(12 years, 4 months ago)
Commons ChamberI 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.
I agree with very much of what my hon. Friend says. When the Bank of England was given its independence—so-called—I thought that if it started to fly in the face of what was obviously sensible for the economy, a Government might choose to take that independence back to the Treasury and into the hands of the Chancellor. If the Bank is not sensible in respect of managing the economy as a whole, is it not possible that a Government might choose to take back that independence and operate policy from the Treasury?
One can see many scenarios. I have seen many political philanthropists since I have been a Member of Parliament. I worry because they come to the House as politicians, but seem not to want to do anything or take any responsibility. They have offloaded power to quangos and agencies, and gave independence to the Bank. The real question is why are the Chancellor and the Treasury sitting back and watching their ground—sensitive economic ground—being given away to a quango, an unelected bunch of people? Under the Bill, those people can take the remit and the guidance on it, which the Treasury sets, and say to the Treasury, “We don’t agree with you,” and that is that. That is the situation we are reaching on accountability and responsibility despite the worry about giving away powers.
On amendment 23, some hon. Members were hard on my hon. Friend the Member for Nottingham East, although it is not as if he cannot defend himself. The Government’s original proposition, which was put out for consultation, included macro-prudential tools, which, as hon. Members have said, are highly sensitive and powerful. One aspect of the proposal they have given up because of its sensitivity—I am going by what has been in the papers in the past few days—is the ability to interfere in the mortgage market on loan-to-value and similar matters. What happens if the unelected Financial Policy Committee starts leaning against the wind in a way that affects large numbers of people, and there is no way of talking to it or affecting its position?
The Government’s original proposal was that decisions on macro-prudential tools would go upstairs to the Committee Corridor as statutory instruments—secondary legislation—for a 90-minute debate on a measure that would not be amendable. All hon. Members know what happens upstairs. The Minister talks for an hour, the shadow Minister talks for 25 minutes and we all go home, with the measure voted through by the Government majority. That happens with Governments of all parties. The way secondary legislation is dealt with in Parliament is an absolute disgrace. We can excuse a lot of it, but matters as important as the ones we are discussing, it is scandalous.
To be fair to the Chancellor, I raised the proposal with him when he first introduced it and asked him to look at it again because of its undemocratic nature. I am pleased that the line has softened, but there is more talking and work to be done. If hon. Members are asked to give away powers that affect our constituents so directly, it is important for us to be absolutely sure that we have had the opportunity to at least have our say in the strongest possible terms and ones that might allow the regulator to think about what has been said, although it is not for us to take its take its job.
A Government Member attacked my hon. Friend the Member for Nottingham East and asked him whether he would interfere with a regulator. We had that situation when the Treasury Committee discussed the retail distribution review with the chief executive of the FSA. We said to him, “This Committee feels strongly about this matter. We’ve had a lot of press about it and a lot of pressure, and we’d like you to think again.” He replied, “No, we won’t think again, unless you give me evidence.” The Treasury Select Committee giving evidence to the chief executive of the FSA—what arrogance! My hon. Friend the Member for Nottingham East is doing the Government a favour. They might not agree with the detail of the amendment, but the spirit is that we give the House every opportunity to comment on, think about and be aware of the powers we give to individuals that might affect our constituents.
It is a pleasure to speak in this debate, albeit briefly. Like Mark Antony in “Julius Caesar”, I come to praise the Bill, not to criticise it. I accept that the Government are all honourable men and women, but so, it might be reasoned, are the members of the Treasury Committee, who are also honourable men and women, advancing a slightly contrary view.
I support the fundamental ethos of clause 1 and welcome the review of the performance of the Bank of England. I certainly do not support Opposition amendment 28, which would remove clause 5; that would be entirely wrong in the present circumstances. I speak as a critical friend of the present system and as the secretary of the all-party group on the Arch Cru Investment Scheme, which is seeking to recover compensation for the thousands of men and women in this country who have lost their lifetime savings. What happened to them is manifestly wrong, and anything that this House can do to strengthen the regulatory system to prevent such disasters, I welcome wholeheartedly.
I speak also as an MP who, almost every week, has a constituent come to me saying that they are unable to obtain bank lending and finance. That is because of the lack of competition in the present banking structure—an issue that is raised regularly. I urge the House to embrace greater competition and to open up the market to competitors to the existing large banks, which will be in a position to provide the bank finance sought by businesses up and down the country.
The other end of the telescope must also be addressed. At present, we have the large banks, but there are no small banks. Germany and America have local banking structures that work tremendously positively: individuals can set up local banks, which provide for a community purpose above all else, which is manifestly a good thing. That is why I support wholeheartedly the competition objectives set out in new section 1E of the Financial Services and Markets Act 2000, inserted by clause 5, which states that there should be an emphasis on
“the ease with which new entrants can enter the market, and…how far competition is encouraging innovation.”
I have met the chairman of Metro bank, which is that remarkable thing: a bank set up to exist at the weekend. It opens on weekends and at 8 o’clock in the morning. Imagine what could be done if we had that at the local level.
I am grateful for what Hector Sants, the present chief executive of the FSA, told me in a letter dated 12 March:
“We are conscious of the balance to be struck between ensuring high standards at the gateway, and the importance of allowing innovation and appropriate levels of access for new firms.”
The letter continues:
“there has been public debate about the potential advantages of new entrants in the area of small, regional banks focused on servicing the SME sector. In such cases we will be proportionate in our approach and would invite all firms with a viable business model and appropriate levels of resources to a pre-application meeting to help guide them through the application process”.
The Bill will, I suggest and sincerely hope, make it easer to establish local banks, which can only be a good thing.
I rise to express my strong support for the amendments in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell).
There are two components of the argument: the first is the relationship between the Governor of the Bank of England and the Government, but the second is the relationship between this House of Parliament and the Government. On both, I strongly believe my hon. Friend has a point. Like him, I was unhappy about the decision to hand power over monetary policy to the Bank of England and give it independence. All aspects of macro-economic management ought to be matters for Ministers accountable to Parliament. I maintain that view and, in a sense, recent events have proved that my hon. Friend and I were right. I thought at the time that if the Governor of the Bank of England or the Monetary Policy Committee chose to be hawkish on interest rates when we had a recession on our hands, there could be a serious conflict between the Bank and Government. Fortunately, the Bank has been sensible in managing monetary policy and that clash did not occur, but it could have happened in 2008. Had the Bank been governed by a hawkish Governor, we could have seen a serious clash and those powers no doubt taken away. I was comforted by the thought that if the Bank of England got out of control, we could easily take back powers. It is not the same with the European Central Bank, where powers have been given away and cannot be taken back.
In relations between Parliament and Government, pre-appointment hearings have been shown to be a success. I have been involved in not just the two most recent pre-appointment hearings, but in developing the arguments in favour of pre-appointment hearings as a member of the Public Administration Committee for the past 10 years. Brilliant work was done by Tony Wright, who made a real impact on our constitution. Pre-appointment hearings are first class. They are not just an experiment; they are here to stay. I would like the Governor of the Bank of England to be subject to a rigorous pre-appointment hearing so that we know that they will serve the economy and relate to the House, and not just be a law unto themselves. I have probably run out of time. I know the Minister needs to speak, but I have made my point.
This has been a thoughtful and constructive debate covering the wide range of issues in this group of amendments. I shall organise my remarks in two parts. I shall deal first with issues relating to the Bank of England and the Financial Policy Committee, and secondly with the Prudential Regulation Authority and the Financial Conduct Authority.
I begin by speaking to Government amendment 12. This change was prompted by an amendment proposed in Committee by the hon. Member for Nottingham East (Chris Leslie), on the wording used to ensure that the view of the Treasury member of the FPC cannot be taken into account in determining whether the FPC has reached a decision by consensus. Although the substance of the provision, which is consistent with the general principle that the Treasury member of the FPC should not have a vote, was endorsed by the Committee, some members of the Committee thought that the wording was ambiguous. Some, including the hon. Member for Foyle (Mark Durkan), felt that the current wording could imply that the Treasury is not even allowed to exercise influence through debate or discussion.
I therefore committed to look again at the wording to see whether it could be made clearer. Amendment 12 amends the provision to make it clear that in determining whether the FPC has reached consensus, the chair should disregard “any view expressed” by the Treasury member. This does not mean that the Treasury member cannot influence the discussion and debate, but in determining consensus, that voice should not be taken into account.
The main focus of the debate has been accountability and transparency. That is absolutely right. Hon. Members are right to highlight the fact that as a consequence of the Bill, the Bank of England takes on more power and responsibility, partly because the PRA becomes part of the Bank family, and through the creation of the FPC. It is right that we strengthen the transparency and accountability of the Bank as a consequence of the reforms before us. The debate about macro-prudential tools was a helpful way of characterising that debate and talking about some of the proposals that we have made. We are committed to ensuring the ex ante approval of those macro-prudential tools by this place and the other place. Hon. Members are right to call for a review of the use of those tools and a retrospective review of the Bank’s performance. That is important too.
