Loans to Ireland Bill (Allocation of Time)
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That the following provisions shall apply to the proceedings on the Loans to Ireland Bill:
Timetable
1.–(1) Proceedings on Second Reading, in Committee, on consideration and on Third Reading shall be completed at today’s sitting in accordance with the following provisions of this paragraph.
(2) Proceedings on Second Reading shall (so far as not previously concluded) be brought to a conclusion three and a half hours after the commencement of proceedings on the Motion for this Order.
(3) Proceedings in Committee, on consideration and on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption or six hours after the commencement of proceedings on the Motion for this Order, whichever is the later.
Timing of proceedings and Questions to be put
2. When the Bill has been read a second time—
(a) it shall (despite Standing Order No. 63 (Committal of bills not subject to a programme order)) stand committed to a Committee of the whole House without any Question being put;
(b) proceedings on the Bill shall stand postponed while the Question is put, in accordance with paragraph (1) of Standing Order No. 52 (Money resolutions and ways and means resolutions in connection with bills), on any financial resolution relating to the Bill;
(c) on the conclusion of proceedings on any financial resolution relating to the Bill, proceedings on the Bill shall be resumed and the Speaker shall leave the Chair whether or not notice of an Instruction has been given.
3.–(1) On the conclusion of proceedings in Committee, the Chair shall report the Bill to the House without putting any Question.
(2) If the Bill is reported with amendments, the House shall proceed to consider the Bill as amended without any Question being put.
4. For the purpose of bringing any proceedings to a conclusion in accordance with paragraph 1, the Speaker or Chair shall forthwith put the following Questions (but no others)—
(a) any Question already proposed from the Chair;
(b) any Question necessary to bring to a decision a Question so proposed;
(c) the Question on any amendment moved or Motion made by a Minister of the Crown;
(d) any other Question necessary for the disposal of the business to be concluded.
5. On a Motion so made for a new Clause or a new Schedule, the Chair or Speaker shall put only the Question that the Clause or Schedule be added to the Bill.
6. If two or more Questions would fall to be put under paragraph 4(c) on successive amendments moved or Motions made by a Minister of the Crown, the Chair shall instead put a single question in relation to those amendments or Motions.
7. If two or more Questions would fall to be put under paragraph 4(d) in relation to successive provisions of the Bill, the Chair shall instead put a single question in relation to those provisions.
Miscellaneous
8. Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply so far as necessary for the purposes of this Order.
9.–(1) The proceedings on any Motion made by a Minister of the Crown for varying or supplementing the provisions of this Order shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.
(2) Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply to those proceedings.
10. Standing Order No. 82 (Business Committee) shall not apply in relation to any proceedings to which this Order applies.
11.–(1) No Motion shall be made, except by a Minister of the Crown, to alter the order in which any proceedings on the Bill are taken or to re-commit the Bill.
(2) The Question on any such Motion shall be put forthwith.
12.–(1) No dilatory Motion shall be made in relation to proceedings to which this Order applies except by a Minister of the Crown.
(2) The Question on any such Motion shall be put forthwith.
13. The Speaker may not arrange for a debate to be held in accordance with Standing Order No. 24 (Emergency debates) at today’s sitting before the conclusion of any proceedings to which this Order applies.
14.–(1) Sub-paragraph (2) applies if the House is adjourned, or the sitting is suspended, before the conclusion of any proceedings to which this Order applies.
(2) No notice shall be required of a Motion made at the next sitting by a Minister of the Crown for varying or supplementing the provisions of this Order.
15. Proceedings to which this Order applies shall not be interrupted under any Standing Order relating to the sittings of the House.
16.–(1) Any private business which has been set down for consideration at 4 pm at today’s sitting shall, instead of being considered as provided by Standing Orders, be considered at the conclusion of the proceedings on the Bill today.
(2) Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply to the private business for a period of three hours from the conclusion of the proceedings on the Bill or, if those proceedings are concluded before the moment of interruption, for a period equal to the time elapsing between 4 pm and the conclusion of those proceedings.
I do not wish to detain the House too long in moving the motion. It seeks the approval of the House to consider all stages of this important Bill in a single day. With the co-operation of the House, the Bill will make a major contribution to the United Kingdom’s declared international commitments.
Why do we need to expedite the Bill? The loan to Ireland is novel and large, and the Bill is needed to give the Treasury the necessary authority to advance funds to Ireland. The loan agreement will require the Government to obtain all necessary authorisations before the first draw-down on the loan can be made. The international package is to be discussed at the International Monetary Fund tomorrow, and it is important that the Government, the IMF and the other lenders can be sure that legislation will be passed so that they can assess the adequacy of the total support package, hence the desire to proceed as quickly as possible today. Passing the Bill will also provide certainty to financial markets that the UK’s funding package will be in place. It is in no one’s interest to create further instability.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I do not think that anybody wants to waste time on the timetable motion unless necessary, but if my hon. Friend were to provide an assurance that the Bill can and will be used only for a single bilateral loan to Ireland, and that it will not be used for any other purpose, that might help it on its way.
Mr Hoban
I do not wish to pre-empt the remarks that my right hon. Friend the Chancellor of the Exchequer will make on Second Reading, but I can provide that assurance to my hon. Friend.
The Bill is needed to provide statutory authority for the Treasury to pay out the funds involved. Any loan agreement is contingent on obtaining that necessary authority. In improving the overall package of financial assistance to Ireland, our international partners need to be sure that the UK will have the necessary legislation in place to allow it to fulfil its part.
Lady Hermon (North Down) (Ind)
Will the Minister clarify one point that confuses me? The Bill is entitled the Loans to Ireland Bill, but the explanatory notes, which I know are not binding, keep referring to, and imply that there is, a single loan. How many loans will there be to Ireland? Is there a limit?
Chris Bryant
I, too, do not want overly to delay the House, but we are using an emergency procedure on a Bill that will not go through the same processes as other Bills. It is therefore all the more important that we ensure that we rarely use such a procedure. Will the Minister ensure that the Government do not use this procedure on future occasions, if similar arrangements have to be made for other countries?
Mr Hoban
It is important that there is proper parliamentary scrutiny of measures such as this. That is why we sought to agree the timetable through the usual channels, and to ensure that there is time to debate amendments and that the Bill goes through the normal process of scrutiny. Given that the Bill is shorter, it can be scrutinised in a shorter period of time without compromising scrutiny. That is why I believe that we can deal with it today. I urge the House to support the programme motion.
Loans to Ireland Bill
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
This has been a good debate about the principles underlying the Bill, and I welcome the Opposition’s support for it.
I am sorry that the shadow Chancellor is not in his place. He made a typical speech: a couple of jokes, a few quotations and then a shaky grasp of the facts. I shall not match him on jokes, but let me give the House a couple of quotations. He talked about the views on Ireland, but let me quote a former member of Labour’s shadow Cabinet, who said:
“The whole purpose is to bring the Welsh economy up to the standards of those of other countries in Europe, so that we can follow the lead of the Irish economy and become, in a matter of 10 or 20 years, one of the most successful regional economies in Europe.”—[Official Report, 28 February 2002; Vol. 380, c. 868.]
The right hon. Member for East Ham (Stephen Timms), when he was Chief Secretary to the Treasury, said:
“The Irish economy has enjoyed a good deal of success over the past few years. The corporation tax regime has contributed to that, but there have been a number of other factors”.––[Official Report, Finance Public Bill Committee, 8 May 2007; c. 19.]
There we go: a record of Opposition Members’ hymns of praise to the Irish economy.
It struck me as remarkable, however, that the shadow Chancellor did not understand the mechanisms being used to support the Irish economy. He seemed to think that the UK would bear a higher share of the bail-out costs than other European Union members, such as France and Germany, and that they do not contribute to the IMF or to the stability mechanism. Let me make it absolutely clear to the House that the UK is contributing through the IMF, the stability mechanism and a bilateral loan. Other European countries are contributing through the IMF, the stability mechanism and, if they are members of the eurozone, the stabilisation facility.
Owing to their share of the contribution to European Union funds, Germany and France are contributing more than the UK: some 27% of the contribution is through the facility. France contributes 20% through the facility, compared with our 14%. And through the mechanism, the UK’s contribution is 14%, Germany’s 20% and France’s 17%. It is a pity that the shadow Chancellor does not understand how the package actually works. The right hon. Gentleman also seemed to deny that the euro made any contribution to the crisis facing Ireland. However, the right hon. Member for Edinburgh South West (Mr Darling), who made a very thoughtful speech about the challenges facing the European Union, punctured his view that the euro had nothing to do with it.
My hon. Friend the Member for Chichester (Mr Tyrie) asked whether we considered buying bank assets. We have in place an agreement by the Irish Government to repay our loan in full, but that could not have been guaranteed if we had sought to buy individual assets of Irish banks. He also asked whether Ireland could repay early without a penalty, and the answer is yes, but the Irish Government would have to make break payments.
