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House of Commons

Thursday 16 January 1997

The House met at half-past Two o'clock

PRAYERS

[Madam Speaker in the Chair]

Oral Answers to Questions

TREASURY

The Euro

1. Mr. Heathcoat-Amory: To ask the Chancellor of the Exchequer if he will estimate the cost to the United Kingdom economy of converting to the euro. [9515]

11. Mr. Gordon Prentice: To ask the Chancellor of the Exchequer what estimate he has made of the costs to the United Kingdom Government of transition from the pound to the euro. [9526]

The Chancellor of the Exchequer (Mr. Kenneth Clarke): The Government have not yet made any full assessments of the transitional costs to the Government or to the economy of introducing the euro. We will make an assessment of such costs at the appropriate time as part of the assessment of whether the United Kingdom should participate in the single currency.

Mr. Heathcoat-Amory: As we must decide this year whether to join the euro, and as the cost of doing so would run to many billions of pounds because all business systems, computers and shop tills would have to be changed, does my right hon. and learned Friend think that a welcome contribution to the debate, which I know that he wants, would be to make and publish such estimates? Have estimates been made of the direct cost to Government Departments such as the Inland Revenue, Customs and Excise and so on? If so, will he undertake to publish them at an early date?

Mr. Clarke: If the euro were to go ahead on the timetable contemplated, and we were to join, Government Departments of the sort that my right hon. Friend cited would not have to change their accounting systems until 2002, when notes and coins are intended to be introduced. We are in close contact with the banking and retailing world and a great deal of consultation has taken place. When the sensible time comes for making a full assessment of the choice facing the United Kingdom, things such as compliance costs will obviously be relevant. By then, we should be able to produce some reliable figures and estimates.

Mr. Prentice: Would not the costs be very considerable? In the 1960s, the Government decided to decimalise five years before D-day and the relevant

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legislation was on the statute book four years before. Why does the Chancellor think that the country can make this momentous and irreversible decision, with euros coming to the United Kingdom in January 2002 and the pound disappearing in June of that year, in less time than it took the country to decimalise in 1971?

Mr. Clarke: Member states are considering the precise transitional arrangements. The British Government are contributing to the necessary rules and regulations that would govern the transition to make it less expensive and to reduce the costs to an acceptable level. As I said, on the strictest interpretation of the timetable, we are talking about a changeover of notes and coins by 2002. At the moment, the sensible thing is to wait and see precisely what the transitional arrangements will be and to continue discussions with banks and retailers. Banks and many financial houses will have to change their systems anyway if the euro is formed by other countries, because I expect much trading in the euro to take place in the foreign exchange markets in the City of London.

Mr. John Townend: Does my right hon. and learned Friend accept that the cost of introducing the euro, which everyone accepts will run into billions of pounds, will have to be paid for by increases in taxes and prices? If we have the same experience as we had with decimalisation, conversion prices will be rounded up. Will not the introduction of the euro therefore result in a significant increase in inflation, pushing up prices and feeding into higher wages and costs?

Mr. Clarke: I think that it is an argument; I am not sure that it is a fact. I agree that it is perfectly legitimate to claim that there will be substantial transitional costs; the Government must be in a position to estimate them and will do so at the sensible time when we face the choice. I well remember taking part in the controversy about decimalisation. The debates were still going on when I first arrived in the House. My only recollection of decimalisation is that, after much agitated debate running up to it, the changeover was almost a non-event.

Mr. Gordon Brown: Following the discussions in Dublin on the euro, its costs and other matters, the Health Secretary said that he favoured renegotiating our position in Europe and was supported by the Prime Minister, who said that he favoured renegotiation. This morning, the Chancellor said that he does not think that that means renegotiating. Who speaks for the Government? Does the Chancellor support the Prime Minister's position on renegotiation?

Mr. Clarke: We have a clear position on negotiating in the context of the intergovernmental conference. We have produced a White Paper, and have set out a clear negotiating position. I have not the first idea what the Opposition's view of any of that is; they have not produced any such document, and this is one of the many areas where it is not possible to get any straight answers out of them.

