Common Consolidated Corporate Tax Base

David Nuttall Excerpts

Wednesday 11th May 2011 Commons Chamber

[Mr David Nuttall (Bury North) (Con)]

It is always a great pleasure to follow my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), who sets out with such great clarity the grounds for my opposition to the measure. We have heard tonight a number of reasons why the proposal for a common Euro corporation tax, as I would like to call it, is wrong. This is yet another stage towards what the eurocrats are determined to proceed with—ever closer union.

We are here on a regular weekly or fortnightly basis, looking at the latest directive that comes before the House. Sometimes the directives could be described as dealing with relatively minor matters. This one most certainly cannot. The harmonisation and the Europeanisation or European Unionisation of the corporation tax base is a step too far. We have heard that its legal basis is unsound. It would, in my opinion, fall foul of the principle of subsidiarity. I believe that it is economically wrong.

It would be interesting to know how many FTSE companies in this country would be in favour of this crazy proposal. It seems that the only people who would benefit if it ever came into force would be those companies and tax jurisdictions that were outside such an arrangement. I accept that in the early days they could arrange their affairs in such a way as to make it attractive in order to encourage companies to come into the euro corporation tax area, but I am absolutely certain that before long, because of the bureaucratic and regulatory burden, they would have to increase their corporation tax rates to such a level that any companies that were ensnared within such arrangements would quickly wish that they had never become involved.

[Mr Cash]

Does my hon. Friend also accept that the objective at the heart of this is to move towards a harmonised tax system for one reason: to complete the circle of political union that will enable this to be one country, driven by fiscal direction, and at the same time to fill the belly of the European Leviathan with the money that will enable it to continue to create circumstances that will inevitably lead to more turmoil, implosion and a greater disaster than we already have?

[Mr Nuttall]

My hon. Friend hits the nail on the head. I see this as the thin edge of the wedge. It is the opening of a whole new war, and a whole new phase of European harmonisation. In fact, it is almost the final frontier, because it is the step towards a euro-wide sales tax and, ultimately, a euro-wide income tax that we would all be subject to. It is extremely difficult indeed.

I heard the Minster’s opening remarks, and it is to be welcomed that we will at least go back to our European partners and state our reasoned opinion for not proceeding with this. I am slightly concerned, to say the least, that we are not saying no outright, which would be a far simpler way of dealing with it. It reminds me of the message of the drugs campaign run when I was at school: “Just say no”. The simplest solution to the problem facing the House tonight would be just to say no. I see no great danger if other countries want to get together and operate a common corporation tax system—that may be ultimately what they want to do—but this EU proposal for a common corporation tax throughout Europe could be described as nothing other than giving away sovereignty, which, to come back to our national politics, is specifically outlawed in the coalition agreement, which states that there is to be

“no further transfer of sovereignty or powers”

to the EU over the course of this Parliament. If this would not be a transfer of sovereignty and powers, I do not know what would.

When the Minister responds to this short debate, will she give an estimated time scale for when she is likely to be able to come back and report on what success there has been in persuading other countries to adopt our position on this matter, and will she give an absolute confirmation that there will be no signing up to the proposal in any way, shape or form without the matter being brought back to the House for further consideration?

--- Later in debate ---

[Justine Greening]

With the leave of the House, I would like to sum up the debate. We have had a full and constructive discussion on this proposal, which is, as we have heard, an important one. I want to close by reiterating a few key points, but also by doing my best to respond to the comments that have been made by Members—I was about to say across the House, but that is obviously not the case, given that the Opposition spokesman turned up with very few other people from his party.

First, I should address a couple of the points that the hon. Member for Nottingham East (Chris Leslie) made about the work that we do as a country with other member states. I can assure him that the UK has, for example, double tax treaties in place with all EU member states that set out mechanisms for allocating taxing rights to prevent the double taxation of companies, and structures for reaching agreement on double taxation relief and the exchange of information. He will be aware that there is also a mutual agreement procedure framework for resolving cross-border disputes about tax, including transfer pricing. It is because such mechanisms and frameworks are in place that we believe that the proposed approach is necessary.

The hon. Gentleman asked about the views that we have heard from business. We have heard a range of views, and discussions between business and Government are ongoing. In general, it is fair to say that business has not been actively calling for this proposal. It is also fair to say that some businesses have welcomed it—in particular, the prospect of allowing for cross-border loss consolidation. However, some companies are stressing that their support depends on the optional nature of the proposal. An awful lot of others, as we heard from my hon. Friend the Member for Amber Valley (Nigel Mills), have expressed concerns about the potential compliance and administrative costs, which are likely to be large for many companies, and the lack of certainty about how many aspects of the system would work—a concern that is shared by the Government.

