Banking Reform

Andrea Leadsom Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

The hon. Gentleman raises a very important point. I met the Federation of Small Businesses and the Bully-Banks organisation and I conveyed their concerns to the FSA, which the hon. Gentleman knows is set up to be the independent regulator. I think most people were relieved that the FSA proposals of last week will result in compensation for the affected businesses within a rapid time frame. What happened is totally unacceptable, and is another feature of the scandalous decline in reputation that the banks have suffered. Small businesses in particular have a right to regard their bank manager as someone who acts in their interests, rather than someone who flogs them dodgy products that they do not need in the first place. That is a breach of trust in banking. I am absolutely insistent that the FSA should conclude this process, giving full recompense to those who have been mis-sold products.

[Andrea Leadsom (South Northamptonshire) (Con)]

The retail ring fence is a good idea, but the real game-changer for banking will be the introduction of full bank account number portability, because it will break open the oligopoly banks. Does my right hon. Friend agree that it is also important for the Payments Council no longer to be controlled by the big banks? Breaking open competition and introducing new challenger banks is of key importance.

[Greg Clark]

I thank my hon. Friend for the effort that she has devoted to promoting this agenda. It seems to me that if there is to be genuine competition, people should have a choice of banks, and it should be easy, not difficult, for them to make changes. I hope that the work that my hon. Friend is doing will be reflected in the policies that we are enshrining in the Bill, and I look forward to detailed discussions with her about how that may be possible.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 29th January 2013 Commons Chamber

[Greg Clark]

The hon. Lady should reflect on the fact that the fall in unemployment in the north-east of nearly 25% is greater than that in any region in the country. She should be celebrating the turnaround in the north-eastern economy to which she and I have been aspiring for many years.

[Andrea Leadsom (South Northamptonshire) (Con)]

To go with the enterprise taking place in Northamptonshire, may I urge colleagues throughout the House to consider having an apprentice in their own office? I have had apprentices for two years now, both of whom were school leavers from Northamptonshire schools. They do a brilliant job and there are all sorts of facilities available to support that.

[Greg Clark]

If the apprentices that work in my hon. Friend’s office contribute to her own productivity and innovation in policy production, she is a standing example of the success of the scheme.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 11th December 2012 Commons Chamber

[The Financial Secretary to the Treasury (Greg Clark)]

The hon. Lady is absolutely right that one of the real problems in banking over recent years was that the people who had a trusted relationship with their customers saw them as sales targets rather than as people to be helped. That needs to change. The Financial Conduct Authority is very clear that these kinds of incentives have to go.

[Andrea Leadsom (South Northamptonshire) (Con)]

I congratulate my right hon. Friend the City Minister on reassuring us that he intends to require the Prudential Regulatory Authority and the FCA to promote new bank competition. Does he agree that full account portability could offer the biggest game changer for bank competition, and that an amendment to the draft Financial Services (Banking Reform) Bill could achieve that?

[Greg Clark]

I am grateful to my hon. Friend for her question and for her campaigning on this issue. My hon. Friend the Economic Secretary and I will meet her to discuss her proposals. The draft Bill responds to the Vickers report. He said that if portability reforms were not adequate we could take further steps, so we have a vehicle to do so.

Financial Services Bill

Andrea Leadsom Excerpts

Monday 10th December 2012 Commons Chamber

[Damian Hinds]

The hon. Lady is entirely right, and I alluded to that point when I talked about behavioural charges. It is wrong to think we can legislate perfectly for all eventualities in advance, however. This market has an amazing ability to shapeshift and find its way around any regulation we might put in place, as has been seen in the United States.

I would like to hear an assurance from the Minister that under the new regime it will be possible to have a flexible capping regime that allows for all parts of the market to operate while also insisting that they do so in a responsible way. I also seek an assurance that we will not just address “payday” loans, which are a relatively new phenomenon in this country. Home credit is massive, and it has been with us since Victorian times, and has been a problem for quite a long time. There is also pawnbroking, which my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) mentioned. Logbook loans are a big market in the United States; they have not appeared in a major way here, but we can bet our bottom dollar that they would get a big boost if other parts of the market were capped. Rent-to-own is another area.

