Section 5 of the European Communities (Amendment) Act 1993

James Clappison Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Hoban]

As I am sure my hon. Friend is aware, I am following what is set out in the coalition agreement. Like him, I do not anticipate that we would seek to join the euro.

Tonight’s debate is a consequence of the stability and growth pact. Since 1999, as a result of the pact, the Government have reported to the Commission on the UK’s economic and budgetary position and our main economic policy measures. I want to reassure the House, however, that the UK is not subject to sanctions under the stability and growth pact—the Treaty is clear that they apply only to euro area countries. The EU can make recommendations as regards our budget, as can other international organisations such as the OECD and the IMF, but, crucially, we are under no obligation to take action and we are not subject to any sanctions by virtue of our opt-out. Any recommendations made will remain just that—recommendations.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend is making a very persuasive case, but on the question of sanctions, may I take it from what he has just said that he is ruling out Britain’s being subject to the economic imbalances procedure set out in the Van Rompuy report?

[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.

Loans to Ireland Bill

James Clappison Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Darling]

Yes, but as I said earlier, because of QMV, the deal would have gone through anyway. I also do not agree with the hon. Gentleman’s analysis or that the legal position was that clear-cut.

[Mr James Clappison (Hertsmere) (Con)]

Will the right hon. Gentleman give way on that point?

[Mr Darling]

No—I will not do so because of the time constraints.

I agree with many hon. Members that Europe urgently needs a robust and workable rescue mechanism. We cannot wait until 2013, which brings me to my second main point.

As I have said, I am concerned about the piecemeal way in which Europe as a whole, and the eurozone in particular, address the problems that they face. Even today, there is speculation that the credit rating agencies might revise Spain’s status, which would be damaging to that country and to the euro. However, the approach that has been taken so far, which fails to recognise that the single currency involves 16 member states and 16 Treasuries, will inherently be under stress in times such as these. We are simply storing up problems for the future.

Germany must recognise that if it wants to keep the single currency, which is important to it economically and politically, there are consequences in respect of transfer payments to help countries that are in difficulty. I also believe that simply telling those peripheral countries that the only remedy lies in austerity programmes that developed countries might baulk at implementing, runs the risk of them—far from being able to repay or service loans—finding themselves deeper and deeper in the mire. The IMF has discussed that problem. When Ministers in different parts of Europe are asked privately where all the growth will come from—for Greece, Ireland, Spain and Portugal—they say, “We don’t know. We can’t be certain.”

Consider the news today. There is rising unemployment. Most of the job losses are in the public sector, and there is precious little sign that the private sector is taking its place. We should be concerned about the “austerity first” programmes that are being imposed across Europe. The dominant political thought at the moment is that if Government’s cut enough, they will get through to salvation. That was tried in the 1920s and early 1930s, and it did not work.

I believe that countries that are in difficulty should look to mend their own houses and to take difficult and controversial steps, but we need to be watchful that we do not get into a situation in which those countries have no way out. If that happens, their consumer and business confidence will fall. Whom do they export to if other countries are shutting down?

The need for some sort of mechanism to address the problems that are inherent in the euro is absolutely urgent. Those problems were simply glossed over 10 or 15 years ago. Let no one think that this is a matter only for the eurozone. As many hon. Members have said time and again, the problem affects us as well, because we are so integrated with Europe and because it is such a big trading partner. Parliament and Ministers need to address the question of such a mechanism. Frankly, we cannot afford to carry on with the current piecemeal approach, which I believe threatens our recovery as much as that of other European countries.

European Union Economic Governance

James Clappison Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Hoban]

But the sanctions regime relates only to eurozone countries, and no sanctions can be imposed on the UK. All that the document is referring to is continuation of the macro-economic surveillance that has been taking place over the past 10 years.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend is making his case persuasively, but will he assist me? The same document from Mr Van Rompuy, dated 21 October—I take it that that is the latest report—clearly states in paragraph 34:

“The Task Force recommends deeper macro-economic surveillance with the introduction of a new mechanism underpinned by a new legal framework based on Article 121”

of the treaty on the functioning of the European Union alongside the stability and growth pact

“applying to all EU Member States”.

Perhaps my hon. Friend will help the House by telling us a little about that.

