Oral Answers to Questions

Greg Clark Excerpts

Tuesday 6th November 2012 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

5. What the level of public sector net borrowing was in the (a) first six months of 2012-13 and (b) equivalent period in 2011-12.

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

Public sector net borrowing totalled £37 billion in the first six months of 2012-13, compared with £62.4 billion in the equivalent period in 2011-12. However, income and expenditure vary throughout any year, and it is too early to draw firm conclusions about the year as a whole.

[Tom Blenkinsop]

Between 2010 and 2015, debt will increase under the coalition by £465 billion in just five years in real terms. How much of that debt is due to an increase in borrowing for higher welfare benefit costs as a result of the Chancellor’s double-dip recession?

[Greg Clark]

I am amazed that the hon. Gentleman has the temerity to talk about debt when the legacy of the previous Government has made it clear that it has been the worst in the G7. The Office for Budget Responsibility has said that the changes in Government spending have directly added to gross domestic product, and have helped matters, rather than subtract from it.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

Government borrowing will be higher when multinational companies pay royalties, management charges and technical licence fees between group companies and across borders, which will depress taxable profits in the UK and shift them abroad. Ensuring such payments properly reflect the service or technical knowledge provided is a complex transfer pricing issue, so does the Minister share my view that tackling abuses in that area is not about the number of HMRC staff but about ensuring that they have the right expertise and experience?

[Greg Clark]

My hon. Friend is absolutely right. It is crucial that the right skills are there, but we have taken a role internationally in leading this. In fact, in Mexico, the Chancellor is leading the way across the world in making sure that we have a co-ordinated regime.

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

I do not quite understand why the Minister is reluctant to be straight with the House on the facts, particularly given the question asked by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop).

[Chris Leslie]

Absolutely. Perhaps it was inadvertent—I would not in any way wish to imply that the Minister was deliberately obfuscating on the facts. I wanted to pick up on a specific question. As I understand it, public sector borrowing in the first six-month period of the last financial year was £62.4 billion. It was £65.1 billion in the first six months of this financial year, so will he confirm that that is £2.6 billion higher, that borrowing has risen, and that the deficit has gone up?

[Greg Clark]

No, the numbers vary from month to month. The hon. Gentleman needs to wait until the end of the financial year. January is the key month for these things, as he knows, but if he is interested in getting matters straight on the facts, will he clarify the shadow Chancellor’s suggestion that there was no structural deficit before the recession, because according to the IMF not only was there a structural deficit but it was the worst in the G7?

[Chris Leslie]

As I understand it, Mr Speaker, we ask the questions—the Minister is supposed to answer them. Why will he not confirm that borrowing figures are higher and that the deficit has risen? Will he stop being so complacent, get a grip of our economy and public expenditure, and confirm that the Government will keep their promise? The Chancellor said that the coalition Government will take responsibility for balancing Britain’s books within five years, so will they keep that promise?

[Greg Clark]

The facts are as I set out, but if the hon. Gentleman is implying that in some way he is against a deficit, that he wants to pay down the deficit, can he explain why he can hold that position and simultaneously be in favour of increasing borrowing? The shadow Chancellor is on the record as saying that his plans mean a short-term increase in borrowing. Let him say by how much and when.

[Mr Speaker]

Order. I am chairing these proceedings. Let me just make it abundantly obvious to the Minister: the hon. Member for Nottingham East (Chris Leslie) gets two questions. He does not get a third and it is not the business of the Opposition to answer questions in this Chamber—that is the responsibility of the right hon. Gentleman in respect of Government policy. Let us be clear about that.

[Mr Edward Leigh (Gainsborough) (Con)]

Notwithstanding what we have just heard, surely, given the still very high and worrying levels of public debt, is it not incumbent on all coalition Members, from whatever party, to continue to support the Chancellor in the very difficult decisions he may have to take in the coming months that may amount to further cuts to public spending?

[Greg Clark]

It is in everyone’s interest to support the path we have embarked on to pay down the deficit. We know that the confidence in the UK economy, which has led to record low interest rates, depends on credibility—a credibility that the policies of the Opposition, by borrowing more, would jeopardise.

[Gavin Shuker (Luton South) (Lab/Co-op)]

7. What recent assessment he has made of the effect of the Government’s fiscal policies on the level of long-term unemployment.

--- Later in debate ---

[Andrea Leadsom (South Northamptonshire) (Con)]

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

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

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

[Andrea Leadsom]

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

[Greg Clark]

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

[Bill Esterson (Sefton Central) (Lab)]

Small businesses are responsible for 40% of the jobs in my constituency, but with the banks not lending to small businesses, it is very hard for them to grow and create the extra jobs that are needed. What action will the Minister take to make sure that the banks do lend to small businesses so that they can play their part in the growth and jobs desperately needed in my constituency and elsewhere in the country?

[Greg Clark]

The hon. Gentleman makes an important point. It is crucial that we get funds to small businesses to get them lending. In fact, lending to small and medium-sized enterprises is up 13% over the past year. He will know that the new funding for lending scheme, which is being conducted in co-operation with the Bank of England, is making £80 billion available to the banking system for the purpose of lending.

[Steve Baker (Wycombe) (Con)]

We need more competition in banking. Later today, I will chair a meeting with Mr David Fishwick, who has been trying to start a responsible and trustworthy local bank but has found that the barriers to entry are far too high. Will my right hon. Friend look at Mr Fishwick’s report on community banking and consider meeting him to discuss his experiences and see whether we can make it easier for communities to create the banks they need?