The right hon. Member for Belfast North (Mr Dodds) and the hon. Member for Belfast South (Dr McDonnell) talked about the impact on the Northern Ireland economy of what is happening south of the border, and we recognise that. We recognise also that more work needs to be done to strengthen the Northern Irish economy, which is why we are in discussions with the Northern Ireland Office about the issues to do with enabling the Executive to set their own corporation tax rate. There is another part to that deal, however, because, if they have that power, they will need to bear the risk with the revenue and see a reduction in their block grant.
A number of hon. Members, including my hon. Friends the Members for Wellingborough (Mr Bone) and for Kettering (Mr Hollobone) and the hon. Member for Nottingham East (Chris Leslie), asked how we can afford to do this, given the fiscal position that we are in. Let me make it clear that we are not paying for the loan out of revenue or capital expenditure; we are going to borrow the money. The measure will not lead to a reduction in the money we can spend in my constituency or theirs. In fact, as my right hon. Friend the Chancellor said, we will end up making a small profit on the loan because of interest rate differentials. The loan will not affect how much can be spent in our constituencies, and if that is the only reason hon. Members are opposing the measure, I ask them to think again.
Mr Hoban
The debt is matched by an asset, which is the amount we expect to get from Ireland, and it does not impact on our deficit. We will actually make a return on the interest that will be paid.
Let me deal with three very brief points. First, there is no expectation that we will have to make further loans to Ireland in the future. Secondly, there is no reason to presume that full repayment will not be met over the term of the loan. Thirdly, ensuring Ireland’s stability is overwhelmingly in our national interest. That is why we are making the loan and this exception for Ireland. It is in our economy’s interests to ensure that the Irish economy is stable and we need to do all that we can to deliver that.
Question put, That the Bill be now read a Second time.
Loans to Ireland Bill
Mark Hoban Excerpts(13 years, 11 months ago)
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Chris Leslie
Although most of the Opposition’s amendments relate to clause 2, these amendments deal with a number of incredibly important issues, and I am grateful to hon. Members for tabling them.
Let me take up some of the points made by my hon. Friend the Member for Foyle (Mark Durkan) about amendment 6 in particular. I understand what he said about the document that was presented to us about five minutes before the start of the debate, which, I have to say, was not only unfortunate, but verging on action that I would describe as morally out of order. It has been very difficult for the Committee to assimilate rapidly what is going on in the negotiations.
However, although I understand, at first glance, my hon. Friend’s impression that amendment 6 or others might have been overtaken by events, the more I think about it, the more I feel that it would be important to have an opportunity to debate the interest rate question in particular because it has such an important bearing not only on the British taxpayer, as the organisation making the loan, but on the Irish people themselves. There are a number of circumstances that can change from time to time. What we have before us is a summary of key terms of the credit facility, which does not necessarily give us the full picture. Although we support the principle of the loan, I am slightly uncomfortable about nodding through quite technical terms without our having had even a retrospective opportunity to air the details properly. That, I think, is essentially what amendment 6 is trying to rectify. I shall say more about that shortly, but let me first deal with amendment 3, because it makes an important point.
I entirely understand the attempt by the hon. Member for Stone (Mr Cash) to limit the way in which the current drafting of the Bill might affect all sorts of other unforeseen loan opportunities. He spoke of the European Union’s inveigling its way into other loan arrangements. In particular, he is worried about whether the Bill excludes what might be done under European law, because, as he sees it, this legislation leaves open opportunities for the EU to enlarge and change the mechanism, and to build on what we, at face value, know about the dimensions of the loan under discussion.
There are some interesting points about the jurisdiction of the European Court of Justice in the case of a default, and some questions probably merit further scrutiny, but I am not entirely convinced of the hon. Gentleman’s arguments or of whether his amendment to clause 1(2) would necessarily achieve much of great use. I am grateful to him, however, for at least tabling it.
We have not touched on some of the other amendments in the group. The Chancellor addressed the denomination in sterling issue in his opening comments, but the question about whether the loan should be repaid over a particular length of time is quite interesting, and the hon. Member for Kettering (Mr Hollobone) tabled a useful amendment involving the 30-year period. The Opposition have also tabled amendments on those matters, in our case to clause 2, but our proposals are about the reports having to comment on the duration of the loan. Amendment 10, on the terms of the credit facility being open to greater debate, is quite interesting, too.
Amendment 6 looks most interesting, however. Given the drafting of this quite hurried legislation, and the unusually conspicuous absence of certain dimensions of the loan, we have a duty to pay attention to what the hon. Member for Clacton (Mr Carswell) suggests. When one thinks about a loan, one should think about not just the sum of money, but the duration and the interest rate. The rate of return on the British loan is a fundamentally important fact that cannot be simply skimmed over by references in documents that are not currently official documents before the House. The Chancellor said that the Swedish and Danish bilateral loan arrangements have not yet been completed, so it is difficult for us to determine whether our prospective interest rate is more or less favourable than theirs. What would happen if there were a sudden spike in global interest rates? Where in the Bill is there any protection for the British taxpayer?
Conversely, where in the legislation is there any protection for the Irish if the current or any future Government decide to chop and change the rate from time to time, perhaps making a unilateral, Executive decision to raise the interest rate in future tranches of the loan arrangement? The Chancellor said that the interest rate will be fixed for the duration of each tranche, but there is no assurance of that in the Bill.
There is no harm in allowing the House the opportunity to debate and approve, by the affirmative procedure, a statutory instrument on the interest to be charged following the recommendation of Ministers. Our parliamentary democracy is often disregarded as some kind of rubber-stamping device, but perhaps these are good times to take back some of those safeguards, given the serious issues at hand. While Parliament votes on those moneys tonight, it must also consider taking greater ownership of the process, rather than delegating absolutely everything in absolutely every arrangement to the Chancellor of the Exchequer. I am certainly interested in amendment 6, and I commend the hon. Gentleman for his prescience in tabling it.
Mr Hoban
Amendment 3, which my hon. Friend the Member for Stone (Mr Cash) moved by, would ensure that the Bill did not apply to any loan made by the United Kingdom to Ireland under the European Communities Act 1972. Let me give him a second-tier assurance that the Bill applies only to the UK’s bilateral loan to Ireland. Any EU loan made to Ireland through the financial stability mechanism would not be a loan from the UK to Ireland and would not be subject to the Bill.
There is no interweaving or interlocking, and therefore the amendment is unnecessary. My hon. Friend referred to paragraph 6(h) of the loan agreement. I am sure he will understand that the funding Ireland gets is dependent on it being a member of both the International Monetary Fund and the European Union. If it were no longer a member, it would no longer receive the funding and therefore there would be a problem. Amendment 4 would remove the power to increase the cap on the loan and adjust the cap for exchange rate fluctuations. I hope that the comments made by my right hon. Friend the Chancellor remove the need for anyone to push that amendment further.
Amendment 6 would require the interest rate on the loan to be approved by Parliament. That is not appropriate. The interest rate for each tranche of the lending to Ireland will be a fixed rate that is set by adding a margin of 2.29% to the sterling seven-and-a-half-year swap rate at the time that the disbursement is made. That is set out in the loan agreement and gives certainty to us and to the Irish Government, who would want to have certainty when accepting and voting on this package.
My hon. Friend the Member for Clacton (Mr Carswell) said that the amendment would enable the loan interest rate to be reduced. It could also lead to the loan interest rate being increased to the detriment of the Irish Government and their economic recovery. It is important that there is a clear, definitive statement about what the rate is. We have published the summary of key terms of the loan agreement to help colleagues understand what the rate is and how it will be set. The rate is set with the Republic and within the range of interest rates agreed with other multilateral bodies. It would be a big mistake and irresponsible of the Labour party to vote for amendment 6, because it would create uncertainty and instability where we want certainty and stability for the Irish Government. I question whether what the amendment proposes is the right thing to do. The loan rate is agreed and clear, and it is in the summary of key credit terms. The Irish Government have signed off on those key terms. That is the rate they are expecting to get. Amendment 6 would create unnecessary uncertainty and I therefore ask my hon. Friend to withdraw it.
Mr Cash
For the time being, I have decided against pressing amendment 3 to a Division.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 6, page 1, line 18, at end insert—
‘(7A) Before determining the interest to be charged on any payments under this Act, the Treasury must specify the rate of interest by order; and the Treasury may not make such an order unless—
(a) the House of Commons has determined by resolution the rate of interest to be charged; and
(b) the order provides for that specified rate to be charged.’.—(Mr Carswell.)
Question put, That the amendment be made.
Mr Hoban
I beg to move manuscript amendment (a), page 2, line 16, at end insert—
‘(d) the remaining term of each Irish loan which is outstanding at the end of that period, and
(e) the original term of each Irish loan in respect of which a payment was made by the Treasury by way of an Irish loan in that period.’.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to consider the following:
Amendment 1, page 2, line 16, at end insert
‘, and
(d) the original term for any Irish loan and remaining terms for any outstanding Irish loans.’.
Amendment 5, page 2, leave out lines 17 to 26.
