What is his policy in respect of taxation on (a) house building and (b) house renovation. [83188]

The construction of new housing is not taxed. The renovation of existing housing is subject to VAT at the standard rate.

Is it not time that the Government took notice of the Select Committee on the Environment, Transport and Regional Affairs and reviewed an obviously illogical policy which is bad for the environment? Surely it would be better if green-field housing were taxed and there were less tax on the renovation and improvement of existing property. That makes sense for the environment. It has no fiscal implications in terms of the amount of money that the Government receive, but it would be a good signal to send. Will the Government pursue that policy?

As the hon. Gentleman knows, the Government's policy is to discourage green-field development and to encourage sustainable housing growth through the use of brown-field sites. He is right to say that tax may play a part in that policy. As he is aware, the Government's statement of intent on environmental taxation makes it clear that we should consider tax and regulation and other items with regard to pursuing that policy. It is important that any change in tax policy does not cause further distortions, which would make the position worse. Therefore, of course the Government keep the tax position under review, because it is important that such distortion is not allowed to undermine Government policy.

The imposition of VAT on house improvement by the previous Conservative Government was undoubtedly a considerable act of folly, with damaging effects in some northern cities and the Welsh valleys, where there are very many elderly, low-income owner-occupiers who need house improvement support. When the Government's urban task force reports next month, will the Minister carefully consider proposals that will equalise the tax treatment of new house building and house improvement, so that those elderly, low-income owner-occupiers can maintain their homes, the quality that all of us would wish?

My hon. Friend will have noted that the previous Government put VAT on fuel, which was also damaging to those poor pensioner households. I know that, as a member of the Select Committee on the Treasury, he is aware that conversion services for housing associations, and the conversion of non-residential properties into housing, are zero rated. He is right to say that we should ensure that the tax system does not discourage the conversion or renovation of any property. Of course we are considering the matter.

I am sure that all hon. Members are worried about the decay of buildings in town centres. Would it not be a positive step if the VAT treatment were changed to give a positive response and an impetus to the development and refurbishment of town and village-centre properties?

Each of those who have spoken on this question have identified a different aspect of housing policy that they wish VAT to tackle—whether it be green-field sites, brown-field sites, the renovation of the inner cities or the importance of all housing in our communities. That shows the diversity and complexity of the problem that the Government are seeking to address. I should say that just one change will not give us the solution that we are looking for, which is why the Government are reviewing the position.

If he will propose changes to the taxation system which would encourage further investment in the exploration and production of North sea oil and gas. [83189]

The Government are committed to the success of the North sea oil industry and promoting investment in this sector and in the economy more generally. The fiscal regime must be consistent with this objective while ensuring that all North sea oil companies pay their fair share of tax.

I thank my hon. Friend for that reply. Given the importance of the offshore oil and gas industry to our national economy—it accounts for 350,000 jobs, 5,000 contractors and 16 per cent. of total industrial investment—and given the fact that the industry is now involved in the exploitation of marginal fields, does my hon. Friend recognise that fiscal measures can play an important part in ensuring that it remains economically viable to exploit our remaining reserves over the next 30 years? Specifically, will she consider the case for capital gains tax rollover relief, as that would be a well-targeted measure that would bring forward investment; and will she look to encourage innovation such as the recommissioning of platforms, which would have great environmental benefits?

Of course I know that my hon. Friend takes a very close interest in these matters, as he is chairman of the all-party British offshore oil and gas industry parliamentary group. I strongly agree with his assessment of the great importance of the industry. That is why I have twice met representatives of the industry; and my right hon. Friend the Chancellor of the Exchequer has also met them. As the House will know, there were three helpful measures in the Budget, including one to reduce compliance costs. We continue to have discussions with the industry. We should take into consideration the current rosier price of oil and not come to any hasty conclusions.

Although the industry was no doubt grateful that the Treasury backed off from its threat of additional tax last year because of the situation in the industry, and although the Minister will no doubt want to review carefully the current state of effort in the North sea compared with that prevailing until a year or two ago, will she have a word with her right hon. Friend the Secretary of State for Trade and Industry about the implications of the gas moratorium which, as well as the present rate of taxation, is sending a negative signal about the future development of the North sea?