[Greg Clark]

I certainly will. I think that there has been a concentration in the number of banks as a result of the financial crisis, and that is not a situation I want to see endure. If the suggestions in the report will help to reverse that, I am all ears.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Comparisons between banking fines for similar offences in this country and in the United States show that we are well behind the curve in that regard. Has the Minister had an opportunity to speak to the Financial Services Authority about a more robust form of regulation that will ensure that fines are appropriate to the issue at stake?

[Greg Clark]

The hon. Gentleman, who is a distinguished member of the Treasury Committee, makes an important point. It is crucial that the change we need in the culture of banking is achieved through leadership and through a clear warning that abuse, mis-selling and all the other vices that banks can fall into will be punished rigorously. The FSA knows my views on that and I will reinforce them to the authority.

[Bob Blackman (Harrow East) (Con)]

17. What recent steps he has taken to tackle tax evasion and reduce tax avoidance.

--- Later in debate ---

[Mr William Bain (Glasgow North East) (Lab)]

21. What recent assessment he has made of the effect on economic growth of the level of bank lending to businesses.

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

As I said to the hon. Member for Sefton Central (Bill Esterson), the Government and the Bank of England are taking action to improve the flow of credit to business. The £80 billion funding for lending scheme is designed to incentivise banks to maintain and boost their lending to businesses and households.

[Mr Bain]

According to the Bank of England, net lending by the banks to small and medium-sized businesses fell by a further £2.4 billion in the three months to this August. Does not the Government’s failure to address that decline show exactly why the IMF downgraded GDP estimates for Britain by 0.6% for this year, and a further 0.3% for next year?

[Greg Clark]

The hon. Gentleman calls for action, but I would have thought that the funding for lending scheme was precisely the type of action that he wanted. The Bank of England has been clear that, in the absence of funding for lending, it was quite possible that rates and lending would have declined because of the turbulence and anxiety in the eurozone. Actually, it has been an important factor in getting money to businesses. I hope that the hon. Gentleman will welcome that.

[Tim Loughton (East Worthing and Shoreham) (Con)]

T1. If he will make a statement on his departmental responsibilities.

Multiannual Financial Framework

Greg Clark Excerpts

Wednesday 31st October 2012 Commons Chamber

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

I beg to move,

That this House takes note of European Union Documents No. 16844/11, No. 16845/11, No. 16846/11, No. 16847/11, No. 16848/11, No. 6708/12 and Addenda 1–3, No. 9007/12, No. 12356/12, and No. 13620/12, relating to the Commission’s proposal on the next Multiannual Financial Framework (MFF), 2014–2020; agrees with the Government that at a time of ongoing economic fragility in Europe and tight constraints on domestic public spending, the Commission’s proposal for substantial spending increases compared with current spend is unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe to bring deficits under control and stimulate economic growth; notes that UK contributions to the European Union budget have also risen in recent years due to the 2005 decision to give away parts of the UK rebate; agrees that the next MFF must see significant improvements in the financial management of EU resources by the Commission and by Member States and significant improvements in the value for money of spend; further agrees that the proposed changes to the UK abatement and proposals for new taxes to fund the EU budget are completely unacceptable and an unwelcome distraction from the pressing issues that the EU needs to address; and calls on the Government to seek significant savings to the Commission’s seven year framework, as set out in the Prime Minister’s joint letter with France, Germany, the Netherlands and Finland of 18 December 2010, which stated that ‘payment appropriations should increase, at most, by no more than inflation over the next financial perspectives’.

The Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), is making a rapid getaway, but if he wants to deal with the motion, I shall not stand in his way.

It is a pleasure to have been sprung from the sometimes stormy world of planning policy into the calm and genteel discussions that characterise such European issues. The debate is, if nothing else, timely, given the forthcoming negotiations on the EU’s annual budget for 2013 and on the multiannual financial framework, which sets out budget ceilings for the seven years between 2014 and 2020.

When I became Financial Secretary last month, hon. Members can imagine the delight I felt to find that the EU negotiations were at the top of my in-tray. However, now that I have had a few weeks to immerse myself in the budgetary demands that have been made by not only the institutions of the EU but several member states, I have to report that my normally cheerful mood has soured. Frankly, the sheer lack of shame displayed by those demanding more of our money is extraordinary. They want more at a time when the International Monetary Fund predicts that Government spending across the EU will fall by more than 8% between 2010 and 2017. They want more at a time when Mr Barroso, the European Commission’s President, has said:

“public finances must be consolidated”

and

“sound public finances are needed to restore confidence that is so essential for growth”.

They are asking for more at a time when the Commission itself is forcing deep public spending cuts on member states that have the misfortune to be locked into a debt crisis. At just such a time, the European Commission has thought it reasonable to propose an increase in what the EU spends of more than €100 billion, which is 10% more than it spends already.

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

In light of what my right hon. Friend is saying, he might have noticed that I tried to give Her Majesty’s Government a nudge in the direction of a veto on anything that would be more than a freeze or a reduction, as well as a refusal to accept the financial transactions tax. Does it follow from his comments that the Government agree with my proposal?

[Greg Clark]

I normally agree with my hon. Friend, who is one of the House’s sages, and I can say that I agree in every respect with the amendment that he tabled.

[Mr Peter Bone (Wellingborough) (Con)]

The Government are therefore making a most generous concession, so will my right hon. Friend make things absolutely clear to the House? My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) spoke about a freeze, which would not allow for a cash increase. Is that the Government’s position?

[Greg Clark]

Our position is that we want the EU budget to be cut, but part of the negotiating mandate that the Prime Minister has agreed is that the very most that we would accept would be a real-terms freeze. However, we want a cut, as I shall explain.

The Commission—this time with the European Parliament—has proposed an increase of 6.8% for the 2013 annual budget. That is for a year in which the IMF forecasts that growth throughout Europe will average 0.5%. My view, and that of the Government, is that such a demand constitutes a grotesque imposition.

