Terrorist Asset-Freezing Regime (17 December 2010 to 31 March 2011)

Mark Hoban Excerpts

Wednesday 4th May 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Government are committed to reporting quarterly on the operation of the UK’s terrorist asset-freezing regime. We believe this is essential to ensure transparency and accountability of the regime. The Terrorist Asset-Freezing etc. Act 2010 (the Act) has enshrined in law the commitment to report quarterly to Parliament on the operation of the UK’s asset-freezing regime mandated by UN Security Council Resolution 1373.

This is the first report under the 2010 Act and it covers the period from when the Act came into force on 17 December 2010 to 31 March 2011¹. This report also covers the operation of the UN al-Qaeda and Taliban asset-freezing regime.

As of 31 March 2011, a total of just under £230,000² of funds relating to terrorism were frozen in the UK. This covers funds frozen under the UK’s domestic terrorist asset-freezing regime, mandated by UN Security Council Resolution 1373, and also funds frozen under the UN al-Qaeda and Taliban asset-freezing regime, mandated by UN Security Council Resolution 1267.

(1) UK’s domestic terrorist asset-freezing regime under the Terrorist Asset-Freezing etc. Act 2010

As of 31 March 2011, a total of 85 accounts containing just over £120,000 were frozen in the UK under the domestic terrorist asset-freezing regime.

Operation of the Terrorist Asset Freezing etc. Act 2010

Asset-freezing designations

In the period 17 December 2010 to 31 March 2011, the Treasury made one new designation under the Act. The final designation was made in respect of the military wing of Hezbollah, including the External Security Organisation (ESO). This replaced a designation of the ESO only, extending the freeze to the entire military wing of Hezbollah.

Reviews under the 2010 Act

The Act contains a transitional provision that ensured that all designations made under the Terrorism (United Nations Measures) Order 2009 which were in force at the time the Act came into force remained valid as final designations under the Act until 17 March 2011, whereupon they would lapse if not already renewed. All 57 UK domestic asset freezes were therefore reviewed during the quarter to see whether they should be renewed as final designations under the Act.

The review process was completed by 17 March 2011 and as a result of these 57 reviews:

37 persons³ had their final designations renewed;

Three persons ceased to be designated and the asset freezes in respect of them were lifted;

A further 16 persons and entities ceased to be designated under the Act but remain subject to asset freezes under EU or UN asset-freezing regimes; and

The designation of the Hezbollah External Security Organisation was revoked and replaced with a new final designation of the military wing of Hezbollah, which includes the ESO.

Licensing

Maintaining a fair and effective licensing system is crucial to ensuring the overall proportionality of the asset-freezing regime, whether the individuals concerned are subject to an asset freeze in accordance with a UN or EU listing, or domestic designation. A licensing framework is put in place for each person in the UK on a case-by-case basis. The key objective of the licensing system is to strike an appropriate balance between minimising the risk of diversion of funds to terrorism and implementing asset freezes in a proportionate way. Licences contain appropriate controls to protect against the risk of the diversion of funds for terrorist finance.

A total of 12 licences were issued this quarter under the Act in relation to four persons subject to an asset freeze. Of these, two were new licences, whereas the other 10 were existing licences which were reissued under the Act so as to reference the current legislation rather than the Terrorism (United Nations Measures) Order 2009, under the authority of which they were originally issued.

In addition to issuing licences relating to a specific person, the Treasury may also issue general licences, which apply to all persons designated under a particular regime or regimes. Licences are granted where there is a legitimate need for such transactions to proceed and where they can proceed without giving rise to any risk of terrorist finance.

Six general licences that had been issued under the 2009 order were reissued this quarter under the Act:

Prisoners’ funds—permitting the payment of funds to prison governors to be held and/or applied for the benefit of a designated person;

Provision of insurance to designated persons;

Legal Aid—licensing of payments of aid to designated persons’ lawyers;

Provision of emergency goods and services under insurance policies;^*

Payment of designated persons’ legal expenses by third parties.

^*During this quarter, this general licence was subsequently revoked and reissued with amendments.

Legal Challenges

Two legal challenges against designations made under the Terrorism (United Nations Measures) Order 2009 were ongoing in the quarter under review.

(2) UN al-Qaeda and Taliban Asset-Freezing Regime

The UN al-Qaeda and Taliban asset-freezing regime, established under UNSCR 1267, is implemented in the UK by Council Regulation (EC) No. 881/2002. Enforcement measures are provided for in the UK’s al-Qaeda and Taliban (Asset-Freezing) Regulations 2010.

As of 31 March 2011, a total of 83 accounts containing just under £110,000⁴ were frozen in the UK under the al-Qaeda and Taliban asset-freezing regime.

Designations

During this quarter, the EU added three people to the list in Annex I to Council Regulation (EC) No 881/2002.

Six people were de-listed during the quarter, three of whom had UK connections.

Licences

No individual licences were issued, varied or revoked in this quarter in relation to persons subject to an asset freeze under the al-Qaeda and Taliban asset-freezing regime.

The general licences referred to above also apply to the UNSCR 1267 regime, with the exception of the general licence for insurance, the provision of which is not prohibited under the UNSCR 1267 regime.

(3) Proceedings

In the quarter to 31 March 2011, no proceedings were initiated in respect of breaches of the prohibitions of the Act or the al-Qaeda and Taliban (Asset-Freezing) Regulations.

¹ The detail that can be provided to the House on a quarterly basis is subject to the need to avoid the identification, directly or indirectly, of personal or operationally sensitive information.

² This figure reflects the most updated account balances available and includes approximately $64,000 of suspected terrorist funds frozen in the UK. This has been converted using exchange rates as of 08/04/11.

³ In this statement, “persons” is taken to refer to individuals and legal entities or bodies.

⁴ Includes approximately $64,000 of suspected terrorist funds in the UK.

Finance (No. 3) Bill

Mark Hoban Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Chris Leslie]

My hon. Friend’s arguments become increasingly attractive, and he makes an important point. The bank bonus tax, which the previous Labour Government introduced, appeared at first to be modest, but in fact the yield was very significant indeed. Did the banks collapse as a result of the bonus levy? No. Did they all flee abroad to relocate somewhere else, as threatened? Absolutely not. So, too, with the continuing scale of the bonus pot, which has hardly changed at all, it is absolutely right that we look to reinstitute the levy this year, along with a decent bank levy, as we are discussing today.

Hon. Members will know that the concept of a bank levy was first developed at the G20 summit in Pittsburgh in 2009, and then championed by my right hon. Friend the former Prime Minister and taken forward by the International Monetary Fund in its report, which aimed to encourage less risky funding to enhance financial stability. Two broad conclusions were reached at the Pittsburgh summit. There was a call for a financial activities tax, or financial transactions tax, which we need to debate another time when we consider some of the extra levies that might be put on activities. The Chancellor of the Exchequer himself still professes to be in favour of a financial activities tax, although he has done absolutely nothing to advocate it in ECOFIN or in other financial meetings around the world, so we will see whether anything comes of his repeated promises to pursue it.

The second prong of the IMF’s report was a financial stability contribution, otherwise known as a bank levy, to be charged on equities and liabilities rather than assets or profits because of the need to disincentivise dangerous potential charges such as those that landed on the taxpayer during the credit crunch. The bank levy is a sensible idea in theory, and we broadly support it. However, the yield suggested in the Bill—only £2.6 billion—is not just small but pathetic by international standards when compared with the rate being pursued in other countries. It is perplexing that Ministers settled on that figure, and there has never been any evidential basis published for why they did so. Will the Minister clarify why the Chancellor chose the figure of £2.6 billion, as that seems to be the pole around which all aspects of the bank levy revolve? If there is any sense in which the revenue might go beyond that envelope, the Treasury tweaks and turns down the dials on the other aspects of the levy to squeeze it back into that £2.6 billion of revenue—the predetermined level that it put out to consultation last summer, never explaining why it was set. Compared with the substantial amounts of taxpayers’ money put up in the bail-out of the banks—£76 billion of shares purchased in the Royal Bank of Scotland and Lloyds, £250 billion of guarantees, another £280 billion of other insurances, and a further £100 billion of annual implied subsidy, according to the Bank of England—a £2.6 billion bank levy is very puny.

It is interesting to look at the Treasury document that lists the respondents to the bank levy consultation. There were 44 respondents, all of which are major financial institutions.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Did the hon. Gentleman respond?

[Chris Leslie]

I will respond to the Minister when I have heard his comments. If he wants me to respond again, I am more than happy to have Government time dedicated to the general principles of bank taxation.

The responses showed that the Treasury’s original design for the bank levy had a threshold that triggered payment of the levy for any organisations, institutions or banks with more than £20 billion of equity and liabilities. Ministers realised that that would yield £3.9 billion—nearly £1.5 billion more than the Treasury had expected—which, by the way, would be more than enough to reverse all their police funding cuts, for example. What did the Chancellor do when he realised that the Treasury’s own design for the bank levy could yield £3.9 billion? Did Ministers think that this might be something they should go ahead with? Absolutely not—they gave in, capitulated, and converted the threshold into a tax-free allowance of £20 billion. Hon. Members will know that the Liberal Democrats have long made great play of the increase in personal allowances, which is pretty much the only thing they are getting out of the coalition as they cling on to it, and there might be a few hundred pounds in that here and there. How about having a tax free allowance of £20 billion? That is what they have decided to give the banks. The banks now do not need to pay on their liabilities below that amount.

--- Later in debate ---

[Mr Love]

I bow to your advice, Mr Hoyle. I will conclude my remarks about the lack of a growth strategy by saying that as an optimist, I believe that it is never too late. I hope the Government will think carefully and recognise that the growth strategy they produced on paper simply does not respond to the real needs of the economy.