Let me deal first with the ex ante side of the equation. Amendment 22 talks about economic growth being part of the FPC’s objective. The Government are clear that the FPC’s principal aim should be to make the financial system safer and more stable. We do not seek the stability of the graveyard. The FPC should not be able to pursue stability to the point where the financial sector can no longer support the real economy. This means that the FPC should not be able to take action that would seriously damage the ability of the financial sector to contribute to growth in the medium to long term and the FPC should consider whether the costs of the action that it proposes would be disproportionate to its benefits. The Bill as drafted already ensures this.
(12 years, 4 months ago)
Commons ChamberI do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.
The IMF was designed for a world of separate national currencies with exchange controls and properly managed national economies. Is it not time to look again at re-creating that sensible world, because it actually worked, starting with the re-creation of national currencies in Europe?
The hon. Gentleman has, for all the time I have been in the House, consistently argued against British membership of the euro and consistently raised questions about the viability of the euro. I completely respect him for that, but to say that the IMF cannot get involved in the eurozone’s problems would be just a remarkable abnegation of the IMF’s commitment to deal with the world’s economic problems. The eurozone is at the centre of the world’s current economic problems because those involved have not been able to convince the markets that they can deal with their debts in the way that we have been able to. So I do not think it would be sensible for the IMF to just say, “There is a very important part of the world, which is at the epicentre of the world’s economic problems, but we are not going to get involved there.”
(12 years, 4 months ago)
Commons ChamberI return to my earlier point: if inflation was 10% and pensioners got a £10 increase in their pension, would Government Members celebrate and say that that was huge largesse for pensioners? It is not; it just keeps pace with the cost of living. The increase in VAT, and the increases in gas and electricity prices, which the Government have done nothing to tackle, and the rise in petrol prices, mean that the cost of living for pensioners and other families has increased enormously because of the Government’s choices.
There is a further hit to pensioners’ incomes, buried in the detail of the Budget documents. This year, an estimated 300,000 pensioners stand to lose their savings credit, while others stand to lose as much as £276 a year as a result of reduced rates of savings credit. Under the Chancellor’s latest plans, the savings credit will be abolished completely, costing more than 100,000 new pensioners as much as £897 a year: another stealth tax that the Chancellor tried to slip past pensioners; another slice taken from the constrained budgets of ordinary families.
I support my hon. Friend’s comments. Rather than speculate about what the next Labour Government will do after the next election—I like to think that Government Members have already conceded defeat—what about the Government’s backing off now and reversing the dreadful decision?
I thank my hon. Friend and congratulate him on hosting the National Pensioners Convention in Parliament today. It came to make the very point that my hon. Friend just made, and that pensioners made to us in the Committee Room earlier. Some Government Members would do well to listen to some of the pensioners in their constituencies.
It adds insult to injury for the Prime Minister and other Government Members to tell pensioners that they should be grateful for a rise in the basic state pension that merely matches the rate of inflation. It is not a rise—it simply keeps things level. If Government Members do not know the difference, they should get out into the real world, where the costs of food and fuel are going up and it is getting harder and harder to make ends meet.
The hon. Lady asks about the party manifesto. I had hoped to discuss the broader issues and great challenges facing us. Manifestos are, by their nature, broad brush, and this is such a tiny change to the tax system in the grand scheme of what the Treasury has to deal with. It is entirely right that the Government are, bravely, addressing it now. In all honesty, would either party go down to such detail in any future manifesto? It is entirely right that the Government are saying, “This is an anomaly. It is incorrect and unfair, and what is more, it is one of the many anomalies that are unaffordable in the long term.”
I hear time and again the Government saying that things are unaffordable and raising spectres of vast pensions bills in the future. This is a simple matter of transferring money from one group of people to another—namely, from the rich to the less rich. Were the abolition of the 83p rate by Mrs Thatcher and Geoffrey Howe and of the 60p rate by Nigel Lawson and getting rid of the 15% surcharge on unearned income all anomalies?
I profoundly respect the hon. Gentleman. He is a torchbearer for a former age in the Labour party, and he should raise that point with his own Front-Bench team. We are clearly not going to agree on it. However, at some point, someone needs to face up to the fact that we will almost double spending on old-age pensions between now and 2040. I shall put that in context: the number of people retiring this year who will be alive in 2041 will be more significant than now. I cannot give the precise figure, but hundreds of thousands of people retiring in the next few years will be alive in 20 or 30 years. We are not only dealing with an intergenerational problem, with a problem between this generation and a generation in two or three generations’ time or with a problem between people in their 20s and those in their 60s or 70s; we are dealing with a problem of those retiring now and to whom we must promise pensions and a decent standard of living in 30 years’ time. The ability to afford that is at the crux of the Government’s reforms, and this proposal is just the start of it.
The Minister may be too young to remember, but the Conservative Government under Mrs Thatcher abolished the Rooker-Wise amendment. The basic state pension would have been much higher now had that amendment been kept in place. What about raising the basic state pension in steps to where the pension would have been had the Rooker-Wise amendment never been abolished?
The Rooker-Wise amendment related to tax thresholds. As for indexation, we are using the higher of earnings or inflation or 2.5%. The plans we inherited were just earnings. That is an important point.
Despite difficult economic conditions, the Government continue to protect benefits for pensioners, including winter fuel payments, free bus passes and free prescriptions, to name but a few. Many pensioners are also benefiting from the Government’s decision to make funding available to local authorities to freeze council tax, and we also have the Warm Homes discount. The Institute for Fiscal Studies has submitted evidence to the Treasury Committee showing that pensioners are the group least affected by the tax and benefit changes implemented by the Government. It has given evidence that pensioners have benefited the most from the distributional impact of tax and benefit changes for some years. I assure the House that the Government are supporting, and will continue to support, pensioners.
I see the hon. Lady on the Opposition Front Bench agrees with me about that.
Perhaps it is appropriate to start by reminding the Committee of what our right hon. Friend the Prime Minister said on 26 May 2009. He said that he had accepted, as Conservative party policy, that
“The House of Commons should have more control over its own timetable, so there’s time for proper scrutiny and debate.”
He said that
“there should be much less whipping during the committee stages of a Bill,”
because
“that’s when you really need proper, impartial, effective scrutiny—not partisan point-scoring and posturing.”
It is against that background that I enter into this debate with confidence.
The Government’s proposals will, by their own admission, result in more complexity and less simplicity, which is completely at odds with their avowed intent on tax policy. The administrative costs alone will exceed £100 million, and 650 extra staff will have to be taken on to administer what is effectively the removal of child benefit from 1.2 million families.
I agree with the hon. Gentleman entirely. I recall when child benefit was first introduced in the 1970s, and I have to point out to those on the Government Front Bench that, throughout the Thatcher and Major Governments, no attempt was made to get rid of that universal benefit. We should stick with universality in this case.
The hon. Gentleman is absolutely right. Even during the International Monetary Fund crisis in the mid-1970s, things never got so tough that the Government of the day felt the need to interfere with child benefit. It was a reflection of the fact that families with children had higher costs than those without.
The proposals will create all sorts of perverse incentives, and the people who want to try to avoid the measures will have a field day. This has been well covered by the Treasury Select Committee’s recent report, as well as by the Chartered Institute of Taxation and other expert bodies. The fundamental issue is the proposals’ lack of fairness, as between one family and another.
(12 years, 4 months ago)
Commons ChamberIf Labour had won the election, it may have changed its view and continued the bank bonus tax. The Opposition certainly believe that Government ought to impose a bank bonus tax in addition to the current levy—[Interruption.] Well, the bonus tax was introduced for a one-off period, but I think a Labour Government would have continued it based on our priorities and values that we described in respect of the 50p rate. We would not have thought it right at this juncture, in a period of fiscal austerity, either to give a big benefit to the wealthiest individuals or to ask the wealthiest corporations to pay a lesser amount.
The hon. Member for Great Yarmouth (Brandon Lewis) implies that paying tax is voluntary, but surely it is compulsory in this country. It is just a question of ensuring that the people who owe tax pay it.
The debate on the 50p rate was interesting in that it revealed the differing attitudes of Opposition Members and Government Members to paying taxation. From the way in which some Government Members responded to the debate, one could surmise that they are very comfortable with people finding every possible means, illicit or legal, to avoid tax. [Interruption.] Well, there was a clear implication from some hon. Members in the earlier debate that the boundaries and borders of the envelope can be pushed, as they were. In some respects, that argument was deployed to justify the cutting of the 50p rate, because so much money was, through fair means or foul, pulled forward into 2009 when it should have been taken in 2010.
The hon. Gentleman ought to read some of the Budget documentation. The Government have not closed anything in respect of Switzerland; they have opened it up and continued to allow people to put money into Switzerland. They have asked them to acknowledge how much they have there and then charged them a lower rate of tax than they would have been charged had they kept their money in the UK. What is worse is that it runs fundamentally contrary to the European train of thought, established across Europe and supported by the previous Labour Government over their last five years, which is that we want more transparency, not less, in our tax affairs. Unfortunately, we will have less transparency as a result of his Government.
