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    <title>Sitting of 11 March 1997</title>
    <dateCreated>Tue, 11 Mar 1997 00:00:00 +0000</dateCreated>
    <ownerName>UK Parliament</ownerName>
    <ownerEmail>mail@robertbrook.com</ownerEmail>
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    <outline id='1527929' text='[MADAM SPEAKER &lt;i&gt;in the Chair]&lt;/i&gt;' title='PRAYERS' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/prayers'>
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    <outline id='1527929' text='PRAYERS'>
      <outline id='1527930' text='PRIVATE BUSINESS'>
        <outline id='1527931' text="&lt;i&gt;Considered; to be read the Third time.&lt;/i&gt;&lt;br/&gt;KING'S COLLEGE LONDON BILL &lt;i&gt;[Lords] (By Order)&lt;/i&gt;&lt;br/&gt;&lt;i&gt;Order for Third Reading read.&lt;/i&gt;&lt;br/&gt;&lt;i&gt;To be read the Third time on Tuesday 18 March.&lt;/i&gt;" title='IMPERIAL COLLEGE BILL' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/imperial-college-bill'>
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        <outline id='1527932' text='&lt;i&gt;Order for Second Reading read.&lt;/i&gt;&lt;br/&gt;&lt;i&gt;To be read a Second time on Tuesday 18 March.&lt;/i&gt;' title='LEVER PARK BILL (By Order)' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/lever-park-bill-by-order'>
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    <outline id='1527933' text='Oral Answers to Questions'>
      <outline id='1527934' text='DEFENCE'>
        <outline id='1527935' text="Lady Olga Maitland: To ask the Secretary of State for Defence if he will make a statement on the work of the Defence Export Services Organisation. [18035]&lt;br/&gt;The Secretary of State for Defence (Mr. Michael Portillo): The Defence Export Services Organisation helps the United Kingdom defence industry to export its products and services. Provisional figures show that Britain's defence exporters achieved around 25 per cent. of the world market in 1996, attracting more than &amp;#x00A3;5 billion to this country.&lt;br/&gt;Lady Olga Maitland: I congratulate my right hon. Friend on that excellent news. Does he agree that, put in a different way, that means that Britain's defence exports have increased by 50 per cent. in the past two years? Does he also agree that it is hard for any other sector or country to match that success story? There is another perspective, however. Does he agree that 360,000 jobs in the defence industry could be put at risk by the Opposition's defence review&amp;#x2014;their cut-and-slash programme to cut defence spending by &amp;#x00A3;5 billion, which would undercut our defence procurement and defence sales?&lt;br/&gt;Mr. Portillo: Everything my hon. Friend says is right. First, it is indeed the case that, in 1994, our share of defence export sales was 16 per cent. of the world market and that today it is 25 per cent., so there has been a 50 per cent. increase. I cannot think of any other industry that has matched that performance, either in this country or elsewhere. My hon. Friend is also right that we can have
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        that level of defence export sales only if we have reliable home markets. The Labour party is now committed to a defence review with, as its spokesman said, all the painful consequences that would follow. Every time we have challenged Opposition spokesmen to say whether one project or another would be exempted from that review, we have been denied any answer, so we must assume that all defence projects are at risk from Labour's defence review. If our home orders are at risk, obviously our export sales are at risk too.&lt;br/&gt;Mr. Llew Smith: How can the Minister justify subsidising arms manufacturers who sell weapons of death to the most odious dictators, who use them against their own people&amp;#x2014;as was done in Indonesia, where hundreds of thousands of people from East Timor were murdered?&lt;br/&gt;Mr. Portillo: We carefully observe the United Nations and European Union embargoes. Our country has one of the strictest regimes in the world for the control of arms sales. I am grateful to the hon. Gentleman for making it so clear that, in the event of there being a Labour Government, many Labour Members would like the industrial success story to be choked off. They would like jobs to be lost in Britain, not because of anything that the UN says or any treaty that we have entered into, but because of their political bigotry towards other countries.&lt;br/&gt;Sir John Cope: Will my right hon. Friend confirm that, at our last defence debate, 21 Labour Members were against all arms exports and defence sales of any sort? Their policies would be extremely damaging right across the board to the jobs to which he referred.&lt;br/&gt;Mr. Portillo: My right hon. Friend is right as far as he goes, but the number was as low as 21 only because the frighteners had been put on tens of others. In previous years, a far higher number of Labour Members have said that they wanted to ban defence export sales and were in favour of unilateralism and cutting our defence budget. Each year, the frighteners are put on them.&lt;lb/&gt;
        The point is that if there were to be a Labour Government, those people would be able to exert influence. People know that our defences would not be safe under Labour because of the pressure that would be imposed on Front Benchers by Back Benchers, and because the Front Benchers themselves are at best new converts to defence; I do not believe in them at all." title='Defence Export Services Organisation' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/defence-export-services-organisation'>
        </outline>
        <outline id='1527936' text='Mr. Jim Cunningham: To ask the Secretary of State for Defence if he will make a statement on the estimated establishment of the Royal Air Force at 1 April 1999. [18036]&lt;br/&gt;The Minister of State for the Armed Forces (Mr. Nicholas Soames): The requirement for trained Regular uniformed manpower for 1 April 1999 is forecast to be 52,200.&lt;br/&gt;Mr. Cunningham: Does the Minister agree that, under the Conservatives, the Royal Air Force has received a 40 per cent. cut? Is not that the true legacy of the Tory Government?&lt;br/&gt;Mr. Soames: That is a fluent and telling question: the hon. Gentleman is clearly well on top of the subject and
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        has a deep knowledge of matters relating to the Royal Air Force. Of course, he is completely wrong: the Royal Air Force has had to go through a difficult period and has reconfigured itself for the new world order, to deal with the challenges that will face it, in common with all our allies and, indeed, our foes. All armed forces have been through a period of downsizing, but the Royal Air Force remains the benchmark against which all other air forces in the world judge themselves. It is highly rapidly deployable and extremely well equipped.&lt;br/&gt;Mr. Wilkinson: May I remind my hon. Friend that 1 April 1999 will be the 81st anniversary of the foundation of the Royal Air Force and the second anniversary of the absorption by the Royal Auxiliary Air Force of the Royal Air Force Volunteer Reserve, forming a Reserve force that will be capable of expansion in time of war and extremely cost-effective in time of peace? Will it not, in short, be an 81st anniversary of which the founder of the Royal Air Force, Lord Trenchard, would be proud? It will be a good basis for taking the service to a glorious future in the next century.&lt;br/&gt;Mr. Soames: I am grateful to my hon. Friend, who is of course completely right. As he knows, because he spoke in the Royal Air Force debate, I announced on that occasion our intention to recruit up to 60 Reservist air crew over the next two years and that the training of the Royal Auxiliary Air Force helicopter support squadron was going well. We shall consider all possible ways of expanding and enhancing the role of the Reserves in the Royal Air Force.' title='RAF (Establishment)' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/raf-establishment'>
        </outline>
        <outline id='1527937' text="Mr. Tony Banks: To ask the Secretary of State for Defence how many works of art are missing from his Department's art collection; and if he will make a statement. [18037]&lt;br/&gt;The Minister of State for Defence Procurement (Mr. James Arbuthnot): As a result of inadequate record keeping and controls in the past, 105 works of art are missing from my Department's collection. New control procedures have been introduced and efforts continue to try to find the missing works.&lt;br/&gt;Mr. Banks: I did not realise that there were so many art lovers among the armed forces. I thought that their job was to go around shooting at people, not nicking paintings. The National Audit Office identified 190 pictures as stolen or missing. Is the Minister telling us that some have been recovered? Where were they recovered from? He said that efforts were being made. Will he describe those efforts? For example, has he been visiting Ministers' pieds-&amp;#x00E0; -terre to see whether any paintings have ended up there? Why does not he declare an amnesty so that we can at least recover the paintings, which are worth something like &amp;#x00A3;100,000 of taxpayers' money?&lt;br/&gt;Mr. Arbuthnot: It beats me how the hon. Gentleman, of all people, has the gall to ask such a question. It was he who in 1986 purloined &amp;#x00A3;50,000 worth of silver from the Greater London council. He asks where I have been
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        looking: I should have been looking in his loft, which is where the GLC silver ended up. It absolutely astonishes me that he has the gall to ask that question.&lt;br/&gt;Mr. Tracey: My hon. Friend knows that only the best security can protect works of art, as the Public Accounts Committee investigation proved. Is he aware that the artefacts that disappeared from county hall during the chairmanship of the hon. Member for Newham, North-West (Mr. Banks) have still not been recovered? Only code marking could have ensured their recovery.&lt;br/&gt;Mr. Arbuthnot: My hon. Friend is no doubt right, although I have not kept track of the GLC silver; perhaps I should have. Perhaps the hon. Member for Newham, North-West (Mr. Banks) should instigate a search of his loft so that he can tell us what has happened." title='Departmental Art Collection' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/departmental-art-collection'>
        </outline>
        <outline id='1527938' text="Mr. Allason: To ask the Secretary of State for Defence what proportion of the defence industry's output was exported in the last year for which figures are available. [18038]&lt;br/&gt;Mr. Arbuthnot: Although definitive output figures are not available, I estimate that, in the recent past, the percentage of defence goods exported was in the region of 35 per cent. That represents an outstanding success for British industry, and one that is envied worldwide.&lt;br/&gt;Mr. Allason: Will my hon. Friend confirm that a large number of British jobs emanate from defence exports, that there is the most rigorous scrutiny of British export contracts, and that no British export is made in contravention of European Union or United Nations embargoes?&lt;br/&gt;Mr. Arbuthnot: I confirm what my hon. Friend says. We have probably the most rigorous control of exports of any nation. We export responsibly and we shall continue to export responsibly. My right hon. Friend the Secretary of State told the House that we take 25 per cent. of world market share&amp;#x2014;an astonishing achievement. Those exports bring many benefits to Britain, not only in jobs, but in increased influence overseas and in the reduction of costs to the Ministry of Defence in buying equipment. If we were to put those jobs at risk by introducing a strategic defence review, we would undermine the stability of the defence industry and damage not only jobs but our influence and MOD costs. We must be careful about that as we move towards a general election.&lt;br/&gt;Mr. Gunnell: Is the Minister aware of the proposed closure of IMI Yorkshire Alloys in my constituency and in Smethwick? That company contributes to defence exports and sells directly to the US Navy and to others. Its products are not made by any other company in Britain. Our position will suffer a net loss if the proposed closure goes ahead. Will he look into the closure and its strategic significance for the defence industry to ascertain whether he can make any suggestions to help those who want at least some part of the company to remain in existence?&lt;br/&gt;Mr. Arbuthnot: I was not aware of that proposed closure. We deeply regret job losses following the closure
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        of any part of the defence industry. In view of the hon. Gentleman's comments, I shall look into the matter in the way that he suggests.&lt;br/&gt;Mr. Day: Is my hon. Friend aware that while the defence industry is important to the nation as a whole, it is of particular importance to the north-west of England, in respect of both the defence and aerospace industries? Has he a message for the many thousands of people in the north-west whose jobs and livelihoods depend on the continuance of present defence policies about the attitudes of the Government and the Opposition to the defence industry?&lt;br/&gt;Mr. Arbuthnot: I do have a message. The defence industry of the north-west is very valuable, and the Government recognise its value. Our defence industry is successful because of the policies that the Government have followed. We have followed policies of competition and privatisation, both of which the Labour party abhors. We have followed policies that improve exports and we have provided stable defence funding. We do not want a strategic defence review that would undermine defence exports and the strength of our defence industry. My hon. Friend is right to draw attention to the importance of the industry in the north-west.&lt;br/&gt;Mr. Spellar: Does the Minister agree that overseas sales depend on orders in the home market? If so, is it not a shame that he did not think about that when ordering the Army field ambulance? We had to mount a massive campaign to save it for Land Rover from the Austrians. Does the Minister comprehend that his comments and those of the Secretary of State will be widely welcomed in Paris, Los Angeles, Fort Worth and anywhere our competitors seek to create uncertainty and to undermine Britain's position? This close to a general election, why does he not stop playing party political games and start backing Britain's defence industry? It all goes to show: &quot;You can't trust the Tories on defence.&quot;&lt;br/&gt;Mr. Arbuthnot:&amp;#x2014;it says here. The answer to the hon. Gentleman's question lies in his own hands. If he is complaining about uncertainty, perhaps he can tell us which of the projects that we have ordered would be exempted from his defence review. For instance, will the replacement maritime patrol aircraft, the Nimrod 2000, be exempted from the defence review? No? I take it, then, that it would not be exempted. Instead of exempting certain elements from a defence review, a more responsible attitude would be to recognise the long-lasting damage that the entire review would do to our British defence industry, and to abandon it lock, stock and barrel." title='Defence Exports' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/defence-exports'>
        </outline>
        <outline id='1527939' text='Mr. Nigel Evans: To ask the Secretary of State for Defence what recommendations arising from &quot;Options for Change&quot; are yet to be implemented.[18039]&lt;br/&gt;Mr. Portillo: All the restructuring arising from &quot;Options for Change&quot; has been completed.&lt;br/&gt;Mr. Evans: Does my right hon. Friend agree that our services have dealt admirably with the changes that have resulted from &quot;Options for Change&quot;? Does he agree that
