Living Standards

Chloe Smith Excerpts

Monday 5th March 2012 Commons Chamber

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I thank hon. Members for their contributions to what has, on the whole, been an insightful debate. We have heard from the hon. Member for Bristol West (Stephen Williams), my right hon. Friend the Member for Wokingham (Mr Redwood), my hon. Friends the Members for Witham (Priti Patel), for Mid Norfolk (George Freeman) and for Halesowen and Rowley Regis (James Morris), the hon. Member for East Antrim (Sammy Wilson) and, indeed, my fellow by-election winners, the hon. Members for Oldham East and Saddleworth (Debbie Abrahams) and for Inverclyde (Mr McKenzie), whom I very much welcome to this House.

I note that today’s motion is deficient, in that it gives the wrong date for the Budget—I wonder whether that reflects the Opposition’s grasp of detail when they want to spend and borrow an extra £12 billion. It is no surprise that they do not wish to talk about how to bring the deficit “down”, as mentioned in the third line of their motion. They also said nothing about lone parents. Do they not care about the single mums and dads? No, there was not a word for them and the fairness of their already having to work 16 hours a week.

As the House is well aware, we all face tough economic conditions as we recover from the disastrous economic legacy left to us by the previous Government.

[Karl Turner (Kingston upon Hull East) (Lab)]

Will the Minister give way?

[Miss Smith]

No, I shall not, because we have had plenty of time to hear from Labour Members. I must press on. We all know that, in these tough times, families across the UK are tightening their belts, managing pay freezes or worse, and coping with ongoing economic uncertainty. Many families are confronting falling living standards because of the dire economic situation we inherited. The Opposition want to keep on spending and keep piling on the debt, but we refuse to burden our children and mortgage the country’s future with their profligacy.

Tackling the deficit is the vital precondition for a sustainable recovery, underpinning private sector confidence to support growth and job creation. It is right and fair that we tackle the deficit now, as a foundation for prosperity. It is because of our decisiveness that we have secured record low gilt yields, which feeds through to record low and stable interest rates that make a real difference to families paying their mortgages and to refinancing business loans right across the country.

If we are going to discuss a squeeze on living standards, let us talk about what a rise in market interest rates would mean for families across the UK. It would force taxpayers to find an extra £21 billion in debt interest payments; it would increase the cost of business loans by £7 billion; and it would add £10 billion to mortgage bills every year, or an extra £1,000 for the average family—and that with just a 1% rise. Let me remind the House that when we took office, our rates were tracking those of the likes of Spain and Italy, but now they are close to those of Germany. That is because of the tough decisions we have taken.

[Karl Turner]

Will the Minister give way?

[Miss Smith]

No, I shall not, as I have already said.

According to the shadow Chancellor, who, as ever, cannot be quiet, low interest rates are a sign of trouble. He would rather have higher interest rates, a bigger squeeze on families and an even bigger fall in living standards.

The simple truth is that the Opposition have no credible response to the economic challenges that this country faces, which is why we must never return the keys to those who crashed the car. It is we who have the answers to tackling the deficit and securing our prosperity. I know that for many families, however, these are tough times. That is why we have taken substantial steps to protect living standards and to ensure we support our poorest and most vulnerable families. That is why we secured the largest ever cash rise in the basic pension and why we uprated working age benefits by 5.2%, protecting the real incomes of the poorest. We are taking the same approach as we reform our welfare system, targeting support where it is needed most.

Tackling the deficit in a fair way means that we have to ensure that tax credits are targeted at our poorest and most vulnerable families, unlike the path taken by the previous Government, who spent more than £150 billion on tax credits and let nine out of 10 families be eligible for them. That is a staggering, untargeted and unsustainable level of spending and it is right and fair that we should reform it.

Let me turn to the working tax credit. It is not fair that a couple with children can claim the credit if one partner works 16 hours, whereas a lone parent has to pull in the same time on their own. Increasing the working hour requirements for a couple is entirely fair. It is right that they should put in more hours than a lone parent before receiving the working tax credit. That also creates a clear work incentive signal, which many Members have sought in this debate, to potential second earners who could benefit from tax credits if they moved into work or increased their hours—and hours are available. Let me answer this one. In the quarter to January, there were 11,000 vacancies across the economy, meaning that 1 million people moved into work. That paves the way for the principles of universal credit because work must pay.[Official Report, 6 March 2012, Vol. 541, c. 9MC.]

At the same time, we are right to reform child benefit to target it towards those families who need it the most, rather than millionaires. I fully understand that it is a vital income boost, but it comes at a substantial cost to the Exchequer, including more than £2 billion a year in payments to higher rate taxpayers. It is right that we should refocus resources where we need them most, and that means taking the tough decision to withdraw child benefit from families with a higher rate taxpayer, because it is simply not fair that working parents on low incomes should subsidise child benefit for millionaires.

None of these points ignores the fact that across the board, we know that this will be a tough year for households. That is why we have gone even further to support families and businesses across the country, limiting the increases to Transport for London and regulated rail fares and funding South West Water to enable it to cut bills by £50 a year for households that face the highest water bills in the country. We are helping pensioners, setting aside an extra £675 million for local authorities in England that freeze or reduce their council tax, deferring the fuel duty increase that was due to take effect on 1 January to August this year and cancelling the further increase for August. As a result, tax on petrol will be a full 10p lower than it would have been under the shadow Chancellor’s plans, meaning families with the average family car will save £144.

As we fix the failures of the past and repair our economy, we are committed to supporting families across the country. It is a tough challenge to ensure and secure our economic stability and to lay the foundations for sustainable growth, but in our determination to do so and to restore the economic prosperity of this country, we will put fairness at the heart of our recovery. We are protecting living standards for the poorest and most vulnerable families by lifting millions out of tax, taking steps to reduce the cost of living and refocusing welfare on those who need it most. Yes, that means that those on the highest income will bear the heaviest burden as we pull together to tackle the deficit, but it is right that those who can contribute the most should do so. A fair and sustainable recovery demands leadership, and that is what this Government are providing.

Question put.

Jam Jar Bank Accounts

Chloe Smith Excerpts

Tuesday 28th February 2012 Westminster Hall

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I thank my hon. Friend the Member for East Hampshire (Damian Hinds) for securing this debate on the topic of jam jar accounts and low-income consumers. It is particularly interesting and timely, given the various reforms going on in the area, which I hope to explain a bit about in my remarks. In the absence of my colleague the Financial Secretary to the Treasury who leads on these issues, I am very pleased to be responding on behalf of the Government. Indeed, hon. Members may know that I have taken a long-standing interest in these issues in my constituency of Norwich.

My hon. Friend the Member for East Hampshire made a number of relevant points concerning the potential role that jam jar accounts could play in helping to improve financial capability and inclusion, particularly alongside the introduction of universal credit. I should like to respond to the various points that he made and take this opportunity to set out briefly some of the work that the Government are doing in this area, which I am sure he and others will welcome.

