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Tax Credits

5. Mr. Stephen McCabe (Birmingham, Hall Green): If he will make a statement on how integrated tax credits will support families. [18686]

The Paymaster General (Dawn Primarolo): In 2003, the Government will be introducing a new credit for families with children, the child tax credit. It will provide a seamless stream of support for families, integrating the income-related elements of support for children, paid directly to the main carer. The child tax credit will be paid to families with children, whether the adults in the family are in work or not. It will build on the foundation of child benefit.

Mr. McCabe: Does my hon. Friend agree that integrated tax credits represent the single greatest advance for ordinary people since the introduction of family allowance itself? Is this not the essence of Labour in action—a Government who believe that those who can work should work, that their children should enjoy the fruits of their honest toil, and that all children have the right to grow up free from the scourge of poverty?

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Are not those who seek to frustrate such measures committing a direct assault on the interests of ordinary people and their children?

Dawn Primarolo: My hon. Friend is right and I am sure that he would be surprised if I did not agree with him. The Opposition presided over a massive growth in child poverty and unemployment, and the key aspects of the Government's policy in tackling poverty are, first, to deal with low pay; secondly, to deal with the problem of workless households; and thirdly, investment in education and health, which will tackle all the elements of poverty in our society and ensure that children and their families are lifted out of that poverty.

Mr. David Laws (Yeovil): Does the Minister agree with Andrew Dilnott of the Institute for Fiscal Studies that it is remarkable that the Treasury has yet to publish estimates of its two new tax credits, even though in a previous precedent it did publish estimates of the cost of the new tax credits? Why has it failed to do so in that case?

Dawn Primarolo: The hon. Gentleman will not be surprised to hear that I do not agree with the gentleman he mentioned. The Tax Credits Bill, which will be debated by the House on Monday, will put in place the framework for a clear, simple, transparent method of delivering income to families, especially those in greatest need. As my right hon. Friend the Chancellor has said, the question of rates and tapers will be a subject for the Budget statement.

Jane Griffiths (Reading, East): Is my hon. Friend aware that in areas such as my constituency, where the cost of living is high and unemployment is low, families who struggle on low incomes have a harder time of it than those in many other parts of the country? Does she agree that the seamless and common framework of assessment for the new credit will remove the stigma attached to receiving benefits that does exist, especially in such areas as Reading, East?

Dawn Primarolo: The child credit will be paid to families with children regardless of whether the adult is in or out of work, thus removing the stigma. It will also ensure that those families have one point of application for those payments. It will be precisely calculated to ensure that those with the lowest incomes will get the maximum benefit. It is strange that on such an important change to the system of support for families, especially those with children, the official Opposition apparently do not have any views.

John Robertson (Glasgow, Anniesland): My hon. Friend will be aware that my constituents welcome the child tax credit, but I am concerned by the shadow Chancellor's view that £50 billion could be wiped off—

Mr. Speaker: Order. The Minister will not be able to answer that point.

Dawn Primarolo: I am sure that the House has noted that in the cuts that the shadow Chancellor wishes to see, both in the public sector and in benefits—

Mr. Speaker: Order.

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Railtrack (Successor Company)

6. Mr. A. J. Beith (Berwick-upon-Tweed): Whether the borrowings of the successor company to Railtrack will be accounted for as public borrowing. [18687]

The Chief Secretary to the Treasury (Mr. Andrew Smith): I see no prospect of such an outcome.

Mr. Beith: Is it not a condition of Treasury agreement that that borrowing should be off the Government's books? How, then, could the permanent secretary go around the City telling people that the successor company would have a BBB star rating? Is not that an implicit guarantee?

Mr. Smith: As public sector net borrowing is, as it says, borrowing by the public sector, and as we do not foresee the successor company—whatever it is—being in the public sector, I see no prospect of the outcome being counted as public sector borrowing.

Mr. John Bercow (Buckingham): So far as the impact of the dismantling of Railtrack on public borrowing is concerned, the Chief Secretary oozes smug complacency. Given that the Confederation of British Industry, the Ernst and Young ITEM Club, Franklin Mutual, Legal and General, PricewaterhouseCoopers and the state of Wisconsin, to name but six, have all warned that the Railtrack fiasco will make it more expensive to attract private capital, why does he not now accept that present policies risk the possibility of financial famine and the virtual certainty of increased borrowing, higher taxes and further damage to a transport system which is already described by the Government's own advisers as the worst in the European Union?

Mr. Smith: On smug complacency, the hon. Gentleman would do well to look in the mirror. As for the impact of what has happened at Railtrack on credit ratings, I shall quote the view of a leading credit rating agency. Standard and Poor published a document on 23 October that dealt with precisely these matters, in which it stated that

Moreover, the Government are attracting private investment into public-private partnerships and private finance initiative projects of all types. That includes our commitment to invest in our railways, in line with the 10-year plan that the Government have set out.

Mr. Michael Jack (Fylde): If Railtrack's credit rating is so good, why did the Minister for Transport recently suggest that the Government are considering reducing expenditure on the roads programme to subsidise expenditure on rail? Is that correct? If it is, by how much will expenditure on roads be reduced, and what will be the damage to the roads programme?

Mr. Smith: I am confident that our plans for rail can and will be financed within the 10-year plan that we have already set out, and out of the £180 billion that the Government have committed to transport. In contrast,

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the Conservative party and the shadow Chancellor at the time of the general election explicitly refused to match our commitment on transport investment.


