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Commons Chamber

Volume 470: debated on Thursday 24 January 2008

House of Commons

Thursday 24 January 2008

The House met at half-past Ten o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


Northern Rock

1. What assessment he has made of the effect the run on Northern Rock has had on the attractiveness of the UK to financial institutions; and if he will make a statement. (181406)

2. What assessment he has made of the effect the run on Northern Rock has had on the attractiveness of the UK to financial institutions; and if he will make a statement. (181407)

With permission, I shall answer Questions 1 and 2 together. The United Kingdom remains in a fundamentally strong position. London remains the leader in international financial markets, and we are determined to keep it that way.

Thousands of my constituents work in the City of London. They go up every day on the train. What reassurance can the Chancellor give them that his delay and dithering are not harming their job prospects?

I appreciate that London is important—not just important to the hon. Gentleman’s constituency and the wider south-east of England, but crucially important to the whole United Kingdom.

We should recognise two things. First, what happened to Northern Rock arose fundamentally because of a mistake made by its management, who had a business plan that simply could not operate when the money markets dried up for them. In relation to London generally, it is recognised throughout the world that our regulatory regime is sound and that our approach is right. London is a recognised world centre for much of the world’s financial trade, and I am determined that it should remain so in the future.

Order. I am due to call the hon. Member for Mid-Bedfordshire (Mrs. Dorries). Can the Chancellor assure me that it was made clear that her question would be linked to Question 1?

Is my right hon. Friend aware that many people in my constituency, in the north of England, and indeed in the City believe that the Government’s handling of the Northern Rock crisis has been first-rate? Jobs have been preserved, the bank is being preserved, and we have an opportunity to save the reputation of the financial services on behalf of our country and the economy. Is my right hon. Friend aware that some of us are sick to death of Conservative Members who could not in any way run the proverbial chip shop—

I probably do agree with much of what my hon. Friend has said.

As I told the House in my statement earlier this week, we are in a difficult position to which, in an ideal world, it would have been good to find a purely commercial solution. Our problem, recognised by at least some Conservative Members, is that the very market conditions that precipitated the problems for Northern Rock are continuing, and it will be obvious to those who look at what is currently happening in the financial markets that those conditions are difficult.

I believe that what I set out on Monday was the right thing to do. I want to ensure not only that we protect the interests of taxpayers and depositors, but—importantly—that we maintain financial stability. As I said to the hon. Member for Castle Point (Bob Spink) a few moments ago, we should all bear it in mind that in the City of London we have one of the finest assets in the world.

In view of the Bank of England’s role in the Northern Rock saga, can the Chancellor give any reason why he feels that we should not appoint Mervyn King to a second term as Governor?

I have made it clear that the matter of appointments will be dealt with in due course. As I said on Monday, I intend next week to publish wide-ranging proposals to strengthen our regulatory and supervisory regime.

I know from visits by the Treasury Committee to Washington, Frankfurt and Brussels that the pre-eminence of London as a financial centre is not in doubt, but we need to do two things: reform the tripartite arrangement and address the international dimension. That is the case whether we are talking about liquidity tests, which many countries have not undertaken, or rating agencies. Those two issues are paramount, and I hope that when the Chancellor receives the Treasury Committee’s report on Northern Rock he will not only include it in the consultation exercise, but take our comments on both issues seriously.

I hope very much that we can do that. I understand that the Committee’s report will be published fairly quickly, and once we have read its conclusions I shall accommodate as many as possible.

My right hon. Friend’s other point is equally important. This is very much an international problem. Some of the problems that are affecting banks are affecting them all over the world. We need to look at early-warning systems, and also at the position of the credit rating agencies. As I have said before, I have always regarded them as simply a source of advice for companies, not a substitute for their judgment. We also need to look at the recommendations for the Financial Stability Forum, which we will discuss with Finance Ministers when the G7 meet in Tokyo in a couple of weeks.

The last thing I would say is that although I can see that it is very tempting from the Opposition’s point of view to run down the City, those working in the City and people in the country as a whole deeply resent it when the Conservatives attempt to do that. Actually, the City is very important to us.

The Chancellor blames the situation on international turbulence, but it is only in Britain that the threat of nationalisation hangs over a bank, it is only in Britain that there is a run on a bank, and it is only in Britain that £55 billion of taxpayers’ money is at risk. Is that not why the Chancellor’s own advisers, Goldman Sachs, said:

“The Northern Rock factor has badly dented the UK’s reputation for being the world’s pre-eminent financial centre”?

[Interruption.] His own advisers said that. By damaging that reputation, has he not put at risk jobs not only in the City of London but across the UK, as well as tax revenues and economic growth, and all because of his dithering and delay in dealing with this crisis?

Mr. O’Neill is a widely respected commentator, but his view on that particular point is not universally shared. Indeed, many people who work in the City and in London recognise London’s importance to the UK. I said a few moments ago that I thought the Conservatives’ comments were unhelpful, and the hon. Gentleman has duly obliged by emphasising that point.

On the hon. Gentleman’s other points, if he cares to look back over events of the past few months he will see that banks throughout the world have been affected by the current problem. That demonstrates that although there are huge advantages in globalisation, huge challenges can also arise, as we can see only this morning.

Olivant and Virgin were given preferred bidder status on the basis of a main feature of their bid being repayment of £10 to £15 billion-worth of debt. Now that that has disappeared, if another private sector bid comes in and, not having had months of scrutiny of Northern Rock’s books, expresses a wish for the 4 February deadline to be shifted slightly, will the Chancellor look positively on that reasonable request?

First, when Olivant and Virgin put in their indicative bids, that was conditional on their being able to raise commercial sources of finance. That has proved not to be possible for the reasons I set out on Monday. I also said on Monday that if any other institution expressed an interest in participating in investing in Northern Rock, we would look at that. I said I wanted proposals by 4 February, and I do not see any merit in letting this process drag on indefinitely. Regardless of where they start from on this issue, I think most Members take the view that we need to bring matters to a head, not least because the state aid approvals will expire in March. If someone comes along on 3 February, of course we will listen to them, and inevitably in such matters there will have to be negotiation. So far, only Olivant, Virgin and the board have expressed an interest. We will be sensible, but I do not want the process to drag on and on.

Further to that last intervention, is not the risk of a rapid private sale that the Government will either be trampled by an Olivant or shafted by a Virgin? In order to reduce the risks to the taxpayer, will the Chancellor assure us that the security that will be offered against the Government bonds will not include any of the £8 billion dodgy, unsecured loans, or the even dodgier Together mortgages, and that the individuals within the bidding consortiums will each be required to put up at least 15 per cent. of the equity, as specified in Financial Services Authority rules?

That is an interesting piece of analysis, and I shall study the hon. Gentleman’s remarks carefully—particularly the first part of his contribution. I have set out the principles that underpin our approach to any possible solution. As I said on Monday, we should receive proposals shortly, and thereafter we shall consider them. As I also said in the House on Monday, I very much hope we can reach a solution. A period of temporary ownership of Northern Rock remains a possibility, but as I said to the hon. Gentleman on Monday, many of the issues he raises now in relation to my proposals would also be relevant in relation to a temporary period of public ownership.

May I ask my right hon. Friend the Chancellor to avoid a situation in which either Northern Rock goes bust—that would be incredibly damaging to Britain’s reputation—or he ends up as a sort of neo-Mr. Putin, operating Northern Rock as a kind of Gazprom of the north?

I had better be careful there for a number of reasons. Suffice it to say, as I have said on many occasions, both before the Treasury Committee, of which my hon. Friend is a member, and on the Floor of the House, that what I set out on Monday offers a constructive way forward for Northern Rock and that I hope that we can find a solution, but if that does not happen, public ownership remains an option. I would much prefer to find a solution whereby we can get private sector investment in it, because I think that in the long term that would be the better option for the bank, its employees and the north-east.

Value Added Tax

3. How many companies Her Majesty’s Revenue and Customs has taken action against for failure to pay value added tax correctly in the last 12 months. (181412)

There is a range of figures on this, and it is difficult to give an exact answer, because a range of actions can be taken. HMRC aims to help business pay the right tax due at the right time, and it tailors its response to the circumstances when that does not happen. Businesses in temporary difficulties can agree time-to-pay arrangements, but those who underpay may face sanctions.

I thank my right hon. Friend for that answer. Will she say what assistance she is giving small business to help with the VAT burden?

My hon. Friend raises a very important point. To assist VAT administration for small businesses, HMRC has introduced a variety of special schemes, which may be used individually or in combination. Each of the VAT schemes addresses a slightly different aspect of the tax, and will have different benefits and costs depending on the individual business. The schemes are specifically designed to assist small businesses in their dealings with HMRC.

As the hon. Gentleman and the House know, there have been difficulties with registering new businesses for VAT, but HMRC has put a tremendous effort in to address the problems that arose. He knows that HMRC has targets to achieve. It is on course to hit those targets by the end of January, which is a week away, and its performance has improved enormously, as businesses seeking to register will discover.

Departmental Performance

4. If he will make a statement on the findings of the Cabinet Office report on the performance of his Department and Her Majesty’s Revenue and Customs. (181413)

The findings of the reviews of Her Majesty’s Treasury and HMRC were accepted in full by the Treasury’s permanent secretary and by HMRC’s acting chairman. Both Departments have responded in detail to the findings of the reviews in their respective reports, which were published by the Cabinet Office on 17 December 2007.

I thank the Minister for her enthusiastic answer. Does she recall that in 1998 the then Chancellor of the Exchequer, now our Prime Minister, said:

Money will be released only if Departments keep to their plans.”—[Official Report, 14 July 1998; Vol. 316, c. 188.]?

He said that in respect of public service agreements. Is she aware that the HMRC capability review says that only three out of 10 targets are likely to be reached? If that is the case, how much money will now be withheld from HMRC?

The capability reviews are a new, honest, robust and open way of focusing on delivery. They are published, as are the responses to them, and I am glad that the hon. Gentleman is so interested in them. We want this public focus on capability so that we can ensure that the civil service can deliver much more effective and efficient government to make the best use of the money that this House allocates.

Tax credits introduced by this Government have helped millions of families around the country, but the administration of them has, on occasions, been poor. Tax credits involve a Kafkaesque situation, because if one gets on to them, one cannot voluntarily withdraw from them. I understand that the only way to get out of tax credits is by dying or by having a substantial increase in one’s income. One cannot simply say, as one of my constituents tried to do, “I want no more to do with this.” Will my hon. Friend please examine the issue?

My hon. Friend knows about Kafka and I can tell him that HMRC has found a way out of the Kafkaesque situation as part of its transformation project. His constituent should therefore be able to withdraw from tax credits if that is what he or she wishes to do.

How can cutting 600 HMRC jobs through Capgemini in Shropshire help the performance of the Minister’s Department?

The capability review had no criticism of the changes in staffing that have gone on in HMRC. On the contrary, it praised HMRC for delivering in core business and making efficiency savings at the same time. I am surprised that the hon. Gentleman seems to think that the Government should not be working to improve the productivity of public service.

