What discussions his Department has had with the Department for Education and Employment regarding its spending allocations for 1997–98 and 1998–99; and if he will make a statement. [12648]

My right hon. Friend the Secretary of State for Education and Employment and I have many discussions with each other. The House will be aware that, as a result of the windfall tax on the privatised utilities, we were able to allocate almost £4 billion to the Department for Education and Employment, including £1.3 billion to refurbish and repair schools. In addition to that, my right hon. Friend the Chancellor of the Exchequer was able to allocate a further £1 billion for schools spending next year.

I am grateful to the right hon. Gentleman for his reply. Does he not accept, however, that because of the difficult overall financial position of local authorities, councils will find it very hard to pass on increases in education spending to schools in full other than by slashing spending on social services? Will he therefore consider either abolishing capping completely, or making minor changes—for instance, introducing a separate and higher cap just for education spending?

The hon. Gentleman will no doubt recall that we discussed those matters when I visited his party conference in Eastbourne, but, whatever other effects I had there, my message clearly did not get through to him.

Will the Chief Secretary confirm that higher inflation since the general election has cut the value of public expenditure? In particular, he will be aware that written parliamentary answers from his Department show that revenue spending on education and training will be lower this year than was planned by the previous Government. Does he also agree that next year total public expenditure will also be lower than we planned for the same reasons? Given that these have been confirmed in writing by his Department, will the Chief Secretary take this opportunity to confirm both these points about education expenditure this year and general expenditure next year, and will he do it clearly and without evasion?

I knew that the Tories were now the caring party but it seems that they are now the party of public expenditure, which will come as some news not just to the House but to people outside. Of course I am aware of the parliamentary answer to which the right hon. Gentleman refers because I answered it. Surely he must accept two things. First, he cannot possibly say that the spending totals that have been allocated for this year were inadequate because it was his party that allocated them before it left office. Secondly, inflation has increased because the right hon. Gentleman's colleagues failed to take any action to restrain the inflationary pressures in the economy when they had ample opportunity to do so before the last election. That is the legacy that we all have to live with, and we are tackling it through a number of measures.

In which year since 1967 the total tax per litre of petrol represented the highest proportion of average male earnings, and in which year the lowest; and if he will make a statement. [12649]

Tax per litre of petrol as a proportion of average male earnings was highest in the period that the hon. Gentleman asks about—1967—although it is currently higher than it has been at any point since 1982 and it is rising due to the commitment on the fuel duty escalator.

Does the Minister agree that the figures give scope for turning the projected green Budget this autumn into a genuinely green Budget through the reduction of VAT on insulation materials and a compensating change in fuel tax? That would be fiscally neutral and would environmentally help the Prime Minister to reach the target that he has set for the reduction of carbon emissions.

I should remind the hon. Gentleman that the commitments on the fuel duty escalator will by 2010 bring in another £2.5 million towards our CO₂ target for reducing emissions. His party should make up its mind about where it stands on fuel duty. One minute the Liberal Democrats tell us that they are against rises because they say that such rises damage rural communities, and the next minute they tell us to put them up even higher to save the environment. Which one is it?

What is the cost to the ambulance service and the police service of the Chancellor's Budget decision to put a 1p higher rate of increase on petrol duty and to advance its date? The Financial Secretary will be aware that that is causing severe difficulties for important public services and adding to the resource problems caused by the Budget.

The hon. Gentleman should be congratulating us on giving an extra £300 million to the health service this year and £1.1 billion next year, which will adequately cope with its expenses.

While the intention to have a green Budget may be laudable, those who live in the greenest parts of the United Kingdom—the rural areas—have great difficulty in meeting the constantly rising costs of fuel. What do the Government intend to do about that large group of people for whom cars are a necessity?

I remind the hon. Gentleman that the Government cut VAT on fuel precisely to assist people to keep warm. In assessing future taxes in connection with the environment, the Government must be sure that they are contributing to the CO₂ reduction target. Irrespective of where people live they are not excluded from involvement in reaching that target.

