Orders of the Day — Finance Bill

House of Commons, 6 July 1999.

RATES OF DUTY AND REBATE ON HYDROCARBON OIL

David Heathcoat-Amory (Conservative, Wells)

I beg to move amendment No. 40, in page 1, line 24, leave out '£0.5288', and insert '£0.499'.

Betty Boothroyd (Speaker, West Bromwich West)

With this, it will be convenient to discuss the following amendments: No. 41, in page 1, line 26, leave out '£0.4721', and insert '£0.4355'. No. 42, in page 2, line 2, leave out '£0.5021', and insert '£0.4557'.

David Heathcoat-Amory (Conservative, Wells)

The amendments seek to bring the massive increase in road fuel taxes back into line with the retail price index. Since the general election, the Government have increased the rate of annual increase in road fuel tax—the so-called escalator—from 5 per cent. above the rate of inflation to 6 per cent. above the rate of inflation. Additionally, they have sneaked in an extra Budget, and a further increase. Moreover, they have loaded further increases on to some fuels, above what one might have assumed to be the 6 per cent. limit. Diesel fuel has been singled out. This year, VAT on diesel has been increased not by 6 per cent., but, in cash terms, by almost 12 per cent. That increase, in a single year, is simply staggering. It is a tremendous and enduring burden for all those driving diesel cars and, most particularly, for the road haulage industry, which relies almost entirely on diesel fuel. The Government have replaced the environmental justification for fuel taxation—which does exist at lower levels and for more moderate increases—by a crude tax and cash grab. It is part of the relentless increase in business and personal taxation that we have seen in the past three Budgets. Annually, fuel duties now net a staggering £25 billion, and that is rising steeply. The Government have ceased even to attempt to justify that huge annual tax escalator on environmental grounds. In the Budget debates, we asked Ministers how they justified the increase on grounds of global warming, or otherwise, but they simply backed away from the issue entirely. I am not surprised, because the Government's own publication on climate change shows that this is a ridiculously expensive and inefficient way of achieving moderate reductions in carbon dioxide emissions. Compared with other reductions which are attainable in the domestic sector and other business sectors, this is not the right way to go about reducing carbon dioxide. The same reductions could be achieved at a fraction of the cost. Most remarkably, the Government seem entirely unaware of the scale of the increases that they have put through. The Chief Secretary told the House on 21 April: The truth is that the price of a litre of diesel has risen by 7p since the general election."—[Official Report, 21 April 1999; Vol. 329. c. 929.] It was immediately pointed out that the Automobile Association had calculated that the increase in diesel prices since the election was not 7p, but more than 13p a litre—nearly twice what the Chief Secretary had admitted to. The figure was checked by "Energy Trends", an official index of the energy sector, and the House of Commons Library helpfully confirmed that the figure of 13p a litre was correct. The Library confirmed also that it had no idea how the Chief Secretary had calculated his figure. We took this matter up with the Chief Secretary, but he failed or refused to admit his error, until a parliamentary answer from the ever-helpful Economic Secretary referred to the correct figure and the right source. It is now confirmed by the Treasury that the price of diesel rose between the election and that April date by 13p a litre. In a sense, it does not matter that it took so long for the Government to admit the truth, because everyone else knew the truth. Motorists, particularly rural motorists, all knew the truth. Ministers in their Government cars may be insulated from the increases. They do not have to fill up their own tanks, and they are becoming increasingly out of touch with the needs of motorists, particularly those in isolated areas. Now, about 85 per cent. of the cost of fuel is represented by taxation. A forecourt or petrol station is now a massive tax office for the Government. It is not just the private motorist who knows the truth and must bear the daily burden—the road haulage industry knows it. The industry warned the Government before the Budget. Its representatives gave the Government the facts and figures, explained their case with great patience and showed the Government that the industry would be made uncompetitive in European terms by the annual increase. Their case was dismissed and entirely ignored by the Government. We now have the most expensive diesel in Europe, with a cost that is far higher than our continental neighbours. There is no way that the haulage industry can avoid this tax. Lorries do not drive around for fun, and there is no way in which they can avoid using diesel or avoid the tax. The haulage industry either has to absorb this extra tax burden, or pass it on. The burden is enormous. Nearly a third of the costs of running a heavy goods vehicle is represented by fuel costs. If a company has to absorb those costs, it could be put out of business—or certainly be made uncompetitive. If it passes on the costs, that raises the price of all goods which must be transported by road. Yet the Government say that they are in favour of industrial competitiveness. They have had seminars and meetings to lecture industry about the benefits of American-style management, competition and productivity. If that is their message, they could start by giving us American fuel tax levels.

Chris Leslie (Labour, Shipley)

Is the right hon. Gentleman making a pledge that the Conservative party manifesto for the next general election will include the aim to work towards reducing fuel duty to American levels?

David Heathcoat-Amory (Conservative, Wells)

I am making the point that if the Government are so keen on American business practices they should start introducing some American-style costs. The European Union has to put up with the spectacle of the Prime Minister telling it to adopt American business regulation, or the lack of it, while at the same time he is converging on European costs or, as in the case of fuel duties, increasing them above European levels. As usual with him, it is very much a case of, Do as "I say, not as I do". Our pledge to the British people is to get off the fuel escalator, which is damaging and uncompetitive. It is crass hypocrisy for the Government to talk about competitiveness and productivity while undermining them through their tax policies. It is the economics of the madhouse. There was a time when the Labour party knew something about industry, but these days very few Labour Back Benchers know anything about manufacturing. I do not think that a single Treasury Minister has ever had hands-on experience of that sector, so perhaps we should not be surprised at Ministers' not understanding the case put to them by the haulage industry, but that does not entirely excuse them. The Government are penalising the industry not only by higher fuel taxes but by higher vehicle excise duty. Anyone can understand that raising British vehicle excise duty to make it not only the highest, but almost twice as high as the next highest in Europe, is tantamount to delivering a body blow to the industry. For the 40-tonne articulated lorry—the workhorse of international haulage—our hauliers have to pay £5,750 a year. The figure for France is £486; for Italy, £634; and for the Netherlands, £670. The duty that the Government have imposed on the industry, in addition to the fuel escalator, is staggeringly higher. The forum with which the industry was fobbed off at the time of the Budget has met only once, and despite what the Government said, there is no independent study on which we can rely to give an accurate comparison of costs here and on the continent. It is wrong to say that no one will benefit from the Government's road tax policy, however: foreign hauliers certainly will. About 1 million foreign lorries will visit the United Kingdom this year and their operators cannot believe their luck. They are puzzled, amazed and in many ways delighted at the spectacle of a United Kingdom Government who are signed up to a code of conduct on unfair tax competition but create unfair competition against one of their own industries. They have created and are widening a gap that renders the British road haulage industry uncompetitive in Europe.

John Bercow (Conservative, Buckingham)

Does my right hon. Friend agree that in describing the Government's policies on these matters as "crackpot, cock-eyed and ridiculous" on 19 March 1999, the president of the Freight Transport Association, Mr. Lawrence Christensen, might conceivably have been guilty of understatement?

David Heathcoat-Amory (Conservative, Wells)

Yes. The gentleman concerned was in fact being rather restrained: he is a great deal ruder about the Government in private. I am sure that he will return to the subject next year if the Government persist with this lunatic tax policy, which is rendering an important British industry uncompetitive in the way that I have described. I said that several people and sectors will benefit from the policy. I mentioned foreign hauliers, but we must not overlook foreign Treasuries. The Treasuries of France and Belgium, in particular, are massive beneficiaries, as British lorries go overseas to fill up with foreign diesel. When they make trips abroad, drivers leave the United Kingdom with empty tanks and fill up on the continent. Before they return to this country, they make sure that they fill up at foreign ports. There are five haulage firms of significant size in my constituency, one of which is Frampton's. Mr. Frampton tells me that more than half his diesel is now purchased abroad. That is a huge and continuing drain on the British Exchequer, but the Government either are unaware of it, or do not care about it. Another group to benefit from the policy are the smugglers in Northern Ireland. The Province has a land border with another EU member state, so smugglers do not have to take a trip by ferry or the channel tunnel to reach it: they need only drive across the border and fill up their tanks. The association representing petrol retailers has estimated that the Government lose about £100 million a year through the smuggling of diesel and other fuels across that land border. The Inland Revenue has not produced an estimate of the amount lost through that smuggling. I have asked the Government to make a stab at an estimate and to do something about what is a real problem, but to no effect. Given that much of the smuggling is done by paramilitaries, it is odd that the Government's tax policy should put illegal funds in their hands. It has been reported that the Government are having second thoughts about the fuel escalator. Trailing changes of policy in the press instead of announcing them to the House is not unusual for the Government, but I hope that the Economic Secretary, when she replies to the debate, will confirm that the Government have changed their mind. That would be welcome, but it would be too late for many haulage firms. However, the House would have something to celebrate if the Government were to repent, even at this late stage. Another fiasco is developing for next year—the possibility of a climate change tax. That threatens to do to the rest of industry what the fuel tax escalator has done to the haulage industry. Perhaps the Government have decided to attack only one sector of industry at a time, and will drop the fuel escalator to concentrate damage, through the climate change tax, on the rest of manufacturing industry. The House would benefit from an explanation of the Government's intentions. One supposed virtue of the tax escalator has always been that it gives industry some warning of changes to duties and that car manufacturers and others can plan design and production. If the Government are having a rethink, as reported in the press, it should be made explicit and clear. In anticipation of the Government's belated change of heart, we have tabled amendments to this year's Finance Bill to end the fuel tax escalator. The destruction of the haulage industry and the campaign against the private motorist—carried out under a bogus environmental justification—have gone on too long. The amendments would end that process, and I invite the House to support them.

Stephen Dorrell (Conservative, Charnwood)

I support the amendment, and I agree with every word that my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said about the way in which the Government have introduced their road fuel duty policy and its perverse effect on the environment and competitiveness. Like my right hon. Friend, I seek from the Economic Secretary to the Treasury a clear statement of the Government's policy but I think that matters are even worse than he suggested. There is press speculation, presumably stimulated by loose talk in the Treasury, that the Government are rethinking their unpopular policy, but the Economic Secretary, at Treasury questions on 13 May, implied not that the policy was being rethought but that the Government intended to pursue it until 2010 if they were re-elected often enough. The price of unleaded petrol would then reach £6.90 a gallon, and diesel would be more than £7. Is that the Government's policy? Are we on an escalator from which there is no exit for a further 11 years if the electorate continue to elect the Government? Or should we believe the press speculation? The Economic Secretary's first duty as a tax Minister is to set out clearly the Government's policy. The policy as last expounded by the Chancellor of the Exchequer—a commitment to the 6 per cent. ratchet—is misguided. It sits badly, to put it no stronger, with the implication that the Government want to reduce the tax burden, an impression that various Ministers, from the Prime Minister down, create, and that was the reason for the income tax rate cut on Budget day. The Government's rhetoric is about low tax, but they are piling on tax by stealth as fast as they dare in parts of the economy that they hope the public will not recognise or in ways that the public will tolerate without too much noise. The Government's approach to taxation of petrol and diesel is a perfect example of stealth tax. The tax is deniable, and it need not be justified year after year because it has been pre-announced. The Government clothe themselves in the garments of tax cutting, but they have made a clear commitment to increasing the burden of taxation paid year after year by a section of the community. That is objectionable.

Chris Leslie (Labour, Shipley)

As the right hon. Gentleman is talking of matters deniable, can he deny that he was in the Cabinet when the fuel duty escalator was his Government's policy? How does he reconcile the previous Government's view with his statements today?

Stephen Dorrell (Conservative, Charnwood)

I find no difficulty in reconciling the two things. To be on an escalator is not to deny the possibility of getting off. We announced a series of tax measures, but, in the present circumstances, we believe that the process has gone far enough, and I have no difficulty whatever in saying so. Presumably, the person who has gently speculated to the press that the Government may rethink the proposal equally finds no such difficulty. My first objection to the Government's policy is that it relentlessly increases taxation on identified sections of the community. Secondly, it reveals a deep-seated prejudice against car ownership that runs right through the Government. I am not opposed to public transport, but I am vehemently against those who oppose in principle the development of private transport. The motor car has been a huge source of wealth creation for those who build and sell cars and a huge source of freedom for those whose horizons have been widened by its flexibility. Surely the challenge to policy makers is not to dress the motor car up as a public enemy, but, through tax and regulation, to create circumstances that make it a good neighbour. I do not understand how relentless increases in the tax on fuel redeem the obligation that rests on the Government. It is a form of intellectual slovenliness on the part of Ministers to think, "We can pander to a prejudice against the car" and that it is somehow a cost-free option. Ministers owe it to the House to be more direct and analytical and to discharge their responsibilities more seriously. The third and perhaps the most immediate reason why I object to the Government's policy on road fuel duties is the reason that my right hon. Friend the shadow Chief Secretary emphasised in his remarks—the effect that the policy is having on the competitiveness of the British road haulage industry and of wider British industry as well. In that connection, I should probably declare an interest as a director and shareholder in a manufacturing business. The manufacturing sector perked up during my right hon. Friend's speech. It is true that all manufacturing businesses rely, at least to some degree, on the haulage sector, and I therefore have an indirect interest in the issue. The tax policies that the Government are pursuing mean that every British road haulier is at a gradually increasing disadvantage compared with continental competitors. Year after year, the Government are creating a set of circumstances in which there is an increasing incentive for British hauliers to tank up and, in some cases, to register their vehicles overseas. Continental hauliers increasingly have the opportunity to undercut their British counterparts on journeys that involve transport between one British destination and another. The British road haulage industry is being crucified by the Government's hostility to road transport and the use of the road vehicle is a key part of the British economy. Beyond that, it is not merely the road haulage industry but all those parts of British industry that rely on the transport of goods that are affected. In a modern economy, the link between one part of the supply chain and another is a key cost element in the build-up of total costs that is charged to the eventual consumer. When the Government increase the cost of haulage between one plant and another within the United Kingdom, they put up not only the cost to British consumers but the price that the producer has to charge in Britain and abroad to compete against foreign competitors. It is not merely the competitiveness of the road haulage industry that is being undermined. The policy is an important source of lack of competitiveness throughout British industry and the Government are solely responsible. Therefore, it is incumbent on Ministers to explain to the House what greater good is being achieved by that relentless and increasing burden on not only the road haulage industry but the whole fabric of British industry.

Michael Fabricant (Conservative, Lichfield)

Surely the answer to the question, "What is being achieved?" is that the Government can add taxes by subterfuge. If they tax through the Inland Revenue, the voter feels it. By doing it this way, they have achieved tax increases by stealth.

Stephen Dorrell (Conservative, Charnwood)

That is why I said earlier that I object to the policy as it is an increase in the tax burden that allows the Government, year by year, to deny that it is a tax increase brought about by the Budget, as they did in this year's Red Book. In a narrow technical sense, they are right. It was not a tax increase brought about by the Budget, because it was previously announced. However, it means that the tables in the Red Book are misleading, if they are intended to show a change in the tax burden from one tax year to another.

John Bercow (Conservative, Buckingham)

Does my right hon. Friend think that, on 23 January 1995, when the hon. Member for Bristol, South (Dawn Primarolo), now the Paymaster General, complained in the Finance Bill Committee that 75 per cent. of the cost of a gallon of petrol or of diesel was accounted for by tax, it would have been helpful if she had explained that her intention, on becoming a Minister, was to increase the percentage to 85?

Stephen Dorrell (Conservative, Charnwood)

My hon. Friend makes his own point; it is a good one, and might be developed if, in response to the debate, the Economic Secretary were to set out clearly the Government's long-term intention for the escalator. The 85 per cent. to which my hon. Friend refers applies only at present. How much further is the policy to be pursued before we reach Ministers' objective? Before I conclude my remarks, I want to mention the broader impact of the Euro-argument—to use that shorthand. We discussed that issue in Standing Committee, to the great merriment of Labour Members, who felt that those of us who favour active and positive involvement in Europe would find it difficult to engage in the debate. However, the issue clearly illustrates the principle of tax competition that should underlie our tax policy—indeed, it would be difficult to think of a better illustration. What is at stake is the use of the tax system to seek competitive advantage for this country vis-a-vis our continental neighbours. The Government are busy making Britain uncompetitive, while a competition is taking place to which they are not responding. I believe in tax competition and that is why I think the Government should examine what their competitors elsewhere in Europe are doing; they should respond to that competitive pressure—it should apply to Governments just as it applies to everyone else in the economy. One of the great benefits of an open liberal economy is that Governments—like every other agent—should be responsive, and should be subject to competitive pressure. The Government are answerable to a competitive marketplace, but they are not responding to the pressures exerted by that marketplace. Until they respond, our economy and those who work in it will carry a heavier and heavier burden; they will pay for the Government's inflexibility with their jobs and their living standards.

Vincent Cable (Liberal Democrat, Twickenham)

I shall speak about the broad principles of the escalator. Yesterday, the Liberal Democrats supported several Conservative amendments. The amendments were well made and well argued; we agreed with them on their merits. However, these amendments are opportunistic and cynical in the extreme. I fully intend to support the Government on the principle of the escalator. Some genuine problems have been raised—such as the international competitiveness of the road haulage industry—to which genuine solutions were proposed in Committee and during our debates in this place. I should be interested to know how far the discussions on the Brit disc proposal have advanced. Before I get into the meat of the subject, perhaps I can tempt Ministers to tell us more about the press reports—especially the story by Messrs Brown and Grice in The Independent. I always read Messrs Brown and Grice, because they seem to have several days' advance notice of Treasury thinking—especially the Chancellor's thinking. By reading their column, one has been able to follow the debate on economic and monetary union several days ahead of public pronouncement. Their suggestions are more than interesting. They seem to suggest that the Government are considering withdrawing the escalator—by which I think they mean the petrol rather than the diesel escalator—and replacing it, in its environmental impact, by a series of congestion charges to be levied by local authorities. That might represent a considerable advance in policy, but I do not know that for sure, because I have not seen the details. I can see that such a policy has both positive and negative implications, but let us first think a little about the positive aspects. 5 pm Such a regime would be far more targeted than the escalator. If the rumours are true, levies would fall most heavily on areas where congestion is worst. Instead of farmers or rural families in Caithness and Sutherland having to pay much higher petrol duty, the levies would fall most heavily on congested cities, which is where most pollution is generated and where there are extra social costs resulting from congestion. Therefore, the policy would appear to be sensible. Another positive aspect would be that the Government had adopted an approach of decentralisation, as local authorities, especially the new mayors, would be able to make their own judgments. The reports also appear to suggest, although we do not know the details, that the Government are now committed fully to the principle of hypothecating revenue from taxation on transport. Yields from the congestion taxes would be fed back into either reduced vehicle excise duty or improved public transport. All those would be positive developments, but we cannot have an intelligent debate until we know the details of the proposals. It could be—I suspect that it is—that the Chancellor is trailing a backdown from the whole principle of environmental taxation generally. We have already seen that trend in the abandonment of the policy of shifting from gas to coal, and the proposals might herald a continuation of it. Even if we get the information a little later than Brown and Grice, we would like to hear more from Ministers about where their thinking is leading. Let me address a few comments to the Conservatives. My belief that their amendments are rather opportunistic is based on two reasons. First, there are the revenue implications of their proposal. As I understand it, the escalator is worth roughly £1.5 billion a year, which is a substantial sum. It is incumbent on those who attack the escalator and so break the cross-party consensus on its use to explain clearly and precisely how else that sum can be funded. Secondly, and following on from that point, if the Conservatives want to lead opinion away from the concept of the escalator—which they promoted in office, with the support of the Liberal Democrats and the then Labour Opposition—do they intend to embrace the new philosophy, which the Government appear to be considering, of having road user charges? Support for the use of congestion taxes would seem to be compatible with the Conservatives' overall philosophy. Right-wing think tanks such as the Institute of Economic Affairs and the Social Market Foundation have long argued that such measures are the right way to deal with the problem, so will the Conservatives support their use? If would be helpful to all parties if we knew that, in London, controversial new taxes to deal with the problem would command all-party support. If the Conservatives are leading us away from the escalator, what alternatives do they propose? To make that point slightly more general, if we do not have an escalator, how is the problem of pollution to be dealt with? There are two options, of which the first is to do nothing.