Let me begin by dwelling on the progress made to date on the issue. Jam jar—or budgeting—accounts are a relatively new concept, as my hon. Friend mentioned. However, they are available in various places. As he has described, such accounts include various features that are aimed at helping customers to manage their money more easily. At the most basic level, that includes the ability for customers to divide their money between different pots. It may also include, as my hon. Friend said, a function that automatically moves money between accounts and access to support from a trained money manager who can provide advice or direction if necessary.

As hon. Members may know, the Financial Inclusion Taskforce commissioned initial research into the viability of this concept in 2010. It was carried out by Social Finance and was published in June last year. As I think my hon. Friend is aware, the report surveyed the demand and provision of jam jar accounts. It noted, as he said, that such accounts currently exist but tend to carry a monthly account usage fee that can put them out of the reach of those on the lowest incomes. The report also quantified the pool of customers who could benefit from such accounts if they were available at lower costs—up to 9 million. The report recommended that further research be undertaken, followed by a pilot study to explore the potential benefits of such accounts.

Certainly, the idea is extremely interesting. While no one financial product will suit every individual, some people may find these kinds of budgeting facilities useful, and far more useful than the methods that they use currently. The Government are committed to promoting a diverse and competitive financial services sector that provides consumers with access to a range of financial products such as jam jar accounts, which may form a part of those services, to meet consumer need.

If my hon. Friend the Member for East Hampshire will allow, I will refer briefly to a couple of points raised by my hon. Friend the Member for Hexham (Guy Opperman). Ms Osborne need not worry—I will not veer into the scope of the Royal Bank of Scotland in this debate. The Government are committed to providing a diverse and competitive financial services sector, exploring options to expand the roles of credit unions, which have been mentioned and which have an important role in providing services to communities. I note the other points that were made about more local banks and housing associations. Hon. Members will be aware of the current opportunity, under the Big Lottery Fund, for housing associations to take an interest in financial capability, which is important and an issue that I am aware of at constituency level. The Financial Services Authority has made improvements to its authorisation process to ensure that it will not act as a barrier to entry for new local banks, if that is something that the good people of Hexham want.

It is relevant to consider this issue, as my hon. Friend the Member for East Hampshire has, in the context of the introduction of universal credit. The new benefit will simplify the existing complex system of benefits and tax credits, improve work incentives and make it clearer to claimants how the move into work will benefit them. As hon. Members are aware, it will be paid in a single monthly payment, with housing costs paid direct to the tenant. That will enable low-income households to overcome one of the traps of poverty relating to the responsibility of managing a budget and the impact that that can have on other things. The monthly payment of benefits will make it easier for households to take advantage of cheaper tariffs and make access to affordable credit easier through an increased financially responsible record.

The Government recognise that some claimants need additional help to budget, particularly during the transitional period. As my hon. Friend suggests, jam jar accounts could have a role to play in helping many universal credit claimants to budget, protecting their essential payments and supporting positive money management behaviours. For that reason, I am pleased to confirm that, in addition to working with the advice sector to ensure that claimants can access appropriate budgeting support services, the Department for Work and Pensions is working with a range of banking and financial product providers, such as banks, buildings societies, credit unions, pre-paid card companies and others, to explore options for delivering such services, and to make financial services more accessible and supportive to low-income households.

[David Mowat (Warrington South) (Con)]

We have heard a good idea this afternoon, but high street banks cannot, or will not, provide such accounts at a cost-effective rate. Until that issue is fixed, we are just talking about an idea or a concept, and it will be very hard for it to be realised. Will the Government do more to bridge the gap between what the banks are able or willing to do and what the market is apparently willing to spend?

[Miss Smith]

I shall, with pleasure, come on to some of the work that the Government are doing to encourage simple financial products, via explaining briefly the next steps for the DWP and via credit unions.

From June this year, the Government will run a series of housing demonstration projects in which we will pay housing benefit direct to tenants to test the support required to help claimants budget and manage their rent payments effectively. They will be an opportunity to consider what type of budgeting products—whether from the commercial sector or elsewhere—can be used to support universal credit claimants in the longer term.

Several hon. Members have mentioned credit unions. They play an important role in offering access to financial services—bank accounts, affordable credit, insurance and savings to name but a few—to people who may not be able to, or may not wish to, access those services through mainstream banks or building societies. They work within a local community ethos and often actively seek to help those most in need of support. The recent legislative reform order brings new and exciting opportunities to credit unions. It is now for the sector to respond to those opportunities by seeking new ways to reduce their costs, to improve the products and services that it offers and to reach out to new markets to become self-sufficient and sustainable. To support credit unions in making this leap, the DWP has carried out a feasibility study to look at options for expanding their role. That study has reported to Ministers and an announcement on its findings will be made soon.

On the point about how the Government can otherwise help consumers take responsibility for their finances and make better choices, jam jar accounts may be one useful tool, but consumers need access to both financial advice and an appropriate range of products. That is why last year the Government launched the Money Advice Service, which promotes understanding of the financial system and helps to raise financial capability across the UK. In particular, its financial health check is helpful to some of the citizens referred to by my hon. Friend the Member for East Hampshire.

Another part of empowering consumers is ensuring that the right products are available. They need to be straightforward, easy to understand and simple to provide consumers with a benchmark with which to compare products, make good decisions and make sense of an often bewildering marketplace. Earlier this month, the Government launched a steering group to design a range of simple financial products, made up of representatives from both industry and consumer advocates. The group will report to Ministers in July and has announced that it will focus initially on developing simple deposit savings and protection insurance products. This is an opportunity for industry to innovate and develop a range of simple products, and it comes at a time of exciting developments elsewhere in the industry.

Under the various developments that I have outlined today, it is clear that there is an appetite, in the Government and in the third and commercial sectors, to find a way forward. I thank my hon. Friend and other hon. Members for their remarks. I am sure that my colleagues, the Financial Secretary to the Treasury and the Secretary of State for Work and Pensions, will appreciate the insights that they have contributed and will continue to take them into account in the further development of work in this area.

Fuel Duty (Northern Ireland)

Chloe Smith Excerpts

Wednesday 22nd February 2012 Westminster Hall

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I congratulate the hon. Member for South Down (Ms Ritchie) on securing the debate and on presenting her case so eloquently. The debate is clearly well attended, with members of the Select Committee on Northern Ireland Affairs present, which puts me in mind of an extensive session that we had in the past few weeks discussing fuel fraud in Northern Ireland. I wonder whether that serious economic issue in Northern Ireland, which we all recognise, will also occupy the hon. Lady, if she has any spare time.

The first issue raised by today’s debate is what the Government have done to assist motorists and businesses in a time of high oil prices. Secondly, I will go on to what we intend to do, before returning, as requested by the hon. Lady, to some details about the fair fuel stabiliser. Before dealing with those two areas, I acknowledge what she said about the difficulties of living, working and running businesses in a rural economy, in particular given the absence of other large businesses whose decisions might be able to bring about cheaper fuel points of purchase. I live in Norwich and am conscious that I can access cheap fuel partly because of the availability of a number of large supermarkets competing with each other on price. She might not be in that position.

