Amendment of the Law

William Cash Excerpts

Thursday 19th March 2015 Commons Chamber

[Vince Cable]

The hon. Gentleman is right. I do not think that the shadow Chancellor mentioned the word “employment”, which is interesting because when we first entered office we heard nothing other than the threat of mass unemployment.

Let me pursue the argument about how we will deal with the deficit in the future. It is perfectly right to say that the parties could debate our actual priorities. To be fair to my Conservative colleagues, they are quite explicit about how they wish to deal with the deficit by relying on reductions in public spending. They recognise, as we do, that there is still a significant problem left. This morning, my right hon. Friend the Chief Secretary set out a different way of achieving the same objective. We all have a responsibility to deal with the problem, and we suggest going about it through a different mixture of taxation and spending. The Conservative approach is to deal with it through spending cuts, and given where they come from politically, that is perfectly understandable. Our approach is different: it is a mixed approach, with a ratio of 55% spending increases to 45% tax increases.

With that different balance, we could do more for the NHS. We have talked to Simon Stevens about the finances required to sustain services, including the extra £8 billion and the commitment on mental health. As far as my Department and its work in supporting growth is concerned, I can say—I do not know what my shadow can say, because he is not in the Chamber—that, on such a trajectory, we could sustain spending on the Budget headings that support growth. Those headings cover the industrial strategy and business support; financial interventions, such as the business bank, the green investment bank and the regional growth fund; innovation, which we need to double by the end of this decade if we are to be competitive internationally; science and research, which we plan to grow in real terms, and which the Chancellor has shown a particular interest in and whose budget he supports; adult skills, further education colleges and apprenticeships; and higher education teaching, research and student support. Those are my priorities, and I am very interested to hear what the Opposition’s are. I think their priority is tuition fees, and I will make a little analysis of how that will be done in a moment.

[Sir William Cash (Stone) (Con)]

My right hon. Friend made a very important speech relating to banks, particularly in rural areas. Will he be kind enough to give us a few extra thoughts on that question? For example, the last bank in Eccleshall in my constituency has been closed. Does he not regard that as a very retrograde step? It is very important to maintain facilities for banking in rural areas.

[Vince Cable]

The hon. Gentleman is absolutely right to say that that is a very retrograde step. The Economic Secretary and I have had discussions with the banks about how to deal with that problem, and about how to mobilise the post office network—under this Government, it has been saved and stabilised—to provide an alternative. I am not absolutely certain, but I hope that an announcement will be made within the next few days to protect the position of the last bank in the village.

Bank Closure (Stone)

William Cash Excerpts

Tuesday 3rd March 2015 Westminster Hall

[Sir William Cash (Stone) (Con)]

It is a great pleasure to serve under your chairmanship, Mrs Main.

Following the news of the decision to close the Eccleshall branch of NatWest bank, I called for a meeting with the head spokesman for Royal Bank of Scotland, which owns NatWest. Eccleshall is in my constituency, and I support my constituents to the hilt in this important matter, not least because the branch is the last bank in Eccleshall. I urge RBS to keep the essential facility open as a key service. My constituents in Eccleshall, including businesses, the elderly and the infirm, need access to bank services. They should not be made to travel, using cars and increasing traffic; their local banking facilities should be in the town where they live.

Eccleshall is a vibrant, attractive place with many small businesses, pubs and restaurants, and farmers nearby, all of whom need banking facilities daily. The bank will be keeping the ATM—I asked for how long—and has reached some agreement with the Post Office, but our local concerns in Eccleshall far outweigh any of that.

Accounting procedures within the bank’s internal systems remove large chunks of income, such as business, wealth management and mortgages, from the branch income measurement. As a result, only large city branches are likely to be shown as profitable. Were interest rates to rise again to a higher rate, would not small town branches such as Eccleshall become profitable again? Furthermore, banks go on and on about their good customer service, while often making huge losses—even when not in turmoil—but closing a bank in a place such as Eccleshall is the opposite of good customer service.

Stafford borough council’s letter on the matter followed an emergency motion and stated:

“The council expresses its disappointment at the decision by National Westminster Bank to close its branch in Eccleshall. This is the ‘last bank’ in Eccleshall and leaves all residents, particularly the elderly, vulnerable and those in remote areas without an adequate banking service.”

Such an emergency motion is a most unusual step for a borough council. It was also supported by 780 signatures on a petition and, indeed, I will be presenting a parliamentary petition after the debate.

Letters went from the council to the chief executives of RBS and NatWest, copying in the Chancellor, the Secretary of State for Communities and Local Government and the Secretary of State for Business, Innovation and Skills. In addition, I wrote to the Minister for Business and Enterprise. I asked and continue to ask RBS to review its decision in the light of those letters and the strength of feeling against the closure. In its letter to the NatWest chief executive, Stafford borough council requested that the bank review its decision. In 2010, RBS as a whole had committed to maintain a bank in communities where—I emphasise—it was the last branch in town, even identifying 168 communities where it was already the only branch in town. In 2014, however, at least 25 of those were closed, and Eccleshall appears to be facing the same fate soon. Through the Minister, I ask RBS not to close our NatWest branch.

In the past five years alone, 431 communities have lost their last surviving bank branch. The nearest alternative NatWest branches for Eccleshall residents are in Stone, which is a 12-mile round trip; Stafford, a 16-mile round trip; Trentham or Newport, each a 19-mile round trip; and Market Drayton, a 25-mile round trip. The banks seem to want to accelerate the rate of closure, especially in rural communities, in spite of the speech by the Secretary of State for Business, Innovation and Skills the other day, and what about the national NatWest pledge not to close the last branch in town? Why can RBS not branch-share, while maintaining the Eccleshall branch to achieve its existing targets? We only need the one branch. The fact that NatWest is part of RBS, with all its historic difficulties, only makes the proposed closure worse.

My broader personal interest derives from the fact that my family founded the Abbey National building society and the National Provident in the mid-19th century, and in my view and that of many of my constituents, banks also have a social purpose. NatWest data claim to show low usage of the Eccleshall branch, but the data is contrary to local reports. People have noticed that queues for the counter service are often extremely vibrant and visible.

The post office, which is intended to offer substitute services, according to the bank, can undertake a wide range of counter transaction services, but it does not have significant capacity to provide a real alternative. The queuing area in the post office is too small and it has only one full-time staff member and two counter positions. How long will the queues be when businesses pay in their weekend takings, especially the pubs and restaurants, on Mondays? As I said, there are plenty of pubs and small businesses in my constituency, so the banking of weekend takings will make things worse, especially for the disabled and elderly if coinciding with pension days and so on.

Banks offer a core service to all in the community, not only to individual people, but to businesses and groups, whether families, single people, the elderly, the infirm, farmers and so on—every stratum of society. If there is a mobile banking service limited to an hour, what happens if people cannot get to Eccleshall at that time? The post office has no disability compliance and wheelchair users cannot obtain access, while its standard paying-in maximum for business is £1,000 per day, which is far below what the pubs need to pay in each Monday. Also, the bank branch can amend or cancel standing orders, but the post office cannot.

On communications about the closure, I have been told that five NatWest Eccleshall business customers merely received a letter and that no meetings have been held. On internet banking, Eccleshall does not fit a pattern of internet-subscribed services and telephone banking. My constituents will be forced to use online or telephone banking services. Many do not have access to the internet and do not feel safe talking to people on the telephone about personal finance.

There has been no effective community involvement in the closure decision. If my constituents are to have a growing and diverse community in their local area, with local employment and services and increased housing, they need to be supported by a local bank in the community, rather than decision making being taken away from their people and business. The Eccleshall community is a caring one, and as I go around the town I know that people feel strongly about the issue. My constituents in Eccleshall value the local NatWest branch and want to retain it. The town is a small, vibrant community. I urge the Minister to intervene with RBS to recommit to maintaining the “last branch in town” policy commitment.

The chief executive of RBS, Mr Ross McEwan, wrote to me last week with the RBS 2014 full-year results. Part of that correspondence refers to a section in the results entitled “A better bank for customers”, in which he says that for too long UK banks have focused on “market share”, rather than “customer care”:

“It is why over the last year our people have worked hard to embed this ‘customer first’ mentality into everything we do as a bank…we are determined to reach our aspiration of being number 1 for customer service, trust and advocacy”—

by 2020—

“It won’t be easy, but I firmly believe it is doable.”

At the end of the letter, he says:

“We will continue to focus on doing what is right for our customers.”

All I have to say is: we shall see.

RBS has an operating profit of £3.5 billion, with an underlying operating profit that increased by £l billion in 2014, less the £2 billion in fines—the ones we know about. That is not good. Thus, in 2015, we might reasonably expect profits to exceed £5 billion, but what about my constituents and their service from the bank in Eccleshall? The chairman and chief executive both reiterated their “customer first” policy. The chairman stated that NatWest must become the No. l bank for trust, service and advocacy, with the chief executive adding that

“the customer has to come first in everything that we do”.

The chief executive met the Chancellor to discuss bank branch closures on the very same day that I was meeting NatWest executives to discuss the closure of the NatWest bank in Eccleshall. That was on Tuesday 27 January 2015. The Chancellor called for a minimum standard for managing any bank branch closure. That speaks for itself.

I also now have problems with closures by the Co-operative bank. It, too, has a poor history. I met with the head of branch network for the Co-operative bank last Wednesday to oppose its decision to close branches at Blythe Bridge, Cheadle and Stone in my constituency. The nearest alternative branch will now be in Longton, which is approximately eight miles from all the other branches. The branches are scheduled to close by the end of July. The Co-operative bank also claims that its customers are its main priority, but how can customers be its main priority if it is removing banks in such key local towns? It says it will write to affected customers to let them know about the changes and the alternatives available to them.

I understand that Bob Rickert, the chief operating officer tasked with helping restructure the bank, left it last week, and last October saw the departure of its chairman, Richard Pym. The Co-operative bank is struggling to turn itself around after facing a £1.5 billion financial black hole, which we have all heard about and was quite clearly self-induced. The bank is not expected to make a profit until at least 2017, and in December, it failed the Bank of England stress tests, designed to scrutinise banks’ ability to weather a downturn.

My constituents in Stone do not want the Co-op bank in their town to close. They banked with its predecessor for 30 years and want a full local branch. The post office is not a good alternative, as it could not offer a full service and the queues are long. The same applies in Cheadle and Blythe Bridge.

I call on the Minister to intervene by writing to the banks and to do everything possible to try to prevent the proposed Co-op closures in Cheadle, Stone and Blythe Bridge, as well as the closure of the NatWest branch in Eccleshall.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

It is a great to serve under your chairmanship today, Mrs Main. I congratulate my hon. Friend the Member for Stone (Sir William Cash) on securing this debate and on presenting his case as compellingly as he always does. He has made good points to which I am extremely sympathetic. I well understand—I have my own constituency cases on the issue—how people feel when a bank in their area is to be closed. Bank branches are often felt to be at the heart of a local community. I appreciate that, as he said, the people of Eccleshall have produced a petition with close to 800 signatures expressing their concern at the loss of their bank branch. Each of those people, and those in the neighbouring communities in Blythe Bridge, Cheadle and Stone who are losing a branch of the Co-operative bank, will feel, quite rightly, that their town is losing a little piece of its identity.

Eccleshall has had a NatWest branch since 1970, and has had a bank branch operating since the 1870s on what I can well imagine is a well loved local site, so the situation must be unsettling for local people. I am deeply concerned about closures not just in my hon. Friend’s constituency but across the country. I therefore want to tell him a bit about what I and others in the Government have been doing to try to make sense of the situation and to protect the important local access to banking services that so many people need and want.

