequently given for the tax is that the bulk will come from the surpluses of occupational pension schemes. There could not be a clearer example of breach of promise, and one for which I hope we will have a formal apology from the hon. Member for Itchen. If that is not forthcoming, we shall certainly be calling for his resignation as a junior Minister. [Interruption.] The Minister thinks that breaking trust with the electorate is an amusing matter, although Labour made trust the central issue in its general election campaign and said that greater trust was placed in it than in any other party.
  The Economic Secretary to the Treasury (Mrs. Helen Liddell)rose—
  Mr. Lilley: I will, of course, give way to the hon. Lady if she will apologise for her colleague.
  Mrs. Liddell: I am delighted that the right hon. Gentleman has given way. Perhaps the electorate will now receive an apology, after enduring the 22 separate tax rises that were introduced in the previous Parliament by the previous Government, who did not honour their own manifesto commitments. Ultimately, they suffered the consequences for that at the ballot box.
  Mr. Lilley: The hon. Lady is absolutely right. We had to face the electorate with that issue before us—but the Government will have to do the same. The electorate will
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  not accept as a sufficient excuse their statement, "As we have alleged that other people did that, we felt free to do the same"—especially because the Prime Minister made trust the central issue of Labour's general election campaign.
  Subsequently, we have been assured that the tax will not matter because it will not hurt. To most people, it is self-evident that extracting £5 billion a year from pension funds will make those funds £5 billion a year worse off. The funds will have to be topped up by that amount if the pensions are to give the same pensions, or they will have to pay lower pensions to people retiring.
  In what has become known as the "Primarolo paradox", however, we have been assured that the measure, far from being bad for pensions, will be
  "good for pensions and pensioners, not bad for them … People should understand that our reforms will benefit pension funds."—[Official Report, 3 July 1997; Vol. 297, c. 507.]]
  Conservative Members have sought, pressed and asked for any coherent explanation of how it is possible that extracting £5 billion a year from long-term investments made for and on behalf of pensioners can benefit pensioners, but we have received only the most incredible explanations. Nevertheless, an attempt at explanation was made.
  After we received Ministers' explanation and had some suggestion that their rationale—although incoherent and incredible—is that the measure will not hurt pension funds, we asked why the Government are attempting to protect charities from the impact of an allegedly benevolent measure if it is not damaging. There was total silence from Ministers.
  In our amendments, we are attempting to extend to pension funds the protection that the Government are affording charities. We are very much attempting to mirror the precise protection that Ministers have vouchsafed charities, so that we can protect pensions, at least for a period, from the damage that will be done by a damaging tax. We hope that, by the time that that protection expires, the Conservative party will be back in power and able to ensure a much more satisfactory regime for pensions and for the economy overall.
  3.45 pm
  Mrs. Liddell: From the right hon. Gentleman's statement, am I to take it that Conservative party policy is to restore advance corporation tax after the next general election, should it be elected?
  Mr. Lilley: We will not commit ourselves on any matter whatsoever at this stage, here and now, to undo the damage that may be done by the Labour Government between now and the end of their regime. It would be foolish for us to do so. We will state our position in our manifesto for the next general election, after we have seen how much damage the Government have done and in how many spheres, and after we have determined what we can realistically promise to make good.
  There can be little doubt that the measure will be immensely damaging. It can be little satisfaction to anyone to know that the best that the Minister can say about it is, "It's no worse than other Governments may do, although you may well find yourself lumbered with it, at least for a while."

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  I have received a letter from the Chartered Institute of Housing, which is not only a charity but a charity with a pension fund. It states:
  "We consider that changes to ACT and its potential impact on pension funds will probably require an additional 0.5 per cent.-0.75 per cent. contribution from the Institute. This money will have to be found from funds that would otherwise be committed to the development of education and training which in, turn creates employment opportunities in the housing sector. You will therefore appreciate our concern with regard to the Chancellor's proposals."
  Of course, the institute's problem is mirrored across the country in pension funds and in organisations with pension funds, be they charitable or commercial. They are all having to consider the extra money that they will be required to put into their pension funds and which will therefore not be available either to invest or to use for the charitable, educational or employment-generating purposes to which the Chartered Institute of Housing refers.
  Another important issue that has arisen in our debates, and on which the amendments touch, is that of the mis-selling of personal pensions. We all deplore such mis-selling, and we are all keen to see the matter resolved and proper compensation given as rapidly as possible. I wish the Economic Secretary every success in achieving that. However, private mis-selling cannot justify public mis-selling.
  The essence of mis-selling is allowing people to purchase pensions or to invest in pensions without full or accurate information being available to them about the implications of their actions for their own circumstances. The Government have now changed the conditions under which people have invested, but they are so far refusing to give the relevant information, either generally, to the public at large, or specifically, via the insurance companies, about the impact of the ACT changes on the contributions that they need to make or on the pensions that they can expect to receive. The Government should ensure that such information is made available. If they do not, people may find themselves opted out of SERPS when they should be opted back in, or they may be tempted to opt out in future when they should not do so.
  On 13 July this year, the financial section of The Mail on Sunday said:
  "Leading independent pensions expert Gareth Marr of Moores Marr Bradley says: 'We would advise anyone who is still contracted into SERPS to stay in because of the uncertainty now surrounding the returns that can be obtained on opted-out plans. We strongly advise those who have contracted out to get back in—unless the government increases the level of National Insurance rebates it gives them."
  The newspaper also states:
  "Steven Cameron, pensions development manager at Scottish Equitable, hopes the government will raise NI rebates to stop a possible flood back into SERPS. He says: 'For many, the advantage of opting out of SERPS has been significantly reduced and for some it has vanished."'
  How can it be other than mis-selling to allow people to make decisions without that information?
  If the Economic Secretary found any of the companies that she chooses to berate every month behaving in that fashion, would she criticise them? If they refused to give such information when selling a pension, would she put them at the top of her jawboning list, or would she say, "It all depends whether you are Government or private. If you're Government, you can do that sort of thing and
  154
  I'll pat you on the back and praise you. If you are private, I will criticise and attack you"? I will happily give way to the Economic Secretary, who is a frequent intervener, if she would like to tell us whether she approves of such behaviour by private pension schemes.
  Mrs. Liddell: I get the impression that the right hon. Gentleman thinks there is something wrong with the way in which the Government have tried to do something about pension mis-selling, but the point that he is making is spurious. The Government have gone to great lengths to ensure that people are aware of the implications for their long-term future of changes to their pensions. Indeed, had the right hon. Gentleman been in Committee, he would have heard the issue debated very fully. Perhaps it is because of the inadequacy of Conservative Members in Committee that the heavy guns have had to attend today's debate.
  Mr. Lilley: The hon. Lady should know that, by convention, neither the Chancellor nor the shadow Chancellor sits on the Committee, and that is why I was not on it. However, I was extremely proud of the role played by my team in the appallingly short time made available for proper consideration of the measure. Once again, the hon. Lady ignores the issue and is content to make party political points. Would she tolerate, let alone praise and advocate, the misinformation and lack of information that the Government are providing if the private sector companies that she seeks to regulate had behaved in such a way? If she is not prepared to answer such questions, we can only assume that she has dual standards on this matter, as on so much else.
  Mrs. Liddell: I am happy to make it perfectly clear that the Government have gone to considerable lengths to ensure that information is available to those buying pensions. We discussed the matter fully in Committee and, quite frankly, as a member of a Government who for eight years ignored pensions mis-selling, it is no wonder that the right hon. Gentleman cannot look me in the eye when I am responding to him.
  Mr. Lilley: To say that the Government are going to great lengths to make information available when they spent tens of thousands of pounds of public money producing a pocket Budget—
  Mr. David Heathcoat-Amory: It cost £50,000.
  Mr. Lilley: It cost the taxpayer £50,000, and its sole reference to this matter was an oblique reference to measures to promote long-term investment.
  If the information is being made available outside the House, can it be made available inside the House? What will be the impact, for example, on a 30-year-old person who has been putting £100 a month into his or her pension scheme and who, as a result of the ACT changes, will have to reconsider the position?
  The hon. Lady says that the information is being made available. Apparently, it was mysteriously made available in Committee, although none of my right hon. and hon. Friends who were present were aware of it. None of it is recorded in Hansard. Somehow the Hansard writer did not manage to get it down. Can she tell us the answer now? If she will not, I can tell the House about the

  155
  calculation by the Association of Consulting Actuaries. If someone put £100 a month into a pension fund before, they will now have to put in £112. It is right that people should know the impact of the changes on their financial circumstances. It is monstrous that the Government are not providing the information.
  I advise the Minister to follow the example of the Trades Union Congress, which has published a leaflet on "Pension power for women" suggesting that women do not have enough information on pensions and should have more. For example, one question in the leaflet is:
  "Is there is a scheme I can afford?"
  After the ACT change, there probably is not. The leaflet offers help in answering such questions as:
  "I work part-time—Can I join my company scheme?"
  The answer is, probably not. The answer may well be that it is not worth doing so now and it might be better to stay in SERPS. I am glad that the trade unions are taking over where the Government have failed to act and deliberately sought to leave people in the dark.
  The impact of the change extends to the pension funds run by local authorities. The hon. Member for Putney (Mr. Colman), from his distinguished position, spelled out the overall impact that it will have on the 99 local authorities that belong to local government pension schemes. He wrote:
  "It has been estimated that the abolition of ACT would add at least 3 per cent. or £300 million to our employers' pension costs. No such increase could be afforded by local authorities without making further cuts to services to their local residents".
  The alternative would be to increase the council tax, if they were allowed to do so.
  Local authorities are beginning to do the calculations to find out how much it will cost their council tax payers in future if they are to ensure that their pension schemes are properly funded.
  Mr. Geoffrey Clifton-Brown: Does my right hon. Friend not find it extraordinary that, in a parliamentary written answer to me on 21 July, the Department of the Environment announced that the next actuarial revaluation for local authority pension schemes would not be until March 1998? Here we have the Government implementing a Budget measure with no idea whatever of the implications for public expenditure on local authorities. Does not my right hon. Friend find that extraordinary?
  Mr. Lilley: I entirely agree with my hon. Friend. I seem to remember that the answer says something such as, "Not until then will the truth be known." Those words make it clear that, up to now, the truth has not been told by Government Front Benchers, and the facts have not been given, even to local authorities, about the impact of the cost of the measure on the pension funds and council tax.
  Earlier today, I was in Uxbridge—not coincidentally, as there happens to be a by-election there in a couple of days. The Conservative party has a very good local candidate there, unlike the Labour party, which has parachuted in a career politician from outside the constituency. As a local candidate, he wanted to know
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  the impact on Uxbridge people of the Budget and the pensions measure particularly. We were able to calculate that probably more than 7,000 people in Uxbridge alone have personal pensions. They, of course, will all wish to know how much extra they will have to put in if they are to receive the pension that they were previously expecting.
  4 pm
  The other night, I was being driven by a taxi driver. I did not ask whether he came from Uxbridge, but he may well have done. He said to me, "You are something to do with politics, aren't you?" I said, being very well known, "That sort of thing." He said that he had just been trying to persuade his father to tear up his Labour party membership card. When I asked why, he said that it was because of what the Budget had done to pensions. I thought that he put the point very pithily when he asked, "What is the point of us putting money into our pension funds if the Government are promptly taking it out?"
  That is precisely what is happening. The amount of money that they are taking out is not so very different from the amount in rebates that the Government were previously putting in. It is a fair indication of how the Government see pension funds just as a source of revenue rather than as prudent provision by the self-employed and those in mobile employment for their future.
  About 7,000 people in Uxbridge will be thinking, "Do I need to put in a full 25 per cent. extra, as will be required just to raise the dividend revenues if everything is in equities, or is the 12 per cent. calculated by the Association of Consulting Actuaries more like what will be required if I have a mix of different investments?"
  Probably about 16,000 people in Uxbridge have occupational pensions. Their position will depend in part on whether their employers are prepared to put extra money into the schemes—in which case that money will not be available for investment, to pay wages or to enhance the firm's position—whether they will have to pay in the money, or whether their future pension rights will be downgraded as a result of the measure. They will have to decide whether their schemes will opt back into the state scheme. The scheme could decide that it is no longer worth being an opted-out scheme, and that it should opt back into SERPS.
  We must consider what impact there will be on the council tax payer in Uxbridge. We understand that, just to pay the extra contributions required by the borough employees' pension fund if it is to offset the effect of the ACT changes, everyone in a band D house in Uxbridge will pay an extra £2 a month.
  There are big impacts on ordinary people in ordinary places—and in important places such as Uxbridge. It is important that that information should be made available. We have tabled new clauses and amendments to try to ensure that more information is made available. If those do not succeed, we want the amendments that will protect pension funds for the next few years to receive the House's support.
  The tax rise concerning pensions is the biggest unexpected tax rise that the Government have inflicted on us. They have done so in direct rejection of assurances given in opposition by hon. Members who now sit on the Treasury Bench. A Government who can do that, and enable it to be done by ramming the Bill through a truncated Committee, are a Government who are ashamed

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  of their own actions—and they are right to be ashamed. We believe that they can partly ameliorate that by accepting our amendments.
  Mr. Ross Cranston: I want to deal with the effect of the changes on investment, which was not covered at length in the Standing Committee, and which the House should deal with.
  First, however, I congratulate the right hon. Member for Hitchin and Harpenden (Mr. Lilley) on his attitude to the mis-selling of private pensions. That mis-selling has been a tremendous scandal, and it is gratifying to hear the right hon. Gentleman admit it. I understood him to be congratulating my hon. Friend the Economic Secretary to the Treasury on the work that she is doing to try to remedy the situation.
  We have heard little about pensioners in general, either in Standing Committee or on Second Reading. For example, we did not hear that the number of active members of occupational pensions schemes has fallen radically since 1979, so that 12 million people in work do not now have access to a company pension. We did not hear about the fact that private pensions can represent very poor value for those on low or modest incomes.
  We heard a great deal, however, about the catastrophic effect that the changes would have on pensions, especially private pensions. In response, I quote to the House the words of Anne Young of Scottish Widows. She thought that one could not put a figure on the impact, and I agree with her:
  "There are three main imponderables. The first is the attitude of companies who currently pay large dividends. The second is the effect the Chancellor's move will have on the valuation of shares, and the third is the attitude of pension fund managers".
  When I consulted my borough treasurer about the impact on the Dudley pension scheme, he could not give me a direct answer. He said, rightly, that a range of imponderables had to be taken into account before the impact of the changes could be estimated.
  Incidentally, the Chancellor has left the tax relief on private pensions entirely untouched. Eagle Star and other advisers on pensions have said that they doubt whether there will be any change in the extent to which people take out private pensions.
  I intended to deal with the effect on investment. I mentioned the subject on Second Reading, so I will not go over the same ground again. However, I must make the point that, when the imputation system was introduced in 1973, most shareholders were basic-rate taxpayers. They did not receive tax credits, but they did not pay tax on the dividends that they received. That system was supposed to be neutral as between companies paying out in terms of distributions and companies retaining earnings to invest. However, a quarter of a century later, we are in a different world, in which most shares are held by institutions—pension funds, mainly.
  The effect of the tax system on distributions, as opposed to retention, has ramifications for that change in the nature of shareholding. In theory, shareholders should be indifferent between dividends and capital gains. If dividends are not paid, the retention within the company should build up the company's strength, and the value of the shares will therefore be enhanced.
  Of course, that is not now the case. Shareholders have different concerns. Some shareholders—those in venture capital enterprises, for example—want capital growth and
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  are not so interested in dividends. Conversely, some shareholders want dividends, for a variety of reasons. They may be unsure about what managers will do with the retained earnings, and therefore want to get dividends out quickly.
  Another factor in the choice between paying dividends and the retention of earnings is the tax system. It can be argued that higher-rate taxpayers favour retention because they have to pay tax, despite the tax credit. Conversely, it can be argued that pension funds favour distribution because of the tax credit on dividends they receive. That puts pressure on companies to pay out money in dividends rather than taking the long-term view.
  We did not hear anything about that argument in the Standing Committee. We did not hear about many people's active concern about the extent to which companies pay out dividends rather than taking the long-term view to invest. I realise from the quizzical look on the face of the hon. Member for East Worthing and Shoreham (Mr. Loughton) that he thinks that pension fund managers, if they get earnings, will use those distributions efficiently and will invest when the opportunity is worth while.
  We say, however, that managers of enterprises should have greater scope to make the decision to invest than they have under the current system. We say that, at present, combined with other factors such as our market for corporate control, which we do not share with Germany and France, there is too much pressure to pay out dividends rather than for managers to use retained earnings to invest for the long term.
  Mr. Shaun Woodward: Will the hon. Gentleman be kind enough to comment on a survey carried out by Merrill Lynch between 7 July and 9 July this year, after the Budget? The company questioned 56 UK institutions managing £775 billion and discovered that, in the wake of the Budget, sellers outnumbered buyers of UK equities by 18 points, the highest figure in a year. Can the hon. Gentleman explain why, if the scheme is so spectacularly successful, this rush selling has taken place?
  Mr. Cranston: The hon. Gentleman anticipates me. In Standing Committee, the hon. Gentleman did not answer one question put to him by my hon. Friends. Yesterday, the hon. Gentleman could not answer one question.
  On Second Reading, I said that there were distortions as a result of the system that the Finance Bill will change. There are distortions in terms of the investment decisions made by pension funds. I pointed out that the existing regime favoured pension funds purchasing UK equities rather than foreign equities. I also said that there is an argument that there is a distortion in terms of buying debt instruments. I acknowledge that one might say that it would be better if pension funds continued to buy UK equities. The point is, however, that there is a distortion, and, as a result of the change, that distortion will be removed.
  Mr. Nick Gibb: Will not the result of the measure be that pension funds will switch to overseas equities? Will that benefit the UK economy?
  Mr. Cranston: I made the point just now that pension fund managers might decide to buy foreign equities.
  Mr. Gibb: Is that better?
  Mr. Cranston: I am not commenting one way or the other. [Laughter.] Hon. Members may laugh. I thought that they believed in free market economics. The existing system has a distortion in it.
  As I said at the outset, the other effect of the change is that earnings will be retained to a greater extent. In that sense, managers of UK companies can take a long-term view which will benefit the economy.
  The widespread debate in the literature and among City analysts and others about the adverse effect of the existing system on long-term growth has passed Opposition Members by. They completely ignored it in Committee; they ignored the possibility of a flat-rate tax on pension funds that was discussed in the reports that they quoted in Committee; and they ignored the possibility of returning to the classic system of corporate tax, which operates in the United States. They were more interested in political rhetoric and in the notion of smash and grab. I do not blame them for that—it was a nice political point to make—but they have not addressed the fundamental issue of long-term investment. As a result of this change, there will be more long-term investment in this economy. I oppose the amendments.
  4.15 pm
  Mr. John Swinney: It may be a naive opinion for a new Member to express, but I hope that during the debate some minds may be changed and some opinions altered. I listened to the right hon. Member for Hitchin and Harpenden (Mr. Lilley) complaining about the lack of debating time. I suspect that, the more debating time we had, the more intransigent Members would become in their positions.
  The amendment covers some serious issues. I did not serve on the Finance Bill Committee, but I have tried to intervene on this point before, and I am grateful for the opportunity to do so today. I have an interest in this debate, as, before my election, I was employed by Scottish Amicable, which is one of the principal financial institutions in Scotland and was recently taken over by the Prudential. My only continuing interest in that company is the welfare of the colleagues I left behind, as they face the challenges that that takeover will bring.
  I also have an interest in that both the local authorities in my constituency area will be affected by the implications of additional contributions to pension funds that may be required as a result of these changes. As some hon. Members have said, that is unquantifiable at this stage, which is why I think that the Government have moved with such haste in introducing these changes and the proposals in the Finance Bill.
  When I went to work at Scottish Amicable, I had experience in business development, but I had no experience of the life insurance and pension fund sector. I was struck by the fact that such companies never make decisions on the quality and strength of funds on a short-term basis: it is always on a long-term basis. Any factor that is away from the predictions—out of the ordinary or different—causes disruption to the long-term development of funds. It has an impact on actuarial calculations and on the position taken by officers on reserves for long-term distribution. Those are not day-to-day factors, but factors on which long-term
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  judgments must be made. The scale of the change that the Government have undertaken disrupts the process of long-term financial management in the interests of those funds.
  I was also struck by the importance that those companies give to the gearing of finance. The ability to transform small amounts of money into much more substantial sums is the art of actuarial science, and the art of investment management. Unless companies are given appropriate opportunities to pursue that essential part of their work without massively changing circumstances—which the proposals on tax credits constitute—many will face difficulties.
  It would be easy for us to get caught up in an exchange of City anecdotes, but there are some simple truths about the proposed changes. Some people's—not everyone's—pension contributions will have to go up, and it is a myth to suggest that the tax will be easy or painless to raise.
  The changes come on the back of the pensions mis-selling scandal. The right hon. Member for Hitchin and Harpenden was right to compliment the Economic Secretary on the energy that has been applied to the problem since the change of Government. I say that partly to encourage her to deal with my constituents' cases that I have forwarded to her.
  It is welcome that the Government are taking such a strong line, and pursuing the industry to guarantee that the wrongs are righted, but it is unfortunate that they have created an element of uncertainty about pensions as a result of the frenetic debate on the Finance Bill—some of which, I concede, has been fuelled by the Conservatives. Anything that creates uncertainty is unwelcome in the pensions industry and the community at large.
  One of my constituents, a trustee of a pension fund of which the principal contributor went out of business, wrote to ask who will pay if additional contributions are required. Some pension funds will be in extremely difficult situations.
  Last week, Standard Life, the largest mutual insurer in the United Kingdom, suspended offering transfer values for occupational pension schemes until it could calculate the full impact of the measures, and various other life insurance and pension companies have said similar things. In pensions, there can be no quick initiatives of which the outcome can confidently be predicted, as the Government seem to think; all changes cause some uncertainty and unease in the industry.
  Let us consider the message that our debate will convey to the country. The debate has been rather impoverished of substance, and fuelled by a great deal of party political rhetoric that will not allay public unease. Anything that undermines the confidence that people are beginning to have to make appropriate contributions to their pension funds, whether primary or secondary, is damaging.
  Pension contributions and funds in this country are more substantial per capita than elsewhere, but they are not perfect. Under the current regime, some people will still have to live on extremely low incomes in their retirement; anything that detracts from people's confidence to contribute to pension schemes is bad news indeed.

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  The last thing that the sector requires is more uncertainty. The previous Government presided over many notes of uncertainty, but for the new Government to compound those mistakes in the very first weeks of their term of office would be extremely regrettable.
  Mr. Quentin Davies: Let me begin by taking issue with the hon. Member for Dudley, North (Mr. Cranston), whose interesting speech displayed the real confusion and misunderstanding on the Labour Benches.
  The hon. Gentleman said that the present advance corporation tax regime—the arrangement that exists now, before the Bill is enacted, which I hope it will not be—represented a distortion in the market. The opposite is the case. The aim of the imputation tax—I genuinely fear that many Labour Members, including Ministers, do not understand this properly—was to prevent a very serious distortion that would have been inequitable, and would also have had serious and damaging economic consequences. I refer to double taxation. The whole purpose of ACT is to avoid that, but the removal of the dividend tax credit reintroduces the notion.
  It is not right for pension funds to be subject to taxation. Why? Because, when their proceeds are paid to pensioners, those pensioners pay tax on them. The clause will introduce double taxation: the income that is invested for pensioners will be subject to tax, and they will still pay tax on the proceeds.
  Some countries operate a system that is the reverse of ours, under which pension funds are themselves subject to tax, but the pensioner receives his pension tax-free. That is one way of avoiding double taxation; we have a different but very effective way of avoiding it. The hon. Member for Dudley, North is supporting a measure that will reintroduce the concept of double taxation, with all that flows from it.
  Mr. Cranston: Can the hon. Gentleman explain why the United States does not have our imputation system, and in what way the United Kingdom system is more advantageous than that in the United States? Can he also explain how the neutrality aspect differs as between higher-rate taxpayers, basic-rate taxpayers and pension funds that are tax-exempt?
  Mr. Davies: The hon. Gentleman has asked me a series of questions, many of which are irrelevant to the issue that we are discussing. I think, Mr. Deputy Speaker, that you would rapidly halt me if I embarked on a disquisition about the American tax system. We are talking about the British tax system. As for the question of equity between basic-rate and higher-rate taxpayers—[Interruption.] I am endeavouring to answer the hon. Gentleman's questions. Labour Members obviously do not want me to answer their questions, but I shall answer them anyway, whether they want me to or not.
  The equity between higher-rate and basic-rate taxpayers under an imputation system is entirely preserved. The basic-rate taxpayer incurs no further tax liability on his dividend, but the higher-rate taxpayer must account to the Inland Revenue for the difference between the standard rate and his own marginal rate—or the difference between the dividend tax credit rate and the higher marginal rate. That is perfectly simple. Equity is preserved, and the principle of double taxation is avoided.
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  If the clause is passed, however, double taxation will become a principle in our tax system. That is a retrogressive and damaging step, and the whole country should be in no doubt about what is happening.
  The measure will affect not only institutional pension funds—which, rightly, we have been discussing today, and about which I shall say a little more shortly—but individuals. It produces another anomaly, in that individuals will be subject to double taxation. Individual taxpayers who should not be paying tax at all, because their incomes have not reached the taxable threshold, will now do so, under legislation introduced—amazingly—by a Labour Government.
  The Labour party used to be proud of concepts of social justice, and proud of being committed to giving the less well-off a fair deal. What will happen now is that a little old widow with her half a dozen privatisation shares who previously could reclaim dividend tax credit and so not pay tax will no longer be able to do so. She will be subject to an invidious and new form of taxation, to which she or anyone below the tax threshold is currently not subject. That is extremely unfair. As well as destroying the neutrality of the system and introducing a distortion, the measure will cause pain and financial loss to those who least deserve to suffer.
  Mr. Peter Brooke: Has it been my hon. Friend's experience, as it has been mine, that pensioner constituents who have been alerted to the change at this late stage in the passage of the Bill are beginning to write in to say that they had not appreciated the situation? Can he contemplate, as I can, the number of letters we will receive after the Bill has become law?
  4.30 pm
  Mr. Davies: I am going to give my right hon. Friend an honest answer, because we all try to give honest answers in this place. The honest answer, which I know is not the one he was hoping to hear, is no. There is a simple reason for that, and the reason is twofold. First—I know they will not mind my saying this—my constituents in Lincolnshire are probably not quite as financially sophisticated as my right hon. Friend's constituents in the Cities of London and Westminster. One would expect the City of London to contain exceptionally financially sophisticated people.
  Secondly—I do not know whether or not this is a compliment, but it can be taken either way—the remarkable success of the Mandelson propaganda machine has been that it has still not become entirely apparent to the general public what will be the effect of the Budget, not only in the field we are discussing now but in many others. If the Labour Government want to regard that as a positive achievement, they can.
  It is a remarkable achievement of propaganda that, in terms of the broad public perception of the initial debates on the Budget, the Government have managed to get away with saying that they have found a pot of gold that no one knew about—that magic holy grail, for which Chancellors of the Exchequer have looking for centuries, if not millennia, but have never found. It is the equivalent of the philosopher's stone—the tax that is not a tax at all; a source of money that can be tapped without doing damage to anyone else. The abolition of the dividend tax

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  credit has been presented to the public as though no one would suffer from the extraction of £4 billion or £5 billion a year from those who currently benefit from the dividend tax credit—institutions such as pension funds as well as individuals.
  My right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) is correct. As Abraham Lincoln said:
  "you cannot fool all the people all of the time."
  I do not think the British people can be fooled for long, and I am certain that the people of Lincolnshire cannot be fooled for long, so to those who are manipulating that remarkable propaganda machine I say that the truth will come back and hit them—reality always wins in the end, and the truth will be victorious.
  When people realise how they have been defrauded, not only by the tax, but by the way in which the tax has been presented, which compounds the offence, they will be extremely angry. We shall receive thousands of letters full of anguish and distress—not that we will be able to do much for the correspondents, many of whom will express sincere regret at having voted the wrong way on 1 May, not realising what costs would flow from that unfortunate and, in many cases, hasty decision.
  That is just one aspect, and I have not by any means finished my strictures in support of the amendment to the Government's appalling clause. I have tried to show that, far from removing distortions from the tax system, the Bill is introducing for the first time some very onerous and unpleasant distortions into our tax system.
  The other point which the hon. Member for Dudley, North made was also wrong. He said that the abolition of dividend tax credit would increase the retention rate of profits by companies. That, too, comes out of the Mandelson propaganda machine all too frequently, and it is complete and utter nonsense.
  There are only two ways in which a company can be responsibly managed in terms of the distribution and level of profits. The first is the classic method taught in business schools around the world, which is to retain for investment such profits as can be invested in projects whose prospective yield will be equal to or higher than the average cost of capital of the company concerned. That rule has a certain mathematical rigour. It is not always easy to estimate profits from potential investment projects, but that is the science of investment appraisal, and it is what professional managers are supposed to do.
  The second approach is also responsible. It supposes that company directors exist in a fiduciary capacity on behalf of their shareholders, and should therefore do whatever is in their shareholders' interests. If some other principle overrides the one that I have just outlined, they should be prepared to allow that to happen, at least in a certain measure. Where a large number of their shareholders—in this case, institutional pension funds—say to the company directors, "We absolutely depend on the maintenance of our dividend cash flows, our own beneficiaries are pensioners who depend on that, and we look to you as directors of our company to ensure that we are, as far as possible, protected from what the Government are doing", the directors may responsibly say
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  that they need to maintain their distribution rate at a slightly higher level than would result from the objective application of the principle that I have set out.
  Mr. Cranston: Can the hon. Gentleman explain why the ratio of dividends to GDP is higher in this country than in the United States?
  Mr. Davies: It is probably a function of the structure of industry in the two countries. An awful lot of mistakes are made, such as comparing stock market performance, because the structure of industry in certain countries is not taken into account. In some industries, a higher pay-out ratio is clearly appropriate, because the opportunities for investment that achieve the criterion that I have just set out—yielding the same return as the average cost of the capital of a company—are less strong than in other sectors of the economy. However, I do not think for a moment that differential pay-out ratios have anything to do with the existence or otherwise of an imputation tax.
  I thought that the hon. Gentleman had intervened to say that he found something wrong with my argument, but far from it. If he finds nothing wrong with it, that may be because he has already seen what inevitably and logically flows from it. In the first case, if companies adopt what I call the "professional principle" in determining their pay-out ratios, by definition the pay-out ratio will not change as a result of the abolition of the dividend tax credit. Thus, far from the Government's measure bringing about a higher retention ratio, the ratio will remain exactly the same.
  The second possibility is that the pay-out ratio will increase because company directors will decide to increase it so that cash inflow to their gross pension funds will remain the same. The exact opposite will thus occur: the retention ratio will fall, and the pay-out ratio will rise. I hope that that shows that the assumption behind the hon. Gentleman's analysis was absolutely wrong.
  Mrs. Liddell: The hon. Gentleman makes an interesting point. Is not the logic of his point that it is up to companies to decide whether it is in their long-term interest to retain or distribute profits? The tax credit system we seek to abolish put a distortion into the system. It created a subsidy for the distribution of profits, and thereby removed the freedom of company boards to determine their long-term future.
  Mr. Davies: I can tell the hon. Lady that I have sat on the boards of companies, and not for one moment would I have been influenced by that consideration. I would always have adopted the first principle, and I would adopt it now if I were on the board of a public company. I would say that we will determine the pay-out ratio on the basis that we pay out everything to our shareholders, except where we believe that we can reinvest at equivalent risk at equivalent returns—or, of course, at lower risk or better returns.
  Beyond that, we have an absolute fiduciary responsibility to hand the money back to the shareholders to whom it belongs. They can then decide how to reinvest it themselves. I would leave tax distortions out of the matter.
  Mrs. Liddell: The hon. Gentleman makes my point for me. Companies are in the best position to judge what is

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  the best way forward for them. He is arguing against—and, in so doing, making the case for—giving companies the right to determine their own future. That is not logical.
  Mr. Davies: The hon. Lady has not been listening to me; she has been weaving a web of fantasy of her own. I said nothing of the kind. I said that there were two possible sets of consequences relating to the pay-out ratio. As a company director I would wish to operate on the basis that there would no change in the pay-out ratios of British companies as a result of the abolition of the dividend tax credit.
  The hon. Lady implied that that was the basis on which good management would operate, and I agree with her. If she accepts that, she pulls the rug out from under the feet of the hon. Member for Dudley, North, who argued that one of the supposed benefits of the abolition of the dividend tax credit would be an increase in the retention ratio.
  I suggested a second scenario, in which the company was being slightly less objectively and professionally managed. There, the effect of abolishing the dividend tax credit would be to increase the pay-out ratio in order to satisfy the demands of a majority of shareholders.
  Yvette Cooper: Does the hon. Gentleman accept that there will be pressure from shareholders on the decisions that companies make, and that those shareholders in the form of pension funds will have an incentive to call for dividends to be paid to them, rather than their potential dividends going into the long-term future of the company and the increase in the value of that company over time?
  Therefore, the distortion comes via the shareholders. Even if other board members are as far-sighted as the hon. Gentleman, the shareholders will put pressure on them to pay out now, rather than to hold the money in investment for the long-term future of the company.
  Mr. Davies: It is typical of traditional Labour myopia about industry to see some antithesis between shareholders and companies. There is no antithesis at all. A company consists of nothing more or less than its shareholders. The members of the company are its shareholders. The board of directors is there only in a fiduciary capacity to manage the shareholders' money. There can be no antithesis or conflict arising between them in a properly managed company.
  The rest of the hon. Lady's point supported my argument that the effect of the abolition of the dividend tax credit will be that some shareholders—the present gross funds, the institutional shareholders and the poor non-tax-paying individuals whom I mentioned earlier—will put pressure on companies to increase the pay-out ratio over what the board of directors would normally consider its responsibility to decide.
  Mr. Heathcoat-Amory: Does my hon. Friend recall that, when there was a 5 per cent. reduction in the ACT credit, the consequence was that, in some cases, pension funds, which own many of the companies, required a higher distribution to compensate for the tax credit that they were no longer receiving? Will he confirm that he has observed the paradoxical element in the proposals, which may lead to a higher distribution, higher dividends
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  and higher pay-outs from some of those companies? That goes against the Government's position that profits are better retained.
  4.45 pm
  Mr. Davies: I agree with my right hon. Friend. He touches on a minor but intriguing theme of the Budget. When the Labour party goes astray, it usually does so by compounding an initial error made by a previous Conservative Administration. It is true that previous Conservative Administrations made a few mistakes, otherwise I suppose that we should still have a Conservative Administration. The Government seem to have said in so many aspects of the Budget, "You sinned a little, so we will sin a great deal more."
  If the Government had examined the consequences for company pay-out policy following the 5 per cent. reduction in ACT a few years ago, they would have seen that those consequences were exactly the opposite of those advanced by their propaganda machine and so ably represented in the debate by the hon. Member for Dudley, North.
  It has taken some time to deal with the illusions betrayed by the hon. Member for Dudley, North, but I shall return to the essence of the clause and the need for the amendment. One hopes that, before the Treasury made such a disastrous proposal, it considered the consequences of abolishing a dividend tax credit. As we shall probably find later, when we discuss foreign income dividends, little consideration and no consultation took place. The Government must confront the damage that would be caused by the Bill, which was not anticipated and which gives rise to confusion and consternation.
  As for the impact on pensions, one can distinguish five consequences that flow inevitably from the abolition of dividend tax credits. The first is that personal pensioners and those with defined-contribution, as opposed to defined-benefit, occupational pensions—there are millions of people in those two categories—will be significantly worse off.
  It simply will not to do to say that, although those pensioners are worse off because of the abolition of dividend tax credit, they are better off because the stock market has done well over the past few months. That would be thoroughly hypocritical, because the Government have not the faintest intention of reintroducing the dividend tax credit if the stock market should cease to perform so strongly.
  When we introduce tax measures, we must always consider the effect if other things remain equal. If this measure is implemented, those two categories of pensioners—millions of our fellow citizens—will be decisively worse off. We heard an estimate of 12 per cent., which more than justifies my saying significantly worse off. There is no escaping that fact.
  The second category is the defined benefit occupational schemes—the traditional occupational schemes in this country. Again, money is being taken away from them. There is no doubt that someone will be worse off; who will it be? In so far as there is a surplus in those funds, some or all of which might have been allocated to pension benefits of one kind or another, clearly the pensioners in those schemes will be worse off.
  In so far as those pension schemes go from an actuarial surplus to an actuarial deficit because of the necessary writing down in the prospective rate of return on the funds

