What estimate he has made of the number of women who will benefit as a result of the windfall levy. [32493]

It is estimated that 500,000 women will benefit from the child care initiative that is partially financed from the windfall levy. In addition, every young woman unemployed for more than six months will, from April, be offered the chance of work and training. Soon, lone parents with school-age children will be offered advice, help and information about work. Others with school-age children will also benefit from the £1.3 million invested from the windfall tax in the new schools capital programme.

I thank my right hon. Friend for his response. Does he agree that the level of child care available in the past 18 years has restricted employment opportunities for many women? Will he guarantee that, when he considers Treasury policy decisions, he will take the needs of women into account—as he has done with child care policy—so that they are part of the main stream and not an afterthought, as they have been for the past 18 years?

That is exactly the Government's position. We will take into account the needs of women in every area of economic policy. Our child care policy has three aims. We want to make child care accessible, which is why we have announced an initiative of £300 million for 1 million after-school places to help young children. We also want high-quality child care, which is why we have announced with the windfall levy an initiative to train child carers that will cost £100 million. To make child care more accessible, we increased and improved the child care disregard in our first Budget. For the first time, this country has a national child care strategy.

If the Chancellor of the Exchequer claims that increasing the cost of employment through a minimum wage will not reduce the number of jobs, how can he claim that reducing the cost of employment will increase the number of jobs?

I am grateful that the hon. Gentleman has raised the minimum wage, because the Conservative Government, by abolishing the wages councils, penalised hundreds of thousands of women. The hon. Gentleman should consider the experience of America, which not only has a minimum wage but has been able to raise it without any adverse effect on jobs. It is the Conservative party that wants us to return to the dark ages.

Many women in my constituency and throughout the United Kingdom will welcome the moves that my right hon. Friend has made, especially to increase the amount of out-of-school child care. Will he also ensure good-quality and affordable child care for under-fives? Many women with young children would like to go back to work but are unable to do so, because of the high cost of good quality child care.

I agree entirely with my hon. Friend. From April, for the first time, new money will be available for the child care initiative that my right hon. Friend the Secretary of State for Education and Employment is launching. My hon. Friend rightly emphasises the importance that we attach to high quality child care. We want a new generation of young people and others to become properly trained child carers in registered facilities so that we can guarantee to every mother—indeed, every parent—that their children will be safe in the new provision of child care.

What estimate he has made of the domestic savings ratio in (a) 1997 and (b) 1998. [32494]

The pre-Budget report gave the latest projections. The Government's policy is to encourage savings for investment in the future and that means, among other things, creating the conditions of economic stability and low inflation. That is what we are doing.

I thank the Chief Secretary for his reply. If his policy is to encourage savings, his tax on savings will do the reverse and contribute to a reduction in personal savings in 1998 compared with 1997. Will he see the error of his ways and abolish the tax on savings above £50,000 and thereby contribute to an increase in savings instead of a diminution?

The hon. Gentleman should bear two things in mind. First, during the 1980s, when the Government he supported were in power, the savings ratio dropped dramatically, and was negative for a number of years. This Government are determined to encourage savings, which is why we are putting in place the long-term economic stability that is an essential precondition of giving people the confidence they need to save. The Government are introducing measures that will help people to save in future.

Will not one group of people have a great deal of money to save—those who have benefited substantially from the privatisation of the railways carried out by the previous Government? Bearing in mind how much the taxpayer has lost—billions of pounds—would it not be fair to apply a windfall tax to those who have benefited in such a way? The sooner that windfall tax is introduced, the fairer it will be for the country as a whole.

My hon. Friend is right in the sense that the way in which the Conservative Government sold off many of the former nationalised industries at knock-down prices, enabling many people to benefit in a way that could not have been imagined, was scandalous. We introduced the windfall tax on the privatised utilities, the nature and scope of which was made clear at the time. The windfall tax that we imposed has been widely supported, not least because the money has been taken away from those who obtained gains without earning them and is now being applied to the new deal, which is giving new hope to thousands of people throughout the country.

