Fuel Prices

Justine Greening Excerpts

Tuesday 15th February 2011 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to serve under your chairmanship, Mr Turner. I also thank my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) for securing today’s debate. We debated the subject on the Floor of the House recently, but I very much welcome another debate today, because she has clearly raised an important issue.

The cost of fuel is a difficult issue for many families and businesses throughout the country. As I said, the House had an extensive debate last week and, again, we have had helpful contributions from Members throughout the Chamber today. I share the disappointment of my hon. Friend that no Labour MPs other than the shadow Minister participated on an issue that clearly affects all our communities.

In fairness, when we face such difficult times, the impact of fuel duty and fuel prices become even more critical for families and businesses. The Conservative party had recognised that in opposition. We have always acknowledged the impact of oil prices—how they feed through into fuel prices at the pump—to be a real challenge. The Opposition, as we heard again from the shadow Minister, still do not recognise the problem to be in need of solution. We do.

As discussed today, we talked about a fair fuel stabiliser, which I reassure the Chamber we are looking at actively. We take it seriously, and we are looking at how we can develop that policy, among others.

[Miss McIntosh]

I know that the Minister will be pressed to go further, but she will probably not be able to today. One of the coalition Government’s best selling points in the run-up to the election was that we always referred to factors such as rurality and sparsity of population. That was in all areas of life, whether delivering the big society or speaking about the everyday roles of individuals and businesses in rural areas. Will the Minister confirm whether we will go back to that? Do we need a fuel duty regulator? Many of the concerns raised during the debate were about how the reduction in cost would transfer to the motorist if a stabiliser was brought in. I hope the Minister will address the huge and significant differential between the prices of diesel and petrol at the pump.

[Justine Greening]

My hon. Friend raises an interesting point, and this debate has been an excellent opportunity for hon. Members to set out the challenge that fuel prices pose for their communities and businesses. It is difficult—and it would not be right—for me to pre-empt the coming Budget, but my hon. Friend sets out some of the broader issues. This debate is not just about how the oil price feeds through to the price at the pump, but about recognising that rural areas face a particular challenge. I say to my hon. Friend the Member for High Peak (Andrew Bingham) that people in urban areas do understand the impact of fuel prices—they face them too—but we recognise that there are additional challenges for rural areas.

As we have heard, public money is short and the deficit we inherited is unprecedented in modern times. The previous Government had no answers or real ideas—we have heard no ideas today—to tackle the mess that they created. There was something ironic about the note from the outgoing Chief Secretary to the Treasury that said, “There’s no money left.” In many respects, it was even worse than that; we were left with a deficit and debts.

It is worth running through the many rises in fuel duty that we have seen. There was a rise of 2p per litre on 1 December 2008; a rise of 1.8p per litre on 1 April 2009; and a rise of 2p per litre on 1 September 2009. A rise of 1p above RPI was announced in the 2009 Budget. That was phased in from April last year, with a second rise of 1p per litre in October. A range of future increases was announced in the 2009 Budget, one of which has particularly concerned hon. Members in this debate. In spite of all those rises, we picked up an enormous deficit and, according to the outgoing Government, there was no money left. That shows what an absolute mess they handed over which, as has been pointed out, places constraints on what we are able to do. However, we know that we must tackle that mess, and tackle it we will.

We have had to take difficult decisions. Nevertheless, in the midst of that we have taken steps to increase the personal allowance, which will rise by £1,000 from April this year. That will help families on the lowest incomes, and 880,000 taxpayers will be taken out of paying income tax altogether. Parents will be able to take advantage of increases in child tax credits, and pensioners will receive above-indexation increases in the state pension. We have managed to do something that the previous Government did not do in 13 years—re-establish the link between the state pension and earnings. Corporation tax for businesses is being cut from 28% to 24% over the next four years.

[Dr McCrea]

The Minister must acknowledge that those measures apply across the board and to those in urban areas as well as rural areas. Rural areas are being penalised because of the price of petrol, and we need something to deal with that issue.

[Justine Greening]

That is why I am about to talk about the fair fuel stabiliser and the rural fuel rebate pilot. We have tried our best to tackle the deficit, but the way to do that is to encourage growth, help business get back on its feet and take away tax rises and the jobs tax—it would have been catastrophic if employment had cost companies more. We managed to get rid of the worst effects of that, but there is a particular issue with fuel.

In opposition, we talked about a fair fuel stabiliser because we recognised the problem posed by oil prices in feeding through to the price at the pump. When we came into power, one of the first things we did was to ask the Office for Budget Responsibility to look specifically at how the price of oil affects our economy. It said that although there may be some tax receipt growth, higher energy and fuel prices do not help the economy—a point reiterated by many hon. Members. It pointed out that a rise in the oil price has a range of other effects on the economy and does not feed through into extra tax receipts in a straightforward way. People spend less money, goods become more expensive, and certain benefits increase as a result of a rise in oil price. Therefore, it is a difficult issue.

I reassure hon. Members that we are looking at a fair fuel stabiliser and at other measures to tackle the problem of fuel prices. There are a range of options, but we must ensure that whatever we do is fair and affordable. Tax is a matter for my right hon. Friend the Chancellor, and I would not be so presumptuous as to pre-empt him. He will update the House during the Budget, which is only a few weeks away.

The rural fuel duty rebate was mentioned. It is clear that changes to the fuel price have a particular effect on those who live in rural areas and, as we have heard, have a greater reliance on petrol and diesel and face significantly higher prices. That problem is exacerbated by the lack of alternative transport, and realistically for many people the car is the main way of getting around.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) spoke about why the definition of rurality is so important. Interestingly, the EU does not have exact criteria to define rurality, but it will look at the rebate in terms of state aid, and take into account a range of factors such as the cost of transporting fuel, average fuel prices, public transport and access to petrol stations. It is able to look at the issue in a flexible way, which is helpful.

When we came into government, we announced our intention to introduce a rural fuel duty pilot. The pilot will deliver a duty discount of up to 5p per litre on all petrol and diesel, which will save some drivers in rural areas more than £500 a year. We are still looking at the exact scope of the scheme; today’s debate has shown that many hon. Members have particular concerns for their communities and the rurality faced by those communities. It is not as easy as one might hope to define what is rural and where a rural fuel duty might apply, but the pilot aims to get on with that process and work through those challenges. We want the scheme to go ahead in the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly, but we have not yet finished the exact definition of the scheme. Before it goes ahead, the scheme must get clearance from the European Union. Those discussions are ongoing and are currently at an informal level as that is the best way to proceed to ensure that the pilot scheme is approved. We will update the House further at the time of the Budget.

To conclude, the dramatic increase in world oil prices and the previous Government’s increases in fuel duty have pushed up prices at the pump. We understand the concerns of families and businesses across the country, and we are taking every action possible to help those most in need. At the same time, we must act responsibly and ensure that we tackle our record national debt. That is not easy; it is a difficult balance to strike and we are considering all options in the run-up to this year’s Budget.

Fuel Costs

Justine Greening Excerpts

Tuesday 15th February 2011 Ministerial Corrections

[Justine Greening]

I am sure that the hon. Gentleman will be aware of the Goodison review and that the Scotland Bill is passing through Parliament right now. We are making some changes on tax, and I think he will welcome those measures to strengthen the devolution settlement.

[Official Report, 7 February 2011, Vol. 523, c. 57.]

Letter of correction from Ms Justine Greening:

An error has been identified in the answer given to the hon. Member for Dundee East (Stewart Hosie) during a debate on Fuel Costs on 7 February 2011.

The correct answer should have been:

[Justine Greening]

I am sure that the hon. Gentlemen will be aware of the Calman Commission and that the Scotland Bill is passing through Parliament right now. We are making some changes on tax, and I think he will welcome those measures to strengthen the devolution settlement.

Departmental Expenditure Limit (2010-11)

Justine Greening Excerpts

Monday 14th February 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

Subject to parliamentary approval of the spring supplementary estimate, HM Treasury’s resource DEL will be increased by £14,148,000 from £180,063,000 to £200,231,000. The administration budget will be increased by £12,724,000 from £137,594,000 to £150,318,000. The impact on resources, including the administration budget is set out in the following table:

Budget Responsibility and National Audit Bill [Lords]

Justine Greening Excerpts

Monday 14th February 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I beg to move, That the Bill be now read a Second time.

Fiscal responsibility is the overriding priority of this Government. In May, within 24 hours of taking office, we published a coalition agreement setting out our agenda for government. Fiscal responsibility was the very first item on the very first page of that agreement. It read:

“deficit reduction and continuing to ensure economic recovery is the most urgent issue facing Britain.”

Let me remind the House why we chose that as our priority. We inherited the largest budget deficit in our peacetime history, we inherited a budget deficit forecast to be the largest in the G20, and we inherited the largest structural deficit in the whole of Europe. We simply could not ignore the mountain of debt that was casting a shadow over our economy and our people, so we set ourselves an ambitious task—to bring order back to the nation’s finances. The Bill aims to do exactly that.

[Mr Mark Field (Cities of London and Westminster) (Con)]

Will the Minister add one more criterion to her list—that a moral case needs to be made for ensuring that we do not pass on to future generations the debts that have been racked up for the consumption of the generations alive today?

[Justine Greening]

I agree absolutely. Far too often we fail to make the point that the penalty for not dealing with the deficit today will be to hand on even bigger debts to our children tomorrow. They will not thank us, and should not thank us, if we fail to address the urgent crisis that we have come into government to tackle.

Before I get into the detail, I would like to set out again the Government’s broader fiscal objectives. This coalition Government believe that fiscal policy should ensure that the national finances are sustainable. As I have just said, sustainable public finances mean that future generations will not need to pay for the services enjoyed by all of us today. Sustainable public finances mean that the economy can expand and grow without the fear of tax hikes and spending cuts in the future. Sustainable public finances also mean that monetary policy can operate effectively and stabilise the economy, when needed. With that in mind, we have taken decisive action since taking office.

In May, we had immediate reductions to in-year spending, which bought us much-needed breathing space in the sovereign debt storm raging across Europe. The emergency Budget in June was the moment when fiscal credibility was restored. At the Budget, my right hon. Friend the Chancellor set out the Government’s fiscal mandate. Our first goal within the mandate is to balance the structural current deficit by the end of a rolling five-year forecast period.

[Mr William Cash (Stone) (Con)]

My hon. Friend may remember that before the election, a number of us took grave exception to the fact that the then Government were not telling the truth about the full extent of the debt. Will she give us an assurance that this Government will tell the truth to the British people, in line with the National Audit Office and Sir Michael Scholar, so that they know what the Budget deficit really is?

[Justine Greening]

My hon. Friend makes an excellent point. The way to provide that guarantee and certainty is to pass the Bill before us today, which sets up the Office for Budget Responsibility—but does so, critically, as an independent organisation that will make its own forecasts. In so doing, it will contribute to being independent of Governments and provide credible official forecasts for the first time in our country. That will give us the certainty we need. I will come on to explain later how we ended up needing official forecasts to be done independently, referring to the problems that had arose prior to this Parliament.

[Mr Edward Leigh (Gainsborough) (Con)]

The Government have a serious political difficulty, to which the Justice Secretary referred over the weekend, giving rise to a considerable amount of publicity. All over the country, local authorities are loading cuts on to front-line services, yet we read today that scores of local authority executives earn more than the Prime Minister. What is the Minister’s message to local authorities? Will she insist that they deliver real efficiency savings to avoid these cuts in front-line services, which are so politically damaging?

[Justine Greening]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I would be grateful if the Minister answered that question in relation to the Bill before the House.

[Justine Greening]

No doubt my hon. Friend will be encouraged to learn of our belief that our efforts to cut back-office costs and protect front-line services in Whitehall should be replicated in town halls.

Key to understanding progress against the Government’s fiscal mandate are strong, credible, independently conducted official forecasts. Our first goal is to balance the structural current deficit by the end of a rolling five-year forecast period; our second is to see the public sector debt ratio fall at a fixed date in 2015-16. The measures that we set out in the Budget, along with the departmental allocations that we set out in the spending review, constitute a four-year plan to meet that fiscal mandate. We are currently on track to meet the mandate one year early, in 2014-15.

[Kate Green (Stretford and Urmston) (Lab)]

I understand the Government’s objective to reduce public debt over a fixed period, but what flexibility does the Minister feel needs to be built into the system to take account of unexpected economic circumstances and shocks?

[Justine Greening]

I have just defined that flexibility. Although we want to balance the structural current deficit by the end of the rolling five-year forecast period, we are, as I have said, on track to meet the mandate one year early. We are clearly ensuring that we will achieve our overall objectives. By the end of the current Parliament we will have completely eliminated the structural current deficit, and the debt ratio will be falling. That is our four-year plan for restoring order and stability to our nation’s finances, which has been praised by the international community and welcomed by the financial markets.

[Sajid Javid (Bromsgrove) (Con)]

The Minister refers to praise from the international community. If she was referring to the International Monetary Fund, I welcome that praise. She will also be aware that the IMF’s independent evaluation office reported last week that it had felt intimidated and bullied by the Treasury in which the current shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), and the Leader of the Opposition played a key role between 2004 and 2006, and that it had been forced to water down its criticism of United Kingdom fiscal policy. Will she reassure the House that, as the IMF has praised this Government’s plans for the OBR, it seems that we did not intimidate it as the last Government did?

[Justine Greening]

I hope that we will have an altogether more constructive relationship with the IMF. In fact, it has already commented on the background to the need for this Bill. In November last year, it stated that the recent crisis led the UK to suspend its two national fiscal rules—the golden rule and the sustainable investment rule—at the end of 2008, and that the credibility of the national rules as effective constraints of policy action was weakened well before the crisis. It went on to say that the rules failed to prevent a worsening of the fiscal balance in the years leading up to the crisis, leaving insufficient buffers as the economy entered the downturn, and that while in place the golden rule was often criticised becauseit provided insufficient monitoring, transparency and accountability of fiscal policy. That was the IMF’s assessment of the previous fiscal mandate, and I think that it demonstrates clearly why it was so ineffective in tackling the problems that our country experienced. In many respects, it provided the ground on which those problems were able to prosper and grow.

[Claire Perry (Devizes) (Con)]

Does the Minister agree that the problem when the Treasury sets rules of that kind is that such rules can be broken, manipulated and “gamed” for entirely political reasons? Following the establishment of the OBR, for the first time we will have a Treasury that focuses on real control of the public finances and value for money for the taxpayer, rather than a policy-making, press release-driven organisation.

