Clause 61 — Computer equipment
Orders of the Day — Finance (No. 2) Bill
5:54 pm
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Prior to
The question that everybody has been asking is: why are the Government doing this? It is perfectly true that many employees have benefited from the tax exemption, but the home computer initiative has been used extensively by groups that we would not generally expect to have difficulty accessing information technology. For example, 25 per cent. of those participating in the home computer initiative are higher rate taxpayers—more than twice the proportion among taxpayers as a whole. Furthermore, nearly one third of HCI participants are from white-collar industries—often defined as industries with a greater proportion of higher-than-average earners.
Peter Luff (Mid Worcestershire, Conservative)
What the Paymaster General is saying is news to the industry, which was not consulted about the problems that the Treasury suddenly discovered at the eleventh hour, just as the ink was drying on the Budget. On the specific point that she just raised, would she say the same thing to the 15,000 nurses who have benefited from the HCI scheme or the 21,000 Tesco employees, who are probably not at the top end of the earning schedule? The evidence was that that level of employee was benefiting more and more from the scheme.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The information comes from the industry. The hon. Gentleman interrupted me rather early on in my remarks. I was certainly not saying that nobody had benefited from the HCI scheme. The case that the Government are putting is that the benefits have slowed down to a point at which the growth is very small. In particular, it is not targeted on the remaining groups that we need to assist—those on low pay. I was just about to turn to that point.
Last month, the Low Pay Commission published the findings of its review of benefits in kind, salary sacrifice schemes and the accommodation offset. It found that take-up rates were often quite low and many part-time low-paid workers would gain no advantage from salary sacrifice schemes for home computers and other benefits in kind. Her Majesty's Revenue and Customs has evidence that, unfortunately, the tax exemption was being used beyond the scope of its original intention.
On the one hand, the initiative has reached a number of people and has increased usage. On the other hand, it is not targeted particularly at the low paid and its effectiveness has been slowing down, and, in addition, it is being used beyond its original intention. For example, the HCI packages included items such as game consoles and MP3 players and allowed employees to buy equipment out of their gross pay, rather than borrow it. Furthermore, the cost of computer equipment has fallen markedly since 1999 when—
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I wonder whether the hon. Gentleman will let me make some progress. I, too, have read the brief from the industry that he has and that has been circulated. If he listens to all my remarks and then contributes to the debate, I will be happy to return to any outstanding matters.
The cost of computer equipment has fallen markedly since 1999 when the exemption was introduced. Figures produced by the Office for National Statistics show that an equivalent computer that cost £2,500 in 1999 would have cost under £700 in 2005. The Government have therefore concluded that the time has come to remove the exemption and to focus Government support in a better way to improve access to technology for groups with the poorest existing access, such as the unemployed, the elderly and the low paid.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I will, but this is the last time that I will give way to the hon. Gentleman. I will then try to make my case and then he can contribute to the debate. If there are any outstanding issues at that stage, I will reply to them.
Peter Luff (Mid Worcestershire, Conservative)
This is a debate in which it would be good to have answers to questions. I asked the right hon. Lady's Department questions a month ago, but I have not had answers, so I have to ask those questions now, in this format—otherwise I might have been able to accelerate her speech. Will she please do the Committee the courtesy of producing the evidence that she has about the so-called abuse of the scheme? It does not exist. The industry specifically asked for MP3 players not to be included in the scope of the scheme, but the Treasury insisted that they should be. The industry would be happy to see them excluded. The other equipment to which she referred was not being offered under the terms of the scheme; it was being offered as part of marketing brochures alongside it. The full price was paid. If she has that evidence, please will she produce it? It is important that we see it.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I am happy to produce that evidence. Indeed, I am happy to produce it to the hon. Gentleman for the company in his constituency for which he has been making the case. The evidence comes from its marketing websites. I think that he will be somewhat shocked when he sees the extent to which packages were being put together involving items that were not supposed to be included in the HCI. That is in addition to the difficulty with take-up. I cannot say that I will put the information in the post to him tonight, but I will certainly do so tomorrow morning and he can look at the evidence. Alternatively, I can give him the website addresses and he can look at them himself—he does not have to take my word for it.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
The evidence of one or two websites is not enough to damn a whole scheme. If the Government have such compelling evidence of abuse, will the Paymaster General explain why so little hard evidence was produced in the regulatory impact assessment that they rushed out last week?
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The Opposition change their argument as they lose each point. The issue with regard to abuse of the scheme—as well as its lack of targeting, the importance of better focusing it, and the problems of not consulting where there are abuses in the scheme because of forestalling—are well known by all Members. If the hon. Gentleman will allow me to continue to make my case, he will be able to make his and further points can be made.
Following the publication of the digital strategy in April 2005, the Government have continued to acquire an evidence base to enable them to consider focusing their support. In November 2005, the Government published their "Inclusion through Innovation" report. It examined where information and communication technology might deliver the most benefit to excluded groups and considered how that might be achieved. The report found that barriers to using ICT included a lack of relevant content, poor awareness of where to access ICT and a lack of preliminary skills, such as literacy or English language skills. The report also noted that digital inclusion does not mean simply
"connecting everyone to the internet".
Community ICT access and intermediaries all form part of a multi-channelled approach that will deliver for the targeted groups. The Government are making the case that it is necessary to use those resources to target the groups in greatest need and in which take-up is lowest.
To ensure the best use of ICT in tackling this type of social exclusion, I am announcing today that the Government are setting up a dedicated digital inclusion team—[Hon. Members: "Oh."] The industry does not mind being represented on the team, so it does not think that the team is to be ridiculed. The team will champion examples of excellence in using highly effective and efficient ICT to tackle the key drivers of exclusion. It will also promote local and national leadership and understanding of the considerable potential of ICT to make a significant improvement to the life chances of excluded people and areas.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
No, I will not give way to the hon. Gentleman. Perhaps he will let me make some progress.
Furthermore, I can today announce that we are changing the aims and objectives of the digital strategy to focus on digital inclusion, which reflects the shift in the Government's focus towards a more targeted approach. The strategy is a genuinely cross-government programme that recognises that only concerted action across Government Departments will realise our objectives. As I have said, access to ICT is about more than access to computers. Other technologies, such as digital television, give disadvantaged groups the opportunity to engage with ICT. The UK has a world-leading position in digital television, with more than 70 per cent. of households now accessing that technology.
The Treasury will work collaboratively with industry as we look towards meeting the goals of the digital strategy. We will keep the focus on targeted interventions to help those with specific difficulties. We will build on the success of more than 6,000 UK online centres, more than half of which are located in the 2,000 most deprived wards in England, so that 95 per cent. of the population live within 5 km of such a centre. Because we want to ensure that future generations gain access to technology, the Government are giving £50 million over the next two years for schools to invest in home access to ICT for their students and a further £10 million to provide internet connectivity to the home access network. The announcements make substantial inroads into achieving our objectives, but we will conduct a review in 2008 to explore whether further action is necessary to close any residual digital divide.
I have written to representatives from industry to invite suggestions on the most effective way to focus our support on targeted groups. The Department of Trade and Industry will review the options put forward over the next few months and consider how the Government's objectives can be met.
I would like to provide the reassurance for which I know that some have already asked—Peter Luff has done so—on computer equipment provided for business purposes. Clause 61 does not change the position for computer equipment provided solely for work purposes when any private use by the employee is not significant. We acknowledge employers' concerns in this area and I know that HMRC has been approached by representative groups to work through the issues. I have asked HMRC to work with those representative bodies to ensure that clear practical guidance is produced to help to keep employers' compliance costs to a minimum.
The Government's policies of liberalisation and competition have led to the strong take-up and use of ICT. The creation of new and innovative services and falling prices have all contributed to that. The HCI has played its part in the strong take-up, but it is not appropriate for the Government to keep the scheme going beyond its useful lifespan. The announcements that I have made today will ensure that all can benefit from technology in a cost-effective manner. I commend the clause to the Committee.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I want clause 61 to be deleted from the Bill for the chief purpose of saving the popular home computing initiative from abolition by the Government. As we are asking the Government to relent, even at the eleventh hour, I will begin by wishing the Paymaster General a happy birthday. I congratulate her on reaching the age of 29—on a seasonally adjusted basis.
The genesis of the home computing initiative was section 45 of the Finance Act 1999, which said that employers could provide computer equipment including
"printers, scanners, modems, discs and other peripheral devices designed to be used by being connected to or inserted in a computer"
for the use of employees and their families at home without the employee incurring a benefit in kind for the purposes of income tax. The measure was designed to help to spread computer literacy among the population. In March 1999, the Chancellor himself proudly told the Daily Record:
"Britain can no longer afford to lag behind America. Inequality in computer learning today will mean inequality in earning power tomorrow".
Between 1999 and 2003, however, relatively few companies took advantage of the tax exemption, largely because it was not widely known or appreciated. In 2003, a working group was formed under the office of the e-envoy to examine how a specific scheme to loan computers to employees, including for private use, might be implemented. Partly as a result of that, the Income Tax (Earning and Pensions) Act 2003 included, in section 320, additional tax incentives specifically to encourage companies to loan computer equipment to their employees up to a maximum tax-free value of £500 a year. It is that section of the ITEPA 2003 that clause 61 would delete. That would have the consequence of effectively sounding the death knell of the scheme, which is why I am asking the Committee to reject the measure.
The home computing initiative, as we have come to understand it, was effectively launched in January 2004 by the Department of Trade and Industry, which, by that time, had taken on board departmental sponsorship of the project. The DTI published specific guidelines for employers and employees on the home computing initiative, thus effectively popularising the scheme. The DTI press release at the time, which contained supporting endorsements from Sir Digby Jones of the CBI and Brendan Barber of the TUC, promoted the scheme in the following terms:
"For employers HCI schemes are about maximising potential in the work place. Basic computer and technology skills are now regarded as essential for the majority of jobs. With home computer access IT confident employees have greater capacity to contribute to an organisation's overall performance and adapt more easily to new roles and opportunities. HCI schemes can also generate employer National Insurance savings."
In practice, the scheme has usually been financed by so-called salary sacrifice, in which employees accept a small decrease in pay in return for being loaned computer equipment by their employer. The employer in turn benefits by paying a reduced rate of national insurance contributions to the Treasury.
We believe that it is ultimately for financial reasons that the Treasury wishes to abandon the scheme. That was effectively confirmed by the Prime Minister last Wednesday when, in reply to a question asked by my hon. Friend Peter Luff, the Chairman of the Trade and Industry Committee, he said:
"we have to ensure that in any such initiative we obviously balance the revenue that is coming in with the support that is being given."—[Hansard, 26 April 2006; Vol. 445, c. 570.]
The decision is thus ultimately financial, as I shall go on to emphasise.
Michael Wills (North Swindon, Labour)
As far as I understand the case that the hon. Gentleman makes, he seems to agree with the objectives of the initiative. I am sure that he would agree that in such a fast-moving world, it is important to keep reassessing the effectiveness of initiatives. If the digital inclusion team that my right hon. Friend the Paymaster General announced came up with a scheme that would better meet Labour Members' objectives, which I understand he shares, would he support that, or is the home computing initiative the only possible scheme that he can imagine supporting?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I shall outline how we believe the scheme can be revised so that it should survive. I am not saying that there should be no modification of the current scheme. I shall outline, as I have said, how we believe that the scheme could be modified both to save money for the Treasury and to improve its operation. I hope that the hon. Gentleman will be patient.
Peter Luff (Mid Worcestershire, Conservative)
Does my hon. Friend agree that there are two separate points, the first of which is how best to achieve the objectives that are shared across the House? It is difficult to disagree with a word about the objectives in what the Paymaster General said. Secondly, there is the issue of how we move from the one scheme to the other. Would it not have been much better if the Government had signalled now that they want to change the method, if they do—I do not think that they need to do so—and give the industry a year to adjust to a new method, rather than writing a P45 directly from the office of the Chancellor of the Exchequer for the workers in the HCI industry?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I agree with my hon. Friend. We are looking to the Government this evening for some indication, when the Paymaster General replies, that they intend to retain the scheme, even in a modified form. We are not saying that there can be no change. However, we want an indication from the Minister that if the Government believe that there is abuse, they will modify the scheme to respond to that while maintaining its inherently positive characteristics. I shall press the Paymaster General on exactly that point in a moment.