On the basis of the Minister’s conversations across Government, can he assure us that the Government will continue with an integrated approach that addresses not just regulation but boosting financial capability, starting with children’s capability with mathematics in school? Will they also continue to support operators that provide responsible credit, in particular credit unions? I pay tribute to the work the Government are doing in supporting that sector, and would like them to go further in modernising it and making credit union services more widely available, such as through the post office network.

[Andrea Leadsom (South Northamptonshire) (Con)]

I want to speak briefly on Lords amendments 25 and 36, both of which deal with the issue of competition in respect of the new regulators: the Prudential Regulation Authority that will supervise the banking sector and the Financial Conduct Authority that will supervise business conduct in the banking sector. I seek reassurance from the Minister that having regard to the quality and level of competition in the marketplace will be sufficient to drive a radical improvement in respect of the new challenger banks.

As the Minister knows, the five oligopoly banks in the UK currently have over 80% of all small and medium-sized enterprise bank accounts and personal current accounts. That means access to finance is very limited in respect of choice and types of finance, and as bank balance sheets are currently in a difficult position, it is extraordinarily hard for small businesses to get hold of the financing they need to grow, which in turn will help our economy to recover. So the Bill gives us a once-in-a-lifetime opportunity to ensure that the regulators are, in future, incentivised to ensure not only that banks do not fail, but that we encourage new entrants to the market. At the moment, many would-be bankers find that they are set enormous hurdles, such as having to set up a dealing room just to provide evidence of their ability to do so, yet at the end of an enormous obstacle course the FSA tells them that they cannot have a banking licence. What we cannot have in the future is the PRA and the FCA combining to make it as difficult or more difficult to encourage new entrants into the market. So I hope that the Minister will set out how the regulators of the future will not only tolerate, but encourage new competition.

[Greg Clark]

This excellent debate has covered a number of issues that colleagues from all parts of the House feel passionately about, and correctly so because they are of huge importance to all our constituents, especially the most vulnerable in our society.

In the short time available, I wish to address some of the points that have been made directly by hon. Members. The shadow spokesman, the hon. Member for Nottingham East (Chris Leslie), asked how the powers would be exercised by the Financial Conduct Authority. The powers come directly from the FCA’s remit, and he will be aware that the Bill establishes a far-reaching consumer protection objective. The overall objective is

“securing an appropriate degree of protection for consumers.”

The Bill goes into detail to require the FCA to consider the following: the different degree of risk to be tolerated by different types of consumers; the different needs of different types of consumers for the provision of information; and the general principle that those providing financial services should be expected to provide consumers with a level of care appropriate to their needs. I think that colleagues would recognise that this is a far-reaching objective which gives quite general powers to protect consumers, and it is right that that should be so.

The hon. Gentleman mentioned basic bank accounts, on which some progress continues to be made. There is no universal legal right to a basic bank account, but the industry guidance still stands. It states that if a consumer asks to open a basic bank account and meets the qualifying criteria, the firm should offer them an account and that banks can refuse to open an account for a customer only where the customer has a history of fraud or is an undischarged bankrupt. Those provisions continue.

Public Service Pensions Bill

Andrea Leadsom Excerpts

Tuesday 4th December 2012 Commons Chamber

[Sajid Javid]

My hon. Friend made passionate contributions in Committee, where he made that same point. I will say the same thing in reply. The Bill and other changes we have made to public sector pensions deliver significant cost savings for the Government and future taxpayers, but maintain our commitment to generous, fair pensions that are sustainable in the long term for people who serve in the public sector.

The Bill is not simply about bringing costs under control and ensuring that schemes are sustainable. We are also seeking to address issues of unfairness that exist within the current scheme designs.

[Andrea Leadsom (South Northamptonshire) (Con)]

The Minister mentions unfairness. Does he agree that one of the greatest unfairnesses was when the previous Government got rid of advance corporation tax relief on pension funds, which destroyed the private sector pensions industry and left many private sector workers much worse off than this excellent Bill?

[Sajid Javid]

My hon. Friend is absolutely right—the change to which she refers had a dramatically negative impact on private sector pensions.

The benefit structure of many existing schemes has led to benefits being disproportionately directed towards higher earners.

