Orders of the Day — Finance Bill

House of Commons, 9 May 2001.

APPLICATION OF DEFINITIONS OF PRIVATE RESIDENCES AND JOB—RELATED ACCOMMODATION

Oliver Letwin (Conservative, West Dorset)

I beg to move, That the clause be read a Second time. The new clause is short and simple. Its effect would be to render it necessary for the Inland Revenue to treat all second homes owned by those who, because of their occupation, live and are forced to live in tied accommodation as principal residences for the purposes of, among other things, the working families tax credit. I shall explain briefly why that is necessary. For many years, the Inland Revenue has treated second homes as principal residences for the purposes of capital gains tax if those second homes are owned by people in the position that have just described—held as investments or hedges, purchased by people who are forced by their occupation to live in tied accommodation. The rationale for that is clear and a matter of consensus between the political parties. If an individual buys a principal residence, he or she is exempt from capital gains tax on that residence. It is and always has been regarded as reasonable that the second home owned by an individual who is forced by his or her occupation to occupy tied accommodation—perhaps a tenant farmer or farm worker, a caretaker, a person who works for one of the utilities, or a carer —should be treated as exempt for capital gains purposes, as is the primary residence of other individuals. Were that not the treatment for capital gains purposes, an inequity would have arisen. A farm worker, for example, who was forced to live in tied accommodation would be exposed to one of two serious risks. If he chose to avoid the capital gains problem by not buying a second home, when he left his job or retired, and if in the meantime house prices had, as has been the case cyclically for decades now, risen significantly, he would find himself in serious financial difficulty and might be unable to buy a home or to rent one at a reasonable price. If, on the other hand, while living in tied accommodation he chose to buy the second home but to encounter capital gains tax on selling it, he could find himself at a huge disadvantage compared to those who live permanently in a primary residence, sell that and move elsewhere, and who do not pay capital gains tax. On those grounds, and as a matter of consensus, the Inland Revenue has for many years treated second homes owned by such individuals as principal homes. That is the purpose of section 222 subsections (1),(8) and (8A) of the Taxation of Chargeable Gains Act 1992. 6.15 pm As I understand it—I am open to correction in narrating this history—when the Government introduced the working families tax credit as a substitute for family credit, the officials—I assume from the Department of Social Security—who handled family credit, or at least the rules and practices that guided those officials, transferred themselves to the Inland Revenue and began to administer the working families tax credit as part of the tax system, but according to principles that bore greater similarity to those that had applied in respect of family credit under the DSS. The right hon. Member for Birkenhead (Mr. Field) frequently alludes to a curious feature of our tax and social security systems, which is that our tax system largely treats individuals as individuals. It does not—or did not before the current Government took office—contain anything recognisable as a graduated means test, as opposed to thresholds of taxation. However, our social security system tends to look at families rather than individuals. It contains heavily graduated means-tested benefits—rather more, regrettably, under the current Government than hitherto. Above all, for the purpose of the current debate it contains a number of wealth tests, unknown in general to the tax system. For example, I cite the famous case of a person who seeks to enter long-term care. That person will be funded fully by the Government only if his or her wealth is less than £18,000—I believe that that is the correct figure. It was, presumably, on that principle that family credit was never treated as exempt from a wealth test and it is, presumably, also on that principle that the working families tax credit is treated as it is.

Dawn Primarolo (Labour, Bristol South)

I do not think that the hon. Gentleman's point serves his argument well. Let me try to assist him. The working families tax credit was indeed built on family credit, and the capital rules on family credit had been in place for 10 years under the previous Government. I do not think tat the issue of capital gains tax serves as a peg on which to hang the debate. The question is whether one has a capital rule and, if so, where the ceiling should be set; not whether, because it lies within the tax system, something should follow capital gains. If the hon. Gentleman thinks that capital rules should be abolished, he must explain why the Conservative Government, in 10 years of presiding over family credit, did not take the opportunity to abolish the capital limits.

Oliver Letwin (Conservative, West Dorset)

The Paymaster General mistakes the character of my argument. I freely acknowledge that capital rules were in place for family credit, just as they are, rightly or wrongly, for other means-tested benefits. I am not accusing the Government of suddenly introducing those rules into the working families tax credit; nor is it our intention to suggest that the capital rules should be removed for the purposes of receiving that credit. I was merely sketching a history. As capital rules have been a feature of benefits rather than taxes, second homes have been treated as a piece of capital. If an individual who lives in tied accommodation obtains a second home, the Inland Revenue will treat him as having capital in that second home for the purposes of disqualification from working families tax credit, although he would be exempt from capital gains tax were he to sell it. That was also the case with family credit.

Dawn Primarolo (Labour, Bristol South)

It will help the debate if we clarify the terms that we use when we refer to tied accommodation. What the hon. Gentleman calls the second home is not, in fact, the second home. I understand the issue that he raises and, clearly, capital gains tax does arise on a second home. Tax language is precise, and so must we be. I accept that it is not a question of removing capital gains on second homes. The Opposition are interested in whether there is a requirement to revise the interpretation of "household" in the working families tax credit, which recognises the existence of only one household—the place where people live. We should be clear on that.

Oliver Letwin (Conservative, West Dorset)

The Minister is right; she has not mistaken our argument. I am sorry if the term "second home" caused confusion. It is, literally, a second dwelling that is treated for capital gains tax purposes as a principal dwelling. We believe that if such a house is owned by someone who lives elsewhere in tied accommodation, it should be treated as a principal dwelling—the dwelling—for the purposes of the working families tax credit. We do not want it to be treated as a piece of capital that leads to disqualification from that credit. I freely admit that we are not launching an attack on the Government. That would be dishonourable because they are merely continuing a practice that pertained in family credit. Our purpose is to spot a lacuna that it is now easy to cure because the Inland Revenue administers both measures. The definition is easily available from the Taxation of Chargeable Gains Act 1992, for the reasons that I identified—the records are in a single place and easily accessed. All we need is a simple change so that farm labourers and others who are in tied accommodation can obtain the working families tax credit to which their income would otherwise entitle them, notwithstanding the fact that they have purchased a house as a hedge against exposure to the property market because they live in tied accommodation. It appears that the Minister understands our concern. We wait to see whether she accepts the new clause. I do not know whether the way in which we have drafted the new clause and the mechanism that we have used are appropriate. The Minister has at her disposal the vast resources of the Treasury Solicitor and parliamentary counsel. No doubt she can highlight deficiencies in the drafting and, perhaps, in the mechanics, but the principle is clear and right. I have constituents who are, and have always been, in work and whose income is zero. That might strike people who are not from rural areas as strange, but that is the case for many tenant farmers who find themselves at the bottom of the heap. They are precluded from receiving the working families tax credit by virtue of owning a house, which in many cases is modest, as a hedge against the fact that their tenancy forces them to be in tied accommodation. People in the countryside believe that to be unjust, which it clearly is. I hope that the Minister will tell us that, no matter which party is in power after the election, it will be a matter of political consensus to change the system by an appropriate mechanism.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Today we have seen the House at its worst and best. Time wasting and poor arguments in the debate on the business of the House motion were most unfortunate because that has prevented us from spending more time on this new clause. I am persuaded by the arguments of the hon. Member for West Dorset (Mr. Letwin). I wondered what the new clause was trying to achieve because it was not obvious, but his remarks and the Minister's helpful interventions allow mere mortals to get our brains around it. He seems to have hit on an interesting issue. He made it clear that he was not trying to make a party political point, but trying to assist the Government in the operation of their policy. The argument is not just about the capital rules, but about a particular aspect of them; nor is it simply about social justice, but about labour mobility and the efficient operation of the labour market, especially as it applies to rural areas where most tied accommodation is to be found. We know how problematic and severe the difficulties are in many of those areas. I doubt whether the Minister will accept the new clause. However, unless she has arguments to override the hon. Gentleman's case—I shall pay great attention to her comments—I hope that she will not dismiss the idea out of hand and that her response is in tone with the hon. Gentleman's remarks. We may well need to tackle the lacuna early in the next Parliament to ensure that there is social justice and efficiency in the operation of the labour market. This is a small but important issue.

Dawn Primarolo (Labour, Bristol South)

I hope that I will be able to help the House and that the hon. Member for West Dorset (Mr. Letwin) will accept my reasons for not being able to accept the new clause, which relates to people in tied accommodation. He mentioned tenant farmers, but there is a long list of people who also live in such accommodation. The issue involves property that they might hold for their retirement or when they move occupations, when it will become their main residence. He fully appreciates that if the property were rented out and an income generated, the working families tax credit would probably not be triggered because the income from the property might take the family's income beyond its limits. 6.30 pm When the Government designed and implemented the working families tax credit, we used family credit as a building block for reasons of speed. The working families tax credit became operational in about 18 months and it has been a huge success in providing help to working families. I think that the hon. Member for West Dorset acknowledged that fact when he said that a group of people should be entitled to the credit even though they do not receive it at present because of the way in which the rules operate. Neither during the design period of the working families tax credit nor during its operational period have we received representations that this issue might be a problem. Foot and mouth disease and the problems that it has caused in rural areas have probably put the spotlight on tenant farmers even though they are not the only people affected. Despite that fact, the issue is low key and it has hardly registered on our radar in terms of the number of representations that have been made. None the less, the hon. Gentleman has highlighted the problem of tenant farmers. If they lived in the other house, there would be no question about their ability to claim the working families tax credit provided that they received no other income that would take them over the limit.

Howard Flight (Conservative, Arundel and South Downs)

The problem is not just foot and mouth, but that of declining farm incomes. Since the working families tax credit was introduced, I have been surprised to find in my constituency that many tenant farmers, who do not own other houses, rely on the credit to survive. Foot and mouth is not the immediate issue.

Dawn Primarolo (Labour, Bristol South)

I am grateful that the hon. Gentleman is so appreciative of the credit. I will not descend to making a partisan comment—although I am sorely tempted to do so—because he makes a reasonable point about the issues involved. I appreciate the comparison that the hon. Member for West Dorset made with capital gains tax, but the new clause will not necessarily produce the outcome that he seeks. It refers to all the functions covered by the Inland Revenue, and I cannot accept the mechanism that he suggests because there is a real risk that it could inadvertently change the application of the law in several other sectors. I am sure that he does not intend it to do that. For example, it could have implications when the Inland Revenue has to take a view on all sorts of tax issues relating to the status of a company, its shareholders, or employees when accommodation is provided. I am sure that he will accept that point. The phrase in the new clause "all of its functions" worried me to such an extent that I had to ask one of my Revenue officials to return from a day's holiday to help us with this issue. It happens to be his birthday and I am sure that the House is extremely sorry to have deprived him of the opportunity to celebrate it with his children. [HON. MEMBERS: "Oh dear."] Even Revenue officials are entitled to a day off occasionally. The working families tax credit is governed by regulations, and regulations that come before the House are the appropriate means to implement such a change if the Government are persuaded that it is necessary. About 17,000 farmers and farm labourers already receive the working families tax credit, and it greatly assists them. I hope that the hon. Member for West Dorset will take my word that the new clause does not provide the solution and that it would create problems elsewhere. Therefore, I hope that he will not press it to a Division. If he does, I regret that I will have to ask my hon. Friends to oppose it. I need to consider the principle in more detail as there are other complications. For example, tenant farmers are self-employed and the rent for land, which may be subject to a low rate, may be offset in their profits and losses. This is not a huge issue People are not knocking down the doors of the Treasury or the Inland Revenue or even writing to us about it. However, after the return of the House, I will be prepared to reconsider the matter and I undertake to speak to the hon. Gentleman about how we can deal with the problem. We shall certainly have corrected the problem by the time that integrated child credit takes over in 2003, but he is pressing me to act a little more quickly. I am willing to consider the issue in more detail and the secondary legislation route of regulations may be the best means of addressing the issue if the Government decide to act. The hon. Gentleman will understand that I cannot give him an absolute commitment, but I give him my word that I shall consider the issue closely and talk to him again, if necessary, about the details.

Oliver Letwin (Conservative, West Dorset)

I am grateful to the Paymaster General for her reply. I take her point that a statutory change of type suggested by the new clause may have unintended consequences. I am delighted to hear that it may be possible to resolve the problem in regulations. Therefore, it appears that, whoever is in government, we shall be able to find a solution, and that fact will be widely welcomed. The Paymaster General is right she will not have received many letters on this subject. The representations that have been made to me and to other Members representing rural constituencies are almost the result of happenstance and of talking to individual constituents. As she and my hon. Friend the Member for Arundel and South Downs (Mr. Flight) suggested, the decline in farm incomes, which has been compounded by foot and mouth, has brought the issue to light. However, I regret to say that most of the people most affected are not in a condition to write letters to Ministers. That is why urgent action is needed. Regulations might be an appropriate way forward and I take the hon. Lady's word that she will consider their introduction. That is what we will do if we find ourselves in her shoes after the election. Therefore, I beg to ask leave to withdraw the motion Motion and clause, by leave, withdrawn.

CHILDREN'S TAX CREDIT: CHILDREN UNDER FIVE YEARS OF AGE

Richard Ottaway (Conservative, Croydon South)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss new schedule 1— `Children's Tax Credit: Children under five years of age: supplementary—

Introduction

Child living with married or unmarried couple

Child living with more than one adult: other cases

Combined cases

Richard Ottaway (Conservative, Croydon South)

The new clause would give any parent with a child under the age of five and who is entitled to the children's tax credit an extra £4 a week or £200 a year. It is no secret that that proposal forms part of the Conservative party's manifesto and we look forward to introducing such a measure in the Finance Bill that will be presented after the election. We moved the new clause because we feel that the Labour party's support for children is inadequate. Earlier today, the Chancellor set out several pledges that he hopes to fulfil in the next Parliament. If he finds himself in that position, we wish him more success than he has had in fulfilling his pledges in this Parliament. One of his pledges was to halve child poverty; I must tell the House that he would make a good start in achieving that objective by accepting our new clause, which would go a long way towards reducing child poverty. The Conservative party recognises the importance of the family as the basis of a free and ordered society and, in particular, believes that marriage plays an important role as the best environment in which to raise children. In general, children from two-parent families do better at school, have better chances in life and are less likely to end up ensnared in crime. Although the new clause focuses exclusively on the children's tax credit, which can be claimed regardless of someone's marital status, we submit that both matters are interrelated; I shall briefly dwell on that. A future Conservative Government will reintroduce the married couples allowance, in addition to the children's tax credit, which is the subject of our debate. We will do so because the two allowances go hand-in-hand to promote the welfare of children.

Andrew Bennett (Labour, Denton and Reddish)

Will the hon. Gentleman tell us how much both those things will cost?

Richard Ottaway (Conservative, Croydon South)

The introduction of the married couples allowance will cost about £1 billion and, as I shall spell out shortly, this particular proposal will cost £300 million. They make up part of the £8 billion worth of tax cuts that we have announced. In his 1999 Budget, the Chancellor said: we will replace the married couples allowance with a new family tax cut that will increase the amount that goes to help families with children. This children's tax credit will give more—not less—help to families at the time when they need it most—when they have their children and when their children are growing up."—[Official Report, 9 March 1999; Vol. 327, c. 182.] That is a laudable objective and a clear statement of policy. However, I submit that is an inadequate and failed policy; what the Chancellor promised has not happened. The children's tax credit does not replace the married couples allowance; nearly 5 million people who were entitled to the allowance are excluded from claiming the tax credit. People have to have children to claim children's tax credit, but many married couples do not have children.