I am rather surprised at the hon. Gentleman's remarks. He will know as well as anyone who knows the industry that my right hon. Friend the Chancellor's statement in September 1998—that, at that time, in view of the low oil prices, he would not proceed with reform of the North sea tax regime—gave the industry what it had long sought: a firm basis on which to plan for the future. As the House is well aware, the changes that we have made to business taxation—the lowering of corporation tax—will help all industry, particularly that in the North sea.

What estimate he has made of the level of tax to be paid by business in 2000–01 as a result of the Budget. [83190]

What estimate he has made of the change in overall tax yield from business in 2001–02 as a result of the Budget. [83194]

All companies that pay tax will benefit from the cuts in corporation tax that were announced in this year's Budget and in previous Budgets.

As a result of the Government's first Budget and the changes in pensions tax, business will have to pay an extra £5.5 billion in taxation next year. As a result of the Government's changes in corporation tax in their second Budget, business will have to pay an extra £2 billion in taxation next year. As a result of the environmental levy in this year's Budget, business will have to pay an extra £1.75 billion next year. Does the Chief Secretary realise that business can pay those extra taxes only by charging its customers more, and that more than £9 billion will therefore be taken by stealth from the pockets of British people?

I am happy to compare our record on business taxes with that of the Conservative Government. I remind the hon. Gentleman that, in their first four years in power, the Conservative Government maintained a corporation tax rate of 52p in the pound. In our first two years in power, we have cut the main corporation tax rate to 30p in the pound and the small companies rate to 20p in the pound and have introduced a new 10p starting rate of corporation tax. Those are the lowest company taxes in the history of this country, the lowest company taxes of any country in Europe, and the lowest company taxes of any major industrialised country in the world. The hon. Gentleman should be congratulating the Government.

May we now please have an answer to the question? For the Chief Secretary's benefit, my question is:

"What estimate he has made of the change in overall tax yield from business in 2001–02".

The right hon. Gentleman refers to the views of the business community. In the past, we have listened—[HON. MEMBERS: "Answer the question."' Opposition Members are getting very excited; they should calm down for a moment. The right hon. Gentleman rightly referred to the views of the business community about the Budget and previous Budgets. I remind him what some leading members of the business community have been saying about the Budget. I remind him, for example, that the hon. Member for Tunbridge Wells (Mr. Norman) said:

"Overall. not a bad business Budget."

Is my right hon. Friend aware that the reduction in the rates of corporation tax has been widely welcomed, as has the extension of first-year capital allowances to small and medium-sized companies? Is he also aware that any incentives to manufacturing industry are difficult to obtain? One of the few ways of achieving those incentives is through capital allowances, so will he perhaps consider some increase in the capital allowances, particularly for manufacturing industry?

I am grateful for my right hon. Friend's welcome for the Budget measures. As he rightly says, the cuts in corporation tax benefit 270,000 companies, and companies paying tax up to the level of £50,000 a year stand to benefit from those cuts. Many more companies on top of that—in the manufacturing and service sectors—will benefit from the extension of first-year capital allowances. I know that that is widely welcomed, in manufacturing in particular. We recognise the difficulties that some manufacturing companies face at the moment, and we hope very much that the Budget measures will help them to grow and prosper for the future.

Does my right hon. Friend agree that, had the Government accepted them, the total cost of the Opposition proposals made in the Committee considering the Finance Bill in the past two weeks—the abolition of the fuel escalator; the abolition of any increase in duty on tobacco; the lowering of vehicle excise duty for 1400 cc cars; and the retention of the married couples allowance for all new pensioners, so that we will all have to get married when we are 65—would have been billions? Ultimately, that money would have to be paid by the wealth creators and businesses of this country. Their commitment to £40 billion for health and education combined with low tax for business is a complete sham—crocodile tears from a discredited Opposition.