Amendment 2, page 2, leave out lines 18 and 19.
Clause 2 stand part.
Mr Hoban
In dealing with the issues emerging in Ireland, we have sought to keep the House informed as much as possible about the progress that was being made as the crisis emerged, and the role that the UK Government felt they should play in helping to resolve it and responding to the Irish Government’s request for help at the end of last month. We have done that through statements to the House and the publication of the Bill last week, and to aid debate, we ensured that before today’s debate started a copy of the loan agreement was placed in the Vote Office. I hope that hon. Members will recognise that we were not able to place the summary document in the Vote Office earlier—or, indeed, to place the full signed agreement there—because negotiations are still ongoing with the Irish Government. However, the principles that have been agreed were set out in the summary of key terms.
I think hon. Members would say, “Well, it’s all very well that you’ve been transparent and open in the run-up to the loan process, but what’s the next stage? Are you going to be transparent during the life of the loan? How are you going to keep the House informed of what’s happening, whether the Irish Government are drawing down each of the eight tranches, how far they’ve got with repayments, and so on?” For that reason, we decided that there should be a clause to deal solely with reporting. It states that the Treasury will
“prepare a report about Irish loans and lay it before the House as soon as practicable after the end of that period.”
The first period will end on 31 March 2011 and a report will be published for each subsequent six-month period. The clause states that those reports will include details of
“any payments made by the Treasury by way of”
the loan, and details of
“any sums received by the Treasury in that period by way of repayment of principal or the payment of interest”
and
“the aggregate amount of principal and interest in respect of…loans which is outstanding at the end of that period.”
Mr Hoban
I am pleased that my hon. Friend recognises the spirit of the new politics, but I am not quite sure where he will take the debate from there. I welcome his recognition of the Government’s flexibility. I do not know what his experience is, but my experience of opposition was that it was rare for a Government to accept an Opposition amendment even in principle. So this perhaps shows that the spirit of the new politics is now coursing through the House.
I should make some holding remarks on amendment 5, which my hon. Friend the Member for Stone (Mr Cash) tabled. I am pleased to see him in the Chamber, because he may be able to be clearer about the thinking behind his proposal than I could.
Subsections (4) and (5) are there to ensure that the duty to report does not continue indefinitely once all loans made under the Bill have been repaid and the authority to make further loans has lapsed. The way in which my hon. Friend has drafted amendment 5 would turn the requirement to report on the loan while sums are outstanding into an open-ended requirement to report every six months ad infinitum, even once all the loans had been fully repaid. I hope that the Committee will agree that this would be unnecessary and undesirable.
Amendment 2, tabled by Her Majesty’s Opposition, would do something slightly different. Whereas my hon. Friend seeks to amend clause 2 to ensure that reports appear ad infinitum, the Opposition seek to bring forward the date on which the duty to report would end, by removing the requirement to report where there were no outstanding liabilities, but where there had been repayments or payments of interest in the preceding reporting period. In effect, amendment 2 says that there should not be a report where there is no balance to be repaid at the end of the period, although payments have been received in those six months. It would seem odd to remove the need for a report on the period during which the last part of the loan was paid off. Clearly the Government should be required to report that that has happened, and that is what the Bill as drafted requires.
I hope that the Committee will accept amendment (a), and that the proposers of amendments 1, 2 and 5 will not press them to a vote.
Chris Leslie
I do not necessarily wish to pour more congratulations on to the shoulders of the Minister—that would not be doing my job correctly—but in the spirit of Christmas I have to acknowledge, albeit begrudgingly, my appreciation of manuscript amendment (a), which the Chancellor of the Exchequer himself has tabled. I like to imagine him poring over the Order Paper, happening upon my amendment 1 and immediately thinking, “I must accept that amendment, but the drafting is not quite right,” and therefore rewriting it in his own fair hand. However, I suspect that several dozen parliamentary draftsmen and women were involved in the process. As the Minister said, the intention was indeed to ensure that when we report every six months on what is happening with the loans, we are talking not just about the aggregate amount of the payments made and the interest, or about the sums that are returned, but about some of the other dimensions.
As the Minister said, the reporting arrangements as set out in the Bill do not exclude the ability to make the reports more comprehensive. Indeed, we ought to state at this stage that we would appreciate as much data being contained in them as possible. One piece of information that I would have found useful is the remaining term of the loan, although that is a small point; given how small it is, I am grateful that the Government have conceded it. Perhaps I should regard this as a famous victory for the Opposition.
Mark Durkan
Like my hon. Friend the Member for Nottingham East (Chris Leslie) and the hon. Member for Stone (Mr Cash), I found clause 2(4) a bit tortuous. However, I can see the problem with amendment 2, because if paragraphs (a) and (b) were removed and the subsection read only
“No report is required to be prepared or laid in relation to a period if…no amount of principal or interest in respect of an Irish loan is outstanding at the end of the period”,
the point at which the loan is finally discharged—when a final payment is made—could be the one point when a report would not be necessary, whereas I would have thought that that was the one point where a report would have been relevant and necessary.
I therefore understand why subsection (4) is framed as it is and why there is a conjunctive that covers all three parts. It is only when no payment is made, no sum is received, and nothing outstanding is due at the end of the period, that no report is made. Otherwise, if all three conditions are not satisfied, there will be a report, as I understand it. Given what Members have said about the scrutiny and oversight that they want the House to have, although subsection (4) reads tortuously it seems to stand, so I would not be persuaded by amendment 2.
Mr Hoban
I think the hon. Member for Foyle (Mark Durkan) has a second career beckoning as a parliamentary draftsman. He has summed up the situation exceptionally well.
In subsection (4) all three paragraphs—(a), (b) and (c)—have to apply if no report is to be published. If amendment 2 were made, removing paragraphs (a) and (b), payments could have been made in the period but they would not be reported if there was no balance outstanding at the end. Therefore we must ensure that all three are true before we allow no report to be published. I hope that provides clarification.
I hope I am not seen by my hon. Friend the Member for Stone (Mr Cash) as someone who seeks to stonewall his inquiries, but having imposed a duty on the Treasury to report, it is right that that duty be extinguished when the loans are repaid; otherwise someone will say, “Yes, the loans have been repaid, but your Act requires you to make those reports.” It is right that the duty to report is extinguished when the loan has been repaid, and that is simply the purpose of—
Mr Cash
Perhaps a little bit of irritation, which is not usual in my case, is beginning to burgeon, because a number of questions that I tabled weeks ago about the legal advice regarding the stabilisation mechanism still have not been answered, and when I use the word “stonewall” I mean just that. When I do not get an answer, and I am told that I will get the answer as soon as possible but I still do not get it, and I have to put in a reminder but I still do not get it, there is something going on; I know that. They do not want to disclose the legal advice; they do not want even to disclose whether in fact it was given, or when it was given. I would like to know the answer to those questions because as Chairman of the European Scrutiny Committee—
The Second Deputy Chairman
Order. This is an intervention. It is a very long intervention. The hon. Gentleman has clarified what he meant by stonewalling, but perhaps we might leave the considerations about the European Scrutiny Committee for another day, because it is not particularly relevant to the amendment that we are discussing now.
Mr Hoban
It is right that the duty to report is extinguished when there is no principal outstanding, and that is the purpose of subsections (4) and (5).
I hope that, with that explanation, hon. Members will accept manuscript amendment (a) and will not seek to press amendments 1, 5 and 2.
Manuscript amendment (a) agreed to.
Clause 2, as amended, ordered to stand part of the Bill.
Clause 3
Short title, commencement and extent
Question proposed, That the clause stand part of the Bill.
Mr Bone
Can the Minister answer the following question, which has been raised several times during the debate: why is the Bill called the Loans to Ireland Bill rather than the Loans to the Republic of Ireland Bill? That seems very strange, as it gives others the impression that we are lending money to Northern Ireland as well as to southern Ireland.
Mr Hoban
That is an interesting question, as my hon. Friend the Deputy Leader of the House knows because he also recently asked it. I draw the attention of my hon. Friend the Member for Wellingborough (Mr Bone) to clause 1(2), which defines an “Irish loan” as
“a loan to Ireland by the United Kingdom.”
Of course the United Kingdom includes Northern Ireland. Therefore, the loan is clearly to what one technically might describe as the Republic of Ireland. I am grateful to my hon. Friend for raising that point, in order to enable me to put that clarification on the record.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill, as amended, reported.
Third Reading
Mr Hoban
I beg to move, That the Bill be now read the Third time.
This has been a quick process; Bills are not usually dealt with so expeditiously. I thank all Members for their contributions and their co-operation during the course of today. The co-operation to enable the Bill to proceed so swiftly today has been particularly helpful because, assuming Third Reading goes according to plan, the passing of this Bill will send a clear signal that the UK is willing to play its part in the financial package to assist Ireland.
As my right hon. Friend the Chancellor said earlier, this package of measures has been discussed in the Irish Parliament today, and it has voted in favour of it. There are further international agreements to be reached over the course of the next few days including on International Monetary Fund assistance. Our progress today helps to ensure that there is a sense of progress in achieving the right outcome in respect of financial support for Ireland.
