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Commons Chamber

Volume 459: debated on Monday 23 April 2007

House of Commons

Monday 23 April 2007

The House met at half-past Two o’clock

Prayers

[Mr. Speaker in the Chair]

Oral Answers to Questions

Work and Pensions

The Secretary of State was asked—

Child Support Agency

The Child Support Agency saw improvements in a number of areas over 2006 as a result of the operational improvement plan, with 58,000 more children receiving maintenance payments, a reduction in uncleared applications of 13 per cent. across both schemes, and new applications being dealt with more quickly. Legislation to replace the agency and overhaul the child support system will be introduced shortly.

I thank the Secretary of State for that reply, but I gave him details earlier today of a case involving my constituent, Mrs. Marshal, who has been woefully served by the CSA. The MP hotline in Belfast that we have tried to access cannot seem to get any answers out of Bolton—it does not even have the telephone numbers. Mrs. Marshal’s investigations show that the amount paid in by dad is £22,365.24, yet she has received only £19,809.91, which means that the CSA is sitting on some of her money. Where is the money? Mrs. Marshal can see the discrepancies from the spreadsheets, so why cannot the Department? Why cannot I get any access via the MP hotline in Belfast to sort out this woeful mess?

The system is far from perfect—[Laughter]I think that we all recognise that. However, unlike the previous Administration, we have put in place significant additional investment to try to improve the service provided to hon. Members. As I said, we are beginning to make progress. The details of the hon. Lady’s case have not yet been brought to my attention.

I am sure that the hon. Lady did so, but unfortunately I have not yet seen that correspondence. However, I assure her that I will look into the matter.

Does the chief executive of the CSA exist—perhaps this is one of the problems with the CSA—because I never get a reply from him to any letter that I write to him at the CSA? If the chief executive took some care in signing replies and, more importantly, reading our letters, he might get some idea of what still needs to be done.

I reject my right hon. Friend’s suggestion that the chief executive of the CSA is not doing a proper job. He is doing a proper job, and that is why the performance of the agency is beginning to improve in several important areas. We set out proposals in last year’s White Paper to bring about significant changes to the system of child support in our country, and I hope that my right hon. Friend will support those changes.

The Government’s figures show that fewer child support cases are being cleared each month and that the number of complex cases that the computer system simply cannot handle has increased by a third in the past 12 months. The system cannot cope. Does the Secretary of State now agree with Conservative Members that the assessment process needs urgent reconsideration, or is he happy to continue to tell families who rely on child support that they will have to wait until perhaps 2013 until they see some change?

We are determined to try to improve the operation of the CSA as much as possible. I understood that there was a consensus between the two sides of the House on the changes that were necessary. I also understood that Conservative Members supported the changes that we were trying to make through the operational improvement plan for the CSA. I am not aware that the hon. Lady and her colleagues have any other proposals to put forward.

My right hon. Friend is right to abolish the CSA and replace it with a new body. However, the fact remains that there are still enormous problems in dealing with the existing case load—that is the issue that is being raised by hon. Members on both sides of the House. While I support what the Secretary of State is doing, what additional resources is he proposing to give the organisation in the meantime so that it can deal with the transitional arrangements? Many of our constituents have to wait an inordinate length of time just for their assessments to be made. That practical, administrative issue is the responsibility of the chief executive. What additional resources is my right hon. Friend prepared to give the agency now?

We are making £120 million of additional investment available over the next three years to support the turnaround in performance that is wanted by all hon. Members, including my right hon. Friend. The first year of the additional investment was spent primarily trying to improve training and recruit additional staff so that we could bring about improvements in the processing of new applications. As I said in reply to the hon. Member for St. Albans (Anne Main), the length of time that it takes to process new applications is coming down.

Will the Secretary of State also consider, as a category, those people who flee from domestic violence, or whose partner has gone abroad? I will give just one example, but we could all give many: I know of somebody who left when their child was 10 months, and their child is now four. The child was meant to have received £94 a month, but they have received a total of £12 because the ex-partner boasts that he can always get away with it. That is unacceptable in any society, so will the Secretary of State consider those categories, and ask the chief executive to make them a priority, as well as other work that he has to do?

I shall certainly do that. If the hon. Gentleman will give me the details of that case, we will look into it. I agree that it will be of primary importance to improve the enforcement arrangements within the agency. To that end, we have proposed a number of additional measures to improve the enforcement powers available to the agency, but I am sorry to say that all of them have been opposed by the hon. Member for Yeovil (Mr. Laws).

The Secretary of State said that the CSA was far from perfect; that is an example of perfect English understatement on St. George’s day. I cannot remember the last time I held a surgery in which I did not have at least one case involving the CSA before me—I often have more than one—and I suspect that it is the same for the Secretary of State. Will he give some indication of the scale of the problems? How many cases where errors are being made are outstanding?

There is a backlog of, I think, over 200,000 cases in the system which needs to be dealt with, and we are trying to do that. Sensible Members understand that the problem did not start in 1997. I am afraid that its origins go right back to day one of the agency, which tried to do a job without the right tools and with the wrong policy framework, and which operated in a way that was simply never likely to deliver the results that all of us wanted and expected. When it comes to the CSA, it is easy for people to jump up and criticise its staff, the chief executive or anyone else, but we have a responsibility, which we should acknowledge in this place, for getting things wrong at the beginning and not correcting them in time. Now we are trying to do that.

Work-focused Interviews

There are more lone parents in work than ever before, and part of that success is because of regular work-focused interviews. Most lone parents think that the experience is useful and, crucially, the contact with advisers means that they are aware of the range of help and support that is available to assist them in their return to work.

I am disappointed that my hon. Friend has not quoted any of the studies that the Department has had carried out on its behalf, but given the success of the voluntary new deal for communities programme, and the fact that 69 per cent. of lone parents whose youngest child is over 12 are in work, what would represent better value for money: spending more money on more compulsory interviews and signings-on, or spending money on removing the barriers to work identified in the studies that have been undertaken for his Department?

I am delighted to see my hon. Friend in the Chamber, just in time to put her question. A range of studies show that over recent years there has been real improvement, both in the employment rate of lone parents and in the earnings potential of lone parents who enter work. I am delighted to confirm again to the House that the new deal for lone parents has helped more than 480,000 lone parents across the United Kingdom into work, but we have to go further. The issue is partly giving personal advice and support, so that we can get lone parents into work, but it is also about the barriers that remain, to which my hon. Friend referred, quite fairly. The top of the list of those barriers remains making affordable, flexible child care available to all, and that is what we are determined to do, across the Government.

The Government welcomed the Freud report, which advocated greater involvement of the voluntary and private sectors. Will the Minister confirm the story in The Guardian last Friday, which said that despite that welcome, the Government are not able to implement measures in the report because the Chancellor is refusing to provide any funding for pilot schemes?

I have not had the opportunity to read last Friday’s Guardian, unlike the hon. Gentleman, but the whole Government are committed to delivering on the Freud report, including my right hon. Friend the Secretary of State for Work and Pensions, the Prime Minister and of course the Chancellor, because it is that sort of teamwork that has, over time, enabled us to deliver the most successful economy and the highest rates of employment that the country has ever known, as well as a fall in the number of people on jobseeker’s allowance, incapacity benefit and income support. We are determined to continue that record of success.

One of the biggest concerns for any lone parent accessing work is access to affordable child care. Workers at the Sure Start in St. Swithun’s in Eastmoor in my constituency of Wakefield have told me that they have noticed a trend, in which people access work just before Christmas, so that they can save up money to buy Christmas presents and get through the festive season, and then take their children out of child care and go back on benefits afterwards. Is that a trend that the Department has noticed, and if so, how can we better help those parents to stay in work?

I have not noticed or had any reports of situations along the lines that my hon. Friend suggests, but I am of course happy to listen to the specifics of her experience in her constituency or elsewhere. She is right to identify the need to provide more support for lone parents to be in sustained employment, because across the welfare system many people who wish for the chance to work and are determined to do so go into part-time or temporary work and go through a revolving door in the welfare system. The Freud report and a series of other reports put a firm emphasis on ensuring that work is sustained and well paid.

Has my hon. Friend noticed that the further away somebody is from the labour market, the more difficult it is to get back into it? In order to gain skills, it is important that people keep in touch with the labour market. Has he thought about how the Leitch report can benefit lone parents and help them to get back into work?

My hon. Friend is right. The evidence is that for many lone parents, regular contact with the labour market through Jobcentre Plus or a private or voluntary sector provider, getting closer to the labour market and keeping close to it, and going into part-time work that must sometimes be flexible by its nature, are all involved in the journey back to work. The continued investment in getting people back into work to achieve that full employment is a price well worth paying.

Notwithstanding the figures that the Minister gave as regards the numbers of lone parents now in work, we still fall pitifully far down the league compared with the Scandinavian countries, for example. There are still 1,420 lone parents in the Rhondda who are not in work, and that is one of the major causes of child poverty. Will the Minister consider ways of ensuring that lone parents become part of the solution to this problem, for instance by gathering together lone parents so that they can provide flexible child care to other lone parents who want to get into work, thereby getting two parents into work rather than just one?

In a devolved sense, some of the detail of that is part of the approach of the Welsh Assembly and the Scottish Executive. However, given the increased role in welfare for the private and voluntary sectors, it is also about the involvement of community groups, faith organisations and trade unions at a local level to support people in giving them the chance to get back into work. My hon. Friend is right about our different profile compared with Scandinavia. There are two differences between our country and those countries. First, as regards the availability of child care, they have had decades of investment, whereas we are catching up after decades of under-investment. Secondly, we have the most liberal—if my hon. Friend will pardon my using that word—approach to job search for lone parents of any major European nation.

Household Incomes

3. What assessment he has made of trends noted in the latest “Households Below Average Income” statistics; and if he will make a statement. (132664)

The “Households Below Average Income” statistics continue to demonstrate an overall improvement to child and pensioner poverty since 1997. The Government have achieved this through their welfare to work policies—in particular, the new deal for lone parents—and increased financial support for children and pensioners through the introduction of pension credit and the child and working tax credits, in addition to substantially increased levels of benefits for children.

Is the Secretary of State concerned that under our system the poorest effectively pay the highest tax? According to the Office for National Statistics, the poorest fifth of households pay 36.4 per cent. of their gross income in direct and indirect tax, compared with 35.6 per cent. for the richest fifth and 35.3 per cent. for households on average incomes. Instead of forcing poor people through an impenetrable maze of means-tested benefits and overpaid tax credits that have to be paid back, is not the more moral and economically efficient way to use the proceeds of growth to raise tax thresholds so that increasing numbers of poor people do not pay tax at all?

I am grateful to the hon. Gentleman. For us, the issue is very clear. We want to provide further support for low-income households, and that is precisely what we are doing. In relation to tax credits, my understanding is that his Front Benchers support the tax credit system. He may not, but then there is now probably very little that his Front Benchers propose that he feels in any way comfortable with. I am relieved to be able to say to him that matters of taxation are the responsibility of my right hon. Friend the Chancellor of the Exchequer.

A large swathe of households below average income has significant difficulty in accessing welfare benefits and entitlement. To what extent does the Secretary of State believe that the Freud report has addressed those specific problems? Will he encourage hon. Members to attend a valuable Public and Commercial Services Union seminar on Wednesday at 5 pm in Committee Room 16, where all will be revealed?

