What estimate he has made of the change in the level of tax to be paid by business in 2001–02 as a result of the March 1999 Budget. [79443]

All companies that pay tax will benefit from the cuts in corporation tax that were announced in this year's Budget and in the previous Budget.

Does the Chancellor dispute the view of the director general of the Confederation of British Industry, who has confirmed that business taxes will increase by £20 billion over the next four years as a result of the Budgets?

The CBI has welcomed the cuts in corporation tax that my right hon. Friend the Chancellor announced in this year's Budget. I remind the hon. Gentleman that, as a consequence of that and previous Budgets, we have the lowest rate of corporation tax in the history of the United Kingdom and the lowest rate of any major industrialised country in Europe—indeed, it is the lowest rate of any major industrialised country in the world. I would have thought that he would have welcomed that.

Does my right hon. Friend agree that, generally, the climate for business and industry after the Government's Budgets is far better? Does he agree that, overall, the future for our aerospace and steel industries is better? I remind him that, in the early 1980s, the Conservative Administration managed to get rid of more than 2.5 million manufacturing jobs. Has he the stomach to face an Opposition with such a record?

My hon. Friend is right. What business most dreads is a return to the years of Tory boom and bust, and a return to the conditions of the late 1980s and early 1990s, when 1 million manufacturing jobs were lost, inflation was in double figures and interest rates peaked at 15 per cent.

Whom should we believe about the effect of this year's Budget on the level of business taxation: the Chancellor, who said that the Budget offered tax cuts to business, or the British Chambers of Commerce, which says that taxes on business are up by £3.2 billion as a result of this year's Budget alone?

As he took part in the Budget debate, the shadow Chancellor should realise that we have not only cut corporation tax in the Budget—[Interruption.] We have reduced it to 30p, 20p and there is a new lop starting rate. In addition—it has been widely welcomed by not just the CBI, but other business organisations—we have introduced new research and development tax credits to help businesses to take forward new products and new services. We have also extended capital allowances to aid manufacturing and service-based industries. The Budget has been widely welcomed by business because it is good for business.

Does the Chief Secretary not realise how insulting it is to pretend that business taxes are coming down when every business man knows that they are going up? Corporation tax rates may be being reduced, but the amount of corporation tax that businesses are paying is going up. It is what they are paying that they mind about. That is going up, in breach of Labour's pledges.

Has the Chief Secretary not read the report from the Treasury Select Committee, which says:

"the tax burden will increase during the coming financial year"?

Has he asked the Chairman of the Select Committee what he thinks about that? Can he not summon the ordinary decency to admit that taxes are rising under Labour by stealth and that Labour's clear pre-election pledge that there would be no increase in taxes at all was a cynical deception?

I am glad that the shadow Chancellor has finally conceded that we have cut the rate of corporation tax. That is welcome. Perhaps he would also concede that there is a fundamental difference between the Labour party and the Conservative party: we keep our tax promises, Conservative Members break theirs.

Has my right hon. Friend seen the recent study by Manchester business school, which shows that small businesses are 5.7 per cent. better off as a result of the Budget? Has he seen the reports in today's papers that 83 per cent. of City fund managers expect the economy to grow this year? Will he therefore ignore the snivellings of the Conservative party and continue to develop the small business service that was announced in the Budget, so that it provides a coherent framework and value-added services?

My hon. Friend is right. He is an expert on small business. He understands its needs. I am pleased that he recognises that this, too, was a Budget that recognised the needs of small businesses and will help them to prosper.

When he last met business representatives to discuss the level of real interest rates. [79444]

I meet regularly with business representatives to discuss issues, including interest rates. Compared to an average of more than 4 per cent. for the past 20 years, real short-term interest rates are below 3 per cent, at 2.8 per cent. Real long-term interest rates are at their lowest level for more than 40 years. Mortgage rates are at their lowest level for 33 years.

I thank the Chancellor for that reply and acknowledge that the recent cut in interest rates has been helpful to business, but will he concede that there is still a substantial gap between our real interest rates and those of our competitors, particularly after the recent reduction in the eurozone? What consolation can he offer to businesses, which, despite the protestations of the Chief Secretary, are facing increases in taxation inherited from previous Budgets, additional regulation and a continued heavy burden of interest rates?

