Northern Ireland Security Arrangements (Carlile Report)

Theresa Villiers Excerpts

Friday 20th March 2015 Written Statements

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

This is a summary of the main findings from the report by Lord Carlile, the independent reviewer of national security arrangements in Northern Ireland, covering the period from 1 December 2013 to 31 December 2014:

“Throughout the year I have been briefed extensively on the state of threat in Northern Ireland. The context in which national security activities are performed in Northern Ireland remains challenging. There have been successes in 2014 and a number of trials of significant alleged terrorists are pending. This is a very dangerous, unpredictable terrorist threat, though one which is much smaller than in the days of PIRA terrorist activity. The authorities are achieving a good level of attrition. Most of the public lead lives unaffected by terrorism.

I regard 2014 as a year of continuing success in thwarting and detecting terrorism. Pending trials are likely to demonstrate this, as have trials during the year. However, there is no sign of reduced ambition in the minds of terrorists, and limited evidence of a lack of capacity on their part. Attrition and continued effort against the dissident republican groups remain a paramount requirement. The number of ongoing investigations remains high. The work is painstaking and, for some involved, potentially dangerous. Peace is in no small way the result of these efforts by PSNI and MI5 personnel.

In preparing this report I have considered the current threat level, and what I have learned of events of a terrorist nature during the year. There have been several serious incidents during 2014, as well as a spate of crude letter bombs. Once again the parading season proved a challenge. Although there were some injuries as a result of sectarian clashes, it was more peaceful than in 2013, with fewer injuries to police and public.

During 2014,1 have met a range of stakeholders. I have engaged with PSNI and MI5 and examined the relationship between them and others. I have held meetings with HM Inspectorate of Constabulary concerning activities relevant to this Report, and with the Police Ombudsman for Northern Ireland and the Northern Ireland Executive's Minister of Justice, David Ford MLA. The liaison between Mr Ford and those responsible for national security issues is satisfactory. I have also engaged with the Independent Human Rights Adviser to the Northern Ireland Policing Board (NIPB) and the Board itself. The Policing Board can feel reassured that the Human Rights Adviser is well able to discharge her duties in respect of national security. The Board has been shown the material reports in relation to Northern Ireland of the Office of the Surveillance Commissioners, subject to minor redactions. Compliance is at 'best in class' level. I am grateful to NIO Ministers for their close interest in national security matters discussed; meetings with Ministers have occurred. Ministers are always very well informed on all material security issues.

I am satisfied that the periodic briefings provided to me have been full and not selective, and that I have a good understanding of relevant matters. I note that when matters of moment occur, active steps are taken to ensure that I am briefed. When I request access, it is given.

I have asked questions again this year about the relationship between MI5 and PSNI staff working alongside each other in security operations in Northern Ireland. Comments made to me in 2014 about the relationship between the two services were strongly mutually supportive. That they work together well and in the national interest is beyond question. The effectiveness of what they do is demonstrated by the successful disruptions that have taken place over the year.

This year once again I have reviewed in some detail the arrangements for Covert Human Intelligence Sources (CHIS). Overall, the use of CHIS has been effective. All activity and decision making concerning CHIS are documented carefully and European Convention on Human Rights issues are fully considered. There is a rigorous legal and policy framework for dealing with CHIS. The Regulation of Investigatory Powers Act (RIPA) 2000, and associated orders and codes, provide the legal framework for authorising and managing CHIS within the UK in a way that is compatible with the European Convention on Human Rights, and particularly the right to privacy. It requires that use of a CHIS is subject to prior senior officer authorisation, limits the purposes for which the CHIS may be used, ensures detailed records are maintained, establishes independent oversight and inspection, and provides an independent appeals mechanism to investigate complaints.

I have also considered a number of issues relating to terrorism prosecutions including arrangements for the continuation of the temporary and renewable non-jury trial arrangements provided under the Justice and Security (Northern Ireland) Act 2007. The situation continues to improve. The number of cases requiring non-jury trial diminishes. The Director of Public Prosecutions for Northern Ireland uses considerable and proper care in the identification and selection of such cases. It is fully recognised that the norm is jury trial but the residual serious and lethal threat of terrorism justifies the continuation of the non-jury system.

There is no evidence of any disadvantage in terms of outcome to defendants in the current system of non-jury trials. They are as likely to be acquitted as in jury trials, and have the advantage of reasoned judgments, and less inhibited access to appeals. Part of the criminal justice setting in need of appraisal is sentencing in terrorism related cases. Generally such sentences are considerably shorter than comparable sentences in England and Wales, with notably different tariffs in murder cases.

I remain as concerned as before about the disclosure regime operated in scheduled cases in Northern Ireland. In England and Wales issues of Public Interest Immunity and other disclosure issues are dealt with by the trial judge, who of course is not the tribunal of fact save in the rarest of trial exceptions, or in 'Newton' hearings where there has been a plea of guilty on a disputed factual basis. In Northern Ireland in non-jury trials there is a separate disclosure judge. This still leads not only to delays in trials, but to a disconnect between the day by day reality of the trial and the insulated disclosure process.

I remain concerned that the disclosure issue outlined above is a real difficulty in dealing with non-jury cases. Given the high regard held generally for the quality of the reasoned judgments given in such cases, and also for the fairness of the trials, I find it difficult to accept that there would be any diminution in actual fairness if the trial judge dealt with disclosure too.

I have inquired about the use of intercept evidence. I remain satisfied that there is solid scrutiny and review of interception, in an environment in which communications technology is developing quickly.

As before, I have asked about loyalist paramilitaries. These are people and groups whose real interest is in making money from crime. The authorities are well sighted against these organisations. I have enquired about violent Islamism in Northern Ireland. For the present this is not a significant threat.

Continued vigilance and the maintenance of counter-terrorism resourcing are essential. However, once again I have drawn comfort from the successful joint operations between MI5 and the PSNI.Normality is a genuine and mostly realisable ambition, rather than merely an aspiration.

I have measured performance in 2014 against the five key principles identified in relation to national security in Annex E to the St Andrews Agreement of October 2006. My conclusions in relation to Annex E are set out in the attached Table.”

Further to reinforce this comprehensive set of safeguards, the Government confirmed that they accept and will ensure that effect is given to the five key principles which the Chief Constable has identified as crucial to the effective operation of the new arrangements, viz:

Northern Ireland Security Situation

Theresa Villiers Excerpts

Thursday 26th February 2015 Written Statements

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

This is the seventh statement on the security situation in Northern Ireland and the final regular statement of this Parliament. It covers the threat from domestic terrorism in Northern Ireland, rather than from international terrorism, which members will be aware is the responsibility of my right hon. Friend the Home Secretary, who updates the House separately.

A number of small, disparate but dangerous groupings of dissident republican terrorists continue with their attempts to undermine Northern Ireland’s democratic institutions through the use of violence. However, because of the tireless efforts of the Police Service of Northern Ireland (PSNI), working in conjunction with MI5, An Garda Siochana (AGS) and Army ammunition technical officers, the overwhelming majority of Northern Ireland’s population are able to go about their daily lives untroubled by terrorism. I would like to take this opportunity to thank the PSNI and all its security partners for their outstanding work.

Continued vigilance is, however, essential. The threat level in Northern Ireland and Great Britain from Northern Ireland related terrorism remains unchanged since my last statement to Parliament in October 2014. The threat to Northern Ireland is SEVERE (an attack is highly likely) while the threat to Great Britain is MODERATE (an attack is possible but not likely). All threat levels are kept under constant review.

There were twenty two national security attacks in 2014 and there has been one so far in 2015. PSNI and prison officers as well as members of the armed forces continue to be the principal targets for dissident republican terrorists and the threat to life persists. A number of these violent groupings continue to attack, or aspire to carry out attacks, including the so-called “new” IRA, Oglaigh na hEireann (ONH) and factions of the continuity IRA (CIRA).

Since October 2014 when I last reported on the security situation in Northern Ireland, PSNI officers have been subject to violent attack on five separate occasions. In two particularly serious incidents violent dissidents set up booby trapped explosive devices in Strabane and Londonderry and then attempted to lure in PSNI officers by making bogus crime reports. Although the devices were intended to target responding PSNI officers, they could easily have been triggered by passers-by or even by children playing. Thankfully, both devices were made safe by Army ammunition technical officers before anyone was injured.

Two further attempts to murder PSNI officers undertaking their duties were made in Londonderry and Belfast in November. In Londonderry, terrorists detonated an improvised explosive device in a residential area of the city as a police patrol vehicle passed by, while in north Belfast an explosive device was fired at a stationary PSNI vehicle. Fortunately, the occupants of both vehicles escaped uninjured but both attacks could easily have resulted in fatalities or serious casualties. In a fifth incident an explosive device was sent to the Chief Constable at police headquarters in Belfast.

Dissident republicans continue to engage in brutal punishment shootings as a means to try to exert fear and control within local communities.

Hoax devices have been deployed without any regard for the impact they have on the welfare of the community, including elderly residents, children and workers. These shameful incidents can cause significant disruption to local people and to businesses.

Dissident republican prisoners in Maghaberry continue to threaten, and to try to intimidate, staff and contractors as they seek to carry out their work. This Government fully support the Department of Justice and the Northern Ireland Prison Service as they respond to this wholly unacceptable activity and I pay tribute to all prison officers for the difficult job that they carry out.

Although risks endure, it is important to highlight the excellent progress that has been made in disrupting terrorist activity and bringing dissident republicans to justice. In October 2014 a weapons hide was uncovered on a farm in County Fermanagh. It was found to contain five complete explosive devices, parts for further devices, a firearm and mortar components. In November, a potential shooting attack was averted when the PSNI arrested a man in possession of a sub-machine gun in Belfast. Also in November, a total of fifteen men were arrested following a long-running investigation into dissident republican activity in Newry, County Down. Of those arrested, ten were charged under the Terrorism Act 2000 and remanded in custody.

In the Republic of Ireland, An Garda Siochana (AGS) has also had success in combating the threat. A weapons cache discovered in Dublin was found to contain an assault rifle, automatic pistols, ammunition and a significant quantity of bomb-making equipment that could have been intended for use in attacks in Northern Ireland. Two men were arrested in December in possession of improvised incendiary devices probably destined for use in Northern Ireland.

The close working relationship between PSNI and AGS, and their joint efforts both north and south of the border, has led to considerable success in combating the threat from dissident republican terrorists over the last six months. I am confident that both police services will do all that they can to build on this through 2015 as they make progress with a number of ongoing investigations. This work is painstaking and lengthy but there is a steadfast commitment to bringing the terrorists to justice on both sides of the border.

In my last statement I commented on in-fighting within loyalist paramilitary organisations. This has persisted in recent months and understandably remains a cause for concern for the wider community. There is no place in Northern Ireland for individuals or organisations that seek to exert fear, control or intimidation. The PSNI have assured me that they are doing all that they can to apprehend those responsible for violent and criminal acts.

As in previous reporting periods, there are individuals associated with loyalist paramilitary groups that are involved in serious criminality. However, overall, we continue to assess that the collective leaderships of the principal loyalist paramilitary groups, the Ulster Defence Association (UDA) and the Ulster Volunteer Force (UVF), remain committed to their ceasefires.

The Government’s Strategic Approach

The Government are clear that terrorism will not succeed in Northern Ireland; democracy and consent will always prevail. Tackling terrorism remains a tier one priority—the highest priority for Government. We will do all that we can to support the PSNI to counter the threat as part of broader efforts by this Government to tackle terrorism, wherever it originates or whatever form it takes.

This Government have already provided additional security funding to PSNI over a five-year period amounting to £231 million. This is despite the overall spending reductions needed to deal with the deficit and the competing resource needs resulting from international terrorism. In addition, the inclusion in the financial package of Stormont House agreement of an undertaking by the Northern Ireland Executive to ensure that police funding is protected from significant reductions will help to ensure that the PSNI remains able to tackle the threat effectively.

Our strategic approach has also involved working closely with our colleagues in the devolved authorities and our partners in the Republic of Ireland on a range of issues. This co operation greatly strengthens efforts to combat terrorism in Northern Ireland.

We continue to build a united, complementary approach to security and politics that leaves no space for violent dissident republicans. We recognise the continuing link between political and security stability. Political progress has been made this year, for example with the Stormont House agreement, but challenges undoubtedly lie ahead.

Other strategic and political challenges, distinct from the threat from dissident republican groupings, require ongoing and concerted action to ensure Northern Ireland continues to thrive.

For instance public disorder is disruptive and distressing for the communities affected, damages Northern Ireland's reputation abroad, and can expose police officers to risk of attack from dissident republicans. Northern Ireland enjoyed the most peaceful parading season for a number of years in 2014. Those involved in parading or protests need to do all they can to ensure this continues.

Conclusion

Suppressing the threat from violent dissident republicans is a difficult and, in many cases, dangerous task. Despite a challenging working environment, there have been notable successes in recent months. This is the result of the considerable effort, expertise, co-operation and resolve. But continued vigilance is needed. It is clear that these violent groupings retain lethal intent and will seek whatever opportunity they can to target the police officers and others who help to keep families, businesses and communities across Northern Ireland safe. The support of the public and their assistance and patience in response to security alerts is both invaluable and admirable.

With every attack that is mounted and the many more that are foiled, the PSNI and its security partners become more knowledgeable, resilient and able to tackle the threat and bring perpetrators to justice. Our commitment to Northern Ireland and to securing a peaceful, stable and prosperous future will not waver. We remain focused on supporting the work that continues on a daily basis to combat terrorism and ensure that people can continue to go about their daily lives safe from attack.

[HCWS304]

Supplementary Estimate 2014-15

Theresa Villiers Excerpts

Monday 9th February 2015 Written Statements

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

Subject to parliamentary approval of any supplementary estimate, the Northern Ireland Executive Departmental Expenditure Limit (DEL), net of depreciation, is increased by £155,587,000 from £10,829,801,000 to £10,985,388,000.

Within the total DEL change, the impact on resources and capital is summary opening position set out in the following table:

Oral Answers to Questions

Theresa Villiers Excerpts

Wednesday 28th January 2015 Commons Chamber

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

1. What recent discussions she has had on the security situation in Northern Ireland; and if she will make a statement.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

Keeping people safe and combating the terrorist threat continue to be the Government’s highest priorities. While the threat level remains at severe, excellent co-operation between the Police Service of Northern Ireland and its partners has put violent dissident republicans under strain in recent months. There have been a number of significant arrests, charges and convictions, which are helping to suppress the threat.

[Tom Greatrex]

I thank the Secretary of State for her reply. When did she last discuss with the Home Secretary the issue of the National Crime Agency and its taking up functions in Northern Ireland? What assessment has she made of the effects of the delay on fighting organised crime in Northern Ireland?

[Mrs Villiers]

I last discussed that with the Home Secretary on Tuesday morning. There are some very good discussions under way between the Justice Minister, members of the Social Democratic and Labour party and the Home Secretary on these matters. There is some optimism that real progress is being made, and I urge all involved—I urge Labour to work with its sister party, the SDLP—to work on this, because the NCA provides excellent services. At the moment, Northern Ireland is not getting the full benefit of the protection that it can offer.

[Mr Andrew Robathan (South Leicestershire) (Con)]

The Secretary of State may have seen some rather surprising reports in the newspapers today. Given that she is talking about serious crime and is talking to parties in Northern Ireland about that, has she talked to Sinn Fein, because apparently the Labour party has been talking to Sinn Fein about a possible link-up after the general election? Did she see that?

[Mrs Villiers]

I was briefed on those stories in The Sun this morning. I certainly discuss many matters with Sinn Fein and the other Northern Ireland parties. It is crucial that all parties—Sinn Fein, the SDLP and all the parties in the Executive—get behind the introduction of the full powers of the National Crime Agency in Northern Ireland, because that is a means by which we can ensure that we do more to keep people in Northern Ireland safe, and it helps to relieve pressure on PSNI resources.

[Mr Nigel Dodds (Belfast North) (DUP)]

One of the biggest threats to security in the months ahead in Northern Ireland is the continuing impasse over parades in north Belfast. Will the Secretary of State tell us what she plans to do, as this is not a devolved matter? The ball is firmly in her court after her decision at Christmas not to proceed with the north Belfast parading panel. She will know that on this side of the House we are determined not to allow this matter to be forgotten or swept under the carpet. It needs to be addressed, and the festering sore of the denial of human rights to people in north Belfast must be sorted out.

[Mrs Villiers]

I fully agree with the right hon. Gentleman that we cannot go on as we are—things cannot be left as they are. It is vital that we get a process in place that will help to resolve the dispute, deal with the impasse, and bring the two sides together. I am actively engaged on that, and I hope to meet him and representatives of the loyal orders soon to discuss this. I would urge a wide range of people to get involved. I accept full responsibility for seeking to drive it forward, but contributions by Church leaders have been helpful on this matter in the past. Other parts of Northern Ireland have demonstrated that input from the business community can be helpful in resolving these disputes. We need to develop an inclusive process that brings a range of interest groups together to try to find a way to resolve this dispute.

[Mr Dodds]

On the issue that was the subject of exchanges a moment ago—I am grateful that the Secretary of State sees the Labour party putting pressure on the SDLP—Sinn Fein is the real impediment, with a veto in the Northern Ireland Assembly in relation to the NCA. What does the Secretary of State intend to do about that? Is there not a more active role for her to play in resolving this issue, and what confidence can we have in Sinn Fein being prepared to support the NCA when one of its leading members, Gerry Kelly, having promised support and help for a victim’s family, ran around giving letters of comfort to the alleged perpetrator against the innocent family?

[Mrs Villiers]

I have been very actively involved in these matters for many months, and I raise the issue with Sinn Fein virtually every time I have a conversation with them. It essential that we see movement on this. The reality is that it will be more difficult to seize the assets of criminals without full implementation of the NCA. It will be more difficult to crack down on drug dealing, racketeering and serious organised crime without full powers for the NCA. I will continue to urge Sinn Fein and the SDLP to accept the extension of the NCA’s remit. The reassurances in place ensure that any activity by the NCA will be entirely consistent with the devolved policing and justice settlement.

[Lady Hermon (North Down) (Ind)]

What additional measures have been put in place by the UK Border Force to enhance the security of this country to ensure that young British people who go out to Syria or Iraq and become radicalised jihadists there could not easily slip back into the Republic of Ireland, cross the border with Northern Ireland back into the UK and commit the most appalling acts of terrorism? What is being done to improve that situation?

[Mrs Villiers]

My right hon. Friend the Home Secretary has a range of measures in place on those matters, including the Counter-Terrorism and Security Bill which is under discussion in Parliament, which in certain circumstances would enable UK nationals not to be admitted back into the country. The hon. Lady is right to raise the threat from international terrorism, which we must remember is a threat in Northern Ireland as it is elsewhere in the United Kingdom. I had the opportunity to discuss these matters with senior members of the PSNI last week. They stand ready not only to play their part in Northern Ireland, but to provide assistance and advice to police services in the rest of the country.

[Rosie Cooper (West Lancashire) (Lab)]

2. What recent steps she has taken to ensure that the Police Service of Northern Ireland has adequate resources to guarantee security for the people of Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The Stormont House agreement included an undertaking by the Northern Ireland Executive to protect the PSNI’s budget from significant reductions. I very much welcome the additional £20 million for the police in the Executive’s final budget for 2015-16. This is in addition to security funding of £231 million provided by this Government to help the PSNI tackle the terrorist threat.

[Rosie Cooper]

The letter bomb sent to the PSNI headquarters earlier this month is a shocking reminder of the great sacrifices made by officers across Northern Ireland. How closely is the Secretary of State monitoring the resource needs of the PSNI?

[Mrs Villiers]

This is of course something I take a very close interest in. That is one of the reasons why the Government have provided the extra security funding and why we included provision in the Stormont House agreement to link our funding package with a commitment by the Executive on police resources. Clearly, the threats to police officers continue to be real and significant, and I welcome the success that the PSNI and An Garda Siochana have had in significant arrests and disruptions, which I believe have contributed substantially to suppressing the terrorist threat.

[Mrs Mary Glindon (North Tyneside) (Lab)]

13. How can the PSNI possibly meet its resource requirements to keep the peace when it has to make budgetary savings of over £51 million by the end of this financial year?

[Mrs Villiers]

As I said, the resource position for the police has been improved with the changes in the draft final budget. The position of the police would be further improved if the NCA were to operate to its full capacity in Northern Ireland, because at present the PSNI is doing work that would otherwise be done by the NCA. The establishment of the Historical Investigations Unit in the coming months will further relieve the PSNI of responsibilities in relation to policing the past, freeing up time and resources for policing the present.

[David Simpson (Upper Bann) (DUP)]

Does the Secretary of State agree that as well as securing resources for security for the PSNI, we need to focus on rural crime, attacks on our elderly and the drugs issue, all of which are increasing in Northern Ireland?

[Mrs Villiers]

These matters are crucially important. The crime figures in Northern Ireland continue to make it clear that Northern Ireland is one of the safest places in Europe and has some of the lowest levels of crime, but I know that the PSNI takes very seriously the regular crime that is the bane of people’s lives and is working hard to combat it, in addition to its duties in relation to national security.