[Mr Hoban]

I know that that paragraph has caused some interest, but many people stop reading after

“by a new legal framework”.

I am grateful that my hon. Friend did not fall into that trap. The provision is based on existing treaties, and it is about macro-economic surveillance. A number of organisations conduct macro-economic surveillance of the UK economy, and there is nothing new in that.

--- Later in debate ---

[Mr James Clappison (Hertsmere) (Con)]

Let me begin by congratulating my hon. Friend the Minister on his very full opening speech. I want to say a few words about one or two things that perhaps did not creep into his remarks.

I should like to pay a compliment to the President of the European Union; I suppose that he does not often get that in this place. The words in his report are very clear about what he was trying to do—to put in place a new mechanism. That is what he was charged with doing by the European Council, and that is indeed what he did. It will be no surprise that the President of the European Union should seek to discharge that duty by putting in place a whole raft of new measures giving new powers and responsibilities to the European Commission.

The Minister helpfully set out those new powers in the Government’s explanatory memorandum. That makes it clear that the European Commission, whether we say that it has new responsibilities, new roles or new powers, is going to be very busy giving a good going over to this country’s economic performance, reaching public judgments that could well have an effect on our economic reputation. It sets a scoreboard for how well the country is doing, and judges the country by that scoreboard. It carries out reviews and investigations and sends delegations, and if the country in question is not responding appropriately, the Commission has the power to recommend to the Council that that country be placed in the excessive imbalances procedure—something that I think the Minister did not have quite enough time to mention.

Whether one regards that as a sanction depends on an interesting choice of language. In my previous career as a member of the Bar, I never thought to console a prisoner who had just been sentenced to immediate custody by saying to him, “Well, at least you didn’t get a fine.” The excessive imbalances procedure could well be borne in mind by those who frame economic policy and wish to avoid such a consequence. Other Members will have far more experience of financial services and the markets than me, but I do not think that anybody in the markets would be dancing with glee at the news that the country was just about to be placed under such a procedure. This is all down to the very wide range of new responsibilities of the European Commission, which is being allocated a much more intrusive role by this document.

The alternative argument is that it is a good thing that this is happening; we heard shades of that from the Labour Front Bench. However, how much confidence can we place in the economic management and judgment of the European Commission, considering matters starting with its rather cavalier treatment of recommendations for the European budget in the current economic circumstances, and going all the way back to the fudged criteria for European economic and monetary union?

Even if one does have great confidence in the European Commission, there are bigger questions that should loom in all our minds. To whom is it accountable? Can we ask it questions? Can we hold it to account in this House, and whom does hold it to account? What can the man in the street, the voter, do if he is not happy with the economic criteria that it has fashioned for this country?

Ministers should be very careful indeed about the responsibilities that are allocated to the European Commission. I know that there is a choice of language and a judgment to be made, but after looking through the long list of new responsibilities that have been given to the Commission, I think we should be very careful. We have heard talk of surveillance and informal discussions, but Ministers should remember that not all that long ago, justice and home affairs, and the common foreign and security policy, were said to be matters on which Ministers would simply carry out informal discussions between themselves. It was said that they would never come within the purview of European institutions. Today, of course, justice and home affairs are very much within the grasp of European law makers and the European Union, and we now have a European Foreign Minister and a European diplomatic service. Not that long ago, those things were the subject of informal discussions.

We should be very careful indeed before setting foot down this path. We should consider the matter carefully this evening and face up to the enormity of the responsibilities that we are placing upon the European Commission.

--- Later in debate ---

[Michael Connarty]

The Government use the nomenclature of the EC reference and I am giving the Committee reference. When people want to find things, it is much easier to look at what the European Scrutiny Committee does under its numbers than to try to find it in EU documentation. They are, in fact, the same documents.

There is a very good advert on television—“Calm down, dear, it’s only an advert.” To people who try to say that this motion is a major sell-out by the Government, I say, “Calm down, dear, it’s only an information exchange.” Frankly, if there is a vote tonight, I will be voting with the Government. I will not be voting for any of the absurd amendments that have been tabled. The Government are doing the right thing. I am not out to score points on behalf of my party against another party. Our relationship with the other 27 countries with which we do most of our trade is far too serious for that. We must not kid people. The hon. Member for Hertsmere, with whom I sit in the European Scrutiny Committee, did not complete his quote from paragraph 34, page 8 of the taskforce report, which said:

“taking into account the specificity of the euro area.”