The Bill will allow Britain to provide up to £3.25 billion in lending to Ireland as part of the wider assistance package. The package will help to recapitalise Ireland’s banks, set up a contingency reserve to deal with any future problems and cover the current shortfall in the Irish Budget. As was discussed in the debate, ensuring Ireland’s stability is very much in our interests. A final written agreement on the various terms of the loans will be forthcoming in the next few weeks, but we have sought to provide a summary of the key terms that have been agreed with the Irish Government, in order to help to inform today’s debate. It is clear from the way in which the Committee stage of the Bill proceeded that the provision of that information was helpful.
I note the point made by the hon. Member for Nottingham East (Chris Leslie). I, too, wish that we could have supplied this information sooner, but when one is negotiating a deal with another Government, one cannot always deliver information as timeously as one would perhaps like. However, we are committed to keeping the House informed about the progress of those negotiations, and clause 2 will enable us to do so—rather, it will require us; we could have been enabled to do so anyway, through our own desire—through six-monthly reporting.
It is clear from the debate, particularly on Second Reading, that Ireland is a friend in need. Our economy is currently in a stronger position than theirs, which is why we are able to offer our support. It is clearly in our interests, because of the strong links we have with the Irish economy. Ireland is one of our key trading partners, and a strong Ireland will help to support growth, jobs and investment in the UK.
The Bill is straightforward: it gives the Treasury the power to make disbursements to the Irish Government. There is a mechanism in place to take into account any adjustments in exchange rates that emerge between 9 December and the signing of the agreement, which we expect to be within the next 30 days. We do not expect to increase our contribution beyond the €3.8 billion agreed with our international partners and the Irish Government, but there is a mechanism to do so if it is required. Again, that would be through the affirmative resolution procedure and would be voted on by all Members of Parliament. So the right safeguards are in place, and the use to which the facility will be put will also be subject to regular reporting under clause 2.
There is no doubting that this Bill is important, and I am grateful to Members from all parties for their support today—support that helped us to progress according to such an urgent timetable. I hope the Bill will now proceed to the other place and be enacted as soon as possible. I commend it to the House.
Terrorist Asset-Freezing etc. Bill [Lords]
Mark Hoban Excerpts(13 years, 11 months ago)
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Mr Hanson
Indeed, but I speak as somebody who in the previous Parliament was the Minister responsible for terrorist issues and policing. Those are serious matters, and the Government need to take action on them. There is always a balance to be struck between the civil liberties of individuals and the civil liberty of ordinary people to live their lives in peace without the threat of terrorist activity. On balance, my judgement is that we need to support the Government’s proposals in the Bill, which initially had its genesis in the previous Government, so that all measures are taken to ensure that the asset freeze can take place and action can be taken accordingly.
I understand the concerns of the hon. Member for Cambridge; they are valid and should be explored. However, in clause 26 there is a right of appeal for designation both at an interim and final stage. If an individual feels aggrieved, he can undertake to exercise that right of appeal. However, very few people will do so if the Bill becomes law, because the Treasury will have taken steps to ensure that those individuals are rightly in the frame, for the reasons that the asset regime has been introduced, and I trust the Treasury to take those actions; that is not something we say all the time but, on this occasion, I have done so.
I hope that the hon. Gentleman feels that he has raised the issues of concern. I am sure that the Minister will give, almost word for word, the exact response that I would give. I am happy to talk about the amendments in more detail, but my message to the hon. Member for Cambridge is clear: in the event of him pushing the matter to a vote, he will find not just the Financial Secretary against him, but the shadow Minister.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I shall respond to each of the amendments proposed by the hon. Member for Cambridge (Dr Huppert). I welcome the approach adopted by the right hon. Member for Delyn (Mr Hanson), who speaks with some authority on these matters, having dealt with them in government. Looking around the Chamber, he is probably the Member with the most experience of tackling these issues. The amendments were considered in Committee. They were tabled by the hon. Member for Carshalton and Wallington (Tom Brake), and I made the same comments in response to them then as I do today. He sought to withdraw them in Committee and I hope that the hon. Member for Cambridge will do the same today.
As I said in Committee, amendment 2 would change the threshold for the making of a final designation from the Treasury from reasonably believing a person is or has been involved in terrorism, to needing to be satisfied on the balance of probabilities. As I emphasised on Second Reading and in Committee, the asset-freezing regime needs to be preventive to fulfil our UN Security Council obligations and to meet our national security needs. In other words, it must be capable of being used at an early stage to disrupt and prevent terrorist acts.
In our view, a threshold on the balance of probabilities would not enable us to act when needed. The balance of probabilities test is applied by courts in the context of civil proceedings and requires one party to demonstrate to the court that it is more likely than not that a particular fact is true. If that test were applied to asset freezing, it would require the Treasury to be satisfied and to be able to demonstrate to a court that a person is more likely than not to be or to have been involved in terrorism.
That may sound reasonable but—to echo the words of the right hon. Member for Delyn—it is, in fact, a high burden. The fact that the burden of proof would rest with the Treasury means, for example, that if the picture were unclear and an equally plausible argument could be made that an individual was or was not involved in terrorism, the Treasury would be unable to impose an asset freeze. The serious threat posed by terrorism means that in such cases where the reasonable belief standard is met, the Treasury should be able to freeze assets on a preventive basis to protect the public. The alternative is to hold back until further evidence is accumulated. However, that runs the risk of an individual being able to carry out a terrorist act without preventive action being taken.
I hope that the hon. Member for Cambridge bears it in mind that—as eminent judges such as Lord Justice Laws and Lord Rodgers have remarked—we need to be mindful of the fact that material available to the authorities about terrorist plots may be fragmentary and incomplete. The picture may not be complete for good reasons, but that does not mean that the material is wrong. Such a situation simply reflects a number of real-world facts about terrorism: that intelligence has to be gathered covertly; that terrorists take considerable steps to disguise their activities; and that the need to protect the public sometimes means that plots have to be disrupted at an early stage, rather than allowed to run on further to accumulate more evidence. For those reasons, moving to a balance of probabilities test would have significant risks for our national security.
I also explained in Committee that a balance of probabilities test would be out of line with international best practice. The Financial Action Task Force makes it clear in its guidance on terrorist asset freezing that a legal threshold of reasonable suspicion or reasonable belief should be used. We are not aware of any other country that uses a balance of probabilities test to freeze terrorist assets in accordance with UN Security Council resolution 1373. As I set out on Second Reading and in Committee, for those reasons we remain convinced that a reasonable belief test is the right threshold for making a designation and that it strikes the right balance between protecting our national security on the one hand and protecting civil liberties on the other.
Mr Hanson
Will the Minister confirm again what I think he said in Committee, which was that whatever the outcome of the review of terrorist legislation—including the review of the case of AF and control orders—the Bill will stand as it is now without amendment in that respect?
Mr Hoban
If we assume that the legislation will receive Royal Assent, it will stand. However, clearly, all terrorism legislation is kept under review and it would be wrong to prejudge the outcome of any other court case. We have taken forward the best form of the legislation, which was, as the right hon. Gentleman knows, based on the previous Government’s proposals. The Bill reflects case law as it stands.
Despite the approach we have taken on reasonable belief, the Bill will not result in the Treasury making decisions where it thinks it is more likely than not a person is not involved in terrorism. The point is that the decision maker should believe, from a careful assessment of what may well be a complicated intelligence picture, that a person is involved in terrorism. The threshold of reasonable belief for a decision is one used in many contexts, including in decisions made about terrorism, such as under the Anti-terrorism, Crime and Security Act 2001 and under schedule 7 to the Counter-Terrorism Act 2008. The courts are then asked on an appeal or review to determine whether there are reasonable grounds for that belief. That is the right test. It provides an assurance that a proper burden is placed on those seeking to impose a designation but, at the same time, it enables action to be taken to protect national security when needed.
Let me move on to amendment 3, which, as the hon. Member for Cambridge pointed out, reflects the report by the Joint Committee on Human Rights. I understand that the amendment would ensure that individuals are sufficiently informed of the reasons for their designation at the point their assets are frozen in order to enable them to mount an effective challenge. As I stated in Committee, the Government do not believe it is necessary to include such an obligation in the Bill because the JCHR’s proposal was intended only to ensure that the Treasury complies with the basic administrative law principle of giving reasons for such decisions. It is the Government’s view that administrative law principles apply regardless of whether a duty is specified in this legislation. Writing such an obligation into the Bill is therefore unnecessary. I think that that was the commitment the hon. Gentleman was seeking.
Amendments 5 and 11 were considered in the other place and in Committee. It is worth reminding the House that the Prime Minister announced in July that the Government will review the whole matter of the use of sensitive material in judicial proceedings and will issue a Green Paper next year. We expect the Green Paper to be published in the summer. The Government do not consider it appropriate to pre-empt it, which we would certainly be doing if we were to accept amendment 5.
