What British involvement there is in the International Monetary Fund rescue plans for the south-east Asian economies; and if he will make a statement. [27201]

Since last summer, four Asian countries have agreed International Monetary Fund programmes under the IMF' s emergency financing mechanism, all with United Kingdom support. They are the Philippines, Thailand, Indonesia and Korea. Britain is also one of 13 bilateral contributors to Korea, with a potential contribution of $1.25 billion; no contribution has yet been disbursed. Help is also being given through the Asian Development bank and the World bank.

I am sure that the Chancellor of the Exchequer is aware of the terrible consequences for the poorest people in that region of last year's collapse of the financial institutions, of the terrifying poverty that many people there are facing and of the expulsion of many migrant workers. Malaysia, for example, is expelling almost 1 million people, and 20 million people in Indonesia are trying to survive on less than $1 a day. Will he assure the House that, in all the considerations of the IMF package, there will be an attempt to stop countries throwing migrant workers out, into even greater poverty in the countries that they have come from, and that the money will be used to support the poorest people in every one of those countries—rather than to bail out the financial institutions that got those countries into a mess in the first place, often decamping with large profits to safer havens elsewhere?

I can tell my hon. Friend two things. First, we are concerned about the social difficulties that have been caused by the problems in those countries. It is important that there is openness in the fiscal policies pursued by those countries. I am glad to say that some of the expensive programmes being pursued by some of the Governments have been cancelled. Secondly, we are following action in the area by the World bank, which is disbursing $16 billion. I shall meet the World bank governor soon to discuss those issues. We are as concerned as he is that the social difficulties caused by the rescue programmes are minimised as much as possible.

Does the Chancellor of the Exchequer agree with his friends in the Trades Union Congress that unemployment will start to rise before the end of this year, and that that has little to do with the crisis in Asia but is primarily to do with his policies of high interest rates, an excessive exchange rate and over-tight fiscal policy? Will he give the House an assurance that he will not further tighten taxation policies in the Budget?

The right hon. Gentleman is stretching his question far beyond the issue of what the Government are doing on the IMF. However, I shall answer him directly. He is saying, first, that fiscal policy is too tight. A few months ago, he was saying that it was too lax. The Conservative party had better make up its mind where it stands on the issues. Is it in favour of lower interest rates, the same interest rates or higher interest rates? Is it in favour of higher public spending or lower public spending? The Conservative party really must make up its mind on those issues.

Is the Chancellor aware of the widespread concern that the IMF, the World bank and, in future, the multilateral agreement on investment will be giving advice to developing countries that is more in the interests of the multilateral companies that might wish to invest in those countries than in the interests of the countries themselves? Will he use his influence to support the new direction, which we begin to see in the World bank, of considering not only openness to world financial markets but the social impact of changes?

Yes, on the last point, we shall follow the social reform policies that are being examined by the World bank. Three issues arise from what has been happening in the Asian countries. First, there is a desperate need for banking reform in those countries to avoid the exposures that caused so many problems in the past few months. Secondly, there is a desperate need for openness in monetary and fiscal policy so that people know exactly where they stand. Some of the recent events could have been avoided had the IMF adopted a code of monetary and fiscal policy, as we have suggested. Thirdly, the IMF will have to look at its own practices and the lessons to be learnt. The G7 and the meeting of the Association of South-East Asian Nations in London will provide a chance to examine all the issues. The lessons will have to be learnt.

What discussions he has had with his EU counterparts on tax harmonisation. [27202]

There have been preliminary discussions in ECOFIN about aspects of tax harmonisation. The Government's view is that direct taxation is primarily a matter for national Governments. Decisions on European tax issues are subject to unanimity. The Government would not agree to measures unless they were in the United Kingdom's interests.

Will the right hon. Gentleman confirm that one of the topics for discussion at those meetings is measures to combat tax avoidance? Will he also confirm that the Belgian tax authorities are participating in the discussions and that he has been drawing on the undoubted and unparalleled experience of the Paymaster General in those matters?

If the hon. Gentleman were genuinely interested in the subject matter, he would realise that the discussions were in respect of tax harmonisation measures that will benefit British businesses. That is a matter to which the Government attach great importance and which was neglected by the previous Government.

In the course of the discussions, will my right hon. Friend discuss with his European counterparts who have an interest in the North sea oil and gas industries the seriousness of the higher operating costs, the diminishing capacity of the fields and the need for further investment, with a view to ensuring that the industry does not suffer any adverse effects of tax changes?

