Commons Sitting of 17 April 2000

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
Oral Answers to Questions
  DEFENCE
  The Secretary of State was asked—
  DEFENCE

    Meteorological Office
    Jane Griffiths: If he will make a statement on the future of the Meteorological Office. [117879]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): As a trading fund combining the best of the public and private sectors, the Meteorological Office will continue to build on its success as a world-leading meteorological service. Its aim is to enable individuals, society and enterprises everywhere to make the most of the weather and the natural environment.
    Jane Griffiths: I thank my hon. Friend for that reply. When Ministers consider the future location of the Met Office, which I understand will have to relocate from its current site, could they consider the economy of the entire country and the fact that the south-east is immensely congested? That makes it difficult to locate such an office in the Reading area as has been suggested.
    Dr. Moonie: To move forward successfully, the Met Office must harness the benefits that go with a modern building and its associated infrastructure. Redevelopment or refurbishment of the main Bracknell site would not be cost-effective. No decisions on the final location have yet been taken, but a move to Shinfield park, near Reading, would have attractions in developing the Met Office's long-standing relations with the European Centre for Medium-Range Weather Forecasts. Other locations that meet the Met Office's future strategic and business needs will be considered. An application for outline planning approval for Shinfield park will be submitted to the local planning authority at the end of May 2000, and that will address a range of environmental issues, including traffic management.
    Mr. Andrew MacKay: The Minister will be aware that the Met Office is based in my constituency, not in Reading, East. Does he accept that the people of Bracknell greatly appreciate having the Met Office in Bracknell, and that the town has had a long association
    678
    with it? The people of Bracknell are appalled to learn from the hon. Member for Reading, East (Jane Griffiths)—this morning, on local radio and now in the House—that they should all lose their jobs and that the office should relocate to Liverpool. Is that official Labour party policy?
    Dr. Moonie: As I said in my initial answer, our current intention is to consider the Shinfield park site as the office's preferred option. Eighty per cent. of the Met Office's staff are mobile grades. Although most of them would be expected to relocate to the new site, it is likely that, if it were at Shinfield park, most would commute.
    Mr. Robert Key: The Met Office's latest annual report states:
    relationships with the Defence Evaluation and Research Agency are key to future service developments.
    Can the Minister say whether the remote sensing branch and the meterological research flight, which are currently at Farnborough, will find themselves partners of core DERA or privatised new DERA under the new arrangements sneaked out today in a written parliamentary answer to a compliant Labour Member, who is not even in the Chamber for Defence Questions?
    Dr. Moonie: The hon. Gentleman will be well aware that that matter has already been considered in the consultation document.

    Aircraft Carriers
    Ms Linda Perham: What progress has been made with plans to procure replacements for the current Invincible class of aircraft carriers. [117881]
    Mrs. Linda Gilroy: What progress has been made in the Government's plans to procure replacements for the Invincible class of aircraft carriers. [117889]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): Competitive contracts, each worth about £30 million, for the future aircraft carrier assessment phase were awarded, on 23 November 1999, to BAE Systems and Thomson-CSF Naval Combat Systems. The assessment phase will investigate options for carrier design and, by 2003, will deliver proposals for the manufacture of the two vessels. The carriers, which will be built in the United Kingdom at a likely cost of some £2 billion, are scheduled to enter service in 2012 and 2015 respectively.
    Ms Perham: I thank the Secretary of State for that answer and welcome his assurance that the aircraft carriers will be built in the United Kingdom. Does he agree that that is excellent news not only for the shipbuilding industry, but for the Royal Navy, with which I am very proud to be on secondment this year under the armed forces parliamentary scheme? Does he agree that the two design contracts give the lie to Opposition Front Benchers who continue to insist that the carriers will never be built?
    Mr. Hoon: I am grateful to my hon. Friend for her observations, and I can certainly confirm that the carriers

    679
    will be built in the United Kingdom, at a cost currently estimated at £2 billion. That should demonstrate to Opposition Members that the Government have a consistent and determined approach to ensuring that the Royal Navy has the equipment that it requires not only for today, but for the long-term future.
    Mrs. Gilroy: I, too, thank my right hon. Friend for that response, which will be very welcome news for my constituents in Plymouth, Sutton. When does he expect the Royal Navy to start considering basing options for the new carriers?
    Mr. Hoon: I would be delighted to help my hon. Friend in her determined efforts to secure re-election at the general election, whenever that may come, but, unfortunately, I am not in a position to do that. However, in response to her specific question, as soon as the carriers are built, we shall be in a position to determine where they should be based.
    Mr. Julian Brazier: Will the Secretary of State confirm that the aircraft of choice to be the carriers' main armament is the American joint strike fighter, into which millions of pounds of British money have already gone? Would he like to tell the House how the prospects for developing the joint strike fighter for the carrier programme will be affected by the likely privatisation of Boscombe Down as part of DERA?
    Mr. Hoon: The joint strike fighter is certainly a strong candidate for the future airborne carrier system, but the Government will also consider various other options. It is important in this procurement that we consider at the same time both the type of aircraft carrier that the country will require and the nature of the aircraft that will fly from it. Too often, we have considered those two issues separately. That has not been a sensible way of resolving our requirements for aircraft carriers or aircraft.
    Mr. Menzies Campbell: Does the Secretary of State agree that if we are to be confident about building the new carriers, we must be satisfied that there will be adequate shipbuilding capacity in the United Kingdom? In view of the unholy mess that has been caused on the Clyde with the roll on/roll off ferries, what confidence can the House and the country have that there will still be adequate shipbuilding capacity to allow us to build the carriers, which are fundamental to the expeditionary strategy embraced in the strategic defence review?
    Mr. Hoon: A number of yards throughout the country have the potential to participate in the construction of the carriers, although which yard is awarded the eventual contracts will depend in large part on the nature of the final design that is selected. When I first arrived in the House, I was always impressed by the right hon. and learned Gentleman's determination to approach issues fairly and reasonably. I regret that he appears to have become a victim of the press release tendency. If he had given a few moments' thought to some of his recent comments on the legal implications of the order in
    680
    Glasgow and applied his fine legal intellect to the problem, he would not have produced such half-baked material lately.
    Mr. Frank Field: I welcome my right hon. Friend's statement. Does he accept that, while there has recently been an increase of 2.5 million jobs in the economy as a whole, some regions, particularly those dependent on older manufacturing industries, have a huge jobs deficit? Does he agree that it would be in the best long-term interests of taxpayers for the Government, when they think about placing the orders, to pay some attention to reviving the economy in certain areas?
    Mr. Hoon: I agree with my right hon. Friend to the extent that, under World Trade Organisation and European Union rules, we can direct where the work on our warship programme should be completed. However, as he will know, for purely commercial contracts, we are not free to direct where work should be undertaken.
    Rev. Martin Smyth: I appreciate the difficulties of British shipbuilding. It will be some time before the ships are ordered. Can the Secretary of State give an assurance that we will have the capacity? Will Harland and Wolff be involved? Has the shipyard responded to possible orders from the Ministry of Defence?
    Mr. Hoon: I said earlier that there were a number of shipyards in the United Kingdom capable of constructing the carriers. Harland and Wolff in Belfast is certainly one of them.
    Mr. Quentin Davies: The Secretary of State keeps saying that there are a number of shipyards in the country capable of building major naval vessels. How many shipyards are there going to be in this country once he has let all six roll on/roll off ferry contracts to foreign yards? Does he believe that metal bashing is no longer a national asset and simply not care?
    Mr. Hoon: Before the hon. Gentleman bursts a blood vessel, he should bear in mind the fact that in January 1997, the then Conservative Government specified a requirement for two ships in an advertisement in the Official Journal of the European Community, stating that those ships were of a commercial character and would be subject to the European Union rules on public procurement. They also told potential contractors that they would decide the matter according to value for money, having regard to price, quality and delivery. Rather like the right hon. and learned Member for North-East Fife (Mr. Campbell), the hon. Gentleman should check his facts before issuing tendentious press releases.

    RAF (Kosovo)
    Mr. David Kidney: What assessment he has made of the RAF's performance during the Kosovo campaign. [117882]
    The Minister for the Armed Forces (Mr. John Spellar): The Royal Air Force made a highly effective and widely respected contribution to the Kosovo campaign, helping NATO to achieve its objectives.

    681
    Lessons are of course being learned, and they will be highlighted in a report that we intend to publish next month.
    Mr. Kidney: Is my hon. Friend aware that this year's annual presentation by the RAF to Members of both Houses of Parliament was exceptionally successful? One of the reasons was the vivid report of the air campaign over Kosovo, informed by video footage. Some of the audience may have been fascinated by the accuracy of the targeting of RAF weapons, but my heart was in my mouth listening to the cool and professional voices of the pilots and navigators describing the ground-to-air missiles coming towards them and the life-saving evasive action that they had to take. Bearing that in mind, will my hon. Friend assure the House that, when the review has considered the needs of the brave members of the RAF for improved protection of their lives when they carry out dangerous operations on our behalf, any such needs will be met?
    Mr. Spellar: Yes, I join my hon. Friend in congratulating the RAF presentation team. I forbear drawing any comparison between that and the equally good presentation from the Royal Navy. The House has been given a very good indication of the enormous quality of the young men and women who serve us.
    On the substance of the presentation and the work undertaken in flight, I was equally impressed. We are considering how to upgrade defensive mechanisms. That is why we are upgrading the Tornados from GR1 to GR4. Of course, the front line and the sharp end are important, but so is the logistics tail that supports those young men and women, not least at the base and depot in Stafford.
    Mr. Nicholas Soames: What steps are being taken to overcome the obvious shortcomings of what was in any event a formidably fought campaign by the Royal Air Force, including the inability to conduct precision bombing in bad weather? Is the Minister satisfied with secure communications between aircraft?
    Mr. Spellar: We are certainly examining how to extend global positioning capabilities for bombing. Of course, laser designation has problems in cloud and we are considering ways in which that could be improved. The hon. Gentleman is right to draw attention to communications, but he should also draw attention to communications between our Air Force and other allied air forces and the ways in which we could enhance it. Those are all expensive items. We have to get the balance right. That is what the report on lessons learned will address, and we look forward to discussing it after its publication next month.
    Mr. Tom Cox: What action is the Ministry of Defence taking on the location and destruction of unexploded bombs in Kosovo, especially cluster bombs?
    Mr. Spellar: Allied forces have made a considerable effort to remove unexploded ordnance, including cluster
    682
    bombs. We had the very unfortunate experience of two members of the Gurkha Regiment dying in that effort. The first priority was to try to ensure that schools could open in Kosovo. We are also working with other agencies to undertake that effort on a more sustained basis, as we do in many areas throughout the world.
    Mr. Iain Duncan Smith: The Minister talks about capability, but does not much of what he said hinge on the capability of the Defence Evaluation and Research Agency? That brings us to what the Government plan to do about DERA. Is not the reality that we have learned today that, if the Government are about to spend £100 million on what they call their heartland vote, that is worth a statement, but if they are about to dispose of a massively important asset such as DERA, that is worthy of no statement whatever?
    The Minister must answer two questions about DERA. First, is not the reality that, in accordance with his earlier answers, the Ministry of Defence will now lose much of the impartial advice that it would have received through the overlap with private industry in assessing the RAF's capability? Secondly, in their attempt to provide a golden blocking share to ensure that DERA will not face problems with its future prospects, the Government are likely to run head on into the EU, which has already expressed the opinion that such golden shares are not acceptable.
    Mr. Spellar: I knew that the hon. Gentleman could not fail to get the EU in somewhere. This is a less than appropriate question on which to raise his point, but I accept that if the hon. Member for Runnymede and Weybridge (Mr. Hammond) had turned up to muster, the hon. Gentleman could have come in at a more appropriate point.
    The announcement is about a consultative document which will, therefore, be available for full public consultation. A statement will be made after that consultation when full and proper decisions have been taken. The hon. Gentleman is right, however, to draw attention to the imperative need for the Ministry of Defence to receive impartial advice from a proper, appropriate Government agency. That is why parts of the agency will be retained within full public control to provide that advice, while other elements will be able to take advantage of commercial expertise and a necessary injection of private capital.
    Mr. Duncan Smith: The Minister says that we should contrive some other method to ask questions, but do not the Government have a responsibility to bring an important measure such as their proposals for DERA to the House for discussion and questioning? He mentioned consultation and perhaps he can now tell us—there is no word on it in the consultation document—what the US Government have said about the issue, given their unique relationship with us over DERA. Have not the US Government made it clear that nothing should proceed, especially in the case of Boscombe Down, that risks jeopardising that relationship, until they have had another chance to discuss that arrangement? In failing to mention

    683
    the US Government, do not the Government show more and more that they know the price of everything and the value of nothing?
    Mr. Spellar: The old jokes are the best.
    We value our strategic relationship with the US through NATO and the technical relationship through DERA with the US and with several other laboratories around the world. Of course, the US is far and away the most significant of those, and that is why Ministers and officials have been in extensive discussion with the Administration in the US regarding the proposals on DERA. We wish to value, maintain and enhance those relationships between our Government laboratories and Government scientific facilities in the US. That is why we have evolved the proposals so that they take account of concerns that were rightly and properly expressed to us. Now those proposals will go out for public consultation. That is the right approach, and when we come to make decisions, we will have a full statement on what the Government propose. We have now made the initial proposals and we look forward to receiving representations from all areas, including from the Opposition.

    RAF Museum, Hendon
    Mr. Andrew Dismore: If he will make a statement about the future development plans for the RAF museum, Hendon. [117884]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): The RAF museum trustees' plans for development at Hendon are dependent on an imminent stage 2 bid for heritage lottery funds. The Ministry of Defence has provided funds in support of that bid and we have given a commitment to provide further funds should the bid be successful.
    Mr. Dismore: I am grateful to my hon. Friend for that assurance of support. However, the scheme is also dependent on the plans for the former RAF East camp site, which are presently with the Department of the Environment, Transport and the Regions. Will he use his best endeavours to ensure that DETR gets on with making a decision on that planning issue, because without it the full scheme cannot go ahead?
    Dr. Moonie: My Department is committed to the success of the RAF museum and to its development plans. The question of the related East camp planning inquiry is a matter for my right hon. Friend the Secretary of State for the Environment, Transport and the Regions. While I cannot comment on a planning inquiry, I am sure that my right hon. Friend will have noted my hon. Friend's remarks.
    Sir Geoffrey Johnson Smith.: Has the Minister any plans to donate funds to enable more Tornados to be stored at the RAF museum? I know that there is a shortage of pilots, and that might help.
    Dr. Moonie: That was a very helpful question. I have not received any inquiries about the possibility of putting more Tornados there, but I am sure that any such inquiry would be given serious consideration.

    Weapons of Mass Destruction
    Miss Julie Kirkbride.: What recent reports he has received concerning the development of weapons of mass destruction by (a) Iraq and (b) Yugoslavia; and if he will make a statement. [117885]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): Since inspectors from the United Nations Special Commission were expelled from Iraq in December 1998, we have continued to monitor the situation there. We remain concerned that the development of weapons of mass destruction programmes is taking place. We therefore strongly support the early deployment of the United Nation's monitoring verification and inspection commission in Iraq.
    The Government receive declarations and reports about a number of other countries, including the former republic of Yugoslavia, concerning weapons of mass destruction, and continue to monitor developments.
    Miss Kirkbride: I am sure that the House will agree that what the Minister has just described is extremely worrying for the prospects of nuclear proliferation. What is the Department's view of the anti-ballistic missile system being developed by the United States? If the Department considers that to be a good idea, why is he not working with the United States to provide that defence umbrella for the United Kingdom?
    Mr. Hoon: We are in regular dialogue with the United States about that but, unless and until the United States decides to employ the system, there is little that I can say to the hon. Lady to resolve her concerns. There is not much point in trying to anticipate the United States' decision on that matter.
    Mr. Iain Duncan Smith.: Is not the Secretary of State avoiding the question? He must have a view, one way or the other. For example, we discovered recently that Yugoslavia has 48 kg of enriched uranium. We also know, from an institute in the United States, that Iraq needs only enriched uranium to make a nuclear device. The two countries have started talking to each other about just that. Is not it time for the Government to get off the fence and take a view, for or against the proposal? What are the Government saying to the US Government?
    Mr. Hoon: I have listened to the hon. Gentleman carefully on this question, and he has an interesting approach to international negotiations. He appears to agree to requests before they are made. He rolls over before he is asked to do so: in those circumstances, it is difficult to see how he could defend Britain's best interests. In my experience, even performing poodles in circuses usually require an order before they do anything.

    New Zealand
    Mr. Andrew Mackinlay.: What co-operation there is between his Department and the Defence Ministry in New Zealand on matters of common interest. [117886]
    The Minister for the Armed Forces (Mr. John Spellar): Our defence relations with New Zealand remain very good, and are based on strong and traditional links between the armed forces of our two countries. Our main ties are through the five power defence arrangements, but British and New Zealand forces have also worked together in UN operations, including in Iraq and Bosnia, and in East Timor and the Gulf.
    These strong ties are reinforced by a number of exchange programmes between the UK and New Zealand, the provision of training for members of the New Zealand armed forces, visits by Royal Navy ships, and, where the opportunity arises, exercises—both bilaterally and as part of FPDA. The naval task group deployment to the far east this year will include an FPDA exercise off Malaysia which will involve elements of the New Zealand navy and air force. It is planned that elements of the task group will visit Wellington.
    Mr. Mackinlay: Has the Minister noticed reports that the Prime Minister and Defence Minister of New Zealand's very radical Labour Government are proposing to announce formally on ANZAC day posthumous pardons for the New Zealand soldiers executed in world war one? I wholly applaud that action, but it is unilateral. Should not the British Government revisit this matter, given that, in strict legal and constitutional terms, the power to pardon all soldiers in the British Empire forces still resides in London? Would not it be silly and grossly unfair to the other 300-odd executed soldiers if the New Zealanders were to be pardoned, and they were not? Will my hon. Friend have a chat with the other Commonwealth countries involved, and revisit with an open mind this important and popular issue?
    Mr. Spellar: My hon. Friend rightly draws attention to an issue that is very strongly felt, not just by himself but by others Members of the House and many others in the country. He will be aware that my predecessor, my right hon. Friend the Member for Hamilton, North and Bellshill (Dr. Reid), made an effective and moving statement to the House on 24 July 1998. He went through the very difficult arguments about the first world war executions. Subsequent to that announcement, a number of decisions have been made locally about adding to war memorials the names of some of those who were executed. There are differing views on that, but I think that it has been very well handled by all those concerned.
    Having reread the statement by my predecessor, I find it immensely persuasive. I think, therefore, that we should stick to that policy, unless there are overwhelming reasons for not doing so.
    Mr. Michael Fabricant.: On the Minister's first answer, does he agree that we should pay tribute to the New Zealand defence forces, particularly for their deployment in East Timor which, I believe, was their biggest since our involvement in Korea? Is he aware that New Zealand forces worked alongside the Royal Marines,
    686
    Canadian forces and Australian forces? Does he agree that when English-speaking nations get together, their common interest and heritage, as well as a common language, mean that they work well for the future safety of all the world?
    Mr. Spellar: I pay considerable tribute to those who were involved in many combined operations, not only with the countries mentioned by the hon. Gentleman but with the countries of NATO. He will be aware that English is also the operational language of NATO.

    Falklands
    Mr. Gordon Prentice.: If he will estimate the cost of garrisoning the Falklands (a) since the restoration of democratic Government in Argentina and (b) for the last 12 months for which figures are available. [117887]
    The Minister for the Armed Forces (Mr. John Spellar): Our best estimate is that some £2,263 million was spent on the Falklands garrison between 1983 and 1999. That includes the cost of constructing the Mount Pleasant airfield. In 1998–99, expenditure on the Falklands garrison came to £69 million.
    Mr. Prentice: Two billion pounds is a huge amount of money, and so is £69 million a year. Can that be justified, given the restoration of democratic government in Argentina? In these days of overstretch, is there a greater perceived threat to the Falklands than there is, for example, to Gibraltar from Spain, which also has a territorial claim'?
    Mr. Spellar: We very much welcome the restoration and development of democracy in Argentina. Indeed, my right hon. Friend the Secretary of State recently visited Argentina, and had very constructive discussions with Ministers there. He also visited the Falkland Islands and, again, had very useful discussions there, reinforcing our policy that the Falkland Islands are British and that sovereignty over the islands is not for negotiation. Accordingly, it is right that we should maintain a military presence as long as Argentina claims sovereignty over the islands.
    Mr. Owen Paterson.: Can the Minister guarantee that the air bridge will be maintained at its current frequency when discussing the cost of garrisoning the Falklands?
    Mr. Spellar: We always look at sustainability, and how to undertake that most cost-effectively. The mechanism by which we do that is to consider and discuss it with the armed forces. The key thing is to ensure that we maintain an effective and viable presence and, indeed, that that is quite clear to the Argentines. We learned from a previous Government, who dropped their guard and perhaps gave the wrong signals to the Argentines.
    Mr. Barry Jones.: Does my hon. Friend agree that garrison costs could be lower if he had available to him a heavy lift aircraft such as the A400M?

    687
    Can he say when there will be a decision? Is it not best to go for the short-term Antonov solution rather than the ruinously expensive C-17?
    Mr. Spellar: I think we shall have to institute a competition on how my right hon. Friend will manage to raise the subject of the A400M in any possible Defence questions. Once again, I congratulate him on his ingenuity. As he is aware, Ministers are considering the matter closely and hope to make an announcement shortly.

    Weapons of Mass Destruction
    Dr. Julian Lewis.: What is his policy on giving up all British nuclear weapons while other countries still retain some weapons of mass destruction. [117888]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): As we made clear in the strategic defence review, our minimum nuclear deterrent will remain a necessary element of our security while large nuclear arsenals and risks of proliferation remain.
    Dr. Lewis: Does the Secretary of State realise that the reason for my concern is the quiet and subtle shift on that matter in the previous two Labour election manifestos? In 1992, the Labour manifesto categorically stated that until "elimination" of the
    world's stock of nuclear weapons … is achieved, Labour will retain Britain's nuclear capability.
    Does the right hon. Gentleman recall that?
    However, the 1997 manifesto stated only:
    When satisfied with verified progress towards our goal of the global elimination of nuclear weapons, we will ensure that British nuclear weapons are included in multilateral negotiations.
    Will the right hon. Gentleman categorically rule out, once and for all, any question that a situation will arise in which Britain would give up its entire stock of nuclear weapons while other countries retained some weapons of mass destruction?
    Mr. Hoon: I am grateful for the hon. Gentleman's comments on the process of drafting a Labour manifesto. It is the first time in the manifesto's history that it has been described as "quiet and subtle". I assure him that we stand by the commitments set out in the manifesto on which we were elected and that we shall take fully into account the existence of nuclear arsenals elsewhere. That would certainly be the most important factor that we would consider before any change in our own strategic security position.
    Mr. Steve McCabe.: Surely we should all welcome the ratification of the START 2 treaty as a major breakthrough. Despite the concerns that many of us may have about some of Mr. Putin's other policies—especially in Chechnya—does my right hon. Friend agree that further multilateral arms negotiations are a real prize that we must pursue?
    Mr. Hoon: I agree with my hon. Friend. My right hon. Friend the Prime Minister will make precisely that point to the Russian president-elect when he meets Mr. Putin today.

    De-mining
    Helen Jones.: What steps his Department is taking to assist those involved in humanitarian de-mining. [117890]
    The Minister for the Armed Forces (Mr. John Spellar): The Government were among the first to sign and ratify the Ottawa convention and we are committed to humanitarian de-mining and the clearing of land mines. The Ministry of Defence works closely with other Whitehall Departments and non-governmental organisations. Ministry of Defence personnel provide technical expertise, management and specialist skills to support mine action programmes worldwide. In the UK, the mine information and training centre at Minley remains the focal point for information on de-mining and mines awareness advice. The Defence Evaluation and Research Agency is examining ways in which mine detecting technologies would be suitable for humanitarian de-mining. In addition, we have gifted surplus military equipment to NGOs for use in their humanitarian mine clearance operations.
    Helen Jones: May I thank my hon. Friend for that reply? I especially welcome his comments on DERA. Does he agree that there is a huge potential for exploiting the technological expertise of that agency to produce low-cost de-mining equipment that can be used for humanitarian purposes? Will he tell the House when he expects to be able to make an announcement on whether the agency has been successful in obtaining further money for such research from the Government's capital modernisation fund?
    Mr. Spellar: I shall certainly write to my hon. Friend on that matter. I join her in paying tribute to some of the innovative work being undertaken by DERA. However, we must consider how we put that work into practice; the donations that we have made to several NGOs enable them to work actively, with local labour, on de-mining in many areas that have been particularly affected to the enormous detriment of the population and local economies.
    Mr. Peter Viggers.: The United States Government take the view, which I share, that land mines have a part to play in certain special circumstances, such as the denying of land to potential aggressors in the Korean peninsula. May I congratulate the Government on supporting the American position by allowing land mines to be stored in ships off the territorial waters of Diego Garcia?
    Mr. Spellar: The hon. Gentleman rightly draws attention to the position of one of our allies. In fact, other allied countries take that view. It is not a view that we share, and we are campaigning and working with those Governments to try to spread the Ottawa convention. As has been graphically illustrated on television and in newspapers, in many areas land mines have an enormous effect on the populations that are left behind, often when conflict is finished, and—as I said in my previous response—a considerable effect on their economy and their ability to regenerate their society and become part

    689
    of a modern society once again. We are working hard on that, and on persuading other countries of the correctness of this position.

    Weinberg Estate, Germany
    Sir David Madel.: What is his Department's policy in relation to the future development of the Weinberg housing estate near Fallingbostel, Germany; and if he will make a statement. [117893]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): The Weinberg estate comprises 474 flats, of which the British forces lease 392. On expiry of two of the current leases at the end of 2001, it is planned to hand back 158 properties to the respective landlords to reflect a reduced housing requirement. For the remaining 234 properties, my officials are actively involved in negotiation with both the landlords and relevant German authorities with a view to effecting improvements both to the overall condition of the estate and to individual properties.
    Sir David Madel: Does that answer mean that part of the estate will be knocked down and rebuilt, possibly with a private finance initiative arrangement with a German construction company? Can the Minister give a bit more detail on the time scale for making the very necessary improvements to those flats which house service men's families?
    Dr. Moonie: I can assure the hon. Gentleman that I share his concern about the quality of our accommodation; I made it known during a debate last week that that is one of our highest priorities for improvement. With that in mind, I have to say that all the service families accommodation on the Weinberg estate is categorised as below the ideal standard set by the Department. Upgrades to the properties already effected include double glazing for all, the provision of new kitchens for 222 flats, new bathrooms for 258 flats and replacement hot water and heating systems for the same number. Four blocks of flats have been reclad externally; the remainder are to be completed within two years.
    The hon. Gentleman may be interested to know that a survey of residents on the estate showed that 80 per cent. of those families surveyed would prefer to remain there than to move to other service families accommodation. On the specific point that the hon. Gentleman made, as far as I am aware, there are no plans for such a scheme.

    Atomic Weapons (Safety)
    Mr. David Rendel.: What reduction will take place in the number of safety-related jobs at AWE Aldermaston and AWE Burghfield during the 12 months from 1 April. [117894]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): In the event that the contractor's proposals lead to a reduction in the number of safety-related jobs, the contractor will need the separate approval of the independent regulators—the nuclear installations inspectorate and the Environment Agency—and of the Ministry of Defence compliance office. Neither the
    690
    Ministry of Defence nor either of the agencies will give its approval if it judges that the changes will have an adverse impact on safety standards.
    Mr. Rendel: The Secretary of State does not appear to know how safety will be managed over the next year at AWE. What on earth were the Government doing handing over AWE to two firms like BNFL and Lockheed Martin, which have such appalling safety records, if he does not even know how they will manage safety?
    Mr. Hoon: I have just made it clear in my answer to the hon. Gentleman that we monitor safety standards, and that any change in safety standards or in the number of personnel will have to be considered carefully both by the Department and by the two agencies in the light of its effect on safety. Before the initial bids for managing AWE were considered, any bidder had to satisfy safety criteria involving 28 separate components, 20 of which were regarded as crucial to the process. Not only did the successful contractor meet those criteria, but theirs was the best of the three bids in that area.
    Miss Anne McIntosh.rose—
    Madam Speaker: Does the hon. Lady want to ask a question now?
    Miss McIntosh: No.

    Aircraft Carriers
    Ms Dari Taylor.: What progress has been made in plans to procure replacements for the current Invincible class of aircraft carriers. [117896]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): I refer my hon. Friend to the answer that I gave to my hon. Friends the Members for Ilford, North (Ms Perham) and for Plymouth, Sutton (Mrs. Gilroy) earlier today.
    Ms Taylor: May I thank my right hon. Friend for the announcement that he has given the House today, because it is excellent news for British shipbuilders? Given the time delay before construction, is there any chance that he might indicate which shipyards will be considered? As I represent Stockton, South, may I persuade him to consider giving work to the excellent shipbuilders on the Tees? We believe that 30 or more warships will be built; will he give us some idea when and how they will be built so that our shipbuilders and workers are again given hope?
    Mr. Hoon: I have certainly made it clear that an extensive programme of shipbuilding is under way. It could amount to 30 large ships and, certainly, they will all be built in the United Kingdom. As there are yards around the country, I would risk creating difficulties if I picked out some and not others. However, I assure my hon. Friend that full consideration will be given to all

    691
    British shipyards and all will be given the opportunity to tender. I look forward to that work providing for a revitalised British shipbuilding industry.
    Miss Anne McIntosh.: I apologise, Madam Speaker, for confusing you earlier.
    I am most grateful to the Secretary of State for his earlier reply suggesting that BAE Systems will contribute to the replacement for Invincible and I am delighted that it has a base in Sutton-on-the-Forest in the Vale of York. Will he put the minds of those who work there at rest by assuring them that a merger with Boeing will not compromise the contract that he has in mind?
    Mr. Hoon: I have seen press speculation about the prospects of a merger between BAE Systems and Boeing but, as far as I am aware, it is no more than press speculation.

    Balkans
    Mr. Desmond Swayne.: What plans he has to increase the United Kingdom forces serving in the Balkans. [117900]
    The Minister for the Armed Forces (Mr. John Spellar): We believe that flexibility and capability are the keys to successful operations in the Balkans. We keep our operational commitments under constant review and have the flexibility to adjust our commitment to match the security situation.
    We have agreed to deploy to Kosovo a Phoenix battery of some 170 personnel to operate unmanned aerial surveillance drones, and two additional Gazelle helicopters equipped with specialist surveillance equipment to reinforce our contribution to KFOR.
    Mr. Swayne: On the very question of flexibility and the need to maintain flexibility, will the Minister reflect on the evidence produced last year that, in the first nine months of last year, 40 per cent. of the reservists supporting our forces in the Balkans theatre were infantrymen? As the decision in the strategic defence review was to cut the fighting capability of the infantry reserves by half, will he now review that decision in light of the need to maintain the flexibility to which he referred?
    Mr. Spellar: As I have told the hon. Gentleman previously, we hope that a higher percentage of the reserve forces in Kosovo will come from the specialist arms. That reflects shortages elsewhere in the availability of those groups and the economic pressures on some of them. I pay considerable tribute to those not just in Kosovo, but in Bosnia who are engaged on the infantry side. I met some of them a couple of months ago when I was there. They perform an excellent job, which is well appreciated by their counterparts in the regular forces, and they thoroughly enjoy doing it.
    On the overall picture for the reserve forces, we have to consider all the arguments that we gave when we restructured the Territorial Army, in particular, and examine where the priorities lie. Home defence is no longer the reserve forces' key priority. As the hon. Gentleman rightly identified, their priority is to form part
    692
    of the overall force and to play their part in the more expeditionary nature of our forces. They are doing that well, but that does not undermine in any way the restructuring and reshaping of the Territorial forces.
    Mr. Paul Keetch.: Given that the Allied Command Europe Rapid Reaction Corps, which was in control of Kosovo until recently, has now been replaced by the Eurocorps, will the Minister join me in congratulating ARRC on the excellent role that it performed in Kosovo, which I saw when I was there a few weeks ago? How is the transfer to Eurocorps going, and does the Minister agree that the role played by Eurocorps will demonstrate the ability of European forces to work together in co-operation, without American support being necessary?
    Mr. Spellar: I join the hon. Gentleman—and, I am sure, the whole House—in paying tribute to the role played by the Allied Command Europe Rapid Reaction Corps under British leadership, not only in the immediate past, but during the Kosovo engagement. I also welcome the introduction of Eurocorps; the transition is working well. The important message is that it is not only ARRC that is capable of undertaking such tasks. That is welcome, because it reduces the pressure on our armed forces. It also helps to reinforce the main argument that we have advanced in the context of the European security and defence identity, which is the importance of the defence capability initiative in ensuring that European forces can undertake such roles. Demonstrating their ability to do so will be critical in maintaining the long-term stability of the alliance.

    Departmental Land
    Sir Sydney Chapman.: If he will estimate the total square mileage of land owned by his Department (a) 10 years ago, (b) five years ago and (c) now; and how much of this land is surplus to requirements. [117901]
    The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie): The total area of land owned by the Ministry of Defence was 240,600 hectares in 1990, 240,300 in 1995 and 238,800 in 1999. That equates to 928.96 square miles in 1990, 927.80 in 1995 and 922.01 in 1999. The figure for the total area of land in disposal is not maintained centrally. However, I will write to the hon. Gentleman once that information has been collated, and a copy of my letter will be placed in the Library of the House.
    Sir Sydney Chapman: I am immensely grateful for those numbers, which I shall try to remember—I may have to consult Hansard tomorrow. However, the Minister did not deal with the fourth part of my question, about land surplus to requirements. May I take it that some of us have scored a 100 per cent. successful campaign in ensuring that the Ministry of Defence no longer holds any land that is surplus to requirements? Is not the central point that we must be flexible about the land we retain, especially for training purposes, in view

    693
    of a development that the Minister might be able to confirm, which is that significantly less land is now available in Germany for training our armed services?
    Dr. Moonie: In the riveting excitement of reading out the figures, I overlooked part of the hon. Gentleman's question. Land in disposal is, by definition, land surplus to requirements. Such parcels of land come up fairly regularly at present, and this year we are on target to meet the sales requirement that we have placed on ourselves. We retain land only to support the delivery of operational capability and for other essential purposes. We keep the size of the estate under constant review, to ensure that it is no larger than is required for those purposes. However, it is true that, because of the change in distribution of our armed services, we have been putting greater pressure than we did formerly on much of the land that we use in this country.
    Mr. Peter L. Pike.: What is the target for disposal of land? Large areas of land, including many beauty spots, have been held for many years for training purposes. How much land is surplus to training requirements?
    Dr. Moonie: We dispose only of land that is genuinely surplus to our requirements. We use land in national parks because that is, and will remain, essential to our requirements. Our target is to sell £700 million worth of land from the estate by 2001–02, and I am happy to say that we are now ahead of target.
    Mr. Gerald Howarth.: If Major-General Palmer's review of training establishments leads to a reduction of training establishments in Aldershot and the surrounding area, will it be the Government's intention to contract the Aldershot garrison and to sell off some of the land that falls inside the garrison premises?
    I have just seen the consultation document about the Defence Evaluation and Research Agency. If DERA is to be cut by three quarters, will it be the Government's intention to maintain the headquarters of the new public-sector operation at Farnborough, where £70 million has recently been expended on brand-new buildings?
    Dr. Moonie: On the latter part of the hon. Gentleman's question, the answer is yes. On the former part, we have made no plans yet for the disposal of land at Aldershot, nor for reconfiguration of our forces there. However, as I have said, that is under constant review.

    Roll On/Roll Off Ferries
    Mr. Julian Brazier.: If he will make a statement on progress on the purchase or leasing of roll on/roll off ferries for sealift for the forces. [117903]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): On current plans, we intend to place a contract this year, under private finance initiative arrangements, for a long-term managed sealift capability equivalent to six ships to support the joint rapid reaction force. A final decision will not be made until we have fully assessed the bids that we have received.
    Mr. Brazier: As a former secretary of the parliamentary maritime group, may I join other Members
    694
    on both sides of the House in expressing extreme concern that an order of this importance could be placed with a yard abroad, when we have lost so much shipyard capacity? We had a cheap shot earlier about a contract for two ships placed by the previous Government. Did the Secretary of State take legal advice on whether the contract could be framed in such a way as to fall within the EU' s exemption for military projects? If he sought such advice, may we have a copy of it in the Library?
    Mr. Hoon: The hon. Gentleman referred to my earlier observation as a "cheap shot". However, the requirement for sea-going lift for the rapid reaction force was the same in January 1997 as that which the present Government identified as part of the strategic defence review. On the strict legal advice that we received, it was concluded that if these vessels were to be available for commercial purposes, that commerciality must by necessity be reflected in the procurement process. The previous Government came to the same conclusion.
    As the hon. Gentleman conceded, we are operating under relevant European and World Trade Organisation public procurement rules. Those rules prohibit preferential treatment for the United Kingdom industry because the vessels concerned are clearly non-warlike; they are available for commercial purposes. By that definition, they must be considered under the relevant EU rules. The hon. Gentleman knows that, his colleagues on the Opposition Front Bench know that, and not only did the previous Government know that but they operated under precisely the same rules.
    Mrs. Gwyneth Dunwoody.: Would my right hon. Friend like to undertake a short, sharp study of how often our European compatriots have managed to pass on what are basically defence contracts under existing rules to nationalities other than their own and to work forces other than those of their own nationalities?
    Mr. Hoon: The British Government are careful to ensure that all relevant EU rules are observed by our partners in the EU. The contracts are published in the Official Journal That is the transparent process that the EU requires. We ensure that other countries participate in those rules as effectively as we do.
    Mr. Jonathan Sayeed.: My hon. Friend the Member for Canterbury (Mr. Brazier) talked about six ships. As I understand it, two of them will be available for trade and four will be used only by the Royal Navy. Is it legally possible for those four ships to be built only in this country?
    Mr. Hoon: The hon. Gentleman misunderstands the nature of the contract. The essence of ensuring that the ships are commercially useful is to have them available to the Government at different periods of notice when a crisis requires their availability. Some will be available at very short notice and others will have rather longer notice periods. In the interim, therefore, they will be available for commercial purposes. As they are available for commercial purposes, they cannot be described as "warlike". Therefore, they do not fall within the exception that is set out in the EU procurement rules.

    France
    Mr. John Bercow.: When he last met the French Defence Minister to discuss defence co-operation. [117905]
    The Secretary of State for Defence (Mr. Geoffrey Hoon): I last met the French Defence Minister to discuss bilateral defence co-operation on 25 November 1999 at the UK-France summit in London. We have also met more recently at multilateral meetings where more general issues were discussed.
    Mr. Bercow: Given President Chirac's description of the United States as a hyperpower that requires to be counterbalanced, the modest financial commitment of the French and their notorious unreliability, why does not the right hon. Gentleman stop sitting on the fence and simply
    696
    accept what is apparent to most right-thinking people: that the rock of American defence co-operation is infinitely preferable to the shifting quicksand of French defence co-operation?
    Mr. Hoon: Certainly, the hon. Gentleman represents rightward thinking.
    Mr. Bercow: Right thinking.
    Mr. Hoon: "Rightward thinking" is what I said. That is a reflection, sadly, of the anti-European attitudes of large numbers of those who sit on the Opposition Benches. What is important for Britain is not only that we maintain the strength of our excellent alliance with the United States through NATO, but that we can bring together the European nations to make an effective contribution to NATO as an alliance.

