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Lord Fraser of Carmyllie: My Lords, before the noble Lord passes from that point, I want to be clear what he is saying. In the gracious Speech there was express provision that legislation would be introduced to improve the regulation of financial services and markets with a new statutory regulator, the financial services authority. What I am still anxious to get is a clear indication, as we go forward in this Session, as to when that legislation will appear. I said in my speech that I understood that it would be introduced in the spring. I have subsequently had reason to believe that I was wrong in that and that it will not be introduced as a Bill at that time. The best we can hope in the spring of this year is that there will be some pre-legislative scrutiny proposal. If that is correct, it would seem to me there is a real danger that what is contained within the Queen's Speech will not be implemented or delivered during the course of this Session. It really is important that we know the Government's position on that.

Lord Simon of Highbury: My Lords, I was about to mention that. It has been announced that the Government's legislative programme for the current Session of Parliament will include the financial services and markets Bill. There will be a period of pre-legislative scrutiny by joint committee of the House of Commons and House of Lords. That answers, in part, the question of when the Bill will start. There will be pre-legislative consultation in both Houses because of the technical nature of the Bill.

Under the proposed new arrangements for carry-over of legislation, the Bill could, if necessary, complete its passage in the first half of the 1999-2000 Session. As has been rightly pointed out, these are requirements for the rationalisation of an industry which is absolutely crucial to the growth of the City of London and our economy at large.

An important part of the Government's strategy outlined by my noble friend Lady Hollis is to help make work pay. Many people on low incomes are trapped in poverty and the tax and benefits system stands in the way of people trying to get out of poverty. That trap frustrates ambition and locks people into poverty. The Government believe that the best route out of poverty and a life on benefits is through work. That is why we are introducing a series of measures to help make work pay. Reforms to the tax and benefits system have been mentioned at length today. We welcome the support of the noble Lord, Lord Razzall, for the minimum wage. As noble Lords are aware, we are also working extremely hard on the development of the working families' and disabled persons' tax credits.

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I welcome the timely contribution of my noble friend Lord Christopher. It will be considered carefully as we progress towards publication of the measure that I have discussed. I have noted many important points that were made on welfare reform in general. I shall content myself with discussing pensions and benefit structures. We are happy to assure my noble friend Lady Turner of Camden that SERPS will continue to play a valued part in our pensions policy. As regards widows' benefits, we confirm that existing widows, many of whom may not have worked, will have their benefits protected. However, nowadays as many women work as men. Therefore the right to review widows' benefits is constructed accordingly.

As regards lone parents and the single gateway we propose only that to obtain benefit lone parents should sign in by attending an interview. Thereafter it is their choice whether they join the New Deal or prefer to look after their children full time. Of course, if they cannot get to the--

Lord Higgins: My Lords, I am not clear what happens if they simply do not turn up.

Lord Simon of Highbury: My Lords, if they do not sign in, they do not get a benefit, but they do not have physically to turn up. They will be able to contact the gateway--if I can put it that way--to enrol themselves. However, I am sure we shall have plenty of time to discuss that as we progress through the Bill.

Lord Higgins: My Lords, what the noble Lord has just said--but he may wish to reconsider his reply--is that if they do not turn up, they do not get benefit. Is he really saying that if a lone parent fails to turn up, his or her benefit stops dead?

Lord Simon of Highbury: My Lords, this applies to new claimants only. They would have to make contact with the interviewer. I take it that there is confusion about this matter. I hope the noble Lord will permit this matter to be dealt with in correspondence as it is rather late in the day and I believe we shall discuss this detail at great length--

Noble Lords: Oh!

Lord Simon of Highbury: My Lords, we guarantee that they will receive benefits when they make contact.

Earl Russell: My Lords, before I ask my question, perhaps I may say that I shall be satisfied with a letter. May I ask for an assurance that, when people are interviewed, the interviewer will not be subject to any performance indicator depending on the number of people he or she places in work?

Lord Simon of Highbury: Yes, my Lords. The target relates only to contacts, not to work placements.

I turn now to the speech made by the noble Earl, to which, given the hour, perhaps I may make a sketchy response. Perhaps we shall have to indulge in some more letter-writing. I hope that the noble Lord,

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Lord Higgins, will understand that I am not the expert in this area. If there are any main points of policy on which the noble Lord is confused--

Lord Higgins: Oh!

Lord Simon of Highbury: My Lords, I meant to say that if there are any main points of policy on which I may be confused, my noble friend will assist. I am covering a wide range of subjects in only a short time.