I am not sure whether the discussions to which I referred will have a direct bearing on the matters that my hon. Friend raises but, as he knows, the North sea oil industry is of immense importance to the United Kingdom, particularly the north-east of England and the north-east of Scotland. The ECOFIN discussions are geared primarily at establishing a code of conduct on business taxation so that Britain and British businesses are not exposed to unfair competition by action in other parts of Europe.

Without arguing for uniform tax rates, will the Minister bear in mind the distorting effect of wide differences between tax rates on businesses and the economy? I am thinking in particular of the tremendous difference between corporation tax rates in the United Kingdom and the Republic of Ireland which puts various parts of the United Kingdom at a serious disadvantage in terms of attracting inward investment.

As the right hon. Gentleman knows, in the Budget and in the pre-Budget report, my right hon. Friend the Chancellor of the Exchequer announced a major reduction in corporation tax, which will be beneficial to the United Kingdom. That is an example of the fair competition that we want to enhance. The code of conduct is geared to stopping unfair competition, whereby member states may be tempted to shelter some niche market in an unfair way. However, I am sure that the right hon. Gentleman will agree that the measures announced by my right hon. Friend last year, which mean that we have one of the lowest corporation tax rates of any of our major competitors anywhere in the world, will be immensely beneficial to the United Kingdom, in respect of investment from here and inward investment.

If he will make a statement on his expenditure plans for the windfall levy. [27203]

What proposals he has to use the revenues accruing from the windfall tax. [27220]

The receipts of the windfall tax are being used to provide new work and training opportunities for young people, the long-term unemployed, lone parents and people who are sick and disabled and who want the right to work. We are also providing £1.2 billion of capital projects for schools and contributing to the development of a national child care strategy. I can tell the House that £2.6 billion has already been paid by the utilities.

I thank my right hon. Friend for that reply and I can assure him that, in Gravesham, the Employment Service is working very effectively with local businesses and organisations to make sure that the new deal is a success and that the money is well spent. Will he consider measures that may assist in giving hope and opportunity to another group—the older unemployed, who were written off by the previous Government but want to use their skills and ability?

Yes, indeed; my hon. Friend is right. We inherited a situation in which nearly 400,000 adult men and women had been unemployed for more than a year and nearly 250,000 had been unemployed for more than two years. Whereas the long-term unemployed make up only 10 per cent. of the unemployed in the United States, they make up nearly 40 per cent. in Britain. That is why, in addition to giving every young person the chance of a job or training from April in our nationwide strategy for the new deal, from July we shall be offering the £75-a-week subsidy to employers to take on men and women who have been unemployed for more than two years. We shall also announce soon other measures to help the long-term unemployed. I believe that that is right, for both adults and the young.

I welcome the £300 million that is to be spent on child care, which represents the first peacetime Government commitment to a comprehensive child care policy. Will my right hon. Friend consider using receipts from the windfall levy to fund pre-school provision as well, as lack of access to that is emerging as one of the barriers for mothers who want to work?

My hon. Friend is absolutely right. One of the scandals that we inherited was the absence of a national child care strategy. There are three elements to our strategy. First, we must make child care accessible, which is why the windfall tax, along with funds from the new opportunities lottery fund, is contributing to an increase in the number of child care places. We believe that there can be 30,000 after-school clubs and a million places after five years, and we are considering other ways in which to increase the number of places.

Can the Chancellor confirm that, along with the windfall tax, one of the main sources of revenue for the Government's programmes is the closing of tax loopholes? What moral and policy lead are he and other Treasury Ministers giving in that matter?

In my first Budget, I closed loopholes worth £1.5 billion—loopholes that the Tories had failed to close in 18 years. I have also said that we are examining all loopholes with a view to closing them. The difference between us and the Conservatives is that they talk about the matter, whereas we take action.

Given that the Government allege that the welfare-to-work scheme will, in the medium term, save the British taxpayer money, can the Chancellor tell us in what year he expects the savings from the scheme to exceed its costs?

The money that we have allocated through the windfall fund is £4 billion—£3 billion for the youth employment programme and another £1 billion to help lone parents, the disabled and the long-term unemployed. As people get back to work, there will be a reduction in the cost of social security benefits; as the programme works, that will happen. We believe that we shall then be able to redirect resources to education—another priority.

What his economic priorities are for the enhancement of opportunities for young people during the British presidency. [27204]

I shall be using the United Kingdom presidency of the European Union to advocate policies that ensure that all young people throughout the Community—5 million of whom are unemployed—are equipped with the skills that they need and given the job opportunities that they want. At the Cardiff summit, we shall consider action plans from each Government.

