Banking Reform

Matt Hancock Excerpts

Monday 29th November 2010 Commons Chamber

[Mel Stride (Central Devon) (Con)]

I rise to speak against the motion, not least because of the argument made by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) that implicit in the motion is the suggestion that the Government have done nothing to avert a future banking crisis. I also believe that the motion is too prescriptive at a time when these matters are being considered in detail, not least through the Sir John Vickers commission. This Government set up the commission and released its issues paper as recently as last September.

Huge complexity, tensions, conflicts and dangers are inherent in the development and implementation of policies that are designed to stabilise the banks. Many hon. Members have spoken about banks being too big to fail. It is true that if we have banks that are too big to fail, there is moral hazard in the actions of those who run them, because they always know that the taxpayer is there to back them up if necessary. In such situations, there is an element of unfair competition in that larger banks, backed by the taxpayer, can afford to take larger risks. However, we are also told by many in the industry that size is a function of competitive advantage and that being big is important in global markets.

Many hon. Members have rightly mentioned capital asset ratios. It is important that banks strengthen their balance sheets and that Basel III is implemented, yet there are inherent dangers even in that. PricewaterhouseCoopers has estimated that the implementation of Basel III in the UK will result in £600 billion put into increased capitalisation, which could in turn reduce growth by between 1 and 2%. I therefore welcome the fact that Basel III will not come into full effect until about nine years’ time.

[Matthew Hancock (West Suffolk) (Con)]

Does my hon. Friend think that it is inconsistent to argue both that the banks should lend more to small businesses and that the improvement in capital ratios should be speeded up, as we have heard from some hon. Members?

[Mel Stride]

That is precisely my point. If we speed up the rate at which the banks have to recapitalise, there is a real danger that we will choke off the supply of lending. There is an argument that lending is not just about supply, but about demand. Companies are not taking up many existing bank overdraft facilities, so it is conceivable that there is an issue with demand, as well as with supply.

We have heard a great deal about the importance of united global action. In an internationally competitive world, there is such a thing as regulatory arbitrage. If one jurisdiction adopts a particularly light approach to regulation, vast sums of money can flow in that direction. However, as the Chancellor of the Exchequer has pointed out, our country needs to retain flexibility to reflect the particular conditions in our banking markets.

I agree with many of the comments on the importance of transparency in corporate pay, and in particular bonuses. I accept that because banks can ultimately turn to the state and the taxpayer for support, we have a right to take an interest in that matter and to see that fair dealing prevails. However, I concur with Sir David Walker’s recommendation that we should act in a united way globally so that we do not disadvantage countries that might move on their own.

We have heard very little about taxation on banks. I congratulate the Government on being the first to introduce a permanent tax on banks. However, the arguments about taking out capital that banks might otherwise lend also pertain to that measure. We want the banks to lend more, but the picture is not clear as to why they are not lending, as I alluded to in response to my hon. Friend the Member for West Suffolk (Matthew Hancock). It may not be just a lack of supply owing to recapitalisation and a greater aversion to risk among the banks, but to do with a lack of demand among companies, many of which are focusing on paying down debt, rather than taking on more.

My hon. Friend the Member for Orpington (Joseph Johnson) and the hon. Member for Bassetlaw (John Mann) mentioned competition. This country has a highly concentrated banking sector and it became more concentrated after the financial crisis, when some foreign lenders withdrew and some banks amalgamated. Lloyds and RBS make up 50% of lending to the retail, mortgage and small and medium-sized enterprises sectors. That is a huge degree of concentration. There are high barriers to entry to banking, not least the very regulation that we are discussing. Over the past century, the only new high street bank, disregarding demutualisations, has been Metro Bank, which was created last year. On the other hand, Australia and Canada have highly concentrated banking sectors and seem to have been spared the worst of the financial crisis.

I welcome the Government’s approach to Basel III and their setting up of the Financial Policy Committee, along with its oversight role in relation to the Bank of England and the Financial Services Authority. I particularly welcome the setting up of the Independent Commission on Banking under Sir John Vickers, which has been welcomed broadly by business, including in a recent speech by Richard Lambert, the director general of the CBI. I welcome some of the approaches that the Government are taking to encourage equity finance to increase above the current level of 1 or 2%.

I fear that stalking the perimeters of the debate on the Government side and perhaps at the heart of the debate on the Opposition side is the idea of bashing bankers and of revenge. The hon. Member for Streatham (Mr Umunna), who I think is no longer in the Chamber, denied that that was what he said. However, when he was speaking, I jotted down his reference to bankers being “to blame”. That is the kind of populism that we must get away from; emotionalism must not triumph over the rational when we consider such issues.

This is a highly important sector in which we have a world-leading position and we must retain that. Protectionism, trade imbalances and exchange rates are threats, but I argue that we must not lose momentum on banking reform, particularly in countries that have not been as swept up in the crisis as we have, for what has bitten us may yet come round to bite them.

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[Matthew Hancock (West Suffolk) (Con)]

I want to speak briefly at the end of what has been a very interesting and informative debate, which I commend the Backbench Business Committee on securing.

I welcome some of the measures that the Government have already taken, so in the light of this debate, I hope that the motion, which states that the Government have taken no action, will not be pressed to a vote. Many Members have accepted that the measures on tax, including a permanent tax on banks, the Vickers review into banking structures, the international push for transparency and the action taken to bring banks together to work on bonuses show that a strong work programme is in place already.

[Mr Meacher]

I do not want to take up time, because I have a couple of minutes at the end of the debate, but the hon. Gentleman picks up on a point I was going to raise. I did not say that no action has been taken. My motion states that

“no action has so far been taken which would prevent a recurrence of the financial crash”.

That is a very different proposition.

[Matthew Hancock]

I thank the right hon. Gentleman for that intervention, because it brings me precisely to the final thing that the Government have already proposed, and which I think is central to preventing a recurrence of the financial crash: the decision to move the powers for prudential regulation to the Bank of England and to strengthen those powers.

Having quickly welcomed the action already taken, I want to concentrate on prudential regulation. The removal of powers of prudential regulation in 1997 was central to many of the things that Members on both sides of the House have talked about. The hon. Member for Islwyn (Chris Evans), who is not in his place, spoke passionately about how his managers were telling him to lend more no matter what the customer needed. That was part of the rapid expansion of banks’ balance sheets, because there was no prudential regulation at the top of the size of those balance sheets. We also heard, from Government Members, about the rapid, uncontrolled run-up in balance sheets.

The idea of prudential regulation and having an institution exercising judgment, instead of just lots more rules-based regulation, has come of age. After all, the system before 1997, although imperfect, had prevented a run on any bank in the UK for 140 years, so it deserves some credit, and it deserves studying. So why would more discretion and judgment based in strong institutions work better than more rules? There are three key reasons. The first, as we have heard in many contributions, is that although rules can be set down in statute, statute can take a long time to change, whereas bankers can change and adapt very quickly. We have heard a lot this evening about regulatory arbitrage—another example of how financial institutions will change quickly to make the most out of whatever rules have been put in place on the ground. But the system cannot then adapt quickly.

