Banking Competition

David Rutley Excerpts

Thursday 12th July 2012 Westminster Hall

[David Rutley (Macclesfield) (Con)]

It is a pleasure to serve under your chairmanship today, Mr Davies—the first time I have done so.

I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing the debate. She is a champion of competition in banking, which she has consistently fought for and campaigned on as a Member of Parliament.

It is great to participate in the debate, because financial services are undoubtedly an important part of our economy, which we have all discussed. The sector is vital in its own right—10% of GDP, more than 1 million employees and a contribution of £53 billion in tax to the UK Exchequer in 2009-10—so we cannot afford not to pay attention to what goes on in it. More to the point, the sector has major implications for a sustainable recovery, because if we do not have a sound banking system that is trusted by all participants in the economy, we will not see the sustained economic growth that we all want and that we all champion—on the Government Benches at least.

According to the World Bank, the UK banking sector, and in particular its assets, is one of the most concentrated banking markets in the G8—if not the most concentrated market—with the combined assets of the three largest banks comprising 88% of the market; in the US, the three largest banks comprise 37% of the market, which is a fundamental difference. That state of affairs cannot be attributed to the financial crisis, because in 1993, almost 20 years earlier, the UK still had 86% of assets tied up in the three largest banks, while the US stood on a much lower total of 21%. For a market economy, which my hon. Friends and I fully support, such a situation is clearly sub-optimal and must be addressed, and I am delighted that the Government are taking it seriously.

I am pleased to see new entrants to the market. The hon. Member for Islwyn (Chris Evans) was concerned about the lack of new entrants and the over-emphasis on a sales culture. I understand such concerns, but the fundamental approach of Metro Bank on entering the market has been about customer service, and it is encouraging to see businesses trying to take a different approach and a different market niche. Not only Metro Bank has a presence in this important market but Virgin Money, Tesco, Sainsbury’s and Asda, my old employer—yours, too, Mr Davies. Their role is increasingly important in making life more challenging for those banks that have been all too comfortable about their position in the marketplace.

Recently, The Times reported on the retail financial services sector, and I will refer to that article, because to see what has been happening is important. Tesco bank now has 6.5 million customers; it started in 1997, after buying out RBS, and in the near future intends to offer mortgages—an important step by a non-traditional bank or retail financial services operation. Marks and Spencer, with 3 million customers, will soon open bank branches in its stores—again, a chance to make a bit of a difference and to move things on. Sainsbury’s has 1.4 million customers and Asda, which I had the chance to establish in financial services, has rebranded this past week as Asda Money and is looking to launch a new credit card.

There are moves afoot therefore, and given the new depths of the lows of trust in banks and financial services, businesses such as retailers have a clear opportunity to come in with their much higher levels of brand trust and to reassure customers that they have something different to offer. I wish them success in making progress; it is not all doom and gloom on increasing competition, but we need to get behind the providers offering new opportunities for customers.

I agree with my hon. Friends the Members for Wycombe (Steve Baker) and for South Northamptonshire about the portability of accounts and increasing the switching capability. It cannot be right that inertia is the basic building block of a business model. The model has to be more dynamic. We must ensure that dynamism and competition lead to profit, not inertia, which is insulting to customers, frankly. From our own experience we all know that trying to transfer banks is an absolute nightmare—that must be addressed.

United Kingdom Financial Investments has a real opportunity to contribute to shaking up the lack of competition in financial services. The paper by the Free Enterprise Group has set out some bold, radical alternatives—characteristic of the group—and UKFI should look carefully at how it disentangles taxpayers from the Lloyds Banking Group and RBS, to sell off business units and branches to enable the more competitive financial services marketplace that we all want and shout out for.

We also need a stronger foundation to enable that competitive environment to thrive and flourish, and it is worth while pointing out how fast the Government are moving on regulation to help put that into place. I applaud the Government for introducing the Financial Services Bill—it was an honour to be on the Committee—which will be critical to restoring accountability to the Bank of England and away from the completely failed tripartite model that was found so wanting in the previous crisis.

The Government also intend to introduce a banking reform Bill, on which they should be congratulated. Others will want it to go further, but it is important that the Bill will provide for the ring-fencing of investment banks, separating them from the retail banking functions in the same organisation. The LIBOR-fixing scandal is only further evidence for the importance of the proposed legislation, which has the potential to be a vehicle for change. The proposed parliamentary inquiry, which we could call the Tyrie commission, can use the Bill as a vehicle to bring about any recommendations, which are so urgently needed. I hope that my colleagues on the Treasury Committee will have a chance to play their role in that commission, to help restore the trust needed in the financial services sector.