--- Later in debate ---

[Chris Leslie]

In an era of increasing life expectancy, it is right and necessary to reform public service pensions in order to ensure that they are affordable and sustainable in the long term. That is why Labour made significant changes to public service provisions when in office, including through increasing the normal pension age from 60 to 65, introducing a cap-and-share mechanism to protect taxpayers from increasing costs and reforming contribution levels. According to the Public Accounts Committee, those reforms, implemented by the previous Government, will save the taxpayer £67 billion over 50 years.

Unfortunately, instead of building on those reforms, the Government ripped up many of them, making sensible reform harder: they have imposed, without negotiation, a steep 3% rise in contributions and a permanent switch in the indexation of future pension income from RPI to CPI. Announcing those changes before the Hutton report on pensions was even published was unfair and needlessly provocative. Those changes are not in the Bill, however, so we did not have a chance to address them in amendments and in Committee and on Report.

Conversely, the main aims of the Hutton reforms in the Bill are ones with which we broadly agree, most notably the shift from final salary to career average defined benefit schemes, the increase in pension age to take account of increasing longevity, and a mechanism to ensure that increasing costs are contained within schemes and do not fall squarely on the taxpayer. It is important for the sustainability of public service pension schemes that those changes are implemented properly, which is why we do not wish to oppose the Bill this evening. However, as we said on Second Reading, we have serious concerns about the detail of the Bill. We said that we hoped the Government would work constructively with us in Committee and the other place to improve it. There was some movement from the Government, but in our view it was not sufficient.

[Andrea Leadsom]

Can the hon. Gentleman therefore confirm that his party would not change the future pensions link from CPI back to RPI?

[Chris Leslie]

I do not think it would be sensible to make a permanent “no review” announcement when it comes to indexation, particularly when some of the projections have been showing that the future burden on the taxpayer might not be as great as the Government have made out. For the time being, we have not been able to make propositions on that, because the scope of the Bill did not allow it.

However, we proposed amendments in a number of other crucial areas in seeking to improve the Bill, focusing particularly on the questions of trust and confidence. We sought to improve the Government’s proposals in a number of ways, most notably in implementing the fair deal—a commitment that was integral to the agreements that had been reached. I am glad that the Minister had the opportunity to correct his words on the local government pension scheme aspect of that, because there were some ripples emanating through the Chamber from some of the previous words he uttered. There is also the question of the Government’s ability to reduce accrued benefits retrospectively. They should have been stronger on that and firmer commitments should have been given as guarantees on replacing defined benefit schemes with new career average defined benefit schemes.

--- Later in debate ---

[Chris Leslie]

We did not table any amendments on judicial pensions. I suspect that the question of relative taxpayer support for private pensions might come up tomorrow in the autumn statement. I am intrigued that hon. Members have castigated previous Governments for changes that have affected private sector schemes. It will be interesting to see what the effect will be on the sustainability of some of those pension pots, but we can only speculate at this stage and see what happens. However, this question is certainly of the moment. It is only a matter of hours before the Chancellor stands up and—undoubtedly—makes his announcement on pensions tax relief. We will see what happens at that point, but we felt that some significant proposals needed to be made.

[Andrea Leadsom]

rose—

[Chris Leslie]

I am conscious of the time. I would be grateful if the hon. Lady let me conclude my remarks.

It was argued that we must not bind future Governments by amending the Bill. That was not a very strong argument, given that legislation can be introduced at any time. We also felt that safeguards were needed to address people’s concerns about the effective sequestration of their deferred wages—their pension savings—by retrospective changes. At no point did we propose amendments that contradicted the Hutton principles. We sought to be constructive, and I am grateful that the Minister recognised the constructive changes that we proposed.

We had some significant victories, and I am grateful to the Minister for at least keeping an open mind on some of these points. In particular, I am pleased that we managed to get a guarantee—it is due in the other place—that future members of defined benefit schemes will receive an annual benefits statement setting out full information on changes to their pensions. That is a big step forward, and I am grateful that the Minister moved on that point.

We will want to come back to some of those questions in the other place, particularly those on scheme capability reviews and the working longer review in the NHS, and to ask why the Government are irrationally not letting those arrangements come to fruition in the drafting of legislation. I am still not fully convinced that the issue of the closure of local government pension schemes has been adequately dealt with, but I know that the Minister has said that he is happy to look into it.