At the same time, my hon. Friend will appreciate that the way we bank is going through an unprecedented period of change. Customers are reducing their use of high street branches and embracing new online and mobile technology. Although we all recognise that decisions on where branches are located are commercial ones, I assure him that the Government can set the tone, stressing the importance of day-to-day banking services to everyone’s daily life. As Economic Secretary, I have made that a personal priority and have worked hard to make sure that the vital services that the banking industry provides remain as widely available as possible.

NatWest has set out its case that the number of transactions at its Eccleshall branch is low compared with the rest of its branch network, but I absolutely recognise the disappointment felt by customers more broadly in the local area at the news of the closure. People often feel that there is inadequate consultation with the community and local stakeholders who may be affected. NatWest has followed current best practice, giving customers a three-month notice period and contacting its most active and most vulnerable customers to help them find alternative ways to bank. However, if people are to feel that their concerns have been heard, and if local businesses are to feel that the services underpinning their livelihoods are safe, banks must go much further. That is why I have been working to encourage the industry to adopt a new protocol that each bank will undertake to follow so as to mitigate the impact of a local branch closure.

[Sir William Cash]

Did my hon. Friend hear the interview on this morning’s “Today” programme with the chief executive of Barclays bank, in which he talked about the amount of money he is earning and about bank bonuses, which are also under wider discussion? The chief executive and chairman of the Royal Bank of Scotland keep making statements about customer service—we have heard much the same sort of thing from the Co-op—but that does not help my constituents or anyone else in the country. They then find a little edge here or there with regard to the profitability of a particular branch. Does she agree that if banks want a reputation that is worth maintaining, it will involve making sure that people in communities such as Eccleshall have actual access to the kinds of services that the banks say they are offering in their annual reports and in the public arena—on radio and television?

[Andrea Leadsom]

I agree to a great extent with my hon. Friend. There is no doubt that banks are keen to restore their damaged reputations and that the big UK banks in particular are determined to show that they are there for their customers. I therefore agree with what he says about the need to make sure that they are addressing the needs of those customers and not looking only at commercial realities. Equally, however, I know he will agree that it is not for Government to intervene in private businesses to force them to retain completely unviable branches. We need instead to make sure that banks pay careful attention to the balance between commercial realities and the needs of local communities.

[Sir William Cash]

On Government activity, I seem to remember only a few years ago an extensive bail-out for RBS. There are also questions in relation to the Co-op. It seems to me that when banks want help—and by help, I mean monumental bail-outs—it comes from the Government and the taxpayer, yet when they say they are putting customer service first they close small but important branches in places such as Eccleshall, which needs its branch.

[Andrea Leadsom]

I am grateful to my hon. Friend for those further remarks. Again, I completely agree that banks have a long way to go to restore confidence that they mean what they say when they talk about customer service. However, again, he will understand if I do not say that a bank must open a branch in this place or that. Those decisions are commercial ones. The Government need to ensure that banks balance the needs of customers with commercial realities.

I mentioned that I have been urging and encouraging the industry to adopt a protocol that each bank would follow to mitigate the impact of a local branch closure. The protocol should not simply set out a series of steps for individual banks to take before they close a branch, but should raise the game of the industry as a whole, including how it listens to the concerns of its customers, and, crucially, how it responds. I am pleased to say that discussions on the protocol are at an advanced stage, and agreement is expected soon, thanks to the help of the trade body for banks, the British Bankers Association. We are hopeful that we will get something positive that will address some of the issues my hon. Friend raised.

My hon. Friend mentioned the availability of banking services through local post offices. I completely understand that for customers having a local post office is not the same as having a local bank branch. However, the services available through the Post Office offer most customers a real opportunity to continue to bank locally. We can and must do more to ensure that everybody understands and is comfortable with using the banking services available to them through their post office. For many customers, the Post Office can provide access to their bank account, including the ability to withdraw money, deposit cash and cheques and check their balance at all 11,700 of its branches throughout the UK—a huge network.

In some respects the Post Office can offer wider customer benefits. I know that a number of post offices, including in my constituency, have much longer opening hours than a typical high street bank and provide services seven days a week. Recently, I met the head of the post office network to talk about moves to improve the network, to provide more customer-facing space and more security, and to improve the range of financial services that it offers. The Post Office is working with its postmasters to ensure that facilities are upgraded and that appropriate security is put in place to enable customers to bank safely, and it is determined to do more to ensure that essential banking facilities remain available in as many communities as possible. The Government have committed almost £2 billion to protecting and modernising the post office network.

I believe that we can continue to improve the banking services that the Post Office offers and make them more consistent for customers, which is why I have encouraged the British Bankers Association and the Post Office to look at a standardised approach to counter banking services available through post offices. The Government expect a report on the progress of those talks in the near future.

My hon. Friend raised concerns about the future of banking beyond the traditional branch network, and about the services that will be accessible to all. It is vital that we ensure that vulnerable customers—particularly the elderly and those in rural constituencies—have suitable access. In Eccleshall, I believe that NatWest has made provision for a change to an existing mobile bank route, so a more traditional NatWest presence will still be available in the town.

A whole new world of banking is becoming available, and we should be excited about the opportunities that online and mobile technology can provide. The UK is positioning itself as a world leader in financial technology, and we can already see signs of the benefits that all the developments in financial technology can bring. For example, since April 2014, customers can securely transfer money instantly to other bank accounts using only their mobile phone number as identification, which means that they do not have to access a computer or travel to a branch to make a payment. From 31 July 2016, customers will be able to use their telephone to photograph cheques for payment into their bank account, making life easier for customers in remote areas. Several banks are taking action to help their customers use those new technologies with confidence.

We are also making progress on ATM provision. The number of free-to-use ATMs is at an all-time high, and 97% of withdrawals are now made free of charge. I understand that in Eccleshall NatWest will still provide an ATM in the local community. There are also two other free-to-use ATMs within 1 mile of the branch that is to close.

More generally, it is often the most isolated or disadvantaged communities that have the worst access to free-to-use ATMs, so the Government are working closely with the LINK network’s financial inclusion programme to subsidise free-to-use cash points in more than 1,400 remote and deprived areas across the UK. Importantly, members of the public can nominate their area for inclusion. I believe that the ATM network can play a more important role in addressing some of the concerns voiced by consumers whose local branch is closing.

On a trip to India last year as part of my job as Economic Secretary, I was impressed at the widespread use of smart ATMs, which have far greater functionality than those we tend to have in the UK. They allow customers not only to make withdrawals and deposits and check their balances, but to carry out a wider range of transactions, such as purchasing train tickets and bus passes. Progress in the UK could be made by simply ensuring that ATMs allowed customers to deposit cash. That facility would be particularly beneficial to local small and medium-sized enterprises if it were provided in a way that allowed depositors to feel safe and secure—for example, within the confines of a Post Office, a store or an e-lobby. I have raised that issue with the banking sector, and my officials are engaged with LINK to find a way forward.

In conclusion, although the Government recognise that individual branch closures are commercial decisions and must continue to be so, I fully understand the disappointment felt in Stone and other communities when local bank branches close. There is no doubt that customers’ usage of banking services is going through an unprecedented period of change, but it is vital that we ensure that vulnerable customers—particularly the elderly and those in rural constituencies—have suitable access.

I want to reassure my hon. Friend that it will continue to be my personal priority for the remaining weeks of this Parliament to ensure that the vital services that the banking industry provides remain as widely available as possible, wherever people live. I fully intend to make further progress on the initiatives to get banks to create a new protocol, to look at what services the Post Office provides, and to push further on using technology to provide solutions to businesses and customers in rural areas. Once again, I thank my hon. Friend for raising these important issues in this vital debate.

Question put and agreed to.

Money Creation and Society

William Cash Excerpts

Thursday 20th November 2014 Commons Chamber

[Sir William Cash (Stone) (Con)]

My hon. Friend is making an incredibly important speech. I only wish that more people were here to listen to it. I wonder whether he has read Nicholas Wapshott’s book about Hayek and Keynes, which deals very carefully with the question that he has raised. Does he agree that the unpleasantness of the Weimar republic and the inflationary increase at that time led to the troubles with Germany later on, but that we are now in a new cycle which also needs to be addressed along the lines that he has just been describing?

[Steve Baker]

I am grateful to my hon. Friend. What he has said emphasises that the subject that is at issue today goes to the heart of the survival of a free civilisation. That is something that Hayek wrote about, and I think it is absolutely true.

If I were allowed props in the Chamber, I might wave this 100 trillion Zimbabwe dollar note. You can hold bad politics in your hand: that is the truth of the matter. People try to explain that hyperinflation has never happened just through technocratic error, and that it happens in the context of, for example, extremely high debt levels and the inability of politicians to constrain them. In what circumstances do we find ourselves today, when we are still borrowing broadly triple what Labour was borrowing?

--- Later in debate ---

[Steve Baker]

The hon. Gentleman is quite right, and I welcome the spirit in which he asks that question. The vast majority of us, on both sides of the House, live on our labour. We work in order to obtain money so that we can obtain the things we need to survive.

The hon. Gentleman pre-empts another remark that I was going to make, which is that there is a categorical difference between earning money through the sweat of one’s brow and making money by just creating it when lending it to someone in exchange for a claim on the deeds to their house. Those two concepts are fundamentally, categorically different, and this goes to the heart of how capitalism works. I appreciate that very little of this would find its way on to an election leaflet, but it matters a great deal nevertheless. Perhaps I shall need to ask my opponent if he has followed this debate.

My point is that if a great fountain of new money gushes up into the financial sector, we should not be surprised to find that the banking system is far wealthier than anyone else. We should not be surprised if financing and housing in London and the south-east are far wealthier than anywhere else. Indeed, I remember that when quantitative easing began, house prices started rising in Chiswick and Islington. Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole. That distribution effect is key to understanding the effect of new money on society. It is the primary cause of almost all conflicts revolving around the production of money and around the relations between creditors and debtors.

[Sir William Cash]

My hon. Friend might be aware that, before the last general election, my right hon. Friend the Member for Wokingham (Mr Redwood) and I and one or two others attacked the Labour party for the lack of growth and expressed our concern about the level of debt. If we add in all the debts from Network Rail, nuclear decommissioning, unfunded pension liabilities and so on, the actual debt is reaching extremely high levels. According to the Government’s own statements, it could now be between £3.5 trillion and £4 trillion. Does my hon. Friend agree that that is extremely dangerous?

[Steve Baker]

It is extremely dangerous and it has been repeated around the world. An extremely good book by economist and writer Philip Coggan, of The Economist, sets out just how dangerous it is. In “Paper Promises: Money, Debt and the New World Order”, a journalist from The Economist seriously suggests that this huge pile of debt created as money will lead to a wholly new monetary system.

I have not yet touched on quantitative easing, and I will try to shorten my remarks, but the point is this: having lived through this era where the money supply tripled through new lending, the whole system, of course, blew up—the real world caught up with this fiction of a monetary policy—and so QE was engaged in. A paper from the Bank of England on the distributional effects of monetary policy explains that people would have been worse off if the Bank had not engaged in QE—it was, of course, an emergency measure. But one thing the paper says is that asset purchases by the Bank

“have pushed up the price of equities by as least as much as they have pushed up the price of gilts.”

The Bank’s Andy Haldane said, “We have deliberately inflated the biggest bond market bubble in history.”

--- Later in debate ---

[Sir William Cash]

With reference to the Treasury Committee, does the right hon. Gentleman see a potential role for some form of joint Committee, perhaps with the Public Accounts Committee, whose origins are to do with taxation and spending? Does he think that broadening scrutiny a little in that direction might be helpful so that we get the full benefit of the all-party agreement of both Committees?