Tim Loughton (Conservative, East Worthing and Shoreham)

I am following the hon. Gentleman's arguments with great interest. Can he explain how congestion taxes would affect freight drivers, who have to be in the centre of towns rather than in the highlands of Scotland because that is where their customers are and where they have to deliver goods to shops and factories? How would the introduction of congestion charges help them, as opposed to removing the absurdly high escalator on diesel fuel?

Vincent Cable (Liberal Democrat, Twickenham)

That is a good question. However, since we do not know whether the Chancellor's new thinking focuses on petrol duty, the diesel escalator, or both, I cannot answer it. The hon. Gentleman is quite right to say that the road haulage sector faces a set of problems that are completely different from that facing urban commuters, against whom congestion charging is primarily directed. We need to know where the Government's new thinking is leading. To return to my basic theme, my justification for the escalator is twofold. First, it is a market-friendly way of changing policy. It sends a signal to consumers—whether road hauliers or motorists—and to industry that they should change their behaviour. It is a price signal; it is an economically efficient way of changing behaviour. The other basic reason why the escalators—whether on road haulage or motorists—are justified is the simple "polluter pays" principle. Pollution is generated, particularly by road haulage. Most of the studies that I have seen suggest that the road haulage industry pays nothing like the social costs of its activities, which are extremely great, both in damage to the carriageway system, especially by very heavy lorries, and in emissions, particularly of black smoke. I think that the industry accounts for about 40 per cent. of that particularly lethal emission. Social costs will not be covered unless there is a proper system of environmental taxation, which the escalator provides.

John Bercow (Conservative, Buckingham)

The hon. Gentleman said a few moments ago that the escalator was a sensible, market-friendly way of seeking to change behaviour. Does he accept that, in order for it to be such a mechanism, it is necessary for consumers to be able to choose from other products—if I may use the word broadly—that are capable of being purchased in the market? If, however, there is no credible alternative, as the Paymaster General poignantly observed on 23 January 1995 in saying that most motorists in rural areas were dependent on their cars, surely the hon. Gentleman's point about the market does not apply.

Vincent Cable (Liberal Democrat, Twickenham)

The hon. Gentleman is of course exactly right: there must be an alternative. That is why I am hoping that the principle of hypothecation will emerge from new Government thinking and revenues will be returned to improve public transport, which I think meets his point. Of course, some money that goes to the Treasury comes back in order to improve provision, but the sums that have recently been allocated to rural public transport are derisory in relation to the revenue raised from it. The other question to which the hon. Gentleman's remarks give rise is, this if we do not have a market mechanism such as taxation or congestion charges, what else can we do to change behaviour? One may do absolutely nothing, which may be what will happen. I do not know whether the Opposition are advocating merely letting taxes stagnate and trend motoring rise above the predicted rate, allowing all the pollution and greater congestion to flow from it. There is a laissez-faire solution: let us just see what happens. I hope that that would be unacceptable to most of us on environmental and broader social grounds. Another approach is to use not the market but regulation. Instead of imposing higher taxes, we could force the motor industry to improve the standards of cars. In many respects, that is happening, and it could happen much more. I came to this House from the energy industry, in which we spent much time thinking about the future of the so-called supercar—cars built from very light materials, with much improved battery systems, fly-wheels and better engines. Enormous improvements could be made to reduce emissions and meet environmental objectives. Through regulation, the industry could be forced to advance production of such models. Of course, there is potentially a very large cost for such regulation, for which somebody must pay—probably not the industry, since it will pass the cost on to consumers. If we want to achieve environmental objectives, we must do so either through market signals, which are taxation or congestion charges, or through regulation, for which someone must pay—or we do absolutely nothing. If the consensus between the three parties is to be broken, it is incumbent on all of us to make it absolutely clear which of those choices we will follow.

John Swinney (Scottish National Party, North Tayside)

The hon. Member for Twickenham (Dr. Cable) made an interesting contribution to the debate, as he did the last time that we discussed this issue on the Floor of the House in April. I am somewhat surprised and perplexed by the reasoning behind his intention to support the Government because, in April, the Liberal Democrats voted against clause 2 stand part. When I sit in my constituency surgery, I am often aware—I suspect that I am not alone in this—that I never know what is coming when the next person steps through the door. However, when fuel taxation is being debated in the House, one knows what is coming next. In the short time for which I have been a Member, the issue has come before the House three times, in the three Budget rounds since the 1997 election. However, it is important that we consider it again today. The difficulty in such a debate—on this point, I have some sympathy with the hon. Member for Twickenham—is that there is a slight whiff of hypocrisy about much of what is said by Conservative Members, because they invented the fuel duty escalator and applied it with vigour during their time in office. They managed to teach this Government another important trick—to tax by stealth. All the arguments that the Government use to hide behind a claim that they are lowering direct taxation while they increase indirect taxation, of which the fuel duty escalator is a strong and powerful example, were taught to them by the previous Conservative Government and their predecessors, so we need no lessons from Conservative Members on the ability to tax by stealth. None of that, however, invalidates the substantial points that have been made. First, the fuel duty escalator represents a serious competitive impediment to many aspects of working life in this country, whether in the haulage sector or the sectors of the economy that particularly concern rural communities. Secondly, the increase in indirect and hidden taxation has a uniform and punishing effect on some of those who are least able to pay that taxation. It has already been said that we have the highest fuel prices in Europe. On current estimates, we shall be paying something like £4.30 for a gallon of petrol by the end of this Parliament if the Government continue with their plans. Over the past few weeks, I have had the benefit of being on the campaign trail, where I have been very assiduous, in the Scottish parliamentary and European elections. I made many visits to individual companies, not only in my constituency, but in central Scotland, the south of Scotland and the highlands, and almost all the discussions that I had with them related to the increasing impediments to competitiveness caused by the increases in the fuel duty escalator. For example, a paper manufacturing company has found that its distribution costs have substantially escalated, and companies in the textiles sector are finding it difficult to get their products to market. There is a direct impact on companies' competitiveness and their ability to secure stable levels of employment. In a debate in the House in late April, I gave the example of a company in my constituency which is emerging from difficult times. As a result of the fuel duty proposal, it faces an increase of about £10,000 in its annual costs, which is a serious burden for such a company when its employees are working very hard to improve its fortunes. That is the sharp end of the Government's proposals. Another perspective that I want to bring to the debate is that of rural communities. I am becoming increasingly concerned about the impact of the fuel duty escalator on rural communities, particularly those that I represent. I should perhaps declare an interest because, over the summer, I shall embark on an extensive tour of my constituency which will involve lots of driving, so I should record that a lot of petrol will be put into the vehicles that I shall use. It is important to consider the impact of the fuel duty escalator on rural communities. It has a direct impact on people who have no public transport alternative and who must own a car to go about their daily business, but I particularly want to draw to the attention of the House the impact that the fuel duty escalator has on public services. In an area such as the one that I represent, key workers who are delivering public services—for example, home-care workers, those delivering education services and those providing health care services—are disproportionately affected by the level of fuel duty increases that we have experienced. Those increases are consequently disproportionately affecting the ability of public services to be effectively delivered and distributed in key rural areas of our community. This flows through into the prices of goods and services within the private sector and, inevitably, affects the weaker within our society. All those issues have been rather glibly thrown aside by the attachment to the fuel duty escalator that the Government have continued to display. 5.15 pm One of the central issues raised by the right hon. Member for Wells (Mr. Heathcoat-Amory) and by other hon. Members, including the hon. Member for Twickenham, is the status of the Government's intention in this policy area. During the days before our previous debate on this subject, which took place on 27 April, it was suggested that the Government were going cool on the fuel duty escalator. That was before some of the substantial outbreaks of anger in the road haulage sector that we have experienced. The national transport forum has been thrown to that sector to address its concerns. The Government suggested then that they were going cold on the question of the escalator and we have heard little about it until the outbreak of the most recent speculation on the subject. The House deserves an explanation from the Government of where they stand. It is apparent from earlier discussions that are recorded in the Official Report that the Chief Secretary has made it clear that the contents of the Red Book reflect the insistence on the application of the escalator for the remainder of the Parliament. That remains a central part of the Government's argument. We require clarification from the Economic Secretary this evening. One of the Labour candidates in the Scottish parliamentary elections—this is someone who will be known to those who run the Labour party in Scotland because he was the candidate for the Galloway and Upper Nithsdale constituency, which I am delighted to say was retained by my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan) on 6 May—said that the application of the fuel duty escalator in rural areas was a poll tax on wheels, affecting people unfairly and unjustly in rural areas and having no relationship to ability to pay. All the damning criticisms that were made of the poll tax are equally valid when made of the poll tax on wheels that the Labour candidate for Galloway and Upper Nithsdale thought was so iniquitous.

John Bercow (Conservative, Buckingham)

To the knowledge of the hon. Gentleman, is the individual concerned still a member of the official list of prospective Labour party candidates?

John Swinney (Scottish National Party, North Tayside)

That is a pretty select list and I imagine that it is difficult to get on to it. I would not venture to go anywhere near the selection process that goes on there. I advise the hon. Gentleman that he should steer well clear of the issues that bear on access to the Labour party candidates' list in Scotland. It is a secret sect if ever there was one.

Malcolm Chisholm (Labour, Edinburgh North and Leith)

Will the hon. Gentleman give way?

John Swinney (Scottish National Party, North Tayside)

I must give way to someone who is—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. Before the hon. Member for North Tayside (Mr. Swinney) is so generous, I must tell him that this fascinating mini-argument that has crept into the debate is out of order.

John Swinney (Scottish National Party, North Tayside)

I apologise, Mr. Deputy Speaker, for taking the House along an inappropriate road, if I might use that pun. I give way to the hon. Member for Edinburgh, North and Leith (Mr. Chisholm).

Malcolm Chisholm (Labour, Edinburgh North and Leith)

Did the hon. Gentleman read the comment of a leading environmentalist that appears in a Scottish newspaper this morning? He says that for the Scottish National party to oppose both fuel duty increases and road user charges is the worst sort of populism and the worst sort of rubbish. What is the hon. Gentleman proposing for the environment? How can he justify the fact that SNP Members of the European Parliament are seeking to join the European Federation of Green Parties, which supports all those taxes and far more?

John Swinney (Scottish National Party, North Tayside)

If I were to talk about surrounding issues the European Parliament, Mr. Deputy Speaker, you would rule me further out of order than I was earlier. It is important that we put in place a credible alternative that will change people's behaviour, and that has not been offered by the Government in support for the rural transport fund or by investment in public transport infrastructure. It is important also that the Government respond constructively and positively to the genuine difficulties that are now being faced by rural communities in Scotland and other parts of the United Kingdom. Nothing has been said by the Government that addresses those difficulties. The sooner we hear an answer from the Government, the better the position will be for the rural communities that are suffering disproportionately as a result of this unfair taxation.

Tim Loughton (Conservative, East Worthing and Shoreham)

I support the amendments moved by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). As a member of the Environmental Audit Committee, I am concerned with the issues of green taxation, achieving Kyoto targets and so forth. The Economic Secretary to the Treasury, who has appeared before our Committee many times, knows our commitment to those matters. In the next week, we shall publish a report on energy efficiency, which touches on many of the subjects that we are debating today. The measure that the amendments seek to ameliorate has nothing to do with energy efficiency and environmental conservation. The crux of the matter is the absurdity of accelerating the fuel duty escalator and then trying to dress that up as an environmental gain. In our many debates on the subject, we never hear from the Government any mention of the change in the cabotage rules that came in last July, which has completely altered the game for the freight industry in Europe and the United Kingdom. As from last July, there is no environmental gain whatever to be had from jacking up diesel fuel duties in this country. That can only result in British lorry drivers, driving British lorries on British roads and emitting British fumes, being replaced by Belgian, French and German lorry drivers, driving Belgian, French and German lorries on British roads and emitting Belgian, French and German emissions from their lorries. Moreover, those emissions tend to be a rather poorer grade, because of the lower standards of maintenance of those lorries and the poorer quality of the fuel sold on the continent. It is utter nonsense to suggest otherwise. The Government cannot continue to refuse to believe the evidence in front of their eyes. My right hon. Friend said that there were about 1 million lorries from Europe travelling on British roads this year. For the past three or four years, there have been 100,000 extra lorry trips a year from the continent. I recently visited lorry drivers up in Lincolnshire. One has only to visit ports around the Humber to see the collapse in the roll on/roll off business. In the old days, foreign lorries would deposit the sealed containers at continental ports, to be brought over to the UK on ferries and picked up by British tractor vehicles and carried on to their final destination. Now continental lorries take the containers all the way through to their final destination, such is the economy of scale. The British lorry drivers who would normally charge £1 per mile for the journey find that they are competing with continental lorry drivers who are quoting just 60p per mile for such journeys. British lorry drivers cannot compete with such a gap in margins, and no reduction in margins is being achieved by their end customers. The British lorry drivers are suffering at every point. Eurostar is offering cheap fares for cab drivers to take their tractor vehicles over to the continent to fill up with petrol. There are also special ferry charters taking lorry drivers over to the continent just to fill up. A cheap rate overnight on a Sunday of less than £20 per metre is economically very attractive. To fill up a 1,200 litre tractor unit can save more than £600, which is well above the cost of the fares. In addition, extra lorry-miles are being created on British roads by those tractor vehicles being driven to the ports to be taken to the continent. That is utterly absurd. What is the net effect? An enormous net loss in revenue to the UK Treasury and a net increase in revenue for the Belgian, French and German Exchequer, as well as the Irish situation, about which we have heard. That of course means less money for the Treasury, which supposedly will hypothecate in respect of more environmentally friendly measures to encourage greater use of liquified petroleum gas to help this country to achieve its Kyoto targets, which we all want to be met. As we have heard from my right hon. Friend the Member for Wells, the Economic Secretary constantly gets her figures wrong, and, at long last, the admission was squeezed out of her that the price of diesel fuel has increased by 13p per litre since the election. However, there still seems to be no sign of the Government acknowledging the reality of what is going on. As one of my hon. Friends has said, at Treasury questions on 13 May, she envisaged the fuel escalator continuing for a further 10 years. As if to add insult to injury, on 24 June, at the next Treasury questions, those freight drivers who wanted an end to the escalator, which we were advocating, were accused of being extremist. They were called extremist for wanting to preserve their industry and their jobs and for wanting British trucks to continue to carry British goods on British roads rather than lose out to European competitors. Even if we put on one side all the other additional costs that the freight industry has been facing, such as the selective increases in vehicle excise duty, and the fact that new tyres will cost about £278 per axle on an 18-tyre vehicle—

Andrew Love (Labour/Co-operative, Edmonton)

I thank the hon. Gentleman for giving way in the midst of painting a picture of doom and gloom. Can he tell us the level of penetration of the British market by foreign lorries?

Tim Loughton (Conservative, East Worthing and Shoreham)

I have already given the figures. There has been an increase of 100,000 lorry trips a year over the past three to four years. Those are the Treasury's figures. If only one Treasury Minister would stand on a motorway and carry out a survey—[Interruption.] To be generous, a Minister could stand at the side of a motorway. Treasury Ministers should visit a service station on a major motorway and count up the number of foreign-flagged vehicles in the car park; then they would have to admit the truth. I cannot see why they cannot carry out some basic research. If they did, they would see that the number of foreign vehicles carrying freight on our roads has increased disproportionately. These measures also hit the smaller operators—owner-operators in particular—disproportionately, because 85 per cent. of goods vehicles in this country operate in fleets of 10 vehicles or fewer. The cost of fuel constitutes at least 40 per cent. of the overall operating costs of such operators. Things would have been even worse had it not been for the weakness in the oil price over the past year to 18 months, although that advantage is disappearing very quickly. With yesterday's news that the oil price has returned to more than $18 a barrel, it will not be long before the small element in the cost of a gallon of fuel that represents the product itself is pushed up. The overall price of fuel will increase even more, let alone the tax on top of it. Whenever we mention those matters and the real factors that are affecting many lorry drivers in this country, the Minister starts talking about special tax concessions for cleaner lorries, for installing catalytic converters and everything else. She should try driving a 38-tonne lorry fuelled by liquified petroleum gas. She might find that the tanker required to fuel it rather bigger than the vehicle itself was, and that a large amount of fuel to be dragged along behind it. Will she start to explore the economics of catalytic converters, which cost more than £2,500 to fit, although the tax break which is supposed to encourage drivers to fit them is very much less than that? They are guaranteed for 12 months only and account for a significant drop in the fuel economy of a vehicle, yet again threatening drivers' margins. We debated road fuel gases last night and it was interesting that the Economic Secretary claimed that Government had broadened the differential between the duties on liquified petroleum gas and on hydrocarbon fuels. She said that it was important that the gap between the duty on those two fuels had been widened, because that would encourage more people to use LPG. Of course that gap will widen if the rate for diesel fuel is jacked up at the upper end. It is absurd. 5.30 pm Unless the Government accept the amendments at the last minute, the proposed measures will result in an overall loss in revenue to the Treasury without any concomitant reductions in CO2 emissions from freight traffic. Business will go to continental lorry drivers at the expense of British jobs, and UK companies will either relocate their fleets or part of their fleets to the continent or flag out to continental operators. British companies are already doing that. Indeed, firms are springing up on the back of the advice given to British lorry drivers on how to take advantage of flagging out or relocating to the continent. As the hon. Member for North Tayside (Mr. Swinney) said, the rural community is affected, and especially community bus services in the countryside. Some months ago, the Economic Secretary talked out a private Member's Bill that would have exempted community buses from bus fuel duty. They currently have no exemption, and pay 100 per cent. of the excise duty charged on diesel fuel. I thought that we were trying to promote such bus services yet, they, along with the commercial freight drivers, will be one of the biggest victims of the proposed increase in excise duty. Those services are often run by charities and volunteers. The disabled, who rely wholly on their cars and disabled bus and taxi services in the country and town alike, will also be victims. The Government must wake up to reality. The amendments send a clear signal that enough is enough. We need a drastic reversal of policy. It may have been appropriate five or six years ago, but it is now time to get off the escalator. If not, the measures will be self-defeating in terms of revenue raised and environmental gain. It is about time that this madness stopped.