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  that every actuary will have to undertake, the companies that have established those defined benefit schemes will be worse off. Under the law, they will have to make additional contributions.
  I complained about that on Second Reading. I said that it was quite irresponsible for the Government to introduce a proposal that will necessarily have a considerable impact on corporate post-tax profitability without making any estimate of the impact on the corporate sector: to what extent it will reduce corporate profits that are available for investment or distribution. Clearly, the effect will be more than significant—although we do not know whether it will run into many hundreds of millions or many billions of pounds a year.
  It is particularly disingenuous of the Government not to make such an estimate when they make much of the fact that they have reduced the nominal rates of corporation tax in the Budget. It is all very well saying that they will reduce corporation tax by 2 per cent., but if not only the utilities, which are targeted in a discriminatory way and face a substantial increase in their corporate taxation, but other companies, which will have to make additional, unexpected and unbudgeted pension contributions, have a new levy imposed upon them, the net position will be a great deal worse. The net impact of the Budget on the corporate sector will be, without the slightest doubt, negative to the tune of several billions of pounds—although we do not know by how many.
  I invite the Economic Secretary and the Paymaster General to intervene in order to give the House that figure. I shall gladly give way now. The hon. Gentleman merely smiles sheepishly: he has not the faintest intention of satisfying my curiosity. There are two reasons why he will not do that. First, he does not know the figure—in which case, he has not done his homework properly. It is a disgrace that the Treasury should advance proposals of that kind without conducting some elementary costing exercises. Secondly, he may know the figure, but he does not want to tell me. He knows how unpopular the news would be for British industry, which would read it in Hansard tomorrow morning—or perhaps the figure would be announced on the airwaves well before then, as I suspect it would be pretty sensational.
  The more reticent, shifty and evasive the Government become every time I question them about this point, the more I am forced to conclude that they have something nasty to hide. If the figure is not calculated by the Government, it will be calculated in due course by analysts in the City and by the actuaries of the various pension funds involved. It will take many months to aggregate the calculations, but, when they are released, the 1997 Budget will be viewed as a grievous one that imposes substantial burdens on industry.
  Despite all the rhetoric and the Mandelson propaganda about the Government's being friendly to business and wanting investment, their deeds totally belie their words. My right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) is correct: it is only a matter of time before the British people realise how badly they have been taken in, and then there will be political retribution for the guilty.
  A third inevitable consequence of abolishing dividend tax credits and reducing the yield from pension savings will be fewer pension savings. That is an automatic
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  consequence: if one reduces the yield from a particular investment, one reduces the volume of that investment. We shall have fewer pension savings, and no doubt fewer savings as a whole, in this country. I pointed out on Second Reading what a curious move that is at a time when the Government claim that the economy is overheating and when, logically, they should encourage, rather than penalise, savings. Considerable aggregate economic damage will flow from that action.
  The fourth important consequence has been mentioned this afternoon. Some funded occupational pension schemes with defined benefits are in the public sector. Local authorities are a good example—civil servants are not, because they have a pay-as-you-go system. Public sector occupational pension schemes are funded, and therefore will lose the income that is currently represented by dividend tax credits. Some schemes will go into actuarial deficit, or surpluses—where they exist—will decline.
  In the course of debate, some pretty frightening estimates have been given of the extent to which local authorities will have to use council tax payers' money—which would otherwise be used for service provision or debt reduction, in the case of Conservative authorities; I do not think that Labour authorities advocate debt reduction programmes—to make up the solvency of the pension schemes. That automatic increase in public expenditure must be set against the gains in public expenditure as a result of abolishing dividend tax credits.
  Yet we have seen no net figure. It is simply not satisfactory to come to the House with a gross figure for tax yield and not tell us the net figure for the necessary losses in revenue or increases in public expenditure that will flow from the same measure. That is a thoroughly unprofessional, unsatisfactory and shoddy thing to do, and it is simply not good enough.
  Mr. Brooke: I am extremely appreciative of my hon. Friend for giving way again. Does he recall that, when the matter was raised with the Prime Minister on the Floor of the House, he absolutely deflected the question, and said that the problem would be solved by the behaviour of the stock market?
  Mr. Davies: Evasiveness is clearly the hallmark of this Administration, and the Prime Minister's colleagues have followed his example. Perhaps we should allow them some moral mitigation—after all, their leader should bear primary responsibility for the tone he establishes in running the Government. On this and other subjects, that tone has been complete evasiveness, as my right hon. Friend has said. That is an extremely worrying state of affairs.
  The fifth consequence of abolishing dividend tax credits also affects public expenditure—but, again, we have absolutely no estimate of its impact. Clearly, all investment decisions are taken at the margin, and the return from potential investment in personal pensions has been reduced significantly.
  Therefore, it follows that many people who, on the basis of the previous equation, would have opted out of SERPS and into a personal pension scheme, will now not do so. There is much evidence that responsible advisers are warning people not to do that. That will impose a greater burden on SERPS as fewer people will opt out,

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  and therefore future public expenditure projections must be revised upwards. However, we do not know by how much.
  Several judgmental assumptions must necessarily be made in this case. When the Paymaster General was the manager of Jaguar, I am sure that he did not allow his finance director, the treasury department or accountants to bring forward budgets without stating their assumptions and calculating the consequences of a particular line of expenditure on a net basis. I am convinced that he did not allow that. Will he intervene now and say that he did? I am sure that he demanded to see the net position. If the net position then had to be calculated on the basis of judgmental assumptions, I presume that he would have demanded to know what they were.
  I think that the Paymaster General was a more successful business man than he is a politician, so he would have queried those assumptions. I am sure that he looked hard at the methodology, and insisted that the job be done properly. He may have said, "I won't employ in Jaguar people who do not do that." However, the hon. Gentleman apparently employs in the Treasury many people who have not even begun to do that work—or perhaps they have done the work and we have not been told the results.
  There is no third, fourth or fifth possibility; it is one of two: either they have not done the job properly—they have not done their basic homework—or they are being less than frank with the public. That fundamental issue runs through the Bill, but nowhere does it pose itself more acutely and more pertinently than in this clause.
  I hope that we now finally receive an answer, from whichever Minister winds up the debate, to that essential question. Which is it: do Ministers not know what the net position is—do they not know what the consequences are of the increases in public expenditure or of the reductions in public revenue that will flow from the clause, set against the potential gains from the dividend tax credit? If they do know, why do they not tell us, and when will they tell us?
  5 pm
  Mr. Damian Green: I cannot aspire to the comprehensive, indeed heroic, coverage of the landscape of the clause that my hon. Friend the Member for Grantham and Stamford (Mr. Davies) has just achieved, but it is important for the House to consider a few more points as to the inadequacies of the clause and the necessity for the amendment tabled by my right hon. Friend the Member for Wells (Mr. Heathcoat—Amory).
  The discussion of the behavioural effects of the proposed change to dividend tax credits has been particularly interesting. Behind much of the Government's argument and, in some cases, behind some of the points made by my right hon. and hon. Friends, is the assumption that the Government, through the clause, may be able to change the way in which companies distribute their profits. The point was made most starkly and most instructively by the hon. Member for Pontefract and Castleford (Yvette Cooper), who said, more or less, that all dividend payments were bad, that if shareholders demanded extra dividend payments they were likely to fritter them away and that it was therefore extremely important for the Government to try to direct dividend payments in socially responsible ways, such as towards investment.
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  That was instructive in two ways. First, it showed a catastrophically fundamental lack of knowledge of and sympathy with any free-market system, in which the interflow of the needs of investors, companies and different classes of shareholder means that investment goes into the most productive sectors. If history, particularly the UK's history in the past 30 years, teaches us anything, it is that attempts by government to micro-manage the economy to the extent of, for instance, managing flows of dividends always end in disaster.
  Secondly, even beyond that misunderstanding, there was a more important misunderstanding: that by cutting companies' incentive to distribute dividends—by changing the ACT rules in this case—we will produce greater investment and greater research and development.
  Mr. Gibb: Would the Government have bothered to deal with this so-called distortion so early in their term if it were not for the fact that it just happened to raise £5 billion a year as a helpful by-product?
  Mr. Green: My hon. Friend makes an extremely pertinent point. The answer to his question is no, of course not. If the Government's proposal directed investment—which they clearly wish to do—but did not raise any money, they would not have introduced it in this emergency Budget. Clearly the fact that dare not speak its name about this tax increase is that the Government were desperate for revenue and took this route because they thought that it was so technical and directly affected so few people that they would get away with it.
  During the debates both upstairs in Committee and on the Floor of the House, the Government have not got away with it. Those involved—the industries, the pension funds and, perhaps most important, the many millions of pensioners who will be affected by the proposal—are beginning to realise what kind of raid this is on their pension funds. When they extract the £5 billion from those pension funds, the Government will notice that pensioners rebel and condemn the clause as much as we do.
  To return to the direct point about whether this tax grab will have any beneficial effect on the flow of funds in British industry, upstairs, we discussed various academic studies that show that what might be regarded as the populist, intuitive line—that, if we make dividends less attractive, companies will put more of their money into productive, long-term investment—is simply not borne out by any evidence.
  All the evidence shows that the companies that devote most effort to research and development are in particular sectors—pharmaceuticals, health care, engineering and electronics—that those companies do not have any particular dividend policy, and that, if there is any link between dividend distribution and investment in research and development, it is that they go together, which is intuitively plausible as well as being true. Companies that invest for the long term are, over the long term, more profitable. They require capital to continue the flow of investment and the flow of profits. Therefore, they need to keep their shareholders happy, so they have generous dividend payments.
  The basic rationale behind the Government's stated desire—the fig leaf that they use to try to disguise the fact that this is simply a tax grab—is itself wrong. There is no rationale that says that, if we reduce the desirability of paying out profits in dividends, we increase the amount

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  of money that goes into research and development; so, even on the Government's own rationale, the clause has no merit.
  If the Government were genuinely interested in the rationale that they state for the clause, they would no doubt give tax credits for research and development. A general principle of Conservative Members—and of the previous Government—is that we want a simpler tax system that reduces corporation tax levels and does not have distortions such as tax credits. In other parts of the Budget, the Government have already shown that, where it suits them, they do not follow that regime. They say that various parts of Bill reduce taxes such as corporation tax and try to simplify the tax system, but when it suits them—as with the film industry—they are happy to introduce tax distortions that they regard as beneficial, so if they were really concerned about research and development they could introduce tax credits.
  Mr. Quentin Davies: While my hon. Friend is on the matter of distortions and pay-out ratios, does he agree that it is damaging for an economy to force companies to retain an excessive rate of profit? If an excessive amount were retained in companies that happened to be generating a lot of cash, not only would it disadvantage their shareholders for reasons that I explained in my speech, but the mobility of capital in the economy as a whole would be reduced and less capital would be available for other parts of the company where growth and investment prospects might be better. It would be an extremely ineffective and unproductive economic mechanism.
  Mr. Green: My hon. Friend is right. The underlying point is that businesses and the people who run them know, by and large, where they should be investing. History tells us that, when politicians and civil servants, however well intentioned, try to interfere in the investment policies of individual businesses, they always get it wrong and make businesses worse off in the long term.
  There is another part to the argument. Many of my hon. Friends have shown that the tax change is damaging to industry, but more important is the effect that it will have on pensioners. Does it help any pensioner? No. Does it damage many pensioners? Yes. Certain classes of pensioner, particularly vulnerable and future pensioners, will be particularly hit.
  Another fig leaf that the Government produced when they introduced the clause was that many pension funds were in surplus, so it did not matter. That betrays a morality which, in itself, is extremely questionable. When Mr. Maxwell decided that surplus pension funds were suitable to be raided for his own purposes, many people rightly found that morally unacceptable. I fail to see the distinction between that and the Government deciding that surplus pension funds are there to be raided. Moreover, while some pension funds are in surplus, many are not, and they will need to find the extra money to increase the pensions available to future generations of pensioners or pay out lower pensions.
  Some classes of business that are important for future job creation, such as small firms, will be particularly hard hit by the measure. In addition, underlying businesses will
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  be affected. Many of them may well take a responsible long-term view about how they should treat their employees. They might say that their employees should not be disadvantaged by the Government's rather immoral one-off raid on pension funds. If, as a result, they decide to increase the contribution from the underlying business to the pension fund, the net effect will be that, again, investment and dividend payments are reduced. The firm concerned will be forced to do things with its capital that it would not otherwise do and the overall net wealth of the economy will, in the long term, be reduced.
  Mr. Gibb: Is my hon. Friend aware of another consequence of trying to confiscate surpluses from the nation's pension funds, which is that many vulnerable pensioners receive a discretionary increase from those pension funds in the payment of their pensions because those pension funds are in surplus, but once those surpluses are eliminated there will be far less scope for such discretionary increases to the more vulnerable pensioners in Britain?
  Mr. Green: My hon. Friend makes a good point. A point that I would develop from that is that whether any individual pensioner is particularly hard hit will be arbitrary. It will probably be no consequence of any action taken by the individual pensioner whether he is with a pension fund that is in surplus or in deficit, or whether that pension fund is associated with an underlying company that is or is not able to make up the deficit or is in a position to pay discretionary payments. Because of the arbitrary imposition of the tax, pensioners or future pensioners will suddenly find themselves severely disadvantaged.
  Another point that I want to draw to the attention of the House is the long-term nature of savings for pensions. For most people involved, this hit will come halfway through the process of saving for their pension in old age. Because this measure changes the terms they thought they were saving under, it is effectively retrospective legislation. People may have been saving for 15 or 20 years under a certain set of rules. This measure changes those rules, dating back to the time when a person started to save for a pension. I hope that all hon. Members will agree that retrospective financial legislation is a bad thing.
  Mr. Clifton-Brown: My hon. Friend touches on an important point. Is not the measure a total misrepresentation, particularly to pensioners who are drawing nearer to retirement who have built up their expectations of their standard of living on a certain pension who will now be denied that level of benefit? They have no time left in their working life to make up the shortfall.
  Mr. Green: That is an extremely good point, and it illustrates the amount of extra uncertainty that is injected into the system. The hon. Member for North Tayside (Mr. Swinney) referred to the fact that, from his experience in the pension industry, the worst that can happen for those running the industry and, more important, for those looking forward to receiving a pension, is an increase in uncertainty. Uncertainty is precisely what this tax increase introduces into the system.
  Another effect of the measure is flatly contradictory to much of the rhetoric that we hear from the Government Front Bench, particularly the reforms favoured by the

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  Minister for Welfare Reform, the right hon. Member for Birkenhead (Mr. Field). He believes that there should be greater personal responsibility for savings and he wants the welfare state to move more towards the application of personal savings.
  One definite effect of the clause, because of the uncertainty that it introduces, is that people will be discouraged from taking that route; they will want to take what they regard as a safer route. If at any time a Government can come along and take £5 billion out of the pension fund industry and possibly damage personal pensions, people will feel more reluctant than they were before to go down the route of personal savings to provide for themselves in old age or in times of illness or unemployment.
  5.15 pm
  What is proposed shows the enormous gap between rhetoric and reality in the Government. We hear a lot of rhetoric about an increase in personal responsibility and modernising the welfare state, but a couple of weeks after taking power the Government introduced an emergency Budget that marches strongly in the opposite direction. The Government have failed to come up with any rationale in terms of their own rhetoric on welfare for taking this action.
  Companies will be badly affected by this measure, particularly small companies and companies that take the honourable route of trying to subsidise their own pension funds. Existing pensioners will be worse off, and future pensioners will be more uncertain about the life that they will be able to live in their old age. This is a thoroughly bad clause which at the very least needs amending.
  Mr. Tim Loughton: As a new boy, I might be forgiven for feeling rather frustrated. For 26 hours, members of the Finance Bill Standing Committee went through the Bill clause by clause. My hon. Friends may have felt during those 26 hours that we had strayed on to the set of "The Woodentops", such was the level of debate not forthcoming from the Government Benches.
  I was almost encouraged that some of those mutes appeared to have found their voices today. Alas, the one who did find his voice—the hon. Member for Dudley, North (Mr. Cranston)—appears swiftly to have disappeared. I can only hope that the reason for his disappearance is the former of two probabilities—the first, that he has gone to the Library to check some of his facts, which have been found to be sorely lacking or, secondly, that his pager has summoned him to Mandelson towers, whither he has hurried hotfoot, quickly shoving a copy of the Order Paper down the back of his trousers to mitigate the consequences of speaking out of turn.
  Particularly galling is the fact that the hon. Member for Dudley, North, the only one to venture any opinions on the matter, has completely and utterly—either by choice or out of ignorance—misunderstood and ignored what we spent much of those 26 hours upstairs debating in fine detail. For his benefit, in case he reads Hansard tomorrow, and those few of his colleagues who have bothered to turn up, I want to go through, step by step, the serious implications of these clauses to a deep stratum of companies, pension funds and individuals.
  Last week, I drew on the example of a large FTSE company, one of the largest employers in my constituency, SmithKline Beecham. Despite being a large
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  multinational company, typically its pension fund was only about 93 per cent. covered at its last actuarial valuation. We know that, from an actuarial valuation basis, if the ACT credits are lost, the fund will be severely less fully funded than it currently is, but what are the options for the trustees of a pension fund such as that of SmithKline Beecham?
  First, it can have a much less well funded pension fund and in due course be hauled up under the minimum funding requirements. Secondly, it could choose, if it is feeling generous towards its pension holders, to stump up the difference and underwrite the shortfall that will be exacerbated by the Government's moves. The cash injection required to do that will amount to approximately 7.5 per cent. of last year's pre-tax profits. That is not a good way to go about maximising funds for investment, something about which we heard so much from the hon. Member for Dudley, North.
  What will this mean for SmithKline Beecham? To enhance shareholder value, it will probably have to launch a share buy-back programme, for which it will have to borrow money when interest rates are rising. That does not leave a great deal of extra money for investment, which is so important. It will have less money to pay out in dividends—which Labour Members apparently so resent. It will have less money for research and development, which is also important. Labour Members refuse to contemplate introducing a tax credit against research and development expenditure, as operates with varying degrees of success in France and the United States. It will have less money for expansion. I cannot envisage any way in which the Bill will increase the opportunities for that company to improve on its already enormous research and development expenditure.
  The problem will be compounded by any tightening of the minimum funding requirements that the Government may introduce. Although that may not apply to SmithKline Beecham, there are less scrupulous smaller companies with pension funds that may put pressure on their actuaries so that there is a less stringent requirement to top up the pension fund, which may then mask the real nature of those funds. Less scrupulous pension fund managers may switch their pensioners out of defined benefit schemes into money purchase options, which are then open to the vagaries of the stock market and the underlying investments in the schemes.
  The proposals will have especially harmful effects on many large, previously nationalised—or still nationalised—companies, all of which operate in Labour-held constituencies. As I have said, the old National Coal Board pension fund is worth a whopping £20 billion and looks after 500,000 former miners. It does not attract new funds, but it still has a great deal to pay out from a diminishing pot of money. The same goes, to a lesser extent, for the Post Office, with a £12 billion fund and 350,000 employees and former employees; for the steel industry; and for many formerly large engineering companies. The pension funds of all those companies will suffer.
  Let us consider the impact on dividend payouts. SmithKline Beecham had a 15.9p full-year dividend last year. What options are open to it now? It could pay a reduced dividend to its shareholders. Because it will not get the advance corporation tax credit, the impact will fall on its shareholders, who will receive a dividend worth 20 per cent. less. That is certainly true for pension funds now and for individual shareholders from 1999. Its own

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  pension fund will suffer as it understandably holds a large number of SmithKline Beecham shares, within the limits allowed. It will be a double whammy.
  Shareholders will suffer immediately and investors will be less attracted to the equity issue, so the cost of capital to borrow goes up, which means equity finance is more expensive, which again affects the capacity of those companies to expand and spend more money on research and development and investing overseas. As raising capital is a speciality of the City of London, it will be a loser under the proposed measures.
  SmithKline Beecham may feel generous. It may feel able to pay out that 20 per cent. lost ACT credit in a higher net dividend to its shareholders. It would be exceedingly generous of that company to do so, but the effect would be less money in the pot for the important investment that the Labour party goes on about—so yet again, the measures are self-defeating.
  What about the impact on individuals? I have already said that people with occupational pension schemes who rely on money purchase arrangements where companies are not making up the difference will be instant victims. Private pensions, which are unlikely to be in surplus, such is the nature of those schemes, will be hit to the tune of 11 per cent. The Association of Consulting Actuaries calculates that about half of final salary schemes will be in deficit and individual schemes will be hit as well. The implication is that pensions will be worth less at a time when the Government have just issued a new basis for encouraging further private pension provision.
  The right hand of the Treasury appears not to know—or chooses to ignore—what the left hand of the Social Security Department is doing. Again, it will be self-defeating. Last week, we heard in detail about the implications for the investment trust and unit trust industry. Holders of those investments will be doubly hit by the changes.
  The upshot is that the measures will undermine individuals' ability to retire early. They will undermine the great clichè of the flexible decade of retirement that we were promised by Labour before the election. Individuals with private pension schemes who already contribute the maximum are given no option to contribute more to make up the ACT shortfall. There have been no changes to the limits. As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said, there will be a serious impact as people will no longer be incentivised to contract out of the state earnings-related pension scheme and may indeed now contract back in.
  There will be an impact on local authority pension schemes. We have had some mixed messages from Labour Members on that issue. My local authority, West Sussex county council, has already estimated that lost ACT credit is likely to cost it £3.4 million. Half of that will be down to the county council; half will be down to the district councils in West Sussex. It comes to about 5 per cent. of the annual payroll for West Sussex. We have received no assurances that that shortfall will be made up.
  I want briefly to read from a letter from Sir Jeremy Beecham, the chairman of the Local government Association, to the leader of West Sussex county council.
  He said:
  "I am pleased to be able to report that the Association correctly anticipated the Chancellor's announcement"—
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  very good Mystic Meg qualities; he obviously gets the Financial Times well in advance of most hon. Members—
  "and had made representations to the Government about the adverse impact on local authority pension funds in advance of the Budget.
  The Government has accepted that the loss of tax credits will need to be taken into account in determining local authority provision for 1999/2000 and subsequent years. We are, however, continuing to press the Government on this point and are asking for the increase to be fully underwritten by an increase in TSS and Government grant from 1999/2000 when the results of the next revaluation are implemented."
  However, when the chairman of the UKSC, now the hon. Member for Putney (Mr. Colman), claimed it as a great triumph that local authorities would be underwritten for any shortfall of ACT credits, there was a great deal on squirming on the Government Front Bench and the assurance was not repeated. We have been given no firm commitment by the Government, upstairs, downstairs on in any lady's chamber, that the shortfall will be underwritten. We know that the result can only be increased council taxes, which also depend on what the Government do on capping, or further cuts in local authority services.
  Mr. Gibb: Does my hon. Friend agree that it is astonishing that the Red Book takes into account the extra pension contributions that companies will be required to pay because of the measure—it is stated on page 46 that there will be a consequent reduction in corporation tax—but that it makes absolutely no provision for the extra contributions that local authorities will have to pay so that they can balance their pension funds?
  5.30 pm
  Mr. Loughton: Of course it is astonishing—but then everything that Ministers have loosely said about their intentions to deal with local government pension funds has been quite astonishing. We have heard that the full implications for local authority pension funds will not really be known until next year, but—as any reasonable, responsible council leader or local authority pension fund trustee will say—it is prudent for all local authorities to have as soon as possible an ad hoc valuation of the very real damage that will be done.
  Mr. Clifton-Brown: Is my hon. Friend aware that not only is it desirable to make up those contributions but the prescriptions governing rules of local government pension funds require trustees to make an informal valuation each year? If they feel that there is a shortfall, they must make it up each year—not when the next actuarial valuation is due.
  Mr. Loughton: My hon. Friend is absolutely right. Ministers' sense of urgency in the matter has been positively snail-like and quite disgraceful. Yet again, local authorities have been left on their own to assess ways of making up the damage. The Government have left local government in a disgraceful position.
  On a related subject, I have a copy of a letter from the Minister for Local Government and Housing to the hon. Member for Putney in which she wrote:
  "We spoke briefly last night about the impact of the Budget on local authority pension funds.
  Pension funds should benefit from improved company performance as a result of encouraging quality long term investment, reflected in long term share values. The reduction in Corporation Tax announced yesterday will greatly assist company performance."

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  In my experience in dealing in investment matters, every promise of investment performance had to contain the qualification that past performance should not be taken as a guarantee of future performance or gains. The Minister for Local Government and Housing, however, apparently takes stock market gains for granted and holds the sentiment, "Don't worry about what we have done, boys, because any shortfalls will be compensated by our great friends in the City—new Labour, new stockbrokers. Our great friends at the temple of Mammon—the stock market—will bail us out."
  As my hon. Friend the Member for Grantham and Stamford (Mr. Davies) asked, however, will the Government reverse their decision when the stock market starts going down? In Committee, I elaborated on the fact that the UK stock market rise has been something of a mirage compared with the much greater rises in other major markets, and that that has had a particularly significant impact on multinational companies, the share prices of which, in many cases, have fallen alarmingly.
  The Government's measures will have a serious impact in four spheres—resulting in a quadruple whammy for companies and their company pensions funds, for beneficiaries of those pension funds, for ordinary people with private pension funds, and, inevitably, for anyone who pays council tax. It is entirely fallacious to suggest that dividend payment levels have positively discouraged investment, because those levels and investment are not mutually exclusive. I have already mentioned how a comprehensive study has shown that, in the vast majority of the past 18 years, dividend payments rose as investment rose.
  Let us leave the final word to the former chairman of a major quoted engineering technology company. On the first page of the company's report and accounts for last year, the second strategic objective was described as achieving
  "sustained growth in dividends per share."
  In his report, the chairman was quite proud to report a dividend rate increase of 15 per cent. over the previous year, when he was able also to increase investment in the company by well over the 15 per cent. dividend increase rate.
  The chairman believes that dividend payments and investment are not mutually exclusive, and that dividend payments are a major incentive for equity finance—which is one of the cheapest and most cost-effective ways of producing funds for expansion and research and development—and I believe him. I trust that his colleagues on the Labour Benches will believe him also, because that former chairman of TransTec plc is now the Paymaster General. It is a shame that he is not in the Chamber to echo the words that he wrote only a few months ago in his own company's report and accounts. I hope that one of the few Labour Members remaining in the Chamber for this debate might pick him up on those points.
  Mr. Clifton-Brown: The change to advance corporation tax amounts to an income tax of 20 per cent. on pension schemes that hold equities. ACT is paid because the taxpayer suffers an income tax rebate of 20 per cent., which is collected by a corporation on behalf of the Treasury. The tax change is therefore a severe raid on people's pension funds.
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  I shall dwell on the effects of the change on local authority pension funds. As I said in an intervention on the speech of my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), on 21 June 1997 I received a written answer from the Department of the Environment, Transport and the Regions stating that the next actuarial valuation for local government pension funds would be in March 1988. The Government therefore included the measure in the Budget, although they had no idea—if they did, perhaps the Minister will tell us—of the precise costs and implications for local government.
  Various calculations have been made of the measure's costs to local government, the most accurate of which is perhaps that provided by the chief executive of the London Pension Fund Association—who, as a member of the Chartered Institute of Public Finance and Accountancy, is a professional in the field. He has calculated that the combined cost to local authorities will be £200 million to £400 million. The effect for most local authorities, including mine, will be increases in council tax bills of between £10 and £12.
  Mr. Richard Cockcroft, whose current title is director of corporate services for Gloucestershire county council—it is a job to keep up with his title, because he keeps giving himself new jobs—has made the point that the next actuarial valuations will be made in March 1998. He states that an informal survey was conducted on behalf of the United Kingdom steering committee, which showed
  "that the average County Council was less than 90 per cent. funded".
  Therefore—far from being one of the 50,000 companies with a pension fund surplus mentioned by the Chancellor of the Exchequer—the local authority sector is in deficit and must quickly make up the shortfall.
  Richard Cockcroft goes on to say that, even before the Budget measures, Gloucestershire county council was
  "already contributing an additional £1m a year to rectify the situation, with the fund's other employers"—
  the district councils—
  "also having to contribute significant extra amounts."
  He states that preliminary discussions showed that actuarial costs for the county council would be
  "at least another £2m a year, with the District Councils in total being faced with similar additional costs."
  Moreover, he states—as I said in an intervention on the speech of my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton)—that the
  "Regulations governing Local Government Scheme require all 'actuarial deficits' to be made good by the employer."
  Mr. Cockcroft continues:
  "Without some form of assistance, I can see no option but for those additional pension contributions being made at the expense of 'front line' services."
  He states that, alternatively, council taxes could be increased. A third option, of course, would be to increase local authority standard spending assessments.
  This is a serious matter, because the Government announced in the Budget that they would stick to the previous Government's targets for the next two years. If they do so, it means that there will be no extra money for local authorities to meet their additional burdens. Local authorities will therefore have to bear those burdens themselves. If, as they said the other day, the Government are going to apply strict capping criteria and not allow council taxes to be increased above very tight limits,

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  the extra contributions will have to come straight out of the money for front-line services. I hope that council tax payers and the recipients of such services across the country will be made aware that their services will deteriorate solely because the Government have introduced this new measure.
  Mr. David Ruffley: I suggest that the position is in fact even worse than my hon. Friend describes. Given the change in the forecast for inflation, it is estimated that there is a cut of between 1 and 2 per cent. in real terms in the amount of central Government grant to local authorities. That is estimated to be a cut of about £570 million this year, and double that the following year. Is not the position therefore rather more grievous for local authorities than my hon. Friend described?
  Mr. Clifton-Brown: I am grateful to my hon. Friend for making that important point. It is all very well to stick to an expenditure programme in nominal terms, but in real terms—after inflation has been taken into account—the situation is in fact far worse. I suspect that that is why the format of the Red Book was changed this year so that it does not include departmental spending totals, as that makes it easier to work out what the shortfall is next year and, indeed, the year after. The effect will be the same in other Departments that have to make up shortfalls in pension contributions to pension schemes within their remit. Those Departments include, for example, the Department of Health.
  While I am on the subject, it is worth pointing out that there is a local authority pension time bomb. There are many completely unfunded local government pension schemes. For example, firemen have no funded scheme at all—not that the change which we are discussing will affect them—but in view of the demographic changes and the fact that people are living longer, each departmental budget is being increasingly stretched to make up an ever greater shortfall in pension funds each year. The Government will have to take that into account.
  We shall have to wait and see, but this measure may well depress by up to 20 per cent. the value of the equities held by pension funds. I hope that that does not happen, because it would be very serious for many pension funds. Should it happen, it has been calculated that the capital value of pension funds would fall by about 11 per cent. which, I believe, pension fund trustees would be required to make up in the first year. Some employer and employee contributions will therefore have to increase steeply this coming year.
  My hon. Friend the Member for Grantham and Stamford (Mr. Davies) mentioned the effect on different types of pension scheme. The objective of a defined pension scheme is to ensure that the pensioner receives a defined benefit when he retires. If he suddenly finds that the performance of his fund is 20 per cent. less than expected, he has two options: he can either accept a 20 per cent. diminution in the value of his fund at the time of retirement or, over a period, make up the shortfall in his contributions.
  As I mentioned in an intervention on my hon. Friend the Member for Ashford (Mr. Green), that is all very well for us youngsters, because we have plenty of time to make
  180
  up any shortfall. However, someone who is within three or four years of retirement—this is true of many of my constituents, because I live in an area which has an elderly population—has virtually no opportunity to make up such a shortfall, because he will not earn enough to do so before his retirement. He will therefore retire on a false prospectus. Such pensioners have reason to feel aggrieved about the Government's proposal.
  5.45 pm
  Of course, the effects depend on the balance of the individual fund. I must make it clear that what happens depends on how the individual fund is structured—the proportion of its investments in equities and the proportion in other fixed or variable interest-bearing stocks. I suspect that one of the effects of the proposal will be to force pension fund trustees to consider other interest-bearing fund stocks—for example, gilt-edged stocks—and increase the proportion of such stocks in their funds. Over time, I suspect that that will mean that the performance of such funds will not be as good as it would have been had they continued to invest the norm of 55 per cent. of their funds in equities.
  Whether institutional investors require companies to pay out their increased dividends to make up the 20 per cent. shortfall or retain the money in their company retained profits, the effect will be distorting. A simple switch out of the equity market of a proportion of the pension funds sounds fairly innocuous, but the Government should bear in mind the combined value of the pension funds—a switch of that nature over a relatively short period could cause a dramatic downturn on the equity market.
  I deal finally with a matter that has not yet been mentioned—the combined effect of the ACT credit withdrawals and the changes to foreign income dividends proposed for 1999. In 1993, Norman Lamont, the then Chancellor of the Exchequer, introduced the foreign dividend scheme to enable companies with large earnings on their foreign trading activities to mop up the surplus ACT on those dividends. To the extent that they were able to pay out foreign income dividends, they could mop up the surplus, but, should they not be able to pay out FIDs in future as a result of a measure that we shall debate later this evening, companies would find that they could not reclaim the surplus ACT that they had paid to the Treasury. That is monstrous.
  As I explained at the outset, ACT is paid because the individual taxpayer is getting tax credit on his income. To the extent that the Exchequer is gaining from surplus ACT—more ACT than the income tax credit paid—it is monstrous that companies are not able to reclaim the surplus. I hope that, when we debate foreign income dividends, that point will be highlighted.
  I believe that the Government are seriously rethinking how they will operate the foreign income dividend scheme. I hope that, when further amendments are tabled, perhaps in the other place, the Government will consider the serious effect on some companies that we wish to encourage to make a profit and to repatriate that profit. It would be bizarre if companies were discouraged from repatriating their profits or, indeed, even encouraged to demerge their foreign subsidiaries or if the foreign subsidiaries were taken over by a foreign concern which could then remit the money into this country but not suffer

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  tax damage as a consequence. That would indeed be a bizarre and perverse consequence of the proposed changes.
  The ACT proposal is the most far-reaching measure in the Budget. To take some £5.5 billion from the pensions and hard-earned savings of the poorest people in this country is a cruel deception. Most people are not able to understand this highly complex tax, but they will understand when they suddenly find their standard of living and their income reduced. I hope that, when they realise that, they will protest loudly against the changes that the Government have introduced. I have no doubt that that will hasten the demise of the Government and the return of a Conservative Government at the next election.
  Mrs. Liddell: I must confess that, during the two hours or so that we have spent discussing the amendments, an irritating refrain has been going through my head. It is an old song and I hope that the Library will be able to remind me of its words. It goes something like, "I think I may have heard this song before."
  In the past couple of hours, we have heard the same speeches to which we listened in Committee, not once, not twice, but on a number of occasions. However, we missed the presence of the hon. Member for Daventry (Mr. Boswell). We send our good wishes to his mother, about whom we heard a great deal in Committee. The hon. Member for East Worthing and Shoreham (Mr. Loughton) told us at great length about the pleasures of English wine. His constituents may find that extremely interesting, but mine are more concerned about a secure future for the economy.
  I found it interesting that the shadow Chancellor opened the debate today. He made much of the fact that, by convention, the Chancellor and the shadow Chancellor do not sit on Committees considering the Finance Bill. He is correct in that. I wonder how much of a precedent it is to field the shadow Chancellor against a junior Treasury Minister. That shows that the right hon. Gentleman has a lack of confidence in his own troops. He still has not answered the point that was made repeatedly in Committee: why, if ACT is so important, did the previous Conservative Government change it?
  Mr. Clifton-Brown: The hon. Lady makes a political point as to why my right hon. Friend did not address the Committee. He gave her a perfectly cogent answer. However, he has appeared here today: are we entitled to ask when the Chancellor of the Exchequer might take part in our proceedings?
  Mrs. Liddell: My right hon. Friend the Chancellor of the Exchequer is currently engaged in other Government business. I take it as a great compliment to his team that he did not consider it necessary to address the House today. The fact that we have such a substantial majority means that we have sufficient Members to staff Committees.
  Mr. Quentin Davies: Will the Minister give way?
  Mrs. Liddell: No. I shall make some progress; no doubt I shall give way to the hon. Gentleman later.
  This evening, we have discussed what are, in effect, wrecking amendments. Their effect would be to allow pension funds to continue to receive tax credits until April 1999. After that, payments would be phased out over five years.
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  I am pleased that, at long last, the Opposition have apparently accepted the principle that the damaging distortion of payroll tax credits should be removed, albeit over a more extended period. That hardly seems logical, but we do not expect logic from the Opposition. That is about all that I can say about the amendments, as they are technically deficient in a number of ways. They would only save the payment of tax credits for companies, when most pension funds do not work in that way. They also purport to allow pension funds to continue to receive payment of tax credits after 1999 at a rate of 21 per cent., when by then the rate of tax credit will have been reduced by 10 per cent.
  Their inadequacies are not really the point, however. The amendments are designed to wreck the carefully constructed package of corporation tax reforms that we have laid before the House. I referred to the fact that the shadow Chancellor has not been able to say why, if tax credits are so vital, the Conservative Government reduced them. It is clear that tax credits were lowered in order to fill a black hole in the Government's finances. Our changes to the corporation tax structure will assist business by ensuring that there is a reduction in the rate of corporation tax for large and small companies.
  It is clear that Opposition Members still do not accept the need for stability and the conditions for long-term growth. That comes as no surprise after 18 years of a Conservative Government who were wedded to the concept of boom and bust. Frankly, people do not want that to continue, and that is precisely why they elected a Labour Government on 1 May.
  Mr. Gibb: How is it stable for a family that, under the new Labour Government, has to pay an extra £10 a month because of the Government's decision to abolish mortgage interest relief at source, and an extra £20 on the mortgage because of three interest rate rises, and now needs to find another £20 a month because of clause 19, which will result in higher pension contributions? How can a family find an extra £50 a month if it did not have £50 surplus in its pay slip before the Budget?
  Mrs. Liddell: I am surprised by the hon. Gentleman, who prides himself on being a technician. If that is the level of his expertise, for the sake of his clients, I am grateful that he is in the House.
  Earlier in the debate, the shadow Chancellor acknowledged that all the rhetoric is pointless. When I challenged him specifically about whether a future Conservative Government would reintroduce ACT, he refused to make any such commitment. That sums it all up. What we have seen here is posturing. Throughout the Standing Committee, Opposition Members were posturing without raising any points of substance.
  Mr. Lilley: The hon. Lady berates my caution in not making commitments at this stage in a Parliament. What has she to say of the present Under-Secretary of State for Social Security, the hon. Member for Southampton, lichen (Mr. Denham), who, only months before the general election, gave a clear and explicit assurance to people in the City that the Labour Government had no plans to introduce this very measure?
  Mrs. Liddell: The right hon. Gentleman is the shadow Chancellor, and his hon. Friends have subjected us to

