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2. Mr. Peter Brooke (Cities of London and Westminster): What recent representations he has received on Government policy in relation to trends in UK competitiveness; and if he will make a statement. 
The Chief Secretary to the Treasury (Mr. Andrew Smith): We are promoting UK competitiveness in partnership with business and trade unions through policies for stability, skills, investment and enterprise, all dedicated to closing the productivity gap with our competitors.
Mr. Brooke: Does the Chief Secretary agree that a constructive resolution of the long-running Whitehall farce over the London underground, which has had an effect not just today but over the past four years, would do more for the competitiveness of this great city than any other single act?
Mr. Smith: It is in everybody's interests--long-suffering travellers in London, the economy of London and the wider economy of the UK--that we achieve the modernisation in the London underground that is so clearly needed and that was so neglected when the previous Government were in office. The best way to do that cost-effectively, to time, to standard and with the high safety standards that we must secure is through the public-private partnership and through safety remaining in the public sector.
Mr. Ian Davidson (Glasgow, Pollok): Does the Chief Secretary accept that one industry in which international competitiveness is key is tourism? Does he also accept that Britain's international position is being undermined by the impression overseas that Britain is in crisis?
Mr. Smith: The timing of the general election, as we all know, is a matter for the Prime Minister. I agree with my hon. Friend about the importance of the British tourism industry, the enormous contribution that it makes to the economy and the damage being inflicted on it by overseas perceptions of the foot and mouth crisis. The best way we can help the tourism industry and the agriculture industry is to eradicate foot and mouth through all the measures that we are taking to tackle it.
Mr. Smith: The rate of productivity is rising and, moreover, it is rising at twice the level that it was when the Conservative Administration left office. We are acting to raise the rate of productivity growth. After all, the Government introduced the 10p corporation tax starting rate for small firms, cut the main and small rates of corporation tax by 3p and introduced the research and development tax credit for small firms, which has been widely welcomed by the CBI and business. We are considering extending it to large firms. We also announced in the Budget wide-ranging reforms of VAT, which, again, were widely welcomed because of the simplification and the benefit achieved for business. Of course, there is more to do, but through our policies of stability, investment and promoting skills, we have set the platform on which productivity can further increase.
The Chancellor of the Exchequer (Mr. Gordon Brown): Some 800,000 people have responded to our recent advertising campaign. An additional 500,000 have already claimed, making 3.4 million employees--and, with the self-employed, 4.4 million--already expected to benefit. To make sure that all eligible families can benefit as soon as possible, I shall write to MPs on both sides of the House enclosing material that they can send to organisations that serve parents in their constituencies, such as local schools, parent-teacher associations, child care providers and local charities.
The Government are adding to the bounty pack given to 750,000 mothers each year information about applying for the children's tax credit. In total, we shall be investing £2.3 billion a year in the children's tax credit by 2003. As a result of increases over this Parliament, the Government will be spending an extra £1.1 billion a year on child benefit in this coming year.
Mr. Browne: I welcome the initiative that my right hon. Friend is taking to disseminate information about the children's tax credit. It occurs to me that, if the pack that he mentioned is to be used with credibility by Conservative Members, it might need to include a statement as to why they now support a policy that they
Mr. Brown: Every available source of information will be used to get the message across that the children's tax credit is up and running from the beginning of April. Many people will receive the credit in their pay packet at the end of April. The additional rate--the £8.50 rising to £10--will be made available in the May pay packet. I will take on board the suggestions that my hon. Friend made about the information that should be provided in the pack. He is absolutely right to say that the Conservatives called the children's tax credit a gimmick. They are completely wrong.
Mr. Edward Leigh (Gainsborough): Has the Chancellor had a chance to view the work of the Childcare Commission, which is chaired by the right hon. Member for Camberwell and Peckham (Ms Harman) and on which I had the honour to serve? Will the Chancellor address his attention to one particular problem? A family where both parents earn £30,000 a year is entitled to children's tax credit. However, there is no such entitlement for a family where the mother, say, wants to stay at home to look after the children and the father earns £45,000 a year. Surely that is unfair. We should not dictate through the tax system how people run their lives. There should be an equitable decision between partners as to how they run their lives in their own way.