Robert Syms (Conservative, Poole)

I intend to make a brief contribution. I support amendments Nos. 40, 41 and 42. The fuel escalator raises £25 billion. It raises so much money because it is a regressive form of taxation. When designing a tax system, one should take into account not only how to raise revenue, but how to make that fair. The effect of these tax measures will be substantially different in each constituency. In large rural areas the car is a necessity. People have to use it to maintain their quality of life—to take the children to school, to go to hospital, to go to church and to do all the basic things. In many urban areas, especially London, there are transport alternatives, but for constituents who live in villages out in the wilds of England, Wales and Scotland there is no alternative to the car. This tax will be determined more by people's postcode than by their choice of transport. It is unlikely to affect wealthier people, but it will hit poorer people in rural areas. I was a rural county councillor. One should not presume that because people live in pretty villages they have high disposable incomes and are well off. Many people who live in villages struggle to bring up a family and keep a home together. The imposition of fuel duty year on year makes that very difficult. The Government's taxation policies are driving poorer people out of rural areas: that is happening more now than in the past 20 or 30 years. That is a pity, because many villages will end up with unbalanced communities. I welcome the amendments. At least they have given rise to a debate, and at least they take into account the fact that a policy that is sane when it relates to one year can become insane when it is implemented year after year, and when it impacts on only certain people in certain constituencies. Some of those people may not have the largest incomes, or, indeed, the largest cars; they simply need to use the car to do basic things. As one who represents a port, and a port that is used by road hauliers, I am very aware of the burden that the clause imposes on the road haulage industry. Road hauliers carry the vast majority of the goods that appear in our shops and supermarkets. There is no such thing as a painless tax increase, and at some point people must pay for the amount that the Government are raising—in this instance, £25 billion. The cost must be paid either by consumers through higher prices, or by road hauliers, who must try to contain their costs. They may be able to squeeze efficiency for one or two years, but that will become increasingly difficult after a period of several years, when fuel prices are constantly rising. The road haulage industry is very competitive. Most hauliers survive on small margins. It is a problem if they have to jack up prices every year in such a competitive industry: many businesses are likely to go bust as a result, and many drivers are likely to lose their jobs. Continental hauliers have an impact on Britain. Many have 100-gallon tanks, which they fill up on the other side of the channel. They come here and unload, and look for business. Because they bought their fuel on the other side of the channel and they do not have to fill their tanks here, they can undercut British road hauliers. As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out, hauliers are not only contributing a great deal in fuel tax; they are contributing a great deal in vehicle excise duty. The more road hauliers go out of business on this side of the channel, the less revenue the Treasury will receive. We should take account of what happens across the channel, and I think that the amendments are at least a step in the right direction. The hon. Member for Twickenham (Dr. Cable) described our policy as opportunistic, but I do not consider it opportunistic to stand up for country dwellers who need cars. I do not consider it opportunistic to stand up for road hauliers who carry the goods that we all want to buy, and who provide a good service for this country—efficiently, we hope—but on whom the Government's policy will impose a considerable burden. I hope that the Economic Secretary will make clear where the Government see their policy going. I believe that, if we continue in this way, anger will erupt, people will go out of business, jobs will be lost, and people who are struggling to remain in rural villages in which they may have been born and grown up will be forced into urban areas.

Desmond Swayne (Conservative, New Forest West)

I support the amendments. I am indebted to my hon. Friend the Member for Poole (Mr. Syms), who drew attention to the small margins on which the haulage industry is based. I wish to stress the plight of the industry in south-west Hampshire. I believe that the relationship between the environment and haulage mileage is entirely different there: indeed, its impact may be perverse in comparison with that in the rest of the country. The difficulty is that, in south-west Hampshire, the need for haulage services is concentrated along the A31—which is in effect an extension of the M3 and M27 motorway network—down the Southampton waterside, particularly in Totton and the oil-refining area of Fawley, and along the southern strip, where population growth and the growth of enterprise are greatest. It will no doubt have occurred to some people that the New forest lies bang in the centre of the localities to which I have drawn attention. It is the policy of Hampshire county council—many of my constituents would say that it is properly so—to prevent hauliers from travelling through the New forest. Therefore, any haulage firm that wishes to pick up business, for example, in Ringwood or on the waterside, but which is located along the southern strip must make a considerable detour, entailing much more mileage. They feel that they have made their contribution to the environment by travelling more miles than would ordinarily be the case were they not restricted by the county council's environmental policy. Now they find themselves penalised disproportionately by the escalator that has been imposed on them. Equally, the greater mileage that hauliers are required to travel has had an effect on many of my constituents. My hon. Friend the Member for Christchurch (Mr. Chope) will be aware of the complaints of his constituents in Highcliffe and Walkford about lorries that would otherwise have travelled through Lyndhurst and Burley, but which make a large detour to avoid the New forest. His constituents, and my constituents in Sopley and along the A31, would undoubtedly welcome the extra revenue that such taxes might yield if it were invested in the road network to provide them with relief from the additional haulage traffic to which they are subjected. The legitimacy of the tax is completely undermined, however, because the prospect of bypasses, particularly around Lyndhurst, and of noise abatement measures along the A31 to allay the misery of many of the local residents, has receded. It is precisely because of the current tax's perverse effects, and its disproportionate effect on my constituents, that I am in favour of the amendments.

Michael Jack (Conservative, Fylde)

First, I apologise to you, and to the House, Mr. Deputy Speaker, for not being here at the start of the debate. I was following it in another part of the Palace estate and heard some of the arguments. If I were in the Government's position and faced with a nice little earner that would yield nearly £1.7 billion extra year on year, I would sit on the Treasury Bench, try not to catch the eye of Opposition Members, and try not to look embarrassed or in any way discomfited that so much additional money was being lifted yet again from motorists. It is almost as though the Government were trying to outdo the previous Government's efforts in their tax approach. They have looked at the escalator and thought, "That is a good idea. Let's double it. Let's really go for it," but, as always, the shoe has begun to pinch tightly. Let us look at the real-world effect of the fuel duty escalator. At one of my local garages, the price was 58p a litre before the last Budget; now, 69p or 70p is the norm. At a modest consumption of 10 gallons a week, the citizen is now paying about £225 a year more for his fuel. I ask the Economic Secretary, if she is to reply to the debate, whether she will initiate a study of the escalator's distributional effects. For all the reasons that other right hon. and hon. Members have mentioned, many of our constituents find it impossible to adjust their motoring habits overnight. They are not financially able to buy the latest and most fuel-efficient cars to overcome the effect of extra fuel duty. They are perhaps wedded to an older and less efficient car, which may be a necessity—perhaps even a tool of the trade—for them. None the less, the Government seem disinclined to measure the regressive effect of the tax, particularly on those who are at the lower end of the salary or wage spectrum. 5.45 pm Will Ministers therefore conduct an exercise examining the tax's full impact? If they continue operating the escalator as they have been, many low-income people will be very adversely affected—which perhaps should, if there is still a vestige of socialism among Labour Members, touch their conscience. I do not think that many people drive many frivolous miles. Most people use their cars of necessity, particularly in rural areas, about which hon. Members have already spoken. Although the oil price may drop to $10 a barrel, the Government ensure that motorists do not receive the decrease's full benefit. I appreciate that there is a relationship between fuel price and fuel use, but, if the Government want to achieve their environmental objectives, other levers should be used rather than simply hiding behind the fuel escalator. What will happen as the oil price increases? I presume that Ministers will be happy to let motorists not only feel the full force of the fuel duty escalator but bear the full weight of any oil price increase. Ministers cannot have their cake and eat it. Yesterday we debated the implications of vehicle excise duties and future applications—perhaps to be announced in the next Budget—of the graduated scale, which is the Government's big idea to meet their Kyoto targets. However, to achieve the same targets, they want also to use the fuel duty escalator. Why do we need two economic measures to achieve the same target, when one will do? The Government are using a very negative and blunt instrument to try to achieve their environmental targets, but they have also committed themselves to a different instrument. They should not have two bites at the same cherry. In trying to achieve their environmental targets, Ministers have taken a lazy approach to taxation. If they want to raise more money to meet the targets, they could do so in other ways—but they are frightened rigid of taxing anything else. Therefore, with a blunt instrument, they are going for the same old "winners", which is having a seriously regressive effect on lower-income groups. Ministers owe it to us to undertake a study to examine the policy's real impact. I take modest comfort from thinking that Ministers may support amendment No. 40, as press reports state that the Chancellor is getting cold feet on the issue. However, I suppose that, being a Scot, he would rather have the money than show even a little generosity to hard-pressed motorists, many of whom are suffering from the Government's anti-road, anti-car policies. Motorists are stuck in traffic jams, spending even more money on fuel and adding to the Government's coffers. I suppose that that is the new stationary method of raising taxes. The Government need very carefully to consider this sphere of taxation. I think that a report on the escalator's impact on individuals, compared with its impact on the environment, would help greatly to clarify Government policy.

Nick St Aubyn (Conservative, Guildford)

I do not know whether the Economic Secretary is a fan of George Gershwin, but, judging by her previous statements on the escalator, I should not be surprised to see her standing at the Dispatch Box singing, "I'll build a stairway to paradise". Nevertheless, as we have heard in the debate, the truth is that the Government are building a treadmill to ruin for businesses across the United Kingdom. We heard from the hon. Member for North Tayside (Mr. Swinney) how the previous Conservative Government's success in attracting funding for Scotland's infrastructure—thereby revitalising so many of its regions—is now being undermined by the ever-increasing cost of getting products made in Scotland to their markets. That is the extent of the damage being done by this serious increase in taxation.

John Swinney (Scottish National Party, North Tayside)

The electorate's conclusions about the great success of the Conservative Administration were shown on 1 May 1997, when the Conservatives failed to win any seat within Scotland. Perhaps that little piece of information will be a part of the hon. Gentleman's recollections about Scottish politics.

Nick St Aubyn (Conservative, Guildford)

We well know that the Conservative party bequeathed to the country, including Scotland, a golden economic legacy. There were other reasons why we lost that election, but the reasons for the legacy will be the reasons why we will win power again. If the Government increase taxation without a thought-through strategy, they will hurt business and destroy jobs, and the tax increases will become self-defeating. That is the stage we are reaching with the so-called fuel escalator. In my part of the country, people do not have a choice to whether or when to use their cars. They are busy people who have to get to work and who have to use the transport that is available and—as in many other parts of the country—that means the motor car. It is no good telling them to put all their freight on rail. They need to use the road transport network which has been built up over so many years. I was struck by the way in which in a recent exchange with me, the Minister for Transport patted herself on the back for having announced a £5 million noise reduction fund—£5 million across the country to reduce noise is a paltry sum when the Government, as a result of their increments in taxation on the motorist, are raising an extra £12 billion from motorists during this Parliament. If the Government were to use a modest increase in road duty to improve our road network by imaginative noise reduction measures, better surfaces or schemes to encourage road traffic to use main roads—and not to disrupt the lives of many people by driving heavy lorries through villages—at least some benefit would flow back to our constituents who are paying these high costs. The Government do not intend to do that. The reason why the Conservative party is opposed to high taxation in principle is that Governments who increase tax simply tend to hoard the money, and do not have the imagination to put it to good use. That is why we need to stop the increases in road fuel taxes. We need to stop and think before we use these extra taxes simply to force businesses into ruin. Any money must be put to good use for the real transport needs of our country.

Patricia Hewitt (Labour, Leicester West)

This has been a lively and interesting debate—albeit one perhaps inevitably, has gone over familiar ground. It might help if I reminded the House of the origins of the fuel duty escalator, which was introduced by the Conservative Government in 1993. It was set initially at 3 per cent., but raised in the same year to 5 per cent. With the exception of some references in one or two speeches from Conservative Members, one would never have thought so. The escalator was inherited by us, confirmed by us and increased to 6 per cent. in 1997. The fuel duty escalator was right when the Conservative Government introduced it—I am prepared on this occasion to give them the credit for it, even though they have since abandoned the policy—and it is still right today.

Stephen Dorrell (Conservative, Charnwood)

Will the Economic Secretary complete that statement of policy? For how long will it be right?

Patricia Hewitt (Labour, Leicester West)

As we said in the "Financial Statement and Budget Report" the escalator will be applied in future Budgets. Our environmental assessment is that if the road fuel duty escalator is continued until 2002, it will, by 2010, save between 2 million and 5 million tonnes of carbon—an extremely significant contribution towards our Kyoto targets.

Michael Jack (Conservative, Fylde)

Will the Economic Secretary give me an undertaking that she will publish the details of how that calculation was arrived at?

Patricia Hewitt (Labour, Leicester West)

The calculation was based on the models used by the Treasury and the Department of the Environment, Transport and the Regions. We referred to that in the environmental impact assessment table in the Budget documentation. There is nothing further that I can add. However, if any further technical details will assist the right hon. Gentleman, I will let him have them. The reduction in greenhouse gases was for the Conservative party and is for this Government the first and continuing justification for the fuel duty escalator. However, there is a second justification—the contribution that the fuel duty escalator makes, by constraining the growth in demand for road transport that would otherwise take place, to improving local air quality and thus people's health. Last night, Conservative Members posed as the friends of health and the opponents of air pollution. The right hon. Member for Fylde (Mr. Jack) moved amendments on road fuel gases, and referred to the problems of fine particulates PM10s, which have a demonstrated link with respiratory and cardiovascular disease, and to oxides of nitrogen, which can damage the lungs and play a part in summer smog episodes. These emissions currently result from the use of petrol engines".—[Official Report, 5 July 1999; Vol. 334, c. 770.] The right hon. Gentleman was absolutely right. He referred later to benzine emissions from petrol, which cause health risks. Let me remind the House of those health risks and the contribution to them from the emissions from cars and lorries. In 1996, airborne particulates in urban areas brought forward more than 8,000 deaths, and either caused or brought forward more than 10,000 hospital admissions for respiratory diseases. Road transport is one of the major sources of those particulates. Across the country, road transport contributes about a quarter of the total emissions of particulates. In London, where the problem is most severe, nearly 80 per cent. of those particulates—about which the right hon. Member for Fylde was so concerned last night—come from road transport. Road transport is responsible for nearly half the emissions of nitrogen oxide. In London, where the problem is at its worst, it accounts for nearly three quarters of emissions.

Nick St Aubyn (Conservative, Guildford)

By how much has traffic been reduced in London since the Government increased the amount of the escalator?

Patricia Hewitt (Labour, Leicester West)

The escalator has ensured that the demand for petrol, and therefore the emissions from petrol and diesel-powered engines, has reduced by 0.1 per cent. compared with a year ago, and is somewhat lower than it was more than 10 years ago. Compared with the scenarios that we could have anticipated in the absence of the escalator, that is an important constraint upon the increase in road transport and pollution. Opposition Members were concerned last night about people's health. Today, they are concerned only about people driving cars and lorries. It is worth remembering that particulates from diesel engines are responsible for a large number of those premature deaths and hospital admissions for bronchial and respiratory diseases. I remind the House of the remarks of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who said—quite rightly—that hon. Members who sought to support the Kyoto targets and to show concern for people's health and the impact on health of road transport-generated pollution, and who simultaneously opposed the fuel duty escalator, were sailing dangerously close to hypocrisy. 6 pm Several hon. Members spoke about the road haulage industry. I commend the remarks of the hon. Member for Twickenham (Dr. Cable), who rightly referred to several studies that strongly suggest that the road haulage industry is contributing considerably less than the total cost of the social and environmental penalties that it imposes on this country. Of course, the industry's competitiveness is taken into account when the Government set diesel duty rates and vehicle excise duty, but the duty on diesel also reflects valid environmental and health concerns which I would have hoped by Conservative Members were shared. My right hon. Friend the Chancellor and I have often stressed that, in considering the industry's competitiveness, we must take into account not only our fuel duty and VED, but our total package of business costs. Thanks to the Government, we now have the lowest rate of corporation tax of any major European Union country. Our non-wage labour costs are generally lower than those in our competitor countries. The small companies rate of corporation tax was cut to 20 per cent. in the Budget and a 10 per cent. rate was introduced for the smallest companies. We have cut VED for the cleanest lorries by £1,000, and in response to a request from the industry we have made it easier for vehicles to change their licence category to become eligible for the lowest possible rate of VED to suit the loads that they bear. In response to the industry's concerns, we set up the road haulage forum, which will meet again under the chairmanship of my right hon. Friend the Minister for Transport later this month. At the request of right hon. and hon. Members, we are considering the specific question of the Euro vignette scheme, although I stress again that the scope for such a scheme is severely constrained by a European directive to which the previous Government committed us. There is considerable evidence of overcapacity in the haulage industry. A third of total mileage is run empty and the supermarkets have achieved enormous improvements in fuel efficiency and loadage, which shows that we are giving the industry absolutely the right incentive, partly through the road fuel duty escalator, to ensure that it makes much more efficient use of its fuel. A recent study by the energy efficiency best practice programme shows that only a third of commercial fleet managers know how much they spend on fuel and only a third have active policies to improve fuel efficiency. The escalator should go some way towards the extremely necessary goal of improving that record. One damaging effect of the amendments is that they would reduce the duty incentive for clean ultra-low sulphur diesel to just over 2p a litre. We have seen clearly that the trade needed the 3p differential that we introduced in the March Budget, as it enables ultra-low sulphur diesel to be offered at the same pump price as conventional diesel. In February, clean diesel was only 41 per cent. of the diesel market; by June, that had already increased to 96 per cent. We have put in place the right duty differential and ensured that virtually all diesel now sold in this country is environmentally friendly. That has been a resounding success, and the amendments would go back on our promise to the oil industry to maintain the differential. The amendments would backdate the reduction in rates to Budget day on 9 March, which would necessitate our repaying about £300 million to the oil industry. I am not sure that the Opposition have begun to think about how that could be administered or how one could insist that the reduction was passed back to the motorists on whom the increase was imposed. As we have come to expect from the Conservatives, their refusal to abide by the policy that they rightly adopted in government and their opportunistic decision to abandon it, as the hon. Member for Twickenham said, mean that there is a black hole of about £5 billion in their spending plans. Perhaps the right hon. Member for Wells (Mr. Heathcoat-Amory) will tell us how he proposes to fill that hole and whether he believes that the resultant cuts should fall on the health service, on schools or on some other part of public spending. I hope that he will tell us how he would achieve the Kyoto and other greenhouse gas targets and the improvements in people's health, of which many Conservative Members have spoken, in the absence of this highly effective and well-justified policy. I urge my hon. Friends to oppose the amendment unless, as I hope, the right hon. Gentleman decides to withdraw it.

David Heathcoat-Amory (Conservative, Wells)

The facts of the issue are not seriously in dispute. The road fuel duty escalator is now well past the point at which it had an environmental justification and is doing severe damage to the private motorist and the road haulage industry. It is part of the Government's totally unnecessary war on the private motorist and it is making an important industry uncompetitive in Europe. The Government first chose to deny those facts and they now choose to ignore them. We do not ignore them and we will now vote to reverse the damage by supporting the amendment, which would cut the escalator back to the rate of the retail prices index.

Clause 40

Vincent Cable (Liberal Democrat, Twickenham)

I beg to move amendment No. 30, in page 21, line 4, leave out subsection (7) and insert— '(7) The amendments made by this section shall be deemed always to have had effect'. This technical matter was pursued at length in Committee, but I should like to take it a little further. It arises from a measure against tax avoidance that was designed to stop people converting remuneration into shares, thereby exempting themselves from higher rates of income tax. That measure fell on a particular class of companies—unquoted companies that frequently pay employees or directors in shares that must be transferred when the employee or director leaves the company. That presented a problem for those people, who would have to pay taxes at higher rates on valid and welcome forms of employee share ownership because of the attempt to clamp down on tax avoidance. The Finance Act 1998 attempted to address the problem by exempting people when the arrangement was built into the company's articles of association. However, it is clear from discussions with the Inland Revenue that the exemption was too narrowly drawn. Many people were caught out who had acquired shares as a result of employee contracts, or because they worked for a subsidiary—unlike the fat cats who work for main companies. Clause 40 is designed to narrow further the range of the anti-avoidance measure, and is generally welcome as it allows exemptions to be extended to people who work for subsidiary companies. However, the exemption is limited to people who bought shares after Royal Assent was granted to last year's Finance Act. It still catches a substantial number of people innocently involved in employee share ownership schemes who purchased their shares long ago. The amendment would therefore apply the anti-avoidance measure retrospectively. Little revenue is involved, though if the sum is more substantial, the Treasury should give us some figures. The amendment cannot conceivably be construed as doing anything to encourage tax avoidance as it applies to decisions already taken. It is a reasonable technical suggestion to widen the scope of the exemption already accepted in principle by the Government in a way that will meet the concerns of those who are trying to promote employee share ownership in a specific category of companies.