Many colleagues will naturally have serious doubts about the Bill. That is entirely understandable, given the differences between it and the Hutton proposals. However, pensions reform is important both for the taxpayer and for scheme members themselves. Our hope is that the other place will see the strength of our arguments and make the changes that this House has been unable to secure. We hope that their lordships will appreciate that only through changes to the Bill will we achieve successful and sustainable pension reform. It is with that hope in mind that we shall not oppose the Bill at this stage, but we hope for further improvements in the other place.

--- Later in debate ---

[Andrea Leadsom]

I welcome this Bill for three particular reasons. First, I welcome the move to career average rather than final salary, which is absolutely key. Secondly, linking eligibility to normal pension age to the state pension age is very important. Thirdly, transitional relief for people with 10 years to go before they retire is vital. I commend the Government for their work.

I have two further points. First, it is a shocking indictment of the last Government that in 1995 there were 4.1 million public sector workers in a defined benefit scheme, while in 2011 there were 5.3 million—an increase of more than a million public sector workers on defined benefit schemes. Surely it is the legacy of the last Government’s spending money we simply could not afford that has put us in a position where we have had severely to curtail some of the benefits that public sector workers enjoyed in the past.

Finally, 79% of workers in the public sector have defined benefit pensions as against 9.4% in the private sector. Again, it is a complete indictment of the last Government that they have taken what was one of the best private sector pension arrangements in Europe and made it one of the worst. It will be a great pity if the Opposition do not welcome the attempt in this Bill to sort out the mess that they left us.

Bank of England

Andrea Leadsom Excerpts

Monday 26th November 2012 Commons Chamber

[Mr Osborne]

I can assure the hon. Gentleman that Dr Carney and Dr Bean are excellent.

[Andrea Leadsom (South Northamptonshire) (Con)]

I am so excited about this appointment that I could jump up and down—but I won’t.

Does my right hon. Friend agree that at some point during the next year he should have a chat with Dr Carney about the ground-breaking bank revolution that would ensue from bank account portability, and about the fact that that could be the very first thing that he did as the new Governor of the Bank of England?

[Mr Osborne]

I hope that my hon. Friend will contain her excitement when she has a chance to question Dr Carney, when he appears before her Select Committee. As she knows, from next year we will have full account-switching, which means that people will be able to switch their bank accounts, including direct debits and so on, within seven days. That will make switching much easier. My hon. Friend has advanced strong arguments for going further and introducing account portability, and we are studying that idea closely. There are pros and cons, which the Vickers commission considered, but she has put her case very powerfully.

Fuel Duty

Andrea Leadsom Excerpts

Monday 12th November 2012 Commons Chamber

[Andrea Leadsom (South Northamptonshire) (Con)]

rose—

[Cathy Jamieson]

I will give way to the hon. Lady if she can give that commitment.

[Andrea Leadsom]

Does the hon. Lady acknowledge that it was her Government who put in place the fuel duty escalator, which is the whole problem facing British motorists today? Does she accept that?

[Cathy Jamieson]

The hon. Lady must also recognise that it was in her Government’s Budget. What we are asking the Chancellor to do is listen. We have heard a great deal about how he is in listening mode, but I do not know how long he must listen before making the decision. According to the House of Commons Library, the cost of delaying the fuel duty rise again until April 2013 would be around £350 million, and we think that could be paid for through a clampdown on tax avoidance. I am conscious that the right hon. Member for Wokingham (Mr Redwood) wishes to intervene.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 6th November 2012 Commons Chamber

[Mr Gauke]

We have to take action to try to deal with the deficit that we inherited, and let us not forget that. The hon. Gentleman mentions fuel. Because of the steps that we have taken on fuel duty, petrol pump prices could be as much as 10p lower per litre than they would have been had we stuck with the fuel duty escalator that we inherited.

[Andrea Leadsom (South Northamptonshire) (Con)]

16. What recent steps he has taken to reform banking and to redirect banking fines to the public purse.

[The Financial Secretary to the Treasury (Greg Clark)]

The draft Banking Reform Bill outlining fundamental reforms to the banking sector was published last month and is undergoing pre-legislative scrutiny. We have tabled amendments to the Financial Services Bill which provide for fine revenues net of enforcement costs to go to the public purse in future. The Bill is being debated today in the House of Lords. Some £35 million of those fines received so far this year will be used to support armed forces charities.