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        a peace dividend can be spent only once, and that we have spent it? The last thing our services need is a review such as the one threatened by the Labour party, should it form the next Government. We all know what a review means: it is new Labourspeak for cuts, cuts and yet more cuts which would savage our services and wreck procurement jobs in the north-west and elsewhere, decimating defence manufacturing industry in this country.&lt;br/&gt;Mr. Portillo: My hon. Friend speaks with real feeling because jobs are at risk in his constituency and in other constituencies throughout the country. He is absolutely right to say that the armed forces led through the &quot;Options for Change&quot; exercise&amp;#x2014;and led brilliantly. That enabled our armed forces to adapt to change better than those of any other country. That has now been done; we are now adapted to the new world in which the cold war is over.&lt;lb/&gt;
        My hon. Friend is absolutely right: the defence dividend cannot be taken again and again. Because we have kept our defence strategy fully up to date, there is no need for a strategic defence review. The only reason for the review proposed by Labour is to initiate defence cuts. The attitude of Labour Members shows that they do not care about defence. Even if there were a Labour Secretary of State for Defence who cared about defence&amp;#x2014;I do not see one in prospect&amp;#x2014;he would get no support from his Back Benchers and would thus be naked in the struggle to defend the defence budget.&lt;br/&gt;Dr. Reid: That is priceless, coming from the man who instigated the biggest cut in, and the most shambolic continual restructuring of, the armed forces every year for the past decade. Does he realise that any review that we carried out, unlike his efforts, would start by involving the chiefs of staff? Unlike his, it would guarantee two years of financial stability, as we have already made clear. Unlike his, it would interleave foreign affairs and defence, giving us some form of strategy. And unlike him, we would avoid the annual big-bang restructuring.&lt;lb/&gt;
        Have not the right hon. Gentleman and the Government been incoherent in strategy, incompetent in finance and indifferent in welfare? We have always known that the Tories cannot be trusted with the health service; we now know that they cannot be trusted on defence either.&lt;br/&gt;Mr. Portillo: The hon. Gentleman leads with his chin. He has no authority whatsoever from the shadow Chancellor or from the Leader of the Opposition to say that there will be stability under a Labour Government. He has authority to say only that there will be a defence review, and that is why at no time will any Labour Member say what we need to hear: that any of the projects that this Government have ordered are exempt from the defence review. They will not say it because they are not authorised to do so&amp;#x2014;they are under the thumb of the shadow Chancellor and of the Leader of the Opposition. The Leader of the Opposition wrote in &lt;i&gt;The Daily Telegraph &lt;/i&gt;that it would be dishonest to claim that Labour would restore defence to its former level, so the hon. Member for Motherwell, North (Dr. Reid) should not risk being dishonest with the House today.&lt;br/&gt;Mr. King: The necessary changes in &quot;Options for Change&quot; were designed to achieve lower manpower levels but ensure that that manpower had the best equipment available in the world at that time, and I congratulate my
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        right hon. Friend on the way in which that programme has been carried through. I was struck by one particular feature during the period in which the changes were introduced&amp;#x2014;I was conscious of the united concern of Conservative Members that our defences might be put at risk. Is he aware that, in contrast, no such concern was expressed by Labour Members? All we heard was exactly what we have heard repeated this afternoon&amp;#x2014;Labour Members pleading for individual equipment orders and pretending that they are in favour of defence, but actually calling for cuts in overall expenditure on every possible occasion.&lt;br/&gt;Mr. Portillo: The strategy conceived by my right hon. Friend has been carried through with great success, and I pay tribute to him for that. We in this country have been willing to undertake difficult changes involving the reduction of numbers and the reduction of the number of bases from which we operate. As a result, we have been able to put more and more money into defence equipment. A rising proportion of the defence budget goes into the sort of equipment that would enable Britain to triumph in future conflicts. My right hon. Friend is absolutely right to say that, throughout that period, he faced legitimate concern from Conservative Back Benchers and no concern from Labour Back Benchers, and that it is the same today. I have been sustained during my two years as Secretary of State for Defence by the tremendous support that I have had from behind me. Any Labour Secretary of State for Defence would know that what his Back Benchers wanted was savage defence cuts to bring us down to the European average&amp;#x2014;but Britain is not of the European average.' title='&quot;Options for Change&quot;' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/options-for-change'>
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        <outline id='1527940' text="Mr. Norman Hogg: T: To ask the Secretary of State for Defence if he will make a statement on the current establishment of the Army. [18040]&lt;br/&gt;Mr. Soames: The current trained manpower establishment of the Regular Army, including Gurkhas but excluding the Royal Irish Regiment (Home Service element), is around 106,000.&lt;br/&gt;Mr. Hogg: Is it not true that the Minister spent &amp;#x00A3;500 million and reduced the Army by 50,000, but wound up with a 5,000 shortfall? How did the Minister get misled into such a muddle?&lt;br/&gt;Mr. Soames: I saw the hon. Gentleman being given a run-through of his question&amp;#x2014;he did not look overly confident then or as he asked it. He is correct when he says that the Army is currently under strength by 5,339 men and women; however, I have some bad news for him, which means that there is good news for the Army. The Army has already recruited 664 officers from a target of 730 for the year and 13,650 soldiers from a target of 15,100&amp;#x2014;a 50 per cent. increase on the year. We are devoting huge and valuable resources to recruiting; we have a lot more to do and the hon. Gentleman may be assured that we will do it. The Government are hugely proud of the Army. We have throughout had the clear objective that the Army should be brilliantly trained and properly equipped for future wars and operations, and I am glad to say that that is now the case.&lt;br/&gt;Mr. Nicholas Winterton: Will my hon. Friend give me the assurance this afternoon that the Cheshire Regiment is
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        safe under a Conservative Government, and that there is every chance that the Cheshire Regiment would be in jeopardy under the review that the Labour party would carry out?&lt;br/&gt;Mr. Soames: My hon. Friend is perfectly right. No cap badge in the British Army would be immune from the type of defence review that the hon. Member for South Shields (Dr. Clark) plans; indeed, the hon. Gentleman has already said that such a review would not be free of pain.&lt;lb/&gt;
        I give my hon. Friend the following assurance: for as long as I am Minister of State for the Armed Forces, for as long as there is a Conservative Government, the Cheshires will be a valued and valuable part of the order of battle of the British Army. Opposition Members would have been proud if they had been able to see, as I did, the way in which the Cheshires conducted themselves in Bosnia.&lt;br/&gt;Dr. Hendron: The Secretary of State is aware of the difficulties for young soldiers patrolling the streets of Northern Ireland, and of the brutal murder by the IRA of Stephen Restorick. Bearing that in mind, does he agree that, difficult as it is for soldiers in Northern Ireland, it is extremely important that at all times they do not inadvertently in some way act as recruiting sergeants for the Provisional IRA in their treatment of young people in the streets?&lt;br/&gt;Mr. Soames: The hon. Gentleman makes an important and valuable point. In my judgment, the British Army's conduct in Northern Ireland during the past 25 years will be one of the most glorious chapters in the annals of this country's military history. I am sure that the hon. Gentleman will agree that the British Army has comported itself with great discipline, great skill and great courage on the streets of Belfast, and I wholly endorse exactly what he said.&lt;br/&gt;Mr. Key: Does my hon. Friend agree that it has always been more difficult to recruit for the Army at times of prosperity and falling unemployment? Will he accept my congratulations on the superb advertising campaign run by the Adjutant-General in cinemas and elsewhere? Will he take it from me that, on my last visit to the Army careers office in Salisbury, it was up to target and recruitment was going very well indeed?&lt;br/&gt;Mr. Soames: I am grateful to my hon. Friend&amp;#x2014;as always&amp;#x2014;for his support for the armed forces and the Army in particular. I agree entirely that the recent advertising campaign has been a great success. It has won many awards in this country and abroad and we are extremely pleased with it.&lt;lb/&gt;
        I am glad to hear how well recruiting is going in Salisbury. My hon. Friend is right that it is hard, in the south particularly, to recruit when unemployment is falling. We must make greater efforts to give people who enter the Army qualifications that they can use when they leave. We have still a great deal to do, but we shall do it. I am grateful for my hon. Friend's support.&lt;br/&gt;Mr. Murphy: Why cannot the Minister accept that although, since the last general election, the Government have spent &amp;#x00A3;500 million on recruitment schemes and &amp;#x00A3;1.5 billion on making service people redundant, he still
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        manages to get it all wrong, with a shortfall of more than 5,000 in the Army alone? Does not he personally accept responsibility for that fiasco, or is it all the fault of some nameless civil servant?&lt;br/&gt;Mr. Soames: No, it is not the fault of a nameless civil servant; it is the result of a combination of circumstances and events. Recently, we have been in a demographic trough. When the Government came to power, one in eight young people went on to further and higher education; now, one in three do. We are fishing in a much smaller pool, and we need to work much harder to get the high-quality young men and women we need.&lt;lb/&gt;
        For all the hon. Gentleman's bleating and harping on about the failure to recruit the numbers, if he could see the quality of the people we are getting, he would revise his view and understand that we need to continue to invest in giving those young people the skills that they need in the Army, and train them in the Army so that they can go out into a useful civilian career afterwards." title='Army (Establishment)' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/army-establishment'>
        </outline>
        <outline id='1527941' text="Sir Colin Shepherd: To ask the Secretary of State for Defence if he will make a statement on the role of the services' cadet forces. [18041]&lt;br/&gt;Mr. Soames: The cadet forces continue to play a sterling role in the nation's voluntary youth movement, giving young people their first experience of the armed forces and their way of life and encouraging the development of such qualities as self-reliance, self-confidence and good citizenship.&lt;br/&gt;Sir Colin Shepherd: We in Hereford are proud to have active units of the Navy, Army and Air Force cadets, which are using service concepts of training and discipline to give young people experience and to develop their powers of leadership and responsibility. Will my hon. Friend join me in paying tribute to the many thousands of volunteer adults who give up their time to lead training activities?&lt;br/&gt;Mr. Soames: I am grateful to my hon. Friend. In this respect, Hereford is no different from many other parts of the country. Cadet forces are booming and are playing a vital role in the community. I am glad to hear that they are doing so in my hon. Friend's constituency. I willingly join him in paying a warm and wholehearted tribute to the thousands of adult volunteers, including parents, who freely give of their time to enable young people to acquire the important skills that they learn in the cadet forces. The future of the cadet forces hinges entirely on our being able to attract high-quality volunteers.&lt;br/&gt;Mr. Barry Jones: How will the Minister help the excellent HMS Tuscan in my constituency? Is he aware that when I recently gave awards to this superb unit at Connah's quay dock it was clear to me that the building in which it operated was in urgent need of refurbishment? It was especially in need of efficient heating. Will the Minister assist by supporting my application, and that of the unit, to the national lottery's small charities sector so that the urgent need for heating can be met?&lt;br/&gt;Mr. Soames: The hon. Gentleman is a loyal champion and supporter of the armed forces. I shall gladly support
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        his project in whatever way I can. He is a regular visitor to the Ministry of Defence and if he would like to talk to me about the matter, I shall be happy to see him.&lt;br/&gt;Sir Cranley Onslow: Will my hon. Friend assure the House that members of the cadet forces will continue to be able to shoot at targets with full-bore weapons?&lt;br/&gt;Mr. Soames: I am happy to give my right hon. Friend that assurance and I am grateful to him for raising the matter. It would be unthinkable for the cadets not to be taught to shoot properly and to learn the disciplines that relate to weapons and the respect that must be shown in skill-at-arms training. Cadets without weapons would constitute a pointless and meaningless operation. We shall ensure that they are properly equipped and properly taught in the vital disciplines that will do so much for them in later life.&lt;br/&gt;Mr. Dalyell: If the cadet forces are, to use the Minister's word, &quot;booming&quot; and are increasing in numbers, what is being done about the necessary increase in the number of rifles, and particularly the security of the armouries in which rifles are kept? Do the cadet forces have the wherewithal to offer the security that, post-Dunblane, people obviously need and want?&lt;br/&gt;Mr. Soames: I share the hon. Gentleman's anxiety about the proper security of weapons. I assure him that the Ministry of Defence takes the matter extremely seriously. We are satisfied that our arrangements for the security of weapons are adequate; indeed, they are excellent and are regularly reviewed. However, I take the hon. Gentleman's point. More cadets are learning to shoot, and in learning that skill they will use deactivated rifles. They will use full-bore rifles only when firing on ranges." title='Cadet Forces' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/cadet-forces'>
        </outline>
        <outline id='1527942' text="Mr. Brazier: To ask the Secretary of State for Defence what proportion of the defence budget in the next three years he plans to spend on defence equipment. [18042]&lt;br/&gt;Mr. Arbuthnot: Expenditure on equipment in the current financial year is estimated to be 39 per cent. of the defence budget. On current plans, this percentage will increase steadily over the next three years.&lt;br/&gt;Mr. Brazier: Will my hon. Friend join me in congratulating Amphenol in my constituency on being the largest and most successful manufacturer of electrical connectors for the defence industry throughout Europe? Does not this go beyond the constituency point? Are not companies such as Amphenol playing a vital part in maintaining our defence base? Would not Labour's threatened defence review, which would turn companies' plans and their tooling up and design capability upside down, be just as bad for the companies concerned as it would be for the armed forces?&lt;br/&gt;Mr. Arbuthnot: I am grateful to my hon. Friend for mentioning Amphenol, which is a valued supplier to the Ministry of Defence. We are delighted with the work that it has done for us. We have plans under a Conservative Government to increase spending on major defence
        &lt;image src=&quot;S6CV0292P0I0075&quot;/&gt;
