Sovereign Grant Bill

William Cash Excerpts

Thursday 14th July 2011 Commons Chamber

[Jacob Rees-Mogg]

The shadow Chancellor concluded his remarks by saying that he had looked up the Commons Journal for 1760. He is, of course, a very modern man. I went a little earlier and looked up the Commons Journal for 1575. I thank the Library for its assistance in helping me to find what I was looking for. I was looking for the behaviour of the House towards a Mr Peter Wentworth, a man who represented a Cornish seat and had the temerity to criticise the then sovereign, Elizabeth I. He said that

“none is without fault, no, not our noble Queen”.

For this “prepared speech” and

“divers offensive matters touching Her Majesty”

he was taken prisoner to the Tower and held there for a month at the insistence of the House of Commons. I must say that I think they knew how to behave in 1575, and it is a model for us today.

I want to come on to who really owns the Crown Estate, because that is important in this discussion. That is why I intervened on the Chancellor, and I am grateful to him for taking my intervention. It is important to remember that the Crown Estate is the property of the sovereign in an ultimate sense, though gifted for a reign. The importance of that is that the sovereign therefore has a right to ask for money. One might think that they would get the money anyway, but sovereigns have been promised money by Parliament that has been stopped. One just needs to go back to Charles II, who handed over all his feudal dues to the Government for £100,000 a year in perpetuity for all his heirs and successors. I am not sure that that £100,000 has been paid once in the last three hundred and some odd years. The Crown, by virtue of owning the Crown Estate, can guarantee that it is entitled to a revenue. The fact that at the beginning of each reign it could theoretically demand the Crown Estate back is important reassurance and a reassertion of that right.

[Mr William Cash (Stone) (Con)]

Is my hon. Friend conscious of the fact that at the time of the secret treaty of Dover in 1670, the Crown would not recall Parliament because Louis XIV insisted that we should do what the French and the rest of the Europeans wanted, in return for which he would give enough money to Charles II to keep him in with his mistresses and the royal household in the manner to which he felt he should be accustomed?

[Jacob Rees-Mogg]

I remember the secret treaty of Dover well, although I was not an active participant. However, it is not particularly relevant to this debate. It has to be borne in mind that Louis XIV did not deliver the cash, which is always a slight problem in such negotiations.

The Crown Estate belongs to the sovereign. Any other great landowner who has inherited land owns that property outright and is free to pass it from generation to generation. The Crown Estate is in that position. We have discussed before whether, because it is exempt from death duties or because it used to be used to pay for Government expenditure, it is in some sense different and the nation’s. I would argue that that reasoning is not accurate. In the same way that the feudal duties that fell upon other landowners were abolished as time went on, so the Crown Estate would in all normal circumstances have become the Queen’s outright.

I therefore go back to my point, which the hon. Member for Newport West (Paul Flynn) dislikes, that the Queen pays an 85% tax rate. There would be £200 million or more in income for the Queen every year, but in fact there will be only about £30 million. So Her Majesty is the highest-paying taxpayer in this country. Members of Parliament might like to think that we could do a deal with the Government, hand over our salary and be given £9,000 a year back.

--- Later in debate ---

[Mr George Osborne]

I shall deal briefly—because time is short—with the points raised. I should say first, however, that I am grateful to the Committee and the Opposition Front-Bench team for the general support they have given to clause 1 and indeed the whole Bill.

My hon. Friend the Member for Gainsborough (Mr Leigh) raised the key question: how do we create a mechanism that preserves the dignity of the monarchy while ensuring that the House is accountable for the expenditure of public money? As I said in my opening remarks, there is the question of whether the money provided is enough or too much. I said that we do not want a cut-price monarch or a lavish monarchy. As a general guide, I have looked at how much the monarchy has spent over the past five years. On average, £34 million of public money has been given per year through various forms of grant and money drawn from a reserve built up using public money. I have said that that is not a bad guide for the future and that 15% of Crown Estate revenue will provide that amount over the rest of the Parliament. In 2016, we will review whether that is the right amount.

[Mr Cash]

The Chancellor referred just now to something that I found difficult to accept. He distinguished between a cut-price monarchy and a lavish monarchy. Given Her Majesty’s incredibly distinguished performance over the past nearly 60 years, to which my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) referred, does he appreciate that this is not about being lavish, but about effectiveness and dignity?

[Mr Osborne]

I agree that it is all about effectiveness and dignity, and I think that the Bill strikes the right balance between those who say that the monarchy is spending too much and those who say that it is not getting enough money for its official duties. The Bill has been discussed with the royal household, and it is content with it, which is why the whole process began with a Gracious message.

I want to clear up a misunderstanding. There will be a real-terms increase in the annual sums that Parliament provides, but that is because the royal household has been relying on a reserve of public money that has built up over time. That reserve has come to an end, and as I said a couple of weeks ago, the previous Chancellor of the Exchequer, perfectly reasonably when confronted with this issue before the general election, said, “I think we’ll wait until after the general election and let whoever are the Government then deal with it.” We are here because we have been relying on a reserve of public money that has run out. However, with the mechanism we are putting in place there will be a real-terms reduction of up to 9%—on our estimates—in public support for the royal household.

The shadow Chancellor and others, including the hon. Member for Glasgow South West (Mr Davidson), asked what would happen if there was a windfall from, for example, the offshore marine estate. At the moment, that constitutes a very small part of the revenues of the Crown Estate—about 1%, as I understand it. It is perfectly possible that, in the latter part of the decade or in the next decade, there will be a big increase, but, because I have accepted the spirit of the Opposition amendment, we will now have a review in 2016 and will be in a much better place to assess whether there will be such a windfall. However, I think that it is highly unlikely. No one is predicting a massive windfall in the next three or four years leading up to that review.

The reserve provides a check. The expenditure of the royal household is audited by the National Audit Office and if the money is not being spent for purposes for which it is provided by Parliament, it will come out in the audit. If there is an excess—in other words, if the sovereign grant is more than it needs—it goes into a reserve. That is a long-established principle. There is now a check on that reserve so that it cannot rise above 50% or thereabouts of the money from the sovereign grant, which was not the case before the Bill was presented to the House. The trustees—the Prime Minister, the Chancellor and the Keeper of the Privy Purse—have to provide an annual report to the Treasury, and through the Treasury to Parliament, on that reserve.

A couple of specific points were made about Marlborough house. The hon. Member for North Durham (Mr Jones) raised this point a couple of times. Marlborough house will remain the Government’s responsibility and is currently used by the Commonwealth Secretariat, as I am sure he knows. It will be up to the royal household to decide what premises it needs. It would, for example, be able to rent premises if it needed to, but I do not think that that is relevant to the support that we are providing.

The hon. Member for Bristol West (Stephen Williams), who is no longer in his place, asked about the mausoleum. It will stay on the English Heritage buildings at risk register until it is repaired in five to eight years’ time. My hon. Friend the Member for Gainsborough asked about the governance of the Duchies of Lancaster and Cornwall. I did not think it appropriate to open up that issue in this Bill, which is more narrowly focused on the official support that Parliament provides to Her Majesty.

I hope that I have now answered all the questions that have been raised, and that clause 1 can now proceed to stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Accounts of the Royal Household

The Economy

William Cash Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Mr William Cash (Stone) (Con)]

The Chancellor’s analysis of what went wrong under the Labour Government is completely right. However, does he agree that our current strategy must be about growth as well as reducing the deficit through making cuts? I know he understands that and would like to achieve growth, but we cannot achieve it, either in our own economy or in Europe, if 4% of our GDP is taken up with the costs of over-regulation, as has recently been suggested. The bottom line is that we have to deregulate, but we cannot deregulate European legislation without overriding it, and negotiation is not working.

[Mr Osborne]

My hon. Friend is absolutely right that a crucial element of our strategy must be to undertake structural reform of the British economy in order to reduce regulation and the burdens on business and make our economy more competitive. We would have to do that in any case, even without the recovery from recession we are having to undertake, but the truth is that it has been made more difficult by the accumulation of all the red tape over the past few years. It is remarkable that when we propose important changes—although not changes that go as far as we would like—to employment tribunal law, Labour opposes them. Those are basic changes that would enable more people to be hired and to be in work, but they are opposed by the Opposition. [Interruption.] We can tell by Opposition Members’ reactions that they simply do not understand what it takes to create jobs in the private sector.

Scotland Bill

William Cash Excerpts

Tuesday 21st June 2011 Commons Chamber

[Michael Moore]

First, I confirm what my right hon. and learned Friend suggests. New clause 13 is now part of the Bill that will go to the House of Lords for scrutiny. Like him, I regret the tone of some of the remarks made against judges in the Supreme Court in recent weeks. I welcome the broad support for the idea that people in all parts of the United Kingdom should enjoy the same rights under the courts.

[Mr William Cash (Stone) (Con)]

On the application of the Human Rights Act 1998 in this context, and conceding that the Supreme Court has a special role to play, does the Secretary of State accept that some Government Members, and an increasing number of people throughout the country, feel that the Human Rights Act should be repealed, and furthermore that the whole basis on which it operates and the European convention on human rights should be reviewed?

[Michael Moore]

I welcome the hon. Gentleman to the proceedings on the Scotland Bill, albeit belatedly, and commend him for his ever sharp eye, looking for opportunities to raise matters European in the Chamber. Perhaps with some disappointment, we will have to agree to disagree on the fundamentals, but I point out that we are indeed considering human rights legislation in this country. I am sure that we will have a proper debate about that over many days and weeks.

Let me outline the key changes that we introduced on Report. First, we will bring forward to this financial year access to finance to allow work on projects, such as the Forth replacement crossing, to begin. We are removing the requirement for Scottish Ministers to absorb the first £125 million of tax forecasting variation within their budget. That will give Scottish Ministers more flexibility to decide how best to respond to any variations in tax receipts compared with forecasts. We will also allow Scottish Ministers to make discretionary payments into the Scottish cash reserve for the next five years, up to an overall total of £125 million. That will help manage any variation in Scottish income tax receipts, compared with forecasts in the initial phase of the new system.

As debated on Report, we have included a provision in the Bill to enable the Government to amend the way in which Scottish Ministers can borrow to include bond issuance. Without that power, further primary legislation would have been necessary to allow bonds to be issued by Scottish Ministers. Before that power is transferred, the Government will conduct a review of the costs and benefits of bond issuance over other forms of borrowing.