In its report on HMRC data security, the Cabinet Office urged that in the longer term electronic data transfer should be expanded significantly to reduce the use of removable media. Will the Minister tell us what preparations have been made for that? What training might be provided for HMRC staff in the light of the fact that ICT experience in the Treasury and its broader agencies has been reduced over many years by the continued adherence to outsourcing computer products?

My hon. Friend should be assured that the interim Poynter review has already identified some of those issues. The management of HMRC are working to establish data security while the review is ongoing. We await the final findings, which will deal with those issues in more detail. I can assure my hon. Friend that I shall take on board all his points, which are fair, and that we will make changes to structures and systems in order to ensure that the highest standards can be guaranteed in future.

The capability review of HM Treasury at the end of the Prime Minister’s decade in control of it noted, among other things, that there is

“a pressing need for greater inclusiveness and humility in its dealings with others.”

Who does the Minister think is responsible for that deficiency?

We have seen an extraordinary period of success with a stable economy, strong growth, increased employment, record investment in public services and one of the strongest economic records in the G7. In 2007 we had the highest growth rate in the G7. We are determined to maintain that economic stability and success.


Treasury Ministers and officials have met a range of stakeholders, including representatives of the bingo industry, to discuss gambling taxation issues.

Bingo is the only mainstream gambling product that is doubly taxed, by VAT as well as gross profits tax. That level of taxation has been a primary cause in the closure of 81 clubs and the identification of a further 108 clubs as at risk. Since each club closure costs the Treasury some £700,000 in lost tax revenues, does not the Minister see the sense in removing this unfair imposition of VAT on bingo? That would be tax revenue-neutral, would prevent further club closures and would secure this popular leisure activity for thousands of people.

Obviously, we keep all taxes under review and decisions about gambling taxes are made at the Budget. It is not at all clear that removing VAT on participation fees would be enough to make some of the marginal clubs viable. I must correct the hon. Gentleman, as bingo is not the only gambling sector to face both duty and VAT. Gaming machines are liable to VAT and amusement machine licence duty. I must also tell the hon. Gentleman that in 2003, bingo saw a big reduction in its effective tax rate from 35 per cent. to a rate that ranges between 20 and 25 per cent. That is in line with all the other tax impositions on other forms of gambling.

Last autumn, I had the very great privilege of calling the numbers at the Byron bingo and social club in Hucknall. Will the Minister listen to the concerns of staff and customers, at the Byron and across the sector, about the effects that the smoking ban and the taxation system have had on the industry’s future? Will she look closely at bringing forward proposals in the Budget to help secure that future?

I assure my hon. Friend that we keep all such matters under close review. The Government have done good things for bingo, not least among them the fact that we lowered the higher rate of tax in 2003. In addition, we have removed the 24-hour rule and the membership requirements, and we have allowed maximum stakes on prize gaming machines to be doubled. We have also allowed rollovers and created the potential for much larger prizes. My hon. Friend mentioned the smoking ban, so he has not fallen into the trap of thinking that all of bingo’s problems are the result of VAT rates. They are not.

In a recent answer to me on this subject, the Minister said:

“The Government consider all relevant factors when establishing and maintaining fair regimes for the gambling taxes and keep all taxes under review.”—[Official Report, 14 January 2008; Vol. 470, c. 907W.]

Bingo clubs provide important social benefits in many communities. What relevant factors did the Treasury consider that led it to conclude that bingo clubs should be taxed more than licensed betting offices and internet gambling?

The issues with internet gambling and offshoring are obvious, but I must correct the hon. Gentleman: the changes made in 2003 knocked 10 per cent. off the effective tax rate for bingo and brought it into line with other forms of gambling. Bingo is not discriminated against.

Climate Change (Economic Impact)

The Stern review assessed a wide range of evidence on the impact of climate change and its economic costs. It concluded that the benefits of strong and early action far outweigh the economic costs of not acting. The intergovernmental panel on climate change has also assessed the economics of taking action, and come to similar overall conclusions.

I am grateful to the Chief Secretary for that answer. As he knows, the Stern report is iconic—a word that I understand could be attributed to my right hon. Friend! The report states that the Government should spend 1 per cent. of gross national product to mitigate the effects of climate change. Have we met that target? When can we hope to do so?

I am not sure that I have done anything to deserve such lavish praise from my hon. Friend, but he is right that the Stern report on the economics of climate change has changed the debate, in this country and around the world. It made it clear that the people who could suffer most from a failure to tackle climate change, or from a lack of ambition in our approach to it, are those living in the developing countries. They are the most vulnerable, and he is right to say that Stern said that the cost of not acting would be large. That is why the Government took various measures in the recent spending review to ensure that we are prepared to face the challenges posed by climate change.

Should not the committee on climate change be set up now, as a matter of urgency? It is not due to report on the 2050 target or the inclusion of aviation in that target until late 2009, and the fact that it has not been set up yet gives an impression of a lack of a sense of urgency on the Government’s part. Setting up the committee as soon as possible would send out a very good signal that the Government are intent on taking this matter forward as fast as possible.

I hear what the hon. Gentleman says, but I assure him that every step is being taken to set up the committee as soon as possible. Every action that the Government are taking makes it clear that we recognise the urgency of the situation, and we have already asked that the committee consider the new scientific evidence being produced to see whether higher targets should be set—although the target of reducing carbon emissions by 60 per cent. by 2050 remains very challenging. The Bill currently being considered in another place is pioneering and groundbreaking, and it sends a very clear signal to the rest of the world about the level of this country’s ambition.

What assessment has my right hon. Friend made of the effect of the climate change levy on industries that are high users of energy, such as the paper-mill in my constituency?

The evidence that the Treasury has collected shows that the climate change levy has reduced harmful emissions overall and has produced revenue that is useful in the fight against climate change. I recall that the levy was introduced in the face of opposition from Conservative Members. It was a far-sighted decision taken back in the early days of this Government. That shows that the Government have always had climate change at the heart of their agenda, unlike others who came to the issue more recently.

With the rapid, dramatic rise in the cost of fuel, energy and food, and in council tax, will the Government be extremely careful about imposing any more additional costs on either the individual or industry? In respect of industry, to follow up on the last question, it would be easy to make British manufacturing industry far less competitive, but we would be a fool to do so, given that so much of climate change is caused by other places and not this country, and given that there remains considerable scientific debate about the impact of climate change.

The hon. Gentleman raises an important point. There is a tension between legitimate objectives, and there is a balance to be struck, but I hope to assure him that the Government seek to strike that balance in all their actions. However, he must recognise that the Stern review identified that there are economic costs to the country and its citizens of not taking action at the appropriate level. If we do not take action on climate change, the cost of food could rise well into the future. We need to consider both the short term and the long term. He rightly raised the issue of fuel bills; we, as a Government, must ensure that we take further steps to help people who are struggling with energy costs, particularly those who face the threat of fuel poverty. He will know that, to meet that objective, we have committed ourselves to the winter fuel payment for the duration of this Parliament.

The Stern report rightly recognises that it is people in the poorest countries who will be affected most and first. In the Minister’s discussions, both at UK and European level and with China and India, will he ensure that any financial measures that are taken to impact on climate change in the UK are reciprocated in places across the globe? Given the growth in the economies of China and India, they will increasingly be at the forefront of having to tackle climate change. Will he ensure that any discussions are international, not just domestic?

My hon. Friend is absolutely right. I think the phrase that Stern uses is that hundreds of millions of people could suffer if we do not take appropriate action. It is true to say that those who would suffer most are those around the world who have perhaps contributed least to climate change. He is right to say that international action is the key. We should take some encouragement from the fact that the European Commission’s package, published this week, draws heavily on the Stern review. It shows that climate change is territory on which there needs to be constructive engagement at the heart of Europe; that is particularly relevant this week, as we have been debating those matters. We want to meet the challenges of this century, whereas others seek constantly to fight the battles of the last century, and constantly bang on about Europe.

Capital Gains Tax

7. What assessment he has made of the impact of the capital gains tax proposals announced in the 2007 pre-Budget report on the decision-making process of small businesses. (181416)

Mr. Speaker, with your permission I propose to make a statement on the subject of capital gains tax immediately after Question Time.

Would the Chancellor like to take this opportunity to apologise to the House for his half-baked, panicked proposals, which were driven by political considerations, as well as for the damage that he has done to small businesses’ planning and confidence, and for the failure properly to consult the business community? Perhaps after that he will say where he will get the money to fund his belated U-turn, which is to be announced later this morning.

I shall come to my proposals fairly shortly. The fact that we have more than 760,000 more small and medium-sized enterprises in the past 10 years is testament to the fact that this country is a good place for small businesses to carry on their operations.

EU (Co-ordinated Action)

8. What discussions he has had with his European counterparts on co-ordinating action across the EU in response to turbulence in the US sub-prime market. (181417)

I met my French, German and Italian counterparts, along with the European Commissioner, in Paris last week to discuss current market conditions. In addition to that, the Prime Minister will meet his counterparts in London next week.

In view of this morning’s announcement of very substantial losses by Société Générale, will my right hon. Friend say a little more about what practical proposals he and the Prime Minister will be putting forward to ensure that financial regulators, central banks and Governments work together right across the European Union to improve both transparency and stability in Europe’s banking sector?

I am aware of the reports from Société Générale in Paris. The Financial Services Authority is looking at the situation. As I understand it, that concerns something that happened in the bank’s operations in Paris, and I further understand that the French Treasury will make a statement later today. On my right hon. Friend’s more general point, it is important to recognise that many of the problems that we have to deal with transcend national boundaries, particularly in relation to the role of the International Monetary Fund and the forum for financial stability and what they can do to get better early warning, and the need to achieve agreement on how banks deal with off balance sheet structured investment vehicles in relation to the credit rating agencies. These are all areas where we must take international action.

We discussed some of these matters in Paris last week, and I very much hope that as we move towards conclusions, we can get the international community to move far faster than it usually does. It took 10 years to get Basel 2 agreed to, and we do not have 10 years to sort out the present problems. We need a combination of actions on the part of individual institutions to report the full extent of their exposure as quickly as possible, so that we can end some of the present uncertainty. That would help to restore stability. In addition, it will be necessary for action to be taken not just domestically, as I shall outline next week, but internationally. Above all, as I think my right hon. Friend would agree, whatever we do must be proportionate. We must avoid the temptation to have a rule and regulation for every possible eventuality, as the American Government did after the Enron difficulties earlier in this decade, which proved to cause as many difficulties as they thought they were solving.

What are the implications for major infrastructure projects such as the expansion of Stansted airport, where a Spanish company which is already heavily borrowed is the lead on that project? What implications will the crisis have for such a project? Are other projects that the Government consider to be in the national interest—I do not happen to think that that is one of them—threatened by the crisis?