Why did the Chief Secretary originally tell the Investors Chronicle that a Labour Government would not tamper with existing PEPs and TESSAs? Will he apologise for breaking that promise, or will he consider attaching to next week's Budget bundle a series of numbered apologies for each of the new taxes and broken promises since 1 May?

I am surprised that the hon. Gentleman cannot bring himself to mention 22 tax rises, which of course he knows all about. Our manifesto was clear and we have kept to it. I say to the hon. Gentleman and to the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who I now discover misquoted me on Monday, that they should be careful about taking words out of context.

When he last met the Governor of the Bank of England to discuss the interaction of monetary and economic policy. [32495]

My right hon. Friend the Chancellor has many meetings with the Governor to discuss a range of matters.

Now that the minutes of the Monetary Policy Committee have revealed that its members are split equally between the inflation nutters and the doves and that we might as well have stayed with the Gordon and Eddie show, will the Minister tell the House whether his sympathies would have been with them if they had increased interest rates for the sixth time since the general election, thereby paving the way for tax reductions in the Budget, or whether he is relieved that they have kept rates as they are to give him a measure of cover for the tax increases that we expect?

First, the fact that the Monetary Policy Committee's proceedings are open and published shows the value of allowing a range of people to consider the inflationary pressures on the economy and to come to a considered view. Secondly, long-term interest rates are now the lowest they have been for 33 years. The last time they were this low, I was in primary school and Harold Wilson was in No. 10.

rose—

And where was the right hon. Gentleman?

He was there, on the Treasury Bench.

I am looking forward.

I do not think that it would be appropriate to do that, but my right hon. Friend is right in the sense that this country has to prepare for the introduction of economic and monetary union in Europe. It also has to prepare itself for the possibility that we shall join that currency at some point, perhaps at the beginning of the next Parliament. He will know that the Government are putting in hand the necessary preparations so that this country can make that choice—preparations that were never made by the previous Government, because they were so hopelessly split on the issue.

The Minister will have noticed that as, in the past two days, there was further talk of a higher interest rate, the pound strengthened again against other currencies. Does he accept that the pound is far too strong, causing chaos for manufacturing industry and for agriculture? Is it an objective of the Government to get the pound down to a saner parity?

The latest predictions are that exports are expected to continue to rise, but let me make an important point. Industry—even people who are worried about what is happening to the exchange rate—accepts the fact that it is necessary for the Government to ensure that we get long-term stability. The last thing anyone wants is a return to the boom and bust or the high levels of inflation that we experienced in the past.

I invite my right hon. Friend to cast his mind back to 12 months ago, when interest rates, inflation and sterling were bobbing up and down like a yo-yo, as they had done in the previous five years. No business man could plan more than six months ahead because of the Tories' irresponsible stewardship of the economy. May I invite my right hon. Friend, despite the difficulties that the level of sterling is causing exporters, to maintain the new policy of having a Monetary Policy Committee and to take every measure to ensure stability? Every business leader I meet welcomes the new policy, and wants no return to the instability of the Tory years.

My hon. Friend is right, in that every business wants stability more than anything else. Many business leaders said to us when we were in opposition—and say to us now that we are in government—that if the Government do nothing else but deliver stability and low inflation, that will benefit their business. Of course, we have also done other things to help business. For example, we introduced the current rate of corporation tax—the lowest ever.

In their pre-Budget discussions with the Governor of the Bank of England, have the Chief Secretary or the Chancellor discussed any plans to raise taxes that were not included in the Labour party manifesto before the most recent general election? Does the Chief Secretary recall the speech made by the Chancellor before the election, in which he said:

"At the general election we will spell out clearly our tax plans so that the British people know what we intend to do"—

"Apart from the windfall tax our plans do not require any extra taxes"?