I note also what the hon. Lady says about public transport, although I regret that I am not a Transport Minister and cannot assist her directly today, and that she might be floating the idea of co-operation on tax matters between north and south on the whole island of Ireland. I do not know whether she is suggesting that and I hear what she is saying, but that is not something that we think that the British Treasury should necessarily do, and I am not entirely sure that the Republic would wish to do so either.

[Ms Ritchie]

I was referring to a discussion between the British and Irish Governments about harmonisation on fuel duty and about the problems encountered by people on both sides of the border, living in close proximity and able to travel with great speed from north to south, and vice versa. At the minute, prices in the south are lower than they are in the north. What amelioration can be brought to the people?

[Miss Smith]

I understand that point. The topic could be on a long list of what the two Governments discuss, and I note positive aspects of those discussions in the realm of transport, such as acknowledgement of the importance of the land border in setting air passenger duty rates, of which the hon. Lady must be aware. We also acknowledge the significance of the land border to fuel fraud—returning to that important subject—but there is a point to stop short of in harmonising tax rates.

I shall plough on swiftly with some helpful points. First, there is absolutely no doubt that the cost of fuel remains difficult for families and businesses up and down the country, as demonstrated in the debate. I am also sure that many of the hon. Lady’s constituents joined the 100,000-signature petition delivered to the Government last autumn and to which we responded in the House. Our response—indeed, I personally responded —recognised that the price of petrol, which is different from the rate of duty, is extraordinarily high in many people’s eyes. The price is the result of a combination of the duty and various global factors, which she has already mentioned, so it is not fully in the control of the Government to say, “The total cost of your litre of fuel shall be this.” What a responsible Government must do, however, is listen, consider and respond.

The Government have eased the burden on motorists by £2.5 billion up to 2012-13. We started by cutting fuel duty by a penny per litre from 6 pm on Budget day. We cancelled the previous Government’s fuel duty escalator and introduced the fair fuel stabiliser, which I shall come on to shortly. Our response also includes the deferment of last month’s duty increase to August and the cancellation of the original increase planned for August, ensuring genuine help for motorists through only one inflation increase this year. The fuel duty changes support motorists throughout the country, including Northern Ireland—I do not see a distinction—because any motorist can be approximately 10p per litre better off as a result of our Government’s actions. The hon. Lady asked me to acknowledge businesses. An average haulier will be better off by £4,400 because of our fuel duty and vehicle excise duty actions, which I am sure she will welcome in her part of the world, as everyone else does.

[Mr Robin Walker (Worcester) (Con)]

Will the Minister give way?

[Miss Smith]

I am terribly sorry, but I must proceed.

The hon. Lady asked me about how the Government might seek to manage the effect of oil prices in the longer term, and I want to give a few details about the fair fuel stabiliser. The Chancellor has been clear that we cannot take risks with the public finances, although the hon. Lady spoke several times of the Treasury needing to shoulder its share of the difficulties faced by the country. Government coffers, however, are public coffers. The Treasury has employees, but there is no separate entity known as the Treasury that could or could not be shouldering a share. The Treasury simply has a role in managing, as best it can, the public resources to which we all contribute, whether we be citizens, motorists, businesses or any other category that anyone can think of.

My point about the fair fuel stabiliser is that any support we provide to the motorist needs to be paid for. As oil and gas production is more profitable in times of high oil prices, it is fair for companies to make an additional contribution. As part of the stabiliser, therefore, the supplementary charge on oil and gas companies was increased in the Budget, meaning that when oil prices are high, fuel duty will increase by inflation only. If the oil price falls, we will reintroduce the fuel duty escalator and reduce the supplementary charge on a staged and affordable basis.

Coming swiftly to a conclusion to allow us to finish on time, I assure hon. Members that, beyond fuel duties, the Government remain fully committed to working with the Northern Ireland Executive to achieve the common objective of rebalancing the Northern Irish economy, to which the hon. Lady referred. Colleagues are aware of wider work looking at how best to achieve such rebalancing, including the ministerial working group chaired by my colleague the Exchequer Secretary. I understand that the group is making good progress and is due to meet again in early March.

We have recognised the impact of record prices on businesses and families, whether on the mainland or in Northern Ireland. The previous Government had no credible plan to deal with the debts that they created or with motorists, as shown by the escalator that they sought to continue. We, by contrast, have listened and responded: we cut fuel duty, we scrapped the escalator and we have ensured that there will be only one inflation-only increase in fuel duty this year. We continue to have a long-term plan for support in the form of the fair fuel stabiliser. I think that the hon. Lady will agree that that is a reasonable position to be in considering the difficulties faced by this whole country, given the resources left to it by the Government represented by the hon. Gentleman sitting to her left, the hon. Member for Ealing North (Stephen Pound).

Question put and agreed to.

Landfill Tax (Scotland)

Chloe Smith Excerpts

Tuesday 21st February 2012 Written Statements

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I am today announcing that the Government will introduce legislation in Finance Bill 2012 to correct a flaw in landfill tax legislation, which means that landfill sites in Scotland have unintentionally been outside the scope of landfill tax.

The definition of a landfill site in landfill tax legislation refers to environmental legislation. Changes were made to this environmental legislation which meant that in 1999 sites moved from a framework of licences to a system of permits. Landfill tax legislation was duly amended and these amendments were brought into effect in England and Wales on 21 March 2000 and Northern Ireland on 17 January 2003. However, the Scottish Government did not introduce the necessary commencement order, thereby unintentionally taking each Scottish landfill site outside the scope of landfill tax from the date each new permit took effect.

The legislation will have full retrospective effect from 21 March 2000 to bring Scottish legislation into line with that in the rest of the UK.

No action is required by, or additional burden applied to, landfill site operators in Scotland or elsewhere in the UK.

Copies of the draft legislation and HMRC brief have been deposited in the Libraries of both Houses and are available on the Treasury website at:

www.hm-treasury.gov.uk.

Air Passenger Duty (Northern Ireland)

Chloe Smith Excerpts

Tuesday 21st February 2012 Written Statements

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

Last September the Government announced measures to support air travel to and from Northern Ireland. From 1 November 2011 APD for passengers travelling on direct long-haul routes departing from airports in Northern Ireland was cut to the lower short-haul rate. To provide a lasting solution, the Government launched a further process to devolve aspects of APD to the Northern Ireland Assembly.

Today, I can announce that the power to set APD rates for direct long-haul flights departing from Northern Ireland will be devolved to the Northern Ireland Assembly and provided for in the Finance Bill 2012. Following devolution, it will be for the Assembly to determine what level of APD will apply to direct long-haul flights. The rates set by the Assembly will apply to the carriage of passengers on and from a day to be appointed by order, irrespective of when the ticket for the flight was booked or purchased.