I wondered whether the hon. Gentleman was changing his line on Stansted. No doubt he is anxious to make that point for his constituents, if not others. It is for BAA, which owns Stansted, to decide whether the investment that it thinks is necessary can come forward. I very much hope that it can. Yes, we have an immediate problem in relation to credit and what is happening in the markets, but we should ask ourselves all the time what we will need 10, 20 or 30 years ahead. When it comes to aviation, as I have said many times, ever since I published the aviation White Paper in 2003, the problem that we have in this country is that on successive occasions when we should have been looking to the long term, short-term decisions were taken that prejudiced the development of transport infrastructure, in particular. That is why it is important that people ask themselves what Stansted will need in 10 or 20 years. I think BAA will take the long-term view, which is extremely important.

Has the Chancellor noted that there seems to be almost universal agreement in the United States that the threat of recession following the sub-prime mortgage and credit crunch crisis can best be warded off by a combination of lower interest rates and fiscal stimulus? Does he think that the response of the European Union and of Britain should be similar, and if not, why not?

Mainly because the situation in the United States economy is rather different from the situation in our economy and in other major economies in the EU. As the hon. Gentleman rightly recognised, the big problem that the Americans have is that following the collapse of the US sub-prime market, the problem has gone on to affect the US housing market more widely. In America, the basic problem is that the supply of housing far exceeds the demand. In this country, we have the opposite problem: demand for housing exceeds supply, as we well know. What may be appropriate for the US economy is not always necessarily appropriate for other economies. As I have said on a number of occasions, because we have low unemployment, historically low inflation and low interest and mortgage rates, the Monetary Policy Committee has room for manoeuvre—as the Governor said in his speech in Bristol, I think of Tuesday evening—that was not available 15 years ago, when the previous Government got into such terrible problems. We will continue to do what is right for the UK economy, and at the heart of that is ensuring that we have a strong, stable economy and that we take the right decisions for the long term. If we do that, we can get through these problems, just as we have dealt with problems in the past.

Data Protection

9. On how many occasions in his Department and its agencies confidential data has been downloaded on to CDs without encryption in the last 12 months; and if he will make a statement. (181418)

There is no central record, as across government the protective marking “Confidential” has a broad specific meaning, and is of a lower order than other security classifications. But it is a very good question, and one of the reasons why the Prime Minister invited Professor Walport to undertake a review of security arrangements across government.

We welcome the ruling by the Cabinet Secretary, Sir Gus O’Donnell, about not taking laptops or computer drives out of offices, but there are many people out there who still believe that the Government have been at best casual and at worst highly irresponsible, and cannot understand why the natural default position is not to encrypt personal data. The Minister has once again repeated her party’s position, hiding behind the report from Kieran Poynter. Does she simply not know the details at this stage? Can she guarantee that the Poynter report will not be slipped out on the eve of a parliamentary recess, and will be accompanied by an oral statement in the House?

I am afraid that the hon. Gentleman prepared his supplementary before he heard my answer to his first question, because I did not refer to Poynter at all. But he brings me to an important point, which is that Her Majesty’s Revenue and Customs instituted new controls. We accept that what happened last November was a grave mistake and that is being corrected. Immediately, HMRC put in controls that required that all customer data transferred by CD be encrypted. I would expect that in his full report, Mr. Poynter will consider how internal processes and culture at HMRC can be strengthened to achieve appropriate data security in the future. The hon. Gentleman can be assured that the House will have the fullest opportunity to comment when Mr. Poynter is ready to report.

I congratulate the Financial Secretary. This is about the first answer to a question relating to data that did not refer to the Poynter report, because the Government have consistently refused to answer perfectly reasonable questions about the missing data, about how many discs have been lost by HMRC, or even HMRC’s tracking procedures with private courier firms, by batting them away, saying that Poynter will report in due course. Given that Poynter will not report for some months, is it not about time that the Government abandoned their brazen attempts to kick the issue into the long grass, treated Parliament with a bit more respect and started answering some questions on this matter?

I do not accept the premise of what the hon. Gentleman says. I take extremely seriously the changes that need to be made within HMRC and that are being made. Kieran Poynter, in his interim report, referred to the fact that many of his immediate recommendations had already been acted upon by HMRC in its immediate response to the circumstances. So the Government and HMRC have given a serious and considered response to the circumstance that HMRC found itself in last November. The matter is being taken extremely seriously indeed, and the House can be assured that Poynter’s final report will be presented to the House, I am sure by an oral statement.

Structural Budget Deficit

10. What estimate he has made of the UK’s structural budget deficit in comparison with other western European economies. (181419)

Cyclically adjusted net borrowing in the UK has averaged 1 per cent. of GDP over the economic cycle that began in 1997. Over the same period, the structural deficit has averaged 2.1 per cent. in the euro area, 3 per cent. in France, 2.3 per cent. in Germany and 2.8 per cent. in Italy.

Is it not the case that our structural deficit is now higher than that of many countries in the euro zone, and is it not true that the Government have squandered tax revenue in years of relatively high growth and now have no choice but to raise taxation to meet the golden rule?

As the figures that I read out indicated, that is not the case. Net debt in this country, at 37.2 per cent. of GDP, is lower than that of France, Germany, the US and all the G7 except Canada. That is the result of a strong fiscal framework and strict fiscal rules that the Government have applied in the past 10 years. We will continue to borrow only to invest, enabling the renewal of our critical national infrastructure—something that the hon. Gentleman’s Government signally failed to do.

Topical Questions

As I said earlier this month, the core purpose of the Treasury is to ensure the stability of the economy, promote growth and manage the public services and finances.

When the fuel escalator was introduced, the oil price was low—the exact opposite of what it is now. The escalator is adding huge, increased costs to British business and industry, thereby endangering their competitiveness while fuelling the flames of inflation. Will the Chancellor consider suspending the escalator?

I keep all taxes under review. Generally, our economy has remained very competitive. British industry has done very well; indeed, as yesterday’s figures showing continuing growth of gross domestic product confirm, the transport sector remains healthy. However, as my predecessor said, we need to ensure that we maintain the appropriate level of taxation on fuel.

It is difficult to make like-for-like comparisons with other countries around Europe, but I think that the level of taxation at the moment is right. We will do everything that we can to help resolve the difficulties that we have with high oil prices. It is particularly important that oil producers recognise that they have an interest in making sure that there are adequate supplies of oil. That, of course, is one of the things determining oil prices at present.

T2. I have asked the Comptroller and Auditor General to launch an inquiry into the costs incurred in rescuing Northern Rock, and he has agreed to do so. However, will the Chancellor tell the House what have been the costs incurred to date in issuing guarantees and indemnifying loans made by the Bank of England to Northern Rock, including professional advisers’ fees incurred by the Treasury? (181432)

The fees of Goldman Sachs will be met by Northern Rock. As I said to the House earlier this week, we have made guarantees but they have not been called, so there has not been a cost to the taxpayer.

T3. In the past few years, Trimdon 2000, a community group in my constituency, has received a grant of about £79,000 from the Northern Rock Foundation. Hundreds of similar community groups have received similar donations from that foundation. During his discussions on the future of Northern Rock, will my right hon. Friend ensure that the future of the foundation is secured? (181433)

As I have said on a number of occasions, I am very aware of the importance of the Northern Rock Foundation in the north-east. It depended on a significant income stream coming from Northern Rock in conditions that no longer exist. All of us, including my hon. Friend and his colleagues who represent north-eastern constituencies, would like to find a solution that helps the foundation; I know that that is also in the minds of those who have expressed interest in investing in Northern Rock. Trying to do something about it will require an effort on the part of us all, but I am very aware of the points that my hon. Friend has made.

At this time of economic uncertainty, people are looking to the central banks and their monetary policies, yet in Britain we still do not know who will be running the central bank come the summer. What exactly is the reason why the Prime Minister and the Chancellor are delaying the decision on the reappointment of Mervyn King?

I have dealt with this issue on many occasions. As I have said before, I will make an announcement—actually, Her Majesty the Queen will do so, as that is how such an appointment is announced—and it will be made at the appropriate time.

I am sure that Her Majesty will take the advice of the Chancellor and the Prime Minister when she makes her announcement. When Mervyn King was first appointed, that announcement was made in November for an appointment in June. At the beginning of this month, the Chancellor said at a joint press conference with the Prime Minister that he would make an announcement in the next few weeks; well, it has been a few weeks. What exactly is the reason for this continued uncertainty in the markets? Why cannot he simply say that he is reappointing Mervyn King? Let me put it another way. Is he looking at any other candidates for the job?

As I have said to the hon. Gentleman and to the House on many occasions, the appointment will be made at the appropriate time; that remains the case.

T4. Will my right hon. Friend consider the views of the Federation of Master Builders and those of 58 MPs who have so far signed early-day motion 669, calling for a reduction in VAT from 17.5 per cent. to 5 per cent. on repairs to and maintenance of existing buildings? Such a move would bring far more empty homes on to the market, assist home owners in making their homes energy efficient, and, importantly, assist groups such as the West Midlands Historic Buildings Trust to maintain heritage buildings such as Lye and Wollescote chapel in my constituency. (181434)

I congratulate my hon. Friend on the persistence with which she is pursuing this subject. I can assure her that I have studied the terms of early-day motion 669. Alongside the zero VAT rate for the construction of certain new residential and charitable buildings, we have applied a 5 per cent. reduced rate for certain supplies related to housing. However, the problem is that we cannot implement the early-day motion proposal under the current European Union rules because there is no vires in EU law to allow any new reduced rate for repair and improvement work on non-residential buildings. I assure her that we keep the situation under review and seek to assist whenever it is possible to do so.

T5. Some 9,400 families in my constituency receive tax credits, a minority of whom experience great difficulty with the system. What changes are my right hon. Friend’s Department making to help those families and my hard-pressed caseworker, Julie? (181435)

I suspect that my hon. Friend’s caseworker is known personally to the staff of tax credit offices. Her Majesty’s Revenue and Customs established the tax credit transformation programme to improve the services that families receive because that is very important for the success of this great project, which is now supported by parties on both sides of the House. HMRC has run several pilot projects, including a new national service to allow couples whose relationship has broken down to initiate a new single claim in one phone call. From the end of this month, it will also be revising its code of practice 26 on recovering repayments and replacing the reasonable belief test, which has caused a great deal of concern and difficulty in understanding, with a clearer test that sets out customers’ responsibilities for checking factual information alongside the responsibilities that HMRC has to fulfil.

T6. I declare that I am a policyholder in terms of having my mortgage with Northern Rock—at the commercial rate, I stress. Many mortgage holders will be concerned about the possibility of having their loans called in, forcing them either to remortgage or to sell their homes. Under the various proposals being considered by the Government, what is the likelihood of that situation coming about? (181436)

I understand the hon. Gentleman’s point; as we all know, he is not the only one who has a mortgage with Northern Rock, as I made clear the first time I made a statement after the recess last autumn. It is for the company, or whoever owns or controls it, to decide on what terms it issues mortgages or how it deals with mortgages as and when they come up for renewal. That is not something that the Government deal with.

To return to the issue of VAT reduction raised by my hon. Friend the Member for Stourbridge (Lynda Waltho), the Government said in last year’s Budget that they were seeking EU agreement to allow a reduction in VAT for certain energy-saving measures. Can my right hon. Friend give us an update on the progress that has been achieved on that?