Energy Policy
3.31 pm
The Secretary of State for Trade and Industry (Mr. Stephen Byers): With permission, Madam Speaker, I would like to make a statement to the House on energy policy.
The central objective of the Government's energy policy is to ensure secure, diverse and sustainable supplies of energy at competitive prices.
In 1998 the Government published a White Paper on energy sources for electricity generation. The White Paper identified significant distortions in the operation of the electricity market. In particular, there were distortions in the operation of the electricity trading pool. These distortions had artificially encouraged a rash of new investment in gas-fired generation, mainly at the expense of existing coal-fired plant. There was also inadequate competition in the electricity market, particularly in the coal-fired generation sector. These distortions in the market meant that electricity prices were higher than necessary. The White Paper set out a programme of reform to remove the distortions and create a competitive market that could operate more vigorously and effectively.
While the reforms identified were being implemented, the Government decided to apply a stricter consents policy for gas-fired stations. We made it clear at the time that this policy was a short-term, temporary measure, aimed at protecting diversity and security of supply while the distortions in the market were removed.
This policy has been in place since October 1998. It created a temporary presumption against the approval of any new gas-fired power stations. It was a tough policy, but one that we felt was justified.
Under the application of the policy proposals, 15 gas-fired power stations were refused clearance. As I know from the representations received from a number of hon. Members, those decisions often meant that employment opportunities were denied and economic regeneration was not created. The White Paper set out a radical reform programme that would need to be implemented before we lifted the stricter gas consents policy. The main elements of the programme were, first, reform of the trading arrangements in England and Wales; secondly, seeking practical opportunities for the sale of generating capacity by the major coal-fired generators; and thirdly, pressing ahead with competition in electricity supply for all customers, including domestic customers
Good progress on the reform programme has been made. We have opened the domestic market to competition, giving choice to all consumers, and there has been a substantial degree of divestment of coal-fired generating plant, increasing the number of coal-fired generators. Our programme for reforming the trading arrangements is well under way. There are already signs that the electricity market is becoming more competitive, and that wholesale electricity prices are considerably lower than they were at the time of the White Paper.
In the White Paper, we made it clear that we expected to lift the stricter gas consents policy as soon as we concluded, on the basis of advice from the Director General of Gas and Electricity Markets, that the reform programme had been implemented, and that the market distortions had been removed.
698
Last Thursday, the director general reported to me that, in his view, substantial progress had been made in the areas of reform outlined in the White Paper. I have placed a copy of his report in the Libraries of the House and in the Vote Office. In short, his report concludes that the reform programme is almost complete. The sole remaining element are the new electricity trading arrangements. I expect them to be in place by October this year. As soon as that has been achieved, I intend to lift the stricter consents policy.
Lifting the stricter consents policy will represent an important step forward in the Government's energy policy. It will provide for full competition in the electricity market by allowing new entrants to challenge existing players. That will ensure that electricity prices remain as low as possible to the benefit of all consumers, including businesses, who need low electricity prices to compete internationally.
It will also enable new power station developments to go ahead if they are viable in the reformed market, thus providing new job opportunities, especially through the creation of new energy parks, which have been proposed by some potential developers.
Today's announcement will be welcomed by the offshore oil and gas industry and its contractors. It will also allow new gas stations that are genuinely competitive, especially combined heat and power stations, to contribute to the enhancement of the United Kingdom's energy efficiency and carbon saving.
Lifting the stricter gas consents policy will mean that the existing presumption against new gas-fired generation will no longer apply. The new initiative for proposals for power stations will remain for private sector companies to consider, to meet the evolving needs of the energy market. That market will be influenced by measures such as exemption from the climate change levy for combined heat and power and enhanced capital allowances.
The Government strongly support CHP and we will expect developers to be able to show that they have explored opportunities to use it. We shall discuss with developers information that needs to be submitted as part of notifications under section 14 of the Energy Act 1976 and applications under section 36 of the Electricity Act 1989.
I have given careful consideration to the impact of lifting the stricter consents policy on the coal industry. From 1985 through to the early 1990s, the coal industry suffered a steep decline, with employment falling from 270,000 people to fewer than 20,000. That was a severe blow to workers and their families. It had a devastating impact on many small—and in some cases isolated—communities. The Government have put in place a major regeneration programme for those coalfield areas. My right hon. Friend the Deputy Prime Minister announced in December last year that some £354 million would be invested over three years in coalfield regeneration. That was in addition to the more than £1 billion that is devoted each year to regeneration of local authority areas containing coalfields.
Our coal industry is by far the most efficient in Europe. Germany, which has the largest coal industry in the Community, produces about 20 per cent. more coal than us with nearly ten times our labour force. The German industry benefits from massive Government subsidies, as do the French and Spanish coal industries.

699
Our coal industry faces stiff competition not only from gas generation but also from imported coal. The Government's policy remains that it is for the coal industry to find its own place in a competitive energy market. However, we recognise that ending the stricter consents policy will create a new market and new challenges for the coal industry.
We cannot block international competition. Indeed, we do not wish to do that. However, it is the task of Government to lead people through the process of change, to create a framework which enables the coal industry to move forward, to help it manage change rather than be submerged by it and to respond positively to the challenges ahead.
In those circumstances, the Government have been discussing with the European Commission the potential for state aid to the coal industry. Any proposal to pay aid will, of course, be subject in advance to approval from the European Commission. Any aid would be temporary—during the transitional period—and would end with the termination of the European Coal and Steel Community agreement in 2002.
Of course, the Government cannot give absolute guarantees about the future shape of the industry. It will be for the owners to determine the future of any individual pit. Although it is too soon to give an indication of the total cost of any aid over the two years before we have spoken to all the parties and had further discussions with the Commission, we need to identify eligible mines that might be entitled to aid. The cost would also be affected by movements in world coal prices. There has been speculation that the total aid to the coal industry could be as high as £100 million. I am not ruling out the possibility of expenditure at that level.
Our arrangements will treat coal producers in a fair and non-discriminatory way. My Department is developing an appropriate scheme of state aids for the coal industry in discussion with the European Commission. We will consult the coal industry and other interested parties and invite interested parties to make their views known to my Department.
In relation to the continued development of our policy for energy, we faced a choice: uncontrolled change, forced by markets and commercial pressures, or a process of reform that delivers economic efficiency and social justice so that individuals and the communities in which they live can be partners in change. The Government have chosen the latter approach.
Lifting the stricter gas consents policy, coupled with the new trading arrangements, will complete our reforms of the electricity market, provide cheaper electricity and lead to economic regeneration and job creation. Today's announcement will allow the coal industry to compete in the new markets that we are creating. It is a vital part of our programme of modernisation and reform and will be good news for hard-working people and their families and communities. I commend it to the House.
Mrs. Angela Browning.: In three years, the Government have failed to produce a coherent energy strategy, and nothing that we have heard today suggests a long-term strategy. They introduced the moratorium on gas-fired power stations, but were quick
700
to make an exception for south Wales when the Welsh Assembly elections were looming. The Secretary of State's rationale in his 1998 energy White Paper was bogus, because no one believed that companies would invest in new power stations based on a temporary hike in electricity prices.
We welcome the Secretary of State's U-turn on gas-fired power stations, but his policy was wrong in the first place. On coal, the former Secretary of State, the right hon. Member for Derby, South (Mrs. Beckett), said:
Our aim is to put all fuels on a level playing field, and not give priority to any one. We do not propose to subsidise any part of the UK coal industry. Coal producers themselves have asked for fairness, not favours.—[Official Report, 25 June 1998: Vol. 314, c. 1171.]
What action has he taken to ensure fairness for our efficient UK coal producers, bearing in mind that France, Germany and Spain subsidise their industries by some £3 billion a year? He referred to it, but what action have the Government taken to address the concerns expressed by RJB Mining and others at the unfair subsidies given by European Union grants? Does he believe that many of those are illegal? If so, what has he done about it?
What approaches has the Secretary of State made to the Commission to date? He mentioned that he is speaking to the Commission, but will the aid be approved swiftly or will we be treated to another fiasco like Rover? Is it true, as reported in The Guardian today, that he removed two civil servants from key posts because of their opposition to the Government's energy policy?
How does today's announcement fit into an overall energy strategy? What plans has the Secretary of State made to achieve a reduction in nuclear components by 2020, and then to meet environmental targets? Surely an energy strategy must cover the whole energy mix.
Is not the announcement contingent on the separation of distribution and supply of electricity for which the Utilities Bill provides, together with the new electricity trading arrangements in the Bill—a Bill whose drafting and passage have been handled with unprecedented incompetence?
As the Secretary of State has now clearly indicated that the Government intend to subsidise the coal industry, may we hear from him the broader strategy for subsidising industry in general? Will he explain why one sector is deemed to be eligible for subsidy, while others are not? What is the rationale behind subsidising coal and not, for example, shipbuilding? It is important for the House to understand what the overall strategy is.
This Secretary of State runs a Department that works on a piecemeal basis, producing policy on the hoof. Given what we have heard today, energy is included in that piecemeal approach.
Mr. Byers: It is unfortunate that the proposals have not received a warm welcome. They reflect important progress in the development of an energy policy that is comprehensive and allows the market to work effectively. It is worth reminding the House of the mess that we inherited in regard to electricity trading arrangements. That is what happened, and Conservative Members know it.
There has been no U-turn. We clearly stated that we would ask the director general to report. He reported to me last Thursday on the progress made towards reform of

701
the electricity trading arrangements, and a copy of his report is in the Vote Office. The report makes it clear that the reform programme is almost complete, apart from the new trading arrangements. They will be introduced in October, which is why we shall be lifting the stricter gas consents policy then. That is entirely consistent with what we said at the time of the White Paper.
The hon. Member for Tiverton and Honiton (Mrs. Browning) asked about Baglan bay in south Wales. We have always said that our policy in that regard is a stricter gas consents policy, not a block on any new development. When considering our proposals for Baglan bay, we noted that it had exceptional technology and was developing an energy park according to a high-quality plan, which we were prepared to approve in the circumstances. I was pleased that we were able to do that.
The German, Spanish and French Governments are able to subsidise their coal industries under the European Coal and Steel Community agreement, which the Conservative Government signed in 1993. [Interruption.] Both the right hon. Member for Wokingham (Mr. Redwood) and the hon. Member for Tiverton and Honiton were members of that Government. It was agreed that the arrangement would hold until 2002. The other countries are simply using the powers that the Conservative Government agreed they could use.
As for the question of civil servants, there is no truth in what was said in the Guardian article.
Environmental objectives are important. That is why we strongly support combined heat and power, and why we feel that gas-fired power stations will make an important contribution.
On the wider issue of subsidy, let me point out that the Government support shipbuilding through the shipbuilding intervention fund. I introduced a degree of flexibility to the arrangements that had not been there before, as a result of which orders have been secured for our shipbuilding and ship repair industry that would not have been secured otherwise.
The Government will provide subsidy where appropriate, but we will not do so in a way that props up failing industries. We will support industries that have a real future. Some of the industries that Conservative Members say have no future, such as shipbuilding and coal mining, do have a real future. People in those industries, and local communities, need to know that they have a Government who are on their side.
Mr. Dennis Skinner.: Is my right hon. Friend aware that the Tories have a cheek to talk about subsidies because, a fortnight ago, there was an announcement that the farming industry would get several hundred millions and the Tories' answer was that it was not enough?
Will my right hon. Friend take it on board that, instead of handing over a big cheque to Budge, who got the industry for a song from the previous Government, it would have made much more sense to have taken the coal industry back into public ownership? Does he accept that some of us, especially in Derbyshire, where there is not a single pit left—they were all closed by the Tory Government—and where there is mass unemployment, will not take kindly to the idea of some of that money
702
enabling Budge and his allies to exploit opencast operations? It would be much better to ensure that all that money goes to deep mines only.
Mr. Byers: My hon. Friend will be pleased to know that, when the paper was submitted to us on the various options in relation to the coal industry, option number 15 was renationalisation of the coal industry, but we did not take it much further than that. On the significant point about support for the coal industry generally, we will have to introduce a scheme that does not discriminate against one sector over another. However, within the scheme, we will be able to give greater emphasis to particular parts of the industry. When we work up the scheme, we will be particularly mindful of the need to improve productivity, particularly in deep-mine pits.
Dr. Vincent Cable.: I am sure that all Members representing mining constituencies, particularly my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith), who has led the fight for Ellington colliery, will welcome the Secretary of State's support for the industry.
More broadly, I welcome the lifting of the moratorium on gas-fired power stations. Can the Secretary of State quantify some of the effects of that on the Government's Kyoto targets? Today's statement gives rather contrary indicators. It would be useful to know by how much the statement will contribute to the saving of carbon emissions, bearing in mind the fact that every unit of energy produced by gas produces 40 per cent. less carbon than coal.
How important is the high value of the pound for the difficulties of the coal industry, given that the pound has appreciated against the Australian dollar by 20 per cent. and against the South African rand by 40 per cent.—they are some of our major competitors? Does he not accept that the Government's inability to deliver a stable and competitive exchange rate is a major factor for the industry, as it is for other manufacturing enterprises?
Will the Secretary of State comment on this morning's Rowntree report on the effectiveness of Government aid to mining communities? It appears to suggest that much of the aid has been ineffectual and needs to be refocused in a radically different way.
Mr. Byers: Today's statement is primarily about the lifting of the stricter gas consents policy and deals with the consequences of that. It would have been foolish not to recognise that that significant change—which we want to introduce from October—will have an impact on the coal industry. The Government will not walk away from their responsibilities to the coal industry and to the communities that depend on coal mining.
On the specific points in relation to the Kyoto targets, the fact that more energy will be produced from gas-fired power stations will obviously make a significant contribution, but it will need to run alongside programmes that the Government are already introducing, particularly to develop cleaner coal technology, which we think will help, as we maintain the coal burn at least at present levels—I hope that those levels will rise as a result of our support—to make an important contribution to achieving those environmental objectives.
The hon. Gentleman mentioned the value of sterling. One of the key issues in coal importation, particularly from European countries, has been the subsidy received

703
by industries in those countries. The German coal industry, for example, receives from the German Government the equivalent of £56 million a week in subsidy. The United Kingdom coal industry has asked us for fairness, not favours. Fairness is achieved by providing a level of subsidy which—even at the modest £100 million that we may be prepared to spend—will still enable the UK coal industry to be competitive against German coal, as the UK industry itself is highly efficient.
Like the hon. Gentleman, I have today read the Rowntree report with great interest. It contains important messages, but it also states that the particular needs of some of the communities that have been affected by pit closures will have to be met. I know that the Deputy Prime Minister will be considering very carefully the lessons that we can learn from the Rowntree report's findings and proposals.
Mr. Bill O'Brien.: May I express my thanks and appreciation to my right hon. Friend for his statement on energy policy? For far too long the coal mining industry suffered, particularly from Tory policies. His statement on help to the mining industry is therefore particularly welcome.
Is my right hon. Friend considering a long-term policy on the mining industry? If so, will he examine the possibility of introducing the fluidised bed system for generating electricity from coal? Introduction of such a system would be one way of ensuring a long-term future for the mining industry.
In considering the issue of combined heat and power, how much attention has been paid to using domestic and industrial waste in CHP programmes? Use of such waste would serve the dual purpose of generating electricity and heat and of disposing of waste that would otherwise go into landfill.
We have to address those issues. Doing that, and some assurances on a long-term programme for the coal industry, would be a major step forward in reassuring my communities in the Normanton constituency.
Mr. Byers: I thank my hon. Friend for his welcome of the measures that we have been able to announce today. He is right to say that the arrangement for the state aid that we wish to provide for the coal industry is transitional. We intend that the aid should end in July 2002, when the current European Coal and Steel Community agreement itself ends. We shall therefore have to consider other ways of planning for the industry's s future.
I have no doubt that we will have to consider new ways of developing programmes. There will also have to be greater innovation in the coal industry if it is going to be in a strong position to compete in the years ahead. I have no doubt that, by providing this breathing space for the industry, it will be able to seize those opportunities.
My hon. Friend makes a very important point about combined heat and power and the use of waste. We are developing a policy on renewables, and the use of waste will make a very important contribution within that context. We have set a challenging but achievable target on amounts of energy generated from renewables. The opportunity of linking that policy with combined heat
704
and power offers some very real prospects of meeting both our environmental concerns and our energy objectives.
Several hon. Members rose—
Madam Speaker: Order. I have 30 Members seeking to question the statement. Questions to the Secretary of State must be very brisk, and I rely on the Secretary of State to give me brisk answers, please.
Mr. Gary Streeter.: The Secretary of State will be aware of a specific application to build a new gas-fired power station in Langage, in my constituency, right next to 45,000 houses on the edge of Dartmoor, overlooking the rolling beauty of the South Harris. The application is opposed by everyone in my constituency, including me. Will he undertake to look at that application, which is on his desk, before the moratorium is lifted, consider it carefully on its merits, and then reject it point blank?
Mr. Byers: I am sure that we shall take those representations into account in considering the matter.
Mr. Harry Barnes.: My hon. Friend the Member for Bolsover (Mr. Skinner) pointed out that the Conservatives destroyed the mining industry in Derbyshire by closing all the Coal Board pits. However, one small mine—Moorside mine—is left in Eckington, in my constituency. What will be the position of the small mines when state aid is provided? The money is not just for Budge. The 29 jobs at stake in Eckington also need to be protected. What will be done, and when will it be delivered?
Mr. Byers: I invite the owners of the mine at Eckington to get in touch with my Department. The scheme that we want to introduce applies to all coal producers. Even small mines such as that referred to by my hon. Friend will come within the state aid schemes. If the owners contact the Department, we can discuss what methods will need to be put in place to support improving productivity.
Mr. Peter Atkinson.: The coal industry will be disappointed that more details of the subsidy scheme have not been given. How will it help Blenkinsopp colliery in my constituency? It employs nearly 100 miners and is threatened with closure in 18 months unless the management can raise £200,000 to £300,000 to open new seams. They have been unable to do that because of the low price of coal. Will the scheme help such collieries?
Mr. Byers: It is worth reminding the House that the price of coal has recovered over the past few weeks. Our scheme will go from pit to pit. Blenkinsopp will be able to discuss it with the Department. If it meets the criteria, it will be able to qualify as well as other pits.
Ann Clwyd.: My right hon. Friend's announcement is excellent news for Wales and for my constituency, particularly for Tower colliery, which remained open despite the best efforts of the Conservatives—with the exception of the right hon. Member for Wokingham (Mr. Redwood), who gave us

705
every assistance when the miners bought out the pit. The pit has made a profit year on year, despite the fact that the then Secretary of State for Trade and Industry told us that the mine should shut and I should tell the men to throw in the towel. We did not throw in the towel and the pit has been a success. That shows that there is a secure future for coal and that the Government care about the social consequences of restructuring our older industries, again unlike the Conservatives. What can Tower hope to get from the announcement? Under the previous Government, I took the case to the European Union and the Energy Commissioner told me that the EU thought that the pit should get a subsidy, but the British Government were against it.
Madam Speaker: Order. Questions must be very much to the point now.
Mr. Byers: The scheme that we have been able to announce today covers Wales and Scotland as well as England. Pits such as Tower will be able to qualify under the criteria that we intend to develop. Given the efforts made by my hon. Friend and some Conservative Members to save Tower, I hope that the colliery will see greater opportunities in the scheme and that the commitment of the work force and the community to Tower colliery will reap long-term rewards.
Mr. Dafydd Wigley.: I welcome the lifting of the moratorium and the contents of the statement not only for Tower, but for north-west Wales. The Secretary of State will be aware of representations made by my hon. Friend the Member for Ynys Môn (Mr. Jones) about a scheme that is vital for the future planning of industries such as Anglesey Aluminium. What criteria will be used to decide on the exemption of combined heat and power projects from the climate change levy?
Mr. Byers: I welcome the right hon. Gentleman's comments, particularly about the benefits that may well come to north-west Wales from the lifting of the stricter gas consents policy. We had to defer a decision on an application in relation to Anglesey because of the policy that was in place. That was not a rejection. The application still lies on the table in the Department. If the promoters wish to come forward, we shall be able to consider it again. I am conscious of the important role that the Anglesey Aluminium plant can play. My right hon. Friend the Chancellor has already said all that he wants to say about the climate change levy as it affects combined heat and power.
Mr. Kevin Barron.: I welcome my right hon. Friend's statement. After all the years of seeing neighbouring coal mines being closed, the coal miners at Maltby colliery in my constituency will be heartened to hear that the Government are standing up for the coal industry. The British coal industry cannot compete against heavily subsidised coal not only from within the European Union but from countries such as Poland. Will coal's share of the electricity supply in the balanced energy policy be met by coal mined in the British coalfield?
Mr. Byers: I understand my hon. Friend's concerns. We have to ensure that our anti-dumping rules are vigorously enforced. We have raised with the Polish
706
Government the subject of the amount of coal coming in from Poland, and we hope that action will be taken in the near future.
Mr. A. J. Beith.: Does the Secretary of State believe that Ellington colliery is likely to be saved under the terms of the statement, especially given its tremendous importance to the local economy of Northumberland? If so, does he realise that people will be grateful, and that he has moved from believing that it would be impossible to give such aid under European rules to recognising that we can actively pursue such state aid?
Mr. Byers: The situation has moved on since November 1999, and we have considered carefully the opportunities that are available to us, but any scheme will still need to be approved by the European Commission. We must work with the EC to ensure that any scheme that we propose satisfies the Commission. I am very much aware of the important role that Ellington plays in the local community. My constituency is a little more than 25 miles away, and I am acutely aware that Ellington is the sole deep mine remaining in the north-east of England. Decisions about individual pits will be taken by the owners—in this case, RJB Mining—but, in the light of today's announcement, the company may have something to say about its proposals for both Ellington and Clipstone.
Mrs. Linda Gilroy.: I warmly welcome my right hon. Friend's statement, particularly in respect of the lifting of the stricter gas consents policy. He may know that, in Plymouth, the city council, the chamber of commerce and the regional development agency will be keen for this to pave the way for the go-ahead for the Langage energy park, which is opposed by the hon. Member for South-West Devon (Mr. Streeter). In addition to considering the important environmental aspects, will he take into account the £600 million investment for jobs and the effect of bringing in the only generator west of Hinkley Point, which, through black start-up, will protect industry, attracting jobs and business to the south-west?
Mr. Byers: My hon. Friend is clearly already making strong representations on behalf of the development. We will need to take those into account when we consider the application.
Mr. John Redwood.: Given that every time the Secretary of State signs a consent for a new gas station, he will effectively be signing the redundancy notices of a large number of coal miners, what is his forecast of how much gas capacity he will license over the next year and how many coal miners' jobs will go as a result? Is not the statement a smokescreen to try to delay the P45s for the miners until after the general election, and does it not in practice mean the death of a large number of mines? Will he come clean and tell us?
Mr. Byers: That is a bit rich from someone who was a member of the Cabinet in 1993, when 33 pits were closed. I have announced a balanced approach. We will lift the stricter gas consents policy, so we will provide state aid to the coal industry to overcome the challenges that it will face over the next two years or so. I do not

707
agree with the right hon. Gentleman, who seems to think that, because a policy decision is taken, redundancies must follow. That was the case under the Government of which he was a member. Tories made decisions and jobs were lost. That will not happen as a result of our policy, which will ensure that there is a viable future for the coal industry within a competitive energy market.
Mr. Ronnie Campbell.: This is obviously a policy through which new Labour will begin to work in the heartlands, and I hope that that continues. The miners of Ellington colliery, and their families, were delighted to hear the news this morning, as I heard it on the wireless on my way here. There was a whisper of it yesterday, but they were delighted by the confirmation that the Labour Government have decided to save Ellington colliery, because their jobs would have gone at the end of the month. I congratulate my neighbour, my hon. Friend the Member for Wansbeck (Mr. Murphy), who has spent enormous energies on the fight to save Ellington colliery. He is not here today, because he is at the pit, addressing concerns about the future. May I also say that it is good to see a Minister, not civil servants, taking decisions?
Mr. Byers: I look forward to continuing to try to convince my hon. Friend that a new Labour Government can act for all our people. This is a new Labour decision, which will help markets work effectively and lead people through change. I look forward to further debates with my hon. Friend on the subject. On a serious point, this is an important development of our energy policy. It will lift the stricter gas consents policy, which stood in the way of the market working effectively. To overcome the difficulties that might be caused as a result, we are also providing state aid to the coal industry. The combination of the two will ensure that we have employment creation through the lifting of the stricter gas consents policy and can maintain levels of employment in the coal industry.
Sir Teddy Taylor.: As the exciting new Labour Government cannot do anything until Brussels allows them to, can the Minister give us some idea when he is likely to get approval? Bearing it in mind that the opencast industry provides jobs in areas of unemployment and now works to strict environmental rules, will he make it clear that there will be no discrimination against opencast in his new proposals?
Mr. Byers: The scheme will be run on a non-discriminatory basis.
Mr. Ted Rowlands.: Let us pursue that issue. Is my right hon. Friend confident that the European Commission will approve his scheme promptly, given the short-term nature of the coal aid, which will be made available only until 2002?
Mr. Byers: Discussions that we have had already with the European Commission indicate that it has no objection in principle to a scheme starting now and lasting until July 2002. We will obviously have to continue those discussions, and I hope that we will be able to put the scheme in place as soon as possible. In the discussions
708
that we have already had, we have been able to assure the coal producers that finance will be available during this financial year, and that is the important element as far as they are concerned.
Mr. Tony Baldry.: Can the Secretary of State confirm that the whole purpose of this announcement today relaxing the gas consents policy is that more gas-fired power stations should come on-stream? Will he return to the question put by my right hon. Friend the Member for Wokingham (Mr. Redwood)? If the Secretary of State intends to lift the gas consents policy, how much more gas-fired capacity does he anticipate authorising during the coming year or two years? The only sector that will lose out from that policy will be the coal sector. Therefore, it is disingenuous to relax gas consents policy at the same time as giving £100 million to the coal industry. The Government are leading the coal industry into believing that it has a secure future, when it has anything but.
Mr. Byers: I made it clear in my statement that the coal industry will need to compete in the new market that we are creating, and that is the reality of the situation. The coal producers are acutely aware of that, and they have said that they would have difficulty competing in the short term without some state aid. That is why we are making those proposals. We will get the balance right and the coal producers have indicated that, with the support that we are able to provide, they will be able to compete effectively against any new gas-fired power stations that come on stream. No restriction will be placed on the number of gas-fired stations, and we will approve those projects that we feel are appropriate for the energy market that we intend to create.
Mr. Michael Clapham.: On behalf of the all-party coalfield communities group, may I welcome the package announced to the House by my right hon. Friend today? It will be good for the industry and for mining communities, but especially good for the mining machinery manufacturing industry. My right hon. Friend spoke about lifting the moratorium on gas-powered power stations, but will he consider allowing the electricity pool reforms to bed in before that happens? Collieries in areas such as Ellington Lynemouth are likely to close in four or five years. Will he ensure that miners in such areas are given further training, so that they have the skills to move on to other industries when the collieries eventually close?
Mr. Byers: The decision to lift the stricter gas consents policy from October was based on the report that I received last Thursday from the Director General of Gas and Electricity Markets, which was very much in line with the proposals in the White Paper. We intend to lift those consents when the new trading arrangements come into force in the autumn of this year.
My hon. Friend points out that employment levels might decrease in five or six years. We do not know for certain that that will happen, but it is clear that proposals for retraining and for economic regeneration must be in place. We will need a period of time in which they can develop, and the Government will be responsive to any proposals in that direction.
Mr. Peter Brooke.: The question from my right hon. Friend the

709
Member for Suffolk, Coastal (Mr. Gummer) to the Prime Minister last Wednesday seems to have provoked a remarkably—and admirably—rapid response from the Government. Its underlying theme was the climate change levy: does today's announcement have any implications, besides combined heat and power, for that levy?
Mr. Byers: As I said in response to the right hon. Member for Wokingham (Mr. Redwood), I do not think that my right hon. Friend the Chancellor will make any significant changes to the way in which the climate change levy will be introduced or implemented.
Shona McIsaac.: As the Member of Parliament whose constituency probably has the most gas stations in it—other developments there have been held up by the moratorium—I certainly welcome the fact that the stricter consents policy has been lifted today. That is good news for job creation and industrial growth on the south bank of the Humber. About 7,000 jobs are at stake, and it is good to know that lobbying pays off in the long run.
However, will my right hon. Friend say how quickly consents will be given after the stricter policy is lifted in October?
Mr. Byers: At the moment, 15 consents have been submitted, and deferred. We will have to talk to the promoters of those consents to see whether they wish to maintain them as originally proposed or whether they want to change certain specifics. Over the next few months, we will study the timing of new applications in relation to the lifting of the stricter gas consents policy.
Mr. Michael Fabricant.: The Secretary of State said in answer to an earlier question that there is no objection in principle from the European Commission for the grant that he has announced. Does that mean that there was such an objection to the grant for Longbridge, which was never granted by the European Commission? If there is no objection in principle to today's announcement, when will permission for it be given?
Mr. Byers: Two quite distinct schemes are in operation. Any state aid for the car industry is covered by the vehicle framework, which has separate procedures and is administered by a different Commissioner. The state aid proposed today comes under the European Coal and Steel Community's agreement, and the methods involved are quite different. We will need to work out the details of the scheme with the United Kingdom industry. When that is in place, an application will be made to the European Union. However, we expect funds to be made available during the course of this financial year.
Ms Rosie Winterton.: My right hon. Friend's statement today will be of great help in maintaining continuity in the mining industry. Will he and his colleagues in the Department of the Environment, Transport and the Regions therefore reconsider the closure of the mining inspectorate office in Doncaster?
Mr. Byers: I will certainly draw that issue to the attention of my colleagues in the Department of the Environment, Transport and the Regions, who I think have policy responsibility for that matter.
Miss Anne McIntosh.: The announcement will certainly be good news for the coal
710
sector. The Secretary of State has also said that there is greater competition in the electricity market. Can he tell the House why he therefore still perceives a need for the overhead line transmission from Lackenby to Shipton in the Vale of York? What will happen to those coal-fired power stations in the constituencies of his hon. Friends—particularly Selby, Ferrybridge and Drax—when those consents are further applied for south of Shipton? Will he admit that there is no need for those pylons to be built?
Mr. Byers: I know that that issue is of great concern to many people in the hon. Lady's constituency. She has been a doughty campaigner, raising the matter and drawing it to our attention. My understanding is that the matter will be subject to an inquiry to see whether it is an appropriate development. It is probably best that we leave the inspector to conduct that inquiry.
Mr. John Grogan.: Is my right hon. Friend aware that today's most welcome announcement should provide the opportunity for the signing of a new five-year deal for Selby coal between RJB Mining and AES, the new owner of Drax, the largest coal-fired power station in Europe? Does he think that there is every prospect of British coal, which is now a flexible, modern industry, being able to compete in international markets in a couple of years, particularly with the price of coal rising in those markets?
Mr. Byers: My hon. Friend has been a strong campaigner on behalf of the Selby coalfield. I am pleased that he believes that today's news will be of real benefit to Selby. He is right to point out that RJB is near to concluding an agreement with AES to provide coal to the Drax power station. I hope that that can be concluded in the near future, because, as he says, that will bring some long-term security to the Selby complex.
Mr. Andrew Robathan.: In the interests of efficient energy generation and usage, I generally welcome the encouragement given to combined heat and power schemes. However, why will the Government not similarly encourage other renewables, or renewables in micro-CHP, by adopting net metering? Why have they specifically ruled this out in the Utilities Bill? Does the Minister understand that that would encourage the development of many renewable energy schemes?
Mr. Byers: As the hon. Gentleman will know, the Government are neutral with regard to net metering. However, we think that the 10 per cent. renewables target is the best way of encouraging people to use renewables in energy production.
Mr. Jon Trickett.: May I assure my right hon. Friend that many of my constituents will contrast favourably his actions with the brutal actions of the previous Government when they closed the pits and rigged the energy market against coal? May I also urge him, when he has the time, to look at another part of the Tory legacy? The interconnector seems to be a one-way device, by which continental electricity is pumped into this country, but we seem unable to send back electricity generated here.
Mr. Byers: My hon. Friend makes an important point. Under the Conservative Government, more than 40 pits

711
were closed in the five years between 1992 and 1997. That is the Conservative legacy. They rigged the energy market against coal. That is the situation that we inherited. It is why we introduced a stricter gas consents policy—to ensure that we began to have a market that was working effectively—and why we are able, this autumn, to lift that stricter gas consents policy.
My hon. Friend raises an important point about the way in which the interconnector operates. I know that there are concerns, among many of my right hon. and hon. Friends and Members of other parties, about that. We will do what we can to make sure that the interconnector works in a way that is favourable to the British coal industry.
Mr. John Bercow.: Given that the Secretary of State has supposedly been pressing for the liberalisation of the European electricity market, can we take it as evidence of his poor power of persuasion that the French have now committed themselves to a liberalisation of only 26 per cent. and that, thus far, Belgium, Ireland and Greece have committed themselves to precisely nothing?
Mr. Byers: The improvements that we are beginning to see are far greater than those that we saw under the Conservative Government. I welcome the fact that the French Government are taking through their National Assembly the legislation that will open up the market for energy in France. We need to continue to ensure that the other markets are opened up. The real challenge in the context of Europe is to make a reality of the single market. That will benefit businesses in the United Kingdom and throughout Europe.
Mr. Andrew Miller.: I remind my right hon. Friend that, within five miles of Ellesmere Port, 11 gas-fired power stations are in operation or are going through the application process. I think that eight are awaiting consent. Will he ensure that he does not grant consent on a first-come, first-served basis, but that he considers the strategic needs of industry in the area so that the approaches are co-ordinated?
Mr. Byers: My hon. Friend raises an important and practical point; we shall need to take a close look at how we deal with the large number of applications that were deferred pending the lifting of the stricter gas consents policy. I have no doubt that many more applications will
712
be made over the next few months because we have indicated that the policy is to change. My hon. Friend makes the important point that we need a strategic over-view of how we can develop gas-fired power stations in the light of the new market that we want to create.
Mr. Owen Paterson.: Before committing himself to a large sum of taxpayers' money, will the Secretary of State say what is his best estimate of the number of pits that will be viable once the scheme has ended and mines have to work in open competition with new gas-fired stations?
Mr. Byers: Ultimately, that will obviously be a matter for the owners to decide; it is not for the Government to determine. However, with targeted support, we can ensure that we provide the coal industry with the opportunity to meet those challenges. I regret that the hon. Gentleman would clearly not want to make such a subsidy available. However, that is wholly compatible with the policy adopted by Conservative Governments over the years.
Mr. Bob Blizzard.: As chairman of the offshore oil and gas industry all-party group, I wholeheartedly welcome the lifting of the stricter consents policy on gas-fired power stations. There are thousands of jobs in the offshore industry, with 10 times more onshore. Such jobs are often concentrated in coastal towns, such as Lowestoft, which I represent, where there is high unemployment. Today's announcement is a hugely positive signal for the industry, as well as good news for the environment.
Has my right hon. Friend received any indication from the offshore operators as to the possible additional investment in gas-field development that might arise from the announcement? Will he try to obtain commitments on such expanded future investment from those operators?
Mr. Byers: I congratulate my hon. Friend, who has been a strong campaigner on behalf of the offshore industry. I am delighted to hear of his support for today's announcement. I have no doubt that the offshore industry will benefit as a result of the proposals that we have made—as indeed will those fabrication yards throughout the country that will have greater opportunities as a result of the lifting of the stricter gas consents policy. I am unaware of any specific proposals from the offshore contractors, but there is no doubt that the announcement will make a real difference to them.