Rural Bank Closures

Chloe Smith Excerpts

Tuesday 21st February 2012 Westminster Hall

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I hope you will excuse my slightly unorthodox speaking style, Mr Brady, due to a broken foot. I thank the hon. Member for Brecon and Radnorshire (Roger Williams) and his colleagues, who are now giggling in the back row. I also thank the other Members who have contributed to this important debate. It follows the interesting and useful debate secured last year by the hon. Member for Brecon and Radnorshire, to which my hon. Friend the Financial Secretary responded. He is in Committee today, considering the Financial Services Bill. I am sure that he will read today’s Hansard with deep interest and mull over the calls for a summit and the suggestions about with whom he should work if he is minded to hold one. I recognise the concerns expressed capably by all hon. Members about the impact of past and planned branch closures by high street banks in their constituencies and about the availability of banking services in rural areas more generally.

[Chris Ruane]

On the issue of a banking summit, will the Minister consider calling it herself, in co-operation with the shadow Minister, or is it something that she will leave to Back Benchers?

[Miss Smith]

The hon. Gentleman will appreciate that I shall have to leave that to the consideration of my colleague at the Treasury, whose portfolio it more properly is. However, as I said, I am sure that during a slow moment in Committee upstairs, he will read today’s Hansard and take the hon. Gentleman’s views deeply into account.

The Government recognise that people in rural areas experience much the same financial challenges as people living in towns and cities, even Harrow. However, living in a rural area can bring additional challenges apart from the obvious examples of bank closures. Exclusion from financial services can be less visible in rural areas than in urban areas. My hon. Friend the Member for Montgomeryshire (Glyn Davies) and others have highlighted a range of rural challenges. I have some understanding of them myself, having grown up in the fens in rural Norfolk. My first bank account was in a branch in a market town.

With regard to access to bank accounts, the Government are committed to improving access to financial services, as I shall explain, and in particular to bank accounts. It has been amply demonstrated that having a bank account is an essential aspect of modern life and that being able to access counter services at a branch while interacting face to face with staff is a service valued not only by individuals but by businesses. I have also heard the points made today about its tourism value. However, I must point out that decisions whether and where to maintain specific branches are commercial decisions and, as such, for the financial institutions in question. The Government do not intervene in such decisions, as a matter of principle.

All banking service providers must balance customer interests, market competition and other commercial factors when considering their strategy. I note the call by the hon. Member for Vale of Clwyd (Chris Ruane) for banks to balance social responsibility with those factors, but I will say at the outset that the Government have been clear about the need for a change in bonus culture and for banks to contribute to the real economy, support small and medium-sized enterprises throughout the UK and lend to families. The bottom line of today’s debate is that banks have customers, and it is clear that they must treat them fairly in taking decisions about them.

With that in mind, I will set out briefly the regulations that apply. Banks’ and building societies’ treatment of their customers is currently governed by the Financial Services Authority in its “Banking Conduct of Business Sourcebook”, which includes a general requirement for firms to provide a prompt, efficient and fair service to all their customers. The guidance agreed by the industry and the FSA sets out expectations of how banks should live up to that code of conduct and specific guidelines for how banks should behave when considering closing a branch.

The guidance states that if a firm plans to close or move a branch, customers should be notified at least 12 weeks beforehand and told how the firm will continue to provide retail banking services. That includes providing micro-enterprise customers with information on any existing inter-bank agency agreements. A notice should be placed in the branch, and consideration should be given to other local advertising and notification of local councils and community groups. The bank should provide information on alternative facilities offered by the firm in the locality, including its nearest alternative branch and nearest free ATM, as well as other channels through which banking services are provided.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) mentioned free ATMs. I believe that the LINK network, of which, I note, he is perhaps no great fan, runs a phone line that customers can use to propose sites for new free-of-charge cash machines. Perhaps he might encourage his constituents to take that up.

The guidance also requires that customers be notified at least 12 weeks in advance of significant alterations to counter services or opening hours. On the back of those points, first, such arrangements clearly help customers make alternative arrangements to meet their banking needs. Secondly, they enable options to be considered, such as the action plans for which the right hon. Member for Torfaen (Paul Murphy) called. Thirdly, to use an example that we heard today, I am pleased that people in Suffolk, Coastal could respond in that way. When people see a notice in branch buildings, some are clearly able to respond. Fourthly, however, that does not change the end fact that a branch may still be withdrawn.

Let us move on and note what banks offer in addition to their face-to-face services. Several Members have made the point today that banks offer services by telephone and by internet. My hon. Friend the Member for Carmarthen West and South Pembrokeshire raised the significant issue of broadband, which I am sure is on everyone’s minds. The Government have laid out significant plans to improve and complete broadband for rural areas. I could go into that more, but I suspect that that is a different debate and that you, Mr Brady, will not allow me to speak on it. I reassure Members that the Government understand that point and are acting on it.

It is fair to say that the channels I have talked about are not always appropriate for every customer and every service. As hon. Members have noted, having access to a branch with face-to-face services is particularly important for older people and for small businesses that may require cash facilities to trade. However, the fact is that phone and online channels are increasingly popular, and the provision of such services is expanding and diversifying rapidly, giving customers a range of choices as to how they manage their affairs.

It is important to note that many bank account providers have an arrangement for customers to access their accounts via post office counters, which I am glad that hon. Members have noted throughout today’s debate. I know that Members will welcome the Government’s stance on post offices, notably making clear commitments regarding the future of the network—that there will be no further closure programmes and that we will maintain a network of at least 11,500 branches and ensure that specific access provisions for rural areas are included. I understand that 80% of customers now have the possibility of withdrawing or depositing funds or checking their balance at a post office branch.

Hon. Members raised shared branching, which is where several banking providers pool their services in some way. That is an interesting idea that clearly requires a high degree of commercial collaboration. I return to my point that the best people to judge that are the banks themselves, and I would certainly encourage them to consider that idea and also mobile banking, which was also raised in today’s debate.

[Roger Williams]

I can understand why the Minister points out that the Government should not micro-manage banks, but surely, the piloting of an innovative proposal such as shared banking is something that the Government could actively introduce?

[Miss Smith]

I am afraid that that would not be something that the Government could introduce, as the Government do not run banks. Regarding the banks in which the Government are the majority shareholder, they are run at arm’s length, as all hon. Members know, but I hope that my words will serve as a small measure of encouragement. It is a positive idea that could and should be looked at by banks themselves.

Regarding what the Government are doing to promote access to financial services, we are taking a number of important actions to help consumers access the services that they need. We are strongly committed to promoting a diverse financial services sector that serves the needs of the wider economy, which is the one of themes of today’s debate.

To start with, we need to encourage access to savings products. The Financial Secretary to the Treasury announced last week that the Government have launched a steering group to design a range of simple financial products, which will help new participants enter financial markets to provide straightforward and easy-to-understand products. I am sure that all hon. Members present today will welcome that.