[Justine Greening]

My hon. Friend makes an excellent point. We cannot allow the Treasury to be judge and jury. That was the problem under the last Government. The Institute for Fiscal Studies said recently:

“If an OBR had been in existence over recent years it might have discouraged Gordon Brown from persevering with fiscal forecasts that most independent analysts thought over-optimistic from 2002 onwards.”

We believe that the OBR can have a real impact on the Government’s financial and fiscal management.

We are clear about the fact that we need to put our country’s public finances back on a sustainable footing. Both the IMF and the OECD went from issuing warnings and cautions about the UK’s economy and public finances to describing the measures introduced by the coalition Government as “essential” and “courageous”. Only a couple of weeks ago the Secretary-General of the OECD urged the British Government to stay the course, and we will. Our bold action has taken Britain out of the financial danger zone, but we must not forget that none of this would have been possible without the crucial first step of increasing the credibility of our fiscal framework. The Bill will put on a statutory footing our reforms of the way in which fiscal policy is conducted in this country.

Let me remind the House of the origins of the Office for Budget Responsibility. Within a week of taking office, we had set up a new independent body to return credibility to official forecasts. Until then, the final decision on official Government forecasts had always been made by the Chancellor and his advisers—one of whom is now shadow Chancellor—rather than by independent experts. Over the past 10 years, the last Government’s forecasts for growth in the economy have been out by an average of £13 billion, and their forecasts of the budget deficit three years ahead have been out by an average of £40 billion. Unsurprisingly, those forecasting errors have almost always been in the wrong direction.

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

The transparency that the Bill brings to finances is part of an overall package of transparency. My hon. Friend mentioned budgets that have overrun. Does she agree that the Bill will help to prevent Departments from losing control of their budgets in the way that was described recently by a senior civil servant?

[Justine Greening]

My hon. Friend is right. The fact that, for the first time, official forecasts will be prepared by a body that is independent of the Treasury is critical. It will not only return credibility to the assessment of whether the Government are on course to meet their fiscal mandate, but will make that more likely to happen. I believe that Governments will be reticent about introducing policies that seem to take them off course. There is a clear distinction between the responsibilities involved. The fiscal mandate and the policies will continue to be determined by Ministers. It is not for the OBR to do that; what it must do is assess the economic and fiscal forecasts in the light of those policies, and in the light of their likelihood of meeting the fiscal mandate.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Does the Minister agree that growth is key to economic recovery, and that the recent negative growth figures have destabilised the Government’s economic policy? Is it not worrying that the OBR has already revised its growth forecast from 2.6% when the Government took power to 2.3% following the emergency Budget, and to 2.1% following the spending review?

[Justine Greening]

I think that demonstrates the value of the OBR. For the first time we shall have a set of entirely independent forecasts to which Members can refer.

The hon. Lady has strayed on to the detail and implications of the policy, and I think that it is perfectly fair for her to do so. We have always said—I believe that Mervyn King, the Governor of the Bank of England, said the same last year—that the recovery would be choppy. It is not at all unusual for an economy emerging from recession, particularly a recession as long and severe as the one that we have undergone, to experience at least one instance of either flat or negative growth.

I do not want to be called to order, Mr Deputy Speaker, so I shall move on. Let me simply say to the hon. Lady that she has confirmed my point that benefiting from independent forecasts for the first time will be key to holding a good-quality, informed political debate about the Government’s economic policy and how it is progressing, and that the OBR has also said that we are on course to achieve our fiscal mandate.

[Mr Peter Bone (Wellingborough) (Con)]

Will the Minister clarify something for me? If the OBR says that growth will be x in the next year, must the Chancellor abide by that? Obviously, measures in his Budget may encourage growth: he may cut taxes, for instance.

[Justine Greening]

The OBR makes an independent fiscal forecast and assessment of the economy. The Treasury may or may not agree with that forecast and assessment, but the point is that it is done entirely independently of the Government. Rightly, however, it will remain the prerogative of Ministers to decide policy. That is the clear distinction we have set out throughout the Bill.

We needed to make sure that we have official forecasts for the economy that the public can trust, even if that means we end up giving away some of our powers as Treasury Ministers. As my right hon. Friend the Chancellor has said, we need to fix the Budget to fit the figures, not fix the figures to fit the Budget. That is why the OBR was established, and the Institute for Fiscal Studies has said it is a “welcome” innovation.

To enable the OBR to get to work immediately, it initially operated on a non-statutory basis. It was headed by Sir Alan Budd, a highly respected fiscal and macro-economic expert in our country. The interim OBR produced an independent assessment of the economy and public finances both ahead of, and at, the Budget in June. We gave it direct control over that forecast, with full access to all the data, assumptions and economic models. It made all the key judgments and decisions underpinning the economic and fiscal forecasts. Great strides were also made in transparency. More information was published than ever before. That fact was noted by both the Treasury Committee and the IFS.

[Andrea Leadsom (South Northamptonshire) (Con)]

As a member of the Treasury Committee, may I say that it was incredibly valuable to be able to challenge the OBR members who were present and Government Ministers? From our point of view as representatives of Back Benchers, the process was very useful.

[Justine Greening]

I welcome that helpful intervention. My hon. Friend will no doubt be aware that the Treasury Committee inquiry into the OBR described Sir Alan Budd as an “exemplary” witness. In putting together this Bill, we took on board the Committee’s points, and I am sure my hon. Friend will be happy about the unprecedented role the Committee will play in appointments to the OBR.

The final task of the interim office was to provide advice on how the permanent, statutory OBR should be established. I am happy to report to the House that the Bill is designed in line with the detailed recommendations made by Sir Alan Budd in his letter to my right hon. Friend the Chancellor. We have now moved to permanent arrangements. This Bill enshrines in statute provisions to ensure the OBR’s independence. Robert Chote has been appointed as the OBR’s first permanent chair. His appointment was confirmed by the Treasury Committee. He is supported by Graham Parker and Steven Nickell, whose appointments were also confirmed by the Committee.

The permanent Budget responsibility committee led on the production of the OBR’s economic and fiscal outlook, published in November. In addition, the resources made available to the OBR have been increased. There has been a transfer of technical forecasting capacity from the Treasury to the OBR, and a transparent, multi-year funding settlement has been agreed for the spending review period. The OBR has also moved to a new external location outside the Treasury building.

Let me now turn to the detail of the Bill. We debate this Bill after the constructive scrutiny the other place has given it. The other place welcomed the Bill. Part 1 includes provisions on the new framework for fiscal policy. Clause 1 sets out the need for the Treasury to produce a charter for Budget responsibility setting out the formulation and implementation of fiscal policy. In particular, the charter will set out the Government’s fiscal objectives and the fiscal mandate, and a draft of the charter is available to Members alongside the Bill.

Clause 2 requires the Treasury to produce a Budget document on an annual basis. The detail of exactly what needs to be covered within the annual Budget document is set out in the charter. The Bill also repeals the legislative aspects of previous Governments’ fiscal frameworks, including the Fiscal Responsibility Act 2010, a pointless piece of declaratory legislation that would have made no improvement in fiscal planning, instead merely setting up another set of targets that Ministers would assure us they were going to meet right up until they missed them.

Clause 3 provides for the existence of a statutory body called the Office for Budget Responsibility. Clause 4 sets out the main duty of the OBR, which is to examine and report on the sustainability of the public finances. This is a broad remit, which means that the OBR will not be limited to forecasting alone. At a minimum, the remit of the OBR means it must produce the following: assessments of the likelihood that the Government will meet their fiscal mandate alongside each forecast; a sustainability report at least once a year; a report on the accuracy of its forecasts at least once a year; and full economic and fiscal forecasts at least twice each year. Beyond these tasks, the OBR will be able to undertake any research and analysis pursuant to its remit.

Clause 5 describes how the OBR is to fulfil its duties. Crucially, it includes a set of principles—objectivity, impartiality and transparency—to guide the OBR in fulfilling its remit. It also requires that the OBR must not analyse or develop non-Government policies. Analysis is rightly the domain of the OBR, but, as I have said, policy making is the responsibility of publicly elected Ministers. These principles protect independence. Clauses 5 and 9 also put in place explicit provisions for the OBR to have complete discretion over the way it carries out its statutory duties, giving it full access to the information it requires to do so. The remaining clauses in part 1, as well as schedule 1, set out further detail of the operation and governance of the OBR.

We have sought to reflect the theme of independence in the constitution and governance of the OBR. In line with the recommendation of the International Monetary Fund, the OBR is established with its own legal personality and will operate at arm’s length from Ministers as an executive non-departmental public body. The OBR’s executive functions will be undertaken by a three-person Budget responsibility committee. The members of this committee will be appointed by the Chancellor. To support independence, the Bill makes provision for the Treasury Committee to veto all appointments and dismissals. That statutory veto bestows on the Committee more power than it has over any other public appointment. The Chancellor has said that he is giving the Committee this veto to ensure that there is no doubt that the individuals leading the OBR are independent and have the support and approval of the Committee.

A chairman will lead the BRC and run the OBR. All staff will report to the chair, and that person will control the “hiring and firing” of the staff. The staff will be civil servants, ensuring that the OBR can recruit from the widest possible pool of expertise. There will also be at least two non-executive members, to provide support and challenge to the OBR. The non-execs will report on how the OBR performs its duty. They will also commission expert peer review of the OBR’s forecast and analysis.

The OBR will report directly to Parliament, with its forecasts and reports laid directly in the House, as was the case with the autumn forecast in November 2010. Written questions from Members will be passed to the OBR to respond to, and the members of the BRC will be available for Select Committee scrutiny.

The provisions in part 1 represent a permanent improvement to economic policy making and the transparency of government. Britain is now one of the first advanced economies to have an independent fiscal agency that produces official fiscal and economic forecasts. It is therefore no surprise that these reforms have attracted praise from the IMF, and they put us at the cutting edge of international best practice. I hope that the world will look with interest at our policy innovations.

Part 2 modernises the governance of the National Audit Office. The goal of the NAO is to maintain effective independent oversight of spending. The Bill’s provisions will strengthen the NAO at this critical time of scarce public resources. Members will be aware that very similar provisions were included in the previous Government’s Constitutional Reform and Governance Bill, which passed through this House with cross-party support. However, there was no time for the other place to consider those provisions at the end of the last Parliament, and this Bill represents the earliest opportunity to bring them back before Parliament. The provisions are aimed at implementing the recommendations made by the Public Accounts Commission following its review of NAO corporate governance.

As a result of this Bill, the office of the Comptroller and Auditor General will continue to exist; the CAG will be an independent officer of this House and will be limited to a single 10-year term. The NAO will be established as a new corporate body in its own right. I do not propose to go into great detail on those provisions, given that when they were discussed during the passage of the Constitutional Reform and Governance Bill the then Chairs of both the Public Accounts Commission and the Public Accounts Committee supported them. I also understand that the new Chair of the Public Accounts Committee has indicated that she is content.

In summary, the provisions in this Bill will bring confidence and responsibility back to our country’s fiscal framework, with stronger institutions and improved governance. They are as crucial for the long term as they are for the short term, and I commend the Bill to the House.

--- Later in debate ---

[Ms Eagle]

Nevertheless, independence has to be perceived to be there too. No matter what individuals behind the scenes know, part of consistency and the whole point of such independence is that it is accepted across the political spectrum and in the country as a whole. If that is not the case, the organisation does not have the credibility that the reform creating it sought to establish. That is why I look to Robert Chote, who has moved out lock, stock and barrel from the Treasury, to begin to establish that reputation.

[Justine Greening]

It is only right that I should put on record the comments of Sir Alan Budd, in his report on the progress of the interim OBR, on the issues that the hon. Lady has raised—budget forecasts and interference. On the fact that some Treasury officials perform both roles of giving advice to the Chancellor and helping the OBR to produce the forecasts, he clearly said in paragraph 31:

“We do not believe that this involved any conflict of interest.”

In relation to how the OBR should operate and the issuing of forecasts, he said in paragraph 44:

“We are also able to state, without reservation, that there was no ministerial involvement in the forecasts at any stage.”

The hon. Lady uses Alan Budd as an example of someone who was somehow manipulated, but does she accept that his comments do not bear that out? Perhaps she would like to withdraw her comments.

[Ms Eagle]

This concerns those who allowed the bringing forward of estimates of job losses caused by the Government’s decisions on fiscal consolidation, which happened to be published just ahead of a Prime Minister’s Question Time at which that was to be a point at issue. Clearly, the relevant people should have realised the effect that that coincidence would have on the OBR’s reputation for independence when it had only just been set up.

On the Minister’s point about whether the OBR should use Treasury forecasters, Lars Calmfors, the chair of the Swedish fiscal policy council, has contrasted the arrangements in the Bill with those in Sweden. He said that it is very difficult when the OBR is working very closely with Treasury civil servants and other forecasters:

“one cannot have it both ways—the OBR cannot be both an independent watchdog and an in-house provider of input into the Treasury’s work.”

We shall certainly want to explore in greater depth in Committee that aspect of the arrangements for our OBR, which differs from the Swedish arrangements.

In addition to concerns about independence, we want to raise in Committee issues of the OBR’s accountability to Parliament. We wish to explore how independent the OBR will really be, given that close co-operation with the Treasury will be needed to access the information to generate the forecast in the first place. There is also the issue of its budget—I accept the comments that the Minister made about the transparent five-year budgeting process, but there are examples of similar bodies in other countries having had their budget cut as a result of displeasing the Government with whom they were working. The governance arrangements will need further scrutiny, as will issues of accountability, not just in relation to the Treasury Committee veto on appointments, but regarding the OBR’s accountability to Parliament.

Although the Bill is about who makes forecasts, the reality is that independent forecasting is no substitute for sound Budget judgements. The Government will not be judged on the accuracy of their forecasts, but they will be held to account for the consequences of the choices they have made in the circumstances they were confronted with and the forecast that the OBR had given them. Our dispute is with the Government’s plans and choices, not with the independence of their forecasting machinery.

When we left office, unemployment was falling, growth was forecast to be 2.3% this year, inflation was lower than it is now and was falling and, according to the OBR, borrowing had come in at £20 billion lower than had been forecast in 2009. When the previous Government delivered their last Budget in March 2010, UK growth was faster than in Germany, Italy and the eurozone as a whole, but the current Chancellor has chosen to prioritise rapid deficit reduction over any other policy goal and he has slammed the brakes on growth. Without an electoral mandate, the Government have chosen to launch a risky experiment with our economy and our prosperity.