On welfare to work, we are not saying that we must reform social security to coerce people into work; instead, we are seeking to make work pay so that low-paid workers do not lose 90p in the pound. That is why the working families tax credit, the minimum wage, the New Deal and our childcare arrangements are all focused on the objective of making work pay.

The noble Earl referred also to incapacity benefit. We are expecting the results of the study soon.

Our reforms of the all-work test are not savings-driven. They are about extending opportunity. The two-year contribution rate is to strengthen the contributory principle. I am referring to those in work who have to have such a benefit because of illness.

On the holes in the safety net for 16 and 17 year-olds, we believe that such young people should be in education and training. If they are in exceptional hardship, they are, of course, entitled to financial help.

On the habitual residence test, we are awaiting the outcome of the European Swaddling case, to which reference has been made, and we shall make recommendations in the light of that.

Perhaps I may now turn with enthusiasm to the points made about Europe. That will be a slightly unusual feature of the debate on this subject. The gracious Speech referred to Europe and economic reform in no fewer than three paragraphs. I should like to make it clear that we shall continue to work with our partners to improve our economies and, therefore, the economy of Europe; to liberalise markets for products, services and labour; to stimulate employment and, through greater flexibility at national level, to achieve national plans for labour market reforms.

We shall work for a successful euro because that is in the interests of the 11 partners and in our own interests. We shall prepare Britain for the option to join the euro in the next Parliament because--I hope that this is a clear response to my noble friend Lord Barnett--we have said clearly that we shall prepare and decide. That means that if you are on the side of those who are awaiting the referendum decision with any doubt in your mind, the question will be "if", but that if you are awaiting the referendum decision in the full expectation that the outcome will be positive, the question will be "when".

We are busily preparing for the exercise by working with small businesses. I personally have made contact with 1.6 million small businesses this year. That effort was carried out largely by my postal friends, for which I am extremely grateful. I have had 250,000 replies and I now understand that 300,000 small businesses are thinking about, and preparing for, the fact that the euro

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will be with us on 1st January 1999, whether or not we support it. Those small businesses are now preparing better than they would have done previously. That is a contribution to the British economy. I rather regretted our "semi-detached" approach to this matter under the previous administration. Fifty per cent. of our small businesses are now in contact with Euroland in a business sense. A quarter of those have already made good preparations.

I am delighted to tell my noble friend Lord Stoddart that the reason why people invest in the UK as the number one country for foreign investment in Europe, according to those to whom I speak, is the fact that they like the flexibility of our economy and are absolutely convinced that we shall join in economic and monetary union and the euro. That is why most of them like to come here.

Taxation is an interesting subject that has arisen during the debate. I shall attempt to respond to the interesting points raised. The Government have made it clear that we will not support any action at European level that will threaten jobs or the competitive position of British business. So any tax proposals will need to pass that acid test. Questions of tax require a unanimous decision. So there is no question of tax changes that we do not support being imposed on us by Brussels. The test has to be whether in any particular case the proposal delivers economic or financial benefits for the United Kingdom. If it does not, then we shall oppose it and argue our case. I agree with the noble Lord, Lord Newby, that we are much more effective when we are inside Europe arguing these cases rather than standing outside saying that we disapprove of the whole process. If necessary, at the end of the day we shall be prepared to use our veto to protect the national interest.

Having outlined those principles, perhaps I may comment on the three areas that have been subject to recent speculation; namely, VAT, corporation tax and withholding tax. On VAT, the House should be clear that there are no detailed proposals to change the existing rates. We were elected with a clear pledge to maintain the zero rate of VAT on food, children's clothes, books, newspapers and public transport fares. The UK's zero rates are fully safeguarded under existing EC arrangements.

On corporation tax, there are no Community proposals so far as the harmonisation of corporation tax is concerned. Indeed, no one proposed minimum rates of corporation tax at today's ECOFIN meeting. The political reality is that harmonisation of corporation tax across Europe is a non-starter. Rates, in Ireland at 10 per cent., in Finland at 28 per cent., in the UK at 30 per cent. from next year, and in Germany at over 40 per cent., pose some problems for the harmonisers. It is increasingly being realised that raising corporate tax rates would harm the competitiveness of the EU economy and we simply should not allow corporation tax rates to be raised to the existing level of some other countries.

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On the issue of withholding tax, the motive behind this measure is one that I hope we all support: to prevent tax evasion. That is its purpose. It is aimed chiefly at Belgian and German citizens who place funds in the highly secretive banking system in Luxembourg--

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