Fiscal Responsibility and Fairness
John Bercow Excerpts(9 years, 1 month ago)
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Danny Alexander
Finishing the job we started in 2010 will require roughly £30 billion of fiscal consolidation by 2017-18. All parties in this House signed up to that in January, although the shadow Chancellor has been trying to wriggle out of that commitment ever since.
Our first priority must be to ensure that those with the broadest shoulders bear the largest share, so the fiscal plans I am setting out today are based on a further £6 billion from tax dodgers—an additional £6 billion of tax rises. We should expect those in high-value properties, the banking sector and others to pay more, rather than asking those working on low incomes to accept less. That would leave around £12 billion of departmental expenditure savings and the remaining £3.5 billion from welfare savings. Those measures would allow the structural current deficit to be eliminated in 2017-18. In fact, the coalition’s fiscal mandate is met with headroom of £7.7 billion.
Once that task is complete, we need to continue to cut the debt as a share of the economy, and we will not flinch from that task, because to do so would be to leave an intolerable burden to future generations. Provided that we can meet that target, borrowing for productive investment in infrastructure—in roads, railways, broadband and housing—can and should be part of our plan. We will therefore grow public expenditure as the economy grows after 2017-18. Ten years on from the financial crisis is the right time for the public finances to turn the corner. To continue the pain beyond that date is unnecessary and simply making cuts for cuts’ sake. To go too slowly, as the Opposition recommend, would drag out the pain for too long.
The national debt as a share of the economy would fall in every year of this plan, from 78.2% in 2017-18 to 76.1% and then 73.9%. The implied spending envelope for Departments would be £314.3 billion in 2017-18, rising to £324 billion and then £348.1 billion in the last year. That is £25 billion, £36 billion and then £40 billion more available for public services and infrastructure investment than in the plans presented yesterday. Just think what could be achieved with that. [Interruption.] They might not like to hear it on the Opposition Benches, but that money could be used—[Interruption.]
Danny Alexander
That money could be used to ensure that the NHS has the £8 billion it needs to secure its future, or to ensure that the education budget can be protected in real terms from cradle to college and not allowed to wither, or to support growth-enhancing spending of the sort delivered so effectively by my right hon. Friend the Secretary of State for Business, Innovation and Skills—[Interruption.]
Mr Speaker
Order. The hon. Member for Denton and Reddish (Andrew Gwynne) must resume his seat.
Mr Speaker
Order. Sir Bob, I do not think I require a lecture from you upon the matter of good order. Calm yourself, man; it will be better for your health.
Danny Alexander
Labour Members may not like it, Mr Speaker, but I am setting out the numbers in the Treasury document published today, which is an entirely legitimate thing to do.
This will also allow us to reward the hard-working public servants whose pay restraint has helped so much to balance the books. Public servants have made big sacrifices, and we need to repay that.
No Chief Secretary has ever had to control public spending in the way that I have, and no Chief Secretary should ever have to do so again. But this scenario proves that there is no need to shrink the state in the way that some in this House propose. The recovery secured, the fiscal mandate met, national debt down, public finances that have turned the corner, a stronger economy and a fairer society, and a better future for the United Kingdom: that is what these plans deliver.
However, fairness is not simply embodied by the numbers on a spreadsheet; it is also about the actions that we take. Nothing makes people more angry than the sight of some refusing to pay the tax that they owe. Last month I committed to ensuring that any individual or company that facilitates tax evasion would face stronger criminal penalties and financial sanctions. Today we deliver on that commitment by publishing a substantial package of next steps in the clampdown on these immoral and illegal practices. We inherited—[Interruption.] If the hon. Member for Denton and Reddish (Andrew Gwynne) would simply listen to what is being said instead of ranting like a lunatic, he would hear the measures that the Government are taking to clamp down on tax evasion.
We inherited from the previous Government a tax system that had more holes than a Swiss cheese and was more complex than a Rubik’s cube. The opportunities for those who wish to get away without paying were many and varied.
Andrew Gwynne (Denton and Reddish) (Lab)
Which page of the Budget is this on?
Mr Speaker
Order. The hon. Gentleman should not keep shrieking from a sedentary position, “Which page?” If the Chief Secretary wishes to go through page numbers, that is his prerogative, but if he does not, excessive gesticulation is rather unseemly. I have high aspirations for the hon. Gentleman’s future as a statesman, but I am not sure he is aiding his objective of becoming a statesman by this rather shrill shrieking, which in any case, as I am sure Mrs Gwynne will confirm, will be injurious to his health.
Danny Alexander
We would not wish to injure the hon. Gentleman’s health, Mr Speaker, nor to allow him not to hear the changes that we are making to deal with tax evasion.
For too long, our tax system struggled with the fact that a small minority felt it perfectly okay to indulge in tax avoidance and commit the crime of tax evasion. The public will not tolerate being stolen from any more. When this coalition Government came into office, we made it clear that we would eradicate loopholes that the previous Administration had left wide open. We said, “If you have not been compliant, we will give you the chance to put your affairs in order, but then we will come after you.” Since 2010, in every year of this Parliament we have put in place measure after measure to tackle the abuse of the tax system. Her Majesty’s Revenue and Customs will have secured £100 billion in additional revenue over the course of this Parliament. That includes more than £31 billion from big businesses and an extra £1.2 billion from the UK’s 6,000 richest people.