My hon. Friend is absolutely right. This is an example of Tory taxation by stealth. The Tories' figures do not add up, and no amount of double-talk from the shadow Chancellor about his commitment to schools and to hospitals can disguise that fact. If they had their way, they would load more taxes on business and, indeed, on individuals. They cannot be trusted, either with the state of the public finances or with our country's vital public services.

Is the Chief Secretary aware that there is a great deal of concern in British business that, as a result of the Government's perfectly valid concern about tax avoidance, there could be a considerably increased tax burden on legitimate businesses, notably through Inland Revenue 35 as it is applied to the computing industry and through the application of value added tax on the internal transactions of banks? How much revenue does he propose to raise in that way, and what assurances is he giving to business that he will not penalise legitimate companies?

If the hon. Gentleman cares to look in the Red Book, he will see what the tax yield would be from that measure. As we have made clear in the Finance Bill Committee, no legitimate service businesses will be affected by this proposed measure.

My right hon. Friend will know that the climate change levy is deemed to be tax neutral, because of the associated national insurance rebate, but does he recognise that there is a severe threat that jobs in the high-energy industries will be transferred abroad? That would be a severe penalty, and there would be no environmental advantage from it. I hope that that will be taken note of in the discussions that are taking place; I know that the Government are anxious to preserve jobs in this country.

As my hon. Friend is aware, an extensive consultation about how best to introduce the new climate change levy is under way. I can tell him and the House that my right hon. Friend the Chancellor met the Confederation of British Industry yesterday to discuss that, among other matters. We are well aware of the concerns of the energy-intensive industries, which is precisely why we are going through the sort of consultation exercise that we are.

What assessment he has made of the impact of changes in cider duty announced in the Budget on producers of bottle-fermented cider. [83191]

Discussions with the National Association of Cider Makers suggest that there are fewer than 30 producers of bottle-fermented sparkling cider, some of which are exempted from paying any duty because their production is below the registration threshold. Of those who pay duty, most also produce mainstream traditional ciders and are not, therefore, reliant solely on bottle-fermented sparkling cider production for their livelihood.

I am grateful to the Financial Secretary, but is it not the case that in order to deal, rather ineffectually, with an infraction proceeding from Italy for a rather unpleasant-sounding beverage, she is driving out a traditional British product of high quality, which is made in my constituency? Is it beyond the wit of the Treasury to devise an exemption that would maintain the production of bottle-fermented cider? If it cannot do that, is not the inference that, for the Treasury, far from small being beautiful, small and rural industries simply do not count?

I am surprised at the hon. Gentleman, who I would have expected to know rather more about the subject. [Interruption.] I say that only because his hon. Friend the Member for Kingston and Surbiton (Mr. Davey), his party's spokesman on this matter, said during a debate on the Finance Bill:

"The vast majority of cider makers will not be affected … the industry as a whole is not worried. It has been consulted, and has agreed with the Government's approach."—[Official Report, Standing Committee B, 4 May 1999; c.41–3.]

What can the Chancellor possibly have meant when he told the House during his Budget speech that there would be no increase in alcohol duty this side of the millennium?

I know that it is a bit early in the morning, but the hon. Gentleman clearly did not hear my earlier reply. There was no new increase; the increase was started by the Conservatives when they were in government. The then Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), initiated it in 1996, nearly four years ago, and the industry knew all about it. Let me tell the Conservative party that it is no good doing another U-turn; Labour Members are far too used to that.

What projection he has made for unemployment levels at the end of the 1999–2000 financial year. [83192]

In line with the practice of previous Administrations, the Government do not publish forecasts of unemployment, but, for the purposes of projecting social security spending, the Government have introduced a new and deliberately more cautious unemployment assumption, based on an average of outside forecasts.

Employment in manufacturing has fallen over the past four months, and is set to go on falling. Over-regulation and stealth tax policies are making matters worse. Why do the Government keep slithering out of their responsibilities for manufacturing industry—or is it someone else's fault that things are going wrong?

Under the last Administration, manufacturing unemployment fell from 7 million to 4.1 million. It is still above 4 million under the present Government. However, the latest figures show that manufacturing output rose last month, despite everything that the Opposition have been saying about manufacturing.

"When we are returned to power we will build on this scheme, which is doing a lot to help people".