We have also strengthened the non-financial sections of the package to enable Scottish Ministers to approve the appointments of MG Alba board members, and to provide for reciprocal consultation between UK and Scottish Ministers when either make changes to electoral administration that impact on their respective responsibilities. We are devolving the power to make an order to disqualify persons from membership of the Scottish Parliament, and we intend to strengthen intergovernmental dialogue in areas of mutual interest in welfare.

Importantly, as my right hon. and learned Friend the Member for North East Fife (Sir Menzies Campbell) indicated, we are implementing the findings of the expert group appointed by the Advocate-General. There is a consensus that there is a problem with the role of the Lord Advocate under existing legislation. The Scotland Act 1998 did not properly recognise that the Lord Advocate fulfils two separate roles: one as chief prosecutor in Scotland, and the second as a Scottish Minister. Our amendment separates those two roles while retaining the consistent application of the protection of fundamental rights for those in Scotland, as exists for those in the rest of the United Kingdom. We believe that it strikes the correct balance.

We believe that the package of the Bill as amended and the supporting non-legislative measures provides the right balance of powers and responsibility for Scotland within the United Kingdom. Today’s debate marks the end of the first stage of debate on, and scrutiny of, the Bill in the House of Commons, but it is by no means the end of the process. There will be further opportunities to consider, debate and amend the Bill in their lordships’ House.

However, as hon. Members will be aware, the Scottish Government have asked for further amendments to the Bill. We have made it clear that we will listen and that we are willing to consider further amendments if they satisfy some key tests. First, any further amendments must be based on detailed proposals. We must be convinced, by evidence and detailed analysis, to support any amendments to a package that we believe provides Scotland with the right balance of responsibility and accountability. Secondly, any further amendments must demonstrate that they will deliver clear benefits to Scotland, without prejudice to the rest of the United Kingdom. Thirdly, any further amendments must generate cross-party consensus, which the measures set out in the Bill have achieved.

--- Later in debate ---

[Ann McKechin]

I am grateful to the hon. Lady, a fellow lawyer. I do not want to turn this into a lawyers’ conference, however, lest anyone should suspect that we have vested interests. More seriously, this is about the tone of the debate and about the relationship between the Executive and the judiciary, which forms the foundation of our democracy.

I noted in this week’s Sunday Herald that some of the First Minister’s own Ministers and MSPs apparently refer to him in private as the “Dear Leader”. References to any similarity with North Korea might seem comical, but this display fits in better with a paranoid one-party state than with a modern, progressive, advanced 21st-century democracy. I certainly do not believe that everyone who supports the SNP or wishes for independence follows that creed—Jim Sillars is a good example of someone who believes in independence but also believes in listening to other people’s arguments—but it certainly has a home within the SNP “cybernat” sphere.

[Mr Cash]

Does the hon. Lady acknowledge that the real problem is that this dispute is not so much about the Supreme Court as about the application of the Human Rights Act 1998 to the Supreme Court? For practical purposes, the Scots are entitled to their criminal law, and that has been the case since the inception of the Union.

[Ann McKechin]

The hon. Gentleman has very particular views about European human rights legislation, but I support it 100%. I believe that the Human Rights Act enhances our legal system, and it is important that people in Scotland should receive the same level of protection as everyone else. The Act is a UK-wide piece of legislation, and it is important that judgments should be made consistently. Accordingly, it is right that there should be one ultimate Court of Appeal that makes important decisions on key points of principle. The Cadder decision, which the right hon. and learned Member for North East Fife (Sir Menzies Campbell) mentioned, was one such decision. It is important to have consistency of judgment, which is one of the parts of our judicial process.

Like most people in Scotland, my domicile arises from birth and not from choice, but I believe that I am exceptionally fortunate to have been born in Scotland at this time in history and I am proud to be a Scot. However, I totally renounce any attempt to mould the politics and culture of the country that I love into one that is marked by a constant placing of the “good Scot versus bad Scot” concept into the dialogue of our public life. That is both dangerous and destructive, and represents a threat to genuine debate. The tactics of the playground bully should form no part of a modern, open Scotland.

Scotland’s legal systems, like any other area of our public life, need to be open to ideas from the outside, and not just from its own legislature. In fact, many of our oldest precepts and concepts are borrowed from a wide combination of other European systems—French, Dutch and Roman as well as English. We have also learned from cases that have occurred in England. It was because we are part of the United Kingdom that one of the most famous cases of tort and delict in civil law, Donoghue v. Stevenson, which took place in my own home town of Paisley, spread across the world. When we genuinely look outwards, we perform at our best; when we revert to inward, defensive complacency, we let our nation down.

This has been an important debate on the future that we see for Scotland. As the Secretary of State has said, the debate will continue over the weeks and months to come, but I want to ensure that it takes place in the context of the hard, reasoned evidence that the Scots demand of us, and that it can be clearly shown to be for their benefit.

Eurozone (Contingency Plans)

William Cash Excerpts

Monday 20th June 2011 Commons Chamber

[Mr Hoban]

The hon. Lady poses a series of very good questions, to which I will respond.

The hon. Lady asked whether the authorities are working together. I said in response to her initial question that the Treasury, the Bank of England and the FSA are working closely on this matter and monitoring the situation. We are keen to ensure that the UK banking system is resilient. The additional capital that the banks hold now, compared with at the start of the crisis, will help with that. As I said, UK banks have not had difficulty in sourcing funding in the market. There is a concern about liquidity risk, but UK banks are continuing to source funding.

I mentioned in my statement the exposure of UK banks to the Greek Government. It is $4 billion, which is less than our exposure to, for example, the Irish banks. The hon. Lady should bear it in mind that French banks’ exposure is about four times that amount and that German banks’ exposure is about five times that amount. We are taking the matter seriously and considering it carefully, and the Chancellor is currently at the ECOFIN meeting in Luxembourg, where I am sure it will be discussed.

The hon. Lady talked about reversing the VAT increase. The shadow Chancellor proposed last week a cut in VAT that would cost £51 billion, which would put at risk our credibility in international markets. We have taken the difficult decisions to ensure that UK market rates are in line with those of Germany. The proposal that she put forward, and which her right hon. Friend put forward last week, would mean interest rates rising for families and businesses across this country, putting the recovery at risk. I do not think that is a gamble that we can afford to take.

[Mr William Cash (Stone) (Con)]

Will the Minister concede that it is crystal clear that the Greek situation, like those of Ireland and Portugal, does affect us? Does he also accept that the idea that is being put forward in the European Union Bill of not having a referendum on treaties that relate to the eurozone would mean that, although we are affected by the situation, we would not be allowed to have a referendum on it? Will he ensure that when the Bill returns to the House of Commons, there are amendments to ensure that there is a referendum on this matter, which affects us, so that the British people can vote on it?

Eurozone Financial Assistance

William Cash Excerpts

Tuesday 24th May 2011 Commons Chamber

[Mr William Cash (Stone) (Con)]

The Government amendment—they have not tabled it in their own name, but that is what it is, to a great extent—reflects badly on the integrity of the coalition. It has nothing whatever to do with the national interest. It also says a great deal about a commitment to Liberal Democrat ideology, and it is primarily about numbers. The Liberal Democrats, and certain elements in the Conservative party at a very high level, are quite prepared to allow further European integration. There are alternatives that would allow us to renegotiate the treaties and/or to say no, but they are simply not doing so.

Indeed, only a few days ago, the Prime Minister made it abundantly clear that the object of the coalition was to stabilise the economy. We understand that. The problem is that this is about numbers, not about principles or policy. There are many people in the Conservative party, outside and inside the House, who know that the arguments we are seeking to address in a reasonable fashion are in the interests of the country. There is no question about that; the press outside believe it as well. The bottom line is that those of us who have relentlessly pursued the issue of the eurozone bail-out and have tabled many questions have invariably received what could reasonably be described as somewhat evasive answers.

Why should the British taxpayer or British hospitals and schools in our constituencies in any way underwrite what goes on in Portugal, or indeed any other country in the eurozone, particularly in times of austerity? It is nothing to do with the question, as suggested on a number of occasions, of qualified majority voting. This is completely contrary to the assertion made in reply to me today by the Financial Secretary. Article 122 is not compatible with the treaty and cannot possibly be used to support the European financial stability mechanism. Indeed, in their acquiescence, as shown in the amendment, the Government accept that the position is legally unsound. By saying that, they completely undermine their position. The Government know it and everyone knows it: it is not compatible with the treaty, and the Minister is wrong.

[Mr John Redwood (Wokingham) (Con)]

My hon. Friend makes a powerful legal point. Does he agree that what these states in trouble need is a work-out, not a bail-out? We do not give alcoholics more drink; we cure the alcoholism. We should not give the over-borrower more borrowing.

[Mr Cash]

I could not agree more, and a course of Alcoholics Anonymous would not be out of place.

It is not just the European Scrutiny Committee that said the position was legally unsound or unlawful. Madame Lagarde herself, the prospective head of the IMF, said on this issue on 17 December:

“We violated all the rules because we wanted to close ranks and really rescue the eurozone.”

This is a stitch-up of the British people to maintain the so-called solidarity for further integration of a failing European project. That is what lies at the heart of the matter.

Why are people protesting and rioting all over Europe —in Madrid, Greece, Italy and the list is growing? What is not growing is the European economy and the reason is that the sort of policies needed—here and in all the other countries—to engender growth to deal with the deficit that the Government rightly say we have to address are impossible to achieve without generating the growth that is needed by repealing legislative burdens and generating policies that the integrationists in Europe simply refuse to allow. I would go further and say that the coalition in this country cannot achieve growth simply because the Liberal Democrats, as part of the coalition, have silenced the Prime Minister’s promise to repatriate burdens on business. It is called 56 votes and the keys to No. 10.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

The hon. Gentleman might have heard, as I did, the Liberal part of the coalition talking clearly about what might happen “if” these loans are repaid, which suggests some ambiguity and concern within the coalition Government about whether the loans will be repaid. He will also recall that when the Conservatives were in opposition, they opposed the bail-out of Northern Rock. What has changed between then and now?

[Mr Cash]

Very simply, we now have a new coalition Government who have been seeking to achieve a reduction in the deficit, but they are not doing the accompanying things that are required in respect of the failing European project. That is the key problem. There are young people throughout Europe—and, for that matter, in this country—who simply cannot get jobs because companies will not take them on as a result of European employment regulations and because the deficit in the public sector cannot be stabilised without reasonable tax revenues from the small business community, which is being deliberately destroyed by the refusal to repeal the burdens that strangle it.