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        equipment by 15 per cent. by the year 2000. That would be put at risk if it were not exempted from the strategic defence review proposed by the Opposition. Unless they can say that the Brimstone missile, the Storm Shadow missile and the Nimrod 2000 aeroplane will be exempt from the review, those projects will all be at risk. Britain cannot take that risk. We know not only that we cannot trust Labour on defence, but that the entire country cannot trust Labour on defence.&lt;br/&gt;Ms Rachel Squire: It is clear that the future of Britain's defence industry is at risk. I draw attention to the letter in the &lt;i&gt;Financial Times &lt;/i&gt;this morning from senior industrialists, including the chief executive of British Aerospace, in which they express their concerns about the consequences of the Government's policies for industry, especially in their approach to Europe and the single market. Does the Minister agree that during the lifetime of the Government, the number of jobs in Britain's defence industry has halved, the Government's contribution has been cut by a third, the industry's success has been due to the industry, in spite of the Government's attempts to wreck it and the Government's&amp;#x2014; &lt;i&gt;[Interruption]&lt;/i&gt;&lt;br/&gt;Madam Speaker: Order. I have noticed today that responses from Ministers have been inordinately long. The hon. Lady will be heard in the House. Come to a conclusion, Ms Squire, but your final words will be heard. Come on.&lt;br/&gt;Ms Squire: Thank you, Madam Speaker&amp;#x2014;and the Government's refusal to work in partnership with the defence industry and draw up a strategy for a secure and long-term future?&lt;br/&gt;Mr. Arbuthnot: No. The reason I do not agree is that the success of British industry has been shown by the fact that we have been able to take 25 per cent. of the world market share in the past year. That has been due to the competitive policies pursued by the Government, and to the fact that the Government and British industry have worked together to ensure that we succeed in exports. It is also due to the fact that we have privatised defence industry&amp;#x2014;privatisation that has been opposed every step of the way by the Labour party." title='Equipment Expenditure' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/equipment-expenditure'>
        </outline>
        <outline id='1527943' text="Mr. Lidington: To ask the Secretary of State for Defence if he will make a statement on the number of Eurofighter aircraft to be ordered by the Royal Air Force. [18043]&lt;br/&gt;Mr. Portillo: We will buy 232 Eurofighters to replace the Tornado F3 and the Jaguar. We may need more in future if Eurofighter proves to be the best replacement for other types of aircraft.&lt;br/&gt;Mr. Lidington: Is my right hon. Friend aware that his answer today will be warmly welcomed by the Royal Air Force, and in particular by my constituents in Halton and at strike command? Does he share my fears that Labour's refusal to exempt the European fighter aircraft from its proposed defence review bodes ill for the future of the Royal Air Force?&lt;br/&gt;Mr. Portillo: It is dismaying that we have been through an entire Question Time and yet again Labour Front
        &lt;col&gt;136&lt;/col&gt;
        Benchers have been unwilling to say that any of the projects that have been mentioned&amp;#x2014;projects on which thousands of jobs and our armed forces depend&amp;#x2014;would be exempt from Labour's defence review. People will draw their own conclusions. The prospect should not be as discouraging as my hon. Friend suggests, because if people draw the right conclusions they will ensure that there is not a Labour Government.&lt;br/&gt;Dr. David Clark: May I make it crystal clear yet again that Labour is fully committed to Eurofighter and will order it in office? Why does the Secretary of State persist in playing party politics over Eurofighter&amp;#x2014;an aeroplane that is so vital for the RAF and for Britain's aerospace industry? Does he not understand that, by doing so, he is giving succour to Eurofighter's enemies at home and abroad, putting at risk thousands of jobs in Britain and threatening the country's security in years to come?&lt;br/&gt;Mr. Portillo: How many Eurofighters is the hon. Gentleman committed to? Is he committed to the stand-off missile, the amphibious assault ships and the frigates? Why does he not answer those questions? Why does he not tell us to what other projects he is committed? The British people know that he is not committed to those things, and they will draw their own conclusions.&lt;br/&gt;Mr. Atkins: What does my right hon. Friend think will be the painful consequences for Eurofighter, British Aerospace, Leyland Trucks and anyone else who provides defence equipment to our armed forces of a defence review as suggested by the Labour party?&lt;br/&gt;Mr. Portillo: After two months of internal struggle, today the Opposition defence spokesman, the hon. Member for South Shields (Dr. Clark), gave a half-hearted promise about Eurofighter that is not worth the paper that it is not written on. He said nothing about the replacement maritime patrol aircraft, the Leyland orders that my right hon. Friend mentioned or the amphibious assault ships, the missiles, the frigates or any of the other projects that the Government have ordered.&lt;lb/&gt;
        There is time before the general election for people to wake up to what a Labour Government would mean: the destruction of jobs and the elimination of orders that are essential for the defence and security of this country and for the deterrence of threats to this country." title='Eurofighter' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/eurofighter'>
        </outline>
      </outline>
      <outline id='1527944' text='PRIME MINISTER'>
        <outline id='1527945' text="Q 1 Mr. Hendry: To ask the Prime Minister if he will list his official engagements for Tuesday 11 March. [18065]&lt;br/&gt;The Prime Minister (Mr. John Major): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.&lt;br/&gt;Mr. Hendry: Does the Prime Minister agree that parents everywhere will welcome today's publication of league tables for primary schools? Does he understand their very real anger at those who would deny them the right to know how their children's schools are
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        performing? Whether or not schools are doing well, parents have an absolute right to know how their children and their local authorities are performing. We understand that, but Labour does not.&lt;br/&gt;The Prime Minister: I agree with my hon. Friend about the importance of the tables. For the first time, parents will have the information they need to help to choose the appropriate primary schools for their children.&lt;br/&gt;Mr. Foulkes: In Orkney?&lt;br/&gt;The Prime Minister: They do&amp;#x2014;&lt;br/&gt;Madam Speaker: Order.&lt;br/&gt;The Prime Minister: It is interesting to note that any prospect of choice or information is an appalling proposition for Opposition Members&amp;#x2014;no wonder they propose to do away with this information if they ever get the opportunity. The tables expose under-achievement and high truancy, and where they occur: in authorities run by the party of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes).&lt;br/&gt;Mr. Blair: Is the Prime Minister aware of the correspondence from the Association of Meat Inspectors sent to Ministers and the Meat Hygiene Service that shows that, contrary to what we were told last week, serious concern about contamination was being expressed to Ministers and others over a nine-month period and that contamination in abattoirs is getting worse, not better? Those are serious allegations. Will the Prime Minister institute immediate inquiries and ensure that the Minister of Agriculture, Fisheries and Food publishes a full account of the state of abattoirs, of what warnings were given to Ministers, and of what action was taken?&lt;br/&gt;The Prime Minister: In the past few hours I have seen the letter to which the right hon. Gentleman refers since it attained some notoriety on the lunchtime media. I entirely share the concern of the right hon. Gentleman and the Association of Meat Inspectors to ensure the highest standards of hygiene in slaughterhouses. I am surprised by the contents of the letter for two reasons: first, I am surprised because the AMI is responsible for the enforcement of hygiene rules, and I understand that extra staff have been provided to the Meat Hygiene Service, including at least 250 staff who are responsible for inspection. Secondly, I am surprised because the vice-president of the Association of Meat Inspectors, who is a vet&amp;#x2014;unlike the general secretary to whose letter the right hon. Gentleman referred&amp;#x2014;said today that he is
        &lt;quote&gt;&quot;fully supportive of the Meat Hygiene Service and everything they have achieved in raising standards&quot;.&lt;/quote&gt;
        Notwithstanding that point, I have not yet fully had the chance to investigate the letter, but I will most certainly do so.&lt;br/&gt;Mr. Blair: I thank the Prime Minister for that, but will he ensure that we are given a full account of exactly what was said to Ministers over that period of nine months and what the state of abattoirs is? Is there not an unanswerable case for ensuring that the Ministry of Agriculture, Fisheries and Food does not look after the interests of the industry and consumers together, and that we set up a
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        proper, independent food standards agency that can look into these matters and monitor them on behalf of the public?&lt;br/&gt;The Prime Minister: The right hon. Gentleman raises two important points. Let me try to answer him in some depth on both of them.&lt;lb/&gt;
        As to the importance of what Ministers have been doing, I understand that my right hon. and learned Friend and my hon. Friend the Parliamentary Secretary have had a total of 22 meetings on hygiene matters over the last year to deal with abattoirs and related matters. That series of meetings continues, which shows the extent of the Government's concern. I will, of course, look personally at what has happened about those meetings.&lt;lb/&gt;
        I share the right hon. Gentleman's view on the need for independent advice. The point of distinction between us is whether it should come from an agency, or independent advice from scientific experts, but not necessarily an agency&amp;#x2014;&lt;i&gt; [Interruption]&lt;/i&gt;I will explain why not necessarily an agency, and I will use the words that are often used by hon. Members when criticising agencies that exist. Hon. Members often say to me that agencies do not stand at the Dispatch Box; that they are not answerable for what is happening. On a matter such as food safety&amp;#x2014;the right hon. Gentleman just asked that my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food be held accountable&amp;#x2014;it is, perhaps, right that there should be independent advice. I agree with the right hon. Gentleman about that and we have set it in train, but a Minister should stand at the Dispatch Box and answer for the advice that he receives.&lt;br/&gt;Mr. Blair: I thank the Prime Minister for that, but I would just point out to him that, in the letter written last Wednesday, the Association of Meat Inspectors said that &lt;quote&gt;&quot;far from being encouraged to enforce stricter hygiene standards,
        MHIs are being actively encouraged to ignore breaches of regulations and in some cases threatened if they try to take action&quot;.&lt;/quote&gt;
        I understand that inspectors have a responsibility, but surely Ministers do as well. I therefore ask the Prime Minister whether, as a result of his previous answer, he is prepared to look again at the possibility of an independent food standards agency&amp;#x2014;not to commit himself to it today, I understand that&amp;#x2014;as a better way to deal with these issues.&lt;br/&gt;The Prime Minister: I am grateful for the way in which the right hon. Gentleman poses his question. Let me deal with the first part of it and what instructions were given to inspectors.&lt;lb/&gt;
        Inspectors have been given clear instructions to apply the rules firmly: for example&amp;#x2014;to pick up one of the points in the letter&amp;#x2014;if they see signs of any form of contamination, not to stamp meat as fit for human consumption. Their job is to stop such meat reaching the consumer. Abattoir managers and owners who flout those rules face prosecution. The right hon. Gentleman will know of the monthly report on observance of bovine spongiform encephalopathy rules. In addition, members of the AMI&amp;#x2014;the inspectors&amp;#x2014;know that they face disciplinary action if they fail to enforce the rules properly. That is a real threat. The Meat Hygiene Service has dismissed a number of employees and disciplined rather more for inadequately carrying out the public safety responsibility of careful examination of abattoirs, and that is right.&lt;lb/&gt;
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        Of course I will look at the question of independent advice, but for the reason that I set out a moment ago I do not favour a food standards agency.&lt;br/&gt;Mr. Gallie: To ask the Prime Minister if he will list his official engagements for Tuesday 11 March. [18066]&lt;br/&gt;The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.&lt;br/&gt;Mr. Gallie: Does my right hon. Friend welcome, as I do, the high level of investment in the electronics industry in central Scotland? Does he recognise the importance to that industry of manoeuvrability of components and products? Will he consider the requirements of fifth freedoms, which could benefit that industry, particularly by using Prestwick airport as a gateway?&lt;br/&gt;The Prime Minister: As my hon. Friend will know, I visited Prestwick airport 10 days ago to look at its excellent cargo facilities. Granting fifth freedom rights to foreign airlines using Prestwick is attractive, provided United Kingdom airlines are given a fair opportunity to compete and there are matching rights for UK airlines overseas. I shall certainly ensure that my right hon. Friend the Secretary of State for Transport is aware of my hon. Friend's comments. I share my hon. Friend's belief that good transport links are vital to that success.&lt;br/&gt;Mr. Ashdown: If, as the Government claim&amp;#x2014;&lt;br/&gt;Mr. Nicholas Winterton: Welcome to the role of grandparent.&lt;br/&gt;Mr. Ashdown: Yes, we hope that we shall be.&lt;lb/&gt;
