What representations he has received on his policy to spend the proceeds of the windfall tax on a welfare-to-work programme. [21051]

What representations he has received from employees' representatives on his policy to spend the proceeds of the windfall tax on a welfare-to-work programme. [21065]

I am pleased to tell the House that we have had widespread positive acceptance of our welfare-to-work programme from employers, from employees and their representatives and throughout the voluntary sector. In particular, I am most encouraged by the firm support of British industry. I am pleased to say that many Members of the House are acting as positive ambassadors for the programme, and that is having a very good effect locally.

I thank the Minister for that reply. Can he confirm that the many positive replies that we have had on the welfare-to-work programme include those from employers in my constituency in the Greater Nottingham area, such as Boots, Experian and East Midlands Electricity? Can he also confirm that not only big employers but many ordinary people are pleased to have a Government determined to tackle unemployment and the scourges of social exclusion and poverty that it brings with it?

I agree with my hon. Friend on all those specific points. The three companies that he mentioned—East Midlands Electricity, Experian and Boots—are all active in his area, which, as he is aware, with 4,000 new dealers passing through the programme in the first year, is the biggest in the east midlands. We are very encouraged by the work that is being done there and by the initial response to the pathfinder programme, which is not operating in his area but which, I am pleased to tell the House, is off to a flying start.

I also welcome the introduction of the welfare-to-work scheme in the pilot areas. However, looking forward to the time when the scheme goes nationwide, can my hon. Friend confirm that many substantial employers in my constituency, Warwick and Leamington, have expressed a commitment to participate in the scheme, and that their involvement will be vital to bring opportunities for work and training to the many young unemployed people in my constituency?

Again, I can agree with all that. My hon. Friend will be aware that, in particular, Ford and Christian Salvesen are very active in the programme in his local area and I am sure that when it gets under way in April 1998, when we roll out the programme nationwide, he will rapidly become aware of considerable benefits accruing from that to those who have previously been denied the opportunity to work. One of the most positive aspects of the pathfinders is that the new dealers are responding extremely well, and especially those given a personal adviser.

Given that unemployment has now been falling for about five years and is at an all-time low, at least in living memory, and given that the numbers of both the long-term unemployed and the young unemployed have been falling dramatically and continue to fall, why does not the hon. Gentleman review this ridiculous gesture programme, which is costing so much money, and give the money back to, for example, the pensioners who have been mugged by his Department?

I think the whole House and the country—and perhaps, on reflection, the right hon. Gentleman—will be dismayed at the terms in which he tried to dismiss this very important initiative. It is true that young unemployed 18 to 24-year-olds are fewer than they were. It is also true, however, that many are still coming on to the programme, and will be coming on to the programme, who have been out of work for six months or more, and we, as a Government—unlike the Conservatives when in government—intend to do something about it.

Does the Minister accept that in some parts of the country there is a growing labour shortage, especially of young people, and that there is some impatience that the resources of the welfare-to-work programme cannot be redeployed more quickly for older workers who have been out of work for a long time?

As the hon. Gentleman knows, within the welfare-to-work programme £350 million has been put to one side for those who have been out of work long term, and that will have good effect. We also have a separate skills shortage programme to put that problem right.

May I say how welcome the new deal scheme is in my constituency of Waveney? In answer to the right hon. Member for Bromley and Chislehurst (Mr. Forth), the virtue of the scheme is that, by its very nature, it involves precise targeting. In my constituency, there are pockets of unemployment within a relatively prosperous area and the scheme will attack those pockets. The unemployed in those areas will benefit most from the scheme because it directs resources where they are needed most. My constituents are looking forward to the scheme getting under way in April and preparations for it are well advanced. Does my hon. Friend agree that this policy proves the Government's commitment to social justice and economic efficiency?

Indeed. It is a £3½ billion project that will last for four years—unlike some of the tinpot schemes that were dreamt up by the Conservatives when they were in government. My hon. Friend will also be pleased to know that the gateway programme targets specifically particular pockets of unemployment in otherwise relatively prosperous areas. That is one of the scheme's innovations that will make it a success.