My right hon. Friend the Member for Wokingham (Mr Redwood) rightly raised the issue of the veto, and I want to provide absolute reassurance to all Members that we will not agree to any proposal that might threaten our Government’s ability to shape the UK’s tax policy. We are prepared to use our veto.

As my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) pointed out, subsidiarity is the basis of one of the arguments that we can make, but that is not the only argument we can make. We should challenge the substance of the proposal, as well as raising our objections to the fundamental principles underlying it. That is precisely what we are doing. I emphasise to the House that we should continue to challenge the substance of the proposals as they develop, even if we do not necessarily want to be part of them.

I disagree slightly with my hon. Friend the Member for Bury North (Mr Nuttall), because I think it is in our interests to understand what the proposals are in which a smaller group of nations may participate and whether they may have any direct or indirect impact on us as a member state. That is one reason why we want to be engaged in the discussions as they unfold. We also want to engage, because other member states are keen, as we are, to have their say on this matter. I do not accept that member states have reached a final position. The parliamentary debates and the development of those views are ongoing.

[Mr Nuttall]

I am conscious of time, so I will be brief. Will the Minister explain what line the Government will take in the negotiations? If the understanding is that we will not join at the end of the day, would it not be to our advantage to make the tax as difficult as possible, so that our companies have an advantage?

[Justine Greening]

We need to be careful to ensure that we understand the complexities of the proposals. For example, we need to understand how companies that also operate in the UK may use any avoidance loopholes, and whether that will impact on the way in which they operate in the UK and structure their corporations. We need to be smart about understanding the breadth of the proposals. Whether we want to be in them is one thing, but we must be conscious that they may have an impact on us even if we are not part of them.

Section 5 of the European Communities (Amendment) Act 1993

David Nuttall Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Hoban]

We are not subject to sanctions as a consequence of our opt-out from the single currency. I made that point when we had a debate last year on economic governance, and it continues to be the case now.

The information we are supplying to the Commission in the convergence programme document that we are debating tonight is the first to be provided under the new European semester arrangements. People were concerned that the Commission would receive information before Parliament, but the information provided to the Commission in the document is already public and much of it was provided when the Chancellor made his Budget statement in March.

[Mr David Nuttall (Bury North) (Con)]

Will the Minister confirm that all the information in the convergence programme document is in the public domain and available to anyone outside the House who wants to gain access to it without the document’s publication?

[Mr Hoban]

Indeed. If my hon. Friend has studied this carefully, as I am sure he has, he will recognise that large chunks of it are familiar from the Red Book. Of course, chapters 6 onwards are taken from the Office for Budget Responsibility’s economic and fiscal outlook. This information is in the public domain and Parliament has had sight of it before its presentation to the European Commission.

--- Later in debate ---

[Mr David Nuttall (Bury North) (Con)]

I will bear that in mind, Mr Deputy Speaker.

It is always a great pleasure to follow my hon. Friend the Member for Stone (Mr Cash), who speaks with such knowledge and who gives the House the benefit of his long experience of these matters. Let me say at the outset that I am 100% supportive of the economic policies that the Treasury and its Ministers have pursued since the general election. It cannot be the case that the way out of the financial mess created by the last Government, who were borrowing, borrowing, borrowing, is to borrow even more, and to continue to borrow at those levels.

[Alec Shelbrooke]

Will my hon. Friend give way?

[Mr Nuttall]

Briefly.

[Alec Shelbrooke]

I am grateful to my hon. Friend, and I will be brief. Is his view not confirmed by what the hon. Member for Nottingham East (Chris Leslie) said about inflation creeping into the system, and by the suggestion of the hon. Member for Luton North (Kelvin Hopkins) that the way out of the problem was to print more money?

[Mr Nuttall]

My hon. Friend is absolutely right. As everyone knows, printing money invariably leads to inflation. I am sure that that would be the case if we continued to print money today.

I want to address the issue of our dealings with Europe, but first let us consider our net borrowing figures. According to forecasts from the House of Commons Library produced just a few days ago—on 21 April—even if we take into account all the measures that the Treasury are taking, we will borrow £122 billion in the current financial year and £101 billion next year. We are not paying back our debts; we are simply reducing the scale of the debt.