Secondly and crucially, the system cannot adapt to innovations. We have seen massive financial innovation, especially with the development of computers over the past 30 years. However, to blame that innovation itself for the mess we are in ignores the fact that it was the lack of regulations—as my hon. Friend the Member for Warrington South (David Mowat) pointed out so eloquently, regulation is crucial to a functioning market economy—around these new developments and the attempt to regulate through explicit and specific rules, rather than the exercise of judgment, that was the problem.

[Stephen Barclay]

Is not one issue that mitigates the need for specific rules the regulator’s 11 principles, which act a bit like the 10 commandments? For example: “Principle 1: you must act with integrity. Principle 11: you must be open with the regulator. Principle 3: you must have adequate risk management.” It is inconceivable, given that those rules have legal force, that some of those catch-all principles could not be used in enforcement.

[Matthew Hancock]

They were not used, and that is the problem. A massive, heavy and expanding rulebook distracted the attention of regulators away from the big picture.

My third point about why discretion rather than rules is the best way for the future concerns the importance of the macro-economy, because we cannot separate monetary policy from banking policy. The size of banks’ balance sheets is crucial to regulating the supply of money in the economy. Having counter-cyclical rules rather than pro-cyclical capital rules, as we had under Basel II, is crucial. The exercise of judgment over a bank’s balance sheet is best done in the same place as the exercise of judgment over the macro-economy. Bringing those two things back together in one institution—the Bank of England—is a better long-term way of trying to wrestle with such difficult judgments than having them in separate organisations, which, as we heard in an earlier, eloquent speech, ended with the tripartite system, in which nobody was in charge.

[David Rutley (Macclesfield) (Con)]

I do not know whether my hon. Friend is aware of this, but last week the deputy Governor of the Bank of England appeared before the Treasury Committee and said that he felt that the new twin peaks approach would be a much better model. He felt that the advantage was that it would remove the problems of underlap that were so obvious in the previous system. Whereas there might be some overlap under the current proposal, that has to be much preferable to the previous arrangements.

[Matthew Hancock]

That is a valid and important point. Central to that point is the judgment of people who look forward and have a broad view, looking after the health not only of the banking system, but of the macro-economy, while also having the ability to change the way they regulate according to changes in the economy, so as to take into account new developments, which is critical. Far from being the simple renaming of the institutions, bringing together macro-prudential regulation with regulation of the economy and monetary policy more broadly is central to restoring the ability to prevent the build-up of credit, as happened over the past 15 years.

[Andrew Bridgen]

Does my hon. Friend agree that it is better to have a regulator who is fleet of foot than a clunking fist?

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[Matthew Hancock]

In my experience it is always better to be anything than a clunking fist.

I will end by saying this. We do not know what the future holds. We know that regulation is not perfect. It is therefore far better to have one person and an institution in charge of the regulatory structure who can exercise judgment to the best of their ability than it is to try to write a rulebook for a perfect system that we know we will never create. That is why I think that the Government have already put forward such a critical change to our financial architecture—a change that I hope will be accepted by the Opposition and which will form the basis of the good economic governance of our country for years to come.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call Mr Morris. Are you going to be very brief?

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[Chris Leslie]

It is difficult for the hon. Gentleman to criticise the previous Government, when they put the statute in place ready to be triggered by the present Government. It is baffling to my constituents and to his that we cannot allow them to see the simple figure of how many multi-millionaire bankers there are. I am not suggesting that we reveal their names, just the number involved.

[Matthew Hancock]

rose—

[Chris Leslie]

I am hoping that the hon. Gentleman is going to concede that that needs to happen.

[Matthew Hancock]

The hon. Gentleman is making an argument for rejecting the Walker review. I was not in the House during the last Parliament. Could he just tell us who commissioned the Walker review?

[Chris Leslie]

I am not making an argument for rejecting the Walker review. It recommended the disclosure of the numbers, but it is true that Walker has since changed his tune. The reliance on what he calls “regulatory arbitrage”, and the suggestion that if we were to make that change here in the UK alone, we would suddenly see an exodus of the banking community, are absolutely fallacious arguments. We have a responsibility to show a lead, and surely the Government should be able to do that. It would be invidious if that were not the case.

In the short time available to me, I also want to walk through some of the other proposed changes that hon. Members mentioned. They raised issues about proprietary trading, and there are even more Government Members who are in favour of the Glass-Steagall split between investment and retail banking. There has been an interesting consensus on that. That might not necessarily be the right thing to do, but it is certainly worth consideration by the Vickers commission.

The structure of the sector has also been mentioned, as has the question of whether we need to revisit the issue of competition. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) asked how we could remove some of the constraints on mutuals and credit unions, and on others entering the sector, given that the barriers to new entrants are too high. Indeed, I note the very thoughtful speech from the hon. Member for South Northamptonshire (Andrea Leadsom), who mentioned a number of interesting ideas about how reforms might take place. I was quite taken by her suggestion about consumers’ current account numbers being portable. Other interesting suggestions were also made.

Basel III and the question of cushions and reserves are clearly important for guarding against failure and reducing taxpayer liability, but do we need to pay similar attention to liquidity, as the hon. Member for Bromsgrove (Sajid Javid) and my hon. Friend the Member for Wirral South (Alison McGovern) suggested? Should certain institutions have greater cushions and reserves than others? Perhaps that is the subject for a more sophisticated debate at another time.

Other components have to be addressed as well, including the financial capability of consumers and consumer responsibility. Yes, consumers have a right to know more about the products and companies involved, but perhaps it is also important to have a debate about the responsibilities of consumers. That needs to be acknowledged. We need to revisit the question of fairness for the taxpayer, and for public service users, indirectly, as well. Unfortunately, we have heard too much back-pedalling on the banking levy and on the role that the banks need to play in repairing the public balance sheet—[Interruption.] The Minister suggests that he is not back-pedalling, but from what we read—albeit in the newspapers—it sounds as though the Government might reduce the percentages that they want to implement, as announced in the Budget, if they are going to stay within the proposed 0.04% in year one and 0.07% thereafter. I would be more than happy to give way to the Minister on that specific point if he wants to clarify that position once and for all. But perhaps he will keep that for another day. He has also been back-pedalling on net lending targets of the business, although that was in the coalition agreement.

It is important that we have these debates. They show that there is a thirst for democratic accountability on financial services policy. Perhaps one of the lessons that we learn is that simply delegating many of these issues to European institutions or to the regulators is inadequate. There is a democratic deficit, and Parliament has a role to play. Hon. Members who try to find out information on Financial Services Authority reforms and regulations sometimes struggle to get the necessary documentation from the Vote Office, which is not good enough. We need to recognise our role as legislators, because our constituents are watching how we behave. They are watching how we set policy, and they expect us to do that. We should not be blown around entirely by the regulators, by Europe and by the markets. Politicians need to lead, and Ministers need to show greater leadership, and I hope that the Government will do that.