The right hon. Gentleman is ill placed to criticise us on the subject of election promises, because people will remember very well that the prospectus on which the Conservatives fought the 1992 general election was abandoned in every subsequent year. [HON. MEMBERS: "Answer."] The answer is that we made an explicit promise not to increase the top and basic rates of income tax, that we kept that promise in my right hon. Friend's first Budget last year, and that we shall keep that promise for the rest of this Parliament—as we told the British people.

Does the right hon. Gentleman realise that his answer tacitly recognised that he betrayed the pledges that he made to the British people? When did he, or the Chancellor, spell out clearly to people with pensions that they proposed a £5 billion tax on their pension funds? When did he spell out to students that they planned a tax on higher education? When did he spell out to rural motorists that they planned three increases in motor taxation in 16 months? And when did he plan to spell out clearly to home owners that they intended to impose the biggest ever council tax increases?

The right hon. Gentleman should be a little more careful, because the Government in which he served introduced the fuel escalator and cut mortgage tax relief when they said they would not. The right hon. Gentleman will also remember that, just before the general election, he proposed pension changes that would have resulted in a huge increase in expenditure for ordinary people. We have kept every promise that we made in our election manifesto. That is the clear difference between the Labour party and the Conservative Opposition.

What plans he has to reduce the debt burden of the poorest countries. [32496]

What discussions he has had with Church leaders about the problems of highly indebted developing countries. [32510]

Since my Mauritius mandate statement to Commonwealth Finance Ministers last September, I have held a number of meetings with religious leaders, including the Archbishop of Canterbury, Cardinal Hume, the Moderator of the Church of Scotland and many others. The United Kingdom firmly supports debt relief for the poorest, most indebted countries and is seeking an early solution to many of the problems experienced by them—which includes finding a solution to the debt problems of Mozambique. The Government take their responsibilities in international debt reduction seriously.

That is a very welcome statement that illustrates the clear difference between the approach of Labour, with its proper ethical policies, and the policies of the Conservatives, which have contributed considerably to the problems experienced by developing countries. I am sure that the Chancellor will recognise that it is equally important that we persist with policies that support continued and sustainable development. We must recognise that, historically, inappropriate technology has been applied in developing countries for the purpose of extracting profit, especially in agriculture. Cash cropping has drained many such economies. We must have world policies—to which I know my right hon. Friend will contribute and on which he will lead the charge—to avoid the continuing problem of mounting debt in those countries.

I did not hear a question. I remind the hon. Gentleman to ask a question in future.

I agree with my hon. Friend's comments. The Government established the Department for International Development, the first act of which was to make a shift in the budget towards poverty relief for Africa. The Government have introduced export credits conditional on not selling arms and taken a millennium initiative to ensure that countries are in the process of debt relief by 2000. The Government will work with other countries to ensure that there is effective debt reduction, particularly in Africa.

I am pleased to hear from my right hon. Friend that the Government are supporting the campaign, which has been backed by Church leaders and others, for a millennium-linked initiative on debt under the banner of the Jubilee 2000 campaign. Can my right hon. Friend tell the House what support he has gathered from other Governments for the welcome lead that he has taken on this issue?

I am pleased to say that, at the Commonwealth Finance Ministers conference last year, all countries in the Commonwealth supported our initiative. The G7 statement, issued only a few weeks ago following discussions in London, expressed support for the idea that countries should be in the process of debt reduction by 2000.

As more than 95 per cent. of debt owed by third-world countries to the United Kingdom is export credit debt, what plans does the Chancellor have to reduce it? Since 1 May, the Government have issued a military export licence to a company selling arms to Mozambique. How can the Government claim to support education, health and economic development in Mozambique when they encourage such exports?

The hon. Gentleman will be pleased to know that, at the September Commonwealth Finance Ministers conference, we made it very clear—via a statement from me and my right hon. Friends the Secretary of State for International Development and the President of the Board of Trade—that future export credits to the highly indebted countries will be conditional on exports not being arms. We have managed to secure that very big change in policy over the past few months. Bilaterally, about £1.2 billion in debt has been waived in the past 25 years. Britain has taken an important initiative over many years on that issue.