Since the Budget was announced in July, has the Minister given any further consideration to developing differential pricing for petrol as between rural and urban communities, and in some way using the duty to influence that proposal?

Is that yet another policy? The answer to the hon. Gentleman's question is no.

What assessment he has made of the effect of the reformed private finance initiative on projects for schools. [12650]

The House will be pleased to know that the reformed private finance initiative is making good progress on all fronts, particularly schools. Four of the six prioritized projects identified by the Department of Health were for schools. I imagine that my hon. Friend has one particularly in mind.

I thank the Paymaster General for that reply. Will he give us an assurance that the valuable development work in PFI Pathfinder schools such as Cardinal Heenan Roman Catholic high school in my constituency—surprise, surprise—will act as a model for the capital investment that is urgently needed in many school buildings?

My hon. Friend is right. Cardinal Heenan is an important Pathfinder school. He will remember that I met its headmaster, the chair of governors and the leader of Leeds local education authority at my office here and that good progress is being made. My hon. Friend will also be aware that Pathfinder projects generally are going well. The Department for Education and Employment is extending great support to that school and I believe that a preferred bidder is shortly to be announced.

How many schools will close and how many teachers will be sacked because of the Government's introduction of a tax on the dividend income of pension funds? Will the Government now give a cast-iron guarantee that councils will be given extra cash next year to meet the higher pension contributions that result from the Government's Budget in July?

I am not sure how that question arises, but let me assure—[Interruption.] I am very pleased that it has arisen. Let me assure the hon. Gentleman that, over the next four years, we are putting £1.3 billion into school buildings. The education budget has been increased and share prices are still higher than at the time of the building, so there has been none of the impact that he wanted perhaps and direly predicted.

What estimate he has made of when United Kingdom investment as a proportion of gross domestic product will reach the average level for the EU as a whole. [12651]

The higher investment that we seek to meet the Government's objective of high and stable employment and growth requires stability as well as the specific measures that the new Government have taken to encourage long-term investment. The Treasury's economic assessment of Britain in Europe, published on Monday, suggests that to be outside economic and monetary union in the long term could damage investment. That is one of the reasons why we support the principle of a single currency.

May I start by recording my appreciation to the Chancellor for his wise decision to create a vacancy on Labour's National Executive Committee? Does he agree that the major reason why the British economy is weak and is not capable of joining the currency union is that the former Government neglected investment? Year by year, we were consistently recording investment levels that were barely 75 per cent. of the European average.

I agree with my hon. Friend on his second point. For 20 years, British investment compared with that in Europe has been lower than it should have been. With our cuts in corporation tax and our investment incentives, we intend to raise investment, but what would be most damaging, particularly for inward investment into Europe, would be to reject in principle the idea of a single currency. Thirty per cent. of inward investment in Europe, 40 per cent. of Japanese investment in Europe and 50 per cent. of Korean investment in Europe comes to Britain. The Conservative party should answer this question: why does it oppose the principle of a single currency? If the economic reasons for a single currency are compelling, why will it not support it in the national interest?

Does the right hon. Gentleman accept that it is the quality, as much as the quantity, of investment that matters? How does the return on investment in the United Kingdom compare with average return on investment in other European Union countries?

Of course it is the quality of investment that matters, but there has to be investment in the first place. I heard the hon. Gentleman on the radio talking about the single currency and his principled objection to it and I must tell him that we would not be serving the cause of British industry or investment in Britain well if we opposed in principle a single currency. To improve the quality of investment requires, first, that there is investment. The Conservative party's policies would ruin the possibility of more investment in our country.

Is the Chancellor aware that his clear line on the single currency has had the unforeseen effect of trapping four British nationals in an alien organisation? Would he care to comment on the dreadful plight of the hon. Members for Esher and Walton (Mr. Taylor), and for Leominster (Mr. Temple-Morris), the right hon. Member for Henley (Mr. Heseltine) and the right hon. and learned Member for Rushcliffe (Mr. Clarke)? Will he urge his ministerial colleagues to refer their case to the International Court of Justice which, unfortunately, sits at The Hague?

