Fuel Costs

Kerry McCarthy Excerpts

Monday 7th February 2011 Commons Chamber

[Justine Greening]

I shall ensure that I respond to my hon. Friend on that issue. A variety of concerns about the cost of motoring have been expressed in constituencies throughout the country in recent years.

I hope I can reassure Opposition Members that we are getting on with the process of requesting a derogation by trying to arrange some pilot schemes. I am sure they will be pleased to learn that, although we are still considering the exact scope of the pilots, we have announced our intention of including the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly, should we be given the necessary dispensation. I assure Members that we are pressing ahead as fast as we can, and we should appreciate their support in helping us to complete the process. I hope that they will be able to overcome any political barriers, do the right thing and back up the coalition Government as we go through this process over the coming months.

We recognise the importance of fuel prices to motorists and businesses. While we are looking at options in the run-up to the Budget, which I will discuss this afternoon, we can have one of two debates today: we can continue to argue about the problem and waste the opportunity presented by today’s debate by scoring points, or we can have a frank and open debate about how to reach the best solution and how we can find common ground. For instance, do we agree that the price of fuel and the affordability of motoring are important for motorists? The answer is yes. Do we agree that the unpredictable way in which the oil price fluctuates can create difficulties for households and businesses when it comes to budgeting? The answer is yes, although the Labour party never recognised that point in government, and I doubt whether it recognises that point in opposition—if it does, perhaps the hon. Member for Bristol East (Kerry McCarthy) will explain why it has suddenly changed its mind after having been booted out by the electorate.

[Kerry McCarthy (Bristol East) (Lab)]

I am pleased that the Economic Secretary wants to have a constructive debate this afternoon and does not want to engage in party political point scoring. Given that conciliatory approach, will she confirm that a Conservative Government were the first to introduce the fuel duty escalator at 3% in the March 1993 Budget, which they increased to 5% in the November 1993 Budget?

[Justine Greening]

The hon. Lady wants to go back into history. The previous Labour Government left a huge fiscal deficit, and we have to get to grips with those ginormous debts, so the position is entirely different. The previous Labour Government left not only debts and deficit, but tax rises that will unfold over the coming years. In opposition, the Lib Dems and the Conservatives discussed helping motorists, and we still want to see what we can do to help them. Given the state of the public finances when they were handed over to us, the Labour party in opposition should be thoroughly ashamed. We have waited in vain for an apology to the British people for the state of the public finances, and I suspect that we will have a long wait before we hear any of them say, “Sorry.”

The most depressing thing is that the main adviser to the former Chancellor and former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), is now shadow Chancellor. It is like returning the car keys to the man who crashed the car in the first place, which is the worst thing for the British electorate.

--- Later in debate ---

[Justine Greening]

I can only reiterate what I have just said, which is that we are considering the exact scope of the scheme, but it is helpful to hear some of the issues that Members have in their constituencies. We are pressing ahead and will need European approval.

[Kerry McCarthy]

Will the Minister give way?

[Justine Greening]

I will give way one last time.

[Kerry McCarthy]

The Minister is being very generous. I am slightly confused, because my understanding was that it was Conservative party policy to look at the fuel duty stabiliser and Liberal Democrat policy to look at the rebate and the rural derogation. She has spoken for more than half an hour and focused almost totally on the rural derogation, so will she, before concluding her remarks, tell us the current position on the fuel duty stabiliser?

[Justine Greening]

I think that I have been very clear on that. In opposition and in government, we have always recognised the impact on motorists of the unstable oil price, which feeds through to pump prices. In setting up a stabiliser, we need to ensure that it works as intended, so the first step was to ask the Office for Budget Responsibility to look at how oil prices feed into the economy and affect public finances. We have commissioned that work, as the hon. Lady will know, and now need to take on board its outcomes before looking at how it feeds into policy making. It would not be right to pre-empt the Budget. Indeed, when the hon. Member for Dundee East was asked for further details, he said that he needed some time, which indicates that this is a complex policy area—too complicated for the Labour party when it was in government.

In conclusion, we want to treat motorists fairly, but we must also act responsibly by ensuring that we tackle our record national debt and the financial deficit, which will not be easy. I will not hide from the House the fact that that is a difficult balance to strike, so difficult that the previous Government chose to ignore it completely. That is also the approach they have adopted for tackling the deficit, offering no credible alternatives to our policies and, in the case of fuel duty, no viable alternatives to their own policies, because it is their fuel duty escalator that is causing the problems.

Once again, it has been left to the coalition Government to clear up the mess left by the Labour Government and look at how we can reach a fair resolution on fuel duty, get our economy back on its feet and support our businesses, families and, in this case, motorists. I look forward to the rest of the debate and hope that we can have an open and honest discussion on the problems faced by motorists across the country and possible solutions. I look forward to hearing from Members in the run-up to this year’s Budget what they think is the best way forward.

[Kerry McCarthy (Bristol East) (Lab)]

I congratulate the hon. Member for Dundee East (Stewart Hosie) on making a powerful case on behalf of his constituents—along with the interventions from his colleagues—about the impact that people living in remote rural areas can feel as fuel prices go up. He did make a very powerful case on behalf of his constituents, and Labour Members do understand the impact that motorists are feeling as fuel prices go up. I might represent an urban seat, but as a Member of Parliament in the south-west I am very much aware of the issues that are faced.

[Stewart Hosie]

I thank the hon. Lady for saying that I made a powerful case, but Dundee East is very much an urban seat. It has a rural hinterland of course, but my constituency is half the city. I know where Bristol is; a wee bit of geography would be great.

[Kerry McCarthy]

The hon. Gentleman makes a valid point. He was speaking on behalf of his colleagues in the more remote parts of Scotland, obviously, rather than on behalf of his own constituents. I thought that perhaps his constituency stretched a little further than the city boundaries.

For Governments, when considering fuel duties there is always a difficult balance to be struck among the needs to raise revenue and balance the public finances; to address environmental concerns about increasing road traffic and emissions, to which there has not been much reference in this debate; and to ensure that the motorist and especially people who have to rely on their cars—people who do not have a choice because of where they live and the environment in which they live—are not disproportionately penalised. The previous Labour Government endeavoured to strike that balance, despite the points that the Economic Secretary to the Treasury made. That was why, for example, in years when fuel prices rose, Labour chose to put the fuel duty escalator on hold—to help motorists meet those rising costs. It is a tricky balance to strike, however, as today’s debate demonstrates, and there are no easy answers.

[Justine Greening]

To clarify matters, is the formal Labour party position that the fuel duty rise should now go on hold?

[Kerry McCarthy]

If I can adopt the mantra that the hon. Member for Dundee East first used and the Minister then picked up on, I should say that that is a matter for us to discuss when we get round to the Budget negotiations. Today, we are here to discuss the two main proposals to ameliorate the impact of rising fuel prices, particularly on rural areas. We are talking about rural areas, rather than about fuel duty prices across the board.

The dog that has not barked during this debate—the thing that was most noticeably missing from the Minister’s speech—is the fact that motorists are being hit hard by the increase in VAT to 20%, which has helped push petrol prices up to their current record levels.

[Stewart Hosie]

It suddenly strikes me that, when the Labour Government had their fiscal stimulus policy, they cut VAT by 2.5 percentage points and increased fuel duty by 2.5 percentage points to compensate, but that, when VAT went back to 17.5%, the fuel duty rise was maintained. Does Labour now regret not reducing fuel duty in line with the increase in VAT?

[Kerry McCarthy]

Those matters were also affected by fuel prices at the time, but it is not my position to apologise for, or to express an opinion on, what my predecessors did.

The VAT rise now is the important thing. VAT went up at the beginning of the year from 17.5% to 20%. According to the Library, the VAT rise increases the cost of a litre of petrol by about 2.6p, assuming that it is passed on in full. That compares with the fuel duty increase in January of 0.76p per litre, so the VAT rise to 20% is hitting the motorist harder and people in rural areas, who rely on their cars most and have to travel longer distances, particularly hard.

[Mr MacNeil]

Is there any tinge of regret among Labour Members that for at least four years the previous Government did absolutely nothing on a rural fuel derogation?

[Kerry McCarthy]

I will deal later in my speech, if I may, with the rural fuel derogation and the problems that we see in implementing it.

The VAT rise did not have to be imposed. It flew in the face of all the warm words that Conservative politicians uttered before the election about ending the war on motorists, helping hard-hit families and keeping fuel costs down, but now it has been done and motorists are paying the price.

Let me turn to the fuel duty stabiliser, or regulator, which the Minister glossed over very quickly.

[Mr MacNeil]

If we are talking about glossing over, I feel that the hon. Lady glossed over my question. Will she take this opportunity to apologise for her Government doing nothing for four years on the rural fuel derogation?

[Kerry McCarthy]

As I said, I am coming on to the derogation, but it is not my place to express such opinions.

In principle, on paper, the fuel duty stabiliser sounds like a fairly simple, reasonable proposition—as oil prices go up, fuel duty goes down, and as oil prices drop, fuel duty goes up, so the motorist pays more or less the same for fuel and the Exchequer gets more or less the same in revenue. However, economics are not that simple.

The idea of the regulator has been floated for some time. During the debate on the 2008 Finance Bill, the Scottish National party spokesman, the hon. Member for Dundee East, suggested that a statutory instrument should implement an automatic mechanism so that as additional income from VAT receipts came in, it could be used to offset fuel duty in direct proportion. However, the regulator was based on rises in oil prices, not on rises in VAT receipts. It was assumed that one would flow from other—the hon. Gentleman reiterated that assumption today—but that is not necessarily the case, as the Office for Budget Responsibility has said.

[Stewart Hosie]

Will the hon. Lady give way?

[Kerry McCarthy]

I would like to make some progress.

There are other concerns about the stabiliser. The then Liberal Democrat spokesman, who is now Secretary of State for Business, Innovation and Skills, said at the time of the 2008 Finance Bill debates that the idea of a fuel duty regulator was “unbelievably complicated and unpredictable”. He said that the Exchequer would have to predict the net windfall, and then:

“May I suggest that there might not be any net windfall at all?”—[Official Report, 16 July 2008; Vol. 479, c. 339.]