        If, as the Government claim, today's primary school league tables are a fair and accurate judge, will the Prime Minister consider two facts? Of the top 20 local education authorities, eight have Liberal Democrat control, three have Labour control and only two have Conservative control. According to the tables, Britain's primary education system is now, in the words of &lt;i&gt;The Express,&lt;/i&gt;the worst in the western world and a national disgrace. After 18 years of Conservative government, does the Prime Minister take any responsibility for that, or is it the fault of the teachers and the Opposition parties?&lt;br/&gt;The Prime Minister: If it were not for the fact that we introduced this information, nobody would know precisely what was happening in schools. As to standards in secondary and primary schools, the fact is that, across the board, it is long-standing Conservative authorities that have the best results, certainly not Labour authorities. The 20 worst secondary schools and the 10 worst primary schools are in Labour authorities. The schools for which the right hon. Gentleman takes credit have been Conservative run for many years, and have only recently been run by the Liberal Democrats.&lt;br/&gt;Mr. John Greenway: To ask the Prime Minister if he will list his official engagements for Tuesday 11 March. [18067]&lt;br/&gt;The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.&lt;br/&gt;Mr. Greenway: Will my right hon. Friend join me in congratulating the Chartered Insurance Institute on its centenary year, which is marked by a major international insurance conference at Westminster today? Are not Governments throughout the world increasingly turning to the private sector to help to meet long-term social costs? Does my right hon. Friend agree that a partnership between insurance companies and the state is the best way of ensuring that future generations can meet their pension needs?&lt;br/&gt;The Prime Minister: If we wish to enshrine the welfare state for our children and our grandchildren, it is necessary to look again at how we can ensure that the provision that is made today is still affordable in years to come. That is why we produced the plans on basic pension plus. That is why my right hon. Friend the Secretary of State for Health yesterday announced our partnership scheme for long-term care, and that is why further plans will be announced tomorrow. We are seeking to ensure that the welfare state is enshrined for the long term by taking decisions that every hon. Member knows need to be taken if we are to ensure the continuation and improvement of welfare provision.&lt;br/&gt;Mr. Ashton: As we are only three or four weeks away from the official start of the general election campaign, will the Prime Minister tell us whether, a few weeks before the last general election, the Conservative Government did a deal with the tobacco companies, in which several hundred hoardings were given to the Conservative party in return for an agreement that there would be no ban on tobacco advertising? Is that true? Will he confirm that that deal will not be done again?&lt;br/&gt;The Prime Minister: I confirm that no deals are being done, although I have noticed one: the substantial advertising campaign by the trade unions. Those trade unions fund the Labour party when the deputy leader is not abroad raising funds for the party before denouncing the Conservatives, whom he claims do the same thing.&lt;br/&gt;Mr. Butler: To ask the Prime Minister if he will list his official engagements for Tuesday 11 March. [18068]&lt;br/&gt;The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.&lt;br/&gt;Mr. Butler: Will my right hon. Friend join me in congratulating the Church primary schools on their exceptional performance, as shown in the league tables that were published today? Is that not further and conclusive proof that traditional teaching methods, employed in an atmosphere in which achievement is expected and there are strict rules and discipline, are not only the most successful but the only proper methods?&lt;br/&gt;The Prime Minister: My hon. Friend is right to point to the excellent performance of the Church primaries. About 60 of the 100 best-performing schools in the tables are either Church or grant maintained. They show the success of a policy of promoting choice and diversity in our education system if we wish to promote excellence.&lt;lb/&gt;
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        [HON. MEMBERS: &quot;Oh.&quot;] I note the hatred of diversity and excellence on the Opposition Benches. I note Opposition plans to abolish grant-maintained schools, to undermine Church schools and to give local education authorities unprecedented control over them. It is very interesting indeed that members of the Labour party would like to deny other parents the opportunities that they exercise themselves.&lt;br/&gt;Ms Walley: To ask the Prime Minister if he will list his official engagements for Tuesday 11 March. [18069]&lt;br/&gt;The Prime Minister: I refer the hon. Member to the answer I gave some moments ago.&lt;br/&gt;Ms Walley: Does the Prime Minister recall that, five years ago yesterday, the then Chancellor of the Exchequer
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        promised in his Budget speech that he would not increase VAT on fuel? Are we not entitled to know now why the Government did not go ahead with that?&lt;br/&gt;The Prime Minister: I think that we are entitled to know by what amount a windfall tax will add to the cost of fuel for people&amp;#x2014;and the cost of water, and the cost of all the other utilities. We are promised such a tax; we have not been given any information about the impact of that tax on either the consumer&amp;#x2014;&lt;br/&gt;Ms Walley&lt;i&gt;indicated dissent.&lt;/i&gt;&lt;br/&gt;The Prime Minister: There is no point in the hon. Lady's shaking her head; this is the fact of the matter. We have not been given any information about the impact of the tax on either the consumer or the dividends of hundreds of thousands of investors in those industries." title='Engagements' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/engagements'>
        </outline>
      </outline>
    </outline>
    <outline id='1527946' text="3.31 pm&lt;br/&gt;Mr. Tony Banks: On a point of order, Madam Speaker. During Defence questions, the hon. Member for Surbiton (Mr. Tracey) made a statement that was unfortunately untrue. He suggested&amp;#x2014;in fact, he did not suggest; he stated&amp;#x2014;that the silver that I had removed from county hall for safe keeping, to prevent it from being stolen&amp;#x2014;which, if I may say so, was more than Defence Ministers were able to do for their paintings&amp;#x2014;had not been returned.&lt;lb/&gt;
    The silver was, of course, handed over to the London residuary body, and was all accounted for. We will get it back when the new Greater London authority is set up. I ask you, Madam Speaker, to invite the hon. Member for Surbiton to correct the record, withdraw his statement and apologise.&lt;br/&gt;Mr. Richard Tracey: Further to that point of order, Madam Speaker. You will have noted that I made no mention of silver; I said &quot;artefacts&quot;. I certainly did not say that the hon. Member for Newham, North-West (Mr. Banks) had taken them. I said that they had disappeared from county hall, and, as far as I am aware, they have still not been returned.&lt;br/&gt;Madam Speaker: Those are not points of order. The hon. Member for Newham, North-West (Mr. Banks) has certainly made his case, and the matter must rest there.&lt;br/&gt;Mr. Brian Wilson: On a point of order, Madam Speaker. I understand that the hon. Member for Ryedale (Mr. Greenway), who asked the Prime Minister a question about the insurance industry, is a paid consultant to the Institute of Insurance Brokers, and a director of an insurance company. Should not that interest have been declared?&lt;br/&gt;Madam Speaker: Not during parliamentary questions. [HON. MEMBERS: &quot;Why not?&quot;] Order. The House determined some time ago that it was not always possible for an hon. Member putting a parliamentary question to declare his interest. Of course, we expect it at the very beginning when any hon. Member makes a speech.&lt;br/&gt;Several hon. Members&lt;i&gt;rose&amp;#x2014;&lt;/i&gt;&lt;br/&gt;Madam Speaker: Order. I have not finished yet. Hon. Members must sit down. I think that the hon. Member for Cunninghame, North (Mr. Wilson) has made his point, and that the House fully understands it.&lt;br/&gt;Mr. Ian Bruce: Before the hon. Member for Cunninghame, North (Mr. Wilson) leaves with his electronic device, could you confirm, Madam Speaker, that there is a ban, enforced by yourself, on electronic devices? When an hon. Gentleman has a message from the hon. Member for Hartlepool (Mr. Mandelson) on his electronic device, which he reads at the Dispatch Box, I suspect that that is a new departure for the House.&lt;br/&gt;Madam Speaker: I would not know who is on the electronic device, but I have requested that electronic devices&amp;#x2014;which make noises, of course&amp;#x2014;are not used in the Chamber, and I want to see that carried out.&lt;br/&gt;Mr. Bill Walker: Are you, Madam Speaker, like me disturbed at the question of interest that
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    was raised by the hon. Member for Cunninghame, North (Mr. Wilson), who himself failed to declare an interest yesterday, a point that I drew attention to in my speech? I find it astonishing that he should come to the Dispatch Box on the following day to make a point about interest, when he himself failed to declare an interest in a speech.&lt;br/&gt;Madam Speaker: I was not aware of that, but I repeat that all Members who have an interest must declare that interest as soon as they rise to begin a speech.&lt;br/&gt;Mr. David Shaw: My concern is that the hon. Member for Cunninghame, North (Mr. Wilson), who rose to the Dispatch Box just now, did not declare &amp;#x00A3;100,000-worth of grants to his company from the Highlands and Islands development board. My hon. Friend the Member for North Tayside (Mr. Walker) made that point yesterday. The hon. Member for Cunninghame, North was in full knowledge of that point, and could have said at the Dispatch Box that he himself was guilty of a non-declaration in a speech yesterday.&lt;br/&gt;Madam Speaker: I have replied to that point of order, which was put to me by the hon. Member for North Tayside (Mr. Walker).&lt;br/&gt;Mr. Seamus Mallon: On a point of order, Madam Speaker. Could I have your guidance? I tabled a question to the Secretary of State for the Home Department asking what representations had been received from the German Government in relation to bail for Roisin McAliskey, through what channels, and when they were received. Those must be matters of record in that Department; they have been going on for the past four months. The reply is:
    &lt;quote&gt;&quot;I will reply as soon as possible.&quot;&lt;/quote&gt;
    Will you give a ruling that, where information is readily available in a Department, it should be available to hon. Members in answer to parliamentary questions?&lt;br/&gt;Madam Speaker: I have no comment to make on that. The hon. Gentleman has had his response from the Minister, who says that he will reply as soon as possible.&lt;br/&gt;Mr. John Greenway: I understand that, a few moments ago, when I had left the Chamber, the hon. Member for Cunninghame, North (Mr. Wilson) alleged that I had failed to declare an interest in the question that I raised with the Prime Minister. All my interests with the insurance industry are declared in the Register of Members' Interests, and have been for many years, but I have no interest in the Chartered Insurance Institute. It is the main education insurance body in the world, is celebrating its 100th anniversary this week, and is not a commercial organisation.&lt;lb/&gt;
    The hon. Gentleman, who did not give me notice that he was going to raise that point, has demonstrated the extent to which the Labour party has a deep distrust of the insurance industry.&lt;br/&gt;Madam Speaker: I dealt with the matter at the time, as the hon. Gentleman will see when he reads &lt;i&gt;Hansard.&lt;/i&gt;&lt;br/&gt;Ms Hilary Armstrong: I wonder whether you can help me, Madam Speaker&lt;lb/&gt;
    &lt;image src=&quot;S6CV0292P0I0080&quot;/&gt;
    &lt;col&gt;145&lt;/col&gt;
    The hon. Member for Dover (Mr. Shaw) declares in the Register of Members' Interests that he has a remunerated directorship in the AdScene Group plc, a newspaper company. Should he not have further declared that he is using that group's headquarters to telephone-canvass for the general election?&lt;br/&gt;Madam Speaker: I have no evidence of that at all.&lt;br/&gt;Mr. Nicholas Winterton: Would you, Madam Speaker, clarify your reply to a point of order that was raised a few moments ago? Is it appropriate, correct and permissible to use an electronic device in this House and use it while raising a point of order? You said that you deplored the use of electronic devices that make a noise; you did not specify whether you deplored the use of electronic devices that do not make a noise.&lt;br/&gt;Madam Speaker: I do not think that such an incident has occurred previously. Personally, I do not like the use of such devices in the Chamber. I think that hon. Members should be aware and alert enough to determine for themselves what they are going to say. I should like to consider the point, if I may.&lt;br/&gt;Mr. Robert G. Hughes: Further to the points of order raised about the point of order raised by the hon. Member for Cunninghame, North (Mr. Wilson), Madam Speaker. Following what my hon. Friend the Member for Ryedale (Mr. Greenway) said, plainly the point made about him by the hon. Gentleman was factually inaccurate and wrong. Should not the House consider the point that the hon. Gentleman was receiving instructions from somebody via his pager&amp;#x2014;presumably the Labour party dirty tricks department? Should we not know who was giving him his instructions, and for whom he was acting merely as a messenger boy?&lt;br/&gt;Madam Speaker: The House has heard what I have said. I will consider the matter, and will certainly rule on it at the earliest opportunity.&lt;br/&gt;Mr. Tam Dalyell: Pursuant to the issue of pregnant women in prison raised by my hon. Friend the Member for Newry and Armagh (Mr. Mallon), whereas you are of course right in saying that, if the Home Office response was that it had no information, it might be correct, it is nevertheless a widespread understanding of hon. Members that there is information in the Home Office. As a pregnant woman is in prison in such circumstances, should not the House of Commons dig a little deeper to find out the facts&amp;#x2014;if, as we are told, information in the Home Office is available?&lt;br/&gt;Madam Speaker: As I understood it, the hon. Member for Newry and Armagh (Mr. Mallon) said that the Minister had replied that he would respond as soon as possible. That does not mean that the Home Office has no information. The Minister said that he would respond as soon as possible, and I expect him to do so.&lt;br/&gt;Several hon. Members&lt;i&gt;rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: Who is next? This is rather nice. I call Sir Michael Neubert.&lt;br/&gt;Sir Michael Neubert: Further to your statement a moment ago, Madam Speaker. Would you
    &lt;col&gt;146&lt;/col&gt;
    include in your review the possibility that, if messages are to be communicated to Members in the Chamber by means of the device you have in mind, they could equally be communicated by an earphone in the ear&amp;#x2014;which, in my opinion, should also be outlawed in this assembly?&lt;br/&gt;Madam Speaker: This is a very difficult matter, but I will look at it.&lt;br/&gt;Mr. Dennis Skinner: I have got an old-fashioned device here: it is a bit of paper. It says on it that the Tory party was bankrupt last year&amp;#x2014;by 19 million quid&amp;#x2014;but it now has a surplus of &amp;#x00A3;40 million. The question is whether anybody will stand up and tell us where the Tories have got it from.&lt;br/&gt;Madam Speaker: I will stand up and tell the hon. Gentleman that the House has had enough of this nonsense.&lt;br/&gt;Several hon. Members&lt;i&gt; rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: I will take only serious points of order from now on.&lt;br/&gt;Mr. David Shaw&lt;i&gt;rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: I have already taken a point of order from the hon. Gentleman, and will not take another.&lt;br/&gt;Mr. Phil Gallie: On a point of order, Madam Speaker.&lt;br/&gt;Madam Speaker: Are you sure that it is a point of order, Mr. Gallie? It is not just something that has just occurred to you?&lt;br/&gt;Several hon. Members&lt;i&gt; rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: Wait a minute.&lt;br/&gt;Several hon. Members&lt;i&gt;rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: Order. Mr. Clifton-Brown has been bobbing up and down. I shall take a point of order from him.&lt;br/&gt;Mr. Geoffrey Clifton-Brown: As we on the Conservative Benches clearly heard the bleeper being operated by the hon. Member for Cunninghame, North (Mr. Wilson), do we have&amp;#x2014;&lt;br/&gt;Madam Speaker: Order. Sit down.&lt;br/&gt;Mr. Kevin McNamara: On a point of order, Madam Speaker. You will remember that a former Member of this House, who is now a Member of the upper House, had a device that enabled him to take part in debates and understand what was going
    &lt;image src=&quot;S6CV0292P0I0081&quot;/&gt;
    &lt;col&gt;147&lt;/col&gt;