Order. As the Chancellor knows, he has very little responsibility for that, but perhaps he could pick one or two bones from that flesh.

It is just as well that I have no responsibility for the Conservative party in its present condition. My hon. Friend has made a point which is emphasised by the former Conservative spokesman on Northern Ireland who talked about the damage to business that would be caused by objecting to a single currency. He said that our businesses need to prepare for Europe urgently. That is the man who, until yesterday, sat on the Front Bench for the Conservative party.

If he will make a statement on Her Majesty's Government's policy concerning the taxation of profit-related pay. [12652]

We believe that profit-related pay should be taxable, like bonus pay and other, similar forms of remuneration.

I thank the Minister for his answer. Does he recall that, before the general election, his right hon. Friend, the current Prime Minister, visited John Lewis in Oxford street and said that it was a good example—as is the whole John Lewis Partnership—of a stakeholding society? Does he also recall—as far as I recall he was not present in the Committee considering the Finance Bill immediately prior to the general election—that the Labour party spokesman on that Committee said that the Labour party would immediately restore profit-related pay? Is he aware of how betrayed the 34,000 members of the John Lewis Partnership and other such schemes feel because of the lie that we heard in that Committee? Will he now apologise to the members of the John Lewis Partnership and to others who formerly benefited from profit-related pay tax breaks for breaking yet another election promise?

If I set aside the hon. Gentleman's rather intemperate remarks, perhaps I can put him right on a number of matters. First, at no time did anyone in the Finance Bill Committee promise, on behalf of the Labour party, that profit-related pay would be restored. I can assure the hon. Gentleman that I was present and, as the then shadow Chief Secretary, had anyone said that, it would probably have been the last thing they would have said on behalf of the Labour party because of the cost involved. What the hon. Gentleman has said is simply not true.

I was present at all the sittings of the Finance Bill Committee and I can confirm what my right hon. Friend the Chief Secretary has said. If the hon. Member for Lichfield (Mr. Fabricant) had got his hair out of his ears, he would have noted that too.

I recall my hon. Friend's contributions on that subject during the Finance Bill—some of them were in Latin. Even though we may not have understood some of what he was saying, we could at least see the enthusiasm with which he said it.

What steps he proposes to take to protect the competitiveness of exporting manufacturers in the United Kingdom from the adverse effects of high levels of sterling; and if he will make a statement. [12653]

The Government wish to see a stable and competitive pound over the medium term, consistent with our objective of price stability. One key route to United Kingdom export success is to ensure that there is no return to the boom and bust that we saw over the 18 years of the previous Government. We need to allow companies to plan ahead and to be competitive in the marketplace.

I well understand the sentiment behind the Minister's answer. However, is she really aware of the damage to manufacturing exporters caused by the high level of the pound? She will be aware that during the past seven days, Pringle of Scotland—a company that exports the vast bulk of its knitwear—has announced 300 job losses in the Scottish borders.

Manufacturing exports are still rising, but I take the hon. Gentleman's point about Pringle. I have been following the matter in the Scottish press. I commend the hon. Gentleman on his prompt action in contacting my office. I will be happy to meet a delegation from the company, and whoever else it wishes to bring, to discuss these matters. I am sure that my hon. Friends in the Scottish Office will be only too happy to join in that meeting.

Does my hon. Friend agree that a core economic issue is how to control inflation while also controlling interest rates and exchange rates? Is she aware that in my Stoke-on-Trent constituency about 500 jobs have been lost over the past six months? If she further aware that one of the main reasons cited for that by the pottery industry, which exports 80 per cent. of its products, is the exchange rate? Will she review economic policy and take fully into account the growing and serious concern about the effect of the exchange rate on manufacturing industry?

The Government fully understand and share the concerns of industry and exporters. However, it is important to remember the significance of ensuring that this country does not return to the boom and bust cycle. I recognise the problems in my hon. Friend's constituency, but since the peak in July there has been a reduction in the value of the pound against other currencies. On his point about reviewing economic policy, I remind him that the economic policy that we have embarked on since we were elected on 1 May is aimed at bringing long-term stability to the economy. By bringing long-term stability, which was so lacking under the previous Government, we hope to get on to the sort of economic footing that will ensure that the vicissitudes of the marketplace that are occurring in my hon. Friend's constituency cease to have the same impact.