The OBR has now confirmed that.

Labour’s then Chief Secretary to the Treasury said:

“In the face of a world slowdown, to take any one tax in isolation and claim that there is a windfall available to spend is economically illiterate, irresponsible or just disingenuous.”—[Official Report, 16 July 2008; Vol. 479, c. 331.]

She was basically saying—this was echoed by the hon. Member for Taunton Deane (Mr Browne), who was the junior Liberal Democrat spokesman at the time—that we cannot consider these revenues in a silo. Yes, oil revenues might go up, which might provide a boost to the nation’s finances—although I stress the word “might”, because it does not necessarily follow that increased revenues come from increased oil prices—but other things might happen that affect revenue flows, and it is irresponsible not to look at everything in the round. Hypothecation can box us into a corner and hamper our choices, and that is a real problem in the case of the stabiliser.

[Justine Greening]

Was the Chief Secretary who referred to economic illiteracy the same Chief Secretary who left us, as an incoming Government, a note saying that there was no money left?

[Kerry McCarthy]

No, I was referring to my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper). The Minister may have got the hint when I said “She”.

If a stabiliser were introduced, there is the question of whether the cut in duty would be passed on to the consumer at the pump. That would be very difficult to achieve without further Government enforcement and interference. I am not sure how that would square with the Government’s purported dearly held belief in the free market and dislike for state interference in the operation of the free market.

[Mr Reid]

Yes, that issue must be considered, but the whole point of a pilot scheme is to enable us to work out whether the cuts are being passed on, which the Government would monitor. The hon. Lady’s argument is no case for not having a pilot scheme.

[Kerry McCarthy]

I thank the hon. Gentleman for that intervention, but I am talking about the fuel duty stabiliser. I appreciate his confusion, because that has not been discussed much in this debate. The rural derogation is a separate issue. I am talking about how a stabiliser would be enforced.

Despite the concerns about a fuel duty stabiliser that were raised during the 2008 Finance Bill debates and afterwards, and the obvious difficulties in implementing one, the Conservatives could not resist dangling the prospect of reduced petrol prices before motorists’ eyes. They published a consultation document in July 2008, which proposed the stabiliser:

“when fuel prices go up, fuel duty would fall. And when fuel prices go down, fuel duty would rise”.

That continued to be Conservative party policy until polling day. A week before polling day, the Prime Minister told voters on a visit to a Coca-Cola plant that

“we’d be helping with the cost of living by trying to give you a flatter and more constant rate for filling up your car”.

It was suggested by Conservative politicians in the media that it would be included in the new Government’s first Budget.

Before the election, this Government made all the right noises about tackling high petrol prices. They led the public to believe that they would take action to slash fuel duty and bring down the price of petrol at the pumps. Since then, they have done nothing. Actually, that is not quite true. They have done nothing to implement the fuel duty stabiliser, which they made such a song and dance about before the election, but they have hit the motorist by whacking up VAT to 20%. They have increased petrol prices, not cut them.

Even the Office for Budget Responsibility, set up by this Government to give independent, impartial advice, has said that the fuel duty stabiliser would not work. The underlying economics of the stabiliser contain a simple, basic assumption that when oil prices rise, the Government receive an unexpected windfall from taxes on North sea oil production. The OBR said that that is not the case, at least not in the long term. In “Assessment of the Effect of Oil Price Fluctuations on the Public Finances”, which was published on 14 September last year, the OBR reported that a temporary rise in the oil price would have a negligible effect on the UK public finances, and that a permanent rise would create a loss. The OBR said that it would be difficult for the Government to introduce a fair fuel stabiliser without a significant cost to the Exchequer:

“There is no improvement in the public finances to be used for stabilising the pump price in the case of a permanent shock.”

In fact, a permanent increase in fuel prices would have a negative impact on the public finances after a year, given the effects on demand, inflationary pressures, household income and consumer spending.

[Stewart Hosie]

The hon. Lady seems to be labouring under a misapprehension. The fuel duty regulator would temper spikes. If there is a structural change in the oil price, the baseline figure against which a trigger is measured has to be reset. We have all seen the OBR figures, but the OBR does not say that we should not have a short-term stabiliser to stop spikes; it says that there is no benefit in the long run, as she said. The regulator is designed to smooth out short-term spikes, not to stop structural changes in the oil price.

[Kerry McCarthy]

What I am saying is that a correlation between oil price movements and revenue has not been established by the OBR. In fact, it has said that that is not the case and that in the short term a temporary rise in the oil price would have a negligible impact on revenue. Therefore, the question is what money would be used to offset the stabiliser or regulatory mechanism that the hon. Gentleman’s party wants. If it does not come from the revenue, where does it come from?

[Stewart Hosie]

I remind the hon. Lady that the OBR’s press notice was clear that the temporary £10 rise would deliver an overall effect in year 1 of £100 million. That is not insignificant.

[Kerry McCarthy]

The new head of the OBR, Robert Chote, said in an interview about a week ago that its analysis

“suggested that a fair fuel stabiliser would be likely to make the public finances less stable rather than more stable”.

If a £10 increase in oil prices was passed through, the assumption is that it would add 7.4p per litre at the pump. To offset that would cost £3.7 billion, which is £1.3 billion more than the consequential rise in oil and gas revenues. It might have been a good idea for the Conservative party to carry out that sort of analysis before making promises that it could not keep. All the Economic Secretary has to say today is that the Government will consider the OBR’s report.

I also ask the Economic Secretary what conversations she has had with people in the industry about the impact of fuel prices. I have been contacted by the Retail Motor Industry Federation, which tells me that it has written to the Chancellor and Prime Minister four times about the matter recently, with no response at all. It has stated that the Government have

“made no attempt to engage with industry”

and that it wants the policy of a stabiliser to be dropped, because it would be

“costly and a huge administrative burden”.—[Interruption.]

Sorry, is the Economic Secretary saying that the RMI has not written to the Chancellor or the Prime Minister?

[Justine Greening]

The hon. Lady says that there has been no engagement, which is completely wrong. Only about three weeks ago, we held a workshop on tax policy in relation to travelling and the environment, at which a range of stakeholders from a variety of sectors of the travelling industry came to the Treasury to talk about their challenges. Many said that it was the first time they had been invited in for any kind of constructive discussion.

[Kerry McCarthy]

The Economic Secretary says that as though I were the one saying that there had been no engagement. I am not, it is the RMI that states that the Government have

“made no attempt to engage with industry”.

Perhaps she could place in the Library a copy of the response from either the Chancellor or the Prime Minister to the letter that the RMI says it has sent four times, and copy me in. That would confirm whether there has been an attempt to have a dialogue.

I turn to the other proposal under active consideration, the rural derogation. As we have heard, the Government are planning to pilot it in the inner and outer Hebrides, the Northern Isles and the Isles of Scilly, although from what the Economic Secretary said I am not sure whether those are the definite areas for the pilot or whether the matter is still under consideration. My understanding is that there would be a maximum 5p per litre discount on petrol and diesel sold in those areas.

Will the Economic Secretary elaborate on just how far the informal conversations with the European Union have gone? Have they been about just the pilot scheme, or have there been discussions about introducing the scheme to a significant proportion of the British isles at some time in the future?

Following on from the question that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) asked, will the Economic Secretary explain on what basis the islands in question were chosen for the pilot as opposed to other remote rural areas? Does she not think that it will be difficult to extrapolate from pilots carried out in island areas how such a scheme would work in remote mainland areas, particularly those from which it is not so far to travel to urban areas where petrol is in greater supply? Will she explain why the pilot scheme is to be so limited, rather than a larger pilot that could have more evidential benefit and be used to show how the scheme would work across the country?

We have a number of other concerns about the rural derogation. There is a long-standing principle that excise duties are charged on a universal basis, and it would set quite a precedent to depart from that practice. As has been said, the scheme would be difficult and expensive to administer, because at the moment duty is levied when oil leaves the refinery, not at the point of retail sale. That takes us back to the point that the hon. Member for Argyll and Bute (Mr Reid) made when I was talking about the stabiliser. How would the system be policed if there were to be differential duty at the point of sale? It sounds like a complex administrative system would be required.

[Justine Greening]

I am trying to follow the hon. Lady’s argument, but it is not clear to me. Will she confirm whether she supports the Government’s attempt to get a derogation in place by introducing pilots?

[Kerry McCarthy]

It is up to the Economic Secretary to answer the questions. We are certainly interested in the conversations that she is having with the EU, but we have major concerns about whether it is practical to take the proposal forward. We would like more information to be convinced that it will solve the problem.

The rural rebate proposal was, of course, a Liberal Democrat manifesto commitment, and it seems that the Government are now taking it up. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) referred to the fact that he has raised the matter on many occasions over the past 12 years, and when he was his party’s transport spokesman he proposed a duty differential based on the Scottish Government’s method of having eight categories to distinguish between urban, rural and remote areas. Again, that could become quite complex. It would be quite easy to calculate rebates in the case of geographically isolated, sparsely populated areas, but in southern Scotland, where there is more of a patchwork of those categories, it could be difficult.

[Dr Whiteford]

For clarity, will the hon. Lady tell us whether her party is saying no to a derogation and no to a stabiliser?

[Kerry McCarthy]

Again, it is for the Economic Secretary to tell us what her policy is on the stabiliser and so on. We are quite happy to discuss and consider proposals for tackling the problem of increased fuel prices in rural areas. However, when the OBR is telling us that the fuel duty stabiliser would cost the public purse huge amounts of money and be difficult to administer, and when real and valid concerns are being raised about whether rural derogation pilot could be transposed over to mainland Britain, we are right to ask questions and require answers before we decide whether we can support the proposal.

[Dr Whiteford]

rose—

[John Thurso]

rose—

[Kerry McCarthy]

I want to conclude now. I have taken quite a lot of interventions, and hon. Members will have the opportunity to pose as many questions as they like in their own speeches.