The people to whom the hon. Gentleman refers will be pleased to know that, while real interest rates peaked at 8.9 per cent. under the previous Government, they are now 2.8 per cent. under Labour. People can see the difference between the downturn in the early 1990s—when 1 million manufacturing jobs were lost, output in manufacturing fell by 7 per cent. and manufacturing investment fell by 28 per cent.—and the current situation with low inflation, interest rates coming down and a growing economy. The hon. Gentleman might want to tell his friends what the vice-chairman of the Conservative party said about the Budget:

"We welcome the help for small businesses. I think that is good. Overall, not a bad business Budget."

Does my right hon. Friend agree that the two surveys this morning that show growing optimism in small business, large business and the City are good news for Britain because we have a period of certainty and certain prosperity? Will he tell the Opposition to stop whingeing and talk Britain up, not down?

I am grateful to my hon. Friend for that question. I welcome the fact that he is chairing the all-party committee on Europe, which has no Conservative party representation. The British Chambers of Commerce survey shows that confidence in turnover and profitability is rising. We have managed to cut interest rates, keep inflation low, maintain stability and invest £40 billion in health and education—something that the Conservatives would not do. We have also introduced a minimum wage and the working families tax credit, which the Conservatives opposed, as well as increasing child benefit and introducing a £100 winter allowance for pensioners, something that we know that the Conservatives would never do.

Does the Chancellor accept that the Liberal Democrats welcome the recent reductions in interest rates and hope that they can be sustained? However, does he acknowledge that there is a problem for savers and that some financial institutions have not passed on the full benefit of the reductions in interest rates to mortgage holders? In that context, is it not absurd to refuse to extend the benefit of the 10p income tax rate to income from savings, which would cost only £85 million?

As usual, the Liberal party wants to make another public spending promise that it has no means of meeting from any of its revenue proposals. The hon. Gentleman is proposing another loss of revenue to the Exchequer, but he never says how he would fund his ideas. We introduced a new savings bond for old-age pensioners in the Budget. The individual savings account has been introduced and people are taking it up. The best thing that we can do for savers is to keep inflation low. Our policy is to keep inflation at or near the target of 2.5 per cent. I hope that the Liberals' finance spokesman welcomes our actions on all those issues. We are combining stability in the economy with help for the pensioners whom he says that he wants to help.

Will interest rates be affected by the debt in the contingency fund brought about by the NATO operation? Is the Chancellor sure that the costs can be contained in the contingency fund?

It is precisely because of our prudence over the past two years in reducing the deficit from £28 billion that we are able to meet contingencies as they arise.

If he will make a statement regarding the British abatement from the EU. [79446]

The Berlin European Council concluded that the UK abatement will remain. Our objective was secured: we said that the Government would maintain the abatement, and we have done so.

I thank the right hon. Gentleman for his reply, although he has put a very positive gloss on a deal that will cost Britain nearly £200 million a year. Did the Government agree in Berlin that the rebate mechanism would also apply to other member states and to new member states? If so, who will foot the bill?

The conclusions of the Berlin summit, which I hope that the hon. Gentleman will not question, say that the UK abatement remains. The Berlin summit's conclusions also say that, in all the other matters on which we were pressing for advantage for the United Kingdom—whether on regional policy, on the highlands and islands or on Ireland—we got what we wanted. As for any other speculation on possible decisions of the Berlin summit, the decisions are as announced; there is nothing in them about what the hon. Gentleman is suggesting.

Given the irredeemably split nature of the Conservative party on Europe, is my right hon. Friend aware of any independent commentator, anywhere in Britain or even in Europe, who believes that, had the Conservative party been in government, it would have brought back from Berlin a better deal than we have done? If he cannot find such independent verification, is it not time that, in their own interests, Conservative Members stopped scratching that open wound?

I hope that the Conservative party will have a proper period of reflection on what went wrong under the previous Government. It is absolutely clear that our policy of constructive engagement has achieved far greater results—on the budget, on regional policy, in advantages for Ireland and the highlands and island, as well as on the abatement—than the Conservative party's carping and narrow isolationism ever could have done. My hon. Friend asked whether I have some advice for Conservative Members on what they might do. I simply refer them to the manifesto issued by the Conservative party in Scotland for the Scottish parliamentary elections. It starts by saying:

"On May 1st 1997 the people of Scotland told us what they thought—we got it wrong."

Will the Chancellor give an absolute assurance that, during the negotiations on the future of the United Kingdom abatement, no horse-trading or compromise was done on the withholding tax? Is he aware of the consternation in the City of London, particularly among the 10,000 people whose jobs are at risk, at the fact that the Deputy Prime Minister does not even know what the withholding tax is? Will the Chancellor stop dithering and just say now that the Government will veto the measure?