Financial Assistance (Ireland)

Matt Hancock Excerpts

Monday 22nd November 2010 Commons Chamber

[Mr Osborne]

As I say, I do not think that it is sensible for me to speculate about any other country in Europe or anywhere else in the world in the current environment. I would make two observations. One is that the IMF is well resourced and is now on the road to reform, so that it properly reflects the balance of economic power in the world. It is therefore well placed to deal with whatever situation emerges, in whatever part of the world. As for the eurozone stability facility, that has to be a decision for members of the eurozone. They contribute to the facility, and they have set aside a considerable sum of money—€440 billion.

[Matthew Hancock (West Suffolk) (Con)]

Is not the lesson from what is happening in Ireland clear: that countries need to get their own houses in order? Would it not be utter folly for us to take as the lesson that we should divert from the path of getting our house in order here in the UK?

[Mr Osborne]

I agree with my hon. Friend. I make the point again that if we followed the prescription advanced by the Opposition—they suggest that tomorrow I should get up and announce a brand-new Budget, and engage in fiscal loosening at a time when we have the largest budget deficit in the G20 and at a time of heightened concern about sovereign debt—that would be a completely irresponsible path to take.

Finance Ministers’ Meeting (Ireland)

Matt Hancock Excerpts

Wednesday 17th November 2010 Commons Chamber

[Mr Hoban]

We have taken action in the UK to tackle our fiscal position to avoid a sovereign debt crisis. [Interruption.] Opposition Members need to recognise that the problems facing Ireland stem from a banking crisis—the banking sector was poorly regulated. We are learning lessons from that in the UK, but it is very clear that because we are outside the euro we have the flexibility to engage in economic policy by setting interest rates that meet our economic needs, and we have the flexibility that our exchange rate brings in stimulating exports. We are in a much better position as a consequence of being outside the euro.

[Matthew Hancock (West Suffolk) (Con)]

Would it not be a grave error if we took from this episode the lesson that we should weaken our resolve to deal with our debts and keep our house in order?

[Mr Hoban]

My hon. Friend is absolutely right. It is noteworthy that Opposition Members have made yet another call for us to put off making difficult decisions. We see in Ireland what will happen if we do not make difficult decisions now and sovereign debt ratings come under pressure.

Terrorist Asset-Freezing etc. Bill [Lords]

Matt Hancock Excerpts

Monday 15th November 2010 Commons Chamber

[Matthew Hancock (West Suffolk) (Con)]

I think that hon. Members on both sides of the House recognise the importance of the Bill, of implementing it and of a legislative structure for freezing terrorist assets. The ministerial statement says that 205 people currently have assets frozen up to a value of £290,000. Most importantly, the measure is part of a global system of freezing assets, which is crucial in this interconnected world.

I do not believe that I need to declare an interest, but I have a history in this area because I worked in the Bank of England on the freezing of assets under the jurisdiction of EC and UN orders. It is surprising that we are talking about this in November 2010, because it has been clear for a while that we need substantive legislation on the statute book to provide a framework for the freezing of terrorist assets. I am glad to be speaking in this debate, but it is a shame that that has not already happened.

I am glad that the Bill has all-party support, but I was surprised by the comment that it is being rushed through. There has been widespread consultation and the Bill has been through the full process in the other place, which included a day of debate on the Floor of the House. It is now going through the full process in this place. The suggestion that it is being rushed through is odd. What is more, it was clear earlier this year, during the previous Session, that there would be a Bill to put asset freezing on a permanent basis. The shadow Minister said that if the Labour party had won the general election, it would have introduced such a Bill.

The system that is now in place is based on UN resolutions 1267 in 1998, 1333, which specifically targeted Osama bin Laden, and 1373, which went through very quickly after the 9/11attacks. As those resolutions were being passed, it was clear that the structure of terrorist asset freezing was becoming more comprehensive, and more important to our national armoury against terrorism. That was supported by terrorism orders in 2001, 2006 and 2009, so the process has been ongoing for many years. In 2002, New Zealand put on its statute book permanent legislation covering a formal structure, which was based on modern statutes for dealing with terrorist financing. Australia has introduced similar legislation.

Over the past decade, we have had many opportunities in terrorism and crime Acts to put such legislation on the statute book. The Ahmed case was started in 2008 on the back of 2006 terrorism orders. It is surprising that anyone can say that the Bill is being rushed through. What is more, for the Opposition to say that it is too soon to put it on the statute book because we need first to know the conclusions of the Home Office’s broader review does not take into account the importance of doing so by the end of December, when the temporary measures will lapse, and we will be back in the same position as when the Supreme Court struck down the previous legislation. It is at least timely, and perhaps too late to be standing here discussing the matter.

A broader question arises about the Supreme Court’s action. It concluded that the United Nations Act 1946 did not intend to support actions on terrorist financing, such as were then carried out under UN and EC structures. We all recognise that it was appropriate for the Supreme Court to give the then Government the ability to put through temporary legislation to ensure that assets were not unfrozen. It is important to note that because of the widespread public policy need for such freezing the Supreme Court recognised the importance of continuing to freeze assets, even while the formal legislative structure was being put in place.

My final question concerns the standard of proof. I am particularly interested in the extent of cross-party support for changes to the standard of proof. I have previously argued that the balance between civil liberties and protection against terrorism in this country has swung too far in favour of autocracy and away from civil liberties. I am pleased to see the new threshold of over 30 days of reasonable belief, rather than reasonable suspicion. I am also pleased that an appeal process is being put in place. However, I was surprised to hear the shadow Minister say that that may not have the support of the Opposition and that they need clarification of the position. The Home Office’s review will look into a much wider array of issues, including control orders, CCTV, border controls and indeed terrorist assets, and I hope that it will ensure that we can go forward and that the freezing of assets will continue to receive cross-party support.

[Mr Hanson]

For the sake of clarification, my right hon. Friend the Member for Morley and Outwood (Ed Balls) will look closely at those issues. As a Government, we obviously had in place the section 44 regime on control orders and CCTV, and we were introducing legislation. We will examine all those matters, but the balance between civil liberties and the protection of individuals, and securing action against terrorists must be right. That is the balance that I hope the review will seek.

[Matthew Hancock]

I am sure that the review will seek that balance. My question is whether the Opposition will have a position when the review comes out. I am glad that the Opposition believe that the measures are proportionate, and that at this stage there is cross-party agreement.

That brings me to my conclusion that far from being rushed through, the Bill is timely, and far from its being introduced too soon, given that a review is under way, it is important that it is enacted within the timetable, no matter the Macdonald review’s timetable. No doubt it will suggest amendments to many pieces of legislation from the previous decade that have been too autocratic and have not sufficiently respected civil liberties, but we must ensure that any amendments are part of that much bigger picture, rather than criticising the timing of this important legislation, which I would argue is about 10 years too late.