Finally, I ask the Economic Secretary to confirm several things. Has the Conservative party dropped the fuel duty stabiliser policy in the light of the OBR’s fairly clear and damning verdict on its practicability? Is the policy now restricted to the rural derogation, and what time scale does she think would be appropriate for its introduction? It will take some time to get it through the EU, and considerably longer to roll it out to the UK as a whole. In the meantime, is she actively considering the impact of the VAT increase on fuel prices? That is hitting people now, and not an issue for the future.

[Several hon. Members]

rose—

Coinage (Measurement) Bill

Kerry McCarthy Excerpts

Friday 4th February 2011 Commons Chamber

[Kerry McCarthy (Bristol East) (Lab)]

I congratulate the hon. Member for Milton Keynes North (Mark Lancaster) on introducing this Bill. It is perhaps not the most exciting Bill for someone who has succeeded in the highly competitive private Member’s Bill ballot, but I appreciate that legislation is needed if we are to keep our promise to the International Olympic Committee and if the Royal Mint is to fulfil its agreement to mint an Olympic coin weighing 1 kg. If he will excuse the pun, the hon. Gentleman has done a sterling job of making the issue seem more exciting than perhaps it is, enthusing those Members who are present about the prospect of purchasing a 1 kg coin. I must confess that I am not entirely convinced that the coin needs to be quite so substantial and weighty. Perhaps he or the Minister could comment on online speculation that the coin will become known as the Boris, on the grounds that it will be overweight and not an awful lot of use. However, it is welcome that the design will be put out to British artists, to see whether we can come up with the best design. I hope that the design meets with rather more public approval than the 2012 Olympics logo did when it was first launched, but we shall see.

In a week in which I, along with many other MPs, have received hundreds of e-mails from constituents determined to save our forests from the Government’s sell-off—I have received more than 200, while my constituency neighbour, the hon. Member for Bristol West (Stephen Williams), has received more than 900 and one of my colleagues in the north-east has received more than 1,200—I would like to think that the complete absence of any e-mails from concerned constituents lobbying me about the Coinage (Measurement) Bill is not a sign of apathy or lack of interest, but a sign of the overwhelming consensus and the warm glow of approval that radiates across the nation when people consider the contents of the Bill and the prospect of being able to purchase a supersized coin, even if it will be beyond the means of most, if not all, of my constituents.

I can confirm that we are happy to support the Bill. I do not want to underplay its importance—I have made it quite clear how supportive I am—but the next Bill on the Order Paper deals with illegally logged timber. Bills dealing with that issue have been brought before the House on a number of occasions without proceeding through to their final stages. In the last Parliament, a similar Bill was introduced by my former hon. Friend the Member for Hendon, Andrew Dismore, one of the veterans of private Members’ Bills Fridays. In the interest of ensuring that the next Bill gets an airing today, I will draw my remarks to a close and look forward to hearing what the Minister has to say.

Court of Auditors 2009 Report

Kerry McCarthy Excerpts

Wednesday 2nd February 2011 Commons Chamber

[Kerry McCarthy (Bristol East) (Lab)]

I, too, welcome the fact that this debate is taking place on the Floor of the House rather than in European Committee B, as it has in previous years. It is somewhat ironic that although having it here enables many more Members to take part, it means that we have only an hour and a half to discuss the matter rather than the two and a half hours allowed in Committee.

The Minister was thorough in her explanation of the Government’s stance and very generous in taking interventions from Back Benchers. I am aware that at least half a dozen Back Benchers want to take part in the debate and that we are already 40 minutes into a 90-minute debate, so I shall be quite brief. Also, the Minister answered quite a few of the questions that I wanted to ask. There is always a problem in dealing with Court of Auditors reports because of the time lag involved. We are now debating the 2009 report in 2011, so it is useful that we have heard about what has happened in the intervening period.

It is, of course, disappointing that for the 16th year in succession, the Court of Auditors has been unable to provide a positive statement of assurance on payments from the EU budget because of weaknesses that it has identified in the procedures for financial control and management. In fact, it is not just disappointing; as the Minister said, it is entirely unacceptable that we are yet again in that position.

I welcome the fact that for the third year in a row, the Court has given an unqualified positive statement of assurance concerning the reliability of the EU accounts. It is important to stress that that has happened, but it is by no means satisfactory that the Court is not prepared to sign off on the payments, which means that considerable sums are not going where they should and money is being paid out wrongly, whether through fraud—as the Minister said, that is at quite a low level but is still a matter for concern—or through error. It is important that we continue to address the issue.

The direction of travel is correct. In the 2003 budget, only 6% of payments were identified as being free from error, which improved to 47% in 2008. I understand that the figure is now around the 60% mark or more. That progress is far too slow and it is vital for progress to be made more rapidly, because apart from anything else, the failure to sign off the accounts year after year understandably undermines public confidence in the EU and public support for EU membership. Naturally, people want to know that the EU is spending money wisely and well, particularly in difficult economic times when there is belt tightening and concern about how money is spent in this country.

We need more transparency and accountability in EU spending. Crucial to that, as the Minister said, is simplifying the procedures and processes of the allocation of EU money. The Court of Auditors has identified complex rules and regulations and complicated or unclear eligibility criteria as key factors in the high level of error, particularly in respect of structural and cohesion funds. Dealing with that as an ongoing, iterative process must be a priority, and I welcome the fact that the Minister is making those points in an ongoing dialogue with people in the EU, including the Commissioner for financial management, and not simply making them on this annual occasion.

The Commission should try to ensure that future programmes are designed to allow more effective control and monitoring; that should not be an afterthought or something to be looked at when the programme is up and running and the time for scrutiny is upon us. There is also a need to consult member states more, because often it is implementation at member state level rather than at Commission level that leaves something to be desired. Member states must have effective monitoring and management arrangements too. In particular, they should ensure that their compliance systems for spending cohesion funds are every bit as rigorous as their compliance systems on other matters.

The UK took the initiative to enhance its reporting through the annual consolidated statement on the use of EU funds in the UK, which is audited by the National Audit Office and presented to Parliament. The Minister advised the House earlier that only four other member states have adopted that model. I would be grateful if the UK Government continued to press other EU Governments to adopt a similar model and to introduce that element of transparency and accountability to their processes.

Are the Government generally optimistic about future improvements in financial management? I appreciate that it is difficult to forecast such things, but when does the Minister believe we are likely to see a positive statement of assurance? Is next year a realistic goal to work towards, or are we still some way off meeting that objective? Can progress be monitored better within year, and can ongoing improvements be made, so that we do not have to wait for the annual report from the European Court of Auditors, when we are inevitably disappointed by the lack of progress?

I am very much aware of the time, but I should like to make a few comments on specific concerns in the report, in particular in respect of agriculture and cohesion funds. In agriculture, the court says that the single payment scheme and single area payment scheme, including specifically problems with ineligible land and over-declarations of land, are the most urgent issues. The court also identified the need to avoid, in co-operation with national authorities, the payment of ineligible grants for fisheries projects. Has the Minister discussed that with her colleagues in the Department for Environment, Food and Rural Affairs? Are they pursuing the matter at European level? If so, can she advise the House on what progress has been made?

Cohesion funds, which have already been flagged up as a great concern, account for 30% of EU expenditure, so we are talking about very significant sums of money. Uniquely, the rate of material error is above 5%, even if it declined from 11% last year. We are travelling in the right direction, but that rate is still clearly unacceptable.

I note that the auditors recommend that the Commission encourage the more rigorous application of corrective mechanisms by national authorities, to ensure that member states do not substitute ineligible expenditure with new expenditure. Will the Minister advise us on what progress is being made to ensure that the control system for the 2007-2013 programming period will be effective? What is being done about the application of procurement rules in member states, which is also identified as a key concern?

The Minister said that a scorecard of recovery orders would be useful. It is worrying that the overall rate of recovery from beneficiaries who receive EU cohesion funds incorrectly has fallen. It is clearly unacceptable. Does the Minister have any idea why the recovery rate is moving in the wrong direction, and may I urge her to flag that up as something that needs to be addressed as a matter of urgency?

I repeat the point that I made earlier. This needs to be an ongoing and iterative process, and we need to keep a very close eye on it. There is consensus across the House on the need to push this up the policy agenda and I am glad that the Minister is doing what she can to push other EU Governments to address the issue. We will do what we can to support her in those efforts.

Funding Formula

Kerry McCarthy Excerpts

Tuesday 18th January 2011 Westminster Hall

[Kerry McCarthy (Bristol East) (Lab)]

As ever, Mr Dobbin, it is a pleasure to serve under your chairmanship. It is also a pleasure to see so many hon. Members present. Some have left to attend a Select Committee, but this has been a good debate in which a lot of people have had an opportunity to participate.

The hon. Member for South West Bedfordshire (Andrew Selous) is passionate about the issue and has raised it on a number of occasions in Parliament. I accept that the issue is complex and that it is worthy of debate. However, although it is easy to criticise the operation of existing mechanisms, it is more difficult to come up with an ideal solution. The hon. Gentleman stated that the Barnett formula is broken, and he has argued passionately for a needs-based formula. He is waving a hefty document at me. If he would like to pass me a copy, I will sit down and digest it with great enthusiasm at some point.

The Barnett formula has been criticised over the years and, as the hon. Gentleman has said, its inventor, Lord Barnett himself, has suggested that we might need to move towards a needs-based formula. The hon. Gentleman has highlighted arguments criticising the formula, but it is easy to conflate and confuse two issues: what happens in terms of spending within a devolved nation as a consequence of devolution, and what is a direct consequence of the Barnett formula. He highlighted the differences in devolved areas in relation to council tax, prescription charges, tuition fees, education maintenance allowances, hospital car parking and so on. However, I should like to question his comments on the differences in relation to bus travel. He said that it was not possible in England for the carer of a disabled person to travel for free with them, but that is certainly not the case in my local area. Perhaps it is up to local authorities to decide, but in my area people get free bus travel if they can show that they are in the company of someone for whom they are caring.