I find it tiresome that while the overwhelming majority of my constituents, who are ordinary working people, pay tax through pay-as-you-earn and have no opportunity to evade or avoid, we spend countless hours debating the minority of rich people, defended by the Conservative party, and their tax affairs. I want the rich to pay their taxes in the same way as those on PAYE so that they do not escape paying one penny.
Well, I think we are very grateful for that clarification. We await the details that, unfortunately, we did not get from the Opposition about how they would target the measure, whom they have in mind, how much those people would have to earn and how much bonus they would get. The point rests on perhaps a narrower base than the words in the amendment lead one to infer. One has to assume that the tax will lead banks to employ fewer people.
The tax that the Government have adopted also has consequences. They have decided to get extra money out of the banks by taxing the size of their balance sheets. I think the Government might be right that that is a slightly better way of doing things than taxing personnel costs because it is more general, but that too has adverse consequences. All taxation has adverse consequences as well as some positive uses. The Government tax encourages banks to shrink their balance sheets because they do not wish to pay too much tax. What does that mean in normal language? It means they want fewer deposits and less share capital and that they want to lend less money to people because the way to reduce the tax burden is to have less taxable capacity in the United Kingdom. The tax therefore has a cost. I do not disagree with what the Government are doing: I understand the awful financial situation that the country finds itself in and I can see how this tax is more popular than many others, but let us not pretend that these things are costless. At a time when we need more growth and more loans of a suitable kind to people who can afford to pay them back in order to create demand and more loans to smaller and medium-sized enterprises at a time when they need to grow, taxes on banks are not terribly helpful.
I am enough of a politician to know that banks are very unpopular and that it is an easy hit for politicians who want to improve their own popularity to take a position against the banks, so I am being something of a foolish hero by standing up and saying that not all banks are bad and that quite a lot of people who work for banks are perfectly decent people doing a decent job. The banking service that is supplied around the country to small and medium-sized enterprises and to you and me, Sir Roger, is very necessary, and sometimes it is well handled and well conducted.
There is a dreadful run of debate in this country that everything to do with the word “bank” is evil and wrong, that it serves the banks right and that everything has to be directed against them, but we have to work with the banks—the good, the bad and the indifferent—because we need them to be on the side of economic growth and recovery to tackle the very real problem that the Opposition have identified in the second part of their amendment—tackling unemployment. We need to get unemployment down, and one way of doing that is by having a strong banking sector working closely in partnership with the small and medium-sized enterprise sector and with those people who have a reasonable income and might want to borrow more to buy things and create demand.
The right hon. Gentleman glosses over the fact that the banking system has two distinct components. There is the banking for ordinary people and small businesses and then there is the casino component, which is about gambling with vast sums of money—often our money—and often losing it by the billion. That is the bit of banking we are complaining about, not the retail banking that looks after our money and ordinary working people’s money.
If it were that easy to make the distinction and to close down or punish the one and reward or encourage the other, I am sure the outgoing Government would have done it. The fact that they did not implies that in office they realised the situation was far more complicated. When we consider the complications of a large conglomerate bank—as it happens the taxpayer should have a lot of knowledge about them because we are the forced owners or part-owners of two such banks—it is immediately obvious to any sensible analyst that the activities of the investment bank are deeply integrated with, and related to, those of the normal commercial bank; for example, in their service for small and medium-sized enterprises. A small or medium-sized export business may need forward currency cover or trade finance and credit, or it may have an investable surplus. It may need all kinds of services that go well beyond the basic banking that the hon. Gentleman was trying to describe—just having a current account to make payments and a simple savings account. The world is much more complicated than that. If we are to survive and compete in a global world with international trade, we need to be able to handle its requirements.
(12 years, 5 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The hon. Gentleman will find that I am not arguing against his views—he is right—but we need to set out clearly how significant the problem is. Do we tax the product to the extent that it makes the smuggler’s job all the more easy, or do we recognise that there are things that the Government and we as a nation can do to address the problem?
The problem is not helped by the fact that I can drive my car to France or Belgium, fill it to the gills with cigarettes or alcohol and bring it back to this island and sell those products illegally. There should be a complete stop on a person being able to bring back a boot full of wine, alcohol and cigarettes and claim, “These are for me.” That is utter nonsense. Everyone knows that they are being brought back to be sold either on the street illegally or to their friends and neighbours. We have to make sure that such activity is stamped out.
The Government should be rigorous and ensure that, if people buy cigarettes and alcohol, they should buy them in this nation, pay tax on them in this nation and smoke and drink them in this nation, rather than allowing them to circumvent tax policies. It makes sense that I can probably buy twice as much legally in every other part of Europe than I can buy here because our tax policies are so severe. If they are severe, we need to make them work on this island.
I apologise, Ms Dorries, for my late arrival—cable theft means that the railways are in chaos.
I strongly agree with the hon. Gentleman. Does he agree that, if hundreds more staff were employed by Customs to seal our borders properly and ensure that such smuggling did not take place, they would not just stop criminality, but make many times their own salary for the Treasury?
I would have no difficulty with the deployment of more people in the worthwhile work of Her Majesty’s Revenue and Customs and other customs and border agencies, but our Committee took evidence from HMRC officials who said that they were satisfied with the money given to them by the Treasury and that they probably have enough people. If HMRC wants more people, it can argue its case, and it will not lack any support from me.
Some people argue that the plain or uniform packaging of cigarettes would solve the problem, but that is utter, total baloney. If people think that by simply uniformly packaging all cigarettes they will suddenly meet a public health objective, they are losing the plot. Plain or uniform packaging will not affect the problem. Every survey tells us that adults do not care if the package is gold, has a camel on it, or if it is red, white and blue. They care about price and taste. A person will smoke Camel lights because they prefer their taste to that of Marlboro. The colour of the stupid package does not matter—that goes in the bin. A person will smoke Benson and Hedges not because the box is beautifully gold with a pair of lungs on it, but because of the product’s taste and availability.
We have to wipe out the nonsense that plain packaging is the panacea to achieving a public health goal and to preventing smuggling. Plain or uniform packaging will just make it much easier for the smuggler, no matter what people say. Smugglers are rubbing their hands in glee at the prospect that someone would be so daft as to uniformly package all cigarettes in the same year as we are implementing a display ban so that we cannot see the daft things. We have to recognise that, if we are to have a display ban, we do not need plain packaging. It would infringe people’s rights and on trade laws, and it would jeopardise many legitimate businesses.
I do not hear the same lobby group arguing for the plain packaging of tins of beer, or for the uniform packaging of bottles of wine or spirits. We should remember that diseases as a result of drinking alcohol cause far more damage and create far more costs for our health system than those that result from smoking cigarettes. Moreover, on antisocial behaviour, there are far more fights on the streets of this city on a Friday night, not because someone has had too many fags, but because they have had too much to drink. We have to recognise that the plain packaging argument is, frankly, nonsense. It is not a panacea to solving the problems of counterfeit crime.
This is the first time I have served under your chairmanship, Ms Dorries, and it is an absolute pleasure. I was not intending to speak in today’s debate, but I thought I would take the opportunity as there is a bit of time. I congratulate the hon. Member for North Antrim (Ian Paisley) who, as always, made a passionate speech. Everybody who has contributed to the debate wants the level of illegal tobacco and illegal alcohol to be reduced. We all recognise the damage to British business, the cost to the Treasury and the cost to companies in all our constituencies. We are united in that view.
However, coming from a brewing constituency and being the chairman of the all-party group on beer, I have some major concerns about the Government’s proposals on duty stamping. Of course, such concerns come on the back of last week’s Budget, which continued the duty escalator on beer and resulted in a 5% increase in duty on a pint of beer.
We need to consider the impact that any measure we introduce on fraud will have on the industry. We already pay more duty on British beer than people in any other European country. The facts are that we pay 40% of all of Europe’s beer duty, yet we drink only 13% of Europe’s beer. Our British brewing industry is being penalised by the duty regime. In France, 7p in duty is paid on a pint; yet, in this country, we pay 49p in duty. Hon. Members can see the impact that the duty regime is having on our industry.
I urge the Minister to think carefully about the effect that such a policy will have on an industry that is already reeling as a result of the duty regime. We are talking about requiring British brewers to duty stamp 5.5 billion bottles and cans every year. We recognise that there is fraud and smuggling in relation to beer, cider and wine, but the Government are not proposing to introduce duty stamps for cider or wine. Why is it that yet again the British brewing industry is being penalised in this way?
Would it not help the British brewing industry if there were serious constraints on imports of beer and, indeed, we returned to the era when we could tax imports of alcohol to the same level that domestic products are taxed?
I agree wholeheartedly that the duty regime is encouraging imports into this country. The fact that the British beer industry pays up to four times the duty paid by the British cider industry is encouraging companies such as Stella Artois to produce cider—or cidre, as it calls its brand—and import it into the UK. We are exporting jobs as a result of our duty regime.