I thank my right hon. Friend for his reply, which shows that, if Britain takes a lead and the European Union countries follow, we shall at last ensure that the EU tackles the youth unemployment challenges that lie ahead. [Interruption.] Does he agree that the welfare-to-work programmes, such as the ones to which he has referred, must feature high-quality training, so that they can benefit the 272 unemployed people under 25 in my constituency of Lincoln and the other unemployed young people in the European Union?

I agree entirely, and it is interesting that, when my hon. Friend mentioned the problems of youth unemployment in her area, Conservative Members sneered at what she is doing. Every hon. Member should consider himself an ambassador for the new deal. It is the opportunity to end the social divisions that have characterised this country as regards youth employment. Most sensible people want that programme to succeed.

Is the Chancellor aware that a number of young people in my constituency work in the duty-free trade, which is due to be abolished in 1999? They cannot understand why that trade should be abolished when duty rates throughout the European Union remain wildly divergent and there is not a single market in those goods.

I wonder whether the hon. Gentleman was told when he arrived in this place that the previous Government agreed to the abolition of duty free. We are now having to deal with the consequences and are considering those matters.

I commend my right hon. Friend for the tremendous political drive that he has put behind the new deal for young people, which should prove an excellent model for our European partners. On flexible labour markets, does he agree that those have nothing to do with macho management, hire and fire and screwing down the wages and working conditions of the work force, and everything to do with superb management, recognising the unique contribution that labour has to make to productivity and the quality of the product and proper investment in training and development of staff?

I applaud the efforts of my right hon. Friend as Chairman of the Employment Sub-Committee of the Select Committee on Education and Employment and the work that he and his colleagues have done on those issues. He is right. The key to our future is: first, giving young people opportunities; secondly, as he rightly said, giving them the skills, both right across the board and for five to seven-year-olds, as our education announcement today begins to do; and thirdly, management working with the work force to ensure that we have a prosperous economy. Those are the ways forward for our economy.

Does the Chancellor accept that the Government's commitment to young people is weakened by the effect of today's announcement on class sizes, which excluded half all local authorities, including mine in Richmond? Does he also accept that the state of public finances is now sufficiently secure that he could afford to relax immediately the capping restrictions to allow local authorities to invest in education and reduce class sizes?

I thought that the hon. Gentleman would want to applaud the investment of £22 million, which was taken from the assisted places scheme by the Government's decision to redistribute resources to help five and seven-year-olds, and the fact that we are making available capital investment—£1.2 billion from the windfall levy—for schools to be refurbished. At the last election, I seem to remember the Liberal Democrat party proposing a £500 million programme. We have produced a £1.2 billion programme and that is the difference between us and the Liberal Democrats. We take action; they just talk.

I welcome the priority that the Government attach to tackling youth unemployment during the United Kingdom presidency of the European Union. Will my right hon. Friend take this opportunity to congratulate Wesley Morgan, the first of my constituents to benefit from a new job under the new deal, and his employers Cumbria Specialist Coaches? Is not the new deal good news for business and a great deal for the long-term unemployed?

I am grateful to my hon. Friend for mentioning one of the many people who have benefited from the new deal. I congratulate him and other hon. Members who have involved themselves directly in that programme. In the past four weeks, 8,000 young people in the 12 pilot areas have been interviewed, with new deal offers of jobs and training. Already, 4,000 have been matched up with jobs and that is a considerable achievement. I look forward, as does the House, I believe, to that programme becoming nationwide, and applying to every constituency.

How many representations he has received on the proposed changes in the taxation of lawyers' fees; and if he will make a statement. [27205]

The Inland Revenue press release issued on 22 December invited comments on the proposals to withdraw the cash basis practices available to professional businesses, not just to lawyers. The Inland Revenue has not only received a large number of responses but has had a number of meetings with representative bodies, including the Law Society, the Bar Council and accountancy bodies. The consultation period ends on 14 February. Thereafter, we shall consider the various points made.

I am obliged to the Chancellor for that response. It seems grossly unfair to expect banisters to pay income tax on fees delivered when typically they will not be paid for several years—many years if they are dealing with Government Departments. Will the Chancellor consider the fact that, if the regressive step that he is considering is adopted, it will be impossible for newcomers to gain entry to the profession? We shall inevitably go back to the old days, when only the well-heeled could enter the legal profession.

I understand the hon. Gentleman's comments. Our sensitivity to the needs of young lawyers entering the profession is clear from the responses that we have had and the indications that we have already given that we shall take the issue seriously. We are in a period of consultation about implementation.

Does not the Chancellor's answer show that the proposal was ill thought through? Is that not symptomatic of the Government's taxation policies? We have had an ill-thought-through decision to abolish advance corporation tax on dividend tax credits, leading to the wholesale change of the corporation tax system, an ill-thought-through proposal on quarterly corporation tax payments and an ill-thought-through proposal to abolish PEPs and TESSAs.