Did my right hon. Friend see yesterday's statement by the Bank of England that the economy was now on course for growth with price stability? Will he suggest to Conservative Members, and to the shadow Chancellor in particular, that the shadow Chancellor should consult more widely with business representatives, rather than just talking to representatives of Asda? We have a 4.6 per cent. unemployment rate; and businesses up and down the country welcome the new deal, and welcome the creation of a business environment in which they can get on with the job.

I am grateful to my hon. Friend for his reference to Asda. If the shadow Chancellor were to talk to the person from Asda, who is also a Conservative Member, he would hear him say about the Budget:

"We'd welcome the help for small business. I think that's good. We'd welcome the reduction in corporation tax and lower corporation tax for small business. That's good … everyone in the country is dead keen on it"—

"and that's good. Overall, not a bad business Budget."

Does the Chancellor accept that the biggest continuing threat to jobs in farming, food production, tourism and manufacturing is the continuing high exchange rate and high interest rates, compared with those of our main partners? Is it not time that he had a strategy for bringing our exchange rate to a more competitive level, and our interest rates into line with those in our major markets? When will he do that?

The biggest threat to jobs in any sector would be the pursuit of the wrong macro-economic policies—the policies that were pursued under the previous Government. I think that the hon. Gentleman agrees. There will be no return to stop-go, boom-and-bust policies. We have kept inflation low, we have made the Bank of England independent, and we have set tough fiscal disciplines. All those disciplines are now yielding results in terms of both the inflation rate and the growth path of the economy, but we have still to have some answers from the Opposition. They oppose Bank of England independence. They oppose all the measures that we are taking that are to do with employment—the minimum wage, the working families tax credit and the new deal. They do not have an economic policy and, sometimes, I wonder whether the Liberal Democrats do.

One of the problems in terms of unemployment is that the Opposition have been talking down the economy for the past two years. As my hon. Friend the Member for Huddersfield (Mr. Sheerman) pointed out, the Bank of England said that the economy is set to grow, and Barclays says that there will be no recession. Is it not true that, in that context, the new deal is even more important in getting people trained and skilled for jobs?

I am grateful to my hon. Friend. I wish that the Opposition party would now welcome the new deal and that, instead of the shadow Chancellor saying that it is a failure, a waste of money and even a fraud, he would respond to the fact that 250,000 young people are now benefiting from the new deal, that the number of young people unemployed for more than six months has been cut by 56 per cent. since the election, and that long-term unemployment has fallen by 42 per cent. I hope that he will take the advice of the hon. Member for South-West Bedfordshire, welcome the new deal and wish that it could be extended.

The Chancellor will recall that, in 1989, when the European Commission last proposed a job-destroying withholding tax on savings—[Interruption.] The question is about employment, and the tax is a job-destroying measure. At that time, the measure was quietly and politely strangled at birth by the then Conservative Government. Although the tax would have destroyed fewer jobs because it excluded eurobonds, in opposition, Labour supported us in ensuring that it never even went into negotiation.

I have made it absolutely clear that the United Kingdom will not accept any directive that requires member states to introduce a withholding tax. It has been absolutely clear for months. It is only the Conservative party's obsession with finding conspiracies in every part of Europe that allows it to use a question on employment simply to talk about the withholding tax.

I do not think it eccentric to use a question on unemployment to talk about a European measure that would destroy jobs; it is directly relevant to unemployment. If the right hon. Gentleman does not understand the connection, that is perhaps part of the problem that the City of London faces. How many jobs is it acceptable to destroy as the price of his going with the flow in Europe?

First, it is very difficult to take lectures about European legislation from the man who signed the Maastricht treaty. Secondly, it is not true to say that the measure was off the table when we came into office; it was on the table and being discussed. Thirdly, because the right hon. Gentleman sees a conspiracy in every part of Europe, he will not accept what I have said all along: the UK will not accept any directive that requires members to introduce and impose a withholding tax. I have made that absolutely clear. It is about time that Conservative Members took what they said they were going to do to heart and listened.