9. Paul Holmes (Chesterfield): What representations he has received on the change in output in manufacturing industry over the last year. [18692]

11. Mr. Mark Field (Cities of London and Westminster): What recent representations he has received from United Kingdom manufacturing exporters; and if he will make a statement. [18694]

The Economic Secretary to the Treasury (Ruth Kelly): The Chancellor and other Treasury Ministers frequently receive representations from manufacturers and all areas of business on a wide range of economic issues. We listen carefully and value their insights—as we did, for instance, at yesterday's manufacturing summit.

Paul Holmes: At meetings with union representatives and managers in my constituency of Chesterfield, I receive representations regarding the destruction of manufacturing industry. This year alone, three major traditional manufacturers—Sterling Tubes, Chesterfield Cylinders and Dema Glass—have either gone into administration or been closed down altogether. Those firms have told me that the overvalued pound against the euro cripples exports. Managers from Toyota at Derby have said that they can see no point in expanding that successful plant while there is no prospect of Britain entering the eurozone. The people to whom I have spoken want to know when the Chancellor will do something about ending the pound's ludicrous overvaluation compared with the euro.

Ruth Kelly: The Government's policy on the euro is clear. The most important thing that we can do for manufacturing is to provide a stable economic climate. By making the Bank of England independent and putting in place tough new fiscal rules, we have taken the necessary measures to ensure that. Artificially to manipulate the exchange rate of the pound as the hon. Gentleman suggests would be ludicrous. Quick fixes are not the solution for manufacturing—the solution is a stable economic climate. The Government are prepared to take the action that manufacturers so desperately need. That is why we held the manufacturing summit yesterday, at which my right hon. Friend the Secretary of State for Transport, Local Government and the Regions announced a further £20 million to help spread best practice within manufacturing.

Mr. Field: The Chancellor assured us last week that we could expect overall growth in the economy to be 2.25 per cent. in 2001. However, after four consecutive quarters of technical recession in the manufacturing sector, will the Economic Secretary say what level of growth in that sector she anticipates in the forthcoming year?

Ruth Kelly: As the hon. Gentleman should be aware, we gave those figures in the pre-Budget report. We are expecting an increase in manufacturing output during next

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year. Of course, an open economy like the UK's cannot insulate itself from a global slowdown, especially when that slowdown affects countries such as the US, Japan and Europe. However, this country is better placed than any other in the Organisation for Economic Co-operation and Development to weather that international storm. That is why we are confident that manufacturing will continue to prosper in the future, and why we are taking measures now to ensure that manufacturing productivity and growth increase.

Mr. Nigel Beard (Bexleyheath and Crayford): Does my hon. Friend agree that the future of manufacturing depends, crucially, on the rate of innovation? In that context, what responses have been received from business and industry for the proposed research and development tax credit for larger companies?

Ruth Kelly: The research and development tax credit, which the pre-Budget report announced would go out to further consultation, has been widely welcomed, particularly by the Confederation of British Industry. Digby Jones has said that it will make a very useful contribution. Of course, innovation is vital in raising productivity, particularly in the manufacturing sector. That is why we propose to extend the research and development tax credit throughout industry, with big companies benefiting as well as small and medium-sized enterprises. It is why we put in place 40 per cent. first year capital allowances for investment in plant and machinery. It is also why we are giving 100 per cent. capital allowances to all small firms that invest in information technology. The only way to enhance our productivity and close the productivity gap with our European and United States neighbours is through innovation and skills.

Mr. David Kidney (Stafford): At the strategic level, does my hon. Friend accept that all the many welcome measures taken by the Treasury over the past four years to help small and medium-sized manufacturers may have sidelined the big companies which, after all, provide the growth and activity for those smaller companies? Does she therefore agree that the proposal for the new research and development tax credit for larger companies is a very welcome sign of a more inclusive approach to what I call the whole manufacturing family?

Ruth Kelly: Certainly, the extension of the research and development tax credits to all companies, large or small, will be welcomed across industry, and has already been welcomed by the CBI. Furthermore, our corporation tax reforms, which have been taking place over the five Budgets since the Government came to power in 1997, have slashed the corporation tax bills of manufacturers across the board. We now have the lowest corporation tax rates in the history of the United Kingdom. Overall, the United Kingdom has the lowest corporation tax rate of any major industrialised country. That is good news for manufacturers, big or small.

Mr. Nicholas Winterton (Macclesfield): The Economic Secretary will know that aerospace is an important part of our manufacturing base and has, historically, made a massive contribution to exports. She will be aware that, sadly, in recent months there have been about 40,000

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redundancies in the industry, in firms such as Rolls-Royce and BAE Systems. Do the Government have any plans to assist the industry during its current problems so that it will have a skilled work force when there is an upturn?

Ruth Kelly: As the hon. Gentleman is aware, the Government are committed to the future of the aerospace industry and have been helping the sector through direct assistance and also by means of the rapid response taskforce, which assists people who become unemployed. Of course, the aerospace industry has been particularly hard hit following the events of 11 September. We must now ensure that it has an environment in which it can restructure and develop. We are committed to working towards that. It is not all gloom and doom on the aerospace front, however. Recent contracts that have been won, such as the Lockheed Martin contract, will bring some welcome help to the employees and the company involved.

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