The scheme has proved popular, with about 500,000 people taking advantage of it effectively to hire a computer from their employer to help to improve their IT skills as part of a modern knowledge-based economy. This is especially important when we are seeking to improve IT skills to allow the UK to continue to compete with economies such as China and India in the 21st century. According to a recent analysis carried out by Hewlett-Packard, China and India between them now produce more than 120,000 IT graduates each year. How are we to compete effectively with that if we are bringing in measures to reduce the spread of IT literacy among our population, which is what the proposed change threatens to do?
A Cabinet Office press release was timed to coincide with the launch of the new initiative in January 2004. It highlighted survey findings that employees with a PC at home had better IT skills and were more familiar with the internet. The DTI guidelines on HCI were entitled, "Maximising Potential in the Workplace". Along with advice on implementing the scheme, numerous references were made to skills. For example, in the CBI's booklet, Sir Digby Jones was quoted as follows:
"Of all the workforce skills required today, there's no question that basic IT literacy is one of the most important . . . Getting IT into the DNA of the workforce must therefore be a primary objective for every organisation that wants to adapt to the high-skills economy of the future."
David Taylor (North West Leicestershire, Labour)
Does the hon. Gentleman accept that the spreading of IT skills of the type that he is describing in the workplace has been under way in a number of areas for quite some years? For example, there is the CLATES qualification, the ECDL and the driving licence system, and other methods have also had significant success with fewer costs and with less of the vulnerability that has been shown to be part of the present scheme that is now being reformed.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I accept, with the hon. Gentleman's background in accounting, that some other measures have helped in that regard. Nevertheless, the scheme that we are discussing has been particularly effective and particularly popular, and that is all the more reason not to scrap it. I shall outline the specific advantages as I continue, though I take the hon. Gentleman's point.
In 2005, the Minister of Communities and Local Government, Mr. Miliband, told his regional press the following about the scheme:
"As technology and IT-based business becomes an even bigger part of our regional economy, it is vital that the workforce develops the skills that will keep us competitive. That process should begin in the home so that everyone has the opportunity to become comfortable and competent with computers. That is why the Government is offering tax breaks which reduce the cost of computers to employees while saving money for their employers."
To coincide with the second anniversary of the scheme in 2006, Brendan Barber, the general secretary of the TUC, said:
"Experience has shown that when a business implements an HCI scheme, demand for learning services and training rises significantly."
In short, the HCI scheme has been hailed as an important part of the drive to improve the nation's IT skills, by the Government, in the form of the DTI, and the umbrella bodies of both British industry and the trade union movement combined.
The scheme has enabled almost half a million people to obtain a computer through HCI. Equipment is not only more affordable, but it usually comes with added peace of mind because of features such as warranty cover for the length of the hire agreement and technical support. So, for many who would not ordinarily have had a PC at home, whether because of lack of access to credit, affordability or simple technophobia, HCI has provided a low-risk, cut-price option which allows them to access the world of information technology, to the benefit of themselves, their families, their employer and, ultimately, the wider economy as a whole.
The Government have sought to argue that they are looking for a scheme that is of more benefit to retired people and jobseekers. However, scrapping a scheme that was already working for those in employment and was, indeed, primarily for the benefit of low-paid workers is not the answer.
Kevan Jones (North Durham, Labour)
I get confused these days about what the Conservative party is. Is the hon. Gentleman really saying that he is supporting trade unions, for example, and is supporting also the TU learning fund, which has brought learning, including IT skills, into many workplaces throughout Britain, to some of the lowest paid workers? Are we now getting a call from the Conservative Benches in support of the initiatives that have been introduced by the Government that have helped many workers in workplaces in my region, but which they opposed last year?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I can tell the hon. Gentleman that the trade union movement, from the general secretary of the TUC downwards, are opposed to the abolition of the scheme, not least because at a local level many trade union officials have put a lot of work into persuading employers to adopt it. The hon. Gentleman must understand, irrespective of the learning fund, that the scheme is one that the trade union movement wants the Government to retain. I have a few quotes to drum that point home in case the hon. Gentleman did not get it the first time around.
Scrapping a scheme that was already working for those in employment will not solve the Government's problem in respect of others. According to the HCI Alliance, 60 per cent. of the scheme's participants are in blue-collar industries and 75 per cent. of them pay the standard rate of tax, or lower. Moreover, as Intel, the computer supplier, argued in a recent letter to me:
"As this scheme is run through the employer even the most financially excluded are able to join. The fact that blue collar workers in the future will be denied such an incentive is genuine cause for concern. This has the potential to create inequity within low paid, hard working families and workforces. 21,000 Tesco workers recently adopted this scheme, many would not have a computer today if this had not been offered to them."
Similarly, Brendan Barber—I hope that the hon. Gentleman is listening—general secretary of the TUC, who has also personally endorsed the scheme that we are trying to save, wrote to the Chancellor requesting a rethink and issued the following statement on
"The Home Computing Initiative has helped thousands of low paid workers without confident IT skills buy their first ever computer. Unions up and down the country have been promoting the scheme, often linked to training schemes. The sudden closure of the scheme would mean that many hours of voluntary union effort would go to waste."
Any politician—Tory, Labour, Liberal Democrat or otherwise—will understand the clear intent that lies behind that statement.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
On that basis, I will give way to my hon. Friend Adam Afriyie.
Adam Afriyie (Windsor, Conservative)
I thank my hon. Friend for giving way after being so generous in giving way earlier, unlike the Paymaster General. It was clear that the right hon. Lady wanted to establish her case for the abolition of the HCI. The only case that I heard her make was against the Government—a case against abolishing the HCI and a case against the Bill. It seems to me that if there is a better way of approaching the provision of information technology to workers at home, surely that better approach should be described and implemented before the existing scheme is removed. It seems that we are in a bizarre situation when a scheme is being removed that has clearly been successful, but there is nothing to replace it.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I thank my hon. Friend for that contribution. The Paymaster General's case can best be described as citing a number of instances of abuse. She referred to a few websites and that was about the extent of it. In the course of my remarks, we can test exactly how much abuse there has been, and then the House can take a decision before we enter the Lobbies.
Let no one argue that the home computing initiative does not benefit people on modest incomes. The Trades Union Congress, companies such as Intel and others have clearly demonstrated that it does. As for the take-up of the scheme, it has taken off in the past year or so and has proved particularly popular in the national health service, with more than 100 trusts and hospitals across the country promoting the scheme to their work forces, including King's College hospital, the Norfolk, Suffolk and Cambridgeshire strategic health authority, the West Midlands ambulance service and even the Sedgefield primary care trust—I hope that that is not the reason why the Chancellor wants to get rid of it. A number of charities have adopted the scheme, including St. John Ambulance, the Institute of Cancer Research, the Royal London Society for the Blind and the Motivation charitable trust, which works with people with a mobility disability and is based in Bristol, not far from the constituency of the Paymaster General.
The scheme has been adopted by a number of private sector organisations, including the British Chambers of Commerce, the Great North Eastern Railway and Yorkshire Water. In total, according to the HCI Alliance, more than 1,000 public and private sector organisations have adopted the HCI scheme to date, often with local trade union support, to help to improve their employees' IT skills. All of that will be put at risk if we do not delete clause 61.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The hon. Gentleman has listed all those fantastically important schemes, but can he explain why the proportion of households owning a computer has risen by only four percentage points since 2004?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I have already explained to the Paymaster General that the scheme was on the brink of taking off. Sweden has the highest personal computer penetration in the world, and one reason is that it has been running a successful scheme for a number of years.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Will the hon. Gentleman give way?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
As a courtesy to the Paymaster General, I shall do so.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I am grateful, because I do not want the hon. Gentleman to dig himself into a hole. He said that the scheme was just taking off, but from 1999 to 2003 the increase was 29 percentage points.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
If the Paymaster General had done me the courtesy of listening, she would know that I explained that between 1999 and 2003 the scheme was relatively unpopular, so the Department of Trade and Industry effectively rebooted and relaunched it in 2004, with clearer and better publicised guidelines. The scheme has now begun to take off, and 500,000 users around the country are dependent on the scheme. It is rather worrying that the Paymaster General—a Treasury Minister—will not listen to basic statistics.
Peter Luff (Mid Worcestershire, Conservative)
What I have heard from the Paymaster General confirms my worst suspicions. She does not have the slightest idea of what is happening on the ground, as Her Majesty's Revenue and Customs have seriously misled her about the true facts. When the scheme was rebooted, as my hon. Friend said, in January 2004, it took several months for the industry to gear up, but the advantages are only being experienced now. That is why the costs of the scheme are projected to increase every year in the Red Book.
Peter Luff (Mid Worcestershire, Conservative)
It is no good the hon. Lady saying that, as the scheme was on the verge of success at the precise moment at which the Government scrapped it.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
As I shall argue, the ultimate reason for the scrapping of the scheme by the Government is its cost. My hon. Friend has hit the nail on the head and the Paymaster General should explain why, if the scheme is not popular, the Treasury's own projections in the Red Book and the regulatory impact assessment to 2011 forecast an increase in costs? If take-up is not good, why does the Treasury expect it to cost more? The Paymaster General must dig herself out of that hole.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I shall come on to that, and I shall prove that it is not taking place on a scale that would justify the abolition of the scheme.
The initial decision to scrap the home computing initiative, once it was discovered hidden in the Budget of
"The real beauty of HCI schemes is that they have the potential to improve performance in almost every area of the organisation. As well as traditional drivers—reducing costs, increasing profitability— they can also contribute to more recent imperatives such as corporate responsibility, individual learning and workplace development."
Even more embarrassingly for the Government, the DTI was in the process of rolling out an HCI scheme for its own staff, as was the Department for Work and Pensions, which has far more staff than the DTI. In addition, the CBI, which actively advocated the scheme for two years at the Government's behest, reacted to the change with consternation. On
"This flies in the face of everything the country is trying to achieve on skills. Seventy-five per cent. of people affected by this change are lower paid taxpayers. They will want to know why the Government has deprived them, and their families, of this opportunity . . . computer literacy has to be a given in a globally competitive economy."
In addition, as we have heard, Brendan Barber of the TUC wrote directly to the Chancellor requesting an urgent rethink, as indeed did my hon. Friend Mr. Osborne.
Stewart Hosie (Spokesperson (Chancellor of the Exchequer; Home Secretary); Dundee East, Scottish National Party)
The hon. Gentleman mentioned flexibility and competitiveness. In the Budget, the Chancellor said that
"of 3.4 million unskilled jobs today, we will need only 600,000 by 2020."—[Hansard, 22 March 2006; Vol. 444, c. 292.]
Does he agree that the scrapping of the scheme, which created flexibility and competitiveness by giving people skills, would be disastrous if we wish to create skilled labour to replace unskilled labour?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I agree. The Chancellor said little about the initiative in his Budget speech but, equally, he said little about the national health service. However, he evidently tried to hide what was being done. Our role in the House is to try to expose that, and then try to persuade the Government to change their mind.
There was adverse reaction from employers who have promoted the scheme to their employees, as the Government encouraged them to do. Andrew Unsworth, the head of e-Government at the city of Edinburgh council, which is Labour-run—at least until Thursday—sent the following e-mail this morning. [Interruption.] That would be lucky for the Labour party. Mr. Unsworth said:
"City of Edinburgh Council has run two very popular schemes for our monthly staff since March 2005. Take-up rates were over 2000 employees, nearly 16 per cent. of those eligible.
We were preparing to launch another scheme making computers available to our weekly and fortnightly paid staff who are predominantly on lower rates of pay. These pay groups may not otherwise be in a financial position to afford computer equipment. We viewed this as an excellent way for employees to benefit from a computer and its educational properties for both them and their families."
He continued:
"This scheme provided an excellent platform to improve literacy, communication skills and overall education for employees and their families. City of Edinburgh is currently introducing more computers to schools and several staff had indicated that they were participating in this scheme for the benefit of their children.
City of Edinburgh Council have followed the HCI guidelines very closely and only included computer packages in their scheme. I would hope that the government would consider reversing its decision in this matter even if it means tightening the guideline to prevent the alleged abuse of the scheme."
Similarly, Mike Clayton, finance director of Essex fire authority, wrote to me on the
"Take up for the scheme was excellent with over 1 in 5 employees joining. The level of take up was particularly high for firefighters where over 1 in 4 chose one of the computer packages available."
Mr. Clayton amplified his point:
"15,000 nurses took up the scheme last year. Many low paid nurses, fire officers and other key workers have access to IT for the first time because of HCI. Given the importance of computers in the lives of nearly all citizens, I hope that this proposal can be withdrawn and the take up of computers extended."
