Finance (No. 3) Bill

Justine Greening Excerpts

Tuesday 5th July 2011 Commons Chamber

[Kerry McCarthy]

Let me start by confirming that Labour Members support the principle of a carbon floor price. We believe that carbon price support could be an excellent opportunity for the UK in providing a high and stable price for carbon. It could encourage investment in low-carbon power and green technologies, create a new generation of green high-skilled jobs which the UK sorely needs, enable the UK to make radical reductions in its carbon emissions, and contribute to meeting our carbon budgets. Unfortunately, however, we cannot support the way in which the Government have implemented this measure. It will hit those who can least afford it, damage the prospects of developing a UK green industry, and fail to reduce carbon emissions. We have to question whether we can call the carbon price support rate a green tax at all.

First, I shall deal with the impact on consumers. We know that people are struggling to pay their fuel bills. The OECD estimates that, on May’s figures, energy prices are nearly 10% higher than they were a year ago. Scottish Power recently announced electricity bill rises of 10% and gas bill rises of 10%, and other companies are expected to follow suit. The Government are not helping. Rising energy bills and fuel bills are coming on top of higher taxes, cuts to tax credits and cuts to public services. This year the Government have cut the winter fuel payment by £50 for people over 60 and £100 for people over 80, with no mention of that in the Budget statement or the pre-Budget report. That comes after their promise in last year’s Budget to protect key benefits, including winter fuel payments, for older people. They may claim that they inherited this from the previous Government, but we could and would have looked again at that decision in the light of rising energy prices, and so could they; that is the point of having an annual Budget statement.

These are the circumstances in which the Government have proposed a carbon floor price designed in such a way that it will cost working families by raising their energy bills. We understand that in the long term, if the policy is designed in a way that encourages a switch to low-carbon energy production, there should be no significant effect on consumer bills—that is why we support the principle of the carbon floor price—but right now, in the short term, there will be price rises for consumers at a time when they are already finding their fuel bills unmanageable. The Government have not included any counterbalancing measures to help working families to deal with those price rises. If the measure goes ahead in the form that the Government propose, between 30,000 and 60,000 more households will fall into fuel poverty in 2013, rising to between 50,000 and 90,000 more households by 2020. Those are the Government’s own estimates. Earlier this year, Consumer Focus said:

“In its current form there is a real risk that this policy may simply displace detriment.”

In other words, even if it did have a positive impact on green investment, that would be at the cost of more people falling into fuel poverty.

There have recently been somewhat hysterical reports about green taxes, alleging that they are the biggest factor in causing consumer bills to rise. That is not true. Ofgem figures from March show that environmental and social costs make up just 8% of the typical dual fuel consumer bill, and that has risen by just one percentage point since 2008. Climate change deniers cite figures suggesting that hidden green taxes add some £200 to energy bills, but those figures do not stack up. That does not mean, however, that now is the time to add to those costs. The Government have got it wrong. Ordinary working families were clearly the last thing on their mind when they designed this policy. That is why the amendment calls for them to look again at the effect that it will have on people in fuel poverty.

I turn to manufacturing, which several of my colleagues will wish to discuss too. Rising energy prices will affect not only consumers but firms that employ thousands of people across the country. In particular, they will hit energy-intensive industries such as steel, aluminium and chemicals. There is a danger, particularly in the absence of a credible Government plan for growth, that growth and jobs will be exported to other countries. According to a report by Thomson Reuters Carbon Point earlier this year, the carbon floor price will impose additional costs on businesses amounting to £9.3 billion. We understand that that effect might be mitigated in the long term if there is a switch to greener sources of energy, although that is not certain given the problems that I will come to in a moment. In the medium term, however, UK industry will be at a disadvantage, and jobs and growth will be put at risk. That is why the director general of the CBI and industry bodies such as the Chemical Industries Association have called for an exemption from these extra costs for high energy-using industries.

Concerns have been expressed by firms such as Tata Steel, which employs 1,000 people in Teesside. Its chief executive officer said:

“The introduction of the carbon floor price represents a potentially severe blow to the sustainability of UK steelmaking.”

Rio Tinto Alcan, an aluminium producer in the north-east, may close, shedding 600 jobs, and 1,800 jobs are at risk at INEOS ChlorVinyls in Runcorn. Some of the industries threatened by this measure are not only major employers but among the UK’s biggest export sectors. For example, the chemical industry, which accounts for 12% of total UK manufacturing, exports the bulk of its production, with a trade balance in 2008 of nearly £6 billion.

There is also the danger that we will harm our own prospects of building a UK green industry. This sector represents huge opportunities for the UK. For example, the wind energy sector provides over 10,000 jobs, and it expanded by 91% in just two years from 2007 to 2009. The solar energy industry in the UK provides over 10,000 jobs. There is a danger that we may not be able to sustain these sectors in the UK, despite any efforts from the Government, if the necessary materials are not available here. This would be yet another own goal for the “greenest Government ever” after their ill-thought-out change of policy earlier this year on feed-in tariffs, which has put thousands of green jobs at risk. The solar sector is a vital, nascent green industry in the UK. Until the Government’s announcement, the 10,000 jobs that it currently supports was expected to rise to 17,000 this year. The Government’s promised green investment bank was supposed to boost investment in new green industries, but it has been watered down: it will be a fund, and not a real bank, until 2015. That makes a mockery of the Government’s green credentials. Our amendment calls on the Government to look again at the carbon floor price and its effect on high energy-using industries. This is the wrong time to put jobs and green investment at risk without a plan to protect them.

I now move on to the impact on green investment. We accept that a well-designed carbon floor price can deliver reduced emissions and higher green investment, which is why we support the idea in principle. However, we doubt whether the Government’s proposal will deliver those goals. The UK is part of the EU emissions trading scheme, so any carbon permits that are not sold in the UK will simply be sold elsewhere in Europe. The Department of Energy and Climate Change commissioned Redpoint Energy, a consultancy, to examine the options for a carbon floor price. It said in a footnote to its report:

“Under the EU ETS, it would be expected that lower emissions from the GB electricity sector in a given year would be offset by higher emissions elsewhere within the trading scheme.”

A recent report by the Institute for Public Policy Research agreed that

“this policy would have no direct effect on emissions reaching the atmosphere.”

It went on to say that

“it is important to be clear that the UK would be meeting climate change targets in a way that has zero direct effect on emissions.”

The Treasury’s own consultation document admitted that for power stations covered by the ETS, the carbon price floor will not directly impact on the Government’s ability to meet their carbon budgets.

Consumers and companies facing higher energy bills because of this policy would be right to question whether this is a worthwhile use of their money. Will the Government’s policy encourage more investment in renewable power? The Energy and Climate Change Committee expressed doubt:

“when it comes to low-carbon investment, the effect of the Carbon Price Support will depend on the confidence of investors in the long-term reliability of the Carbon Price Support.”

[The Economic Secretary to the Treasury (Justine Greening)]

Perhaps I can just tell the hon. Lady that the Institution of Civil Engineers said that the policy will create a “more conducive environment” for investment. Does that allay her fears? If she has concerns about the structure of the policy, it would be helpful for Members to hear the Opposition’s alternatives.

[Kerry McCarthy]

As I will go on to explain, there are concerns about future stability, as we have seen with the North sea oil tax, which we discussed yesterday. Investors need stability to plan for the long term, particularly in solar and wind power, which need long-term investment. People need to know what to expect and what impact proposals will have.

As for what the Opposition are saying, I refer the Minister to our amendment, which calls for a review of three main points, which I am discussing in my speech. Those are the impact on fuel poverty, the impact on energy-intensive industries and the fact that this is, in effect, a subsidy for nuclear power, which I will discuss later. It is important for us to look at the consequences of this policy because, as with so many things, the Government have introduced it in haste and without thinking through the consequences. It is not until we look at the impact on these sectors that we will see what the ideal solution might be. It is premature of the hon. Lady to ask us to come up with an alternative before we have done that analysis and reached a consensus with the industry on what the impact will be. As I have said, we agree in principle with the carbon price support, but because of the way it is being implemented, it will not achieve any of the objectives that she presumably wants it to achieve.

--- Later in debate ---

[Justine Greening]

As we will no doubt debate later, we carried out an extensive impact assessment on this policy. Indeed, the hon. Lady has quoted a couple of figures from it. I reiterate what I said earlier. If she agrees in principle with the policy, which I very much welcome, it would be helpful to hear how she thinks the delivery of it ought to differ from what the Government are doing.

[Kerry McCarthy]

As I said, we are calling for a full-scale review. I am not convinced that the Government’s impact assessment examined in sufficient detail the impact on fuel bills, for example. As the Economic Secretary is intervening on me, it is obviously not the time for me to pose questions to her. When she speaks later, perhaps she can enlighten us as to what it was judged that the impact would be on consumers in meeting their fuel bills, on fuel poverty and on energy-intensive industries. What impact does she think that will have on jobs and growth in the areas where energy-intensive industries are based? Perhaps she could also respond to the questions that I will soon pose about whether it is wise to, in effect, create a subsidy for the nuclear industry when there are other competing priorities, on which some people would argue the money would be better spent.

--- Later in debate ---

[Kerry McCarthy]

I am not sure where to start in responding to the hon. Gentleman. My opening line was that we support the idea of a carbon floor price in principle. Everything that I have said since has outlined why we have reservations about the way in which it is being implemented. I simply refer him to the speech that I am making.

I appreciate that there are difficulties in getting this policy implemented at an EU level. It would be easier if we could look at the EU emissions trading scheme in the round. Experts have said that measures on carbon pricing should first be considered at EU level, and that a UK-only solution is a second best option. Lord Turner, the Chair of the Committee on Climate Change, has said that, and it was echoed in the Institute for Public Policy Research report. The Government appear to have done nothing to explore the EU option. The coalition agreement says that the Government will

“make efforts to persuade the EU to move towards full auctioning of ETS permits.”

However, it does not mention any intention to talk to our EU partners about a carbon price floor. Perhaps that is unsurprising, given the Government’s record on dealing with the EU. For example, the Government’s MEPs tabled no proposals to reduce the EU budget, whereas Labour MEPs tabled amendments that could have cut more than €1 billion of waste from EU spending.

[Justine Greening]

Is the hon. Lady aware that one of the main reasons why the UK’s contribution to the EU budget is going up is that the former Labour Prime Minister, Tony Blair, gave away part of the rebate?

[Lyn Brown (West Ham) (Lab)]

Enough now.

--- Later in debate ---

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

I wish to speak to amendment 12, and I shall do so both as chair of the all-party group on energy-intensive industries, which the hon. Member for Redcar (Ian Swales) so kindly mentioned, and as the Member of Parliament for Stoke-on-Trent Central—the potteries. I wish to draw the Minister’s attention to the impact of the carbon price on the ceramics industry, because that poses a real danger to the future of the industry which really began the industrial revolution, at Etruria, under the great influence of Josiah Wedgwood.

You will know, Mr Deputy Speaker, that the potteries came to north Staffordshire not because of the north Staffordshire clay, although that helped, but because of the coal—because of the energy—as Edwin Clayhanger told young George in the great “Clayhanger” novel by Arnold Bennett. The firing of the kilns and the making of the pottery demand intensive energy use, as temperatures of up to 1,200° C are involved, although we are hoping to bring that down with new technology. The cumulative impact of some of the carbon price legislation is therefore dangerously undermining the ability of these industries to survive.

The point about the effect of this legislation is that these industries will provide a classic example of carbon leakage. Over the past 20 years we have seen jobs disappear to Indonesia, Vietnam and China, and we face the threat of jobs leaving for Poland and Bulgaria. We do not cut global carbon emissions through this process. Instead, we export jobs and reimport the carbon. Britain loses economic competitiveness and the world gains nothing in terms of cutting carbon emissions. Ministers need to understand that many of the companies involved are international conglomerates, as many of my hon. Friends have pointed out. Such companies have the ability to move their businesses offshore, and they will do so if we become more and more uncompetitive.