The issues raised by the hon. Gentleman remind us of the argument about whether devolution is about deciding the size of the cake or about allocating who gets which piece of the cake. As my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) said, Scotland misses out in other areas as a consequence of policies on prescription charges and tuition fees that differ from those in England. Moreover, the hon. Member for Vale of Glamorgan (Alun Cairns), who is no longer present, pointed out that waiting lists are far longer in Wales as a consequence of decisions taken, using devolutionary powers, to spend money elsewhere. He said that, as a consequence, there will be real-term cuts in the health service—in the cancer drugs fund, for example—in Wales.

We have to accept that our establishment of the devolved Parliament and Assemblies means that the basic principle of devolution will lead to differentials in spending. It may create a sense of unfairness, but I do not think that that is particularly germane to the issue of the Barnett formula and its grant.

[Andrew Selous]

I understand what the hon. Lady is saying and I do not disagree with her that how the Scottish Government and the Welsh Assembly Government spend the money they are given is up to them. I have no quarrel with that. However, as my hon. Friend the Member for Warrington South (David Mowat) has said, if Scotland is getting £4.5 billion more than a needs-based assessment might imply, does she not understand that that can fund additional services that are not available to her constituents and mine?

[Kerry McCarthy]

As I have said, the Barnett formula is not perfect. We have established the Calman commission and the Holtham commission to look at the more detailed issues of how devolution works and how we fund matters.

[Mark Lazarowicz]

As we have already heard, the Barnett formula is essentially based upon historical levels of spending, which means that the relatively high levels in Scotland and Wales reflect the decades of argument between Government Departments making the case for higher spending in those areas. It has not appeared from nowhere. Does my hon. Friend agree that it is a question not only of having to assess needs, but of the impact of Government spending? For example, there is no doubt whatever that the presence of Government in London is a major boost to the London economy. That does not apply to the Barnett formula, but it means that London benefits from Government spending in a way that other parts of the UK—not just Scotland and Wales—do not.

[Kerry McCarthy]

I agree entirely. Statistics are thrown around about public spending, its impact and who gets the most. It is not just about Government block grants, but about things such as welfare spending and the impact of locally raised funding, such as council tax, which is a separate issue. I think that people sometimes forget that.

The hon. Member for South West Bedfordshire argued that either a separate body or the Office for Budget Responsibility should administer and oversee the introduction of a needs-based allocations system. I agree that, if we are to move towards something like that, now is not the time to introduce radical change overnight. This is a difficult time economically, and the Scotland Bill, which is making its way through Parliament, will have a major impact on the tax-raising powers of the Scottish Parliament. There are decisions to be made about whether it will take up those tax-raising powers and the impact that would have on its spending. The impact of the comprehensive spending review settlements on the devolved nations is also an issue.

I accept—I think that there is cross-party consensus on this—that we need to examine the case for moving towards a needs-based formula. Some of my colleagues have said that, but it has to be done carefully. I do not want to return to line-by-line negotiations with the devolved nations whenever there is a spending round. There has to be a formula of some sort. I think that my hon. Friend the Member for Pontypridd (Owen Smith) said that a needs-based formula would be eminently contestable. It would be difficult to establish which needs should be taken into account and which needs should not.

[Andrew Selous]

Does the hon. Lady think that we are so much more pathetic than Australia? Queensland and New South Wales are at each other’s throats to get more funding, yet they have a settled procedure which they all respect. Does she really not think that we can aspire to and achieve that in this country?

[Kerry McCarthy]

I am saying not that it is impossible to achieve, but that it is difficult. The Barnett formula was established in the 1970s and people have said that the implication was that it was intended to be in place for only a year. A Labour Government operated under the Barnett formula for 13 years, but a Conservative Government operated under the same formula for 18 years, so this applies to successive Governments. Although there were criticisms, they were unable to find the ideal solution to replace it. Devolution has bedded in and there has been a call from the devolved Assemblies for more powers, which is going to throw the issue into the spotlight again. It is time to revisit it.

[Hywel Williams]

Is the hon. Lady, as a Front-Bench spokesman for the Labour party, saying that the Barnett formula is serving Wales well now? If that is not what she is saying, what is her argument for not changing it as soon as possible?

[Kerry McCarthy]

The argument for not changing the formula as soon as possible is exactly as I have said. At a time when spending cuts are hitting Welsh people, as well as people throughout the rest of the UK, and when changes are afoot and the Welsh Assembly is arguing for it to be given similar powers to those of the Scottish Parliament, we have to look at all those things in the round. There is no immediate solution or magic bullet that will sort the matter out. I accept the case made by my hon. Friend the Member for Pontypridd, who feels that a needs-based formula would serve the UK better.

I am conscious of the time so, to sum up, I shall just say that we accept that the Barnett formula is not perfect and that the situation needs to be reviewed. However, we would be very worried if there were a rush towards jettisoning the Barnett formula overnight. We must deal with the matter in a measured, considered way and with an acknowledgment that devolution is at the heart of the matter. There are devolved powers and we cannot expect Scotland and Wales to conduct their spending and financial affairs in exactly the same way as the rest of the UK.

Oral Answers to Questions

Kerry McCarthy Excerpts

Tuesday 21st December 2010 Commons Chamber

[Danny Alexander]

The hon. Lady has made some important points. Throughout this process we will have regard to the impact that spending decisions have on different groups, including people who live in rural areas, and in particular the most disadvantaged. Our investment in early years education and the pupil premium are important to ensure that the most disadvantaged have the better life chances that we all want them to have.

[Kerry McCarthy (Bristol East) (Lab)]

Does the Chief Secretary accept the independent analysis that the poorest 10% of people will suffer 15 times more than the richest as a result of the Government’s spending decisions? With women and children being hit the hardest, support for people with disabilities being cut, and the Business Secretary suggesting that the winter fuel allowance is being lined up for the axe, no wonder there is growing public anger about big corporations and wealthy individuals seeming to be able to get away without paying tax altogether. What will he do to restore a sense of fairness and justice to the economic system?

[Danny Alexander]

I think that the hon. Lady was trying to get every subject into one question before Christmas. I do not accept the analysis that she offers. She should study more carefully the analysis in the spending review, which took into account the impact of taxation, spending reductions and welfare changes. It showed that as a share of people’s income, and taking account of benefits in kind from the state, people in the wealthiest quintile make a greater contribution to deficit reduction than the poorest. That is in keeping with the Government’s stated ambition of carrying through the unavoidable deficit reduction plan, which is necessary because of the mess that the previous Government left, in a way that is fair and supports economic growth.

Savings Accounts and Health in Pregnancy Grant Bill

Kerry McCarthy Excerpts

Monday 22nd November 2010 Commons Chamber

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call Mr David Hanson to move the next amendment.

[Kerry McCarthy (Bristol East) (Lab)]

rose—

[Mr Deputy Speaker]

Sorry. I call Kerry McCarthy.

Clause 3

Removal of entitlement to health in pregnancy grant

[Kerry McCarthy]

I beg to move amendment 3, page 2, line 22 leave out Clause 3.

[Mr Deputy Speaker]

With this it will be convenient to discuss the following:

Amendment 42, page 2, leave out lines 26 and 27 and insert—

‘(2) The Treasury will conduct a review of the health in pregnancy grant, to be concluded by 1 January 2012, which will consider, inter alia, the case for—

(a) the health in pregnancy grant to be retained in its current form;

(b) the health in pregnancy grant to be means-tested or in other ways targeted towards those most in need; and

(c) the health in pregnancy grant to be replaced by a system of vouchers.”’.

Amendment 44, page 2, line 27, leave out ‘2011’ and insert ‘2014’.

Amendment 43, page 2, leave out lines 31 and 32 and insert—

‘(2) The Treasury will conduct a review of the health in pregnancy grant, to be concluded by 1 January 2012, which will consider, inter alia, the case for—

(a) the health in pregnancy grant to be retained in its current form;

(b) the health in pregnancy grant to be means-tested or in other ways targeted towards those most in need; and

(c) the health in pregnancy grant to be replaced by a system of vouchers.”’.

Amendment 45, page 2, line 32, leave out ‘2011’ and insert ‘2014’.

Amendment 34, page 3, line 1, Clause 4, leave out ‘Sections’ and insert ‘Section’.

Amendment 30, page 3, line 1, leave out from ‘1992)’ to ‘extend’ in line 2.

Amendment 35, page 3, line 4, leave out ‘Sections’ and insert ‘Section’.

Amendment 33, page 3, line 5, leave out from ‘1992)’ to ‘extend’ in line 6.

Amendment 38, in title,  line 2, leave out from ‘2009;’ to ‘and’ in line 3.

[Kerry McCarthy]

I am sorry for not notifying you in advance, Mr Deputy Speaker, that my right hon. Friend the Member for Delyn (Mr Hanson) and I would be job sharing on Report.

We had a reasonably comprehensive debate in Committee on clause 3, which deals with the abolition of the health in pregnancy grant, although not as comprehensive as we would have liked. The Minister did not provide as much explanation as we would have liked on why he and his Government colleagues felt compelled to rush into axing the grant without sufficient evidence that it is not achieving the purposes for which it was intended. Amendment 3 would therefore delete clause 3, the grant would continue and we would have more time to assess whether it improves maternal health and nutrition, and the health of the unborn child and the child once it is born, and whether it achieves the important aim of getting expectant women to access professional advice during pregnancy.

I do not have time to rehearse in full the arguments in favour of such intervention during pregnancy. In Committee, we heard compelling evidence from witnesses of the health benefits for mother and child of tackling poor nutrition. We heard statistics about how many parents worry about not having enough money to feed their families and how many people on low incomes do not have enough money to provide healthy nutritious food. That can be seen in research carried out by organisations such as the Joseph Rowntree Foundation on what sort of household income would be sufficient to provide a healthy diet. Witnesses also told us of the importance of the grant as a nudge towards changing behaviour—the Prime Minister has been a keen advocate of such nudges in the past. By giving the grant and, in particular, by making the payment conditional on accessing advice on nutrition during pregnancy, we have encouraged expectant mothers who perhaps were not completely au fait with nutritional issues to start thinking about them, to access advice on health during pregnancy and to start on the road towards changing their patterns of behaviour. The scheme was in place for only a couple of years, so there was nowhere near enough time to assess its impact, but we heard evidence that it could help break generational cycles of poor nutrition, poor health, birth defects or even mortality during childbirth.