Paragraph 35 talks about the Commission conducting in-depth analysis and surveillance missions

“in liaison with the ECB for euro area…states.”

It is quite clear that these documents are about the eurozone. I know that there are problems in the eurozone, but when signing up to the euro one takes on such responsibilities.

[Mr Clappison]

rose—

[Michael Connarty]

Given that we are trying to let people speak, I will not give way.

Let us be sensible. To give and exchange information is sensible, as is surveillance. Without any wish to criticise anyone in this or the previous Government, I say that when comments were being made about our imbalances, perhaps our Government should have listened, and then we would not be living in such straitened times.

Economic Governance (EU)

James Clappison Excerpts

Wednesday 27th October 2010 Commons Chamber

[Mr Hoban]

I am not entirely sure which planet the right hon. Gentleman is on at the moment. We need to ensure that the eurozone functions effectively, but we have secured an opt-out from the sanctions proposals, originally through the opt-out in the Maastricht treaty and reinforced by the Lisbon treaty. That is the right place for this country to be in, and that is why the coalition Government are right behind that position.

[Mr James Clappison (Hertsmere) (Con)]

May I congratulate my right hon. and hon. Friends on their refreshing approach of standing up for Britain’s interests in Europe, in contrast to that of Labour Members and their MEPs? Will they bear in mind, however, that there is little appetite for any extension of the competence of the EU into economic governance through any legal framework, whether by treaty or otherwise? There is still less trust in the institutions of the European Union, including the Commission, given the way in which the competence of the EU is for ever being expanded and the fact that previous safeguards in other areas have turned to dust.

[Mr Hoban]

My hon. Friend makes an important point. I know that he thinks about these issues very deeply, and I would encourage him to read the final report of the taskforce. It sets out our exemptions explicitly, and he will recognise that they will protect the UK’s position and help to develop a strong and stable eurozone, which is also in our long-term economic interests. The document makes it clear that we are outside the sanctions regime that applies to members of the eurozone and others.

Draft EU Budget 2011

James Clappison Excerpts

Wednesday 13th October 2010 Commons Chamber

[Justine Greening]

I have no doubt that other Members will refer to that in their contributions. As my right hon. Friend will be aware, we did not support the setting up of the European External Action Service, but as it is now in place our aim is to ensure that it does not duplicate in the way that he says, and that instead it has a role that has some value. We have been concerned about the increased budget because when the EEAS was set up, a key aspect of the conditions was that there would be fiscal neutrality and that is already being challenged. That is one reason why we have been pressing for that to be explicitly put into the terms of the EEAS remit. We have been successful in that, and we are pressing Cathy Ashton to make 10% savings immediately. Discussions on this are continuing in the EU right now. My right hon. Friend is absolutely right, therefore.

To make a broader point on the EU budget, it is vital that decisions taken on budgeting are stuck to. There is an underlying problem that I talked about in respect of implementation: in too many projects there is a gap between what has been budgeted for and what ends up being spent. It is quite a basic financial management problem, but it needs to be addressed.

Turning to the background to today’s debate and what has happened so far, in August the Council adopted its first reading position on the Commission’s draft budget. We should bear in mind that this draft budget proposed an increase of 6% in the 2011 budget. That first reading position saw the Council reduce the budget level proposed by the Commission by €788 million in commitment appropriations and by just over €3.5 billion in payment appropriations. However, although the Council reduced the payment levels in the Commission’s proposal, the reductions would still have meant an increase of almost 3% in EU budget spending from 2010 to 2011. Also, although the Council’s position was to reduce spend in the administration budget by more than €160 million and to cut the total budget for the EU’s regulatory agencies by almost €12 million, even that would have left a rise in administration of 2.5%.

