Cabinet Office
John Bercow Excerpts(13 years, 4 months ago)
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Mr Speaker
As usual, the hon. Gentleman is correct. The time limit was an expectation that I stated at the outset, but the Chair will exercise judgment about when the debate should be concluded. The hon. Member for Preseli Pembrokeshire (Stephen Crabb) is seeking to respond to points, and he may briefly continue to do so.
Stephen Crabb
I am grateful for your generosity and clarification, Mr Speaker. All previous competitions up to 2002 had been organised on a UK-wide basis. The golden jubilee competition was the only time when separate competitions were held for the devolved nations and for England. We regard the bestowing of city status as a signal honour and a rare mark of distinction. Something special will be lost if too many places are granted city status. The Government’s expectation is that only one new city will be created as a result of the diamond jubilee competition and, similarly, that only one existing city will be granted a lord mayoralty or lord provostship.
Loans to Ireland Bill (Allocation of Time)
John Bercow Excerpts(13 years, 4 months ago)
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Mr Speaker
The amendment has not been selected, but there will be an opportunity for a debate, and if necessary a vote, on the main motion.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I wanted to intervene on my hon. Friend the Financial Secretary to ask for a further assurance. I am minded to support my hon. Friend the Member for Wellingborough (Mr Bone) by voting against this motion in the Lobby if there is a Division. However, I might refrain from doing so if my hon. Friend the Financial Secretary were to rise to his feet and assure me that the measures in the Bill could not be used to lend to Ireland through another international institution, such as the European Union. I would be grateful for that assurance.
Mr Speaker
No further Members are standing to show that they wish to speak.
Question put.
Loans to Ireland Bill
John Bercow Excerpts(13 years, 4 months ago)
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Mr Speaker
Order. We cannot have an intervention on an intervention. We will hear from the Chancellor.
Nadhim Zahawi
I thank my right hon. Friend for giving way. Setting aside the technicalities of why we are debating this measure and how long we shall do so, and getting down to the substantive issue of the loan, can the Chancellor share with the House what the fees and the interest to the UK Government will be over the period of the loan if the Irish Government draw down the whole of the loan?
Business without Debate
John Bercow Excerpts(13 years, 4 months ago)
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Mr Speaker
We come now to the 10 o’clock motions and the business of the House motion in the name of the Prime Minister.
The Lord Commissioner of Her Majesty's Treasury (James Duddridge)
Not moved. [Interruption.]
Mr Speaker
Order. The House must calm itself. We will come to other matters in due course—any points of order and so on. The next motion is on Deferred Divisions, in the name of the Prime Minister.
Mr Speaker
We come to the business of the House motion in the name of the Leader of the House.
Hilary Benn (Leeds Central) (Lab)
On a point of order, Mr Speaker. The Government are clearly in a state of chaos when it comes to tuition fees. Yesterday, the Leader of the House tried to move a motion and it was objected to, much to the anger of the Chief Whip, as you know. Today, the Leader of the House tabled one motion in his own name and two motions in the name of the Prime Minister but, as we have just seen, did not have the courage to move the motion in his own name.
I am sure that you understand the deep sense of anger that there is in the House at the amount of time that the Government are proposing to give Members on Thursday to debate the biggest change in tuition fees and support for higher education that we have ever seen. Since the House is being treated with contempt by the Government, may we now have a statement from the Leader of the House to tell us what on earth is going on? Will he indicate how much time we will have on Thursday to debate the increase in tuition fees? [Interruption.]
Mr Speaker
Order. I am grateful to the right hon. Gentleman for his point of order. The concern of the Chair is always that matters should be handled in an orderly manner. [Interruption.] Order. That has happened, whatever the disquiet or consternation the right hon. Gentleman or others may feel. I know that he will understand that it would not be right for me, from the Chair, to say anything more on the matter. His concerns have, however, been forcefully registered.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
Further to that point of order, Mr Speaker. I expected to be debating with the Minister for Universities and Science tonight, yet we have not had even the courtesy of an explanation why the Government have not moved their motions tonight. Have you been given an explanation? How can it be acceptable that students will be saddled with £39,000-worth of debt after just three hours of debate in the House—£13,000 of debt for each hour of debate?
Mr Speaker
My simple response to the hon. Gentleman is that it would not be right now to rehearse matters of substance relating to the tuition fees debate, which there will be an opportunity to develop on Thursday. I am sure the hon. Gentleman looks forward to that opportunity. He, too, has put his concerns explicitly on the record.