In the meantime, Germany has had unit labour costs of a mere 2% on average over the last 10 years, whereas the average for the rest of the European member states is between 25% and 30%. It is an impossible situation, making it impossible for Europe—this entity that the integrationists believe in—to be able to compete with the BRIC countries. Germany invests in cheaper labour markets in Europe, with 67% of all its trade being with Europe, while 45% of all European trade with China is German.

The reality is that what we are debating today is symptomatic of a failure in the coalition Government’s strategy. We are not going to get out of this problem—I say this in all sincerity and in the great hope that people will listen at last—as long as we go on with this failing project. We will not get out of the mess. Today’s debate is an opportunity to get the issue straight. As Michael Stürmer, the chief correspondent of Die Welt argued, the dream is over and the Maastricht treaty has to be revised, but the coalition has no will to do so. The European bail-out of Portugal is a symptom of this deeper problem.

[Claire Perry (Devizes) (Con)]

Given my hon. Friend’s very pessimistic view of the outlook for the eurozone, which many of us share, does he not feel like giving just a tiny cheer that, thanks to the Chancellor’s efforts last December, we will take no further part in a permanent bail-out mechanism for Europe?

[Mr Cash]

I did not say anything adverse about it at the time other than that the opportunity was not taken, despite advice I tried to give, to use the treaty opportunity to say to other member states that we would not agree to the treaty and would veto it unless we were taken out of the EFSM; we could then have brought forward the arrangements currently proposed for 2013. That proposition was eminently reasonable, eminently possible and €440 billion was available under the facility, which is in operation until 2013. In other words, the whole EFSM issue pivots on vanity and a determination not to unravel something that cries out for unravelling. It is not just; it is not right; it is completely irrational.

There are going to be further and deeper riots and protests. Worse still, I believe that the Government are contributing towards instability throughout Europe while claiming that within the time frame extending to 2013, bailing out the German and French banks—we should remember that that is what lies at the root of the problem—as well as Portugal and Greece will achieve stability. It will not. The argument is not only wrong, but totally—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order.

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[Margot James (Stourbridge) (Con)]

I wish to preface my remarks by acknowledging the hard work and bitter battles engaged in by so many members of my party, several of whom are in the Chamber today, that resulted in the freedom that our country enjoys in not being part of the euro. That the euro has proved such a disastrous policy for members of the eurozone is evident to all. The improvements to our trade balances and the growth in our exports this year would not have been possible without the devaluation of sterling. The recovery of our manufacturing sector and the stabilisation of employment figures have been facilitated by the low interest rates that the UK, unconstrained by membership of the euro, has been free to pursue.

I share the view, in principle, that as we are not part of the eurozone we should not be bound by its bail-out commitments. That principle has, I believe, been upheld by our Government, but our Government cannot undo the commitments set in stone by the previous Government. The die was cast at the ECOFIN meeting last May when the UK agreed to the creation of the €60 billion European financial stability mechanism. That placed an obligation on the UK to underwrite emergency loans to crisis-hit member states.

[Mr Cash]

I do not want to interrupt my hon. Friend’s flow, but it was open to the Government to challenge the issue before the European Court and they did not do so. It was open to them to say that they would veto the treaty unless we had an unravelling of the EFSM, but they chose not to do so. They went for integration, not for dealing with the situation.

[Margot James]

I thank my hon. Friend for his intervention, but I shall proceed to make the point that it is no good dwelling on what our Government should or should not have done and whether the former Chancellor should have committed the UK to the EFSM. The point is that the Labour Government signed up to the Nice treaty way back and gave away our veto on the costly European bail-out funds. The decision to establish the EFSM was therefore subject to qualified majority voting and would have been passed. I am not convinced that there is any basis in law to challenge that decision.

The other question raised by the motion concerns whether the loans granted under the EFSM are being granted correctly given the requirement that they should be made in conjunction with the IMF and the other much larger European financial stability facility, in which Britain, thanks to our Government, has no obligation. Under the terms of the proposed loan to Portugal, those three sources of finance share the commitment equally. If there is evidence that the EFSM is bearing a disproportionate load compared with the other two sources of finance, the Government should raise that at the next meeting of the Council of Ministers or the European Council. I cannot see any argument with that.

I contend that the situation facing Europe is so dire and potentially calamitous that we might well look back at this time and conclude that being up for a proportion of the loans distributed by just the EFSM, commensurate with our share of the European budget, was the least of our problems. The Government are to be congratulated on securing a complete withdrawal from Britain’s liability from 2013 and a very tight cap on anything we might have to underwrite between now and then—something akin to just 1% or 2% of the potential total bail-out loan facilities that might be called on by the eurozone countries. I will therefore support the amendment to the motion proposed by my hon. Friend the Member for Daventry (Chris Heaton-Harris).

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[Chris Leslie (Nottingham East) (Lab/Co-op)]

May I pay tribute to the hon. Member for Rochester and Strood (Mark Reckless) for securing this important debate? This is one of those occasions that make me think that there are not just two parties in the coalition.

We need to clarify some of the history to this issue because I get the impression that certain hon. Members are labouring under a false set of impressions about the European financial stabilisation mechanism. Of course there were the ECOFIN meetings of 9 and 10 May at which the EFSM was agreed to as part of the package of measures to maintain financial stability across Europe. It was against that backdrop that my right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, consulted both the current Chancellor and the Business Secretary, and cross-party consensus had been gained. Those are not my words but those of the Economic Secretary to the Treasury. The explanatory memorandum that she signed on 15 July 2010 in her own fair hand—Justine Greening, Economic Secretary—says those words:

“cross-party consensus had been gained.”

I know it is convenient for Ministers and some hon. Members to rewrite history and to give a partial account of what happened and about these important facts, but there it is in writing. [Interruption.] If hon. Members want to dispute the words of their honourable colleague on the Front Bench I am happy to give way to them.

[Mr Cash]

rose—

[Chris Leslie]

In a moment. In a letter of 18 July 2010 to the Chairman of the European Scrutiny Committee, to whom I shall give way in a moment, the Economic Secretary also said, very helpfully, that

“this Government judges”

the EFSM

“to be an appropriate response to the crisis.”

So the official voice of the Government, according to what the Economic Secretary has written in her own fair hand, was that there was a consensus approach during the transitional period following the general election and that the current Government judged the EFSM to be an appropriate response to the crisis.

[Mr Cash]

Does the shadow Minister accept that the date on which that particular statement was made, 15 July 2010, was four days after the expiry of the date on which a challenge to the European Court could have been made? Furthermore, does he accept that since then the Government have insisted that they oppose the proposal of the former Chancellor of the Exchequer?

[Chris Leslie]

That is an extremely illuminating fact and it would be perfectly legitimate for Members on the Government side, perhaps in private meetings elsewhere, to ask a few more searching questions about what exactly their Front Benchers have been doing in their name. Either the Minister who signed the memorandum was wrong—perhaps she was misled in her understanding or she and her officials were ignorant of the facts—or perhaps she was actually speaking the truth but was subsequently slapped down by the Chancellor.

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[Mr Hoban]

No. As I said earlier, I want to make some progress on the matter.

My right hon. Friend was also clear that, in the days prior to the formation of the coalition, the right hon. Member for Edinburgh South West was still the Chancellor of the Exchequer, representing the UK in a dynamic negotiating environment, and it was for him to reach that decision.

The hon. Member for Nottingham East (Chris Leslie) quoted an extract from an explanatory memorandum, and yes there was consensus between the parties about the process, but not about the outcome—as the former Chancellor of the Exchequer made clear in his statement to the House in December. It was a matter for the previous Chancellor to decide, and he was the man occupying the office at the time.

Some of my hon. Friends have today articulated concerns about the use of article 122. The EFSM was created following agreement by a qualified majority of member states at the ECOFIN meeting on 9 May 2010, and the terms of the mechanism are set out in an EU Council regulation. It is based on article 122 and states:

“Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional circumstances beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned.”

The Council decided that in those circumstances those criteria applied.

Several hon. Members have raised the issue of article 125 of the treaty, the so-called “no bail-out” clause, but article 125 does not preclude member states from providing loans to one another, and, as evidence of that, the EU’s balance of payments facility has already provided medium-term financial assistance to a number of member states.

Over the past year, we have had to deal with the legacy that we inherited from the previous Government and the previous Chancellor of the Exchequer, but we have made sure that the permanent arrangements to sort out the euro area are the ultimate responsibility of euro area member states.

My right hon. Friend the Prime Minister made that his goal at last December’s European Council, where he secured two significant victories for the UK. First, he made sure that article 122 could not be used for euro area bail-outs in the future. Secondly, he ensured that the UK would not have to contribute to the European stabilisation mechanism, the permanent mechanism that will replace the EFSM and the EFSF. As the Prime Minister said, we have a good “belt and braces” approach—a no need, no use approach.

[Mr Cash]

Will my hon. Friend give way?

[Mr Hoban]

If my hon. Friend allows me to continue for a few minutes longer, I may be able to take some interventions.

We ensured that the recitals—the preamble—to the decision by Heads of State and of Government at the March European Council stated that article 122

“will no longer be needed”

and “should not be used” to ensure financial stability for the whole euro area once the permanent mechanism is in place.

In shaping the debate about the ESM, we had clear priorities. First, we had to ensure that there was no transfer of powers from the UK to the EU. We would never have accepted such a transfer, so the treaty change applies only to euro area member states, and only euro area member countries have to contribute to the rescue of other euro area countries. There is no transfer of power, competence or, indeed, funds from the UK to Brussels under that treaty change, but that judgment will not be for Ministers alone.

[Mr Cash]

Will my hon. Friend give way?

[Mr Hoban]

I have two minutes left to conclude my remarks and to respond to the very detailed questions that hon. Members on both sides have raised, so I should like to continue to do that.

The treaty change was agreed at the Council in March and will have to be ratified according to the process set out in the European Union Bill. Ministers will need to make a statement explaining why the treaty change does not transfer power or competence from the UK to Brussels, and Parliament will need to pass primary legislation before the UK can ratify that change.

[Mr Cash]

One last time?

[Mr Hoban]

I will give way to my hon. Friend—briefly.

[Mr Cash]

On the Minister’s own terms, it is absolutely clear that the Chancellor of the Exchequer was against those arrangements, so why in that two-month period did the Government not challenge them in the European Court of Justice?