Yesterday’s Budget announced further measures targeting those who persistently enter into or market tax avoidance schemes that HMRC defeats. The Budget also announced game-changing information exchange agreements with over 90 tax authorities worldwide. Today I can announce the next steps—a tough, comprehensive new evasion-deterring package. First, for offshore evaders, following consultation we will introduce a new strict liability criminal offence so that people can no longer simply plead ignorance in an attempt to avoid criminal prosecution. Strict liability will bring an end to the defence of, “I knew nothing—it was my accountant, m’lud.”
Secondly, the Government will introduce a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion. No longer should any organisation be able to get away with facilitating or abetting others to evade tax. If people help a burglar, they are accomplices and criminals too. Now it will be the same for companies that fail to prevent their employees from helping tax evaders; they will be treated as accomplices too.
Thirdly, we will increase financial penalties for offshore evaders, including, for the first time, linking the penalty to underlying assets. A billionaire evading £5 million of tax will not just be liable for that £5 million. Fourthly, we will introduce new civil penalties so that those who help evaders will have to pay fines that match the size of the tax dodge they facilitate. If someone helps someone else evade £1 million of tax, they risk a penalty of £1 million, or even more, themselves. Fifthly, we will extend the scope for Her Majesty’s Revenue and Customs to name and shame both evaders and those who enable evasion.
Our message is simple: “Come forward and settle your affairs, or be caught and face the consequences.” These measures are helping to put in place a far more effective tax system in the UK. Once again it combines fiscal responsibility with fairness.
I would like to mention one last measure. Mr Speaker, you and the right hon. Member for Salford and Eccles (Hazel Blears) have pioneered measures to open up politics and Parliament to people from a more diverse range of backgrounds. Following extensive discussions, I am delighted to confirm that the Treasury has agreed to provide reserve funding of £200,000 a year for the Speaker’s parliamentary placement scheme in both 2015-16 and 2016-17, to ensure that its excellent work can continue beyond this year. I pay tribute to the work done by you, Mr Speaker, and the right hon. Lady as the driving forces behind the programme.
Combining fiscal responsibility with fairness—that is the approach that we as Liberal Democrats have brought to the coalition Government. We will finish the job of dealing with the deficit, and do so fairly. We will get the national debt down, we will secure the economic recovery and we will have no tolerance of people who evade tax or those who help them. That is the approach that will deliver a stronger economy and a fairer society. I commend this statement to the House.
Mr Speaker
Order. I must tell the hon. Member for Leeds North West (Greg Mulholland) that he is a cheeky fellow. He came into the Chamber after the start of the statement, and I therefore know that he will not expect to be called to ask a question on it, for in parliamentary terms that would be inappropriate. I know that he would not knowingly commit a misdemeanour in that regard. He can sit and listen if he so wishes, but he will not take part in this particular exchange. That is only fair.
Adam Afriyie (Windsor) (Con)
I have to say that I am stunned by this statement. The fact that not a single Conservative is on the Front Bench says an awful lot. This is the Westminster bubble at its absolute worst, and it represents everything that is wrong with politics today. The Liberal Democrats have betrayed their voters, and their voters know it; their own candidates are now pretending to be independents; and today’s display is an absolute betrayal of the role they have played in government. I have no question, Mr Speaker. I think the voters will make up their own minds.
Oral Answers to Questions
John Bercow Excerpts(9 years, 1 month ago)
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Mr Dennis Skinner (Bolsover) (Lab)
I could not help but notice that when my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) was asking the Chief Secretary’s sidekick to answer a question about Lord Green, the Chief Secretary was constantly having a laugh at his expense. I am going to give him a chance: will he now answer the question about meeting Lord Green. Now is the opportunity to make a name for himself. Come on.
Mr Speaker
The hon. Gentleman has made his point, but unfortunately it does not relate to investment in infrastructure.
Mr Speaker
I am trying to use such powers of anticipation as I have, but let us hear the Chief Secretary respond.
Danny Alexander
I do not recall ever having had any conversations about investment in infrastructure with Lord Green. Matters relating to ministerial appointments are, of course, a matter for the Prime Minister. What matters is making sure that in this country we have a zero-tolerance approach to tax evasion and tax avoidance, and that where organisations are facilitating or encouraging tax evasion, we put in place the proper penalties.
Danny Alexander
I am not going to change the answer I gave to the earlier question. I appreciate the sensitivity of these matters, and I would say that this Government have taken steps, wherever we can, to support that particular industry. I am not sure that it would be appropriate for me to comment further.
Sir Oliver Heald (North East Hertfordshire) (Con)
The Financial Secretary to the Treasury will be aware that Hertfordshire is a prosperous and successful county. However, it had reached the point at which growth was being compromised because the A1M was not being widened between Stevenage and Welwyn. That work has now been announced but, for the future, are the Government satisfied that they are planning such infrastructure projects far enough ahead to enable us to maintain the kind of strong economic growth that we have at the moment as a result of the long-term economic plan?
Mutuals’ Deferred Shares Bill [Lords]
John Bercow Excerpts(9 years, 1 month ago)
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Sir Tony Baldry (Banbury) (Con)
I beg to move amendment 1, page 2, line 14, leave out clause 2.
