Terrorist Asset-Freezing etc. Bill [Lords]

Sajid Javid Excerpts

Monday 15th November 2010 Commons Chamber

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

I believe that we need a system of asset freezing. It would be idiotic for anyone to argue that that is not necessary in this day and age, given the link between organised crime and terrorism. It occurs not just in Northern Ireland but, I am sure, throughout the United Kingdom. I take it as read that every Member in the Chamber believes in the principle of asset freezing. The next issue that arises is how we arrive at that position and ensure that it is compatible with people’s civil rights. That is important. I am not a bleeding-heart leftie as such, but I do believe that we have basic human rights and that we need to observe them. Indeed, we are obliged to do so by international law, and by domestic law too now.

I referred in my discussion with the right hon. Member for Leicester East (Keith Vaz) to the apparent unanimity between the two Front-Bench teams, and I mentioned the Dangerous Dogs Act 1991. It was introduced following some terrible incidents involving Staffordshire bull terriers maiming people and, in one instance, killing a child. The rush to legislate was understandable, but the measures were not properly scrutinised and, to this day, the Act is unworkable.

Another such Act has passed through the House during my tenure and that of the right hon. Gentleman, namely the gun control legislation following the Dunblane massacre. Everybody was appalled by that massacre, but we rushed to legislate without adequately scrutinising the measures we were putting in place, and I am afraid that the resulting Act did nothing to control the use of illegal firearms. My point is that scrutiny is vital, and that unanimity of purpose between both the Front-Bench teams, and, indeed, all Members, does not matter, because at the end of the day every one of us has a duty to ensure that our constituents live in a safe environment and that we can deal with the terrorism that might threaten them.

There is clearly a terrorist threat; only a fool would deny that. Having said that however, let us examine the Bill. The Financial Secretary to the Treasury referred in his opening speech to United Nations Security Council resolution 1373. It includes a requirement that UN member states must prevent the financing of acts of terrorism, including by the freezing of funds and economic resources

“of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts”,

and that they must prohibit

“their nationals or any persons and entities within their territories from making any funds, financial assets or economic resources”

available to such persons. I submit that there is a world of difference between that requirement and what is being proposed in the Bill.

Initially, the Bill stated that its powers could be used if there was a suspicion that a person might be involved in some form of terrorism. That has now been strengthened somewhat: there must now be a reasonable belief that they are involved. That is quite different from what the UN is calling for, however, and in my view it does not strike the appropriate balance between protecting national security and preserving civil liberties. It is vital that we do that, and this is precisely why so many pieces of anti-terrorism legislation have been struck down by the courts. That has happened not because there is all-out war between the courts and Parliament, but quite simply because we have not been getting that essential balance right.

I believe that if we subject the Bill to proper scrutiny, we can work towards ensuring that we get the balance right. I do not want us to have to argue the same points again in a few months, after the Supreme Court has knocked some of the Bill’s measures on the head a second or a third time because of a perceived lack of respect for human rights.

As the hon. Member for Cambridge (Dr Huppert) mentioned, this Bill gives powers to the Executive, not the judiciary, and those powers are potentially harsh and punitive. As has been said, it is a form of punishment for someone to have all their assets frozen—one might argue that it is almost as bad as dealing with the Independent Parliamentary Standards Authority, but perhaps we should not go there, folks. There is a right of appeal, which is welcome, but these measures deal with persons about whom it has not been established that they have ever been involved in terrorism, but when there is just a reasonable belief that they could be, or might at some stage have been, involved in some act of terrorism.

I have concerns about the Bill, therefore, and I know that Justice and Liberty also have grave concerns. Let me repeat that I want a proper framework set up. I am not arguing an empty case—I am not saying that I oppose just for the sake of opposing. I want the legislation to be workable and to be seen to be acceptable, and for it to be tested by the courts and to be found acceptable to them. If we ensure that that is the case, we will have done our duty as parliamentarians in that we will have introduced good law.

Allowing the Executive to designate individuals as suspected terrorists is unacceptable. As the deputy president of the Supreme Court has said, these people are

“effectively prisoners of the state.”

Those are strong words from a Supreme Court judge, and I do not think he would have said them unless he felt strongly about the issue.

The Bill goes much further than is required by UN Security Council resolution 1373, a resolution that the UN’s own special rapporteur on terrorism, counter-terrorism and human rights has said

“cannot be seen as a proper response to a specific threat to international peace and security”.

I also believe the Bill fails to address the UK’s asset-freezing obligations under UN Security Council resolution 1267, recently criticised by the General Court of the European Union as “particularly draconian”.