How can the Paymaster General plausibly promote a welfare-to-work programme that involves cutting welfare to the poorest people and raising taxes for ordinary savers while, at the same time, he is dodging taxes through the use of an offshore trust that he now admits that he controls? If the Paymaster General wants to retain a shred of credibility for himself and the programme, he should belatedly make a full disclosure about how his welfare is being looked after and how his windfall is being protected by the use of an offshore tax-avoiding trust, which the Labour party said before the election that it was committed to removing.

The right hon. Gentleman seeks to hide the fact that the Tory party opposed the money and voted against the programme. I am pleased to say that many Opposition Members are now taking a positive interest in the programme and are playing a positive role. However, the right hon. Gentleman seeks to hide the fact that he voted against the measure. While the Opposition will the end, they refuse to vote the means.

Does the Minister agree that the welfare-to-work programme not only tackles poverty but, by expanding the available work force, increases the capacity of the economy and will play a very important role in tackling inflation in a much more positive and beneficial way than by raising interest rates, for example?

My hon. Friend is absolutely correct. The welfare-to-work programme will play a particularly important role in Wales. As to the question of skills shortages and the tightening of the labour market generally, all sectors of British industry firmly support the programme because they have begun to see that it could be the smart way of easing existing skills shortages.

What is his policy on providing financial support to high-technology industries. [21052]

The essential policies for high-technology firms are those that promote stability and prevent stop-go. In addition, in order to encourage investment, we have reduced the corporation tax rate for businesses from 33p to 31p. We propose to reduce corporation tax to 30p in 1999. We have produced a small and medium business tax relief by doubling capital allowances and we are reviewing capital gains tax. Dr. Keith McCullagh and senior figures from high-tech companies are also producing a report about how to stimulate high-tech investment, especially in research and development-based firms.

Do the Chancellor and his Treasury team plan to assist high-tech industries by exempting them from capital gains tax on share issues? Is that not precisely what the Paymaster General managed to do by transferring £10 million-worth of shares to do with his high-tech company into his offshore trust? Why should the Treasury team, which contains a Minister who seems intent on avoiding tax, be so keen to impress upon other lesser mortals that they should pay every penny of tax?

I might have known that the hon. and learned Gentleman was not at all interested in high-technology firms. The Conservative party should start talking to businesses that have welcomed the cut in corporation tax from 33p to 31p—the lowest rate of corporation tax in our history. They have also welcomed the fact that we plan to cut corporation tax to 30p and that we are reviewing capital gains tax. It is a measure of the Government's success that we have persuaded senior figures from the high-technology industries to come together in a working party that will report soon, with a view to the Budget, on how we can help specifically some of the most modern, high-technology firms in our country.

Does my right hon. Friend agree that many high-tech companies spin out of universities and university research? Is there a way in which he could introduce a tax break for companies and individuals who give back to universities specifically for high-tech innovation? We in Britain—individuals as well as big corporations in the private sector—are small givers to universities, and that could be a new form of resource.

We have already made available for small and medium companies, including those that have spun off from universities, an enhanced capital investment tax relief that they can use in this financial year to expand their investment. In addition to that, by cutting corporation tax we are creating the environment in which long-term investment can take place. For university-based and other firms, the McCullagh committee is looking at how we can increase the venture capital industry's input into investment in these areas.

What discussions he has had with his EU counterparts on tax avoidance issues. [21053]

On 1 December 1997 the ECOFIN group of Finance Ministers agreed a code of conduct on business taxation. The code of conduct is aimed at eliminating special business tax regime loopholes, and we are working closely with our European partners and have persuaded the Commission to adopt a more rigorous and thorough application of the state aid rules in this area. In relation to multinational companies, we will keep our European partners, the G7 and the Organisation for Economic Co-operation and Development in touch with our discussion on how we modernise the tax rules on transfer pricing for multinationals and the existence of controlled foreign companies. We are publishing our proposals in these areas.