Mr Speaker
With this it will be convenient to discuss amendment 2, in title, line 3, leave out from “shares;” to end.
Sir Tony Baldry
I should make it clear at the outset that the Bill is an extremely valuable and useful one. The House is grateful to my hon. Friend the Member for Cardiff North (Jonathan Evans) for promoting it here. The Bill started in the other place, where there was a comparatively short debate on Second Reading and no Committee stage. I believe that, because time was short, the Government Minister said to the Bill’s promoter, Lord Naseby, “If you agree to certain amendments, we will support the Bill. If you do not, we will not support it.” Lord Naseby, being a very wise former Deputy Speaker of the Commons, agreed to the amendments and came to a sensible compromise. The Bill came to the House of Commons and was debated in Committee, which was skilfully navigated by my hon. Friend, because he managed to persuade the Chair to have one debate on all the clauses. There was no reference whatever to clause 2 during the debate.
The reason I tabled amendment 1 as a probing amendment is that there is potentially a conflict in the Bill. The Bill seeks to help mutuals to raise further money, funds and solvency. On the other hand, it says that however much anyone invests in a mutual, they will get only a single vote. I will describe this in more detail in a second, but the European Union Commission has proposed a statute for European mutuals. Under that proposed European law, members of a mutual would have more than one vote, and decisions would be made by a majority vote. The potential conflict is this: how do we encourage people to invest in mutuals but at the same time tell them that, however much they put in, they will get only a single vote?
Mutuals are an important part of what is known more broadly as the social economy, which staggeringly accounts for 10% of all European undertakings—the amount undertaken by mutuals in the UK is less than the amount undertaken by mutuals in other EU member states. Mutuals have been described as voluntary groups of persons whose purpose is primarily to meet the needs of their members rather than to achieve a return on investment. All hon. Members will recall mutuals in their constituencies that go back to the 18th or 19th centuries—they would have been set up in workplaces or neighbourhoods to provide sickness help, funeral cover and various reliefs of that kind, some of which were overtaken by the Beveridge report and the welfare state. There has always been a sense of each person making a contribution and getting something out.
Mutuals were put into difficulty because of the so-called solvency II directive, which called for increased solvency margins, but there are differences between different financial services providers. Smaller and medium-sized mutuals are often focused on one risk or cover one homogenous group. As a consequence, they have more difficulties in acquiring risk capital compliance with the solvency II rules. That has significant consequences for them and can result in their dissolution. As I understand it, the Bill seeks to deal with that conundrum in the solvency rules.
The basic principles behind the solvency II directive, which was adopted in 2009 and came into force in 2013, are that insurance institutions in Europe should be based on a better risk assessment, better spreading of risks and better financial foundations so as to improve the stability of the market and reinforce consumer protection—all sensible stuff. The main innovation introduced by the directive is that in establishing an improved foundation for the insurance sector, the directive concerns more than only the capital solvency requirements as they existed at the time, and it also lays down rules on the whole organisation of insurance takings in Europe. Within the European Union, it also concerns the taking up and pursuit of self-employment activities—the direct insurance and reinsurance, the supervision of insurance and reinsurance groups and the reorganisation and winding up of direct insurance undertakings.
Financial Services Industry
John Bercow Excerpts(9 years, 2 months ago)
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Douglas Carswell (Clacton) (UKIP)
I am grateful to the Minister for taking part in this debate, following the previous long and onerous one.
This issue is desperately important: the need for more competition in financial services is urgent. Choice and competition are always and everywhere a good thing. They drive up standards, force innovation and always manage to give customers better value. In many areas of our lives, we take choice and competition for granted—we assume that they happen naturally—but I simply do not think that there is enough choice and competition when it comes to financial services. In fact, financial services in this country have in many respects become something of a cartel, in which the different provider interests do not have any incentive to give the customer what they want, or to innovate and do better.
Historically, there has been a great loss of diversity in the financial industry in this country. We have a handful of banks in the UK today, but my researcher tells me that there are 417 savings banks in Germany. There has been a steady process of centralisation over the past few generations. Within living memory, cities such as Leeds and Norwich were financial centres in their own right; today, London predominates. We used to have many more types of governance structure in banks and financial institutions, with many more credit unions, partnership banks, friendly societies and old-style building societies. Banking is now dominated by big corporate plcs, which is a model that detaches management from ownership. Today, 77% of the current account market is dominated by the big four banks.
It is interesting to ask whether that is a natural process that has happened because of market-driven consolidation. I think it is a consequence of a regulatory system that has created and enforced homogeneity not just of providers but of products. It is has led to a system in which compliance is elevated above the need for customer service. I cannot help noticing that growth in many financial institutions and businesses has happened through acquisition, rather than through increasing the number of happy customers.
It is worth asking whether regulation has proved to be a barrier to entry in financial services. We commonly hear the complaint that people with money to invest are looking for a way to save it with a good rate of interest, and at the same time it is often said that businesses complain that they cannot get credit. In a normal market, the former would be put together with the latter and those who want to lend at a competitive rate of return would lend to those who want to borrow. Might it be that something about the regulatory system in this country is preventing that from happening?