Many in the ceramics industry are in favour of energy-saving measures, and I am not averse to those. We have seen, in different industries across the sector, the ability of energy-saving measures to improve performance. Let us consider what happened to the German car industry in the 1980s. When the Greens began to turn their attention towards the inefficiencies of that industry and its overuse of energy, that industry began to be transformed. Today the German car industry is among the most successful and competitive in the world.

The problem that we face in Stoke-on-Trent is that many of our industries and many of our pottery firms have already cut their energy usage by 80% or 90%, yet they still face new hikes and new measures. It will be very difficult for them to make further cuts. We need a more sophisticated way of measuring carbon, which is what our amendment suggests. We need a more sophisticated way of understanding carbon usage, and we need to understand its use over a lifetime.

We have already heard references to the chemical industry. In my constituency I am blessed with the Michelin tyre production company, and when the energy used in production is set against the lifetime use of those tyres, energy is actually saved. My hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) mentioned using clay pipes rather than plastic pipes, and again, over the lifetime of the products, energy is saved. In Newcastle-under-Lyme, next door to my constituency, one can also see some very good clay pipe production.

The point is that high-quality products made with high energy intensity often, in the long run, save carbon. The Government need to get their thinking straight. When considering the competitiveness of such industries, Ministers often point to cuts in corporation tax as saving businesses. If no profits can be made—if they are wiped out by the carbon costs—the cuts to corporation tax will make no difference. There is a failure to appreciate the cumulative impact and the international market.

I hope that we have begun to see the beginnings of a shift in thinking. We look forward to the outcome of the DECC-BIS-Treasury working party, which will reach its conclusions towards the end of the year. Ministers should regard our amendment as an attempt to help them and to encourage a degree of clarity in the dealings between their civil servants over the coming months. What is frustrating about this process is the fact that the ceramics sector in Stoke-on-Trent is enjoying a resurgence. Jobs are coming back from China because of rising energy and labour costs in both porcelain and bone china. We are seeing a resurgence in the kingdom of Spode, Wedgwood, Churchill and Dudson, and of new companies, such as Emma Bridgewater. It would be typical of British legalistic short-sightedness and the myopia of the Treasury world view if, faced with a rising and successful industry, we were to undermine it. If we are interested in rebalancing the British economy we should support the ceramics, chemical, steel, glass, aluminium and other energy-intensive sectors on their journey towards a green economy. The amendment seeks to do just that.

[Justine Greening]

Clause 78 and schedule 20 amend the climate change levy to introduce a carbon price floor for electricity generation. We have had a helpful and interesting debate on the two amendments and I shall do my best in the time available to try to address as many of the points that were raised as possible. Before I do that, it is probably worth returning to the question of why this measure is necessary in the first place. Indeed, the hon. Member for Brighton, Pavilion (Caroline Lucas) spent some time setting that out in her speech.

We all recognise that the UK needs significant new investment in low-carbon electricity generation over the coming decades. As the debate has shown, we do not want that to be the only thing that we encourage over the coming years. We also want to encourage a broader transition to a low-carbon economy. As the hon. Member for Penistone and Stocksbridge (Angela Smith) pointed out, many industries that have been mentioned today in the context of the challenges they face have the chance to benefit from their role in the low-carbon economy of the future.

We need significant new investment in low-carbon electricity generation. As well as preparing for an increase in demand for electricity over the following decades, the UK must meet its legally binding CO₂ emissions reduction targets, which require an 80% reduction from 1990 levels by 2050. That is why in the Budget, following consultation, we announced that the UK would introduce a minimum carbon price. As the hon. Member for Southampton, Test (Dr Whitehead) pointed out, we included a number of different scenarios in that consultation so that we could understand and get feedback from stakeholders on the impact of the different scenarios. In fact the carbon price floor will provide a strong incentive for billions of pounds of new low-carbon investment.

[Dr Whitehead]

Does the hon. Lady agree that none of the scenarios in the consultation document included the idea that there should be a £5 premium on the emissions trading scheme as a result of the introduction of a carbon floor price?

[Justine Greening]

The scenarios we looked at as part of the consultation asked stakeholders what carbon price they felt we should start at, and where they felt it should finish—the trajectory from the first to the last point. As suggested by respondents, we used the market price of carbon, which is low, although we used DECC’s central carbon price as an illustration in the consultation. The hon. Gentleman referred both in his intervention and in his contribution to the balance we have to strike in setting a carbon price floor that will actually make a difference while putting in place one that does not in the meantime make the energy-intensive industries in our country uncompetitive, as we heard in powerful contributions from my hon. Friends the Members for Redcar (Ian Swales) and for Brigg and Goole (Andrew Percy) and, in an intervention, from the hon. Member for Scunthorpe (Nic Dakin). I want to provide the House with some reassurance about the steps we are taking to ensure that we manage to strike that balance. Despite the various contributions we have heard today, when we take the time to read Hansard tomorrow we shall probably see that there was more agreement in the approaches than may have come across from the tone of the debate. The challenge for us on both sides of the House is to strike the right balance, and I want to talk a little more about how we intend to try to do that.

We know that ultimately we have to make the transition to low-carbon electricity generation cost-effectively, and that will happen only if investors have greater long-term certainty about the cost of carbon emissions. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) talked about uncertainty, but the measure is about introducing more certainty so that the extra investment we need can take place. The impact assessment that was part of the consultation showed that although the carbon price floor will increase electricity bills in the short to medium term, bills will be lower in the longer term than would have otherwise been the case, as more low-carbon capacity leads to cheaper electricity. I shall talk about how we want to see fuel poverty tackled over coming years, because that is obviously important.

[Andrew Percy]

I particularly welcome my hon. Friend’s comments about supporting industry as we move forward. I had to pop out of the Chamber after my speech to meet people from Drax. One of the things they told me was that at the moment the system is so structured that it discourages them from buying UK coal in favour of foreign coal. Will she take that into account when looking at the extra support that can be provided? If not, could she meet us to discuss this important issue in a bit more detail?

[Justine Greening]

My hon. Friend makes a helpful contribution. I am always happy to meet hon. Members. In fact, only last week I wrote back to the hon. Member for Stoke-on-Trent Central (Tristram Hunt) to say that I would be happy to meet representatives of his local industry. One of the reasons we are working across Government—not just the Treasury, but BIS and DECC—is to make sure that we consider all the different aspects of the support we want for the energy-intensive industries, and get it right.

I am conscious of the time, and the fact that Members want to debate the remaining amendments, so I now want to make progress. In Committee we discussed at length the issues raised in the amendments. Not all Members present in the Chamber today will have heard those debates, so I shall go through my response to both amendments, taking amendment 21 first, as it raises some important points. It would require the Government to lay, and Parliament to approve, an agreed package of mitigation measures for energy-intensive industries.

A number of Members from across the House made powerful cases on behalf of their local industry about why the issues are so important. The Government recognise the issues and want to take steps to address them. There is, as I said, clearly a balance to be struck: we need to meet our carbon reduction requirements, but to do so in a way that still enables the UK to continue to have competitive energy-intensive industries. That is why the Budget helped to offset the impacts of the price floor on energy-intensive industry and to show, as we have heard, that the UK is open for business, as it must be.

In March we announced an extension of climate change agreements to 2023, with an increase in the discount on electricity from 65% to 80% for participants in the scheme from April 2013. We plan to consult on how to simplify climate change agreements for the companies participating in them. Overall we intend to reduce tax levels to among the lowest in the EU.

We announced that we would not introduce the previous Government’s planned complex and costly carbon capture and storage levy, which would have increased electricity bills by 2% from 2015. In addition, we set out plans that will see a cap on the cost of policies funded through energy bills. To support industry more broadly, we introduced policies that will reduce corporation tax by a further 1%, which is part of an overall year-on-year set of reductions in corporation tax.

As I said, BIS, DECC and the Treasury are already in discussion with energy-intensive industries to identify those most affected by the carbon price floor and to pull together the best set of options to address some of those concerns. The package that we plan to announce by the end of the year will build on the measures, some of which I have set out, that we announced in the Budget. The Bill could also be a means of implementing part of the package. I should be clear that the options that we are considering do not relate only to tax. They look across the board at what we can do to support energy-intensive industries.

On Opposition amendment 12, the carbon price floor is designed to give UK electricity generators certainty about the carbon price. That will encourage more investment in low carbon. Although some Members expressed concerns about how the policy will work, it has been supported by a number of members of the investment community. A range of policy assessments have been carried out not just as part of the consultation document, but as part of the extensive impact assessment that was done alongside that, including the tax impact and information note that was published at the time of the Budget.

[Caroline Lucas]

Does the Minister agree that the carbon price floor effectively constitutes a subsidy for nuclear power? Does she therefore agree that unless it is clawed back through a windfall tax, it would contravene the terms of the coalition agreement on no subsidies for new nuclear?

[Justine Greening]

I am pleased that the hon. Lady has raised that point, because it gives me the opportunity to be crystal clear again—alongside the statements that I made in Committee, and those that she knows I have made to the Select Committee of which she is a member—that this policy is not a subsidy for the nuclear industry. As was pointed out in the previous debate by my hon. Friend the Member for Bristol West (Stephen Williams), who I am pleased to see in his place following his contribution to the Committee stage, this is a tax on carbon, not on nuclear fuel rods, as happened in Germany.

The reason nuclear is outside the scope of the tax is that uranium and wind, for example, are not in the carbon price floor because, of course, they do not contain carbon. I understand the arguments that have been made, but they are a little like saying that because we have a tax on alcohol, that is a subsidy for the soft drinks industry. There is also a contradiction between what Opposition Members have been saying. They complain that this is a tax-raising measure, yet they also say that it is a subsidy. Those arguments are contradictory.

Amendments 21 and 12 are unnecessary, and I hope that they will both be withdrawn.

Question put, That the amendment be made.

Civil List

Justine Greening Excerpts

Thursday 30th June 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

The last time that the House substantively debated this issue was during proceedings on what became the Civil List Act 1972, and, as the system that the Act implemented comes up for renewal, it is only right that we debate its merits and potential for reform.

I am grateful to right hon. and hon. Members for, in particular, a lively and informative debate about reforming the sovereign grant. As we heard from my hon. Friends the Members for Brentford and Isleworth (Mary Macleod) and for Northampton North (Michael Ellis), the royal family contributes a tremendous amount to our country, and they paid fitting tributes to its work on behalf of the nation. We also heard from other Members their thoughts about the royal family and how they should be funded in future.

Of course, the last time we had such a debate was back in 1972. I have not yet had time to read that debate; I am not sure whether it would have been as entertaining as the one we have had today. We heard suggestions about whether we should have a biking monarchy. I am sure that Members will be interested to know that the Duke and Duchess of Cambridge were given a tandem Boris bike by the Mayor of London; I am sure that they will use it frequently.

As my right hon. Friend the Chancellor said, we believe that the system is in need of change. I greatly appreciate the support of the shadow Chancellor, the right hon. Member for Barking (Margaret Hodge) and my hon. Friend the Member for Gainsborough (Mr Leigh) for the measures that we are bringing forward. We want to reform the system so that we can put the grant funding on a sustainable, long-term footing and, as we have said, open it up to full parliamentary scrutiny. I think the colleagues I mentioned appreciate the objectives that we have in mind. In addition, we want to take the opportunity to modernise and simplify some peripheral elements of the current legislation.

As the Chancellor set out, we have been guided by three principles: first, ensuring that we have sustainable, long-term financing for the royal household, free from annual political interference; secondly, ensuring that it has some flexibility so that the royal household can manage its finances efficiently; and thirdly, ensuring accountability by establishing proper checks and balances to prevent sums from becoming excessive. Following those principles, we have arrived at the proposals that we are debating—initially, although we will have a Second Reading debate shortly—for a new sovereign grant.

