What estimate he has made of the number of house buyers likely to switch their mortgages from lenders trading in sterling to those trading in the euro. [50487]

The United Kingdom mortgage market is already one of the most competitive in Europe. The narrow differential between longer-term interest rates in Britain and in Europe and the need to manage currency exposure are likely to make these specialist products.

I am not entirely sure about that. It seems that, if there is a big gap between interest rates in the sterling zone and those in the euro zone, it would make sense for people entering the mortgage market to go where mortgages are cheap, or cheaper. I have had a letter from one of the big high street banks telling me that it will be offering euro mortgages next year. What is to stop French, German or Dutch banks—banks throughout the European Union—putting advertisements in the national press here to induce people to switch from sterling mortgages to euro mortgages, which may be more beneficial?

The answer is that, subject to the regulatory requirements that are enforced in this country, there is nothing to stop any French or German bank or other financial institution from offering mortgages in this country. Indeed, British lenders are already offering mortgages in other member states. That is what the single market is all about.

Given that 89 per cent. of mortgage finance in the United Kingdom is held at variable rates and given the simple established fact that mortgages account for almost 11 per cent. of average earnings in the UK—by contrast, they account for only 3.5 per cent. of average earnings in the rest of the European Union—will the right hon. Gentleman, in his public information campaign about the single currency, make it abundantly clear to the British people that they will be much more damaged by an increase in interest and mortgage rates under the single currency than they would be if they lived in France, Germany or elsewhere in the EU?

I should have thought that the hon. Gentleman might have thought long and hard before he asked that supplementary question, because the last time that mortgage rates in this country increased dramatically to double figures was in the late 1980s, following mismanagement by the previous Government. I should have thought also that he would have supported this Government's policy, which is geared to reducing inflation, so that we can bring down interest rates and get long-term stability. The final point that he might want to bear in mind is that interest rates in continental Europe have always been lower than those in this country because it has had the long-term economic stability that this country has not had, primarily because of the stop-go, boom-bust, high-interest-rate policies that were operated by the previous Government.

What representations he has received on proposals in the comprehensive spending review in terms of the funding of the NHS. [50488]

Within a falling debt-to-gross-domestic-product ratio and a current surplus over the next three years, we have made £21 billion available for the NHS, money for modernisation to improve services to patients. To deliver that agenda, responsibility in pay will continue to be necessary but, as a result of our decisions, 30 new hospitals are planned, 1,000 general practitioner surgeries will be renovated, and 7,000 more doctors and 15,000 more nurses will employed in the health service over the next three years. Our proposals have brought a favourable response in the representations that we have received.

I welcome that response and the real increase of 3.7 per cent. over the next three years in NHS funding, compared with 2.5 per cent. under the previous Government. Will the Chancellor confirm that modernisation goes hand in hand with that additional funding? Does he believe that the public will welcome that approach, rather than the approach that involves cutting NHS spending, which is the policy of the Conservative party?

I agree entirely with my hon. Friend. This is money in return for modernisation. Resources will be available for reform in the NHS. As a result, £8 billion will be invested in new hospitals, clinics and GP premises. It has been possible to raise real-terms health service spending by 5.7 per cent. next year, 4.5 per cent. the year after and 3.9 per cent. the year after that. That is an average growth of 4.7 per cent. in real terms, far more than was ever achieved by the previous Government. Because of their policies now to cut public spending, the Conservatives will have to tell us which hospitals and which schools they would close.

Increases in NHS spending have frequently required calls on the reserve. Does the Chancellor think that it was prudent to announce a reserve that is smaller than any reserve announced by the six predecessors in his post?

The whole point of three-year plans is that Departments now make their decisions within the resources allocated to them. I would have thought that, as a result of seeing the stop-go in public spending under the previous Government, the hon. Gentleman would prefer three-year plans that will allow us to break from the short-termism of the annual cycle and to plan the proper delivery of services. The Conservative party has some questions to answer about its future policies.

