Oral Answers to Questions

Lord Tyrie Excerpts

Tuesday 6th March 2012 Commons Chamber

[Mr Osborne]

I agree with the hon. Gentleman that there are practices in that industry that we want to see stopped—and I would highlight two in particular. The first is the rolling over of loans, which we are working with the industry to stop; the second is the ongoing use of continuous authorities to take money out of bank accounts, which people might not be aware that they have granted to a pay day loan company or anyone else. We are dealing with those specific abuses and, as I say, we are creating a new powerful consumer champion in the financial conduct authority.

[Mr Andrew Tyrie (Chichester) (Con)]

The Financial Services Authority agreed to publish a review of its own conduct in the run-up to the failure of RBS only after considerable pressure from the Treasury Committee. It really should not be that difficult to get some answers out of a regulator.

Does the Chancellor agree that accountability to Parliament would be better served if the Financial Services Bill were amended to require the new regulator, the financial conduct authority, to respond to similar such reasonable requests from the Treasury Committee?

Oral Answers to Questions

Lord Tyrie Excerpts

Tuesday 24th January 2012 Commons Chamber

[Danny Alexander]

I would have thought that the day on which it has been announced that the national debt has broken the £1 trillion mark would provide a good opportunity for the Labour party to apologise for its catastrophic economic mismanagement that led the country into the mess that the coalition Government are cleaning up.

[Mr Andrew Tyrie (Chichester) (Con)]

The Redknapp case and the public interest in it illustrate the need to reform taxation to ensure that top earners pay what is due. The Chief Secretary will not want to comment on an individual case, but what steps are the Government taking, consistent with the Treasury Committee’s report on the principles of tax reform, to ensure that all taxpayers, including top earners, pay the correct amount of tax?

[Danny Alexander]

Of course, as the hon. Gentleman says, I cannot and will not comment on ongoing individual cases, but he is right to say that the wealthiest need to pay their fair share. That was why we announced in the spending review an extra £900 million of funding for tackling tax avoidance and evasion, which has helped to set up a new specialist unit, which became operational last year, targeting offshore evasion. High-profile tax evasion cases could become more commonplace in future, and our message to tax dodgers is: “No matter how well known you are, how clever you think your accounts are or how far away you hide your money, we are coming to get you.”

Public Service Pensions

Lord Tyrie Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

I am not sure that the hon. Lady was listening to anything that I said in my statement, because I have already answered almost all the points that she raised. She certainly seems to have forgotten that this is the season of good will. She said that the Opposition’s position was clear, but she did not say what it was. As she and her party have opposed most of the reforms, perhaps they should have the good grace to admit that they got it wrong. It is no doubt uncomfortable for the Labour party that many of its union paymasters have been willing to come to an agreement in the interests of their members—and, indeed, in the national interest.

Lord Hutton’s contribution was significant; indeed, he is the only Labour Member—or former Labour Member—who has made a contribution. It is worth telling the hon. Lady that he welcomes the deals that we have announced today. She asked a question about the agreement put in place by the previous Government, so let me tell her what Lord Hutton said about that cap and share deal:

“Cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer. Also, untested, complex cap and share arrangements cannot of themselves, address the underlying issue of structural reforms, nor significantly reduce current costs to taxpayers.”

That is why we could not rest with the position agreed with the previous Government.

The hon. Lady asked a few questions about the timetable. As I said in my statement, the timetable for reaching heads of agreement is finished. Negotiations on the heads of terms have finished, and as I said in my statement, those heads of terms are agreed by most unions in all schemes. That is a good result, which I hope she would welcome. The other schemes—for the judiciary, armed forces, police and so on—will be agreed in due course. For the firefighters the deadline is 20 January; for the police service the second round of the Winsor report, due at the end of January, will take forward that process.

I think that the hon. Lady still opposes the increase in member pension contributions, but I have to tell her that, as a consequence of today’s announcements, that is continuing. She asked a question about the relationship between accrual rates and revaluation factors. I listed the precise accrual rates and precise revaluation factors for each scheme in my statement; I do not propose to repeat them now, but they will certainly be available in Hansard later. As for older workers, one of the reasons why the trade unions favoured the relationship in question between accrual rates and revaluation is precisely that it works more strongly to the advantage of older workers. We will bring forward legislation, I hope in the next Session, that will include the changes that we want to make to ensure the 25-year guarantee.