I do not know what will be revealed in the meeting. However, I am convinced that David Freud’s report has identified some important issues for the Department and for the way in which Jobcentre Plus should increasingly individualise and tailor the support that it provides for people who are out of work, through a range of new services to help them get back into work. I suspect that my hon. Friend is worried about the role of the voluntary and private sectors. To put the record straight, it is worth reminding ourselves that those sectors deliver virtually all the flagship success policies that we have pursued through the new deals for lone parents and for disabled people. They do an outstanding job.

Does the Secretary of State accept the Government’s figures, which show that, according to the overall measure of inequality in the UK—the so-called Gini coefficient—the position has deteriorated since 1997?

It is usually a good idea for Secretaries of State to accept Government figures—

No buts. Through our reforms, such as the national minimum wage, and the tax credits which the hon. Gentleman opposed, we have been able to provide significant additional financial help, which has increased the income of the poorest in our society. The hon. Gentleman might also like to consider the fact that the income of the poorest two fifths has increased in the past 10 years at a faster rate than that of the top two fifths.

The Secretary of State knows that the revised figures that he announced in his written statement this morning show that poverty among adults of working age has increased by 100,000. Does he have any explanation of that?

As the hon. Gentleman knows, he refers to a relative poverty measure. Some people suggest that the overall income of poor households is falling—it is not; it is rising significantly. Obviously, we need to reflect on and tackle some matters and we will do that.

Fighting poverty is a priority for all politicians but in March, the Government’s figures showed that the number of our fellow citizens in severe poverty had increased by 600,000 in the past 10 years. It is said that, in the past year, the total number of individuals in poverty—with less than 60 per cent. of median income before housing costs—rose from 10 million to 10.4 million, and that poverty among working age adults rose from 5 million to 5.4 million. The Secretary of State’s figures show that poverty is getting worse. Why?

I wish it were true that tackling poverty was an issue for all politicians. That is not what the history books tell us about the Conservative Government’s record. Child poverty doubled under the Conservative Government and it is now falling significantly for the first time in a generation because of our measures. If the hon. Gentleman had a record about which he could boast, I would seriously take something from it. He has no such record.

Income Support Fraud

In October 2005, we published new proposals for reducing benefit fraud. Fraud in income support is now at the lowest level since figures were recorded: down from an estimated £550 million in 1997-98 to around £200 million in 2005-06. That equates to a drop from 6.7 per cent of income support expenditure to 2.1 per cent.

We are determined to make further reductions in fraud, for example, by trying new data-matching initiatives with credit reference agencies.

Everybody living in Hammersmith and Fulham—except, it seems, the Secretary of State—is baffled by the unwillingness of the Department to investigate past and present claims for income support and other benefits by former local resident, Abu Hamza, and his family. Despite owning various properties, receiving rental income and buying a flat in Hammersmith with £75,000 in cash, there has never been a DWP investigation. Will the Secretary of State tell us why?

My understanding is that inquiries have been made into whether fraud or criminal activity has taken place. We have not found any evidence yet.

Does the Minister agree that if he wants to find examples of fraud or criminal activity, he could try to ensure that the DWP runs proper checks to ensure that those claiming income support are not among the thousands who have disappeared from open prisons over the last few years and are not living out in the wild somewhere like Australian bushmen, but are back at their home addresses, no doubt living off the benefits that they received before they were convicted of breaking laws in the first place?

I do not know whether the hon. Gentleman heard the answer I gave to the hon. Member for Hammersmith and Fulham (Mr. Hands), but fraud in respect of income support is falling sharply and we are determined to make further progress. In that regard, I am happy to say that this Administration has a far better record of dealing with these problems than the Administration to which the hon. Gentleman lent his support.

Financial Assistance Scheme

5. If he will make a statement on the impact of the 2007 Budget on the financial assistance scheme. (132666)

As a result of the Budget statement and the amendment tabled to the Pensions Bill, all the estimated 125,000 people with losses will be helped, receiving 80 per cent of the core pension rights accrued in their scheme. In addition, we have started a review of non-public sources of funding to top up the financial assistance scheme. I have today placed a note in the Library with details of the review and an indicative list of 17 schemes where we understand a compromise agreement is in place. We are asking for any similar schemes not on this list to come forward. The review will look at the definition of solvent employers, provide an initial view in the summer and make a final report by the end of 2007.

I thank the Minister for that answer and look forward to reading his statement. Last week, facing a Back-Bench revolt, the Chancellor was forced to expand his Budget measures to cover solvent schemes. He seems able to commit funds for pensioners when it suits him, but when a cross-party agreement for a solution is put forward, he rejects it out of hand. Surely what pensioners need now is not just another review, but action and payment in respect of pensions that many people saved a long time for, but may not live to receive.

I have looked at the proposed amendment and have found that it promises to pay 90 per cent., without saying how it can be funded. There is a word in the pensions sphere for guaranteeing pensioners a certain level of income with no guarantee to fund it—and the word is mis-selling. That is exactly what the Opposition are doing.

On behalf of the pensioners of HH Robertson’s, may I say how grateful they are for the work done by the Minister and the Secretary of State in developing the financial assistance scheme as they did? However, may I ask the Minister to look carefully into some of the smaller technical issues, such as bridging pensions, that remain as obstacles? Some of the rules of schemes such as HH Robertson’s are still presenting tiny problems for a small number of members, but they are entitled to benefits from the scheme. It is often a case of working out precisely what they are. Will the Minister meet me to discuss those issues?

I would be very happy to meet my hon. Friend to discuss them. He may well have been the first Member to raise this issue in the House, so his constituents and others owe him a real debt of gratitude. He may want to make a submission to the review so that those issues can be looked into by the external panel.

As one trade unionist to another—[Interruption.] For those in doubt, I used to be a member of the Fire Brigades Union. In respect of this cobbled-together agreement that took place on Thursday evening between the trade unions, the Secretary of State and the Chancellor, can I ask whether any people who were not members of trade unions were present? Many of the people who have lost their pensions, including the Dexion workers in my constituency, are not trade union members and were not invited to this little gathering.

To be honest, I am not quite sure what meeting the hon. Gentleman is referring to. The important thing is to provide 80 per cent. to those affected and look further into how to top it up. It would be mistake to go for the sort of dodgy small print that the hon. Gentleman’s scheme has. The shadow Chancellor guaranteed on Wednesday morning that no extra public money was available, but that afternoon he was contradicted by his shadow Secretary of State who said that it was. We are opting not for that sort of dodgy small print, but for a proper review, which will look at the available money and make recommendations in due course.

May I ask my hon. Friend about the timetable for the unclaimed pension assets—he said that a statement was due some time before the recess—and whether the measures will need primary legislation? Are any pension funds, such as Legal and General or Prudential, not co-operating with this process and, if so, how are we going to get them to co-operate?

One of the things that the review needs to look at is whether legislation will be needed, as well as considering any technical, financial and legal issues. That is why we believe that the right way to proceed is to hold the review and to make recommendations in the light of its findings, rather than guaranteeing levels of payments that cannot be guaranteed. It is important that the financial services industry co-operate with the review; we will need its help and support. It is in the interest of everyone involved to come up with as good a settlement as we can, and I would urge my hon. Friend and other hon. Members, as well as those on the Front Bench, to put in a submission to the review.

The Budget changes to the financial assistance scheme and the additional change that the Minister announced last Wednesday are welcome. They will improve the position of those who are some way away from retirement, and of those on higher incomes. They will do nothing, however, for those at or near retirement who are on low wages, including shop floor workers and trade unionists. Such people are increasingly having to look to the Conservative party to defend their interests and fight their case, because the Labour Members who have taken up their case let them down last week. Will the Minister tell the House why he rejected a perfectly sensible proposal, supported on both sides of the House, that would have delivered an immediate solution at no cost to the public purse, save that of providing a short-term loan?

The hon. Gentleman has just illustrated why the proposal needed to be rejected; he contradicted himself in the space of one sentence. Either there is a taxpayer guarantee, in which case his shadow Chancellor was wrong last week to say that there was no public spending commitment involved, or this is mis-selling the Conservatives’ policy. Which is it?

The Minister might want to be a little bit careful about what he says about the package of policies that we announced last week. On Tuesday, shortly after my hon. Friend the Member for Tatton (Mr. Osborne) announced the package, the Chancellor accused him of having announced a reheat of his own policy. The Minister should therefore be a bit careful before he rubbishes it. This is about people. Let me give him two examples: Peter Humphrey, a former Dexion worker, and John Brooks, a former Early’s of Witney worker, are both now seriously ill. The Minister will know about their cases. They are receiving precisely nothing from the financial assistance scheme, and the announcement that he has made will deliver nothing extra to them. Is he not sending a message to them today that people will have to wait still longer, and that, in their cases, they might never receive the benefits for which they have been saving for many years?

That is not the message at all. We made it clear that we were increasing the level of initial payments from 60 per cent. to 80 per cent. The problem with the hon. Gentleman’s proposal is that he does not know how to fund it. The House will notice that he absolutely refused to say which of the two options was correct. We still do not know who is right. Is it the shadow Chancellor, who said that no public spending commitment was involved, or is it the hon. Gentleman? There is a contradiction at the heart of their policy. What I was saying was exactly what the Chancellor said, namely that we should have a review and make decisions in the light of its findings and of proper technical advice, rather than adopting cooked-up amendments from the Conservative Front Bench.

State Second Pension

6. How many more women will receive entitlements to the state second pension as a result of Government pension proposals. (132667)

As a result of reform, around 1 million more people will build up entitlement to the state second pension from 2010, 90 per cent. of whom will be women.

I thank my hon. Friend for her answer. As a Member of Parliament whose constituency has one of the highest percentages of women, I am naturally concerned about the treatment of women. Does my hon. Friend agree that the low take-up of the state second pension among women might be due to the fact that they are still being paid less than men? Of course, it could be that they are going for other pensions that are more favourable, but what are the Government doing to investigate why there is such a low take-up of the state second pension?

My hon. Friend is correct that for many years the number of women who build up a full state pension has been significantly lower than the number of their male counterparts who do so, which is why in our reforms, including the reform of the second state pension, we seek to equalise the take-up of the basic state pension and the building-up of that entitlement. He is correct, too, that there are other issues to do with the advice given to women workers and whether or not they think it worth their while to join in a private pension scheme. That is something that the Department for Work and Pensions must look at, along with employers and with the sponsorship of other Government Departments, to make sure that the right information is given to women. For too long, women have been second-class citizens with regard to pensions, whether it is the payment of the small stamp or the fact that they have never been given the opportunity to build up an entitlement, and we seek to rectify that.

I wonder whether my hon. Friend will join me in congratulating the Association of Greater Manchester Authorities which, last Thursday, with the help of Age Concern and Bolton council launched a new mobile advice centre that has three interview rooms and a large satellite dish on the roof, and allows professional staff from the Department for Work and Pensions and the Pension Service to give all the citizens of Greater Manchester who receive pensions or are about to receive them proper advice?

I am delighted to join my hon. Friend in offering my congratulations. He has illustrated the way in which the Department for Work and Pensions, through the Pension Service, goes out to people and ensures that information is taken to the community. It works closely with voluntary organisations and local authorities to ensure that there are no barriers to information among the local population, and I should be interested to learn from the Pension Service the improved take-up in the Greater Manchester area.

Inactive Benefits

There are more people in work than ever before in the UK. There are also 900,000 fewer people on out-of-work benefits compared with a decade ago. There is a real contrast with the decade before that, in which the number of people on incapacity benefit trebled.