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  weeks of scaremongering. The hon. Member for North Tayside (Mr. Swinney) legitimately made the point that the worst thing that we can do to pensioners is to introduce uncertainty. The only uncertainty that has been introduced has been created by the scaremongering of Opposition Members. If they were so wedded to the concept of ACT, why in 1993 did the right hon. Member for Charnwood (Mr. Dorrell) say that it was the least damaging way for the Government to raise money?
  Mr. Clifton-Brown: Will the hon. Lady give way?
  Mrs. Liddell: No. I must make some progress.
  The right hon. Member for Hitchin and Harpenden referred to the mis-selling of pensions. He did it with a straight face. We should like to know how it was that the previous Administration had eight years to act on the mis-selling of pensions, but did not do so. They sat on their hands. That shows how much they were concerned about the impact of the mis-selling of pensions.
  The shadow Chancellor made some dubious comments about his visit to Uxbridge and the number of pensioners there who would be affected by the measure. He did not tell us how many pensioners in Uxbridge had been mis-sold pensions and how many of them had died without the problem being solved. We do not take lectures from Opposition Members who have been responsible for the biggest financial scandal this century.
  The right hon. Member for Hitchin and Harpenden talked about how local authority pension schemes will hit council tax payers. That theme has come up repeatedly in debate. Yet again, I should like to put it on record—I know that Opposition Members do not like listening to the facts—that any impact on local authority budgets will not apply until after the next revaluation in March 1998. I say to the hon. Member for North Tayside that, in Scotland, revaluation will take place a year later than that, so the earliest effect will be between 1998 and 2000. Any impact on budgets will depend on decisions taken by actuaries.
  Mr. Ruffley: Will the hon. Lady give way?
  Mrs. Liddell: No, I am going to make some progress.
  Any impact on budgets depends not just on the actuarial impact of changes in ACT but on the impact on company performance of the reduction in corporation tax.
  Much has been made of the letter that my hon. Friend the Minister for Local Government and Housing sent in relation to the impact on local authority pension funds. This time, I shall quote from that letter—and I quote accurately. I had the letter in front of me while Opposition Members were trying to quote it, and I found a wide discrepancy between what they said and the facts. The letter states specifically:
  "The Government will take all these factors into account in determining he level of local authority provision for that and subsequent years."
  That to me is quite clear-cut.
  Mr. Loughton: Will the hon. Lady give way?
  6 pm
  Mrs. Liddell: No, I want to make some progress.
  A number of hon. Members, especially the right hon. Member for Hitchin and Harpenden, talked about the briefing paper of the Association of Consulting Actuaries. It has been much prayed in aid in the debate. I understand that the consulting actuaries have now acknowledged that they failed to take into account the effect of the 2 per cent. cut in corporation tax rates. They also failed to take into account the distortion to which tax credits led and the preference that pension funds had for dividends rather than capital gains.
  Despite all the hyperbole and invective of Opposition Members, the reality is that pension schemes are still very favoured by the tax system. There is tax relief for contributions, plus tax-free build-up, plus a tax-free lump sum where that is part of a scheme. It is important to get a sense of perspective into the debate.
  The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) claimed that pension funds would shift out of United Kingdom equities. The decisions that pension funds take are for them. Rational investors put their money where the return is greatest. In international comparisons, the UK still has a very high dividend yield. From 1992 to 1996, the return in UK equities was higher than that in foreign equities, even without the payment of tax credits.
  My hon. Friend the Member for Dudley, North (Mr. Cranston) made one of his very perceptive speeches in which he talked about the impact on investment of retained profits. We have returned to that point repeatedly. Although it is always very interesting to listen to the hon. Member for Grantham and Stamford (Mr. Davies)—once one gets beyond the hyperbole, one often finds that he has something to contribute to the debate because of his expertise and experience—he argued in circles about decisions that companies will take on the future of investment. The Government make the point that it is up to companies to decide what is to their long-term benefit as against distributed profits or retained profits.
  The hon. Member for Bognor Regis and Littlehampton made a most impassioned speech about the operation of free markets. For a free market to operate effectively, it has to operate without distortion. Frankly, his argument is fallacious.
  I turn to a point made by the hon. Member for North Tayside.
  Mr. Quentin Davies: Will the hon. Lady give way?
  Mrs. Liddell: Yes, I promised that I would.
  Mr. Davies: Does the hon. Lady agree that the abolition of dividend tax credit involves the institution of double taxation in many circumstances? Double taxation is, by definition, a distortion.
  Mrs. Liddell: I shall come to that in a minute.
  I first want to reply to a point made by the hon. Member for North Tayside, who referred to Standard Life. He said that it was delaying quoting transfer values for people changing occupational pension schemes and claimed that that was due to loss of tax credits. A number of factors affect transfer values for people moving from one

  185
  occupational pension scheme to another. Share values and general dividend levels, which have been changing substantially over the year, are just as important as issues such as tax credits. There is no reason for Budget changes to cause any serious delay in the quotation of transfer values.
  Mr. Swinney: The point which I was making was that, as the hon. Lady correctly identified earlier, a variety of factors will bear on decisions made by actuaries. No one factor can be isolated. If the Government introduce a measure that increases uncertainty in the entire decision-making process of actuaries, they must accept some responsibility for the disruption that that causes in the marketplace.
  Mrs. Liddell: The hon. Gentleman is contradicting the point that he made in his speech. He referred to the need for long-term stability. As long as there is distortion in the tax system, there are automatically preconditions for instability. The change would mean a move to greater long-term stability. The minute that the previous Government started altering the rate of tax credits, a process of uncertainty began. If we want a coherent corporation tax policy, the logical next step is to get rid of tax credits.
  I turn to the point made by the hon. Member for Grantham and Stamford about double taxation of pension funds. There is no such double taxation. The basis of imputation will continue as it is now. Where individual shareholders are taxable on dividends that they receive from a UK company, they will continue to get a tax credit to set against that liability. That mitigates any double taxation. Pension funds, however—this is the point that the hon. Gentleman was seeking to make, but he confused the two matters—are usually exempt from tax. There is no tax charge on exempt pension funds when they receive dividends, so there is no double taxation.
  Mr. Quentin Davies: I think that the hon. Lady has seriously misunderstood the basis of corporation tax. The whole purpose of a dividend tax credit is indeed to ensure that pension funds are not taxed. Now, they are having tax deducted in the form of ACT, which is not being refunded to them. They have therefore suffered a tax on their dividends. The hon. Lady has not understood the basis of her own tax system.
  Mrs. Liddell: Frankly, that is nonsense, and the hon. Gentleman knows it. I congratulate him on being able to say it with a straight face. To the extent that pension funds are not exempt from taxation, they can set any tax credit against their liability, just like anybody else. In the debate on 9 July, I believe that he suggested that pension funds were being taxed on their dividends. That is not so.
  I turn to another point made by the hon. Member for Grantham and Stamford about pensioners and pension funds being worse off, "if other things remain equal". We are all familiar with that phrase. Other things are not remaining equal. We are cutting corporation tax rates and boosting capital allowances as part of the package. That means that we are not only removing a damaging distortion but encouraging more and better investment, to the benefit of the UK economy in the long term.
  Mr. Davies: Will the hon. Lady give way?
  Mrs. Liddell: No, I want to make some progress. I am very anxious to do so because I know that Opposition Members wish to debate other matters. I have already given way a number of times.
  I should like to take up one other point that the hon. Member for Grantham and Stamford made about whether companies will have to make higher pension contributions to defined benefit pension schemes. There should be no effect on many companies until the next actuarial valuation of their pension schemes, which could be as far as three years away. What is more, removing a distortion benefits the pension funds, because they get a more stable corporate base on which to develop investment.
  Mr. Davies: Will the Minister give way?
  Mrs. Liddell: No. The hon. Gentleman made a great contribution in Committee, but he tends to make the same speech, about how companies that invest in research and development pay dividends. If I have made the point to him once, I have made it half a dozen times: yes, many companies that distribute dividends spend money on R and D—but they would do that anyway, because they are large global companies with large reserves to spend on that activity. The change affects specifically the smaller high-tech companies that the distortion has forced to distribute dividends, when it would have been more effective for them to retain the money.
  The gracelessness of the hon. Member for East Worthing and Shoreham has marked our debates. On behalf of his hon. Friends, I must testify to the fact that he has been most insulting to them, describing them as "woodentops". I accept that several of them are new to the House, but they tried hard, and the fact that the hon. Gentleman used that description may suggest that he has been indulging a little too much in the English wine about which he talked earlier.
  The Leader of the Opposition has talked several times about why the previous Government fared so badly in the general election, and has made it clear that features such as arrogance and a lack of humility put the voters off. Perhaps the hon. Member for East Worthing and Shoreham does not care what the right hon. Gentleman thinks—perhaps he supports the prince across the water—but I must tell him that, when people look at the House and see the condescension that was portrayed in his speech, they tend to tar us all, not only on the Opposition side but on the Government side, with the same brush.
  To summarise, we have seen in the debate an attempt to replay the Standing Committee. The shadow Chancellor said that we were ramming the Bill through the House. That is nonsense. Considerable time was given in Standing Committee. That must be so, because I now have an intimate knowledge of the family tree of the hon. Member for Daventry, we have been taken up and down the Orinoco by various members of the Committee, and I also now have a considerable knowledge of English wine, which may lead me to sample it in the next few weeks. However, what we have not heard are convincing arguments about why the Government should not make the change. I therefore ask the House to reject the amendment.
  Mr. Lilley: I am sorry that the Minister is made to feel so inadequate by my presence at the Dispatch Box.

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  I assure her that she does not need to feel that way. When I held her post, I certainly did not possess the brazen self-confidence that she brings to it—but then I never had to convince the House that taking £5 billion out of long-term investment would somehow encourage increased investment.
  It is undoubtedly a great help to the hon. Lady to have the effrontery that she no doubt picked up in Glasgow politics and elsewhere.
  Mrs. Liddell: I feel that, for the sake of my constituents in Airdrie and Shotts, I must make the point that not only am I not a Glaswegian, but I live between Glasgow and Edinburgh, and my constituency lies between Glasgow and Edinburgh. There is no greater affront to a Lanarkshire lassie than to suggest that she is a Glaswegian.
  Mr. Lilley: I apologise unreservedly to the hon. Lady, and look forward to the repercussions that her remarks may have among her hon. Friends. I should say that such Scots blood as I have comes from the same part of Scotland from which she comes, so I have no excuse for having made that mistake.
  I must return to the essential issue that faced us throughout the Committee stage. There have been only 12 working days between the publication of the Bill and today, the end of Report. That compares with an average of about 77 days during the preceding 18 years of our consideration of Finance Bills.
  That is a measure of how compressed has been the time within which people outside the House have been invited to make representations. My hon. Friends have done sterling work in Committee in exposing the inadequacies and putting forward reasoned arguments and propositions, but they have had to do so without backing, without being able to mobilise the considerable unease felt in the country as a whole. People have not had the time they have had in previous years to make representations.
  6.15 pm
  That is all the more alarming because—I have already exposed this fact—the Government have introduced in this measure the biggest of the 17 tax increases that they have made, in flat contradiction of specific promises and assurances given by Front-Bench Labour spokesmen only a few months before the election.
  That is another reason why the Minister needs her brazen effrontery. When faced with the truth, she goes into auto-rant about the defects of other people. The fact is that the people who now form the Government made promises to the British electorate that they have broken, and for which they will be held to account.
  The hon. Lady pretends that the measure involves some high-minded purpose to do with fiscal neutrality—but it is not fiscally neutral to take £5 billion out of pension funds. Nothing that she has said, or can say, can convince us that it is. She has not answered the Primarolo paradox. If the measure is harmless, why is it essential to protect charities from its impact? The Financial Secretary to the Treasury could not explain that, and the Economic Secretary has not been able to do so either.
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  The hon. Lady took up the issue of mis-selling, from which she sometimes shrinks when it is raised from the Opposition Dispatch Box in such debates, although she had the effrontery to say that she would take no lectures from us on the subject. I shall certainly take no lectures from a former public affairs director of the Maxwell group during the four crucial years when Maxwell was ripping off surpluses throughout the country in a way that the Government now seek to emulate.
  When I became Secretary of State for Social Security, the biggest issue that I faced was the Maxwell—[Interruption.] I got the money back for the pensioners, including the Minister—every penny of it. Not one of those pensioners had to suffer a penny's loss. That is why we will take no lectures, especially on this issue, from a Government who reassure pensioners by putting a former Maxwell employee in charge of dealing with mis-selling, who appoint as a Government spokesman someone who was previously Maxwell's fearless seeker after truth—Alastair Campbell—and who employ Lord Donoughue, one of his cronies, as another Minister. I am afraid that this is not an issue on which we shall take lectures from them.
  We want to know the answers to our questions. Will what the Government have done encourage people to opt back into the state earnings-related pension scheme system, as we are convinced it will, and as are all the experts whose testimony I have read out? Do the Government agree that that will be the impact? Was that their intention? Have they made any calculation of the number of people who will be persuaded to opt back in?
  Will that number be equal to the number who ought to opt back in? If not, will it constitute mis-selling that those who are not properly informed and persuaded to do that, despite the change in their circumstances, will be left outside with pensions less adequate than those that they could have received inside, because of the changes?
  The other big issue that has come up in the debate is the impact of the measures on local authorities. We have received no satisfactory response from the Government Front Benchers to the issues raised by their own Back Benchers as well as ours, and by Labour as well as by Conservative councils throughout the country.
  Council tax payers need to be reassured that the change will not inevitably feed through into higher council tax when hundreds of millions of pounds extra are required every year to ensure that local authority employees receive the pensions that the boroughs, the districts and the county councils have promised them. It is just not good enough for the Minister to say, "Oh, we shall not know the cost for a year or so; therefore, we need not take any action or inform everybody about the impact now."
  This is a very important issue. Some £5 billion of tax revenue is to be raised for no purpose other than to be spent in future, because Labour Governments only tax now to spend later. The Government are acting in clear breach of their election promises, and in a way that will disadvantage members of occupational and personal pension schemes and leave them in ignorance of how the change will affect them. Our amendments would help to remedy some of those defects, and we urge the House to support amendment No. 16 in the Division Lobby.
  Questions put, That the amendment be made:—
  The House divided: Ayes 168, Noes 328.

  Division No. 71]

  [6.20 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Hague, Rt Hon William

  Allan, Richard (Shef'ld Hallam)

  Hamilton, Rt Hon Sir Archie

  Ancram, Rt Hon Michael

  Hammond, Philip

  Arbuthnot, James

  Harvey, Nick

  Atkinson, David (Bour'mth E)

  Heald, Oliver

  Atkinson, Peter (Hexham)

  Heath, David (Somerton & Frome)

  Baker, Norman

  Heathcoat-Amory, Rt Hon David

  Baldry, Tony

  Horam, John

  Ballard, Mrs Jackie

  Howard, Rt Hon Michael

  Beggs, Roy (E Antrim)

  Howarth, Gerald (Aldershot)

  Bercow, John

  Hunter, Andrew

  Body, Sir Richard

  Jackson, Robert (Wantage)

  Boswell, Tim

  Jenkin, Bernard (N Essex)

  Bottomley, Peter (Worthing W)

  Johnson Smith, Rt Hon Sir Geoffrey

  Bottomley, Rt Hon Mrs Virginia

  Brady, Graham

  Jones, Nigel (Cheltenham)

  Brake, Thomas

  Keetch, Paul

  Brazier, Julian

  Kennedy, Charles (Ross Skye)

  Breed, Colin

  Key, Robert

  Brooke, Rt Hon Peter

  King, Rt Hon Tom (Bridgwater)

  Browning, Mrs Angela

  Kirkbride, Miss Julie

  Bruce, Ian (S Dorset)

  Laing, Mrs Eleanor

  Burns, Simon

  Leigh, Edward

  Burstow, Paul

  Letwin, Oliver

  Butterfill, John

  Lewis, Dr Julian (New Forest E)

  Cable, Dr Vincent

  Lidington, David

  Campbell, Menzies (NE Fife)

  Lilley, Rt Hon Peter

  Cash, William

  Lloyd, Rt Hon Sir Peter (Fareham)

  Chapman, Sir Sydney (Chipping Barnet)

  Loughton, Tim

  Luff, Peter

  Clark, Rt Hon Alan (Kensington)

  Lyell, Rt Hon Sir Nicholas

  Clarke, Rt Hon Kenneth (Rushcliffe)

  MacGregor, Rt Hon John

  McIntosh, Miss Anne

  Clifton-Brown, Geoffrey

  Maclean, Rt Hon David

  Cormack, Sir Patrick

  McLoughlin, Patrick

  Cotter, Brian

  Madel, Sir David

  Cran, James

  Major, Rt Hon John

  Curry, Rt Hon David

  Malins, Humfrey

  Davey, Edward (Kingston)

  Maude, Rt Hon Francis

  Davis, Rt Hon David (Haltemprice)

  Mawhinney, Rt Hon Dr Brian

  Davies, Quentin (Grantham)

  May, Mrs Theresa

  Day, Stephen

  Merchant, Piers

  Donaldson, Jeffrey

  Michie, Mrs Ray (Argyll & Bute)

  Dorrell, Rt Hon Stephen

  Moore, Michael

  Duncan, Alan

  Morgan, Alasdair (Galloway)

  Duncan Smith, Iain

  Nicholls, Patrick

  Emery, Rt Hon Sir Peter

  Norman, Archie

  Evans, Nigel

  Oaten, Mark

  Ewing, Mrs Margaret

  Öpik, Lembit

  Faber, David

  Ottaway, Richard

  Fabricant, Michael

  Page, Richard

  Fallon, Michael

  Paice, James

  Fearn, Ronnie

  Pickles, Eric

  Flight, Howard

  Prior, David

  Forsythe, Clifford

  Redwood, Rt Hon John

  Fowler, Rt Hon Sir Norman

  Robertson, Laurence (Tewk'b'ry)

  Fox, Dr Liam

  Roe, Mrs Marion (Broxbourne)

  Gale, Roger

  Ruffley, David

  Garnier, Edward

  Russell, Bob (Colchester)

  George, Andrew (St Ives)

  St Aubyn, Nick

  Gibb, Nick

  Sanders, Adrian

  Gill, Christopher

  Sayeed, Jonathan

  Gillan, Mrs Cheryl

  Shephard, Rt Hon Mrs Gillian

  Goodlad, Rt Hon Alastair

  Shepherd, Richard (Aldridge)

  Gorman, Mrs Teresa

  Simpson, Keith (Mid-Norfolk)

  Gorrie, Donald

  Smith, Sir Robert (W Ab'd'ns)

  Gray, James

  Soames, Nicholas

  Green, Damian

  Spelman, Mrs Caroline

  Grieve, Dominic

  Spicer, Sir Michael

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  Spring, Richard

  Viggers, Peter

  Stanley, Rt Hon Sir John

  Wallace, James

  Steen, Anthony

  Walter, Robert

  Streeter, Gary

  Wardle, Charles

  Stunell, Andrew

  Webb, Professor Steve

  Swayne, Desmond

  Wells, Bowen

  Swinney, John

  Whitney, Sir Raymond

  Syms, Robert

  Whittingdale, John

  Tapsell, Sir Peter

  Widdecombe, Rt Hon Miss Ann

  Taylor, John M (Solihull)

  Wigley, Dafydd

  Taylor, Matthew (Truro)

  Willetts, David

  Taylor, Sir Teddy

  Willis, phil

  Temple-Morris, Peter

  Woodward, Shaun

  Townend, John

  Yeo, Tim

  Tredinnick, David

  Young, Rt Hon Sir George

  Trend, Michael

  Tellers for the Ayes:

  Tyler, Paul

  Mr. Nigel Waterson and

  Tyrie, Andrew

  Mr. Malcolm Moss.

  NOES

  Ainger, Nick

  Clarke, Eric (Midlothian)

  Ainsworth, Robert (Cov'try NE)

  Clarke, Rt Hon Tom (Coatbridge)

  Allen, Graham (Nottingham N)

  Clarke, Tony (Northampton S)

  Anderson, Donald (Swansea E)

  Clelland, David

  Armstrong, Ms Hilary

  Clwyd, Ann

  Ashton, Joe

  Coaker, Vernon

  Atherton, Ms Candy

  Coffey, Ms Ann

  Atkins, Charlotte

  Coleman, Iain (Hammersmith)

  Banks, Tony

  Cook, Frank (Stockton N)

  Barnes, Harry

  Cooper, Yvette

  Barron, Kevin

  Corston, Ms Jean

  Battle, John

  Cousins, Jim

  Bayley, Hugh

  Cox, Tom

  Beard, Nigel

  Cranston, Ross

  Beckett, Rt Hon Mrs Margaret

  Crausby, David

  Begg, Miss Anne (Aberd'n S)

  Cryer, Mrs Ann (Keighley)

  Bell, Martin (Tatton)

  Cummings, John

  Bennett, Andrew F

  Cunliffe, Lawrence

  Benton, Joe

  Cunningham, Jim (Cov'try S)

  Berry, Roger

  Cunningham, Rt Hon Dr John (Copeland)

  Best, Harold

  Betts, Clive

  Curtis-Thomas, Mrs Claire

  Blears, Ms Hazel

  Dalyell, Tam

  Blizzard, Bob

  Darling, Rt Hon Alistair

  Blunkett, Rt Hon David

  Darvill, Keith

  Boateng, Paul

  Davey, Valerie (Bristol W)

  Borrow, David

  Davies, Rt Hon Denzil (Llanelli)

  Bradley, Keith (Withington)

  Davies, Rt Hon Ron (Caerphilly)

  Bradley, Peter (The Wrekin)

  Davis, Terry (B'ham Hodge H)

  Bradshaw, Ben

  Dawson, Hilton

  Brinton, Mrs Helen

  Dean, Mrs Janet

  Brown, Rt Hon Gordon (Dunfermline E)

  Denham, John

  Dewar, Rt Hon Donald

  Brown, Rt Hon Nick (Newcastle E)

  Dobbin, Jim

  Browne, Desmond (Kilmarnock)

  Dobson, Rt Hon Frank

  Buck, Ms Karen

  Donohoe, Brian H

  Burden, Richard

  Dowd, Jim

  Butler, Christine

  Drown, Ms Julia

  Byers, Stephen

  Dunwoody, Mrs Gwyneth

  Caborn, Richard

  Eagle, Angela (Wallasey)

  Campbell, Mrs Anne (C'bridge)

  Eagle, Maria (L'pool Garston)

  Campbell, Ronnie (Blyth V)

  Edwards, Huw

  Campbell-Savours, Dale

  Efford, Clive

  Canavan, Dennis

  Ellman, Ms Louise

  Caplin, Ivor

  Ennis, Jeff

  Casale, Roger

  Etherington, Bill

  Caton, Martin

  Field, Rt Hon Frank

  Cawsey, Ian

  Fisher, Mark

  Chapman, Ben (Wirral S)

  Fitzpatrick, Jim

  Chisholm, Malcolm

  Fitzsimons, Lorna

  Church, Ms Judith

  Flint, Caroline

  Clapham, Michael

  Flynn, Paul

  Clark, Rt Hon Dr David (S Shields)

  Follett, Barbara

  Clark, Dr Lynda (Edinburgh Pentlands)

  Foster, Rt Hon Derek

  Foster, Michael Jabez (Hastings)

  191

  Foster, Michael John (Worcester)

  Linton, Martin

  Fyfe, Maria

  Livingstone, Ken

  Galbraith, Sam

  Lloyd, Tony (Manchester C)

  Gapes, Mike

  Lock, David

  Gerrard, Neil

  Love, Andrew

  Gibson, Dr Ian

  McAllion, John

  Gilroy, Mrs Linda

  McAvoy, Thomas

  Godman, Dr Norman A

  McCabe, Stephen

  Godsiff, Roger

  McCafferty, Ms Chris

  Golding, Mrs Llin

  McCartney, Ian (Makerfield)

  Gordon, Mrs Eileen

  Macdonald, Calum

  Graham, Thomas

  McDonnell, John

  Grant, Bernie

  McFall, John

  Griffiths, Jane (Reading E)

  McGuire, Mrs Anne

  Griffiths, Nigel (Edinburgh S)

  McIsaac, Shona

  Griffiths, Win (Bridgend)

  McKenna, Ms Rosemary

  Grocott, Bruce

  Mackinlay, Andrew

  Gunnell, John

  McLeish, Henry

  Hain, Peter

  MacShane, Denis

  Hall, Patrick (Bedford)

  Mactaggart, Fiona

  Hamilton, Fabian (Leeds NE)

  McWalter, Tony

  Hanson, David

  Mahon, Mrs Alice

  Heal, Mrs Sylvia

  Mallaber, Judy

  Healey, John

  Marek, Dr John

  Henderson, Doug (Newcastle N)

  Marsden, Gordon (Blackpool S)

  Henderson, Ivan (Harwich)

  Marsden, Paul (Shrewsbury)

  Hepburn, Stephen

  Marshall, Jim (Leicester S)

  Heppell, John

  Martlew, Eric

  Hesford, Stephen

  Maxton, John

  Hill, Keith

  Meacher, Rt Hon Michael

  Hinchliffe, David

  Meale, Alan

  Hodge, Ms Margaret

  Merron, Gillian

  Home Robertson, John

  Michael, Alun

  Hoon, Geoffrey

  Michie, Bill (Shef'ld Heeley)

  Hope, Phil

  Milburn, Alan

  Hopkins, Kelvin

  Miller, Andrew

  Howarth, Alan (Newport E)

  Mitchell, Austin

  Howells, Dr Kim

  Moffatt, Laura

  Hoyle, Lindsay

  Moonie, Dr Lewis

  Hughes, Ms Beverley (Stretford)

  Moran, Ms Margaret

  Hughes, Kevin (Doncaster N)

  Morgan, Rhodri (Cardiff W)

  Humble, Mrs Joan

  Morley, Elliot

  Hurst, Alan

  Morris, Ms Estelle (B'ham Yardley)

  Hutton, John

  Morris, Rt Hon John (Aberavon)

  Iddon, Dr Brian

  Mountford, Kali

  Illsley, Eric

  Mudie, George

  Jackson, Ms Glenda (Hampstead)

  Mullin, Chris

  Jackson, Helen (Hillsborough)

  Murphy, Denis (Wansbeck)

  Jenkins, Brian (Tamworth)

  Naysmith, Dr Doug

  Johnson, Alan (Hull W & Hessle)

  O'Brien, Bill (Normanton)

  Johnson, Miss Melanie (Welwyn Hatfield)

  O'Brien, Mike (N Warks)

  O'Hara, Edward

  Jones, Helen (Warrington N)

  Olner, Bill

  Jones, Ms Jenny (Wolverh'ton SW)

  Organ, Mrs Diana

  Pearson, Ian

  Jones, Jon Owen (Cardiff C)

  Pendry, Tom

  Jones, Dr Lynne (Selly Oak)

  Perham, Ms Linda

  Jones, Martyn (Clwyd S)

  Pickthall, Colin

  Jowell, Ms Tessa

  Pike, Peter L

  Kaufman, Rt Hon Gerald

  Plaskitt, James

  Keeble, Ms Sally

  Pond, Chris

  Keen, Alan (Feltham & Heston)

  Pope, Greg

  Keen, Mrs Ann (Brentford)

  Pound, Stephen

  Kennedy, Jane (Wavertree)

  Powell, Sir Raymond

  Khabra, Piara S

  Prentice, Ms Bridget (Lewisham E)

  King, Andy (Rugby & Kenilworth)

  Prentice, Gordon (Pendle)

  King, Ms Oona (Bethnal Green)

  Primarolo, Dawn

  Kumar, Dr Ashok

  Prosser, Gwyn

  Ladyman, Dr Stephen

  Quin, Ms Joyce

  Laxton, Bob

  Quinn, Lawrie

  Lepper, David

  Rammell, Bill

  Leslie, Christopher

  Reed, Andrew (Loughborough)

  Levitt, Tom

  Reid, Dr John (Hamilton N)

  Lewis, Ivan (Bury S)

  Robertson, Rt Hon George (Hamilton S)

  Lewis, Terry (Worsley)

  Liddell, Mrs Helen

  Robinson, Geoffrey (Cov'try NW)

  192

  Roche, Mrs Barbara

  Stringer, Graham

  Rogers, Allan

  Stuart, Ms Gisela (Edgbaston)

  Rooker, Jeff

  Sutcliffe, Gerry

  Rooney, Terry

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Ross, Ernie (Dundee W)

  Rowlands, Ted

  Taylor, Ms Dari (Stockton S)

  Ruane, Chris

  Taylor, David (NW Leics)

  Ruddock, Ms Joan

  Thomas, Gareth (Clwyd W)

  Russell, Ms Christine (Chester)

  Thomas, Gareth R (Harrow W)

  Ryan, Ms Joan

  Timms, Stephen

  Salter, Martin

  Tipping, paddy

  Savidge, Malcolm

  Todd, Mark

  Sawford, Phil

  Touhig, Don

  Sedgemore, Brian

  Trickett, Jon

  Shaw, Jonathan

  Truswell, Paul

  Sheerman, Barry

  Turner, Dennis (Wolverh'ton SE)

  Sheldon, Rt Hon Robert

  Turner, Desmond (Kemptown)

  Short Rt Hon Clare

  Turner, Dr George (NW Norfolk)

  Simpson, Alan (Nottingham S)

  Twigg, Stephen (Enfield)

  Singh, Marsha

  Vaz, Keith

  Skinner, Dennis

  Vis, Dr Rudi

  Smith, Rt Hon Andrew (Oxford E)

  Ward, Ms Claire

  Smith, Angela (Basildon)

  Watts, David

  Smith, Miss Geraldine (Morecambe & Lunesdale)

  White, Brian

  Whitehead, Dr Alan

  Smith, Jacqui (Redditch)

  Wicks, Malcolm

  Smith, John (Glamorgan)

  Williams, Rt Hon Alan (Swansea W)

  Smith, Llew (Blaenau Gwent)

  Winnick, David

  Snape, Peter

  Winterton, Ms Rosie (Doncaster C)

  Soley, Clive

  Wise, Audrey

  Southworth, Ms Helen

  Wood, Mike

  Squire, Ms Rachel

  Wray, James

  Starkey, Dr Phyllis

  Wright, Dr Tony (Cannock)

  Stevenson, George

  Wright, Tony D (Gt Yarmouth)

  Stewart, Ian (Eccles)

  Wyatt, Derek

  Stinchcombe, Paul

  Stoate, Dr Howard

  Tellers for the Noes:

  Strang, Rt Hon Dr Gavin

  Mr. David Jamieson and

  Straw, Rt Hon Jack

  Janet Anderson.

  Question accordingly negatived.

Schedule 3

  INSURANCE COMPANIES AND FRIENDLY SOCIETIES
  Mrs. Liddell: I beg to move amendment No. 11, in page 64, line 22, leave out 'In'.
  Mr. Deputy Speaker: With this, it will be convenient to discuss Government amendments Nos. 12 to 15.
  Mrs. Liddell: The amendments take us into the wonderful mysteries of the taxation of life assurance companies. I shall not go into too much detail on this subject, because I do not want hon. Members to get too excited before the holidays. I shall try to give a brief explanation of the purpose of the amendments.
  Hon. Members will perhaps detect that the amendments have something to do with foreign income dividends. When we dealt with clause 36, we discussed at length the abolition of FIDs in 1999. The amendments have nothing to do with abolition: they are about the treatment of FIDs received by a life assurance company after 1 July 1997.
  Schedule 3 makes a number of detailed changes to the tax treatment of dividends received by life companies, one of which involves the calculations that are made to determine what part of a life company's income is charged at special rates, what part is charged at policyholders' rates and what part at normal corporation

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  tax rates. The Bill, as drafted, made a minor but necessary change to the way in which ordinary dividends are treated in that calculation, and the treatment of FIDs should have been changed in the same way. However, it was not, because an oversight that occurred when reference to FIDs was inserted in the 1994 Finance Bill was regrettably repeated this year. The amendment makes the necessary change. Failure to do so could cost a few million pounds a year, depending on the extent to which FIDs are paid in the future.
  A related change made by the amendment is to remove some disadvantages that life companies have perceived. They affect the so-called notional case one test, of which the right hon. Member for Fylde (Mr. Jack) gave an eloquent description to the Committee considering the 1996 Finance Bill. The test involves a comparison of profits calculated in two different ways. FIDs have hitherto appeared on one side of the comparison but not on the other. There might have been good reasons for that at the time, but, with the treatment of FIDs and ordinary dividends in the hands of life companies and other dealers in shares becoming more similar, there is less reason to distinguish between them.
  I may add that, in proposing this change, we have taken account of representations made by the Association of British Insurers.
  Amendment agreed to.
  Amendment made: No. 12, in page 64, line 23, leave out from 'companies)' end of line 28 and insert
  'shall be amended as follows.
  (1A) In subsection (2B) (relevant income from life assurance business to be sum of items in paragraphs (a) and (b)) for paragraph (b) (relevant franked investment income) there shall be substituted—
  "(b) the franked investment income of, and foreign income dividends arising to, the company which are referable to its basic life assurance and general annuity business."
  (1B) In subsection (8) (interpretation) the definition of "relevant franked investment income" shall cease to have effect.'.—[Mrs. Liddell.]
  Mr. Deputy Speaker: We now come to Government amendments Nos. 13 and 14.
  Mr. Gibb rose—
  Mr. Deputy Speaker: These amendments have already been debated. We are now voting on them.
  Amendments made: No. 13, in page 69, line 36, leave out 'and'.
  No. 14, in page 69, line 43, at end insert
  'and
  (c) in paragraph (c) (which provides for Case I profits to be reduced by the shareholders' share of foreign income dividends in respect of such investments) for "in respect of investments held in connection with the company's life assurance business" there shall be substituted "which are referable to the company's basic life assurance and general annuity business".'.—[Mrs. Liddell.]