[Mr Denis MacShane (Rotherham) (Lab)]

I welcome the Financial Secretary to his new job. Will he confirm the House of Commons Library figures showing that Her Majesty’s Government’s spending between 2010 and 2015 will increase by £100 billion?

[Greg Clark]

I cannot confirm that, but I noted from the right hon. Gentleman’s article in the New Statesman that he is calling for increases in the budget, especially for the structural funds.

The Commission’s proposal is totally unacceptable, so let me say very clearly to hon. Members, as well as those around Europe who might be watching, that it is not happening. On the MFF, we will accept no real-terms increase in the EU budget for the next seven years. We will veto any proposal that either does not cut the budget or does not at the very least freeze it for the whole of the period. There will be no more budgets that pursue ever closer union through ever higher spending.

[Mr Edward Leigh (Gainsborough) (Con)]

I am sure that the Financial Secretary heard the Prime Minister’s excellent words today calling for a cut in the budget, so will he resist the blandishments of a very polite gentleman who appears to be impersonating the Conservative Chief Whip, and join those patriotic Conservative Members who will be voting for a cut in the budget?

[Greg Clark]

I have great respect for my hon. Friend, with whom I served on the Public Accounts Committee, and I shall explain why the Prime Minister will indeed be arguing for a cut, and why we have our mandate.

[Several hon. Members]

rose—

[Greg Clark]

Let me make a bit of progress and then I shall, of course, give way to hon. Members on both sides of the House.

Our opposition to the demands of the Commission is more than a matter of headline figures alone. When we dig down into the detail, there is always something repellent to find. For example, let us consider the EU administration costs. Members may not be aware that the pay of employees within the EU bureaucracy increases automatically each year. There is, however, a sensible provision to set this aside at times of economic crisis yet, unbelievably, the EU Commission is taking the EU Council to court to insist that the EU is not experiencing a time of economic crisis and that pay should rise. This is the same Commission that has attended four ordinary and three emergency European Councils during the past 12 months to agree unprecedented measures to bail out member states which have been unable to fund themselves without help. So while some member states face a crisis of solvency, the institutions of the EU face a crisis of credibility.

[Chris Bryant (Rhondda) (Lab)]

I welcome the right hon. Gentleman to his post. I have known him for a long time and he has always been a very good pro-European. One of the elements that determines how much Britain pays towards the EU is VAT. If we increase VAT in this country, it means that we pay more money to the EU. Can he tell us precisely how much more we are paying by virtue of the increase of VAT to 20%?

[Greg Clark]

The hon. Gentleman may have known me for a long time but he has a faulty memory. It was his Government—he served, I think, as Europe Minister in that Government—who gave away half of our rebate, which caused the increase that we have seen.

Though they are ready to lecture others on fiscal discipline, it is fiscal incontinence that characterises the approach of the European institutions. Administrative costs need to be hammered down to bring them into line with the modern world, yet the response of the Commission’s spokesman has been little short of insolent. The British Government asked the Commission to model cuts of €5 billion, €10 billion and €15 billion to its staffing budget, and the Commission refused. Its spokesman said:

“We declined as it’s a lot of work and a waste of time for our staff who are busy with more urgent matters…we are better educated than national civil servants. We’re high fliers, not burger flippers”.

As the Prime Minister has pointed out, one in every six of the Commission’s employees earns over €100,000 a year. The ordinary working people of this country have run out of patience with the attitude displayed by the Commission. The British public are ready to make sacrifices to put Britain back on its feet, but not to featherbed a self-styled elite and its agenda. We are not rolling back wasteful public spending in this country only to see it re-imposed from Brussels.

[Charlie Elphicke (Dover) (Con)]

My right hon. Friend is far too generous to the Labour party on the matter of the rebate. The House will recall that for every one of the 13 years of Labour government, there were above-inflation increases in the European Union.

[Greg Clark]

My hon. Friend is totally right. The last time the country had the misfortune to be in the hands of a Labour Government, including the shadow Foreign Secretary, who was Europe Minister at the time, far from agreeing even a real-terms freeze or a cut, they increased the budget over seven years by 8%. That is the record of the Opposition.

It is not just the overall total. Once more we see the usual suspects circling round Britain’s budget rebate. That rebate was secured for future generations by Margaret Thatcher at Fontainebleau—the rebate which Tony Blair and his Europe Minister, now the shadow Foreign Secretary, put on the table in 2005, in the negotiation of the current multiannual financial framework. Of course, when I say negotiation, what I mean is unconditional surrender, giving away in perpetuity a large part of the rebate in return for nothing. If seven days is a long time in politics, seven years is even longer. The amendment to the motion would delete all mention of this betrayal. The act would be forgotten, but the consequences have not gone away.

[Andrew Percy (Brigg and Goole) (Con)]

The position of the Opposition is truly incredible, given their record in government. However, the problem that the good people of Brigg and Goole have with the multiannual financial framework is that all we can do is hope for a freeze as potentially the best outcome. Does that not show just how much the European Union has managed to take away the sovereignty of this country?

[Greg Clark]

Every budget negotiation under the seven-year framework has resulted in an increase. That must now stop. The next seven years must see an end to the perpetual ratcheting up of EU spending. The Prime Minister will be looking to achieve precisely that. As far as the Government are concerned, what remains of the rebate, after the predations of the Labour party, is absolutely non-negotiable. That means that even talking about it is a waste of time. Without it, our net contribution would be by far the largest in the EU, twice as big as that of France and more than one and a half times that of Italy or Germany as a percentage of gross national income.

[Kelvin Hopkins (Luton North) (Lab)]

Earlier in his speech the Minister said that the Government are opposing a real-terms increase. The figure involved would be significantly different from a money-terms increase. Would the Government not do better by asking for a freeze in money terms, not real terms?