Regulation alone will not help bring about the foundations for genuinely competitive and trusted markets. We need to look at the shareholders, who have been too absent in the past. They need to speak out. The shareholder spring of increased shareholder activism is to be applauded, and it was refreshing to see BlackRock, one of the major shareholders in Barclays, speak out quickly and urgently during the recent problems with leadership in the bank. We need to see more of that. Shareholders must not duck their responsibilities in recalculating and rebalancing reward for results. In my opinion, those excessive bonuses are discrediting the market and the trust that we have in our financial institutions.

Having said all that, Members present might find it odd for me to say that I agree with Bob. That is, I agree with something that Bob said on the “Today” programme business lecture in November 2011:

“Culture is difficult to define, I think it’s even more difficult to mandate—but for me the evidence of culture is how people behave when no-one is watching.”

Sadly, while thousands if not millions of our constituents are working professionally when no one is watching, or even when their customers are watching, the leaders of our banks—recently, of Barclays in particular—have not displayed those virtues. Ultimately, real leadership will be required, and I wish Barclays well in finding a successor to Bob Diamond—an individual who will help to create that culture.

As we proceed with many of the ideas we have discussed today—to put in place the regulatory foundations, proper shareholder activism and the right culture and leadership—we stand a chance to have a financial sector that we are proud of. We will only achieve that, however, when we have proper levels of competition. I support the efforts of my hon. Friend the Member for South Northamptonshire and urge the Minister to press forward with every effort and his strength of character to enable us to see the new measures put in place so that we have true competition in the financial services and banking sector.

Professional Standards in the Banking Industry

David Rutley Excerpts

Thursday 5th July 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

Many years ago, when I was at business school with my hon. Friend the Member for Bedford (Richard Fuller), I took a summer job in Wall street. I shall never forget the occasion on which I was interviewed by a certain individual who sat with his feet up on his desk, wearing big red braces, smoking a huge cigar, and chewing gum. The interview was for a job in leveraged buy-outs. Before even introducing himself, that individual said to me, “David, how greedy are you?” I do not remember what my response was, but in my head it was pretty clear: “Not greedy enough to take this job.”

My interest in investment banking evaporated pretty quickly after that experience of outrageous behaviour and outrageous remarks. Behaviour of that kind on the part of a few bankers has led to investment banking in particular, but banking across the board to some extent, being given a very bad review by many of our constituents, and it has failed to build the trust that is so badly needed.

I went on to spend most of my career in retail, much of it at Asda, building its financial services business. There was a stark difference between supermarkets and banks when it came to levels of trust—and that was back in 2002; I hate to think what the difference is nowadays. Every day the supermarkets had to go out and compete for the right to earn the trust and loyalty of their customers, so that they would shop there every week. The lifetime value of those shopping baskets was vital. The supermarkets knew that if they captured that loyalty, it would lead to profits on the bottom line. In banking, by contrast, the focus is so much on short-term profit that the banks lose sight of the customer side of the equation. That was brought home to me starkly when I spent a couple of years working for Barclays before the election, trying to address some of the effects of the credit crunch on its business.

My work in retail financial services highlighted the need for change, and also how difficult it is to bring it about: to break with accepted norms, and to move on from rules of the game that people have previously regarded as being quite acceptable. The LIBOR-fixing scandal has highlighted the desperate need for root-and-branch change in investment banking. That change is needed, and it is needed sooner rather than later.

It is hard to believe that it is five years since the collapse of Lehman Brothers, and five years since we saw the queues outside Northern Rock. The public expect change, and they expect it quickly. It is for that reason—the need for urgent action—that I support the call for a parliamentary inquiry. We cannot wait until 2015 or 2016 to secure the answers and, more important, the solutions. A properly resourced parliamentary inquiry with full access to papers, officials and Ministers, with evidence given under oath, could make much-needed progress.

[Mr Cash]

Does my hon. Friend agree that we could also adopt the system applied to hybrid and private Bills, with a cross-examination carried out by a fully forensic Queen’s Counsel, so that we could get to the root of what is really going on? Could we not have specialist advisers on the Committee as well?

[David Rutley]

I am not familiar with that approach. As a former member of the Treasury Committee, however, I should like to say that I have worked with my hon. Friend the Member for Chichester (Mr Tyrie), and that I have a huge amount of respect for his knowledge and experience in Treasury-related matters, and also for his independence of mind and personal integrity.

[Richard Graham (Gloucester) (Con)]

Does my hon. Friend agree that what our constituents really want is a recognition of what went wrong, swift action to prevent this from happening again, and then work to restore trust in this sector, which is so important to the country? As Lord O’Donnell said, the public will not want us to kick this into the long grass.