[Kelvin Hopkins]

I could raise a number of issues, but one in particular is that the Treasury is now predicting that the deficit at the end of this Parliament will be £11 billion higher than it thought a few months ago, simply because it expects the economy to grow less.

--- Later in debate ---

[Mr Nuttall]

I think there is always scope for margins of difference in predictions for five years ahead. I agree that on page 54 of the document in question a figure of 0.8% is referred to in respect of the quarterly growth figures, but what was not mentioned is that the previous line refers to erratic factors, and the very use of the word “erratic” implies there is some deal of scope for the figure not to be precisely bang on the nail. As we all know, the figures that have been released today are provisional, and it would be very surprising indeed if they are not revised one way or the other. [Interruption.] They may well go up, but it would be very surprising indeed if they were not to be revised.

Let me move on to my concern about this motion. I have said that I am entirely supportive of the Government’s economic policy, but I am not at all supportive of the idea of our supplying 201 pages of information, which I am grateful the Minister confirmed is all in the public domain, to Europe. Why cannot we send the Europeans one simple e-mail with a link to the Treasury website, where we say the following: “Here you are chaps; if you’re interested in what we’re doing, look at our website as it’s all on there, and you’ll be able to read what you want. We are a sovereign nation, and we are not going to produce 201 pages of bumf for you to no doubt translate into dozens of other languages. If you want to see what we’re doing, look at our website or read Hansard, as it’s all in there. We’ve got nothing to hide”? Frankly, I have to ask what on earth they do with these documents when they get them, as they obviously have not been keeping an eye on Greece, Ireland or Portugal, because look at the mess they are in! They obviously get these documents, file them under “Too difficult”, and let those countries get on their merry way.

That is not good enough, and that is why I do not support this motion. I do not think we should be sending any documents to the Europeans. We should be saying, “If you want to see what we’re doing, look at our documents, which are all in the public domain, and where it is all confirmed.” I am fully supportive of our economic policies. Let us stick at it, and let us say no to Europe.

Coinage (Measurement) Bill

David Nuttall Excerpts

Friday 1st April 2011 Commons Chamber

[Mr David Nuttall (Bury North) (Con)]

I congratulate my hon. Friend the Member for Milton Keynes North (Mark Lancaster) on piloting the Bill so swiftly through its stages in the House. I should like to make a couple of points following on from the remarks made already.

My first comment concerns the value that the coin will bring to the Treasury. I understand that there are to be two coins—a gold coin with a face value of £1,000, and a silver coin with a face value of £500. I also understand that 60 of the gold coins and an estimated 14,000 of the silver coins are to be minted. The value of the coins will depend on the prevailing cost of precious metals, but if we were to base the cost on the best current estimate, a gold coin is likely to fetch about £40,000 and a silver coin about £500. Taking those together and doing a quick bit of maths, that makes £19.9 million—not bad for a morning’s work—which I am sure would be gratefully received by the Treasury. Indeed, I understand that 20,000 coins were sold in the Beijing Olympics, so I wonder whether there might be scope for minting more than is currently allowed for.

[Mark Lancaster]

I fear that the figure might even be slightly larger than my hon. Friend realises. The estimated retail value of the silver coin will actually be £1,250.

[Mr Nuttall]

In that case the amount from the silver coins would be more than doubled, and there are more of them as well.

Let me turn to the size. On Second Reading I mentioned my disappointment that the coins were to be minted in kilograms, and suggested that they be minted in a multiple of a troy ounce. It was said that the coins are for the international market. If the object of the enterprise is to raise as much money as possible for the Treasury, the coins might be worth even more—with more collectors for them, raising even more money for the Treasury—if they are minted as a multiple of a troy ounce, because of their rarity on the international market.

Mention has been made of the suggestion made in Committee that the coin should perhaps bear an image of my hon. Friend in an athletic pose. He has been very modest today, because he has not mentioned the fact that, as he told the Committee, on the weekend before it sat he did his combat fitness test for the Army, running 8 miles while carrying 25 kg on his back. That is no mean feat, and I am not sure that many of us in the Chamber this morning could do that.

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

I wonder whether the 25 kg that my hon. Friend the Member for Milton Keynes North (Mark Lancaster) was carrying was made up of coins.

[Mr Nuttall]

That is a good point.

[Mark Lancaster]

I wish they had been.

--- Later in debate ---

[Mr Nuttall]

Indeed, it would have been easier if they had been, but the pack on my hon. Friend’s back was probably rather bulkier. I thank him for his work for the Army.

