What representations have been made in respect of recent changes to the stability and growth pact. [78221]

What assessment he has made of the economic implications of non-compliance by member states in the euro-zone with the stability and growth pact. [78224]

I have received no recent representations on the stability and growth pact, but when I attended the ECOFIN meeting in Brussels on Tuesday it was agreed to invoke the excessive deficit procedure with respect to Portugal. Since 1997, the Government have consistently supported a prudent interpretation of the pact that takes into account the economic cycle, sustainability and the important role of public investment. We continue to discuss this with our European Union colleagues.

Portugal, Germany and France are all in breach, or about to be in breach, of the pact's deficit limit. Does the Chancellor believe that there is an urgent need for reform of the pact and that, until that reform has been implemented and the stalled Lisbon agenda has been satisfactorily concluded, it would be reckless to recommend to the British people that we join the single currency?

I do not know whether the hon. Gentleman is speaking for his party. It is correct that the excessive deficit procedure has been started in relation to Portugal. It is possible that it may be started in relation to Germany, and probable that not an excessive deficit procedure but an early warning procedure may be adopted in relation to France.

My right hon. Friend will know that, following the meeting on Tuesday, some of us were concerned about the decisions that were made. Given that Germany is teetering on the brink of dangerous deflation, would not forcing the Germans to intensify that deflation by further fiscal tightening drive them into recession, and would not that cause a crisis in the euro zone as a whole? What would the implications for Britain be; and does he agree that Romano Prodi's description of the pact as "stupid" is something of an understatement?

Adjectives are widely used these days in a pejorative sense, be it "stupid" or "nasty", or any other such word. I would refrain from using such adjectives. The point of our proposed reforms is to be able to distinguish between structural and cyclical deficit. That is part of the debate about the German position: whether the deficit is structural or cyclical. There is absolutely no doubt that we face a world downturn. This is the first synchronised world downtown for 30 years, seriously affecting every continent. It is also true that we suffer from the fact that, while in the last recession world trade went down by only 1 per cent., and it grew by 13 per cent. two years ago, it has been stagnant last year and this year, creating difficult conditions for all countries.

Given that the Chancellor has no objection in principle to ceding sovereignty over monetary policy to the European Central Bank, which we do not elect and cannot remove, and which, under the terms of the treaties, it would be illegal to seek to persuade to the view of the British Parliament, why does he think that, when he claims to believe that this country should retain control over tax and expenditure decisions, we should believe a word of what he says?

It is interesting to note that the hon. Gentleman has moved to the Back Benches to say exactly what he said on the Front Bench. I thought that he was going to take a distinct position. It is Parliament that makes decisions on taxation and spending; it is Parliament that made its decision on the Maastricht treaty. The Maastricht treaty contained all the terms under which the stability pact now operates, including the requirement to submit convergence plans and the requirement to avoid excessive deficits, and the measures that might be taken in respect of that. It was Parliament that voted in favour of that—and the House should know that the shadow Chancellor was a member of the Cabinet that put those proposals to Parliament.

Is it not the case that not only the growth and stability pact but the whole Maastricht enterprise, and the common monetary policy established by it, are flawed? Is that not evidenced by what is happening in Germany, where a democratically elected Government have no jurisdiction over the value of the currency, no control, in effect, over public expenditure, and no jurisdiction over interest rates?

My right hon. Friend, who was a Minister in the Labour Government of the 1970s, has at least been consistent in this: he opposed the Maastricht treaty and he continues to oppose it, unlike many Conservative Members, who brought in the Maastricht treaty but now wish to oppose its provisions.

Order. I always worry when the Chancellor starts to lean on the Dispatch Box, because it means that his reply is getting very long.

Can the Chancellor tell us where in his five tests we find a reference to the difficulties caused by the stability and growth pact?

The five tests look at all those issues. They look at investment, employment and flexibility—and if the right hon. and learned Gentleman reads the submission that I made to the Treasury Select Committee, he will see that we consider specifically the issues of the stability and growth pact, and will publish a paper on the subject as part of the five tests. The question that the shadow Chancellor has to answer is why he once supported the stability and growth pact, yet now, for purely party political reasons, he opposes it.

