Financial Services Authority
Mark Hoban Excerpts(12 years, 5 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
The annual report 2011-12 of the Financial Services Authority (FSA) has today been laid before Parliament.
The report forms a key part of the accountability mechanism for the Financial Services Authority under the Financial Services and Markets Act 2000 and assesses the performance of the Financial Services Authority over the past 12 months against its statutory objectives.
Financial Services (Market Abuse)
Mark Hoban Excerpts(12 years, 5 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That this House takes note of European Union Documents No. 16010/11 and Addenda 1 and 2, relating to a Draft Regulation on insider dealing and market manipulation (market abuse), No. 16000/11 and Addenda 1 and 2, relating to the Draft Directive on criminal sanctions for insider dealing and market manipulation, and No. 8253/12, relating to the European Central Bank Opinion on market abuse legislation; recognises that an efficient financial market that aids economic growth requires market integrity and public confidence; welcomes the UK’s leading role in combating market abuse; and supports the Government’s decision not to opt-in to the Criminal Sanctions Directive until it is clear that related provisions within the Markets in Financial Instruments Directive Review and the Market Abuse Regulation are further progressed in order to enable the Government to evaluate the implications for the UK, and ensure high standards in tackling market abuse are maintained.
I welcome the opportunity to open the debate. It is important, before I deal with the details of the motion, for me to reinforce our commitment to ensuring that there are efficient financial markets which assist economic growth. If markets are to be efficient, however, they must command public confidence and demonstrate their integrity. Central to that is the sense that those who are trading in shares, whether they are retail customers or our largest fund managers, are doing so in possession of, or with access to, the same information. We must also ensure that markets are not manipulated against the interests of those who are trading in shares.
It is the recognition of the importance of markets that have integrity and command public confidence that has led to the UK’s leading role in tackling the problems of market abuse. We established our own civil market abuse regime in 2000, ahead of the EU market abuse directive of 2003. The Financial Services Authority has made considerable strides in recent years since launching its “credible deterrence” strategy for market abuse in 2008, particularly as a result of the financial crisis. Our no-nonsense approach to market abuse is now a regular feature of national and international news. The FSA levies increasingly large penalties, and exercises its criminal powers. Abuse of this sort will not be tolerated. In 2003, the FSA handed down fines relating to market abuse totalling just over £1 million; halfway through this year, the figure is £8.9 million. The FSA is bringing the full weight of the law against perpetrators of abuse, and that includes the £7.2 million imposed in the Punch Taverns case.
The hard-line stance that we have taken on market abuse is one of the reasons London flourishes as a global financial centre. Investors and other market participants value the cleanliness of our market, which is why they use London to carry out their business. Market abuse is a blight on financial markets. It destroys confidence. It puts typically sophisticated financial actors at an unfair advantage over ordinary investors and savers. Those who manipulate the markets or abuse their position to trade on inside information undermine the efficiency and safety of the financial marketplace.
Mr William Cash (Stone) (Con)
I am sure my hon. Friend is in no way trying to divert attention away from the fact that jurisdiction is now, effectively, with the European Court of Justice. I am not going to ask him to be precise, but does he not agree that for the purposes of interpreting financial services regulations within the framework of the supervisory authorities that have been created, all these matters are ultimately matters of European law as applied by our Parliament so long as it continues voluntarily to accept them?
Mr Hoban
I am not sure I agree with my hon. Friend. I do not want to be diverted along that path, but I point out to him that, as he will know as Chairman of the European Scrutiny Committee that put forward this motion for debate on the Floor of the House, the criminal sanctions directive acts as a minimum harmonisation directive, and this House can impose more stringent penalties than the minimum required.
Mr Hoban
My hon. Friend missed out on the opportunity that I and the hon. Member for Nottingham East (Chris Leslie) had of serving on the Financial Services Bill Committee. We spent a considerable amount of time developing the details of jurisdiction in the UK, through giving powers to the Financial Services Authority. There are areas where rules are made at a European level, but, equally, there are areas where rules are made in the UK, and it is not appropriate to say, “There’s only European law.” There is a whole raft of UK law on these matters.
To date, the UK has used the flexibility of the minimum harmonisation EU directive to create a stronger standard, applying the regime to more venues and having stronger rules. Now we have the opportunity to have a better framework applied across the whole of the EU, and that is in our interests.
It is clear that market abuse can take place beyond our borders and yet still affect securities traded within our borders. For that reason, the Government support the Commission’s objective to revise the EU market abuse framework. Improving the strength and consistency of the framework is vital to investor confidence.
There are challenges and opportunities in shifting to a regulation. There are challenges if the UK’s own practices are compromised. There are opportunities from having a more consistent and stronger EU regime and potentially reducing the cost and complexity of compliance for market actors.
Clearly, our prime objective is to ensure that the powers currently available to competent authorities are not weakened, which would damage the UK and the creditable work of the FSA. Secondly, we wish to deliver a robust framework for tackling market abuse within Europe.
Interest in changes to the market abuse framework extends beyond this House. In March, the European Central Bank published its opinion of the market abuse proposals. Its commentary focused largely on the new provision in the regulation for competent authorities to be able to delay the publication of inside information with systemic consequences. The Government echo the ECB’s support for seeking the legal framework to be improved in this respect. This is a key provision for the Bank of England and the FSA following the financial crisis and the difficulties experienced surrounding the disclosure of emergency lending assistance.
I want to outline briefly the EU market abuse package proposed by the Commission. In October 2011, the Commission published a regulation and an accompanying directive on criminal sanctions for market abuse. Those proposals together update the framework formerly established by the market abuse directive 2003, including proposing EU harmonisation of criminal law for market abuse for the first time. The legal basis for the criminal directive is article 83(2) of the treaty on the functioning of the European Union. This is the first use of the relevant provision since the Lisbon treaty was agreed. It means that the directive is subject to a justice and home affairs opt-in. The UK and Ireland have discretion on whether it should apply to them. Denmark is automatically opted out. In light of the fact that this was the first use of the article, it was important that the Government carefully contemplated the issues and came to the appropriate decision.
The European Scrutiny Committee also considered the use of the opt-in. In its 52nd report of the last Session, the Committee noted that the full potential impact for the UK of the draft directive will become certain only once negotiations are concluded. The European Affairs Committee concurred with that opinion, but we are, of course, bound by the regulation.
The Government’s decision not to opt in at this time is a reflection of the sequencing of the directive compared with related legislative proposals. The proposed directive is entirely dependent on the outcome of the market abuse regulation, and the markets in financial instruments directive, which are both in relatively early stages of negotiation. The Government believe that it is very challenging to assess the implications, scope and way in which the criminal directive may develop, given the broader uncertainty of the market abuse framework, which itself is simultaneously subject to a major review.
The key issue here is ensuring that the interaction between the criminal and administrative regimes is clear and workable for all member states. Above all, we need to address the flexibility of when to apply a criminal penalty and when an administrative penalty needs to be retained within member states’ national systems. That must be determined on a case-by-case basis, in the light of the evidence of an individual case. In addition, there was uncertainty about whether the powers of competent authorities would be weakened in respect of accessing telephone records in the regulation and, potentially, the accompanying criminal directive.
It is essential that competent authorities have the flexibility to determine the appropriate type of penalty—whether it is criminal or administrative—and the powers available to them to investigate suspected cases of market abuse. The Council has itself recognised the difficulties involved in trying to complete negotiations on the criminal directive, with linked proposals being negotiated simultaneously. Therefore, the presidency decided to pause progress on the directive, in order to wait for policy progress to be made in the market abuse regulation.
However, I note that although the Government have decided not to opt in at this stage, we have continued to participate fully in negotiations. It is important that we use our expertise in combating market abuse, including the fact that the UK already covers market abuse in its criminal law today. If we are able to do that, and further progress the related proposals in the market abuse regulation and the markets in financial instruments directive in a manner that meets our objectives, we may consider opting in to the criminal directive. We can assess this only when the trio of proposals are properly progressed.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister is giving a lucid and paced description of Government policy. Let me cut to the chase. It is important that he has the opportunity to hear my question. Are we as a nation—are the Government—opting in to the criminal sanctions market abuse directive, or is he proposing to opt out of it? Which is it?
Mr Hoban
At the moment, let me clarify the position by saying that we have not opted in. As I was saying, we need to see how discussions on three linked legislative proposals work through before deciding whether or not to opt in, but our priority is to ensure that we have a proper market abuse regime in place—one that maintains the highest standards and ensures that the Financial Services Authority, which is responsible for this area of policy, is enabled to use its powers fully to ensure that there is confidence in the integrity of markets.
So I can reassure the House that this Government will not allow legislation on market abuse to be insufficient, and we would not opt into a directive that would undermine the FSA’s current powers in this area. I welcome the opportunity to debate this issue tonight, including the opt-in decision. This is an important issue, and it is right that hon. Members have an opportunity to debate it.
Mr Hoban
I will respond briefly to the hon. Member for Nottingham East (Chris Leslie) and to my hon. Friends the Members for Stone (Mr Cash) and for North East Somerset (Jacob Rees-Mogg).
The challenge that we face is that there are three interlocking legislative initiatives: the markets in financial instruments directive, which provides the scope of markets; the market abuse regulation, which looks at broadening the scope and is intimately linked with MiFID; and the criminal sanctions directive. Because the UK has a world-leading regime on market abuse, has historically taken a tough line and has a range of sanctions in place that few countries in the European Union can match, we are shaping the debate in this area and playing a major role in getting it right. We are trying to ensure that we maintain the high standards that the Financial Services Authority has in its investigatory powers and its sanctions.
The progress on these matters is not as quick as we would like, but that is partly because there are three interlocking initiatives. It is not quite the case that one moves at the speed of the slowest ship in the convoy on these things, but there is a challenge. The hon. Member for Nottingham East said that the matter is being passed across to the Cypriot presidency. A whole raft of things are being passed across to the Cypriot presidency. There is nothing new in stuff passing from one presidency to another. [Interruption.] The hon. Member for Nottingham East asks from a sedentary position when we will get some movement. Discussions on MiFID are proceeding and it is one of the priorities of the Cypriot presidency. That will perhaps form the keystone and get the rest of it happening.
We are reserving our position on the opt-in. It is vital to London’s continued success as the world’s leading financial centre that we have the right measures in place on market abuse. That is why we have not opted in.
Jacob Rees-Mogg
I am extremely grateful to the Minister. I have just one question. What advantage is there to opting in if the rest of Europe is going to do it anyway and we already have something better in place?
Mr Hoban
We have an interest in ensuring that criminal sanctions are applied across Europe if we think the directive is appropriate, because shares and instruments that are traded within our borders can be affected by market manipulation outside our borders. It is therefore important that we have a proper regime in place, but let us leave the decision whether to opt in until the three interlocking pieces that I mentioned come closer together. Then I am sure the European Scrutiny Committee will bring us back to the topic once again.
Question put and agreed to.
Resolved,
That this House takes note of European Union Documents No. 16010/11 and Addenda 1 and 2, relating to a Draft Regulation on insider dealing and market manipulation (market abuse), No. 16000/11 and Addenda 1 and 2, relating to the Draft Directive on criminal sanctions for insider dealing and market manipulation, and No. 8253/12, relating to the European Central Bank Opinion on market abuse legislation; recognises that an efficient financial market that aids economic growth requires market integrity and public confidence; welcomes the UK’s leading role in combating market abuse; and supports the Government’s decision not to opt-in to the Criminal Sanctions Directive until it is clear that related provisions within the Markets in Financial Instruments Directive Review and the Market Abuse Regulation are further progressed in order to enable the Government to evaluate the implications for the UK, and ensure high standards in tackling market abuse are maintained.
Banking Reform
Mark Hoban Excerpts(12 years, 5 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
With permission, Mr Speaker, I would like to make a statement on banking reform.
The financial crisis exposed a great many flaws in the system. Banks borrowed too much, took risks they did not understand and bought securities that proved to be far from secure. Banking groups became too complex and interconnected to be managed effectively, regulators failed to identify the risks and taxpayers paid the price. Between October 2008 and December 2010, European taxpayers provided almost €300 billion to prop up their banks, with liquidity and lending support in the trillions. In the UK, the bail-out of RBS was the biggest banking bail-out in the world.
Just as the crisis revealed many flaws, there is no single solution. The Government are reforming the substance and structure of the financial architecture, putting the Bank of England in charge of prudential regulation. We have created the Financial Policy Committee to look at risks across the financial system. Our permanent bank levy penalises short-term wholesale funding, and we have introduced the toughest and most transparent pay regime of any major financial centre in the world. We have worked with our international partners to deliver robust, consistent prudential standards for banks and markets.
The White Paper that we are publishing today sets out how we will implement the recommendations of the Independent Commission on Banking. The Government’s reforms will form a key part of our broader programme of reform. In the same way that the action we have taken on the deficit has meant that UK debt is currently seen as a safe-haven asset by investors around the world, we will ensure that British banks will be resilient, stable and competitive, and so attractive to investors at home and abroad.
The eurozone crisis makes reform more, not less important. The link between the strength of a country’s banking sector and that country’s stability could not be clearer. At the same time, our proposals reflect the progress that has been made in European and international regulation since December. The Government welcome the European Commission’s bank recovery and resolution directive, which will improve member states’ ability to resolve cross-border banks without imposing costs on taxpayers. We will also continue to press for full Basel III implementation in Europe.
The goals of today’s White Paper are clear. First, since financial crises rarely repeat the pattern of the past, we must ensure that banks are more resilient to shocks. Secondly, we must make our banks more resolvable, so that if they fail, they do not threaten the provision of vital services to the real economy. Seeing through those two goals will achieve our third—to curb risk-taking in financial markets. It must be clear that investors reap rewards when banks do well, but take the pain if banks fail.