I should remind the House that when we had the opportunity in the European Parliament to vote against the rise in the Parliament’s 2010 budget, we took it. Although the Council had battened down the rise proposed by the Commission, the Government could not accept the proposed level of budget increase and we therefore voted against the Council’s first reading. In fact, six other member states joined us: our Nordic partners—Finland, Sweden and Denmark; and the great brewing nations of Austria, the Netherlands and the Czech Republic. The Council’s position was, however, adopted by a qualified majority, although I just remind the House that we were very close to achieving a blocking minority on that vote; we were just three votes away from doing so—we got 29 votes when we needed 32. That is why we have been working so hard with our European partners to put our case, because we want, at the minimum, to be in a position to have a blocking minority. We really want to aim for a majority, and that is what we are working towards.

I know that, as we have just heard, the European Scrutiny Committee is considering the Council’s first reading position and the Commission’s first amending letter. However, I thought it would be helpful for Members taking part in this debate to be given an outline of that developing position. I referred to this briefly in response to my right hon. Friend the Member for Wokingham (Mr Redwood), but I can say that more than 90% of the 2011 budget for the EEAS is transferred from the existing budgets of the Commission and Council. As he points out, an additional €34.5 million is requested to fund new staff posts and other start-up costs.

Overall, the proposal includes the following: first, the establishment plan of more than 1,600 posts—this includes 100 newly created in 2010, and 18 requested for 2011, carrying a remuneration cost of just under €19 million; secondly, just over 2,000 other staff, 70 of whom are newly recruited this year, costing an extra €2.5 million in 2011; thirdly, other staff-related spending, of which less than €2 million would be additional; and, fourthly, spending on buildings and other operational spending amounting to just over €157 million, less than €4 million of which would be additional.

The amending letter stated that cost-efficiency, budget neutrality and efficient management should guide the EEAS, and, as I said, it set a target of 10% efficiency savings in headquarters. Although the Government acknowledge that some additional funding is required in the EEAS’s first full year, it is essential that the EEAS demonstrates not only value for money, but budget discipline in its funding bids and a firm commitment to substantial cost efficiencies. It is vital that the aim of budget neutrality is respected, so we are pushing for immediate cost savings and stressing the importance of achieving cost efficiencies, including in decisions over the EEAS’s premises.

We have also pushed, thus far successfully, for the Council to state on the record that the term “budget neutrality” for the EEAS applies solely to the context of the EU budget. We pressed for that so that we can counter unhelpful suggestions from the Commission in the future that additional spending at EU level could be offset by savings in member states’ diplomatic services. Such suggestions are completely unacceptable to the UK.

[Mr James Clappison (Hertsmere) (Con)]

I am extremely heartened by the proposition that my hon. Friend has put before the House this evening on this matter, but will she examine this very carefully indeed? I know that the EEAS was opposed by Conservative Members and is the legacy of those on the Labour Benches. As she would say, we are where we are, but on this point of budget neutrality will she make it her business to look carefully at any further proposals to increase expenditure on the EEAS? Budget neutrality has already been breached by the European Commission and it is likely that further attempts will be made to breach it in future.

[Justine Greening]

I assure my hon. Friend that we are looking across the piece to challenge rises in all areas of the EU budget, including the EEAS. As he points out, only months ago we were given an assurance that there would be fiscal neutrality and that has already been broken. We are challenging that and I believe we are doing so successfully. I assure him that we are making our case very strongly within the EU to challenge those sorts of spends when they are bad value for money and when the money is spent in an unplanned way that has not been agreed and was not passed in the original proposal that was signed up to. As he points out, that proposal was signed up to by the Labour party when it was in government.

So, let me wrap up. Although the annual budget negotiations are not the usual forum to achieve major budget reform, we have still set out our stance. We will be looking for a cash freeze in 2011 and, in this time of austerity, Europe needs to be looking to make the same efficiency savings that we are making in the UK.

I know that the House is interested in this topic, so I shall touch on it briefly. The European Parliament’s Budgets Committee has voted on this budget and the European Parliament in plenary will be voting next week on the European Parliament’s position on the 2011 budget. We have done our best to ensure that our Government’s position on the 2011 budget has well and truly got through to MEPs. We sent a lobbying note to the UK MEPs in September clearly setting out our position.