[Justine Greening]

I completely disagree with much of what the hon. Lady says, not least given that her Government left unemployment 400,000 higher. She mentions electoral mandate, but surely she does not think that the previous Prime Minister had one, because he was never voted in as Prime Minister.

[Ms Eagle]

We do not have a presidential system: we have a prime ministerial system and the leader of the governing party tends to be asked by Her Majesty the Queen to form the Government. That is what has always happened, and if the Minister wishes to change that, perhaps we need to take an even wider look at our constitutional arrangements than that planned by the Deputy Prime Minister.

--- Later in debate ---

[Ms Eagle]

Yes, but the Bank of England will also forecast for its own use growth and other aspects which it needs to assess in formulating monetary policy.

OBR forecasts predict that by the end of this Parliament, 110,000 more people will be on the dole under the Government’s plans, compared with our previous plans. Under Labour, the economy was forecast to grow by 2.6%, compared with only 2.1% under the current Government’s plans. The consumer prices index would have been at 1.6%, rather than 2.8%. So the OBR has decided that there would have been higher growth, more jobs and lower inflation under Labour.

[Justine Greening]

May I ask the hon. Lady a straightforward question? The Office for Budget Responsibility assesses that we have a greater than 50% likelihood of hitting our fiscal mandate, which is to eliminate the structural deficit by 2014-15 and achieve our broader fiscal mandate on debt ratio. Does she welcome that or not?

[Ms Eagle]

It is important to see what the forecasts are and what they mean at this stage of economic recovery. Of course I want to see the economy recover and grow, unemployment coming down and inflation being controlled. Unfortunately, that is not what the signs that we have been picking up since the Government’s decision to cut so deep and so fast tell us about the real economy. We will see as time goes on how the OBR adjusts its forecasts to take account of the monthly and quarterly statistics from the Office for National Statistics.

The shock GDP figures before Christmas strongly imply that the Chancellor will suffer the embarrassment of his growth forecasts being downgraded by the OBR in his self-proclaimed Budget for growth, which is due to be unveiled next month. We will wait and see.

We on the Labour Benches support a genuinely independent OBR but, as I said, we will explore in Committee the practical extent of that independence and suggest amendments to the Bill to shore it up a little more. We will need to explore the viability of the arrangements to produce, rather than comment on, the fiscal forecasts, as many other fiscal councils do. We will need to explore the extent of the OBR’s remit and whether the close co-operation with civil servants required to produce the forecast will lead to behind-the-scenes negotiations that will compromise at least the perception of independence.

Let us be under no illusion that the existence of the OBR, which we support in principle, can in any way protect us from the misjudgments of the present Chancellor or any other. The OBR must assume, as the Minister said, that the Government’s plans are a given. It cannot comment on the fiscal mandate or on wider fiscal policy in general. It is prevented from doing so. All it can do is calculate the probability of the Government being able to achieve their stated plans. The OBR therefore cannot protect the country from the mistakes that the Chancellor makes, or from the mistakes that he has made already. It is no panacea and it should not be regarded as one. Our dispute—

Oral Answers to Questions

Justine Greening Excerpts

Tuesday 8th February 2011 Commons Chamber

[Angie Bray (Ealing Central and Acton) (Con)]

8. What recent estimate he has made of the level of Government debt.

[The Economic Secretary to the Treasury (Justine Greening)]

Public sector net debt doubled in the decade from 2000-01. By the end of last year, it stood at £900 billion. Servicing it costs the taxpayer £120 million every day.

[Angie Bray]

I thank my hon. Friend for that answer. As I am sure she is aware, a debt of some £37,000 hangs over the head of every voter in my constituency of Ealing Central and Acton, thanks to the Labour party. Can she reassure us that there will be no deviation from the path, regardless of siren calls, of getting rid of the deficit as soon as possible, so that this country can move forward to prosperity once again?

[Justine Greening]

Yes, I can, and of course my hon. Friend is not the only person to hold that view. The secretary-general of the OECD said only last week that Britain needed to “stay the course”. He realises, as did the Bank of England Governor Mervyn King when he talked about our deficit as being “clearly unsustainable”, that if we had not set out a credible plan and got a grip on our public finances to tackle the deficit, we would have run the risk of an even sharper fiscal tightening later down the road, a loss of confidence and higher interest rates in future.

[Helen Goodman (Bishop Auckland) (Lab)]

It costs £150 to give a person debt advice, and it costs £50,000 to rehouse a family. Will the Economic Secretary explain why Treasury Ministers are cutting the funds to citizens advice bureaux to provide such advice, and why that is a good way to cut the debt?

[Justine Greening]

We are looking at ways in which we can ensure that people still get the debt advice that they need, and of course a lot of the grants are provided by local authorities. There is no point in Opposition Members talking about debt, because it was their party that created the problem in the first place.

[George Freeman (Mid Norfolk) (Con)]

9. What assessment he has made of prospects for growth in the high-technology manufacturing sector.

[The Economic Secretary to the Treasury (Justine Greening)]

The Office for Budget Responsibility sets out the official economic and fiscal forecasts. However, high-tech manufacturing is a key part of our growth plan and we need to ensure that Britain is not just open for business but making things again.

[George Freeman]

Is my hon. Friend aware of the latest data on manufacturing business confidence? January’s purchasing managers indicators show a sharp jump, suggesting annualised growth this year of 2.6%. Intuit, the software survey business, reports that 66% of small and medium-sized enterprise owners say that the VAT rise has no impact on their business, and Investec reports that two thirds of owner-managers plan to hire more staff in 2011. Does that not show that the Government’s policy is working and that the right hon. Member for Morley and Outwood (Ed Balls) is out of touch?

[Justine Greening]

What it shows is that we have the right plan to get our economy back on track. My hon. Friend mentions the purchasing managers index for January, which was at a record high since the series began in 1992. We recognise that our road to recovery will still be choppy, which is one reason why we will bring forward the first phase of the growth review in the Budget that is coming up. That will examine how we can ensure that we create the conditions for our companies to be successful.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the Economic Secretary agree with the Institute for Fiscal Studies that the new patent box tax, reducing the patent tax from 28% to 10%, does nothing for new jobs or research and development, and that in fact the Pfizer case, with the loss of 2,300 jobs in Sandwich, is a case in point? It shows that she is doing nothing for modern manufacturing and that choking growth and increasing inflation through VAT is increasing the deficit, not decreasing it.

[Justine Greening]

It is hard not to point out to the hon. Gentleman that his party supported the patent box when it was in government. It is not just that policy that will support high-tech manufacturing. Our policies of reducing corporation tax year on year rather than having it go up, and of reducing national insurance and getting rid of the worst impacts of the jobs tax that was making it harder for companies to keep people employed, will support growth in the economy. His party simply has no idea how to start making that happen.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

12. What his policy is on transparency in private finance initiative contracts.

Fuel Costs

Justine Greening Excerpts

Monday 7th February 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes the dramatic increase in the world oil price to over $100 per barrel; further notes that there has been a significant impact on fuel prices in the UK as a result; recognises the impact this has on households and business; notes that the previous administration’s rises in fuel duty that have taken effect during the past year have further increased prices; further notes that the Government inherited the largest deficit in UK peacetime history, that the previous administration had no credible plan to deal with the deficit, that the Government has been clear that everyone will make a contribution to tackle the deficit but that the most vulnerable will be protected, and that the Government is considering a fair fuel stabiliser that could support motorists and businesses when oil prices are high; further notes that the Government in addition is taking forward swiftly its commitment at EU level to introduce a pilot scheme that would deliver a discount of up to 5 pence per litre in duty in remote rural areas such as the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly; and further notes that the Chancellor will update the House on all fiscal matters at the time of the Budget.”

We have long recognised on this side of the House—both parties in the coalition Government—that the price of fuel has been a very difficult issue for motorists, businesses and families up and down the country. I know that it is a particular concern for people living in our rural communities, and no doubt many Scottish Members who hope to participate in the debate will make points on behalf of their constituents and echo the concerns set out by the hon. Member for Dundee East (Stewart Hosie). I am sure that other Members representing rural seats will also want to set out their concerns.

There is no doubt that rising oil prices and their impact as they feed through to the petrol pump have been a real concern. In fact, even before we came into office, both coalition parties had committed to looking at the issues surrounding the cost of the fuel, as the hon. Member for Dundee East has pointed out. Let us be clear, however, that the last Government chose completely to ignore this whole area. They believed that the challenges posed by these problems were too great. When we were talking about alternatives to help families, hauliers and motorists, they said that it was all too difficult and that the issues were way too complex.

Let me state at the outset that we would be interested to hear from the Opposition whether they stand by the fuel duty escalator—the one that they put in place before the election; it is a bit like reaching from the political grave into taxpayers’ pockets. Or do they believe that that policy was a mistake? Are we to be treated to the spectacle of Labour Members arguing not only against the Government’s measures across a whole range of areas, but against the measures they put in place before being booted out of office? We have taken a very different approach to fuel prices to that of the last Government.

[Mr Weir]

I am listening carefully to the hon. Lady and it is not my place to defend the Labour party, as we spent much of the last Parliament attacking the Labour Government and their fuel policy, which was disgraceful. It is interesting to see that so few Labour Members are here today. However, the Economic Secretary is now in government: what is she going to do and when is action going to come? The problem is getting worse by the day, and unless action is taken soon, it will be too late for many businesses in rural Scotland.

[Justine Greening]

I can assure the hon. Gentleman that I shall set out our approach to policy in this regard in the run-up to the Budget in my further comments, but we need to recognise that the fuel duty escalator was put in place by the last Government. They have, I believe, a blank piece of paper that is called their economic policy, and they owe the House the honesty of being transparent about whether they believe that putting that policy in place was the right or the wrong thing to do.

[Mr MacNeil]

Far be it for me to draw it to the hon. Lady’s attention, but since last May she has been in government. We want to know—in Lewis, in Harris, in North Uist, Benbecula, South Uist and Barra—what she is going to do about the price of fuel.

[Justine Greening]

The hon. Gentleman will be pleased, as I have looked at the Scottish National party website today and seen the letter he wrote to voters last April, in which he said that it was the SNP who first called for this “derogation” for fuel areas. I can assure him that I am getting on with that very policy.

[Mr MacNeil]

rose—

[Justine Greening]

Presumably, the hon. Gentleman wants to intervene again to welcome the efforts of the coalition Government.

[Mr MacNeil]

I will welcome those efforts when they bear some fruit. We had four years of shilly-shallying from Labour—and I do not want to hear any more shilly-shallying from any Government from the Treasury Dispatch Box.

--- Later in debate ---

[Justine Greening]

In that case, I can tell the hon. Gentleman how he can help. It would be helpful if his party wholeheartedly supported the Government’s proposal to the European Union and the European Commission as we go through the process of securing the derogation. I assure him that we will be more powerful if we adopt a cross-Government, cross-devolved-Administration approach.

[Stewart Hosie]

The Minister is asking the Scottish National party and our friends to support the Government’s efforts in Europe. Will she please tell us whether the Chief Secretary has finally managed to write to the European Commission asking for the derogation?

[Justine Greening]

The hon. Gentleman will be aware that the derogation will come about as the outcome of a process. He seems to be asking me whether we are getting on with that process, and how much progress we have made. I trust that if I explain what the process is, what we have done so far and what will happen next, he will have been given so much information that he will find it necessary to take a more considered approach.

Let me explain the timing involved in the process leading to European Union and Commission clearance. We must begin by undertaking informal talks with the Commission abut the implementation of the scheme. That will give us a better chance of presenting a proposal that it will agree is, as it were, right first time. As Members have pointed out, similar schemes exist in other countries. It is sensible for the Government to engage in a process that includes talking informally to the European Commission about those schemes, and about the ways in which our scheme may resemble or differ from them.

[Mr MacNeil]

Will the Minister tell us how long it has taken other Governments to proceed from the informal talks stage to implementation of a rural fuel derogation, and how long she thinks it will take this Government to do so? Time is of the essence.

[Justine Greening]

Obviously it will not be a short process involving a few weeks, but I think that the hon. Gentleman and his party know from their experience of the process involved in calling for the derogation that the route that we are taking can provide real support for motorists in rural areas.

[Robert Halfon]

rose—

[John Thurso]

rose—

[Justine Greening]

I will give way to my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso), because he tried to intervene earlier.

[John Thurso]

I think I heard the Minister quote from a letter from members of the SNP saying that they had thought of the derogation first. In fact, it was first raised in the House of Commons in 2000 by my predecessor in the constituency, now Lord Maclennan. I fleshed it out in a debate that I held in Westminster Hall in 2001, and I think I have raised it every year since then. Given that the matter was raised over a period of 12 years, is it not commendable that this Government have done more in six months than the last Government did in those 12 years?

--- Later in debate ---

[Justine Greening]

I agree with my hon. Friend. I too remember his party, before it joined the coalition Government, making the case for a rural fuel rebate.

I now give way to my hon. Friend the Member for Harlow (Robert Halfon), who tried to intervene earlier.

[Robert Halfon]

I welcome the debate, because hard-pressed constituents of mine, especially small businesses and families, are suffering hugely as a result of high fuel costs. May I make a special plea? National health service workers in my constituency who have to use their cars to visit patients receive tiny fuel allowances—in some cases, only 12p per mile—which remain the same regardless of the price of fuel. Will my hon. Friend consider changing the guidelines so that NHS workers need not suffer in that way?

[Justine Greening]

I shall ensure that I respond to my hon. Friend on that issue. A variety of concerns about the cost of motoring have been expressed in constituencies throughout the country in recent years.

I hope I can reassure Opposition Members that we are getting on with the process of requesting a derogation by trying to arrange some pilot schemes. I am sure they will be pleased to learn that, although we are still considering the exact scope of the pilots, we have announced our intention of including the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly, should we be given the necessary dispensation. I assure Members that we are pressing ahead as fast as we can, and we should appreciate their support in helping us to complete the process. I hope that they will be able to overcome any political barriers, do the right thing and back up the coalition Government as we go through this process over the coming months.