What proportion of the increased expenditure on the NHS capital programmes comes from the private finance initiative? What will be the real cost to the NHS in the longer term of repaying private finance both in terms of the funding of each district health authority and each hospital and in terms of democratic control of the NHS which, in my view, might be handed over in part to the private sector through the PFI?

The difference between the private finance initiative under this Government and what happened under the previous Government is that, under the previous Government, public investment was replaced by private investment and, under our Government, public investment is being enhanced by private investment. That has made possible the 30 new hospitals that are being planned—work is already under way on eight. Private finance initiative schemes will produce the new hospitals and they will be very much part of the £8 billion invested in new hospitals and clinics. As a result of the changes that we have made, from a failed PFI unit in the Treasury when we took office to a new and reinvigorated public-private partnership unit in the Treasury now, we are determined to achieve the value for money that I should have thought was wanted by both sides of the House.

Will the Chancellor explain why he seems so determined to leave the NHS totally unprotected and uninsured against the possibility of high inflation? Does he not realise that high inflation could have a damaging effect on the NHS? Why can he not simply say that he will use the higher tax revenues that will come with higher inflation to give a cast-iron guarantee to the House that he will maintain the spending on the NHS announced in his review in real terms?

The hon. Gentleman speaks as if we are not increasing NHS expenditure in real terms. It is being increased by 4.7 per cent. a year in real terms. The whole purpose of a three-year settlement is that, within the health budget, with the total increase of £21 billion, all the decisions about the use of resources can be made. It ill becomes the Liberal Democrats, who were suggesting that we should spend an extra half a billion a year on health—that is £1.5 billion over the next three years—when we have now allocated £21 billion, to start complaining about a Labour Government who have delivered when they can never deliver. It is a party that wants publicity without responsibility. That is all that it is.

I listened to my right hon. Friend talking about the party that seeks publicity without responsibility. Has my right hon. Friend listened to the pledges and commitments of the Scottish National party in previous weeks and months? I notice that not one of them is here—

Order. The hon. Gentleman must ask a question about Government policy and not about other parties in the House.

Has my right hon. Friend had time since the announcement of the spending review to investigate how his announcement compares with the pledges of other parties? Is he aware that the investment in Scotland's health service that is threatened by the SNP and its policies would mean 3,000 fewer nurses, 300 fewer doctors, 400 fewer intensive care beds and 4,000 fewer beds in our hospitals? Is it not true that, under the SNP, we would have cuts, cuts, and cuts again?

Order. The hon. Gentleman will resume his seat and it will be some time before I call him again.

How can the Chancellor be so sure that his spending plans are securely based when independent survey after survey—Ernst and Young on Monday, the National Institute of Economic and Social Research this morning—all conclude that he is seriously over-estimating economic growth and tax receipts? Are all those reports wrong, or is it the type of self-opinionated arrogance that has driven prudence away?

Labour Members will not take lectures on arrogance from the hon. Gentleman. I urge him to read the NIESR report that he mentioned. It states:

"Despite our different assessment of future receipts, our forecast shows the Government's fiscal plans being broadly met."

"This is an incredibly conservative package that…wasn't imaginable from an old Labour"

"The rate of growth of spending is going to be slower than under the last Government".

"A reasonable combination of tight control of current spending and a welcome increase in capital expenditure."

What recent discussions he has had regarding the European Court's decision that certain EU budget lines had no legal basis. [50489]

I had very fruitful discussions with other European Budget Ministers, and with representatives of the European Commission and European Parliament, at the Budget Council on 17 July. I am pleased to say that, in line with the assurances given by the Prime Minister on 18 June to Members of the European Parliament, we have reached an agreement that will enable funding to be released while ensuring that the European Court of Justice's ruling is respected.

I thank my hon. Friend for that reply, and for the work that she has been doing to resolve that very difficult situation. When does she estimate that the funding will be released?