Finally, it is often said that too few private Member’s Bills—in fact, hardly any—make it through the House. I would draw hon. Members’ attention to the fact that this Bill—which will, I am sure, shortly complete its stages through this House—will be the fourth Bill to complete its passage on a Friday, in addition to the Estates of Deceased Persons (Forfeiture Rule and Law of Succession) Bill, the Sports Grounds Safety Authority Bill and the Wreck Removal Convention Bill. That shows that passing a private Member’s Bill is possible, and as this Bill has shown, it is also possible to do it fairly swiftly. The Bill received its Second Reading on 4 February, went to Committee on 16 March and today, on 1 April, will pass safely to the other place for consideration, where I hope it will receive swift approval, so that the Royal Mint can crack on with producing the coins and bringing in much needed funds to our Treasury. I congratulate my hon. Friend on piloting the Bill to this stage and wish it well in its future consideration.

Coinage (Measurement) Bill

David Nuttall Excerpts

Friday 4th February 2011 Commons Chamber

[Mr David Nuttall (Bury North) (Con)]

I congratulate my hon. Friend the Member for Milton Keynes North (Mark Lancaster) on bringing forward the Bill. It might not have generated many e-mails—in fact, I have not received any at all on the subject—but that does not detract from its merit. I rise to support it and I wish it well at the start of its long parliamentary journey.

The eyes of the world will be on the United Kingdom next year as we host the 2012 Olympics. Great as the games will be, however, they will be over in two or three weeks; after all the hype and the years of planning, I am sure that they will pass all too quickly. It is therefore right that we should concentrate as much on the legacy that the games will leave behind as on the games themselves, and a crucial part of the Olympic legacy will be the sale of commemorative coins. If there is one item that people are likely to save and treasure, it is a commemorative coin. I can see such items being left in people’s wills as legacies to future generations, perhaps for centuries to come.

We know that the 2009 “Countdown to London 2012” coin collections sold out due to the huge demand for them. On 1 April last year, more than two years before the start of the games, the Royal Mint confirmed that the London 2012 Olympic and Paralympic commemorative coins would be the best-selling coins in the history of the Royal Mint. That is testament to the great work that the Royal Mint has done in the build-up to the Olympics. In addition to ensuring that the country is left with a great sporting legacy following the Olympics, it is important to ensure that the games and the legacy provide value for money. As my hon. Friend the Member for Milton Keynes North said, the Royal Mint contributes considerably to the Treasury coffers, and this commemorative coin will add to that revenue.

Among the existing coins available on the Royal Mint website, there is already a “Countdown to London 2012” £5 silver proof coin, available at £65.99—a snip. Also awaiting stock are a gold three-coin set—in a four-coin case, for some reason I do not understand—at £4,499, and a gold proof £5 coin at £1,599. Perhaps Members will be more interested in the 50p coins available at £2.99, which are provided for all 29 individual sports: shooting, taekwondo, table tennis, judo, volleyball, table tennis, handball and so on. Alternatively, if people want to splash out they can get a bumper pack for all 29 sports, plus a free album, for £85.

When the coins were issued, the Royal Mint’s director of commemorative coins, Dave Knight, said that they will

“become treasured mementos of the biggest sporting event to happen on UK shores for over half a century and we hope will encourage a new generation of collectors.”

I am sure that they will. His view was backed up by an Olympic gold medallist, Rebecca Adlington OBE, who, when launching the “Countdown to 2012” commemorative coins, said that the Olympic games is just around the coiner—[Laughter.] A Freudian slip there. She said:

“The Olympic games is just around the corner and this coin is a great way for the British public to show its support for the sports men and women who are already preparing for this ultimate sporting challenge.”

The issuing of gold coins representing the ethos and history of the Olympic movement has been a key part of the build-up to the Olympic games for centuries. To celebrate the 30th Olympiad, the Royal Mint has already begun issuing its gold coin collection, with the distinction of being the only coins to feature the Olympic rings as part of their design. The complete collection will eventually contain nine coins, comprising three separate three-coin sets inspired by the famous Olympic motto, to which we have already heard reference, “Citius, Altius, Fortius”—faster, higher, stronger. The Faster series, inspired by the classical heritage of the Olympic games, presented in a luxurious hardwood walnut case, is already on sale and available. Each of the three coins features a different Roman god, representing and inspired by the classical heritage of the Olympic games. The 1 oz coin features Neptune, god of the sea, who will look after the sport of sailing. The ¼ oz coin features Diana, goddess of hunting, who will look after the sport of cyclists. The other coin represents Mercury, the god of speed, who will look after the athletes.