--- Later in debate ---

[Mr James Clappison (Hertsmere) (Con)]

I congratulate the Economic Secretary to the Treasury on an excellent and most competent speech. I listened to her and to the right hon. Member for Rotherham (Mr MacShane), so may I say to him that the last thing she needs is his protective arm around her? He could do worse than to put his arm around himself, because the end of his speech contradicted its beginning. At the end he told us that now, more than ever, our contribution to the European Union budget comes from general Government expenditure. Therefore, if our contribution increases, we have to increase taxation, cut expenditure or run up a bigger deficit, at a time when we are trying to reduce the one we have. He would do well to reflect on that.

I noted that in all the advice the right hon. Gentleman and the Opposition Front-Bench spokesperson, the hon. Member for Bristol East (Kerry McCarthy), gave us, neither of them told us—we will be watching this—how they would advise MEPs to vote when this matter comes before the European Parliament once again, under its procedures. Will MEPs vote in favour of the Council to keep the budget down or are they going to vote in favour of the Commission and for more spending on the European Union? The hon. Member for Bristol East may not want to answer the question tonight, but her MEPs will have to vote or abstain in the European Parliament. They will be watched as to how they vote and we will remind them of the effects that this measure would have in this country.

I was a member of the European Scrutiny Committee and I wholeheartedly supported recommending this document for debate, because it is precisely the sort of thing that this House ought to debate. Something caught my eye in the figures that the Economic Secretary put before the House: the European Commission was seeking in its budget this year an increase of 5.8% or £7 billion in payment appropriations—at this of all times. That comes after increases in the past three years of 3.9%, 1.6% and 2.3%. That raised a question in my mind: how on earth at a time like this, when this country and other member states are facing such stringency in their public expenditure and are seeking to reduce their deficits, could the European Commission have the instinct to seek an increase in its spending? A cynical mind might say that the European Commission made proposals to increase spending on such a scale thinking that they might be trimmed back and that it was aiming for what it would get when those were trimmed back.

Be that as it may, the Economic Secretary is doing exactly the right thing, exercising her powers and this country’s influence to the utmost. I would like those powers to be greater, but they are what they are and they are being used to restrain the European budget, to seek alliances with other member states and to seek to bring about the reductions that she has talked about. It is in this country’s interest that she should do that, and I am sure that all hon. Members on the Government Benches wish her good luck in her endeavours.

Reference has been made to the rebate, so I do not propose to dwell on that. However, because this country’s rebate has been abated in part—in 2005, somewhat inexplicably, when this country had a veto and could have prevented any such abatement—we must have to bear a higher proportion of any increase in European expenditure than would otherwise have been the case. As has been rightly said, that means that our net contribution to the European budget is set to rise progressively from £3 billion in 2008-09 up to £9.5 billion in 2014. That is a substantial increase, which is inexplicable. Historians will have an interesting time examining the motivations of those who took part in the relevant discussions in 2005, when the case for this country was put by the previous Prime Minister but one.

The thing that strikes me more than anything else as I peruse this document and the various budget headings is how little attempt seems to have been made to economise on the part of the European Union—and not only that, but how little attempt has been made to cut back on planned expenditure. It seems that the European Union is ploughing on as though nothing had changed in the world.

Talking of planned expenditure, one of the worst examples, I am afraid to say, is the European External Action Service. We were promised originally—I remember taking part in the debate with the right hon. Member for Belfast North (Mr Dodds)—that it would be budget-neutral and the rumour was that nobody in the European institutions believed that. Surprise, surprise, after we were told that it would be budget-neutral and given a solemn assurance to that effect by the European Commissioner, the European Commission started coming back for more increases in expenditure. So far, in the brief time that has elapsed since it started to put that organisation into place, it has already breached the principle of budget neutrality twice, with increasing amounts being sought—the most recent was an increase of £35 billion for an extra 190 posts.

[Mark Reckless (Rochester and Strood) (Con)]

Does my hon. Friend agree that in the current financial circumstances we should be talking not about budget increases or even budget neutrality but about reductions in the EU budget, as proposed in the excellent amendment (b)?

[Mr Clappison]

If there were a search for economies in the European budget, one of the best places to start would be the External Action Service. I have a suspicion that although some of its activities might be worth while, the prime motivating force behind the establishment of what is in effect a diplomatic service is the promotion of the European Union itself rather than the interests of member states or their citizens. I suspect that there might be scope for economies.