I thank the Chancellor for that illuminating reply. In the light of the helpful comments that the Financial Secretary to the Treasury made to European Standing Committee B, when she told us that

"Countries engage in unfair competition when they adopt zero or near-zero tax rates for special niche areas"—[Official Report, European Standing Committee B, 26 November 1997; c. 2.],

Again, it is a measure of the modern Conservative party that Conservative Members cannot now even address the issues of Europe and taxation without reducing them to trivia.

Does my right hon. Friend agree that the Government's measures are tough and are in the country's interests, and that it is a bit rich for Conservative Members to come out with all that criticism now, when they did nothing about the situation for 18 years?

Yes. We took measures in the first Budget to close a number of tax loopholes. We have done what the previous Government failed to do, and by doing so have raised more than £1.5 billion for the Treasury. Conservative Members who raise questions about these matters now seem to support taking action in areas where, when they were in government, they took no significant action for 18 years.

Can the Chancellor give the House an assurance, following his meetings at ECOFIN and with his counterparts in other forums, that the European Union will not require the United Kingdom to extend the scope of value added tax, and that he will effectively prevent any such extension?

We have made it absolutely clear that these are matters for vetoes and for the House.

What representations he has received from manufacturing industry about the effect on exports of the value of sterling. [21054]

Treasury Ministers receive numerous representations from business on a wide range of issues, including the impact of the strength of sterling. The Government are committed to open discussion of our economic performance with a view to achieving a shared sense of economic purpose. We take seriously the views that have been made available to us.

I thank my hon. Friend for that reply, but is she aware that in my constituency of Pendle, 44 per cent. of employees work in manufacturing industry, as against a national average of about 19 per cent., and there are real concerns about the appreciation of sterling against other currencies? In the past year, the pound sterling has risen by 21 per cent. against the deutschmark, 16 per cent. against the yen, 16 per cent. against the ecu and 5 per cent. against the American dollar. Firms are cutting prices and profit margins just to maintain market share, and that cannot continue indefinitely. Can my hon. Friend give manufacturing industry any encouragement that matters will improve in the short term?

I take on board my hon. Friend's point about the difficulties being experienced in his constituency, but the CBI and British Chambers of Commerce have pointed to manufacturing industry's strong performance throughout the north-west. I welcome the fact that throughout the north-west firms are performing strongly in a range of industries, including chemicals, pharmaceuticals and food and drink. But it is important to ensure that companies face macro-economic stability so that they can plan ahead for the future, and since the Government were elected on 1 May our policies have been designed to provide the kind of economic climate that allows manufacturing industries to be competitive and to plan ahead for the future.

Does the Economic Secretary agree that the current strength of sterling is the forgotten factor in the Government's economic and particularly monetary policy? Does she agree with the old City maxim that a 10 per cent. appreciation of the pound is equivalent to an increase of about 1 per cent. in interest rates? Will not this excessively tight monetary policy lead to one of the lowest growth rates in the European Community in two years' time? The National Institute of Economic and Social Research has calculated that we will have a growth rate of about 2 per cent. in two years' time, which will be the lowest of all 15 member states of the EU, in contrast with one of the highest growth rates under the previous Government's economic management.

The hon. Gentleman seems committed to trying to return Britain to the kind of stop-go, boom and bust economic policies of the previous Government—a Government who made sure that this Government inherited an economy with an inflation problem. The most sensible course of action for this economy is to obtain the climate of stability that the Government seek to achieve. We are conscious of the many pressures on manufacturing industry, and the hon. Gentleman is talking rubbish if he suggests that our attitude to sterling is to make it a forgotten problem.