Orders of the Day

  Finance Bill
  [Relevant documents: The Fifth Report from the Treasury Committee, Session 1999–2000, on The 2000 Budget, HC 379.]
  Order for Second Reading read.
  Madam Speaker: I have selected the amendment in the name of the Leader of the Opposition.
  4.28 pm
  The Chief Secretary to the Treasury (Mr. Andrew Smith): I beg to move, That the Bill be now read a Second time.
  This Finance Bill continues to deliver on Labour's promises, enacting Budget decisions to deliver opportunity and security for the hard-working families of Britain. Through measures for enterprise and fairness, it takes further action to achieve our long-term goals—including new measures to encourage work, to improve productivity and to protect the environment. We are working hard for a stronger and fairer Britain, releasing substantial new resources for health and education, and for tackling child poverty, supporting pensioners, improving transport and tackling crime.
  That is possible only because we are delivering a platform of stability and steady growth, leaving behind the boom and bust of the past. Inflation is now—
  Sir Peter Tapsell.: Will the right hon. Gentleman give way?
  Mr. Smith: I give way to the hon. Gentleman on boom and bust.
  Sir Peter Tapsell: On stability, does the right hon. Gentleman recall that, when he was winding up the Budget debate, I put to him the fact that the greatly increased public expenditure under the Finance Bill would result in higher interest rates being imposed on us by the Bank of England, and that he denied that the Budget was expansionary? Indeed, he claimed, in effect, that it was a "contractionary" Budget. Has he noted that, since then, almost every economist has disagreed with him—including the International Monetary Fund?
  Mr. Smith: As I pointed out to the hon. Gentleman when I was winding up the Budget debate, the Budget locks in the fiscal tightening since last year to the tune of 0.3 per cent. of GDP and then 0.2 per cent. of GDP. Moreover, I point out, as I did when I responded to the hon. Gentleman in the Budget debate, that we are looking at a current surplus of £17 billion, followed by £14 billion, followed by £16 billion, followed by £13 billion, followed by £8 billion. That Budget and that fiscal position are prudent. They lock in the tightening—by, I think, some 5 per cent. of GDP since before the general election—which the Government have achieved on the basis of following our sound and prudent rules for fiscal policy,
  714
  the sensible arrangements that we have set up for monetary policy, and our firm grip on public spending. Therefore, I do not accept that—
  Mr. Robert Sheldon.rose—
  Mr. Quentin Davies.rose—
  Mr. Smith: I give way to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon).
  Mr. Sheldon: I did of course agree with my right hon. Friend generally on the Budget judgment that he made, but of course the Red Book omitted the amount paid for telephone licences, which I had estimated would be between £7 billion and £10 billion, but which is likely to be nearer £20 billion. That is obviously a very large increase in the revenue. Not all of it will come in this financial year, but it should have some impact on the expenditure or even, possibly, the revenue side. Will my right hon. Friend give us some idea of his thinking on these matters?
  Mr. Smith: The prudent thing to do with such a large income is to use it to reduce debt, and that is what we plan to do with it.
  I was saying that inflation is now low and stable.
  Mr. Davies: Will the Chief Secretary give way?
  Mr. Smith: I will give way to the hon. Gentleman when I have made a little more progress.
  There are 800,000 more people in work than at the general election and, as I have said, the public finances are under control. It is worth reminding the House that we inherited from the Conservative party a public sector borrowing requirement of some £28 billion, and yet now, with our fiscal framework in place, we have the stream of current surpluses that I was just drawing to the attention of the hon. Member for Louth and Horncastle (Sir P. Tapsell).
  Moreover, we inherited national debt that had doubled, and a debt to GDP ratio of 44 per cent. With our commitment to prudence, we have cut that ratio to 37 per cent. this year, and the Red Book shows it decreasing to 33 per cent. in the years ahead, cutting the millstone of debt that the Conservative party strung around the necks of the British people and saving £4 billion a year in debt interest.
  Mr. Davies: Will the Chief Secretary give way?
  Mr. Smith: In a few moments.
  The Bill maintains our commitment to sustainability and prudence, locking in the fiscal tightening to an even greater extent than projected in last year's Budget, ensuring that we remain on track to meet the fiscal rules and to deliver steady growth. This, as we have said, is prudence for a purpose. Through the Budget and the Bill, we are not only locking in fiscal tightening but releasing substantial new resources for our key public service priorities.
  Mr. Davies: The Chief Secretary keeps on saying—rather irrelevantly and, I am tempted to say,

  715
  rather disingenuously—that the present Budget locks in last year's Budget's fiscal tightening. Does he agree that it represents a discretionary fiscal loosening from this year forward to 2003–04?
  Mr. Smith: I have already cited to the House the extent to which this is fiscal tightening—the 0.3 per cent. of GDP followed by the 0.2 per cent. of GDP. The hon. Member for Louth and Horncastle referred to what various commentators have said about the Budget. It is important to point out that the Monetary Policy Committee has twice had the opportunity to examine the assumptions and forecasts surrounding the Budget—Mervyn King himself has commented on this. Having examined them, the committee saw no reason to change its policy or to change interest rates. That is a matter for members of the committee, but I believe that the House will want to take that judgment very seriously.
  Mr. Edward Davey.: On fiscal loosening, will the Chief Secretary confirm that the fiscal position has been tightened only in relation to what it was planned to be in the pre-Budget report of November 1999, but that it has been loosened with respect to fiscal policy as it was on 20 March 2000?
  Mr. Smith: I have already cited several figures on that point. If the hon. Gentleman is looking further ahead, I commend to him—I do not often do this—the words of Professor Patrick Minford. When he unwrapped the assumptions around the Budget, he described it as unprecedented fiscal tightening. The hon. Gentleman might like to consider that point.
  As a consequence of the stability and prudence and the sound public finances that we have put in place, working families are able to see the benefit. Thanks to sound economic management, we can cut taxes for working families—not only introducing the working families tax credit and the new 10p rate but, in clause 31, cutting the basic rate of income tax to 22p, its lowest level for nearly 70 years. By April next year, personal tax and benefit changes in this and previous Budgets will mean that households will on average be £460 a year better off and that families with children will on average be £850 a year better off. The tax burden on a single-earner family on average earnings with two children will be at its lowest since 1972.
  Coupled with low inflation and economic growth, that adds up to substantial increase in living standards which is what really matters to people. For a single-earner family on average earnings with two children, living standards will rise by more than 10 per cent. over this Parliament. For a single-earner family on half average earnings, living standards will rise by 30 per cent. this year—the biggest annual rise for more than 25 years. A single-earner family on half average earnings will be £2,600 a year better off over the Parliament.
  Our measures will also help achieve our goal that every child should have the best possible start in life. As the Prime Minister has said, child poverty is a scar on the soul of Britain. That is why we set out in the Budget our ambition to halve child poverty by 2010 and end it altogether by 2020.
  Mr. John Bercow.: In the light of what the Chief Secretary has just said about the working
  716
  families tax credit, will he tell me why Nicole Wanford, a low-earning, single parent constituent in Buckingham who has a salary of little more than £10,000 a year after tax, should pay an effective tax rate of 78 per cent. on a modest £600 bonus that her employer paid her? Does the right hon. Gentleman understand that her view of the Government's operation of the policy would not constitute parliamentary language?
  Mr. Smith: When Members raise individual cases in the House, the best thing that I can do is undertake to examine the circumstances of those cases. However, such a marginal rate of reduction should not arise from the working families tax credit. Indeed, one of the things that it and our other reforms do is reduce marginal rates of reduction, because our policy is all about helping and encouraging people to move from welfare to work. That is what it has done very successfully.
  I referred to the issue of tackling child poverty and was about to point out that 1.2 million of Britain's children will be out of poverty as a consequence of measures already introduced in this Parliament and in the Budget. By April next year, personal tax and benefit changes alone in this and previous Budgets will mean that a single-earner family on average earnings with two children will be £370 a year better off. A family on half average earnings will be £2,600 a year better off and, for that matter, the poorest two-child family on income support will be £1,500 a year better off. What is more, the Bill will take further steps to increase support for children. An additional 50p a week will be added to the children's tax credit when it is introduced in April next year, so that it will be worth up to £442 a year—more than twice the value of the married couples allowance that it replaces. We are introducing a £4.35 a week increase in the child credit in the working families tax credit from June this year, and the same increase in child allowances in income support from October.
  Mr. Michael Jack.: On the working families tax credit and while the Chief Secretary is in generous reviewing mode, will he take a look at the case of lone parents who work in, for example, the field of nursing care for what he and I would regard as unsocial hours? The child care arrangements available at those unsocial hours do not currently qualify for assistance under the working families tax credit. Will he examine the case of that small but important group and see whether some assistance can be provided?
  Mr. Smith: I shall certainly examine that case. I should point out that, through our national child care strategy, a huge expansion in child care provision is under way, stimulated not least by the provisions of the working families tax credit. However, as I said, I undertake to look at the point the right hon. Gentleman raises.
  The improvements I have described and their impact on tackling child poverty and helping working families will be reinforced by further improvements to public services that will be made, thanks to our commitment to average real growth in health spending of more than 6 per cent. a year over the next four years—the longest period of sustained high growth in expenditure in the history of the national health service. The immediate boost of £2 billion for health this year is in part funded by the real increase in tobacco duties set out in clauses 12 to 15.

  717
  The Conservatives' decision not to vote for the tobacco tax provides further confirmation that their sums do not add up and that they could not deliver on Labour's pledges on health and education.
  Our additional boost of £1 billion for education this year is accompanied by the introduction in clause 57 of a new training relief for employees. It will make employers' contributions to education or training undertaken by holders of individual learning accounts exempt from tax and national insurance where they qualify for grant or discount and are available to all employees on similar terms.
  Businesses and jobs will benefit from our commitment to enterprise. We have already cut main and small business rates of corporation tax to their lowest-ever levels—the lowest of any major industrialised country. The Bill contains several measures designed further to promote enterprise and help business. Those include the cuts in capital gains tax in clause 37; the research and development tax credits in clauses 67 and 68; the permanent 40 per cent. capital allowances for small and medium-sized enterprises in clause 69, which will help manufacturing businesses in particular; the new all-employee share ownership plan in clause 47; the enterprise management incentives in clause 61, which will help high-risk companies recruit key personnel; and the corporate venturing provisions in clause 62.
  Those measures have been widely welcomed by business. Together with the introduction in the Budget of three-year, 100 per cent. capital allowances for investment in information and communications technology equipment and an extra £100 million for the new £1 billion target umbrella fund for regional enterprise growth, they comprise a huge commitment to business success on the part of a Government who believe that enterprise must go hand in hand with fairness.
  Mr. Andrew Tyrie.: The Chief Secretary makes great play of the tax breaks that have been given to business, but will he tell us what the overall burden on business of the changes in business taxation since 1997 has been?
  Mr. Smith: We have been helping businesses to invest, expand and create an enterprise culture in this country. Let me quote the Institute of Directors news release commenting on the Budget. It states:
  The Institute of Directors welcomes the pro-enterprise flavour of the Budget, coinciding with the Institute's own recommendations. The cut in capital gains tax on business assets, plus the moves to encourage wider employee shareholding, will be a welcome boost to enterprise. We are delighted to see businesses being encouraged to seize the opportunities offered by e-commerce, where moving quickly will have a big effect on our international competitiveness.
  Mr. Dafydd Wigley.: The right hon. Gentleman was referring to the regional dimension of creating new businesses. He will be aware that in the areas that are lucky enough to be getting objective 1 status—Cornwall, South Yorkshire, Merseyside and a good part of Wales—there is concern about the adequacy of finance during this financial year, whatever happens in the comprehensive spending review, to enable advantage to be taken of the opportunity to create development funds of the sort that have already been created on Merseyside. Is he able to give an assurance that if it is found in the
  718
  areas to which I have referred—I am obviously concerned about Wales—that there is a need for more than the £25 million in our budget under the Barnett formula for meeting the European and match funding aspects of objective 1, he will be able to go to the contingency reserve, given that he has a good reserve, and help us out if need be?
  Mr. Smith: As the Government have said on a number of occasions, we fully appreciate the importance of objective 1 status for west Wales and the valleys and the regions within England, which are benefiting from it. The Administration in Wales have stated that the money this year is adequate to get the programme started. I have said many times that the future is properly a matter for the spending review. Anyone who has tangled with these issues will realise that they are of some complexity.
  It is a mark of our recognition of the importance of objective 1 status for west Wales, the valleys and Wales as a whole that it is being dealt with in the spending review. Full consideration will be given to how the funds and the public expenditure cover can be provided to ensure that the programme goes ahead. We realise its importance for the regeneration of parts of Wales and for regions in England as well.
  Sir Brian Mawhinney.: Bearing in mind the Bill's positive aspects for business, will the right hon. Gentleman tell us whether the tax burden on business has increased or decreased since the 1997 general election?
  Mr. Smith: I have recently pointed to a string of ways in which tax on business is falling. Moreover, there are measures in the Budget that will encourage business to invest further by extending reliefs, which have been widely welcomed throughout industry, by its representative organisations and by individual firms. We shall take no lectures on business from Opposition Members, who presided over the two deepest recessions since world war two, which resulted in the decimation of business, with hundreds of thousands of firms going bust and 1 million jobs lost, in manufacturing industry. That must be contrasted with the stability, sound finances and prospects of business growth that we now have.
  I must make progress on the Bill itself. The new optional ring-fenced regime in clause 81 is another measure that will help business.
  Mr. Geraint Davies.: Would my right hon. Friend be interested to know that when tax and borrowing are put together as a share of gross domestic product—in other words, what the Government are spending on behalf of the public—they were 38.2 per cent. in 1996–97, and are due to decrease to 36.4 per cent. in 2000–01? That is a difference of about £17 billion, or an extra 7p on income tax. As Baroness Thatcher has pointed out, at the end of the day all business tax is paid by individuals. Does my right hon. Friend agree that the burden of tax on business and everybody else is decreasing under the Government?
  Mr. Smith: I thank my hon. Friend for his helpful intervention. He always makes interesting observations on our proceedings. I welcome them, even when they involve quoting the baroness.

  719
  I was referring to clause 81, which will introduce the so-called tonnage tax regime, whereby shipping companies can opt to work out taxable profits on the basis of the tonnage of ships operated. This innovation, which I know a number of my hon. Friends and Opposition Members have called for, and which follows Lord Alexander's inquiry, is part of the Government's commitment to encourage the British shipbuilding industry and will, I am sure, be welcomed.
  The Bill modernises the tax treatment of corporate groups and international operations. Clause 96 extends group relief to UK branches of non-resident companies. Clause 100 enables groups to bring together chargeable gains and allowable losses on asset disposals, without having to go through the rigmarole of transferring asset ownership within the group. Clause 103 improves the fairness and the effectiveness of anti-avoidance rules for controlled foreign companies.
  I shall say a word about the Budget provisions in clause 102, which limit the use of so-called mixer companies to shelter low-taxed foreign profits from UK tax. It is important to understand that under the old rules, the UK taxpayer is currently underwriting the cost to business of investing in countries that have not reduced their tax to the UK level. In that sense, our changes promote international tax competition. Perhaps even more important, they level the playing field among groups that invest directly from the UK and those that adopt mixing structures.
  Taken together, our measures align tax treatment with economic rationality, tackle avoidance, and help sustain the United Kingdom as a competitive base for international operations.
  Mr. Oliver Letwin.: Is that why the Inland Revenue consulted for a long period on enshrining the previous regime?
  Mr. Smith: There has been extensive consultation about the regime from which these changes result. The changes have been widely welcomed—there has been criticism but there has also been a substantial welcome—and they make the United Kingdom a more attractive base for international and multinational operations.
  Mr. Owen Paterson.: Can the right hon. Gentleman name three groups that have welcomed the measure?
  Mr. Vernon Coaker.: Labour Back Benchers, for one.
  Mr. Smith: Labour Back Benchers certainly welcome the measure. I was at a post-Budget breakfast where an array of luminaries commented on the Budget. The measures which, for example, avoid the need to transfer assets before pooling chargeable gains and losses were welcomed. I shall be happy to send the hon. Gentleman details.
  Mr. Jack: If the measure is supposed to increase the competitiveness of UK companies in terms of their overseas investments, can he explain why I have received
  720
  no representation from any UK overseas investor pointing out that his tax bill will be lower by virtue of the Government's proposals?
  Mr. Smith: The package of measures does make the UK more competitive. If people write to the right hon. Gentleman, they are far more likely to do so when they have something to complain about than when they have something to praise in the Budget.
  Mr. Nick St. Aubyn.rose—
  Mr. Smith: I have given way sufficiently.
  The Bill will also help us meet our international commitments to the environment. Following last year's Budget, the Bill is an important part of the largest-ever package of environmental tax measures to be introduced in the United Kingdom. Clause 30 introduces the climate change levy. Clauses 20 to 23 reform vehicle excise duty for cars. Clause 58 fundamentally reforms company car taxation, providing an incentive for low CO2 emissions and removing the perverse incentive for drivers to clock up business mileage simply to reach more generous thresholds.
  Clauses 136 and 137 increase the landfill tax rate and clarify liability. Moreover, the changes to the affordable warmth programme in clause 78 and the reduced rate of VAT on the installation of energy saving materials and on the grant-funded installation of heating systems for which clause 131 provides will help ensure that pensioners feel the benefit of warmer homes and cheaper fuel bills as well as that of the £150 winter allowance. The programme takes forward the Government's commitment to combating fuel poverty by supporting the installation of energy efficient central heating systems and insulation. It will benefit up to 1 million low-income homes.
  The affordable warmth programme will be funded through a public-private partnership with commercial lessors. Capital allowances will reduce the cost of leasing and allow the scheme to reach many more households than would otherwise be possible. Those provisions, taken with the Budget announcements of an incentive for ultra low sulphur petrol, the aggregates levy and the consultation on stamp duty relief for brownfield developments, make this a Finance Bill for the environment as well as for working families and enterprise.
  The Bill also backs charitable giving. Clauses 38 to 46 implement our radical package of measures to boost donations to charities and improve the operation of the tax system for charities. The Bill abolishes the minimum limit on tax relief for donations, boosts payroll giving through the three-year, 10 per cent. Government supplement and abolishes the maximum limit on donations.
  Clause 40 cuts red tape on corporate donations. The Bill also introduces new income tax reliefs on gifts of shares and securities, frees charities from the need to set up subsidiaries for small trading and fundraising ventures, and broadens the VAT zero rate for the sale or hire of donated goods. It is a good package, which is widely welcomed by charities. Simon Hebditch of the Charities Aid Foundation described the provisions as radical. He estimated that they would mean £350 million extra a year in tax relief.

  721
  Together with our on-going consultation on the establishment of a network of children's funds, our measures on charities show how Britain can make the most of one of our greatest strengths: the readiness of our people to give so much of their time and money through voluntary and community activity for the benefit of all.
  The Bill promotes enterprise and fairness. It looks to the future while the Conservative party remains locked in the past. It shows the Government keeping their promises, whereas the Conservative Government broke theirs. Labour stands for the many as we provide sound public finances, low inflation, higher living standards, help for working families and pensioners and employment opportunities for all. By contrast, today's increasingly extreme Conservative party makes reckless tax pledges for the few. Those policies would deny health and education investment for the many, and return Britain to the bad old days of boom and bust.
  The Bill means more enterprise, opportunity and fairness in a Britain that is better off with Labour. I commend it to the House.
  4.59 pm
  Mr. David Heathcoat-Amory.: I beg to move, To leave out from 'That' to the end of the Question, and to add instead thereof:
  'this House declines to give a Second Reading to the Finance Bill because its 558 pages impose more complex regulations, introduce further taxes and fail to reverse the increasing burdens of taxation on families, on homeowners, on motorists, on consumers, on savers and on businesses.'
  The Chief Secretary to the Treasury omitted to mention one of the records that the Bill breaks: it is the longest Finance Bill that the House has had to consider. It runs to 558 pages in two volumes. It will cost any member of the public £27.40.
  Mr. Barry Gardiner.: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: Not yet. The Bill begins encouragingly by stating that it conforms to the European convention on human rights.
  Mr. Andrew Smith: For the record, the right hon. Gentleman should accept that the Bill is 54 clauses shorter than that which the Conservatives introduced in 1996.
  Mr. Heathcoat-Amory: That is a wholly bogus way in which to measure the length of the Bill because volume II and half of volume I are made up of schedules. It is not difficult to cut the number of clauses if the number of schedules is increased. This is easily the longest Bill so it is not surprising that the Institute of Chartered Accountants spokesman said:
  This is out of all proportion to anything we have seen before…I do not know how ordinary people have a hope of understanding their tax affairs. Even accountants are struggling.
  There is a democratic point: the public and taxpayers should at least understand the taxes that they are asked to pay, even if they do not approve of them. Apart from that, the Bill's sheer baffling complexity and length is bad for business because an arbitrary, illogical and complex tax and benefits system creates a national overhead of unavoidable costs that all businesses and taxpayers have to bear.
  722
  Instead of boasting about the temporary Budget surplus, which has largely been achieved through three tax-raising Budgets, the Chief Secretary should attend much more closely to the economy's long-term productive capacity, on which we shall have to rely to pay for our public services long after the Budget surplus has disappeared. That productive potential is being eroded and undermined by the Bill, which is particularly damaging when combined with the ever higher tax burden being levied on taxpayers and businesses of all sorts.
  The Chief Secretary was coy when my right hon. Friend the Member for North-West Cambridgeshire (Sir B. Mawhinney) asked a straight question about the additional burden on business. The Confederation of British Industry Budget briefing refers to
  the increase in the business tax burden which we have estimated at over £20 billion over the five years of this parliament.
  It would be helpful if the Chief Secretary could confirm that that figure is correct.
  The argument about whether the Government have broken their pre-election promises not to increase the tax burden has, in essence, been settled. Before the Budget, the Prime Minister's personal press officer, Mr. Campbell, let the cat out of the bag, or reaffirmed what the rest of the country knew: the tax burden has increased sharply since the election and, at the end of this Parliament, will be substantially higher than at the start.
  Mr. Geraint Davies: Following my intervention on my right hon. Friend the Chief Secretary about the combination of borrowing and tax, does the right hon. Gentleman accept that the global level of borrowing and tax has decreased? Will he support the right hon. Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, who has called for the Tories to introduce a borrowing guarantee, which would reveal the high borrowing and tax levels that the right hon. Gentleman oversaw?
  Mr. Heathcoat-Amory: The hon. Gentleman has it all wrong again. I refer him to the Government's own Budget document, which clearly states on page 200 that the tax burden has risen, continues to rise and will be higher at the end of this Parliament. If he does not believe the Government's literature, no wonder he is in denial on the tax burden. The arithmetic is absolutely clear, but the Government have invented a new trick: a hypothetical average family that pays no indirect tax at all, spends no money and does not drive, smoke, drink, insure anything or move house. That family, supposedly, now has a lower tax burden. Perhaps he was referring to that.
  Kali Mountford.: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: I will finish the point first.
  The worst of it is that the Government have put their claim about a lower tax burden on this "typical family" in a propagandist leaflet, printed and distributed at public expense, which gives an entirely misleading and one-sided view of the Budget. I am glad to say that the Select Committee on the Treasury—whose distinguished Chairman is present—has pointed out that that is in itself a misleading way of portraying what is happening in regard to taxation. The Committee rightly suggests that if

  723
  the Government repeat that bit of propaganda at state expense, it should be independently audited by an outside body.
  Mr. Jack: Will my right hon. Friend give way?
  Mr. Heathcoat-Amory: I will give way first to the hon. Member for Colne Valley (Kali Mountford), as I promised.
  Kali Mountford: I hoped that the right hon. Gentleman would further develop his theme of productivity, which I thought made an interesting beginning to his speech. I agree with him that productivity is the best way forward. Does he agree with me that the families to whom he refers benefit most when they work, and does he not welcome the injection of 800,000 new jobs into the economy on which our success should be based?
  Mr. Heathcoat-Amory: I shall return explicitly to that point. I shall also return to the way in which the Government are eroding the competitiveness that they inherited from their predecessor.
  Mr. Jack: Before my right hon. Friend leaves the subject of disclosure, may I ask whether he has ever got to the bottom of the facts that lie behind the unwillingness of the present Treasury team to answer a question first tabled in 1981 by the now right hon. Member for Blackburn (Mr. Straw)? Each year, the right hon. Gentleman sought to put on record the full effect of the Government's tax proposals, both indirect and direct. Has my right hon. Friend ever been given a reason for the fact that that information is not now made available to us?
  Mr. Heathcoat-Amory: It would be highly embarrassing. That is not a very good reason, but it is the real reason. As my right hon. Friend may know, the Treasury Committee drew attention to the deficiency and called for the Government to make the calculation again, as we always did—my right hon. Friend was part of our Treasury team—so that the public could know exactly what was happening to the tax burden on families of all sorts.
  Mr. Bercow: Is it not significant that the Bill will do nothing to change the fact that taxes are rising but, at one and the same time, class sizes are bigger, waiting lists are longer, police numbers are smaller, the plight of agriculture is more and not less severe, and the transport system is more and not less congested? Is that not proof positive that under the present Government we get rotten services at rip-off prices?
  Mr. Heathcoat-Amory: My hon. Friend is absolutely right: we pay more taxes, and services are getting worse. What is happening to all the money is a complete mystery. It must be going into some black hole in the Treasury.
  Mr. Christopher Leslie: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: I will give way once more, but then I must move on.
  Mr. Leslie: Why did the right hon. Gentleman say on Sky News on 22 March that the increases in health spending were "unwise and irresponsible"?
  Mr. Heathcoat-Amory: The hon. Gentleman is entirely wrong. I did not say that the increases were unwise in any way; I said that the mechanism for taking the increase in public expenditure outside the comprehensive spending review mechanism was unwise.
  It was the Chancellor himself who said, in last year's Budget statement, that in no circumstances would he unravel a three-year expenditure commitment until the end of that three year period. So why—I think I know the answer to this question; I think the reasons are entirely political—have the Government, in the middle of that period, lurched into an uncomprehensive spending review, doling out a bit of money here and a bit of money there before the spending review period ends in July this year? That is the question that I asked on the television programme, and I was right to ask it.
  What we already see in the Bill is a picture of not just higher taxes but more taxes, and more complicated taxes. The best illustration is the new energy tax—the so-called climate change levy to which the Chief Secretary referred. As the more alert Government Back Benchers will know by now, the tax does a great deal of damage to manufacturing industries, especially those that are exposed to international competition. It is also completely unnecessary. The reductions in carbon dioxide emissions could be achieved at a fraction of the cost by many other means. Earlier this afternoon, we heard that the moratorium on gas-fired generation is to be removed. If that is the case, that will be a better, more efficient and cheaper way in which to achieve the reduction in greenhouse gas emissions.
  It is an unnecessary tax in another sense. Only certain industries will be able to negotiate rebates; that privilege will be given only to certain sectors of British industry. What should concern the House is that the rebates will be agreed not by the House, or even by Ministers, but by civil servants, so we are, in effect, asked to delegate to civil servants the right to tax.
  Dr. Nick Palmer.: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: Will the hon. Gentleman forgive me? I shall make a little more progress.
  The main point about the energy tax is its sheer complexity. I declare an interest. I am a company director and will be affected by that part of the Bill, but I am in good company. Every other business in the country, of whatever size, will have to pay the tax.
  Schedule 6, which brings in the energy tax, runs to 83 pages, so every business in the country, from ICI to the corner shop, must somehow make sense of a schedule running to that length. It is not just the length of it, but the language. Almost at random, I picked out the following provision. I have mentioned electricity rebates. They are to be calculated by treatment of supply
  as a reduced-rate supply to the extent (if any) that the exempt renewable supplies made by the supplier in the averaging period would have been reduced-rate supplies if they had not been made on the basis that they were exempt.

  725
  I defy anyone to make sense of such a provision. It is pure gobbledegook, but everyone will have to understand it. Everyone will have to calculate that ludicrous and unnecessary levy, and that example was pulled out at random.
  The tax is complicated, unnecessary and damaging. There are many other examples.
  Mr. Andrew Smith: Is the Conservative party prepared to repeal it, then?
  Mr. Heathcoat-Amory: We are absolutely committed to meeting the Kyoto target for carbon dioxide and greenhouse gas emissions. We will not support a tax that does it in an entirely unnecessary and damaging way. We will fight the tax to the Report stage, when it comes back to the House and beyond that. We are adamantly and completely against unnecessary and complex taxation on that scale.
  Mr. Geraint Davies: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: No. I will not give way again.
  What we get from the Government is all the waffle about working with business—all the talk of partnership. Partnership is the word of the moment, but their idea of partnership is similar to that of the black widow spider. Zoologists in the House will know that it gets what it wants and then the partner is dead—like the British motor industry, as it is discovering to its cost. I shall not discuss the goings-on at the Department of Trade and Industry—they are almost beyond parody—the farcical attempts at a competition policy, the substantial withdrawal of the Utilities Bill, or the goings-on over Rover, but the point is that the Treasury has adopted the same attitude towards business.
  As the House will remember, last year, the Treasury smuggled out a proposed change to the self-employed status of those working in so-called service companies: IR35. Instead of announcing it on Budget day, or in the Budget speech, the change appeared in the 35th press release: that is why it is called IR35. It is highly and hugely damaging to the British high-tech labour market.
  It is therefore not surprising that the British Chambers of Commerce has added the cost of IR35 to its burden barometer. It calculates—it gets its figures from the Government' s regulatory impact assessments—that the cumulative regulatory burden on British industry over this Parliament totals just over £10 billion. That is a terrifying indictment of the Government's attitude towards industry.
  Dr. Palmer: In view of the right hon. Gentleman's strictures on IR35, will he explain why the Conservative party did not divide the House when the matter came up at the end of the Budget debate? Will he give a commitment that a Conservative Government would repeal it?
  Mr. Heathcoat-Amory: Perhaps we took the Government at their word when they said that they were reviewing and consulting on IR35. In retrospect, we were wrong to do so. Not only have the employees concerned been let down; we have been betrayed by Government
  726
  assurances that they wish to work with businesses. Yes, we shall be opposing the clauses that seek to implement IR35.
  Kali Mountford: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: If the hon. Lady will forgive me, having given way to her already, I should like to make some progress.
  Following IR35 last year, the Government are in this Finance Bill attacking controlled foreign companies and double-taxation relief, to which the Chief Secretary referred. The trouble is that, although that was cooked up in the Treasury, people in the accountancy profession know a great deal more about the matter and have shown that the cost to British industry will not be the £300 million in the Budget document but many billions of pounds.
  As Governments all over the world are discovering, if a tax jurisdiction is run to the detriment of internationally mobile businesses, such businesses simply disappear. Perhaps that is how the Government square their arithmetic. Perhaps the small additional revenue is because the companies concerned will leave the country and not pay tax at all. Is that what the Government really understand by a partnership with British industry? I want confirmation from the Government this afternoon: will they proceed with such damaging proposals or will they withdraw them? We need an answer because the very uncertainty is damaging.
  There is an important wider issue. The Government inherited from us three years ago a world-class economy. People came here to do business; we were a magnet to global business. That is not a permanent state of grace; it has to be worked at and kept in repair. The Government simply do not understand that one cannot run a taxation policy without regard to such wider global dimensions. The Government's little Englander approach on tax is unsustainable. I shall give the House another example.
  Let us consider excise duties. The Government's endless increase in hydrocarbon fuel, alcohol and tobacco duties has at last, in one sense, been stopped. They have at last ended the fuel escalator of 6 per cent. in real terms, but the damage has already been done. Those of us on the Opposition Benches cannot be the only ones who receive letters from haulage firms that have been made uncompetitive—at least in European terms.
  More than that, we are losing revenue. Instead of filling up in this country, vehicles do so in Calais. Not only are the Government undermining the British haulage industry, they are losing revenue. They have cheated on that, too. The Chancellor said in his Budget speech that he was going to increase road fuel duty only in line with inflation. He did not, however, say that he had changed the definition. Rather than increasing the duty in line with actual inflation, he is now predicting an inflation rate of 3.4 per cent. When we were in office, we always used an actual inflation rate. Now, the Government are using a predicted inflation rate, of 3.4 per cent. This year, that change will net the Treasury an extra £500 million.

  727
  Therefore, even when the Government come off the fuel escalator, as we have been demanding, they cannot resist pocketing an extra £500 million.
  Sir Brian Mawhinney: I have noticed that the Chancellor has been using that 3.4 per cent. inflation rate. However, I thought that the Government's policy was never to allow inflation to exceed 2.5 per cent.
  Mr. Heathcoat-Amory: Exactly; I think that we are owed an explanation. The Chancellor said in his Budget speech that the duty will increase in line with inflation. He has an inflation target of 2.5 per cent. Why is the duty increasing by 3.4 per cent? My right hon. Friend has asked a good question, to which we need an answer.
  Mr. Gardiner: Will the right hon. Gentleman give way?
  Mr. Heathcoat-Amory: I shall give way one more time.
  Mr. Gardiner: Does the right hon. Gentleman not know—if he does know, will he not accept—that different sectors of the economy have different inflation rates? Specifically, when he talks of inflation in the health service, he carefully does not use the same inflation rate that he uses when talking about the retail prices index.
  Mr. Heathcoat-Amory: That is one of the feeblest explanations that I have heard. I think that we should all expect a slightly more convincing explanation from Ministers.
  The point that I wish to raise now is the excise duty increases on beer and tobacco. Smuggling of those products has become an epidemic. The Government's own figures show that more than one in five of the cigarettes smoked in the United Kingdom are smuggled in, and that 80 per cent. of the hand-rolling tobacco smoked here is similarly illegally imported. The Government have said in their own review document that
  Smuggling is on a strong upward trend.
  Last year, revenue from tobacco decreased by £2.5 billion. The Government say that they want to give some extra money from that source to the health service. It is just as well that they were not planning to do it last year. If they had, this year, there would be a cut in the allocation to the national health service budget.
  The Revenue is being undermined, and so is the health strategy. Smoking is on the increase, particularly among young people. Moreover, the trade is now being taken over by criminal gangs, who are selling in uncontrolled outlets. The Government—or at least the Home Office—lectures the licensed trade about responsible drinking and tobacconist shops about not selling tobacco to minors, but, because of their own excise duty policy, they are undermining that legitimate trade.
  We therefore have a failed tax policy, a failed health policy and a failed crime policy. What are the Government doing about it? They are increasing the duty on tobacco products by another 5 per cent. in real terms, making a bad situation worse. That is what we mean by
  728
  saying that the Government are pursuing a little-Englander tax policy, in defiance of the logic of the single market in Europe.
  Mr. Martin Taylor was commissioned by the Government to report on that very subject. His report has never been published. Why? It is leaked that the report has not been published because Mr. Taylor drew the obvious conclusion that, if we are to tackle the smuggling epidemic, we must tackle the cause—which is the wide and growing duty differential between the United Kingdom and the continent. The Government will never solve the smuggling problem until they recognise that fact and do something about it. However, Mr. Taylor's report—which is too embarrassing to publish—has simply been suppressed.
  The Government, rather than tackling that cause of crime, will try to tackle the crime itself by deploying another 1,000 Customs and Excise officers. I tell the Government that that will simply not work unless and until the Treasury recognises the logic of the single market in Europe. We will not agree to the duty increases until the Government not just commission, but publish an independent study into the causes and consequences of the smuggling epidemic.
  There are plenty of other examples of how the Government are defying the international tax facts of life, such as stamp duty on shares. We read that the London stock market may merge with the German stock market. That will be handicapped and undermined unless the Government take seriously the problem of us having stamp duty on share transactions and the Germans not having it. Equally, everyone knows that many people bet on horses through telephone or internet betting in a jurisdiction with no betting tax. The Government have refused to face up to the problem, or even to study it.
  We created a low-tax jurisdiction in this country. That is part of the golden economic legacy that the Government are demolishing. They—or rather the country—will pay the price of lost revenue, lost business and, because of their efforts to shore up the tax system, increased regulations and complexity.
  The Government's answer to everything is more officials, more rules and more civil servants. Maybe that helps to answer a question that one of my hon. Friends asked earlier: what is happening to all the extra tax money? It cannot be just Conservative Members who are asked that. When people are paying all those extra taxes, they want to know why public services are not only not getting better, but getting worse? Why do people now have to join a waiting list to get on a waiting list to see a consultant? We now have at least part of the answer. The cost of central Government has risen under this Government by £2 billion a year. In case the Government are inclined to dispute that, it is spelled out in the Budget documents.
  Mr. Leslie: Where?
  Mr. Heathcoat-Amory: The hon. Gentleman need only go to the Vote Office, get out Command Paper 4601 and turn to page 60, where he will find helpfully laid out the gross administrative expenditure by Department. If he glances at the bottom line, he will see that the cost of

  729
  central Government was flat in our last three years. Since then, it has risen by £2 billion a year. That is the cost of a Labour Government.
  Mr. Leslie indicated dissent.
  Mr. Heathcoat-Amory: The hon. Gentleman shakes his head. He is taking issue with a document produced by his own Government. It is all here in black and white—an extra £2 billion a year. There may be no more policemen in our constituencies, but there are more special advisers in Government Departments. There may not be enough nurses in the NHS, but there are plenty of politicians in it, and they are all being paid for out of that extra £2 billion a year.
  We have got to the secret in the Bill. Among all the verbiage, all the extra schedules and all its 500 pages, the truth is that it is a summary—practically an embodiment—of the Government. It taxes more and delivers less. That is why we shall oppose it.
  5.29 pm
  Mr. Giles Radice.: The Treasury Select Committee report is tagged to this debate, so I hope that hon. Members will forgive me if I say something about it. In the Budget debate, I warmly welcomed the measures proposed, including the increases in health and education spending, the working families tax credit, child benefit and winter fuel allowances. I repeat that welcome this afternoon, particularly because the measures have strong support in my constituency, which, as hon. Members will know, is in Labour's heartlands.
  I want to speak in my role as Chairman of the Treasury Committee.
  Mr. Quentin Davies: Will the hon. Gentleman give way?
  Mr. Radice: I have hardly said a word yet.
  Mr. Davies: That is precisely why I wanted to intervene now: I do not want to throw the right hon. Gentleman off when he has got into his stride—not that it is easy to do that. As Chairman of the Treasury Committee, will he note that paragraph 25 of the Committee's report on the Budget explicitly confirms the point that I put to the Chief Secretary, which he refused to acknowledge and tried to run away from? It says:
  there will be a discretionary loosening of the fiscal stance in each financial year over the period 2000–01 to 2003–04 …
  Is it not extraordinary that a Labour Chief Secretary refuses to acknowledge the clear, explicit conclusion of a Treasury Committee with a majority of Labour members?
  Mr. Radice: I shall come to that point in a moment. The role of the Treasury Committee is not to provide opposition to the Government—which many political commentators think that we should do, because the official Opposition are not making much of a fist of it—but to make Ministers and civil servants open, transparent and accountable. That is what we try to do.
  This is our third report on the Budget in this Parliament, and our fifth report this Session. We congratulate the Government on the effectiveness of the pre-Budget report
  730
  process as an aid to openness and consultation. The Government consulted on the 12 measures in the pre-Budget report, and all are in the Bill. Some changes have resulted from the consultation. That, I believe, is open government in action.
  We also congratulate the Government on "Analysing UK Fiscal Policy". That document is a useful background paper on which both supporters and critics of Government policy have drawn heavily. The Government have been questioned on their fiscal stance precisely because people have been able to read that document and see how the calculations are done. We asked the Government to show the distributional effects of the Budget. There are gains for families, but we would have liked the Government to go further and display the impact on all households.
  I want to return to that hoary annual—the tax burden. Table 5 in our report showed clearly that, taking into account the Budget, the pre-Budget and last year's Budget, taxes are falling. The figure for the tax burden—the tax take as a percentage of gross domestic product—depends on whether we count working families tax credit as a tax. If we do—and the Government's preferred measure, the net tax and social security contributions, does—the burden falls between 1998–99 and 2000–01. If we do not count the working families tax credit, and use the measure of current receipts, which are in the Red Book, the tax burden rises.
  To put that in context, and bearing in mind the presence of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), his plan in the November 1996 Budget was for taxes to rise higher, on the measure of net taxes and social security contributions, in 1999–2000 and 2000–01, than is predicted in the most recent Budget.
  Mr. Geraint Davies: Did my right hon. Friend agree with the right hon. and learned Member for Rushcliffe (Mr. Clarke), the former Chancellor, when he described borrowing as deferred taxation in an earlier Budget debate? If we take borrowing and taxation together, that clearly shows that levels of taxation have gone down. If we were at the same level as in 1996–97, we would have had to raise income tax by 7p.
  Mr. Radice: That is an interesting theory.
  Mr. Davies: It is a fact.
  Mr. Radice: To put it more charitably, it is an interesting way of looking at the issue. It is also legitimate, and I have no objection to different ways of calculating the tax burden as long as they are laid out in the Red Book, as they are.
  The working families tax credit is not counted as tax, according to present accounting conventions. However, as it is a new scheme and as the plan is to extend it to children and pensioners, in a move to what might be better termed a negative income tax, we say in our report that there is a strong case for reviewing accounting conventions and for considering whether it should be scored in as a tax.
  We have not included my next point in our report, but to put the debate in context, the fact is that if one is going to bring down the public sector borrowing requirement, as the right hon. and learned Member for Rushcliffe did