[Naomi Long (Belfast East) (Alliance)]

The hon. Member for West Lancashire (Rosie Cooper) referred to the attack on PSNI headquarters in my constituency. In addition to being under threat when in uniform and on duty, officers are often under threat in their own homes. The PSNI needs resources to be able to provide adequate security measures at officers’ homes if it is to retain officers who have been trained. What can the Secretary of State do to allow additional funding for the PSNI to ensure that that happens?

[Mrs Villiers]

As I said, one way to do that would be to take burdens off the PSNI’s shoulders by implementing the NCA. Continued focus on trying to resolve parading disputes is also important, given their potential impact on police resources. It is crucial that we get the new institutions on the past up and running as soon as possible to provide that relief to PSNI funding, and, as we discussed in the House yesterday, we need to consider whether any of the £150 million for dealing with the past can be deployed prior to the establishment of the HIU to help on these matters for the PSNI.

[Mr Ivan Lewis (Bury South) (Lab)]

The Conservative party seems to want to introduce new protocols to the House, believing everything in The Sun and demanding that the Labour party take responsibility for problems that are clearly the responsibility of the Government.

Yesterday, the Secretary of State was unable to tell us how long it would take the PSNI to review the case of all those covered by the on-the-runs scheme. When will she be able to answer that question? In lieu of the creation of a new architecture to deal with the past, what will the PSNI be doing in the meantime to deal with some of the unresolved murders?

[Mrs Villiers]

How to deal with such cases, the priority given to them and the length of time it will take are matters for the PSNI, but it has said publicly that it will take some years to progress through the cases under Operation Redfield. As I told the House yesterday, it is important for us to consider whether any of the £150 million that is to be devoted to matters relating to legacy cases can be used to assist the PSNI in its work prior to the establishment of new institutions to look at past cases.

--- Later in debate ---

[Mark Durkan (Foyle) (SDLP)]

4. What steps she is taking to safeguard records relevant to the work of the Historical Investigations Unit, the Independent Commission for Information Retrieval, inquests, and other inquiries into the past.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The Northern Ireland Office takes responsibility for safeguarding its records very seriously and will continue to follow existing protocols.

[Mark Durkan]

The Secretary of State gave the commitments on behalf of the British Government in the Stormont House agreement to ensure that whenever the new mechanisms come into place all records will be given to them. What steps is she taking to make sure that all current records will still be available? She knows that there have been many cases where files or their contents have disappeared, to the dissatisfaction of those dealing with them. What steps is she taking to safeguard against that?

[Mrs Villiers]

The Northern Ireland Office undertook a review of record keeping in the wake of the problems that occurred in relation to the cases involving the RPM—royal prerogative of mercy. We are satisfied that all necessary measures are in place to ensure that records will be available for transfer as appropriate, but we will also take steps to make sure that sensitive material is protected from onward disclosure by the institutions concerned.

[Dr William McCrea (South Antrim) (DUP)]

In 1976, 10 innocent Protestant workmen were brutally slaughtered by the side of the road at Kingsmills. The Historical Enquiries Team report now reveals the chilling fact that a large number of the terrorists responsible included neighbours based in the village of Whitecross just over 1 mile from the scene of the atrocity and close to where many of the innocent victims lived. Does the Secretary of State not accept that it is sickening to think that these men were part of that murdering team, when the victims needed neighbours to be faithful most of all?

[Mrs Villiers]

The Kingsmills tragedy was an appalling terrorist atrocity. I have met the families, and they have my deepest, deepest condolences. Every effort should continue to be made to bring to justice those responsible for this horrific episode in the troubles.

[Stephen Pound (Ealing North) (Lab)]

Further to the question by my hon. Friend the Member for Foyle (Mark Durkan), I am sure that the whole House welcomes the new architecture proposed as a result of the Stormont House agreement. Will the Secretary of State give us some indication of the time scale and, crucially, say whether it will require legislation in this House? Frankly, the victims’ families have waited too long—they need answers and they need them now.

[Mrs Villiers]

I am meeting the leaders of the Northern Ireland parties on Friday to agree an implementation plan on the Stormont House agreement. It is highly likely that we will need at least some legislation both in Westminster and in the Assembly. We will talk to the Northern Ireland Executive about the balance between the two to ensure that we get these institutions up and running as soon as possible, because current systems are not giving the right outcomes for victims, and that needs to change.

[Mr William Bain (Glasgow North East) (Lab)]

5. What progress she has made on implementation of the Stormont House agreement; and if she will make a statement.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The Government are committed to timely implementation of the Stormont House agreement and we are making progress—for example, on corporation tax devolution. We hope to agree an implementation plan for the agreement at our first formal review meeting with the parties on 30 January.

[Mr Bain]

I welcome the Stormont House agreement as further strengthening devolution across the United Kingdom and offering the Northern Ireland Executive nearly £2 billion in new finance and loans. What process will the Secretary of State propose to deal with the unresolved issues of parades, flags and cultural identity?

[Mrs Villiers]

The SHA sets out a clear pathway for reaching a resolution of those issues with the commission on flags, which was first proposed by Dr Richard Haass. It is right that we have a broader engagement with the public on the matters relating to identity. The SHA commits the Executive to producing options for a new system of parading that could be devolved, we hope, in future.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Does the Secretary of State agree that the Stormont House agreement, with the boost to the economy that should come as a result of the corporation tax decision, the reduction in the size of Government, and the provisions on no rewriting of the past and no expansion of cross-border bodies, means that we now have a once-in-a-generation opportunity to make significant progress in Northern Ireland?

[Mrs Villiers]

I wholeheartedly agree with the hon. Gentleman’s description of the Stormont House agreement. It was balanced and fair, it comes with a significant financial boost for Northern Ireland, and it guards against the dangers of those who would attempt to rewrite history. Corporation tax devolution could be genuinely transformative for Northern Ireland as a place sharing a land border with a low-tax jurisdiction.

[Ms Margaret Ritchie (South Down) (SDLP)]

Further to the question on corporation tax, will the Secretary of State have immediate discussions with the Northern Ireland Executive to force home the point that that lever should be used to bring about balanced regional development in terms of inward investment locations for projects? [Interruption.]

[Mr Speaker]

Order. Let us make sure we hear the Secretary of State’s answer on the Stormont House agreement.

[Mrs Villiers]

Both the UK Government and the Northern Ireland Executive are united in our efforts to rebalance the Northern Ireland economy, and we both share the determination to ensure that economic prosperity and the boost that will come with corporation tax devolution are shared throughout all towns, cities and rural areas in Northern Ireland.

[Mr Ivan Lewis (Bury South) (Lab)]

The Stormont House agreement states that corporation tax devolution will not take place until 2017, subject to various conditions, so will the Secretary of State tell the House what tangible benefits the economic pact has so far delivered to Northern Ireland’s economy? When did she last meet the Business Secretary and the Foreign Secretary to talk about how the UK Government can support Invest Northern Ireland?

[Mrs Villiers]

I regularly discuss such matters with my colleagues in Cabinet. We have rolled out a range of measures under the economic pact—devolution of corporation tax is one, and the investment conference following up on the G8 is another. We are seeing real progress on projects such as the Lisanelly shared campus, as well as increased take-up of the Government’s financial schemes to promote lending to business, so the economic pact is already delivering for Northern Ireland in a range of ways.

[Pamela Nash (Airdrie and Shotts) (Lab)]

6. What steps the Government are taking to tackle youth unemployment in Northern Ireland.

--- Later in debate ---

[Bob Blackman (Harrow East) (Con)]

7. What steps the Government are taking to strengthen the economy of and increase inward investment to Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The Government’s long-term economic plan is working for Northern Ireland, as shown by the good news on employment statistics last week. We have introduced a Bill to devolve corporation tax-setting powers, which will act as a significant marketing tool to attract foreign investment to Northern Ireland.

[Bob Blackman]

I thank my right hon. Friend for that answer. Does she agree that reducing corporation tax rates would enable greater employment prospects and a brighter future for the people of Northern Ireland?

[Mrs Villiers]

I agree with my hon. Friend. That change has great potential to transform the Northern Ireland economy, which is already starting to recover. Since the election, employment is up by 31,000, private sector employment is up by 51,000 and unemployment is down 6,000, and the claimant count in Northern Ireland has gone down for 24 consecutive months.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

The Secretary of State will be aware that strengthening the economy and increasing investment require multiple factors, not just the reduction of corporation tax. Does she appreciate how critical regional connectivity is, particularly the air links between Belfast and London and Dublin and London that go into Heathrow? Will the Heathrow slots be protected if International Airlines Group takes over Aer Lingus?

[Mrs Villiers]

It is not for me to speak for IAG, but it is vital that Heathrow maintains its links with Belfast and Dublin. I agree that a corporation tax reduction on its own is not enough for economic recovery; it is crucial that economic reform and investment in infrastructure accompany that change.

[Mr Speaker]

Last but not least, on the Union flag, I call Kate Hoey.

On-the-Runs Scheme

Theresa Villiers Excerpts

Tuesday 27th January 2015 Commons Chamber

[Ian Paisley (North Antrim) (DUP)]

(Urgent Question): To ask the Secretary of State for Northern Ireland to make a statement about recent developments relating to the on-the-run letters which have permitted a second fugitive to evade justice.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

On Monday 26 January, the coroner conducting the inquest into the death of Mr Gareth O’Connor, who disappeared in May 2003, directed that the inquest should be stayed pending an investigation by the Police Service of Northern Ireland into one of the suspects in Mr O’Connor’s murder. The suspect was part of the administrative scheme dealing with so-called on-the-runs, and was in receipt of a letter from the Northern Ireland Office informing him that he was not wanted for arrest by police forces in the United Kingdom. This case is specifically covered on pages 107 and 108 of the Hallett report on the on-the-runs scheme, where it is described as “error 2”. The fact of the error has therefore been in the public domain for some time, and the case is not a new development.

The Police Service of Northern Ireland is investigating the suspect’s case, and will be considering whether charges can be brought against the individual concerned. I spoke to the Chief Constable of the PSNI yesterday, and I understand from him that this is a live police investigation. I also briefed the Justice Minister—in brief—on the case. The police will investigate where the evidence leads them. In the circumstances, it would not be appropriate for me to comment further on the specifics of the case.

As for the OTR administrative scheme, I set out the Government’s position fully in my statement to the House on 9 September. That followed detailed consideration of the report by Lady Justice Hallett, which was published in July. I made clear in my statement that the scheme was at an end, and that there was no basis for any reliance on letters received by so-called OTRs under the scheme. There is no amnesty, immunity or exemption from prosecution. Those who received letters under the scheme should be in no doubt: if there is considered to be evidence or intelligence of their involvement in crime, they will be investigated by the police, and if the evidence is sufficient to warrant prosecution, they will be prosecuted.

[Ian Paisley]

I thank the Secretary of State for her answer. The most disturbing aspect of what she has told the House today is the fact that the O’Connor murder relates to a post-1998 murder that occurred in 2003. We have been consistently told that the names of the OTRs were critical to securing a 1998 peace agreement, yet this murder post-dates that. Will the Secretary of State now agree to publish all the names with all the letters? Will she publish correspondence between Baroness Scotland and the right hon. Member for St Helens South and Whiston (Mr Woodward), whom I informed earlier I would be mentioning in the House, in terms of the relationship between that correspondence and the murderer of Mr O’Connor? Will the Secretary of State estimate how many other errors there are in this catalogue of errors and accept that the Government and the Hallett review conclusion that there is a single error is now without foundation?

Will the Secretary of State now consider legislation formally to annul the value of all these letters, to put meat on the bones of what she has said: that these letters are without value? Does she agree that Gerry Kelly must be formally investigated for how these letters have been distributed and for whom these letters have been requested? What compensation is now being considered for the families of those who have suffered as a result of Mr Downey’s activities and as a result of the actions by the murderer of Mr O’Connor, because these people cannot get justice by any other means and must now be entitled to some form of compensation?

[Mrs Villiers]

As is clear from the conclusions of the Hallett report, this letter should not have been issued; it was issued in error. For a number of reasons I do not think it would be appropriate to make public the names of the individuals who received letters under the scheme, not the least of which is that doing so could prejudice a future prosecution and make it more difficult to secure a conviction.

In relation to the number of errors, Lady Justice Hallett identified in her report two errors in addition to the one made in the case of Mr John Downey. She also identified a further 36 cases considered by Operation Rapid where she believed there was a risk that the wrong test had been applied. She did not conclude that there were actually errors in these cases, but she proposed that they should be a priority for further investigation because the risk of error in those cases was higher than in others.

In relation to legislation, as I briefed the House in September, it is clear to me that the most effective means to guard against future collapses of trials and future abuse of processes defence is to issue a clear statement indicating to anyone who received a letter under the scheme that it is not safe to rely on those letters—that they should not be relied on—and that is what I did. The option of legislating on these matters was carefully considered, but the conclusion is that legislation would not be as effective as a clear statement at the Dispatch Box that the scheme is at an end and these letters should not be relied on, not least because of a risk that errors have been made in other cases.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I thank the Secretary of State for the response to the urgent question. She will be aware that as well as the 36 cases identified by Hallett as being perhaps the most worrying, we were told by the then assistant chief constable, now the deputy chief constable, of the PSNI that 95 people who received letters are connected through intelligence to almost 300 murders. That is a very serious situation indeed. Will the Government ensure that the PSNI has the full resources to look into all those cases not in the period of as long as nine years that the PSNI estimates it may take it, but very quickly so that the Government can decide whether there is a need for legislation to make it absolutely clear that nobody can rely on these letters to protect them from prosecution?

[Mrs Villiers]

I am grateful to the Chairman of the Select Committee on Northern Ireland Affairs for his question. It is of course important that the PSNI has appropriate resources for its investigations under Operation Red Field relating to OTRs, as is the case for all other matters for which it has responsibility. I welcome the fact that the agreement on a final budget for the Northern Ireland Executive for 2015-16 allocated an additional £20 million to the PSNI. There is also the Stormont House agreement, which commits the Government to contributing £150 million to aid Northern Ireland in its treatment of legacy cases. I will look carefully at how that money should be appropriately deployed in the coming weeks.

On the question of legislation, I do not think I can really add to my previous answer. Having considered this carefully, the most effective means to ensure that we do everything we can to remove barriers to justice is a clear statement indicating that this scheme is at an end and these letters should not be relied on. That is what I have done. Legislation would not take us further and, I believe, would not be the right option in this instance.

[Mr Ivan Lewis (Bury South) (Lab)]

As the hon. Member for North Antrim (Ian Paisley) suggested, the revelation yesterday regarding the collapse of the inquest into the murder of Gareth O’Connor has caused further concern and anxiety in Northern Ireland. Our thoughts today should be with the O’Connor family. Like so many of those left behind, they sought justice and truth about what happened to Gareth in 2003. They have waited 12 long years for an inquest into the death of their son, and the thought of preparing for a week-long inquest would have been harrowing for the family. This development made a highly stressful situation even worse.

News of another error from the administrative scheme for the on-the-runs is devastating, following the catastrophic error in the Downey case last year. We have apologised for the Downey error, and do so again for the error in the O’Connor case. In the same way as this scheme never offered amnesty, it was also never intended to cover alleged offences committed after the signing of the Good Friday agreement. Doubly troubling is the delay in the coroner and the family being made aware of the error. The Northern Ireland Office and the police knew about the case—indeed, it was referred to in the Hallett report.

I have several questions for the Secretary of State. Why did the Northern Ireland Office not ensure this family were told of the error in the immediate aftermath of the publication of the Hallett report? Secondly, further to the question from the Chairman of the Select Committee, in view of the financial pressures facing the PSNI, how long does the Secretary of State estimate it will take to review all the cases covered by the OTR scheme? I do not believe she has clarified that in her answer to the House today. Finally, on a related matter that has caused similar concerns, can the Secretary of State update the House on investigations into the missing information regarding royal prerogatives issued before 1997?

[Mrs Villiers]

I thank the shadow Secretary of State for his questions. It is useful to remind the House that this scheme never offered an amnesty, and that it was designed to give individuals who were not wanted an indication that they were not wanted by police, so the letters issued in relation to the Downey case and this one were clearly issued in error.

On the Chairman of the Select Committee’s question about the connection between the 95 individuals and intelligence or indications relating to 300 crimes, these are of course matters for the police to investigate, but I would emphasise that a connection to intelligence or evidence is not necessarily sufficient to justify arrest or prosecution.

I welcome the shadow Secretary of State’s repetition of the apology he gave on behalf of the previous Government for the errors made in these cases, and I, of course, am happy to reiterate the apology I made on behalf of this Government for the pain and hurt caused to all families affected by the OTR scheme. I think there is consensus that the scheme should, at the very least, have been handled in a much more transparent way.

I acknowledge that the way the family in this case found out about the connection to the OTR scheme was very problematic. My understanding is that the PSNI has issued an apology for that, and I join in confirming that apology. It is, of course, as I said in response to the previous question, important that the PSNI is properly resourced for all its functions, which is why the Government have provided extra security funding of £230 million and one reason why we have provided funding for help in investigating the past. Even with those additional resources, it is clear that Operation Red Field, the investigation into all the OTR cases, will take some years.

[Mr Andrew Robathan (South Leicestershire) (Con)]

The Secretary of State is to be congratulated on bringing some transparency to this scheme, via the Hallett inquiry. Such transparency was needed, because the previous Government set up the scheme and kept it under the carpet, if not secret from the nation. Does she agree that it was one of the shabbiest deals they did, notwithstanding the shadow Secretary of State’s apology? Will she further reassure me, the House, the country and the courts that she has taken legal advice on her statement that nobody can rely on one of these letters any more?

[Mrs Villiers]

I have taken into account a number of factors in deciding how to respond to the Hallett report, and they of course include legal advice on the best way to guard against further trial collapses as a result of abuse of process. My right hon. Friend has referred in clear terms to his view of the scheme. As I said, I think there is agreement that it was deeply unfortunate that the scheme was not handled in a more transparent way. That is something for which I have apologised, but I emphasise once again to the House that it was never an amnesty and it was never a scheme to let people wanted for arrest get off without arrest or prosecution; it was, from the start, intended to be a scheme that merely indicated to those who were not wanted by the police that that was the factual position at the time in question.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The Secretary of State has repeatedly said that individuals should not rely on the OTR letters as the police carry out their duties. Does she agree that the law-abiding community in Northern Ireland would see much greater strength in that reassurance whenever they saw people with an OTR letter in their possession standing in the dock and the judge carrying out his duty, despite their having possession of a letter?

[Mrs Villiers]

It is, of course, important for all crime to be properly investigated in Northern Ireland and for those guilty of offences to be brought to justice, regardless of whether or not they have an OTR letter.

[Nigel Mills (Amber Valley) (Con)]

We all want to see people with a strong case against them standing trial to see whether a jury will convict them. Will the Secretary of State revisit her legal advice on her statement that these letters should not have any great effect on a trial, to make sure that, in the light of this new decision, it remains correct and there is no need for further action by this place?

[Mrs Villiers]

I am certainly happy to do that, and I discussed the matter with the Chief Constable yesterday. Just to reiterate, the Northern Ireland Office stands ready to take any further steps that might assist in removing barriers to prosecution. My current view is that the best way to guard against future problems in relation to abuse of process is a clear statement that these letters should not be relied on, and that is what I have made and issued to this House in September.

[Naomi Long (Belfast East) (Alliance)]

The PSNI has already confirmed that Operation Red Field will take at least three years, so I am glad the Secretary of State is looking directly at how she can assist with the funding. This was a Northern Ireland Office scheme, not a devolved scheme, and so the review should not come from the Northern Ireland budget. Is she in a position to shed any light on the allegations that have been made in the media that this individual was issued with a letter in respect of crimes that predated 1998 but which included a crime for which they were wanted in 2003, and that the tag of “wanted” on their file was then changed subsequent to the issue of that letter to “not wanted”, which would have made this incredibly difficult to detect?

[Mrs Villiers]

For the reasons I have given, I am reluctant to get into the specifics of this case. As I have mentioned, the hon. Lady will find some further detail on these matters on page 108 of the Hallett report. In particular, there is a real concern that the offence in question was a post-1998 offence.

[Richard Drax (South Dorset) (Con)]

Having done three operational tours in Northern Ireland, I fully appreciate that some areas are murky and remain so, and these 200 letters were a shabby effort to sign up to the peace deal. Will the Secretary of State tell me how long it will take to investigate these 95 people who have received letters? As we understand it, through intelligence, they are connected to 300 murders, so how long will it take to pursue this and ensure that proper justice is done?

[Mrs Villiers]

As I have said to the House, it will, unfortunately, take some years to go through all the OTR cases. That is why we will need to give serious consideration as to whether some of the extra funding provided as a result of the Stormont House agreement to deal with matters relating to the past can be used in some way to assist the PSNI in this important work.

[Mr David Anderson (Blaydon) (Lab)]

In response to the question that my hon. Friend the Member for Bury South (Mr Lewis) asked about why the family and the coroner were not involved in July when Hallett produced the report, the Secretary of State said that it was “problematic”. That is not good enough. We want to know what has been going on since July. We have been told earlier that the police are now investigating this case, but what have they been doing since July? And what has the NIO been doing since July?

[Mrs Villiers]

The NIO has been involved in a number of matters implementing the conclusions of the Hallett report. They include consideration of this case by the policy board set up as a result of Lady Justice Hallett’s conclusions. We also implemented a number of her conclusions through my statement to the House to provide clarification of the status of the scheme. That also covers the recommendations that she made in relation to removing barriers to prosecution. The PSNI has also made progress on the matters in Lady Justice Hallett’s recommendations on how it deals with police databases and the PSNI’s liaison with other police services in the United Kingdom.