I finish where I started, by commending the amendment to the Government. It poses no threat to them; it simply seeks to review the bank levy system that they are introducing. They will know, because they have spent a great deal of time on this, just how important the public think the role of the banks in getting our economy sorted out is. After all, it is widely perceived that the banks were the main cause of the problem in the first place, so people are looking to them to help our economy in a meaningful way. For the reasons that I have stated, the amendment will address some of those issues and provide an opportunity to examine how the levy is working in December. I hope that it will provide us with an opportunity to straighten out and ensure that the levy really addresses the needs of our country.

[Mr Hoban]

Amendment 9 seeks to require a report into the effectiveness of the new bank levy, which is introduced in clause 72. I will come to the components of the amendment shortly, but I think it would help hon. Members if I first explained the role and features of the levy.

The levy is a new tax that will ensure that the banks fairly contribute to the Exchequer, while encouraging them to move to less risky forms of funding. This levy forms part of the Government’s far-reaching plans for banking reform. We have already announced an overhaul of financial regulation, marking a break from the light-touch regime championed by the shadow Chancellor when he was the City Minister. We have created an Independent Commission on Banking, which published its interim report last month and is due to publish its final report in September.

When Labour Members were in government, they refused to debate the structure of the banking sector. They were afraid of banking reform and they were afraid to understand and tackle the lessons from the financial crisis. This debate would have been better if one of them had had the courage to accept the failures of the previous Government on the regulation of the banking sector. Not one of them did so. I think this whole debate is a cover for their bluster. When we proposed in March last year to introduce a bank levy, on a unilateral basis if necessary, Labour Members were against it. The then Chancellor was against it and the present leader of the Labour party, who wrote the Labour manifesto, was against it, too. What we have heard today is a whole load of bluster, rhetoric and empty words about how we must tax the banking sector properly when Labour Members lacked the courage to champion these moves when they were in government. We have taken the lead on the issue, when they would have hung back and waited for international consensus and agreement. We have taken the lead, as I say, and France and Germany have joined us in announcing levies. Others have since followed, including Hungary, Austria and Portugal.

The hon. Member for Nottingham East (Chris Leslie) made great play of the various rates that other countries were introducing. Let me point out to him, then, that in France the levy is expected to raise only €500 million. In Germany, the levy is expected to raise €1 billion annually. The hon. Gentleman prayed in aid the US on two occasions, but the US has not yet introduced legislation, so his comments are empty—

[Chris Leslie]

Will the hon. Gentleman give way?

[Mr Hoban]

No, I am not going to give way. We have had quite a long debate already, and it is time we made some progress.

[Chris Leslie]

On a point of order, Mr Hoyle. I understood that this was a Committee stage, and that we were considering the Bill in detail. Is it usual practice for a Minister responding to a debate not at least to give way and allow a dialogue on the clause in question?

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

That is not a point of order. It is up to the Minister to decide whether to give way, and I am sure that he heard the cries for him to do so.

[Mr Hoban]

Subsection (2)(a) of the amendment requires a report on

“the Government’s analysis behind the rate and threshold chosen for the bank levy”.

It might help Opposition Members if I explained how we designed the levy, and why we set the rate and threshold as we did. The levy is intended to ensure that the banking sector makes a fair and substantial contribution, reflecting the risks that it poses to the financial system and the wider economy. It is intended to encourage banks to move away from risky funding models, and complements the wider regulatory agenda to improve standards and enhance financial stability. During the crisis, it became clear that some banks had become over-reliant on short-term funding for long-term lending. When financial markets seized up, those banks were exposed.

I must emphasise that the levy is based on the liabilities of a bank, not on its assets. It is based on the bank’s deposits, its share capital and loans made to it, not on loans made by it. It applies to the global balance sheets of UK banks, building societies and banking and building society groups, and to the UK operations of banks from other countries.

In determining the scope of the levy, we concluded that foreign banks operating in the UK also posed potential risks to the UK financial system and the wider economy, whether they operated as branches or as subsidiaries. It therefore follows that they should contribute on the same basis, and branches and subsidiaries of foreign banking groups are included to ensure that they cannot avoid the levy by group restructuring. That will ensure the provision of a level playing field for all banks operating in the UK.

The levy will be paid by between 30 and 40 building societies and banking groups, and we have made it clear that we expect it to yield about £2.5 billion of revenues each year in its steady state. That appropriate contribution balances fairness with competitiveness, and the rates of the levy were chosen to allow it. We initially announced that a reduced rate would apply for 2011, recognising the uncertain market conditions prevailing at the time, but we no longer consider that to be necessary.

In December the Bank of England noted that the near-term outlook and resilience of the UK banking sector had improved. Markets also now have greater certainty about the timing and direction of regulatory change, with the Basel III regulatory reforms being introduced in 2013 and transition periods being extended to 2015. We therefore decided that from 1 March this year, the full rate of the levy should be introduced for 2011. The levy will now yield £2.5 billion in that year. The steady state target yield was set out last year, when we also announced our intention to make significant cuts in the main rate of corporation tax.

[Chris Leslie]

rose—

[Mr Hoban]

I am going to continue my speech.

We were clear at that time, as we are now, that the bank levy yield far outweighs the benefits that banks receive from the corporation tax change. Other sectors will benefit from the reduction in corporation tax, but the banks will not benefit because of the levy. In the March Budget, the Chancellor went further in helping our economy to grow, and announced an additional 1p reduction in the main rate of corporation tax. At the same time, to offset the benefits to banks from that further cut and maintain the same incentives for them to move to less risky funding, we announced that the rate of the levy would increase from 1 January 2012, to 0.078%.

The threshold has prompted some discussion. The initial announcement on the bank levy last year proposed that it would include a threshold of £20 billion. However, as part of the subsequent consultation exercise, we explicitly sought views on whether it would be preferable to make it an allowance rather than an all-or-nothing threshold. A threshold would provide a cliff edge that banks would avoid by restructuring. Respondents to the consultation made that clear to us, and even suggested that banks, or indeed building societies, might avoid growing their UK operations to avoid the threshold and to avoid paying the levy. We accepted that argument, and have therefore decided that there should be an allowance on the first £20 billion of liabilities liable for the levy. That means that smaller banks, building societies and foreign banks with a small UK presence—that is, those whose liabilities are less than the £20 billion allowance—will not pay the levy.

The allowance will ensure that the levy is proportionate to the risks inherent in banking businesses of different sizes. It balances the probability that the failure of a bank could pose a systemic risk against the relative burden imposed in order to gather additional revenue at the margin. While size is not the sole factor in determining risk to the system, it is an important one. Increasing the allowance would risk excluding banks or building societies that are highly likely to pose a systemic risk if they fail. Similarly, setting the allowance at a lower level—which Opposition Members seem very keen on doing—would risk imposing an unnecessarily high burden on institutions that do not pose a systemic risk to the UK economy in the way that larger banking institutions do. These details, along with many others, have already been made public, and I am sure that the Opposition Members who tabled the amendment are aware of the steps the Government have taken to explain the basis of the decisions. All tax measures now have a tax information and impact note, which sets out clear information relating to the measure and its impact, and which has provided a significant amount of analysis on the levy so far. It is clear that there is no need for a report to provide an analysis of the rates and threshold of the bank levy.

Let me turn to the second element of the amendment.

[Mr Lammy]

rose—

[Mr Kevan Jones]

Will the Financial Secretary give way?

[Mr Hoban]

Let me make progress. The hon. Gentleman spoke for over an hour and I am responding to the speeches made in five hours of debate. I therefore think the hon. Gentleman should hear me out, after which I may consider taking interventions.

Let me turn to the second element of the amendment, on the adequacy of the levy in the context of other reforms to the wider banking sector.

[Mr Lammy]

On a point of order, Mr Hoyle. In Committee, when Ministers have not answered questions from Back Benchers, is it normal for them not even to give way? Surely the Financial Secretary could simply photocopy what he is reading out, and send that to all of us so we can go home?

[The Chairman]

That is not a point of order. It is up to the Minister to decide how he wishes to reply to the debate.

[Mr Hoban]

I think that is the best suggestion the right hon. Gentleman has so far made in this debate. I shall send a copy of my speech to all hon. Members who are interested in it, so they can then go home.

The levy is a permanent tax, and is part of our wider package of far-reaching reforms. It is designed to be consistent with global regulatory practices, drawing on proposals from the International Monetary Fund and reflecting emerging proposals from the Basel committee. Excessive risk taking in the financial sector was a significant contributory factor in the recent financial crisis. As I said earlier, the levy is intended to encourage banks to move away from riskier funding.

The levy should not be seen in isolation from other reforms to the banking system. Domestic, European and international banking reforms will change the landscape of banking. For example, Basel III will lead to higher capital levels, and its liquidity reforms will change the funding profiles of banks. There is a vigorous debate within the EU and the G20 about whether the holders of bank debt should be required to contribute to the recovery or resolution of banks, for example through the conversion of debt to equity. As I said earlier, we have established an independent commission on banking to consider structural and related non-structural reforms.

The hon. Member for Edmonton (Mr Love) raised issues to do with the implicit guarantee, to make sure the right reforms are in place so banks are not dependent on the guarantee from the taxpayer. We have tackled that issue, whereas when his party was in government, it failed to do so. I wish he would give us some credit for the action we have taken to reform the regulation of the banking system during the year in which this Government have been in office.

The final element of the report calls for information on the total tax revenues expected from banks in each year to 2016-17. We have been clear that we expect the levy to raise about £2.5 billion each year. We have also taken other steps to ensure that banks pay their fair share. The previous Government introduced the code of practice on taxation for banks, but they utterly failed to get banks to sign up to it. They talk tough now, but they failed when in government; only four of our leading 15 banks actually signed up to that code of practice when they were in office. By the end of November, however, all the top banks had signed up to the code, and by March 2011 some 200 banks had adopted it. We therefore need take no lessons from the Labour party about getting the banks to sign up to codes.