Dawn Primarolo (Labour, Bristol South)

Would the hon. Gentleman tell the House the exact conditions under which the Conservative party would reintroduce the married couples allowance? I thought that the allowance would be only for couples with children under 11. The Conservatives are not reintroducing the married couples allowance because, of course, lots of married couples have children over 11.

Richard Ottaway (Conservative, Croydon South)

The Minister makes my point for me; the children's tax credit does not benefit married people, either—[Interruption.] I shall come to the Minister's point. There is no limit to the aspirations of the Conservative party. We have set out our aims and objective for 2003 to 2004. Unlike the Labour party, we generally believe that the concept of marriage is worth supporting and we will use our best endeavours to expand allowances wherever possible.

Dawn Primarolo (Labour, Bristol South)

Does the hon. Gentleman believe in marriage so much that he believes that couples will be committed to it only if we pay them?

Richard Ottaway (Conservative, Croydon South)

We believe in marriage, so the point of the policy is to encourage people to marry.

Mark Hendrick (Labour, Preston)

Does the hon. Gentleman accept that the fact that a couple is, or is not, married does not necessarily affect the stability of their relationship? In fact, a married couple could be in an unstable relationship and an unmarried couple could be in a stable relationship. Why the necessity to pay people to get married?

Richard Ottaway (Conservative, Croydon South)

The hon. Gentleman makes an important point, but research shows that children brought up by a married couple are more likely to do better at school and less likely to commit crime, as I said a few minutes ago. The hon. Gentleman's party believes in family life, and family life is enshrined in marriage, which is why we support it. One should take a hard look at ministerial statements and, indeed, the 1997 Labour manifesto, which states: We will uphold family life as the most secure means of bringing up our children. Families are the core of our society. We believe that the concept of a married family is better than the concept of an unmarried family; that is the point of our policy.

Mark Hendrick (Labour, Preston)

Clearly, stability is important in any relationship. Is the hon. Gentleman seriously telling us that, given the fact that his party is committed to £16 billion worth of c>uts, it is prepared to pay £1.3 billion to encourage people to get married?

Richard Ottaway (Conservative, Croydon South)

First, I do not know where the hon. Gentleman got his figure of £16 billion. There will actually be £8 billion worth of tax cuts. Like the Prime Minister, the hon. Gentleman can pluck artificial figures from the air. We have made it quite clear that we are committed to £8 billion worth of public expenditure cuts and, as a result, will be able to deliver £8 billion worth of tax cuts.

Melanie Johnson (Labour, Welwyn Hatfield)

Perhaps I can help the hon. Gentleman with the exact source of the £16 billion. A Conservative press notice last July said that the Conservative party believed that the Government were overspending some £600 per head of population which, multiplied up, came to £16 billion. The Government did not produce that figure; the Conservative party itself released it.

Richard Ottaway (Conservative, Croydon South)

The spin machine in Millbank has got to try a bit harder than that. In the long term, we hope to give substantially more than £8 billion worth of tax cuts to the British people; that is where the Economic Secretary got that convoluted concert. Unlike the Prime Minister and the Chancellor, we are precise and accurate about what we intend to do. Before the last election, the Prime Minister said that he had no plans for any tax increases at all but, in this Parliament alone, we have had something like 45 tax increases. When it comes to accuracy, the Economic Secretary had better put her own house in order before she starts criticising our party. As I said, the children's tax credit does not replace the married couples allowance; nearly 5 million people entitled to the MCA are excluded from claiming the CTC. I must tell the Paymaster General that I am raising that matter because the Chancellor said that the children's tax credit would replace the married couples allowance. Clearly, it does not and, as a result, millions are worse off. In truth, it is another Labour stealth tax. The children's tax credit did not replace the married couples allowance; it was introduced a year after the MCA lapsed. As a result, everybody had to pay higher taxes—yet another Labour stealth tax. The children's tax credit is not available to higher rate taxpayers, as it tapers out quite quickly once the threshold is reached. That is another stealth tax and another breach of the Chancellor's pledge to eliminate means testing. It is quite remarkable that the Chancellor, who said at his party conference that he was pledged to eliminate means testing from the welfare system, has presided over the biggest increase in means-testing in recent history. Fourthly, the credit discriminates against one-earner families. It contains a perverse anomaly that we raised during the Committee stage of the Finance Bill last year. A higher rate taxpayer earning £45.000 per annum will have lost all entitlement, yet a family with two earners on £30,000 each, making a household income of £60,000 a year, will get the credit. Thus, a family with £60,000 a year gets it, whereas a family with £45,000 a year does not. In the debate on the Finance Bill last year, the Government said that they would look into the anomaly, recognising the force of the Opposition's arguments, but they have taken no steps whatever to rectify the anomaly.

Melanie Johnson (Labour, Welwyn Hatfield)

Would the hon. Gentleman remove the right to independent taxation, which is the basis of our present tax system and allows a man and a woman in the same household to be taxed independently? He is criticising a much-prized feature of our tax system.

Richard Ottaway (Conservative, Croydon South)

I am not criticising that at all. Independent taxation was introduced by a Conservative Government, and we are proud of it. I was pointing out that the Government had made a pig's ear of the system as a result of their independent taxation. How anybody can design a credit which gives a benefit to the better off but not to the less well off is beyond me. I see that the Parliamentary Private Secretary, the hon. Member for Gravesham (Mr. Pond), is grinning at that proposition. I am happy to give way to him, but I see that he considers it appropriate to walk off, as he does not want to back up the Government's argument. I come to my fifth point. Because of the Government's incompetence, there is likely to be a low take-up of the credit. The complexity of the forms to claim the children's tax credit is proving to be too great for many people. It is believed that there are about 2 million eligible families who have not applied for it. The figure comes from a written answer from the Treasury in February 2001. If Ministers want to bring the information up to date and tell us how many people are entitled to receive the credit but have not claimed it, I look forward to hearing from them.

Melanie Johnson (Labour, Welwyn Hatfield)

I intended to deal with that later when I replied, but I shall update the figures now for the hon. Gentleman. Some 3.5 million forms have already been returned by people claiming children's tax credit. That represents more than 85 per cent. of the eligible PAYE population. Claims are still coming in and we expect a steady flow throughout the year. People who claim later will not lose out, as their CTC will be backdated to the start of the tax year. We are delighted that the take-up rate is so high. The February figures quoted by the hon. Gentleman predate the start of the financial year and of the new tax credit. That may well account for the discrepancy, but it is a pity that he has come to the House without getting the figures updated.

Richard Ottaway (Conservative, Croydon South)

What a cheek for the Minister to tell us that hundreds of thousands of people entitled to claim the credit have not done so, and for her to claim that that is an achievement on the Government's part. It is a disgrace that hundreds of thousands of people are entitled to the credit but have not applied. It ill behoves the Minister to take that attitude.

Mark Hendrick (Labour, Preston)

I thank the hon. Gentleman for giving way again. He says that it is a disgrace that hundreds of thousands have not claimed CTC, yet his party criticises the Government for using publicity to the extent that they have.

Richard Ottaway (Conservative, Croydon South)

The reason why so many people have not claimed the credit is that the application forms are complex and hard to understand. That is why a simplified system under a future Conservative Government will be welcomed by all, particularly the hundreds of thousands of people who are entitled to claim but have not done so.

Andrew Bennett (Labour, Denton and Reddish)

I have been listening carefully to the hon. Gentleman, and it is nice to witness his conversion to concern for the under-fives and their families. Can he explain why, for the 18 years of the previous Conservative Government, no attempt was made to use the child benefit provisions to pay different rates to children of different age groups?

Richard Ottaway (Conservative, Croydon South)

We gave the married couples allowance, which was a universal benefit. [Interruption.] We did not eliminate it. It was there—

Melanie Johnson (Labour, Welwyn Hatfield)

rose—

Richard Ottaway (Conservative, Croydon South)

I have not given way to the hon. Lady. I am answering the hon. Member for Denton and Reddish (Mr. Bennett).

Andrew Bennett (Labour, Denton and Reddish)

We are not discussing the married couples allowance. We are dealing with a special benefit for families with children under five. I want to know why the Conservatives did not have that interest between 1979 and the last election. If they were so concerned, why did they not introduce a provision under the child benefit regulations that allowed them to pay a higher rate to particular age groups of children? Why the conversion now? Is it because they are in opposition?

Richard Ottaway (Conservative, Croydon South)

It is because the Conservative party is prepared to look to the future. We do not intend to dwell on the past and drag out old recriminations about why we did not do this or that, or whether amendments were tabled to previous Finance Bills to provide extra benefits for the under-fives—maybe yes, maybe no. We are looking to the future. The new Conservative party is prepared to go forward on proposals such as those contained in the new clause. We recognise that the under-fives are a group of children who need special help. We are targeting the under-fives because we believe that they are most entitled to the benefit.

Melanie Johnson (Labour, Welwyn Hatfield)

Can the hon. Gentleman explain to me and my hon. Friends why child benefit was frozen for a period and was not increased over the term of the previous Government as it has been by this Government, who have put record increases into child benefit? Will the hon. Gentleman confirm that the previous Government cut the value of the married couples allowance?

Richard Ottaway (Conservative, Croydon South)

Yes, I confirm that the previous Government cut the value of the married couples allowance. Our argument is that the children's tax credit has not been designed as well as it could have been. It should be a simpler and a fairer structure. As it is currently designed, the tax credit is a duplication. As the Minister knows, the 10 per cent. band covers the first £1,500 of taxable income. The CTC merely duplicates the relief that would be available at 10 per cent., which is not available to those who are entitled to CTC. Indeed, when the working families tax credit is taken into account, the children's tax credit is a triplication. The credit does not give parents with younger children the level of support that they need and deserve. A discriminating, inadequate, poorly thought out measure incompetently introduced is not the way to support the nation's children. The next Conservative Government will increase the children's tax credit for parents with children under the age of five by £200 per annum by 2003–04. We will devote £300 million of our £8 billion capacity for tax cuts to reducing the income tax payable by parents with a child under the age of five. That, coupled with our pledges to restore the married couples allowance, to simplify the system, and to arrest the advance of means-testing with all its complexity, means that only the Conservative party recognises the problems of the family and is prepared to do something about them.

Andrew Bennett (Labour, Denton and Reddish)

If it is so important to help the family, why should families have to wait so long for help?

Richard Ottaway (Conservative, Croydon South)

We have made it clear that we intend to phase the help in over the first three years of the next Parliament. The hon. Gentleman and the Minister know that we have accepted the Government's spending plans and tax plans for the first year of the next Parliament. We will introduce ax cuts and achieve reductions in public expenditure in years two and three. The figure that I mentioned is for 2003–04.

Dawn Primarolo (Labour, Bristol South)

Did I hear the hon. Gentleman correctly? Did he confirm that if by some disaster his party were elected at the general election it would be committed to spending cuts and tax cuts, and it would expect the electorat to believe that everything would remain the same?

Richard Ottaway (Conservative, Croydon South)

The Paymaster General makes it seem like I have revealed some secret. We have made it perfectly clear in countless press conferences that by 2003–04 we will have reduced public expenditure by £8 billion on the figure announced in the Red Book and in the comprehensive spending review last November. That is well-documented. It is our policy, and the hon. Lady knows what public expenditure we are committed to maintaining and where our adjustments will be made.

Mark Hendrick (Labour, Preston)

The Conservative party is willing to pay £1.6 billion to entice people into getting married. If those people decided to divorce, would it be willing to claw back all the benefits they received when they were married to prove that it was not a marriage of convenience?

Richard Ottaway (Conservative, Croydon South)

I am not quite sure what point the hon. Gentleman is making. If people were to divorce, they would not be entitled to the married couples allowance, because they would no longer be married.

Mark Hendrick (Labour, Preston)

The Conservatives would spend £1.6 billion of taxpayers' money to give people an incentive to get married. If they decided to get divorced a few years later, would the Conservative party claw back that extra benefit to prove that it was not a marriage of convenience?

Richard Ottaway (Conservative, Croydon South)

The hon. Gentleman is getting his figures in a twist. We are not proposing to spend £1.6 billion on the married couples allowance: the figure is £1 billion. I am araid that the hon. Gentleman's point about clawing back the benefit is lost on me. Perhaps he would write to me about it, and I will give him an answer.

William McCrea (DUP, South Antrim)

Is not it strange to talk about £1.6 billion or £1 billion to encourage people to get married? Labour Members seem to be sneering at the basic morality of marriage. Why should we sneer about the fact that people get married?

Richard Ottaway (Conservative, Croydon South)

The hon. Gentleman is on to something. For the past 20 minutes, there has been nothing but criticism and sneering at the concept of marriage. I should like mildly to correct the hon. Gentleman on one point. Our proposal is not a reward for marriage: it is a recognition of marriage. The Conservative party believes in marriage, whereas it is becoming manifestly clear that the hon. Member for Preston (Mr. Hendrick) does not.

Mark Hendrick (Labour, Preston)

Will the hon. Gentleman give way?

Richard Ottaway (Conservative, Croydon South)

This is a guillotined debate, and I have given way three or four times, so 1 shall not give way again. Families have suffered a systematic increase in taxation over the past four years. How does it help our children if their parents are taxed up to the hilt? If people smoke, drink, drive a car, have a pension or are married, they have been subjected to 45 increases in taxation during this Parliament. Such regressive taxes hit those on lowest incomes hardest—the people in Labour's heartlands. The average family pays more than £600 a year more tax under Labour. The Conservative party will reverse the trend. We will take 1 million pensioners out of taxation. We will make income from savings tax free for millions. That is the way to help our children. The Conservative party is in tune with the British public. We will reduce taxation and will liberate the nation's creativity.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

There may be a germ of a good idea in this new clause. The serious, wider policy debate is about the best way of providing support for families and children, whether couples are married or unmarried. The Government are gradually moving towards a coherent approach, and they may get there by hook or by crook. At the moment, the system is highly complicated, with child benefit, child care tax credit, working families tax credit and children's tax credits. Previously, we had the married couples allowance, which was available whether couples were married or not. This is a complex area, and the Finance Bill adds to that complexity by introducing the babies tax credit, which is available to families with children under the age of 1. Having created some of that complexity to meet their laudable objective of reducing child poverty, the Government are now trying to tidy things up. The Chancellor is working towards an integrated children's credit. As the Government move towards a more rational, streamlined approach to ensure that families have the resources they need to tackle child poverty, the question is whether it is a good idea to include families with children under the age of 5 in the proposals for an integrated children's credit.