Is the Minister aware that since the Dublin Government announced three months ago that they would join the euro, the punt in southern Ireland has declined by 20 per cent. against sterling which operates in Northern Ireland, and that that is now a major barrier to trade between Northern Ireland and the Republic? Will the Government, in their role as President of the European Finance Ministers and in the context of the joint statement by both Governments on Monday on the creation of a council of the various devolved assemblies and Governments within these islands so that we can act in co-operation, approach the Dublin Government to see whether it would be possible for the pound sterling to join the euro at the same time as the Republic of Ireland?

The UK Government's responsibility, in their role as President of the EU, is to be open and fair in the negotiations that will take place during the next few months. Those are critical negotiations for the future of the EU and its economies. In that setting, it is appropriate to pay tribute to the extent to which the EU is contributing to the process of peace and reconciliation in Northern Ireland.

Is it not clear that the high level of the pound and of interest rates is affecting manufacturing industry much more than service industries? Will my hon. Friend therefore consider further assistance to the manufacturing industry?

My right hon. Friend makes a good point. There is a differential between the performance of the service sector and the manufacturing sector. Notwithstanding that, official estimates still point to continued growth in exports from the manufacturing sector. We take on board the point that my right hon. Friend makes about assistance to manufacturing industry. Indeed, the Minister for Trade has already established arrangements to assist companies in their marketing operations abroad. We have also embarked on a research programme to find the means whereby we can encourage especially small and medium enterprises to promote exports abroad and we shall continue to look closely at the matter to ensure that we create the most propitious circumstances for our manufacturing industry throughout the United Kingdom.

What plans he has to impose VAT on research grants by charitable trusts; and if he will make a statement. [21055]

There are no plans to impose VAT on research grants made by charitable trusts.

I declare an interest in this subject. In the wake of the report by the National Council for Voluntary Organisations, which says that the impact of the Government's Budget will be to impose on charities an additional £350 million because of the changes to advance corporation tax, will the Minister take this opportunity to rule out definitively an attempt by Customs and Excise to impose VAT on research grants for scientific purposes?

I made it clear to the hon. Gentleman that VAT on research grants will not be imposed on charitable trusts. With regard to the ACT changes, which the Government made on the basis of economic and long-term planning, the Chancellor recognised the special position of charities and transitional arrangements were put in place—a total of £1 billion will be spent over seven years on that issue. I am surprised that the hon. Gentleman did not go on to mention, given his commitment and involvement in charities, the Government's review of charities taxation, which is widely welcomed by all concerned in the charitable sector. When I was at the annual general meeting yesterday of the charitable taxation reform group, we had a positive discussion about the future of charities.

What his priorities are for job creation at the ECOFIN meeting in York during the UK presidency. [21056]

I look forward to holding the informal ECOFIN in my hon. Friend's constituency in two months' time. I shall use the UK's presidency of the European Union to advance policies that help the unemployed to find work, ensure that we have a skilled, adaptable labour force and increase flexibility and adaptability in the labour market, to which we are committed, thereby raising the sustainable level of employment in Britain and Europe. I expect to discuss those issues at several ECOFIN meetings during the course of the next few months.

Just over a year ago, R. R. Donnelley, which has a large print works in my constituency employing several hundred people, was teetering on the brink of closure. It has now secured a contract to print all the telephone directories for the Netherlands for the next seven years and those jobs have been secured. Does my right hon. Friend agree that that experience shows that Britain benefits from involvement in the European Union? Will he be using our presidency further to ensure that we play a full part in Europe so that this country benefits from jobs from that source?

I agree entirely with my hon. Friend. Sixty per cent. of our trade is with European Union countries: both imports and exports. We are trying to expand the single market into areas where it has not been effective in the past: not just telephone directories, but telecommunications and the energy and utilities industries. I hope that we shall make advances during the European presidency. It would, of course, be better if we had the support of the Conservative party.

If the Government are really serious about giving advice at ECOFIN on reducing unemployment in European Union countries, will they tell the French Government to uncouple their currency from the deutschmark, even if that means getting out of the exchange rate mechanism?