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[Dr Julian Huppert (Cambridge) (LD)]

It is a great pleasure to follow the right hon. Member for Leicester East (Keith Vaz), who chairs the Home Affairs Committee, on which I also have the privilege to serve. He did indeed visit my constituency of Cambridge this morning and he will doubtless have understood something of the expertise of some of my residents and constituents. He did not on this occasion meet David Howarth—he will be known to most hon. Members as a great constituency MP and an expert on these issues—who worked hard on this legislation and I pay tribute to him for what he did.

The aim of the new revised Bill is clear, and I suspect that no Member would have any problem with it. We need to control terrorism and we need to control the flow of funds for terrorism. We support, of course, UN Security Council resolutions, particularly resolution 1373, although others are also relevant. We all share those aims, so the question is how best to go about achieving them.

Earlier this year, the order was held to be ultra vires in respect of the United Nations Act 1946. Lord Phillips used strong phraseology when he said:

“The draconian nature of the regime imposed under these asset-freezing Orders can hardly be overstated.”

I suggest to right hon. and hon. Members that what he meant was not that these were draconian because they were orders, but that they were draconian because of their content. So we need to be careful before reintroducing measures that are very similar to those orders.

There was a Terrorist Asset-Freezing (Temporary Provisions) Act 2010. I shall not enter into the argument over whether this particular Bill is being rushed through, but the temporary one clearly was in an effort to catch up with what happens when Government do not take account of legal processes. This Bill is better than the previous temporary one. I have no hesitation whatever in saying that. I am grateful that a number of amendments were accepted in the other place, which have significantly improved the Bill.

I nevertheless have a number of concerns about the Bill, and these are echoed by organisations that are familiar to us all: Liberty, Justice, the Equality and Human Rights Commission and the Joint Committee on Human Rights, on which I also have the pleasure to serve. I urge Members to look at our short and simple report, which makes a number of clear suggestions and proposes amendments, which I, if nobody else, will table. The key issue is that we must not treat those people whose assets we freeze as effectively “prisoners of the state”, as Lord Hope of Craighead said. That is not the correct intention; we should be careful about that.

I do not wish to detain the House for long, but I shall speak briefly about the amendments that I wish to table. I hope that the Minister will be able to respond to many of the issues tonight, which will save time later on in the proceedings. Before I do so, I want to point out a few areas that I believe are missing from the Bill, which is a shame. I would not go so far as to mention the whole counter-terror review, but the Bill does not deal with the parallel asset-freezing powers in the Anti-terrorism, Crime and Security Act 2001 or the terrorist financing provisions of the Terrorism Act 2000—despite the fact that the Privy Council recommended in 2003 that these be rationalised. Surely it makes sense to bring legislation together and make it clearer.

I am also concerned that the Bill fails to deal with those designated by the European Union. Under this legislation, such people have no right to appeal or review a decision to put them on the list. I find that disappointing. I am sure that some hon. Members, particularly Conservative Members, would naturally be wary of any instruction from the EU. In this case, although not in many others, I agree with them. We should find a way to safeguard British citizens from this process and provide them with some form of appeal or review. I believe that amending provisions could be added to clauses 26 and 27.

There is a fundamental issue at the heart of the matter, which I do not believe has been properly discussed—at least not in this House. It comes down to who should decide whose assets should be frozen. Should it be the Government or the Treasury, as in the Bill; or should it be a court? Do we want punishments—that is what these provisions amount to—to be dealt with by Government or by the judiciary? The appeals process is, I acknowledge, a significant improvement on what obtained before.

[Matthew Hancock]

I am trying to follow the hon. Member’s argument, but does not the concept of a judicial implementation of asset-freezing contradict the fact that this is a global system? Whether it is done through the EU or the UN, the designation is done at that global level and then executed in the UK. The decision is not made in the UK, so while the right of appeal is important, it is crucial that the Executive can freeze assets rapidly in response to a global proposition.

[Dr Huppert]

I am afraid that the hon. Gentleman is not correct about that. There are cases where the Treasury designates and it is that act of designation that counts. The provisions could be changed simply—I will propose the wording later—so that the Treasury requests the courts to designate; there would be nothing amiss in so doing.

The present situation is that there is a freeze and then there is an appeal. One problem with that cycle—not to mention the problem of where the power lies—is that the onus is on the affected person to find a way to make an appeal. They will have to get legal advice first and get clearance to secure the funds in order to pay for such advice. I hope that we will have absolute clarity from the Minister on whether they will always be able to get access to the funds necessary to clear their name. They will then have to apply and have their case heard. As I will explain in more detail later, they may not even know the case against them.

That highlights the real questions over who should make these judgments. I think it should be a court that determines the freeze and that it should be done ex parte. I absolutely accept that the courts should be able to go through the process without warning the accused in advance, because if they can simply move the money or assets somewhere else, it will not work, but the courts need to be involved and the people accused must be given a chance to make their case fairly.

I would also like to deal with the issue of standards of proof. I have put the issue to both Front-Bench teams and I have asked a number of colleagues—legal and otherwise—what the standard of proof should be before we take an action like freezing someone’s assets. Should it be the criminal standard of proof or should it be the civil standard? I have been fascinated by the number of people who think that they are somewhat illiberal in believing that it should be a bit below the criminal level. I have heard that from a number of colleagues.

Should things be done separately? Should we require people to have been convicted, tried or just arrested before we apply the provisions? When I asked him earlier, the Minister referred to the problem of arresting non-UK people, and I accept his point, which was well made. I nevertheless seek an assurance that the people involved will at least have been through a process of arrest—for people in the UK, where that is appropriate—and that at least consideration will have been given to taking the person through the full legal processes of trial and conviction. Security Council resolution 1373, with which we are trying to comply, requires us to deal with those who

“commit or attempt to commit terrorist acts”.

It does not say anything about those we “suspect” of committing such acts, so the Bill goes beyond what is required by the Security Council.

I understand the argument for having a slightly lower standard for the interim powers, although I would ask why it was decided to go for 30 days and whether “reasonably suspect” is the appropriate provision. I am very concerned, however, about the idea of “reasonable belief” for a final designation. That means treating people below the civil standard, which is essentially a 50:50. We are saying that it is just as likely to be one way as the other. That is the civil test. The Government are seeking to freeze people’s assets in circumstances where they believe that it is more likely than not that those people were not involved in terrorist activities. I find that alarming. If we think people were probably not involved, we should not freeze their assets. In the Government’s defence, I have to say that the Opposition seem to think that the degree of involvement in terrorist activities could be even less before these provisions are applied, which I find significantly worse.

These are draconian powers and we should be sure, to a reasonably high standard of proof—I could even accept a balance of probabilities—that the people are likely to have been involved with terrorist offences. I am also concerned about what is meant by a “terrorist offence”. Many concerns have arisen over a number of years where actions have been described inappropriately as terrorist offences. I am sure that Members are aware of the figures relating to section 44 of the Terrorism Act 2009. According to the latest figure that I have seen, 101,248 people were stopped and searched and none was arrested for terrorism-related offences. Does that constitute involvement in terrorism? How do we define the term?