Clause 30

  TAX CREDITS
  Mr. Tim Boswell: I beg to move amendment No. 25, in page 22, leave out lines 24 to 37.
  The intention of the amendment is to modify the Government's proposals on distributions and tax credits arising on or after the tax year 1999–2000. It would strike out the provisions of the Bill that deprive United Kingdom residents who are not taxpayers of the payable tax credits that they can now claim on their dividends. We believe that the amendment says a great deal about the philosophical differences between the Conservative party and the Labour party, and a good deal about the practical outcome of the stances that they each adopt: where they are coming from affects where they get to.
  There was a point in the partial imputation system that was introduced by a Conservative Government in 1973. Those of us who served on the Standing Committee that considered the Bill know that the Economic Secretary has emphasised her belief that that was a distortion. She has sold her proposals not as a tax increase—which they are—but as the removal of a distortion that has crept into the tax system. We do not accept that.
  I remind the House that the purpose of the changes introduced nearly a quarter of a century ago in 1973, after the former Labour Chancellor, Lord Callaghan of Cardiff, had unsuccessfully tried to produce something similar to what the Government are producing now, was to avoid double taxation on the same profits arising in the hands first of the company then of its shareholders. That was done by arranging that advance payments of corporation tax against dividends should be met by a matching tax credit in the hands of shareholders.
  Shareholders were then, and are now even more, a heterogeneous bunch. Many more shares now are held by institutions, some of which, such as pension funds, are non-taxpayers; others, such as insurance companies, have special arrangements. Income on dividends for pension funds is effectively exempt because the funds pay their tax on the way out to pensioners, in whose hands it is taxed.
  Other types of shareholders include collective investment vehicles, such as the unit and investment trusts that we debated extensively in Committee, and holders of personal equity plans, who are individuals, but in a protected environment. There is still a significant number of private direct shareholders, especially in privatised companies; it has been estimated that at the peak there were about 10 million, and anyone who reads a company's annual report and looks at the distribution of shareholders will be likely to find that, although the majority of the share capital is held by institutions—often by a limited number of institutions, such as pension funds—there is a numerical preponderance of individual shareholders, who in some cases still account for a significant proportion of the share capital. Those shareholders pay varying rates of tax: some are higher-rate taxpayers; some on the basic rate; some on the lower; and some, the subject of the amendment, do not pay income tax at all.
  There are two remarkable aspects of the Government's proposals. The first is that they have found it necessary to put in place elaborate arrangements, as set out in schedule 4, to effect them. Schedule 4 introduces us to the delights

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  of schedule F ordinary rate, higher rate and trust rate, on the back of a residual tax credit of 10 per cent. The reason for that residual tax credit will become apparent later on.
  The effect on the lay taxpayer, the man or woman who has an income from employment and a few shares—let alone somebody older, with a pension and a few shares, who does not find forms easy to manage—is likely to be pretty awkward; the more so now that self-assessment is being introduced.
  There will be serious trouble with the self-assessment forms, given that we are talking about a limited amount of people's personal income. It is not their professional income from employment, and they will not all have accountants. It is pretty difficult even for accountants to contend with some of the complexities of schedule 4.
  I hope that the Economic Secretary will reflect on those concerns; perhaps she can find a simpler way of effecting the measures. If she reflects, as I wish that someone had reflected before the Bill was introduced, she may come up with a simpler structure.
  The Government have set up an elaborate, roundabout route, if not to Paradise by way of Kensal Green, at least to Birmingham by way of Beachy Head. They have very probably succeeded in their goal of achieving no detriment to the ordinary or even the higher-rate taxpayer. Praise the Lord: the Paymaster General is unscathed by the measures. It is only the non-taxpayer—the Aunt Agatha, although she will change her name later in my speech—who will lose out.
  The second rather bizarre aspect of the proposals is that Ministers show clear signs of not knowing what they are doing; perhaps that is understandable, even if not formally excusable, given the complexity of the proposals. Conservative Members are thoroughly familiar with the law of Bristol, South, as enacted by the Financial Secretary, from whose constituency it is named. Speaking of the impact of advance corporation tax changes on pensioners, she said:
  "The measure is good for pensions and pensioners, not bad for them."—[Official Report, 3 July 1997; Vol. 297, c. 507.]
  The same philosophy seems to have affected the Economic Secretary, who said:
  "Ordinary shareholders who previously did not pay tax are not adversely affected by the Bill."
  Search me about that; indeed, search my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), because when he rose more than once in the dialogue that ensued to challenge her about that assertion, she replied:
  "I refer the right hon. Gentleman to the Official Report."—[Official Report, Standing Committee A, 21 July 1997; c. 224–25.]
  Her latest statement on the record therefore remains uncorrected. I believe that it is wrong—we challenge it—and that she should use this opportunity to correct it formally.
  6.45 pm
  There will indeed be an impact on non-taxpayers who previously received the benefit of payable tax credits, which will be withdrawn with effect from April 1999. Within two years—this is the sole exception of treatment—non-taxpayers will be in exactly the same
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  position regarding payable credits as pension funds are now, although there are some significant differences between them.
  The first difference is that pension funds are much larger, accounting for about half the value of the current tax credits, while individuals, excluding those in PEPs, account for only about £100 million, and the second is that pension funds and other institutions have effective voices to lobby and cry foul at the Government's proposals—they have indeed lobbied us and we rehearsed those points extensively in Committee—but Aunt Agatha has usually and typically only herself to rely on. She will not know what has hit her until she finds that she can no longer reclaim the cash.
  In its Budget submissions, the Institute of Chartered Accountants in England and Wales cited an example of a widow aged 80 with a state pension of £3,247 a year and dividends of £1,600, which currently attract a tax credit of £400, which is about £8 a week. Even if she were still to get the nominal 10 per cent. tax credit—and the Government do not propose to offer her even that—she would be £222.23 a year worse off; as it is, she will lose the whole £400. As the institute says, the effect is harsh and is likely to encourage such people to dispose of their shares.
  Because people in that situation are approaching the end of their working years, although I hope not of their natural life, and can hardly plough new savings into, for example, individual savings accounts, having instead to rely on what they have, the measure is a dead loss to them.
  In Committee, the Economic Secretary briskly referred to the need to encourage savings, presumably in a tax-sheltered medium, such as gilt-edged, and made the remarkably clear but remarkably challengeable assertion that tax credits for non-taxpayers are a contradiction in terms. In doing so, she revealed that she simply did not understand—or, to put it more charitably, perhaps did not accept—that companies representing shareholders were already paying corporation tax on behalf of all their shareholders, including the non-income-tax-paying shareholders who are the subject of the debate. I say "companies representing shareholders" because the two cannot, as it were, be unpicked.
  The final anomaly of treatment, which gives rise to political as well as technical concern, is that the Government can take tax credits away from those with no power, but fight shy of taking them from those with more clout. The Budget documentation revealed that foreign shareholders receive some £600 million a year in payable tax credits—but they, of course, have the protection of double—tax agreements. That is what the tax credit—continuing and notional, and never repayable—is about. The Government must go through the rigmarole of maintaining a notional 10 per cent. tax credit as a basis for calculating relief for overseas taxpayers.
  The Government now say that the effect is so small that it will make no difference, and that the effective credit is likely to be about 0.25 per cent. of the total income. That gives rise to a dilemma. Either the Government have kept faith with the spirit of the double-tax agreements that are being concluded for this country, or they have gutted them, while preserving a legal shell against legal challenge for the renegotiation of those agreements. Either they are repaying significant funds to overseas shareholders, or they are not; and I think that if they are

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  not, overseas shareholders and their Governments will draw an inference from that. The tension that is thus engendered also gives rise to unfairness in the difference between the treatment of the foreign taxpayer—the foreign shareholder—and that of the domestic shareholder.
  Not only do the Government dislike the small domestic shareholder, whom they deny the benefit of credit that is available to higher-rate taxpayers in this country—because it will still run for lower, basic and higher-rate taxpayers—but they dislike the United Kingdom resident shareholder and non-taxpayer so much that they are prepared to contrive, notwithstanding the complexity involved, to contemplate a system that pays credits to the foreign resident who is in exactly the same income position as the domestic taxpayer to whom they deny those credits—or even in a better position. In those circumstances, I think that Aunt Agatha will change her personality.
  Let us suppose that I have two aunts—Aunt Ursula, who lives in Uxbridge, and Aunt Bertha, who has gone to live in Boulogne. Whether she has gone for the seafood or to watch French films—which we debated in another context in Committee—I know not. Both have inherited from their mother a share portfolio—what Victorian novelists would have described as a modest competence—worth, say, £10,000, which generates an annual income of £500. In addition, Aunt Bertha has shares from her late husband worth, say, another £10,000, which means that she has two modest competences, as well as a residence in Boulogne. The other income—pensions and so forth—is the same in both cases.
  In those circumstances, who will receive more help from the United Kingdom Treasury—Aunt Ursula of Uxbridge, or Aunt Bertha of Boulogne? You have guessed it, Mr. Deputy Speaker. Not only does Aunt Bertha receive a tax credit on her husband's shares; she receives a tax credit on the shares that she inherited from her mother—which the Economic Secretary is denying her sister Aunt Ursula, who happens to live in Uxbridge.
  I shall draw my remarks to a close, having exposed the incoherences of the Government's approach. I can only conclude that the Government have either been hasty in preparing the legislation, or exercised malice. Either they intended to do what they have done, or they do not care what they have done. They preach the brotherhood and sisterhood of man, they talk about the need for investment and they introduce what they would call a Budget for the people; but, when we vulgar persons analyse the Budget, we find that it gives tax credits to British shareholders only when they have enough capital to generate an income large enough to incur tax, and gives greater credits to those who go abroad than to those who stay in this country. It targets the pensioner of modest means who needs the tax credits most. It is unfair and, in the amendment, we challenge its damaging social agenda.
  Mr. Gibb: As my hon. Friend the Member for Daventry (Mr. Boswell) said, the amendment seeks to end a distortion introduced by clause 30. The Government contend that by removing the ability of non-taxpayers to retain their tax credits, they are removing an anomaly or distortion; but the contrary is true. All the measures in the Budget introduce a severe distortion.
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  The explanatory note attached to clause 30 states:
  "Currently, the system actually goes further than simply mitigating any double charge to tax. Where a person is exempt from tax, or where their tax credits exceed their tax liability, the tax credit can be paid to them. This introduces a distortion into the system. The payment of tax credits to certain shareholders means that profits paid out by a company can actually face a substantially lower effective tax charge than the profits which are retained by the company and reinvested."
  That is a political statement if I ever heard one. Similarly, "The Pocket Budget", produced with £50,000 of taxpayers' money—the so-called Inland Revenue explanatory note—makes a political statement, with which Conservative Members whole-heartedly disagree. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) has already explained that the imputation system does not introduce a distortion, and that removing the so-called distortion itself creates a distortion. The Inland Revenue seems content to state categorically that there is a distortion, but it is treading on a political issue—and, again, the Government are using taxpayers' money to air a political issue.
  That point goes to the heart of the imputation system. With your indulgence, Mr. Deputy Speaker, let me try to explain to Labour Members precisely how the imputation system works, and how the taxation of a dividend in the hands of an individual works. Let us suppose that a dividend of £80 is paid to an individual by a United Kingdom company. That £80 must be grossed up in the individual's tax return by tax credit, and the individual is therefore regarded as having received taxable income of £100. A basic-rate or lower-rate taxpayer will have £100 in his or her tax return, and will then pay tax at 23 or 20 per cent., depending on whether he or she is a basic-rate or lower-rate taxpayer. The lower-rate taxpayer will therefore have a tax bill of 20 per cent. of £100, which is £20.
  That £20 bill is paid by the tax credit that is attached to the dividend, so the lower-rate taxpayer will have no further liability. The basic-rate taxpayer will have a theoretical bill of £23, but he, too, will have no further tax to pay, because the tax credit received with his dividend wipes out his bill, too. We then turn to the higher rate taxpayer, who is regarded as receiving £100 of dividend income. He or she is taxed at 40 per cent. on that income, so the tax bill is £40, against which is a placed tax credit of £20, giving a final tax bill of £20.
  We then turn to the position of the non-taxpayer, who is again regarded as receiving £100 of gross income from the £80 dividend because the dividend has to be grossed up. On the non-taxpayer's tax return, if one is filled in, it says £100 of taxable income from dividends less the personal tax allowance—the implication being that a non-taxpayer has not yet fully used up the tax allowance—therefore the tax bill will, in effect, be zero.
  However, the non-taxpayer will have only a cheque for £80 in his or her hands, despite having theoretically having received income of £100. Where does the remaining £20 come from? The answer is that the non-taxpayer applies to the Inland Revenue, which sends a cheque for £20, corresponding to the tax that the company paid over to the Inland Revenue through the advance corporation tax mechanism just after the dividend was paid. The company has paid the tax of the taxpayer, but if the individual receiving the dividend is

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  not a taxpayer, that individual expects to get the tax back and thus be in the same position as the other two types of taxpayers in having received gross income of £100.
  7 pm
  That is how the imputation system works. As it is currently structured, there is no distortion in the system. The explanatory note goes on to say:
  "The payment of tax credits to certain shareholders means that profits paid out by a company can actually face a substantially lower effective tax charge".
  That is misleading: it is not the tax credit that creates the lower effective rate of corporation tax; it is the personal allowance of the non-taxpayer that gives rise to that beneficial effective tax rate. The personal allowance of about £4,000 means that someone earning only £4,000 per annum faces a lower effective rate of tax than someone earning £5,000 per annum; and someone earning £5,000 per annum faces a lower effective rate of tax than someone earning £6,000 per annum. That is because Parliament has decided that people on low incomes should pay a lower effective rate of tax. The House decides at every Budget that it is right that people on low incomes should pay a lower rate of tax, which is why we have the whole notion of personal allowances.
  The same applies to pension funds. Parliament decided that pension funds should be tax free, and the purpose to making them tax free is to encourage and help people to save for their old age. That is and should still be a priority, given that the era we are entering is one of an ever-aging population. The fact that a company appears to have a lower effective rate of tax when it distributes profits to a non-taxpayer is irrelevant, because that arises from the special status that we have deliberately attached to non-taxpayers. Parliament decreed that certain individuals should be non-taxpayers for the sound social reasons of helping people on low incomes and encouraging people to take out pensions and provide funds for their old age.
  The essence of the imputation system—or, as it should be called, the partial imputation system—is that the combined tax position of both the company and the shareholder is looked at. In most cases, where the shareholder pays tax, the profits distributed are taxed—broadly speaking—only once, at the rate applicable to company and shareholder. For example, a basic rate taxpayer will pay no more tax because the company from which the dividend is received has paid tax on those profits at 33 per cent. A higher-rate taxpayer will pay a little more, because he or she pays tax at 40 per cent.
  A UK company receiving a dividend from another UK company will pay no more tax, because the company paying the dividend has already been taxed. When a non-taxpaying shareholder receives a dividend from a UK company, the overall tax position is that the company and shareholder will have an effective rate of tax of about 15 per cent., because one half of that combination of company and shareholder—the shareholder—is not taxable, so the imputation system does not seek to extract tax from that individual. To do so would be to impose a tax that Parliament has decreed, for social reasons, should not be imposed.
  The new Labour Government do not understand business tax or the imputation system, so they have effectively imposed a tax that is focused solely on non-taxpayers. It is the most regressive tax ever imposed, and the amendment seeks to undo that damage.
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  I had hoped that the amendment would be drafted a little wider, because the clause has a detrimental effect on overseas investors. My hon. Friend the Member for Daventry has given a wise explanation of why the Government decided to halve the tax credit from 20 to 10 per cent., apparently in order not to contravene the treaties.
  Let us suppose that a United States shareholder invests in a wholly owned subsidiary in Britain. Previously, that company was able to obtain a repayment of half the tax credit, less a withholding of 5 per cent. of the net dividend plus the tax credit. That meant that the effective rate of tax for an overseas United States shareholder in a UK company was about 28 per cent. instead of 33 per cent. It was therefore attractive for US companies to own and invest in the UK.
  Now, however, halving the 10 per cent. tax credit leaves only 5 per cent., from which is withheld 5 per cent. of the net dividend plus the tax credit. That leaves almost nothing—in fact a repayment of only 0.25 per cent. or less is received, which will not be attractive to investors from the United States. The consequence of the measure is that it will discourage investment in the United Kingdom, yet the Budget was meant to encourage investment by companies.
  Overall, the clause is highly damaging to shareholders, non-taxpayers and overseas investors. Had the Government spent a little time between announcing their Budget intentions and drafting the Finance Bill, and gone to the trouble of consulting outside bodies, many of these points would have been spotted. The Government have accused Conservative Members of arrogance in the way our arguments were advanced, but the truth is that the arrogance is on the Government side. Why did they not spend a little time consulting? There seems to be no real evidence that there was any requirement to get the Finance Bill passed by 4 August—that is certainly the understanding of the Institute of Chartered Accountants in England and Wales—so the rush can only be put down to the arrogance of newly gained power.
  Another example of that arrogance comes in clause 39, in which there is a drafting error. The error does not appear to have been amended in the Standing Committee, yet I raised it in Committee. The Financial Secretary said to me:
  "I am grateful to the hon. Gentleman for making that point."
  She went on:
  "I am happy to write to him and to other members of the Committee making our"—
  that is, the Government's—
  "intentions absolutely clear. If the hon. Gentleman is correct, we shall have to return to the matter."—[Official Report, Standing Committee A, 22 July 1997; c. 393.]
  Of course, I have received no such letter, and the drafting error in clause 39 remains.
  Mr. Boswell: I may be able to help my hon. Friend.
  Mr. Deputy Speaker (Mr. Michael J. Martin): Order. Can the hon. Gentleman explain to me why he is discussing a different clause? The amendment before us relates to clause 30. How does clause 39 relate to that?
  Mr. Gibb: I raised it as an example of the Government's arrogance, but I take your point,

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  Mr. Deputy Speaker. I hoped that the clause would be amended before Third Reading, and I am keen that the Bill should not enter the statute book containing a drafting error.
  Mr. Boswell: My hon. Friend may not be aware that, within the past few hours, I have received a response from the Government on that point. This shows that it is difficult for any of us, particularly when we cannot seek outside advice and do not have access to expertise, to know whether it is right. It is unfortunate that my hon. Friend has not yet had a chance to see the letter, let alone assimilate it. I am afraid that the same points may well apply to clause 30 as well.
  Mr. Gibb: I am grateful to my hon. Friend for pointing that out, and I look forward to reading the letter when I sit down. I rest my case, Mr. Deputy Speaker.
  The amendment was drafted to try to alleviate the unjust position that clause 30 creates, particularly for non-taxpayers. Many retired people in my constituency of Bognor Regis and Littlehampton have small portfolios of shares. As a result of the Budget, after April 1999 they will no longer be able to reclaim small sums of money back from the Exchequer on receiving dividends from their small portfolios.
  The measure is regressive and unfair, and I hope that the Government will accept the amendment as a way of alleviating a distortion created by the Finance Bill.
  Mr. Edward Davey: The Liberal Democrat party supports the amendment whole-heartedly, as it aims to protect non-taxpaying pensioners on the lowest incomes.
  Some of the points that Conservative Members and I raised in Committee were not properly answered by Ministers, who showed no regard for the effect that the measure would have on low-income pensioners. They claimed that that category of pensioners would be protected because removal of tax credits would be phased in and would not come into effect until April 1999. The Government say that, by that time, they will have put in place individual savings accounts, enabling such pensioners a tax exemption on those dividends.
  I would argue, however, that the Government are not living in the real world. The hon. Member for Daventry (Mr. Boswell) described the real world of self-assessment and complicated tax legislation. In the real world, savers are inert to changes in the tax regime. Aunt Agatha and Aunt Ursula are probably the most unresponsive of savers. They do not read the financial pages of Sunday newspapers every week for advice and they are much less likely to be aware that such tax measures have even been introduced. Indeed, Aunt Agatha will probably get a shock in April of the financial year 1999–2000, when she will lose her tax credit. She was probably looking forward to spending it, although it would probably have been spent on making ends meet.
  The money that will be taken from those pensioners will make the difference between giving them some dignity in their old age and giving them no dignity. I should like to understand why the Government proposed that move, particularly given the efforts that they have expended on behalf of foreign shareholders and higher-rate taxpayers. I do not criticise those efforts,
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  but simply say that the Government seem to have perverse priorities if they wish to protect those affected by the changes. Why are they not acting on behalf of Aunt Agatha and Aunt Ursula?
  The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) said that part of the Government's argument is that they want to remove all distortions from the system. I disagree with the hon. Gentleman that the change in ACT does not remove distortion; there is a genuine argument that removing the ACT credit system removes distortion in the way companies decide on their dividend and investment policies. However, removing tax credits from non-tax-paying pensioners is not about removing distortions; it is about over-tidy minds in the Inland Revenue.
  It is preposterous to suggest that protecting that group of non-tax-paying pensioners would have led to distortions within companies' dividend policies. It is ludicrous to suggest that quoted companies would change their investment mix if that protection were given to non-tax-paying pensioners. The Liberal Democrat party will therefore support the amendment whole-heartedly.
  7.15 pm
  Mrs. Liddell: I oppose the amendment. I do not wish to keep repeating myself—although why should I change what has been happening for the past couple of hours? The amendment goes over old ground and was discussed at length in Committee. It would stop the second stage, in 1999, of the abolition of payable tax credits for all UK shareholders.
  I am not clear whether the amendment is also intended to allow pension funds to claim payment of tax credits again from 1999, although that may be one of its consequences. It comes to mind, given the comments of the right hon. Member for Hitchin and Harpenden (Mr. Lilley) on a previous set of amendments. I do not want to go over old ground. We have explained again and again why we have taken action to remove a distortion in the corporation tax system, which was affecting company behaviour and investment.
  The entitlement to payable tax credits is removed from pension funds from Budget day and from others from 6 April 1999. The amendment would stop the second element of that change, leaving in place a permanent anomaly and distortion whereby some people would be entitled to a payable tax credit while others would not. That would simply not be sustainable.
  As I have said repeatedly, it was not easy to decide whether we should move to abolish tax credits, because we recognised that it would be a complex measure and that we would have to take into account many knock-on effects. Clause 35 relates to charities, which was the subject of one of the best debates in Committee. Hon. Members on both sides recognised the great work done by charities and were unanimous on wanting to protect them. This measure, however, seeks to get rid of a distortion.
  If we simply wanted to get rid of the distortion and completely ignore the long-term needs of ordinary savers—the Aunt Berthas, Aunt Agathas and Aunt Ursulas—the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) would be right to criticise us. If we sought simply to draw the line in 1999, he would be right to condemn us for saying that ordinary taxpayers

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  would not suffer. However, that is not what we are doing. We are taking a two-year period to allow people to adjust their portfolios and savings requirements.
  By 1999, we hope to have in place individual savings accounts. I have already made it clear to Opposition Members how anxious we are to include them in discussions about the future of individual savings accounts.
  That is why, if the hon. Gentleman quotes what I said in Committee and does not match it with our intention to introduce individual savings accounts, he is right. However, through individual savings accounts we are seeking to develop a savings vehicle that suits all low-income savers, and is transparent and easy to understand. For many people, savings are as complex as the taxation system. We now have an opportunity to introduce a savings account that Aunts Agatha, Bertha and Ursula would find easy to comprehend and which would benefit them.
  Mr. Gibb: The hon. Lady used the word "protected" with regard to charities. She said that charities need to be protected. I asked her from what. Perhaps I can suggest an answer: protected from the damage that clauses 30 and 19 do to charities. If she believes that charities should be protected from those devastating measures, what about pensions and non-taxpayers? Do they not also need protecting?
  Mrs. Liddell: If the hon. Gentleman wants me to replay all the arguments of the Bill, I will happily do so, and it will take up the time until 9 o'clock, which will mean that hon. Members will not have an opportunity to debate other matters.
  We took action to protect charities because they do not have the freedom of manoeuvre that other investors have. That is why we have given seven years. It is interesting to see the extent of the selective amnesia of Opposition Members. It was the previous Conservative Government who reduced the level of ACT. In doing so, the right hon. Member for Charnwood (Mr. Dorrell) said clearly:
  "I did not seek to disguise the fact that the measure is revenue-raising. It is intended to raise revenue from a part of the economy where it can be raised, in the context of the Budget, with minimum damage."—[0fficial Report, Standing Committee A, 15 June 1993; c. 387.]
  We have acknowledged that charities will encounter difficulties. We recognise that if we take away something that has benefited certain groups of savers, we must put something in its place. That is why we are moving to the introduction of individual savings accounts.
  I challenge the hon. Gentleman. Here is an opportunity for him to channel his undoubted talents into helping to create a savings vehicle that takes into account those who do not even have the modest competence about which the hon. Member for Daventry spoke. The hon. Member for Bognor Regis and Littlehampton belongs to a profession that is not known for hyperbole. He should remember that. He speaks about the measure as the most damaging and regressive change in the history of creation. That is wrong. We are getting rid of a distortion so that we can improve matters for the future.
  204
  It does no good to attack officials. The hon. Gentleman may think that in attacking me, he is attacking only me, but when he attacks the Revenue, he attacks the officials who construct the explanatory notes, and they do so with the best intentions.
  We had a lengthy discussion in Committee about self-assessment. Hon. Members spoke about the complexity of the tax system. May I point out that the tax system did not become complex just from 1 May. The previous Government had 18 years to demystify the taxation system and the legislation surrounding taxation. What we propose to do with corporation tax and ACT is to remove yet another complexity from the taxation system.
  There will be plenty of time to adjust the forms that must be filled in for self-assessment, to take the change into account. When taxpayers receive dividends, their dividend voucher will show, as now, figures for the dividend and the tax credit. They will have to copy those over to their tax returns, just as they do at present. They will not have to do anything more when completing their tax returns. The hon. Member for Daventry and I discussed in Committee the need to make all the procedures as straightforward as possible.
  We had our usual foray into geography with the hon. Member for Daventry. I always learn new phrases from him. I had never heard the one about Paradise by way of Kensal Green. In Airdrie and Shotts, I may have difficulty explaining that to the people of Bonkle and Newmains, who do not even know where Kensal Green is. I am grateful to the hon. Gentleman for the information that it was an allusion to G. K. Chesterton. It is some years since I last read Chesterton, but perhaps we can have a conversation about it some time. I have some comments to make, but I will not take up the time of the House.
  The Government have been honest and open about the decision to enhance the neutrality of the taxation system. We have tried to have a full and wide-ranging debate. A number of hypothetical cases have been used. The hon. Member for Daventry spoke about the 80-year-old widow; the same example was used by the Institute of Chartered Accountants. She will not save more through 1999. However, she will be able to switch to tax-favoured individual savings accounts during 1999. The decision about whether she saves more is entirely up to her.
  Let me take up the issue of Aunt Bertha from Boulogne, vis-a-vis Aunt Ursula from Uxbridge. Neither UK nor French individuals will generally be able to obtain payment of tax credits from 1999. Credits will not generally be available to portfolio investors such as Aunt Bertha. The notion that Aunt Bertha would be more severely disadvantaged than Aunt Ursula is wrong.
  Mr. Boswell: I should be grateful if the Economic Secretary would clarify the point. If there is provision for relief for foreign shareholders under double tax agreements, why should it not be available for the individual portfolio investor?
  Mrs. Liddell: Individual portfolio investors have two years to adjust their portfolios. The question of tax credits for non-residents under double taxation agreements was fully discussed. The hon. Member for Bognor Regis and Littlehampton began the debate on double taxation agreements in the Standing Committee. Some agreements

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  with other countries provide for a given proportion of tax credits to residents of those countries. It has always been clear that, if the amount of tax credit fell, so would the payment under the agreement. That happened in 1993, as I am sure right hon. and hon. Members can tell the hon. Gentleman.
  That follows the spirit and the letter of our agreements with foreign Governments. We are not overriding those agreements. We are keeping tax credits at a certain level, to try to avoid any question of disadvantage to UK-based groups with US subsidiaries and some US investors, mainly individuals in US-dollar-denominated preference shares issued by UK banks and others.
  There is an interesting assumption that the Labour Government are suddenly homing in on ACT. In reality, the previous Government began eroding ACT in 1993. Only a few weeks ago, the special adviser to the former Chancellor referred to the distorting impact of ACT. It is wrong to suggest in the extreme phrases that we heard from the hon. Member for Bognor Regis and Littlehampton that the change represents the end of civilisation as we know it.
  The right hon. and learned Member for Rushcliffe (Mr. Clarke), who had Edward Troup as his adviser, clearly received information that there was a distortion. I cannot believe that, in the space of a few days, that gentleman would have changed his position. It is a logical assumption that the previous Chancellor was urged to get rid of the distortion.
  We have carefully considered the effects of the change. That is why we are anxious that individual investors should have the opportunity to invest in new tax-privileged individual savings accounts in 1999. If we were not offering that, there would be some substance to the hon. Gentleman's criticism. However, we intend to take that measure. I have suggested that there is cause for common ground in creating an acceptable tax vehicle. That is one of the reasons why we have been generous in providing transitional arrangements for charities so that they receive compensation over five years.
  Mr. Brooke: The hon. Lady has said that those who will be disadvantaged by the provisions—several examples were given earlier—will be compensated by the individual savings account. Will she give an assurance that the Treasury will consult those who are disadvantaged and who have investments at present?
  7.30 pm
  Mrs. Liddell: There will be widespread consultation. We referred to that at great length in the Standing Committee. The second stage will not kick in until 1999 in order to give people an opportunity to adjust their portfolios, given sensible advice and in recognition of the nature of the individual savings account that will be on offer. I urge the House to reject the amendment.
  Mr. Boswell: The Economic Secretary is clearly in a hole, and she is doing her best to scramble out of it. She has created a series of measures in haste that target the least well off and the least sophisticated shareholders. Although she has not explicitly conceded that she is doing damage, her comments suggest that some will be damaged unless they rearrange their affairs. She has made a series
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  of suggestions about what may be done in two years through the individual savings account. That may be a way forward in the future—particularly if the hon. Lady is prepared to rebrand as an individual savings account the small shareholdings of individuals who do not want to change those shareholdings or lose control of them.
  We have no details of that proposal at present, and no clear proposition in that regard. We have simply a withdrawal of the payable credit in two years. That is the Government's certain proposal. We find it socially damaging and unacceptable, so we shall press our amendment to the vote.
  Question put, That the amendment be made:—
  The House divided: Ayes 149, Noes 326.

  Division No. 72]

  [7.31 pm

  AYES

  Ainsworth, Peter (E Surrey)

  George, Andrew (St Ives)

  Allan, Richard (Shef'ld Hallam)

  Gibb, Nick

  Ancram, Rt Hon Michael

  Gill, Christopher

  Arbuthnot, James

  Gillan, Mrs Cheryl

  Atkinson, David (Bour'mth E)

  Goodlad, Rt Hon Alastair

  Atkinson, Peter (Hexham)

  Gorman, Mrs Teresa

  Baker, Norman

  Gorrie, Donald

  Ballard, Mrs Jackie

  Gray, James

  Beggs, Roy (E Antrim)

  Green, Damian

  Bercow, John

  Grieve, Dominic

  Blunt, Crispin

  Hamilton, Rt Hon Sir Archie

  Body, Sir Richard

  Hammond, Philip

  Boswell, Tim

  Bottomley, Peter (Worthing W)

  Harvey, Nick

  Bottomley, Rt Hon Mrs Virginia

  Heald, Oliver

  Brady, Graham

  Heath, David (Somerton & Frome)

  Brazier, Julian

  Heathcoat-Amory, Rt Hon David

  Breed, Colin

  Horam, John

  Brooke, Rt Hon Peter

  Howard, Rt Hon Michael

  Browning, Mrs Angela

  Howarth, Gerald (Aldershot)

  Bruce, Ian (S Dorset)

  Hughes, Simon (Southwark N)

  Burns, Simon

  Hunter, Andrew

  Burstow, Paul

  Jackson, Robert (Wantage)

  Butterfill, John

  Jenkin, Bernard (N Essex)

  Cable, Dr Vincent

  Johnson Smith, Rt Hon Sir Geoffrey

  Campbell, Menzies (NE Fife)

  Cash, William

  Key, Robert

  Chapman, Sir Sydney (Chipping Barnet)

  King, Rt Hon Tom (Bridgwater)

  Kirkbride, Miss Julie

  Chope, Christopher

  Laing, Mrs Eleanor

  Clark, Rt Hon Alan (Kensington)

  Leigh, Edward

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Letwin, Oliver

  Lewis, Dr Julian (New Forest E)

  Clifton-Brown, Geoffrey

  Lidington, David

  Cormack, Sir Patrick

  Lilley Rt Hon Peter

  Curry, Rt Hon David

  Livsey Richard

  Davey, Edward (Kingston)

  Lloyd, Rt Hon sir Peter (Fareham)

  Davis, Rt Hon David (Haltemprice)

  Loughton, Tim

  Davies, Quentin (Grantham)

  Luff, peter

  Day, Stephen

  Lyell, Rt Hon Sir Nicholas

  Donaldson, Jeffrey

  MacGregor, Rt Hon John

  Dorrell, Rt Hon Stephen

  McIntosh, Miss Anne

  Duncan, Alan

  Maclean, Rt Hon David

  Duncan Smith, Iain

  Maclennan, Robert

  Emery, Rt Hon Sir Peter

  McLoughlin, Patrick

  Evans, Nigel

  Madel, Sir David

  Faber, David

  Malins, Humfrey

  Fabricant, Michael

  Maude, Rt Hon Francis

  Fallon, Michael

  Fearn, Ronnie

  Mawhinney, Rt Hon Dr Brian

  Flight, Howard

  Merchant, Piers

  Forsythe, Clifford

  Nicholls, Patrick

  Fowler, Rt Hon Sir Norman

  Norman, Archie

  Fox, Dr Liam

  Oaten, Mark

  Gale, Roger

  Ottaway, Richard

  207

  Page, Richard

  Taylor, John M (Solihull)

  Paice, James

  Taylor, Sir Teddy

  Pickles, Eric

  Temple-Morris, Peter

  Prior, David

  Townend, John

  Redwood, Rt Hon John

  Tredinnick, David

  Robertson, Laurence (Tewk'b'ry)

  Trend, Michael

  Ruffley, David

  Tyler, Paul

  Russell, Bob (Colchester)

  Tyrie, Andrew

  Sanders, Adrian

  Viggers, Peter

  Sayeed, Jonathan

  Walter, Robert

  Shephard, Rt Hon Mrs Gillian

  Wardle, Charles

  Shepherd, Richard (Aldridge)

  Webb, Professor Steve

  Simpson, Keith (Mid-Norfolk)

  Wells, Bowen

  Smith, Sir Robert (W Ab'd'ns)

  Whittingdale, John

  Soames, Nicholas

  Widdecombe, Rt Hon Miss Ann

  Spelman, Mrs Caroline

  Willetts, David

  Willis, Phil

  Spicer, Sir Michael

  Winterton, Nicholas (Macclesfield)

  Spring, Richard

  Woodward, Shaun

  Stanley, Rt Hon Sir John

  Yeo, Tim

  Streeter, Gary

  Young, Rt Hon Sir George

  Stunell, Andrew

  Swayne, Desmond

  Tellers for the Ayes:

  Syms, Robert

  Mr. Malcolm Moss and

  Tapsell, Sir Peter

  Mr. Nigel Waterson.

  Question accordingly negatived.