The proposal is that those in professional bodies should be taxed in the same way as everybody else. The hon. Gentleman should applaud the modernisation of the tax system. He should also congratulate us on reducing corporation tax from 33p to 31p, with a further proposal to reduce it to 30p—the lowest corporation tax rate in the industrialised world.

If he will make a statement on the progress of the Economic Secretary's discussions in respect of mis-selling of pensions. [27206]

Today, I have placed in the Library a table showing what progress has been made by the companies that we have been monitoring up to the end of January. It shows that they have made further progress. About 60 per cent. of the cases requiring review have been reviewed—which would never have happened but for the action taken by my hon. Friend the Economic Secretary.

I warmly welcome the progress that my right hon. Friend has just described. Is he aware that, in some companies, the problem remains of temporary, untrained staff pyramid-selling pensions, which is the root cause of many of the mis-selling problems that we have had? Will he ensure that the views of responsible practitioners are taken on board so that the scandal of mis-selling, the legacy of which we inherited from the Conservatives, is not repeated?

My hon. Friend makes a good point. No one should doubt our intention that all the major pension companies, all the independent financial advisers and others who were involved should clear the problem up as quickly as possible. That is good for the industry and for the public. My hon. Friend may be interested to know that the Personal Investment Authority listens closely to what practitioners have to say, as will the Financial Services Authority, because such advice can be very helpful. The lessons to be learnt from the affair are that the old regulatory system was too lax, because self-regulation was incapable of ensuring high standards, and that clearing the matter up required firm Government action, which we have taken.

The Chief Secretary will know that the Government report on the affairs of the Maxwell Group has not yet been published, but is awaited. Is he aware that the current edition of Business Age Magazine details how Robert Maxwell stole £450 million from pensioners in his companies and how the Paymaster General, who has not answered the question yet, made his fortune by buying and selling such companies to and from Robert Maxwell? The article describes how the transactions were carried out at non-commercial valuations. Should not any Minister of the Crown so implicated, subject to a possible investigation which the House is awaiting, resign?

It was entirely predictable that the shadow Chief Secretary would have nothing to say about pensions mis-selling, which is what the question is about, because it was thanks to the Tory system of self-regulation that millions of people were cheated out of money—and the previous Government were prepared to do nothing about it.

What analysis he has undertaken of the impact of the current level of interest rates on the Scottish economy. [27207]

Scottish business, as well as businesses in the whole of the United Kingdom, want stability and an end to boom and bust. Low inflation is an essential precondition for long-term sustainable growth.

The Minister referred to boom and bust. Another Scottish company went bust this morning in the constituency of my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan). Many Scottish companies, exporters, manufacturers and people in the agricultural industry are being crippled by the Government's interest rate policy. When will they deliver an interest rate policy that is appropriate to Scotland and not just to the south-east of England?

The hon. Gentleman belongs to a party that wants independence in Europe, which would mean Europewide interest rates, never mind just for the United Kingdom. The important point is that, unless we get stability and an end to the boom and bust that has so characterised the British economy, difficulties will continue to face businesses in Scotland and elsewhere. The Government are determined to get inflation out of the system and to create a stable platform on which businesses can build. Unless we take that long-term view, we shall return to the days—not so very long ago—of high inflation, which destroys businesses and badly affects mortgage payers and savers. We are not prepared to do that. We are taking the necessary action to ensure that the capacity of the economy expands and that there is a platform on which businesses and individuals can prosper.

Has my right hon. Friend analysed what effect the high borrowing policies of the Scottish National party would have on interest rates? Is not the best way to achieve sustainable low interest rates by the supply-side and European policies of the Government?

I am grateful to my hon. Friend for his support on those matters. He is right; it is not only a question of the nationalists' policy on taxation, spending and everything else. Nationalists will remember that their parliamentary leader, at the end of the last Parliament, said that an independent Scottish currency would shadow the pound sterling, which makes nonsense of the question asked by the hon. Member for North Tayside (Mr. Swinney). The Government are committed to economic stability and providing the stable platform that is essential if we are to break away from the cycle that has been so destructive in the past.

Given that the Chief Secretary is speaking the day after Scottish unemployment started rising again, he can congratulate himself on ending the boom phase of the boom and bust to which he objects. Does he agree with the TUC, which says that the main priority for the Government in the Budget should be to start a managed depreciation of sterling to help manufacturing industry in Scotland and elsewhere?

