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Mr. St. Aubyn: Will the hon. Gentleman confirm that there are now virtual shopping malls where a business can set up shop and come under the umbrella of a recognised method of selling via the internet? When people purchase a product through the internet, they probably use a credit card. The credit card companies ultimately take the risk, because they guarantee that their customers will not get ripped off on the net. Is it not the companies at the heart of the system that are at risk, not the customer or the small guy who is trying to get on the bottom rung of the ladder?

Dr. Ladyman: The hon. Gentleman is right, and he makes a good point about shopping malls. If credit card companies guarantee products on behalf of companies operating from those malls, they will charge a commission

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for that service, and a small business may not want to pay that. As the hon. Gentleman said, people can pay with a credit card. I have a credit card that I use only for internet shopping, so that I can check the bill carefully and make sure that I am not being cheated. On the other hand, how many people realise that debit cards with a little Visa sign on them, which often look like other credit cards in their wallets, are not covered by the same credit protection legislation? People may shop with a debit card thinking that they are getting the protection to which the hon. Gentleman referred, but they have no protection at all. Indeed, they may be in a worse position, because their debit cards may give away bank account details to unscrupulous people. What the hon. Gentleman says is true to a certain extent, but the Conservative party has not thought out its opposition to the Bill as well as it should have done.

Dr. Palmer: I agree with my hon. Friend about the Opposition's position on new companies and the bias towards certain trade names. Does he agree that having an established brand name is not necessarily a guarantee for the customer? For instance, the Conservative party has a website. If he were to check it against his nine criteria, it would fail all nine.

Dr. Ladyman: My hon. Friend is right to remind me that not all brand names are as reliable as others.

I believe that the Government have listened to representations made to them. Had they rushed into this legislation, as some Conservatives wanted, we would have been saddled with a Bill that would have been wrong. They have done the right thing by listening, and they have adapted the Bill appropriately. As someone who is experienced in the industry, I am delighted to say that I shall support it tonight, and I hope to have further to do with the Bill at later stages.

8.31 pm

Mr. Nick St. Aubyn (Guildford): Despite an element of partisanship in some of the remarks that we have just heard, I count it a privilege to participate in a debate in which hon. Members are so evidently knowledgable about their subject. It is a tribute to the House that we have so many Members with outside interests who are engaged at the forefront of new developments in commerce.

Like other hon. Members, I have some interests to declare. They have spurred my interest in e-commerce, and have helped me to realise the potential of this new world. I am chairman of a joinery business in the west country that has recently set up its own website. In our own small way, we see the advantages of the Bill and the development of e-commerce for our business, because it enables us to extend our network of contacts.

Through the Industry and Parliament Trust, I am currently involved in a fellowship with DHL, the international company that provides a delivery service overnight around the world from business to business and business to consumer. For that company and their many competitors, there has been a revolution in expectations and in the way in which they do business. One of the results of the growth in e-commerce is a demand for business to consumer and business to business delivery services. Those companies are set to grow rapidly.

I am privileged to represent Guildford, which is at the forefront of new technology. The town is recognised as one of Britain's leading centres for the development of

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software. Not only do we have access to telecom lines, but more than 60 per cent. of houses will have cable access by the end of next year as an alternative and more efficient means of reaching the new technology.

I come to this issue from a different angle. I sense that our country is on the threshold of a golden opportunity to become a centre for e-commerce in Europe, just as, 20 years ago, we had a golden opportunity to become the financial centre of Europe. We realised that under the Conservative Government, and we are now Europe's financial centre. Indeed, we are one of the world's leading financial centres. With our English-speaking world contacts and our international outlook due to our history, the key event that virtually guaranteed that we would be Europe's financial centre was the fact that, in 1979, the Conservative Government abolished exchange controls. We deregulated: we opened up this country and this city, and it became a success story in the world of finance.

What are the Government doing? They are introducing new regulation in part I, and attacking the source of future potential--the people. They are attacking the people in IT through IR35. They will drive thousands of the most able people with IT skills out of the country, and they will drive them out over a petty tax point. We want them not to spend the money that they are earning, but to accumulate it in their businesses and invest it in the future of e-commerce.