The old Financial Services Authority issued some 6,000 pages of regulation between its inception and the financial crash. It is fair to say that the new regulators are carrying on with the blizzard of regulations. There are thousands of pages of compliance. Ultimately, I suspect that that is an attempt to restrain the worst excesses of some aspects of fractional reserve banking and to mitigate risk by decree or fiat. I wonder whether one consequence of that regulation is that it prevents us having new competitors, a broader spectrum of products and a broader range of providers.
It is no surprise that Metro bank, which I believe is the first new high street bank to open in this country in a generation, is so customer focused. We need to do far more to ensure that there are more banking start-ups. I will go on to elaborate on what I mean by that. We need to do more to ensure that regulation encourages banking innovation. We must allow the changes that the internet will bring about in banking to happen and ensure that regulation does not inhibit those natural, organic changes.
I am full of praise for the Minister’s magnificent idea in her former incarnation about allowing greater portability of bank accounts. I strongly support that. It is a wonderful scheme. I would love to hear a bit more about it. To put it a different way, since 2008, the percentage of personal current account holders who switch banks has grown. I would love to hear the Minister talk about ways in which we can encourage that. I am not certain what the correct percentage ought to be in a properly competitive market, but I imagine that it would be a good deal more than the current 3%. In any properly competitive market, there ought to be quite a high level of customer turnover. Should it be closer to 5% or 10%? I would love to hear the answer.
I would also love to hear whether the Minister has any sympathy with the idea that the regulatory system needs to encourage more banks to enter the market. The Prudential Regulation Authority has responsibility for that, but is it making it easier for start-ups—the equivalents of Metro bank and Handelsbanken—to come into the market? Are we making sure that capital requirements, although important, do not inhibit change?
On a slightly different note, I would love to hear whether we could review the regulatory system not only to allow new banks, but to allow new kinds of banking. We are all familiar with the idea that we can use our mobile phones to pay for things. That would have seemed like science fiction or magic 20 years ago and perhaps even 10 years ago. Similarly, might we not be able to have banking without banks—without those costly institutions that require big buildings and big bonuses? Might it not be possible to have banking through a company like O2, Google or Facebook? Those organisations have a huge customer base and know a great deal about their customers. Could we have a regulatory system that would allow a Google, a Facebook or an O2 to get a banking licence if they wanted to? It is key that if a company like that wants to acquire a banking licence, we make sure it is able to do so.
I fear that the regulatory system we have is very good at preventing new competition. That is one reason why the existing players tend to have such a close, symbiotic relationship with the regulator. There tends to be a revolving door between the regulator and the big corporate banks. I fear that corporate gigantism is a product of corporatist regulation. The regulatory system that we have is very prescriptive and detailed. It talks not simply about the outcome, but about the process that needs to be followed. I am not sure that that is a good way of regulating financial services. We must bear it in mind that Northern Rock was a highly regulated institution. The model in this country encourages financial institutions to create large compliance departments and to acquire armies of compliance officers, but those people often fail to ask the most basic questions about reserve ratios.
In financial services there is an inevitable correlation between risk and reward, and rather like the laws of gravity, if we try to create a regulatory system that defies the correlation between risk and reward, ultimately it will become unstuck. The basis for the investment industry is that correlation between risk and reward, yet I fear—particularly in the fund management industry—that some regulators try in effect to stipulate the investment mix, which has a big impact on that correlation between risk and reward.
The Building Societies Association and the Association of Financial Mutuals have made sensible suggestions about various aspects of our regulation, and interestingly they seem to recognise that our regulatory system prevents competition—it favours big corporate plcs and established players, and it does not help the mutual funds. They have come up with proposals to remove restrictive barriers to raising capital from mutuals, to change the regulation system that favours big corporate plcs, and to encourage market diversity. I would love to hear whether the Minister has sympathy with those ideas, and if so what we could try to change. The Competition and Markets Authority sounds like a wonderful idea—it is a wonderful name: who could be against it? It investigates cases where competition rules have been breached, and rightly so. Might it be, however, that Government regulation and Government fiat is doing more to restrict competition than any of the providers?
At various times in recent years there have been instances of alleged mis-selling in the financial sector, and people have been sold products on the basis of misinformation or facts that they regarded as misinformation. A constituent of mine was recently involved in the interest rate swap mis-selling scandal. That is not the first incident, and I fear it will not be the last. Every time there is an incident of mis-selling in the financial industry in this country, we ask about changing the rules and regulations, and rightly so, but we should not lose sight of the fact that the best regulator ought to be choice and competition. Happy customers ought to ensure that mis-selling does not happen, and behaviour that leads to mis-selling will be much less likely in a market focused on customer satisfaction, rather than simply compliance. We should not ask, “Are we able to do this?”, but “Does the customer want us to do this?”
I am afraid it is impossible for us to consider competition in the financial industry without considering the EU dimension—it is a sad reflection of how hollowed out our democracy has become that Ministers can really only reiterate the EU’s position on many of these issues. A couple of weeks ago Lord Hill issued a Green Paper on the capital markets union—another incident of further integration—and the Juncker Commission is pushing for standardisation in European capital markets. On the face of it, the aim is noble and it is a good ambition to remove the systemic risk in European capital markets. However, I fear that it has led to an alphabet soup of regulation in the form of the European system of financial supervision, and to unintended consequences. I will therefore touch on three rules that I think introduce such unintended consequences.