[Mr Meacher]

That is a helpful intervention. Although it is a relatively big part of what I am proposing, it is not for me to suggest exactly what the structure of accountability should be. I would be strongly in favour of increasing it as the hon. Gentleman proposes. Until this House is content that it has a proper channel of accountability which is effective in terms of the way our financial system is run, we should bring in further changes to the structure of accountability as may be necessary, such as along the lines that he suggests.

On lending to businesses, the experience that we have had in the past half-decade has been very unsatisfactory. Under a sovereign monetary system, the central bank would be empowered to create money for the express purpose of that funding role. The money would be lent to banks with the requirement that the funds were used for productive purposes, whereas lending for speculative purposes—for example, to purchase pre-existing assets, either financial or property—would not be allowed. The central bank could also create and lend funds to other intermediaries—the hon. Member for Wycombe referred to this—such as regional or publicly owned business banks, which would ensure that a floor could be placed under the level of lending to businesses, which would be a great relief to British business, guaranteeing support for the real economy.

To avoid misunderstanding, I should add that within the limits imposed by the central bank on the broad purposes for which money may be lent, lending decisions would be entirely at the discretion of the lending institutions, not of the Government or the central bank.

I believe that a sovereign monetary system offers very considerable advantages over the current system. First, it would create a better and safer banking system because banks would have an incentive to take lower levels of risk, as there would be no option of a bail-out or rescue from taxpayers and thus moral hazard would be reduced. Secondly, it would increase economic stability because money creation by banks tends to be pro-cyclical, as I explained, whereas money creation by the central bank would be counter-cyclical. Thirdly, sovereign money crucially supports the real economy, whereas under the current system 83% of lending does not at present go into productive investment. I underline that three times.

EU Budget (Surcharge)

William Cash Excerpts

Monday 10th November 2014 Commons Chamber

[Mr Osborne]

As the hon. Gentleman should know, the rebate involves a discussion between member states and the European Commission, which is why we were discussing with the Commission, in parallel, the size of the British rebate. Frankly, any question from Labour Members about the rebate is a bit rich, given that they gave up half of it.

[Sir William Cash (Stone) (Con)]

My right hon. Friend is to be congratulated on getting rid of these punitive interest rates. I hope that he will refer the new rules that were decided at ECOFIN last Friday to my Committee so that we can scrutinise them properly. Is there any sound reason for our making any payment at all if those rules do not deal with the problem of other member states including their black economy in the statistical base that they use when putting forward their proposals? That greatly affects the whole basis on which the calculations are made.

[Mr Osborne]

My hon. Friend raises an important point about the quality of the statistics. It was raised by the European Court of Auditors last week; it was also made forcefully by the Dutch Finance Minister at ECOFIN. The key point is that we can examine the numbers, and if there are errors we will get money repaid to us at the end of next year.

Undeclared Work (Reasoned Opinion)

William Cash Excerpts

Monday 9th June 2014 Commons Chamber

[Mr William Cash (Stone) (Con)]

We are extremely conscious of the timetable this evening, and the fact that the whole business must be dealt with by at least 10.45 pm. We will do our best—at least, some of us will—to ensure that we get through the business as quickly as possible, but we must also have regard to what needs to be said.

The explanatory memorandum that the Minister has just discussed states:

“The Government is not yet persuaded that the proposed decision to require Member States to participate on a mandatory basis is consistent with the principle of subsidiarity and believes that participation in any platform should be on a voluntary basis.”

I know that further consideration is being given to that position, and as far as we are concerned the matter is of sufficient importance to be regarded as a breach of subsidiarity. That is our view, and the view of our legal adviser and the European Scrutiny Committee. The Minister added:

“The Government’s view is that the proposal lacks the empirical evidence base or analysis of structural failure at Member State or Union level which would support a case for intervention.”

We wish to underline the inadequacy of the Commission’s impact assessment, which acknowledges the absence of a clear “incidence chain” linking the establishment of the EU platform to a reduction in undeclared work, greater social well-being and better economic outcomes.

We also seek a clear explanation from the Government about their position on the content of the draft reasoned opinion prepared by the European Scrutiny Committee, as well as an indication of how they intend to use it in Council negotiations on the draft decision. Will member states continue to express a preference for voluntary participation in any EU platform on undeclared work? The Commission’s impact assessment indicates that most member states favour a voluntary approach.

We wish to press the Minister for a clearer indication of the scale and significance of the cross-border dimension in tackling undeclared work. In that context we bear in mind that, as she has said, there are justice and home affairs implications in respect of that and of whether there should be an opt-in. Will the Minister confirm that the Government will oppose any attempt in the general approach proposed to interfere in internal governance structures and the co-ordination mechanisms of national enforcement authorities responsible for tackling undeclared work?

I think that that is as much as needs to be said at this stage, but I wanted to put that on the record and make a general comment about reasoned opinions. I have been sceptical about reasoned opinions and the yellow card system for a long time—in fact, from the moment they were first put forward. We know that there are thresholds, but we were extremely disturbed when, in relation to the European Public Prosecutor’s Office, the threshold was passed by all member states and—surprise, surprise—the European Commission ignored that fact. The national Parliaments, which the Commission keeps telling us are so important, took the view that there was a breach of subsidiarity. On account of that it was assumed that the Commission would withdraw the proposal, but no such thing occurred.

I say that in general as we start the new parliamentary Session, because it is no good getting these grand statements—we are getting a lot at the moment—from the likes of Mr Juncker and company about the kind of European Union they want. There are very serious questions about the drive towards political union. If they want to trample on national Parliaments, when they put forward and achieve the threshold in terms of reasoned opinions and subsidiarity, and just ignore them, then I am afraid the increase in disaffection with the European Union will grow exponentially.

--- Later in debate ---

[Jenny Willott]

A number of the points that have been raised by hon. Members are very similar. First, it is important to put on the record that undeclared work is an extremely important issue across Europe. It is on a larger scale in some countries than others. The hon. Member for Edinburgh South (Ian Murray) asked what research had been undertaken on the levels of undeclared work in the UK. The most recent estimate for the UK was, I think, 1.7%—extremely low. In other member states the figure is significantly higher, so it is clearly a bigger issue in other states.

Cross-border working was mentioned by the hon. Member for Stone (Mr Cash) and the hon. Member for Edinburgh South. One of our concerns is that very little evidence has been put forward on the implications and requirement to take action on cross-border work. On the assessment of the numbers and the amount of detriment that can be attributed to them, we are not convinced that the data are particularly accurate. We have asked the European Commission to identify, in a much better way, the scale of the problem. The UK, alongside other member states, does a lot of work internationally across borders, in a completely voluntary way, to try to tackle these issues. A huge amount of work is done because, as responsible Governments across different countries, we all think it is really important to tackle this issue. We do not feel that the Commission has provided evidence that what is being done at the moment is not a good enough approach and we have not seen evidence to suggest that the problem is significantly larger. That is one of the main reasons why we feel that the Commission has not made the case for why this needs to be done at EU level, rather than at member state level.

The hon. Member for Stone asked about participation and about our position on the subsidiarity principle, given that we are saying that the position has changed. We still have concerns that the mandatory nature of the platform is a breach of the subsidiarity principle. However, as regards the operation, given that the only mandatory element is attendance at the platform, we now believe that the concerns we raised in explanatory memorandums about the requirements for member states to take action when it is for them to decide—it has been agreed in the negotiations that it should not be mandatory—are not such a problem for the UK. Yet we feel it is really important that any activity should remain voluntary rather than mandatory.

[Mr Cash]

Is the Minister saying that she still believes that, as far as the UK Parliament is concerned, there should be a yellow card for the purpose? The question is as simple as that.

Henry Thorley and HMRC

William Cash Excerpts

Thursday 18th July 2013 Commons Chamber

[Mr William Cash (Stone) (Con)]

I am holding this Adjournment debate in consequence of a very grave injustice that has been done to my constituent, Mr Henry Thorley, who is now aged 88, and in line with the fundamental principles of our constitution, namely redress of grievance and accountability, which go back to the earliest times of our Parliament.

I am appalled by the manner in which this matter has been handled because it strikes me that a case of this kind, relating to a man aged 88, whose correspondence has already been sent to the Chancellor of the Exchequer and to the Exchequer Secretary and has been handled by the person responsible in Her Majesty’s Revenue and Customs, the director of criminal investigation, Mr Donald Toon, does not provide the justice that I believe is owed to my constituent.

The case goes back to the 1970s—indeed, it goes back to a period when my predecessor, Sir Hugh Fraser, was the Member of Parliament for Stafford. I became the Member of Parliament for Stafford in 1984 and I am now the Member of Parliament for Stone, where Mr Henry Thorley resides. I sent to the Minister on 21 May a letter that I received, which summarised various points relating to the case in question. The case is simply explained. At Stoke-on-Trent Crown court in December 1979 Mr Thorley was convicted of theft arising from VAT returns. In 1980 the Court of Appeal quashed the conviction and Mr Thorley left the court utterly blameless.

It appears clear that from the outset the prosecution case was fatally flawed, and the prosecution knew it. A Customs and Excise official had conducted a satisfactory inspection for the period subsequently complained of, and said so in a written report. So, in the words of leading counsel,

“How any prosecution could thereafter be considered let alone persisted in beggars belief.”

He goes on to say that the prosecution of Mr Thorley was, he believed, motivated by malice and conducted in chaos. That is why I have raised the matter and why I am looking for a suitable response from my hon. Friend the Minister.

I have here the report, which has already been sent to my hon. Friend. It is a note of the visit of the person in question from the then Customs and Excise, which shows four items and states quite clearly against them the word “satisfied”. On 2 July 2013 I received a letter through my office from Mr Toon which thanked me for my letter to the Exchequer Secretary and stated that on behalf of the chief executive he would reply, as he had operational responsibility for criminal investigation. He went on to say:

“I have reviewed the papers provided by Mr Thorley’s advisers”—

which, by the way, are well known in the Department—

“but I am afraid that there is nothing more I can add to David Gauke’s letter to you of 23 May 2013. Whilst I sympathise with Mr Thorley, HM Revenue and Customs has no papers in relation to this case and therefore nothing on which to base an apology. The papers enclosed with your letter seem to show that the Appeal Court overturned Mr Thorley’s conviction because of misdirection by the judge in the original trial but this does not mean that the decision to prosecute was flawed.

I know that Mr Thorley will find this reply disappointing but I hope you will understand that without the original case papers I cannot comment further.”

I also had a letter dated 23 May from my hon. Friend the Exchequer Secretary, in which he said:

“I am afraid that following my inquiries, I can only repeat what he has been told in previous letters. HMRC does not hold any papers in relation to his court case. There is no official record, either paper or electronic, of any information in relation to this case and so HMRC cannot confirm on what basis a prosecution was undertaken. Neither can it ascertain from records whether or not there was an appeal. It follows therefore that I cannot comment on the outcome of that appeal. HMRC does not hold any records in relation to Mr Thorley’s original VAT registration, which would have presumably been active when the prosecution took place. Whilst there are some records in relation to a later 1992 registration, these papers make no reference to any previous prosecution.”

In the light of the information I have supplied, I find it unbelievable that there would be no basis for an apology. My constituent—who, at 88, does not have by any reasonable standards much longer to live—has throughout this period been seeking by various means to obtain an apology. He does not want compensation and has made that absolutely clear in correspondence. There is no need for HMRC to be concerned about that if it made an apology. There is no need for electronic files; he was convicted and sent to prison for three years, serving 11 months. As a result of the diligent conduct of his defence by his lawyers, he was released from jail on the orders of no less a judge than Lord Justice Eveleigh. He asks only for an apology.