Howard Flight (Conservative, Arundel and South Downs)

Clause 40 and the Liberal Democrat amendment are the fruits of excessive zeal in anti-avoidance measures, the complication of which has resulted in mistakes by the Government. The amendment is broadly correct, as the administration of clause 40 would be a nightmare for the Inland Revenue during the year in which an unfair tax rule existed, but it sets a precedent with which we are uncomfortable by making tax matters retrospective, even though it favours individuals. However, we cannot see how clause 40 will operate smoothly without it, unless the Revenue acts as if it had been included in the Bill. Where companies pay individuals in shares subject to later forfeiture—which creates a difficulty in valuing the benefit and the income tax that arises—special rules apply. When the original provisions were drafted in 1988, cases in which an employee dismissed for misconduct had to sell the shares at a discount were not included, but those cases were included in the special rules last year. Those people are in a tax situation different from the deliberately advantageous situation in which shares become forfeit in order to avoid charges to income tax. The tidying up of parts of last year's Act made the mistake of including a charge to income tax that no reasonable person would have considered. We are glad that the Government are correcting that error in clause 40. However, do they intend the Revenue to be lumbered with the unintended law for a year, or will the Revenue operate as if the mistake had not happened, even if the amendment is not accepted?

Michael Fabricant (Conservative, Lichfield)

I, too, support the amendment and welcome clause 40. The clause is a small demonstration of the Government's so-called commitment to a stakeholding society, although they are also attacking fat cats and claiming that anyone who enjoys the fruits of the company for which he or she works is a fat cat. There is a fundamental inconsistency there. It is wholly wrong that clause 40 should become operational from a particular future date. It should be backdated. It should, indeed, have gone further. When in Opposition, Government Members criticised our Finance Acts, claiming that share and profit participation schemes were not lawful, and that profit schemes were being abused. There were instances of that, for example, one at Nottingham university, which was quoted by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). A shell company was set up and people were paid through dividends rather than wages. 6.30 pm Assurances were given before the last general election to companies such as the John Lewis Partnership, which I do not think any hon. Member would accuse of operating a scheme to make use of a tax loophole and which has suffered as a consequence. Everyone who works for the John Lewis Partnership is designated as a partner. At the end of the year, instead of a dividend being declared, a proportion of salary is declared as a bonus, which is distributed among all the workers. If that is not a good example of a stakeholding society, I do not know what is. I clearly remember during debates on the Finance Bill before the last general election Labour Members pledging that if a Labour Government were elected they would restore tax-exempt status to profit-sharing schemes such as that operated by the John Lewis Partnership, which is a bona fide scheme. Now, two years into a Labour Government, what do we see? The stakeholding society is merely another spin. There has been no deed and the Government have not attempted to reinstate that profit-sharing scheme. That is another empty promise—another promise unfulfilled and another group of people who feel betrayed as a consequence. Will the Minister, who was not in the House prior to the general election, look through the Hansard of our debates on that Finance Bill, see the promises that were made and undertake on her word of honour that bona fide profit-sharing schemes will be reinstated as tax exempt? There is no logic in introducing clause 40 into the Bill without introducing the sort of scheme that I just mentioned. The Labour Government claim that they are no longer against fat cats. They hope that fat cats will vote for them. They claim that they want a stakeholding society. Yet when companies generate the very conditions that provide such a society, the Government, either through their inaction or action, work against them. That is hypocrisy, betrayal and spin of the worst kind.

Patricia Hewitt (Labour, Leicester West)

I draw the hon. Gentleman's attention to the commitment made in the Budget by my right hon. Friend the Chancellor, both to introduce new tax regulations for employee share ownership schemes, which will make it the most generously tax relieved form of employee share ownership in this country and to introduce a new enterprise management incentive, which is directed particularly towards new and start-up companies. We are more than fulfilling our pledge to promote stakeholding by employees.

Michael Fabricant (Conservative, Lichfield)

Will the hon. Lady give way?

Patricia Hewitt (Labour, Leicester West)

No. If the hon. Gentleman will forgive me, I would rather deal with the amendments to clause 40. It is fair to say that he strayed somewhat wide of those. As the hon. Member for Twickenham (Dr. Cable) said, clause 40 adds two new cases to the categories of shares that are specifically excluded from the special tax rules that were introduced in the Finance Act 1998. Those excluded cases are, instead, taxed in line with general tax rules. The amendment would make the change retrospective to last year. A similar amendment was tabled in Committee and was spoken to by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). I asked him to withdraw it on the ground that it would be wrong to present an unexpected tax bill to some employees. He agreed to do so on the basis of my statement to the Committee, which he described as "full, frank and helpful". I always seek to be full, frank and helpful. My concern at that time was that making the changes retrospective, while it would be beneficial for the majority, might result in some employees receiving a larger tax bill. That is because the value of shares can go down as well as up. If an employee had been awarded shares since 17 March 1998 that were subject to a risk of forfeiture that could not last for more than 5 years and the shares had fallen in value, the tax charge would, in the absence of retrospective exemption, be on a lower value than would be the case under general tax rules. In most cases, however, the opposite would apply: the shares would have increased in value and the employee would be better off with retrospection. Because of the possible risk that a few people might be worse off, it seemed better on balance not to make the clause retrospective. The debate in Committee was helpful and since then several advisers have shown us examples of cases where ordinary employees will be disadvantaged unfairly by the absence of retrospection. In one case, the directors of a company were offered shares subject to the risk of forfeiture in February 1998, before the special rules in section 140A apply. Any subsequent increase in the value of those shares will therefore be taxed as a capital gain. However, similar shares were awarded to all the employees of the company in April 1998. Those fall within the special rules of section 140A with the result that when they sell their shares the employees will have to pay income tax on any subsequent increase in their value. For most employees that will mean a real cost as the annual capital gains tax exemption would normally cover their gain. Therefore, the employees end up being treated far more harshly than the directors of the company who acquired their shares a month earlier. If the employees were awarded the same shares after Royal Assent, they would be covered by the exemption provided by clause 40 and would be treated the same as the directors. Therefore, employees who were awarded shares between 17 March 1998 and when this Bill is enacted would be treated more harshly than any employees receiving exactly the same shares both before and after those dates. We have also reached the conclusion that many of those affected will simply not be aware that they are in that unfortunate position. Therefore, like the hon. Member for Arundel and South Downs (Mr. Flight), I think that on this occasion there is a convincing argument that we should set aside our normal concerns about retrospective legislation and the problems to which it can give rise. I am therefore happy that we should adopt the common-sense solution which is clearly fairer to most employees. I am grateful to hon. Members and those advisers who have brought those cases to our attention and I am happy to accept the amendment.

PROVISION AND SUPPORT OF BUS SERVICES

Patricia Hewitt (Labour, Leicester West)

I beg to move amendment No. 3, in page 24, line 21, leave out 'large'.

Michael Martin (Deputy Speaker, Glasgow Springburn)

With this, it will be convenient to discuss Government amendments Nos. 4 to 12.

Patricia Hewitt (Labour, Leicester West)

These amendments deal with the minimum seating capacity for the works bus exemption and related matters. We had an extremely helpful debate on the subject in Committee and hon. Members raised various matters there on which I promised to reflect further. I have done so and these amendments are a consequence of that further consideration—further proof that this Government do listen and respond. Amendments Nos. 3 and 4 would reduce the minimum seating capacity requirement for the works bus exemption from 17 to 12. Several of the amendments moved in Committee sought to reduce our initial figure of 17. As I explained in Committee, the reason for a high seating test is simply to prevent the exemption being siphoned off, notably to family companies where husband and wife directors provide themselves with a large family vehicle, via the company, to take the two of them to and from work. There are tens of thousands of such companies. Such vehicles would normally be classed as cars and it is not the aim of the clause to change that in any way. The provision removes the tax charge where a works bus is used to transport employees between home and work; it is part of our green transport package. However, in order to avoid potential abuse, the bus in question needs to be clearly distinguishable from a car, so the minimum seating requirement needs to be large enough to act as a deterrent against using a larger vehicle to attract a tax break. A fine balance has to be struck between avoiding a perverse incentive on the one hand, and, on the other, meeting the aims of the many employers who genuinely want to provide a bus service that will get a significant number of employees out of their own cars and on to buses. Since the Committee stage, I have considered whether the 17-seat requirement could be reduced for works buses, and whether we could dispense with any seating capacity requirement for the public bus service exemption. As hon. Members will see from other amendments, we have indeed entirely removed the seating requirement for the public bus exemption. For the works bus, we felt able to come down significantly—by almost one third—to a minimum seating capacity of 12, which, I think, was the figure proposed in Committee by the hon. Member for Torridge and West Devon (Mr. Burnett). That does not reduce the minimum quite as far as was proposed in some of the amendments tabled in Committee. However, there would be a real danger of opening the way to avoidance, if a figure lower than 12 were adopted. None the less, the amendment, taken with the other relaxations that we have introduced, will go a very long way towards meeting the points that were made in Committee, and in representations to us. Amendments Nos. 5 and 6 deal with concerns expressed in Committee that the wording of the conditions about qualifying journeys in a works bus was too restrictive, and that some specific relaxation should also be introduced to enable children of employees to travel on the works bus without prejudicing the exemption. As I explained in Committee, the original wording would already have permitted some non-qualifying journeys, but concern was expressed in Committee about the use of the word "only" in relation to the qualifying conditions. The amendments retain the main thrust of the exemption—to exempt employees on their home-to-work journey from any tax on that benefit—but we have now expressed that, in amendment No. 5, in a main-use test for home-to-work journeys. We have removed the references to "substantial compliance" and to "only" about which some hon. Members were concerned. I hope that makes it clear that, provided the main-use test is met, a certain amount of other use of the service can take place without the exemption being lost—that is the key point. As regards children, within the main-use test provided by amendment No. 5, amendment No. 6 includes a specific reference to allowing the children of employees to use the bus. However, that does not involve any restriction of the opportunity for a limited amount of other non-home-to-work travel by individuals without the exemption being lost. Together, the amendments introduce a simpler and, I hope, more user-friendly concept of main use. As I have pointed out, amendments Nos. 7, 8, 9 and 12 remove any seating requirement for the public transport service subsidy, because the avoidance risk in respect of husband and wife directors, to which I referred, does not really apply to a public passenger transport service. We have decided that we can dispense with any minimum seating test. Amendment No. 10 responds to an issue that was brought to my attention in Committee by my hon. Friend the Member for Wentworth (Mr. Healey). He wanted to cater for situations in which, for example, bodies with particular experience in the transport sector, such as passenger transport executives, provide an intermediary service—brokering the necessary payment and transport arrangements with transport companies—on behalf of one or more employers. The amendment introduces a relaxation to the road service bus subsidy exemption, by removing the requirement that the subsidy, or other support, for the bus service must be provided directly to the operator of the service. Finally, amendment No. 11 arises from the consideration that I promised to give to an amendment proposed in Committee by the right hon. Member for Fylde (Mr. Jack). The issue is whether the condition in clause 45—that the service must be substantially used for commuting journeys only—is necessary in relation to the exemption for employer subsidies to public transport services. As I said in my reply to the Committee, under the transport subsidy exemption, employees have to pay the same fare as other passengers. In those circumstances, there is no need to be concerned about the number of occasions, in addition to the ordinary commuting journey, on which the employee otherwise uses the service. In reconsidering the matter, we see no further risk in making the change proposed by the right hon. Gentleman. I am happy to introduce an amendment to remove entirely the requirement for employees to use the public bus service substantially for home-to-work journeys. The amendments simplify and improve the package of measures announced by my right hon. Friend the Chancellor in the Budget to give significant support to the growing number of employers who are introducing green transport schemes and, hence, providing an incentive to other employers to follow that example. I commend the amendments to the House.

Howard Flight (Conservative, Arundel and South Downs)

After I was privileged to be elected as the representative of the citizens of Arundel and South Downs, the first business that I visited was a mushroom farm employing about 500 people. The business was in a rural area and many of the employees did shift work. They went through various business issues with me, and two major political points arose. The first was the subsidisation by the EU of mushroom farmers in Ireland, but the second was the advice from the Revenue that the bus service provided for the workers would be taxed as a benefit in kind to the recipients. In view of the hassle of assessing what the benefit in kind might be, it was felt that the company should stop providing the service. I wrote to the Treasury once or twice, before the present Economic Secretary was appointed. The responses that I received were not particularly encouraging, but the point of my preamble is to explain why I am delighted that the Government have introduced these measures. They are obviously common sense, if we want to cut down the use of cars in rural areas. The benefit in kind aspect is minimal, while the benefit to the rest of the community is substantial. My main comment is on amendment No. 6. It struck me that there could be occasional use by children, but not by spouses. I understand the explanation given by the Economic Secretary as to the purpose of that limitation, but it struck me that that might not be adhered to in practice. It might present a problem, if one spouse and the children—for whatever reason—needed a lift to the workplace of the other spouse. Secondly, such works buses could occasionally provide valuable help in rural communities, by giving a lift to old age pensioners; I am sure that, if there were space on the bus, such people could board it. I trust that such practical anomalies would not undermine the tax advantages of the whole scheme.

Nicholas Winterton (Conservative, Macclesfield)

My hon. Friend obviously knows his constituency remarkably well. Out of interest—I do not seek to score political points—and given the problems that the company might encounter, or the hassle to which he refers, are there other public service buses to carry out the service?

Howard Flight (Conservative, Arundel and South Downs)

I thank my hon. Friend for his question. The bus services are not adequate; it would be a nightmare for many of those individuals to get to work. There are substantial time gaps in the existing services, and many of the staff would have to stop working for the company. Others would have to travel by car, scooter or other forms of transport. The example that I have given is a high-employment rural industry that is currently prospering and it is a wholly suitable beneficiary of the Government's proposals. There must be many other such cases, especially in rural areas, where labour-intensive employment is sought. The rest of the amendments strike me as being fairly sensible, if occasionally slightly over-defined. We understand the underlying principle of avoiding exploitation of the concession by family companies, but if a 17-seat minimum is too high for the purposes of defining a bus, 12 seats is well in excess of the number found in a car. However, if a company were to use some form of dormobile, it is debatable whether 12 seats really means 12 seats. Amendment No. 12 appears to remove the definition of how the number of seats is counted, and I assume that that is done to permit a degree of practical flexibility in the matter. However, the essential point is that the amendments are welcome. It is good news that the Government have modified their original proposals to make them as practical and user friendly as possible. I trust that the general enforcement guidelines issued to the Revenue will reflect common sense.

John Healey (Labour, Wentworth)

I welcome the amendments, which make a good clause much better. I particularly welcome amendment No. 10, and I am grateful to my hon. Friend the Economic Secretary for responding so positively to my representations in Committee. Amendment No. 10 removes the restriction whereby tax relief is payable only on subsidies from an employer paid directly to a bus operator for services provided exclusively to employees of that company. Ensuring that that tax exemption may also apply to subsidies paid via a passenger transport authority will strengthen the hand of PTAs to broker new bus services that serve more than one employer. That is especially relevant to an area such as Rotherham, which I represent. Over two decades, we witnessed the destruction of the coal industry and severe damage done to our engineering, manufacturing and steel base by two deep recessions. The borough contains areas such as the lower Don valley and the Dearne valley which are now regeneration areas; they are strong on inward investment, but weak on public transport. Earlier this month, I met the recruitment manager of Ventura, which is a call centre that is currently investing in the Dearne valley and seeking to recruit about 4,000 employees during the next two years. She told me that the company had identified 200 unemployed people in the Dearne valley to whom it could not offer jobs because they did not have a car and so could not get to work. Good transport has a role to play in job regeneration. The clause, as amended, will allow PTAs and employers to play their part in achieving the aim that the Government have set for the clause, which is the encouragement of greener transport means.

Vincent Cable (Liberal Democrat, Twickenham)

I should like to express my support for the measure and, in the process, thank the Economic Secretary for her response to representations on the previous clause. I was so gobsmacked that the Government had listened carefully to the criticisms, talked to the practitioners and responded sympathetically that I did not rise as quickly and as graciously as I should have done to express my appreciation. That was a positive development. The season of good will appears to be upon us—we are being showered with presents and concessions. The current group of amendments is especially welcome. My hon. Friend the Member for Torridge and West Devon (Mr. Burnett) asked the Government to examine the definition of a bus. He asked Ministers to consider size—specifically, 12 seats—as a means of introducing greater flexibility; and to consider intermediate means of transport that fall between the full-sized bus and the car. I am glad that the Treasury has considered those matters and has acted positively. I unreservedly welcome this positive development.

John Horam (Conservative, Orpington)

I, too, welcome the amendments and I shall join my hon. Friend the Member for Arundel and South Downs (Mr. Flight) in making favourable comments about them. The measure before us is part of the Treasury's transformation into a much greener Department than it has hitherto been. I recall the Minister in Committee making a good case for actions taken in the Budget, and I recognise the amendment as part of that effort. Anything that encourages green transport plans is wholly welcome. As the hon. Member for Wentworth (Mr. Healey) said, they help in his part of the world, and they certainly help in rural areas. Jobs can depend on transport planning. May I enter one caveat—or one encouragement, to put it more mildly? The Minister is not only the Economic Secretary but the Green Minister in the Treasury, so she may have noticed that the Environmental Audit Committee, of which I am Chairman, published a report this week in which we pointed out that, Department by Department, the Government were not setting an especially good example in developing Green transport plans. When the Economic Secretary attends the next Green Ministers' meeting, will she make a favourable report on the reception given to the amendments by the House of Commons in this debate, and encourage Green Ministers in other Departments to follow her excellent example?

CYCLES AND CYCLIST'S SAFETY EQUIPMENT

Patricia Hewitt (Labour, Leicester West)

I beg to move amendment No. 13, in page 27, line 1, leave out from 'to' to end of line 3 and insert 'the condition that the employee must use the cycle or safety equipment mainly for qualifying journeys.'. While the House is in a happy mood of consensus on environmental objectives—which was far less obvious in our earlier debate on the fuel duty escalator—let us turn to amendment No. 13, which again simplifies the provisions relating to tax relief for cycling, which is another part of our green transport package. The amendment replaces the requirement that the tax exemption is available only if there is substantial compliance with the condition that the employee must use the cycle or safety equipment only for qualifying journeys with the condition that the equipment is used "mainly" for qualifying—that is, home-to-work—journeys. In other words, it does for bicycles what the previous group of amendments did for works buses. As I explained in Committee, there is no intention to withdraw the relief if the employee also uses the bike for private or leisure use. Provided that the bike is mainly used for the commuting journey, the tax exemption will remain. Of course, employers will not be expected to check up on their employees' other cycling journeys. In Committee, concern was expressed—notably by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale), who has since been translated into the Trappist position of Parliamentary Private Secretary to the Leader of the Opposition—about the apparently restrictive nature of the "substantial compliance … only" wording. Similar concern was expressed about the works bus exemption in clause 45. In the light of our amendments to clause 45, we thought that it would be helpful and welcome if we made a similar change to clause 47, to replace the "substantial compliance … only" formulation with a main-use test. That is what amendment No. 13 would achieve. On the subject of green transport plans in general, I emphasise that Her Majesty's Treasury does, indeed, have a green transport plan. It encourages employees to use bikes and buses to get to work, and the proof of its success is demonstrated by the number of bike parks used within the Treasury building. I commend the amendment to the House, in the certainty that it, too, will meet with an unreserved welcome.