Crown Currency Exchange
John Bercow Excerpts(13 years, 4 months ago)
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Mr Speaker
I call Tessa Munt. [Interruption.] I note the considerable excitement in the House, and I am concerned that the hon. Lady should be able to develop her case on the regulation of foreign exchange services and the case of Crown Currency Exchange. I therefore appeal to right hon. and hon. Members leaving the Chamber to do so quickly and quietly, and to afford the hon. Lady the same courtesy as they would wish to be extended if they themselves had the Adjournment, so I hope there will be no further animated conversations, even between very senior Members.
Business without Debate
John Bercow Excerpts(13 years, 4 months ago)
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Mr Speaker
I was about to say that the Question is as on the Order Paper, as many as are of that opinion say Aye.
Mr Speaker
Objection taken. [Interruption.] Order. The Government Chief Whip has absolutely no business whatsoever shouting from a sedentary position. He—[Interruption.] Order. The right hon. Gentleman will remain in the Chamber. He has absolutely no business scurrying out of the Chamber. [Interruption.] Order. The Chief Whip has absolutely no business—
The Parliamentary Secretary to the Treasury (Mr Patrick McLoughlin)
We all saw you.
Mr Speaker
Order. The right hon. Gentleman has no business behaving in that way. The objection has been registered, and it has been registered in a perfectly proper way. I thought it proper to put the Question. The objection had been registered, and it was registered clearly. The right hon. Gentleman has nothing about which to complain.
Delegated Legislation
Motion made, and Question put forthwith (Standing Order No. 118(6),
Electronic Communications
That the draft Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010, which was laid before this House on 27 July, be approved.—(James Duddridge.)
Question agreed to.
Motion made, and Question put forthwith (Standing Order No. 118(6),
Animals
That the draft Welfare of Farmed Animals (England) (Amendment) Regulations 2010, which were laid before this House on 8 November, be approved.—(James Duddridge.)
Question agreed to.
European Union Documents
Motion made, and Question put forthwith (Standing Order No. 119(11),
Right of Information in Criminal Proceedings
That this House takes note of European Union Document No. 12564/10 and Addenda 1 and 2, Draft Directive of the European Parliament and of the Council on the right to information in criminal proceedings; and endorses the Government’s support of the proposal to ensure that individuals subject to criminal proceedings across the EU are given timely information about their rights, information on the accusation against them and access to evidence.—(James Duddridge.)
Question agreed to.
Joint Committee on Consolidation, &c., Bills
Ordered,
That Mr Robert Buckland, Martin Caton, Mrs Jenny Chapman, Damian Collins, Jim Dobbin, Mr Stephen Dorrell, Charlie Elphicke, Paul Farrelly, Yvonne Fovargue, Jesse Norman, Sir Robert Smith and Justin Tomlinson be members of the Select Committee appointed to join with a Committee of the Lords as the Joint Committee on Consolidation, &c., Bills.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)
Autumn Forecast
John Bercow Excerpts(13 years, 5 months ago)
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The Chancellor of the Exchequer (Mr George Osborne)
I would like to make a statement regarding the Office for Budget Responsibility’s first autumn forecast. I will also, with your permission, Mr Speaker, inform the House about further measures that the Government are taking to support economic growth, including the new growth review launched today and a far-reaching programme of reforms to our corporate tax system. Following yesterday’s announcement by European Finance Ministers, I would like to take the first opportunity to update the House about the Irish situation and the UK’s involvement.
Copies of the OBR’s autumn forecast were made available in the Vote Office earlier today. We should take a moment to recognise the significance of this occasion and the practical demonstration of this Government’s commitment to transparency and independent forecasting. Today is the first time that Members of this House will engage in debate about an autumn forecast produced by the independent Office for Budget Responsibility, rather than conjured up by the Chancellor of the Exchequer, and available to read two hours before the statement. This is also the first forecast by the new independent chair of the OBR, Robert Chote, with the other members of the budget responsibility committee, Stephen Nickell and Graham Parker, whose appointments were approved by all Treasury Committee members from both sides of the House. As a result, I am sure the country can have full confidence in the independence of these forecasts.