The Government will ring-fence retail deposits from the risks posed by international wholesale and investment banking. A ring-fenced bank will be economically and legally separate from the rest of its group and run by an independent board. The ring fence will not in itself prevent a bank from failing, but it will insulate the deposits of families and businesses, and if a bank does fail those essential parts of the banking system can continue without recourse to the taxpayer.
The deposits and overdrafts of individuals and of small and medium-sized businesses will, in general, be placed in ring-fenced banks. To minimise the risks that a ring-fenced bank is exposed to, it will be prohibited from conducting the vast majority of international wholesale and investment banking. It will not be permitted to carry out activities through branches or subsidiaries outside the European economic area, or, except in limited circumstances, with financial institutions. Beyond that, and within certain constraints, firms may decide what to put inside the ring fence. Ring-fencing will provide customers with flexibility, but not at the cost of financial stability.
The Government also propose to strengthen the ICB’s recommendations by applying strict controls to the use of derivatives by a ring-fenced bank to hedge its balance sheet. That will ensure that a ring-fenced bank does not take excessive risks when managing its own risks, as was the case with J. P. Morgan’s much-publicised trading loss.
Governance of the ring-fenced banks will be important. The Government propose to strengthen the ICB recommendations in that area, establishing separate risk committees and possibly also separate remuneration committees. However, it is important to focus these reforms where they will have the biggest impact, which is on the biggest, too-big-too-fail banks. We therefore propose that smaller banks, with less than £25 billion of mandated deposits, will be exempt from those requirements. Large, systemically important banks gain a competitive advantage from the perceived implicit guarantee. Our targeted reforms will remove that advantage, helping smaller banks and new entrants.
One of the clearest lessons from the crisis is that investors and creditors, not taxpayers, should bear the costs of failure. That is why we have supported Basel III, which increases bank capital to 7%, with a top-up for systemically important banks, and why we have pressed for that to be implemented across Europe, but to protect taxpayers, the Government will go further. The largest UK ring-fenced banks should hold an additional 3% of equity on top of the Basel III minimum numbers. The Government also strongly endorse the introduction of a binding minimum leverage ratio. The White Paper supports the Basel proposal of a 3% leverage ratio for all banks, including UK ring-fenced banks, and we will continue to press for the implementation of the Basel standard through EU law.
Large ring-fenced banks should hold a minimum amount of loss-absorbing capacity—made up of debt or equity—of 17% of risk-weighted assets. Their overseas operations should be exempt from that requirement unless they pose a risk to financial stability. For smaller UK banks, as the ICB recommends, the minimum requirement should be lower.
To deliver those proposals, the authorities need a way to “bail in” bank liabilities so that bondholders, not taxpayers, bear the losses. The Government will work with European partners to ensure that the ICB recommendations on bail-in are credibly and consistently applied across Europe through the recovery and resolution directive. We intend to introduce the principle of depositor preference for insured deposits. Unsecured lenders to banks are better placed to monitor the risks that banks are taking and should take losses ahead of ordinary depositors.
Our proposals on financial stability also improve competition in UK banking. The implicit guarantee to large banks distorts competition; its reduction will help to create a level playing field. However, we want to do more to encourage new entrants and promote competition. We will shortly issue a consultation on reform to the payments system. I welcome the reviews by the Bank of England and the FSA into the prudential and conduct requirements for new entrants to ensure that they are appropriate and not disproportionate. We strongly support the need for a stronger challenger bank to emerge from the Lloyds Banking Group divestment. We are engaged with Lloyds and the European Commission to ensure that the divestment process creates as strong a challenger as possible. A more competitive banking system will work only—[Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. Government Members do not need assistance from the Opposition on where they should sit. The Minister is making a serious statement to the House. Perhaps Opposition Members could hear what he has to say.
Mr Hoban
That really sums up the Opposition. All they can talk about is who sits where. They have no ideas on how to resolve this banking crisis.
I welcome the reviews by the Bank of England and the Financial Services Authority into the prudential and conduct requirements for new entrants to ensure that they are appropriate and not disproportionate. However, as I have said, a more competitive banking market will work only if consumers are prepared to change banks. The Government are pleased with the progress on the industry-led initiative to make current account switching faster and easier for customers. Providers covering 97% of the current account market have signed up and the scheme is on track to be launched next September. However, to switch, customers need better information, so the Government welcome the fact that the Office of Fair Trading and the Financial Conduct Authority will take forward the ICB recommendation to improve transparency across all retail banking products. Work is already under way on a number of projects, such as making account data available to customers electronically, to enable them to shop around.
Financial stability is a prerequisite for growth. Our analysis suggests that the proposals in the White Paper will cost, in gross domestic product terms, in the region of £0.6 billion to £1.4 billion per annum. However, that should be compared with the estimate that the 2007 to 2009 crisis has already cost the UK economy £140 billion, which is one hundred times the maximum cost estimate of our proposals.
The proposals, although ambitious in scale, are proportionate in impact. They will promote financial stability while supporting sustainable growth and making the UK’s role as the world’s leading international financial centre secure. The reforms we are announcing today, together with the changes we are making to the regulatory architecture, demonstrate that the Government are determined to take action to deliver a stable and sustainable banking sector that underpins rather than undermines economic growth. I commend this statement to the House.
Ed Balls
I shall put my questions briefly, Madam Deputy Speaker. I only regret that I cannot put these questions to the Chancellor because he has not turned up.
We have consistently urged the Chancellor to take a swifter approach to competition and to have a growth objective for the new Financial Policy Committee. We and the CBI agree on that, but the Chancellor will not listen. The problem is that in those circumstances Vickers implementation could lead to a continuing impact on business lending at the expense of small businesses.
To conclude, we set three tests for Vickers, but on each one the Government are failing, causing uncertainty where we need confidence, lending and growth. They are failing to take the lead on reforms in the EU, and fudging and watering down proper taxpayer protection. We need a Chancellor who can do the economics, grip the detail and work full time on the job—someone who at least turns up in the House and answers questions on this vital issue.
Mr Hoban
The shadow Chancellor was the Minister who stood by when bank balance sheets ballooned and banks took on these risks. He did nothing to tackle that problem. As the Governor of the Bank of England said in May:
“With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much, and that so-called ‘light-touch’ regulation hadn't prevented any of this.”
Only two politicians were quoted in the FSA’s report on the failure of RBS as champions of light-touch regulation—the shadow Chancellor and the former Prime Minister, the architects and cheerleaders of light-touch regulation at home and abroad. They should recognise the costs that the British Government and economy have borne as a consequence of banking failure— £140 billion between 2007 and 2009. We must recognise the need for a stable banking system to ensure stable and sustainable growth in the UK economy.
As Sir John Vickers proposed, we are ring-fencing retail banking, imposing the higher capital standards required by him and introducing a binding minimum leverage ratio on banks. The shadow Chancellor asked some questions in the mix of his lengthy contribution, but he did not apologise for his role in the banking crisis. However, I shall respond to his tests. First, we have achieved international agreement with our European partners to implement Vickers through capital requirements directive 4 and capital requirements regulation. We have achieved that goal and are working to introduce a binding leverage ratio with international partners. Vickers can, therefore, be implemented through the existing international regulatory framework.
The shadow Chancellor talked about a banking union. Banking union is a product of the requirement for fiscal union and will be needed to promote stability in the eurozone, but that will not flow through to non-eurozone EU member states—an important distinction to make. Banking union is about the sustainability of the eurozone, not the EU.
The shadow Chancellor asked about hedging. Sir John Vickers recognised the need to ensure that retail customers and small businesses could access the hedging products necessary to manage risk on their balance sheets. However, we have gone beyond Vickers in imposing higher and tighter standards on how derivatives can be managed by a ring-fenced bank.
I have set out a clear programme of reform that responds to the mistakes of the previous Government and ensures a stable and sustainable banking system that underpins, not undermines, economic growth.
Mr Andrew Tyrie (Chichester) (Con)
The White Paper just published contains an impact assessment, paragraph 104 of which makes clear a point that we heard in extensive evidence—that costs to small businesses will rise as a consequence of these proposals. We also heard evidence that the scale of the rise would depend on the Government’s decision on the design of the ring fence. They have now published a lead option for that design, so what is their estimate of the increased cost of these proposals to small business lending?
Mr Hoban
We have considered Sir John’s recommendations carefully, including the cost on banks, the economy and business, but we felt it was in the interest of business to ensure that a wider range of products could be sold within the ring fence, including complex ones such as derivatives. We set out, in our cost-benefit analysis, to look at the cost of the package as a whole, not to break it up into particular areas. I am confident, however, that we will have a more stable banking system in a position to lend to business on a more sustainable basis. Through these reforms, we hope to increase competition in the banking system, which is in the interests of small businesses and will help to improve competition on price. I think, therefore, that this is a good package for businesses and will ensure the stability of the economy.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Next Thursday, there will be a debate in the House on the mis-selling of derivative and hedging products to small businesses, yet the Minister has announced that these will be allowed inside the ring fence. His excuse is that there will be stricter regulation, but are these not high-risk products that should not be mixed up with deposits in retail banks?
Mr Hoban
The hon. Gentleman follows these matters carefully. I do not know whether he, like me, has a fixed-rate mortgage, but that is actually a form of derivative. These products are widely used and there is a need for them. It is in the interests of businesses that such products be within the ring fence—it will provide much more control over their sale—although it is important to supervise properly the conduct of the banks selling them. The Financial Conduct Authority is well placed to provide that supervision, and with the tougher powers we have given it, that supervision will apply not only to retail customers but to business customers.
Andrea Leadsom (South Northamptonshire) (Con)
Does my hon. Friend think it amazing, as I do, that the Opposition seem to take no responsibility for the tripartite regulation system that led to the complete disaster we have seen? I congratulate him on working to ensure that such a lack of accountability never happens again. Does he agree, however, that more can and needs to be done on new competition in banking, particularly on access for new banking entrants? Will he continue to assess—I keep asking him this—bank account portability, because it would be a game changer in the banking sector?
Mr Hoban
My hon. Friend, who is right to point out the lack of an apology from the Opposition for their role in the crisis, has persistently raised account portability. She will know that Sir John Vickers considered this matter in the report but opted for improvements to the switching process to make it easier and more straightforward for customers. It is important that we pursue that, although full account portability will be an option if the former does not prove effective. We also welcome the work that the FSA and the Bank of England are doing looking at the requirements on new entrants to the banking system to ensure that both the conduct and prudential requirements are appropriate and not disproportionate.
Mr David Winnick (Walsall North) (Lab)
On banking reform, would it not have been appropriate to make at least some reference to the outright greed of those who head the banks or to the millions of pounds that some of them get each year? Why no such condemnation—or is it the case that this Tory-led Government could not care less? What is all this business about “We’re all in it together”? It does not appear so, does it?
Mr Hoban
The hon. Gentleman should reflect for a moment on what happened when his Government were in power. Bankers were able to take their bonuses in cash in the year they were paid, while Lord Mandelson said that he was “intensely relaxed” about the filthy rich. What we have done since we came to office is put in place the toughest and most transparent pay regime of a major financial centre and ensured that shareholders have a stronger voice over bank pay. We have tackled the problem, which the previous Government simply neglected and allowed to fester and develop, thereby contributing towards the crisis that we have seen in the banking sector.
Stephen Williams (Bristol West) (LD)
Two of the core reasons why the Conservatives and the Liberal Democrats came together in coalition were to stabilise our public finances and to reform Britain’s broken banking sector. Our constituents tell us that they want more banks that specialise in lending to small and medium-sized businesses, as well as ethical providers, such as Triodos bank, which is based in my constituency. Will the Minister undertake to smooth the path through regulation for new entrants and also make it easier for people to move their money from existing banks to new providers?
Mr Hoban
My hon. Friend makes some important points. We need to make the regime easier when it comes to authorising banks, which is why the Bank and the FSA are looking at prudential and conduct requirements, to ensure that they are appropriate and not disproportionate, which is one of the criticisms that many potential new entrants make. However, he is also right that once we have new entrants to the market, they need to be able to attract business from other banks. We need to ensure that customers are able to switch their accounts more easily. An industry-led initiative will be launched later this year which will help with that, but it is also important that customers understand the costs of their accounts and are able to use that money to help them shop around and opt for better-quality or new providers, so that there is much more choice and diversity in the market.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Considering that the banks are directly responsible for the great recession that we have experienced since 2008, is the Minister not concerned that delaying the implementation of the reforms until 2019, as reported in the press today, will leave seven years for the so-called golden goose to hold a golden gun to the heads of ordinary working people and the real economy, and give ample time for the all-powerful financial lobby to water down the proposals?
Mr Hoban
What we have been clear about, following the Vickers proposals on the timing of implementation—Vickers suggested that the measures should be implemented by 2019—is that we are taking steps now to ensure that there is a framework in place, so that banks understand what the rules will be and can respond. Today’s White Paper is part of that, and we will produce a draft Bill later, which will be subject to pre-legislative scrutiny as well. There will therefore be a transparent process to ensure that we implement the proposals. The proposals that Sir John Vickers made, such as ring-fencing, are vital to ensure the stability of the banking system and the stability of the economy.
Mark Field (Cities of London and Westminster) (Con)
In the 14 months since the publication of John Vickers’s interim report, which other major global financial centres have gone down the route of proposing either a ring fence along these lines or the gold-plating of capital requirements, which is also proposed, on top of Basel III, which was supposed to harmonise capital arrangements?