We are very clear that banks should make a contribution reflecting the risks they pose to the UK financial system and wider economy. While amendment 9 calls for a report, this Government are delivering action. We have already set out the reason for the rates chosen and the decision to set an allowance at £20 billion. We have been clear on how the bank levy fits with and complements our wider reform package and we have been clear that we expect revenues from banks to grow as the economy recovers. We have also secured agreement from the top banks on the tax revenues they expect to pay over the spending review period. We are raising more in this levy than the previous Government raised through their one-off bank payroll tax. Labour Members refused to introduce a bank levy when they were in government. We backed it where they have failed to act and I ask hon. Members to support the clause.

Section 5 of the European Communities (Amendment) Act 1993

Mark Hoban Excerpts

Wednesday 27th April 2011 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I beg to move,

That this House takes note with approval of the Government’s assessment as set out in the Budget Report, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook, which forms the basis of the UK’s Convergence Programme, for the purposes of section 5 of the European Communities (Amendment) Act 1993.

As we look at the economic history of the past decade, we see clearly that economic imbalances create the conditions for recession, and even growth fuelled by imbalances can prove illusory. This Government’s economic programme tackles the imbalances built up under the previous Government, which triggered the deepest recession since the 1930s. As the Chancellor set out in his Budget and as is set out in the convergence programme document before us, growth in the United Kingdom under the previous Government was fuelled by debt. Imbalances arose from the UK’s overreliance on the south-east and the financial services sector, from high levels of Government debt and an over-inflated housing market. The OECD said of the UK that these imbalances

“exacerbated the downturn during the global recession and contributed to a more pronounced fall in GDP, a larger fiscal deficit and higher inflation than in most of the OECD”.

That is the legacy we inherited from the Labour party, which we need to tackle.

As we look across Europe and beyond, we see that we have had to learn the hard way that in an open, global marketplace, no economy exists in isolation: imbalances in individual countries can cause instability on a regional and global basis; the failures of economic policy in one country can be quickly exported to other nations; and unsustainable levels of debt, asset bubbles and uncontrolled deficits can destabilise whole regions through contagion, as we have seen in recent years. In the light of the global and economic crisis, there is increased emphasis on economic surveillance to identify imbalances and take action to deal with them.

Existing surveillance by the International Monetary Fund and the OECD has taken on renewed importance. The IMF has recognised the need to focus on multilateral surveillance and monitoring spill-over effects and systemic risks, and the OECD has recognised the importance of labour markets, housing markets and current account imbalances for strong and sustainable growth. Furthermore, the G20 is looking at countries with large and persistent imbalances to ensure that growth is strong, sustainable and balanced across the world.

In Europe, work to address this has been done through the stability and growth pact. The pact has been around for many years, but in more than a decade of monetary union the sanctions it contains have never been used. The recent proposals to strengthen the stability and growth pact aim to make it more effective. The changes recognise that maintaining economic stability is not just about deficits. Just as the OECD and the IMF are refreshing their approach to macro-economic surveillance, so too is the European Union as it considers a scoreboard of indicators such as labour market flexibility, current account balances and unemployment to ensure that we are alert to risks across Europe.

[Kelvin Hopkins (Luton North) (Lab)]

The Minister talks about imbalances. We always talk about financial imbalances, but the real imbalances in the European Union are the massive imbalances in trade. Germany has looked after its manufacturing and we have neglected ours under several Governments over the past 30 years. We at least are able to depreciate our currency and to address that to an extent, but there has still been a complete failure by successive Governments to do anything to counter the collapse of manufacturing that began in 1979 when we lost a fifth of it following the election of a Conservative Government.

[Mr Hoban]

The hon. Gentleman makes an important point. Under the previous Government, we saw a further deterioration in manufacturing and an overreliance on the financial services sector, creating some of the imbalances that led to the deepest recession since the 1930s. Part of the challenge faced by the Government is how to tackle those imbalances and move to a more broadly based economy, and I shall touch on that later in my speech.

We must remember that sustainable economic growth across Europe is vital to the success of the British economy. Having the right warning mechanisms in place, underpinned by sound data, will help to identify future economic crises that could harm the UK economy. Even though we are not part of the single currency and will not be joining it in the lifetime of this Parliament, we cannot consign ourselves to be bystanders in the debate.

[Mr William Cash (Stone) (Con)]

I noticed the Minister use the expression “we will not be joining the single currency in the lifetime of this Parliament”. I thought there was a clear commitment that we were never going to join the single currency.

[Mr Hoban]

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

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

[Mr James Clappison (Hertsmere) (Con)]

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

[Mr Hoban]

We are not subject to sanctions as a consequence of our opt-out from the single currency. I made that point when we had a debate last year on economic governance, and it continues to be the case now.

The information we are supplying to the Commission in the convergence programme document that we are debating tonight is the first to be provided under the new European semester arrangements. People were concerned that the Commission would receive information before Parliament, but the information provided to the Commission in the document is already public and much of it was provided when the Chancellor made his Budget statement in March.

[Mr David Nuttall (Bury North) (Con)]

Will the Minister confirm that all the information in the convergence programme document is in the public domain and available to anyone outside the House who wants to gain access to it without the document’s publication?

[Mr Hoban]

Indeed. If my hon. Friend has studied this carefully, as I am sure he has, he will recognise that large chunks of it are familiar from the Red Book. Of course, chapters 6 onwards are taken from the Office for Budget Responsibility’s economic and fiscal outlook. This information is in the public domain and Parliament has had sight of it before its presentation to the European Commission.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Will the Minister remind me exactly why we have to produce all this information for the European Union? I have not read it in enormous detail but it seems that Parliament is telling teacher or the boss why we have done what has been done. That places the House of Commons very much in the position of being subordinate to the European Union.

[Mr Hoban]

I do not agree that Parliament has been placed in a subordinate position. We are passing this information to the European Union having already made it available to the House, particularly during my right hon. Friend the Chancellor’s Budget speech, and there is no requirement on us to accept any recommendations that the Commission might make as a consequence of having read the information. We are in a very different situation to those member states that will provide their convergence programmes at the same time as the UK, but before their Budgets rather than after them.

[Martin Horwood (Cheltenham) (LD)]

Does the Minister agree that all European economies have a shared interest in there being proper economic governance in all other European economies? Britain therefore clearly has an interest in proper economic management within the eurozone. Indeed, will he go further and welcome the recommendations of the European Parliament’s Economic and Monetary Affairs Committee, which pressed for even stronger sanctions against those countries that do not manage their public finances as well as this Government are doing?

[Mr Hoban]

Of course, sanctions are a matter for the eurozone countries. They do not apply to us, as we are outside the eurozone thanks to the opt-out secured under the Maastricht treaty and reiterated in the Lisbon treaty, so that point is not relevant to tonight’s debate. We have ensured, through our opt-outs and our commitment not to join the euro—this addresses the point raised by the hon. Member for Glasgow South West (Mr Davidson)—that Parliament remains sovereign.

The Commission has endorsed the UK’s domestic consolidation plan, which is laid out in the convergence programme. As a result of the measures the Government have taken, the path set for fiscal policy means that the UK is on course to meet the Commission’s recommendations and deadline for dealing with our excessive deficit. We are not doing this to get a gold star—to use the language of the hon. Member for Glasgow South West’s analogy—from Brussels; we are doing it for the UK’s economic health. The plan will tackle our record deficit, with expenditure falling as a share of income in every year of this Parliament and national debt falling as a proportion of gross domestic product by 2014-15.

For those in opposition who question this approach and who would condemn Britain to years of unaffordable and wasteful expenditure, let us look at the facts. In Britain we have a higher budget deficit than both Portugal and Greece. Last year, we also had a similar level of national debt to Ireland, but our market interest rates are a fraction of those countries’ rates. Greece’s currently stand at more than 14% and Portugal’s at more than 9%, while Ireland’s is approaching 10%. Britain’s market interest rates have fallen to 3.6%, our triple A credit rating has been secured and we have avoided the sovereign debt storm that has engulfed our continent. That is a direct result of the decisive action that we have taken.

[Claire Perry (Devizes) (Con)]

Does the Minister agree that it is not only the absolute value of interest rates that is important but the spread over countries such as Germany? Indeed, the spread over German bunds for UK sovereigns has dropped by almost two thirds since the election, confirming the validation of this fiscal convergence programme.

[Mr Hoban]

My hon. Friend makes an important point. Interest rates are low and the spread is narrowing. That is a huge benefit to the British economy. It ensures that mortgage rates for families are kept low and it helps to encourage the economy by reducing the costs faced by businesses that borrow. There is a significant benefit to this country as a consequence of the firm action that we have taken. These actions have shown the world that Britain’s future is now in safe hands, and that this is a Government who know how to manage their finances and who have a credible plan that is delivering stability, certainty and growth.

The independent Office for Budgetary Responsibility has forecast growth in each and every year of this Parliament, with growth of 1.7% forecast for 2011. This is in spite of the rise in world commodity prices and higher than expected inflation. The OBR points out that this effect

“creates scope for slightly stronger growth in later years”

than previously forecast. So although it expects real GDP growth of 2.5% next year, it forecasts that it will then rise to 2.9% in 2013, 2.9% again in 2014 and 2.8% in 2015.

The European Commission last month published its own economic forecasts. These show that the UK will grow more strongly in the coming year than Spain, Italy, France, the average for the eurozone, and the average for the EU.

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

Can the Minister remind the House what the OBR predicted the growth rate would be for the first quarter of 2011? I think it is on page 54 of the convergence programme.

[Mr Hoban]

I am rather surprised that the hon. Gentleman has not congratulated the Government on taking the tough action that put the recovery on track and made sure that we have lower interest rates than Greece, Ireland and Portugal. That is a consequence of the actions that we have taken—actions that the Opposition would not take. We are tackling the legacy that they left. The problem is that the scale of the legacy is huge. That makes the recovery challenging. Today’s figures demonstrate that we are making good progress on that.

To support the economy and to continue the growth in the private sector, my right hon. Friend the Chancellor set out a new economic strategy as part of this year’s Budget. The strategy has four ambitions at its heart—that Britain will have the most competitive tax system in the G20; that it will be the best place in Europe to start, finance and grow a business; that it will be a more balanced economy, by encouraging exports and investment; and that it will have a more educated work force that is the most flexible in Europe. In pursuit of these objectives, we have announced further cuts to corporation tax, taking it down to 26% this year and 23% by the end of this Parliament.