[David Rutley]

I completely agree. It is so important that we drive for urgent action that I hope Opposition Members will reconsider their stated position and vote with us this evening in support of a parliamentary-led—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I asked the hon. Gentleman to conclude his remarks by 4.55 pm and that is now the time. The winding-up speeches will now start.

LIBOR (FSA Investigation)

David Rutley Excerpts

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

There will be no constraints because of cost.

[David Rutley (Macclesfield) (Con)]

Does my right hon. Friend agree with the view expressed a few years ago that

“nothing should be done to put at risk a light-touch, risk-based regulatory regime”?

Is this not further evidence of the wishful thinking that is all too prevalent on the Opposition Benches?

[Mr Osborne]

My hon. Friend is right. I remember sitting at the Mansion House listening to the former Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), telling us in 2007 about the golden age of the City, just before the City imploded.

Finance Bill

David Rutley Excerpts

Monday 2nd July 2012 Commons Chamber

[Sheila Gilmore]

It could, and there could also have been significant investment in the building of affordable housing, which is dear to my heart. That would not just give people houses but create jobs and apprenticeships and boost the local economy. The Government could have done that if they had really wanted a Budget for growth. Our criticism of the Budget was that however balanced it may have seemed—it now turns out not to have been quite so carefully balanced as we were told—it was not a Budget for growth. Very little was put into building up jobs and growth. Perhaps it was only a practice Budget, although I always thought that was what the autumn statement, which used to be called the pre-Budget report, was for.

[David Rutley (Macclesfield) (Con)]

Fiscal responsibility is clearly an overriding priority, but does the hon. Lady agree with President Hollande, who recently said that

“national debt is the enemy of the left and the enemy of France”?

It is also the enemy of the United Kingdom.

[Sheila Gilmore]

National debt is sometimes essential. After all, I seem to recall that it was very much higher at the end of the second world war than it has been at any time since. There were reasons for that, and I believe we finished paying it down only a few years ago. Sometimes, we have debt because we have made essential or useful investment, and of course it is not the same as deficit.

Financial Services Bill

David Rutley Excerpts

Tuesday 22nd May 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

The part of the Bill before us is mainly about transferring powers between the FSA, the FCA and the Prudential Regulatory Authority, and adding new powers, so I am not sure that it sits very well with the hon. Gentleman’s amendment. Will he explain in more detail why legislative measures are required when such objectives can be measured in other ways?

[Chris Leslie]

We are trying to ensure that the Government fundamentally address the question. These provisions give the Minister and the Treasury the power to make by order amendments to many of the rules, statutory instruments and suchlike that affect mutual societies. We think that they should have the capability to measure progress on mutuality in order to help to smooth progress towards fulfilling the coalition’s pledge.

Given that we have before us a financial services Bill, our constituents would expect us to be talking about firm and defined measures to make progress on diversifying the financial services sector. Unfortunately, they would be disappointed by the Treasury’s progress on that. The Treasury website has a very scant, short set of paragraphs stating the coalition agreement’s desire to promote mutuals. It says:

“The Treasury is developing policy and delivering legislative changes to…meet this aim.”

That is basically it—a statement but no substance. I want the Minister to tell us what progress is being made in fulfilling that objective. It is not good enough merely to talk about consolidating existing rules or legislation and wrapping that up as though the Law Commission’s recommendations somehow fulfil Government promises. We want to see more action.

--- Later in debate ---

[Geraint Davies]

I shall be brief, Mr Deputy Speaker. The coalition Government say that they want to encourage diversity in the market and increase the proportion and number of mutuals, yet they refuse to agree with measuring the number of mutuals or their market share. Anybody who is serious about any policy should want to measure it in order to manage it and show that it has been successful; otherwise they come across as completely hollow. Given that we have the Office for Budget Responsibility and so on measuring important things such as outputs and economic performance, I cannot understand why we cannot include mutuals as part of that portfolio.

[David Rutley]

I understand the hon. Gentleman’s strength of opinion, but is he not aware that these data are readily available? We need only go to a market research firm or to researchers in the City to find that the data are readily available.