I end on one small point of concern about the Bill: the reference to a “kilogram”. Although I support the Bill and its intentions, I would much prefer it to refer to 32.1507466 troy ounces, because gold is normally dealt with in troy ounces.

[Tom Brake]

Does the hon. Gentleman not agree that that is precisely why it will be a 1 kg coin?

[Mr Nuttall]

I do not accept that point. I see no reason why coins could not be minted in troy ounces, as gold bars are. There is no difficulty in selling gold bars.

With that one small point, I commend the Bill to the House and wish it well through the parliamentary process.

Court of Auditors 2009 Report

David Nuttall Excerpts

Wednesday 2nd February 2011 Commons Chamber

[Justine Greening]

Let me pick my words more carefully. My hon. Friend is right that Conservative Members had deep concerns about the content of the Lisbon treaty at the time. That is one reason why, as a party, we pushed to have a referendum before going into and signing off on the Lisbon treaty. It is a matter of deep regret that the previous Government chose not to give the British people their chance to have a say on the changes that were proposed via the Lisbon treaty.

The challenge in my role is to ensure that, in terms of where we are today, I stand up for our interests in Britain. One way we need to do that as a Government is to tackle some of the fundamental weaknesses in how the EU works, but my particular concern is financial management, not only at the EU level but at the member state level as funds are spent.

I am sure that other Members will rightly want to have their say on this, so before I finish let me quickly turn to the issue of fraud, which is of great concern to the Government and to hon. Members. I want to be absolutely clear that of course any level of fraud is completely unacceptable. We fully support the work of the Commission and of the European anti-fraud office, OLAF. I am pleased that the European Court of Auditors reports very low levels of fraud in the UK. In 2009, we had a rate of just 0.19 of 1% of spending, but it is still too high. The Government and I will focus on that as we look at how we can tackle this problem. We are therefore deeply concerned that, according to the latest OLAF report, the level of fraud seems to be increasing at the European Union level.

It would be wise for me to point out that the Commission’s figures have to be interpreted with care. As we know, fraud and irregularities are not the same thing. Irregularities make up the bulk of the available figures. To my mind, irregularities are also a serious concern, because they are payments that have been made outside the rules. We should not find that acceptable. The figures quoted by OLAF for suspected fraud are increasing. It is not possible to say that fraud is increasing, but there are indications that that may be the case. Even an increase in suspected fraud is unacceptable. The best way to tackle fraud, irregularities, waste and the lack of priorities is ultimately to have better systems, financial processes and financial controls, and a better regime for financial management in the first place.

[Mr David Nuttall (Bury North) (Con)]

My hon. Friend is right to identify those measures that need to be put in place. Is she aware of whether that is happening in the European Union?

[Justine Greening]

To my mind, that is the work that we need to ensure happens. I met Commissioner Šemeta in October 2002 to discuss his plan to improve financial management across the EU. The challenge for the Government, which I set out for him and to which he was receptive, is to make that stronger and better, and to make it more of a priority for the EU as a whole. As hon. Members have pointed out, there is a long way to go, but I assure the House that we are making a start.

--- Later in debate ---

[Mr Nuttall]

Does my hon. Friend agree that one of the problems is that it apparently takes 25 months on average—more than two years—for OLAF to conduct its investigations, and that only 56% of cases have led to follow-up action?

[Mr Cash]

That is the problem. It is easy for us in this House to make scattergun criticisms of bureaucrats, civil servants and the rest of it, but the real problem is that if something does not work, we have to mend it—and there is no evidence of that happening.

I had an exchange with Lord Kinnock when he was responsible for these matters, and set up the new OLAF arrangements. He got a bit shirty with me in a Select Committee some years ago. People like Marta Andreasen were thrown out, and even before then, there was another chap whose name I cannot remember—

Autumn Forecast

David Nuttall Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

If the hon. Gentleman cannot tell the difference between the economic situations in which Britain and Ireland find themselves today perhaps he should not turn up to these events.

I just make this observation. This is an independent report, produced by Robert Chote. [Interruption.] I have had a lot of chuntering from Opposition Front Benchers about the independence of the Office for Budget Responsibility. We set it up on an independent basis and we have given all members of the Treasury Committee the right to approve or reject the members of the budget responsibility committee. We will see whether Opposition Members, including Front Benchers, support this legislation when it comes before Parliament. At the moment, it does not sound as if they will support it, but perhaps they will change their minds.