(12 years, 6 months ago)
Commons ChamberI stand together with the Chair of the European Scrutiny Committee, of which I am delighted to be a member, on this issue. When we have these debates, I worry about the constant references to Europe. Europe is a wonderful place; I go there for my vacations and I love everything about it. The European Union is not Europe; it is a political construct invented by someone or other and imposed on the peoples of Europe. We should always refer to the European Union, because that is what we are discussing; it does not even cover all the countries of Europe.
My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) talked about making alliances. Some alliances are little short of conspiracies against countries’ peoples. The Greek Government are made up of PASOK, an allegedly socialist party, and New Democracy, an allegedly conservative party, standing together against their own people. In the elections, at least 43% of the population will vote for the left and probably an equal number will vote for right-wing parties that are not even represented in their Parliament. When Front Benchers start to agree with each other against their own peoples, democracy is in danger. We should sometimes take different views, and when we form alliances, we should do so on the basis of what we believe in, and not for political convenience in order to conspire.
On salaries at the European Union, I believe that senior officials there have been bought for generations. When I worked as a scribe at the TUC some 35 years ago, one of our colleagues, who was left of centre, was suddenly jetted off to Brussels to become a European Union, or Common Market, official. His salary was astronomical, and he had to pay no national taxes. It was obvious that he was plucked out so that he could be bought. The people in Brussels wanted to pick out some key people of the left from the trade union movement, which was sceptical about the Common Market, and get them over there literally to buy their loyalty.
It is not just about salaries but benefits in kind and allowances—duty-free cars and things like that. These are incredible perks that no one else in Europe gets.
This may be a light-hearted comment, but it always strikes me that people I have known who have gone to work in the European Union come back with a rather fuller figure than when they went. I may be wrong, but that is the impression I get. They are certainly loyal to their new organisation.
I pay tribute to the hon. Gentleman for consistently being right on this subject. Does he think it is rather perverse and insidious that one of the caveats attached to someone being awarded a pension by these European institutions is that they are specifically proscribed from criticising those organisations? Perhaps that is something that the Deputy Prime Minister takes on board on a regular basis.
It is a feature of all authoritarian regimes that they cannot bear criticism, particularly from the inside. In a healthy democracy, we should accept challenges from time to time. If we are governing, it is very useful to have people telling us that perhaps we have not got it right. Even at my modest level as a Member of Parliament, I like my staff to tell me when I have got something wrong. I do not sack them; I say “I thank you for your comments, and I’ve got to think about this.” Occasionally they put me right, and sometimes I am right, but debate of that kind is always healthy in a democracy. It is anti-democratic to sack somebody simply for disagreeing or criticising. In the end, we always do things by debating and voting, one hopes, with openness and transparency.
I have a story from a few years ago. Someone I knew who was involved in Brussels arrangements drifted into a meeting unexpectedly and found senior officials discussing among themselves whom they wanted to get into the post of Social Affairs Commissioner. They openly said, “We don’t want Social Affairs to be effective because it is only there as a decoration to get trade unionists and socialists on side, so we want somebody weak and ineffectual. Who shall we have?” Eventually they found an innocuous, sufficiently weak commissioner from one of the minor eastern European countries—I will not mention the name—to make sure that the post was not effective. The person sat in the room astonished at what was going on. The officials were deciding who the commissioner was going to be, and of course it transpired that that is who it was.
That is how the European Union operates. It is very anti-democratic, secretive and closed. We cannot get a verbatim report, or any kind of report, of what goes on in the Council of Ministers. When the European Council meets, a decision is made by officials before it meets. People talk for a couple of hours in the meeting, and they come out and the decision is adopted. It has been drafted beforehand and is invariably accepted, because that is the way things work. Let us not pretend that we are involved in some thrusting, democratic organisation—it is a bureaucratic structure where people are expected to fall into line.
I would enter a caveat for low-paid staff in any organisation—cleaners, security officers, people who work in the restaurants, and so on, who should have trade unions representing them to make sure that they have reasonable pay. We are talking about the highly paid officials who are part of the slush fund of the European Union and are clearly looking after themselves, with those who believe in this organisation being prepared to turn a blind eye to their vast salaries because they want to secure their loyalty for the foreseeable future. The whole structure needs to be opened up so that we have proper democratic controls at every level.
If the European Union is serious about reducing administrative costs, the way to achieve that is to cut out some of the things that it does. For example, there would be a substantial reduction in administrative costs if we got rid of the common fisheries policy and abandoned the common agricultural policy, as we should. We have talked about the repatriation of regional policy. If Governments decided what was appropriate for their regions, moneys would not be sent directly to our regions by Brussels, but would come through our Governments. If those unnecessary activities were repatriated, the administrative costs of the EU would be dramatically reduced and it would be a much more acceptable organisation.
I support the motion and commend the hon. Member for Stone (Mr Cash), the Chair of the Committee, for bringing it to the House.
(12 years, 6 months ago)
Commons ChamberLet me start by striking a rather different tone from that of the Chancellor’s performance in the House this afternoon by setting out where the Opposition agree with what he and the Government are trying to achieve and offering some constructive proposals to tackle the flaws in the legislation before us and help make it a better Bill. Financial stability and the effective regulation of our banking and wider financial services industry are vital for stability, for consumers to save and for businesses to invest. Getting the balance of regulation right is an important task for any Government, especially when hundreds of thousands of jobs depend on the industry. That is a task in which all Governments throughout the world failed during the previous decade.
We can all agree that the irresponsible actions of the banks themselves caused the crisis, but there were major failings in financial regulation, in law, in corporate governance, in procedure and in judgment in America, Asia, throughout Europe and here, too, in Britain. We did not regulate the banks in a tough enough way and stop their gross irresponsibility here in Britain or throughout the world, and after a financial crisis on that global scale we need to learn the right lessons and to put in place the right reforms in order to do what we can to stop such a crisis being repeated.
In that spirit, we welcome aspects of the Bill before us and, in particular, the establishment of the new Financial Policy Committee and the competition and consumer focus of the Financial Conduct Authority, but we are worried that the Bill falls well short of being fit for purpose.
In an excellent report, the Joint Committee that scrutinised the draft Bill stated:
“To be successful reforms will have to change the regulatory culture and philosophy,”
which is
“not something that legislation can guarantee but legislation can influence the culture of a regulator by: setting objectives; allocating and aligning powers and responsibilities; establishing appropriate systems of accountability.”
Despite the changes that the Government made in response to the Joint Committee’s report, the Bill as it stands does not meet the objectives that the Committee set. What the Chancellor proposes in the Bill and in statute is essentially to move from the current tripartite system of regulation to a new quartet system—the Treasury, the Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority, with the Monetary Policy Committee sitting alongside—with, at best, opaque structures for decision making and accountability under the Bank of England umbrella, albeit now with not two deputy governors but three, and all with overlapping responsibilities.
Unless we get the detail of that quartet system right, we risk delivering a more complex and less transparent system that is harder for the Chancellor and for Parliament to navigate and understand than the current arrangements. Several of those substantial misgivings have been echoed in recent weeks and days by the Treasury Committee and by many City, business and consumer groups. The responsibilities are confused; there is insufficient accountability in the new, more cumbersome system; there is insufficient focus on consumer protection, financial education and exclusion; and, as the CBI has highlighted, there is no objective for the Financial Policy Committee proactively to support growth and employment.
We intend to work with the Government and the Treasury Committee to amend the Bill in Committee to deal with its many shortcomings. To that end, we will not vote in opposition to the Bill in its entirety on Second Reading today; we will see whether we can make progress in Committee and then decide our Third Reading vote only when we have seen whether we have been able to make the progress and the change that is needed in the Bill.
Does my right hon. Friend accept that the crisis was caused in very large part by a complete failure of the auditing industry? If the auditors of all those companies and banks had spotted that worthless bits of paper, claimed as assets, were flooding the world, we might not be where we are now. Does he agree that we need to do something fundamental about auditing?
It is a pleasure to follow the shadow Chancellor, who began by promising us—somewhat uncharacteristically—a speech that would not be partisan or adversarial. I am sure that the House would have been as disappointed as much as surprised had he fulfilled that promise. I shall endeavour to do so for him because, as Chairman of the Joint Committee scrutinising the Bill, I had to adopt a more consensual approach than is sometimes my wont.
I am grateful to the Chancellor for responding so positively to the Joint Committee’s report and taking on board the substance and spirit of most of our recommendations. I hope that we have helped to make the Bill better. This was my first experience of the Joint Committee procedure, and I found it extremely productive, not least because the members, Chairman apart, were all of an immensely high calibre, brought great experience and approached their task in a thoroughly constructive way. However, it is salutary to remind ourselves that the first ever Joint Committee was set up to scrutinise the Financial Services and Markets Bill, which this Bill effectively replaces.
My Committee was conscious that, despite the eminence of our predecessor Committee, it did not diagnose the problems that subsequently ensued—above all the lack of focus on banking supervision and systemic stability. I hope history will not show us to have missed the elephant in the room.