[Geraint Davies]

But as I have just said, if that is the case why do we need the OBR? We could go on the internet, like the hon. Member for Birmingham, Yardley (John Hemming) did, and then say, “I’ve got a figure from a reliable mate in the City.” This is completely absurd—

Business and the Economy

David Rutley Excerpts

Monday 14th May 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

Contrary to what the hon. Member for Dundee East (Stewart Hosie) said, the economy is central to the Government’s agenda. They have already taken much-needed action to ensure lower-cost Government borrowing by working to create the most cost-effective business tax system in the G7 and by pushing forward supply-side reforms that are needed to tackle the burden of bureaucracy facing British businesses, much of which was put in place by Labour when it was in power. Real progress is being made, and I support the Government in their efforts to show that Britain is open for business once again.

The Queen’s Speech sets out proposals that will build on those achievements. The enterprise and regulatory reform Bill will promote enterprise and fair markets through a new competition and markets authority, the creation of the green investment bank, and much-needed reform of employment tribunals. The Queen’s Speech also contained the Groceries Code Adjudicator Bill, which has been welcomed by farmers in Macclesfield, the National Farmers Union, and small food producers more widely. By establishing an independent adjudicator that will enforce the groceries supply code of practice, the Government will ensure that supermarkets deal more fairly with their suppliers and that we have a much more effective supply chain for the food industry.

The Queen’s Speech includes important measures on financial services. The banking reform Bill will create a ring fence around vital banking services and introduce depositor preference, in line with the recommendations of the Vickers Independent Commission on Banking. After the Northern Rock experience, with the first run on the banks in over a century, it was clear that much needed to be done to protect the pensioners, families and small businesses who rely on our banks and financial services and that the failed framework of the previous Government had to be replaced. After the general election, the Government rightly focused on putting back in place a financially stable mechanism to ensure that we had a solid foundation, and they commissioned Vickers to take forward a bold approach to financial regulation and propose the ring fence for retail banks. That must be put in place to make certain that we do not see further failures such as Northern Rock and the Royal Bank of Scotland. This highlights the importance of going beyond Basel III and the minimum capital requirements that it proposes to ensure that there is real stability for the UK financial services system. I am pleased that the recommendations of the Vickers commission are now being taken forward by the Government in the banking reform Bill.

The Financial Services Bill, which I was involved in scrutinising in Committee, was the next step in the process. It puts accountability back with the Bank of England, where it needs to be, by creating a new systemic regulator—the Financial Policy Committee. The Bill is one of the carry-over Bills that will continue its progress in this parliamentary Session, and it is vital that it does so.

It is a concern that the aims of these reforms, whether banking reform or the Financial Services Bill, might be undermined by plans being suggested by Brussels. There are worrying signs that a significant number of EU regulations in the pipeline could have a major effect on the Government’s new financial regulations and undermine our freedom to take the necessary steps to get our banking system into a safer, more secure position.

A huge amount is at stake for the UK economy, and it should not be forgotten that the financial services sector still accounts for 10% of UK gross domestic product. In 2010, the sector employed 1 million people, and it contributed £53 billion in taxes in the 2009-10 financial year alone.

The Chancellor is right to work hard to ensure that the single European rule book does not bind the UK to a maximum level of EU capital requirements, which the Vickers report believes is inadequate. Capital requirements directive IV threatens to tie the hands of the Financial Policy Committee. Given the importance of this decision to the British economy, our negotiators are right to use every tool in their arsenal to protect our ability to regulate UK financial services. The Treasury is right to push back on Brussels to ensure that the box-ticking culture that was all too prevalent under the previous system is not replaced by further box ticking from Brussels.

Domestic regulators require discretion to utilise the new judgment-led approach, which is welcomed by many, to cater for the changing needs of the financial services sector here at home. However, without the effective safeguards from EU regulations, the UK risks being tied into a system more suited to Germany’s regional Landesbank or Spain’s caja savings banks than one regulating the globally important City of London.

The Government are right to continue to press for the safeguards that the Prime Minister sought at the EU Council meeting, where he made his decisive veto. Tomorrow’s ECOFIN meeting offers Finance Ministers from across the EU the chance to address the eurozone’s crisis and I hope that they take note of what this Government are doing in their efforts to tackle the deficit and push forward constructive reforms in the financial—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I call Bridget Phillipson.

Financial Services Bill

David Rutley Excerpts

Monday 23rd April 2012 Commons Chamber

[Chris Leslie]

We are doing this because the hon. Gentleman and I are here to represent our constituents, some of whom will be on variable rate mortgages in these circumstances. All we are saying is that we want all the banks to warn of the potential impact of rate changes across a range of scenarios. It is about helping customers anticipate what might be around the corner. It is as simple as that. The banks will give all sorts of reasons for increasing their standard variable rates. For example, they claim that costs make it difficult and often cite the special liquidity scheme, which is now beginning to taper off so the taxpayer safety net is beginning to come away, but taking more and more from consumers is in many ways unfair. I think that Lloyds bank recently borrowed many billions from the European Central Bank as part of its long-term refinancing option, so there is cheap money available wholesale for the banks. We have to keep an eye out for the way they sometimes seek to make an excessive profit off the backs of ordinary mortgage customers.