The OBR report published today includes some 150 pages of information—an unprecedented level of detail and transparency, much of it of the kind available to previous Governments but never before published. I should like to thank the budget responsibility committee and the staff of the OBR for their hard work in putting together this autumn forecast. I hope that we now entrench this major improvement in the making of fiscal policy by passing the legislation currently before Parliament.
Although today’s figures are of course independent, they are still just forecasts, and we must treat them with a degree of caution, as one should treat any economic forecast. Indeed, the OBR is explicit about that, illustrating the uncertainty surrounding any economic forecasts with the use of fan charts rather than claiming the infallible certainty that my predecessors asserted when they provided their forecasts. The only thing that was infallible and certain was that those political forecasts were usually wrong.
With that caution in mind, let me turn to the forecast. After the deepest recession since the war, the greatest budget deficit in our peacetime history and the biggest banking crisis of our lifetime, recovery was always going to be more challenging than after previous recessions, but the message from the Office for Budget Responsibility is that Britain’s economic recovery is on track. The economy is growing, more jobs are being created and the deficit is falling. Its central forecast is for sustainable growth of over 2% in each of the next five years, and employment rising in each and every year. Indeed, employment and gross domestic product are higher in every quarter and every year than in the June forecast.
At a time when markets are gripped by fears about Government finances across Europe, today we see that the Government were absolutely right to take decisive action to take Britain out of the financial danger zone. Britain is on course both to grow the economy and balance the books, something that some people repeatedly said could not happen.
Let me take the House through the detail of the forecast. The forecasts for the economy are broadly in line with those produced for the June Budget, despite the more challenging international conditions. I should also like to point out that they are very similar to the European Commission forecasts for the UK, which also happened to be published today. Indeed, the European Commission today forecast that Britain would grow faster over the next two years than Germany, France, Japan, the United States of America and the average for the eurozone and the European Union.
The OBR forecasts real GDP growth of 1.8% this year, 2.1% next year, 2.6% in 2012, 2.9% in 2013, 2.8% in 2014 and 2.7% in 2015. Growth this year is now expected to be considerably higher than was forecast in June. In the OBR’s judgment, some of that improvement is likely to be permanent and some of it a temporary impact of stock-building. As a result, it forecasts that the rate of growth next year will be 0.2 percentage points below its forecast in June. It also predicts above-trend growth for the four years after that, but the level of GDP, or indeed the overall size of our economy, is forecast to be about half a percent higher next year than was forecast in June, and indeed higher throughout the whole forecast period.
Some have made predictions of a so-called double-dip recession, and although the OBR points out that
“growth has been volatile, as this is a common characteristic of post recession recoveries”,
its central view is that there will be no double-dip recession. Its forecast is growth next year of more than 2%, and it expects that in the slowest quarter of growth, the first quarter of next year, it will be 0.3%, rising back to 0.7% by the last quarter of next year. It also forecasts that consumer prices index inflation will fall from 3.2% in 2010 to 1.9% in 2012, once the short-term effects of the VAT rise and other temporary factors fall away.
Crucially, the OBR forecasts a gradual rebalancing of the economy as we move away from an economy built on debt to one in which we invest and export—again, something that some people said would not happen. It expects more demand to come from business investment, which is set to grow by over 8% for each of the next four years, as well as exports, which are expected to grow on average by over 6% per year. That new model of sustainable economic growth will rebalance the economy towards investment and exports and away from an unhealthy dependence on private debt and public deficit. It will bring to an end the unsustainable situation that saw families save less and less each year, so that they ended up, in the words of today’s report,
“effectively borrowing money to purchase increasingly expensive houses.”
The OBR also published today a full forecast for the labour market—something that, I should like to point out, previous Chancellors chose not to do. Employment is forecast to grow in every year of this Parliament. Total employment is expected to rise from 29 million to 30.1 million—that is over 1 million additional new jobs. Thanks to faster-than-expected growth in the economy, the OBR now expects the unemployment rate to be slightly lower this year at 7.9%, instead of 8.1%. Its forecast for the unemployment rate for next year is unchanged from the June Budget at 8%. For future years, the OBR predicts a gradual decrease in unemployment, with the rate falling every year. By the end of the Parliament, the OBR forecasts that it will fall to just above 6%, which is about 500,000 fewer unemployed people than at the beginning of this Parliament.