The block that was put on budget lines because of the European Court of Justice's decision has now been lifted, and we anticipate that those budget lines will now be fully operational.

Much as the European Court and the European Commission play a beneficial role in extending the single market in the European Union, will the Minister have a close look at the decision on the Air France subsidy, whereby the Commission appears to have overturned the European Court's judgment? That could affect £2 billion of subsidy to Air France. The Commission's decision seems an outrageous one, and may well have budgetary implications for the Chancellor of the Exchequer to consider.

The Council of Ministers keeps a very close watch on all the Commission's activities in budgetary matters. We are very committed to tight budget discipline, and that commitment is shared by a number of our European partners. I very much take on board the hon. Gentleman's point.

If he will make a statement on Customs and Excise policy in relation to the illegal importation of coral reef products. [50490]

As in the case of all items protected by the Convention on International Trade in Endangered Species, customs policy is to confiscate coral imported illegally. Customs usually would prosecute if there were evidence of the importer deliberately breaking the law by such activity.

Acknowledging the excellent efforts of many customs officers, often in trying circumstances, and in the light of the Adjournment debate on 1 July, may I ask what efforts the Government are making to increase awareness of the impact of the coral trade on coral ecosystems, not only in the United Kingdom but in holiday destinations, where tourists often buy illegally got coral?

My hon. Friend is quite correct to say that there is an amount of unintentional importation occurring, and we are taking action—in a public advertising campaign at airports and other points of embarkation and debarkation—to clarify the matter. I should like to take this opportunity to congratulate him on his Adjournment debate and on drawing attention the matter. I have also read with great interest the recent "Reefs at Risk" report, which he will have seen. Moreover, we are in close contact with the World Wide Fund for Nature and other organisations on the matter.

If he will make a statement on the priorities for public spending set out in the comprehensive spending review. [50491]

If he will make a statement on his priorities for public spending for 1999–2000. [50505]

The statement on 14 July 1998, Official Report, columns 187–94 and the White Paper on spending set out prudent spending plans which will achieve a falling debt-to-GDP ratio and a current surplus over the next three years and will invest in reform of the public services and reallocate 50 per cent. of new money to two priority areas—the national health service and education. We shall invest £19 billion in education. We shall renovate or build 2,000 classrooms and employ 6,000 extra teachers to cut class sizes, and we shall have half a million more students in higher and further education.

We on the Government Benches welcome the emphasis in my right hon. Friend's comprehensive spending review on capital spending, especially on the doubling of capital investment in our schools, which will be music to the ears of the mums and dads in the Vale of Glamorgan whose children's education had suffered for so long under the Tories. Is not the only way to get the high-quality public services that the public clearly want through increased investment, something that the Conservative party totally opposes?

Capital expenditure on schools will double in this Parliament, to the benefit of thousands of school pupils. Also, 6,000 schools are already benefiting from the new deal for schools, which was paid for by the windfall levy on the privatised utilities—something that was also opposed by the Conservatives. We have made our investment in education; it is now time to hear the policies of the other parties.

Does my right hon. Friend agree that the serious under-investment by the previous Government prevented the modernisation and improvement of the British infrastructure? Will he outline what levels of investment will be going into the public sector when we set up the investing in Britain fund?

All hon. Members will welcome the improvements that will be made in their constituencies as a result of the investing in Britain fund. It will double capital investment over the next three years from 0.8 to 1.5 per cent. of GDP. At the moment, 1 million school pupils are being taught in classrooms built before the first world war; two thirds of our hospital blocks are hand-me-downs from the days of the voluntary and charity hospitals; and everyone knows that our roads and the transport infrastructure have been under-maintained. As a result of the investing in Britain fund, I should like to see signs in every constituency that the Government have invested in this country's future.

Does the Chancellor recall that, under each of the previous five Labour Governments that this country has had to endure, unemployment has always been significantly higher when they left office than when they assumed it? Has he noted the report by Ernst and Young—the largest accountancy firm in the world—which states that his comprehensive spending review is going to send unemployment soaring towards 2 million?