What representations he has received on the use of petrol duty rates as a mechanism for achieving environmental objectives. [32497]

The Chancellor has received a number of representations which will be taken into account in reaching decisions for his Budget on 17 March.

Will the hon. Lady clarify the Government's policy on duty on fuel, as the Government seem to be giving different messages to different audiences? Is it the Government's intention to continue to increase duty on fuel to meet environmental concerns and reduce the number of people who drive cars, or are they the motorist's friend and the friend of the oil industry—although that was certainly not the case three weeks ago when I attended the annual oil industry dinner?

I am sure that that meeting was not in Basildon, which is only a short drive from Southend—which I understand the hon. Gentleman did at some speed.

My hon. Friend will recall that the changeover to lead-free petrol was greatly assisted by increasing the differential and reducing the price of that fuel. Is there not a case, on environmental grounds, for encouraging vehicles powered by liquid petroleum gas by reducing duty on that fuel?

As my hon. Friend will know, there is considerable discussion about clean fuels, building on the excellent record of the previous Government in favouring unleaded fuels over leaded ones. Mechanisms are already in place to assist the shift, especially to clean diesel, to deal with particulate emissions. The Government are constantly reviewing the development of clean fuels—an item that needs consideration in the interests of environmental protection.

Does the Financial Secretary agree that it might be more acceptable to motorists, especially those in rural areas who are suffering from the escalating increase in petrol, if there were some compensating reduction in, for example, vehicle excise duty on fuel-efficient cars, as proposed by the Liberal Democrats? Will she confirm that she promised last July that the Government would produce a Green Book to be published alongside the Red Book at the time of the Budget? Is that still the Government's intention? Will it be published with the Red Book on Budget day?

The Liberals have a policy for emptying toilets and wiping their backsides.

But is it a green policy?

The Chancellor of the Exchequer has already announced his intention of increasing the duty on fuel by at least 27p per gallon in next week's Budget. Does the Minister agree that that will be the third such increase in 16 months? The Government have a policy of tax early, tax often. Does the hon. Lady agree also that this scale of increase raises the price of transport for everyone and imposes an especially heavy burden on the rural motorist, for whom a car is a necessity and not a luxury? Does the hon. Lady agree that these increases are being imposed not for environmental reasons but simply to raise more revenue? Will she and her colleagues have a rethink before next Tuesday's Budget?

That is rich, coming from the right hon. Gentleman, who was a member of the Government who introduced the 5 per cent. fuel escalator. Unlike the Conservative Government, the Labour Government are committed to reaching our CO₂ targets. We shall abide by the international agreement arising from Kyoto. The 5 per cent. escalator donates 2½ tonnes towards that target for the year 2010.

Is my hon. Friend aware that there are 1 million cars, vans and trucks powered by liquid petroleum gas in Italy, and only 2,000 in Britain? Will she and her colleagues continue positively to examine fiscal measures to encourage the use of more environmentally sensitive fuels?

I was not aware of the situation in Italy. I assure my hon. Friend that we shall continue to examine these important matters.

If he will make a statement on the distribution of the tax burden and public expenditure between different income groups. [32498]

An annual article is published by the Office for National Statistics in "Economic Trends" which describes the effects of taxes and benefits on household income. The last one was published in March 1997.

I look forward to reading that interesting article and future editions of the publication. Does the Minister understand that the Labour party won last year's general election only because it persuaded the electorate that a Labour Government would not increase taxes on middle England? Does he accept that abolishing PEPs and TESSAs, or putting tax on child benefit, would be an increase in tax on middle England? Will he now rule out any such taxes?

The hon. Gentleman should recall that we won in middle England and everywhere else as well. The hon. Gentleman would understand why we won and the Conservative party lost if he read the annual report to which I referred, which shows that inequality increased throughout the 1980s.

That is not true. Everyone was better off.