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Small Businesses

2. Sir Wyn Roberts: To ask the Chancellor of the Exchequer what economic measures he is taking to encourage small businesses. [9516]

The Economic Secretary to the Treasury (Mrs. Angela Knight): The main contribution that the Government can make to a successful small business sector is to provide a stable macro-economic environment, with low taxation, limited regulation, and support and guidance where necessary: this we are doing.

Sir Wyn Roberts: I welcome my hon. Friend's reply. Does she agree, however, that the economic stability and excellent prospects that small businesses now enjoy, and the help given to them in the Budget with business rates and corporation tax, will be put at risk if the electorate are foolish enough to take a leap in the dark and vote the Labour party into government?

Mrs. Knight: My right hon. Friend is right: he has made an important point. The major criterion that all small businesses want us to achieve is a stable economic environment, and they now have that. It is also important to note that we now have uniform business rates because, before they were introduced, too many Labour-controlled local authorities continued to put up rates, thus milking dry companies in their areas and inhibiting their ability to employ and foster. It is not surprising that small businesses are so worried about the Labour party's policies.

Mr. Foulkes: Is not one of the additional burdens borne by small business men the extra cost of value added tax on fuel? Will they not have been rather upset, if they voted Conservative at the last election having been assured that there would be no VAT on fuel, to find that it was immediately imposed?

Mrs. Knight: That just shows how little the hon. Gentleman knows about small businesses. They claim the VAT back. What they are very worried about is the question of the minimum wage and the social chapter, with which they know the Labour party is threatening them.

Mr. Tredinnick: Is my hon. Friend aware of any proposals to give control of business rates to local authorities? Does she think that, were that to happen, business rates would go up or down in councils controlled by Opposition parties, such as Hinckley and Bosworth borough council in my constituency?

Mrs. Knight: My hon. Friend raises the issue that worries so many businesses. When their local authorities were controlled by Labour, they felt that they were having to pay far too much for far too few services--and, what is more, statistics prove that they were absolutely right. The Labour party's promise that it would return small companies to local authorities for business rating purposes shows just how little the party knows about companies, and shows why companies justly fear its policies.

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Inheritance Tax

3. Mr. Pike: To ask the Chancellor of the Exchequer how many people he estimates will pay inheritance tax in the current financial year. [9518]

The Financial Secretary to the Treasury (Mr. Michael Jack): It is provisionally estimated that inheritance tax will be paid on around 18,000 transfers on death and in lifetime in the current financial year.

Mr. Pike: As a Lancashire Member, I congratulate the Minister--another Lancashire Member--on his elevation to the Privy Council.

Does not the Government's obsession with the abolition of inheritance tax underline, in many people's minds, their obsession with helping a minority of wealthy people rather than giving a fair deal to the majority? That has been the trend ever since the Government were elected in 1979.

Mr. Jack: In a spirit of camaraderie, I thank the hon. Gentleman for his kind good wishes on my appointment to the Privy Council. I listened to what he had to say, but it contrasts starkly with what the hon. Member for North Warwickshire (Mr. O'Brien) said last year in the Standing Committee considering the Finance Bill. At that time, he confirmed your party's wish for more millionaires to be created, and seemed to confirm some interest in the creation of wealth; but you show your usual nasty attitude to that wealth passing down--

Madam Speaker: Order. Privy Councillors do not behave in that way.

Mr. Jack: I apologise, Madam Speaker--the heat of battle must have got to me.

The hon. Gentleman suggested that his party takes a rather unfortunate attitude to wealth being passed on. Inheritance tax statistics show that only 2 per cent. of estates now pay it. Through raising the threshold and our long-term desire to remove the tax, we want to end the worry caused to those with modest estates as they pass their wealth down the generations. We want more wealth to be passed on for productive use by future generations.

Mr. Nicholls: Does my hon. Friend agree that 2 per cent. of estates being subject to inheritance tax is 2 per cent. too many? The trouble with inheritance tax is not that it was designed to raise revenue for items that must be financed by the state, but that it was devised as a way of punishing people for having money in the first place. It is a thoroughly un-Conservative tax and it should go at the earliest opportunity.

Mr. Jack: My hon. Friend puts his finger on an important point. It is worth considering the history of estate taxes, or estate duty as it was once called. Such taxes were relevant when the tax base was not as it is today. Today, we have taxes on income, earning and consumption; the time has come for us to make progress on our long-term objective of removing inheritance tax, as and when we can afford it.

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