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12.36 pm

Peter Luff: I am most grateful for the opportunity to reply briefly to this debate, which has left me in a quandary. The Minister has obviously been reading the Disraeli manual on flattery of the royal family—lay it on with a trowel—and I am grateful for his kind words, especially about the Federation of Small Businesses, which deserves such flattery. However, we must not allow flattery to influence our judgment, and we must be hard-headed in our approach.

We have had an excellent debate that has been very good-natured. Every Member who spoke did so passionately and convincingly, from a basis of a real understanding of the issues. The hon. Member for Somerton and Frome (Mr. Heath) spoke of the urgent need for this Bill, and my hon. Friend the Member for Ribble Valley (Mr. Evans) spoke of the role of community pubs and how that should be treated by the rating system. My hon. Friend the Member for Northampton, South (Mr. Binley) is always a powerful advocate for the cause of small business, and he made a particularly good speech today. My hon. Friend the Member for Hemel Hempstead (Mike Penning) made some interesting suggestions that probably go beyond the scope of the Bill and could not be incorporated in it—although I could be wrong about that—and give me some cause to think that the Minister may have a point about the package. However, the Department should take my hon. Friend’s suggestions on board.

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I am very grateful to my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) for his kind words from the Front Bench and for confirming that our party supports this proposal—it has not always been the case—and will introduce it should we win the next election. That is very encouraging. My hon. Friend was challenged about quantitative easing, but in my opinion small businesses are least likely to benefit from that as they do not have many corporate bonds to sell to the Bank of England. That is a debate for another day.

My hon. Friend the Member for Christchurch (Mr. Chope) made a surprising and helpful contribution at the end of the debate. He made the enormously important point about revaluation, and the scale of money involved is huge. I agree that it is crucial that those issues are addressed clearly and categorically in the much-delayed Budget statement and debate.

The Minister showed seductive charm in replying to the debate, but I disagreed with him on some points. For example, my Committee heard evidence that the VAT reduction was a problem for small businesses, not a benefit, because it put a huge administrative burden on them. It was okay for big businesses, but bad for small ones. That point can be considered further perhaps in Monday’s debate on the Department for Business, Enterprise and Regulatory Reform.

I loved the Minister’s sub-Shakespearean theme of to automate or not to automate, although I do not think that it would make it into “Hamlet”. However, I do not accept two of his main reasons for opposing the Bill. First, I do not accept that the burden of responsibility would be transferred to local authorities, because they are doing most of this work already. The legal responsibility could rest with the small business, using the device that I mentioned, and in any case the LGA is an enthusiastic supporter of the Bill. If the trade association for local authorities does not share the Minister’s concern, the Minister should also relinquish it.

Nor do I accept that costs would rise substantially. I made a clear case, using the example of two large companies in my constituency, about the scale of the cost for them, and it would be peanuts compared to the benefit that the Bill would bring to small businesses and the wider economy. It is true that we do not know exactly how many businesses are not claiming, but we can know, because we know the number of hereditaments in the valuers offices’ lists, the maximum possible number. It cannot be much more than half, so we know it cannot be much more with an increase from 0.4 to 0.8, and thus that argument does not hold water for a second. I want to re-emphasise what my hon. Friend the Member for Northampton, South said. Small businesses are fighting to be here next year—that is their business objective, he said. That is a powerful message that sums up the debate.

I have won many battles as the Bill has progressed with my good friends in the FSB. I have persuaded my party of the rightness of my cause, and I have won the support of almost every lobby group one can think of, with the acquiescence of two that have some reservations. At the end, the Minister has said that he does not rule out the possibility of adopting the measures in the Bill. I have listened to the overall tone of his remarks, and it is my judgment call on how best to advance the issue. He is right: I do not want my name on the statute book—I want small businesses to thrive and prosper,
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and to be free of every possible burden. I have had dealings before with the Minister for Local Government—we have negotiated, and he has always been true to his word, which is an encouraging sign. I know, too, as a parliamentarian that if the Government are genuinely opposed to the Bill they can easily kill it on Report and Third Reading. It is much easier to do so then than it would be today. We could have a pyrrhic victory today, only to go down in flames in a few weeks’ time. With great reluctance, I have therefore taken the decision to trust the Government, and hope that the Minister delivers on the implied promises. I hope that the debate will give him the ammunition—and, indeed, his colleagues in the Department for Business, Enterprise and Regulatory Reform—to go to the Chancellor and say, “Everything possible must be done.” The sum of many small things such as the Bill could make a huge difference to the small business community. Having taken that decision, I seek leave to withdraw the motion.

Motion and Bill , by leave, withdrawn.