May I ask my hon. Friend to look at the position of people with mental health problems, particularly given the scheme that operates in Hull through the local branch of Mind? It is called Mindful Employer, and it offers support and encouragement to local employers to employ people with mental health problems, so will he look at whether it can be rolled out across the country to support employers?

I know how carefully my hon. Friend looks at all those issues, and she has spoken to me before about the Mindful Employer experience in her constituency. She is absolutely right, and there are some extremely enlightened attitudes among employers small and large across the United Kingdom who are doing an awful lot to support people with a mental illness as well as people with a learning disability, who have traditionally been excluded from the labour market. I am happy to listen further to my hon. Friend’s experiences to see what more we can do to embed those reforms so that they genuinely support those with a fluctuating mental health condition.

The Minister will be aware that there is a record number of 16 to 18-year-olds among the number of people not in education, employment or training. Does he accept that the path through university to work is very much embedded in young people’s minds but that the Government need to do more to encourage them to go on and secure vocational training, which does not necessarily involve university but will give them a job for life?

I am not sure that there is a job for life for many people in today’s labour market in a world of globalisation. Nevertheless, there is a significant task ahead concerning the skills and aspirations of many young people. Of course there has been progress in recent years on the number of young people not in employment, education or training, but we have to go further. One way of doing so is perhaps raising the school leaving age; another is continuing to make a success of the new deal, which has transformed the lives of hundreds of thousands of young people and is a policy that was, and still is, opposed by the Opposition.

Does my hon. Friend agree that getting people who have been on an inactive benefit for many years into work is one of the most challenging jobs for us? Will he give me an assurance that Jobcentre Plus has sufficient resources to meet that challenge?

My hon. Friend is right, and that is why 250 people have come off an inactive benefit, with the chance to go into work in many cases, every day over the past 10 years. My hon. Friend is right to allude to the remarkable work done by Jobcentre Plus in supporting people to get into work in many communities and towns across the country. But clearly, Jobcentre Plus cannot, and should not, be asked to do that job on its own. Increased involvement by the private and voluntary sector, community organisations, and—as I have alluded to—faith groups and trade unions in communities is also important in supporting more people into sustained employment.

The latest edition of “Labour Market Statistics”, published on 18 April, showed that the number of economically inactive people of working age rose by 76,000 in the past quarter to 7.93 million. Is the Chancellor to blame?

The figures released will also show, of course, that the number of people on jobseeker’s allowance fell last month—the seventh fall over the past eight months—that the number of people on incapacity benefit is the lowest that it has been for six years, and that the number of lone parents on income support has decreased. Alongside the fall in the number of people claiming each and every one of those benefits, a record number of people are in work—a record of which the Government are rightly proud.

Pension Contributions

8. What estimate his Department has made of the number of people aged 40 years or under who do not make any contributions to either occupational or private pensions; and if he will make a statement. (132669)

In 2005-06, 6.2 million employees, 0.9 million self-employed people and 3.6 million economically inactive people aged 20 to 40 in the UK were not contributing to a non-state pension.

I am grateful to the Minister for those statistics. If he has looked at the general household survey conducted by the Office for National Statistics, he will know that since 1995 the number of men and women in full-time employment who have occupational or private pensions—in the age bracket about which I asked—has fallen. Many of my constituents in Putney see getting a pension as a luxury to come after having paid off student debt and perhaps having bought their own home. Given that we know from Barclays that the average starting salary fell last year to £13,800, does the Minister agree that it was particularly unhelpful and counter-productive for the Chancellor to increase income tax on low earners when his Department seeks to introduce personal accounts in which those people are expected to save money?

Obviously, taxation policy is a matter for Treasury questions. I believe, however, that the hon. Lady shares in the consensus that personal accounts should be introduced. I have read with interest the helpful and serious report on that by the Select Committee on Work and Pensions, of which she is a member, and we shall examine that in detail. The right response to the issue of pension saving is automatic enrolment and a matching employer contribution—both of which I think that she agrees with—and the introduction of the national pensions saving scheme, which is the right model to deliver low charges and good returns for those saving in it.

I was visited recently by a constituent who has lost not one, but two, pensions, and who falls outside the FAS. He complained to me that when he chided his daughters for not contributing to a pension scheme, they replied that he was a mug for having done so. Until Ministers are prepared to grasp the nettle, which our amendments last week offered them the opportunity to do, there is every likelihood that people who save for a pension will simply be told that it is a mug’s game.

We have grasped the nettle. We have introduced an amendment that guarantees at least 80 per cent. of what people have lost. We are examining how that can be supplemented. We are not prepared to make empty promises, which have been described by the Association of British Insurers as robbing Peter to pay Paul, or as yet another raid on pensions, which should not be done. We are saying that we should have a proper review. I would say to his constituent’s daughters that we now have the Pension Protection Fund, which does provide a safety net for people in the future. The Labour party tabled proposals for that in the 1995 Pensions Bill. If the hon. Gentleman’s party had supported them, we would be in a very different situation now.

Does not the Minister realise the terrible damage done to long-term confidence in pensions by this Government’s failure to ensure prompt and adequate compensation for people who have lost pensions? Does he think that the under-40s in particular will be encouraged to participate in personal accounts by the sad spectacle of some pensions victims dying before help reaches them, while the Government conduct yet another review?

It is not right to promise people money that we do not know how to deliver. That is not the right type of politics. The shadow Chancellor said that a test of the Opposition’s credibility as a Government was whether they were going to come up with more unfunded promises on pensions. That is exactly what they have done. Voters will draw their own conclusions on the credibility of the Opposition party to be in government.

Welfare to Work

We announced on 2 April that city strategy pathfinders have now succeeded in bringing together new partnerships capable of planning and driving through real change to local employment and skills services. We are now working with them to agree ambitious targets to tackle worklessness and expect to finalise these targets by the end of May.

I thank the Minister for that answer and congratulate him again on the work that he has done in getting the city strategies under way—certainly in my city of Nottingham, with 31,000 incapacity claimants and those on related benefits, we need it. However, does he share with me a small degree of impatience that in setting up the city strategies over many months, we have yet to begin the delivery? What does he expect in terms of targets and outcomes, not least in respect of my city?

My hon. Friend has championed the city strategy approach for some months now, not least because Nottingham is, uniquely, the sixth richest city in the country and the seventh poorest. He also chairs the consortium in Nottingham. Let me say to him and, through him, to the partnership in Nottingham that we are looking for a real change in outcomes. Of course we have to get the processes right, but it is the transformation of people’s lives that is important. In that sense, we have set aside additional money to incentivise further success so that the consortiums can share in the success of getting people off benefit and into work. That announcement was made to the 15 city consortium pathfinders when we set out the details of the flexibilities to them recently.

Pension Credit

Our latest estimates show that in November 2006 there were 6,130 households—7,810 individuals—in the parliamentary constituency of Waveney receiving pension credit. Across Great Britain, there were 2.7 million households—3.3 million individuals—receiving pension credit. This is nearly 1 million more than received the minimum income guarantee that preceded it.

I thank my hon. Friend for that answer. Has he estimated how much extra money per annum those figures amount to in terms of what comes into the Waveney constituency? It strikes me that it is not just good news for pensioners, but good news for the local economy in which my constituents spend their money. They remember the time when there was no such thing as pension credit.

The average amount that people get from pension credit is just under £50 a week. A quick off-the-top-of-the-head calculation would suggest that about £13 million a year goes into the Waveney constituency from pension credit—a measure that was opposed by the Conservatives and was described last week by their Front Bench as a cancer.

Child Support Agency

11. What steps his Department is taking to reduce the number of Child Support Agency cases waiting to be processed. (132672)

The main steps are increased staffing levels and improvements in the agency’s IT, and those steps are working.

At the commencement of the improvement plan, there were some 220,000 new scheme cases uncleared. By last December, that was down to 186,000. The immediate target is to get it down to 160,000 by the end of the first full year of the plan—and given that clearances have exceeded intake for nine consecutive months, I am confident that the target will be met and that there will be continued improvement thereafter.

I am grateful for the hon. Gentleman’s response. He will recall that earlier today his right hon. Friend the Secretary of State said that there was a backlog of 200,000 cases with the CSA. What assessment does the hon. Gentleman make of the work of the Select Committee on Work and Pensions, which indicates a far higher level of problems and backlog? Does he accept that the backlog is causing real problems for vulnerable people in all our constituencies? What further will he do to clear that backlog quickly?

As I told the hon. Gentleman, the backlog is now being reduced. It was reduced by 13 per cent. in just the first year of our operational improvement plan, and the targets that we have set for the agency include the clearing of 80 per cent. of cases within 12 weeks by 2009. The substantial improvement achieved in the first year will continue. If the hon. Gentleman wants to know what more is being done to support that improvement, I suggest that he read the detailed information that we have made available about reforms to the agency’s information technology system. When we examined it at the start of the operational improvement plan, it contained 500 defects. More than half those defects have now been fixed, including all the important ones. Additional investment, new processes and new ways of working for staff are helping us to make rapid progress in reducing the backlog.

Leader of the House

The Leader of the House was asked—

Early-day Motions

19. What assessment he has made of the merits of establishing an online system for tabling and signing early-day motions. (132696)

My right hon. Friend the Leader of the House—who, unfortunately, is abroad today—is aware of both possible advantages and possible problems associated with e-tabling of and signatures to early-day motions. The Procedure Committee is examining the matter, and I understand that it is due to consider a report in the near future. The Government will pay close attention to any recommendations that the Committee makes, and will respond in the normal way.

Does the Minister accept that the currency of the early-day motion is now considerably devalued? It is now little more than parliamentary graffiti, and is used as the equivalent of parliamentary snout in this place. Could it not be returned to a central position in our deliberations? Perhaps the early-day motion that has the most cross-party signatures each week could be debated without a vote on a Friday.

My hon. Friend is right to stress the value of the currency of both early-day motions and questions. There is concern in the House about the number of questions tabled. Another Committee of the House, the Modernisation Committee, is examining the use of non-legislative time, and among the issues that it is considering are early-day motions and the number of signatures to them. I understand that its report may be available before the summer recess, and will provide an opportunity for discussion of my hon. Friend’s point.

The Deputy Leader of the House will know that, for the reasons given by the hon. Member for Nottingham, North (Mr. Allen), many Members on both sides of the House do not sign early-day motions at all. Before we adopt the proposal in the question and make it even easier to table and sign early-day motions, does it not make sense to wait for the more substantive review to which the Deputy Leader of the House has referred?

I agree. That is precisely why the Procedure Committee is examining the matter, and I understand that its report is fairly imminent. As the right hon. Gentleman says, it is important for early-day motions not to be abused and to have significance, and I hope that we shall be in a position to reinforce that in the future.

In echoing the concern expressed by my right hon. Friend the Member for North-West Hampshire (Sir George Young), may I reinforce the argument by suggesting that the problem with the current system—and it would also be a problem with a system allowing early-day motions to be tabled online—is that it appears to many people to be profoundly ritualistic and to have no end result? Will the Deputy Leader of the House consider again the idea that if a decent number of signatures is achieved, that should be the threshold for a substantive debate, as suggested by the hon. Member for Nottingham, North (Mr. Allen)—but preferably not on a Friday? Monday, Tuesday, Wednesday or Thursday would do.

The hon. Gentleman can name the day, as long as it happens. He will not mind my saying that he gave evidence to the Modernisation Committee fairly recently, and one of the issues discussed in the session that he attended was giving effect to early-day motions. I am not sure what the Committee will recommend, but I can tell the hon. Gentleman, fairly forcefully, that we will look carefully at any recommendation that the Committee makes.