It is for the Chancellor to answer questions, and he has not been able to point to a single reference to the stability and growth pact in the five tests. Are not the difficulties of the pact caused in large part by the inappropriateness of the "one size fits all" interest rate for so many economies in the euro zone? Has the Chancellor seen the study by the European Commission that showed that the single interest rate was too low for seven countries in the euro zone and too high for another three, which made it about right for just two countries?

The shadow Chancellor is entirely wrong. The evidence that I put to the Treasury Select Committee says specifically—[Interruption.] J The shadow Chancellor is asking for this to be one of the tests—in other words, he wants a sixth test. What I am saying to him is that, as part of the five tests, when we consider employment, investment, flexibility and durability, we will he examining the operation of the stability and growth pact. [Interruption.] If he has any doubt about that, I will send him this afternoon the memorandum that we sent to members of the Treasury Select Committee—I see one member of the Select Committee nodding at that, because he knows it to be the case—saying that we would publish a paper on the stability and growth pact as part of our assessment of the five tests. There are five tests, not six, but as part of the five tests, which include employment, investment and flexibility, we shall look at the macroeconomic issues—[HON MEMBERS: "Order!"] The idea that we have not submitted evidence to the Treasury Select Committee saying that that is part of the review is completely wrong, and the shadow Chancellor will have to withdraw his allegation.

Will my right hon. Friend ignore the bleating of the Liberal Democrats, who have been Euro-fanatics from the very beginning? Will he ignore the rants of the shadow Chancellor of the Exchequer, who condemned the current Leader of the Opposition when they were uniting and dying over Maastricht? Will my right hon. Friend also keep finding excuses for not going into the euro? He has managed that for five years—good luck to him.

We will publish the assessment that we are making of the five economic tests. It is serious, detailed and rigorous, and the most comprehensive piece of work that the Treasury has done. It will look at all the relevant issues, as the five tests make absolutely clear, and the House of Commons will have the fullest chance to debate the issues.

What recent discussions he has had with manufacturers about the effect of the climate change levy on UK competitiveness. [78223]

The Government have regular discussions with business about a wide range of issues, including matters related to tax.

Will the right hon. Lady tell the House whether the Government are considering the proposals of the Engineering Employers Federation, which would not only help the environment more quickly, but would be less burdensome to business? Is she aware of the extreme difficulty caused to Linpac, a manufacturer in my constituency, which has had to move two of its moulding machines to Spain, where neither the climate change levy nor anything similar operates—a move that was demanded by one of its major customers? When the company briefed the Chief Secretary on the matter, he apparently turned to his officials and said, "Oh, it wasn't supposed to operate like this." What does the right hon. Lady have to say about that?

I am aware of the report that the hon. Gentleman refers to. As he will know, the initial report on the introduction of a climate change levy was undertaken by Lord Marshall. He recommended, and the levy went on to include, two principles: that the revenues from the levy would be recycled, and should be broadly revenue neutral; and that specific issues should deal with energy-intensive industries where they are subject to international competition. The levy undertakes both of those arrangements.

Does my right hon. Friend agree that the climate change levy is a very important environmental tax, and that getting it right is important? I was pleased to hear her comments on that point, but does she also agree that we need a range of innovative environmental taxes that help industry to do the right thing, and that have the right touch? Will she continue with the environmental taxation review, and introduce measures in the near future?

I can of course confirm that the climate change levy contributes to the Government's programme in committing ourselves to reach our Kyoto targets. I should also remind my hon. Friend that, before the levy's introduction, there were some two years of consultation with business. That consultation continues, but, as he rightly says, climate change is a threat now, and we cannot wait for solutions tomorrow. We need to move forward on these issues, and the climate change levy is an important aspect of that agenda.