[Mr Hoban]

My hon. Friend and his Committee have a particular view on the legality of the arrangements, but as I have said there was a clear view that article 122 could be used in those circumstances.

Although we have had to live with the decisions of the past and the EFSM, we have fought to free our nation from the constraints of those decisions in the future. We will not have to contribute towards a European rescue of another euro area member state once the permanent ESM comes into force.

I believe that the amendment tabled by my hon. Friend the Member for Daventry (Chris Heaton-Harris) captures the essence of our position. As a consequence of the action taken by the previous Government, we are part of the EFSM. This Government have had to ensure that we are outside the scope of the permanent mechanism. My right hon. Friend the Prime Minister has already delivered that commitment at the European Council in December. I hope that my hon. Friends recognise that the action we have taken has freed the UK from the obligation to take part in future bail-outs of euro area member states.

Common Consolidated Corporate Tax Base

William Cash Excerpts

Wednesday 11th May 2011 Commons Chamber

[Justine Greening]

At the moment, there is no proposal on the table. A proposal is being worked up, but things are at an early stage. Member states have had, I believe, two working group meetings with the Commission to talk about how any proposal might operate. Fundamental questions are still being developed on, for example, how the formula will work, and a host of other issues. As I have said, part of the challenge is how any avoidance loopholes might work in practice, and whether they would be substantial. We are at a very early point in the process. Today’s debate allows Members of our Parliament to have their say, which we can then add to the Commission’s process.

[Mr William Cash (Stone) (Con)]

The Opposition Benches are virtually empty, but there are also no Liberal Democrats in the Chamber—there is a sort of let-out under the coalition agreement.

The Minister seems to be referring to enhanced co-operation, which the agreement says is the basis on which the Government will be engaged in discussions to help to shape a corporate tax base that does not undermine the competitiveness of the EU or the UK. She has made it clear that enhanced co-operation would have that effect, so clearly, we will not under any circumstances accept it. Therefore, the answer can only be no. Why do we not say so?

[Justine Greening]

As I have said, we need to manage risks, and it is unclear at this point where the process will end up. However, there might be risks posed by enhanced co-operation. We need to be part of the discussions to ensure that our arguments carry weight. Our arguments will not carry weight if we are not part of those discussions from the beginning, because we say that we never want to be involved. That is not a sensible approach. In addition, I do not agree that it is as simple as saying, “We don’t want to be in it,” because the proposal might go ahead in a different form involving a limited group of nations, which could still affect us, even if indirectly. I want to make it absolutely clear tonight what the Government are fundamentally seeking to achieve. We will not agree to any proposal that will threaten or limit our ability to shape our tax policy.

--- Later in debate ---

[Justine Greening]

My hon. Friend might well be right, but I want to make clear the rules and the processes going forward. No member state can unilaterally block the use of enhanced co-operation. Of course we can decide whether we want to be part of that—I have clearly set out the Government’s concerns about the proposal—but I am saying to the House that we need to participate in the debate and ensure that we influence the underlying proposal. We do not want to end up being unable to stop enhanced co-operation simply because it was a proposal that we fundamentally did not want in the first place. We need to make our case, with other member states, in order to influence the proposal as it develops, and that is precisely what we want to do.

[Mr Cash]

The Minister is always well informed, so I am sure that she knows that the Tax Commissioner has already said that if there is a veto—if, in other words, the Commission does not get unanimity—it will go ahead with enhanced co-operation. If we know that to be the case, why do we not just say no and be done with it?

[Justine Greening]

The Commission might, as my hon. Friend has said, take a view, but we need to understand what other member states think about the proposal. This evening is a chance for us, as a member state, to allow our Parliament to voice its concerns. The European Scrutiny Committee, which he chairs, has produced a helpful report that will no doubt form a basis of this debate.

I shall now finish my remarks so that other Members can put on record their views on the report.

[Chris Leslie]

The Minister has essentially enunciated a continuation of the policy advocated by the previous Administration. In fact, this common consolidated corporation tax base proposal has been around for a decade or so. In that time there has not been a massive change in policy, which is interesting, because I had anticipated that, in her quasi-Thatcherite mode, the Minister would say, “No, no, no!” to this proposal—but she did not.

As I said, it is interesting that the motion is quite carefully worded. It specifically mentions “reasoned opinion”, “subsidiarity and proportionality” and so forth, but if passed it would not actually instruct the House of Commons to reject the directive as drafted. I suspect—on this point I was considering intervening on the hon. Lady, but I thought I would let her finish—that it might be more to do with the Liberal Democrat position on this issue. [Interruption.] The Minister rolls her eyes, but there are no Lib Dems here so it is difficult to put them on the spot.

Hon. Members will be interested to hear the Lib Dems' official policy on a common consolidated corporate tax base. In their 2009 document, they stated that they would “address the variability issue” on cross-border corporation tax

“by developing a medium and long-term statement of business tax policy, covering a minimum two parliament timeframe. This statement would…identify areas for greater international co-operation on tax policy. A clear area for co-operation is in the movement towards a harmonised tax base in the EU, often referred to as a Common Consolidated Corporate Tax Base”.

So, there is a loud voice—muscular and visible, as we now know—in the coalition arguing vociferously in favour of a common consolidated corporate tax base. I say that for the benefit of the House, because it is important that hon. Members know the facts. Given that the motion was published only this morning on the Order Paper—hon. Members did not really have notice of exactly the Government’s proposition, which is quite ridiculous—and that all 298 pages of the supporting papers were published only yesterday, I am not surprised that many hon. Members have not yet woken up to the opinion being taken of the Government on this matter.

[Mr Cash]

In this new guise of the Pym or Hampden of the British Parliament, am I to imagine, beyond the wildest speculation, that the Labour party is about to announce that it will vote against these proposals on the grounds that it does not veto the Commission’s proposals?

--- Later in debate ---

[Mr William Cash (Stone) (Con)]

This is of course about direct taxation, and I welcome the Government’s limited stand against the draft directive, for the reasons given in the motion endorsing the European Scrutiny Committee’s report on the points that the Minister has just summarised. I remain concerned, however, about one matter still hanging over the debate. The Minister might be able to guess what I am about to say. It goes back to a motion that was before a European Standing Committee which asserted, in the name of the Government, probably for the first time since 1640—I mentioned Pym and Hampden just now—that the British Government, as a sovereign Government, were only primarily responsible for direct taxation, whereas in fact our Parliament is exclusively responsible for it. That motion was put to a deferred Division in the House and passed, which is pretty alarming. I invite the Minister to be rather clearer than she was the last time I put this point to her, because it must be made absolutely clear that this House is exclusively responsibility for direct taxation.

The Minister has been at pains to describe the context of this measure in the light of the questions of subsidiarity, but some Members might recall that it was on 27 April that I raised this matter with the Prime Minister, together with the proposed increase in the European budget and the Portuguese bail-out, not to mention prospective Greek bail-outs and whatever else. I said that we expected the answer to be no to each of those proposals. His reply referred only to the increase in the EU budget, and I hope—for reasons that have been expressed in interventions, including my own—that we are unequivocal in reserving to ourselves the absolute determination, and not merely the right, to say no to these proposals, because they infringe a number of important principles. I shall come to those in a moment.

I want it on record that the coalition agreement states that there should be

“no further transfer of sovereignty or powers”

to the EU. Our Committee report looked at that and found it wanting in relation to the EU referendum Bill. The Government have also said that they would reject any proposal that

“might threaten or limit our ability to shape our own tax policy.”—[Official Report, House of Lords, 16 February 2011; Vol. 725, c. WA172.]

I have the greatest respect for the Minister, as she well knows, but she left out the next bit, which was the word “but”. That word “but” is represented by Banquo’s ghost, who is not sitting on the Liberal Democrat Front Bench tonight—[Interruption.] Ah! My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) is there, acting as a surrogate, which is extremely unlikely in the circumstances, although I am delighted to see him and I hope that he will contribute to the debate at some point.

I want to continue with the words that come after the word “but”. They are that, “under enhanced co-operation” the coalition Government will

“engage in discussions to help shape a CCCTB that does not undermine the competitiveness of the EU or the UK”.

Now that is a monumental exception, because it is obvious, for reasons that I shall explain, that the proposal will undermine the competitiveness of the EU and the UK ab initio—and the Government know it. It follows from that, as light follows day, that there is no reason for us not to put our foot down now and say no. We know that the Tax Commissioner is saying that this is going ahead under enhanced co-operation, and this it not something magicked out of the air, as he knows perfectly well that that is what Germany, France and other countries are intending to do. When I provide the figures on the number of member states engaged in the process, as I shall in a moment, perhaps matters will fall into place.

The proposals before the European Scrutiny Committee are, for reasons set out in our conclusions, all profoundly objectionable, but the draft directive falls down particularly on four main issues: one, the sovereignty of this House; two, the insufficient legal base; three, an inadequate and unconvincing impact assessment; four, grounds of proportionality, making the doubling of tax regimes in the EU, the cost of establishing 27 new regimes and the apportionment formula excessively disadvantageous for certain member states.

I add that the Oxford university centre for business taxation says in its policy briefing that

“it is unlikely that the introduction of the CCCTB would bring significant benefits to the EU in aggregate in terms of employment, GDP or efficiency, although some individual countries could benefit significantly.”

I make that point because, under the formula of Roland Vaubel of Mannheim university, it is well known that there is such a thing as regulatory collusion and that, by the clever use of certain majority voting systems, through negotiations in the case of unanimity as in this instance or by enhanced co-operation, it is possible to arrive at a point where some countries benefit to the disadvantage of others. The Oxford university think-tank has its finger on that issue.

It is quite clear that the objective of this tax base—this is the important part that needs to be borne in mind on the big landscape—is to raise money to pay for the profligate, incompetent and failing European project. Countries such as Greece, Ireland and Portugal are either on the verge of or in danger of bankruptcy or are actually going bankrupt because of the systemic failure of economic policies. The stability and growth pact does not work: as I have said before, there is no stability, no growth and no pact.

The creation of a two-tier Europe will merely exacerbate these problems, as was noted when we debated the European Union Bill, and will lead to ever-greater German domination over the European economy. The economic predominance of Germany in east and central Europe might be a good thing from its point of view, but we now have a transfer Union and a massive redistribution of resources. What we are also witnessing as a result of the failure of this project are riots and protests as Germany repatriates its profits at the expense of cheap labour unit costs from the countries in which it has put investment in the centre of Europe, as Portugal, Greece and even Ireland have found to their cost. The pumping of money supports not so much the member states as the French and German banks, which have lent money indiscriminately to suit themselves—and we are expected to engage in the bail-out procedure, the covert mechanism for which is the stability mechanism, coming into effect in 2013.