The judgment of the court was read on 27 and 28 October 1980 by Lord Justice Eveleigh. I will not go through every detail of it—the Minister has a copy—but I will read out some salient points. In June 1975, an investigating officer named Mr Evans from Customs and Excise went to Thorley’s office to investigate the claim for the repayment of £43,000. He expressed the view that he was satisfied, in the document I mentioned earlier. He was given a large number of documents and made inquiries—chiefly from a Mrs Mannering. He was left in the office to investigate these at his leisure and sent in his report. He wrote “satisfied” against all four periods that he investigated. Mr Evans also states that he investigated the position in depth. At the trial four and a half years later he could not say what had happened but felt that the word “satisfied” meant that he had compared the claim with the totals in the books and that the returns had been reconciled. That is why he put “satisfied” against it. I have the paper in front of me signed by this gentleman and so has the Minister.

No one is doubting that the trial took place, that my constituent was sent to jail and released, or that Lord Justice Eveleigh importantly quashed the conviction. Against that background, to my mind it is utterly astonishing that my constituent cannot even get an apology, simply because the records are not available. It is not for me to lay down rules about what records have been or should have been held by the Departments in question, or any other Department, but nobody with any sense of justice—or, indeed, with any common sense—would seriously dispute the facts as I have described them. Nobody has attempted to dispute those facts; they say only that they cannot find the records.

My constituent is now aged 88. He is an old man whom I have met on many occasions, and he is clearly deeply concerned and affected by the manner in which he is being treated. He simply wants an apology—that is all he is asking. The note that I have states:

“This Court concludes that the crux of the Appeal was the misdirection relating to Mr Evans…There had been a misdirection on the material point and the Court concludes that conviction must be quashed.”

Part of that includes a sworn statement by Mr Ian Wright, who stated:

“Between October 1957 and July 1994 I was a Customs and Excise Senior Officer.”

He described what happened, which I have already explained to the House. The statement continues:

“At the time of my own initial visit to Mr Thorley’s company and before the decision to prosecute Mr Thorley was taken I was aware of a report by a colleague, one Graham Harry Evans, of his control visit to the Thorley companies in 1975. This did not indicate anything untoward…Throughout my work alongside Mr Riley whilst in support of his investigation into the affairs of Mr Thorley’s company, I was made aware that Mr Evans’s report would not feature in any way in the Department’s conduct of the case.”

That is from a senior Customs and Excise officer who was looking at the manner in which a prosecution had been levied against my constituent, who has been convicted and released because the conviction was unsound. The statement goes on:

“I progressively became more anxious about this deliberate omission and discussed this in detail with Mr Riley and with numerous of my own senior colleagues over some months before the Court case. At the commencement of Mr Thorley’s trial, the omission of what I considered a very important document (Evans’s report) became apparent to me. Before my own evidence was due, I remonstrated directly with a Crown Solicitor that there were very great dangers in not producing the Evans report. It was then produced in Court immediately thereafter.”

I understand that it was only five minutes before the jury gave its verdict.

I also have a letter dated 13 May 2013 from Mr Thorley’s accountant, which was supplied to me and has been passed on to the Minister. It expresses, on behalf of its client, many of the concerns one would expect. Among other things, it says that, in 1980-81, Mr Thorley lost his home, his business and his family pride. His family were made homeless and his wife had to recommence work to provide food for the family. The letter says that since then he

“has had to try and rebuild what he has lost. Mr Thorley has also tried in vain to get an apology from HMCE (Now H M Revenue & Customs) for their failure of withholding back such crucial evidence.”

Mr Thorley says he is not seeking any financial compensation—

--- Later in debate ---

Motion made, and Question proposed, That this House do now adjourn.—(Mr Syms.)

[Mr Cash]

I find it impossible to understand why so far the Minister has not been prepared to issue an apology. It simply does not stack up. There is no serious dispute about the facts. Is he going to say that Lord Justice Eveleigh had no case? Will he explain why HMRC does not hold the records or why my constituent was put in jail for three years and released because the Court of Appeal, on considering the facts, regarded it as completely unfair, unjust, unacceptable and unreasonable? I cannot explain it any better. It is incredible. I have never before come to the House on an Adjournment debate with such a case. I doubt whether many people have had to come to the House to ask a Minister to apologise. I do not know what he will say, although I have no reasonable doubt about what he should say. I will supply any necessary documents in my possession to anybody at any time to get the justice due to my constituent. He is not asking for compensation; he just wants an apology, which I think the House will agree he is due.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

I thank my hon. Friend the Member for Stone (Mr Cash) for his remarks, for securing this debate and for putting forward his constituent’s case with his characteristic eloquence. The case relates to the investigation and subsequent prosecution of one of his constituents by what was then Her Majesty’s Customs and Excise. His constituent and his advisers have approached my hon. Friend requesting a public apology for what they have described as a malicious prosecution by HMCE. I have great sympathy with his constituent for the worry and distress that the case has clearly caused both him and his family, and I hope this afternoon to offer reassurance that the case can be further investigated by Her Majesty’s Revenue and Customs. I shall return to that in a moment.

For reasons I shall explain shortly, however, HMRC does not old information about the case, other than that supplied by my hon. Friend in his correspondence and by his constituent.

[Mr Cash]

Is the Minister even remotely disputing what I have said?

[Mr Gauke]

I am not disputing any of the facts provided by my hon. Friend, but I hope he will allow me to explain the reasons why HMRC does not hold information about this case, other than what has been provided to it by him, and why that constrains what HMRC can say. I will also explain how we might be able to take this matter a little further forward.

Let me deal with the first point about why HMRC does not hold information. In line with the requirements of the Data Protection Act, HMRC must not hold personal data indefinitely, so the organisation regularly reviews and destroys or deletes information. For cases involving criminal investigation, the retention period varies depending on the outcome of the investigation. The default period is six years from the conclusion of the investigation, but when the investigation leads to a conviction, the retention period is the length of sentence imposed plus one year, or six years, whichever is the longer. When an investigation ends in conviction but that conviction is later overturned on appeal, as clearly occurred in this case, the retention period is six years from the Court of Appeal ruling. In the case of my hon. Friend’s constituent, the data relating to the investigation and prosecution would have been destroyed as early as 1986.

However, the Data Protection Act also requires that when someone makes a request for the release of information, the recipient of that request must make a thorough search to see whether it is held, even if the normal destruction date has passed. To that end, HMRC has carried out a department-wide check of all electronic systems and a targeted search of manual records. It also asked the Crown Prosecution Service to check its records to see whether it held anything relating to this constituent’s case. That check has revealed that no such records exist.

Further correspondence from my hon. Friend, enclosing correspondence from his constituent and addressed to the Chancellor of the Exchequer, was passed to HMRC to reply under normal Treasury procedure. That correspondence was dealt with under HMRC’s complaints procedure for ministerial correspondence. I should make it clear that HMRC of course welcomes complaints as an opportunity to apologise and put things right where it has made a mistake, and as a source of learning to make its services better for taxpayers in future.

[Mr Cash]

On the question of procedure, is my hon. Friend aware of the Cabinet Office’s 2005 guidelines on dealing with letters from Members of Parliament to Ministers, which set out very precisely what has to happen in relation to such letters and the manner in which such letters have to be handled under the Cabinet Office guidelines prescribed by the Prime Minister?

[Mr Gauke]

The Treasury is aware of the guidelines that apply to ministerial correspondence, and we seek to comply with them. Where operational matters are involved and it is more appropriate for HMRC to deal with them in order to provide as much information as possible and to deal with them as appropriately as possible, HMRC will respond to those letters. My hon. Friend has received a letter from me and from HMRC—indeed, he has received several items of correspondence—on this front.

Let me return to the procedure. Usually, HMRC has a two-stage complaints process, which seeks to deal with as many complaints as possible at the first review. At the end of that stage, the reply tells the customer that if they are still unhappy, they can ask HMRC to look at the complaint again. At that stage, a different official takes a fresh look at the complaint and gives HMRC’s final response. If the customer remains unhappy, they may approach the Adjudicator’s Office. The Adjudicator’s Office will investigate the complaint, drawing together a full and impartial summary of details from the customer and HMRC.

[Mr Cash]

I have read out the salient reference in the statement of Mr Ian Godfrey Wright, the senior Customs and Excise officer involved. He is a member of HMRC, or he certainly has been—I dare say he is retired now. This statement is dated 1996, so it is possible that it could be followed up, and it contains serious allegations by a senior Customs officer about the conduct of Customs and Excise—as I believe it still was—at the time. It is not as though we are talking just about communication between me and the Minister; we are also talking about sworn statements made by a senior Customs officer, which can be followed up. They must have this record—if they have not got that, I do not know what is going on.

[Mr Gauke]

Again, I will not repeat the data protection guidelines and the length of time for which HMRC is entitled to hold on to personal data. I note my hon. Friend’s comments about a statement being made in 1996. I do not know what communications there were with HM Customs and Excise, the body in place until the merger in 2005, or how they were made. As I have made clear in my remarks, a search was made across HMRC to locate records on the case, and no records were found.

As I was saying, the Adjudicator provides an independent review of details and makes her decision and recommendation. Customers who continue to be dissatisfied can ask an MP to refer their complaint to the Parliamentary Ombudsman, who will then decide whether to investigate the complaint. If she decided to do so, her investigation might also look at the way in which the Adjudicator’s Office reviewed the complaint.

It is worth noting that this specific case did not follow the normal procedure. My hon. Friend is perfectly entitled to contact Ministers about the matter. He has received replies from senior officials at HMRC and one from me dated 23 May 2013. All those replies carried the same message: given the age of the case and the lack of any of the original papers, HMRC is not in a position to comment with any certainty on the case.

Letters from the Adjudicator to my hon. Friend on 13 March and 25 April 2012 contained a similar message and provided contact details for the Parliamentary Ombudsman. However, if the constituent or his advisers provide HMRC with full copies of all the documents they hold in connection with the matter, I can assure my hon. Friend that it will carry out a thorough review and revert to them with its findings.

[Mr Cash]

Will the Minister please give way?

[Mr Gauke]

I will give way, but first I will make this point: my hon. Friend has provided HMRC with information regarding the case that indicates that a conviction was quashed following the finding that there had been a misdirection. As he will also be aware, his constituent’s concern is that there was a malicious prosecution against him. If HMRC has evidence that there was a malicious prosecution against someone, of course it should apologise. If that evidence is presented to it and it is satisfied that that is what has happened, I would hope and expect it to do exactly that.

[Mr Cash]

Whether or not it was malicious, the question is whether an apology is due, given the fact that—of this there is no doubt—there was a prosecution, my constituent spent time in jail, the conviction was quashed and then he was released. I am simply asking for an apology. There is an element of farce about the situation. I do not want to be told that I should go off to the Ombudsman; I am talking to the Minister, who is accountable to the House. He has responsibility for HMRC and for the conduct of Customs and Excise before it, in one form or another. All I am asking for—it sounds as though I am not going to get it, even this afternoon—is an apology on the Floor of the House from the Minister in relation to this. It is no good just reading out all the bits of paper that have been supplied—

[Mr Speaker]

Order. The hon. Gentleman’s intervention is a little on the long side. He has expressed some frustration that he does not think that he will get what he wants this afternoon but, on the strength of his 29 years of service in the House and the indefatigability with which he has pursued a variety of causes over those years, he will be well aware that it is open to him to pursue the matter again, and again, and again.

[Mr Gauke]

Thank you, Mr Speaker, for setting out that prospect.

What I am seeking to say to my hon. Friend is that his constituent clearly feels wronged. He was, as my hon. Friend says, convicted on a case brought by HM Customs and Excise, and that conviction was subsequently quashed. I understand my hon. Friend’s position, which is, in essence, that in any circumstances when someone has been wrongly convicted, the prosecuting authority should apologise to that person. I fully respect that position. However, it must also be said that the fact that an individual is found not guilty after a criminal trial or their conviction being quashed by a higher court on appeal does not necessarily mean that it was inappropriate for the case to have been investigated, or even prosecuted, in the first place. I am sure that my hon. Friend, as a distinguished lawyer, can appreciate that point.