Andrew Bennett (Labour, Denton and Reddish)

Do the Liberal Democrats think that it is a good idea? My impression from listening to the arguments about child benefit was that, although one could identify loss of earnings as a problem for families with very small children, after the first year small children do not cost families anything like as much as young teenagers.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful for that intervention, because I was just about to explain my party's position on this issue and the thinking behind it. We have some sympathy with the idea of rewarding families with children under the age of 5. That could be achieved through a premium on child benefit or through the mechanism in the new clause. The hon. Gentleman is right that children cost more in their first year. The Government were right to acknowledge that, although we believe that they could have gone about it differently—for example, through a maternity grant. Many of the costs in the first year are up-front and not spread through the year, as the proposal for a babies tax credit suggests. We understand that argument, but I suggest to the hon. Gentleman that there are not just costs but benefits in ensuring that a family has more money in those early years. It would give parents a real choice between staying at home to look after their children or going to work. > The Government have continually tried to give the impression that they want new mothers to go back to work as soon as possible: that has been part of the rhetoric and, indeed, part of the Government's tax and benefits strategy. I fear that they may have gone too far in advocating an early return to work for new mothers, and it is in that context that I see the germ of a good idea in new clause 2. It may well be—and I believe some sociological studies suggest—that it is beneficial to young children for their parents to have more contact with them in their earlier years, before they go off to nursery school, playschool or primary school. There is a serious policy question to be asked: should the tax and benefits system make it easier for parents to remain at home during those first five years? I hope that, in response to today's debate and as they proceed with the debate on integrated children's credit over the next year or two—I say that assuming that Labour will be returned to office—the Government will consider the issue in some depth. The commissioning of research, and a wider public debate, may be required to establish whether it makes sense—in terms of effects on the labour market, and in terms of effects on the welfare of families and children—to ensure that the money that we are putting aside is targeted at the early years. In many ways, the whole debate is about where resources should be targeted. One of the aims of the children's tax credit was to augment the funds going to families, without augmenting only a universal benefit—child benefit. The Government considered taxing child benefit, as the Conservatives had done before them, but for various reasons they decided against it, and ended up with the children's tax credit. Again, they were trying to find the best way of targeting resources more effectively. The new clause raises the important question of whether we should target resources at children during those early years. I think that there is a strong argument for doing so, but 1 should like the Government to commission further research, and I think that we should engage in a wider public debate. Only when we see the results of research will we know the facts. Perhaps we should target even more resources at families with children under five than the new clause suggests; perhaps we should be much more ambitious. That might be the quickest, most tax-efficient and most expenditure-efficient way of meeting the Chancellor's objective of halving child poverty in 10 years. As I have said, there is a serious issue behind new clause 2. I hope that, rather than taking the partisan, political point-scoring route down which the hon. Member for Croydon, South (Mr. Ottaway) seemed to be tempting Ministers, the Government will address themselves to what I consider to be the really serious policy issue.

Melanie Johnson (Labour, Welwyn Hatfield)

Let me begin by responding to the closing remarks of the hon. Member for Kingston and Surbiton (Mr. Davey). I think it useful for our policies to be based on evidence; indeed, work continues in the Treasury in an attempt to ensure that they reflect the real needs of society, in terms of child poverty, as much as is possible at any one time. The hon. Member for Croydon, South (Mr. Ottaway) did not take into account the Government's introduction of a number of measures reflecting the extra costs incurred by the parent of a child under five. One way of structuring such measures is to take account of the cost of children over lifetime— which has been done, in that there is £5 more child benefit for the first child, throughout its lifetime, than there is for second and subsequent children.

Richard Ottaway (Conservative, Croydon South)

Does the Minister think that she is doing enough? Does she not think that more could be done for the under-fives?

Melanie Johnson (Labour, Welwyn Hatfield)

I intend to deal with that in much more detail. Let me say initially, however, that we have reduced the number of children in poverty by 1.2 million during the life of the current Parliament. That includes many children under five, as it includes many over five, and it represents a substantial improvement. The increase in maternity pay from £60.20 to £100, the extension of paid maternity leave from 18 to 26 weeks and the introduction of two weeks' paternity leave in 2003 will help the parents of under-fives. As the ex-parent, as it were, of three under-fives, including twins, I speak with personal experience of the substantial needs of those with young children in the house, in terms of both income and time.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The Minister—who, I am sure, is not an ex-parent—mentioned maternity and paternity leave. Have the Government considered parental leave? Some countries give parents leave that they can take later in their children's lives, which is often limited to the first five years. That provides greater flexibility: it can be used, for example, when a child is ill.

Melanie Johnson (Labour, Welwyn Hatfield)

The idea has been suggested in a number of quarters, and is being discussed. Consultation is taking place. As I said at the outset, we are keen to give the best possible support to families with children in general, but to those with children under five in particular. The Opposition seem to want to increase children's tax credit by £200. Lest, by any quirk of fate, the Opposition might be in charge of a Finance Bill after a general election—unlikely as that may seem now—I should point out that, as drafted, the new clause would reduce it by £20. As the sum in question is 10 per cent. of an allowance, the figure should be £2,000. The Government will, in fact, increase children's tax credit by a further £520 in the year of the child's birth, and will do so from 2002 rather than 2003—which is what I understand the hon. Gentleman to propose, assuming that he is thinking in terms of £ 200 rather than £20. What we are already doing is far better than what the Opposition suggest. It is more, it is earlier, and it focuses resources on the time when parents are most in need.

Richard Ottaway (Conservative, Croydon South)

The Minister is right: we intend the amount to be increased by £200. We have taken into account the increases in the pipeline, and this is over and above those increases.

Melanie Johnson (Labour, Welwyn Hatfield)

Is it over and above the introduction of babies credit?

Richard Ottaway (Conservative, Croydon South)

Yes.

Melanie Johnson (Labour, Welwyn Hatfield)

That is interesting. I thank the hon. Gentleman. I will come to the £16 billion later. The hon. Member for Kingston and Surbiton has urged other courses on me, but I cannot resist returning to some of the slightly wider political issues, on which we have been much tempted by the hon. Member for Croydon, South. First, I turn t the married couples allowance, on which he spent considerable time. The so-called reintroduction of the married couples allowance is probably a complete misnomer. For the Conservatives to say that the new clause would reintroduce the married couples allowance involves considerable spin. It would do nothing of the sort. It is a proposal for married couples to transfer their personal allowance between themselves. It does not benefit many married couples, or indeed many families with children. Eight out of 10 married couples would gain absolutely nothing from the proposal; eight out of 10 families with children would gain nothing from it. For example, single parents and married couples who were both in work would gain nothing, despite the fact that the hon. Gentleman claimed lie supported marriage and that the proposal was partly about that. Married couples with secondary school-aged children would gain nothing from it because of the cut-off at the age 11. I do not know what Conservative party policy is on helping children and families out of poverty where the children are aged over 11, because the new clause does not address their needs. This Government have been committed to helping families with children and have introduced the working families tax credit and the children's tax credit, and those policies will lift 1.2 million children out of poverty.

Andrew Bennett (Labour, Denton and Reddish)

Does my hon. Friend accept that Conservative Members have never explained why they did nothing about this matter throughout all their years in government? The House debated the cost of children in 1976, when Baroness Castle introduced the child benefit legislation. The then Conservative Opposition said that they would like to do more for children in families, yet they did nothing for 18 years.

Melanie Johnson (Labour, Welwyn Hatfield)

I am grateful for my hon. Friend's recollection of a time when I was not an hon. Member, but I do remember that nothing was done. In proposing the new clause, the Lon. Member for Croydon, South did nothing to answer questions that my hon. Friend, I and other Labour Members put to him about why these issues, by which he apparently sets so much store now, were not addressed over those 18 years, when there was ample opportunity to do so.

Howard Flight (Conservative, Arundel and South Downs)

May I make two points? First, the proposal for married couples is additional to existing provision, so it is not a debate about taking something back, or whether to have A or B. Secondly, it is specifically targeted at married couples with children under 11, partly to offset some of the bias against mothers, or fathers for that matter, who wish to stay at home to look after children. In particular, it is designed to give mothers a little more flexibility. We can debate what was done in the past, but the Minister is wrong to seek to cast the proposal in a negative light. She may disagree with it, but it is specifically tailored to meet the needs of a group of people who wish to stay at home a little longer to look after their children while they are younger.

Melanie Johnson (Labour, Welwyn Hatfield)

Yes, but that is exactly why I said that calling it a reintroduction of the married couples allowance was a very spun description. The hon. Gentleman accepts that it is a targeted measure and that it does not help many who are married, or, indeed, many who have children. As I said, eight out of 10 married couples and eight out of 10 families with children will gain nothing. [Interruption.] The hon. Member for Croydon, South is burbling some further remark from a sedentary position. I did not catch exactly what it was and he may want to intervene again, but may I remind him that it is this Government who have increased child benefit to £15.50 a week for the first child and £10.35 a week for subsequent children? That is a 26 per cent. real-terms increase over the life of this Parliament. People will have to judge for themselves—they are getting the opportunity not only to make that judgment, but to act upon it—whether our record of increasing child benefit by record amounts stands up against the record of the Conservative Government, who promised tax cuts and hiked tax up, who promised to help people but put 3 million on the dole and who froze child benefit; they did not increase child benefit in line even with inflation at various periods. I am proud to stand in support of what the Government have done. Our record speaks for itself.

Richard Ottaway (Conservative, Croydon South)

I presume that the Minister is advancing an argument against the new clause She has to say why she does not believe that more can be done for families, and why £200 a year, or £4 a week, would not help children, rather than going on about the past.

Melanie Johnson (Labour, Welwyn Hatfield)

I have already said why I believe that it is better to take the action that we are taking through the various measures that we have introduced. which support families, and why increasing support for children in their first year of life, which we have just introduced, is a valuable support.

Mark Hendrick (Labour, Preston)

Given that the hon. Member for Croydon, South (Mr. Ottaway) has accepted that no such comparable measures were introduced in 18 years of Conservative government and that we should look forward to "a new Conservative Government", will my hon. Friend be willing to invite him to intervene in order for him to apologise for that omission over 18 years?

Melanie Johnson (Labour, Welwyn Hatfield)

I am grateful to my hon. Friend for his suggestion. I would be happy to take him up on it, but I appreciate, as he will, that the hon. Member for Croydon, South is well aware of the invitation that has just been extended to him and is not leaping to his feet. I think that we will all draw our own conclusions from that. The introduction of a new children's tax credit at £10 per week from April is worth £520 a year—more than twice the value of the married couples allowance that it replaces. From next April, the children's tax credit will be raised to £20 a week in the year of a child's birth, which will in effect double the allowance in the first year of a child's life. I was much amused by the remarks of the hon. Member for Croydon, South on the form that is required. It is easy to allege that forms are complicated, but that was an absolute load of nonsense. The form was thoroughly tested with the help of 1,000 volunteer taxpayers—indeed, I am told that the forms that the Inland Revenue has received have been completed to a very high standardand— and it asks for the most basic information, such as the name, the date of birth of the child and the partner's national insurance number. It does not ask claimants to detail their income or to provide complicated details. 7.30 pm Many people have completed the forms quite satisfactorily. As I said, 3.5 million claims have been made, encompassing 85 per cent. of the eligible PAYE population. The hon. Member for Croydon, South probably does not want me to remind him of the fact that, despite years of work in trying to improve take-up, family credit had a much lower take-up rate than the children's tax credit has had. The Government would like take-up to be even higher. As my hon. Friend the Member for Denton and Reddish (Mr. Bennett) said when commenting on publicity, the Government will do everything that we can to ensure that those who, for one reason or another, are not aware of the credit or have not yet claimed it do so. We are working on that, and the forms are continuing to come in.

Richard Ottaway (Conservative, Croydon South)

The Minister makes it sound as though complaints about the form's complexity are being made only by the Opposition. I was quoting the Association of Chartered Certified Accountants, which presumably knows what it is talking about. It said that the application form is very complex. For those not used to filling in tax forms, the task may prove to be too arduous and some will lose out on an allowance altogether.

Melanie Johnson (Labour, Welwyn Hatfield)

I am completely mystified by that statement, but I am sure that we could quite quickly find the hon. Gentleman a copy of the form. The details required could not be simpler or more basic, and it is unlikely that, in supplying them, taxpayers would have to do other than perhaps look up their national insurance number if they did not know it.

Howard Flight (Conservative, Arundel and South Downs)

The Minister made a similar point when I spoke about this issue in a previous debate. I think that the form that is being referred to—I remember receiving one myself—is the one sent out a year earlier to determine whether people would qualify for the credit. That form went to the heart of the problem about how much each partner earned and whether they would be ineligible for the credit because one partner was earning too much. It was extremely difficult to complete, and if one did not complete it correctly one did not receive the instant form. Half a million people, including several of my constituents, never got round to submitting their claim promptly in April because they had not completed the previous pre-qualification form.

Melanie Johnson (Labour, Welwyn Hatfield)

As I said, 85 per cent. of the eligible PAYE population have satisfactorily sent in their forms, we have had a very high response rate, and the forms are still coming in. The hon. Gentleman may be referring to another form, but the fact is that anyone claiming the children's tax credit has only to supply some very basic information. The tax office will take that information, assess the tax credit and make it available to claimants as a tax cut in their pay packet. The hon. Member for Croydon, South made the remarkable allegation that the Government have shown a lack of support in addressing the issue of child poverty. I simply remind him that the previous Conservative Government not only cut the married couples allowance, but froze child benefit and increased taxes. The hon. Member for Croydon, South also talked about the £8 billion worth of "adjustments", which seems to be more Conservative spin for cuts, that a future Conservative Government would make to our spending plans. We do not accept the £8 billion figure simply because we are working from the figures given by the right hon. Member for Kensington and Chelsea (Mr. Portillo) in a press notice that he issued last summer. The notice described a cuts guarantee of £16 billion, which would entail a £25 million public expenditure reduction for every constituency in the country, massively hitting schools, hospitals and other services.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am intervening to try to be helpful to the Minister. The mass unemployment of the 1980s over which the then Conservative Government presided caused the greatest damage to the fight against child poverty. If the Government have achieved only one thing by adopting the Liberal Democrats' policy of an independent central bank, thus ensuring stable economic growth, it has been to reduce unemployment by 1 million. That has constituted the Government's most effective attack on child poverty. I therefore congratulate them on being sensible enough to adopt Liberal Democrat policies.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Before the Minister responds to that, I point out that there is a grave danger of this debate developing into a general economics debate. Will the Minister and all other hon. Members please focus on new clause 2?

Melanie Johnson (Labour, Welwyn Hatfield)

I shall certainly do my best to do that, Mr. Deputy Speaker. I believe that the hon. Member for Kingston and Surbiton has made a valuable point about the Government's contribution in getting people into work and making work pay. Both of those achievements have made very valuable contributions. I am puzzled by Liberal Democrat Members' lack of support for the new deal, which has certainly played a crucial role in cutting unemployment and addressing the issue of child poverty. I should like finally to outline the Government's record on those issues. Families with children will be on average £1,000 a year better off from all the measures introduced in this Parliament. A family with two children now faces the lowest tax burden since 1972. A single-earner family on average earnings of £25,000 a year with two young children will be £520 a year better off, and a single-earner family on half average earnings of £12,700 a year with two young children will be £3,000 a year better off. A family on income support with two young children will be £1,670 a year better off. We have addressed the issue of child poverty in all those ways. We have also, as I said, focused some of those resources specifically on under-fives. We must not forget what we have done to address the issue, including introducing the working families tax credit — which, on average, compared with the previous family credit system, is worth £35 a week more. By such measures, we have succeeded in lifting 1.2 million children out of poverty. The policies being advocated by the hon. Member for Croydon, South are set within the context of an absence of a fiscal framework and fiscal rules. He does not answer the question of where the spending cuts that are necessary to fund tax cuts will fall or address the issue of continuing economic stability. We are able to support families and children because of economic stability and the fact that we have so many more people in work and have cut unemployment to its lowest levels for many years. I therefore urge the House to reject new clause 2.