The truth about this exchange, as with so many others, is that there are two parties on this side of the House acting in the national interest and one party on the other side that seems to find it increasingly hard to see even its own self-interest. While we on this side of the House are working together to build confidence in the future of the British economy, Labour Members are fighting with each other, as they lose confidence in their own leader. As a result of this statement, at least the hon. Lady can assure the Leader of the Opposition that if he falls on his sword there will be a good pension available to him. All that the British people will see is a party that has not a shred of economic credibility left.

[Mr Andrew Tyrie (Chichester) (Con)]

By far the most important point in this statement—the one that the Chief Secretary touched on only briefly—is that it demonstrates to the markets that the Government will remain committed to sound public finance. Does that not stand in contrast to a number of eurozone countries, not least France, which are finding such measures extremely difficult to implement, and are paying the price in much higher debt service costs?

[Danny Alexander]

I hesitate to enter into any specific diplomatic disagreements of recent weeks, but my hon. Friend makes an essential point. The ability to negotiate such changes strengthens our fiscal credibility as a country, as well as the long-term sustainability of our public finances. To those who want to see that this Government are capable of making changes that reassure the markets and build confidence—not just in the short term, but in the medium term—this agreement is an essential building block. It is one that other European countries have not always been able to achieve—and again, it goes to show that this Government are making the right decisions in the national interest.

Banking Commission Report

Lord Tyrie Excerpts

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

I can assure the former Chancellor that we are still on speaking terms. Indeed, I had an hour and a half conference call just before I came into the Chamber, so I can promise him that a lot of speaking is still going on. The question he rightly asks is: where is the action? The eurozone has taken a number of important steps, but we still need to see a more credible firewall, which will enable it to stand behind its banks even more effectively.

On the right hon. Gentleman’s specific point about the Bank of England and whether this could have prevented what happened when he was Chancellor, of course institutions can get things wrong, and the Bank of England got things wrong in the run-up to the crisis, but it is sensible to try to have one body that is looking at both the prudential risks in individual firms and the overall systemic risks in the economy. The tripartite system clearly failed to do that. I do not think that before he became Chancellor it met in person at a principal level, or perhaps only once. The system did not work and many Committees of this House have pointed that out. For the Bank of England to have clear responsibility for monitoring risks is sensible. As to whether all this could have prevented what happened, I draw attention to two points. First, there are higher capital requirements in Vickers that would have better protected banks such as HBOS, and, secondly—the biggest challenge of all that he had to face—it is precisely the collapse of a large universal bank such as the Royal Bank of Scotland that Vickers is seeking to address. No one pretends that it is easy, but we believe, Vickers believes and many others believe, that the idea of ring-fencing the retail operations focused on the UK will give the Chancellor of the day greater opportunity to protect what really matters to the UK economy without having to resort to bailing out the entire institution.

[Mr Andrew Tyrie (Chichester) (Con)]

The House and the Chancellor will have heard the remarks made across the House about the need to strengthen the accountability of the Bank of England, which the Treasury Committee has already reported on, so I will not dwell on that. On the European angle, does he agree that the UK should be permitted to implement Vickers without awaiting the outcome of Commissioner Barnier’s latest announcement that he will review the merits of breaking up banks altogether, an idea explicitly rejected by Vickers, while at the same time not worrying about another of Mr Barnier’s curious and contradictory proposals, which is that a cap, as has just been mentioned, should be placed on the amount of capital UK regulators could demand of banks, which, if implemented, could prevent us from putting Vickers in place at all?

[Mr Osborne]

As I have said, I will return to the House early in the new year to address the issues that my hon. Friend’s Committee, other Members of the House and the pre-legislative Committee have raised about the accountability of the Bank of England and the accountability and responsibility of the Chancellor in a financial crisis. On his points about Europe, I understand that Commissioner Barnier, or the part of the European Commission that sits under him, is interested in the Vickers report and is looking at it, as is the European Parliament, which we welcome. On maximum harmonisation—in other words, not allowing individual countries with large banking systems to have their own regimes sitting on top of the EU minimum—that is something that other member states are concerned about. It was actually the Swedish Finance Minister who signed the letter that first raised concerns about that and got other Finance Ministers, myself included, to sign it, and the International Monetary Fund has also been very public in raising its concerns. We have not yet reached the point where the directive is about to be passed, but there is certainly a lively debate going on about it.