[Sajid Javid (Bromsgrove) (Con)]

The hon. Gentleman is making some fine points, but does he accept that global co-operation is required to combat global terrorism and the financing it utilises, and that that is the intent behind the UN’s actions on this, following the terrible events of 11 September 2001? Does he also agree that for that reason global organisations, such as the committee the UN has set up, must issue orders internationally to all countries to freeze assets? The UK is absolutely key in implementing such orders given the role we play in international finance, and bringing courts into this would make any orders terribly difficult to implement.

Comprehensive Spending Review

Sajid Javid Excerpts

Thursday 28th October 2010 Commons Chamber

[Danny Alexander]

Outlandish predictions by politicians were the prerogative of the previous Government. We have established an independent Office for Budget Responsibility to make forecasts. We do not make the forecasts, and I am merely quoting what the OBR had to say.

[Sajid Javid (Bromsgrove) (Con)]

Does my right hon. Friend agree that the biggest risk to our economy is the record deficit of 10% of GDP, the highest in the G20? Had we not taken action, that would have posed a big risk and we would have lost more than 490,000 jobs. Opposition Members should think about the jobs that we would have lost had the Government not taken decisive action.

[Danny Alexander]

I agree wholeheartedly with my hon. Friend. If we had not tackled the deficit, the poor in this country would have suffered most.

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[Sajid Javid]

The hon. Lady is fond of saying, “Let’s have a grown-up, sensible debate”, so it would be useful if she followed her own rules. Why is she refusing to give way to my hon. Friend the Member for West Suffolk (Matthew Hancock)?

[Ms Eagle]

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

Comprehensive Spending Review

Sajid Javid Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

What I would say to the hon. Gentleman is that, again, we have to take a realistic decision about investment in our railways. We are going to invest £14 billion in them and we also want to invest in new rolling stock, on which I was asked a question by the hon. Member for Sedgefield (Phil Wilson), who has now left his place. That has required a tough decision on rail fares, but I hope that passengers will at least understand that if we want investment in rail stock we have to be able to afford it, and the people who use the rail stock should make a contribution to that.

[Sajid Javid (Bromsgrove) (Con)]

I welcome the bold and powerful statement that my right hon. Friend has made today and, in particular, the efforts to protect the most vulnerable. Does he agree that the biggest risk to our economy would have been to have done nothing at all, as advocated by most Labour Members, and that the action that he has taken today will do the most to restore economic confidence to our economy?

[Mr Osborne]

I agree with my hon. Friend. Whoever won the general election—whoever formed the Government—was going to have to come to the House of Commons to set out a plan for reducing the highest budget deficit in our peacetime history; the deficit is considerably higher than it was when Denis Healey had to go to the International Monetary Fund. We have set out those proposals, and I believe that they will deliver certainty and stability going forward. The market interest rates for British businesses and British families are already lower as a result of the decisions that we have taken since coming into office. As for the decisions that we have announced today, I have noted that not a single Labour Member has asked me about the increase in the child tax credit, which will help 4 million families.

Finance (No. 2) Bill

Sajid Javid Excerpts

Monday 11th October 2010 Commons Chamber

[Sajid Javid (Bromsgrove) (Con)]

I congratulate the hon. Lady on her new position. The emergency Budget to which she referred was absolutely necessary considering the train wreck of an economy that we inherited. The country’s debts were spiralling out of control. That Budget calmed the debt markets and allowed the country to look at its finances and to bring economic competence back into the Treasury.

[Ms Eagle]

The hon. Gentleman is even more melodramatic in his rewriting of history—his historical revisionism of what was going on in the UK economy—than the Chancellor. I had thought, having watched that performance, that that was impossible, but perhaps the hon. Gentleman should try out pantomime this year as Christmas approaches.

I was about to say before I was so rudely interrupted that, rather than encumber himself with the tedious technical detail in this Budget, the Chancellor decided to start behaving like the Liberal Democrat student activists we all come across at university and to take it in parts. This is part two. As a result, we have in today’s Bill what can best be described as the technical innards of a Budget; I think that the Exchequer Secretary used other words. In fact, most of the clauses, as he pointed out, are the technical innards of the last Labour Budget, which was presented in March 2010. However, it is the duty of the Opposition to scrutinise the detail of all Budgets, and we certainly intend to fulfil that obligation tonight.