[Andrea Leadsom]

Does the Minister agree that one of the best ways to ensure good practice in future is through more transparency and competition in the banking sector? Does he further agree that full bank account portability could be a great way to achieve that?

[Greg Clark]

I do agree that we need much more competition in the banking industry, and account portability can play a major role in advancing that. The Vickers commission looked at it, and my hon. Friend has been very vigorous in proposing ways in which she thinks it can be implemented. My hon. Friend the Economic Secretary and I will meet her to discuss how we can advance these proposals.

Banking Union and Economic and Monetary Union

Andrea Leadsom Excerpts

Tuesday 6th November 2012 Commons Chamber

[Andrea Leadsom (South Northamptonshire) (Con)]

Like all Members here, I urge the Government to consider renegotiating Britain’s relationship within the European Union as a full member but using every opportunity that presents itself to get a better deal for British taxpayers. I firmly believe that that is entirely possible and that the establishment of the European Banking Authority may give us one of the greatest opportunities yet to negotiate not just to defend British financial services but to get something back that enables us to expand our financial services activities.

The hon. Member for Nottingham East (Chris Leslie) talked about the Luxembourg compromise, which was proposed in 1966 following General de Gaulle’s refusal to take part in European Council proceedings. It urged the EU to recognise nation states’ vital interests in particular industries. For example, the French have a veto over the common agricultural policy and the Spanish have a veto over fisheries policy. The automotive industry is as important to the Germans as financial services are to the UK, but they are able to use not only qualified majority voting but competition legislation to defend their industry, which is much less flighty than financial services. We in Britain have less protection than any other member state for this strategically vital industry which produces 1 million jobs directly within it and represents 10% of our GDP and 10% of our annual tax take.

I applaud my hon. Friend the Member for Stone (Mr Cash) for his work on looking at the legality of European banking union, but I urge that instead of focusing on that aspect, which is a given—I do not for one moment believe that our Government would sign up to something that is illegal at EU level—we should instead focus on what we can get in return for our consent. Of course, European banking union is in all our interests; it is absolutely crucial for our economic growth because if the eurozone collapses, we are in big trouble too. Nevertheless, financial services are core to us as well. As the Prime Minister showed by using his veto last December, he is not afraid to stand up for this most important sector.

I would like the Government to negotiate three things. The first is a legal safeguard for the single market so that no other eurozone caucusing can put up protectionist barriers and prevent British financial exports from being sent into the rest of the European markets. That is a basic key point. Secondly, I believe that in the culture and honour of the Luxembourg compromise, the rest of the EU needs to recognise the strategic importance of the financial industry to Britain, and give us the ability to impose an emergency break at European Banking Authority level if we believe that a proposal from the EU directly harms that industry.

Under qualified majority voting we have an 8% vote at the EBA, yet Britain represents 36% of EU wholesale financial services markets. We are therefore greatly under-weighted in what we can do to defend our financial services sector, and I urge the Government to make that case strongly in negotiations with the rest of the EU.

The third point is more proactive. The EU focuses its attentions on negotiating free trade agreements mainly for goods, and there is little intra-EU service trading. In spite of British UCITS—undertakings for collective investment in transferable securities—being the most successful financial export ever, that is only within the EU and not externally. The future for growth in financial services lies in big emerging markets such as Brazil and China, and involves not Government bond trading, but basic things such as mortgages, life insurance policies, health insurance and so on. I hope the Government will urge the EU to commit—in return for our consent—to promoting free trade agreements with emerging economies in services, and specifically financial services.

British success in financial services generated more than 1% growth in GDP per annum across all key EU member states during the financial boom. We now need to solve the financial crisis together, but Britain is in the uniquely strong position of being able to gain something back at the same time.