Kevan Jones (North Durham, Labour)
The hon. Gentleman has concentrated on the low-paid gaining access to computers, but is it not the case that higher-rate taxpayers accounted for 25 per cent. of the take-up of the scheme, even though they account for 10 per cent. of taxpayers? His arguments would be more credible if the scheme ensured that the money went to the low-paid, as people who pay a higher rate of tax can afford computers without Government assistance.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
We have already established—and everyone accepts— that 75 per cent. of people who benefited from the scheme were on the standard rate of income tax or lower. The hon. Gentleman wishes to raise the issue of higher rate taxpayers and may wish to know that the general secretary of the TUC made a similar suggestion. I would be interested to hear the Government's answer to that proposal and to find out whether they would be prepared to retain the scheme on that basis—
Stephen Hesford (PPS (Rt Hon Baroness Amos, President of the Council), Privy Council Office; Wirral West, Labour)
rose—
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I have given way several times to Mr. Jones and I want to make some progress. I may give way later to Stephen Hesford, particularly given that we greatly enjoyed his intervention on my Second Reading speech last week.
I move on now to deal with the reaction of the IT industry, including the companies that had been created to fulfil the home computer initiative objectives by facilitating the supply of computing equipment to both public and private sector enterprises, many of which will go out of business if the provision goes through. The Government's regulatory impact assessment, which was rushed out just last week in response to the furore over this issue, admits that, exceptionally, no small firms impact test has been carried out in this instance, although that would usually be the procedure. It also notes in paragraph 62, in classic Whitehall jargon:
"HMRC does expect there to be an impact for HCI providers. Particularly those in the small business sector that have been set up specifically to provide HCI schemes . . . will be impacted more significantly in the short term than businesses with more diversified business models".
The IT industry body, Intellect, put it more succinctly after the Budget:
"There are about 2,000 individuals working in this industry that Gordon Brown has just signed redundancy notices for".
Before Ministers seek to accuse anyone of crying wolf in this matter, I have to inform the House that the programme of redundancies in the companies established to support the HCI initiative has, unfortunately, already begun. Last month, Red PC became the first company to fall victim to the abolition of the HCI when it was reported that it was about to call in the liquidators. On
"As a small company solely involved in providing HCI, I was completely knocked back by the Chancellor's decision. The government's Digital Strategy sets targets for 2008 so I thought the HCI scheme would run until then, and at the very least we would have 12 months notice. To be given 15 days is appalling."
At a time when unemployment is unfortunately on the rise again, it will be a great shame to see further high-tech companies going into liquidation if clause 61 remains in the Bill.
Most importantly millions of people across the country who might have been able to take advantage of the scheme to improve their and their families' IT skills are now to be denied that opportunity. The Chancellor will now disappoint them if the scheme is withdrawn. Moreover, even those on the existing scheme will be allowed to benefit from it only until whatever agreements they have reached with their employers have expired. That is confirmed by paragraph 71 of the regulatory impact assessment:
"Changes to the exemptions for computers and mobile phones were announced in the Chancellor's Budget statement on
In other words, at that point they will be caught by the changes. Even the 500,000 people who are benefiting now will not do so for much longer, once their individual agreements with their employers expire.
Stephen Hesford (PPS (Rt Hon Baroness Amos, President of the Council), Privy Council Office; Wirral West, Labour)
rose—
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I promised to give way to the hon. Member for Wirral, West and I shall keep my word.
Stephen Hesford (PPS (Rt Hon Baroness Amos, President of the Council), Privy Council Office; Wirral West, Labour)
I am obliged to the hon. Gentleman, who has moved on to the point that I wanted to raise. The problem is his umbrella assertion that there is an HCI industry. I do not readily accept that there is such an industry that will be abolished by the legislation. I believe that the figures quoted by my right hon. Friend the Paymaster General are correct and that there has been a take-up over the last couple of years of only 4 per cent. That being the case, it is not clear what industry has supposed to have grown up over that time. The hon. Gentleman is talking about an industry that sells computers, which has been around for a long time. That industry will continue, irrespective of whether this particular legislation goes ahead. The hon. Gentleman has not taken into account the fact that the scheme will move on to a different phase, focused on provision for the elderly and the unemployed who really need these IT skills—[Interruption.]
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I thank the hon. Gentleman for giving way before I was tempted to intervene on him. He is trying to play games with the statistics. He said that the scheme had only a 4 per cent. take-up, but that is nonsense. I have already provided one example of an organisation that saw take-up of 16 per cent. and it has been at that level or higher for a number of organisations. The take-up among employers pushing the scheme has been very healthy and I have already argued that the scheme was about to take off with other organisations—[Interruption.] I have to ask Government Members who are intervening from sedentary positions why, if the scheme was so bad, both the Department of Trade and Industry and the Department for Work and Pensions were about to roll it out for their own employees. Perhaps some Government Member could stand up and answer that question. I will gladly give way to anyone prepared to do so. Silence.
Perhaps the greatest problem in the whole sorry saga is the effect on individuals who have benefited from the scheme. I have already explained how even their benefit will be time-limited. In order to understand how they will be affected, I cite the example of one HCI provider, the company Futuremedia, which established a website to allow subscribers to provide feedback on the scheme. Here are some examples from respondents outlining the benefits that they believe the scheme confers. I have taken four representative examples. One respondent said:
"I joined so that my twelve-year-old daughter would not be disadvantaged when it comes to homework, research and preparations for exams. To date it has proved to be money well spent."
The next respondent said:
"I joined because it gave me the chance to involve myself in the process of gaining new skills. This without the direct pressure of any direct work-related scheme but with help at hand and the knowledge I could work at my own pace in my own time."
A third said:
"I joined as I was looking for a computer for myself but couldn't afford to buy one outright; when the offer came along I decided to apply as it was a cheap and easier way of affording a new computer."
The fourth said:
"As a man approaching my 50th birthday I find it vital to be dragged into the 21st century learning computer skills, as more and more they become an everyday part of life."
Those are just a few of the numerous examples of how HCI was benefiting people in exactly the way intended, allowing them to gain both IT skills and the chance to learn about other subjects online and giving access to a PC to those who could probably not otherwise afford it. All that could be lost if we do not delete clause 61.
For all those reasons, we believe that the scheme needs to be retained not only for the UK IT industry, which could quite conceivably be harmed by the clause, or the 2,000 or so whose jobs could be lost, but for the many employees in the country who would have taken advantage of HCI in the future to help maintain Britain's competitiveness. We believe that not least because all the indications are that HCI was just beginning really to take off.
I now move on to options to save the scheme by producing a revised system, under which it could operate alternatively in future—
Adam Afriyie (Windsor, Conservative)
Just before my hon. Friend moves on to establishing his case for a revised scheme, does he agree that the low take-up of technology at home is not the only problem, because about 500,000 people will have to change their behaviour, which has associated costs? If it costs £50 or £100 to change the arrangements, that could well work out in the region of £25 million to £50 million in additional costs incurred by business.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
My hon. Friend is right. Many people entered into the arrangement in good faith, having been encouraged to do so by their employers. Indeed, they were ultimately encouraged to do so by the Government. Now, suddenly, that benefit is effectively being withdrawn, or will be once their individual contracts with their employers expire. Those people will understandably feel let down—[Interruption.]
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I will briefly, but then I want to outline the alternative.
Peter Luff (Mid Worcestershire, Conservative)
The Paymaster General is muttering from a sedentary position something about it being for work. My hon. Friend should be allowed to answer that point, because the Paymaster General obviously does not understand the purpose of the scheme. A DTI document published in January 2004 lists among the benefits for employees' education for their children, entertainment, e-mail and purchasing goods and services; it was clearly intended for home use. It was all about spreading understanding of computing, so I repeat that the Paymaster General obviously does not understand the purpose of the scheme.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
In my experience, the Paymaster General mutters a lot from a sedentary position. [Interruption.] I really think that she should go away and re-read her brief. Having heard her remarks—I shall listen, of course, to what she says in her wind-up speech—I am not certain that she realises what exactly she is abolishing.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
On a point of order, Mrs. Heal. I have not said a dicky bird. I have been sitting in my place listening to the debate. I do not mind being criticised by the hon. Gentleman, but does he need to make things up?
Sylvia Heal (Deputy Speaker)
Order. That is not a point of order for the Chair. May I ask all those participating in the debate to concentrate on the matters in hand? Let us have a little calm.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
Those who know the Paymaster General well can judge for themselves.
On the options to save the scheme, the Treasury has sought to justify the scrapping of the home computer initiative by citing abuse. On Second Reading the Paymaster General appeared to have no other defence of the Chancellor's ill thought-out decision than to make noises about iPods from a sedentary position. It is true that a loophole existed. A number of products that are entertainment rather than educational, and so are not exactly in the spirit of the scheme, such as MP3 players, game consoles and digital cameras, were ordered in some cases and qualified for the tax exemption because the HCI guidelines from 2004 gave only broad definitions. So there was a loophole which some people attempted to exploit.
However, the Treasury has produced little clear evidence, even tonight, of the extent of the abuse that it claims was occurring, which we believe was only at the margins. As I pointed out in an intervention, there was little hard evidence of the abuse in the Government's own regulatory impact assessment, which they produced last week in a desperate attempt to justify the abolition of the scheme.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
In a moment.
In any event, it would not be difficult to tighten up the rules by producing guidelines that give details about the items to which the tax exemption would not in future apply. It is very simple to do that if the intention is to combat the abuse. Throughout the Bill—
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
In a minute.
Throughout the Bill, we will debate ad nauseam all sorts of anti-avoidance proposals that the Government have introduced in the Bill—some of which are highly complex and technical—to try to prevent what the Treasury determines to be abuse. It would be simple to produce relevant guidelines; they would be less complicated than some of the measures that we will debate on real estate investment trusts and group relief. If the Treasury wanted to maintain the scheme, it could easily produce guidelines.
There is a precedent. In Sweden, the Government have for some time operated a scheme similar to the HCI. There were similar concerns there about people seeking to exploit the tax advantages to purchase equipment outside the original spirit of spreading IT skills. However, in 2004, instead of scrapping the scheme, the Swedish Government found a workable solution, by tightening up the rules on qualifying equipment.
For example, the rules stipulated that in future only one personal computer would be allowed per employee; some had attempted to order more than one. The monitor size of those PCs was restricted to 30 in. Peripherals and accessories were divided into two categories; those primarily used connected to a PC, such as keyboards and printers, which were allowed, and those whose primary usage did not involve a PC, such as digital cameras and MP3 players, which were specifically not allowed.
Such restrictions would be relatively simple to introduce, were HMRC to produce a list of equipment that would continue to qualify, perhaps reinforced by another list of equipment that was specifically excluded from the scheme, such as iPods and MP3 players.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
In a minute.
The Government cannot hide behind excuses, such as the difficulty of defining qualifying equipment, because we have just provided them with an empirical example showing how another nation tackled the problem. Moreover, the Government's own regulatory impact assessment concedes that continuing the scheme with tighter guidelines on qualifying equipment, which is characterised in the RIA as option 2, would virtually halve the estimated cost of the scheme to the taxpayer, as projected by the Treasury out to 2010–11, thus allowing the scheme to survive, retaining its key benefits at a reduced cost to the taxpayer on a more tightly defined basis. That should constitute a win-win all round. I urge the Government to take the opportunity while there is still time.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
In a moment.
I come to an important point—the definition of "not significant", which the Paymaster General briefly addressed in her introductory remarks. If the existing exemptions are removed by clause 61, an associated issue arises; how computers provided by employers to employees will be taxed. As the RIA states at paragraph 22:
"If significant private use is made of a computer provided for business purposes a tax charge will arise on the private use element based on the value of the computer and the extent of the business and private use. Employers will also be liable to Class 1A National Insurance contributions."
That could lead to a significant compliance burden for employers if they are required to police the extent of private use by their employees. As the British Chambers of Commerce states in The Times today,
"Businesses have already seen the cost of implementing government regulation rise to over £50 billion since 1998, so to introduce in the small print of the Budget another measure such as this one will further serve to burden employers and impact on their ability to compete effectively."
The Government have responded by arguing that there will be no tax or NIC liability if such use is deemed "not significant", but have not clarified how that will be defined. If clause 61 remains part of the Bill, it is vital that that is clarified so that both employers and employees know where they stand.
The RIA states at paragraph 73 that HMRC will
"invite employer representatives to work with them as they develop guidance which will articulate their approach for handling compliance and administration issues that flow from the changes announced in the Budget."
I think I heard the Paymaster General reiterate, but I will ask her to repeat beyond peradventure in her winding-up speech, that the Government are planning to consult industry so that they can clearly define "not significant" and the matter can be clarified once and for all.