Measures included in the Bill are important to the workings of the taxation system—the Minister did the House a service by going through them in great detail—but they have failed to inspire much interest or controversy in the outside world, perhaps because they have been signalled for a long time. The measures were subject to consultation under the previous Government as well as the current one when they were in development. Some might even say that they were prototype proposals, because that is the way that things tend to be done in the Treasury. That is attested to by the lack of much comment on or reaction to the proposals even among the taxation professionals who usually pore over the technical details of Finance Bills with fine-toothed combs. In respect of this Finance Bill, those professionals have been strangely unmoved—I might even say indifferent.

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[Ms Eagle]

My hon. Friend is right on both points, but he also raises an important issue about what Keynes called “animal spirits”. It is fair to say that all the signals are that the animal spirits are somewhat more depressed now than they were a few months ago and that the things that have depressed them are the decisions that were announced in the June Budget.

Ominous noises are coming out of the recent International Monetary Fund meeting about currency wars and competitive devaluations, and they offer worrying echoes of conditions that led to the great depression in the 1930s. Dominique Strauss-Kahn was not joking or exaggerating when he warned the IMF meeting about the dangers that the huge increases in unemployment will pose for our democratic institutions. Yet none of this is referenced in the measures before us today.

[Sajid Javid]

rose—

[Ms Eagle]

I have given way to the hon. Gentleman before and I want to get on, because I know that other people wish to speak.

In many ways, we find ourselves in a kind of pre-spending review phoney war. We know that something truly awful is coming but it has not arrived yet, so we are whistling to keep up our spirits as the winter approaches and the long nights draw in. The Prime Minister himself has taken to using wartime phraseology. For some strange reason, in his conference speech he was moved to invoke the spirit of Lord Kitchener and his famous “Your country needs you” first world war Army recruitment slogan, not once but twice. Quite why he did that is beyond me, since Lord Kitchener was the general who created the world’s first concentration camps in the aftermath of the Boer war. They inflicted appalling suffering on innocent women and children in order to quell any Boer resistance. As Secretary of State for War, he supported the disastrous Dardanelles operation and was widely blamed for the shortage of shells in 1915, which, incidentally, precipitated the formation of a Tory-Liberal Government.

Of course, Kitchener has become best known for the famous Army recruitment campaign and its memorable slogan, which our Prime Minister saw fit to borrow the other day. In 1914, that plea resulted in the creation of what became known as “Kitchener’s Army”, and I suppose we should refer to the attempts to create a “big society army” to fill in the gaps that the cuts will create. Unfortunately, however, that Army was destined to go into action in the Somme, where 60,000 of them were slaughtered on the first day of the offensive. By its end, 600,000 had been lost to gain just 6 miles of territory, and overall casualties in the offensive as a whole reached an almost unbelievable 1.2 million men—

Equitable Life (Payments) Bill

Sajid Javid Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

I shall come to that in a minute, but the Bill simply gives the Treasury the powers to make the payments. It is right that the Treasury takes those powers, but it needs to do so now so that we can move on to the procurement process and identify who will make the payments.

[Sajid Javid (Bromsgrove) (Con)]

I am sure that my hon. Friend is as shocked as I am that, in five months, this Government have achieved more than the previous one did in 10 years? I welcome the Treasury’s swift action. The matter is extremely complex, as he said, not least because a number of financial regulators were involved during Equitable Life’s problems and because of the problems associated with the life insurance industry in general. Will he assure the House that, unlike the previous Government, we will not hide behind that complexity in trying to bring justice to Equitable Life policyholders?

[Mr Hoban]

That is why we are keen to ensure that we have a scheme that is simple, swift and transparent. That is important and it is the basis of the pledge that we signed. I was unsurprised that the Government made so much progress in the first five months because I have been following this issue for some time. What surprised me was how little progress our predecessors made.

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[Stephen Timms]

That is precisely what happened.

I just wish to tell the House the main amendments that we will table in Committee. I hope that the first will meet no opposition, because it directly picks up on a point in the EMAG pledge. It will require that the payments scheme be independent of government. The Bill does not say that, but our view is that it should; indeed, the Minister has confirmed that he intends it to be independent.

The Minister made a slightly puzzling point in his statement to the House on 22 July, when he said:

The ombudsman…concluded that the design of the scheme should be independent of the Government.”—[Official Report, 22 July 2010; Vol. 514, c. 577.]

That is of course true, but the ombudsman concluded that the scheme itself should be independent—that is the point that should be in the Bill, and it is crystal clear in the EMAG pledge. We will doubtless see lots of wriggling by those on the Benches opposite about exactly what was meant by the phrase “proper compensation” in the pledge once the figures are announced on 20 October; many Members will explain that they did not think it meant what EMAG members think it meant. But on scheme independence there is no wriggle room in the pledge, so we will table an amendment to make that a requirement.