Given the Government's commitment in principle to joining economic and monetary union, will they give a commitment also, in principle, to joining the exchange rate mechanism? If they will not, will it not be merely another example of the Government running scared of British public opinion?

My right hon. Friend the Chancellor has made it perfectly clear that we have no intention of joining the ERM.

Is it not also true to say that, in a highly technological world, people who export must also import if they are to provide their exports? There is an argument about swings and roundabouts in the value of the pound, and we should take no notice of those tinpot Liberals. We should remember that previous Labour Governments have devalued the pound, and previous Labour Governments have not managed to secure a second full term in office.

My hon. Friend is right in the points that he makes about the Liberals, who are consistent on nothing. I take the point that he makes, and I can assure the House that the Government intend to secure an economy that is on a stable and sound footing.

Further to the answer that the Economic Secretary to the Treasury gave to my hon. Friend the Member for Bury St. Edmonds (Mr. Ruffley), does she recall the Chancellor saying that the Maastricht criteria should be applied without fudging? She will be aware that one of the treaty criteria is participation for two years in the exchange rate mechanism without devaluing against member currencies. Will she explain why the Government do not think that it is in Britain's interests to rejoin the exchange rate mechanism?

The right hon. Gentleman asks an intriguing question. The criterion is exchange rate stability. The House will be interested to learn from him, however, what action the Conservative party is prepared to take, and which faction of the Conservative party has the ascendancy this afternoon as distinct from this morning.

The Economic Secretary might consult the treaty to learn that the criterion is participation in

"the Exchange Rate Mechanism … for at least two years, without devaluing against the currency of any other member state."

I will answer the question quite clearly so that the right hon. Gentleman can understand it: the issue is exchange rate stability. I wonder whether he would care to answer my question about the position of the Tory party today.

What steps he is taking to end major fluctuations in the business cycle. [12654]

The Government have taken decisive action to strengthen economic stability. As my hon. Friend the Economic Secretary said, the damaging boom and bust legacy that we inherited has been extremely damaging to British industry. We attach great importance to stability, openness and transparency of policy—because from them flows the credibility that world markets now demand.

Does my right hon. Friend agree that the Government have established a framework for monetary policy that is transparent, accountable and the best in the world? Does he agree also that the monetary policy reforms signal the Government's intention to get away from the boom and bust policies and short-termism of the past, allowing the United Kingdom to take decisions with the long-term interests of the economy rather than political expediency in mind? Does he think that the Conservatives will support the Bank of England Bill?

If Conservative Members cannot tell us their policy on the European single currency, perhaps they can tell us their policy on supporting the Bank of England Bill, which was introduced earlier this week; we shall see. My hon. Friend is quite right that we must have stability if we are to put the economy on a long-term footing and create an environment that encourages investment and increases prosperity. Our reforms—which the Bank of England Bill will soon introduce—are a part of that process. Those reforms must be considered alongside the actions taken this year by my right hon. Friend the Chancellor in his Budget, which were geared to achieving long-term stability, reducing the high debt level that had been encouraged and creating a climate in which British business can flourish.

Does the Minister accept the view of the International Monetary Fund that exchange rate flexibility is necessary to cushion business cycles, as has been witnessed recently in south-east Asia? The view has also been relevant to Europe and America over the past few years, and is supported by most central bankers.

The hon. Gentleman seems to forget that it was his party which took this country into the exchange rate mechanism, although it seems that the Conservatives are now collectively sorry for it. I am happy to accept that the IMF has been complimentary about the conduct of the economy in the hands of my right hon. Friend the Chancellor.