--- Later in debate ---

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. May I suggest that we stick to the amendments that are selected for discussion now? Amendment 49 is not on the selection list and nor are some of the other amendments. If we could stick to the list, I would be very grateful.

[Kerry McCarthy]

Sorry, Mr Deputy Speaker. I assumed that they had all been grouped together.

Let me make a general point that links back to amendment 3 and the need to retain the grant. This is not just a matter of putting the £190 into people’s pockets so that they can spend it either on improving their diet during pregnancy or on items that they might need when the child is born. We need to bring people in so that they access professional health advice at the 25th week of pregnancy or, as we have debated, earlier in pregnancy. That is really important and there is nothing to replace it. The Government seem to have no suggestion on how to bring people in through the door and ensure that we increase the number of women who access such advice if the health in pregnancy grant is not used as a trigger mechanism. If the Government will not accept amendment 3 or any of the other amendments that call for more time and a review of how the grant works, will the Minister at least tell us how we can ensure that more women access professional advice on their health and the health of their unborn child during pregnancy? The grant was designed to tackle a serious issue and it is being abolished in its early stages. It is a shame to abandon the project at this stage.

[Paul Maynard]

Thank you, Mr Deputy Speaker, for giving me the opportunity to speak about the health in pregnancy grant, which of the three items covered by the Bill caused the most consternation in Committee and on the Opposition Benches. It certainly appeared to cause confusion in the Opposition’s arguments.

I have noted even today that there has been a slow, gradual erosion in the totalitarian position taken early on by the Opposition that the health in pregnancy grant was the most wonderful thing imaginable and could not possibly be trampled on. There has been a gradual slip back and quite a few Opposition Members have claimed that the grant was somehow misnamed and that, had they only called it something different, it would have all been all right. I must take them back to what the previous Prime Minister said when the grant was introduced. He said that he had received “powerful representations” about the

“importance of a healthy diet in the final weeks of pregnancy”.

He was very specific. He said the “final weeks of pregnancy”—not early in pregnancy, halfway through, in the 12th week, in the first week, or in the 25th week. The grant was well named, because it did precisely what the previous Prime Minister intended it to do.

The debate is not about the benefits of maternal nutrition, either. Everybody in the House agrees about the importance of proper maternal nutrition, but, clearly, we are divided on how that is best achieved. The Government do not believe that the health in pregnancy grant is the way to do it.

The debate is certainly not about timing. We have a range of alternatives: the Healthy Start vouchers, the maternity grant, and the Sure Start facilities. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) focused in particular on access to health care advice. I entirely agree with her about that, but she cannot avoid the fact that the Healthy Start vouchers are linked to attendance with a midwife.

Furthermore, the idea of the health in pregnancy grant was to provide access to health visitors, but one of the previous Government’s innovations that I wholeheartedly approve and wish to build on is the family nurse partnership schemes that operate in about 50 different councils. They specifically offer the access to advice for the most vulnerable that the hon. Lady was talking about. I simply do not understand her obsession with the health in pregnancy grant as the sole mechanism through which we can access advice. There are already multiple pathways to that advice—pathways that are more successful. I even think that there is a family nurse partnership in Bristol. Such schemes target the most vulnerable in society from the moment of conception until well past birth. This is far more expensive, I accept, but that is because it is a targeted intervention.

I do not accept the hon. Lady’s argument that we need to retain the health in pregnancy grant because it gives access to health advice. It is not the sole pathway for that.

[Kerry McCarthy]

The hon. Gentleman mentioned the family intervention project, and he is right that it does some valuable work—including some valuable work in Bristol. Does he have any idea how many families receive that advice and how many have been brought within the scheme compared with how many people would have received advice through the health in pregnancy grant?

[Paul Maynard]

It is actually called the family nurse partnership, but I assume that we are talking about the same thing. I know that in Blackpool it has worked with about 200 families in the past year. The numbers are clearly far fewer than those who could access the health in pregnancy grant, but once again the hon. Lady is returning to the debate that we have had over and over again about the universal versus the targeted.

--- Later in debate ---

[Dr Poulter]

That is a fair point. Nevertheless, many women smoke during pregnancy and do not necessarily give up smoking. The hon. Lady made the point in her speech earlier about low birthweight babies, a factor which we know is linked to smoking. The grant can be used by mothers to support their smoking habit. To be used effectively, a grant must be tied in with results and effect. We all want mothers to have better nutrition, but unfortunately the grant was often spent on harmful substances. The main problem with the grant is that it was not targeted, it was not effective, and it was not making a difference at the time that we know matters to mothers, which is at birth and delivery.

[Kerry McCarthy]

I am slightly suspicious about the extent to which the hon. Gentleman speaks with authority on what the women who come to see him in his surgery spend their health in pregnancy grant on. I cannot imagine them saying, “I’m off now to spend my grant on rather a lot of packets of fags.” What is the difference between the point that the hon. Gentleman is arguing now—that during pregnancy women should not be given a lump sum that they can spend in any way they choose because some of them might spend it on the wrong things—and what happens with child benefit after a child is born? Surely mothers could spend their child benefit on cigarettes, drugs and alcohol. If that is pursued to its logical conclusion, is it not an argument against giving them child benefit?

[Dr Poulter]

We are not talking about child benefit this evening. We are debating the pregnancy grant. On the principle that the hon. Lady outlines, if we want to provide an intervention and if we want to make a gift of money effective, we need to target it effectively. We have no evidence to show that the grant is an effective intervention in pregnancy. No one on the Labour Benches has shown that the intervention is effective in improving nutrition in pregnancy.

Granted, in my clinics I obviously did not discuss in detail where the grant was spent. Nevertheless, I saw in my clinical practice far too high a rate of women smoking during their pregnancy. I would much rather see effective and targeted advice, independent of any grant, being focused on making sure that women do not smoke while they are pregnant. That would be a much better way of dealing with the issue.

--- Later in debate ---

[Mr Hoban]

That is an unfortunate consequence of the difficult decisions that we have to take to tackle the deficit that the hon. Lady’s party has left behind. Tough decisions have had to be made to target help as closely as possible on those in the greatest need. The support that exists, whether through the Sure Start maternity grant—yes, we are restricting that to the first child from April 2011—or through the Healthy Start vouchers, provides targeted, focused help for those in the greatest need. That is the best way to give support to help mothers on low incomes through pregnancy. The health in pregnancy grant does not tackle nutrition, and it is not well timed because it should be delivered at an earlier stage to help families.

I have to say to the hon. Member for Bristol East that if the grant goes, there are still plenty of opportunities for expectant mothers to access health visitors, midwives and GPs to get the support that they need to help them with their diet or with smoking cessation, and to give them advice and support throughout the pregnancy. Support is not limited simply to receiving that grant; it is there throughout pregnancy, and we should not overlook that fact in discussing the Bill.

It is right to remove the health in pregnancy grant, even though we do not do it lightly and would not choose to do it unless it were a consequence of the situation that we have inherited. The previous Government lost sight of good fiscal discipline, and we are having to take measures today to tackle the problems that have resulted.

[Kerry McCarthy]

In all our debates on the health in pregnancy grant on Second Reading, in Committee and today, we have been going round and round in circles without ever quite nailing what the Government’s objections are to the grant continuing.

I shall try to pin down what the Minister has said. He says that the grant would be better if it were paid earlier, yet he has not brought forward any suggestion that it should be. He says that it is a problem that there is no guarantee about what it is spent on, yet he seems perfectly happy to go on paying child benefit to mothers or the winter fuel allowance to pensioners. There is no guarantee about how that money is spent, so I reject that argument. It has been suggested that there has been no evaluation of the scheme, but as he said, it was introduced in 2009. How on earth can we possibly have had the chance to carry out a full evaluation of the take-up of the grant, what it is spent on and people’s access to advice?

My final point, and the crux of the matter, is that the Minister praises the Healthy Start scheme because it is targeted at the people who need it most. He also mentioned the Sure Start maternity grant, which, as we know, is being reduced to cover just the first child. Does he not accept that if we abolish the health in pregnancy grant, the families he spoke of, who need the Healthy Start vouchers to cover expenses and to have a healthy diet during pregnancy, will be £190 a week worse off? That is why we argue for the retention of the grant, with a review of whether it should be means-tested and better targeted. In rejecting the idea of a review totally, he is basically saying that the poorest families, who are already suffering because the Sure Start maternity grant is being restricted to the first child, must lose £190 a week. That is something of a scandal. I therefore wish to press the amendment to a vote.

Question put, That the amendment be made.

Oral Answers to Questions

Kerry McCarthy Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Gauke]

The hon. Gentleman is absolutely right to highlight that issue. We think that the number is very high and that it is possible to find savings in HMRC’s budget. However, there have been specific proposals for where HMRC has identified that it could recover large levels of yield, and this Government have been happy to provide the funding to do that.

[Kerry McCarthy (Bristol East) (Lab)]

I am sure that the Government will be aware of the growing public outrage at the fact that a company such as Vodafone seems to have been able more or less to decide the size of its own tax bill, and, in doing so, is rumoured to have avoided a sum as high as £6 billion. Do the Government agree that we need far more transparency and accountability when it comes to such backroom deals with large companies, or are we now entering a world where only the little people pay their taxes?

[Mr Gauke]

This Government are determined to crack down on tax evasion and tax avoidance, but the Vodafone deal was a matter for HMRC, and it is right that the Government are not involved in such negotiations. I hope that the hon. Lady will not be aligning herself with those involved in campaigns to close down Vodafone shops. The fact is that companies should pay the correct amount of tax, but she should not believe everything she reads.