Is the Paymaster General proud of the fact that this Government have managed to combine the anticompetitive impact of the climate change levy with an increase in greenhouse gas emissions, as was recently pointed out by Friends of the Earth? Has she read the recent remarks of Digby Jones, Director General of the Confederation of British Industry, who said that the levy is

"damaging key sectors of the UK economy, driving jobs abroad, [and] has become a great friend to our French and Spanish competitors?"

I am sure that the right hon. and learned Gentlemen will be aware that at least seven other member states in the European Union have comparable measures and that others are moving to introduce them, precisely because we need to address the issue of climate change. As Lord Marshall's report clearly pointed out, the climate change levy includes reductions to assist energy-intensive industries that are subject to international competition. What the right hon. and learned Gentleman has to tell the House is whether he is serious, as the spokesman for the Opposition, about tackling climate change. If he is, how should it be done? Will he tell us whether he is prepared to commit himself now, or will it be another promise for tomorrow?

What appraisal he has made of the case for the introduction of an incineration levy to encourage future re-use and recycling of waste. [78225]

The Government announced in the Budget 2002 that they would consider the case for a tax on incineration in the light of the strategy unit waste project, which is due to be completed later this autumn.

Will my hon. Friend also appraise the large, long-term contracts being entered into by local authorities that centre on waste incineration? When he considers such a levy, will he address how it might help local authorities move beyond their reliance on such contracts?

I pay tribute to my hon. Friend as one of the House's renowned experts on the subject and I thank him for his question. The need to minimise the production of waste and maximise the re-use and recycling of waste is at the heart of our waste policies. Technologies, including incineration, have a role to play in recovering value from waste, whether through recycling, composting or energy from waste, as my hon. Friend's question suggests. We will consider the specific questions he raises, and also the general questions, in light of the waste report that the Prime Minister's strategy unit is currently completing and which we expect to be able to publish shortly.

Why is it that whenever the possibility of improving business behaviour arises, the Government's knee-jerk reaction is always to increase the number or rate of taxes? Is not this an opportunity to reduce taxes to encourage behaviour?

We have cut corporation tax, capital gains tax and small business tax. On the incineration tax, I made it clear in my original answer that the Government have agreed to consider the case—no more, no less—for a tax on incineration as part of the long-term waste management policies that we need to put in place.

Does my hon. Friend agree that important though this issue is, the problem partly arises because of the sheer amount of packaging and unnecessary extra material that is thrust on consumers, whether we want it or not? Will he consider a levy on packaging or other ways to discourage firms from generating unnecessary waste with which consumers have to grapple?

We have no plans to introduce or consider such a tax. The specific questions and the wider long-term aims of our waste policies will be considered in the light of the strategy unit's report, which is currently being completed and which we expect to be able to publish shortly.

What his latest figure is for the GDP of East Sussex; and what this is as a percentage of (a) the mean GDP across the country and (b) the highest GDP for a county. [78226]

The latest sub-regional GDP data relate to 1998 and show that the GDP of East Sussex at current basic prices was £3,850 million. That represented 0.5 per cent. of total GDP for the UK. It is not meaningful to calculate mean and highest levels of GDP for counties, as counties vary in size.

The Financial Secretary will be aware that East Sussex's GDP per head is the third lowest in the country, below Liverpool, Newcastle and Glasgow. The Government's plans for local authority spending could result in East Sussex losing £44 million a year, despite its GDP level. Will the hon. Lady therefore have urgent discussions with her ministerial colleagues to make sure that they understand that any system designed to make local government funding fairer—a Government objective—should assist poorer counties rather than penalise them?

Perhaps I could point out that East Sussex has benefited from this Government's policies: unemployment has fallen by 46 per cent. in the hon. Gentleman's constituency and, as a result of personal tax and benefit measures since 1997, pensioners will be £1,150 better off on average by October of next year.