[David Rutley (Macclesfield) (Con)]

I appreciate the rationale that the hon. Gentleman is putting forward and that he is trying to protect customers, but I have to agree with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on the impracticality of the proposal. There now seems to be a tendency to make proposals on single products, but the Bill is about financial stability in the round, which we are trying to achieve, so is he seeking to introduce a similar forewarning system for savers on fixed incomes, who find interest rate changes equally worrying?

[Chris Leslie]

There might well be a case for that, but we are talking about people’s homes and the roofs over their heads. Repossessions can seriously hurt people, especially if they were unable to anticipate the situation because of a shock or unpredicted changes to their interest rates. As I have said, this point in the cycle is the right time to make this sort of change. It is about preparedness and information for home owners, and I feel strongly that we ought to have that in statute. If the Minister does not agree, this is certainly one of the issues on which we want to test the will of the House.

--- Later in debate ---

In exercising those powers of intervention, I hope that the new chief executive of the FCA will be prepared to work with other regulating bodies in the Channel Islands and elsewhere across Europe and beyond, particularly when it comes to cross-cutting products that have become international and products that have been designed to overcome the tighter regulatory structure here in comparison with elsewhere. I view that as essential. Under current legislation, I believe the FSA has the power to play a leading role in resolving some of these issues, but I hope that the new chief executive of the FCA will accept the will and demands of many Members when action needs to take place but has not, as with Arch Cru and others.

[David Rutley]

My hon. Friend is making a characteristically powerful speech about his concerns about various products and what the FCA should do to move things forward. I am concerned about some of the speeches and interventions from the Opposition, who are trying to be too prescriptive about what the FCA should do with particular products. Clearly, there is a range of issues and concerns, but ultimately we should surely allow the new chief executive of the FCA to take the decision based on what he or she feels should be the priority. Does my hon. Friend agree that we should not be too prescriptive?

[Alun Cairns]

I entirely agree. That is one of my reasons for opposing amendment 40. In my view, it will not achieve what it sets out to achieve, but will have far-reaching consequences for not only the FCA but consumers and providers.

--- Later in debate ---

That is not a significant protection—it is weak and caveated. We need the FPC to have proper regard to the impact its decisions can have, positively and proactively, on jobs and growth. That is why we tabled amendment 22. It is not something just dreamed up by the Opposition; the pre-legislative scrutiny Committee, some of whose members are here this evening, recommended that the measure be in the Bill. The FPC must be made to think about the impact of its decisions on the real economy; otherwise, it could become obsessively risk-averse and start to stifle credit availability.

[David Rutley]

There is a sense of déjà vu, as the Bill Committee spent a lot of time debating this measure. The hon. Gentleman talks about what he perceives is the present Government’s blind spot, but the previous Government’s was clearly a regulatory system that was woefully inadequate to cope with the challenges that came its way and was found wanting. What the Bill aims to address is financial stability and to make it a core focus. Why does he want to diffuse the focus at a time when the key element we have to tackle is financial stability? Government policy more generally tackles what he wants.

[Chris Leslie]

This goes back to the odd statement from the Minister in Committee, when he said it would be wrong for the Bank of England and the FPC to be asked to have regard to the impact of its decision on economic growth and employment. I ask the hon. Gentleman to pause and reflect on what he is saying, which is that it is not the Bank’s and the FPC’s job to think about jobs and growth. If he goes to his electorate and says that that is what he is legislating for, I doubt he will get much of a response, but it is important. The FPC will be a vital player in our economy. The Monetary Policy Committee has this objective in its remit; it seems only reasonable to have it mirrored in the Financial Policy Committee’s remit.

This attitude, which we called the Fareham doctrine of compartmentalism, that it is for the Treasury alone to think about jobs and growth—that it would be wrong and somehow dangerous for the Bank of England to think about such issues too—is an extremely dangerous way to think about this vital and extremely powerful institution. The Chair of the Treasury Committee said that, in certain ways, the Governor of the Bank of England could become even more powerful than the Chancellor of the Exchequer. I want all the players in our economy to be thinking about the impact of their decisions on our constituents, their employment prospects, their business prospects and the prospects of growth.