I reiterate that we want the industry to take a lead in designing simple products, because we want the products to be viable commercial propositions for customers that will stand the test of time. There is an opportunity for industry to innovate properly, which may include mobile or shared services, and to develop a range of simple products that—again we return to the key point—meet their customers’ needs.

[Toby Perkins]

Will the Minister give way?

[Miss Smith]

I am about to respond to the hon. Gentleman’s points, so if he will allow me to continue with my comments, I will do so later.

I think we have all acknowledged in today’s debate that the needs for access to finance go far wider than banks and building societies. The Government strongly believe that credit unions can act as alternatives to banks and building societies in providing affordable financial services to people who may not otherwise be able to access them. The Government are providing additional support to such institutions through the Department for Work and Pensions, which I know hon. Members will welcome. The results of some of its feasibility studies will be published in due course. That forms just one part of the Government’s efforts to promote a diverse and competitive financial services sector, on which I am sure the hon. Member for Chesterfield (Toby Perkins) will have something to say.

[Toby Perkins]

I am delighted to hear that there is an interest in credit unions, and the Minister is absolutely right to say that they can play an important part.

Regarding the substantive issues that have been raised today, Members will be forgiven for thinking that they are walking away from the debate with little sense that the Government are doing much about the issue. What we are hearing is that such decisions are for the banking sector. Regarding the main thrust of the debate, which is about customer service and public service responsibilities of the bank, I think Members will leave with the sense that there is little pressure from the Government to get banks to face up to their responsibility and recognise the broader economic impact if we do not sort the issue out. I think we need to see a far greater sense of urgency and action from the Government on the issue.

[Miss Smith]

The hon. Gentleman will in that case be pleased to hear me move straight on to the next section of my speech, which deals exactly with what the Government are doing this very day in Committee: acting on the part of the financial system for which they have responsibility, which is to talk about financial conduct and competition in financial services. The key to the hon. Gentleman’s question is in his own words. There are two things at stake: customer service and public service. Banks and commercial institutions must be responsible for customer service, and I will now turn to some aspects for which the Government can reasonably be said to be responsible.

It is essential that consumers are able to apply competitive pressure and to understand where they can hold their bank to account and how the broader market operates. Customers should be able to vote with their feet and to switch their custom to banks that provide the best products for them, including access to a branch. The Government are therefore committed to fostering diversity and promoting competition in the banking sector. To that end, the Government have accepted in principle the competition recommendations of the Independent Commission on Banking, which was mentioned earlier in the debate. The Government will now consider the proposals in more detail.

In line with those recommendations, I am pleased to note that the banking industry has already made some commitments, such as introducing a faster and safer switching service to ensure that customers can switch within seven days. Along with the more enhanced transparency measures that are already being implemented in the personal current account market, including making charges clearer and providing annual statements of charges to each customer, the new service will make it easier for customers to exercise what they have to do, which is vote with their feet if they feel that their bank is not meeting their needs.

To ensure that consumers are adequately protected in accessing financial services, the Government are also reforming the regulation of financial services. I remind the House that as part of the Financial Services Bill that is being discussed in Committee as we speak, the Government are creating a new and dedicated conduct of business regulator, the financial conduct authority. Also, the Office of Fair Trading has already committed to reviewing the personal current account market in 2012, about which I hope my hon. Friend the Member for Suffolk Coastal (Dr Coffey) will read later.

It is clear that customer service is at stake here, and there is public interest in how rural communities can best be supported. However, it is also clear that the issue spans a substantial regulatory and non-regulatory agenda, and the Government are pursuing that. The landscape is changing rapidly, just as customers’ needs are changing, and the financial services sector will need to change to take account of that. It is vital that the sector continues to meet the needs of ordinary consumers, including those who prefer to access banking services via a branch.

Once again, I thank the hon. Member for Brecon and Radnorshire for his continued work on the issue. Clearly, we all share appreciation of that. I would also like to thank all the others who have contributed today. The Treasury will continue to take the issue into account as it pursues the wider financial inclusion agenda.

Remuneration of EU Staff

Chloe Smith Excerpts

Tuesday 21st February 2012 Commons Chamber

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I beg to move,

That this House takes note of European Union Documents No. 17625/11 and Addendum, relating to a draft Regulation adjusting, from 1 July 2011, the rate of contribution to the pension scheme of officials and other servants of the European Union and a Commission staff working paper: Eurostat report on the 2011 update of the 2010 actuarial assessment of the Pension Scheme for European Officials, and No. 17627/11, a Commission Communication to the Council providing supplementary information on the Commission report on the Exception Clause of 13 July 2011; questions the European Commission’s conclusion that recent and challenging economic conditions do not warrant application of the Exception Clause; regrets that the Commission has not modified the salary adjustment method this year; stresses that consequent increases in EU staff pay, proposed by the Commission, are completely unacceptable when as part of its fiscal consolidation plans the Government has imposed restraints on public sector pay; notes that the framework for setting EU remuneration requires reform to increase Member States’ oversight and control, which the ongoing review of the EU Staff Regulations may enable; and commits to achieve very significant reductions in EU administrative spending in the next Multiannual Financial Framework as part of the UK’s overarching goal to impose real budgetary restraint.

I welcome the opportunity to discuss the 2011 EU salary adjustment and the Government’s agenda to reform and reduce EU administrative spending. The House is familiar with the context for EU spending: while Europe’s economy remains very fragile, delivering and supporting plans to consolidate public finances remains crucial and, at the same time, we must also seek to promote growth using available resources.

There are two clear implications for the EU budget. First, the EU must live within its means; high spending is not the way to fix Europe’s problems. Secondly, all EU spending must deliver the highest added value. Strict and rigorous prioritisation is necessary to reduce waste and inefficiency.

Over the past few years, the Government have worked hard to establish a new framework for budget discipline at EU level. That is an important task because current EU spending targets, agreed by the previous Government, set a rising trajectory for EU spending to 2013 that is no longer realistic.

We have pursued our goal with considerable success. For 2011, growth in EU spending was limited to 2.91%, far below the unacceptable 6% increase demanded by the Commission and European Parliament, and last year, the 2012 EU budget was set at only 2.02% above the original 2011 budget, exactly as proposed by the European Council in July. That delivered on the Prime Minister’s determination to freeze the EU budget in real terms, and set spending €4 billion below the level advocated by the European Parliament.

A drive to limit EU administrative savings is a key plank of the Government’s approach to budgetary restraint at EU level. It reflects the tough domestic measures the Government are taking to find savings. As set out in the spending review, the administrative budgets of central Whitehall Departments will be reduced by 34%, saving £5.9 billion a year by 2014-15 so that resources can be focused on front-line services.

The EU should show a similar drive to find efficiency savings. Any suggestion of waste in the EU budget damages the standing of the EU institutions and of the EU as a whole. Its ambition, however, is evidently lacking. Strikingly, for 2012 the Commission proposed to save only €695, much less than one 1,000th of its €3.3 billion budget. We are clear, however, that the EU institutions must manage themselves and the programmes that they help to manage far better and on lower budgets. We have called for a cash freeze in EU administrative spending in recent annual budget negotiations and we want to see cash cuts in that area over the next multi-annual financial framework.