Richard Ottaway (Conservative, Croydon South)

In her final remarks, the Minister said that new clause 2 was set outside any framework and any rules, but it is set within the context of the Government's own framework and rules. As I said at the beginning of the debate, the new clause is part of an £8 billion tax reduction package. There has been much childish merriment among Labour Members about the nature of that £8 billion, but I make it clear that the Government's plans as outlined in the Red Book are to increase public expenditure by £72 billion by 2003–04. A future Conservative Government would increase spending by £64 billion by 2003–04, thereby creating the £8 billion difference. To prevent the Minister from continually repeating the mistaken figure of £16 billion over the next four weeks, after the debate I shall give her the precise figures supporting the £8 billion figure. That is what we stand on, and that is what we intend to do. There is no need for her to repeat the figure of £16 billion again, because that figure is wrong. The most important thing that has happened today is that the Minister has singularly failed to say why this proposal, designed to help the children most in need of assistance, the under- fives, should not be accepted. She says that she stands on her record, and that the Government are doing what they can to help that group of children. That is complacent, inadequate and unacceptable. If we were not working to a timetable motion I would seek to divide the House. but time is short and there are other new clauses to be debated. I therefore beg to ask leave to withdraw the motion. Motion and clause, by leave, withdrawn.

EXEMPTION FROM CAPITAL GAINS TAX

Howard Flight (Conservative, Arundel and South Downs)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this we may take new clause 4—Substantial shareholdings: deferral of capital gains tax—

Howard Flight (Conservative, Arundel and South Downs)

The two new clauses would provide alternative measures to complete the correction of the major mistake in the Government's original Budget proposals last year. The House will remember that the Chancellor came to the House with proposals to tax the offshore mixing companies used by multinationals based in Britain. The original proposals would have made Britain one of the most unattractive places for multinationals to be based, whereas it has been, after Holland and the United States, one of the most attractive. They would have led, in due course, to companies setting up elsewhere and moving abroad, causing jobs and tax revenue to be lost. Fortunately, after many—not only the Opposition but businesses and accountants—had spoken out against the proposals, the Government were forced to accept the objections and change their proposals. Last year's Finance Act corrected the error by introducing the practical and sensible arrangements for onshore pooling.

Dawn Primarolo (Labour, Bristol South)

Did the hon. Gentleman agree with the mechanism of offshore pooling and the mixer companies that were used as holding companies to avoid tax in this country?

Howard Flight (Conservative, Arundel and South Downs)

The Paymaster General is well aware that international businesses have been in discussion with the Inland Revenue for more than a year—quite sensibly, if that is what they thought they had achieved—to bring about onshore pooling arrangements. because they did not like having to use offshore mixers to achieve fair tax rates on their international earnings. It was the need for onshore pooling arrangements, which did not then exist, that led to the use of offshore mixers. That usage was established and well known by the Revenue. It was a pity that when the issue was moving towards being satisfactorily resolved, the original Budget proposals did not pick up on that, but tried to be clever. Fortunately, the Government were eventually persuaded to see the light and change their line.

Dawn Primarolo (Labour, Bristol South)

That was not the question that I asked the hon. Gentleman; I asked whether he was in favour of the use of mixer companies for offshore pooling. His party was in power for 18 years, and did nothing about it. Which does he favour: offshore mixing, which his Government presided over, or onshore mixing, which this Government have introduced?

Howard Flight (Conservative, Arundel and South Downs)

The Paymaster General, who has played her role in this Government extremely competently, must surely accept that they have now been in power for four years, that we are coming up to another general election, and that what happened in the past is out of date. My answer is that probably, provided that the Government accept new clause 3 or 4, onshore pooling in its entirety is more desirable, because it is overt and within the control of the UK Government and tax authorities. 7.45 pm The question of how to deal with the tax position of multinational companies has emerged over the years. There were far fewer multinational companies 20 years ago, and the idea of Britain being an important base for multinational companies has developed dramatically over the past 10 or 20 years.

Dawn Primarolo (Labour, Bristol South)

rose—

Howard Flight (Conservative, Arundel and South Downs)

If the hon. Lady is going to ask me why the Conservative Government did not introduce onshore pooling as an alternative to offshore mixers, my answer is that first, I personally was not a Member of the House at that time. and secondly, that we are now dealing with the present, not the past.

Dawn Primarolo (Labour, Bristol South)

I entirely accept that Opposition Members were not brought up, as I was, to believe that we are all responsible for our past as well as for our present—[Interruption.] I am perfectly prepared to say that; it would appear that my past is scrutinised quite a lot by hon. Gentlemen. The hon. Gentleman has Made the Government's for us, because he has just said that in more than 18 years, the previous Government failed to see or act on the development of the new economy, and so did nothing about offshore pooling, which became an ever increasing problem. They did nothing about deferral or exemption, either. Perhaps he will tell us why.

Howard Flight (Conservative, Arundel and South Downs)

The Paymaster General is being unnecessarily and rather ineffectively aggressive, in comparison with her normal behaviour. The issue is simple. The practice of using offshore mixers developed with the knowledge—indeed, to some extent with the collaboration—of the Inland Revenue over the past 10 years or so. However, its time had come: it was time to make a change and bring the arrangements onshore. The fruits of the offshore mixers were beneficial to the United Kingdom, because they enabled us to collar much of the multinational capital business. They therefore acted in the national interest. However, the time had come to move the activity onshore. The two new clauses would complete that process fairly, and along the lines that, as I am sure the Paymaster General would be forced to agree, the Government undertook to follow during the debates on the Finance Bill last year. Indeed, the hon. Lady herself has admitted that the Government have been consulting on the issue that the two new clauses address almost since that Finance Bill became the Finance Act last summer. I repeat that if they wish to achieve both fairness and a continuing competitive environment for multinational holding companies in the UK, the Government need choose only one of the two new clauses. The provisions are needed because holding companies will have to reshape themselves into a flatter structure than has typically prevailed under the old offshore mixer arrangements. They will be moving from what was in effect a double tax relief regime to the new onshore pooling arrangements, under which the relevant holding company in the UK will be required to hold the international subsidiaries directly. New clause 3 would provide the route of exemption from capital gains tax when such a UK-based holding company reorganises its subsidiaries. In essence, it would make what had been a subsidiary of a subsidiary a direct subsidiary of the holding company. That probably represents the simplest and fairest solution to the problem, but we have also put forward an alternative in new clause 4, which would provide roll-over relief. The amelioration of the tax position resulting from the Government's required restructuring from offshore to onshore pooling was promised by the Government as part of their package on double tax relief and controlled foreign companies. The Paymaster General herself has advised that the Government continue to consult on the matter. I suggest that it is now time to act, because the Government have had a year to consult on that important technical matter in the national interest. My hon. Friend the Member for West Dorset (Mr. Letwin) raised the issue in discussing clause 79 in Committee and she, while not promising to act, said: The Government are consulting on changes to the tax on gains made by companies and disposals of substantial share holdings with a view to introducing either a deferral or an exemption."—[Official Report, Standing Committee A, 8 May 2001; c. 160.] The new clauses modestly request that the Paymaster General make a decision and tidy up the loose ends in the national interest and to complete the new arrangements for multinationals. If she chooses not to accept either new clause, I hope that she will give a firm undertaking that the issue will be addressed. A year's consultation is surely sufficient.

Dawn Primarolo (Labour, Bristol South)

I am afraid that I must disappoint the hon. Gentleman. It will not surprise him to learn that should he press his new clauses to a Division, I shall ask my hon. Friends to oppose them. In all truth, he knows why that is a reasonable position in what is a complex area of taxation. I am sure that he will also accept that the Government, having set such a splendid record in the past four years in consultation on, and reform of, those complex areas, are aware that the question of whether deferral or exemption should be used is of considerable interest to business. We must ensure that our proposals are relevant to businesses today and will stand the test of time in a competitive and important sector of the economy. I gently point out to the hon. Gentleman that his Government failed to address any of the issues before us. Organisations such as the Confederation of British Industry pressed for changes to be considered, but the previous Government failed to act. I understand their reluctance to act on a highly complicated area of taxation, but it is simply not true that this Government have failed to deal with the issue. Nor was it reasonable to expect that the Government should deal with it at the same time as the changes to double taxation relief. The hon. Gentleman was a member of the Finance Bill Committee last year as he was this, and he will know well that the double taxation relief changes were enormously complex and challenging, not only for Inland Revenue officials and businesses advising them, but for Members of Parliament. I cannot accept that at the same time as dealing with that highly complex legislation. we should have discussed a pick-and-mix choice between deferral and exemption. Matters have moved on, to the considerable benefit of business, since the two issues of double taxation and deferral were linked in May 2000. In June 2000, the Government announced the double taxation rules allowing the onshore pooling that the hon. Gentleman mentioned. The pre-Budget report raised the possibility of an exemption as an alternative to a deferral of capital gains tax on the disposal of substantial share holdings. Businesses are very interested in that alternative, but they wish to see more work done on it. The Government have made it clear, as I said on Second Reading, that we will introduce the changes in the 2002 Finance Bill. That is not that long to wait.

Howard Flight (Conservative, Arundel and South Downs)

On a technical matter, will that timetable of dealing with the outstanding issue in the 2002 Finance Bill fit with the period required for restructuring to onshore pooling? If it does, and companies will not be left for a year in no man's land, that will be a satisfactory solution.

Dawn Primarolo (Labour, Bristol South)

I rely on representations made to the Government in the consultation, but I am not aware that any company has claimed that its transactions will be affected and that the issue needs to be dealt with immediately. Businesses are saying that they want further consultation. Technical notes are being discussed in considerable detail. and the pre-Budget report made it clear that we are considering deferral or something better. The benefits of deferral have not been doubted. The new clauses would encourage the Government to make legislation in haste. The hon. Gentleman wants us to pick one of his options, say, "That'll do", and add it to the Bill. I know that if we did, next year he would criticise the Government for poor drafting, even if it was his drafting. The matter is proceeding and we want to legislate in 2002, but we also want to ensure, through consultation with business, that our proposals will be a good fit now and help companies as well as standing the test of time. He will agree that our proposals must ensure, for example, that intellectual property rights are held here in the UK and that this is the most competitive place for businesses to be located, with the best environment for them to develop. If the hon. Gentleman agrees with those objectives, he should withdraw the new clause and await the outcome of consultation with business—something that he frequently implores the Government to do. In that way, we will achieve an agreed way forward, rather than a quick fix this year that will not work.

Howard Flight (Conservative, Arundel and South Downs)

I briefly take issue with two things that the Paymaster General said at the beginning of her remarks. First, she boasted of the Government's splendid record of consultation with business on this matter, but I remind her of the outrage felt by business when the original proposals were introduced by the Chancellor. They caused business's love affair with the Labour party to fall apart. As I commented earlier, it is fortunate for the good of the country that the Government have changed their mind. Secondly, the Paymaster General is not taking the point that, in the past, offshore mixers worked. They enabled the UK to do extremely well in the multinational headquarters business. The time had come for something better, but it was not the case that a nagging problem had not been addressed. However, I was glad to hear the Paymaster General's response. I may have missed something in one of the earlier debates on this matter, but the seemed to say a little more than she did in Committee She did not respond completely to my main point—that businesses will have to restructure to move from offshore mixers to onshore pooling and that they must not be put in a void for a year while they wait for the issue to be resolved—but she went some way towards providing an answer to it. The next Conservative Government will get on and deal with the matter. If that does not happen, the Paymaster General has promised that it will be dealt with in next year's Finance Bill. On that basis, I beg to ask leave to withdraw the motion. Motion and clause, by leave, withdrawn.

ENVIRONMENTAL PROTECTION REBATES SCHEME

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this, it will be convenient to discuss the following amendments: No. 1, in clause 16, page 12, leave out from line 18 to end of line 8 on page 41. No. 3, in page 12, line 37, at end insert— '(7) The provisions of this section shall cease to have effect on 5 April 2004 unless the Treasury makes provision by order made by statutory instrument for its continuation. (8) The Treasury shall not make an order under subsection (7) above unless a draft of the order has bean laid before Parliament and approved by resolution of the House of Commons.'. No. 2, in schedule 4, page 102, leave out from line 18 to end of line 17 on page 143.

David Heath (Liberal Democrat, Somerton and Frome)

Returning to the aggregates tax seems like revisiting an old friend. The Financial Secretary will recall that I tabled an amendment and the new clause in Committee. They were connected: the amendment would have required the Government not to introduce the aggregates tax until they had introduced a rebate scheme, while the new clause would permit the Government to apply that rebate scheme to companies subject to the levy. I shall not waste the House's time going over the arguments that I adduced in Committee. To my mind, they still hold true. I still believe that there is a serious design fault in the Government's proposals that will do enormous damage to the quarrying sector and to related industries, such as the concrete industry. Firms in my constituency, for example, will not benefit from the proposals. The question before the House today is whether there should be a rebate scheme at all. What is the purpose behind the Government's proposed aggregates levy? We have heard the Government's justifications for it. The Budget 2000 statement said that the tax would generate reductions in noise, dust, visual intrusion, damage to wildlife habitats and other environmental impacts. Elsewhere, the Treasury stated in evidence that the encouragement of recycling is the main tax purpose. We have heard also that the tax would reflect the environmental cost of quarrying. If the tax did that, it would be fine. However, I live in a quarrying area on the edge of the Mendips, and I know that it is far from obvious that the tax will bring with it any of the predicted benefits. It is also hard to see how it will improve the local environment. The tax could easily improve local environments if there were a direct link between the performance of the quarrying companies in terms of what they do to protect or enhance the local environment and the protection of environmental amenities enjoyed by local residents. At present, residents suffer from all the ills that the Government cite as factors behind the introduction of the tax. The new clause would provide the appropriate mechanism to make the tax work. It would institute a system of rebate against the aggregates levy for companies prepared to take the necessary steps with regard to their processes, or to the infrastructure by which they quarry stone or transport it away. The new clause would reward that endeavour. The Government's problem is that, without a rebate system, the tax will not achieve its stated objectives. That point has been made many times, in the House and outside it. Industry representatives and independent commentators share an opinion on this matter. The classic quotation is from Professor David Pearce, who is something of a guru when it comes to environmental taxes. I remember discussing his proposals in connection with the original Environmental Protection Act 1990. Mr. Chris Patten was Secretary of State for the Environment in the then Conservative Government, and he toyed with many of David Pearce's ideas, but did not bring many of them to fruition. In July 1999, Professor Pearce conducted the only independent research into the proposal, and said that we conclude that an aggregates tax is an extremely inefficient way to try and secure an environmental target. That was his verdict, but it is not the end of the story. A rebate scheme would deal directly with the problems. New clause 5 covers the salient points. It provides that the Treasury could bring forward a statutory instrument to introduce the rebate scheme, but does not prescribe the exact form of that order. If the process turns out to be difficult, as the Financial Secretary has claimed, the new clause would permit time for the task to be accomplished. In Committee, I argued that the matter was urgent, but the urgency argument is not relevant to the new clause. The new clause does not suggest that there should be a blank cheque for the companies involved; instead, it provides that the Secretary of State would determine the environmental measures to be taken. In other words, the Secretary of State would compile the tariff list of suggested measures that could and should be put in place, which would then be set against an audit of what had been done. The new clause would link environmental protection measures to the process of commercial exploitation of aggregates, and tie them to the location of the quarrying. A criticism strongly voiced in my part of Somerset, and repeated in Leicestershire, Derbyshire and the other main quarrying areas, is that people do not see how they would benefit if an aggregates tax were introduced. They fear that the benefit would apply a lot further away, and not locally. The new clause would also require that any benefit should be verified and certified by an external body prescribed for that purpose by the Secretary of State. Again, it would not allow companies merely to claim to have done something: any action would have to be proved before the rebate came into effect. That seems a sensible way forward. I cannot see that the Government would wish to produce any argument against that proposition, other than that it does not use their wording. If they intend to introduce a rebate scheme in the future—I sincerely hope that they do, and there is evidence that at least one other Department is keen on it—the new clause would provide them with a legal basis for doing so without bringing back to the House further primary legislation in the form of provisions included in a Finance Act or a separate Bill which would delay the process and make matters more difficult. Even if the Government are not prepared to accept the words that I suggest, I hope that they will at least give a clear indication that they are committed to doing what they said they wanted to do and what they know they have to do to make the aggregates levy a genuine environmental tax rather than an imposition on the industry which has no direct environmental benefit and is to the detriment of the industry's commercial interests and competitiveness. The quarrying industry and those who are concerned about the local environment in the areas where quarrying takes place are waiting to hear from the Government a clear commitment that they intend to introduce this scheme and that it is being done as a matter of urgency. It would be absurd to introduce the aggregates levy without the only element that provides for local environmental benefit.