The first is the solvency II directive, which was enacted in January this year and regulates insurance companies across the EU. It is important for the House to understand that the insurance model ought to be an inherently stable model in the financial industry. It is no coincidence that during the financial crisis insurance companies tended to be pretty stable, which is because they tend to have a steady flow of income from premiums. Solvency II has the effect of imposing capital requirements on insurance firms, which would favour investment in sovereign bonds over corporate debt. I fear that would mean that there was less capital for companies—less choice, less competition and more homogenous products in the EU.
The second directive having unintended consequences is the markets and financial instruments directive II. Again, it aims to reduce risk, but as so often when one tries to remove the correlation between risk and reward through fiat, all sorts of unintended consequences are created. I fear that this will hinder the allocation of capital in markets in Europe. It will hinder the innovation in financial products.
The name of the alternative investment fund managers directive implies that left to their own devices there would be alternatives. I think the directive would inhibit the development of alternatives: the development of choice and competition in the financial markets. It would make it more likely that there would be homogeneity in the marketplace. I would be interested to hear if the Minister thinks that EU rules will help or hinder the development of competition in UK financial markets.
In conclusion, in most aspects of our lives we take choice and competition for granted. We take it for granted when we go shopping, when we buy groceries and shop around for holidays and entertainment. It is that choice and competition that I think makes life better, that improves standards and makes the world today so much better than it was a generation ago. We need to extend choice and competition into the financial markets too, and into financial services. Ever since the financial crisis, free market popular capitalism has been given a bad name. Free market capitalism needs to be given a good name again.
One key to doing that is to recognise that sometimes in financial services in this country there has been a cartel. One does not have to be Russell Brand or a leftist to recognise that there is a cartel in the financial services industry. We need to respond to that by breaking open the cartel, by allowing choice and competition and, in doing so, giving free market capitalism, the honest market and the financial services sector in this country a good name again.
I am sure the Minister agrees with me on this and I will be fascinated to hear what she thinks we need to do to ensure that we have proper choice and proper competition in our financial services industry once again.
Mr Speaker
Order. That would be the normal course of events. It is possible for another hon. Member to speak if there is time to do so, but ordinarily that is on the understanding that the Member concerned has the agreement of the sponsoring Member and of the Minister. I am not sure whether the Minister’s agreement has been sought. If the Minister were content for the hon. Gentleman to speak, I think he would intend to do so extremely briefly. Is the Minister content?
Mr Speaker
The Minister is an accommodating Minister, and therefore a suitable expression of gratitude I know will be forthcoming from the hon. Member for Rochester and Strood, Mr Mark Reckless.
Mark Reckless
Thank you, Mr Speaker. May I first clarify whether the time limit of half an hour or 7.30 pm applies? It is not entirely clear from the Order Paper.
Mr Speaker
The answer is very straightforward: until 7.30 pm. That is the factual position, but the norm in these circumstances is for agreement to contribute to have been achieved in advance. In this instance, in which the Minister is graciously agreeing to accommodate the hon. Gentleman—and it is a case of graciously agreeing—luck should not be pushed. I am always happy to hear the hon. Gentleman in an orderly way. On that basis, we will now hear his thoughts briefly.
Mark Reckless (Rochester and Strood) (UKIP)
Thank you, Mr Speaker. I have no intention of speaking at any great length or keeping the Minister from her dinner or from her very important duties.
My hon. Friend the Member for Clacton (Douglas Carswell) talked about competition and breaking up a cosy cartel in banking. I have heard him use similar language about our political system. I think there is some commonality between what we see in banking and what we see in politics. I would like to add to his remarks on solvency II. As well as the risk of starving corporate sectors of credit they might otherwise receive, I have a concern that if there is a regulatory push to force insurers to hold Government bonds, particularly when they are required to hold those only within the eurozone for certain purposes, that actually may increase risk relative to holding diversified global corporate bonds.
I want to make three brief points. First, the barriers to entry in financial services, particularly banking, so often stem from regulation—in banking, there are minimum requirements in terms of assets, time and other things—and I credit the Minister, the Treasury and our regulators with reducing them in recent years. Will she give an assessment of how that has worked? Have we managed to relax the requirements without problems developing, and might it be possible to relax them further?
Secondly, the extent of competition in banking seems often to be the product of the state of the monetary cycle, whether globally or in a particular country. In the late 1980s, we saw what happened with the Japanese banks that kindly built Eurotunnel for us but made enormous losses in doing so. In the 2000s, we saw the explosion of credit, and particularly in this country, from 2001, we saw what happened in the inter-bank credit market and across Europe. In some ways, there were positives to that—for example, greater cross-border competition between banks in Europe—but it was driven by over-optimism about the eurozone and the state of monetary policy. Since we have retreated from that position, if anything the euro appears to have driven banks back to national markets, and it is the individual sovereign—the taxpayer—who has been required to bail out the banks, which I fear has reduced the competition we were otherwise seeing from that source.
Thirdly, my hon. Friend spoke about the limits and restrictions on the current account market. I am also concerned about the small and medium-sized enterprise market. A constituency case concerning the potential mis-selling of interest rate swaps and a company called Port Medway Marina has taught me that a small business can become so entangled with a bank that, when it gets into a dispute with the bank, even if over only one aspect of their relationship, it can be difficult to disentangle from the bank and move to another one. That is a limit on competition that I fear banks too often exploit. If the Minister could say something about that, I would be very grateful. I concur with my hon. Friend’s comments about her record in the Treasury.