It may well be that in this investigation over 30 years ago HM Customs and Excise behaved wrongly and inappropriately. If that is the case, then his constituent would deserve an apology in those circumstances—let me clear about that—and I would be very happy to give that apology on behalf of HMRC. However, before HMRC is in a position to give a full apology, it needs to see the facts more fully. As I say, the mere evidence that a conviction has been quashed does not necessarily mean that HM Customs and Excise behaved in an unacceptable way. That is why I believe that it is essential that my hon. Friend’s constituent provide all the available paperwork that he and his advisers hold to enable HMRC fully to assess the reasons for the quashing of the conviction.

[Mr Cash]

Will the Minister give way before he sits down?

[Mr Gauke]

I will allow my hon. Friend to intervene again; he need not worry that I am galloping towards the end.

I am keen to ensure that HMRC looks at the evidence again thoroughly, and if it is in a position to make the apology—I can understand the reasons why my hon. Friend wants that apology sooner rather than later—I am keen to do all I can to facilitate that. My hon. Friend rightly has a reputation for being someone who weighs the evidence thoroughly, and HRMC also needs to weigh the evidence thoroughly before it reaches a conclusion. It might be the easiest thing in the world just to announce an apology, but it should do so on the basis of the facts, and at the moment it does not have those facts.

[Mr Cash]

Let me refer again to the statement by Mr Wright—a senior Customs officer who I presume, or hope, is still available to be spoken to because his statement was so clear. There is also the opinion of the leading counsel, and there are all the other papers that have been supplied. If the records are not in the Department and no papers are available other than the ones we have already supplied, then I do not know what else we would be able to produce. I think that a careful judgmental assessment of the justice of this case is required, and that the apology is due, although my hon. Friend is now making some very helpful remarks.

[Mr Gauke]

I am glad that I have had the opportunity to make some helpful remarks. I say to my hon. Friend that the more evidence there is that can be presented, the better. I assure him that HMRC will consider the matter thoroughly and follow the evidence. If an apology is due on the basis of that evidence, it will of course make an apology. I accept that no apology was made when the conviction was quashed more than 30 years ago and that there has been no apology in the intervening 30 years.

I hope that this wider airing of the case and the offer for HMRC to review all his constituent’s paperwork go some way towards providing the assurance that my hon. Friend is seeking. If I have not provided that reassurance or if HMRC’s investigation of the evidence proves to be less than fruitful as far as he is concerned, I suspect, as you have said, Mr Speaker, that we will return to the subject.

Question put and agreed to.

Financial Transaction Tax and Economic and Monetary Union

William Cash Excerpts

Tuesday 18th June 2013 Commons Chamber

[Greg Clark]

My hon. Friend is right, and that is why I was keen to have this debate and make sure the Committee’s concerns on this matter can be aired at an early stage. As I said a few moments ago, the proposals so far do not cohere into proposals that will come forward to be scrutinised, but this debate offers an opportunity for this House to send a clear message, as my hon. Friend may be able to do later, during this process of working-up ideas as to what this House’s clear expectations are with regard to the role of national Parliaments. That is very important.

[Mr William Cash (Stone) (Con)]

I hear what my right hon. Friend says, but in the light of the assumption, based on what the Chancellor has said, about the remorseless logic of allowing the core member states to go ahead with proposals for monetary union—which are implicit in the 52 pages of the blueprint alone—does he accept that our policy is allowing this to happen, and although we may not, it appears, be directly involved, we will certainly be affected by it?

[Greg Clark]

We have taken the view that the problems in the euro area that require resolution should be resolved by its members, and it is in the interests of the international economy that that should be so. My hon. Friend is right to point out, however, that our interests are engaged in this, and we will make use of our powers and rights in the EU to insist that those interests are protected. An early example of that is in the single supervisory mechanism, where through repeated interventions and insistence by the Chancellor and me at ECOFIN meetings, the Prime Minister was ultimately able to secure agreement by way of a text in the regulation of that mechanism explicitly stating that there should be no discrimination against any country or currency as a result of these arrangements.

These matters will come up from time to time, and protecting our interests requires eternal vigilance. The work that the Committee does in scrutinising and bringing matters to our attention in advance of discussions at European level is crucial to that, which is why the importance of this Parliament needs to be underlined, and will be by this debate.

--- Later in debate ---

[Mr William Cash (Stone) (Con)]

I thank the Financial Secretary for his extremely diligent approach to the debate. He has dealt with all the arguments on the financial transaction tax and I leave those on the record. It is extraordinary that the Opposition should promote the idea, but there is no need for me to go into that this afternoon. I am primarily concerned about the other aspect of the debate and the report, which is the question of primacy. Without primacy, there is no democracy in the House, and without going back to the financial transaction tax, that is a subset of the question of primacy, which is why the Scrutiny Committee insisted on having this debate. I do not think my right hon. Friend will mind my saying that there was a little uncertainty about having it, and I am indebted to him for the clarity with which he has understood this vitally important question.

Our democracy and legitimacy as a Parliament in this House is the basis on which we decide questions of taxation and spending. As my right hon. Friend the Prime Minister said, in the Bloomberg fourth principle, national Parliaments are at the root of our democracy. Therefore, it is absolutely fundamental that we stand by that. I veer away slightly from the trajectory of my right hon. Friend—which he takes for perfectly sensible reasons, but which I disagree with none the less—that somehow the blueprint, which is described as “launching a European debate” is somehow just a piece of blue- sky thinking. It is not. It is absolutely fundamental to the one question that lies at the heart of the Bloomberg speech, in the light of what is said in the Commission document and in the van Rompuy conclusions, both of which put the prime emphasis on the European Parliament, to all intents and purposes at the expense of national Parliaments. They use the word “commensurate”, but it is not commensurate. We cannot have two Governments dealing with the same subject matter. We cannot have two Parliaments dealing with the same subject matter. It is impossible, which is why we have to assert the primacy of this House, and, as the Prime Minister rightly said in the Bloomberg speech, it is at the root of our democracy.

[Mr Redwood]

I thank my hon. Friend for highlighting this crucial issue and bringing it to the attention of the House. Will he accept that those of us who will not have time to speak today are fully behind him in wanting to re-establish and re-assert the primacy of this House in all matters that are important to the British people, and we have a long way to go to do that?

[Mr Cash]

We have a long way to go, and in fact the journey is becoming longer. I am extremely glad that we are having a proposal for a referendum Bill, which will enable us to decide these questions, if it comes off. I also believe that there is an understanding among possibly 240 Government Members that there is a serious problem in relation to the EU. There are some who take a different view, but it is a tangential question for them. For us it is fundamental. The biggest demonstration of the problem is this fundamental relationship, which turns on primacy. That is what the Scrutiny Committee focused on, and that is what I will speak about, somewhat briefly.

Basically, the landscape involves a two-tier Europe. I am astonished that the shadow Minister should have said, in parenthesis, that he did not really want to go into—I paraphrase—the rather self-indulgent ruminations on institutional differences with monetary union and the like. I am certain that if the primacy question were properly explained to the hon. Gentleman and Opposition Members, they would appreciate that it is fundamental.

I pay tribute to the hon. Member for Linlithgow and East Falkirk (Michael Connarty) because he understands that. I am sure that he will not mind me referring to an interesting altercation the other day with Olli Rehn in a committee meeting that we had in Brussels. The hon. Gentleman made it crystal clear with regard to this idea of the centralisation, with the contracts that he referred to in an intervention, when he was rather abruptly caught short, The reality is that he understands that it is an infringement of our democratic relationship with the electorate. It is about the person in the polling booth voting and making a decision about the kind of Government that they want, and the kind of economy that they want. He and I may have a difference of view about whether there should be adjustments to the public purse. I would argue that if there is a black hole out there in the EU and the black hole prevents growth in the EU and we trade 50% with it, we cannot pay for the public services. The hon. Gentleman understands that.

This goes right to the heart of the issue of whether we are prepared to accept, at this fork in the road—which is what this document represents—this launching of the European debate, which we must carry forward to ensure that we retain primacy in this House over taxation and spending. The shadow Minister nods, so now he concedes that it is not a matter of self-indulgence, but a matter of significance. That is why the debate has to take place. I am afraid to say that the black hole, and the direction in which it is going—because of the two-tier arrangement that is being created, on which they are determined; I could quote from the documents, which talk about political integration that is needed within the hard core and they know what it means—will lead to a German Europe. They will control that hard core. The bottom line is that we cannot be part of it. That means that there is a change in the fundamental relationship, not merely for monetary union reasons, not merely for reasons of remorseless logic, but for political ones.

[Madam Deputy Speaker (Dawn Primarolo)]

Order.

--- Later in debate ---

[Jacob Rees-Mogg]

I seem to remember that 365 economists said that Margaret Thatcher had got it wrong in 1981, but one great and noble Prime Minister had got it right and 365 economists were flawed in their thinking. I would back the British politician against a collection of academic economists living in an ethereal world.

A financial transaction tax would ultimately be paid for by the British people through higher housing costs, lower pensions and possibly through higher Government borrowing costs leading to higher overall taxation. Of course the Labour party wants higher taxation, because that is what it has always been in favour of—more taxes, more spending and a worse economy.

I would now like to move on to the points made by my hon. Friend the Member for Stone (Mr Cash), because they, too, are extremely important. They relate to the European Union’s ambitions to become a superstate based on the euro. I accept that we are outside the euro, but that is not entirely a protection from the development of the EU along the lines of a single state with a single Government based in Brussels. Of the papers we are considering today, there is one from the European Commission showing that it wants within 18 months to have a eurozone seat on the International Monetary Fund’s board, that it wants within five years to co-ordinate eurozone tax and employment policies, and that it wants a political union with adequate pooling of sovereignty with central budgets as its own fiscal capacity and a means of imposing budgetary and economic decisions on its members. That means a single Treasury and a single fiscal union.

The danger for us is that, as the European Union obtains more powers for the eurozone, our association with it will become very different from the present one, and one in which we have little influence over what happens because we are outside it. Alternatively, we could get dragged into the arrangements because, as our experience of the European Union shows, our opt-outs will ultimately expire. We have seen that happening with the social chapter, and we will see it again next year with the decision on title V of the Lisbon treaty. We should therefore be very careful about the ambitions of the European Commission in relation to this single government for the eurozone.

We should also be cautious about what the President of the European Union, Mr van Rompuy, has to say. He has published a paper lauding the success of the euro and all that it has done. It states:

“The euro area needs stronger mechanisms…so that Member States can reap the full benefits of the EMU.”

That is a fascinating way of phrasing it: “the full benefits”. After all the other benefits that they have so far received, there are further benefits to give the member states if only they will join a tighter system of governance. I wonder whether the unemployed Greek youths have noticed all the benefits that they have received from this wonderful beneficent eurozone.

Mr van Rompuy has also been kind enough to say:

“‘More Europe’ is not an end in itself, but rather a means for serving the citizens of Europe and increasing their prosperity.”

I am proud to say that I am a subject of Her Majesty, and not a citizen of Europe. The idea that we need more Europe to benefit the citizens of the member states is palpably false. The more Europe we have had, the worse the situation has become. The more powers that have accreted to Europe, the more bureaucratic, less democratic and worse run has become the whole system of the European Union. The economies of the European Union have suffered because of the euro.

[Mr Cash]

Will my hon. Friend give way?

[Jacob Rees-Mogg]

I apologise, but I will not, as I have only 45 seconds left, and counting. I have had two extra minutes already.