I can reassure my hon. Friend that those discussions are ongoing. I have been involved with them at ECOFIN, and we are pressing the case for the reduction. It is gaining support throughout Europe, but we are not yet in a position where we can change the rules to achieve such a laudable change.

T7. Following the loss of child benefit data by Her Majesty’s Revenue and Customs when on its way to the National Audit Office, I asked the Chancellor what other organisations and departments were in receipt of such personal data. The written reply failed to answer that question. Instead, it said that “Most transfers of data take place under statutory gateways”—[Official Report, 3 December 2007; Vol. 468, c. 1038W.]—whatever they are. What about the data that go out of the HMRC that do not go through statutory gateways? Which departments and people are in receipt of those data, and why is there a continuing transfer of personal information, or leak, out of that department without parliamentary authority? (181438)

No transfers take place without parliamentary authority. HMRC operates within clear guidelines and rules set down by Parliament. The transfer of data is a large part of HMRC’s business. The management of personal data is a critical part of what it does, which is why it is right that we consider all of the representations that we receive from Mr. Poynter. We will also need to consider the police report when we get it. A great deal of work is being done to understand the procedures that are in place, how they work and their effectiveness in order to ensure that we have the most secure procedures possible in place.

T8. Why were the Government running such a substantial budget deficit ahead of forecast, even before the credit crunch bit? (181439)

The figures that I gave to the hon. Member for Poole (Mr. Syms) earlier show that this country has met debts at a lower level than any of our European competitors. If the hon. Member for New Forest, West (Mr. Swayne) is questioning our spending, let me quote the right hon. Member for Witney (Mr. Cameron) from his press conference last week—[Hon. Members: “Answer the question.”] Just hear me out. The right hon. Gentleman said that

“the government spending plans for the next three years are really quite tight…I think it represents a fairly tough approach to public spending.”

Given that the hon. Gentleman’s party has several billion pounds of tax cuts promised, what does he propose to do about borrowing?

I am assured that HMRC will have met the targets in place for such registrations by the end of January.

With all the publicity about Northern Rock and various other things, it is important that the Government get the message across that it is right for people to save. But it is difficult for people to open a bank account if they do not have an address, they are not a householder or they do not have a passport. People under 16 have particular difficulty in opening a bank account. If we do not get young people saving at an early age, we are not going to change the public perception of saving, or encourage more people to save. What are the Government going to do about that?

My hon. Friend is absolutely right to raise that issue. I draw her attention to what the Government have done through the success of individual savings accounts. Nearly one in three adults—more than 17 million people—now have an ISA. She is absolutely right to say, however, that further work needs to be done to encourage those on lower incomes to make provision for their later life. She will know that we have piloted the savings gateway, which is a new approach to encouraging people to save, and we are considering the results of those pilots before making further decisions about extending the pilot more widely.

Topically, I received a letter recently telling me that 31 January is my final deadline for a tax return, and encouraging me to file my tax return online, saying that that was the best way for me to do so. Given our discussions on the efficiency of HMRC recently, how come I have also been sent a letter from HMRC saying that I cannot file online? Does the left hand not know what the right hand is doing at HMRC?

The hon. Gentleman raises a fair point. There are categories of individual for whom security is a higher priority. [Hon. Members: “Oh!”] Not just Members of Parliament—there are several categories of people in that position, and HMRC does not have the facilities for them to file online. However, it is working to see what can be done to change that in future.

With British Gas about to announce profits of £750 million, why has the Chancellor rejected Ofgem’s proposal for a windfall tax on energy suppliers?

I met representatives of Ofgem about 10 days ago because I want to ensure that we have a competitive market in this country for electricity. The hon. Gentleman is right—several companies have announced significant increases for a variety of reasons, while other companies have been able to manage things differently and have not had to do that. However, Ofgem’s proposals are just that—Ofgem’s proposals.

Capital Gains Tax

With your permission, Mr. Speaker, I would like to make a short statement on capital gains tax reform.

Following discussion, I am today announcing the introduction of a new capital gains tax entrepreneurs relief. This will complement the new regime, which I set out in the pre-Budget report last year. The reformed regime and the new entrepreneurs relief will come into effect in April.

The relief will provide a special 10 per cent. tax rate for the first £1 million of qualifying gains. Gains made on different occasions will qualify for the 10 per cent. rate up to a cumulative lifetime total of £1 million. However, gains in excess of that will be taxed at 18 per cent. The special 10 per cent. rate will be available on the disposal of all or part of a trading business carried on by an individual either alone or in partnership. It will also be available to individuals disposing of shares in a trading company, provided that the individual is an officer or employee of the company and takes a minimum 5 per cent. stake in the business. The measure will benefit the owners of small businesses when they choose to sell their business, as well as business angels and other business investors who take a 5 per cent. or greater stake in the company concerned.

As a result of the reforms that I have announced, entrepreneurs and material business investors will keep 90 per cent. of the first £1 million of gains that they make. And they, and everyone else, remain entitled to make gains of up to £9,200 a year without paying any capital gains tax. That annual exemption will rise again in April.

We estimate that, next year, around 80,000 business owners and investors will make disposals eligible for the entrepreneurs relief. In approximately 90 per cent. of those cases, we expect the individual’s entire gain to be taxed at the special 10 per cent. rate.

In the other cases, people will pay 10 per cent. on the first £1 million of gains and the standard 18 per cent. rate on the excess. The proposal remains in line with the Government’s objective of keeping the tax system as simple as possible. It is very much in accordance with representations from small business.

I estimate that the proposal will cost around £200 million a year. Her Majesty’s Revenue and Customs is today issuing further information about the scope of the new relief, along with draft legislation and supporting materials related to the capital gains tax proposals announced in the pre-Budget report. Those documents have been deposited in the Libraries of both Houses and are available on the HMRC website.

As with all other aspects of the tax regime, I am determined that we do as much as possible to encourage entrepreneurship in this country and, in future Budgets, I will seek to do more. I will therefore keep the £1 million lifetime limit for the entrepreneurs’ relief under review.

I can confirm that we have retained the full range of reliefs for people investing in smaller, unquoted companies, including the enterprise investment scheme and venture capital trusts. Rollover relief also remains available to people wishing to reinvest in another business. Taken together, those measures include generous income tax reliefs, capital gains tax reliefs and exemptions, which have helped thousands of businesses. We have also retained several tax- advantaged share schemes, which include save-as-you-earn schemes, company share options plans and enterprise management incentives.

In December last year, the Treasury and HMRC issued a consultation document, which included legislation designed to prevent individuals from disguising income streams as a capital return to avoid tax. I will set out the Government’s next steps on measures to prevent abuse of the tax rules when the consultation process has concluded. I want to be satisfied that only genuine investors benefit from the reformed capital gains tax regime.

I have also received representations from the life insurance industry. That is a complex area and there are no clear answers, but we are ready to hear further representations.

The UK business environment remains one of the best in the world. I am determined to keep it that way. My announcement today, with measures to simplify the regime, will ensure that that continues to be the case. I commend the statement to the House.

In the short, inglorious time in which the Chancellor has been in office, he has had only one original idea on tax, which was a big increase in capital gains, thinly disguised as a simplification. It is now four months since he announced it—four months in which it has attracted the universal opposition of British business; four months in which his own Prime Minister has briefed against him; four months in which he has dithered and delayed on whether to ditch it; and four months in which thousands of businesses have faced uncertainty and instability, as we all waited for him to make his mind up finally.

And so we reach today’s humiliation, as the Chancellor of the Exchequer comes to Parliament, late in January, to announce a retreat on his one big idea. Does he remember saying in his very first interview in the job to the Financial Times, back in the dim and distant days when he still had a reputation as a safe pair of hands, that he thought that we needed to be very clear that

“When…we make…changes”

to tax

“they must be made at the proper time in the context of the Budget or the pre-Budget report”?

Now here we are, halfway between the pre-Budget report and the Budget, and he is announcing major changes to dismantle the single-rate CGT regime before it has even been put into place. What a textbook example of how not to write tax law.

May I ask the Chancellor about two features of his plan? First, will he confirm that it still represents a huge tax rise on businesses? He said that the move was a £200 million tax cut; in fact, if we take the whole package, it is a £700 million tax rise on enterprise, at the very moment we face the greatest economic difficulties. Can he name one other major western economy that is planning to raise taxes as its response to the global slowdown? Any claim that the Government are preparing Britain for the rainy days that may lie ahead now lies in tatters.

Secondly, will he confirm that any pretence to simplicity has also disappeared today? In October, he told us that he was abolishing the distinction between business and non-business assets. Will he confirm that that distinction re-emerges today? He said at the Dispatch Box that

“a single rate of capital gains tax is the right thing to do.”—[Official Report, 18 October 2007; Vol. 464, c. 957.]

Can he confirm that he is introducing another rate, so that there are now two rates of capital gains tax? He boasted of the simple administration of his new regime. Can he confirm that the lifetime limit will require an entirely new administration within HMRC?

Where does the Chancellor think the extra £700 million in tax will come from? Will it come from the people who start and build successful businesses or from the angel investors who help small companies get off the ground? What about the 4 million employees in the save-as-you-earn share schemes, who as far as I can tell will not benefit from the tax changes that he has announced today, or the entrepreneurs who add value to the British economy—in other words, all the very people whom we should be supporting in the face of global competition? No wonder the latest survey of business opinion, published today, shows that 59 per cent. of people think that he is out of his depth in his job.

In the two years I shadowed the Chancellor’s predecessor, with the exception of Budgets and pre-Budget reports, he never once came to make a statement to the House. But in the six months I have shadowed the right hon. Gentleman, he has been popping up every week, and sometimes twice a week, to explain the latest disaster to befall his Department—the mishandling of Northern Rock, the scandal of the missing discs and now this entirely self-inflicted wound on capital gains tax.

The Chancellor is a decent and pleasant man, and many of the problems that he is dealing with were inflicted upon him by the Prime Minister. However, I am afraid that he is the living proof of what is called the Peter principle, which states:

“in a hierarchy every employee tends to rise to the level of his incompetence”.

The misfortune for us all is that his incompetence means higher and more complex taxes on business at the very worst moment for the British economy.

I notice that at no time in the hon. Gentleman’s contribution did he say whether he was for or against the proposal. It is a bit like Northern Rock—we are not at all sure what his position is from one day to the next. Indeed, I am beginning to think that he does not know either.

The proposals that I announced last October were right then and I believe that they are right now. It is right to recognise, however, that we need to do more to help small businesses in particular, and the proposals that I have announced today will do that. As I have said, the vast majority of people who have put money into a company and built it up will benefit from the entrepreneurs relief. I believe that that will be welcomed by a large number of businesses.

The hon. Gentleman asked about employee share schemes. I remind him that everyone in this country is allowed an exemption of £9,200 before they pay any CGT, so someone would have to make a gain—that is not a total shareholder—of that amount in a year. Actually, the average gain under save-as-you-earn schemes is between £2,000 and £3,000, so most employees will be covered by that. One of the interesting things about capital gains tax is that most of it is paid by a comparatively small number of people.