Stability is essential for the long-term good of this country. As the hon. Gentleman mentioned unemployment, I should point out that the Government's welfare-to-work programme is one of the many ways in which we can help give people who have been put out of work the skills and opportunities to get back into work. It is also a way of increasing the country's skills level because some parts of the country have low skills levels. The Government's overall strategy, which is long term, unlike that of the previous Government, is the key to getting the economic stability and expansion that we all want.

Will my right hon. Friend confirm that interest rates are not the only factor affecting the value of the pound, and that the current exchange rate against the deutschmark is not greatly different from the rate at which the previous Government thought fit to take Britain into the exchange rate mechanism, and from which the right hon. Member for Huntingdon (Mr. Major) said it would be fool's gold to devalue?

Of course, the exchange rate policy of the last Government has now been renounced by all those who took that decision. In contrast, our policy is to ensure that we have a low-inflation economy and conditions where we have a skilled and educated work force that will expand the capacity of our economy. Ours is a long-term policy designed to end the violent swings seen in the past, and ours is the only way to provide the stable platforms for businesses and individuals that everyone in the country wants.

If he will make a statement on his policy towards the taxation of trusts. [27208]

We are committed to taking action to close any tax loopholes that may arise.

We are surprised that the Paymaster General has chosen not to answer that question, given his long and acknowledged expertise on the subject of trusts. Will the Chief Secretary comment on the article in Business Age Magazine this week, which is headed, "How Maxwell put his trust in Robinson" and states how the Paymaster General gave Mr. Maxwell particular advice with regard to losing his stolen billions? If that is ill informed and defamatory, as no doubt the Paymaster General believes it is, why is it that he has promised to sue The Sunday Times and The Observer for their ill-informed and defamatory remarks, but is not suing Business Age Magazine?

All I can say is that, unlike the Conservative party, we take action against tax loopholes. As my right hon. Friend the Chancellor has said, in the last Budget, we closed £1.5 billion-worth of tax loopholes, whereas the last Government did absolutely nothing about it for 18 years.

If he will raise for discussion in ECOFIN the likely compliance by other countries in the EU with the Maastricht treaty conditions for entry into stage three of economic and monetary union. [27209]

In May this year, ECOFIN will assess, on the basis of reports by the Commission and the European Monetary Institute, whether each member state fulfils the necessary conditions for the adoption of the single currency. The Economic and Finance Ministers will then recommend their findings to the Council meeting in the form of the Heads of State or Government and decisions will then be made.

Will the Chancellor of the Exchequer, as chairman of ECOFIN, recommend that all those countries which have the political aspiration to participate in the single currency should do so, in the interests of wider European unity; or will he insist that the strict stipulations of the treaty on European Union be met and thereby exclude Belgium and Italy, which have a level of national debt twice that permitted under the Maastricht treaty rules?

What we shall do is follow the procedures that have been laid down, which means that in March we shall receive reports from the Commission and the European Monetary Institute; those reports will then be discussed and a decision will be made on 1 May; and that will be reported to the European Parliament the next day for a final decision by the Council. We shall wait for the reports before making our recommendations and we shall chair the meetings in the orderly way that is required.

Is my right hon. Friend aware that, in any institution, it is the decisions taken in the first few months or year of that institution which determine much of what happens subsequently? Given that the decisions in question are so important and that we are out of many of them, how does he suggest we might reduce the problems of the danger to our economy?

We have set clear objectives for the British economy. Although we are in principle in favour of economic and monetary union, we have set five economic tests that must be met. Those tests involve looking at what is to happen to employment, financial services, industrial investment, convergence and flexibility and adaptability of labour markets to enable the single currency to work. Those are the tests that we shall apply in relation to Britain before we make a recommendation. That recommendation will have to be passed, not only by the House and by Parliament, but by a referendum of the British people.

Does the Chancellor agree that our European partners consider EMU a political, rather than an economic, issue—the great leap forward to political union? That is why they will proceed with EMU, regardless of the fact that some countries do not meet the economic convergence criteria. Is it not nonsense to say that economies have converged when one of the most important criteria—unemployment—is not being considered? How can economies be said to have converged when Spain has 22 per cent. unemployment, Germany has 12 per cent., France has 12 per cent. and we have 5 per cent.?

It is precisely because unemployment is high in Europe that we have taken our initiatives including the Luxembourg special conference on jobs; the action plans that will be set by member states; and the commitment given by countries to reduce youth and long-term unemployment.

My right hon. Friend will of course accept that the price for that has often been high unemployment. [HON. MEMBERS: "Hear, hear."] Would he be kind enough to ensure that whatever happens in relation to the creation of the monetary system, a full discussion takes place with the British public so that they understand the disadvantages and not the supposed advantages alone?