The hon. Gentleman should read the report. The first thing of which I remind him is that unemployment increased by 50 per cent. under the previous Government. Secondly, the Labour Government have created 400,000 jobs in their first year. Thirdly, the new deal for young people, which the hon. Gentleman's party also opposed, has already involved 60,000 young people. We are determined to end the problems of youth and long-term unemployment. It is about time that we heard a Conservative party policy that would cut unemployment instead of increasing it.

Does the Chancellor accept that next year will be the last in which Conservative expenditure totals apply, and that, after that, expenditure as a proportion of GDP will be out of control, in the sense that he does not have the foggiest idea what the GDP will be beyond that, given that he himself has produced two totally different central forecasts for GDP in the past four months?

First, the forecasts that we have put before the House of Commons have been absolutely consistent since the November statement and the Budget, so I hope that the hon. Gentleman will reconsider the point that he made on that. Secondly, in respect of prudence in public spending, our golden rule means that, over the cycle, revenues will pay for current spending. In other words, the Budget will be in balance. Under the Conservative Government and in the last economic cycle, there was a deficit of 1.5 per cent. of GDP, averaging £12 billion every year on current spending. So I ask the hon. Gentleman to consider who was prudent and who was imprudent.

Is my right hon. Friend aware that his comprehensive spending review statement was the defining moment for the Government? It reminded the British people why they voted Labour last year. My right hon. Friend has identified the productivity gap as crucial to the success of his economic and financial policy. In view of the overvalued pound and earnings rising at 5.4 per cent., will he now ensure that the Government devote sufficient resources to deal with the problem?

I understand the concerns of exporters about the pound, but, more than anything else, they are concerned about the possibility that we shall return to the policies of the previous Government. We are engaged in a process of moving the economy from the stop-go, low productivity and instability of the past 20 years under the Conservatives to an economy that is capable of sustained and steady growth with high investment and productivity. I believe that most businesses and industrialists do not want a return to the boom-bust years of the Conservatives, and we shall not be diverted from a policy for long-term growth in the economy.

Why did the Chancellor abandon the commitment made in his March Budget statement to balance the Budget in cash terms by 2000?

No commitment was made. We said that we would publish three scenarios about the future growth of public expenditure, all of which would meet the golden rule. If the right hon. Gentleman looks at what I have said in past years, he will see that I said two things: it is prudent in economic policy first to meet the golden rule and secondly to have a sustainable debt-GDP ratio. When we published the projections in March, they included, under the old public sector borrowing requirement, zero in one year. In the projections that we published in June, under the net borrowing requirement, we reached zero in one year.

The Chancellor's defence to the charge that he has abandoned his commitment is that he has changed the definition. It is almost the same explanation that the Paymaster General gave for his failure to disclose his interests—that he signed false accounts instead. Will the Chancellor now correct the Prime Minister's gravely misleading statement yesterday and accept that his own forecasts are now much more optimistic than any others?

"the fiscal arithmetic is dangerously prone to recessionary shocks which hit welfare spending and tax revenues."

"The sharp rise in Government spending will keep interest rates higher than would otherwise have been the case and delays their eventual reduction."

The shadow Chancellor has no reputation to worry about. The average of Treasury and independent growth forecasts is 2.2 per cent. We have said that growth will be within a range of 2 to 2.5 per cent. Far from being out of line with independent and City forecasts, we are in line with them.

"the inflation outlook remains benign"

"We expect…growth at 2 per cent. this year and 1½ per cent. next year".

"our forecast shows the government's fiscal plans being broadly met."

What assessment he has made of the effects of the current level of pay rises among senior business executives. [50492]

Pay in all sectors and at all levels must be related to what is affordable in the medium term. Senior business executives are no exception. It would be the worst of short-termism for senior executives or anyone else to pay themselves unsustainable pay increases today at the cost of higher interest rates, fewer jobs and slower growth tomorrow.