We have already discussed joint measures to tackle unemployment throughout Europe. At the Luxembourg summit in November, British proposals to help young people who have been unemployed for more than six months and long-term unemployed men and women who have been unemployed for more than a year throughout Europe—exactly the policies that we are pursuing in Britain—commended themselves to our European partners. Those measures will create job opportunities and give people the skills that will be effective in reducing the unacceptably high level of unemployment in Europe. Britain is leading the way in those areas.

What representations he has received about the steps he is taking to prepare business for EMU. [21057]

We received a large number of representations as a result of our decision in October on economic and monetary union. We have set up a business advisory committee, and a Treasury committee is examining the preparations for EMU. The president of the Confederation of British Industry, the Governor of the Bank of England and the president of the chambers of commerce are involved in discussions on these matters. This country is committed to making those preparations now.

I thank my right hon. Friend for that answer. Does he agree that it would be wholly contrary to the British national interest for this Government or any future British Government to rule out for ever taking part in the single European currency? That is what Mr. Michael Portillo proposed yesterday, and he was apparently reflecting the views of many Conservative Members.

There are two positions that can be understood and are credible, and neither of them is held by the Conservative party. The first is to support the principle of monetary union, and the second is to oppose it. This side, supported by Lord Howe and many others, supports the principle of monetary union, whereas the other side cannot tell us what it supports. At least we now know what Mr. Portillo supports: he is totally against the principle.

Will the Chancellor tell us what he would support if there were a conflict, perhaps in the near future, between the needs of monetary policy in this country and the need for a sensible and competitive exchange rate? Which need would come first for him?

The steps that we are taking are right for Britain. The tests of economic and monetary union that I set out, and which were contained in a Treasury paper that was put before the House, will be applied by the Government according to what is in the national economic interest. The problem with the Conservative party's position is that it cannot tell us whether it would support joining the single currency if that were in the national interest. Even if the economic consequences were entirely beneficial, the Conservative party would probably oppose it.

The Chancellor's clear statement that our decision on membership of the single currency would be made on the basis of what was in this country's economic interests was derided by Conservative Members. Surely my right hon. Friend's view is self-evident to anyone who has examined this issue from a neutral position, and is shared by most people in this country. Does my right hon. Friend share my concern that anyone in the modern Conservative party who takes that view, including senior members such as former Chancellors, former Prime Ministers and former Deputy Prime Ministers, is described by the current Tory leadership as a has-been?

I agree with my hon. Friend. Lord Howe's letter was signed by many others, including several hon. Members, a former Prime Minister, a former Deputy Prime Minister and a former Chancellor in the last Conservative Government. They said that they

"support Tony Blair and his colleagues in making the right decisions on the difficult challenges which lie ahead."

If he will make a statement on the number of (a) new taxes introduced and (b) increases in tax rates since 1 May. [21058]

At the election, we made a clear promise not to increase the basic or the top rate of income tax. We have kept that promise and we will continue to keep it.

That is patently not an answer to my question. Anyone listening to it would have assumed that there would be only one new tax and no tax increases. We know that not to be true. There have been some 17 tax increases since the Government came to office, although before the election they sought to give the impression that they would not increase the tax burden. Is not the simple truth that, month on month, the tax burden on the people of Britain is increasing under the present Government?

The hon. Gentleman should recall that, during the general election—I should have thought that Opposition Members might remember the general election, as I believe it left something of an impression on them—when those who presented our tax policies were rigorously examined and cross-examined by Conservative Members and by commentators, we made a promise in relation to the top and basic rates of income tax, which we have kept.

Has my right hon. Friend found, as I have, that the Government's decision to cut VAT on fuel has been greeted with pleasure by families and by older people, and with some surprise by our constituents who are used to Governments' pledging to keep VAT at the same rate and then increasing it rather than keeping their tax promises as this Government have done?

My hon. Friend is quite right. Not only did we cut VAT on domestic fuel—in contrast to the actions of the previous Government—which has been greatly appreciated by elderly people in particular, my right hon. Friend the Chancellor announced a £200 million package to help poorer pensioners with their winter fuel bills and, of course, pensioners generally. None of that help would have been possible but for the change of Government last May.