As the European Scrutiny Committee insists, this whole proposal is in breach of the principle of subsidiarity. I remind the House that this principle is intended to ensure that decisions are taken as closely as possible to the citizen. Direct taxation is such a policy. The national Parliaments are able to use the procedure under the treaties to challenge breaches of subsidiarity. At present, there are only six countries whose parliamentary Chambers propose to, or have, issued a reasoned opinion. We have, but, interestingly enough, the House of Lords has not. I think that we should note that.

In passing the motion, the House will challenge the breach of subsidiarity. I suspect that the Minister has figures that are even more up to date than mine, but as far as I know, of the 27 member states, the five that are on our side are Ireland, Malta, Netherlands, Poland and Sweden. I am told that Cyprus, Greece, Hungary and Slovenia have no plans even to scrutinise the proposal, that those yet to decide include Austria, Bulgaria, the Czech Republic—the lower chamber and the senate—Denmark, Estonia, France, Lithuania, and Luxembourg; that Romania, Portugal, Italy and Spain believe that the draft directive complies with the principle of subsidiarity; and that the German Bundesrat is considering it only on the basis of content.

The picture is very uncertain. There is no guarantee that the accumulated number of reasoned opinions will be sufficient to meet the threshold requiring the European Commission to review the proposal, and because that will be known somewhat in advance, the tax commissioner will say that he has already received a demand to proceed with enhanced co-operation.

We have a serious problem on our hands; however, we have another card up our sleeve. Unbeknown to some, although I am more than happy to share the information with the House, under article 8 of protocol 2 the United Kingdom Parliament can go to the European Court of Justice, which has jurisdiction to determine our claim as the House of Commons—which is regarded as a separate Chamber—that the principle of subsidiarity has been breached. That gives us the basis for a challenge.

I believe that if the Government are not prepared to say no—which, for the reasons that I have already given, I think that they should have done already—the House of Commons should take the matter to the European Court of Justice; but would it not save an enormous amount of time and trouble if we simply recognised that the House is sovereign, that it has the right to take the action that it has taken, that the European Scrutiny Committee has done its job at this stage in the proceedings, and that the Minister is profoundly on our side of the equation? I know her sentiments, and I also know her Parliamentary Private Secretary. He was a member of the European Scrutiny Committee with me for years. He would be jumping about all over the place about this if he were still a member of the Committee, and agreeing with every word that I am saying.

Leaving aside the attack on Thatcherism, of all things, by the Deputy Prime Minister immediately after the disastrous showing of the Liberal Democrats in the polls, which is probably why no Liberal Democrat Members are present today—and, for that matter, the let-out that they have been given in the coalition agreement, which I think I have now shot to pieces—I would say that there is every reason for the Liberal Democrats to back down and not veto our Conservative party veto simply because of the coalition arrangement, and for the Prime Minister to do what I asked him to do at Prime Minister’s Question Time only a few weeks ago and say “No, no, no.” That would save a great deal of time and argument.

The UK corporate tax director of a major European bank has said that this proposal would increase our corporation tax and drive investment away, reduce our GDP by £73 billion over 10 years, increase the administrative burden, and lose the UK an estimated total of £58 billion, again over 10 years. We know that Mr Sarkozy and Ms Merkel are in favour of the competitiveness pact, which affects us although it is presented as a eurozone matter. I believe profoundly that, whether the proposal involves enhanced co-operation, the creation of a two-tier system, or whatever other means or machinations may be produced by the Faustian pact that is being devised in Europe, we should put our foot down, lead from the front, and say no. I am prepared to admit that the opportunity to do that exists, but I want to hear it from the Prime Minister’s own lips. He will then be able to enjoy as much success in this context as he, and we, enjoyed in the context of the alternative vote the other day, when the Liberal Democrats got their come-uppance.

--- Later in debate ---

[Mr John Redwood (Wokingham) (Con)]

Tonight’s debate should be a vital one because, after all, it is about sovereignty; it is about power. The might of this House of Commons in its great years was based on one very simple proposition: that only a vote of the House of Commons could impose or remove a tax on the British people. It was that power which our predecessors fought for and achieved, and it was that power which was crucial to grant the supply to the Government, who could then choose how to spend it, on the advice and with the votes of the House of Commons.

We have been assured and reassured by countless Ministers of the Crown since we joined the European Economic Community in the 1970s that taxation was always a matter for unanimity; that we would always have a veto over any tax matter; and that there was no question of the European Union interfering and choosing taxes for us or running our tax system. Under the previous Labour Government, tax was said to be a defensible red line, which they always told us they had always protected. Under previous Conservative Governments, Ministers could rightly then say that it was always a matter entirely for the jurisdiction and decision of this House of Commons.

Yet tonight, in this small and short debate, we are presented with a 102-page draft law which is a comprehensive new corporation tax system for the European Union, including the United Kingdom. Worse still, we have been warned in a friendly way by the Minister that if this country disagrees with it, a group of countries may go ahead under some other procedure and create it anyway, and they will then exert extraterritorial jurisdiction over the UK because they will try to tempt our companies away from our system to their system. As my hon. Friend the Member for Amber Valley (Nigel Mills) has just said, tax advisers and accountants will be able to play all sorts of games under this complicated system so that companies that have some activities in Britain could be tempted into the European Union opt-in system. That would mean that the British Treasury and British Ministers would no longer have jurisdiction over them; we would get back only what the sharing formula allowed, which the European Union would be in charge of.

I assume that it is because the Minister is worried about that eventuality that she has not come here with a straightforward proposal just to veto the whole thing. My advice to the Government is that this should be the issue we fight over. This proposal is so outrageous, it is such a comprehensive violation of subsidiarity, as they call it, and it is such a U-turn from the proposition that a member state has control over its own tax affairs that surely we should veto it. If we vetoed it and other countries still wanted to go ahead as a lesser group than the European Union, we should follow things through and say that it therefore does not apply to the United Kingdom and we will not operate it in respect of companies that are properly domiciled here and should be taxed here under our rules. We should set the rules for organisations and companies undertaking activity in Britain, making money in Britain and employing people in Britain. If we cannot do that, what is the point of this House of Commons? I think the Minister is in a stronger position than perhaps her officials and advisers have suggested.

We have heard, I think rightly, from my hon. Friend the Member for Stone (Mr Cash) that the legal base is not correct. In order to justify all the statements that this is a matter for unanimity, it must come under that measure in the treaty that states that other proposals can be produced but that they require the unanimous consent of all member states. It must come under a unanimous base. Once it is a matter to be decided under a unanimous base, we can then save the European Union a lot of time, trouble and money because we can simply say that we do not wish to have a collective corporation tax system and that Britain is going to use her veto. For once, surely, the United Kingdom could have some influence over the agenda of the European Union and we could show that we mean it when we say that taxation is for national decision—that it is a matter for subsidiarity, in the EU’s language, or a matter of sovereignty, in my language.

I would like to ask my ministerial friend what the point was of this House solemnly legislating to maintain, uphold or reaffirm the sovereignty of the British Parliament if we cannot even choose our own corporation tax regime. What is the point of our going along with the negotiations to try to ameliorate, improve or abate the severity of this draft law if we are doing so in the spirit that we will end up with a law of sorts anyway? We will then hear from the Minister that instead of it being something that we have vetoed, it is something we have taken the worst out to make it a bit more tolerable so that we can go along with it. It will not be necessary for the other member states who want the measure to use a special procedure to get it, and there will be no need for us to say to them that we refuse to go along with it or comply with it.

[Mr Cash]

Does my right hon. Friend recall the words of Chancellor Kohl, who, only 10 or 15 years ago, made it clear that, on the question of the speed of the convey, which is what this is all about, he would want the front of the convey to go ahead, led by Germany, and for the other Member states to be left in such a parlous condition that they would eventually, in his words, have to catch up?

[Mr Redwood]

My hon. Friend is quite right. That also explains why the European Union is so keen to try to get the Irish rate up, because if it is to have a common system such as this, it would not want a weak link. The EU would see a weak link as a state that dared to set a more realistic and lower rate in order to attract business.

--- Later in debate ---

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

It is always a great pleasure to follow my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), who sets out with such great clarity the grounds for my opposition to the measure. We have heard tonight a number of reasons why the proposal for a common Euro corporation tax, as I would like to call it, is wrong. This is yet another stage towards what the eurocrats are determined to proceed with—ever closer union.

We are here on a regular weekly or fortnightly basis, looking at the latest directive that comes before the House. Sometimes the directives could be described as dealing with relatively minor matters. This one most certainly cannot. The harmonisation and the Europeanisation or European Unionisation of the corporation tax base is a step too far. We have heard that its legal basis is unsound. It would, in my opinion, fall foul of the principle of subsidiarity. I believe that it is economically wrong.

It would be interesting to know how many FTSE companies in this country would be in favour of this crazy proposal. It seems that the only people who would benefit if it ever came into force would be those companies and tax jurisdictions that were outside such an arrangement. I accept that in the early days they could arrange their affairs in such a way as to make it attractive in order to encourage companies to come into the euro corporation tax area, but I am absolutely certain that before long, because of the bureaucratic and regulatory burden, they would have to increase their corporation tax rates to such a level that any companies that were ensnared within such arrangements would quickly wish that they had never become involved.

[Mr Cash]

Does my hon. Friend also accept that the objective at the heart of this is to move towards a harmonised tax system for one reason: to complete the circle of political union that will enable this to be one country, driven by fiscal direction, and at the same time to fill the belly of the European Leviathan with the money that will enable it to continue to create circumstances that will inevitably lead to more turmoil, implosion and a greater disaster than we already have?

[Mr Nuttall]

My hon. Friend hits the nail on the head. I see this as the thin edge of the wedge. It is the opening of a whole new war, and a whole new phase of European harmonisation. In fact, it is almost the final frontier, because it is the step towards a euro-wide sales tax and, ultimately, a euro-wide income tax that we would all be subject to. It is extremely difficult indeed.