Royal Bank of Scotland (FSA Report)

Lord Tyrie Excerpts

Monday 12th December 2011 Commons Chamber

[Mr Hoban]

The approach taken by the hon. Gentleman, who seeks to try to blame everybody for the crisis, overlooks the key role that the shadow Chancellor—who is not in his place today—played in the design of the regulatory system that led to the problems we saw at RBS. That design—driven by the shadow Chancellor, who took great credit for it—meant that no backstops were in place when RBS took those decisions.

The other point that the hon. Gentleman should bear in mind is that only three politicians are named in the report as having put pressure on the FSA to adopt a light-touch regulatory regime. One was Tony Blair, one was the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and the third one—the person who is missing from the Opposition Front Bench today—is the shadow Chancellor, the person who in his first speech as City Minister called on the FSA to adopt a light-touch regulatory regime, a regime that, when confronted with the challenge of RBS, turned from a light touch to a soft touch. It is, of course, the taxpayer who has picked up the bill for the fundamental flaws in Labour’s regulatory regime.

The hon. Gentleman talked about disqualification of RBS directors. It is a pity that the previous Government did not think about that issue in the aftermath of the financial crisis. My right hon. Friend the Secretary of State for Business, Innovation and Skills has referred the report to counsel to see whether it is possible to disqualify the directors of RBS.

The hon. Gentleman talked about approval for acquisition. We will look carefully at the proposal Lord Turner made, but the reality is that the FSA had powers to intervene, but chose not to use them—partly as a consequence of the light-touch regime foisted on them by the previous Government.

When the hon. Gentleman talks about bonuses, let us not forget that it was under the previous Government that bonuses could be paid out in cash and taken straight away. Under the regime in place now, bonuses are deferred, paid out in shares and can be clawed back. Let us not forget that the moment that it was possible to exercise the maximum leverage on Sir Fred Goodwin—the banker Labour knighted—was the moment when it gave away his pension scheme. So I will take no lessons from the Labour party on the way in which we should deal with the problems of RBS.

The hon. Gentleman referred to the Bank of England and seemed to question whether it was able to take on the additional responsibilities. I thought he was moving away from his party’s position of supporting the package of reforms that we have put forward. Let me remind him that it was the Bank of England that identified the problem of the mispricing of risk in the financial markets. The problem was that the regulatory structure it had to deal with meant that the Bank did not have the power to tackle the problem—nor, indeed, did the FSA. What we are faced with is a problem of dealing with the regulatory regime left to us by the previous Government. They chose not to make these reforms when they were in government; we are taking action now to ensure that we have the right regime in place to tackle those risks and ensure that we have a stable, but successful, financial services sector.

[Mr Andrew Tyrie (Chichester) (Con)]

Powerful institutions do not leap forward to explain themselves when they make mistakes, and neither did the FSA. The fact is that the almost 500 pages of this report would never have been written had it not been for the unremitting pressure from the Treasury Select Committee. I would like to thank my colleagues on that Committee for helping me to secure this report from the FSA. Furthermore, to make sure that the report was of adequate quality, we took the unprecedented step of sending our own specialist Committee advisers into the FSA with full powers to examine papers and personnel in order to check that the papers underlying the compilation of this report were fairly reflected in it.

Is it not now crucial that the new regulators—the Bank of England and the Financial Conduct Authority—are subjected in future to far more vigorous parliamentary scrutiny than the FSA has been in the past? Will the Government commit in the draft legislation to secure a much higher level of parliamentary scrutiny of these powerful quangos than we have had hitherto?