    on. Will you in your ruling take particular care for our colleagues who are blind, deaf or disabled in some other way?&lt;br/&gt;Madam Speaker: Indeed.&lt;br/&gt;Mr. David Winnick: Would not your difficulties be eased somewhat, Madam Speaker, if the general election were called now, to ease the pre-election atmosphere?&lt;br/&gt;Madam Speaker: West Bromwich, West has been awaiting me for a long time. I should like it to be called as soon as possible.&lt;br/&gt;Mr. Ian Bruce&lt;i&gt;rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: The hon. Gentleman has already made a point of order. He will resume his seat&amp;#x2014;one point is enough.&lt;br/&gt;Mr. Denis MacShane: On a point of order, Madam Speaker. Very simply, I ask for your guidance. You said earlier that the matter of declarable interests on the Register was not relevant to parliamentary questions. However, the sheet for parliamentary questions says &quot;tick&quot;. So what is the guidance?&lt;br/&gt;Madam Speaker: Of course it does, but I do not expect an hon. Member who is asking a supplementary question to begin with a long preamble declaring his interests. That information is already declared. We would have to extend Question Time to three hours if I were to expect hon. Members to declare their interests before asking a question.&lt;br/&gt;Mr. Ian Bruce: On a point of order, Madam Speaker.&lt;br/&gt;Hon. Members: Sit down.&lt;br/&gt;Madam Speaker: Order. Let me hear the hon. Gentleman, as he is very anxious. He has already made one point of order, so this one must be very important.&lt;br/&gt;Mr. Bruce: I wonder, Madam Speaker, whether you can give some help to a constituency Member. I am trying, on behalf of Labour and Liberal Democrat councillors, to get to the bottom of germ warfare tests that were conducted in my constituency 30 years ago. I have approached Ministers on the matter, but they have told me that they are unable to obtain the advice given to the then Secretary of State for Defence by his scientists on whether those tests were safe.&lt;lb/&gt;
    In Dorset, we cannot discover exactly what happened and who knew what. My point of order is to ask whether it would be possible for Lord Healey, who was Secretary of State for Defence at the time, to examine those papers and to report to me and to the House on what has happened to my constituents.&lt;br/&gt;Madam Speaker: The activities of any Member of the upper House have nothing to do with me. The
    &lt;col&gt;148&lt;/col&gt;
    hon. Gentleman might have thought of the problem&amp;#x2014;which he has faced for a long time&amp;#x2014;rather earlier, and initiated a full Adjournment debate on it, in which he would have received a reply from a Minister.&lt;br/&gt;Mr. Gallie&lt;i&gt;rose&lt;/i&gt;&amp;#x2014;&lt;br/&gt;Madam Speaker: Has the hon. Member already made a point of order?&lt;br/&gt;Mr. Gallie: No, Madam Speaker.&lt;br/&gt;Madam Speaker: Then he must.&lt;br/&gt;Mr. Gallie: Bearing in mind Column 41 of yesterday's &lt;i&gt;Hansard,&lt;/i&gt; the comment on the large sums of money paid to a company with which the hon. Member for Cunninghame, North (Mr. Wilson) is associated, the fact that he has returned to the Chamber, and your earlier comment, Madam Speaker, would it not be in order for him to apologise to the House?&lt;br/&gt;Mr. Wilson: As a small business man, I am very proud of my association with that company. I am also very proud of the fact that, from the day that it was formed, I have both practised and preached openness about every penny that it should receive; if only Conservative Members would practise or preach the same. My association with that company is well known, and it is and always has been registered in the Register of Members' Interests.&lt;lb/&gt;
    What Conservative Members object to so strongly is that a very successful socialist newspaper is operating in that part of Scotland. It has been very influential, and it will continue to be very influential in making the highlands and islands of Scotland a Tory-free zone.&lt;br/&gt;Madam Speaker: Order. The hon. Gentleman should have made the declaration yesterday." title='Points of Order' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/points-of-order'>
    </outline>
    <outline id='1527947' text='BILL PRESENTED'>
      <outline id='1527948' text='Mr. Andrew Welsh, supported by Mr. John McAllion, Mr. James Wallace, Ms Roseanna Cunningham, Mrs. Maria Fyfe and Mr. David Marshall, presented a Bill to make provision about single homeless persons in Scotland; to make reforms of the laws on homelessness, social security and housing benefits; to set up a National Hostels Inspectorate and national standards for care; to make amendments to the Representation of the People Act; to give additional duties to General Practitioners; to amend the duties and powers of local authorities relating to young people in care; to cede to the European Union competence over specific matters relating to housing and homelessness; to outlaw discrimination on the grounds of homelessness; and related matters: And the same was read the First time; and ordered to be read a Second time upon Friday 2 May, and to be printed [Bill 133].' title='SINGLE HOMELESS PERSONS (SCOTLAND)' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/single-homeless-persons-scotland'>
      </outline>
      <outline id='1527949' text="3.48 pm&lt;br/&gt;Mr. Alan Simpson: I beg to move,
      &lt;quote&gt;That leave be given to bring in a Bill to require the Secretary of State to draw up and facilitate the carrying out, over a period of fifteen years, of a programme of action to provide at least 500,000 households per year with a comprehensive package of home insulation and other energy efficiency improvements; and for connected purposes.&lt;/quote&gt;
      In the first two weeks of January 1997, 10,000 more people died than we would normally expect in the period at the beginning of the year. Those deaths coincided with a winter freeze, and they were overwhelmingly cold-related. Although that excessive number might have been extreme, it is difficult to say that it was unusual.&lt;lb/&gt;
      In that context, it is difficult to know whether we should be debating this as a scandal or a tragedy. Those deaths form part of the annual cull of the fuel-cold and old in Britain. They are caused by neglect, and are the price paid by the public for Britain's failure to have a serious programme to challenge and eliminate fuel poverty. The 50,000 avoidable deaths each winter are concentrated among those who have to make the difficult choice between eating and heating during the freeze. One could say, sadly, that at least their dilemma is resolved by death.&lt;lb/&gt;
      The situation is a scandal. Britain has poorer home insulation standards than those set by Scandinavia in 1945&amp;#x2014;more than 50 years ago. Some 8 million households in Britain today are fuel-poor, meaning that more than 15 million people shiver their way through each winter; they shivered through last winter, and they will shiver through next winter and all succeeding winters until we face up to the root cause of the situation&amp;#x2014;the problem of cold homes in this country.&lt;lb/&gt;
      Britain is not indifferent to the problem of the fuel-poor. A plethora of local initiatives make laudable efforts to tackle fuel poverty. A patchwork quilt of Government schemes attempt to do the same, but they are a piecemeal series of fragments, not a coherent policy. The Bill would reclaim the integrity of this House, which once was not afraid to engage in the joined-up thinking that we were then proud to call a housing policy. The Bill does not duck some of the difficult issues involved. It offers a serious programme, with a 15-year commitment to providing 500,000 households a year with a comprehensive package of home insulation and energy-saving materials.&lt;lb/&gt;
      Hon. Members of all parties have been involved in drawing up the Bill. They know that there are real costs involved. We have tried to provide background briefings that do not duck the issues. We know that there would be a net saving to the country over 15 years of more than &amp;#x00A3;3 billion&amp;#x2014;a saving in health care costs, a saving in avoidable housing costs, a saving in the 50 per cent. of wasted energy that pours out of Britain's housing because of inadequate insulation, and a saving in lives. However, the programme has to be sustained on the basis of initial funding to launch it.&lt;lb/&gt;
      To reflect the diversity of those who are behind the Bill, we have tried to offer different ways to fund the programme, so that no party should feel unable to support
      &lt;col&gt;150&lt;/col&gt;
      it. However, we all recognise that the common starting point is that Britain must spend to save&amp;#x2014;to save on health care costs, to save on housing stock and administration costs, to save on environmental pollution, and to save lives. That is necessary to tackle the current scandal.&lt;lb/&gt;
      Britain is alone among European countries in having a long-standing problem of death through hypothermia in winter. In other parts of Europe, while people know that they may die if they are caught outside in a snow blizzard, they do not expect to die in the coldness of their home. I know of no pensioner in the land who looks forward to the bracing experience of shivering to death throughout the winter, but I know many who fear that they will face that reality.&lt;lb/&gt;
      We need to tell those pensioners that the House will tackle the dereliction of their housing experience. The root cause of that is the dereliction of our political obligations. Those derelictions are in the absence of a serious programme to tackle and eliminate fuel poverty.&lt;lb/&gt;
      The financing of the Bill would be an exciting prospect. I have had support from both sides of the House, and the Bill has brought together a gathering of the great and good outside the House. It is important to note that its supporters range from Age Concern to the Child Poverty Action Group, from local authorities to Neighbourhood Energy Action, from the Churches to the chambers of commerce and virtually every environmental campaign group. Each of those supporters expects not that the Bill will become law in the dog days of this Parliament, but that it will set the agenda for the Government who are to come, and the century to come.&lt;lb/&gt;
      The Bill is the declaration of the public expectation of what Parliament has to deliver sooner rather than later. I am pleased to be able to introduce the Bill with the support of hon. Members from all parties. Better still is the recognition that it is a Bill, not for all parties, but for all seasons. It is a Bill to restore to the people the right to enjoy our seasons, not to live in fear of them.&lt;lb/&gt;
      It is a Bill to eliminate fuel poverty and restore to people the right to know that they can face a winter without simply having to pray that they may hibernate through the coldest parts of it. On that basis, I am proud to present the Bill, and I hope that it will be given further platforms until it becomes an Act of Parliament.&lt;lb/&gt;
      &lt;i&gt;Question put and agreed to.&lt;/i&gt;&lt;lb/&gt;
      Bill ordered to be brought in by Mr. Alan Simpson, Mr. Matthew Taylor, Mr. Harry Greenway, Ms Diane Abbott, Mr. Peter Temple-Morris, Mrs. Margaret Ewing, Mr. Llew Smith, Mr. Cynog Dafis, Sir Robert Hicks, Mr. John McAllion and Sir Andrew Bowden." title='Warm Homes and Energy Conservation (Fifteen Year Programme)' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/warm-homes-and-energy-conservation'>
      </outline>
      <outline id='1527950' text='Mr. Alan Simpson accordingly presented a Bill to require the Secretary of State to draw up and facilitate the carrying out, over a period of fifteen years, of a programme of action to provide at least 500,000 households per year with a comprehensive package of home insulation and other energy efficiency improvements; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Tuesday 18 March, and to be printed [Bill 132].' title='WARM HOMES AND ENERGY CONSERVATION (FIFTEEN YEAR PROGRAMME)' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/warm-homes-and-energy-conservation-1'>
      </outline>
      <outline id='1527951' text='&lt;i&gt;Resolved,&lt;/i&gt;
      &lt;quote&gt;Deductions in respect of annuity payments&lt;/quote&gt;
      &lt;quote&gt;That provision may be included in the Finance Bill about payments made in respect of annuities by companies carrying on life assurance business.&amp;#x2014;&lt;i&gt;[Mr. Brandreth.]&lt;/i&gt;&lt;/quote&gt;&lt;br/&gt;&lt;i&gt;Resolved,&lt;/i&gt;
      &lt;quote&gt;Transactions in futures and options etc&lt;/quote&gt;
      &lt;quote&gt;That provision may be included in the Finance Bill about the taxation of profits and gains arising from a transaction involving the disposal of&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a) rights and obligations under a commodity or financial futures contract; or&lt;/li&gt;
      &lt;li&gt;(b) a traded or financial option or an option relating to such a contract.&amp;#x2014;&lt;i&gt;[Mr. Brandreth.]&lt;/i&gt;&lt;/li&gt;
      &lt;/ol&gt;' title='FINANCE BILL [WAYS AND MEANS]' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/finance-bill-ways-and-means'>
      </outline>
    </outline>
    <outline id='1527952' text='Orders of the Day'>
      <outline id='1527953' text='&lt;i&gt;As amended (in the Committee and in the Standing Committee), considered.&lt;/i&gt;&lt;br/&gt;3.57 pm&lt;br/&gt;Mr. Edward Leigh: On a point of order, Madam Speaker. By long-standing practice, you have the right to reject or accept new clauses and amendments for debate. I seek your guidance. You will have noticed that this morning I tabled new clause 7 for debate. It was signed by more hon. Members than any of the others&amp;#x2014;50, I think&amp;#x2014;and was the only one with all-party support. The new clause concerns transferable allowances, which are of vital concern.&lt;lb/&gt;
      From the provisional selection list, I see that you decided not to select my new clause. Without asking you to give your reasons, is it too late to ask you to reconsider, or to give me guidance on when I can raise the matter? From reading the list of amendments that you have selected for debate, it seems to me that there will be no opportunity to debate transferable allowances on the marriage care allowance issue on Report. If that is not possible, could I raise the matter on Third Reading?&lt;lb/&gt;
      I had hoped that, when replying, the Minister would agree that I had made a good point and say that he should produce a report. I am anxious to get the matter on the record and for there to be some debate on this important issue.&lt;br/&gt;Madam Speaker: It is far too late for me to reconsider. I gave full consideration to the new clause this morning. The hon. Gentleman might try to raise the issue on Third Reading if he so wishes. I regret the fact that he has been disappointed, but he has answered the point of order himself: I do not give reasons for non-selection.' title='Finance Bill' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/finance-bill'>
      </outline>
    </outline>
    <outline id='1527954' text='New clause 8'>
      <outline id='1527955' text="&lt;quote&gt;'.&amp;#x2014;(1) In section 437 of the Taxes Act 1988 (extent to which payments in respect of new annuities are to be treated as charges on income), for subsections (1A) and (1B) there shall be substituted the following subsection&amp;#x2014;&lt;/quote&gt;
      &lt;quote&gt;&quot;(1A) In the computation, otherwise than in accordance with the provisions applicable to Case I of Schedule D, of the profits for any accounting period of a company's life assurance business, new annuities paid by the company in that period shall be brought into account by treating an amount equal to the income limit for that period as a sum disbursed as expenses of management of the company for that period.&quot;&lt;/quote&gt;
      &lt;quote&gt;(2) In subsection (1C) of that section (interpretation of section), after &quot;this section&quot; there shall be inserted &quot;(but subject to subsections (1CA) to (1CD) below)&quot;; and after that subsection there shall be inserted the following subsections&amp;#x2014;&lt;/quote&gt;
      &lt;quote&gt;&quot;(1CA) Where a new annuity ('the actual annuity') is a steep-reduction annuity, the income limit for an accounting period of the company paying the annuity shall be computed for the purposes of this section as if&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a)the contract providing for the actual annuity provided instead for the annuities identified by subsections (1CB) and (ICC) below; and&lt;/li&gt;
      &lt;li&gt;(b)the consideration for each of those annuities were to be determined by the making of a just and reasonable apportionment of the consideration for the actual annuity.&lt;/li&gt;
      &lt;/ol&gt;&lt;br/&gt;&lt;quote&gt;(ICB) The annuities mentioned in subsection (1CA)(a) above are&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a)an annuity the payments in respect of which are confined to the payments in respect of the actual annuity that fall to be made before the earliest time for the making in respect of the actual annuity of a reduced payment such as is mentioned in section 437A(1)(c); and&lt;/li&gt;