[Mr Anderson]

What about this family?

[Mrs Villiers]

We have to bear in mind that deployment and disclosure of information in relation to these individual cases needs to be handled with the greatest care, because any disclosure presents risks in relation to future prosecutions. That is probably one of the reasons why the information came out at the time that it did. So we need to reflect carefully on these matters. It did come out in an unfortunate way; I reiterate the apology I made earlier to the family for how they learned of this matter, but we all need to take care on the disclosure of information about this scheme, because none of us would want to be responsible for the collapse of a future trial.

[Ms Margaret Ritchie (South Down) (SDLP)]

I am reflecting and thinking of the O’Connor family from Newry today. Will the Secretary of State confirm, notwithstanding the content of the Hallett report, that no further errors will be revealed?

[Mrs Villiers]

No, I am afraid that I cannot give that confirmation. The Hallett report was clear in its conclusions about the management of the scheme: it was not properly managed and the risk was not properly managed. Anyone reading the Hallett report must expect that further errors will come to light. As I told the House earlier, Lady Justice Hallett highlighted 36 further cases as ones where the risk of error is higher than in others. That is one reason why nobody should be relying on these letters; because of the errors in the way the scheme was managed, it is likely that other errors will come to light.

[David Simpson (Upper Bann) (DUP)]

The Secretary of State will know that I have raised the position of the victims on a number of occasions, and they are at the core of the whole issue. Many victims will never see justice because of these OTR letters. My hon. Friend the Member for North Antrim (Ian Paisley) made a point about printing the names. Is one reason why the Government will not print the names of those with OTR letters and the royal pardons that they were received by some people who have been elected to this House and are currently elected to the Assembly?

[Mrs Villiers]

Let me emphasise that the issue of an OTR letter does not necessarily lead to the result that it did in the John Downey case. The judgment is clear: the reason why the trial collapsed was that the letter was incorrect. Mr Downey was wanted, but he was sent a letter indicating that he was not. The issue of an OTR letter does not give immunity from prosecution; it never did and it will not do so in the future. On the disclosure of names, I have said to the Northern Ireland Affairs Committee on many occasions that, by disclosing names, there is a risk that I would jeopardise future prosecutions, make them more difficult and increase the risk of an abuse of process. That is why I will not disclose names in relation to this scheme or be drawn on categories of individuals who might have been part of it.

[Mr Stephen Hepburn (Jarrow) (Lab)]

Does the Secretary of State agree that we should not have short memories when it comes to Northern Ireland? The fact is that 3,600 people were killed during the civil war. Rather than condemn the previous Government, we should acknowledge the risks that they took to make Northern Ireland the fantastic place that it is today.

[Mrs Villiers]

I have certainly always tried to be objective and measured in how I view the actions of the previous Government on these matters. In relation to OTRs generally, there certainly are some differences between the parties, not least of which is the opposition of the Conservatives and the Liberal Democrats to the Northern Ireland (Offences) Bill. In relation to this scheme and the way in which Northern Ireland matters were handled generally by the previous Government, I do not doubt their sincerity. They were motivated, I am sure, by a wish to see the process move forward and to secure peace and stability for Northern Ireland. The key problem that was revealed by the Hallett report was that, unfortunately, the scheme was not managed in the way that it should have been, and that gave rise to risks. Errors were made, which, unfortunately, could jeopardise future prosecutions.

[Jim Shannon (Strangford) (DUP)]

At a time when yet another OTR is issued a covert letter to escape jail, British soldiers—funded by legal aid—are being investigated for a shoot-out with terrorists which led to the much-deserved deaths of those terrorists. Does the Secretary of State not accept that the legal system and the rule of law are being undermined by the fact that while some individuals are not being charged for their terrorist activities, British soldiers are being investigated?

[Mrs Villiers]

For some, confidence in the legal system has been shaken by the OTR scheme. But that is a reason to be very clear that it was not an amnesty; it never was. It was a scheme designed to ensure that individuals who were not wanted by the police were told that that was the case as a matter of fact at a particular point in time. It is important that the scheme is described in such a way to provide as much reassurance as possible to the people who have been understandably distressed by what has happened.

[Mark Durkan (Foyle) (SDLP)]

The Secretary of State will recall that much of the negotiations in relation to the Stormont House agreement revolved around concerns to protect the option of the inquest process into the future. Does it not strike her as somewhat disappointing that after parties such as the SDLP and Sinn Fein argued to defend that very process, an inquest has been compromised by what has happened in relation to this discredited OTR scheme? Although we will not join the call for the publication of the names of everyone who received letters, we ask the Secretary of State to assure us that those letters and the details around them will be shared with the new bodies that will be dealing with the past, which were set up as a result of the Stormont House agreement. In that way, no one else can be surprised by events in the way that they were with this twisted and terrible case.

[Mrs Villiers]

I agree with the hon. Gentleman that inquests were a key matter that were considered at great length in the Stormont House agreement talks. Although we could not build a consensus on the way to reform inquests, we did reach a consensus on the fact that the inquest system needs to be reformed because, at the moment, it is not working effectively enough to give proper answers to families. I am working with the Justice Minister and others in the devolved Executive to do everything we can to take that reform process forward; it is vital that we do that. Disclosure was also debated at length, and I can assure the House that the Government are committed to the fullest disclosure in relation to the new bodies to be set up under the Stormont House agreement. But when it comes to onward disclosure, we will of course need to put in place national security measures, which are broadly equivalent to those that apply in respect of current institutions. In conclusion, I wish to pass on my condolences to the O’Connor family, who must have been distressed and upset by recent events.

[Sammy Wilson (East Antrim) (DUP)]

I am sure that the Secretary of State will understand why the people of Northern Ireland are cynical about her oft-repeated mantra that no one can rely on these letters, when we have already had two people relying on them, and she has indicated today that there could possibly be another 36. Will she tell the House who was responsible for the error, and what the nature of the error was? In that way, we can at least determine whether this was a deliberate action to ensure that a killer was not brought to justice or a genuine mistake.

[Mrs Villiers]

The Hallett report indicates that the error may well have originated within the PSNI, but we should not rush to judgment on that. As I have said in relation to the John Downey case, wherever the error arose, the problem was that the scheme was not designed to guard against errors or to pick up on them when they were made. The overall responsibility for the errors still rests at ministerial level. There is a consensus on both sides of the House that the Ministers in power at the time need to take responsibility for what happened, even if, at the end of the process, the error may have been made by the PSNI. It is a matter on which we should not rush to judgment. The hon. Gentleman may wish to look at page 108 of the Hallett report to assess how the error occurred.

Corporation Tax (Northern Ireland) Bill

Theresa Villiers Excerpts

Tuesday 27th January 2015 Commons Chamber

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

I beg to move, That the Bill be now read a Second time.

The Bill provides for the devolution of a rate-setting tax power to the Northern Ireland Assembly and would allow Northern Ireland to set its own rates of corporation tax. Just under five years ago, the Conservative party went into the general election with a commitment in our Northern Ireland manifesto to produce a Government paper examining the mechanism for changing the corporation tax rate in Northern Ireland. The pledge subsequently formed part of the coalition’s programme for government. It was part of our strategy for rebalancing the Northern Ireland economy from over-dependence on the public sector by revitalising private enterprise and attracting new investment.

The commitments in the Conservative manifesto and the programme for government were fulfilled a little under four years ago, when the Government launched a consultation on rebalancing the Northern Ireland economy and on the potential for devolving corporation tax powers to the Executive and the Assembly. The response to that consultation was near-unanimous support from Northern Ireland’s political leaders and the business community for the devolution of corporation tax. We have worked tirelessly since then on the technical details needed to make devolution possible.

My predecessor, my right hon. Friend the Member for North Shropshire (Mr Paterson), whom I welcome to the Chamber today, established a joint ministerial working group with the Treasury and Executive Ministers in late 2011 to work through the main questions of contention. In the economic pact that we signed with the Northern Ireland Executive in June 2013 on the eve of the G8 summit, we committed to further progress and a final decision in principle on devolution no later than the autumn statement of 2014. In that autumn statement my right hon. Friend the Chancellor said that

“we recognise the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland. The Treasury believes it can be implemented provided that the Northern Ireland Executive can show that they are able to manage the financial implications. The current talks will see whether that is the case. If it is, the Government will introduce legislation in this Parliament.”—[Official Report, 3 December 2014; Vol. 589, c. 314.]

As I informed the House on 7 January, following extensive negotiations, those cross-party talks reached a successful conclusion on 23 December with the Stormont House agreement. That agreement, which also covered crucial legacy issues such as flags, parading and the past, sets a path for the Executive to put their finances on a sustainable footing for the future. That has paved the way for us to go beyond the commitments we made in our manifesto in 2010 and to introduce the Bill to devolve corporation tax rate- setting powers to Northern Ireland. Unlike the Opposition, the Government believe in lower taxes for business because we understand that businesses thrive when they are free to get on with what they do best, unencumbered by burdensome regulations and excessive taxes.

That is why since 2010, the Government have cut the main rate of corporation tax from the 28% we inherited from Labour to 21% today. It will fall still further to 20% in April, giving the UK the joint lowest rate of corporation tax in the G20—a competitive edge that Labour wants to deny British business, as the Shadow Chancellor is committed to reversing that reduction. The small profits rate has also been cut to 20%. Those tax cuts are a central part of the Government’s successful long-term economic plan to make the UK as a whole more competitive, supporting business investment and job creation— something that would be jeopardised by a return to the high-tax, high-spending, high- borrowing policies of the previous Government.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Secretary of State will be aware that the UK Government-sponsored Silk commission, which was set up in Wales a number of years ago, reported that if corporation tax were devolved to Northern Ireland, consideration should be given to devolving it to Wales and the other devolved Parliaments. Can she enlighten the House on the Treasury’s thinking, now that a decision has been made for Northern Ireland, on the other devolved Parliaments?

[Mrs Villiers]

Careful consideration has been given to the devolution settlements across the United Kingdom. The Government have made it clear that the fact that Northern Ireland shares a land border with a low corporation-tax jurisdiction means that the case for reform is strong for Northern Ireland, but it is not made out in relation to the rest of the United Kingdom. Northern Ireland is different from the rest of the country, because the history of the troubles has left its economy with a high dependence on the public sector. That is another reason why Northern Ireland is different, and corporation tax devolution could provide a boost to growing the private sector in Northern Ireland. While there is a clear case for doing this in Northern Ireland it would not be the right move for other parts of the United Kingdom.

[Ian Paisley (North Antrim) (DUP)]

Has any assessment been carried out about the level at which Northern Ireland should set its new rate of corporation tax, given what the Minister has just alluded to—our competitiveness with the Republic of Ireland, which has a rate of 12.5%? Has any research been carried out by the Treasury on that?

[Mrs Villiers]

The principle of the Bill is that that becomes a matter for the Northern Ireland Assembly and the Executive. It is for them to make the choice and decide whether to go ahead with implementation of a reduced rate. Obviously, there is a great deal of support for bringing down the rate of corporation tax in Northern Ireland to the same level as in the Republic of Ireland. I know that the hon. Gentleman’s party colleague, Minister Foster, would like to see it reduced still further. Those matters are not provided for in the Bill because the Bill vests that choice with the Northern Ireland Executive once commencement has taken place.

As I was saying in response to the intervention, Northern Ireland has a unique position within our United Kingdom. The land border that it shares with a very low corporation tax environment in the Republic of Ireland puts it at a significant competitive disadvantage when competing for inward investment into the island of Ireland. Northern Ireland is also more dependent on the public sector than most other parts of the UK. Estimates vary as to the extent of this dependence, but it is generally accepted that around 30% work in the public sector, compared with about 20% in the rest of the UK. Some surveys put the dependence on the public sector at even higher levels.

Economic prosperity as measured by gross value added per capita is still some 20% below the UK average and has been so for a number of decades. Of course, Northern Ireland faces a range of difficult issues flowing from the legacy of the troubles. All these challenges need to be overcome if Northern Ireland is to compete successfully on the national and global stage for jobs and for investment. None of this is to say that Northern Ireland does not have some amazing entrepreneurs and some hugely successful businesses that are truly world-beating. Under this Government unemployment in Northern Ireland has fallen in every month for the past two years and the record of foreign direct investment is strong, not least because of the efforts of the Northern Ireland Executive.

But for all the great businesses we have in Northern Ireland, the blunt truth is that there are just not enough of them, so the Government are convinced that to boost the private sector and enable Northern Ireland to perform even more strongly in attracting inward investment, we need to go further. We need to provide stronger incentives for Northern Ireland firms to invest in growth. The Bill before the House today will give the Assembly a powerful tool to help them do this, enabling Northern Ireland to take a decisive step forward towards rebalancing its economy.

The Bill provides a further demonstration of this Government’s general commitment to devolution, which we have shown in many ways, including with the Scotland Act 2012. We are making progress on implementing the Smith commission proposals for further powers for Scotland over tax and welfare to be transferred to the Scottish Parliament. Draft legislative clauses were published on 22 January.

[Nigel Mills (Amber Valley) (Con)]

Is my right hon. Friend aware of the data which suggest that almost twice as much will be raised from companies moving from Great Britain to Northern Ireland than from those moving into Northern Ireland from overseas? If that is the case, does she think it fair that Members from Northern Ireland may vote on the UK-wide corporation tax rate as well as their own, when they are effectively competing with our constituents?

[Mrs Villiers]

I emphasise that the new system is designed to deal with artificial avoidance. A number of measures are in place to prevent abuse of the new system; I will come to those in a moment. In relation to voting on taxation matters, my hon. Friend will be aware that ensuring that the devolution settlement is fair to the English as well as to the rest of the United Kingdom is an important matter under consideration by the House and by the political parties. I am sure it will be extremely important that we get the right outcome to ensure that the devolution settlement is fair across the board, but it is also crucial that we have a coherent and unified tax system.

[Naomi Long (Belfast East) (Alliance)]

I take on board the issue raised by the hon. Member for Amber Valley (Nigel Mills). Does the right hon. Lady agree with me, though, that Northern Ireland would want to avoid corporation tax devolution and any subsequent reduction by the Assembly leading merely to brass-plating of companies in Northern Ireland? For us to benefit from the economic out-turn of investment, we need people who are involved in creating employment and raising skills levels as well.

[Mrs Villiers]

As the hon. Lady will hear when I get further into my remarks, the approach in the Bill is to focus on genuine economic activity which generates jobs. We want to minimise the risks of matters such as brass-plating and artificial avoidance schemes, so the Bill maintains the coherence of the corporation tax system as a whole and also provides an incentive to bring genuine economic activity to Northern Ireland and assists in that rebalancing process.

The Wales Act 2014 came into effect on 6 January, providing the legislative framework to support the implementation of recommendations made in the first report of the Silk commission. As my right hon. Friend the Secretary of State for Wales has told the House, he continues to take forward discussions on the next steps for devolution in Wales. The debate continues on the most effective way to ensure that devolution operates in a fair way with regard to England, as one of the component nations of the United Kingdom.

Turning back to Northern Ireland matters, the devolved system for corporation tax rates set out in the Bill reflects the following overarching Government goals: we want to attract genuine economic activity to Northern Ireland, minimise additional administrative costs for business, keep the costs of a reduced rate for the Executive at a proportionate level, and ensure as much consistency as possible between the new NI provisions and the main UK corporation tax regime—and of course we need to comply with legal requirements.

The legislation does not cut off Northern Ireland from the rest of the UK tax system or establish a separate and distinct corporation tax regime for Northern Ireland. Control over what is taxed remains a matter for the UK Government and this House. The Bill devolves only the power to vary the rate, so Northern Ireland’s trading regime remains firmly and clearly within the overall UK corporation tax system. The Bill will insert new part 8B into the Corporation Tax Act 2010 and amend the Capital Allowances Act 2001. These changes would give the Assembly the power to set a rate of corporation tax for certain trading profits, based on a proposal from the Northern Ireland Executive. That would be a decision for Northern Ireland, independent of the UK Government or this House. It will give the Assembly and the Executive a powerful economic lever to drive potential growth and enable it to be exercised on the basis of the wishes of Northern Ireland voters, taxpayers and businesses.

Efforts are made to minimise the scope for artificial tax avoidance, as I said in response to interventions. Existing anti-avoidance measures will continue to apply, including the UK targeted anti-avoidance rules and the general anti-abuse rule, and further protections may be introduced before implementation. The overall structure of the devolved regime has been designed to limit the opportunities for avoidance, as I told the House in response to interventions.

A new Northern Ireland rate would cover trading profits, such as those associated with manufacturing and providing services. Other profits—non-trading profits, such as those associated with property income—that do not generate jobs or economic growth in the same way will continue to be subject to the UK-wide rate. Similarly, activities such as lending, leasing, and reinsurance offer significant scope for profit shifting without the benefits of bringing substantial new jobs, so these, too, will be excluded from the Northern Ireland provisions.

To promote continued success in Northern Ireland in attracting back-office functions, companies with excluded trades and activities may make a one-off election for the back-office functions of those excluded trades or activities to qualify for the Northern Ireland Office regime. This is an example of the UK Government’s responding specifically to areas of activity where Northern Ireland has demonstrated its great strength in attracting inward investment. It will not apply to the oil and gas or long-term insurance sectors, which have their own separate regimes and will not be included in the new devolved arrangements. Allowances and credits remain reserved to Westminster to help to maintain a common tax base across the United Kingdom and to prevent unnecessary new complexity from being added to the tax system.

However, a number of rules will be amended to reflect the new circumstances. For example, if there is a lower rate of tax in Northern Ireland, research and development tax credits, capital allowances and creative reliefs for the film, TV and computer game industries will be adjusted to ensure that they continue to be broadly equivalent in value to those in Great Britain. That means that Northern Ireland can continue to be just as attractive a location for successful projects such as “Game of Thrones” and other film and television productions.

The devolved tax regime will also operate differently for larger and small businesses. Larger businesses will need to divide their profits between Northern Ireland and Great Britain, as they do now between the UK and other countries. This effectively means that they will treat their Northern Ireland trading activity as a separate business from their activity in the rest of the UK and allocate the appropriate amount of profit to Northern Ireland. We recognise, however, that this would be burdensome for smaller businesses. Indeed, the issue of potential administrative burdens on small business was one of the key concerns brought out by the 2011 consultation, and the matter was raised by Northern Ireland Executive Ministers on a number of occasions at the ministerial working group. Therefore, if at least 75% of such a business’s staff time and staff costs relate to work in Northern Ireland, then all their trading profits will be chargeable at the Northern Ireland rate. If not, they will be chargeable at the UK corporation tax main rate. This simple in/out test will mean that the majority of small and medium-sized enterprises are spared the burden and cost of apportioning profits.

As I made clear in my previous statement to the House, the Bill’s progress through Parliament is dependent on the Executive parties delivering on their commitments in the Stormont House agreement. Those include agreeing and delivering a 2015-16 budget that works, legislating for changes to the welfare system, and taking the steps required to put the Executive’s finances on a stable footing for the long term. I warmly welcome the progress that is under way on those three crucially important matters, with, for example, the recent agreement on a budget for 2015-16. Given the practicalities of implementation, the earliest point at which reduced rates could come into effect is April 2017. The Bill contains a commencement clause meaning that these devolved powers will be switched on for the planned start date in 2017 only if the Executive can demonstrate that they have succeeded in the third goal of achieving sustainable public finances. This is in line with the approach used for other tax devolution measures in other parts of the UK.

The Government have been very clear that devolving corporation tax rates is not an end in itself. Certainly, on its own, it is clearly not the answer to all the economic challenges facing Northern Ireland. If the full potential benefit of corporation tax devolution is to be realised, a number of areas of economic reform need to be addressed, such as planning, skills and infrastructure. However, given the land border that Northern Ireland shares with a lower-tax jurisdiction, it is difficult to think of any one policy which, on its own, may potentially have such a transformational impact on the Northern Ireland economy—

[Ms Margaret Ritchie (South Down) (SDLP)]

rose—

[Mrs Villiers]

And, I believe, on the hon. Lady’s constituency.

[Ms Ritchie]

Does the Secretary of State agree that, as regards potential visits and potential locations for foreign direct investment, there is a need to address the historical legacy of under-investment and regional imbalance if the issue of corporation tax is to have any meaningful benefit in pump-priming the local economy?

[Mrs Villiers]

I know that the Northern Ireland Executive are committed to doing all they can to ensure that the effects of boosting the private sector and enhancing prosperity are felt throughout Northern Ireland. All Administrations grapple with the difficult problem of how to ensure that economic prosperity is appropriately spread. I believe that corporation tax devolution—coupled with a focus on other areas of economic reform such as skills, planning reform and investment in infrastructure—is a crucial way to enhance the private sector and boost prosperity throughout Northern Ireland. I am sure that the hon. Lady will be aware of some of the many difficulties that have been experienced in border areas over the years. People living in border areas stand to benefit as much as everyone else in Northern Ireland from a potentially significant and welcome impact in achieving the rebalancing of the Northern Ireland economy that we all want to see.