[Greg Clark]

Our position is very clear: we want to see a cut in the EU budget. That is what all of us on the Government side of the House want. I will come on to explain the negotiating mandate that the Prime Minister has agreed with European leaders.

[Mr John Redwood (Wokingham) (Con)]

I welcome strongly the Government’s wish to have a new relationship with the EU, which is so appropriate now that it is going to integrate for the euro, so why is this not the time to negotiate different arrangements on how much we contribute and how many spending programmes we are part of, as the framework covers such a long period of time?

[Greg Clark]

That is exactly what we are doing in this multiannual financial framework, and the opportunity we have to veto a settlement that we are not in favour of gives us leverage in that.

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

The amendment to the motion

“calls on the Government to strengthen its stance so that the next MFF is reduced in real terms.”

Does the Financial Secretary disagree with the amendment?

[Greg Clark]

The hon. Gentleman, characteristically, is playing games with the issue. Of course we want to see a reduction. His position is wholly incredible, because this week he has been calling for a cut in the EU budget, which we all want to see, but when asked whether he is prepared to veto the budget, as we have said clearly we are prepared to do, he refuses. How can he take that position if he does not will the means to enforce it?

[Chris Leslie]

rose—

[Greg Clark]

I will not give way, because I want to make progress.

We have touched on a number of themes in the debate already—shamelessness, wastefulness, hypocrisy and betrayal—which leads us neatly to the position of the Labour party. Those sitting on the Opposition Front Bench are the same men who gave away so much of our rebate and who would surely surrender the rest on demand to curry favour with Europe. It is the party that, the last time it was in power and had the opportunity to negotiate an MFF, agreed not to a cut or a freeze, but to an 8% real-terms increase. It is a party whose socialist comrades in the European Parliament declared that the Commission’s proposed 10% increase was

“not sufficient to finance all the EU’s objectives”.

It is a party that nearly bankrupted our country but now claims conversion to the rigours of fiscal rectitude. It is a party whose last act in office was to sign Britain up to the EU stabilisation mechanism when it did not ever have a mandate to govern. It is a party that is so caught up in its cynical political games that it calls for a cut in the budget but at the same time says we should not deploy our veto to secure Britain’s interests. It is not a party that deserves to be taken seriously, as its opportunistic posturing this week shows.

[Wayne David (Caerphilly) (Lab)]

The previous Labour Government argued for the repatriation of regional policy to save money. Do this Government stand by that?

[Greg Clark]

One of the issues that I hope unites Members of this House is a reflection that the structural funds need to be cut. They are one aspect of the budget that is recycling money from one set of taxpayers to another, often the same taxpayers. If there is no reason for it, it should be cut, and that is part of our negotiations.

[Mark Pritchard (The Wrekin) (Con)]

Although it might be popular on the Government Benches, I think that the country is getting sick and tired of Eurosceptic words from Ministers but very little action on the ground. Is it not the case that, irrespective of whether or not the Government are successful in negotiating a freeze, in cash terms more money will be given to the European Union? If I am incorrect, will the Financial Secretary please correct me on the record?

[Greg Clark]

The shape of the budget needs to be negotiated—it has not been settled yet—but it is true to say that as a result of the giveaway of the rebate that the previous Government introduced we lose out from spending that goes to the new member states that previously would have been abated.

Let me address the three main differences between the motion and the amendment. First, the amendment would remove the condemnation of the previous Government for giving away part of our rebate. Despite the talk of fiscal responsibility, the aim is to conceal the loss to this country of £10 billion. That amount, coincidentally, is nearly equal to the whole of Britain’s share in the budget increase proposed by the Commission—an increase to which we are opposed. It is simply not credible to vote for restraint and then to remove from criticism the most wasteful surrender of the British taxpayer’s interest that any Prime Minister has made in Brussels.

The second effect of the amendment would be to delete references to new EU taxes. Yet the tax sovereignty of this country is, or should be, non-negotiable. In particular, this removal would send a signal that this House supports the introduction of a new financial transaction tax which could badly undermine Britain’s economy. By the Commission’s own analysis, the tax would lead to a fall in European GDP of up to 3.5% and nearly half a million job losses.

Thirdly and finally, there is the call simply to cut the EU budget and not, as the Government’s motion has it, to cut or, at the very least, to have a real-terms freeze. Let me address this aspect precisely, as it comes to the crux of the matter. I should like to say this not only to Labour Front Benchers but to all those Members present who are genuinely outraged by the budget proposal. Like them, I believe, very simply, that the EU should cut now, and keep on cutting. The Opposition call on the Government to persuade others and to build alliances with those who share our concerns. On the issue of budgetary restraint, that has been exactly our approach. In 2010, the Prime Minister achieved a historic breakthrough when he agreed with the leaders of Germany, France, Finland and the Netherlands that

“payment appropriations should increase at most, by no more that inflation over the next financial perspective.”

If this position were to be agreed to, then it would be the first time in the history of the EU that the seven-year budget has done anything other than accelerate. No one is pretending that this would represent all the long-term reform required—not a bit of it—but it would be a turning point. Having reached such an agreement, which has been scrutinised in this House in the two years since it was published, it is surely right for the Prime Minister to keep to his commitment rather than have to give backword at the last moment.

This Prime Minister has been clear, as neither of his two predecessors were, that the remorseless rise in spending in the EU has to stop, and it will stop. If there is no cut, or no real freeze, there is no deal: the framework will be vetoed. The Prime Minister has a formidable task in persuading other countries of this—many of them were looking forward to a seven-year pay-out—but he has made a strong start, and he deserves the support of this House as he goes in to bat for Britain.