Howard Flight (Conservative, Arundel and South Downs)

I support the amendment and, indeed, clause 47. As has been pointed out, the amendment applies similar common sense and fairness to cycling as the previous amendments did to bus transport. I cannot resist commenting that my hon. Friend the Member for West Dorset (Mr. Letwin) could not have spoken on this amendment without declaring an interest as a regular cyclist.

Oliver Heald (Conservative, North East Hertfordshire)

Does my hon. Friend think that it is rather shocking that, on such an important green issue, not a single Liberal Democrat is present?

Howard Flight (Conservative, Arundel and South Downs)

They have clearly got on their bikes. Interestingly, this measure will be used mostly in towns, whereas those that apply to buses will be most used in rural areas. It will be interesting to note to what extent the provision encourages bicycle transport in towns, because it amounts to a considerable tax perk. Companies will be able—as a result of the amendment, without too many strings attached—to give people bicycles on which to travel to work and to use privately. That may lead to a substantial increase in cycle transport in cities. Not having looked up the definition of a cycle, I wonder whether the measure will be wholly limited to pedal-driven vehicles, or whether it will cover any degree of petrol usage, as might pertain to the French velocette. I suspect that the former will be the case. We support the amendment and the clause, and are grateful to the Government for introducing it.

John Healey (Labour, Wentworth)

I, too, welcome the amendment. It improves a clause that is already innovative and an important departure from the past. The amendment loosens and improves the definition for tax-exemption purposes of what counts as bicycle use. My hon. Friend the Economic Secretary will be aware that the all-party cycling group, which is so ably chaired by my hon. Friend the Member for Exeter (Mr. Bradshaw), has pressed this point. I believe that it will very much welcome the amendment, which represents a more realistic reflection of the way in which people use bicycles, and will do much to encourage more people to take advantage of the tax break. I spent 10 years working in London without ever using the tube. I went everywhere on an old, sit-up-and-beg, single-speed boneshaker with rod brakes, which was worth a tenner, and would therefore not have benefited from the tax relief on capital cost under the clause. I used that bicycle for many non-standard work journeys—from C to D to E to F throughout central London—rather than just for the A to B, home-to-work journey every day. Will such use be covered by the provision as amended? I shall leave my hon. Friend the Economic Secretary with a point made by my hon. Friend the Member for Wimbledon (Mr. Casale) in Committee. If the measure is to have the intended impact, people must know about it. I urge my hon. Friend the Economic Secretary and her colleagues in government to give serious thought to promoting this important and innovative tax change.

Nicholas Winterton (Conservative, Macclesfield)

I rise not as a dissenting voice in the harmony across the Chamber, but merely to solicit some information. My hon. Friend the Member for Arundel and South Downs (Mr. Flight) was, as ever, gracious in the way in which he responded to the Economic Secretary, but he did not ask the question which I thought he was about to ask. I am aware that some pedal bicycles are fitted with a small auxiliary petrol engine, which can be incorporated into the pedal power of the cycle when an adverse gradient is encountered. I do not know whether such a mechanism automatically switches on or whether the rider must activate it.

John Healey (Labour, Wentworth)

rose—

Nicholas Winterton (Conservative, Macclesfield)

I am very happy to give way to the hon. Gentleman, who knows far more about these things than I.

John Healey (Labour, Wentworth)

Perhaps I can help the hon. Gentleman. He is referring to what in France is called the velosolex, to which the hon. Member for Arundel and South Downs (Mr. Flight) referred. It is activated with a lever and a clip. When one wants to lower the engine on to the wheel, one does so manually.

Nicholas Winterton (Conservative, Macclesfield)

It is at times like this that the House is at its most informative and helpful. I thought that my hon. Friend the Member for Arundel and South Downs, whose knowledge on matters financial I respect, was about to ask whether such a pedal cycle would be included under the amendment. I hope that the Economic Secretary is listening; as ever in this House, I am trying to be helpful. Is the hon. Lady listening?

Patricia Hewitt (Labour, Leicester West)

Yes.

Nicholas Winterton (Conservative, Macclesfield)

Can the hon. Lady give me an answer to the question whether such cycles will be covered under the amendment which she so articulately and courteously moved? I see that those in the Box have quickly provided the answer—at least I hope they have.

Patricia Hewitt (Labour, Leicester West)

I must confess that I had not anticipated a debate about the meaning of the word bicycle, but clearly I should have done so. Perhaps it would assist if I drew attention to section 192 of the Road Traffic Act 1988, in which a cycle is defined as a bicycle, a tricycle, or a cycle having four or more wheels, not being in any case a motor vehicle". Therefore, I must disappoint the hon. Member for Arundel and South Downs (Mr. Flight) on the issue of velocettes or whatever. A bicycle that is powered by a motor would not qualify under the definition in the 1988 Act. Should the single market in power-driven bicycles take off, this is no doubt a matter to which we will return in a future Finance Bill debate. My hon. Friend the Member for Wentworth (Mr. Healey) raised the question of non-standard journeys. Perhaps I can reassure him that, so long as the journey or any combination or element of it is related to work, the benefit from the cycle will not be taxable and the exemption will indeed apply. My hon. Friend also rightly raised the issue of publicising the tax exemptions that we are giving to green transport plans. We shall certainly be working with green organisations and cycling bodies particularly, as well as with employers' and employees' organisations, to ensure that people receive full information and are encouraged to take advantage of the exemptions. The hon. Member for Arundel and South Downs referred in our earlier debates to the flourishing mushroom factory in his constituency. Perhaps I may be forgiven for saying that we hope that as a result of this package, green transport plans will also mushroom.

RELEVANT DISCOUNTED SECURITIES

Barbara Roche (Labour, Hornsey and Wood Green)

I beg to move amendment No. 15, in page 35, line 27, leave out 'sub-paragraph (2)' and insert 'the following provisions of this paragraph'.

Barbara Roche (Labour, Hornsey and Wood Green)

Clause 61 is designed to prevent avoidance of tax through an artificial scheme that exploits a feature of the definition of a discounted security. The effect is that a discount on a security which should be taxed as income over the lifetime of the security is charged only as capital gains tax and only when the security is disposed of or redeemed. The clause changes the definition of a discounted security so that it will no longer be possible to use that device. The Government received a number of representations expressing concern that the clause went too far and would catch securities for which any discount that arises is small in absolute terms and obtainable only in the case of an event that is outside the control of the parties to the security. We listened carefully to the industry and examined the representations. As I said in Committee, we recognise that clause 61 might catch some securities where it would not be appropriate to do so. We therefore published, during the Bill's passage through the House, draft amendments for consultation, and we have received comments from practitioners. The amendments before the House are slightly different from those published in draft form and take into account our considerations following the representations that we received. The amendments would target the clause more closely on the objectionable transactions. They deal with the concerns expressed about the current version of the clause, without reopening the possibility of the avoidance at which the clause is aimed. I commend the amendments to the House.

Howard Flight (Conservative, Arundel and South Downs)

The amendment, which we welcome, is yet another example of the result of over-zealous but somewhat sloppy initial attempts to introduce tax avoidance measures. The original proposals aimed to close a loophole through which bonds had been issued which offered a redemption premium in place of interest payments, and which had previously escaped the relevant discount securities regime. However, the proposals went much further and would trigger what is known as the Spens clause. I should declare an interest at this point. I have some knowledge of bonds because I ran an investment management business for 25 years. There are unit trusts holding some £12 billion of bonds which, under the original proposals, could have found that their capital gains were assessed under income tax rules, and that would have affected hundreds of thousands of small investors. As the Financial Secretary pointed out, the amendments serve—as was the original intent—to exempt from the anti-avoidance measure the Spens clause arrangements where redemption premiums can be paid at the issuer's option, in circumstances in which the owner can have no influence over that, except in cases of connected companies. Various learned tax lawyers and the financial services industry generally take the view that the amendments reflect the Government's original intention. We therefore welcome them. However, although it can be difficult initially to focus anti-avoidance measures so that they will not cause injustices way beyond their intended effects, we should like to think that in future there will be a greater effort to get such measures right first time.

Nick St Aubyn (Conservative, Guildford)

I thank Ministers on the Treasury Bench for finally getting their act together on this complicated issue. Why are they prepared to go to such lengths to make sure that these anti-avoidance provisions are sufficiently finely honed to deal with the mischief about which the Government were originally concerned, when last night, in the case of the sale of trust interests for capital gains tax purposes, they introduced a very crude anti-avoidance measure? It was so ill-thought-out—

Nick St Aubyn (Conservative, Guildford)

No, I do not mean to do so, Mr. Deputy Speaker. However, we need to know why the Government are now making such an effort while in that case they were prepared to breach the terms of their own code for fiscal stability by not adhering to the cardinal principle of tax neutrality.

Barbara Roche (Labour, Hornsey and Wood Green)

It always pains me considerably to break the mood of consensus and all-party support, but I must do so. As the hon. Member for Arundel and South Downs (Mr. Flight) knows, because this is an anti-avoidance measure and substantial amounts of taxpayers' money are at stake, it would not have been appropriate to issue draft clauses for consultation before the measure came into effect. However, because this Government listen and develop our policies properly, the Finance Bill process allowed us to consult on the details of the measures and to make improvements. In the gentlest way possible, I say to the hon. Gentleman and the hon. Member for Guildford (Mr. St. Aubyn) that the amendments and the clause complete yet more unfinished business left to us by the previous Conservative Administration. They will know and appreciate that we have had to deal with the deficiency of definition in the Finance Act 1996.

Nick St Aubyn (Conservative, Guildford)

Will the hon. Lady give way?

Barbara Roche (Labour, Hornsey and Wood Green)

No. I say to the hon. Gentleman exactly what I said to him in Committee: in 1996, 200 amendments on this matter were tabled two days before the debate in the House, and the Conservative Government had to vote down a clause. I have great pleasure in commending the amendments to the House.

ECONOMIC AND MONETARY UNION: TAXES AND DUTIES

Francis Maude (Conservative, Horsham)

I beg to move amendment No. 31, in page 90, line 6, after '122.', insert '(1)'.

Francis Maude (Conservative, Horsham)

I am grateful to the Financial Secretary, who is now departing the Chamber, for breaking our spirit of consensus, because that saves me the effort of doing so in this debate. That spirit could not last for ever. We move the amendments because we regard the clause as profoundly unsatisfactory. The principle that we seek to serve through the amendments is a clear one. It is to ensure proper accountability by the Government in all of their spending. Nowhere is that need clearer than where the Government have pledged to spend an unspecified quantity of taxpayers' money in pursuit of British membership of the single currency, or the euro. That is the proposal that is contained within clause 122. It empowers the Commissioners of the Revenue and of Customs and Excise to spend money to prepare systems in advance of any political decision by the House or apparently even by the Government, let alone by the people, to join the euro and to scrap the pound. Systems can be prepared well before there is any question of there being a referendum, when people will have the choice whether they want to scrap the pound to join the euro. When there is uncontroversial legislation, Departments will often spend some money in advance of a formal decision being taken by the House. However, there is no comparison between that traditional arrangement and the device that is being proposed in clause 122. Quite simply, the clause allows any amount of public money to be spent in advance of a decision following a national referendum, let alone of Britain actually joining the single currency.

John Healey (Labour, Wentworth)

How much would the right hon. Gentleman regard it as acceptable for the Inland Revenue to spend before a national referendum?

Francis Maude (Conservative, Horsham)

Questions about how much it is acceptable to spend should not be addressed to me. The Opposition have repeatedly asked what sums of taxpayers' money the clause allows the Government to spend. It is a blank cheque because no amount is specified. No estimate has been put before the House. The hon. Gentleman would do better to intervene when the Economic Secretary rises to reply, to ask her how much taxpayers' money she is proposing to shell out on this project without the people having had any chance to adjudicate on whether they want it to be implemented. As the Government's turmoil over the single currency in the past month shows, the result of any referendum is no foregone conclusion, although that is what the clause is designed to try to achieve. The Government's natural inclinations show through in a measure that is oblivious to public opinion and wasteful of public money and that cocks a snook at democracy. I suppose that it is the natural solution for a Government who hope that the state can steamroller its way through public opposition into a project which few people in Britain seem to want. As the Prime Minister was forced to admit recently, hardly anyone in the country wants the project. Above all, we see a pretty cowardly attempt to encourage businesses to do the dirty work of persuading people to want to scrap the pound. In what is no more than a charade now, the Government hide behind the five economic tests that they set out nearly two years ago and delay the day when they must make a public decision. The experts are more and more doubtful whether those tests mean anything. Mr. Buiter of the Bank of England's Monetary Policy Committee has said: Except through a fluke, the UK will not join EMU at a time when the business cycles … are synchronised. The requirement or condition that the British economy should be synchronised or converged cyclically with the continental economies is a fundamental condition for Britain joining the euro. Yet here we have a Government-appointed expert saying that that will not happen. The Deputy Governor of the Bank of England, Mr. Mervyn King, recently commented: You would probably need 200 to 300 years of data. You will never arrive at a point when you will be confident that the cycles have converged. I am referring to experts who have been appointed by the Government. They make it obvious that any decision to join the single currency that is taken by the Government will not be based on certain economic conditions being fulfilled. On the most important one of all—cyclical convergence of the economies—the Government's experts at the Bank of England say that, effectively, that will never be met. That is the clearest sign that, if they find themselves in the position to do this, the Government will fudge the conditions and move ahead anyway, which is what they want to do. That is why the Government are apparently willing to start spending money on preparations for Britain to join the euro. They wish to soften up the electorate now while maintaining that there is an economic tripwire in relation to the conditions. That tripwire does not exist.

Geraint Davies (Labour, Croydon Central)

Is the right hon. Gentleman aware that the National Audit Office audits the accounts on an annual basis? What is more, the appropriation accounts focus specifically on areas where there might be difficulties of change. Therefore, the amendment is completely redundant. Can the right hon. Gentleman give any particular reason why the expenditure that we are discussing, which will be transparently reported by the NAO in two sets of accounts, should be the subject of yet another layer of bureaucracy and extra costs for his own party political reasons?

Francis Maude (Conservative, Horsham)

If that is all the case, that is a powerful reason for the Government, if they are genuine in their desire to be open about these matters, to accept the amendments. They will then be incorporated in the Act, as it will then be, and the requirement will be there. However, the House is being asked, effectively, to sign a blank cheque. We think that that is wrong. If, as we contend, the process is being handled wrongly, a proper requirement for full auditing and for full transparency on a six-monthly basis would seem to be the least that the House, in pursuit of its historic task of controlling expenditure, should require the Government to agree to. I hope that the Economic Secretary has heard the point made by the hon. Member for Croydon, Central (Mr. Davies) and will be persuaded by him that there is no problem in accepting the amendments.

Geraint Davies (Labour, Croydon Central)

The amendments are about reporting, not limiting, the cost. I am contending that the cost is reported in any event. Therefore, the amendments are unnecessary and we should get on with business.

Francis Maude (Conservative, Horsham)

It would be advantageous in those circumstances for the amendment to be included in the Act so that there is an additional form of scrutiny. There is no way otherwise of exercising any control over the amount that the Government spend. The hon. Gentleman may be happy to tell his constituents that, in his great role as a Member of this place, exercising his historic role of controlling the Government and controlling public expenditure, he sat on his hands and thought that it was fine to write a blank cheque for the Government to spend. He may think that, but we do not.

Geraint Davies (Labour, Croydon Central)

Will the right hon. Gentleman give way?

Francis Maude (Conservative, Horsham)

No. The hon. Gentleman has made two silly points already. He may want the opportunity to make a fool of himself again, but the House will wish to proceed. There is every sign that the Government are happy to pick taxpayers' pockets to fund a measure that taxpayers patently do not support. There is no sign of Ministers being willing to commit themselves publicly either to the single currency or to an early referendum. I suppose that we should not expect an answer from the Prime Minister. He is rather like a first world war general. He is happy to push his colleagues over the top into the line of fire but is pretty reluctant to get tangled up in the barbed wire himself. General Blair is comfortably ensconced in his chateau ordering his faithful troops to clamber over the barbed wire when he blows the whistle. Not a peep from him, be it noted, until it comes to trying to trumpet and spin his new sceptical image on the single currency. Just the other day, he said that it was "daft" to consider entry straight away. 7.30 pm Should we believe the Prime Minister's official spokesman, who said: The Prime Minister does not feel there is any need to persuade people to make a decision that does not yet have to be made"? That was quite instructive. Why, then, do the Government ask the House to approve expenditure—to sign a blank cheque—in relation to a decision that the Prime Minister says does not have to be made yet? It is extraordinary. How persuasive is the Government's case to allow the Revenue or the Customs to spend public money, if the decision for which they are preparing does not, according to the Prime Minister, have to be made yet? Perhaps we should turn to the Leader of the House for elucidation. She said recently that the referendum might not be called even in the next Parliament. Is that the official position? It rather looks as though those may turn out to be her famous last words. The confusion might be laughable, if those were not the people supposedly running the country. A week or so ago, the Secretary of State for Trade and Industry said about the organisation Britain in Europe, which is campaigning for Britain to join the single currency, that because they"— Britain in Europe— have changed their position the Prime Minister can endorse their programme. That was all part of the web of confusion that the Government were so sedulously spinning, but it turned out not to be the case. The noble Lord Marshall, the chairman of Britain in Europe, said immediately afterwards: We are not backing off the euro at all. Clearly, the confusion runs far and wide. Around the same time, the Prime Minister's famous official spokesman commented: I don't understand the purpose of Britain in Europe. Is its campaign about Britain in Europe, or is it saying it's the start of the campaign to join the single currency? The two things are entirely different. He spotted that, anyway. The two things are indeed entirely different. What is puzzling is why he is so confused about the purpose. All that he needs to do is open the pamphlet issued by Britain in Europe and he will see there, as large as life and spelled out in words of very few syllables, that Britain in Europe is the campaign to persuade the British public that they should agree to scrapping the pound and joining the euro. All the confusion has not impressed people in Britain in Europe. They said: We intend to press ahead with our campaign"— for Britain to join the euro— and we don't intend to hold back for anyone".

Chris Leslie (Labour, Shipley)

I am grateful to the shadow Chancellor for giving way. He is trading statements, comments and quotes. What is his reaction to the comment It would be completely crazy and contrary to the national interest to throw away our option to join the single currency", especially as it was made by the hon. Member for Grantham and Stamford (Mr. Davies), his colleague on the Front Bench? What is his reaction to that?

Francis Maude (Conservative, Horsham)

A warm endorsement of our policy, which is not to throw away the option. The point that the hon. Member for Shipley (Mr. Leslie) has not got into his head is that the Prime Minister's and the Chancellor's policy of dragging Britain into the euro by stealth at the earliest opportunity is the policy that gives up the option. Once we have scrapped the pound and gone into the euro, we have no options at all, because the decision is irrevocable. As long as we stay out of the euro, we always have the option. That is why our policy has always been the pragmatic policy. The dogmatic policy is the Chancellor's policy, which states that the Government are dogmatically committed in principle to Britain joining the euro. As soon as Britain joined the euro, if that were allowed to happen, the option would be gone. That is why the statement that the hon. Gentleman feels so clever for having quoted actually supports our policy.

Andrew Love (Labour/Co-operative, Edmonton)

I thank the right hon. Gentleman for giving way. He mentioned the organisation Britain in Europe. Some of the best-known members of his own party are prominent in that organisation, and I note that they are not present in the Chamber this evening. Is not the Conservative party deeply split on the issue?