Business Committee

20. If he will instigate discussions with all political parties represented in the House about the establishment of a business Committee. (132697)

As the hon. Gentleman is aware, my right hon. Friend has received regular representations about the case for a business Committee. The proposal has been raised in evidence to the Modernisation Committee’s current inquiries into the role of Back Benchers and the use of non-legislative time. I think it best to let the Committee make its recommendations on the matter.

I welcome the Deputy Leader of the House back to the Front Bench. He is a thoughtful and kindly man who is deeply committed to the procedures of this House. Does he not accept that people are increasingly concerned that what takes place in this House is not topical, and does he not agree that if Back Benchers were represented on a business Committee of this House not only would more topical debate be part of debate during the week—not only on a Friday, although I support the hon. Member for Nottingham, North (Mr. Allen) in his question—but that would be more relevant and topical for the people of this country? That is one of the objectives of the current Modernisation Committee inquiry.

I am grateful to the hon. Gentleman for his remarks about me, and let me reciprocate by saying that he is a long-standing and influential member of the Modernisation Committee and that I am sure that he will use all his powers to ensure that the report that comes forward addresses the case he makes that the Chamber should be more relevant and that there must be greater involvement of all the political parties in a more structured way. Because of his background, he will also understand that it is important, too, to persuade people that there should be an appropriate and agreed time for Government legislation and for their programme in general.

Does my hon. Friend accept that if such a business Committee were already in existence it might well have come to the conclusion, and have made recommendations to the House, that to exempt the House of Commons from the Freedom of Information Act 2000 would be totally against the interests of the House of Commons, and that therefore circumstances would not arise such as those that arose last Friday where Whips on both political sides were trying to bring about a situation whereby the Freedom of Information Act applies to everybody else but not to Parliament—

The former Leader of the House, the late Robin Cook, was a strong supporter of introducing a business Committee. Indeed, he said that

“one of the ways in which the executive retains its control over the Commons is to make sure that only it can propose the business before the House”.

Given that a business Committee is normal for most democracies and legislatures, and that there is a business Committee in the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly, why is it taking so long for this Government to consider properly the merits of having a business Committee for this House?

The hon. Gentleman rightly says that the late Leader of the House, my friend Robin Cook, was a great advocate of that. The simple answer to the hon. Gentleman’s question is that there are different voices and views in Government. That is why I believe that the Modernisation Committee report is important. I speculate that it will say something about a business Committee although, clearly, I cannot make commitments; the only commitment that I can give is that the matter will be explored carefully and thoughtfully.

This House gave up without a whimper various very important powers that would have enabled us to vote, as we originally did, on resolutions of the House and Back-Bench motions. My hon. Friend will accept that we are one of the last legislatures not to have control of its own business programme, which is unacceptable, pointless and damaging—and may I add that I, too, think that he is lovely?

Well, let me agree with that last point, and say to my hon. Friend that she has been a strong supporter over many years of more motions coming before the House and of the debates being on substantive motions, not motions for the Adjournment. My right hon. Friend the Leader of the House is committed to trying to ensure that that happens further.

Under this Government, there has been an ever-increasing amount of legislation. Since 1997, the number of pages of secondary legislation has increased by almost 20 per cent. and the number of pages of primary legislation has increased by 125 per cent. What measures do the Government intend to introduce to ensure that there can be proper and effective scrutiny of all those laws?

This is a matter not just for the Government, but for the whole House. The whole process of timetabling of motions and business—I know that it has been controversial—gives the opportunity to the Opposition to highlight the important areas of concern. This is a two-way street, and I am clear that we could use the way in which we timetable our business in a more effective and efficient way than we do at present.

House of Commons Commission

The hon. Member for North Devon, representing the House of Commons Commission was asked—

Parliamentary ICT Network

Hon. Members raise their concerns with me from time to time, but the Administration Committee has been carrying out an inquiry into the provision for and by the House of ICT services and equipment. That has of course covered matters relating to the performance of the network managed by PICT. A report is expected from the Committee shortly.

Having working in IT for three decades before I became an MP, I have to say that the service that we get from the blend of hardware, software and staff, in support and technical design and development, is excellent, but the remote service in the constituencies is a different picture. The performance and stability of the remote network is as lethargic and unpredictable as a teenager on a hot day. May we please have some focus on, and investment in, that particular area, for the benefit of all 646 of us when we are not here between Monday and Thursday?

I thank the hon. Gentleman for his positive remarks about the network in general. It is recognised that there are problems with the remote access to the network and a programme of work is under way to improve the way in which that operates. I hope that as time goes on that will prove to be successful and that external users will get the same satisfaction as internal users generally report.

May I dissent, because I think that the network is the most unbelievably incompetent bureaucracy? We had a much better service from individual suppliers before, and we should think again and return to that system rather than the network.

The taxpayer would pay considerably more if 646 Members each procured their own IT arrangements rather than it being done collectively. Overall, the performance of the network is extremely reliable. It is recognised that there are problems with some of the other services, but the right hon. Gentleman should not underestimate the scale of the task that PICT faces. These are early days. The joint department for the two Houses has only just been formed, and time will tell in the next few months as to whether it is able to improve the service. Generally, Members seem fairly satisfied with it.

Points of Order

On a point of order, Mr. Speaker. May I ask your advice? Last Wednesday, during the debate on the Pensions Bill, I asked the Minister for Pensions Reform, the hon. Member for Stalybridge and Hyde (James Purnell) about the pensions expert, Ros Altmann. He replied:

“I have great respect for Ros Altmann, but…she never worked as an adviser to No. 10 or No. 11, as is often said.”—[Official Report, 18 April 2007; Vol. 459, c. 329.]

Ros Altmann sent me an email pointing out—

No. It is a matter for debate. Whatever information the lady gives, it is not a point of order.

On a point of order, Mr. Speaker. Perhaps you could help me. I gave the Minister more than three hours to research the case that I referred to, including the Child Support Agency number and the national insurance number. I wrote to the Minister on 26 March, so it cannot have been lost in the system. How much time does a Minister need to be able to find a case?

Once again, the hon. Lady is trying to extend Question Time, and that is not the purpose of a point of order.

On a point of order, Mr. Speaker. I seek your guidance on a written answer given on 16 April by the Minister for Local Environment, Marine and Animal Welfare, the hon. Member for Exeter (Mr. Bradshaw), in which he listed local councils that provide only fortnightly rubbish collections. He included Ashford borough council on that list, but that is factually wrong. Ashford borough council provides a weekly collection service—

Order. That is not a point of order. Sometimes Ministers get things wrong. They do not mean to do so, but sometimes they do, and points of order should not be used to try to put the matter right.

On a point of order, Mr. Speaker. May I seek your advice about what happens when constituents’ lives are affected because they are misquoted by a Minister? Ros Altmann worked at No. 10, yet the Minister said that she had not. How is that lady to get compensation?

The hon. Gentleman should go to the Table Office and put down a further question, or point the matter out at oral questions. Sometimes early-day motions are used to state that a Minister has got something wrong. There are ways to redress the balance.

Orders of the Day

Finance Bill

[Relevant document: the Fifth Report of the Treasury Committee, Session 2006-07, on the 2007 Budget, HC 389-I and –II.]

Order for Second Reading read.

I beg to move, That the Bill be now read a Second time.

At the time of the Budget, my right hon. Friend the Chancellor was able to set out an upbeat account of the state of the British economy. It was not just my right hon. Friend, however: I draw the House’s attention to the International Monetary Fund’s report on the UK economy in February, which referred to

“a decade-long record of strong and steady macroeconomic performance”,

and pointed out that

“growth of real GDP per capita was higher and less volatile than in any other G7 country”.

We have seen a remarkable transformation of the British economy over the past decade. Uniquely among major economies we have avoided a downturn; 29 million people are in employment for the first time ever and gross domestic product per capita is up from seventh to second in the G7 and the economy is growing faster this year than in every other G7 economy. Locking in that new stability, avoiding risks to it and sticking to our fiscal rules are the immovable constraints around which the Budget and the Finance Bill were constructed.

Can the Minister explain why 1 million manufacturing jobs were lost in Britain over that decade and why 5.3 million people of working age are on benefit with no job?

As I have just said, and as the right hon. Gentleman knows, record numbers of people are in employment in the UK and unemployment is falling. The claimant count fell again in the most recent figures. Of course, there has been a shift from manufacturing to services—as there has been across the developed economies—but there has been positive news from the manufacturing sector in recent months, which I am sure the right hon. Gentleman and the whole House will welcome.

As a west midlands MP, may I remind my right hon. Friend that although it is sad that a huge number of manufacturing jobs have been lost, there is record employment in the economy and in the west midlands? Manufacturing output has continued to grow significantly over the past 10 years under the Government.

It has, with particularly strong figures in recent months, as I said, which reflect the strength in manufacturing across the economy. I particularly welcome the strength of the economy in my hon. Friend’s region, to which he referred.

Acknowledging intensifying global competition, the Bill takes the next steps to prioritise investment and innovation. It includes important measures to simplify business tax and to ensure that everybody pays their fair share. With measures to deliver further emissions reductions, incentives to encourage fuel and energy efficiency and further support for renewable energy technologies, the Bill strengthens UK leadership in tackling climate change.

On fair taxation, can my right hon. Friend tell me how many representations he has received from low-paid workers about the abolition of the 10p rate of tax? Constituents of mine who earn only one sixth of what we earn are paying £3 a week more, and I have tabled questions asking how many other people are similarly affected. Is my right hon. Friend satisfied with the balance the Government have struck, and when might I receive a reply to my questions?

I am absolutely certain that my right hon. Friend will receive answers shortly. I am sure that he has seen the analysis published by the Institute for Fiscal Studies showing that the great majority of households will be better off. The IFS also points out that the proportionate gain is highest for those on the lowest incomes, although of course the changes to which my right hon. Friend refers will be in the Finance Bill next year, rather than this year.

But does my right hon. Friend not accept that some people will be worse off and that some of them might have noticed that they are thought to be so unimportant that they do not feature in the reasoned amendment opposing Second Reading?

My right hon. Friend may be correct about that. Some, no doubt, will find themselves a little worse off next year as a result of the changes in the Bill but, by and large, their position will have been considerably strengthened by the other changes over the past 10 years.

Will the Chief Secretary respond to the recommendations in the Treasury Committee’s report on the 2007 Budget, which raises two important issues? The first is that the winners and losers are not clearly identified in the Red Book and that this should be done in future. The second is that take-up of tax credits remains low and further efforts need to be undertaken to make sure that those who could benefit from tax credits actually do so. Many will lose out not only because of the tax changes, but because they are not claiming tax credits.

I welcome the report that has been published today. We will reflect on all the points that it makes. On the second issue that the hon. Lady raised, the report does welcome the recent initiatives, including the information that my right hon. Friend the Chancellor gave to the Treasury Select Committee at its meeting on take-up, but there is no doubt that more needs to be done.

May I clarify something for the House? The abolition of the 10p rate is not referred to in the reasoned amendment because it does not appear in the Bill. No doubt, the right hon. Member for Birkenhead (Mr. Field) will hear more about that issue later in the debate.

On tax, spending and borrowing, the balance that we strike is of crucial importance. Our commitment, with the golden rule, is to borrow only to invest over the course of the cycle, and the Budget reported an £11 billion surplus on the golden rule over the current cycle. On borrowing, to keep net debt sustainable below 40 per cent. of gross domestic product and consistent with those rules, this Bill sets the right balance and underpins our commitment to maintaining the new stability in the economy that has been so invaluable over the past decade.