Let me consider the amendment in detail. It seeks to create a new subsection within section 67 of the Counter-Terrorism Act 2008, which provides for the content of court rules about disclosure in financial restrictions proceedings and which will apply to court rules made in relation to challenges to decisions under the Bill. The amendment would place a requirement for the court rules, which are to be made initially by the Lord Chancellor for England and Wales and Northern Ireland, to ensure that the Treasury provides sufficient open disclosure to enable the designated person to give effective instructions to the special advocate. That form of words is based on the European Court of Human Rights judgment in the case of A, which was applied by the House of Lords in the case of AF and others to the stringent control orders that were before it. The effect of the amendment would therefore be to apply “AF No. 3” principles to challenges to final designations. I reassure the hon. Member for Cambridge that persons designated by the Treasury will have the full protections afforded them under article 6 of the European convention on human rights. Section 67(6) of the 2008 Act states:
“Nothing in this section, or in the rules of court made under it, is to be read as requiring the court to act in a manner inconsistent with article 6 of the Human Rights Convention.”
It is therefore absolutely clear that article 6 rights apply in full to asset freezing.
Dr Huppert
Notwithstanding the answer that the Minister gave to the shadow Minister, if the result of the Green Paper process suggests that we should update the legislation in this respect, will he agree to do so?
Mr Hoban
In the context of this amendment, which seeks to affect the court rules, the court rules would be reinterpreted in the light of any action taken forward as a consequence of the Green Paper.
The Green Paper will ensure that such a coherent and consistent approach is taken to the use of sensitive material in judicial proceedings. Its timing should allow for judgment to be handed down in the lead case in relation to whether the judgment in the case of AF and others applies more widely than to stringent control orders—that is, in the employment tribunal case of Tariq. That case will be heard by the Supreme Court in January, and we expect a judgment in the spring.
As I said, it would be wrong to pre-empt the Green Paper. I hope that having heard my arguments, the hon. Gentleman will welcome and support the approach that we are taking and withdraw his amendment.
Dr Huppert
I thank the Minister for his comments and for the assurances and commitments that he was able to give. I continue to disagree with him about the standard that should be required, and I still find it concerning that we are not moving towards a balance of probabilities. However, I will not press the matter to a vote. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 31
Independent review of operation of Part 1
Mr Hoban
I did not know that we were going to proceed at such a quick pace this evening, although perhaps it is not as quick as you, Mr Deputy Speaker, and other colleagues might have hoped. I hope that we will not detain the House too much longer on the matters before us.
I will deal with amendments 6 to 10 first, before returning to amendment 1. As the right hon. Member for Delyn (Mr Hanson) pointed out, amendment 1 relates to a topic that gave rise to one of the longer debates in Committee.
The amendments tabled by my hon. Friend the Member for Cambridge (Dr Huppert) relate to the appointment of the independent reviewer and the terms by which he will report. My hon. Friend and other hon. Members will be aware that such amendments were debated at length during the Bill’s passage in the other place and in Committee. As I said in Committee, the proposals are based on the provisions of the Prevention of Terrorism Act 2005 that relate to the independent reviewer of terrorism legislation. That provides an effective and suitable model for the statutory independent asset-freezing reviewer.
Amendment 6 would require the independent reviewer to be approved by Parliament. I believe that the intention is to ensure that the reviewer is suitably independent of Government. I hope that I can reassure my hon. Friend that the Government are fully committed to the independence of the reviewer. Independent oversight is an essential element of the safeguards that the coalition Government have introduced into the Bill, and it will be the principal objective of any appointment. I will touch on the recruitment process later.
We do not believe that it is necessary for Parliament to approve the independent reviewer. That would be a significant departure from standard practice. The appointment of the reviewer by Government reflects the long-standing principle of ministerial responsibility. It is Ministers who are accountable to Parliament and to the public for the people whom they appoint. Parliament will, of course, be able to scrutinise the work of the reviewer and to hold him or her to account through existing mechanisms—for example, through Select Committee scrutiny.
My hon. Friend proposed the compromise of a requirement that an appropriate Select Committee approve the appointment of the reviewer. The Minister for the Cabinet Office and Paymaster General is due to meet the Liaison Committee shortly to discuss the pre-appointment hearing process. A decision to add new appointments to the list of posts subject to pre-appointment scrutiny may be announced as a result of that meeting.
Amendments 7, 8 and 9 would replace the independent reviewer’s obligation to report to the Treasury and the Treasury’s obligation to lay that report before Parliament with an obligation for the reviewer to report directly to Parliament. To draw a comparison, all the annual reports and ad hoc reports produced by Lord Carlile, the current independent reviewer of terrorism legislation, have been provided in the first instance to the Home Office to check that they do not inadvertently contain any classified material that cannot be published. Hon. Members will recognise that asset freezing deals with sensitive and classified information. That is why the Government believe that a similar approach is appropriate.
The independent reviewer will have access to all relevant papers and evidence, including highly classified intelligence reports and, on occasion, material that is being considered as part of a separate criminal prosecution. It is important to ensure that published reports do not include classified or sub judice material, and Parliament could not undertake such a check. I reassure my hon. Friend that the Government will not seek to influence the outcome of any report. The reports will be provided to Parliament as quickly as possible after they have been delivered, and they will be available to the public.
Amendment 10 suggests that the appointment of the independent reviewer should be for five years, and that it should not be renewable. We do not believe it necessary or desirable to have a statutory limit on the length of time that a reviewer should remain in post. There might be valid reasons why someone wishes to step down at an earlier stage, but there might also be valid reasons why they wish to occupy the position for a longer period. They will build up significant experience and significant knowledge of how legislation works, and that will be invaluable.
It is important to take the opportunity to learn from the experience of the current reviewer and see how he feels the system should work. In the debate in the other place, Lord Carlile said about appointment procedures:
“As to the way in which the independent reviewer is appointed, I do not have any very strong views. Appointment by a Minister does not make the reviewer any less independent. Many public appointments have sprung surprises on government; for example, chief inspectors of prisons. Independence is in the way the person concerned operates.”—[Official Report, House of Lords, 25 October 2010; Vol. 721, c. 1085.]
I notice that the right hon. Member for Delyn raises his eyebrows at the reference to the chief inspector of prisons—he clearly knows from his own experience how independent such people can be once they are appointed.
On the question of whether submitting reports to the Government, rather than directly to Parliament, would run the risk of reports being altered in any way, Lord Carlile said:
“I cannot imagine any circumstances in which any honourable person appointed to this role would be prepared to change their report at the behest of a Minister or civil servant for political reasons. It has never happened. It did not happen with any of the reviewers before I was appointed, it has not happened during my period of tenure, and I do not think it will happen with any successor I can foresee under the present or changed arrangements.”—[Official Report, House of Lords, 25 October 2010; Vol. 721, c. 1086.]
That reinforces the right hon. Gentleman’s experiences.
It is essential that the independent review of the asset-freezing regime is robust, impartial and transparent, and we are satisfied that the provisions in the Bill regarding the appointment and operation of the reviewer are appropriate to achieve that. I therefore hope that my hon. Friend the Member for Cambridge will not press his amendments.
Amendment 1, tabled by the right hon. Member for Delyn, would, as he said, ensure that whoever fulfilled the role of Home Office independent reviewer of terrorism legislation would also fulfil the role of independent reviewer of asset freezing. I shall provide the House with an update on the Treasury’s position on the appointment of an independent reviewer, but first I wish to set out why we do not support the amendment.
The Government do not accept that the independent reviewer for asset freezing must always be the same person as the Home Office counter-terrorism reviewer. Requiring them to be the same person would unnecessarily reduce flexibility, and could therefore constrain the Government’s ability to appoint the best person to the post. There might be good reasons why, in a particular case, both roles could not be held by the same person. For example, the best qualified person for the job might simply not have the time to carry out both roles to the level required.
We have to remember that both roles are demanding and important. Counter-terrorism legislation is an expansive and complex area, and the issues raised concerning the balance between protecting security and protecting civil liberties are of fundamental importance. Moreover, individuals may well wish to combine their work as independent reviewers with other ongoing professional commitments. That is entirely reasonable, as long as it does not give rise to conflicts of interest. In the light of that, it would be wrong to say that we must only ever appoint somebody who can perform both roles. We need to retain flexibility and always look for the most suitable person to do the job.
We recognise, however, that there are good arguments for combining the two roles where it is possible and desirable to do so. That might produce greater consistency and coherence and better value for money, as the right hon. Member for Delyn said in Committee. As I have said, however, we need to consider the matter on a case-by-case basis and not just assume that combining the two roles is the only approach that can work.
I now turn to the current situation. My officials have been in close contact with Home Office and Cabinet Office officials to explore the matter further. There has also been an initial discussion with the incoming counter-terrorism reviewer, David Anderson, to explore whether he would be willing to be considered for the asset freezing reviewer post. Mr Anderson has indicated that he would be willing to take up the post were it to be offered to him, and that neither he nor the Treasury is aware of any impediment to his taking on the role were it to be offered.