These are genuinely significant reforms that are designed to last. Linking the sovereign grant to Crown Estate profits means that arrangements will be durable where the old system was not. As we have heard, 15% of Crown Estate profits is the starting point for deriving the grant amount. It will be based on 15% of profit in the year two years prior—so, for example, the grant for 2013-14 will be 15% of the profit for 2011-12. That will provide an amount that should keep royal spending broadly in line with spending in recent years in real terms. The percentage will be reviewed every seven years. In the unlikely event that an increase is proposed, it will require affirmative resolution in Parliament; and, of course, there are powerful control mechanisms that ensure that the grant never becomes unmanageable.

Furthermore, the Bill brings accountability arrangements for the royal household into line with those for other Government Departments. We think it is important that Parliament should have the ability to scrutinise the expenditure when it sees a need to do so—

[Mr Kevan Jones]

If a large surplus builds up in the seven-year period, what will happen to it? Will it be retained by the royal household for their use, or will it be paid back to the Treasury?

[Justine Greening]

There will be a cap at 15% of the spend by the royal household in the previous year. If the hon. Gentleman waits for a few more minutes, when I will have a chance to present the Bill to the House, he will have even more information at his disposal to understand exactly how that cap will work, how the review will take place, and who will perform it.

The Bill brings accountability arrangements for the royal household into line with those for other Government Departments. Parliament will have an opportunity to scrutinise that expenditure when it—

[Mr MacShane]

The hon. Lady keeps saying that the royal household will be brought into line with other Government Departments. Does not that imply that there will be a Government Minister who is accountable to the Commons for what the royal household is spending and will, from time to time, answer questions on it?

--- Later in debate ---

[Justine Greening]

The right hon. Gentleman is absolutely right to raise that issue. Of course, the Treasury will be accountable for the sovereign grant.

As for accountability to Parliament, sovereign grant expenditure will be audited annually by the Comptroller and Auditor General and those reports will be laid before Parliament. Should it wish to do so, the Committee of Public Accounts will also be able to scrutinise grant expenditure and will be able to invite the royal household to give evidence. As we heard from the right hon. Member for Barking, her Committee is already looking at how it may wish to fulfil its role in the accountability of the sovereign grant. In fact, that was one of the main things that Parliament argued for before the Civil List Act 1972. It was not implemented at that time, but it is right to do so now.

I very much welcome the valuable contributions of Members on both sides of the House—those of the right hon. Member for Rotherham (Mr MacShane), the hon. Members for North Durham (Mr Jones) and for Newport West (Paul Flynn), and my hon. Friends the Member for Caithness, Sutherland and Easter Ross (John Thurso), for Bristol West (Stephen Williams) and for Cheltenham (Martin Horwood). They set the context for the debate that we will have on Second Reading of the Bill, which I will shortly present. Once that Bill is before the House, Members on both sides of the House will have a better chance of understanding the proposals and how they will impact on the sovereign grant.

As I have said, this is only the first debate. There will be an opportunity to debate the matter in more detail on Second Reading and in Committee, which will be a Committee of the whole House. I am pleased that we have had a good discussion this afternoon, and that there is agreement on a number of fundamental issues.

Her Majesty the Queen has given exemplary service to the country throughout her 60-year reign. She, and other members of the royal family who support her in her official capacity, will continue to play a vital role in representing and promoting the UK and the Commonwealth. I know that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) would agree wholeheartedly that it is right to provide the royal household with stable and sufficient support in those duties.

As I have pointed out, the royal household has significantly reduced its expenditure. As the Chancellor said, total spending by the royal household has reduced by almost £10 million over the past two decades. That is a real-terms cut of more than 50% in 20 years, which no other Department can claim to have achieved. It is also right that we ensure that that provision is transparent and accountable. In fact, on current assumptions, we expect the sovereign grant to be between £34 million and £36 million for 2013-14 and 2014-15. Such a level of support is lower than it would have been under the old system. As we have heard, in cash terms, that is broadly in line with the current level of spending, but in real terms, there is a cut of 9% over the course of this Parliament. As I said, that is lower in real terms than royal household expenditure in any of the past 20 years. The cost amounts to 51p per person per year in the UK. That is a remarkably low price to pay for the royal family’s profound contribution to public life.

The sovereign grant Bill will put that funding on an efficient, sustainable footing, and provide for it to be fully accountable to Parliament and the public. These are necessary reforms and I commend the Bill to the House.

Question put and agreed to.

Resolved,

That—

(1) new provision be made for, or in connection with, the financial support of the Sovereign and of the heir to the throne;

(2) any sums payable in respect of provision so made should be payable out of money provided by Parliament;

(3) provision be made enabling the continuation, in the reigns of Her Majesty’s successors, of the payment of the hereditary revenues of the Crown as directed under section 1 of the Civil List Act 1952;

(4) provision be made about allowances and pensions under the Civil List Acts of 1837 and 1952;

(5) any sums payable in respect of such allowances and pensions by virtue of any provision so made should be charged on the Consolidated Fund;

(6) it is expedient to amend the law relating to the financial support of members of the Royal Household.

Ordered, That a Bill be brought in upon the foregoing Resolution;

That the Chairman of Ways and Means, the Prime Minister, the Deputy Prime Minister, Mr Chancellor of the Exchequer, Mr Secretary Clarke, Mr Secretary Hammond, Mr Secretary Hunt, Danny Alexander, Mr Mark Hoban, Mr David Gauke and Justine Greening bring in the Bill.

[The Treasurer of Her Majesty's Household (Mr John Randall)]

The Prince of Wales, having been informed of the subject matter of the Bill so far as it relates to the Duchy of Cornwall, recommends it to the consideration of the House.

Sovereign Grant Bill

Presentation and First Reading

Justine Greening accordingly presented a Bill to make provision for the honour and dignity of the Crown and the Royal Family; make provision about allowances and pensions under the Civil List Acts of 1837 and 1952; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 213).

Private Finance Initiative

Justine Greening Excerpts

Thursday 23rd June 2011 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

I pay tribute to my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) for securing this debate. The topic is incredibly important, and he has done a brilliant job of raising it high up the agenda and rightly so.

We have heard from many Members today, but not from as many Opposition Members as we might have expected. Many Members feel that the PFI has, in their experience and their constituencies, let them down. Nevertheless, one of the qualities of today’s debate was the balance demonstrated by hon. Members. Not all PFI contracts have been bad. Many have delivered good contracts. There have been bad ones for the taxpayer and bad ones for the private sector. The one that is particularly close to my heart, as my hon. Friend the Member for South Norfolk (Mr Bacon) has mentioned, is the public-private partnership for the London underground. Investment in my stretch of the underground was significantly delayed, because of its bad structure and the ultimate failure of both of the private companies that participated in it due to the losses that they were making as a result of their poor contracting. The topic is important.

My observation as an incoming Treasury Minister was that the background to the issue was all part and parcel of a much broader lack of financial management shown by the previous Government across government. I might address that later, if I have time, but I intend to leave a couple of minutes at the end to my hon. Friend the Member for Hereford and South Herefordshire to have a final say.

As my hon. Friend the Member for Wycombe (Steve Baker) and a number of other colleagues have pointed out, the main attraction for the previous Government in turbo-charging the PFI process was the fact that they were able to spend not only taxpayers’ money that was being earned at the time, but taxpayers’ money that had not even been earned and that would be earned at some point in the future. The main appeal of PFI for them was that it was off balance sheet. It was also unfortunate that it came at a time when that Government thought that they had abolished boom and bust and were saying that we all lived in the land of milk and honey. The general ethos that was applied to the public sector was to spend, spend, spend, get on with things, and be less worried about whether it was good value and just get on with the job at hand. My hon. Friend the Member for Worcester (Mr Walker) pointed out how that impacted upon his local hospital.

We have some problems. I will discuss what the Treasury is doing to try to sort some of them out, but we seem to have three main issues. One is a lack of accountability, which is an inherent risk in these contracts, mainly because of their longevity and the fact that the people who set them up will not be there to manage them or be accountable for them throughout their duration. There is also an issue of transparency, and I will talk later about what we are doing in that regard. Underpinning all that is the need for value for money and for having contracts in place that deliver on behalf of taxpayers in the way in which they are meant to. My hon. Friend the Member for Warrington South (David Mowat) put it very well: PFI can work, but the challenge is making sure that, in structuring our contracts, we end up with a win-win situation for the private sector contractor, for the public sector and for taxpayers. We can do that, but the challenge that we saw over the past decade is that it just did not happen often enough.

The shadow Minister asked about the number of contracts that we have signed off. No PFI contracts have been approved yet by the new Government, and we have put in place much more stringent processes to ensure that any contracts that go ahead have a much better prospect of being good value for money.

My hon. Friend the Member for Nuneaton (Mr Jones) asked whether the Government are looking closely to see how we can ensure that we get value for money. We are doing that—he is absolutely right to say that we should do it—and we are doing it across the board.

Many hon. Members discussed transparency, which I will discuss shortly. My observation is that one of the reasons why we are debating the PFI is that, ironically, there is perhaps more transparency in the PFI in some respects than there is across the rest of Government spend. One of the projects that I am leading on behalf of the Treasury is to introduce common chartered accounts. Any hon. Member who has been in business will find it fantastical to learn that the Government do not have common chartered accounts, but that is indeed the case. Once that system is in place, once we are able to upgrade the combined online information system database and once we can drive central Government further in terms of the transparency agenda, we will go through a similar process of lifting up the stone on central Government spend as we have done in relation to PFI contracts. Transparency is absolutely critical in that regard.

I want to outline where there is room for improvement. We are all aware that we face tough economic conditions and that we must ensure that we get value for money. The Government have already taken a number of steps to address many of the concerns about the use of PFI in funding public infrastructure, concerns that have been expressed in this important debate. I will go on to talk briefly about what we are doing in relation to existing contracts, but first I will talk about what we are doing to ensure that we can achieve good value for the taxpayer for new projects.

With new projects, value for money is, of course, the primary driver for the choice of procurement route. We are very clear that private finance should be used only when it can be demonstrated that it offers better value for money than a publicly financed alternative. As I have said, my hon. Friend the Member for Worcester made a powerful case in relation to that. We have already taken measures to strengthen the value for money assessment of new projects.

As the hon. Member for Solihull (Lorely Burt) pointed out, we abolished PFI credits in the 2010 spending review. Previously, funding for local government projects was ring-fenced. That had become a genuine cause for concern, because what it actually meant was that Government Departments and local authorities could use the PFI as a means to increase their budgets, with the potential for diverting funds away from more beneficial areas—areas that could have offered taxpayers better value for money. Now, the economic case for PFI projects must be compared by Departments and local authorities on a like-for-like basis with the other calls that they have on their budgets.

I have huge respect for my hon. Friend the Member for South Norfolk. His experience on the Public Accounts Committee goes back many, many years. As he pointed out, too often there has been insufficient competition and an insufficient ability for firms to compete. I actually felt that he was violently agreeing with my hon. Friend the Member for Stroud (Neil Carmichael) on the point about specifying contracts. The key is to specify contracts smartly, in other words tying down the details that need to be tied down in areas where we have certainty, as my hon. Friend the Member for Warrington South pointed out, but leaving flexibility in other areas—the right areas.

I remember that that issue arose when I was serving on the Work and Pensions Committee when I first came into this House, which I very much enjoyed. We looked at the EDS contract in relation to the Department for Work and Pensions. That point—the importance of flexibility—was one of the key things that came out of that process. I am sure that EDS will not mind my putting this on the record, but one of the challenges that it faced was that it was dealing with a Government who wanted to specify absolutely everything and therefore the cost of the contract absolutely ballooned. In fact, what was needed for that system was to retain an element of flexibility for future demands as they evolved. The key to success in all these contracts is people understanding not only what needs to be tied down in terms of the contract but, critically, where flexibility must be left.