Clause 36

  FOREIGN INCOME DIVIDENDS
  7.45 pm
  Mr. Heathcoat-Amory: I beg to move amendment No. 22, in page 29, leave out lines 11 to 27.
  Mr. Deputy Speaker: With this, it will be convenient to discuss amendment No. 24, in schedule 6, page 80, leave out from beginning of line 22 to end of line 8 on page 86.
  Mr. Heathcoat-Amory: Nothing displays the Government's muddled and incompetent policy in this entire Budget better than these two amendments and the clause to which they relate. Foreign income dividends can appear somewhat technical, and it is no disrespect to hon. Members if I say that some of them may not have followed the intricacies of the British corporation tax system. Most people have better things to do, but, luckily, the effect and purpose of the dividends can be easily stated in non-technical terms.
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  FIDs, as they are called, are a way of relieving certain multinational companies based in this country from paying excessive corporation tax. Without FIDs, important British companies with large foreign earnings would be unable to relieve their advance corporation tax payments. Therefore, they would be paying ACT and tax on their foreign earnings. That is unfair and excessive, as was recognised by the previous Government, who introduced foreign income dividends to relieve the situation.
  Under the Government's proposal, British companies earning profits overseas but based in the United Kingdom, would be put at a disadvantage in relation not only to ordinary British companies, but to foreign multinational companies based here. We would have the absurd situation in which a multinational British company would suffer unfair competition from a foreign company, perhaps operating in the same markets, and would be vulnerable to takeover by such a foreign company.
  Despite those well-known facts, in his Budget statement the Chancellor of the Exchequer announced with a flourish that foreign income dividends were to be abolished. Any first-year accountancy student or half-decent tax practitioner could have told him that that was daft. We do not know whether he received such advice. I imagine that he probably did, but, with that ignorance, combined with arrogance, that has been the hallmark of the entire Budget process, he went ahead and announced the abolition of foreign income dividends in two years' time. He wrote that into the Bill in clause 36, and in the six-page schedule 6.
  When we reached clause 36 in Committee, we warned Ministers that the abolition of foreign income dividends would be extremely damaging, and we advised the Government to withdraw the proposals. As usual, the debate was guillotined, so we had no real opportunity to explore the subject at great length. All six pages of the complex schedule 6 went entirely unexamined because of the timetable motion imposed by the Government.
  Luckily, however, we were not entirely alone in drawing attention to the damage that might be caused. When the companies affected heard the Chancellor's statement, they contacted the Treasury and made it clear that, if they were treated in the way set out in the Budget, they would simply leave the United Kingdom. They would prefer to remain here, but they do not have to be located here. They are, by definition, international companies, they operate in many different markets, they have investments in many other countries, and, if pressed, and if sufficiently damaged by the change, they would relocate. The Government would lose not only some important British companies, their headquarters and the employment that they offer, but all the tax.
  Even this Government realised that something was wrong, so they eventually started to listen. Not only were they contacted by the companies themselves, but they received urgent representations from business associations and institutes, such as the Confederation of British Industry and the Institute of Directors. All pointed out to the Government how stupid the proposal was.
  Drawing almost at random from the letters sent to me as a member of the Finance Bill Committee, I have here a letter from the Association of British Insurers. It says:
  "The measure will have very detrimental effects for British based international groups. There has been inadequate time for consideration of the measure. In these circumstances I ask you to press the Government to withdraw the measure."

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  I believe that that letter was sent to all members of the Committee, but, as usual, Labour Members showed no interest in standing up for British business. They remained entirely silent about the matter, and it fell to my hon. Friends on the Committee to make the appropriate noises.
  We now have a Liberal Democrat gracing our presence here this evening, but that is unusual, because they were seldom present in Committee. Perhaps one or two Liberal Democrats are present. I apologise to the hon. Member for Taunton (Mrs. Ballard), who comes from my county of Somerset. I particularly welcome her presence this evening.
  However, their presence was highly unusual in Committee, and, during the debate on foreign income dividends, not one Liberal Democrat was present, despite the fact that they had been alerted to the damage that would be caused to important British companies, many of which operate in their and our constituencies. As usual, it fell to Conservative Members to take the entire burden of opposition to this particularly daft proposal in the Finance Bill.
  We are not here dealing with a few odd British companies with highly unusual tax positions. We are dealing with companies such as BAT Industries, Burmah Castrol, Coats Vyella, Glaxo Wellcome, Reckitt and Colman, RTZ, SmithKline Beecham and Taylor Woodrow, to name just a few. The damage caused caught the eye of the London Chamber of Commerce and Industry in particular, and it wrote in strong terms to, I think, all members of the Committee, certainly to the Government, in a release headed "Planned tax changes 'could drive firms out of UK"'. Its chief executive said:
  "We are concerned that these proposals will drive many companies out of the UK as they will object to having to pay a tax 'double whammy' in Britain and abroad."
  He urged:
  "the decision to scrap FIDs was over-hasty and unjustified."
  Dr. Rudi Vis: Will the right hon. Gentleman list those companies which have said that they will be leaving the United Kingdom, rather than mention a long list of companies which we all know about? Which ones have said that they will be leaving the United Kingdom if what the right hon. Gentleman says takes place?
  Mr. Heathcoat-Amory: The discussions between the companies concerned and Ministers were presumably confidential. The companies do not want to issue threats. They prefer to make the threats in private.
  I have spoken to representatives of the companies concerned, and they have made it clear to me that they do not have to put up with a hostile tax regime in Britain. They would prefer to remain in the United Kingdom. We are a magnet for these companies. They like our low costs, our flexible labour market and our business-friendly environment, all of which are very much the achievements of the previous rather than the present Government; but they have made it clear that, if they run up against a tax regime that does not understand their particular requirements, and effectively subjects them to double taxation, they will relocate.
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  If the hon. Gentleman does not think that that was a consideration, will he explain why the Government capitulated and agreed to look again at the matter? They realised that they had made a mess of this, and finally listened to the entreaties. In other words, the penny finally dropped. The Chancellor, and the Paymaster General in particular, realised that a major mistake had been made, and they went into a frenzy of back-tracking, side-tracking and general confusion.
  Of course we welcome the rethink—we welcome it when a sinner repents—but the fact that the Government are thinking again does not stop some of the damage. There is still a great deal of uncertainty around about the Government's intentions.
  During the debates on the timetable motion, we heard how important it was to get the Bill through in order to give taxpayers certainty. Do my hon. Friends remember that? We heard a lot of that, particularly from the Financial Secretary, who said that certainty and stability were crucial, so the Bill had to be put on the statute book without any delay. But that rush has created the very uncertainty we now see.
  The Government have withdrawn the original damaging proposal to abolish foreign income dividends, but they have not replaced it with anything else. Many companies are highly uncertain about what sort of tax regime they will face in future. They do not know where they stand, and the Government still not have told them.
  We listened with great interest in Committee when we reached clause 36, when the Paymaster General was due to tell us the result of his deliberations. Although we laboured under the timetable motion, we were careful to give him plenty of time to expand on his plan to give taxpayers the certainty that the Government deemed so important.
  What a terrible disappointment that all was. The Paymaster General admitted that a great rethink was going on. Remarkably, he started with the suggestion that it was the companies themselves that should come up with a new arrangement. He seemed unwilling to do any of the work. However, a little later he said that he had four options. They were sketchily set out in his remarks. The first is clearly completely dotty. He suggested that he might restrict foreign income dividends to companies mainly in foreign ownership. To discriminate even more transparently against British companies in that way does not solve the problem; it makes it worse.
  As we proceeded with the non-explanation of the conclusions to the non-consultations, we became more and more depressed, because it was apparent that the Government were in a terrible muddle, and were really a victim of their own guillotine. They wanted to bring forward some alternative proposals, but the timetable motion that they have imposed on the Bill and on the House made it impossible to consult fully and table proposals in time for consideration in Committee and by the House.
  By bringing forward legislation in such a rush and by refusing to consult, the Government have fallen into their own trap. They now realise that the abolition of foreign income dividends is unsustainable. Therefore, clause 36 and schedule 6 are damaging, contradictory, defective and wrong.
  8 pm
  Nevertheless, in Committee the Government insisted on passing that clause and schedule into law unamended. They say that they will look at the issue again, but it is extraordinary that, having failed to consult before legislating, they are now legislating before consulting. That is a serious matter for the House, which is being invited to pass into law something that the Government know is wrong.
  Luckily, the House has two amendments before it which would remove the whole shambles from the Bill and give the Government an opportunity to think, discuss and consult. After all, the measures would not have come into force for two years, anyway, so what is the hurry? Sheer arrogance is preventing them from withdrawing these damaging measures, which they know are wrong. Instead, they intend to force into law something that they admit is wrong and damaging, simply because they lack the courage to withdraw it.
  I urge the House to take advantage of these modest amendments, which would remove the confusion from the Bill and give the Government an opportunity to have a genuine re-think.
  Mr. Howard Flight: After the attack on pension fund accumulations, the two other aspects of the Finance Bill that do most damage are the abolition of foreign income dividends and of TESSAs and PEPs in 1999, without announcing what the Government intend to put in their place.
  The main advantage of the Anglo-Saxon economies of north America and Britain, in contrast the continental Europe economies, has always been the clarity of our tax law, which has been sharply defined both in this House and by the courts. In continental Europe, tax law is a political mush, with many areas where it is not clear what is within or without the law.
  As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said, to legislate for the abolition of FIDs in 1999, but then to say that that will not happen and that the Government will sort it out in the 1998 Finance Bill, makes no sense. Having recognised the problems, the correct course must be not to change the law until there has been full consultation.
  Similarly, woolly statements in the Budget speech and in Committee about ending TESSAs and PEPs in 1999 and putting some undefined individual savings accounts arrangements in their place creates unnecessary uncertainty for savers and for the investment management industry. I declare an interest, as I spent 25 years in the industry, and I remain the deputy chairman of an international investment management company.
  I recollect that the Chancellor stressed in his Budget speech that his key long-term objective was to increase investment in this country. However, the two interrelated actions that I have described are bad news for savers and for investors, especially at a time when the Government should be promoting and strengthening measures to encourage savings.
  If we want to take pressure off interest rates and sterling, we should encourage people to save the £32 billion pay-outs from mutual building societies. Surely we saw the problem coming, so the Finance Bill should have included appropriate measures. The way to
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  achieve higher investment is through higher savings. Anything that is a potential attack on savings is bad for investment. I shall return to that point later.
  I want to focus specifically on FIDs. Surely it is self-evident that it is desirable to retain and encourage international companies based in the United Kingdom. Whether they are foreign-owned or internationally owned, they are a source of tax revenue and employment, with a spin-off for accounting, legal and other services.
  Our long-term history shows the wisdom of encouraging our businesses to invest profitably overseas, whether through direct investment by individual companies or portfolio investment by individuals or pension funds. The abolition of FIDs would undermine that. If international holding companies do not know where they stand, which will be the case if the Finance Bill goes through unamended, there is every motive for those companies not to take risks, and to consider moving somewhere else. In addition, I believe that the estimated savings of £250 million per annum are highly optimistic.
  The conditions suggested by the Paymaster General to alleviate the position make little sense. If we require 80 per cent. foreign ownership, that merely encourages foreign takeover of British companies, but also encourages British-based international companies to move elsewhere. If we require a fixed percentage of overseas earnings—90 per cent. has been suggested—that would be illogical and inflexible. Indeed, it would discourage international companies from setting up in the UK. To limit the amount that companies could pay out in an FID would impose a fiscal distortion on UK companies' overseas investment.
  My biggest objection is one of principle—the attack on FIDs is an attack on the principles behind the double taxation treaties and the underlying equity thereof. Aside from the practical problems that that raises, I am surprised that it should ever have been considered by the Government.
  The present rules permit advance corporation tax paid on FIDs, which cannot be offset against UK corporation tax, to be recovered. The reason is simple. An international company pays its taxes in the parts of the world where it operates. It gets double taxation relief on those against UK corporation tax. If it pays dividends, which is a normal and proper thing for a company to do, there is likely to be a shortfall that cannot be offset against its specific UK corporation tax liability.
  Therefore, the net effect of abolishing FIDs is that British-based international companies will suffer a tax disadvantage against UK companies. That then encourages UK companies to concentrate their investments in this country, and not spread them around the world where we have such a good record.
  More narrowly, FIDs abolition, as proposed, represents for the UK investment management industry a complete undermining of several years of work and substantial expenditure by both the Government and the industry in developing the open-ended investment company as a UK-based investment fund structure designed to compete attractively with Dublin and Luxembourg, encouraging foreigners to come to the UK to use an OEIC to structure their funds to sell around the world. If people go to Dublin or Luxembourg, they will take not only fund management fees but all the ancillary accounting and legal revenues.

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  It is no wonder that Dublin is laughing, as it again offers a substantial tax advantage for international funds. Speaking as someone in the industry—after years of work trying to get the right product—I find it frustrating that the ground is being cut from under such products just as we are about to use them.
  Also damaging for the United Kingdom investment management industry, and related to our not knowing what will happen with FIDs and ACT after the next two years, is the announcement that PEPs and TESSAs will be abolished. Middle England has to be clear that PEPs and TESSA will end.
  We have received some notice of the nature of the proposed individual savings scheme in the Inland Revenue's news release, "A New Individual Savings Account". Having thought about the matter in some detail, however, I believe that whatever is proposed will be considerably less attractive than the current PEP and TESSA arrangements if ACT is lost and if the FIDs measures are passed. It will also be less attractive in principle.
  The announcement mentions proposals that tax relief will be limited, up to an overall—
  Mr. Deputy Speaker: Order. The hon. Gentleman is speaking about matters that are not relevant to the amendment. We are debating foreign income dividends, not savings schemes. He was properly speaking to the amendment; perhaps he will do so again.
  Mr. Flight: Thank you, Mr. Deputy Speaker; I apologise. I ask the indulgence of yourself and of the House, however, because the matters are interrelated. As you will have noted, when Conservative Members make a point about something damaging investors' interests—whether it is abolition of ACT or of FIDs—we receive the reply from Ministers, "But we have this new savings scheme, which will answer all the problems." I believe that it is fair to give the matter an airing.
  Mr. Deputy Speaker: It may seem fair to give the matter an airing, but the House has given me its rules, which state clearly that hon. Members must stick to the amendment and not stray from it. Perhaps the hon. Gentleman will find another opportunity to raise those issues.
  Mr. Flight: I hear what you say, Mr. Deputy Speaker. I hope that you will give me an opportunity on Third Reading to deal with the matter.
  The point that I wish to stress is that abolition of FIDs and the other tax proposals that I have mentioned will not only damage for UK international businesses but bring a lack of clarity to our tax system. The measures are also damaging to the UK investment management industry—which I should have thought it was in the interests of the Government and the House to support. Unless our amendment dealing with FIDs is passed, we will make no progress with the OEIC scheme in competing for business with our competitors in Luxembourg and Dublin.
  I hope later today to have an opportunity to deal with the issues. The measures will be damaging if they are passed unamended. They are bad aspects of the Budget and of the Finance Bill, and we should correct them before they become law.
  8.15 pm
  Mr. Brooke: My speech will be extremely brief. I think that I am right in saying that my right hon. Friend the Member for South Norfolk (Mr. MacGregor), the right hon. Member for Llanelli (Mr. Davies), the Paymaster General and I are the only four hon. Members participating in the debates on this Finance Bill who were on the 1978 Standing Committee.
  I remember the Paymaster General with particular affection on that occasion, because we tried to cause the House to sit into August, and the only way in which we could accomplish that was by ensuring that the Finance Bill was considered for a decent length of time. On one occasion, he joined us after dinner and—slightly to the distress of his Whips—made a very powerful speech, in which, for our purposes, he gently steered the ball towards his own goal. Against that background, and with immense good will, I should like to ask him one question. I hope that you, Mr. Deputy Speaker, will not rule me out of order.
  I served in the Committee on the Housing Act 1996. The Government had proposed in that Act several clauses that they subsequently withdrew because of representations from people in my constituency. Although the Minister for London and Construction, the hon. Member for Greenwich and Woolwich (Mr. Raynsford) made a powerful speech explaining how incompetent the then Government had been, the Opposition had not explained what was wrong with the clauses.
  In the case of this Finance Bill and foreign income dividends, not only the Conservative party but my constituents, in a series of multinational companies, have drawn the Government's attention to what is wrong with their clauses. In the Government's posture, I do not understand—I hope that the Paymaster General will tell us—why Ministers, unlike those dealing with the Housing Act 1996, will not straightforwardly withdraw the clauses and return with the proposals on which, they say, they are consulting. Why are Ministers ploughing ahead and saying that they will consult after the clause has been passed? I do not absolutely follow the logic of the Government's actions.
  Mr. Gibb: I do not know whether the Government are aware how much damage they are doing with their decision to abolish foreign income dividends, how much damage has been done since 2 July 1997 or how much damage is being done daily as Ministers dither in deciding how to extract themselves from the mess that they have got themselves into. Conservative Members have mentioned in this debate the problems of United Kingdom companies with overseas holdings, and I mentioned those problems in an earlier debate. Today, however, I should like to deal with the equally disastrous problems—which my hon. Friend the Member for Arundel and South Downs (Mr. Flight) mentioned—that the City of London will face.
  The history of the City of London has been bound up in collective investment vehicles. Unit trusts, particularly, have been an enormous success, although they are not particularly attractive vehicles for overseas investors—especially continental Europeans, who do not really understand the trusts concept. Consequently, in recent years, centres such as Dublin and Luxembourg—which my hon. Friend the Member for Arundel and South

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  Downs also mentioned—have become much more popular locations for collective investment vehicles. The asset management side of the industry is located in the United Kingdom, but the back office—which represents about 60 per cent. of managers' cost base—is located with the vehicle.
  Dublin and Luxembourg have open-ended company vehicles rather than trusts. Therefore, those locations have recently become enormously popular for collective investment vehicles. Luxembourg and Dublin combined now have a 22 per cent. share of the European funds market—which represents 12 per cent. growth in just five years. In the same period, the UK's share has remained static at 10 per cent. Moreover, in that period funds managed in Luxembourg and Dublin have quadrupled while those in the United Kingdom have only doubled.
  In 1992, the combined assets of UK fund managers in Luxembourg and Dublin were three and one third billion dollars. By 1995, they had increased to £20 billion. Sixty three per cent. of Dublin business has been undertaken by UK fund management houses. This means that we are exporting jobs to Dublin and to Luxembourg. We are talking about thousands of jobs in the back office—jobs in the accountancy and legal professions, to which my hon. Friend the Member for Arundel and South Downs also alluded. In co-operation with the City and the Government, the concept of an open-ended investment company was recently developed. These OEICs were introduced precisely to deal with the problem that I have just outlined.
  OEICs are attractive to European investors, but only while we have foreign income dividends. If those companies are to be attractive to European investors, they will have to invest in European or overseas equities. By definition, investors want to reduce the risk of, for example, currency fluctuations, so they will want to invest through vehicles which will themselves invest in European and overseas equities. Of course, if those overseas equities are paying dividends to the UK OEICs, those dividends will have been taxed in the overseas jurisdiction; when they arrive in the UK vehicle, they will be subject to UK tax, but that tax will be offset by double taxation relief.
  We now reach the point at which those vehicles want to pay dividends to their investors. Again, the companies will be subject to advance corporation tax, but there is nowhere for those vehicles to offset their ACT because there is no mainstream UK corporation tax liability. The ACT is therefore simply carried forward from one year to the next, indefinitely into the future. As such, it becomes an irrecoverable cost. Unless we have foreign income dividends, it becomes an unsustainable cost.
  If a company can demonstrate that the dividends that it is paying out of the OEIC derive from overseas investment income, having FIDs means that that company can obtain a repayment of the ACT that was paid when the dividends were initially paid. Effectively, that means that the ACT is no longer a cost and the company is being taxed only once on its overseas profit. That is precisely what FIDs were designed to do and why OEICs have become an attractive vehicle. If OEICs do not have FIDs, the attempt to overturn the rise of Luxembourg and Dublin will fail. OEICs are taxable on their income at 20 per cent., but they are exempt from tax on their capital gains.
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  Research shows that, if the Government retained FIDs, and if OEICs were fully established in the UK, a European portfolio moving to the UK would yield more than double an identical fund in an offshore centre, and the yield would be about 40 per cent. more for a global fund than for a European fund. That is the result of the previous Government's development of FIDs and, of course, of our favourable double taxation treaty network.
  Until the Budget, Luxembourg and Dublin were greatly concerned about the development of OEICs and the fact that we have FIDs. However, on 4 January the Financial Times said:
  "OEICs are expected to stem an exodus of investment business to Dublin and Luxembourg."
  The previous Government had successfully tackled a serious problem for the City of London but, alas, we then had the Budget on 2 July.
  Investment Week magazine states:
  "Perpetual is to consider selling offshore funds to the UK market following the Government's decision to scrap Foreign Income Dividends (FIDs).
  The fund management group is one of several that have now put on hold plans to establish UK-based OEICs to sell into Europe"
  and
  "repatriate funds from Dublin or Luxembourg … These include Standard Life, Henderson Investors and Barings.
  David Mossop, chief executive of Perpetual said:' … We have plans to start marketing into Europe in 12–24 months and will now have to consider using Luxembourg vehicles rather than UK OEICs.'"
  That is the consequence of this enormously damaging measure.
  I refer the Paymaster General to the letter from Sheila Nicoll, director of legal and fiscal affairs at the Association of Unit Trusts and Investment Funds, who says:
  "we will continue to stress the need for an early statement"
  on FIDs. She continues:
  "Damage has already been done, and while the toothpaste clearly cannot be put back in the tube, a clearer statement at Report Stage that Ministers have no intention of damaging the international competitiveness of UK-based funds would at least prevent more spillage."
  In Committee, the Paymaster General accepted that the Government had committed an enormous gaffe and had been wrong to propose the abolition of FIDs, and that they were now going to consult interested parties to see whether they could come up with a solution to the problem that they had created. He suggested four solutions but, even during the enunciation of those potential solutions, he said:
  "I do not know whether any one of these suggestions will solve the problem."
  I will briefly run through the Paymaster General's four suggestions.
  The first was that the Government
  "could relax the shareholding condition for the international shareholding company rules."
  International holding company rules are slightly different from FID rules. One can establish an international headquarters company, which means that one is not obliged to pay ACT initially—one can pay a FID without paying ACT in the first place. When the Chancellor introduced that scheme, he pointed out that the

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  international holding company rules will remain in place so that these provisions can be used. As everyone knows, however, the international holding company rules can be used only by companies which are at least 80 per cent. owned by non-residents.
  The Paymaster General's first suggested solution was thus to relax the rule that international holding companies should be 80 per cent. owned by non-residents. He said that the Government could "reduce that percentage", but to what does he propose to reduce it? If he were to reduce it to nil, he will be virtually reintroducing FIDs, so why on earth does he not withdraw the clause and schedule 6, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) proposes?
  The Paymaster General's second proposal was to
  "allow surplus ACT to continue to be reclaimed by companies which derive 90 per cent. or, perhaps, a lower percentage—".
  Is that not virtually bringing back FIDs? The third suggestion was
  "to limit the amount of FIDs that a company could pay to the amount that it had paid historically, perhaps in the average of the past two or three years."
  As my hon. Friend the Member for Arundel and South Downs said, that is a terrible distortion of the tax system. It is also horribly complicated but, in any case, if the Paymaster General does that, is he not virtually bringing back FIDs?
  The Paymaster General continued:
  "A fourth option would be to that a company could pay no more than a specified proportion of its dividends as FIDs."—[Official Report, Standing Committee A, 22 July 1997; c. 386–7.]
  Depending on what proportion the Government deigned to allow the companies to pay, they may or may not be virtually bringing back FIDs. If the Government allowed a lot of FIDs to be paid, they would be bringing back FIDs.
  All the Paymaster General's proposals admit that the only solution to the terrible mess that the Government have got this country and the City of London into is to bring back FIDs. Why is he prolonging the agony of international and multinational companies based in this country, and that of City fund managers who want to boost London as a centre for collective investment funds, by saying they have to wait until the 1998 Budget before he can undo the damage that the Government have now done? Why does he not instead simply accept the amendment and withdraw this very damaging clause, so that, from now on, the City of London and the multinational companies can get on with what they do best, which is investing and making money for this country?
  The Paymaster General (Mr. Geoffrey Robinson)rose—
  Mr. Woodward rose—
  Mr. Deputy Speaker: Order. If the hon. Gentleman wishes to speak, he will have to be quick.
  Mr. Woodward: I apologise for being so slow, Mr. Deputy Speaker. In considering the amendment, I find myself questioning the rationale behind it and the rest of the Budget. Why, when there seems to be so much
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  evidence to support the need for consultation and a review, do the Government wish to proceed with the clause? The amendment is sensible, given the sheer body of opposition to the proposals.
  8.30 pm
  Let me remind the House what the Paymaster General said in Committee:
  "There will be two years in which we can not only ask but consult them, and we have made it clear that we will do so."
  He then referred to my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton):
  "What is the hon. Gentleman on about? I cannot understand the sense of his remarks."—[Official Report, Standing Committee A, 22 July 1997; c. 387.]
  I should like to make some sense of the remarks that the Paymaster General found so difficult to draw together. They were ably and simply expressed by my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke), who suggested that the right thing to do would be to withdraw the clause altogether, rethink it and come back with some better proposals.
  There is no question that FIDs were introduced to benefit the United Kingdom. The purpose of the current FIDs system was to provide a means by which companies with foreign operations could avoid double taxation. I hope that Labour Members do not support double taxation, despite their addiction to taxation as a means of living. Double taxation should always be resisted. The reasons for the introduction of the system are extremely important.
  The amendment seeks to remove the distortion that the clause will introduce. It is yet another example of the Government's desire to proceed with precipitous haste. They have been in government for only three months and yet they are throwing out this proposal. Has their policy really been thought through?
  There is now evidence from so many companies which earn a great deal of money for the United Kingdom. They are clearly extremely worried. The Paymaster General said in Standing Committee that he could not understand what we were on about. It is very simple: we are expressing the concerns of businesses up and down the country that earn money for this country. We are at a loss to understand, if the right hon. Gentleman knows that a review is necessary, what is the point of proceeding with the clause. Of course, withdrawing it might involve some loss of face, and we know that the Minister without Portfolio would be extremely upset with his colleagues were they to do that, but is the measure right for Britain?
  The Government spend hours every day constructing reviews and appointing business leaders from all over the City to join various projects. Would it not be better to withdraw the clause and then to draw in experts from some of those companies to review the matter properly and look in detail at the consequences of what the Government wish to achieve?
  The Association of British Insurers has been perfectly explicit. It states:
  "The measure should be withdrawn and any changes in this area should be the subject of full consultation."
  The Government are in love with consultation and working parties. They prefer a review, when a decision would be more appropriate. In case after case, they have

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  a review or set up a working party. Yet when business says, "Let us have a review and full consultation," what happens? In the most arrogant, high-handed way, the Government say, "No, we know best: we will introduce the legislation and if there is a problem, we will try to clear it up in the next two years."
  The Association of British Insurers points out:
  "The purpose of FIDs is to ensure that British based multinationals are not at a tax disadvantage in respect of trading income and dividends received from abroad. The withdrawal of the FIDs regime will place such groups at a disadvantage."
  What is the point of that? The Association of British Insurers recognises:
  "Foreign-owned groups will not be affected by this change because they will be able to set up International Headquarters Companies to remit dividends overseas without paying ACT."
  What do the Government have against British-based multinationals?
  The Government spend a great deal of time talking about the need to create certainty and stability. The Chancellor claimed that his entire Budget was predicated, as he claimed, on the need to create certainty. Yet declaration after declaration by company after company is that the proposal will create uncertainty and instability.
  Only a few weeks ago, the Chief Secretary to the Treasury said that there would be "no U-turn" on FIDs. He also added that the Paymaster General was in talks with companies to find an alternative. Where is the certainty when on the one hand the Government say that they will do something but on the other hand realise the need for consultation? What is gained by their precipitate haste?
  Some of the companies are issuing warnings. The chief executive of Lasmo wrote to the Chancellor as follows:
  "The very independence of Lasmo, and all British companies which have had international success, is put at risk by your proposals, as we will simply be worth more to a foreign acquirer than we can be on our own."
  Is that not a significant warning that the Government might wish to heed?
  Time after time, we hear sermons from Labour Members about why the Conservative party failed to understand. In speech after speech and sermon after sermon in Committee we heard that our knowledge was not relevant because we lost the election. But the warnings are not from Conservative Members: they are statements from the companies that will be affected by the proposals.
  Burmah Castrol, the oil company, said that it would lobby the Chancellor, and stated:
  "It seems a shame that successful groups are being penalised in this way. We need to review our options. Moving offshore is not high among them but remains a possibility."
  Rio Tinto, the world's largest mining company, is also understood to have written to the Government expressing its opposition. Glaxo Wellcome and BAT have also said that they intend to make known their opposition to the change as they are worried about double taxation on profit. We are talking about big money. Brokers estimate that it represents up to 5 per cent. of United Kingdom dividends.
  The consequences of the proposal are serious. SmithKline Beecham, which earns more than 90 per cent. of its profits overseas said:
  "This is a disappointment. If London is going to be a centre for raising capital, this is hardly the thing to do."
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  So why is it being done now? The purpose of our amendment is to ask the Government to have a little humility. The Chancellor, the Paymaster General and the Chief Secretary lecture the Conservative party on the need for humility. Is there not something for them to learn, too? Should they not show a little humility in recognising that, when company after company clearly express not minor concerns but grave, serious concerns about the proposals, it might be better to amend the Bill and take the proposals out pending further consideration?
  The Chancellor said that, to stop the yield from ACT being eroded by greater use of foreign income dividends, the Government were ending foreign income dividends from 6 April 1999. Yet expert after expert tells us that that defence is a fig leaf. The change is an arbitrary revenue-raising mechanism. The Government should not take my word for it. I know that Government Members will simply respond to the words of Opposition Members by saying that they are, in their eyes, the words of a discredited Tory party. They do not have to accept our words. They should take the words of Paul George, tax adviser with the accountants Coopers and Lybrand. He said:
  "The abolition of Fids will bring back a distortion in the tax system which can penalise overseas investment by UK multinationals. The logic for the change is not clear."
  We are searching for the logic, the rationale behind the fact that, although the Government are claiming that they are removing distortions, company after company and adviser after adviser are telling them, "Hold back: this may be a mistake." Yet the Government are proceeding with extraordinary haste in their concern to, in their eyes, tidy up the distortions that they see.
  Why do the Government not listen to some of the bodies that I have mentioned? Why do they not have the humility to recognise that in this Finance Bill, which has been put together at extraordinary speed, covering a wide range of areas that were never anticipated in the Labour party manifesto, it would be better to hold back, review, involve all groups who have expressed concern, accept the amendment, and withdraw clause 36?
  Mr. Geoffrey Robinson: I shall not need to detain the House for very many minutes as we approach the final moments of the Finance Bill debates. What we have heard has, sadly, been nothing more than a rehash of what we heard on Second Reading and in Committee. Much though we welcome the right hon. Member for Hitchin and Harpenden (Mr. Lilley) to the Opposition Front Bench, he, too, had nothing to bring to the debate.
  I shall deal with the core question first to get it out of the way. The simple reason why we had to introduce clause 36, which puts an end to foreign income dividends in two years' time, was that, if we did not, there would be a rising net cost to the Exchequer of almost £1 billion. That is simply because, having removed one element of distortion—the tax credits—in the arrangement that the previous Government had rightly struck between shareholders, companies and the Exchequer, there was every incentive for multinational companies to move much more heavily into FIDs.
  I ask Opposition Members to reflect for a second on the fact that, despite introducing the arrangement four or five years ago, multinationals have continued to pay a great deal of dividends in the normal way simply because they have

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  been under pressure from their shareholders for them to obtain tax credits. We do not have precise figures on how much they have paid, but it is a substantial amount. That could grow very much more quickly in the new, unbalanced situation. We want to discuss that balance with industry, consult industry and negotiate with it. For the arrangement to be balanced, it has to be fair among the three parties.
  For the Opposition to criticise the Government for allowing time to consult is to deny completely all their criticism about lack of consultation. In this case, we have provided all this time for consultation, which has been welcomed by the companies concerned. We are determined and confident that we will reach a new arrangement with them.
  Mr. Heathcoat-Amory: If the Government wish to protect their revenue, while at the same time protecting the position of important British companies, why did they not announce a consultation exercise with a view to legislating in a future Finance Bill? Why rush ahead with an ill-judged announcement about the entire and immediate abolition of FIDs, which has turned out to be a fiasco?
  8.45 pm
  Mr. Robinson: I notice that the right hon. Gentleman challenged not the need for a review but the need to get the balance back that his own Government so rightly struck when they introduced FIDs. The point is very narrow. We had to include in the Bill the fact that we could not accept the tax loss that could well amount to more than £1 billion. Industry had to be notified of that. That does not mean that we are prejudging in any way where the new balance will be struck or the mechanism for it.
  I notice that Opposition Members were scathing about some of the proposals that I put forward just as starters, but two of them came straight from the initial consultation that we have already had with companies.
  Mr. Gibb rose—
  Mr. Robinson: I shall give way to the hon. Gentleman in a second. He might deal with the following point in his intervention. I do not think that he is a scaremonger or very irresponsible—if he is, I have misjudged him—but ever since we have been discussing the point, he has mentioned the damage that it is doing. Why did Billiton go ahead with a major flotation that was a great success?
  Mr. Gibb: I have been told about the damage to which I have referred by the Association of Unit Trusts and Investment Funds. That is the body which is most concerned about the damage. The proposals are doing enormous damage to the City of London. Investment in OEICs has almost been totally wiped out by them. You refer to my criticism—
  Mr. Deputy Speaker (Mr. Michael Lord): Order. The hon. Member should be referred to as the Paymaster General.
  Mr. Gibb: I am sorry, Mr. Deputy Speaker. The Paymaster General refers to my criticism of his four proposals and says that one of the proposals came from
  224
  industry itself. The reason why I am scathing about them is that they virtually mean that FIDs need to be brought back. If he is merely going to bring them back, why does not he do it today?
  Mr. Robinson: We need a new arrangement—a properly balanced arrangement like the previous one among the three parties. That is what I am sure we will strike.
  Mr. Loughton rose—
  Mr. Robinson: The hon. Gentleman missed much of the debate, but I know that he was very vocal and garrulous in Committee, so I shall give way to him.
  Mr. Loughton: I am grateful for the hon. Gentleman's somewhat more subdued comments in comparison with the Economic Secretary to the Treasury, who is not in her place. Perhaps, as an employee of the company that floated Billiton, I could be granted the opportunity to respond to the question that he asked my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb). Why did that company have to be floated at a substantially reduced price than was previously anticipated, due to the changes in the Budget? If it had not been affected by those changes, why is the share price heading below the issue price? The change has not been taken very well, has it?
  Mr. Robinson: I should have thought that a share price returning to its issue price happens quite often in the markets. The hon. Gentleman should know that far better than most in the House, and perhaps even better than I. As I have said before, I long ago gave up trying to read the markets and how a price may move on a particular day.
  I do not know of any criticism of the Government from the Flemings advisers—I imagine that the hon. Member for East Worthing and Shoreham (Mr. Loughton) was declaring an interest, if he still retains one—or from the company itself. If he considers a personally written letter that arrived on my desk—I will spare him the embarrassment of quoting from it—he will find that the negotiations that we conducted with Billiton and its advisers might well serve as a model for how Government and industry can work together. Far from there being damage, the Government have regained the confidence of industry and of the stock exchange, and we are building on that.
  Mr. Brooke: I thank the hon. Gentleman genuinely for the straightforward way in which he answered my question. What I am not quite clear about—perhaps he could clarify this—is whether the events on 2 July in the Chamber, on 4 July in Standing Committee, and in debates today are exactly what the Government intended in the first instance.
  Mr. Robinson: Yes, exactly. The relevant part of the Budget speech by my right hon. Friend the Chancellor, who has just joined us for these climactic moments as we move towards the last few seconds of the debate, said precisely that. We could see that there would be a problem, and we said, "That is why it has to end then. We must have new arrangements."

  225
  I, too, remember the Finance Bills that the right hon. Member for Cities of London and Westminster (Mr. Brooke) rather ungraciously brought up. He knows that to be straightforward and clear-cut gives a deadline against which the negotiations can be undertaken, a benchmark against which the new arrangements can be set. That is precisely what we have done.
  Far from there being any uncertainty, we have certainty in the markets, and a willingness on the part of all the major companies that have written to us to enter into the negotiations. We are determined to reach a balance between the three interested parties.
  SmithKline Beecham has already proposed one of the suggestions that I put forward. Flemings has also put forward one of the proposals—I see the hon. Member for East Worthing and Shoreham (Mr. Loughton) nodding. For all I know, there may be better and more radical proposals, but what I do know is that we are approaching the negotiations in a spirit of commitment and determination, and that industry is doing the same.
  Throughout our debates we have seen and heard the Opposition's crass hypocrisy. They say that they do not have enough time; then they filibuster for hours to fill the time that they get. We have seen them perform with rank incompetence from the very first day, when they could not table any amendments that were in order. The best that they have been able to do tonight consists of two wrecking amendments, which I urge the House to reject.
  Mr. Heathcoat-Amory: Why cannot the Government, just once, admit that they have messed up? That is clearly what happened, and we all know it. Any impartial outside observer—there are plenty of them—realises that the Government have fallen into a trap of their own making.
  On Budget day the Chancellor announced with a flourish, and without qualification, that he would abolish foreign income dividends. He did not say that he might not do it after all, or that he might have a second thought. He did not say that he would consult. It was a bald and unambiguous assertion: foreign income dividends would go.
  That is what is in the Bill before us. Clause 36 does not refer to any conditions being attached. Schedule 6, which, sadly, the guillotine denied us the opportunity to debate, puts into practice and lays down detailed mechanisms for the abolition of foreign income dividends.
  We all know what happened then. The Government suddenly realised that they had made a mistake. Under the impact of what the Opposition said, what the trade associations, the Confederation of British Industry and so on said, and what the companies were saying, the Government suddenly realised what any tax practitioner could have told them—that one cannot simply abolish foreign income dividends and expect important British companies to go on locating in the City of London or elsewhere in the United Kingdom.
  Companies are subject to double taxation without the relief granted by foreign income dividends. We know that, and now the Government know it, too. They did not know it on Budget day, but they have learnt it since. An extraordinary combination of ignorance and arrogance characterised both the Chancellor of the Exchequer's statement on Budget day, and the bluster of the Paymaster General throughout the Committee.
  226
  The Paymaster General refused to admit that the clause was defective. It apparently protected the Revenue, but by threatening to drive companies out of the United Kingdom altogether it would have the paradoxical effect of decimating revenues.
  Why can the Government not withdraw the clause? It will not come into effect for two years, anyway, so what would be lost by admitting that they have made a mistake? If they accepted our amendments, they would thereby withdraw the damaging proposals and could then have their discussions and consultations with those affected. That would enable them to bring forward some genuinely thought out proposals in plenty of time for the next Finance Bill.
  The Government have not established that there is a threat to the Revenue. The Paymaster General merely asserts that there is. Even if there is a need to protect the Revenue, while balancing that with the needs of British companies, that is all the more reason to take the matter rather more slowly.
  The Government are a victim of their own timetable motion. We know that, and it is extraordinary that on this small item, this small amendment that would simply withdraw from the Bill something that they know to be wrong, they, in their pig-headed way, proceed in the knowledge that they are thereby putting into law something that they know to be damaging.
  We shall persist with our amendments and press the matter to a Division. Outside commentators will draw their own conclusions—that, when the Government talk of the need for a partnership with industry, a need to consult and to listen, those are hollow words from a hollow Government.
  Question put, That the amendment be made:—
  The House divided: Ayes 150, Noes 330.