Bankers’ Bonuses and the Banking Industry
John Bercow Excerpts(9 years, 2 months ago)
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David T. C. Davies (Monmouth) (Con)
On a point of order, Mr Speaker. On 3 February, during the debate on mitochondrial DNA, I deliberately abstained from the vote because I did not feel that I fully understood all the arguments, yet I was recorded as having been in the Aye Lobby. I took the matter up afterwards with the officials, and received a full apology and explanation. I said that I was quite happy to let the matter rest there, despite the fact that some of my constituents had contacted me and questioned the veracity of what I had said to them.
I was therefore perturbed when on Monday, in an equally controversial and free vote on abortion during the Serious Crime Bill, I acted as one of the Tellers for the Ayes, being a strong supporter of the amendment, yet I was recorded as having voted in the No Lobby on Division 157. I took the matter up again and have been furnished with an explanation that I have forwarded to you, Mr Speaker, since it is a slightly more complicated scenario. As constituents have contacted me, I first wish to put on the record the way that I voted. Secondly, with the greatest of respect, I wish to say that it is very important that every single vote by Members in this House is recorded correctly.
Mr Speaker
I am grateful to the hon. Gentleman for his point of order and for his characteristic courtesy in giving me advance notice of its likely content. I understand his frustration. He has placed the facts on the record and I am informed that the Hansard record has also now been corrected. He correctly pointed out that he has received a comprehensive explanation, which he understands—also correctly—has been copied to me. That explanation, very properly, is comprehensive, and occupies a page and a half of A4. The House will be relieved to know that I do not intend to read it out, but suffice it to say that I believe confidence can be placed in it. Officials of this place put great importance on recording and publishing Divisions accurately, and I am informed that they will redouble their efforts to minimise such errors. The hon. Gentleman has properly drawn attention to this matter. He is also a reasonable man and I hope that he will accept that explanation. We will leave it there for now.
Tax Avoidance (HSBC)
John Bercow Excerpts(9 years, 2 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Ed Balls (Morley and Outwood) (Lab/Co-op)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement about the HSBC tax evasion scandal.
Mr Speaker
Order. I do not wish to be pedantic, simply accurate, but I think the wording of the urgent question was “avoidance”—the tax avoidance scandal. The point is on the record.
The Chancellor of the Exchequer (Mr George Osborne)
The allegations about tax evasion at HSBC Swiss are extremely serious and have been the subject of extensive investigation by Her Majesty’s Revenue and Customs. Money has been recovered for the Exchequer, and HMRC continues to be in active discussion with our prosecuting authorities. The chief executive of HMRC and the Director of Public Prosecutions have confirmed that they have the necessary resources to carry out their work on this matter, and if they need more resources they will get them.
The House should know, however, that in each and every case the alleged tax evasion—both by individuals and the bank—happened before 2006 when the shadow Chancellor was the principal adviser on tax policy and economic affairs to the then Labour Government. News that the French had got hold of the files with the names of the bank accounts became publicly known in 2009 when the shadow Chancellor was sitting on the Government Benches, and the files were requested and recovered by HMRC before May 2010, when he was a member of the Cabinet.
The right hon. Gentleman has written to ask me five questions about my responsibilities. I will answer each one directly, and in return he can account for his own responsibilities. He asked about what he calls the selective prosecution policy pursued by HMRC, and whether that decision was made by Ministers. Yes, that decision was made by Ministers, and the Inland Revenue’s overall approach to prosecuting cases of suspected serious tax fraud was set out in the Official Report on 7 November 2002, column 784W, in an answer by the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). That was confirmed again when HMRC was created in 2005—again by the right hon. Gentleman. I have increased resources for tackling tax evasion, and as a result prosecutions are up fivefold. I have answered for my responsibility on that question; perhaps the right hon. Member for Morley and Outwood (Ed Balls) will answer for his and tell us whether he drafted that policy.
Secondly, the right hon. Gentleman asked when I was first made aware of the HSBC files, what action I took, and whether I discussed them with the Prime Minister. I first became aware of the existence of the files in 2009 when a story appeared in the Financial Times. I was shadow Chancellor at the time so I could take no action, and I could not discuss it with the then Prime Minister because I was not on speaking terms with him. That is what I knew. The right hon. Member for Morley and Outwood was a Cabinet Minister. When he heard about these revelations, did he speak to the Prime Minister about them?
Thirdly, the right hon. Member for Morley and Outwood asked why we appointed Stephen Green to the Government. We appointed him because we thought he would do a good job as trade Minister, as did the Labour party, which welcomed the appointment. The trade job was not Stephen Green’s first public appointment. That was when he was appointed by the previous Government to be not just a member of the Prime Minister’s business council but its chair—a post he continued to hold after the existence of the HSBC files became public and after HMRC negotiated to recover them under the previous Government. I have explained why we appointed Stephen Green. Perhaps the right hon. Member for Morley and Outwood will explain why he appointed Stephen Green.