If that is the Government's intention, can the Paymaster General estimate how long the process will take? For instance, does she anticipate that it will be concluded successfully by July, as suggested in paragraph 74 of the RIA? Even better, if clause 61 were removed from the Bill, the current exemptions would remain in place and the issue would not arise. As The Times argued this morning in a leader sub-titled "The Treasury sends another nasty message to business",
"Treasury officials have promised to take a 'practical' view of how much private use should be regarded as 'significant'. The most practical approach, when the issue is debated in the Commons today, would be to withdraw it. We are watching."
That is another good reason for deleting clause 61. I shall now give way to Mr. Wills.
Michael Wills (North Swindon, Labour)
I am extremely grateful to the hon. Gentleman for finally giving way. He has moved on from the point on which I wanted to ask him to clarify his intentions. However, I will take advantage of his generosity and ask him to be a little more specific about how he intends to define the scope of the reformed HCI, as he would regard it. Does he accept that the technology is moving so fast that it is difficult to draw the parameters? When the scheme was originally defined, it was appropriate for the technology. He acknowledges that abuses take place, although there is some disagreement about the extent. Those have come about partly as a result of changes in technology that were not conceivable. Although he has tried to provide a constructive alternative, two or three years down the line the technologies may well have moved on again. Is it not right to try and address abuse in the light of the rapid changes in technology?
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I thank the hon. Gentleman for conceding that we have tried to be constructive about the matter. I welcome the fact that as a former Minister in the Department of Trade and Industry, he has put that on the record. Those canny Swedes thought of that possibility, too. They realised that as technology moved on, particularly in such areas, the list would need to be reviewed regularly to make sure that the definitions remained current. It should be perfectly possible for us to do that too. We come up with an inclusive list and an exclusive list and we review them periodically—say, once a year—to make sure that the definitions remain current. That seems, to coin a phrase, not to be beyond the wit of man, or indeed woman.
To summarise, the HCI scheme has been important in spreading computer literacy among our population, including the lower paid, in order to help our country compete in the 21st century. As such, the scheme should be retained and not effectively wound up, as the Government propose. It should be possible to devise a revised version of the home computer initiative that allows the scheme to survive for its intended purpose, while introducing safeguards to combat the alleged fraud. If the Scandinavians are able to do that, I see no reason why we could not do it as well. The situation is a good example of the old maxim, "Where there's a will, there's a way".
The key question is whether there is a will on the part of the Government to save the scheme, or whether the Chancellor is so desperate for the £300 million in revenue which the Treasury's Red Book estimates would be raised by scrapping the HCI scheme from 2006–07 to 2008–09. Will avarice take over, and will the scheme be cancelled regardless of its obvious merits? Option 2 in the Treasury's regulatory impact assessment would allow the scheme to survive on a honed-down basis.
If we do not hear a convincing argument from the Government tonight—I do not find the digital inclusion team convincing—we shall simply assume that the money that the Chancellor is hoping to recoup has taken precedence over all other considerations and that a financially desperate Chancellor, who loves to talk about the technological revolution and the need to promote a high skills economy, has simply taken the cash. That decision is doubly detrimental, because it will damage our ability to compete in high skills industry with the likes of China and India in the 21st century.
I urge Ministers to draw back from that course while there is still time and to work co-operatively with other parties, industry and scheme users to save that very important scheme. I shall listen to the Paymaster General's reply with genuine interest in the hope that, on behalf of the 500,000 scheme users and the 2,000 employees who will be directly affected, common sense may yet prevail and that that particularly bad decision by an analogue Chancellor may yet be reversed.
Rob Marris (Wolverhampton South West, Labour)
I thank Mr. Francois for his speech, a large part of which was thoughtful, although he will not be surprised to learn that I disagree with much of what he said. If clause 61 passes into law, computers provided for use at home solely for business purposes will continue to be allowed, and I shall return to that point.
The hon. Gentleman accepts that times change. The Paymaster General has said that the take-up rate for the HCI scheme in the first four years after its introduction in 1999 was 29 per cent. and that it then fell to 4 per cent., which shows the operation of the law of diminishing returns. I know that the hon. Gentleman was not a Member of the House in 1999, but I strongly suspect that his party failed to support the HCI when it was introduced and when it was reviewed in 2003—he can correct me on that point, if I am wrong. He, along with Peter Luff, now supports the HCI, and the thrust of his speech seemed to be that times change and that the scheme has reached lift-off.
It is true that times change, but we must put the matter into context, which the hon. Gentleman addressed only at the beginning and end of his speech when he discussed India, China and globalisation. He issued a challenge to the House, which I shall answer. The hon. Gentleman, and most Conservative Members in the Chamber, want to retain the HCI, because it is an attempt to upskill our society.
The Government have spent a huge amount of taxpayers' money on trying to upskill our society, and they continue to do so. I will not reel off the figures, because we have all heard them, but Labour Members agree that that spending was certainly correct, whereas Conservative Members are somewhat divided. For example, the education maintenance allowance was piloted in my constituency, and, although I cannot prove it, I posit as cause and effect the fact that staying on rates at 16 greatly increased. That measure involved investing a lot of money in a long-term process of upskilling our economy, which is the context in which we need to understand the HCI.
The hon. Gentleman mentioned the trade union learning fund. I served in the Committee that considered that legislation, where Conservative Members opposed it. The trade union learning fund has been very successful as part of a mosaic of measures to upskill our economy. The HCI was part of that mosaic, and the Government now say that they would rather that other things were part of it, too.
As far as I am aware, the HCI did not cover students or pensioners, unless they happened to be in paid employment. As part of the mosaic of upskilling, the Government have been pouring computers into schools. All hon. Members visit schools in their constituencies— I am sure that you have done so in the west midlands, Mrs. Heal—where interactive white boards have been installed, many teachers have been provided with laptops, and increased numbers of computers have been made available to pupils. Indeed, some schools in Wolverhampton are successfully piloting the use of personal digital assistants—I do not know whether PDAs fall within the category of computers, because, as my hon. Friend Mr. Wills has said, technology moves on so quickly.
Shortly before the Budget, the hon. Member for Rayleigh asked about support for the scheme by the Department for Work and Pensions and the Department of Trade and Industry. However, the Budget included a lot more money for education, and what is known in the vernacular as "Brown money" consists of money that goes directly to schools—from memory an average secondary school can receive up to £198,000 in the following financial year. It is surprising that the hon. Gentleman has suggested that the abolition of the HCI is simply an act of desperation by the Chancellor, because the Budget included far more extra money for education, which affects skills both directly and indirectly, than will be saved by the abolition of the HCI. The further education White Paper was produced at the beginning of March, and adult learning grants allow people to upskill to level 2 and under-25s to upskill to level 3. The HCI was part of that mosaic of upskilling.
Whether Conservative Members like it or not, those taking advantage of the HCI disproportionately consisted of higher-rate taxpayers. As my hon. Friend Mr. Jones has pointed out, that is not the case in absolute numbers, but it is true proportionally. In round terms, higher-rate taxpayers make up about 10 per cent. of taxpayers, but they made up 25 per cent. of those who benefited from the scheme. That is not to say that we should abolish the scheme just because higher-rate taxpayers benefited disproportionately, but it is worth bearing that point in mind against the backdrop of where the Government want to go on skills provision. We must consider the HCI in that context.
Kevan Jones (North Durham, Labour)
Does my hon. Friend agree with the Low Pay Commission, which has pointed out that many part-time women workers would not benefit under the scheme?
Rob Marris (Wolverhampton South West, Labour)
I did not know that, although it does not surprise me. Although the HCI had some success, times change and we must move on.
It is unfortunate that the HCI appears to have been axed overnight rather than its withdrawal being phased over a year. It is entirely proper for the Treasury to examine whether a tax measure produces a certain effect and whether that effect could be produced through the better use of taxpayers' money. The Opposition would rightly berate any Government who introduced a measure to help with skills and who did not change it for years and years rather than keeping it under review to see whether it worked, whether behaviour changed as a consequence of it and whether they should put taxpayers' money into something else.
Peter Luff (Mid Worcestershire, Conservative)
I am grateful to the hon. Gentleman, who is a colleague on the Trade and Industry Committee. On the abolition of the scheme, I would not be so angry if a year's notice had been given on the intention to ban the scheme, which would have been the right way to proceed. The Paymaster General must address why the change is so sudden, because the matter could have been handled much more elegantly and effectively and with less serious consequences for the employees who risk losing their jobs.
Rob Marris (Wolverhampton South West, Labour)
I am sure that the Paymaster General will address that issue later, if she catches your eye, Mrs. Heal. I believe that the hon. Gentleman has a constituency interest in the matter, for which he is rightly fighting. In terms of the economy as a whole, however, we must consider whether, for example, fewer computers will be purchased because of the abolition of the initiative. I do not know the answer to that, but I suspect that many fewer computers will be bought. While, sadly, there may be the P45s to which the hon. Gentleman referred in his constituency, in terms of the economy as a whole more people may be employed in outlets such as Dixon's, which is going to call itself Curry's, or wherever, selling computers to people direct instead of their being refracted through their employers. I do not know the research on that, and I do not know whether the Treasury does.
The hon. Member for Rayleigh mentioned what was said in The Times, and probably in other newspapers, about the idea, which I am sure that the Government do not have, of taxing personal e-mails. I would draw an analogy with company cars. I am sure that the House has spent a lot of time over the years discussing the taxation of company cars. The matter has come to rest in the past few years because, as a House and as a society, we have reached a modus vivendi and a balance as to how much company cars should be taxed. In most cases, company cars are used for business purposes as well as domestically. A car is an expensive piece of kit. Why have a car that one uses at work, and that one then has to park at work, or, if one can prove that there is no secure parking at work, drive home and leave there? When one then went to the supermarket, one had to go in a different car that one had bought oneself. We all recognised that that was a bit silly.
The taxation of part of the value of company cars is done on a fairly rough and ready basis. People do not go round saying, "How many miles have you driven?" There used to be banding. I think that there still is—I do not have a company car any more—but they are pretty broad bands. One does not have to clock every mile as regards whether it is business and personal. There is a contradistinction between the cost of enforcing something and simply getting in some tax while not spending too much on enforcement.
Perhaps we can have a similarly rough and ready approach to computers provided by employers for business use at people's homes by assuming that, say, 75 per cent. is business use as against 25 per cent. that is personal use. Otherwise, we could go on and on, ad infinitum, with the taxpayer subsidising computers at home for people's private use, which was a measure to kick-start IT literacy and competency in 1999. That may be the route that Sweden is taking, and good luck to it if it does.
The Government are absolutely right to set the Bill in the context of the mosaic of upskilling measures for our economy, and absolutely right to review it, but I wish that they had given it a little more time instead of doing it overnight.
Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth and Camborne, Liberal Democrat)
I welcome the announcement of a dedicated digital inclusion team and hope that it will really tackle exclusion issues. Will the entirety of the £370 million in savings that the abolition of the scheme will generate be transferred into that, or will some go into the Treasury pot?
If the clause remains in the Bill, it will signal the end of a very successful scheme that has helped 500,000 people, more than 75 per cent. of whom were in the lower-income tax brackets. Those people gained access to computers at home, not only for them but for their families. Siemens told us that its participation rate is more than 35 per cent.
Can the Paymaster General tell us more about how the decision to end the scheme was made? I understand that it was made a matter of hours before the Budget with very little consultation with the Department of Trade and Industry. The explanatory notes give this reason for the decision:
"There is also evidence to suggest that the exemption has been applied beyond the scope of its original intention. Some HCI providers have offered packages that include games consoles and MP3 players and allow employees to buy equipment through salary sacrifice arrangements rather than borrow it".
Will the Paymaster General not only write to Peter Luff with that evidence but place it in the Library so that all Members can have access to it?
The Government claim that there are fundamental problems in two key areas, yet neither need be terminal for the scheme. All that is needed is clearer definition of the existing regulation. The Government would be more believable if, when they gave their reasons, they accompanied them with the hard evidence which, as yet, we have not seen.
The first problem is that of the definition of a computer, which in the original regulation is defined as "computer and peripheral equipment". There is a precedent in terms of how that has been resolved in other countries. Sweden tightened up its definitions of "eligible equipment" and "ineligible equipment", and made it clear that only one computer per household would be eligible. It might be worth paying attention to another Scandinavian precedent—that of Denmark, which cancelled the scheme but brought it back a year later. The Government might be forced to eat their words in future. There are ways of coming up with a series of workable definitions that continue to bring benefits to employees and their families. It should not merely be a case of robbing Peter to pay Paul in order to improve inclusion in other deprived groups.