Let us be clear that what is being sought is planned increases in the External Action Service. Let us spell out the facts of what it will cost so far as it stands—as the Economic Secretary made clear. So far, the cost of the External Action Service, which is on the record under the so-called budget neutrality, is €400 billion. The diplomatic service has 3,700 employees and posts in about 130 nations in the world, many of which already have British diplomatic representation. Spending of that magnitude compares, I am afraid, with the search for economies that is being made in our Foreign Office, where savings of much smaller amounts of money are sought all the time in the face of the demands that have been made to try to economise. It would be sad to see the Union flag taken down in some countries in the world while the European flag was run up. I would regret that, as I think our Foreign Office does a good job in the world and represents the interests of our country. Its prime consideration is to represent this country and our citizens’ interests, rather than searching for exterior political objectives to do with the European Union.

This has been a very good debate. I commend the line that has been taken by the Economic Secretary. The facts are stark and anybody who reads these budget documents will be shocked that such increases are sought by the European Union at this of all times. It also prompts a question about the relationship between the European Union institutions, the Commission of the European Union, our constituents and the man on the street in every European state. What must be the attitude at a time when there is so much concern about the economy, when people are suffering and when cuts are being made if the European Union somehow feels that it is immune from those pressures and can go on increasing its expenditure?

[Kelvin Hopkins]

Let me reinforce that point. When referendums have been held in a number of countries, the people have voted against the European Union, in essence. That has happened in France and Holland, and in Sweden when they voted against having the euro. The hon. Gentleman is absolutely right.

[Mr Clappison]

I am grateful to the hon. Gentleman for that contribution. He has a very consistent record on this issue.

An increasing proportion of our laws, certainly as a result of the past 13 years, are being passed in the European Union, which searches constantly for new fields over which to exercise authority. It has made its way into home affairs and justice and it has huge ambitions regarding security and criminal justice. It also seeks to have an increasing influence over foreign affairs, with the establishment of a Foreign Minister and a diplomatic service. We know that it has all those great ambitions and we would do well to reflect, in the House, on what the increases in the budget say about the EU’s attitude toward individual citizens and its accountability to them.

Finance (No. 2) Bill

James Clappison Excerpts

Monday 11th October 2010 Commons Chamber

[Richard Harrington]

Well, the cut cost in excess of £300 million, and it is common sense that people do not change spending decisions based on a 2% difference.

I shall move on, because time is running short and I wish to talk about two parts of the Bill. The first relates to the British film industry. The Bill contains a technical adjustment to film funding to allow more leeway in calculating the amount that is surrenderable for tax credit. That sounds complicated, but it is sensible. The real issue is the need for appreciation by this House of the film industry’s economic contribution.

I must confess to having a constituency involvement, in that Leavesden film studios, where much of “Harry Potter” was filmed, are in my constituency. The American company Warner Bros has announced that it is acquiring the site, and that there will be a big increase in employment. Hopefully those studios, as well as Pinewood, Elstree and many others, will continue their prosperity.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend’s mention of film studios tempts me to intervene. As he knows, Elstree studios are in my constituency in Hertfordshire, and Hertfordshire as a whole has a world-class tradition of film making. “Star Wars” was made partly in my constituency, as were many other famous films—he mentioned “Harry Potter”. Does he agree that through financial incentives it is possible to build on that tradition and create considerable employment opportunities for many young people in a growing industry?

[Richard Harrington]

I thank my hon. Friend, and of course I agree with him. Our part of Hertfordshire is rapidly becoming the Hollywood of southern England—or its Beverly Hills, in the case of his bit.

There is no doubt that taxation of the film industry is important. According to a recent Oxford Economics study, the industry employs 35,000 people and makes a direct contribution of £1.6 billion to the UK economy. It pays about £445 million in tax, even without any multiplier effect being applied. The £110 million in tax allowances for it in the Bill and in previous Acts of Parliament represent very good value for this country.