Members of the business community have told me on very many occasions that they are convinced that this is the right measure for Northern Ireland. They believe that it will boost the indigenous private sector, both large and small, as well as attract foreign direct investment, and will provide an effective means of rebalancing an economy which for decades has been over-dependent on the public sector. They have therefore strongly welcomed the Government’s introduction of this Bill. I am very grateful for the support for this measure shown within the Northern Ireland business community.

The Government will use our very best endeavours to get the Bill on to the statute book before the Dissolution of Parliament. This legislation has strong support in Northern Ireland. Moreover, the whole of the UK will benefit if corporation tax devolution can help to drive economic growth and rebalancing, and help to deliver a prosperous and stable Northern Ireland.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The Secretary of State alludes to the need to get the legislation on to the statute book, and I hope that progress is now being made towards that. Does she agree that beyond that stage, the next Government, and the next Prime Minister and Secretary of State, will have a central role in helping the Northern Ireland Executive in terms of overseas trips and inward investment to ensure that maximum advantage is taken of the opportunity to get the most benefit out of corporation tax reduction?

[Mrs Villiers]

I agree that if the benefits of a reduced corporation tax rate for Northern Ireland are to be realised, that needs to be accompanied by a determined effort to sell the benefits of Northern Ireland to the world. I am absolutely 100% certain that if my right hon. Friend the Member for Witney (Mr Cameron) is Prime Minister in the next Parliament, that is exactly what the UK Government will be doing, because he is completely committed to Northern Ireland and believes that it is a wonderful place. That is why he takes every opportunity to tell the rest of the world what a fabulous place it is, and why he brought the G8 summit to County Fermanagh.

Turning to the mechanics of passing the Bill, any delay would be a great mistake. I therefore very much welcome the support that the Bill has received from hon. Members from Northern Ireland, who have rightly highlighted the importance of corporation tax devolution to their constituents and the potential benefits it could deliver. I welcome, too, the recent U-turn by the Leader of the Opposition, who last week confirmed that Labour will facilitate the passage of the Bill. I am most grateful for that. That recognises the firm and consistent support for the change from the five parties in the Northern Ireland Executive, as well as the fact that this new piece of devolution has a key part to play in the Stormont House agreement.

[Mr Ivan Lewis (Bury South) (Lab)]

Will the Secretary of State explain at what point the Opposition ever said they would oppose the devolution of corporation tax to Northern Ireland in this Parliament? Can she give a date and a time when the Opposition said that?

--- Later in debate ---

[Mrs Villiers]

I seem to remember that when I reported to the House on the Stormont House agreement just a few weeks ago, the shadow Secretary of State was distinctly lukewarm in his approach to corporation tax change, and called for more consultation despite the fact that we had a very extensive consultation back in 2011. If he is now an enthusiast for corporation tax devolution, I welcome that and thank him for coming on board for a project which, of course, the Conservatives have been championing for many years. It is great that Labour has seen the light at last.

In closing, I want to pay the fullest possible tribute to my right hon. Friend the Member for North Shropshire, who picked this issue up off the floor where it had been left by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), championed it, and put it firmly back on the political agenda here in Westminster and in Northern Ireland. It is in no small part due to his determined and dogged support that this ground-breaking Bill for Northern Ireland is before the House today.

Taking the Bill through Parliament shows that the UK Government are delivering on the commitments the Conservative party made to Northern Ireland at the last general election, and it demonstrates real progress on implementing our side of the Stormont House agreement. The agreement addresses issues that threatened the credibility, the stability and even the continued existence of devolution, and if it is fully and faithfully implemented, it will help us to build a Northern Ireland where politics works, the economy grows and society is stronger and more united. The agreement enables Northern Ireland to take a further step along the road towards a more stable, prosperous and confident future, and I warmly commend the Bill to the House.

--- Later in debate ---

[Sammy Wilson]

If the hon. Lady is not feeling sore from some of my remarks, she is more brazen than I thought she was—[Laughter.] As she has not yet heard the rest of my speech, she does not know what I am going to say or the balanced arguments that I am going to make about corporation tax.

Everyone who has spoken so far has suggested that there is widespread support for the Bill in Northern Ireland. That is, of course, not true. The Green party opposes it, but then that party opposes economic growth apparently, according to its latest manifesto. I can understand, therefore, why it would not want to see any measures that would encourage economic growth in Northern Ireland. I do not know how the Green party expects us to tackle our unemployment or standard of living problems with no economic growth, but in any event it opposes the Bill.

The other opponents of the Bill are the trade unions, which are organising a one-day strike against it and other measures some time in March. At the same time as they complain about youth unemployment and the low-wage economy, they oppose a measure that has the potential to address all of those issues and want to strike against it. I do not understand their logic.

The only other party that opposes the measure is the traditional Unionist voice, but I think that is because we support it. That seems to be the rationale for anything it does.

All parties in this House are agreed that tax incentives can be beneficial in stimulating business growth. Some may disagree about the actual form the tax incentive should take or the degree to which it should be used, but there is an undeniable correlation between such incentives—be they small business rates relief, corporation tax reductions or oil industry taxes—and growth. Shareholders are attracted to putting money into businesses, which in turn have more profits to plough back into investment. Tax incentives can also give businesses a competitive edge over those in other countries. That is the rationale behind the Bill and no one can deny that it will have an effect.

In Northern Ireland there is an additional reason to make the change in that we share a land boundary with a country that has had a lower corporation tax rate. Some people say that this will not have a beneficial effect, but it is significant that, even when the Government of the Irish Republic were having to slash public expenditure and incur the wrath of the population by reducing wages in the public sector, putting up taxes, introducing new charges for water and so on, the one area for which they were fiscally responsible and did not make any changes was corporation tax. They had obviously judged that when it came to fighting for business, corporation tax—albeit along with other measures—was a shock and awe tactic they could use to try to attract businesses to the Irish Republic. That is a significant argument.

I have a degree of scepticism about economic modelling. As I am sure the Financial Secretary would tell us, we can put whatever finely tuned assumptions we want into economic models, but they can be upset fairly quickly. In the next 15 years, it is estimated that output in the Northern Ireland economy will grow by 11%, creating about 37,500 jobs. Any economic model must come with a warning that the assumptions on which it is based can change fairly rapidly. However, the estimate has been made using the economic data we have at present: assumptions, past trends, information from other economies and so on. In Northern Ireland, we cannot afford to ignore that estimate, even if it is not totally correct, especially if it will grow the private sector and bring in well-paid, above-average jobs.

We had concerns about a number of issues. We did not want a Bill for people who simply moved their profits to Northern Ireland and did not create jobs. There is no benefit to us in having companies with just a brass plate outside the door, but no substance. I believe the Bill addresses that issue, as much as it can, by indicating that it will benefit trading profits only. In addition, there will be strict investigation by the Treasury of companies who try to move profits. As I understand it, there will be a charge for ensuring that compliance measures are put in place to avoid such scenarios.

If we do that, what about small businesses? Many small businesses, especially in the construction industry, have a substantial amount of work in Great Britain because of the decline in the construction industry. We did not want small businesses to have huge administrative costs imposed on them for differentiating where they made their profits. I welcome the proposal in the Bill that businesses based in Northern Ireland with 75% of their activity and employment there, will be exempt on all their profits. That should cover 99% of small businesses in Northern Ireland so there should not be administrative costs for small businesses.

Oil and gas is excluded from the legislation. I hope that very shortly, despite the endeavours of the Social and Democratic and Labour party Environment Minister, we will have a substantial oil and gas industry that can exploit the shale gas resources that we believe are buried under the ground in Northern Ireland. There may be some who play the populist line and say, “Let’s just keep those resources there. After all, they’re nasty CO₂-producing fossil fuels.” I want them to be exploited for the benefit of the people of Northern Ireland and the United Kingdom. The profits from those companies would not currently be subject to the corporation tax arrangement, but I hope that if and when we develop such an industry, Northern Ireland will benefit from the kinds of promises that have been made to the north-east of England, including a sovereign wealth fund to take in part of the profits from those businesses and plough them back into public expenditure projects. I understand, however, why that has not been included at present.

On financial sector profits, there were two issues. I was not all that supportive of the argument about why those nasty banks, who nearly destroyed our economy, should benefit from reductions in corporation tax, paid for by reductions in the block grant. I understand the emotional rhetoric in that argument, but I am more concerned that the profits of banks and other financial institutions are much more volatile and more easily moved without detection than the profits of manufacturing or other companies. One has only to look at the difference between 2007-08 and 2008-09, when banks’ profits changed from £255 million to £45 million. That kind of volatility in tax revenue was a compelling reason why we should not include the profits of financial institutions in the Bill. I am glad that the Government have responded to that.

[Mrs Villiers]

I very much welcome the hon. Gentleman’s remarks. It is important to bear in mind that certain activities relating to banks and financial services can fall within the scope of a new Northern Ireland rate, in no small part because of the election provisions in relation to back-office functions. For example, the kind of work that is currently done in Northern Ireland by Citigroup could fall within a new reduced Northern Ireland rate.

[Sammy Wilson]

That was exactly the point I was going to make. Having said that there are exceptions to this, the exemptions are important because one of the fastest-growing sectors in the higher wage end of the Northern Ireland economy has been those back-office financial services jobs. We would not want to lose the ability to attract them. There is provision in the Bill to allow for that. Whether they are brought as separate or spur companies to the main company, they will nevertheless be subject to the new regime.

There are some dangers. One danger we have heard about time and again—it was alluded to by the shadow Secretary of State—is the potential loss of public sector expenditure. Under the Azores ruling, we will have to pay for whatever the forgone revenue happens to be. That will depend on the rate we eventually set. At maximum, it could be about 3% of the current revenue budget available to Northern Ireland. In the current circumstances, to try to find that immediately would be very difficult, which is one reason why the decision to introduce this will not be implemented until at least 2016-17. That will give the Executive time to plan.

We must remember, however, that the reduction in the block grant and money available for public expenditure in Northern Ireland will be offset by the expansion in other parts of the economy. Yes, that is a gamble, but can we politicians in Northern Ireland sit on our hands and do nothing, knowing that public expenditure is going to tighten, regardless of whether there is a Labour or Conservative Administration, given how heavily reliant we are on public expenditure? That would be wrong. The shadow spokesman wants to know the reason for my alleged conversion. This is one of the issues to weigh in the balance. Can we just drift along, knowing that regardless of which party is in government at Westminster the public sector is going to contract, and make no provision for expanding the private sector?

--- Later in debate ---

[Mark Durkan (Foyle) (SDLP)]

I join fellow Northern Ireland Members in acknowledging not just the enthusiastic contribution from the right hon. Member for North Shropshire (Mr Paterson), but his long-standing role on this issue. I know that when he was Opposition spokesperson on Northern Ireland, he took a deep interest in the issues facing the community in different parts of the country, and he was particularly interested in helping those who were trying to develop the economy. I recognise that he had a particular sympathy with the case that was being made, but giving Northern Ireland the capacity to differentiate itself in respect of corporation tax was not getting much of a hearing from the then Government.

I recall chairing the Enterprise, Trade and Investment Committee in the Assembly during some of those years, and in that capacity I had meetings with David Varney, who had been asked to produce a report by the British Government. It was quite clear from my conversations with David Varney and when we collectively as an all-party Committee met him that he was picking up different sentiments from across the political parties, and certainly from the permanent Government. A particularly sceptical attitude was notable on the part of certain quarters in the civil service, who may or may not have been speaking for their Ministers. The strong suggestion was made that the case noisily being put collectively by the Northern Ireland parties via the business groups—I recall the late Sir George Quigley doing great work on this—was not being matched by what was being said in private. That is what the Government were saying.

That might have reflected some trepidation about the possible impacts of the change or the price that would have to be paid for making it, but it was always the case that a price would have to be paid when it came to corporation tax. I remember when the Business Alliance had its first meeting about corporation tax. I recently heard that that ball was thrown in by Peter Robinson when he was Finance Minister. This was back in late 2002, after the Assembly had been suspended, and it went into 2003. Some of us said then that the issue would come down to whether we were prepared not just to seek the devolution of corporation tax, but to pay the price for such devolution, and that we needed to prepare for that conversation. At that stage, some of the parties said no, as they did not think that was needed, so the issue was ducked.

To be honest, I do not think we shaped up enough to make the case as well as we might have done. That was not the first time that the issue of capacity in relation to corporation tax was raised because it came up in the negotiations leading to the Good Friday agreement. Some of us said that we wanted to build in capacity for fiscal discretion, particularly in relation to corporation tax and some other taxes that had an economic impact. That was certainly the SDLP’s position.

The right hon. Member for Torfaen (Paul Murphy) was chairing the detailed negotiations on strand 1, and that is often forgotten, when everybody else claims all sorts of credit for the peace process. He honestly reflected that he was under strictures from the Treasury not to encourage too much discussion on the issue, but he nevertheless facilitated and allowed it. It just so happened that there were not too many takers among the Northern Ireland parties for it at that time. Perhaps people did not believe that we would get an agreement at that stage. There were certainly not many takers. With the exception of the SDLP, which put forward arguments about corporation tax and other matters, and the Alliance party, which favoured the Scottish-style proposal of 3% on income tax, there were no other takers for according fiscal discretion to the Assembly. The argument and the case were made, but for whatever political reasons, people did not embrace them.

So the argument was put back on the table by the Business Alliance between late 2002 and early 2003, but it particularly came back into play with the restoration of devolution in 2007. To be honest, the question arises as to why more of a case for it was not made when the terms for restoring devolution were discussed. Some of us raised the issue again during all those negotiations in 2005, 2006 and 2007, but there were no takers or backers for it. Perhaps people needed the confidence of seeing a more settled phase of devolution before they could fully turn their minds to the issue.

Perhaps if we had achieved the devolution of corporation tax much earlier, we would have been much further down the road when it came to all the benefits it can offer. We are told that all this opportunity and prosperity can come on the back of this corporation tax differential, so would it not have been much better if we had done this years ago—at a time when we had a much healthier budget management situation for the devolved Executive?

[Mrs Villiers]

Given that the hon. Gentleman’s party holds the environment portfolio in the Executive, does he agree that one way to get the full benefit of corporation tax devolution is by making Northern Ireland more competitive by reforming the planning system? It would be good to see back on the agenda in the Assembly the amendments that were debated on the reform of judicial review and planning, because it seems that the system is getting in the way of some important and worthwhile infrastructure projects in Northern Ireland.

[Mark Durkan]

I think that is a very unfair criticism of previous Ministers of the Environment who presided over that very system for many years and who are here. Yes, we hold that portfolio at the moment and, yes, we have made significant moves and improvements. What we did not agree with was the attempt to abandon planning criteria on the basis of the say-so of the First Minister and the deputy First Minister by designating a particular area. We thought that would lead to controversy, and the resistance to it came not only from the SDLP Minister but from many stakeholders, including many economic representatives, who were very sceptical about this strange approach. There are straighter and better ways of improving the planning system in Northern Ireland and of making it more efficient and more effective.

Many people have raised the issue of Northern Ireland’s competitive position compared with the south of Ireland. We need to remember that the sort of factors at play in the south of Ireland’s very successful drive for inward investment and its successful growing of its indigenous companies to become increasingly global players—to be acquired and, indeed, to conduct acquisitions themselves—go beyond just the corporation tax regime. They include the very significant long-term investment in further and higher education—not just at university level, but at the level of the institutes of technology. Many people are going to graduate from the technical universities as well, and this has happened alongside heavy investment in infrastructure and a very responsive and better managed planning system to deal with the needs of companies. The planning system in the south might have been long and delayed for some infrastructure projects, but when it comes to industrial projects, it has moved with a fleet of foot, and Northern Ireland does not compare well with that.

Like others, I believe that corporation tax on its own is not a silver bullet, a magic bullet or any other type of bullet. We in Northern Ireland are not meant to like bullets nowadays, but we sometimes find ourselves talking about them in contexts such as this. The fact is that we need to consider other policy measures as well. The Executive will be put under some strain by the budget scenario that they will face over the next few years when it comes to the other drivers that will be needed to maximise the benefits of corporation tax in a way that would compare favourably with the success of the south.

Mine is a border constituency. The Foyle constituency contains the city of Derry, or Londonderry as some Members would be quicker to call it, and many people in the constituency work in businesses across the border. The right hon. Member for North Shropshire referred to investments in Letterkenny. Many of my constituents work there, and there is strong cross-border co-operation. Something that is good in Letterkenny is good for Derry, and something good in Derry is good for Letterkenny.

There are firms that are paying 12.5% in corporation tax, but that does not mean that we have full employment in Derry. Some Derry firms are in nearby Donegal, and firms there that are Derry-based and originated in Derry employ many Derry people. A peripheral border region will face other infrastructure challenges, and the corporation rate on its own will not deliver high employment.

We must ensure that the Bill does not create unnecessary complications or confusions for the firms that would benefit from it, or create reputational problems for the region and its governance. The Chairman of the Select Committee, the hon. Member for Tewkesbury (Mr Robertson), wanted to know whether some clauses would be taken on the Floor of the House during the Committee stage or whether the entire Bill would be dealt with upstairs, but, in any event, we shall need to go through all the detail. I agree with the hon. Member for Bury South (Mr Lewis) that the Bill requires the fullest and best possible scrutiny, so that we do not find ourselves surprised or confused by what may emerge later, whether it is the behaviour of businesses or the response from the Treasury or Her Majesty’s Revenue and Customs. We may be confronted by patterns and practices that we did not anticipate, or that we assumed would be dealt with by measures in the Bill.

The Bill introduces not just the capacity to devolve corporation tax in the sense of allowing the Assembly to set a different headline rate, but a whole calculus in relation to the effects on the block grant. There is what could almost be called a new ecosystem of company definitions: for instance, the Bill defines Northern Ireland regional establishments, Northern Ireland small and medium-sized enterprises, and Northern Ireland rate activity. All that will clearly provide a field day for the accountants and others who will have to work their way through it and take companies through it, but we, as legislators, will have to be careful when dealing with those terms. We shall need to understand how they will operate in practice, and how they will be interpreted. We shall need to know how the relevant profits will be measured, not least the relevant intellectual property profits.

The Bill states that the Government—the Westminster Government—will retain full control of allowances and credits, and I can see the case for avoiding an arrangement whereby the regional Government would be responsible for both the headline rate and for allowances. The devolved Government might well be susceptible to particular pressures from particular sectors for specialised allowances. That could create more difficulties and confusion, and it could also create a risk of some regional disrepute. There is, rightly, an increasingly worldwide movement in favour of more transparency in respect of tax matters and the conduct of taxation. We in Northern Ireland are not in the business of trying to create twilight zones in relation to tax adherence, and we recognise the need for a proper balance.

Today a Tax Dodging Bill campaign is being launched by a very active alliance that includes Action Aid, Christian Aid and Oxfam. The aim is to broaden efforts to create greater transparency in respect of corporate taxation, to establish new standards, and to bring about the introduction of a Bill in the next Parliament. I support the campaign, and was involved in many of the preliminaries. I must make it clear that there is no tension or contradiction between supporting the principles of that campaign and supporting Northern Ireland’s capacity to set its own differential rate of corporation tax.

Other Members have talked of the need to balance the economy, Growing our indigenous private sector while also attracting more inward investment and investment from industries that can partner our local companies is hugely important, and the corporation tax measures can open some windows for us in that regard. However, it is not just a question of rebalancing the economy; we must rebalance the region. The west of Northern Ireland—not least my own constituency—is clearly lagging behind in terms of both infrastructure and employment. We must ensure that, we well as the corporation tax rate, we have other instruments that have been properly developed. We need infrastructure investment to underpin shared growth across the region, and we also need significant advances into tertiary education.

People refer to corporation tax as a game-changer, but most people and businesses in my constituency are clear about the fact that the single biggest game-changer for us would be an expansion in higher education. That is not just needed to enhance the university status of the city of Derry; it is needed in Northern Ireland, which is, in effect, exporting a university campus every year. Given what is happening in the south of Ireland, the north will lose out very badly if it decides that corporation tax is the only thing on which it wishes to compete with the south. We are not competing with the south, or indeed this country, on further and higher education.

However, we also need to recognise this is not just about competing with the south. There has been almost an obsession with Northern Ireland’s competition with the south in relation to corporation tax. We need to recognise that the game is changing when it comes to competition in cities and city regions. Important things are happening on this island. For instance, enterprise zones have developed and taken on a different life. As we have heard from the Opposition, it is not a question of “Life on Mars”, or a return to the 1980s. Enterprise zones have had different effects in different areas, and some have been more vibrant than others. More and more Opposition Members want them in their constituencies, along with city deals and growth deals.

Cities and other locations in Northern Ireland are not just competing in economic terms with parts of the south, but with places on this island as well. Alongside the latitude on corporation tax, I should like the Executive to pursue the idea of creating their own version of city deals, and recruiting support from the Treasury and any other support that is needed from Whitehall. That is what happened in Scotland in connection with the city deal for Glasgow. Therefore we could, and should, be developing more tools, rather than leaving everything to corporation tax alone.

The hon. Member for East Antrim (Sammy Wilson) and others raised issues to do with the financial sector, and I think it is right that there are limitations and qualifications there. People would have been very sceptical if a corporation tax measure for Northern Ireland had meant that the banks were freely able to move their brass plates or some of their offices purely to avail themselves of lower corporation tax. I do not think people in Northern Ireland would want that, and certainly people elsewhere would not want it. Would it happen? Well, we suddenly saw at one point during the Scottish referendum campaign that banks were saying they might move, depending on the result. That would have been the first bank run in history in which the banks were going to move yet the money was going to stay, but that was what was being talked about, so there is reason to believe that might happen.