Crucially, the Bill also provides the resources to equip us to meet future challenges successfully, enabling the new investments for education and skills, science and the other key areas that my right hon. Friend the Chancellor set out in the Budget to be made. With total spending rising to £674 billion in 2010, we are committed to continuing to invest. In a world economy in which competition is intensifying, technology is changing fast and almost every country faces challenges from global insecurity, investment is vital to enable us successfully to address the long-term challenges ahead.

Let me turn to the details of the Bill. First, on business and productivity, our starting point is a very strong one indeed. In the past year, total investment is up by 6½ per cent., business investment is up by 7¾ per cent and inward investment is up by 15 per cent. Business investment is forecast to rise again by more than 7 per cent. this year. Maintaining that success requires a modern, corporate tax system that reflects the intense worldwide competition in the globalised economy, and the Bill introduces the changes that we need. From 2008, there will be a cut in the main rate of corporation tax from 30 per cent. to 28 per cent.

The Chief Secretary appears to think that everything in the economy is rosy. Is he concerned that inflation has hit a 16-year high?

Inflation is currently at 3.1 per cent., and the hon. Lady may have noticed that the recent sending of a letter by the Governor of the Bank of England to my right hon. Friend the Chancellor was the first time it had happened in 10 years. At the outset, it was expected that that would be required every year or two. The system and the macro-economic framework that we have put in place have been remarkably robust and successful. Inflation at 3.1 per cent. is a great deal lower than the rates of inflation that obtained when the party that she speaks for was last in government. At that time, we had double-digit inflation and double-digit mortgage rates. The system continues to work extremely well and the fact that, after 10 years, it has been necessary for a letter to be sent need not give rise to undue concern. Indeed, it is generally agreed by those who study these things that the rate of inflation will fall sharply towards target in the second part of this year.

From 2008, as I said, there will be a cut in the main corporation tax rate from 30 per cent. to 28 per cent. That is a lower rate than those of all our major competitors and has been widely welcomed by, for example, the Institute of Directors and the City of London Corporation, which said:

“The City is very pleased that the Government is making such a clear commitment to keeping London competitive”.

There is clear evidence that a lower headline rate of corporation tax attracts foreign direct investment and that the change will strengthen our position further.

I am listening carefully to the Chief Secretary’s comments about corporation tax. Small companies in my constituency are concerned about the increase in the small companies rate. Will he go on to talk about the representations that he has received from the Federation of Small Business and others?

I shall come to the small companies corporation tax rate in a moment, but let me say a little more about how we are funding the welcome and significant reduction in the main rate. It is being funded by modernising and streamlining the capital allowances system, which has been largely unchanged for the past 20 years and which, in part, still reflects the needs of post-war redevelopment. This is the most extensive reform of investment allowances since the 1980s, better aligning allowances for buildings and plant with economic depreciation, removing tax-driven distortions in business decisions and giving incentives for long-term investment.

My right hon. Friend announced just two rates in future for capital allowances—20 per cent. for short life assets and 10 per cent. for long life assets. Clause 35 paves the way for phasing out over four years industrial and agricultural buildings allowances, so removing a selective and outdated subsidy for some buildings, which is not available, for example, for commercial office space or for science parks. It is a strong package, pro-growth and pro-investment, which is expected to add 0.2 percentage points per annum to investment above the trend rate, strengthening our global competitiveness.

The Bill also sets the small companies rate of corporation tax at 20 per cent. for 2007. We have announced that we will raise it further to 22 per cent. from April 2009 as we remove incentives to incorporate solely for tax reasons. As the Red Book shows, setting out the figures for this year and the following two years, all the proceeds from that increase will be recycled to small businesses that invest, through a package that reduces the tax due from them and gives them incentives to invest, with current first year capital allowances for small firms maintained in the Bill at 50 per cent. until April 2008, and with the Finance Bill next year to introduce a 100 per cent. annual investment allowance of £50,000 for all firms. That shifts the incentives in favour of investment, which will further strengthen small firms.

The Chief Secretary has been extremely generous in giving way. Does he recognise the problem for many small retailers or small service businesses, which cannot make that level of investment to recoup for the tax increase? For example, a newsagent will not be able to make those high levels of investment and will end up with a higher tax bill.

Perhaps the hon. Lady will tell us when she speaks whether her party would reverse the change. We are using the tax system to improve the incentives for investment and thereby strengthening businesses, particularly the wealth-creating, job-creating businesses. I have no doubt that as a result of this package the economy will be strengthened further. It is a matter of using the available incentives in the right way, as we are doing. There will be a significant cash-flow benefit to small businesses that reinvest their profits, offsetting the small companies rate increase for small companies that are investing.

Through clause 50 and schedule 16, the Bill reforms venture capital trusts, the enterprise investment scheme and the corporate venturing scheme. Those measures will give greater certainty to investors and the companies in which they invest and help to secure the future of the schemes, which have been very valuable. All the yields from those changes are being recycled to fund enhancements in research and development tax credits to strengthen further innovation and productivity in the UK. These measures will encourage investment and innovation, promote competitiveness and help to equip the UK to meet successfully the challenges of globalisation ahead.

The Chief Secretary is talking about the ability of companies to invest in some of the things that the Government are doing. However, of the 265,000 businesses in Scotland, 98 per cent. have fewer than 49 employees and 1.3 per cent. have between 50 and 249 employees. That leaves only a couple of thousand firms, of which 1,510 employ more than 500 people. The new definition of small and medium-sized enterprises that applies to much of the research and development tax credit stuff will apply to merely a few hundred companies out of 265,000. Is the Chief Secretary not overstating the benefits in the Finance Bill?

No, I do not think that I am. Of course, I am not familiar with the figures that the hon. Gentleman is quoting, but I suspect that he is including a large number of self-employed individuals. I am certainly not overstating the benefits. He will see in the Red Book the analysis of the additional revenue raised from the change in the small companies rate and the additional sums being relieved through the changes that I have described. Over the period set out, all the proceeds are being recycled.

The Budget extended support to hard-working families. It announced tax changes to help more people into work and to boost further the incentives for employment. But for 2007-08, in the Bill income tax rates are unchanged at 10 per cent., 22 per cent. and 40 per cent. The personal tax reforms set out in the Budget, amounting in total to a reduction in personal taxation of £2.5 billion, will come into effect from April 2008 and will be contained in the Finance Bill next year.

Clause 4 of the present Bill will increase the nil rate band for inheritance tax to £350,000 for the financial year 2010-11, maintaining recent practice of pre-announcing nil rate band increases for future years. That means that 94 per cent. of estates are expected to pay no inheritance tax, with transfers of assets to spouses, civil partners and charities, of course, exempt.

On the issue of personal taxation, will the Minister explain why the changes were not included in this year’s Finance Bill?

If the hon. Lady looks at the arithmetic set out in the Red Book, she will see that the package has been carefully designed. There will be changes next year, balanced by other changes, which are all set out. The phasing of those changes is consistent with our commitments both to fairness and to stability in the economy as a whole.

Part 3 of the Bill includes important changes to ensure that everybody pays their fair share of taxation. We remain firmly committed to advancing fairness by tackling tax avoidance, as well as fraud. For example, clause 25 ensures that workers providing their services through managed service companies pay the same income tax and national insurance as those who provide their service as employees.

The Bill also takes the next steps in our response to the Stern report. It introduces further measures to protect the environment, building on the success of the climate change levy in tackling carbon emissions, supporting the introduction of carbon trading, reflecting our commitment to tackle climate change through effective international action, and providing incentives for change while maintaining our other economic and social objectives. Changes in clause 11 to vehicle excise duty sharpen the environmental signals to motorists to purchase more fuel-efficient cars. Clauses 17 to 19 introduce a range of other measures to encourage energy efficiency.

Stamp duty land tax relief for new zero-carbon homes was a feature of the Budget and is provided for in clause 19. In view of the absence of details in the list of measures, will the Chief Secretary tell the House the estimated cost of clause 19 in a full year and his latest estimate of the number of prospective beneficiaries?

The cost on introduction is small because there are very few zero-carbon homes. I am pleased to be able to tell the hon. Gentleman that a development of zero-carbon homes is going forward at Gallions Park in my constituency. We want to change the nature of house building in the UK and to provide incentives for a completely new zero-carbon approach. There is a lot of confidence in the construction industry that the measure and other mechanisms will enable us to bring about the changes that we want in the coming decade on a large scale.

A very small number, but we want a great deal more. As I said, we want to change the whole nature of house building in the UK. The important and welcome measure will contribute towards that goal.

I am going to make a little more progress.

Clauses 20 and 21 encourage the use of domestic microgeneration by helpfully and supportively clarifying the tax rules. The increases in the rates of fuel duty will help to reduce polluting emissions from road transport.

Clause 12 doubles the rate of air passenger duty with effect from 1 February 2007. I know that the principle of increasing the tax burden on aviation is supported by hon. Members on both sides of the House. The change reflects better the principle that the sector should meet its environmental costs. It is estimated that the measure will save 300,000 tonnes of carbon a year by 2010-11. Of course, we continue to work to ensure that aviation is included as soon as possible within the European Union emissions trading scheme, which is the right long-term solution. Taken together, measures outlined in the Budget will deliver a carbon saving of 6 million tonnes. They will also strengthen the UK’s leadership on critically important international decisions that alone can deliver the worldwide changes that we need.

Did the figure on aviation that the Chief Secretary gave us take account of the proposed expansion of Heathrow?

The figure that I cited is the difference between the emissions after the change to APD and the amount if there was no change.

The Bill is the right next step in extending further our decade-long record of economic success, stability, growth, investment and fairness that my right hon. Friend the Chancellor set out in the Budget. It promotes the international competitiveness of the UK economy because maintaining our success on competitiveness is vital to the prosperity of every family in Britain. The Bill provides further protection for the environment to ensure not only that we stay on track to exceed our Kyoto commitment, but that we strengthen UK leadership internationally. Our aims are to build on the longest period of economic stability and sustained growth in Britain’s history, with a strong economy alongside a strong society, the right balance among tax, spending and borrowing, and Britain equipped to address successfully the long-term challenges of the future. The Bill takes those important next steps and I commend it to the House.

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 it fails to equip the UK to compete in the globalised world economy in the face of ever increasing competition from countries such as China and India, penalises small companies with higher tax rates and a more complicated tax system, hits freelance workers with more tax bureaucracy and uncertainty, involves yet further instability and U-turns on pensions policy and does nothing to tackle the UK’s worsening pensions crisis, gives HM Revenue and Customs intrusive and disproportionate new powers of investigation, misses the opportunity to provide effective mechanisms for tackling climate change, fails to reform the UK tax law after years of erosion of its competitiveness, and fails to reverse the massive increase in complexity and instability which the Chancellor has inflicted on the tax system of the UK.”

This Finance Bill might not be quite as long as last year’s—the Government have been able to squeeze it into a single volume—but that cannot make up for the massive increase in complexity and continuing instability that we have seen during the Chancellor’s 10 years in charge of our tax system. Recent reports from Grant Thornton and Ernst and Young highlight the erosion of our competitiveness that has been caused by the complexity of a tax code that has doubled in length during that decade. We believe that there is an urgent and pressing need for tax reform. If the Government shirk the challenge, there is a real risk of an outflow of jobs to other countries. The limited steps in the Bill towards simplification and reform do not meet that challenge, which is one of the key reasons why we decline to give it a Second Reading.