We might have hoped that the Chancellor himself would answer a question allowing him to defend his breach of a clear promise not to increase taxes in any way at all—the promise given by the Labour party before the election. The Chancellor, however, dodges questions about taxes just as the Paymaster General dodges taxes on his income. How do the Government justify imposing a tax of £5 billion a year on pension funds? How do they justify imposing taxes on those who have saved £50,000? Will they not make the situation worse by imposing an affluence tax on pensioners?

A moment ago, my right hon. Friend the Chancellor and I were wondering why the right hon. Gentleman had not asked a supplementary question on Europe, when he might have clarified one or two points for us. For some reason he chose to say absolutely nothing.

If he will make a statement concerning the taxation of the casino industry. [21059]

The gross gaming yield of a casino is liable to gaming duty.

Does my hon. Friend agree that there has been no major review of casino taxation for 20 years, since the royal commission? Does she agree that we should try as far as possible to ensure a level playing field between different forms of gambling? If casinos were taxed on the same basis as bookmakers—6.75 per cent. of bets placed, rather than the sliding scale that she mentioned, which is based on bets less winnings—instead of the £79 million that she mentioned for last year, the Exchequer would have recovered £175 million out of total bets of £2.6 billion. Is it not time that we examined the matter to ensure fair play between the casino industry and the country?

Gaming duty was introduced on 1 October 1997 after a period of consultation. The tiered rate on casinos is based on the tax set before the new regime to ensure a fair return to the Exchequer. The gross gaming yield is the most efficient way to tax the industry. So far this year, with a quarter to go, £70 million has been raised. My right hon. Friend the Chancellor constantly reviews the relationship of all the taxes to ensure that they are set at a level that is acceptable to the industry and the Exchequer.

What recent discussions he has had with other European Community countries regarding the convergence of excise on alcohol and tobacco; and if he will make a statement. [21060]

I have had no discussions with representatives of other EU member states regarding the convergence of excise duties on alcohol and tobacco products. The mechanism for progressing convergence is through the European Commission's biennial reviews of the minimum rates of excise duties. The reports on the current alcohol and tobacco reviews are overdue.

Is my hon. Friend aware—I am sure that she is—that a vast black market has grown up in cheap booze and tobacco from the continent and that much of it is sold out of front doors and car boots to under-age youths who then cause mayhem in the communities where they live? That black market is also doing tremendous damage to our domestic brewing and tobacco industries. I appreciate that there are no easy answers to the problem, but will my hon. Friend give an assurance—I am not sure that I detected it in her first answer—that the problem is being seriously addressed?

I can assure my hon. Friend that in their negotiations in the European Union, the Government continue to press the case in relation to minimum rates of duty on both alcohol and tobacco. In addition, the Government have conducted a review of alcohol and tobacco involving smuggling, cross-border shopping, crime, health and competition. The report of that review will be with me soon. The industry has co-operated with us fully in order to target exactly the sort of measures that my hon. Friend identified.

Is that not a typical reaction from this bossy, authoritarian Government—[Interruption.]

Be authoritarian, Mrs. Bottomley.

The Government are moving hastily to ban tobacco advertising as a knee-jerk reaction, although it is well known that price is a more significant factor than advertising in tobacco consumption. I suggest that the Government take the steps that we set in hand to try to persuade other European countries to increase the price of tobacco rather than ban advertising.

This is not a bossy, typical reaction as the right hon. Lady suggests. We are taking a positive step, in partnership with the tobacco and alcohol industries and through the review that has been organised and led by Customs and Excise to tackle the very real problems of smuggling, particularly of tobacco products. The Government continue to negotiate in Europe on the minimum rates. The right hon. Lady is right to say that taxation is a tool in our health policy on tobacco, as is the ban on tobacco advertising.