Does my right hon. Friend accept that, given last year's very worrying measures of business confidence, yesterday's estimate by the Bank of England of a gentle take-off in growth was not only very encouraging but unprecedented? Will he spell out which of the Government's policies he believes have contributed to creating that growth, and which future policies will ensure that it continues? Will he also assure the House that he will not be thrown off by an Opposition who seem to be unsure whether they believe that public spending is reckless or desirable, whether the Bank of England should be independent, and whether they would raise or lower business taxes?

I agree entirely with my hon. Friend. I also think that the Opposition should take to heart the comments of the junior shadow Health Minister—who shall remain a junior shadow Minister—who said of the speech of the right hon. Member for Hitchin and Harpenden (Mr. Lilley) a few weeks ago:

"You can't build a strategy on unclear thinking: that's the cart before the horse. We need clear thinking".

"We've got to go back to the drawing-board and no longer just scrabble around in the hope of winning short-term engagements".

What is his estimate of the additional revenue to be derived from the proposed increase in VAT on works of art imported into the UK from outside the EU in each of the first three years of operation. [83193]

In the first two full years, the amount of money collected from imposition of VAT at 5 per cent. on works of art will be £10 million. As the hon. Gentleman will know, the Government are not convinced of the case for raising VAT on art to 5 per cent.

I am grateful to the hon. Lady for that answer. However, is it not the case that, in the first year after imposition of VAT at 2.5 per cent.—under the seventh directive of the European Union on imported antiques, works of art and collectables from outside the European Union—imports decreased by 40 per cent., from £1 billion to £600 million? Is she aware that the United Kingdom has 12,000 art dealers and 50,000 jobs in the trade, most of which are in London? She says that she is not convinced of the case for increasing the tax. How was it that she was unable—being such a good European—to persuade the European Commission not to waive the previously agreed derogation to 1 July? The tax, like so many European taxes, will destroy jobs. Is it not time that the Government cut the Gordian knot and did not harmonise tax with Europe?

I should first correct the hon. Gentleman. The unanimously agreed deal to which the previous Government signed up—the right hon. Member for Wells (Mr. Heathcoat-Amory), when a Minister, signed the explanatory memorandum—stated that we should apply VAT at 2.5 per cent., rising to 5 per cent. There was no vote on whether to increase the 2.5 per cent. to 5 per cent. The previous Government made the commitment to increase VAT to 5 per cent., and the increase was agreed unanimously.

Why are our European partners being so sticky about the issue, which affects a lot of jobs?

The issue is whether there is an unfair distribution between European art markets. The Government have put the case that the direct competition to the London market comes from New York, so anything that undermined the London market would be bad for all European markets. We are still trying to convince our partners to reopen the issue. Unfortunately, we cannot use the veto because the deal is signed and delivered. It cannot be reopened without unanimity.

Is the Paymaster General aware that the British art market, which employs more than 50,000 people, faces a threat not only from the doubling of VAT, but from the European directive which will impose a compulsory resale levy, which will drive the market out of London—indeed, out of the European Union—to centres such as New York? If she really wants to stand up for British industry, why is she not standing up to the European Union, whether on the road haulage industry, which faces uncompetitive fuel duties, on the City of London, which faces a withholding tax that should have been vetoed months ago, or on the British art market, which is facing new threats to its existence? Why do the Government not stand up for British industry instead of pursuing their mission to be popular in Europe?

The right hon. Gentleman has a cheek: he defended the fuel duty escalator in the Chamber when he was a Minister in the previous Government. His Government failed to stand up to Europe when agreeing to allow 5 per cent. VAT on the art market immediately. I read his pamphlet on the art market with some interest. I acknowledge that he knows a considerable amount about the subject, but, if he knows so much, why did his Government do such a bad deal?

What representations he has received regarding the increase in child benefit announced in the Budget. [83195]

I have received a number of representations, including those made at a meeting with the Child Poverty Action Group before the Budget. Most have welcomed the fact that child benefit has risen by 30 per cent. since we came into government and from next April will be £15 for the first child and £10 for subsequent children.