The steps that I have announced today will provide a simpler scheme, with a rate of 18 per cent. We also recognise that we need to continue to encourage small businesses to expand, which is why I have introduced the entrepreneurial relief. That will benefit the vast majority of people who are likely to take advantage of it in the next year and in the years that follow. I will continue to keep these matters under review. It is far better to take the time to get these things right. That is what we have done, and that is what we will continue to do.

I welcome the statement from my right hon. Friend. I wonder whether he can answer this question. If someone had a 20 per cent. ownership of a private equity company that traded in other companies, and that private equity company owned a very small proportion—less than 5 per cent.—of a plc that made a lot of profit, could that individual claim the relief that my right hon. Friend has described, on the ground that their investment was in a trading company, namely, a private equity company, that traded in other companies, and their holding of 20 per cent. was more than 5 per cent.?

I am always wary of giving tax advice on the Floor of the House. I set out in my statement the condition that the arrangement would apply to unincorporated trading companies with a shareholding of more than 5 per cent. Certain other conditions would also be attached. If my hon. Friend wants further details, he will find them in the Library. We are aiming the measure at people who have set up a business and are either sole traders or in partnership, or people who own more than 5 per cent. of the shares in their unincorporated business and are an employee or an officer of their company. They are typically the sort of people who have been encouraged to set up a business and might at some stage want to sell up and then invest further. The measures will also help people who have reached retirement, because the first £1 million of gains will be taxed at the 10p rate. Those are people we are aiming at.

I said at the time of the pre-Budget report that, in relation to private equity, whenever there is a wide disparity between different rates—whether relating to income or capital—there is always a problem of people seeking to take advantage of capital gains tax. The 18 per cent. rate will help in that regard. In addition, as I said in my statement and as I have said before, we are seeking to close any loopholes in order to stop the kind of abuse that my hon. Friend might be concerned about.

May I take the Chancellor back to the beginning of his Odyssey through capital gains tax reform, and remind him of the moral outrage that was being expressed by, among others, his colleagues on the Treasury Select Committee at the fact that extremely rich people in the City were paying lower rates of tax than their cleaners? Will he confirm that, after all the twists and turns and comings and goings, those extremely rich people will now be paying 18 per cent.—or, in some cases, 10 per cent.—while their cleaners will now be paying 20 per cent. plus national insurance contributions? In what sense does that represent progress?

Will the Chancellor also explain the impact of all this on the second homes market? Has not he given a tax cut to second-home owners—


Has not the Chancellor given a tax cut to second-home owners of a minimum of 6 per cent. and, in certain circumstances, of 30 per cent.? Has he considered the impact of those measures on rural areas such as Cornwall, mid-Wales, the Lake district and large parts of rural England, where local people are being priced out of the housing market by second-home owners?

Is the implication of the Chancellor’s retreat today and his move away from taper relief that he accepts that the changes brought in at the outset of the Labour Government, when I believe he was Chief Secretary to the Treasury, were—as, indeed, some of us argued at the time—expensive, unnecessary and a diversion? Will he tell us what was wrong with the capital gains tax system under the previous Conservative Government, which was introduced by Lord Lawson? That system had at its heart a very simple central principle that income and capital should be taxed on the same basis. If, as the Chancellor is arguing and as the Conservatives now appear to want, income is taxed at a significantly higher rate than capital, there is a massive opportunity for tax avoidance as individuals and companies convert income into capital. What estimate has the Treasury made of the potential leakage into tax avoidance from that very familiar route?

Finally and on that basis, may I commend the idea of going back to the 1997 capital gains tax system, which was simple, made generous provision for small business, had indexation and would, on the Treasury’s own estimates, produce an additional tax revenue of about £2.7 billion? That could be used now for cutting the taxes of cleaners and other people on low pay.

I do not know of many people who would argue that capital gains tax should be put back up to the 40 per cent. rate. If that is the Liberal party policy, I was not aware of it—and I am sure that many of the hon. Gentleman’s colleagues are not aware of it either. I suspect that two parties in the House will make it their business to ensure that people around the country know that that has become the Liberal party’s policy. As the hon. Gentleman has set out, the Liberal policy has been to end taper relief.

I believe that our proposals of October and of today provide the right approach. Simplifying taxes must be a good thing if we can do it. What I sought to do in October was set out a much simpler capital gains tax system at a rate of 18 per cent., but I recognised that we needed to do more to help small businesses in particular. As I said earlier, there are 760,000 small businesses in this country. There is additional help—it is important to remember this—through venture capital trusts and enterprise investment schemes. The enterprise schemes have raised about £6 billion and have invested in 14,000 companies, while venture capital trusts have raised about £3 billion and helped about 1,400 companies. That shows that there are many other things we can do to help small businesses through the capital gains tax and income tax regimes. I believe that what I have announced today will be good for small businesses. I have listened to what people have had to say and I believe it important to get the issues right. Overall, simplifying the tax has to be the right way forward. I can see no justification for putting the rate of capital gains tax back up to 40 per cent., which is what I now understand the hon. Gentleman’s and the Liberal policy to be.

May I welcome the Chancellor’s statement? It is a huge step forward to have moved in 10 short years from a tax rate of 40 per cent. to 18 per cent. and with accompanying simplification. It is important for the Chancellor to continue to encourage entrepreneurship, which includes the private equity industry. However, may I say that there is a loophole in that management fees are not taxed? That information has come to me from the private equity industry, so I hope that the Chancellor will seek to close that loophole.

The insurance industry has also had discussions with me over the last couple of weeks and it is concerned that the new regime will disadvantage savers. I would ask the Chancellor to have further discussions with that industry to ensure that we do everything we can to encourage savings.

I am grateful to my right hon. Friend for his welcome. On his last point about the insurance industry, I did say that we have had discussions with that sector, but there are particular problems with one particular set of products. It is not immediately obvious that sorting out that problem will not create other problems. As I said, Treasury officials will remain in discussion with the industry. If we can resolve that problem, let us do so, but I believe that there may be considerable difficulties in doing so. As to the loopholes and various other points that my right hon. Friend raised, I keep them all under review. As a result of what I have announced today, I hope that small businesses, whose organisations have called for help of this nature, will recognise that we are determined to do all we can to help them. People who have made the effort and put all their skills and enterprise into setting up businesses should be helped to grow them and then hopefully to grow other businesses. We want to do everything we can to help them.

It is a bit rich for the Chancellor to come here and accuse my hon. Friends on the Front Bench of not saying whether they are in favour of or against the proposals, when he has been both against his own proposals and in favour of them at almost exactly the same time? Will he now accept that his Chief Secretary has let the cat out of the bag, as he has recently made it absolutely clear that under the new set of proposals people in Britain will be subject to a significant tax hike?

I do not think that that is right. I have just explained that the cost of the proposals announced today is about £200 million, which will go back into the small business sector. It is important, however, that we not only help small businesses but maintain stable finances in this country. I am not sure that the right hon. Gentleman was a supporter of the Conservative Government all the time in the 1990s, but he will certainly remember that they got into real difficulties because they could not manage their own finances.

Any tax system must have the confidence and consent of those involved in it, and today’s statement is a fair and sensible response to the consultation that has taken place. Will my right hon. Friend confirm that if the two owners of a hypothetical company of 40 or 50 employees, which has been established for about 30 years, for example selling management services to the not-for-profit sector, sold that company this year, the tax regime would be more generous now than it would have been under the taper system that preceded it?

As my hon. Friend describes, there are advantages for people who have set up and are perhaps considering selling small companies. If the other measures are taken into account, such as the small loans guarantee, the enterprise investment scheme, venture capital trusts and the regional help given, we are doing a lot to help small businesses, as well as helping the employees. It is also important to remember, as it is sometimes overlooked, that people have an individual annual tax allowance of £9,200 before they pay any capital gains tax. The proposals that I am announcing today represent significant help to a lot of small businesses, as we expect about 88,000 to be able to take advantage of them next year, most of them paying the 10p rate not the 18p rate; and the 18p rate is significantly less than the 40p rate that we had under the Tories and which the Liberals apparently want to reinstate.

What has puzzled me about the Chancellor’s announcement is that when he was first in the Treasury he espoused tapered tax as a key ingredient of long-term, stable capital formation and business investment. He has now abandoned that, so if he wanted to retain the advantages of his first premise, why has he not grandfathered the rights of the existing system to existing investments? If he wants his claimed benefits from the new scheme, why does he not move to that for new investments?

Quite simply because I think that that would make the system very complicated and difficult to administer.

I welcome the main thrust of the Chancellor’s announcement, but I would like to return to the item raised by the Chairman of the Treasury Committee, on life insurance. The Chancellor has indicated that he accepts that the issue is complex and he appears to accept that there are real difficulties for the life insurance industry. As we are nearing the end of January, and the new rules will operate from 1 April, can he give that industry, which is clearly worried about the proposals, any hope of some help before April?

As I said to our right hon. Friend the Member for West Dunbartonshire (John McFall) and others, and as I said in the statement, I am aware of the issue, which has been raised with me by the Association of British Insurers and individual insurers. If we can, we would like to try to help them. As I said to our right hon. Friend, however, it is not immediately obvious that the particular problem raised can be easily resolved. I have asked my officials, however, to speak to the industry’s representatives, and they will do so over the next few days and beyond. I hope that we can find a resolution, but I do not want to raise hopes because the issue is quite complex.

My hon. Friend the Member for Twickenham (Dr. Cable) raised the question earlier, but I am not sure that I caught the Chancellor’s response. Can he confirm that second-home owners will see a cut in their CGT bills? Was that an intended or unintended consequence of his proposals?

If there is a single rate, and we move away from the old system of a number of rates, does it not follow that some people will gain? Because we have a single rate of 18 per cent., that is less than some people might have paid on previous occasions.

I am sure that my right hon. Friend’s statement will be warmly welcomed by many small business owners in my constituency. He will be aware, however, that at the time of his initial proposal real concern was expressed that the simplification measures, although otherwise welcome, might disadvantage employee share ownership plans. Is he satisfied that the proposals that he has announced today will encourage companies to maintain, and indeed extend, their employee share ownership plans?

As I said earlier, the average gain under such employee schemes is between £2,000 and £3,000. Everybody in the country has an annual exemption for capital gains tax of £9,200—every year—so the vast majority of people would come nowhere near paying CGT. The number of people who benefit from capital gains tax exemption in such schemes is growing, because more people are in such schemes. I want to encourage that; I have always believed that employee share ownership schemes should be supported. My proposals will help small businesses, and the annual exemption, which will go up again in April, will ensure that many of the people about whom my right hon. Friend is concerned will be more than covered.

As today’s statement, far from complementing the previous proposals, is clearly a retreat, what lessons has the Chancellor learned from this sad affair? For instance, in future will he properly consult business before putting forward such tax proposals, which have caused such chaos and uncertainty?