The trend in the claimant count is similar to that for the internationally recognised labour force survey measure of unemployment. However, the level is expected to be higher. The OBR explained that the revision is mainly due to a change in the way that flows from employment and support allowance on to jobseeker’s allowance will take place as a result of the new work capability assessment. In other words, more people are assumed to be flowing off ESA and on to JSA. That is a key part of our reforms to create a welfare system that encourages people to seek work and reduce costs to the taxpayer. In short, we will stop hiding people who can work in the incapacity statistics. Crucially, in each year, fewer people are expected to be on both of those out-of-work benefits combined than in the June forecasts.
I can also tell the House that following the spending review the OBR has recalculated its estimate of the reduction in the headcount in the public sector. In June, the OBR forecast a reduction in headcount of 490,000 over the next four years; in its latest forecast, that estimate has come down to 330,000—a reduction of 160,000. The bulk of that revision results from the action that we have taken to cut welfare bills rather than public services. Our difficult choices on child benefit, housing benefit and other benefits, each of which the Labour party opposed, mean that fewer posts will be lost across the public sector. Those headcount reductions that still need to take place will happen over four years, not overnight, and the OBR forecast is that private sector job creation will far outweigh the reduction in public sector employment. Its forecast states:
“A period of rising total employment alongside falling general government employment is in line with employment trends during the 1990s”
when total employment increased by 1.3 million over six years while general government employment fell by about 500,000.
The most important point is this: the lesson of what is happening all around us in Europe is that unless we deal decisively with this record budget deficit, many thousands more jobs will be put at risk in both the private and the public sectors.
Let me summarise the forecast for the public finances, which shows that Britain is decisively dealing with its debts. Borrowing this year is expected to be £1 billion less than was forecast in June. The OBR forecasts that public sector net borrowing will fall from £148.5 billion this year to just £18 billion in 2015-16. Government debt as a share of GDP is projected to peak just below 70% in 2013-14 and then to fall to 67% by 2015-16, so the debt ratio is now expected to peak at a lower point compared with the June forecast—just below 70% instead of just above it.
On the OBR’s central forecast, we will meet our fiscal mandate to eliminate the structural current budget deficit one year early, in 2014-15. The same is true for our target to get debt falling as a percentage of GDP. Indeed, to use the OBR’s own words,
“the Government has a slightly wider margin for error in meeting the mandate than appeared likely in June.”
For the first time, the OBR has also tested the resilience of the fiscal mandate against two alternative scenarios for the economy that critics have put forward, and in both cases the mandate is met.
It is clear that our decisive actions have proved to the world that Britain can live within her means. The Government have taken Britain out of the financial danger zone and set our economy on the path to recovery. That is the judgment not only of the OBR, but of the International Monetary Fund, the OECD, the European Commission, the Bank of England and all the major business organisations in this country. Already, our efforts are paying off. Today’s forecasts show that the cost of servicing the Government’s debt has come down. Compared to the June forecast, the OBR predicts that we will save £19 billion in interest payments between now and the end of the forecast period. That is £19 billion that will no longer be paid by British taxpayers to private bondholders and foreign Governments. It is £19 billion that would have been wasted, but will instead be saved.
This is an uncertain world, but the British recovery is on track. Employment is growing, 1 million more jobs are being created and the deficit is set to fall: the plan is working, so we will stick to the course. That is the only way to help confidence to flourish and growth to return, and I urge those who seriously suggest, when they see what is happening to our neighbours across Europe, that we should abandon the decisive plan we are following, and instead borrow and spend more, to think again. What they propose would be disastrous for the British economy, would put us back in the international firing line we have worked so hard to escape from and would mean higher deficits and jobs lost, and we should reject that path.
Stability is a necessary precondition for growth, but it is not enough. Our economy’s competitiveness has been in decline for more than a decade, undermining its ability to create jobs and grow, which is why we have already announced four annual reductions in corporation tax, axed the jobs tax, cut the small companies rate, expanded loan guarantees, simplified health and safety laws, invested in science and apprenticeships and promoted exports through major trade missions.
Let me set out some of the other things that my right hon. Friend the Secretary of State for Business, Innovation and Skills and I are announcing today to support growth and a rebalancing of our economy. In the Budget, I set out a plan to reduce the main rate of corporation tax to 24%—its lowest ever rate—demonstrating our commitment to tax competitiveness. I can now tell the House that today we are publishing the most significant programme of corporate tax reforms for a generation, for consultation with the business community. We propose to make the UK an even more attractive location for international business and investment by reforming the outdated and complex rules for controlled foreign companies. We have seen a steady stream of companies leaving the UK in recent years, and this Government, unlike the last one, are not content to sit by and watch our competitiveness leach away and our corporate tax base be undermined.
