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Mr. Francois: I want clause 61 to be deleted from the Bill for the chief purpose of saving the popular home computing initiative from abolition by the Government. As we are asking the Government to relent, even at the eleventh hour, I will begin by wishing the Paymaster General a happy birthday. I congratulate her on reaching the age of 29—on a seasonally adjusted basis.

The genesis of the home computing initiative was section 45 of the Finance Act 1999, which said that employers could provide computer equipment including

"printers, scanners, modems, discs and other peripheral devices designed to be used by being connected to or inserted in a computer"

for the use of employees and their families at home without the employee incurring a benefit in kind for the purposes of income tax. The measure was designed to help to spread computer literacy among the population. In March 1999, the Chancellor himself proudly told the Daily Record:

"Britain can no longer afford to lag behind America. Inequality in computer learning today will mean inequality in earning power tomorrow".

Between 1999 and 2003, however, relatively few companies took advantage of the tax exemption, largely because it was not widely known or appreciated. In 2003, a working group was formed under the office of the e-envoy to examine how a specific scheme to loan computers to employees, including for private use,
 
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might be implemented. Partly as a result of that, the Income Tax (Earning and Pensions) Act 2003 included, in section 320, additional tax incentives specifically to encourage companies to loan computer equipment to their employees up to a maximum tax-free value of £500 a year. It is that section of the ITEPA 2003 that clause 61 would delete. That would have the consequence of effectively sounding the death knell of the scheme, which is why I am asking the Committee to reject the measure.

The home computing initiative, as we have come to understand it, was effectively launched in January 2004 by the Department of Trade and Industry, which, by that time, had taken on board departmental sponsorship of the project. The DTI published specific guidelines for employers and employees on the home computing initiative, thus effectively popularising the scheme. The DTI press release at the time, which contained supporting endorsements from Sir Digby Jones of the CBI and Brendan Barber of the TUC, promoted the scheme in the following terms:

"For employers HCI schemes are about maximising potential in the work place. Basic computer and technology skills are now regarded as essential for the majority of jobs. With home computer access IT confident employees have greater capacity to contribute to an organisation's overall performance and adapt more easily to new roles and opportunities. HCI schemes can also generate employer National Insurance savings."

In practice, the scheme has usually been financed by so-called salary sacrifice, in which employees accept a small decrease in pay in return for being loaned computer equipment by their employer. The employer in turn benefits by paying a reduced rate of national insurance contributions to the Treasury.

We believe that it is ultimately for financial reasons that the Treasury wishes to abandon the scheme. That was effectively confirmed by the Prime Minister last Wednesday when, in reply to a question asked by my hon. Friend the Member for Mid-Worcestershire (Peter Luff), the Chairman of the Trade and Industry Committee, he said:

"we have to ensure that in any such initiative we obviously balance the revenue that is coming in with the support that is being given."—[Official Report, 26 April 2006; Vol. 445, c. 570.]

The decision is thus ultimately financial, as I shall go on to emphasise.

Mr. Michael Wills (North Swindon) (Lab): As far as I understand the case that the hon. Gentleman makes, he seems to agree with the objectives of the initiative. I am sure that he would agree that in such a fast-moving world, it is important to keep reassessing the effectiveness of initiatives. If the digital inclusion team that my right hon. Friend the Paymaster General announced came up with a scheme that would better meet Labour Members' objectives, which I understand he shares, would he support that, or is the home computing initiative the only possible scheme that he can imagine supporting?

6.30 pm

Mr. Francois: I shall outline how we believe the scheme can be revised so that it should survive. I am not saying that there should be no modification of the
 
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current scheme. I shall outline, as I have said, how we believe that the scheme could be modified both to save money for the Treasury and to improve its operation. I hope that the hon. Gentleman will be patient.

