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Mr. Wills: Will the hon. Gentleman give way?
The Government cannot hide behind excuses, such as the difficulty of defining qualifying equipment, because we have just provided them with an empirical example showing how another nation tackled the problem. Moreover, the Government's own regulatory impact assessment concedes that continuing the scheme with tighter guidelines on qualifying equipment, which is characterised in the RIA as option 2, would virtually halve the estimated cost of the scheme to the taxpayer, as projected by the Treasury out to 2010–11, thus
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allowing the scheme to survive, retaining its key benefits at a reduced cost to the taxpayer on a more tightly defined basis. That should constitute a win-win all round. I urge the Government to take the opportunity while there is still time.
Mr. Wills: Will the hon. Gentleman give way?
I come to an important point—the definition of "not significant", which the Paymaster General briefly addressed in her introductory remarks. If the existing exemptions are removed by clause 61, an associated issue arises; how computers provided by employers to employees will be taxed. As the RIA states at paragraph 22:
"If significant private use is made of a computer provided for business purposes a tax charge will arise on the private use element based on the value of the computer and the extent of the business and private use. Employers will also be liable to Class 1A National Insurance contributions."
That could lead to a significant compliance burden for employers if they are required to police the extent of private use by their employees. As the British Chambers of Commerce states in The Times today,
"Businesses have already seen the cost of implementing government regulation rise to over £50 billion since 1998, so to introduce in the small print of the Budget another measure such as this one will further serve to burden employers and impact on their ability to compete effectively."
The Government have responded by arguing that there will be no tax or NIC liability if such use is deemed "not significant", but have not clarified how that will be defined. If clause 61 remains part of the Bill, it is vital that that is clarified so that both employers and employees know where they stand.
The RIA states at paragraph 73 that HMRC will
"invite employer representatives to work with them as they develop guidance which will articulate their approach for handling compliance and administration issues that flow from the changes announced in the Budget."
I think I heard the Paymaster General reiterate, but I will ask her to repeat beyond peradventure in her winding-up speech, that the Government are planning to consult industry so that they can clearly define "not significant" and the matter can be clarified once and for all.
If that is the Government's intention, can the Paymaster General estimate how long the process will take? For instance, does she anticipate that it will be concluded successfully by July, as suggested in paragraph 74 of the RIA? Even better, if clause 61 were removed from the Bill, the current exemptions would remain in place and the issue would not arise. As The Times argued this morning in a leader sub-titled "The Treasury sends another nasty message to business",
"Treasury officials have promised to take a 'practical' view of how much private use should be regarded as 'significant'. The most practical approach, when the issue is debated in the Commons today, would be to withdraw it. We are watching."
That is another good reason for deleting clause 61. I shall now give way to the hon. Member for North Swindon (Mr. Wills).
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Mr. Wills: I am extremely grateful to the hon. Gentleman for finally giving way. He has moved on from the point on which I wanted to ask him to clarify his intentions. However, I will take advantage of his generosity and ask him to be a little more specific about how he intends to define the scope of the reformed HCI, as he would regard it. Does he accept that the technology is moving so fast that it is difficult to draw the parameters? When the scheme was originally defined, it was appropriate for the technology. He acknowledges that abuses take place, although there is some disagreement about the extent. Those have come about partly as a result of changes in technology that were not conceivable. Although he has tried to provide a constructive alternative, two or three years down the line the technologies may well have moved on again. Is it not right to try and address abuse in the light of the rapid changes in technology?
Mr. Francois: I thank the hon. Gentleman for conceding that we have tried to be constructive about the matter. I welcome the fact that as a former Minister in the Department of Trade and Industry, he has put that on the record. Those canny Swedes thought of that possibility, too. They realised that as technology moved on, particularly in such areas, the list would need to be reviewed regularly to make sure that the definitions remained current. It should be perfectly possible for us to do that too. We come up with an inclusive list and an exclusive list and we review them periodically—say, once a year—to make sure that the definitions remain current. That seems, to coin a phrase, not to be beyond the wit of man, or indeed woman.
To summarise, the HCI scheme has been important in spreading computer literacy among our population, including the lower paid, in order to help our country compete in the 21st century. As such, the scheme should be retained and not effectively wound up, as the Government propose. It should be possible to devise a revised version of the home computer initiative that allows the scheme to survive for its intended purpose, while introducing safeguards to combat the alleged fraud. If the Scandinavians are able to do that, I see no reason why we could not do it as well. The situation is a good example of the old maxim, "Where there's a will, there's a way".
The key question is whether there is a will on the part of the Government to save the scheme, or whether the Chancellor is so desperate for the £300 million in revenue which the Treasury's Red Book estimates would be raised by scrapping the HCI scheme from 2006–07 to 2008–09. Will avarice take over, and will the scheme be cancelled regardless of its obvious merits? Option 2 in the Treasury's regulatory impact assessment would allow the scheme to survive on a honed-down basis.
