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Interest Rates

12. Dr. Lynne Jones: If he will make a statement on the level of interest rates. [12660]

Mr. Gordon Brown: Interest rates are now set by the Bank of England with the aim of meeting the Government's inflation target. I am satisfied that the new arrangements will deliver long-term price stability and prevent a return to the cycle of boom and bust.

Dr. Jones: Does my right hon. Friend agree that the Government need to give high priority to policies that will

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reduce interest rates and improve the competitiveness of the pound in preparation for joining the single currency? Would not the prospect of Britain joining sooner put us in a strong bargaining position to argue for a slowing down of the bandwagon to 1999?

Mr. Brown: We have made it absolutely clear that it is not practical for Britain to join in 1999, as the economic tests that we have set are not being met.

As for the level of interest rates now set by the Bank of England, we inherited circumstances in which inflation was about to rise as a result of the previous Government's failure to take action. We are not prepared to contemplate pursuing the same stop-go boom and bust policies that bedevilled the country for the past 20 years under a Conservative Government and were responsible for thousands of jobs and businesses being lost unnecessarily as a result of recession. That is why we took the action that we did and made the Bank of England independent and put it in operational charge of interest rates.

We still need an answer. Is the Conservative party now opposing our proposals to give independence to the Bank of England?

Mr. Wilkinson: Is it not one thing to have an independent national central bank, namely the Bank of England, but constitutionally and practically quite another for our interest rates to be controlled by an independent, unaccountable central bank in Frankfurt over which the British people have no democratic control whatsoever and whose actions could decimate British jobs and do incalculable harm in this country? How can the Chancellor continue to say that there are no constitutional implications to a single currency?

Mr. Brown: I take it that we have the answer to at least one of my questions: the hon. Gentleman is opposed to the principle of a single currency. On Monday I made it clear that there was a pooling of economic sovereignty involved--[Interruption.] If the hon. Member for Buckingham (Mr. Bercow) wants to follow the debate, he should really be in the Chamber and look at the issues. I said quite clearly on Monday, as he will acknowledge, that a pooling of economic sovereignty was involved. We have to ask ourselves whether there is a constitutional bar to economic and monetary union as a result. We say no. What does the hon. Gentleman say?

Mr. Bercow rose--

Madam Speaker: Mr. Bob Blizzard.

Beer Imports

14. Mr. Blizzard: What steps he will take to recover revenue lost from bootleg imports of beer. [12662]

Dawn Primarolo: The Government take excise smuggling and fraud very seriously. Customs is currently deploying additional officers to front-line work in the Dover area to counter those involved.

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Mr. Blizzard: I thank my hon. Friend for that reply. Brewers in my constituency will welcome the deployment of extra staff and the review of the matter. Does my hon. Friend agree, however, that the scale of bootlegging is so large that French beer occupies about 5 per cent. of the British market and 70 per cent. of it is smuggled beer? That represents a huge loss to the public purse and a huge threat to the British brewing industry and to jobs. It is also resulting in gangs being involved in violent criminal activity. Does my hon. Friend accept that the root cause of the problem is the large differential between the rates of duty on French and British beer? Will she therefore seriously consider the case put to the Treasury that if beer duty were reduced by 20 per cent., within three years there would be a net gain to the Exchequer and an increase in employment of some 60,000 jobs?

Dawn Primarolo: As I have said to my hon. Friend, to put the matter in proportion, the loss to the Treasury from smuggling was something like £120 million in 1996-97, against a total income of £4.9 billion in duties from beer. That estimate is based on figures agreed by the brewers. Although my hon. Friend is absolutely right to draw attention to the problems of growing crime and its associations with extensive importing of French beer, the answer is not harmonisation of duty rates. The answer is collaboration, as we have demonstrated through the review that we have set up to tackle excise fraud, to deal with crime and competitive issues and address health issues.

Frankly, I find the idea that we could cut our duties--as the brewers propose--and lose £3 billion in revenue and somehow make that up in increased consumption in three years a little hard to believe.