We recognise the importance of fuel prices to motorists and businesses. While we are looking at options in the run-up to the Budget, which I will discuss this afternoon, we can have one of two debates today: we can continue to argue about the problem and waste the opportunity presented by today’s debate by scoring points, or we can have a frank and open debate about how to reach the best solution and how we can find common ground. For instance, do we agree that the price of fuel and the affordability of motoring are important for motorists? The answer is yes. Do we agree that the unpredictable way in which the oil price fluctuates can create difficulties for households and businesses when it comes to budgeting? The answer is yes, although the Labour party never recognised that point in government, and I doubt whether it recognises that point in opposition—if it does, perhaps the hon. Member for Bristol East (Kerry McCarthy) will explain why it has suddenly changed its mind after having been booted out by the electorate.

[Kerry McCarthy (Bristol East) (Lab)]

I am pleased that the Economic Secretary wants to have a constructive debate this afternoon and does not want to engage in party political point scoring. Given that conciliatory approach, will she confirm that a Conservative Government were the first to introduce the fuel duty escalator at 3% in the March 1993 Budget, which they increased to 5% in the November 1993 Budget?

[Justine Greening]

The hon. Lady wants to go back into history. The previous Labour Government left a huge fiscal deficit, and we have to get to grips with those ginormous debts, so the position is entirely different. The previous Labour Government left not only debts and deficit, but tax rises that will unfold over the coming years. In opposition, the Lib Dems and the Conservatives discussed helping motorists, and we still want to see what we can do to help them. Given the state of the public finances when they were handed over to us, the Labour party in opposition should be thoroughly ashamed. We have waited in vain for an apology to the British people for the state of the public finances, and I suspect that we will have a long wait before we hear any of them say, “Sorry.”

The most depressing thing is that the main adviser to the former Chancellor and former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), is now shadow Chancellor. It is like returning the car keys to the man who crashed the car in the first place, which is the worst thing for the British electorate.

[Mr Stewart Jackson (Peterborough) (Con)]

The issue is not about going back into pre-history to discuss what a previous Conservative Government did 18 years ago. Her Majesty’s Opposition are not willing to make it clear where exactly the 20% public expenditure cuts would come from to pay for their opposition to tax rises. Is that not the real issue? We are paying £120 million a day in debt interest because of their debt legacy.

[Justine Greening]

My hon. Friend is right. We do not even know whether the Opposition think that going ahead with the fuel duty rise, which they planned, is a good idea. We know that they rejected calls from Opposition parties to look at alternatives when they were in power. Perhaps the hon. Member for Bristol East will explain her party’s position today.

My hon. Friend is also right to point out the difficult challenges that the current Government face. He has rightly pointed out that the level of deficit and debt that we have been left as a country costs the British taxpayer £120 million every single day. To put that in the context of a 1p a litre rise in fuel duty, which is worth £500 million, the British taxpayer will pay as much in debt interest over the course of four or five days as they will pay in fuel duty, if fuel duty is subject to a 1p a litre rise. That demonstrates two things, the first of which is the importance of tackling the deficit. Clearly, this country cannot continue to pay this expense of £120 million a day and it has to be tackled, because we are spending more on servicing our debt than on transport. The challenge for this country is that if we do not get this £500 million of real money from fuel duty, it has to come from somewhere else. The Government have made it clear that they want to try to protect key spending, for example, on the NHS—the Labour party did not want to do that—and schools.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Does the hon. Lady agree that it would be unfair for the disproportionate burden of that tax to fall on people in rural and remote areas?

[Justine Greening]

As I have said, the Government recognise the particular pressures that motoring costs put on people living in rural areas, which is one of the reasons why we want to try to get a derogation and undertake pilot schemes in some of those areas to see whether we can implement a rural fuel rebate. I hope that the hon. Lady acknowledges that we recognise those challenges.

[Naomi Long (Belfast East) (Alliance)]

Does the Minister recognise that this is about not only the significant issue of rurality but remoteness from the marketplace? In Northern Ireland, it can be incredibly difficult, even in urban constituencies such as mine, for those who wish to trade to reach the marketplace; added costs can be involved, reaching from Northern Ireland on to the UK mainland.

[Justine Greening]

The hon. Lady is right in that few Members in this House would not have their own particular reasons for raising the issue of the cost of motoring with government. This issue is clearly a real challenge, which is why the Conservative party acknowledged it in opposition and said that we wanted to examine how we could tackle some of the key issues.

The hon. Lady also referred to the impact of fuel duty on businesses. That is one of the reasons why our emergency Budget introduced a package of corporation tax reductions for companies, as she will recall. Small companies will now face a corporation tax rate of 20% whereas they were facing a rise to 22% under the previous Government. We also introduced reductions in national insurance, getting rid of the worst effects of the proposed jobs tax. We can support businesses in a number of ways to help them through a very challenging economic situation created by the previous Government.

[Mr Weir]

I reiterate a point that I made in last week’s debate about the Department for Business, Innovation and Skills: the Government keep saying that they have reduced corporation tax and although that is welcome for small companies, very many small businesses in our areas do not pay corporation tax. They are single traders or partnerships that pay income tax, so they are not being helped by these measures and being hammered by the VAT rises and the fuel cost rises.

[Justine Greening]

The hon. Gentleman will know that alongside those measures to support companies, particularly small ones, I could have mentioned the regional growth fund and the regional reduction in national insurance for new start-up companies creating new jobs. He will also be aware of the rise in the personal allowance, which has removed about 880,000 people from paying income tax altogether. We have also raised the threshold for national insurance, which means that employers no longer have to pay employer national insurance for thousands of employees. Across the board we are doing what we can, despite the challenging financial deficit left to us. We are doing what we can to make sure that we tackle the overriding priority of sorting out the deficit—that is what we have to do. For motorists, companies, families and unemployed people wanting to get back into the employment market and get a job, we have to get the economy back on its feet and public finances back on a sustainable footing. At the same time, we understand the pressures and challenges for motorists.

As things stand, there are alternatives for the devolved Administrations. I have to challenge hon. Members representing the Scottish National party in Scottish constituencies on whether they have considered using some of the devolved Administration budget to fund their own grant scheme to support motorists in their areas. They have taken different decisions on tuition fees to those taken in England and there is now additional scope for them to see this issue as a priority for their spending, as well as for the national Government to consider how we might be able to help in terms of tax policy.

[Mr MacNeil]

I want to ensure that the hon. Lady is aware of the importance of what the devolved Scottish Government—in what is an independent Parliament without the powers of independence—have done for the Outer Hebrides. We have introduced road equivalent tariff pilots, which have substantially reduced transportation costs, but the difficulty is that when the Scottish Government produce schemes that stimulate and grow the economy, the tax revenue goes not to our Government but down to Westminster. We are doing good work, but there is a double whammy: as we stimulate the economy, Westminster benefits, and then it comes and sticks on a fuel tax—thank you!

[Justine Greening]

I think the hon. Gentleman is taking the debate slightly wider than the wording in the motion. However, I will say to him that the measures we are taking are designed to get our economies in his part of the United Kingdom and the rest of it back on their feet. I hope that he welcomes the tax reductions we are bringing forward.

[Stewart Hosie]

Will the hon. Lady give way?

[Justine Greening]

I will give way one last time, and then I shall make a little progress. I have been generous in taking interventions.

[Stewart Hosie]

The hon. Lady has been very generous indeed. She asks us to welcome the actions that the Government have taken in terms of a deficit consolidation plan. I like and respect her, but I will never welcome a £1.3 billion cut to the Scottish budget this year and a £3.2 billion cut to the Scottish block over the next four years. That is the wrong thing to do in terms of stimulating economic growth and growing our way out of the recession. If we could focus on the fuel duty, that would be particularly helpful, unless of course she wants to devolve the duty to Scotland, in which case I would be absolutely delighted as we could take all the right decisions.

[Justine Greening]

I am sure that the hon. Gentleman will be aware of the Goodison review and that the Scotland Bill is passing through Parliament right now. We are making some changes on tax, and I think he will welcome those measures to strengthen the devolution settlement.[Official Report, 15 February 2011, Vol. 523, c. 3MC.]

I shall now, as I am sure the hon. Gentleman would like me to, address my comments to the measures we have been talking about and what we are considering. Only this Government have been looking at how best to help drivers, including those in Scotland and Wales. We have demonstrated our concerns about these issues both before and since coming into government. Indeed, one of the first things that the coalition Government did was to get the Office for Budget Responsibility to look at how oil prices affect the economy and feed into public finance.

This is a complex issue, and we have to make sure that whatever we do is not only fair but affordable. It would not be right of me to pre-empt the Chancellor or the Budget, but, as we promised in the June Budget, we are considering a range of options. We have already discussed the rural fuel duty rebate. The Government understand the challenges faced by people in rural areas in relation to fuel costs, which those of us in city and urban areas perhaps do not face. I know that those people cannot easily shop around nearby petrol stations to get the best deal in the way that other people can. I understand the arguments about the lack of public transport as an alternative and that the car is often the most realistic mode of transport. That is precisely way we are working towards getting a derogation so that we can get on with putting in place pilots to look at how a rural fuel rebate would work.

[Dr Whiteford]

Is it intended that at a future date the derogation pilots should extend to other rural and remote parts of Scotland not included in the current pilot scheme?

[Justine Greening]

We have yet to decide the exact scope of the pilots. I assume from her question that the hon. Lady would like her area to be included. No doubt she will write to me formally. I will take her comments on board. As I said, we are already working towards putting in place the pilots for a rural fuel duty rebate which will reduce the cost of fuel in the most remote areas of Britain. As with trying to tackle the feed-through of unpredictable oil prices to the pump prices, the previous Government rejected that outright, but the coalition Government are committed to getting it under way.

As my right hon. Friend the Chief Secretary announced in October, we wish to conduct a rural fuel duty pilot and look at how a rural fuel duty rebate could work in practice. We want to examine the underlying issues and see how that could be applied. The initial pilot could deliver a duty discount of up to 5p per litre on all petrol and diesel. That would save some drivers in rural areas upwards of £500 a year.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

As part of the derogation, will my hon. Friend please make sure that the definition of “rural” is a great deal more scientific than it has been in previous attempts? Will she also make sure that the interests of Wales are not left out?

[Justine Greening]

My hon. Friend makes a relevant point. One of the reasons that our initial discussions with the European Commission are so important is that they are an opportunity to scope properly any rural fuel duty rebate, why we would introduce it, where it would apply and the basis on which it would take place. In other countries, specific arguments have been made for the particular areas where such rebates were allowed by the European Commission. The benefit of going through the process, as we are doing, is that it maximises the chance that any proposal that we make will be given the go-ahead.

[Mr Stewart Jackson]

I thank the Minister, who is being very generous. The House will forgive me if I do not join in the excitement of our Scottish colleagues at the largesse of my English taxpayers footing the bill for their constituents. Will my hon. Friend take representations from areas such as mine, which is a travel-to-work area and essentially urban, but where there are pockets of social deprivation and low wages, such as the fens? In future, will she and her colleagues perhaps consider that such areas also require some support and assistance from the Treasury with significant increases in fuel duty, which have an impact on working life there too?

[Justine Greening]

My hon. Friend, as ever, represents his constituents powerfully. The point I would make to him and to the House is that we have inherited a huge fiscal deficit and eye-watering levels of debt, and we have to get the public finances back on to a sustainable footing. We must make sure that the economy is back on a sustainable footing too, creating long-term jobs, and that the economy is balanced so that it is less exposed to the peaks and troughs of economic winds than it was, perhaps, over the past decade.

That is the best way to help people across our country so that they are less reliant on Government giving them this, that and the other, and so that they can be reliant on themselves and choose where they spend their money and what they spend it on, instead of being reliant on somebody from Whitehall telling them.

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

Does the Minister recall that when the fuel duty escalator first came in, it was meant to be a green tax? The environment was meant to benefit from the imposition of that year-on-year tax. As far as I know, it has not benefited the environment. It has just been a nice little earner, and now it is terribly heavy on rural dwellers and in the urban context as well. I, for one, appreciate the fact that Government are looking at the issue, and I hope they come up with a fair solution.

[Justine Greening]

There is undoubtedly an environmental aspect to how fuel duty changes over time, because people do change their driving behaviour. The hon. Gentleman’s point is that clearly we are all concerned about the affordability of motoring, which has been an issue in the past few years, and particularly today. In the long term, of course, the best move is to help people not to have cars that are so dependent on petrol and diesel and therefore prey to the fluctuations in the oil price market in the first place, but that is a debate for another day. That ties in to his earlier points about the environment.

Let me wrap up my remarks, because hon. Members wish to speak and I do not want to take up any more time. We are considering the exact scope of the rural fuel rebate scheme, and Members from Scotland will welcome the fact that the Inner and Outer Hebrides, the Northern Isles and the Isles of Scilly will certainly be included. It is not quite as simple as people suggest; there is complexity, so we are taking some time to work through it.

[Katy Clark (North Ayrshire and Arran) (Lab)]

The Minister has taken a number of interventions, which we are grateful for. I have written to her about part of my constituency, the Isle of Arran, where fuel prices are often the highest in Scotland. There has been a great deal of debate about what criteria will be used to choose the pilots being considered. Arran already does badly as a result of the equivalent scheme brought in by the SNP Administration in Holyrood, so will she look at Arran when considering these issues and perhaps expand on the criteria that will be used, either today or at a future opportunity?

[Justine Greening]

I can only reiterate what I have just said, which is that we are considering the exact scope of the scheme, but it is helpful to hear some of the issues that Members have in their constituencies. We are pressing ahead and will need European approval.

[Kerry McCarthy]

Will the Minister give way?

[Justine Greening]

I will give way one last time.

[Kerry McCarthy]

The Minister is being very generous. I am slightly confused, because my understanding was that it was Conservative party policy to look at the fuel duty stabiliser and Liberal Democrat policy to look at the rebate and the rural derogation. She has spoken for more than half an hour and focused almost totally on the rural derogation, so will she, before concluding her remarks, tell us the current position on the fuel duty stabiliser?

[Justine Greening]

I think that I have been very clear on that. In opposition and in government, we have always recognised the impact on motorists of the unstable oil price, which feeds through to pump prices. In setting up a stabiliser, we need to ensure that it works as intended, so the first step was to ask the Office for Budget Responsibility to look at how oil prices feed into the economy and affect public finances. We have commissioned that work, as the hon. Lady will know, and now need to take on board its outcomes before looking at how it feeds into policy making. It would not be right to pre-empt the Budget. Indeed, when the hon. Member for Dundee East was asked for further details, he said that he needed some time, which indicates that this is a complex policy area—too complicated for the Labour party when it was in government.