I want to finish on the point of democratic legitimacy and accountability. I am glad that my right hon. Friend the Minister for Europe is in the Chamber, because it was his Bill in 2011 that so wisely reminded us that United Kingdom powers are ceded to Europe only by Act of Parliament and can be withdrawn. However, van Rompuy says that

“the involvement of the European Parliament as regards accountability for decisions taken at the European level”

is key. I deny that. It is this House that is key, and it is this House that should maintain our democracy.

Economic Growth

William Cash Excerpts

Wednesday 15th May 2013 Commons Chamber

[Mr Jim Hood (Lanark and Hamilton East) (Lab)]

I am delighted to have caught your eye, Mr Deputy Speaker, and to speak in the debate on the Gracious Speech. I made my maiden speech in a debate on the Gracious Speech on 8 July 1987, following Mrs Thatcher’s third victory. I remember using an analogy. I said that the Government and the Gracious Speech were more of the same poison in a different bottle. I thought of that comment when I looked at the Conservative Back-Bench amendment. It is déjà vu, or Maastricht, all over again. If historians check the speeches on the Maastricht debate in Hansard against what we have heard in the past hour or so, I am sure they will understand what I am saying.

[Mr William Cash (Stone) (Con)]

As one who led the Maastricht rebellion, I should say that, at the time, we made predictions. Exactly what we said would happen has happened—that is the difference.

[Mr Hood]

The hon. Gentleman has been saying exactly what he said in the Maastricht debate ever since, at every opportunity. It will surprise no one, including me, if he continues to say those things, but I am speaking to the reality. Some say that the Conservative amendment is a UKIP amendment. In fact, the hon. Member for Harwich and North Essex (Mr Jenkin) accepted that he agrees with a lot of what UKIP says.

I remind the House of something the Prime Minister said in his Conservative party leadership campaign. He promised the country and his party that he would make the Conservatives electable again, and get rid of the “nasty Tory” image. He travelled to the Arctic to embrace huskies, and came back here and cuddled hoodies. These are changed days. Where is he now? This week, with conspiracies going on behind his back in his own party in Parliament, he is away negotiating an EU trade deal. You could not make it up! As my grandmother used to say, when the cat’s away, the mice will play. That is what is happening to him.

The debate and the run-up to it are more like Shakespeare’s assassination plot in “Julius Caesar”. The big question is who will be Brutus. Margaret Thatcher’s political assassination in 1990 had nothing, or nothing much, to do with Europe, but we have the same modus operandi. As my hon. Friend the Member for Bolsover (Mr Skinner) pointed out in a speech two weeks ago, the Conservatives kicked Mrs Thatcher out on the street like a dog.

--- Later in debate ---

[Mr William Cash (Stone) (Con)]

Basically, I regard the whole question of having a referendum as fundamental. I led the Maastricht referendum campaign, and the question now is about the same fundamental questions we were addressing then. This is the problem: nothing has changed, but much has got worse. The real problem is one of urgency. This is not just about an abstract theory of sovereignty; it is about the economy, who governs Britain and whether we can achieve economic growth, which is what the debate is actually about. We cannot achieve economic growth in the circumstances I shall now describe. In my judgment, it would be wrong to wait until 2017, given that the situation is so urgent, as hon. Members will hear in a moment. The British Chambers of Commerce, which represents 104,000 businesses and 5 million employees, is concerned about the delay and the uncertainty that goes with it and about over-regulation.

It is generally acknowledged by all parts of the House that our relationship with the EU has to change, but the trouble is with the institutional treaty changes, on which I have had meetings in Brussels. I saw Mr Van Rompuy only 48 hours ago and also Mr Olli Rehn, and the fact is that they are on a railway line, and are continuing along it. They talk about destiny, contracts with other countries—unenforceable as they might be—and more centralisation. The European Scrutiny Committee had an interesting meeting on that.

[Mr Jenkin]

In his travels around Europe, has my hon. Friend gained the impression that there is any appetite in the Commission or among our European partners for substantial treaty change that would allow the United Kingdom to have a different relationship with the EU while remaining signed up to the existing treaties?

[Mr Cash]

It is my opinion, based on extensive discussions yesterday and over several months, that there is absolutely no prospect of any changes that would even begin to alter the circumstances we are now in and which are pivoted on the existing treaties.

The problem is one of debt and deficit. We cannot pay for the public services needed in the country, whether health, education or whatever. I hear the point from Opposition Members and I agree with some of their arguments—it is not right that people should be deprived of services—and I do not believe that the entire answer depends on cuts. It depends on the subject of this debate, which is economic growth. We can grow with the rest of the world. We are running a trade surplus of about £13 billion with the rest of the world, other than the EU, with enormous potential in south-east Asia, India and Africa, which is where the emerging markets are. This is where we have to concentrate our efforts.

On our trade relations with the other 26 member states, I ask hon. Members to take account of the following very alarming figures. Two weeks ago, during a debate on the Maastricht treaty and the convergence criteria, I gave what was then the latest figure, which was that we were running a trade deficit with the other 26 of £47 billion. Now, some might think a deficit of that scale is an awfully big loss, but the following Monday the new figure came out. In one year, the deficit had risen from £47 billion to £70 billion. Furthermore, the German surplus, which was running at £30 billion, rose to £70 billion between 2011 and 2012. It is essential that we take note and hold this referendum—and hold it urgently—because we have to deal with fundamental changes in the relationship that will enable us to disentangle ourselves from the spider’s web that we have got caught up in and which we have not asked the British people about since 1975. It is a vital question of national interest, and I beg hon. Members to listen.

[Mr Jenkin]

Is not the corollary of what my hon. Friend is saying that if we follow the programme of the Labour party and continue to pursue a policy of closer integration and more burdens on our economy, it will mean more cuts, more borrowing, slower growth and more unemployment than if we sort out this relationship?

[Mr Cash]

My hon. Friend is completely right. Labour caused the debt and the deficit; now Labour Members want to engage in more borrowing without the growth that would come from expanding our trade with the rest of the world.

[Mr Hood]

rose—

[Mr Cash]

I will give way to the former Chairman of the European Scrutiny Committee.

[Mr Hood]

I am listening with interest, as I always do, to the hon. Gentleman’ s speech, and I have heard it a few times—a lot of times, in fact. If he gets his referendum and the vote is overwhelmingly, or marginally, in favour of staying in the EU, will he then embrace the EU and work from the positive side, in the same way as everybody else?

[Mr Cash]

I have come to the conclusion that we have to leave the existing treaties, but I will say one last thing. The UK Independence party argument is self-defeating, for a simple reason. If UKIP were to take a number of marginal seats on the scale that seems likely and we were to lose the next general election, UKIP will not get the referendum or make the changes it wants, because we would be faced with a Lib-Lab, pro-integrationist, anti-referendum situation, which would be a complete disaster. UKIP, with which I am quite obviously much in agreement, will not produce the answers, because it is not possible to repeal the European Communities Act 1972 or have a referendum without a majority of MPs. It does not have a majority and it will not get one.

Section 5 of the European Communities (Amendment) Act 1993

William Cash Excerpts

Monday 22nd April 2013 Commons Chamber

[Greg Clark]

I do not think that that is entirely right, although I happily acknowledge that the hon. Gentleman was on the side of right throughout. I remember working for the Foreign Secretary when he was leader of our party. In November 1997, when, as the hon. Gentleman said, the received opinion was that our joining was inevitable, my right hon. Friend made the courageous decision to set out in a lecture to the conference of the CBI, which then was in favour of joining, the forensic reasons why it would not be in our interests. He committed then, right at the beginning of the parliamentary process that resulted in these measures, to campaign for Britain to stay outside it. While I acknowledge the hon. Gentleman’s distinguished record, I think he would acknowledge that the Conservative party was the first party to commit itself to oppose these measures.

The Government plan to make their submission by 30 April, with the approval, we hope, of both Houses of Parliament. It explains the Government’s medium-term fiscal policies, as already set out in the 2012 autumn statement and Budget 2013, and includes the Office for Budget Responsibility’s forecasts. We think it right and proper to draw from previously published documents presented to Parliament, rather than incur the cost and time to produce bespoke documents for this purpose.

[Mr William Cash (Stone) (Con)]

Is my right hon. Friend aware that the very document to which he refers states:

“The IMF forecasts UK GDP per person to grow faster than the rest of the G7 between 2012 and 2017, with the exception of the US”?

Of course, he will have read the comments made by Madame Lagarde only yesterday. Does he not find them a little incongruous, given that the IMF is now taking rather a different view?

[Greg Clark]

The IMF is considering its view, and we will see what it has to say in the months ahead, when it issues its review. We have always been clear that, as we have advised all EU member states, keeping control of finances is an important precondition for growth. That is an important matter.

As I said, we have been parsimonious in not generating excess quantities of paper. Members will be aware—certainly my hon. Friend the Member for Stone (Mr Cash) will be—that we did not follow the advice that other countries followed and align our financial year to fit in with the norm in Europe. We think it right to stick with our financial year and make use of the documents presented.

With the Budget announcement having taken place on 20 March, shortly before Easter, I appreciate that the timetable was tight, but we made every effort to provide early copies of the convergence programme to the House and the other place in advance of this debate.

--- Later in debate ---

[Greg Clark]

I do not agree with that. The hon. Gentleman will be aware that the IMF recommends to many countries around the world, not least in Europe—this is the point my hon. Friend the Member for Bury North (Mr Nuttall) referred to—that they should get their public finances in order.

When the Office for Budget Responsibility revised its forecast for global economic growth—and eurozone growth in particular—and world trade downwards, that had an inevitable impact on UK growth, given that the euro area is the destination for 40% of UK exports. Over the past year, net trade was the key factor in the underperformance of the economy relative to earlier OBR forecasts, as well as in the downward revision of the forecasts this year and the year after. Fiscal consolidation, on the other hand, has not had a larger drag on the economy than the OBR expected in June 2010. Indeed, the UK’s fiscal situation argues strongly in favour of maintaining our commitment to deficit reduction.

Opposition Members sometimes accuse us of going too far, too fast, but there is further to go and we must get there as fast as we sensibly can, not least because so much rests on the market-tested credibility earned by this Government. The near historic low gilt yields that underpin the low interest rates that are so important to millions of households and businesses cannot be put at risk. As shown by global developments, the consequence of losing market confidence can be sudden and severe. A sharp rise in interest rates would be particularly damaging to an economy weighed down by the burden of so much public, corporate and personal debt, built up during a time when it should not have been.

[Mr Cash]

The OBR’s executive summary states:

“Public sector net debt…is forecast to peak at 85.6 per cent of GDP in 2016-17, rather than 79.9 per cent a year earlier as in our December forecast.”

In reality, debt is simply out of control, although much of it is the responsibility of the previous Government.

[Greg Clark]

Of course my hon. Friend is right that the inevitable consequence of running a deficit is that debt increases. It continues to be our purpose to reduce the deficit and return the economy to a balanced budget in order to start to pay down debt, and it is important that we should do that.

Budget 2013 also set out measures to equip the UK to compete in a global race. The Government will give every business and charity a £2,000 allowance towards their national insurance contributions from April 2014, benefiting more than 1 million businesses. We will achieve the ambition for the UK tax system to be one of the most competitive in the world, which includes a further cut in corporation tax to 20%—the joint lowest in the G20—from April 2015. We will increase capital investment plans by £3 billion a year from 2015-16. Public investment will be higher on average over this Parliament and the next than under the previous Government. We will devolve a greater proportion of growth-related spending to local areas from April 2015, in response to Lord Heseltine’s review.