I can give the hon. Gentleman an absolute assurance that there was no horse-trading on the matter that would have been in any way damaging to Britain—[HON. MEMBERS: "Ah!"] Well, there was no horse-trading on the matter, if he wants that assurance. I can also say that—in preference to the Conservative negotiating tactics that would have left Britain completely isolated in Europe on that and on every other issue—we shall get the best deal for Britain on the matter, as we did at Berlin.

I congratulate my right hon. Friend on his negotiations on the abatement. However, is not the reality that the existence of the abatement—which was negotiated by a former Prime Minister—over many years, has undermined our negotiating position within the European Community, particularly in CAP reform?

No, I do not accept that. The abatement is wholly justified, and we have defended it. Conservative Members said that we would give away the abatement—we did not. The conclusions of the Berlin summit accept that the abatement continues, and Conservative Members should be congratulating us.

If he will make a statement on the Government's contingency plans in respect of a failure of systems at the new millennium in major financial institutions. [79447]

The Treasury has a wide range of contacts with both the Financial Services Authority and the Bank of England on the year 2000 issue. The FSA regards the issue as a major supervisory priority and has made it clear that firms that fail to implement appropriate measures face regulatory intervention. The memorandum of understanding between the Treasury, the Bank of England and the FSA sets out the role of each institution in the field of financial stability, including where there are exceptional circumstances.

Why did the Minister not mention in her reply the recent report of the FSA's director of supervision—which suggested that a significant number of high-impact financial institutions are so negligent that they have not even started to make preparations for millennium compliance and may well be required to close their doors in the new year, with incalculable consequence for individuals and small businesses? Will she explain more precisely what the Government, in addition to the FSA, plan to do to prevent that disaster from occurring?

The Government are working closely with the FSA, and daily meetings are taking place. It is well acknowledged that UK financial institutions are perhaps the leading institutions in terms of year 2000 compliance. The hon. Gentleman mentioned the statement about those firms. Those figures were for the end of 1998. The authority has challenged those firms that appear to be less ready than others either to show that the assessment was out of date or rapidly to produce a plan for remedial action. Updated figures will be produced next week.

What estimate he has made of the increase in national insurance to be paid by the self-employed in 2000–01 as a result of the March 1999 Budget. [79449]

For 2000–01, it is estimated that the self-employed will pay £420 million less in contributions as a result of the March 1999 Budget.

That figure is not an accurate reflection of the increases. Will the Minister give the House some calculation of what the effect may be on unemployment?

On unemployment, I am a little disappointed that the hon. Gentleman did not congratulate the Government on the fact that, since the 1997 election, unemployment in his constituency has gone down by over 22 per cent. The changes will mean that self-employed people who pay class 2 contributions will benefit by £4.55 a week. We are the party that supports the self-employed and small businesses.

What is the Minister's justification for raising the national insurance upper earnings limit next year and the year after by almost three times the rate of inflation? Is that not yet another stealth tax rise on middle Britain—a tax rise that the Government hoped that no one would notice? Will the Minister give an assurance that the Government will propose no further increases in the upper earnings limit beyond the rate of inflation for the remainder of this Parliament?

The hon. Gentleman has a bare-faced cheek. The Conservative party raised taxation and broke its promises to the British people 22 times. [HON. MEMBERS: "Answer the question."] Conservative Members are shouting because they do not like the facts—but they are going to hear the facts. Under the Conservatives, a small business went bust every three minutes. That is why middle-income families up and down the country voted with the rest of the British people for this Government at the last election, and why they will vote us in again.

If he will make a statement on the impact of the measures in his recent Budget statement to encourage more environmentally friendly road transport. [79452]

This year's Budget contained the most far-reaching package of environmental tax reforms ever seen in our country. In particular, my right hon. Friend the Chancellor announced a number of measures designed to encourage the use of cleaner fuels and vehicles and to discourage unnecessary journeys. Those included a £55 reduction in vehicle excise duty for small cars, a fundamental reform of company car taxation, changes in fuel duties to encourage cleaner fuels and seven new tax relief measures to encourage employers to promote environmentally sensitive commuting. Those measures will help to reduce congestion and emissions of both greenhouse gases and local air pollutants.