Mr Hoban
A number of countries have argued for the freedom to go further and impose higher capital surcharges—Switzerland is one and Sweden, which has introduced higher capital surcharges, is another. It is our responsibility to ensure that we protect the stability of the UK economy and the interests of the taxpayer, and respond to the structure of the banking system in the UK. Bank balance sheets in the UK are many times larger than our economy. We are much more exposed to risk. It is therefore right that we should take actions in the UK that help to protect the economy and the taxpayer, which is why we are introducing these proposals today.
Anas Sarwar (Glasgow Central) (Lab)
The Scottish Finance Secretary and the Scottish First Minister have said that if Scotland were to become a separate country, the Bank of England would remain the lender of last resort, while UK regulatory authorities would still oversee Scottish institutions. Can the Minister tell us what representations the Government have received from the Scottish Government and whether he is aware of any other EU country that does not have its own central bank or regulatory regime?
Mr Hoban
The hon. Gentleman raises an interesting question. There are some important questions to be answered about how the banks would be regulated if Scotland were to become independent. As I made clear in my response to the shadow Chancellor, a fiscal union needs its own system of banking supervision and its own resolution arrangements, and it is hard to see quite how things would work for an independent Scotland.
Mark Garnier (Wyre Forest) (Con)
I am grateful to my hon. Friend for his statement today, and also for these measures, which go a long way in dealing with the “too big to fail” problem, and in some ways deal with the “too small to start” problem. He will be aware that in the last 100 years, only one ab initio banking licence has been granted. Part of the problem is a reluctance on the part of officials at the FSA to grant new banking licences. Will he look again at the issue of competition in the Prudential Regulatory Authority, in order to try to help challenger banks enter the marketplace?
Mr Hoban
My hon. Friend makes a good point. As I have said, the Bank and the FSA are looking at prudential and conduct requirements to ensure that they are proportionate. However, the other thing I would say is that the implicit guarantee enjoyed by our bigger banks distorts competition. Our reforms tackle that, helping to create a more level playing field for new entrants and enabling them to compete properly with established players.
Keith Vaz (Leicester East) (Lab)
The Minister will know that four weeks ago today the liquidation of the largest bank to have gone bust in Britain—BCCI—was completed, after 21 years. The foundation of the system introduced by the last, Labour Government was the Bingham report. The first part has been published; the second part is still confidential. As far as I know, only successive Chancellors have read it. Has the Minister read the second, confidential part, and does he not think it is time to publish it, so that we can have a proper understanding of the reforms that he has set before the House today?
Steve Baker (Wycombe) (Con)
I congratulate my hon. Friend on the measures relating to bail-in and depositor preference in particular. However, I am sure he will remember that under the last Government the FSA came under political pressure. Will his measures deal with that and ensure that, in future, banks are resolved under the rule of law?
Mr Hoban
It is important that independent regulators exist and that their independence is credible. Going back to the FSA’s report on the RBS failure, it was interesting that the FSA clearly came under sustained pressure from the shadow Chancellor and the then Prime Minister to have a light-touch regulatory system, and we have seen the consequence of that. It is important that there are clear rules to ensure that regulators act independently and that their regulation is seen to be credible. The shadow Chancellor should recognise that he got it wrong when he called for light-touch regulation and championed it throughout the world.
Sheila Gilmore (Edinburgh East) (Lab)
Given the double-dip recession and the continuing fall in net lending to businesses, what exactly are the Minister’s reforms going to do to stimulate the economy? Is there not a risk that we are going for the stability of the graveyard?
Mr Hoban
The hon. Lady makes an important point about getting the balance right, but let us not forget that the banking crisis cost this economy £140 billion between 2007 and 2009. An unstable banking sector costs the economy dear: it costs jobs, it costs tax revenues and it costs families. The important thing is to ensure that we get the banking system right, so that it is stable and promotes growth, rather than allowing banks to let loose, grow their balance sheets unconstrained and take on risks that they do not understand, which is what happened in the lead-up to the financial crisis, when the shadow Chancellor’s system of regulation was in full swing.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Where is the Chancellor, and at what point did he decide not to make the statement himself?
Mr Hoban
It has always been the case that I would make the statement today. This may come as news to the shadow Chancellor—it may be different from his experience when he was City Minister—but the Treasury is a team. We have worked together on these reforms, and it was always the intention that I would make today’s statement. The shadow Chancellor should not believe what he reads on Twitter.
Mr William Cash (Stone) (Con)
Having invested so much time advocating EU jurisdiction over banking in the City, how are the Government going to protect the City of London both from that EU jurisdiction and from qualified majority voting?
Mr Hoban
I think it is very clear that the emerging debate about a banking union flows from the problems we are seeing in the eurozone. It is important that the banking union helps resolve some of the problems in the eurozone, but it is a consequence of having a single currency, not a consequence of having a single market. It is important for the eurozone to move ahead in dealing with its problems and strengthening the banking regime within it. It is also important for the future of the City to ensure that there are proper safeguards over the functioning of the single market.
Mr William Bain (Glasgow North East) (Lab)
With a double-dip recession made in Downing street, bank lending having fallen for five consecutive quarters and businesses facing a shortfall of £190 billion in finance over the next decade, why are there no further proposals in the White Paper to diversify the range of banking institutions to make sure that finance gets into the real economy?
Mr Hoban
I do not know whether the hon. Gentleman has yet read the White Paper. If he had, he would have seen a section on competition that deals with encouraging diversity, making it easier for new entrants to come into the market and promoting switching. When the hon. Gentleman has read the White Paper, he might like to come back to me.
Greg Mulholland (Leeds North West) (LD)
One of the very important and positive aspects of the Government’s reforms has been transparency, particularly over pay and banking products. Will the Minister assure us that there will also be a move to ensure greater transparency over bank lending figures, as small business organisations, and indeed small businesses themselves, tell us that the new lending figures provided often include existing loans and are simply not honest?
Mr Hoban
My hon. Friend is right, and I think transparency plays a key role in holding the financial system to account. We need to make sure that data on lending is transparent, but we also need to focus on identifying other ways in which we can help small businesses. That is why the Government introduced the national loan guarantee scheme—to help support lending to new businesses. That scheme is working; it is making thousands of loans to small and medium-sized enterprises, which are benefiting from the lower interest rates that the scheme delivers. That is an important way to help businesses grow.
Ian Murray (Edinburgh South) (Lab)
Why will the Treasury not agree to Opposition requests for the Vickers commission to implement a progress report on how the Government are doing with its recommendations? Is it because the Government are trying to water them down?
Mr Hoban
The process we are going to go through is a very transparent one. We have published a White Paper today, setting out clearly our response—our detailed response—to John Vickers’ recommendations. As I said earlier, we are going to publish a draft Bill, which will be subjected to pre-legislative scrutiny. We are being very transparent about how we are implementing Sir John Vickers’ recommendations. I hope that the hon. Gentleman will work with us and ensure that the recommendations get through, so that we remedy the mistakes of the past.
Richard Fuller (Bedford) (Con)
I welcome the Minister’s proposals for the long-term protection of depositors, but he will be aware that many of us are concerned about the supply of credit to businesses in our economy right now and the impact right now of these long-term proposals. What analysis has the Treasury made of the impact on credit from these proposals in the near term? May I suggest that the Minister continues to monitor the impact with more urgency so that the concerns that have been raised can be assuaged?
Mr Hoban
Strong banks that are in a position to lend to businesses are absolutely vital to the long-term future of our economy. We have seen that the mistakes of the past eventually catch up with people. They have led to a weakening of bank balance sheets, which are now being strengthened. We need not only strong banks, but schemes in place to sustain bank lending and to ensure a supply of credit to SMEs.
Matthew Hancock (West Suffolk) (Con)
In the week we discovered that a plan put forward to the last Government to prevent the run on Northern Rock was ignored, I warmly welcome these proposals. How will the Minister ensure that as finance changes in the years ahead, the Vickers proposals to ensure separation will always stay up to date with new technology and new techniques?
Mr Hoban
My hon. Friend makes two important points. He is right to highlight Hector Sants’s comments this week about how the previous Government ignored his proposals, leading to a run on Northern Rock that triggered widespread financial instability. If his proposals had been listened to, we could have had more financial stability, which would have been to the benefit of the economy.
My hon. Friend is also right that finance changes. Part of the problem of the previous Government’s regime was that it did not keep pace with changes in the markets. The previous Government clearly did not understand what was going on in the banking sector, despite the many meetings between the City Minister and the banks, but I think the regime that we are putting in place is forward looking. We will have the Financial Policy Committee looking at emerging threats to financial stability, and both our introduction of the Vickers reforms and the rules of the Prudential Regulation Authority will help to ensure that the ring fence is kept up to date and meets not just the needs of business, but the need for a strong and stable economy.
Bilateral Loan to Ireland (Revised Interest Rate)
Mark Hoban Excerpts(12 years, 5 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr Mark Hoban)
I would like to update Parliament on the loan to Ireland.
Parliament will be aware that in July 2011 the Chancellor committed in principle to lower the interest rate on the bilateral loan to Ireland.
Following the agreement last year, the Treasury have now in principle agreed the new, lower interest rate on the bilateral loan to Ireland. The new rate will represent the UK’s cost of funds plus a small service fee of 0.18%. The UK’s cost of funding is defined as the average yield on gilt issuance in the six months prior to the disbursement of a tranche. This is subject to the loan agreement being revised to reflect the new rate.
I will update Parliament once the revised loan agreement has been finalised and signed.
HM Treasury has provided a further report to Parliament in relation to Irish loans as required under the Loans to Ireland Act 2010 alongside this statement.
Financial Services Bill
Mark Hoban Excerpts(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell
I understand where the hon. Gentleman is coming from but we have tried that and it has not worked. We sought under the recent Companies Act to increase the responsibilities on directors, but unfortunately we were unsuccessful. The evidence that came to the London Mining Network report, which I shall send to the hon. Gentleman, clearly shows that the existing system is not working, and this Bill provides an opportunity to enhance the powers of the regulatory authorities in this country.
My hon. Friend the Member for Wigan will not push the amendment to a vote. I understand why, although I am a bit more proactive on these matters. May I suggest to the Minister that the Government usefully look at the report and bring together the relevant representatives, including the existing authorities and the new individuals who will sit on the various authorities when the Bill has gone through, to discuss where we go from here? How do we ensure that we have an effective mechanism that includes the monitoring of corporate ethical behaviour within companies that are listed in this country and that gain all the advantages from that, such as reputational advantage, but that are doing our country a disservice through their operations in the developing world?
The Financial Secretary to the Treasury (Mr Mark Hoban)
I am grateful for the opportunity to reply to this debate. The hon. Members for Wigan (Lisa Nandy) and for Hayes and Harlington (John McDonnell) have raised some very important issues and there is a lot of truth in what they say. The reputation of the UK listing regime depends partly on the behaviour of companies, and we need to think about that quite carefully. However, there are other forums in which these issues should be explored—I do not believe that the Financial Services Bill is the place for it. In the regulatory reforms we have brought forward, we have tried to be very clear about the responsibilities and focus of the new regulators, the Financial Conduct Authority, the Prudential Regulation Authority, and the macro-prudential body the Financial Policy Committee.
Matters of stewardship and corporate behaviour are predominantly the responsibility of the Financial Reporting Council, which is responsible for the stewardship code and corporate governance issues. I encourage both hon. Members to engage with the FRC on this issue. Of course, it is not only the FRC that is relevant. The hon. Member for Hayes and Harlington talked about the mining sector, and the Government are engaged in that debate. We are a strong supporter of transparency in the extractive sector and we are pressing for requirements to be placed on EU extractive companies to disclose the payments they make to Governments. That is flowing from the accounting and transparency directives. We are also very supportive of the extractive industries transparency initiative, under which companies publish the payments they make to companies in resource-rich countries, so we are aware of the need to increase transparency.
Lisa Nandy
I am grateful to the Minister for giving way, but I urge him to speak to his colleagues, particularly in the Foreign and Commonwealth Office, because this amendment is supported by a wide range of organisations. They include investors and members of the business community, as well as non-governmental organisations that represent those whose lives have been so appallingly blighted by some of the companies that my hon. Friend the Member for Hayes and Harlington (John McDonnell) and I have been discussing.
Mr Hoban
The hon. Lady makes a good point, and if my colleagues in the Foreign and Commonwealth Office are not reading this debate carefully I shall certainly raise the matter with them and ensure that they think carefully about their role. I encourage her to speak to the FRC about these issues.
Mr Andrew Love (Edmonton) (Lab/Co-op)
The Treasury Committee interviewed members of the Financial Reporting Council this morning. They explained to us that their powers are about implementing or explaining and that they do not have powers to deal with companies that break the rules in this regard. Would it not therefore be appropriate to involve a body such as the FCA, which really could deal with implementation?
Mr Hoban
As my hon. Friend the Member for Wycombe (Steve Baker) highlighted, there is a responsibility on directors and there are criminal sanctions for criminal behaviour. We need to be very careful that we do not duplicate powers that already exist elsewhere and that we do not confuse the role of the regulators. It was the Treasury Committee that highlighted some of the problems in the existing regulatory system with the confusion of roles and remits. We want to be very clear in these reforms about what we seek to achieve.
The FSA—and in future the FCA—has a role to play. The FSA supports the FRC’s stewardship code through mandatory requirements on asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy. Those powers will transfer to the FCA.
John McDonnell
I hope that what the Minister just said was helpful. Is he saying that the stewardship role that he envisages for the FCA will include an element whereby judgments can be made about behaviour in terms of corporate ethics?
Mr Hoban
I am saying that what we need to ensure in terms of the stewardship code, and what the FCA does, is to require asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy, so the obligation is on asset managers rather than necessarily on companies themselves to disclose their adherence to stewardship matters.