[Mr Speaker]

Before I call the Opposition spokesman, I remind the House that there will be an eight-minute limit on Back-Bench contributions.

--- Later in debate ---

[Chris Leslie]

If the hon. Gentleman calms down, I will explain. No one should be fooled into thinking that a veto is cost-free. The hon. Gentleman and all other hon. Members should know that the way in which European Union rules work means that last year’s budget will be cut and pasted and become the new budget for 2014, plus the inflationary increase. In other words, if the Prime Minister flounces off again, an extra £310 million will go from the Exchequer to the 2014 budget. That is a fact and we need a negotiation strategy that is going to work.

[Greg Clark]

Will the hon. Gentleman answer a simple question? Would he back the use of the veto—yes or no?

[Chris Leslie]

We have three weeks of negotiations. There is a summit on 22 November. [Interruption.] If the Minister has decided today to use the veto, why even bother going to the summit on 22 November? What is the point of the Prime Minister even travelling there? Will he still attend the summit? Surely the path to be pursued is the one that is the best for the taxpayer. I have explained what will happen if the Prime Minister walks away from the talks—it will cost the taxpayer more. Members can look at the Library research paper, which makes it clear for all to see that it will cost £310 million in 2014.

--- Later in debate ---

[Chris Bryant]

If the hon. Gentleman will forgive me, I will not. A lot of people want to take part in the debate. Perhaps he will catch Mr Speaker’s eye later.

Mr Barroso, in his introduction to the original version of the Commission’s suggestions, said:

“The European budget is the instrument for investment in Europe and growth in Europe.”

That is arrogance of the highest degree. It might be one instrument—a tiny part of the equation that is trying to refocus Europe towards a more competitive economy that is able to fight for jobs and added value against countries such as Russia, China and Mexico—but the biggest instruments must surely be the member states, or even the nations and regions within them. For instance, the factor that will make a difference to the resolution of Spain’s problems will almost certainly be the economic future of Catalunya and whether it invests in IT and future industries. It will not be the EU budget.

I am also convinced that, whatever happens to the EU budget, it will not make a dramatic difference to solving the problems in Greece or in Spain. The issues in those two countries are completely different. In Spain, for instance, the sub-prime mortgage market and the way in which houses were constructed along the coast, often for the British ex-pat market, is the single biggest problem that is dragging down the Spanish economy. So I say to Mr Barroso that, although I am ardently pro-European and I believe that the European Union has been one of the great political success stories of the past 100 years, I do not believe that the EU budget is the way to resolve the problems of those countries.

Government Members have been talking today about the small-ticket items in the EU’s expenditure. The Financial Secretary to the Treasury held rather different views from those he holds today when he was a member of the Social Democratic party. When I was a member of the Conservative party, I held exactly the same views on Europe as those I hold today. The sadness is that the Conservative party has abandoned its past.

[Greg Clark]

May I again correct the faulty recollection of the hon. Gentleman? The reason that I was a member of the David Owen branch of the SDP, rather than the one that went off in a different direction, was precisely because of its position on Europe, and I held the same views then as I do now.

[Chris Bryant]

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

--- Later in debate ---

[Chris Bryant]

I am not giving way, as I know that many other Members want to speak.

I resent the Minister’s answer to my earlier question, as I think he simply misunderstood it. When the Government increased VAT in this country to 20%, it increased the amount of money we would have to pay to—[Interruption.] The Minister has probably been inspired by officials at this point, so he may know the answer.

[Greg Clark]

I am surprised that the hon. Gentleman, as a former Minister for Europe, did not know the answer—that the tax base is notional, so the levies of VAT make no difference whatever. It is irrelevant.

[Chris Bryant]

I will explain it all to the Minister later; he is wrong.

There are some specific savings that the EU could and should make. One relates to the ludicrous caravanserai between Brussels and Strasbourg. I merely point out to Conservative Members that it was John Major who negotiated that final agreement in the treaty of Amsterdam; I wish we were able to dismantle it. It costs us £180 million a year, and it is a complete and utter waste of time and money. Similarly, we have to tackle the common agricultural policy.

My final point for Conservative Members is this. If they choose to start their negotiating position first by saying that the veto is going to be used, and secondly by saying that there is a long shopping list of things that they want the EU to deliver—the new Margaret Thatcher, the hon. Member for South Northamptonshire (Andrea Leadsom), has often referred to a shopping list—the danger is that when they get to the till, they will have to say how they are going to pay. If they have already said that they want to get out of justice and home affairs policy and all sorts of other European Union policies, they will not have a negotiating leg to stand on. If they have already declared that they are going to use the veto, they will end up with a worse, rather than a better position for the United Kingdom and will be paying more money. That is why I, as a good pro-European, will be supporting the amendment.

--- Later in debate ---

[Greg Clark]

This has been a debate of passionate contributions, as befits such an important consideration—the next seven years’ budget of the EU. It is right, and many Members have referred to this, that the House should give consideration not just to the aspirations and the good intentions surrounding the European Union, but to the nitty-gritty—the decisions that need to be taken and which affect all our constituents. I am proud to be a Member of a House that will undertake this level of scrutiny.

It comes down to this: we want to see a real-terms cut in the budget. We all want to negotiate for that. That is the position that unites most Members of the House, but in seeking to advance that agenda the Prime Minister has done something historic, something that no Prime Minister during the history of our engagement with the European Union has managed to do, which is to secure from the most powerful allies that we have in the European Union a position that we should negotiate for the first time a cut over seven years in the EU budget, or a maximum of a real-terms freeze. That was agreed two years ago and has been scrutinised by the House in detail. Having put that to the House, it is reasonable for the Prime Minister to go into the negotiating chamber able to deliver on the commitments that he has had from his colleagues there.