I heard the Minster’s opening remarks, and it is to be welcomed that we will at least go back to our European partners and state our reasoned opinion for not proceeding with this. I am slightly concerned, to say the least, that we are not saying no outright, which would be a far simpler way of dealing with it. It reminds me of the message of the drugs campaign run when I was at school: “Just say no”. The simplest solution to the problem facing the House tonight would be just to say no. I see no great danger if other countries want to get together and operate a common corporation tax system—that may be ultimately what they want to do—but this EU proposal for a common corporation tax throughout Europe could be described as nothing other than giving away sovereignty, which, to come back to our national politics, is specifically outlawed in the coalition agreement, which states that there is to be

“no further transfer of sovereignty or powers”

to the EU over the course of this Parliament. If this would not be a transfer of sovereignty and powers, I do not know what would.

When the Minister responds to this short debate, will she give an estimated time scale for when she is likely to be able to come back and report on what success there has been in persuading other countries to adopt our position on this matter, and will she give an absolute confirmation that there will be no signing up to the proposal in any way, shape or form without the matter being brought back to the House for further consideration?

--- Later in debate ---

[Mr Jenkin]

But that was always the danger with article 5 and the subsidiarity clause. There are some very general objectives set out in the treaties, and subsidiarity is one of those catch-all arrangements that can justify stretching the meaning of other articles, as we have already seen.

How does the European Union justify the bail-out mechanism that the previous Chancellor of the Exchequer approved under article 122 of the Lisbon treaty, which was designed for natural disasters? How can a crisis in the euro possibly be classified as a natural disaster? The mechanism has, however, been allowed to go through by default.

The arrangement before us is another that will go through by default if we do not challenge it. Indeed, article 26 of the draft directive, the penultimate paragraph of the preamble, states:

“The objective of this Directive cannot be sufficiently achieved through individual action undertaken by the Member States because of the lack of coordination among national tax systems.”

It goes on to justify the objective as being

“in accordance with the principle of subsidiarity”—

and in its own terms that is very difficult to argue with.

I appreciate the European Scrutiny Committee’s points about the direct legal base, but the European Union is going for an indirect legal base. That demonstrates that subsidiarity was always a deceit. It was always something that could be a centralising, as opposed to a decentralising, concept, and if we rest our case against the proposal purely on the principle of subsidiarity we will allow the EU, rather than what we want ourselves, to determine what is imposed upon this country. If we rest our case against this proposal purely on the principle of subsidiarity, we are allowing the European Union to decide what shall be imposed on this country rather than deciding what we want for ourselves.

[Mr Cash]

I know that my hon. Friend was able to come in only somewhat late in the debate, but the arguments that we have been presenting show that there are a whole series of weapons that we can employ. Subsidiarity happens to be a procedural device that is available to us by way of a reasoned opinion, which is what the motion is about. We are critical of the Government’s position in that they have not exercised their political will, for all the reasons that my hon. Friend and others have explained. This whole business is an infringement not merely of the word “sovereignty” but of the practical requirements of the people of this country to tax themselves by consent. That is what it is all about.

[Mr Jenkin]

There is absolutely no difference between me and my hon. Friend on that point.

To echo my right hon. Friend the Member for Wokingham (Mr Redwood), the Budget moment in the calendar of this House is the most important political occasion of each year, when the Chancellor comes to this House to deliver his Budget judgment and it is for the House to determine what the levels of expenditure, taxation and borrowing should be. That is absolutely fundamental not only to the mechanics of our democracy but to the culture of our democracy and the culture of this House. This proposal is a very direct challenge to government by national democratic consent.

The only, rather lame and late, point that I might be adding to the debate is a very simple one, and I do so for the same reason as that which led my hon. Friend the Member for Stone (Mr Cash) to lambast the concept of subsidiarity when it was first proposed in the treaty on the European Union back in 1992—the Maastricht treaty. It is, very simply, that subsidiarity is not sovereignty. Subsidiarity is subservience; it is submitting to the jurisdiction of the European institutions instead of the sovereign judgment of the British people as expressed in this House. Subsidiarity is no substitute for Government saying no, particularly where the veto is in their hands. I urge my hon. Friend the Minister to exercise that veto, knowing that she will have the confidence of the British people behind her, because they do not want her to say yes in this case.

--- Later in debate ---

[Justine Greening]

We need to be careful to ensure that we understand the complexities of the proposals. For example, we need to understand how companies that also operate in the UK may use any avoidance loopholes, and whether that will impact on the way in which they operate in the UK and structure their corporations. We need to be smart about understanding the breadth of the proposals. Whether we want to be in them is one thing, but we must be conscious that they may have an impact on us even if we are not part of them.

[Mr Cash]

Will the Minister be kind enough—and be smart enough—to make it clear that we will not do anything that the Liberal Democrats had in their manifesto? I have a suspicion bordering on certainty that the wording in the coalition agreement is taken straight from their manifesto commitments.

Section 5 of the European Communities (Amendment) Act 1993

William Cash Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Hoban]

The hon. Gentleman makes an important point. Under the previous Government, we saw a further deterioration in manufacturing and an overreliance on the financial services sector, creating some of the imbalances that led to the deepest recession since the 1930s. Part of the challenge faced by the Government is how to tackle those imbalances and move to a more broadly based economy, and I shall touch on that later in my speech.

We must remember that sustainable economic growth across Europe is vital to the success of the British economy. Having the right warning mechanisms in place, underpinned by sound data, will help to identify future economic crises that could harm the UK economy. Even though we are not part of the single currency and will not be joining it in the lifetime of this Parliament, we cannot consign ourselves to be bystanders in the debate.

[Mr William Cash (Stone) (Con)]

I noticed the Minister use the expression “we will not be joining the single currency in the lifetime of this Parliament”. I thought there was a clear commitment that we were never going to join the single currency.

[Mr Hoban]

As I am sure my hon. Friend is aware, I am following what is set out in the coalition agreement. Like him, I do not anticipate that we would seek to join the euro.

Tonight’s debate is a consequence of the stability and growth pact. Since 1999, as a result of the pact, the Government have reported to the Commission on the UK’s economic and budgetary position and our main economic policy measures. I want to reassure the House, however, that the UK is not subject to sanctions under the stability and growth pact—the Treaty is clear that they apply only to euro area countries. The EU can make recommendations as regards our budget, as can other international organisations such as the OECD and the IMF, but, crucially, we are under no obligation to take action and we are not subject to any sanctions by virtue of our opt-out. Any recommendations made will remain just that—recommendations.

--- Later in debate ---

[Mr Hoban]

I am rather surprised that the hon. Gentleman has not congratulated the Government on taking the tough action that put the recovery on track and made sure that we have lower interest rates than Greece, Ireland and Portugal. That is a consequence of the actions that we have taken—actions that the Opposition would not take. We are tackling the legacy that they left. The problem is that the scale of the legacy is huge. That makes the recovery challenging. Today’s figures demonstrate that we are making good progress on that.

To support the economy and to continue the growth in the private sector, my right hon. Friend the Chancellor set out a new economic strategy as part of this year’s Budget. The strategy has four ambitions at its heart—that Britain will have the most competitive tax system in the G20; that it will be the best place in Europe to start, finance and grow a business; that it will be a more balanced economy, by encouraging exports and investment; and that it will have a more educated work force that is the most flexible in Europe. In pursuit of these objectives, we have announced further cuts to corporation tax, taking it down to 26% this year and 23% by the end of this Parliament.

This is alongside our decision to introduce a highly competitive tax rate on profits derived from patents and our fundamental reform of the complex rules for controlled foreign companies, making them much more territorial and making the UK a much more attractive place for businesses to locate, ensuring that we have a far more attractive tax system than either Germany or France.

This year’s Budget also deals directly with the challenge of education and youth unemployment, which has been rising steadily for the past seven years. Instead of 20,000 young people benefiting from our new work experience scheme, as we originally planned, we will increase that number fivefold to 100,000 places over the next two years. Although in Austria and Germany one in four employers offers apprenticeships, in England fewer than one in 10 does so. That must change.

That is why last year my hon. Friend the Minister for Further Education, Skills and Lifelong Learning published a skills strategy and confirmed the largest ever expansion in adult apprenticeships. At the Budget we committed to funding another 40,000 apprenticeships for young unemployed people. That brings a total of 250,000 more apprenticeships over the next four years, as a result of this Government’s policies. This will help to ensure that all parts of the country have access to a better educated work force.

This year’s Budget will help to create a more balanced economy, tackling the imbalances of the past that undermined the economy and led to the longest and deepest recession since the war. This year’s Budget gives support to the private sector and hope to those looking for work, and will stimulate job creation across Britain.

[Mr Cash]

One word that the Minister has not mentioned is “deregulation”. In view of the fact that 4% of GDP is lost as a result of European regulation, does he agree that we need to override European regulation, such as the working time directive, when it has the effect of increasing unemployment and preventing businesses from growing?

[Mr Hoban]

My hon. Friend makes an important point about the burden of regulation on business, and that is why in the Budget my right hon. Friend the Chancellor set out our plans for a moratorium on new regulations for micro-businesses and for start-ups, why the Prime Minister, along with several other European leaders, called for plans to cut the burden of European red tape, and why the Prime Minister has also required José Barroso, the President of the European Commission, to deliver on his commitment to reduce the cost of red tape for business by 25%.

We need to work on those issues to tackle regulation that hampers growth not just here in the UK but throughout Europe, because regulation is a Europe-wide issue. We need to tackle and reduce that burden if the eurozone is to grow at the levels that we expect to see in Asia and in the far east.

As I said to my hon. Friend, this Budget tackles regulation and introduces a moratorium, and that is why it stands firm on our plan for recovery. It is good for business, it is good for growth, and with the approval of the House it will form the basis of the information that we provide to the European Commission. I commend this motion to the House.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Many hon. Members might wonder why we are having this debate tonight. It is an incredibly important debate, but they might be forgiven for not having spotted the small print on, I think, page minus 2 under the ISBN number of the Red Book in probably seven or eight-point font, where it points out that the UK is required to submit to Brussels an annual convergence programme so that it can monitor our economic policy.

I am, however, grateful to the Financial Secretary for having written to me to draw attention to the debate this evening, the papers for which were published only at lunchtime yesterday. In fact, the motion appeared on the Order Paper only yesterday, too, and I am surprised about that, because in the parallel debate a year ago following the 2010 pre-Budget report, the hon. Member for South West Hertfordshire (Mr Gauke), now the Exchequer Secretary, then speaking from the Opposition Benches said:

“It was also very difficult to locate the report. I obtained a copy last week, but it was not available in the Vote Office yesterday. This is a point that has been made many times before”. —[Official Report, 10 February 2010; Vol. 505, c. 947.]