If he will make a statement on the outcomes of the World Bank and IMF meeting in September in relation to debt relief and the HIPC initiative. [78227]

At the recent IMF and World Bank meetings in Washington, we agreed up to $1 billion of further debt relief for poor and indebted countries. I am pleased to announce that the UK has been joined by 16 other donors, which have already made firm commitments totalling $850 million to the HIPC trust fund. European Union member states have called on the Commission to make a contribution through the European development fund. That will benefit 26 highly indebted poor countries. Of the remaining 12 countries that could qualify for debt relief, nine are unfortunately in conflict, one has opted for debt relief, and two are developing their poverty reduction strategies to meet the conditions for debt relief.

I thank the Chancellor for that reply. At the risk of sending Tory Members into orbit, I freely acknowledge that the progress that has been made on this matter has been due largely to his efforts. However, does the Chancellor realise how disappointed people in the country are that more progress has not been made since the millennium? According to the organisation Jubilee 2000, the cancellation of debt for the 26 HIPC' countries would cost around $6.8 billion over five years for the countries in the Organisation for Economic Co-operation and Development. That is probably less than the US spent on bombing Afghanistan. Will the Chancellor put pressure on the World Bank and the IMF at least to suspend debt repayment—[Interruption.]

Order. The hon. Lady may have been slow to start, but she is certainly making up for it now.

I want to thank all those in the House who have joined us in the campaign to secure debt relief. The figures show that $62 billion of debt will be wiped off as a result of the initiative so far. If other countries join the initiative, that total should amount to $100 billion. That is a very considerable figure, involving 26 countries, and it is yielding money for education, health and anti-poverty programmes. However, I readily accept that there is more to do. That is why we are considering, with other countries, further measures in addition to debt relief that can yield results both in terms of expenditure on education, health and anti-poverty programmes, and in terms of meeting the millennium development goals, which include ensuring that every child has an education.

I am sure that the whole House welcomes the moves that have been made to progress this matter, largely thanks to the moral lead that my right hon. Friend the Chancellor has taken. However, does my right hon. Friend accept that the collapse of commodity prices has caused real problems for many countries already in the HIPC initiative and receiving debt relief? What further measures can he take to ensure that those countries' future levels of sustainable debt are tied into the collapse of commodity prices? Will he assure the House that the $1 billion extra that has been promised will be new money and will not merely replace money that should have come from multilateral creditors such as the IMF and the World Bank?

The extra $1 billion is necessary precisely because of the economic conditions in poorer countries, and because in the first round of the HIPC trust fund we underestimated what would be needed to pay for the debt relief that has been provided. It is new money, and is being allocated by this Government and other Governments. As I said, 16 Governments have joined the initiative, and that is huge progress on where we were a few months ago.

As the Chancellor well knows, I greatly sympathise with his efforts on the HIPC initiative. Given the Prime Minister's humiliating failure, however, even to know of in advance—let alone to prevent—the French and Germans stitching up a cosy deal between themselves on the common agricultural policy, the right hon. Gentleman will surely agree that that self-serving deal has done, and for years to come will do, much more damage to the economies of the developing world than anything that he might do to relieve poor countries' debt under the initiative. How happy is he that the Prime Minister has not taken any action to remedy the situation when one of his Treasury officials has said that every cow in the EU receives over S2 a day from Brussels, while a fifth of the world's population lives on only a dollar a day?

Those figures have been put out by me and by other people in the past year. We have to get action on the common agricultural policy. At the summit, a ceiling was agreed on the amount of money available for agriculture. Contrary to the wishes of some countries, what was left open was that further progress would be made at Doha and in the mid-term review of agricultural policy. I should have thought that the Conservative party would have supported the Prime Minister's efforts in that respect. These matters are open for Doha. We now need all parties to combine to make a success of Doha and persuade other countries that we must curb agricultural protectionism.

What are the Government doing to put pressure on non-participating countries to get involved in the HIPC process— countries such as Romania, Iran and Libya? Are the Government offering support to the HIPCs that face legal challenges from those who are not participating in the HIPC process?