We will have to tease out in Committee or at another time some of the questions around the financial sector and other sectors in terms of the interpretations and implications of what does or does not count as a back office. Similarly, questions have been raised around what we have been told about the calibration that will be done in relation to allowances and credits, so that, for instance, the film industry and other creative industries may be told that there will be a clawback of some of their other allowances and credits if they are in Northern Ireland, to take account of the benefit they are getting in terms of corporation tax. We need to tease out whether people actually have to have those benefits and receive them before the clawback will take place, or whether they will be told that on paper they could benefit from that as they are in a different corporation tax environment and that therefore they are in a different environment as far as the allowances and credits are concerned. So the question of when some of these things are triggered or kick in is important.

There are similar issues in relation to the impact on the block grant. If we are going to start with assumptions being made as to the opportunity cost in revenue terms of the lower rate of corporation tax for Northern Ireland, this issue arises: once we know what it actually is, will adjustments be made year on year to the block grant, so that if less is forgone in one year than was anticipated, that will be made up in next year’s block grant? Similarly, will more come out of the block grant if there is deemed to have been more uptake in relation to the corporation tax differential? We need to tease out more detail.

The credit union movement is very dear to many people in my constituency. The credit unions are strong in my constituency. They pay corporation tax and they would like to think that they will not be counted as benefiting from the lower rate, because they are rooted in the community and exist totally for, and are dedicated to, the community, so they will not be salting away profits in an egregious way. They will not be abusing the system, and they want assurances that they can be protected and that they will not be treated in the same way as the banks in terms of the protection against any possible undue benefits going to the financial sector.

On procedure, the hon. Member for Tewkesbury (Mr Robertson) has made the point that he would like this Bill to be taken on the Floor of the House. I believe it could be, and certainly significant clauses could be taken on the Floor of the House, so that if and when issues arise in a few years’ time, none of us has the excuse of saying that we did not know and we were not in on that. I am not afraid of the questions that arise from the Scottish position, the Welsh position or anything else, so I do not agree with those who say we should just take this away in secret Upstairs, and that we cannot afford to answer any questions that might arise. I think we can address those questions.

It is my belief that, as this plays out, Northern Ireland will end up with lower rates of corporation tax but probably not for long, because I think a deal will be done in future that sees corporation tax devolved in some form or other to Scotland, and I think that on the back of that there will be strong pressure to say that the corporation tax rate in England must come down further. The Government who have produced this Bill are a Government who have reduced corporation tax throughout this Parliament, as the Secretary of State said in her opening remarks, and I cannot believe that they will not be committed to trying to reduce corporation tax if they are in government in any future Parliament—and of course they would use the lower rate of corporation tax in Northern Ireland and Scotland to drive that measure and catch the Opposition in the same way as they think they caught the Opposition today.

Stormont House Agreement

Theresa Villiers Excerpts

Wednesday 7th January 2015 Commons Chamber

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

With permission, Mr Speaker, I would like to make a statement on the political talks in Northern Ireland, which culminated in the Stormont House agreement on 23 December. When I last had occasion to update the House, after the visit to Belfast of my right hon. Friend the Prime Minister and Taoiseach Enda Kenny, I reported that 10 weeks of talks had so far failed to deliver consensus on any of the key issues. I made it clear that the stakes over the coming days were high, and that without an agreement before Christmas we were unlikely to get so close again for months, or even years.

Further intensive discussions duly took place on Wednesday 17 December and continued on Thursday and Friday of that week. Resuming on Monday 22 December, the negotiations continued overnight, concluding some 30 hours later at around lunch time on the 23rd. At that stage, we presented the parties with a final heads of agreement, reflecting the many weeks of discussion and with the input of both the UK and Irish Governments, in accordance with the three-stranded approach. Key issues covered included the finances of the Stormont Executive, reform of the devolved institutions and the legacy issues of flags, parading and the past. I will take each in turn.

The agreement sets a path for the Executive to put their finances on a sustainable footing for the future, averting the impending budget crisis that was threatening the stability and credibility of the institutions. That includes the implementation of welfare reform, with certain agreed adaptations to be paid for out of the Northern Ireland block grant, alongside efficiency measures and reforms to the public sector. Measures to improve the way the devolved institutions work, including provision for an official Opposition, a reduction in the number of Government Departments and a cut in the number of Members of the Legislative Assembly by 2021 are also part of the agreement. A commission on flags, identity and culture is to be established by June and, based on the party leader discussions in the summer, proposals set out by the Government will open the way for a devolved system of adjudicating on parades, to replace the Parades Commission.

Crucially, the agreement also sets out broad-ranging new structures to deal with the legacy of Northern Ireland’s past. They include an oral history archive, a new historical investigations unit to look at the deaths that occurred as a result of the troubles, and an independent commission for information retrieval to be established by the UK and Irish Governments. All those bodies will be required to operate in a balanced, proportionate, transparent and accountable way, preventing any group or strand of opinion from being able to subvert the process or try to rewrite history.

The new system puts the needs of victims and survivors at centre stage and has reconciliation as a key goal. Consensus on how to deal with Northern Ireland’s past has eluded successive Governments since the Belfast agreement was signed 17 years ago, so the significance of the progress that has been achieved should not be underestimated. The Government have agreed to contribute £150 million over five years to help fund the structures dealing with the past, meaning that the Police Service of Northern Ireland can devote its efforts to policing the present rather than the past. That funding forms part of a wider package of significant financial support from the Government amounting to about £2 billion of additional spending power. That is made up of a combination of new funding and important flexibilities in relation to existing resources, and it is targeted at Northern Ireland’s specific circumstances—the legacy of its divided past, its divided society and its overdependence on the public sector.

Last, but certainly not least, the agreement paves the way for legislation to devolve the power to set the rate of corporation tax for Northern Ireland. A Bill will be presented to the House shortly for First Reading. If the Stormont parties press ahead on agreeing their final budget and on delivering welfare reform legislation, the Government will use all their best endeavours to get the corporation tax legislation on to the statute book before Dissolution. The parties in Northern Ireland have made it clear that they believe that corporation tax devolution can help them rebalance the economy and attract investment, not least because of Northern Ireland’s unique position of having a land border with the Republic of Ireland. I welcome the fact that it is this Government who are delivering that momentous and transformative change, subject to the important conditions contained in the agreement, and I call on the Opposition today to commit to supporting the Bill as a key part of the Stormont House agreement.

The agreement involves compromise on all sides, and it has been widely welcomed. First Minister Peter Robinson hailed it as “a monumental step forward” for Northern Ireland. Deputy First Minister Martin McGuinness called it “a remarkable achievement” and

“a fresh start we need to seize with both hands”.

President Obama said that Northern Ireland’s political leaders have shown that

“there is a way to succeed for the benefit of all”,

and Secretary of State Kerry called their actions “statesmanship, pure and simple”.

Securing an agreement is not the end point—far from it. There is much work ahead on implementation for the Executive, for the UK Government and, where appropriate, for the Irish Government. However, I give this assurance: if the parties in the Executive press ahead on that, the Government will implement our side of the agreement, and we will do it faithfully and fairly. There are no side deals.

In closing, I pay tribute to Minister Charlie Flanagan for his crucially important contribution to the process. I would also like to thank the United States Administration, and in particular Secretary Kerry’s special representative, Gary Hart, for their support. I thank all the officials at the Northern Ireland Office who worked so hard on the process. Above all, I would like to record my appreciation for the leadership and determination shown by Northern Ireland’s Executive parties.

In the Government’s view, the Stormont House agreement represents a genuine and significant step forward for Northern Ireland, offering the prospect of real progress on some of the most intractable issues faced there—problems that have defied multiple attempts to resolve them over the years. This agreement gives the five parties in the devolved Executive the chance to refocus and work together with renewed confidence for a more prosperous, more stable, more united and more secure future for the people of Northern Ireland. I urge them to seize the opportunities it presents to build a brighter future for Northern Ireland, and I commend the agreement to the House.

[Mr Ivan Lewis (Bury South) (Lab)]

I thank the Secretary of State for advance sight of her statement. The Opposition welcome many aspects of the agreement that she has outlined to the House. It is not perfect, but it is a genuine advance on the stalemate of the past two years. I congratulate the Secretary of State, the Under-Secretary of State and their counterparts in the Irish Government on their painstaking and, I am sure, at times painful facilitation of the talks. I also recognise the contribution of US Secretary of State Kerry’s special representative, Senator Gary Hart.

Throughout the political impasse of the past two years, we have repeatedly called for the Government to play a more active role. We hope that the right lessons have now been learned about the consequences of disengagement for political stability and momentum in Northern Ireland. I am sure the Secretary of State will agree that there is no room for complacency. As we have seen in the recent past, unresolved issues such as parades and flags have the potential to fuel public concern, disorder and, ultimately, political instability.

I want to pay tribute to Northern Ireland’s political leaders for stepping back from the abyss and restoring some level of public confidence in their capacity to move Northern Ireland forward. It should be acknowledged that they face unique challenges in managing the transition from a society scarred by conflict and sectarianism to a more normalised society. However, that acknowledgement does not mean exemption from difficult political choices about priorities, or an expectation of blank cheques from this or any future Westminster Government.

Turning to the agreement itself, we welcome the adoption of a viable budget for the next financial year. It is right that it includes some elements of welfare reform while excluding the pernicious bedroom tax, which an incoming Labour Government will scrap. However, we remain concerned by the Government’s rush to introduce legislation on corporation tax devolution, a decision that will have profound implications for Northern Ireland and the rest of the United Kingdom. We believe that there should be a proper consultation process, including an analysis of the financial impact of significant reductions in corporation tax on Northern Ireland’s block grant, before legislation is introduced in this House.

It is good news that a comprehensive system for dealing with the past has finally been agreed. It is to be hoped that, over time, victims and their loved ones will develop confidence in the integrity of the new architecture and get the truth and justice that they have been denied for too long. We also strongly support the Government’s decision to make new investment available to boost integrated education. That is one of the most powerful manifestations of what a shared future can mean for Northern Ireland.

I have a number of questions for the Secretary of State. What assessment have the Government made of the impact on the block grant if Northern Ireland reduced corporation tax to the levels of the Republic of Ireland? What criteria will be applied to determining whether penalties will be levied by the Treasury next year in connection with welfare reform? What is the time scale for the creation of the new system to deal with the past? What negotiating process will be put in place to deal with unresolved issues such as parades, flags, and other identity issues such as the Irish language? Finally, what process has been agreed to monitor the implementation of the agreement? I am sure the Secretary of State will agree that it is one thing to reach an agreement, but for the sake of credibility, it is incredibly important that that agreement is now implemented.

[Mrs Villiers]

I thank the hon. Gentleman for his expression of support for much of what is in the agreement, and for his kind comments about the work in which I and Minister Flanagan took part. As ever, I refute his allegation of a period of disengagement. At no stage have this Government been disengaged from Northern Ireland. We have actively worked throughout our time in office, not least in agreeing an economic pact that saw us working more closely with the devolved Executive in Northern Ireland than ever before, in addition to bringing the world’s media to Northern Ireland for the tremendously successful G8 conference.

I welcome the hon. Gentleman’s comments about progress on budget matters. Those on both Front Benches are united on the point that there will be no blank cheques, and the Government have put forward a significant and important financial package, reflecting Northern Ireland’s specific circumstances. I was disappointed to hear his comments on corporation tax devolution, because I think that change could have a significantly transformative effect on Northern Ireland’s economy. Northern Ireland is in a unique position in the United Kingdom, because it shares a land border with a jurisdiction that has a much lower rate of corporation tax. I urge the hon. Gentleman to urge the shadow Chancellor to allow Labour to support that change, which I believe is good for Northern Ireland.

The hon. Gentleman asked about the implications for the block grant. The Azores criteria mean that any future reduction in corporation tax in Northern Ireland needs to be funded from the block grant. Various estimates have been made of what that might look like, but at this stage it is impossible to be certain, not least because no final decision has been made on what the rate would be reduced to.

On the criteria for calculating welfare shortfall payments, the £114 million due in financial year 2015-16 is dependent on progress on implementing welfare reform. The quicker welfare reform is introduced and is up and running, the lower the shortfall payment will be. The time scale on the past is a key point, and the Government are keen to start working with the Northern Ireland Executive on the work needed for those institutions. They will certainly need Assembly legislation and in all likelihood they will also need Westminster legislation, and we are getting on with those matters.

The agreement sets out provision for a commission on flags to be established by June, and it is important that we press ahead with that. There is clearly more work to be done on that issue and on parades, and the agreement provides for further work by the Office of the Legislative Counsel of the Executive, bringing forth options that can then be consulted on for reform of the parading system. The process for monitoring will start with its first meeting between the Executive and the Government by the end of January. The final paragraphs of the main part of the agreement set out a system for monitoring implementation, and that will be taken seriously by the Government. It will, of course, involve the Irish Government, where appropriate and consistent with a three-stranded approach, and we look forward to getting down to work with the Executive on those matters.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I thank the Secretary of State for providing an advance copy of her statement. What discussions has she had with the parties in Northern Ireland about moving the Assembly and the Executive towards becoming a more efficient decision-making body?

[Mrs Villiers]

My hon. Friend will find a section in the agreement on that. There is a commitment to draft a protocol on the use of the petition of concern, and to set out more clearly the sorts of issues on which it should be deployed. There are important changes to the way the Executive work, so that Ministers from the smaller parties can get business on to the agenda. There are proposals for reform of the MLA expenses system, and a commitment to a future reduction in the number of MLAs. I am sure that more could be done in terms of institutional change, but the agreement is a real step forward. In particular, I draw the House’s attention to the provision for an official Opposition for the first time in the history of the devolved institutions.

[Mr Peter Hain (Neath) (Lab)]

I congratulate the Secretary of State and all the party leaders on reaching an agreement, not least in view of the Prime Minister’s astonishingly premature exit from the previous summit, and his lack of engagement, which has been greater than that of any Prime Minister for more than 20 years. How can the Secretary of State be sure that this process will not long-grass the key flashpoint issues of parades and flags? On corporation tax, is she aware of Sir David Varney’s 2007 report to the Treasury, which showed that 95% of businesses in Northern Ireland do not pay corporation tax? That is not a silver bullet; it will leave a £300 million hole, or 3%, in the block grant, if there is equalisation with the Republic of Ireland.

[Mrs Villiers]

I assure the right hon. Gentleman that the Prime Minister has been closely engaged with this process, and the visit he made along with the Taoiseach was significant in moving things forward. The financial package that he was able to agree with the Treasury was a crucial part of our progress. This Government have delivered significant achievements on some of the most difficult issues that Northern Ireland faces, and that is in large part due to work done by the Prime Minister.

I have acknowledged that there is more work to be done on the difficult issues of parades and flags, and no one would say for a moment that this agreement is the last word. I will be working, as will my officials and colleagues in government, to find a way forward on those matters, and ensure that they are not long-grassed and that we make real progress. As the right hon. Gentleman pointed out, those issues can cause huge disruption in Northern Ireland and poison the political relationships that are crucial to making the Executive work effectively. He says that corporation tax devolution is not a silver bullet. I agree that on its own it will not transform the Northern Ireland economy, but combined with other economic reform, a focus on skills and competitiveness, and economic reform across the board, it can have a significant and transformative effect. That is why I am disappointed that Labour is not supporting it.

[Mr Owen Paterson (North Shropshire) (Con)]

I congratulate the Secretary of State on her statement, and all parties involved on showing real perseverance through some intractable negotiations. On the past, I pay tribute to all those at the Historical Enquiries Team who produced reports on cases that may have been low profile but nevertheless presented a real agony to relatives and friends of murder victims. I hope that the successor organisation will continue to publish such reports as they are of immense importance to those individuals. Looking to the future, the decision to introduce a Bill on corporation tax is tremendous and a tribute to all parties—the Opposition should remember that all political parties wish for it. Grow NI has overwhelming support from the business community in Northern Ireland, and estimates a cost of £200 million to £300 million if the tax were dropped to the level of the Republic. That is a very small investment in total Government spending of £23 billion in Northern Ireland. What issues does the Secretary of State believe might impede the progress of that Bill on to the statute book before March?

[Mrs Villiers]

I agree with my right hon. Friend about the importance of reports by the HET. Paragraph 30 of the agreement provides that the historical investigations unit will continue to provide those types of reports to families as part of its work. I pay a warm tribute to the work my right hon. Friend has done on corporation tax. He championed it alongside Grow NI, business groups and Northern Ireland’s political leaders, particularly the Democratic Unionist party, and it is a tremendous achievement that the Bill is now so close to being presented to Parliament. That is a real tribute to my right hon. Friend’s work as Secretary of State for Northern Ireland.

[Several hon. Members]

rose—

[Mr Nigel Dodds (Belfast North) (DUP)]

On 15 December, the Secretary of State told this House:

“the north Belfast panel”—

on parades—

“will be constituted shortly.”—[Official Report, 15 December 2014; Vol. 589, c. 1136.]

The Secretary of State knows that we did not negotiate on the issue of parades in the talks and that, of course, the Ligoniel parade was outside the ambit of those talks, but can she tell the House why, eight days later on 23 December, she went back on her word, did not consult the Unionist parties, did not consult this House and has not made any further statement other than to retract and give to Sinn Fein the opportunity to announce that the panel was not going ahead? Why did she do that? Is that not an act of gross bad faith? Is it not something that will cause immeasurable trouble in the days, weeks and months ahead? The festering sort of the denial of human rights to the people of Twaddell is not going to go away. If she does not intervene and do something—it is her responsibility; it is not devolved—it will get worse and worse in the weeks and months ahead.

[Mrs Villiers]

I fully appreciate how strongly the right hon. Gentleman feels. I am absolutely determined to continue to work with him and with Northern Ireland’s party leaders to find a way forward to ensure that we find a way to resolve the parading impasse. As we have had the chance to discuss, the trouble with the panel was that it did not have enough support. It never had nationalist support. The Unionist coalition that had called for it to be set up in the first place could not produce a public statement in support and had actually broken up—some of the smaller parties had walked out. None of the smaller parties were making the case for the panel publicly, and there was a distinct lack of enthusiasm among the smaller parties. I regret the way the news came out. I have apologised to the right hon. Gentleman for that, but now we need to move forward and find something that will work to try to resolve the impasse in north Belfast.

[Mr Andrew Robathan (South Leicestershire) (Con)]

I congratulate my right hon. Friend the Secretary of State, the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for South West Wiltshire (Dr Murrison) and all the staff who worked on this. It is a real achievement. My right hon. Friend knows that I am not much given to flattery, but it is a real achievement for which she deserves congratulations. She said that this is not the end. Going forward, will she ensure that those who were perhaps stumbling blocks—I understand Sinn Fein was a little bit difficult about welfare reform—are not allowed to stop this process in its tracks, and that we all work towards an Northern Ireland that is exactly like the rest of the United Kingdom, where people can go about their daily lives without fear, without corruption and without criminality?

[Mrs Villiers]

I thank my right hon. Friend for his kind comments. I echo his praise for my hon. Friend the Under-Secretary of State for Northern Ireland, who worked with great assiduousness and devotion on these matters alongside, as my right hon. Friend pointed out, many of the civil servants in the Northern Ireland Office. It is a tremendously important step forward that the political parties together were able to find a compromise on welfare reform. It does involve a top-up from the block grant to reflect Northern Ireland’s circumstances. Agreement on welfare reform was essential to putting together a sustainable budget. The important thing now is for a final budget to be agreed by the end of January and for progress on a welfare Bill passing through to consideration stage in the Assembly before the end of February. Those are the next steps.

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the Secretary of State for her statement. Can she possibly give us a little more detail on the specifics for the implementation of the legislation in the Chamber here in Westminster and in the Assembly? What particular legislation will apply to both? In relation to victims and the past, the detail is quite light. Many people will believe that the information sought in relation to inquests by those who have been deliberately affected—the victims and survivors—will not be met, because it falls far short of Haass and Eames-Bradley.

[Mrs Villiers]

I expect the House to receive news on legislation on corporation tax in the very, very near future. We are working on how the structure of legislation in the Assembly and Westminster on the rest of the package is precisely to be formulated. The procedures for review and monitoring are set out in paragraphs 73 to 75. In relation to inquests and the provision of information to families, it is crucial that we all work on this. The agreement has a commitment to reform. There is an acknowledgement that the current inquest system is not meeting the needs of the families effectively enough and not delivering the Government’s obligations under article 2 effectively enough. That will be a hugely important priority for the UK Government. We hope to work closely with the Department of Justice in the work that it will no doubt be doing on this.

[Nigel Mills (Amber Valley) (Con)]

I welcome the fact that an agreement was reached, but will the Secretary of State set out exactly how much extra money has been given to the Northern Ireland Assembly to make the deal happen? Does she regret that, yet again, we have shown that if the parties of Northern Ireland hold out for long enough, Westminster will eventually cave in and send more money over?