I think the amendment should be made. It is exceptionally important, and I feel strongly that we should press the matter. In a sense, it is similar to amendment 24. In the Bill, we enter new verbal territory with descriptions of how policy will be made. I know that many Members are intimately familiar with macro-prudential regulation, but essentially, it is that suite of rules and powers that the Bank of England and the FPC will be able to use to intervene in their systemic oversight of the economy as a whole. We suggest simply that every time the Bank of England produces a financial stability report it should give an assessment of the impact that each of the new macro-prudential measures will have on employment and growth—a simple assessment of their impact on the real economy. As the Bill stands, there is no requirement on the Bank of England, when exercising those massive powers, to provide that assessment. As the House knows, in many policy areas, we require frequent regulatory impact assessments to be made; this is a parallel requirement. We want the Bank of England properly to analyse the impact of the measures.

Let me give hon. Members some examples, so that they understand what macro-prudential regulation is. It is about setting maximum leverage ratios; sectoral capital requirements; rules on the terms of or the conditions on a loan, either to businesses or to consumers; loan-to-value ratios and loan-to-income ratios in mortgages; haircuts on secured finances or derivative transactions; disclosure requirements; and minimum credit card repayment levels. All those things are of real and great concern to our constituents. If the FPC and the Bank are able to assess the impact of their policies on credit availability, they should also be able to assess and analyse their impact on jobs and growth. Amendment 24 would achieve that.

--- Later in debate ---

That wording may be less objectionable to him than that of amendment 22, but it states that the FPC should not be run in a vacuum. If the Government are seeking a given level of growth or employment, the FPC should not do things that cut across that. In fact, it should work its policies to ensure that it happens.

[David Rutley]

I know that the hon. Gentleman is very knowledgeable about these matters and was on the pre-legislative scrutiny Committee, but has he not seen that proposed new section 9C(4) in clause 3 contains some clear wording about what the FPC should do? It states that subsections (1) and (2) of that proposed section do not

“authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy”.

The matter is addressed, so what does he want in addition to that, and why does he feel the need for more?

[Mr Mudie]

I accept that point, which has been made clear all the way through, but that is negative language rather than positive. Instead of telling the FPC, “In carrying out your duties, you mustn’t adversely affect growth”, I would rather put it to work with the MPC on ensuring that we have a buoyant economy with steady, acceptable growth and employment levels. At the moment, apart from the negative words that the hon. Gentleman quotes, all we have is the requirement of financial stability.

The hon. Gentleman was with a number of colleagues here on the Treasury Committee. We go through accountability with the MPC. It is bad enough trying to get the Governor of the Bank of England to be accountable even when he has a named target; what would he be like, or what would a future Governor be like, when he came before the Committee to which he was accountable and only had to defend his actions on the grounds of financial stability, which cannot be defined? It is a case of the emperor’s new clothes. There really should be a joint mandate, with a definition of financial stability and an acceptance of the Government’s picture of growth and employment.

Finance (No. 4) Bill

David Rutley Excerpts

Monday 16th April 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

It is good to follow the hon. Member for Dumfries and Galloway (Mr Brown), who makes an important point about staycations. I recommend coming to Macclesfield for a staycation. Nestled beneath the Peak district, and enjoying tremendous views over the Cheshire plain, it is a great place to be. It even beats Retford; the hon. Member for Bassetlaw (John Mann) will know that.

[John Mann (Bassetlaw) (Lab)]

But Macclesfield is about to be relegated.

[David Rutley]

Let’s keep football out of this. Coming back to the Finance (No. 4) Bill, it is tremendous to have the opportunity to speak in this important debate. Now that we are nearly halfway through this Parliament, it is important to think about our direction of travel. It is clear that under this Government, Britain has returned to economic credibility, and is laying the foundation for private sector and business-led recovery. Despite views to the contrary among those on the Opposition Benches, my right hon. Friend the Chancellor of the Exchequer has been proved right to chart the course that he did at the beginning of the Parliament. He was right not just to tackle the deficit head on, but to put the private sector at the heart of the growth agenda, where it needs to be. It is a consistent theme that came through loud and clear in the emergency Budget and the 2011 Budget. Now, in the 2012 Finance (No. 4) Bill, it continues to be pivotal, and at the centre of what the Government are trying to achieve.