John McDonnell
All right, I will not be a pain any further. To be frank, that does not move the matter on. The Minister need not give an answer on this tonight, but it would be incredibly helpful if he or one of his colleagues met my hon. Friend the Member for Wigan (Lisa Nandy), me and representatives from the London Mining Network to talk this issue through because there is clearly a gap between the different institutions, which corporate ethics seem to fall down when it comes to their being pragmatically adhered to.
Mr Hoban
I am always loth to offer meetings on behalf of colleagues, because it has happened to me, but the hon. Gentleman may wish to approach the Minister with responsibility for consumer affairs, who is also responsible for corporate governance and the role of the FRC. That might be the most productive furrow to plough.
On amendment 38, the hon. Member for Nottingham East (Chris Leslie) is absolutely right that we have heard it before. It is identical to amendment 150, which we discussed at some length in Committee before rejecting it. I do not think his arguments today were any more persuasive than they were a few months ago. I know that he will find that personally disappointing but I am sure he will get over it. In short, the objectives of each authority are broad enough to enable them to make the rules suggested in the amendment.
More generally, these issues are better considered in other forums, including those concerned with governance across the corporate sector. I also point out gently to the hon. Member for Nottingham East that the Department for Business, Innovation and Skills recently consulted quite widely on executive remuneration and that it included in that consultation both the suggestions that have been made, neither of which received significant support. [Interruption.] The hon. Member for Nottingham East says that it depends whom we consulted but it was an open consultation. Views were encouraged from across a wide range of bodies, including investor organisations, and I am sure that institutions such as the TUC and others would have taken part. I know that the Treasury Committee is also looking into this matter, so perhaps the hon. Member for Edmonton (Mr Love) can illuminate us about the conversations he has had this afternoon with Baroness Hogg.
Mr Love
I thank the Minister. What we were told today was that remuneration committees draw from a very select pool and are heavily influenced by the argument that their chief executive has to be at or above the average of all chief executives and that comparisons are made directly with the United States, which may be inappropriate. It was also made clear to us that we should widen that pool. One suggestion of how that could be done was to put an employee on the remuneration committee. If that is not acceptable, how is the Minister going to address this problem?
Mr Hoban
That is why the Government have embarked upon a consultation to look at ways to enhance the accountability of boards to their shareholders, looking particularly at the issue of executive pay. That is a welcome move and the Government will shortly respond formally to the responses to that consultation. I agree with the hon. Member for Nottingham East that shareholders must play a more powerful role in these issues, and in recent months they have put across their views more powerfully.
The hon. Member for Nottingham East spoke about the disclosure of voting patterns. As he mentioned, there is provision for such a power in the Companies Act 2006. The previous Government made it clear that they would use the power only if market practice did not improve. The outcome of the stewardship code has been to encourage institutional investors to vote more and to disclose that. The latest Investment Management Association survey of institutional investors shows that 66% of those surveyed now publish their voting records. That is up from 21% in 2004. Professor John Kay, in his review of equity markets and long-term decision making, is considering the issue and will report in the summer.
Let me move on to Government amendments 7 and 8 and Opposition amendment 73. Amendment 8 makes two minor technical corrections and allows firms and the Financial Ombudsman Service to make referrals to the FCA on matters of mass detriment. Amendment 7 deals with super-complaints. The new provision in the Bill for the FCA to receive super-complaints from designated consumer bodies has been widely welcomed. I am grateful for the scrutiny provided in Committee and in particular for the arguments made by the hon. Member for Makerfield (Yvonne Fovargue), who is in her place, who tabled an amendment in this connection.
It has never been the Government’s intention that the super-complaints mechanism could be made available to bodies whose purpose is to represent professional investors, but the debate in Committee highlighted the fact that the drafting would allow that. The amendment therefore revises the definition of “consumer” used in the super-complaints mechanism to exclude representatives of authorised firms.
Amendment 73 seeks to require the Government to introduce a provision allowing for collective proceedings for small and medium-sized firms and to give them access to super-complaints. The amendment has created confusion in the minds of hon. Members about the rights currently available to businesses to make complaints. Paragraph (b) of the amendment suggests that small and medium-sized businesses cannot make complaints. That is not the case, but I shall return to that.
I deal first with collective proceedings. The Government are consulting on a range of proposals to make it easier for consumers and small businesses to bring private actions in competition law, including on whether to extend to businesses the current right of consumers to bring a collective action following a breach of competition law, and whether to make it easier to bring such actions. We should take the opportunity to learn from the outcome of that consultation and reflect on what the implications might be for the financial services sector before proceeding to legislation. It would not be appropriate to legislate today in haste, without having consulted.
On access to super-complaints, the provisions in the Bill will not prevent bodies representing small and medium-sized enterprises which fit the relevant definition of consumers from making super-complaints. Within the new statutory framework the issue of what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill. These criteria will be of interest to parliamentarians and to organisations seeking to become super-complainants. I can therefore announce to the House that the Treasury will publish draft criteria for consultation later in the year.
On paragraph (b) of amendment 73 about the rights of small and medium-sized businesses to make complaints to the FSA, there has been much discussion about the mis-selling of interest rate hedges. I do not want to comment on that directly, as it is a matter for the FSA. However, I can point out that the FSA already has a powerful toolkit that can be very effective. That includes its powers to establish industry-wide or firm-specific redress schemes under section 404 of FSMA, which was recently used in the case of Arch Cru. The FSA is consulting on such an arrangement to help people who lost out as a consequence of the issues at Arch Cru.
The FCA will have the powers that the FSA already has to refer firms to enforcement, to use supervisory measures, to agree with or require a firm to undertake the necessary remedial action, including carrying out a past business review, and the payment of redress, or obtaining redress for firms through their use of their restitution powers under section 384 of FSMA. There are therefore provisions in place that will help the FSA to tackle complaints of mis-selling that businesses as well as consumers have brought to it. I hope that provides the clarity and reassurance that my hon. Friends are looking for.
My hon. Friend the Member for Warrington South (David Mowat) picked up in his interventions the confusion that amendment 73 has created. The FSA has the power to take action to help businesses which feel that they have been mis-sold products and to ensure that restitution can take place.
Steve Brine (Winchester) (Con)
I am listening carefully to what the Minister says, and I agree that paragraph (b) has caused some confusion and may have planted some hope that did not need to be planted in some of my constituents, who have some sympathy with amendment 73, as do I. The Minister said that the FSA or FCA has a toolkit at its disposal, and I am sure it has been listening carefully to what he has said at the Dispatch Box this afternoon. Will he consider writing to the FSA to make that crystal clear, giving clarity to Members and constituents listening to the debate today?
Mr Hoban
I would not say that amendment 73 sowed seeds of hope. Rather, it sowed seeds of doubt by suggesting that those powers were not available. Of course they are available. I have written to hon. Members in respect of Arch Cru and also about interest rate swaps recently, setting out the work that the FSA is doing in this regard. It is looking carefully at the sales practices of a number of institutions in respect of interest rate swaps and will take action, as appropriate. I can reassure my hon. Friends and those who take a close interest in these matters on behalf of their constituents and businesses in their constituency that the FSA has the powers that it needs to tackle these issues properly and fully and to get to the bottom of them.
Mike Freer (Finchley and Golders Green) (Con)
Sadly, I am none the wiser. I have three constituency cases in front of me on this very issue. Two of them include a letter from the FSA which clearly states that this is a matter for the courts to decide and is not part of its remits under the complaints procedure. Can my hon. Friend clarify why the FSA is telling constituents that it is a matter for the courts, but he says it is a matter for the FSA?
Mr Hoban
There are two issues here. There is a route through the courts that any type of consumer, whether retail or a business, can use if they have been mis-sold a product. That is a normal commercial right. What the FSA has identified as a consequence of the number of complaints on the issue that it has received from businesses is that it needed to undertake more work. It started that work in mid-March. It was looking at products that were sold in the run-up to the financial crisis, and as a consequence of its investigations it believed that more work was needed to establish the scale of the problem and to determine what action should be taken.
There is nothing contradictory about the letter that the FSA sent. Thanks to the efforts of a number of hon. Members who raised with the FSA the concerns of businesses in their constituency, it recognised that they were not just isolated examples and that there was a wider issue that needed to be addressed. Its powers under FSMA enable it to address the problem in the right way. That is a welcome step forward by the FSA.
Mr Love
Looking at the issue from a small business perspective, small businesses are not allowed, as the amendment proposes, to take collective action on these matters through the courts, which is frustrating. They feel that the FSA is not responding to them adequately. There are great delays in the system. The Minister has commented on the legal aspect of collective actions currently going through. May we have some reassurance today that the FSA will act more promptly in dealing with these matters?
Mr Hoban
As a consequence of the reforms that we are introducing, we are giving the FSA, and now the FCA, tougher powers to tackle these problems. The FSA has a much-reduced appetite for risk and a more interventionist approach to tackling matters where there appears to be consumer detriment. Some people feel very uncomfortable with this, but it is right for the FSA to act vigorously in defence of consumers and to take the necessary action to ensure that consumers get a fair deal. The Bill takes that one step forward and that is why we have been keen to ensure that we give the FCA more powers, which it has demonstrated the appetite to use.
Amendments 5 and 6 require the FCA and the PRA to publish a statement explaining how they consider making the proposed rules compatible with the principles of regulation set out in new section 3B. Given the important framing role of these principles, I agreed with the suggestion made by the hon. Member for Nottingham East in Committee that the Bill should be explicit about the regulator’s duty in that regard, and I committed to tabling the appropriate amendments when the Bill returned to the House. I am sure that the hon. Gentleman will be keen to support them.
Amendments 13 and 14 are minor and technical and are designed to maintain a position currently provided for in FSMA whereby the FSA is not required to make rules for the FSCS that provide cover over all regulated activities. The amendments ensure consistency with section 214(1)(g), which provides that the scheme may in particular provide for a claim to be entertained only if it is the type of claim specified by the scheme. These are technical changes and I hope that hon. Members will support the Government amendments and reject those tabled by the Opposition.
Chris Leslie
I am sorry that the Minister has not reacted to the importance of the issues in the amendments that we have tabled today, particularly when it comes to the need for small firms to have a greater capacity to complain or to make collective proceedings when there is lack of clarity about their capability to do so. The issues were raised not only by the Opposition; Government Members also felt it necessary to clarify these issues. The Minister should at the very least have committed to write to hon. Members so that they could pass on to the businesses in their constituencies a clear route map for communicating some of these questions, such as interest rate swap mis-selling. All we sought was that small firms that feel aggrieved should have their concerns taken seriously as consumers of financial products, but hopefully the point has been made in the debate.
I am sorry that the Minister felt it necessary to reject our amendments on stewardship issues. It is not good enough for the Government to rebut such questions. The Prime Minister had plenty of warm words in January when this issue was high on the media agenda, but we have seen precious little action subsequently. The Government are not taking the stewardship issue seriously and it is important that they do so, particularly with regard to the remuneration committees of some of the largest corporations and our banks and the idea that these obscene bonuses and excessive pay packages can continue to roll on. As my hon. Friend the Member for Edmonton (Mr Love) said, the remuneration committees are self-perpetuating. Would it not be a good idea to broaden them out and try to put an employee voice on their panel, and make sure that they appointed consultants in a way that did not conflict with their own management’s vested interests?
After we have voted on amendment 40, which we debated on day one of Report, on the need to regulate some of the excessive high-cost credit arrangements, I will press to a Division amendment 38 on remuneration committees, because it typifies one of those areas on the stewardship agenda where we need to see action most swiftly. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22
Rules and guidance
Amendment proposed: 40, page 80, line 2, at end insert—
‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.—(Stella Creasy.)
Question put, That the amendment be made.
Geraint Davies
This is about having the reliable and consistent measurement of data in order to measure the effectiveness of policies, rather than having to rely on looking at the website of whatever trade association we are talking about. That is the essence of this amendment and it is why I support it.
The hon. Member for Stone (Mr Cash) mentioned the Rochdale pioneers, and I am glad that he did so. At that time, the idea of co-operation, co-operatives and mutuals was forged very much in the fire of unbridled capitalism and an economic Darwinism that I know some hon. Members would like to see return in the so-called “spontaneous order” of things. In that unbridled free market, the weaker members of society were being crushed, and a collective, mutual ownership emerged, through mutual societies and co-operatives, that enabled normal people to share risks, benefits and ownership, and to reinvest surpluses in their mutual. That is why those organisations grew, and I am very proud consistently to a have supported them.
One of the questions that arises is: why has there been a slight falling away of mutuals over the past few decades? Partly it has been because the Conservatives pushed demutualisation to get quick profits for their friends, who are involved in the capitalist system to make quick profits. Then, in 2008, we have this tsunami and suddenly people wake up in the debris of this chaos realising that some of the surviving organisations are mutuals, and they rightly ask why that is. The answer, of course, is that the focus of mutuals—their raison d’être—is not about just reaching out to maximise profitability and taking irresponsible risks; it is about delivering services for their members, who have equal shares. As a result, the time of mutuals is back.
This is a time of enormous global financial turmoil. We all know about the risks from the sovereign debt of Greece, Spain and elsewhere, and the knock-on impacts of that. We also face a great deal of risk from German banks and other financial institutions that do not have the inherent solidity and risk management of the co-operative system. If the Government are serious about this, now is the time to move forward. The coalition Government have said that they will move forward, but they cannot even be bothered to measure the market share and the number of mutuals. So how seriously can we take them? The answer, self-evidently, is: not seriously at all. The top management consultancy McKinsey has the mantra, “If you can’t measure it, you can’t manage it.” That company knows that that is self-evidently the case, but we are saying here, “We don’t really want to manage it. We won’t measure it. It does not really matter.” That is what is coming across, and it is a great shame that it is.