Of course we will listen to what businesses—small and large alike—have to say. It is important that we introduce the right tax regime. What I propose today is right. We have introduced an overall simplification, but we recognise the particular circumstances of small businesses, which we want to encourage to grow. That is why I have introduced the measures.

Is the Chancellor convinced that people are being given adequate time to plan their affairs, particularly if we are dealing with the disposal of businesses as opposed to liquid assets such as quoted shares? Is there not a risk that forced disposals will take place, and that people will be disadvantaged because of the decisions taken at this time? Could taper relief not be extended, at least for a period? There is no requirement for it to end at midnight on 5 April, is there?

No, but the overall thrust of what people are saying is that they want certainty as to what the regime will be from April. To add a further uncertainty by putting it off for a year or so would not have been particularly helpful. What I propose now means that people know exactly the position and can plan accordingly. As my hon. Friend will know, it is not uncommon in Budgets for the tax changes to take place that evening. What is needed is some degree of certainty, and that is what I have provided today.

This statement is as inadequate as the Chancellor has proved himself to be incompetent on the issue. Many owners of small businesses have said to me that, after 15 weeks’ delay, as many right hon. and hon. Members have said, entrepreneurs will still lose £700 million. It will only be the smallest firms who will be spared, and then only if they remain the smallest. What kind of message does that send to the ambitious entrepreneur—the real wealth and job creators? What place do they now have in Labour’s Britain?

The tax regime in this country, whether it is the lowest corporation tax rates that we have ever had—due to come down again in April—the capital gains tax regime, or the incentives provided through enterprise investment schemes or venture capital trusts, has a whole range of measures that have helped businesses. On top of that, we have been able to maintain a strong and stable economy, with low levels of inflation, which has also encouraged long-term investment. That is very different from the situation 15 or 20 years ago.

Analysis of the economy in my constituency shows that it contains about a third of the number of businesses in the average constituency in the land. That is partly because of the devastation wreaked on the economy in south Wales by another political party, but will the Chancellor confirm that he will do more to encourage entrepreneurship in former coalfield areas, and that he will ensure that the enterprise investment scheme and venture capital trusts really do deliver more jobs and more small businesses in those peripheral economies?

My hon. Friend is right: the Tory party paid scant attention to communities like his that were devastated when the mines were shut in the 1980s. The situation in many parts of the country has changed almost unrecognisably since then.

We have introduced a range of measures, including regional venture capital funds and specific arrangements to assist people through reduced income tax, corporation tax and capital gains tax. That has helped businesses, which is why, as I said, there are more than 760,000 more small and medium-sized enterprises in the country than there were 10 years ago. But yes, we will continue to do all we can to encourage small businesses, because they are the engines of future growth. Ninety per cent. of businesses that are likely to take advantage of my announcement next year will pay the 10p rather than the 18p rate—which, of course, is infinitely better than the 40 per cent. rate with which they were confronted more than 10 years ago.

Does the Chancellor not understand that offering a tax break to second-home owners will make investment in second homes even more financially attractive and will put further pressure on house prices, especially in rural areas, making them even less affordable than they are now? Are the Government not making the same mistake that they made with self-invested personal pensions? Having originally proposed to include second homes as a qualifying asset, they then had to withdraw the proposal because of precisely the objections that are being made now.

I think the real answer to the problem that the hon. Gentleman has raised—and the shortage of housing is undoubtedly a problem in rural areas, as it is in urban areas—is for us to recognise the need to increase the supply of housing as a whole. I hope that Members in all parts of the House will support the Government’s measures both to encourage more housing and to reform the planning laws; otherwise we shall continue to experience the problem of far more people needing housing than there are houses, which will force prices up. It is important for us to recognise the fundamental problems that we face in this country.

I understand my right hon. Friend’s motives, but new reliefs will mean new opportunities. Tax changes behaviour. Can my right hon. Friend assure us that firm measures will be taken to prevent income being switched to capital and the real benefits going not to business angels but to money magicians?

I said in my statement that I would keep that under review. If there is any sign of abuse of this or, indeed, any other part of the tax system, the Government will be ready to take the appropriate action.

Will the right hon. Gentleman confirm my understanding that his October proposals, as modified today, involve the removal of the indexation of the acquisition costs in respect of a number of years from the early 1980s to the end of the 1990s? If so, is that not a form of retrospective taxation which should be deeply deplored, depriving people of a reasonable expectation in regard to acquisition costs? Perhaps I should add that I come into one of those categories.

It is good of the right hon. and learned Gentleman to say that.

One of the many changes that we have made in an attempt to simplify the system relates to indexation. I understand the right hon. and learned Gentleman’s point, but the tax system does change from time to time, especially in relation to capital gains. It is quite possible that something may be acquired long before a particular tax measure is introduced. Capital gains tax is a relatively new tax: it was only introduced in 1965.

I am trying to simplify the tax system, which is something that people in the House and outside have asked successive Chancellors to do. I readily accept that once we do start to simplify a tax, we soon hear from those who did not want that particular simplification.

Many Members have commented that the combination of the changes announced today and those announced in the pre-Budget report represents a tax increase of £700 million, and the Chancellor has not denied that. For the avoidance of doubt, will he confirm that it is indeed the case?

If the hon. Gentleman cared to look at the figures that we published in the pre-Budget report, he would see exactly what the changes meant. It is hardly a secret; it is in documents published at the time of the pre-Budget report.

Like many Members, in these sorry circumstances I support the proposal, although it flies in the face of the simplicity that was the whole idea of the original statement in October.

It is important to have a sense of perspective. I think that between 1945 and 2002 most business owners would have been delighted at the prospect of not having to pay tax on 82 per cent. of their earnings, but that is partly a function of being in a global economy. Does the Chancellor not recognise, and will he not confirm, that this climbdown will require yet more anti-avoidance measures?

I am grateful to the hon. Gentleman. He has endeavoured to give a fair assessment of what I am proposing, and he is the first Conservative Member to say that it might actually merit support. He is right: obviously the tax rates have changed over the years. I do not think many people apart from the hon. Member for Twickenham (Dr. Cable) believe that capital gains should be taxed at 40 per cent. I think that a lower rate is right, and our rate is comparable with international rates.

I believe that this measure will help small businesses. I believe that all Members believe that people who take the trouble, put in the effort and have the initiative to set up and develop such businesses ought to be supported, and that is what I am trying to do.

Business of the House

The business for the week commencing 28 January will be as follows:

Monday 28 January—Consideration of Procedural Motions relating to the European Union (Amendment) Bill.

Tuesday 29 January—Debate on the treaty of Lisbon provisions relating to fighting cross-border crime; justice; policing; human trafficking; and asylum and migration policy, followed by consideration in Committee of the European Union (Amendment) Bill [1st Allotted Day].

Wednesday 30 January—Debate on the treaty of Lisbon provisions relating to energy, followed by continuation of consideration in Committee of the European Union (Amendment) Bill [2nd Allotted Day].

Thursday 31 January—Topical debate, subject to be announced, followed by remaining stages of the National Insurance Contributions Bill.

Friday 1 February—Private Members’ Bills.

The provisional business for the week commencing 4 February will include the following:

Monday 4 February—Motions relating to the police grant and local government finance reports.

Tuesday 5 February—Debate on the treaty of Lisbon provisions relating to human rights, followed by continuation of consideration in Committee of the European Union (Amendment) Bill [3rd Allotted Day].

Wednesday 6 February—Debate on the treaty of Lisbon provisions relating to the single market, followed by continuation of consideration in Committee of the European Union (Amendment) Bill [4th Allotted Day].

Thursday 7 February—Topical debate, subject to be announced, followed by motions relating to European Standing Committees.

I should also inform the House that the business in Westminster Hall for 31 January will be as follows:

Thursday 31 January—A debate on working in partnership to reduce reoffending and make communities safer.

I thank the Leader of the House for giving us the forthcoming business. Today the House finally sees the motions for Monday’s debate on procedure relating to the European Union (Amendment) Bill and debates on the Lisbon treaty. Labour Back Benchers, however, have had this knowledge for days, courtesy of a document circulated by the Government Chief Whip. The Leader of the House has given us two weeks’ business, but according to the list that I have, Labour Back Benchers know the dates of business until the end of February. If they know, why does the Leader of the House not have the courtesy to tell the whole House?

This morning the Home Secretary appeared on the “Today” programme giving details of the Counter-Terrorism Bill before it was published for Members of the House. Yet again, the Government have put the media before Parliament. Every week the Leader of the House tells us that she puts Parliament first, and every week her colleagues treat Parliament with disdain.

Last week I asked the Leader of the House about issues of vital importance to Members and the public. Instead of responding properly, she said,

“if there is a bandwagon, she will jump on it and if there is a myth, she will peddle it.”—[Official Report, 17 January 2008; Vol. 470, c. 1079.]

I had raised Northern Rock, organ donation and the security of personal data. Which of those issues does the Leader of the House consider to be a bandwagon or a myth?

In view of the recent downturn in international financial markets, may I suggest the state of the British economy as a subject for a future topical debate? On Monday the Secretary of State for Defence announced that the Ministry of Defence had lost a laptop containing the bank details of 3,700 Army applicants. It lost a further two laptops containing personal data on Tuesday, and yesterday the Ministry of Justice announced that it had lost four CDs containing the restricted data of court defendants, witnesses and victims. When will we have a debate on the Government’s systemic failure to protect our personal information?

Given this record on data management—or mismanagement—it is no surprise that within two weeks, the Prime Minister has changed his mind and delayed the introduction of the identity card scheme; and we have learned today that two companies have pulled out of the procurement process for the scheme, including Accenture, the very company the Minister for Borders and Immigration used to work for. This is a shambles. The scheme is clearly in administration and should be liquidated. When will the Home Secretary come to the House and make a statement on the ID card scheme?

As a London MP, the right hon. and learned Lady will be aware of the concern being raised about the Mayor of London. Does she not find it extraordinary that the Mayor has defended his senior staff using their paid time to run a smear campaign against Trevor Phillips? May we have a debate on the abuse of power by Mayor Livingstone?

The Prime Minister has written a book about courage: it was clearly not an autobiography. He did not have the courage to sign up to the EU reform treaty alongside other leaders, he did not have the courage to vote for the Bill on the treaty on Second Reading, and he has not had the courage to give the British people a referendum. So can we have a debate on courage and leadership?

We have a Prime Minister who dithers, delays and dodges on matters of crucial importance to our country. When will he finally get a grip and start running the country, instead of running away from difficult decisions?

Let me begin by explaining how we intend to deal with the important debate on the European treaty. The European Union (Amendment) Bill is brief—it contains only eight clauses—but we know that the treaty that it would bring into effect is of concern across the House in relation to energy, the economy, international development, the environment and cross-border crime. We have sought to arrange debates so that Members can discuss both the structure of the Bill and any amendments they might wish to make to it, and the substance of the treaty that the Bill brings into effect. The order of business is before the House today. There will be an opportunity next Monday to discuss the procedure, so there will be a full debate on the procedure before we move on to the substance on Tuesday. Of course it is possible for provisional plans to be discussed—as they sometimes are—with the Opposition and with individual Members, but what is of particular importance is that the Government lay their motions before the House early enough for Members to know how the debate is intended to proceed, and for them to be able to amend those motions if they see fit. That is what we have done in our handling of the Bill.