Terrorist Asset-Freezing etc. Bill [Lords]

Kerry McCarthy Excerpts

Monday 15th November 2010 Commons Chamber

[Kerry McCarthy (Bristol East) (Lab)]

As my right hon. Friend the Member for Delyn (Mr Hanson) said at the beginning of the debate on Second Reading, we support the Bill in principle and will not press it to a vote tonight. It is a measure that we would have introduced ourselves, had we still been in government, to meet our international obligations and to replace the temporary legislation and put it on a permanent footing.

The Bill has been subject to thorough scrutiny in the Lords, but in the Committee sittings next week we will not shirk from our duty to examine it robustly. As my right hon. Friend said, we will table amendments. The report of the Joint Committee on Human Rights has only just been placed before the House—I think it was available on Friday—and it contains some suggested amendments that we may table, as my right hon. Friend indicated to the hon. Member for Aberavon (Dr Francis), who chairs the Joint Committee. We will keep some of the issues under review in the light of the review being carried out by Lord Macdonald and the internal review.

It is a shame that the hon. Member for West Suffolk (Matthew Hancock) is no longer in his place. I think he slightly misunderstood some of the points made in the opening remarks made from the Opposition Benches. We did not say that the Bill was being rushed through with undue haste. That point was made by my right hon. Friend the Member for Leicester East (Keith Vaz), the Chair of the Home Affairs Committee. He did not speak in the debate—[Interruption]. I thought he had just made a number of interventions, but I stand corrected. He is such a frequent speaker in this place that I lose track of when he pops up and when he does not.

There was also a misunderstanding on the part of the hon. Member for West Suffolk about the amendments that we might table in Committee, but I hope that he will decide to become a member of the Committee and that we will be able to take up those points with him then. I should point out that it is certainly our intention to co-operate with the Government to try to get the Bill through.

I shall now turn to my notes on what my right hon. Friend the Member for Leicester East said—which does indeed confirm that he spoke in the debate—and a fascinating contribution it was, too! He said that the Home Affairs Select Committee would look into this issue more generally after Lord Macdonald had reported, and that it would examine issues such as control orders and the wider civil liberties questions. He also asked the Minister a number of questions about whose accounts had been frozen and whether the 205 such accounts related to 205 separate individuals. He also said that not much money seemed to be involved. I hope that the Minister will be able to respond to those points in his closing speech.

The hon. Member for Cambridge (Dr Huppert) is a member not only of the Home Affairs Select Committee but of the Joint Committee on Human Rights, so he has a double interest. He said that he intended to table some amendments in Committee, which presumably means that he wants to be a member of the Committee. I am not sure whether the Liberal Democrat Whips will be quite so enthusiastic about his doing that, but we look forward to seeing him next week if he is allowed. He raised some important points tonight, as did the hon. Member for Hexham (Guy Opperman), particularly about the test of reasonable suspicion being replaced after 30 days by one of reasonable belief. He said that that was still a lower standard of proof than that of the balance of probabilities. That is an important point, and it has been discussed in the other place.

[Guy Opperman]

rose—

[Dr Huppert]

rose—

[Kerry McCarthy]

I am spoiled for choice! I shall give way first to the hon. Member for Hexham.

[Guy Opperman]

I have no issue with the fact that I have been chosen over Cambridge. Do the Opposition have a specific view on what the percentage is? The hon. Lady will recall that the hon. Member for Cambridge (Dr Huppert) and I mentioned this in our speeches. Is it 40%, 30% or 20%?

[Kerry McCarthy]

Would the hon. Member for Cambridge like to intervene now, so that I can answer both hon. Members at once?

[Dr Huppert]

I was going to ask a very similar question of the hon. Lady. Will she clarify the Opposition’s policy? Should the test be one of reasonable suspicion, as under previous legislation, or one of the balance of probabilities? The right hon. Member for Delyn (Mr Hanson) seemed to suggest that there should be a very low threshold, perhaps even lower than the one the Government propose.

[Kerry McCarthy]

We welcome the fact that the reasonable suspicion test is to be in place for only 30 days before it moves to one of reasonable belief, which is slightly tougher. In response to the hon. Member for Hexham, it is a matter for the courts to interpret what “reasonable belief” would be. We need to thrash out in Committee whether that constitutes a much lower standard than the balance of probabilities. We do not have a firm view on that, but we need to debate the matter in Committee.

The hon. Member for Upper Bann (David Simpson) spoke from his experience of the Northern Ireland situation, as did my right hon. Friend the Member for Delyn, who is a former Northern Ireland Office Minister. The hon. Member for Upper Bann described the Bill as a sincere attempt to deal with important issues, but raised some questions about the interpretation of civil liberties, and it is important that they should be thoroughly debated in Committee.

The hon. Member for Dwyfor Meirionnydd (Mr Llwyd) said that it was absolutely vital to scrutinise these matters, and that, although there seemed to be unanimity of purpose across the House in that we all want to ensure that assets are not misused for terrorist purposes, that was not quite the same as ensuring that the legislation would actually work. He referred to the Dangerous Dogs Act 1991 and to the legislation that followed the shootings at Dunblane, and made the valid point that we must ensure that the legislation will not be struck down because of a perceived illegality. He quoted Burke saying that bad law was the worst kind of tyranny. This highlights the importance of scrutinising the Bill in Committee, and, although we broadly support its intentions and principles, we will subject it to robust scrutiny next week.

Savings Accounts and Health in Pregnancy Grant Bill

Kerry McCarthy Excerpts

Tuesday 26th October 2010 Commons Chamber

[Jacob Rees-Mogg]

My hon. Friend is absolutely right and spot on. That is a most helpful intervention. There is no point in giving money late in the day to everybody—those who need it and those who do not need it alike—for an unspecified purpose when other ways of spending money may prove to be more useful.

[Kerry McCarthy (Bristol East) (Lab)]

The hon. Gentleman is saying that benefits should be targeted rather than universal and that they should be for a very specific purpose—that the state should dictate what the benefit money is spent on, which contradicts what he said earlier about the nanny state. Given his support for targeting benefits, how does he justify the Government’s continued support for the winter fuel allowance?

[Jacob Rees-Mogg]

The winter fuel allowance goes to the elderly, many of whom will have paid full national insurance contributions, and it is therefore in some sense a recompense for what they have paid in. I think that to look after the old in society is an important and virtuous thing to do. It is right to give that help so that people can be warm in their homes, but we are talking at present about £250 for children when they are born that will give them a pitiful amount a few years later. We are talking about £190 given to every woman who is going to have a baby for no necessary benefit to her because she may not need the money or it may be received too late for her to address some of the problems referred to earlier. Those two benefits are therefore unnecessary and wrong.

The third benefit is the Government’s matching of personal savings, and there is a misconception here. Saving from a deficit is a dis-saving to the economy because there are costs associated with allocating that saving. To put that more simply, if someone borrows money from one account to put into another account they will pay a higher rate of interest on their borrowings than they will receive on their savings so, net, the country is dis-saving by topping up savings accounts. Opposition Members are therefore wrong to say that this is an encouragement to saving.

We need to look at all that is being done in the broader context. We have this phenomenal deficit—our highest peacetime deficit—which the Government have, in a workmanlike and serious-minded way, decided to tackle. They have decided to bring the deficit down so that we may have the conditions for economic growth. The essence of good government and of a sensible Treasury policy is to ensure that there are the conditions where business can thrive, jobs can be created and money can cascade through the economy. That is what really lifts people out of—

--- Later in debate ---

[Kerry McCarthy (Bristol East) (Lab)]

It is almost obligatory for a Minister or shadow Minister rising at the Dispatch Box to respond to a debate to say that we have had a fascinating discussion, but I can genuinely say that our debate has been very engaging with lots of issues discussed and clear differences expressed between Labour Members and those on the Opposition—or, rather, Government—Benches. If only they were still in opposition; then we would not be in this position of having to try to defend measures such as these against attack from them.

At least the hon. Member for Blackpool North and Cleveleys (Paul Maynard) was brave enough to speak in the debate, unlike many of his Conservative counterparts. I do not think a single Liberal Democrat spoke, and it was very disappointing to see the lack of interest from them.

[John Healey (Wentworth and Dearne) (Lab)]

It was a lack of support.

[Kerry McCarthy]

Yes, we have to wonder whether the absence of so many Members from the Government Benches was due to a lack of interest or the fact that some of them have serious reservations about what is being proposed today. It was particularly noticeable that very few women Members from the coalition parties attended or spoke in the debate. I hope that that shows some concern on their part.

The hon. Member for Blackpool North and Cleveleys suggested that children would be better served by a piggy bank in their bedroom than a child trust fund, which shows a shocking lack of understanding of the issues. The hon. Member for Gloucester (Richard Graham) showed a similar lack of understanding by saying that an individual savings account was a better form of saving at zero cost to the taxpayer than a child trust fund. I gather from his CV that he worked for Baring Asset Management; I suspect that a background of working for Barings is not the best qualification for advising other people on how to manage their assets.

My hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) made an eloquent speech in defence of the child trust fund. I want to congratulate her on becoming a grandmother today—[Interruption.] Has it not arrived yet? Well, I hope mother and baby do very well when it does finally come along. [Interruption.] Yes, there should now be a pregnant pause in my speech, as the shadow Chancellor, my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), says.

The hon. Member for Strangford (Jim Shannon) and his colleagues from Northern Ireland showed how important they thought the child trust fund was for the people of Northern Ireland. He mentioned that it is backed by the credit union movement, which is obviously well developed there, and that it has cross-party support. We very much valued his support on that point.

The hon. Member for Mid Norfolk (George Freeman) described the contributions of Labour Members as “hysterical”. I have to say that that word is often used by a certain type of man when women express strong views. I am sorry if this makes him uncomfortable, but Labour Members are not desiccated calculating machines and we care passionately about defending the measures that the Government are trying to abolish in this Bill. My hon. Friend the Member for Stretford and Urmston (Kate Green) gave, as always, an awe-inspiring speech. She has impeccable credentials on this point and demonstrated the eloquence that comes from truly knowing her subject and caring passionately about it.