Another tax issue of crucial importance to our corporate sector is the tax treatment of income from intellectual property. For a long time, we have argued that we should increase the incentives to innovate and develop new products in this country, so to encourage high-tech businesses to invest in the UK and to create high-value jobs here, we can confirm that we will introduce from April 2013 a lower 10% corporate tax rate on profits from newly commercialised patents. We have been consulting the business community, and I can tell the House that as a result of this measure, GlaxoSmithKline will today announce a new £500 million investment programme in the UK, including new manufacturing in Hertfordshire; a £50 million venture capital fund to invest in health care research; a new facility at the university of Nottingham to develop green chemistry technology; and the building of GlaxoSmithKline’s next biopharmaceutical plant in this country, with sites in the north of England and Scotland under consideration. In total, it estimates that 1,000 new jobs will be created in the UK over the lifetime of these projects.
Today, we are also launching a cross-government growth review. This will be a determined, forensic examination of how every part of Government can do more to remove barriers to growth and support growth opportunities. Too often, the natural inclination of Government is in the opposite direction, creating new regulations, putting up new barriers, and making life more difficult for entrepreneurs and innovators. We are starting to turn the super-tanker around. Together with the Department for Business, Innovation and Skills, the Treasury will lead an intensive programme of work, involving all parts of Government, using evidence provided by the business community and reporting by next year’s Budget. We will identify reform priorities that can benefit the whole economy. Specific priority will be given to improvements to the planning system and employment law, more support for exporters and inward investment, and reforms to the competition regime. At the same time, we will begin a new sector-by-sector focus on removing barriers to growth and opening up new opportunities. Some of the resulting changes will be substantive on their own; others will help particular industries in specific ways. Some changes may be controversial if they confront vested interest, but brick by brick we will remove the barriers that are holding Britain back.
Finally, I would like to update the House on the international assistance package for Ireland. I attended the various European meetings in Brussels yesterday. We agreed a three-year package for Ireland worth €85 billion, which is
“warranted to safeguard financial stability in the euro area and the EU as a whole.”
Of that, €35 billion will be used to support Ireland’s banking sector, with €10 billion going towards immediate bank recapitalisation and €50 billion being used for sovereign debt support. Ireland will contribute €17.5 billion towards the total package, and the remaining €67.5 billion will be split, with one third coming from the IMF, one third from the European financial stability mechanism, and one third from bilateral loans and the eurozone facility. The terms of the IMF loans will be determined over the coming weeks. In principle, our bilateral loan is for £3.25 billion, and we will expect the loan to be denominated in sterling. The rate of interest on the loan will be similar to the rates levied by the IMF and the eurozone. The loan to Ireland is in Britain’s national interest. It will help one of our closest economic partners manage its way through difficult conditions.
I should also tell the House that the eurozone Finance Ministers met without me to discuss a permanent financial stability facility. I made it clear in the subsequent ECOFIN meeting that the UK will not be part of that. The president of the euro group made it clear that the UK will not be part of the permanent bail-out mechanism, and that the European financial stability mechanism, which was agreed under the previous Government in May and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.
When we came into office, Britain was in the financial danger zone. Our economy was unstable, our public finances out of control, our country—[Interruption.]
Mr Osborne
Our economy was unstable, our public finances were out of control and our country was on the international watch list to avoid. We took decisive action. Now, the independent Office for Budget Responsibility has confirmed that the British recovery is on track, our public finances are under control, 1 million jobs are set to be created and our economy is rebalancing. Today we are taking further measures to secure growth and create prosperity. We are doing so based on the foundation of stability that we have now secured. Britain is on the mend, and I commend this statement to the House.
Mr Osborne
Ah. Well, I am sure that Lord Drayson also had some interesting things to say. [Interruption.] I welcome, by the way—[Interruption.]
Mr Speaker
Order. Members really must calm down. Only this morning I was talking to sixth-formers, one of whom observed that the noise in the Chamber was totally off-putting. The public loathe it, and so do I. Let us put an end to it.
Mr Osborne
I welcome the support that the Opposition have given to our decision to offer a bilateral loan to Ireland. We will have to put legislation before the House, and I will of course keep the shadow Chancellor informed of the details when they are negotiated along with the IMF, eurozone and other bilateral contributions. I should have mentioned that Sweden and Denmark have also provided bilateral loans.