Today, I can inform the House that the Chancellor took the unprecedented step of voting against discharging the accounts for the 2010 EU budget. We have not seen enough progress in reducing the level of errors in EU transactions, which is unacceptable. We should remember that national taxpayers stand behind the EU budget and that is why we have clearly signalled the need for important and urgent improvements to the quality of EU financial management.

[Mr William Cash (Stone) (Con)]

I am sorry to intervene on the Minister because of the effects of her unfortunate accident, but is there a blocking minority against the proposals and has it been exercised? May I ask whether we are not only voting against it, but have voted against it, and what the outcome was?

[Miss Smith]

I think I will cover all those points in my speech, although I am grateful to my extremely well-informed hon. Friend for his prompt to do so.

Let me turn now to the 2011 EU salary adjustment. The Commission’s attitude towards EU staff pay adjustments is another clear indication of its estrangement from reality. In the UK, the public sector pay bill makes up more than half of departmental resource spending, so action on pay is inevitably part of the Government’s fiscal consolidation strategy. Accordingly, the Government have announced a two-year public sector pay freeze for those earning above £21,000, with pay awards following that averaging only 1%. Those measures are estimated to save around £3.3 billion a year by 2014-15.

At EU level, on the contrary, staff remunerations counted for 69% of the Commission’s budget in 2011, which means that EU annual salary adjustments have important implications for the size of EU administrative costs. However, rather than taking action to reduce its wage bill the Commission proposed to increase it by 1.7%, representing an extra €39 million, in the year from July 2011, despite the fact that the vast majority of EU officials earn significantly more than most public officials in the UK and many other member states.

I turn now to the position of the UK and the Council. Clearly, any pay increase for EU staff is unacceptable. In conjunction with other member states, the Government called on the Commission to lower its proposals, taking into account the economic situation and the policy measures in many member states to curb public wage bills. The request was made not once but twice, first in December 2010 and again in November 2011. The requests were made by invoking the so-called exception clause—article 10 of the 11th annex to the EU staff regulations—the only means for seeking to alter the mechanistic salary adjustment process under the current system.

Each time, the Commission has stubbornly refused to reduce growth in EU staff pay. Its defence for its inaction has been internally inconsistent, self-serving and, as the European Scrutiny Committee observed, one-sided. By claiming that there has been no

“sudden and serious deterioration in the economic and social situation”

in the EU, the Commission has undertaken faulty analysis. For example, it based its rosy evaluation on forecast indicators that did not pertain to the period defined for its assessment.

More seriously, the Commission ignored the huge number of important fiscal consolidation measures adopted and implemented by member states during the period under review. The Commission itself has strongly advocated such measures, yet incredibly it used stabilising debt and deficit levels to justify higher pay for its own staff.

Most seriously of all, the Commission has manipulated the current system to deprive member states of the opportunity to evaluate the situation independently and to adopt appropriate measures, at a time when it is evident to us all that taking immediate action to curb growth in EU staff pay is the right thing to do. That is why the UK and the wider Council rejected the 1.7% pay increase in December. It is also why we have blocked reductions in EU staff contribution rates to their pension scheme. In addition, the Council has lodged a court case against the Commission for mishandling the 2011 salary adjustment.

The Council’s decision to proceed with legal action against the Commission indicates the seriousness with which we treat the issue. Should the Council lose the case, it will simply add weight to our view that the current process is defunct and cannot adapt properly to difficult economic circumstances. In any event, reform of the salary adjustment system is urgent. The ongoing review of the EU staff regulations, which set out the rules in this area, provides an important opportunity to make that happen.

Delivering a subtler and more responsive way of setting EU staff pay, which empowers the Council to make suitable adjustments in times of economic distress and more generally, is an important objective. One part of the Government’s broader agenda to achieve efficiency gains and financial savings in the EU budget is via reform of the staff regulations that determine such a high level of the EU’s administrative budget.

Overall, the potential for savings is high. This dossier is subject to qualified majority voting and co-decision with the European Parliament. Our success will depend on building firm alliances, so the Government are already working closely with other member states to agree cost- saving ideas that can command broad support in Council.

[Mr Christopher Chope (Christchurch) (Con)]

Does my hon. Friend agree that the problem of co-decision with the European Parliament is that its Members already have their fingers in the till and are giving themselves a substantial pay increase for the coming year?

[Miss Smith]

I certainly agree that everybody associated with European institutions needs to show restraint at this time, as I think the debate will show in some detail, so I very much welcome my hon. Friend’s intervention. He will be reassured that alongside the measures I have already laid out, we intend to pursue the modernisation of EU institutions, in order to help them become more effective, and to encourage a better geographical spread of EU officials from across member states.

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

Further to the point made by my hon. Friend the Member for Christchurch (Mr Chope), is the Minister aware that the European Court of Justice has ruled that sufficient circumstances did not exist for abandoning the pay rise proposed in 2009? It has therefore been judge in its own cause, abandoning one of the founding principles of natural justice.

[Miss Smith]

My hon. Friend makes a further fine point, as he frequently does. By failing to restrain the budget, the Commission is almost, metaphorically speaking, acting as judge and jury in its own case, deciding the matter in a way that could clearly be said to be self-serving. My hon. Friends will all be pleased to hear that reform of the staff regulations is extremely important in the next multi-annual financial framework, because it is there that we can control administrative expenditure year in, year out.

The House is aware that we need to promote budgetary restraint at every opportunity. That is the UK’s top priority. That means that we need to ensure that the EU budget contributes to domestic fiscal consolidation. The Prime Minister has stated, jointly with his EU counterparts, that the maximum acceptable expenditure increase through the next financial perspective is a real freeze in payments. To deliver this, we want very substantial reductions in many areas of EU spending, compared to the Commission’s proposals, including on salaries, pensions and benefits, as well as discretionary administrative spending, such as buildings policy and IT. The EU cannot continue to insulate itself from cuts at the expense of UK taxpayers.

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

The Minister talks about ways of cutting back expenditure. What representations have the Government made recently on the terribly wasteful and inefficient practice by the European institutions, particularly the Parliament, of moving between Strasbourg and Brussels? Have the Government pressed that issue recently?

[Miss Smith]

As I hope my comments have made clear to all hon. Members in the Chamber, this Government take extremely seriously all aspects of budgetary restraint. I firmly expect us to review the situation with the same principles at hand. We are looking for the kind of restraint in the EU institutions that we can show proudly to UK taxpayers back at home. That is what I am laying out today across a number of areas. I mentioned buildings policy, for example, in my comments a moment ago.