In conclusion, we want to treat motorists fairly, but we must also act responsibly by ensuring that we tackle our record national debt and the financial deficit, which will not be easy. I will not hide from the House the fact that that is a difficult balance to strike, so difficult that the previous Government chose to ignore it completely. That is also the approach they have adopted for tackling the deficit, offering no credible alternatives to our policies and, in the case of fuel duty, no viable alternatives to their own policies, because it is their fuel duty escalator that is causing the problems.

Once again, it has been left to the coalition Government to clear up the mess left by the Labour Government and look at how we can reach a fair resolution on fuel duty, get our economy back on its feet and support our businesses, families and, in this case, motorists. I look forward to the rest of the debate and hope that we can have an open and honest discussion on the problems faced by motorists across the country and possible solutions. I look forward to hearing from Members in the run-up to this year’s Budget what they think is the best way forward.

--- Later in debate ---

[Kerry McCarthy]

The hon. Gentleman makes a valid point. He was speaking on behalf of his colleagues in the more remote parts of Scotland, obviously, rather than on behalf of his own constituents. I thought that perhaps his constituency stretched a little further than the city boundaries.

For Governments, when considering fuel duties there is always a difficult balance to be struck among the needs to raise revenue and balance the public finances; to address environmental concerns about increasing road traffic and emissions, to which there has not been much reference in this debate; and to ensure that the motorist and especially people who have to rely on their cars—people who do not have a choice because of where they live and the environment in which they live—are not disproportionately penalised. The previous Labour Government endeavoured to strike that balance, despite the points that the Economic Secretary to the Treasury made. That was why, for example, in years when fuel prices rose, Labour chose to put the fuel duty escalator on hold—to help motorists meet those rising costs. It is a tricky balance to strike, however, as today’s debate demonstrates, and there are no easy answers.

[Justine Greening]

To clarify matters, is the formal Labour party position that the fuel duty rise should now go on hold?

[Kerry McCarthy]

If I can adopt the mantra that the hon. Member for Dundee East first used and the Minister then picked up on, I should say that that is a matter for us to discuss when we get round to the Budget negotiations. Today, we are here to discuss the two main proposals to ameliorate the impact of rising fuel prices, particularly on rural areas. We are talking about rural areas, rather than about fuel duty prices across the board.

The dog that has not barked during this debate—the thing that was most noticeably missing from the Minister’s speech—is the fact that motorists are being hit hard by the increase in VAT to 20%, which has helped push petrol prices up to their current record levels.

--- Later in debate ---

[Kerry McCarthy]

I would like to make some progress.

There are other concerns about the stabiliser. The then Liberal Democrat spokesman, who is now Secretary of State for Business, Innovation and Skills, said at the time of the 2008 Finance Bill debates that the idea of a fuel duty regulator was “unbelievably complicated and unpredictable”. He said that the Exchequer would have to predict the net windfall, and then:

“May I suggest that there might not be any net windfall at all?”—[Official Report, 16 July 2008; Vol. 479, c. 339.]

The OBR has now confirmed that.

Labour’s then Chief Secretary to the Treasury said:

“In the face of a world slowdown, to take any one tax in isolation and claim that there is a windfall available to spend is economically illiterate, irresponsible or just disingenuous.”—[Official Report, 16 July 2008; Vol. 479, c. 331.]

She was basically saying—this was echoed by the hon. Member for Taunton Deane (Mr Browne), who was the junior Liberal Democrat spokesman at the time—that we cannot consider these revenues in a silo. Yes, oil revenues might go up, which might provide a boost to the nation’s finances—although I stress the word “might”, because it does not necessarily follow that increased revenues come from increased oil prices—but other things might happen that affect revenue flows, and it is irresponsible not to look at everything in the round. Hypothecation can box us into a corner and hamper our choices, and that is a real problem in the case of the stabiliser.

[Justine Greening]

Was the Chief Secretary who referred to economic illiteracy the same Chief Secretary who left us, as an incoming Government, a note saying that there was no money left?

[Kerry McCarthy]

No, I was referring to my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper). The Minister may have got the hint when I said “She”.

If a stabiliser were introduced, there is the question of whether the cut in duty would be passed on to the consumer at the pump. That would be very difficult to achieve without further Government enforcement and interference. I am not sure how that would square with the Government’s purported dearly held belief in the free market and dislike for state interference in the operation of the free market.

--- Later in debate ---

[Kerry McCarthy]

The new head of the OBR, Robert Chote, said in an interview about a week ago that its analysis

“suggested that a fair fuel stabiliser would be likely to make the public finances less stable rather than more stable”.

If a £10 increase in oil prices was passed through, the assumption is that it would add 7.4p per litre at the pump. To offset that would cost £3.7 billion, which is £1.3 billion more than the consequential rise in oil and gas revenues. It might have been a good idea for the Conservative party to carry out that sort of analysis before making promises that it could not keep. All the Economic Secretary has to say today is that the Government will consider the OBR’s report.

I also ask the Economic Secretary what conversations she has had with people in the industry about the impact of fuel prices. I have been contacted by the Retail Motor Industry Federation, which tells me that it has written to the Chancellor and Prime Minister four times about the matter recently, with no response at all. It has stated that the Government have

“made no attempt to engage with industry”

and that it wants the policy of a stabiliser to be dropped, because it would be

“costly and a huge administrative burden”.—[Interruption.]

Sorry, is the Economic Secretary saying that the RMI has not written to the Chancellor or the Prime Minister?

[Justine Greening]

The hon. Lady says that there has been no engagement, which is completely wrong. Only about three weeks ago, we held a workshop on tax policy in relation to travelling and the environment, at which a range of stakeholders from a variety of sectors of the travelling industry came to the Treasury to talk about their challenges. Many said that it was the first time they had been invited in for any kind of constructive discussion.

[Kerry McCarthy]

The Economic Secretary says that as though I were the one saying that there had been no engagement. I am not, it is the RMI that states that the Government have

“made no attempt to engage with industry”.

Perhaps she could place in the Library a copy of the response from either the Chancellor or the Prime Minister to the letter that the RMI says it has sent four times, and copy me in. That would confirm whether there has been an attempt to have a dialogue.

I turn to the other proposal under active consideration, the rural derogation. As we have heard, the Government are planning to pilot it in the inner and outer Hebrides, the Northern Isles and the Isles of Scilly, although from what the Economic Secretary said I am not sure whether those are the definite areas for the pilot or whether the matter is still under consideration. My understanding is that there would be a maximum 5p per litre discount on petrol and diesel sold in those areas.

Will the Economic Secretary elaborate on just how far the informal conversations with the European Union have gone? Have they been about just the pilot scheme, or have there been discussions about introducing the scheme to a significant proportion of the British isles at some time in the future?

Following on from the question that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) asked, will the Economic Secretary explain on what basis the islands in question were chosen for the pilot as opposed to other remote rural areas? Does she not think that it will be difficult to extrapolate from pilots carried out in island areas how such a scheme would work in remote mainland areas, particularly those from which it is not so far to travel to urban areas where petrol is in greater supply? Will she explain why the pilot scheme is to be so limited, rather than a larger pilot that could have more evidential benefit and be used to show how the scheme would work across the country?

We have a number of other concerns about the rural derogation. There is a long-standing principle that excise duties are charged on a universal basis, and it would set quite a precedent to depart from that practice. As has been said, the scheme would be difficult and expensive to administer, because at the moment duty is levied when oil leaves the refinery, not at the point of retail sale. That takes us back to the point that the hon. Member for Argyll and Bute (Mr Reid) made when I was talking about the stabiliser. How would the system be policed if there were to be differential duty at the point of sale? It sounds like a complex administrative system would be required.

[Justine Greening]

I am trying to follow the hon. Lady’s argument, but it is not clear to me. Will she confirm whether she supports the Government’s attempt to get a derogation in place by introducing pilots?

[Kerry McCarthy]

It is up to the Economic Secretary to answer the questions. We are certainly interested in the conversations that she is having with the EU, but we have major concerns about whether it is practical to take the proposal forward. We would like more information to be convinced that it will solve the problem.

The rural rebate proposal was, of course, a Liberal Democrat manifesto commitment, and it seems that the Government are now taking it up. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) referred to the fact that he has raised the matter on many occasions over the past 12 years, and when he was his party’s transport spokesman he proposed a duty differential based on the Scottish Government’s method of having eight categories to distinguish between urban, rural and remote areas. Again, that could become quite complex. It would be quite easy to calculate rebates in the case of geographically isolated, sparsely populated areas, but in southern Scotland, where there is more of a patchwork of those categories, it could be difficult.

Coinage (Measurement) Bill

Justine Greening Excerpts

Friday 4th February 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I pay tribute to my hon. Friend the Member for Milton Keynes North (Mark Lancaster). I think it fair to say that he has definitely had his money’s worth, for the Bill has plainly captured the imagination of the House.

In many respects, this is an historic day. Bills relating to coinage do not come along very often, but here we have a private Member’s Bill that will change the way in which we can create coinage for our country. It is not complicated, it is not really controversial—except perhaps in the respect cited by my hon. Friend the Member for Bury North (Mr Nuttall) at the end of his speech—and hopefully it will not lead to division, but will receive universal support from all parties.

British coinage has a rich and colourful past, stretching back beyond the memories of even our most seasoned parliamentarians. The Royal Mint alone is nearly 1,100 years old. Having journeyed from its first home in the Tower of London to Tower Hill, it now resides in Llantrisant in Wales. Equally interesting are the many intricate laws that govern our currency, defining appearance, weight, size and scale. Each of those laws is important in its own right, and each is steeped in tradition dating back many centuries.

King Offa, the King of Mercia who was considered to be the greatest Anglo-Saxon ruler of the 8th century, was responsible for the establishment of a new currency based on the silver penny, which, while undergoing many design changes, was the standard coin of England for many centuries. In 1060 AD, a coin shaped like a clover was minted in England. The user could break off any of the four leaves and use them as separate pieces of currency. Perhaps more worryingly, until 1790 every woman convicted of counterfeiting gold or silver coin of the realm was sentenced to be drawn on a hurdle to the place of execution and there

“to be burned with fire till she was dead”.

For reasons that have been made clear, protection of the coinage is paramount in the value of a nation’s currency. Over the next few days, the Royal Mint will be conducting the Trial of the Pyx, with which Members may not be familiar. It dates back to 1282, and is used to verify that the gold, silver and cupro nickel coins made through the ages meet the required specifications, to guarantee that the Master of the Mint has not been stealing any of the state’s precious metals, and—perhaps most relevant to our modern times—to ensure that Britain’s coins satisfy the standards set by the Coinage Act 1971. Following all those centuries of tradition, the 1971 Act brought together and rationalised some of the ancient laws that I mentioned earlier. It was instrumental in the creation of the modern coinage system, because decimalisation began at that time, and it is the legislation on which we are seeking to build today.

While reinforcing the historic pageantry of the Trial of the Pyx, the 1971 Act also did away with some of the more unusual provisions that had developed over the decades. I am sure that Members are relieved to learn that, thanks to the Act, there is no longer a provision which allows, by means of proclamation and without any control by Parliament, the introduction of foreign coins to the currency of the United Kingdom. Although the Act allowed the Chancellor to remain Master of the Mint, he was no longer to be known as its Warden or Worker, those roles and titles having fallen into disuse. Before they did so, however, they were positions of significance which were held by some formidable historical figures.

For instance, Sir Isaac Newton served as both Master and Warden of the Mint. Apparently he treated his position as Warden with the utmost seriousness, going to great personal lengths to tackle the counterfeiting of coins following the Great Recoinage of 1696. He reportedly disguised himself to pursue the counterfeiters before personally interrogating them. I am sure that the present Master of the Mint would not hesitate to go to such lengths, and it is probably just as well that the Serious Organised Crime Agency shoulders that burden in modern times.

Newton also brought about the move from silver to the gold standard for pound coins—further evidence of the long, historical evolution of this country’s coinage. As I have said, 1971 was the year of another great innovation, as that was the year in which the UK adopted a decimal currency, although Parliament first considered and rejected the idea nearly 150 years earlier. With the Olympics just around the corner, let us hope that we can make faster progress on the proposal in the Bill, which would allow the Royal Mint to play a part in the success of London 2012. The linkage of an historic institution with the chance for London and the UK to host an historic sporting event makes a huge amount of sense, as the Royal Mint’s mission statement makes clear:

“The Royal Mint will be a national treasure, at the heart of every momentous personal occasion and coin collection”.

By supporting the Bill, we support the Royal Mint in achieving that mission, helping to place it even closer to the heart of what will surely be a momentous national occasion while it continues to be a valuable asset to the British economy.

Speaking without any sense of irony, even in this challenging economic environment the Royal Mint has continued to make money for this country. For the fourth year running it has produced a substantial profit, and it continues to deliver on its five-year strategy. Its first responsibility is to make and distribute United Kingdom coins, blanks and official medals, but it also makes coins and medals for an average of 60 countries every year. In fact it makes coins for countries as diverse as Macau, Malawi, the Maldives, the Falkland Islands, Guernsey, Hong Kong, Iceland, Ireland, Jamaica, Jersey, Bahrain, Botswana and other countries all over the world. Last year, it was able to expand its international coin business against a backdrop of tough business conditions. Critically, it provided the Treasury as shareholder with a dividend of about £4 million.

I am proud to say that the Royal Mint is the first mint in the world to be awarded accreditation to the international social accountability standard SA8000, which is designed to ensure safe working conditions and fair management practices. Last year, after becoming Economic Secretary, I was keen to go to Llantrisant to meet the people who work at the Royal Mint and take a look at their production line, so I have seen in person how the Mint meets those high standards. It was fantastic to meet the management team and staff, and to have the chance to see the benefits of investment in the business. Like any normal person, I found it amazing to see so many freshly minted coins in huge boxes waiting to be packed and bagged up so that they could go into circulation. The machines that produced them were incredible—a bit like the reverse of a slot machine when people win—spitting them out at a fast pace. It was an incredible place to go, and I look forward to my next visit.

[Christopher Pincher]

The Minister mentioned new coins and their reverse. Out of deference to you, Mr Deputy Speaker, should we not consider putting the Welsh dragon on the back of our coins? We have just about every other symbol, and may well have some more as a result of the Olympic games, yet the Welsh dragon is missing from the reverse side of our coins. Will the Minister take up that issue?