[Mr David Nuttall (Bury North) (Con)]

Is my right hon. Friend as concerned as I am that over-prescriptive regulation such as that proposed by the Financial Services Authority’s retail distribution review may result in a loss of jobs?

[Mr Osborne]

I know that a number of concerns have been raised about the FSA’s review of that area. Obviously, it is an independent regulator, but I have made sure that those concerns have been drawn to its attention.

Financial Assistance (Ireland)

David Nuttall Excerpts

Monday 22nd November 2010 Commons Chamber

[Mr Osborne]

Quite frankly, that assessment is not shared by the International Monetary Fund or other EU member states. It is not the assessment of anyone who looks at the Irish situation except for the hon. Gentleman.

[Mr David Nuttall (Bury North) (Con)]

Bearing in mind that the Treasury will itself have to borrow the billions of pounds that it proposes to lend to the Irish Government, will the Chancellor reassure the House that the interest rate it charges the Irish Government will be substantially higher than the rate we must pay?

[Mr Osborne]

The terms and conditions of the loan are still to be decided, and as I said, they will be brought to the House of Commons. However, to make a general observation, we are seeking not to make a buck, but to help our friend.

Independent Financial Advisers

David Nuttall Excerpts

Wednesday 20th October 2010 Westminster Hall

[Harriett Baldwin]

My hon. Friend, who is also a member of the Treasury Committee, makes an extremely important point, which I will mention in a moment.

The impact of the proposals has been brought to my attention by a range of independent financial advisers, who are also constituents. Acting independently of one another, they all came to see me in my advice surgeries. Under the RDR proposals, each IFA should pass a set of exams and then spend at least 35 hours per annum on continuous professional development. Hon. Members should note that the requirement is 35 hours and that 34 hours would not be acceptable. IFAs also need to obtain a statement of professional standing from an accredited body. Someone who, today, is a qualified and approved IFA but who does not meet those requirements by 31 December 2012, will no longer be able to practise his or her profession, despite many years’ experience.

[Mr David Nuttall (Bury North) (Con)]

Is not the problem with the RDR that many of our constituents will be left without appropriate financial advice because of the introduction of the new rules? Often it is the most experienced IFAs, with the most years of experience, who will be forced out of the profession.

[Harriett Baldwin]

My hon. Friend makes a good point, which I am about to make myself, so I thank him for his helpful intervention.

Advisers will have to charge explicitly for their services and will not be able to accept commissions. Oxera, the market research firm employed by the FSA to assess the costs and benefits of the changes, expects the net present value of the compliance costs to the industry to reach between £1.4 billion and £1.7 billion. Worryingly, the estimate in 2008 was £600 million. That cost will be passed directly to consumers. The latest estimate represents an astonishing 180% increase.

Oxera expects the increase in compliance costs to be passed on to consumers, so they will pay for the changes. Charges will be higher, so sales of financial products will decline. The majority of adviser firms expect a reduction in turnover. Consumers with smaller amounts to invest are much less likely to seek advice if they have to pay for it explicitly. Smaller firms of IFAs are the most likely to exit the market.

--- Later in debate ---

[Mr Hoban]

That is an interesting point, but my hon. Friend should bear in mind that with some products, which might be long term, it can be some time before an issue emerges. If people buy a product in their 30s—a pension product, for example—they might only find out in their 60s that they had been mis-sold something. There is a real issue about looking at complaints records in that way.

The retail distribution review aims to address the structural problems in the distribution of retail financial products, such as conflicts of interest, transparency and professional standards. Although the RDR is the responsibility of the FSA, I fully support its aims—all colleagues should support those objectives. I hope that the RDR will lead to increased confidence, simplicity and clarity in the financial advice sector.

On professionalism, hon. Members are familiar with the fact that the rules seek to ensure that all financial advisers adhere to common professional standards, including an increased minimum qualification level, effective maintenance of knowledge and subscription to a code of ethics. The current minimum financial adviser qualification is at the same level as a diploma in shift management offered by McDonald’s. We should all reflect on that for a moment: the products being sold by IFAs are infinitely more complex and more long-lasting in their effect than a Big Mac.