My constituency neighbour—in all other senses he is probably from another planet from me—the hon. Member for North East Somerset (Jacob Rees-Mogg), talked about these measures involving “pitiful” amounts that are “too small” to make a difference. It may be that in the world that he inhabits these sums are pitiful, but I ask him to cross the constituency border and come to meet some of the people whom I deal with in Bristol East, because he would then learn some lessons about how much difference these small amounts of money can really make.

That was something that my hon. Friend the Member for Walthamstow (Stella Creasy) showed in a well researched speech full of statistics. She described just how investing small sums can create substantial assets for a child in its future.

[Ian Swales (Redcar) (LD)]

rose—

[Kerry McCarthy]

I am sorry, but I do not have time to give way because we are a bit under the cosh.

My hon. Friend the Member for Rochdale (Simon Danczuk) talked about how scrapping the child trust fund would heighten the contrast between the tax advantages for the wealthiest savers and the poorest and vulnerable slipping further and further behind. My hon. Friend the Member for Stockton North (Alex Cunningham) reminded the House of the old biblical tale of the widow’s mite and the comparison with the poor being made to contribute to deficit reduction at great sacrifice while the very richest in society will not feel the same pain.

My hon. Friend the Member for Kingston upon Hull North (Diana R. Johnson) talked about how the saving gateway had been piloted in Hull. That measure was not mentioned as much during today’s debate, but it is obviously important and it was praised by my hon. Friend the Member for Scunthorpe (Nic Dakin).

My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)—I think that I finally pronounced that right after several attempts—talked about how the child trust fund is about freedom and opportunity, and not about the nanny state. That is such an important point to make, because the fund is about creating the ability for young people to go out into the adult world with a little bit behind them that they can put to good use.

My hon. Friend the Member for Bolton South East (Yasmin Qureshi) rightly pointed out that those on the Government Benches have been using specious arguments against universalism all afternoon, yet they are not arguing that the health in pregnancy grant should be targeted, although that would be the logical conclusion of their argument. They are also not using the same argument to say that the winter fuel allowance, for example, should be targeted.

We heard a passionate defence of the health in pregnancy grant and the child trust fund from my hon. Friends the Members for Walsall South (Valerie Vaz), for Newcastle upon Tyne North (Catherine McKinnell) and for Edinburgh East (Sheila Gilmore). The latter described some of the language used or some of the suggestions made by those on the Benches opposite about what the health in pregnancy grant could be used for as quite offensive. The suggestion that ladies, as my neighbour, the hon. Member for North East Somerset, would say, cannot be trusted to spend the money wisely in a way that would benefit their health and their child is quite offensive.

[Jacob Rees-Mogg]

rose—

[Kerry McCarthy]

By way of light relief today—[Hon. Members: “Give way.”] I would love to.

[Jacob Rees-Mogg]

I thank the hon. Lady for giving way, because I want to clarify that I had not made the point that people did not spend their money wisely. It may have been made by somebody else, but I would not like people to be confused.

[Kerry McCarthy]

My reference to the hon. Gentleman related just to the fact that he used the term “ladies” quite frequently during the debate, which is actually charming in its own way.

Earlier today, after a heavy morning spent in the Finance Bill Committee, by way of light relief I watched a video that had been posted on the ConservativeHome website in January this year. It was one of those videos that the Conservative party was very fond of when it was on a mission to convince the British voters that it really had changed and was no longer the nasty party. It featured the then Leader of the Opposition, now the Prime Minister, of course, in his shirt sleeves talking with well-rehearsed spontaneity to an audience carefully chosen to seem like a random cross-section of the general public. He said that he wanted this Government

“to be the most family friendly Government we’ve ever had in this country and that is about everything we do to support families and it’s about supporting every sort of family.”

What have this Government, in collusion with their friends from the Liberal Democrat party, done to support families? For a start, what have they done to support children? The so-called emergency Budget and the spending review take away almost £7 billion from funds to support children, three times the amount the bank levy is estimated to raise. According to the Institute for Fiscal Studies, families with children will lose the most from what this Government plan to do by 2014-15. The poorest 10% of families will lose 7% of their income. The Government are freezing child benefit, cutting child care tax credits, restricting the Sure Start maternity grant to just the first child and, of course, axing the child trust fund and the health in pregnancy grant under the Bill that we have considered today.

What about when the children get a bit older? Education maintenance allowances are being abolished, school spending per pupil is being cut in real terms and the IFS has said that the pupil premium could widen funding inequalities. As the End Child Poverty campaign said after the comprehensive spending review, it was

“a dark day for any family struggling to stay out of poverty, or deep in it already and fearing things will get worse still.”

[Guy Opperman (Hexham) (Con)]

Will the hon. Lady give way?

[Kerry McCarthy]

I am afraid I do not have time.

What about the impact on women? Our research has shown—we have had to do our own research, because this Government seem to have abandoned any notion of doing real and meaningful equality impact assessments, and I pay tribute to my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) for her work on it—that the cuts hit women twice as hard as men, without considering the impact of cuts to public services. We know that 65% of public sector workers are women and that two thirds of the public sector redundancies arising from the spending review are expected to be women.

Of the £16 billion cuts in total, £11 billion comes from women. Some 72% of the emergency Budget cuts will be met from women’s income, and in the CSR cuts £5.7 billion will be taken from women compared with just £2.7 billion from men. A million more women claim housing benefit than men, 70% of tax credits are paid to mothers, 94% of child benefit is paid to mothers and 90% of lone parents are women. So much for being family friendly. So much for looking after every sort of family. So much for doing everything they can to support the family.

My hon. Friend the Member for Chesterfield (Toby Perkins) stole my line earlier when he talked about the Government believing in women and children being first when it came to cuts. The phrase “women and children first” comes from a mariners’ saying when a ship is doomed to sink, and what we are discussing today is just the tip of the iceberg.

The Bill might be tiny in terms of written content—it is just three pages and four clauses—but it does a huge amount of damage. It scraps the support that we have given to families to help them save through the saving gateway. It scraps the chance a child from a poor family had to enter adult life with a little pot of money to help them fulfil their dreams and ambitions, something that hon. Members on the Government Benches, with their multi-million pound trust funds, could never hope to understand. It snatches away money from pregnant women—money that was designed to help them have healthy, happy pregnancies and healthy, happy babies.

We on the Labour Benches will carry on fighting for those families and for children who were not born with a silver spoon in their mouth, and we will oppose the Bill tonight.

Draft EU Budget 2011

Kerry McCarthy Excerpts

Wednesday 13th October 2010 Commons Chamber

[Kerry McCarthy (Bristol East) (Lab)]

The Minister certainly talks very tough talk about the current EU budget negotiations, but I have several questions about how she intends to turn that talk into action. She has given a very clear exposition of the negotiations to date—the Commission originally proposed an increase of getting on for 6% in the payment appropriations; the Council then discussed reducing those appropriations; and the UK failed, at that meeting, to persuade a significant number of member states to accept the EU’s position that there should be substantial cuts. We are now at a halfway house, which means that there will still be an increase in the budget. I understand that the EU Parliament will vote next week, on 20 October, on whether to reinstate all the budget lines. Why does the Minister think that the UK Government failed in that way at the meeting and why, when the Chancellor went to ECOFIN in May to propose a cash freeze, was he unable to win a consensus?

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

The hon. Lady talks about failure. Will she remind the House how many times in the 13 years of the previous Labour Government Ministers raised one question about the fact that the European Commission’s accounts were not being signed off by the European Court of Auditors?

[Kerry McCarthy]

That is completely irrelevant to the subject that we are debating. The matter has been discussed in the House on many occasions and has been raised by many of the hon. Gentleman’s colleagues. I understand that, as a new Member, he was not in the House then, but it has been discussed many times.

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

Will the hon. Lady give way?

[Kerry McCarthy]

No; I want to make a little progress. I have not started saying what I intended to say.

I am slightly confused by the Minister’s stance on the motion and the amendments. The motion states that the Government support

“efforts to maintain the 2011 EU budget at cash levels equivalent to the 2010 budget”—

in other words, a freeze. The hon. Member for Stone (Mr Cash) argues that there should be no increase in the EU’s budget, which is pretty much the same position. Although the Minister implied through everything she said that she wants the budget to be smaller, that is not what the motion states. Will she clarify whether the Government are arguing for a freeze, or whether they support the 34 Back Benchers who have signed amendment (b) calling for cuts in the budget? Will she also clarify what she meant when she said that it would be illegal to support amendment (b)? I would be very happy for her to intervene on me to explain the element of illegality. If there were not that illegality, would she call for cuts? If so, why does not the Government’s motion say that there should be cuts?

[Justine Greening]

On the legalities, we are part of the EU—I am sure that some hon. Members wish that we were not, but we are—and we are under a treaty obligation to make payments. If we were to stop making payments, we would breach our treaty obligations, which we are not able to do under law. If we went down that route, presumably any other European country could do anything it liked against any particular treaty obligation it thought inappropriate, which would not be conducive to good diplomatic relationships or to progressing the case that we want to make for a cut in the 2011 budget. I hope that that has clarified matters for the hon. Lady. Perhaps I can press her to confirm whether Labour MEPs will support our Government’s policy stance for a cash freeze in the 2011 budget.

[Kerry McCarthy]

I am here to put the questions to the Minister and to find out what her stance is. She is trying to placate Conservative Back Benchers, who are clearly unhappy about the lack of progress being made by the Government. It is tough talk, but it is all talk and there is no action. When she goes to Brussels tomorrow, what will she see as success in those negotiations? What is she aiming for?

[Robert Halfon (Harlow) (Con)]

Does the hon. Lady’s party support a cash cut in the EU budget?

[Kerry McCarthy]

Again, we are not here to answer questions. We are here to put the questions and to get—[Interruption.] The Minister should accept that the Conservatives are now in government. She cannot just do what she did in opposition and talk tough—

[Mrs Anne Main (St Albans) (Con)]

Will the hon. Lady give way?

[Kerry McCarthy]

I want to make progress. The Minister cannot just talk tough on European issues and pander to people who want to take us out of the EU. She is here to make progress in negotiations and to fight Britain’s corner. I have asked her what she would see as success in doing that.