  731
  and as my right hon. Friend the Chancellor has, taxes are bound to go up, as they did under the right hon. and learned Gentleman and—in the case of indirect taxes—in the first two years of this Government. Following on from that, it is obvious that fiscal drag and economic growth put up the tax burden and the tax take as a percentage of GDP. So we should not make such an issue of that point and, in our report, we tried to put it into context. After all, our job as a Select Committee is to try to shed some light on the debate.
  If one reads the background document that the Government produced, which analyses fiscal policy, one realises that there is a difference between a relative change and an absolute change. The relative change is the difference between the Budget stance this year and what was forecast in last year's Red Book. The absolute change is the difference between the Budget stance and last year's outturn. On the first measure, we will undoubtedly see fiscal tightening in 2000–01 and 2001–02, but on the second measure we will see what Kate Barker of the CBI, who gave evidence before our Committee, described as a "slight loosening" in 2000–01 compared with 1999–2000.
  The question then arises of whether we can afford the increase in public spending that has taken place. My answer is yes, because since 1996–97 we have experienced a 4.2 per cent. tightening, which is the equivalent of £40 billion. The public finances are unquestionably in good shape. The further question arises of whether the fiscal stance is supporting the monetary policy. It is on that issue that some City economists and the IMF have raised some questions, although they have been a matter more of qualification than of outright criticism. If one accepts that some loosening has occurred, it has only been very marginal. Indeed, the Monetary Policy Committee did not change interest rates in March or April. As my right hon. Friend the Chief Secretary to the Treasury said, the deputy Governor of the Bank of England believed that the impact of the Budget on monetary policy was slight.
  The debate was best summed up by Peter Riddell in The Times. Likening it to the question of whether a glass was half full or half empty, he pointed out that the relaxation was very small—much less than the tightening that happened each year since 1997, which the right hon. and learned Member for Rushcliffe, the former Chancellor, has described as too severe. That perhaps sets the matter in context.
  Mr. Edward Davey: Will the right hon. Gentleman confirm that the specialist advisers to the Select Committee said that fiscal policy was not supporting monetary policy and that it was going in the other direction?
  Mr. Radice: Some did, some did not: like special advisers everywhere, their opinions were divided. A slight divergence between fiscal and monetary policies may not be that important, and I assume that that is why the deputy Governor said that the Budget's impact on monetary policy was slight. We should probably heed his voice even more than the voices of our advisers—but that may be unfair to everyone involved.
  The Select Committee report shows that fast growth has been combined with low inflation, and that the public finances are still in good shape. It supports the idea of
  732
  setting an inflation target for the Monetary Policy Committee of 2.5 per cent., which should be the MPC's prime objective. It is concerned about the strength of sterling and its impact on manufacturing—as anyone who studies the situation must be—but believes that most of that strength is due to the weakness of the euro, rather than to anything that the Government or the MPC have done, and that the problem may right itself over the next 18 months or so.
  Mr. Geraint Davies: Did the Select Committee support the Liberal Democrat party's alternative Budget, whose main proposal was that income tax should be raised by 1p, regardless of the level inherited?
  Mr. Radice: I do not think that the Committee considered the proposal. No doubt we would have considered it if it had been brought to our attention.
  The Select Committee's report found that the Bank of England's Monetary Policy Committee must take into account the exchange rate when coming to a decision about inflation. That is very sensible.
  In conclusion, some commentators—usually in newspapers that are hostile to the Government—have said that the Select Committee report is critical of the Government. However, although Labour Members form the majority in the Committee and the rest of its membership comes from Opposition parties, it broadly supports the Government's economic policy.
  5.43 pm
  Mr. Kenneth Clarke.: I begin by declaring a personal interest to the House. Not only do I pay income tax, smoke, drive a car and occasionally have a drink, but I am also, as the Register of Members' Interests shows, a non-executive director of four limited companies in this country. Those companies are affected by various proposals in the Bill. I do not think that that marks me out particularly, as almost every company in this country is likely to be adversely affected by the Budget. The Budget statement and the Bill show that the Government's claims to be business friendly are looking very frayed indeed.
  The Government took over a very good economic environment for the real economy—we had striven to enable British companies to make themselves competitive in global markets. At times, the Government's positively anti-business stance has steadily undermined that, as I think that this debate will make clear.
  The Budgets and resulting Finance Bills produced by the Government are difficult to penetrate. I accept that the process has never been totally comprehensible to ordinary members of the public. However, we always answered embarrassing parliamentary questions. We acknowledged when we were increasing taxation and when we were reducing it. We produced the fiscal judgment in a clear and comprehensible form, and we exposed ourselves to criticism, sometimes on that account.
  Budget speeches, as given by the Chancellor, are extremely uninformative and, quite often, misleading. They are short political speeches. The Red Book is completely obscure, and much parliamentary questioning is straightforwardly avoided if the result is to give an embarrassing answer. The Finance Bill itself is quite enormous. I remember how we struggled to move towards

  733
  expressing a Bill in plain English, and to ensure that the drafting was such that it would eventually produce shorter Bills. The only thing that is clear from the front page of this Bill is that it apparently complies with the European convention on human rights—unless accountants have any claim, through being required to pick up heavy loads. The thing is utterly incomprehensible and impenetrable to ordinary members of the public, and it does not shed much light on what the Government will do.
  I said that the climate for business was worsened by this. The overall effect of the Budget is to carry on the Government's policy of increasing the burden of taxation. The Government have increased the overall burden of taxation on most ordinary families, although I accept that families on low pay, probably with a single parent, have benefited. They have also increased the tax burden on business, and are continuing to do so. What is most alarming, when one looks at the judgment behind the Budget, is that the Government almost certainly intend to continue increasing the tax burden on both the public and business.
  We have reached a stage where the economy is recovering from a near-recession at the end of 1998 and early 1999, and recovering quite strongly. The Government boast that there was no recession; they are extremely lucky to be able to make that boast. We had six months in which there was no growth at all, but we did not have the two successive quarters of negative growth that most people were anticipating.
  Recovery is now quite strong, but business is facing substantial difficulties. One is the tax burden; another is the mounting pile of red tape and bureaucracy that all sectors of business face. Another difficulty, on which the Budget and Finance Bill have a bearing, is the excessive strength of the pound. We are plainly going to have a floating exchange rate for the next two or three years at least. The exchange rate has floated upwards to a quite unpredictable level, and no one expected to see that. When I was Chancellor, the pound was usually at DM2.50 against the German currency. Much of British manufacturing and agriculture and many British exporters find the present exchange rate of DM3.25 quite insupportable. It is no good the Chancellor lecturing us about the need to raise productivity to cope with the strength of the pound. I accept that a strong currency has a beneficial effect on encouraging people to raise productivity, but one cannot possibly raise productivity to cope with the extraordinary increase in the value of the pound. Therefore, we must consider what the Government's tax and fiscal policies are likely to do to the exchange rate.
  I challenge the frightful hand-wringing about the exchange rate, sometimes from the Bank of England but equally strongly from the Government. It is no good saying that one understands how much many parts of the country and many sections of business are suffering because of the strong pound, if one implies in the next breath that, although one is aware of it, there is—sadly—nothing that can be done. I do not agree with that.
  Mr. Christopher Gill.: I am most grateful to my right hon. and learned Friend for giving way. Does he consider that, as our trade with the European Union represents less than 12 per cent. of gross domestic product, it would be more appropriate and significant to consider the strength of the pound relative to the US dollar? For example, will he tell us what the exchange
  734
  rate with the US dollar was, when he was Chancellor? Would he explain by how much, or—more significantly—by how little, it has changed since then?
  Mr. Clarke: I am taken by surprise by my hon. Friend's figure. I suspect that its source lies in some remark made by the present Chancellor; it has the ring of some of his more popular slogans on the tax burden and other matters. Our major market is the EU; it is significant that we have a strong pound. I was steering away from the question of whether we shall continue to have a floating pound, but we should all agree that it is no good going into a state of denial about the damaging effect that that has on farming—in my hon. Friend's constituency and in mine—and on manufacturing across great swathes of the country.
  Mr. Roger Casale.: Will the right hon. and learned Gentleman give way?
  Mr. Geraint Davies rose—
  Mr. Clarke: The hon. Gentleman has already made many interventions; I give way to the hon. Member for Wimbledon (Mr. Casale).
  Mr. Casale: I am grateful to the right hon. and learned Gentleman. Given his well-known pro-European views, what I am about to say does not apply to him. However, does he not despair at the incoherent voices of the Opposition, who berate the pound for being so high and for having a negative effect—supposedly—on manufacturing, while saying that they will never see Britain join the euro, whatever the economic costs?
  Mr. Clarke: I am sure that the hon. Gentleman does not want to draw me into a dispute with any of my right hon. and hon. Friends. I merely point out that, as long as one has a floating pound, it is not sensible to maintain a policy of complete neglect as to its level. That matter must be borne in mind by a Chancellor, when he makes his Budget judgments—as it must be by the governor of the central bank and his colleagues when they make judgments on monetary policy.
  Liz Blackman.rose—
  Mr. Clarke: I shall make a little more progress; I know which subject I shall be drawn into if I give way.
  In any view, the present situation is undoubtedly damaging. People are out of touch with farmers or manufacturers if they do not believe that. It is also quickly producing a deteriorating balance of payments position. Our balance of trade was positive in 1997, but it is now rapidly deteriorating. That, too, has a negative effect on growth and thus a negative effect on our ability to create wealth and to make jobs secure.
  Mr. Andrew Love rose—
  Mr. Clarke: No, I shall not give way.
  Behind the Budget lies the question asked by the right hon. Member for North Durham (Mr. Radice), in his customary erudite fashion, as to whether the Budget is supporting monetary policy. The extremely tight monetary

  735
  policy maintained by the Monetary Policy Committee of the Bank of England is one of the things that is keeping the pound so high. Our interest rates are almost double those that prevail on the continent. We can see how tight our monetary policy is in real terms when we consider the fact that we have the lowest inflation rate of any member state in the EU. Our real rates are extremely high; that is one reason why the pound is so very strong.
  To use the right hon. Gentleman's phrase, does fiscal policy support monetary policy in the Budget? The two must have a relationship, so we would hope that the Chancellor would pursue a fiscal policy that discourages the MPC from making monetary policy any tighter and thus postponing even further the date at which the pound might return to a level that was nearer to trading realities.
  The Chancellor can bring down the rate of exchange in two ways. The best way would be for him to stick to his former girl friend, Prudence, and to maintain a prudent fiscal policy—to keep fiscal policy tighter than it might otherwise be—in order to signal to the Bank that it does not need to tighten monetary policy and raise interest rates so fast to keep inflation down.
  The worst way would be to have a lax fiscal policy, so that the signal to the markets was that control of the balance between spending and taxation was being lost, that borrowing in the medium to longer term is likely to start to soar and that the rate would be brought down in that way.
  At least the Chancellor prefers to talk about the first option, and seems—just about—to be holding to it, in the judgment of the MPC. However, he uses rather meaningless phrases to describe what he has actually done. He overstated the point in the Budget speech. On Budget day—relying, as I did, on the Budget speech—when I heard his descriptions of how the fiscal position was even tighter than it had been in November, I was quite impressed.
  However, as has already been revealed, in an intervention from the hon. Member for Kingston and Surbiton (Mr. Davey) and—if one listened carefully—in the speech of the right hon. Member for North Durham, that does not quite stack up when looks at the matter more closely and asks by what comparison the fiscal position is becoming tighter. All the talk of locking in fiscal tightening and prudence turns out to be fairly meaningless, because there is no doubt that, on balance, and especially in the medium to longer-term, the Budget represents a considerable loosening of policy.
  The IMF warning was couched quite modestly; it should be taken seriously. It is no good for the Government to wave it away. I applauded what they did just before the Budget. They took a step further towards the policy that I had introduced, on behalf of the previous Conservative Government, of openness on the IMF report. We initiated the policy of exposing the article IV reports by the IMF on British economic management. Just before the Budget, the Chancellor did the same thing and, for the first time, published the complete statement. He was full of pride in that achievement. He stated:
  The publication of the IMF's report on the UK economy clearly demonstrates our commitment to open up the IMF's scrutiny process. Today marks an important step forward by the UK in economic policy making.
  736
  The IMF made an extremely sensible comment on the overall effect of the Budget. The IMF plainly believes that fiscal policy no longer wholly supports monetary policy; that also seems to be the conclusion of the Select Committee on the Treasury. Suddenly, the Chancellor is dismissive. He gave a radio interview during which he returned to that meaningless string of phrases—about locking in fiscal discipline and prudence—that he always employs whatever the question, but he has not done that.
  To be fair, the immediate outlook is reasonable, if fiscal policy is fairly tight; we are at the stage in the cycle where we are running into a surplus. That was always predictable. The policy of the previous Conservative Government was, first, to reduce the then excessive borrowing and, then, to aim for a policy under which one balanced budgets over the cycle. That is a wholly desirable policy. The Government are running a surplus because they inherited the benefits of that policy. They have roughly maintained the course that was projected; indeed, they have speeded it up slightly—by raising taxation and by underestimating their tax revenues. It looks as though they will run a large surplus for the next year or two. However, the intervention made by the hon. Member for Kingston and Surbiton is unanswerable. Although we are entering that desirable surplus, there is absolutely no doubt that the Budget and the Bill make that surplus smaller and shorter than it would have been.
  The right hon. Member for North Durham, on behalf of the Treasury Committee, offered us two ways of considering the matter. The first was the Chancellor's way, in which one made a comparison with his forecast in November. The second way, which the rest of us prefer, would be to compare the situation with what it would have been without the Budget.
  The Chancellor fooled me on Budget day; it is true that, compared with his forecasts, the policy looks tighter, but that is because he got his forecast wrong. He had underestimated the revenues that he would produce. He found that revenue was pouring in on a greater scale and he used it—he spent it. The result of the Budget is that the Chancellor has actually loosened policy. The Bank should be looking two years ahead, so members of the Monetary Policy Committee may say, "For the time being, this does not cause us to think about raising interest rates any more than we previously would have done." They should be looking at a two-year time scale—I hope that they are, for the sake of British industry. However, there is absolutely no doubt that, looking further ahead, this is a loosening of policy, and a serious one, because the Government are losing control of public spending.
  Under the influence of questioning on the David Frost programme, a well-known consultant who has become a Labour life peer admitted that the Government have abandoned their previous approach to public spending and are producing popular announcements—desirable announcements, which no one can be tempted into opposing—of future levels of expenditure on health, education and transport, with no indication of how they might accommodate those within an overall total of public spending that might make sense in two, three or four years' time.
  The difficult question of, "How are you going to fit this in?", is no longer being addressed in the context of a three-year spending review; it is being addressed in the context of, "Do not ask that question. Let us think of

  737
  answering that after the next general election, once we have got back. Meanwhile, let us hold out these goodies for the future and see what happens as we go along."
  Mr. Matthew Taylor.rose—
  Mr. Radice rose—
  Mr. Clarke: I give way one more time, to the hon. Member for Truro and St. Austell (Mr. Taylor).
  Mr. Taylor: I very much agree with what the right hon. and learned Gentleman says about fiscal loosening. In view of his kind comments about the Liberal Democrats, it feels unfair to ask the question, but is there not a problem for the Conservative Front-Bench team, given that it has now announced that it will adopt the Government's spending programme—which the right hon. and learned Gentleman has just described—and cut tax on top? Therefore, if there is a problem with fiscal loosening on the Government side, there is undoubtedly one on the Conservative side.
  Mr. Clarke: I hope and believe that my party has addressed this subject in the context of a structured approach to public spending. Anyone who makes it one of their objectives to reduce the level of taxation during the life of a Parliament is placing on themselves some constraints when it comes to taking a proper, sensible approach to judging public spending priorities across the board. If one promises to do so, one may face some tight public spending rounds occasionally. If one commits oneself—as we always committed ourselves—to increased spending on health and education, one faces some difficult global choices in other areas, depending on how the economy goes. The Government have given that up entirely.
  In July 1998, the Chancellor lectured the House about his structured approach to public spending. He announced the three-year comprehensive spending reviews—of which I, and I think the Liberals, always said, "He will never stick to it. It is not possible. It is all nonsense." However, the Chancellor addressed the subject on a serious basis. He assured us that two things were essential. As he moved, foolishly, from an annual cycle to a three-year cycle, he said, first, that he would stick to it and no new resources would be added during the three years; and secondly, that, when he reached the comprehensive spending review for next three years, any new resources would be conditional on reforms—
  money, but only in return for modernisation—[Official Report,14 July 1998; Vol. 316, c. 187.].
  All that it required was the Frost programme and the Prime Minister in a panic, and both of those rules were abandoned.
  Mr. Andrew Smith: Does the right hon. and learned Gentleman accept that, even with the additions to expenditure for the last two years of the three-year spending period announced in this Budget, total managed expenditure, on comparable figures, is lower than the amount originally announced in the comprehensive spending review?
  Mr. Clarke: I will study that delphic sentence because I suspect that, like many others, it disguises the facts.
  738
  First, it disguises the fact, which was the basis on which the first announcement was made to the House, that substantial increases in public spending have already been made within the previous three-year period, despite the fact that no modernisation has been delivered—and with no policy on how to achieve any more reform, because the Prime Minister and the Cabinet Committee are working on that and will let us know by June.
  The best forecast that I have seen for the three years thereafter, before the comprehensive spending review has started for most Departments, based on what has been announced, is the PricewaterhouseCoopers forecast that total managed spending will rise by 3.7 per cent. a year in real terms over the next four years. That figure is well in advance of any likely growth in the economy, and certainly well above the trend growth that the Government adhere to.
  That is why the Chancellor is raising taxes and why, in my opinion, he will continue to do so, especially after the next general election, because, if he carries on like this, he will certainly need to raise taxes after the next election. And he raises the wrong taxes. My party has always called them stealth taxes. Anything that cannot be understood in the hundreds of pages of the Finance Bill is used to raise revenue. He raises taxes on fuel, which went far too high last year, and he has misled a lot of people this year into believing that he has not raised them again. He has made our haulage industry extremely uncompetitive and we are saddled with the highest taxes in Europe.
  The taxes on business do particular harm. I shall not discuss the tax arrangements for foreign dividends at length because two companies with which I am involved undoubtedly have an interest, but there is no way in which that change could be described as anything other than unfriendly to British companies doing international business. It was not consulted on properly. No one anticipated that the arrangements for mixing foreign dividends would be re-opened. The Treasury grossly underestimated the impact of the change; it got the likely revenue all wrong. The change will actually raise substantial sums, and I have no doubt that it will emerge that that is having a marked effect on many British companies with an international business. It makes this country, in yet another way, a less attractive place than it was as a base for international companies, makes it less attractive to make overseas investments and places some companies at a competitive disadvantage to international companies based in other countries.
  The climate change levy is a disgraceful way of raising revenue, using an environmental cloak. I am all in favour of environmental taxes. We introduced the landfill tax. We were contemplating more. We were so anxious to avoid increasing the burden on business that we always offset any increases by reducing the employer's national insurance contribution. We cut a tax on jobs to relieve a burden on business at the same time as we raised the landfill tax. That has now been abandoned. The climate change levy, the increases in the landfill tax, and the aggregates tax are good little earners for the Treasury. The Government are using them as revenue raisers. They know that they can dress up the revenue raisers with an environmental cloak. As a result, extraordinary damage is being done to industry.
  Even the stamp duty changes, which were obviously popular with the Labour party because they seem likely to affect wealthier individuals, have an adverse economic

  739
  effect. One of the things that we need in this country is more mobility. In the new economy, it may be necessary for people to move in and out of, let us say, the south-east of England. The effect of the stamp duty is extraordinary. All the changes to stamp duty on housing since the Government came to power have tripled the stamp duty on houses over £250,000 and quadrupled the stamp duty on house sales of over £500,000. That is just the taxation of envy, and it will have some adverse effects as well.
  The likely effect of all this will come home over the next few years, and we shall see an end to prudence. Prudence has not been locked up; Prudence has been let out and is gone and, after the election, from 2002 onwards, the Government will face more difficulties because the Government's economic inheritance will be steadily dissipated.
  Mr. Gardiner: Will the right hon. and learned Gentleman give way?
  Mr. Clarke: I am in my last few sentences, so I will not.
  The Government are slowly losing control. They took over an improving situation—a good situation. They have not wrecked it, which has surprised the electorate because Labour Governments usually did wreck these things quite quickly, but it is steadily eroding.
  The Government are turning into an old tax-and-spend Government after all. At first, they taxed a lot and did not spend very much. Now they are spending more and they will have to tax some more and, as they go along, they keep finding ever more ways of taxing that damage business, and therefore employment and wealth creation. It is tax now, promise to spend later—and perhaps they will sort out how to run a proper macro-economic policy when the time comes if they are still in office in 2002. That is the irresponsibility that lies behind the Budget and this Bill.
  6.10 pm
  Mr. Denzil Davies (Llanelli): I will not be tempted to follow the right hon. and learned Member for Rushcliffe (Mr. Clarke), the former Chancellor, in his rather rambling speech. Towards its end, he told us that he was rather worried that Prudence was going to be let out. Some Labour Members think that Prudence should occasionally have fun, but we are confident that my right hon. Friend the Chancellor of the Exchequer, being a good, solid son of a Scottish manse, will ensure that Prudence does not have too much fun. That perhaps sums up the Budget.
  The right hon. and learned Gentleman was right to some extent about the strength of sterling, and it is not easy to know what to do about that. My right hon. Friend the Member for North Durham (Mr. Radice) made the good point that we must also consider the weakness of the euro, but I shall not pursue that point because I want to make a short and boring speech about a small provision in one of the Bill's schedules. However, the euro is in difficulty because of structural problems in Europe. Those problems are not related to inflexible labour markets, but the financial community and those who shift large sums of capital around the world have moved money out of
  740
  Europe because they see structural problems in Europe and with the euro. They are probably one of the main reasons for money going into the dollar. The Japanese bought far too many euros and burned their fingers doing so. They are moving money out as well, so there are real problems. Of course, the counterpart of the strength of sterling is the weakness of the euro.
  I shall be boring and brief as I consider a small provision in the Bill. It is foreshadowed by clause 102, but my point is not about controlled foreign companies so I do not want the Opposition to get excited about that. The clause foreshadows schedule 30, which is as long and rambling—and perhaps even more complex—than the speech of the right hon. and learned Member for Rushcliffe. It is certainly as long and rambling because it deals with a few provisions relating to double taxation relief in its various forms.
  I refer briefly to paragraph 4 of schedule 30. I will not say much about it except to point out that the notes on clauses are very helpful. [Interruption.] The hon. Member for Kingston and Surbiton (Mr. Davey) guffaws, but paragraphs 8 and 9 of the notes on clause 102 are very helpful. Paragraph 8 states that paragraph 4 of schedule 30 amends two sections of the Taxes Act 1988
  so as to provide for the allowance of credit relief for foreign tax to non-resident persons (companies and individuals) who have branches or agencies in the United Kingdom.
  Paragraph 9 of the notes adds:
  In future, credit relief will be available to all non-resident taxpayers with United Kingdom branches or agencies, in respect of taxes paid other than in the taxpayer's home state.
  Clause 102 is a consequence of a decision taken by the European Court of Justice. I am glad to see that my hon. Friend the Paymaster General accepts that point even though it is not made clear in the notes on clauses. On 21 September 1999, the court held that a French company that was not resident for tax purposes in Germany—it was resident in France even though it had a branch in Germany—could have the same rights to foreign tax relief as would be given to a German resident company. That sounds boring.
  A case was brought by a French company against the German tax authorities, which the court held were acting contrary to European Union treaties because they were deemed to be discriminating against the French national company even though it was not resident in Germany but merely had a branch there. It decided that because the French company had a branch in Germany, it was entitled to have credit for all foreign taxes from all over the world in the same way that a German resident company would. The European Court of Justice considered that the provision upheld by the German tax authorities was discriminatory, so it struck it down.
  Several points need to be made about that judgment. First, it gave the lie to the belief—if some people still held to it—that European Union treaties have no jurisdiction over direct taxation, by which I mean income tax and corporation tax. Before the court will act, there must be an infringement of what are described in the treaties as the four freedoms: the freedom of movement of labour, the freedom of capital, the freedom of establishment and the freedom to provide services. The French company was certainly well established in Germany and provided services. Because it operated within the four freedoms of the treaties, it fell within their remit and the court was then able to strike down a tax provision in a member state.

  741
  There was no question of the Councils of Ministers making a decision about jurisdiction on tax; no vetoes were used and no directives were made in Brussels. The case is a clear example of a member state's sovereignty on direct taxation being overridden—not just challenged—by the European Court of Justice. Consequently, the Government had to introduce this provision.
  This is not an isolated case. I have examined the jurisprudence of all the cases that the court has considered since it examined its first case—one involving France—in 1987. In at least a dozen cases, taxpayers have challenged national tax authorities about their provisions for income tax and corporation tax, and in all but two cases those challenges have been successful. The cases divide more or less equally between those involving income tax and individuals on the one hand and those involving corporation tax and companies on the other. As I said, only two national tax authorities have won their case against a taxpayer.
  I do not advise it, but I have read some of the judgments and the opinions of the Advocates General. Some of those opinions are Talmudic in their complexity, but it is clear—we should not be surprised by this—that a European court, the main purpose of which is to secure ever increasing union, has bent over backwards in most cases to try to strike down member states' legislation on direct taxation.
  Mr. Kenneth Clarke: I am sure that the right hon. Gentleman is explaining accurately that treaty obligations do not allow member states to discriminate in their tax laws between nationals or residents of different countries. Indeed, this Government and the previous one have spent much time on that, and the Paymaster General chairs a committee that we joined and that tries to set aside discriminatory tax arrangements for nationals and residents of different states. However, I am sure that the right hon. Gentleman would not join the more unscrupulous campaigners who claim that that means that the European Union has jurisdiction over levels of corporate tax or personal taxation.
  Mr. Davies: I shall come to that point shortly. However, the right hon. and learned Gentleman should not assume that it is a side issue of discrimination that can be considered by the committee chaired by my hon. Friend the Paymaster General.
  The European Court is not only challenging the sovereignty of the member state; the second consequence of those decisions is that it is challenging the basic cornerstone of income tax and corporation tax—the concept of residence. The court is saying to member states, "Your legislation is based on residence, but if it can be shown that you are discriminating against a non-resident, your law can be struck down." As the right hon. and learned Gentleman knows, residence is not some quaint little concept dreamed up by we Euro-sceptics to make life difficult for the Commission. The concept of residence lies at the heart of the taxation legislation of all the countries of western and eastern Europe and of the United States of America; more important still, it forms the basis of the hundreds of international double taxation treaties that have been signed since the end of the 1940s.
  That is not merely an issue to be examined by a committee. A basic challenge has been thrown down by the court—albeit within the scope of the four freedoms,
  742
  I concede. With more trade, more people moving around, more establishments in different countries and more provision of services, such cases will arise more often. The court is challenging the whole concept of residence, which lies at the heart of each member state's system of taxation. Let me cite a Dutch professor writing in the 1994 edition—things have moved on since then—of a publication called The Common Market Law Review. He went so far as to suggest—I do not subscribe to everything he suggests—that the court's actions could easily result in the disintegration of national tax systems.
  That is the argument that has been advanced by many member states—not by Britain, which has been involved in only two such cases, but by France, Germany and Belgium, between which there is a great deal of cross-border trade and movement. The argument has been advanced, not by Euro-sceptics and little Englanders but by the national tax authorities of several European countries, that the court is arrogating the concept of nationality above that of residency by telling member states that they can have their residency rules, but if the court finds that one country is discriminating against a national of another country, nationality becomes more important than residence for the purposes of direct taxation. That is a real clash—not a minor matter, as the right hon. and learned Gentleman attempted to imply in his intervention. A challenge has been made to the very concept of residency and many people are extremely concerned about it.
  Mr. Clarke: Is the right hon. Gentleman arguing that within a single market a British Government should be able to discriminate in the treatment under British tax law between companies domiciled in this country and companies domiciled elsewhere in the European Union? We set our rates of corporate and personal taxation, but the European treaties have always ruled out discriminatory provisions which are contrary to the four freedoms. That is not a sensational new discovery. I repeat: the Government whom the right hon. Gentleman supports continue to work within a committee, to which the Government of whom I was a member also contributed, trying to get rid of discriminatory tax provisions—
  Mr. Deputy Speaker (Mr. Michael J. Martin): Order. I remind the right hon. and learned Gentleman that interventions must be brief.
  Mr. Davies: With respect, the right hon. and learned Gentleman misses the point. It is a question not of discrimination but of a nation state being unable to provide different tax treatments for residents and non-residents. It has always been accepted in international taxation law and beyond western Europe that countries will provide different tax regimes for residents and non-residents. That has always happened and it still happens, but the European Court says that that is discrimination because the treaties are concerned with nationality, not residence.
  Let me return to paragraph 4 of schedule 30. It is not retrospective—it does not apply to previous tax years. Except in that it applies to accounting periods ending on or after Budget day, it is not retrospective for six years. Will an EU-resident individual or company be able to claim six years back from the passage of the Bill for relief

  743
  against foreign taxes, based on the way in which the European Court has decided previous cases? From my reading of the professional journals, I understand that the Inland Revenue has said that if an individual or a company is resident in the EU, that individual or person can claim relief six years back from this legislation—even though the clause itself does not allow a six-years-backdated claim. If EU residents are entitled to make such a claim, what about non-EU residents? What about companies in the United States that are not resident in the United Kingdom but that trade through a branch or agency in this country? Presumably, such companies will not be entitled to claim the six-years-backdated relief.
  I see that the members of the European movement are engaged in a serious confab on the Conservative Benches. The right hon. and learned Member for Rushcliffe talks about discrimination, but the discrimination in the case I have described is against the non-EU resident. Let us take our major partner, the United States of America. Does it follow from my analysis—I am sure that the Paymaster General's officials will provide an answer by 9 o'clock tonight—that a United States resident would be denied a six-years-backdated relief, despite the fact that an EU resident would be granted the relief, albeit not under the Bill?
  I do not want to prolong the debate but I have to ask, what about the cases that are in the pipeline? There is a case in which a large German multinational company is challenging the entire imputation system of corporation tax. That system has now been abolished, or at least changed to a substantial extent. The imputation system provided different rates of tax relief or tax credit in respect of underlying corporation tax to residents and non-residents: usually, non-residents received half the relief that residents received. That case is now going through the courts, and my reading of the jurisprudence is that the European Court might strike down our imputation system. In fact, it has been struck down already, so that fox has been shot. I do not know why the Chancellor did away with, or at least changed substantially, the old imputation system of corporation tax. I am sure that there were many good reasons. However, I and others cannot help thinking that he had better shoot the fox once and for all, before the European Court does it for him.
  Finally, let me deal with the point raised by the right hon. and learned Member for Rushcliffe about different tax rates. I forget the name of the case, but one of the arguments advanced by the taxpayer—I forget whether it is a Belgian, French or German taxpayer—in one of the cases that came before the court was that that taxpayer had been denied the same tax rates in Germany as applied to a resident in Germany because that taxpayer was resident in France. I believe that the taxpayer lived in France and taught in Germany. The challenge was based on the fact that German tax rates differ from French tax rates, which was, in itself, discrimination.
  The court was a bit wary of taking that approach and, in the end, it did not do so. The Advocate General, in rabbinical guise, managed to find a way not to challenge the nation state on the issue of tax rates. However, the right hon. and learned Gentleman is a lawyer and he knows how cases are built up; he knows that there will be another case—another challenge to differential tax rates. It may well be that, in a few years' time and in a different
  744
  climate, and once it has developed its jurisprudence, the court will feel more confident and will decide that the very fact of a French tax rate of 30 per cent. and a German tax rate of 35 per cent. discriminates against the person who has to pay the 35 per cent.
  At that point we shall have moved into a harmonised system of direct taxation laid down by the European Court of Justice. The Council of Ministers will not be able to do anything about it. There will be no point in trundling out the veto. The court will have introduced the system of its own accord as it has the power to do. The Council of Ministers will be outflanked, and we may find ourselves with a harmonised system of income tax before we realise it.
  6.30 pm
  Mr. Edward Davey.: I think I am not the only Member who is not entirely convinced by the argument advanced by the right hon. Member for Llanelli (Mr. Davies). In the United States, the Supreme Court examines various decisions made by the various states: jurisprudence in the United States has not gone down the route that the right hon. Gentleman suggests. There are various rates and systems of taxation in the different states. I favour the arguments of the right hon. and learned Member for Rushcliffe (Mr. Clarke) over those of the right hon. Gentleman.
  Mr. Denzil Davies: The hon. Gentleman falls into a fallacy. Residency in one state or another does not make any difference to United States income tax and corporation tax. It is residence in the United States that counts. In Europe, we have residence for tax purposes in different states—that is the difference.
  Mr. Davey: The right hon. Gentleman has failed to deal with the point that there is variability of rates between the states of the United States—and that will remain the position within Europe. Again, he fails to make his point.
  I pay tribute to the right hon. Member for North Durham (Mr. Radice) for his chairmanship of the Select Committee on the Treasury, on which I have the privilege to serve. He gave the House a fair representation of the Committee's report. However, he failed to mention that it was not unanimous because Conservative Members were split. I regret that as, I know, he does.
  The right hon. Gentleman talked about openness and accountability, which we discussed in the sittings of the Select Committee and in producing the report in regard to presentation. Some members of the Committee, including me, felt that the Chancellor could have been far more open in dealing with our questions. On many occasions, he failed to answer direct questions directly. That limited the scope of the Committee's inquiries rather too much.
  It is difficult to welcome a Finance Bill of such length and complexity. Rather than prudence with purpose, we have prudence with pages—558 of them. The Chief Secretary, in exchanges with the right hon. Member for Wells (Mr. Heathcoat-Amory), said that there are only 152 clauses. Perhaps there are, but there are 40 schedules. The Bill comes before us in two volumes—and that is before the Government have started amending it in Committee as they undoubtedly will. It is a very long and complex Bill.

  745
  Ministers are right to say that the present Government are not the first Government to introduce such Bills. Unfortunately, the Conservative Government, when the Treasury was under the chancellorship of the right hon. and learned Member for Rushcliffe, introduced very long Finance Bills. Indeed, in 1996 the Finance Act ran to 618 pages—even more pages than that of the Bill that preceded it. That has sadly become a trend, and it is an unwelcome one. In 1955, the Finance Act contained 24 pages; in 1965, it had increased to 270; in 1985, it contained 241 pages; and in 1995 it had reached 511. As I have said, the current Bill has 558 pages. Such growth is unwelcome not only because it increases complexity but because it increases compliance costs for business.
  We are having to consider longer and more complex legislation. The proposed capital gains tax legislation is incredibly complex. There are five schedules dealing with CGT changes alone—and that from a Government who introduced CGT changes two years ago which were supposed to be about promoting long-termism.
  Two years ago, long-termism meant taper relief of 10 years. In the pre-Budget report in November 1999, the Government proposed taper relief of five years. Moving on from a CGT regime to promote long-termism, they are now saying that there should be taper relief for only four years. As a result of these changes we have inconsistency and complexity. That is bad tax legislation.
  The number of tax rates in the personal and corporate tax systems since the Government came to power has ballooned. With more than 50 tax rates, there are now three times the number that applied in 1997. The Bill does nothing to reduce their number. Increased complexity means increased costs on business.
  Mr. Gardiner: The hon. Gentleman complains of the complexity of the five capital gains tax schedules, but does he not accept that their effect will be dramatically to reduce the complexity of CGT? As he has said, we are changing from a 10-year taper moving the rate down to 20 per cent, to a four-year taper moving it down to 10 per cent—the lowest ever rate. The move has been widely welcomed throughout the accountancy world and by business.
  Mr. Davey: The hon. Gentleman would have a point if the Government had not introduced 10-year taper relief in the first place. The change has meant that the accountancy profession and businesses are having to deal with two sets of legislation, the interaction of which is incredibly complicated. We welcome the fact that the Government are at last seeing sense, but if they had done so in the Finance Act 1998, we would not have the present complexity and the time-wasting and expensive procedures for business.
  Mr. Howard Flight.: May I draw to the hon. Gentleman's attention the example of an individual who might have bought some shares in the business for which he worked in 1995, who will now face three different CGT calculations? There will be the earlier one with indexation; followed by one on the 10-year taper; and, following this year's Budget, one for a four-year taper to bring the rate down to 10 per cent.
  746
  That is a ludicrously complex calculation for someone to face simply for being virtuous enough to have some shares in the company for which they work.
  Mr. Davey: The hon. Gentleman is exactly right. There are three starting dates for the different CGT regimes. As I have said, the proposal has increased complexity and costs for business. It is a serious matter.
  The Government talk about wanting to remove the regulatory burden on business: they cannot try to meet that objective if, within the tax system, a key part of the regulations with which business has to comply is becoming increasingly complex because the Government are increasing the amount of tax legislation. The process diverts resources from the job of business, which should be to promote the prosperity and growth of business. Increased legislation means that there is more work for accountants and more work within business as it focuses on various tax schemes and various possible tax avoidance schemes. That is not good tax legislation.
  It is time for reform. We could start by separating the finance legislation that comes before the House. The tax measures that are needed to raise significant sums to keep the Government's finances running could be set out in a short Bill, which could come before the House shortly after the Budget to ensure that the Government had statutory cover for their tax-raising powers.
  There could then be a second Bill called, for example, the Tax Technicalities Bill, which would be published in draft form. There would be wide consultation, and an effort would be made to adhere to various codes of simplicity so as to reduce complexity. An effort would also be made to ensure that tax changes were not for ever happening—there could then be continuity within the tax system. With such a Bill, we could begin to change the culture of the Treasury and the way in which successive Chancellors of all persuasions have gone about introducing their tax legislation.
  I suggest that Treasury Ministers refer themselves to a very good report produced by the tax faculty of the Institute of Chartered Accountants in England and Wales, entitled "Towards a Better Tax System". It refers to 10 tenets that a Government should adopt to try to ensure that they reduce the regulatory burden of the tax system on business. I commend the report to Ministers and Back-Bench Members alike.
  Let me move on to the terms of the fiscal policy that the Bill will put in place for the forthcoming year. There are some real problems.
  There are always two questions that one can ask about fiscal policy for the forthcoming year—first, does it leave the Government with enough money to fund their programmes without excessive borrowing, and secondly, does it complement monetary policy by keeping the economy growing in a sustainable way, without having knock-on effects for interest rates and the exchange rate?
  On the funding aspect of fiscal policy, there can be no doubt that the Government can fund their programme. They have an incredibly strong fiscal position. Here I part company from the right hon. and learned Member for Rushcliffe. I do not believe that the Government are losing control of public spending. Yes, there has been a loosening of fiscal policy, with which I will deal shortly, but to say that they are losing control is an exaggeration.

