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TREASURY

Export Credits Guarantee Department

Mr. Russell Brown: To ask the Chancellor of the Exchequer if he will make a statement about progress on implementing the recommendations made by KPMG in December 1999 on the adequacy of the risk management systems and processes of the Export Credits Guarantee Department. [148480]

Mr. Timms: The Government, in their response to the Trade and Industry Committee's report on the future of ECGD, noted that it intended to commission a follow-up, independent report to assess progress in addressing the recommendations made by KPMG in 1999 [Cm 4792]. I announced the Terms of Reference for this follow-up review to the House on 30 November 2000. KPMG have been re-engaged for this review which is to be undertaken in two stages. The first stage is now complete and I have placed a copy of KPMG's report in the Library of the House. KPMG's conclusions were as follows:

"A significant volume of work has been undertaken in addressing the recommendations set out in the original KPMG report. Most of the recommendations have been addressed, although there are still some areas outstanding. However, in most cases, the implementation of the proposals made to address the recommendations is still in course.

As a result, the majority of steps taken to address the recommendations could only be reviewed through studying the so called Product Papers relating to each area of the Action Plan, and the practical effectiveness could not be reviewed. Many of the findings of this report have, therefore, stated a requirement for further review in Phase 2 of the review. In many cases, it will be necessary for ECGD to revise the processes proposed by the Action Plan Products to fit the PMS3 framework and this is likely to involve a considerable volume of work.

Therefore, as regards Section 5 of the original KPMG report, we believe that there is a need for ECGD to formally monitor the implementation of the Product Papers and their associated recommendations, in order to maintain the momentum required to ensure full implementation in advance of Phase 2 of the review.

As regards Section 4 of the original report and progress towards capitalisation, there was found to be a high degree of commitment within ECGD to the development of the PMS3 framework. There has been considerable progress in the high level design of the constituent elements of a capitalisation framework comparable to best practice in the commercial sector. However, in most cases, the detailed design of the various elements is still in course and was not therefore ready for review.

The high level review of the elements in place revealed that significant progress has been made towards the development of the PMS3 framework, but that there is also a great deal more work to be completed for ECGD to successfully meet the April 2001 implementation date. This is particularly the case regarding

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the development of the operational framework within which PMS3 will work. It is recommended that fulfilment of the criteria set out in Annex B of this report should be reviewed in Phase 2 to more fully assess the potential effectiveness of the PMS3 framework.

Overall, therefore, whilst we believe that significant progress has been made in addressing the recommendations, it is clear that there is still a considerable amount of implementation work to be completed before the operating environment will be appropriate for the delegation of full operational autonomy to ECGD and the adoption of the purely strategic relationship proposed in Product E4 of the Action Plan".

Special Shares

Mr. Cousins: To ask the Chancellor of the Exchequer if he will list the special shares he holds in former nationalised companies; what value is placed on those shares based on resource accounting procedures; and what market value is attached to those shares. [147251]

Mr. Andrew Smith: HM Treasury does not hold special shares in any former nationalised companies.

For figures on the numbers of special shares held by the Government, I refer to the answer my hon. Friend the Financial Secretary gave to the hon. Member for Twickenham (Dr. Cable) on 21 February 2000, Official Report, column 764W. Since 21 February, the Government have redeemed their special share in both PowerGen plc and National Power plc and have obtained a special share in Lattice plc following the restructuring of British Gas plc.

Special shares are not marketable and are not assigned a value within departmental resource based accounts.

Children's Tax Credit

Mr. Davidson: To ask the Chancellor of the Exchequer how many families in the constituency of Glasgow, Pollok he estimates will be eligible to claim the children's tax credit. [148119]

Dawn Primarolo: An estimate of the number of families in the constituency of Glasgow, Pollok who will be eligible to claim the children's tax credit (CTC) is unavailable, but an estimate of the number of families in Scotland who will be eligible to claim CTC is 400,000.

Unemployment Costs

Mr. Rammell: To ask the Chancellor of the Exchequer what the average annual cost to public funds is in terms of benefits payments and lost revenue of each unemployed person; and how this varies between employment sectors. [147721]

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Mr. Andrew Smith: The extent to which unemployment affects Government revenues and spending depends on a number of assumptions, in particular the extent to which unemployment reflects permanent changes in output growth. Treasury research on this is included in "Fiscal policy: public finances and the cycle" (March 1999). As a result of falling levels of unemployment, social security expenditure to the unemployed is forecast to be £4 billion lower, in real terms, in 2000-01 than in 1996-97. DSS ready reckoners estimate that an increase of 100,000 in claimant unemployed would lead to an increase in expenditure of around £500-£550 million a year. Public revenue and spending effects of unemployment in different employment sectors are not available.

Drug Smuggling

Mr. Lilley: To ask the Chancellor of the Exchequer (1) how many employees of HM Customs and Excise (a) are predominantly involved in tackling importation of illegal drugs and (b) have some responsibility for tackling importation of illegal drugs and how many employees there are in total; [146301]

(2) what proportion of the resources deployed by HM Customs and Excise are involved in dealing with the importation of illegal drugs. [146302]

Dawn Primarolo [holding answer 24 January 2001]: This information for resources deployed to the Protection of Society is contained within HM Customs & Excise's Annual Report 2000, a copy of which is available in the House of Commons Library. The majority of these staff will be deployed on anti-drugs work.

Insurance Regulation

Mr. Cousins: To ask the Chancellor of the Exchequer what plans he has to investigate the regulatory performance of his Department and its predecessors in respect of insurance providers and appointed actuaries on the issue of (a) guaranteed annuity policies, (b) with profits funds and (c) policyholders' reasonable expectations in the period leading up to 1 January 1999. [145695]

Mr. Ottaway: To ask the Chancellor of the Exchequer if he will conduct an inquiry into his Department's regulation of Equitable Life during 1997 and 1998. [146685]

Miss Melanie Johnson [holding answer 16 and 22 January 2001]: The Financial Services Authority is preparing a report on the events leading to the closure of Equitable Life to new business. As the FSA said on 22 December the report will set out the background and events leading up to the FSA assuming responsibility for prudential insurance regulation. The report is likely to take some months and it will be published.

Mr. Ottaway: To ask the Chancellor of the Exchequer, pursuant to his answer of 8 January 2000, Official Report, column 462W, if he will make it his policy to provide compensation to Equitable Life policy holders who acted on the guidance issued by his Department. [145570]

Miss Melanie Johnson [holding answer 15 January 2001]: As I announced in the Westminster Hall Adjournment debate on 19 December 2000, Official Report, column 56WH, compensation for the customers of financial services firms is available if a firm becomes insolvent. As I also reported in that debate, the FSA said

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when the firm closed to new business that the Equitable Life was not insolvent. In the case of insolvent insurance firms, the relevant compensation scheme is that provided for under the Policyholders Protection Act 1975. The Financial Services and Markets Act 2000, when implemented, will bring these arrangements into the single Financial Services Compensation Scheme.

Tax Law Rewrite Project

Barbara Follett: To ask the Chancellor of the Exchequer if there have been further developments on the Tax Law Rewrite project. [148479]

Dawn Primarolo: I am pleased to be able to tell the House that the Tax Law Rewrite project is continuing to make good progress. The rewritten Capital Allowances Bill was introduced in this House earlier this month and the Inland Revenue today publish the project's eleventh Exposure Draft, containing draft clauses rewriting a second group of the employment income provisions. Copies of the Exposure Draft are being placed in the Libraries of the House.

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