Oliver Letwin (Conservative, West Dorset)

First, let me say a few words first about the proposition of the hon. Member for Somerton and Frome (Mr. Heath). For reasons that I will come to, I am not—as the hon. Gentleman and others may know from the Committee stage and Second Reading—a great fan of this tax. However the logic of the hon. Gentleman's argument is difficult to dispute. The Financial Secretary has said on numerous occasions that he will continue discussions with the industry about the possibility of introducing an exemption scheme. If he is so minded, it must be true, as the hon. Member for Somerton and Frome said, that it would be convenient to avoid tile necessity for subsequent primary legislation. Indeed, it may be more than merely convenient—it may be necessary for the survival of large parts of the industry that it be possible to introduce the exemption scheme without the need for the laborious process of primary legislation. We ought to hear today—although I harbour a doubt that we will—that the Financial Secretary has at last capitulated to the demands for at the very least an enabling clause of the kind proposed by the hon. Member for Somerton and Frome. The Financial Secretary said in Committee not a day or two ago that an enabling clause did not commit the Government to very much. That is true. The resistance that the Government have so far displayed towards an enabling clause, however, suggests that they are not so convinced as they make out and that they will eventually introduce an exemption scheme. That would be lamentable I hope that the expectations that I have voiced will be shown to be false and that the Financial Secretary will accept the hon. Gentleman's new clause. As we have said repeatedly during the passage of the Bill and those parts of it relating to the aggregates levy, even with the exemption scheme, we strongly oppose the introduction of this new stealth tax. That is why we have tabled amendments Nos. 1, 3 and 2. At this point, I should declare an interest the nature of which has always eluded me, but which might exist. 8.15 pm I am clear that there is a deficiency in the tax, even in the rational version of it entailing the hon. Gentleman's proposed exemption clause and regulations that provide for exemption. That version is rational because it might at least achieve the environmental effects that the tax purportedly seeks to achieve. In that, I agree with the hon. Gentleman. Our objection is to the triadic rhythm, which runs like this: the Government announce a tax, in the nature of a fine, for a particular segment of British industry. The second step is that the Government announce that people who behave well will not be subject to the fine. The third step is that the Government institute officials, in a more or less arbitrary fashion, to negotiate with particular parties in the industry sector about whether they are sufficiently good boys not to pay the fine. That is not how to govern the country. We do not believe that there should be pre-ordained fines or that officials should be put in the position of judges, seeking to determine whether particular firms have behaved sufficiently like good boys or girls to avoid such fines. I grant that it may be effective—in that, I agree with the hon. Gentleman—but I do not think that it is proper. It is not the right way in which to go about achieving the aim. If the aim is essentially regulatory, let the device be essentially regulatory. If the aim is to create a market or charging system, let the device be a charging system of tradeable permits or the like. If the aim is to create an economic incentive, let it be an incentive and not a penalty. None of those devices is the same as a fine, which people can avoid if they behave well in the judgment of some official. That is a route, not to immediate disaster, but gradually, by degrees, to an arbitrariness in government which I think even Labour Members will come to regret.

Stephen Timms (Labour, East Ham)

I am listening to the hon. Gentleman's discourse with interest. Would he include in the list of avenues that might be considered the price mechanism, which applies in this case? I should have thought that, on reflection, he would agree that there could be an important role for the price mechanism in achieving environmentally beneficial results.

Oliver Letwin (Conservative, West Dorset)

I do not wish to prolong the debate, but I should like briefly to address the really interesting issue raised by the Financial Secretary. I suspect that all three parties are at one in believing that economic incentives, including pricing mechanisms, are in some circumstances appropriate for achieving desirable environmental effects. The problem about this tax, and particularly in relation to the way in which it is being implemented, is that it is not a pricing mechanism, because the elasticity at the other end—the supply elasticity—does not exist. The tax will not reduce the propensity of people who are building buildings to use less that is made with aggregates, because that cannot be done. If there were a serious elasticity of building, the tax would slightly reduce the amount of building in the United Kingdom. I judge the effect to be minimal, however. The Financial Secretary has never brought forward an elasticity study suggesting anything to the contrary. Cross-elasticities, on the other hand, may be considerable, and I shall come to that. The problem about the tax is that what elasticity effect it has is at the wrong end. It will drive out domestic aggregates production in favour of imported aggregates production, in the form of asphalt arid pre-cast concrete. It will destroy British jobs, and in that, it will indeed be a price signal. However, that is not the price signal that the Financial Secretary wants to send, and the tax, in its present form, will have no other serious effect. So although we agree with the hon. Gentleman about the principle, he has unfortunately not translated that principle into practice in this instance. That leads me directly to the essential point that I want to make tonight. I do not want to rehearse at length all the arguments that we made on Second Reading and in Committee of the whole House about this tax; that would be tedious. I do want to place on the record and put in the mind of the Financial Secretary, who has exhibited a tendency to think about these things and to reach conclusions after debates, a series of answers to his response to a point that I made in the Committee of the whole House. I argued in the Committee, as l had on Second Reading, that the effect of the tax would be seriously to displace employment from this country to southern Ireland and the northern continental shelf. The Financial Secretary said—I know from experience that when he says these things, he means them—that he did not believe that proposition. He said that he did not believe that the £1.60 a tonne of tax, even with the differential that it created with the zero tax rate in southern Ireland or the 5p tax rate in France, would be sufficient to offset the transport cost disadvantage of displacing production to those locations outside the United Kingdom. To be absolutely fair to the Financial Secretary, because this is no party political game and I want to try to get this straight, I believe that he made that argument particularly about northern Europe—the northern continent. He was less firm about southern Ireland. I believe that he did take on board the issue in relation to southern and Northern Ireland. I stress here that, essentially, we are dealing with the commodities that are made of aggregates, as opposed to the aggregates themselves. The aggregates themselves are correctly subject to tax if imported, just as if produced domestically. I have looked into that assertion by the Financial Secretary since those debates in the Committee of the whole House, and I have consulted the industry. To say that I have done so widely would be hyperbole. I have consulted a number of people in the industry—among the small producers and the larger producers—who are very well informed, to try to get a sense of whether there is a serious problem of differentials. I want to try to identify briefly why I believe that there is a very serious problem of differentials. Eight tenths of this argument depends on understanding that the £1.60 is not the end of the story. The first part of that part of the argument stems from the fact that £ 1.60 a tonne is a true assessment of the average cost of the tax to the producer, but, as we have had occasion to note in our rather lengthy debates about this matter—although not, alas, sufficiently lengthy in some cases—the production of aggregates is a highly complex business in the sense that many things are being produced simultaneously, some of which are the intended product and some of which are by-products. The Financial Secretary is as familiar with that reality as we are. It is impossible to sell by-products and low-grade waste—in Committee, we had a long disquisition about dust—at full price. They cannot be sold at much above the price at which they are currently sold. That is what I am told by both sides of the industry—the aggregate producers and the construction industry. As a result, the average cost of production of the high-grade material will go up by more than £1.60 a tonne, because a hefty part of the tax, which would otherwise be borne by the by-products and will be chargeable to the by-products, will have to be loaded on to the price of the primary products. That, I suspect, is an inescapable conclusion.

David Heath (Liberal Democrat, Somerton and Frome)

indicated assent.

Oliver Letwin (Conservative, West Dorset)

I am glad to see that the hon. Gentleman, who knows a great deal about the industry—much more than I do—gives his assent to that proposition. I shall be very surprised if the Financial Secretary can produce any evidence that those assertions, which I believe to have been given to me in good faith by both sides of the industry, are false. The estimates that I have been given vary, but they centred around a 50 per cent. uplift. I believe that the effective rate of tax on the primary products will be not £1.60 but about £2.40. Next we have to add the increased costs of administration. I do not want to exaggerate the case, because I want to make a genuinely robust case rather than a political statement. I do not know the increased cost of administration, but I am sure that the Financial Secretary will acknowledge that it will be more than zero. Dealing with a new tax and keeping the records required for it, especially in the case of—if I may be permitted a pun— the disaggregations required to deal with an aggregates tax that is to be levied on a series of commodities, some of which are exempt and some of which are not, with some that are exempt being produced at the same time as some that are non-exempt, making it difficult to disentangle one from another, is bound to occasion a significant increase in administrative costs for producers. I have been given various estimates, and I do not know how reliable they are. I am inclined to think that 10p to 20p a tonne is a reasonable estimate of additional administrative costs. If I take the lower end of that scale, at about 10p, that takes us up to about £2.50 a tonne—£1.80 plus the uplift of 80p for the primary products, plus the 10p. Taxes are collected by Customs and Excise with unvarying efficiency. [Interruption.] I say that with a degree of irony, in the sense that it is not always the case that Customs and Excise collects the right amount and it is not always the case that all our constituents feel that they are properly treated, but taxes are collected with unvarying efficiency in the sense that Customs and Excise always swoops early. This is not a party political point, although the Chancellor has certainly taken policy steps to advance tax receipts in many respects, including corporation tax. This is a point about administration under all Governments. Customs and Excise quite properly sees it as its duty to protect the Revenue, so it swoops early. It looks for the money as soon as possible. That has a cash-flow effect on the firms that produce the goods, because the goods are not always sold quickly, and the definitions of commercial exploitation in the relevant sections of the Bill are, as we have had reason to note in lengthy discussion, such that one need not have sold the item to be liable to the tax. There will be a cash-flow effect. I do not know what it will be. I have taken estimates, and it sounds as though about 10p a tonne would not be an unreasonable estimate. That gets us to £2.60. Undoubtedly, the administrative burden and the price increase will together conspire to accelerate the process of consolidation in the industry. To some degree that may be a good thing; for many producers it will be a bad thing. It is clear that it will tend to concentrate production in fewer locations. The Financial Secretary might argue that the tax is thereby having an effect, but one thing is sure: that that will tend to raise internal transport costs. I do not know the amount, but it has been suggested to me that it might be as high as 75p or as low as 50p. I will take the lower estimate and add 50p. We now have the following: £1.60 plus 80p equals £2.40; £2.40 plus 10p equals £2.50; £2.50 plus 1Op equals £2.60; £2.60 plus 50p equals £3.10. I am told that a differential of £3.10 is vastly greater than the transport cost differential implied by importing pre-cast concrete from northern Europe. If the Financial Secretary has figures to the contrary, we shall be most interested to hear them. Such a differential will clearly hugely exceed the transport costs from southern Ireland. If that were not the case, my estimate of the transport costs increase owing to consolidation in the industry would, clearly, also be too low, but I am told that moving pre-cast concrete by ship is an efficient method of transport—not, of course, one that would be applicable to the use of such concrete deep in Wiltshire, but perfectly applicable on the south coast and, indeed, through the London docks, in London. 8.30 pm In other words, a large part of the construction industry in the United Kingdom could be serviced by pre-cast concrete from the northem ports of Europe at a far lower transport cost than would be involved because of the more than £3 differential that has been identified. That is a serious problem, but we have yet to hear from the Financial Secretary any set of equivalent figures, or disputations of those figures, that would allay our fears. We have not invented those fears; they have been expressed by the industry, which has, in principle, no reason to invent them If it were true that the displacement of jobs and business would not occur, why should the industry care about the tax; it would merely pass it on to a virtually inelastic buyer—the construction industry? House occupiers and people trying to build business premises might object, but I have not the slightest idea why the industry would invent those figures, so there must be some truth in them. Given all the arguments of principle that we have discussed at length and rehearsed again today and given the problems of implementation and the way in which the aggregates tax has been proposed in the Bill—for example, the failure to produce an exemption clause such as that suggested by the hon. Member for Somerton and Frome—I am driven to the conclusion that there is a failure in the Government's factual analysis; they have not recognised that the differential will have a serious effect on thousands of jobs in the United Kingdom, and that needs to be addressed urgently.

Stephen Timms (Labour, East Ham)

I shall respond to the hon. Gentleman's points in detail in a moment, but before he completes his speech, will he confirm that it would be the intention of an incoming Conservative Government not to introduce the 0.1 percentage point reduction in employers' national insurance contributions that balances the revenue that we expect to receive from the aggregates levy?

Oliver Letwin (Conservative, West Dorset)

Yes, that is absolutely correct. The intention of an incoming Conservative Administration will be not to introduce the entire package, but to seek to negotiate with the industry the very kinds of environmental improvement that were so near to completion when some siren voice got at the Prime Minister and managed to reverse the trend of Government thinking, pushing them back into introducing an aggregates tax. We want to have a serious and adult discussion with the industry about how the environmental improvements can be achieved without this tax, which, of course, implies without the NIC reductions.

David Taylor (Labour/Co-operative, North West Leicestershire)

The hon. Gentleman's analysis of the projected extra costs is admirably rigorous, but does he accept that those figures are, by their very nature, tentative? The British Aggregates Association has come up with a figure of £ 4.35, whereas his is £3 or so. Is it not equally possible that the Government's approach, with the figure being very much at the low end of the spectrum, is likely to represent the eventual outcome? If it did not, could not a future Government respond by regulation?

Oliver Letwin (Conservative, West Dorset)

Well, that is possible. Of course there is room for uncertainty. I have also received the British Aggregates Association figures. I have consciously chosen the lower end of the estimates that we have received so that I cannot be accused of inventing figures for effect. Neither the hon. Gentleman nor I—and nor, and this is my problem, the Financial Secretary—knows what the exact figure is. If it is anything like any of the figures discussed by the industry, it is sufficient to outweigh the transport costs. That is the problem. I may be wrong, but I do not understand how that problem can be cured within the structure of the tax. If that cannot be done and we all wait up three, four or five years from now and 5,000, 7,500 or 10,000 jobs—the estimates vary—have disappeared as a result, it will be too late; it will be impossible to re-create those jobs in the United Kingdom for years to Come. We have a serious problem: the Government do not have the factual basis on which to be confident that the tax will not have those dire effects. That is why the House should accept the amendments tabled by Conservative Members.