The Bill is essentially about changing the structure of regulation from the tripartite system to a twin-peaks model in the light of the recent banking crisis. However, the Committee was struck by the weight of evidence for two things. First, no system of regulation can guarantee that there will never be another banking crisis. Consequently, it is essential to have a process in place to resolve the situation if banks get into problems. I urge the new FCA to make it a priority to see that major banks draw up their living wills as soon as possible. It is also essential to know who is in charge if a serious crisis erupts. We heard from the previous Chancellor that during the last crisis there were serious differences between the Treasury and the Bank of England and no easy way to resolve them. We recommended that, once the Bank has identified that a problem could lead to a call on public funds, the power to exercise responsibility should lie with the Chancellor, even though he may continue to leave that power in the hands of the Governor. I am pleased that the essence of that recommendation has been adopted.
The second point made by many witnesses was that regulatory structure is less important than the culture, focus and philosophy of the regulator, as the shadow Chancellor reminded us. That culture will depend crucially on the leadership, staffing and training of the new regulatory bodies, which are beyond the scope of this Bill. The only way in which legislation can influence the culture and focus is by setting clear objectives, powers and responsibilities, and systems of accountability for each of the new bodies. We made a number of detailed recommendations to clarify those and I am glad that most have been taken on board.
The House will be relieved to hear that I do not propose to go through all 70 recommendations item by item, but the biggest change of culture is from what has been described as box-ticking regulation to discretionary or forward-looking supervision. The Government advocated that change before the Joint Committee was established, but we found it hard to see where in the Bill the approach was given legal backing, especially for the Prudential Regulation Authority. I hope that the Chancellor is confident that regulators will be fully empowered under the legislation to behave in that way.
As our work progressed, the Committee became increasingly aware that, however well drafted, the Bill will have a decreasing impact on how the British financial system operates, as regulations are increasingly being set at a European level. A veritable tsunami of EU regulation is about to wash over the City, so it is vital that the UK exercises the maximum influence on decision making in Brussels. However, the architecture of the regulatory structure being created in Brussels is different from that in the UK. It’s is based on sectors and ours will be based on prudential and financial conduct. There is a danger that our lobbying input to the EU regulators will be fragmented, divided and weakened as a result. We therefore proposed the establishment of a high level committee, chaired by the Treasury and reporting to the Chancellor, to co-ordinate the UK lobbying effort in Europe of all the bodies created by the Bill, and in international forums such as Basel. I am glad that that recommendation has been adopted in the memorandum of understanding between the various bodies, but it is obviously also important closely to consult financial firms—both British and foreign—that do business in London, Edinburgh and elsewhere in the UK, whose lobbying power also needs to be deployed in Brussels.
I should mention that while I was in Brussels last week on other business I had the opportunity to meet Monsieur Barnier, the commissioner responsible for most of the proposed financial services legislation. I am grateful to him for seeing me. When I told him that many of us on the Committee had been surprised to learn about this tsunami of financial services legislation descending upon us, he rightly said that we should not have been. The measures were in the public domain and followed from the decisions of the College of Commissioners and the Council of Ministers. He is correct. Mea culpa—or nostra culpa: the fault is ours in this House if we pay too little attention to what is brewing across the channel until it is too late. The European Scrutiny Committee does sterling work, but I wonder whether our procedures need to integrate its work more closely into our process of scrutiny on the Floor of the House, bringing Ministers here to explain our negotiating position at an early stage.
As a member of the European Scrutiny Committee, I appreciate what the right hon. Gentleman is saying, but does he not agree that it would be strengthened if the European Standing Committees had permanent instead of ad hoc membership which means that the work is not taken so seriously?
That is probably a good point, and I hope that the relevant powers will listen to it.
When Monsieur Barnier came to London a few weeks ago, he defended his legislative programme as necessary to creating a single market. If it would create a single market, most Members on both sides of the House would wholeheartedly support it—I certainly would—but I cannot see how any of the measures will open up a single new opportunity for financial companies to trade outside their own national markets across the single market beyond what is already open to them. Most if not all of the directives are about centralising regulatory powers over the financial sector in Brussels rather than in nation states.
Monsieur Barnier did not dispute that, but he argued that the financial crisis had been caused by lack of regulation of “British and American banks”, so it was essential to impose regulation at an EU level. I gently reminded him that the credit crunch had been sparked when a French bank, BNP Paribas, announced it could no longer put a value on its property funds, that it subsequently emerged that continental banks had far higher levels of gearing than Anglo-Saxon banks, and that the current euro crisis is, at its heart, a banking crisis, as continental banks are so under-capitalised that they cannot absorb the losses on their holdings of sovereign debt and their Governments cannot afford to recapitalise them openly and immediately, as British and American Governments did.
Monsieur Barnier also argued that a single market requires a single rule book. However, that was promptly negated by his promise that that does not mean a one-size-fits-all regime and that
“we also need to allow considerable flexibility for national supervisors”.
Either there are separate national rule books, or there is a single EU-wide rule book. We cannot have or pretend to have both—or rather we can, and in a sense we do. Under the second banking directive, any bank or similar financial firm can operate anywhere in the EU under the supervision of its home authority, so any individual bank can operate under a single rule book throughout Europe. Of course, that rule book must obviously meet minimum requirements agreed at EU level. I believe that that is the model that we should retain and encourage across Europe within the single market.
That brings me to the issue of the draft fourth capital requirements directive, which will implement the Basel III agreement. The Committee discussed it at length with Mr Enria, chairman of the European Banking Authority, who strongly defended the EU’s decision to set not only a minimum level of reserve that each country must require its banks to hold, but a maximum level that banks can be required to hold. We subsequently wrote asking for clarification of his reasons for setting a maximum, but found his arguments unconvincing. His claim that our setting a higher rate would somehow siphon off funds from other countries, or that it would be unfair if we made our banks safer than those of other countries, were not entirely convincing.
In the light of the Committee’s experience, my interview with Monsieur Barnier and the evidence from Mr Enria, I believe strongly that the Prime Minister was right to seek to reintroduce what Monsieur Barnier called a dose of unanimity in decision making on financial markets. I hope that the Prime Minister will continue to press that with the support of both sides of the House.
Everything that my right hon. Friend is saying suggests that we are re-empowering Parliament when it comes to how our economy is run, which is the opposite direction from the one in which we have been moving in recent years. Is that not welcome, and does it not strengthen our democracy?
We need to go further. How Parliament interacts with the Governor in his new role as regulator has not been properly addressed in the Bill, but we need to think about that carefully. Although finding fault with every other structural problem with financial services, the Government propose no change to the arrangements for the accountability of the regulator to Parliament. Accountability, therefore, is through Ministers, primarily Treasury Ministers, or through the work of Select Committees, primarily the Treasury Committee, which is one of the hardest-working Select Committees in the House of Commons. We should consider whether that is adequate. As the new arrangements come into effect and settle down, alongside the recommendations from the Independent Commission on Banking, surely there is a need for an authoritative forum in which emerging issues can be examined, ideas explored and recommendations made. Public discussion and transparency are important safeguards.
The other place, too, has a legitimate role in these arrangements. Acting as a check and balance on elected representatives, and public life more generally, is what the other place, as currently constituted, does well. In any event, we should consider very carefully whether we are satisfied with the present arrangements alone. Perhaps this is a suitable subject for a separate debate.
Private sector financial services in the United Kingdom are underpinned by the public sector in a number of important ways. The most significant are the £85,000 deposit compensation limit guarantee; even more importantly, the Bank of England’s role as lender of last resort; and the need to intervene when private sector misjudgments threaten a collapse of the banking system. We, as the people’s representatives, should take an interest in this democratic deficit.
There is a third point to consider. Each of us is elected to represent our fellow citizens. There is nothing more frustrating and upsetting for a constituency MP than to know that individual constituents are faced with an injustice and that there is no effective remedy. Such situations occur far too frequently in the financial services sector. One thinks of the present Arch Cru scandal as the latest of a depressingly large number of similar scams.
I welcome the fact that the Bill gives the FCA powers to intervene in the case of individual products and their promotion. The Bill allows consumer bodies to make super-complaints to the FCA and facilitates a reform of consumer credit with a view to better protecting consumers. That is welcome too. It is important to ensure, however, that the FCA’s strategic objective is clearly stated. I was taken by the suggestion from Which? of
“ensuring a fair and transparent market in financial services”,
which is reflected in the Joint Committee’s recommendation that the FCA’s strategic objective
“should be amended to focus on promoting fair, transparent and efficient financial services markets that work well for users.”
That is more specific than the Bill, as drafted, which refers to
“ensuring that the relevant markets function well.”
The phrase is too general—how else would one want markets to function? There are still concerns that section 348 of the Financial Services and Markets Act 2000 is too restrictive and discourages the publication of information. I hope that the Minister will have something to say about that, because I know that the Government propose to address the matter in Committee.
We are expecting a lot of the new structure and are placing yet more responsibility on the shoulders of the Governor of the Bank of England. The new role has been described as similar to that of a sun-king presiding over an empire. There is clearly a democratic deficit in the new structure that ought to be addressed—
(12 years, 7 months ago)
Commons ChamberFollowing the intervention from the right hon. Member for Wokingham (Mr Redwood), is not the nation state rather than the EU the best place to judge how much should be spent, what it should be spent on and how efficiently it should be spent?
