Oral Answers to Questions

Debate between George Kerevan and Mark Garnier

Thursday 9th February 2017 Commons Chamber

[Mark Garnier]

My hon. Friend is right to raise the importance of this sector. The numbers are absolutely fantastic: it has six times the average research and development investment, and it has 2.7 times the average productivity in the UK. During the past couple of years, the DIT has supported 19 successful inward investment projects in this sector, and we will continue to work with the Department for Business, Energy and Industrial Strategy to deliver the UK space innovation and growth strategy in the future.

[George Kerevan (East Lothian) (SNP)]

The encrypted public service channels of the new Galileo space navigation system are restricted to EU member states. What steps will the Government take post-Brexit to ensure that the UK has access to Galileo, in which we have invested?

[Mark Garnier]

Galileo is the satellite navigation system that is being put up by the European Space Agency and the European Union. That is one of the many things we have to negotiate over the coming years. The use of spectrum is incredibly important, because spectrum is limited. The Government will look at that among many other important things, but I assure the hon. Gentleman that spectrum is a very valuable asset for this country, and we will work with Ofcom to ensure that we get our fair share.

Bank of England and Financial Services Bill [Lords]

Debate between George Kerevan and Mark Garnier

Monday 1st February 2016 Commons Chamber

[George Kerevan]

Absolutely.

As the right hon. Member for Chichester pointed out, time after time when there have been regulatory failures, the regulators have been implicated. I therefore do not want to return to a situation in which it is up to the regulators to prove that something has gone wrong in the new regulatory regime, when they are partly responsible for it. I want the onus to fall on the bankers themselves.

It is worth looking more forensically at the reasons against the presumption of the reverse burden of proof. Andrew Bailey has argued that there is a worry that when the next crisis comes along, senior bankers will rush off to the European Court and claim that their rights under the European convention on human rights are being taken away because of the reverse burden of proof. That is rubbish.

The Parliamentary Commission was perhaps a little unwise to use the phrase “the reverse burden of proof”, even though we all use it and I use it. We are not talking about criminal law and making people guilty until proven innocent. We are talking about infractions in banking if, say, a banking crisis takes place. The legislation that the Government are trying to change would make it an infraction to be responsible for an activity in which wrongdoing took place, rather than for committing the wrongdoing itself. To give a flippant example, if it is a criminal offence to be in charge of a bawdy house, the prosecution needs to prove only that somebody was in charge of that house of ill repute, not that they were selling their own body. It would be no defence that they thought the bawdy house was a nunnery.

The reverse burden of proof regime makes managers responsible for the activity in their banks. When a disaster takes place, it is up to them to prove that they failed to stop it happening, rather than, as has always been the case, it being up to the regulators to find the solution and explain what happened, which means that everyone hides behind collective responsibility.

[Mark Garnier]

The hon. Gentleman is making an extraordinarily intelligent speech, but he has just hit on the key point. It is possible for bankers to provide a tick-box operation, which their lawyers have advised them on, to prove that they have undertaken every possible measure to prevent such action. It is therefore very easy for them to get around the reverse burden of proof legislation. The point behind reversing that legislation, which was given by Andrew Bailey and by the Governor of the Bank of England and some of the Bank’s lawyers, is that there cannot be a tick-box operation to show that they have complied with the rules because they involve a much more esoteric way of running the bank. It is therefore much more difficult for bankers to escape the rules if something does go wrong.

[George Kerevan]

I respect the logic of the hon. Gentleman’s argument. Sadly, we will never get a chance to see the legislation that he voted for in the last Parliament put into practice and to watch it fail. I look forward to his contribution—he will have time to make it if I hurry up—and to finding out why he has changed his mind.

I am interested in Mr Bailey’s tick-box argument, which is that if we reverse the burden of proof, senior bank officials will hold endless seminars with those on the trading floor, explaining to them why doing the sort of things that happened in the LIBOR scandal is wrong. When the inevitable crisis happens, they will come with list of who they spoke to—they told the traders that this should not happen, but it did.

It is not enough to have lots of meetings; we must change the culture of the banks. It is also important to remember—I hope the Minister remembers this—the title of the Parliamentary Commission’s report on banking standards: “Changing banking for good”. There are a lot of good things in the Bill, but it does not change banking for good. It is half a loaf, and I am afraid that another half loaf will lead us more quickly to yet another banking crisis for which nobody is responsible. Ultimately, we need responsibility.

In conclusion, we are being offered a duty of responsibility versus a presumption of responsibility. Once upon a time, there was a convention: when a ship sank, the captain went down with the ship, whether it was his fault or not. It was presumed that it was his fault no matter what happened, because he was in charge of the ship. What happens these days is that the ship goes down, the captain gets into the first lifeboat, and he turns up at the inquiry to say—to use a Scottish term—“It wisnae me; I did my best”. Once upon a time Ministers also resigned when something went wrong. We should return to a situation where if there is a banking crisis the captain goes down with the ship, and we assume that he will do that, whether it was his fault or not, because he or she was in charge and leading the bank. If we do not change that culture, we will go on having banking crises ad nauseam.

Finance Bill (First sitting)

Debate between George Kerevan and Mark Garnier

Thursday 17th September 2015 Public Bill Committees

[George Kerevan]

I am mindful of the fact that we have got another 48 clauses, so I will try to be brief—which is difficult for me. There are particular issues about the VAT lock that have to be put to the Minister.

VAT income to the Treasury is notoriously variable because VAT is a tax on consumption. It varies with the business cycle because it is a consumption tax. Unfortunately, in clauses 1 and 2 the Government are introducing the new doctrine that major taxes, including VAT, will be set once every five years at the start of each Parliament. I presume that in the Government’s mind the tax lock will exist in perpetuity and will be set at a different level every time we elect a Government. They are decoupling the raising of revenue—the revenue function of the Government and the Treasury—from the business cycle. As the business cycle goes up and down, income to the Treasury will go up and down independently of when we set tax rates—particularly VAT.

[Mark Garnier]

I am acutely aware of the fact that we have got a lot to get on with, but I find the hon. Gentleman’s argument utterly preposterous. He is arguing that, should the business cycle slow down, he would increase VAT—were he in a position to do so—which would have the effect of stifling consumption and thereby amplifying the problem, rather than negating it. This measure is quite clearly a cap, not a floor, so we can reduce VAT should we want to stimulate the business cycle.

[George Kerevan]

My good friend from the Treasury Committee anticipates what I was not going to say. All I am arguing is that we require flexibility in setting taxes to respond to events in the real economy. The doctrine that the Government are introducing of a tax lock in perpetuity removes such flexibly. That in itself creates uncertainty in the minds of business and the financial community, which the Government will have to address.

I accept the principle that we should try to set taxes in a way that is not destabilising. That should lead us to consult with the business community and community interest groups before we change taxes. That is perfectly possible and it is done in other countries. In Germany, for instance, there is mandatory consultation between the federal and regional Parliaments before income tax levels are changed. There are other ways to do that. The Chancellor accepted that principle in relation to North sea oil taxes when he gave an undertaking that any major changes would come only after consultation with the industry. Unfortunately, he did not extend that doctrine to the renewables industry, which would have been sensible.

To put a tax lock on VAT in perpetuity decouples revenue setting from the business cycle and, in the end, that is not tenable, because the taxes would be varied in an emergency. It is not tenable to decouple them, so the Government will live to rue the day that they put the lock in. That explains the reason for the lock. It is not for economic reasons; they are playing a political game. It is a gimmick.