Francis Maude (Conservative, Horsham)

If that is the best that the hon. Member for Edmonton (Mr. Love) can do, I suggest that he remains in a sedentary position. Whichever of those apparently non-committal statements we prefer to believe—or none of them, in my case—the lack of leadership offered by the Government on the issue hardly makes a pressing case for the House to agree to the spending of money—the writing of blank cheques—that we are asked to agree tonight. The national changeover plan—the handover plan—gives the game away, by showing that what we are being asked to do is not necessary. I refer the House to figure A in the changeover plan at page 18, which sets out a time line or critical path for Britain to scrap the pound and join the euro. It shows the various points: decision; referendum; UK joins; euro cash issued; and the end of the process, when the pound is finally scrapped. There is a nice blue bar showing which process must start at which point. There is a bar marked "public sector", which I assume includes the Inland Revenue and Customs and Excise. That blue bar does not start now. It does not even start at the point at which the decision is made. The bar starts when a positive decision is made in a referendum. Even if there were a rock-solid certainty that there would be a decision to join, which there patently is not, we do not need to contemplate the matter now. The Government's own document makes that clear. It is not as though there is nothing before the point of decision. There is a nice blue bar showing that there must be legislation before the referendum. The banks would have to make preparations before the referendum, but there is nothing in the figure about the Inland Revenue and Customs and Excise. It is all there, in the public sector. According to the Government's own document, nothing needs to be done until there is a positive decision in a referendum.

Nigel Griffiths (Labour, Edinburgh South)

I remember the right hon. Gentleman saying in 1997 that he would make it clear to his constituents that he would oppose any legislation to adopt the euro. Has he now changed his mind?

Francis Maude (Conservative, Horsham)

What I am doing today is opposing legislation to adopt the euro. I do not know how I can make it clearer than that. We think that the measure is wrong. We think that the Government should not be asking the House of Commons to sign blank cheques and to force the taxpayer to spend money. If there is not a decision to join the euro—the Prime Minister himself accepts that hardly anyone believes that we should—that money is wasted money. We have still had no answers from the Government about how much money is involved. We have still had no answers about how many schools will not get their extensions, and how many wards will have to be closed down to pay for this utterly unproductive expenditure on which the Government are so keen. When the Economic Secretary replies, I should be interested to hear her explain the fact that the graphic in the Government's document makes it clear that there is no case for the measure that the Government propose. That graphic seems to have escaped the attention of the spin doctors. It lets the cat out of the bag. It makes it clear that there is no basis for the measure. Not surprisingly, given how distant the Government are trying to make the possibility of a referendum appear, the Prime Minister has been a bit woolly about how much money the Government would spend. In his statement on the national handover plan on 23 February, he referred to the Inland Revenue and the Customs, saying: They may need to spend some money prior to a referendum to make their information technology systems euro-compatible". He moved on to give us an idea of how much "some money" is, saying: such expenditures … will amount to some tens of millions of pounds spread over a number of years. Will the Economic Secretary tell us today whether the measure that we are being asked to agree to amounts to tens of millions of pounds? If so, how many tens of millions? She must have some idea. I cannot believe that Treasury Ministers would ask the House of Commons for approval to spend money without having any idea of how much would be spent, but our questions are met with a deafening silence. The Government are absolutely sure that agreeing to the measure is the right thing to do, but they cannot tell us how much that will cost. They have not quantified the benefits of Britain joining this effort, and they cannot tell us how much that will cost. Not a flicker of an effort has been made to cost the costs and quantify the benefits. How do they expect to persuade anyone that this is a good project for the country when the Government cannot even get to that point?

Chris Leslie (Labour, Shipley)

Will the right hon. Gentleman give way?

Nick St Aubyn (Conservative, Guildford)

rose—

Francis Maude (Conservative, Horsham)

I shall give way to my hon. Friend the Member for Guildford (Mr. St. Aubyn). [Interruption.] The hon. Member for Shipley made such a poor fist of his previous intervention, I am saving him from embarrassment.

Nick St Aubyn (Conservative, Guildford)

Does my right hon. Friend agree that the Prime Minister's readiness to tell businesses and taxpayers to reach into their pockets to spend money preparing for the euro contrasts starkly with his refusal to spend any of his own time promoting the project?

Francis Maude (Conservative, Horsham)

That is an absolutely fair point. The Prime Minister is keen to get other people to make the running because, although he and the Chancellor are absolutely committed to the project, to dragging Britain into the euro and to scrapping the pound by stealth—no one should be under any illusions about that—he is reluctant to put his head above the parapet because he understands that hardly anyone wants the euro. He has admitted that himself. The Prime Minister makes the large claim that, "It's only tens of millions of pounds. That does not matter, it's just a rounding error." He justifies it by saying: The Government will be making active preparations for the euro, in the belief that it will be in this country's interests to join in the future should our economic tests be met. We have already seen that those tests are bogus because the Government's own experts have accepted that the principal test will never be met. He went on: Business should start to do the same."—[Official Report, 23 February 1999; Vol. 326, c. 181.] He seems to have overlooked the rather important difference between his Government's lavish spending plans and the day-to-day fight that many businesses face to survive against increasing regulation and mounting stealth taxes, which his Government are imposing weekly. The Prime Minister seems to forget that, while 100 per cent. of small businesses pay the rising taxes that fund those spending plans, only six out of every 100 small businesses said that the euro would affect them a great deal and 46 per cent. said that it would not affect them at all. The big difference is that, although businesses have to budget carefully to remain in business, the Government think that they can throw money at the political problem, because the Prime Minister does not have the courage to take a lead on an issue that he knows is unpopular. He is trying to buy his way out of that with taxpayers' money, which is a case of, "Do as I say, not as I do." That cannot be right—not when the funds needed to prepare for economic and monetary union may outstrip the cost of dealing with the millennium bug by as much as 5:1. Whereas the millennium is at least foreseeable, the Government seem to be doing their best to spin an opaque web of disinformation around their own position. Why should business spend money to prepare when they refuse to give a coherent lead? Why should the taxpayer and the small business man bankroll a Government who are so unwilling to give a forthright lead? It has been estimated by Lloyds TSB that those preparations will amount to £2,000 for every small business in the land. For many, that money will not be an investment with any prospect of payback—46 per cent. of small businesses say that the euro would not have any impact on them at all because they are United Kingdom-based. After all, 83 per cent. of Britain's national output is not sold in the eurozone at all—it is sold either here in Britain or elsewhere in the world—but the costs of preparing will fall on 100 per cent. of British capacity. 7.45 pm There is little sign from the plan that the Government understand the demands of business. It talks blithely of how small businesses may have to take on extra staff to help the elderly to meet the challenge of the changeover, but small businesses cannot afford to take on more staff—certainly not with the cost and complexity of employing people increasing so rapidly under this Government. That is one reason why businesses are small. The document's open advocacy of EMU is unfeigned. Talking, supposedly dispassionately, about the engineering sector, it says that 50 per cent. of all engineering exports are to the EU. Historically, the sector has been vulnerable to fluctuations in the value of sterling. What does that have to do with the changeover? The answer is nothing; it is just a party political broadcast on a supposed benefit of EMU. It is quite clear that, if the national changeover plan—which pretends to have foresight of which Nostradamus would have been proud—cannot avoid being political, we have every right to question the latest Government proposal to help to drag the United Kingdom into the single currency.

Chris Leslie (Labour, Shipley)

Will the right hon. Gentleman give way?

Francis Maude (Conservative, Horsham)

No, I shall make some progress now. It is time that the Government started to tell the truth about the real costs of joining the single currency. According to one survey, the real costs for businesses of changing are turning out to be 10 times higher than the European Commission predicted. That is surprising. We believe that it is absolutely right that the Government should account for their own spending and should come clean about what those costs will amount to and what the money will be spent on. It is also time that the Government came clean about some of the constitutional issues involved in the decision.

Geraint Davies (Labour, Croydon Central)

Will the right hon. Gentleman give way?

Francis Maude (Conservative, Horsham)

I shall give the hon. Gentleman another chance.

Geraint Davies (Labour, Croydon Central)

As I understand it, the right hon. Gentleman's position is to keep his options open and, at some point in the future, he could conceivably put to the British people the question whether to join the single currency. Would it be wise to make some preparations for the contingency of joining or should we put the question to the British people with no hope of business and the public sector being prepared for the tremendous changes that we might see? Would he let the British public down in such a way or would he prepare?

Francis Maude (Conservative, Horsham)

The hon. Gentleman is clearly the sort of chap who starts building a house before he has even applied for planning permission. It is mad to start spending money on an eventuality that the Prime Minister himself admits people do not want to happen and which cannot happen unless most people agree in a referendum that it should. Even the Government admit that, so it is crazy to start wasting money, which is scarce. The public services and businesses need it to create new products, services, jobs and wealth, but the Government think that it is fine to spend in such a way. If the hon. Member for Croydon, Central looks at the time lines set out in the document, he will see that there is a considerable period between a decision being made in a referendum and the United Kingdom joining.

Geraint Davies (Labour, Croydon Central)

Will the right hon. Gentleman give way?

Francis Maude (Conservative, Horsham)

No, because plenty of other hon. Members want to speak in the debate. I have given way a great many times and I want to make progress. The fact is—[Interruption.]

Francis Maude (Conservative, Horsham)

If the Government do not want to call a referendum to test public opinion, they should not be asking the House of Commons to agree to spend taxpayers' money, either on departmental preparations or on the changeover plan. Our proposal offers a simple precaution: the Commissioners of the Revenue and of the Customs should account for every penny that they spend to get ready for EMU every six months, as long as the position remains as it is. On such a controversial political issue, is it not right that taxpayers should have the right to know in detail how much of their money is being spent on the project—in arrears, at any rate? If the Government are not honest enough to set that out in advance—when they are asking for the money to be spent—we should know how much is being spent on this project, which most people do not want. Surely that is part and parcel of proper scrutiny in a parliamentary democracy. In an age in which it is claimed that government have learned some lessons from business, it is surely right that the Government should set themselves some budgetary limits. There is a good reason why the Government want to spend so much public money so far in advance of a referendum. They want to prepare to scrap the pound and drag Britain into the euro by stealth. They want to sap opposition to their plans through a vast state-sponsored spendathon, and to spend so much taxpayers' money that a headlong rush into EMU becomes the only plausible option. That is arbitrary government, not parliamentary government. That is why we have opposed, and will continue to oppose, the national changeover plan as a ploy dressed up in the language of prudence. We shall continue to press the Government to sign up to the Neill report, which is of direct relevance to these provisions. They have shown a remarkable reluctance to sign up to the recommendations of Lord Neill and his committee. We should remind the House of one of his principal conclusions. The committee said: The Government of the day in future referendums should, as a Government, remain neutral, and should not distribute at public expense"—

Francis Maude (Conservative, Horsham)

I shall move on to my final remarks. There is a direct parallel with the Neill committee's recommendation. The Government are spending money without parliamentary authority to make the drive towards scrapping the pound inevitable. It is wrong for the Government to be involved in the campaign using taxpayers' money, as they have done. It is wrong from them, in this clause, to spend taxpayers' money, which will be utterly unproductive if the British people decide that they do not want to go into EMU. The Government want the so-called national changeover plan to be a national handover plan. We oppose the sleight of hand that goads business into spending money on something on which the Government will not risk their popularity. Their leadership on the single currency is leadership from behind. Proper accountability is the responsibility of any democratic Parliament, especially the House of Commons. The amendment guarantees proper scrutiny, and is in line with the conclusions of the Neill committee, on which the Government have promised they will act. I commend it to the House.

Vincent Cable (Liberal Democrat, Twickenham)

I am a little mystified about the purpose of the debate. We have been given a half-baked analysis of EMU—a few throwaway lines about the problems that it presents—and an equally half-baked analysis of the scrutiny process and the constitutional issues. We are not focusing on either subject properly. There is a genuine issue of constitutionality in relation to the preparations, and it should be dealt with openly and transparently. When we debated this matter in Committee, the shadow Chief Secretary raised some technical points about the constitutional nature of expenditure commitments. As I am not a constitutional lawyer, I do not know whether he was right or wrong. The shadow Chancellor did not persist with those points. I do not know whether it was because they have been answered, but we need to focus on that aspect. We need a proper analysis of the constitutional position, and that is why I surprisingly supported the request of the hon. Member for Stone (Mr. Cash), among others, for a constitutional White Paper dealing with EMU in general and preparations in particular. It is quite wrong for the Shadow Chancellor, to say that there is no mechanism for scrutinising this expenditure. As has already been said, the National Audit Office, the Select Committee on the Treasury, European Standing Committees and the Chancellor of the Exchequer's committee on EMU preparation, on which I sit and which has been convened precisely for that matter, exist for that purpose. I hate to remind members of the Conservative Front Bench that they were invited to sit on that committee. They procrastinated for three months: they put forward a name and then withdrew it. That committee is now meeting, and it has been fruitful.

Francis Maude (Conservative, Horsham)

Our position has been misrepresented before. When that Committee was being set up, we ascertained that it would not be involved in preparations for Britain to scrap the pound and to join the euro, and would be concerned solely with preparations for Britain to deal with the euro from outside while retaining its own currency. We thought that function wholly appropriate, so we nominated someone for the committee. However, we do not want to be involved in a process that we think quite improper until the British people have decided that they want to join the single currency. That is the time at which preparations should be made. One does not wheel the wagon half way across the river before asking the passengers whether they want to get to the other side.

Vincent Cable (Liberal Democrat, Twickenham)

I do not understand what impropriety is being committed, because the euro preparations committee comprises not only people who, like me, believe that Britain should be a member of EMU, but some fairly severe Euro-sceptics from Northern Ireland, who do not feel at all uncomfortable about sitting on that committee. It provides a forum. I have asked the chairman of the committee to prepare documents and to obtain from the Treasury detailed information on this preparatory process so that we can review it critically and perform a scrutiny function. Members of the Conservative Front Bench, whatever their original reasons, are missing a perfect opportunity that Parliament has provided. To get back to the nub of the point, the objection seems to be that the Government should not engage in contingency planning for something that has not yet been approved by the British people in a referendum. That is irrational. The public and private sectors, in their different ways, engage in contingency planning: often very expensively. The defence budget is a form of contingency planning against events that we hope will never happen but for which we must be prepared. As I said in Committee, I know from my private sector experience that many companies in the energy and property sectors spend large amounts of money purchasing options on future investments that they may never make. That is good commercial practice. We are confronted with a decision that we all agree—whether we are for or anti—is probably the most important that this country must make, and it should be taken well and in the full knowledge of what is required.

Desmond Swayne (Conservative, New Forest West)

Is not that the thrust of these amendments? They would allow us to scrutinise what is done with full knowledge. The hon. Gentleman seems to suggest that that scrutiny function should be carried out solely by his small committee. It should be undertaken by the whole House, as the amendments require.

Vincent Cable (Liberal Democrat, Twickenham)

That small committee would be larger in significance and number if the hon. Gentleman and his colleagues joined it. We could have many other scrutiny mechanisms. There is no justification for stopping sensible forward planning and contingency planning. Other points, which were thrown into the debate off the cuff and not as part of a coherent theme, related to the economics of EMU. I was surprised that the Conservative spokesman quoted in defence the views of Professor Willem Buiter, whose articles I have read. Professor Buiter is an independent-minded member of the Monetary Policy Committee, and has gone out of his way to argue—as distinct from the Governor of the Bank of England—that Britain should be a member of EMU and, moreover, that it is likely to succeed. That is a different position from the one that the right hon. Member for Horsham (Mr. Maude) has taken, so it is an odd choice of witness. The other point of substance that the right hon. Gentleman made, with which I partly agree, is that there must be a proper test of economic readiness to join. We all agree on that. I am not arguing for entry tomorrow. It must be on the right terms and conditions, the most important of which is the exchange rate, which is not one of the five tests at present. It is not correct to say that it is absolutely necessary to have complete cyclical convergence. There is no reason why that should be achieved. We should converge at the same low level of inflation, which is broadly what has happened, and our cycles should be broadly compatible, but the myth has been perpetuated that the British cycle is different from that of continental Europe. It has been since 1990, when German reunification created a divergence of our economies, but throughout much of the post-war period the British and German economies have moved in parallel, and there is no reason why that should not resume in a few years' time. The purpose of the debate is not to discuss the pros and cons of EMU: I am happy to join in that debate at any other time. It is about parliamentary scrutiny. It is right that the Government should make prior preparations, and it is right that that should involve certain expenditure and should be scrutinised, and we have a mechanism for that. I agree with the Conservative spokesman on one point. He is right to say that the private sector is being invited to take substantial risks. It is being invited to make preparations without being given the clarity that I would expect. It is unfortunate that we have not already had a referendum, although that is water under the bridge. I feel that the Government must be clearer and more forthright about where they are heading, about their commitment to join and about the timing. On that if on nothing else, I agree with the right hon. Gentleman.

Sir Peter Lloyd (Conservative, Fareham)

I strongly support the amendment. My right hon. Friend the Member for Horsham (Mr. Maude) put the case for it very well, especially in making the point that there is no real need to rush spending before the referendum. Figure A and the chart on page 35 of the changeover plan seem to endorse his view. Certainly, the amendment does not ask for very much; it simply asks for information, so that Parliament and the public can know how much the Inland Revenue and Customs and Excise are spending on preparation for our joining the single currency. The single currency is a matter of growing public interest. In some it generates enthusiasm, as for an exciting new dawn; in others, it generates certain conviction that it will bring us no good. In most, however, it probably generates puzzlement and apprehension, as it becomes plainer that it is they who, in due course, will have to pass judgment, and say yes or no to the question of our actually joining. The Finance Bill would give the Government authority to spend whatever money they thought fit to prepare the Revenue and Customs and Excise for the possibility that the answer will be yes. Because there is apparently no ceiling to that expenditure, the Government should surely, at the very least, keep a running total of what they spend, and then let the country know at regular intervals how much they are spending and on what. This is not to deny the desirability of the Government's laying plans for our possible entry into the euro. As it is for the people to decide the matter by way of referendum, however, the Government should so organise themselves that the costs of joining are made clear, and the work that must be done to give effect to a yes vote is thought through well beforehand. The facts concerned are part of the evidence of which the public should be in possession, so that they can weigh them before deciding that the money is needed to put into effect the decision that they make. I am sure that it is right for the Departments involved, when upgrading their procedures, programmes and equipment in the normal way of good housekeeping, to make certain that the new procedures, programmes and equipment are sufficiently versatile to handle the euro as well as sterling, so that greater expense and unnecessary delay are avoided if the voters eventually decide that joining the single currency would be to the United Kingdom's advantage. I am also sure that the Government ought to make the necessary plans and investment across the public sector to accommodate and facilitate trade in euros, and its use in domestic transactions when companies or individuals choose to make and receive payments in euros. That should be done regardless of whether we join the single currency. If we do not eventually adopt the euro, we shall want to be able to use it whenever it suits us, our businesses, or overseas visitors doing business here. This country has prospered as a result of its openness and flexibility, dealing happily in any and every currency in which its customers want to trade. My own view has always been that, when the public are finally asked for their verdict, they will say no to a single currency. It is beyond the scope of this debate for me to say why, so I will not; but it is germane for me to say that I am not as worried as some of my colleagues—including, perhaps, my right hon. Friend the shadow Chancellor—that Government expenditure, assuming our entry into a single currency, will give the public the idea that entry is inevitable, and so cause them to vote yes in the referendum when they would have preferred to vote no. It may be that some members of the Government who are enthusiasts for the single currency do have such an idea. They may see the unrestricted freedom to spend as a wonderful way of carrying the public psychologically into euroland before they have voted to join. I believe that such thinking, if it exists, is erroneous. I am sure that the public would resent and resist any attempt by the Government to use their money to foreclose on a decision that they, the public, had expected to make in due course—freely, in the light of the experience of other EU countries that have already adopted the euro. I believe that, if the Government really want to take us into the single currency, they will find it counterproductive to give the public the impression that their assent was taken for granted, or the impression that they—the Government—seek to engineer entry in advance by means of a series of faits accomplis, especially if they do that by spending money that would be wasted in the event of a no vote. Such an action on the Government's part would be of dubious constitutional propriety. I will not expand on that, as the Bill would give the Government the legal right regardless of the proprieties, as my right hon. Friend said earlier. What I will say, however, in an effort to be helpful to the Economic Secretary—although my right hon. Friend may not thank me for revealing this—is that the Government will do themselves a disservice if they reject the amendment, and deny themselves the chance to show that they have nothing to hide and no ulterior motive, but merely wish to be open and frank with Parliament and the electors. If the Government do reject the amendment, they will leave in the public mind a suspicion that, at the very least, they want to retain the option of not being open and frank. They will also leave my right hon. Friend to argue convincingly that they are not coming clean: that they do have something to hide, and that they are spending money that need not and, indeed, should not be spent at this point. He will be able to argue that money that could usefully be devoted to the real needs of health and education, and spent in many other constructive ways, is being spent to secure the result that the Government want in the coming referendum. That will not help the Government. It will suggest to the public not that entry to the euro is inevitable, but that the Government have no real confidence in the objective case. It will weaken the case for entry by suggesting that that case is not strong enough to stand on its own merits. In their own enlightened self-interest, the Government ought to jump at the amendment with alacrity, saying that as they were planning to do what the amendment requires them to do in any event, they might as well accept it.