The hon. Gentleman makes an important point. There is a debate to be had on where such decisions should be taken and what our priorities should be. That is why it is important for us to impose discipline on the EU budget and try to influence debate on it to ensure that when money is spent, it is spent well and wisely in pursuit of our objectives.
Let me remind the House of three key aspects of the Commission’s proposal for the next financial framework: first, an increase in the budget of more than €14 billion a year compared with a freeze on current levels; secondly, a new financial transactions tax to fund the EU budget; and thirdly, an end to the UK’s permanent rebate. That financial framework proposal and the proposals to increase spending through the connecting Europe facility are unacceptable.
In November, the House agreed that the Commission’s financial framework was
“unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe to bring deficits under control and stimulate economic growth”.
My hon. Friend is absolutely right: there were bold and tough words from the previous Government about being prepared to give up part of our rebate for real reform of the CAP. Well, we gave up our money, but we did not get real reform. That was typical of the Labour party’s reactions when it was in government: lots of tough talk, but no action to back it up.
Like Government Members, I was opposed to giving up that great tranche of our rebate. The Government have made much of the issue. Is it not time they started trying to renegotiate the rebate to get it back again?
We have made it absolutely clear that the rebate is there to stay, and that is one of the key parts of our negotiating strategy.
I want to say a few words about infrastructure spending. The Government have made it clear that focused infrastructure improvements are a domestic priority. When undertaken wisely, it is clear they can boost growth, protect the environment and improve lives. In his autumn statement, my right hon. Friend the Chancellor announced investment of £100 million in the creation of up to 10 super-connected cities across the UK with 80 to 100 megabits per second broadband and city-wide, high-speed mobile connectivity. Last week, the Secretary of State for Transport announced details of the new high-speed rail network.
However, the key is having carefully focused investment. When prioritising spending for infrastructure, the Government have taken the wider economic context into account. The urgent need to reduce our domestic deficit has meant that we have had to choose our investments carefully and focus infrastructure spending on where it can have the most positive effect.
That is the approach the Commission needs to take to European infrastructure spending, focusing affordable levels of spending where they will make most difference. Therefore, while the Government will, first and foremost, argue for a reduction in the overall size of the connecting Europe facility budget, we will endeavour to ensure that the final settlement agreed is focused on spending money where it will add most value. That means spending money only where neither the market nor domestic Governments are better placed to act—the point the hon. Member for Luton North (Kelvin Hopkins) made in his first intervention.
We will be pushing the Commission for additional information to allow us to judge where the money will best aid growth and support our environmental objectives. That is consistent with the Government’s desire to see spending that promotes sustainable growth take a bigger share of a tighter budget in the next financial framework. The ambition of the connecting Europe facility, while laudable, must respect the fiscal realities of Europe.
The Opposition have tabled an amendment to today’s motion. It is rather incredible, in a week when Labour’s policy on deficit reduction has become ever more confused, that the hon. Member for Nottingham East has tabled an amendment calling for an effective deficit reduction strategy. Ever since the shadow Chancellor said on Saturday that
“we are going to have keep all these cuts”,
the Labour party has been totally confused, with its deputy leader later saying:
“We’re not accepting the Government’s austerity cuts, we are totally opposing them”.
So Labour Members accept the cuts, but then oppose them.
Labour Members cannot say they are credible on the budget, because of the legacy they have left. Despite our entering the downturn with the largest structural deficit in the G7, the Labour leader told Andrew Marr this weekend that he did not think Labour spent too much. Let us remind him that it is because of Labour’s record on spending that our triple A rating was on negative outlook when the Labour party left office. That downgrade threat has been lifted because this Government have a credible and effective deficit reduction strategy. One would think that the Labour party would have learned from that, but, no—its five-point plan would add £20 billion to the deficit this year. Rather than seeing an effective debt reduction strategy from Labour, all we have is more of the same: more spending, more borrowing and more debt. So before Labour lectures anybody else on the deficit reduction strategy, it had better get its own house in order.
If that was not bad enough, the hon. Member for Nottingham East has scored another own goal in his amendment by calling for reform of the common agricultural policy—we touched on that earlier. We have heard brave words before from Labour politicians about CAP reform. Tony Blair said that
“the rebate remains because the reason for the rebate remains. Of course, if we get rid of the common agricultural policy and we change the reason why the rebate is there, the case for the rebate changes.”—[Official Report, 29 June 2005; Vol. 435, c. 1293.]
Those were tough words, but as we know, he gave way to the French, sacrificing €2 billion in our rebate a year, which will cost the country €10 billion over the lifetime of this Parliament. In the current financial framework, CAP spending has not fallen, as Labour said that it would, but increased by €3 billion. So it is all very well the hon. Gentleman talking tough in his amendment, but we have heard it before from Labour—all bark and no bite.
Achieving the priorities that the House has supported in the next financial framework will not be an easy task. The Government need to defend the rebate, resist EU taxes and restrain the budget size. The UK can deliver results in Europe, as outcomes in the 2011 and 2012 annual budget negotiations have shown, but to achieve our overall aims we must be constant and vigilant in our resistance to increases in the budget. A 400% increase to infrastructure spending in the EU budget, without any corresponding reductions elsewhere, is unacceptable in the current economic environment. We will work with our allies to cut this programme down to size, delivering fiscal restraint and value for money. Although we are clear that we need infrastructure investment to boost productivity and growth, projects need to be effective and affordable, but the plans in the connecting Europe facility proposed by the Commission are neither. I therefore urge my hon. Friends to support the motion.
We have to change the common agricultural policy. My point is that the CAP is far too heavily involved in subsidising the big multinational farming institutions, which are the largest agricultural producers, and is not fair enough on some of the smallest farmers and crofters.
One simple point, which I have made before, is that if the common agricultural policy were abolished, we could continue to subsidise farmers at the same level and be net beneficiaries.
There is much agreement on the need to reform the common agricultural policy. More should have been done in the past, but more needs to be done now. I want to hear the Government’s strategy on that. I want to hear how they are going to win some concessions and what they are doing to change the negotiation stance. They are certainly doing nothing about refocusing growth priorities or reforming the common agricultural policy.
We have to re-order the connecting Europe facility so that we can phase capital infrastructure components and enhance employment and growth. While the 26 other countries are busy negotiating their new economic treaty without the UK taking part, they will realise that the EU budget is highly relevant to their economic predicament, particularly in the eurozone. I would therefore like to ask the Minister an important question: how will he ensure that he keeps track of all those discussions on the sidelines—all those deals being done in meetings that he will not be party to—so that the UK voice is part of the process?
We are discussing an important series of proposals, which touch on broadband, transport and energy policy. A year ago, the Government unveiled their broadband strategy. It is becoming clear that the vast majority of local authorities are not likely to meet the Government’s universal broadband target by 2015, which has already slipped by a couple of years compared with the target that we set when in government. We tabled some freedom of information requests before the Christmas break and discovered that 70% of local councils said that they had
“not made any plans, provisions or budgeted to take advantage of the Government’s funding allocation for broadband provision,”
and that 74% had had no assessment made of the likelihood that the roll-out of superfast broadband in their areas would be completed by 2015. The Minister therefore needs to explain why a quarter of local authorities say that they have not even been contacted by BDUK—Broadband Delivery UK—about the need to secure funding; indeed, only a quarter have made plans to finance universal broadband roll-out. Even the Countryside Alliance and the Federation of Small Businesses agree that the Government are not doing enough to support Britain’s digital future.
I strongly support the amendment and its heavy emphasis on growth, because growth is the way to reduce deficits. Members who have seen The Independent today will know that our deficit is rather lower than those of many other major European member states, and that our biggest debt is located in the banks rather than in state spending. The fact remains, however, that the way to lower deficits is to achieve growth. Creating employment and ensuring that people pay taxes rather than living on benefits is the way forward.
I agreed with most of what was said by the hon. Member for South Northamptonshire (Andrea Leadsom), who is no longer in the Chamber. In particular, I agreed with the hon. Member for Portsmouth North (Penny Mordaunt), who pointed out that we do not need the European Union or the European Commission to tell member states what they need and what they should build, and to spend our money for us. Member states themselves know best what they need, and what should be done to meet those needs. International co-ordination is best achieved through bilateral and multilateral agreement and collaboration, rather than through the bureaucratic controls imposed by the European Union.
Big infrastructure has indeed been built by European national Governments, especially rail freight infrastructure. We have our own channel tunnel, which is a product not of the European Union but of a collaboration between France and Britain. We have the channel tunnel rail link, which is also nothing to do with the European Union. We have rail tunnels through the alps, built to a broad gauge that enables trains to carry lorries and double-stack containers and providing a freight link from southern to northern Europe. Those were built by states using state funds. The Brenner pass, a 28-mile tunnel built to a broad gauge through faulted rock, also carries freight between northern and southern Europe, and it too is the work of member states rather than the European Union. We have the Betuweroute, another broad-gauge freight route linking Rotterdam to the Ruhr. When I visited it, I asked who had paid for it. I was told, “The Dutch Government, of course.” The state bears the cost, not the European Union.