We are not only committed to a referendum if that decision is recommended by the Government and the House: we are also committed to making sure that the British public are informed about economic and monetary union and all the issues referring to it. My hon. Friend should note that the issue of employment is uppermost in our mind and it is one of the five economic tests that we have set down. In order for monetary union to work, we will have to reduce substantially the amount of unemployment in Europe. The cheers of support for my hon. Friend from Conservative Members come a bit strange because it was their party which said that unemployment was a price worth paying.

In the right hon. Gentleman's discussions in ECOFIN or elsewhere on monetary union, has any consideration been given to the future of the administrative currencies and will the advent of the euro mean the demise of the green pound?

Matters of agricultural reform are under discussion as a result of the Commission's proposals to reduce the amount of money spent on the agricultural budget. We are profoundly committed to such reform. The hon. Gentleman will see us pursue proposals during our presidency and afterwards that will attempt to reduce that agricultural budget. Of course there will be consequences for the agricultural pound as a result.

If he will make a statement concerning his policy to reduce VAT on fuel. [27210]

What representations he has received from pensioners' organisations on his reduction in VAT on fuel.

rose—

Hear, hear.

I am pleased to tell my hon. Friends that we have reduced VAT on fuel to 5 per cent.—the lowest level permitted to us under European Community regulations. That reduction has been very well received throughout the country, in particular by pensioner communities.

I was delighted to note that my hon. Friend was greeted so warmly by those on the Conservative Benches. The pensioners in my constituency of Hove greatly welcome the cut in VAT. Would he care to contrast the efforts made by the Government with those of the Opposition and the Liberal Democrats?

In addition to the cut in VAT, other measures relating to the gas levy and the winter fuel payments paid by my right hon. Friend the Chancellor mean that pensioners are between £100 and £130 better off per year. All one can say about the Conservative party is that when in government it managed to introduce 22 tax increases. The only tax reduction was that introduced as a result of the actions of the Labour party in opposition and the Liberal Democrats, who fought against the Conservative Government increasing VAT on fuel to 17.5 per cent. What we need to know this afternoon is whether the Opposition are in favour of increasing it again to 17.5 per cent.—yes or no?

Will my hon. Friend allow me to thank the Chancellor of the Exchequer for the action that he has taken in this sphere? He should know that pensioners in my constituency are glad of what he has done. Is it not a fact that the Labour Government keep their promises?

The reduction in VAT on fuel was one of the five pledges in our manifesto, and it has been redeemed; we are in the course of fulfilling the other pledges. I am pleased to have my hon. Friend's confirmation that pensioners in his constituency appreciate that action while the Opposition hang their heads in shame at the fact that they took no action when in government.

Surely the hon. Gentleman will know that his Department has told me that the increases in VAT announced by the previous Government were fully or overcompensated to pensioner households. Surely what we need to do for pensioners is to keep tax rates down. Surely the best way to do so would be to makes sure that rich business men pay their taxes and do not keep the money offshore.

The best thing we did was to get rid of the Tory Government. That was the first step. Next, we reduced VAT on fuel. We then made the winter fuel payments and introduced the rebate on the gas levy. Those practical measures have helped people who live in the real world. The hon. Gentleman should be ashamed of his question.

Although the reduction of VAT on domestic fuel for pensioners is welcome, will the hon. Gentleman bear it in mind that increasing taxes on diesel and other transport fuels will have an adverse effect on the peripheral regions, and especially on firms engaged in export?

I welcome the first part of the hon. Gentleman's question. All the other matters are being considered by my right hon. Friend the Chancellor in the context of the Budget.

The pensioners who are visiting the House today from my constituency are extremely pleased about the reduction in VAT on fuel, but tomorrow concerns them as much as yesterday. Many of them count the buses that pass their door by the number per week, not the number per day. Can my hon. Friend assure them that when the Chancellor draws up his Budget, he will take fully into account the distinctive needs of those who live in rural constituencies, now represented mainly by those on the Labour Benches?

I should be pleased to meet my hon. Friend's pensioners with him. I assure them that all those matters are under consideration. In particular, he will be aware that a major review of pensions is under way. We hope to answer positively to his pensioners and his other constituents in due course.

When he will announce his plans for the next phase of the housing capital receipts initiative. [27211]

In line with our policy as stated in the manifesto, and in line with Liberal Democrat policy—we welcome the hon. Gentleman to an agreed policy—£900 million is to be released in the first phase of the release of capital receipts: £200 million this year and £700 million in 1998–99. That is a good start.

