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27 Jan 2003 : Column 605W—continued


Mr. Hood: To ask the Chancellor of the Exchequer what the outcome was of the ECOFIN Council held on 21 January; what the Government's stance was on the issues discussed, including its voting record; and if he will make a statement. [93156]

Mr. Gordon Brown: I attended the ECOFIN meeting on 21 January.

The Presidency and the Commission introduced their work programmes for ECOFIN. The principal objective would be to maintain a stable macroeconomic environment and boost confidence and growth through a renewed commitment to structural reforms.

The council reached political agreement on the tax package, based on proposals outlined by the presidency at the 3 December 2002 ECOFIN meeting, and discussed at the 11 December 2002 ECOFIN meeting.

The council confirmed the agreement at the Feira European Council that the objective of the EU should be exchange of information on as wide a basis as

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possible. And it confirmed the rejection at Feira of an EU-wide withholding tax, which would have had severe implications for the London bond market.

Political agreement was reached that 12 member states will move to automatic exchange of information on the savings income of EU residents. Austria, Belgium and Luxembourg will move to automatic exchange of information by the end of the first full fiscal year from the date when the council agrees by unanimity that the third countries named at Feira have committed to the OECD standard of exchange of information on request.

Austria, Belgium and Luxembourg will operate a transitional withholding tax of 15 per cent. from 1 January 2004, 20 per cent. from 1 January 2007, and 35 per cent. from 1 January 2010. The council agreed that the EC should enter into an agreement with Switzerland, Liechtenstein, Monaco, Andorra and San Marino to adopt the same rates of withholding and maintain the 35 per cent. after adoption of exchange of information to the OECD standard.

The council assessed that in respect of dependent and associated territories the necessary reassurances had been received that the same measures would be applied as in EU member states, and that in respect of the United States the necessary reassurances had been received that equivalent measures would be applied.

The council committed itself to formal adoption of the tax package before the European Council in March 2003. This is dependent upon receiving firm offers from Switzerland, Liechtenstein, Andorra, San Marino and Monaco to enter into agreements as outlined, and on the council assessing the work of the Code of Conduct Group on the rollback of the identified harmful business tax measures of member states and of dependent and associated territories.

In furtherance of the ultimate objective of exchange of information on as wide a basis as possible, the council asked the commission to continue negotiations with Switzerland and the other third countries for the exchange of information and to report back to the council before 2007, and to enter into discussions with other important financial centres.

On the Stability and Growth Pact, the council adopted Opinions on the Stability and Convergence programmes of Sweden, Finland, Greece, Italy, Germany and France. The council adopted a Recommendation on an Excessive Deficit Procedure for Germany. It also adopted a Recommendation on an Early Warning for France, with France abstaining.

In view of the lengthy discussion on the tax package, the presidency decided to postpone discussion of energy taxation and VAT administrative co-operation to the 18 February ECOFIN.

No formal votes were taken at this meeting.

Employment Distribution

Mr. Cousins: To ask Mr Chancellor of the Exchequer what the distribution of employment in finance and insurance was in each Government office region and nation of the United Kingdom in (a) 1996, (b) 2000 and (c) the most recent available period. [89905]

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Ruth Kelly: The information requested falls within the responsibility of the National Statistician. I have asked him to reply.

Letter from Len Cook to Jim Cousins, dated 27 January 2003:

Equitable Life

Mr. John Taylor: To ask the Chancellor of the Exchequer who has assumed the (a) responsibilities and (b) potential liabilities of the regulatory bodies previously charged with regulating the affairs of the Equitable Life Assurance Society. [93256]

Ruth Kelly: The Treasury was responsible for the prudential supervision of insurers between 5 January 1998 (prior to this responsibility rested with the Department of Trade and Industry) and 30 November 2001. Between 5 January 1998 and 31 December 1998 the Treasury undertook this task directly. From 1 January 1999 the Treasury contracted out most of its functions relating to prudential insurance supervision to the FSA. The FSA became responsible for prudential insurance supervision in its own right from midnight on 30 November 2001 when the Financial Services and Markets Act 2000 (FSMA) came into force.

Under the provisions of Part II of the Deregulation and Contracting Out Act 1994, the Treasury remains responsible for the actions carried out by the FSA on behalf of the Treasury during the period of contracting out. Under the Transfer of Functions (Insurance) Order 1997 (S11997/2781) the Treasury became responsible for all the liabilities of the Secretary of State for Trade and Industry in connection with the functions which were transferred to the Treasury.

Under the Financial Services Act 1986, conduct of business regulation was the responsibility of the Personal Investment Authority (PIA), a self-regulating organisation recognised by the FSA. Between 1 June 1998 and 30 November 2001, FSA staff carried out work on behalf of the PIA Board, under contract, in preparation for the implementation of FSMA when conduct of business regulation also became the responsibility of the FSA.

Under transitional provisions made under FSMA, the FSA assumed the liabilities of the PIA and other Self Regulatory Organisations when the Act came into force.


Mr. Allen: To ask the Chancellor of the Exchequer how he proposes, within the assessment of the five economic tests, to verify whether present and planned levels of public expenditure could be maintained if the UK were to join the Euro. [93117]

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Ruth Kelly: A comprehensive and rigorous assessment of the Five Economic Tests will be completed within two years of the start of this Parliament.

The Government remains fully committed to its plans for public spending. These plans provide a much needed boost to public investment in key public services including schools, hospitals and transport, redressing years of under-investment, while maintaining economic stability.

Mr. Allen: To ask the Chancellor of the Exchequer what assessment was made by HM Treasury of the economic consequences of joining the euro in the first wave; and if he will publish it. [93118]

Ruth Kelly: "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" was published by HM Treasury in October 1997. A copy can be found in the Library, and is also available on the HM Treasury website.

Euro Pamphlets

Mr. Flook: To ask the Chancellor of the Exchequer how many businesses were sent the pamphlets, "Do you trade with business or individuals from the euro area?" and "Do you know whether the euro's introduction in the euro area could affect your cashflow and profits"; how many have responded to date; and what the cost was of this exercise. [91618]

Llew Smith: To ask the Chancellor of the Exchequer pursuant to the statement by the Financial Secretary to the Treasury, of 15 January, Official Report 307–88WH, what the cost was of the printing and distribution of the factsheets and business case studies on the euro. [92319]

Ruth Kelly : Details of HM Treasury expenditure on business euro preparations were included in the 'Sixth Report on Euro Preparations', published on 18 July 2002. Copies of the report were deposited in the Library of the House.

In Autumn 2002, over 1.4 million businesses were sent a mailer containing the 'Dealing with the euro' leaflet. 11,600 requests for additional information on how to deal with the euro as a foreign currency have been received to date and 34,600 copies of material relating to the euro as a foreign currency sent to UK businesses. The cost of this mailing was met from within departmental resources.

Exchange Rates

Miss McIntosh: To ask the Chancellor of the Exchequer if he will make a statement on the impact of exchange rates on small businesses in (a) 1992, (b) 1997 and (c) 2002. [93010]

John Healey: The effects of exchange rate changes are difficult to isolate with any confidence, but the Government recognise the difficulties that the recent weakness of the euro has caused for exporters, including many small businesses.

The Government seek a stable and competitive pound over the medium-term, and the best contribution it can make is to deliver low, stable inflation and sound public finances. Previous experience shows that any short-term

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attempt to manipulate the exchange rate can lead to wider economic instability, with damaging consequences for small businesses.

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