[Dr Huppert]

I am not entirely sure how that is relevant to what I was saying, but I do indeed find it astonishing. I suspect that the public, if they thought about the matter, would imagine very large sums, although that might be a result of their having watched too many James Bond films. I certainly find it surprising that we are concerned with the net sum of roughly a quarter of a million pounds.

[Matthew Hancock]

I understand the figure of just under £290,000 to be the amount that is currently frozen, rather than the amount that has been frozen over time. Past figures have been much higher.

[Dr Huppert]

Indeed, but I still consider it to be a relatively small amount. It is certainly a smaller amount than I would have expected if I had not seen any of the data.

Let me return to the question of what constitutes a terrorist offence. We know of specific instances of arrests using anti-terrorism powers that have been deeply inappropriate. I am sure that Members will recall the case of Walter Wolfgang, who was ejected from a Labour party conference and arrested—under anti-terror legislation—when he tried to return. I do not think that we should pass Bills allowing us to deal in such a way with people like that—or indeed Iceland, which was also subject to anti-terror rules, or the BBC photographer Jeff Overs, who was stopped while taking photographs of St Paul’s Cathedral in November 2009 and arrested under the same rules. Surely that is not what the Bill ought to be about.

I should welcome a stricter definition of terror offences from the Minister. As ever, we are seeing an expansion of the present definition. Another recent example, which is highly topical at present, is that of a gentleman called Paul Chambers, who was recently convicted of sending a menacing tweet that threatened a terrorist activity. It read:

“Crap! Robin Hood airport is closed. You've got a week and a bit to get your shit together otherwise I'm blowing the airport sky high!”

I should add at this point, for reasons of which some Members may be aware, that I am Spartacus.

The tweet led to a conviction under section 127 of the Communications Act 2003 for

“Improper use of public electronic communications network”.

Surely that is not appropriate. The tweet did not actually threaten terrorist activity. It led to legal fees of £3,000 and the loss of the gentleman’s job, which is utterly ridiculous. We need to be careful about allowing these powers to expand and take in more cases. I need hardly remind Members that Jean Charles de Menezes was also “reasonably believed” to have been involved in terrorist activity.

We must also be clear about the reasons for which someone’s assets are being frozen. I fear that the Bill currently allows far too little information to be given to individuals to enable them to defend themselves. I would propose an amendment suggesting that as much information as possible must be given to the relevant person. We must bear in mind the possible public interest in non-disclosure, but, except when it simply is not possible, the balance should be in favour of openness, so that people can genuinely defend themselves.

Similarly, we should require a fair trial and a fair hearing. I would propose an amendment making it clear that the accused must have enough information to be able to instruct the defence. That is an essential part of a fair trial. The report from the Joint Committee on Human Rights contains a detailed case analysis, drawing a comparison with control orders. Many of us are concerned about the impact of excessive powers when victims have had no opportunity to defend themselves properly, and advocates in closed courts do not enable them to know what is going on.

The Government rely on a very thin distinction to avoid some of the legal hearings that have resulted from control orders. They argue that judges have commented that control orders do not apply to terrorist asset-freezing. I do not buy such arguments. I urge the Government to adjust the Bill now so that it works, rather than doing what the last Government did so often: waiting until an expensive court case arose, then being forced yet again to amend legislation in an ongoing cycle.

The role of Parliament is important. I am pleased that reports are to be made, but I believe that they should be made to Parliament rather than to Government. We have a responsibility to the people to verify that the powers are being used. The independent reviewer should be confirmed by Parliament, and should report to Parliament. It should not be up to the Treasury to vet reports before passing them to us; that should be our responsibility.

As I said to the Minister earlier, I am concerned about the licences that are dealt with in clause 17. It should be made absolutely clear that the Government will ensure that there are sufficient funds for reasonable living. As far as I can see, no such requirement currently exists. According to Lord Wallace of Tankerness, there is a “general presumption” that more is needed.

I am also concerned about the level of information that is required by clause 20. It may be very onerous to provide that level of information if the Treasury chooses to make it so. In the case of Ahmed, the Supreme Court noted the extraordinary burden that the requirement could place on a designated person. For example, the wife of one of the designated persons was

“required to report to the Treasury on every item of expenditure, however small, including expenditure by her children”.

Is that really what we want, and what we expect from the Bill? Designated persons will have limited funds anyway. Do we actually want the Treasury to go through itemised lists of toiletries, sweets, school books and bus tickets? The Bill should make clear provision for no account to be taken of very small amounts.

Clause 22 raises the issue of self-incrimination. Article 6 of the European convention on human rights includes a privilege against it, but the Bill does not. According to the Government in the other place,

“the right against self-incrimination would form a reasonable excuse”—[Official Report, House of Lords, 6 October 2010; Vol. 721, c. 197.]

It would form a reasonable excuse, that is, to refuse to comply with a request for such information in clause 22. I think that that should be made clear in the Bill. The onus should not be on the accused to make the case after being prosecuted for providing the information.

Another fascinating part of the Bill which I hope can be changed is clause 25(1), which states:

“Nothing done under this Chapter is to be treated as a breach of any restriction imposed by statute or otherwise.”

There are a couple of exceptions, but I find that very concerning. It appears that the Bill is exempt from all rules that might apply to it except the two that are listed in the clause. That might catch, for example, the Human Rights Act. I see nothing in the Bill suggesting that the Act applies to it. Indeed—although I am sure that it would be tested in court—it could be argued that the clause expressly states that the Bill is exempt from the Act’s provisions. I hope that that is not what the Government intend. Similarly, what about common law torts? What about negligence? What about defamation? Nothing in the Bill secures any of those aspects of common law. I hope that the Government will replace section 25(1) with a provision that actually states what they probably intended. At present, it is dangerously unclear.

Asset-freezing is a very strong power, but a very necessary one. Because it is so strong and because it can be so draconian, it must be fair and properly controlled, and it must be applied only to those who are actually involved with terrorist activities.

European Union Economic Governance

Matt Hancock Excerpts

Wednesday 10th November 2010 Commons Chamber

[Chris Leslie]

Indeed. There could be significant direct policy changes as regards transfers of policy and also indirect economic impacts on the UK. We have to see more detail about what will emerge from those who are in the driving seat—unfortunately, that does not seem to be either our Chancellor or our Prime Minister.

[Matthew Hancock (West Suffolk) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I want to make a bit of progress—but it is too tempting.

[Matthew Hancock]

I am extremely grateful. The Minister made a clear statement that this House, under this Government, will retain fiscal sovereignty. Would the hon. Gentleman?