We know that the EU offers token amounts to investment projects to try to confer some relevance, presence and significance on itself, but that is not the real deal. The real deal is that states decide what they want and need and pay for it—sometimes with private finance, but largely with state funds—and, on occasion, collaborate with neighbouring states to ensure that things work well.
What the United Kingdom needs is investment in a dedicated rail freight line from the channel tunnel to Glasgow. Although we are somewhat peripheral to the continent in geographical terms, we need to be linked with its economy. I refer to the continent rather than the European Union because we are talking about the whole continent, which extends beyond the bounds of the European Union as it is currently constituted.
We need to be linked to the continent by freight as well as passenger rail, and that will be possible only if the delivery system on this side of the channel is capable of taking trains carrying lorries and full-scale and double-stack containers, and, indeed, continental-gauge trains, which cannot gain access to our platforms or our tunnels. In fact, I have been involved with a scheme—which I have mentioned in the Chamber a number of times in the past—to build a line from the channel tunnel to Glasgow, linking all the major conurbations of Britain and capable of doing all the things that I have just mentioned.
The hon. Gentleman is making an enormously powerful speech, as he normally does on these issues. Does he share my concern about the fact that, although members of his party and the nationalist parties have been in the Chamber today and the Conservative Benches are full, not a single Liberal Democrat Member has been present? Given that the Liberal Democrats make such a fuss about Europe and restrict what the coalition can do about it, where on earth are they?
The hon. Gentleman makes a good point, but I have to say that the Liberal Democrats are in a coalition with his own party. It is his grief rather than ours, I think, so I will not intrude.
To an extent, work on a dedicated rail freight line has already begun. A terminal at Barking is taking trains from as far afield as Poland. However, although they can travel as far as Barking using the channel tunnel rail link, they can proceed no further because the gauge will not allow it.
According to an old chestnut, if we build HS2 we shall be able to take the passengers off the west coast main line and free it up for freight, but making that line capable of taking continental-gauge trains, double-stack containers and lorries would be prohibitively expensive. We need to build a line to take the freight off the west and east coast main lines and off our roads, so that the lines can be freed up for more and faster passenger trains and we can provide more capacity for passengers travelling to the north while taking as much traffic as possible off the roads. It is estimated that we could take 5 million lorry journeys off our roads simply by building that route, which would be economically viable and cheap to build.
The scheme has a precise route that uses old track bed and under-used lines, and requires only 14 miles of new track, mostly in tunnels. It will be easy to construct, it will not cause any environmental problems as the track bed is already there and it will be cheap to build. Some estimate that the whole route will cost as little as less than £4 billion. We have put in an estimate of £6 billion, which is still a third or so of what we will spend on Crossrail—I support Crossrail—and a tiny fraction of what will be spent on HS2, yet we would get an enormous advantage to our economy and transform road transport in Britain as we would not get the road damage caused by lorries, as the freight would be on trains instead.
The scheme would attractive to hauliers because they would not need to worry about drivers’ hours problems. They could put their lorry trailers on trains in Glasgow, south Lancashire, south Yorkshire or the north-east and, eventually, in the south-west and south Wales, and overcome such problems. On the question of unemployment, there is a shortage of long-distance lorry drivers because it is not a popular job. It takes people away from home and it is very difficult. The little group proposing the scheme even has a major haulier working with it.
That scheme is what Britain needs. It has nothing to do with the European Union, which would not pay for it—we would. It would offer value for money, it would be profitable and economical and it is vital for our future. I hope that both the Government and my hon. Friends on the Front Bench will listen carefully to our suggestion.
(12 years, 9 months ago)
Commons ChamberAlthough we are all going to acquiesce in this motion—I understand that there will not be a vote—and although I support the conclusion that we should not increase our spending on the European budget, and, indeed, that it should be reduced, I do not support some of the wording in the motion.
I agree that we should not increase our UK contribution to the EU budget, now or at any time. We have to look towards a world where we reduce our contribution very substantially. The right hon. Member for Wokingham (Mr Redwood) and others have mentioned the common agricultural policy. Many times, when sitting on the Government Benches in previous Parliaments, I have called for the abolition of the common agricultural policy. If it were abolished and we carried on subsidising our own farmers at the level they are subsidised now, we would have a massive reduction in our contribution to the EU budget.
The proposed changes to UK abatement and new taxes are unacceptable. We should decide what our level of taxes should be. The UK abatement was wrongly reduced in a previous negotiation on the common agricultural policy that did not result in anything beneficial for Britain. At the time, The Economist said that the deal was so bad that it could have been better to have had no deal. I agree. I support the Government’s efforts to reduce the Commission’s proposed budget. The numbers that are being talked about are clearly unacceptable. It is regrettable, too, that all these things are governed by qualified majority voting instead of unanimity, but there we are.
I do not care for the wording of the motion. It refers to “economic fragility in Europe”. Yes, the situation is certainly very fragile at the moment, and we will not recover from that fragility until we have more common sense about the eurozone. Certain members should be allowed to recreate their own currencies, find an appropriate parity for their currencies, and then reflate behind those currencies. That is the way forward for those countries, and it will benefit the eurozone and the European Union, and indeed the world economy overall, when that is allowed to happen.
I should like to correct the hon. Gentleman on something. The multi-annual financial framework is governed by article 312 of the treaty on the functioning of the European Union, under which:
“The European Council may, unanimously,”—
in other words, we could have imposed a veto—
“adopt a decision authorising the Council to act by qualified majority when adopting the regulation”.
That means that it is unanimity first, and then QMV.
I would like to see Governments, and in particular our Government, using their veto from time to time in a more bold and radical way.
The wording that I am particularly concerned about is that which talks about
“tough decisions being taken…to bring deficits under control and stimulate economic growth”.
Those things are incompatible. If one wants simply to bring down budgets by cutting, that will not stimulate economic growth, but reduce it. The wording should be the other way around. If one wants to bring deficits under control, the best way to do so is to stimulate economic growth. Economic growth would bring down unemployment, increase tax revenues and reduce the burden of benefits.
If we encourage all the member states of the European Union to deflate collectively, that is the route to depression. There are lessons from the 1930s on that. I hope that we will quickly come to our senses and realise that we are in a pre-1930s situation. If we do not reverse it, we may head towards depression.
In questions to the Chancellor the other day, I talked about the Labour Government of 1945, who had a gross debt much larger than we have now. They chose not to cut spending, but to create the welfare state, bring in the national health service and run a full-employment economy. Full employment was sustained for two and a half to three decades. That is what brought the deficit under control, and that is what we should do again.
There are other bad examples from history, which I have mentioned before. After the first world war, there was the Geddes axe. There was a deficit after the war—there are always deficits after wars—so we thought that we should cut our way back to a lower budget. What happened, of course, was that for a decade we had low growth, high unemployment and the deficit got worse, not better. We are in danger of doing that again.
In the short term, we have to spend. We could reduce our contribution to the European Union budget and spend some of that money on areas of labour intensity with low import content. Those areas are obviously construction and the public services—precisely the areas that are being cut. Cutting is exactly the wrong thing to do and we should do the opposite if we are serious about bringing the deficit down. That would be beneficial for everybody because the people who do not have jobs would have jobs, the public services that are now suffering would not suffer, and the people who are dependent on public services would not be hurt.
I agree with the objective of reducing our contribution to the European budget and constraining it in the short term, but I do not believe that we should emphasise simply cutting deficits without recognising that that could make unemployment rise and the deficit get worse in the long term. That could lead us into a very serious economic situation.
(12 years, 9 months ago)
Commons ChamberIt is difficult to ascribe motives to the Commission in all circumstances. My hon. Friend may well be right, but then again I have also talked to some of the City’s large banking institutions, which have in some ways argued in favour of harmonisation, so it is a mixed picture. I agree with the Government on the point before us, however, and it is important that we stand firm and retain the flexibility of higher standards if we possibly can.
Is it possible that those banks that seem to favour harmonisation think that they might have an easier time under Europe-wide regulations than under more stringent regulations from the British Government?
My hon. Friend may well be correct. “Who knows?” is the ultimate question, but his cynicism has been proved right in the past and may well be right today.
The motion is a sensible assessment, and asking the Clerk to send a reasoned opinion to the presidents of the European institutions is absolutely right, but what happens next? Will the Minister set out in a little more detail the consequences of today’s motion, and whether we would have any prospect of shaping our own financial regulatory agenda if, indeed, many of the changes in the directive went through regardless of the opinion that we sent? The mismatch between the Commission’s view and the UK’s position is only the tip of the iceberg or, to use a better metaphor, only the beginning of the story.
I am afraid to say that the Government’s proposals for financial regulation have not been properly thought through and clash so much with European regulatory arrangements that they just will not be able to stand up adequately to their strength and power. Ministers knew very well that the EU supervisory institutions would be split across thematic groups around banking, pensions and insurance, and markets. Yet according to the Minister’s legislation, we are choosing to split our arrangements between prudential and conduct regulation.
