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Financial Flows (EU)

4. Michael Fabricant (Lichfield): If the Treasury will conduct an analysis identifying the (a) direct and (b) indirect financial flows in and out of the United Kingdom arising from EU membership; and if he will make a statement. [118660]

The Chancellor of the Exchequer (Mr. Gordon Brown): The UK conducts the majority of its trade—50 per cent.—with the EU. It also receives 55 per cent. of its inward foreign direct investment from the EU, and invests 40 per cent. of its outward foreign direct investment there. In addition, 61 per cent. of the UK's inward mergers and acquisitions activity, and 54 per cent. of its outward mergers and acquisition activity, are also with the EU.

Michael Fabricant : I am grateful for that answer, but it does not cover indirect fund flows from and into the UK. In a recent parliamentary answer, the Foreign Office confirmed that no such analysis, including of indirect fund flows, has been undertaken since around 1992. Will the Chancellor ensure that such an analysis is now made? Is he aware that a recent analysis by the US Treasury suggested that the net cost to the UK of EU membership was of the order of $40 billion a year—almost equivalent to a doubling of the state pension. Clearly, that finding cannot be true. No Opposition Member believes that there can be any question of withdrawal from the EU, but it is not about time that our own Treasury conducted an analysis of indirect and direct costs, so that we can know how much we benefit from the EU?

Mr. Brown: I have looked at the American authorities' analysis and I shall do so in more detail now that the hon. Gentleman has drawn my attention to it again. He says that no analysis has been conducted since

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1992. He might have been more successful in persuading the previous Government to conduct it between 1992 and 1997.

The hon. Gentleman really cannot tell us that he does not want to take Britain out of the European Union. I shall read from his article in The Birmingham Post. He wrote:

Mr. Barry Sheerman (Huddersfield): If my right hon. Friend performs that analysis, will he be sure to track how much inward investment we have received, especially in manufacturing, since we became been a member of the EU? Most of the figures I have seen show the beneficial effects of membership in terms of jobs, investment and productivity.

Mr. Brown: My hon. Friend chairs the Select Committee on Education and Skills and throughout his parliamentary career has taken an interest in all matters industrial, so he knows that since 1972, when 40 per cent. of our trade was with the EU, the figure has risen to 55 per cent. It was on that basis that the figure of 3 million jobs was first used, if I remember aright, by the Confederation of British Industry about 10 years ago, and has been updated ever since. It would be difficult for any Member to deny that there has been increased trade within the EU as a result of what has happened over the past 30 years or that that is very important to the future of every region of our country. My hon. Friend is right to remind people that those who want to take us out of the European Union are making a terrible mistake.

Mr. Peter Lilley (Hitchin and Harpenden): Unlike the Chancellor, who was elected to the House on a pledge to leave the European Community, I have always been, and remain, an unwavering supporter of British membership, so I should welcome a study of the kind advocated by my hon. Friend the Member for Lichfield (Michael Fabricant). Such a study would show that, over recent years, it has been to the benefit of this country to be a member of the EC but that as the Chancellor has shown recently, it would have been to our disadvantage to have been in the euro. Will the Chancellor confirm that there can be benefits from being in Europe yet outside the euro?

Mr. Brown: I have just said that we would have been wrong to take the advice of the Liberal party and to join the euro in 1999. When the Liberals look at our detailed studies, they will see that their 1999 proposal was wrong. Equally, however, we would be wrong to rule out membership of the euro entirely. The Conservative party is making a historic mistake. The Conservatives have turned their back on their previous position—to review membership during a Parliament and then to leave it for two Parliaments—and they are now against it altogether. I am afraid that they are in danger of moving from being not just against the euro but against Europe altogether, although I accept that the right hon. Gentleman is not.

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Tax Credits

5. Helen Jones (Warrington, North): What estimate he has made of the impact of the new tax credits on low-income families in Warrington, North; and if he will make a statement. [118661]

The Paymaster General (Dawn Primarolo): Six million families are expected to benefit from the new tax credits, including 250,000 low-income working families without children.

Seven hundred and fifty thousand families in north-west England are expected to receive the child tax credit, and 210,000 families in the region are expected to receive the working tax credit, including some who are also expected to receive the child tax credit.

Helen Jones : I am grateful to my right hon. Friend for that reply. Does she agree that, despite some of the difficulties of implementation, the new system of tax credits will provide a major boost to the incomes of many families in constituencies such as mine? However, the problems that my office is picking up result mainly from people filling in the forms wrongly or from changes in circumstances that they have notified since completing the original form. Will my right hon. Friend look into the application process for tax credits and, if possible, simplify it, and will she also consider how we can deal more quickly with changes in circumstances, so that families are not left in the lurch?