We have issued new guidance, which the shadow Minister, the hon. Member for Bristol East (Kerry McCarthy), asked about, to strengthen the approvals for PFI projects. As of 1 April this year, any centrally funded projects that are outside a Department’s delegated authority have to go through a rigorous three-stage scrutiny and approval process with the Treasury. To put that in context, previously the Treasury only reviewed PFI projects when they were at the outline business case stage. After that, it was only the risky ones that were further reviewed. We now have a three-stage scrutiny process, which means that projects are subject to far more scrutiny as they are being developed. In addition, the largest and most risky projects in Government will be subject to a review by the Major Projects Authority, which has just been established by the Minister for the Cabinet Office.

We have also published guidance to help public sector bodies identify savings in their PFI contracts. I will come on to the Romford case study in a second and provide hon. Members with an update. All the measures that I have outlined should mean that we are better placed to ensure that only those projects that offer the best value for money to taxpayers can go ahead, which is absolutely right.

As for operational savings, clearly we have a number of PFI projects that are in place and operating right now. Therefore, it is about looking at not only new projects but the existing stock of PFI projects. As many hon. Members are aware, we have taken a strong interest in the pilot savings project that is currently under way at the Queen’s hospital in Romford. As my hon. Friend the Member for Hereford and South Herefordshire said in a recent newspaper article, we have taken a deep dive to get under the skin of the project to see where we can save money. He raised the idea of a rebate. Although we want to drive savings, it is a challenge to do that with contracts that are already in place, as the hon. Member for Walthamstow (Stella Creasy) pointed out. Nevertheless, we want to try to save money.

The pilot is nearing its conclusion, and we will be passing on the lessons that we have learned to the wider PFI portfolio—of course, there will some lessons that are not applicable. Given the commercial sensitivity of the pilot, it is probably inappropriate for me to comment in more detail before it is completed. However, I assure hon. Members that the pilot has made good progress and that there will be lessons that we can take from it to help to achieve better value for money from existing contracts.

My hon. Friends the Members for Wycombe and for North East Cambridgeshire (Stephen Barclay) asked about guidance. We have been seeking industry agreement to a new voluntary code of conduct to support the idea of achieving operational savings from other PFI projects. That is important not only for getting better value for money but for driving better standards of transparency, so it is clearer to the outside world what contracts are delivering for the general public. We also issued some draft operational savings guidance in January 2011. Therefore, although the pilot in Romford is still ongoing, we have already issued some guidance on where further savings can be made.

As for the PFI rebate, the Chancellor and the Commercial Secretary have both met my hon. Friend the Member for Hereford and South Herefordshire. We fully support the principle of making savings in PFI contracts and we will look carefully at how we can do that over the coming weeks, months and years.

The Government want to improve the financial transparency of PFI projects. We currently collect and publish data on each PFI project twice a year. That includes information on the capital value, the equity owners and the full stream of payments over a project’s life. The Cabinet Office is now publishing tender documents and contracts for all future central Government projects over £25,000, and that will capture privately financed projects.

My hon. Friend the Member for Wyre Forest (Mark Garnier) mentioned the PFI equity issue and the trading in secondary markets. We agree that more can be done in that area and that there is not sufficient transparency around investor returns, particularly with regard to secondary market sales. The Treasury is now collaborating with the National Audit Office to look at PFI equity issues, including not only transparency, but equity risk issues and equity returns. We are currently working with it to ensure that we scope that work stream effectively to obtain output that will be of use to the Government. We are also engaging with PFI investors and contractors to reach agreement on the voluntary code of conduct, as I have said, and transparency will form a critical part of that.

Value for money, not the accounting treatment, should be the key determinant of whether a PFI scheme goes ahead. We have talked briefly about the fact that public-private partnerships have been left off Government balance sheets. The whole of Government accounts project, which will be completed in the coming months, is basically, in a nutshell, the Government’s first set of consolidated accounts. They will be done under international financial reporting standards—in other words, proper accounting standards—and they will put that liability on the balance sheet, so giving us a sense of what it is for the first time. That will show the massive liabilities that were run up by the previous Government not only for our generation but for future generations.

The Green Book covers offshore tax. I understand the point made by the hon. Member for Walthamstow. From my experience of having worked in business, of course we want to look at the bottom bottom line, but we also need to be pragmatic in understanding that companies will always look at their tax position. If they think that they are having to move onshore and are disadvantaged by doing so, there is always a sneaky suspicion that they will recoup that lost cost elsewhere. It is not quite as straightforward as simply saying that we should not use any company based offshore.

The key challenge for us all is to ensure that we have a more competitive tax system in the first place that does not drive companies offshore, which is why we are reducing corporation tax year on year. I very much hope that the hon. Lady will find time to support and vote for that when the Finance (No. 3) Bill finally goes through. The best way to tackle offshore tax is to have a competitive tax regime that makes companies want to stay in the UK and be based here for tax in the first place.

[Stella Creasy]

I am interested in what the Minister has said. Does that mean that the Treasury will rewrite the Green Book, so that it does not take account of the potential tax take under a PFI, if she is saying that offshore tax avoidance is unavoidable in some circumstances, given that it is part of the value-for-money decision on a PFI? There is a specific point about PFI and tax, so will the Green Book be rewritten, so that it is not part of the decision in future?

[Justine Greening]

We are not going to rewrite the Green Book. My point is that there are a number of variables in any PFI contract. There are several variables in the overall propensity for it to be profitable for the taxpayer in relation to value for money or for the private sector firms considering engaging in it. Tax is one of those variables. Obviously, it can change, as can the costs, which the parties to the public-private partnership for the tube discovered once they became engaged in it. We need to tackle the underlying issue that, under the previous Government, Britain became uncompetitive in the corporation tax world. We have got to get back to being more competitive over the coming years, which is exactly what we plan to do.

We are working on the skills agenda across Government. I do not have time to go into that now, because I want to give a minute to my hon. Friend the Member for Hereford and South Herefordshire. I assure hon. Members that we recognise that, as does the civil service. There is currently a huge review of skills going on across government to ensure that we have the right skills in place. We have therefore taken a number of steps. I know that my hon. Friend wants to come in, so I will conclude my remarks.

The Economy

Justine Greening Excerpts

Wednesday 22nd June 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

This has been an important and excellent debate, with good contributions from both sides of the House. The best Opposition contributions were made by newly elected Labour Members, and I have no doubt that they will look back on this period as the dark days of deficit denial by the Labour party. [Interruption.]

Throughout this important debate, the Opposition failed to mention, let alone welcome, that in the last year exports are up, industrial production is up, manufacturing is up, investment is up, employment is up, unemployment is down and, most importantly—[Interruption.]

[Mr Speaker]

Order. The Minister must be heard by the Opposition, and also, one would hope, with some respect by her own side.

[Justine Greening]

Most importantly of all, the private sector has created half a million jobs, and I would have hoped that the whole House could have agreed that that is good news for the country, as my hon. Friends the Members for Witham (Priti Patel) and for Thurrock (Jackie Doyle-Price) said. We must not talk down the economy, but the Opposition have persistently done so.

As the International Monetary Fund has said,

“repair of the UK economy is underway.”

Of course that is a difficult task, and of course recovery will be choppy, but that is because our predecessors left us with an unprecedented and unenviable challenge, as was eloquently pointed out by my hon. Friends the Members for Dover (Charlie Elphicke), for Gloucester (Richard Graham) and for Elmet and Rothwell (Alec Shelbrooke). They understand the problem the country faces, and their constituents knew that, which is why they chose a different and a better Government.

Many people in our country will be incredulous that the Opposition have had the gall to come here today and lecture MPs about economic credibility, because the shadow Chancellor and the Labour party have absolutely none. Their legacy to the British people was higher unemployment, a broken economy and enormous debt. The shadow Chancellor said a lot, but there was one word missing from his speech that people would have liked to have heard: sorry. There was no apology for the disastrous mess his party left on leaving office, and no acceptance of responsibility for its actions. The shadow Chancellor is still in denial about there even being a structural deficit—if he wants to confirm that he does think there is a structural deficit, he can intervene on me now.

If the shadow Chancellor had spent less time when he was a Minister plotting with his political master, he might have done a more effective job. He was the architect of the tripartite banking regulatory scheme that failed so badly. He was the City Minister when the City went off the rails. He was the economic adviser to the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he ran up a structural deficit that the OECD described as a snowballing of debt.

Many people in our country would not put the shadow Chancellor in charge of their household finances, let alone the nation’s finances, yet he called for a debate on the economy today. We might have expected him to have something meaningful to say, therefore, but he did not. There were no plans to tackle the deficit at all; not a word on how to rebalance the economy and replace some of the 1 million manufacturing jobs that were lost between 1997 and 2007; nothing on financial services reform; and hardly any mention of his party’s VAT proposal. That seems to have fallen apart within days. Members on the Government Benches talked more about that than Labour Back Benchers. When the VAT rise went through last year, what did the Opposition do? They abstained. They did not stand up and say that it was wrong. A few months later, however, they decided that there should be a VAT reduction on fuel, and now, even before the Finance Bill has completed its passage, they want a VAT reduction on everything. This is policy made on the hoof.

Today’s motion refers to halving the deficit, but we have heard not a word from the shadow Chancellor on how he would do that or on their spending plans. The bottom line is that those plans do not exist. He is trapped by misguided, discredited and irrelevant policy, and yet he still runs with it. He used to be a bruiser, but now he is a kitten. He is Macavity’s kitten trapped in his own ball of policy wool which he has woven around himself, churning out the same old lines that will take neither his party nor the country forward.

We heard many contributions from Labour Members, but I must say that they were let down by their Front Benchers, who clearly have no economic alternative. All they have is pointless opposition. We heard a lot of amnesia from them on employment. Let us remember that they left unemployment higher, just as every Labour Government before them did. Presumably they will say that that was the result of the recession. Presumably they think it is a coincidence that every Labour Government leave Britain’s economy in crisis. The amnesia goes deeper. We heard amnesia on social housing. Somehow they think that they created lots of social housing.

[Ed Balls]

Will the hon. Lady clarify something for the House? During Prime Minister’s questions today the hon. Member for Clacton (Mr Carswell) said that the hon. Lady had signed a memo on the European financial stabilisation mechanism after the election stating that cross-party consensus had been agreed on the matter. Will she clarify whether she signed the letter and whether such a consensus had been reached? If so, was the Prime Minister wrong when he said today that there was no consensus?

[Justine Greening]

Well, there is a cross-party consensus, because his party agrees with it. We are now in government, so I do not think that that is particularly complicated. He is trying to waste my time, so I will make a little more progress.

The bottom line is that the Labour party has only one economic policy: spend, spend, spend. When times are good, their policy is to spend, spend, spend, because they can afford to. When times are bad, their policy is to spend, spend, spend, because they cannot afford not to. It is no wonder that this Government ended up mired in debt when Labour left office. The hon. Member for Airdrie and Shotts (Pamela Nash) talked about the previous Government’s record but was unaware that she had abstained on the VAT rise. As we have seen with the overall VAT policy, there is clearly a huge disconnect between their Front and Back Benches. After all that spending and the creation of the structural deficit, even Labour Members asked themselves, “We’ve spent all this money, but what have we got for it?” The answer is, “Not enough”.

When the Opposition called this debate, people might have been entitled to think that they had something relevant to say on the economy, but they do not, and we have seen that demonstrated again. We do have a plan. As my hon. Friends the Members for Bromsgrove (Sajid Javid), for Spelthorne (Kwasi Kwarteng) and for Ipswich (Ben Gummer) all pointed out, it is a plan backed by the IMF, which described it as essential. It is a plan backed by the OECD, which described it as vital. It is a plan backed by the CBI, the rating agencies and pretty much everyone who understands why it is important that we get our economy back on track and our public finances back in order.