I thank my hon. Friend for that reply, and I welcome the cut in duty for liquid petroleum gas. Will she go further and encourage the use of more environmentally friendly fuels—for instance, ultra-low sulphur diesel? On vehicle excise duty, I welcome the step along the way in relating that to engine size, but does she agree that engine size is not the best measure of environmental performance? We need to look at much more exact measures, such as carbon dioxide emissions.

The Budget cut duty on road fuel gases, including liquid petroleum gas, by 29 per cent., and we have widened the differential for ultra-low sulphur diesel. That differential is having such a beneficial effect that we expect that, by the end of the year, virtually all the diesel sold in this country will be the cleaner ultra-low sulphur type.

As my right hon. Friend the Chancellor announced in the Budget, from next autumn we will introduce a new system of vehicle excise duty for new cars, graduated according to their emissions of carbon dioxide. That will give a very clear signal to people who are buying new cars to choose cleaner cars that do less environmental damage.

The Minister trumpets the environmental gains in the Budget, but the measures will drive British hauliers into bankruptcy. British freight will be carried by foreign hauliers. Hauliers with trucks on the continent have told me that the foreign lorries are not maintained as well as lorries in this country. The freight will still be carried, the pollution will stay here, and it will be pumped out by less well-maintained, dirty foreign trucks.

The hon. Gentleman is wrong as well as xenophobic. It was of course the Conservative Government who introduced the road fuel escalator, which he now apparently opposes. It was the Conservative Government who drove 5,000 British hauliers into bankruptcy. In the Budget, we froze the rate of vehicle excise duty for 98 per cent. of lorries for the second year in a row; doubled the VED reduction for cleaner lorries to £1,000; increased the differential on ultra-low sulphur diesel; cut the duty on road fuel gases; made it easier for hauliers to down-plate, as the industry has long requested; and introduced cuts in the rate of corporation tax, from which all businesses, including hauliers, will benefit.

I warmly welcome the imaginative measures in the Budget to promote cycling, including the tax breaks for employers and employees to encourage cycling to work, which will go a substantial way towards helping us to achieve our target of quadrupling cycling by 2010. What is my hon. Friend doing to publicise those measures and to increase the take-up?

I know that my hon. Friend sets an excellent example by riding his bicycle to work. We have responded to the pleas of various companies and the environmental lobby by introducing seven measures in the Budget to promote environmentally friendly commuting. Those have been warmly welcomed by both business and the environmental lobby, with which we are working closely to ensure that employers and employees know of the measures and take full advantage of them.

Will the Economic Secretary confirm that the further 12 per cent. increase in diesel duty in the Budget has made diesel nearly twice as expensive in Britain as on the continent? Is she aware that it enrages the British haulage industry that the Government dress up that huge revenue-raising measure as an environmental measure? How does it help the environment to drive British haulage firms out of business; raise the cost of all manufactured goods that have to be transported; encourage foreign lorries to come into this country using cheap foreign diesel and taking away British jobs; and to encourage British lorries to travel to the content to fill up with cheaper fuel?

The right hon. Gentleman was a Treasury Minister when the previous Government introduced the road fuel escalator. It was he and his colleagues who described the road fuel escalator as an environmental measure. Less than 1 per cent. of road miles in this country travelled by lorries are travelled by foreign lorries. International competitiveness is simply not the issue.

In the context of the total tax and cost burdens on business, this country is the favoured environment for road hauliers, as for other businesses. A typical road haulier setting up in the Netherlands would face costs £600,000 higher than those in this country, and, for Belgium, that figure would be £800,000.

We are helping the road hauliers by freezing VED—[Interruption.] Tory Members clearly prefer to support the disruption caused by extremist lorry drivers instead of supporting us in our policy of discussion with the road hauliers through the new industry forum that we have set up. We took several steps in the Budget to help hauliers—by freezing VED, by widening the differential for cleaner fuels and by doubling the VED cut for cleaner lorries.

Will the right hon. Gentleman tell us whether the Conservative party supports the policy of disruption by lorry drivers, or our policy of discussion—

Order. It is not for the Minister to ask the Opposition what their policies are.

If he will make a statement about the implementation of the industrial energy tax. [79453]

Following the recommendations made by Lord Marshall, the Government will introduce a climate change levy on the business use of energy from April 2001. The new levy will make a significant contribution to meeting our targets for reducing greenhouse emissions.