  747
  The Government have huge fiscal surpluses, continuing into the future. No objective analyst could fail to conclude that it is one of the strongest fiscal positions that any Government have had in living memory. The Liberal Democrats unreservedly welcome that development.
  The question is why it has taken the Government so long to realise that. The Liberal Democrats have been speaking about the Chancellor's war chest and the healthy state of the public finances since the start of the Parliament. The right hon. and learned Member for Rushcliffe referred to that. It is no surprise that the Government finances are in such a good state. They should have used the healthy public finances early in the Parliament to invest in our public services, to make sure that our schools and hospitals had the money that they so desperately needed.
  Those of us who serve on the Select Committee on the Treasury heard City economists telling us that. Geoffrey Dicks said:
  With the benefit of hindsight, I would have spent the money on health and education two years ago.
  Those were his words. [HON. MEMBERS: "With the benefit of hindsight."] The Government had the benefit of Liberal Democrat foresight. We gave them that advice, and Ministers failed to take it. That is why there was the crisis in the NHS this winter.
  The Paymaster General (Dawn Primarolo): Is the hon. Gentleman telling us that his middle name is Mystic Meg?
  Mr. Davey: No. One did not have to be Mystic Meg to realise that the public finances were in a good state two years ago. After the 22 tax rises introduced by the Conservatives and the tax rises announced early on in the present Parliament, it was clear that the public finances were in an extremely good state.
  The Conservative Opposition may have predicted recession a year or two ago, but the Liberal Democrats did not. We believed that the economy was healthy and that the public finances would remain healthy. We were responsible in arguing for targeted, sensible and early investment in the public services.
  Mr. Gardiner: I am grateful to the hon. Gentleman for giving way once again. Does he accept that at that stage, the sensible thing to do was to pay off the £28 billion of public sector debt? That means that the revenues into the Exchequer are now that much greater. Does he also accept that at every stage, what he was calling for in public sector expenditure has been trumped by a multiple of approximately six in the steps that the Government have taken?
  Mr. Davey: I do not accept that. No one is suggesting that in the early years of this Parliament, the Liberal Democrats were arguing for £28 billion in public expenditure. Of course some of that surplus should have been used to pay back the debt, but other moneys were available to the Government early in the Parliament, which they should have invested. Because they failed to do so, people died as a result of lack of treatment by
  748
  the NHS. People did not get the service that they needed. It was open to the Government to make those decisions and they failed.
  The political problem facing the Government is evident to everyone. We saw this Christmas a huge crisis in the national health service. The Government had to react. That is why, at long last, they went against what they had set out in the comprehensive spending review and put extra money into the NHS for the forthcoming year. We unreservedly welcome that. It should have come earlier.
  Mr. Bill Rammell.: Will the hon. Gentleman give way?
  Mr. Davey: No. I want to explain to the House what is happening at the coal face. Last Friday, I visited my local hospital, Kingston Hospital NHS Trust, and spoke to the chief executive about the extra money that was found for the coming financial year. He welcomed it, as we have, but he said that because of the underfunding in the previous years of this Parliament, it will go to pay for the deficits. It will not pay for expansion of services; it will pay for the deficits. That was not needed. The Government could have chosen a different path, and I regret that they failed to do so.
  There is a profound issue relating to the fiscal surpluses that have built up and how that changes the nature of economic and policy debate in this country. I hope the Chancellor will take this on board as he approaches the comprehensive spending review.
  We have left behind the years of high unemployment under the Tories. With high employment and a growing economy, the public finances are in a much better state than they have been for decades. We are back to the era of the 1950s and 1960s, when the problem for a Chancellor is how he spends the money, rather than how he affords the programmes. That is a welcome development. It is time that we started focusing on that argument.
  As other hon. Members have said, the Budget must be judged by whether the way in which the money is to be spent is affordable for the macro-economy, or whether it has the potential to destabilise the macro-economy. The Select Committee was clear that if the fiscal stance is judged in absolute terms, the Chancellor has undoubtedly loosened fiscal policy.
  In our alternative Budget, the Liberal Democrats clearly and openly advocated extra spending, but we covered much of that by extra taxation, believing that this was not an appropriate time to loosen fiscal policy because of the high level of real interest rates and the high level of the pound. That is where we believe the Government are going seriously wrong in their management of the macro-economy. They have loosened fiscal policy for 2000–01, but they are not getting the balance right. That is a shame.
  The International Monetary Fund was right to criticise the Government. It stated:
  In this regard—
  that is, in respect of fiscal policy—
  the recently announced budget for 2000/2001 appears to be regrettably pro-cyclical.
  That means, in short, that there will be higher interest rates as a result.

  749
  It was interesting that in the Red Book, the Chancellor tried to hide his largesse, but we uncovered it in the Treasury Committee. On Budget day, the Chancellor announced £3.1 billion for 2001–02 for the NHS, but he failed to tell the House that there is another £5.9 billion in the Red Book to be allocated to other public services. He did not announce that because he is worried about scaring the markets. He knew that he had loosened fiscal policy; he just did not want to admit it.
  Mr. Radice: I remind the hon. Gentleman, who has been fair in his description of what the Treasury Committee said, that we also said that Monetary Policy Committee had met twice and had not put up rates. We could have added—it has just happened—that the deputy Governor said that the impact of the Budget on monetary policy was slight. In fairness, the hon. Gentleman should say that as well.
  Mr. Davey: What the right hon. Gentleman says is true. The impact may be slight, but it is certainly positive. That means that interest rates are likely to be higher than they would otherwise have been. For a struggling exporter or farmer, that slight change and the fact that the exchange rate and interest rates will be higher, are significant. It is no use Ministers wringing their hands when manufacturers and farmers come to them. The Government failed to make the right decisions in the Budget.
  Liz Blackman: Will the hon. Gentleman give way?
  Mr. Davey: No. I need to make progress.
  The problem is that fiscal policy has been loosened not just in 2000–01. It will be loosened significantly up to 2004. The Treasury official, Mr. Gus O'Donnell, gave that away when he gave evidence to the Treasury Committee. He said that we need to get back to current balance as the golden rule dictates, but that the Treasury had decided to go back slightly more slowly than the rule would suggest. He admitted that there was significant loosening in prospect.
  Although we welcome the extra public spending, we must not take risks with the stability of the macro-economy. If that means funding extra public spending through taxation, the Government should not shy away from that. They must be prepared to make tough decisions to ensure that we do not return to boom and bust.
  When deciding priorities for public spending in the next few years, Ministers should consider pensioners. The national insurance fund has a huge surplus of billions of pounds, yet some pensioners are in serious need. Yesterday's Sunday Times reported that Ministers now admit that they made a mistake. A senior Minister was quoted as saying that it was a mistake to grant an increase in the state pension of a mere 75p this year and that the Government would suffer a backlash. That is deserved, especially when they send hon. Members glossy, laminated propaganda about their achievements for older people. They should acknowledge that 75p is an insult, apologise to the House and pensioners throughout the country and start to put matters right.
  Mr. Rammell: Will the hon. Gentleman give way?
  Mr. Davey: No, I will not.
  750
  I want to examine one or two provisions. First, let us consider the climate change levy, which is a new tax. Many people have pointed out that the tax will not achieve its objective. It taxes energy, not carbon. We are faced with a global environmental catastrophe because of greenhouse gases and global warming, and should not try to suggest that the new tax will help tackle that problem. We need a proper phased carbon tax, which ensures that industry adjusts and makes the changes necessary to reduce greenhouse gases. The climate change levy will not achieve that.
  Many details in the climate change levy are wrong. For example, combined heat and power schemes have only a partial exemption. Some good CHP schemes will not go ahead because of the way in which the climate change levy is designed. Earlier today, I spoke to representatives of a large United Kingdom public limited company, which had planned to introduce a CHP scheme, but will not do that because of the description of the climate change levy in the Bill.
  The Bill is a missed opportunity for the environment; it fails to develop the green tax agenda. Chart 6.2 in the Red Book shows the effect of that failure. Greenhouse gas emissions will increase in the next few years. The Government have reneged on their pre-election target of a 20 per cent. cut in greenhouse gas emissions. If chart 6.2 provides a true picture, they may miss even the Kyoto target. That would be a disgrace.
  There is great anger in the information technology, engineering and offshore oil industries about the way in which IR35 will hit many people, especially single-person contractors. The Government may be right to tackle avoidance, but they are using a sledgehammer to crack a nut. We will argue that vigorously in Committee because we believe that the Government should withdraw the provisions on IR35 and consult widely again to get it right.
  Dawn Primarolo: Why do the Liberal Democrats advocate an increase of 1 p in everyone's taxation rate while defending a position whereby some people avoid paying the proper rate of tax or national insurance?
  Mr. Davey: The Paymaster General could not have been listening. I argued against tax avoidance. The hon. Lady should consult officials and the industry and try to devise more targeted provisions which tackle the avoidance problem but do not create genuine difficulties for important sectors of British industry. When we debate the matter fully in Committee, I shall ask the Paymaster General how she will monitor the impact of IR35 to ensure that key people do not leave these shores and work elsewhere.
  I shall also ask the Paymaster General to ensure that the IR35 provisions are implemented flexibly, especially in the early years, to ensure that tax officials give the benefit of the doubt to businesses that make legitimate mistakes in interpreting unclear provisions, and help them to comply. We shall argue that if Ministers stick to the IR35 provisions, the Government should provide for more generous allowances, especially for administration and training.
  Liberal Democrats cannot support the Conservative amendment because it is irresponsible. It proposes reducing taxes when the economy is growing fairly fast

  751
  and when, to quote the right hon. and learned Member for Rushcliffe, a loosening of fiscal policy is planned. It would therefore be irresponsible to agree to the Conservative suggestion of reducing taxes all round. That would lead to higher inflation, a higher exchange rate, higher interest rates and a catastrophe for the United Kingdom economy. Indeed, it would mean a return to boom and bust. We shall therefore not support the Conservative party in the Lobby tonight.
  We shall oppose the Bill because it is too long, creates too many complexities, provides for a fiscal policy that is too loose and is far too niggardly to pensioners, the health service and schools.
  6.56 pm
  Mr. Roger Casale.: I am pleased to speak in support of the Finance Bill and against the amendments tabled by the Liberal Democrats and by the Conservative party.
  The Bill builds on the work of previous Budgets. It establishes a new and stronger framework, which will safeguard the future prospects of the British economy. It builds further a platform of stability, locks it in place, extends employment opportunities for all and lifts millions of hard-working families out of poverty. The Bill sets out strong but realisable ambitions for the British economy; we should accept nothing less. However, they were unthinkable under the boom-and-bust policies of the Tory Governments of the past.
  Step by step, the Government are constructing a platform of economic stability. The platform is an effective metaphor: it has sound and solid foundations, which are based on the independence of the Bank of England and the new fiscal rules. The Bill will rightly lock the new stability into place. We reject the boom-and-bust economics of the past for the simple reason that Britain cannot afford to repeat the mistakes of the previous Tory Government. Reckless borrowing led to swingeing cuts in public services; scarce resources had to be siphoned off to pay the interest burden on the public debt.
  It would not be right to accept the Liberal Democrats' suggestion and abandon prudent management of the economy for the sake of short-term gain. That would also take us back to the boom-and-bust economics of the past that the hon. Member for Kingston and Surbiton (Mr. Davey) and his party rightly reject.
  Boom-and-bust economics took Britain through two of the most damaging recessions of the post-war era; it led to millions of men and women losing their jobs and their livelihoods; it destroyed hundreds of thousands of businesses and broke the dreams and aspirations of a generation.
  It is right to remind the House of the economic legacy of the recent past, not least because the right hon. Member for Kensington and Chelsea (Mr. Portillo) said that specific groups of people in Britain would be under attack because of the Budget. What about the damage that the Tory years of boom and bust did to Britain? We can celebrate only one victim of boom and bust: the Tory party's reputation for economic credibility and competence.
  Is it a surprise that the man who argued in the House for the privatisation of the health service one week was appointed shadow Chancellor the next? Is it a surprise that
  752
  we heard soon after of reckless proposed tax cuts for the privileged few, packaged as a tax guarantee? Those are reckless promises because the country will remember broken Tory tax promises and 22 Tory tax rises in the previous Parliament alone. That appointment is no surprise because the Tories are still in the business of making rash policy gestures based on a horizon that stretches no further than the next general election. Apart from its record in government and the posturing that has gone on since, the Conservative party should examine the economic figures that it suggests, which simply do not add up.
  I welcome the fiscal tightening represented by the Budget. Putting to one side the debate about whether there is tightening or loosening, tax revenues are increasing because of the Government's policy, opposed by the Conservative party, of increasing employment and participation in the labour market. That is boosting tax revenues. As a result, we are able to spend more on much needed public services such as education and health. Contrast that with the previous Government's record: the generation of mass unemployment, the huge social costs of carrying it and public services starved of the resources that they needed.
  The Budget locks in place the platform of stability that we need to build a new economic framework to safeguard Britain's future. On that platform the Government seek to build three lasting and interrelated elements of the new economy.
  Mr. Geraint Davies: On stability, does my hon. Friend agree that the comments of the right hon. and learned Member for Rushcliffe (Mr. Clarke) were ridiculous? He said that there would be no independence for the Bank of England, interest rates would be lowered unilaterally and inflation would rip. Perhaps he should be known as the Chancellor ripper. Does my hon. Friend agree that stability has been the key to our success—800,000 jobs—and that the Opposition would jeopardise that?
  Mr. Casale: I have some respect for the right hon. and learned Gentleman and for his views on Europe in particular, which are out of kilter with those of his party. However, in 1996 he had to strip hundreds of thousands of pounds of much-needed investment due for London Underground out of the last Tory Budget—with deepest regret, I am sure—and public services in my constituency, especially the Northern line, have been run down ever since. As a result, South Wimbledon station's refurbishment, which was due in 1997, has been carried out only this year. He is as much to blame as the others, but whether he wants to learn from those mistakes is an open question. The Conservative Front-Bench team seem to want nothing more than the opportunity to repeat them.
  The first and foremost of the three elements is modernisation of the public services. We rightly want to provide a massive injection of new funds, especially into the health service, and to achieve far-reaching reforms to deliver best value and raise productivity. We want extra money for schools and for other public services such as transport and the fight against crime. However, we can contemplate such reforms only against the backdrop of economic stability.
  The second element is welfare reforms that focus on reconnecting the lives of many people who have become completely disengaged from the labour market. However,

  753
  the reforms will also provide security and dignity for all those for whom that is not an option and encourage people to save and to make more provision for retirement.
  The third related element is labour market reform based on putting a floor under wages through the national minimum wage and making resources available for training and for lifelong learning. That will not only enable us to bring people back into the labour market, but allow them to contribute more productively once they are back in. Their work will be of greater value and they will be able to move up the labour market value chain and raise productivity for the whole country.
  These reforms are closely interrelated; we cannot reform welfare without reforming the labour market to make it more flexible. If we can get people off welfare and into work, there will be greater resources for the public services. They could be invested in education, which would increase skills. That would raise productivity, which would help people to become more productive in the labour market later on.
  In contrast to the vicious Tory cycle of boom and bust and neglect and decline, and built on that platform of economic stability, we are starting to see a virtuous circle of increased productivity and increased long-term productive capacity in the British economy.
  In office, the Tories made the mistake of believing that the economy could grow and Britain could succeed while millions were left out and forgotten. Their Government thought that it did not matter in economic terms if thousands of young people left school without a job and no immediate prospect of getting one and were given no chance in life. Promoting fairness and bringing individuals back into the labour market is precisely how we build the foundations for long-term prosperity, which is why the steps in the Budget aimed at creating a fairer Britain are also part and parcel of building a stronger economy.
  The Budget is lifting children out of poverty—it aims to halve child poverty in 10 years and eliminate it in 20—and delivers extra support for pensioners. More than 15,000 in my constituency of Wimbledon will benefit from the increase in the winter fuel allowance. It also rewards working families through the tax system with the working families tax credit. Step by step, a broader vision of how Britain could be in future is emerging. Contrast that with the narrow attack on individual Budget measures or the Liberal Democrat position that this visionary Budget is simply too long.
  In that vision, Britain's long-term economic prospects are more secure. All who want to work are able to, which is perhaps a modern definition of full employment. In that Britain, child poverty will be halved, hard-working families will be lifted out of poverty and public services will be modernised, reinvigorated and working for the good of all rather than a rump serving those who cannot afford private provision.
  Contrast the Bill's strength and vision with the pathetic spectre of a Tory party that has lost its reputation for economic competence and hides behind criticising the proposals as too complicated—the Tories' proposed simplicity would result from privatising public services, borrowing against future revenues and reckless tax cuts—and a Liberal party that has again become entangled in the complexities of its own contradictions. Once again, the Liberals have failed to see the wood for the trees.
  754
  The Bill is substantial. Taken together, its measures represent an important new step in the creation of a framework for a fairer and more prosperous Britain. I commend it to the House.
  7.9 pm
  Mr. Michael Jack.: I have listened carefully to the hon. Member for Wimbledon (Mr. Casale) and hope that he will volunteer to serve on the Finance Bill Committee. Once he has had the opportunity to wade through 588 pages and examine some of the more Byzantine and complex ways in which the Chancellor seeks to translate his proposals into law, he will be less enthusiastic about condemning simplicity and more on the side of Conservative Members, who speak with the voice of experience and reality.
  I strongly support the Conservative amendment, which asks the House to decline to give the Bill a Second Reading, because of its 558 pages and its content—the extra taxes that it imposes on the citizens of Wimbledon and the rest of the United Kingdom, on the businesses of Wimbledon and the rest of the United Kingdom, and, importantly, on home owners in Wimbledon. I intend to say something about business taxation later. I remind the House that I have properly declared my declarable interests—principally, my interest as a non-executive director of a quoted public company.
  Before we talk about the size of the Bill, we must reflect on how a Finance Bill is put together. It is always interesting to observe the creative tension, and the battle that takes place between Inland Revenue officials, Treasury officials and Ministers as they decide just how big a Bill they think they can cope with—and, more importantly, what measures need to go into it. I think that this Bill is so long—its length has already been mentioned—and so complex for two reasons.
  This is likely to be the last full-length Finance Bill before the next general election. All the evidence suggests that certain people are sweeping every possible bit of legislation into a large pile, on the basis that next year they will not be so lucky. As for the Bill's complexity, I think it reflects the fact that this Chancellor likes to fiddle with the tax system. The Red Book contains a series of measures—small measures—dealing with small and medium-sized enterprises. It continues a trend that the Chancellor has followed ever since taking office: the introduction of a series of small measures that are not terribly well thought out, and are certainly not crafted with care in the sense of evaluating the real effect on the economy—measures whose whole purpose is to give the impression of an active Chancellor who is doing all kinds of things, probably to very little effect. That is the sort of trend that leads to a long Finance Bill.
  Another reason for the fact that our Finance Bills have become longer is that the financial community has become more adept at finding ways around the drafting of legislation. I warmed to the theme of the hon. Member for Kingston and Surbiton (Mr. Davey), the Liberal spokesman, who spoke of the need to separate the parts of the Bill that deal with the Taxes Management Act 1970 and the parts that deal with the more contentious elements of the Budget. I made that point last year, and I make it again this year. If we are to have any meaningful reform of our tax laws, it is important to make that separation in the legislation and the concurrent consultation.

  755
  If I am selected as a member of the Standing Committee, I hope to table an amendment asking the Treasury to go one step further than the tax law rewrite exercise. I have been on the steering committee dealing with that exercise. It is interesting not only to observe the results of the rewrite of our tax law in plain English, but to note the frustration of those who have been involved. They are frustrated by the dearth of resources to support the exercise; but more interestingly, they are frustrated by the fact that, although measures to smooth the operation of our existing law are already emerging, they cannot be enacted because of the inevitable strictures of the rewrite exercise. I do not apologise for that, because I was partly responsible, but I think it fair to say that the exercise is doing a good job in showing better ways in which the existing tax law could be developed.
  If we are talking about reform, we must be certain about whether we want better, clearer legislation of the current type, or less tax legislation in total. If we want to reform the tax system fundamentally, how would we do that? I do not think that question has been properly answered, but practitioners cry out for an answer. I hope that the Treasury will look kindly on the idea of a report showing how the tax law rewrite could be taken into territory allowing a real reform of the system. That might take a decade, but we need to think about it. We should ensure that size does not necessarily determine whether a Finance Bill is good or bad, and that quality and clarity become the benchmarks.
  Some of the proposals feature niggling complexities. We have already heard today about changes in the Government's energy policy. I was interested to note that the Secretary of State for Trade and Industry chose today to announce some easing of the moratorium on gas-fired power stations. Having tabled parliamentary questions, I learned from the Government that there was no need for the climate change levy as currently proposed. While I entirely support the idea of saving 2 million tonnes of carbon dioxide as a contribution to our Kyoto target and to a reduction in global warming, the proposed method is unnecessarily complex.
  Horticulture, in which I earned my living before coming to the House, has survived because it has saved energy over the years, but the best that that industry—which has a superb record on energy saving, and which is carbon-neutral in terms of the job that it performs—can get out of the Government is a 50 per cent. rebate. If the Paymaster General considers the implications of an end to the moratorium on gas-fired power stations, and also reads the parliamentary answers that I have secured from my colleagues so far, she will find that a 13 per cent. reduction in coal-fired electricity generation, coupled with a 14 per cent. increase in generation from gas, will save 2 million tonnes of carbon dioxide a year. The climate change levy, as such, is thus not needed.
  If the hon. Lady would like an even more environmentally friendly example, I can refer her to a letter placed in the Library by the Minister of State, Ministry of Agriculture, Fisheries and Food. In the England rural development plan, the Ministry was able to point out the benefits of carbon absorption by the planting of miscanthus grass or short rotational coppice—energy crops. I asked the Ministry what would happen if the horticulture industry increased its plantings: could it
  756
  absorb its own carbon dioxide output? I was told that if 41,000 hectares were planted, that could be done; but much more tellingly, that the planting in the United Kingdom of 108,000 hectares of short rotational coppice would take away all the 2 million tonnes of carbon dioxide. That complies with Government policy.
  I estimate that the cost would be £150 million. If burning that short rotational coppice required, as it would, the construction of more appropriate power stations, the cost could be recovered through the cost of the energy itself. If necessary, the Government could recoup any upfront moneys that they had to invest to encourage that form of activity.
  We have 18.6 million hectares under cultivation; the 108,000 hectares that I mentioned represent about 0.5 per cent. of our cultivatable land area. In a simple, straightforward, environmentally friendly, job-creating way, we could do away with the levy, and provide a solution to the complexities in the Bill. It is time that the Government looked for some energy-saving carrots, instead of always looking for sticks with which to beat people, and imposing additional costs on UK industry that will not be imposed on our continental and world-based competitors.
  Just as the Government refuse to consider such simple ways of dealing with climate change, they reveal themselves as the authors of complexity on page 147 of Red Book, in the Financial Statement and Budget Report, which deals with the parts of the Bill that introduce variable rates of vehicle excise duty on new cars. There is nothing in the Bill or the Budget praising motor manufacturers for their technical ingenuity in reducing noxious emissions, nor anything that recognises the fact that Europe's car makers have already voluntarily agreed to exceed Government emission standards by means of their own technology and agreements throughout Europe.
  I do not know what the table in page 147 is supposed to say about future emissions because there has been no environmental impact study. There are four VED bands and three levels of taxation: for cars using cleaner fuels, for petrol cars and for diesel cars. We are supposed to find that all sorts of magic things will occur because of a spread in VED—it will be between £90 and £160. In terms of influencing people's car purchase, it is for the birds. To be introduced, such a system requires complex legislation, but it is against a background of no measurable environmental benefit because no study has been done. It is about time the Government looked more carefully at the way they introduce legislation, because it is complex indeed.
  In the Budget, attempts are made to bring the same environmental schemes to the field of company car taxation. The Government have seen fit to amend the previous arrangement, which may have induced people to drive unnecessarily long distances to try to get over the 18,000-mile barrier to pay a discounted rate of company car tax, rather than the full rate. However, the Government seem to have introduced a full, head-on charge for the man who takes home the company van, the genuine company car user, the person for whom the company car is a proper tool of the trade.
  That person has in no way been assisted by the proposal. Again, there is no effort to try to work out whether company car purchase schemes will be influenced by that mechanism, yet in its own way, it adds complexity to the Bill.

  757
  One thing confuses me above all else. If, through those two measures on motor vehicles, the Government are trying to encourage a reduction in carbon dioxide emissions, why are they penalising the most carbon dioxide-efficient type of engine: the diesel? They seem to have imposed a penalty on such cars. They say that they will consult and do something about it later, but why wait until later? Why not do something about it now and back companies such as BP Amoco, which are introducing their own very clean fuels? One of the benefits of the fuel will be to take away sulphur dioxide emissions. It will be burned by the most energy-efficient engine.
  I do not see the logic in what the Government are doing, introducing unnecessary complexity in that whole area. There is very little to encourage the take-up of liquified petroleum gas, which in terms of non-carbon dioxide emissions is one of the cleanest fuels in the country. The Government's policies in that area are confused.
  I comment next on the Government's arrangements for non-controlled foreign companies, so-called company mixer schemes, and the tax arrangements for companies trading abroad. I well understand why companies have become concerned about that form of taxation. It is true that there was consultation with business on double taxation over the two years before the Budget, but nowhere in that consultation exercise was there any indication of the proposal to change the nature of those companies and their tax position—that was not part of the consultation exercise. All of a sudden, the competitive position of United Kingdom companies trading on a world basis has been put at risk by the proposal.
  I held a conversation with one such company last Thursday to establish beyond peradventure whether it would be trading at a disadvantage. The answer is very clearly that it would. In a tax sense, it will be treated worse, for example, than its German counterparts.
  The company has a subsidiary. The mixing of revenues under different tax regimes takes place in Luxembourg. It can maintain its competitive position, for example, compared with German companies, by mixing streams of incomes, which have borne a different rate of taxation. As a result, it can maintain a competitive tax regime compared with its continental counterparts and sustain a regular flow of investment to new enterprise in Europe.
  Dawn Primarolo: Will the right hon. Gentleman explain why he believes that multinationals should be able to use offshore structures to mix foreign tax and thus deny the Exchequer the right level of tax in the UK?
  Mr. Jack: Perhaps the hon. Lady would like to explain what she means exactly by "the right level of tax." If UK companies are using legitimate methods of safeguarding their tax position, whatever income is eventually remitted to the UK can be taxed appropriately. That seems the right way in which to tax.
  Dawn Primarolo: Will the right hon. Gentleman accept that that is precisely the point? Some multinationals are bringing their profits back to the UK to be taxed at the tax rate in the UK and others are using offshore arrangements not to do that and to mix. Does he think that fair to the multinationals that are bringing back their profits to be taxed here at our rate?
  Mr. Jack: If we talk to companies that are active in business, they will point out that, sometimes, because of
  758
  their investment strategy abroad, they need to maintain investment income on a world basis to carry on investing, particularly if that investment was originally funded by seedcorn capital from the UK. Once that capital starts to generate interest and dividends, which can then be returned to the UK, there is a stream of income which could be taxable. Every other major G7 member of the Organisation for Economic Co-operation and Development has the ability to mix tax. What the hon. Lady has put forward clearly leaves UK companies at a competitive disadvantage compared with their G7 counterparts.
  Dawn Primarolo: I am looking forward to discussing the matter in Committee with the right hon. Gentleman; I hope that he gets on to the Committee. Does he accept that, when we compare how we tax our multinationals and, in particular, the use of our controlled foreign company legislation, with the practice of our European partners, we find that the Government's proposals are to bring us into line with the competitive practice of other countries, not the reverse?
  Mr. Jack: I find that very difficult to accept, particularly in the light of the letter that was sent to the Chancellor by Dame Sheila Master. Perhaps the hon. Lady will, in her winding-up speech, comment on Dame Sheila's points, some of which I have drawn on. It is always a mark of the sensitivity that those on the Treasury Bench feel about remarks by Conservative Members when the Paymaster General chooses to intervene on the remarks of a humble Back Bencher on three separate occasions. I can only assume that my comments are hitting home.
  The Government's proposals will effectively change the regime on the qualifying arrangements for non-controlled foreign companies, which currently enable them to take advantage of the different taxation regimes throughout the world in mixing their incomes. The proposals will make it more difficult for them to remain competitive. The hon. Lady should concentrate on addressing business's concerns about international competitiveness, rather than take swipes at me because I choose to raise what business experts are saying.
  Mr. Gardiner: May a humble Back Bencher intervene on a humble ex-Minister? The right hon. Gentleman talked of companies that were taking the opportunity to safeguard their tax position. Can he clarify precisely what he meant by the word "safeguard"? Does that simply mean, in common parlance, paying minimal taxes in this country?
  Mr. Jack: No, that is not what the type of company to which I am referring is about. The company to which I have referred is in direct competition with European rivals in a retail business. In order to maintain its competitiveness, it must use the same mechanisms as are available to its European competitors. I am referring to its safeguarding its relative competitive position. It is a pity that the Paymaster General did not offer the possibility of onshore tax mixing in order that she might have more direct jurisdiction over such flows of income, and at the same time, maintain British companies' ability to take advantage of differing rates of taxation that are levied on their earnings in different parts of the world. It is clear that companies feel an injustice, a subject to which I hope we shall return.

  759
  I should like briefly to raise two other points before I conclude. The question of IR35 has been raised. People from all over the country who are affected by IR35 came to a meeting in my constituency. Subsequently, I have contacted some companies that provide the Government with information technology practitioners. They confirm that, because of IR35, they envisage problems retaining staff and staff going abroad to practise their skills; and that, in spite of changes to the employment test that the Paymaster General and the Inland Revenue have introduced, the provision bears unfairly on such workers.
  Kali Mountford: The right hon. Gentleman says that there is a risk of people going abroad to avoid tax. He is talking about tax avoidance. Will he name countries to which he thinks people are likely to go, because he will find that most countries levy such tax?
  Mr. Jack: I did not use the words "tax avoidance". The Treasury and the Inland Revenue became twitchy on the matter because the Government created a tax regime in which small-scale companies could legitimately take advantage of UK laws. People are so concerned about IR35 because as a group of, effectively, self-employed practitioners, they are unfairly penalised compared with other enterprises.
  A corner shopkeeper may pay himself in dividends and take advantage of the Government's changes to corporation tax law, but an individual who supplies services in IT or other industries will not receive the same tax treatment. We are talking not about avoiding tax but about people who want to pay tax. We are talking about the self-employed person who takes risks—the very entrepreneurs whom I thought the hon. Lady's party was supposed to support. With respect, her question shows her ignorance of the matters.
  I thank the Chief Secretary for his kindness in agreeing to consider the effects of the working families tax credit on lone parents who work unsocial hours in, for example, the health service and social care and find it difficult to secure appropriate registered child care to enable them to work. That is a small failing in legislation. I hope that Treasury Ministers will make representations to the Department for Education and Employment and perhaps table an amendment to ensure that parents who want to work 24 hours around the clock and are in need of child care may benefit from the working families tax credit.
  7.33 pm
  Mr. Eric Illsley.: I will not detain the House long; I seek only to make a few comments on issues that affect my constituency and constituents. I declare at the outset that I am a paid adviser to the Caravan Club. I make that declaration because one of my comments will relate to motor car taxation, which has many affects on caravaners.
  I welcome the Budget and the Finance Bill, especially measures on relieving child poverty. I welcome the working families tax credit and the extra money that has been allocated to the national health service. Like other hon. Members, I cannot understand the Opposition's amendment, which simply complains about the Bill's length and complexity.
  760
  The first area that I will raise briefly relates to our treatment of pensioners. As hon. Members, we have all been lobbied by pensioners who are somewhat unhappy with the increase in their retirement pension. I am aware of the Government's letter, which has been circulated in the past few days, setting out the help that the Government have given pensioners. I very much welcome the minimum income guarantee and relaxation of the limits on savings, from which more people will benefit.
  I also welcome the £150 winter fuel payment—but, so far, that has not been paid. I receive many complaints from pensioners who want to know, bearing in mind the small increase in their retirement pension, when that money will be made available. As they constantly point out, their council tax, council house rents and various other household costs have risen, but benefits have not increased to meet that.
  Another example, to which I have referred before, relates to the provision of free television licences for all those over the age of 75. Quite a lot of housing association tenants will not qualify because their television licences are included in their rent. I have seen nothing yet from any housing association suggesting that they will pay pensioners the equivalent of the licence fee. Therefore, the Government could have done a little more with the money available to them to provide for the welfare of pensioners.
  I also want to make a point about tax allowances. I fully appreciate the reasons behind the Chancellor's moves to cut the married couples allowance and to introduce a children's allowance in order to target the cost of bringing up a family. I have been heavily lobbied by my constituents on tax allowances, especially by one person who, two years ago, suffered an accident which left him paralysed. He is wheelchair-bound, living on the occupational pension from his previous employment—he was a qualified engineer on a considerable salary—and incapacity benefit. Over the past week, his tax bill has increased by about £11 a week. I find it strange that we are targeting tax increases on people who live in such unfortunate circumstances.
  I turn to one of my old favourites: tobacco taxation and smuggling. I have raised this issue on a number of occasions and my hon. Friend the Paymaster General knows my views. She is aware that my area has suffered greatly from smugglers—people who operate on an organised basis, bringing contraband tobacco, alcohol or whatever into the country on a huge scale.
  I fully support increases in tobacco tax to discourage smoking, which results in a huge cost to the NHS and society. We should do as much as we can to decrease smoking, which, as has been pointed out, is sadly on the increase, especially among young women. I agree that we must take measures to combat smoking, but my worry is that such measures are defeated by smuggling.
  In my constituency, it is very easy to buy cheap cigarettes; they are on sale all over the area. I have been lobbied constantly by tobacconists and newsagents, who inform me that it is not worth their while even trying to sell tobacco products because they cannot compete with smugglers. When I talk of smuggling, I mean the arrival of contraband goods in articulated lorries so many times a week. A smuggler will sell to his runners at a £1 profit cartons of cigarettes that he has bought for £12 or £13. They, in turn, will sell them at £1 profit, and that is how the stuff is distributed throughout the constituency.

  761
  The issue is whether we continue to increase tax on tobacco products without addressing smuggling. Regardless of the difference in taxation rates, whenever there is a financial incentive for people to smuggle tobacco into the United Kingdom, they will do so. We have to determine how to deal with smuggling. I welcome the action that the Government have already taken and the extra money that they have provided to prevent smuggling, but it seems that that action is not yet working and that we shall have to re-double our efforts. The same arguments apply to alcohol. However, although the dangers of alcohol are real, they are not as bad as those of tobacco.
  I am a member of the Caravan Club and, as I said, represent it in the House. Increased motoring costs are a major concern for the club's 300,000 members, who usually have to use a larger car, with a larger engine, to tow their caravan. In a recent survey, the Caravan Club established that 11 per cent. of its members had a company car. Club members are therefore being targeted by the Budget and Finance Bill's measures to increase company car taxation. That increase is having an affect on the leisure industry, as people are having to decide whether they should continue with that leisure pursuit.
  Increased taxes on diesel fuel also are affecting caravaners, who often choose to use diesel cars because of their better fuel consumption and performance. Caravaners, the Caravan Club and the tourism and leisure industry feel that they are being unfairly discriminated against by increased diesel fuel duty.
  I have often raised the issue of the climate change levy with Ministers, both in private meetings and in the House. I feel that the levy is not the correct way of meeting our Kyoto emissions targets. I accept that we have to deal with CO2 emissions. I was also a member of the Select Committee on Energy that, in 1990, produced a report on greenhouse gases. As I have often said in the House, that report is still on the shelf, and its recommendations on greenhouse gases and emissions have been ignored.
  The climate change levy will be a tax on high-energy users. Consequently, it will be a tax on manufacturing. It will also be a tax on jobs in my constituency, particularly in the glass industry and in another industry that I shall deal with later. The glass industry uses a great deal of energy. As my constituency has one of western Europe's largest glass bottle producers, the industry is a major employer in my constituency.
  Luckily, the glass industry can take advantage of the agreements made by energy users under the integrated pollution prevention and control regulations, and will therefore qualify for the discounts available to industries entering energy saving agreements. However, some industries and companies—particularly the British Oxygen Company, which has a distribution centre in my constituency—will not qualify for the discounts.
  In his statement today, my right hon. Friend the Secretary of State for Trade and Industry promised about £100 million in the next four years for the coal industry, and said that he will lift the stricter gas consents policy. The decision to end the current consents policy will result in the removal of our coal industry from Britain in the next two years. Because of the gas consents that have already been approved, and those that will be allowed in October 2000, there is no way that our industry will be
  762
  able to compete with gas. Our coal industry will be eclipsed, and we will have ever more gas-fired power stations.
  Consequently, even without a climate change levy, we will be able easily to meet the Kyoto targets. I agree with the right hon. Member for Fylde (Mr. Jack) that we really do not need the climate change levy, which will be a tax on jobs in my area. If it is imposed, money will go out of my constituency and jobs will be cut. National insurance rebates will not compensate for those losses.
  Recently, the BOC Group—which, as I said, has a distribution centre in my constituency—wrote to me, as I presume it did to many other hon. Members, on the climate change levy. Each year, BOC spends £60 million—which is 78 per cent. of its production costs—on electricity at its largest sites. Although it cannot qualify for any of the exemptions from the climate change levy, it uses more electricity than do some of the industries that can qualify.
  BOC is involved in the process of air separation, but that process is not covered by the integrated pollution prevention and control regulations. BOC therefore cannot qualify for the 80 per cent. rebates provided to the glass industry, for example. Similarly, processes that do not melt, but bend glass—such as those used by Pilkingtons in the manufacture of car windscreens—do not qualify for the 80 per cent rebate. The regulations therefore have different effects in different sectors of the glass industry. Although some are able to qualify for the rebates, some cannot. As the automobile components market is very competitive, Pilkingtons vehicle windscreen division will suffer greatly from uneven application of the regulations.
  In most of the letters that I have received on the climate change levy, companies make the point that, as they are burning so much energy and their energy costs are so high, they pay very close attention to energy consumption, which they try to reduce by installing the most energy-efficient plant that they can afford.
  The aggregates tax is another environmental tax. Although it is not dealt with in the Finance Bill, it has already been mentioned in the debate.
  Mr. Jack: Before the hon. Gentleman moves on to the aggregates tax, could he summarise his precise personal position on the climate change levy? Does he think that, as currently formulated, it should be dropped?
  Mr. Illsley: Yes, I do. As I said after today's announcement on the British coal industry, there is no need for the climate change levy. It now takes about two years to build a gas-fired power station. We are providing assistance to the coal industry to compete with gas-fired power stations. However, since 1912, gas production has been increasing and coal production has been decreasing. The time has just about come when the gas industry will simply do away with coal. Removal of the stricter consents policy will achieve whatever emissions level we need. I am sad to say that, as my area's industry will be hit, first, by the climate change levy and, secondly, by the loss of our coal industry.
  Sand, silicates and other aggregates are used in the glass industry, much of which is located in my constituency. My glass producers will be hit both by the climate change levy and by the aggregates tax. Their raw materials costs will increase.