It most certainly is true. The rate at which inequality increased in the United Kingdom in the 1980s was faster than in any other industrialised country except New Zealand.

My right hon. Friend, like me, comes from middle Scotland. Does he agree that, if the Government reduced tax in some directions, that would be immensely popular electorally? I think especially of introducing a policy of free beer for all the workers. If he were to cut duty on beer, would he ensure that the brewers and licensees were obliged to introduce lined glasses to ensure that the full measure was pulled for those who purchased drink? Of course, if the beer were free, people would not be so worried about lined glasses.

I am glad to hear that my hon. Friend now agrees that Glasgow is middle Scotland. I am sure that my right hon. Friend the Chancellor of the Exchequer will have heard his plea on behalf of beer drinkers. My hon. Friend will appreciate that he might have to wait a little longer before he receives a fuller answer to his question.

May I tell the Chief Secretary that the Labour party did not quite win in Macclesfield? There is quite a lot of countryside in Macclesfield, and the countryside is an important part of the environment. Does the Chief Secretary accept that if he continues with his intention dramatically to increase the duty and tax on hydrocarbon oils—[HON. MEMBERS: "It is the wrong question."] No, it is not the wrong question.

The hon. Gentleman is entirely in order. I know what he is getting at.

I am immensely grateful, Madam Speaker.

I agree that the Labour party did not win Macclesfield, although many people believe that the Conservatives did not win it, either. I am pleased to see the hon. Gentleman back in his place, and hope that he keeps up his good work in the Conservative party.

What plans he has to restructure the public sector borrowing requirement in relation to European monetary policy. [32499]

The Government have no plans to restructure the public sector borrowing requirement in relation to European monetary policy. The Government's deficit reduction plan is in Britain's interest whether or not we participate in economic and monetary union.

I thank the Minister for that answer, but does she accept that many of my constituents consider it wrong that investment in Norwich City airport suffers and is curtailed as a result of the local government capital control legislation, whereas Stansted is not disadvantaged? Does she think it is time to review that, and that the European budgetary union conventions are a way forward?

I congratulate my hon. Friend on the concern that he has consistently expressed about his local airport. I am happy to write to him on the specific matter relating to Norwich City airport.

Never mind European monetary policy; does the hon. Lady agree that it is the Government's duty to apply policies that are in the interests of this country? Having established that the overriding objective of the Bank of England is 2.5 per cent. inflation, will she confirm that the PSBR, fiscal policy and all other economic policies will comply with that overriding policy?

Fiscal policy is the responsibility of the Government, as the hon. Gentleman should realise. It is interesting that he says, "Never mind European monetary policy." He should take into account the fact that the Labour Government have taken measures since we were elected last May to improve this country's finances. Indeed, as my right hon. Friend the Chief Secretary pointed out, the moves that we made in relation to the Monetary Policy Committee have resulted in the lowest long-term interest rates for 33 years, and, if I may say so, I was still in primary school 33 years ago as well.

If he will seek to achieve a more competitive exchange rate level. [32501]

The Government want a stable and competitive pound over the medium term, consistent with the objective of price stability. The only sure path to long-term exchange rate stability is through sound macro-economic policies.

Yet is it not obvious to everyone, except four blind academics and ex-academics on the Monetary Policy Committee who have no contact with the real world, that the pound is substantially overvalued as a result of high short-term interest rates here, the deliberate depreciation of the deutschmark and the devaluation of Asian currencies? Does my hon. Friend agree that a 25 per cent. loss of competitiveness for manufacturing, which provides 60 per cent. of our exports is, over a short term, not stability but instability that will lead to depression and deflation later this year?

As I told my hon. Friend on 17 February when I wrote to him on the matter, more jobs are lost as a consequence of instability. I in no way minimise the concern of British exporters over the strength of the pound, but the strength of the pound is a consequence of a variety of different factors. I return to the point that I have made previously to my hon. Friends—that it is important that Britain has economic stability so that companies can develop policies that make them truly competitive across the board.