[Sajid Javid]

I am grateful that the right hon. Gentleman started his speech by saying that his party would not oppose the Bill this evening. Many victims of the scandal will wonder why his party did not propose a similar Bill when it had the opportunity to do so. My question is a specific one; I am asking him to make something clear for the benefit of everyone watching this debate tonight. His party commissioned the Chadwick report and set the terms of reference. Chadwick said that his final loss figure is £400 million to £500 million. Does the right hon. Gentleman’s party accept that amount or not?

[Stephen Timms]

Our intention, as I have said on a number of occasions, would have been to proceed on the basis that my right hon. Friend the Member for Birmingham, Hodge Hill set out before the election. He did not set out an amount, but he did set out a process, and we would have published within two weeks of the submission of the Chadwick report the timetable for the payments and the scheme itself.

Proposed Public Expenditure Cuts

Sajid Javid Excerpts

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

Let me say this to the hon. Gentleman: he sat on the Government Benches year after year while the budget deficit racked up; he allowed this country to have the largest budget deficit in the developed world. We are now seeking to reduce that budget deficit. The previous Government pencilled in but never identified £44 billion of public expenditure savings. If he wants to make a serious contribution to the debate, I suggest that he propose some specific measures to deliver the plans on which he stood at the last general election.

[Sajid Javid (Bromsgrove) (Con)]

Does my right hon. Friend have a view on why Labour Members continue to treat the entire British public like children? They spend, spend, spend, bringing our country to the verge of bankruptcy—

[Mr Speaker]

Order. There is much pressure on time. I remind the hon. Gentleman that he must ask a Minister about the policy of the Government, not the attitude of the Opposition. We will leave it there; the Chancellor can respond briefly if he wants, but he is under no obligation.

Equitable Life

Sajid Javid Excerpts

Thursday 22nd July 2010 Commons Chamber

[Mr Hoban]

I have not set a formal deadline or time scale, but I am sure that over the summer recess, my hon. Friends will talk to policyholders in their constituencies and gather their views. The Leader of the House today announced a debate on 14 September, I believe, on Second Reading of the Equitable Life (Payments) Bill, which might give my hon. Friends the opportunity to make an oral representation.

[Sajid Javid (Bromsgrove) (Con)]

Earlier this month, I held a public meeting in my constituency on Equitable Life, and I heard directly from many policyholders how they suffered, especially because of the inaction of the previous Government and their callous disregard for their rights. Will my hon. Friend assure me that the coalition Government will do all they can to end the long suffering of the Equitable Life victims?

[Mr Hoban]

Indeed I can give that commitment. I am also very mindful that at points over the previous nine years, the previous Government could have acted to bring justice to policyholders but chose not to do so. I am afraid that that is another aspect of that Government’s legacy that the Conservatives have to sort out.

Office of Tax Simplification

Sajid Javid Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

I really do not accept the point that having a simpler tax system, which is understandable by everyone and not just those who can afford expensive advice, is in any way a regressive step. As my hon. Friend the Member for Dover (Charlie Elphicke) said, it will benefit everybody and we are pleased to be able to do it.

[Sajid Javid (Bromsgrove) (Con)]

Does the Minister agree that along with the cancellation of Labour’s jobs tax and the reduction in corporation tax that his team has proposed, this will also help to re-open Britain for business?

[Mr Gauke]

That is right, and I would add our tax policy-making paper to that list. We want to provide greater certainty and stability in the tax system. It will encourage businesses to invest in the UK, and we are making good progress.

Finance Bill

Sajid Javid Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Byrne]

Precisely. The Minister could not understand that point from his own Budget, but I shall explain it in more depth in a moment.

On Friday this week, we will be able to test the durability of the recovery that Labour delivered. Almost two years on from the oil price hitting $147 and the collapse of Lehman Brothers, the Office for National Statistics will publish growth figures for the second quarter of 2010, which I am sure all hon. Members await with some interest. But this much we already know. The ONS has told us that our economy has grown by 0.7% since its low point last year; that growth in the first quarter of 2010 was some £8 billion larger than it was in the final quarter of 2009; and that output is growing by about £88 million a day.