[Justine Greening]

I am sure that the Royal Mint advisory committee will have listened to my hon. Friend’s comments with interest. As the hon. Gentleman will be aware, the Royal Mint changes the themes of its coins from time to time, which is one of the interesting things about UK coinage. Doubtless, it will want to take on board his suggestion.

Today our focus is not only on the Mint’s industrial and commercial achievements, but on its services to the promotion and celebration of British sport. From the 50p sports series, to the Celebration of Britain coins, to the Faster, Higher, Stronger gold sovereigns, the Royal Mint has a wide-ranging Olympic coin programme that caters for children, sports fans and professional coin collectors alike. We are concerned today with allowing the production of coins that will be of great interest to professional collectors and others.

As my hon. Friend the Member for Milton Keynes North said, very large coins have become a part of many countries’ commemorative coin offerings. My hon. Friend the Member for Carshalton and Wallington (Tom Brake) expressed concern about a slot machine big enough to take a 1 kg coin. He would probably have even greater concerns for the Canadian Royal Mint, which produced a 100 kg fine gold coin with a face value of 1 million Canadian dollars. Different countries take different approaches. The French Monnaie de Paris produced a glamorous diamond-studded gold coin. Those coins are, of course, exclusive products for a limited number of customers. That does not mean that the proposal before us is not worth while.

Although the Bill that my hon. Friend the Member for Milton Keynes North is promoting is intended to help the Mint to create kilo coins for the 2012 Olympics, it will also allow coins of that size to be struck for other significant events in future. It is important to do all we can to create a level playing field on which the Royal Mint can compete, appealing to collectors worldwide, even at the top end of the market. However, the Olympic coin programme has been designed to ensure the widest possible levels of participation.

Coins of many denominations will be produced, providing an accessible opportunity for those just starting their collections to own a commemorative Olympic coin for as little as £2.99. That is one of the reasons why it was fantastic that “Blue Peter” was able to be part of the design process. I shall come to that in a moment. The non-numismatists will not miss out; we all, I hope, look forward to seeing Olympic coins in our pockets as they enter general circulation between now and 2012, and we will have them as a reminder of a fantastic event long after our games have finished.

I am happy to report that the Royal Mint has opened up the design process to a wider group than ever before. Design competitions have been organised by “Blue Peter”. Designs have been submitted by countless secondary school children, art and design colleges, and members of the public. Although not all the results of the contests have been decided, I remind the House of one further competition winner—the Royal Mint. Following a competitive tender procedure, the Royal Mint has, as we heard, secured the honour of producing our Olympic and Paralympic medals. That further cements the important relationship between the London 2012 Olympics and our world-class export mint.

I urge hon. Members across the House to take a look through the brochure that the Royal Mint has produced, showing the 50p coin collection that will be issued. There are some wonderful designs. My personal favourite is No. 12, the athletics 50p, which is the one designed by “Blue Peter” viewers. It is brilliant. It will make everybody who sees it and uses it over the coming years smile every time they fish it out of their wallet or purse.

We all want the 2012 games to be a resounding success. I, like my hon. Friend the Member for Milton Keynes North, have strong constituency ties to the Olympics. Those include potential Olympians such as Jessica Harper, who has been identified as a future champion by British Swimming’s disability swimming section. Locally, Southfields underground station will be a key Olympic gateway for people to get to the All England club, where the Olympic tennis events are to be held. We are delighted in my constituency that last year it became the 60th station to be step-free. We will have the experience of one of the Olympic events just down the road from us. We are used to having Wimbledon every year, but June and July 2012 will be even busier than we are used to. I am delighted that during the rest of the year Southfields station will be accessible to all of my constituents in a way that it just was not before, and there have been further improvements to make it safer and easier to use.

The Olympics are fantastic for our country and we must make the most of the opportunities that they bring. The Bill is part of enabling us to do that—enabling the Royal Mint to be part of the process.

[Christopher Pincher]

We have heard a lot this afternoon about the Olympics and their being the driving reason for a 1 kg coin to be struck, but next year we will also enjoy the diamond jubilee of Her Majesty the Queen. Does my hon. Friend think that when we mint an Olympic coin, it would be appropriate to mint a similar coin in honour of Her Majesty’s jubilee?

[Justine Greening]

My hon. Friend raises a very good point. I am sure that future events of national cultural or historical significance, such as the one that he describes, could be commemorated in this way. However, the final decision would be taken by Her Majesty the Queen and the Chancellor of the Exchequer, on the advice, as I have said, of the Royal Mint advisory committee on the design of coins, medals, seals and decorations.

The background to this issue is twofold. First, the Royal Mint has more than 50 years of experience in the international commemorative coin market, and secondly, historical data from previous Olympic games show that the kilogram coins are big sellers. In fact, 14,000 were sold at Sydney 2000 and 20,000 were sold at Beijing 2008, and we have high hopes that we will see that figure rise when the Royal Mint issues its coins for London 2012.

The Royal Mint regularly attends international seminars with other mints, numismatists, collectors and trade partners, from which it is clear that there is a sizeable international market for kilogram coins. As I said, they first featured in the international commemorative coin market in 1992. They tend to be attractive to numismatists across the world, not just due to their size and the high-profile artists who design them, but because ultimately they become works of art as well as an investment opportunity. During the past 10 years, more than 40,000 Olympic kilogram coins have been issued around the world and their ongoing popularity makes them an important addition to any international Mint’s commemorative coin range.

Not only does the Bill give us the benefit of being able to continue what seems to be becoming a tradition by having an Olympic kilogram coin for London 2012, it will mean that we strengthen the Royal Mint’s ability to compete further in the commemorative coin market. We all need to do our bit to make the 2012 Olympics a games that we can be proud of. The Royal Mint wants to do its bit, and that is why the Bill is necessary. It is good for the games, good for the Exchequer and good for the country too.

I repeat my thanks to my hon. Friend the Member for Milton Keynes North for promoting the Bill, which the Government wholeheartedly support, and I look forward to further discussions on it.

Court of Auditors 2009 Report

Justine Greening Excerpts

Wednesday 2nd February 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I beg to move,

That this House takes note of the Unnumbered Explanatory Memorandum dated 25 November 2010 submitted by HM Treasury on the implementation of the 2009 EU budget, the Unnumbered Explanatory Memorandum dated 24 November 2010 submitted by the Department for International Development on the activities funded by the Eighth, Ninth and Tenth European Development Funds in the financial year 2009, European Union Document No. 12393/10 and Addenda 1 and 2 on Protection of the European Union’s financial interests, European Union Document No. 13075/10 and Addendum, relating to an annual report to the discharge authority on internal audits carried out in 2009, the Unnumbered Explanatory Memorandum dated 22 October 2010 submitted by HM Treasury on the European Anti-Fraud Office’s tenth activity report for the period 1 January to 31 December 2009, and European Union Document No. 16662/10 and Addenda 1 and 2, Commission Report to the European Parliament and the Council on the follow-up to 2008 Discharge; and supports the Government’s continued engagement with its EU partners to improve financial management of the EU budget.

I should start by saying that it is a pleasure to have this debate on the Floor of the House, as I believe that this is the first time that that has happened. European Union issues are occupying hon. Members’ thoughts at this time, so holding this debate on the Floor of the House demonstrates how important it is to focus also on the crucial issue of ensuring sound financial management of the EU budget. I therefore wish to emphasise at the outset the seriousness with which this Government take the issue. Managing taxpayers’ money properly is crucial.

[Kelvin Hopkins (Luton North) (Lab)]

Yet again, the European Court of Auditors has failed to approve the European budget. Will the Minister tell us for how many consecutive years that has occurred?

[Bob Russell (Colchester) (LD)]

Fifteen.

[Justine Greening]

In fact, it is 16 years, and the Government view that as completely unacceptable. I hope that the hon. Member for Luton North (Kelvin Hopkins) will bear with me while I set out some of the steps we have already taken and those we plan to take over the coming months to play our part in getting these issues tackled.

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

Does the Minister accept that every previous Government, of whatever party, have always said that that situation is unacceptable, yet nothing has ever changed? Why are her Government so soft on Europe?

[Justine Greening]

I completely reject the hon. Gentleman’s intervention about this Government being soft on Europe, and I think that even he does not believe it. Far from being soft, we have taken a proactive approach to managing down the EU budget and getting control over it. We are dealing with a key part of that because, as he is aware, we have been leading the debate on the size of the EU budget, with some success. We plan to lead the debate as we enter the next financial perspective about how large the budget should be and the need for it to reduce in real terms over time. He will also be pleased to hear that we are steering the debate on what we should be spending the budget on. However, we are here tonight to debate the fact that although that is crucial, if we do not have the final piece in place—ensuring that once the decision has been taken on that money it gets spent in the way that was intended—we are not fulfilling what we need to fulfil. That means we are not getting value for taxpayers’ money, and that is why this debate is so critical.

The hon. Member for Glasgow South West (Mr Davidson) asks how we can make a difference. I hope the fact that I am an accountant will bring some—[Interruption.] He is groaning, but it is a good thing to be an accountant in this role. I understand some of the technical issues involved in auditing and managing financial accounts and in managing budgets, and I assure him that I shall bring that experience to my role as Economic Secretary on behalf of the Government.

Let me set out for the House the background to this issue before taking more interventions from hon. Members who rightly want to have their say on this topic. First, managing taxpayers’ money properly is crucial at any level, be it local or national Government or across the EU. It is a key part of the responsibility of Government and essential to the credibility of the EU budget and the European Union as a whole. As I have said, this Government and I, like other Members of the House, find it completely unacceptable that the Court of Auditors was, for the 16th year in succession, unable to provide a positive statement of assurance on the EU’s accounts. That is a continuing blot on the EU’s reputation and it raises serious questions about the management of EU funds. As I have said, British and EU taxpayers need to know their money is being well spent, but the Court of Auditors cannot provide that assurance. We are talking about large sums of money and it remains difficult to spend them effectively to deliver clearly the results we want—growth, jobs and a stable EU.

[Kelvin Hopkins]

As an accountant, the Minister will understand large numbers. In 2009, reported irregularities in agriculture increased by 43%. Things are getting worse, not better.

[Justine Greening]

The hon. Gentleman is right that in some areas things are getting worse, but in others they are getting better. The problem is that there is no clear pace of improvement at a rate that will make a big enough difference fast enough. The key challenge that we have to debate tonight and that the Government are keen to push within Europe is how to get that step change. What will it take to make sure that core financial management of EU funds is further up the agenda in the European Union than it has been? I will discuss later how to manage that more effectively.

[Neil Parish (Tiverton and Honiton) (Con)]

There is one way: we could say to the EU, “If you don’t balance your books, we won’t pay our contributions.” Will the Government consider taking that position?

[Justine Greening]

My hon. Friend echoes a sentiment that many people in the country will feel. Clearly, we have a legal obligation in terms of our payments to the EU budget, but the challenge is sorting out the underlying problem and even doing what he suggests would not do that. We have to address the underlying problem now, and there are ways in which we can do that.

If I can make a little progress, I shall provide some context and talk about the steps that we are taking and are planning to take. It is important to have this debate, because the views of Members across the House and their constituents on the budget are key in pointing out how important this matter is not only for the UK Government but to represent in Europe, which we plan to do. To give some background, the European Court of Auditors report on the 2009 EU budget was published on 9 November 2010. As hon. Members will know, at that time the Government were taking extremely tough decisions domestically, having just published the spending review that was our plan to deal with the largest peacetime deficit in British history. At home, we are taking the steps needed to cut the deficit and start tackling our debt. Actually, the experience is the same for most people and most countries across Europe—member states bringing their deficits under control by cutting spending.

[Henry Smith (Crawley) (Con)]

I do not doubt the determination of the UK Government to bring down the deficit—nor do I doubt the determination of many other countries in the EU to bring down their deficits—but is it not telling that great countries trying to work together to bring down deficits do not seem to be able to make an impact on the EU, because it is so remote from the peoples of Europe, particularly the people of this country?

[Justine Greening]

That remoteness—the lack of the ability, day to day, rigorously to monitor how spend is going on—is one reason why we have reached this stage today. Also, it is fair to recognise that 80% of the spending happens at member state level. Therefore, there is some challenging complexity for any system in ensuring that that spend across those disparate member states, some of them new, is effective.

In spite of that, we have to get a grip. Our Government in the UK are getting a grip on departmental spending and the EU needs to do the same. I say to my hon. Friend the Member for Crawley (Henry Smith) that I think that there is now an appetite across member states to start to address the issue. There is more of a common agenda—perhaps at the EU and member state level—to address financial management. I welcome that development, but I am also determined to harness it while it is there to get change for the better.

As I was saying, the Court of Auditors report was published at the same time as the EU-level negotiations were taking place on the 2011 annual budget.

[Jim Shannon (Strangford) (DUP)]

The number of member states has risen from nine to 27, and the number of staff involved here has risen to some 200, yet the number of reports produced has gone down from 15 to six. If we are going to get a grip, we also need to get a grip on the financial situation in relation to what the Court of Auditors delivers and the work that it does. Does the Minister agree that something has to be done about that as well?

[Justine Greening]

Yes, I do. The Government thought it totally unacceptable that EU officials received a 3.7% pay rise when our Government had to propose a pay freeze for public sector workers. We are not the only member state taking difficult decisions such as that. The debate the hon. Gentleman is referring to is the one we have already actively engaged in, which is about not only the level of the EU budget, but what we spend that money on and ensuring it is spent on the right things that deliver the right priorities for people on the ground, whichever member state they are in.

We are about to engage in a debate, which is important for the longer term, on how we change that mix of investment to make it more significant. It is called the debate on the financial perspective, and the hon. Gentleman will be aware that that relates to the seven-year plan, whereas early last year we debated the budget for 2011. We have a chance to have that more fundamental debate about how we spend money within Europe. The Government are keen to lead that debate at EU level.

[Mr William Cash (Stone) (Con)]

My hon. Friend—a member of the coalition Government—knows that I am one of her greatest fans. Having said that, is she aware, as I know she will be, that the irregularities by Bulgaria and Romania in relation to pre-accession funds amount to 81% of all the cases, and that there is also this yawning hole concerning cohesion funds? Really, this is totally unacceptable. I have been involved in such debates for 26 years. Nothing has changed.

[Justine Greening]

My hon. Friend is right to raise that issue, for lots of different reasons. Two spring to mind. The first is the macro level of the argument, which is that new members joined the EU during the ’80s. Those member states got cohesion funds to help to develop their economies. There is a question as to the effectiveness of that spend. We are about to embark on investment in a new group of countries that are coming in. The assumption about and the argument made for the accession countries is opening up markets, but we need to see those economies develop for that business model of the EU to work.