[Mr Hoban]

I, too, commend the work of my hon. Friend and his Select Committee, along with the work done by Bill Knight and Sir David Walker in scrutinising the FSA’s report and making consequent improvements to it. One of the challenges we face is, as my hon. Friend said, to ensure that there is proper scrutiny. He commented on the fact that it took the pressure of his Committee to produce this report. The reality is that the existing powers in section 14 of the Financial Services and Markets Act 2000 to require a report to be produced where there is regulatory failure have never been exercised. One measure we have put in place in the Bill is to enable such reports to be produced on a more regular basis—not at a Minister’s request but in response to objective triggers to ensure that reports are published in a timely fashion so that we can learn the lessons from past mistakes. I think that is a helpful way of enabling Parliament to hold the regulators to account. We look forward shortly to responding not just to my hon. Friend’s Select Committee report, but to that of the pre-legislative scrutiny Committee.

The Economy

Lord Tyrie Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr Andrew Tyrie (Chichester) (Con)]

I will not try so much of the party political stuff that we have just heard, but I will make a short point about the central fiscal judgment, a point about the forecasts and, if I have time, a point about the supply side.

First—we did not hear much of this in the previous speeches—I want to emphasise the backdrop against which the autumn statement was made. It was undoubtedly the most difficult backdrop since 1981, with a huge inherited budget deficit, a dysfunctional banking sector and an economy in which far too much is taken and spent by the public sector, as a result of which the private sector is having trouble leading the recovery. All parties were agreed on that before the election and all had plans to reduce public spending as a proportion of GDP. On top of that, we have a severe eurozone crisis, which is our most important market.

I will not be popular on either side of the House for saying this: despite the clash of cymbals we have just heard, fiscal policy would not be so different whoever was in power. There would be a little less deficit cutting and probably a bit more tax and spend under Labour, but the market discipline in the world at the moment is severe and biting, and the markets would demand roughly the same strategy, which it would get from any rational Government. That is an important basic point to have in mind.

My second point concerns the forecast. The Treasury Committee had the OBR before it earlier today. It has radically adjusted its estimate of the output gap—that was discussed a bit in earlier exchanges, although it was difficult to spot—and its estimate of productivity growth compared with its spring forecast. That radical adjustment in eight months has in turn obliged the Chancellor to adjust policy for the later years of the forecast period, as he pointed out, in order to meet the fiscal mandate.

A good number of my Committee colleagues—from both sides of the House—were a little sceptical of the OBR’s decision. Frankly, when we look at the OBR documentation, we do not find a great deal of evidence to support it. There is some evidence, and the Committee might well return to the issue when it reports on the autumn statement.

This morning’s Treasury Committee sitting brought home to me and to other colleagues a couple of important points, the first of which is that the OBR forecast is an independent one—nobody can claim that it has been cooked up by politicians—which in itself can add confidence to markets. Secondly, the difficulties that the OBR has had in supporting specific points on which the Committee challenged it this morning flags up the perils of all economic forecasting. The one thing we can say with some degree of certainty is that this forecast, like all others, will almost certainly turn out to be wrong.

I do not have very much time. I shall end with a few words about supply side reform. The financial crisis exposed the structural weaknesses in the public finances and the structural deficit now appears to be much bigger than was originally thought. But the financial crisis also exposed structural weaknesses in the real economy. As businesses struggle to recover, the full scale of the web of complicated taxation, excessive regulation and much else is being exposed to view, and that is getting in the way of businesses doing better.

The coalition Government assembled a fully worked up agenda for action to deal with the deficit, but until this autumn statement, we did not have a fully worked up strategy for improving long-run economic performance —the supply side of the economy. I was critical of the Government’s earlier proposals that were published a year ago. They reflected the fact that they were dealing with an inheritance from the previous Government and also with policies that had been thought up and planned at a time of economic abundance before the crash. The obvious truth is that supply side reform is extremely difficult to accomplish. Raising the long-run growth rate is a very big and long-term job. The Thatcher Administration did not even start to implement their major reforms in that area until their second term.

This autumn statement has taken a huge step forward in the right direction. It sets out a more consistent and coherent agenda to support enterprise. It recognises the crippling burden that is being imposed on energy-intensive industries by climate change regulation and by the need to improve transport and to do something about the planning system. There is a good deal else. The phrase “supply side” has also been rehabilitated.