The National Institute of Economic and Social Research has also already estimated that output in the second quarter of this year could hit 0.7%. If that comes to pass, it will be no mean achievement, especially when our neighbours tell us precisely how hard it is to sustain recovery. In the first quarter of this year, our last quarter in office, growth in this country reached 0.3%. In Germany, it was lower; in France, it was lower still; in the eurozone, it was lower; and Spain, Ireland and Greece are all forecast to see negative growth this year. Labour is proud to be the party of the recovery, and the question that the Bill should have answered is, how do we guarantee the recovery’s future?

We are proud to have been the party that brought together a global response to the recession. Here in London, countries from throughout the world agreed a plan, including a £1.1 trillion support package, that helped to ensure the revision of global growth from 1.9% last year up to 3.5% this year. We are very proud to be the party that stopped the British banking system collapsing in the face of its exposure to melting international credit systems, and we are very proud to be the party that put in place here at home the most comprehensive recovery plan to protect people’s jobs from the axe, homes from repossession and employers from liquidation.

[Sajid Javid (Bromsgrove) (Con)]

The right hon. Gentleman quotes ONS statistics, but he will also be aware of how last week the ONS reported that, from peak to trough, the British economy declined by 6.7%—more than any other industrialised economy. Is he also proud of that?

[Mr Byrne]

Perhaps the hon. Gentleman will intervene again and remind us what happened in Germany and Japan. Will he tell us a little more about what happened to unemployment in other major economic nations?

[Sajid Javid]

I thank the right hon. Gentleman for giving me the opportunity to intervene again. The 6.7% decline was bigger than that of any other industrialised economy; no other economy racked up a debt, both visible and unofficial, at the rate that we did; and no other economy pumped in £200 billion of its own printed money, the results of which we still do not know. He might be proud of the results that he thinks have been achieved, but the full consequences of the Labour party’s actions over the past two or three years are not yet known and may be much worse than we know them to be today.

[Mr Byrne]

Let us come to that point directly. If we want to understand the difference between our parties, we need only compare the recession that we have been through in the past two years with the one presided over by the Conservative party. Unemployment in this recession is half what it was during the recession of the 1990s. Furthermore, repossessions are 40% lower and company insolvencies are running at about a third of the rate reached in the 1990s recession. We Labour Members believe that it is right to act to protect people’s jobs and homes and the firms that they work in.

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[Mr Byrne]

The hon. Gentleman makes an extremely good point. The evidence on that is mixed. The CBI industrial production survey, which was published earlier this afternoon, shows that manufacturers reported that the second quarter of this year was good and that they have a degree of confidence in exports. However, the problem is that the OBR is projecting a £100 billion increase in exports over the next four or five years. That is the equivalent of our exports to America tripling, our exports to China going up by something like 20 times, and our exports to India going up by something like 40 times. That may well come to pass, but it is safe to say that very few people would bet on it. That is why the Opposition believe that the Government should do a little more to nurture both domestic business investment and domestic demand.

The alternatives for reducing the deficit that we have rehearsed in the past couple of weeks bear a final word this afternoon. I want to return to the explanation of the difference between the scorecard projections for tax growth and what the OBR said would come through the door, which the Exchequer Secretary struggled with earlier. The point centres on how much growth will contribute to paying down the deficit over the next four years. The Labour Government’s deficit reduction plan projected that the deficit would be reduced by something of the order of £78 billion over the next four years, and the OBR inconveniently told the Chancellor that we were on course to deliver that. That plan involved £57 billion-worth of discretionary action, which was set out in detail in chapter 6 of the March Budget—£19 billion in tax increases and £38 billion of spending cuts. However, £21 billion of the deficit was projected to be closed by the economy returning to growth, with higher tax receipts and lower benefit bills.

The June Budget appears to hit growth so hard that £9 billion of extra tax is necessary to make good the effect of lower growth. That is the price of slowing the recovery. The Liberal Democrats are awfully pleased that they got an increase in income tax thresholds, and I congratulate them on securing that concession, but the truth is that they have been sold a pup. They could have had the increase in the threshold they originally wanted if we did not have to pay for the cost of lost growth.

The Budget scorecard on page 40 of the Red Book says that by rights, the Chancellor’s decision ought to bring in an extra £8.2 billion in tax by 2014-15, but the OBR says that only £3.1 billion will actually come through the door, because growth will be depressed so much by the Budget. The Red Book goes on to say—on page 97, table C9—that something like £9 billion in extra taxes and spending cuts are necessary because of this go-slow Budget. In other words, the Government have almost halved the contribution of growth to closing the deficit. It is now quite clear to the House that although the Government may have lost their monetarists, they have certainly not lost their masochists.