Labour Members are saying, “Let’s paint a picture of how things are changing. Let’s try to use that to make progress and to actively encourage credit unions, housing co-operatives and so on.” Such organisations tend, by their very nature, to be locally owned, with local benefits for local people. That contrasts with the situation described by the hon. Member for Stone, whereby a member of the Royal Bank of Scotland may find that Santander has suddenly sent them part of their bill, and they wonder why that is and whether there is a risk from the Spanish contagion, linked into the Greek risk. Somebody was mentioning that sort of situation to me the other day, and of course it arises because of the global nature of these organisations.
People want the security and assurance of knowing that they can go to local co-operatives and be offered loans if they save, whereas they would be excluded from high street banks, which would say, “You’re too poor. We can’t give you an overdraft”, but if people were in a credit union they could get one. A lot of this is about risk management and stability, but it is also about ethics. We know that mutuals—the Co-op in particular—are trying to promote fair trade, sustainability and so on. If we are serious about encouraging risk management, and a better and fairer future for all our communities with mutuals, we should be serious about pushing forward the top line of this amendment—that to manage it, we should measure it. I very much hope that the Minister will accept this modest amendment.
Mr Hoban
We have had a wide-ranging debate on mutuality, and it has acted as a peg for discussion. As is clear from this evening’s contributions, we all recognise the strength of the mutual sector, its importance in providing choice and diversity, and the benefits it brings. A couple of times, however, Opposition Members seemed to elevate mutuals into semi-religious institutions. Let us be realistic about some of the issues that mutuals faced during the crisis. Some mutuals had to be bailed out by others, and the first use by the previous Government of the special resolution regime was on the Dunfermline building society. A number of mutuals strayed from their core business model, which had consequences.
One hon. Member—I think it was the hon. Member for Harrow West (Mr Thomas), who is no longer in his place—referred to mutuals supporting their branch network. I recall that one of the first Adjournment debates I replied to as a Minister was as a consequence of Nationwide closing a number of branches in south-east London. All mutuals face commercial pressures, which needs to be acknowledged.
Geraint Davies
What the Minister says is true, but does he accept that there is a differential outcome and that, on balance, because of the lower-risk structure, the mutuals do better than conventional capitalist banks?
Mr Hoban
It depends on risk management and the business model that mutuals follow. There is a different set of constraints around building societies, which helps to ensure their stability, but that does not mean that they are immune from some of the mistakes that have caused failure in the past.
The clear intention of the Bill—we discussed this at length in Committee—is to ensure that regulation does not discriminate against mutuality, or indeed any other type of ownership, simply because it diverges from the norm of public or private ownership. I believe that the Bill delivers that result. For example, in clause 22, new section 138K requires the Prudential Regulatory Authority and Financial Conduct Authority to analyse the impact of the proposed rules on mutual societies. This will help to build up a base of impartial evidence to allow the regulators to continue to assess whether mutuals are being treated appropriately within the regulatory system. It is important that regulators think through very carefully the impact that their rules will have, particularly on mutuals.
Jonathan Evans
My hon. Friend will recall coming to our all-party group on insurance and financial services, when we asked him some questions on these issues. In fact, the regulator thinks that the Financial Services Authority has changed its processes in order to recognise the specific position of mutuals. What it is that the Government have changed, other than their even-handed approach?
Mr Hoban
The new duty in the Bill goes beyond what the FSA currently does. It imposes a requirement separately to identify the impact of regulation on mutuals. Let me continue my remarks and set out some of the other things we have done to promote mutuality. As I was saying, the regulatory principle of proportionality also bites in this regard. If the regulators are taking action that impacts on one type of firm more than another, it should be done on the basis that the action is necessary and proportionate.
Let me highlight a number of ways in which the Government are promoting mutuality outside of this Bill. In January this year, the relevant provisions of our Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 came into effect, allowing credit unions to grow faster and compete better by offering interest on deposits and admitting corporate bodies like local charities and firms as members.
My colleagues in the Department for Work and Pensions recently commissioned and published a report on enhancing the sustainability of the credit union sector. It looked at some of the initiatives undertaken by the previous Government, how they have helped the credit union sector and how best to take that work forward. Important recommendations were made to the Government that will help to enhance the sustainability of credit unions and ensure that if there is further public sector investment in them it will be used to expand their base and ensure that they are sustainable.
The capital requirements directive, CRD4, includes a capital instrument that is available for use by mutuals and building societies. That was not on the agenda when we came into office two years ago. It is a consequence of the work that this Government have done with their European partners to ensure that that instrument can enable building societies to issue capital instruments so that they can expand and deal with some of the challenges they face. A number of Members of the European Parliament, as well as the Government, have been working to ensure that within CRD4 a particular capital instrument is available for the Co-op, which, because of the nature of its ownership, falls outside the instrument that is available to building societies.
The Prime Minister announced earlier this year that we intend to bring forward a Bill to consolidate most legislation governing co-operatives and mutuals. The industry greeted the announcement of this Bill warmly, and I believe it is important to bring forward this consolidation. Ed Mayo, the secretary-general of Co-operatives UK, stressed the importance of bringing together a series of nearly 20 Bills or Acts of Parliament, which will make it easier and cheaper to establish co-operatives and remove some of the ambiguity in the sector. Co-operatives UK is looking forward to working with the Government to bring forward this consolidation Bill.
Mr Love
The Minister has already admitted that credit union deregulation goes back many years. I was frustrated by the lack of progress under the previous Government; it has taken us a long time to get here. As for a consolidation Bill, I asked the Secretary of State for Business, Innovation and Skills why it was not included in the Queen’s Speech, given that it is a relatively modest and non-controversial measure—yet the Government could not give enough priority to it. Is there not some concern—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman spoke earlier and interventions are meant to be short, not to be another speech.
Mr Hoban
Consolidating something like 18 pieces of legislation is not a simple task. It needs to be done properly and well, and we would need to do it in conjunction with the co-operative movement, as well as with the Law Commission. Other pieces of legislation need to be implemented before the introduction of the consolidation Bill. It represents an important step forward, which is why it has been welcomed by people like Ed Mayo as a way of making it easier to set up mutuals in the future.
In the Government’s response to the recommendations of the Independent Commission on Banking, we committed to assess whether the Building Societies Act 1986 should be updated in line with the reforms to the wider banking sector. We want to work with building societies to identify the barriers to their growth. We will shortly publish a paper, alongside the White Paper on ICB implementation, as a consequence of that work, to identify where the Building Societies Act 1986 needs to be amended to enable building societies to take advantage of the opportunities that are out there.
I believe that this Government have demonstrated a clear commitment to promote mutuality and to diversify the mutual sector. Our commitment takes its shape in many forms—whether it be the new capital instrument, the protection given to members of Northern Ireland’s credit unions, legislation to help to take forward and grow credit unions, or the increased public investment in credit unions that should flow from changes to the model on which they operate. That demonstrates the practical concrete steps that the Government are taking to strengthen the mutual sector.
The information requested by the amendment is clearly widely available, if my hon. Friend the Member for Birmingham, Yardley (John Hemming) can Google it in a minute, and it will be maintained and kept. I do not think that this requirement to provide information, placing additional burdens on the regulator and the sector, is necessary. Actions speak louder than words and they speak louder than data. What this Government have clearly done is bring forward a series of measures to strengthen the mutual sector, which will be to the benefit of all our constituents.
Mr Hoban
I beg to move, That the Bill be now read the Third time.
It is worth stepping back at this point to look at why this is such a crucial Bill and why we must get it right. The UK banking system is emerging from the most serious financial crisis in over 100 years. It was a global crisis, but in the UK it highlighted fundamental dangerous flaws in the existing tripartite system of regulation. That system was put in place by the previous Government and designed by the shadow Chancellor—a system that, because of its flaws, failed its first major test.
The Bill addresses the most serious weaknesses in the system. Currently, all responsibility for financial regulation rests with the Financial Services Authority, resulting in an unwieldy remit across prudential and conduct-of-business regulation. The conflicts and challenges involved in that dual mandate were highlighted in the recent FSA report on the failure of RBS. The Bank of England is responsible for financial stability, but it did not have the tools with which to effect change, and the Treasury has no clear remit in a crisis, in spite of the immense threat to public funds in such scenarios. The confusion and lack of clarity in respect of roles and responsibilities triggered the asking of this question: who is in charge? The system’s structural flaws were compounded by flaws in approach. The FSA’s focus on tick-box compliance in the run-up to the financial crisis meant that insufficient time and resource was dedicated to thoughtful and challenging analysis of risk.
The Bill gives a clearer mandate to the regulatory structure and ensures that the regulators are equipped with the powers they need to tackle the problems both of today and, crucially, of the future. The Bill gives the Bank, through the new Financial Policy Committee, a much clearer mandate to protect financial stability and the ability to develop and use levers to fulfil that role. In Committee, we discussed at length the remit of the FPC and the tools that would be required, and I reconfirm what I said then: we will consult on the macro-prudential tools later this year, to ensure that there is full public discussion of them and their effects both in the outside world and here in Parliament.
In response to questions about who should be the prudential regulator, and recognising the close synergy between macro-prudential regulation—the task of the new FPC—and micro-prudential regulation, we have established a new subsidiary of the Bank of England: the Prudential Regulatory Authority. The PRA will have a new emphasis on a judgment-led approach to regulation. We will ask it to act proactively and to look ahead at problems that may emerge. The PRA will be empowered to act to tackle problems before they emerge, rather than waiting to clean up afterwards.
Andrea Leadsom (South Northamptonshire) (Con)
Does my hon. Friend agree that it is important that the PRA and the FPC consider the need for greater bank competition in the UK? Does he also agree that it is important that when the Bill moves into the other place consideration is given to any changes that might encourage greater competition through the new PRA?
Mr Hoban
The FPC’s remit does not cover the consideration of competition in the system. Its role is to consider stability and the threats to it. On the question of the Prudential Regulatory Authority, one of the challenges we need to accept is that, for a host of reasons, the failure of a bank is costly and expensive. We saw that in the UK with the response to the banking problems during the crisis, when a huge amount of public money was pumped into banks to prevent some of the problems that bank failure would create. Part of the responsibility for tackling the problem lies with the previous Government, who introduced living wills through recovery and resolution plans in the Banking Act 2009, work which is now being taken forward.
Of course, the Vickers report includes in its recommendations ways in which it will be easier to allow the orderly failure of a bank. Helping a bank to have an orderly failure where there is a problem will help to tackle the problem with barriers to entry. At the moment, the cost of failure is so high that the barriers to entry are proportionately higher. The regulators want to know that a bank is safe and to have huge confidence in that bank and they will require it to have high levels of capital because the cost of failure is so high. If we can tackle the barriers to exit from the banking sector, it will be easier to tackle the barriers to entry. That will help enormously in improving competition.
We have also given the Financial Conduct Authority an explicit objective of improving competition in markets. We have strengthened that objective, taking into account the work of the Treasury Committee and the representations of others, and I believe, as I think my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) does, that competition plays an important role in improving outcomes for consumers. That is why we see competition as one of the key new roles for the FCA, which will be a specialist regulator of conduct and will have strategic objectives not just to promote competition but to focus on consumer protection and to ensure that markets function well and have integrity.
We have also listened to the widespread concerns about the regulation of consumer credit. The Bill gives us powers to transfer the responsibility for regulating consumer credit from the Office of Fair Trading to the FCA. That will bring significant benefits and will ensure that consumer credit is well regulated. The FCA has a wider range of penalties than the OFT and can take a wider range of enforcement action, which will help to reassure our constituents that we are tackling the issue of consumer credit properly and sensibly.
Mr Hoban
The hon. Gentleman makes an important point. I emphasise that it is the Bank of England that is getting more powers, as I do not think we should be personalising matters in the context of who within the Bank will get more power. It is the institution that will get more power. We have taken steps in the Bill to increase the accountability and transparency of the Bank. It is very important, for example, that the FPC, in explaining its actions, uses the financial stability report to communicate the risks it identifies and what its responses should be. I expect that the FPC will be held to account by business, the banking sector and this House. That is important but, as I said on our first day on Report, the Treasury Committee has raised a number of issues—I pay tribute to the work of the Committee and its Chair in highlighting them—and we will return to them in the other place.
It is important to get the arrangements for the governance of the Bank right. I believe that accountability and transparency should be at the heart of the regulatory system, which applies not just to the regulators but to some of the tools that we have given to them, which I think will help. For example, at the moment no one knows when a financial promotion has been withdrawn at the direction of the regulator, but that information will now be made public, which will help consumers to know which financial services firms push the boundaries with promotions. That is why we want to see the publication of warning letters. I know that that is controversial, but it is right that consumers should know when enforcement action is being proceeded with and that that information should be in the public domain. The powers we are giving to the FCA to ban toxic products are also an important strengthening of that regime. In a range of areas, we are changing not only the structure of the regulatory organisation of this country but the approach. Transparency and accountability are part of that, as are the increase in competition and the new powers that we are giving to the FCA.
The process of scrutiny has been constructive, I think, and I pay tribute to the Treasury Committee for its work. We also had pre-legislative scrutiny of the Bill by a Joint Committee of both Houses chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). As we have developed the Bill, the way in which we have listened to the arguments being made inside and outside Parliament has demonstrated that we listen carefully to what is said and will amend the legislation as appropriate. We passed a number of Government amendments on Report that reflected comments that were made—even those made by the hon. Member for Nottingham East (Chris Leslie). That just shows that we are prepared to listen. The fact that there has been such widespread support for the Bill in the Commons demonstrates that our aim to ensure that there is widespread consensus behind our reforms to the structure and approach of regulation was achieved through the consultation process we adopted. That consensus is important. It demonstrates confidence in our proposed changes and shows that this Bill should receive its Third Reading.