Does my right hon. Friend agree that large pay increases that are not related to productivity can only make firms less competitive and lead to inflationary pressures in the economy?

My hon. Friend makes an important point. Boardroom members who are telling others to pull in their belts and accept reasonable and affordable pay increases must show a lead. Our productivity record is not very good compared with other countries. Management has a role to play. I repeat that for anyone—senior executive or not—to pay themselves unsustainable pay increases today would bring the worst possible results, with fewer jobs and slower growth. Everybody—boardrooms in particular—should take the lead on that.

Does the Chief Secretary agree that the issue is not the amount that chief executives are paid, but their calibre and the performance of their companies, particularly their investment in infrastructure and the fact that consumers' bills since privatisation have been held at incredibly low levels? We all remember the times when nine out of 10 public telephones did not work and every high street in the country was being dug up by a different utility. The utilities are very different today. We need world-class companies such as British Telecom and other privatised utility companies.

I am not sure where the hon. Gentleman has been for the past few years. Many hon. Members can name many high streets that are still being dug up by the utilities. I am not sure when he last received a water bill, but many people's water bills have increased substantially.

Does my right hon. Friend agree that expecting bosses, especially of the public utilities, to adopt the moral tone that the Government might encourage, and asking them to occupy high moral ground on their own pay, is not likely to work? They have never been prepared to respond in the past. As the Government have something to do with regulators and can propose public utility price levels, should they not take the opportunity to work in that direction? Should not the people whom the Government appoint to quangos—I do not like quangos, but the Government do, and they appoint thousands of people to them every year—impose conditions on bosses' pay? If we go down that road—it is public intervention for sure—we might get a better result than by merely preaching.

My hon. Friend makes an important point, particularly in respect of directors of monopoly utilities, who make their profits, to a large extent, because of their monopoly. He will know that the Government are considering action to ensure some degree of restraint in those boardrooms. I repeat that it is up to everyone, particularly senior executives, to show some responsibility and to set an overall example.

Will the Chief Secretary comment on the future of pay review bodies apropos public sector pay increases? Does he share my view that it is more appropriate for consultants, doctors and nurses to receive a larger increase than public sector executives?

The hon. Lady will know that pay review bodies, some of which were set up more than 20 years ago, will remain. We have enhanced their responsibilities by asking them to have regard not only to recruitment, retention and motivation but, crucially, to affordability in order to ensure that whatever they award is consistent with Departments' obligations to achieve the targets set out in last week's review.

What progress has been made towards meeting the criteria which the Government have set for joining EMU. [50493]

The Government are committed to a programme that is in the national economic interest and will help to satisfy the five tests outlined by the Chancellor in his statement in October.

Given that, in 14 months, the Government have done more to prepare British business for either the threat or the opportunity—depending on one's point of view—of the euro than the previous Administration in the long years since Maastricht, will my hon. Friend explain how she intends to provide the House and the British people with regular progress updates, so that any decision on British entry to the euro can be an informed choice rather than the knee-jerk reaction so typified by Conservative Members?

The Government regularly publish details of the performance of the economy against which the five economic tests can be measured. My hon. Friend makes a valid point. We have only five months until the introduction of the single currency in 11 countries with which businesses in this country trade. It is quite appalling that the previous Government did nothing to ensure that preparations were in place. Indeed, their actions could have adversely affected the competitiveness of British industry. This Government are doing everything in our power to address that.

In the light of the job losses announced by Rover today, does the Economic Secretary not recognise that the overvalued pound is causing serious damage to British manufacturing and threatens tens of thousands of jobs, and that that has been brought about partly by the Government's failure in their fiscal policy to tackle consumers rather than businesses, so forcing up interest rates and the pound? Does she not recognise that the Government have the power and the duty to address that problem, and also to ensure that business has a clearly identifiable timetable for membership of European monetary union so that it can make plans now, knowing that the British exchange rate will be at a competitive level, which at the moment it is not?