There is no comparison between someone who works in IT, earning many thousands of pounds, and someone who is an employee with all the rights and guarantees that are granted to such employees, whether that person is working in a hospital, in a school or in any other profession. Those people's jobs are on the line every day. They are negotiating for new contracts with new companies; they do not know where their bread will be buttered in two years, or one year, or, sometimes, one month. What they do know is that, if they can retain the earnings in the companies that they have set up, they can invest those earnings to enable their businesses to grow, and to ensure that this country takes the opportunity to become a centre for e-commerce in Europe.

Dr. Ladyman: Will the hon. Gentleman accept from someone who employed an awful lot of contractors in his time that, relatively, most have exactly the same rights and privileges as company employees? They are usually taken on because companies do not wish to show head counts on their accounts. There are mechanisms for avoiding costs to large companies, which have been passed on to those people. They will continue to work in this country and contribute to the IT industry even after the change.

Mr. St. Aubyn: I have no doubt that some people involved in providing IT services to companies will stay here after the implementation of IR35, but those who have the most opportunity, who are the most able, and who have the most need to retain earnings and investment to develop their businesses and the potential of e-commerce are those who will go elsewhere. It is a fast-moving environment. No one can afford to give up a competitive advantage, or to give in to what the Government are

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doing. The Government are telling them that they are merely employees, but in fact they are entrepreneurs at the forefront of what should be a golden opportunity.

Dr. Palmer: Will the hon. Gentleman give way?

Ms Hewitt rose--

Mr. St. Aubyn: I want to develop my point, but I will give way to the Minister, for whom I have a great deal of respect.

Ms Hewitt: I am grateful to the hon. Gentleman. Perhaps he would care to tell us whether he endorses the advice given by at least one computing magazine to some IT sub-contractors to take from their earnings no more than just over £4,000 in the current tax year, and to take the rest in dividend payments, thus avoiding any national contributions on all their income. Does the hon. Gentleman support tax-dodging of that kind?

Mr. St. Aubyn: I am sure that the Minister would not wish to describe a perfectly legitimate exercise as tax-dodging. If she wants to prevent or discourage companies from implementing such a dividend policy, let her by all means introduce a specific rule to deal with that point, but people in the world of providing services should not be prevented from setting up companies and accumulating capital to develop bigger and more successful businesses, which is what the Minister's Government have managed to do in a cumbersome, clumsy way in introducing IR35.

Dr. Palmer: Will the hon. Gentleman give way?

Mr. St. Aubyn: No, I will take no further interventions.

The Bill is not about IR35; it is about e-commerce. Speaking to a group of Members of Parliament last week in the environs of the House, the managing director of Unilever, Mr. Richard Greenhaugh, said:


The problem with the Bill is that the competition restraints may be very real and very large.

It is not good enough for the Minister to tell us that the powers in part I of her Bill are reserve powers. We have seen the same Jekyll and Hyde trick from the Government before: they have tried to present two faces at once. We know that tonight the Minister has drunk from the bottle by her bed marked "light touch", but we also know that there is another bottle marked "regulation potion". We are very worried about when and where she will drink from that bottle and come back to the House with a very different look in her eye. We fear that she may announce, without sufficient debate, without a further Bill, and without proper consultation, that she will take a sledgehammer to this business and, in effect, drive it off our shores.

The problem with the light touch and with self- regulation is that they require strong nerves. In the fast-moving world of e-commerce, there will be occasions when people make mistakes and things go wrong. It will be easy at that time for the Minister to come to the House and to justify part I, saying that she is going to enact it. That will probably be the wrong thing to do.

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There were occasions in the 1980s and 1990s when financial institutions were in trouble. They made losses. Indeed, on one or two occasions, taxpayers' money was used to prevent those losses from getting even worse, but let us compare that with the position in countries that had far more heavily regulated financial sectors. They had just as many problems. The difference was that taxpayers had to foot a much bigger bill to put them right because their Governments had said at the outset that they were responsible for ensuring that nothing would go wrong. When it did, billions of pounds, or rather billions of dollars and tens of billions of francs were spent to try to redress the mistakes of Government, not just of businesses. The danger of regulation in such a new sphere is that the Government will find that it is underwriting activities that they do not understand and cannot control until it is too late and until taxpayers' money has been taken for a ride.

Part I depends on decisions by Ministers, yet we heard criticism after criticism by the Minister of her Department just months before the Government came to office. Why is she so confident that, under her management, the Department of Trade and Industry will always get it right in the sphere of information technology and e-commerce, when she has told us how wrong its original proposals on encryption were in 1997, a point with which we agree?


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