I hope that the Opposition are not going to oppose Third Reading. If they do, it will demonstrate that they have not learned the lesson of the past—[Interruption.] The deputy Opposition Chief Whip says, “You never know,” from a sedentary position, but if the Opposition vote against this Bill on Third Reading people will wonder whether they are so wedded to the constructs of the past that they cannot move on. People will think that they are so wedded to the system put in place by the shadow Chancellor that they cannot move on and that they cannot recognise the flaws in both its structure and approach. If they choose to vote in such a way, the world will know that they have not moved on and that they have not learned those lessons.
The Government have looked at the financial crisis and the reforms that must be made. The structure we are proposing today will help to deliver better outcomes for consumers and to strengthen and improve the resilience of the financial system in the future. I commend the Bill to the House.
ECOFIN
Mark Hoban Excerpts(12 years, 6 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
An extraordinary meeting of the Economic and Financial Affairs Council (ECOFIN) will be held in Brussels on 2 May 2012. The following items are on the agenda to be discussed:
Revised Capital Requirement Rules (CRD IV)
The council will discuss the presidency’s compromise on the Commission’s proposal to replace the capital requirements directive (directives 2006/48/EC and 2006/49/EC, as amended by directives 2009/111/EC and 2010/76/EU), with a regulation on prudential requirements and a directive on the access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, together known as “CRD IV”.
The UK will push for the full implementation of Basel 3 and for member states to have sufficient flexibility to protect financial stability in their jurisdiction.
Follow-up to the G20 meeting of finance ministers and governors and IMF spring meetings (Washington 20-22 April 2012)
The Commission will update member states on the IMF spring meetings, which took place in Washington on 19-22 April, including a meeting of G20 finance ministers and Central Bank governors. The Chancellor updated the House on the outcome of the discussions at the spring meetings, including on IMF resources, in a statement on 23 April.
Counter-Terrorist Asset Freezing Regime
Mark Hoban Excerpts(12 years, 6 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
Under the Terrorist Asset-Freezing etc. Act 2010 (“TAFA 2010”), the Treasury is required to report quarterly to Parliament on its operation of the UK’s asset freezing regime mandated by UN Security Council resolution 1373.
This is the fifth report under the Act and it covers the period from 1 January 2012 to 31 March 2012. This report also covers the UK implementation of the UN Al-Qaida asset freezing regime and the operation of the European Union (EU) asset freezing regime in the UK under the EU regulation (EC) 2580/2001 which implements UNSCR 1373 against external terrorist threats to the EU. Under the latter regime, the EU has responsibility for designations and the Treasury has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.
Annexes 1 and 2 to this statement provide a breakdown by name of all those designated by the UK and the EU in pursuance of UN Security Council resolution 1373.
Following the publication in February 2012 of the Treasury’s response to the independent reviewer’s first report on the operation of TAFA 2010, the Treasury is continuing work to implement the independent reviewer’s recommendations. Progress on these will be reported in future reports to Parliament.
The following table sets out the key asset-freezing activity in the UK during the quarter ending 31 March 2012:
Activities | TAFA 2010 | EU Reg (EC) 2580/2001 | Al-Qaida regime UNSCR 1989 |
|---|---|---|---|
Assets frozen (as at 31/03/2012) | £33,000 | £11,000 | £71,0001 |
Number of accounts frozen in UK (at 31/03/12) | 68 | 10 | 38 |
New accounts frozen | 0 | 0 | 0 |
Accounts unfrozen | 1 | 0 | 1 |
Number of designations (at 31/03/12) | 40 | 37 | 329 |
(i) new designations (during Q1 2012) | 0 | 0 | 11 |
(ii) Delistings | 2 | 14 | 25 |
(iii) individuals in custody in UK | 14 | 0 | 2 |
(iv) individuals in UK, not in detention | 5 | 0 | 7 |
(v) individuals overseas | 13 | 12 | 260 |
(vi) groups | 8 (0 in UK) | 25 | 69 (2 in UK) |
Renewal of designation | 34 | n/a | n/a |
General Licences | |||
(i) Issued in Q1 | (i) 0 | ||
(ii) Amended | (ii) 0 | ||
(iii) Revoked | (iii) 0 | ||
Specific Licences: | |||
(i) Issued | (i) 6 | (i) 0 | (i) 0 |
(ii) Revokd | (ii) 1 | (ii) 0 | (ii) 0 |
1This figure reflects the most up-to-date account balances available and includes approximately $64,000 of suspected terrorist funds frozen in the UK. This has been converted using exchange rates as of 02/04/12. |
The key area of activity during the quarter was:
Reviews of the remaining 36 existing designations, not reported on in the previous quarterly report, were conducted during the quarter, which resulted in the renewal of 34 designations and the delisting of Habib Ahmed and Selman Bozkur. The renewals and delistings were all publicised on the Treasury website. All current designations under TAFA 2010 are listed at Annex I.
Legal Challenges
Three legal challenges against designations made under both the Terrorism (United Nations Measures) Order 2009 and TAFA 2010 were ongoing in the quarter covered by this report. The challenges brought by Ismail Bhuta and Habib Ahmed were withdrawn during the quarter, in accordance with agreed terms of settlement. There were no specific developments during the quarter in the case brought by Zana Rahim.
Proceedings
In the quarter to 31 March 2012, no proceedings were initiated in respect of breaches of the prohibitions of the Act or the Al-Qaida (Asset-Freezing) Regulations 2011.
Designated persons under TAFA 2010 by name |
|---|
Individuals |
1. Hamed ABDOLLAHI |
2. Bilal Talal ABDULLAH |
3. Imad Khalil AL-ALAMI |
4. Abdula Ahmed ALI |
5. Abdelkarim Hussein AL-NASSER |
6. Ibrahim Salih AL-YACOUB |
7. Manssor ARBABSIAR |
8. Usama HAMDAN |
9. Nabeel HUSSAIN |
10. Tanvir HUSSAIN |
11. Zahoor IQBAL |
12. Umar ISLAM |
13. Hasan IZZ-AL-DIN |
14. Parviz KHAN |
15. Waheed Arafat KHAN |
16. Osman Adam KHATIB |
17. Musa Abu MARZOUK |
18. Gulam MASTAFA |
19. Khalid MISHAAL |
20. Khalid Shaikh MOHAMMED |
21. Ramzi MOHAMMED |
22. Sultan MUHAMMAD |
23. Yassin OMAR |
24. Hussein OSMAN |
25. Zana Abdul RAHIM |
26. Muktar Mohammed SAID |
27. Assad SARWAR |
28. Ibrahim SAVANT |
29. Abdul Reza SHAHLAI |
30. Ali Gholam SHAKURI |
31. Qasem SOLEIMANI |
32. Waheed ZAMAN |
Entities |
|---|
1. BASQUE FATHERLAND AND LIBERTY (ETA) |
2. EJERCITO DE LIBERACION NACIONAL (ELN) |
3. FUERZAS ARMADAS REVOLUCIONARIAS DE COLOMBIA (FARC) |
4. HIZBALLAH MILITARY WING, INCLUDING EXTERNAL SECURITY ORGANISATION |
5. HOLY LAND FOUNDATION FOR RELIEF AND DEVELOPMENT |
6. POPULAR FRONT FOR THE LIBERATION OF PALESTINE—GENERAL COMMAND (PFLP-GC) |
7. POPULAR FRONT FOR THE LIBERATION OF PALESTINE (PFLP) |
8. SENDERO LUMINOSO (SL) |
2 For full listing details please refer to http://www.hm-treasury.gov.uk/d/terrorism.htm |
Persons designated by the EU under Council Regulation (EC)2580/20013 |
|---|
Persons |
1. Hamed ABDOLLAHI* |
2. Abdeikarim Hussein AL-NASSER* |
3. Ibrahim Salih AL YACOUB* |
4. Manssor ARBABSIAR* |
5. Mohammed BOUYERI |
6. Sofiane Yacine FAHAS |
7. Hasan IZZ-AL-DIN* |
8. Khalid Shaikh MOHAMMED* |
9. Abdul Reza SHAHLAI* |
10. Ali Gholam SHAKURI* |
11. Qasem SOLEIMANI* |
12. Jason Theodore WALTERS |
Groups And Entities |
|---|
1. Abu Nidal Organisation (ANO) |
2. Al-Aqsa Martyrs’ Brigade |
3. Al-Aqsa e.V. |
4. Al-Takfir and Al-Hijra |
5. Babbar Khalsa |
6. Communist Party of the Philippines, including New People’s Army (NPA), Philippines |
7. Gama’a al-Islamiyya (a.k.a. Al-Gama’a al-Islamiyya) (Islamic Group—IG) |
8. Islami Büyük Dogu Akincilar Cephesi (IBDA-C) (Great Islamic Eastern Warriors Front) |
9. Hamas, including Hamas-Izz al-Din al-Qassem |
10. Hizbul Mujahideen (HM) |
11. Hofstadgroep |
12. Holy Land Foundation for Relief and Development* |
13. International Sikh Youth Federation (ISYF) |
14. Khalistan Zindabad Force (KZF) |
15. Kurdistan Workers Party (PKK) (a.k.a. KONGRA-GEL) |
16. Liberation Tigers of Tamil Eelam (LTTE) |
17. Ejército de Liberación Nacional (National Liberation Army)* |
18. Palestinian Islamic Jihad (PIJ) |
19. Popular Front for the Liberation of Palestine (PFLP)* |
20. Popular Front for the Liberation of Palestine—General Command (PFLP-GC)* |
21. Fuerzas armadas revolucionarias de Colombia (FARC)* |
22. Devrimci Halk Kurtulu Partisi-Cephesi—DHKP/C (Revolutionary People’s Liberation Army/Front/Party) |
23. Sendero Luminoso (SL) (Shining Path)* |
24. Stichting Al Aqsa |
25. Teyrbazen Azadiya Kurdistan (TAK) |
3For full listing details please refer to http://www.hm-treasury.gov.uk/d/terrorism.htm. * EU listing rests on UK designation under TAFA 2010 |
UK 2012 National Reform Programme
Mark Hoban Excerpts(12 years, 6 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
The Government have today published the UK 2012 national reform programme. The document has been submitted to the European Commission, as part of the European semester.
National Reform Programme
Under council recommendation 2010/410 of 13 July 2010, member states submit national reform programmes each year, which report to the Commission on their structural reforms and plans.
The UK 2012 national reform programme reports on actions taken by the UK as a whole, including by the Government and by the devolved Administrations where policy responses are of a devolved competence.
The 2012 national reform programme:
puts the UK’s structural reforms in the context of deficit reduction and the 2011 autumn statement and plan for growth;
reports on the broad macro-economic context, which uses the same text as the UK’s convergence programme;
reports on policies to tackle the five country-specific recommendations addressed to the UK by the June 2011 European Council: continuing with fiscal consolidation; reforms to the housing market; improving the employability of young people; reducing worklessness; and increasing access to finance; and
sets out the UK’s approach to national monitoring, in line with the five headline Europe 2020 targets agreed by the European Council in June 2010.
The national reform programme only draws on public information and is based on the announcements and forecasts of Budget 2012, “The Plan for Growth” and the autumn statement 2011. It is, therefore, entirely based on information already presented to Parliament.
Copies of the document will be deposited in the Libraries of both Houses and will be available on the Treasury website at: www.hm-treasury.gov.uk.
Oral Answers to Questions
Mark Hoban Excerpts(12 years, 7 months ago)
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Mr Dennis Skinner (Bolsover) (Lab)
1. If he will consider imposing a further bonus tax on banks to fund job creation for young people who are unemployed.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The bank payroll tax is a one-off measure, but the Government have gone further by imposing a permanent bank levy that will raise £10 billion over the course of this Parliament. Those funds will help to pay for the youth contract, introduced this month, which will provide up to 500,000 young people with new education and employment opportunities.
Mr Skinner
So the answer is no: they are not going to introduce a bank bonus tax that could provide jobs for 100,000 young people and still leave money to spend on providing a training facility at Markham vale, which would serve all the constituencies of south Yorkshire and the north midlands. What an opportunity! If this posh, arrogant Government will not do that, the next Labour Government will do it for them.
Mr Hoban
We have heard the same old stuff from the hon. Gentleman for the last 42 years. Perhaps it is time for him to help youth unemployment by creating a vacancy. We are providing young people with more help to get into work, with an extra quarter of a million apprenticeship places. I would have thought he would have welcomed the fact that the city of Sheffield enterprise zone is at Markham vale in his constituency. That is the sort of practical action this Government are taking to ensure that jobs are being created.
Harriett Baldwin (West Worcestershire) (Con)
Will the Minister explain to employers—in Bolsover and elsewhere—that as of this month there is a youth contract that will pay them to take on unemployed young people?
Rachel Reeves (Leeds West) (Lab)
Can the Minister tell us how many young people have now been out of work for more than six months, and how that compares with the figure of a year ago?
Mr Hoban
I would have thought the shadow Chief Secretary would have welcomed the fact that youth unemployment fell last month. That demonstrates that the Government are taking action to tackle the scourge of youth unemployment—a problem that did not emerge under this Government, as youth unemployment also rose when her party was in government.
Rachel Reeves
The Minister failed to answer my question, so let me tell the House that 170,000 young people have been out of work for more than six months. That is an increase of 114% since just a year ago. Does the Minister think it is fair that families with children are being asked to pay a higher price for deficit reduction than the banks, and if not, will he reconsider reinstating the bank bonus tax to support young people back to work—especially as his Budget has given a tax cut worth £40,000 to 14,000 millionaires?