Fourthly, the right hon. Gentleman asked about discussions with Stephen Green on tax evasion. I can confirm that the Cabinet Secretary and the director general of ethics at the Cabinet Office carried out the background checks for ministerial appointments that were put in place by the previous Government. Stephen Green’s personal tax affairs were examined by HMRC on behalf of the House of Lords Appointments Commission, again using the procedures put in place by the previous Government. Those are the procedures we followed when we appointed Stephen Green. What procedures did the right hon. Gentleman follow?
Finally, the right hon. Gentleman asked me why I signed a deal with the Swiss authorities in 2012. He does not need my explanation. Listen to what the shadow Chief Secretary at the time, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), said:
“We support the agreement signed by the UK and Swiss Governments to secure billions in unpaid tax.”––[Official Report, Finance Public Bill Committee, 26 June 2012; c. 655.]
She is right: billions of unpaid tax never collected under a Labour Government. Under this Government, tax evasion is at the top of the G8 agenda. We have collected more money and prosecutions have increased five times over. Ahead of the Budget, I set the Treasury to work on providing further ways to pursue not just the tax evaders, but those providing them with advice. So anyone involved in tax evasion, whatever your role, this Government are coming after you. Unlike the previous Government, who simply turned a blind eye, this Government are taking action now and will do so again at the Budget. So I am happy, any time, to answer for our record on tackling tax evasion. Now, let him account for his.
Mr Speaker
Order. These exchanges are not, frankly, to the advantage of this House. They will be conducted in a more decorous atmosphere. I say to Members on both sides who are calculatedly trying to whip it up and are shouting at the tops of their voices, some holding very senior positions in this House: cut it out or get out.
Ed Balls
We know when they shout that it is because they have something to hide, Mr Speaker. That is the truth.
First, let me ask the Chancellor about what he knew and when. Two weeks ago, Downing street announced that no Minister found out about the HSBC issues until two-and-a-half weeks ago. At the weekend, the Chancellor said that he should not be involved in the tax dealings of any individual bank. Today, he has told us he knew in 2009. If he knew about systemic abuse on this scale in 2009, why did he not act when he became Chancellor? That is the first question.
Secondly, given that the Chancellor says he knew about this in 2009, why, five years on, has there been only one prosecution after the provision of 1,100 names? We know that in November 2012 HMRC confirmed that the Government had adopted a selective prosecution policy. Let me ask the Chancellor: given he knew what was happening at HSBC, did he confirm he wanted a selective prosecution policy in these cases?
Thirdly, why in 2012 did the Chancellor sign a deal with the Swiss authorities that has prevented the UK from actively obtaining similar information in the future? The agreement states that the UK and Swiss Governments will
“not actively seek to acquire customer data stolen from Swiss banks”.
Why sign up to a declaration that clearly impedes HMRC’s and the Government’s ability to act in the future? Two weeks ago, they told us it was because they did not know, but we now know that the Chancellor has known for six years. Why did he sign that deal?
Fourthly, if the Chancellor and the Prime Minister knew what was happening at HSBC in 2009, why, one month after the Government received these files, did they appoint the chair of HSBC during the period in question as a Conservative peer and Minister? What due diligence did the Government carry out in advance, and did the Prime Minister and the Chancellor see the details? Fifthly, did Lord Green have any involvement in the Swiss tax deal when he was a trade Minister? Did he ever advise the Treasury on it? Did the Chancellor discuss what happened at HSBC with Lord Green in the almost three years he was a Conservative Minister? Two weeks ago, the Prime Minister was unable to answer that question. Did the Chancellor discuss the Swiss deal and those past events at HSBC with Lord Green, who was appointed as a Minister after this scandal came to light?
It is not good enough for the Chancellor to shout and bluster, and to try and sweep these questions under the carpet and claim he did not ask the questions. Since the Government were given the files, he has been the Chancellor for five years. Is it not clear either that he and the Prime Minister were negligent in failing to act on the evidence the Government received, including about HSBC and Lord Green, or, just as with the appointment of Mr Coulson, that they deliberately turned a blind eye?
Mr Speaker
Order. Twenty Back Benchers have contributed to this exchange. As the House knows, my normal practice is to try to facilitate everybody, on both sides of the House, who wants to take part, but I should advise the House that we are time constrained today. We now have a very important statement by the Prime Minister, on which there will doubtless be substantial questioning, and then important matters in the Serious Crime Bill, in which a lot of people are interested and for which, frankly, there is not adequate time. The inadequacy of the time is down to the business managers. It is not a matter for me, but I am doing my best to cope with the situation in the interests of Back-Bench Members.
Tax Avoidance
John Bercow Excerpts(9 years, 2 months ago)
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Mr Speaker
I inform the House that I have selected the amendment in the name of the Prime Minister.
National Insurance Contributions Bill
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Mr David Burrowes (Enfield, Southgate) (Con)
On a point of order, Mr Speaker.
Mr Speaker
In that case, we shall come later to the hon. Gentleman. I am saving him up. It would be a shame to squander him too early.
Clause 2
Consequential etc power
Mr Gauke
This group comprises four minor technical amendments to clause 2 and schedule 1, which deal with simplifying the collection of class 2 national insurance contributions payable by the self-employed.