On the legal issue, we are looking into that matter. We had a list of the 37 countries, I think, that would qualify for HIPC debt relief. I have named the countries that have already benefited. Equally, those that are in conflict cannot benefit while they are in conflict. When countries are coming out of conflict, we have measures to enable them to get debt relief quickly if they pursue the necessary policies and if we can be sure that the money is going to poverty reduction. The three remaining countries, which do not include those on the list that my hon. Friend mentioned, are now part of the HIPC process and should be able to get debt relief readily and quite quickly.

What assessment he has made of the change in output of manufacturing industry since January 2001; and if he will make a statement. [78330]

The contraction in United Kingdom manufacturing output, which began last year, was due to the sharpest slowdown in G7 industrial activity since 1975, but UK economic fundamentals remain sound and our macroeconomic framework leaves us well placed to respond to those challenges. The Government will publish an updated assessment of prospects for manufacturing in the forthcoming pre-Budget report.

Does the Minister accept that whatever success the Government may have achieved in other parts of the economy, the deep and abiding recession in manufacturing is a matter of continuing concern? Does he also accept that in the past four years, an estimated 500,000 jobs have been lost across the United Kingdom? In my constituency in the Scottish borders, the number of people employed in manufacturing has fallen by 23 per cent. since 1995. Would it not be right for the Treasury team to engage in an onslaught on exchange rate policy rather than on the unemployed, to ensure that there are some manufacturing vacancies in prosperous businesses for job seekers in the future?

There has undoubtedly been a decline in manufacturing across the G7. We are seeking to ensure that Scotland benefits not only from the macroeconomic measures that we have taken, but from micro-economic measures such as the improvements that we have made in the climate for research and development, and the steps that have been taken with the Scottish Executive to promote enterprise and manufacturing in Scotland. In 2001–02, that led to 61 new inward investment projects being created in Scotland—the equivalent of more than 6,000 new jobs. We intend to continue to work with the Scottish Executive to that end. That is the best hope for the hon. Gentleman's constituents, and for the people of Scotland and the United Kingdom generally.

Manufacturing has taken a knock in the west midlands as well as in Scotland. However, does my right hon. Friend agree that short-term fixes such as fiddling with the exchange rate are not the way to deal with this? The Government have addressed the long-term approach to productivity by improving research and development as well as average skill levels.

Low inflation, low interest rates and good, solid macro-economic foundations are, as my hon. and learned Friend accepts, the best hope for British industry. However, the important steps that we are taking, not least in relation to research and development and to science and technology, stand in marked contrast to the successive failures of Conservative Members over the years in their stewardship of the economy.

Does the Chief Secretary accept that manufacturing employment has gone up in the euro zone since 1997 while plummeting by 500,000 in this country since 1997? Does the Chief Secretary think that that is simply down to bad British business or that it might relate to Government policy, which has seen exchange rates remain uncompetitive, investment at record low levels and the longest manufacturing recession since 1981? As the Monetary Policy Committee has not been able, in a two-track, two-speed economy, to cut interest rates today, what do the Government plan to do with the rest of the policy armoury to help them?

I do not think that the hon. Gentleman's figures will stand up in Germany or bring much comfort there. Comparing our performance with that of the rest of the G7 shows that we have the highest employment rates and the lowest unemployment rates. That is a direct result of the policy of this Government and of my right hon. Friend the Chancellor of the Exchequer.

Does my right hon. Friend agree that aerospace is a crucial, high-skill and high-value industry to Lancashire, the north-west and the country as a whole? It has been hit particularly hard since 11 September last year. Will my right hon. Friend stress to the industry that the Government will give the maximum support possible to encourage research and development and training? They are crucial and, at a time when the industry is being squeezed, they should not be squeezed. In that way, we will ensure the future of the industry to the benefit of the country.

My hon. Friend's interest in the aerospace and high-tech industries in his constituency and throughout the north-west is well known. We meet regularly with the aerospace industry. Recently, I visited the north-west and spoke with the vice-chancellors of the three major universities there. They are all working in close contact with the industry and the regional development agency. They are benefiting from our proposals not only on science and technology but on the additional funding for the RDA and the important bedrock that we have put in place for long-term research and development, particularly in large companies, and they will continue to benefit.

