I welcome the hon. Member for Twickenham to the Committee’s proceedings. If the Liberal Democrats have that sort of quality on the substitutes’ bench, they match Chelsea. It is a pleasure to see him reappear. [Interruption.] Indeed—they did not actually win this year, but there we are.

Why have we interpreted the rules as we have? As we set out in the Budget text, we are required to introduce the employee head count test, on which the hon. Gentleman focused his questions, to meet the requirements of the European state aid obligations. I shall be honest with the Committee: we did not want to introduce the head count test or the new employee limit. We are acting essentially to ensure that we can secure the future of the venture capital schemes.

The corporate venturing scheme, the enterprise investment scheme and the venture capital trusts are important elements in helping to tackle the equity gap, but to continue they need to meet the state aid requirements set out by the European Commission, particularly the new state aid rules on risk capital that were introduced last August. We have spent a good deal of time and effort, particularly since then, on submitting strong evidence about UK market failures in such investment.

Our situation is not necessarily the same as that of other European states, particularly as we have a mature market. Of course, the state aid risk capital rules, with some flexibilities, are designed to apply across Europe. We argued that we need national policy measures if we are to respond to the structural problems affecting our national capital markets. The Commission did not  accept our argument that the additional provision that we wanted to make in all areas for mid-size companies—the sort of provision that is set out in these amendments—would be compatible with the Common Market.

If we were to persist with that approach or, indeed, if we were to amend the Bill in the way that the amendments suggest, it would bring the continuation of these schemes into question. Therefore, we will continue to propose amendments and to discuss the matter. I hope that, in conjunction with the industry, we can collate further evidence that might encourage the Commission to make greater use of the flexibilities that can be found within the rules that it introduced last year. For the moment, our schemes need to be judged as compliant by the Commission by August this year. Because of our detailed discussions with the Commission, particularly in the past 12 months, I am confident that we will get clearance. However, we have not formally had it yet.

Finally, I welcome the comments of the hon. Member for Fareham on our amendments about the inadvertent breaches and the 70 per cent. rule. He did indeed raise those points in our discussions last year, and I took them seriously. They were raised by others as well and we have had the chance to examine them over the past 12 months. For that reason, I am glad that we have able to cover them in the Bill.