However, we must bear in mind the fact that so far this is largely just an agenda; it now needs to be implemented. It also needs to be complemented by reforms to bring greater simplicity and certainty to the tax system, which is in a huge mess, thanks largely to the previous Government and that is what I hope the Budget, in only 17 weeks’ time, will be all about.

Autumn Statement

Lord Tyrie Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

As far as I can tell, the shadow Chancellor complains that we are borrowing too much—and then proposes that we borrow even more. It is completely unconvincing and a reminder to Government Members why we are so pleased that he is in the job that he is doing, for he is a constant reminder of everything that went wrong with Labour’s economic policy—a permanent advertisement for why we should never trust Labour with our money again.

Let me answer the right hon. Gentleman’s specific questions. He welcomes the fact that we have open and honest figures from the OBR. When did we never get them when he was at the Treasury? He complains about the bank levy. He was the City Minister, so why did he not introduce a bank levy? It will raise £2.5 billion a year. In the Labour policy document on the bonus tax that he proposes, his party costs its measure at £2 billion a year. That is less—a tax cut for banks, if can I put it like that.

The right hon. Gentleman complains about off balance-sheet borrowing. That is from Mr PFI. He says that we should have kept the future jobs fund, but 50% of all people who left that scheme were unemployed within 12 weeks, which is in part why we have an unemployment problem.

Yes we are committed to real increases in the health budget, and yes the OBR confirms that we will meet our fiscal mandate and our debt target—[Interruption.] In the terms set out by me in the emergency Budget.

The right hon. Gentleman told the House this extraordinary thing—that the OBR forecasts that growth in the UK will be less than in the euro area. That, I am afraid, is simply not true. I am not going to use unparliamentary language, but it is in the OBR document in black and white: 2012, 2013, 2014, 2015—every single year, growth unfortunately is slow in the eurozone and slower than in the UK. That is one of the problems we are facing.

Let me respond to the three arguments that the right hon. Gentleman advanced in his reply. First, he said that we should try to borrow our way out of a debt crisis; he talked about extra borrowing. His plans—the plans of the previous Government—would have led to an additional £100 billion on top of borrowing over the course of the Parliament. Let us look at the facts. There is not a single credible political party in the entirety of Europe that is proposing more spending at the moment, apart from—and it is not credible—the Labour party. This is what Tony Blair said this morning on the radio—[Interruption.] Go on—have a go at booing him! Tony Blair said on the radio this morning:

“frankly whatever government is in power it is going to be pursuing a pretty tough programme at the moment”.

Blair or Balls—I think the British public made their mind up on Labour politicians long ago.

The second astonishing argument that the right hon. Gentleman deployed was to say that low interest rates in Britain were a sign of failure. Presumably that means that he wants interest rates to be higher in Britain. Presumably the fact that Italian interest rates are over 7% is a sign of success. Presumably the fact that Greek interest rates are 30% is an economic miracle. His policy for higher interest rates would put families’ mortgage bills up, increase debt interest charges for taxpayers, increase the cost of loans for small businesses, and put people out of work. Now people know—you vote Labour, you get higher interest rates.

The third and final argument that the right hon. Gentleman advanced is that the events happening in Europe will have almost no impact on anyone in Britain or on the British economy. [Hon. Members: “That’s not what he said.”] He mentioned it once in passing. That flies in the face of what the Bank of England says and what the OECD said yesterday. He quoted the IMF. The IMF supports our deficit reduction plan. It explicitly asked itself the question, “Should Britain change course?”, and said no. He quoted the independent OBR’s numbers, but he refuses to accept its analysis. Anyone who turns on the television and listens to the news knows that his argument is completely absurd, so we have to ask ourselves why he advances it. Why does he alone advance the argument that Britain is not affected by what has been going on in the world—by the external oil shocks, by the size of the financial crisis, by the eurozone crisis? There is a very simple reason: because if he admits that we are in a debt crisis, then he has to admit that we borrowed too much when he was in office, that the crash here was deeper than anywhere else, and that the effects were longer lasting. It would be an admission of his personal failure.