The climate change levy will entail no increase in the overall burden of tax on business, since it will be recycled in full through a cut of 0.5 per cent. in the main rate of employers' national insurance contributions. Businesses will also benefit from an additional £50 million for schemes aimed at promoting energy efficiency directly, and from extra support for renewable sources of energy.

The Government recognise the need for more special consideration for the position of energy-intensive industries, given their high energy usage and exposure to international competition. We intend to set a significantly lower rate of tax for energy-intensive sectors. My right hon. Friend the Deputy Prime Minister initiated discussions with the sector concerned at a meeting on 29 March.

I thank my hon. Friend for that reply, and congratulate the Government on the way in which a consensus has been developed in recent months on the need for the climate change levy. However, does she agree that, although large companies are now well aware of the arguments surrounding the levy and the need for it, many thousands of small companies have not been party to the debate surrounding Lord Marshall's report, climate change and the Kyoto protocol? Can my hon. Friend assure the House that, in implementing the levy, and also in explaining its purpose, special attention will be given to the needs of small companies?

I can give my hon. Friend that assurance, because the consultation now taking place on the details of the scheme and the percentage of the levy, and the discussions on how it will operate, are not only targeted at assisting the energy-intensive industries. As my hon. Friend rightly pointed out, they will also ensure that small and medium companies are aware of their obligations and of the process that will take place.

The Minister has just emphasised the Government's environmental concerns, as the Economic Secretary did a moment ago. Ministers have argued for some time that they can justify huge and stringent increases in fuel tax for vehicles because they will be environmentally helpful. Given that the pollution of the environment by domestic energy is at least as great as that by vehicles, how can she explain the reduction that the Government made in domestic fuel energy tax?

The answer is fairness, and to assist pensioners so that people could afford to keep warm. The Government's targets for meeting their Kyoto obligations are clearly laid out, in connection with both the industrial energy tax and the measures taken in the transport sector, in the consultation documents that are to be published by the Department of the Environment, Transport and the Regions.

Are not the energy-intensive industries the very ones that benefited most from the collapse in energy prices in the past 10 years? Oil prices have fallen from $30 a barrel to $10 a barrel, the price of gas has fallen by half, and coal is down to £30 a tonne. I am disappointed to hear that the Government have decided to introduce a lower rate when those industries have benefited the most from low energy price and have the most to contribute to carbon dioxide savings.

I am sorry that my hon. Friend is disappointed, but we need to pay especial attention to the question of competitiveness. The consultation document, which suggests an illustrative rate reduction for intensive energy industries, is designed to ensure that they make a contribution and fulfil their obligations. At the same time, we are mindful of the environment in which their businesses operate.

If he will make a statement on his plans to increase the savings ratio. [79454]

The Government want to encourage people to save more and that is why we have taken the tough decisions necessary to create a climate of low inflation, economic stability and an end to boom and bust. Those are the conditions that will encourage people to undertake long-term saving and improve their security.

The verdict of the professionals in the savings industry is that ISAs are more expensive and more bureaucratic than PEPs, and less generous. ISAs are not attractive to those on modest means, which is why Marks and Spencer and Sainsbury have refused to sell them over the counter in their supermarkets. As the decline in the savings ratio is especially acute among those who are less well off, will the Minister agree to publish and place in the Library a savings ratio disaggregated for each of the income groups and then explain to the House how she will encourage the less well-off to save, because ISAs are clearly failing?

Contrary to what the hon. Gentleman suggests, ISAs are clearly set to be an enormous success. I note that in the entire first year in which the previous Government introduced PEPs, 250,000 were sold. One provider alone has already sold more than 250,000 ISAs in the first week since their introduction. We have nearly 400 companies signed up to sell ISAs. National Savings, which was banned by the Conservative Government from selling TESSAs, will be able to sell ISAs through the Post Office as well as through the post. The hon. Gentleman may have observed that the Co-operative bank announced yesterday that it will offer ISAs and make them available at supermarket tills in precisely the low-income communities where we want to encourage more people to take advantage of tax-free savings.

As my hon. Friend has said, the Government want to make ISAs successful among those lower income families who are the people we need to encourage to save. All the publicity for PEPs and TESSAs in the past few weeks will have soaked up some of the money that may have been available for savings schemes. Does my hon. Friend agree, therefore, that we need to give ISAs a reasonable amount of time before we can judge their success? I am sure that, in 12 months' time, my hon. Friend and my right hon. Friend the Chancellor of the Exchequer will be able to say that it has been a successful scheme for lower income families.