It has been made clear that we on the Government Benches regard this as a red line. We will deploy a veto if our conditions are not met. That is widely understood. This debate will be watched outside the Chamber and everyone can be clear about that. We have seen total confusion on the part of the Opposition as to what is a red line. The Leader of the Opposition, the shadow Foreign Secretary and the shadow Chancellor would not confirm that they would even deploy a veto. [Interruption.] The shadow Justice Secretary asks what our position is. Our position is that we would deploy a veto if our conditions and our red lines are not met.

[Mr Burley]

Can the Minister confirm the amount of extra money which, under the Government’s proposals, we will send to the EU over the next two and a half years? According to my calculations and the House of Commons Library, it is an extra £1.3 billion between now and the next general election. Can he confirm that figure or tell the House what the figure is?

[Greg Clark]

It is true that the increase that we are talking about would involve further contributions from the House, but the negotiation that we are entering is to avoid that, to minimise the contribution that we make and to secure the best deal for the taxpayer.

The hon. Member for Bolsover (Mr Skinner), who is not in his seat, referred to the Maastricht debates and the attitude of the official Opposition at the time. If we could have drawn from the behaviour of the Opposition their intention in government, we would have reached a wholly misleading conclusion. During their time in government, from 1998 to 2010, they presided over a 47% increase in the contributions that we made to the EU budget. They surrendered our rebate in return for no reform. The reform that we were expecting was in the common agricultural policy. Our contribution to that increased over the time that they were in power from £48 billion to £56 billion.

We have secured the agreement of member states. We have led the way by managing our national finances. If our negotiating position does not succeed, we are ready, willing and able to veto. We urge the House to stand with us as the Prime Minister goes to negotiate for us.

City Deals

Greg Clark Excerpts

Monday 29th October 2012 Written Statements

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

The Government are today announcing a second wave of city deals, inviting a further 20 cities and their wider areas to negotiate for the devolution of the specific powers, resources and responsibilities required to deliver their locally-determined economic priorities.

The first wave of city deals involved the eight largest English cities outside London. In order to support our dual objectives of rebalancing the economy and boosting private sector growth, we are going to invite the next 14 largest cities, together with the six cities with the highest population growth, to participate in the second wave.

We will ask each of these cities to work across their functional economic area to put forward proposals for: the Black Country, Bournemouth, Brighton and Hove, Greater Cambridge, Coventry and Warwickshire, Hull and Humber, Ipswich, Leicester and Leicestershire, Milton Keynes, Greater Norwich, Oxford and Central Oxfordshire, Reading, Plymouth, Preston and Lancashire, Southampton and Portsmouth, Southend, Stoke and Staffordshire, Sunderland and the North East, Swindon and Wiltshire, and Tees Valley.

This second wave of city deals will build on the success of the first wave, accelerating the pace of decentralisation and unlocking new and innovative ways to drive local economic growth. Deals will represent a genuine transaction between cities and Government, with “asks” and “offers” from both sides.

Each city and their local enterprise partnership will be invited to put forward a landmark proposal to address a significant local economic issue which requires a transformative response. These bespoke arrangements will be complemented by a “core package”, consisting of measures that will devolve significant powers and functions to all cities and their wider areas that go on to negotiate a deal with Government. This will capitalise on the progress we have made so far, demonstrating our commitment to the devolution of powers from central to local government, if local areas are willing to offer significant reform in return.

There will be an element of competition in wave two, with the 20 cities being given up until 15 January to put forward initial proposals. Deals will not be guaranteed. Cities will need to demonstrate that they can meet the following five criteria:

i. to make proposals for stronger governance across their functional economic area, so that decisions necessary for the growth of the area as a whole can be taken quickly and effectively;

ii. to include proposals for harnessing significantly greater private sector input, expertise and resources;

ii. to demonstrate strong political commitment and readiness to put resources into delivering the deal;

iv. to present proposals that are consistent with the need to drive efficiency in the use of public money in the area, doing more with less, in pursuit of our medium-term goal to eliminate the deficit; and

v. to propose reforms for their area which represent the leading edge of the Government’s general economic strategy—to reduce regulation, create well functioning markets, promote an enabling environment for business and boost private sector growth and investment.

We will engage directly with leaders across cities and local enterprise partnerships, advancing only those that have the strongest propositions.

Alongside the city deals process the Government will work with all local enterprise partnerships, beyond those in the first and second waves of the city deals programme, to identify and respond to barriers which may be constraining immediate growth in their area.

Tier 2 Regulatory Capital

Greg Clark Excerpts

Friday 26th October 2012 Written Statements

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

The Government are today clarifying the tax treatment of banks’ tier 2 regulatory capital instruments for those already in issue and those which will be issued in the future to ensure compliance with regulatory capital requirements under the forthcoming capital requirements directive IV.

Tier 2 capital instruments may now need to include a reference to the fact that these instruments may be subject to a regulatory requirement to be either written down or converted to share capital at the point at which a bank nears insolvency. Changes to existing tax legislation will ensure that the tax treatment of banks’ tier 2 capital instruments is unaffected by this requirement. This is consistent with the tax treatment provided in other countries.

This clarification will ensure that the coupon on tier 2 capital which is already in issue or yet to be issued will be deductible for the purposes of a bank computing its profits for corporation tax purposes. This will provide banks and investors with the certainty they need regarding the issuance of new tier 2 capital instruments that banks need to issue now and in the future to replace existing instruments as they reach their maturity date and to meet their regulatory requirements.

Further details have today been published on HMRC’s website, together with a technical note detailing how this is intended to operate.

Counter-Terrorist Asset Freezing Regime

Greg Clark Excerpts

Wednesday 24th October 2012 Written Statements

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

Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report quarterly to Parliament on its operation of the UK’s asset-freezing regime mandated by UN Security Council resolution (UNSCR) 1373.