The rules aim to improve trust and the service offered to consumers. Consumers will have confidence that their financial adviser is up to the job. Investment advice will be seen as a professional activity, financial advisers will have a new status and fresh talent will be attracted to the industry. The FSA reports that, rather than being put off by studying, many financial advisers are going on to obtain more advanced qualifications than those required by the RDR. One of my constituents, who is an IFA, has said that when the FSA raised the minimum bar he wanted to go even further, to demonstrate that his qualifications, knowledge and technical expertise went beyond those of his peers. The FSA also noted that take-up for financial planning degree courses has increased.

I know that many financial advisers have concerns about meeting the increased qualification standards required by the RDR, but almost half of advisers already meet the required level, with two years to go before the RDR is introduced.

Many financial advisers feel that the new rules should be “grandfathered,” so that those advisers with experience are exempt. However, how do we know how good those advisers are? Someone might have been in the industry for some time, but is that necessarily a guarantee of the technical expertise and quality of advice?

[Mr Nuttall]

rose—

[Mr Hoban]

I only have seven minutes left and my hon. Friend the Member for West Worcestershire gave way quite a lot, so I would like to make some progress.

The existing qualification requirements for advisers focus mainly on knowledge, whereas the new higher level is primarily about understanding and applying that knowledge, which are core skills for every adviser to demonstrate. The result is a level playing field where consumers can have confidence that their adviser meets a required standard.

IFAs are not the only people who have an interest in this debate. The consumer group Which? welcomes the FSA’s increased standard, as it does not feel that the current qualification level is sufficient.

Advisers are required to maintain competence under the FSA’s current rules as part of their approval conditions, and so those advisers that have actively engaged in maintaining competence by keeping up to date with market developments should not have to commit a significant amount of time to study. Continuing professional development can be used to fill any gaps between existing and revised examination standards, and financial advisers can opt to undertake an alternative basis of assessment, instead of a traditional written qualification. That addresses one of the points made by my hon. Friend the Member for West Worcestershire, about how someone who is slightly long in the tooth, as I am, might not be as exam-ready as someone straight out of university. The alternative assessment might well help advisers in such a situation.

On adviser charging, at present financial advisers earn different amounts of money as commission payments, depending on which particular firm they recommend a product from and on what product they recommend. That creates a potential conflict of interest which can be damaging to consumers and undermines trust in the investment industry. The RDR rules on adviser charging are designed to tackle the risk, as well as the perception that commission paid by product providers might bias advice.

FSA consumer research also found that only half of respondents understood how the value of their product would be affected by commission. To add to that, in October 2007, Which? conducted a survey of IFAs and found that 82% of advisers failed to explain the document on the key facts about the costs or to have a meaningful discussion with their client about how advice would be paid for. There is a big issue to be addressed—getting people to understand how they are paying for advice at the moment—and IFAs have a role to play.

It should be noted that consumers already pay for advice, through the commission structure in their product. We are not doing anything new by ensuring that consumers know how much advice costs. It is important that consumers understand the value that good financial advice can add and that we create a much more transparent market in which advisers compete on cost and quality. That is a good outcome for consumers.

My hon. Friend mentioned how banks reward employees for pushing certain products—I understand her point—and the FSA is to look into how the reward structures of in-house sales staff in banks affect their performance.

On ability to pay for advice, we need to bear in mind that not enough people are in receipt of financial advice. That is one of the reasons why our party, in opposition and now as part of the coalition Government, has been able to support the Consumer Financial Education Body, the introduction of a social responsibility levy on the financial services sector and the funding of a free national advice service, which will help people review their financial affairs regularly, plan ahead and ensure that they hold appropriate products. Such measures will help to tackle some of the advice gap. I hope that the industry will work in partnership with the CFEB and the Government to ensure access to financial advice.

A number of my hon. Friends raised the issue of the disproportionate impact of RDR on small firms. I appreciate that concern. Smaller IFA firms, in remote areas in particular, will feel the impact, and they are more likely to struggle to meet the challenges of the RDR proposal, unlike the larger IFA firms and the banks, and instead might decide to exit the market. However, the RDR will apply to all advisers in the retail investment market, not just to IFAs.

Although the change will bring challenges in the short term, it is important that we see the advice sector grow and strengthen in the long term. New and existing firms can increase supply in the long term to meet that demand, and indeed the FSA has found that a larger proportion of the costs of the RDR will be borne by larger firms.

In respect of the costs being passed on to the consumer, it is true that with the RDR come implementation costs. The Oxera research commissioned by the FSA found that such costs could translate into higher prices placed on consumers in the short term. However, over the longer term, it concluded that the higher prices could be competed away through increased transparency of prices, encouraging consumers to shop around.