On the wider issue of salary sacrifice, I understand from the HCI Alliance that the Office of Fair Trading has to approve every single hire agreement that goes through the scheme, so that if a claim fell outside the terms of the scheme, it would not qualify for the exemption. If the Government were able to provide evidence of such abuse, that would help clarify the situation. Certainly, the HCI Alliance has no evidence that it was being abused in that way or beyond the definitions of the regulation.
Withdrawal of the scheme will create a massive compliance problem for employees and employers. The regulatory impact assessment is very helpful. It explains that if the exemption is removed, all employees are technically required to log the time that they spend at home on their work computer using it for leisure purposes, such as checking e-mails or playing computer games, because it will be taxable. The removal of the scheme will create further confusion, not remove it.
Paragraph 18 of the RIA states:
"Where employers and their employees enter into new agreements to loan computer equipment for private use on or after
The RIA goes on to say in paragraph 22:
"Some employees may be provided with computer equipment or mobile telephones solely for business use. In this situation as long as any private use that it is made of the equipment is not significant there will be no liability to tax. If significant private use is made of a computer provided for business purposes a tax charge will arise on the private use element based on the value of the computer and the extent of the business and private use. Employers will also be liable to class 1A National Insurance contributions."
I will be grateful if the Paymaster General can explain what "significant" means and how employers are planning to fill out their tax returns.
Stewart Hosie (Spokesperson (Chancellor of the Exchequer; Home Secretary); Dundee East, Scottish National Party)
How does the hon. Lady understand the following example? If an employee has a computer for business use and learns to use a new computer package or software development tool that is not directly related to the work that they do but is in line with what the company does, does that count as personal or business use?
Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth and Camborne, Liberal Democrat)
I am sure that the hon. Gentleman could have an interesting discussion about that with the taxman.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I can help the hon. Lady on this point. It may be confused in her mind, but it is not confused in employers' minds. The interpretation of what is significant use was in operation before 1999, when the exemption came in, and employers managed to operate it perfectly well. I have said to the Committee that I am happy to ensure that that is restated in that way. Employers have used it before and knew what it meant, and it will not be an intellectual challenge for them.
Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth and Camborne, Liberal Democrat)
I hope that employees feel the same way as employers.
Another major problem is the way in which the scheme has been axed with no warning. That has had a negative impact on a variety of businesses. Last week, Meriden announced profit warnings, which are partly due to its significant involvement with the HCI scheme.
On a smaller scale, I was contacted by a business called BizApp, which is based in Cheltenham and was expressly set up to help smaller businesses access the scheme. It now faces the loss of six jobs. It established its business because it identified precisely the same problem about which the Government are now talking: it is difficult for smaller businesses to access the scheme. It found a solution, by automating the process and providing the three-year warranty and support package that so many people found attractive and that small businesses could manage to administer. It wrote:
"We became involved in HCI in 2004 and realised very quickly it was impossible for the industry to bring HCI to the Small to Medium Business Sector because the process was still too complex . . . We therefore developed an online platform which automated the whole process. This was no easy task because it was necessary to ensure that all the relevant legislation was adhered to and the platform allowed resellers who use our platform to make substantial savings over the manual methods."
The company was therefore clear that it had identified a problem and found a way in which to overcome it. However, it now faces making its staff redundant because the Government claim that there is insufficient participation from those on lower incomes and more deprived sectors. It is illogical that it cannot now participate in the process of helping people access the scheme.
It is disturbing that the Government have taken so long to provide any indication of the mechanisms on which they will focus their resources. It is interesting that option 2 was rejected because it did not help people from deprived backgrounds. Option 3 announces all the savings and gives no idea of how the Government would target support. That is important because many businesses have invested in and built up infrastructure to provide the HCI. They could use their expertise and investment to provide the scheme to people from more deprived backgrounds, yet all elements of certainty for their business have been taken away. That will have an impact on their confidence to invest in any future scheme and future Government proposals.
Kevan Jones (North Durham, Labour)
I have been listening carefully to the hon. Lady. How will low paid workers, the unemployed or the elderly, to whom my hon. Friend Rob Marris referred earlier, benefit from the scheme?
Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth and Camborne, Liberal Democrat)
I can give the hon. Gentleman a precise example of someone to whom I spoke this morning and who is using the HCI to buy a computer for his mother, who is a pensioner. The whole point of the HCI was to bring computers into private use and encourage their use in the home. Why, therefore, has the Paymaster General rejected modifying the scheme to ensure that the abuses that she mentioned do not take place?
Peter Luff (Mid Worcestershire, Conservative)
For the second time in the debate, the Paymaster General indicates that she does not understand the purpose of the scheme that she is abolishing. She shook her head in dismay at the example that the hon. Lady provided, when, according to the Department of Trade and Industry document, which was produced jointly with the Department for Education and Skills and other Departments, that is exactly the sort of purpose for which the scheme was established. It was to take computers into homes, not for business purposes. The Paymaster General clearly does not understand that point.
Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth and Camborne, Liberal Democrat)
The hon. Gentleman makes a good point. The scheme was an initiative to bring computers into the home. Why, therefore, did the Paymaster General reject option 2 and why was the new scheme announced only today? I hope that she will reply in her winding-up speech.
Michael Wills (North Swindon, Labour)
I welcome today's announcement by the Government of the digital inclusion team. It is welcome not least because it focuses on the overriding objective of ensuring that all those who are potentially excluded from the benefits of access—everyone who has spoken said that such access was essential—to fast-changing new technologies remain the priority. The emphasis will be on them, not some specific scheme, which, I accept, was relevant when it was introduced and was, incidentally, opposed by Opposition parties at the time. We should focus on the ends, not the means. I therefore greatly welcome the digital inclusion team but I want to ask for reassurance about two matters.
First, my right hon. Friend the Paymaster General spoke generally about those who are potentially excluded from the new technologies. I should be grateful for an assurance that one of the key focuses of the new digital inclusion team will be lower paid workers, especially those on the national minimum wage for whom access to new technologies could be crucial to help them upskill and move up the employment ladder, as my hon. Friend Rob Marris rightly stressed.
The second point is more technical. My right hon. Friend referred to digital television. Of course, that could be enormously important. We are about to move to a switchover from analogue to digital television and that will clearly be important in many different ways. However, I hope that she will reassure me that she will not ask the digital inclusion team to rely on digital television as the main passport to literacy in the new technologies. It is important to bear in mind that there will be a plethora of ways in which to access the new technologies and that the computer is likely to remain important for most people, if not everybody, in that regard. I should therefore be grateful for some reassurance on those points.
Peter Luff (Mid Worcestershire, Conservative)
Although you rightly rebuked us, Mrs. Heal, for getting a little excitable earlier in the debate, I know the Paymaster General well enough to realise that she will not take it personally. In that spirit, I join my hon. Friend Mr. Francois in wishing her an extremely happy birthday. I am sorry that she has to pass it here.
I have two separate concerns. First, was the scheme a good thing—yes or no? A related question is whether it could have been improved. Secondly, was the manner in which it was abolished satisfactory? Although my colleague on the Committee, Rob Marris, said that I spoke from constituency interest, as Chairman of the Select Committee on Trade and Industry, I am also worried about the impact of the scheme on the Government's strategy for bridging the digital divide to build new societies. The scheme was originally believed to have played an important part in the process. I freely declare my constituency concern, but I also have a genuine anxiety about the broader issues that precipitate change in Government policy raises.
The scheme's demise deserves a tribute along the lines of Mark Antony's celebrated speech in "Julius Caesar":
"Friends, Romans, countrymen, lend me your ears;
I come to bury Caesar, not to praise him.
The evil that men do lives after them,
The good is oft interred with their bones".
I come to praise the home computing initiative, not to bury it—the Chancellor has done that. The good that the scheme has done lives on. The computers are in homes and much good has been done. The scheme has made a contribution to fulfilling the Government's key objectives of improving IT skills and productivity and increasing access to the internet in UK homes.
I repeat that the Paymaster General made several sedentary comments earlier that suggest that she does not understand the purpose of the scheme. It was not a business scheme but was provided by businesses to their employees for personal use. That was what made it so strong, successful and important. I hope that she has now understood that. The scheme was not for business use of computers at home.
Stewart Hosie (Spokesperson (Chancellor of the Exchequer; Home Secretary); Dundee East, Scottish National Party)
The hon. Gentleman has made that point a few times during the debate. On
"With effect from
Perhaps she understood the point on
Peter Luff (Mid Worcestershire, Conservative)
That is a helpful intervention, which speaks for itself.
The scheme was universally approved by the outside world, including all the stakeholders—to use the Government's word. Although consensus is normally a cause for some concern, it is occasionally right. Those who provided the equipment, those who used it, the trade unions, the CBI—indeed, everyone—believed that the scheme was good and an excellent example of an effective Government-private partnership.
Alas, the evil that the Chancellor has done by abolishing the excellent scheme will live on. Jobs will be lost. There is an HCI industry and companies had invested large sums of money in developing marketing initiatives, in the expectation that it would run for at least an extra two years. One of the questions that I tabled to the Chancellor, to which I have received no reply after more than a month, asked why it has been abolished sooner than anticipated. Large amounts of investment were made on the back of an assurance that the scheme was important and that the Government were committed to it.
Stephen Hesford (PPS (Rt Hon Baroness Amos, President of the Council), Privy Council Office; Wirral West, Labour)
I am interested in the hon. Gentleman's argument that an HCI industry exists. Is he arguing for a state subsidy for that industry?
Peter Luff (Mid Worcestershire, Conservative)
No, not at all. The hon. Gentleman does not understand how much money the industry has had to invest to make this scheme work. After the debate, I will happily show him the Government's own documentation on how employers and employees should implement the scheme. It is very complicated and difficult; it is not straightforward. The Department for Work and Pensions had a significant sized team of officials working on how it should be implemented, but that scheme has now been abolished, when it was on the point of succeeding.
As I said, the scheme was difficult and complicated. It did not work in 1999, and it was effectively rebooted in 2003 and relaunched in 2004. It is just beginning to have an impact now, which is what makes this precipitate decision so unfortunate. Evesham Technology will survive this body blow, but income from the scheme represents a quarter of its turnover. About £1.5 million a month will disappear overnight.
I was going to make this point to the Paymaster General later, but I have been drawn into making it now. I am about to be nice to her, so I hope that she will listen. No? I will not hold my breath. I might come back to the point later when she can hear. I was about to express my great gratitude to her for the way in which she reacted so diligently—
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I can assure the hon. Gentleman that I was not speaking when he accused me of doing so. I am listening to him, but I do not need to look him in the eye to hear what he is saying.
Peter Luff (Mid Worcestershire, Conservative)
I am sorry. I thought that the right hon. Lady was reading something.
I am genuinely grateful to the Paymaster General for the way in which she responded to the concern about the impact of the Office of Fair Trading's involvement in the initiative. She was magnificent. She now looks slightly puzzled. Each and every scheme approved under the initiative had to go to the OFT because it technically breached the terms of the Consumer Credit Act 1974. There was huge backlog of cases, and if the scheme had been abolished overnight—as was originally intended—many thousands of computers that had been earmarked for consumers would have been lost. Now, Evesham Technology will have four more months' turnover at £1.5 million a month, so the Paymaster General's action—for which I had to fight hard with her and the OFT—was really appreciated. She has enabled companies such as Evesham Technology to plan for the future, instead of being dumped in it very suddenly. I am genuinely grateful to her for that.
However, a very worrying evil has been done. There is no doubt that those involved in the IT sector—often big multinational companies, not just small ones—have been shocked by the precipitate way in which this Government strategy has suddenly been torn up. I can tell the Paymaster General with absolute certainty that this will reduce industry support for working with the Government on such schemes. The industry will not be prepared to commit management resources and expense to such projects if the Government are suddenly to decide to throw them out.
Sadly, I am not allowed to name the company involved in the scheme, but I can tell the Paymaster General that one multinational IT company that had earmarked a multi-million pound investment for an education IT partnership in this country has now decided to abandon it and to move to another of our European Union competitors. I shall call it a competitor for the purposes of this argument. So the abolition of the scheme has already had the effect of shifting the support of major multinational players away from this country. The manner in which the Government have abolished the scheme is having a serious impact. I am particularly sad that no replacement schemes have been identified or funded, and I am really worried that we will lose the infrastructure to deliver any future schemes that the Government might introduce.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
My hon. Friend is making an extremely important point. When companies, especially large multinationals, consider making investment decisions, they look at a whole range of factors. One of the most important is confidence in the continuity of the tax regime in the jurisdiction in which they plan to invest. Decisions such as this are therefore injurious, in that they will damage that confidence and have a long-term knock-on effect on investment in this country. Would my hon. Friend like to amplify that point a little more, because of its importance?