      &lt;li&gt;(b)subject to subsection (1CC) below, an annuity the payments in respect of which are all the payments in respect of the actual annuity other than those mentioned in paragraph (a) above.&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;(1CC) Where an annuity identified by paragraph (b) of subsection (1CB) above ('the later annuity') would itself be a steep&amp;#x2014;reduction annuity, the annuities mentioned in subsection (1CA)(a) above&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a) shall not include the later annuity; but&lt;/li&gt;
      &lt;li&gt;(b) shall include, instead, the annuities which would be identified by subsection (1CB) above (with as many further applications of this subsection as may be necessary for securing that none of the annuities mentioned in subsection (1CA)(a) above is a steep&amp;#x2014;reduction annuity) if references in that subsection to the actual annuity were references to the later annuity.&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;(1CD) Subsections (1CA) to (1CC) above shall be construed in accordance with section 437A.&quot;&lt;/quote&gt;
      &lt;quote&gt;(3) After that section there shall be inserted the following section&amp;#x2014;&lt;/quote&gt;
      &lt;quote&gt;&lt;i&gt;&quot;Meaning of 'steep-reduction annuity' etc&lt;/i&gt;&lt;/quote&gt;
      &lt;quote&gt;437A.&amp;#x2014;(1) For the purposes of section 437 an annuity is a steep&amp;#x2014;reduction annuity if&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a)the amount of any payment in respect of the annuity (but not the term of the annuity) depends on any contingency other than the duration of a human life or lives;&lt;/li&gt;
      &lt;li&gt;(b)the annuitant is entitled in respect of the annuity to payments of different amounts at different times; and&lt;/li&gt;
      &lt;li&gt;those payments include a payment ('a reduced payment') of an amount which is substantially smaller than the amount of at least one of the earlier payments in respect of that annuity to which the annuitant is entitled.&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;(2) Where there are different intervals between payments to which an annuitant is entitled in respect of any annuity, the question whether or not the conditions in subsection (1)(b) and(c) above are satisfied in the case of that annuity shall be determined by assuming&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a)that the annuitant's entitlement, after the first payment, to payments in respect of that annuity is an entitlement to payments at yearly intervals on the anniversary of the first payment; and&lt;/li&gt;
      &lt;li&gt;(b)that the amount to which the annuitant is assumed to be entitled on each such anniversary is equal to the annuitant's assumed entitlement for the year ending with that anniversary.&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;(3) For the purposes of subsection (2) above an annuitant's assumed entitlement for any year shall be determined as follows&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a)the annuitant's entitlement to each payment in respect of the annuity shall be taken to accrue at a constant rate during the interval between the previous payment and that payment; and&lt;/li&gt;
      &lt;li&gt;(b)his assumed entitlement for any year shall be taken to be equal to the aggregate of the amounts which, in accordance with paragraph (a) above, are treated as accruing in that year.&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;(4) In the case of an annuity to which subsection (2) above applies, the reference in section 437(1CB)(a) to the making of a reduced payment shall be construed as if it were a reference to the making of a payment in respect of that annuity which (applying subsection (3)(a) above) is taken to accrue at a rate that is substantially less than the rate at which at least one of the earlier payments in respect of that annuity is taken to accrue.&lt;/quote&gt;
      &lt;col&gt;154&lt;/col&gt;
      &lt;quote&gt;(5) Where&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a) any question arises for the purposes of this section whether the amount of any payment in respect of any annuity&amp;#x2014;&lt;/li&gt;
      &lt;ol&gt;&lt;li&gt;(i) is substantially smaller than the amount of, or&lt;/li&gt;
      &lt;li&gt;(ii) accrues at a rate substantially less than, an earlier payment in respect of that annuity, and&lt;/li&gt;
      &lt;/ol&gt;
      &lt;li&gt;(b) the annuitant or, as the case may be, every annuitant is an individual who is beneficially entitled to all the rights conferred on him as such an annuitant,&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;that question shall be determined without regard to so much of the difference between the amounts or rates as is referable to a reduction falling to be made as a result of the occurrence of a death.&lt;/quote&gt;
      &lt;quote&gt; (6) Where the amount of any one or more of the payments to which an annuitant is entitled in respect of an annuity depends on any contingency, his entitlement to payments in respect of that annuity shall be determined for the purposes of section 437(1CA) to (1CC) and this section according to whatever (applying any relevant actuarial principles) is the most likely outcome in relation to that contingency.&lt;/quote&gt;
      &lt;quote&gt;(7) Where any agreement or arrangement has effect for varying the rights of an annuitant in relation to a payment in respect of any annuity, that payment shall be taken, for the purposes of section 437(1CA) to (1CC) and this section, to be a payment of the amount to which the annuitant is entitled in accordance with that agreement or arrangement.&lt;/quote&gt;
      &lt;quote&gt; (8) References in this section to a contingency include references to a contingency that consists wholly or partly in the exercise by any person of any option.&quot;&lt;/quote&gt;
      &lt;quote&gt;(4) Section 434B(2) of that Act (treatment of annuities paid by an insurance company) shall cease to have effect and accordingly&amp;#x2014;&lt;/quote&gt;
      &lt;ol&gt;
      &lt;li&gt;(a)in section 76(2A)(b) of that Act (limit on expenses of management of insurance companies), the word &quot;and&quot; shall be inserted at the end of sub-paragraph (ii), and sub-paragraph (iv) (together with the word &quot;and&quot; immediately preceding it) shall be omitted; and&lt;/li&gt;
      &lt;li&gt;(b)in section 337(2B) of that Act, for &quot;the references in sections 338(2) and 434B(2)&quot; there shall be substituted &quot;the reference in section 338(2)&quot;.&lt;/li&gt;
      &lt;/ol&gt;
      &lt;quote&gt;(5) In paragraph 9B of Schedule 19AC to that Act (subsection (3) inserted in section 434B in relation to overseas life insurance companies), for the words from the beginning to &quot;An&quot; there shall be substituted&amp;#x2014;&lt;/quote&gt;
      &lt;quote&gt;&quot;9B. The following section shall be treated as inserted after section 434A&amp;#x2014;&lt;/quote&gt;
      &lt;quote&gt;&lt;i&gt;Treatment of annuities &lt;/i&gt;434AA. An&quot;.&lt;/quote&gt;
      &lt;quote&gt;(6) In sub-paragraph (l) of paragraph 16 of Schedule 7 to the Finance Act 1991 (which makes transitional provision for annuities under contracts made in accounting periods beginning before 1st January 1992), for the words before paragraph (a) there shall be substituted&amp;#x2014;&lt;/quote&gt;
      &lt;quote&gt;&quot;(1) In the computation, otherwise than in accordance with the provisions applicable to Case I of Schedule D, of the profits for any accounting period of an insurance company's life assurance business, an amount equal to the lesser of the following amounts shall be treated (if it is not nil) as a sum disbursed as expenses of management of the company for that period, that is to say&amp;#x2014;&quot;.&lt;/quote&gt;
      &lt;quote&gt;(7) Subsections (1) and (4) to (6) above have effect in relation to accounting periods beginning after 5th March 1997.&lt;/quote&gt;
      &lt;quote&gt;(8) Subsections (2) and (3) above have effect in relation to accounting periods ending on or after 5th March 1997 but do not affect the computation of the capital elements contained in any annuity payments made before that date.'.&amp;#x2014;&lt;i&gt;[Mr. Jack.]&lt;/i&gt;&lt;/quote&gt;&lt;br/&gt;&lt;i&gt;Brought up, and read the First time.&lt;/i&gt;&lt;br/&gt;4 pm&lt;br/&gt;The Financial Secretary to the Treasury (Mr. Michael Jack): I beg to move, That the clause be read a Second time.&lt;br/&gt;Madam Speaker: With this it will be convenient to discuss Government amendments Nos. 20 and 21.&lt;br/&gt;Mr. Jack: It is important to give the House some reasons why the new clause has appeared at a relatively late stage. That happened simply because it was only literally in the past few weeks that the Inland Revenue discovered what was going on. Tax avoiders cannot expect some sort of close season during the passage of a Finance Bill when, having discovered their tricks, we will not act to stop them.&lt;lb/&gt;
      A sharp-eyed inspector of taxes worked out that something funny was going on after investigating parts of a banks tax affairs at which the company would not have expected him to look, and thereby discovered the basis of the new clause. His action clearly demonstrated the benefit of our &quot;spend to save&quot; initiative.&lt;lb/&gt;
      The trick that lies at the heart of the matter involves the bank buying a series of annuities from a life insurance company that are in theory to last for the life of bank employees in their 20s, but the pattern of payments is structured so that the capital paid is returned with interest within five years and after that a trivial amount is paid to keep the annuity going.&lt;lb/&gt;
      The tax rules on annuities have the result that nearly all the payment is classed as income, because annuities on the lives of younger people are deemed to consist mostly of income. If the person holding an oddly structured annuity of that sort were an individual, the effect of the rules would be to charge him to tax on far more income than was justified, so an individual annuitant would not take out such an annuity.&lt;lb/&gt;
      When a bank holds the annuity, because of the way in which it is taxed as a trader, it makes no difference to it what part of the annuity is treated under the tax rules as income, as the rules do not affect banks; but the insurance company gets relief for all the payments treated by the rules as income when in commercial reality they are a return of capital.&lt;lb/&gt;
      The new clause proposes that, when an annuity contract involves a substantial reduction in the amount of an annuity payment at any time, the annuity is treated for the tax purposes of the life insurance company as if it were two separate annuities, one short term with high payments and one long term with low payments. That will ensure that the life company gets relief for the income return inherent in the contract, but no more.&lt;lb/&gt;
      The new clause applies to payments made on or after 5 March 1997, when we announced the new measures. We thought long and hard before confining the measure to future payments. The House is rightly wary of retrospective legislation imposing a charge to tax on payments that have already been made, and we felt it right that in, for example, the leasing clauses, we applied the new rules only to payments made after Budget day; but, if companies continue to abuse the tax system in such blatant ways, I cannot say that we would never introduce
      &lt;col&gt;156&lt;/col&gt;
      retrospective legislation in appropriate cases. This case is on the borderline, and I have given it the benefit of the doubt, but the message to tax avoiders is: beware.&lt;br/&gt;Mr. Alan Milburn: I am grateful to the Minister for that explanation and for providing an earlier briefing on the matter. I add my congratulations to his sharp-eyed inspector of taxes on spotting the abuse.&lt;lb/&gt;
      As I understand it, the new clause is in essence intended to prevent an abuse which has recently developed whereby a life insurance company gets favourable tax treatment by using a financial trading company, such as a bank, as the recipient of front-end loaded annuity payments. The tax position of the financial trader, the bank, means that it is taxed only on the difference between the amount paid for the annuities and the amount received from them, rather than on the total income.&lt;lb/&gt;
      The insurance company gains by making large early payments on an annuity to reduce its overall tax liability. It treats the payments as income, even though they are in effect capital, as they involve the payment of the bulk of the value of the annuity. That is, in essence, the nature of the abuse. Both the bank and the insurance company gain from the device and the only loser is the Exchequer or the taxpayer.&lt;lb/&gt;
      Although new clause 8 seems to be a sensible measure, I have several questions. Can the Minister say how many companies are taking advantage of the arrangement? Am I right in thinking that one particular insurance company has been at the forefront of this avoidance scam? What does he estimate the losses to the Exchequer to have been? What is the potential loss? &lt;i&gt;[Interruption.]&lt;/i&gt;&lt;br/&gt;Madam Speaker: Order. More electronic devices. There is a ruling about that. Will the hon. Member for Sheffield, Attercliffe (Mr. Betts) remove both himself and the device until it has stopped?&lt;br/&gt;Mr. Milburn: We seem to be having a problem with electronic devices.&lt;lb/&gt;
      What will the introduction of new clause 8 mean in terms of protection for the Exchequer? I have a question about the means that the Government have chosen to close off the abuse. It is being stopped, as I understand it, by two means&amp;#x2014;most notably, by deeming annuity payments to be management expenses of insurance companies rather than charges, as, historically and economically, they have always been regarded. Insurance companies have more flexibility in respect of what they can do with surplus charges than with excess management expenses. For example, where there are surplus charges in an insurance company's purchase annuity business, the loss can be surrendered against profits in another part of the group. Although I cannot think of an example off the top of my head of an innocent insurance company that could be adversely affected by new clause 8, theoretically there could be. What consideration did the Minister give to targeting the abuse more precisely rather than changing the overall basis on which annuities rank for tax relief in insurance companies?&lt;lb/&gt;
      We must take particular care in dealing with insurance, because the Minister knows as well as I do that the insurance industry is a key part of the UK's financial services sector, which contributes about 18 per cent. of our gross domestic product and employs hundreds of
      &lt;image src=&quot;S6CV0292P0I0086&quot;/&gt;
      &lt;col&gt;157&lt;/col&gt;
      thousands of people. It is an important sector of the economy, and has been successful in recent years, both domestically and internationally. When we take action that affects the sector, wherever possible we must ensure that we are helping, rather than hindering, the industry's efforts. I seek assurances on that point.&lt;lb/&gt;
      I also seek an assurance that new clause 8 will have no repercussions for the many members of the public who take out ordinary annuities. I appreciate that the device that new clause 8 seeks to close down is not one that ordinary individuals use, but it is important that the Minister takes the opportunity of giving an absolute assurance to people taking out ordinary annuities that they will not be affected. Ordinary policyholders should not suffer as a result of misbehaviour in an isolated part of the corporate sector.&lt;lb/&gt;
      In essence, we welcome the measure and the prior briefings that the Minister was able to afford us on the matter. I simply seek reassurances on the points that I raised.&lt;br/&gt;Mr. Jack: I am grateful to the hon. Member for Darlington (Mr. Milburn) for the way in which he supported new clause 8. His support for the sharp-eyed revenue inspector will be warmly welcomed; I add mine.&lt;lb/&gt;