[Chris Leslie]

We take the view, as we always have, that where it was in the British interest to co-operate with our European colleagues, we would do so. The hon. Gentleman’s continuing loyalty to the Chancellor is laudable—he has a record of that—but I am not sure that he has convinced the colleagues on his own side. The coalition remains precarious on Europe, straddling so many major divisions on how to proceed. It is little wonder that the Prime Minister is on the margins of these discussions in Europe when he is buffeted between the margins of his own Government. He is caught somewhere between the pro-European enthusiasms of the Deputy Prime Minister—at least, that used to be his position before the general election, and I am not quite sure what his position is now—and the anti-European Union noises from a sizeable chunk of his party. Will the Prime Minister persuade his colleagues that any treaty should not require a referendum? We shall have to wait and see. Although the Government might be concentrating on papering over the cracks in the coalition, the Opposition will monitor closely the impact of these changes on exports, growth, jobs and the prosperity of this country. Those are the issues that matter to our constituents and they are our priorities.

Comprehensive Spending Review

Matt Hancock Excerpts

Thursday 28th October 2010 Commons Chamber

[Danny Alexander]

The cap that we propose, which will be debated in due course, is nearly £21,000-worth a year of housing benefit. That is more than equivalent to what most working families have to spend on their housing costs.

[Matthew Hancock (West Suffolk) (Con)]

Does the Minister think it fair that his, my and other constituents should pay so that some people can live in houses costing £500, £600 or more a week?

[Danny Alexander]

No, I do not think it is fair.

--- Later in debate ---

[Ms Eagle]

That is not my statement: it is a statement by the Office for Budget Responsibility. It is also the figure that was revealed accidentally the day before the Chancellor’s statement by the Chief Secretary when he was filmed in the back of his car with open documents. It is not my figure. The right hon. Member for Wokingham (Mr Redwood) should remember that the Ministry of Justice is already planning 14,000 redundancies, as we know from a leak, and has set aside—

[Matthew Hancock]

Will the hon. Lady give way?

[Ms Eagle]

No, I shall finish answering the question. The hon. Gentleman can sit down and be patient, and we will see whether I give way to him a little later.

The Ministry of Justice is already planning cuts of 14,000 in front-line staffing. It has also set aside £230 million to pay for the costs of those redundancies. I asked the Chief Secretary what the figure was for the rest of Whitehall. He will know what that figure is, because he will have signed it off. Twice I asked him for that figure, and twice he avoided the question. It does him no credit if, knowing what that figure is, he comes to this House for a debate on the comprehensive spending review but avoids the question of the costs to the public purse of the redundancies that will be directly caused by the statement made by the Chancellor last week. He knows that figure and he should stand up now and give it to the House. Silence is sometimes far more revealing than an answer.

--- Later in debate ---

[Ms Eagle]

The hon. Lady’s intervention was extremely helpful. Of course I have. We have all done a great deal of work on social security reform, and I hope she will be the first to acknowledge some of the progress we made, particularly in helping lone parents into work. Tax credits and all the support we gave on child care were among the measures that were crucial in ensuring that we managed to increase significantly the number of lone parents in work when we were in office. I hope she will be the first to recognise our success in those areas. She should take a close look at the increasing rates of marginal tax that came about because of some of the changes, particularly for lone parents, and the savings made in tax credits, and she should also have a word with her party’s Front-Bench team about their priorities for cuts, given that they are taking away benefits that particularly help women go out to work.

In softening up the country for this age of austerity, Ministers have been anxious to establish some myths, the first of which is that the deficit was a Labour spending choice. We heard a lot of that today from the Chief Secretary to the Treasury. The second myth is that the cuts announced are unavoidable. We need to start with some facts. When the credit crunch struck in 2008, Britain had the second-lowest debt in the G7. We had low interest rates, low inflation and low unemployment. There is nothing reckless about that. Now, however, the Conservative party and the Liberal Democrats are trying to rewrite history.

[Matthew Hancock]

Will the hon. Lady give way?

[Ms Eagle]

No.

Public spending did not cause this deficit—the global financial crisis caused it. A large deficit is what we get when the largest financial crisis since the war hits. When companies’ profits are hit, tax revenues fall.

[Matthew Hancock]

Will the hon. Lady give way?

[Ms Eagle]

I said no.

When families have to work shorter hours, they pay less tax. We took a conscious decision to spend money to keep people in their jobs and homes, and I am proud that we did that. As a result of our action, unemployment was half what it had been in previous recessions and repossession levels were also half what they were in the Tory recession of the 1990s. Some of this help has been cut away in the CSR and, as a result, it is more likely that more people will lose their homes, as unemployment and the cuts begin to bite.

--- Later in debate ---

[Ms Eagle]

There we see it—the old boys’ network writ large. They stick together, don’t they?

[Matthew Hancock]

rose—

[Ms Eagle]

Go on then.

[Hon. Members]

Hooray!

[Matthew Hancock]

I am very grateful to the hon. Lady for plucking up the courage to give way. She said that Britain went into the crisis with the second lowest deficit in the world, but she has now revised that to point out that, actually, it was the second lowest debt in the world. Does not the fact that she and her colleagues muddle up the debt and the deficit show just why we are in this mess?

[Ms Eagle]

Whatever happened to old-fashioned courtesy? The hon. Gentleman should ask himself why I do not want to give way to him when he is so generous and lovely to me when I do.

Money spent on infrastructure investment kept the construction sector going. As we saw from the GDP figures on Wednesday, that is still having a positive effect. The deficit was unavoidable. It was vital to support people and businesses through tough times, but let us be clear about Labour’s spending before the crisis hit. Far from being too high, it was, as the Prime Minister said—I am quoting him directly—“really quite tough”, while the Chancellor was urging us to spend more.

The second myth is that the scale of the cuts is unavoidable. As my right hon. Friend the shadow Chancellor has pointed out, Government propaganda has got it precisely the wrong way round. The fact is that the deficit was unavoidable; it is the June Budget and the Chancellor’s spending review that are a political choice. They are not only avoidable, they are downright dangerous. That is why there was no mention of these supposedly unavoidable cuts in the manifestos of either of the parties now in government when they went to the country. That is why they have no mandate for the cuts policy that they have embarked on since the general election.

Since the election, we have seen the contortions of the Deputy Prime Minister, along with his accomplice in what we now have to call the “quad”, to justify his volte-face. First he told us that he took a call from the Governor of the Bank of England as he stepped into the ministerial Jag, but the Governor begged to differ. Then the Deputy Prime Minister said that Britain was about to become Greece. That is about as close to a myth as you can get, Mr Deputy Speaker. The Government have made their choice, and we on the Opposition Benches will hold them responsible for the social and economic consequences of those choices.

Oral Answers to Questions

Matt Hancock Excerpts

Tuesday 12th October 2010 Commons Chamber

[Mr Speaker]

Order. There is quite a lot of chuntering from sedentary positions, but I want to hear both the questions and the answers.

[Matthew Hancock (West Suffolk) (Con)]

Since the formation of a Government who are determined to deal with the deficit, market interest rates have in some cases halved. What impact does the Chancellor think that has had on both our GDP growth and the interest payments that we have to make on Government debt?

