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Stewart Hosie: The hon. Gentleman has made that point a few times during the debate. On 24 April, the Paymaster General said:
"With effect from 6 April, a tax charge will arise on computer equipment made available by employers to their employees for private use."—[Official Report, 24 April 2006; Vol. 445, c. 461.]
Perhaps she understood the point on 24 April but does not understand it today.
Peter Luff: That is a helpful intervention, which speaks for itself.
The scheme was universally approved by the outside world, including all the stakeholders—to use the Government's word. Although consensus is normally a cause for some concern, it is occasionally right. Those who provided the equipment, those who used it, the trade unions, the CBI—indeed, everyone—believed that the scheme was good and an excellent example of an effective Government-private partnership.
Alas, the evil that the Chancellor has done by abolishing the excellent scheme will live on. Jobs will be lost. There is an HCI industry and companies had invested large sums of money in developing marketing initiatives, in the expectation that it would run for at least an extra two years. One of the questions that I tabled to the Chancellor, to which I have received no reply after more than a month, asked why it has been abolished sooner than anticipated. Large amounts of investment were made on the back of an assurance that the scheme was important and that the Government were committed to it.
Stephen Hesford: I am interested in the hon. Gentleman's argument that an HCI industry exists. Is he arguing for a state subsidy for that industry?
Peter Luff:
No, not at all. The hon. Gentleman does not understand how much money the industry has had
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to invest to make this scheme work. After the debate, I will happily show him the Government's own documentation on how employers and employees should implement the scheme. It is very complicated and difficult; it is not straightforward. The Department for Work and Pensions had a significant sized team of officials working on how it should be implemented, but that scheme has now been abolished, when it was on the point of succeeding.
As I said, the scheme was difficult and complicated. It did not work in 1999, and it was effectively rebooted in 2003 and relaunched in 2004. It is just beginning to have an impact now, which is what makes this precipitate decision so unfortunate. Evesham Technology will survive this body blow, but income from the scheme represents a quarter of its turnover. About £1.5 million a month will disappear overnight.
I was going to make this point to the Paymaster General later, but I have been drawn into making it now. I am about to be nice to her, so I hope that she will listen. No? I will not hold my breath. I might come back to the point later when she can hear. I was about to express my great gratitude to her for the way in which she reacted so diligently—
Dawn Primarolo: I can assure the hon. Gentleman that I was not speaking when he accused me of doing so. I am listening to him, but I do not need to look him in the eye to hear what he is saying.
Peter Luff: I am sorry. I thought that the right hon. Lady was reading something.
I am genuinely grateful to the Paymaster General for the way in which she responded to the concern about the impact of the Office of Fair Trading's involvement in the initiative. She was magnificent. She now looks slightly puzzled. Each and every scheme approved under the initiative had to go to the OFT because it technically breached the terms of the Consumer Credit Act 1974. There was huge backlog of cases, and if the scheme had been abolished overnight—as was originally intended—many thousands of computers that had been earmarked for consumers would have been lost. Now, Evesham Technology will have four more months' turnover at £1.5 million a month, so the Paymaster General's action—for which I had to fight hard with her and the OFT—was really appreciated. She has enabled companies such as Evesham Technology to plan for the future, instead of being dumped in it very suddenly. I am genuinely grateful to her for that.
However, a very worrying evil has been done. There is no doubt that those involved in the IT sector—often big multinational companies, not just small ones—have been shocked by the precipitate way in which this Government strategy has suddenly been torn up. I can tell the Paymaster General with absolute certainty that this will reduce industry support for working with the Government on such schemes. The industry will not be prepared to commit management resources and expense to such projects if the Government are suddenly to decide to throw them out.
Sadly, I am not allowed to name the company involved in the scheme, but I can tell the Paymaster General that one multinational IT company that had earmarked a multi-million pound investment for an
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education IT partnership in this country has now decided to abandon it and to move to another of our European Union competitors. I shall call it a competitor for the purposes of this argument. So the abolition of the scheme has already had the effect of shifting the support of major multinational players away from this country. The manner in which the Government have abolished the scheme is having a serious impact. I am particularly sad that no replacement schemes have been identified or funded, and I am really worried that we will lose the infrastructure to deliver any future schemes that the Government might introduce.