It might help the House if I briefly outline the four amendments. Amendments 2 and 3 are the Government’s response to the report, published on 27 November, by the Delegated Powers and Regulatory Reform Committee on the delegated powers contained in the Bill. The report drew to the House’s attention the power in clause 2 to amend primary and secondary legislation as a consequence of the reform of class 2 NICs. This power is currently subject to the negative procedure. The Committee said that the justification in HMRC’s “Delegated Powers Memorandum” was not sufficient for the negative procedure to apply where the power allows for the amendment or repeal of primary legislation, and the Committee recommended that in this instance the power be subject to the affirmative procedure. The Government have considered and acted on the Committee’s report. Lords amendment 2 provides that regulations made under clause 2 that amend or repeal primary legislation be subject to the affirmative procedure. Lords amendment 3 provides that the negative procedure will continue to apply to any use of the power set out in clause 2 where a statutory instrument does not contain any regulations amending or repealing primary legislation.
Lords amendments 4 and 5 are minor technical amendments dealing with the simplification of the collection of class 2 NICs payable by the self-employed. This is a matter that I have previously debated, if not at great length, with the hon. Member for Birmingham, Ladywood (Shabana Mahmood). Amendment 4 amends schedule 1, which inserts new section 11A into the Social Security Contributions and Benefits Act 1992. It will ensure that the relevant self-assessment penalties apply to class 2 contributions collected through SA by adding a missing reference to the SA under-declaration penalty contained in schedule 24 to the Finance Act 2007. It was always the Government’s intention to align penalties for class 2 contributions more closely with those for SA as part of the reform of class 2 so that the self-employed are not subject to two different regimes, but this penalty was unintentionally omitted. Lords amendment 5 makes a corresponding amendment to the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
With that explanation, which I know the House was keen to hear, I hope it will agree with the Lords amendments.
Lords amendment 2 agreed to.
Mr Speaker
It is always a joy to hear the Minister develop the argument, but he is exercising a self-denying ordinance. I must say that the way he has addressed matters thus far—comprehensively and courteously, in his usual manner—has been accompanied by a slight increase in the number of Members present for the next business. It is not for me to suggest that those two phenomena are causally related, but some people might think they are. I suppose if one is in a tight corner and hoping that the Minister will develop the arguments fully, one can always best depend (a) on a Treasury Minister and (b) on a lawyer, and he is both.
Lords amendments 3 to 5.
Mr David Burrowes (Enfield, Southgate) (Con)
On a point of order, Mr Speaker. Has any consideration been given to disapplying Standing Order No. 16(1), which allocates 90 minutes to consideration of the mitochondrial donation regulations? When similar regulations, concerning embryo research, came before the House in 2000, some 3 hours and 19 minutes were taken. Through the usual channels, the House has previously disapplied Standing Orders when dealing with issues of great significance, not least in this area. Obviously, many are concerned about the significant impact of these regulations, not least in respect of mothers at risk of passing on serious diseases to their children. This matter is of great significance to the country, because, for the first time in the world, we would be permitting human germ-line genetic modification. Given the significance of these matters, not just for those in the House but for the public, and in the interest of considering them in detail, I would have thought these matters deserved fuller debate and scrutiny, although I respect the fact that we will be turning to a general debate on rural phone and broadband connectivity afterwards. Given all that and the significant safety and legal issues, as well as ethical issues, surely we need longer than 90 minutes. Has any consideration been given to disapplying Standing Orders?
Mr Speaker
I am grateful to the hon. Gentleman both for his point of order and for his usual courtesy in notifying me in advance of its intended content. I am very sympathetic to the hon. Gentleman, but I fear—I say this in all sincerity—that I am unable to help him. The hon. Gentleman is right that it is within the power of Ministers to propose an extension of time available for a debate to which the 90-minute limit under Standing Order No. 16 applies. Notice is required, and there is no such motion on today’s Order Paper. I am clear that that is extremely regrettable, so far as the hon. Gentleman is concerned and many other Members may feel likewise. But we are where we are. In practical terms, the possibility of proposing such an extension is in the hands of the Government business managers, and is not available to Back Benchers.
The hon. Gentleman knows my views about the importance of empowering Back Benchers, and I have never been much fussed about empowering Ministers in any Administration, as the hon. Gentleman knows. Obviously, however, the Speaker has to operate within the established procedures of the House. As far as I can see—I have taken advice on the matter—today’s business must therefore conclude after an hour and a half.
The Minister is always a most courteous Minister, and she will have taken note of what has been said. Knowing the Minister as I do, I know she is planning to be pithy in her remarks to facilitate the majority of Back Benchers. About 18 Members wish to speak in the debate. If Members help each other, it will maximise the number of contributors. I fear we will have to leave it there for now.
Oral Answers to Questions
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Mr Osborne
I will not make any commitments in relation to the Budget, but my hon. Friend is right to point out that our support for the pub industry and for motorists has provided huge boosts for industries and families in Lancashire and throughout the country. Of course, we do not encourage people to mix the two.
Alison McGovern (Wirral South) (Lab)
Will the Chancellor confirm that he has ruled out a further VAT increase in the next Parliament?
Mr Speaker
Order. I apologise to colleagues whom I was not able to accommodate, but, as usual in the case of Treasury questions, demand massively outstripped supply.
Charter for Budget Responsibility
John Bercow Excerpts(9 years, 3 months ago)
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Mr Speaker
I wish to inform the House that I have not selected the amendment on the Order Paper. It is therefore for the Minister to move. I call the Chancellor of the Exchequer.