[Mr Osborne]

First, the fall has helped to reduce interest payments, and secondly it has helped many companies during the recovery. It is striking how our market interest rates have fallen since taking the steps that we announced in the Budget. That is not the case in some other countries in Europe that had similar market interest rates to ours at the time of the general election.

Proposed Public Expenditure Cuts

Matt Hancock Excerpts

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

The people who are talking down the British economy are the Opposition. Since the hon. Gentleman mentioned the IMF, let me remind him what it said this weekend:

“Fiscal consolidation remains essential for strong, sustained growth over the medium term.”

[Matthew Hancock (West Suffolk) (Con)]

Since the election, the interest rates on gilts at two and three years—the kind of time periods that people borrow for their mortgages—have halved. Does the Chancellor think that that has anything to do with the new Government getting to grips with the nation’s finances?

[Mr Osborne]

I think it does have something to do with the new Government setting out their plan, and it is easy to see why. We can compare what has happened to market interest rates for the United Kingdom with market interest rates for countries such as Spain, Portugal, Ireland and Greece. At the time of the general election, it was well understood that people in the world were concerned about the record UK budget deficit, the largest in the G20. As a result of the steps that we have taken in the Budget—which we now need to see through in the spending review—we have restored stability to the economy and helped to bring down market interest rates. That would not have happened if Labour had stayed in office.

PAYE Contributions

Matt Hancock Excerpts

Wednesday 8th September 2010 Commons Chamber

[Mr Speaker]

I call Matthew Elliott. [Interruption.] I mean Matthew Hancock. Tax was on my mind.

[Matthew Hancock (West Suffolk) (Con)]

The Minister said that one reason why some payments will have to be so big is that there has not been a reconciliation for two years. Can he explain why moneys were not required back from taxpayers up and down the country last year in the months running up to the general election?

[Mr Gauke]

My blood ran slightly cold for a moment when I thought that the TaxPayers Alliance had managed to get in here, but I know that my hon. Friend is a good representative for taxpayers. As for last year, it is fair to say that the introduction of the computer system was a relevant issue, but none the less the lack of a reconciliation has exacerbated the problem. The fact that nothing was done last year prior to the election has left us with a bigger problem this year. He can draw his own conclusions.

Finance Bill

Matt Hancock Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

If that is the point that the right hon. Gentleman is getting at, I must point out what the OBR made very clear in the Red Book. That point is that it is misleading to make a straight comparison between the growth figures that were projected on the basis of market expectations of interest rates, which were lower as a consequence of the anticipated fiscal tightening that this Government promised to deliver and that we have delivered, and the forecasts that do not take that into account. That is a point that we have gone over a number of times. The OBR said that such comparisons were potentially misleading, so if that idea is what is driving the right hon. Gentleman’s queries, I must point out to him that the OBR would not accept that.

[Matthew Hancock (West Suffolk) (Con)]

Is not one explanation the idea that the OBR came forward with growth forecasts that were reasonable and at least had a hope of being accurate rather than the hopelessly over-optimistic growth forecasts put in place by the previous Government?

[Mr Gauke]

My hon. Friend might well have the answer. One point that we learned from Lord Mandelson in the course of his much-loved memoirs is that the then Chancellor, who is now shadow Chancellor, apparently accused the then Prime Minister of having a “ludicrously over-optimistic” view of what the growth forecasts would be and about

“Britain’s ability to support such a large and expanding deficit.”

That might well be the explanation.

--- Later in debate ---

[Matthew Hancock (West Suffolk) (Con)]

It is an honour to follow the right hon. Member for Birmingham, Hodge Hill (Mr Byrne). Having spoken a couple of times in the debates on this Bill as it has passed through the House, I wanted today to consider the economic evidence. We have heard an awful lot about the importance of what we need to do, and we have heard an awful lot from the Labour party complaining about every measure put forward, but it is also important to consider the economic evidence. Listening to his speech, it struck me that he thinks that nothing that the previous Labour Government did was wrong. It also strikes me that, so long as he and his party continue with that approach, nobody will listen to them when they make other points. It is clear to all of us who went through the election campaign that the previous Government did many things wrong, and a little bit of an apology, or perhaps a suggestion of individual things that went wrong, might be appreciated in this debate.

--- Later in debate ---

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I remind Members that we have to stick to the Bill. We are being dragged off in different directions, so please stick to the Bill. That is what we are debating.

[Matthew Hancock]

I am grateful for the opportunity to pay tribute to the then Chancellor, who expressed his gratitude to the then Opposition Conservative party for the support it gave him during September 2008. That is often forgotten on the Labour Benches.

On the evidence, one of the central questions to which we return time and again in this debate is whether there is a contradiction between dealing with the deficit and getting growth. It is clear that the Labour Front-Bench team think that those two things are entirely in contradiction. However, I want to consider the evidence for whether that is true. We all know that, in the long term, tackling the deficit is unavoidable—occasionally that is even acknowledged by those on the Labour Front Bench. Any child born is born with £23,000 of debt, and under the former Government’s plans, interest payments would have amounted to £70 billion a year, which could otherwise have been spent on important public spending.

There is also a question, in the shorter term, of whether fiscal responsibility can lead to growth. I was interested in this, so I went to look at some of the evidence. There is a very good literature review by Alberto Alesina, who, having described the argument that there is only either fiscal consolidation or growth, wrote that

“the accumulated evidence paints a different picture… Many even sharp reductions of budget deficits have been accompanied and immediately followed by sustained growth… These are the adjustments which have occurred on the spending side and have been large, credible and decisive.”

If the shadow Minister thinks that the Budget was large, credible and decisive, I would be happy to hear from him.

[Mr Byrne]

I understand the debating technique that the hon. Gentleman is adopting—trying to set up a straw man in order to knock it down—but our deficit reduction plan contained £57 billion of decisions relating to fiscal consolidation alongside £22 billion of growth. Fiscal consolidation was not posed as an alternative to growth; actually the two things were seen very much as twins.

[Matthew Hancock]

Unfortunately, those from whom the previous Government had borrowed so much did not see a credible plan from the Labour party. That is why we have had to introduce the emergency Budget, so that we could put that credible plan in place. Since the election, there have been downgrades in the debt of many of our competitors, so it is critical that we have managed to put that triple A rating on to a sustainable basis.

I want to go through three reasons why a fiscal consolidation can lead to growth. The first, of course, concerns interest rates. The long-term interest rates at which many companies around the country borrow—they include those in my constituency, and no doubt those of all other Members—have fallen. In fact, since the election the 10-year rate has fallen from 3.88 to 3.44%, which represents more than a 10% fall in the funding costs of companies up and down the country. Of course, that was not taken into account in the two productions of the Office for Budget Responsibility analysis, which is why a direct comparison of the two is, as stated by Sir Alan Budd, misleading.