Mr. Francois: My hon. Friend is making an extremely important point. When companies, especially large multinationals, consider making investment decisions, they look at a whole range of factors. One of the most important is confidence in the continuity of the tax regime in the jurisdiction in which they plan to invest. Decisions such as this are therefore injurious, in that they will damage that confidence and have a long-term knock-on effect on investment in this country. Would my hon. Friend like to amplify that point a little more, because of its importance?
7.45 pm
Peter Luff: I have talked to many representatives of the Home Computing Initiative Alliance, and they have all expressed their deep concern about the Government's intentions, not just on taxation but on all the initiatives related to home computing. Which of the initiatives will endure? Which will be torn up without warning at the eleventh hour, leaving the massive investment and effort made by the companies worthless and in tatters? This is a serious issue.
Mr. Wills: Will the hon. Gentleman clarify the point raised by the hon. Member for Rayleigh (Mr. Francois) about the importance of stability in fiscal regimes? That was a good point, but does it mean that the Conservatives have now abandoned their plans for a flat rate of tax?
Peter Luff: I am not going to speculate on the tax policies drawn up by my Front-Bench colleagues. I do not have any knowledge whatever of them. We all believe that tax policies should change and evolve over time; that is not in dispute. If the Government had made a good case for the abolition of the HCI, I would have accepted its abolition. However, they did not, and they have abolished the scheme in the worst possible way. That is the problem. If only they had taken a bit more time and care over its abolition, we might not be having this debate tonight.
I remind the Paymaster General that, on 19 January 2004, the then Secretary of State for Trade and Industry—now the Health Secretary—said at the relaunch of the scheme:
"For individuals—as well as cost savings—HCI schemes can help realise personal and professional potential. Through improved ICT access and use, they provide the tools and resources which further individual learning, enhance workplace skills and increase employment opportunities."
In January this year, on the second anniversary of the scheme, the Minister for Industry and the Regions said that the
"HCI provides a great example of what can be done when the government and industry are working together to fulfil policy objectives".
On 13 March, he repeated that praise in The Times, in a supplement on the HCI, when he stated:
"Since 2003, our home computing scheme has promoted the Government's aim of widening the ownership and use of computers at home, while helping our aim of bridging the digital divide."
As the Paymaster General knows, the DTI offered the scheme to its own staff for the first time on 15 March this year. It was still encouraging its staff to take up the scheme even on the very day of the Budget. It came as a total surprise to the Secretary of State for Trade and Industry that it was to be abolished. That is a matter of public record.
The most extraordinary quote of all comes from the Chancellor of the Exchequer in his 1999 Budget:
"Inequality in computer learning today will mean inequality in earning power tomorrow, so to bring more computers into more British homes, we will legislate so that employees will be able to secure computers on loan from their companies as a tax-free benefit . . . In the new economy, the more individual talent we nurture, the more economic growth we will achieve."—[Official Report, 9 March 1999; Vol. 327, c. 180.]
Yet at the precise moment at which that ambition was beginning to be fulfilled, the scheme was abolished.
The reasons that the Paymaster General gave earlier for abolishing the scheme do not bear even the most cursory critical examination. The job has not been done. She made derisory comments about a 4 per cent. increase in the number of people taking up that initiative, but that is 1 million households by my reckoning. If we are to be internationally competitive, we have a long way to go to increase the penetration of computers in households.
I was particularly disturbed by the Paymaster General's comments on the abuse of the scheme. Of course, everything that we do is abused. The VAT system is abused, and I expect that many hon. Members would love to see it abolished, but I doubt that that would be the response to its abuse. Instead, the response would be to close the loopholes and to police the system more effectively. That should have been the Government's response to abuse of the HCI scheme. If there was significant abuse—which I genuinely doubt—the response should have been to close the loopholes. Indeed, the industry is bursting with ideas on how to close every possible loophole.