Dawn Primarolo: My hon. Friend is right about the benefits to families from the new tax credits; millions and millions of families have applied.

On moving to the new system, we required information to establish the claim and looked for clear ways to show simple things on the application form—name, address, national insurance number, work details, pay and number of children and their age. It was important to get all those details into the system.

Next year, the renewal of claims for those already in the system will be much simpler and the forms will be much shorter. Despite the fact that the new tax credit forms are half the size of those for the working families tax credit—its predecessor—and notwithstanding the extensive testing that we did on the original form, I agree that it would be wise to consider whether further improvements could be made.

Mr. Mark Prisk (Hertford and Stortford): Many people in Warrington, North—indeed, in the whole north-west—would be interested in the Paymaster General's answer. On 28 April, she promised the House that

Obviously that would include people from Warrington, North. That week ended on 2 May, yet, one month later on 4 June, the Government's own figures showed that, in fact, 750,000 eligible claimants across the country had yet to be paid. Why did the Paymaster General break her promise? Given what this shambles has cost people

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in bank charges and interest payments, will she now apologise to the many families affected and compensate all those who are out of pocket?

Dawn Primarolo: I appreciate that figures are challenging for the hon. Gentleman, but, to return the statement that I made on 28 April and the number of claims that we had received by that date, I told the House that those claims would be either processed into payment or claimants would be contacted where issues were still outstanding. Every day, because of the popularity of this policy, thousands of forms arrive, and the position that I stated on 28 April remains the case. It is important to check applications with outstanding queries, because I am sure the House would not wish us to pay public money to those who may not be entitled to it, but every claim received by that date is in payment or the claimant has been contacted by the Revenue to ensure that the claim is correct.

VAT (Tourism Services)

6. Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): When he last met representatives of the tourism industry to discuss value added tax rates applicable to tourism services; and if he will make a statement. [118662]

The Economic Secretary to the Treasury (John Healey): There have been no recent discussions on that specific subject, but whenever we receive representations on tax matters we consider them carefully.

Mr. Llwyd : The Minister is right: the Government probably consider such representations carefully, but they do not do very much in this sector. May I remind the House that hotel accommodation in the United Kingdom is very expensive in comparison with other European countries? For example, France has a 5.5 per cent. VAT rate; Spain, 7 per cent.; and Ireland, 12.5 per cent. Would it not be a boost for the tourism industry, which is a very large employer in the UK, to look again at the VAT rate?

John Healey: It might not offer the boost that the hon. Gentleman imagines, and let me explain why. We have the highest VAT registration threshold anywhere in the European Union, so half the hotels in this country do not fall within the system and therefore do not charge VAT. The type of measure that he proposes would cost the Exchequer about £650 million, most of which would benefit the major hotel chains and luxury city hotels. So the blunt measure that he proposes may not have the effect that he would wish.

Paul Farrelly (Newcastle-under-Lyme): My hon. Friend may not be aware that tourism is one sector that we are trying to develop in north Staffordshire, precisely because of the difficulties in our manufacturing industry and the urgent need for regeneration, so I welcome the Chancellor's Budget commitment to regionalism, but may I ask all my right hon. and hon. Friends on the Front Bench whether—as well as supporting our diversification efforts, including tourism—they would

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be receptive to a bid from north Staffordshire for Government agency jobs that will relocate from London and the prosperous south-east in future?

John Healey: I welcome the efforts that my hon. Friend and those with whom he is involved in north Staffordshire are making to promote tourism. I know how beautiful the area is, and there must be a lot of potential to develop. On the specific point that he makes, the movement of civil service jobs out into the regions of England is being considered at the moment, and we will report on any plan in due course.

Sir Teddy Taylor (Rochford and Southend, East): Will the Economic Secretary clarify the legal situation, bearing in mind our EU obligations? Do the Government, in this Parliament, have the right to abolish VAT on tourism services, for example, or to move the rate from the higher band to the lower band? What freedom of action is available to the Government?

John Healey: VAT in this country is governed by European rules. We have long-standing formal agreements with other European states that we cannot introduce new zero rates or extend or introduce new ones, to which the hon. Gentleman refers. In relation to reduced rates and tourism, the Government considered the matter in 1998. No persuasive economic case existed for moving, as I have indicated, and there was not a strong fiscal case for doing so either. I must say to the hon. Gentleman that little has changed since then.

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