As well as action in the UK to tackle the economic challenges that we face, progress needs to be made to tackle the crisis in the euro areas. However, the growth challenges in Europe continue to be serious, as every Member is aware. We have seen a welcome fall in borrowing rates, particularly for Spain and Italy, from the high levels that they reached last summer, but recent events in Cyprus remind us—and leave us in no doubt—that the euro area continues to be a fragile environment. Only a sustained period of successful reforms and improvements in financial markets can lay the foundations for growth. Economic activity in the European Union remains subdued. In the euro area, most of the so-called peripheral economies are in pronounced recessions, with weak labour markets, adverse credit conditions and an ongoing process of deleveraging all weighing on growth.

Structural reforms at the national level should be supported by the co-ordination of progress towards freer markets at the EU level. The improvement of the single market, regulatory reform and free trade agreements can all help to improve the growth prospects of every country in the EU at a minimal cost. This is a critical agenda that the UK and other like-minded states have advanced at successive European Councils, including in March, and we will continue to push.

[Mr Cash]

My right hon. Friend says that it is critical that we enter into EU free trade agreements. I hope he appreciates that under the majority voting system, the power of the European Commission under the Lisbon treaty means that at present our influence is only 8% at maximum—although it will shortly rise, albeit to only 12%. The whole policy will effectively be driven by the European Union and its objectives, which are largely dominated by Germany. It will not be in British interests.

[Greg Clark]

It is possible for our influence to go beyond our voting weight, just as there are Members of this House—I might include my hon. Friend in this—whose influence goes beyond their proportional representation in this place. I hope he agrees with that.

It is important to maintain momentum on bilateral EU free trade agreements. Ninety per cent of global growth will come from outside Europe after 2015, so the EU needs an outward-looking trade agenda. A free trade agreement with the United States of America is, and must be, a major opportunity that should be pursued with all vigour. It is estimated that EU free trade agreements that are currently under way or in the pipeline could add £200 billion to EU GDP and create 2 million jobs across the EU. We welcome the European Commission’s stated commitment to bringing forward concrete proposals to reduce regulatory barriers for small and medium-sized enterprises. That is long overdue and we look forward to seeing those proposals in June.

It is estimated that removing all barriers in the single market would increase UK GDP by about 7%, while prices could fall by 5% due to increased competition. The single market already adds €600 billion a year to the EU’s economy. Further progress is possible. Ambitious implementation of the services directive by all member states could result in increased national incomes. Service liberalisation would be particularly beneficial to the UK, as services are an area of enormous comparative advantage, as we know, and the UK has had a trade surplus with the EU in services since 2005.

--- Later in debate ---

[Chris Leslie (Nottingham East) (Lab/Co-op)]

That was a paean of praise from the Minister for the right hon. Member for Richmond (Yorks) (Mr Hague); it is a pity that there was not quite so much for the Chancellor of the Exchequer. One of the strange things about this debate is the strong sense of having been here before to debate this issue. Indeed, it was about this time last year that we did so—and, sadly for me, the year before that as well.

[Mr Cash]

Twenty times.

[Chris Leslie]

In my case, it is not 20 times. I have responded to these debates only since the general election.

The key to the debate is the Budget Red Book. I suspect that many Members are not in the Chamber this evening because they have looked at the screens advertising the debate and seen a reference to some obscure European legislation, but I draw all Members attention to page minus 2 at the very beginning of the Red Book. In tiny 9-point font, beneath the statement that the Red Book is printed on paper containing 75% recycled fibre content minimum, it states:

“The Budget Report is presented pursuant to section 2 of the Budget Responsibility and National Audit Act 2011 and…constitutes the Government’s assessment under section 5 of the European Communities (Amendment) Act 1993 that will form the basis of the Government’s submissions to the European Commission”.

If Members knew that we were debating whether the Chancellor’s assessment of the economy was a true and accurate reflection of what is going on in the UK economy, for the purposes of that Act of Parliament, they would be absolutely astonished.

We have obligations under the Maastricht treaty articles; that is essentially what we are talking about when we refer to the European Communities (Amendment) Act 1993. Article 103 states:

“For the purpose of this multilateral surveillance”—

I know that those words stick in the throats of some hon. Members—

“Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy”.

--- Later in debate ---

[Chris Leslie]

That is one way of looking at it.

The point that concerns me is that the Government have in recent days tried to shove this issue off the Floor of the House and sweep it upstairs to a Delegated Legislation Committee. The Minister has said that this is a busy time of year and that the Government do not want to waste the House’s time with these questions, but we are already faced with an opaque description of the legislation, so it is no wonder that they are trying to push it out of parliamentary time. It is, in fact, the kind of legislation that ought to be advertised more to hon. Members.

[Mr Cash]

I would no doubt have a lot in common with some of the remarks made by those who were critical of the Maastricht treaty. Will the hon. Gentleman be good enough to tell me whether he would like to leave the existing treaties, and to describe the basis on which this nonsense, this farrago, is now being conducted?

[Chris Leslie]

Well, this does feel like rather an anachronism, but we have legal obligations under those treaties. No doubt there will be revisions, and some of the reporting requirements ought to be considered afresh, but my principal concern is whether it is right for the House to endorse the Red Book as a true and accurate reflection of what is happening in the UK economy. In my view, the Government must be kidding if they are saying that the Red Book reflects the facts. It is more like a work of fiction. They have been spinning furiously as the key indicators have taken a turn for the worse, as my hon. Friend the Member for Luton North (Kelvin Hopkins) said. In fact, the Red Book is little more than a vanity exercise cloaked in an official publication. It revolves entirely around the Chancellor’s need to retro-justify his failing economic ideology.

I invite hon. Members to look seriously—and without cracking up—at page 1 of the Red Book, and to ask themselves genuinely and dispassionately whether it is a true reflection of what is happening in the UK economy. The first line states:

“The Government’s objective is to…build…a fairer society”.

Well, tell that to those who are struggling with the new bedroom tax while they watch the great and good millionaires of this country rake in a typical £100,000 tax cut, thanks to the reduction in the 50p rate of income tax for those earning more than £150,000. So much for a fairer society!

Here is another one:

“The Government’s plan…is based on…fiscal responsibility to deal with our debts with a credible debt reduction plan”.

That is in total contradiction with the first page of the Office for Budget Responsibility report, which states plainly that the deficit reduction plan has “stalled”. That is the word that the OBR uses. No one would think from reading the Budget Red Book that the Government had presided over an increase in the national debt of 38% during their three years in office.

--- Later in debate ---

[Mr William Cash (Stone) (Con)]

This is an extremely important debate, but I am sorry to have to say that the Government did their best to prevent it from being held on the Floor of the House. Speaking as the Chairman of the European Scrutiny Committee, I feel that that must be put on the record. It was very unfortunate, to say the least, and no doubt the Committee will consider it when we meet next Wednesday.

Having said that, I must add that this is an opportunity to put in context the tributes that should be, and indeed have been, paid not just to Margaret Thatcher but to Alan Walters and all who took part in the Maastricht rebellion, and also to those who have fought so tenaciously throughout the accretion of these treaties, from the early days until the present time. I use that collective term because many new Members who are in the Chamber now—notably my hon. Friends the Members for Rochester and Strood (Mark Reckless), for Bury North (Mr Nuttall), for St Albans (Mrs Main), for North East Somerset (Jacob Rees-Mogg) and for Bedford (Richard Fuller)—are apprised of the seriousness of the situation, as indeed we were at that time.

Section 5 of the European Communities (Amendment) Act 1993 was passed 20 years ago as a result of a very tense debate about these questions. In the last 20 months, there have been at least 20 economic summits in an attempt to unravel the dysfunctional nature of the economic requirements with which we are having to comply, in the context of the convergence criteria and as set out in papers that have been placed before the House. I imagine that many Members have not had an opportunity to read those papers, but they have been placed in the Vote Office for the benefit of those who wish to do so.

While we are dealing with the consequences of the Maastricht treaty, I want to take the opportunity to put on record a correction to a book by the former Chief Whip in the House of Commons, Lord Renton. After making some fairly disobliging remarks about certain Members—I need not ignore the fact that I was one of those of whom he did not particularly approve—he wrote that

“the vehicle for their resistance was the parliamentary approval for the Treaty of Maastricht.”

He went on to observe, astonishingly,

“Although this had been signed by their heroine, Margaret Thatcher, they revelled in defying three-line whips in order to vote against its enactment into British law”.

That is complete and total arrant nonsense. Margaret Thatcher did not sign the Maastricht treaty, although she certainly became a patron of the Maastricht referendum campaign, which I organised along with Bryan Gould and a Liberal Democrat Member who represents one of the Devon seats. However, the present Prime Minister himself has now said that there should have been a referendum on that treaty, and I believe that, had there been one, we would have won. The father of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) was one of the leading campaigners in the House of Lords for the referral of the treaty to a referendum, but his campaign was defeated by a monstrous whipping operation, with the result that we are where we are.

There was a complete refusal to listen to what was said at the time, and there has been a complete refusal to listen to what has been said ever since. I fear that the coalition is still not listening, although it is now clear as crystal that our predictions were right and that riots, massive unemployment, the rise of the far right and the failure of the system are destroying not only the European economy but Britain’s prospects for growth. I shall say more about growth in a moment, because it is fundamental to the issue that we are discussing.

[Mark Reckless]

As my hon. Friend pointed out, the Prime Minister now says that there should have been a referendum on the Maastricht treaty. Does he recall that the Prime Minister was at the time a special adviser to the then Chancellor of the Exchequer, who had been Chief Secretary to the Treasury under Margaret Thatcher and who refused to sign the treaty? A junior Minister, my right hon. Friend the Member for Horsham (Mr Maude), had to go and do it instead.

--- Later in debate ---

[Mr Cash]

The hon. Member for Stone—who is also Chairman of the European Scrutiny Committee—will of course do just that. I am grateful to you, Madam Deputy Speaker, for drawing my attention to these interesting documents. Among the interesting statements in the documents is this in paragraph 2.17:

“The euro area is the key market for UK exporters, accounting for 42 per cent of UK exports in 2011. As a consequence, the euro area sovereign debt crisis and subsequent recession have weighed heavily on the UK recovery. Action by European policy makers in 2012”—

I must say that I am astonished by the phrase that follows—

“helped ease the crisis and there are signs of investor confidence improving, but as the situation in Cyprus demonstrates the challenges facing the euro area are not fully resolved.”

Well, we can tell that to the people of Cyprus, but we can also say it to the people of Britain. This is not just a eurozone problem; it is a European Union problem, but above all else it is a British problem, and that is why we must take the necessary action.

The document is completely wrong to describe the euro area as “the key market”. In fact, as I pointed out in a paper that I wrote with my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), the UK runs a trade deficit with the other 26 member states of £47 billion a year, yet we have a surplus of about £20 billion in our trade with the rest of the world. Furthermore, the Germans—about whom I shall say more in a moment, because of what was said by Angela Merkel at 3 pm today—run a surplus of no less than £29 billion a year with the other 26 member states.

That is why the debate is so important.

[Jacob Rees-Mogg (North East Somerset) (Con)]

On paragraph 2.17, does my hon. Friend share my view that it is a mistake to look at the euro area as one export market, as the individual countries that make up the eurozone have their own characteristics, and we naturally have a huge trade with Ireland, as all countries do with their nearest nation, irrespective of which currency bloc they belong to?

[Mr Cash]

Absolutely, and one of the greatest pleasures I have had in the past couple of years has been to have my hon. Friend serving on the European Scrutiny Committee, with the diligence, knowledge and judgment he brings to all these matters.

It is also stated, at paragraph 2.19, that

“Brazil, Russia, India and China taken together were the destination for 6.5 per cent of UK exports in 2011.”

The real problem here is that our exports certainly have to go to the BRIC countries and also to the rest of the Commonwealth, which is where the emerging markets are, as well as to the United States.