Mr Hoban
I just point out to the hon. Lady that the last Labour Government ruled out introducing a bank levy. That levy is raising £2.5 billion, and it will raise £10 billion over the lifetime of this Parliament. I think it is right that banks should pay a fair contribution for the risks they have posed for the UK economy, and I would have thought she would have welcomed both the bank levy and the fall in youth unemployment last month.
Duncan Hames (Chippenham) (LD)
Youth unemployment is clearly more acute in some parts of the country than in others. Why does the Minister think youth unemployment over the last two years has fallen in over a third of the country, including Bolsover, but not in some constituencies, such as Bradford West, where it has increased by 500?
Mr Hoban
My hon. Friend makes the important point that the pattern of youth unemployment varies across the country. It is important that the necessary support is in place to help young people looking for work, and the Work programme is likely to help 100,000 young people this year. That is just one of the practical measures we are taking to tackle the problem of youth unemployment—which, as the right hon. Member for South Shields (David Miliband) said, started under the last Labour Government.
Mr Iain McKenzie (Inverclyde) (Lab)
With the disgrace of having more than a million young people unemployed up and down this country, does the Minister not now regret scrapping the future jobs fund during the first few months after coming to power?
Mr Hoban
It was clear that the future jobs fund was not cost-effective in helping young people, and we have found that the work experience programme is 20 times more effective. We have introduced a range of measures to help young people find work. We have already talked about the increase in the number of apprenticeship places, the number of people being helped by the Work programme and the number of wage incentives in place through the youth contract. We are going to see more voluntary work taking place and more job experience. Those are the practical measures needed to tackle youth unemployment.
Tom Brake (Carshalton and Wallington) (LD)
2. What fiscal steps he is taking to encourage investment and growth in the manufacturing sector.
Andrew George (St Ives) (LD)
10. What steps he plans to take to ensure taxes owed are duly collected.
The Financial Secretary to the Treasury (Mr Mark Hoban)
HMRC has managed both to reduce debt levels and to help businesses through difficult economic times. It offers help to businesses that are in genuine difficulty, including through time-to-pay arrangements. Where appropriate, it is taking faster and firmer action against those who fail to engage with it. The amount of customer debt owed to the Exchequer decreased by about £2.4 billion between February 2011 and February 2012.
Andrew George
I am grateful to the Minister for that answer and I must congratulate the Government on their plans to close loopholes, particularly for the super-rich, including through the gift aid system. Will he ensure that the Government do not weaken their resolve in that regard, and ensure that gift aid genuinely goes to support charitable activities?
Fiona Mactaggart (Slough) (Lab)
19. Why has not the Exchequer Secretary given Members of Parliament, or even the House of Commons Library, copies of the figures he released to the press last week suggesting that 330 millionaires are paying less than 10% tax, which he connected directly to charitable giving? Will he make those figures available to Members through the Library?
Gordon Henderson (Sittingbourne and Sheppey) (Con)
11. Whether caravans designed and constructed for continuous occupation will remain zero-rated for VAT purposes under his proposals when used as holiday homes.
Andrew Bingham (High Peak) (Con)
16. What steps he is taking to increase the availability of credit to small businesses.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The Government have announced a range of initiatives to help small businesses access finance from a wide range of sources, including the national loan guarantee scheme and the business finance partnership.
Andrew Bingham
I thank my hon. Friend for that answer and welcome the Government’s efforts on this matter. Does he agree that in constituencies such as High Peak, micro-businesses are still having difficulties finding loans, despite the assurances of the banks that they are open for business? What words of support and advice can he offer the small, independent business owners upon whom the recovery depends to such a great extent?
Mr Hoban
My hon. Friend raises an important point, and having visited his constituency, I know it is very rural. He might encourage businesses in his constituency to apply for the rural economy grant scheme, which is worth £60 million and is open to businesses operating in rural areas in certain markets, including agri-foods, tourism and digital media technology. I would encourage them to do so.
Kerry McCarthy (Bristol East) (Lab)
18. What estimate he has made of the revenue which would accrue to the Exchequer from maintaining the additional rate of income tax at 50 per cent in 2013-14.
Alun Cairns (Vale of Glamorgan) (Con)
T2. I welcome the Financial Services Bill, which we debated yesterday. It is a significant step towards re-instilling confidence in the financial services industry, but does the Minister accept that regulators, including the current Financial Services Authority, have an obligation to work with other regulatory bodies that go beyond their competence to bring about negotiated settlements when the product is far more complicated than is covered by their jurisdiction, such as in the Arch Cru affair?
The Financial Secretary to the Treasury (Mr Mark Hoban)
My hon. Friend raises an important question. There are a number of cases—Arch Cru is one of them—in which different parties are in different jurisdictions. It is important that regulators work together, along with the parties involved, to ensure that a good deal is put in place to help investors.
John Mann (Bassetlaw) (Lab)
T3. A listed building that is dismantled and rebuilt as a new dwelling will be zero rated, but people will not be able to renovate an empty barn for the same price if it is VAT-able at 20%. Is that or is that not a perverse incentive to demolish empty listed buildings?
Jacob Rees-Mogg (North East Somerset) (Con)
Tomorrow, the European Commission will publish its proposed 2013 budget. Will Her Majesty’s Government do everything they can to ensure that there is no increase in that budget? More importantly, will they use their veto on the multi-annual framework to ensure that there is no increase?
Mr Hoban
My hon. Friend makes an important point. At a time when Governments across Europe are making difficult decisions to curb spending, it is completely unacceptable for the Commission to propose an inflation-busting increase in its budget and the medium-term financial framework. The Government will work with their allies to tackle those issues.
Stewart Hosie (Dundee East) (SNP)
In normal times, the mortgage standard variable rate rises or falls as the base rate goes up or down, but we are aware that some banks—not all—are increasing their standard variable rates now, while the Bank base rate remains near the zero-bound. Will the Chancellor take this opportunity to fire a warning shot across the bows of some of those banks not to increase their standard variable rates and so put more pain on to people likely to have had pay cuts and wage freezes over the past two or three years?
Mr Hoban
It is important that we stick to the fiscal course to ensure that UK interest rates remain low for as long as possible. However, many banks face increased funding costs, partly because of the turbulence in the eurozone and partly because there is more competition for savings on the high street, and that works its way through to mortgage rates. It is important that banks provide the help they can to their customers to ensure they have the support necessary to deal with higher mortgage interest rates.
Section 5 of the European Communities (Amendment) Act 1993
Mark Hoban Excerpts(12 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That this House approves, for the purposes of section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment as set out in the Budget Report, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook, which forms the basis of the UK’s Convergence Programme.
I welcome this opportunity to debate the information that will be provided to the European Commission this year under section 5 of the European Communities (Amendment) Act 1993. As in previous years, the Government will send to the Commission data on the UK’s economic and budgetary position, in line with our commitments under the EU stability and growth pact.
The Government will submit their convergence programme by 30 April, after debates in both Houses. It explains our medium-term fiscal policies, as set out in the autumn statement, the Budget and the Office for Budget Responsibility’s forecasts, and it is drawn entirely from previously published documents that have been presented to Parliament. It makes it clear that this year’s Budget reinforces the Government’s determination to return the UK to prosperity, and it reiterates our No. 1 priority of tackling the huge deficit that we inherited from the previous Government.
It is because of the decisive action this Government have taken to tackle that deficit since the June 2010 Budget that we have secured and maintained the stability of the UK economy. Last month’s Budget builds on those strong foundations, safeguarding our economic stability; creating a fairer, more efficient and simpler tax system; and driving through reforms to unleash the private sector enterprise and ambition that are critical to our recovery.
As the Chancellor said in his Budget speech, Britain will earn its way in the world, but we can succeed in that goal only if we continue to safeguard our economic stability, tackling the record deficit and debt we inherited from the previous Government. That is why this year’s Budget has a neutral impact on the public finances, implementing fiscal consolidation as planned, and keeping us on course to achieve a balanced structural current budget by 2016-17 and debt falling as a percentage of national income by the end of this Parliament in 2015-16.
Fiscal sustainability is the vital precondition for economic success, but we are doing much more to catalyse growth. First and foremost, we are undertaking far-reaching reform to ensure that our tax system is simple, predictable and fair, and that it supports work.
Kate Hoey (Vauxhall) (Lab)
Given that the requirement for the Government’s assessment was passed under the Maastricht treaty, for which no one in the country voted, and that it must go to a Commission that no one in this country has elected, why does an independent British Parliament have to go through this procedure—this charade—every year?
Mr Hoban
We have signed up to certain aspects of the stability and growth pact. One precondition is that we present this information, as we have done every year since the Maastricht treaty. I will set out later why the UK is treated differently in this process from other European Union member states, but there is nothing new in the information that we will supply and it has been presented to the House. When the EU sought to revise its economic governance package, we were very clear that, whereas other member states provide information to the Commission in advance of their budget-setting process, the UK will provide it after our process.
Mr John Redwood (Wokingham) (Con)
Does the Minister believe the UK is bound by the Maastricht rules that its deficit should be 3% per annum and no more, and that it should have a stock of debt of only 60% of national income?
Mr Hoban
We are required to endeavour to achieve the Maastricht criteria. A very different regime is in place for the UK because of the opt-out that John Major negotiated under the Maastricht treaty. We have been clear, as the economic governance package has developed in recent years, on preserving that opt-out and the different treatment for the UK as compared with other European member states. One achievement is that we are not subject, for example, to the sanctions regime to which other member states are subject.
We jealously protect our particular position in the process, as I am sure hon. Members on both sides of the House would want us to do. Clearly, were we to follow the Leader of the Opposition’s policy—he wants us to join the eurozone at some point—we would have to give up those safeguards and protections. That is not a policy that this Government or the Conservative party would support.
Kelvin Hopkins (Luton North) (Lab)
Setting aside my views on the Budget, which are probably not printable, is not talking about the stability and growth pact at this time simply building castles in the air? We have neither stability nor growth in any part of Europe at the moment. It might be that we are waiting for things to turn, but even in Britain we face savage deflation if we do not change our policies.
Mr Hoban
Europe needs to tackle its fiscal deficit and put in place the policies that will lead to economic growth. One reason for such uncertainty in the eurozone is that a series of imbalances have built up in different European economies. It is important that we tackle them and set out a very clear course for growth. I shall come later in my remarks to some of the actions that the UK Government have led to ensure that the EU spends more time talking about growth and finding ways in which we can accelerate economic progress in the European economies.
Let me mention some of the measures we are taking at home that were set out in the Budget. We are committed to creating the most competitive tax system in the G20. We are cutting the rate of corporation tax to 22% by 2014, which will be the lowest rate in the G7 and the fourth lowest in the G20. [Interruption.] The hon. Member for Nottingham East (Chris Leslie) pre-empts my remarks, because I was about to say that we will remove the ineffective and uncompetitive top rate of tax.
I should say to the hon. Gentleman that I talk to businesses that wish to grow and businesses that want to locate here in the UK. They commend the Government for the corporate tax reforms in which we have engaged. In Treasury questions earlier, my right hon. Friend the Chancellor referred to remarks made by the chief executive of GlaxoSmithKline, who responded positively to the tax changes that we introduced. He is not alone—other businesses are moving to the UK as a consequence of our corporate tax arrangements.
Clearly, when we are trying to attract international business men to work here in the UK, and if we want to retain high-paid, talented business leaders here, the 50p tax rate is an issue. It is an outlying issue in G7 countries and affects location decisions for businesses. Cutting the top rate of tax is therefore the right thing to do. We set out the cost—£100 million—in the Red Book and highlighted measures that would raise five times that amount from the very wealthiest in society.
That was a difficult decision, but I believe it was the right one if we want the economy in this country to grow. As was mentioned earlier, one consequence of the higher rate that the previous Government introduced—they did not bother to introduce it in the first 12 years they were in office—was that 20,000 people moved from the UK to Switzerland. That demonstrates the negative impact of a 50p rate. If we want to be competitive, we need a competitive tax regime for both personal and corporate taxes.
Kelvin Hopkins
I do not believe that nonsense about people moving because of the top rate of tax. In France, the socialist opposition have suggested a top tax rate of 75% and said that if people move away because of it, plenty of other people who are just as talented will be prepared to take their jobs because they will still earn a lot of money.
Mr Hoban
To be fair to the hon. Gentleman, I suspect he is one of the few Opposition Members who supported the 50p rate throughout the period of the Labour Government, and is not one of the late converts that many of his hon. Friends have become.
As I have said, it is important that we create the right competitive conditions for business to flourish, and this Government will continue to invest in our nation’s future. We have announced that we will take forward many of Alan Cook’s recommendations on roads and develop a national roads strategy; we have confirmed investment to provide ultrafast broadband to 10 cities across the UK, with a second wave of cities to be identified in future; and we will continue to support the establishment of a new pension infrastructure platform to unlock an initial £2 billion of investment by as early as 2013.
However, a return to prosperity in the UK depends not only on what is happening here, but on what happens beyond our shores.
Mr Stewart Jackson (Peterborough) (Con)
My hon. Friend makes a coherent argument, but we have been told on many occasions that what happens in the eurozone is important for exports. Without any monetary stimulus, and without major fiscal changes or major structural reforms, how can a cumulative 3% year-on-year reduction of budgets in southern Europe in countries such as Portugal, Greece and Italy possibly assist us in growing our economy out of the recession of the past few years?
Mr Hoban
My hon. Friend needs to recognise that, in several countries that have a programme in place, there is a requirement to make structural reforms. A number of member states are already embracing structural reforms, tackling issues such as restrictions on the labour market and looking at ways to tackle the burden of regulation. We are seeing the structural reform that goes hand in hand with fiscal consolidation to create a stable and sustainable platform for economic growth. Here in the UK, we are undergoing fiscal consolidation, but at the same time we are engaging in supply-side reforms to help stimulate growth in the economy. I do not see the two as mutually exclusive. Indeed, they need to go hand in hand if we are to deliver growth.