Again, we have publicity without responsibility. The hon. Gentleman is advocating short-term solutions to problems that have to be dealt with in the longer term. It is ironic that that should come from the Liberal Democrats, who voted against all the tax changes introduced by the Government. The sensible thing to do is to get the economy on to the path of long-term sustainable growth. In that way, we benefit the entire British economy, and allow the British people to make a reasoned judgment on whether to join a single currency.

My hon. Friend will be aware that in the west midlands we are very concerned about the job losses—up to about 10,000—which will arise as a result of Rover's announcement. Will she and her colleagues tell the Monetary Policy Committee that it is important not to exaggerate the inflationary pressures in the economy and that, with the exception of fat cat pay rises, pay settlements, including those at Rover, have been in line with inflation? Higher earnings have largely been the result of factors such as increased overtime working, which, ironically, has come about because employers are unwilling to take on new staff because of the high and uncompetitive rate of the pound. Will the Minister also tell the Monetary Policy Committee that tomorrow's mortgage interest rate rise will lead to demands for higher pay increases? The sooner we can get interest rates down, the better.

I must tell my hon. Friend that only last month Rover announced 1,000 additional new jobs in connection with the R40 model that it is introducing. One of the key elements for long-term business planning in this country is to get inflation down and stability into the economy. Some 400,000 new jobs have been created over the past year, and to enable us to build a sustainable economy we need the kind of decisions now being taken by the Monetary Policy Committee, which should have been taken by the Conservative Government. Much of the increase in the value of sterling—two thirds of it, in fact—took place in the lifetime of the previous Government. Conservative Members frequently try to forget that.

As the Government have decided in principle to join the single European currency, and it is now just a matter of timing, does the hon. Lady agree with the National Institute of Economic and Social Research report that came out this morning, which says that the recently announced public spending increases will lead to an interest rate regime that is higher for longer than would otherwise have been the case, and that joining the single European currency in the next Parliament would lead us to join at an uncompetitive rate? According to the report, that will mean

"a period of very slow growth and price deflation".

The right hon. Gentleman is obsessed with the European Union. Indeed, it was interesting that in the debate on the single currency the other evening, the shadow Chancellor, in response to a question by my right hon. Friend the Chief Secretary about whether he could tell the House under what circumstances a Conservative Government would ever join the single currency, replied:

"At the moment I cannot".—[Official Report, 21 July 1998; Vol. 316, c. 990.]

"the inflation outlook remains benign",

"inflation falling below 2½ per cent. per annum by the end of this year, with a modest revival to the target rate in 1999".

How many representations he has received since 1 May 1997 about the debt problems of the poorest countries in the world. [50494]

Since 1 May 1997, the Treasury has received more than 9,000 letters and postcards about third-world debt. In the past year, eight of the poorest indebted countries have moved into the debt reduction process.

Although some progress was made at the G8 summit in May, is my right hon. Friend aware of the disappointment at the failure of some of our G8 partners to agree on more positive measures for debt relief? As the International Development Committee report on debt relief was published more than 11 weeks ago, can we expect an early positive response to the Committee's excellent recommendations? Will my right hon. Friend assure us that the Government will step up their efforts to write off the unpayable debts of the world's poorest countries by 2000?

I assure my hon. Friend that a response has been sent to the Select Committee, outlining a number of initiatives in which the Government are engaged. As a result of the heavily indebted poor countries initiative, Uganda became the first country to receive a debt reduction—it will complete the process this month—by $347 million. Another five countries will have their debt reduced by $3 billion as a result of the negotiations and of the decision points that have been reached. Another two countries are about the reach the decision point, and we are close to agreement on six other countries.

What discussions is the right hon. Gentleman having with other European Union financial leaders about how substantial progress can be made towards ensuring that the whole of the EU helps to reduce the debt burden of the poorest countries?