[Mrs Villiers]

I can outline the financial package, but it is a fair one. It was not a blank cheque. It recognises that Northern Ireland faces specific problems that the rest of the United Kingdom does not. In outline, it involves £150 million over five years to help to fund work on the past; flexibility to use £700 million of capital borrowing to fund a voluntary exit scheme for four years; a contribution of up to £500 million over 10 years of capital funding for shared and integrated education; £350 million of borrowing for capital infrastructure projects; and the flexibility to use the receipts from asset sales and capital funding to repay the welfare shortfall payments.

[Kate Hoey (Vauxhall) (Lab)]

I welcome the replacement of the Parades Commission, which in my view has done more harm than good. May I take up the point made by the right hon. Member for Belfast North (Mr Dodds)? There is one parade that is causing huge long-term problems in north Belfast. Will the Secretary of State get involved personally? Will she talk to the Orange Order directly? Will she visit Twaddell avenue camp, as many of us have, and actually talk to the people there to understand why they feel so strongly about this very small amount of road that people are deliberately trying to stop them going back along? Until that is sorted, none of this talk about parades commissions or new bodies will work. She has the power to get this solved.

--- Later in debate ---

[Mrs Villiers]

I assure the hon. Lady that I will certainly be meeting the Orange Order and others who have a very strong interest in these matters. I fully appreciate the huge importance that both sides of the dispute place on them. I have been actively involved, and I will continue to be actively involved to try to find a way forward. This dispute is in nobody’s interests and we need to find a way to solve it.

[Stephen Lloyd (Eastbourne) (LD)]

I welcome the Secretary of State’s announcement and I pay tribute to all the party leaders, and the Prime Minister, who helped to make it happen. I am disappointed that there was not more progress on the Parades Commission. We have kicked it back to June and to the middle of the marching season, which is going to be rather difficult. I would also like to pay tribute to the decision to have an independent audit on the cost of division. That will be terribly important to help us move forward. My question, however, relates to paragraph 69 and shared and integrated education. The Secretary of State knows there is a world of difference between shared education and integrated education. I would be grateful for her take on what she believes that means and what impact it will have on education in Northern Ireland.

[Mrs Villiers]

Clearly, there is much work to be done on parades. Whatever had gone into the agreement, there were always going to be decisions to be made on the implementation process. I agree that the proposal to have an independent audit of the cost of division is very important—a point championed in particular by the Alliance party. There is obviously a slightly blurred division between integrated education and shared education, but what they both have in common is that they ensure that the children who go through those schools have the chance to get to know and learn alongside children from other community backgrounds. That is a crucial means of helping to deliver a shared and united future for Northern Ireland. That is why the Prime Minister has given a substantial commitment to supporting integrated and shared education through funding.

[Lady Hermon (North Down) (Ind)]

With so many people throughout Northern Ireland feeling profoundly disillusioned with the performance of the Northern Ireland Assembly, will the Secretary of State accept that it is imperative that the political parties make the agreement work this time and that they do so with a generosity of spirit? I speak as someone who absolutely loathed direct rule and who is passionate about devolution and ensuring that the Assembly survives and succeeds to serve the whole of Northern Ireland.

[Mrs Villiers]

I welcome the hon. Lady’s sentiments. She is absolutely right. This is an opportunity for Northern Ireland’s political leaders to make it work. Anyone who thinks the agreement takes us in the wrong direction needs to reflect on the alternative: increasing chaos over the budget and increasing tension over a range of issues. This is an opportunity. There is work ahead of us all to implement the agreement, however, and I hope that everyone in the House will urge the Northern Ireland parties to seize the opportunity and make the agreement work for all of Northern Ireland.

[Crispin Blunt (Reigate) (Con)]

My right hon. Friend will recall the behaviour of the Democratic Unionist party over the vote on 42-day detention in the last Parliament, the deal for which cost this country about £1 billion. From the numbers she just gave my hon. Friend the Member for Amber Valley (Nigel Mills), it would seem that this latest deal has cost the taxpayers of Great Britain another £1 billion. Does she, like me, fear for the fate of this country if, by some mischance, there is not a clear Conservative majority at the next election and the Administration has to rely on that lot over there?

[Mrs Villiers]

My hon. Friend will be aware that the Conservatives are campaigning for a majority Conservative Government at the general election, not for coalitions of any sort. I will not comment on the history of the 42-day vote. I am keen to emphasise the crucial role played by First Minister Peter Robinson and the DUP in delivering a significant package of reforms for Northern Ireland.

[Naomi Long (Belfast East) (Alliance)]

I pay tribute to the Secretary of State and her team and to the Irish and American Governments, who were involved in the talks over a protracted period. On many of these issues, the Stormont House agreement provides a road map for Northern Ireland, particularly around finances, but much deeper reform is needed than simply filling the holes. I also believe in dealing with the past. However, on other key and volatile issues, such as parading and flags, this has simply become a parking garage where things will be left to sit until the difficult period over the summer. What will she do personally to remain engaged on those key issues? It is clear that there is not the will across all parties to come to a mature resolution on them.

[Mrs Villiers]

I welcome the hon. Lady’s comments and pay tribute to the sterling work done by her and her party in moving things forwards on all these issues through the cross-party talks and in other ways. She is right to describe the agreement as a road map. As ever with agreements in Northern Ireland’s history, this is a further staging post, and the next journey along the road will be implementation. Of course, I will be directly involved in keeping everything moving on implementation. Given the comments we have heard, I will no doubt be spending a lot of time on parading matters over the coming weeks.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

I congratulate my right hon. Friend on her hard work and all the political parties in Northern Ireland on delivering this agreement. However, may I press her for a little more information about how we can rebalance the economy in Northern Ireland? As I understand it, 80% of the economy there is dependent on the public sector. I am keen that there is not a significant impact on taxpayers in my constituency.

[Mrs Villiers]

On rebalancing the economy, as I have said, the devolution of corporation tax—assuming that the conditions are met—could have a transformative effect. In addition, the economic pact sets out other means to deliver the competitiveness that Northern Ireland needs to rebalance its economy. It will require reform of the planning system—that was proposed in the Assembly, but has not progressed as yet; crucially, a strong focus on skills and education; and measures to reduce red tape, which is why the pact contains a commitment by the Executive to a reduction of red tape. The Enterprise Minister has followed that up with some important work.

[Ian Paisley (North Antrim) (DUP)]

I welcome the advance copy of the statement that the Secretary of State gave us, but I am rather perplexed at the attitude towards corporation tax of the Labour Front-Bench team. We have worked hard to achieve this, and for it to be delayed would be a shame.

On the financial agreement, the Secretary of State said that she would allow the proceeds of specific agreed asset sales to be retained entirely by Northern Ireland. What are those assets? Will she confirm whether they include the port of Belfast, Translink, the water service and/or Northern Ireland car parks?

[Mrs Villiers]

It is important that the Executive give proper consideration to those and all other assets of a similar nature, but it would not be right for me to prejudge what sale proposals the Executive might develop. Each asset will be considered in relation to the provision in the agreement’s financial annexe.

[Bob Stewart (Beckenham) (Con)]

I add my voice to those who are congratulating my right hon. Friend, her team and everyone involved in getting agreement at Stormont House? It is fantastic.

I am pleased that there is to be a new historical investigations unit. Will my right hon. Friend reassure the House that the investigation will continue into what happened to the late Captain Robert Nairac GC and where his body might be located?

[Mrs Villiers]

I reiterate my sympathies and condolences to Robert Nairac’s friends and family, who must feel the pain of their loss even after so many years. Of course, a process is already in place for seeking the remains of the disappeared, and I do not think it would necessarily be impacted on by the HIU’s work. However, as part of the implementation process, we will work out how it will interact with existing bodies.

I thank my hon. Friend for his kind words about the achievement of this agreement. There were many people who said a Conservative-led Government could not do this kind of thing. Well, they have been proved wrong.

[Mr David Anderson (Blaydon) (Lab)]

On corporation tax, I am quite happy for the north to adjust its corporation tax to compete with the south, but this is also a Westminster Government, so we need to be clear that doing that will not disadvantage other parts of the UK, including places such as the one I represent.

On the demise of the HET, the Northern Ireland Committee heard just before Christmas that because of budget cuts to the police, the work of the HET, which we thought would end in three years, will not end for nine. We have been told today that there will be legislation in this House and Belfast. When does the Secretary of State envisage the legislation going through and the HIU being put in place? What does she think the time scale for concluding all those investigations will be? Will it be shorter or longer than we thought?

--- Later in debate ---

[Mrs Villiers]

Obviously, the PSNI has made some difficult announcements in recent weeks in seeking to absorb budget reductions, but the funding package and agreement, when implemented, will provide some relief. I hope that means that the work the PSNI indicated would take much longer than it had originally expected can be completed more quickly. We have put forward our proposal, and we hope that the HIU will complete the bulk of its work within five years.

On corporation tax, it is key to recognise that Northern Ireland is different and that there are specific reasons to justify its devolution in Northern Ireland that do not apply to the rest of the UK.

[Mr Robin Walker (Worcester) (Con)]

I congratulate the Secretary of State on the patience and resolve she has shown in helping the parties reach an agreement, particularly on the milestone of establishing an official Opposition in Northern Ireland, which is an important step forward in the normalisation of politics in the Province.

On the past, it is great that we have seen a degree of agreement between the parties, but does she agree that nothing in the agreement should imply an amnesty for the criminal gangs who preyed on the people of Northern Ireland for so long?

[Mrs Villiers]

Absolutely not. There are no amnesties in the agreement. This Government do not support such things, and they would not be justified in this instance.

[David Simpson (Upper Bann) (DUP)]

The Secretary of State mentioned parades a number of times, and those will be a problem in the future. Does she therefore understand the frustration of my constituents at the Drumcree protest, which has been ongoing for 16 years? The panel gave us the possibility of finding a model to deal with that parade, but the rug has again been pulled from under us. Does she understand the complete frustration?

[Mrs Villiers]

I do, and the hon. Gentleman and I have discussed the Drumcree situation on many occasions. It is important in north Belfast to focus urgently on finding an inclusive process to bring the two sides together. That is why I will be meeting many of the different groups involved in the next few days and discussing these matters with the right hon. Member for Belfast North (Mr Dodds) and the First Minister tomorrow.

[Damian Collins (Folkestone and Hythe) (Con)]

I congratulate the Secretary of State on her role in securing the agreement. Does she agree that the proposed independent commission on information retrieval should attach the same importance to requesting information from the British Government as is attached to pursuing the cases of the disappeared people who were victims of IRA murders during the troubles?

[Mrs Villiers]

Certainly, and it is crucial that the work on the disappeared is allowed to continue. Thankfully, it has been possible to find answers in relation to a number of cases. Sadly, many have so far not been resolved, but the good work done by the Independent Commission for the Location of Victims Remains is a good model on which to base the ICIR’s work for the future.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

Let me say to the hon. Member for Reigate (Crispin Blunt) that if he is faced with the choice of the Scottish nationalist party or a Unionist party, he may have cause to think again about the comments he just made.

The Secretary of State will join me in welcoming the progress we have made on dealing with our troubled past in Northern Ireland. She knows the hard work that was put in during the talks to achieve this outcome, which is a victim-centred outcome. However, many of those victims were victims of people operating from the jurisdiction of the Irish Republic; indeed, some were murdered in the Irish Republic. Will she ensure that the Irish Government hold good to the commitment and obligations they have undertaken in the agreement to co-operate fully with all the institutions dealing with the past and release all papers, documents and files held by Irish state forces that will assist in the apprehension of those responsible for those murders?

[Mrs Villiers]

I thank the right hon. Gentleman for his hugely important work in the cross-party talks and for delivering what I believe is a good agreement overall, although his input on the past has been particularly highly valued. It is important that all participants—the UK Government, the Irish Government and the Executive parties—play their part and live up to the obligations they have undertaken. Minister Flanagan has repeated on many occasions that his Government would co-operate with those institutions; I have every confidence that they will do so.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I commend the statement and acknowledge the comprehensive efforts made by all involved in reaching the agreement. The Secretary of State alluded to the need to ensure that the process did not become a rewriting of history. Will she go further and indicate to the wider public in Northern Ireland that there has to be a distinction between the genuinely innocent victims in the past who were murdered and butchered, and those who caused that murder and butchery and happened to be caught up in violence of their own hand?

[Mrs Villiers]

Of course there is a very clear distinction between those two. I know that there continues to be controversy around the way that the law defines a victim, which has been the barrier to taking forward the proposal for a pension for severely physically injured victims. The hon. Gentleman will appreciate that the agreement commits to there being further work on whether we can find a way to enable that pension to be taken forward without raising those problems around the definition of “victim”. It is a difficult issue, but one that we should all continue to try to find an answer to.

[Liz McInnes (Heywood and Middleton) (Lab)]

Failure to agree on contentious issues such as flags and parading has led to violent protests, as we all know. What additional steps has the Secretary of State taken to ensure that the PSNI has adequate resources to guarantee security for the people of Northern Ireland and the capacity to police public events?

--- Later in debate ---

[Mrs Villiers]

The hon. Lady makes an important point. The agreement will help partly by providing extra funding for institutions that are doing work on the past that is currently done by the PSNI, but the financial annex attached to the financial package also contains an obligation on the Executive to do what they can to minimise reductions in police funding. Given the financial realities, it seems inevitable that there will be reductions in PSNI funding to some degree, but the UK Government would certainly like these to be kept to an absolute minimum, which is why it is in the financial annex to the agreement.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for her statement and for all the hard work that she and many others did to achieve the Stormont House agreement. We in the Democratic Unionist party ensured that the bedroom tax would not be implemented in Northern Ireland thanks to the flexibilities and the top-ups that we secured through the Northern Ireland block grant. Sinn Fein, of course, opposed that, but they never turned up in this Chamber to vote against it. However, this time Sinn Fein have joined with the DUP to agree a deal, which means that there is now no obstacle to a revised welfare reform Bill for Northern Ireland. Can the Minister set out the time scale for welfare reform in Northern Ireland and the legislative process through this House?

[Mrs Villiers]

I thank the hon. Gentleman for his comment. It is a hugely important step that the five parties reached an agreement on a way forward on welfare reform. It is indeed a matter for the Northern Ireland parties that they have applied the top-up in relation to certain matters, including the spare room subsidy, which they are funding through their block grant. It is now vital that progress is made on implementing welfare reform as soon as possible, so that we can press ahead with the rest of the agreement.

[Mark Durkan (Foyle) (SDLP)]

The Secretary of State will be glad that I will not rehearse the issues of welfare and finance that many of us concentrated on in the negotiations. She is right that we should not understate certain aspects of the agreement. However, it would also be wrong to oversell other aspects, where we have superficially strimmed the long grass, not least in respect of parades. Does she now regret her misadventure in proposing a panel on north Belfast, believing that that would somehow assist the talks, when we now know from the Unionist parties that their position was that, on the expected promise of the panel, they were not going to negotiate on parades in those discussions?

[Mark Durkan]

We heard it from them today and we heard it from their leaders this week. That is why we had all the nugatory discussions in Stormont House about parades, and therefore ended up with no negotiations on parades, and those who wanted a panel have now ended up with no panel. That is the Secretary of State’s fault.

[Mrs Villiers]

I pay tribute to the hon. Gentleman and the Social Democratic and Labour party for the work they did on welfare reform and, in particular, the past, where their ideas have been highly influential. I think everyone would acknowledge that there is more work to be done on parades, and that it will be crucial to take that forward for the good of all in Northern Ireland whose lives are potentially disrupted by parades and for those who want to conduct their parades and express their culture in the way they have for hundreds of years.

As for the panel, as I said to the right hon. Member for Belfast North, unfortunately there was just not enough support for it. It was well intentioned, and I still believe that we need to find a way to mediate between the two sides and find an inclusive process that can engage as widely as possible. It became apparent that the panel would not be able to do that. We need to find a way forward, and I will be working with the Northern Ireland Executive and their parties to seek to do that.

[Dr William McCrea (South Antrim) (DUP)]

The Secretary of State mentioned the establishment of a commission to consider flags and emblems. Does she agree that it is absolutely outrageous that the people of Northern Ireland are not permitted to have their flag, the flag of the United Kingdom, displayed on their driving licences like everywhere else in the United Kingdom—the SDLP is trying to out-green and out-Sinn Sinn Fein—especially bearing in mind that people in Northern Ireland died to keep Northern Ireland a part of the United Kingdom and beat the provos?

[Mrs Villiers]

These are hugely sensitive issues and these matters have been under discussion in various forums for many years, and the proposal to have a broader civic conversation and debate about finding a way forward is a good one. The hon. Gentleman will be aware that it was first proposed by Dr Richard Haass in the work that he and Meghan O’Sullivan did. We simply do not have all the answers on how all these matters need to be resolved. Including as many people as possible in finding a way forward on these sensitive and crucial questions of identity is an important step towards that.

[Sammy Wilson (East Antrim) (DUP)]

The additional money made available to Northern Ireland through flexibility and borrowing, and the extra money for the additional institutions, will be welcome. Despite what the hon. Member for Reigate (Crispin Blunt) said in his little Englander outburst, which helps nationalism more than the nasty nationalists of this House do when it comes to the break-up of the Union, this is something that Northern Ireland needed.

The important thing is to rebalance the economy as well. Will the Secretary of State spell out for us what exactly she means when she says that the Government will use their “best endeavours” to get the legislation on corporation tax through Parliament? Does that mean that that might not happen, and if not, why can she not give total clarity that the legislation will go through before the end of this Session?

[Mrs Villiers]

As I have said before, the reality is that introducing legislation at this stage of a Parliament runs the risk of running out of time for it, in which case we become dependent on the Opposition for getting it through. We will try to speed it through as best we can, assuming that the Northern Ireland Executive do their bit. We had hoped to introduce the legislation in December, in which case we would have been pretty confident of getting it through on time without the support of the Opposition. Given the delay of a few weeks, it is more uncertain. That is why I put the question I did to the shadow Secretary of State, but we will certainly try our very best to get this legislation on the statute book.

[Toby Perkins (Chesterfield) (Lab)]

I congratulate all the parties involved in enabling the statement to be made and in achieving the agreement, which is a significant step forward for Northern Ireland. The rising inequality and rising child poverty that we have seen under this Government and their hostility to public sector work have had an impact on Northern Ireland, creating a potential breeding ground for paramilitaries and political extremists. Has the Secretary of State had any discussions with the Chancellor about the impact on Northern Ireland of the decisions this Government have taken and of increasing poverty? What is she going to do to support a peaceful future by ensuring that Northern Ireland, and the rest of the United Kingdom, is able to have a more equal future than it has had in the recent past?

[Mrs Villiers]

I have had many discussions with the Chancellor on Northern Ireland matters. This Government’s economic plan is working for Northern Ireland. There has been significant inward investment and a significant number of jobs created, and the Northern Ireland economy is predicted to grow at a faster rate than the economies of many major developed economies around the world. The economy is turning around in Northern Ireland, which is a result of the work done by this Government.

Northern Ireland (All-party Talks)

Theresa Villiers Excerpts

Monday 15th December 2014 Commons Chamber

[Mr Ivan Lewis (Bury South) (Lab)]

(Urgent Question): To ask the Secretary of State for Northern Ireland if she will make a statement on the talks process in Northern Ireland following the Prime Minister’s visit.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

I am grateful for the opportunity to update the House on the cross-party talks which have been taking place in Stormont over the past nine weeks.

In September the Government concluded that the time was right for a fresh round of political discussions to be convened with the parties in the Northern Ireland Executive. The Irish Government reached the same conclusion and co-ordinated statements were issued. The aim was to address some key issues which are hindering the effectiveness and credibility of devolution and the Stormont Executive. These included: welfare reform and the Executive’s budget; the so-called legacy issues of flags, parading and the past; and reform of the political institutions.

The talks began at Stormont house on 16 October. As a signatory to the Belfast agreement, the Irish Government have been fully involved in all those matters where they too have responsibilities, consistent with the three-stranded approach, which means that the internal arrangements for Northern Ireland are a matter for the UK Government and the parties. I would like to take this opportunity to put on record my thanks for the positive and constructive role played throughout by the Irish Minister for Foreign Affairs, Charlie Flanagan TD, and his team of officials. In addition, I am very grateful for the support and wise counsel of the Under-Secretary of State for Northern Ireland, my hon. Friend the Member for South West Wiltshire (Dr Murrison). The US Government have also been supportive and closely engaged with this process, in particular through Secretary of State Kerry’s representative, Senator Gary Hart.

So far, around 90 hours of the formal talks have taken place. My right hon. Friend the Prime Minister and An Taoiseach, Enda Kenny TD, have been closely following the whole nine-week process and on Thursday they joined the discussions directly. They conducted an intensive round of talks with the Executive parties and I would like to thank both of them for their support, perseverance and ongoing commitment to this process. Despite their efforts, by early Friday morning they made a realistic assessment that there was still insufficient consensus across the parties for a broadly based agreement to be reached. Shortly afterwards, all five Executive parties declared their firm intention to continue to strive for a deal. They asked me and Minister Flanagan to take part in a resumption of discussions on Friday afternoon, which we duly did.

Let me briefly set out to the House the outline of the deal put on the table on Thursday. A draft heads of agreement was tabled including, first, a fresh approach to the past which puts the needs of victims and survivors at its heart; secondly, devolved arrangements for adjudicating on parades that would see the Parades Commission replaced by a new authority; and thirdly, reforms to the institutions such as support for those parties that might want to form a formal Opposition within the Assembly. The draft also sought a commitment from the Executive to press ahead with welfare reform, although with a number of flexibilities to reflect Northern Ireland’s circumstances, and to implement a serious efficiency programme to make long-term savings in the cost of government. This draft heads of agreement was the result of the work of both the UK and Irish Governments, again respecting the three-stranded approach, and we believe it represents a balanced package and a sound basis for cross-party agreement.

