Thank you all for your comments. I now have an update, although not a happy one.
At the weekend I replaced the spark plugs. The old ones looked really weird; a hard white deposit. I fully expected a wet dirty burnt oil appearance. I wonder if this meant that the EGR valve had not been working and hence the combustion chambers were too hot??? I also blanked off the EGR valve at the suggestion of a retired garage owner. I rechecked the cylinder compressions; still all looking good, ranging from 185 to 195 cold and 175 to 190 hot.
Today I returned to the MoT man (they are also Volvo specialists). He repeated the emissions check and it failed as before. He then did a diagnostics check; no faults showing. As before, the CO and HC readings rose dramatically as the temperature increased. On the final emissions check he took a video of the rear of the car; as the engine heated up the exhaust output went from nothing visible to a huge cloud of smoke....however the smoke is white not black. I would like to think that "Welton" is correct in suggesting that it is not oil burning, however the water level does not change but it takes possibly a gallon of oil between 10k changes.
I have spent the evening pondering what to do next. Scrap it? Strip the engine and replace piston rings? Buy a replacement engine? I wish I had kept my V40, or my 480, or my 940, or my 440, or my 240!!!!
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