Much as many hon. Members want the European Union to work in an integrated way on all issues of foreign policy, debt relief works through the Paris club and through pressure in the G7 and other organisations. I think that what the hon. Gentleman wants is what we are trying to do—to persuade our G7 partners to become far more fully involved in the debt reduction process and to persuade countries to reconsider their refusal to sell International Monetary Fund gold. Through our new initiative for post-conflict countries such as Rwanda—which have been burdened not only by huge, unsustainable debts but because they are recovering from war—we can do more as members of the international community to extend the debt reduction process.

Will my right hon. Friend redouble his efforts to solve some of the debt problems of the poorest countries? I, like many hon. Members, receive many representations from schoolchildren, who absolutely cannot understand why we cannot do something about the terrible pictures that we see on the television. I welcome the progress that has been made, but will he redouble his efforts, so that, when we go to schools, we can talk about the real progress that we are making?

The Government want poverty to be halved in the future. I assure my hon. Friend that our efforts are designed to ensure that international development aid money goes to the reduction of poverty, to health programmes and to education. We want to avoid what happened in the 1980s, when much borrowed money financed prestige projects, was wasted on military expenditure and, in some cases, led to the corrupt use of resources.

If he will make a statement on the impact of the proposals set out in his comprehensive spending review on the United Kingdom's net contributions to the European Union.

The United Kingdom's contributions to the European Community derive from its treaty obligations with the Community. Consequently, the comprehensive spending review has had no direct impact on the United Kingdom's net contributions to the European Community.

I thank the hon. Lady for her reply. If that is so, can she assure the House that when the budget and expenditure review of the EU takes effect from the end of next year, the UK's net contributions to the EU in the first two years of the new millennium will be no higher than they are at present?

The hon. Gentleman will be aware that discussions are about to start on the new financial prospectus for the European Community. It is important to make the point that, at the moment, there are increased pressures on the European Community budget because of decisions entered into by the Government of which he was a member in 1992 in relation to structural funds, which have meant a significant increase in expenditure on contributions to the EU. The long-term financial prospects must be looked at in light of the proposed enlargement of the EU. It is the determination of the Government to ensure that we can have a tight budgetary package so we get value for money not just for our domestic economy, but right across Europe.

Does my hon. Friend agree that targeted investment-led EU structural funds have made a major impact on the economies of regions such as the north-west, particularly during those years when the Conservative party refused to intervene to do anything about disparities in regional economies? Does she believe that the comprehensive spending review's proposals for new investment in transport infrastructure will help to develop the economies of our regions so that we may strive to become near the average of the EU regions in terms of gross domestic product, rather than below, where we find ourselves as a result of 18 years of neglect?

My hon. Friend is well aware of the Chancellor's intention in the comprehensive spending review to seek to reach a settlement that ensures that our infrastructure gets the investment that it requires. We are coming up to a period in which we will be examining the future of the structural funds. The aim of the British Government will be to ensure value for money and that the new structural funds settlement and the common agricultural policy secure the best interests of the taxpayers of the United Kingdom and our constituents.

What steps Her Majesty's Government are taking to ensure that the European investment bank properly assesses applications for investment. [50496]

All projects approved by the EIB are approved by its board after appraisal by its staff.

Is the Minister aware that the Select Committee on European Legislation was recently advised of a substantial write-off of an advance to a regional airline which subsequently failed, and that the reasons given were

"Poor financial and commercial management, an inadequate choice of aircraft—

"and lack of political support"

I have met Sir Brian Unwin, and I will bring the matter to his attention. I would not like to leave the House with the impression that the EIB is an inactive or incompetent organisation. It has invested £26 billion, £23 billion of which was in the EU, and, last year, £3.8 billion—the highest level ever—was invested in the UK. I will bring the matters to the attention of Sir Brian. I have met him before and will do so again, and I will report what he says back to the hon. Gentleman.