This is the seventh report under TAFA 2010 and it covers the period from 1 July 2012 to 30 September 2012. This report also covers the UK implementation of the UN al-Qaeda asset-freezing regime and the operation of the EU asset-freezing regime in the UK under EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the UN al-Qaeda asset-freezing regime, the UN has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under the Al-Qaeda (Asset-Freezing) Regulations 2011. Under EU regulation 2580/2001, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

Annexes 1 and 2 to this statement provide a breakdown by name of all those designated by the UK and the EU in pursuance of UN Security Council resolution 1373.

The following table sets out the key asset-freezing activity in the UK during the quarter ended 30 September 2012:

Bilateral Loan to Ireland

Greg Clark Excerpts

Monday 22nd October 2012 Written Statements

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

I would like to update the House on the loan to Ireland.

Ireland completed the seventh quarterly review of its International Monetary Fund and European Union programme of financial assistance on 13 September 2012, following which, the utilisation period for the fifth instalment of the UK bilateral loan began.

Upon request, the Treasury disbursed the fifth instalment of £403.37 million on 19 October 2012, with a maturity date of 20 April 2020.

The interest rate charged on the loan is calculated as set out in the loan agreement as the UK’s cost of funds plus a service fee of 0.18 basis points per annum, creating an effective per annum interest rate on this tranche of the loan of 2.372%. The UK more than covers its cost of funds.

The Treasury will provide a further report to Parliament in relation to the bilateral loan as required under the Loans to Ireland Act 2010 as soon as is practicable following the end of the next reporting period, which ends on 31 March 2013.

The Government believe that it is in our national interest that the Irish economy is successful and its banking system is stable. The Government continue to support Ireland’s efforts to improve its economic situation.

LIBOR (Wheatley Review)

Greg Clark Excerpts

Wednesday 17th October 2012 Written Statements

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

At the end of June it was revealed that LIBOR—the London interbank offered rate, the benchmark used in trillions of pounds worth of financial contracts—had been subject to repeated attempts at manipulation.

The attempted manipulation of LIBOR is totally unacceptable and has further undermined trust in the financial services industry—without which this vital sector cannot operate.

Although the abuse is by no means confined to London—banks and benchmarks in a number of jurisdictions have been implicated, including Euribor and Tibor—I am determined that we in this country should move quickly to restore credibility to this globally important benchmark and repair the damage to London’s reputation caused by this behaviour and the failure of the regulatory sector to prevent it.

In July, one week after the scandal came to light, the Chancellor asked Martin Wheatley, the managing director of the Financial Services Authority and chief executive-designate of the new Financial Conduct Authority to consider immediate reforms to LIBOR and to report back by the end of September.

On the 28 September—13 weeks later—Mr Wheatley presented his review to the Government. I am very grateful to Mr Wheatley and his team for their excellent work on this matter.

This statement sets out the Government’s response to the Wheatley review of LIBOR.

The Wheatley review made 10 main recommendations:

1. The new Financial Conduct Authority should regulate the submission to, and administration of, LIBOR—and that there should be criminal sanctions for any attempted manipulation.

2. The British Bankers’ Association (BBA) should make an orderly transfer of responsibility for LIBOR to a new administrator, selected by an independent committee.

3. The new administrator should scrutinise submissions and regularly review the effectiveness of LIBOR.

4. There should be a new code of conduct for submitters, approved by the Financial Conduct Authority.

5. LIBOR should, as far as possible, be corroborated by transaction data in line with the guidelines in the review.

6. To improve this ability to corroborate submissions, the number of currencies and maturities for which submissions are made should be cut substantially to achieve a sharper focus on the more heavily used benchmarks.

7. Submissions should be published, but after three months to avoid the incentive for banks to try to flatter their perceived credit standing and reduce the opportunity for collusion.

8. The Government should provide the Financial Services Authority with a reserve power to compel banks to submit to LIBOR.

9. All market participants should consider whether LIBOR is the most appropriate rate for their needs and to ensure that their contracts have workable contingency provisions.

10. The UK, European and international authorities should establish clear principles for global benchmarks.

The Government fully endorse every one of these recommendations. All institutions involved in the process of setting LIBOR should implement them. For those recommendations that require Government action, we will take it without delay.

The Government will bring forward amendments to the Financial Services Bill to implement those recommendations that require primary legislation. These amendments will enable the submission of rates to benchmarks such as LIBOR and the administration of such benchmarks to be brought within the scope of regulation. The power to regulate these activities will be vested in the new Financial Conduct Authority. Existing offences covering the making of misleading statements, under section 397 of the Financial Services and Markets Act, will be extended to capture the making of misleading statements to manipulate benchmarks such as LIBOR. The Financial Conduct Authority will have the lead role in investigating the possible commission of such offences and bringing prosecutions.

Most people expect that the law should be respected and enforced at all levels of society. If someone breaks the law, they should be punished. Where the crime is serious, the punishment should reflect this. The Government also intend to legislate to enable the Financial Conduct Authority to make rules requiring authorised persons to contribute to the LIBOR setting process. Draft legislation and further details of these measures will be deposited in due course in the Libraries of both Houses.

But statutory regulation and criminal enforcement alone are insufficient. LIBOR is a mechanism created by the market for use by the market. That is why it is right that some of Mr Wheatley’s recommendations fall to the industry to implement.

The Government agree with Mr Wheatley that, in order to restore credibility to the LIBOR setting process, the BBA should give up its operational role with regards to the computation, administration and governance of LIBOR. My noble Friend Baroness Hogg has agreed to chair a panel of independent experts tasked with identifying an appropriate successor to the BBA.