I shall conclude in order to allow other hon. Members to have their say on this extremely important topic. The Commission must not be allowed to cosset its officials with pay packages that are grossly inflated. It has a clear responsibility to put forward an ambitious programme of reform to reduce its administrative budget. That is why this Government will continue to challenge the current system in order to contain the costs of Europe. I commend the motion to the House.

--- Later in debate ---

[Miss Chloe Smith]

I thank colleagues on both sides of the House for an interesting and consensual exchange of views. The British Parliament has clearly said today that it believes that the Commission’s proposals to increase EU staff pay are unacceptable, and that they serve only to demonstrate how out of touch the institution is with the domestic challenges that we face. This shows how important it is to act in our national interest, financially and politically.

I shall do my best to respond to the questions that have been raised in the debate. If I leave out any details, I shall attempt to furnish colleagues with that information in other ways if they so wish. I shall respond first to some of the political points that have been made. It was suggested that the Prime Minister’s actions in looking after our national financial interests could have left the UK isolated in Europe, but it is clear to most Members that he has stood up for the UK’s national interests. Indeed, even President Sarkozy said last week at the Anglo-French summit that he might have acted in the same way. In contrast, the former Prime Minister gave up a large slice of our rebate, leaving us £2 billion a year worse off, as has been ably pointed out.

Several hon. Members have asked what action the Government will take to deliver on our tough stance. In the ongoing review of the staff regulations, we are seeking to deliver savings in a number of ways: first, by cutting the package of allowances for EU staff, especially the 16% expatriation allowance; secondly, by improving the affordability of EU pensions, which I know my hon. Friend the Member for Bury St Edmunds (Mr Ruffley) will be pleased to hear; and thirdly, by adjusting the system for EU staff pay so that we can avoid higher pay in future. That adjustment involves a complicated method with which some colleagues will be familiar.

[Chris Bryant (Rhondda) (Lab)]

The Minister has just nodded towards the hon. Member with the wonderful tie, the hon. Member for Bury St Edmunds (Mr Ruffley)—

[Chris Bryant]

I think that his tie and mine are from the same shop. In fact, I know they are. The hon. Gentleman read out a long list of places where he thought there should be either no representation or minimal representation, including Papua New Guinea. Papua New Guinea has a high level of representation because it has the second largest rain forest in the world, and it is essential to climate change work. If the EU is to perform its work effectively, it needs representation there, and I hope that the Minister will not succumb to easy attacks.

[Miss Smith]

Nor will I succumb to interventions that could take us far beyond the scope of today’s debate. I know, however, that the hon. Gentleman will be particularly pleased to hear that the lobby that we have put in place to give effect to our tough stance has already had an effect. For example, the Commission, having been put under pressure, is preparing to reduce European Union staff levels by 5% between 2014 and 2020.

Returning to the actions taken in the past year to deliver the agenda for EU administrative spending, and to what we are doing on staff regulations reform, I can tell the House that the UK has been a signatory to two joint letters calling on the Commission to deliver “significant” savings in EU administrative spending over the next multi-annual financial framework. One was signed by 17 member states, and it represents a strong blocking minority, which I know my hon. Friend the Member for Stone (Mr Cash)—who has moved from his place—will be happy to note. He will be pleased to know that we intend to hold that strong blocking minority together as we press for more specific changes to the way in which the EU institutions work.

I refer hon. Members to two more letters, one of which is dated 20 February 2012 and deals with a plan for growth in Europe. It has been signed by 12 European Union leaders, and it talks about the effort that we must all make to put our national and international finances on a sustainable footing. In the second, dated 18 December 2010, our Prime Minister and those of four other countries state that the challenge to the European Union is not to spend more but to spend better.

A number of questions were asked about the cost of court cases. The costs of the 2009 court case were met from existing Council budgets, as per normal standards. However, it is clearly not ideal to deal with these matters through court cases. Clearly we need to seek deeper reform, and that is what we are endeavouring to do. I was asked whether we should distinguish between high and low-earning EU staff. Other hon. Members have spoken eloquently about this today, notably in respect of the judiciary. EU officials fall into the category of highly paid officials, and we therefore think that they are a legitimate target for key financial savings.

My hon. Friend the Member for Stone asked whether the Government were taking a blocking minority on the 2010 EU budget discharge. I am afraid he is still not in his place to hear my answer, but I shall be happy to discuss it with him later. At ECOFIN today, the UK voted against that; it was not, in technical terms, a blocking minority.

My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) asked how the Commission could possibly not invoke this course of action, and said that the economic situation was patently a crisis. I know that he will welcome my agreeing with him on that. There is patently an economic crisis, and highly paid officials cannot be immune from that. I know that he will appreciate being reminded that the Delphic oracle talked about “nothing in excess”. I believe that that applies to EU salaries, and the House has eloquently agreed with me today.

Our debate today sends a clear signal that the Commission must take the challenge of modernising its institutions far more seriously and, most important, it must work harder to deliver efficiency savings in administration. Stopping an unjustified hike in EU staff pay is an obvious and good place to start, and our debate today sends a clear signal that we stand behind the principle outlined in the court case brought against the Commission for refusing to take action on the 2011 salary adjustment. Disputing higher staff pay in 2011 was not only the right thing to do; it also highlighted the fact that the current process is defunct and cannot adapt properly to difficult economic circumstances.

[Kate Hoey]

If the court rules in the wrong way, if there is no change, and if all our protests here come to nothing, does the Minister agree that no one in the European Union will listen unless the Government take back some of the money from the amount that we were going to pay? When are we going to do something practical to show that we mean what we say, rather than simply repeating all these warm words that never change anything?

[Miss Smith]

The hon. Lady makes a fine point. I want to reassure her that the Prime Minister has worked hard during the past year to take serious action, and the Chancellor has taken serious action at ECOFIN today to demonstrate how seriously we take the improvement of the way in which the EU budget is managed and spent. The action that she suggests might be at the far end of the spectrum, but we take the full agenda very seriously none the less. We are resolved to lobby hard for cuts to EU administrative spending in future years, as part of the real freeze in the overall EU budget over the next framework. I commend the motion to the House.

Question put and agreed to.

Financial Services bill (programme) (No. 2)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the Order of 6 February (Financial Services Bill (Programme)) be varied, in paragraph 2, by the substitution for Tuesday 20 March of Thursday 22 March.—(Mr Dunne.)

Question agreed to.

Red Diesel (Private Pleasure Craft)

Chloe Smith Excerpts

Monday 20th February 2012 Written Statements

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I am today announcing that from 1 April 2012 the use of red diesel to propel private pleasure craft will be allowed only within United Kingdom waters.

From 1 April anyone purchasing red diesel for use as fuel for propelling private pleasure craft will be required to make a declaration that the fuel will be used only within UK waters. The declaration will include an acknowledgement that the UK procedures do not affect any restrictions or prohibitions under the national laws of other European member states regarding fuel used for propelling private pleasure craft.

These changes are being made following a challenge by the European Commission to the UK practice of allowing marked red diesel with full duty paid in private pleasure craft.