--- Later in debate ---

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

In some respects, this is a modest debate compared with last week’s, although it is worth reflecting that employment in the City, as reported by City AM, has collapsed by more than 100,000 since the peak of 2007. Some of that was self-inflicted, but much of it was inflicted by increased regulation. The Centre for Economic and Business Research reports that employment in the City is set to fall much lower. Most of the jobs are highly paid, high-taxpaying jobs, on which the economy in general and the economy of London and the south-east in particular depend very deeply.

I commend the sincerity of my right hon. Friend the Minister’s approach. He is in a difficult position. The difficulties he is confronting are a microcosm of the conundrum of the UK’s place in the EU. We are not in the room, so we cannot function as a positively engaged member of the EU on our current terms of membership, but we are also not negotiating the alternative terms of membership that would protect us from the effects of the treaties we have already signed.

It needs to be pointed out that banking union simply was not envisaged in the Lisbon treaty. We now find ourselves confronted with a new institution and a reform that simply was not regarded as necessary when the Lisbon treaty and its predecessors were signed. The treaty is not fit for purpose for a banking union.

The problem is that no arrangements that nibble at those problems will protect the UK’s interests—a wholesale change in our relationship is the only way to protect them. Sadly, the motion represents the Government yet again passing up a substantial opportunity to start laying the foundations of a different relationship and to start leveraging the renegotiation of our terms of membership. That is a matter of great significance.

[Andrea Leadsom]

Will my hon. Friend give way?

[Mr Jenkin]

I give way to my hon. Friend, who made a very able speech.

[Andrea Leadsom]

I am grateful to my hon. Friend, but I have to challenge him, because I think that the Government are absolutely committed to renegotiating. Why does he think that they are not?

[Mr Jenkin]

Unfortunately, our party’s leadership does not intend to start substantive renegotiation of our relationship until after 2015, long after this particular opportunity will have passed us by. If we attempt to remediate this measure and its effects on our interests, we will not succeed. This is happening in case after case—the fiscal union treaty is another example.

Multiannual Financial Framework

Andrea Leadsom Excerpts

Wednesday 31st October 2012 Commons Chamber

[Chris Leslie]

I would like to make progress as we have a limited amount of time.

The next seven years of the EU budget should prioritise jobs, growth, infrastructure and practical programmes that rejuvenate fragile economies. Building up those elements, however, means reducing EU spending elsewhere. Savings can be made on the common agricultural policy, which currently costs European nations £45 billion with the UK contributing about £1 billion a year. The common agricultural policy is a distorting barrier to trade liberalisation, a wasteful programme that is in need of further reform, and it is astonishing that the Government motion does not refer to it.

Savings can be made on aspects of EU structural funds that represent 35% of the budget and are too often committed in a haphazard manner and depend on outdated commitments rather than future priorities. Unless structural funds contribute to positive economic development, they cannot be justified. Savings can also be made on subsidies for tobacco growers, which will be discontinued, on outdated practices such as relocating the European Parliament to Strasbourg for a week each month—that costs €200 million each year—on non-essential projects such as the House of European History museum, which cost a reported £137 million, and on export refunds, which cost millions and disfigure fair trade.

Savings can and must be made, and delivering a real-terms reduction in the EU budget requires a relentless focus on the justification behind detailed expenditure. That is why we need a more effective and independent EU auditor who is able to examine the impact of programmes on the EU economy. The auditor must also improve the accountability of spending on pro-growth activities, which will require the bringing together of disparate Commission priorities under the auspices of a single commissioner for growth, persistently and single-handedly concentrating on that overarching concern.

How capable is our Prime Minister of delivering real reform in the EU budget? Can he come back with a deal that sees the contribution from the UK Exchequer reduced in real terms? Those are the tests he must now face. We know that his phantom veto last December placed the UK in the margins of influence, just when it mattered most, but today’s debate must be about more than the frailties of the Prime Minister. It boils down to how much we care about taxpayers’ money—money that is hard-earned and needs to be safeguarded.

For every 1% that the Government concede in additional spending on the multiannual financial framework, nearly £1 billion will transfer from UK taxpayers to the EU budget over the seven years of the spending review period. If negotiations fail because a member state walks away from the talks, we will simply see last year’s settlement rolled forward and supplemented by an automatic 2% inflation upgrade which, as I said, will cost our taxpayers at home an extra £310 million in 2014.