[Sajid Javid]

The right hon. Gentleman was comparing the growth forecast of the previous Government to that of the current Government. Is not the truth that the forecasts of the previous Government were made up by Ministers whereas the forecasts we are looking at today were made up by the independent OBR? He talks about selling a pup, but was not the pup the forecasts of the previous Government?

[Mr Byrne]

I hope that at some point in his future illustrious career in this House the hon. Gentleman has the chance to put that argument to the chief economist of the Treasury, David Ramsden. The growth forecasts that were published in our Budget were set out by Treasury civil servants. Like me, the hon. Gentleman will have noticed that the rebound in growth that was projected by the then Chancellor—now the shadow Chancellor—was very much in line with the rebound in growth that we saw after recessions in the 1980s and 1990s, but it was supported by far stronger monetary policy action. We were comfortable with the growth forecasts that we presented. The hon. Gentleman will have to reconcile himself in the months to come to the impact of slower growth and the fact that we are now having to put taxes up—something that I always thought the Conservatives opposed—because demand has been depressed to such an extent.

Finance Bill

Sajid Javid Excerpts

Monday 12th July 2010 Commons Chamber

[Sajid Javid (Bromsgrove) (Con)]

May I say that there seems to be a big confusion between tax evasion and tax avoidance? The hon. Gentleman keeps referring to “avoidance and evasion” and treating them in almost exactly the same way. Clearly one of them, avoidance, is entirely legitimate—it is a basic human instinct for someone to try to hold on to more of their own money, which they have earned through their hard work—whereas the other, evasion, is an illegal activity. Would he not do well to focus on what might be the issue, rather than trying to confuse it?

[John McDonnell]

I understand the point that the hon. Gentleman is making. My amendment tackles tax evasion, which is clearly an illegal activity, but we need to address a wider issue that goes beyond the normal tax planning: tax avoidance beyond the spirit of the law. In previous debates, we have tried to insert into the tax laws of this country a general duty of tax compliance, which exists in other countries. Such an approach puts an onus—as a duty in law—on the individual to comply and to try to emphasise that duty, rather than to look for every possible means to avoid tax. There is a gradation in these matters, but I tackle both these things because they are both legitimate concerns in wider society and will become increasingly pressing ones as individuals experience the public expenditure cuts that will take place as we seek to tackle the deficit.

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[Mr Jones]

That is a good point. We have heard about banking codes and other ways of forcing the banks into lending, but many small and medium-sized enterprises will be paying for this. They are facing a double whammy, because they are paying for it not only through the reduction in investment allowances but, as my hon. Friend rightly says, through not getting access to the lifeblood of working capital that they need.

That brings me to what the hon. Member for St Ives said about other sectors. Amendment 50 says:

“This section shall not come into force until the Treasury has laid before the House of Commons an assessment of the impact of this section on—

(a) the banking sector, and

(b) all other sectors to which corporation tax applies.”

That makes an important point about how this cut in corporation tax is being paid for—that is, through the reduction of the annual investment allowances, which from 2010 will fall from £100,000 to £25,000. That will affect a lot of SMEs in the manufacturing sector. One need only look at some of the comments that were made on Budget day. The Engineering Employers Federation, representing manufacturers, said:

“Reducing the corporation tax rate over time was in principle the right course of action. But financing it, in part, by cuts to investment allowances will be a heavy price to pay, especially for smaller companies. It might be a positive signal for large companies, but not for their suppliers.”

That reflects a key point made in the amendment—the need to look at the effects on other sectors of the economy and how they are paying for this.

Even members of the coalition are feeling some concern about the corporation tax plans. The Secretary of State for Business, Innovation and Skills signalled a recognition that they could hinder the interests of British industry when he said in the Financial Times on 14 May:

“The one thing I would want to make sure is that the productive parts of the British economy are helped and not hindered by corporation tax changes…I will certainly make an input to the debate defending the interests of British industry and making sure there are proper incentives to invest.”

We are now seeing this time and again in policy areas. The Liberal Democrats can protest all they wish, but they are being overruled on every single occasion, and this is clearly another example of that happening.

The Institute for Fiscal Studies and the EEF have both criticised the Government for reducing investment and capital allowances. The IFS’s post-Budget briefing on business and capital taxes dated 23 June said:

“Biggest benefits go to low-investment, high-profit firms—banks and supermarkets rather than manufacturers”.