There are a number of important proposed tax changes, which we have heard discussed by hon. Members, but I want to focus on the measures that have been designed to support British businesses, which are critical to economic recovery. First and foremost, I welcome the Government’s move to accelerate the commitment to having the lowest corporation tax in the G7. It is strange that no Opposition Members took any time to mention that, because that is where we will create new jobs. Having corporation tax at 22% by 2014 will give us real competitive advantage in attracting the investment that we need for sustainable economic growth. This Government’s plans are bold and ambitious, bringing the effective rate of corporation tax to a level below that of developed countries such as France, where it is currently 36.1%, Germany, where the rate is 30% to 33% and Canada, where the rate is 25% to 31%. I understand that even the Republican party in the United States proposes an effective rate of 25%. The measures set out in clause 5 will help us to increase business investment and will help us on our trajectory. I understand that the forecast by the Treasury suggests £3.4 billion of extra investment by British businesses, which is vital for the country.

Through the Finance Bill the Government have recognised the vital roles that innovation will play in helping to strengthen the economy. That is clearly demonstrated by the Government’s corporate tax road map, which came out in November 2010, with the introduction of the patent box, which features in clause 19 and schedule 2, and by the above the line research and development tax credit, both of which will come into effect in April 2012. Such tax measures complement the work that the Government are doing to support vital innovative businesses and industries, such as pharmaceuticals. The recently launched life science strategy will also help industry in the UK to tackle global challenges that are being faced in the pharmaceutical sector and will help us to keep this important skilled work force in the UK, just as I am working with AstraZeneca to do in Macclesfield.

The Budget sets out important steps to help the small and medium-sized enterprise sector. The SMEs will be the vital engines for growth in the sector, as many of us on the Government Benches are aware. The Budget’s £20 billion national loan guarantee scheme will help to reduce the cost of credit for SMEs, which 60% of small firms believe is unaffordable, and will provide an opportunity for small firms to motor ahead. Both the Federation of Small Businesses and the British Chambers of Commerce have welcomed this important and ambitious scheme.

The reforms of corporation tax and of corporate tax more generally have been welcomed by business. The forecasts suggest that they will save business £6 billion a year by 2015. That is money that will be better invested by businesses in new initiatives, enabling them to get on with the job of creating the work that many of us on both sides of the House are keen to see come to fruition. That is why the Budget has been welcomed by so many business groups and by the business community.

The CBI says that

“by seizing the opportunity to make sure our corporate tax system is more internationally competitive, he”—

the Chancellor—

“has sent a powerful signal to companies to invest, do business and create jobs in the UK.”

The IOD goes further and says:

“The reduction of Corporation Tax faster than planned is a positive step in the right direction”.

These are important signals and key messages from the business community showing support for what the Government are doing in this important area.

Although the debate today is rightly focused primarily on the tax-related aspects of the Budget, I shall spend a few minutes considering the supply-side reforms which will also have important impacts on the economy. That is why it is right to acknowledge the work that is being done by the Government in reducing the regulatory burdens faced by our businesses. As Ronald Reagan once said:

“It’s hard when you’re up to your armpits in alligators to remember you came here to drain the swamp”,

but this Government have not forgotten, and are taking action to drain that swamp.

The UK has more than 21,000 regulations on its books, and the Institute of Directors has calculated that the cost of those regulations is approaching £112 billion a year. These figures clearly demonstrate that we will benefit from an approach to deregulation that is every bit as ambitious as the Government’s deficit reduction initiatives and their tax reform strategies that will create the optimal conditions for growth. That is far better and more constructive than the demands from the Opposition for yet more Government spending.

The size of the prize is huge. Cutting the regulatory burden on businesses by just 10% would save British businesses about £11 billion a year. That is the equivalent of cutting corporation tax and the small profit rate by a staggering eight percentage points. Even by the standards of the benefits provided by the Bill, that is a hugely positive contribution to business. That is why the Government are pressing ahead with their deregulatory agenda. The one-in, one-out rule has helped to stem the flow of new regulations, and the red tape challenge is tackling the stock of old regulations. Reforms of health and safety regulations will help to free British businesses from a culture that is damaging the well-being of our economy.

Churchill once said:

“If you have ten thousand regulations you destroy all respect for the law” ,

and, just as relevant today, destroy a nation’s competitiveness. Working together, the Government and the private sector should continue to seize the opportunity and put the deregulatory agenda in a higher gear. This approach will be critical to complement the important work set out for businesses in the Bill.

Representing the Ribble Valley, Mr Deputy Speaker, you will be aware that many of the pro-business policies in the Bill will help to rebalance the economy in the country and across the regions, including the north-west. We have become too dependent on the public sector to create jobs, and we must change that, as we are doing. Despite much grumbling from the Opposition, there is evidence of success. We see important progress at Jaguar Land Rover, where 1,000 jobs are being created at Halewood by a 24-hour production line, one of the few 24-hour facilities in Europe. BAE Systems has been named a key contractor for the F-35 joint strike fighter, which will bring about £30 billion to the UK economy and safeguard 25,000 jobs, many of which are based in the north-west, near Mr Deputy Speaker’s constituency.