This is alongside our decision to introduce a highly competitive tax rate on profits derived from patents and our fundamental reform of the complex rules for controlled foreign companies, making them much more territorial and making the UK a much more attractive place for businesses to locate, ensuring that we have a far more attractive tax system than either Germany or France.

This year’s Budget also deals directly with the challenge of education and youth unemployment, which has been rising steadily for the past seven years. Instead of 20,000 young people benefiting from our new work experience scheme, as we originally planned, we will increase that number fivefold to 100,000 places over the next two years. Although in Austria and Germany one in four employers offers apprenticeships, in England fewer than one in 10 does so. That must change.

That is why last year my hon. Friend the Minister for Further Education, Skills and Lifelong Learning published a skills strategy and confirmed the largest ever expansion in adult apprenticeships. At the Budget we committed to funding another 40,000 apprenticeships for young unemployed people. That brings a total of 250,000 more apprenticeships over the next four years, as a result of this Government’s policies. This will help to ensure that all parts of the country have access to a better educated work force.

This year’s Budget will help to create a more balanced economy, tackling the imbalances of the past that undermined the economy and led to the longest and deepest recession since the war. This year’s Budget gives support to the private sector and hope to those looking for work, and will stimulate job creation across Britain.

[Mr Cash]

One word that the Minister has not mentioned is “deregulation”. In view of the fact that 4% of GDP is lost as a result of European regulation, does he agree that we need to override European regulation, such as the working time directive, when it has the effect of increasing unemployment and preventing businesses from growing?

[Mr Hoban]

My hon. Friend makes an important point about the burden of regulation on business, and that is why in the Budget my right hon. Friend the Chancellor set out our plans for a moratorium on new regulations for micro-businesses and for start-ups, why the Prime Minister, along with several other European leaders, called for plans to cut the burden of European red tape, and why the Prime Minister has also required José Barroso, the President of the European Commission, to deliver on his commitment to reduce the cost of red tape for business by 25%.

We need to work on those issues to tackle regulation that hampers growth not just here in the UK but throughout Europe, because regulation is a Europe-wide issue. We need to tackle and reduce that burden if the eurozone is to grow at the levels that we expect to see in Asia and in the far east.

As I said to my hon. Friend, this Budget tackles regulation and introduces a moratorium, and that is why it stands firm on our plan for recovery. It is good for business, it is good for growth, and with the approval of the House it will form the basis of the information that we provide to the European Commission. I commend this motion to the House.

--- Later in debate ---

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

I do not know how long I have before we move on to the wind-ups, if indeed we are having them.

[Mr Hoban]

indicated dissent.

[Jacob Rees-Mogg]

We are not having them, so I have 11 minutes—this is very exciting. Thank you, Mr Deputy Speaker for calling me last—it does sometimes happen that the first will come last and the last first.

UK Convergence Programme (2010-11)

Mark Hoban Excerpts

Tuesday 26th April 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Section 5 of the European Communities (Amendment) Act 1993 requires the Government to report to Parliament for its approval an assessment of the UK’s medium-term economic and budgetary position. This assessment is comprised of the Budget report and the Office of Budget Responsibility’s (OBR’s) “Economic and fiscal outlook”. This then forms the basis of the UK’s convergence programme, which is therefore based entirely on information already presented to Parliament. The UK is obliged to submit a convergence programme annually to the European Commission under article 126 of the treaty on the functioning of the European Union (the “Lisbon” treaty).

Article 126 is the legal basis for the stability and growth pact, which is the co-ordination mechanism for EU fiscal policies and requires member states to avoid excessive Government deficits, although the UK, by virtue of its protocol to the treaty opting out of the euro, is only required to “endeavour to avoid” excessive deficits.

The Budget report and the Office for Budget Responsibility’s (OBR’s) “Economic and fiscal outlook” were deposited in the Library of the House on 23 March 2011. A small proportion of the content of the convergence programme may be drawn from other material that has already been presented to Parliament, such as last year’s spending review. All of the information it contains has therefore already been published and made available to Members.

A debate in this House has been scheduled for 27 April in order for the House to approve this assessment.

The UK’s convergence programme has been published today. Copies have been deposited in the Library of the House and the document is available electronically via the HM Treasury website. It will be submitted to the EU by 30 April as required by the European Commission. While the convergence programme itself is not subject to parliamentary approval or amendment, a small supply of advance copies was made available to Members through the Vote Office on 21 April.

Financial Services (Rural Communities)

Mark Hoban Excerpts

Tuesday 29th March 2011 Westminster Hall

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I congratulate my hon. Friend the Member for Brecon and Radnorshire (Roger Williams) on securing this debate. There may have been relatively few participants in it, but the quality of contributions has been high, and Members have recognised the importance of the issue.

Access to financial services is not just a rural issue. On a Friday afternoon a couple of weeks ago, I responded to a debate secured by the right hon. Member for Greenwich and Woolwich (Mr Raynsford) on access to financial services in south-east London. There are some common strands, but the particular nature of rural communities creates an additional challenge that we need to reflect.

I shall respond to several points that were made before I cover most of the rest of the issues in a few brief remarks. On automated teller machines, it seems that hon. Members should be in Rhayader on a Friday night if the hon. Member for Brecon and Radnorshire is in town, since he is keen to ensure that he is able to get that tenner out of the cash point to buy us all a drink. He is right to highlight the fact that there is only one cash point in the town. He may be aware that since the report in December 2006 by a parliamentary working group on cash machines, LINK has received nominations for sites, particularly in low-income areas, for about 600 free cash machines. I encourage him to contact LINK directly to suggest that there is a need for one in his community.

My hon. Friend and several other hon. Members spoke about the future of the cheque, a matter which I take seriously. The previous Government turned a blind eye to the threat to the cheque. I have met the UK Payments Council and discussed with it the need to ensure that there is a viable alternative to the cheque before its operation ceases. I made it clear that that is a priority for this Government. It is not clear to me what the alternative would be, given the many qualities of cheques: they are easy to use, people are familiar with them and it is easy to post them. We wait to see what the council says, but I made it clear that it should proceed only if there is a viable alternative that is accepted by many of the groups that currently use cheques.

However, I add a note of caution. The diminishing use of cheques means that the cost per cheque is rising. Clearly, that cost has to be covered in some way, so no one should see cheques as an entirely free option.

The hon. Member for Arfon (Hywel Williams) spoke about Lloyds Banking Group’s plans by to divest itself of 600 branches. He may recollect that the European Commission made that a condition of state aid before signing off the significant investment that the previous Government made in bailing out Lloyds after its merger with HBOS. The Commission required Lloyds to make a significant divestment, and it is making progress on that. There is a great opportunity for that divestment to be used to create a new challenger to UK banks. None of the existing banks in the UK that have a share of the personal account market of more than 14% can buy those branches, so there is an opportunity for someone to become a challenger—to enter the market, buy the branches and provide competition. There is not enough competition in banking at present. A new challenger in the market would help ensure a better deal for consumers, and that banks focus much more on their customers.

My hon. Friend the Member for Ceredigion (Mr Williams) spoke about broadband services in rural areas, and how important it is to ensure that people in such areas have access to online banking. He will know that broadband is not a reserved policy, but work is being done through the UK Government and the Welsh Assembly on improving access to broadband.

In the spending review, we provided more than £500 million of funding for superfast broadband over the next four years, and some of that money can be used to pay for superfast broadband roll-out in areas that the market alone does not reach, including rural areas. The Welsh Assembly are now in discussions with Broadband Delivery UK on how its work will be supported in future.

I agree with my hon. Friend that there are huge opportunities if we can roll out superfast broadband to rural communities. It will help tackle the digital divide and not just enable banking services to be more easily accessed by people in rural areas but create new wealth opportunities, and encourage economic growth and development in those areas.

My hon. Friend also spoke about the future of the Financial Inclusion Fund. I am pleased that the Government will make funding available to continue the face-to-face advice project until April 2012. However, we have been clear that the debt advice sector needs to be put on a more sustainable footing in the long term. There is considerable investment already through the Consumer Finance Education Body, which is looking at financial advice more broadly. We have asked it to take forward debt advice as part of its work of running the money advice service. That work will be funded not by the taxpayer but the financial services industry, which benefits most directly from good quality debt advice being available. He made an important point about access to advice.

[Chris Leslie]

Will the Minister give way?

--- Later in debate ---

[Mr Hoban]

I will, if the hon. Gentleman will be patient for a moment.

My hon. Friend the Member for Ceredigion made points about face-to-face advice and issues in rural areas around accessing advice. Part of the challenge is to ensure that advice is available when people need it. Sometimes that is difficult, given that citizens advice bureaux and other providers operate at fixed opening times, but there are other ways. The Money Advice Trust runs an effective telephone helpline service, as does the Consumer Credit Counselling Service, and we need to look at online tools. It is important that we have a holistic approach to financial advice, and that is why I am keen that the CFEB takes this forward and provides a coherent view about how we provide advice to people, not just in urban areas but across the country.

[Chris Leslie]

I accept what the Minister says about online and telephone advice, but, on face-to-face advice, can he confirm that, as far as the Government are concerned, the £27 million fund will not be available from April 2012 onwards? It is his decision that it will end next April.

[Mr Hoban]

The reality is that the previous Government expected the project to end at the end of this month—that was in their spending plan—but we have extended it for a further year. However, it is important that the financial services sector picks up the bill for it. It is important to integrate it as part of the CFEB—it is its responsibility to take it forward. Of course, we will work closely with that organisation and monitor it to ensure that it delivers that advice. It accepts that it is its responsibility to develop a model of debt advice that meets the needs of people across this country. That is an important goal for that body. The hon. Member for Nottingham East (Chris Leslie) was not around in the last Parliament, but the CFEB had support from his party as well as mine. His colleagues in the then Government saw it as an important way of improving financial capability and advice, so there is shared interest in ensuring that it is successful.