Peter Luff : Does my hon. Friend agree that there are two separate points, the first of which is how best to achieve the objectives that are shared across the House? It is difficult to disagree with a word about the objectives in what the Paymaster General said. Secondly, there is the issue of how we move from the one scheme to the other. Would it not have been much better if the Government had signalled now that they want to change the method, if they do—I do not think that they need to do so—and give the industry a year to adjust to a new method, rather than writing a P45 directly from the office of the Chancellor of the Exchequer for the workers in the HCI industry?

Mr. Francois: I agree with my hon. Friend. We are looking to the Government this evening for some indication, when the Paymaster General replies, that they intend to retain the scheme, even in a modified form. We are not saying that there can be no change. However, we want an indication from the Minister that if the Government believe that there is abuse, they will modify the scheme to respond to that while maintaining its inherently positive characteristics. I shall press the Paymaster General on exactly that point in a moment.

The scheme has proved popular, with about 500,000 people taking advantage of it effectively to hire a computer from their employer to help to improve their IT skills as part of a modern knowledge-based economy. This is especially important when we are seeking to improve IT skills to allow the UK to continue to compete with economies such as China and India in the 21st century. According to a recent analysis carried out by Hewlett-Packard, China and India between them now produce more than 120,000 IT graduates each year. How are we to compete effectively with that if we are bringing in measures to reduce the spread of IT literacy among our population, which is what the proposed change threatens to do?

A Cabinet Office press release was timed to coincide with the launch of the new initiative in January 2004. It highlighted survey findings that employees with a PC at home had better IT skills and were more familiar with the internet. The DTI guidelines on HCI were entitled, "Maximising Potential in the Workplace". Along with advice on implementing the scheme, numerous references were made to skills. For example, in the CBI's booklet, Sir Digby Jones was quoted as follows:

"Of all the workforce skills required today, there's no question that basic IT literacy is one of the most important . . . Getting IT into the DNA of the workforce must therefore be a primary objective for every organisation that wants to adapt to the high-skills economy of the future."

David Taylor (North-West Leicestershire) (Lab/Co-op): Does the hon. Gentleman accept that the spreading of IT skills of the type that he is describing in the workplace has been under way in a number of areas for quite some years? For example, there is the CLATES qualification, the ECDL and the driving licence system, and other methods have also had significant success
 
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with fewer costs and with less of the vulnerability that has been shown to be part of the present scheme that is now being reformed.

Mr. Francois: I accept, with the hon. Gentleman's background in accounting, that some other measures have helped in that regard. Nevertheless, the scheme that we are discussing has been particularly effective and particularly popular, and that is all the more reason not to scrap it. I shall outline the specific advantages as I continue, though I take the hon. Gentleman's point.

In 2005, the Minister of Communities and Local Government, the right hon. Member for South Shields (Mr. Miliband), told his regional press the following about the scheme:

"As technology and IT-based business becomes an even bigger part of our regional economy, it is vital that the workforce develops the skills that will keep us competitive. That process should begin in the home so that everyone has the opportunity to become comfortable and competent with computers. That is why the Government is offering tax breaks which reduce the cost of computers to employees while saving money for their employers."

To coincide with the second anniversary of the scheme in 2006, Brendan Barber, the general secretary of the TUC, said:

"Experience has shown that when a business implements an HCI scheme, demand for learning services and training rises significantly."

In short, the HCI scheme has been hailed as an important part of the drive to improve the nation's IT skills, by the Government, in the form of the DTI, and the umbrella bodies of both British industry and the trade union movement combined.

The scheme has enabled almost half a million people to obtain a computer through HCI. Equipment is not only more affordable, but it usually comes with added peace of mind because of features such as warranty cover for the length of the hire agreement and technical support. So, for many who would not ordinarily have had a PC at home, whether because of lack of access to credit, affordability or simple technophobia, HCI has provided a low-risk, cut-price option which allows them to access the world of information technology, to the benefit of themselves, their families, their employer and, ultimately, the wider economy as a whole.

The Government have sought to argue that they are looking for a scheme that is of more benefit to retired people and jobseekers. However, scrapping a scheme that was already working for those in employment and was, indeed, primarily for the benefit of low-paid workers is not the answer.

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