Other urgent reforms will be implemented by the BBA and, in time, by the new LIBOR administrator—such as phasing out the benchmark rates for those currencies and maturities wherever they are not heavily used by the market and there is an available alternative.

The recommendation to consider the use of benchmarks in other financial and commodities markets will be taken forward through the relevant international bodies. These discussions have already commenced in the Financial Stability Board, the International Organisation of Security Commissioners (IOSCO) and the institutions of the European Union. The Government stand ready to work with their international partners to ensure that we can have confidence in the integrity of all major global benchmarks.

The Government recognise that the LIBOR scandal cannot be seen as an isolated incident. There are wider standards of integrity and ethics in banking which have compromised the confidence and trust between banks and the businesses, customers and general public they exist to serve.

Parliament has established the Parliamentary Commission on Banking Standards under the chairmanship of the hon. Member for Chichester (Mr Tyrie) and including similarly respected Members of both Houses. We all look forward to receiving the recommendations of the commission by early next year.

The financial services industry is of great importance to this country. It employs, directly and indirectly, 2 million people, in every part of the United Kingdom. The essential condition for the functioning of the financial services industry is trust. The behaviour that has been uncovered in the LIBOR scandal corrodes that trust, and the behaviour of a few has tainted the reputation of an industry in which the vast majority of people have been proud to work, not least because it has been associated with integrity and responsibility.

We owe it to all of those people as well as to the millions of people who rely on the financial services industry in their day-to-day lives and in running businesses to restore that reputation for probity and strength. The reforms that Martin Wheatley has recommended are a significant step towards achieving this goal.

Ireland Loan (Revised Agreement)

Greg Clark Excerpts

Monday 15th October 2012 Written Statements

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

I have today placed in the Libraries of both Houses revised copies of the agreement providing a credit facility to Ireland of £3,226,960,000.

This agreement was negotiated between HM Treasury and Ireland and originally signed on the 22 December 2010 following enactment of the Loans to Ireland Act, which received Royal Assent on 21 December 2010.

Parliament will be aware that in July 2011, following the euro area’s commitment to lower the interest rate on their loans to Ireland, the Chancellor committed in principle to lower the interest rate on the UK’s bilateral loan to Ireland. The Chancellor took the view that the UK had been unable to lower the interest rate on its loan to Ireland before that point without effectively subsidising the higher interest rates applicable to the European financial stability facility (EFSF). Changing the rate now ensures that all of the benefit goes to Ireland and not to higher interest rates paid to euro area Governments.

The UK’s loan agreement has now been revised to reflect this change in the interest rate, in which the UK has more than covered its costs of funds. The new rate that will apply to each tranche of the loan represents the UK’s cost of funds plus a service fee of 0.18 percentage points per annum. The UK’s cost of funding is defined as the weighted average yield on gilt issuance in the six months prior to the disbursement of a tranche.

The new interest rate will apply retrospectively to those tranches of the loan already disbursed, to ensure Ireland receives the full benefit of the lower rate. The rates, which apply to the tranches already disbursed on 14 October 2011, 30 January 2012, 28 March 2012 and 1 August 2012, are 3.373%, 2.559%, 2.546%, and 2.534% respectively.

The revised loan agreement also contains further minor amendments, which include taking account of changes made to Ireland’s agreements with other financial support facilities. These amendments maintain the effect of the provisions in clause 7 of the original bilateral loan agreement, on prepayment and cancellation of the loan.

HM Treasury has provided a further report to Parliament in relation to Irish loans as required under the Loans to Ireland Act 2010 alongside this statement.

Banking Act 2009

Greg Clark Excerpts

Tuesday 18th September 2012 Written Statements

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

The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 October 2011 to 31 March 2012. Copies of the document are available in the Vote Office and the Printed Paper Office.

Financial Policy Committee's Macro-Prudential Toolkit

Greg Clark Excerpts

Tuesday 18th September 2012 Written Statements

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

I have today laid before Parliament a consultation document, “The Financial Services Bill: the Financial Policy Committee’s macro-prudential tools”.

Establishing the Financial Policy Committee within the Bank of England as the UK’s macro-prudential authority is a key element of the Government’s reforms to the UK’s system of financial services regulation, as set out in the Financial Services Bill. The Financial Policy Committee will identify, monitor and address risks to the stability of the UK financial system as a whole.

It is vital that the Financial Policy Committee possesses the necessary tools to address the systemic risks that it identifies. Alongside broad powers of recommendation, the Financial Policy Committee will also have specific powers to direct the regulators to take action, which will be set out by the Treasury in secondary legislation, subject to the affirmative procedure.

Recognising the importance of these tools, the Government have committed to consulting on its proposals for the Financial Policy Committee’s direction-making powers, during the passage of the Financial Services Bill.

This document therefore sets out the Government’s proposals for the Financial Policy Committee’s initial toolkit, which have been informed by the recommendations of the interim Financial Policy Committee in March 2012.

The Government propose to make the Financial Policy Committee responsible for setting the level of the UK’s counter-cyclical capital buffer and to provide the Financial Policy Committee with a direction-making power to impose sectoral capital requirements.

The Government intend to provide the Financial Policy Committee with a direction power to set, and vary over time, a leverage ratio cap, but no earlier than 2018 and subject to a review in 2017 to assess progress on international standards.

The document contains draft secondary legislation that will provide the Financial Policy Committee with its directive tools and an impact assessment that contains illustrative estimates of the net benefits of these macro-prudential tools.

The Treasury seeks responses to the consultation on the proposals by 11 December 2012, in advance of laying the secondary legislation before Parliament once the Financial Services Bill receives Royal Assent.

Copies of “The Financial Services Bill: the Financial Policy Committee’s macro-prudential tools” are available in the Vote Office, Printed Paper Office and the HM Treasury website.