Why am I speaking about the film industry, given that as far as I am aware the main political parties agree about the need to provide that assistance? It is because the industry provides an example of not only some of the best uses of Government credits, but some of the worst. Following an earlier Act of Parliament, the accountancy tax avoidance industry used perfectly acceptable vehicles for investing in the film industry as tax avoidance methods. Film and television producers have told me that their films or programmes, which were effectively pre-sold so that there was no financial risk whatever, were used to provide large tax benefits through comparatively risk-free investments. That opportunity was correctly removed about two years ago, but that does not mean that the Government should ignore the perfectly reasonable demand for very high-risk investors to have a tax-efficient vehicle to invest in the film industry. That is good for this country and leads to vast amounts of money and a lot of high-quality employment being brought in. I accept that the Government have much greater priorities at the moment, but I ask them to consider introducing a proper, tax-efficient vehicle for venture capital investment in the film industry, in a way that does not allow it to be used as a method for tax avoidance, which is quite unacceptable.

Secondly, I feel that because of my experience in business and the continual discussion in the press and the House about whether the banks lend enough money to businesses, I should tell the House of my experiences in Watford. I have spoken to most of the major banks there and to nearly 100 small businesses to find out the exact position. Members will know that a Bank of England document shows that the monthly average of new loans has gone down from a peak of £991 million in 2008 to £564 million in 2010, which is a significant reduction.

However, the real question is not the volume of loans being granted but the percentage of loan applications that are rejected. That figure is never seen. The banks’ criteria for lending used to be entirely based on property. Many business loans were really property loans in disguise, because they involved guarantees based on the personal houses of people who were borrowing money. Now the banks do not like lending money on property, so for the first time they are looking at small businesses’ balance sheets, cash flow and business plans. They are treating them as stand-alone instruments.

I observed the figures in Barclays bank’s main business lending office only two weeks ago. I saw people borrowing money and businesses having money advanced, but the reality is that the property-based loans, for the moment, have gone. That is one reason—not a macro-economic reason, but a practical reason—why lending is low. There is money available for small businesses. I agree that management fees are high. That is because banks have to spend a lot of time on a £50,000 loan, instead of just saying, “He’s got a house worth half a million, so we are not worried about anything else.” As we know, the spreads are high because banks can lend money to Governments for 2% over the base rate, so to lend to a small business banks have to consider a spread greater than that. There is more to bank lending than meets the eye, and we should consider the number of applications compared to the number of rejections.

I see that it is 8 o’clock. I know that other Members want to speak, so I shall leave it at those two comments.

Economic Affairs and Work and Pensions

James Clappison Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr James Clappison (Hertsmere) (Con)]

This is my first opportunity to make a contribution in this Parliament, and it is a pleasure, as always, to follow the right hon. Member for Holborn and St Pancras (Frank Dobson), although I will not go down the same route as him. I wish to say a little about the work and pensions side of this debate, but before I do so may I deal with a subject that is somewhat associated with it: the proposal in the Gracious Speech for a limit on economic migration from outside the European Union? I warmly welcome that sensible proposal. Strangely, it was part of the Opposition amendment to yesterday’s motion, although it was not mentioned in the speech of any Opposition Member, including the Front Benchers. One can only speculate as to the internal problems in the Opposition on that matter.

Although I welcome the proposal, I note that the coalition agreement says that it is to be subject to consultation on the “mechanism” by which the limit is achieved. I urge my hon. colleagues to bear in mind that an important consultation has just taken place; call me old-fashioned, Mr Deputy Speaker, but I think that the most important consultation takes place when the voter goes into the voting booth and puts his or her cross on the ballot paper. Therefore, I respectfully invite my right hon. and hon. Friends to take account of the considerable concern expressed about immigration during the campaign.

It is right to engage in some consultation about implementation and, doubtless, the Government will have a queue of employers come before them. When I served on the Select Committee on Home Affairs we examined this very question. We heard from restaurant owners, farmers and people involved in the IT industry, and they seemed to be under the impression that the resident working population of this country was incapable of working on a farm, in a restaurant or in the IT industry. I suggest to my hon. Friends that when they hear such submissions from employers they gently point those employers towards the unemployment statistics, particularly those relating to young people in this country.