  Division No. 72]

  [7.31 pm

  AYES

  Ainsworth, Peter (E Surrey)

  George, Andrew (St Ives)

  Allan, Richard (Shef'ld Hallam)

  Gibb, Nick

  Ancram, Rt Hon Michael

  Gill, Christopher

  Arbuthnot, James

  Gillan, Mrs Cheryl

  Atkinson, David (Bour'mth E)

  Goodlad, Rt Hon Alastair

  Atkinson, Peter (Hexham)

  Gorman, Mrs Teresa

  Baker, Norman

  Gorrie, Donald

  Ballard, Mrs Jackie

  Gray, James

  Beggs, Roy (E Antrim)

  Green, Damian

  Bercow, John

  Grieve, Dominic

  Blunt, Crispin

  Hamilton, Rt Hon Sir Archie

  Body, Sir Richard

  Hammond, Philip

  Boswell, Tim

  Bottomley, Peter (Worthing W)

  Harvey, Nick

  Bottomley, Rt Hon Mrs Virginia

  Heald, Oliver

  Brady, Graham

  Heath, David (Somerton & Frome)

  Brazier, Julian

  Heathcoat-Amory, Rt Hon David

  Breed, Colin

  Horam, John

  Brooke, Rt Hon Peter

  Howard, Rt Hon Michael

  Browning, Mrs Angela

  Howarth, Gerald (Aldershot)

  Bruce, Ian (S Dorset)

  Hughes, Simon (Southwark N)

  Burns, Simon

  Hunter, Andrew

  Burstow, Paul

  Jackson, Robert (Wantage)

  Butterfill, John

  Jenkin, Bernard (N Essex)

  Cable, Dr Vincent

  Johnson Smith, Rt Hon Sir Geoffrey

  Campbell, Menzies (NE Fife)

  Cash, William

  Key, Robert

  Chapman, Sir Sydney (Chipping Barnet)

  King, Rt Hon Tom (Bridgwater)

  Kirkbride, Miss Julie

  Chope, Christopher

  Laing, Mrs Eleanor

  Clark, Rt Hon Alan (Kensington)

  Leigh, Edward

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Letwin, Oliver

  Lewis, Dr Julian (New Forest E)

  Clifton-Brown, Geoffrey

  Lidington, David

  Cormack, Sir Patrick

  Lilley Rt Hon Peter

  Curry, Rt Hon David

  Livsey Richard

  Davey, Edward (Kingston)

  Lloyd, Rt Hon sir Peter (Fareham)

  Davis, Rt Hon David (Haltemprice)

  Loughton, Tim

  Davies, Quentin (Grantham)

  Luff, peter

  Day, Stephen

  Lyell, Rt Hon Sir Nicholas

  Donaldson, Jeffrey

  MacGregor, Rt Hon John

  Dorrell, Rt Hon Stephen

  McIntosh, Miss Anne

  Duncan, Alan

  Maclean, Rt Hon David

  Duncan Smith, Iain

  Maclennan, Robert

  Emery, Rt Hon Sir Peter

  McLoughlin, Patrick

  Evans, Nigel

  Madel, Sir David

  Faber, David

  Malins, Humfrey

  Fabricant, Michael

  Maude, Rt Hon Francis

  Fallon, Michael

  Fearn, Ronnie

  Mawhinney, Rt Hon Dr Brian

  Flight, Howard

  Merchant, Piers

  Forsythe, Clifford

  Nicholls, Patrick

  Fowler, Rt Hon Sir Norman

  Norman, Archie

  Fox, Dr Liam

  Oaten, Mark

  Gale, Roger

  Ottaway, Richard

  207

  Page, Richard

  Taylor, John M (Solihull)

  Paice, James

  Taylor, Sir Teddy

  Pickles, Eric

  Temple-Morris, Peter

  Prior, David

  Townend, John

  Redwood, Rt Hon John

  Tredinnick, David

  Robertson, Laurence (Tewk'b'ry)

  Trend, Michael

  Ruffley, David

  Tyler, Paul

  Russell, Bob (Colchester)

  Tyrie, Andrew

  Sanders, Adrian

  Viggers, Peter

  Sayeed, Jonathan

  Walter, Robert

  Shephard, Rt Hon Mrs Gillian

  Wardle, Charles

  Shepherd, Richard (Aldridge)

  Webb, Professor Steve

  Simpson, Keith (Mid-Norfolk)

  Wells, Bowen

  Smith, Sir Robert (W Ab'd'ns)

  Whittingdale, John

  Soames, Nicholas

  Widdecombe, Rt Hon Miss Ann

  Spelman, Mrs Caroline

  Willetts, David

  Willis, Phil

  Spicer, Sir Michael

  Winterton, Nicholas (Macclesfield)

  Spring, Richard

  Woodward, Shaun

  Stanley, Rt Hon Sir John

  Yeo, Tim

  Streeter, Gary

  Young, Rt Hon Sir George

  Stunell, Andrew

  Swayne, Desmond

  Tellers for the Ayes:

  Syms, Robert

  Mr. Malcolm Moss and

  Tapsell, Sir Peter

  Mr. Nigel Waterson.

  NOES

  Ainger, Nick

  Clapham, Michael

  Ainsworth, Robert (Cov'try NE)

  Clark, Rt Hon Dr David (S Shields)

  Allen, Graham (Nottingham N)

  Clark, Dr Lynda (Edinburgh Pentlands)

  Anderson, Donald (Swansea E)

  Armstrong, Ms Hilary

  Clarke, Eric (Midlothian)

  Ashton, Joe

  Clarke, Tony (Northampton S)

  Atherton, Ms Candy

  Clelland, David

  Atkins, Charlotte

  Clwyd, Ann

  Banks, Tony

  Coaker, Vernon

  Barnes, Harry

  Coffey, Ms Ann

  Barron, Kevin

  Coleman, Iain (Hammersmith)

  Battle, John

  Cook, Frank (Stockton N)

  Bayley, Hugh

  Cooper, Yvette

  Beard, Nigel

  Corston, Ms Jean

  Beckett, Rt Hon Mrs Margaret

  Cousins, Jim

  Begg, Miss Anne (Aberd'n S)

  Cranston, Ross

  Bell, Stuart (Middlesbrough)

  Crausby, David

  Bennett, Andrew F

  Cryer, Mrs Ann (Keighley)

  Benton, Joe

  Cummings, John

  Berry, Roger

  Cunliffe, Lawrence

  Best, Harold

  Cunningham, Jim (Cov'try S)

  Betts, Clive

  Cunningham, Rt Hon Dr John (Copeland)

  Blears, Ms Hazel

  Blizzard, Bob

  Curtis-Thomas, Mrs Claire

  Blunkett, Rt Hon David

  Dalyell, Tam

  Boateng, Paul

  Darling, Rt Hon Alistair

  Borrow, David

  Darvill, Keith

  Bradley, Keith (Withington)

  Davey, Valerie (Bristol W)

  Bradley, Peter (The Wrekin)

  Davies, Rt Hon Denzil (Llanelli)

  Bradshaw, Ben

  Davies, Rt Hon Ron (Caerphilly)

  Brinton, Mrs Helen

  Davis, Terry (B'ham Hodge H)

  Brown, Rt Hon Gordon (Dunfermline E)

  Dawson, Hilton

  Dean, Mrs Janet

  Brown, Rt Hon Nick (Newcastle E)

  Denham, John

  Browne, Desmond (Kilmarnock)

  Dewar, Rt Hon Donald

  Burden, Richard

  Dobbin, Jim

  Butler, Christine

  Dobson, Rt Hon Frank

  Byers, Stephen

  Donohoe, Brian H

  Caborn, Richard

  Doran, Frank

  Campbell, Mrs Anne (C'bridge)

  Dowd, Jim

  Campbell, Ronnie (Blyth V)

  Drown, Ms Julia

  Campbell-Savours, Dale

  Dunwoody, Mrs Gwyneth

  Canavan, Dennis

  Eagle, Angela (Wallasey)

  Caplin, Ivor

  Eagle, Maria (L'pool Garston)

  Casale, Roger

  Edwards, Huw

  Caton, Martin

  Efford, Clive

  Cawsey, Ian

  Ellman, Ms Louise

  Chisholm, Malcolm

  Ennis, Jeff

  Church, Ms Judith

  Etherington, Bill

  208

  Ewing, Mrs Margaret

  Kumar, Dr Ashok

  Field, Rt Hon Frank

  Ladyman, Dr Stephen

  Fitzpatrick, Jim

  Lawrence, Ms Jackie

  Fitzsimons, Lorna

  Laxton, Bob

  Flint, Caroline

  Lepper, David

  Flynn, Paul

  Leslie, Christopher

  Follett, Barbara

  Levitt, Tom

  Foster, Rt Hon Derek

  Lewis, Ivan (Bury S)

  Foster, Michael Jabez (Hastings)

  Lewis, Terry (Worsley)

  Foster, Michael John (Worcester)

  Liddell, Mrs Helen

  Fyfe, Maria

  Linton, Martin

  Galbraith, Sam

  Livingstone, Ken

  Gapes, Mike

  Lloyd, Tony (Manchester C)

  George, Bruce (Walsall S)

  Lock, David

  Gerrard, Neil

  Love, Andrew

  Gibson, Dr Ian

  McAllion, John

  Gilroy, Mrs Linda

  McAvoy, Thomas

  Godman, Dr Norman A

  McCabe, Stephen

  Godsiff, Roger

  McCafferty, Ms Chris

  Golding, Mrs Llin

  McCartney, Ian (Makerfield)

  Gordon, Mrs Eileen

  Macdonald, Calum

  Graham, Thomas

  McDonnell, John

  Grant, Bernie

  McFall, John

  Griffiths, Jane (Reading E)

  McGuire, Mrs Anne

  Griffiths, Nigel (Edinburgh S)

  McIsaac, Shona

  Griffiths, Win (Bridgend)

  McKenna, Ms Rosemary

  Grocott, Bruce

  Mackinlay, Andrew

  Gunnell, John

  McLeish, Henry

  Hain, Peter

  MacShane, Denis

  Hall, Patrick (Bedford)

  Mactaggart, Fiona

  Hamilton, Fabian (Leeds NE)

  McWalter, Tony

  Hanson, David

  Mahon, Mrs Alice

  Harman, Rt Hon Ms Harriet

  Mallaber, Judy

  Heal, Mrs Sylvia

  Marek, Dr John

  Healey, John

  Marsden, Gordon (Blackpool S)

  Henderson, Doug (Newcastle N)

  Marsden, Paul (Shrewsbury)

  Henderson, Ivan (Harwich)

  Marshall, Jim (Leicester S)

  Hepburn, Stephen

  Martlew, Eric

  Heppell, John

  Maxton, John

  Hesford, Stephen

  Meacher, Rt Hon Michael

  Hill, Keith

  Meale, Alan

  Hinchliffe, David

  Merron, Gillian

  Hodge, Ms Margaret

  Michael, Alun

  Home Robertson, John

  Michie, Bill (Shef'ld Heeley)

  Hoon, Geoffrey

  Milburn, Alan

  Hopkins, Kelvin

  Mitchell, Austin

  Howarth, Alan (Newport E)

  Moffatt, Laura

  Howells, Dr Kim

  Moonie, Dr Lewis

  Hoyle, Lindsay

  Moran, Ms Margaret

  Hughes, Ms Beverley (Stretford)

  Morgan, Rhodri (Cardiff W)

  Hughes, Kevin (Doncaster N)

  Morley, Elliot

  Humble, Mrs Joan

  Morris, Ms Estelle (B'ham Yardley)

  Hurst, Alan

  Morris, Rt Hon John (Aberavon)

  Hutton, John

  Mountford, Kali

  Iddon, Dr Brian

  Mudie, George

  Illsley, Eric

  Mullin, Chris

  Jackson, Ms Glenda (Hampstead)

  Murphy, Denis (Wansbeck)

  Jackson, Helen (Hillsborough)

  Naysmith, Dr Doug

  Jenkins, Brian (Tamworth)

  O'Brien, Mike (N Warks)

  Johnson, Alan (Hull W & Hessle)

  O'Hara, Edward

  Johnson, Miss Melanie (Welwyn Hatfield)

  Olner, Bill

  Organ, Mrs Diana

  Jones, Helen (Warrington N)

  Pearson, Ian

  Jones, leuan Wyn (Ynys Môn)

  Pendry, Tom

  Jones, Ms Jenny (Wolverh'ton SW)

  Perham, Ms Linda

  Pickthall, Colin

  Jones, Jon Owen (Cardiff C)

  Pike, Peter L

  Jones, Dr Lynne (Selly Oak)

  Plaskitt, James

  Jones, Martyn (Clwyd S)

  Pond, Chris

  Jowell, Ms Tessa

  Pope, Greg

  Kaufman, Rt Hon Gerald

  Powell, Sir Raymond

  Keen, Alan (Feltham & Heston)

  Prentice, Ms Bridget (Lewisham E)

  Keen, Mrs Ann (Brentford)

  Prescott, Rt Hon John

  Kennedy, Jane (Wavertree)

  Primarolo, Dawn

  Khabra, Piara S

  Prosser, Gwyn

  King, Andy (Rugby & Kenilworth)

  Quin, Ms Joyce

  209

  Quinn, Lawrie

  Stoate, Dr Howard

  Rammell, Bill

  Strang, Rt Hon Dr Gavin

  Raynsford, Nick

  Straw, Rt Hon Jack

  Reed, Andrew (Loughborough)

  Stringer, Graham

  Reid, Dr John (Hamilton N)

  Stuart, Ms Gisela (Edgbaston)

  Robertson, Rt Hon George (Hamilton S)

  Sutcliffe, Gerry

  Swinney, John

  Robinson, Geoffrey (Cov'try NW)

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Roche, Mrs Barbara

  Rogers, Allan

  Taylor, Ms Dari (Stockton S)

  Rooker, Jeff

  Taylor, David (NW Leics)

  Rooney, Terry

  Thomas, Gareth (Clwyd W)

  Ross, Ernie (Dundee W)

  Thomas, Gareth R (Harrow W)

  Rowlands, Ted

  Timms, Stephen

  Ruane, Chris

  Tipping, Paddy

  Ruddock, Ms Joan

  Todd, Mark

  Russell, Ms Christine (Chester)

  Touhig, Don

  Ryan, Ms Joan

  Trickett, Jon

  Salter, Martin

  Truswell, Paul

  Savidge, Malcolm

  Turner, Dennis (Wolverh'ton SE)

  Sawford, Phil

  Turner, Desmond (Kemptown)

  Sedgemore, Brian

  Turner, Dr George (NW Norfolk)

  Shaw, Jonathan

  Twigg, Stephen (Enfield)

  Sheldon, Rt Hon Robert

  Vaz, Keith

  Short, Rt Hon Clare

  Vis, Dr Rudi

  Simpson, Alan (Nottingham S)

  Ward, Ms Claire

  Singh, Marsha

  Watts, David

  Skinner, Dennis

  White, Brian

  Smith, Rt Hon Andrew (Oxford E)

  Whitehead, Dr Alan

  Smith, Angela (Basildon)

  Wicks, Malcolm

  Smith, Rt Hon Chris (Islington S)

  Wigley Dafydd

  Smith, Miss Geraldine (Morecambe & Lunesdale)

  William, Rt Hon Alan (Swansea W)

  Wilson, Brian

  Smith, Jacqui (Redditch)

  Winnick, David

  Smith, John (Glamorgan)

  Wise, Audrey

  Smith, Llew (Blaenau Gwent)

  Wood, Mike

  Snape, Peter

  Wray, James

  Southworth, Ms Helen

  Wright, Dr Tony (Cannock)

  Spellar, John

  Wright, Tony D (Gt Yarmouth)

  Squire, Ms Rachel

  Wyatt, Derek

  Starkey, Dr Phyllis

  Stevenson, George

  Tellers for the Noes:

  Stewart, Ian (Eccles)

  Mr. David Jamieson and

  Stinchcombe, Paul

  Janet Anderson.

  Division No. 73]

  [8.54 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Clark, Rt Hon Alan (Kensington)

  Allan, Richard (Shef'ld Hallam)

  Clark, Dr Michael (Rayleigh)

  Amess, David

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Ancram, Rt Hon Michael

  Arbuthnot, James

  Clifton-Brown, Geoffrey

  Atkinson, David (Bour'mth E)

  Cormack, Sir Patrick

  Atkinson, Peter (Hexham)

  Curry, Rt Hon David

  Ballard, Mrs Jackie

  Davey, Edward (Kingston)

  Beggs, Roy (E Antrim)

  Davis, Rt Hon David (Haltemprice)

  Bercow, John

  Davies, Quentin (Grantham)

  Blunt, Crispin

  Day, Stephen

  Body, Sir Richard

  Donaldson, Jeffrey

  Boswell, Tim

  Dorrell, Rt Hon Stephen

  Bottomley, Peter (Worthing W)

  Duncan, Alan

  Bottomley, Rt Hon Mrs Virginia

  Duncan Smith, Iain

  Brady, Graham

  Evans, Nigel

  Brazier, Julian

  Faber, David

  Breed, Colin

  Fabricant, Michael

  Brooke, Rt Hon Peter

  Fallon, Michael

  Browning, Mrs Angela

  Fearn, Ronnie

  Bruce, Ian (S Dorset)

  Flight, Howard

  Burnett, John

  Forsythe, Clifford

  Burns, Simon

  Forth, Rt Hon Eric

  Burstow, Paul

  Fox, Dr Liam

  Butterfill, John

  Gale, Roger

  Campbell, Menzies (NE Fife)

  George, Andrew (St Ives)

  Cash, William

  Gibb, Nick

  Chapman, Sir Sydney (Chipping Barnet)

  Gill, Christopher

  Gillan, Mrs Cheryl

  Chope, Christopher

  Gorman, Mrs Teresa

  227

  Gorrie, Donald

  Paice, James

  Gray, James

  Paterson, Owen

  Green, Damian

  Pickles, Eric

  Greenway, John

  Prior, David

  Grieve, Dominic

  Redwood, Rt Hon John

  Hamilton, Rt Hon Sir Archie

  Robertson, Laurence (Tewk'b'ry)

  Hammond, Philip

  Ruffley, David

  Harvey, Nick

  Russell, Bob (Colchester)

  Hawkins, Nick

  Sanders, Adrian

  Heath, David (Somerton & Frome)

  Sayeed, Jonathan

  Heathcoat-Amory, Rt Hon David

  Shephard, Rt Hon Mrs Gillian

  Horam, John

  Shepherd, Richard (Aldridge)

  Howard, Rt Hon Michael

  Simpson, Keith (Mid-Norfolk)

  Howarth, Gerald (Aldershot)

  Smith, Sir Robert (W Ab'd'ns)

  Hughes, Simon (Southwark N)

  Soames, Nicholas

  Hunter, Andrew

  Spelman, Mrs Caroline

  Jack, Rt Hon Michael

  Spicer, Sir Michael

  Jackson, Robert (Wantage)

  Spring, Richard

  Jenkin, Bernard (N Essex)

  Stanley, Rt Hon Sir John

  Johnson Smith, Rt Hon Sir Geoffrey

  Streeter, Gary

  Stunell, Andrew

  Keetch, Paul

  Swayne, Desmond

  Key, Robert

  Syms, Robert

  King, Rt Hon Tom (Bridgwater)

  Tapsell, Sir Peter

  Kirkbride, Miss Julie

  Taylor, John M (Solihull)

  Laing, Mrs Eleanor

  Taylor, Sir Teddy

  Leigh, Edward

  Temple-Morris, Peter

  Letwin, Oliver

  Townend, John

  Lewis, Dr Julian (New Forest E)

  Tredinnick, David

  Lidington, David

  Trend, Michael

  Lloyd, Rt Hon Sir Peter (Fareham)

  Tyler, Paul

  Loughton, Tim

  Tyrie, Andrew

  Luff, Peter

  Viggers, Peter

  Lyell, Rt Hon Sir Nicholas

  Wallace, James

  McIntosh, Miss Anne

  Walter, Robert

  Maclean, Rt Hon David

  Wardle, Charles

  Maclennan, Robert

  Waterson, Nigel

  McLoughlin, Patrick

  Webb, Professor Steve

  Malins, Humfrey

  Wells, Bowen

  Mawhinney, Rt Hon Dr Brian

  Whittingdale, John

  Merchant, Piers

  Widdecombe, Rt Hon Miss Ann

  Michie, Mrs Ray (Argyll & Bute)

  Winterton, Nicholas (Macclesfield)

  Moss, Malcolm

  Woodward, Shaun

  Nicholls, Patrick

  Yeo, Tim

  Norman, Archie

  Young, Rt Hon Sir George

  Oaten, Mark

  Tellers for the Ayes:

  Ottaway, Richard

  Mr. Oliver Heald and

  Page, Richard

  Sir David Madel.

  Question accordingly negatived.
  It being after Nine o'clock, Mr. Deputy Speaker proceeded, pursuant to Order [14 July] and Resolution [yesterday], to put forthwith the Question on an amendment moved by a member of the Government.

Schedule 8

  REPEALS
  Amendment made: No. 15, in page 95, line 4, column 3, at beginning insert—
  'In section 76(8), the definition of "relevant franked investment income".'.—
  [Mr. Darling.]
  Bill reported, with amendments.
  Order for Third Reading read.
  9.7 pm
  The Chief Secretary to the Treasury (Mr. Alistair Darling): I beg to move, That the Bill be now read the Third time.
  This debate concludes proceedings on the first Finance Bill of the new Government. The Bill goes a long way towards implementation of the manifesto commitments that we made prior to the election and resulted in our winning. It introduces a number of measures that are good for the long-term health of the economy. The measures that we have taken in the Budget and in our reform of the way the Bank of England fixes short-term interest rates will ensure that we have a stable platform on which to build for the future.
  Before I deal with the merits of the Bill, I want to say a word or two about a recurring theme of the debate. Conservative Members referred to the guillotine and to proceedings on the Bill generally. We had the usual two days in Committee of the whole House, nine sittings in Standing Committee A and the best part of two days on Report. If there was insufficient time to discuss everything that the Opposition wanted to discuss, they have only themselves to blame. From our proceedings in Committee—both here and upstairs—it is obvious that the Opposition did not make the best use of their time.
  For example, on Wednesday 23 July, the hon. Member for Grantham and Stamford (Mr. Davies), who has won the respect of all hon. Members on previous Finance Bills, and whose ability to speak without notes on any subject for any length of time the Whips care to allot him is unparalleled, was warned under Standing Order No. 42, which deals with "irrelevance, or tedious repetition", because he spoke for more than an hour on clause 43, which the Opposition did not even oppose.
  The hon. Member for Witney (Mr. Woodward) spoke for about an hour on a measure relating to the film industry that the Opposition did not oppose. We had a long discussion about the mother of the hon. Member for Daventry (Mr. Boswell) and whether she was Welsh. At one point, the shadow Chief Secretary told us about a tour that he had taken in various parts of the world. We had all sorts of discussions.
  We know, because we had 18 years—rather too long—to practise, that it can be easy and tempting for the Opposition to filibuster and waste time when there is no matter of substance to discuss. Conservative Members and those who follow our proceedings outside the House have every right to expect that legislation should be studied line by line, but the Opposition did not put their limited time to good use in this instance. Some Labour Members believe that the Opposition's strategy all along was not to

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  discuss the matters in hand, so that they would have some reason to complain afterwards. That is a matter for the Opposition.
  We gave ample time—more than has been given in the past—to debate the Bill. It is surprising, especially in view of everything that the Conservatives said during the general election campaign and right up to the Budget, that they gave the windfall tax on the privatised utilities such scant attention. That, we were told, was to be the main battleground for the Tory party, yet it was not even mentioned on Second Reading and there was scarcely any criticism—certainly none of substance—in Committee. The Opposition talked a lot beforehand, but when they had the opportunity to table amendments, they could find nothing that they wanted to criticise, and did not even bother.
  Mr. Ken Livingstone: I agree with my right hon. Friend about the weakness of the attack. Many of us regret the fact that the Budget's weaker points were not scrutinised more diligently by the Opposition. Perhaps I can now help to rectify that. Does he think that the Opposition did not really attack the windfall tax because they did not think that it was too bad? As they had seen all those City forecasts that the utilities could stand £10 billion of tax, our settling for half that amount seemed like a pretty soft option.
  Mr. Darling: I am sure that my hon. Friend needs no encouragement to follow the Opposition and offer his own criticisms. Before the general election, we always said that the windfall tax was reasonable in every respect, and so it proved when it was announced by my right hon. Friend the Chancellor. It was a reasonable amount because we are a reasonable Government.
  What is more, the tax will be applied to a reasonable cause: helping to equip the country for the future and to give many young people and the long-term unemployed some hope. Perhaps that is why the Conservatives gave up on their opposition to it; perhaps they realised that people in general, and even the utilities themselves, understood that our proposal was reasonable, as was the purpose to which the money was to be applied.
  Not only will the tax help the young and the long-term unemployed, but there will be £1.3 billion, of which my hon. Friend the Paymaster General and my right hon. Friend the Secretary of State for Education and Employment are now considering the allocation, for rebuilding and repairing schools and thus improving education for children.
  The Government have also introduced measures to begin a programme to reduce the deficit—the massive debt—that we inherited because of the outgoing Conservative Government's mismanagement of the economy. It is necessary to reduce debt if we are to secure the stable platform that the country needs to build for the future.
  A central part of the Bill is the measure to reform the corporation tax system. Lowering corporation tax rates by 2 per cent. for both large and small companies is one of the major reforms of the system and will help businesses to plan and to invest for the future. The Bill also contains measures to increase investment relief. Conservative Members either did not find that exceptionable or did not get round to tabling any amendments to it.
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  A central part of the Government's approach to taxation is the concept of fairness—a concept that the Conservative party does not always understand. That is one of the reasons for our reduction of VAT on domestic fuel to the lowest rate that European rules allow. The Bill also contains a number of measures designed to close tax loopholes and deal with abuses in the tax system. That clearly excited Conservative Members. Let me say this to them: did not their Government, under prompting, try to close some of the loopholes in the Finance Bill that was debated earlier this year? It must be the duty of any Government to ensure that there are no unintended abuses in the tax system and, if there are loopholes, to close them.
  I appreciate that it can be galling for those who engage in tax planning and who legitimately advise people on how to take best advantage of the tax system to find that the Government of the day have shut off a particularly lucrative avenue. They must accept, however, that as taxpayers themselves they have an interest in ensuring that the Government are rigorous in their approach to the system and do not allow abuses to develop.
  The Bill also builds on our commitment to the environment and the promotion of health. It largely implements our manifesto promises, on the basis of which we won the election.
  I note that the International Monetary Fund, which is not noted for its support for our party in government, said that the new Government have made an excellent start and that we have set a high standard for our economic policies, aiming to maintain stability and foster long-term growth while seeking fairness and developing human potential. That does not strike me as too bad an assessment of what we have done, and it strikes me as an infinitely better assessment than anything that could have been said about many of the Budgets that have been introduced over the past 18 years.
  This is a Budget for fairness. It is a Budget for opportunity. It is a Budget that will create the right economic conditions for investment, growth and job opportunities. The Budget, and the Finance Bill, will equip the country for the future and provide a solid foundation on which to build. That is why it deserves an overwhelming endorsement.
  9.17 pm
  Mr. Heathcoat-Amory: The Bill was conceived in great haste and forced through on a timetable motion. Its long-term effects will be extremely damaging.
  The Chancellor promised only one tax increase in the Bill: the windfall tax. The Chief Secretary to the Treasury made the extraordinary observation that the Committee had not debated the tax. I realise that he made only fleeting appearances during the Committee stage, but one of his hon. Friends really should have told him that we spent the whole of the first day debating the windfall tax, having spent a good deal of the Committee stage on the Floor of the House debating clause 1—the clause that introduces the tax. The right hon. Gentleman cannot even get the facts straight in regard to proceedings in Committee.
  The central feature of the Budget, however, is the fact that, although the Chancellor did indeed promise us one tax increase, he delivered 17. Despite all the assurances and promises that were made before the election, which were repeated so often and emphasised so strongly,

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  the Chancellor will raise between £5 billion and £6 billion every year, starting this year. We have the immediate imposition of extra duty on fuel—petrol, diesel and heating oil—which nets the Chancellor £750 million this year and is far more than he is giving away in the 3 per cent. cut in VAT on domestic fuel. We have the restriction on mortgage interest relief, the stamp duty increase, the abolition of relief on health insurance and many other increases.
  Then, an hour or so ago, we again witnessed the extraordinary spectacle of the foreign income dividends saga. The whole world knows, even if the Government will not admit it, that the Government made fools of themselves over that. They blundered ahead, trying to abolish foreign income dividends in the teeth of advice to the contrary.
  For the benefit of any hon. Member who has just joined us, I remind the House that foreign income dividends are a form of tax relief for British companies with large overseas earnings that was brought in by the previous Government. The Labour Government simply wanted to abolish them, but were soon told by those responsible that the damage would be immense. Instead of withdrawing the proposals, however, they continued to blunder on and, an hour ago, we were forced to adopt the proposals in the Finance Bill. The Bill that is about to pass out of the House of Commons contains a clause and a major schedule that do not contain the Government's intention—we have legislated to put into law something with which the Government disagree.
  The Government were a victim of their own guillotine. Having admitted their mistake, they did not have time to correct it. That is not the way to legislate. We did our best in Committee, both upstairs and on the Floor of the House, and on Report to improve the Bill. Few Liberal Democrats were involved in our proceedings, although I see that the hon. Member for Kingston and Surbiton (Mr. Davey), who was a member of the Committee, is here. I believe that they had three places on the Committee, but whole debates went by without any Liberal Democrat representative, so the burden fell on my hon. Friends. I can safely say on behalf of my hon. Friends that they did a great deal to try to improve the Bill but, despite their efforts, 14 clauses and three long schedules were left entirely undiscussed in Committee—24 pages of a Bill of slightly more than 100 pages went unexamined.
  There was no filibustering—[Interruption.] If the Chief Secretary or his hon. Friends are alleging that there was, they are really saying that the Chairmen, one of whom is a member of their party, failed to control the Committee. The Chairmen did not allege that there was any filibustering, and there was none. There were long speeches because we had a lot to discuss. The Finance Bill is highly technical and it is no fault of my hon. Friend the Member for Grantham and Stamford (Mr. Davies) that he happens to know a great deal more about the subject than the—
  Mr. Darling rose—
  Mr. Heathcoat-Amory: I am responding to the Chief Secretary's points. One of his hon. Friends will have an opportunity to respond to the debate and we will listen to what is said. It is not the fault of my hon. Friend the Member for Grantham and Stamford that he knows more about the Bill than the Government or that he spoke at some length to some of the amendments and clauses.
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  About a quarter of the Bill remained unexamined at the end of our proceedings. That created great difficulty, not only for the members of the Committee but for outside bodies. The Chief Secretary's extraordinary statement that the Bill's being bundled through the House was all according to precedent ignores the fact that outside bodies often want to criticise some of the proposals, recommend improvements and propose amendments, but they were denied the opportunity to do so.
  We are complaining not just about the short time between the Bill going into Committee and its coming out of Committee, but about the fact that the Committee sat every day of the week. Many outside bodies, institutes and tax practitioners wrote in to complain.
  I have before me a letter from the respected Association of Unit Trusts and Investment Funds, which complains that it was not seeking, in its suggested amendments, to wreck the Government's proposals. It says that it likes to work with Governments to avoid unintended consequences of legislation. It says that its members would not meet Ministers because there was no time. When its members asked to meet officials they were told that there was no point in talking to officials because Ministers made the decisions. So the only people worth talking to had no time for them. Association members were offered the chance to meet Ministers only once the Bill had completed its Committee stage.
  That is what we are complaining about. It is an insult not just to the House but to taxpayers outside the House that they had no opportunity to be consulted or to recommend improvements to the Bill. I am surprised that the Government do not concede that. Hon. Members will remember that they came to office full of all sorts of stuff about partnerships, the need to listen—they were going to be a listening Government—and the need to consult. How hollow and hypocritical it sounds now. The way we have proceeded is practically a definition of how not to legislate. The Government have proceeded in haste, made mistakes, and pushed ahead in the teeth of well-argued opposition.
  The proceedings have not been fruitless. We are not saying that the procedures of the House have not brought advantages, because we have established certain facts beyond dispute. One interesting fact the Government did not deny—and implicitly accepted—is that real expenditure in the current year is reduced by £3 billion, and by more than £5 billion in the next financial year, because of the extra inflation that is now built into the Budget arithmetic at least in part because of the inflationary effect of some of the Budget measures.
  I mentioned the increase, from the date of the Budget, in petrol and heating oil duties, which, as we have already observed, feed straight into the retail prices index. That is inflationary for all public services and an additional imposition on their costs, but there is extra money for none of the public services this year or next. What the Government have done for next year is simply pre-allocate some of the reserve, which was part of the control total anyway. Not a penny piece has been promised for public services as a whole, but the inflationary consequences of the Budget and other measures that the Government have taken ensure that the real value of public expenditure is reduced by £3 billion in the current year. It was therefore useful to be able to establish beyond doubt that that is indeed the case.
  Mr. Nicholas Winterton: My right hon. Friend will recall that the Chief Secretary has stated more