At this stage, the Treasury has not made an offer of appointment to the role, and in our view it would be premature to do so. After all, the Bill is not yet law and the post does not yet exist. However, I reassure the House that the Treasury is considering all the relevant issues, including value for money and the interconnection of the two roles. The process of appointing a reviewer is on track, and the appointment will be made in plenty of time for the reviewer to prepare their first report, which is due nine months after the Bill comes into force. I hope that that update will reassure Members of the progress that the Treasury is making in filling the post, and of its recognition of the points made today about costs and the interconnection of the two roles. On that basis, I hope that the right hon. Gentleman will be willing to withdraw his amendment.
Mr Hanson
I think I will take that as a sort of yes from the Minister about the principle behind the amendment, even though he is not accepting it. I feel reassured by what he has said. He has been very fair in his assessment that there are synergies between the two roles and potential cost savings. An individual could undertake both roles, and from my experience the two posts may be reviewing a similar pool of people. I believe that progress has been made.
The Bill obviously needs Royal Assent very quickly, because of the expiry of the previous legislation. I urge the Minister to ensure that, upon his final approval of a person to review the operation of the Bill, he tables a written ministerial statement. The individual needs to be in post prior to the time set out in clause 31(2) for the production of the first set of reviews, which is nine months after part 1 comes into force. It is important for the House to have feedback on that, and that will keep the House informed, at least in part, of matters related to the other amendments in this group.
I am very pleased to “bag” my amendment. The Minister has made his case and come as near as he can to saying what will happen. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Mr Hoban
I beg to move, That the Bill be now read the Third time.
I start by thanking right hon. and hon. Members from all parts of the House for their participation on Second Reading, in Committee and now on Report, and for helping the Bill reach this stage. It has been given careful scrutiny, even though it has not been the most lengthy scrutiny process. The issues have been dealt with thoroughly both in Committee and on the Floor of the House.
We have considered very closely the civil liberties issues that have been raised in our debates and how best to address them without compromising national security. I am confident that the Bill strikes the right balance between protecting national security and protecting civil liberties, but it is right that we have considered carefully both in Committee and on Report amendments that would strike a different balance.
I am grateful for the Opposition’s constructive approach. The Bill’s genesis was legislation that they developed in the previous Parliament. We have taken that legislation forward and, I think, improved it by introducing additional safeguards to protect fundamental freedoms.
The Opposition could have extended the debate on these changes, had they so wished, but they did not do so. I recognise that the right hon. Member for Delyn (Mr Hanson) brought his experience to our debates. That helped to enlighten the scrutiny process. It is right that where there is agreement between Government and Opposition, we should make it clear that that is the case and co-operate in the national interest, in the same way as, when we were in opposition and faced with the Supreme Court judgment that triggered the Bill, we worked with the then Government to ensure that the temporary legislation reached the statute book quickly to maintain the security of our nation.
I think that we all recognise that the Bill is necessary to the United Kingdom’s continued national security. We have seen again with the events in Sweden at the weekend the threat posed by international terrorism. The Government must have the right tools to combat terrorism in the UK and overseas, and among those tools must be options to act preventively and to be able to disrupt terrorist plots in their planning stages. It is worth bearing in mind that the Bill covers assets in the UK but might relate to parties overseas. The most recent set of figures that I have shows that of the 57 freezing cases covered by this Bill, 25 of those involved are resident in the UK and the remainder are resident overseas. The most durable freezing orders are those that relate to people outside the UK. Of the 46 cases that are more than four years old, 31 relate to cases outside the UK. It is important to bear in mind that we must have the tools to combat terrorism wherever it happens.
One of the most effective ways of limiting terrorists’ actions is to limit their ability to finance attacks, maintain their infrastructure, provide training, equipment and recruitment, and promote their message of hate. The UK’s terrorist asset-freezing regime is an important and valuable tool. That is why there was cross-party support for the emergency legislation earlier this year and why I hope the House will unite behind the legislation today.
Let me reiterate some of the changes that have been made to make the Bill stronger and better. The Bill introduced in the other place was a significant improvement on the current regime. It included more targeted prohibitions to limit the impact of asset freezing on innocent third parties; a provision to ensure that, in accordance with a ruling in the European Court of Justice, the regime did not catch the payment of state benefits to the spouses or partners of designated persons and so did not have the draconian impact on family life that the Supreme Court was concerned about; and the establishment of an independent reviewer—something we talked about today and in Committee—to ensure that there is proper independent scrutiny of the asset-freezing regime.
Further safeguards were introduced by Members in the other place to raise the legal test for freezing assets for more than 30 days from reasonable suspicion to reasonable belief and to strengthen judicial oversight by ensuring that there is a full merits-based review of designation decisions. Combined, those important new safeguards will serve to make the asset-freezing regime significantly more proportionate and more transparent in its application, in addition to raising the legal threshold that must be met for a freeze to be imposed. However, I also believe that they are changes that will not undermine the effectiveness of the regime or risk the UK’s continued compliance with international best practice. I welcome the endorsement that many Members have given the changes, both in this House and the other place.
In summary, I believe that the Bill we are considering for the final time today strikes the right balance between protecting public safety and protecting civil liberties, and that the balance we have struck commands widespread and cross-party consensus in Parliament. The Bill will put the UK’s terrorist asset-freezing regime on a secure legislative footing and significantly improve it. We have made excellent progress against a tight deadline, and I am pleased to be able to commend the Bill to the House.
Simple Financial Products (Consultation)
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
Today the Government are publishing a consultation on developing a new category of simple financial products. The consultation sets out the Government’s proposals in this area, and provides an opportunity for interested parties to respond. Copies of the document are available on the HM Treasury website.
The Government are committed to helping consumers to take responsibility for their finances and are already taking forward the coalition commitment to develop Britain’s first free national financial advice service. This consultation proposes a new regime of simple products that will complement current work on advice and education, giving consumers a simple alternative when they reach the market.
These products will ensure that people understand the products they need, help people make better choices and encourage competition in the market. The Government expect that these proposals will be taken forward on a voluntary basis by the industry, in collaboration with consumer representatives, and that once introduced, will have a positive impact on consumer engagement in the market.
Copies of the consultation document have been placed in the Libraries of both Houses.
Restricting Pensions Tax Relief
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
On 14 October the Government announced that, from April 2011, the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000 and that from April 2012 the lifetime allowance will be reduced from £1.8 million to £1.5 million, to ensure that pensions tax relief remains fair and affordable. Representations were sought on some specific policy issues around reducing the lifetime allowance and the Government are today setting out their proposals for the operation of a new protection regime for individuals who may have already built up pension savings in the expectation that the lifetime allowance would remain at its current level of £1,800,000.
This new “fixed protection” will give anyone the opportunity to apply for a lifetime allowance of £1,800,000 instead of the reduced lifetime allowance of £1,500,000 on the condition that they no longer actively contribute to their pension or actively accrue pension benefits (that is, broadly excluding annual inflationary uprating). Individuals who are already entitled to primary protection and/or enhanced protection will also continue to receive their current levels of protection.
Draft clauses and draft guidance are being published today on the reduced lifetime allowance, including the operation of “fixed protection”. It is intended that from 6 April 2012 individuals will be considered “inactive” if they do not make or receive any further contributions to a registered defined contribution pension scheme, or build up additional annual pension over an allowable “relevant percentage” in a registered defined benefit or cash balance pension scheme. In order to prevent pension scheme rules being amended following this announcement so as to allow for artificially inflated annual increases to pensions rates the “relevant percentage” is defined as being the rate of increase specified in the scheme rules as at today’s date, 9 December 2010. If no rate is specified in the scheme rules, the “relevant percentage” will be the annual percentage increase in the consumer prices index for September in the previous tax year.
A revised set of draft clauses on the annual allowance, that were previously published on 14 October, have also been published today. This contains some additions and amendments, including details of the proposed exemption from the annual allowance in cases of severe ill health.
Crown Currency Exchange
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I congratulate the hon. Member for Wells (Tessa Munt) on securing a debate on this important topic. The fact that there are 40 Members here tonight demonstrates the widespread interest across the House in what has happened to Crown Currency Exchange. I am glad to have the opportunity to explore the collapse of Crown Currency Exchange and touch more broadly on how foreign exchange services are regulated.
I share the hon. Lady’s concern about the impact of the failure of Crown Currency Exchange. I have enormous sympathy for the 13,000 people who have been affected by its collapse. They are honest, hard-working people who have been hit hard and, in some cases, the losses have been considerable. I welcome the work of the administrators in investigating the issues surrounding Crown’s collapse, and their efforts to recover as much money as possible for the consumers affected. The administrators have written to the creditors, and have held a creditors’ meeting to discuss their proposals. They will continue to review Crown’s trading operation, its financial position and the conduct of its directors. I look forward to receiving the administrators’ report, so that the Government can consider what lessons can be learned from it and assess what might need to be done to protect customers in future.