Mr. Brown: That is exactly why we are integrating the children's benefits into the new integrated child credit in 2003, when the issue that the hon. Gentleman raised will be dealt with. I applaud the work of the Childcare Commission and the hon. Gentleman's service on it. However, he should look at why the problem has arisen. It is a function of the independent taxation introduced by the previous Government, and of the way in which it was introduced. The problem will be dealt with in 2003. Until then, nearly 5 million families will benefit from the children's tax credit, and I hope that his party will stop calling it a gimmick and start recognising that it is vital to improving the standard of living of millions of families.
Mrs. Louise Ellman (Liverpool, Riverside): How many of the 600,000 families eligible for children's tax credit in the north-west does my right hon. Friend think will receive it? Is he satisfied about the progress of his general policy, which combines measures to make work pay with investing in local economies? Will he give us a progress report on his efforts to secure regional investment funds, in the discussions that he is having in Europe?
Mr. Brown: Every family with children in my hon. Friend's constituency will receive child benefit. Almost every family that is eligible will receive the children's tax credit, and those who have not yet applied can still do so. That is why the information packs are going out. On the general question about the standard of living among families, the key to that is to create employment
The Paymaster General (Dawn Primarolo): We want to make the United Kingdom the most competitive environment for business in the world. Our policy on the taxation of personal service companies helps to do this by making sure that the tax measures intended to support genuine businesses can be properly targeted at those businesses and do not, instead, go to those that are essentially no different from employees.
Mr. Brady: Is the Minister not ashamed of having introduced a stealth tax on enterprise? Is she not ashamed of having introduced a tax that will drive skilled information technology professionals overseas? What is her estimate of the number of those professionals who have already been driven out of the country by her proposals?
Dawn Primarolo: The legislation is fair, proportionate and compatible with the United Kingdom's obligations under EU legislation. There is no evidence to support the allegation that there is a flood of IT specialists leaving the UK. The hon. Gentleman should look at some of the various publications; for example, an article called "Contractor UK" by David Houston of Glow International Ltd. He warns IT specialists that despite the widespread press speculation concentrating on UK contractors post-IR35, it is a fallacy that they would be better off overseas. He reminds them that in western European countries where there are vacancies for freelance professionals, in every case taxation is higher than in the UK. The hon. Gentleman's allegation that thousands are leaving is not the case, and his suggestion that the tax proposals are unfair is not the case. He should bear in mind that the measure is to deal with an avoidance mechanism in the tax system whereby those working through personal services companies were paying tax and national insurance at the rate of 21 per cent., whereas an employee earning the same amount in the same circumstances was paying, on average, 35 per cent.
Mr. Wilkinson: Nobody in this House, and certainly no independent IT specialist or anyone running a consultancy company outside this House, will be impressed by the verbose filibuster of the Paymaster
It is true that the Government, along with the Governments of other European countries, are looking at visa applications. The people concerned are coming to this country knowing our tax regulations, and knowing full well that they will be very well off.
Mr. Nigel Beard (Bexleyheath and Crayford): May I congratulate my hon. Friend on plugging this tax loophole? Does not the Opposition's attitude to this matter reveal them to be, as always, the tax dodger's friend?
Dawn Primarolo: The proposals contained within IR35 are intended to close a tax loophole that meant that a huge amount of resources was being lost to the UK Exchequer. Opposition Members who so gladly say that they will abolish the measure need to explain to the House where they would find nearly £1 billion of expenditure, which would result from their actions.
Mr. Brian White (Milton Keynes, North-East): My right hon. Friend will be aware that IT contracting has gone through ups and downs, particularly when the Tories changed the tax rules several times in the 1980s. The key area for those companies is investment in skills and continual reskilling. Will she give an assurance that she will look to provide investment in those areas for such companies?
Dawn Primarolo: The suggestion that IR35 is targeted only on IT consultancies is not true. It is to deal with a mechanism for service companies where those involved were essentially employees. A legitimate business that is not caught by the regulations in IR35 can continue to be able to invest in training, as it could before IR35.