One of the factors that will influence the exchange rate is the fiscal management of the UK economy. Does the Minister accept that one of the key factors is how credible our entry into the European monetary union will be at some point in the future? Will she urge the Chancellor, in his Budget next week, to set out a much clearer timetable, with an unequivocal commitment to entering monetary union, to allow the markets to prepare—and British industry to prepare so that it does not lose competitive advantage to a currency that will be used in 80 per cent. of our EU home market?

That is an interesting question from the hon. Gentleman. I see that he is not wearing his European presidency tie today, which is perhaps unfortunate. My right hon. Friend the Chancellor made perfectly clear the five key tests that should be applied to ensure that if we decide to enter a single currency, we do so when that would be in Britain's best interests. The Government's present priority is to ensure that British industry prepares for 1 January 1999, because it looks as though there will be a euro zone and, because of the laxness of the Conservative Government who made the single currency the subject that dare not speak its name, we now have a job to do to ensure that British companies do not lose competitive advantage.

Does my hon. Friend agree that, during the past 18 years, Britain lost 40 per cent. of its manufacturing base, and that hardly any of that could be attributed to the high pound? Most of it was due to the fact that the Tory Government deliberately set about reducing the manufacturing base by closing down the shipyards, the pits and the steel industry. It is nonsense for those industrialists to say that they cannot make the profits they want, first, because they are paying the workers too much—and they are against the minimum wage—and, secondly, because of the high pound.

Needless to say, I agree with my hon. Friend. The attitude of Conservative Members the other night to the national minimum wage, to which my hon. Friend refers, was interesting. The Government's policies are about stability and allowing companies, families and households to plan for the long term in a way that was denied to them during 18 years of Conservative government.

What plans he has to compensate the national health service for the additional costs arising from the removal of VAT zero rating for home delivered continence products. [32502]

The NHS is already fully funded for its VAT costs.

Will the Minister explain why a written answer that I received recently from the Department of Health clearly stated that the cost of additional VAT being imposed by the Government on the health service is £9 million a year? In a press release before the general election, the Labour party rightly criticised the imposition of VAT on continence products. Why are the Government now only too willing to impose such a tax and, as a consequence, cause great difficulty to the NHS and to elderly and disabled people?

The hon. Gentleman simply has it wrong. There was no imposition of VAT on the national health service. The NHS is fully funded for its VAT costs. Since the general election, the Government have given the NHS an additional £1.5 billion. The hon. Gentleman is referring to an order that closed an avoidance mechanism being used by private hospitals, which took considerable resources out of the Exchequer. No patient will suffer extra VAT costs as a result of that order, because there are none. Incontinence pads are being treated as part of the provision of health care, so there is no extra burden on the NHS. Some hospitals were using an avoidance mechanism and were therefore being funded twice by the Exchequer. That mechanism was removed.

What representations he has received from pensioners' organisations on his reduction in VAT on fuel. [32503]

We said in our election manifesto that we would reduce VAT on domestic fuel to 5 per cent. My right hon. Friend the Chancellor introduced that measure in his July Budget. It is another example of the Labour Government fulfilling their promises.

I welcome my right hon. Friend's action to reduce VAT to the lowest level possible, from which some 18,000 pensioners have benefited in my constituency alone. Does my hon. Friend agree that pensioners are the most vulnerable group and the greatest victims of the previous Administration's imposition of VAT on fuel?

My hon. Friend is correct on all those points, and the measure will have been welcomed by pensioners in her constituency as it was by pensioners throughout the country. It is worth bearing in mind the fact that, when the Conservative party was in Government, it introduced VAT on fuel. Together with the Liberal Democrats, we prevented them from increasing VAT to 17.5 per cent. and, in line with our manifesto commitment, we reduced it to 5 per cent. Pensioner households spend approximately 50 per cent. more of their income on fuel than ordinary households and they therefore benefit most from the measure—[Interruption.]