Michael Spicer (Conservative, West Worcestershire)

I want to ask the Economic Secretary a brief question. Does clause 122 really apply only to the possibility of expenditure by the Commissioners on taxes that are likely come out of stage 3 of EMU, or is it possible that it could also apply to taxes that are emerging irrespective of stage 3? We know that a mass of taxation is beginning to emerge in the existing legislation to which we are attached. The Government are conniving and contriving to increase the pace of that taxation at a remarkable rate. Luckily, they have been caught on the hop in regard to, for instance, the withholding tax. Commitments have been made. An answer that I received this week from the Paymaster General stated that not only eurobonds but all other forms of savings would be included, which is good news. Nevertheless, we all know that a mass of taxation is beginning to emerge, irrespective of stage 3. What does the Economic Secretary think of all the taxation that is beginning to emerge? Is it not right that the amendments should apply, so that at least we know a little more about that taxation and any expenditure that is likely to be incurred by the Commissioners? Is the Bill giving the Government powers to anticipate the panoply of taxation that is beginning to emerge, irrespective of stage 3? Of course, it is true that, in relation not just to harmonisation, but to increased expenditure, under stage 3 of EMU, there will be a massive increase in taxation, to which the clause and amendments apply. We all know why that is to be. Under EMU, wages will not be flexible, but prices will be very much on the move upwards and there will have to be a massive transfer of funds from the northern, rich parts of Europe to the southern parts and, therefore, an enormous new system of taxation. If we enter EMU, there will be enormous increases in taxation. Therefore, the clause is applicable. One can perhaps understand, although it is highly unsatisfactory, why the Government want to prepare for the massive increase in taxation that would occur under stage 3. The real issue before Parliament, however, is whether what we are really doing is passing a clause and a Bill that will give the Government power to create expenditure in anticipation not of stage 3, which the Government seem to be running away from anyway—which some of us think is good news—but of other bad news: what Lord Denning called the on-rush of European legislation, the tidal flow down our rivers and estuaries, which goes on and on. That applies to taxation as much as anything else. Therefore, it is legitimate to ask: will the clause apply well before stage 3 is entered into? Are the Government not conniving, both implicitly in the clause, and explicitly in the Councils of Europe, in a massive taxation regime, to be imposed on this country, irrespective of stage 3 of EMU?

Peter Luff (Conservative, Mid Worcestershire)

It is natural that high emotions should attach to any debate on economic and monetary union, the single currency and any aspect of it, because people feel strongly on the subject. A variety of emotions have already been expressed by Conservative Members. I declare myself with my right hon. Friend the Member for Fareham (Sir P. Lloyd), who says that he expects the people of this country eventually to vote no when the referendum is held. I also express the hope that they will vote no, but one does not need to get terribly worked up about the issue to suggest to the Economic Secretary that the amendment is thoroughly pragmatic and sensible and its rejection would be literally incomprehensible. I agree with much of what has been said by my right hon. Friend the Member for Horsham (Mr. Maude), the shadow Chancellor, but forget all that for a minute. I understand what the hon. Member for Twickenham (Dr. Cable) said about the ability of Parliament to scrutinise the matter, but I do not understand why the amendment should do anything other than commend itself to the Government. I am sure that they have nothing to hide, but a rejection of the amendment would certainly suggest that they did. The job of the House of Commons is to scrutinise the Executive. That would be made easier by the passage of the amendment, whatever other mechanisms already exist. I am sure that the Government have no wish to conceal from us any aspect of their expenditure in preparing to take us into a single currency—a move that is likely to be rejected anyhow by the majority of the British people. I ask you, Mr. Deputy Speaker: do you think that any Chief Secretary to the Treasury would conduct negotiations with another Government Department which asked for a few tens of millions of pounds for something and, on the basis of a bland assurance, say, "Oh that is fine, Fred. Have a few tens of millions for that"? We know that that is not the way in which such negotiations are conducted, but, so far, a bland assurance is all that the House has been offered. The Treasury notes on clauses simply say: the revenue departments may need to spend some tens of millions of pounds on preparations for possible UK entry to the single currency prior to a referendum". I am against writing blank cheques in the House at any stage, never mind on a matter as controversial and important to the future of the economy and this country's constitution as the single currency. Does the Economic Secretary really think that she could conduct negotiations, if she were ever to be Chief Secretary, on the basis of assurances from her spending Ministers that they would live within their settlement—within the odd tens of millions of pounds here or there? 8.15 pm My right hon. Friend the Member for Horsham said that it was a debate between pragmatism and dogmatism. He is right. The amendment offers the pragmatic view. What is wrong with exposing the information to public scrutiny? It is simple dogmatism to reject it. It will be dogmatism that makes the House and the country suspicious of the Government's motive in seeking to conceal the information from the House and the people. The Government have laboured mightily to bring forth their freedom of information proposals and they have been widely criticised. Surely, they do not want to hide information, but they are acquiring a reputation for doing so. Rejection of the amendment will enhance public scepticism about the Government's true motives. I understand the problem for the Government, and for the Prime Minister in particular. On the single currency issue, as on many others, one could never accuse them of sitting on the fence. They come down firmly on both sides of it. The Prime Minister says that he is the friend of the pound, but, privately, he is an enthusiast for the euro. He says both things to different audiences to confuse the enemy and opposition, but the changeover plan shows where the Government's heart really lies. The Government owe it to the House and to the people who put them in office to explain how much money they are spending on trying to persuade the public to vote against their instincts and for membership of the single European currency. How much money do the Government intend to spend as a result of the clause? A reference to tens of millions is not good enough for the House. No parliamentarian should go through the Lobby tonight to allow the Government, according to some vague estimates, to spend tens of millions of pounds on something as important as the single currency. No parliamentarian worth his salt should even contemplate allowing the clause to go unamended on to the statute book. Yesterday, the Government rejected tens of millions of pounds of help for pensioners when there was the option to change the taxation of savings. We estimated that the cost would be £85 million, which is backed by independent analysis, but a wild figure of £1 billion was thrown out from the Dispatch Box. A few tens of millions of pounds would have made a great difference to those pensioners. A few tens of millions of pounds would make a great difference to the Worcestershire social services department, which could do with a few tens of hundreds of pounds, never mind tens of millions, to help it out with its difficulties. I have the great honour to be Chairman of the Select Committee on Agriculture. Last week, we had before us the permanent secretary of the Ministry of Agriculture, Fisheries and Food. Clearly, MAFF is scratching around for every odd pound that it can find here and there because of the incredibly tight settlement that was imposed on it during the comprehensive spending review. The Ministry will face some difficult choices. A few tens of millions of pounds would help it considerably. The Government could abandon their plans to scrap harbour grants, and fishing safety grants, to cut research and development in MAFF and a host of other things, so why does the Treasury set one standard for itself on something as important as our membership of the single European currency, and another standard for every other spending Department? Why did we have the comprehensive spending review? Why did they not just say, "The Government are spending a few tens of billions pounds next year" and leave it at that? It is preposterous, incredible and an affront to the House that the Government should insist on proceeding with the clause unamended. The Economic Secretary shakes her head in disbelief. I shake mine in disbelief at her. Tens of millions of pounds is a lot of money for every man, woman, child and family in this country, particularly when it is being used to prepare the country for something that it does not want.

John Horam (Conservative, Orpington)

The clause is a relic of the halcyon days, from the Government's point of view, when they thought that life in government was simple. The plan was obvious—they were hoping to win the next election, and if they did, legislation would be introduced to hold a referendum shortly thereafter. They would hope immediately to win a yes vote for entry into the euro. All would follow, so there had to be a national changeover plan. My right hon. Friend the Member for Horsham (Mr. Maude) made the point that the national changeover plan contains a lovely chart, which sets out clearly where we proceed from one point to the end point, where we end up with notes. I noticed that it also said "end cash", which, in these circumstances—as I am sure my hon. Friend the Member for Stone (Mr. Cash) will agree—is rather symbolic. Nevertheless, a timetable of three and a half years was established. Sadly, from the Government's point of view, those halcyon days are over—there are no more glad mornings. Since the European elections, the process has become etiolated, and it has been put ever further into the distant future. Should the Government win the next general election, will there even be a referendum in the first half of the next Parliament? Will there be a referendum at all in the next Parliament? How long will the process take? Even the Prime Minister must realise that the process will take much longer, and that it is much vaguer than it was a year ago when the national changeover plan was proposed. The process has become extraordinarily vague, but clause 122 encapsulates the sense of certainty that the Government have lost. As my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) said, there is also the matter of the blank cheque. How much will be required? The Government have mentioned tens of millions of pounds for the process, although Tim Congdon and other economists have calculated that, if we were to go into the euro, the total changeover cost would be £2.5 billion; and that, even if we do not go into the euro, the cost will be £750 million. Those figures are being bandied about, and they cannot be totally irrelevant to the Government—who purchase 40 per cent. of everything purchased in the United Kingdom. The Government have huge purchasing power. Although they have vouchsafed to the House a potential changeover cost of tens of millions of pounds, the extent of their own procurement ensures that the changeover will have a far greater effect on them than that. I remember when my hon. Friend the Member for Mid-Worcestershire and I were in government, and we were castigated by the then Opposition for signing an allegedly blank cheque for the private finance initiative; yet the PFI was operated wholly within departmental—in my case, the Department of Health—budgets, which could not be exceeded without the Treasury's agreement. However, clause 122 would go beyond any agreement between the Treasury and a Minister. It deals not with a certain unspecified sum that would have to be agreed between Departments, but, literally, with a blank cheque. The fact is that we are now so far down the line—it is a year since the changeover plan was proposed—that Ministers must have some estimate, even a guesstimate, of the sort of figures involved in the changeover plan. The House should be told that estimate. I agree with my hon. Friends that we should be failing as parliamentarians, not to mention as Opposition Members, if we did not press for that information. The hon. Member for Croydon, Central (Mr. Davies), in an intervention on my right hon. Friend the Member for Horsham, made the fair point that Opposition Members are not attempting to limit the spending provided in clause 122—and we are not. It would be foolish to try to limit the spending, as we do not know—any more than the Government do, apparently—the correct figures. We are simply trying to expose the information that is available. It is a matter of accountability, not simply of disagreeing with the figures proposed. We simply want the House and the public to know what is likely to be spent, what is being spent, and even what will be spent—as my hon. Friends have said—retrospectively on those very important matters.

Andrew Love (Labour/Co-operative, Edmonton)

I have listened very carefully to the hon. Gentleman's comments, and he has finally got to the nub of amendment No. 31—parliamentary accountability. However, as Labour Members and the hon. Member for Twickenham (Dr. Cable) have said, there is already such parliamentary accountability in debates in this Chamber on the Public Accounts Committee's reports. Opposition Members should tell us why that parliamentary scrutiny is not acceptable.

John Horam (Conservative, Orpington)

First, that is an annual accounting. The National Audit Office examines matters annually, after which the Public Accounts Committee has to decide whether to deal with a specific expenditure item. The Committee has to choose from a crowded list of matters, and it may not have the time, even annually, to examine a specific subject in depth—as the changeover should be examined. We are not asking for something that the Government are not already doing. In the Government's own document on the national changeover plan, at the very end they state: The Treasury will report on progress on this further work in the euro preparation unit's next six-monthly report and produce a further plan in around a year's time. We are simply asking for the EPU's six-monthly report to the Treasury to be reported also to the House. In their own document, Ministers state that they believe that six months is the right interval in which to report on that expenditure stream. I therefore think that it is not unreasonable for hon. Members to ask for any progress to be reported to them in a sensible way. I also do not think that the National Audit Office and the Public Accounts Committee are the right forums to deal with that six-monthly report.

Oliver Letwin (Conservative, West Dorset)

My hon. Friend is making the most interesting speech. Does he agree that—unless we have that canard come back to us from the Minister—there is a third reason for the House to be provided with the information? The National Audit Office could justify the expenditure as wholly effective and proper—as it would be achieving the very result that the Bill was trying to make it achieve—even if huge sums were spent with the sole purpose of driving us into the euro.

John Horam (Conservative, Orpington)

Indeed. The other point is that, by definition, the National Audit Office will take a non-political view on the matter, but does not always have the access to Government papers that it should. Perhaps it should have further powers. Moreover, the Public Accounts Committee, with a Labour majority, may or may not decide that it wishes to investigate the matter in depth. We are right to want to consider the matter separately. There should be an audit trail so that we can examine the matter systematically and discover how the expenditure is being used. We need to know not merely the total amounts involved, but how the money is being spent. I assume, from what the Government have said, that the national changeover plan deals not with private sector expenditure but with expenditure by the public sector for its own purposes. It also provides for information to be provided to the private sector so that it may prepare for a putative national changeover to the euro. That is the content of the changeover plan.

Tim Loughton (Conservative, East Worthing and Shoreham)

What possible confidence can we have in the Government's accountability to this House when every time Opposition Members have asked Treasury Ministers for a rough idea of the sort of amounts involved, they have wholly and utterly evaded any figure, or even a stab at a figure?

John Horam (Conservative, Orpington)

My hon. Friend is right; we will get no estimate this evening from the Economic Secretary. I give full credit to the hon. Lady for her words on green and environmental matters, but on this matter she will be bound tightly by Treasury rules and will not be able to say anything about possible expenditure. However, we are some way down the track on these matters, and we should by now have some idea of what is likely to be spent.

Peter Luff (Conservative, Mid Worcestershire)

Does my hon. Friend agree that it is a question not just of the amount of money but, how the money is actually spent? The lack of any definition of categories of expenditure is extremely worrying and could have wide-ranging implications. The clause, as drafted, is capable of wide interpretation.

John Horam (Conservative, Orpington)

My hon. Friend is right. I have looked through the reports on the national changeover plan and I can find nothing other than two vague categories in this area—public expenditure on its own purposes, and measures to inform the public of what is happening. We need more definition, clarity and exposure to parliamentary scrutiny. I agree with my right hon. Friend the Member for Horsham that the proposal is simple pragmatism, although I disagree with those who talk about emotion. This is low-key matter of parliamentary scrutiny, so we can take the emotion out of it. Whether one is for or against the euro, this is a matter of simple, pragmatic parliamentary exposure and discussion which should be dealt with on that basis. I hope that, in those terms, the Government can agree to the amendments.

Desmond Swayne (Conservative, New Forest West)

Were I an evangelical advocate of the abolition of the pound—and, despite the Prime Minister's belief that such a position is daft, I understand that such people exist—I would nevertheless advocate that the Government accept the amendments. The existence of clause 122 demands such scrutiny. The clause states: Customs and Excise may incur expenditure". I am afraid that I did not follow my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) in his assertion that tens of millions of pounds were involved. Any amount of money might be involved over any period of time.

Peter Luff (Conservative, Mid Worcestershire)

For the record, I entirely agree with my hon. Friend. That was not my estimate; I was relying on the vaguest estimate that we have from the Government, which is in the notes on clauses. The amount could be hundreds of millions of pounds.

Desmond Swayne (Conservative, New Forest West)

I thank my hon. Friend for that clarification. That begs the question: on what might those amounts, whatever they might be, be spent? The clause states that Customs and Excise may incur expenditure to exercise their functions relating to taxes and duties (including agricultural levies of the European Community). Despite racking my brains, I am unaware of how those concerned might properly spend any sum of money, never mind the unspecified amounts suggested by the clause. Therefore, the clause demands the amendments tabled by my right hon. Friend the Member for Horsham (Mr. Maude). It demands scrutiny and accountability. The lack of accountability and any proper answer to our questions adds to the requirement for such scrutiny. I will listen with interest to the Economic Secretary when she tells us precisely how she anticipates these funds will be spent. I hope that she will do so when she gets up to tell us that she will accept the amendments. Any reticence on her part, or any decision not to accept the amendments, will only reinforce the sense of suspicion and concern that something is being stitched up behind people's backs in precisely the same way as in 1975, when the people were duped, and one campaign, the "Britain in Europe" campaign, outspent the "No" campaign by 10:1. I am sorry that the hon. Member for Croydon, Central (Mr. Davies) has left the Chamber. He asked in what way the amendments provided any control over expenditure. In one sense, he was right: they do not give us the ability to control expenditure—which, if I may say so to the Economic Secretary, is a good reason why she should accept the amendments. They do not give us the ability to control whatever it is that she wishes to spend on whatever it is that she wishes to spend it on. They merely give us the right to know what she has spent and what she has spent it on, which would at least provide some constraint on the expenditure. Not only do we not know what will be spent and what it will be spent on, but we do not know for how long it might be spent. I suggest that it could be a very long time indeed. The Government have made it clear that the event that the expenditures are designed to achieve—the abolition of the pound—cannot happen until there is sustained convergence. I did not agree with the suggestion of the hon. Member for Twickenham (Dr. Cable) that convergence had already taken place and that the British economy had moved closer to the European economies in the late 1980s. If the British economy is moving in an orbit around the European economies, it is an elliptical orbit, because it would appear that over the past 25 years it has diverged rather than converged. The key question is: what has caused that? I suggest that the principal cause is the volume of British trade that takes place with the United States and elsewhere and the consequentially large volume of assets and asset income. Because of those long-term changes, it is highly unlikely that the Government's timetable will be realised. The time scale for the expenditure is in fact very long, so it is highly pertinent for us to have the scrutiny that the amendments offer, which would preserve Parliament's ability to hold the Government to account.