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Scottish Banknotes (Acceptability in United Kingdom) Bill

Second Reading

12.42 pm

David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con): I beg to move, That the Bill be now read a Second time.

May I say at the outset that I am grateful to the Minister and to the Secretary of State for Scotland for the opportunity to discuss my Bill with them before Second Reading? I am grateful, too, to the many constituents and other people mainly, and perhaps not surprisingly, from Scotland, who have been in touch with me since I intimated my intention to introduce the Bill. Indeed, many aspects of the measure are summed up in an e-mail that I received only this morning from Johann Murrison, in which he said:

Inevitably, in pursuing a measure such as this, I learned a number of things about banknotes. First, there are relatively simply marker-type pens available that can easily determine if a banknote is a forgery. Secondly, in the presence of a television camera, Scottish banknotes are universally accepted. Indeed, in retrospect, a Bill requiring TV cameras to turn up every time a Scottish banknote was handed over would achieve the desired effect.

My constituents were instrumental in the Bill’s inception. After my position in the ballot for private Members’ Bills was announced, I sought their views on what piece of legislation I might introduce. The acceptance or, I should say, non-acceptance of Scottish banknotes was certainly to the fore. It was an issue with which I was personally familiar and a problem, at least anecdotally, that most Scots have experienced. There is also a phenomenon to which my constituency of Dumfriesshire, Clydesdale and Tweeddale bears witnesses. My constituency has as its backbone the M74 corridor linking central Scotland with the north of England. Increasingly, people who are heading back to England, having spent time in Scotland and found themselves in possession of Scottish banknotes, are going to local banks and businesses and asking to have their Scottish notes changed to Bank of England notes, for fear that they will run into difficulty with the use of the Scottish notes back in England. My constituents deal politely with such requests when they can be accommodated, but they are irked by the implicit suggestion that there is something wrong with the Scots notes.

Mr. Tim Boswell (Daventry) (Con): I am listening to my hon. Friend’s argument with a great deal of sympathy. He will be aware that there has been much discussion in
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recent days about quantitative easing. Given the particular position of the Scottish banks, in that they are primarily agents of the United Kingdom Government, will he comment on the likely implications of his measure for quantitative easing? Would it ease it or make it more difficult?

Mr. Deputy Speaker (Sir Michael Lord): Order. Before the hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) answers that intervention, it might be helpful to the House if I read out that the purpose of the Bill is to

David Mundell: Thank you, Mr. Deputy Speaker.

I am sure the Scottish banks will be happy to play their part in quantitative easing.

Mr. Nigel Evans (Ribble Valley) (Con): In my constituency I have noticed complaints from retailers about the number of forged £1 coins that are in circulation. There are millions of them. Whereas in Scotland retailers are used to Scottish banknotes and are therefore able to detect whether they are forged, the appearance of those notes will be rarer south of the border, and will lessen the further south one goes, and the more problematic it will be to detect forgeries. Does my hon. Friend believe that the Bill that he is trying to introduce with the best of intentions might lead to many more forged Scottish notes being circulated round the UK?

David Mundell: I note my hon. Friend’s concern. In the course of my speech I will deal in detail with the issues that he raises. Retailers are very much aware of the problem of forged paper notes and regularly use pen devices, for example, which when marked on a note give an indication whether that note is a forgery or not. As I understand it, Bank of England notes, Bank of Scotland notes and other Scots banknotes give the same reaction, so that method operates to identify relatively simply whether a note is a forgery.

The Exchequer Secretary to the Treasury (Angela Eagle): I thank the hon. Gentleman for giving way and, when the time comes, I will congratulate him on getting his Bill before us today. Although the so-called magic pens are useful in some circumstances, they are not useful in all, so they do not give the level of assurance about forgery that some people claim for them.

David Mundell: I note what the Minister says, but I am sure she will accept that the point applies equally to Bank of England notes, which are received in such outlets.

Mr. David Heath (Somerton and Frome) (LD): Can the hon. Gentleman help me with a bit of history? I am very proud of the different histories of the constituent nations of our country and the fact that we have cultural differences and differences of jurisdiction. Is there any country in the world, other than Scotland, where promissory notes are issued by private banks and are in general circulation? I am not aware of one. Does the hon. Gentleman know the answer to that?

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David Mundell: I thank the hon. Gentleman for his intervention. I will give a short potted history of the Scottish banknote in due course. In the United Kingdom, obviously, notes are issued from Northern Ireland.

Mr. Christopher Chope (Christchurch) (Con): My hon. Friend’s Bill discusses the acceptability of Scottish banknotes throughout the United Kingdom. Does he think that that acceptability would be enhanced if the £150 billion of banknotes being issued by the Government as part of quantitative easing were issued in Scottish banknote form?