My hon. Friend will be pleased to hear that yesterday I met the Bulgarian Minister who oversees the EU funds in Bulgaria. His entire job is administering those funds. He has been in place for about a year. For the reasons that my hon. Friend mentions, I was keen to talk to the Minister about Bulgaria’s perspective. He made the point, which I thought was right, that in the past people said to countries like Bulgaria, “You’re not spending the money that we are giving you.” His point was that those countries are keen to have it spent effectively, because that is in their interest.

Clearly, countries such as Bulgaria are at an early stage of putting in place the structures and processes. The Minister talked to me about the work that they are starting to do at national level and at regional level to enable better financial management of EU funds. That is a move in the right direction. The question for other member states is what we can do at pan-EU level to make that easier. We should get rid of unnecessary complexity and consider what we can do to help those member states to get along the road to stronger financial management faster. I believe they want to do so.

States such as Bulgaria understand that it is important for their relationship with other EU member states to be seen to be stronger financial controllers of the money that they are getting. They understand why that is important, not only in the medium or long term, but in the short term. The challenge for us is to ensure that we improve the framework within which they are working, and transparency is part of that.

I am aware that I have taken several interventions. In part, that is forcing me to jump to bits of my speech that I will come to shortly anyway. Perhaps I can make a little progress and talk to the House about what I think we need to do, some of the steps that we are taking, and what a better system of financial management at EU level would look like. I shall begin with a little more background to the European Court of Auditors report and go on to the discharge negotiation, of which this debate is an important part—in other words, how we get those accounts signed off.

On the report, it is fair to say that there are some improvements. We have had a positive statement of assurance on the reliability of the EU’s accounts, but as we can see and as we have already discussed tonight, everybody agrees that much more needs to be done. The pace of change is too slow, and we see no discernible trend in the right direction. We want to see financial management clearly supporting and controlling spend by the EU.

I shall set out the steps that the coalition has already taken to drive through improvements since we took office in May. It is worth reminding the House that the European Court of Auditors report relates to 2009, prior to the time that the coalition Government were in office. In October, when I was in Brussels having some of my meetings in relation to the EU budget, I took the opportunity to meet the Commissioner in charge of financial management in the EU, Commissioner Šemeta, to talk about our concerns and some of our ideas, and to push the case for transparency and sound financial management. I believe the Commissioner was receptive, and I think he understood that in his role, that needs to be a more fundamental priority than it has been for Commissioners in his position in the past. Since then, we have had a firm but constructive line throughout the negotiations among the member states. Let us not forget that they are responsible for management of 80% of EU funds spent.

The Government and other like-minded member states have pushed for concrete processes in several areas. First, at the pan-European level we must have further simplification of what are excessively complex rules that often hinder, rather than help, strong decision making that drives strong value for taxpayers’ money. We must push EU-level auditing toward a more risk-based and proportionate system. Simply checking through receipts in member states that are randomly selected really will not work in future. We need to move towards a system where the European Court of Auditors operates a risk-based approach, where the focus is on member states for which there seems to be evidence of poorer and weaker financial management, and where we understand exactly where the management is breaking down in those processes and control systems. We are keen to ensure that what we do at the level of the European Court of Auditors is done more effectively than it has been in the past, and I plan to meet the European Court of Auditors to discuss those issues.

We are also encouraging member states to take greater responsibility for the funds that they implement, which, as I have said, is the vast majority of the budget. In practice, that means that we are lobbying for member states’ annual summaries to be upgraded and published. The UK is currently one of only four member states that publish the sort of consolidated statement that we are debating today. We want more transparency, which we think will drive better financial management; it is not the only consideration, but a key one. The Government have pursued that agenda at the domestic level because we think that it is worth while, so we are pursuing it at the EU level. We need those annual summaries to be published and to contain more meaningful information so that people can use and interpret them.

[Kelvin Hopkins]

Is there not a vested interest in countries that are net recipients having a relaxed approach to the budgets? It is a bit of a slush fund for them to keep them on side. We are the ones who will be upset about it, because we are net contributors.

[Justine Greening]

I can see why the hon. Gentleman says that, and there is always a risk that that might be the case. Interestingly, when I met the Bulgarian Minister in charge of EU funds, that was precisely not his attitude, because clearly there is a debate about what will happen to structural and cohesion funds in future, given that new member states are now involved and want to see investment to help grow their economies. They also want value for money; they do not want billions of pounds handed over if it makes no difference on the ground. As member states, we need to drive that agenda and point out that it is unacceptable for a 16th audit report not to be given the statement of assurance. At the same time, we must have a positive agenda to work with member states to improve not only our own ability to control the finances and funds that come from the EU, but the ability of other member states to do so.

[Steve Baker (Wycombe) (Con)]

Does the Minister accept that even when the EU controls its money within its rules, it still manages to waste it? I am thinking in particular of a beautiful hotel I visited in Spain that was in the middle of nowhere—unless one was a skydiver, there was no reason to visit the local village. It seemed a total waste of public money.

[Justine Greening]

My hon. Friend demonstrates exactly why there is a far broader debate to be had on the EU budget and how the money is spent. Tonight we are debating whether the money has been spent in the way that member states agreed when they negotiated how and on what basis the investment would be split between different countries and what the priorities would be for our individual taxpayers.

The Government are determined to bear down on the size of the budget as a priority. We led the debate on limiting the EU 2011 budget in a way that other member states, at the time when we began to gather support, perhaps thought was ambitious. In fact, it worked. My hon. Friend will be aware that, as we go into the fundamental debate about the financial perspective and the longer-term budget, we will also set the parameters—with countries such as France and Germany, which, alongside us, are net contributors and, therefore, absolutely want to see that money spent effectively—within which that debate can take place.

Having led the debate on the amount, there is then a need to start leading the debate within that about priorities and ensuring, as my hon. Friend says, that we do not have wasteful spending on administration or, as the hon. Member for Luton North said, by individual member states. We have to drive out waste at the EU level. That is what we are trying to do at the national level, and it is unacceptable not to go through the same process at the EU level, too.

[Mr Douglas Carswell (Clacton) (Con)]

My hon. Friend talks a great talk about clamping down on the EU’s excesses, but will she please explain why our net contribution has gone up and will continue to go up, and why she is not reducing the amount that we contribute to the EU, when we are having to make reductions in Britain—at home?

[Justine Greening]

We are doing slightly more than talking a good talk. I share my hon. Friend’s concern that one key thing driving the budget up was the previous Government’s disastrous approach to negotiating the common agricultural policy, which saw us give away a huge chunk of our abatement and, over this Parliament, will cost the British taxpayer about £10 billion. That is totally unacceptable. He says that it is important we bear down on excesses, and I agree. That is one reason why we led the debate to stop the European Parliament’s proposal for a 6% rise in spending. We achieved that, and we are now trying to ensure that, when we go into the longer-term debate about the financial perspective over the next seven years, which starts in 2014, we begin to see real-terms reductions. Countries such as France and Germany are backing us up on that, and those are the first steps towards delivering what we want.

My hon. Friend is right that we need to go beyond words and start delivering, and that is absolutely what we want to do. For tonight, the key aspect is how we can ensure that, when we have “decisioned” the funds, the final building block, which is about financial management, is delivered professionally, robustly and with an integrity that companies would recognise. We have to move towards a better system than the one we have picked up.

We are also keen to see some quickly taken measures and short-term gains, such as a one-stop shop that provides better information to those member states implementing EU funds, and a published scorecard of recovery orders against member states. That sort of transparency will start to change the culture, but we have to question how we have reached the position of poor financial management in which we find ourselves. The answer is partly down to culture, which has to change and improve at the EU and member state levels.

Sound financial management is critical, and it brings us closer to our overarching aim, which is a budget that delivers value for money for British and EU citizens. As I am trying to get over, that is not a negative agenda, because securing better value for money is a positive thing to do. It is what we are doing; it is what taxpayers want to see us doing; and it is what all member states should want to do themselves. We believe that we have a positive agenda, and it is not just about picking or prioritising the right objectives. Last year, our excellent debate in the House about the EU budget was a good chance for Members to discuss those objectives. We should return to that over the coming months, but critically we have to ensure that, when we have “decisioned” EU money, it is spent and implemented effectively.

As I said, only yesterday I met Mr Donchev, the Bulgarian Minister overseeing the administration of EU funds in Bulgaria. I am pleased that alongside such meetings, including the meeting that I plan to have with the European Court of Auditors, and the work that we are doing with the European Commission and MEPs in the European Parliament, there is a sense that people are receptive to the need to improve financial management and want to see that happen.

I am keen and grateful for this House’s support for the Government in pursuing that agenda, because that is vital. It was important that we could go into the negotiations saying that as a Parliament we stood behind the motion on bearing down on the EU economy and our decision that a 6% rise was unacceptable. We can learn lessons from that. We as a Parliament need to stick together and show solidarity in tackling these issues. That is one step that we must take.

Even my hon. Friend the Member for Stone (Mr Cash), in his role as Chairman of the European Scrutiny Committee, has a role to play, together with his fellow-chairmen of scrutiny committees across Europe, in pushing this sort of issue to the top of the agenda. We have to be prepared to say in all channels that we must get an EU budget that becomes affordable, that is spent on the right priorities, and that is managed in the right way. His role is also vital in being able to back up some Governments while perhaps pressing those for whom this has been less of a priority to put it further up their list of priorities in future.

[Mr Cash]

This is not in any sense directed at my hon. Friend personally, but one of the big problems in implementing the Lisbon treaty is the increased functions of the EU. Increasing functions increases expenditure, and increasing expenditure has tended to increase the amount of irregularities. I am sure she will understand my concern about the manner in which we are Europeanising not only our own domestic economy, with European economic governance and all the other things that go with it, but inviting ourselves into the arena of a black hole where other member states do not understand the rules and do not much care about them either.

[Justine Greening]

My hon. Friend will know that Conservative Members, in particular, had a range of concerns about the Lisbon agenda.

[Mr Cash]

I did not mean the Lisbon agenda: I said the Lisbon treaty. I think that the Lisbon agenda has been an almighty disaster and that the 2020 strategy would fare no better. The Lisbon treaty is the instrument that increases the functions.

[Justine Greening]

Let me pick my words more carefully. My hon. Friend is right that Conservative Members had deep concerns about the content of the Lisbon treaty at the time. That is one reason why, as a party, we pushed to have a referendum before going into and signing off on the Lisbon treaty. It is a matter of deep regret that the previous Government chose not to give the British people their chance to have a say on the changes that were proposed via the Lisbon treaty.

The challenge in my role is to ensure that, in terms of where we are today, I stand up for our interests in Britain. One way we need to do that as a Government is to tackle some of the fundamental weaknesses in how the EU works, but my particular concern is financial management, not only at the EU level but at the member state level as funds are spent.

I am sure that other Members will rightly want to have their say on this, so before I finish let me quickly turn to the issue of fraud, which is of great concern to the Government and to hon. Members. I want to be absolutely clear that of course any level of fraud is completely unacceptable. We fully support the work of the Commission and of the European anti-fraud office, OLAF. I am pleased that the European Court of Auditors reports very low levels of fraud in the UK. In 2009, we had a rate of just 0.19 of 1% of spending, but it is still too high. The Government and I will focus on that as we look at how we can tackle this problem. We are therefore deeply concerned that, according to the latest OLAF report, the level of fraud seems to be increasing at the European Union level.

It would be wise for me to point out that the Commission’s figures have to be interpreted with care. As we know, fraud and irregularities are not the same thing. Irregularities make up the bulk of the available figures. To my mind, irregularities are also a serious concern, because they are payments that have been made outside the rules. We should not find that acceptable. The figures quoted by OLAF for suspected fraud are increasing. It is not possible to say that fraud is increasing, but there are indications that that may be the case. Even an increase in suspected fraud is unacceptable. The best way to tackle fraud, irregularities, waste and the lack of priorities is ultimately to have better systems, financial processes and financial controls, and a better regime for financial management in the first place.

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

My hon. Friend is right to identify those measures that need to be put in place. Is she aware of whether that is happening in the European Union?

[Justine Greening]

To my mind, that is the work that we need to ensure happens. I met Commissioner Šemeta in October 2002 to discuss his plan to improve financial management across the EU. The challenge for the Government, which I set out for him and to which he was receptive, is to make that stronger and better, and to make it more of a priority for the EU as a whole. As hon. Members have pointed out, there is a long way to go, but I assure the House that we are making a start.

[Mr Carswell]

My hon. Friend was right to highlight that a very bad financial deal was negotiated for the United Kingdom under the previous Administration. Does she therefore think it right that we should promote some of the senior Treasury officials who were responsible for those negotiations to senior positions in UKRep?

[Justine Greening]

Let us be clear that the responsibility for the catastrophic decision on the EU rebate is fairly and squarely political. I hope that the shadow Minister will tell the House why somebody in the Cabinet and the former Prime Minister, Tony Blair, thought it was a good idea to give up the equivalent of £10 billion in rebate over the course of this Parliament, in return for a common agricultural policy review that has taken years to come through and will ultimately be part of an overall budget review and a discussion on the financial perspective. In other words, they gave it up in return for a debate. That was a terrible deal for the UK taxpayer.

I assure my hon. Friend that I will take every opportunity I get, as I am sure he will, to make sure that people remember just how badly the previous Government dealt with this whole area, and just how badly they let down the UK people when it came to standing up for our interests in Brussels and having the judgment to make the right call on behalf of the UK taxpayer. That relates not just to the rebate, but to the Lisbon treaty.

[Mr Davidson]

I agree completely with what the hon. Lady said about the appalling deal that was reached by the previous Government. I and many of my colleagues took that view at the time.

Does the hon. Lady agree that the rising fraud figures should be approached with caution, because they are often an indication of rising detection rates, which are to be welcomed? Has she made a study of the matter that leads her to believe that some countries are starting to take it more seriously? I used to visit the EU when I was a member of the Public Accounts Committee. We were constantly asked to redefine the rules so that things would no longer be counted as fraud or irregularities because the goalposts had moved. I hope that she would not be amenable to such a settlement of these issues.

[Justine Greening]

The hon. Gentleman is right, and the discussion with the Bulgarian Finance Minister yesterday showed that statistics can take us only so far. There had been a debate about why Bulgaria had spent only a very small proportion of the funds that had been committed to it, but actually, if there is difficulty in spending those funds effectively, it is good for Bulgaria not to get through all of them until the problems are sorted out.