Peter Luff (Mid Worcestershire, Conservative)
I have talked to many representatives of the Home Computing Initiative Alliance, and they have all expressed their deep concern about the Government's intentions, not just on taxation but on all the initiatives related to home computing. Which of the initiatives will endure? Which will be torn up without warning at the eleventh hour, leaving the massive investment and effort made by the companies worthless and in tatters? This is a serious issue.
Michael Wills (North Swindon, Labour)
Will the hon. Gentleman clarify the point raised by Mr. Francois about the importance of stability in fiscal regimes? That was a good point, but does it mean that the Conservatives have now abandoned their plans for a flat rate of tax?
Peter Luff (Mid Worcestershire, Conservative)
I am not going to speculate on the tax policies drawn up by my Front-Bench colleagues. I do not have any knowledge whatever of them. We all believe that tax policies should change and evolve over time; that is not in dispute. If the Government had made a good case for the abolition of the HCI, I would have accepted its abolition. However, they did not, and they have abolished the scheme in the worst possible way. That is the problem. If only they had taken a bit more time and care over its abolition, we might not be having this debate tonight.
I remind the Paymaster General that, on
"For individuals—as well as cost savings—HCI schemes can help realise personal and professional potential. Through improved ICT access and use, they provide the tools and resources which further individual learning, enhance workplace skills and increase employment opportunities."
In January this year, on the second anniversary of the scheme, the Minister for Industry and the Regions said that the
"HCI provides a great example of what can be done when the government and industry are working together to fulfil policy objectives".
On
"Since 2003, our home computing scheme has promoted the Government's aim of widening the ownership and use of computers at home, while helping our aim of bridging the digital divide."
As the Paymaster General knows, the DTI offered the scheme to its own staff for the first time on
The most extraordinary quote of all comes from the Chancellor of the Exchequer in his 1999 Budget:
"Inequality in computer learning today will mean inequality in earning power tomorrow, so to bring more computers into more British homes, we will legislate so that employees will be able to secure computers on loan from their companies as a tax-free benefit . . . In the new economy, the more individual talent we nurture, the more economic growth we will achieve."—[Hansard, 9 March 1999; Vol. 327, c. 180.]
Yet at the precise moment at which that ambition was beginning to be fulfilled, the scheme was abolished.
The reasons that the Paymaster General gave earlier for abolishing the scheme do not bear even the most cursory critical examination. The job has not been done. She made derisory comments about a 4 per cent. increase in the number of people taking up that initiative, but that is 1 million households by my reckoning. If we are to be internationally competitive, we have a long way to go to increase the penetration of computers in households.
I was particularly disturbed by the Paymaster General's comments on the abuse of the scheme. Of course, everything that we do is abused. The VAT system is abused, and I expect that many hon. Members would love to see it abolished, but I doubt that that would be the response to its abuse. Instead, the response would be to close the loopholes and to police the system more effectively. That should have been the Government's response to abuse of the HCI scheme. If there was significant abuse—which I genuinely doubt—the response should have been to close the loopholes. Indeed, the industry is bursting with ideas on how to close every possible loophole.
As I said earlier, I take particular exception to the Paymaster General's suggestion that Evesham Technology was abusing the scheme by marketing other products. Some of those products were specifically allowed under the scheme. Her Majesty's Revenue and Customs kept the terms vague because it said that it wanted to allow room for emerging technology. Actually, the industry would have liked the terms to be tighter, to avoid any possible abuse. Also, as good entrepreneurs, representatives of the industry offered other products outside the scheme at full market cost in their brochures. They were trying to sell more kit. That is a natural reaction for enterprise. HMRC made the fatal error—a tragic misunderstanding that further undermines my confidence in it—of thinking that those products were being offered as part of the scheme. They were not; they were add-ons that were not included in the scheme's terms. I accept that there is bound to be a modest amount of abuse, but I fear that the abuse that the Paymaster General has referred to will turn out either to have been very modest indeed or to have involved a complete misunderstanding of what was actually going on.
I completely reject the idea that the scheme was not properly focused, because 375,000 lower-paid workers have already benefited from it. All the signs were that, as the scheme extended down into the small and medium-sized businesses, more and more lower-paid workers would benefit. It is no good the Paymaster General shaking her head in disbelief: that is what the evidence showed. It is quite clear that that was beginning to happen.
The TUC expressed its strong support for the scheme. Brendan Barber stated:
"The Home Computing Initiative has helped thousands of low paid workers without confident IT skills buy their first ever computer. Unions up and down the country have been promoting the scheme, often linked to training schemes. The sudden closure of the scheme would mean that many hours of voluntary union effort would go to waste."
I am not sure whether that was the quote that my hon. Friend the Member for Rayleigh cited earlier. I do not think that it was.
As for suggestions that higher rate taxpayers particularly benefited, I note that the foreword to the information and guidelines booklet referred to developing,
"a broader skills base for all employees",
not just lower-paid ones. The Government were not focusing on those workers then, and they boasted about the greater benefit that higher rate taxpayers would get from the scheme— the combined taxation benefits meant that the price of a computer fell by 41 per cent. for those higher rate taxpayers compared with a 33 per cent. discount for basic rate taxpayers. An advantage that the Government were trumpeting then is now suddenly a reason for abolishing the scheme.
We all know that the sole reason for the removal of the scheme is that the Chancellor wanted to save some money at the eleventh hour. That is the only explanation for the fact that the proposal was put in the Budget at the last minute, without any of his colleagues in Whitehall even knowing that it was being considered. That is what makes it so sad. Although I was interested to hear what the Paymaster General had to say in her opening speech, she sounded more like the Secretary of State for Trade and Industry than the Paymaster General. We need to know where responsibility for delivering the Government's digital strategy resides. I wrote to the Prime Minister, following an unsatisfactory exchange in Prime Minister's questions last week, to ask him whether that responsibility now lies with:
"The Chancellor, who did not understand the very serious consequences of his precipitate actions, or the Trade and Industry Secretary, who had only just offered this excellent scheme to his own departmental staff?"
Such crucial policy cannot be made on the hoof in response to bad Budget decisions, but that is what we have seen tonight, and that is why I am so concerned.
I could go on at great length, but other Members wish to speak and we wish to hear the Paymaster General's response. I know that I have sounded excitable and angry at times; that is because I am angry about the way in which the scheme has been abolished. It was delivering the Government's objectives and I resent the way in which they are rewriting history to say that it was not. The method of its abolition was handled appallingly, causing maximum possible despair and despondency in the industry and destroying the vital bond of trust that should exist between Government and the private sector in this important area of policy.
I had hoped, with more time, to list ways in which the scheme could have been improved, all of which have been suggested by the industry, which was discussing them with HMRC officials a few days before the Budget—only a few days before the scheme was abolished. That is what I find utterly extraordinary. Not even HMRC had the slightest idea that the Chancellor was planning to abolish the scheme. It was a last-minute decision, and I plead with the Paymaster General for it to be reconsidered. At least the scheme should be given an extra year for an orderly phase-down while satisfactory alternatives are put in place.
Kevan Jones (North Durham, Labour)
I agree with the aspiration of Mr. Francois for wide use of computers in homes across the country. Members on both side of the Committee would agree with that. Part of my constituency is in South Stanley, which is in the top 10 most deprived wards in the country and has one of the lowest uptakes of IT skills, and I doubt whether many of my constituents in that area have benefited from the HCI scheme.
My hon. Friend Rob Marris made the point that the Opposition have portrayed this scheme as the only one put forward by the Government to extend computer literacy and the availability of computers in communities. In my constituency, putting money into education is doing more to increase the use of computers and computer skills, and the Chancellor gave extra money to education in the last Budget. In every school that I visit, I see not only laptops being used by teachers but interactive whiteboards and young people using IT skills in a way that could only be imagined a few years ago.
I referred earlier to the trade union movement, which, I understand, the Conservatives now support. I get confused about their position from day to day. One thing that has led to improved IT skills in many workplaces is the trade union learning fund, which has been consistently opposed by the Conservative party. I look forward to its support in future for that vital initiative, which has brought learning into many workplaces and reached some of the lowest-paid in society. In addition, Durham has a new further education college, with funding for IT from the Government. I reiterate that the Government have not just been tackling lack of IT skills and computer equipment in communities through the HCI scheme but through, as my hon. Friend the Member for Wolverhampton, South-West said, a mosaic of measures.
That is demonstrated by a good initiative in the South Stanley school of technology run by Janet Bridges, the head teacher. That initiative is not just about enabling students to pay for computers; it is giving computers to 300 children, and is paid for by the Government's neighbourhood renewal funding. In those communities, that is the only way in which some children would get direct access to computers at home. Rather than spawning a private industry, it has already allowed local people to create infrastructure and support. Although the HCI scheme has been successful in some parts, it will not reach the hard core of people in poor communities, such as those that I represent, who will not get access to computers without such funding. That is why I support funding being directed to those areas.
I have heard some criticism of the way in which the scheme has been wound up, and Peter Luff made his points well. I find it strange, however, that the Conservatives and Liberal Democrats are now arguing that this type of scheme, of which the late lamented J. K. Galbraith would have been proud, reflects a kind of Keynesian view that money should be put forward to support the computer industry, which, as we know, is a poor and dying sector of our economy. I am sorry, but that is not what it is meant to do. It is meant to direct resources to and ensure skills in some of the poorest communities. That more targeted approach, which the Government are adopting, will bear fruit. In my constituency, I will support that direct help to low-paid, elderly and unemployed people, who need access to computers and skills not just in the home but in village halls and libraries
Peter Luff (Mid Worcestershire, Conservative)
The hon. Gentleman is making an important point—of course we want lower-paid people to get access to information technology. To make maximum use of that, however, it must be in their homes. There is no point having open access schemes in public places where people will be reluctant to enter private and confidential data. In relation to the success of the Government's e-initiative, people will not fill out an income tax return online in a public place or do anything confidential where they cannot secure data, and families will not get the benefit. If low-paid people are to benefit most effectively, computers must be in their homes.
Kevan Jones (North Durham, Labour)
I take the hon. Gentleman's point. Unfortunately, however, I, unlike Julia Goldsworthy who referred to her elderly or low-paid constituent whose rich relative purchased a computer, do not have many constituents for whom that is the case. In schools, hardware is being given to kids because that is the only way that they will get access to computers in the home. I do not disagree with the hon. Gentleman's points, but he must recognise that many low-paid workers, unemployed and elderly people will not be able to purchase the equipment. I would be radical and say that in some cases we should give the equipment free to certain user groups, as it will end up certainly saving them money and also saving the Exchequer money in relation to the accessing of certain services. I would welcome support for that initiative from the Conservative Front Bench.
As other Members have pointed out, the scheme has been successful in allowing certain sections of the community to access computers. That is good, but we now need to ensure that we direct money and resources to those who will never get access to computer equipment or IT skills unless we do such targeting.
Brooks Newmark (Braintree, Conservative)
This year, the Chancellor presented a Budget for Britain's future, a Budget which will supposedly equip this country for the increasing challenges of global competitiveness. Unfortunately, clause 61 will do anything but that. The foreword to the HCI guidelines published in 2004 had no hesitation in stating that the scheme was an extremely powerful catalyst for an organisation that wants to exploit the clear and indisputable link between individual learning, workplace productivity and overall competitiveness.
The then Secretary of State for Trade and Industry, now the Secretary of State for Health, has fallen on hard times since the heady days when she was able to add her signature to a statement, alongside those of the director general of the CBI and the general secretary of the TUC. If only the Royal College of Nursing were as co-operative. The strength of Government support was also indicated by the fact that the guidelines were issued by three Departments: the Department of Trade and Industry, the Cabinet Office and the Department for Education and Skills, with—I stress the word "with"—the backing of the Treasury.
Sadly, Members have not been surprised by the lack of consultation before the scrapping of the HCI, but the contrast between the close co-operation of 2004 and the chaos of 2006 is particularly stark. No longer is there joint authorship; the DTI itself was busy investing thousands of pounds in a scheme for its own staff, unaware that just across the road in the Treasury, Ministers were planning to axe the very same scheme.
We should also contrast the flamboyantly named Office of the e-Envoy, which existed until 2004, with the present e-Government Unit. The first had a responsibility to get the nation online, and, with the HCI, piloted a project that actually worked. Its successor focuses on
"delivering and transforming public services through information technology."