If he will make a statement on the reduction in VAT on domestic fuel. [12655]

What representations he has received on his reduction in VAT on domestic fuel from 8 per cent. to 5 per cent. [12657]

The change to a 5 per cent. rate on VAT came into effect on 1 September, benefiting all households well in time for winter fuel bills. This honours our manifesto commitment to the people of Britain.

I thank my right hon. Friend for that answer. Does he agree that the manifesto pledge that we kept will stop the obscenity of pensioners having to choose between eating and heating?

Not only have we cut VAT on fuel but we have abolished the gas levy. At the same time, in our welfare-to-work programme we are introducing an insulation programme to enable elderly people to insulate their homes against the winter cold. These measures add up in only 18 weeks to far more than the previous Government did in 18 years.

I thank my right hon. Friend for his comments. My constituency, Vale of Clwyd, has the second highest number of pensioners in Wales, and his announcement will go down well there. Does my right hon. Friend have any further proposals to promote warmer homes, such as a reduction in VAT on insulation schemes?

That is part of a review that we promised at the time of the Budget—and, indeed, before the election—which will report soon. As for the measures that we are taking to protect elderly people against the winter cold and to enable them to have better insulated homes, the environmental task force being set up under the welfare-to-work programme will have a significant role to play. I accept that for elderly people, whose fuel bills are a far higher proportion of their income and expenditure, Government action is necessary. However, I remind my hon. Friend that if the Conservative party had had its way, VAT on fuel would have been 17½ per cent.—it was the Labour party that stopped it rising to 17½ and then reduced it to 5 per cent.

How does the Chancellor balance the electorally popular measure of reducing VAT on fuel with the hard choices, about which the Prime Minister spoke, involved in reducing carbon emissions? Is not the policy of reducing VAT on fuel in direct contradiction to the hard choices involved in reducing carbon emissions and the incremental growth in taxation on petrol?

If the hon. Gentleman is saying that the policy is in direct contradiction to the objective of energy efficiency, I assume that the Conservative party is pledging at the next election to raise VAT on fuel from 5 per cent. to 8 per cent. and perhaps to 17½ per cent. When the Opposition Front-Bench spokesman rises to speak, perhaps he will tell us what the Conservative policy is. Only a few minutes ago, when talking about the environment, my hon. Friend the Financial Secretary spelled out all the measures that have been taken to honour the Prime Minister's commitment on the environment. We are an environmentally friendly Government who are dealing with the problems of energy efficiency and insulation.

Before the Chancellor overdoses on self-congratulation, will he confirm, as the Economy Secretary has already done in the House, that had he not deftly chosen to manipulate the implementation date of the reduction in VAT on fuel—introducing it on 1 September, before the pensions uprating, rather than after it on 1 October—the state pension would have risen next April by an additional £6.23 per year for a pensioner couple and £3.90 per year for a single pensioner? Has not his manoeuvring taken that money directly out of the pockets of pensioners?

Here we see the Conservative party in action. [HON. MEMBERS: "Answer."] It is about time the Conservatives listened to what is happening. They are saying again that VAT on fuel should not have been reduced in September and that we should have waited longer, letting pensioners suffer during the winter. We were not prepared to do that.

If he will make a statement about the impact of inflation on his public expenditure projections. [12658]

Public expenditure figures are based on cash planning. A key principle of spending control for two decades has been that there should be no automatic adjustments for inflation, because that would just build inflation into the system. We are committed to controlling public expenditure and keeping a firm grip on inflation.

Nevertheless, so that false expectations are not aroused, will the Chief Secretary confirm that, even with the very welcome extra £270 million, the national health service budget will be £150 million lower in real terms than was planned by the previous Government?

As I said earlier, we are committed to maintaining tight control over public expenditure. That is very important if we are to put the public finances on a sound long-term footing. No one could accuse us—or me in particular—of raising false expectations. I have never shrunk from saying that some hard choices will have to be made during the next two years. However, we have allocated an additional £300 million for the health service for the coming winter and an extra £1.2 billion for next year. That money would not have been available had the Conservatives still been in office. The health service will benefit greatly from that, as it will from other measures that we are taking to improve patient care.