Tim Loughton (Conservative, East Worthing and Shoreham)

Conservative Members have made some powerful points. It was clear that the debate was not going the Government's way when the hon. Member for Croydon, Central (Mr. Davies) was summoned away by pager and the right hon. Member for Hartlepool (Mr. Mandelson) wafted in. I fear, though, that the heat has been too intense even for him and he has slunk away because even he knows that it is a losing battle. He has gone off, officially or unofficially, to represent the No. 10 view with yet another anonymous foreign diplomat. My right hon. Friend the Member for Fareham (Sir P. Lloyd) put his finger on it: the debate is not about whether and when we want to join the euro or what damage or good it may do to the economies here or in Europe, but about transparency and democratic accountability. Today, the Economic Secretary has been in Committee debating the Financial Services and Markets Bill, which is all about accountability, cost to consumers and industry and the guarantee that we are seeking that everything will be up front, which I hope the Government will go along with. This afternoon, the Secretary of State for Health said that of course all the costs of his new-fangled health plan would be made public—so it is ironic that this evening, on an open-ended and potentially enormous issue, the Government are asking for our authority for an entirely blank cheque. As my right hon. Friend the shadow Chancellor said, that cocks a snook at the whole democratic process. It was only on 23 February that the Prime Minister—uncharacteristically—came to the House and devoted all of 67 minutes to announcing the changeover plan and answering questions on it. That has been the House's sole opportunity to question a member of Her Majesty's Government on the changeover plan. Attempts to secure other appearances have been evaded and wafted aside. Yet within a month of that statement, the Bill was published, with this provision hidden deep among the latter clauses. It gives the Government the most enormous blank cheque which, as my hon. Friend the Member for New Forest, West (Mr. Swayne) said, is not even time dated. I am not in the business of writing blank cheques. No Conservative Member is. When I receive a tax bill from the Inland Revenue I expect to pay the amount stipulated at the bottom. I do not expect to pay an amount that may be thousands—or even tens—of pounds more. Similarly, when I get my council tax bill I expect to pay the amount stated, not some amount that may be much higher, of which I may—or may not—be informed at a later date, for added expenditure whose details may—or may not—be revealed. It is ironic that the Government should go on about all their proposals being fully costed. They have done so since before the election. They constantly go on about measures that will be paid for by taxation elsewhere. Earlier this afternoon, the Economic Secretary used a well-worn phrase when she spoke about the "black hole" that would be left by Opposition proposals, but this clause makes a black hole look like a vicarage tea party. The Government should never again have the temerity to ask Conservative Members how much our amendments to legislation might cost. That remark displayed nerve beyond belief. The clause is about the inevitability of gradualism, by means of which Britain will be driven into the euro behind everyone's back. It is about membership of the euro by stealth. If the Government stick to their promise of holding a referendum on the matter, the balance of probabilities is that the British public will vote resolutely against entry into the euro. That was true a year ago and remains true now. It will still be true in two years, and in the dim and distant future. The latest opinion poll showed opposition at a record level, with more than two thirds of the public against joining the euro. The Governor of the Bank of England has said that going into the euro would be the most enormous leap of faith. Just two weeks ago, the Secretary of State for Trade and Industry, on his not terribly successful visit to China, admitted that Britain's economy was large enough to merit having its own currency. So why are the Government asking for funds to go completely against that statement of fact? The Government's policy ignores the fact that 80 per cent. of the world's financial trade, and 60 per cent. of commercial trade, is transacted in dollars. So what are the Government doing about preparing to ensure the stability of the dollar? That is a far more important currency for our financial and commercial markets, and is likely to remain so for some years, but the Government are doing nothing to ensure its stability. What are the Government doing to plan for what the hon. Member for Croydon, Central (Mr. Davies) called the contingencies of a no vote in a referendum? Everything is geared to a yes vote being secured. Nothing is being done to prepare for a no vote, or to protect our more important trade conducted in dollars.

John Bercow (Conservative, Buckingham)

Does my hon. Friend agree that, unless our amendments are passed, the situation will be perilous indeed? The president of the Bundesbank has said that within a single European currency it is an illusion to think that member states can retain their autonomy over taxation policy, but the Government have always rejected that view. Does not my hon. Friend think it peculiar that clause 122 provides for the exercise of functions relating to taxes attendant on entry to European monetary union, when previously the Government have insisted that the prospect of income tax control through EMU was a nonsense? Is there not a contradiction in the Government's position? Have the Government not slipped out the truth, so to speak, by stealth?

Tim Loughton (Conservative, East Worthing and Shoreham)

My hon. Friend puts his finger precisely on the point. So great, in fact, is the emergency before us that the Chancellor has joined us for the first time tonight. The right hon. Member for Hartlepool plainly pressed all the panic buttons when he left the Chamber.

Francis Maude (Conservative, Horsham)

He would not have phoned the Chancellor.

Tim Loughton (Conservative, East Worthing and Shoreham)

Wonders will never cease. There has been yet another shift in alliances within the Government. Only 18 per cent. of the United Kingdom economy is involved in Europe, but 100 per cent. of British business, industry, shareholders and taxpayers will have to pay the cost of a highly expensive, but uncosted, contingency changeover plan. We are always promised cost assessments, but the absence of one for the plan is stark. It is amazing that, before they deal with any of our EU problems—the common agricultural policy, fraud in the Commission, our rebate, the withholding tax, unfair tax competition that penalises our enterprises, and much more expensive social costs—the Government are trying to commit the British people to enormous and unlimited expenditure, although even the Prime Minister has doubts about which side of the fence to come down on. It is bad enough to be asked to write a blank cheque and to open up a funding black hole. It is worse still that the bank account holders—the British people—are not allowed to know the amount to be written on that cheque, when it will be written or for what it will pay. I do not share the confidence of my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) because I think that the Government are hiding something. Transparency is the best regulator.

Peter Luff (Conservative, Mid Worcestershire)

I know that it is not the custom of Hansard to put "irony" in brackets after our comments, but I hope that mine were heavy with it.

Tim Loughton (Conservative, East Worthing and Shoreham)

My hon. Friend spoke so subtly that I did not wish to disrupt the bonhomie that he engendered across the House. Transparency is the best regulation and the best measure of accountability. The amendment does not deal with the whole issue of the euro, but simply seeks accountability and the ability to hold Labour Members and the Government democratically to account on behalf of our constituents. The changeover plan is purely a contingency plan, but potentially the most expensive contingency in history. We should have none of it.

Patricia Hewitt (Labour, Leicester West)

It is fair to begin by saying that Conservative Members have livened up somewhat during this debate. Indeed, we have heard from almost every Conservative Member present, except of course the hon. Member for Grantham and Stamford (Mr. Davies). It is hardly surprising that he has remained completely silent on the issue. Once again, the debate has shown that the Conservatives are indeed a single-issue party. It would appear, at least this evening, that they are a single-sex party too. We have heard a great deal of nonsense this evening in an attempt to whip up some excitement on the Opposition Benches.

Peter Luff (Conservative, Mid Worcestershire)

At least we Conservatives are here in numbers to discuss one of the most important issues that faces the United Kingdom, unlike Labour Members.

Patricia Hewitt (Labour, Leicester West)

I do not think that we need to worry about the numbers this evening. The nonsense that we have heard from Conservative Members started with the right hon. Member for Horsham (Mr. Maude), who accused the Government of asking Parliament to give us a blank cheque to spend—a phrase with which Conservative Members were clearly so impressed that several of them repeated it. That is complete rubbish. Clause 122 establishes the propriety of expenditure by Customs and Excise and the Inland Revenue on preparations for the possibility that the United Kingdom might join the single currency. It does not remove Parliament's right to scrutinise the expenditure, or the requirement for Parliament to give legal authority for such expenditure each year through the annual supply estimates and the Appropriation Act. It might be helpful if I remind hon. Members that statutory authority for the payment of expenditure out of moneys provided by Parliament must be given each year and can only be given each year by the supply estimates and confirming Appropriation Act. Any expenditure by the Government on euro preparations, like any other expenditure out of moneys provided by Parliament, will have to be authorised each year by Parliament in the annual Appropriation Act, which provides the legal authority for the expenditure.

Francis Maude (Conservative, Horsham)

If that is the case, will the Minister undertake that the House will have the opportunity to debate separately the sums allocated for that line in the Budget?

Patricia Hewitt (Labour, Leicester West)

We will treat it like every other line in the Budget. I am surprised at the right hon. Gentleman. He did not refer to the constitutional practice that was enshrined in the 1932 concordat between the Treasury and the Public Accounts Committee. I assume that as a former Treasury Minister he is familiar with that concordat. It is a rule of propriety that continuing functions of Government, in particular when they involve financial liabilities that extend beyond a given financial year, should also be defined and covered by specific statutes. It is in accordance with that rule of propriety that clause 122 provides specific statutory authority for expenditure on euro preparations.

Francis Maude (Conservative, Horsham)

I take it from what the hon. Lady says that the answer to my question is no, the House will not have such an opportunity. If she cannot supply that and as she claims that this is not a blank cheque for the Government, will she tell us what number will be on the cheque? How much money is she proposing to spend? If she does not know, she has the Chancellor at her side—he seems to have come to life—and she should ask him.

Patricia Hewitt (Labour, Leicester West)

I shall come to the figures for expenditure in a minute. As I said, expenditure on that matter will be treated in exactly the same way as any other expenditure from moneys authorised by Parliament. Perhaps it is not surprising that the right hon. Gentleman, who is Maastricht man—the man who signed the Maastricht treaty on behalf of the previous Government—wants to divert attention from his record by his obsession with clause 122. I shall spell out the procedures once again because the right hon. Gentleman and his colleagues seem to have forgotten them. As with all expenditure incurred by revenue Departments, Parliament votes through estimates. Forecasts of euro preparation expenditure would be included in those estimates. The annual appropriation accounts report the actual outturn against the figures projected in the estimate and those are laid before Parliament in the January following the end of each financial year to which they relate. Moreover, the annual departmental reports, which are laid before Parliament around the end of March, provide a backward look to the previous financial year as well as a forward look to the coming financial year and expand on the detail contained in the estimate and appropriation account. I remind the House of that because so many right hon. and hon. Conservative Members seem to have forgotten it. There are three main reasons for pre-referendum spending in the Revenue Departments. First, unless we undertake the necessary practical preparations, the United Kingdom will not be in a practical position to join—even if that were in the national economic interest. That is especially true of the Revenue departments, whose computer systems are among the largest and most complex in Europe. Secondly, if the UK were to join the single currency, our Revenue departments would come under pressure from UK businesses to allow taxes to be assessed, reported and paid in euro. That would be no more than was offered by countries which participated in the first wave. We have allowed taxes to be paid in euro from 1 January this year. So far, the investment that we have made in IT and other systems to enable that to take place has been small—about £150,000. We considered that to be commensurate with a relatively low take-up. Even without extending the euro options for UK businesses, increased take-up of existing options would require significant investment to ensure cost-effective and accurate services. I am sure that hon. Members would want that. Thirdly, by making relatively small and well-targeted expenditure now, we can save substantial sums if the UK were to join. That is effective public sector planning, to deliver best value for money, of the kind that any sensible organisation or business would undertake. The right hon. Member for Horsham and several other hon. Members asked me for detailed figures as to expenditure. I shall set out exactly what was spent up until the end of February 1999. The public sector spent £27 million on ensuring that the City of London and many businesses and departments were able to deal with the euro from its introduction on 1 January. The Bank of England, the euro preparations unit in the Treasury, Revenue departments and the Department of Social Security accounted for most of that preparatory spending. Less than £2 million has been spent on preparing for the possibility of UK entry. The Bank of England spent about £16.6 million preparing for 1999—£17 million in total. The euro preparations unit spent £8.5 million, of which only about £50,000 was related to possible UK entry. Customs and Excise spent £0.8 million on 1999 preparations—£0.2 million on planning for possible UK entry. The Inland Revenue spent £0.15 million on 1999 preparations—£0.35 million on planning for possible UK entry. In both cases, the spending on preparations for 1999 was to ensure that firms could pay taxes in euro from its launch. The DSS has spent about £0.5 million in total—almost all of which was geared towards possible UK entry, including £0.3 million on set-up and staff costs and £0.2 million on IT analysis. I hope that no Conservative Member will accuse me of lack of detail in these matters. I point out to the House that the extraordinary concern of Conservative Members over the relatively small amounts involved in this matter sits ill with their complete indifference to the £5 billion hole in their own spending plans, arising from their resistance to the fuel duty escalator and other matters that we discussed earlier.

Quentin Davies (Conservative, Grantham and Stamford)

The hon. Lady has given precise figures, broken down between departments and functions, for moneys spent up until the end of February. Will she give us the Budget figures for prospective expenditure under the same headings? To return the phrase that she used, any well-managed—or half well-managed—business or organisation would have a budget with precise figures. If the organisation for which she is responsible is at least half well-managed, she will have forward budgetary figures. Will she give them to the House?

Patricia Hewitt (Labour, Leicester West)

In the current financial year, the Inland Revenue plans to spend about £5 million, and Customs and Excise plans to spend about £10 million in total. As for the years beyond that, the planning that we are undertaking at present, following the publication of the outline national changeover plan, will enable us to produce detailed figures. They will be dealt with in the normal way, through the procedures that I have described.

Oliver Letwin (Conservative, West Dorset)

I am most interested in the figures the Economic Secretary has just given. She has told us the spending that is planned for this year—figures of £5 million and £10 million. In which estimates were those approved, and which debate that occurred in this House inspected the validity and propriety of that expenditure?

Patricia Hewitt (Labour, Leicester West)

They are part of the normal estimates, dealt with in the proper way. If the hon. Gentleman did not notice them at the time, that is his problem. It is absolutely fascinating to have heard from the two sides of the Conservative Treasury team. The hon. Member for Grantham and Stamford said in 1996: It would be completely crazy and contrary to the national interest to throw away our option to join the single currency. The British people would not respect a Government that did such a thing. He went on to say: Taking irrevocable decisions before you have to and before all the essential facts are available is bizarre and indefensible He is describing the policy of his own party, on whose Front Bench he now sits, as "crazy", "bizarre and indefensible" and contrary to the national interest".

Quentin Davies (Conservative, Grantham and Stamford)

I had better state it quite explicitly, so as to remove any doubt from the hon. Lady's mind. The quotation she has just delivered describes precisely the Conservative party's position on this issue, which I have the honour to defend from the Front Bench.

Patricia Hewitt (Labour, Leicester West)

That is the entirely bizarre explanation that was offered by the right hon. Member for Horsham when he opened the debate. If I understood him correctly—it was difficult to follow his arguments—it is now the Conservative party's position to keep open the option of joining the single currency by ensuring that the British people are never given a chance to join. It is impossible for the Conservatives to square their policy of keeping open the option of joining with their other policy of establishing a constitutional principle that rules out the possibility of joining for five years, 10 years or for ever, depending on who is speaking.

John Bercow (Conservative, Buckingham)

Will such expenditure be undertaken only upon the assumption of continued direct taxation sovereignty, and rejected without it?

Patricia Hewitt (Labour, Leicester West)

We have made it clear on numerous occasions in the House and elsewhere that tax harmonisation—harmonisation of direct taxation—is not required by possible entry into the single currency. The House knows well the Government's position on the question of taxation, specifically the withholding tax, which has been mentioned. The fact is that there are three possible positions on the question of the single currency. The first is to rule it out, even if joining a successful single currency would be good for Britain. That is the position of the Conservative party, which has now become the anti-European party of British politics.

Quentin Davies (Conservative, Grantham and Stamford)

indicated dissent.

Patricia Hewitt (Labour, Leicester West)

Apparently, that is not the Conservatives' position any longer. Perhaps the right hon. Member for Horsham—Maastricht man—will clarify the position once again. We have heard many different policies this evening, so the right hon. Gentleman, who signed the Maastricht treaty, should tell us what the Conservative policy is. That is one possible policy: to rule out joining a single currency on principle, even if it would be good for Britain. That policy was described, correctly, by the hon. Member for Grantham and Stamford as "crazy", "bizarre" and contrary to the national interest. The second position is that we should join the single currency as quickly as possible, even if doing so were bad for this country. That indeed would be "crazy", "bizarre" and contrary to the national interest", even though it is supported by some hon. Members. The third policy position—the position of this Government—is to join a successful single currency if it is good for Britain. If the economic benefits of joining a successful single currency are clear and unambiguous, then of course it is right that we should join. That is the only policy in the national interest, and it is of course the Government's policy. We have made it clear, in the statements in October 1997 by my right hon. Friend the Chancellor, and earlier this year by my right hon. Friend the Prime Minister when he launched the national draft outline changeover plan, that the decision on possible entry to a successful single currency should be made by Government, Parliament and then the British people in a referendum. It is in pursuit of that policy of "prepare and decide" that we have published the changeover plan. The hon. Member for Esher and Walton (Mr. Taylor), a member of the previous Conservative Government and, indeed, a Front Bencher before he resigned in disgust at the anti-European position that his party has adopted, made the position clear when he welcomed the publication of the changeover plan. He said: Anyone who opposes a national changeover plan must not want to have a referendum, because it can be held only if the British people are prepared."—[Official Report, 23 February 1999; Vol. 326, c. 194.] Our changeover plan has been prepared in very close consultation with business associations in this country. It is further illustration of how completely out of touch the Conservative party is with British business and the British national interest that it has opposed the sensible planning of the changeover plan, which was welcomed by, among others, the president of the CBI. The changeover plan is a sensible and necessary step to enable this country to have the option of joining a successful single currency if that would be in the interests of our country. Under clause 122, as I have explained in considerable detail, we have ensured that the proper rules of propriety and the convention with the Public Accounts Committee are observed. We are extremely supportive of the important role that Parliament plays in the proper scrutiny of public expenditure, but there is a set procedure for reporting on expenditure to the House. The procedure works well, and the Opposition were quite happy to follow it during their 18 years in government. Euro preparations expenditure will continue to be included in the annual estimates, appropriation accounts and departmental reports, along with all the other spending by revenue Departments. I am astonished that the Opposition seek to impose an extra bureaucratic burden on our tax authorities—one that has nothing whatever to offer in improving real accountability and scrutiny of public expenditure. I hope very much that the right hon. Member for Horsham will have the wisdom to withdraw his amendment. If not, I shall certainly urge my hon. Friends to vote against it.

Francis Maude (Conservative, Horsham)

I knew that it would be fascinating to hear how the Economic Secretary would make the case to resist the amendments. Now we have the answer. She did not make the case; she just ignored the case, which became stronger and stronger as each hon. Member rose to their feet. The Economic Secretary has insulted the House of Commons by refusing to address the actual issues and by making a pathetic attempt to sow dissention. She was dismayed by the fact that Conservative Front Benchers have been resolutely united in this approach. It is very upsetting for her, but it is a fact that the whole House ought to be concerned about this issue. I said when I moved the amendment that the Government were asking for a blank cheque. Having heard what the Economic Secretary has had to say, that remains so. This is an extraordinary clause. As far as I can see, no other clause is a spending clause. It has been claimed that the National Audit Office already has the power to scrutinise the accounts, but if the expenditure is proper according to the terms of the clause—we have no reason to suppose that it will not be—the NAO will not scrutinise the accounts in detail but simply report on the global sum. The Public Accounts Committee will not get close to the accounts because the NAO will sign off that sum as having been effective spending. That spending may be effective according to the terms of the clause, but it is effective spending to achieve the wrong outcome. The Government will spend unspecified amounts of taxpayers' money on something that even the Prime Minister has accepted hardly anyone wants. The Economic Secretary has mentioned several figures, but she cannot say in which estimates those figures are contained. She cannot tell us in which National Audit Office report they are scrutinised. There is no proper mechanism by which the House can fulfil its historic function of scrutiny for such extraordinary expenditure. Coming from a Government who prate about and use the language of prudence and competence, this is a disgrace. The Treasury, which admits to having negotiations to agree hard and fast budgets with other Departments, will simply say, "We shall spend as much as we think right." The Prime Minister says, "We shall spend tens of millions of pounds over a number of years." That is airy-fairy, and it is intolerable that the House of Commons should not have the ability properly to scrutinise that expenditure. For that reason, I ask the House to support the amendment.