Is the Chief Secretary aware of the importance of the construction products industry, which is a full 20 per cent. of the total British manufacturing sector? Will he ensure that the Government deliver their promises in the public sector by building the schools, hospitals and road infrastructure that they promised in their public spending review and are way short on delivering, so that the construction products industry can benefit?

I take that as a request from the hon. Gentleman for yet more investment in the public sector, but that rings pretty hollow given the Conservatives' record. They failed to invest in our infrastructure and in our schools and hospitals. While they are talking about it, this Government are doing it.

Does my right hon. Friend agree that the large manufacturing losses in the Yorkshire region occurred because the mining machinery industry there has declined considerably? Will he favourably consider help for the mining industry to maintain its current output, which in turn will help to sustain the manufacture of mining equipment and machinery in the Yorkshire area, thereby saving jobs? Will he also accept my appreciation for the work that he and my right hon. Friend the Chancellor have done to help manufacturing in the Yorkshire region?

I am grateful to my hon. Friend. I know that he takes a keen interest not only in mining but in manufacturing, research, development, science and technology throughout his region. Our best hope for maintaining and developing the manufacturing base of his region lies in the encouragement of IT and innovation. That is the Government's commitment, and it will endure.

What assessment he has made of the impact of recent changes in pensions taxation. [78232]

From April 2002, as a result of the Government's personal tax and benefit changes, pensioner households are, on average, £840 a year better off than in 1997.

But is it not the Chancellor's policies that have so badly harmed people's private pensions and indeed their future in retirement, especially the fact that more than £25 billion has been taken out of pension funds—£5 billion a year since the abolition of advance corporation tax relief?

The hon. Gentleman wholly misrepresents the situation. As he knows, and as has often been pointed out to the House, the abolition of payable tax credit was an essential part of wider corporation tax reforms, which included cutting both main and small company corporation tax rates. Since 1997, cuts in corporation tax have been worth more than £3.5 billion a year to companies, and pension funds benefit from that as well.

My hon. Friend will be aware of the high number of pensioners in my constituency, where there are well over 13,500 pensioner households. I thank my right hon. Friend the Chancellor for the work that he has done to alleviate pensioner poverty, but will he reconsider the winter fuel allowance that people in my constituency receive in wintertime when it is needed the most? Will he consider upping it by £50 to £250 as soon as possible?

I thank my hon. Friend for his support. Unlike the Conservatives, the Government have made tackling pensioner poverty a priority. We introduced not only the £200 winter fuel allowance, but also free eye tests for the over-65s. Furthermore, next year, we shall introduce the pension credit, which will reward the savings of low-income pensioners. I take my hon. Friend's question as a Budget representation and as my eight hon. Friend the Chancellor is here, I am sure that he will have listened to it.

How can the Minister claim that the pension dividend tax has nothing to do with pension scheme closures? When Labour came into office, no large company schemes were closed to new entrants, but only five years later—a short time in the long-term business of pension provision—we have moved to a situation where the main pension schemes of fewer than half our largest companies are open to new entrants. How can the Chancellor and the Minister claim that those two events—the Chancellor's largest-ever stealth tax and the rapid closure of schemes—are not related? Is he the only person in the country who does not understand that if one takes £25 billion from pension funds and continues to take money at the rate of £5 billion a year it will have an effect on pension funds and schemes?

Let me take this opportunity to put the facts that the hon. Gentleman mentions in context. The abolition of payable tax credits, for example, was equivalent to the difference of a tenth between the best and worst pension fund providers. I hardly think that he can criticise that measure when he knows that it is also being offset by a huge package of corporation tax cuts. He points to the closure of final salary schemes. Clearly, changes are taking place right across the world, partly as a result of changing work patterns, which mean that the structure is changing, but what really matters to people is the level of pension contributions going into pension funds. That is why we are working in partnership with the industry, employers and individuals to ensure that people can have the security of knowing that they have secure income in retirement.