The changes announced today will ensure that red diesel can continue to be used in UK coastal waters and on the UK’s inland waterways in accordance with current procedures to the benefit of suppliers and users. It also ensures that users can continue to use red diesel at the rebated rate of duty on fuel used on board for domestic purposes, such as heating and cooking.

HMRC have published the draft legislation on the HMRC website today.

Parliamentary Questions

Chloe Smith Excerpts

Wednesday 8th February 2012 Written Statements

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

The Treasury has conducted its annual indexation exercise of the cost of oral and written parliamentary questions so as to ensure that these costs are increased in line with increases in underlying costs. The revised costs, which will apply from today, are:

Oral Questions £450

Written Questions £164

The disproportionate cost threshold (DCT) for written questions will increase to £850.

North Sea Oil and Gas

Chloe Smith Excerpts

Wednesday 25th January 2012 Commons Chamber

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I am extremely pleased to have the opportunity to discuss this subject in the House at perhaps greater length than I did when my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) asked me on Tuesday for an update on the ongoing work. I thank him, and, of course, my right hon. Friend the Member for Mid Sussex (Nicholas Soames) for calling for this evening’s debate, and for their contributions to it.

My right hon. Friend is absolutely correct: the oil and gas sector makes a huge contribution to the UK economy. He is right to draw out the statistics as he has done this evening. I concur that UK oil and gas provide about two thirds of the UK’s primary energy needs, and even as we move into a less carbon-intensive future, they are set to remain a vital part of our energy system for years to come. The Government recognise the crucial role the sector plays in driving jobs and growth. Together, oil and gas contribute about 2% of the country’s GDP, and the industry supports about 350,000 jobs directly and indirectly across the UK, as well as another 100,000 in exporting goods and services. Of course, as my right hon. Friend said, it is also source of skills, expertise and technology. Finally, as my hon. Friend the Member for West Aberdeenshire and Kincardine said, oil and gas are a UK-wide concern. Indeed, that has an impact close to my constituency around the coast of Norfolk, where there is a North sea gas industry.

It is vital that we do what we can to maximise the economic recovery of our indigenous hydrocarbon reserves. It is for that reason that the Government remain committed to encouraging investment and innovation in the North sea. We recognise that tax plays an important role in helping us to achieve those objectives. The Government’s aim is therefore to shape a tax regime for the North sea that encourages exploration, development and production while ensuring a fair return for the UK taxpayer.

That is not always an easy balance to strike, and at times it can require us to make difficult decisions, to which my right hon. Friend the Member for Mid Sussex has referred. Everyone who listened to the Budget 2011 will understand that. In the Budget the Government sought to soften the impact of record pump prices for car fuel on households and businesses by abolishing the fuel duty escalator and replacing it with a fair fuel stabiliser. We also cut fuel duty by 1p a litre on Budget day. Since then, we took steps in the autumn statement further to ease the burden on motorists to ensure that there will be only one retail prices index increase in fuel duty in 2013. All told, that means that the Government will ease the burden on motorists by approximately £2.5 billion in 2012-13. At a time when businesses and families across the country are coping with extremely difficult economic circumstances it is right that we should support them as best we can through these tough times, including looking at measures that affect the cost of living such as fuel pricing.

Given the economic situation and the state of the public finances, that support must be funded. In the Budget, at a time of exceptionally high oil prices, the Government felt that it was fair that the oil and gas industry should make an additional contribution through an increase in the supplementary charge. Indeed, that increase was voted on in the House.

At the time of the Budget the Government made it clear that although they accepted that some marginal projects might be affected, they did not expect a significant impact on investment or production over the forecast period. To answer the points that my right hon. Friend raised about receipts, investment and the state of the industry, our assessment of the impact on production was supported by the independent Office for Budget Responsibility. Moreover, while the oil price remains well over $100 a barrel, the fair fuel stabiliser means that taxes on oil and gas production will reduce if the oil price falls below a certain threshold.

Indeed, there have been announcements of further significant investment in the basin over the past few months. For example, BP has said that with its partners it will invest almost £10 billion in North sea oil and gas over the next five years. That investment will provide an extra 3,000 jobs across the oil and gas supply chain. 2012 could be a prosperous year for the North sea. We expect a substantial increase in offshore field approvals over last year’s figure, and many other discoveries are being worked up for the years ahead.

None the less, I recognise that those tax changes have not been welcomed by the sector. I understand that, and I acknowledge the recent news suggesting that there were lower levels of exploration and drilling than expected last year. I believe a range of factors contributed to that, and tax is only one part of what my right hon. Friend will accept is a complex situation for businesses seeking to operate in and around the basin.

Tonight’s debate gives me an opportunity to tell the House a little more about the way in which we have engaged closely with the industry since the Budget last year to ensure that we fully understand its views on a range of fiscal issues related to investment. Only last week, as my hon. Friend the Member for West Aberdeenshire and Kincardine noted, I chaired the first meeting of a new oil and gas industry fiscal forum. It was attended by the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry) and representatives from more than 15 companies across the sector. We had an extremely productive discussion covering the points that my right hon. Friend the Member for Mid Sussex has noted, including decommissioning and field allowances. I believe that the fiscal forum will continue to provide a structured basis for further dialogue between industry and Government on oil and gas tax issues.

We hope this will complement the excellent work already being taken forward by the industry and Government task force, known as PILOT. This group seeks to contribute to the long-term future of the UK continental shelf through initiatives focusing on reducing costs, eliminating barriers and maximising the effectiveness of resources.

In addition to these wider discussions, the Government have been engaging closely with industry to consider changes to specific elements of the tax regime that could unlock additional investment in the basin. For example, in line with our commitment at last year’s Budget, we have been working closely with industry with a view to making a further announcement on greater long-term certainty about decommissioning tax relief at Budget 2012. We have also been considering the case for improved or new types of field allowance to act as a further incentive to investment in marginal fields.

Hon. Members here today following the debate will know the range of detail encompassed in the representations made to me and my colleagues by industry, and they will be aware of the number of different proposals put forward under those headings of decommissioning tax relief and field allowances. Following such detailed discussions with industry, we have already increased the rate of the ring-fence expenditure supplement from 6% to 10%, which helps to ensure that existing field allowances work more effectively and equitably.

I am very encouraged by the positive engagement that we have had with industry on these issues. I believe that this sort of constructive dialogue can only be helpful as the UK continental shelf matures and the tax regime has to evolve accordingly. We remain committed to supporting the sector in realising its ambition of fully maximising the growth and jobs potential from our oil and gas industry. Ultimately it is in everyone’s interest that we foster a regime that continues to promote investment and harness our mineral wealth effectively, while also ensuring a fair return for the UK taxpayer from this valuable national resource.

Once again, I am very grateful to my right hon. Friend for having brought this debate here tonight and for giving me a short opportunity to expand on some of the valuable work that we have been endeavouring to undertake to support the industry and meet the aims that I know he shares.

Question put and agreed to.