I thank my right hon. Friend for that answer and for the increase in child benefit, which will help 13,800 families in my constituency. My real reason for tabling the question is to tell him that I have met a number of pensioner groups recently. As ever with pensioners, they were interested in more than just the policies that benefit them directly. They also expressed interest in and support for measures that are beneficial to children, particularly the increase in child benefit. Will my right hon. Friend confirm to me, so that I can confirm to parents and grandparents in my constituency, that the Government will continue to pursue policies that support families when they need it most, which is when they are bringing up children?

All our changes, including the working families tax credit and the child tax allowance which will be introduced from 2001, are designed to give families help when they need it most—when children are growing up. Some 7 million mothers and 12 million children will gain from the increase in child benefit. It is the biggest rise that this country has ever seen and is backed up by our working families tax credit, which will start in October. There will be a minimum income of £200 for families in work with children, which will benefit 1.5 million families. I hope that the Opposition will support the measure instead of opposing it.

Does the Chancellor not recognise that, although the increase in child benefit will at least go to the child, the changes that he is proposing through the working families tax credit will result in the benefit being lost to the child, because in most cases it will go to the married father? Will he admit that the Labour party has failed to deliver on its election pledge of reducing welfare spending?

I hope that the hon. Lady will understand these facts. First, child benefit goes to the mother. She seems to have misunderstood that. Secondly, the working families tax credit means an overall increase in family income amounting in some cases to £40 or £50 a week. Thirdly, our proposals for the working families tax credit, backed up by child benefit, are far superior to those now floated by the shadow Chancellor and the leader of the Conservative party for a transferable tax allowance that would give a millionaire £1,734 as a result of tax relief and, in some cases, would give nothing to the lowest-paid in the country.

Is the child benefit increase a way of showing how the Government are standing up for the many, and not the few? Is that not in stark contrast to the priorities of the Conservative party, which would spend hundreds of millions of pounds on cutting stamp duty on properties valued at over £500,000?

I have looked at the voting of the Conservative party on the Finance Bill and the Budget, and it has committed more than £7 billion to measures that include cutting the tax rate for smokers. That money would not be available for the health service or for education, and that makes absolutely hollow the attempt by the Conservative party to put itself on the side of the health service and parents educating their children. As the Minister for Public Health has reminded them, the Tories have to go back and think these things out because none of their figures add up.

What assessment he has made of the effect of the road fuel duty escalator on (a) economic growth and (b) Government revenue in each of the next five years. [83196]

The Government are committed to ensuring that economic growth takes place in a sustainable way that respects the environment and is fair to future generations. The fuel duty escalator—which we inherited from the previous Government—is an important element of a package of tax measures that will contribute towards the aim of achieving economic growth while protecting and, where possible, enhancing the environment.

I am afraid that that answer treated my question with the same contempt received by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) and my hon. Friend the Member for Guildford (Mr. St. Aubyn), who made specific requests for information and found that none was forthcoming. Has the Treasury team not worked out that the purpose of an escalator is to accelerate one's movement from one floor to another? Why are they behaving like a group of demented four-year-olds, out of control in a department store—

Order. The hon. Gentleman must use better language in this House.

Why are the Treasury team taking the rest of the economy—the grown-up economy—way past any sensible destination and inflicting enormous damage on our rail freight industry? The only things that will be getting a lift from the ridiculous decision to stay on the escalator way past any sensible point will be our goods on foreign-owned trucks.

I am a little puzzled by the hon. Gentleman's question. The previous Government introduced the fuel duty escalator, the effect of which, by 2010, will be to save between 2 million and 5 million tonnes of carbon annually—a measure that was in the green manifesto on which the hon. Gentleman stood for election. As the Budget report clearly set out, the revenue raised in the current year from the fuel duty escalator—which we inherited from the Conservative Government—is £1.7 billion. The Conservative party, which voted against the measure, needs to tell us how it would replace that hole in the public finances and how it would meet the Kyoto targets to which it was committed in government.

Does my hon. Friend not think it remarkable that, in 1993—when the fuel tax escalator was introduced—the hon. Member for Reigate (Mr. Blunt) was not only a failed Tory candidate in West Bromwich, but a political adviser to a former Tory Transport Minister?