I am grateful to my hon. Friend for those points. He is right to say that the majority of savings schemes are sold in the last few months of the tax year rather than at the beginning of the new tax year. That is another reason why the take-up of ISAs in the first week of their introduction is so very encouraging. We know that the lock-in period that was one of the conditions of TESSAs was one of the biggest barriers to putting money into savings, especially for lower income people. People want to know that they can get at their savings when they want them, and they want to be sure that there are no nasty surprises or excessively high charges hidden in the small print. That is why we have introduced the cost access terms—or CAT—standards for IS As, to ensure that they offer fair charges, easy access and reasonable terms in which people can have confidence.

I put it to the Minister that the demand for ISAs at the beginning of the new financial year is substantially down on the demand for PEPs and TESSAs in the same period last year. In addition, although it is not directly a Treasury area, the uncertainty in pension arrangements between now and 2001 and the introduction of stakeholder pensions is causing a vacuum in pension saving. If one takes together the potential decline in new pension schemes and the lower accumulation in ISAs than obtained in PEPs and TESSAs, I do not see how the savings rate will rise; rather, it will continue to decline.

The hon. Gentleman has done nothing but abuse ISAs ever since we announced the plans for them. I regret that he seems to have a vested interest in seeing them fail. On the contrary, we are confident that they will be extremely successful, as the take-up in the first week has already shown.

The Financial Services Authority has just published guidance to providers on how to advise people to make appropriate provision for their pension savings in anticipation of stakeholder pensions. As the hon. Gentleman will know if he has read the consultation document on stakeholder pensions, we will ensure that millions of people on middle incomes, for whom personal pensions have been, in most cases, a disaster because of the charges that were imposed by providers, will in future have access to a low-cost, secure form of provision through the stakeholder pension.

What representations he has received from children with regard to debt relief. [79455]

The Treasury has received around 2,000 letters and postcards from children on the vital question of debt relief. The Government welcome the strong interest shown by many young people in debt relief and the poverty relief that can be made possible by it. Our plan for 2000 is to cut the debt, increase the aid to the poorest countries, sell International Monetary Fund gold to make that possible and increase giving by individuals and companies.

I thank my right hon. Friend for his answer and draw his attention to a letter that I received recently from one of my constituents, seven-year-old Joshua Deegan. Joshua's message is quite straightforward: "Help cancel the debt". For Joshua's sake, but more particularly for the sake of the millions of young children who live in the poorest, most indebted countries, will my right hon. Friend continue to press at every point to ensure that that noble aspiration can be turned into a practical reality in the new millennium?

I thank my hon. Friend for bringing to the attention of the House the concerns of one child, which are also the concerns of thousands of children who have taken up the issue. I applaud the work of the Churches and other voluntary organisations that have taken a lead in pressing for the millennium year to be remembered for the debt relief that is made possible.

I can assure my hon. Friend that, when it comes to the IMF and World bank meetings in the next few days, we shall be pressing our colleagues in other countries to join us in trying to secure in 2000 a debt reduction of $50 billion as a minimum, and an increase in aid to the poorest countries so that they receive $60 billion in 2000. To do that, we want initially to sell $1 billion of IMF gold. I hope that my hon. Friend will join me, as will other hon. Members of all parties, in encouraging individuals in our community to sign up to millennium gift aid, under which the Government and the Treasury will match donations that are given by individuals throughout Britain.

I am sure that it was only an oversight on the part of the Chancellor not to pay tribute to the previous Conservative Government's role in promoting debt relief. The idea of selling IMF gold was particularly promoted by the previous Conservative Chancellor, and many children in Britain supported the Conservative Government's actions in that regard. But may I ask the Chancellor about a quite different form of debt relief which is in the offing? What calculation has the Treasury made of the savings on debt interest which will be given to companies as a result of an EU withholding tax, and of the costs that will be imposed on British pension funds if such a tax goes through?

I have already answered the question about the withholding tax and what the Government are doing, and I do not think that it is covered by this issue of debt relief. I am sorry that, on an issue for which there should be all-party support, the hon. Gentleman chooses to turn a question on overseas aid and international debt relief into an obsession with the Conservative party's policies on Europe. I did praise, and have on previous occasions praised, the work of the former Chancellor of the Exchequer, although he seemed to get small thanks from the Conservative party for the work that he did. At the same time, there is an urgency about what we have to do over the next year; and I hope that Opposition Front Benchers will join us in pressing everybody in the country to take part in the campaign to secure international debt relief and make 2000 a year when debt relief is converted into poverty relief too.