      The hon. Gentleman asked about the number of companies that we have identified. So far, one example has been found and the action proposed in new clause 8 will save up to &amp;#x00A3;100 million in tax loss alone. We estimate that the tax loss at this moment probably amounts to about &amp;#x00A3;20 million; but, if we had not taken action, some &amp;#x00A3;1.5 billion in tax might have been at risk.&lt;br/&gt;Mr. Milburn: The Minister says that one company was taking advantage of this tax avoidance scam. Does he know whether the industry at large was contemplating following that company's initiative?&lt;br/&gt;Mr. Jack: In the course of investigating one company's set of books, the Inland Revenue discovered the problem. Obviously, the Revenue will look at other examples if they come to light; in any case, we acted quickly, and the new clause should be a deterrent to others that might seek to follow suit. I cannot guarantee that no other such attempts were in the pipeline at the time of the first discovery, but as we moved swiftly&amp;#x2014;within weeks of the discovery&amp;#x2014;to close the loophole, I hope that we have ring-fenced this anti-avoidance measure.&lt;lb/&gt;
      The hon. Gentleman went on to ask about the mechanisms involved in ensuring that the new clause will put a stop to this sort of tax avoidance. It is important to distinguish between the ring fencing, as a result of this work, of the losses in this area of life assurance, to prevent them from being used elsewhere in a company, and another more specific element. I hope that the hon. Gentleman has a copy of the notes on clauses&amp;#x2014;if he does not, I apologise. Paragraph 31 shows that the object of the proposal&amp;#x2014;to divide the annuity arrangement into two and effectively to increase the amount in repayment, to capital as opposed to income&amp;#x2014;is subtly to remove the beneficial effects of this type of activity in respect of the I minus E calculation. That calculation is at the heart of the way life assurance companies are taxed on their annuity business. How the avoidance is rendered unattractive is described in some detail in the notes on clauses.&lt;lb/&gt;
      &lt;col&gt;158&lt;/col&gt;
      The hon. Gentleman asked whether the innocent, at company or individual level, are protected. I can assure him that companies that are not seeking to contrive such arrangements will not, to the best of our knowledge, be affected. One of the difficulties of this sort of anti-avoidance work is that we cannot be certain how many people have attempted avoidance. In this case, we were lucky enough to have had a sharp-eyed inspector who spotted the problem, and we hope that the new clause will be a shot across the bows of anyone contemplating a variation on the theme. Nevertheless, I cannot guarantee that some who may look innocent but are actually up to their tricks will be caught by the measure. Still, the new clause, and the Opposition's strong support for it, will send out a powerful message.&lt;lb/&gt;
      The hon. Gentleman asked, finally, whether ordinary individuals with annuities will be affected in any way. The answer is no.&lt;br/&gt;&lt;i&gt;Question put and agreed to.&lt;/i&gt;&lt;br/&gt;&lt;i&gt;Clause read a Second time, and added to the Bill.&lt;/i&gt;" title='ANNUITY BUSINESS OF INSURANCE COMPANIES' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/annuity-business-of-insurance-companies'>
      </outline>
    </outline>
    <outline id='1527956' text='New clause 9'>
      <outline id='1527957' text="&lt;quote&gt;'. In section 410 of the Taxes Act 1988 (group relief not available in certain cases including those where a person, either alone or with connected persons, controls 75&amp;#x0025; or more of the voting rights in a company owned by a consortium), in the definition of &quot;connected persons&quot; in subsection (5) after &quot;in accordance with section 839&quot; there shall be inserted &quot;but as if subsection (7) of that section (persons acting together to control a company are connected) were omitted&quot;.'.&amp;#x2014;&lt;i&gt;[Mr. Jack.]&lt;/i&gt;&lt;/quote&gt;&lt;br/&gt;&lt;i&gt;Brought up, and read the First time.&lt;/i&gt;&lt;br/&gt;Mr. Jack: I beg to move, That the clause be read a Second time.&lt;lb/&gt;
      I undertook to introduce the new clause in Committee in response to a new clause tabled by my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg), to whom I am grateful for his assiduous efforts. The point that my hon. Friend and others have made to me concerned the genuine and potentially damaging uncertainty created among those considering whether to enter into joint ventures through consortium companies. Consortiums are an important and valuable business tool. That is reflected in the relief, similar to group relief, made available to certain consortiums. That relief must be protected by anti-avoidance rules.&lt;lb/&gt;
      The concern is that, following a Court of Appeal decision last year, one of those rules might deny relief solely because members of a consortium enter into a shareholders' or joint venture agreement as a normal part of their commercial activities. We have to take care here, because we are, after all, dealing with an anti-avoidance provision&amp;#x2014;which is why I could not accept my hon. Friend's new clause in Committee.&lt;lb/&gt;
      We have, however, found a way of removing the uncertainty from those entering these sorts of agreements without putting the Exchequer at additional risk. That is what the new clause does; I commend it to the House.&lt;br/&gt;Mr. Barry Legg: I am grateful to my right hon. Friend the Minister for introducing new clause 9 to deal with potential problems in respect of consortium relief. The new clause will deal
      &lt;image src=&quot;S6CV0292P0I0087&quot;/&gt;
      &lt;col&gt;159&lt;/col&gt;
      with the concerns that I sought to address with the new clause that I tabled in Committee. His efforts will help a number of major consortiums and their shareholders to ensure that their funds are effectively and properly used.&lt;lb/&gt;
      I should be grateful if my right hon. Friend could offer some guidance in respect of the position of consortiums and their shareholders during 1996. I understand that the amendment to the legislation will be effective from Royal Assent. Can he tell me whether, following the decision in Steele &lt;i&gt;v.&lt;/i&gt; EVC International NV, the Inland Revenue is likely to interpret the existing legislation in a way that would prejudice the 1996 consortium relief claims that might arise under the bona fide commercial arrangements which he has now put in place? Can he also assure me that this relief will be available in 1997 and in the future?&lt;br/&gt;4.15 pm&lt;br/&gt;Mr. Milburn: This important new clause is intended to clarify the rules governing consortium relief. Again, I am grateful to the Minister for alerting us to the background to the issue, which was raised in Committee by the hon. Member for Milton Keynes, South-West (Mr. Legg), who tabled his own new clause. At the time, the Minister expressed concern about that new clause being potentially open to abuse, and he gave a commitment in Committee that he would come back with a Government new clause. He has honoured that commitment today.&lt;lb/&gt;
      The new clause seeks to clear up the tax rules on consortium relief following the May 1996 Court of Appeal decision in the case of Steele &lt;i&gt;v.&lt;/i&gt; EVC International NV which, by providing a wide definition of connected persons, effectively restricted group relief. Understandably, the court's decision has given rise to some concern among commercial organisations that enter into joint venture agreements. It is clear that such agreements are increasingly becoming par for the course: one thinks particularly of the role of consortiums in relation to private finance initiative projects, and one would expect the influence of such consortiums to increase in future. That pooling by companies&amp;#x2014;sometimes of very different backgrounds&amp;#x2014;of expertise and resources is a sensible way of proceeding and reflects the trend whereby the modern company does not try to provide all services by itself, but instead contracts in, buys out, or works together with other like-minded companies on a specific project.&lt;lb/&gt;
      To date, the tax treatment has been to offer participating companies tax relief on losses from the consortium company in which they hold shares according to the proportion of their shareholding in the consortium company. That sort of arrangement is especially important in the context of long-term and major infrastructure projects, which may involve considerable initial investment and, therefore, early losses. The Court of Appeal decision seemed to say that, where there was a means of participating companies' governing the policy of the joint venture company, they would lose their right to tax relief because they could be defined as connected persons. Existing tax rules prohibit relief where certain types of arrangements are entered into: for example, where someone and others&amp;#x2014;connected persons&amp;#x2014;are acting together to obtain at least 75 per cent. of the votes in the joint venture or consortium company.&lt;lb/&gt;
      &lt;col&gt;160&lt;/col&gt;
      The hon. Member for Milton Keynes, South-West said in Committee that some people in the City were advising companies not to enter into joint venture agreements, given the Court of Appeal ruling and the subsequent advice issued by the Inland Revenue in December 1996. I do not know to what extent that is happening, but, obviously, erecting significant new obstacles to legitimate commercial activity is a matter of very serious concern. I believe that the Minister has recognised the concerns, and proposes by means of the new clause to remove the uncertainty by eliminating the acting together rules from the particular arrangements test in which they are to be used.&lt;lb/&gt;
      I should be grateful if the Minister would clarify some important points about the operation of new clause 9. What is the object of the clause, and what arrangements will be regarded as outside the new criteria for gaining tax relief? In what regard does he believe the existing rules have proved so deficient that they have deterred potential joint venture arrangements? Obviously, it would be a matter of concern if important projects had been deterred in any way because of the operation of the rule, especially in the light of the Court of Appeal decision and the subsequent Revenue guidance in December 1996.&lt;lb/&gt;
      How long have the Government been aware of the deficiencies in the current rules? Have they responded to specific representations that have been made during the few months since the Court of Appeal judgment and the issue of the Inland Revenue guidance?&lt;lb/&gt;
      Perhaps the Minister will answer two significant points on the new clause when he replies to this short debate. First, can he give us an idea of the cost of the measure in a full year&amp;#x2014;has the Revenue gauged the implications for the Exchequer? Secondly, will he give some assurances that the changes to group relief structures will not result in new abuses? If we close loopholes to encourage productive investment, it is important that taxpayers receive an assurance that their interests are properly looked after.&lt;br/&gt;Mr. Jack: The hon. Gentleman has posed me six questions, but I hope that he will forgive me if I respond first to my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg), who asked a specific question. The change will have effect from the date of Royal Assent, but the Inland Revenue will not seek to argue that a shareholder agreement might prevent consortium relief on the ground of acting together for any open case.&lt;lb/&gt;
      The hon. Member for Darlington (Mr. Milburn) asked about the object of the new clause. I hope that my introductory remarks, and my comments in Committee, have shown what it is about. The new clause resulted from uncertainty created by the Steele &lt;i&gt;v.&lt;/i&gt; EVC International NV judgment; we have sought to end that uncertainty.&lt;lb/&gt;
      The hon. Member for Darlington asked about the existing rules. I have made it clear that we wished, not to undermine the existing avoidance rules, but merely to clarify the operation of consortium relief in exactly the terms that he has used.&lt;lb/&gt;
      The hon. Member for Darlington asked how long we had been aware of deficiencies in the current rules. Following the decision in the Steele &lt;i&gt;v.&lt;/i&gt; EVC International NV case, we received representations about whether that
      &lt;image src=&quot;S6CV0292P0I0088&quot;/&gt;
      &lt;col&gt;161&lt;/col&gt;
      form of acting together conflicted with consortium relief, and that effectively gave rise to the uncertainty that the hon. Gentleman expressed.&lt;lb/&gt;
      The Inland Revenue issued its tax bulletin in December 1996 to try to reassure those who had doubts following the Steele &lt;i&gt;v.&lt;/i&gt; EVC International NV court decision, but that alone was not enough to provide reassurance, although in our view the position was clear. Matters were brought to a head when my hon. Friend the Member for Milton Keynes, South-West proposed his own legislative solution, which we subsequently refined into the new clause.&lt;lb/&gt;
      I cannot answer questions about cost. We have merely clarified the use of an existing relief. We are not creating any new opportunities; instead, we are merely allowing that which would normally have carried on within the existing curtilage of the law. We are not creating new opportunities. We are merely clarifying the operation of the existing relief.&lt;lb/&gt;
      I was asked, finally, whether these changes occasioned the opportunity for new abuses. With respect, that was why we targeted the new clause precisely so as to ensure that we hung on to the proper anti-avoidance measures that are part and parcel of the arrangements that we are discussing, but without disrupting the proper use of the consortium reliefs to which the hon. Gentleman and my hon. Friend have rightly attested.&lt;br/&gt;&lt;i&gt;Question put and agreed to.&lt;/i&gt;&lt;br/&gt;&lt;i&gt;Clause read a Second time, and added to the Bill.&lt;/i&gt;" title='CONSORTIUM CLAIMS FOR GROUP RELIEF' type='link' url='http://hansard.millbanksystems.comhttp://hansard.millbanksystems.com/commons/1997/mar/11/consortium-claims-for-group-relief'>
      </outline>
    </outline>
    <outline id='1527958' text='New clause 10'>
      <outline id='1527959' text="'.&amp;#x2014;(1) After section 127 of the Taxes Act 1988 there shall be inserted the following section&amp;#x2014;&lt;br/&gt;&lt;i&gt;&quot;Futures and options: transactions with guaranteed returns&lt;/i&gt;&lt;br/&gt;127A. Schedule 5AA (which makes provision for the taxation of the profits and gains arising from transactions in futures and options that are designed to produce guaranteed returns) shall have effect.&quot;&lt;br/&gt;(2) After Schedule 5 to that Act there shall be inserted, as Schedule 5AA to that Act, the Schedule set out in Schedule &lt;i&gt;(Futures and options: taxation of guaranteed returns)&lt;/i&gt; to this Act.&lt;br/&gt;(3) In section 128 of that Act (profits arising from commodity and financial futures etc. to be taxed only under the provisions relating to chargeable gains)&amp;#x2014;
      &lt;ol&gt;
      &lt;li&gt;(a) after the word &quot;which&quot;, where it first occurs, there shall be inserted &quot;is not chargeable to tax in accordance with Schedule 5AA and&quot;; and&lt;/li&gt;
      &lt;li&gt;(b) for &quot;that Schedule&quot; there shall be substituted &quot;Schedule D&quot;.&lt;/li&gt;
      &lt;/ol&gt;&lt;br/&gt;(4) In section 399 of that Act (withdrawal of loss relief for losses from dealing in futures etc.), after subsection (1) there shall be inserted the following subsection&amp;#x2014;&lt;lb/&gt;
      &quot;(1A) Subsection (1) above does not apply to a loss arising from a transaction to which Schedule 5AA applies.&quot;&lt;br/&gt;(5) In section 469(9) of that Act (sections 686 and 687 disapplied in relation to unauthorised unit trusts), at the end there shall inserted &quot;except as respects income to which section 686 is treated as applying by virtue of paragraph 7 of Schedule 5AA.&quot;&lt;br/&gt;(6) Subject to subsection (7) below, this section and Schedule &lt;i&gt;(Futures and options: taxation of guaranteed returns)&lt;/i&gt; to this Act shall have effect, and be deemed to have had effect, for chargeable periods ending on or after 5th March 1997 in relation to profits and gains realised, and losses sustained, on or after that date.