  763
  Recently, the Quarry Products Association wrote to me, and presumably to other hon. Members, to point out that it was dismayed that its request for a voluntary agreement to deal with the Government's environmental concerns was rejected in favour of the tax.
  Mr. David Heath.: I am glad that the hon. Gentleman is dealing with the aggregates tax. Does he agree that the tax, because of its bad design, will not promote recycling materials rather than using virgin stone, and that it will attack the very companies that are installing the infrastructure necessary to improve the environment? Will they not be worse off for taking that action?
  Mr. Illsley: The hon. Gentleman anticipates my point. The tax will not promote good practice in the aggregates industry. The good operator and the bad operator will be equally affected.
  Although the glass industry can recycle waste glass, it cannot use recycled quarry materials, as the Government would like it to do. I fully support the protection of national parks and the sites of quarries and minimising the use of raw materials through voluntary agreements, but the proposals will be a tax on jobs in my constituency. We talk a lot about the north-south divide. Here are two examples of a northern heavy industry manufacturing constituency being affected by Government policy.
  I welcome the thrust of the Bill and the Budget. I very much welcome the extra money for the national health service and other services and the fact that our economy is strong and our public finances are in good shape. I just wish that the Government would look again at the climate change levy; the aggregates tax; what we are doing for our pensioners; and smuggling.
  7.51 pm
  Mr. Christopher Gill.: It is a great pleasure to follow the hon. Member for Barnsley, Central (Mr. Illsley). I should like to say across the party divide how much I agreed with his comments on bootlegging, the climate change levy and the aggregates tax. I have the same experiences in my constituency.
  The Government speak of working for a stronger and fairer Britain. That is an admirable aspiration, but after that I part company with them. I imagine that many Conservative Members agree that a stronger economy cannot be built through the imposition of additional taxes on the wealth-creating sector. We have listened to Government rhetoric. Ministers have said that businesses and jobs will benefit from the Budget. A reasonable test of the Bill is to examine how it will impact on businesses in my constituency, just as the hon. Member for Barnsley, Central assessed its effects on his constituency.
  As the hon. Gentleman rightly said, the aggregates tax will be a tax on jobs. There are many jobs in quarries in my constituency, including those operated by Aggregate Industries at Much Wenlock, the Bromfield sand and gravel company at Ludlow, Hanson at Clee hill and Lafarge Redland at Bridgnorth. The Quarry Products Association is not best pleased that, having spent the best part of 18 months working up a partnership agreement and hoping to persuade the Government to accept a package
  764
  of 30 regulatory and voluntary proposals that it maintains would have guaranteed a much better deal for the environment, its proposals have been rejected in favour of a tax.
  It seemed rather unprincipled of the Government to encourage the Quarry Products Association to believe that if it came up with satisfactory answers that addressed the Government's objectives, no tax would be imposed. The other disappointment is that the tax will undoubtedly have serious ramifications throughout the economy. The tax will not differentiate between good and bad operators and provides no incentive to improve environmental performance.
  I say that with some feeling, because the quarry on Clee hill last year won the civic trust award and a national quarry reclamation award for doing a very good job restoring quarry workings after they have been worked out. It is a slap in the face for the operators of that quarry and others who have worked hard to do the right thing by the environment to find that the proposals that they spent a lot of time, money and effort on have been rejected. They were given no reason to suspect that, like many other interest groups, they were being taken for a ride by the Government, who eventually imposed an aggregates tax on Budget day of £1.60 per tonne. The Quarry Products Association points out that many small operators working on a small profit margin will be at serious risk of closure, which would lead to job losses. I am concerned about that, because those jobs are very important in my constituency.
  Where is the sense in the tax? Henceforth, every construction project in the land will cost more. Every new factory, every new house and every new Government building will cost more. Every mile of farm track or forestry access road will cost more. Maintaining and improving the permanent way on our railways will cost more. If they had one, the Government's roads programme would also cost more. Once again, the Government demonstrate their failure to understand that increased taxes and other cost and regulatory burdens imposed on the wealth-creating sector have consequences for the whole economy. I am sad that the Government have failed to recognise that imposing increased taxes on industry puts up costs and makes British companies less competitive.
  The Clee hill quarry produces a category of stone that is shipped to south Wales, where it is converted into rockwool. As many hon. Members know, that is an insulating material. There seems to be a contradiction. The Government are imposing a tax on the quarrying industry, but at the same time they are intent on reducing VAT on energy-saving materials. The left hand does not know what the right hand is doing. That is an example of the law of unintended consequences.
  Mr. David Heath: The hon. Gentleman is putting a powerful case that is shared by many of us who represent quarrying constituencies. Does he agree that his point could have been foreseen, because the Environmental Audit Committee drew attention to such perverse environmental consequences when we looked at the design of the tax?
  Mr. Gill: I have a lot of sympathy with that point. As we get into the detail of the Bill, it becomes clear that the

  765
  imperative is to raise more revenue. I shall give an example in a moment of another industry that has argued a sound case for several years and thought that it was going to persuade the Government to see sense, but fell at the last hurdle.
  The biggest employer in my constituency is the Lawson Marden Star aluminium factory at Bridgnorth. It will be subject to the full climate change levy, whereas the smelters in the aluminium industry will get a rebate. That is very much like the situation that the hon. Member for Barnsley, Central described in the glass industry, where the makers will get rebates but the benders will not.
  It will be very difficult to draw hard and fast lines in the sand for individual industries that will be meaningful and, more to the point, fair and that, even more to the point, will not prejudice the jobs that the hon. Gentleman and I value so much in our respective constituencies. Very few businesses indeed will find that the reduction in employers national insurance comes anywhere near compensating them for the amount that they will have to pay out for the climate change levy. It is a bad tax and should be withdrawn.
  I want to say a word about small independent brewers—including pub breweries—of which I have not a few in my constituency, such as the Three Tuns and the Six Bells at Bishop's Castle, the Sun at Corfton, the Crown at Munslow, Hobson's brewery at Cleobury Mortimer and the Wood brewery at Wistanstow. They might all have expected that the case for progressive beer duty put by the Society of Independent Brewers was so powerful and reasonable and such sheer common sense that the Government would accept it.
  A letter from the general secretary of the Society of Independent Brewers shortly after the Budget said:
  We have overcome all the objections from government departments as to why PBD—
  progressive beer duty—
  should not be introduced…
  Just like the quarrying industry, the brewing industry found at the final hurdle that it could not persuade the Government to recognise the sound common sense of its case.
  The Government are not friendly towards small businesses, as further evidenced by their obdurate refusal to listen to the voice of the Brewers and Licensed Retailers Association, which made the case that bootlegging of alcoholic drinks and tobacco is putting its members out of business. That was another point eloquently made by the hon. Member for Barnsley, Central.
  Let us face facts. Six rural pubs per week are closing. They are not going out of business because of market forces but are being driven out of business by a Government obsessed with political correctness and spin, who have a cynical disregard for the bona fide traders who are entitled to believe that the law of the land—the criminal, civil and fiscal law—is on their side. There is a dawning realisation that, under this Government, it is not. I trust that that will be reflected in the ballot box at the next general election.
  The quarry owners, the small brewers, the publicans, the newsagents and tobacconists and the sub-postmasters and mistresses are not the only ones to have been sidelined by the Chancellor. In his Budget speech, there was not a mention of farming, Britain's second biggest
  766
  industry and one that is crucial in my constituency. After three years of Labour dither and delay, that industry is in desperate straits.
  The Chancellor might have seen the good sense of reducing the duty on beer, to encourage its production and consumption in this country, as against all the alcoholic drinks that we import. Let us consider the spin-off to the farming industry. If it was required to produce more hops and malting barley, that would be a win-win situation for the brewers, the farmers and the consumers—it would be a virtuous circle—but instead we have the opposite and the Labour party is returning to tax and spend, and the devil take the hindmost.
  The inexorable hike in road fuel duty does nothing to improve the rural economy. The Bill contains nothing for people in rural areas. The Chancellor may bluster that corporation tax and the standard rate of income tax have been reduced, and I applaud him for that, but that is no consolation to the road hauliers whose profits have evaporated, to the farmers who are driven to claim income support, or to the retailers who are forced to put up the shutters for the last time because the Government, far from running the bootlegger out of town, are driving the bona fide trader out of business.
  I have deliberately concentrated on the effects on business, because there is no escaping the fact that without business there is no wealth creation, without wealth creation there are no jobs, and without jobs and wealth creation there is no money for the public sector.
  8.5 pm
  Liz Blackman.: I commend the Bill to the House. The Budget cannot be viewed in isolation from earlier Budgets. There is an interaction between this Finance Bill and those that have gone before it. Each Bill is a building block. Building blocks need firm foundations, and I want to hammer home the point that although when we took office in 1997 a frustrated electorate had tremendous aspirations and expectations that the Government would deliver all kinds of policies, it would have been very foolish to set off on a course that we could not deliver because of the weak footings that we inherited.
  I was very interested to hear the speech of the right hon. and learned Member for Rushcliffe (Mr. Clarke). I fear that he was suffering from selective amnesia. When we took office in 1997, debt as a share of gross domestic product was far too high, at 44 per cent. He had made an attempt to bring the deficit down, but it was still £28 billion: inflation was rising, and he should have put up interest rates before the general election in May, but the issue was very politically sensitive at the time. I see a Conservative Member nodding in agreement.
  Mr. Tyrie: Will the hon. Lady give way?
  Liz Blackman: Not just yet.
  Inflation was rising when we took office, and we had to follow a more painful track in interest rates as a result. The House will recall that rates had been bobbing up and down furiously over many years leading up to 1997 and had reached the heady height of 15 per cent. How could businesses have operated in that climate? The fact is that they did not operate very successfully.
  Mr. Tim Loughton.: As the hon. Lady would not give way to my hon. Friend

  767
  the Member for Chichester (Mr. Tyrie), who was nodding, can she point to a single speech made by her Labour colleagues before the general election suggesting that interest rates should go up? Will she acknowledge that interest rates have changed about 15 times over the past three years? What stability does that offer for business?
  Liz Blackman: First, at the time to which the hon. Gentleman refers, we were not in government. On his second point, although interest rates have bobbed up and down recently, they have done so by quarter points within a very narrow band; at no point have they got anywhere near the 15 per cent. that we endured during the late 1980s and early 1990s. We will take no lessons from him.
  Mr. Tyrie rose—
  Sir Teddy Taylor.rose—
  Liz Blackman: I want to make a little progress before I give way.
  Before we could move forward on our priorities, we had to put the house in order. In three years, we have reduced debt as a proportion of GDP to 35 per cent. and what was then a deficit is now a surplus of £14 billion. We have substantially locked in those surpluses, and rightly so, given the strength of the economy.
  Mr. Tyrie: Will the hon. Lady give way?
  Liz Blackman: No. The hon. Gentleman can make his own speech shortly.
  In tandem, the Monetary Policy Committee, which was appointed early in the Government's life, has kept inflation bang on target at an average of 2.5 per cent. and has also kept interest rates within a narrow band. The shape of the economy is good—and that despite the fact that in 1998 we faced a severe contraction in economic activity in Asia, which is something that Opposition Members forget. The Opposition predicted recession, but it did not happen. That was not an accident: it was because the economy, and our fiscal and monetary policies, were working properly to ensure that we stayed on course.
  Several hon. Members rose—
  Liz Blackman: I shall not give way, because I would like to make some progress. [Interruption.] I seem to be getting under the Opposition's skin, so I judge myself to be succeeding.
  We are now three years down the line and into our third Finance Bill, and we have flagged up our priorities. The priority that is nearest and dearest to my heart is education. The state of education resourcing in Derbyshire in 1997 was diabolical. The reason for that was the vicious spending restrictions placed on the local authority by the then Government. Class sizes were at a record high and were some of the worst in the country. Buildings were falling apart and the situation was at rock bottom.
  In recognition of Derbyshire's dire straits, it was the only authority that this Government allowed to breach its spending cap in the first year of this Parliament. It has
  768
  since had generous slabs of ring-fenced funding: classrooms have been built; we have more teachers; roofs have been mended; the majority of schools in my constituency now have indoor toilets; and the literacy and numeracy strategies are working well.
  The differential in funding between Derbyshire and other authorities is still of concern, because we are still at the bottom of the league. However, I congratulate the Government on re-examining the issue and on their commitment to try to get greater parity between authorities. That is not only an issue for me as a Derbyshire MP, but for other hon. Friends and Opposition Members.
  Mr. Bercow: If the Government are doing as well on education expenditure as the hon. Lady claims, why is it that they have reduced the proportion of GDP spent on education from 5 per cent., as it was under the previous Government, to 4.7 per cent?
  Liz Blackman: All I can say is that when I go round my constituency I see real and tangible results from spending, for the first time in many years. I see new classrooms, more teachers, new and renovated buildings. What is more, I see children following curriculums that are making progress for them so they will not reach secondary schools with poor reading and writing skills, as they were allowed to by the previous Government. That is the difference, and I can see it working in my constituency.
  I also welcome the money that is to be given to the NHS. Again, my local health authority has done well out of the settlement in capital and in revenue. My constituency has two hospitals, and both are beneficiaries of the private finance initiative. That would never have happened under the previous Government, because not one hospital contract had been signed when we came to power in 1997.
  The other NHS funding that I especially welcome is the money that is going direct to primary care groups, for which I have much sympathy because they are being asked to deliver the lion's share of the Government's agenda. The PCGs in my constituency have certainly welcomed the extra funding that will allow them to do that.
  We have heard much about industry today, and of course it is the engine of a successful economy. The Treasury Committee has taken a lot of evidence about productivity, because it is strongly linked to business success. All our witnesses came to the same conclusion—the reason for the existence of such a wide productivity gap between this country and some of our European competitors and the United States was a structural lack of investment over many years. The policies in the current Finance Bill and in our previous Finance Bills, as welcomed by the Institute of Directors, will help to reverse that lack of investment. That is at the heart of raising productivity. I welcome the lowering of corporation tax, the permanence of the capital allowances, the reforms to the capital gains tax system, the research and development credits and the regional venture capital fund, of which the east midlands will now receive its share.
  Underpinning all those factors is a stable economy. Businesses will not invest in an economy in which they have no confidence. Businesses have not invested

  769
  structurally in the past because Government policies did not encourage them to do so and also because they had no certainty about what the economy would be doing from one year to the next. That certainty now exists, so business investment has increased significantly since 1997. It is up 16.5 per cent. and inward investment is up 45 per cent.
  Much has been said tonight about the manufacturing sector and the hard time that it is having exporting because of the level of the pound. However, Opposition Members cannot explain why when interest rates went down last year the level of the pound stayed the same. Neither the right hon. and learned Member for Rushcliffe nor the hon. Member for Kingston and Surbiton (Mr. Davey) could explain that. According to their argument, the pound should have fallen when interest rates were that bit lower last year, but it did not. The fact is that the euro is weak, but euro economies are recovering, especially France and Germany.
  Mr. Edward Davey: Is the hon. Lady saying that fiscal policy has no effect on the exchange rate?
  Liz Blackman: If any hon. Member can explain why the pound stayed at exactly the same level when interest rates went down last year, we might be able to have something of a debate, but the movement of the pound in relation to the euro is inexplicable not only to all the experts who have appeared before the Treasury Committee but to the Governor himself. If monetary policy had been relaxed with a significant impact on the level of the pound, we could argue some kind of cause and effect, but that has not been demonstrated.
  Sir Teddy Taylor: Will the hon. Lady give way?
  Mr. Bercow: Will the hon. Lady give way?
  Liz Blackman: No, I will not. The hon. Gentlemen can make their own speeches.
  I turn now to the supply side and to the skills that are vital to improved output and productivity. The game is a long one, and I have talked already about investment and the effects that our policies and resourcing strategies are having. However, I also welcome the significant training programmes that the Government are putting in place, and the policy on lifelong learning.
  My constituency has a skills shortage that was identified many years ago. I am delighted with the Government's new deal policies, under which youth unemployment and long-term unemployment have each been cut by 65 per cent. My right hon. Friend the Chief Secretary visited my constituency not so long ago and met a new dealer who was 58 years of age. Between the ages of 50 and 57, he was out of work and he never thought that he would work again. However, he got on the pilot new deal 50-plus scheme, and is now a really valued employee of the firm for which he works. I welcome the additional proposals to roll out the new deal 50-plus scheme across the country. It should be recognised that every section of society has a contribution to make, and my constituent has certainly made his.
  All the measures that I have mentioned, together with the enhanced working families tax credit and the lower marginal rates of tax and national insurance, help to
  770
  ensure that people are supported back into work. The 800,000 new jobs that have been created are testimony to that.
  Mr. Bercow rose—
  Liz Blackman: Finally, I want to say a few words about pensioners. My hon. Friend the Member for Barnsley, Central (Mr. Illsley) congratulated the Government and welcomed the measures in the Bill that are targeted at pensioners. Some are aimed at poorer pensioners but others—such as the winter fuel allowance—are more universal. I have had discussions with pensioners in my constituency, and a couple of other points arise out of the representations that they made. I believe that the measures that we have taken are absolutely right, but even with the new savings thresholds that have been introduced, those pensioners just above the minimum income guarantee who have modest savings will not get the same benefits as those on the minimum income guarantee. I want more to be done for them, but the Government recognise that and I know that they are consulting on introducing more pensioner credits for that particular group. That is absolutely right.
  Finally, when the Government flagged up the priorities of education and health, the Opposition said that our proposed investment in public spending was reckless. They were wrong. They foretold recession during the Asian crisis, and they were wrong. Some Opposition Members now endorse an investment strategy in public services, but they also urge the minimum tax guarantee—exactly the combination that will take the country back to the dire recession of the late 1980s: it would lead to the same disaster.
  A well-managed economy allows us to pursue economic success, productivity, better public services, and fairness. All those objectives are inextricably linked.
  8.24 pm
  Mr. Dafydd Wigley.: I shall not pick up the speech from the hon. Member for Erewash (Liz Blackman) in detail, but I agree with what she said about the Government's treatment of pensioners. That story was told very dramatically by the hon. Member for Barnsley, Central (Mr. Illsley), who is not in his place now. Some Labour Back Benchers are feeling very strongly the pressure being applied by pensioners. No doubt they will make known to the Government the dissatisfaction and unhappiness felt by pensioners at the weekend press reports about the Government abandoning the pensioner vote.
  Where will that vote go? The Conservative party broke the link between pensions and earnings in 1981 and is unlikely to reap the harvest from pensioners. Clearly, my party will have to put up candidates throughout the United Kingdom.
  During the Budget debate, I had the opportunity to touch on a number of issues. I described the effect on rural areas of increased petrol prices: I spoke about pensions, and I welcomed some of the provisions in the Budget, such as the policy for children. Today, therefore, I shall concentrate on three or four matters only.
  Before I do so, however, I want to echo what some other hon. Members have said about the ridiculous size of the Bill. There are 558 pages, 150 clauses and

  771
  40 schedules. Schedule 6 alone covers 83 pages. It takes up about 4,000 lines and amounts to about 30,000 words. The Government say that that is not a problem, but it will be one in Committee: if only a minute is devoted to each line, consideration of the schedule would take up about 67 hours. Perhaps Labour Members want to spend their time in Committee like that, but I think that their enthusiasm will soon run dry.
  We must think also of the people who have to live with the consequences of the Bill. There is a need for some stability and simplicity in the legislation, so that people can get their lives on a more even keel.
  The hon. Member for Erewash presented the novel idea that interest rates have no bearing on the value of the pound. I am afraid that I do not entirely share that view.
  Liz Blackman: Will the right hon. Gentleman give way on that?
  Mr. Wigley: No, the hon. Lady was not all that generous about giving way. I shall not be either.
  The value of the pound is a central question, and the indications following the Budget are that the pressure on interest rates will be upwards. The hon. Member for Erewash may disagree, but I believe that that will cause the pound to strengthen. There is no doubt that a high pound is bad for the Welsh steel industry, which is facing a difficult time in the coming months, but it is bad too for the motor industry and for other industries throughout the country.
  The high pound also has a devastating effect on farming. Imports are being sucked in, and it is impossible for our farmers to export goods. It is also very detrimental for tourism, an industry that is important to me and to many other hon. Members. The Government must deal with the problem and not just shrug it off and pass it over to the Bank of England.
  The transfer to the Bank of England of responsibility for the level of the pound is all very well, but that responsibility ought to cover levels of employment as well as inflation. Both elements are important, and they should be dealt with side by side. I know that that conviction is shared by Labour Members, and perhaps by some in the Opposition parties.
  Earlier in the debate, Labour Members boasted that public expenditure now takes up a smaller proportion of gross domestic product than in the past. I would like public expenditure to rise—on pensions, transport and housing, for example. Everyone knows that there is a need for money to be spent on renovating houses. I do not therefore consider falling public expenditure to be especially commendable.
  However, the burden must be spread fairly throughout the community. Conservative Members continually refer to the wealth-creation sector of the economy, as if only businesses create wealth. Everybody who is in work is part of the wealth-creating sector of the economy. It is no use saying that people working in the national health service are not part of the productive wealth of the
  772
  economy because it is a service, so called—of course they are. They make it possible for other people to do their work.
  Mr. Geraint Davies: Will the right hon. Gentleman give way?
  Mr. Wigley: Let me finish my point first. A doctor in the private sector could be regarded as being in business and therefore wealth creating because he is paid out of profits, while a doctor in the public sector, who does not get paid in that way, could be regarded as a drain on the economy. That is clearly nonsense. We must consider the whole economy and everyone in it who is undertaking worthwhile work, whether it is productive or in the service sector, is part of that economy. It is not simply a question of the wealth-creating side of the economy in business, but of the whole economy, a fair burden of taxation and a fair level of expenditure on public services.
  Mr. Geraint Davies: My point was that real increases in public expenditure can occur at the same time as a proportion of gross domestic product rises because the economy is growing. By how much does Plaid Cymru want to increase income tax so that public expenditure is increased to the desired rate?
  Mr. Wigley: I will be coming on to that in a moment. However, I certainly would not have taken a penny off income tax at this time. That £2,600 million, or whatever such a move generates these days, would have been better used to help pensioners, transport and housing.
  Mr. Bercow: The right hon. Gentleman talked about his desire for increased expenditure on housing. What assessment has he made of the effect of the change in the rules on the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?
  Mr. Wigley: That is one element, but a more fundamental question faces people who are waiting for renovation grants in the old industrial areas, not only in Wales, given the reduction in the money spent on housing by central Government. Obviously, there is an effect from the change mentioned by the hon. Gentleman in the funds that are available, but that is one among a number of elements which have undermined the rolling programme of house renovations. People in houses that are virtually unfit to live in may be waiting six, seven or 10 years, given the present level of expenditure, for renovation grants. They are often elderly people who do not, and will not, have the resources themselves. We need a new mechanism to bring finance into the housing sector, both public and private, to ensure that people have decent housing.
  I shall turn briefly to regional policy. At the heart of what has been happening with interest rates and the higher level of the pound that has resulted has been the question of the differential heating up of the economy. There has been a problem in south-east England and no doubt in other parts of the country, such as south-east Wales. The economy in the Cardiff area may be heating up more than in other parts of Wales. That underlines the question of whether it is possible to have a mechanism, through

  773
  taxation of some other means, to stimulate economic development in slow areas and damp it down in areas that are overheating.
  There was an attempt to do that in the 1960s, although it was not altogether successful. However, it is worth revisiting some of the ideas, such as the regional employment premium and selective employment tax. I am not sure about the selective employment tax, because that ossified industries in one direction. [Interruption.] I see the Chief Secretary putting his thumb down.
  Mr. Bercow: It was the Labour Government—Harold Wilson.
  Mr. Wigley: Yes, it was the Wilson Government, from 1966 to 1970, who introduced those proposals. The regional employment premium was, in concept, a devaluation, because it resulted in more purchasing power in the region. If we are not to have the strong investment programmes that many of us would like, there must be some fiscal approach along these lines.
  Within the rules of the European Union, if it is possible to have plus or minus 2 per cent. around value added tax rates, is it possible to consider having differential VAT rates as one way of stimulating the economy a little in some areas and damp it down in others? I believe that such a mechanism needs to be considered if we are to make progress. It is possible in areas with objective 1 status, some of which are lived in by the poorest people in these islands. I refer to Merseyside, South Yorkshire, Cornwall, west Wales and the valleys. It is possible to use operating aid—as has happened in other parts of Europe which have objective 1 assistance—to have a lower level of employers' national insurance premium as a mechanism with which to stimulate the economy in those areas. I know that the Department of Trade and Industry and probably the Treasury were looking at that idea last year, and I think that it was rejected. However, I believe that similar mechanisms should be considered if we are to avoid an even worse polarisation between areas doing relatively well and those in parts of Wales, the north of England and Scotland that are not doing so well. I hope that such mechanisms will be considered by this time next year, even if it is not possible to do so in the context of this Finance Bill.
  How do we pay for such adjustments? If I want to spend more money in certain areas, I need to put forward funding proposals. For example, I would remove the cut-off on the top level of employee national insurance premiums. It is ridiculous to have a cut-off that means that the marginal rate, taking the combined rate of income tax and national insurance, for someone earning £10,000 is 32 per cent., whereas for somebody earning £28,000 a year, the rate is 22 per cent. That is not sensible, and a combined upper rate of 50 per cent. rather than 40 per cent. for those on higher earnings would be acceptable and would bring in resources. Such steps need to be taken.
  The provisions for the climate change levy have been mentioned by a number of speakers and are clearly causing considerable worry. The measure will not achieve what it was meant to achieve. The levy is not a carbon tax, and it is too blunt an instrument to result in the benefits in climate change at which it should be aiming. A number of right hon. and hon. Members will have received a letter from the plastic industry saying that the measure's impact
  774
  on electricity alone would cost the industry £60 million a year. We need to reconsider the issue. It will be a body blow to many companies, and they will not be able to change overnight.
  Following the statement this afternoon by the Secretary of State for Trade and Industry, I asked what criteria would be used to decide on the exemptions of the combined heat and power projects from the climate change levy. He referred me to the Treasury Front Bench. I have looked carefully through schedule 6 and at paragraphs 20 and 21. All I can find is a provision in paragraph 20(1) stating:
  The Commissioners may by regulations make provision for giving effect to the exclusions and exemptions…
  There is no clarification on that issue.
  Mr. Letwin: Does the right hon. Gentleman agree that the main deficiency of the climate change levy is that, for the first time in British taxation history, an arbitrary tax—the discounts for which will be decided by individual civil servants in negotiation with particular companies—has been introduced by a Government?
  Mr. Wigley: Much work will be needed in Committee on the 83 pages of that schedule. The most worrying aspect of the tax is its impact, but there is also its uncertainty—for example, whether exemptions will be allowed or not. That is open-ended—to say the least. The matter will need clarification. People have a right to know not only who is administering the tax, but on what basis such taxation will be undertaken. We need some certainty in planning for the future.
  The Chief Secretary to the Treasury would be surprised if I did not return to the point that I made earlier during an intervention on his speech: I referred to the way in European structural funding would be carried out. Understandably, in his reply, the right hon. Gentleman pointed out that the matter would be sorted out in the comprehensive spending review. I am sure that the Government have good intentions in that regard; we all look forward to its being sorted out during years 2 to 7 of their programme. However, that still leaves this year—2000–01 will not be covered by the CSR.
  In Wales, £25 million was built into our budget for this year's spend, against a possible spend of up to £368 million. Clearly, that would not happen, but there is the expectation of a spend of between £50 million and £100 million. For example, a development fund could call up 7 per cent. of the total structural funds for Wales—£1.2 billion under objective 1—within the first two years; that would be about £40 million a year. That money could be available for small businesses in Wales. However, there is only £25 million in our budget, which has to cover not only the match funding but the European money itself; under the present mechanism, the European money goes to the Treasury. Yes, it is passed over when projects are developed, but the amount is knocked off the Barnett block. We gain with one hand, but we lose with the other so we are no better off.
  This year, if we find that expenditure runs beyond that £25 million in our budget, will it be possible to go into the contingency reserve—not only for Wales, but for other areas that might be affected—to ensure that we do not lose out on the objective 1 programme? The Government have worked hard to obtain that programme for Wales;

  775
  we certainly need it in areas of high unemployment and low per capita income. It would be a tragedy if we missed out. I hope that the Chief Secretary will reflect on that during the coming weeks, and that he will be able to give a positive response in due course—for this financial year and not just for the next.
  8.41 pm
  Mr. Christopher Leslie.: Hon. Members have the opportunity on too few occasions to consider the broad sweep of economic and public finance policy. However, the Second Reading of the Finance Bill provides just such an opportunity. During the many hours of debate, I have been struck by the fact that Opposition Members have apparently forgotten some of the fundamental tenets of economic policy—one of which must surely be that, to spend money on public services, revenue must be raised.
  The right hon. Member for Caernarfon (Mr. Wigley) and the hon. Member for Kingston and Surbiton (Mr. Davey) seemed to want to stop fiscal loosening. On the other hand, they said that we should spend much more money on pensioners and health, but failed to point out how on earth such measures would be funded. Such irresponsibility persuades no one of the merits of their case.
  Conversely, the Conservatives suggest that, somehow, they can reduce taxation—to stop raising revenue—while magically continuing to maintain expenditure on vital public services. My constituents—indeed, the wider public—are neither stupid or naive; they will not be fooled by that poor arithmetic. They know about the basic sums in public finance and that, to pay for important services, we must have a secure revenue base.
  Building on the progress that we have already made, the Finance Bill goes a long way towards securing a healthy set of public finances to pay for those important public services that we all need and that Labour Members are ensuring that we deliver, step by step.
  I have a few brief observations on the Bill; the first focuses on the vital public service of health. The Budget measures on tobacco duty have come in for some criticism. However, I am proud to defend such measures, which use policy to target a demerit product—one that has a greatly adverse effect on our many constituents who smoke. The 5 per cent. real increase in tobacco duty will discourage people from smoking. Furthermore, that expenditure will bolster expenditure on the national health service—it will go towards the extra £2 billion allocated to the NHS during the financial year 2000–01. In my health authority area, the Bradford and Airedale hospitals will receive a 9.3 per cent. cash increase in one year. That is a massive increase; it will take local spending to £344 million.
  All this will have a considerable impact. The money will not be set aside; it will be spent on cancer services, on reducing waiting times, on vital services provided by doctors and hospitals, and at the front line. The Bill well illustrates cause and effect—where the revenue is raised and the purposes for which it is spent.
  The Bill will bring significant benefits to business. The 100 per cent. allowance for small firms for information technology will be broadly welcomed throughout
  776
  industry, but there are also small but significant measures such as the abolition of stamp duty on intellectual property transactions and the simplification of the capital gains system.
  These are important measures. While Opposition Members criticise the length of the Bill, we should be focusing on its outcome. That is what matters most, and I do not at all mind standing here, even though it might be a quarter to nine at night, enacting these measures and putting the Finance Bill on the statute book.
  Many important measures in the Bill, such as the closure of several tax loopholes, illustrate the fact that the Government are anxious to achieve fairness across the board for taxpayers, and to ensure that a few people cannot get away with paying less than their fair share.
  The other side of the coin is that the Bill provides a package of very significant new measures to help charitable giving, such as those making payroll deduction much easier and lifting the threshold on gift aid. Those measures will have a real impact.
  I have heard criticisms tonight about the climate change levy, but we must not forget the wider environmental context in which these measures come into being. My mailbag does not contain as much criticism of the measure as do those of Opposition Members. However, people are writing to me about the floods in Bangladesh and Mozambique and the famine in Ethiopia—areas where adverse weather conditions have created devastation for very many millions of people—caused, we can now safely assume, by emissions of too much carbon into the atmosphere.
  We must do something about that, and that is what the climate change levy is about. It is not imposed for and of itself. Moreover, it is revenue-neutral; the money is paid back through the national insurance system. I am glad that the Government have made concessions, especially to energy-intensive industries. The aim is to reduce our carbon emissions, meet our environmental commitments and, ultimately, do the right thing for the world. It is unwise to lose sight of those important aspects.
  When the right hon. Member for Wells (Mr. Heathcoat-Amory) was criticising the Government on several grounds, he mentioned that an extra £2 billion was being spent on central Government administration. When I—from a sedentary position, I admit—balked slightly at the scale of his allegation, I was castigated for not referring to page 60 of Command Paper 4601, which he thought proved his case.
  I have taken the liberty of referring to the Library and asking for an opinion on the matter. The figures in the document show that the right hon. Gentleman was referring to the cash figures, without taking into account inflation in wage costs. He tried to imply that we could consider the matter purely in cash terms. If we consider the figures in real terms, which we should all accept as the best way of measuring such matters—[Interruption.] That is interesting; Conservative Members seem to be suggesting that they do not believe that we should use real-terms figures to consider such matters. The figures for the final year of the Conservative Administration, when compared with the figures for central Government

  777
  administrative expenditure projected for next year, show that the Labour Government will spend £137 million less in real terms.
  Mr. Letwin: Will the hon. Gentleman read out what happened in cash terms under the Conservative Administration?
  Mr. Leslie: I shall read out the fair terms, which are the real-terms figures. For example, in 1994–95, the figure was £15,000 million compared with £14,186 million for the financial year of 2001–02. That represents a reduction in real terms. It does Conservative Members no good at all to scrabble around to try to find ways to pay for their ridiculous tax guarantee, or spending cuts guarantee as it should be called. They suggest that somehow they can stretch expenditure to cover myriad issues. The hon. Gentleman suggested that they would not only spend on health and education, but that he wanted additional expenditure on defence and to prevent crime. Those areas make up 40 per cent. of public expenditure, yet he believes that we could see a real growth in expenditure on them above the rate of increase in the GDP. He believes that he can sustain such increases in expenditure while simultaneously reducing taxation. That is not feasible unless there are swingeing cuts in other services.
  Mr. Letwin: Has the hon. Gentleman had the opportunity to look at the Red Book? If he has, has he noticed that that he has described precisely the oddity that the Chancellor of the Exchequer predicts?
  Mr. Leslie: If the hon. Gentleman is suggesting that my right hon. Friend the Chancellor of the Exchequer is working in line with the Conservative party's distorted policy of a tax—or public service cuts—guarantee, he cannot have been paying too much attention. Given his suggestion that public expenditure should increase significantly in real terms and that tax should be reduced by enormous amounts, what would he cut? As he has said that he does not agree with borrowing, there would have to be cuts in international development aid, the transport budget, pensions, child benefits, disabled benefits and myriad other services.
  Mr. Letwin: Is the hon. Gentleman now denying the proposition that the Chief Secretary has repeatedly made in the House: that, in the Chancellor's plans in the Red Book, tax will fall as a percentage of GDP for several years?
  Mr. Leslie: The hon. Gentleman should realise that his proposal is for the lifetime of a Parliament, but I know that there is a rumour that the shadow Chancellor is considering changing that proposal so that it falls into line with the economic cycle. The hon. Gentleman is right in so far as the Government will reduce the burden of taxation, but we correctly consider such matters over cycles and by examining the needs and the demands of the public sector and what we need to spend. We are not driven by the ridiculous dogmatic guarantee that would set in concrete a notional level of revenue reduction regardless of economic circumstances. That would continually force enormous cuts in the public services that the Conservatives say are not crucial. However, many of my constituents would say that public expenditure on
  778
  matters such as international development, agriculture and trade and industry is important. We all know that the Conservatives would cut that enormously.
  When I examined other statements on expenditure made by the Conservative party, I noticed that it had made significant new spending—and not just tax reduction—commitments. For example, the Conservative Front-Bench spokesman on education wants to reinstate the assisted places scheme, albeit in a new form, which would cost many millions of pounds. The Conservatives want to restore the married couples allowance. Their home affairs spokesman wants to increase the police fund grant by about 6.1 per cent. They want to increase funding for ambulance services: the Conservative Whip here now, the hon. Member for Beverley and Holderness (Mr. Cran), has said in the past that he wants greater expenditure on ambulance services in his area. The shadow transport team wants higher spending on train station car parks, and has even spoken of free shares for all who live in London under the privatisation of London Underground.
  All those commitments have implications for public expenditure. People will not believe that the Conservatives could deliver their promises while simultaneously reducing taxation, without resorting to borrowing and adding to the national debt. That was their strategy during the 1980s, and we experienced the consequences of that.
  Mr. Edward Davey: Does the hon. Gentleman share my concern that the Conservative Front-Bench spokesmen do not appear to know whether their tax guarantee is a guarantee to reduce taxes over the lifetime of a Parliament, or over an economic cycle? Would he care to comment on that?
  Mr. Leslie: For once, I agree with the hon. Gentleman. The Conservatives' confusion is somewhat disturbing, even though it is also quite hilarious from our point of view. It demonstrates how there is no chance that the Conservatives will be trusted by the electorate, who will not have the wool pulled over their eyes. The electorate know about the balance of public finances and they know the difference between a realistic pledge and an unrealistic one. It is all very well for the Conservatives to give guarantees, but it is a sorry sight for voters to see the Conservatives trying to wriggle out of those guarantees only months later.
  My constituents will benefit significantly from the Budget and the Bill. We shall be able to deliver results locally. Progress will accelerate on a new road scheme worth £60 million in my constituency: the Bingley relief road. Thanks to the Government, there will be new school buildings at Cullingworth school, Beckfoot school, Bingley grammar school and Salt grammar school, paid for out of public funds. There will be new train rolling stock with extra carriages so that people are not crammed together at peak times. There will be a new accident and emergency wing at Bradford Royal infirmary. All those important local services will be delivered, thanks to the Government's careful and prudent management of the public finances.
  The Government have focused on stability and on ensuring that we get the fiscal balance right, while targeting assistance through tax cuts. They have always borne in mind the fact that a responsible Government have to balance revenue against expenditure. That is what my constituents want. I hope that the Bill receives the support of the House.
  8.58 pm
  Mr. Andrew Tyrie.: Originally, I was going to say something about macro-economic policy and take only an oblique look at the fiscal measures. However, having had a good look at the Bill over the past 48 hours, I have decided to spend some time talking about the climate change levy.
  Without a shadow of a doubt, the levy is the most astonishing measure that I have ever seen in a Finance Bill. Set out over the 83 pages of schedule 6. it is a most unusual provision. No clear explanation has been provided of why the measure has been introduced, nor of how it is to be applied. It is a poorly designed levy and poorly thought through. What was the ostensible reason for the levy, and what is it designed to achieve? I can only assume that it has been introduced because the Government have swallowed whole every assertion made by those who argue that we must act now to arrest climate change.
  I have asked the Library whether, since the general election, the Government have produced a study setting out their view of the conclusions of the Kyoto summit, the extent to which they agree with them or the extent, perhaps, to which they feel that we should go further. The Government have published nothing on those lines. Nor have they called together a group of scientists to publish an independent report, as far as I know.
  I do not know whether climate change is a serious problem. However, over the past 48 hours, I have started to read up about it again. With the Finance Bill, we could find ourselves at the start of what will amount to a fundamental alteration of the shape of the economy to take account of climate change without many of the basic questions about it being answered. I shall ask a few of those questions now.
  My interest in these matters was first triggered 10 years ago when I went to a lecture by Sir John Mason, the head of the Meteorological Office, who more or less destroyed the argument that climate change was occurring as a consequence of carbon dioxide emissions. Since then, he has modified his views somewhat, but, apparently, he still holds to many of his basic points. As I have said, I do not know the answers to these matters, but as I think that they are pertinent to schedule 6, I shall ask six or seven basic questions and make some brief allusions to them. I urge the Government to produce a thorough study of these matters before putting the Bill on the statute book.
  Let us try a really basic question. Is global warming occurring? That might be thought a most absurd question because the answer is so obvious. Over the past 20 years, statistics have shown that the surface temperature of the planet has risen between 0.3 and 0.8 points of a degree celsius. However, reading over the weekend, I discovered that satellite measures of the temperature of the earth show no rise. There are many scientists who think that such measurements are more accurate than terrestrial measures. Balloons called radiosonde are also used to measure temperature. They, too, have failed to find any increase in global temperature over the past 20 years. If I had to guess, I would say that the planet probably is increasing in temperature, but I really do not know.
  I shall try another basic question. Has the planet been warmer than it is now? I quickly discovered that it has been much warmer. In the middle ages, grapes were apparently cultivated along the south coast to produce
  780
  wine. There is overwhelming evidence to suggest that this part of the world, and probably the whole world, has been warmer than it is now. It was probably warmer in Roman times. There was also a mini-ice age in the 17th century.
  Even if the earth is warming, is that necessarily bad? I have seen no convincing evidence to suggest that it is. It is clear that there will be a distributional effect from one region to another. However, it is not clear that, overall, the earth will be worse off if temperatures rise.
  Will warming lead to more unstable weather? The Deputy Prime Minister has been unequivocal about that. He has stated that
  we can expect extreme weather events to become more frequent…as temperatures rise.
  When I read the evidence of the experts at the Intergovernmental Panel on Climate Change, I discovered that some of them strongly disagree with that view. They think that increases in temperature will lead to a smaller differential between the poles and the equator and that that will reduce extreme weather events. Again, I do not know whether that is true. I merely beg right hon. and hon. Members to read some of the literature that is available, which is by no means clear cut on these matters.
  Mr. Love: I thank the hon. Gentleman for giving way. Is he disagreeing with the right hon. Member for Wells (Mr. Heathcoat-Amory) who, in his speech this afternoon, committed the Opposition to the Kyoto targets?
  Mr. Tyrie: Commitments, once made, should be honoured. The Kyoto targets are probably quite manageable, possibly without a levy, as several Labour Members have said this evening. The question that I am raising is whether the general philosophy behind the objective that the levy is designed to achieve is right. I am not suggesting for a moment that I have the answers. I am suggesting that we should not rely exclusively on work done by a United Nations working group. There should be intensive study and debate on climate change by the Government before we fundamentally change the structure of British industry to take account of it, which is the long-term implication of a levy.
  I shall ask a few more questions, to which I also do not know the answer. If there is global warming, is it caused by human activity—in other words, is it anthropomorphic? The former Economic Secretary was clear about that. She said unequivocally:
  We cannot doubt that climate change is the result of human activity.—[Official Report, 20 July 1999: Vol. 335, c. 1040.]
  She was presumably referring to the only solid statement made on the matter by the IPCC, which noted in its report:
  Observations suggest a discernible human influence on climate change.
  That is rather weak wording on which to base a drastic change of economic and industrial policy.
  As far as I can tell from the literature, there is no clear evidence that humans are the exclusive or even the major cause of climate change, if indeed it is taking place. There are many learned tracts suggesting that variations in radiation from the sun are the main cause of variations in the weather. Moreover, a good number of models are being developed suggesting that climate change is endogenous to the planet.
  Kali Mountford: The hon. Gentleman is advancing an extraordinary thesis, which I have not often heard before.