David Mundell: That is an interesting proposition, but I am conscious of your earlier comments, Mr. Deputy Speaker.

Before I took those interventions, I was discussing the issue of changing banknotes. At least people who come to outlets in my constituency to change Scottish notes for the Bank of England equivalents do not have the same experience as Mr. Derek MacLachlan of Inverness, whose attempts to make such an exchange at Newcastle airport are highlighted in the Scottish edition of The Sun of 7 February 2009. In an article headed “Currency swap blast”, Mr. MacLachlan tells of how he was faced with a £3 commission charge when he attempted to change £70 at Travelex; the transaction would have left him with just £67 of non-Scottish currency. As he said:

I could not agree more with Mr. MacLachlan’s analysis, which goes right to the heart of the issue. The financial value of Scottish notes is not different. Indeed, Scottish banknotes are a key part of what passes for the Government’s vision for the banking sector; I acknowledge that, through the Banking Act 2009, the Government have removed any remaining doubts about their future. Whatever the legal framework of our currency or the meaning of the expression “legal tender”, there is absolutely no reason why Scots notes should be questioned unless there are substantive grounds for believing that they are forgeries.

Mr. Chope: Will my hon. Friend explain why his Bill does not go as far as to say that Scottish banknotes should be legal tender?

David Mundell: I am coming to an interesting resumé of the meaning of “legal tender” and why that does not strike at the heart of the issue. Basically, what concerns my constituents and other people in Scotland is not the legal definition, but the need for their money to be accepted, not questioned, when they are in a retail outlet. As I shall say in due course, the status of legal tender would not necessarily achieve that objective.

The Bill is not designed to force unwilling retailers to take Scottish banknotes or to impose draconian sanctions on anyone who does not. I am very aware of the regulation that business faces already, and I want less regulation, not more. Unnecessary additional burdens are to be avoided. The Bill simply seeks to put Scottish notes on an equal footing with any other banknote that is accepted.

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For the benefit of hon. Members, I shall now provide a little background detail on Scottish banknotes. The first Scottish bank to issue notes was the Bank of Scotland, which has done so almost since its foundation in 1695. At that time, coinage from the Scots mint was scarce, and of uncertain value in any case. Most Scots relied on a mixture of English, French, Dutch and Flemish coins. As we would expect, the lack of adequate currency severely restricted the growth of trade.

The new Scottish banknotes were grasped first by the merchants and then by the population at large, as a solution to the problem. The notes’ success was such that, in the words of the Committee of Scottish Clearing Bankers, Scotland became one of the first countries to use paper currency from choice. The National Museum of Scotland says that one of the remarkable things about the country is that, from a very early stage, banknotes had a high degree of acceptability. It says that the Scots became known for preferring their paper money to gold, because it was easier to carry around. It was very different here in England, where paper money took longer to gain widespread acceptance.

Scotland’s innovative approach to banknotes went further than just being an early adopter. Vast amounts of ingenuity were connected with making them more difficult to forge. After all, the only punishment that Scots law could mete out to forgers was death and tongue amputation, probably not necessarily in that order. The Royal Bank of Scotland pioneered the use of colour in banknotes, with a blue rectangle displaying the words “One guinea” and the King’s head shown in red. Yet colour did not come into widespread use until nearly a century later. The Royal Bank was also the first to use notes in three different colours.

The Scottish economy once had to handle a vast array of different designs of banknote. I know that the Minister feels that the current number, 22, is a vast array, but previously there were even more. Nowadays, many of the former note-issuing banks have been absorbed through mergers and acquisitions, and we are left with just the Bank of Scotland, Royal Bank of Scotland and Clydesdale bank. This year’s Banking Act ensures that no further banks can join that list. Between them, the three banks issue a core of 16 note designs in denominations of £5, £10, £20, £50 and £100, with the Royal Bank of Scotland still printing a small number of £1 notes. As with the Bank of England, there are also sometimes additional designs in circulation to allow a transition to take place between an old and a new series of notes.

In addition, some notes have images or words added to them to commemorate an event or person of particular importance to Scotland at that time. Although of a manageable number, the core designs give a true overview of the range of pre-eminent Scottish buildings, landscapes and historical figures. The commemorative editions, meanwhile, are a way of uniting the public behind celebrations of what, as a nation, Scots cherish.

Mr. Chope: Does my hon. Friend think that there would be any scope for the Royal Bank of Scotland, now that it is owned by taxpayers, to have that fact included as part of the design of its banknotes?

David Mundell: What an interesting proposition. As far as I am aware—I stand to be corrected—there is no limit on what wording, presumably other than obscenities, can appear on banknotes.

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