Is my hon. Friend aware of the number of jobs in constituencies such as mine that depend on duty-free shopping? What plans does she have to try to secure those jobs in view of what will happen to duty-free shopping?

I understand my hon. Friend's point about jobs. Ending duty-free shopping, however, is not solely a decision for our Government. Decisions on duty free require unanimity in the European Union—a unanimity that does not exist at present. The Government's position, therefore, continues to be to support the demands for a review of the impact of the duty-free regime ending in June 1999.

What is his policy for increasing saving by individuals. [21061]

This Government's policy is to encourage saving by as many people as possible. As we said in opposition and as we have said in government, it makes sense to encourage as many people as possible to save and make provision for whatever eventuality they think appropriate. To that end, we have ensured that we have the right economic conditions, with low inflation, that will encourage people to save. We have, of course, introduced specific proposals such as the individual savings account.

Will the Minister consider upping the £50,000 limit on the individual savings account, not only because of opposition to the proposal, but because of the real anger that my constituents feel? Their income is being squeezed by a man who is not only the architect of the scheme, but who has £12 million in the Channel Islands avoiding UK taxation.

The Government made it clear when we were in opposition that we would introduce the individual savings account, which extends the principles of tax-exempt special savings accounts and personal equity plans, which have been established for a number of years. The House must face the fact that both we and the previous Government have spent just over £1.3 billion a year in tax relief for the schemes. It makes sense to ask what we can do to encourage people who do not save at the moment to do so in future. The objective of the individual savings account is to increase the number of people who save, but who are at present not saving. That is good for them as individuals and good for the country as a whole.

I am slightly surprised that this question is not being answered by the Paymaster General. Does the Chief Secretary agree with the Treasury official who told the House of Commons Library on 5 January that tax relief on savings, after the introduction of the individual savings account, would be less than would have been available if PEPs and TESSAs had continued?

The hon. Gentleman raises two points. The Chief Secretary to the Treasury takes a great deal of interest in everything that happens in the Treasury. Indeed, I can tell any of my ministerial colleagues who read the report of this Question Time that I take a great deal of interest in what they do in their Departments. It should, therefore, come as no surprise that I should choose to deal with a subject about which I have said a great deal both in opposition and in government.

Will the Chief Secretary confirm that, on the current gross dividend yield, annual income from £50,000 invested in a UK equities PEP is only £1,420? Instead of punishing middle Britain for saving, will he either scrap the limit or allow people to transfer any surplus into the type of offshore trust that is operated by the taxmaster general?

Yet again Opposition Front Benchers show that they have precious little interest in the cause of promoting saving. As I said, the Government—any Government—have a choice about how to balance the total amount that they are prepared to spend on tax relief to encourage people to save. Our view is that it is far better to use the available money, which will always be finite, to encourage people on middle and lower incomes who are not currently saving and need encouragement to get into the savings culture. That is our objective. I am bound to say that the vast majority of those with an informed opinion, who have sat down and thought about the matter, support the Government's objective, which is to encourage those who are less well off to make provision for themselves.

What is his policy on tax avoidance. [21063]

In the July Budget, we took action on the following matters relating to the issue: taxation of dividends on trading assets as trading profits; acceleration of capital allowances by finance leasing; sale and lease-back; transfers of unused past allowances; company purchase schemes; pay-as-you-earn avoidance; on VAT, in relation to the second-hand goods margin scheme, cash accounting schemes, capital goods schemes and insurance premium tax. Those actions will raise £1.5 billion over five years. We are now considering strengthening tax rules on multinationals and all other matters with a view to action in future Budgets.

Is the right hon. Gentleman aware that, in response to his announced policy to abolish PEPs and TESSAs, some important financial journalists suggested to their readers that they might move their investments offshore to avoid tax? As such arrangements are clearly condoned at the highest level of Government, would the Chancellor like to comment on those suggestions and on whether even middle-income savers should take heed of that professional advice?