We have seen other positive news in recent weeks. In Crewe, near Macclesfield, thanks to a £3 million regional growth fund investment, Bentley has announced that it will create 500 extra new jobs. All these steps show that private sector jobs are being created. As a result, more employers in the north-west are feeling more optimistic about job creation opportunities. According to a March 2012 Manpower survey, 6% more employers in the north-west say that they intend to hire this quarter than in the last quarter, which is welcome news for the region.

We have heard much from the Opposition about job creation. My concern as I look at their policies is that, yet again, they are calling for more jobs to be created by the public sector, which are not sustainable. The jobs that the Government seek to create are sustainable. They are based on a private sector-led recovery. As I listen to the arguments from the Opposition, it is ever more clear to me that the previous Government were overspent, overdrawn and over-awed by the challenge that they had helped to create. It has been left to this Government to clear up that mess.

As we approach the halfway point in this Parliament, we can take stock of the progress that is being made to back business. Important strides have been taken to tackle the deficit, to address supply-side constraints and in this, as in previous Finance Bills, to create a truly competitive corporate tax environment. Such changes are much needed. That is why I add my support to the Bill today.

--- Later in debate ---

[Julian Sturdy]

Obviously, as a north Yorkshire MP who represents a rural constituency, I understand the impact of fuel prices on rural areas and economies, and the Government must consider that. However, as I said, the Government have to consider the wider impact when they make such decisions. They would like to do many things, and I would like them to do a lot of things—I would like the 3p rise not to come in in August, and I hope that it will be kept under review if oil prices continue to rise—but they have to take a balanced view.

[David Rutley]

Is my hon. Friend aware that every penny reduction in the fuel duty allowance costs half a billion pounds? I wonder whether the hon. Member for Bassetlaw (John Mann) and other Opposition Members can tell us how they would fund such changes in fuel duty.

[Julian Sturdy]

My hon. Friend is right that any cut in fuel duty or reduction in potential rises that are coming down the line has a huge impact on the Treasury’s finances, and the money always has to be found elsewhere. However, I go back to my original point, which will have some resonance across the House: rural areas are particularly affected by high fuel prices and that has an impact on the rural economies. I ask the Exchequer Secretary to keep the matter constantly under consideration whenever he looks at increasing fuel prices.

Budget Leak Inquiry

David Rutley Excerpts

Thursday 22nd March 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

Does my hon. Friend agree that it is a bit rich to be asking this question today—[Hon. Members: “A bit rich!”] Does he agree that it is more than unfortunate to ask the question today, when articles such as the one I have with me, from The Guardian on 11 March 2008, state:

“Alastair Darling is set to deliver his first budget to the House of Commons tomorrow…but in reality, much of it has already been trailed”?

[Mr Gauke]

Some things are not entirely new. The Labour party really does have to think back to its time in government and to the behaviour undertaken then. What is remarkable is that Opposition Members managed to brief some of their announcements, given that most were decided only at the very last minute.

Oral Answers to Questions

David Rutley Excerpts

Tuesday 6th March 2012 Commons Chamber

[Mr Hoban]

It is important that people take as much advantage as they can of the discounts on offer. The Money Advice Service is there to provide advice to people at all levels of income. Encouraging more people to open bank accounts and to take advice on direct debit services is a key part of its role.

[David Rutley (Macclesfield) (Con)]

15. What assessment he has made of the effect of Government spending commitments on the budget deficit.

[The Chief Secretary to the Treasury (Danny Alexander)]

In the autumn statement, the Government announced their decision to continue the consolidation beyond the current spending review period in response to a deterioration in the Office for Budget Responsibility’s forecast. The Government’s plan has restored confidence in the UK’s fiscal position, protected the UK from the European sovereign debt crisis and kept low long-term interest rates.

[David Rutley]

Has the Chief Secretary seen the latest report by the International Monetary Fund, which shows that although the US had a fiscal contraction of 0.8% last year and Germany saw a 2.3% tightening of its fiscal policy, both those economies are still growing? Does he agree that this shows that those who have called for an increase in the deficit as a way to drive growth are completely wrong?

[Danny Alexander]

Yes, I wholeheartedly agree with my hon. Friend. When the coalition Government came into office the UK was forecast to have the largest deficit in the whole of the G20. It is necessary to stick to the Government’s consolidation plan to restore public finances to sustainability. At the same time, the Government are delivering a radical programme of supply-side reforms to lay the foundations for a stronger and more balanced economy in the future.