I have two brief points to make about the hon. Gentleman’s remarks. He should be very clear that the Independent Commission on Banking is a focused piece of work—perhaps he ought to read its terms of reference. It is about stability and competition in the banking sector, not the greater issue of banking’s social role. The ICB’s mandate is narrowly focused. The hon. Gentleman is looking perplexed.

[Chris Leslie]

With respect to the Minister, surely competition is integral to the wider social and consumer interest. If his Administration have so narrowly defined the ICB’s activities, is there not at risk that some more important questions might be neglected by Ministers in their future decisions?

[Mr Hoban]

We were keen to ensure that the ICB has a focused remit to enable it to deliver its work on time, so that we could take forward some of the lessons that should be learned from the financial crisis, when large banks posed a greater risk to the economy. UK banking was consolidated, partly as a consequence of the Lloyds and HBOS merger, and the building society sector became more concentrated. That is different from imposing additional social obligations on banks, which the hon. Gentleman seems to favour.

The hon. Gentleman also touched on independent financial advisers. He should be aware that their advice is not free; it is paid for through commission, and it is not always entirely transparent how much is being paid. A move to a fee-based system will help improve transparency. It is important that consumers receive good quality advice. We live in a complex world of financial services, and as a Minister I deal with too many cases of consumers being given bad advice and paying a high price for that. There is a strong consumer-friendly element in the reforms.

The hon. Gentleman also talked about the financial services compensation scheme levy. It pays for the cost of failure among IFAs. It is an important part of the mechanism to give consumers confidence that if something goes wrong, the bill is picked up so that they are not left out of pocket. If the hon. Gentleman believes that the Financial Services Compensation Scheme should be reformed, and that someone else should pick up the levy, he should be clear which sectors should do so. My experience is that people are keen to offload the responsibility to someone else, but never clear who that should be. The scheme ensures that the sector swallows its own smoke.

Turning to the main issues raised by my hon. Friend the. Member for Brecon and Radnorshire, I recognise his concerns about the significant impact of branch closures in his constituency, and the fact that the HSBC branch in Rhayader has only limited opening hours. I also recognise that although people in rural areas experience the same financial challenges as people in towns and cities, living in a rural area may bring additional challenges. Exclusion from financial services may be less visible in many ways in rural areas compared with urban areas.

My hon. Friend referred to micro-managing banks’ activities. I am not interested micro-managing them, and that is as true for the banks in which the state has a significant stake as for those in which we have no shareholding. However, banks and building societies should serve the economy, and we are committed to improving access to banking, and transparency of financial products for consumers. Decisions on opening and closing branches are taken by the management team of each bank and building society on a commercial basis, and the Government do not intervene in such decisions.

My hon. Friend should recognise that the role of banks is not just about branches. They play a much a wider role in helping the UK economy, and we reached agreement with them earlier this year to encourage them to work in partnership to support the recovery, to increase the amount of money they lend to small and medium-sized enterprises, and to pay out lower bonuses than last year. They are more transparent about their pay, and are making an additional contribution to support business growth and the big society bank of £1.2 billion. However, there is more work to do to improve access to financial services, certainly among the most vulnerable groups, by supporting financial mutuals, and improving competition in the banking sector.

We are committed to improving access to basic financial services, especially for those who are vulnerable to exclusion, and we are working actively to ensure that all consumers can access an appropriate mix of financial services. Bank and building society branches are not the only channels for accessing financial services, nor are they necessarily favoured by consumers on low incomes. For many people, the barriers are significantly greater than simply having no local bank or building society branch to visit.

It is important that financial services adapt so that they fit the grain of how people run their lives. For example, many consumers without bank accounts express a preference for managing their finances in cash. They want direct control over their spending, and often believe that a bank account takes that away from them. For many, the financial services with which they engage most often are not in bank branches.

That brings me to the post office network, which has more branches than all the retail banks put together. An important part of the Post Office’s future sustainability will be the continued growth of revenue from financial services. The Government have promised that there will be no programme of post office closures, and in last year’s spending review we promised to provide £1.34 billion for the Post Office to modernise the network and to safeguard its future, making it a stronger partner for the Royal Mail. We have also said that expansion of accessible and affordable personal financial services available through the Post Office should be a priority. Our ambition is that all UK current accounts should be accessible through the post office network, making post offices the convenient place for people to access their cash.

[Roger Williams]

I thank the Minister for his comments on the debate. On a practical issue, people tell me that the one thing they value about banks is that they can talk in private about their financial concerns. That facility is not available in post offices. If the Post Office is to deliver more financial services, it must address that issue, as well as availability, with the public.

[Mr Hoban]

My hon. Friend makes an important point. As it expands the financial services that it offers, the Post Office will have to think about how to encourage take-up, and how to provide support and advice, if that is the route that it wants to take. I was about to acknowledge that the range of services that the Post Office will offer will not be the same as a community bank, which is an idea that he outlined.

There is a real challenge in putting in place the right model of financial services in rural communities. It is not right to mandate a particular model as being right. The impetus for new ways of developing services should come from the financial services sector. The hon. Member for Arfon complained about the HSBC branch that has become highly automated. The challenge there is whether that meant that the branch could stay open, and whether new technology is being used to keep more branches open by changing the way in which services are offered. There are some interesting challenges, and banks must work their way through them.

When thinking about how financial services best support families and businesses, particularly in rural areas, we must think more carefully about their changing nature. There is a risk of getting stuck in a particular view of how banking should work. People are turning increasingly to prepayment cards or e-money. For example, Tesco is making payment to short-term employees with an e-money card, instead of paying money into a bank account. We can learn from other countries how they have tried to get around lack of bank branches. We should think about developing new safe and convenient financial services using different channels.

Mutuals were mentioned a couple of times, and I am conscious of the excellent work done by credit unions, particularly in the constituency of my hon. Friend the Member for Brecon and Radnorshire. Mutuals can be more accessible for those who cannot or do not want to access banks. The coalition is committed to a strong mutual sector that should have the capability to enrich British society. It is in everybody’s interest to do whatever we can to help the mutual sector prosper and grow, and for that to be achieved sustainably. Over the past few months, I have had the opportunity to start a meaningful dialogue with the mutual sector about its ambitions, looking at what services it can offer and how it can overcome the hurdles that have been holding it back.

Although mutuals benefit from not having to pay dividends to their shareholders, they have an obligation to their members. They have to strike a balance between meeting their wider obligations and providing returns to their members through higher returns on savings or lower borrowing costs, ensuring that they remain viable and competitive. Such considerations are at the heart of every decision made by a building society.

As a consequence of the financial crisis, there is clearly an appetite for change in the way financial services operate, and mutuals stand well placed to respond to that challenge. To help achieve it, the Government are implementing several legislative reforms to help create a more equal playing field in financial services, thus promoting diversity and providing a challenge to banks.

The legislative reform order on industrial and provident societies and credit unions has been a long time coming. It will be re-laid before Parliament shortly, and will introduce basic yet far-reaching reforms that will enable credit unions to modernise and grow. We will also take forward the implementation of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 after the legislative reform order comes into force. That will bring the industrial and provident society name into the 21st century, and modernise the powers available to update legislation in the future.

My hon. Friend the Member for Brecon and Radnorshire asked about reducing the burdens on building societies. We will shortly lay an order that gives mutual societies—including building societies—the option to use electronic communications to engage with members and distribute certain statutory information, as opposed to sending it by hard copy. That will reduce costs to businesses and enable them to invest more in services.

In recent years, credit unions have made great progress in providing affordable financial services to people who could not otherwise access them. They provide an alternative to payday lending, loan sharks and home credit, and I want them to continue to develop and strengthen. We are providing additional support to those institutions outside the regulatory legislative process. Building on the financial inclusion growth fund, the Department for Work and Pensions will continue to support credit unions for four years through a new expansion and modernisation fund worth up to £73 million. The fund will seek to extend access to basic, appropriate financial services to many people on lower incomes, through modernising delivery and customer support systems.

[Roger Williams]

One concern relayed to me by mutual societies, particularly building societies, is about the burden of reporting that has to be done on a regular basis, presumably to the Financial Services Authority. That seems to be out of proportion to the risk that building societies present, and certainly to that presented by large commercial organisations.

[Mr Hoban]

My hon. Friend makes an important point to which I should have responded earlier. He lays down a challenge about the burden imposed on building societies and other financial services organisations. The FSA has looked carefully at the regulation of building societies. He will be aware that building societies were affected during the financial crisis, and there were several rescues as they had to consolidate. The concern is that a number of them moved into areas in which they were not entirely comfortable or well resourced to deal with, and that put the building society and depositors at risk. We need to ensure a proportionate regime for regulating building societies that recognises the risks posed to members and financial stability.

One area in which the Government are taking forward further work to support building societies, and an issue building societies have raised as a consequence of the financial crisis, is the need to find new sources of capital. We are working closely with building societies to identify an instrument that enables them to raise capital markets, will help absorb losses if they occur in the future, and is consistent with enhancing the stability and security of the building society sector. We are taking active measures to strengthen the mutual sector because we believe that its diversity can act as a spur to further challenges to the banking sector. It is an important part of the architecture of financial services, not just in terms of providing mainstream products, but in trying to provide greater access to groups that are harder to reach.

I have been fortunate to have enough time to expand on the subject at some length. I hope that my hon. Friend will recognise that although the Government cannot intervene in the individual decisions taken by banks and building societies to close branches, we are committed to taking further steps to improve access to financial services throughout the country, in rural and urban areas alike. We recognise that particular challenges face financial services in rural areas, and we will continue to look carefully at those issues and listen to concerns raised by hon. Members.