Will the Chief Secretary tell the House the precise impact on inflation of his right hon. Friend's Budget this summer?

As the hon. Gentleman will know, I have answered many parliamentary questions to his colleagues, and perhaps even to him, in which I have made that clear. We have given real-terms increases to health and education, which will benefit patients and people in schools. I am not prepared to take lectures from the Conservatives, who left public finances in a ruinous state and left record levels of debt, having doubled the national debt over six years. Their failure to take action to control inflation has meant that we have had to make tough choices and take the necessary action that they ducked on every occasion.

How he proposes to further the public debate on the implications of a single currency. [12659]

In addition to publishing a guide to economic and monetary union, with a special edition as a guide for business, the Government are preparing for economic and monetary union by setting up a steering group, led by the president of the Confederation of British Industry, the Governor of the Bank of England, the chairman of the Association of British Chambers of Commerce, and Ministers. We are also planning sectoral and regional consultations on the single currency to start from January.

I thank my right hon. Friend for that response and congratulate him on his statement this week, which was the most positive statement on economic and monetary union that we have heard from a British Government. Does my right hon. Friend agree with the Tory Reform Group, which stated this morning that the Leader of the Opposition's tactics on EMU have united the Government and business against the Conservative party?

I quite understand my hon. Friend's remarks. Because the Conservatives cannot tell us whether they support the principle of a single currency or whether they will put a national economic test above all others, they have lost the support of business. They are the anti-business party in Britain today. Confirmation of that, if it was needed, has come from the Tory Reform Group and the remarks of the right hon. Member for Henley (Mr. Heseltine), the former Deputy Prime Minister, who said this morning that the Conservative party is at war with business.

In the light of his repeated comments this week that all that matters are the economic tests, will the Chancellor explain what he would do if other countries went ahead with economic and monetary union and—against the expectations of people on both sides of the House, including me—it succeeded economically but the tests failed democratically? What would the Government's view be if a new regime emerged that destroyed the democratic freedoms of those countries?

The hon. Gentleman does not seem to understand my statement on Monday. I said that we supported the principle, that we would apply economic tests, that national economic interests would be decisive in the Government's recommendation and that the people would have the final say. The hon. Gentleman should tell us whether his party supports the principle of a single currency or not. I understand that Conservative Members went to Eastbourne to sort the matter out in what they called sessions for bonding. I gather that they were split up into small groups—and that is literally the position in which they are now.

I am aware of all the fiscal constraints involved. Arising from what my right hon. Friend has just said, is there not a case for public money being used for another prolonged bonding session for the Conservative party so that it can try to sort out the issue? May I also suggest that it could be held at Henley and that a few more records of wartime songs could be thrown in at evening sessions?

I offer the shadow Chancellor the chance—with your permission, Madam Speaker—to tell us whether he supports the principle of a single currency or not. Within the Conservative party, there is now a five-year group, a 10-year group, a 30-year group and a group that will never go into the single currency. If the Conservative party does not support a single currency for the foreseeable future, it will not be a single party for the foreseeable future.

Does the Chancellor accept that many in this country believe that economic tests are the only basis on which a decision to join a single currency should be made? It is conceivable that those tests may arise within this Parliament. Will the Chancellor accept, therefore, that it is imperative to mobilise public opinion to ensure that we get support for a commitment to enter a single currency? Does he agree that the split within the Conservative party at least creates the opportunity for a cross-party campaign that can ensure a yes vote in a referendum whenever it comes?

I respect the hon. Gentleman's long-standing commitment to a single currency. I think, however, that on reflection, he will agree that getting it right is more important than getting it quickly. If he believes, as I do, that the economic tests must be met and that we need a sustainable and durable period of convergence, he must accept that that will take time. What he found on Monday was a Government prepared to make the preparations. I hope that he will support us, not only in the standing committee that will deal with the preparations for monetary union, but in our attempt to inform and to show the people of Britain what monetary union can mean. What happened on Monday is that we were the first Government who were prepared to support the principle of a single currency. We are still waiting for an answer from the Conservative party.