The whole House can see today on the Order Paper—

The whole House can see the dates on the Order Paper for the days allotted for the business, where it is confirmed. [Interruption.] As the business is confirmed, we put it on the Order Paper.

As for the Home Secretary and the Counter-Terrorism Bill, Members know that there has been a great deal of discussion about how we can ensure that we safeguard people in this country from acts of terrorism, while also safeguarding civil liberties. During the course of that debate, the Home Secretary has given evidence to the Home Affairs Committee, which has discussed her proposals and issued a report, and she has responded to it. It is necessary for the Home Secretary to consult Members, the Opposition Front Benches and outside organisations. The detail of the scheme in the Bill has not been made public, and will not be until it is published to this House.

The right hon. Lady talked about the economy. It is important for us to bear in mind that our economy is in a good position to weather the international economic storm. In such circumstances of international economic turbulence, I do not think the Opposition should talk down economic confidence in the British economy.

On data protection, we have had written ministerial statements from the Ministry of Justice and oral statements from the Ministry of Defence and the Chancellor of the Exchequer. Government Departments and agencies collect important data so that they can do their jobs properly, and as the right hon. Lady will know, there is a cross-departmental review of how we ensure that individuals’ details are not put at risk by breaches of data protection rules. When that review is complete, no doubt we will report the conclusions to the House. It is right that we bring the House up to date as and when we discover that there have been breaches of data protection, and we shall continue to do so.

The right hon. Lady raised the identity card scheme and talked about a delay. Let me explain to her that there is a phased introduction of this process: first, biometric data on passports; then biometric data on visas; and it will then include biometric data on cards for some people, such as those who work in the security industry. We have always said that there will be a phased approach and we will learn lessons as the phases roll out. Should we, on the basis of the lessons we learn, want to extend it to make it compulsory for British citizens, it would be brought back to this House for a debate and a vote. That has been the situation, and it remains so.

The right hon. Lady talked about the Mayor of London. As London’s Mayor, Ken Livingstone has revitalised the city. I am sure that Members will agree that London is the greatest capital city in the world. It is on his record, which speaks for itself, that London voters—[Interruption.] The Mayor of London holds an elected post, and Londoners will decide on his record at the ballot box in May.

Order. May I ask for single questions to the Leader of the House and a brief response, as many Members hope to catch my eye?

I missed the Home Secretary on the “Today” programme, as I was recovering from having attended the march protesting against the Government’s decision on police pay. I welcome the fact that, as a result of the anecdotal discussions that have been taking place, the Government have accepted a number of the Home Affairs Committee’s proposals in their counter-terrorism proposals. May we have a debate on the Committee’s proposals over the next few weeks—if not on Second Reading then independently of that—as that would aid a further discussion by Members on how to approach this important subject?

The Committee has produced its report, and the Government have produced their Bill. The next opportunity for the House to debate this important issue will be on Second Reading of the Bill.

The Leader of the House has announced that on Monday week we will debate and vote on motions relating to the police grant and local government finance. There is huge concern in the country about the police needing adequate funding as well as adequate pay. There is also great concern across local government, of all parties, because the settlement means that council tax will have increased by 100 per cent. in 10 years, whereas if education is taken out, the money available for councils for things such as social services will have increased by 14 per cent. in real terms over 10 years. Given those concerns, may we have entirely separate debates and votes on those matters? Can we have a police debate and a local government finance debate? They are separate subjects, separate budgets are involved and the organisations are separate. We always used to take that approach.

Will the Leader of the House guarantee that the five motions on the Order Paper in the name of the Secretary of State for Communities and Local Government dealing with local government reorganisation in Cornwall, Wiltshire, Shropshire, County Durham and Northumberland will each be the subject of a separate debate, so that they can be properly decided upon, as they deserve to be?

The Leader of the House has announced that at the end of the week after next, we will consider motions on the scrutiny of European Union legislation. That is a matter of considerable interest in the House, and her deputy has consulted colleagues about it. May we see the results of that consultation, and a report on it, in good time before we see motions and are asked to debate the proposals for better scrutiny of European Union matters?

Today, the written statement by the Secretary of State for Justice on the Government’s long-promised review of electoral systems has been published. One of my friends said that it was more like an A-level piece of work or an undergraduate thesis than a great Government study. Irrespective of that, may we have an opportunity to debate across the board the way in which electoral systems have worked well or badly at different levels of government, so that the Government can honour their manifesto commitment in reality, rather than just in word?

Today, we learned that eight Russell group universities have underspent significantly—by hundreds of thousands of pounds—the money allocated for bursaries to improve access among the poorest and most disadvantaged families, and that four others have not even disclosed their figures. Can we have either a statement from the Secretary of State for Innovation, Universities and Skills or a debate to ensure that a policy on which we all agree—ensuring that people get to university irrespective of their background or means—is delivered? We do not want to find, as is happening at the moment, that people are not taking it up because the money is sitting in the bank.

Lastly, terrible prevarication has taken place over whether the war veterans entitled to disability pensions who have been paid the wrong amounts will have to repay the sums, which are sometimes in the order of thousands of pounds. The Ministry of Defence said that it would repay them and would write the money off, then it said that it could not do that because the Treasury had to be consulted, and now the people involved are told that they must wait for another couple of months before those two Departments get their act together. Can we please have an announcement on this, either from the Chancellor or from the Secretary of State for Defence? I hope that such an announcement will say that war veterans who have served their country and been disabled in that cause will not have huge debts that have to be repaid because of a Government mess.

On the question of the universities and bursaries, which is an important issue for hon. Members across the House, I shall ask the relevant Secretary of State to respond to the hon. Gentleman’s point in writing and place a copy in the Library. I shall do the same in respect of the overpayments made to war veterans and how the MOD is proposing to handle the matter. All of us are concerned that our war veterans should be treated in the most careful sensitive way, commensurate with the duty that they have done for their country, which we all respect and admire.

The hon. Gentleman proposed a debate on the electoral systems review that has been published by the Ministry of Justice. I suggest that if he thinks fit, he could propose that subject for an Opposition day debate, or he could seek a Westminster Hall debate on it. He also mentioned this House’s scrutiny of European legislation. As he said, my hon. Friend the Deputy Leader of the House has consulted widely on how we can ensure that this House gives more effective scrutiny to legislation that comes from Europe. The hon. Gentleman makes a good suggestion, so I shall consider, with my hon. Friend, whether we could issue forthwith a written ministerial statement so that people could see how we intend that the House should deal with this matter before we table the resolutions that would give effect to the determination that we have made.

Sufficient time will be given to discuss the local government situation in relation to the counties that the hon. Gentleman mentioned. There will also be sufficient time to debate both police matters—how we increase police numbers as well as increasing their pay—and how we handle council tax. We have put those issues on one day, and we think that there will be adequate time for debate.

May I let the Leader of the House know that there is growing disquiet among some Labour Members about the compressed timetable and the arbitrary selection of themes that we will be discussing in relation to the European treaty? Does she agree that our opting out of the charter of fundamental rights, as it affects working people, is at least worthy of one full day’s debate? That would give the Government a wonderful opportunity to prove people such as me, who feel that the EU is heading in an increasingly neo-liberal direction, wrong.

On the fourth day of debate, which starts next Tuesday, we will propose to the House that there be four and a half hours’ debate on the very important issue of how our membership of the European Union helps our economy, and how we should ensure that everyone working in the European Union and in this country has good minimum standards of terms and conditions.

Can we have a debate in Government time on early-day motion 512, or a similar motion, that would give us a chance to vote on the Government’s decision to dishonour the police pay agreement ?

[That this House is disappointed by the failure of the Government to accept in full the recommendations of the Police Arbitration Tribunal police pay award; believes that the pay settlement should be backdated to 1st September; notes that the police are the front line in the fight against organised crime, terrorism and anti-social behaviour; recognises that their work puts them at great personal risk; further believes that this dispute over 0.6 per cent. difference is petty and needless; and calls upon the Government to reconsider its decision.]

Does she agree that we owe it to the 22,000 people who came to Westminster yesterday—those of us who went to the rally saw how passionately they feel about this breach of trust—to have a debate and a vote in this House about such an important matter? That agreement has lasted 28 years, and it is a disgrace for the Government to break it in this way.

I pay tribute to the work of the police. Their pay has increased ahead of inflation since we came into government. The Prime Minister has said that we would like to pay them even more, and I think we would all agree with that. However, we must ensure that there is no risk of inflation. We hope in future to secure an agreement with the police on a three-year pay settlement—but legally, police pay is a matter to be determined by the Home Secretary.

Can we have a topical debate on the cross-party campaign to secure a medal decoration for military personnel injured in Iraq or Afghanistan, similar to the American purple heart medal? Such a measure has cross-party support, and we need to discuss it in the House.

I think that that would be a good subject for a topical debate, and I shall consider it. I think that the whole House would want the opportunity to show the admiration and support in this House, and in the country as a whole, for our troops fighting bravely in Iraq and Afghanistan. My hon. Friend makes a proposal about recognition and war medals. He will know that that is a matter for the armed services to propose to the MOD, but an expression of this House’s opinion would assist in that process. I will take his proposal forward.

Will the Leader of the House confirm that in real terms, the pay of Members of Parliament has decreased in recent years?

I will confirm that point—and we will debate this subject for a number of hours at the conclusion of business questions.

Will the right hon. and learned Lady arrange for the Justice Secretary to come to this House next week to make a statement on low copy number DNA? She will be aware of the judgment made at the back end of last year on the Omagh bombing, as a result of which there is considerable anxiety about the evidential value of such DNA both in past cases and in prospective cases. We need to know where we stand. May I declare an interest? I am a criminal barrister too, and I have a professional interest in one such case.

On the question of low copy number DNA evidence being material to past convictions, there is a procedure for any defendant or offender who has been convicted who wants their case to be reopened or who has yet to finish the appeal process. In future, prosecution authorities will have looked carefully at that judgment and will consider how to go forward.

When can we have a debate about the performance of the train operating companies? I am sure that the Leader of the House is aware of the problems related to First Great Western, which provides the service from Paddington to south Wales. I commend the company for its efforts on Monday, when I was on the first train to go through the floods around Swindon—at 5 mph. Everyone rallied together and the managers and staff produced tea and coffee. Today, the Passenger Focus report shows that First Great Western is at the bottom of the customer satisfaction league. There are particular concerns about prices and delays. Can we have a debate on that?

Members of the Select Committee on Transport will have the opportunity to raise my hon. Friend’s important point with the Secretary of State when she appears before the Committee next Wednesday.