The hon. Gentleman may be right that there is now a better ability to detect suspected fraud, and he is right that there is substantive change to be made beyond this debate. We need to consider how individual member states can work within the rules to ensure that they are more effective and do not create dysfunctional decisions and systems at national level. The Court of Auditors needs to take a risk-based approach to examining how spend is managed, and it needs to work more proactively with member states so that improvements take place to address the problems that it uncovers. There is a clear agenda to be taken forward.

I look forward to hearing what hon. Members have to say. We have debated this matter on many occasions, which shows how important it is. When the UK Government and the UK people are having to take and bear the consequences of such difficult decisions, it would not be acceptable if we did not go through the same process at EU level with the same intensity. The Government are determined, and I am determined, to ensure that we lead that agenda at EU level. I hope that with the support of the House, we will be able to have some success in doing so.

--- Later in debate ---

[Justine Greening]

May I say how much I appreciate the contributions made by all hon. Members across the House this evening? They were made with passion and frustration at the continued unacceptable situation of the European Court of Auditors persistently not being able to sign off the statement of assurance that we want signed off to give us the kind of confidence that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) was just speaking about. I can tell hon. Members that I share their frustration. My task is to channel that deep frustration into positive steps to address some of our concerns.

In the short time that is left, I shall try to respond to Members on some of the points that they have raised. The hon. Member for Bristol East (Kerry McCarthy) is absolutely right to say that the procurement rules need to be simplified. The recovery rate is moving in the wrong direction, but we want to see it start moving in the right direction.

My hon. Friend the Member for Stone (Mr Cash) is absolutely right to talk about the need for improved standards. We want to work with other member states to improve the ability of the European Court of Auditor to perform its role. I absolutely agree with the hon. Member for Luton North (Kelvin Hopkins) on his frustration with the poor value for money that the common agricultural policy represents. The Government are making the case, as the previous Government started to make, that the fund must become better value for money for taxpayers. His other point about flexibility for member states to make their own decisions on how they spend the money and meet their own priorities was quite right.

My hon. Friend the Member for Daventry (Chris Heaton-Harris) is right that one part of the debate that we did not have tonight, and which I thought might have come up more, was the discharge process. He is right to point out that we have not used that process to challenge the poor financial management. I think that previous Governments have just signed that off and said that there was no need for discussion. That is not the position of this Government. We will start using the discharge process and having a discussion at the senior level, because we do not believe that we can afford not to.

[Steve Baker]

I welcome the Minister’s remarks, but given the figures that my hon. Friend the Member for Daventry (Chris Heaton-Harris) quoted on the European Parliament’s voting record, does she not agree that it seems rather futile to expect that the European Parliament might fail to discharge?

[Justine Greening]

Clearly, the European Parliament will take its decisions. I am talking about our role within the European Council and the discussions that we will have as a member state there. I can assure Members that we are talking with other member states about why we find this position unacceptable and to see what support there is for having that proper debate at the European Council meeting on 15 February so that we can resolve some of those outstanding questions and ensure that financial management becomes a priority in a way that it has not been in the past.

Question put and agreed to.

Resolved,

That this House takes note of the Unnumbered Explanatory Memorandum dated 25 November 2010 submitted by HM Treasury on the implementation of the 2009 EU budget, the Unnumbered Explanatory Memorandum dated 24 November 2010 submitted by the Department for International Development on the activities funded by the Eighth, Ninth and Tenth European Development Funds in the financial year 2009, European Union Document No. 12393/10 and Addenda 1 and 2 on Protection of the European Union’s financial interests, European Union Document No. 13075/10 and Addendum, relating to an annual report to the discharge authority on internal audits carried out in 2009, the Unnumbered Explanatory Memorandum dated 22 October 2010 submitted by HM Treasury on the European Anti-Fraud Office’s tenth activity report for the period 1 January to 31 December 2009, and European Union Document No. 16662/10 and Addenda 1 and 2, Commission Report to the European Parliament and the Council on the follow-up to 2008 Discharge; and supports the Government’s continued engagement with its EU partners to improve financial management of the EU budget.

Northern Ireland Gas Supplies

Justine Greening Excerpts

Monday 31st January 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

The Government have today announced the climate change levy [CCL] exemption for supplies of gas in Northern Ireland will be replaced with a lower rate from 1 April 2011.

Following discussion and agreement with the Department of Enterprise, Trade and Investment in Northern Ireland, legislation will be introduced in the Finance Bill 2011 to remove the exemption and replace it with a lower rate for a transitional period of 1 April 2011 to 31 October 2013, after which the main CCL rate for gas will apply in Northern Ireland. During the transitional period such supplies will become subject to the levy at a rate of £0.00059 per kilowatt hour, which is 65% lower than the full rate of CCL on gas for business and public sector consumers. Domestic consumers do not pay CCL.

Following consultation with the European Commission, the Government consider it is unlikely that they would be able to secure re-approval for the exemption. The measure is therefore necessary to ensure compliance with European tax law and state-aid rules.

To give gas suppliers and business gas consumers certainty over their tax affairs, this announcement is being made early to allow energy suppliers and businesses in Northern Ireland time to start to prepare for the introduction of the lower rate on 1 April 2011.

Copies of the draft legislation and tax information and impact note have been deposited in the Libraries of both Houses and are available on the Treasury website at

www.hm-treasury.gov.uk.

Air Passenger Duty

Justine Greening Excerpts

Thursday 20th January 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

I congratulate the hon. Member for Hackney North and Stoke Newington (Ms Abbott) on securing this debate. She eloquently ran through some of her concerns about the way in which air passenger duty is currently structured. She is asking me, as a Minister, to defend the current structure, but it is difficult for me to take responsibility for the structure of APD, given that it was entirely put in place by the previous Government. I took on board the questions put by the hon. Member for Streatham (Mr Umunna) about the fairness of the structure, but he would be better placed asking his party leader and the now shadow Chancellor about the logic that the previous Government used in approaching these issues and how they thought about the issue of fairness with respect to Caribbean countries.

[Ms Abbott]

I am the last person to defend the previous Government mindlessly. I made it clear from the very beginning of my speech that I made this argument to the outgoing Government and was disappointed by their response. Nobody is asking the Minister to defend the current system, because we know that incoming Ministers have to deal with the hand that they are dealt. What I am asking her to do is to reconsider the current system—that is a different point.

[Justine Greening]

In that case, I have good news for the hon. Lady. She was doubtless paying close attention to the emergency Budget in June, when we said that we would look at reforming APD. We recognise some of the shortcomings in the existing system’s structure, and in the next few minutes, I am going to discuss some of the issues that she has raised.

First, it is important to say that the new coalition Government recognise the importance of the strong ties that exist between the UK and Caribbean countries. As a London Member, a large number of my constituents have strong family ties with the Caribbean and they spend a lot of time saving up to go there, travelling there and spending time there, as well as having relatives come over to see them in this country. So the hon. Lady makes an important point about these links. We must also not forget the Caribbean’s relationship within the Commonwealth, which is a further incredibly important link with our country.

When the hon. Lady wrote to me recently to raise her concerns about this issue, she rightly highlighted the context within which the coalition Government are operating. Clearly the fact that we have inherited a record budget deficit has meant that some of the tax rises announced by the previous Government, such as the increase in APD rates that came into effect last November, simply could not be avoided. She referred to the APD bandings, which are the aspect of APD that concerns the Caribbean countries most, and I need not remind her that they were the brainchild of the previous Administration, not this Government.

However, we need to look forward, which is why today’s debate is worth while and important. The hon. Lady was right also to point out the role that aviation and business plays. The coalition Government recognise that as we get the economy back on track and as the recovery in the world economy starts to gather pace, aviation can play an important part in delivering future growth for the UK economy. Without continuous improvements in air connectivity, we risk endangering future growth and prosperity in the UK. She talked about the importance, particularly for the Caribbean tourism industry, of the aviation connection with the United Kingdom. I shall discuss that in a little more detail shortly, but she will be aware that I met representatives from the Caribbean countries and the Caribbean Council here in London last year, once we started to ensure that we were talking to all the stakeholders who had an interest in the reform of APD. Of course, they were an important group that I needed to talk to face to face. We had a very helpful meeting and they set out their case effectively to me that afternoon.

The hon. Lady raised some particular concerns today and in the letter that she wrote to me, and I shall do my best to address them. First, she talked about the contrast between the duties paid on flights to the Caribbean and to other destinations, including the United States. It is true that the current four band structure of air passenger duty based on the distances between London and the capital cities of other destination countries—something that was brought in under the previous Government—has the effect of placing the Caribbean in a higher tax band than the United States. Such issues are common to any banded system. I do not particularly want to defend the existing structure of APD and how the previous Government changed the tax system, but it is difficult to have any banding system that solves all the problems raised. Whichever approach we take—she mentioned time zones—there are trade-offs between equity, simplicity and effectiveness. She is right to point out that the current banding system has some downsides, but it is also fair to be pragmatic about the fact that any banding system will have its downsides.

The second point, which is very fair, concerns APD as structured and the environment. I shall not try to defend the way that APD is structured in that regard, but the new coalition Government have been very clear that we have a strong sense of purpose about the environment. We want to be the greenest Government ever. We know that alongside other major sources of emissions, the aviation sector needs to start to take proper account of its global environmental impact in the future. It is also worth recognising that from 2012 aviation will be part of the EU emissions trading scheme. That is an important step forward in ensuring that the environmental impact of aviation is better taken into account as part of the overall fiscal environment.

The coalition Government’s approach to the environment will be guided by the evidence. We do not think that there is anything to be gained by empty rhetoric on the environment, so I am very clear that we need to take a fresh look at how best to deliver our environmental objectives in a way that is fair to passengers—the hon. Lady has talked about her concerns about passengers flying to and from the Caribbean—and to industry, which has perhaps never been more important than it is now. Also, we must not lose sight of the need for the UK to have economic growth while tackling the clear problems with emissions.

[Ms Abbott]

It is important that we as a country achieve our environmental goals, but our environmental goals should not necessarily conflict with other wider development goals, such as the millennium development goals. As regards the impact of the air passenger duty as constructed on a region that, although it is ostensibly a middle income region, has communities that are among the poorest in the world, I see no reason why environmental goals cannot be co-ordinated with broader development goals.

[Justine Greening]

In many respects, that is precisely what we are trying to do. We are trying to see where we can strike the balance. That is one reason why, at the emergency Budget, we talked about wanting to reform APD. The hon. Lady is setting out some of the challenges, and finding the right mix in an approach to APD that means that we try to square off some of the difficult issues at the same time will not be easy. Debates such as this, and the time that I am taking to meet the various stakeholders—not just the Caribbean countries and their interests, particularly in tourism, but the aviation industry, airports and business in general—

[Richard Fuller]

I greatly appreciate my hon. Friend giving way. I have admired the rigour of her analysis as she has gone about her duties as a Minister as well as her powerful advocacy. If I may, I want to encourage her to use the second part of her talents—her advocacy. There is a strong equity case for people in this country to consider carefully the APD ratings for Caribbean islands. A significant number of people who have made their home here like to go home to their place of birth and origin. We all want to see the environmental goals that she has discussed accomplished, but there is a strong and powerful equity case. I ask her, through her rigour, to give due regard to that case as well as to the other competing pressures.

[Justine Greening]

I am grateful for that intervention. My hon. Friend points out the impact on local communities but, in a friendly way, I would challenge the point about contradictions. In terms of our tourism industry and our need for links with other countries to drive economic growth, this is very healthy. Our relationship with the Caribbean and the role that aviation plays in helping us to maintain that more broadly is particularly important, so we are not necessarily faced with an either/or choice.

One of the most intractable problems we face, which underpins the whole approach in the Treasury, is the unavoidable challenge of tackling the fiscal deficit. We are faced with that while also making sure that the tax measures in place work effectively and do not have the sort of negative impacts that we do not want or need them to have.

[Mr Umunna]

I should like to follow up the point about equity made by the hon. Member for Bedford (Richard Fuller), which I endorse. The key issue is the banding system, which was, admittedly, introduced by the previous Labour Government—I think one of the Minister’s predecessors referred to it as being rather rough and ready—and I would not necessarily endorse the form of APD that they put in place. The Minister says that the coalition Government have undertaken to review the system, but can she tell us when we can expect the results of the review? Obviously, the Budget will be on 23 March. Are the results of the review likely to be announced then or beforehand? That information would be useful to the industry and the many families who want to plan what they will be doing in the next few months.

[Justine Greening]

First, it would be wrong of me to pre-empt the Budget statement. What I can say—we have already been clear about this—is that any major change to air passenger duty will be subject to consultation. One thing that we have learned from looking at how this tax and others have been changed in the past is that we need a sensible tax-making policy that involves not just the Treasury thinking about the objectives it wants to achieve, but talking with stakeholders. There is a need to issue a consultation document to which people can respond and then draft legislation to make sure that the final legislation can achieve the aims we have agreed on and that have come out of the consultation.

I cannot give the hon. Member for Streatham any timings for all that, but I can tell him that we want to ensure that any reforms we bring forward will work as intended. He quoted a previous Minister saying that the system was rough and ready. We want to avoid making another change to APD that brings other problems we have not anticipated. Whatever we do in this area, it is impossible to get the perfect system, but we need to understand the pros and cons of any particular approach. We need to understand what the risks are and whether we can mitigate them. He is right to ask about timelines. The fact that we said in the previous Budget that we want to review and reform APD and that we have been working on that and meeting a variety of stakeholders to get their views shows that we want to do this in a thoughtful way rather than just announcing something that would be a surprise to the industry and to people who are trying to plan for their holidays.

Let me finish by saying that I recognise the urgency with which the hon. Member for Hackney North and Stoke Newington wants this area of tax policy to be changed. However, I think we are right to work out cautiously which path we want to go down. That is why we talked about reviewing the existing APD regime in the June Budget. As I have said, in the past few months I have met a variety of stakeholders, particularly from the Caribbean countries and the Caribbean Council in London. Those discussions have been very helpful and I have had a useful and detailed report from the Caribbean countries about their views on how we could reform APD. Obviously, we will look at that carefully. I am determined to make sure that we continue that constructive dialogue and I hope that in doing so we can ensure that wherever we end up with the reform of APD we will have done a better job of making sure that—