Order. The hon. Member for Teignbridge (Mr. Nicholls) is disrupting the proceedings.

Is the Minister aware that Age Concern backed my private Member's Bill on the wind chill factor, which would have given extra support to the poorest pensioners on income support in the coldest parts of the country? Will the Minister ensure that his Department makes provision for next year—it is now too late for this year—and backs my Bill so that those pensioners get the support that they deserve? Originally, it was not my Bill but that of a Labour Member, who tried to push the Bill through the House before the general election. Is it not a case of telling pensioners one thing before the general election and letting them down badly afterwards?

The whole House will welcome the hon. Gentleman's belated concern in these matters. He will remember voting for VAT on fuel when his party was in government. This Government have introduced winter fuel payments of £20 for ordinary pensioners and £50 for pensioners on income support. That goes further than the recommendations to which the hon. Gentleman refers. Taken together, the measures that we have introduced—on the abolition of the gas levy, the reduction in VAT and the winter fuel payments—mean that pensioners are £100 better off on average, and £130 better off where they are on income support.

What the reasons are for proceeding with the abolition of duty free within the European Union in 1999 in advance of harmonisation or equalisation of taxation rates in member states. [32504]

The Council of Finance Ministers decided unanimously in 1991 to abolish duty-free sales for travellers within the European Union because it saw them as an anomaly within the concept of a single market. However, because of the effects of immediate abolition, and to give operators time to adjust, the Council decided to allow duty-free sales to continue after 1 January 1993, until 30 June 1999. The harmonisation of duties and taxes was not a factor in that decision.

Will not millions of holidaymakers be mystified that duty free is to be abolished in July 1999, given the huge differences in duty within the member states and the fact that proceeding with the abolition could cost 100,000 jobs across the European Union? In this country, 30 million people use duty-free shops annually. I urge my hon. Friend not to be neutral, but to use the presidency of the European Union to argue forcefully for the measure to be postponed until there is full harmonisation of duty across the EU, which I suspect will not happen for many years.

As my hon. Friend knows, the Government do not object to a study into the impact of the abolition of duties being undertaken, particularly if it examines the nature of the successor regime. Any postponement requires unanimity, however, and there is no suggestion that unanimity of action exists among the 15 member states.

Might not Her Majesty's Government at least try to secure a postponement, now that they hold the presidency of the European Union and, supposedly, have such great influence over their EU counterparts? Do they take pride in the fact that the measure will cost hundreds of jobs in a number of companies in air transport, shipping and retailing that are already experiencing extreme competitive pressures. How will the British travelling public benefit from abolition of duty-free sales? Surely it will lead to increased fares.

I take no pride in the decisions that the Conservative Government made, or their commitment on the phasing out of duty-free. The Government will not stand in the way of a study being conducted into the likely impact on jobs of abolition, but there is no unanimity on the matter at the moment. The hon. Gentleman should direct himself to the question why Conservative Ministers agreed to abolition in the first place.

What he estimates will be the cost to holders of personal equity plans to transfer them to ISAs. [32505]

The costs will depend on the final shape of the scheme.

I thank the Chief Secretary for that illuminating reply. Other policyholders will be affected if costs are passed on to them. The uncertainty about extra charges that may be levied if people transfer from PEPs to ISAs is preventing them from investing in PEPs in the first place. That uncertainty is causing many problems: should people invest and expect a second charge for their policies, or are they expected to depend on blind trust?

I shall be more illuminating. If the hon. Gentleman sticks around a little longer, he might receive the answer he wants.

What assessment he has made of the correlation between the boom and bust phases in the economic cycle and the value of the pound, and the time lag involved. [32506]

There is no simple relationship between the economic cycle and the exchange rate. The Government's policies are designed to end the cycle of boom and bust, and to create conditions for sustained growth and high employment.