I come back, however, to the point that this forecast shows 1 million new jobs being created over the next four or five years. It also shows growth of over 2% in each year; it shows the economy rebalancing; it shows Britain getting to grips with its debts. Yet all the shadow Chancellor could come up with was this: he said he had read a Financial Times editorial in the last week—and I note from his interview this morning that that is how he does his homework; he says he photocopies articles from the FT. Well, I went one better and actually got a copy of the FT, and he said this in his FT interview this morning:
“I am a great believer in the philosophy that if you’ve not got anything to say, keep your mouth shut”.
Very good.
Mr Speaker
A lot of Back Benchers want to say something and I would like to accommodate them, but there is important business to follow in the form of Backbench-led debates, so brevity is of the essence from the Back Benches and the Front Benches alike.
Mr Andrew Tyrie (Chichester) (Con)
In June, the Red Book was forecasting that the savings ratio would remain broadly steady at about 6% for the next five years, which is quite near its long-run average for the previous 40 years. On page 67 of the most recent document however, the new forecast assumes a fall in the savings ratio to just over half that, and for the remainder of the Parliament, at only 3%. Is the Chancellor worried about that fall in the savings ratio, and will he consider measures to address it?
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I warmly welcome the announcement that you made of the investment by GSK into our British economy today on the back of the 10% tax rate for patents and innovation. Can you tell us more about the competitiveness measures that you are taking to help this country on its way out of the mess left behind by the Opposition?
Mr Speaker
Order. May I make the point that I have made no announcement and I can certainly say no more, but I think the Chancellor can oblige? We know what the hon. Lady meant.
Chris Ruane
I was right here at the back, Mr Speaker.
In my constituency, 46% of the workers are in the public sector. In one Edinburgh seat, the figure is 66%. Those are huge numbers of public sector workers and many of them will be laid off. What additional help can the Chancellor give to constituencies that contain large numbers of public sector workers?
Banking Reform
John Bercow Excerpts(13 years, 5 months ago)
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Mr Speaker
It might be for the convenience of the House to know that I have imposed, on account of the level of interest in this subject, a six-minute limit on each individual Back-Bench contribution, such limit to take effect when the mover of the motion has completed his speech. I would add also for the benefit of the House that I have selected neither of the amendments on the Order Paper.
Independent Financial Advisers (Regulation)
John Bercow Excerpts(13 years, 5 months ago)
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Mr Hoban
I have about nine minutes to respond to quite a long debate in which a number of points have been made, and I want to take the opportunity to address some of those issues.
Let me put on the record the importance that I place on independent financial advisers. They play a key role in helping people make financial product purchases and financial choices. High-quality, independent financial advice is vital in ensuring that people are encouraged to save and plan for the future and make the most out of their money. I have used independent financial advisers and been happy with the service I have received, because they have provided me with good-quality advice.
I cannot overstate the detriment to consumers from poor and biased advice. Indeed, the FSA estimates the detriment to consumers from inappropriate advice to be £200 million per annum, and it thinks that the figure could be significantly higher. Consumer detriment has led organisations such as Which? and the consumer panel that advises the FSA to support the measures in the retail distribution review. We need to get that balance right and to address some of the issues that undermine consumer trust in the IFA sector, and the FSA has sought to do so through the RDR.
I have become very conscious—in particular, over the past six or seven months as a Minister—of the financial services sector’s increasing complexity, and consumers must be confident that IFAs are fully up to date and that their advice is underpinned by good technical knowledge. There can be few hon. Members who do not support that stance or recognise the benefits that increased professionalism can bring. Indeed, the FSA finds a clear link between increased qualifications for financial advisers and improved consumer outcomes. Under its reforms, consumers will be confident that their adviser has a minimum level of understanding and expertise that is maintained each year through continuing professional development.
We should also recognise that a number of IFAs already comply with those standards. Just under half of IFAs already hold the required qualification and, indeed, many go beyond QCF level 4. Some 89% of advisers already meet the required hours each year for CPD, and we need to recognise the progress that has been made since examinations were introduced in 2008.