I am grateful to my hon. Friend, who has made his point extremely well. He reminds me of the remarks of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who rightly said that hon. Members who support the Kyoto targets, as the previous Government did, but refuse to support the road fuel duty escalator, are sailing dangerously close to hypocrisy.

Is the Minister aware that many small haulage firms are becoming desperate, as they are now only weeks away from bankruptcy? Her answer, that the Government intend to continue with the escalator until 2010, will simply increase that despair. Does she understand that more and more people feel that the Government's road haulage forum is a waste of time, given their refusal to abandon the fuel escalator or the increase in excise duty? Will the Government commission a full independent report specifically on the competitiveness of the industry, and give an undertaking to act on it?

I hope very much that the hon. Gentleman will support our policy of discussion with the industry, rather than the policy of disruption pursued by some of the hauliers. The road haulage forum is proving an extremely useful venue for serious and constructive discussions with the industry—something that the previous Government did not undertake—and of course we are considering the industry's competitiveness.

What assessment he has made of the impact of the proposed climate change levy on (a) the aluminium industry and (b) other high-energy using manufacturing industries. [83198]

Following Lord Marshall's recommendation, the Government are not taking an across-the-board approach to the climate change levy. As my right hon. Friend the Chancellor announced on Budget day, we intend to set significantly lower rates of levy for those energy-intensive sectors that agree targets for improving their energy efficiency. My right hon. Friend the Deputy Prime Minister has had a useful initial meeting with the associations representing the energy-intensive sectors and detailed negotiations with those sectors, including the aluminium industry, are now under way.

That is a very reassuring answer, but even with the 50 per cent. reduction for energy-intensive industries such as aluminium there are fears that production costs will rise dramatically. I have been told that the aluminium industry anticipates a rise of perhaps 12 per cent. per tonne, which would drive it offshore. I was reassured by what I heard about discussions and negotiations taking place, with a concluding date of 28 May, and I very much hope that my hon. Friend will take into account and give full weight to the concerns expressed by the industries.

I am grateful to my hon. Friend for that question. The points that he makes are precisely those that we are taking into account in our discussions with the energy-intensive sectors. I stress that the 50 per cent. lower rate in the Customs and Excise consultation document is purely an illustrative assumption. It is not a statement about what the lower rate might be for any energy-intensive sector. That lower rate will depend on the stringency of the targets to which the sectors agree. In line with our published statement of intent on the principles of environmental taxation, international competitiveness is one of the key issues that we consider for any environmental tax, including the climate change levy.

Given that British Steel estimates that the climate change levy will add £200 million to its annual tax bill, whereas the offsetting reduction in national insurance is worth only £5 million a year to it, does the Economic Secretary acknowledge that the levy is yet another clear example of the Government's policy of taxation by stealth, which has served to throttle manufacturing industry in this country and plunge it into recession while she has been a Minister?

The hon. Gentleman does not seem to appreciate that, as my right hon. Friend the Chancellor made clear, the new levy will entail no increase in the overall burden of tax on business: it will be revenue neutral. As I have already said on a similar point, we are now looking in detail at the different energy-intensive sectors, what each of them is willing to do to improve energy efficiency and how we should respond by introducing a significantly lower rate of climate change levy.

May I tell my hon. Friend of the apprehension of the national leadership of British Steel plc and Shotton steelworkers in my constituency about the levy, not least in view of the ruthless foreign dumping of steel products and the high value of the pound? Will she receive a deputation to hear our fears? May I suggest that she can best assist manufacturing in my constituency by insisting that assisted area status be retained and that objective 2 status be given to us?

I am grateful to my hon. Friend for that question. I am always delighted to meet my hon. Friend and discuss this and other matters of particular concern to his constituents. Treasury Ministers and my right hon. Friend the Deputy Prime Minister are examining carefully the impact on competitiveness of the energy-intensive sectors. That will be the guiding principle when we come to set the significantly reduced rates of climate change levy in return for sector agreements to promote and deliver greater energy efficiency. I remind my hon. Friend of the significant reductions in corporation tax that we have delivered, which will be of great help to businesses in his constituency as well as across the country.