I draw the Paymaster General's attention to the fact that, in the controlled spending targets for public sector housing this year, there is a £200 million reduction, which knocks out the £200 million made available under the Local Government Finance (Supplementary Credit Approvals) Act 1997. That is not the release of capital receipts; it means that local authorities will be allowed to borrow money against the value of the capital receipts. Furthermore, the hon. Gentleman referred to £900 million. Can he clarify how that relates to the figure of £800 million given by the Prime Minister yesterday?

We welcome the hon. Gentleman's agreement with our policies. The £200 million this year is a separate issue. Why does he not focus on the £700 million that will be genuinely additional next year? He is well aware that we went for supplementary credits because the receipts were not in those areas where housing need was greatest. That is the best mechanism that we could find to make sure that the receipts were released in those areas, rather than in areas of less need.

Will my hon. Friend ensure that social housing receives its fair share of resources over the next few years? One of the greatest stigmas that we see is the plight of the homeless, and one does not have to go very far from the House to see that. Social housing is desperately needed in many parts of the country to rehouse the homeless and to ensure that everyone has a decent place to live.

I entirely agree with my hon. Friend. He is aware that the new deal programme is specifically designed to help the young homeless, and that we have split up the housing receipts to take care of regeneration, as well as rehabilitation. Taken together, those measures will go a long way to meeting his genuine and justified concerns.

As the Minister could not answer the very good question from the hon. Member for Torbay (Mr. Sanders), perhaps I could ask him a simpler question. In Islington, one in 16 council-owned properties lies empty, while Islington councillors go around complaining about homelessness. How will the Minister make sure that giving those capital receipts to local authorities will ensure that they place homeless people in the homes that have been standing empty for many years?

It is a terrible indictment of 18 years of Conservative rule and bashing of local councils that the hon. Gentleman admits that that is the case. What we are doing through the release of receipts will enable—[Interruption.] Many of those problems were caused by central Government through the Tories bashing local authorities and reducing them to a position where they could not take decisions, which was the point of Tory policy. One of the reasons why so many of the houses are unoccupied is that they need urgent rehabilitation. That is what the phased release of capital receipts will achieve.

Is my hon. Friend aware that, in my constituency, the waiting time in the local authority housing sector for a couple with one child increased from one month to nearly four years between 1986 and 1996? Is my hon. Friend aware that that waiting time is dropping under Labour policies? Will he ensure that the next phased release of capital receipts takes account of the actions taken by local authorities to bring about such reductions, and thus relieve the burden on housing benefit and other charges to the Exchequer?

My hon. Friend is quite correct, and I entirely agree with him. In the context of the comprehensive spending review, we are looking at what the next phase of releases will be. It is too early to predict that yet. My hon. Friend makes precisely the point in respect of his council that I made a moment ago: the previous Government's housing and general local government policies caused a terrible situation, with deteriorating housing stock. We are grappling with that problem, and the phased programme of capital receipts release will contribute to solving it.

When he expects the review of corporate taxation to be concluded. [27213]

The Inland Revenue has recently consulted business on proposed changes to the corporate taxation regime. That consultation period ended on 30 January. Any further announcements are, of course, a matter for my right hon. Friend.

Where is the Confederation of British Industry at fault in its analysis that the Government's announced corporation tax changes will amount to a £22 billion increase in tax in this Parliament?

The changes that we have made to the corporation tax regime will greatly help industry. The tax system will no longer be the determining factor as to whether profits are retained or distributed—that is properly a matter for managers. The tax changes have allowed us to reduce the rate of corporation tax, as has been said many times this afternoon, in order to ensure that we have one of the lowest rates of corporation tax of any of our major competitors.

Will my right hon. Friend ensure that any such review takes seriously the suggestions that Labour Members often make that corporations should be given certain incentives to invest in universities and university research that creates jobs? Is he aware that the Dearing report recommended that an extra £500 million—much of it coming from the corporate sector—be invested in universities? We have not seen much of that money yet.

My hon. Friend is correct: we want industry not just to invest in its own development but to co-operate with educational institutions. I am aware that the Dearing committee expressed a similar hope. I think that my hon. Friend will agree that the reduced level of corporation tax, together with the other steps that we are taking to encourage business, will prompt businesses not just to co-operate with educational institutions but to make the necessary investment that will benefit individual businesses as well as the wider economy.

Should not the Chancellor have completed his review of corporation tax before he announced his ill-thought-out changes, which impose a hefty burden on pension funds and companies? Would he not then have avoided stumbling from announcing the abolition of tax credits in July—without realising that that would involve abolishing foreign income dividends—to abolishing advance corporation tax in the autumn, which then required him to introduce a new system of quarterly payments in his autumn statement, which he will now have to revise in his March Budget because of the criticisms from the CBI? Will he confirm to the House that unless he does so, despite the change in the corporation tax rate, the changes so far announced will increase the burden on business by £22 billion?