The Budget talked about rejigging the economy away from the public sector and the banking sector into manufacturing, but this will not assist the manufacturing sector in any way at all. One can add to that the pressures that are resulting locally from the abolition of the regional development agencies and the nonsense that is going on with the freezing of grants for business investment. For example, Geka Manufacturing in my constituency, which vitally needs such a grant to secure 130 jobs in Stanley, has had it frozen by the Government. Local manufacturing SMEs are not only being hit by the corporation tax changes in the Budget but affected by the winding up of the RDAs in terms of the small business support that is vital for their investment decisions.

If we are to consider the effect on other sectors, as the hon. Member for St Ives suggested, we need to ensure that that includes not only SMEs but the manufacturing sector. If the Red Book is to be believed, I do not understand how the levy will result in a rebalancing of the burden of taxation between banking and other sectors. Clearly the SME sector will pay dearly, and that is in addition to some of the other matters that will affect it.

The cuts in capital allowances will prevent many SMEs from investing in vital equipment. That is no way to grow the economy in the way that the Government are suggesting. Despite the rhetoric that we heard before the election about bashing the bankers—[Interruption.] I say to my hon. Friend the Member for Glasgow East (Margaret Curran), who looks at me in horror, that I said “Bashing the bankers”. Instead, the Government are going to give back to banks the money that they will take from the levy. As my hon. Friend the Member for Nottingham East pointed out, it would have been right to wait for the results of the 1 January review, whenever they come, before introducing the decrease for the banks.

I ask hon. Members to support the amendment, which makes sense. Once the public recognise what the Con-Dem Government are doing, they will be disappointed that the Government are basically letting the banks off scot-free.

[Sajid Javid]

I shall keep my contribution brief. I congratulate my hon. Friend the Member for Lincoln (Karl MᶜCartney) on making a very good maiden speech, and I draw hon. Members’ attention to my entry in the declaration of Members’ interests.

[Chris Leslie]

There is not a Register of Members’ Financial Interests currently published, so for the benefit of the debate could the hon. Gentleman inform the House what that interest is?

[Sajid Javid]

Yes, I am a shareholder in a bank. [Hon. Members: “Which one?”] It is called Deutsche Bank.

[Chris Leslie]

How much?

[Sajid Javid]

That is not relevant. The hon. Gentleman can read the entry in the declaration of interests.

If we are to address the amendments properly and consider the changes to corporation tax that the Government have proposed not just for banks but for all companies, we cannot get away from the serious mess that the economy is in. As Members have heard on a number of occasions, as an inheritance from the previous Government, the Government are borrowing some £3 billion a week and our budget deficit is £155 billion, which is 12% of GDP—the highest in all G7 countries and the highest in Europe.

To address the issue, we need to consider how to restore growth to the economy and start paying back our debt. That will not just be through the changes in the Budget, such as raising extra taxes and cutting spending, but through restoring growth in our economy. That is at the heart of the changes to taxation, especially corporation tax, put forward in the Budget. The gradual reduction of corporation tax from 28 to 24% is all about giving business people and entrepreneurs incentives once again to take the risks that are always involved in starting and running businesses. It is such growth that will rejuvenate our economy and create the employment that we need to push up GDP and help us repay the debt that we have inherited.

[Mr Kevan Jones]

I know that the hon. Gentleman is a banker, and therefore possibly a bit detached from the SME sector and others, but how can cutting the investment allowances of SMEs and rewarding bankers with cuts in corporation tax make sense as a way to generate and grow new businesses?

[Sajid Javid]

I am not detached from small business, because my father was a small business man, I grew up in a small business and I know what it takes to make a small business grow. As well as hard work, it takes low taxes, less regulation and a desire for Government to get out of the way of business people. That is what this Government are desperately trying to restore after 13 years of the opposite.

[Stephen Timms]

Was the hon. Gentleman surprised that the Office for Budget Responsibility reduced its estimate of future growth in the British economy following the Budget?

[Sajid Javid]

That is a misleading question, and it does not go to the heart of the matter. It is a nice try, but the right hon. Gentleman will really have to try harder than that.

To return to banks and how to get our economy going, as well as restoring incentives we need to get banks lending again. That was the only vaguely accurate or factual point that I could pick up from the speech of the hon. Member for North Durham (Mr Jones). If we are to do that, we need to understand why they are not lending at the moment, and the major reason is a lack of capital for British banks. Banks across the world face the same problem. As a Government, we need to work out a way to restore the capital positions of banks so that they are willing to take the risks that are a necessary part of making lending decisions.