We have a plan to rebalance the economy, generate growth and ensure that those communities that can most benefit from the new jobs do. We have a plan to create the most competitive business tax regime in the G20. We have plans for more apprenticeships and work placements—

[Mr Alan Campbell (Tynemouth) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Question put accordingly (Standing Order No. 31(2)), That the original words stand part of the Question.

Oral Answers to Questions

Justine Greening Excerpts

Tuesday 21st June 2011 Commons Chamber

[Tony Baldry (Banbury) (Con)]

9. What fiscal measures he is taking to encourage bequests to charities.

[The Economic Secretary to the Treasury (Justine Greening)]

At the Budget this year we announced the most radical and generous series of charity tax reforms for more than 20 years. The measures were not just about improving support for gift aid and payroll giving—we also introduced new measures to improve the inheritance tax system so that we can encourage more bequests.

[Tony Baldry]

What estimate has my hon. Friend made of the number of charities that will benefit from the raising of the gift aid limits, the simplification of gift aid administration and the introduction of the gift aid small donation scheme?

[Justine Greening]

My hon. Friend is right to point out that we have taken a number of steps to improve the ability of gift aid to help charities. There are about 100,000 charities and community and amateur sports clubs currently registered for gift aid, all of which should be able to benefit in part or in entirety from these changes.

[Ian Lucas (Wrexham) (Lab)]

The reality of the Government’s approach to charities is that they have imposed a tax burden on charities by increasing VAT. If the Minister really wants to do something positive for charities, why does she not extend to them the same tax relief relating to VAT that is extended to local government?

[Justine Greening]

I emphasise to the hon. Gentleman that the measures we came up with for the Budget were ones that we talked to charities about in order to pull together. Over this Parliament, the measures will encourage approximately £600 million more going to charities from donations, and I think that all hon. Members across the House should welcome that.

[Paul Blomfield (Sheffield Central) (Lab)]

10. What assessment he has made of the level of taxation of banks.

--- Later in debate ---

[Andrew Gwynne (Denton and Reddish) (Lab)]

14. What assessment he has made of the progressive effects of the measures in the June 2010 Budget which have been implemented to date.

[The Economic Secretary to the Treasury (Justine Greening)]

As the House knows, the Government published huge amounts of analysis of the impact of the measures announced in the Budget of June 2010. The majority of the measures have now been implemented. The charts in the Budget book show that the most well-off households make the largest contribution to the fiscal consolidation, both in cash terms and as a proportion of their net income.

[Andrew Gwynne]

I am grateful to the Minister for that reply, but has she seen the analysis produced by the House of Commons Library and my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) showing that the measures in the last Budget hit women three times as hard as they hit men? Why is that?

[Justine Greening]

I do not accept the premise of the hon. Gentleman’s question at all. As ever, what we have heard from the Opposition is a cheap political point-scoring jibe. They might be better advised to come up with an alternative plan for tackling the fiscal deficit. The hon. Gentleman had nothing to say to my response to him, which implied that it is the most well-off households in the country that are bearing the brunt of the fiscal consolidation.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

A year ago, when the Institute for Fiscal Studies analysis found that the Budget was a regressive one, the Treasury objected to that analysis on the basis that the IFS had not properly considered the incentives to economic growth that the Budget contained, but given that growth is now flatlining and seems to be frequently downgraded, is the Treasury willing to accept that the IFS analysis last year was entirely correct?

[Justine Greening]

The IFS analysis was very clear-cut that it was indeed the most well-off people in our country who were bearing the brunt of the fiscal consolidation measures. I draw the House’s attention to the need to look at the overall impact of not just the Budget 2010, but the spending review and the Budget this year. They show that the most well-off people in our country are bearing the brunt of the fiscal consolidation, whether that is measured in terms of their income or of their expenditure.

[Mr Philip Hollobone (Kettering) (Con)]

The incentives for job creation in the June 2010 and subsequent Budgets are to be welcomed, but given that for every 10 new jobs eight go to foreign-born workers, what more can be done to encourage the employment of the indigenous work force?

[Justine Greening]

As my hon. Friend knows, one of the key aspects of the Budget this year was to launch “The Plan for Growth”. A key part of that was to provide for more apprenticeships and more work experience so that we can make sure that people have the right skills that companies in this country need.

[Alison McGovern (Wirral South) (Lab)]

18. What assessment he has made of the most recent growth forecast by the Office for Budget Responsibility.

--- Later in debate ---

[Mr Denis MacShane (Rotherham) (Lab)]

T2. Has the Chancellor by chance seen the interesting analysis by the House of Commons Library showing that the measures in his Budget will affect women three times as adversely as they will affect men? Is he a misogynist?

[The Economic Secretary to the Treasury (Justine Greening)]

rose—[Interruption.]

[Mr Speaker]

Order. Mr Ruane, I want to hear the Minister’s answer.

[Justine Greening]

The right hon. Gentleman’s hearing must be suffering, because he obviously did not hear my earlier answer to the hon. Member for Denton and Reddish (Andrew Gwynne).

[Mr Aidan Burley (Cannock Chase) (Con)]

T4. Dr Adrian Steele, the managing director of Mercian Labels in Cannock, has just been named as one of the midlands’ most promising entrepreneurs. His company supplies labels and barcodes to the medical industry and employs 32 people. Does the Chancellor agree that it is small business entrepreneurs such as Dr Steele who will grow our economy back to strength, and will he continue to support manufacturers, who were shamefully neglected by the Labour party?

--- Later in debate ---

[Henry Smith (Crawley) (Con)]

Last week, a consortium of regional airports called for a congestion tax on London airports such as Gatwick in my constituency. Will the Treasury rule out such an absurd and, frankly, anti-free trade measure?

[Justine Greening]

My hon. Friend is right to refer to the importance of the aviation sector. As he will know, the consultation on reform of air passenger duty closed last Friday, and we have received a number of different representations from stakeholders. He will be aware that this is partly about looking at what we can do to support regional airports, but we certainly do not want to do that at the expense of our other key airports in the south-east.

[Mr Chuka Umunna (Streatham) (Lab)]

Several figures have been cited about the number of jobs created over the past 12 months. What percentage of those jobs were created before the spending review and are arguably attributable to the last Government, and what percentage have been created since?

Motoring Fuel Costs

Justine Greening Excerpts

Tuesday 14th June 2011 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to serve under your chairmanship, Mrs Brooke, and I congratulate my hon. Friend the Member for Harlow (Robert Halfon) on securing this important debate—Harlow is a place I know well as I used to work there many years ago. He is one of a number of MPs who represent their constituents well by talking to the Government and Ministers about the concerning cost of fuel, and about how that is impacting on the ability of businesses across Britain to employ people, and on families and household finances.

In the short amount of time available, I would like to say why the Government agree that the cost of fuel is a concern, and mention some of the actions that we have taken to try to address that. I will then say a little about some of the things that we think need to happen during the rest of this Parliament.

[Mr MacNeil]

Does the Minister, or her Department, have any suspicion that high oil prices are the revenge of oil companies for the £2 billion that the Chancellor raised in the Budget through the North sea tax, which also threatens perhaps 15,000 jobs? Oil companies are losing money to the Government in one way, and are penalising consumers and people up and down the country.

[Justine Greening]

The hon. Gentleman raises an interesting point, but the price of oil is a spot price driven by commodity markets. We are talking about a part of the industry that is different from the area in which we chose to raise tax. We are working with industry to ensure that we mitigate any risk of a lessening of investment in the North sea as a result of that tax. As my hon. Friend the Member for Harlow pointed out, we needed to strike a balance to take into account the overall effect of high oil prices as they fed through into the broader economy in petrol prices and energy prices more generally.

The hon. Gentleman will be aware of the report from the Office for Budget Responsibility. It showed clearly that, although the Exchequer has some growing tax receipts, the dampening effect of the rest of the economy is also significant. We felt that although there was an overall impact on the economy, one sector—the oil companies—was doing much better from a high oil price. It seemed fair and sensible to look at how we could balance some of the value that was being generated by the high oil price, and to create a fairer split between oil companies and those motorists and businesses that bear the brunt of the prices at the pump. We are working hard with industry to mitigate the impact of our policy on investment—the impact was analysed as being small by industry observers such as Wood Mackenzie. This is an important debate, and the Government recognise that motoring is an essential part of life for households and businesses. Fuel costs affect us all, and as the price of petrol continues to rise, those costs have become an evermore significant part of everyday life for people and companies. We were keen to look at what could be done.

The previous Government left us facing the introduction of a fuel escalator from the 2009 Budget that would have involved seven fuel duty increases. I realise that in this half-hour debate, only a Government Minister gets the chance to respond to the Member who secured it, but I am disappointed that a shadow Minister is not present to listen to some of the concerns raised. One of our biggest challenges concerned how to deal with the proposed above-inflation increase in fuel duty. That increase could have resulted in average prices at the pump being 6p per litre higher than they are currently. We would have seen above-inflation rises in 2012, 2013 and 2014. When we took office, no plan was in place to support motorists, and within the huge financial constraints in which we found ourselves, and with little room for manoeuvre, we had to see what we could do to address such an important issue.

[Mr Russell Brown]

I am sure that my colleagues will read Hansard tomorrow to see exactly what has been said. The Government inherited potential increases in fuel duty and the Chancellor has done the right thing by removing the fuel duty escalator, just as the previous Labour Government did. We also froze proposed increases in fuel duty on 11 occasions because of the increase in the price of crude oil.

[Justine Greening]

What was missing, however, was any kind of long-term plan for how to deal with changes in the price of oil feeding through to the pump. We wanted to look at how a stabiliser mechanism would work, which we felt would be in the interests of households, companies and the overall economy.

[Mr Robin Walker (Worcester) (Con)]

I have been listening carefully to the Minister and, like other hon. Members, I am grateful for the actions that the Government have already taken. One issue that has been raised by Back Benchers from all parties concerns differential pricing around the country. There are sharp differentials—a difference of about 5p between petrol prices in Worcester and those 20 miles away in Cheltenham. Will the Minister comment on how the Government could address that issue and increase transparency, as my hon. Friend the Member for Harlow (Robert Halfon) has urged?

[Justine Greening]

My hon. Friend is right to raise that point. In a sense, the most extreme examples of that problem are the reason why we are bringing in a pilot scheme for the rural fuel rebate. We are making progress on that.

[Mr MacNeil]

When might we see that welcome rural fuel rebate and rural fuel derogation? We have been calling for such a measure for years, and although we welcome the progress made, we would like to have a date fairly soon.

[Justine Greening]

I say, “Me too” to that. We are working with the European Commission, and once we have clearance, we will get on with the pilots as soon as possible. We are keen to make progress on the issue, and I assure the hon. Gentleman that we are working and making our case in Europe. We must get agreement from the Commission, and unanimous agreement from European Finance Ministers. Once we have that agreement, we will be pushing on with the pilot schemes.

[Andrew Percy]

If we left the European Union, we would not need that permission—that is a debate for another day. I have some concerns about the rural fuel derogation applying in some areas but not in others. Rural areas such as my constituency have a low-wage economy. We have poor bus services and high toll-bridge costs—I know the Minister is committed to doing something about that, which is pleasing. A rebate should not apply to one rural area but not to others; we should be careful about doing that.

[Justine Greening]

We need to help families across the board. That is one reason why raising the personal tax allowance was critical—in any other Budget that measure would have got a huge amount of attention, but perhaps because of the other things we did, it got less consideration. The provision will benefit the lowest paid workers, and this year’s rise in allowance, together with that of next year as announced in the Budget, will take 1.1 million people out of paying income tax altogether. We are right to have a targeted package to help motorists, and we know how important that is. We are also right to make progress on our commitment to increase the personal allowance. Such a measure will help many of those who feel the pinch most when the cost of living goes up.