My hon. Friend and the Treasury team keep telling us of the importance of stability in bringing about an end to boom and bust cycles, but such stability will be impossible given the current high exchange rates, because manufacturing industry is being crippled by the high value of the pound. Does he agree that part of the Treasury's job is to create an economic climate in which interest rates could fall to 3 per cent., like those of our European partners, and the pound could fall in value to DM2.60 or DM2.70, so that in five years it would be possible to join the single currency?

I understand my hon. Friend's point, but as I told the House earlier, the most important thing for the Government is to ensure that we have the right economic conditions for a stable economic platform on which to build and so that we will achieve low inflation. That is what manufacturing industry—and everyone in the country—wants. As I said earlier, there are already encouraging signs that, because of our reforms—not just the measures in my right hon. Friend's Budget last year but as a result of a general feeling of confidence in the Government's commitment to stability and the reforms that we have made to the Bank of England—long-term rates are now falling. I repeat—they are the lowest they have been for 33 years. I believe that the path on which the Government have embarked is the right path, and the only path in the long-term interests of this country.

Does the right hon. Gentleman accept that it was concern about economic stability that led 11 countries to prepare themselves for first-wave entry into EMU? Does he welcome the fact that as many as 11 countries are now ready? Will he tell us what economic policy decisions those 11 countries will be party to as members of the euro X committee to which Britain will not be a party?

The hon. Gentleman is aware that the decision about who will join EMU will be made during April and May. As my right hon. Friends the Chancellor and the Prime Minister have made clear, we want to ensure that if monetary union goes ahead, it is a success, because that must be in the interests of the whole of Europe and this country. Whether we are in or out, what happens in EMU will affect us. As my right hon. Friend the Chancellor made clear, we are beginning to put in place the necessary steps to ensure that this country can make a genuine and real choice about whether we join at the appropriate time.

Has the right hon. Gentleman noted that, even after two centuries of theorising and libraries packed with books on economics, Governments still have remarkably little influence on the trade cycle? The one thing that does seem to be indicated by history is that, if one gets into difficulties, it is easier to get out of them with a floating currency rather than a fixed currency.

I remember sitting more or less where the hon. Gentleman is sitting some years ago listening to a 45-minute speech from him on that very point. I am well aware of the hon. Gentleman's views, and I note them with great interest.

Does my right hon. Friend agree that raising interest rates is not the only way to deal with inflationary pressures in the economy? Will he assure the House that other methods will be sought in the forthcoming Budget?

All sorts of pressures lead to inflation, including wages and general economic conditions. I shall repeat an important point; it is in the interests of this country—every single one of us, whether in industry or not—to ensure that we have low inflation and that we get away from the damaging cycle of boom and bust that has bedevilled this country for most years since the war. We are determined to avoid that, and everything we do will be geared towards that end.

What steps he has taken to achieve equalisation of taxes in the European Union. [32507]

This Government have taken no steps towards equalising direct tax rates in the EU. The Government believe that fair tax competition is positive and helps to maintain Europe's external competitiveness. The UK has already persuaded other member states of this and the benefits of fair tax competition are explicitly recognised in the code of conduct agreed by ECOFIN on 1 December 1997.

Early-day motion 949 deals with the increase in tobacco taxes. Does the Minister accept that that is having an adverse effect on our people and on their jobs without helping people's health? Also, about £1 billion a year is being lost to the Treasury through smuggling.

As the hon. Gentleman will be aware, the report produced by the European Union on excise duties, particularly with regard to tobacco, is now considerably overdue. The Government are pressing hard to obtain publication of the report. As the hon. Gentleman will know, the Government take very seriously the problems of smoking and smuggling.

I am grateful to have the opportunity to ask the hon. Lady a question, as she does not have the courtesy to sign her replies to me.

I find it incredible that Conservative Members who supported a Government who for 18 years did nothing about smuggling now try to saddle this Government with solving the problem immediately. As the hon. Gentleman well knows, we take smuggling and excise fraud seriously. It was this Government who set up with the industry the review on tobacco and alcohol smuggling and fraud. The report before us will inform the Chancellor's judgments in his Budget next week.