I am surprised that the Government have not really listened to their own Members when it comes to flagging up the importance of this particular debate, but, given that we have a motion asking the House to note “with approval” the Government’s assessment of the economy, and to conform with the requirements laid down in the various European Union treaties, I am sure that it is pure coincidence that Ministers did not flag it up or put bells and whistles around it to draw its attention to many hon. Members.

[Mr Cash]

rose—

[Chris Leslie]

But I am quite pleased that the hon. Gentleman keeps his eye on these developments.

[Mr Cash]

We certainly do our best on the European Scrutiny Committee, which included our making sure, by the way, that this debate took place on the Floor of the House by objecting to the motion to refer it to a Committee. I thought that we might just as well get it on the Order Paper.

[Chris Leslie]

I am very grateful for the hon. Gentleman’s work on the European Scrutiny Committee. This is, as I say, an incredibly important debate, and more hon. Members ought to be aware of it.

--- Later in debate ---

[Chris Leslie]

We have the opportunity to divide the House on this matter, although I think that it would be a deferred Division; obviously, that is a matter for Mr Speaker.

As we go through the details of the document, we see that there are problems in it. Page 17 says that the economy is forecast to grow by 1.7% in 2011—lower than the forecast in the June Budget. Is that forecast sustainable? The Government and the Office for Budget Responsibility revised down their forecasts for growth in June and revised down expectations in November. The OBR then revised down expectations for a third time after the March Budget.

The answer to the question that I asked the Minister earlier—what was the OBR’s prediction for the first quarter of this calendar year—is 0.8%. Yet today the Office for National Statistics gave a rather comatose and limp growth rate of 0.5%. That comes on the heels of a growth rate in the fourth quarter of 2010 of minus 0.5%. Essentially, there has been a zero rate of growth—flat-lining—over the past six months.

As Stephanie Flanders, the BBC’s economics editor, said, it is

“depressing to think that the economy is treading water…in a normal recovery we would expect to see a lot of momentum at this point”.

Chris Giles, economics editor at the Financial Times, said that for there to have been any credible claim to a return of underlying growth, this quarter’s figure should have been 0.7%. He went on:

“Add in one quarter of the growth expected in 2011—about another 0.5 per cent—and the figure necessary to show the economy growing at an average pace in the first quarter is at least 1.2 per cent.

Arguably, it should be even higher, at somewhere about 1.7 per cent, if the underlying stagnation in the fourth quarter of 2010 has been recovered in the first quarter of this year.”

We are a long way from that, and that is a serious problem. Yet the Chancellor seems to think that we are on the right track; as somebody said today, if he thinks that, he needs to chuck away his satnav and get a new one.

The GDP growth figure of 0.5% for the first three months of this year merely replaces the loss of output in the snowbound fourth quarter of 2010 and suggests that the economy has no underlying momentum at all. The chief statistician at the ONS said today that we had been “on a plateau” for the past six months. Tony Dolphin, the chief economist at the Institute for Public Policy Research, says that a 0.5% fall followed by a 0.5% bounce-back is equivalent to two successive quarters of zero growth—

“as close as it is possible to come to a recession without actually being in one”.

Yet the Prime Minister says that this is “good news”—those were his words as he trumpeted this resounding success at Prime Minister’s Questions today. Even the Minister said, a matter of minutes ago, that it is good progress. I am afraid to say, however, that the document we are being asked to approve is already out of date, even though it was published only 24 hours ago. It is a bit of dead parrot. It is no more, it has ceased to be, it has expired; it is an ex-convergence programme.

It is not good enough if the Minister cannot even produce a document when he gets advance notice of ONS growth statistics that matches the realities of the economy rather than the forecasting ideas that are dreamed up in the Treasury. That is a sign that the Government do not understand the importance of growth in our economy, especially when today’s statistics showed that construction has fallen back by 7% over the past six months, with total production already falling back even from the last quarter before Christmas. Government cuts have not yet started in earnest, and the VAT increase is already biting hard.

What are the prospects for business growth? On page 14 of the document, the Treasury says:

“Credit conditions have shown signs of stabilisation”.

That is certainly not the experience of small and medium-sized enterprises: lending to businesses is in an atrocious state. It goes on to say in paragraph 2.43:

“however, credit conditions for smaller firms remain tight”.

That is an exceptional understatement. The Bank of England’s lending report shows that lending to SMEs fell by a further 3% in February. That is echoed by the British Bankers Association’s growth rate statistics on lending to small businesses, which cited a figure of minus 6% in December. So much for the much-vaunted Project Merlin. Yet the mark-ups that small businesses have to pay for loans are widening, and the banks are charging small businesses even more even though less and less lending is available. We have a serious systemic problem with our economy. Underpinning the difficulties with growth are the factors that businesses need in order to fire up the economy, and they are going wrong.

We also have to look at the Government’s failure on employment. Page 84 of the convergence programme document says:

“In line with a weaker outlook for output growth, we expect employment to be lower than forecast in November.”

The OBR predicts that unemployment will go up by 200,000 as a result of the Government’s policies. If each unemployed person costs the Exchequer about £7,800 in welfare costs and lost taxes, that could represent a loss to the Exchequer of more than £1 billion—money that the Exchequer should have coming in that is going the wrong way. In addition, inflation is undermining Government spending plans, as the document admits in terms of VAT fuelling inflation, and it is forecast that borrowing and debt will be higher than predicted in June. As a consequence, the interest that we will need to pay on our borrowing will be higher because of the inflationary costs of social security expenditure.

[Mr Cash]

I have no doubt that the hon. Gentleman has looked at the comparison of unit labour costs throughout the whole of Europe. It shows that in the past 10 years Germany’s costs have increased by only 2% whereas almost every other country’s have increased by massive multiples of up to 35%. Does he accept that one of the real reasons Germany is predominating in the European economy includes, in particular, the fact that its labour costs are so low, which means that it can compete in the BRIC countries, including India, China and the rest?

[Chris Leslie]

There are several factors underpinning the German economy. The Germans do not pursue the same degree of hard and fast austerity that we are pursuing, they have a different approach to productivity, and they are achieving higher levels of growth. Our economy needs a pro-growth strategy. I do not say that as a whim—it is a hard-headed credible necessity for reducing the deficit and getting the economy moving again. Without growth, the Treasury will be losing revenue.

--- Later in debate ---

[Chris Leslie]

It is actually based on common-sense economics. I regret that the Government cannot see that. Unfortunately, I think that they will rue the day that they neglected growth in the economy. As we know, there is anxiety in the Treasury at the flat-lining, almost comatose nature of the economy. We hope sincerely that it picks up through the next quarter, but many people predict choppy times in the second quarter of this calendar year. I refer the hon. Gentleman to the paradox that I spoke about: pursuing the austerity approach too hard and too fast undermines growth and pulls from under the economy some of the key drivers for future prosperity that support it. Cutting too far and too fast is bad not just for the economy, but for deficit reduction strategies.

The Government’s spending plans are already coming unstuck. I will wind up with this point because I know that a lot of hon. Members want to speak. On tuition fees, which we debated earlier, we know that the cuts to higher education budgets will mean that universities will charge the highest fees, which will result in the ballooning of student loan pressures and the creation of a funding shortfall. Where will that money come from? We know that the Government have U-turned on school sports and that, when it came to the crunch, even the Financial Secretary had to U-turn on the financial inclusion fund. We are glad that he did so, but it changed the spending trajectory. On forests and on any number of other spending plans, when the rubber has hit the road, the Government have been unable to fulfil many of the so-called spending cuts that they promised in their much-vaunted June Budget.

[Mr Cash]

Does the hon. Gentleman concede that, leaving aside the question of cuts for a moment, the motor for an economic revival comes from growth, which in turn can come only from private business and private enterprise generating the taxation to pay for public expenditure? Without that, there is no public sector.

[Chris Leslie]

I agree with the first part of the hon. Gentleman’s point. Of course we need a pro-growth policy, and of course the private sector has to be the engine of that. However, he suggests that the Government somehow have no role to play in encouraging and fostering growth, and that is where we differ. The Opposition believe in supporting firms in moving forward into prosperity. The laissez-faire attitude of the Conservative-Liberal alliance has moved us into wholly different terrain and proves that it does not have a credible fiscal stance.

Unfortunately, the convergence programme is a hollow document that is already out of date. Its predictions are not probable or plausible, and for those reasons I urge Members to reject the motion.

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

I start by drawing on the last intervention by my hon. Friend the Member for Stone (Mr Cash). He made an important point, and it was the one that I made last night. Government money is not our money, it is the public’s money generated by the private sector. We cannot simply say that we should carry on pouring in money, because it is not our money. We must think about where it comes from.

The hon. Member for Nottingham East (Chris Leslie) said that if certain actions had not been taken, an extra £6 billion would have come in to the Exchequer, but in our emergency Budget we cut the deficit by £6 billion. If we had not done that, there would not have been any extra money, would there? We would have borrowed an extra £6 billion instead. We would have been borrowing money, churning it out, collecting it back in and saying, “What great money generation”. We would just have been turning money around. We can get money coming in to the Exchequer only through growth, and that can occur only if the private sector is in a credible position so that it can move forward.

The Opposition’s comments are interesting, because there is a paradox in that they paint a gloomy picture but meet it with glee and struggle to keep a straight face. Of course, we know that if we had followed the previous Chancellor’s spending plans, we would have been cutting £7 for every £8 that is being cut now. The margins are small. Let us not get into a discussion about the idea that if the Government’s actions had not been taken, a further £6 billion would have come in. We cut the deficit by that amount in the emergency Budget, so there would not have been any extra money. The money that we borrowed would just have been churned out and collected back in, which would have done nothing to stimulate the growth of the economy. I agree with the hon. Member for Nottingham East that the growth figures are small, but they are growth figures. He says that they may be flat, but we know that things can be choppy. The point is that we are growing and moving forward.

Let us come back to tonight’s debate and the history of the Council of the European Union. Back in July 2008, the Council of Ministers decided that the UK had an excessive deficit and asked it to correct that by the financial year 2009-10 at the latest. In April 2009, the Council concluded that the UK had failed to correct its excessive deficit within the time set. In December that year, it adopted a recommendation that the UK end its continuing excessive deficit by the financial year 2014-15, by bringing it below 3% of gross domestic product. In 2009-10 it was at 11.4% of GDP, but the convergence document now predicts it to be at 2.6% of GDP.