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  than once—he certainly did it in his opening speech—that the Budget is designed to bring growth and stability for the future. That must mean unemployment continuing to fall and investment continuing to grow.
  Does my right hon. Friend believe that the way the Government have dealt with foreign investment dividends and advance corporation tax in respect of pensions is likely to lead to further investment by companies, which will now need to invest rather more in their employees' pensions thus depriving companies of investment in technology and machinery? How will he further respond to matters relating to foreign investment dividends, which will have a damaging effect on some big companies that employ a large number of people?
  Mr. Heathcoat-Amory: I agree with my hon. Friend. He will recall that, as an excuse for the timetable motion, the Government said that they wanted to get the Bill on to the statute book to end the uncertainty. In fact, as we now know, the Bill has created uncertainty. The status of foreign income dividends is in limbo. We do not know what the Government intend. All we know is that clause 36 is defective and inoperative.
  My hon. Friend mentioned the effect on savings and pensioners. The central feature of the Budget is the huge and unexpected tax increase on pension funds and, therefore, on millions of savers. I use the word unexpected only because a few people might have believed the Labour party's promise not to increase taxation. They will have been alarmed and amazed by the speed with which the Labour party broke its pre-election promises.
  Labour is hitting the very people who are attempting to provide for themselves and their families in the long term. The Government have the brass neck to call this a Budget for the long term. It is, in one sense: it hits the people who are saving for the long term.
  To add insult to that injury, the Government deny that they are hitting pension funds at all. It remains Government policy, as enunciated by the Financial Secretary, that the withdrawal of £3.5 billion a year from pension funds is good for them. That is what she asserted on 3 July. No member of the Government has withdrawn or modified that remark.
  The Budget will always be known as the pension tax Budget. If the Government believe that hitting pension funds to the tune of £3.5 billion a year is good for them, many other sectors of the economy must be hoping that the Government will not try to do any good to them in future Budgets.
  We knew that the Labour party would break its promises on taxation. We did not know that they would break them within three months and on such a colossal scale. We and millions of people outside will never trust the Government on taxation again.
  9.31 pm
  Mr. Tony Clarke: I am grateful for the opportunity to make my maiden speech during this debate. I begin by offering through you, Mr. Deputy Speaker, my gratitude to Madam Speaker for her comments on her acceptance of office. She spoke about my predecessor, the right hon. Michael Morris, who was the previous Chairman of Ways and Means and a Deputy
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  Speaker. She spoke of his fairness in handling debates, and I echo those remarks. Many hon. Members have commented to me on his fairness, and in particular his handling of the Maastricht debate.
  I wish to take this opportunity of placing on record my thanks to Michael Morris for his service to the House, and wish him and his family well for the future. He was a good servant of the House and I am sure that he will be missed in the Speaker's Office.
  Michael is not the only Member for Northampton to have left his mark on the House, as previous post-holders have played their part in the history and administration of this place. I am honoured to count myself among their number.
  Spencer Perceval entered Parliament in 1796 and remains the only Member for Northampton to date to hold the post of Prime Minister. He also has the unenviable honour of being the only British Prime Minister to be assassinated. He was shot in the Members' Lobby in 1812 by an angry farmer by the name of J. Bellingham.
  Mr. Nicholas Winterton: John.
  Mr. Clarke: Indeed.
  I appreciate that the folk of Northampton have strong views on parliamentary representation. Fortunately, Mr. Bellingham was not a local, but from the east coast.
  Charles Bradlaugh was a radical Member, first elected in 1880, but it was six years before he was finally able to take his seat. Having asked to affirm rather than swear the oath on arrival, he was imprisoned in the Clock Tower and excluded from Parliament, and a by-election was called. The wise folk of Northampton refused to accept Parliament's view. They did not allow Parliament to tell them whom they should select or refuse, and continued to return Bradlaugh. Unlike people today, he faced elections in 1880, 1881, 1882, 1884 and 1885. The people of Northampton returned him each time, declaring, "It is up to us to decide whom we wish to represent us." Finally, the Speaker allowed him to take his seat in 1886. I am pleased to say that, in 1888, he secured the passage of a Bill legalising affirmation in both the law courts and Parliament.
  Bradlaugh opposed the English oppression of Ireland. He also frowned on many aspects of the British empire, and was a great friend of India—of which I am sure many people are aware. He condemned war making and deplored malnutrition and neglect of the people. He was an advocate of land reform, and a staunch republican. There is much about Mr. Bradlaugh and his views that I find desirable today.
  No history of Northampton parliamentarians would be complete without reference to Margaret Bondfield—who was also mentioned by my hon. Friend the Member for Northampton, North (Ms Keeble). Margaret Bondfield became the first woman Minister in this place when she was appointed Minister of Labour in 1929.
  Northampton was a seat of Parliament many times during the 14th century, and it has a proud history in defence of this place. During the civil war, the strong parliamentary garrison at Northampton led the assault at Naseby. Its shoemakers made the boots for Cromwell's army on the promise of payment following his victory. That payment was never received—I raise that issue now

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  as we are discussing the Finance Bill, and the relevant Ministers are present. I understand that the Chancellor is looking to introduce legislation on late payment of bills. I believe that Northampton has a just case in that regard. Alternatively, if that is not possible, we would settle for a favourable standard spending assessment settlement next year.
  My constituency of Northampton, South today comprises the southern half of the town and its surrounding green belt. It remains one of the fastest growing constituencies in the land. Despite a recent review, the electorate is 81,000 and rising. The population increases at an alarming rate: Northampton alone grows at a rate of 2,000 people per annum. The current population of 192,000 is expected to exceed 200,000 by the millennium.
  Industry has changed over the years. It still includes the tradition of shoemaking, but is now much more diverse. Church's shoes are particularly noteworthy, and I am grateful to the company for its assistance during the election campaign. The shoes that I purchased from it are still going strong and have seen me through both the election campaign and my many trips around this place, during which I have got lost many times. I recommend that brand to hon. Members.
  As I said, industry in my constituency has changed and is now more diverse. Carlsberg, Barclaycard and MFI are based in my constituency and have their headquarters in Northampton. We look forward to welcoming Panasonic to the fold later this year. Industry looks to the Government to strengthen the economy, and the measures in the Chancellor's Budget and in the Finance Bill will ensure that there is long-term stability and prosperity, rather than a cycle of boom-bust, for the first time in several years.
  My constituents welcome that stability and prosperity, and they welcome the additional provision for the national health service and for education. Although I understand the reasoning behind some of the amendments placed before the House today—I was in the Chamber for a considerable time this afternoon, listening to discussions about the pensions issue—I am somewhat disappointed that none of the amendments mentioned from where finance would come to replace that which they would eliminate. I found it particularly difficult to accept Conservative Members' advice on pensions, when they sat back for eight years and did nothing about the mis-selling of pensions.
  It is a great honour to serve the people of Northampton and its surrounding areas. It is the town of my birth and where I live and raise my family. I am proud to be the first member of the town for many years to serve the place of my birth. If we look through its history, we will see that not many people who were born and bred in Northampton have had the honour of serving that area. I am proud to be able to do that.
  May 1997 was a memorable time for me, not simply because of the general election result, but because, as the hon. Member for Daventry (Mr. Boswell) will know, my team, Northampton Town, were at Wembley. The cobblers, celebrating their centenary this year, reached Wembley for the first time and were victorious. Their defeat of Swansea was not appreciated by the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) who joined me on that day, but
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  Northampton Town has now been promoted to the second division. That is proof positive that anything is possible under a Labour Government. As vice-chairman of the supporters trust, I wish the team well in their centenary year.
  I also place on record my gratitude to my constituents, who have supported me very well since the election, and thank my family for their support.
  I trust that the Bill will be passed and will bring about the financial stability for which the country cries out. On a personal note, my task is to serve my constituents with the same diligence and dignity that were evident in the careers of the Members whom I mentioned earlier. Northampton was described by Daniel Defoe as the handsomest town in England. I share that view, and I look forward to serving Northampton's people well into the new millennium.
  9.40 pm
  Mr. Brooke: On behalf of the whole House, I congratulate the hon. Member for Northampton, South (Mr. Clarke) on a perfectly excellent maiden speech. I suspect that he made it easier for the Deputy Speaker to decide who should be called when a wide range of hon. Members—I am not referring to myself here—got up in what is necessarily a truncated Third Reading debate.
  The proceedings on the Bill have been notable for the fact—this is a tribute to my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb)—that Bognor has, I suspect, been mentioned more often than the City of London. I have visited Bognor, but the most vivid thing I knew about it before these proceedings was an exchange between the late Duke of Norfolk and someone who asked him whether, when he was senior steward at the Jockey Club, he ever had a flutter. He said that it was wrong that he should ever make a bet of any sort in that capacity, but it was true that Lavinia, the duchess, did occasionally have a bet. "Does she do well?", the person asked. "Not really," said the duke, "I had to sell Bognor last week."
  The Government's defence for the truncated proceedings on the Bill—the 12 working days that it has taken—has been that they are guided and governed by precedent, and that we have had just as much time as in past years; but the fact remains that, by having to take it day after day without intermission, the outside bodies have not had the opportunity to contribute, nor necessarily has there been any margin for those of my hon. Friends who sat on the Committee to be able to absorb advice. Frankly, the test will be whether the Government, who have defended the use of 12 days this year, use the same technique next year. If they were to use it again next year, the City of London would have much more to say than perhaps it has had to say this year, in these circumstances.
  The Chief Secretary alluded to the Treasury to the long speeches, and various references have been made to the fact that those speeches were not wholly satisfactory. One of the consequences of the long speeches of Conservative Members has been the nature of the interventions that they have provoked and prompted. The interventions of Labour Members on both the Back and the Front Benches have been the most revealing way in which they have shown that they have not fully understood the Bill.
  I close, because I want other hon. Members to be able to speak in the debate, with one exchange that I had with the Economic Secretary to the Treasury, with whom

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  I have had, broadly speaking, excellent relations throughout, although I acknowledge that there have been frissons.
  On the subject of the windfall tax, I raised with the Economic Secretary the fact that one Minister had said that there was no difficulty at all in companies affected by the tax paying it out of their borrowings. Her response to me was that the Paymaster General had made it clear in other debates that the regulators had said that the utilities would have no difficulty in paying the tax without affecting their investments, but that was not the point that I was making.
  The point that I was seeking to make was that it seemed to me to be an offence against the golden rule that the Chancellor had put forward in terms of his Budget that one should borrow for public purposes only if the money was to be used for investment and then oblige the utilities to borrow to pay the tax. That seemed to me an unfortunate imbalance and, although the Government have said that this is a one-off measure, I have an uneasy feeling that private borrowing will be used on future occasions.
  I promised that I would be brief. I reiterate my congratulations to the hon. Member for Northampton, South.
  9.44 pm
  Yvette Cooper: I, too, congratulate my hon. Friend the Member for Northampton, South (Mr. Clarke) on his admirable maiden speech. This is my speech as a maiden from the Finance Bill, or perhaps a Finance Bill virgin. Friends and family asked, "So how was it for you?" I have to say that it was a strange experience.
  I shall give the House some examples. I took Opposition Members extremely seriously when we began proceedings on the Finance Bill. For example, they said that they did not have enough time to discuss the important measures in the Bill which deserved deep scrutiny. I looked at the reports of the Committee's proceedings in Hansard. In my earnestness, I even timed some of the debates. I counted the column inches, subject by subject.
  Taking an afternoon at random—not one of those that included some of the more strange and exciting flights of fancy around the world and around the various members of the family of the hon. Member for Daventry (Mr. Boswell); it was slightly more specific—we had a two and a half hour debate, of which Conservative Members spent 40 minutes discussing how little time they had. That was 40 minutes that could have been spent scrutinising all kinds of measures that would have been important to the House. Instead, 40 minutes was spent discussing how little time they had. A further hour was spent on various trips around the globe, flights of fancy and matters adding, shall we say, colour, a full character list, a cast to the debate.
  Taking a step back from the intricacies of the Finance Bill, which obviously needed to be scrutinised, we see the overall balance of the Finance Bill. I found two dividing lines between the Government and the Opposition. The first is fairness and the second is consideration for the long term.
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  On fairness, Opposition Members felt the need to defend tax relief for private medical insurance, something that helps only a tiny minority, rather than using the money to reduce VAT on fuel, something that favours everyone and that we can extend to all. The most important measure of all for fairness was the windfall tax, raising money to help the long-term and the young unemployed into work. Nothing could be more important to fairness and to helping people who are in most need of support, help and fair opportunities in Britain.
  Then there was the long term. The Opposition tended to cluck and crow, and kept raising the issue of the long term. They said that the Government did not understand it. I found that the Opposition simply did not understand that the most important long-term issue for Britain and the British people is to get out of the traumatic long-term boom-bust cycle that has plagued the economy for so long, doing huge damage.
  We saw that time and again in the debate about pension funds. Opposition Members simply could not understand that what matters for future pensioners is the long-term health of the entire economy; what matters is staying out of another recession, not swinging on the same old rollercoaster—up we go, inflation takes off, down we come again, and crash into a recession with repossessions and huge numbers of people losing their jobs and being forced on to the dole once more.
  Opposition Members did not seem to take that seriously, but the Government are determined to do something about it. That is what the Budget is all about: that means the measure to give the Bank of England operational control of interest rates, measures for investment and measures to improve the capacity of the economy and to help the long-term unemployed back to work. All those things can help to improve the long-term sustainable growth rate of the economy.
  That also means sorting out the public finances. I heard little about that from Conservative Members, yet sorting out the public finances and the level of borrowing in the economy are incredibly important matters, not only to encourage a balanced recovery, but to get it on a sustainable footing for the future—something that the Conservative Government failed to do.
  After the last recession, borrowing rose to 7 per cent. of gross domestic product. That is a shocking level. Even next year, on the Conservative Government's forecast last November, borrowing would have been £12.2 billion, despite the years of economic growth. That is not a sustainable level. The Labour Government pledged to do something about it, and they are doing something through the Bill. The measures for contracting borrowing by £4.1 billion are important, yet we have heard little from Conservative Members about that or about what they would have done. All we heard was, "Why are you having a Budget? It is not needed." Presumably they would have been content with borrowing at unsustainable levels.
  Conservative Members took the same attitude on individual measures throughout our debates. For example, they opposed the abolition of tax credits on advance corporation tax, but they did not tell us what they would have done to find that £3.9 billion next year. However, they were content with the cuts in corporation tax of £1.9 billion, but where would they have found that money? They supported the cuts in corporation tax, but not the measures that would raise the money to fill the

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  gap. Time and again, Conservative Members opposed measures to cut borrowing, yet they said nothing about how they would fill the gap and tackle the problem of unsustainable borrowing.
  That typifies the irresponsible, short-termist view of the Opposition. It is a shame. This is a constructive Finance Bill, and there could have been a constructive debate about the long-term future of Britain, something on which the Government place great emphasis.
  It is astonishing how little Conservative Members have taken into account fairness and the issues that matter to people throughout the country. They have quibbled, moaned and whinged about bits and pieces here and there—
  Mr. Desmond Swayne: Pensioners.
  Yvette Cooper: If the hon. Gentleman wants to talk about pensioners, let us talk about the 15,000 pensioners in my constituency who were horrified by the way in which the previous Conservative Government treated them and their future. They were denied their full entitlement to benefits and denied help to get the extra income support to which they were entitled. Some 2,300 people in my constituency were mis-sold personal pensions—
  Mr. Swayne: However much the hon. Lady wishes to return to better days and to bring back the past, I remind her that we are discussing this Finance Bill. Does she agree that pensioners, those approaching pensionable age and even those some years away from pensionable age who are making savings decisions, require, more than anything else, stability in their assumptions? This Budget has robbed them of any stability. Does she accept that the Budget will go down in history as one that attacks the saver?
  Yvette Cooper: I am not trying to look backwards; I am trying to look forwards. The hon. Gentleman makes my point—pensioners need stability. They need to know that their pension funds will be worth something when they retire. What matters to them is the future performance of the pension funds. That performance depends on the state of the economy in which those pension funds are invested. That performance depends most of all on whether the companies in which they invest continue to grow and to prosper, rather than being slammed into a recession with the consequent destruction of capacity, of jobs and of those companies' value. The previous Government pushed companies and pension funds into such a recession.
  The hon. Member for New Forest, West (Mr. Swayne) is absolutely right: stability is what matters—for people of my generation, considering our future. What most jeopardises our security and future stability is the fear that we may lose our jobs because the economy again tumbles into recession—which has been caused by the boom-bust, irresponsible policies pursued by the previous Government. Ministers in the previous Government simply shrugged their shoulders and said, "The economy has nothing to do with us; it can carry on rolling up and down, up and down."
  Mr. Nicholas Winterton: We have the strongest economy in Europe.
  Yvette Cooper: The previous Government slammed our economy into a deep and damaging recession,
  242
  in which people lost their jobs and their homes were repossessed. Conservative Members seem to shrug their shoulders over those consequences.
  We now have a chance to do something about that cycle and to try to prevent it from happening again—to make a difference for the sake of our future, of our children and of our grandchildren.
  Mr. Cranston: Will my hon. Friend give way?
  Mr. Boswell rose—
  Yvette Cooper: Yes.
  Mr. Deputy Speaker: I call Mr. Boswell.
  Mr. Boswell: First, I congratulate the hon. Member for Northampton, South (Mr. Clarke) on his maiden speech.
  Mr. Livingstone: On a point of order, Mr. Deputy Speaker. It is clear that my hon. Friend the Member for Pontefract and Castleford (Yvette Cooper) gave way to a colleague behind her—not to this.
  Mr. Deputy Speaker: It was not clear to whom the hon. Lady gave way. I thought that she had finished her speech. I call Mr. Cranston.
  Mr. Cranston: Does my hon. Friend the Member for Pontefract and Castleford agree that, in Committee, we heard nothing about issues of growth or, specifically, of social justice? We focused on the needs of only a few people who would be affected by withdrawal of relief on private medical insurance—a measure that will affect no more than 550,000 people.
  Yvette Cooper: I thank my hon. Friend for his intervention. The Budget will be remembered for the contribution that it makes to jobs for the long-term unemployed. We are raising money and enabling people to get the jobs and the future that they need.
  Future pensioners will depend most on stability, on jobs and on having the money to contribute to their own pensions—which they will not have if they are without a job and on the dole. Future and current pensioners care most about their children and their grandchildren and about jobs for them. Our Budget will get 250,000 young people off benefit and into work, making a huge difference to the 900 under-25s in my constituency who have no job and very little hope for the future. They certainly deserve better than they received from the previous Conservative Government.
  The Budget has managed to provide extra resources for the health service, for education and for rebuilding our schools.
  Mr. Ben Chapman: My hon. Friend is talking about the welfare-to-work programme and how it will affect 250,000 young people. In my constituency, as many as 2,000 young people are striving to get work, and as many as one in four are out of employment. Many of our young people have no aspirations, no hope and no

  243
  opportunity of getting work, and they very much welcome the Budget. My entire constituency welcomes the Budget, and I applaud my hon. Friend's efforts to explain it.
  Yvette Cooper: I thank my hon. Friend—[Interruption.] It is such a shame that Conservative Members want to cluck, crow and jeer when the subject under discussion is the future of the young unemployed and their opportunity to thrive and prosper—an opportunity not given to them by the previous Government but which they are being given by this Government, who believe in a future for the people of Britain.
  9.59 pm
  Mr. Boswell: The hon. Member for Pontefract and Castleford (Yvette Cooper) has clearly cast herself in the role of winding up the debate. No Government Front Bencher was prepared to do it, but the hon. Lady did not make too bad a job of it.
  I attempted to congratulate my constituency neighbour, the hon. Member for Northampton, South (Mr. Clarke), on a most elegant speech full of wit and in which he paid a gracious tribute to Michael Morris.
  I have very little time to say anything else about the Bill because of the operation of the guillotine. It is a Bill that should never have been. There might be some credibility in the proposal for the windfall tax, but there is no mandate for or credibility in the other 15—
  It being Ten o'clock, MR. DEPUTY SPEAKER put the Question already proposed from the Chair, pursuant to Order [14 July] and Resolution [yesterday].
  Question put, That the Bill be now read the Third time:—
  The House divided: Ayes 336, Noes 168.

  Division No. 73]

  [8.54 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Clark, Rt Hon Alan (Kensington)

  Allan, Richard (Shef'ld Hallam)

  Clark, Dr Michael (Rayleigh)

  Amess, David

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Ancram, Rt Hon Michael

  Arbuthnot, James

  Clifton-Brown, Geoffrey

  Atkinson, David (Bour'mth E)

  Cormack, Sir Patrick

  Atkinson, Peter (Hexham)

  Curry, Rt Hon David

  Ballard, Mrs Jackie

  Davey, Edward (Kingston)

  Beggs, Roy (E Antrim)

  Davis, Rt Hon David (Haltemprice)

  Bercow, John

  Davies, Quentin (Grantham)

  Blunt, Crispin

  Day, Stephen

  Body, Sir Richard

  Donaldson, Jeffrey

  Boswell, Tim

  Dorrell, Rt Hon Stephen

  Bottomley, Peter (Worthing W)

  Duncan, Alan

  Bottomley, Rt Hon Mrs Virginia

  Duncan Smith, Iain

  Brady, Graham

  Evans, Nigel

  Brazier, Julian

  Faber, David

  Breed, Colin

  Fabricant, Michael

  Brooke, Rt Hon Peter

  Fallon, Michael

  Browning, Mrs Angela

  Fearn, Ronnie

  Bruce, Ian (S Dorset)

  Flight, Howard

  Burnett, John

  Forsythe, Clifford

  Burns, Simon

  Forth, Rt Hon Eric

  Burstow, Paul

  Fox, Dr Liam

  Butterfill, John

  Gale, Roger

  Campbell, Menzies (NE Fife)

  George, Andrew (St Ives)

  Cash, William

  Gibb, Nick

  Chapman, Sir Sydney (Chipping Barnet)

  Gill, Christopher

  Gillan, Mrs Cheryl

  Chope, Christopher

  Gorman, Mrs Teresa

  227

  Gorrie, Donald

  Paice, James

  Gray, James

  Paterson, Owen

  Green, Damian

  Pickles, Eric

  Greenway, John

  Prior, David

  Grieve, Dominic

  Redwood, Rt Hon John

  Hamilton, Rt Hon Sir Archie

  Robertson, Laurence (Tewk'b'ry)

  Hammond, Philip

  Ruffley, David

  Harvey, Nick

  Russell, Bob (Colchester)

  Hawkins, Nick

  Sanders, Adrian

  Heath, David (Somerton & Frome)

  Sayeed, Jonathan

  Heathcoat-Amory, Rt Hon David

  Shephard, Rt Hon Mrs Gillian

  Horam, John

  Shepherd, Richard (Aldridge)

  Howard, Rt Hon Michael

  Simpson, Keith (Mid-Norfolk)

  Howarth, Gerald (Aldershot)

  Smith, Sir Robert (W Ab'd'ns)

  Hughes, Simon (Southwark N)

  Soames, Nicholas

  Hunter, Andrew

  Spelman, Mrs Caroline

  Jack, Rt Hon Michael

  Spicer, Sir Michael

  Jackson, Robert (Wantage)

  Spring, Richard

  Jenkin, Bernard (N Essex)

  Stanley, Rt Hon Sir John

  Johnson Smith, Rt Hon Sir Geoffrey

  Streeter, Gary

  Stunell, Andrew

  Keetch, Paul

  Swayne, Desmond

  Key, Robert

  Syms, Robert

  King, Rt Hon Tom (Bridgwater)

  Tapsell, Sir Peter

  Kirkbride, Miss Julie

  Taylor, John M (Solihull)

  Laing, Mrs Eleanor

  Taylor, Sir Teddy

  Leigh, Edward

  Temple-Morris, Peter

  Letwin, Oliver

  Townend, John

  Lewis, Dr Julian (New Forest E)

  Tredinnick, David

  Lidington, David

  Trend, Michael

  Lloyd, Rt Hon Sir Peter (Fareham)

  Tyler, Paul

  Loughton, Tim

  Tyrie, Andrew

  Luff, Peter

  Viggers, Peter

  Lyell, Rt Hon Sir Nicholas

  Wallace, James

  McIntosh, Miss Anne

  Walter, Robert

  Maclean, Rt Hon David

  Wardle, Charles

  Maclennan, Robert

  Waterson, Nigel

  McLoughlin, Patrick

  Webb, Professor Steve

  Malins, Humfrey

  Wells, Bowen

  Mawhinney, Rt Hon Dr Brian

  Whittingdale, John

  Merchant, Piers

  Widdecombe, Rt Hon Miss Ann

  Michie, Mrs Ray (Argyll & Bute)

  Winterton, Nicholas (Macclesfield)

  Moss, Malcolm

  Woodward, Shaun

  Nicholls, Patrick

  Yeo, Tim

  Norman, Archie

  Young, Rt Hon Sir George

  Oaten, Mark

  Tellers for the Ayes:

  Ottaway, Richard

  Mr. Oliver Heald and

  Page, Richard

  Sir David Madel.

  NOES

  Abbott, Ms Diane

  Blears, Ms Hazel

  Ainger, Nick

  Blizzard, Bob

  Ainsworth, Robert (Cov'try NE)

  Blunkett, Rt Hon David

  Allen, Graham (Nottingham N)

  Boateng, Paul

  Anderson, Donald (Swansea E)

  Borrow, David

  Anderson, Janet (Rossendale)

  Bradley, Keith (Withington)

  Armstrong, Ms Hilary

  Bradley, Peter (The Wrekin)

  Ashton, Joe

  Bradshaw, Ben

  Atherton, Ms Candy

  Brinton, Mrs Helen

  Atkins, Charlotte

  Brown, Rt Hon Gordon (Dunfermline E)

  Banks, Tony

  Barnes, Harry

  Brown, Rt Hon Nick (Newcastle E)

  Barron, Kevin

  Browne, Desmond (Kilmarnock)

  Battle, John

  Buck, Ms Karen

  Bayley, Hugh

  Burden, Richard

  Beard, Nigel

  Butler, Christine

  Beckett, Rt Hon Mrs Margaret

  Byers, Stephen

  Begg, Miss Anne (Aberd'n S)

  Caborn, Richard

  Bell, Martin (Tatton)

  Campbell, Mrs Anne (C'bridge)

  Bell, Stuart (Middlesbrough)

  Campbell, Ronnie (Blyth V)

  Bennett, Andrew F

  Campbell-Savours, Dale

  Benton, Joe

  Canavan, Dennis

  Berry, Roger

  Caplin, Ivor

  Best, Harold

  Caton, Martin

  Betts, Clive

  Cawsey, Ian

  228

  Chisholm, Malcolm

  Griffiths, Jane (Reading E)

  Church, Ms Judith

  Griffiths, Nigel (Edinburgh S)

  Clapham, Michael

  Griffiths, Win (Bridgend)

  Clark, Rt Hon Dr David (S Shields)

  Grocott, Bruce

  Clark, Dr Lynda (Edinburgh Pentlands)

  Gunnell, John

  Hain, Peter

  Clarke, Eric (Midlothian)

  Hall, Patrick (Bedford)

  Clarke, Rt Hon Tom (Coatbridge)

  Hamilton, Fabian (Leeds NE)

  Clarke, Tony (Northampton S)

  Hanson, David

  Clelland, David

  Harman, Rt Hon Ms Harriet

  Clwyd, Ann

  Heal, Mrs Sylvia

  Coaker, Vernon

  Healey, John

  Coffey, Ms Ann

  Henderson, Ivan (Harwich)

  Coleman, Iain (Hammersmith)

  Hepburn, Stephen

  Cook, Frank (Stockton N)

  Heppell, John

  Cooper, Yvette

  Hesford, Stephen

  Corston, Ms Jean

  Hill, Keith

  Cousins, Jim

  Hinchliffe, David

  Cox, Tom

  Hodge, Ms Margaret

  Cranston, Ross

  Home Robertson, John

  Crausby, David

  Hoon, Geoffrey

  Cryer, Mrs Ann (Keighley)

  Hopkins, Kelvin

  Cummings, John

  Howarth, Alan (Newport E)

  Cunliffe, Lawrence

  Howells, Dr Kim

  Cunningham, Jim (Cov'try S)

  Hoyle, Lindsay

  Cunningham, Rt Hon Dr John (Copeland)

  Hughes, Ms Beverley (Stretford)

  Humble, Mrs Joan

  Curtis-Thomas, Mrs Claire

  Hurst, Alan

  Dalyell, Tam

  Hutton, John

  Darling, Rt Hon Alistair

  Iddon, Dr Brian

  Darvill, Keith

  Illsley, Eric

  Davey, Valerie (Bristol W)

  Jackson, Ms Glenda (Hampstead)

  Davies, Rt Hon Denzil (Llanelli)

  Jackson, Helen (Hillsborough)

  Davies, Rt Hon Ron (Caerphilly)

  Jamieson, David

  Davis, Terry (B'ham Hodge H)

  Jenkins, Brian (Tamworth)

  Dawson, Hilton

  Johnson, Alan (Hull W & Hessle)

  Dean, Mrs Janet

  Johnson, Miss Melanie (Welwyn Hatfield)

  Denham, John

  Dewar, Rt Hon Donald

  Jones, Helen (Warrington N)

  Dobbin, Jim

  Jones, leuan Wyn (Ynys Môn)

  Dobson, Rt Hon Frank

  Jones, Ms Jenny (Wolverh'ton SW)

  Donohoe, Brian H

  Doran, Frank

  Jones, Dr Lynne (Selly Oak)

  Dowd, Jim

  Jones, Martyn (Clwyd S)

  Drown, Ms Julia

  Jowell, Ms Tessa

  Dunwoody, Mrs Gwyneth

  Kaufman, Rt Hon Gerald

  Eagle, Angela (Wallasey)

  Keen, Alan (Feltham & Heston)

  Eagle, Maria (L'pool Garston)

  Keen, Mrs Ann (Brentford)

  Edwards, Huw

  Kennedy, Jane (Wavertree)

  Efford, Clive

  Khabra, Piara S

  Ellman, Ms Louise

  King, Andy (Rugby & Kenilworth)

  Ennis, Jeff

  King, Ms Oona (Bethnal Green)

  Etherington, Bill

  Kumar, Dr Ashok

  Ewing, Mrs Margaret

  Ladyman, Dr Stephen

  Field, Rt Hon Frank

  Lawrence, Ms Jackie

  Fitzpatrick, Jim

  Laxton, Bob

  Fitzsimons, Lorna

  Lepper, David

  Flint, Caroline

  Leslie, Christopher

  Flynn, Paul

  Levitt, Tom

  Follett, Barbara

  Lewis, Ivan (Bury S)

  Foster, Rt Hon Derek

  Lewis, Terry (Worsley)

  Foster, Michael Jabez (Hastings)

  Liddell, Mrs Helen

  Foster, Michael John (Worcester)

  Linton, Martin

  Fyfe, Maria

  Livingstone, Ken

  Galbraith, Sam

  Lloyd, Tony (Manchester C)

  Gapes, Mike

  Lock, David

  George, Bruce (Walsall S)

  Love, Andrew

  Gerrard, Neil

  McAllion, John

  Gibson, Dr Ian

  McAvoy, Thomas

  Gilroy, Mrs Linda

  McCabe, Stephen

  Godman, Dr Norman A

  McCafferty, Ms Chris

  Godsiff, Roger

  McCartney, Ian (Makerfield)

  Golding, Mrs Llin

  Macdonald, Calum

  Gordon, Mrs Eileen

  McDonnell, John

  Graham, Thomas

  McFall, John

  Grant, Bernie

  McGuire, Mrs Anne

  229

  McIsaac, Shona

  Salter, Martin

  McKenna, Ms Rosemary

  Savidge, Malcolm

  Mackinlay, Andrew

  Sawford, Phil

  McLeish, Henry

  Sedgemore, Brian

  MacShane, Denis

  Shaw, Jonathan

  Mactaggart, Fiona

  Sheerman, Barry

  McWalter, Tony

  Sheldon, Rt Hon Robert

  Mahon, Mrs Alice

  Short, Rt Hon Clare

  Mallaber, Judy

  Simpson, Alan (Nottingham S)

  Marek, Dr John

  Singh, Marsha

  Marsden, Gordon (Blackpool S)

  Skinner, Dennis

  Marsden, Paul (Shrewsbury)

  Smith, Rt Hon Andrew (Oxford E)

  Marshall, Jim (Leicester S)

  Smith, Angela (Basildon)

  Martlew, Eric

  Smith, Rt Hon Chris (Islington S)

  Maxton, John

  Smith, Miss Geraldine (Morecambe & Lunesdale)

  Meacher, Rt Hon Michael

  Meale, Alan

  Smith, Jacqui (Redditch)

  Merron, Gillian

  Smith, John (Glamorgan)

  Michael, Alun

  Smith, Llew (Blaenau Gwent)

  Michie, Bill (Shef'ld Heeley)

  Snape, Peter

  Milburn, Alan

  Southworth, Ms Helen

  Mitchell, Austin

  Spellar, John

  Moffatt, Laura

  Squire, Ms Rachel

  Moonie, Dr Lewis

  Starkey, Dr Phyllis

  Moran, Ms Margaret

  Stinchcombe, Paul

  Morgan, Rhodri (Cardiff W)

  Stoate, Dr Howard

  Morley, Elliot

  Strang, Rt Hon Dr Gavin

  Morris, Ms Estelle (B'ham Yardley)

  Straw, Rt Hon Jack

  Mountford, Kali

  Stringer, Graham

  Mudie, George

  Stuart, MS Gisela (Edgbaston)

  Mullin, Chris

  Sutcliffe, Gerry

  Murphy, Denis (Wansbeck)

  Swinney, John

  Naysmith, Dr Doug

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  O'Brien, Mike (N Warks)

  O'Hara, Edward

  Taylor, Ms Dari (Stockton S)

  Olner Bill

  Taylor, David (NW Leics)

  Organ, Mrs Diana

  Thomas, Gareth (Clwyd W)

  Palmer, Dr Nick

  Thomas, Gareth R (Harrow W)

  Pearson, Ian

  Timms, Stephen

  Pendry, Tom

  Tipping, Paddy

  Perham, Ms Linda

  Todd, Mark

  Pickthall, Colin

  Touhig, Don

  Pike, Peter L

  Trickett, Jon

  Plaskitt, James

  Truswell, Paul

  Pond, Chris

  Turner, Dennis (Wolverh'ton SE)

  Pope, Greg

  Turner, Desmond (Kemptown)

  Pound, Stephen

  Turner, Dr George (NW Norfolk)

  Powell, Sir Raymond

  Twigg, Stephen (Enfield)

  Prentice, Ms Bridget (Lewisham E)

  Vaz, Keith

  Prescott, Rt Hon John

  Vis, Dr Rudi

  Primarolo, Dawn

  Ward, Ms Claire

  Prosser, Gwyn

  Watts, David

  Quin, Ms Joyce

  Whitehead, Dr Alan

  Quinn, Lawrie (Scarborough)

  Wicks, Malcolm

  Rammell, Bill

  Wigley, Dafydd

  Raynsford, Nick

  Williams, Rt Hon Alan (Swansea W)

  Reed, Andrew (Loughborough)

  Wilson, Brian

  Reid, Dr John (Hamilton N)

  Winnick, David

  Robinson, Geoffrey (Cov'try NW)

  Winterton, Ms Rosie (Doncaster C)

  Roche, Mrs Barbara

  Wise, Audrey

  Rogers, Allan

  Wood, Mike

  Rooker, Jeff

  Wray, James

  Rooney, Terry

  Wright, Dr Tony (Cannock)

  Ross, Ernie (Dundee W)

  Wright, Tony D (Gt Yarmouth)

  Rowlands, Ted

  Wyatt, Derek

  Ruane, Chris

  Ruddock, Ms Joan

  Tellers for the Noes:

  Russell, Ms Christine (Chester)

  Mr. Kevin Hughes and

  Ryan, Ms Joan

  Mr. Jon Owen Jones

  [Division No. 74]

  [10 pm

  AYES

  Abbott, Ms Diane

  Borrow, David

  Ainger, Nick

  Bradley, Keith (Withington)

  Ainsworth, Robert (Cov'try NE)

  Bradley, Peter (The Wrekin)

  Allen, Graham (Nottingham N)

  Bradshaw, Ben

  Anderson, Donald (Swansea E)

  Brinton, Mrs Helen

  Anderson, Janet (Rossendale)

  Brown, Rt Hon Gordon (Dunfermline E)

  Armstrong, Ms Hilary

  Ashton, Joe

  Brown, Rt Hon Nick (Newcastle E)

  Atherton, Ms Candy

  Browne, Desmond (Kilmarnock)

  Atkins, Charlotte

  Buck, Ms Karen

  Banks, Tony

  Burden, Richard

  Barnes, Harry

  Butler, Christine

  Barron, Kevin

  Byers, Stephen

  Battle, John

  Caborn, Richard

  Bayley, Hugh

  Campbell, Mrs Anne (C'bridge)

  Beard, Nigel

  Campbell, Ronnie (Blyth V)

  Beckett, Rt Hon Mrs Margaret

  Campbell-Savours, Dale

  Begg, Miss Anne (Aberd'n S)

  Canavan, Dennis

  Bell, Martin (Tatton)

  Caplin, Ivor

  Bell, Stuart (Middlesbrough)

  Caton, Martin

  Bennett, Andrew F

  Cawsey, Ian

  Benton, Joe

  Chapman, Ben (Wirral S)

  Berry, Roger

  Chisholm, Malcolm

  Best, Harold

  Church, Ms Judith

  Betts, Clive

  Clapham, Michael

  Blears, Ms Hazel

  Clark, Rt Hon Dr David (S Shields)

  Blizzard, Bob

  Clark, Dr Lynda (Edinburgh Pentlands)

  Blunkett, Rt Hon David

  Boateng, Paul

  Clarke, Eric (Midlothian)

  244

  Clarke, Rt Hon Tom (Coatbridge)

  Hanson, David

  Clarke, Tony (Northampton S)

  Harman, Rt Hon Ms Harriet

  Clelland, David

  Heal, Mrs Sylvia

  Clwyd, Ann

  Healey, John

  Coaker, Vernon

  Henderson, Doug (Newcastle N)

