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The Chief Secretary to the Treasury (Mr. Andrew Smith): As my right hon. Friend knows, the Government's spending plans have been set down and agreed for the years until 2003-04, including spending allocations for Scotland, Wales and Northern Ireland. Those allocations are governed by the statements of funding policy incorporating the Barnett formula, and that remains the Government's policy.
Joyce Quin: Does my right hon. Friend appreciate that, despite the welcome increases in public spending in the regions, the Barnett formula continues to be the focus of public concern and public attention, especially in the north-east of England? Indeed, the issue was raised several times during the general election campaign. Given the Government's commitment, which I very much hope that they will honour, to hold referendums on regional government in England, does he agree that we should grasp the opportunity to devise a long-term formula, more closely related to needs, which would benefit the whole of the United Kingdom?
Mr. Smith: My right hon. Friend refers to remarks made during the general election campaign and she will be aware of what the Prime Minister said. I have nothing to add to his words. However, for those who have concerns about the Barnett formula, I point out, first, that it is not the formula that is responsible for the inequalities in funding about which people are worried. Those are historic matters which, of course, the Barnett formula addresses. It is a convergence formulasomething on which we receive representations from other parts of the United Kingdom.
Secondly and importantly, I am glad that my right hon. Friend welcomes the substantial increases in public expenditure and the benefits that they bring to the north-east and other regions. Money from, for example, the new deal, the working families tax credit and the child tax credit, the extra help for pensioners and the employment credit that will operate from 2003 give extra resources precisely to those areas that need them most, including of course the north-east.
Mr. Simon Thomas (Ceredigion): I welcome the new honesty from the Minister about the fact that the Barnett squeeze does exist in Wales and Scotland. What is the real justification for the formula, other than as a bad habit or for the avoidance of blood on the carpet? Does he realise that Wales, Sheffield, Cornwall and Liverpool will lose out in additionality from European funding until we get a better and more equitable funding regime in these islands? Is it not time to replace the Barnett formula with a new relationship between the nations and regions of these islands? Is he not enamoured of a needs-based formula for Wales and fiscal autonomy for Scotland?
Mr. Smith: I thought that the nationalists did not want a formula at all, but to be wholly responsible for raising and spending their own money. We have shown sensitivity to the particular needs of regions and countries.
Mrs. Louise Ellman (Liverpool, Riverside): What mechanism does my right hon. Friend have for relating public spending to public needs in the English regions? Will he consider spending billions of pounds of public funds through the science research councils, especially in relation to the regional implications and the development of the knowledge economy, particularly in the north-west?
Mr. Smith: I was fortunate enough to launch our knowledge economy White Paper in the north-west, and I know how much of a contribution the investment in science is making there, building up clusters and building on the traditional strengths of industry in the region. There is innovation and new investment in pharmaceuticals and other sectors in which the north-west has a relative competitive advantage. We will build on that in the interests of my hon. Friend's constituents. Long-term unemployment in the region has dropped very sharply, thanks to the Government's initiatives. She asked what mechanisms we have for relating public expenditure to need; I think that the new deal is the best example.
The Financial Secretary to the Treasury (Mr. Paul Boateng): The climate change levy will raise an estimated £1 billion in its first year, all of which will be recycled back to business through cuts in national insurance contributions and support for energy efficiency.
Although the levy is broadly revenue-neutral, it is not possible to say at this stage what the effects on any specific sector or industry will be. That will depend on several factors, including the future energy consumption of firms in the sector and employment levels in those firms, the number of energy-intensive firms in the sector that are eligible to receive a discount on the main rates of the levy by signing up to an energy efficiency agreement, and what use firms in that sector make of electricity generated from levy-exempt new renewable sources of energy and combined heat and power.
Miss McIntosh: I thank the Minister for that reply. Does he accept that the Government are discriminating between sites that are covered by integrated pollution prevention and control and those that are not? Does he accept that businesses are now the principal tax collectors in this country? What would he say to Chennell and Armstrong, a firm in my constituency, which will pay out £3,562 more in tax but receive a reduction in national insurance contributions of only £78?
Mr. Boateng: No. This is the Government who cut corporation tax and capital gains tax, and introduced generous capital allowances as part of the climate change levy. The hon. Lady should welcome all that, not criticise it.
Mr. Colin Challen (Morley and Rothwell): Does my right hon. Friend agree that the best leader for the Conservative party would be Dr. Faustus, who believed that a short-term gain pays off with a long-term pain? What is the cost to the country of not leading in the development of new technology to combat climate change? What is the cost to the country of businesses suffering the effects of flooding and other consequences of extremely severe weather? All those costs are mounting, and if we do not deal with them, we will have a long-term pain.
Mr. Boateng: Given the record of Conservative Members, I do not think that Dr. Faustus would have got through the first round. [Interruption.] They don't like it up 'em. The whole House recognises that combating climate change and reaching the Kyoto targets are
Sir Patrick Cormack (South Staffordshire): Will the Minister look carefully at the impact of the tax in those areas that have been particularly affected by foot and mouth disease? Does he accept that in many of those parts of the country, any extra burden is crippling?
Mr. Boateng: The hon. Gentleman makes a very important point. We are concerned to make sure that in rural areas, particularly those affected by foot and mouth, Customs and Excise takes a sympathetic attitude to the problems experienced by farmers. We have not only made sure that energy-intensive parts of agriculture have access to the 80 per cent. reduction, but established a Customs and Excise national advice centre, which has a specific remit to give advice and help on claiming discounts, on collection arrangements, on other technical issues relating to relief and, importantly, on arrangements for deferring payment of VAT, where that will help.