[Anna Soubry (Broxtowe) (Con)]

I am meeting hauliers next week and I speak on behalf of many people. Does the Minister have a message of hope for all motorists and hauliers in particular?

[Justine Greening]

We scrapped the fuel tax escalator and we understand how motoring impacts on the broader economy. Prior to the Budget, I was keen to meet groups such as FairFuelUK and motoring stakeholders. I assure my hon. Friend that I will continue to do what I can to stay close to the industry, and I will work with my hon. Friends in the Department for Transport to look at an overall approach that will support our economy as well as supporting hauliers, motorists and businesses.

Debt Management Office

Justine Greening Excerpts

Tuesday 17th May 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

The United Kingdom Debt Management Office (DMO) has today published its business plan for the year 2011-12. Copies have been deposited in the Libraries of both Houses and are available on the DMO’s website, www.dmo.gov.uk.

Charter for Budget Responsibility

Justine Greening Excerpts

Wednesday 11th May 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I beg to move,

That the Charter for Budget Responsibility, a copy of which was laid before this House on 4 April, be approved.

I welcome the opportunity to bring forward the charter for budget responsibility for the approval of the House. The charter sets out the Government’s new fiscal framework following the passage of the Budget Responsibility and National Audit Act 2011. I will start by setting out the context for the reformed framework.

Following the general election last year, the coalition Government inherited the largest budget deficit in our peacetime history, which was forecast to be the largest in the G20. Our structural deficit was the largest in Europe. The fiscal situation that we inherited was unprecedented, so on coming into office, the challenge that we faced as a new Government of two parties working together to resolve the problems left by the Labour party was to bring order back to our nation’s finances. The new fiscal framework contained in the charter is at the heart of that task. We published a draft of the charter in November last year, which provided time for substantial scrutiny. Indeed, it was considered at all stages of the passage of the 2011 Act. Perhaps before I get into the details of it, it would be helpful if I set out the Government’s broader fiscal aims.

We believe that fiscal policy should restore sustainability to the public finances. That is essential so that we can reduce our vulnerability to shocks or a loss of market confidence, underpin private sector confidence, support growth and avoid an irresponsible accumulation of debt at the expense of the next generation. We have taken tough and decisive action since taking office, and of course last May, the immediate reduction of in-year spending brought us much-needed breathing space given the acute sovereign debt concerns across Europe.

The emergency Budget in June was the moment when credibility was restored to Britain’s public finances, and in the 2010 Budget my right hon. Friend the Chancellor set out the Government’s fiscal mandate, which is now, for the first time, included in a statutory document, which is the charter that we are debating tonight. That mandate requires the Government to balance the structural current deficit by the end of the rolling five-year forecast period, and it is supplemented by a target for the public sector debt ratio to be falling at a fixed date of 2015-16.

The measures that we set out in the emergency Budget, alongside the departmental allocations that we set out in the spending review, represent a comprehensive four-year plan to meet that fiscal mandate. The 2011 Budget reaffirmed the Government’s consolidation plans set out last year, and reinforced them by implementing a balanced set of tax and expenditure policies. In the assessment of the Office for Budget Responsibility, we are currently on track to meet the mandate and the supplementary debt target one year early, in 2014-15.

[Mr John Redwood (Wokingham) (Con)]

Does the Minister recall that the decision was taken in the March Budget to increase both spending and borrowing by £34 billion over the following four years? Will she remind the House why we did that?

--- Later in debate ---

[Justine Greening]

We are introducing a series of measure that will, over time, tackle our underlying structural deficit. My right hon. Friend makes the point that in the meantime we need to borrow to pay off the structural deficit, which the country will continue to have until we have been through the process of fiscal consolidation. Until our nation’s finances are in balance, we face a challenge, because debt interest payments will continue to increase. If we had not taken the action that we are taking, we would have the added problem that the rate of interest on that debt would also increase. It is important that we get a grip on the debt interest rate that we are paying, that we tackle the problem now and that we do not leave the problem of debt and the fiscal deficit to future generations. We need to get into a position in which the debt is affordable, because it is currently squeezing the availability of money to spend on the public services on which we all depend. It is critical that we continue with that plan.

Angel Gurría, the secretary-general of the OECD has urged our country to “stay the course”, which is precisely what we will do. Our plan has been praised by the international community and welcomed by the financial markets. As I have said, that will hopefully enable us to keep those interest rates lower for longer. Both the International Monetary Fund and the OECD went from issuing warnings and cautions to the UK regarding economic management under the previous Government to calling this Government’s measures essential and courageous. This Government’s decisive action has therefore taken Britain out of the financial danger zone, and the crucial first step in that process was restoring the credibility of our fiscal policy by replacing the fiscal framework. The charter sets out the new framework before Parliament and for the public.

Perhaps I should remind the House why the Government set up the Office for Budget Responsibility. The previous Government’s forecasts for economic growth over the past 10 years were, on average, out by £13 billion, and their forecasts of the budget deficit three years ahead were, on average, out by £40 billion. Those forecasting errors were almost always in the wrong direction. In fact, all the previous Government’s forecasts for borrowing for more than two years ahead since Budget 2000 underestimated the eventual figure. It is vital for credibility and confidence that the forecasts for the economy and public finances are produced independently, which is why we established the OBR.

In June 2010, the interim OBR produced an independent assessment of the economy and public finances ahead of the emergency Budget. Then, at the Budget, the OBR produced a revised forecast on the basis of the consolidation measures announced by the Government. In November, the OBR produced its economic and fiscal outlook under the leadership of Robert Chote, whose appointment last year was scrutinised and confirmed by the Treasury Committee.

We have moved the OBR on to a permanent status that is underpinned by primary legislation. The 2011 Act establishes in statute the provisions necessary to secure the OBR’s independence, and it received Royal Assent on 22 March. The permanent budget responsibility committee led on the production of the OBR’s March economic and fiscal outlook, which was published alongside the Budget 2011.

The origin of the charter lies in the 2011 Act, which requires the Government to prepare a charter relating to fiscal policy and the management of the national debt, just as with the previous code for fiscal stability. However, the 2011 Act enhances the requirements for the charter compared with the code, because it provides that the charter must formally set out the Government’s fiscal objectives and mandate. The charter must in addition specify the minimum contents of the Budget report. The 2011 Act states that the charter may include guidance to the OBR on how it should perform its duties. Finally, the 2011 Act requires the Government to lay the charter before Parliament. The charter fulfils all those requirements, consistent with the 2011 Act and the remit of the OBR.

The first part of the charter covers the Government’s fiscal framework. It sets out that the Government’s two fiscal objectives are first to ensure sustainable public finances that support confidence in the economy, promote intergenerational fairness and ensure the effectiveness of the wider Government policy, and secondly to support and improve the effectiveness of monetary policy in stabilising economic fluctuations.

As we have heard, the Government’s fiscal policy mandate is a forward-looking target to achieve cyclically adjusted current balance by the end of the rolling five-year forecast period. At this time of rapidly rising debt, that mandate is supplemented by a target for public sector net debt as a percentage of GDP to be falling by a fixed date of 2015-16. That will ensure that the public finances are restored to a sustainable path.

Crucially, the charter cannot simply be ripped up and rewritten whenever is convenient for a Government. Instead, if the Treasury wishes to alter the mandate, it must follow the formal process set out in primary legislation and return to the House for approval, which enhances the Government’s accountability to the House for their fiscal targets. The charter reiterates the Government’s intention also to adopt as the official forecast the OBR’s economic and fiscal forecast, and if the Treasury wishes to disagree with the OBR’s forecast, it will have to explain why to Parliament. Finally, the charter sets out the Government’s debt management objective and how they will set and report on their financing remit. The charter covers each element of the Government’s fiscal policy framework in a statutory document that the House has the ability to approve, enhancing the Government’s accountability for their fiscal policy.

I turn now to the second part of the charter. It is an important part of the charter that provides guidance to the OBR on its role and duties. The OBR’s main duty, as set out in the 2011 Act, is to examine and report on the sustainability of the public finances. The OBR has complete discretion over how it carries out its statutory duties, and the 2011 Act makes it clear that in all its work the OBR must be objective, transparent and impartial. As part of this independence, the OBR has the freedom to decide the methodology that it uses, the forecast judgments that it takes, the contents of its documents and its work programme for future research and analysis. This independence is delivered through the 2011 Act and therefore protected in primary legislation.

The purpose of this part of the charter is to set out extra detail on the OBR’s statutory responsibilities within the scope of the legislation. The charter requires the OBR to produce forecasts that cover at least five financial years, that provide sufficient information to allow the Government to use them as a basis for policy decision and that include all the Government’s announced policy decisions. The OBR must also set out the key assumptions that underpin its forecasts. In fact, it has already published far more detail in its assumptions and judgments than previous Budget and pre-Budget reports. The 2011 Act ensures that this will continue in future publications, while the charter provides further detail on the set of economic variables and fiscal aggregates that the forecasts should include.

Of course, at this time of heightened uncertainty, the charter also sets out that the OBR must be clear about the risks that it has factored into its forecasts. The OBR forecasts result in an assessment whether the Government are on track to meet their fiscal mandate, and the charter also sets out that the OBR independently scrutinises and certifies all the policy costings that feed into its fiscal and economic forecasts. Importantly, the 2011 Act ensures that the OBR has a right of access to all Government information it requires to deliver its remit.

As well as medium-term forecasts, the OBR will look to the longer term. As we have heard, the OBR has a duty to report on the sustainability of the public finances. It will therefore produce an annual fiscal sustainability report that will include long-term projections of the public finances covering the next 50 years. The first report is due out on 13 July. The charter sets out that as well as those projections, the report will include an assessment of the public sector balance sheet. The OBR will also analyse its forecasting performance, drawing lessons for future forecasts from the inevitable differences between its forecasts and out-turn data.

Finally, the charter provides guidance on a number of administrative questions on the timing of interaction between the Treasury and the OBR. These are necessary to ensure that the complex Budget process runs smoothly while preserving the OBR’s freedom to act independently. There is also a memorandum of understanding agreed between Robert Chote, as chair of the Office for Budget Responsibility, and other Departments to support their working arrangements. The charter restates and reinforces the independence of the OBR, and none of the guidance undermines its impartiality or objectivity.

This charter lies at the heart of our reformed fiscal framework. It strengthens institutional arrangements, reinforces the independence of the OBR and restores credibility and confidence to the public finance forecasts.

--- Later in debate ---

[Kerry McCarthy]

We cannot get into a whole debate about macro-economic policy. Needless to say, I disagree with the hon. Gentleman’s analysis of how the financial crisis occurred. The point I was making—the intervention was not particularly relevant to it—was that this Government’s action in reducing the deficit too far and too fast is hitting people at the bottom end of the income scale far harder than it is hitting people such as bankers. If the Government were to adopt our suggestion of introducing a banking bonus tax again this year, as we did last year, they would not have to make cuts that hit people at the bottom so hard.

[Justine Greening]

I find the hon. Lady’s comments ironic in a debate welcoming a charter that sets out some guidelines on the operation of the Office for Budget Responsibility—an independent group of forecasters who have looked at and then provided input into distribution analysis showing that the richest people have borne the greatest burden of deficit reduction. I do not understand how we can have that debate on the one hand, yet hear the hon. Lady saying on the other hand that the burden has fallen on the most vulnerable. This Government have worked hard to protect the most vulnerable.

[Kerry McCarthy]

I shall come in a few moments to some of the Government’s measures that have done precisely the opposite of what the hon. Lady claims. Will the Minister explain why thousands of people with disabilities—people in wheelchairs, people with chronic illnesses and so forth—were protesting outside Parliament today under the banner of the Hardest Hit campaign, supported by reputable charities? Is she saying that being hit by what the Government are doing is a figment of their imagination?