[Andrea Leadsom (South Northamptonshire) (Con)]

Perhaps the hon. Gentleman has not realised that trying to negotiate in a calm way on a deal that was agreed two years ago by our Prime Minister is the most sensible way to proceed. If he looks into it, he will find that new member states also have a lot of skin in the game, and they will not want us to use our veto because they will also lose out. This is not just about Britain and Britain’s veto, but about dynamics across the whole EU membership. Using our stated policy over two years in a consistent and calm fashion gives us the best chance of achieving real reductions in cost for the British taxpayer.

[Chris Leslie]

I have a lot of respect for the hon. Lady and she made a calm and persuasive point. The difficulty is that the Prime Minister has not been calm in these negotiations; indeed, he has deployed the veto almost three weeks before negotiations have even started. It is important to have a consistent and calm strategy, and the window of opportunity must surely be to persuade nations across the EU that their taxpayers also want a spending reduction in real terms. If the Prime Minister ends up at the November summit writing a cheque for hundreds of millions of pounds more, he will surely send an unpalatable message to millions of hard-pressed taxpayers across the country.

--- Later in debate ---

[Chris Bryant]

As you know, Mr Speaker, I love apologising to Government Members, and I apologise to the Minister. The point I am making is a serious one, however. He referred to some of the small-ticket items in the EU budget, but the big-ticket item is the common agricultural policy. If we do not address that issue in this next round, we will manifestly have failed to deal with the gaping moral and ethical hole at the centre of the European Union.

[Andrea Leadsom]

rose—

[Harriett Baldwin (West Worcestershire) (Con)]

rose—

--- Later in debate ---

[Chris Bryant]

The hon. Lady praises me far too much. I was Minister for Europe for about 2.5 seconds. In those 2.5 seconds, however, the one thing that I argued aggressively with my socialist friends and with my European People’s party friends—with whom her party used to be friends—was that the next multiannual round had to be lower than before and should not have an inflationary increase. I am afraid that the hon. Lady is pitching at the wrong person in this particular round.

I believe that there is a role for the EU budget and it should relate to growth, research and development. There are some things where we can do more together as a continent and add value. Unfortunately, however, those are not the issues that grab the attention of the French, the Germans, the Italians and the Spaniards. That is why we have to, and have always had to, build alliances with other countries, particularly the smaller countries.

[Andrea Leadsom]

rose—

[Chris Bryant]

I saw the hon. Lady attempting to intervene earlier. I will give way to her, but then no more.

[Andrea Leadsom]

I am grateful. Does the hon. Gentleman agree, then, that in order to be able to negotiate successfully on the big-ticket items as he says, we need a sound basis on which to go forward? Supporting an amendment that would simply trash all negotiations with other EU members, such as calling for a cut that is nigh on impossible, would not be the way to progress any decent negotiation on structural reform in the future.

[Chris Bryant]

To be honest, I do not agree with the hon. Lady. If I take her back to the last debate I had with her on this issue, I do not think that that is the position she was advocating then. In her heart of hearts, she would prefer Parliament to give a strong single voice today, so that the Government have a negotiating position whereby they can go to Brussels, Strasbourg or wherever and say, “Look, we have the whole of Parliament behind us saying, ‘We’ve got to cut’.” That is why I hope she will vote for the amendment today.

I know that some hon. Members do not like structural funds at all—perhaps this was the issue that the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who has already left the Chamber, wanted to raise—but I believe structural funds have a role to play in trying to make the whole European Union far more competitive in the world economy. That is certainly true for places like the valleys in south Wales. Sometimes the money is not particularly well spent, but if we did not have structural funds and cohesion funds, the danger is that each individual country would end up abusing state aid to protect specific businesses in their own country, thereby undermining countries like our own that choose not to go down that route.

I ask Government Members this: how could we possibly go back to our constituents and say to teachers, fire officers, police officers and all the rest, “We want to give more money to the European Union, but you’ve got to live with a pay freeze, and you’ve got to live with less money, with 19% cuts year on year to local authority funding for the building of hospitals, homes and so forth.”? I just do not see how I could possibly argue that.

--- Later in debate ---

[Stephen Williams]

This is about a debate we are having now on a budget from 2014 to 2020, not about a position we took in 2009 before any of us knew we were going to be in a coalition Government. This is a position we can decide for ourselves, knowing the circumstances we are currently in. They are entirely different situations.