  Coffey, Ms Ann

  Henderson, Ivan (Harwich)

  Coleman, Iain (Hammersmith)

  Hepburn, Stephen

  Cook, Frank (Stockton N)

  Heppell, John

  Cooper, Yvette

  Hesford, Stephen

  Corbyn, Jeremy

  Hill, Keith

  Corston, Ms Jean

  Hinchliffe, David

  Cousins, Jim

  Hodge, Ms Margaret

  Cox, Tom

  Home Robertson, John

  Cranston, Ross

  Hoon, Geoffrey

  Crausby, David

  Hopkins, Kelvin

  Cryer, Mrs Ann (Keighley)

  Howarth, Alan (Newport E)

  Cummings, John

  Howells, Dr Kim

  Cunliffe, Lawrence

  Hoyle, Lindsay

  Cunningham, Jim (Cov'try S)

  Hughes, Ms Beverley (Stretford)

  Cunningham, Rt Hon Dr John (Copeland)

  Hughes, Kevin (Doncaster N)

  Humble, Mrs Joan

  Curtis-Thomas, Mrs Claire

  Hurst, Alan

  Dalyell, Tam

  Hutton, John

  Darling, Rt Hon Alistair

  Iddon, Dr Brian

  Darvill, Keith

  Illsley, Eric

  Davey, Valerie (Bristol W)

  Jackson, Ms Glenda (Hampstead)

  Davies, Rt Hon Denzil (Llanelli)

  Jackson, Helen (Hillsborough)

  Davies, Rt Hon Ron (Caerphilly)

  Jamieson, David

  Davis, Terry (B'ham Hodge H)

  Jenkins, Brian (Tamworth)

  Dawson, Hilton

  Johnson, Alan (Hull W & Hessle)

  Dean, Mrs Janet

  Johnson, Miss Melanie (Welwyn Hatfield)

  Denham, John

  Dewar, Rt Hon Donald

  Jones, Helen (Warrington N)

  Dobbin, Jim

  Jones, Ms Jenny (Wolverh'ton SW)

  Dobson, Rt Hon Frank

  Donohoe, Brian H

  Jones, Dr Lynne (Selly Oak)

  Doran, Frank

  Jones, Martyn (Clwyd S)

  Drown, Ms Julia

  Jowell, Ms Tessa

  Dunwoody, Mrs Gwyneth

  Kaufman, Rt Hon Gerald

  Eagle, Angela (Wallasey)

  Keen, Alan (Feltham & Heston)

  Eagle, Maria (L'pool Garston)

  Keen, Mrs Ann (Brentford)

  Edwards, Huw

  Kennedy, Jane (Wavertree)

  Efford, Clive

  Khabra, Piara S

  Ellman, Ms Louise

  Kidney, David

  Ennis, Jeff

  King, Andy (Rugby & Kenilworth)

  Etherington, Bill

  King, Ms Oona (Bethnal Green)

  Field, Rt Hon Frank

  Kumar, Dr Ashok

  Fitzpatrick, Jim

  Ladyman, Dr Stephen

  Fitzsimons, Lorna

  Lawrence, Ms Jackie

  Flint, Caroline

  Laxton, Bob

  Flynn, Paul

  Lepper, David

  Follett, Barbara

  Leslie, Christopher

  Foster, Rt Hon Derek

  Levitt, Tom

  Foster, Michael Jabez (Hastings)

  Lewis, Ivan (Bury S)

  Foster, Michael John (Worcester)

  Lewis, Terry (Worsley)

  Fyfe, Maria

  Liddell, Mrs Helen

  Galbraith, Sam

  Linton, Martin

  Gapes, Mike

  Livingstone, Ken

  George, Bruce (Walsall S)

  Lloyd, Tony (Manchester C)

  Gerrard, Neil

  Lock, David

  Gibson, Dr Ian

  Love, Andrew

  Gilroy, Mrs Linda

  McAllion, John

  Godman, Dr Norman A

  McAvoy, Thomas

  Godsiff, Roger

  McCabe, Stephen

  Golding, Mrs Llin

  McCafferty, Ms Chris

  Gordon, Mrs Eileen

  McCartney, Ian (Makerfield)

  Graham, Thomas

  Macdonald, Calum

  Grant, Bernie

  McDonnell, John

  Griffiths, Jane (Reading E)

  McFall, John

  Griffiths, Nigel (Edinburgh S)

  McIsaac, Shona

  Griffiths, Win (Bridgend)

  McKenna, Ms Rosemary

  Grocott, Bruce

  Mackinlay, Andrew

  Gunnell, John

  McLeish, Henry

  Hain, Peter

  MacShane, Denis

  Hall, Patrick (Bedford)

  Mactaggart, Fiona

  Hamilton, Fabian (Leeds NE)

  McWalter, Tony

  245

  Mahon, Mrs Alice

  Savidge, Malcolm

  Mallaber, Judy

  Sawford, Phil

  Marek, Dr John

  Sedgemore, Brian

  Marsden, Gordon (Blackpool S)

  Shaw, Jonathan

  Marsden, Paul (Shrewsbury)

  Sheldon, Rt Hon Robert

  Marshall, Jim (Leicester S)

  Short, Rt Hon Clare

  Martlew, Eric

  Simpson, Alan (Nottingham S)

  Maxton, John

  Singh, Marsha

  Meacher, Rt Hon Michael

  Skinner, Dennis

  Meale, Alan

  Smith, Rt Hon Andrew (Oxford E)

  Merron, Gillian

  Smith, Angela (Basildon)

  Michael, Alun

  Smith, Rt Hon Chris (Islington S)

  Michie, Bill (Shef'ld Heeley)

  Smith, Miss Geraldine (Morecambe & Lunesdale)

  Milburn, Alan

  Miller, Andrew

  Smith, Jacqui (Redditch)

  Mitchell, Austin

  Smith, John (Glamorgan)

  Moffatt, Laura

  Smith, Llew (Blaenau Gwent)

  Moonie, Dr Lewis

  Snape, Peter

  Moran, Ms Margaret

  Soley, Clive

  Morgan, Rhodri (Cardiff W)

  Southworth, Ms Helen

  Morley, Elliot

  Spellar, John

  Morris, Ms Estelle (B'ham Yardley)

  Squire, Ms Rachel

  Mountford, Kali

  Starkey, Dr Phyllis

  Mudie, George

  Stevenson, George

  Mullin, Chris

  Stewart, Ian (Eccles)

  Murphy, Denis (Wansbeck)

  Stinchcombe, Paul

  Murphy, Paul (Torfaen)

  Stoate, Dr Howard

  Naysmith, Dr Doug

  Strang, Rt Hon Dr Gavin

  O'Brien, Bill (Normanton)

  Straw, Rt Hon Jack

  O'Brien, Mike (N Warks)

  Stringer, Graham

  O'Hara, Edward

  Stuart, Ms Gisela (Edgbaston)

  Olner, Bill

  Sutcliffe, Gerry

  Organ, Mrs Diana

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Palmer, Dr Nick

  Pearson, Ian

  Taylor, Ms Dari (Stockton S)

  Pendry, Tom

  Taylor, David (NW Leics)

  Perham, Ms Linda

  Thomas, Gareth (Clwyd W)

  Pickthall, Colin

  Thomas, Gareth R (Harrow W)

  Pike, Peter L

  Timms, Stephen

  Plaskitt, James

  Tipping, Paddy

  Pond, Chris

  Todd, Mark

  Pope, Greg

  Touhig, Don

  Pound, Stephen

  Trickett, Jon

  Powell, Sir Raymond

  Truswell, Paul

  Turner, Dennis (Wolverh'ton SE)

  Prentice, Ms Bridget (Lewisham E)

  Turner, Desmond (Kemptown)

  Prentice, Gordon (Pendle)

  Turner, Dr George (NW Norfolk)

  Prescott, Rt Hon John

  Twigg, Stephen (Enfield)

  Primarolo, Dawn

  Vaz, Keith

  Prosser, Gwyn

  Vis, Dr Rudi

  Quin, Ms Joyce

  Ward, Ms Claire

  Quinn, Lawrie

  Watts, David

  Rammell, Bill

  White, Brian

  Raynsford, Nick

  Whitehead, Dr Alan

  Reed, Andrew (Loughborough)

  Wicks, Malcolm

  Reid, Dr John (Hamilton N)

  Williams, Rt Hon Alan (Swansea W)

  Robertson, Rt Hon George (Hamilton S)

  Wilson, Brian

  Robinson, Geoffrey (Cov'try NW)

  Winnick, David

  Roche, Mrs Barbara

  Winterton, Ms Rosie (Doncaster C)

  Rogers, Allan

  Wise, Audrey

  Rooker, Jeff

  Wood, Mike

  Rooney, Terry

  Wray, James

  Ross, Ernie (Dundee W)

  Wright, Dr Tony (Cannock)

  Rowlands, Ted

  Wright, Tony D (Gt Yarmouth)

  Ruane, Chris

  Wyatt, Derek

  Ruddock, Ms Joan

  Russell, Ms Christine (Chester)

  Tellers for the Ayes:

  Ryan, Ms Joan

  Mr. Jim Dowd and

  Salter, Martin

  Mr. Jon Owen Jones.

  NOES

  Ainsworth, Peter (E Surrey)

  Atkinson, David (Bour'mth E)

  Allan, Richard (Shef'ld Hallam)

  Atkinson, Peter (Hexham)

  Amess, David

  Baldry, Tony

  Ancram, Rt Hon Michael

  Ballard, Mrs Jackie

  Arbuthnot, James

  Beggs, Roy (E Antrim)

  246

  Beith, Rt Hon A J

  Jones, Nigel (Cheltenham)

  Bercow, John

  Keetch, Paul

  Blunt, Crispin

  Kennedy, Charles (Ross Skye)

  Body, Sir Richard

  Key, Robert

  Boswell, Tim

  King, Rt Hon Tom (Bridgwater)

  Bottomley, Peter (Worthing W)

  Kirkbride, Miss Julie

  Bottomley, Rt Hon Mrs Virginia

  Kirkwood, Archy

  Brady, Graham

  Laing, Mrs Eleanor

  Brazier, Julian

  Leigh, Edward

  Breed, Colin

  Letwin, Oliver

  Brooke, Rt Hon Peter

  Lewis, Dr Julian (New Forest E)

  Browning, Mrs Angela

  Lidington, David

  Bruce, Ian (S Dorset)

  Lilley, Rt Hon Peter

  Burnett, John

  Livsey, Richard

  Burns, Simon

  Lloyd, Rt Hon Sir Peter (Fareham)

  Burstow, Paul

  Loughton, Tim

  Butterfill, John

  Luff, Peter

  Campbell, Menzies (NE Fife)

  Lyell, Rt Hon Sir Nicholas

  Cash, William

  MacGregor, Rt Hon John

  Chapman, Sir Sydney (Chipping Barnet)

  McIntosh, Miss Anne

  Maclean, Rt Hon David

  Chope, Christopher

  Maclennan, Robert

  Clark, Rt Hon Alan (Kensington)

  McLoughlin, Patrick

  Clark, Dr Michael (Rayleigh)

  Major, Rt Hon John

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Malins, Humfrey

  Mawhinney, Rt Hon Dr Brian

  Clifton-Brown, Geoffrey

  Merchant, Piers

  Cormack, Sir Patrick

  Michie, Mrs Ray (Argyll & Bute)

  Cotter, Brian

  Moore, Michael

  Cran, James

  Moss, Malcolm

  Curry, Rt Hon David

  Nicholls, Patrick

  Davey, Edward (Kingston)

  Norman, Archie

  Davis, Rt Hon David (Haltemprice)

  Oaten, Mark

  Davies, Quentin (Grantham)

  Öpik, Lembit

  Day, Stephen

  Ottaway, Richard

  Dorrell, Rt Hon Stephen

  Page, Richard

  Duncan, Alan

  Paice, James

  Duncan Smith, Iain

  Paterson, Owen

  Emery, Rt Hon Sir Peter

  Pickles, Eric

  Evans, Nigel

  Prior, David

  Faber, David

  Redwood, Rt Hon John

  Fabricant, Michael

  Robertson, Laurence (Tewk'b'ry)

  Fallon, Michael

  Roe, Mrs Marion (Broxbourne)

  Fearn, Ronnie

  Ruffley, David

  Flight, Howard

  Russell, Bob (Colchester)

  Forsythe, Clifford

  Sanders, Adrian

  Forth, Rt Hon Eric

  Sayeed, Jonathan

  Fox, Dr Liam

  Shephard, Rt Hon Mrs Gillian

  Gale, Roger

  Shepherd, Richard (Aldridge)

  Garnier, Edward

  Simpson, Keith (Mid-Norfolk)

  George, Andrew (St Ives)

  Smith, Sir Robert (W Ab'd'ns)

  Gibb, Nick

  Soames, Nicholas

  Gill, Christopher

  Spelman, Mrs Caroline

  Gillan, Mrs Cheryl

  Spicer, Sir Michael

  Gorman, Mrs Teresa

  Spring, Richard

  Gorrie, Donald

  Stanley, Rt Hon Sir John

  Gray, James

  Steen, Anthony

  Green, Damian

  Streeter, Gary

  Greenway, John

  Stunell, Andrew

  Grieve, Dominic

  Swayne, Desmond

  Hamilton, Rt Hon Sir Archie

  Syms, Robert

  Hammond, Philip

  Tapsell, Sir Peter

  Harvey, Nick

  Taylor, John M (Solihull)

  Hawkins, Nick

  Taylor, Sir Teddy

  Heath, David (Somerton & Frome)

  Temple-Morris, Peter

  Heathcoat-Amory, Rt Hon David

  Tredinnick, David

  Horam, John

  Trend, Michael

  Howard, Rt Hon Michael

  Tyler, Paul

  Howarth, Gerald (Aldershot)

  Tyrie, Andrew

  Hughes, Simon (Southwark N)

  Viggers, Peter

  Hunter, Andrew

  Wallace, James

  Jack, Rt Hon Michael

  Walter, Robert

  Jackson, Robert (Wantage)

  Wardle, Charles

  Jenkin, Bernard (N Essex)

  Waterson, Nigel

  Johnson Smith, Rt Hon Sir Geoffrey

  Webb, Professor Steve

  Wells, Bowen

  247

  Whitney, Sir Raymond

  Woodward, Shaun

  Whittingdale, John

  Yeo, Tim

  Widdecombe, Rt Hon Miss Ann

  Young, Rt Hon Sir George

  Willetts, David

  Tellers for the Noes:

  Willis, Phil

  Mr. Oliver Heald and

  Winterton, Nicholas (Macclesfield)

  Sir David Madel.

  Question accordingly agreed to.
  Bill read the Third time, and pased.

  CONSOLIDATION, &c., BILLS
  Ordered,
  That Mr. Tony Clarke, Mr. Patrick Hall, Mr. Robert Marshall-Andrews, Mr. James Plaskitt, Mr. Laurence Robertson, Mr. Adrian Sanders, Dr. George Turner, Mr. Andrew Tyrie and Mr. Brian White be members of the Select Committee appointed to join with a Committee of the Lords as the Joint Committee on Consolidation, &c., Bills.—[Mr. Betts.]

  DEREGULATION
  Ordered,
  That Mr. David Chaytor, Mr. Iain Coleman, Mr. Brian Cotter, Mr. John Cryer, Mr. Stephen Hesford, Mr. Edward Leigh, Mr. Ivan Lewis, Mr. David Lock, Mr. Stephen McCabe, Mr. Gordon Marsden, Mr. Piers Merchant, Mr. Denis Murphy, Mr. Peter L. Pike, Mr. William Ross, Miss Geraldine Smith, Mr. Richard Spring, Mr. Anthony Steen and Mr. Ian Stewart be members of the Deregulation Committee.—[Mr. Betts.]

A1 (Dualling)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]
10.15 pm
Mr. John Home Robertson: The debate—[Interruption.]
Mr. Deputy Speaker (Mr. Michael Lord): Order. Will Members leaving the Chamber do so quickly and quietly, please?
Mr. Home Robertson: Thank you, Mr. Deputy Speaker.
The debate is primarily about road safety on the A1, but, before speaking about that, I must mention the tragic deaths of two young children crossing the B 1348 from Seton Sands holiday centre on Saturday. That makes the point that road safety must be our overall concern in all aspects of transport planning. The accident was tragic, and there may well be a point that needs to be addressed on that spot, too.
It is extremely disappointing to have to come to the House tonight to repeat the case for dualling the remaining single carriageway sections of the A1 trunk road. The local case in East Lothian, the borders and Northumberland has been made conclusively on the fundamental grounds of safety and economic impact, and the national case for completing that missing link in the United Kingdom's strategic highway network is blindingly obvious.
I have been involved in the A1 Safelink campaign for nearly 10 years, and it was my understanding that the debate about whether to dual the A1 had been concluded in 1992, when Malcolm Rifkind and Lord James Douglas-Hamilton accepted the overwhelming weight of the argument and the unanimous pressure of public opinion on both sides of the border.
The debate had moved on to questions of funding and phasing, because the Government at that time and all other parties, both political and non-political, had accepted that the road had to be upgraded. So it is disappointing, to put it mildly, to run into unexpected problems with another Minister, this time from my own party.
The Government have announced a review of all major road schemes. Mysteriously, the Scottish Office has gone much further than both the Department of Environment, Transport and the Regions and the Welsh Office, by imposing a comprehensive 12-month moratorium which has stopped the next phase of dualling between Haddington and Dunbar, which should be going out to tender now, for construction next year.
That delay is very bad news, and it will almost certainly cost lives. What on earth is there to be reviewed? The A1 has been reviewed to a standstill, with reams of surveys and reports since 1989—and it all leads to the same inevitable conclusion. We have a severely congested and extremely dangerous single-carriageway bottleneck in the national dual-carriageway network, and the only solution is a phased dualling programme to complete the link between Haddington and Morpeth.
I had a meeting with my hon. Friend the Parliamentary Under-Secretary on 2 July, together with a delegation from East Lothian council and the hon. Member for

249
Roxburgh and Berwickshire (Mr. Kirkwood). My hon. Friend told us that the review was not a Treasury-driven exercise and that it was to be a genuine reassessment of transport priorities. Fair enough—the Labour Government were elected with a specific commitment to review a number of programmes. However, we have not stopped building hospitals just because we are reviewing the private finance initiative system and we have not imposed a moratorium on water and sewerage projects while we review the Scottish water quangos—of course not. I do not understand why there should be a moratorium on the roads programme.
The other territorial transport Departments are approaching their highways reviews according to sensible pragmatic criteria. When my right hon. Friend the Secretary of State for Wales announced the Welsh roads review in a written reply on 3 July, he said:
"The review will consider afresh all schemes currently in the Welsh roads programme with the exception of the A55 dualling across Anglesey. In that case, I have decided that the strategic importance of the improvement is so great that it must proceed without delay".—[Official Report, 3 July 1997; Vol. 297, c. 218.]
I fully accept the strategic importance of traffic to and from Ireland via Holyhead, but I put it to my hon. Friend the Under-Secretary that the strategic importance of traffic between Scotland and the east of England is just as great.
Mr. A. J. Beith: Will the hon. Gentleman give way?
Mr. Home Robertson: Very briefly.
Mr. Beith: I am grateful to the hon. Gentleman for joining me and a delegation to English Transport Ministers about the English section of the road. Does he agree that as the A1 is also an important European route, it is absurd that we have to toil to persuade Ministers even to recognise that dualling projects already in the pipeline should go ahead?
Mr. Home Robertson: I am grateful to the right hon. Member. I was about to move on to the way in which the review is being approached south of the border.
When the right hon. Member for Berwick-upon-Tweed (Mr. Beith), my hon. Friend the Member for Wansbeck (Mr. Murphy), the hon. Member for Roxburgh and Berwickshire and I met the Minister of Transport and the Minister for Roads in England last week, we were advised that the English review was split into two categories, with a comprehensive reappraisal for projects where there is any reasonable doubt, and an accelerated review, which was completed yesterday in very short order, for developments where a detailed review would be a waste of time and money.
I must put it to the Scottish Office again tonight that we could save a lot of aggravation and money, and probably several lives, too, if we were to adopt a similar accelerated review arrangement for projects such as the Haddington-Dunbar section of the A1.
At this stage, I should give a brief summary of the case for the phased completion of the A1 east coast highway. From 1978 to 1983, the whole of the Scottish section of the A1 was in my constituency, and I became increasingly worried about the toll of accidents and the increasing volume of traffic on a road that still followed the line of
250
the ancient Great North road. There was much correspondence with the Scottish Office about specific accident black spots.
By 1988, it was painfully obvious that we needed a co-ordinated approach to the problem from both sides of the border. We are not talking just about a local road south from Edinburgh to the borders and a local road north to Berwick-upon-Tweed from Newcastle upon Tyne. We are talking about one of the two major trunk roads linking Scotland and England.
I convened a meeting of the four hon. Members concerned, the seven local authorities and a wide range of other interests, which led to a detailed technical report produced by the three local highways authorities in 1989. That report was submitted to the Scottish Office and the then Department of Transport, and, after some fairly vigorous debates, including a massive public petition and powerful backing from the Edinburgh Evening News and the Newcastle Journal, the then Government accepted the case for completing the A1 link.
The Scottish Office has made a very good start by upgrading the road between Tranent and Haddington, and by completing all the preliminary procedures for the next section to Dunbar ready for work to start next year. Indeed, the first bridge has already been built, but today it looks depressingly like a bridge to nowhere. I hope that it does not remain like that for much longer.
I put on record my personal thanks to the Scottish Office staff and, perhaps surprisingly, to Lord James Douglas-Hamilton, the former Minister with responsibility for Scottish roads, for the excellent work that has been done, and for the two small sections that are under construction further south in my constituency and that of the hon. Member for Roxburgh and Berwickshire, who I hope will be able to take part in the debate briefly. Lord James took a long time to grasp the case for the A1—that was so on other issues as well—but when he did accept the case, he certainly got on with the job in style.
Meanwhile, the volume of traffic is still increasing and the road will get even more congested as the economy improves and trade between Scotland and other parts of the European Union increases because the A1 is the main Euro-route to the east coast ports. Perhaps because of that, there is an abnormally high proportion of commercial traffic on the road.
Mr. Alasdair Morgan: Will the hon. Gentleman give way?
Mr. Home Robertson: Very briefly, please.
Mr. Morgan: I totally accept the case for the A1 dualling, both on safety and strategic grounds. Does the hon. Gentleman agree that an equal case can be made for the A75, which is on a strategic Euro-route from Northern Ireland to western Europe? We are waiting not only for dualling, but for the drawing up of a route action plan and for the action that would follow from that plan.
Mr. Home Robertson: I appreciate the hon. Gentleman's anxiety about the road in his part of the world. He must make his own case in his own way. The point is made that we need a different type of review of priorities for roads in Scotland.

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I was referring to the proportion of heavy goods vehicles on the A1. The abnormally high proportion of commercial traffic on that road tends to accumulate into convoys; and not just little convoys. These days, convoys of 60 to 70 vehicles are not uncommon on the single carriageway section of the A1. The situation gets far worse with even slower traffic such as caravans in summer time, exceptional loads, farm vehicles and traffic diverting from the A68 and other routes in severe winter weather.
It does not take much to bring the whole road to a standstill: that happens quite frequently nowadays. When it is at a standstill or very slow-moving, reckless attempts are made to overtake. All too often, that leads to violent, head-on collisions. There were 828 casualties, including 42 deaths, on the single carriageway sections of the A1 on both sides of the border between 1992 and 1995.
We do not need a review to analyse the situation: it is a severely congested bottleneck in the national highway system which will remain a running sore until it is dualled. There is no other way of resolving the problem, because there is nowhere else for the traffic to go. I should love to see more freight carried by rail, but it would be barmy to suggest that lorries should tranship their loads on to railway wagons between Prestonpans and Morpeth: it is just not feasible.
Speaking of lorry traffic, the Minister may know that I was a volunteer driver on Edinburgh Direct Aid convoys to Bosnia during the war there, and I found it rather embarrassing that one can drive from south of Ljubljana in Slovenia to Morpeth in Northumberland on dual carriageway roads, but Europe seems to come to an end when the road degenerates into an overloaded country track near the Scottish border. Foreign visitors must think that they are approaching a third-world country when they get to north Northumberland.
The economic case and the road safety case for completing the A1 are conclusive and overwhelming. The Government have inherited a phased scheme for upgrading the road, which specifically includes a fully prepared project for the section between Haddington and Dunbar, with £40 million in the budget to pay for it. We now face the threat of a delay of at least 12 months while the Scottish Office goes through the motions of reviewing the project again. That is absolutely dire news for everybody who has to use the road, and in particular for my constituents in the Dunbar area
There is worse to come, because a massive new landfill site will start operating this autumn just east of Dunbar. The Oxwellmains site will take all Edinburgh's domestic rubbish. Happily, most of that material will be transported by rail, but the Minister confirmed in a written reply on 17 July that the dump will generate 400 more lorry movements each week, which is 800 each-way journeys, on the single carriageway between Haddington and Dunbar, including the long, slow haul up Pencraig Hill.
East Lothian Council reluctantly gave planning consent for that road traffic on the understanding that the road was about to be dualled, and the Secretary of State has just amended the Lothian structure plan to confirm that dualling "is now in hand". Well, apparently it will not be in hand for at least another year, and I put it to my hon. Friend the Under-Secretary that he is adding insult to
252
injury for my constituents and for many other people by stopping the upgrading of the road and sending convoys of trucks with rubbish from his constituency in Edinburgh to aggravate the congestion on the A1 in East Lothian. If the road is not to be dualled in short order, perhaps consent for road haulage to that dump should be suspended until the road is dualled.
Obviously the principal issues are traffic management and road safety, but there is also the small matter of keeping promises. I have been fighting for a safe A1 road for years, and I am not going to stop now that we have a Labour Government. I told my constituents before the election that the phased dualling of the A1 would not be delayed by Labour's roads review. When I made that statement, I was not speaking off the cuff; I was confident that I had authority from the relevant members of the shadow Cabinet to say that the A1 was one of a handful of roads that did not need to be reviewed again.
My right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), who was then shadow Secretary of State for Transport, wrote on 1 August 1994:
"I have made it clear that the moratorium should not stop progress on some much needed schemes. Amongst those falling into this category I have specified … dualling the A1 between Morpeth and the border (Scottish roads being outside my brief). You can rest assured of my support—I have already explained this to George who shares my view".
That was a reference to my right hon. Friend the Member for Hamilton, South (Mr. Robertson), then shadow Secretary of State for Scotland, who wrote to me on 29 August 1994 to confirm that,
"as far as I am concerned from Berwick-on-Tweed northwards dualling is a major priority on the grounds of communication and safety".
My right hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), then shadow Secretary of State for the Environment, wrote in similar terms in 1994, and, as my right hon. Friend the Member for Glasgow, Anniesland (Mr. Dewar), now Secretary of State for Scotland, had written to me at length as long ago as September 1991 to state his support for the completion of the dualling of the A1, I felt that I was on safe ground.
I repeat the case for the A1 and to remind my hon. Friend the Minister that clear assurances were given before the general election. I have already had a meeting with him in the Department, as well as private discussions, and I very much regret having to raise the matter in this way. This is one of those cases in which duty to constituents has to take precedence over party loyalty.
I make a final appeal to the Minister to conduct the Scottish roads review according to the same criteria as those applied in England and Wales. By all means let us have a full review of roads schemes where there is any doubt or controversy, but in cases such as the next phase of the A1, where there is neither doubt nor controversy, he should allow an accelerated review to avoid an expensive and disruptive delay which would certainly cost lives.
10.31 pm
Mr. Archy Kirkwood: I am grateful to the hon. Member for East Lothian (Mr. Home Robertson) and the Minister for allowing me two minutes to speak in the debate.

253
I pay sincere tribute to my hon. Friend and constituent the Member for East Lothian, who took the lead in co-ordinating the Safelink campaign, of which I have been aware for 10 years. He deserves the credit for the considerable impact of that campaign, which was the single most important factor that led the Government in 1992 to accept the principle of dualling the road from Edinburgh to Newcastle in due course. He is therefore right to feel disappointed. He is also courageous, in that he has not spared the Labour Government's blushes, and has put his constituents' interests first tonight.
The problem is not local to East Lothian, but international. It has impact south of the border and in Berwickshire. The A1 is a European route, and for that reason, if for no other, it deserves special treatment, as is given to the A55 in the Wales review and to some English roads in the accelerated review. The hon. Member has made a powerful case over 10 years. I shall be disappointed if he does not get better consideration from the Minister tonight than he has had from Ministers since the general election. He deserves better, as do people in the Borders and south of the border.
10.33 pm
The Parliamentary Under-Secretary of State for Scotland (Mr. Malcolm Chisholm): I join the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) in acknowledging the zeal and tenacity of my hon. Friend the Member for East Lothian (Mr. Home Robertson) in his continued efforts to secure the upgrading of the A1. I welcome the opportunity to set out what has been done and to reiterate the Government's commitment and approach to the development of an integrated transport system in Scotland.
My hon. Friend's efforts have been remarkably successful. Since 1991, about £55 million has been spent on five new construction projects on the A1, the latest being the dualling of the Tranent to Haddington section, which was opened to traffic in November last year. Two further dualling schemes are under construction: Oswald Dean to Innerwick, and Lemington to Howburn, at a combined cost of more than £7 million.
The movements of lorries carrying waste to which my hon. Friend referred will be allowed only when the road improvements associated with the former scheme have been carried out. The vast majority of movements of waste will be, and indeed ought to be, by rail, and any changes to the consent are purely a matter for East Lothian council.
A route accident plan has been carried out over the past few years, costing a total of £180,000 to date. The plan has provided a number of engineering measures, such as junction improvements, signing and lining and the introduction of speed cameras. All those measures have resulted in a dramatic reduction in the accident rate on the route, particularly within the Scottish borders area. There is, of course, no room for complacency, but accident statistics show that the average accident rate on the A1 is now half the rate for trunk roads.
Further schemes are being prepared. Four minor schemes, for all of which draft statutory orders have been published, will continue. A major scheme between Haddington and Dunbar—to which my hon. Friend referred—has been the subject of a public local inquiry, whose report is awaited. Further procedural work on the
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scheme will, in common with other major schemes, be suspended to await the outcome of the review of the trunk road programme that I announced on 19 June.
The review is an important part of our approach to the development of an integrated transport system in Scotland. The trunk road programme inherited from the previous Government was not soundly based, and was unaffordable given the significant reductions made by them to roads expenditure over recent years.
Since announcing the Government's plans to conduct a review of priorities on the trunk road network, I have had the pleasure of hearing views, and learning about priorities, in relation to potential schemes in constituencies across Scotland. Only this afternoon, I met my hon. Friend the Member for Kilmarnock and Loudoun (Mr. Browne) to discuss the A77/M77. I have also had meetings with others to discuss a number of schemes, including schemes involving the A830, the A96 and the A75. In fact, I think I could say that I have received more representations on roads than on any other subject since I became a Minister, although I deal with local government, housing and many other controversial matters.
My hon. Friend mentioned the decision of my right hon. Friend the Secretary of State for Wales in relation to the A55. That decision clearly reflects his judgment in regard to all the factors that were relevant to the case, but let me establish what seems to me to be a simple fact and a fundamental difference. In Scotland, no one road stands out as everyone's No. 1 priority. It is different in Wales.
Mr. Alasdair Morgan: I doubt whether the people in south and central Wales would see the A55 as a strategic priority.
Does the Minister agree that the dualling of the A55 has a severe effect on the traffic through Stranraer? Freight hauliers operating through Stranraer have already admitted that they are losing traffic to the north Wales route.
Mr. Chisholm: I do not want to be dragged into a debate about Welsh roads. I have quite enough to be going on with in regard to Scottish roads.
I have noted all the views that have been presented to me, but it is clear that the continued pressure for progress on all those routes—set against a background of the mismatch between the expectations that the previous Government encouraged, and the public expenditure plans that we inherited from them—underlines the need for a review of priorities.
My hon. Friend rightly said that it was not Treasury-driven, but the simple fact is that the previous Government's sums did not add up, and we must replace their make-believe road programme with a real one. Before any scheme is implemented in the future, it will have to demonstrate its viability against the criteria of accessibility, safety, economy, environmental impact and integration with other transport plans. It must be recognised that the previous policies of predicting traffic growth and providing roads to meet such predictions are, in the long term, financially, socially and environmentally unsustainable.
Mr. Home Robertson: Will my hon. Friend give way?
Mr. Chisholm: I will take some interventions later, but, because there were two speeches, I should like to make some progress—I have a great deal of material to cover.

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At an appropriate stage of the review, we will seek the views of a wide range of bodies including the Convention of Scottish Local Authorities, local authorities, the Confederation of British Industry and other transport and environmental interest groups on revised criteria for setting priorities. We shall aim to reach decisions on priorities as soon as possible.
Until then, work will continue on a number of major schemes that are already under construction and on the A75 the Glen and the A828 Creagan bridge schemes, which are at such an advanced stage of preparation that work was due to start on them this financial year. Even the scheme to complete the M8 motorway, which was scheduled for this year's programme, is being reviewed, although the advanced stage of tendering requires an early decision on whether it should proceed on that timetable or be deferred for consideration as part of the main review process.
No further statutory procedural work will be carried out on any of the remaining major schemes in the trunk roads programme inherited by this Government. The programme of minor schemes that deliver cost-effective safety improvements and the trunk road maintenance programme will not be affected by the review.
Mr. Home Robertson: My hon. Friend mentioned the M74: the A74 is already a dual carriageway, so to upgrade that to motorway standard is to ice the cake. My specific question is, what has happened to the money that was in the budget for the next phase of dualling for the A1? We understood that money was allocated and committed for the next phase of work between Dunbar and Haddington—obviously not the full £40 million, but the first bit of it at least. What has happened to that money? What is to be done with it during the 12-month delay?
Mr. Chisholm: Clearly, a lot of work needs to be done on the roads programme. This year, for example, there were massive cuts in the work for minor roads improvements, and we could easily spend all the money on that—I am not saying that we will, because final decisions have yet to be made about next year's budget. The money will be in the transport budget and I am sure my hon. Friend will agree that there is much work that can be done under that budget.
The dualling of the Haddington to Dunbar scheme will be examined within the context of the review. I know that my hon. Friend would like the Government to make an exception, and our reasons for not doing so do not imply any discrimination or prejudice against the scheme. The Government have a clear obligation to ensure that the review treats all roads in the same way. To make exceptions would seriously prejudice the conduct, validity
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and outcome of the review. We have departed from that approach in only one case—the long-term plans for the Kincardine bridge—because of the special nature of the operational concerns that arise.
My right hon. Friend the Secretary of State has given an assurance that preparatory work within the Scottish Office will continue on the Haddington to Dunbar scheme, with the aim of allowing it to proceed without unnecessary delay should it be identified by the review as a priority. That work will cover issues that may arise as a result of the public local inquiry. In programming terms, there will inevitably be a delay in publishing the decision letter resulting from that inquiry and the confirming of the draft orders should that be the approved way forward. The preparation work within the Scottish Office will, however, aim to minimise that delay should the outcome of the review favour the early implementation of the scheme.
I can confirm the indication given to my hon. Friend that we consider that it remains a possibility that work could begin on the scheme in the next financial year, if it is confirmed as a top priority in the review.
As for finance, I have made it clear that the inherited roads programme was simply unsustainable. It would therefore be quite wrong to make assumptions regarding allocation of funds to major projects in coming years, or to anticipate the outcome of future public expenditure decisions and priorities. I am sure that my hon. Friend fully supports the Government's initiative in developing a coherent, affordable and environmentally sustainable roads strategy for Scotland, which will contribute to a properly integrated transport policy.
I stress that the review is not founded on an automatic assumption about cutting public expenditure on roads. For many people, especially in rural areas, the car is, and will continue to be, an essential form of transport. It is vital, however, that an integrated transport strategy is developed to offer the public real choices and protect the environment. The Government intend that the review will produce a future programme that is environmentally and financially sustainable, and integrated with our wider policies to reduce traffic growth and manage transport and traffic more effectively. Clear criteria for setting priorities for long-term road planning will result, and the application of those criteria will enable us to plan a roads programme based on an up-to-date assessment of Scotland's needs.
I hope that my hon. Friend will recognise that the fair and correct course of action is to review the A1 within that context. I am sure that he will continue to remind us of the serious claims of the A1, of which I am also well aware.
Question put and agreed to.
Adjourned accordingly at fifteen minutes to Eleven o'clock.