What steps he is taking to publicise the new tax credits. [78233]

We carried out a series of national road shows from 16 September to 11 October to highlight the launch of the tax credits campaign and to publicise the new tax credits. That includes the Inland Revenue sending out claim forms automatically to all existing claimants of working families tax credit and disabled person's tax credit. It also includes a national advertising campaign, which started on 16 September, including television, radio, press and online advertising and specific measures to ensure that minority groups are aware of the new tax credits. That involves planning publicity specifically for ethnic minority radio stations and publications.

I thank my right hon. Friend for what she has done until now and, obviously, for what she will do in the coming weeks and months, but may I draw her attention to the current tax credits? Undoubtedly, hundreds of thousands of families have benefited from the working families tax credit, but I have some concerns about the uptake of the child care tax credit. I feel that more families should have become involved in it because not only is it an opportunity to provide finance to assist with child care costs, but I firmly believe that it is an opportunity to develop child care services in many places, particularly rural areas. May I ask her to put more emphasis on developing child care services and the support that the Government offer for that?

I am sure that my hon. Friend is aware that about 170,000 families who currently receive working families tax credit are benefiting specifically from the support to assist in the payment of child care expenses, but I also know, because he has raised this before in the House, that he shares my concern about the inflexibility of the current arrangements. The new tax credits will ensure that we will be able to respond as child care needs and costs change, rather than fixing things for a specific period.

What action is the Minister taking to end the subtle pressure that seems to be being applied to many people to receive their tax credits through bank accounts, rather than over the counter at post offices?

There is no subtle pressure. The new tax credit legislation, supported by the Liberal Democrats, specifically included an arrangement whereby the new tax credits could be paid directly into families' bank accounts. That is a very useful way, first, to ensure that the right person gets the right amount of money and, secondly, to assist in reducing the fraud that, unfortunately, has been causing considerable difficulties with giros and order books. Having completed the entire legislation on tax credits, I am surprised to hear the hon. Gentleman now say that, apparently, the Liberal Democrats will change their minds on that principle.

Is my right hon. Friend aware that the working families tax credit form is fundamentally flawed and therefore open to abuse? Is she aware, for example, that to receive money for a year, claimants need only insert the registration number of an after-school care project, often without the knowledge of that provider? Will she investigate that abuse before it spreads throughout the country?

I am grateful to my hon. Friend for his comments. I know that he is keenly aware of the difficulties in ensuring that payment of child care tax credits is made to the right people. I reassure him that applications for payment of child care expenses will be rigorously scrutinised to ensure that the expenditure has been incurred and that the payment goes to the child care providers.

Will the statement on the pre-Budget report, which is eagerly anticipated, be an opportunity to clarify, if not modify, the situation on tax credits? Will the Minister therefore tell the House when the statement is finally to be made?

If the hon. Gentleman has seen the TV advertising campaign or taken the opportunity to read the pack that I sent him, he will be fully familiar with the tax credits, and he will be actively campaigning in his constituency to ensure that people receive those resources. As the advertising says, this is money with families' names on it, and I hope that the hon. Gentleman will help his constituents to get it.

What proposals he has to reduce the tax liabilities of pensioners. [78235]

We will increase the age-related personal allowances above inflation. As a result, from 2003–04, no pensioner aged 65 or over will pay tax unless their income reaches £127 a week.

I am grateful to the Minister for her answer. Does she recognise that pensioners who have saved throughout their working life or paid into an occupational pension fully support the proposal for a pension tax credit, which may reduce many pensioners' tax liability, but the level of awareness about what the proposal may mean for them in the next tax year is very low? What will my hon. Friend do to ensure that there is a significant increase in that awareness over the next six months?

I thank my hon. Friend for her question. My right hon. Friend the Secretary of State for Work and Pensions is fully aware of the need to promote the eligibility for the pension credit as widely as possible. That will be done, first, by ensuring that people know in good time that they may be entitled to it. Secondly, to ensure maximum take-up, the Government will run a wide-ranging campaign in which we will not only work with the media but avail ourselves of the knowledge of local agencies and partners.