For many years, the United Kingdom Government have been at the forefront of pressing to persuade the IMF to sell off gold stocks to finance debt relief in developing countries. If today's media reports are to be believed, that campaign has achieved a measure of success and I congratulate my right hon. Friend on his staunch and unending work in this area over the past couple of years. Will he elaborate on the details of today's media reports? What will the time scale for selling the gold stocks be? How much will be sold, and how will this be implemented?

I am grateful to my hon. Friend for that and for the work that she and others have done in pressing the cause of debt relief. We put the proposal to sell IMF gold to the G7 Finance Ministers' meeting a few weeks ago, as we have done on previous occasions. The American Government have said that they will support the proposal and the German Government, who have resisted in the past, are now in a position to support the proposal. I confidently expect that all G7 members will now support the sale of gold, so the IMF will go ahead with the proposal later this year. We have initially proposed the sale of $1 billion of gold. That is an initial sale that can take place, but there is pressure for more to happen.

If he will make a statement on the likely impact of the introduction of the construction industry scheme. [79456]

The new construction industry scheme, which commences on 1 August this year, will significantly reduce the opportunity for tax evasion in the building trade. This will be achieved by restricting gross payment certificates to subcontractors who have met their tax obligations on time and have a turnover above the threshold we have set in regulations; and by requiring other subcontractors to register with the Inland Revenue.

I thank the Minister for that answer. May I point out that the scheme will exclude 200,000 subcontractors from receiving gross payments? We are told that this is to combat £50 million of tax evasion. However, the figure calculated of tax liability for 714 tax certificate holders is just £1,800 per head. That means that £50 million of tax evasion is being drawn from only 27,000 certificate holders. Is it reasonable that 170,000 honest contractors should suffer being sidelined by contractors and subjected to cash flow problems in order to reach this small minority? May I suggest that there could be a fairer, more efficient way of avoiding this tax evasion than the scheme proposed?

I know that the hon. Gentleman has received many representations in his constituency and he has written to me a number of times on this matter, but I should point out some facts to him. The legislation to deal with this abuse in the construction industry, which has the support of the industry, the trade unions and associations, was first introduced to Parliament in 1995 with all-party support. It was further dealt with in legislation in 1996, again with all-party support. The issue is the evasion of tax in this area and was recognised by the industry, the trade unions, the Government and employment tribunals as a result of some hearings. The Government must take action. Instead of worrying about, and undermining, such action, the hon. Gentleman should be supporting the Government in dealing with a very difficult area. He should not break the all-party support that his party has helped to maintain until now.

Will the proposed schemes announced in the Budget for other contractors follow the path of the construction industry scheme? The suggestion that such a scheme will be introduced for information technology contractors, for example, is causing a great deal of worry among all sorts of self-employed people and those who form single-member limited companies. Exactly what is the Treasury up to?

The hon. Gentleman is confusing a number of items. The clauses in the construction industry scheme which his party initiated, with our support, and which will continue, are designed specifically to deal with the problem of labour-only subcontractors—who used to be called the lump—in the building industry. The turnover threshold that we have introduced is set at a very fair level—lower, I might say, than the one his Government were going to set.

What remit he has given to Lord Alexander's investigation of the fiscal regime for British shipping. [79457]

Lord Alexander has agreed to conduct an independent inquiry into the case for, and design of, a lower rate ring-fenced tonnage-based tax and additional enhanced training incentives for the shipping industry, taking account of the Government's objectives for shipping and the national and international competitiveness issues involved. The inquiry is to conclude as soon as is practicable.

I am grateful to my hon. Friend for that reply. What assessment have the Government made of the possible revenue implications for the Exchequer of a tonnage-based tax such as that in which the Dutch Government are engaged, which has resulted in a 37 per cent. increase in Dutch-flag ships, a 23 per cent. increase in employment in their shipping industry and a 19 per cent. increase in their gross domestic product? Will she confirm that the assessments will be made available to Lord Alexander, so that he can set them alongside the success of the Dutch scheme?

Those are precisely the issues that Lord Alexander will be considering in studying tonnage-based tax regimes in other European Union member states and, indeed, elsewhere. He will be supported by the Treasury in ensuring that the figures are detailed and correct, and will be making his recommendations on precisely such information.

What recent representations he has received from business on the single currency. [79458]

My right hon. Friend the Chancellor receives many representations from business on the single currency.