There are only three ways for banks to try to raise capital. The first is through the free capital markets, but today those markets are effectively closed to virtually all banks. Prior to the financial crisis, there were many instruments that banks could use to try to raise capital, including types of subordinated debt, hybrid equity instruments, tier 1 and 2 securities and common equity. Not only are those markets closed to banks today, but if Opposition Members have watched carefully what has happened in the financial markets over the past three or four months, they will know that banks cannot even raise senior debt effectively, let alone capital. Banks throughout Europe—especially those on the continent, but British banks included—are in many cases unable to raise that type of debt, let alone equity. The capital markets as an avenue to raise capital are closed.

The second option is for the Government themselves to give capital to banks. After the £70 billion-odd injection made by the previous Government, I do not believe that any Member of any party is advocating the Government injecting more capital into the banking system.

There is one final way left, which is to allow banks to hold on to some of their profits, if they are in a position to generate profits. No matter what Opposition Members would like to think, unless we create the conditions inside a bank that make it want to lend, there is no way to force it to do so.

[Stewart Hosie]

Technically, those are the three ways in which capital can be raised. Is the hon. Gentleman making a case, then, to oppose the Government’s bank levy, which would keep an extra £2 billion in the banks and perhaps allow an extra £40 billion of lending?

[Sajid Javid]

No, not at all. We have to separate the two issues. The levy is about working towards a way of taking something back from the banks to build an insurance-type system, so that if things such as happened during the financial crisis happen again, the Government will have a mechanism to withdraw some capital from the banks. However, if we are to cut corporation tax on all companies, it would be madness to leave out the banks. They need to be allowed to build capital, not just for the sake of getting them lending again by putting them in a comfortable enough position to make that decision, but because of the impact on their competitiveness.

Whether we like it or not, our financial sector is a huge part of our economy, and it is much bigger as a percentage of GDP than that of many of our international competitors, even after the financial crisis. It accounts for thousands of jobs up and down the country, not just in the City but probably in each and every constituency. If we are to restore some health to our financial sector, it makes no sense to make it uncompetitive when compared with other sectors in our economy and with other countries. The banking and financing sector is one of the most mobile of all our economic sectors. If we have differentiated tax rates for one sector of the economy compared with others, that will only make matters worse. I therefore oppose the amendments.

[Stephen Timms]

I am grateful to the Exchequer Secretary for his kind remarks on my return to the Dispatch Box. He, along with many Members of all parties, was good enough to write to me after I was attacked and injured. I greatly appreciated all the messages of good will that I received, and I would like to put on record my thanks to all those from across the House who got in touch; I think that those messages have accelerated my recovery. I am grateful to the Exchequer Secretary for his words.

My hon. Friend the Member for Nottingham East (Chris Leslie), in an excellent speech when moving the amendment, raised some important points. I was also encouraged by the comments of the hon. Member for St Ives (Andrew George). I am pleased that he described himself as free ranging, and I hope that his freedom of ranging includes joining us in the Lobby. I am particularly keen to have the opportunity to vote on amendment 34.

The Chancellor told us in his Budget speech that he was being tough on the banks. Listening to some Conservative Members’ speeches, I wonder whether they heard that part of his speech. He explained rightly:

“The failures of the banks imposed a huge cost on the rest of society, so I believe that it is fair and right that in future banks should make a more appropriate contribution, reflecting the many risks that they generate.”

At that stage, it could well be that the Chancellor’s words were consistent with the comment in the Red Book, to which the hon. Member for West Suffolk (Matthew Hancock) drew our attention. It states:

“The levy will result in a rebalancing of the burden of taxation between banking and other sectors.”

Who knows to what a “rebalancing of the burden” amounts? It could mean something pathetic and small. However, the Chancellor went further in his Budget speech. He said that the introduction of the bank levy would entail

“a greater contribution from the banking sector—one that far outweighs any benefit that it will receive from the lower tax rates that I have just announced.” —[Official Report, 22 June 2010; Vol. 512, c. 175.]

The Chancellor told the House that the cost of levy to the banks would “far outweigh” any benefit that the banking sector received. Listening to the speeches of the hon. Member for West Suffolk and the hon. Member for Bromsgrove (Sajid Javid), I do not think that they heard that part of the Chancellor’s speech.

My hon. Friends the Members for Nottingham East and for North Durham (Mr Jones) queried whether the levy, in so far as we know about it—the hon. Member for St Ives told us something about it—would fulfil the Chancellor’s words and far outweigh any benefits that the banks receive from the reduction of corporation tax. It is odd, as my hon. Friend the Member for Nottingham East pointed out, that for all the appearance of toughness in the Chancellor’s speech, bank shares actually went up after his announcement.