During the evening, the Prime Minister also set out proposals to provide further financial assistance from the UK Government. This included flexibilities which would have given the Executive nearly £1 billion of extra spending power to help them through their current difficulties and support their most important priorities. It would also allow the devolution of corporation tax to go ahead. A change which just a few years ago seemed inconceivable and undeliverable is now within the grasp of Northern Ireland’s leaders, if they choose to take it.

The talks resume this week and the stakes are high. All parties agree that if there is no agreement before Christmas, we will not get this close again for months or even years. In particular, failure to agree a balanced budget would leave the Executive increasingly unable to conduct even ordinary day-to-day business effectively. So this week is crucial. We all have a responsibility to do whatever we can in the few days left to us.

The UK Government have shown that they can compromise, even over hugely sensitive and difficult issues regarding Northern Ireland’s past and even when resources are constrained by the pressing need to deal with the deficit. We will continue to do all we can to deliver agreement within the financial constraints in which we are operating, but the UK and Irish Governments can do only so much. Ultimately, whether an overall agreement is reached will be down to Northern Ireland’s political leaders. They have the chance to show that, once again, they can move Northern Ireland forward towards a better future in which politics works, the economy grows and society is stronger and more united. That is the prize on offer, and I know that all the participants in the talks will have the support and good will of this House in our attempts to seize it.

[Mr Lewis]

I thank the Secretary of State for her answer. Christmas is meant to be the season of good will, but for a second consecutive year in Northern Ireland there is a real risk that it will be a season of entrenched mistrust and political failure. The people of Northern Ireland want progress. They yearn for politicians who offer hope that the journey to a shared future, while not easy, is irreversible and who accept that a shared obligation and a shared commitment to a better future require compromise and mutual respect.

Of course, the UK and Irish Governments have responsibilities too. Three years of relative disengagement by the UK Government have damaged trust and weakened mutual understanding. It also has to be recognised that Northern Ireland faces unique challenges related to the past. A properly resourced, comprehensive framework should be part of any agreement, but fairness also means that there can be no blank cheques or exemption from tough choices. Northern Ireland has the right not to implement aspects of Tory-Lib Dem welfare cuts, but a refusal to implement any welfare reform is neither affordable nor credible.

I have some questions for the Secretary of State. Will she spell out how the £1 billion of extra spending power offered by the Prime Minister is broken down? Where is the money going to come from? How quickly will the loan element have to be repaid, and at what rate of interest? What is the Government’s estimate of the overall annual cost to Northern Ireland’s budget of the current instruments to deal with the past and of those envisaged under new arrangements? Finally, Prime Ministers usually attend political negotiations either to announce an agreement or to roll their sleeves up and stick around to make an agreement possible. As the Prime Minister did neither, can the Secretary of State explain the strategy underpinning his flying visit to Belfast last week? Does she expect him to engage further in the talks before Christmas?

[Mrs Villiers]

I thank the shadow Secretary of State for his questions. I agree that people in Northern Ireland want to see progress and confirmation that their leaders are striving towards building a genuinely shared future, and that they are prepared to see their political leaders accept compromise and make difficult decisions.

It is most emphatically not true that the UK Government have been disengaged over recent years. We have followed all these matters closely and we pressed for the establishment of the Haass talks in the first place. Also, the economic pact has seen our two Administrations in Belfast and London working more closely than ever before. The devolution of air passenger duty took place in double-quick time to save Northern Ireland’s transatlantic flights, for example, and the G8—a huge opportunity for Northern Ireland—was brought to Northern Ireland personally by the Prime Minister. I agree that, in this situation, there can be no blank cheques for the Executive. We all have to live within the constraints of the need to deal with the deficit.

On the financial package, the Prime Minister outlined a contribution of £10 million a year towards the running of the Historical Enquiries Unit, which is proposed in the draft heads of agreement. The Government would also approve the use of Northern Ireland’s existing allocation of £200 million of the re-investment and reform initiative borrowing for 2015-16 to implement an exit scheme for the Northern Ireland public sector, to be used in that financial year. That includes the £100 million already sought by the Executive as part of their draft 2015-16 Budget. The Government would also agree that the Executive may use a further £100 million of their RRI borrowing power in each of the five subsequent years, beginning in 2016-17, for the same purpose. The Prime Minister also set out plans to support the establishment of the peace and investment fund proposed by Northern Ireland’s leaders, including allowing the Northern Ireland Executive to keep additional funds generated from asset sales in the financial year 2015-16, after the achievement of a balanced budget. I assure the shadow Secretary of State that the Prime Minister did indeed roll up his sleeves and engage in intensive negotiations, because he, like all of us here, is determined to reach a successful outcome.

[Mr Owen Paterson (North Shropshire) (Con)]

I congratulate the Secretary of State on her perseverance, working with the local parties on matters that we know are of intense interest and concern to them. Does she think they have really got the message that the devolution of corporation tax, bringing economic benefits which have so dramatically helped the Republic of Ireland, would be of enormous significance and would in many ways measure up to the level of the agreement years ago, and that we really are in the final hours? As I understand it, a Bill is ready to be laid, but it has to be laid this week. If the local parties blow this opportunity, they deserve to have the obloquy of future generations descend upon them—they must not fluff this opportunity.

[Mrs Villiers]

I agree that one of the most urgent matters at stake is the devolution of corporation tax, and the clock really is ticking on that. If we are to pass legislation within this Parliament, we need to introduce it as soon as possible, not least because the Opposition Front-Bench team has not yet been prepared to give its support to the potential devolution of corporation tax.

[Mr Peter Hain (Neath) (Lab)]

May I offer a critical observation, not for some partisan motive, but out of experience of negotiating at such summits alongside Tony Blair, when he was Prime Minister? I was both troubled and astonished that the current Prime Minister left the summit prematurely in the way that he did. My experience is that any Prime Minister has to coax and progress the discussions and negotiations, and there is a chemistry about those and a momentum that it is possible to develop. Walking away as he did leaves a kind of political paralysis which I suspect and fear may continue. That is extremely damaging and I am extremely worried about the situation.

[Mrs Villiers]

I can provide the right hon. Gentleman with reassurance that the Prime Minister has not walked away; he continues to follow these matters with the greatest of attention, because he cares about Northern Ireland and wishes to see a successful conclusion to this process. The reality is that both he and the Taoiseach made a realistic assessment on Friday morning that the parties were still far apart on a number of issues, and there was an indication that on some key issues some parties were simply not prepared to move. In particular, it was very difficult to see that Sinn Fein was prepared to move on matters relating to welfare reform.

[Mr Laurence Robertson (Tewkesbury) (Con)]

Is not one of the deeper and wider problems in Northern Ireland the fact that the Assembly and the Executive were set up in the way they were, although for the very laudable reason of bringing about peace and bringing people together? Does the Secretary of State agree that that model is not a good one for effective and efficient decision making? Is she discussing with the parties of Northern Ireland ways in which changes might be proposed by them that might move us towards a more efficient system?

[Mrs Villiers]

I have had those discussions at great length, including discussions about how to amend the petition of concern process. The Chairman of the Select Committee is right to acknowledge that the institutions set up to secure a peace settlement can often find it difficult to take difficult decisions, but they are capable of it; adaptations can be made. However, improving the way the institutions work will be an important part of an overall agreement.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

Of course these matters do not just affect the Northern Ireland parties; national issues and national security issues are at stake in the discussions on the past. On parades, we are still awaiting the Secretary of State’s announcement about what she is going to do on north Belfast and the Ligoniel parade. That could unlock the way for progress being made, so it is important that the UK Government—our Government—play their part in moving things forward as well. Although I welcome what the Opposition spokesman has said, I remind him that part of the reason for the mistrust at the moment is the previous Government’s actions in relation to on-the-runs.

[Mrs Villiers]

I can assure the right hon. Gentleman that the north Belfast panel will be constituted shortly. I agree that national security matters are at stake, not least because the current dispute over welfare reform and budgets means that the Police Service of Northern Ireland is facing significant funding cuts. Those cuts could impact on its ability to deliver community policing, which is an important part of our counter-terrorism strategy as a means of building support for policing within the community.

[Mr Andrew Robathan (South Leicestershire) (Con)]

Will the Secretary of State be slightly more specific about what is holding up the talks? In particular, she mentioned Sinn Fein’s opposition to reform of welfare. She will know that Sinn Fein wishes to see the destruction of the Northern Ireland entity, which is not exactly the position that most other people take. Is it a fact that we may have to impose a solution—I am not entirely clear about how that can be done—to ensure that things move forward?

[Mrs Villiers]

I shall be as brief as possible. There remain significant differences of view on a number of matters. There is no sign as yet that Sinn Fein will move its position on welfare reform. Further progress is needed on a specific plan for efficiencies within the Northern Ireland Executive. On the past, issues around thematic work and inquests will be quite difficult to resolve. On parading, the discussions that took place in the summer under the party leaders’ talks indicate that the criteria for adjudicating parades and the sanctions to be attached to a code of conduct remain the main sticking points.

[Paul Murphy (Torfaen) (Lab)]

How on earth can the Prime Minister come to the conclusion, after 24 hours, that there is no realistic way of reaching a consensus? Over the years, both with the Good Friday agreement and the St Andrew’s agreement, the Prime Minister actively tries to ensure that there is a consensus. The Secretary of State should go to Downing street and persuade the Prime Minister to do that again—and quickly.

[Mrs Villiers]

I can assure the right hon. Gentleman that the UK Government will continue to work as hard as possible to secure an agreement out of this process.

[Nigel Mills (Amber Valley) (Con)]

May I agree with the Secretary of State’s earlier sentiment that the solution to every problem in Northern Ireland cannot be more money from the English taxpayer? Will she now confirm that there will be no bigger offer than the £1 billion that was talked about last week to get this deal over the line?

[Mrs Villiers]

As I have said many times, the solution to these problems cannot be a big cheque from the UK Government. That is partly because it would not solve the problems, and partly because there is no more money. We have made it clear that we are not prepared to subsidise a more expansive welfare system for Northern Ireland. We are certainly prepared to continue to discuss the funding of matters such as new institutions on the past.

[Mark Durkan (Foyle) (SDLP)]

Does the Secretary of State recognise that £700 million of an existing borrowing power that we originally negotiated for strategic capital investment to be used for voluntary exit schemes does not seem to people to be new money or a big attractive offer? Is she not concerned that she has informed the House that the issue of inquests will be difficult? The two Governments propose that the families who have fought for inquests and had new inquests opened will now be told that, no, they will not now have an inquest. There is to be a new arrangement as part of the historical investigations unit that may not work in respect of the inquest and also damage the working prospects for other key aspects of the HIU’s work.

[Mrs Villiers]

I assure the hon. Gentleman that the flexibilities offered in relation to borrowing powers would be of significant assistance to the Northern Ireland Executive in delivering the voluntary exit scheme for which they are calling. It was a significant and serious offer, but one that accepts the realities of the financial constraints we are under. I fully appreciate the difficulties concerning inquests. The Government are in listening mode, and we will continue to discuss the matter with the parties over the next couple of days. Whatever the outcome, it is vital that the cases be dealt with within a framework that is fully compliant with our obligations under article 2 of the European convention on human rights.

[Lady Hermon (North Down) (Ind)]

The Prime Minister’s failure to broker a deal last week caused considerable disappointment in Northern Ireland, although I have to say that I do not think it caused much surprise, since he did not stay there very long trying to bring about success. However, it is the season of good will, so could the Secretary of State provide us with some reasons to be cheerful about the likelihood of success in the near future in these talks? That would be very welcome.

[Mrs Villiers]

I think that the reasons to be cheerful are that all the Northern Ireland parties accept that we need to find a deal and that everyone accepts that going into the next financial year with an unresolved budget would lead to increasing chaos and make it increasingly difficult for the Executive to perform even their ordinary, day-to-day functions. No one wants that. I think everyone accepts that that would be bad for every party that is a member of the Executive. I think there is that willingness to make progress. We are relatively close on matters, for example on how we set up new structures to help deal with the past in a way that better meets the needs of victims and survivors.

[Kate Hoey (Vauxhall) (Lab)]

The Secretary of State has said that she wants to see a fresh approach to the past. Does she realise that that will be very difficult while there is still so much secrecy about the on-the-runs? The Northern Ireland Affairs Committee is facing increasing difficulty in getting the ex-Prime Minister Tony Blair to give evidence for its inquiry—we have had to summons him and he has not come yet. There are people from the Northern Ireland Office whom the Secretary of State seems to want to prevent coming to speak to us. We have to get the inquiry finished and we have to get the past looked at very differently, but we need some openness and transparency from the ex-Prime Minister.

[Mrs Villiers]

One of the advantages of setting up new structures on the past is that it allows us to reflect upon and respond to mistakes made in the past so that whatever we set up is transparent, balanced, fair and properly accountable. I very much welcome the work that the Select Committee has done on the matter. It is for the Committee to negotiate with former Prime Minister Blair. I certainly hope he will accept the invitation to give evidence. In relation to junior civil servants, the Government’s approach is consistent with that taken by previous Governments: we do not generally put forward junior civil servants to answer in Select Committees.

[Jeremy Corbyn (Islington North) (Lab)]

Is it not entirely predictable that many people in Northern Ireland, having observed the operation of the welfare cap in England and Wales, look with great trepidation at deepening poverty, increasing homelessness and all the problems that have been associated with that policy here?

[Mrs Villiers]

I cannot agree with the hon. Gentleman on the benefit cap—I think that is what he means, rather than a welfare cap. The reality is that setting a cap on out-of-work benefits at £26,000 a year puts it somewhere in excess of average earnings in Northern Ireland. I think that most people would agree that it is entirely fair to restrict the benefits that an out-of-work family can receive to levels that are equivalent to or below the average that a working family can bring home by going out to work.

[John McDonnell (Hayes and Harlington) (Lab)]

I would like the Secretary of State to clarify the maths on this. Some £1.5 billion has been cut from the Northern Ireland budget since 2011 to assist the UK Government in reducing borrowing and tackling the deficit, yet the solution now being put forward is to ask Northern Ireland to increase its borrowing by £500 million. Is that not simply inflicting a high burden of cost on the residents of Northern Ireland?

[Mrs Villiers]

I am afraid that I do not agree with the hon. Gentleman’s figures on the Northern Ireland block grant, which has actually gone up in cash terms. In real terms there has been a reduction, but it has been around only 1% for every year of the spending review. The reality is that the Northern Ireland Executive have a larger budget now than they did when they set their programme for government, because of Barnett consequentials. Those figures compare favourably with policing and the Home Office, for example, which have had to take a significant cut in England, and English local government, where the reductions have also been very significant.

[Naomi Long (Belfast East) (Alliance)]

I pay tribute to the Secretary of State, the Prime Minister and the Taoiseach for the work they did, and not just over recent weeks but in the run-up and on Thursday and Friday. Does she agree that there is a distinct difference between all parties recognising that an agreement is necessary and all parties having the will to deliver it? Does she agree that all parties recognised the need for an agreement even before Richard Haass and his team arrived 18 months ago, yet we are in practice no closer to such an agreement? Far from further devolution of corporation tax and other matters being at stake, what is actually at stake if there is no serious agreement in the next few days is the existing devolution that we have in Northern Ireland, because without a budget the Assembly simply cannot function.

[Mrs Villiers]

I agree that the credibility of the institutions is on the line. If the Assembly cannot get its budget right, it is very difficult for it to perform its basic functions, and it would be in for significant criticism if it cannot resolve these matters. As to the hon. Lady’s comment that the parties recognise the importance of delivery, and her question about whether they have the will to do it, I hope they do and I believe they do. Time is running out. It is crucial that we seize this opportunity because we will not get another one for months, if not years, to come.

[Sammy Wilson (East Antrim) (DUP)]

The main reason that the talks failed this week was Sinn Fein’s deluded belief that Northern Ireland should be totally exempt from the implications of UK budgetary policy and welfare reform. Will the Secretary of State confirm and put it on the record for those head-in-the-sand ostrich economists who advise Sinn Fein that if Northern Ireland wishes to deviate from the welfare reform package which is available in the rest of the United Kingdom, that money must be found from the Northern Ireland block grant and there is no additional money available?

[Mrs Villiers]

Yes, I can certainly do that. There will be no new money for welfare reform.

[Mr David Anderson (Blaydon) (Lab)]

The leader of the Minister’s sister party in Northern Ireland said last week that the Government were trying to bribe the people with their own money. The truth is that they are trying to bribe the people to accept an agenda that the people there do not want. It is disgraceful that this involves things as important as identity and the past and the future of the place. Does this not show that because we have a Prime Minister with the attention span of a gnat, exactly as my right hon. Friend the Member for Neath (Mr Hain) said, he has left a vacuum—the worst thing one can do in Northern Ireland—which proves that he is not up to the job?

[Mrs Villiers]

That is nonsense. The Prime Minister made a realistic offer. Remember, what the Prime Minister can put on the table by way of financial assistance is severely constrained by the huge mess that Labour made of the economy in the years when it was in government.

[Wayne David (Caerphilly) (Lab)]

We all appreciate the gravity of the situation, but will the Secretary of State tell us what the Prime Minister intends to do during the next few days to break the logjam?

[Mrs Villiers]

We will be doing everything we can to break the logjam over the coming days. We have thrown everything we can at the process, including stretching ourselves on the past, and taking forward proposals for corporation tax devolution, despite a degree of lack of enthusiasm from our coalition partners. We are doing everything we can to do the right thing for Northern Ireland, but ultimately this process will not succeed unless Northern Ireland’s political leaders are prepared to make the compromises necessary for an agreement.

Oral Answers to Questions

Theresa Villiers Excerpts

Wednesday 29th October 2014 Commons Chamber

[Pat Glass (North West Durham) (Lab)]

1. What discussions she has had with Ministers in the Northern Ireland Executive on ensuring the Police Service of Northern Ireland is adequately resourced.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

May I first convey to the House the apologies of the Northern Ireland Minister who is chairing cross-party talks in Stormont today?

It is for the Executive to ensure that the PSNI is properly resourced, and the Government have provided significant additional funding to tackle terrorism, totalling £231 million. We are now working with the PSNI to understand the impact that funding reductions imposed by the Northern Ireland Executive will have on its ability to police the terrorist threat.

[Pat Glass]

The Police Service of Northern Ireland is experiencing budgetary shortfalls that the Chief Constable has said will leave it “unrecognisable”, and “put lives at risk.” What is the Secretary of State doing to ensure that budget cuts to the PSNI do not undermine the peace process or put lives at risk?

[Mrs Villiers]

This is a very serious matter, and as the hon. Lady has said, the Chief Constable is concerned about the extent of the reductions proposed. A real concern is that a number of the cuts are in-year cuts, which makes achieving them through efficiency reforms very difficult. The Government will continue to support the PSNI with substantial extra security funding, but the Chief Constable now believes that the reductions proposed by the Executive will impact on his ability to police terrorism. We are working closely with him to ascertain exactly what that impact will be, and to see what steps can be taken to mitigate it.

[Mr Andrew Robathan (South Leicestershire) (Con)]

13. I pay tribute to the PSNI, which does a marvellous job in very difficult circumstances. Will my right hon. Friend consider whether it would be assisted by the National Crime Agency operating in Northern Ireland, and in particular by tackling the gangs that are still operating down in South Armagh—the same gangs that used to shoot and murder British soldiers, and that are still trying to murder police officers? They should be brought to book by the NCA.

[Mrs Villiers]

I agree with my right hon. Friend in paying tribute to the PSNI, and allowing the NCA to operate with its full remit in Northern Ireland is essential if we are to combat organised crime effectively. This matter does impact on PSNI funding, because its inability to receive the full support of the NCA and having to do the work that the NCA would otherwise do for it places additional pressures on the PSNI.

[Mr Ivan Lewis (Bury South) (Lab)]

The Secretary of State will be aware that due to budget cuts the PSNI has effectively ceased all investigations into historical crimes associated with the troubles. Does she accept that that places a greater responsibility on all political parties to agree new mechanisms to deal with the past that put the needs of victims and their families first?

[Mrs Villiers]

It is very important that political parties in Northern Ireland find a way to agree a fresh approach to the past, and that is one reason why cross-party talks have been convened. We need to listen to the needs of victims, and we must also understand the increasing pressure on the PSNI and the criminal justice system. I believe it is important that we find a way forward on that, not least to relieve pressure on the PSNI so that it can concentrate on the important policing needs of today.

[Mr Laurence Robertson (Tewkesbury) (Con)]

Will the Secretary of State confirm that she will be having discussions with the Executive about Operation Red Field?

[Mrs Villiers]

I have regular discussions with the PSNI on the question of on-the-runs and Operation Red Field, and I will do so again. It is crucial that the Executive parties reach an agreement on the budget for next year, and that they take into account the crucial importance of appropriate resourcing for the PSNI, and of course the cost of policing the past.