Stephen Timms (Labour, East Ham)

As we have heard, under new clause 5, moved by the hon. Member for Somerton and Frome (Mr. Heath), a rebate would be allowed from the aggregates levy for so-called green quarries, and the rebate would be introduced by secondary legislation. We debated a very similar new clause in Committee yesterday. It was moved by the hon. Member for Gordon (Mr. Bruce), who is well able to look after himself on such occasions, but he withdrew it on the basis of the assurances that I was able to give Him. Of course, I am happy to repeat those assurances today. I hope that the hon. Member for Somerton and Frome agrees that his hon. Friend the Member for Gordon was right to withdraw his new clause after yesterday's debate in Committee. I remind the House that the aggregates levy as set out in the Bill will have important and significant environmental benefits. It will do so by ensuring that the price of aggregates reflects the environmental cost of obtaining them—using a straightforward price mechanism for an environmentally beneficial end. That is a mechanism that the Liberal Democrat party well understands; it would thus be mistaken for the hon. Member for Somerton and Frome to suggest that the price mechanism will have no effect. There certainly will be an effect. I stress that point, because it is at the heart of the environmental benefit that we expect from the introduction of the aggregates levy. Moreover, the package also includes the £35 million sustainability fund that will be available to be applied directly in communities that are affected by quarrying, to help to deal with some of the environmental problems caused by quarrying. The hon. Gentleman's suggestion that there was no direct environmental benefit from the package is mistaken. In those two specific respects, there will be clear environmental benefits from the levy. I again draw the hon. Gentleman's attention to the sustainability fund. That important measure will benefit communities that are affected by quarrying, such as the one in which he lives. We announced in the Budget that we are attracted to the idea of differential rates of aggregates levy for green quarries. We are exploring with a variety of interested parties options on how that might be achieved, but as I have pointed out several times, significant practical problems remain—not least the definition of a green quarry. We need to know how those issues can be overcome in a practicable and workable way before we introduce legislation to give effect to that idea. When we have a workable scheme, we shall legislate. The new clause is guesswork. I suggest to the hon. Member for Somerton and Frome that the scheme would need to take into account factors that are not referred to in the new clause, which is couched in terms of environmental protection measures being taken. However, other considerations might need to be taken into account. It is possible, for example, that the location of a quarry might have an impact on the extent of its environmental friendliness. I should certainly not want to exclude that possibility, as the new clause does. As I think that the hon. Member for Gordon acknowledged yesterday, during our debate in Committee on exactly the same proposal, nothing is to be gained in the meantime by introducing legislation that may well turn out not to be quite right when we have resolved the way forward—[Interruption.] I give way to the hon. Member for West Dorset (Mr. Letwin).

Oliver Letwin (Conservative, West Dorset)

I am grateful to the Financial Secretary for giving way, although I was actually chuntering from a sedentary position. However, I will ask him a question. Perhaps the hon. Gentleman should listen to a tape recording of his own remarks. Is he aware of just how "Yes, Ministerish" he sounds? If I had been the official charged with inventing every reason that I could think of—including reasons that I could barely think of—for rejecting the new clause, I could certainly not have come up with a better list than the one he has provided.

Stephen Timms (Labour, East Ham)

It would be classic "Yes, Minister" to introduce a new clause to do something when we do not quite know what we are trying to achieve. That would be a serious mistake and I could not support such a proposal. As I pointed out in yesterday's debate, the new clause sets out three groups which should be consulted. I can again assure hon. Members that we shall indeed consult representatives from all three of those groups.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful to the Financial Secretary for giving way, especially as I was unable to be in the Chamber for all of the debate on the new clause. Will he confirm that the sustainability fund, which will produce the environmental improvements referred to in the new clause, is an intrinsic part of the levy? If he can confirm that, will he explain why he is going ahead with the levy even though he has not sorted out the sustainability fund?

Stephen Timms (Labour, East Ham)

The hon. Gentleman is confused. The sustainability levy is part of the package as it stands. It will have an initial value of £35 million and we are consulting on precisely how the fund will be applied and to what categories of use it will be put. The hon. Gentleman is mistaken: the fund will be in place from the introduction of the levy in April next year and does not depend on any of the mechanisms mentioned in the new clause.

David Taylor (Labour/Co-operative, North West Leicestershire)

Will my hon. Friend confirm whether he is to consult the British Precast Concrete Federation, which makes a very powerful case in favour of the pre-cast concrete industry being treated in same way as the clay, silica sand and cement industries, all of which will not be covered by the aggregates tax?

Stephen Timms (Labour, East Ham)

I confirm that I have in the past week met representatives of the British Precast Concrete Federation. We had a useful discussion. We are consulting widely on the measures, as we always do. Amendments Nos. 1 and 2 propose abolition of the levy. The Committee of the whole House considered that matter at the start of Committee stage and took a clear view that the aggregates levy should be in the Bill. I have no doubt that that view will, rightly, be repeated today. The levy is being introduced to address the significant environmental costs associated with quarrying and it will bring about environmental benefits, as I have described. The introduction of the levy and the associated cut in employers national insurance contributions will contribute to the Government's strategy, consistently applied, of shifting the burden of taxation from good things, such as employment, to bad things, such as environmental damage. That was the intention we set out in our 1997 statement of intent on environmental taxation and it is the approach that we have taken. I am grateful to the hon. Member for West Dorset for confirming that a Conservative Government would not proceed with the reduction in employers national insurance contributions. We have also heard that the Conservatives would reverse the reduction in employers national insurance contributions associated with the climate change levy—0.3 per cent. in that case. In addition, the hon. Gentleman has made more clear the Conservatives' intentions regarding the 0.2 per cent. reduction in employers national insurance contributions associated with the landfill tax. I do not know precisely why the Conservatives want to pile up taxation on employment, but I am certain that our approach of shifting the burden of taxation away from employment is the right one. We shall continue to pursue it. The levy will be revenue neutral for the Exchequer because all of the proceeds will be recycled through the reduction in employers national insurance contributions and the £35 million sustainability fund that will help to develop alternatives to primary aggregates extraction and help to redress the local impact of quarrying in communities that are affected by it.

Oliver Letwin (Conservative, West Dorset)

Will the Financial Secretary give now the undertaking that he refused to give earlier: that if his Government are fortunate enough to be re-elected, each and any subsequent increase in the aggregates levy will be accompanied by an equal and opposite reduction in national insurance contributions or some other tax?

Stephen Timms (Labour, East Ham)

I do not want to discomfit the hon. Gentleman, but in our enjoyable debate on the subject in the Standing Committee yesterday, he made a lengthy case against the landfill tax, saying that we were giving out more in the reduction in employers national insurance contributions than we were taking in through the landfill tax. He was simply wrong about that: the revenue from the landfill tax is s significantly less than—in fact, it is equivalent to about two thirds of—the revenue forgone through the reduction in employers national insurance contributions. The hon. Gentleman was mistaken in yesterday's debate and it is unwise of him to pursue that line of argument further today.

Oliver Letwin (Conservative, West Dorset)

rose—

Stephen Timms (Labour, East Ham)

No, I want make some progress—a couple of other points need to be made to complete the picture. It is possible to make greater use of recycled aggregates, as we discussed in earlier debates. They will be more attractive because the price of primary aggregates will include an additional cost that will not apply to them, and that will be beneficial. 8.45 pm In my response to my hon. Friend the Member for North-West Leicester shire (Mr. Taylor), I mentioned my discussions with manufacturers of pre-cast concrete blocks. The hon. Member for West Dorset made something of that. I do not believe that the prospect of significant imports from across the sea of pre-cast concrete blocks will be a serious problem. The industry did not suggest that. However, I accepted in an earlier debate that Northern Ireland might be a different case, and today I met the hon. Member for Foyle (Mr. Hume) and two representatives of the quarrying industry from Northern Ireland. The Northern Ireland Executive is also considering the problem, which we will continue to explore. The land border between Northern Ireland and the Republic means that the situation there is different. As for concrete blocks from Norway or elsewhere in continental Europe, tile cost of transport is a sufficiently high hurdle for the 1 per cent. of pre-cast blocks that are imported not to change. Those are specialist products and they do not reflect the bulk of what is produced in the United Kingdom.

William McCrea (DUP, South Antrim)

Having listened to those representations, when will the Government determine what action to take to alleviate the problem faced by businesses in Northern Ireland?

Stephen Timms (Labour, East Ham)

I can only repeat what I said to the hon. Member for Foyle this morning: we will work with the Northern Ireland Executive and, if there is a strong case for us to act, we will do so. I cannot, however, say precisely when that will be. I hope that the Horse will hold to its clear view on the issue and reject the amendment. It was interesting to hear the hon. Member for West Dorset say that the Conservative party would not implement the measure and, instead, would try to achieve a negotiated agreement with the industry. The Quarry Products Association and the Government invested much work in examining the prospects of a negotiated voluntary agreement. For several reasons, those discussions were not successful and the package that the QPA put to us for the Budget last year contained serious difficulties, not least the likelihood of falling foul of European law. However, another reason for that lack of success was the great hostility of the British Aggregates Association, to which my hon. Friend the Member for North-West Leicestershire referred. I think I am right in saying that the BAA came into existence when a group of small quarries came together to object to the big quarrying companies formulating an agreement that did not benefit them. The hon. Member for West Dorset needs to be cautious before believing that a negotiated solution is possible. The real question facing hon. Members is whether we face up to the need to address the environmental costs of quarrying. if the House decides—as I believe it will— that that is necessary, our proposal is the right way to proceed.

David Taylor (Labour/Co-operative, North West Leicestershire)

My hon. Friend is right to say that Leicestershire has a significant mineral extraction industry. Many small firms operate there. Does he believe that the implementation of the levy risks accelerating the industry trend towards a smaller number of larger quarries, with the extra haulage costs: and other problems that are associated with that?

Stephen Timms (Labour, East Ham)

I have not seen any evidence of that, and none that I am aware of has been forthcoming. The way in which the industry responds to the levy is a matter for the industry. Amendment No. 3 at least has the merit that the House has not already rejected it, but the environmental costs of aggregates extraction will not cease in April 2004. Therefore, there is no justification for limiting the life of the levy to that date. For the reasons that I have set out, I hope that the House will reject the new clause and the amendments.

David Heath (Liberal Democrat, Somerton and Frome)

I listened with incredulity to the Financial Secretary's response. His arguments became steadily more preposterous as he vent on. That might suggest that we have been right all along and that the impost has been cobbled together at short notice and is half thought through. That is why justifications for the levy are so lacking.

Stephen Timms (Labour, East Ham)

I am sorry to hear the hon. Gentleman say that. Will he at least acknowledge—as he did not in his opening remarks—that the sustainability fund and the £35 million that will be available will provide an opportunity to tackle some of the local quarrying issues that he referred to earlier?

David Heath (Liberal Democrat, Somerton and Frome)

I would do that if we knew what the sustainability fund will do. One of the arguments that the Financial Secretary adduced for not accepting the new clause was the fact that he did not yet know the precise detail of the environmental measures that it might encompass. Nevertheless, he is prepared to go ahead with imposing a tax on the industry without knowing the precise details—indeed, any details—of the sustainability fund. That is extraordinary. The only lacuna that the hon. Gentleman could identify in my remarks related to some sort of concept of a retrospective planning permission being applied by tax rebate, so that those quarries that happened to be in the wrong place would be taxed out of the market in favour of those that happened to be in the right place. It would be interesting to know the exact mechanism that he had in mind and how it would play in terms of European competition law and the Human Rights Act 1998. The Government have been very clear about what they consider to be the principles of good environmental taxation. They include the fact that an economic instrument must deliver environmental gains cost effectively and must not threaten the competitiveness of UK business. All of us accept that there is an imbalance between the needs of the quarrying industry—the motive for which is to build our infrastructure—and the environmental effects of quarrying. Those of us who represent the areas involved and who have been involved in discussions for more years than we care to remember know that there is a difficult balance to reach. We certainly do not turn our face against the need to provide for economic and environmental instruments to achieve the best balance possible. We simply say that a tax mechanism that fails to differentiate between environmentally sound and environmentally unsound operations is not such an instrument. Because the Government are going ahead without knowing what they will do, we can conclude only that the most important thing for them is appearing to be doing something that is of environmental benefit rather than actually doing something that is of environmental benefit to quarrying areas. The most sensible thing that the Financial Secretary could have said was that he would take the tax away and return with it next year, when it has been properly designed and is in a correct form with a rebate system. We could then all agree that we had an economically and environmentally sound scheme. Instead, we have something which, frankly, is nonsense. We are keen to discuss other groups of amendments in the limited time available—so, for that reason alone, I beg to ask leave to withdraw the motion. Motion and clause, by leave, withdrawn.

EXTENSION OF CARRY BACK OF TRADING LOSSES

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move, That the clause be read a Second time.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss the following: New clause 7—Extension of carry back of excess interest costs— '(1) Chapter II of Part IV of the Finance Act 1996 (loan relationships) shall be amended in accordance with subsections (2) and (3) below. (2) In paragraph 3(7) of Schedule 8 (permitted period of twelve months for carry-back of deficits), after "means" and before "the period" insert "subject to paragraph 3(7A) below". (3) After paragraph 3(7) of Schedule 8, insert the following new paragraph— "3(7A) This paragraph shall have effect in relation to a deficit, incurred by a company which is not large (as defined by SI 1998/3175 as subsequently amended)— (a) as if in paragraph 3(7) above, the words 'three years' were substituted for each case of the words 'twelve months'; and (b) which is incurred in any accounting periods ending in the period beginning on 1 April 2000 and ending on or before 31 March 2003.".'. New clause 8—Relief for furnished holiday lettings— '(1) Section 504 of the Income and Corporation Taxes Act 1988 (Letting of furnished holiday accommodation treated as a trade, supplementary provisions) shall be amended in accordance with subsections (2) and (3) below. (2) In subsection (3)(6) the figure "70" shall be replaced by the figure "30". (3) This section shall only apply for accounting periods ending in the period beginning on 1 April 2001 and ending on or before 31 March 2002.'.

David Heath (Liberal Democrat, Somerton and Frome)

These new clauses allow the House, should it wish—even at this late stage of this Parliament—to do something effective for businesses seriously affected by the foot and mouth crisis. Businesses in my constituency and in many rural constituencies throughout the country that have been affected by the crippling economic consequences of the disease simply do not understand why the Government are deaf to their need to survive this year. The epidemic has been awful for the livestock industry. However if—and it is a big "if' because, in my own county of Somerset, new cases are being reported every day, so we are by no means sure that the epidemic is over—we are drawing to the end of the animal disease epidemic, I assure hon. Members that we are entering an epidemic of business failures in rural areas. Businesses in rural parts of Britain such as the south-west all say that they have suffered an extraordinary reduction in turnover in the past few months. I am sure that that also applies to the north-west and the north-east, where foot and mouth has done its worst, and even areas passed over by the epidemic, which have suffered in the same way from the downturn in economic circumstances and tourism. It is not just businesses directly associated with agriculture or tourism that have suffered; a huge spectrum of businesses in every sector in every town and village throughout rural Britain has been affected.

Paul Tyler (Liberal Democrat, North Cornwall)

Does my hon. Friend agree that, although a devastating tragedy has hit many livestock farms, particularly smaller family farms, at least they have some cash flow coming through? Businesses that are indirectly affected, however, are the hidden victims of this terrible scourge and have no prospect of any cash flow improvement in the coming months. They are having a desperate time in making a good case to their bank managers to keep going.