  781
  What amount of evidence would satisfy him that measures are necessary? Even if he has doubts, is it not reasonable to err on the side of caution, before we lose atolls, islands and icebergs all over the world?
  Mr. Tyrie: The hon. Lady mentions icebergs. The evidence that the polar ice caps are disintegrating in the long run is weak. Sir John Mason made it clear in his lecture that he found the evidence extremely unreliable. If I had time, I would read his lecture out to the House.
  I suggest to the hon. Lady and to the House that we need to think carefully about these issues, before making drastic changes. I have not yet been convinced that the right course is to try to lower CO2 emissions to the point at which the models would start to predict that the earth was no longer warming. There may be other courses of action that we should take. I shall come on to those in a moment.
  It is clear that the planet has changed temperature many times, both up and down, well before any power stations were built, so we know that climate change can take place endogenously, as I suggested.
  Let us now make a few assumptions. Let us suppose that there is global warming, which is a reasonable assumption. Let us suppose that we are causing it, which looks a little less reasonable; that we are causing it through carbon emissions; and that it is resulting in a great deal of net harm to the planet. We ought to examine all those assumptions carefully.
  The next question, which again does not seem to have been asked by the Government, is: should we adapt to the change in climate or should we try to reverse it? As I mentioned, the main effect of a change in the climate is likely to be distributional—it impoverishes some areas and enriches others. There is a deal of evidence to suggest that an increase in the temperature of the planet will increase overall precipitation, and therefore increase the overall fertility of the inhabited areas of the globe, even though there will be some land loss, as the hon. Lady suggested when she envisaged sea levels rising.
  I do not know the answer to all those questions; I am not an expert. However, it is worth asking whether we should respond to such an event by accepting that some land loss will occur and deciding to build better sea defences, or by trying to devise some distributional mechanisms whereby the impoverished regions benefit from the areas that are enriched by global change. We should also consider whether it is worth trying to change the climate of the planet. That is a big undertaking, which we need to be clear that we need to achieve.
  If we conclude that we want to change the temperature of the planet, it is important that most of us are on side and working on the same project. There is a major problem with the CO2 emissions project. Although the Chinese have signed up to Kyoto, it is widely argued that they are not likely to implement it; the United States, which is responsible for the most CO2 emissions, has not even agreed to sign it. Upwards of half of the total global emissions of CO2 are from those two large countries, which do not seem to support the policy. It is dangerous to take such a step almost alone. As in other matters, Britain will honour its commitments more vigorously than many other countries that have signed agreements.
  The Bill introduces a massive new tax; in the long term, the Government plan to restructure British industry. If they are not planning to do that, they are not tackling the
  782
  problem but paying lip service to it. Therefore, one can assume that the measure creates a new tax base on which the Government clearly intend to build in the long run.
  I implore the Government to establish a high- powered committee, possibly a royal commission, to examine urgently the issues that I have raised, and to develop a British, considered view of global warming and ways in which to tackle it. No British Government have done that, but such action is urgently required.
  We have accepted too many arguments on the nod, without further careful examination. I stress that I do not claim that global warming is a load of nonsense. I genuinely do not know the answers to the questions that I have posed, but I believe that we should work on the best evidence available before implementing the tax. That is the biggest single reason for my caution about the levy.
  Let us consider the levy in detail. What does it propose? It does not directly affect carbon emissions. It is a downstream levy because the Government want to avoid a direct effect on consumers. It is an energy, not a carbon tax. Its guns are therefore pointing in the wrong direction. It will damage several successful industries, including British Steel. Brian Moffatt said:
  It will close plants, which will be replaced by inefficient plants in other parts of the world.
  In other words, net global CO2 emissions from the steel industry are likely to increase as a result of the proposals.
  Let us consider the liquid petroleum gas industry; the Calor gas industry. It will be badly hit, despite being the most CO2 friendly industry in the sector. It would be replaced by burning hydrocarbon oils; CO2 emissions will consequently increase.
  The list of potentially affected industries is endless. Several have already been mentioned. They include the renewables industry, aluminium, glass—the hon. Member for Barnsley, Central (Mr. Illsley) mentioned the effect on the glass industry in his constituency. In my constituency, I have a horticulture industry, which would be badly hit. It is ironic that the levy will hit those industries that are most exposed to international competition. It is therefore likely that we will force the industries offshore, and the net effect on global CO2 emissions will be zero or even negative. Eastern Europe, which has inefficient plants for a wide variety of industries, will benefit from that.
  Most extraordinary of all, the tax will be collected unlike any other, without a degree of certainty and on the basis of negotiation. It is discretionary and subject to what are described in schedule 6 as "umbrella agreements". There is no precedent for such negotiations on the collection of a tax or for empowering civil servants to negotiate with firms and agree their tax liabilities. Nor should politicians have that power. Therefore, I am deeply concerned about the Bill on that point of principle.
  Altogether, the structure of the tax is a right mess. In fact, I have not seen such a right mess since I looked at the poll tax in about 1985. I do not know whether we need the tax to fulfil the Kyoto targets, but my guess is that we probably do not, given that the Government have shown the common sense today to drop the gas moratorium. If more is needed—I said that we should fulfil our international obligations—we could think of far better ways, far less damaging to British industry, than the Government's extraordinary proposals.
  I said that I would say a few words about macro-economic policy, and there will be only a few, given the time available. I want to make two points by asking

  783
  questions. First, is fiscal policy tight enough to enable monetary policy to be relaxed? Everyone feels that, if we could engineer it, we should like some relaxation. That is the current mantra. I am not entirely convinced, but there is a case for it. If looser monetary conditions were achieved, the exchange rate could fall and the imbalance between the service and manufacturing sectors would be easier to handle.
  My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) argued in his first speech after the Budget that the Budget was tight. In his second, he argued that it was loose. He was more or less right the second time; it represents a loosening of policy. I cannot help feeling a resonance from events in the late 1980s when I was in the Treasury. What do we have? A brittle stock market, a bit of a housing boom after a long period of growth and some talk from the Government about how to end the business cycle—the end of boom and bust. There was talk of that then, but there is more now. I regret that Nigel Lawson let that phrase slip on one occasion, although he quickly tried to back-track later. Labour has not yet realised that it will have to do that. There was a debate about whether fiscal policy was too loose. We were addressing exactly those questions in the late 1980s. The situation is not so primed for as big a boom and bust, but several of the conditions are evident right now.
  No Government can afford to ignore the value of the exchange rate for ever—at least, no Government of a small or medium-sized country. At any rate, it is extremely difficult to manage an economy without giving some consideration to the exchange rate. I am sure that, sooner or later, the Government will realise that they will want to tighten fiscal policy to get the exchange rate to an appropriate level and to enable the Monetary Policy Committee to find the room to make the necessary changes to interest rate policy that would enable the exchange rate to fall.
  Mr. Love rose—
  Mr. Tyrie: I give way to the hon. Gentleman for a second time.
  Mr. Love: I thank the hon. Gentleman for giving way again. How does he square the fiscal tightening of which he talks with the Conservative amendment and the tax guarantee about which Conservative Members talk so much?
  Mr. Tyrie: I do not have the amendment in front of me, but the Red Book suggests a loosening of policy. If anything, fiscal policy should be tightened. If the hon. Gentleman will forgive me, in my remaining minute I shall not go into the territory of the tax guarantee, although I am fascinated by tax guarantees and would love to debate them on another occasion.
  I want to make another brief point by asking a question. Could the announced spending increases be sustained in the event of a downturn in economic activity? That is the other big question about the Budget and there are two pointers as to why that might not be the case. The first is the growth forecast. The whole Red Book is based on a forecast of above-trend growth, followed by our slipping back to trend growth; nowhere is there even the hint of an idea that we might be below trend.
  784
  Some Front Benchers are mathematicians, and will know that trends are averages: there must be a period a bit below the trend for there to be a period a bit above it. The Government's, it appears, is a unique trend, in that there is never anything below the line. That is a problem for the Government. If there is any downturn below trend, the numbers in the Red Book simply will not add up.
  The second factor that should be taken into account in an assessment of whether the spending can be afforded is the net borrowing figure. [Interruption.] If the hon. Member for Nottingham, North (Mr. Allen), who is grunting on the Front Bench, looks at page 146 of the Red Book, he will see that the rise in net borrowing is very fast over the planning period. That, I think, gives cause for concern.
  The structure of the economy is still sound, but it is slowly being chipped away. The Chancellor has taken risks, partly for electoral purposes. He is fuelling the beginnings of a political cycle with his fiscal policy, and in that sense he is undermining the good work that he did when he tried to dissociate politics from the business cycle by making the Bank of England independent.
  9.21 pm
  Mr. Howard Flight.: I am sure that all Members will join me in welcoming the tremendous improvement in the performance of the UK economy since 1992. As I think everyone knows, and as the Prime Minister has implicitly admitted, this is essentially the result of the supply-side reforms of the 1980s, the development of a venture capital industry, the return to entrepreneurship, and the key measures introduced by the Thatcher Administration.
  Mr. Geraint Davies: Is the hon. Gentleman aware that between 1990–91 and 1996–97 net debt as a percentage of gross domestic product grew from 27 to 44 per cent? Am I not right in saying that if the Tories ever returned to office with their tax guarantee, all that would happen would be more and more borrowing, more and more debt, and the indebtedness—again—of the British economy?
  Mr. Flight: It is about time that the hon. Gentleman matured a little. I was referring to the growth rates that have been achieved and the new industries that have developed. Indeed, comments made by the Prime Minister—the leader of the hon. Gentleman's own party—underline much of what the Government have done and most of the reasons why Labour has changed its spots so dramatically.
  What has happened in this country and in America, and to a lesser extent in Europe, has been very much the result of supply-side improvements.
  Mr. Davies: Will the hon. Gentleman give way?
  Mr. Flight: No. [Interruption.] I ask the hon. Gentleman not to interrupt. I said that I would not give way.
  The Chancellor has made an ill-conceived attempt to take credit for the good performance of the UK economy and for what we all hope will continue to be good growth rates during forthcoming years. He is also unwise to believe that he has abolished the business cycle, for

  785
  reasons that have been illustrated by recent events in the stock markets, and also for reasons given by my hon. Friend the Member for Chichester (Mr. Tyrie).
  I feel that the general thrust of the Budget is somewhat mistaken. The International Monetary Fund has said that it is uncomfortable about the Government's decision, at this stage in the cycle, to increase fiscal expenditure by some £4 billion over 2001–02, and by £15 billion by 2003–04. The IMF is saying implicitly that the Government run the risk of creating a return to boom and bust. That, too, was mentioned by my hon. Friend the Member for Chichester.
  I am, however, more worried by the fact that the overall thrust of the current Administration continues to be more Government involvement, more Government expenditure and higher taxes to finance this. In July 1998, the Chancellor lectured us about the great virtues of prudence and said that he would stick to his three-year spending targets, but, as my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said, he has thrown that out of the window with the current Budget without a by-your-leave.
  I also point out to the hon. Member for Shipley (Mr. Leslie) that the last Conservative Administration did freeze Government expenditure: it was at £13.3 billion in cash terms in 1994–95 and £13.29 billion by 1997–98. It has increased by £2 billion in cash terms since then.
  Mr. Leslie: Will the hon. Gentleman give way?
  Mr. Flight: No, I will not. We have debated the issue.
  Mr. Leslie rose—
  Mr. Flight: Come on then.
  Mr. Leslie: Will the hon. Gentleman admit that, when looking at central Government expenditure, it is better—he should suggest it to the right hon. Member for Wells (Mr. Heathcoat-Amory)—to use real terms than cash terms? They show that the present Government are reducing those costs.
  Mr. Flight: It is rational to look at both, but the point that I was making was that in the last three years of the previous Administration, there was prudent economy in managing Government expenditure: we held the sum in cash terms.
  The truth, as the electorate is becoming increasingly aware, is that the Government have put up taxes by the equivalent of 8p on income tax. The average family is paying some £13 a week, or £670 a month, more. Perhaps they would not mind if the delivery of services improved, but, as women in our community in particular are well aware, class sizes and waiting lists are up, police numbers are down and crime is rising. It is the failure to deliver which we attack and over which the Administration are increasingly being rumbled.
  The pledge was simple: taxation was not going to be increased at all; education and health were going to have a lot more spent on them and to be greatly improved; and the economies were going to come from reductions in the social security budget. The reality is that the latter is going up by some £30 billion over the current Parliament.
  786
  Both the Chancellor of the Exchequer and the Chief Secretary to the Treasury have continued to reveal a somewhat compulsive addiction to presenting incomplete data—and indeed, on some occasions, perhaps unwittingly, an addiction to misrepresenting data—and to hiding fiscal nasties as far as possible from Parliament. It is no accident that the director general of the British Chambers of Commerce commented on the recent Budget:
  It is becoming incredibly difficult for Business to match the Rhetoric with the Reality.
  The Budget is again full of stealth taxes. There are the double tax treaty treatment of proposals relating to mixer companies, the further increase in stamp duty, and the new car tax, which is almost impossible for anyone to understand but adds significantly to taxation where employers provide cars. There are the coming aggregates tax, the climate levy tax and the extra duty on tobaccoes and fuel.
  The biggest of the lot is not even in the Bill: IR35, which is budgeted to add some £900 billion of revenue. [HON. MEMBERS: "£900 billion?"] Would that the Government were so lucky—I mean £900 million of revenue. There are also national insurance contributions applying to venture capital companies on the exercise of employee share options.
  The Government have taxed pensions, business, insurance contracts, the self-employed and enterprise. As the hon. Member for Kingston and Surbiton (Mr. Davey) has pointed out, through their changes to the capital gains tax regime they have created something that is impossibly complicated for ordinary citizens to deal with. Allegedly, the Government are providing incentives to companies to make available shares to individuals who work in those companies, which Conservative Members welcome greatly, but the tax effects of the Bill as it stands are mind-blowingly complicated for such individuals.
  Mr. Gardiner: Does the hon. Gentleman not accept and welcome the fact that capital gains tax has been cut to the lowest level not only that this country has ever seen but in the western economy? Does he not recognise that the simplicity of planning over a four-year cycle—knowing that capital gains tax will be at 10 per cent. after four years—is welcomed by businesses up and down the country?
  Mr. Flight: Germany has no long-term capital gains tax and the rate in the United States is lower. I certainly welcome the cuts, but my criticism was of the complications.
  I turn to the change in the double taxation treaty. The last time that the issue was raised, I felt that the Chief Secretary cast an improper slur on Mr. Peter Wyman. It has emerged since that the mean of the forecasts of all the leading accounting firms is that the tax will raise at least £3 billion as it stands and make the United Kingdom the least attractive place among the main economies of the world to base multinationals headquarters.
  Is the Paymaster General aware that a main story in The Times tomorrow is that Allied Zurich plc will be moving its headquarters from the UK and that there will be a loss of £100 million of taxation to the Revenue as a result? I would be interested to hear what the Government have to say to that.

  787
  More particularly, and following Dame Sheila Masters' comments, we would like to know whether the Government will stick with the proposals or whether, as virtually all industry, accountants and so forth have advised, they will be going back to the drawing board. If they do not do so, they will simply succeed in driving multinationals from this country. Indeed, almost as if we are returning to the days of Harold Wilson and the brain drain, this Government seem determined to drive small businesses out of the country with IR35, and large businesses out of the country with the double taxation proposals.
  I turn to fuel duty and allowances. At the most recent Treasury Question Time, I asked the Paymaster General why the inflation indexation applying to fuel was 3.4 per cent. but for pensions and allowances it was only a 1.2 per cent. She responded—I felt slightly patronisingly—that as I had not been in government, I would not understand such things. The truth is that, right down to the last Conservative Budget, the same inflation base was used for both allowances and the fuel escalator. It is only as a result of this Administration increasing the duty on fuel four times over three years that they have moved the inflation index for fuel to the forecast rate. Indeed, I discovered another stealth tax in that, where the forecast has proved to be larger than the actual, no adjustment has been made in the following year's duty.
  There have been four increases in stamp duty for properties worth more than £250,000 over the past three years. As my right hon. and learned Friend the Member for Rushcliffe pointed out, that is a virtual tripling and quadrupling of stamp duty. The Government no doubt like to think that that is a pleasant major stealth tax on the well-off, but I remind them that £250,000 is the average price for a normal, family semi-detached home in London. The duty is an unfair tax on people in the south-east, who may have to move because of their job. It will discourage older people from vacating larger properties, thus adding to the demand for more houses on greenfield sites. It is similarly a burden on business.
  Mr. Love: Does the hon. Gentleman accept that the increase in stamp duty for houses worth more than £250,000 applies to only 4 per cent. of residential property?
  Mr. Flight: The main point is that the tax covers businesses, but as I pointed out and as the hon. Gentleman is no doubt aware, the cost of an average, perfectly unfancy family home in London is now around such a price.
  Opposition Members welcome the Government's proposals to increase the tax breaks on giving to charities. However, the value of those proposals is a good deal less than the full cost to charities of the abolition of advance corporation tax, which will come into effect in 2004. Additionally, the Government have failed to deal with the major problem of value added tax paid by charities.
  We broadly welcome the Government's venture capital and enterprise measures. It is a pity, however, that the impact of those measures is substantially undone by measures in other spheres, particularly IR35.
  I should like to tell the Paymaster General of the case of one of my constituents and the reason why IR35 is not merely a tightening-up on tax avoidance arrangements.
  788
  My constituent is typical of the 60,000 information technology subcontractors who have been persuaded to subcontract at the prompting of the main company for which they work. His complaint is that the limit on expenses will cost him an extra £5,000 annually. He has annual revenues of £60,000, and his legitimate expenses—depreciation, accounting, travel and supplies—amount to £11,000 per annum. At the 5 per cent. limit, he is permitted only £3,000 per annum of tax-deductible expenses. He will therefore have to find £8,000 of expenses out of after-tax income. That has to be wrong. No other business structure is obliged to meet bona fide business expenses out of after-tax income.
  My many right hon. and hon. Friends on both sides of the House—for Caernarfon (Mr. Wigley), for Wells (Mr. Heathcoat-Amory), for Rushcliffe, for Kingston and Surbiton, for Fylde (Mr. Jack) and for Barnsley, Central (Mr. Illsley)—have all criticised the crackpot climate change levy proposals. The crucial point is that the levy will tax energy, not carbon. The levy is not a necessary environmental tax, but simply an excuse for raising revenue.
  The Budget's measures on transport expenditure are likely to prove inadequate, especially with the approval to introduce 44-tonne lorries, and particularly in the south-east.
  My right hon. Friend the Member for Wells and my hon. Friend the Member for Ludlow (Mr. Gill) rightly criticised the tobacco duty increase, which will simply increase bootlegging. I commend to the House, in the recess, a read of Parson Woodforde's diary, which described an entirely similar phenomenon in the 18th century, when coffee was overtaxed and people's integrity was undermined by coffee smuggling.
  More seriously, the tobacco duty increase bears hardest on the least fortunate members of society. I should perhaps declare an interest in the matter and in the Bill as a whole, both personally as a smoker and as a director of companies. Hon. Members will know that, although some people can buy cigarettes or wine abroad, single parents and many others who smoke and are at the bottom of society will suffer most from the increase.
  Rarely has a Chancellor been in such a strong position to present his last Budget, or last Budget but one, before a general election. It is surprising that this Budget has been a relative flop. It has been criticised by business and by the International Monetary Fund. It has also been resented by ordinary citizens, who are now aware that their mortgage interest relief at source and married couples allowance are going as their new tax codes are being introduced. People are increasingly aware that they are paying £670 a year more in tax.
  As the director general of the Confederation of British Industry commented:
  This is not the Budget for Business that we were hoping for.
  The head of the Federation of Small Businesses commented:
  Overall this was a Social Budget and a lost opportunity for small business.
  The Chancellor has sidelined over 80 per cent. of small firms by ignoring the unincorporated self-employed sector. I believe that the Budget reveals Labour's visceral response towards both the self-employed and pensioners. The Government think that, politically, neither of those groups is on their side, and, therefore, that neither of those groups is to be helped.

  789
  The real criticism—this is where my right hon. Friend the Member for Wells and I began—is that the Government have loaded taxes and regulations on the economy. Their regulations cost business £5 billion per annum and there will be £30 billion of extra taxation on business over the Parliament, as well as higher taxation on average families. But the Government have failed to deliver in the key service areas of health and education for which they were elected. That is why the House should refuse to give the Bill a Second Reading.
  9.40 pm
  The Paymaster General (Dawn Primarolo): This has been an interesting debate. I congratulate my right hon. Friends the Members for North Durham (Mr. Radice) and for Llanelli (Mr. Davies) and my hon. Friends the Members for Wimbledon (Mr. Casale), for Shipley (Mr. Leslie) and for Erewash (Liz Blackman) on their contributions, which I shall attempt to cover, as well as those of the right hon. and learned Member for Rushcliffe (Mr. Clarke), the right hon. Members for Fylde (Mr. Jack) and for Caernarfon (Mr. Wigley), and the hon. Members for Kingston and Surbiton (Mr. Davey), for Ludlow (Mr. Gill) and for Chichester (Mr. Tyrie).
  My hon. Friend the Member for Shipley dealt effectively with the comments of the right hon. Member for Wells (Mr. Heathcoat-Amory) about Government spending on administration. My hon. Friend made it clear that administrative costs last year accounted for 4.1 per cent. of total Government spending, compared with 4.4 per cent. in 1996–97.
  The purpose of the debate is to deal with the measures in the Bill. I shall try to respond to the concerns that have been expressed. My hon. Friend the Member for Wimbledon talked about fairness in the tax system and the need to create a platform of economic efficiency and success on which to build social progress and stability. He highlighted the enterprise agenda in the Bill and echoed again that full employment is possible and we can deal with the structural unemployment that we inherited from the previous Government.
  My hon. Friend the Member for Barnsley, Central (Mr. Illsley) made several points, some of which I shall return to. He will not be surprised to hear that I did not always agree with him. I shall deal in particular with his points about the smuggling of tobacco and alcohol. I remind him and the House that the Government have announced that we will spend another £209 million over three years and that there will be nearly 1,000 more staff tackling the issue. We are dealing with smuggling on three fronts: first, we are improving our intelligence collection and targeting those who finance smuggling; secondly, we are targeting those who transport the goods into this country; thirdly, we are targeting the gangs who distribute the products. My hon. Friend focused on duty, but the problem is far worse than that. The systematic criminal activity of smuggling goods into this country that do not carry the cost of duty means that whatever we do with our duty rates, we will still
  790
  have to tackle the serious problems of smuggling. Hon. Members should not underestimate the problems of that systematic criminal activity.
  Mr. Tyrie rose—
  Dawn Primarolo: I shall give way to the hon. Gentleman before I move on to his points about climate change.
  Mr. Tyrie: Does the Minister accept that the most intelligent thing to do is to accept that the Government are creating a criminal class through the huge differential? The answer is to reduce the differential and kill off the smuggling. The Government would probably get an increased yield in the long run as a result.
  Dawn Primarolo: I do not think that the hon. Gentleman heard what I said, so I will repeat it. The problem is with goods on which no duty has been paid, smuggled in from beyond the European Union, at a price that we simply could not compete with, by systematic, organised criminals, not Jack-the-lads. The hon. Gentleman does the cause no good by continuing to peddle a simplistic answer to what is a very serious problem in all our communities.
  Several hon. Members have spoken about the climate change levy. The hon. Member for Arundel and South Downs (Mr. Flight) seems a little confused—I hope that he will not take that as patronising, as I would not dream of patronising him—about exactly what happens with the levy. The levy package will cut CO2 omissions by at least 5 million tonnes by 2010. He said that it raised taxes, but in fact it is revenue neutral. All the proceeds will be recycled back to business. The package will be broadly neutral for the manufacturing sector, too. There will not be a transfer to the service sector, as some have suggested today.
  The hon. Gentleman should say whether, in opposing the climate change levy, his party is opposing the employers national insurance contribution cut that will result from these measures.
  Mr. Paterson: Will the Minister give way?
  Dawn Primarolo: No, because I want to answer the points made by others who have been in the Chamber for the whole evening.
  The hon. Member for Arundel and South Downs should be clear about what is in the Bill. He referred to the aggregates levy, as did others. They are wrong in thinking that it is in the Bill. It is a future consideration.
  My right hon. Friend the Member for Llanelli talked about group relief, the European Court of Justice rulings and the changes in the Bill. There are two separate rulings: ICI-Colmer and another case, the name of which has just slipped my mind. The ECJ ruled, in relation to the single market, that double tax relief had to apply to branches. That means that it would be backdated for six years in the case referred to, because the ECJ has ruled that it would apply for the whole time.

  791
  I will look closely at what my right hon. Friend said. He also referred to profit and loss for branches. That was not covered in the ECJ ruling and would not be backdated for six years. That is a change that the Government have chosen to make.
  Mr. Denzil Davies: My point—my hon. Friend has half answered it—was that it is possible to claim back for six years, but will the claiming back be restricted to residents within the European Union?
  Dawn Primarolo: It applies not to residents but to companies. We are talking about branch relief. There is a difference, and my right hon. Friend spoke very particularly about the difference of residence and whether one must be in the European Union to qualify. The changes that we have made are part of the package of improvements that we are making in this year's Budget.
  I want to speak about double taxation relief and the controlled foreign company measures to which several hon. Members have referred. Budget 2000 introduces changes to the corporate tax rules covering the treatment of foreign profits, including limiting the use of so-called mixer companies to shelter low-tax foreign profits from UK tax. Multinationals will no longer be able to use offshore structures to mix foreign tax rates of, say, 60 per cent. and 5 per cent. when they bring foreign profits into the UK as dividends. Currently, they do that to shelter low-taxed foreign profits from UK tax. That means that the Exchequer underwrites the cost to business of investing in countries that have not reduced their taxes to the UK level. Companies would not be able to get relief for higher foreign tax if they held overseas subsidiaries directly from the UK.
  The reality is that companies have been attracted to the UK in recent years primarily as a result of the climate of economic stability that the Government have fostered through the low corporate tax rates and, most recently, by the abolition of advance corporation tax, which has made the UK a much more attractive location for companies that have activities outside the UK. The problem for international business and UK companies investing abroad is not the abolition of mixer companies, but that the tax rates in countries in which they are investing, including Germany, the US and Japan, are higher—
  Mr. Flight: Will the Paymaster General give way?
  Dawn Primarolo: No. The hon. Gentleman can sit down to allow me to make my points. He will have plenty of time to debate these points with me, in Committee and in the House again.
  In some cases, the taxes are much higher, but changing the rules for mixer companies will get rid of the subsidy that the UK taxpayer provides for those other tax systems. The use of mixer companies has made UK investors more or less indifferent to the high tax rates in countries in which they invest, and we need to change that focus to ensure that we receive the correct amount of tax.
  The fundamental point is that the Government do not believe that companies should be able to roll up profits offshore, in many cases out of the reach of any normal tax system. This is not about competitiveness, but about
  792
  fairness. Opposition Members wish to focus only on that one issue. They do not wish to consider the wider issues of double taxation relief, but that is only one of the considerations that companies take into account when considering where to set up their groups. The changes to the double taxation relief need to be considered with the other elements of the tax and non-tax environment.
  Other elements within the tax environment consist of taxation of capital gains made by companies on selling their subsidies and the tax relief for interest on loans to fund overseas investment. The changes made to the double taxation relief system may tighten the rules in that area, but when the proposals in the Budget are taken into account, the UK will remain competitive in the future in the international arena.
  The background is simple. The relief for foreign tax extended to overseas companies mergers is part of the double taxation relief. Allowing foreign tax to be carried backwards and forwards for use in another year is also part of the double taxation relief. The Government are legislating for a number of practices to improve the transparency and certainty of the relief, as companies requested. The other changes, to which Opposition Members never wish to refer, make up the complete package, including the reduction in the corporation tax rates, the abolition of advance corporation tax, the extension of the group rules, and the abolition of stamp duty on sales of intellectual property to boost research and development to create an environment favourable to the innovation and invention of our companies. These provisions represent a broader rationalisation and modernisation of the double taxation reliefs, and Opposition Members should look at them carefully before making wild accusations about how much money is going to be saved. The hon. Member for Arundel and South Downs could not even tell the difference between £900 million and £900 billion—but I am not surprised at that.
  I shall turn briefly to the question of what is known as IR35, which covers people using service companies. The House must be clear that we are not talking about entrepreneurs or employers. We are talking about employees who want a better deal from the tax system than their status says they are entitled to. Opposition Members must say why a nurse should pay more national insurance on her income than an IT specialist who uses a service company to reduce his income before making those payments.
  Our intention is not to prohibit service companies—nor to touch those who work legitimately through them. We want to make it clear that people who are really employees but who seek to disguise their employment status through a service company should pay the correct amount of national insurance and tax. That is what every hon. Member in the Chamber does, and all the 26 million employed people in the tax system do.
  Opposition Members continue to try and make it sound as if the people at whom the Bill is targeted are to be denied what other people get, but it is not possible for people simply to say, "I want to be self-employed." The rules on terms and conditions in the tax system dictate whether a person is categorised as self-employed or as an employee. Opposition Members argue for a 5 per cent. reduction in payments for training costs. The implication is that only employees in service companies are so entitled, and that ordinary employees are not.

  793
  There have been endless statements in support of the Government's action in bringing forward these proposals. There has been a vocal and effective campaign against them but, as The Daily Telegraph stated on 3 April:
  Many…people were merely taking advantage of a loophole in the tax rules. They were by most normal definitions employees but found a legitimate way of reducing their tax.
  That is what IR35 seeks to deal with.
  An article in Scotland on Sunday on 2 April stated:
  Every bar-room regularly knows at least one smart kid with a six figure income who has slashed his tax bills simply by calling himself self-employed and charging for his work through
  a personal service company. Such practices cannot be allowed to continue.
  As I said to the hon. Member for Kingston and Surbiton, the Liberal Democrats advocate that everyone else's tax must go up by 1p in the pound; he must therefore explain why he believes that those few people who use service companies should be allowed to pay less tax than anyone else simply because that is what they want to do.
  The Bill is about business and jobs, which will benefit from our commitment to enterprise. The Bill contains a number of measures to promote enterprise and help business—cuts in capital gains tax, research and development tax credit, the permanent 40 per cent. allowance for small and medium-sized companies, the new all-employee share ownership plan, the enterprise management incentive and the corporate venturing proposals.
  The Bill promotes enterprise and fairness. It looks to the future, whereas the Conservative party is still locked in the past. Conservative Members have put forward no coherent proposals this evening: there is no indication that they have an understanding of what the problem is, let alone a glimmer of what the solution should be.
  The Bill shows that this Government are keeping their promises where the previous Government broke theirs. Labour is standing for the many, as we deliver sound public finances, lower inflation, high living standards, help for poorer families and pensioners, and employment for opportunities for all, while the Conservative party continues to make reckless pledges that sacrifice future security. I commend the Bill to the House.
  Question put, That the amendment be made:—
  The House divided: Ayes 136, Noes 342.

  Division No. 169]

  [10 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Chapman, Sir Sydney (Chipping Barnet)

  Amess, David

  Ancram, Rt Hon Michael

  Clappison, James

  Arbuthnot, Rt Hon James

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Baldry, Tony

  Bercow, John

  Collins, Tim

  Beresford, Sir Paul

  Cormack, Sir Patrick

  Body, Sir Richard

  Cran, James

  Boswell, Tim

  Davies, Quentin (Grantham)

  Bottomley, Peter (Worthing W)

  Davis, Rt Hon David (Haltemprice)

  Bottomley, Rt Hon Mrs Virginia

  Day, Stephen

  Brady, Graham

  Dorrell, Rt Hon Stephen

  Brazier, Julian

  Duncan Smith, Iain

  Brooke, Rt Hon Peter

  Emery, Rt Hon Sir Peter

  Bruce, Ian (S Dorset)

  Evans, Nigel

  Burns, Simon

  Faber, David

  Cash, William

  Fabricant, Michael

  794

  Fallon, Michael

  Nicholls, Patrick

  Fight, Howard

  Norman, Archie

  Forth, Rt Hon Eric

  O'Brien, Stephen (Eddisbury)

  Fowler, Rt Hon Sir Norman

  Ottaway, Richard

  Fox, Dr Liam

  Page, Richard

  Gale, Roger

  Paice, James

  Garnier, Edward

  Paterson, Owen

  Gibb, Nick

  Pickles, Eric

  Gill, Christopher

  Portillo, Rt Hon Michael

  Gillan, Mrs Cheryl

  Prior, David

  Gorman, Mrs Teresa

  Randall, John

  Gray, James

  Redwood, Rt Hon John

  Green, Damian

  Robathan, Andrew

  Greenway, John

  Robertson, Laurence

  Grieve, Dominic

  Roe, Mrs Marion (Broxbourne)

  Hague, Rt Hon William

  Ruffley, David

  Hamilton, Rt Hon Sir Archie

  Sayeed, Jonathan

  Hammond, Philip

  Shephard, Rt Hon Mrs Gillian

  Hawkins, Nick

  Shepherd, Richard

  Heald, Oliver

  Simpson, Keith (Mid-Norfolk)

  Heath, Rt Hon Sir Edward

  Soames, Nicholas

  Heathcoat-Amory, Rt Hon David

  Spelman, Mrs Caroline

  Hogg, Rt Hon Douglas

  Spicer, Sir Michael

  Horam, John

  Spring, Richard

  Howarth, Gerald (Aldershot)

  Stanley, Rt Hon Sir John

  Hunter, Andrew

  Steen, Anthony

  Jack, Rt Hon Michael

  Streeter, Gary

  Jackson, Robert (Wantage)

  Swayne, Desmond

  Jenkin, Bernard

  Syms, Robert

  King, Rt Hon Tom (Bridgwater)

  Tapsell, Sir Peter

  Taylor, Ian (Esher & Walton)

  Kirkbride, Miss Julie

  Taylor, John M (solihull)

  Laing, Mrs Eleanor

  Taylor, Sir Teddy

  Lait, Mrs Jacqui

  Tredinnick David

  Lansley, Andrew

  Trend, Michael

  Leigh, Edward

  Tyrie, Andrew

  Letwin, Oliver

  Viggers Peter

  Lewis, Dr Julian (New Forest E)

  Walter, Robert

  Lidington, David

  Waterson, Nigel

  Lilley, Rt Hon Peter

  Wells, Bowen

  Lloyd, Rt Hon Sir Peter (Fareham)

  Whitney, Sir Raymond

  Loughton, Tim

  Whittingdale, John

  Lyell, Rt Hon Sir Nicholas

  Widdecombe, Rt Hon Miss Ann

  MacGregor, Rt Hon John

  Wilkinson, John

  McIntosh, Miss Anne

  Willetts, David

  MacKay, Rt Hon Andrew

  Wilshire, David

  McLoughlin, Patrick

  Winterton, Mrs Ann (Congleton)

  Madel, Sir David

  Winterton, Nicholas (Macclesfield)

  Malins, Humfrey

  Yeo, Tim

  Maples, John

  Young, Rt Hon Sir George

  Mates, Michael

  Maude, Rt Hon Francis

  Tellers for the Ayes:

  Mawhinney, Rt Hon Sir Brian

  Mr. Geoffrey Clifton-Brown

  May, Mrs Theresa

  and

  Moss, Malcolm

  Mr. Peter Atkinson.