Crown Currency Exchange operated an online bureau de change—put simply, it bought and sold currency over the internet, which is quite normal in modern day currency exchanges. However, what separated Crown from other operators was that it was among a minority of companies whose customers paid for their foreign currency weeks or months before they were due to receive it. Some other aspects of its operations were also unusual. It offered much better rates than those on the high street and enticed customers by offering special deals purporting to be from cancelled contracts that did not exist. It did not hedge its exposure to foreign exchange rate changes, so it was at risk if sterling moved against it, and it took payment in full and in advance, for up to a year before delivery. In addition, it did not accept payments by debit or credit card. Crown’s business model was an outlier, which posed risks to the firm and, as we know, to consumers. The way in which Crown operated meant that consumers lacked protection because they were unable to pay by debit or credit card.
I do not wish to prejudge the causes of Crown’s failure. The administrators’ final report, which is expected in a few months, will go over that in detail, and look at the conduct of the company’s directors. Let me touch on the regulatory questions raised by the failure. As we have heard, Crown Currency Exchange was registered by the Financial Services Authority as a small payments institution, which means that it managed payments from one person to another. Such institutions may handle the remittances from migrant workers to be sent home to their families, or they may offer an internet service for making payments in competition with the banks.
European legislation—the payment services directive—provides for light touch regulation of small payments institutions. That was the case with Crown, which had some reporting obligations to the FSA. However, the FSA was not required to exercise any prudential regulation, such as oversight of capital requirements over Crown; it was required only to oversee its payments. Buying and selling foreign currency is not a regulated activity, so Crown’s foreign currency sales were not regulated by the FSA. The regulatory requirements relating to foreign currency sales are limited to quoting rates clearly, which the FSA oversees, and complying with money laundering legislation, which Her Majesty’s Revenue and Customs oversees. The money laundering rules are designed to fight terrorism and crime, not to protect customer deposits. That is why neither the FSA nor HMRC was in a position to investigate or address any problems with the business model of Crown Currency Exchange.
Mr Dominic Raab (Esher and Walton) (Con)
A number of my constituents have also lost money in this case. I recognise the limited remit of the FSA, but should it have registered CCE when, as I understand it, one of CCE’s directors had a criminal conviction? Was that an example of maladministration, or will that be reviewed?
Mr Hoban
Often in these cases—I do not want to go into detail on this—the FSA is dependent on disclosure by directors. As the hon. Lady said, the FSA does not have the power to access criminal records to enable it to find out whether directors’ disclosures are accurate.
The question that we need to address is why foreign exchange services are not more tightly regulated. Traditionally, buying and selling currency is the same as buying and selling any other commodity, whether it is gold and silver or food and drink. With the exception of Crown, this kind of trading has been, and remains, a low-risk business. It is something that millions of us do day in, day out, whether at the post office, in banks or at bureaux de change, without a problem. But Crown’s business model was different, and what should have been straightforward transactions led to substantial losses for its customers. I accept, of course, that Crown has inflicted substantial losses on customers. The Government are anxious to learn the lessons from this failure and to take what action may be needed, including regulatory changes.
Mr Dennis Skinner (Bolsover) (Lab)
A lot of people have lost money, including people in my constituency and loads of others. Does the Minister think that, as in the case of Equitable Life, it would be a good idea to make sure that the financial ombudsman has a look at this case?
Mr Hoban
It is not a matter for the ombudsman—it is for the administrator to decide what further actions are needed. As I said, the problem is that the nature of this business was such that it fell outside the regulatory perimeters. It is not covered by the Financial Ombudsman Service or the financial services compensation scheme, so there is a distinction between this case and the one to which the hon. Gentleman refers.
Mr Hoban
I should like to make some progress, as there are important points that I want to make by the time I finish in seven minutes’ time.
I want to reassure hon. Members that I am anxious to protect customers and that we should learn lessons from this. I would point out, however, that there are 1,480 businesses operating as bureaux de change in this country, the vast majority of which are retail outlets dealing with customers face to face. The majority of these firms are not taking payment in advance or entering into forward currency contracts. They do not expose their customers to the kind of risks that Crown appears to have done.
Mr Hoban
No, I am going to continue.
The regulation of these businesses, including capital requirements, would impose costs on them and on their customers, so we must be sure that the benefits of regulation outweigh the cost to consumers. I assure hon. Members that we are looking at the other companies to see if any are operating in the same way as Crown. We have not yet identified any, although the investigation is still ongoing. I undertake that the Government will seek to learn the lessons from Crown’s failure, once we have all the facts, and take whatever action is appropriate.
Mr Hoban
Let me continue for a bit longer.
I recognise that there are innocent victims at the heart of this, but because Crown’s activities are not regulated by the FSA, its customers are not covered by the financial services compensation scheme. Crown did not accept credit card or debit card payments, so its customers are not covered by the protection they offer, and I am afraid that they are therefore awaiting the outcome of the administration process. I believe that it is vital that consumers understand their rights and what products and services are covered by the FSCS. I welcome the fact that the FSCS is launching a campaign in the new year to raise consumer awareness and encourage them to seek more information on what is and is not covered by the scheme. However, I also believe that there is a responsibility on companies to be up front with their customers about the protection that is available if something goes wrong, particularly where the business is complex, as was the case with Crown.
Tessa Munt
Exactly what purpose is served by registering a small payments institution with the FSA? Given that the FSA makes it perfectly clear that it denies any regulatory involvement with small payments institutions, of which there are 547, I am not entirely sure for what one is paying £500.
Mr Hoban
The hon. Lady makes an important point, but the reality is that this activity falls outside the regulatory perimeter of the FSA. The reason these businesses are registered with the FSA is that when the payments services directive was introduced, there had to be somewhere for these businesses to be registered, so the decision was taken to register them with the FSA. That decision was taken not by this Government, but by the previous Government. The hon. Lady is right that that situation leads to some confusion for consumers. The reality is that such businesses were not regulated by the FSA. The same applies to the other 1,500 bureaux de change that operate under this model.
Nick Smith
I thank the Minister for giving way. Given the scale of the issue with 13,000 people having been affected, will the Minister tell us more about the role of Barclays bank?
Mr Hoban
Barclays had a limited relationship with Crown. It did not lend money to Crown, but simply provided it with a bank account. It raised a number of questions with Crown, but the answers gave no cause for concern. It acted simply as Crown’s bank and had no engagement in the business.
Mr Russell Brown
I could ask the Minister when he believes that my constituents will receive money and how much, but I want to come back to the fact that the company was classed as a small payments institution, despite its turnover putting it in a category that meant it should have been regulated. Is he in a position to instruct the FSA to look at the more than 500 other companies that are small payments institutions to see whether they fall into a regulated category?
Mr Hoban
When the €3 million figure is exceeded, a company should be regulated, but that figure refers to the average monthly payment transaction. A company can therefore be turning over €36 million a year and still fall below the threshold for registration.
To conclude, I agree with the hon. Lady that the collapse of Crown Currency Exchange has hit 13,000 innocent victims and that, in some cases, the losses have been substantial. We all agree that that should not happen again, that we have to learn the lessons from Crown’s failure and that we must take all the steps necessary to ensure that consumers are better informed about the risks that they take and the rights that they have. We will be able to determine the action to be taken by the Government or the regulators only once we have received the report. We will look at the costs and benefits of regulation. I remind the hon. Lady that in last week’s debate on the retail distribution review, she pointed out the risk that more regulation poses to businesses.
We must ensure that there is proper regulation for consumers. We must learn the lessons from Crown to ensure that we put the right protection in place for consumers, given the risks involved. I assure hon. Members who take an interest in this matter that I will keep them up to date with what is happening with Crown. I recognise from the number of hon. Members present in the House tonight how important—
E-Communications (Mutual Sector)
Mark Hoban Excerpts(13 years, 11 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
The Government are committed to fostering diversity in financial services, promoting mutuals and creating a more competitive banking industry. Much of the legislation applying to mutuals has existed for a long time and an up-to-date legislative framework is a pre-requisite to a successful mutual sector.
Mutual societies are under a number of statutory obligations to communicate with their members or the public in the conduct of their business. Today the Government published a consultation document that proposes to amend legislation that will facilitate the use of electronic communications, such as e-mail, by the mutual sector to discharge these statutory obligations and allow mutuals to reduce their administrative costs.
The deadline for responses to the consultation is Friday 28 January 2011 and electronic copies of the consultation document, which includes the draft statutory instruments, will be deposited to the Libraries of both Houses of Parliament.
Pensions Tax Discussion Document
Mark Hoban Excerpts(13 years, 12 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
On 14 October the Government announced that from April 2011, the annual allowance (AA) for tax-privileged pension saving will be reduced from £255,000 to £50,000 and that from April 2012 the lifetime allowance (LTA) will be reduced from £1.8 million to £1.5 million. These changes will generate around £4 billion annual revenue in the steady state, protecting the public finances.