We are essentially discussing a comprehensive spending review of the European Union from 2014 to 2020, for which the European Commission has asked for a budget of €972 billion. That is roughly €100 billion above what would be a real-terms freeze. That is completely unrealistic at a time when EU member states are under real budgetary pressure, and some more so than others. It would be unacceptable for the United Kingdom to agree an increase of that magnitude, because it would represent roughly £10 billion in extra contributions. Therefore, it is absolutely right that the UK Government are going into the negotiations, in concert with many other member states, asking for a real-terms freeze. That is what is important: the position our Government are taking is in agreement with that of many other member states. It is a position that has a realistic prospect of achieving the success that most of us actually want. Undermining the United Kingdom’s position today will blow a hole in that negotiating position and make it much less likely that we will get the outcome many of us wish to achieve.

[Andrea Leadsom]

Does my hon. Friend agree that it blows a hole in our credibility with our European colleagues regarding not only the budget but other reforms where we have a significant, perhaps once in a lifetime, opportunity to create real structural reform of the EU?

[Stephen Williams]

I absolutely agree, and I will come to that shortly.

The negotiating position of arguing for a real-terms freeze is agreed right across the coalition Government. There is no one more Europhile than the Deputy Prime Minister, who tomorrow is going to make a speech in which he highlights several of the reasonable differences that exist between the coalition parties on our relations with the European Union and makes it absolutely clear that he fully agrees that a real-terms freeze is the right way forward.

My hon. Friend the Member for South Northamptonshire (Andrea Leadsom) mentioned the case for reform. The European Union spends 33.8% of its existing budget, as negotiated in 2005, on the common agricultural policy and 5.7% on a very bloated central administration system, with the caravan moving between Strasbourg and Brussels, and it could make cuts in those areas. Yet it spends only 9.2% of its budget on the competitiveness agenda—on supporting research and development and small and medium-sized enterprises. That is where we want the European Union to spend whatever its agreed budget is in future.

The Government are right to argue against what the European Union calls its “own resources”—in other words, tax revenues directly hypothecated for the EU—and to say that we do not want that to happen with VAT. They are also right to argue against a Europe-wide financial transactions tax. My colleagues and I think that there is a good case to be made for a financial transactions tax across all the global financial centres, but many of those are outside the European Union, most obviously in Switzerland. It is not for the European Union to make the case for an FTT, and it certainly should not be the recipient of any revenues from an FTT should one be imposed in future, because it would then be taking on the personality of a state and a Government, and that is not the vision of the European Union that the Liberal Democrats wish to see. It is also right that the Government should argue for the retention of the British rebate.

Labour’s position is quite extraordinary. The hon. Member for Bolsover (Mr Skinner), who is no longer in his seat, gave the game away by alluding to the Maastricht votes of 20 years ago. Its position is a marriage of genuine Euroscepticism—I accept that—and naked opportunism. We in the coalition Government have waited two and a half years for Labour Front Benchers to tell us which of the cuts that the coalition Government are implementing they agree with, and, if they disagree with all of them, which has been the position thus far, at least to suggest alternatives. There has been total silence. The only cut that they are brave enough to suggest is one that has to be imposed by 26 other member states—they show no bravery at all in suggesting cuts in our own budgets. That is incredible, and for those Labour Members who are Europhiles, it is an embarrassing position in which to find themselves. I can only assume that they have been put there by their more senior Front-Bench colleagues who are not with us at the moment.

Labour Members should know that it is not possible to achieve a real-terms reduction in the MFF. They did not manage it in 2005, when they negotiated an increase. The current leader of the Labour party, the current shadow Chancellor and the current shadow Foreign Secretary were leading members of that Government. Liberal Democrat MPs and Conservative MPs voted against an increase in November 2007. In recent years, our Members of the European Parliament, Liberal Democrat and Conservative, have consistently voted against a real-terms increase in the European budget. Labour Members of the European Parliament have voted against a freeze in the EU budget; all they voted for was extra money for the trade unions. We want the EU to spend more on measures that grow the European economy, deepen the single market and make the EU globally competitive.