People would be well advised to be wary of any advice on those issues from the Opposition. The available tax relief on individual savings accounts, PEPs and TESSAs is about £1.3 billion, which is substantial and rising, and we are committed to funds being made available in future Government budgeting. The hon. Gentleman should think carefully about the previous Government's record on tax avoidance. We are taking action on tax avoidance; for 18 years, they failed to do so.

Does my right hon. Friend agree that the previous two questions demonstrate a concerted campaign by the Conservative party on the issue of standards in public life, that that campaign carries no conviction and that the Government will take no lectures from the party that brought us cash for questions in brown paper envelopes?

I shall certainly take no lectures on tackling tax avoidance from Conservative Members. We have already closed loopholes to the tune of £1.5 billion and we are committed to closing loopholes in tax rules for multinationals. We are also taking action on other matters and will report in future Budgets. The problem with Conservative Members is that they have a new found interest in tax avoidance although they never took action to deal with it when they were in government.

I come back on this because the Chancellor has consistently tried to pretend that the issues raised by the Paymaster General's trust are minor and insignificant. I submit that hypocrisy, conflicts of interest and economy with the truth are not minor matters. When he was in opposition, the Chancellor pursued such matters in respect of people who did not hold ministerial office. Will he stop hiding behind a statement issued on 8 December by the Treasury which both threatened to sue newspapers and claimed—I quote the words of the Paymaster General's solicitors:

"our client does not influence the decisions of the Orion trust in any way."?

The hypocrisy is people saying that they want to take action on such matters when they refused to do so when they were in government. [HON. MEMBERS: "Answer the question."] I remind the right hon. Gentleman that when he was Financial Secretary to the Treasury and was asked to take action on offshore trusts, he said that

"it would impose a substantial and unreasonable burden on business."—[Official Report, 11 January 1990; Vol. 164, c. 706.]

Does my right hon. Friend share my concern that the Opposition are in danger of bringing the House into disrepute? We rightly have on our agenda a series of questions that are important to the future prosperity of the nation, yet it is clear that the real intent of the Opposition is to contribute not one whit to the discussion on tax evasion—

Order. The hon. Gentleman must put his question directly and it must concern Government policy and not the activities of the Opposition, for which the Chancellor is not responsible.

Does my right hon. Friend agree that he and the House should be addressing the important issues that the Opposition failed to address for 18 years?

I agree entirely with my hon. Friend. When the right hon. Member for Hitchin and Harpenden (Mr. Lilley) was Financial Secretary and was asked to take action on the taxation of trusts in Bermuda, he said that he would not. That is the reputation of the Opposition for taking action. The difference between them and us is that we are prepared to take the action that is necessary to close down tax avoidance.

If he will make a statement on his policy on tax-free offshore trusts. [21064]

If he will make a statement on the taxation of offshore trusts. [21066]

The tax treatment of offshore trusts is being considered as part of the wide-ranging review of tax that my right hon. Friend the Chancellor announced in his Budget statement.

Perhaps the Chief Secretary could tell us what progress has been made on implementing the commitment given by the Chancellor at the Labour party conference in 1996 that in future millionaires would not be able to exploit tax relief and offshore tax havens. Even allowing for the fact that bare-faced brazen cheek does not usually march hand in hand with a proper sense of shame, does the right hon. Gentleman sense any unease at having given such a commitment and then sharing the Treasury Bench with someone who was exploiting tax avoidance on a massive scale?

My right hon. Friend the Chancellor had greater success at our party conference than the hon. Gentleman had at his a few years ago.

Given the Government's commitment to closing offshore tax loopholes and their commitment to high standards in public life, would it not be better if the Paymaster General was moved somewhere else?

I do not agree with the hon. Gentleman. I repeat the point that we have made time and again. For 18 years, the previous Government did nothing about closing tax loopholes. When Mr. David Shaw, of fond memory for many of us—even he was asking for something to be done—asked the now shadow Chancellor about the issue, he was told that it would

"impose a substantial and unreasonable burden on business."—[Official Report, 11 January 1990; Vol. 164, c. 706.]