In the Chancellor's welcome statement on Monday, he addressed the lack of convergence between our economy and that of our European neighbours. Will he give some information on how we shall measure that convergence over the next few years, picking out particularly the element of interest rates, on which he laid so much emphasis?

My hon. Friend makes a good point. We have laid down five economic tests. They include investment and what impact the single currency will have on it, whether there is sufficient flexibility to withstand shocks, whether the business cycles are convergent, and the impact on jobs. We can set these tests down because we have been prepared to say that we support the principle of a single currency. Until we clarify the Opposition's position—do they support a single currency or not—we cannot move further in understanding it. The leader of the Conservative party said at one stage:

"We should say very clearly that we have principled objections to a European single currency. If in some future decade, that is no longer the case …"

If, as is inevitable, there comes a point when the interests of this country are not the same as the interests of the rest of Europe, whose interests does the Chancellor think will prevail in this brave new world—the interests of this country or the interests of the rest of Europe?

It is precisely because we have set national economic tests for Britain which have to be met that we can say that the decision will be made in the national economic interest. Even if the economic arguments for a single currency were compelling and it was in the national interest to go in, the Conservatives cannot say that they would recommend doing so. I suggest that they return to Eastbourne and have another bonding session to see whether they can sort things out.

If he will make a statement on the level of interest rates. [12660]

Interest rates are now set by the Bank of England with the aim of meeting the Government's inflation target. I am satisfied that the new arrangements will deliver long-term price stability and prevent a return to the cycle of boom and bust.

Does my right hon. Friend agree that the Government need to give high priority to policies that will reduce interest rates and improve the competitiveness of the pound in preparation for joining the single currency? Would not the prospect of Britain joining sooner put us in a strong bargaining position to argue for a slowing down of the bandwagon to 1999?

We have made it absolutely clear that it is not practical for Britain to join in 1999, as the economic tests that we have set are not being met.

Is it not one thing to have an independent national central bank, namely the Bank of England, but constitutionally and practically quite another for our interest rates to be controlled by an independent, unaccountable central bank in Frankfurt over which the British people have no democratic control whatsoever and whose actions could decimate British jobs and do incalculable harm in this country? How can the Chancellor continue to say that there are no constitutional implications to a single currency?

I take it that we have the answer to at least one of my questions: the hon. Gentleman is opposed to the principle of a single currency. On Monday I made it clear that there was a pooling of economic sovereignty involved—[Interruption.] If the hon. Member for Buckingham (Mr. Bercow) wants to follow the debate, he should really be in the Chamber and look at the issues. I said quite clearly on Monday, as he will acknowledge, that a pooling of economic sovereignty was involved. We have to ask ourselves whether there is a constitutional bar to economic and monetary union as a result. We say no. What does the hon. Gentleman say?

rose—

Mr. Bob Blizzard.

What steps he will take to recover revenue lost from bootleg imports of beer. [12662]

The Government take excise smuggling and fraud very seriously. Customs is currently deploying addition officers to front-line work in the Dover area to counter those involved.

I thank my hon. Friend for that reply. Brewers in my constituency will welcome the deployment of extra staff and the review of the matter. Does my hon. Friend agree, however, that the scale of bootlegging is so large that French beer occupies about 5 per cent. of the British market and 70 per cent. of it is smuggled beer? That represents a huge loss to the public purse and a huge threat to the British brewing industry and to jobs. It is also resulting in gangs being involved in violent criminal activity. Does my hon. Friend accept that the root cause of the problem is the large differential between the rates of duty on French and British beer? Will she therefore seriously consider the case put to the Treasury that if beer duty were reduced by 20 per cent., within three years there would be a net gain to the Exchequer and an increase in employment of some 60,000 jobs?

As I have said to my hon. Friend, to put the matter in proportion, the loss to the Treasury from smuggling was something like £120 million in 1996–97, against a total income of £4.9 billion in duties from beer. That estimate is based on figures agreed by the brewers. Although my hon. Friend is absolutely right to draw attention to the problems of growing crime and its associations with extensive importing of French beer, the answer is not harmonisation of duty rates. The answer is collaboration, as we have demonstrated through the review that we have set up to tackle excise fraud, to deal with crime and competitive issues and address health issues.