Kelvin Hopkins
I shall reserve most of my remarks for later when I hope to have the chance to speak. However, I must say that supply-side reforms are all very well, but if there is no demand in the economy, it will not grow but contract.
Mr Hoban
It has been demonstrated time and again in a host of different economies that supply-side reforms are vital, because they reduce some of the costs on businesses and enable them to invest and improve productivity, and in that way they stimulate demand and growth.
Hon. Members are right to focus on events beyond our shores. As the Office for Budget Responsibility said in its March report,
“the situation in the Euro area remains a major risk”
to the UK’s economic forecast. More than 40% of our exports are to the euro area, and recent events in the markets remind us that euro area countries need to make painful adjustments to their public finances and external deficits. It is a difficult path that they have to walk, although new Governments in the likes of Ireland, Portugal, Spain and Italy are walking it. That is the logic of the single currency to which they are all committed, and progress is being made.
The European Central Bank’s monetary loosening has helped to stabilise the banking system, and the trillion dollars pumped in through the long-term refinancing operation has been helpful. There has been progress in stabilising Greece, and—as I have said—a number of countries have announced important economic reforms.
As well as these measures, important longer-term reforms have been made since we last debated the convergence programme. Those reforms include a stronger, more effective stability and growth pact following agreement of the “six pack” in December 2011. A new macroeconomic imbalances procedure will provide an assessment of potential economic risks across Europe, with sanctions for euro area countries that fail to take action. Importantly, the Commission has put forward proposals to improve co-ordination of budgetary processes between euro area countries.
The treaty on stability, co-ordination and governance—the fiscal compact—was signed in March by 25 member states and it also has the potential to embed stronger rules on fiscal discipline. Together, these reforms represent a stronger, reinforced system of economic governance for the EU and the euro area in particular. While many of these stronger measures may not be right for the UK, they can support stability in the single currency area.
Mr Hoban
If I may, I will finish my paragraph as it may clear up any misapprehensions that the hon. Gentleman has.
I would like to reassure the House that following these reforms the UK is still not subject to sanctions under the strengthened stability and growth pact—the EU treaty is clear that they apply only to EU area countries. Unlike other countries, the UK will only present its convergence programme to the Commission after the Budget is presented to Parliament—the procedure that we are following today.
Graham Stringer
Does the Minister read the newspapers? Has he not noticed that Europe is getting less and less politically stable and that many of the European economies are shrinking? Whatever titles are put on the policies, that is what is really happening. Would it not make sense for the Government and this country to support an as stable as possible break-up of the euro, which would provide growth in Europe and in the United Kingdom?
Mr Hoban
It would be inappropriate for the UK Government to dictate the economic policies to be followed by those in the eurozone. Members of the eurozone have made it very clear that they wish to remain part of it, and there are even member states queuing up to join it. Indeed, if we have an independent Scotland, it might consider joining the eurozone. There are challenges, but there is a strong political commitment in the eurozone for the euro to remain in place.
Mrs Anne Main (St Albans) (Con)
The Minister is making a genuine argument in favour of stability, but the rise of the far right—and Marine Le Pen receiving one in five votes in France—shows that whatever was said before, when all these treaties were signed, may not be current now. There is great unrest on the part of the public about what is being done in their name, both abroad and here.
Mr Hoban
It is not appropriate for any of us to provide a running commentary on the French presidential elections, but it is important that Governments, whether inside or outside the euro, make their argument as to why they believe that the measures required to bring about fiscal stability and economic growth are necessary. Those arguments need to continue to be made, because that is vital to Europe’s long-term interests. We will wait and see what the outcome of the French presidential election is and what the view of the new President is on the fiscal compact.
Richard Drax (South Dorset) (Con)
What will the Minister tell the millions of people in the eurozone when it goes horribly wrong—as it will—and their lives are ruined, given that we have had the chance, as has been suggested, to rebalance the euro from a position of control? It will collapse.
Mr Hoban
My hon. Friend should recognise the strong political consensus in the eurozone for the continuation of the euro. The actions of member states have sought to stabilise the situation in the eurozone, and that is why they have set up the European stability mechanism and boosted it with funds to strengthen the firewall. They are also looking at recapitalisation of banks and trying to stabilise the situation. The actions of eurozone countries are attempts to reinforce the stability of the eurozone, and they have also embarked on reforms to try to bring about closer fiscal integration, and the fiscal compact is part of that.
Mark Hendrick (Preston) (Lab/Co-op)
Will the Minister accept that even though we are not members of the eurozone, this country is still teetering on the brink of another recession? Does he also accept that the euro will continue for many decades to come—probably ad infinitum—albeit without some current members?
Mr Hoban
I remind the hon. Gentleman that as a consequence of the actions taken in the Budget one of the rating agencies, Standard & Poor’s, reaffirmed the UK’s triple A rating—[Interruption.] If the hon. Member for Nottingham East paid attention and read the newspapers—he accused me of not doing so—he would have seen that post-Budget one of the big rating agencies reaffirmed our credit rating with a stable outlook. Actions have been taken to stabilise the UK economy, and that is important.
This is not a debate about the future of the eurozone and whether individual members should be in or out, because that is a matter for the national Governments of those member states, not for us. What we cannot ignore is that the stability of the European economy is a vital factor in determining the level of economic growth in the UK. As I said, 40% of our trade is with Europe. We still export significant amounts to places such as Ireland and, historically, we have exported more to Ireland than we have to Brazil, Russia, India or China combined. It is important to recognise that jobs in all our constituencies are dependent on trade with the European Union and the strength of European economies.
Stewart Hosie (Dundee East) (SNP)
I agree entirely with what the Minister has said about the need for stability, not least for UK recovery. I also welcome what he said about the fiscal compact and the other measures being taken. Does he agree that if there is a legitimate debate in any country about growth versus austerity, it is not—as some more excitable colleagues suggest—any indication of political instability in the eurozone, but merely a debate about the direction of travel that a country’s economy might take?
Mr Stewart Jackson
I thank the Minister for giving way; he is being his normal generous self. Do we not have a responsibility to the millions of young people in southern Europe who are on the edge of penury and economic misery, essentially because of this institutionalised, obdurate approach, principally from the Germans, and the failure to accept that the European Central Bank should be the lender of last resort? This political project, which the euro is, is plunging millions of working people in southern Europe into poverty for the next 10, 15 or 20 years. Surely we have a moral duty not to be complicit.
Mr Hoban
My hon. Friend would, I think, be the first to criticise other member states seeking to lecture us on our economic policy, so we need to be careful not to lecture them either. As I said, there is the political will in the eurozone to keep the euro, and its actions are consistent with that. Whether through closer fiscal integration or increased firepower for the European stability mechanism, those signs are there. The fiscal compact is a significant step towards closer fiscal integration.
Mr Nigel Dodds (Belfast North) (DUP)
The Minister talks about the political will in Europe to continue with the euro, but one wonders about the popular will among the peoples of Europe. He knows that the Irish Republic will shortly hold a referendum on these measures. Does he welcome that and would he encourage other countries to go to their people and seek their views, as opposed to the consensus among the political elites?
Mr Hoban
Different member states have different constitutional requirements and different histories on the use of referendums, so it is not necessarily appropriate for a politician here in Westminster to lecture others on how to ratify treaty changes.
Before I took the intervention from the hon. Member for Blackley and Broughton (Graham Stringer), who has now disappeared, I was talking about how the UK fits into the economic governance measures. We will present the convergence programme to the Commission after the Budget has been presented to Parliament—the process we are going through at the moment. The EU, alongside other international institutions such as the OECD and the International Monetary Fund, can comment on the Budget, but, crucially, we are under no obligation to take action. It is up to the Government, not Brussels, to decide what action to take in the UK.
Of course, as the euro area moves towards closer fiscal integration, we must remain vigilant to protect the UK’s interests. Where matters are rightly for discussion or agreement by all 27 member states—for example, on the single market or financial services—they must be agreed by all 27 member states. In case there is any doubt, I can reassure Members that the UK remains at the heart of the EU’s economic debate. It is because of the Prime Minister’s recent letter with 11 other Heads of State or Government ahead of the March European Council that the Council conclusions were agreed with a commitment to ambitious structural reforms at the EU level. That included concrete Council conclusions on strengthening the single market and its governance; completing the digital single market by 2015; making further progress in reducing administrative burdens; and boosting trade by removing trade barriers and ensuring better market access and investment conditions.
The Government will push for even more ambition, however, because a return to sustainable growth is the only way for EU member states to pay down their debts and exit the current crisis. It is essential that the Commission uses EU-level policy levers fully to support growth, but member states must continue to take tough decisions to prioritise the most growth-enhancing reforms, matching the kind of ambition that the Government have demonstrated since coming to office, including in our most recent Budget. The Budget information we are providing to the Commission in the convergence programme is part of the European semester process, now in its second year, and will be something that the Commission will look at.
Mr Redwood
Does the Minister think that, when the Commission reviews the British Government’s homework, it will say that we need to go further and faster with the cuts or endorse the Government’s programme?
Mr Hoban
I do not wish to pre-empt the Commission’s conclusion—it would be wrong to do so—but when other international organisations have looked at the Budget and the Government’s path to fiscal reform, they have clearly endorsed keeping to the path and sticking to the course. That is important. It has meant that we have retained the confidence of international markets, and interest rates are low as a consequence, which is to the benefit of households and businesses. That is vital to the programme of continued economic reform in the UK.
It is important that we discuss these matters with international partners and have a debate about economic policy in Europe, but at home we have to stick to the path required to deliver the necessary reforms. The Budget builds on the Government’s ambition to create a stable and prosperous economy, it shows our commitment to fiscal consolidation and economic growth, and, along with the OBR’s forecast, forms the basis of the UK’s convergence programme. We are taking the right path, and I hope that—
Kate Hoey
I want to be clear in my own mind, because obviously this is important. If the House was to say no to this tonight and say, “Actually, we don’t think it’s got anything to do with the Commission what we are doing in our independent country. We’re not part of the eurozone,” what would be the repercussions? What would it matter?
Mr Hoban
No, I will allow the hon. Gentleman to make his own contribution in his distinctive style, and doubtless I will have a chance to wind up and respond to the points made. However, I have gone on for nearly 30 minutes, and other hon. Members want to take part. I will now allow him to do so.
Mr David Nuttall (Bury North) (Con)
As always, it is a great pleasure to follow the hon. Member for Luton North (Kelvin Hopkins). He referred to the fact that only a few Conservative Members voted with the then Labour Opposition on the Maastricht treaty—I rather suspect that I may have been one of them at that time.
May I correct the hon. Gentleman on one matter, however? He referred to our sending the Red Book. I wish that it were so, but we are not sending the Red Book; instead we are sending the 210 pages of the “2011-12 Convergence Programme for the United Kingdom, submitted in line with the Stability and Growth Pact”. It is a specially produced document. As last year, I oppose the submission of this convergence document to the European Union.
No doubt by contrast to the previous speaker, I entirely accept that the Government are pursuing a sensible economic policy that is designed to enable this country to start to live within its means once more. Of course there is a debate to be had in the House about whether taxation is at the right level in certain areas or whether public expenditure should be reduced further and faster, but those matters are not what this debate is about. It is specifically about whether the Government assessment of our economic position should be approved
“for the purposes of section 5 of the European Communities (Amendment) Act 1993”,
which requires this country to submit an assessment every year of how well we are progressing on convergence. I object to that, as, I suspect, do many millions of my fellow Britons.
I wish to raise three questions about this convergence. First, what are we supposed to be converging with? Is it the eurozone? It probably is, and I certainly suspect that that is what the Eurocrats want us to do, but why on earth would anyone want to converge with the eurozone at present? It has a failing currency and is based on a failed idea that is continuing to survive in its current form only thanks to bail-out after bail-out and the failure of European leaders in Brussels to wake up and accept the reality that, as any sensible independent commentator can see, it is folly to try to tie together the economies of different countries with such widely divergent characteristics. Such a plan is doomed to fail.
Secondly, who are we supposed to be converging with? Surely not the struggling economies of southern Europe. Things are still going very badly wrong across the eurozone, as we saw only yesterday with the collapse of the Dutch Government because of the fall-out from the eurozone crisis. In addition, there are the economic data: first-quarter GDP shrank by a further 0.4% in Spain, and the eurozone’s own composite purchasing managers index—a useful measure of progress in the eurozone—has slumped to 47.4 in April, down dramatically from March’s 49.1, and we must note that any index figure of less than 50 means contraction. That collapse was both in services, down from 49.2 to 47.9, and in manufacturing, down from 47.7 to 45.0. Even the mighty German economy is being affected by the struggling eurozone. Its overall purchasing managers index figure is down to 50.9, with even German manufacturing at a 33-month low of 46.3. It is clear, therefore, that despite all the bail-outs and the firewalls and the new IMF fund that has just been created, the eurozone remains mired in deep crisis, and I submit that we do not want to converge with it.
Thirdly—and perhaps most importantly—why are we converging? Has anybody bothered to ask the British people if they want to be converging with the countries of the eurozone? We ought to be pursuing the policies that are right for this country, regardless of what the unelected bureaucrats in Brussels think.
Mr Nuttall
I am most grateful, as I am sure are all Members, for that confirmation from the Minister. That answer raises the following question, however. No doubt many officials at the Treasury have been engaged in the preparation of this convergence document, spending many hours of precious time and energy on it, but why? What a complete waste of time! As was ascertained last year, anybody who is interested in this information could glean all of it from the internet, without any need to move any paper about. This is a complete, gigantic waste of time. It is a giant, paper-shuffling exercise.