We now have the paradox of a Government investing in online services—an example is the £340 million spent by Her Majesty's Revenue and Customs on expanding electronic tax returns—while simultaneously cutting spending on a project that has successfully delivered on its promise to increase the uptake of personal computers by low-paid workers. There is a delightful irony here, which I know many of my hon. Friends will appreciate: in the long litany of disasters that have come about because of Government investment in IT projects there is one notable success, and it is being cancelled. Perhaps the Government will consider applying some of the £71 million compensation which has been paid as a result of the tax credits IT fiasco to the continuation of the HCI scheme. The subsidising of a success by a disaster would be a rather neat compromise.
On Second Reading, the Chief Secretary reminded the House that
"times have changed and are changing rapidly".—[Hansard, 24 April 2006; Vol. 445, c. 368.]
Indeed they are, but they are not changing so rapidly that they excuse the total absence of consultation on the end of the HCI. Rob Marris was also helpful when he said that this issue
"seems to have become a big deal".—[Hansard, 24 April 2006; Vol. 445, c. 410.]
I am sure that my constituent Mr. Jon Emin is grateful for that sage pronouncement. I should add, however, that the hon. Gentleman made some thoughtful suggestions in his speech today.
Mr. Emin is the director of a company which, over the past few years, has been working to deliver the NCI scheme to the NHS. To date, he has helped to provide some of the 15,000 personal computers for nurses. He wrote to me that the HCI was
"one of the few good things that this current Government"
have achieved. He continued:
"There are still millions of low paid workers—in smaller organisations which are now finally being reached by the HCI administrators—yet to take advantage of this scheme, not to mention all the nurses, council workers and teachers who have not yet been given the opportunity to take part.
Is this fair? We think not.
The Government claim that it's trying to help UK Plc become more IT literate, but this clearly goes against that claim."
My constituent enclosed a copy of a letter that he had received from the director of finance at the Public and Commercial Services Union. It stated:
"We were about to introduce the scheme to our staff and have over the last few months undertaken a considerable amount of work to get the scheme off the ground. Both PCS and its employees are therefore extremely disappointed"
that the Government intend to end the scheme. As I am sure the Paymaster General will tell us, taxpayers are often "extremely disappointed" by Budget measures that leave them worse off, but the Government have given no explanation for their decision, and there is a sense that the Chancellor may have believed that no one would notice clause 61.
Let me now deal with the question of definitions in amendments Nos. 2 and 17. On Second Reading, the Paymaster General gleefully challenged my hon. Friend Mrs. Villiers on what definition of computer equipment should be applied for the purposes of the scheme. She should have been a little less triumphant. In the Standing Committee that considered the 2004 Finance Bill, my hon. Friend Mr. Prisk asked her
"to clarify what is included as eligible equipment."
That was two years ago. If the Paymaster General had given an answer in 2004, she might have been able to prevent the two years of abuse—[Hon. Members: "Alleged abuse!"]—alleged abuse—that the Government are using as a justification for axing the HCI. Instead, she said that the Office of the e-Envoy
"will be monitoring take-up in the coming months. That information will demonstrate to us whether the £500 is reasonable, what type of equipment is being purchased and how wide take-up is."—[Official Report, Standing Committee A,
It is sad, therefore, that the Office of the e-Envoy was itself axed along with whatever evidence of abuse it may have found. The Government should have provided a definition of computer equipment back in 1999, and certainly when Ministers were pressed for one in 2004. A definition must be open to regular review.
iPods have been mentioned with some derision in debates, but the average iPod now has more memory than the average home computer did when the scheme was initiated in 1999. Furthermore, podcasting is increasingly being used as a business tool. That is why amendment No. 2 emphasises the need for industry and user consultation, with the aim of arriving at a workable, flexible definition that is not open to abuse.
The notion that people have been buying games consoles and iPods is as yet unproved, but I was interested to learn that "entertainment" was among the list of benefits that the DTI believed to stem from home computer ownership. It was mentioned in its 2004 guidelines, along with education, e-mail and e-government, as my hon. Friend Peter Luff pointed out earlier.
It seems always to have been envisaged that
"most new computers support the latest video game, DVDs and other popular multimedia formats."
Why the Government's new-found technological puritanism?
Before I end my speech, I want to refer to the lack of evidence and the solution proffered by amendment No. 18. In 2004, the Paymaster General said:
"Since the exemption was introduced, we have not had exact figures on the take-up for obvious deregulatory reasons."—[Official Report, Standing Committee A,
Conservative Members are all in favour of deregulation, but it is unfortunate that this single example of obvious deregulation should have had the inadvertent effect of undermining a successful IT initiative.
The Minister for Industry and the Regions, Alun Michael, admitted in a recent parliamentary answer:
"I am unable to provide a statistical breakdown of how many individuals have participated in the Home Computing Initiative Scheme in each year since 1999, broken down or by region."
Instead, he said only that
"A recent estimation provided by the HCI Alliance (BT, Intel and Microsoft) indicates that over 500,000 units have been loaned under the Home Computer Initiative Scheme since 1999."—[Hansard, 25 April 2006; Vol. 445, c. 989W.]
The Government's evidence base for axing the HCI seems to have been provided by the very organisation that is lobbying for its continuation. That is an absurdity. Perhaps the Minister will tell us where is the evidence, where was the consultation, and where is the need to scrap an IT project that has helped the lowest-paid people to improve their skills and prospects.
David Gauke (South West Hertfordshire, Conservative)
I want to make four brief points about the proposal to abolish the HCI, which is perhaps symptomatic of the Government's approach to many forms of taxation.
First, I want to echo the point made forcefully by my hon. Friend Peter Luff, in what I thought was an excellent speech, about the uncertainty created by constant tinkering with taxation regimes. If incentives are introduced, expanded five years later and abolished two years after that, there will always be the difficulty of businesses not being confident that they are working in a stable environment. Such a situation can impact on research and development, for example; indeed, it has had a considerable impact on productivity. This Government, and particularly this Chancellor, have a tendency to meddle and to tinker, and this is an example.
My next two points relate to the taxation of employees and employers in respect of home computers—an issue raised by my hon. Friend Mr. Francois—which are treated as a benefit in kind. One consequence of abolishing the HCI is that the question again arises of how home computers are treated. They will not be considered as a benefit in kind where their personal use is not significant, and guidance will be provided on this issue. However, businesses will obviously have to police such usage carefully. They will have to issue guidance themselves and monitor employees to ensure that computers are not used for personal purposes. However, most work computers are to some extent used for personal purposes. I suspect that most people occasionally use computers at work for personal matters and for sending personal e-mails—that is what happens in the real world—and the same applies to the use of home computers. Of course, people are supposed to use computers to complete their tax returns, but that, too, is personal use. So the clause will impose a significant bureaucratic burden on business, which is often another consequence of Government policies.
As I said, the Government are going to introduce guidance, and I suspect that there will be a generous and fairly broad definition of what constitutes insignificant use. I am slightly worried, however, at the prospect of the law saying one thing and the guidance saying another—it is saying that people need not worry. My fear is that, instead of having a tightly defined law that people should obey, we will have a loosely defined law that people will obey only sometimes, depending on the guidance. That would not be an ideal arrangement.
Rob Marris (Wolverhampton South West, Labour)
Surely it is up to a business to decide whether such use is significant. If it is, class 1 national insurance contributions would have to be paid. If it is not, it is a benefit in kind, on which tax is paid by the employee, not the employer.
David Gauke (South West Hertfordshire, Conservative)
The employer, when providing such a facility to their employees, will be expected to provide some advice. As the hon. Gentleman says, national insurance contributions would have to be paid, and the employer would need to take a view on that point. A degree of monitoring would be required.
My fourth point relates to one that Rob Marris made with characteristic candour: the lack of consultation surrounding this proposal, which was rushed out without regard for the need to examine the various arguments. The Paymaster General says that there is concern about possible abuse, but why do we not look at this proposal closely and carefully? We have heard about how other countries deal with this issue—how one can have an HCI scheme without its being abused. My hon. Friend the Member for Rayleigh and others referred to what I call the "Minnie the Moocher" argument: if the Paymaster General had looked at the scheme in Sweden, it would have given everything that she was needing. That did not happen, which was a great pity.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Is the hon. Gentleman aware that the Swedish scheme has been recommended for abolition, and for exactly the same reasons as we have abolished the HCI here?
David Gauke (South West Hertfordshire, Conservative)
My understanding is that that scheme is in place. Indeed, we heard earlier that the Danish scheme was abolished and then brought back, because it was missed.
We have to ask why the HCI is being abolished. I suspect that the Treasury was looking to save a few hundred million pounds, and that the HCI caught the eye of someone there. That is a great pity, but perhaps there is also another reason. The Chancellor has been associated with various polices, such as the individual learning account. He was criticised for being very slow in identifying fraud and misuse of the ILA, and he resisted getting rid of it. I wonder whether the question of not allowing the HCI to continue was a sensitive issue for the Treasury. None the less, the Government's scrapping of that scheme was a panicky overreaction. There should have been consultation and we should have addressed the real concerns, but that has not happened.
Philip Dunne (Ludlow, Conservative)
I am grateful to you, Mr. O'Hara, for allowing me to contribute to this debate. This is a novel experience for me on two counts. This is the first time since joining this House that I have attended a debate in which the Government are insisting on scrapping a successful measure; in my experience, they usually seek to abandon failed initiatives that they have introduced during their tenure. To witness them abandoning a successful one is surprising, to say the least.
I am pleased that the Paymaster General has an opportunity today to defuse criticism of this penny-pinching, revenue-retaining measure by making a positive announcement on digital inclusion. In my experience, the Paymaster General is usually asked to defend the indefensible on the Chancellor's behalf, but today she is able to announce some good news. However, it is a classic new Labour move: on the one hand, we are debating a measure, the withdrawal of which will save the Treasury £300 million over three years; on the other, Labour is sweetening the pill with a £50 million new initiative, but it is merely a sleight of hand to try and distract attention from the bigger issue.
Having said that, I welcome the digital inclusion initiative and I should like to comment briefly on it, given that the Paymaster General introduced it into this debate. I hope that the new cross-departmental unit will address the severe shortcomings of the digital TV footprint. It is claimed that digital TV will reach 98.5 per cent. of the population. Given that the Paymaster General has taken an interest in this subject, I will send to her and to whoever is responsible for running the new unit a map that the Shropshire Star helpfully provided. It shows the area along the Welsh marches that would be excluded from digital TV coverage. That area includes most of the western half of my constituency and all the area classified as an area of outstanding natural beauty, which amounts to about 80 per cent. of south Shropshire district. I look forward to hearing about the measures that this magnificent new unit will implement to provide coverage for my constituents.
I want to speak to amendment No. 2 to clause 61. The home computing initiative has encouraged home-working, and before I illustrate this issue with some comments about my constituents, I want briefly to highlight some of the non-financial benefits that derive from home working of which the Paymaster General may not be aware. BT, one of the largest employers in the country, has undertaken research among its work force. It states:
"People working from home are 7 per cent. happier than their office-based colleagues".
So there is a happiness quotient to this issue. The research also noted that there is
"20 per cent. less absenteeism than the national average"
among such people, on account of BT's home-working policy. These non-financial but none the less important factors are being put at risk by this penny-pinching Government measure. There are 8 million people working from home, who—
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
People working from home are not affected by this measure. The hon. Gentleman is speaking to an amendment that has not been selected and about a subject that we are not debating.
Philip Dunne (Ludlow, Conservative)
As I said earlier, I am supporting my Front-Bench colleagues' amendment to clause 61, which we are debating and which is about home computing.
Edward O'Hara (Knowsley South, Labour)
Order. I must rule from the Chair that the Paymaster General is correct: amendment No. 2 has not been selected.
Philip Dunne (Ludlow, Conservative)
I stand corrected, Mr. O'Hara, and I am grateful for that clarification.
On the general subject of home computing and the amendments that have been selected, I want to draw to the attention—
Edward O'Hara (Knowsley South, Labour)
Order. According to my information, no amendments to clause 61 have been selected.
Philip Dunne (Ludlow, Conservative)
I am grateful again, Mr. O'Hara, for making that clear. I shall therefore explain very briefly why the Government's proposals are so important to me and my constituents.
Shropshire was the home of the first industrial revolution, and it is also the home of the current home working revolution. I represent the southern part of the county and am delighted to say that it is second only to the Isles of Scilly—and the House will not be surprised that there is significant amount of home working there—in terms of the number of home workers per head of the population. In my area, 15 per cent. of self-employed people now work from home.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
What is the relevance of those figures?