  NOES

  Adams, Mrs Irene (Paisley N)

  Bell, Stuart (Middlesbrough)

  Ainger, Nick

  Benn, Hilary (Leeds C)

  Ainsworth, Robert (Cov'try NE)

  Benn, Rt Hon Tony (Chesterfield)

  Allan, Richard

  Bennett, Andrew F

  Allen, Graham

  Benton, Joe

  Anderson, Donald (Swansea E)

  Bermingham, Gerald

  Anderson, Janet (Rossendale)

  Best, Harold

  Armstrong, Rt Hon Ms Hilary

  Betts, Clive

  Ashton, Joe

  Blackman, Liz

  Atherton, Ms Candy

  Blears, Ms Hazel

  Austin, John

  Blizzard, Bob

  Ballard, Jackie

  Boateng, Rt Hon Paul

  Barnes, Harry

  Borrow, David

  Barron, Kevin

  Bradley, Keith (Withington)

  Bayley, Hugh

  Bradley, Peter (The Wrekin)

  Beckett, Rt Hon Mrs Margaret

  Bradshaw, Ben

  Begg, Miss Anne

  Brake, Tom

  Beith, Rt Hon A J

  Brand, Dr Peter

  Bell, Martin (Tatton)

  Breed, Colin

  795

  Brinton, Mrs Helen

  Gerrard, Neil

  Buck, Ms Karen

  Gibson, Dr Ian

  Burden, Richard

  Gilroy, Mrs Linda

  Burgon, Colin

  Godsiff, Roger

  Burstow, Paul

  Goggins, Paul

  Butler, Mrs Christine

  Golding, Mrs Llin

  Byers, Rt Hon Stephen

  Gordon, Mrs Eileen

  Cable, Dr Vincent

  Griffiths, Jane (Reading E)

  Caborn, Rt Hon Richard

  Griffiths, Win (Bridgend)

  Campbell, Mrs Anne (C'bridge)

  Grocott, Bruce

  Campbell, Rt Hon Menzies (NE Fife)

  Grogan, John

  Hain, Peter

  Campbell, Ronnie (Blyth V)

  Hall, Patrick (Bedford)

  Cann, Jamie

  Hamilton, Fabian (Leeds NE)

  Casale, Roger

  Hancock, Mike

  Caton, Martin

  Hanson, David

  Cawsey, Ian

  Harman, Rt Hon Ms Harriet

  Chapman, Ben (Wirral S)

  Harvey, Nick

  Chaytor, David

  Heal, Mrs Sylvia

  Chidgey, David

  Healey, John

  Chisholm, Malcolm

  Heath, David (Somerton & Frome)

  Clapham, Michael

  Henderson, Doug (Newcastle N)

  Clark, Rt Hon Dr David (S Shields)

  Henderson, Ivan (Harwich)

  Clark, Paul (Gillingham)

  Hepburn, Stephen

  Clarke, Charles (Norwich S)

  Heppell, John

  Clarke, Eric (Midlothian)

  Hesford, Stephen

  Clarke, Rt Hon Tom (Coatbridge)

  Hewitt, Ms Patricia

  Clarke, Tony (Northampton S)

  Hill, Keith

  Clelland, David

  Hodge, Ms Margaret

  Clwyd, Ann

  Hood, Jimmy

  Coaker, Vernon

  Hoon, Rt Hon Geoffrey

  Coffey, Ms Ann

  Hope, Phil

  Cohen, Harry

  Hopkins, Kelvin

  Coleman, Iain

  Howarth, Alan (Newport E)

  Colman, Tony

  Howells, Dr Kim

  Connarty, Michael

  Hughes, Ms Beverley (Stretford)

  Corbett, Robin

  Hughes, Kevin (Doncaster N)

  Corbyn, Jeremy

  Humble, Mrs Joan

  Cotter, Brian

  Hurst, Alan

  Cousins, Jim

  Hutton, John

  Cox, Tom

  Iddon, Dr Brian

  Crausby, David

  Illsley, Eric

  Cryer, Mrs Ann (Keighley)

  Jackson, Ms Glenda (Hampstead)

  Cryer, John (Hornchurch)

  Jackson, Helen (Hillsborough)

  Cunningham, Jim (Cov'try S)

  Jenkins, Brian

  Darvill, Keith

  Johnson, Alan (Hull W & Hessle)

  Davey, Edward (Kingston)

  Jones, Rt Hon Barry (Alyn)

  Davies, Rt Hon Denzil (Llanelli)

  Jones, Helen (Warrington N)

  Davies, Geraint (Croydon C)

  Jones, leuan Wyn (Ynys Môn)

  Davis, Rt Hon Terry (B'ham Hodge H)

  Jones, Ms Jenny (Wolverh'ton SW)

  Dean, Mrs Janet

  Jones, Jon Owen (Cardiff C)

  Dismore, Andrew

  Jones, Dr Lynne (Selly Oak)

  Dobbin, Jim

  Jones, Martyn (Clwyd S)

  Donohoe, Brian H

  Kaufman, Rt Hon Gerald

  Doran, Frank

  Keeble, Ms Sally

  Dowd, Jim

  Keen, Alan (Feltham & Heston)

  Dunwoody, Mrs Gwyneth

  Keetch, Paul

  Eagle, Angela (Wallasey)

  Kemp, Fraser

  Eagle, Maria (L'pool Garston)

  Kennedy, Rt Hon Charles (Ross Skye & Inverness W)

  Ellman, Mrs Louise

  Ennis, Jeff

  Kennedy, Jane (Wavertree)

  Etherington, Bill

  Khabra, Piara S

  Fearn, Ronnie

  Kidney, David

  Field, Rt Hon Frank

  King, Andy (Rugby & Kenilworth)

  Fisher, Mark

  King, Ms Oona (Bethnal Green)

  Flint, Caroline

  Kirkwood, Archy

  Flynn, Paul

  Kumar, Dr Ashok

  Follett, Barbara

  Ladyman, Dr Stephen

  Foster, Rt Hon Derek

  Lepper, David

  Foster, Don (Bath)

  Leslie, Christopher

  Foster, Michael J (Worcester)

  Levitt, Tom

  Foulkes, George

  Lewis, Ivan (Bury S)

  Gapes, Mike

  Lewis, Terry (Worsley)

  Gardiner, Barry

  Linton, Martin

  George, Bruce (Walsall S)

  Livsey, Richard

  796

  Lloyd, Tony (Manchester C)

  Raynsford, Nick

  Llwyd, Elfyn

  Rendel, David

  Lock, David

  Robinson, Geoffrey (Cov'try NW)

  Love, Andrew

  Roche, Mrs Barbara

  McAvoy, Thomas

  Rogers, Allan

  McCabe, Steve

  Rooker, Rt Hon Jeff

  McCafferty, Ms Chris

  Rooney, Terry

  McCartney, Rt Hon Ian (Makerfield)

  Ross, Ernie (Dundee W)

  Rowlands, Ted

  McDonagh, Siobhain

  Roy, Frank

  Macdonald, Calum

  Ruane, Chris

  McDonnell, John

  Ruddock, Joan

  McFall, John

  Russell, Bob (Colchester)

  McGuire, Mrs Anne

  Russell, Ms Christine (Chester)

  McIsaac, Shona

  Salter, Martin

  McKenna, Mrs Rosemary

  Sanders, Adrian

  Mackinlay, Andrew

  Sarwar, Mohammad

  Maclennan, Rt Hon Robert

  Savidge, Malcolm

  McNamara, Kevin

  Sawford, Phil

  McNulty, Tony

  Sedgemore, Brian

  MacShane, Denis

  Sheerman, Barry

  Mactaggart, Fiona

  Simpson, Alan (Nottingham S)

  McWilliam, John

  Singh, Marsha

  Marsden, Gordon (Blackpool S)

  Skinner, Dennis

  Marsden, Paul (Shrewsbury)

  Smith, Rt Hon Andrew (Oxford E)

  Marshall, David (Shettleston)

  Smith, Angela (Basildon)

  Marshall, Jim (Leicester S)

  Smith, Rt Hon Chris (Islington S)

  Martlew, Eric

  Smith, Miss Geraldine (Morecambe & Lunesdale)

  Maxton, John

  Meacher, Rt Hon Michael

  Smith, Jacqui (Redditch)

  Meale, Alan

  Smith, John (Glamorgan)

  Merron, Gillian

  Smith, Llew (Blaenau Gwent)

  Michael, Rt Hon Alun

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

  Michie, Bill (Shef'ld Heeley)

  Snape, Peter

  Michie, Mrs Ray (Argyll & Bute)

  Soley, Clive

  Miller, Andrew

  Southworth, Ms Helen

  Mitchell, Austin

  Squire, Ms Rachel

  Moffatt, Laura

  Starkey, Dr Phyllis

  Moonie, Dr Lewis

  Steinberg, Gerry

  Moore, Michael

  Stevenson, George

  Moran, Ms Margaret

  Stewart, David (Inverness E)

  Morgan, Ms Julie (Cardiff N)

  Stinchcombe, Paul

  Morris, Rt Hon Ms Estelle (B'ham Yardley)

  Stoate, Dr Howard

  Strang, Rt Hon Dr Gavin

  Morris, Rt Hon Sir John (Aberavon)

  Straw, Rt Hon Jack

  Stuart, Ms Gisela

  Mountford, Kali

  Stunell, Andrew

  Mudie, George

  Sutcliffe, Gerry

  Mullin, Chris

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Murphy, Jim (Eastwood)

  Oaten, Mark

  Taylor, Ms Dari (Stockton S)

  O'Brien, Bill (Normanton)

  Taylor, David (NW Leics)

  O'Hara, Eddie

  Taylor, Matthew (Truro)

  Olner, Bill

  Temple-Morris, Peter

  Öpik, Lembit

  Thomas, Gareth (Clwyd W)

  Organ, Mrs Diana

  Thomas, Gareth R (Harrow W)

  Osborne, Ms Sandra

  Timms, Stephen

  Pearson, Ian

  Tipping, Paddy

  Pendry, Tom

  Todd, Mark

  Perham, Ms Linda

  Tonge, Dr Jenny

  Pike, Peter L

  Touhig, Don

  Plaskitt, James

  Trickett, Jon

  Pollard, Kerry

  Turner, Dennis (Wolverh'ton SE)

  Pond, Chris

  Turner, Dr Desmond (Kemptown)

  Pope, Greg

  Turner, Dr George (NW Norfolk)

  Pound, Stephen

  Twigg, Stephen (Enfield)

  Powell, Sir Raymond

  Tyler, Paul

  Prentice, Ms Bridget (Lewisham E)

  Tynan, Bill

  Prentice, Gordon (Pendle)

  Vis, Dr Rudi

  Prescott, Rt Hon John

  Ward, Ms Claire

  Primarolo, Dawn

  Watts, David

  Prosser, Gwyn

  Webb, Steve

  Purchase, Ken

  Wicks, Malcolm

  Quinn, Lawrie

  Wigley, Rt Hon Dafydd

  Radice, Rt Hon Giles

  Williams, Rt Hon Alan (Swansea W)

  Rammell, Bill

  797

  Williams, Mrs Betty (Conwy)

  Wright, Anthony D (Gt Yarmouth)

  Willis, Phil

  Wright, Dr Tony (Cannock)

  Winnick, David

  Wyatt, Derek

  Winterton, Ms Rosie (Doncaster C)

  Wood, Mike

  Tellers for the Noes:

  Woodward, Shaun

  Mr. Mike Hall and

  Worthington, Tony

  Mr. David Jamieson.

  Question accordingly negatived.
  Main Question put forthwith, pursuant to Standing Order No. 62 (Amendment on second or third reading), and agreed to.
  Bill accordingly read a Second time.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 63 (Committal of Bills),
  That Clauses Nos. 1, 12, 30, 31, 59, 102, and 113 be committed to a Committee of the whole House.
  That the remainder of the Bill be committed to a Standing Committee.
  That when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Dawn Primarolo.]
  Question agreed to.
  Committee tomorrow.

  EUROPEAN COMMUNITY DOCUMENTS
  Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),
  EUROPEAN COMMUNITY DOCUMENTS

    WHITE PAPER ON FOOD SAFETY
    That this House takes note of European Union Document No. 5761/00, a White Paper on Food Safety in the European Union; and supports the Government's view that consumer concerns and the complexity of current arrangements demand urgent action to develop a coherent EU policy for the foodstuffs sector: to this end, welcomes the establishment of a European Food Authority; and notes the Government's commitment to identifying the most appropriate terms and structure for such an Authority with the objective of improving and enhancing food safety and the associated EU regulatory process.—[Mr. Dowd.]
    The House divided: Ayes 305, Noes 170.

    Division No. 170]

    [10.19 pm

    AYES

    Adams, Mrs Irene (Paisley N)

    Bermingham, Gerald

    Ainger, Nick

    Best, Harold

    Ainsworth, Robert (Cov'try NE)

    Betts, Clive

    Allen, Graham

    Anderson, Donald (Swansea E)

    Blackman, Liz

    Anderson, Janet (Rossendale)

    Blears, Ms Hazel

    Armstrong, Rt Hon Ms Hilary

    Blizzard, Bob

    Ashton, Joe

    Boateng, Rt Hon Paul

    Atherton, Ms Candy

    Borrow, David

    Austin, John

    Barnes, Harry

    Bradley, Keith (Withington)

    Barron, Kevin

    Bradley, Peter (The Wrekin)

    Bayley, Hugh

    Bradshaw, Ben

    Beckett, Rt Hon Mrs Margaret

    Brinton, Mrs Helen

    Begg, Miss Anne

    Buck, Ms Karen

    Bell, Martin (Tatton)

    Burden, Richard

    Bell, Stuart (Middlesbrough)

    Burgon, Colin

    Benn, Hilary (Leeds C)

    Benn, Rt Hon Tony (Chesterfield)

    Butler, Mrs Christine

    Bennett, Andrew F

    Byers, Rt Hon Stephen

    Benton, Joe

    Caborn, Rt Hon Richard

    798

    Campbell, Mrs Anne (C'bridge)

    Heal, Mrs Sylvia

    Campbell, Ronnie(Blyth V)

    Healey, John

    Cann, Jamie

    Henderson, Doug (Newcastle N)

    Casale, Roger

    Henderson, Ivan (Harwich)

    Caton, Martin

    Hepburn, Stephen

    Cawsey, Ian

    Heppell, John

    Chapman, Ben (Wirral S)

    Hesford, Stephen

    Chaytor, David

    Hewitt, Ms Patricia

    Chisholm, Malcolm

    Hill, Keith

    Clapham, Michael

    Hodge, Ms Margaret

    Clark, Rt Hon Dr David(S Shields)

    Hood, Jimmy

    Clark, Paul (Gillingham)

    Hoon, Rt Hon Geoffrey

    Clarke, Charles (Norwich S)

    Hope, Phil

    Clarke, Eric (Midlothian)

    Hopkins, Kelvin

    Clarke, Rt Hon Tom (Coatbridge)

    Howarth, Alan (Newport E)

    Clarke, Tony (Northampton S)

    Howells, Dr Kim

    Clelland, David

    Hughes, Ms Beverley (Stretford)

    Clwyd, Ann

    Hughes, Kevin (Doncaster N)

    Coaker, Vernon

    Humble, Mrs Joan

    Coffey, Ms Ann

    Hurst, Alan

    Cohen, Harry

    Hutton, John

    Coleman, Iain

    Iddon, Dr Brian

    Colman, Tony

    Illsley, Eric

    Connarty, Michael

    Jackson, Ms Glenda (Hampstead)

    Corbett, Robin

    Jackson, Helen (Hillsborough)

    Corbyn, Jeremy

    Jenkins, Brian

    Cousins, Jim

    Jones, Rt Hon Barry (Alyn)

    Cox, Tom

    Jones, Helen (Warrington N)

    Crausby, David

    Jones, leuan Wyn (Ynys Môn)

    Cryer, Mrs Ann (Keighley)

    Jones, Ms Jenny (Wolverh'ton SW)

    Cryer, John (Hornchurch)

    Cunningham, Jim(Cov'try S)

    Jones, Jon Owen (Cardiff C)

    Darvill, Keith

    Jones, Dr Lynne (Selly Oak)

    Davies, Rt Hon Denzil (Llanelli)

    Jones, Martyn (Clwyd S)

    Davies, Geraint (Croydon C)

    Kaufman, Rt Hon Gerald

    Davis, Rt Hon Terry (B'ham Hodge H)

    Keeble, Ms Sally

    Keen, Alan (Feltham & Heston)

    Dean, Mrs Janet

    Kemp, Fraser

    Dismore, Andrew

    Kennedy, Jane (Wavertree)

    Dobbin, Jim

    Khabra, Piara S

    Donohoe, Brian H

    Kidney, David

    Doran, Frank

    King, Andy (Rugby & Kenilworth)

    Dowd, Jim

    King, Ms Oona (Bethnal Green)

    Dunwoody, Mrs Gwyneth

    Kumar, Dr Ashok

    Eagle, Angela (Wallasey)

    Ladyman, Dr Stephen

    Eagle, Maria (L'pool Garston)

    Lepper, David

    Ellman, Mrs Louise

    Leslie, Christopher

    Ennis, Jeff

    Levitt, Tom

    Etherington, Bill

    Lewis, Ivan (Bury S)

    Field, Rt Hon Frank

    Lewis, Terry (Worsley)

    Fisher, Mark

    Linton, Martin

    Flint, Caroline

    Lloyd, Tony (Manchester C)

    Flynn, Paul

    Llwyd, Elfyn

    Follett, Barbara

    Lock, David

    Foster, Rt Hon Derek

    Love, Andrew

    Foster, Michael J (Worcester)

    McAvoy, Thomas

    Foulkes, George

    McCabe, Steve

    Gapes, Mike

    McCafferty, Ms Chris

    Gardiner, Barry

    McCartney, Rt Hon Ian (Makerfield)

    George, Bruce (Walsall S)

    Gerrard, Neil

    McDonagh, Siobhain

    Gibson, Dr Ian

    Macdonald, Calum

    Gilroy, Mrs Linda

    McDonnell, John

    Godsiff, Roger

    McFall, John

    Goggins, Paul

    McGuire, Mrs Anne

    Golding, Mrs Llin

    McIsaac, Shona

    Gordon, Mrs Eileen

    McKenna, Mrs Rosemary

    Griffiths, Jane (Reading E)

    Mackinlay, Andrew

    Griffiths, Win (Bridgend)

    McNamara, Kevin

    Grocott, Bruce

    McNulty, Tony

    Grogan, John

    MacShane, Denis

    Hain, Peter

    Mactaggart, Fiona

    Hall, Patrick (Bedford)

    McWilliam, John

    Hamilton, Fabian (Leeds NE)

    Marsden, Gordon (Blackpool S)

    Hanson, David

    Marsden, Paul (Shrewsbury)

    Harman, Rt Hon Ms Harriet

    Marshall, David (Shettleston)

    799

    Marshall, Jim (Leicester S)

    Sedgemore, Brian

    Martlew, Eric

    Sheerman, Barry

    Maxton, John

    Simpson, Alan (Nottingham S)

    Meacher, Rt Hon Michael

    Singh, Marsha

    Meale, Alan

    Skinner, Dennis

    Merron, Gillian

    Smith, Rt Hon Andrew (Oxford E)

    Michael, Rt Hon Alun

    Smith, Angela (Basildon)

    Michie, Bill (Shef'ld Heeley)

    Smith, Rt Hon Chris (Islington S)

    Miller, Andrew

    Smith, Miss Geraldine (Morecambe & Lunesdale)

    Mitchell, Austin

    Moffatt, Laura

    Smith, Jacqui (Redditch)

    Moonie, Dr Lewis

    Smith, John (Glamorgan)

    Moran, Ms Margaret

    Smith, Llew (Blaenau Gwent)

    Morgan, Ms Julie (Cardiff N)

    Snape, Peter

    Morgan, Rhodri (Cardiff W)

    Soley, Clive

    Morris, Rt Hon Ms Estelle (B'ham Yardley)

    Southworth, Ms Helen

    Squire, Ms Rachel

    Morris, Rt Hon Sir John (Aberavon)

    Starkey, Dr Phyllis

    Steinberg, Gerry

    Mountford, Kali

    Stevenson, George

    Mudie, George

    Stewart, David (Inverness E)

    Mullin, Chris

    Stinchcombe, Paul

    Murphy, Jim (Eastwood)

    Stoate, Dr Howard

    O'Brien, Bill (Normanton)

    Strang, Rt Hon Dr Gavin

    O'Hara, Eddie

    Straw, Rt Hon Jack

    Olner, Bill

    Stuart, Ms Gisela

    Organ, Mrs Diana

    Sutcliffe, Gerry

    Osborne, Ms Sandra

    Taylor, Rt Hon Mrs Ann (Dewsbury)

    Pearson, Ian

    Pendry, Tom

    Taylor, Ms Dari (Stockton S)

    Perham, Ms Linda

    Taylor, David (NW Leics)

    Pike, Peter L

    Temple-Morris, Peter

    Plaskitt, James

    Thomas, Gareth (Clwyd W)

    Pollard, Kerry

    Thomas, Gareth R (Harrow W)

    Pond, Chris

    Timms, Stephen

    Pope, Greg

    Tipping, Paddy

    Pound, Stephen

    Todd, Mark

    Powell, Sir Raymond

    Touhig, Don

    Prentice, Ms Bridget (Lewisham E)

    Trickett, Jon

    Prentice, Gordon (Pendle)

    Turner, Dennis (Wolverh'ton SE)

    Prescott, Rt Hon John

    Turner, Dr Desmond (Kemptown)

    Primarolo, Dawn

    Turner, Dr George (NW Norfolk)

    Prosser, Gwyn

    Twigg, Stephen (Enfield)

    Purchase, Ken

    Tynan, Bill

    Quinn, Lawrie

    Vis, Dr Rudi

    Radice, Rt Hon Giles

    Ward, Ms Claire

    Rammell, Bill

    Watts, David

    Raynsford, Nick

    Wicks, Malcolm

    Robinson, Geoffrey (Cov'try NW)

    Wigley, Rt Hon Dafydd

    Roche, Mrs Barbara

    Williams, Rt Hon Alan (Swansea W)

    Rogers, Allan

    Rooker, Rt Hon Jeff

    Williams, Mrs Betty (Conwy)

    Rooney, Terry

    Winnick, David

    Ross, Ernie (Dundee W)

    Wood, Mike

    Rowlands, Ted

    Woodward, Shaun

    Roy, Frank

    Worthington, Tony

    Ruane, Chris

    Wright, Anthony D (Gt Yarmouth)

    Ruddock, Joan

    Wright, Dr Tony (Cannock)

    Russell, Ms Christine (Chester)

    Wyatt, Derek

    Salter, Martin

    Sarwar, Mohammad

    Tellers for the Ayes:

    Savidge, Malcolm

    Mr. Mike Hall and

    Sawford, Phil

    Mr. David Jamieson.

    NOES

    Ainsworth, Peter (E Surrey)

    Bottomley, Peter (Worthing W)

    Allan, Richard

    Bottomley, Rt Hon Mrs Virginia

    Amess, David

    Brady, Graham

    Ancram, Rt Hon Michael

    Brake, Tom

    Arbuthnot, Rt Hon James

    Brand, Dr Peter

    Baldry, Tony

    Brazier, Julian

    Ballard, Jackie

    Breed, Colin

    Beith, Rt Hon A J

    Brooke, Rt Hon Peter

    Bercow, John

    Bruce, Ian (S Dorset)

    Beresford, Sir Paul

    Burns, Simon

    Boswell, Tim

    Burstow, Paul

    800

    Cable, Dr Vincent

    Lidington, David

    Campbell, Rt Hon Menzies (NE Fife)

    Lilley, Rt Hon Peter

    Livsey, Richard

    Cash, William

    Lloyd, Rt Hon Sir Peter (Fareham)

    Chapman, Sir Sydney (Chipping Barnet)

    Loughton, Tim

    Lyell, Rt Hon Sir Nicholas

    Chidgey, David

    MacGregor, Rt Hon John

    Clappison, James

    McIntosh, Miss Anne

    Clarke, Rt Hon Kenneth (Rushcliffe)

    MacKay, Rt Hon Andrew

    Maclennan, Rt Hon Robert

    Collins, Tim

    McLoughlin, Patrick

    Cormack, Sir Patrick

    Madel, Sir David

    Cotter, Brian

    Malins, Humfrey

    Cran, James

    Maples, John

    Davey, Edward (Kingston)

    Mates, Michael

    Maude, Rt Hon Francis

    Davies, Quentin (Grantham)

    Mawhinney, Rt Hon Sir Brian

    Davis, Rt Hon David (Haltemprice)

    May, Mrs Theresa

    Day, Stephen

    Michie, Mrs Ray (Argyll & Bute)

    Dorrell, Rt Hon Stephen

    Moore, Michael

    Duncan Smith, Iain

    Moss, Malcolm

    Emery, Rt Hon Sir Peter

    Nicholls, Patrick

    Evans, Nigel

    Norman, Archie

    Faber, David

    Oaten, Mark

    Fabricant, Michael

    O'Brien, Stephen (Eddisbury)

    Fallon, Michael

    Öpik, Lembit

    Fearn, Ronnie

    Ottaway, Richard

    Flight, Howard

    Page, Richard

    Forth, Rt Hon Eric

    Paice, James

    Foster, Don (Bath)

    Paterson, Owen

    Fowler, Rt Hon Sir Norman

    Pickles, Eric

    Fox, Dr Liam

    Portillo, Rt Hon Michael

    Gale, Roger

    Prior, David

    Randall, John

    Garnier, Edward

    Redwood, Rt Hon John

    Gibb, Nick

    Rendel, David

    Gill, Christopher

    Robathan, Andrew

    Gillan, Mrs Cheryl

    Robertson, Laurence

    Gorman, Mrs Teresa

    Roe, Mrs Marion (Broxbourne)

    Gray, James

    Ruffley, David

    Green, Damian

    Russell, Bob (Colchester)

    Greenway, John

    Sanders, Adrian

    Grieve, Dominic

    Shephard, Rt Hon Mrs Gillian

    Hague, Rt Hon William

    Shepherd, Richard

    Hamilton, Rt Hon Sir Archie

    Simpson, Keith (Mid-Norfolk)

    Hammond, Philip

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

    Hancock, Mike

    Soames, Nicholas

    Harvey, Nick

    Spelman, Mrs Caroline

    Hawkins, Nick

    Spicer, Sir Michael

    Heald, Oliver

    Spring, Richard

    Heath, David (Somerton & Frome)

    Stanley, Rt Hon Sir John

    Heathcoat-Amory, Rt Hon David

    Steen, Anthony

    Hogg, Rt Hon Douglas

    Streeter, Gary

    Horam, John

    Stunell, Andrew

    Howarth, Gerald (Aldershot)

    Swayne, Desmond

    Hughes, Simon (Southwark N)

    Syms, Robert

    Hunter, Andrew

    Tapsell, Sir Peter

    Jack, Rt Hon Michael

    Taylor, Ian (Esher & Walton)

    Jackson, Robert (Wantage)

    Taylor, John M (Solihull)

    Jenkin, Bernard

    Taylor, Matthew (Truro)

    Taylor, Sir Teddy

    Keetch, Paul

    Tonge, Dr Jenny

    Kennedy, Rt Hon Charles (Ross Skye & Inverness W)

    Tredinnick, David

    Trend, Michael

    King, Rt Hon Tom (Bridgwater)

    Tyler, Paul

    Kirkbride, Miss Julie

    Tyrie, Andrew

    Kirkwood, Archy

    Viggers, Peter

    Laing, Mrs Eleanor

    Walter, Robert

    Lait, Mrs Jacqui

    Waterson, Nigel

    Lansley, Andrew

    Webb, Steve

    Leigh, Edward

    Wells, Bowen

    Letwin, Oliver

    Whitney, Sir Raymond

    Lewis, Dr Julian (New Forest E)

    Whittingdale, John

    801

    Widdecombe, Rt Hon Miss Ann

    Yeo, Tim

    Wilkinson, John

    Young, Rt Hon Sir George

    Willetts, David

    Willis, Phil

    Tellers for the Noes:

    Wilshire, David

    Mr. Geoffrey Clifton-Brown

    Winterton, Mrs Ann (Congleton)

    and

    Winterton, Nicholas (Macclesfield)

    Mr. Peter Atkinson.

    Question accordingly agreed to.

Police Firearms
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dowd.]
10.31 pm
Mr. Brian Sedgemore.: On 22 September 1999, Harry Stanley, one of my constituents, was walking home minding his own business, carrying with him in a blue plastic bag the leg of a coffee table which had just been repaired, when he was gunned down round the corner from where he lived. It was as swift and clinical as any contract killing, except that the killing was carried out not by professional criminals, but by two armed S019 police officers. It ought not to happen like that—[Interruption.]
Mr. Deputy Speaker (Mr. Michael J. Martin): Order. There is still far too much conversation in the Chamber. An hon. Member is addressing the House.
Mr. Sedgemore: Thank you, Mr. Deputy Speaker.
It ought not to happen like that—Harry Stanley trashed virtually on his own doorstep by the very people who are paid to keep the peace and to protect us. Undoubtedly, this was the worst and most tragic case of its kind ever to take place in the United Kingdom. For heaven's sake—Harry had been diagnosed as having cancer of the colon and was recovering from an operation.
Harry Stanley never asked for much. When he left home that morning, his last words to his wife Irene, who asked him what he wanted for dinner, were, "I'll have stovies"—a reference to a traditional Scottish dish of sausage, potatoes and onions. Hours later, Mrs. Stanley heard a noise—bang, bang—but had no idea that her husband was lying dead in a pool of blood around the corner.
When something like that happens and a wholly innocent person is killed, the system goes into denial. Inquiries are held, these days under the auspices of the Police Complaints Authority. The inquiry takes for ever, lasting three, four or even 10 times longer than a murder inquiry, often exceeding the 120-day deadline set. The papers are sent to the Crown Prosecution Service, where they are dealt with at a leisurely pace by the few Treasury counsel capable of handling them. Charges rarely ensue, and that is that.
My inquiries reveal that 22 people have been shot dead by police officers since 1990, some of them found to be unarmed and some armed with a toy replica gun. Prosecutions have been virtually non-existent. Indeed, in only two of the cases has anyone been charged. In one case, the jury acquitted; in another, a trial is pending. Although each case must be considered on its merits, when the cases are examined collectively, the signal that goes out to the public is that the police have a licence to kill.
In London the role of the police authority is performed by the Home Secretary, who is answerable to the House. The House, as far as I am aware, has not given the Home Secretary the power to grant police officers in London, openly or covertly, licences to kill.
Bizarrely, the identity of the killers in such cases is kept secret for as long as possible. Even today, Irene Stanley does not know who killed her husband. Why? If police

803
officers had not been involved, she would have known a long time ago. Why has Mrs. Stanley received no word of apology from the two officers involved? Surely she has a right to know who killed her husband; surely her son Jason has a right to know who killed his dad. It was insensitive—to put it mildly—that the officers were not suspended pending an inquiry. That sends the wrong signals: namely that police officers have a licence to kill and that their identities will be protected.
Of course there are guidelines for the police on the use and issue of firearms. They are contained in an Association of Chief Police Officers document, which was issued in 1987, and which may have been reissued recently. The ACPO guidelines state that, first, firearms should be used only when there is reason to believe that a police officer may have to face a person who is armed or so dangerous that he could not be restrained without the use of firearms. Secondly, only reasonable force should be used. Thirdly, a proper briefing should be given to armed police officers before they set off. An officer of appropriate senior rank and, I presume, someone who has satisfied himself that an operation by armed police officers is justified should give the briefing. Fourthly, firearms should be used only as a last resort when conventional methods have been tried and failed. Fifthly, only properly trained police officers should bear arms.
I am told that the provisions of the ACPO manual are a Government secret, subject to a public interest immunity certificate. If that is true, the veil of secrecy should be lifted so that the public can know what the procedures are, and ascertain whether they are adequate and how they could be improved to avoid further death.
All the cases that I have examined raise the question of police training in the use of firearms. Too often, those who use guns seem deficient in detective skills and training. Surely it is important that officers who carry guns should be capable of detective work, which can shatter the preconceptions that they held when they set off on their mission, often in a highly charged and pumped up state. Uniformed police officers who carry and discharge guns must be capable of thinking quickly and intelligently for themselves as well as responding to the unexpected.
Harry Stanley's mistake when going home on that fatal day was to go into the Queen Alexandra pub for a glass of lemonade. When he left, some idiot from the pub telephoned the police and told them, without a shred of evidence, that the table leg in the plastic bag was a sawn-off shotgun. Sadly, the strength of that evidence was never tested in the recorded telephone conversation or by the police officers who subsequently shot Harry in the street.
One expects sensitivity from the police when innocent people have been killed through the use of firearms by their own. Even more sadly, the police failed to identify Harry as he lay dead in the street although he had a passport and other evidence from which he could easily have been identified.
Rule 7 of the coroner's rules 1984 requires the coroner to notify the relatives of a deceased person in advance of a post mortem examination so that, if they wish, a representative may be present. By the time the post mortem of Harry Stanley took place, Brian Craddock, the
804
officer in charge of the inquiry, had discovered Harry's identity, but could not be bothered to inform Mrs. Stanley that her husband had been killed and that she had the right to a representative at the post mortem. We need more respect from the police than that: they should not feel that they can ignore us or our rights just because we are working class in Hackney.
At first, the Metropolitan police offered to pay for Harry's funeral—a small recompense, you might think, Mr. Deputy Speaker—but, in an act as nasty as any I can remember, the organisation that employed the killers who shot Harry withdrew the offer. Imagine what Mrs. Stanley's feelings must have been when she heard that. I can only suggest, in the strongest possible terms, that the Commissioner of Police of the Metropolis, John Stevens, pay Mrs. Stanley a visit to apologise in person for that appalling behaviour. What about a touch of common humanity from the commissioner?
Meanwhile, we still do not know why Harry Stanley died. The only ballistic expert capable of dealing with such cases, Chief Superintendent Alan Bailey, slowed the inquiry down by a month, developing questionable virtual reality reconstructions on video. I understand that that is some kind of new technique. The Surrey police are investigating the Metropolitan police. The Suffolk police are investigating the investigators, the Surrey police. It all seems a bit incestuous. It is not for me in the debate or for the House to pronounce on what happened in this dreadful case, but too much time has passed and there has been too much secrecy.
A daft suggestion was originally put around that, in walking home and minding his own business, Harry Stanley was on a suicide mission, hoping that police officers would turn up out of the blue and shoot him dead. Another silly suggestion was that he was Irish—so what else could he expect? From what I know of the case, my considered opinion as a barrister is that a jury should be asked to decide on the evidence whether the two police officers are innocent or guilty of manslaughter or, worse, murder.
10.42 pm
The Minister of State, Home Office (Mr. Charles Clarke): As my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) has said, this is indeed an appalling case. I congratulate him on obtaining the debate. He was my Member of Parliament for a long period of my life, so it is a particular privilege to respond to his debate. I want to make a number of general points, but shall start with the specifics of the appalling incident that he described.
I express my sympathy and that of the Government to the family and friends of Harry Stanley over this sad death. That sympathy needs to be expressed not only for the reasons outlined by my hon. Friend in his eloquent address, but because any such terrible occasion must be properly acknowledged.
The shooting of Mr. Stanley occurred at about 7.54 pm on 22 September 1999 in Fremont street, Hackney—a street I know well. Following a call from a member of the public, police believed Harry Stanley to be armed. They challenged him. He raised a bag that the police believed to contain a firearm and the two officers each fired a shot. Mr. Stanley was fatally wounded and pronounced dead at the scene. It was subsequently discovered that he was not carrying any firearm.

805
The Metropolitan police reported the shooting to the Police Complaints Authority and it was agreed the next day—23 September—that the Surrey police should investigate the incident described by my hon. Friend. It remains under investigation by the PCA and we understand that that investigation is due to be completed shortly. However, as the matter has yet to be considered by the Crown Prosecution Service—my hon. Friend raised important issues about charges that might or might not be brought—and by the PCA in respect of any criminal or disciplinary matters, it is important that I do not say anything that might be held to prejudice those important decisions. I am grateful to him for acknowledging that.
I well understand the family's concern at the time taken by the investigation. The time that it takes to deal with complaints of this kind has been one of the most distressing aspects of this job, which I took on in August last year. Such investigations are time consuming and, in my opinion, very legalistic; moreover, they do not satisfy victims. I am talking not just about complaints of the type that we are discussing, but about all complaints about the way in which the police operate—particularly those involving death, of course, but others as well. We are actively considering the best way in which to deal with the problem. A report to be published shortly will, I hope, shorten the time taken by investigations. If an investigation takes time, however, it may mean that a thorough and rigorous inquiry has been undertaken, as is happening in this instance. Everything possible is being done to ensure that the truth is established.
I am glad that my hon. Friend dismissed some of the "silly suggestions"—I think that was the phrase he used—about what might or might not have been the motivation in this case. He did, however, raise a number of other matters, which the inquiry will decide. He asked what authority had been given. He also asked what briefing and instructions had been given, and correctly pointed out that there were clear guidelines. It will be for the inquiry to establish whether they were fulfilled. He raised the question of firearms being used as a last resort, which is a requirement of the guidelines. That, too, will be inquired into and reported on. More generally, he raised the question of proper training, which will be an important feature of the inquiry. He mentioned the failure to identify Mr. Stanley, and the extent to which the coroners rules were or were not obeyed. That, too, will be dealt with.
I am appalled by what my hon. Friend said about the withdrawal of the offer to pay for the funeral, and I will look into that specifically; but all the matters that he raised will be considered in the inquiry, and a full report will be made.
The use of firearms by police has been and remains a rare last resort. Neither in this case nor in any other have the police had a licence to kill; nor has the Home Secretary, any police authority or anyone else given them a licence to kill in any circumstances, general or particular. I feel I must rebut the suggestion that any police have a licence to kill, because it is simply wrong. The policy is that the police should not generally be armed, but that specialist firearms officers should be deployed when an operational need arises.
The protection of officers and members of the public is clearly the highest priority whenever there is a firearms risk. It is against that background that chief officers must decide whether, in any given circumstances, the
806
deployment of armed officers is justified. I think there is a consensus that that is far preferable to the routine arming of patrol officers, which happens in some countries.
Decisions about the deployment of armed officers are the responsibility of individual chief police officers. They are, however, guided by a manual issued—as my hon. Friend said—by the Association of Chief Police Officers, which provides guidance on the selection of armed officers, training, tactics and equipment. It is intended to ensure that all matters concerning police firearms are subject to the tightest control and discipline, while aiming also to ensure that the police are properly equipped for the dangerous conditions that they must sometimes face. The report will deal with the extent to which those requirements were or were not fulfilled in the case of my hon. Friend's constituent.
As my hon. Friend said, the manual—which is currently being revised to take into account the Human Rights Act 1998—is confidential, because it is deemed to contain information that could be useful to armed criminals. However, I am glad to tell my hon. Friend that the police are actively considering whether parts of it, at least, could be made public. I agree with him that this is an important issue of public concern.
It may be of interest to the House to know how it is all moving: what the statistics are. Last Wednesday, we released figures to show that the number of firearms operations had fallen from 11,842 in 1997–98 to 10,942 in 1998–99, a decrease of more than 7 per cent. There has been a 4 per cent. decrease in the number of authorised firearms officers in police forces and a 3 per cent. increase in the number of operations involving armed response vehicles.
The number of authorised firearms officers continues to fall because of a trend towards concentrating police firearms capability in a smaller number of highly trained officers, and the replacement of many divisional firearms officers with a smaller number of armed response vehicle officers. The small rise in the number of operations involving armed response vehicles may have been due to more of those units being available to police. Many forces are increasing their numbers of armed response vehicles.
The number of operations in which firearms are discharged by police remains very low. The number of operations in which firearms are issued has decreased again. Chief officers are continuing to concentrate their firearms capacity in a small number of highly trained officers.
Obviously, any operation involving the use of firearms carries risks. If the operation goes wrong in any way, the consequences can be devastating for all those involved, but there will be an investigation process to be followed if incidents occur.
As my hon. Friend acknowledged, investigations are supervised by the Police Complaints Authority, which has the power to approve the choice of investigating officer and to give directions on the course of the inquiry. At the end of the investigation, the PCA must issue a statement indicating whether the investigation has been completed to its satisfaction.
I emphasise—it is a critical point, particularly in the light of the remarks about licence to kill—that police officers are not above the law. They need to abide by

807
section 3 of the Criminal Law Act 1967, which is the golden rule on the use of force by officers of the law, or by anyone else. It says that
a person may use such force as is reasonable in the circumstances in the prevention of crime, or in the effecting or assisting in the lawful arrest of offenders or suspected offenders or persons unlawfully at large.
That is the legal definition, which will be one of the aspects that is assessed in the inquiry to which my hon. Friend referred.
Of course, the degree of force justified will vary according to the circumstances of each case, but the responsibility for the use of the firearm is an individual decision which may have to be justified in legal proceedings. It is for the courts to decide in any particular case whether the force used was reasonable.
As part of the Home Secretary's action plan on recommendations of the Stephen Lawrence inquiry, the Home Office commissioned a feasibility study of possible arrangements for the independent investigation of police complaints. That report will be published shortly. The House may be interested to know that Liberty has also commissioned such a report, which will also be published. The Government will consider in the light of that work whether to introduce legislation to establish a new independent complaints investigation body.
808
I mention this because my hon. Friend, who spoke entirely reasonably, raised the doubts and concerns that individuals might have about the independence or otherwise of the complaints process. The Government believe that it is important that any complaints process on the operation of the police carry the confidence of those who have been affected by it. That is why we are looking very positively at the recommendation and have commissioned detailed work on how such an operation might work and provide reassurance, which is tremendously important for the future of policing as a whole.
I have endeavoured to explain the situation around the shooting of Mr. Stanley as I understand it and to extend, as strongly as I can, my sympathy and that of the Government to the family and friends of Harry Stanley. I have endeavoured to give some context to the overall situation and to indicate that many of the trends on the use of arms in those circumstances are going downwards at the moment. I hope that the result of the inquiry will be published shortly and that that will give everybody involved some purchase on the important issues at stake. I am grateful to my hon. Friend for raising this subject and for airing what I think the whole House would agree is an important issue.
Question put and agreed to.
Adjourned accordingly at five minutes to Eleven o'clock.