--- Later in debate ---

[Justine Greening]

With the leave of the House, I shall sum up the debate and respond to some of the points that have been made. I thank hon. Members for their contributions. As I said at the start of this evening’s proceedings, it is essential that we restore the sustainability of the public finances. My right hon. Friend the Member for Wokingham (Mr Redwood) set out clearly the challenges that we face in doing that, the steps that we are taking and why they are so important.

The hon. Member for Bristol East (Kerry McCarthy) asked about the relationship between the OBR and the Bank of England and their ongoing discussions. Ultimately, it is for the OBR to decide how it wants to work with the Bank of England. It must make those decisions on its own and carry them out independently. The OBR’s forecast will be used as an official forecast for the Government. As the hon. Lady knows, that is provided for in the Budget Responsibility and National Audit Act 2011 and in the charter. She asked what would happen if the Chancellor of the day did not agree with the OBR forecast. He would have to come to the House and explain why not, and he would be accountable. That is one of the safeguards that we put into the Act, and it will strengthen the OBR’s role.

The hon. Lady raised concerns about paragraph 4.12, about the OBR not providing “normative commentary”. We had the debate in Committee and as the Budget Responsibility and National Audit Bill passed through Parliament. It is critical that we preserve the OBR’s impartiality by ensuring that it never gets dragged into political debate on specific policy measures. Paragraph 4.12 puts that beyond doubt.

I take this opportunity to reassure my right hon. Friend the Member for Wokingham. He spoke about ensuring that the OBR does its job, not just in terms of what it is meant to be doing, but in terms of the quality. As he knows, the Act—the relevant schedule—provides for the OBR to have non-executive members. It will periodically have an external review of its effectiveness. Aside from the normal scrutiny mechanism, the House can ask the Treasury Committee to examine the effectiveness of the OBR. So those safeguards will be in place to make sure not only that the OBR operates as intended and operates independently, but that there will be scrutiny of the quality of its work. One of the reports that it must publish periodically is its own assessment of how effective it is at forecasting.

With those safeguards in place, the charter, along with the Act, restores confidence and credibility to the public finances. It sets a reformed fiscal framework before Parliament and the public and complements the Act by providing extra detail on the OBR’s duties within the scope of it.

My hon. Friend the Member for Macclesfield (David Rutley) talked about his role on the Treasury Select Committee. I think that he was wise to point out that the Committee has a unique role, in relation to other Select Committees, because it will have a role in appointing members to the budget responsibility committee. That is an important role that will also strengthen the OBR’s organisation and its evolution over time.

The OBR has complete discretion over how it performs its statutory duties. It will make its own judgments on the economy and public finances and will use its own methodology to produce forecasts. It will make its own assessment of the Government’s performance against the mandate. The charter reinforces that independence and, by providing greater clarity on the interaction between the Treasury and the OBR, sets out the OBR’s key relationships and how it will work with the Treasury and other Government Departments. The charter reiterates our intention to adopt the OBR’s economic and fiscal forecasts as the official forecasts, as we have done since last May.

The hon. Member for Bristol East asked whether the Chancellor will respond to those forecasts as they come out. He has in fact responded with an oral statement to every forecast the OBR has published to date. Compared with the code for fiscal stability introduced by the previous Government, the charter provides a greater degree of accountability before Parliament for the fiscal framework. It requires us to set out formally our fiscal objectives and mandate before Parliament and specifies the contents of the Budget report. The hon. Lady said that it is obvious that there will need to be a Budget report, but I still think that it is important to have that clearly set out. Many people expected the previous Government to get on with the ordinary course of business by having a comprehensive spending review, but of course that was cancelled. Therefore, I think that it is important to put what seem to be normal assumptions about how a Government should approach things into the charter, which is precisely what we have done in relation to the Budget report.

In conclusion, the charter reflects our commitment to restore order to the public finances. It sets out our fiscal objectives and mandate for parliamentary approval. It strengthens governance arrangements and institutions and reinforces the independence of the OBR.

Question put and agreed to.

Resolved,

That the Charter for Budget Responsibility, a copy of which was laid before this House on 4 April, be approved.

Common Consolidated Corporate Tax Base

Justine Greening Excerpts

Wednesday 11th May 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I beg to move,

That this House considers that the Draft Directive to introduce a Common Consolidated Corporate Tax Base (European Union Document No. 7263/11) does not comply with the principle of subsidiarity, for the reasons set out in chapter 2 of the Twenty-seventh Report of the European Scrutiny Committee (HC 428-xxv); and, in accordance with Article 6 of the Protocol on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the presidents of the European institutions.

I am pleased to have the opportunity to discuss this European Commission proposal, which, as the House is aware, is potentially significant. I will highlight a few general points before turning to the specific legal and treaty issues which the European Scrutiny Committee has raised in its report and which are the subject of the motion.

I want to start by reiterating the Government’s commitment to ensuring that there is no further transfer of sovereignty or powers to the EU over the course of the Parliament. I also stress that the Government have made it clear that we will not agree to a proposal that might threaten or limit the UK’s ability to shape its own tax policy. I know that the motion focuses on whether the proposal complies with subsidiarity and proportionality, which are both important questions that I will address in turn.

[Mr John Redwood (Wokingham) (Con)]

This is extremely good news from the Minister. Will she confirm that the UK will not consent to the so-called six-pack measures on economic governance, of which at least three clearly apply to non-euro members and represent a transfer of powers?

[Justine Greening]

As my right hon. Friend will be aware, important discussions on economic governance are under way and are being resolved. I assure him that we have no intention, as I have said, of seeing any further powers transferred to Brussels. We keep a watching brief on not only the topic that we are discussing, but across the board. I am sure he is aware of a number of areas in which we are expressing concerns to the Commission, because we are concerned that further powers may be taken by Brussels.

[Mr Peter Bone (Wellingborough) (Con)]

Has my hon. Friend noticed that Her Majesty’s official Opposition do not seem to care much about this matter? I cannot see anybody other than the shadow Minister on the Labour Benches.

[Justine Greening]

Perhaps the actions of Labour Members demonstrate how ashamed they are that their Government gave away much of the rebate that the Conservative party, which is now part of the coalition Government, had achieved for our country.

[Mr James Clappison (Hertsmere) (Con)]

I am tempted to remind my hon. Friend that the rebate that the Labour party gave away cost more than £9 billion. I think that this question follows from what she has said: do the Government take the view that the draft directive would amount to a substantial transfer of power and sovereignty to the EU, if it were implemented?

[Justine Greening]

At the moment, the directive is in such a rough draft that it is not exactly clear in what shape it will end up. Important questions are already being asked not only by the UK but by countries such as the Netherlands and Sweden, and by some smaller and newer member states such as Lithuania. They are asking whether there is a problem that needs to be solved in the first place and whether the European Commission’s hypothesis about why a common consolidated corporate tax base is required is correct. The second debate that is starting to happen in earnest across Europe is about whether this solution is the best solution to solve that problem. The Government’s position is that we do not believe that the problem exists in the form that the European Commission articulates, and that this solution would not be the right solution to that problem, even if it did exist.

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

rose—

[Justine Greening]

Perhaps if I make a little more progress, it will help hon. Members to understand the Government’s position in a little more detail and where we are in the proposal’s development, which it is important to understand. It is also important to understand Parliament’s role in the process, which is the whole point of this debate.

A number of issues need to be addressed in the policy substance of this proposal. Those issues will have to be discussed among all 27 member states. That is why we have committed to engage in the ongoing EU discussions on this proposal. It is important that the UK participates fully in the negotiations, so that we can seek solutions that meet the interests of the UK and the EU as a whole. Although the issues of subsidiarity and proportionality are fundamental, we need to be ready to engage fully in the negotiations that are starting in Brussels. We need to engage not only in Brussels, but with our fellow member states to ensure that we influence them.

For example, member states will need to consider the implications of the proposal for companies operating across the UK, particularly if it were taken forward through enhanced co-operation. We should also seek to ensure that a common consolidated corporate tax base does not undermine UK competitiveness or create opportunities for tax avoidance.

Such considerations will involve examining some of the specific issues raised in the European Scrutiny Committee’s helpful report, such as the potential implications for the tax treaties and the risk of creating additional administrative burdens on business. Of course, one of the European Commission’s arguments is that the proposal will reduce burdens and provide simplification, but, like the Committee, the Government simply do not accept that argument.

I turn to some of the specific concerns that the Committee raised in its report. First, I will address the proposal’s legal base. Article 115 of the treaty on the functioning of the European Union provides for EU legislation that directly affects the single market. In strict legal terms, it is possible to make a case that that article is an acceptable legal base for a proposal such as that which we are discussing, but the Government have broader reservations. We do not believe that a common consolidated corporate tax base is necessary for the internal market to function effectively, and we do not accept the assumptions that appear to underpin the Commission’s proposal. At present, we are therefore not convinced that the proposal is consistent with either subsidiarity or proportionality. In this instance, we think it difficult to separate the two, because both centre on whether such an EU mechanism is necessary to achieve the objectives set out by the Commission.

[Jacob Rees-Mogg]

Establishing the legal base is absolutely crucial before the Government engage in negotiations about the form of the directive. May I draw the Economic Secretary’s attention to conclusion 2.12 of the European Scrutiny Committee’s report? It clearly states that the ability for the single market to have taxes refers to turnover taxes and VAT, and not to the type of tax included in the directive. If there is no legal base for the tax, is there any point in having further discussion?

[Justine Greening]

Our assessment is that it is possible to make the case that because article 115 of the TFEU relates to the effective functioning of the single market, it is relevant to consider whether the proposal would affect the single market. There is also the question whether there is any problem that needs to be addressed. We do not accept that there is, but if there were, we would have to ask whether the proposal was the right solution. That is what I mean when I talk about proportionality. We must also consider subsidiarity, and we do not believe that the two can simply be separated, because they go hand in hand.

For the Government to be reassured that the proposal complies with the fundamental principles of proportionality and subsidiarity, we would require far stronger justification from the Commission. We would need evidence that the existence of 27 different tax systems is a significant barrier to the functioning of the single market—we do not believe it is, or that the evidence is there to support such a conclusion—and directly results in all the specific tax obstacles that the proposal claims to address. We would also need evidence that the proposal is the only, or the best, way to address those tax obstacles. We will continue to raise those points with the Commission during our discussions, and we will continue to engage proactively and constructively with other member states on the important issues of policy substance, including those highlighted in the European Scrutiny Committee’s report.

As I have said, we are not the only member state that has raised significant concerns about the proposal, and we will continue to talk to others about their concerns and ours.

[Mr Redwood]

Is it not rather easier than that? We have always been assured by previous Ministers of the Crown that we have an absolute veto on tax matters, so do we not just have to say to the EU, “We have a veto, and the answer is no”?

--- Later in debate ---

[Justine Greening]

My right hon. Friend is absolutely right to say that we can say no for ourselves, but the problem, as he is aware, is that under the treaty, a smaller group of nine or more member states—

[Mr Redwood]

Fine.

[Justine Greening]

My right hon. Friend says that that is fine, but there is a danger for our country that even that would have an impact on the tax planning that we could undertake with corporations as member states choose whether to opt in or out. We want to ensure that we are in those discussions at this earlier stage, before we get to that part of any future process. We do not know whether we will get to that stage—many member states might share our concerns—but we absolutely need to be in there now, making our case, because we do not want to end up with a smaller group of member states going down that route, which could, depending on their decisions on tax loopholes and avoidance, which are complex, lead to negative unforeseen consequences for the UK tax system’s competitiveness, which might happen even if the UK were outside any possible future proposals.

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

That was a lucid explanation—irony, of course, sometimes does not work in Hansard. The right hon. Member for Wokingham (Mr Redwood) has hit the nail on the head. Why does the motion not say no to the consolidated corporate tax base proposal?