Let me begin with clause 1. The right hon. Member for Birkenhead (Mr. Field) asked why our reasoned amendment did not cover the income tax changes announced in the Budget. As I said in an intervention, that is because they are not in the Bill. However, we remain concerned about the proposals that will be imposed next year, and my hon. Friend the Member for Rayleigh (Mr. Francois) will deal with that matter in his winding-up speech.

When the time comes and an amendment is tabled to provide transitional protection for workers who will be made worse off, does the hon. Lady think that Opposition Members will support the Labour Members who table it?

We will assess that amendment when we see it. We will certainly give consideration to the question that the right hon. Gentleman asks.

I now turn to clause 3. The Chancellor has changed the tax system for small companies in every one of his 11 Budgets, which have included six rate changes. The Bill not only raises tax rates for small businesses, but makes the tax system more complicated for them. More than 12 million people in this country work for small businesses, and it is they who will lose out—the thousands of small retailers on our local high streets just trying to make a living.

Nick Goulding, the chief executive of the Forum of Private Business, described the measures as

“a kick in the teeth for Britain’s small businesses.”

David Frost, director general of British Chambers of Commerce, said:

“This is a substantial rise and will hit those looking to grow their business.”

The verdict of John Wright of the Federation of Small Businesses is that

“Small businesses were the main victims of this Budget”.

The Chancellor and the Chief Secretary to the Treasury claim that the new allowances mean that businesses that invest will not lose out.

I have listened to the hon. Lady’s speech but I am slightly confused, because she quoted a business man saying that businesses seeking to grow would lose out, but a few moments ago another Opposition Member, the hon. Member for Falmouth and Camborne (Julia Goldsworthy), admitted that the Government’s proposals will help firms that seek to invest.

The proposals will not help small business. They will lead to a higher tax bill for small business and a more complicated tax system, and other parts of the Finance Bill make it more difficult for small business to get advice about that complicated tax system. Most small businesses simply do not have the expertise to navigate their way around the Chancellor’s eye-wateringly complex system of incentives and reliefs. The average hairdresser, newsagent or owner of a rural post office will not shell out on the research and development tax credit; it just is not feasible for them. What the Chancellor and the Chief Secretary do not seem to understand is that reinvesting profits is a luxury that many small businesses cannot afford at the moment. Most of them need to take money out of their business to live on, particularly now that inflation is at a 16-year high, and mortgage rates are going up.

I am not trying to be awkward, and I understand some of the points that the hon. Lady is making about the dilemma facing small businesses, but will she concede that the main factor that affects small businesses is what is happening to big businesses and to the economy generally? When the economy is operating at a high level of demand, people have more money in their pockets, and there is more work for small businesses.

Small businesses are affected by rising inflation, like everyone else; they are also affected by rising interest rates and a rising tax bill, and under this Government they have all three.

Does the hon. Lady agree that small and medium-sized enterprises include micro-businesses with fewer than five employees, and that those are exactly the type of business that will find it so difficult to navigate the ever more complex regulations?

The hon. Lady makes a good point, and one of the big disadvantages of the increasing complexity in the tax system is that it is more difficult for micro-businesses to make sense of it. Small companies such as hairdressers, newsagents, post offices and one-man businesses will be badly hit by the Bill, because it is not feasible in all cases for them to invest at significant levels.

In a double whammy, the Chancellor has hit small service businesses again in schedule 3, on managed service companies. Let me make it clear that we support attempts to crack down on abuse and abusive behaviour. Of course people who are not genuine freelance contractors but are in reality in a relationship with their end client that amounts, to all intents and purposes, to employment, should pay their fair share of tax. However, it sometimes seems as though the Government think that all freelancers are tax dodgers. They are not, and those who are genuinely outside an employment relationship should not be penalised for making that choice about their working life. Flexible contract working is an important part of our economy, and it is invaluable in allowing businesses to respond quickly to changes in demand and innovations in the market. In particular, it plays a vital role in the IT sector, which, as I am sure the Chief Secretary will agree, is a crucial area for maintaining our economic competitiveness in a globalised world.

In seeking to crack down on abusive behaviour, the Government are in danger of hitting all contractors who have incorporated and chosen to outsource some of the administration and finance connected with their company. Whether someone is a genuine freelancer is irrelevant to the operation of schedule 3. It looks as if more or less any involvement with a third-party organisation that provides regular services to contractors and assists them with the operation of their service companies could bring the freelancer and her company within the new managed service companies legislation and completely change her tax status.

One of the worrying consequences of these proposals is that many contractors who have—understandably, given the complexity in the tax system and in regulation— allowed an adviser to take some of the burden of administration off their shoulders will have to set up their own personal service companies. They will no longer be able to outsource day-to-day corporate administration to an adviser. On top of an increase in tax rates and an increase in tax complexity, freelancers will have the hassle and bureaucracy of registering and running their own company into the bargain.

The hon. Lady talks about complexity. Why, therefore, are more small companies operating in the British economy now than when her party was in power? Specifically, which bits of the tax code would the Conservative party abolish?

There are many ways in which we need seriously to reform the tax system so that it becomes much simpler, and in due course we will come forward with detailed proposals.

According to the Institute of Chartered Accountants, we are already seeing the symptoms of the changes involving managed service companies, because well over 56,000 new companies were registered in February—around double the usual monthly figure. Freelancers, as well as having to set up their own companies and being unable to outsource, are likely to see the bill for professional advice go up because of the risk that their advisers could find themselves caught by the definition of a managed service company provider; those professionals could find themselves liable for the tax debts of their clients. It is difficult to know in advance how the carve-out for professional advisers in proposed new section 61B(3) will be interpreted. While some basic accountancy and legal services may steer clear of the rocks, how will everyday tax advice, company formation and company secretarial work be treated? We will have to wait for a court decision before we can understand the legal position with confidence, leaving freelance workers and their professional advisers in an expensive limbo in the meantime.

The Contractors UK website reported many contractors feeling that

“this latest legislation is just part of an inevitable ongoing revenue attack. Freelance contractors are a valuable section of our flexible workforce, and once again, they feel victimised by this assault on their livelihoods.”

Freelance software development expert Mr. David Hazell recently wrote that the Chancellor

“and his ilk have spent the last 10 years slowly twisting the public view of my chosen way of keeping myself in work to something akin to benefit fraud. Contractors are not tax dodgers, and they have better things to do with their time than spend it getting their heads around Gordon’s corkscrew-like reinterpretations of tax and company law.”

Martin Hesketh, who provides professional services to freelance workers, said:

“The UK economy relies heavily on people freelancing, and the Government has promoted this ‘flexible’ way of working for some time now to attract more people into the work force. However, the new rules seem to work against the Government's own agenda. Not only are they adding more confusion to this already complex market, but…are also requiring contractors to take on additional layers of legal and accounting responsibilities—something they’ve clearly not asked for”.

A major plank of the Government’s proposals is not even in the Bill for scrutiny this afternoon. Their highly controversial draft rules on making third parties liable for other people’s tax debts are still to come, so we only have part of the picture—the rest is to be inserted via regulations. Yet clause 25 would bring the rules into effect from 6 April. People are being asked to deal with that upheaval even before the rules have been finalised and agreed by the House.

The Chancellor’s attack on enterprise and small business start-ups continues in schedule 4 with the restrictions imposed on sideways loss relief. Under the Bill, it seems that people are damned if they do incorporate and damned if they do not, with schedule 4 hitting business partnerships. Restricting the ability to set off partnership losses against other income could have an impact on several important high-risk investment areas.

Several concerned entrepreneurs have contacted me about sideways loss relief, including Mr. Antony Blakey, who told me that many investors and scientists were worried about the impact on private collective investment. He told me that

“we now have a serious problem for environmental research and small business start-ups.”

Film production is an example of something that could be negatively affected. I acknowledge that not everyone in the film industry is worried, especially since the Government carried out their spectacularly rapid U-turn on applying the rules to section 42 and section 48 reliefs. However, some in the film industry are worried, and concern about schedule 4 stretches to several other sectors, including the multi-billion-pound computer games industry, in which the UK has such an important opportunity to compete alongside the best in the globalised world economy.

I have also received representations about the damage that schedule 4 could do those trying to make use of the special capital allowances that the Chancellor introduced to encourage environmental projects. Biotech investment could also be hit. Rupert Lywood of Matrix Securities contacted me about a project to develop cancer vaccines. He told me that it would have been much harder to get that off the ground without sideways loss relief, because it would have been difficult to find a single investor who could fund the entire project. To get the necessary critical mass of investment for such high-risk projects, one generally needs several investors and, consequently, a partnership.

If investors can no longer relieve losses against other income, the risk increases and ventures find it more difficult to get financial backing. In many cases, spending 10 hours a week on the project, as required by the new rules, simply would not be practical. Mr. Lywood tells me of a business venture concerning Down’s syndrome and genetic diseases, which is now in jeopardy as a result of schedule 4.

Again, it is true that avoidance has occurred, and we support attempts to crack down on abusive schemes, but the Government already have extensive tools with which to deal with partnership-based avoidance. Schedule 4 fails to distinguish between abusive and non-abusive schemes. We need to find a way to save sideways loss relief for projects undertaken for genuine commercial and entrepreneurial motives rather than for tax reasons, and we will table amendments in Committee to bring that about.

Coupled with the new restrictions on venture capital trusts in clause 50, schedule 4 comes as a body blow to enterprise in Britain, and we desperately need to encourage enterprise if more jobs are not to be sent offshore to India and China.

Let us consider the Bill’s proposals on green issues. Tony Juniper of Friends of the Earth said that the measures announced were “disappointingly weak” and described the Chancellor’s record as “woeful”. During his 10 years at No. 11, green taxes have been falling as a proportion of total tax receipts. The much-hyped climate change levy is flawed because it targets the use of energy rather than focusing on carbon emissions. The Renewable Energy Association branded the low carbon buildings programme a fiasco. Clause 19’s stamp duty exemption for zero carbon homes will make a minimal difference, especially as the Chief Secretary cannot tell us with certainty whether any houses in the entire country qualify for that relief.

The Chancellor’s tax break for microgenerated energy sold back to the national grid is not exactly a big giveaway, since HMRC admits that it has never collected income tax on such payments to date. The Renewable Energy Association called the £22 a year that that might save home owners

“a drop in the ocean”.

The Bill may contain provisions that are labelled as environmental, but it is not a genuinely green Finance Bill.

Part 6 deals with powers. Of course we acknowledge the importance of ensuring that the authorities have the right tools to fight tax fraud and organised crime such as missing trader intra-Community—MTIC—fraud. However, we also agree with the Chartered Institute of Taxation about the importance of

“ensuring those powers are used only by those who need them and are subject to proper control.”

We welcome the extensive consultation carried out on that issue. There has certainly been an improvement since the initial draft, which took an Inspector Gene Hunt-type approach: “Kick the door down first and ask questions afterwards.” Real progress has been made since the “PACE is for wimps” stance with which some of the proposals started. However, there are still a number of instances where the criminal powers granted by clause 81 to HMRC exceed those given to the police under the Police and Criminal Evidence Act 1984, so we will scrutinise those proposals with care.

Vesting responsibility for both civil and criminal investigation in the hands of a single body does give rise to certain risks; I am sure the Chief Secretary will acknowledge that. HMRC’s criminal investigation officers should be separate and distinct from the rest of the organisation. There needs to be a limit to the range of people who can exercise the very considerable powers that the Government are asking the House to sanction in the Bill. We do not want to see every tax inspector given a power of arrest, so we seek assurance from the Government that the draconian powers to tackle smugglers that have built up at Customs and Excise over the years will not be allowed to leak into HMRC’s civil jurisdiction.