Amendment of the Law

Mark Hoban Excerpts

Monday 28th March 2011 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

We knew that the Labour party was in denial about the deficit and the difficult decisions that the country has had to take as a consequence of its legacy, but every one of the 16 speeches we heard from Opposition Members today reiterated that same denial. They claim that 250,000 people were out at the weekend to find an alternative, but there is clearly no alternative from those on the Opposition Benches. In speech after speech, Labour Members denied the reality of the economic situation they left the country. They have forgotten that when they were in Government the manufacturing sector halved in size while financial engineering replaced real engineering, and that our share of world trade fell as we failed to take advantage of growth in the global economy. The gap between the north and the south grew on their watch, and under their stewardship red tape, whether regulation or the length of the tax code, ballooned, acting as a dead weight on business. Their legacy to this country is an economy that needs reform if we are to have stable and sustainable growth, if every part of this nation is to prosper and if we are to compete with the best in the world. That is the agenda of reform that we set out in the Budget last week.

We want the UK to become the best place in Europe to start, finance and grow a business, but in the past decade alone countries such as Germany, Denmark and Finland have overtaken us in international rankings for competitiveness. In our plan for growth we have therefore taken action to abolish £350 million-worth of specific regulations, to implement in full Lord Young’s recommendations on health and safety laws and to impose a moratorium, exempting businesses employing fewer than 10 people and all genuine start-ups from new domestic regulations for the next 10 years. These measures were welcomed by my hon. Friends the Members for Aberconwy (Guto Bebb), for Mid Dorset and North Poole (Annette Brooke) and for City of Chester (Stephen Mosley). No longer will British business be tied down by wasteful red tape.

We are going to tackle what every Government have identified as a chronic obstacle to economic growth in Britain but have never done anything about: the planning system. Councils are spending 13% more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third. Yes, communities should have a greater say in planning, but as a result of the Budget we will expect all bodies involved in planning to put jobs and growth first, and we will introduce a new presumption in favour of sustainable development so that the default answer to development is yes.

We will protect the greenbelt, but we will also remove the nationally imposed targets on the use of previously developed land. We will streamline the planning process. I welcome the support from the hon. Member for Bristol East (Kerry McCarthy), who wants to stop applications being bogged down for years, which I think will free up the economy. I am pleased that there is at least one measure in the Budget that Labour Front Benchers will support. No longer will cumbersome planning rules and bad regulation stand in the way of job creation up and down this country.

There has been a lot of talk about enterprise zones. The hon. Member for Nottingham East (Chris Leslie) was dismissive of them, so I think that he should speak to his friends the hon. Members for Blyth Valley (Mr Campbell), for Telford (David Wright) and for Coventry South (Mr Cunningham), who all want to see enterprise zones in their constituencies because they want to see the benefit that will flow as a result. We have already announced four new enterprise zones: Mersey Waters in Liverpool; the Royal docks in Newham; Manchester city airport, which was welcomed by the right hon. Member for Wythenshawe and Sale East (Paul Goggins); and the Boots campus in Nottingham. There are 17 more to follow. The only Member who did not call for an enterprise zone in his constituency was my hon. Friend the Member for Colchester (Bob Russell), who went one further and called for Colchester to become a city. I do not know whether city status will offer the same benefit as enterprise zones, but I wish him well in that bid.

There was some discussion among Opposition Members about the problems of youth unemployment. We know that under the previous Government youth unemployment increased. Let me remind the House what the Chancellor announced in the Budget last week: 80,000 additional work experience placements and a doubling of the number of university technology colleges from 12 to 24. He announced 50,000 additional apprenticeships, taking the number introduced by this Government to 250,000 in total, compared with the plans left us by the previous Government.

We also need to make sure that we have a competitive tax system. Britain used to have the third lowest corporate tax rate in Europe; now we have the sixth highest. At the same time, our tax code has become so complex that it has overtaken India’s to become the longest in the world. As my hon. Friends the Members for Mid Sussex (Nicholas Soames) and for Wolverhampton South West (Paul Uppal) said, we have to address that issue.

Our taxes should be efficient and support growth, be fair and predictable, simple to understand and easy to comply with. That is why from April the corporation tax rate will be reduced not just by 1 percentage point as we announced last June, but by 2 percentage points, and by 1 percentage point for each of the next three years, taking our rate down to 23%—16 percentage points lower than in America, 11 lower than in France and 7 lower than in Germany, giving us the lowest corporation tax rate in the G7.

A competitive tax system is not just about lower rates, however; it is also about the way in which we make tax policy and cut the cost of compliance. That is why last July we set up the Office of Tax Simplification to give advice on how to reduce the complexity of the tax system; and that is why we are going to reduce no fewer than 43 complex reliefs, from Black Beer to Angostura Bitters and late-night taxis to luncheon vouchers. We are ridding the tax system of unnecessary legislation and taking out 100 pages from our tax code, which is a good step towards creating a simpler tax system and reducing the cost of compliance for small businesses.

We need to go further, however. For decades, we have operated separate systems for income tax and for national insurance, with two completely different systems of administration and two different periods and bases of charge. That imposes unnecessary costs on our country’s employers, and that is why this Government will consult on merging the operation of national insurance and income tax to create a simpler, more competitive and more stable tax system that is an asset to our economy.

Several hon. Friends talked about the importance of small businesses having access to finance, and we should not ignore the problems that businesses face in that regard. Small businesses in particular have been innocent victims of the credit crunch. They have seen the flow of affordable credit dry up, their overdrafts squeezed and lending conditions deteriorate. That is why we have agreed with the nation’s banks a 15% increase in the availability of credit to small businesses.

But that is not the end of the story. As my hon. Friends the Members for Stratford-on-Avon (Nadhim Zahawi) and for South Northamptonshire (Andrea Leadsom) said, we need tax incentives to encourage entrepreneurial activity, and that is why it was good to see Sir Ronald Cohen and a number of venture capitalists and business angels praise the measures we announced in the Budget last week to double the size of entrepreneurs relief to £10 million and to increase income tax relief to 30%. That is how we will provide finance to the nation’s small businesses in order to help them to grow and create the jobs that we will need in the future; and that will help Britain to become the best place in Europe to start, grow and finance a business.

The issue is not just about financing start-ups and smaller businesses. We are pleased that the banks have agreed to increase the size of business growth funds to £2.5 billion, and to provide more equity investments for small and medium-sized businesses that want to grow and become the best in the world.

This Government are looking to right the wrongs of the past. We are going to reverse the trend of the past decade, a decade that saw manufacturing shrink, businesses tied down by red tape imposed by the previous Labour Government, the south grow faster than the north and growth balanced precariously on a mountain of debt. We will not repeat the mistakes of the previous Labour Government. We want to see growth built on firm foundations, with reforms that make our country more competitive and more business-friendly, with an economy exploiting new opportunities in the manufacturing, life sciences, digital and creative industries.

That is why the Budget has been greeted with acclaim throughout the country by business organisations that recognise the measures we have taken. That is why the strategy that my right hon. Friend the Chancellor set out, of tackling the deficit, has been supported by the OECD, the International Monetary Fund, the European Union, the CBI, the Institute of Directors, the Bank of England and 35 business leaders who wrote in support of our plans at the time of the spending review last year. Who can the Opposition claim in support of their plans? The Guardian. Is it not typical that, when this country needs far-reaching economic reform, the only answer that the Labour party has is a policy, which it knows is illegal, to cut the VAT rate on petrol?

We have set out measures to ensure that we tackle the mistakes of the past, that build a more dynamic, prosperous and sustainable economy that this country—

European Summit

Mark Hoban Excerpts

Thursday 24th March 2011 Commons Chamber

[Mr William Cash (Stone) (Con)]

(Urgent Question): To ask the Chancellor of the Exchequer whether the decision described as the draft decision in the motion to approve the treaty change on the European financial stability mechanism without a referendum, which was passed by the House yesterday, is now under review.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am grateful for this opportunity to make a statement to the House about Portugal and the European stability mechanism. I understand that hon. Members are concerned about the events that unfolded in Portugal, which has faced difficult challenges for some time.

Yesterday, the Portuguese Prime Minister resigned after Parliament rejected his austerity Budget. However, let us be clear: Portugal has made no request for assistance, and I hope that hon. Members will understand that it would be inappropriate for me to engage in any speculation about what may happen. It is not for me to say whether Portugal should ask for help, just as I would not tell it how to run any part of its economy. However, I assure the House that we will keep hon. Members informed of any developments.

Hon Members may wish to reflect on the fact that, as my right hon. Friend the Chancellor said yesterday, our deficit is larger than Portugal’s, but market rates in the UK are similar to those of Germany. That reinforces the fact that it is right to pursue the course that we set last year to tackle the deficit.

My hon. Friend the Member for Stone (Mr Cash) has also raised questions about the European stability mechanism. A strong and stable euro area is important for British business. Over 40% of our exports go to the euro area, but we are not a member of the monetary union, and it is not our responsibility to deal with the euro area’s problems. That is why we have welcomed the progress that has been made on the European stability mechanism. In the design of the ESM, we had to ensure that there was no transfer of powers from the UK to the EU. We would never have accepted that.

The treaty change applies only to euro area member states. There is no transfer of power or competence from the UK to Brussels. The ESM puts no obligation, legal or political, on the UK to contribute. That is why we have supported the agreement, which makes the euro area’s responsibilities absolutely clear. In 2013, the European stability mechanism will come into effect. Also in 2013, the European financial stability mechanism will come to an end, and the UK will not be part of it.

Several countries, including Germany, have strong views about how the ESM should be designed, but that cannot change the fundamental aspects of the mechanism, because the ESM will be developed under article 136 of the treaty and it can apply only to member states whose currency is the euro. The UK cannot join the ESM without joining the euro. As my hon. Friends know, that will not happen in the lifetime of this Parliament.

Furthermore, we have ensured that the recitals—the preamble—to the draft decision by the Heads of State and Government at the December Council meeting stated that article 122, which was used to create the temporary funding mechanism,

“will no longer be needed”

and “should not be used” to ensure financial stability for the euro area as a whole once the permanent mechanism is in place.