[James Wharton (Stockton South) (Con)]

I would like to echo my hon. Friend’s comments about interest rates, but also add that low interest rates have a beneficial impact not only on our economy and businesses, but on the very individuals and families whom the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) talked so much about. The most disadvantaged in our society will benefit most from the positive outcomes of the fiscal and economic policy approach that we have taken.

[Matthew Hancock]

My hon. Friend is getting a reputation for making extremely good interventions, and that was one of them. Fiscal consolidation also means that interest rates can be held lower for longer by the independent Bank of England, which is a second important channel through which economic growth can be supported, and not opposed, by fiscal consolidation.

[Mr Byrne]

I am following the hon. Gentleman’s argument with great interest. He will have worked at the Bank of England for long enough to be able to read bond yields. Like me, he will have noticed that they were actually coming down from late 2008, down to a low point in February, not least because there was a flight to safety in the European bond markets. As people began to worry about what was going on in the eurozone, they chose to transfer to safer assets, including UK gilts. That was because there was credibility in what was the fastest and clearest deficit reduction plan of any country in the G7.

[Matthew Hancock]

Of course, the bond market could see a Conservative—or coalition—Government coming, and that is exactly what happened. I will say this to the right hon. Gentleman: when there is a flight to safety, I would rather it was to British bonds, not to bonds overseas, which is what could easily happen if we did not have a credible policy.

[Kwasi Kwarteng (Spelthorne) (Con)]

Those of us who have looked at bond yields will have noticed that the tightening—as it called—of British bonds actually happened in April. That happened as a consequence of the markets being sure that the Labour Government would be voted out, as everyone in the City has mentioned.

[Matthew Hancock]

I am always delighted to talk about when the previous Labour Government lost office, so I thank my hon. Friend for that intervention. Let me go through a few more elements of the economic evidence. I have here an extremely good literature review, by Policy Exchange, the think-tank, which lists—

[Chris Leslie]

Tories!

[Matthew Hancock]

What Policy Exchange has done is review the economic literature, which is what I am looking at. Perotti, in 1999, said:

“High debt levels are associated with higher probability for fiscal policy to have”

expansionary effects. The European Commission—not something that Labour Members tend to barrack—said: “Expenditure cuts may exhibit” expansionary features,

“even in the short and medium run.”

So the economic evidence is there. The best quotation from that review is this:

“Though now quite well established in economic literature”—

referring to the argument that fiscal consolidations promote growth—

“this work is still feeding its way into the wider public consciousness.”

No doubt part of the reason for the slow move of that argument into the public consciousness is the argument put forward by Opposition Members that it is not true.

There are two other important ways in which consolidation will get to higher growth. The first, of course, concerns expectations of future tax rates. If people around the country can see that spending is out of control, they will anticipate that taxes might have to rise in future, whereas setting out a clear path for taxes makes it clear that there will not have to be sharp and immediate tax rises in future, even if that path includes some tax measures. That forward-looking element of human nature, which is so important in understanding how the economy works, matters at a personal level—for some people far more than for others, as I entirely accept—but it especially matters in the corporate world. Businesses look to the future to see how much tax they will be paying, as well as how much it will cost them to pay it because of the complexity of that tax. That is why it is so important to have both the simplification of the tax system that my hon. Friend the Exchequer Secretary—soon to be right hon. Friend, no doubt—set out, and the ladder down in headline corporation tax rate, which will set out a 1% reduction year on year so that our businesses know that Britain is open for business.

[Owen Smith]

On that specific point of corporations looking to the future and thinking about how to plan their business, can the hon. Gentleman tell me of any industrial sector or any big British company that has responded to the austerity budget and said that they now anticipate significant growth and taking on new people? I have not seen any such report.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Before the hon. Member for West Suffolk (Matthew Hancock) resumes his speech, let me say that we allow some latitude on Third Reading of the Finance Bill, but that it would be useful if Members made reference to the Bill from time to time.

[Matthew Hancock]

The reductions in corporation tax that are outlined in this Bill have been welcomed by the CBI, the British Chambers of Commerce, the Institute of Directors and the Federation of Small Businesses. Indeed, a multitude of business organisations have welcomed it. Even the Engineering Employers Federation said that this was a path in the right direction. That shows the support from business organisations.

[Owen Smith]

rose—

[Matthew Hancock]

Let me make some progress; I have only a couple of minutes left.

The final argument is about productivity. Greater tax competitiveness not only helps productivity in the private sector, as consolidation can also help productivity in the public sector. We read only this morning that the police have said that they can take 12% out of their budget without affecting front-line services. I wonder what that 12% was spent on under the previous Administration.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Paperwork.

[Matthew Hancock]

My hon. Friend is probably right.

[Several hon. Members]

rose—

[Matthew Hancock]

I am going to conclude.

So this is my argument: fiscal responsibility is not contradictory to growth; it is absolutely central to sustainable growth in our country. The Budget is unavoidable, but it also lays the platform for confidence and for support of the businesses that are going to grow us out of this hole. Everybody knows that if one is in debt, the sooner it is dealt with, the better; and the longer it is left, the worse it gets. Having looked at the economic evidence surrounding this Budget, I am absolutely delighted to say that I commend this Bill to the House.

--- Later in debate ---

[Mary Creagh]

No. I am going to take my time. As I have said, I am not going to take interventions.

Nappies, prams, babygros, bottles, dummies and high chairs will all be more expensive for families in our constituencies as a result of the VAT increase, but the grants to help the poorest women in our society to afford them will be cut. When I asked the Secretary of State for Work and Pensions how he expected families to cope, he said that he wanted them to recycle prams, but if someone has a child one year younger than another child, where is the second baby supposed to sleep? In the same cot? The parent of a second child will still need to buy a new car seat and a double buggy. It will be more difficult for low-income families to buy all those items. We are losing the baby element of child tax credit, and we are losing Labour’s proposed toddler tax credit, which would have meant another £208—

[Matthew Hancock]

Will the hon. Lady give way to an intervention on the increase in tax credit?

--- Later in debate ---

[Mary Creagh]

I have already said that I am not going to give way to Opposition Members. It is true that child tax credit will rise by £150 above inflation for one year—

[Matthew Hancock]

rose—

[Mary Creagh]

I am dealing with the hon. Gentleman’s point. Perhaps he would acknowledge that. Families on low incomes, however, will see their costs rise as a result of the VAT increase—

[Matthew Hancock]

rose—

[Mary Creagh]

I know what the hon. Gentleman wants to ask, and I am happy to answer his question without his having to spend a minute asking it.

[Matthew Hancock]

On a point of order, Mr Deputy Speaker. I am new to the House. Could you possibly advise me whether it is appropriate for a Member to make an entire speech having stated in advance that he or she will take no interventions whatever?

[Mr Deputy Speaker (Mr Nigel Evans)]

It is very much up to hon. Members whether to take any interventions or a number of interventions, but what I have heard from the hon. Lady tells me that she is going to take no interventions during her speech.