I could respond to many more issues. I will write to my hon. Friend the Member for West Worcestershire on RDR and tax issues.

We all want to ensure that consumers have access to good-quality advice, delivered in a transparent and professional way, so that people understand what they are buying and have paid for. I believe that that will be taking a major step forward in improving the financial outcomes for our constituents.

Draft EU Budget 2011

David Nuttall Excerpts

Wednesday 13th October 2010 Commons Chamber

[Chris Heaton-Harris (Daventry) (Con)]

I thank my hon. Friend the Economic Secretary for her comments. I shall raise a couple of issues because I should like a tiny bit of clarification on a couple of matters.

I welcome the shadow Minister to her role. Obviously, I am very new here, but what she probably does not know is that, alas, I have had to follow the European budget for 10 years as a Member of the European Parliament. In that time, I followed the abject failure of Labour Ministers who came to Brussels, gave away money and powers and did not care for this country. They did not bother to raise any questions when we were looking at the accounts and whether or not they were signed off. The hon. Lady might have forgotten the failure of a former Prime Minister who went and tried, when he was Chancellor, to get back money from structural funds but failed and then went quiet on the issue. I very much doubt that the hon. Lady has yet, in her new job, read the European budget line by line and page by page. Alas, I did that nine times out of 10: the 10th time, I found a fantastic new doorstop.

I am not going to talk about the budget in financial terms, as my hon. Friend for Harwich—[Hon. Members: “Clacton.”] I love these boundary reviews; they are so much fun. My hon. Friend the Member for Clacton (Mr Carswell) has outlined the costs. I want to press home the process behind all this. Having sat on the back benches of the European Parliament, watching all this go through, I have seen the process get to the stage that we are at now, when the European Parliament’s Budgets Committee adopted its wishlist for how much more money it could possibly spend, and I know what comes next. There will be a little knock-back from the Council at the meetings that the Economic Secretary is about to attend and then there will be the stage at which these matters will be decided by qualified majority voting, because that is how all this works.

[Mr David Nuttall (Bury North) (Con)]

Qualified majority voting is a term that might not be understood widely outside the House. Could we more simply describe it as other countries telling this country what to do?

[Chris Heaton-Harris]

I suppose so; I have heard it put in slightly more complicated terms. At the end of the qualified majority voting process, member states coalesce into different groups and it is quite remarkable that we have so many member states on our side at this time. That is something else that the Labour Government utterly failed to achieve on any occasion when it came to the budget. I think we are heading in the right direction.

I want the House to give our Economic Secretary the strong message that a number of us are simply reflecting the views of the people who elected us to this place. They see a lot of money being wasted and a lot of excess in the European Union and they know that we want to do something about it, but we need to negotiate from a very strong position. I know that the Economic Secretary is an unbelievably good negotiator. She speaks many languages when she goes abroad to talk to our European friends and those with whom we have to negotiate. I would like her to know that when she goes into those negotiations she can say, “This Government have taken a perfectly reasonable position. We are reasonable, but look at the Members of the House of Commons who are trying to represent their constituents—they are absolutely livid about the position the Government are taking just to get a half-decent cut, or maybe a standstill, in the European budget.” We are trying to give extra force to her argument—nothing more, nothing less.

I commend what we are doing in the European Parliament. My colleague James Elles, a Conservative Member of the European Parliament, has tabled many fantastic amendments, some of which might go through, because he is an able negotiator who knows the institutions very well, and some of which will not. However, we will still end up in the same position whereby, at the end of the process, the European Commission’s budget is bigger this year than it was last. That is unacceptable to the British public.

President Barroso recently gave a state of the Union address. I talk about that because I want to put into context where the argument sits now. We might be talking about the 2011 budget for the European Parliament, and I am trying to look forward to how we negotiate in the negotiations that are just opening up for the next financial framework. President Barroso put his cards on the table in his state of the Union address: not only does he want more money, but he wants to raise it in a completely different way. A former Minister for Europe talked about own resources; essentially, President Barroso would like to have a European tax. There is a debate for us to have on that.

Some people want a European tax because more member states are having debates such as the one in the Chamber today whereby their parliamentarians say, “You are spending a lot of money from direct taxation, not from the way you used to raise it.” My hon. Friend the Member for Hertsmere (Mr Clappison) referred to that and it is unacceptable in the current economic climate.