      &lt;col&gt;162&lt;/col&gt;
      &lt;quote&gt;(7) In relation to profits and gains realised, and losses sustained, on or after 5th March 1997, paragraph 1(6) and (7) of the Schedule 5AA to the Taxes Act 1988 (rule against double counting) inserted by this section shall be deemed to have had effect for chargeable periods beginning before that date (as well as for those beginning on or after that date).'.&amp;#x2014;&lt;i&gt;[Mrs. Angela Knight.]&lt;/i&gt;&lt;/quote&gt;&lt;br/&gt;&lt;i&gt;Brought up, and read the First time.&lt;/i&gt;&lt;br/&gt;The Economic Secretary to the Treasury (Mrs. Angela Knight): I beg to move, That the clause be read a Second time.&lt;br/&gt;Madam Speaker: With this it will be convenient to discuss Government new schedule 1&amp;#x2014;&lt;i&gt;Futures and options: Taxation of guaranteed returns.&lt;/i&gt;&lt;br/&gt;Mrs. Knight: The purpose of the new clause and the associated schedule is to counter an avoidance undertaken by the use of transactions in derivatives that produce a guaranteed return on investments.&lt;lb/&gt;
      The avoidance devices can take many forms, but essentially they turn income into capital gains. The background note to the explanatory note gives an example of an avoidance device that the new clause covers. It is called a &quot;box spread&quot;, and it uses four options that are related to the FTSE 100 index. We first learned of the use of this avoidance device last summer. It was being used by an authorised unit trust. The Association of Unit Trusts and Investment Funds responded by suggesting that a change should be made to the accounting rules in the relevant statement of recommended practice&amp;#x2014;or SORP, for short&amp;#x2014;to prevent this abuse. We accepted the association's assurances.&lt;lb/&gt;
      Evidence has come to light, however, that the avoidance device was being used by others. For the moment, we shall keep faith with the unit trust industry's assurances that its SORP will be effective in countering any use of the device by authorised unit trusts. For others, the new clause will apply only where there is a scheme or an arrangement involving two or more transactions that is designed to produce a guaranteed return from the disposal of one or more futures or options, and only if that return is in substance similar to interest. It will apply from 5 March. I commend the new clause and associated schedule to the House.&lt;br/&gt;Mr. Mike O'Brien: We welcome the new clause as it will close a loophole. We accept many of the points that the Economic Secretary has made. There remain, however, some questions, some of them technical and others that are broader. Perhaps I should start with the broad questions.&lt;lb/&gt;
      First, how much will be saved by the implementation of the new clause? Is there some concern that the Government may be faced with the development of further avoidance techniques? What steps are the Government taking to prevent the similar exploitation of the different tax treatments of various financial instruments? We wish to be reassured that the Government have an overall strategy and that we are not merely waiting for some clever tax specialist to find a new angle to exploit. We hope that the Government have a strategy, by the use of which they will get ahead of the tax avoidance industry and ensure that revenue is protected.&lt;lb/&gt;
      &lt;image src=&quot;S6CV0292P0I0089&quot;/&gt;
      &lt;col&gt;163&lt;/col&gt;
      Given the importance of the City and of the financial instruments that concern us, what steps are the Government taking to ensure that bona fine business does not suffer as a result of the misbehaviour of some? Those are some of the broader questions that we wish to raise.&lt;lb/&gt;
      As the Economic Secretary says, the new clause is aimed at counteracting an avoidance device that effectively turns interest coming to capital gains into something that may be more favourably taxed. As the House will know, futures and options are financial instruments that are used by companies and individuals to manage risk, and increasingly financial risks. For example, a metal-bashing company in the midlands may purchase an option contract on the London metal exchange to protect itself against unfavourable price changes in key raw materials. UK tax law treats futures and options as capital assets when they are in the hands of taxpayers who are not financial traders&amp;#x2014;not banks and the like. Therefore, if the midlands company exercised or sold the contract and made a gain, it would be taxed as receiving a capital gain. Similarly, a loss on the contract would be taxed as a capital loss.&lt;lb/&gt;
      4.30 pm&lt;lb/&gt;
      The abuse occurs when a taxpayer&amp;#x2014;usually a cash-rich taxpaying company&amp;#x2014;purchases a specially constructed financial derivative in favour of a usually higher-yielding conventional deposit. Such arrangements may not be abusive if the financial derivative exposes the purchasing company to the usual risks inherent in such instruments. However, the Government are rightly seeking to prevent cases where the derivatives are structured to expose the purchaser to essentially the same risks of movements in interest rates as the purchaser would be exposed to simply by purchasing a conventional deposit.&lt;lb/&gt;
      The new clause is broadly welcomed. Its objectives are worthy, but let us examine some of the more technical aspects. The new legislation seems to overcome the mischief by applying a charge under case IV of schedule D to profits realised on or after 5 March 1997 from the futures or options concerned. Some have suggested that taxing under case IV of schedule D is strange. Should they not be deemed to be non-trading debits and credits arising from a loan relationship under the Finance Act 1996? Those are amounts that are axiomatically equivalent to interest by definition arising from contracts which, but for failures in definition, would have been non-trading items under the Finance Act 1994 financial instruments regime. The legislation applies just as much to hedged transactions that were entered into for purely commercial reasons, with no intention to secure a tax advantage, as to avoidance transactions.&lt;lb/&gt;
      If schedule 5AA generates a D IV gain, a trader can eliminate it, presumably, by a corresponding non-trading deficit. However, if schedule 5AA generates a D IV loss, which can hardly have been an effective tax avoidance transaction under the existing rules, a trader cannot use this and will probably have to do an artificial schedule 5AA transaction in order to use the D IV loss. One of our advisers suggested to me that&amp;#x2014;to use his words&amp;#x2014;that might be daft. Perhaps the Minister can reassure us that that is not the case, and that, although we have only just
      &lt;col&gt;164&lt;/col&gt;
      moved derivatives out of D IV and into D III and non-trading deficits, this way of dealing with matters will work.&lt;lb/&gt;
      The next issue is not so technical and concerns unit trusts. As the Minister pointed out, it became apparent in the summer of 1996 that unit trusts were exploiting this form of arbitrage to market a product for investors. The close capital account was the main example. I have a news report which is effectively an advertisement for the close capital account launched by Close Fund Management. Although the purpose was apparently to announce plans to outlaw moves in relation to unit trusts, it seems that the present clause does not apply to unit trusts. However, as the Economic Secretary pointed out, the intention was to try to deal with the matter by way of a practice direction issued by the Investment Management Regulatory Organisation&amp;#x2014;IMRO.&lt;lb/&gt;
      We need further reassurances that the Minister is satisfied not just by the Association of Unit Trusts and Investment Funds agreeing to abide by the direction. Perhaps she could provide more substantial reassurance that although a decision was initially made to examine unit trusts, they have now been satisfactorily dealt with. Will the Minister assure us that, if problems arise with unit trusts, the Treasury will act very quickly&amp;#x2014;general elections notwithstanding? The Treasury must monitor the situation closely, and the revenue must be protected for the sake of AUTIF and everyone else.&lt;lb/&gt;
      I seek the Minister's reassurances regarding a more technical area. Will she confirm that the schedule is being dealt with? That is very important. I have several questions about paragraphs 4(4) and 4(5) of schedule 5AA. If the Minister cannot respond to my somewhat technical points now&amp;#x2014;I appreciate that it may take some time to answer them&amp;#x2014;perhaps she could reply in writing.&lt;lb/&gt;
      The grants of options are not disposables under schedule 5AA&amp;#x2014;notwithstanding that they are under the Taxation of Chargeable Gains Act 1992&amp;#x2014;so long as there is a later disposal of something else. Where an option is granted and not exercised, the grant of an option is taken to be a disposal only as and when a disposal takes place with respect to a related transaction&amp;#x2014;not necessarily one arising under the option contract. Will the Minister clarify precisely what those parts of the schedule mean?&lt;lb/&gt;
      I do not see the point of paragraph 4(3)(c), given the definition of an option in paragraph 4(6); nor how that alters the definition in section 144(8)(c), as it already excludes traded options. Schedule 5AA is arguably retrospective as it applies to contracts in existence on 5 March 1997. What does &quot;significant extent&quot; in paragraph 3(1)(a) mean? The Minister may need to respond in writing.&lt;br/&gt;Mrs. Angela Knight: It is estimated that the new clause would save &amp;#x00A3;50 million. However, as people talk to each other, there could be more costs to the Exchequer. That is why we have moved quickly to introduce this measure. Obviously, others might look to other types of derivatives apart from those covered by the new clause. I assure the hon. Gentleman that we shall keep a close eye on how matters develop. If it is necessary to change the legislation, we shall do so. Otherwise, we shall ensure that other sorts of transactions are challenged within the existing legislation.&lt;lb/&gt;
      The hon. Gentleman asked whether the legislation would catch all taxpayers, including those engaged in bona fide transactions. I assure him that, with the
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      exception of financial traders whose profits from such transactions will already be taxed as part of their normal case 1 trading profits, the legislation catches everyone. There are a few more exceptions: charitable trusts, pension funds and authorised unit trusts. Therefore, the hon. Gentleman can see that those who are engaged in legitimate transactions will be able to continue with those transactions.&lt;lb/&gt;
      The hon. Gentleman referred to a metal-bashing company and asked several questions in that regard. All the points relating to that company and others come under the general hedging heading. No commercial hedging will be caught: the legislation applies only where the guaranteed return arises from the futures or options used. I remind the hon. Gentleman that I said in my opening remarks that the clause applies only to a scheme or arrangement, involving two or more transactions, that is designed to produce a guaranteed return from the disposal of one or more futures or options if the return is similar to interest. I can put his mind at rest on that.&lt;lb/&gt; The hon. Gentleman asked a number of questions relating to case IV, but the taxable income will be calculated under case VI of schedule D.&lt;br/&gt;Mr. Mike O'Brien: The Minister is quite right; it is case VI rather than case IV.&lt;br/&gt;Mrs. Knight: I can assure the hon. Gentleman that taxable income will be calculated in accordance with the principles of case VI. That will usually mean the profit or loss&amp;#x2014;the difference between the acquisition cost and the disposal proceeds of the future or option. I think that I have answered most of his questions in that area.&lt;lb/&gt;
      We will keep faith with the unit trust industry's assurances