[Mr Nigel Dodds (Belfast North) (DUP)]

The PSNI certainly needs to have adequate resources, not least to ensure that there are full and proper investigations into the continuing scandals involving Gerry Adams and Sinn Fein in relation to cases of sexual abuse, paedophilia, cover up, and the exiling of people from Northern Ireland to the Irish Republic. Does the Secretary of State agree that no amount of waffle or self-serving platitudes from Gerry Adams or the Sinn Fein leadership can distract or take away from the awfulness of those crimes, and the need for them to be brought fully to light?

[Mrs Villiers]

Any abuse or sex crime is appalling, and I entirely share the right hon. Gentleman’s concerns about the allegations made by Mairia Cahill. It is genuinely a very shocking, disturbing and distressing case, and all such crimes, whether the acts themselves or any purported cover-up, need to be fully investigated by the police. An independent review is set to take place into the way the original case around the allegations made by Mairia Cahill was handled.

[Mr Dodds]

I am grateful to the Secretary of State for her reply and for her reference to the independent investigation by Keir Starmer into Mairia Cahill’s allegations. However, does she understand the concern and anger of people right across the community in Northern Ireland in relation to the allegations against Gerry Adams about the cover-up of the sexual abuse by his brother and his refusal to go to the police or to alert people about what was going on within Sinn Fein and the republican movement, putting other children and young people at risk? We still have not had the publication of the report by the Public Prosecution Service or the police ombudsman. Does she accept that there can be no whitewash of the black sins of Sinn Fein in relation to sexual abuse and paedophilia?

[Mrs Villiers]

These are indeed shocking crimes and shocking allegations. I certainly would urge Sinn Fein to answer all the questions that have been put to them about this very disturbing case.

[Sir Gerald Howarth (Aldershot) (Con)]

Does my right hon. Friend accept that it is quite intolerable for my constituents in Aldershot who served with the Parachute Regiment in Northern Ireland to read in the newspapers that, because of lack of resources in the PSNI, so-called historic crimes will no longer be investigated or are in doubt? It is grossly unfair to my constituents, who have served this country to the best of their ability to try to keep the peace between the warring parties, still to be living with the threat, nearly 60 years on, of prosecution.

[Mrs Villiers]

I agree with my hon. Friend that there are many people who will suffer as a result of the announcements in recent days in relation to delays in legacy matters and criminal justice in Northern Ireland. That is an important reason to press ahead with a fresh approach on the past, to be agreed through the cross-party talks, but it is also a crucial reason for the Executive to agree a budget and to make sure that they give appropriate priority to the need for police resources when they reach that agreement.

[Mr Speaker]

May I just gently point out to the House that we have a lot of questions to get through and we need to speed up?

[David Simpson (Upper Bann) (DUP)]

2. What the geographical remit will be of the recently announced panel to discuss parading disputes in Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The proposal I announced on 7 October relates to disputed parades in the Twaddell and Ardoyne area of north Belfast, responding to the call by the Parades Commission for a wider, more structured process to address the issues around parades in the area.

[David Simpson]

I thank the Secretary of State for that clarification, but does she agree that resolution also needs to be found to the dispute in Drumcree in my constituency, which has been ongoing for the past 16 years?

[Mrs Villiers]

I recognise the grave disappointment that the hon. Gentleman and many in the Unionist and loyalist community feel about the situation in relation to that parade. It is important for all sides, wherever there is a dispute about a parade, to engage in a local dialogue to try to take things forward. In many parts of Northern Ireland that has proved successful in taking the tension out of parading and reaching an agreement with local residents affected.

[Mr Peter Hain (Neath) (Lab)]

On parading, does the Secretary of State agree that the current political paralysis in Northern Ireland is undermining already shaky local faith in its elected politicians? Although I wish the Secretary of State well, I do not believe that the Prime Minister has been engaging closely or energetically enough with the parties to ensure that the 2007 settlement remains in good faith. I make no party point on this: from experience, I know that Northern Ireland needs constant care and attention from No. 10 and I hope it will now get that.

[Mrs Villiers]

I assure the right hon. Gentleman that Northern Ireland does get constant care and attention from the Prime Minister, not just with his decision to bring the G8 to Northern Ireland, but everyday in focusing on the security situation and repairing the Northern Ireland economy and, of course, by closely following these talks. I agree that it is vital that we do not let disputes about parades, painful though they are, get in the way of the need to reach resolution on important issues such as the budget, flags and reform of parading decisions.

[Stephen Mosley (City of Chester) (Con)]

3. What steps the Government are taking to strengthen the Northern Ireland economy.

[Neil Carmichael (Stroud) (Con)]

6. What steps she is taking to promote economic growth in Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The Government’s long-term economic plan is working for Northern Ireland. Unemployment is falling and economic activity is increasing. We continue to work with the Executive on our shared objective to rebalance the Northern Ireland economy.

[Stephen Mosley]

The Northern Ireland science park recently published figures showing that the knowledge economy in Northern Ireland grew by 33% over the past five years, which is better than pretty much every other region in the UK. What action is my right hon. Friend taking to ensure that science and technology play a massive role in the future of the Northern Ireland economy?

[Mrs Villiers]

The economic pact signed between the Government and the Executive contained an important programme to support aerospace research with Bombardier and to promote Northern Ireland’s economic activity in the aerospace and space sector. That work is going well and will continue.

[Neil Carmichael]

News that the economy in Northern Ireland is growing is extremely welcome, especially with the increase in employment, but one potential drag on it might be the shortage of HGV drivers. What steps is my right hon. Friend taking to encourage young people to take up training opportunities to become such drivers?

[Mrs Villiers]

These are matters for the Northern Ireland Executive, but the UK Government recognise the crucial importance of the haulage industry, which is one of the reasons why we have frozen fuel duty, which is saving the haulage industry millions of pounds every year.

[Mark Durkan (Foyle) (SDLP)]

The Government cite city deals as a way to support the economy in the cities and regions on this island. If the Executive put forward a proposition for a city deal for Derry, would the Secretary of State work with the Treasury and other colleagues to support and deliver that deal as a way of implementing a lot of the key targets of the One Plan?

[Mrs Villiers]

The economic pact between the Executive and the Government was modelled on some of the approaches we take with city deals, but I would be delighted to talk to the hon. Gentleman about any proposals he might have to replicate the city deal model for Derry/Londonderry.

[Mr Ivan Lewis (Bury South) (Lab)]

The Secretary of State will agree that the current political paralysis has a corrosive impact on business confidence and therefore the Northern Ireland economy. Can she clarify whether the all-party talks she is chairing are dealing with all issues simultaneously that are causing the stalemate or focusing exclusively on the budget crisis?

[Mrs Villiers]

The talks are dealing with a long list of issues. We have taken them day by day—we did the budget, then we moved on to the legacy issues of flags, parades and the past. We will be looking at institutional questions today, and there are also proposals to look at unfinished businesses from the Belfast agreement. All these issues are important, but most crucial is that the budget is agreed, so that it is no longer causing instability in the Northern Ireland institutions.

[Mr Lewis]

Economic inactivity and worklessness are major underlying causes of instability and insecurity in Northern Ireland. Will the Secretary of State therefore undertake to ensure that the Northern Ireland Office gives its full support to the Heenan-Anderson commission, which we have established with a brief to come up with proposals for how the UK Government and Northern Ireland Executive can tackle the problems of worklessness in a more effective way?

[Mrs Villiers]

I am certainly prepared to look at whatever findings that body comes up with. I was slightly surprised to see that Deirdre Heenan had tweeted that Labour did not have any policies, which I thought was quite an unusual start to the commission’s work. It is important to recognise that in this country we have had the largest annual fall in unemployment since records began. In Northern Ireland, the claimant count has fallen for 21 consecutive months. That is providing more peace of mind and security for thousands of people in Northern Ireland and it is the result of the Government’s long-term economic plan.

[Chris Evans (Islwyn) (Lab/Co-op)]

4. What steps she is taking to tackle youth unemployment in Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The October labour market survey reports that the unemployment rate in Northern Ireland for 18 to 24-year-olds has come down 4.2 percentage points over the year. The Government’s policy of reducing the largest structural deficit in UK peacetime history is delivering a sustainable economic recovery and assisting young people into employment.

[Chris Evans]

As the Secretary of State will know, youth unemployment is still stubbornly high in Northern Ireland. Jobs Growth Wales has created 12,000 opportunities for young people living in Wales. Has she had the chance to study the programme with the Executive, with the hope of adopting it?

[Mrs Villiers]

The Government are working hard to support a balanced economic recovery right across the United Kingdom. We welcome the fact that the UK economy is now growing faster than any major developed economy and that we have seen record falls in unemployment. We will continue to work hard on reducing the deficit, keeping mortgage rates low and reducing business taxes to encourage employers to take on more people in the workplace, particularly young people.

[Mr William Bain (Glasgow North East) (Lab)]

9. PricewaterhouseCoopers has noted that unemployment in Northern Ireland is falling at half the rate of the rest of the United Kingdom. Will the Secretary of State discuss with the Northern Ireland Executive some specific proposals, such as Labour’s plan for a one-year national insurance tax break for all small firms that take on new workers? Would that not help to promote employment in Northern Ireland and the rest of the UK?

[Mrs Villiers]

We are doing better than that. We are actually cutting national insurance contributions for employers across the whole of the United Kingdom. As from April, employers in Northern Ireland—just as in the rest of the UK—will not pay any national insurance contributions at all on the people they employ who are under 21. That is real action, helping young people in Northern Ireland into jobs.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Young people in Northern Ireland can be exploited rather than given employment opportunities. Tomorrow night in Londonderry an event is scheduled to mark the 40th anniversary of a young man of 16, having been recruited to the IRA, killing himself in a bomb explosion. Does the Secretary of State agree with me that Sinn Fein representatives in Northern Ireland should be helping to create employment opportunities for young people rather than trying to rewrite history about a small number of young people being given instructions to carry out bomb attacks who ended up destroying their own lives and the lives of others?

[Mrs Villiers]

I urge anyone who is planning any form of commemoration to consider the impacts of their decisions and choices on people from all sides of the community. I certainly have concerns about the sort of commemoration to which the hon. Gentleman referred. As well as addressing matters relating to the past, it is important for both the Executive and the UK Government to focus strongly on sustaining the recovery in Northern Ireland’s economy. It is going well—unemployment is falling—but there is, of course, more to do to tackle youth unemployment. This Government will continue to do so through their long-term economic plan.

[Andrew Gwynne (Denton and Reddish) (Lab)]

5. What recent assessment she has made of the effect of the non-implementation of welfare reform on the Northern Ireland Executive’s budget.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The failure of the Executive to implement welfare reform means that Northern Ireland is retaining a system that too often fails the people it is supposed to help by trapping them in dependency and discouraging work. This failure also means that financial savings are being forgone and other areas of public spending in Northern Ireland are being cut as a result—for example, the budget for policing and justice.

[Andrew Gwynne]

I think I am grateful to the Secretary of State for that garbled answer. Will she confirm that she is in agreement with all the Northern Ireland parties that the bedroom tax is a pernicious policy? Given that, will she tell us what proportion of the overall budget cuts proposed for Northern Ireland are directly related to the non-implementation of welfare reform?

[Mrs Villiers]

I believe that of the £87 million of savings forgone for this year, around £16 million relates to the spare room subsidy, which is all about fairness to ensure that the rules for the social sector are the same as those for the private rented sector. I do not think that is an unreasonable position. The reality is that our welfare reforms are about encouraging people into work, reforming the system to ensure that work always pays and ending the perversities and arbitrary cliff edges that saw people trapped on benefits under the old system, which Labour manifestly failed to reform.

[Ian Paisley (North Antrim) (DUP)]

Sinn Fein MPs claim to be fighting welfare reform. When did the Secretary of State last directly challenge Sinn Fein MPs to come to this House, to take up their places and to fight it from these Benches? If they are not prepared to do that, when is she going to remove the £600,000 a year they receive for not coming to this House?

[Mrs Villiers]

I think it would be far better if Sinn Fein took their seats. That would give them the opportunity to debate these important Northern Ireland matters. I know that the contribution of all the Northern Ireland parties who take their seats in this House to the debate on welfare reform was very much welcomed. Now is the time to get on with this. Failing to implement welfare reform is putting severe pressures on departmental spending in a range of other areas for the Executive, including policing.

[Dr William McCrea (South Antrim) (DUP)]

7. When she expects the National Crime Agency to be fully operational in Northern Ireland.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

Justice Minister Ford has submitted a paper to the political parties which sets out enhanced accountability arrangements for the National Crime Agency in Northern Ireland. I would urge all parties in the Executive to accept the full implementation of the NCA’s remit without further delay.

[Dr McCrea]

Bearing in mind last week’s statement by the Under-Secretary of State for the Home Department, the hon. Member for Staffordshire Moorlands (Karen Bradley) that the consequences of not acting on the NCA was potentially devastating, with drugs and violence on our streets, children being abused and vulnerable people defrauded, how can the Secretary of State justify that Minister going on to say

“If agreement is not reached, we will have to accept that the NCA will not be fully operational for the foreseeable future”?—[Official Report, 22 October 2014; Vol. 586, c. 967.]

Surely that is an intolerable situation, handing a veto to Sinn Fein.

[Mrs Villiers]

The Government take their obligations under the devolution settlement very seriously, but there is no escaping the fact that this is a matter for the political parties in Northern Ireland to decide, and that choice has consequences. As the hon. Gentleman said, the decision by the two nationalist parties to reject the NCA’s remit means criminals not arrested, assets not seized, and victims suffering.

[Mr Speaker]

Order. These are very important matters appertaining to Northern Ireland. Let us have a bit of quiet for Lady Hermon.

[Lady Hermon (North Down) (Ind)]

Thank you, Mr Speaker. That was very gracious of you.

In the absence of the operation of the National Crime Agency in Northern Ireland, what steps are this Government taking to ensure that Northern Ireland does not again become a honeypot for human traffickers, drug traffickers and other gangs of organised criminals?

[Mrs Villiers]

We have been working with the NCA, Minister Ford and the Police Service of Northern Ireland to ensure that the NCA can do everything possible to help Northern Ireland, within the constraints of being able to operate only within the devolved field. It is able to do some work on human trafficking, for example, and significant effort has gone into ensuring that it can take over the cases involving proceeds of crime that it inherited from the Serious Organised Crime Agency. We are doing all that we can to maximise the support that the NCA can give in Northern Ireland, within the limitations set by the Executive.

[Jim Shannon (Strangford) (DUP)]

8. What steps she is taking to ensure that the change in Northern Ireland’s unemployment rates is similar to that of the rest of the UK.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

Northern Ireland’s claimant count has fallen for 21 consecutive months, which shows that the Government’s long-term economic plan is working. The latest labour market survey shows that the level of unemployment in Northern Ireland is 6.1%, which is only marginally higher than the United Kingdom figure.

[Jim Shannon]

As the Secretary of State well knows, unemployment has been reduced in parts of Northern Ireland, but we can do more. The agri-industry in my constituency can provide more jobs if it is helped to do so, and the same applies to the pharmaceutical industry and tourism. What can the Secretary of State do, along with other Ministers here on the mainland, to enable those sectors to expand and provide more employment for young people and those aged over 50?

[Mrs Villiers]

One of the main ways in which we can help is through the tax system. That is why we have cut corporation tax, which will be the lowest in the G20 by April, and why we are cutting job taxes for employers for the benefit of, in particular, young unemployed people. We think that it is vital for more people to have the security of a pay packet to take home to their families, and our tax policy has been driven by that.

[Sammy Wilson (East Antrim) (DUP)]

10. What the cost to her Department was of the Parades Commission in each of the last five years.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

The cost of the Parades Commission was £1.01 million in 2013-14. In the preceding four years it was £1.37 million, £0.93 million, £1.07 million and £1.01 million respectively.

[Sammy Wilson]

Rather than reducing the tension surrounding parades, the Parades Commission has actually contributed to further tension because of its bias against the Orange Order, its incompetence, and its propensity to give in to republican protesters. Does the Secretary of State agree that we now need a root-and-branch change in the way in which contentious parades are dealt with in Northern Ireland?

[Mrs Villiers]

The Parades Commission faces a hugely difficult task in adjudicating on highly sensitive parades, and I think that it performs that task well. If the political parties in Northern Ireland want a different system for parading, that is open to them, but the only way in which to achieve that is to get round the table and consider future reform in the cross-party talks that are now under way.

[Naomi Long (Belfast East) (Alliance)]

11. What lessons have been learnt from the previous talks processes, and what outcomes she expects from the current round of talks.

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

Previous talks processes have demonstrated what can be achieved when political parties engage seriously and constructively, and are prepared to make difficult decisions in order to reach an accommodation.

[Naomi Long]

The lack of serious political engagement in the current round of talks, which is characterised by the fact that parties are still squabbling over whether or not they are attending the talks, does not bode well for the future. Meanwhile, in my constituency, a young man has been hospitalised with head injuries, police officers have been injured, and pensioners have been terrified in their own homes after three successive nights of violence. What sanctions will the Secretary of State impose on the parties that fail to show the will to resolve the outstanding issues in this process?

[Mrs Villiers]

It is important that all the five parties are engaging in this talks process, and I would encourage them to take this very seriously. It is crucial that we find a way forward on these matters. I wholeheartedly condemn what has gone on in the hon. Lady’s constituency not just over the last few days but over a series of weeks. There have been continuing problems with that interface. It is utterly disgraceful that the teenage boy was hospitalised as a result of this sectarian violence, and I hope it will be tackled with the full force of the law.

The Prime Minister was asked—

Kincora Boy’s Home (Historical Institutional Abuse)

Theresa Villiers Excerpts

Tuesday 21st October 2014 Written Statements

[The Secretary of State for Northern Ireland (Mrs Theresa Villiers)]

I have been giving careful consideration to the best way to address the allegations, some of which involve security agencies, in connection with abuse at Kincora Boys’ Home in Belfast in the 1970s.

The sexual abuse of children, or any tolerance by people in positions of authority of such activity by others, is abhorrent. I urge anyone with information about these matters to come forward to the police.

A number of people have proposed that the independent inquiry panel into institutional failures––“the inquiry panel”––in respect of child sexual abuse to be chaired by Fiona Woolf CBE set up by my right hon. Friend the Home Secretary, is the most appropriate vehicle to establish the facts concerning Kincora. The remaining appointments to the panel and its terms of reference are being announced today.

There is already in place, however, the Northern Ireland Historical Institutional Abuse Inquiry––“the inquiry”––appointed by the Northern Ireland Executive and chaired by Sir Anthony Hart. I believe that this inquiry is the better forum for the allegations concerning Kincora to be investigated, and we should not seek to take them out of its remit.

The protection of children is a devolved matter and legislation was enacted by the Northern Ireland Assembly to establish the inquiry.

The inquiry has already received a number of reports relating to allegations of abuse that took place at Kincora. It has wide powers of compulsion under section 9 of the Act to require persons and bodies to produce evidence, although, respecting the fact that it is a body established by the devolved authorities, those powers do not extend to the UK Government. The Home Office inquiry panel will have no such powers of compulsion, unless a decision is made to turn it into a statutory inquiry at some point in the future.

In addition, because the protection of children is a devolved matter, it would clearly be less appropriate for the inquiry panel to make recommendations for Northern Ireland concerning the running of the child protection system there.

Because the inquiry’s powers of compulsion do not extend to the UK Government, concern has been expressed as to whether they will be able to deal effectively with the allegations that have been made of misconduct and cover-up regarding the horrific events that occurred at Kincora.

I have discussed these issues with ministerial colleagues and can confirm that there will be the fullest possible degree of co-operation by all of HM Government and their agencies to determine the facts. All Government Departments and agencies which receive a request for information or documents from the inquiry will co-operate to the utmost of their ability in determining what material they hold might be relevant to it, on matters for which they have responsibility in accordance with the terms of reference of the inquiry.

My Department has already started this process by disclosing a list of files to the inquiry held by the NIO which relate to the Kincora Boys’ home. In parallel, the MOD has begun work to establish whether it holds any documents which are relevant to the inquiry and other UK Departments and agencies will do likewise.

It will be important for the inquiry to determine whether either the Security Service or the MOD have documents which are relevant to it. The detailed modalities for achieving this are being worked upon as a matter of urgency.

We will resolve as quickly as possible other issues Sir Anthony has raised as follows. We will ask officials from the relevant Departments who disclose documents to his inquiry to make a witness statement confirming that all the relevant documents and information sought by the inquiry have been produced to it, or, if no longer in existence, accounted for. We will address the question of how the necessary extra resources will be made available to his inquiry in consultation with the Executive. And we will discuss with the Attorney General for England and Wales whether undertakings in the usual form can be given, as appropriate, to give immunity from prosecution under the Official Secrets Act to any person who is requested to give evidence to the inquiry.

With my right hon. Friend the Home Secretary, I am determined that no stone should be left unturned to investigate such serious allegations of institutional failure. We currently believe that the Historical Institutional Abuse Inquiry is the best place to do that in respect of Kincora and I, and my officials, will work closely with Sir Anthony to help to achieve that.

We will monitor carefully the extent to which the inquiry is able to make progress in respect of material relevant to Kincora. We will look at the situation again if the inquiry tells us it is unable to determine the facts. In the event that this were to occur, there remains the possibility of seeking agreement to bring the Kincora allegations within the terms of reference of the inquiry panel, along with the option of converting it into a statutory inquiry.