Should there be any suggestion of amending the draft decision at the European Council, the Prime Minister could not legally agree to it without first coming back to the House for additional approval after a further debate. The House and the other place would have to ratify any change to the treaty.

[Mr Cash]

I asked the question, first, because the existing European financial stability mechanism, to which we are potentially exposed in respect of Portugal, was described in the report of the European Scrutiny Committee, which I have the honour to chair, as “legally unsound”; and, secondly, because it involves the United Kingdom underwriting approximately €8 billion to eurozone countries until 2013.

The motion for a treaty change to create the new mechanism, which was passed yesterday, provides for amending article 136 of the European treaty without a referendum, but the amendment prescribes strict conditionality. What are those conditions? The motion that was passed yesterday now appears to be vitiated. Will the Government renegotiate the decision so that the European stability mechanism, if proceeded with at all, is agreed by the British Government with unanimity only if the legally unsound existing European financial stability mechanism, to which we are wrongly exposed, is repealed? The United Kingdom would thus not be required to contribute to the bail-out of other eurozone countries such as Portugal, which would amount to approximately €4 billion. That course of action is open to the Prime Minister in his negotiations at the summit today, and it would relieve the hard-pressed British taxpayer.

If my proposal were accepted, I feel sure that the Government would have an improved chance of obtaining the European Scrutiny Committee’s clearance for any new decision and the passage of any subsequent Bill required under the House’s procedures. Will my proposal be accepted?

[Mr Hoban]

My hon. Friend and I have debated this subject before, and my right hon. Friend the Minister for Europe opened a lengthy debate on it on 16 March. The Government are clear that the European stability mechanism is an important tool, but it is for the euro area to fund it. The ESM will lead to the extinction, as it were, of the EFSM. I do not feel it appropriate to engage in further speculation on events elsewhere.

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

Clearly, it would be troubling if the situation in Portugal reignited a round of eurozone bond market anxieties. The Opposition agree that it would be inappropriate either for us or the Government to engage in a running commentary on the likely impact of events in Portuguese politics or Portugal’s debt-financing capabilities. That is for the eurozone countries to resolve, and I would not expect the UK taxpayer to be drawn into the situation.

However, I have a number of specific questions for the Minister. For general information and the interest of the House, will he say a little more about the UK’s relationship with the Portuguese economy, including our trade relationships and UK banks’ interests in Portuguese bonds and so forth? Will the Minister update us on the Finance Ministers meeting that took place—I think—on Monday as a prelude to today’s EU summit? Originally, there were reports of an expectation that today’s summit would find its way towards resolving the permanent bail-out mechanism, yet we now hear that because of various disagreements, that will be kicked into the long grass again, until June. Does the Minister agree that it would be quite bad not to resolve that ongoing problem until the summer?

What are the Prime Minister and Chancellor doing to expedite negotiations and agreement on the permanent mechanism? Is it acceptable that the Prime Minister did not actually attend the meeting of 17 countries at the last summit at the beginning of the month, when we clearly have an interest in resolving those questions? Is it correct that the eurozone countries have invited the UK and other non-eurozone countries to have a say in debates on the new permanent mechanism? Quite honestly, we have an indirect interest in what happens, so it is surely in our interests to ensure that the eurozone countries resolve those questions quickly. It is not acceptable for the UK to absent itself at the critical moment, when it should be putting pressure on them to resolve those questions. Ultimately, we need stronger leadership from the Government to ensure that those matters are resolved in Europe and the eurozone. The longer they remain unresolved, the more likely it is that our interests will be affected.

[Mr Hoban]

The hon. Gentleman makes an important point. It is vital that there is stability in the eurozone and that agreement is reached on the ESM. My understanding is that the issues raised by the German Government and German Chancellor are not about the fundamental design of the mechanism, but about its detailed terms. We will discuss that at this weekend’s European Council, on which the Prime Minister will report to the House on Monday, as is customary.

The hon. Gentleman asked about the UK economy’s exposure to Portugal. Our exposure is relatively small—smaller than that of a number of other European countries. Our bilateral trade in 2010 was about £4 billion, so we do not have a significant exposure, although Portugal is of course an important trading partner.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

Can we just have a reality check? There will be no stability in the euro area until at least some of the countries currently in it leave. There seems to be little doubt about that.

May I remind my hon. Friend that we have just had an austerity Budget—another one? In my constituency, people are talking about having to make NHS savings of £84 million over the current planning period. Can he imagine how absolutely furious British voters will be if it turns out that the British taxpayer must continue to contribute to the bail-out of euro countries even though we are not a member? Why does he not take the opportunity—before agreeing to the new stability mechanism—to get our European partners to agree that we shall be released from any obligation to the temporary stability mechanism for which we are currently liable?

--- Later in debate ---

[Mr Hoban]

My hon. Friend forgets that we have already agreed with our European partners that the European stability mechanism will replace the temporary structures that were put in place, and of course we should not forget that we are part of the EFSM as a consequence of decisions made by the previous Government, not this Government.

[Mr Speaker]

I call Denis MacShane.

[Mr Denis MacShane (Rotherham) (Lab)]

Obrigado, Mr Speaker.

The plain fact is that Portugal is our oldest ally. It is in trouble and we should help. When Margaret Thatcher brought the rebate back, she was questioned by a Eurosceptic on the Labour Benches who asked, “Why are you allowing more money to go from the British taxpayer to all these new countries?” She replied: “We should help Portugal”. We should do the same tonight. I hope that our Prime Minister will remember our longest, oldest friendship with any European country, and ignore the Eurosceptic waffle from those sitting behind the Front Bench.

[Mr Hoban]

I do not believe it is appropriate at this stage to engage in speculation about the Portuguese economy. There has been no request for a bail-out, and further comment would be unhelpful.

[Mr Peter Bone (Wellingborough) (Con)]

On the Portuguese potential bail-out, will the Minister agree to make a statement to the House before we are committed to any bail-out? What provision has been made in the Budget for such a bail-out?

[Mr Hoban]

My hon. Friend wishes me to respond to a hypothetical question, but I do not intend to do so today.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

For clarity—and in the hope of getting at least one sensible answer out of this debate—will the Minister confirm that because we do not have a veto over the bail-out mechanism, if Portugal applied for a bail-out, we could be exposed to liabilities of up to €4 billion? We have no veto, which means that we would be forced to do it, irrespective of which Government negotiated the position. I would like a yes or no.

[Mr Hoban]

The hon. Lady, who is very knowledgeable and well-versed in these matters, knows exactly the terms on which the EFSM was established. However, I do not believe that it is helpful to speculate on hypothetical situations.

[Sajid Javid (Bromsgrove) (Con)]

Portugal finds itself in this sorry state today because yesterday its Parliament failed to pass a budget that would have allowed foreign investors to continue investing in its sovereign bonds. Does my hon. Friend realise that had we not had a change of Government in our country 10 months ago, we could just as easily have found ourselves in a very similar situation?

--- Later in debate ---

[Mr Hoban]

My hon. Friend is absolutely right. Owing to decisions that this Government have taken to get our public finances back on the right track, it is not sterling that has been speculated against in the currency markets.

[Sir Stuart Bell (Middlesbrough) (Lab)]

Listening to what my right hon. Friend the Member for Rotherham (Mr MacShane) said about Portugal being our oldest ally, I was reminded of the only word that survived the Peninsular war. It was “vamos”—the Portuguese and Spanish ran away. It seems from the speeches of the hon. Members for Stone (Mr Cash) and for Harwich and North Essex (Mr Jenkin) that they wish to run away from the European Union. They have been running away from it since its beginning. In response to a question from me, the Prime Minister said recently that he believed in “a healthy eurozone”. Is it not better for the eurozone to have its competitive pact and its financial stability system? Furthermore, building on the point made by my hon. Friend the Member for Nottingham East (Chris Leslie), is the Minister not worried that 17 member states in the eurozone will create a two-speed Europe?

[Mr Hoban]

It is absolutely right that Europe should be competitive and able to compete with companies in north America, Asia and south America in what are becoming increasingly challenging global markets. Europe needs to address its competitiveness, which is why we engaged in the economic taskforce led by Herman van Rompuy. We need to see changes in Europe, and my right hon. Friend the Prime Minister will be pressing for that at the summit.

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

The Minister will know that although Portugal has not so far requested any help, it is in a similar situation to Ireland, in that Ireland did not request any help at the very beginning, but was forced to take it later. Yesterday, we voted—essentially—on a treaty change. Will the Minister confirm that, if the change is made in the coming weeks—the Prime Minister having come back to the House—the UK Government will still have a veto to play, or will the veto be played this weekend, meaning that we cannot change anything in the future?

[Mr Hoban]

I do not know whether my hon. Friend was present for the debate in the House on 16 March when we discussed the ESM, but let me remind him of what my right hon. Friend the Minister for Europe said:

“Should there be any suggestion of amending the draft decision at the European Council—there is no such suggestion from any quarter at present—the Prime Minister could not legally agree to it at the European Council without first coming back to this House and the other place for additional approval after a further debate.”—[Official Report, 16 March 2011; Vol. 525, c. 424.]

Of course, there can be no change to the treaty unless primary legislation passes through both this place and the other place.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Will the Minister confirm that had we joined the euro, we would have been expected beyond 2013 to make a significant contribution? Has he had a chance to ask the Chief Secretary to the Treasury whether he has abandoned his policy of joining the euro at the earliest possible date?

--- Later in debate ---

[Mr Hoban]

I frankly think that that was a pathetic question.

[Martin Horwood (Cheltenham) (LD)]

Do Ministers agree that, having just put in place the most comprehensive system of democratic checks on further transfers of power to the European level of government, it is now high time that this Government got on with the priority of providing a positive leadership role for Britain in all European decision-making forums, and that the anti-European guerrilla warfare from the Back Benches really does not help?