On the specifics, we are here to debate whether, when EU member states and regions are all engaged in belt tightening, the EU itself should engage in a similar exercise. The Minister has said that sizeable austerity measures are being implemented across the EU. Does that not in itself prove that this economic situation is a global phenomenon that affects all EU member states and not, as the Government say every time Ministers get to their feet in the Chamber, the result of profligate public spending by the previous Government?

[Mr Redwood]

Will the hon. Lady tell us whether she now thinks it regrettable that the previous Government gave away our rebate and got no reform at all of the common agricultural policy, which is why this is such a big budget?

[Kerry McCarthy]

The CAP represented 71% of the EU budget, but it is now down to 40%, so that is significant progress, although I agree that there is more work to be done on that front. I shall come to that.

[Henry Smith (Crawley) (Con)]

If this truly is a global circumstance, how come, apart from the Republic of Ireland, this country has the largest deficit of any in the EU and the largest of any in the G20?

[Kerry McCarthy]

That is obviously partly related to the fact that the UK has probably the largest financial centre globally—it is certainly far and away the largest financial services sector in the EU. There is a more significant impact on the UK economy, London being as it is, as opposed to other countries.

To return to my speech, I shall not take any more interventions for a while. Labour Members believe, as we have always done, that the EU should always scrutinise its expenditure carefully and closely in cutting waste. We want to ensure that the budget is spent wisely and well, and that there is demonstrable added value for the member states and regions as a result of such expenditure.

We welcome the fact that the EU Parliament has chosen, for the first time, not to go above the ceiling set out in the budget at a time when member states face economic hardship. That demonstrates that the Parliament has at least gone some way to appreciating the challenges, but the issue today is whether we should go further. The Government, despite all their talk and bluster, seem to be singularly failing in their aim of putting a lid on what the EU Parliament wants to spend.

Labour Members fully support the principle that the EU budget needs to play its part in an era of fiscal consolidation, and we do not think it right that there should be significant real increases next year, but we should avoid throwing the baby out with the bathwater. The EU has key roles to play, and it was noticeable in the Minister’s speech that she made only passing reference to the good things that come out of working with our European partners. In particular, it is important that the EU continues to foster growth and recovery, which is the priority for us here in Britain. As Europe is our largest export partner, growth in Europe is an essential precondition for our recovery.

We welcome the stated key objectives for the draft 2011 budget, which are to support the EU economy and recovery from the economic and financial crisis, and to help EU citizens by reinforcing economic growth and employment opportunities. It is somewhat ironic that as the European Parliament debates and votes on the draft budget on Wednesday 20 October, when it will focus on the admirable and important objectives of supporting recovery and growth, we in the UK Parliament will hear a statement on the comprehensive spending review from the Chancellor, who clearly rejects an active role for the Government in securing such objectives and believes that cuts, cuts and cuts alone are the way forward.

[Ms Gisela Stuart]

Will my hon. Friend take on board two observations? On an earlier intervention about the Commission’s budget not having been signed off for the past 10 years, is she aware that neither has that of the Department for Work and Pensions? On a much more practical point, if the great ambition is to make us economically successful, will my hon. Friend reflect on the Lisbon agenda, which was supposed to make us the most competitive and technologically advanced economy in 2010 and has singularly failed to do so? Why does she have so much faith in the 2011 aspirations?

[Kerry McCarthy]

There was also the 2010 strategy. In the flagship initiatives set out in the documents before us today, there are some good programmes that we should support, to the extent that they have demonstrable outcomes and that they make a difference, rather than being fine words that do not achieve what they set out to do.

Let me go briefly through the headings in the budget. The Minister was unspecific. She spoke generally in favour of a cash freeze, but did not specify in which areas. [Interruption.] Perhaps the hon. Member for Devizes (Claire Perry) will refrain from heckling me quite so much. She is a near neighbour of mine, and we get to talk rather a lot on the television cameras outside the Chamber. It is extremely distracting, and she will get a chance to contribute later if she wishes. That is fair.

Under sub-heading 1a in the budget, on competitiveness for growth and employment, we support funding that encourages the effective operation of the single market, including addressing transport challenges, such as the greening of transport systems, and promoting sustainable, low-carbon economic recovery and growth. It is important to continue to support innovation and research and development on, for example, the environment, clean energy, energy efficiency and promoting a knowledge-based economy. Europe has a key role to play in that.

On structural and cohesion funding, which is included under sub-heading 1b, much of that spending is key to EU enlargement. Sensible steps to ensure that that money is well spent, which we agree should be taken, should not be allowed to slip into undermining the important principle that enlargement is in the UK’s long-term interest.

[Andrew Percy]

I hope that the shadow Minister will be gentle with me—I am a new Member, after all. We keep going back to the same point, which is that for all the good that she says the European Union does—she has highlighted several areas of spending—we still do not know whether that money has been spent, because the accounts are never signed off.

[Kerry McCarthy]

I will not repeat the point about the hon. Gentleman not being in the Chamber on many occasions when we have had similar debates. As with any public spending, it is important that there is some measure of outcomes, so that we can be sure that there are demonstrable changes and that objectives will be achieved as a result of the spending programmes. We are committed to that. To use the argument about the accounts not being signed off to dismiss everything good that the EU has done and all the initiatives on which we are working with our European partners is tantamount to throwing the baby out with the bathwater, as I said earlier. The argument is used as a red herring by those who are against the entire European project.

[Guy Opperman (Hexham) (Con)]

The hon. Lady has referred to many good things about the European budget. Is she, in her shadow ministerial role, able to identify anything that she would cut?

[Kerry McCarthy]

I shall come on to that point, if the hon. Gentleman will bear with me.

We support some of the structural and cohesion funding, but we agree with the Government that budget levels should be realistic and reflect absorption capacity. In certain areas throughout the EU budget, planned spending levels are indefensible, and, in response to the question that was just asked, we believe that spending under heading 2 on the preservation and management of natural resources should not be a priority in the current economic climate. We do not support that scale of spending on agricultural intervention, and we will support the Government’s close scrutiny of it.

We very much welcome, however, the Government’s statement that there should be an increased emphasis on development objectives, including on reaching the millennium development goals in poorer countries, and we believe that adequate funding is necessary to achieve those aims.

Finally, we also support the Government in pushing for reductions in the administration budget.

[Mr Peter Bone (Wellingborough) (Con)]

Will the hon. Lady give way?

[Kerry McCarthy]

No. I am coming to a conclusion, and the hon. Gentleman will have his chance to speak in a moment. Where efficiency savings can be found, they should be found, and there are significant savings to be made in that area. I can see that many Members want to speak, so I do not intend to delay the House any longer. I look forward to hearing the rest of the debate.

--- Later in debate ---

[Justine Greening]

I must make some progress, because we have very little time left.

In the wake of the worst financial crisis in living memory, and with the events that subsequently unfolded, we have said today in this House that we believe—rightly—that there is no justification for an increase in the EU’s annual budget of nearly 6%. In fact, as we have heard, countries across Europe are taking steps to ensure fiscal consolidation, and there is a strong case for the EU to follow suit—I know that the House can tell that I am taking that case to Europe directly and making it to those countries. My right hon. Friend the Member for Wokingham (Mr Redwood) pointed out how they are taking difficult decisions, and I made that exact point in French to the French Finance Minister.

At a time when all our European neighbours are looking to rein in public expenditure, the EU should not be looking to carry on with business as usual. It cannot be a case of carrying on regardless. That is why we voted against the Council’s first reading, which went in the right direction but did not go far enough—a view seemingly shared by everybody in this House apart from those on the Opposition Front Bench. They let us down by losing part of the rebate in 2005 and now in 2010 they are letting us down again by failing to support our efforts as a Government and as a coalition of parties on behalf of the British taxpayer to get value for money.

My hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) asked how many MEPs will vote against this provision. I can reassure him that we are already talking to our partners in Europe and in our group—the European Conservatives and Reformists. I have spoken to my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), my good friend, and he assures me that he spoke yesterday to the Whip in charge of that group and all that group will be voting against a rise in the European Parliament when it comes before them. I urge those on the Opposition Front Bench to join us in that and to confirm that their Socialist group will do that. If they want to help the British taxpayer, they can start lobbying their own group in the European Parliament in the way that we have already successfully done.

Finally, we have spoken a lot tonight about concerns over the effectiveness of the EU spend and how well it is accounted for. I share those concerns. In fact, the last Government never used their vote when they took a look at the European audit accounts. We plan to be ready to use our vote if we see accounts that fail to meet the standards that we think they should. If we see accounts that contain points made by the European auditors that we believe the Parliament is not taking on board, we will be ready to use our vote in future to challenge the Commission in a way that the last Government never were.

I want to thank Members again for their valuable contributions. It has been incredibly useful for me to have this debate, particularly on the day before I travel to Brussels to defend our national interests and to get the best possible deal for the taxpayer.

[Kerry McCarthy]

Will the Minister give way?

[Justine Greening]

Not unless the hon. Lady is about to say that Labour MEPs and their Socialist group will support us.

[Kerry McCarthy]

indicated dissent.

[Justine Greening]

Sorry.

This year, member states have been taking unprecedented action to restore sustainability to their national finances, making tough choices today to deliver a better future tomorrow. That is the case that I shall be making to my colleagues across Europe in the days and weeks ahead. In these times of austerity, there is no justification for ineffective, wasteful expenditure and there is a real need to scrutinise every euro of spending to ensure that it delivers what is promised. The Opposition might not want to play a role in challenging the unacceptable Commission budget rise, but the Government and we on the Government Benches will. I commend the motion to the House.

Amendment proposed: (b), leave out from ‘the financial year 2011’ to end and add

‘is concerned at the above-inflation increase being made to Britain’s EU budget contribution; believes that, at a time when the Government is poised to make reductions in public spending elsewhere, it is wrong to increase that contribution; and calls on the Government to reduce Britain’s EU budget contribution’. —(Mr. Carswell.)

Question put, That the amendment be made.