As a result of measures taken in the design of the new pensions tax regime, the Government believe that few individuals will incur tax charges from exceeding the AA. However, it recognises that in some exceptional cases, typically of long-serving individuals in defined benefit schemes, it is possible that large charges could occur. These charges reflect a significant uplift in pension value in a given year. The Government have today published a discussion document on options to meet high annual allowances charges. These include payment from pension benefits or by the pension scheme. This document is now available online on the Treasury website, and has been deposited in the House Library.
The Government intend to publish draft clauses on the chosen approach by February 2011.
Banking Reform
Mark Hoban Excerpts(13 years, 12 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
It is a pleasure to take part in this debate, and I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing it. I would like to pick up on one point that was raised by the hon. Member for Nottingham East (Chris Leslie) when he talked about the Government showing leadership. If I remember rightly, it was his party that said before the election that we could not introduce a banking levy on a unilateral basis. This Government have introduced such a banking levy, and it will raise £2.5 billion in a full year. That is what leadership is about. All that we have heard from the Opposition is that there is more disagreement on policy among the Front Benchers than among the Back Benchers. The problem is that the debate showed that those Back Benchers had more policy than the hon. Gentleman. Nothing in the 15 minutes for which he spoke told us anything about the future direction of the Labour party on the regulation of the financial services sector, other than his vague attempt to justify their decision not to vote for the motion. The right hon. Member for Oldham West and Royton has been hung out to dry yet again by his Front Bench.
It is vital that we learn and act upon—[Interruption.] I ask the hon. Member for Streatham (Mr Umunna) to let me continue. He will have his chance tomorrow in the Treasury Committee. It is good to see that the Leader of the Opposition’s Parliamentary Private Secretary is already revving up for that experience.
It is right for us to learn the lessons of the financial crisis, and to act on them. We must think very carefully about the range of interventions that we make. It was clear from everything that was said today that a range of measures was needed. The hon. Member for Streatham himself said that there was no magic bullet, and that is true. We need to take a range of measures domestically, in Europe, and at G20 level, if we are to learn those lessons of the financial crisis.
Let us begin with what we should be doing at home. We know that the regulatory architecture introduced by the last Prime Minister was fundamentally flawed. As my hon. Friend the Member for West Suffolk (Matthew Hancock) pointed out, he took away the Bank of England’s responsibilities for the regulation of banks. The Bank had the ability to spot threats to financial stability, but it lacked the power to tackle them. The last Prime Minister gave the FSA a dual mandate, which focused on the conduct of business to the detriment of prudential supervision.
Unlike the last Government, we have decided to reform the architecture and the approach to financial regulation, and to implement a structure that works. Before I outline the institutional reforms, let me set out the new approach that we want regulators to adopt. We believe that whether the problem is a threat to financial stability, a flawed business model or the mis-selling of financial products, regulators should intervene decisively and early to minimise its impact on our economy, on financial stability, or on consumer outcomes. The regulators will be required to demonstrate judgment and discretion, which represents a big change in attitude and approach.
However, we do not think that it is enough simply to change the approach; we want the architecture to change as well. We will establish a financial policy committee in the Bank of England with a dedicated focus on macro-prudential analysis and action, to ensure that risks that develop across the financial system as a whole are identified and responded to when that did not previously happen. The FPC will have a strong mandate to protect financial stability, with credible and knowledgeable external membership. It will be able to challenge the prevailing consensus, and to ensure that potential risks are identified, monitored and addressed rather than being ignored, as they were under the last regime.
The new architecture will also ensure that macro-prudential regulation of the financial system is co-ordinated effectively with the prudential regulation of individual firms, and that a new, more judgment-focused approach to regulation of firms is adopted so that business models can be challenged, risks can be identified, and action can be taken to preserve stability. That will be the responsibility of the new prudential regulation authority, which will be an independent subsidiary of the Bank of England.
However, it is not just a question of prudential stability. As a number of Members pointed out today, we also need to reform the way in which we look after the interests of consumers. We will set up a consumer protection and markets authority with a primary statutory responsibility to promote confidence in financial services and markets. Regulation and conduct within the financial system, including the conduct of firms towards their retail customers and the conduct of participants in wholesale financial markets, should be carried out by a dedicated, specialist body with focused and clear statutory objectives and regulatory functions.
As I said earlier, it is also not just a question of regulation. We need to think about the structure of the banking system. It was the last Government who closed down the debate about whether the activities of universal banks should be divided between investment and retail banking. We had the courage to open that debate, which is why we have established an Independent Commission on Banking, led by Sir John Vickers, to examine the structure of banking in the United Kingdom, the state of competition in the industry, and how customers and taxpayers can be sure of the best deal. The commission will consider issues of systemic risk and moral hazard, and will examine the complex issue of separating retail and investment banking functions, which was raised by Members on both sides of the House. It is due to deliver its report to the Cabinet Committee on Banking Reform by the end of September 2011, and its findings will help to shape the UK’s banking sector for decades to come.
One of the issues that has been a focus of international debate is linked to the work of the independent banking commission. Recent interventions have reinforced perceptions that some institutions in particular are too big or too important to fail: the so-called systemically important financial institutions, or SIFIs. They pose a much greater risk to taxpayers and to the efficient working of markets. We believe that it is vital for us to eliminate that source of moral hazard, and to ensure that it is possible to resolve failing firms without triggering a systemic crisis or requiring support from taxpayers. The Government are taking an active role in the G20 and in the Financial Stability Board’s work on the development of a robust, internationally consistent policy framework to address SIFIs and the risks that they pose. We fully support the principle that they should be required to have a higher loss-absorbency capacity than other institutions.
That is just one sphere in which international co-operation is needed. We recognise that financial stability cannot be achieved by any one country operating in isolation. The UK has a commanding position in international financial services, and the industry is global in character. It is therefore vital that we co-ordinate our actions with our international partners to ensure that we have effective means for dealing with threats as they arise. We have consistently argued for strengthened international financial regulation to address the failings that were laid bare by the crisis, and huge progress has been made in strengthening international regulatory standards. Getting these reforms right is vital for financial stability, but it is also vital for the future of our global financial services sector.
Capital was mentioned frequently during the debate. During the crisis, we learned that the banking system lacked the capital that was needed to absorb losses, or the liquidity that would enable it to survive when markets closed. We have been a vocal supporter of the G20’s endorsement of the Basel committee’s reforms to strengthen international capital and liquidity standards. Banks will be required to hold more capital to withstand losses, with the buffer of 2% core tier 1 required under Basel II being replaced by a buffer of at least 7% by 2019. I think that the long transition period gets the balance right. It strengthens the banks’ capital position, but at the same time ensures that banks are able to lend and continue to sustain economic recovery. I believe that this crucial set of reforms will strengthen the resilience of the banking system to the long-term benefit of the economy.
The motion refers to derivatives. I think that the hon. Member for Nottingham East and I agree on one point. I believe that neither of us will support the motion, but we have learnt through the crisis that over-the-counter derivatives in particular lacked transparency and created a complex web of interdependence between the bilateral contract parties, which made it difficult to identify the nature and level of risks involved. The financial crisis has demonstrated how those characteristics increased uncertainty in markets in times of stress, and posed risks to financial stability.
Notwithstanding the comments made by the hon. Gentleman, the UK has shown strong leadership in reforming the derivatives markets. We have continually called for more transparency and central clearing of OTC derivatives. Internationally through the G20 and the Financial Stability Board, and in Europe through the European market infrastructure regulation, we are implementing vital reforms that will address the shortcomings evidenced by the crisis in the derivative markets.
The right hon. Member for Oldham West and Royton has proposed that the Government should establish a clearing house for approval of all financial derivatives. However, in the crisis, the private sector clearing houses successfully unwound the positions of defaulting members. Their prudent risk management meant that they did not need assistance from the public sector, despite being directly exposed to failing institutions such as Lehman Brothers. We therefore believe that clearing houses as private sector entities are able to manage risk effectively, but we also believe that central counter-parties should be bound by high standards given their systemic importance, and that those standards should be harmonised on an international basis. The Government are committed to ensuring that that happens.
The main aim of our reform should be the reduction of systemic risk in the financial sector. It should cover derivatives only when central clearing will indeed bring a reduction in systemic risk. Corporate end-users that trade derivatives purely for the purposes of hedging, as opposed to speculation, will be exempt from the clearing obligation. That will reduce the cost that will be passed on to their customers. I reject the arguments in the motion.
The motion tabled by the right hon. Member for Oldham West and Royton fails to recognise the action that we have taken to reform financial regulation at home and abroad. We have done more in the past seven months than our predecessors did. We are building a new financial regulatory architecture and approach. Banks will hold higher amounts of capital so that their shareholders, and not taxpayers, will bear the losses when the next crisis comes. International reforms must strengthen financial stability, but they should be proportionate and should not choke off economic recovery.
Over the past few months, this Government have led the debate on financial reforms both at home and abroad. We are taking the action that is required to create a much more sustainable and stable financial system, and if the motion is put to a vote, I will urge my hon. Friends to oppose it.