Ivan Lewis (Economic Secretary, HM Treasury; Bury South, Labour)
What is the relevance of the whole speech?
Philip Dunne (Ludlow, Conservative)
The relevance is that home working is put at risk by the Government's proposal to scrap the home computing initiative, which has meant that people, especially in rural areas, now have improved access to broadband, for example. It has also improved access to work for those people in deprived rural areas who lack public transport and job opportunities. Even people with their own transport have to travel a long way to work in such areas.
Rob Marris (Wolverhampton South West, Labour)
At the risk of detaining the House, will the hon. Gentleman say more about his statistics? Labour Members usually understand the term "home working" to mean the gross exploitation of labour, such as paying people piece rates to pack Christmas crackers at home. It is not taken to mean the wonderful world of telecommuting by computer.
Philip Dunne (Ludlow, Conservative)
I shall give the House a specific example of the sort of effective and high-tech home working that goes on in my constituency and across the country. A company called Premier Medical processes insurance policy claims, and about half of its staff work from home. The hon. Gentleman is a neighbour of mine and, if he is interested, I should be delighted to take him to meet the magnificent managers who have relocated the business to my area from the south-east.
I hope that the Paymaster General will explain why the Government want to scrap an initiative that is working so well.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
It falls to me sum up this interesting and sometimes vigorous debate on the future of the home computing initiative and clause 61. A number of contributions were made and I am sorry that time constraints mean that I cannot refer to all of them individually, but I shall attempt at least to genuflect to some where I can.
I welcome the Paymaster General's commitment that HMRC, in consultation with industry, will issue guidelines to define what constitutes a "not significant" use of a computer. We have pressed the Government on that quite hard over the past week. We tabled amendments on the subject, and I am pleased that the Government have listened to us and agreed to produce a definition. I hope that it will remove doubt, but I repeat that it would be better to delete clause 61 from the Bill, so that the problem would not arise in the first place.
First, in her opening speech the Paymaster General did not provide a convincing rationale for abolishing the scheme. She talked vaguely about a few websites that provide examples of inappropriate equipment, but was unable to quantify that or to put clear figures on the extent of the abuse. If the Government's argument is based on the claim that abuse has been widespread, I should have expected the right hon. Lady to have been able to give firmer examples.
Secondly, we have argued that the scheme could be saved by being more tightly defined. The abuse that the Government claim is going on could be prevented if they were to produce an inclusive list of the products that would continue to qualify, and an exclusive list of those that would not. We have referred to the other countries that have done exactly that, and I point out to the Paymaster General that although a debate is taking place in Sweden about whether the scheme there should continue, it is still in force and is likely to remain so. It is incorrect to say that the Swedes have decided to scrap it: they are debating what to do.
Peter Luff (Mid Worcestershire, Conservative)
My understanding is exactly the same as my hon. Friend's. I left the Chamber to check what was happening in Sweden, and was told by a person in that country that the scheme is not going to be scrapped. If the Paymaster General has contradictory information, she should share it with the House.
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I agree with my hon. Friend, the Chairman of the Trade and Industry Committee. We have used Sweden as a specific and empirical example of how guidelines could be produced to allow the scheme to survive, were the Government so minded. The problem is not one of definition; it is that the Government wants the money.
Thirdly, the Treasury's own regulatory impact assessment confirms that a more tightly defined scheme could be continued at a reduced cost to the taxpayer. Option 2 of the Treasury's RIA is entitled "Refocus the Exemptions"—exactly what we have argued. The Treasury estimates that a refocused scheme would cost £190 million a year to 2010–11, compared with the £370 million a year that the scheme would cost were it to continue unaltered. I refer the Paymaster General to the table printed below paragraph 76 of the RIA.
It is therefore possible to refocus the scheme, keep it alive and save all its benefits—and save money for the taxpayer in the process. That has to be a win-win proposition and the House would be wise to adopt it. Arguments in the scheme's defence have been made by the CBI and the TUC, other Government Departments such as the DTI, employers that have implemented it at the Government's behest, companies that were set up to support it and the people who are benefiting. However, given the attitude exhibited by the Paymaster General and the other Labour Members who have contributed to the debate, I fear that the Government have closed their ears and minds to them all. To put it bluntly, they are minded to take the money instead.
This is a poor decision. It will be detrimental to our long-term competitiveness in the 21st century, not least in respect of countries such as China and India. Moreover, as my hon. Friend Mr. Luff noted, the next time that the Government launch a scheme to promote information technology and look to business and the unions to support it, who on earth will believe them? Effectively, they are canning this scheme after only two years of operation. How will major multinationals looking to invest in IT projects and facilities in this country view that?
We all know what has happened—a decision was taken just before the Budget to take the money. Under pressure, the Government have been desperately scrabbling around for a way to justify that decision. This evening, they have suddenly come up with the digital inclusion team as a fig leaf that they hope will do just that. The Government's proposal marks a sorry decision, so I genuinely make one last plea to the Committee, including the Labour Members who have expressed reservations about the measure: join us in the Lobby and save the home computing initiative from that awful, mistaken proposal. I move that clause 61 be deleted from the Bill—
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Mr. Francois made a nice try, Mr. O'Hara, but he was not fast enough.
I think that it would help the Committee if we reflected on the introduction of the regime, its performance and the current position, to clear up some of the misunderstandings.
I assure Mr. Dunne that no amendments have been selected. If he looks at the annunciator screen, he will see that it says, "Clause 61 stand part". There has been no attempt to amend the clause, which would be almost impossible due to the definitional problems. Furthermore, the clause has nothing to do with home working, so I shall park all those points.
At the time of the 1999 Budget, my right hon. Friend the Chancellor said:
"We hope this new measure will encourage business to loan computers to their employees and that it will be as successful as a similar scheme developed in Sweden . . . There are real benefits to business, employees and the wider community from increasing access to computers."
The digital strategy launched in April 2004 was assessed by the Prime Minister's strategy unit, with a foreword by the Prime Minister and the Secretary of State for Trade and Industry. The assessment stated:
"The conclusions in this report will be implemented by government and will play a crucial role in improving the cohesion of our society, the wealth of our economy and the quality of the life of our people."
The report was reflecting on the fact that the home computing initiative was not sufficiently targeted to help the low paid, the unemployed and the excluded.
The HCI was underpinned by a tax exemption, which can be found at section 320 of the Income Tax (Earnings and Pensions) Act 2003. It allowed an employer to lend a computer to an employee for private use, tax free. If an agreement between the employer and the employee was in effect a hire purchase agreement, the tax exemption did not apply and any direction issued by the Office of Fair Trading would not cover it. That means that the tax exemption does not apply where the computer equipment has been bought, whether for a mother or otherwise. That is quite clear.
As Members have pointed out, the HCI was modelled on a Swedish scheme introduced to increase home computer ownership. The evidence from Sweden shows that between 1996 and 2001 home computer penetration rose by 29 per cent. to 56 per cent., a compound annual growth rate of about 14 per cent. However, over the same period, UK household penetration increased from 27 per cent. to 44 per cent., a compound annual growth rate equivalent to 12 per cent. So the UK achieved a comparable rate of growth in home computer take-up when the HCI was barely used, demonstrating that the HCI itself has not had a strong impact. I am not saying that it has not helped, but other issues have been involved, such as competition and liberalisation.
With regard to other international comparisons, a similar HCI scheme was introduced in the Netherlands but it was scrapped several months ago, citing the same sort of reasons as those in the UK. In Sweden, the Agency for Public Management, which is responsible for efficient public administration and promoting e-government, recommended abolishing the scheme in August 2005, as its positive effects had declined while its costs remained high. The Swedish Finance Minister is considering action at present.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I am putting the evidence to the Committee.
In the Netherlands and in Sweden, whatever the Finance Ministers decide to do, as in the UK, there have been rising costs, poor targets and a lack of impact on the important areas that the Committee has identified.
The hon. Gentleman asked why the Government did not target misuse of the scheme. That is a bit rich, as the Conservatives did not manage to get any of their amendments selected, for precisely the reason that we constantly give: it is extremely difficult to draft legislation to cover certain types of equipment while excluding others, because the technology is changing.
The hon. Member for Rayleigh said, "Well let's do it once a year." Once a year, he wants a completely new statement that would be out of date already, excluding equipment that would not otherwise have been included in the system. Opposition Members say that the scheme should be restricted—perhaps to basic rate taxpayers or someone else—while complaining about administrative burdens and the scheme's complexities. So, the Government had to take a decision. If the scheme is poorly targeted and abused and if we cannot target it sensibly, the Government must determine the best way to proceed, and the best way to proceed is the way that the Government have said: through our digital strategy and the announcements that I have made today.
My hon. Friend Rob Marris asked, "Why change overnight?" We had problems in the system, which I will come to, and we could not find a way to squeeze them out of the system, and we needed to ensure that we refocused. I cannot see how that could have been done in any other way. When the scheme was introduced in 1999, it was made clear that it would be kept under review. When the digital strategy came out, it was made clear that that review was ongoing, particularly in respect of targeting. There can be no doubt in any quarter that the Government were considering this, although I accept that some people do not like the outcome.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
No, it has been a very long debate.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
No, I should like to complete—
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
No, I do not wish to give way.
It has now been suggested—I can only suggest that it is wilful misinterpretation of the proposed changes—that the removal of the tax exemption in section 320 of the ITEPA 2003 is somehow undermined where an employer provides computer equipment solely for work purposes and that, where any private use is not significant, no tax charge will arise. That was the case before 1999, and it is the case now. Employers need to work under that system; they have worked under it in the past. The idea that the Opposition have wrung a concession out of the Government is preposterous. All the Government have said is that employers must operate under the same rules as applied in 1999, and that if they require guidance and they want to discuss it we are happy to do so—but the idea that this is something new is just ridiculous.
The hon. Member for Rayleigh referred to the regulatory impact assessment and says that it analysed the impact of removing the tax exemptions, but he should read a bit further because it then refers to mobile phones and computers. It summarised the evidence of misuse, but it also made it clear that that was only one of the reasons on which the decision was based. There was a lack of focus, poor targeting, rising costs and abuse.
Let us deal with the abuse. I am sorry that I did not take longer in introducing the clause, by going through the types of things that are now being offered. We have got PCs, which will be
"a delight for intense gamers and the users of high-performance visual application."
We have then got option 7—I will not embarrass the taxpayer by saying who is offering such schemes—that says:
"This is the complete home entertainment package. This is an enhancement."
Then, having made it clear that this is about what is on loan to employees—this comes to the point about take-up—one of the websites very helpfully asks:
"What happens at the end of the scheme?"—
that is, comes to the end of the negotiated settlement—and it says,
"You may be able to start a new scheme with a more up to date computer."
So people who have already got a computer will get another one, but the scheme is supposed to be about take-up by the low paid and the excluded.
The website then says:
"Can I get more than one computer?"
That is not the purpose of the scheme, but the website goes further. I really do not know how this will be used: apparently, people can have as part of their package a massage ball. I have not figured out, because I do not have one, exactly how that is plugged into the computer and is part of the HCI—and I do not want to hear any rude comments—but I am sure that the hon. Member for Rayleigh might prefer to take up the mug warmer option in the HCI, or perhaps he would like to go further.
Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
Not at the moment, because the hon. Gentleman asked me for the evidence and then ridiculed me when I did not provide it. I am going on to give it.
Perhaps the home cinema package is helping the excluded—or iPods, which are great, but are hardly about ensuring the take-up of information and communications technology initiatives by the socially excluded. I freely admit that I made a mistake in being much too kind to the hon. Gentleman. I referred to websites and said that I would let him have details. I should have said that if he looks at the sites, he will see that about 75 per cent. show signs of offering leisure equipment outside of the intended exemption.
What have the Government done? My hon. Friends the Members for North Swindon (Mr. Wills), for North Durham (Mr. Jones) and for Wolverhampton, South-West referred to that. We have refocused on the low paid and the unemployed, and on making sure that we truly have a strategy that reaches the parts that are excluded from information technology.
When removing any tax relief, the Government have not only to consider its popularity, but whether it is still meeting its aims and is not imposing an unfair burden on the taxpayer population as a whole. The tax exemption was a popular scheme and has given many employees access to home computers since 1999, but it does nothing to help those groups who are the most technologically excluded—those on the minimum wage, those not in employment and the elderly. That is what the Government are moving to do and that is why they are removing the HCI exemption. I commend the clause to the House.