As regards the consultation exercise, most of the responses have been very positive. I should have thought that the right hon. Gentleman would welcome that. I repeat that the changes we have made to the corporation tax regime will be to the long-term benefit of companies in this country and the economy. I think that most people recognise that.

What plans he has for merging the systems of personal taxation and welfare benefits. [27214]

As I stated in the pre-Budget report, we plan to build on our £4 billion welfare-to-work programme, and unveil in the Budget the second stage of our plan to modernise the welfare state. To encourage work and to help low-paid families, we are now considering in detail the introduction of a working families tax credit, paid through the tax system. That would also allow us to do more to help with the cost of child care.

I am grateful to my right hon. Friend for that reply. Can he confirm that the working families tax credit will be of significant benefit to a great many women already in work and those who want to work? Will he further confirm that allegations that there will be a compulsory transfer of resources from women to men, or that there is a threat to independent taxation, are completely untrue?

I can reassure my hon. Friend. As I made clear in the pre-Budget statement, the Budget will include the next stage of the modernisation of the welfare state—reform of tax and benefits to make work pay, which will be of particular benefit to women. There is no threat to independent taxation from the working families tax credit, nor would there be a compulsory transfer of resources from women to men. If the working families tax credit replaced family credit, families would have the right to elect to whom the tax credit was paid, the man or the woman.

I offer my commiserations at the fact that Treasury Question Time this afternoon has been a woman-free zone.

The compulsory transfer of resources from women to men is not proposed in any of the detail that has been examined by the Treasury. The existing system of family credit, for which the Conservative party was responsible, has only a 69 per cent. take-up; 645,000 people have a marginal tax rate above 70 per cent.; 500,000 people are paying tax as they receive benefit; and only 31,000 have been able to receive the child care disregard. That is not a system that is working in favour of women or children, and we shall reform it and make it better.

Will my right hon. Friend ensure that in the forthcoming Budget he does whatever possible to remove the poverty trap for lone parents, and thus give a welcome boost to the new deal for lone parents which has helped so many women in my constituency and elsewhere in the United Kingdom?

It is a symbol of what the Conservative party was about in government that it took care to deal with the disincentives for people on high tax rates, but left people with high marginal tax rates if they were low paid. As a result of Conservative policy, 360,000 families have an 80 per cent. marginal tax rate and more than 100,000 have a 90 per cent. marginal tax rate. That is unacceptable. It is a disincentive to work, it is unfair to mothers and their children, and Britain can do better. That is why we are modernising the British welfare state.

Will the Chancellor confirm the Financial Secretary's apologies for bunking off this afternoon to discuss more of the Budget with the sisters of the Fawcett Society following her Budget leak to The Daily Telegraph this morning? Could not women still be pressurised by their husbands into not applying for direct payment of the working families tax credit and, even if they do apply, will not their husbands still know what they earn?

Under the present system, the woman and the man have to sign the family credit form. The hon. Gentleman should consider that before he makes such allegations. The hon. Gentleman has to face up to the fact that thousands of women—even in work—and children are left in poverty as a result of the policies that we have inherited from the previous Government. That is why we must begin to reform the welfare state.

What is the current level of receipts from the windfall tax. [27216]

The first tranche of the windfall tax was paid on 1 December, in full and on time, and we are grateful to the companies for their co-operation in this matter.

Will my hon. Friend confirm that the £2.6 billion that has been raised is exactly what was expected? Does not that give the lie to the previous criticisms that the tax was unworkable? Will he also confirm that the amount raised already is more than the £2.2 billion that the Liberal Democrats would have raised through their 1p in the pound on income tax?

My hon. Friend is correct. Now that we have the money, we can ensure that we spend it wisely. We note that the Opposition agreed with the ends, but would have denied us the means. I am pleased to tell the House that the pathfinder programmes are doing extremely well and the whole country is looking forward to the overall national deal beginning on 4 April.

Will the Paymaster General now answer the question that was ably put by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley): when will the cost of the welfare-to-work programme reduce?

It is an odd question. I heard it earlier—[HON. MEMBERS: "Well, answer."] Exactly, I will. We have not begun the national programme for welfare to work. It does not begin on a national level until 4 April, so how can anybody ask us to show results now? That programme will yield results. The Opposition should have implemented such a programme when in government instead of letting youth unemployment build up. Instead of scoffing and trying to point ridicule at a sincere programme to deliver the goods, Conservative Members should be out in their constituencies, as we are, trying to make the programme a success.