Miss McIntosh: Is the Minister prepared to look at the facts and figures provided by the Wines and Spirits Association, which confirm the point made by the hon. Member for Waveney (Mr. Blizzard) that millions of pounds are lost to the Treasury from bootleg imports not only of beer but of wine and spirits, including the produce of the Chancellor's and my own country, Scottish whisky? Most of the duty on Scottish whisky is lost through bootlegging. Does the Minister agree that it is a misuse of public resources to increase the use of agents to apprehend bootleggers and that, as the hon. Gentleman suggested, the money could go to the Revenue as genuine income?

Dawn Primarolo: When the Conservative Government reduced duty on Scottish whisky, the producers responded by putting up the price, not putting it down. If the case was so strong that a price reduction was necessary to assist in combating smuggling, perhaps they should have reflected on the increase before they implemented it. All producers--of wine, spirits and beer--are actively involved in the Government's review. Discussions are under way about the exact scale of the problem and agreement will be reached in solving it in partnership between industry and Government.

Economic Stability

15. Mr. Cranston: What measures he is taking to strengthen economic stability in the United Kingdom. [12663]

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Mrs. Liddell: As my right hon. Friend the Chancellor has already made clear this afternoon, the Government have taken decisive steps to strengthen economic stability. In May, we established the new framework for monetary policy, giving operational independence to the Bank of England. In July, my right hon. Friend introduced the deficit reduction plan, based on tough fiscal rules, designed to put public finances on a sustainable course.

Mr. Cranston: Does my hon. Friend agree that market expectations indicate that interest rates will go down next year and that, since May, long-term interest rates have gone down by 1 per cent.? Does that not show that the measures taken by the Government since May have directly encouraged economic stability?

Mrs. Liddell: The measures taken by my right hon. Friend the Chancellor were aimed at the long term. In fact, since his announcement in May, long-term interest rates have fallen. The Government are seeking to bring about a climate of stability which was sadly lacking. All of us remember the Ken and Eddie show, when interest rates went up, went down and then went up again. That is not a sustainable way to run an economy. In the long term, we hope that companies and individuals will be able to plan ahead with a degree of consensus, with politics taken out of the setting of interest rates.

Mr. Brooke: If the Government claimed to be so clear and so economically stable on Monday, why did the markets so misunderstand them in the previous 30 days?

Mrs. Liddell: Given that share values are up since May, I find the right hon. Gentleman's point rather difficult to take. The action that my right hon. Friend the Chancellor took in giving operational independence to the Bank of England has been widely welcomed. The only answer that we cannot get is whether the Conservative party is prepared to support the Bank of England Bill. Conservative Members have been asked three or four times this afternoon for a response but have failed to give one.

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16. Mr. Sheerman: If he will assess the advantages of applying taxes to resources rather than labour. [12664]

Dawn Primarolo: The Government's statement of intent on environmental taxes, issued in the July Budget, demonstrates our commitment to the use of economic instruments to achieve environmental objectives. However, we will look at the advantages and disadvantages of taxes on a case-by-case basis. In each case, it is important to consider all the effects of a tax, including its distributional impacts, and any implications for competitiveness.

Mr. Sheerman: My hon. Friend will know that the decision by the Chancellor to examine the issue of environmental taxation seriously, rather than going for a quick fix, was widely welcomed. I ask the Government to continue the work on environmental taxation and to consider--with no prejudice--the landfill tax introduced by the right hon. and learned Member for Rushcliffe (Mr. Clarke) in his penultimate Budget. It has been very effective in changing the environment. I hope that we can build on that rather than ignoring it.

Dawn Primarolo: I confirm that the cross-party support for the introduction of the landfill tax, which has been a successful measure--its first year of operation is currently being reviewed by the Government--is an excellent example of how an environmental tax can work.

Mr. Gibb: Given the European Union tax harmonisation proposals, which were discussed by the Chancellor at the recent Economic and Finance Council meeting, is it the Government's long-term intention to hand over direct tax policy to Brussels? Or will the Financial Secretary today commit the Government to vetoing those proposals at the next ECOFIN meeting?

Dawn Primarolo: As the hon. Gentleman well knows, we have a veto and we have always declared our intention to use it when that best serves British interests.

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