Does my hon. Friend accept that support for the euro among larger international trading companies is much greater—as it is in the City—than among smaller companies, partly because larger companies see the natural trade benefits if we join and the prospective loss of investment if we never join the euro? What action is being taken to inform and advise small and medium companies on the benefits of the single market and the single currency—particularly those that link their supplies to international companies, which obviously have much greater interest in trading in euros?

I thank my hon. Friend for that question. Our priority for small and medium companies is to help them to adjust and to take advantage of the opportunities that were created by the introduction of the euro earlier this year. Some 750,000 small and medium firms in our country already have trading links with Europe. That is nearly half our small and medium firms. All of them could be affected by the euro, regardless of whether we finally decide to join economic and monetary union. We have been ensuring that they are aware of the euro and its implications, and have been helping them to adjust to that new reality.

Does the Minister accept that many small to medium enterprises are operating at the margin? They are already reeling from new rulings and regulations from the European Union adopted by the Government, such as the 48-hour directive. Will she explain to the small to medium enterprises that, if we go into a single currency, interest rate policy will be directed from elsewhere and they will have to pay higher interest charges just for the benefit of other parts of the EU?

My right hon. Friend made it clear in his statement to the House in October 1997 that the overriding test for whether Britain should join the single currency would be whether it would be good for our economy and our businesses, for jobs, for investment and for the City. Of course that includes small businesses, but, at this stage, I hope that the hon. Gentleman agrees that the priority is to ensure that small and medium businesses in this country, half of which already have trading links with companies in other parts of the EU, are given all the help that they need to trade with suppliers and customers who use the euro. We are helping small businesses to adjust to the euro. We are also helping them by introducing the lowest rate of corporation tax for small businesses ever in this country.

Does the Minister accept that, since the euro was introduced, it has been managed by the European Central bank to achieve a falling exchange rate against the Anglo-Saxon currencies? That has now been compounded by an interest rate cut in Europe, placing our trading exporters in industries and services in a more difficult position. Can my hon. Friend assure us that she is making representations to the European Central bank to try to prevent competition over exchange rates?

I would observe that 80 per cent. of the rise in sterling's value came under the Conservative Government. We have made the tough decisions necessary to end the cycle of boom and bust, bring inflation down and get the public finances under control after we inherited from the previous Government a public sector debt of £26 billion. We have created the conditions for economic stability that, in turn, can underpin a stable and competitive exchange rate.

Does the Minister agree that many pro-euro businesses have concerns about the rate at which the pound will join the euro? Will she acknowledge that it is important that the level of the pound be reduced, because it is not competitive? Will she promote a public debate in the country and among our European partners on the sustainable long-term rate for the pound, so that we can join the euro at that rate?

As I have just said, of course we want a stable and competitive exchange rate. The way to achieve that is to put in place the conditions for economic stability. That is what we have done by giving independence to the Bank of England and by ensuring that inflation falls and stays low. We now have the lowest long-term interest rates for 40 years, the lowest mortgage rates for 33 years, and the lowest rates of corporation tax ever. Those are the conditions for economic stability that, in turn, will underpin a competitive and stable exchange rate.

When he next expects to meet the Governor of the Bank of England to discuss the state of the economy. [79459]

My right hon. Friend the Chancellor of the Exchequer meets the Governor of the Bank of England regularly to discuss a range of issues.

Will my right hon. Friend tell the Governor of the Bank of England and anybody else he bumps into that, in Bolsover and Barnsley, people are not talking about the withholding tax yet? What they are talking about is jobs. Unemployment is a problem that has to be resolved by this Government before the next election. In about 120 or 150 constituencies mainly represented by Labour Members of Parliament, in the coalfields and old industrial areas, unemployment is still too high.

Will the Minister give a guarantee that, in the next few months, we will ensure that regional aid of all descriptions is not reduced? Will he also ensure that the 82 recommendations in the coalfields task force report, which would considerably help those areas, will be implemented and that the money will be found as soon as possible?

As my hon. Friend is well aware, the Government are considering the recommendations of the report of the coalfields task force. He will be aware that the new regional development agencies have now come into being. They will act as a powerhouse for economic regeneration, especially in regions such as his and mine. He will also be aware that, since the general election, unemployment has continued to fall; employment has continued to go up; an extra 400,000 people are now in work; youth and long-term unemployment have been halved; and the new deal is proving especially effective precisely in communities such as his own that most need the creation of new jobs.