If we do not hear a convincing argument from the Government tonight—I do not find the digital inclusion team convincing—we shall simply assume that the money that the Chancellor is hoping to recoup has taken precedence over all other considerations and that a financially desperate Chancellor, who loves to talk about the technological revolution and the need to promote a high skills economy, has simply taken the cash. That decision is doubly detrimental, because it will damage our ability to compete in high skills industry with the likes of China and India in the 21st century.
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I urge Ministers to draw back from that course while there is still time and to work co-operatively with other parties, industry and scheme users to save that very important scheme. I shall listen to the Paymaster General's reply with genuine interest in the hope that, on behalf of the 500,000 scheme users and the 2,000 employees who will be directly affected, common sense may yet prevail and that that particularly bad decision by an analogue Chancellor may yet be reversed.
Rob Marris: I thank the hon. Member for Rayleigh (Mr. Francois) for his speech, a large part of which was thoughtful, although he will not be surprised to learn that I disagree with much of what he said. If clause 61 passes into law, computers provided for use at home solely for business purposes will continue to be allowed, and I shall return to that point.
The hon. Gentleman accepts that times change. The Paymaster General has said that the take-up rate for the HCI scheme in the first four years after its introduction in 1999 was 29 per cent. and that it then fell to 4 per cent., which shows the operation of the law of diminishing returns. I know that the hon. Gentleman was not a Member of the House in 1999, but I strongly suspect that his party failed to support the HCI when it was introduced and when it was reviewed in 2003—he can correct me on that point, if I am wrong. He, along with the hon. Member for Mid-Worcestershire (Peter Luff), now supports the HCI, and the thrust of his speech seemed to be that times change and that the scheme has reached lift-off.
It is true that times change, but we must put the matter into context, which the hon. Gentleman addressed only at the beginning and end of his speech when he discussed India, China and globalisation. He issued a challenge to the House, which I shall answer. The hon. Gentleman, and most Conservative Members in the Chamber, want to retain the HCI, because it is an attempt to upskill our society.
The Government have spent a huge amount of taxpayers' money on trying to upskill our society, and they continue to do so. I will not reel off the figures, because we have all heard them, but Labour Members agree that that spending was certainly correct, whereas Conservative Members are somewhat divided. For example, the education maintenance allowance was piloted in my constituency, and, although I cannot prove it, I posit as cause and effect the fact that staying on rates at 16 greatly increased. That measure involved investing a lot of money in a long-term process of upskilling our economy, which is the context in which we need to understand the HCI.
The hon. Gentleman mentioned the trade union learning fund. I served in the Committee that considered that legislation, where Conservative Members opposed it. The trade union learning fund has been very successful as part of a mosaic of measures to upskill our economy. The HCI was part of that mosaic, and the Government now say that they would rather that other things were part of it, too.
As far as I am aware, the HCI did not cover students or pensioners, unless they happened to be in paid employment. As part of the mosaic of upskilling, the Government have been pouring computers into schools. All hon. Members visit schools in their constituencies—
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I am sure that you have done so in the west midlands, Mrs. Heal—where interactive white boards have been installed, many teachers have been provided with laptops, and increased numbers of computers have been made available to pupils. Indeed, some schools in Wolverhampton are successfully piloting the use of personal digital assistants—I do not know whether PDAs fall within the category of computers, because, as my hon. Friend the Member for North Swindon (Mr. Wills) has said, technology moves on so quickly.
7.15 pm
Shortly before the Budget, the hon. Member for Rayleigh asked about support for the scheme by the Department for Work and Pensions and the Department of Trade and Industry. However, the Budget included a lot more money for education, and what is known in the vernacular as "Brown money" consists of money that goes directly to schools—from memory an average secondary school can receive up to £198,000 in the following financial year. It is surprising that the hon. Gentleman has suggested that the abolition of the HCI is simply an act of desperation by the Chancellor, because the Budget included far more extra money for education, which affects skills both directly and indirectly, than will be saved by the abolition of the HCI. The further education White Paper was produced at the beginning of March, and adult learning grants allow people to upskill to level 2 and under-25s to upskill to level 3. The HCI was part of that mosaic of upskilling.
Whether Conservative Members like it or not, those taking advantage of the HCI disproportionately consisted of higher-rate taxpayers. As my hon. Friend the Member for North Durham (Mr. Jones) has pointed out, that is not the case in absolute numbers, but it is true proportionally. In round terms, higher-rate taxpayers make up about 10 per cent. of taxpayers, but they made up 25 per cent. of those who benefited from the scheme. That is not to say that we should abolish the scheme just because higher-rate taxpayers benefited disproportionately, but it is worth bearing that point in mind against the backdrop of where the Government want to go on skills provision. We must consider the HCI in that context.
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