If he will review his policy to abolish dividend tax credits for people with incomes below the level of the personal income tax allowance. [83199]

No. We will not be reviewing the decision.

That answer was, unfortunately, not surprising. May I tell the hon. Lady that she should be reviewing the decision? Will she consider talking to her predecessor, who at least appeared to show some sympathy for the hundreds of thousands of pensioners who will be hit by the policy? Will she consider meeting an all-party delegation of hon. Members who have expressed concern about the matter and want to see the poorest pensioners protected from this tax increase?

The Government's record on helping poor pensioners is clear. The proposals in the Budget contained the winter fuel allowance and the minimum income guarantee. The minimum tax guarantee was also introduced. The question of helping poor pensioners has been discussed extensively in the House over nearly two years, and the hon. Gentleman will know the reasons for the reform. He should stop trying to make spending commitments, but should support the Government in ensuring that policies concentrate on the poorest pensioners.

Why do the Government insist on hitting those of our poorest pensioners who have a small amount of savings? The Government are not content with abolishing dividend tax credit for those pensioners who are below the personal allowance threshold and therefore did not pay any tax at all. That was a mean-minded measure, but now they have introduced another—the highly spun 10p tax rate, which will not apply to pensioners with savings. Why is that?

As the hon. Gentleman knows, savings are dealt with very fairly in the tax system. The introduction of the lop tax rate will benefit those pensioners who pay tax on their income. As a result of the Government's proposals, only about one third of pensioners will now pay tax. The hon. Gentleman knows full well that the Budget proposals, and especially the winter fuel allowance, did a great deal to help pensioners.

What estimate he has made of the change in the amount in national insurance payable by the self-employed in 2000–01 as a result of the March 1999 Budget. [83200]

We estimate that the extra amount payable by the self-employed for 2000–01 is £240 million.

This is the second time that I have asked this question at Treasury questions. Last time, I got an appalling reply from the Financial Secretary, who completely avoided the question, and I thank the Paymaster General for coming up with the right answer this time—second time lucky.

I inform the hon. Gentleman—very gently—that his question today is different from his question at the previous Treasury questions. Last time, he asked about the amount paid, and my hon. Friend the Financial Secretary gave him the correct answer. Today, he asked about liability, and I have answered his question. Both the answers that he has received are correct. The changes to class 2 and class 4 national insurance for the self-employed will help them enormously by ensuring that their entitlement to benefits moves closer to that of those in employment. They also distribute national insurance liability much more fairly among the self-employed.

My hon. Friend will be aware that trade unions such as the Union of Construction, Allied Trades and Technicians have warmly welcomed the measures to tighten the system of national insurance contributions and tax in the construction industry. However, there is concern that Government agencies are not enforcing sufficiently rigorously the classification of construction workers for national insurance contributions. Will my hon. Friend assure me that every effort will be made to ensure that the new regulations are enforced properly?

My hon. Friend raises a question about the construction industry scheme, and the 714 certificates. I am aware of the concerns among trade unions and the construction industry about the effectiveness of the scheme. We are constantly reviewing the successful registration of those in the construction industry who are required to register. Like me, my hon. Friend may have had the advantage this morning of hearing the radio information bulletins advertising to those in the construction industry that they are required to get the certificate. The clear message was, "No certificate, no pay."

The difference in the wording of the question put by my hon. Friend the Member for South-West Hertfordshire (Mr. Page) was between "paid" and "payable". Ministers are playing a dangerous game of semantics to avoid revealing to the House the extra taxes that they are imposing on people. Will the Minister confirm that, when all the Government's changes to employees' national insurance are taken into account, millions of people in middle Britain who earn £27,000 a year or more will pay significantly higher national insurance contributions? Is that not yet another stealth tax increase from a party that promised not to raise taxes at all?

I cannot be held accountable if the hon. Gentleman does not understand how national accounting works or the difference between liability and the amount actually paid. He is an accountant, and I thought that he understood these matters, but perhaps he needs to grapple further with that point.