I agree completely that we need a greater focus on prudential regulation, but there is a growing risk and increasing evidence that our UK institutions may leave us in a tangled mess unable to engage effectively with those very powerful EU structures. That concern is shared not only by Opposition Members, but across the City and other financial service sectors. If our voice is not adequately heard, we may be unable to be represented properly in the right meetings at the right time.
It is not just the Opposition who are saying that. Last year, the Financial Services Consumer Panel said that
“the current European structure under the ESMA would be a poor fit with the proposed new UK arrangements and that this could potentially weaken the UK’s voice in the European Union.”
In September, the British Bankers Association said that
“little has been related on how the regulators will go about ensuring…that UK representation around the European table is second to none. There has not, for example, been acceptance of the suggestion made by the industry that consideration be given to maintaining a single international secretariat across the relevant authorities as a common shared service and the establishment of cross-authority teams to ensure that UK representatives at the three European Supervisory Authorities and other European and international committees are in a position to draw upon all relevant expertise and knowledge.”
The Association of Independent Financial Advisers—incidentally, I am attending its annual dinner this evening—said in September:
“The AIFA is concerned that the twin peak approach to UK regulation is not consistent with the developing European sectoral approach. We must ensure that the UK system is able to efficiently interact with the European system and does not lead to significant confusion for regulated firms and cost inefficiencies, or damage the competitiveness of the UK.”
Indeed, two weeks ago, the Chairman of the Treasury Committee, the hon. Member for Chichester (Mr Tyrie), said in a letter to the right hon. Member for Hitchin and Harpenden (Mr Lilley):
“How will the PRA and the FCA co-ordinate their interaction with the new European Supervisory Authorities which do not neatly match the twin-peaks model—particularly where both financial stability and consumer protection outcomes may be considered together at an EU level? With an enormous amount of EU legislation under way, how will the EU regulatory authorities ensure that UK interests are represented with one voice?”
So there has been a barrage of anxiety about the Government’s proposals and how the design of their domestic regulatory arrangements will fit with those European supervisory structures. The Minister has time to think about those matters before introducing the Bill. If we try to persuade EU regulators to comply with our approach to financial regulation retrospectively, it will genuinely be like shutting the stable door after the horse has bolted.
It has been declining, and that is another reason for concern, but the latest figure is something of the order of 15% to 20% of our gross domestic product. Take that away, and where would we be? The draft regulation is a deliberate attempt to do that, and it is only one document of many.
The aim of the Basel Committee on Banking Supervision is to
“enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.”
I hope that it succeeds. However, the various directives in question relate to the taking up and pursuit of the business of credit institutions and to capital adequacy, and they are collectively known as the capital requirement directive or CRD. They introduce a supervisory framework within the EU, designed, it is stated, to
“ensure the financial soundness of credit institutions (banks and building societies) and certain investment firms.”
I take a slight interest in that, because my family founded the Abbey National building society back in the 19th century and the National Provident Institution in 1835. Those institutions were run on sound grounds and lasted until very recently, but have unfortunately now been mopped up as a result of some of the international goings-on in the financial sphere.
In 2011, the European Commission proposed a draft regulation—the document referred to in the motion—and a draft directive, known together as CRD IV. They would incorporate the Basel III agreement on prudential requirements for credit institutions and investment firms into EU law. How often have I said that the danger is that when a matter is transferred to EU jurisdiction, we lose control? Because of section 2 of the European Communities Act 1972, we cease to be able to control it. We hand over control of the drafting, method and interpretation of the law, and its effect on our own institutions, our own initiative and our own ability to be innovative and succeed.
The proposals are still before the European Scrutiny Committee, pending the receipt of further information from the Government. Meanwhile, the Committee has recommended that the House submit a reasoned opinion on the draft regulation to the European Commission, the Council of Ministers and the European Parliament. A draft is annexed to the Committee’s report. I mention that because if enough member states issue a reasoned opinion, we will be able to stop the proposals. I strongly urge the Government to get as many member states as possible together, and I am sure they are doing that, if only to retrieve the situation as best they can.
Of course, as we all know, other member states will know what we are up to, and they will not enter into an arrangement to submit a reasoned opinion. We have seen that in the past—we do not get the requisite number of member states, and the proposal goes through. This is a test not just of the Government but of the integrity of the system. If a reasoned opinion is required because the Commission has exceeded its powers in relation to subsidiarity, nothing should prevent that from going ahead on an objective basis. I am not trying to pre-empt the decision, but I am anxious, on the grounds that I am about to mention, for other member states to understand that a reasoned opinion is necessary. It is in their hands to prevent the proposals from going through.
I turn now to the argument about the objectivity of a reasoned opinion. When the Commission makes a proposal for legislation, it is now required under the European treaties to produce a “detailed statement” that makes it possible to appraise the proposal’s compliance with the principles of subsidiarity. I do not for a minute demur from what I said during the Maastricht debates—that subsidiarity was a con trick intended to establish hierarchies, not true subsidiarity. We shall see.
That detailed statement is not just a bureaucratic procedure for its own sake, although one might be forgiven for thinking that some in Brussels think it is. It is the principal means left whereby national Parliaments and electorates can assess the basis on which the Commission considers legislation to be necessary at supranational rather than national level. The presumption underpinning subsidiarity is that decisions are best taken as close to the citizen as possible. Amen to that, providing that it happens.
It is not sufficient to underline the importance of those detailed statements. I remind, or inform, the House that no piece of European legislation has ever successfully been challenged in the Court of Justice of the EU on the grounds that it breached subsidiarity. Not one. That sends a very powerful message. There is not a little suspicion, therefore, that subsidiarity is just something to which lip service is paid. It strikes the democratic gong, but is not followed by any lunch. One of the jobs of national Parliaments—that is us here in the Chamber—is to try to change that position.
I suggested yesterday in European Committee A that, as the hon. Gentleman suggests, subsidiarity has not functioned well. In fact, I do not really understand it myself. I suggested that it was a political decoration, to overcome a difficulty. The reality that I would understand is opt-outs and opt-ins, with member states having the independence to do what they thought was right for their interests.
I very much agree. All that I can say is that on this occasion, there will be a very good test of whether subsidiarity can win the day. Let us see.
Given the importance of the detailed statement, the treaty makes several stipulations about what it should contain, which include an
“assessment of the proposal’s financial impact…in the case of a Directive, some assessment of the proposal’s implications for national and, where necessary, regional legislation; and…qualitative and, wherever possible, quantitative substantiation of the reasons for concluding that an EU objective can be better achieved at EU level.”
When the European Scrutiny Committee looked at the draft regulation, it found—not by any means for the first time—that neither the Commission’s explanatory memorandum nor its impact assessment contained a detailed statement to make possible an assessment of its compliance with subsidiarity. Hon. Members should bear it in mind that the draft regulation, which is of immense importance, amends the capital requirements directive by removing the discretion previously given to member states to impose stricter prudential requirements where national circumstances require that. That is a significant change. Indeed, the Government argue that it could lead to greater financial instability and, as the Minister said, could severely undermine Basel. It will be seen from the draft reasoned opinion that the Committee concluded that the Commission failed to discharge the treaty obligation placed upon it to provide quantitative and qualitative reasons for that change in the form of a detailed statement.
Putting the procedural failures to one side, the House will gather from the draft reasoned opinion that, on the substance, the Committee agrees with the Government that the objectives of the regulation were not better achieved by precluding member states from imposing stricter prudential requirements when they considered that necessary. The Committee came to that conclusion because it was clear from the Government’s explanatory memorandum that there continued to be a need for a flexible approach to address prudential concerns at a national level. That reality was reflected in the fact that the Commission proposes in article 443 of the draft regulation that it should be able to adopt delegated Acts to impose stricter prudential requirements for member states where necessary. The Committee could not find sufficient evidence to demonstrate that the Commission was better placed than member states to address national prudential risks that suddenly arise. Indeed, there was a strong argument for saying that national authorities were not only better placed, but could react more quickly than the Commission by means of delegated legislation, thereby enhancing financial stability.
I also have grave misgivings about the Commission having such powers delegated to it—ever. EU delegated legislation is not unlike our own: it affords considerable Executive power with far less oversight.
Finally, the Commission’s approach to the consideration of subsidiarity is a matter of concern not only to the European Scrutiny Committee, but to every national Parliament of every member state. I hope that they take note and do something about it, because a great deal is at risk. At its last meeting, COSAC—the bi-annual conference of the EU Committees of national Parliaments, which I attended—concluded that the Commission was not complying with the treaty obligations placed upon it to provide sufficiently detailed statements. That was on the motion that I proposed, which was accepted by COSAC. This was good news, because the Committee had been pushing for it. We await a response from the Commission, but we need support from other member states.
I repeat: I urge the Government to use all their diplomatic and persuasive powers, because we are put at a significant disadvantage as a result of the transfer of functions to the European Union. If there is sufficient opposition from enough member states, we can defeat this proposal.