Without even getting into the issue of the ferocious powers already vested in the Revenue and Customs Prosecution Office, we would welcome the clearest guarantees from the Financial Secretary in his summing up that that the powers of arrest and investigation contained in the Bill will not be used in the context of HMRC’s day-to-day tax collection duties. We hope and trust that he will also be able to assure us that submitting a late tax return will not mean a dawn raid and frozen bank accounts.

Before my hon. Friend leaves the subject of fraud—specifically MTIC, or missing trader intra-Community fraud—she will recall that we debated the provisions of the reverse charge in last year’s Finance Bill. The Government appear to have gained agreement from our allies in the European Union on this subject, but reports suggest that in doing so, they made concessions on our rebate. Does my hon. Friend share my concerns that the Government may have made concessions on the rebate in order to deal with MTIC fraud?

Getting the derogation is certainly welcome, but it is deeply regrettable that it has come at the expense of our rebate. The Prime Minister’s original decision to give £7.2 billion more of our money to the EU is regrettable, and the Chancellor is only confirming that in the negotiations on MTIC. That is indeed of great concern to Conservative Members.

Lastly I turn to pensions, and clauses 67 and 68. Clause 67 is not a particularly high-profile part of the Bill. It removes tax relief from something called pensions term assurance. On 6 April 2006, as probably every hon. Member knows, the Government introduced new rules on certain types of life cover as part of their A-day reforms, which included new rules on certain types of life cover. Their aim, they said, was to increase fairness, but their premise seemed to be to give people who did not have access to employer-based death-in-service schemes access to similar benefits if they set up their own personal cover. The result was that the tax treatment for such schemes was the same both for employees and for the self-employed.

The Secretary of State for Communities and Local Government, when she was Financial Secretary to the Treasury, told the House that A-day reforms would

“create a transparent, consistent and flexible system that is readily understood. That will make it easier for people to concentrate on the things that matter, such as when and how much to save for their retirement, rather than on trying to understand anomalies between the different tax regimes.”—[Official Report, Standing Committee A, 8 June 2004; c. 427.]

When the A-day reforms were being negotiated, the insurance industry made very plain to the Government what the impact of those changes would be—that certain types of life cover would be given the same tax treatment as a pension. The Government were clearly told by the industry about the sort of products that would be developed in response to the legislation. From A-day onwards, a competitive market developed in what became known as pension term assurance, or PTA.

Then suddenly, in December last year, after only 9 months, the axe fell and the Chancellor announced that tax relief for PTA policies was to be scrapped. As the Association of British Insurers put it, the Government had managed

“in one blow—to put an end to a developing market that they had only just helped create”.

Scottish Widows estimated that £35 million had been spent on developing PTA plans.

We can see that the Government also found their reverse gear on clause 68, which introduces significant restrictions on the use of alternatively secured pensions—again, only nine months after their introduction on A-day. The Government have carried out U-turn after U-turn on pensions. These two latest examples come hard on the heels of their reverse on self-invested personal pensions—SIPPs—last year.

What we want is for the Government to work out what they want to happen to pensions and to stick to that. We want them to get their pensions legislation right the first time, not to create legislation that generates whole industries, and then shut them down. Time and again, we see the Government producing legislation with a wholly predictable outcome about which they are warned in advance—yet when that outcome duly materialises, they decide that they do not like the consequence about which they were warned, and seek to amend the legislation and crack down on products that they themselves were effectively responsible for creating.

This instability serves only to heighten the pensions crisis in this country. No wonder the savings ratio has halved in Britain since in 1997, when there is always a threat that the rug could be pulled from under people’s feet at any moment if the Government decide that they have got their legislation wrong yet again. These repeated blows to Britain’s savings come on top of the Chancellor’s £100 billion raid on our pension funds. The right hon. Member for Birkenhead (Mr. Field) has pointed out that

“when Labour came to office we had one of the strongest pension provisions in Europe and now probably we have some of the weakest”.

The Chancellor should accept his share of the blame for that disastrous decline.

No, I am about to conclude my speech. The hon. Gentleman will have his chance later.

In conclusion, the Opposition decline to give a Second Reading to the Finance Bill because it fails to equip the UK to compete in the globalised world economy in the face of ever-increasing competition from China and India; it penalises enterprise and business start-ups and imposes higher tax rates and a more complicated tax system on small companies; it hits freelance workers with more bureaucracy and uncertainty; it does nothing to tackle the UK’s worsening pensions crisis; it is ineffective in the fight against climate change; it fails to reverse the massive increase in complexity and instability that the Chancellor has inflicted on Britain’s tax system; and it implements a Budget that was a tax con, not a tax cut.

I refer the House to my entry in the Register of Members’ Interests.

It is sometimes useful to remind ourselves of why we have Finance Bills. They have two principal purposes, and one is to assess the state of the economy and make the necessary fiscal changes to ensure that we strike the proper balance between expenditure programmes and reasonably fair revenue raising systems. If we look back at Finance Bill debates of the past—I see at least one face opposite who used to take part in them with me—we see that the major focus has been on the macro-economic impact of the legislation. It was about whether the Finance Bill that followed on from the Budget was appropriate to regulate the state of the economy.

The second purpose of a Finance Bill, today as always, is to look at the way in which fiscal rules—and sometimes expenditure rules relating to matters such as education—affect the economy. Do they achieve what they set out to achieve? Do they raise the necessary revenues that the system was introduced to raise in the first place? Is it a fair and efficient system? Has it kept up with the times? Those are both legitimate purposes for a Finance Bill, and those are legitimate arguments that should take place across the Floor of the House.

I have read the Opposition’s reasoned amendment—it is more of a rhetorical amendment—which comments on competing in the globalised economy. I hope that I am right in assuming that that relates to the first purpose of a Finance Bill, in that it deals with Britain’s place in the world. The amendment goes on to mention a number of other issues, including whether small company taxation and the system that taxes freelance workers are appropriate. Is it better to be a freelance worker who sets up a company to manage the system or to have it managed by someone else? Should those people simply be self-employed? That is a legitimate argument, as is the question about the extent to which interventions or intrusions by the Revenue are proportionate. Those are all legitimate issues for debate on the Finance Bill, both in the House and in Committee, and our colleagues who will serve on the Public Bill Committee look forward to them. I may take part in the Committee of the whole House next week, but they may wish to look at the detail of those issues, and it is right that they should do so.

The problem with the Conservative amendment is that the first part does not relate to the second part. The way in which small companies are taxed, the tax regime for freelance workers and the degree to which the Revenue has powers of intrusion do not, in the real world, make a massive difference to the British economy. They make a difference to people who employ freelance workers and to people involved in a small company but, generally, but there is consensus among those who take an interest in those subjects that they do not make a big difference to Britain in the globalised economy, because they do not relate to the major issue of the level of expenditure and revenue in the economy. They do not relate largely to interest rate regimes in the economy or to Government expenditure programmes that equip the economy for future effectiveness and so on.

That is the problem with the amendment. It would have been better if the Opposition were more honest, like the right hon. and learned Member for North-East Fife (Sir Menzies Campbell), the Liberal Democrat leader, who said in the Budget debate that the Chancellor had governed a successful economy. At least the Liberal Democrats conceded that there was a successful economy in Britain, so it would be legitimate for them to argue about whether those micro-fiscal regulations are appropriate. The Conservatives, however, have not conceded the point about Britain competing in the globalised economy, and I want to focus on that in my contribution. I am happy to look at other issues, but I am not prepared to concede that what we do on the tax regime for freelance workers will make a colossal difference to the state of the British economy and our ability to compete in a globalised world, which is the principal point made by the Conservative amendment.

The amendment is entitled to refer to all aspects of the Budget, but on its first point—competitiveness—what does the hon. Gentleman think about a whole dockyard in Britain being stripped out, sold and taken half way round the world, and a whole car plant being folded up and sent half way round the world to China? Is that a sign of success?

I am tempted to tell the right hon. Gentleman that a few more dockyards, shipyards, car plants, steelworks, coal mines, engineering factories and chemical factories were either closed or shipped off somewhere else when the Conservatives were in power than is the case now. I am not one to say that, because an industry is in a particular position, it should be there forever. Things change, and I will come on to discuss high-value investment and jobs.

My main point is that the evidence for the Conservatives’ argument that we are failing to compete in a global world does not hold up. I am happy to trade any evidence that the Opposition Front Bench wishes to use as a test. We would all agree, for example, that growth is a reasonable test, and the British economy has now had an all-time record 59 consecutive quarters of growth.

Is the hon. Gentleman concerned that this country came 22nd out of 27 European Union member states on economic growth? Is he also concerned that the UK has fallen from fourth to 10th in the World Economic Forum competitiveness league?

I am also a bit of an anorak on football goal averages, so I am always happy to look at statistics. I want to take time to reflect on the hon. Lady’s particular points, but in 1997 we came bottom among the G7 countries for growth, whereas in the last year for which figures are available we were second only to the United States. A longish to medium-term analysis of the past 10 years demonstrates significant, sustained growth in the British economy. That may have just fallen out of the sky—some would allege that that is the case—but I think that there are more fundamental reasons why that has taken place.

The hon. Gentleman was comparing the position in 1997 with the position now. Is he concerned that inflation is now running at about twice the 1997 rate?

I am grateful to the hon. Lady for raising that point again. When I was a union official in the early 1980s, I used to negotiate 27 per cent. wage increases as my contribution to improving the state of the British economy. She will know that the Conservative years in the 1990s had average annual inflation of more than 10 per cent., and between 1981 and 1991, that figure was worse.

There is no scope for the hon. Lady to say that we might have won the growth argument, but that we can be challenged on the inflation argument. Inflation is a reasonable test of the direction of the economy, as it affects expectations, which are colossally important for investment. It is the right measure to consider, but I am not sure that the conclusions drawn are accurate.

Will my hon. Friend also consider the impact of interest rates—which, in the early 1990s, were at 15 or 16 per cent.—on businesses?

I welcome my hon. Friend’s point. In those days, it was not just the high level of interest rates that made planning future investment difficult, but the wild fluctuation in interest rates. A fluctuation of 15 or 20 per cent. on an annual interest rate of, say, 15 or 17 per cent, has a lot more impact on the international competitiveness of a company than a 15 per cent. fluctuation on a 3 or 4 per cent. interest rate, as will be obvious to most Members.

I am grateful to the hon. Gentleman for the history lesson in fluctuating interest rates. I think that the point he is trying to make is that expectation of interest rate movements has an influence on business investment. Does he agree that businesses currently have to operate in a very uncertain environment, with rising inflation and the expectation of rising interest rates? What will be the impact of that on business investment this year?

I am happy to have an interjection of monetarism into my historical examination. To go back to the 1990s—in the sense of saying, “You started it”—the fluctuations on high interest rates made conditions extremely difficult. I am not saying that we can accurately predict interest rates—indeed, I am still in a quandary about whether to buy dollars today or wait until Friday. I accept that there is an expectations issue, but there is much greater stability. The ability to predict generally the trend that is going to take place greatly affects those who make the major investment decisions. As I said to the hon. Member for Chipping Barnet (Mrs. Villiers), if we get the major investment decisions right, in general, the small investment decisions will be right as well.

Does the hon. Gentleman agree that one key to ensuring that we have more stable inflation and interest rates was the decision to give independence to the Bank of England to allow the Monetary Policy Committee, rather than a politician, to decide such things? That was obviously a Liberal Democrat proposal.