I recognise the strength of the debate about grandfathering, and it is an important debate to have, but we need to think about how much experience is sufficient for people to be grandfathers, and about how we can ensure that that experience covers the range of products necessary to provide whole-of-market, independent advice. We ask people to advise on a range of products, such as pensions, insurance bonds and ISAs, and they need such technical knowledge to do so. Consumers are entitled to know that their adviser has a high standard of technical knowledge, and a minimum qualification standard should deliver that.
The increase in standards will not discriminate against those who have kept up to date with market developments, and they should not have to commit a significant amount of time to study. As I have said, 90% of advisers already undertake the required number of hours for continuing professional development, and I think that over the next two years the measure can be used to fill any gaps between existing and revised standards. As a consequence of lobbying by the IFA community, the FSA has relaxed the regulations, so there will be non-exam-based alternative assessments, rather than formal written exams. That is an important move forward that the FSA has already made, but high standards of technical knowledge will be crucial to help IFAs navigate their clients through the increasingly complex choices that they have to make.
I want to touch on the issue of adviser charging. I am strongly committed to increased transparency in financial services; it is important that consumers—whatever they are buying, be it advice or a product—understand the charges and the returns that they are likely to get. That underpins a whole range of work that we are doing at the moment in the Treasury.
Currently, financial advisers can earn different amounts as commission payments, depending on which product they recommend and from which provider. How much they earn is not always transparent; indeed, Which? found that 82% of advisers failed either to explain the “key facts of cost” document or have a meaningful discussion with their clients about how their advice would be paid for. It is important that remuneration arrangements for advisers work in the best interests of consumers and promote independence of advice.
A number of IFAs have already moved away from commission to a fee-based approach. I know that AIFA, the trade association for IFAs, is helping IFAs change their business model. I do not doubt the integrity of the vast majority of advisers, but no one can doubt the financial detriment caused to consumers as a consequence of mis-selling scandals of the past. Following the FSA’s pensions review in 2002, 1.7 million consumers received compensation totalling £11.8 billion due to pension mis-selling alone.
Advisers should welcome changes in remuneration as a clear way of building consumer trust in the sector. Consumers already pay for advice, as commission is deducted from their premiums or initial investments. Advice is not free; that money comes out of the contribution that consumers make to their pensions, their investment bonds or their savings for the future. However, it is important that both the cost and the value of advice is clear to consumers. These reforms will provide clarity on price and service and that will promote competition. Just as we want transparency on interest rates paid on ISAs to promote competition among ISA providers, I believe that transparency on IFAs’ remuneration will also promote competition and provide a better understanding of the value of advice. It will increase consumers’ confidence in that area.
We want to broaden the range of advice available. A number of hon. Members have raised the annual financial health check that CFEB is going to organise. Let me be clear. The cost of that will be borne by a social responsibility levy that will be paid by institutions from Goldman Sachs through to the high street insurance broker. The cost will not be borne by independent financial advisers alone. The biggest firms, such as Goldman Sachs or Barclays, will make the biggest contributions, and they will make a far bigger contribution than IFAs. Furthermore, consumer credit organisations have also been brought into the scope of this; they will also have to pay their share towards the annual financial health check. It is important that the burden should be shared.
Financial Assistance (Ireland)
John Bercow Excerpts(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
Order. There is enormous interest but some pressure on time, so brevity from Back Benchers and Front Benchers alike is vital.
Mr Andrew Tyrie (Chichester) (Con)
I think that the public were shocked to discover that the UK was going to be bailing out a eurozone member, not just through the IMF or bilateral loans, but through the European stabilisation mechanism—that is, through the EU budget. Will the Chancellor reassure the House that he will seek to block British participation in any replenishment of the €60 billion mechanism?
Mr Speaker
Order. I should also mention that Members who were not here at the start of the Chancellor’s statement should not expect to be called. That is what I said in respect of the previous statement and that is our usual practice, to which I think we should adhere.
Mr Alistair Darling (Edinburgh South West) (Lab)
I agree with the Chancellor that it is in our country’s interests to do everything we can to help Ireland through its present difficulties. Although he and I agree that I was right to keep us out of the eurozone support fund, some money coming from Europe is partly subscribed by us and also the IMF—but does that not demonstrate that it is in our interests? The fact that he is also willing to make bilateral loans available to Ireland demonstrates that it is our interests to sort out the problems in Ireland. Although he does not have the details, can he tell us how much of that money from us and from other sources will be used to restructure and recapitalise the Irish banks, which is absolutely necessary in Ireland and also, I suspect, in a number of other countries in Europe?