Is the Minister prepared to look at the facts and figures provided by the Wines and Spirits Association, which confirm the point made by the hon. Member for Waveney (Mr. Blizzard) that millions of pounds are lost to the Treasury from bootleg imports not only of beer but of wine and spirits, including the produce of the Chancellor's and my own country, Scottish whisky? Most of the duty on Scottish whisky is lost through bootlegging. Does the Minister agree that it is a misuse of public resources to increase the use of agents to apprehend bootleggers and that, as the hon. Gentleman suggested, the money could go to the Revenue as genuine income?

When the Conservative Government reduced duty on Scottish whisky, the producers responded by putting up the price, not putting it down. If the case was so strong that a price reduction was necessary to assist in combating smuggling, perhaps they should have reflected on the increase before they implemented it. All producers—of wine, spirits and beer—are actively involved in the Government's review. Discussions are under way about the exact scale of the problem and agreement will be reached in solving it in partnership between industry and Government.

What measures he is taking to strengthen economic stability in the United Kingdom. [12663]

As my right hon. Friend the Chancellor has already made clear this afternoon, the Government have taken decisive steps to strengthen economic stability. In May, we established the new framework for monetary policy, giving operational independence to the Bank of England. In July, my right hon. Friend introduced the deficit reduction plan, based on tough fiscal rules, designed to put public finances on a sustainable course.

Does my hon. Friend agree that market expectations indicate that interest rates will go down next year and that, since May, long-term interest rates have gone down by 1 per cent.? Does that not show that the measures taken by the Government since May have directly encouraged economic stability?

The measures taken by my right hon. Friend the Chancellor were aimed at the long term. In fact, since his announcement in May, long-term interest rates have fallen. The Government are seeking to bring about a climate of stability which was sadly lacking. All of us remember the Ken and Eddie show, when interest rates went up, went down and then went up again. That is not a sustainable way to run an economy. In the long term, we hope that companies and individuals will be able to plan ahead with a degree of consensus, with politics taken out of the setting of interest rates.

If the Government claimed to be so clear and so economically stable on Monday, why did the markets so misunderstand them in the previous 30 days?

Given that share values are up since May, I find the right hon. Gentleman's point rather difficult to take. The action that my right hon. Friend the Chancellor took in giving operational independence to the Bank of England has been widely welcomed. The only answer that we cannot get is whether the Conservative party is prepared to support the Bank of England Bill. Conservative Members have been asked three or four times this afternoon for a response but have failed to give one.

If he will assess the advantages of applying taxes to resources rather than labour. [12664]

The Government's statement of intent on environmental taxes, issued in the July Budget, demonstrates our commitment to the use of economic instruments to achieve environmental objectives. However, we will look at the advantages and disadvantages of taxes on a case-by-case basis. In each case, it is important to consider all the effects of a tax, including its distributional impacts, and any implications for competitiveness.

My hon. Friend will know that the decision by the Chancellor to examine the issue of environmental taxation seriously, rather than going for a quick fix, was widely welcomed. I ask the Government to continue the work on environmental taxation and to consider—with no prejudice—the landfill tax introduced by the right hon. and learned Member for Rushcliffe (Mr. Clarke) in his penultimate Budget. It has been very effective in changing the environment. I hope that we can build on that rather than ignoring it.

I confirm that the cross-party support for the introduction of the landfill tax, which has been a successful measure—its first year of operation is currently being reviewed by the Government—is an excellent example of how an environmental tax can work.

Given the European Union tax harmonisation proposals, which were discussed by the Chancellor at the recent Economic and Finance Council meeting, is it the Government's long-term intention to hand over direct tax policy to Brussels? Or will the Financial Secretary today commit the Government to vetoing those proposals at the next ECOFIN meeting?

As the hon. Gentleman well knows, we have a veto and we have always declared our intention to use it when that best serves British interests.