David Heath (Liberal Democrat, Somerton and Frome)

My hon. Friend is right. The consequential losses, which no one could have expected, are quite extraordinary, and a range of businesses are involved. I have mentioned in the House before a garden centre in my constituency whose takings are down by 80 per cent. A dealer in lawnmowers and similar equipment has had his takings reduced by two thirds. A marquee manufacturer in my constituency has as its principal clients the major agricultural shows, all of which have been cancelled; the Royal Bath and West show, for example, is not happening. The firm is having to lay off workers because it no longer has any orders. Another such firm is a laundry whose trade is mainly with the hotel industry. It must now shut up shop. I even have in my constituency an animal incinerator which must close its doors because no one can bring animals to be burned, because of the foot and mouth restrictions. These are serious matters which are affecting the rural economy in a big way. What is so disappointing is the paucity of ideas and the lack of urgency on the part of Government in dealing with these issues.

Oliver Letwin (Conservative, West Dorset)

I am grateful to the hon. Gentleman for giving way. Every hon. Member of whatever party who represents a rural constituency would agree with him. Does he agree that we probably face an increase in the problems to which he alluded as we come to the summer months? That is the time on which many of our tourism-related industries in rural areas depend for the great bulk of their income, and that is when we shall see the crisis magnified, long after, as we all hope, the disease has virtually disappeared.

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Gentleman is right. He knows and I know that a crisis taskforce was set up. It goes away and ponders, and that is all it does. The Minister for the Environment who chairs the taskforce gave a preliminary report, which was the last that the House heard about what it intended to do to deal with the crisis. We have a so-called Rural Affairs Cabinet Committee. What has it done during the crisis Nothing, as far as anyone can see. I exclude from these strictures the Minister of Agriculture, who has reported frequently to the House about what he has been doing, but of course his purview is limited to the agricultural aspects. One of the problems to which we have repeatedly drawn attention is the fact that we do not have a Department of Rural Affairs, which might have taken wider view and recognised the fact that there is a crisis for the rural economy, not simply for the agricultural industry. We are failing in our duty because the Government have not allowed the House the opportunity to give proper scrutiny to measures that could have been introduced over the past few weeks. Now we face the extraordinary prospect that the House will dissolve at the beginning of next week without our having the opportunity properly to discuss in Government time the proposals that they might have introduced to deal with the crisis.

Melanie Johnson (Labour, Welwyn Hatfield)

Does the hon. Gentleman accept that so far 7,000 businesses have been helped, and £40 million worth in tax has been deferred by Customs and Exercise and the Inland Revenue to help businesses affected by foot and mouth?

David Heath (Liberal Democrat, Somerton and Frome)

Does the hon. Lady not understand that that is a drop in the ocean compared with magnitude of the crisis in our rural areas? Deferment of tax simply puts off the evil day when the bailiffs come in. That is the problem that the Government do not seem to understand. The measures proposed in the new clauses are not the only steps that the Government should take, but they are at least an attempt to deal with issues such as restoring cash flow to many small businesses, in rural areas and elsewhere, and giving them an immediate benefit through the tax system. The carry-back of trading losses and excess interest costs could be made against previous years' accounts, which would provide immediate benefit and help them get through the present crisis, rather than offering help at some indeterminate stage in the future.

Melanie Johnson (Labour, Welwyn Hatfield)

rose—

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Lady wants to intervene, but she knows that we have limited time for the debate.

Melanie Johnson (Labour, Welwyn Hatfield)

I am anxious that the hon. Gentleman will not allow me any time at all to respond to the debate. In four minutes the time will be up. Is he aware of the non-tax measures that have been taken, which will assist all the businesses affected by foot and mouth? Those measures include providing temporary relief for business rates, whereby authorities can offer hardship relief to small businesses with a rateable value of £12,000 or less, in the knowledge that central Government will reimburse 95 per cent. of the cost. There is an extension of the small loans guarantee. There is a Phoenix fund aimed at helping small business in the most distressed communities. There are regional venture capital funds as well. A further £18 million is being made available to help promote Britain as a tourist destination. Additional measures include a £15 million package—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Lady cannot reply to the debate in an intervention.

David Heath (Liberal Democrat, Somerton and Frome)

I hope that the hon. Lady is not castigating me for what her business managers consider to be the appropriate time for debating this important matter, for which not one minute of Government time has been given. It is an outrage that we are being told that we must hurry our comments on this crucial problem facing the country, especially rural areas, prior to the coming general election. We are told that there is lot time to discuss it. That tells us all we need to know about the Government's attitude to rural areas. I will place a bet with the hon. Lady that more businesses will go out of business in rural areas over the next few months. She clearly considers her measures to be magnanimous, generous and adequate. People in rural areas do not think so. The people who came to lobby the House from Powys in mid-Wales and from Cumbria were desperately seeking something from the Government and the House to keep their businesses going over this summer. The proposals in the new clause would be a start, and would certainly be more adequate than anything that the Government have come up with so far. If the Government cannot accept it, they must answer to the people in rural areas who will lose their businesses in the next few weeks. They must tell those people why they sat by and did nothing while a disaster for the rural economy unfolded.

Oliver Letwin (Conservative, West Dorset)

I do not want to detain the House for long. We thoroughly agree with the hon. Member for Somerton and Frome (Mr. Heath), and we would have liked other measures to have been introduced. We have been arguing for months for measures such as the £500 million interest-free loan scheme. The proposals in these new clauses would be beneficial. By her tone of voice, the Economic Secretary showed the Government's neglect and misunderstanding of rural areas. Contrary to the tone in which some of the rational debates of the past three hours have been conducted, the tone in which the Economic Secretary replied to the hon. Gentleman was demonstrative of a total lack of understanding of the scale of the disaster that is and will be faced by rural business in the tourism-related sector as we approach the summer months. What has already— It being three hours after the commencement of proceedings on the Programme motion, MR. DEPUTY SPEAKER put forthwith the Question already proposed from the Chair. Question put, That the clause be read a Second time:—

Rating (Former Agricultural Premises and Rural Shops) Bill Programme (No. 2)

Consideration and Third Reading

James Paice (Conservative, South East Cambridgeshire)

Few Bills, other than those covering genuine emergencies, can have had so little time devoted to them in Committee or on the Floor of the House as has been devoted to this measure. I remind the House that the Prime Minister promised this Bill on 30 March 2000). It did not have a Second Reading until a week ago, so we have already suffered a long delay because of the Government's incompetence in turning the Prime Minister's promise into a Bill. As the Minister said, the Committee yesterday had only two and a half hours—

James Paice (Conservative, South East Cambridgeshire)

The Minister says from a sedentary position that the Committee had all day but did not need it, but, if he were to be frank, he would acknowledge that some matters received extremely cursory attention because of the pressure to make progress, as shall describe in a moment.

Jim Dowd (Labour, Lewisham West)

The hon. Gentleman was not there.

James Paice (Conservative, South East Cambridgeshire)

I may not have been in the Committee, but I am perfectly able to read the Hansard report of the sitting. I have done so, but I suspect l hat the hon. Member for Lewisham, West (Mr. Dowd) has not. The Opposition have supported the principle behind the Bill, as we made clear on Second Reading—indeed, I called for this measure three years ago—but the Government are again confusing support for a principle with support for the detail of a measure. Many matters arise from the Bill with which the Opposition do not agree, some of which were considered yesterday, such as the definition of rural areas and rural businesses and the level of rateable value. In respect of the latter, the Government advanced rather obscure arguments in favour of the figure of £6,000, but a figure of £9,000 for pubs and petrol stations appeared in secondary legislation only two or three weeks ago. Considerable concern has been expressed about how a shop should be defined. That is the subject of the amendments that we shall debate shortly, which my hon. Friend the Member for Ashford (Mr. Green) will move. There was much discussion on Second Reading about the definition of a shop, the fact that takeaway food and confectionery were excluded and what percentage of the business those items could account for if the exclusion was to have effect. There is also the issue of the Bill's impact on existing businesses. The equestrian sector —riding schools, livery stables, stud farms and many other equestrian activities —will be greatly affected.

Michael Martin (Speaker, Glasgow Springburn)

Order. The hon. Gentleman is debating the Bill, but we are on the programme motion.

James Paice (Conservative, South East Cambridgeshire)

I am endeavouring to explain why I do not believe that there is sufficient time under the motion, Mr. Speaker, but of course I heed your admonition. The equestrian sector of rural industry will be seriously affected, yet when the Bill was in Committee yesterday, that sector was debated for only 10 minutes. My hon. Friend the Member for North Wiltshire (Mr. Gray) moved an amendment and, almost in the same breath, was persuaded to withdraw it, without any substantial debate having taken place. Yet it has been said on Second Reading and in Committee that the Bill will affect equestrian businesses because the existing businesses, which receive no rate relief other than the traditional stud farm relief—introduced by the previous Government, I am pleased to say—will be competing with new equestrian businesses that will secure the rate relief under the Bill. Nothing in the Bill as it stands corrects that unfair situation. No one could contend that the 10 minutes of debate that this subject received in Committee yesterday was adequate to deal with what everyone accepts is a substantial rural business—indeed, it is the second largest rural business after farming.

James Gray (Conservative, North Wiltshire)

My hon. Friend makes a powerful point about equestrian businesses. In retrospect, I regret that I was weak enough to accept the rough looks that I was receiving across the Floor. Labour Members had heard that the Prime Minister had gone to Buckingham palace and were so excited by this momentous event that they were determined that the Committee's proceedings would end by lunchtime. In retrospect, I wish that we had given the subject much more time during the afternoon. Not only are these immensely important issues for the countryside, but the rates charged for equestrian businesses are extremely complicated and would have benefited from detailed examination.

James Paice (Conservative, South East Cambridgeshire)

1 am grateful to my hon. Friend. As he knows, I have taken a close interest in the industry ever since I have been a Member of this House because of my constituency involvement with the racing industry. It is a very important sector of the rural economy. My hon. Friend was persuaded to curtail debate yesterday to some 10 minutes, which he now regrets.

Edward Leigh (Conservative, Gainsborough)

I was talking only today to someone who runs an equestrian centre. The industry is suffering hugely because of the foot and mouth crisis, with bridleways being closed. The lady to whom I spoke is going out of business.

Michael Martin (Speaker, Glasgow Springburn)

Order. The hon. Gentleman is talking about the Bill, not the progyarnme motion.

Edward Leigh (Conservative, Gainsborough)

I was just going to say—

Michael Martin (Speaker, Glasgow Springburn)

I do not think that the hon. Gentleman was just going to say anything.

James Paice (Conservative, South East Cambridgeshire)

I know that my hon. Friend the Member for Gainsborough (Mr. Leigh) will seek to catch your eye later, Mr. Speaker, and may be able to debate the Bill in more detail. A lot of points will need to be made on Third Reading. The programme motion deals not only with amendments but with the time allocated for Third Reading. My hon. Friends the Members for North Wiltshire and for Gainsborough, who obviously have cogent and important points to make on Third Reading, may be prevented from doing so by the timetable motion.

James Paice (Conservative, South East Cambridgeshire)

The Minister falls into his own trap. My hon. Friend the Member for North Wiltshire said that there was consensus that there was no need to go beyond 10 pm, yet the business was curtailed at 12.55 pm, which shows that he was right that those matters should have been debated in Committee until 10 pm last night, but were not.

John Bercow (Conservative, Buckingham)

Is not the Minister making the error, which Ministers habitually make on these occasions, of supposing that the adequacy of consideration in Committee is synonymous with adequacy of consideration on the Floor of the House? I did not have the good fortune to serve on the Committee. Does my hon. Friend agree that we need adequate time to justify our inclusive approach in relation to these matters, compared with the rather narrow, undesirable, priggish exclusivity of the Government?

James Paice (Conservative, South East Cambridgeshire)

The only aspect of my hon. Friend's intervention to which I would take exception is the generality with which he used the word Minister. I would say "Ministers of this Government" because, although my hon. Friend was not in the House at the time, I can assure him that Ministers in the previous Government did not adopt that approach.

Anne McIntosh (Conservative, Vale of York)

Unlike my hon. Friend the Member for Buckingham (Mr. Bercow),I did have the honour to serve on the Committee. Does my hon. Friend the Member for South-East Cambridgeshire (Mr. Paice) agree that, in tune with what the Father of the House said earlier this afternoon, the true scrutiny role of the House should be performed on the Floor of the House rather than in Committee on an upper corridor?

James Paice (Conservative, South East Cambridgeshire)

That is one of the points on which I did agree with my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) in his farewell statement to the House, although of course I did not agree with everything that he said. In conclusion, I want to raise a point about abattoirs, which are directly affected by the Bill.

John Bercow (Conservative, Buckingham)

Put a few Ministers in them!

James Paice (Conservative, South East Cambridgeshire)

I am sure that there will be a long queue for them if my hon. Friend's desire is met, but the serious point—Third Reading would allow the opportunity to expand on it—is that part of the reason for the foot and mouth crisis and the rapid spread of the disease was the absence of abattoirs.

Andrew Miller (Labour, Ellesmere Port and Neston)

You closed them all.

James Paice (Conservative, South East Cambridgeshire)

I can assure the hon. Gentleman, who shouts from a sedentary position, that the rate of closure under his party's Government is substantially higher than it was under the previous Government. The crucial point is that the Bill will affect abattoirs, partly because it is the farmers and the farm business premises that may be currently consigning animals to abattoirs, but also because many farmers may wish to use the provisions of the Bill to gain—

Michael Martin (Speaker, Glasgow Springburn)

Order. The hon. Gentleman has dispensed with the programme motion and is talking about the Bill, but we can talk only about the programme motion at the moment.

James Paice (Conservative, South East Cambridgeshire)

I am grateful, Mr. Speaker. I contend that the programme motion does not provide adequate time to cover all the points that should be made, both in ways—

Michael Jack (Conservative, Fylde)

Will my hon. Friend give way?

James Paice (Conservative, South East Cambridgeshire)

I will just finish the point. The motion does not provide adequate time to debate the amendments, which my right hon. Friend will deal with, or to debate all the arguments that should he debated on Third Reading, which are beginning to come in a flurry from my right hon. and hon. Friends.

Michael Jack (Conservative, Fylde)

Does my hon. Friend agree that the very fact that we have amendments to debate, and indeed a Third Reading to consider, offers us the opportunity for mature reflection on arguments that were put, albeit inadequately, in Committee, hence the fact that this evening we are now faced with further amendments to the Bill, justifying a greater amount of time than the two hours offered by the Government?

James Paice (Conservative, South East Cambridgeshire)

My right hon. Friend is entirely right. In Committee, the Minister promised to take away some items and consider them further, and I do not believe that the two hours that we have been allocated is adequate, particularly in view of the fact that Ministers have only had from yesterday morning until today to consider those items. We are under pressure to pass the Bill before dissolution. Tomorrow, the Bill will go to another place and is expected to pass through all its stages in order to receive Royal Assent before Dissolution. Therefore, we shall lose the opportunity that is norm ally allowed for any legislation, which may not be given proper scrutiny in the House, to go to the other place for more in-depth scrutiny, using the expertise that we all know exists there.

Michael Jack (Conservative, Fylde)

Has my hon. Friend considered the fact that the Minister may have a rather restricted view on the amount of time needed by virtue of his former incarnation as a Government Whip? As we all know, the Government Whips' objective is to get business through the House at any cost.

James Paice (Conservative, South East Cambridgeshire)

My right hon. Friend's experience of those matters tells in such debates. Not all hon. Members necessarily share his cynicism, but I can vouchsafe that I do, having been a Member as long as he has and having seen the machinations of the dark corners of the Whips Office. I understand that the business takes precedence, rather than any propriety in scrutinising legislation. The Bill is important in itself. We welcome it in principle, but believe that it should be given greater scrutiny on Report, on Third Reading and in the other place. I regret very much that the Government have seen fit to introduce a two-hour timetable. Given that we are still at a very early stage of the night's proceedings compared with what we were used to only a few years ago, there could have easily been time to give the Bill the far greater scrutiny that it will not now be given. That is a great shame, but there are many points that my hon. Friends and I wish to make in debating the amendments and on Third Reading, and we shall demonstrate the validity of the arguments that I have adduced against the motion.