[Justine Greening]

At the moment, there is no proposal on the table. A proposal is being worked up, but things are at an early stage. Member states have had, I believe, two working group meetings with the Commission to talk about how any proposal might operate. Fundamental questions are still being developed on, for example, how the formula will work, and a host of other issues. As I have said, part of the challenge is how any avoidance loopholes might work in practice, and whether they would be substantial. We are at a very early point in the process. Today’s debate allows Members of our Parliament to have their say, which we can then add to the Commission’s process.

[Mr William Cash (Stone) (Con)]

The Opposition Benches are virtually empty, but there are also no Liberal Democrats in the Chamber—there is a sort of let-out under the coalition agreement.

The Minister seems to be referring to enhanced co-operation, which the agreement says is the basis on which the Government will be engaged in discussions to help to shape a corporate tax base that does not undermine the competitiveness of the EU or the UK. She has made it clear that enhanced co-operation would have that effect, so clearly, we will not under any circumstances accept it. Therefore, the answer can only be no. Why do we not say so?

[Justine Greening]

As I have said, we need to manage risks, and it is unclear at this point where the process will end up. However, there might be risks posed by enhanced co-operation. We need to be part of the discussions to ensure that our arguments carry weight. Our arguments will not carry weight if we are not part of those discussions from the beginning, because we say that we never want to be involved. That is not a sensible approach. In addition, I do not agree that it is as simple as saying, “We don’t want to be in it,” because the proposal might go ahead in a different form involving a limited group of nations, which could still affect us, even if indirectly. I want to make it absolutely clear tonight what the Government are fundamentally seeking to achieve. We will not agree to any proposal that will threaten or limit our ability to shape our tax policy.

[Mr Clappison]

I support the course that my hon. Friend the Minister is taking this evening with the motion, as far as it goes, and the Opposition have revealed via an intervention that they do not understand the treaty to which they signed up. However, following what my hon. Friend the Member for Stone (Mr Cash) and my right hon. Friend the Member for Wokingham (Mr Redwood) have said, is not the fear of what others may do by way of enhanced co-operation robbing us of our right to a veto and the requirement for unanimity? Is that not a new doctrine? If we do not agree with the proposal, let us say no rather than robbing ourselves of the veto by worrying about what others may or may not do.

[Justine Greening]

As has been pointed out already this evening, we ultimately have the ability to say no, but rather than having to do so, we want to ensure that we carry the majority of member states in the first place. That is precisely what we are doing now, and we want to ensure that we are in a position to do it as effectively as possible.

I assure the House that we are putting our points across. Tonight’s debate is a key part of that, because it is an important opportunity for the House to put on record its concerns and views as these proposals develop. The proposals are at an early stage, but they are shaping up to be important and fundamental.

[Nigel Mills (Amber Valley) (Con)]

We are inviting the Minister to say whether she agrees that, as I believe, no form of consolidated tax base will ever be acceptable. It is vital to our competitiveness that we can attract business here with a more competitive way of calculating the tax base, so any proposals under which we would not have that competitive edge must be bad for our nation. It is all right saying that this is a draft, but I cannot think of any form of this proposal that could ever be in our interest.

[Justine Greening]

My hon. Friend might well be right, but I want to make clear the rules and the processes going forward. No member state can unilaterally block the use of enhanced co-operation. Of course we can decide whether we want to be part of that—I have clearly set out the Government’s concerns about the proposal—but I am saying to the House that we need to participate in the debate and ensure that we influence the underlying proposal. We do not want to end up being unable to stop enhanced co-operation simply because it was a proposal that we fundamentally did not want in the first place. We need to make our case, with other member states, in order to influence the proposal as it develops, and that is precisely what we want to do.

[Mr Cash]

The Minister is always well informed, so I am sure that she knows that the Tax Commissioner has already said that if there is a veto—if, in other words, the Commission does not get unanimity—it will go ahead with enhanced co-operation. If we know that to be the case, why do we not just say no and be done with it?

[Justine Greening]

The Commission might, as my hon. Friend has said, take a view, but we need to understand what other member states think about the proposal. This evening is a chance for us, as a member state, to allow our Parliament to voice its concerns. The European Scrutiny Committee, which he chairs, has produced a helpful report that will no doubt form a basis of this debate.

I shall now finish my remarks so that other Members can put on record their views on the report.

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[Chris Leslie]

Yes, I agree with the right hon. Gentleman on that. We need to begin to readdress entirely the accountability deficit. I know that this Parliament already tries valiantly to address it—in Scrutiny Committees and elsewhere—but this is a debate about serious proposals. The Treasury is often an intermediary these days when it comes to new regulations and policy changes. It is important that we should think about the design of our Government and our Parliament in tackling proposals as they come along.

As I said, I am interested in the Government’s line. We will not take issue with them on this proposal this evening, but we want to watch where they go with it. All I am asking of the Minister is whether coalition policy is taking into account the Liberal Democrat official line.

[Justine Greening]

We are one Government and this is a Government motion. The hon. Gentleman can take it from the motion that it has the support of the coalition Government, who include two parties.

[Chris Leslie]

That is very helpful, and it means that the Liberal Democrats must have undergone a de facto change of opinion. I suppose that we can ask the Liberal Democrats. [Interruption.] The hon. Lady says, “Ask them,” but we cannot. Anyway, I do not want to intrude on private grief, one Government or not—although probably not—and neither do I want to take up too much more of the House’s time.

The hon. Lady has said that she is anxious that, if we are not careful, a smaller group of states might just go ahead with the enhanced co-operation procedure in any case. What assessment has been made of the potential impact on UK businesses, tax revenues and so forth? Which other member states does she think are most likely to go ahead? What role could we play in ensuring that we are not sidelined or excluded from those discussions, but instead have an impact on them?

Those are the key points that we need to address right now. I am generally worried about the Government’s disengagement from those European issues that really matter to this country. As we know, the Minister has a habit of signing Treasury memorandums about European matters that are perhaps not always agreed to by others in her party. I am referring to the European stability mechanism documentation that she signed, when she agreed that cross-party consensus was gained between the previous Government and her Administration. We will obviously be debating that on another occasion, but, for the time being, we will be keeping a watching brief on where the Government stand on this matter.

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[Justine Greening]

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

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

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

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

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

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

[Mr Nuttall]

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

[Justine Greening]

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

[Mr Cash]

Will the Minister be kind enough—and be smart enough—to make it clear that we will not do anything that the Liberal Democrats had in their manifesto? I have a suspicion bordering on certainty that the wording in the coalition agreement is taken straight from their manifesto commitments.

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[Madam Deputy Speaker (Dawn Primarolo)]

Order. I know that there is a terrible pull for the Minister to turn around and face the Benches behind her, but I remind her that she should be looking forwards, or towards me, so that we can hear clearly what she is saying.

[Justine Greening]

I will of course do that, Madam Deputy Speaker. Your observation demonstrates that there have been few questions from any part of the Chamber other than behind me. That shows which Members of this House are prepared to stand up for our national interest and scrutinise proposals that affect our national interest, and which Members would rather go home and watch TV than represent their communities as they should.

We are committed to pursuing our national interest. My hon. Friend the Member for Amber Valley was right to raise the issue of complexity in regulation and the need for simplification. The Government set up the Office of Tax Simplification because we understand why those issues are important in helping business domestically. We are taking those very same arguments to Europe.

When I look at the proposal that we have been debating tonight, I find it hard to see how it can be reconciled with, for example, the Europe 2020 document and strategy that have been launched, which are all about stimulating growth. The impact assessment of the current proposal gives rise to grave concerns that it will do the exact opposite of that. It could hinder growth, investment and employment. We will focus our arguments not just on whether the proposal complies with subsidiarity and proportionality but on the important issues of policy substance that have been highlighted. That is the best way to ensure that we get the right outcome for the UK and for our UK businesses operating across Europe. I can assure the House that the UK will continue to participate fully in the EU negotiations on the proposal, and I will, of course, as I have been asked, keep the European Scrutiny Committee updated on the progress of those negotiations.

Question put and agreed to.

Resolved,

That this House considers that the Draft Directive to introduce a Common Consolidated Corporate Tax Base (European Union Document No. 7263/11) does not comply with the principle of subsidiarity, for the reasons set out in chapter 2 of the Twenty-seventh Report of the European Scrutiny Committee (HC 428-xxv); and, in accordance with Article 6 of the Protocol on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the presidents of the European institutions.

Oral Answers to Questions

Justine Greening Excerpts

Tuesday 10th May 2011 Commons Chamber

[John Stevenson (Carlisle) (Con)]

8. What recent estimate he has made of the size of the public sector borrowing requirement.

[The Economic Secretary to the Treasury (Justine Greening)]

The public sector finances first release published by the Office for National Statistics estimates that the first provisional out-turn for public sector net borrowing in 2010-11 is £141.1 billion, or 9.6% of GDP. That is £15 billion lower than in 2009-10.

[John Stevenson]

Manufacturing has been undergoing a renaissance under this Government, and clearly has a role to play in helping the economy grow and in reducing the deficit. Does the Minister agree that manufacturing also has a significant role to play in helping to reduce the other deficit: the balance of payments deficit?

[Justine Greening]

I completely agree with my hon. Friend; he is absolutely right that manufacturing has a vital role to play. In fact, the total trade deficits narrowed in each of the past three months, and that recovery in exports has been driven largely by strong growth in the export of manufactured goods, which accounted for almost 50% of the UK’s total exports. That is not just good news for those businesses; it is good news for jobs, too. It shows that under this Government Britain is not just open for business in the UK; it is open for business abroad, too.

[Kelvin Hopkins (Luton North) (Lab)]

When the Government’s cuts really start to kick-in, unemployment will rise by hundreds of thousands, if not up to 1 million. That will result in lower tax revenues and higher benefit payments, and the deficit will get worse and public borrowing will increase. Is not the Government’s policy nonsense?

[Justine Greening]

The hon. Gentleman is giving a critique of his own party’s policy in many respects, because its proposed cuts are nearly as large as ours this year. The difference is that we have set up the Office for Budget Responsibility, and there is clear evidence that we will start to see employment growing year on year and unemployment falling year on year, so by the end of this Parliament we should see a net creation of almost 1 million jobs. Surely, the hon. Gentleman must welcome that? His party leaves unemployment higher when it leaves office.

[Mr Marcus Jones (Nuneaton) (Con)]

9. What fiscal measures he is taking to support first-time home buyers.

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[Mr Gary Streeter (South West Devon) (Con)]

13. What recent representations he has received from the licensed trade on alcohol duty.

[The Economic Secretary to the Treasury (Justine Greening)]

I met a number of stakeholders ahead of this year’s Budget, including the all-party group on beer and the British Beer and Pub Association. We carried out a review of alcohol taxation last summer and members of the licensed trade contributed heavily to that.

[Mr Streeter]

I thank the Minister for her answer. Given the importance of the licensed trade to the economy and our culture, particularly in regions such as the west country, where tourism is high, is it not now time to seek to reduce alcohol duty on served drinks and to increase it on cheap booze sold by supermarkets?

[Justine Greening]

My hon. Friend is absolutely right to raise that issue. In fact, it is part of the rationale behind tackling problem drinking. One way we have sought to do that is by introducing the limits on the below-cost selling of alcohol in supermarkets. That will be done by a formula of assessing duty plus VAT as the below-cost level. My hon. Friend is also right to point out that we need to do what we can to support pubs, which are the lifeblood of many local communities. They will also benefit from the various packages of measures we have brought forward to support small businesses, including reduced corporation tax, increased national insurance thresholds and, of course, the plan for growth.

[Jeremy Lefroy (Stafford) (Con)]

14. What recent discussions he has had with his international counterparts on strategies to reduce budget deficits.