Is my hon. Friend aware that if the Chancellor of the Exchequer were to announce that he was in favour of joining EMU—without setting a date—the consequences would be an increase in inward investment, a reduction in the high level of the pound and a reduction in interest rates? Would that not be one those rarest-of-all economic consequences—a genuinely free economic lunch?

My right hon. Friend the Chancellor made clear the five conditions that must be met and has said that, if it is in the national interest, there is no barrier to our joining EMU. The performance of the European investment bank in the United Kingdom and the European Union is already extremely good and should be welcomed by the whole House.

When he last met his counterparts in the European Union to discuss tax harmonisation. [50497]

The Government's view is that direct taxation is primarily a matter for national Governments. Decisions on European tax issues are subject to unanimity.

As we know, there have been extensive discussions within the auspices of the Economic and Finance Council on future tax harmonisation. Can my right hon. Friend guarantee that there will be no future discussions on income tax harmonisation within the European Union because, as sure as eggs is eggs, that is what enthusiasts for EMU will press for next?

It is not true to say that there have been extensive discussions. ECOFIN has discussed measures to cut down on tax evasion and also the effects of harmful tax competition—a matter that has been pursued by this Government—as some countries are offering tax incentives in particular areas rather than a generalised reduced rate of corporation tax. I listened carefully to what my hon. Friend said in the debate on the European Union the other night and I understand his general position on it—let alone the European currency. I believe that his fears are exaggerated and I do not share the basis on which he opposes the concept of monetary union or the European Union itself.

With the London art market already largely destroyed in the pointless quest for tax harmonisation, does the Chief Secretary accept that the Commission's proposal to impose a 20 per cent. withholding tax on interest income poses a real threat to London's position as an international financial centre and will lead to investors simply switching their money to Zurich or New York? Will he give a categorical assurance that the Government will veto that proposal and reject any compromise that damages the City of London?

I was wondering what the hon. Gentleman was doing on the Front Bench, but I am reminded that he is now an Opposition Treasury spokesman and I welcome him to that job. I recently met an individual who is involved in the art world and am aware of the fears. Frankly, we were sticking up for the position of the art market long before the hon. Gentleman showed any interest in the matter. The Government are aware of the problem—and to say that the London art market is under threat is to raise unjustified fears, as it is competitive and well regarded throughout the world.

What estimate he has made of the annual costs to the United Kingdom general public of exchange costs related to European currencies. [50498]

Any estimate of annual exchange costs related to European currencies would be subject to wide margins of error. It would need to take account of the transaction costs incurred by business and individuals each time currencies are exchanged and the associated costs to business of exchange rate uncertainty.

Why should the British holidaymaker in Europe spend billions of pounds annually filling the pockets of European money changers, when at the stroke of a pen—entry into the single European currency—those costs would disappear overnight? Is that not a powerful argument for early entry into the European single currency?

My right hon. Friend the Chancellor made the Government's position on the single currency absolutely clear. If we meet the five economic tests, we believe that, in principle, the single currency would be good for this country. In the past six months of our presidency, we have done everything that we can to ensure that it is launched successfully. I understand my hon. Friend's point, but I think he would agree that the important thing is to ensure that this country prepares so that it is in a position to make a genuine and real decision whether to join such a currency at the appropriate time.

Surely the costs of conversion of currencies are as nothing to the costs to our people of having to endure inappropriate levels of interest or quantities of money in circulation, imposed by an alien bank over which they have no democratic control.

The hon. Gentleman illustrates the problems of the Conservative party when he describes the European Union as alien. No doubt he was greatly encouraged the other night when the shadow Chancellor moved his party's position from not joining a single currency for at least 10 years to not being able to envisage ever joining it at all. That is how out of touch Conservative Members are. They must realise that we are part of Europe. More than 50 per cent. of our trade is within Europe, and we believe that, if it is in our economic interest to join a single currency, that should be equated with the national interest.