David Heath (Liberal Democrat, Somerton and Frome)

This is, by common consent on both sides of Me House, a modest Bill. It is limited in scope, flawed in detail, late in formulation and even more dilatory in execution, but with all its manifest inadequacies, it is important and should reach the statute book before Parliament is dissolved. I do not believe that we should take up the time that our constituents properly expect us to spend debating what is—or is not —in the Bill with a sterile argument on process. I urge the House to move on to the debate on the Bill itself. Let us pass it into law at the earliest opportunity because, however inadequate, it is better than nothing.

James Gray (Conservative, North Wiltshire)

I rise to contribute briefly to the programme motion debate on this modest Bill, as the hon. Member for Somerton and Frome (Mr. Heath) rightly describes it, for two reasons. First, as I said a moment ago, in retrospect, I am sorry that yesterday's debates in Committee were so sharply curtailed. Hon. Members will remember that there was an atmosphere of excitement as the helicopters hovered overhead and the Prime Minister made his stately way down the Mall to visit Her Majesty the Queen to request the Dissolution of Parliament. There was a general feeling in Committee that sitting around for an afternoon discussing such matters was not the right thing to do. 1 regret that I gave in to that feeling and allowed my remarks on important matters connected with the horse industry to be limited to only 10 minutes. Perhaps I should declare an interest: I am the chairman of the horse and pony taxation committee—an informal committee of the House, established by my noble Friend Lord Cope of Berkeley, who will wish to take a close interest in the Bill's equestrian provisions when it is debated in the other House tomorrow. Furthermore, I am an unpaid consultant to the British Horse Industry Confederation, a body that brings together all the interests of the horse industry throughout the nation. The Bill's provisions will have a significant effect on that industry; we have been debating such matters in the committee and the confederation for many years. As long ago as 1987, we nearly brought in an amendment to the Finance Bill that would have changed the status of the horse on farms to that of an agricultural animal, thereby removing business rates from all buildings in which horses were accommodated. These are complex matters and we in the horse industry are concerned about elements of the Bill that will help the industry in some respects but that may be worrying in others.

Dale Campbell-Savours (Labour, Workington)

What does that have to do with the programme motion?

James Gray (Conservative, North Wiltshire)

Although programme motions have only recently been invented, I am surprised that after his many years in this place, the hon. Gentleman does not understand the relevance of my comments. The answer is that the amendment that we tabled on equestrian matters has not been selected. That means that the only detailed discussions took place yesterday when, sadly —in retrospect, I regret it—I curtailed my remarks on that complex subject. I thus seek extensive time on Third Reading to discuss those matters. Unfortunately, only two hours to discuss everything—the programme motion, amendments and Third Reading — is not enough to discuss extraordinarily complex matters. I do not think that the hon. Gentleman knows anything about the business rate regime in so far as it affects horse matters on farms. It is extraordinarily difficult, delicate and complex. Broadly speaking, it achieves cross-party consensus. We are talking about riding schools throughout the nation. We are not talking about something grand but about something very ordinary: horse matters in all our constituencies. It is thus a matter of great regret that neither in Committee yesterday nor, because of the programme motion in the House today, shall we have any time to discuss such complex matters as how riding schools have declined in recent years. Every year, 200 riding schools disappear because of the tax and rating system that we shall debate later.

Dale Campbell-Savours (Labour, Workington)

What has that got to do with the programme motion?

James Gray (Conservative, North Wiltshire)

I am surprised that the hon. Gentleman does not understand by now but I shall try again. It is important that I should explain how complex such matters are so that it should be clearly understood that we do not have enough time to discuss them. If they were small and simple, we could discuss them in a few seconds, but because they are difficult, and because he does not have the faintest idea of them, I must explain that we do not have enough time.

Edward Leigh (Conservative, Gainsborough)

What my hon. Friend's comments have to do with time is this: as riding stables go out of business every day of the week and as the industry is in crisis, the House should be given time to debate these matters to bring them to the attention of Ministers and to try to put pressure on them. The industry accounts for 6 per cent. of the total work force. There is minimal—indeed, no—compensation. We need time to discuss that. Again and again, the Government ram through programme motions—two hours here, one hour there. That is not good enough. People are not being properly represented.

James Gray (Conservative, North Wiltshire)

My hon. Friend makes a powerful point well. In this country, 2.4 million people ride horses; 1 million horses are kept. The equestrian industry is the second largest in the countryside. We are talking about—

Michael Martin (Speaker, Glasgow Springburn)

Order. The hon. Gentleman will have to wait until we discuss the Bill before he tells us how many equestrian exercises are going on throughout the country.

James Gray (Conservative, North Wiltshire)

Of course, Mr. Speaker, I will happily do so. The business rate regime covering equestrian businesses in the countryside is badly flawed; there are peculiar anomalies. For example, if a private stable is next door to one's house—attached by a wall—it is exempt from business rates in the countryside. If, however, the private stable is at some distance from the house, it is not exempt and one has to pay business rates on it even though it is an entirely private—

Michael Martin (Speaker, Glasgow Springburn)

Order. I point out again to the hon. Gentleman that that has nothing to do with the programme motion. He must wait until we move on to the Bill to tell us those interesting facts.

James Gray (Conservative, North Wiltshire)

I understand, Mr. Speaker. The point that I was making—albeit inadequately as I am inexperienced in such matters-is that the two hours available to deal with the whole process, including amendments on village shops and Third Reading, are wildly inadequate for covering the complex detail of the rating regime as it affects equestrian businesses in the countryside. However, I think that we have had an opportunity to make that reasonably clear. That brings us back to the process— It being Ten o'clock, MR. SPEAKER proceeded to put forthwith the Questions relating to Estimates which he was directed to put at that hour, pursuant to Standing Order No. 55 (Questions on voting of estimates, &c.) and Order [this day].

ESTIMATES, 2001–02

CONSOLIDATED FUND (APPROPRIATION) BILL

RATING (FORMER AGRICULTURAL PREMISES A ND RURAL SHOPS) BILL PROGRAMME (NO. 2)

Edward Leigh (Conservative, Gainsborough)

On a point of order, Mr. Speaker. I feel that it should be plat ed on record that we, the House of Commons, have just approved estimates for £149 billion in 55 seconds—[Interruption.]

Michael Martin (Speaker, Glasgow Springburn)

Order. Let me reply. We have acted in accordance with long-standing Standing Orders, and these matters are, of course, properly recorded.

Allan Rogers (Labour, Rhondda)

Further to that point of order, Mr. Speaker. Is it not true that it took only 55 seconds because the Conservative party did not want to vote against it?

Michael Martin (Speaker, Glasgow Springburn)

I cannot comment on those matters.

Edward Leigh (Conservative, Gainsborough)

Further to that point of order, Mr. Speaker. No debate is allowed so that was a completely duff point of order.

Michael Martin (Speaker, Glasgow Springburn)

I have a nicer way of putting things than the hon. Gentleman Mr. Gray.

James Gray (Conservative, North Wiltshire)

Thank you, Mr. Speaker. It puts the little matter that we are discussing into context to think that, according to the explanatory notes, if the Bill becomes law, up to £16 million will be spent over five years, which translates as roughly £3 million a year. When I compare that with the £149,381,539,000 that we agreed in a matter of seconds, Perhaps I should be grateful for the fact that we have two hours in which to discuss a mere £16 million. However, in the countryside, post-foot and mouth disease, the £16 million is crucial to the farms that the Bill will allow to diversify. That diversification will be crucial to the riding schools and other equestrian businesses throughout the nation that are going out of business. The matter is of great importance, which is why I believe that the time allocated to it in wildly inadequate. The Programming Sub-Committee met yesterday morning at 10 o'clock. I made the point that it is absurd to have a Committee in which no record is taken. There is no purpose in the Opposition and the Government debating the programming proposed by the Government if there is no one present to take note of those points. Members of the Programming Sub-Committee then have to repeat in Standing Committee the valuable points that they made so that they are put on tilt record. I hope that the Modernisation Committee, or whatever abstruse organisation is responsible for such matters, will take that into account and consider keeping an official record of Programming Sub-Committees so that our powerful points on whether enough time is available are recorded and perhaps referred to when subsequent programming motions are discussed.

John Bercow (Conservative, Buckingham)

My hon. Friend maes a powerful point about the absence of a verbatim record or even of a minute of the proceedings of the Programming Sub-Committee that considers the terms of a programme motion. That concern has been raised before, not least in relation to other Bills. Does he accept that one reason why that is problematic is that the absence of a record tends inevitably to lead to argument about who said what in the Committee, when they said it, or whether they said it at all?

James Gray (Conservative, North Wiltshire)

My hon. Friend makes a good point. He has participated in many Programming Sub-Committees and knows their shortcomings. I believe that you, Mr. Speaker, are considering whether a Hansard reporter should be present to produce a formal record of what happens in them. That would be an eminently sensible innovation for the new Parliament to consider. There is another absurdity to take into account. As the Minister said, the Programming Sub-Committee was reasonably agreeable towards the Bill's timetable. That was because the Bill has broad cross-party support and we thought that it was sensible to sit until 10 o'clock last night. I shudder to mention it in Public, but the usual channels had duly considered that factor well in advance of the sitting of the Programming Sub-Committee. Therefore, its meeting was absurd and a waste of time. That highlights the nonsense that has come about as a result of the Government's so-called programming ideas. Either both sides of the House agree on a suitable programme for discussion of such matters, or they do not. By and large, we have agreed since time immemorial; rarely have we disagreed on how much time should be given to discuss a Bill or other business. However, if we disagree, there is no Hansard reporter to take a note of that fact and the reasons for it, which means that we have to repeat our arguments in Standing Committee. The system makes no sense. The programme motion for this Bill was relatively generous and the Bill could, theoretically, have been discussed in Standing Committee until 10 o'clock last night. Both sides of the House agreed to that. None the less, two Ministers, two Whips and half a dozen Back Benchers had to spend five or 10 minutes yesterday morning meeting in a Committee to agree something that had already been approved. I hope that those points will be noted when the future of programming is considered in the next Parliament. It has not worked. Well established and acceptable procedures have managed to achieve the same results. In that context, allowing us only two hours today to discuss the Bill's remaining stages perhaps reflects the fact that we did not make use of the full time allocated to us last night. That was because of the great excitement buzzing around the Committee Room as a result of the Prime Minister's announcement. However, that was before we saw his nauseating performance in the school in Southwark, which made the nation call for the sick bag.

Michael Martin (Speaker, Glasgow Springburn)

Order. The hon. Gentleman is certainly straying from the programme motion.

James Gray (Conservative, North Wiltshire)

You are, of course, right. Mr. Speaker. I apologise, but I was so overcome by the horror of what I saw on the news last night that I deviated from the motion. The truth is that the Bill deals with difficult and important matters. The issue is complicated and important to hon. Members who represent rural constituencies. I hope that the Government will see sense and, even at this late hour, allow us more time to have a proper discussion of village shops and the diversification of farms. I am particularly concerned about the equestrian industry. Either they should give us more time tonight or, at the very least, the Minister should assure us that they have listened carefully to our concerns. They are reasonably aware of the problems facing the equestrian industry. In the unlikely event that they form a Government after 7 June, I hope that they will say that they will consider these points. The Conservative party has said that, when we are in government, we will impose zero business rates on equestrian industries and other businesses in the countryside.

Edward Leigh (Conservative, Gainsborough)

The point made by the hon. Member for Somerton and Frome (Mr. Heath) needs to be answered, because it is one that Liberal Democrat Members regularly make in these debates. They say that these are important matters and that we should not spend time debating the programme motion because that takes up some of the time that we have available to discuss the Bill. We only have two hours to discuss the remaining stages of the Bill, so the pressure is on us to shut up. Every minute that we take on the programme motion means that less time is available for consideration of the Bill. That is a sort of kowtow version of politics, whereby the Opposition have to give way to Government blackmail and the way in which they ram legislation through Parliament.

John Bercow (Conservative, Buckingham)

My hon. Friend has generously complimented the hon. Member for Somerton and Frome (Mr. Heath) on his remarks on the programme motion, but the said hon. Gentleman does not even have the courtesy to listen to the compliment that is being paid to him.

Edward Leigh (Conservative, Gainsborough)

I do not want to get involved in that debate because the hon. Gentleman is having an important discussion elsewhere. [Interruption.]

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

It is disgraceful of Conservative Members to make such comments when my hon. Friend the Member for Somerton and Frome (Mr. Heath) is talking to Mr. Speaker.

Edward Leigh (Conservative, Gainsborough)

It does not matter who the hon. Gentleman is speaking to. The fact is that he made a point and I was seeking to reply to it. We cannot let that point pass. The Opposition cannot be put under moral pressure not to do what Oppositions have traditionally done, which is to debate programme motions properly. We have a perfect right to do that. Each time we debate a programme motion, the Government look back through history and quote all the times that Conservative Governments introduced guillotine motions. It is true that, on occasion, Conservative Governments have had to introduce guillotine motions. [HON. MEMBERS: "Ah."] Yes, I accept that we did that. The then Opposition sought, quite rightly from their point of view, to prolong debate because that weapon was available to them. When Labour Members were in opposition, they did that extremely well. I sat through many Standing Committees in which they spoke at length. They were not filibustering and were not out of order, and sometimes we spent many hours in Committee. The sittings of the Committee on which I served and that considered the Bill that led to the privatisation of British Telecom went on for more than 100 hours, and we considered hardly any of the clauses. It was on occasions such as those that Conservative Governments introduced programme motions. We then had a great set-piece debate on the Floor of the House, which lasted for three hours. Important Front Benchers made speeches and the argument went to and fro across the Floor. It was a big occasion. Now, as a matter of course, the Government introduce programme motions for everything. I know that some Members argue that that is the right way to proceed, but, surely, programme motions should be introduced on the basis of consensus and the House should not be treated with contempt. The Government should not say that matters that are important—they affect the livelihoods of those who run equestrian centres and village shops—will receive only two hours of debate. The Government say, "If you want to talk about the programme motion, you'll get even less time, mate. It's up to you. Just take it and be stuffed." That is what they are saying and it is simply not good enough. When programme motions are introduced, we shall argue again and again the point that the House must have more time. I do not understand what the hon. Member for Somerton and Frome said. In his first breath, he said that this was a modest Bill that had much to be modest about, but in his second sentence he said that it was a very important Bill. He is a Liberal. Is it an important Bill or a modest one? Is it complex Bill or one that does not need much debating? Does it affect people's real lives? Perhaps the hon. Gentleman can enlighten us.

David Heath (Liberal Democrat, Somerton and Frome)

I am grateful—

Anne McIntosh (Conservative, Vale of York)

The hon. Gentleman is back.

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Lady intervenes on my intervention to say that I am back. She knows perfectly well that I got no further than the Speaker's Chair. The hon. Gentleman asked how the Bill can simultaneously be important and modest. It is important because it provides some relief, however modest, to the businesses that we represent in rural areas, which desperately need it. t is modest because it does not go nearly far enough, as I made clear in my contributions on Second Reading and in Committee.

The rest of the debate is in Hansard.