The right hon. Gentleman was the City Minister who let the City explode. He is the author of the golden rules that failed. He does not have the excuse of the Leader of the Opposition that he was only photocopying orders: he gave the orders; the orders came from him. Labour’s economic credibility will never recover while he remains the shadow Chancellor.

[Mr Andrew Tyrie (Chichester) (Con)]

The whole country, I think, will welcome the supply-side measures announced today, which are an essential counterpart to the deficit reduction plan. Britain’s recovery depends on thousands of small businesses in our constituencies that need the confidence and the cash to invest and grow. That is why the credit easing package that has been announced today is so welcome. Does my right hon. Friend agree, though, that the recovery can be secured in the long term only when we have banks that are operating normally —when we have a return to more normal lending conditions? Does not that reinforce the need for him to work extremely closely with the regulators and the banks to achieve this?

[Mr Osborne]

I agree with the Chair of the Treasury Committee that the impact of the financial crisis and the deleveraging in the British financial system and other financial systems are having a huge impact not just on our recovery but on recoveries around the world. I completely agree that we need to try to clear the impaired balance sheets of the banking system. We need to try to get new lenders on to the high street. That is why we took the decision we took on Northern Rock—to get Virgin Money out there on the high street. I will have more to say on the banking system next month when I respond to the Vickers report and to the very good report from the Treasury Committee.

Northern Rock

Lord Tyrie Excerpts

Monday 21st November 2011 Commons Chamber

[Mr Hoban]

That was a lame response to my statement. The previous Government presided over the failure of financial regulation and an irresponsible banking culture that led to the collapse of Northern Rock. Now we have to deal with their legacy, and that includes the agreement that they struck with the European Commission requiring Northern Rock to be sold by 2013. Given the hand we were dealt by the previous Government, we had to do three things: get the best deal for the taxpayer, for the consumer and for Northern Rock and the north-east. The deal that we announced last week did just that.

The hon. Gentleman asked about proceeds. As we have said, this is a one-off transaction, and the proceeds will go towards paying down the debt. He asked whether it would have been better to hold on to Northern Rock longer. The reality is that Northern Rock is currently loss-making, and it is expected to make losses in the first part of next year. The best outcome for Northern Rock is to be acquired by somebody who wants to use the base in Gosforth to expand the business and offer a better deal to consumers and the staff of Northern Rock. David Fleming, the Unite trade union official, said:

“The treasury’s decision to sell Northern Rock to Virgin Money marks a significant moment in the history of this north-east based financial institution. After three years of turmoil and upheaval for the workforce at Northern Rock, Unite hopes that today will be the start of a secure future.”

Let me deal with Virgin Money’s capital position, which the hon. Gentleman raised. Virgin Money has clearly set out to be a strong and dependable partner. Its core tier 1 capital ratio is 15%, which is much higher than that of many existing high street banks, which averages about 10%. Of course the FSA will approve the capital structure and will have to give its approval of the transfer of ownership, and hon. Members should welcome that support.

On mutualisation, I made it clear, as did the Chancellor, that we were open to offers from existing mutuals to buy Northern Rock for a stand-alone remutualisation, but no firm bids were made in the final round. No one came forward with a well worked-out plan on how Northern Rock could be remutualised on a stand-alone basis, and that is why we took the decision we did. It was in the best interests of the taxpayer, the consumer, the north-east and Northern Rock to sell the business to Virgin Money.

[Mr Andrew Tyrie (Chichester) (Con)]

In the Treasury Committee’s recent report on competition in retail banking, we argued strongly that competition, and not just short-term revenue maximisation, should play a major part in the sales of the nationalised banks. Have consumer interests influenced the Treasury’s decision to sell Northern Rock now, and does the Minister agree that increasing competition should be central to future divestments?

[Mr Hoban]

My hon. Friend makes an important point. We have studied the Treasury Committee’s reports on competition carefully. We agree with him that competition is vital to improve outcomes for consumers, whether they be business or personal; and, to the extent that divestments of banks help to deliver improved competition, that is something to be welcomed and borne in mind. There are other areas where we can look to improve competition in the banking sector. The Independent Commission on Banking has made its proposals, and we will respond to them in due course.