As I said earlier, I take particular exception to the Paymaster General's suggestion that Evesham Technology was abusing the scheme by marketing other products. Some of those products were specifically allowed under the scheme. Her Majesty's Revenue and Customs kept the terms vague because it said that it wanted to allow room for emerging technology. Actually, the industry would have liked the terms to be tighter, to avoid any possible abuse. Also, as good entrepreneurs, representatives of the industry offered other products outside the scheme at full market cost in
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their brochures. They were trying to sell more kit. That is a natural reaction for enterprise. HMRC made the fatal error—a tragic misunderstanding that further undermines my confidence in it—of thinking that those products were being offered as part of the scheme. They were not; they were add-ons that were not included in the scheme's terms. I accept that there is bound to be a modest amount of abuse, but I fear that the abuse that the Paymaster General has referred to will turn out either to have been very modest indeed or to have involved a complete misunderstanding of what was actually going on.
I completely reject the idea that the scheme was not properly focused, because 375,000 lower-paid workers have already benefited from it. All the signs were that, as the scheme extended down into the small and medium-sized businesses, more and more lower-paid workers would benefit. It is no good the Paymaster General shaking her head in disbelief: that is what the evidence showed. It is quite clear that that was beginning to happen.
The TUC expressed its strong support for the scheme. Brendan Barber stated:
"The Home Computing Initiative has helped thousands of low paid workers without confident IT skills buy their first ever computer. Unions up and down the country have been promoting the scheme, often linked to training schemes. The sudden closure of the scheme would mean that many hours of voluntary union effort would go to waste."
I am not sure whether that was the quote that my hon. Friend the Member for Rayleigh cited earlier. I do not think that it was.
As for suggestions that higher rate taxpayers particularly benefited, I note that the foreword to the information and guidelines booklet referred to developing,
not just lower-paid ones. The Government were not focusing on those workers then, and they boasted about the greater benefit that higher rate taxpayers would get from the scheme— the combined taxation benefits meant that the price of a computer fell by 41 per cent. for those higher rate taxpayers compared with a 33 per cent. discount for basic rate taxpayers. An advantage that the Government were trumpeting then is now suddenly a reason for abolishing the scheme.
We all know that the sole reason for the removal of the scheme is that the Chancellor wanted to save some money at the eleventh hour. That is the only explanation for the fact that the proposal was put in the Budget at the last minute, without any of his colleagues in Whitehall even knowing that it was being considered. That is what makes it so sad. Although I was interested to hear what the Paymaster General had to say in her opening speech, she sounded more like the Secretary of State for Trade and Industry than the Paymaster General. We need to know where responsibility for delivering the Government's digital strategy resides. I wrote to the Prime Minister, following an unsatisfactory exchange in Prime Minister's questions last week, to ask him whether that responsibility now lies with:
"The Chancellor, who did not understand the very serious consequences of his precipitate actions, or the Trade and Industry Secretary, who had only just offered this excellent scheme to his own departmental staff?"
Such crucial policy cannot be made on the hoof in response to bad Budget decisions, but that is what we have seen tonight, and that is why I am so concerned.
I could go on at great length, but other Members wish to speak and we wish to hear the Paymaster General's response. I know that I have sounded excitable and angry at times; that is because I am angry about the way in which the scheme has been abolished. It was delivering the Government's objectives and I resent the way in which they are rewriting history to say that it was not. The method of its abolition was handled appallingly, causing maximum possible despair and despondency in the industry and destroying the vital bond of trust that should exist between Government and the private sector in this important area of policy.
I had hoped, with more time, to list ways in which the scheme could have been improved, all of which have been suggested by the industry, which was discussing them with HMRC officials a few days before the Budget—only a few days before the scheme was abolished. That is what I find utterly extraordinary. Not even HMRC had the slightest idea that the Chancellor was planning to abolish the scheme. It was a last-minute decision, and I plead with the Paymaster General for it to be reconsidered. At least the scheme should be given an extra year for an orderly phase-down while satisfactory alternatives are put in place.
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