The leader of the hon. Lady’s party was helpful in the Budget debate in acknowledging the success of the British economy. I am grateful that she has acknowledged the correctness of the policy that was struck in 1997. If that was a policy that the Liberal Democrats agree with, it goes to show that it is not possible to get it wrong all the time. We all very much welcome that.

There are many other indicators. My test is not growth, although that is important. The thing that affects human beings of working age more than anything else is whether they have a job. If one looks at the misery in families up and down the country over the years, which we have all come across, sometimes in our own families, we can see that things have been at a nadir when people have had the least opportunity of getting employment.

The major gain in our economic performance made by the Government is the fact that employment is at an all-time high. Unemployment—not just this year or last year, or this month or last month, but over 10 years—is at a sustained low level. Unemployment in my constituency is way under half of what it was in 1997. That is the major achievement. That is what gives people hope, dignity and opportunity. That, to me, is the test of success in a global economy. If we do not compete successfully in a global economy, we do not compete on employment in the world in which we live.

It is useful again to consider further why we have been able to achieve that. To some extent, it is about the business world and people in general having confidence in what is going to happen—in knowing that the economy is in good hands and that policies on tackling inflation, on having an independent determination of interest rates and on having high employment as a major political and economic goal are going to be consistent. Everybody knows that that is the case. People might not agree with some of the objectives, but they know what they are. It is that stability, given by the strong leadership of this Government, and in particular by the Chancellor, who has sustained it over 11 Budgets, that has got the economy in a position where it is competing successfully in the global world.

Does the hon. Gentleman appreciate that we are in the middle of a cycle where UK plc is shedding about 1.5 million jobs and the small and medium-sized business sector is creating about 2 million jobs? In the light of his comments about employment, what impact does he think the increase in corporation tax for small business will have on that scenario?

I come back to the point that I raised with the hon. Member for Chipping Barnet. I am not underplaying the importance of taxation regimes for the small business world, although they have to be fair. There must be equity between people who work for themselves and people who work for themselves with perhaps others in a company. That is an important principle of taxation. However, I do not believe that what we do in that regard ultimately affects our international competitiveness very much. What does affect our competitiveness is the ability of the economy to sustain a high level of aggregate demand, along with our ability to invest now to ensure that that continues in the future.

I know that I have been speaking for rather a long time, and that many other hon. Members want to speak, but I want to say more about education and reskilling. I do not wish to underplay the hon. Gentleman’s point, but sustained demand helps small businesses more than anything else. If someone wants to buy a product, there is an incentive for the producer to ensure that it is worth buying. Businesses must live with the various regulatory regimes—financial, environmental, or whatever they may be.

Leadership and predictability are important. It is also important to understand that we live in a global world in economic and indeed in social terms. It is not a case of Bradford competing with Birmingham or Bordeaux; it must compete with every town in the world that begins with “B”.

Beijing, yes. Bombay—well, that has changed to Mumbai.

Small business people who are trying to sell engineering products or the like know who they must compete with. They know the market: they know what other businesses compete in it, and what those businesses are doing. There is now a recognition in the British economy, driven to some extent, but not entirely, by the Government, that we operate in a global world. It does not matter whether we are talking about BAE Systems, employing thousands of people, or a small contractor, perhaps a freelancer, doing some computer work for it. That recognition is a major achievement. It may not have been achieved only by the Labour Government, but it has been achieved while there has been a Labour Government. It means that we must have a more flexible economy than we have ever had before, in all sorts of different ways. A flexible economy does not mean throwing away workers’ rights, which should be secured, but the workers must be flexible in the way in which they do their jobs.

How can we keep all this going? There is not much difference in the availability of capital around the world. Someone who has a good idea in the relatively stable political environment that much of the world can offer can usually obtain capital from somewhere to finance it. If it is necessary to develop or purchase technology, it does not matter where one is in the world, as long as people are prepared to provide money to be invested in technology. Where we can make a difference is in labour. The business environment factor is also important, but the labour factor is crucial, as I think all Members recognise.

The test of the Budget is, does it help? Will the Government’s policies generally, as reinforced by the Budget, and the specific policies in the Finance Bill help us to invest in a skills base in the future? The evidence suggests that it is possible. I am told that we expect to spend £90 billion on education in 2010. We are now spending 5.6 per cent. of our gross domestic product on education, compared with 4.7 per cent. in 1997. Our expenditure levels have increased dramatically, and we all know what that has enabled us to do in our constituencies. There are new schools in Westerhope and Gosforth and new equipment in virtually all the schools in my constituency, and that is replicated in most constituencies in the country. There has also been more spending per pupil. Earlier Budget decisions gave head teachers more control over the way in which expenditure could be used, and those welcome decisions have been reinforced in this year’s Budget.

We have doubled the number of apprenticeships, which provide an important way of improving how we adapt to the new technologies that we must use in our economy. The one-to-one tuition proposal, which is partly financed by the revenues raised in the Finance Bill, is one of the most radical measures taken in education policy—certainly by this Government, and arguably by any Government in my political lifetime. We all know that if a child attending a state school—and sometimes even a child at a private school—is suffering, a parent who has a couple of bob in their pocket can buy extra tuition. Many people have done that, but it has not been possible for those whose finances are tight—and they are tight for far more than 50 per cent. of families. The Government’s proposal that anyone can get additional tuition in English and maths is fundamental to improving skills levels, which will help small businesses in five or 10 years’ time—or 15 to 20 years’ time—to get the skilled labour that they need and that we as a nation need if our economy is to be successful.

I will not trade in education statistics—because, to be frank, I do not know much about that—but the aggregate figures that I have looked at show that we have better results at all levels in education, right through from primary school to university. That is a reflection of a greater commitment to society and of the investment of more resources. However, although there will be many long-term benefits in our economy, there is a problem to do with labour which we must address more effectively than we have thus far been able to address.

In the past few years, the strange situation has occasionally arisen that at the same time as unemployment has increased—which it did in some months last year—so, too, has employment. That has never happened in any period of economic history that I have looked at, and certainly not during my political lifetime. There is a simple explanation for it: where companies have had a demand for labour, they have met that demand by bringing in people from somewhere else—such as Australia or eastern Europe. They have frequently got good skilled labour, but as they have been able to do that, some employers have not worked as hard as they might have done in the past, when it was not possible to do that, to improve the skill levels of our indigenous people—of those who have been in the country a lot longer. There is a certain amount of alienation among some of those people who have not experienced the benefits of increased prosperity and growth in the economy. We must look into that territory more carefully.

I am vehemently in favour of the mobility of labour. I would hate it if a Government somewhere in the world were to tell me that I could not go and sell football programmes in their country—in Milan, or Africa, or wherever. As a human being, I like to live under a regime where people can do that. Therefore, I do not want any restrictions on immigration. There must sometimes be controls on the numbers over certain periods by using different methods—such as visas—but the principle should be that people are able to move around: people should be allowed to move to where there is demand for labour. However, we must also help people in our country—especially in constituencies such as mine—who often do not get any of the benefits that come from that.

The Budget has recognised that issue in a number of ways, and it is therefore covered in our Finance Bill. The extension of the working tax credit threshold will help, as will the extension of the £40 work credit. Increasing the minimum wage, which is financed by the Budget, is another helpful measure, and the partnership for jobs proposal points in the right direction. However, we must address the issue more seriously than we have in the past.

I absolutely accept that the business climate is nowadays merely a factor of production. We must make sure that we get that climate right, if we are to achieve economic prosperity. The corporation tax proposals in clause 2 will overwhelmingly be welcomed by large and small companies alike. They will be welcomed by large companies because their tax burden will be reduced, and by small companies because that will create more growth in the economy. The provisions in clause 36 for extending capital allowances for small companies are also important. In past Finance Bills we have extended tax relief on research and development. That is done again in this Bill, and it needs to be done on a greater scale. Investment in public science is a crucial factor in improving our productivity in the future.

I do not wish to interrupt the hon. Gentleman’s paeon of praise for the various measures in the Budget, but he mentioned the welcome that he anticipates that they will receive from smaller companies. How many smaller company proprietors or managers in his constituency have actively welcomed the measures to increase the rate of corporation tax for smaller companies?

Before the hon. Gentleman intervenes again, he should know that I am not a born sycophant. Although I have a list, it does not include every measure. If one consults the bodies that represent small companies in my constituency, such as the chamber of commerce, one finds that they have all said that education is the priority and that we need to raise the revenues and have the right educational programmes to make us more efficient and productive in the future. They are right about that.

Every small company that I know, and I know quite a few, is most concerned about whether someone wants to buy their product, not the hassle they have with Revenue and Customs. One always has hassle with Revenue and Customs, so that is not the issue. They are concerned whether anyone wants to buy their product or service and whether they can make that product or deliver the service in a way that will make people want to buy it tomorrow. That tends to be determined by attitudinal feelings in the economy and the level of aggregate demand.

Does my hon. Friend agree—in relation to his earlier point—that when it comes to selling products around the globe, the need is for the highest levels of skill, ability and knowledge to make a product stand out, which is of crucial importance when wage rates across the globe are so markedly different? For example, tax rates are so low in the far east that companies in this country will never be able to compete on price if they are simply trying to sell the same product.

I agree. When a product has many different inputs, the question is which bit we want to concentrate on, and that is a decision that companies often have to make. The machine tool industry is a classic example. Instead of trying to sell the whole machine—the whole Cincinnati, for example—one can try to sell a specific high-value part of it as a contribution to others’ productions systems. Decisions like that have to be made all the time, and my hon. Friend is right about that.

I am happy to give way to the hon. Gentleman, but I should say that I do not usually go on at such length.

The hon. Gentleman is being very generous. I just wondered how many service industry small businesses there are in his constituency, because there would appear to be none. More importantly, the hon. Gentleman seems to discount the impact of regulation, taxation and other problems faced by small businesses. Does he not recognise that in relative terms the impact is up to 30 times greater on small businesses than it is on UK plc companies?

Of course I accept that there is a disproportionate impact on small businesses. That is bound to be the case as it is in the nature of small businesses. But my general point, which I am not moving from, is that that does not generally affect the prosperity of the small business which is, as I have already said two or three times, based on whether people have the money to buy their products—

Yes. The service sector is crucially important, but we are now seeing changes in definition. When I used to work at Rolls-Royce, we did everything, but it is all subcontracted now. Some of the subcontractors are classified as service industries, such as the catering, management systems and accountancy, but previously they would have been involved in manufacturing. There are slight changes in definition, but I take the general point that services must be a major part of Britain’s economy—we have to up the value of service industries if we are to compete in the future.

I thank the hon. Gentleman for giving way, because I am keen that he does not underestimate the importance of the contribution that micro-businesses make to the economy. Micro-businesses are the largest employers in the county of Cornwall, which has one of the lowest GDPs in the country, so supporting the smallest enterprises in the small and medium-size range is critical to turning around the county’s economy.

I understand the predicament in areas such as the one the hon. Lady represents. Helping small businesses is fine and throwing money at them may keep them going for a little while, but if they do not change and find products that people want to buy or if they do not operate in an economy where people have the money to buy their products or services, that help will not solve their problems. That is why the general state of the economy and our ability to compete on skills in the future is what really matters for small employers in her constituency.

No one is suggesting that we should throw money at micro-businesses. The point is that we should not penalise them with such an incredibly heavy regulatory burden and that there will be real problems if the tax burden is increased, as it will be by the Bill.