[Mr Hoban]

My hon. Friend is right to point out that much work needs to be done in Europe. I believe that this Government have played an important role, particularly in pushing the competitiveness and growth agenda, and that is the right role for this country to play.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The Minister and colleagues on the Government Benches are again keen to draw an analogy between this country and, this time, Portugal—previously it was Ireland and Greece. Can he confirm that the UK is in an entirely different position from those countries, given that it controls its own interest rates and its own currency?

[Mr Hoban]

The only reason that this country is in a different place from Greece, Ireland and Portugal is the action that this Government have taken to sort out the mess left by Labour.

[Matthew Hancock (West Suffolk) (Con)]

Will the Minister confirm that the contingent liability under the scheme was set up after Labour had lost the election by the then Labour Chancellor? Does what is happening in Portugal, where interest rates have today risen above 8%, not provide the most eloquent lesson on what would happen here if we did not get a grip?

[Mr Hoban]

My hon. Friend is absolutely right. The decision taken by the previous Chancellor meant that we became part of the ESFM, and that is why the liability exists today. My hon. Friend is absolutely spot on: we have taken difficult decisions in this country. This Government have decided to tackle the deficit that Labour left behind, and we have a clear plan to do it. The Opposition have no ideas. Under a Labour Government, this country would be running out of steam.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

The events last night in Portugal bring into sharp focus why it is important to maintain the confidence of the markets. Is the Minister glad that this Prime Minister did not attend the meeting of the 17 eurozone countries, because the last Prime Minister attended and gave away our rebate?

[Mr Hoban]

Certainly, the previous Government very rarely showed any backbone in dealing with our European partners on the rebate or other matters. This Government stand up for Britain’s interests when it comes to the debate in Europe. We have done that on the rebate, on the budget and on this mechanism.

[Bob Blackman (Harrow East) (Con)]

When Ireland was in trouble, we helped out. Ministers brought forward a proposal to give a loan to Ireland to help sort out their finances. I appreciate that at the moment there is no proposal to do the same for Portugal, but will the Minister give an assurance that we as a House will be given the opportunity to debate any such proposal that comes forward?

[Mr Hoban]

As I said before, I do not think that it is helpful to engage in unnecessary speculation. However, I would point out to my hon. Friend that this Government have sought to ensure that we keep the House informed on all matters of importance.

Amendment of the Law

Mark Hoban Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Diana Johnson]

I am sure the hon. Gentleman will be delighted to know that, because of the additional funding that the Labour Government put in from 1997, huge strides were made in education in my city, with more children achieving at GCSE level and more young people going on to college and university. That is important because it links into the growth strategy. Unless we have an educated, skilled work force, employers will not be attracted into the area. I disagree with the hon. Gentleman.

What the Chancellor announced today is a return to the 1980s. As mentioned earlier, the detail on the enterprise zones is very sketchy and it looks like only limited resources will be available to the 21 areas granted this status. Hull, however, is not in the initial 10 announced today, which is very disappointing because Hull and the Humber is one area where I would have hoped the Government would see the need to invest in and support the economy for it to grow.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am delighted that the hon. Lady is so supportive of our policy on enterprise zones. Perhaps she can encourage her local LEP to bid in the next round for one of them to be based in Humber and then to make a compelling case for the Humber to benefit from the policy.

[Diana Johnson]

With the greatest respect, if the Minister had listened to what I said, he would know that the Conservatives and Liberal Democrats who run the local authorities in my region cannot agree on an LEP, so there is not one. There is no procedure whereby anyone can lobby the Government for an enterprise zone. I question what will be delivered for local communities through an enterprise zone, and I also question how this policy fits with the localism agenda that the coalition is so keen to promote, whereby local areas are supposed to decide for themselves what they want to do and what best fits their particular needs. I question the announcement today, what it will mean and how it will help areas like the Humber.

I am also intrigued by this start-up Britain initiative. How is that going to help Yorkshire businesses? How is it going to help businesses in the Hull area? This start-up business sounds like a roadshow; I understand that the Prime Minister is going to tour around the country with some business leaders. If that is part of the growth strategy, then we have a long way to go.

Is this really a Budget for growth? I am concerned about some of the announcements that roll back people’s rights at work. A race to the bottom is not part of a sensible progressive growth strategy for our economy. We want high-skill jobs; we want a highly trained work force; and we want people treated properly in the workplace. Under the Labour Government, we married up social justice and economic efficiency from 1997 up until 2008, when we had the crisis with the bankers.

I am also concerned that women will lose out in this Budget. I was disturbed at Treasury questions yesterday when one of my hon. Friends raised the issue of how measures taken by the Treasury team were affecting women, only to have it dismissed along the lines of “We cannot possibly provide that information. We can only drill down to a household level. We can’t be gender specific.” In this day and age, the Treasury can be gender specific and should come clean on what these measures will mean for women and families.

Young people in Hull is another important issue. We are seeing a lost generation of NEETS—those not in education, employment or training. The coalition policies to remove education maintenance allowance and treble university fees will mean more and more young people deciding not to get the skills and the education that we all want them to have. It is a retrograde step when the Government pursue such an agenda against our young people.

Debt and Service Management Report 2011-12

Mark Hoban Excerpts

Wednesday 23rd March 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The “Debt and reserves management report 2011-12” is being published today. Copies have been deposited in the Libraries of both Houses.

Oral Answers to Questions

Mark Hoban Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

10. By what date he expects revenue to the Exchequer to match levels of public expenditure.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Excluding capital expenditure, the Office for Budget Responsibility forecasts revenue to exceed current expenditure by 2015-16. This is further evidence that this Government believe that the country should live within its means.

[Mr Speaker]

Order. We are asking about current policy, and some of these questions are simply—[Interruption.] Order. We have got the gist.

[Mr Hoban]

My hon. and learned Friend is absolutely right, and a number of organisations, both at home and abroad, have criticised the lack of ambition of the previous Chancellor’s plans. That is why the Obama Administration, the International Monetary Fund, the OECD, the Institute for Fiscal Studies, the CBI, the Governor of the Bank of England, 35 leaders of British businesses, the European Commission, the World Bank, three major credit rating agencies and the world’s biggest bond trader have been backing our plans—the only person the shadow Chancellor can find to back his is The Guardian.

[Tony Lloyd (Manchester Central) (Lab)]

Public expenditure is to be matched by revenue in 2015, but has the Treasury made any estimate of the amount of growth and employment that will have been forgone by these policies of making too-deep cuts too quickly?

[Mr Hoban]

The hon. Gentleman should pay attention to the forecast produced last year by the OBR indicating that the economy would continue to grow in each year of this Parliament.

[Stephen Hammond (Wimbledon) (Con)]

Does my hon. Friend agree that real progress on growth has to be made through not only matching expenditure, but cutting the deficit, and that the OECD says that the only way we will get future growth is by ensuring that the deficit plans are continued and this Government pursue their policy?

[Mr Hoban]

My hon. Friend is absolutely right. The OECD is one of a number of organisations that have supported our plans. The IMF has said:

“The government’s strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability.”

That theme continues to come across from international organisations, which demonstrates that we are on the right track to get this economy growing again and ensure that Britain continues to live within its means after a decade of a Labour Government who maxed out on the nation’s credit cards.

[Helen Goodman (Bishop Auckland) (Lab)]

11. If he will (a) prepare and (b) publish an assessment of the relative effect of his forthcoming budget on women, families and ethnic minorities.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Government have received a number of representations for the Budget referring to the need to reduce the budget deficit. In addition, the Government’s strategy has been endorsed by a number of organisations, including the OECD, which said in January that the Government should

“stay the course…The fiscal situation in the UK absolutely requires this approach”.

[Mark Lancaster]

The Government’s plan to eliminate the deficit by 2015 is in stark contrast to the Darling plan, which was simply to reduce it by half. What assessment has the Minister made of the likely impact of the Darling plan on the level of debt and the cost of servicing it?

[Mr Hoban]

If we had continued with the previous Government’s deficit reduction plan, debt would still be rising in 2015, not falling, meaning that we would have to spend an extra £3 billion in one year on debt interest while still having to make spending cuts. The lack of ambition in the previous Government’s plan put our credit rating at risk, thus threatening the prospect of higher interest rates and putting a brake on the recovery.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

When such representations were being made, was the Minister conscious of the effect that these cuts might have on young people in our country? Did he look at last week’s level of unemployment among young people? When will his Government do something for young people in this country?

[Mr Hoban]

The legacy left by the previous Government was that youth unemployment was continuing to rise. The other problem with which the Opposition left us was that our children and grandchildren would have to pick up the tab for Labour’s mismanagement of our economy. We need to get the deficit down to create the foundations for economic growth to ensure that more young people are back in work.

[Duncan Hames (Chippenham) (LD)]

The Chief Secretary to the Treasury has certainly received representations from me on such measures, including about the estimated loss to the Exchequer of more than £100 million due to tax avoidance through low value consignment relief on VAT. Will the Minister at least confirm that the Government’s conclusions on that will be shared with us in tomorrow’s Budget?

[Mr Hoban]

I encourage my hon. Friend to be patient.

[Mr Kevan Jones (North Durham) (Lab)]

15. What recent assessment he has made of the effect on economic growth of the spending reductions set out in the June 2010 Budget.

--- Later in debate ---

[Mike Freer (Finchley and Golders Green) (Con)]

T2. The Financial Services Authority’s mortgage market review stated:“Our existing regulatory framework has been shown to be ineffective”and that“regulatory reform is needed to reduce the probability and severity of future financial crises”.Does the Minister agree?

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

My hon. Friend is right. The mortgage market needs reform, but it needs stability as well, which is why I welcome the statement by the FSA today. It says that it will not introduce reforms this year and will take into account overall economic stability before it introduces any further changes. It has also made it clear that lenders should not pre-empt any conclusions from its review.

[Bill Esterson (Sefton Central) (Lab)]

T5. Can the Chancellor confirm that between 1990 and 1997 the proportion of tax paid on a litre of fuel rose from 59% to 75%? Can he also confirm that the proportion of tax paid then fell by more than 10% between 1997 and 2010?