Those statistics show one of the most baleful inheritances from the previous Government. Given the speeches that we have heard today, Labour Members seem totally oblivious of the plight that they have left so many young people facing. We have heard a lot about child trust funds, but we have not heard so much about the lack of opportunities for young people who are about to enter their working lives and find themselves facing the prospect of the dole queue. After 13 years of a Labour Government, almost 1 million young people are out of work and there is a structural problem of youth unemployment. I say that because the level of youth unemployment was rising long before the recession took hold. All that has occurred under a Government who had promised at their outset to reduce unemployment among young people by 250,000.

A further 1.5 million older workers are out of work, and standing behind them, although not of course recorded in the formal unemployment statistics, are the many millions of people of working age who languish on out-of-work benefits. We cannot expect some of them to work because of the nature of their condition, but many of them are capable of work and indeed want to work but under the current system they are not receiving the help that they need, be it medical help, encouragement or training, to enable them to work.

In many cases—this is an important part of the problem—such people also lack the incentives to work. We talk a lot about providing incentives for better-off people to work—I am all in favour of that, because I support enterprise and hard work, seeing it as the way forward, unlike some Labour Members, whose view is to rely on the state for everything. However, we must consider also providing incentives for poorer people on benefits to get into and remain in work. All too often, the poorer person on out-of-work benefits, who may not have many skills and may have a patchy previous employment record, can find only low-paid employment. Under the current system, a large part of their money—their housing benefit and council tax benefit—is withdrawn from them the moment they start work. The moment a poor person who has been on out-of-work benefits gets into work they, in effect, face a marginal tax rate of 80% or 90%. They then find that out of the meagre proceeds left for them they have to pay the normal costs involved in getting to work, being prepared for work, dressing for work and so on. In addition, they have the fear of not being able to rely on the benefits system in the future for housing and all their other needs.

[Mrs Anne McGuire (Stirling) (Lab)]

Will the hon. Gentleman recognise that the previous Government implemented a proposal that meant that people could move into work from receiving benefits and still retain for two years their right to move back to receiving benefits? He is misrepresenting the current situation.

[Mr Clappison]

I am not misrepresenting it in any way. Labour Members were prepared to have a system in which 80% or 90% of income was withdrawn from people who went into work, through the withdrawal of council tax and housing benefit, and not very much has been done about that. I recognise that some Labour Members were aware of the problem, including the right hon. Member for Birkenhead (Mr Field) and some who have now left the House such as James Purnell and John Hutton. They were aware of the problem, but I suspect that they were blocked when they wanted to do something about it. The result is that 2 million people now say that they want to work but are on out-of-work benefits and are not included in the formal unemployment statistics, which amount to 2.5 million.

Labour Members have presided over a welfare system that is incredibly effective at trapping people on benefits once they get on to them, and it is a challenge for my hon. and right hon. Friends to devise a better system that will get people off welfare and into work. They are having to undertake radical action on this front at a very unpropitious time, when we are facing, as we all know, the appalling deficit that has been inherited. I urge them to turn their hands to this task, because it is too important to fail or to put in the drawer marked “too difficult to undertake”. It has to be undertaken, particularly for the sake of the younger people who are languishing on out-of-work benefits and are formally recorded as unemployed. This is a challenge for the future for my right hon. and hon. Friends; it is a challenge that has been neglected by the Labour party and so left for us to take up. It will contribute to solving the problem of the deficit, but we have to take the bold action that has not been taken for far too long—for 13 years of wasted opportunities, which have led to wasted lives and people who have been left, after a Labour Government, languishing on unemployment and out-of-work benefits.

Oral Answers to Questions

James Clappison Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr Speaker]

Order.

[Mr James Clappison (Hertsmere) (Con)]

Does not part of the contribution to the EU budget result from the surrender of the UK rebate in 2005 by the previous Government, which will cost taxpayers in this country up to £9 billion over six years and was given in return for nothing? Should we not add that to the Chief Secretary’s list of waste by the previous Government?

[Mr Osborne]

My hon. Friend is absolutely right. The former Prime Minister Tony Blair gave away the UK’s budget rebate in return for absolutely nothing. We were promised at the time that it would give us leverage over CAP reform, which never arrived, and I am afraid that that is just one of the many decisions that the previous Government got wrong.