Eurozone Crisis

Lord Tyrie Excerpts

Thursday 3rd November 2011 Commons Chamber

[Mr Hoban]

Let me first tackle this issue of who kept us out of the euro. The fact that a previous Conservative Government secured an opt-out from the Maastricht treaty meant that we were not going to join the euro. Also, one of the things that we did when we came into office last May was to close down the euro preparations unit in the Treasury. We are taking action on contingency planning for a whole range of outcomes, and that work is under way in the Treasury.

The hon. Gentleman asked whether work would be put on hold on the three legs of the deal that was agreed last week. It is important that the euro area continues to work on those three legs, particularly on the ring fence and on the recapitalisation of the banks. They are important parts of the package, and they are needed to ensure that the eurozone is stabilised. He talked about the various European mechanisms that are in place to support finance. He will remember that the Greek bail-out was originally paid for purely by the eurozone; the UK did not contribute to it and has not contributed to subsequent parts of the bail-out package for Greece. We have negotiated that when a permanent mechanism is put in place to replace the one that the previous Government signed us up to, which we do have to contribute to, that permanent mechanism will not require UK participation. That is an achievement of this Government, getting us out of the mess that the Labour Government put us into in May last year.

The hon. Gentleman referred to the IMF. He will have to remember that it was he who led opposition to increasing our subscription to the IMF—[Interruption.] He says that that was to safeguard Britain’s subscription to the IMF, but it would in fact have marginalised the UK in international debates on tackling the global economic problems that we face today. Labour should think very carefully about its repudiation of the legacy left to it by the previous Prime Minister, who agreed to a trebling of resources for the IMF. We need to take action to stabilise the situation in the eurozone. The uncertainty is casting a chilling effect on the UK economy, and it is important that those issues are tackled as soon as possible.

[Mr Andrew Tyrie (Chichester) (Con)]

I wonder how much we can reasonably learn from the Minister, given that the negotiations are taking place in Cannes and that he is here with us today. Anyway, there are one or two questions that we might ask. What assurance can he give us about the UK banks’ exposure not only to Greece but to other eurozone countries at risk? What confidence does he have that the eurozone banks have the capital strength required to withstand a eurozone default?

[Mr Hoban]

My hon. Friend asks some interesting questions. I think that I would rather be here in the House than in Cannes at the moment—[Interruption.] It is important that Parliament should hold Ministers to account on these matters, and I am here to answer its questions. On my hon. Friend’s first question about the strength of the UK banks, there has been a process with the leadership, through the European Banking Authority, which is based here in London, and it concluded that the UK banks did not need to be recapitalised. That is partly a consequence of the measures taken over the past two or three years to increase banks’ holdings of capital and highly liquid assets, which have helped to ensure that they are to an extent insulated from the problems in the euro area.

On my hon. Friend’s wider question about the strength of the European banks, I can tell him that, in calculating the amount of additional capital that banks should hold, the EBA determined that they should hold 9% core tier 1, and that, crucially, their holdings of sovereign debt should be marked to market rather than held at face value. That led to the calculation that banks across Europe need to hold an additional €100 billion of capital.

Oral Answers to Questions

Lord Tyrie Excerpts

Tuesday 1st November 2011 Commons Chamber

[Mr Osborne]

We shall see the 17 members of the euro attempting to co-ordinate their budget policies better, and more mutual surveillance, with sanctions, for those who do not do what has been agreed. I have to say that the confusion, if there is any, is in Labour’s policy, because it is now holding open the prospect of membership of the euro, which would be the ultimate fiscal and monetary integration.

[Mr Andrew Tyrie (Chichester) (Con)]

Does the Chancellor agree that it is wholly unacceptable that the rest of Europe should be held to ransom by Greece? What would be the consequences for the UK and the eurozone of a no vote in a Greek referendum?

[Mr Osborne]

There is no doubt that the decision by the Greek Prime Minister has added to the instability and uncertainty in the eurozone. We can see that today. We are trying to create stability and certainty in the eurozone. Ultimately, it is up to the Greek people and the Greek political system to decide how they make their decisions, but I believe that it is extremely important for the eurozone to implement the package that it agreed last week. I said at the time that that was crucial, as did everyone else involved. We need to get on with it, sooner rather than later.