Given that interest rates and annuity rates are very low and that the Government have made a raid on pension funds, does the Minister think that there is any merit in cutting the tax rate on pensioners' savings, particularly as it is usually money that they saved during their working life and on which they have paid tax?

Most pensioners pay no income tax at all. Indeed, this Government introduced the 10p tax band, which was raised above the rate of inflation in the last Budget, taking another 3 million pensioners out of tax. I have already explained to the House that we are increasing the age-related personal allowances, and, next year, bringing in the pension credit to reward low-income pensioners. We are maximising the incomes of pensioners, particularly those on low incomes. Unlike the Conservative party, the Government are putting the abolition of pensioner poverty at the forefront of our efforts to increase pensioner incomes.

Does my hon. Friend agree that there is widespread confusion among pensioners and the rest of us, who will be pensioners one day, about how pensions are paid for? I refer, for example, to the deferred taxation on pension contributions and the working of the pension tax credit. Will she run a public education campaign designed to inform not only current but future pensioners about the financing and taxing of pensions so that people can plan properly for their future, which many currently do not do?

My hon. Friend makes an excellent point. At the moment, the complexity of the pension regime—not just in the rules for operation of pension funds but in the taxation system—makes it extremely difficult for low-income people to access financial advice, and even for those who can access financial advice to be fully aware of their opportunities and obligations in the future. We are determined to simplify the system to maximise the information available to individuals and employers to exercise their responsibilities. That is why we shall publish later this year a Green Paper that will open up broad discussion about how people can achieve a secure and adequate retirement income. That is also why, in that Green Paper, we will report on the three reviews that we have commissioned: the Ron Sandler review, which looks at the role of saving in general; the Pickering review from the Department for Work and Pensions, which looks at pension simplification and the rules attached to that; and the review of pension taxation that has been undertaken by the Inland Revenue.

What recent representations he has received on how his policies are affecting small businesses; and if he will make a statement. [78236]

The Chancellor regularly meets small business leaders and receives a large number of written representations on small business concerns.

Can the Economic Secretary tell the House what are the latest indicators for business startups in the United Kingdom?

We have published this week the latest figures for business start-ups, nationally and in every part of the country. If the hon. Gentleman wants to complete the briefing that he normally uses, may I also point him to independent international studies that consistently show that the UK now has one of the most enterprise-friendly environments in the world and one of the best business tax regimes in the European Union? As Minister with responsibilities for Customs, may I also point him to some of the measures introduced recently in my area to relieve the costs in time and money for small businesses in complying with taxation legislation and responsibilities?

Is my hon. Friend aware that small businesses in my constituency are very supportive of the moves that have been made in recent years to increase the science and technology budgets and the innovation budgets? If he would like to consider how that has affected small business in practice, I would encourage him to visit some of the small manufacturing companies in my constituency, especially those doing innovative work with digital printing, which have a great future in front of them.

I am grateful for the welcome that small companies in my hon. Friend's area have given, particularly to the new measures that the Government have put in place to support long-term investment in research and development and science and technology. That will be a crucial part of meeting the productivity gap and the challenge that the UK faces to close the gap with our competitor countries and to ensure that small business start-up rates, not just in my hon. Friend's constituency but across the country, are boosted, so that the survival rates of those small firms are boosted, too. I welcome her kind invitation to visit firms in her constituency, and I shall consult my diary manager on possible dates.

Given that the Institute of Directors has recently calculated that the annual cost of employment regulations has risen by £6 billion during the last five years, what is the Economic Secretary's response to small businesses in my constituency that say that it is becoming increasingly difficult to do business and that they are having to move their manufacturing base abroad?

The real cost of administering employment and other regulations is a fraction of the figure that the hon. Gentleman cites. We are ready to have a serious debate about regulation, but that debate must be based on fact and not on rhetoric. We have demonstrated since 1997 that we are ready to cut regulation when there is a good case for that. For example, we have raised the threshold for statutory audit, saving small companies £180 million a year, and we have cut and simplified the regulations on the minimum wage, saving small firms £100 million a year.