I strongly recommend that this House of Commons and this Government start waking up a bit. I really mean that, as I am very concerned indeed, as any right-minded person in this country should be.

It is also argued in this paper that:

“Between 2009 and 2012 UK goods exports to Brazil increased by 49 per cent, to Russia by 133 pre cent, to India by 59 per cent and to China by 96 per cent.”

I have heard those figures before, but I asked what our actual import penetration into China was in relation to that of the rest of the world. It is 2%. The 96% increase is entirely relative, therefore. The real question is how much we are managing to export into China. Germany exports into China 45% of all the EU exports into China. I do not cite that figure in order to denigrate the expert efficiency, determination and political will of those who run Germany, but I do say that we had better get our act together. Continuing to be locked into these absolutely penalising treaties is causing us enormous damage, when we could gain so much by trading not only with Europe, but with the rest of the world on a much more enhanced basis.

There is far too much discussion and not enough action, and I was glad to note the campaign launched today by 500 business men and run by Matthew Elliott, and I also commend the book about the euro by the Institute of Economic Affairs, which puts its finger on many of the problems in the euro area.

[Richard Fuller (Bedford) (Con)]

I am very interested in what my hon. Friend is saying. Does he agree that this report has given us an opportunity to put an alternative argument against the strong argument about commonality? I know he will draw the House’s attention to the interesting comments about Europe by the Chancellor of Germany today. My hon. Friend talks about those other economies, and there is an argument against commonality and for the UK having an opportunity to be able to trade with the rest of the world, but that is being lost as a result of such statements. Is there an opportunity for us to make this case, because I am not sure we are making it strongly enough?

[Mr Cash]

I agree with my hon. Friend. We must be realists. T. S. Eliot once said,

“human kind

Cannot bear very much reality”,

but Britain has got to wake up. It is crucial at this stage that we understand—in a constructive, not a negative, sense—that we have both a problem and an opportunity, but that opportunity will not last much longer, and we must not simply repeat the recitations and mantras about section 5 while not tackling the intrinsic problems.

These papers were, no doubt, prepared by worthy civil servants, but they may well not reflect the real situation. Let us look at the question of the level of debt, for instance. I mentioned that in an intervention on my right hon. Friend the Financial Secretary, and I gave him the percentage figures. However, under the previous Government—I now turn my attention to those on the Opposition Benches—I repeatedly said, along with my right hon. Friend the Member for Wokingham (Mr Redwood) and one or two other Members, that the debt that was accumulating under them was causing so much damage to our economy. Furthermore, as I said at the time of the last election in my manifesto—or, rather, in my personal message to my constituents—the stated debt levels, which is the key issue, were based on what could only be described as a lie.

[Chris Leslie]

What does the hon. Gentleman think about the fact that the national debt has risen by 38%—by over a third—in the past three years, while the current Front-Bench team has been in charge?

[Mr Cash]

Not only am I appalled by that, but I also recognise that the genesis of much of this can be traced back to the time of the previous Government. Furthermore, we now understand from the official figures published by the UK Statistics Authority that the level of debt—which at one time was, astonishingly, described as being “merely” £1 trillion—will go up to £1.5 trillion. However, under the previous Government the real level of debt—taking into account public pensions, Network Rail, nuclear decommissioning and several other factors, which we cannot ignore—was actually up at about £3.25 trillion, as I argued at the time, and if we include those factors it is now likely to be about £4 trillion.

That is the inheritance of the young people of this country. They have got to be brought into work as a result of growth, but the prescription from the Opposition Benches is more debt, not less, and more Europe, not less.

Regardless of how I vote this evening, I pay tribute to the fact that at least the coalition Government have begun to look at these questions. My complaint is that they have not done enough and they are going too slowly. If they do not get on with it, there will be a catastrophe. In fact, we are already living through the beginnings of a catastrophe.

There is another question to be asked about growth. We can only grow our economy by growing from the other countries with whom we trade. In a nutshell, we must engage in cuts, but we need the taxation from the growth of small and medium-sized businesses in order to provide the public services those on the Opposition Benches say we need to provide. All they do is call for ever more cuts, but they talk about growth but do not actually do anything about it.

The European approach of large, and greater, Government spending tends both to increase the rate of Government debt and to lower the GDP growth rate. As a result, growth in most European countries, and the possibility of getting Government debt under control, recedes. The rigidities imposed by a single currency—the euro—and the burden of EU regulation on EU economies are continuing to cause frictions and difficulties and will destroy the countries in the European monetary union.

If only people would listen at the time, when it matters, rather than afterwards and then try to cover things up. Only a few weeks ago, Moody’s downgraded our economic performance, and Fitch did so in the last couple of days. Portugal, Ireland, Greece, Spain, France and Italy are now all countries of perpetual economic concern. There is a black hole, but the call is for more and more Europe.

I referred to the remarks of Angela Merkel today. It is regrettable and unfortunate that she was quoted as saying that countries in the eurozone must accept that Europe “has the last word,” and need to work more closely together if the continent is to avoid going into decline. I am sorry to have to say this so specifically, but that is precisely because there is a centralised approach, which is driven by German requirements and goes back to Chancellor Kohl.

In the 1990s, I wrote a pamphlet called “British and German National Interest”, and we are seeing a repetition of that time. Chancellor Merkel said:

“We need to be prepared to break with the past in order to leap forward. I’m ready to do this.”

In fact, she is going back to the past—not the dark past we all witnessed so vividly, but the kind of past that assumes it is not actually a European Union, but in practice, a German Europe. We should ask people in Cyprus and Greece what the position is. She said:

“Germany will only act together with the others—hegemony is totally foreign to me.”

It may be foreign to what she wants, but the practical reality is that it is happening.

We are now being lectured by Madame Lagarde, who was a French economic Minister and is now head of the International Monetary Fund. She said:

“We violated all the rules because we wanted to close ranks and really rescue the euro zone.”

Those are the rules we are discussing. On top of the theft in Cyprus, everyone knows that those of us who argued the case have been proved right.

I am sorry to hear that Madame Lagarde appears to have criticised our Chancellor. It is some gratitude for all the work he did urging her to accept the presidency of the IMF, and leading the charge to make sure she got it.

Everyone wrings their hands, but what are the Government doing? We are being locked into the question of whether the debt is being sufficiently reduced, but the debt is escalating and the deficit remains unacceptably high. Problems in the eurozone have a real effect on the UK economy. I repeat that it is not just about the eurozone, or just about the European Union; it is about Britain, which is why we have to get our act together. I notice that the Chief Whip has just come into the Chamber, so I hope he will listen with care, because these debates will unravel.

Real GDP fell in every quarter of 2012 in the eurozone, and by 0.6% over the year as a whole. The IMF forecasts a further fall of 0.3% this year. What is happening is completely unacceptable. No wonder the UK Independence party is making such headway; it will continue to do so until there is real growth.

We have the opportunity. We can deliver. No doubt the commentariat will fail to report this debate, as it fails to report other debates when we deal with facts and not mere speculation, but that will not prevent us from continuing the fight. We have the means to achieve the results. Some of them will come from a change of position by the Government, going for more and more growth based on real policies for growth and disentangling ourselves from the shackles of the regulatory arrangements of the European Union, making sure that the EU does not dominate the free trade agreements that are being determined. We have to be able to trade on our own terms, just as we in this Westminster Parliament have to decide the future of British policy.

As the Prime Minister said in his five Bloomberg principles, our national democracy depends on our national Parliaments. European democracy depends on their national Parliaments. He was right about that. Let us do something about it. Let us make sure that we run our own economy based on our own assessment and that we do not remain shackled to the existing treaties. It is time to put an end to them.

[Kelvin Hopkins (Luton North) (Lab)]

I rise to speak briefly in support of my hon. Friend the Member for Nottingham East (Chris Leslie) about the nonsense of presenting the fiction of the Red Book as though it represented the truth about our country. Another organisation—perhaps the Institute for Fiscal Studies—would do a better job.

Last week, in a speech in the Chamber, I reminded colleagues of an organisation that used to get forecasts right: the Cambridge Economic Policy group. But it was a left-leaning Keynesian group and the Conservative Government of the time withdrew its funding, because they did not like its answers and chose to follow the London Business School, which always got the forecasts wrong. The Sunday Times always gave it nought out of 10. Let us not pretend that all forecasts speak the truth. Officials will never present the Chancellor with a gloomy picture; they try to put as big a gloss on things as possible so that the Chancellor can say nice things to us in the Budget speech.

I only wish that the colour of the Red Book represented some of the policies inside, but I am afraid it does not. The antiquated language is nonsense. The Minister drew our attention to the fact that the reference to convergence was born of the past assumption that all countries would be in a single currency, we would all be growing nicely together, and poorer countries would become rich countries. That has all been washed away; it is all complete nonsense. It seems the only convergence we seek now is with an area that might be in terminal decline—the European Union. It is in serious economic difficulty, so do we want to converge with it? I suggest we want to diverge from it and make our economy work.

Although there are areas where we would have definite disagreements, the hon. Member for Stone (Mr Cash) often says things I agree with. He said we were talking about a German European Union. In 1989, the Institute for Public Policy Research published a document called “The German Surplus,” which was quickly suppressed because it was too explosive. The whole political establishment was moving towards a pro-euro, “Let’s join the single currency and the exchange rate mechanism at the wrong time” approach. I still have a copy of the document and I think it can still be found on the internet. It said that Germany had built an economy around itself, such that it could sustain low parity for its currency against all the others. Building that low parity for their currency into the euro meant that the Germans would always have a competitive edge over the other countries and could export to them freely. What they did not appreciate was that over time those countries would run out of money and Germany would have to lend them money to buy German products, which is what has been happening. Germany either has to dissolve the whole arrangement or carry on giving vast sums of money to other members of the eurozone to help them buy German goods.

[Mr Cash]

The hon. Gentleman may find it interesting to read the book by the Institute of Economic Affairs on that very subject.

[Kelvin Hopkins]

I shall certainly look it up.

Ministers go on and on about the importance of exports to the rest of the European Union—our Ministers did too—but they rarely talk about imports. We have a gigantic trade deficit, which is getting worse and worse every year. Even between January and February, the goods deficit with the EU rose from £4.8 billion to £5.1 billion. It now looks as though the trade deficit this year may be £60 billion. That is enormous; it is more than £1 billion a week. We are buying £1 billion more goods from the EU every week than the EU buys from us. That is not a sensible way to run an economy.

Cyprus

William Cash Excerpts

Monday 18th March 2013 Commons Chamber

[Greg Clark]

I do not think anyone is suggesting that the measures that have been taken are not rigorous and exacting. The reaction in Cyprus and across the eurozone indicates that these are regarded as very tough measures, including on the transparency of the banking system, particularly to avoid the reputation for money laundering. However, this is a matter for the Cypriot Government. They have had to convince their partners in the eurozone that this programme represents a credible set of conditions which can give confidence to those who are helping to bail them out.

[Mr William Cash (Stone) (Con)]

The Minister will no doubt appreciate that Mr Draghi’s comment that the European Central Bank will do whatever it takes clearly includes daylight robbery of British pensioners, among others. Does he agree that this is symptomatic of the dysfunctionality of the European Union? Will he also note that Germany has very much driven the measures itself, and furthermore that it has a surplus of £29 billion with the rest of the European Union, whereas we have a deficit of £48 billion?

[Greg Clark]

Clearly, it is a matter of regret, and lessons should be learned from the situation that Cyprus finds itself in. One of the clear lessons is that it should not have been allowed to descend into this state of indebtedness, and the banks should not have been allowed to get into their present position of vulnerability. It is in our interests, as well as in the interests of other members of the eurozone, that we have a much more soundly based banking system right across Europe.