On Monday afternoon, Jessica Knight, a 14-year-old girl who is a constituent of mine, was subjected to the most sickening, horrendous and frenzied knife attack in Astley park, Chorley. I am sure that my right hon. and learned Friend would agree that that case highlights the threat faced by members of the public from those carrying knives. Will she assure me that the plans laid out by the Prime Minister to impose stricter sentences on those found carrying knives—as well as on those who carry out such sickening attacks—in order to tackle knife crime will be implemented as a matter of urgency? I am sure that the thoughts of the whole House are with my constituent. She is in a critical stage, hanging on and fighting for her life.

I am sure that the whole House will support and agree with the comments made by my hon. Friend about his constituent, Jessica Knight, who was subjected to that horrendous attack. Of course, the Government must take serious and violent crime seriously. We must ensure that we have the right penalty, the right prevention and greater support for victims.

May I take this opportunity to wish you, Madam Deputy Speaker, the Leader of the House and all hon. Members a very happy Burns nicht tomorrow? Can we have a look at tomorrow’s business to see whether it might be possible to have a short examination of the growing concern about the possible shortage of haggis, which is of course essential to every good Burns supper? The problem was highlighted by Improve, the independent sector skills council. It is concerned that the withdrawal of European social fund support for training in the calf butchery industry will have an impact and will lead to a lack of skilled butchers who are able to produce this finest of foods. Will the Government act to protect the

“chieftain o’ the puddin’-race”

or will they each just be a

“Wee, sleekit, cow’rin’, tim’rous beastie”?

I shall draw the hon. Gentleman’s question to the attention of the relevant Minister. I am sure that we all wish everybody a happy Burns night; I seem to be going to a Burns night dinner not tomorrow but next Friday.

Will my right hon. and learned Friend organise a debate on town and parish councils? That would allow me to celebrate the work of so many town and parish councils in my area and, in particular, to condemn the irresponsible action of the independent group in Featherstone, which has gone for a tax increase that would get into the Guinness book of records—an 800 per cent. increase in the precept—despite the fight put up by the local Labour party. That will substantially damage pensions, in particular, as it will take most of the increase. Such a debate would allow us to explore the mysterious decision to put half of the increase—

We all pay tribute to the important work that is done in town and parish councils. It is disappointing if groups such as the Featherstone independent group bring that independent civic work into disrepute by behaving in the way that my hon. Friend has described.

Given the importance of how the Mayor of London is running his office and how he is spending taxpayers’ money in London, can we have a topical debate to find out why the Greater London Authority Act 2007 will give the role even more powers, especially as there are problems with the checks and balances on it? In the light of the recent statement made by the Secretary of State for Work and Pensions, does the Leader of the House think that the Mayor of London should resign to clear his name, too?

The previous Government abolished the Greater London council, the authority that was democratically elected to run London. We set up a Mayor of London in order to allow people in the hon. Lady’s constituency, in mine and throughout London to have their say. I pay tribute to the work of the Mayor, who was elected democratically by the people of all of London. Next May, it will be the responsibility of the electors to have their say on how he has done his work. We have full confidence in him. We cannot tell whether we are fully confident in the work done in this House by the hon. Member for Henley (Mr. Johnson), because we never see him.

May I suggest to my right hon. and learned Friend that the subject of next week’s topical debate should be the situation in Gaza, which gets worse by the day? I ask her and the Government to agree that the Israeli Government should lift their blockade of Gaza, which is holding an entire population to ransom. That is against all principles of civilised behaviour and is clearly in breach of international law.

There is a debate this afternoon in Westminster Hall on the middle east. I think that everybody will be concerned by the developments that have been reported overnight.

The Leader of House will know that today the Secretary of State for Justice has published a document about the review of voting systems. He said that it remained the Government’s view that, as a change to the voting system used for this House would have significant effects on the way in which democracy works, it would come into effect only if it were endorsed by a referendum. What confidence should the public have that that promise of a referendum on any change to the voting system will mean any more than the promise of one on a European constitution?

We have made it clear that any decision to change the way in which Members of this House are elected, by going from first past the post to a proportional system, would not be for us to make and that we would ask for support for the decision through a referendum. We have no proposal with which to come forward; we do not propose that following the review there should be a change in the voting system for the House of Commons.

The Human Fertilisation and Embryology Bill contains a number of controversial clauses, including those on hybrid embryos, the deletion of the need for a father and new powers for the Human Fertilisation and Embryology Authority to apply the law in new cases without reference to ethical guidelines. The Bill has almost completed its passage in the House of Lords. Will the Leader of the House let us know whether it will come to this House before the Easter recess, so that we can plan our campaign? It is an important issue. A lot of people are making submissions to their MPs and they want to contact them at the appropriate time.

I know that the Bill will be subject in this House to a great deal of intense scrutiny and debate, as it has been in the House of Lords. I cannot give a specific time frame for when it will leave the House of Lords. Of course, the House of Lords needs to be allowed to complete its deliberations in as much time as it regards to be necessary.

What has happened to today’s topical debate? Does the Leader of the House really believe that there is nothing to debate today apart from our salaries?

I am afraid that the right hon. Gentleman has hit the nail on the head. The topical issue for debate today is Members’ pay.

Will my right hon. and learned Friend find time for a debate on the importance of holocaust memorial day? I draw her attention to early-day motion 648, which has been signed by 145 hon. Members.

[That this House notes Holocaust Memorial Day is 27th January, the day the Nazi death camp Auschwitz-Birkenau was liberated; recognises the significance of this day and the importance of remembering and learning from the past especially when there are those who seek to denigrate and deny its significance; observes that the lessons of the Holocaust have not been learnt and racism, anti-semitism and intolerance continue in the UK and abroad; further observes that the international community has failed to prevent the occurrence of genocide in Cambodia, Rwanda, Bosnia, Iraq and now Darfur; thanks the City of Liverpool for hosting the national event and the Holocaust Memorial Day Trust for organising the day; supports 2008's theme, Imagine, remember, reflect and react; applauds organisations like the Holocaust Educational Trust (HET) for their work and in particular recognises the impact the acclaimed HET visits to Auschwitz have had in shaping young minds; notes that a Book of Commitment will be placed in the corridor between the hon. Members' Cloakroom and hon. Members' Staircase between 1430 and 1630, Monday 21st to Wednesday 23rd January; and encourages all hon. Members to sign it and mark a day that helps to ensure the memory of the Holocaust is kept alive to serve as a warning now and in the future.]

The motion notes that memorial day is this Sunday and praises the work of the Holocaust Educational Trust. I thank my right hon. and learned Friend for using her good offices to allow the book of commitment to be placed in the House this week. It has been signed by many hon. Members of all parties. May I encourage hon. Members to attend local memorial events and to sign the early-day motion?

I shall take my hon. Friend’s suggestion as a proposal for next week’s topical debate. The need to remember and learn from the holocaust is raised regularly at business questions by hon. Members of all parties. The fact that Sunday is holocaust memorial day could make it an appropriate subject for next Thursday’s topical debate.

There is no confidence in the Northern Ireland community that policing and justice will be devolved to the Northern Ireland Assembly—and certainly not in the lifetime of the present Assembly. In addition, there seems to be some confusion in the mind of the Secretary of State for Northern Ireland about the devolution of those powers. Will the Leader of the House therefore find time for a debate on that very important and topical subject?

I do not accept that there is confusion in the mind of my right hon. Friend the Secretary of State about that matter, but I shall draw the hon. Gentleman’s comments to his attention. I shall ask my right hon. Friend to write to him, and to place a copy of the letter in the House of Commons Library.

May we have a debate on the economy, to be led by the Prime Minister? That would give him an opportunity to explain why he said to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) yesterday that he had

“inherited a very difficult economic situation from him in 1997”—[Official Report, 23 January 1997; Vol. 470, c. 1493.]

How is that remark consistent with the fact that the economy at that time was moving into considerable surplus, with the best pensions provision in Europe, a savings ratio of more than 10 per cent., trade in balance and inflation under control at 2.5 per cent? Treasury officials described those figures as “fantastically good”. How is that consistent with the description given by the Prime Minister yesterday?

The House has the opportunity every Wednesday to ask the Prime Minister questions about the economy. My right hon. Friend has shown that he is very willing to respond to such questions at length. He considers it to be of the utmost importance that our economy remains strong and stable, with high levels of employment and low inflation and interest rates, and that it stays strong against a background of international financial turbulence.

Harold Wilson was right to say that a week is a long time in politics. There are more important matters than MPs’ pay, and the resignation of Ministers and the conduct of Government are among them. Does the right hon. and learned Lady agree that today’s breaking news gives the Government an ideal opportunity to look again at the workings of government, and to decide that the responsibilities for Wales and for work and pensions—and indeed for Scotland and defence—should be split? Does not today’s resignation news give the Government an ideal opportunity to carry out a mini-reshuffle?

In light of the breaking news, may we have an urgent statement today on the implications of the resignation of the Secretary of State for Work and Pensions?

I know that since I have been answering business questions today there have been media reports about the resignation of my right hon. Friend the Secretary of State for Work and Pensions, who also has responsibility for Wales. I do not have confirmation that his resignation has been received, but my right hon. Friend has worked to improve pensioners’ retirement income and to ensure that more people come off benefits and go into work. That has been important work for people in this country, and I personally consider him to be an excellent colleague and a good friend.

May we have a topical debate on the rules governing community bids to take over post offices? The Government’s response to consultation on the post office network stated:

“The Government wants to encourage more community-run post offices”.

Last Monday, I attended a meeting in my constituency, at which EnviroKirn, a local community group, said that it wanted to take over a post office that is threatened with closure. Post Office representatives were far from encouraging, however, and the rules that they set out made it appear almost impossible for a community group to take over a post office. It is clear that the Post Office is not following Government policy, so may we have an urgent debate on the subject?

I shall draw the hon. Gentleman’s remarks to the attention of my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform. In the meantime, I suggest that he seeks a meeting with senior Post Office managers, so that he can present his constituents’ concerns about services.

May we have a debate on education so that we can discuss the Government’s plans to impose thousands of new homes on Milton Keynes while at the same time slashing its education budget by some £64.5 million? What would the Leader of the House say to parents with children at Oakgrove school in my constituency? They face the prospect that the final phase of building will not be completed, with the result that pupils will have to leave and go elsewhere. Why exactly is Labour deserting Milton Keynes?

Labour is certainly not deserting Milton Keynes. I know that there is a demand across the country for more housing, especially among people who are finding it difficult to afford to get on to the housing ladder for the first time, or who are finding it hard to rent a good property for themselves and their families.

The hon. Gentleman asked about homes, and I am dealing with that question first. As for education, there has been a big increase in investment in schools in this country, including in Milton Keynes, since this Government took office. The background at that time was that many children were being taught in very large classes, and problems with the roofs of many schools meant that buckets had to be put in place to collect the drips when it rained. The Government have instituted major programmes of capital and revenue investment in education, and I find it hard to believe that Milton Keynes is the only part of the country that has not benefited. Moreover, having made that investment in education, we intend to increase it in future.

The public think that hon. Members are like children with the keys to the sweet shop, and they are astonished that we vote for our own pay rises. Will the Leader of the House programme proposals that our salaries be determined entirely by an independent body, so that we can get rid of that indecent practice before we go off for the summer recess?