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The Financial Secretary to the Treasury (Mr. Stephen Timms): The appreciation of sterling relative to the eurozone currencies since 1996 has certainly caused some problems but, overall, exporters have still achieved robust growth. Exports of goods have risen by 25 per cent. over the past four years and by 7 per cent. over the past year.
Mr. MacShane: My question refers to 1996 because the main rise in the value of sterling happened under the former Tory Chancellor--another economic snafu he left his successor. Is my hon. Friend aware that every tonne of steel exported to the EU since 1996 has been exported at a loss, so that, while demand for exports has gone up, profits have gone down? Is he also aware that steelworkers, car workers, textile workers and farmers are fed up with being crucified on the cross of an overvalued sterling left to the Government by the Conservatives? While the only policy of the Opposition on this can be summed up in six words--"Europe, Europe, Europe. Out, Out, Out!"--the time is coming when many members of the public want a clear statement from the Government that the overvalued pound and undervalued euro is causing real damage to our economy.
Mr. Timms: I suggest to my hon. Friend that export growth has generally been much stronger than might have been expected given the exchange rate difficulties faced by exporters. The UK's exports to the European Union have grown much faster than have our exports to countries outside the EU. The average of independent forecasts shows export growth of more than 7 per cent. this year. The exchange rate differential causes problems for firms exporting into the eurozone, but improvements in productivity are helping to balance that. The 8 per cent. growth rate in the European Union between 1997 and 1999 has also helped. The UK steel industry is among the most efficient in the world. On that basis, I believe that it can look forward to a bright future.
Sir Michael Spicer (West Worcestershire): Productivity rates are crucial to this question, so why do the Chancellor of the Exchequer and the Prime Minister continue to distort the productivity figures? In particular, why have productivity rates fallen under Labour? That is demonstrated today by the Institute of Management Services index on productivity, which shows a continuing fall.
Mr. Timms: The figures have been made clear. The pre-Budget report contains figures that set out the precise position. The main rate of corporation tax is lower in the UK than in any big EU country and any major industrialised country in the world. As my right hon. Friend the Chancellor said, business investment has reached record levels, which is helping to boost productivity. The UK receives 40 per cent. of all investment into the European Union made by the United States and Japan, which also encourages better productivity. I point out to the hon. Gentleman that the
The Economic Secretary to the Treasury (Miss Melanie Johnson): The Government's strategy to encourage saving is to create the right environment for saving and the right incentives for people to save, and to provide information and education to help people to make the right saving choices.
The Government's initiatives include introducing the highly successful individual savings accounts, and developing stakeholder pensions, which widen people's savings opportunities for retirement. More than £28.4 billion was invested in ISAs in their first year--a third more than was invested in TESSAs and PEPs during their last and most successful year. Early indications show that ISAs are doing even better in their second year.
Miss Johnson: We have done a lot to encourage savings, as is demonstrated by ISAs. Estimates show that low-income savers invested £3 billion more in their ISAs in their first year than they had in the previous year in their PEPs and TESSAs. The hon. Gentleman is also forgetting the fact that there is more investment in savings via the net wealth that is available. Net financial wealth has risen by 25 per cent. since 1997--more than twice the rise in income. The stock of wealth saved shows that people have money to invest and that it is being invested.
Sir Peter Tapsell: Does the Economic Secretary agree that, over the years, much of the nation's wealth has been invested in our gold reserves? She and I have had a lot of correspondence about that. Will she confirm that, since July 1999, the Treasury has sold 225 tonnes of Britain's gold for US $2,000 million? According to her last answer to me, 40 per cent. of that money has been reinvested in the euro. As the euro has lost one fifth of its value against the dollar during that period, is it not clear that the Treasury has frittered away huge amounts of the taxpayers' money?
Miss Johnson: The hon. Gentleman's ability to introduce this subject into any question is remarkable, and I compliment him on it. However, the answer is the same as those he has received on many occasions. We made the right decision to diversify our portfolio and we were only acting in line with decisions taken by a number of other
Mr. Oliver Letwin (West Dorset): If the Economic Secretary is able to tell the House, as she just has, that her policy is to encourage savings, does she think that it is a measure of the success of that policy that the savings ratio is now at its lowest level for 37 years? Does she agree that the more worrying trend is in gross savings, and that the proliferation of means tests is bound to provide a further disincentive to saving? Does she agree with the Chancellor, who wrote in the pre-Budget report:
Mr. Jack: I am grateful to the right hon. Gentleman for that reply, as the reports confirm that, contrary to their manifesto commitment, the Government have introduced new taxes. The pre-Budget report shows that for this financial year and the next two, as a result of the introduction of new taxes such as the climate change levy, there is a trend of rising taxation on business as a percentage of GDP. Does the right hon. Gentleman agree
Mr. Smith: On the pre-Budget report and the share of taxation in the economy, we observe that that share is lower this year, was lower last year and will be lower next year than planned by the last Conservative Government. Unlike the Conservatives, we have kept every promise that we made on tax. That includes the measures that we have taken on taxation to help business: the 3 percentage point cut in the main rate of corporation tax; the 3 percentage point cut in the small businesses rate of corporation tax; the introduction of the new research and development tax credit to help small businesses to innovate and to invest; and the changes that we have made to capital gains tax, reducing from 40 per cent. to 10 per cent. the tax on assets held for four years. That is the mark of a Government who believe in this country's businesses and are making sure that our taxation policies, as well as our policies for fiscal, monetary and economic stability, foster sustainable growth in place of the shambles and the boom and bust of the previous Government.
Mr. Peter L. Pike (Burnley): Is it not important to remember that the overriding aim of the Government in taxation policy has been to make our taxation system fairer and help the poorest sections of the community, which we have done with income tax and so many other measures? Should we not remember what the previous Government did time after time, especially the intended 17.5 per cent. VAT on gas and electricity? We stopped that measure under the previous Government; VAT on gas and electricity has been reduced to 5 per cent., which has helped many of the poorest people in the country.
Mr. Smith: My hon. Friend is absolutely right to remind the House of one of the worst of the previous Government's broken promises. Contrary to everything that they said before their last Administration, they put VAT on fuel and it hit the poorest hardest. We promised to cut it to its lowest possible level--a promise made and a promise kept--just as we promised not to increase the upper or basic rate of income tax. Indeed, we have cut the basic rate of income tax, along with introducing the working families tax credit, the minimum wage, the new deal and measures not only to get many more people into work but to ensure that they are better off, and that the poorest gain most of all.
Mr. John Bercow (Buckingham): Why did the Chancellor of the Exchequer fail in his speech on the pre-Budget report even to mention the huge hike in national insurance contributions that will have to be paid by up to 1 million people who earn approximately £30,000 a year? Is the Chief Secretary proud of the fact that, as a result of that further stealth tax, something of the order of 20,000 nurses, 9,000 policemen and 23,000 teachers will face an additional burden of taxation of £200 a year?
Mr. Smith: Not for the first time, the hon. Gentleman asks yesterday's question. My right hon. Friend the Chancellor dealt very ably with all these matters then. Of course, there is nothing new in this--the matters to which the hon. Gentleman refers were announced in the