That is in stark contrast to the Opposition argument that it is unnecessary to make cuts and that we should continue as before. I shall tell the House later how I actually feel about the EU’s interference in such matters, but people outside this country were saying, “You are spending too much; you need to make those changes,” and we are now doing so. Whether we should have to do that for the EU is a slightly different debate, and my hon. Friend the Member for Bury North (Mr Nuttall) was right to say that we are using parliamentary time and publishing documents containing information that the EU could quite easily find out for itself. That adds to the already bloated EU system, and perhaps indicates why it asks us for a 5% increase in its budget, which is an absolute disgrace at times of austerity.

The hon. Member for Glasgow South West (Mr Davidson) spoke of the imbalance of trade with the German economy. The German manufacturing economy is a powerhouse of Europe, and as my hon. Friend the Member for Stone outlined, we have a very low manufacturing base. The picture that that paints is that economic integration in the EU is not possible with sovereign countries generating high GDP growth and trade imbalances. For integration, countries must move to one common taxation policy. That, if anything, is proof that the euro is leading to a common taxation policy and a loss of fiscal sovereignty.

[Mr Cash]

As my hon. Friend may have noted, I raised that question with the Prime Minister earlier today in relation to voting against the provisions for a corporate tax base for the whole of Europe. That decision will in fact be made unanimously, and we can get rid of it with our veto. I did not get an answer from the Prime Minister, and I hope my hon. Friend continues to urge against having a tax system imposed upon us by the rest of Europe.

[Alec Shelbrooke]

My right hon. Friend the Prime Minister has a very pragmatic view on such things, and I am sure he took great note of my hon. Friend’s question. I am also sure that the Prime Minister will listen to the mood of the country and ensure that the EU does not move towards such a common economic base.

This is crux of the matter: we are publishing documents tonight to pass back to the EU that show that the UK is in compliance with the rules. Those rules mean that we could qualify for the euro. People have often asked, “With the pound so close to parity with the euro, why don’t we join?” but we will not join because we will not fudge the figures just to get into the euro—not that we want to join—[Interruption.] Please! I would not want anyone to leave the Chamber thinking that I am pro-euro, because I certainly am not—perish the thought.

To qualify for the euro, countries must have a budget deficit of 40% of GDP and they must borrow no more than 3% of GDP annually. We know that the Italians fudged that. That is one reason why the euro is in the mess that it is in, and why it is nowhere near competing with the US dollar, or indeed the Chinese currency, in the way that people thought it would. The fact is that if the EU wants to have a strong economic case, it must go for full monetary union, which is totally unacceptable for sovereign countries.

As we know from the treaty of Rome, the original European partnership of six nations was set up to try to prevent further wars in Europe, to bring peace to the European nations, and to get everybody trading together as one bloc. That was the vision. However, I do not think that the rise of far-right parties across Europe and the increasing moves down the federalist route are coincidental. People feel that they have lost their sovereignty and identity. If the EU moves forward to a full, integrated economic policy, that will be the end of the EU, because people around Europe will vote in extremist parties to try to reclaim their national identity. I say that as a warning, with no joy. I am probably one of the more dove-ish Government Members when it comes to violence or military matters, but I fear where those moves could lead.

The Opposition’s main argument this evening has been: “You’ve got your economic policy completely wrong. You could have had more money coming to the Exchequer.” However, they have forgotten that the money coming to the Exchequer was the money they printed, pumped out and brought back in before saying, “Oh, look at all the money we’ve generated!” I do not think so. This is about creating growth, and in the document before us, an independent body has said that the Government’s policy is correct and in line with what we want to achieve, which is what the previous Government singly failed to achieve despite the warnings in December 2009.

--- Later in debate ---

[Mr William Cash (Stone) (Con)]

It will be useful to remind the House of what section 5 of the European Communities (Amendment) Act 1993 actually says. Some of us were here in 1993 during the Maastricht debates, and it was rather an interesting moment when the only piece of reality in the whole of that Session occurred. That was when an attempt was made to restrain the movement towards a European Government. Section 5 states:

“Her Majesty’s Government shall report to Parliament for its approval an assessment of the medium term economic and budgetary position in relation to public investment expenditure and to the social, economic and environmental goals set out in Article 2”—

they are pretty extensive—

“which report shall form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Articles 103 and 104c.”

What this really boils down to is that, in order for us to be able to continue—leaving aside the opt-out from the euro—we effectively have to comply with the convergence criteria and other criteria that are laid down by the European Union. Effectively, leaving aside the question of the European stability mechanism—my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) knows that I totally agree with the extremely important point that he made earlier—the bottom line is that we have been moving inexorably, regrettably and avoidably towards deeper and deeper European integration, with more and more requirements and obligations being imposed on us.

As Chairman of the European Scrutiny Committee, I and other colleagues here tonight—my hon. Friends the Members for Daventry (Chris Heaton-Harris) and for North East Somerset (Jacob Rees-Mogg), and the hon. Member for Luton North (Kelvin Hopkins), a distinguished member of the Committee from the other side of the House—know the sheer, massive extent of the invasion and the vast range of impediments that are put in our way as a result of decisions taken not by this Parliament but by other countries, by the European Commission and by the European institutions. So this is an important debate, and the Minister will understand why I objected to the idea that it should be shunted off to some innocuous Committee, well controlled by the Whips, without having any real opportunity for the whole House to participate.

I can make my points briefly. Some have already been made and others I have made myself in the past, so I do not need to elaborate on them. First, I very much agree with the suggestion that this undemocratic process affects the daily lives of the people of this country and inhibits our ability to grow our economy, particularly when at least 4% of our gross domestic product is lost through excessive European regulation of small and medium-sized businesses. I find it utterly absurd—it is incomprehensible to me—that the Government cannot simply say, “Look, we’ve tried. We’ve gone ahead. We’ve tried to negotiate, but they are not listening. We are going to have to override the European legislation.” I think it negligent not to do so.

I received a letter from the Prime Minister only a few days ago, reminding us that the European Council

“agreed on the need for robust actions to support growth”.

He went on to refer to reducing

“the overall burden of regulation including exemptions for micro-enterprises from future regulations”.

In my right hon. Friend’s absence, I have to say—he will know that I would say it anyway—that “future” regulations are not the issue. The real question is about existing regulations. I do not need to go through them all again—I have written pamphlets about them, as have many others—and we know that there is a vast array of completely negative regulations that cause a vast amount of difficulty for small and medium-sized businesses. We are not going to achieve the private enterprise that will be needed to pay for the public sector that is needed unless we get out of that vicious circle. That is point No. 1.

Point No. 2 is that the consequences of not having sufficient growth and of having the deeply regrettable legacy of the deficit will mean that riots and protests—not only in other countries, but in our own—will grow as the pain bites into the economy and into people’s daily lives. This will lead to an increase in the potential for parties of the far right to gain traction. I do not think that the policy pursued on the stability and growth pact can be described as anything other than a disaster area because there has been no stability, no growth and no pact. I wrote an article about that in The Times five or more years ago, but it is exactly the same now. Nothing changes. That is terribly depressing, which is why we must have the political will to do something about it.

The Europe 2020 strategy is another re-run of the vast amount of verbiage that accompanied the Lisbon agenda, which those involved had to admit was a complete disaster. It is words, words and words; it is nothing to do with the practical question of generating growth. I mentioned Brazil, India and China earlier. The plain fact is that we have to compete with these other countries and it is impossible to do so when looking at the question of unit labour costs in those countries and then looking at the European Union and noticing that Germany had an increase of only 2% in the last 10 years, compared with 30% in most other EU countries. We are in a completely impossible situation. I say this with the greatest respect to my hon. Friend the Financial Secretary, but I did not hear anything in his speech to respond to this situation except for the fact that he said we were getting close to achieving the parameters laid down by the EU for the excessive deficit procedure.

Let me ask a question that I asked before the general election and again during it. It is simply this: what is the true level of our debt? Suppose that the Chancellor of the Exchequer had risen to make his Budget speech in the House the other day and said, “The first thing I must tell the House is that we will have to knock £6 billion off the figures that I am about to announce because we will be bailing out Portugal—and, by the way, our budget contribution to the European Union will rise to £10 billion, so we had better start factoring that in as well.”

Some Members may not know—I do not think many people do—that a spat is going on between the Office for National Statistics and Eurostat about the formulation of our figures in relation to the deficit. I am looking into it, but it is the sort of thing that really troubles me. If we do not get the figures right, and if the Eurostat figures are imposed in a way that makes it difficult for us to accord with the parameters of the rules, that will be another matter that should concern us.

There are many other issues that I could raise, but let me end by dealing with the question of looking to the future. The plain fact is that Germany has now taken pole position in the European Union. The European Central Bank—which has not been mentioned tonight, and to an extent I understand why—has been more or less working in a German environment, if I may put it in those general terms, and has become the owner of vast quantities of bad assets. Another problem is being stoked up there. As was pointed out in a very interesting article in The Economist a few weeks ago, all that is part and parcel of Germany’s pole position at the heart of Europe and also the heart of the problem itself. We cannot afford to work on the basis of a system—to which the Government have foolishly agreed—in which we would not be isolated, but would be engaged in the process of a two-tier Europe because we had agreed to a treaty that will have a serious adverse effect on us. We must renegotiate these treaties and return to a European Free Trade Association-type arrangement, so that we have independence and, with it, the ability to deliver an economy that the British people deserve.

[Several hon. Members]

rose—

European Summit

William Cash Excerpts

Thursday 24th March 2011 Commons Chamber

[Mr William Cash (Stone) (Con)]

(Urgent Question): To ask the Chancellor of the Exchequer whether the decision described as the draft decision in the motion to approve the treaty change on the European financial stability mechanism without a referendum, which was passed by the House yesterday, is now under review.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am grateful for this opportunity to make a statement to the House about Portugal and the European stability mechanism. I understand that hon. Members are concerned about the events that unfolded in Portugal, which has faced difficult challenges for some time.

Yesterday, the Portuguese Prime Minister resigned after Parliament rejected his austerity Budget. However, let us be clear: Portugal has made no request for assistance, and I hope that hon. Members will understand that it would be inappropriate for me to engage in any speculation about what may happen. It is not for me to say whether Portugal should ask for help, just as I would not tell it how to run any part of its economy. However, I assure the House that we will keep hon. Members informed of any developments.

Hon Members may wish to reflect on the fact that, as my right hon. Friend the Chancellor said yesterday, our deficit is larger than Portugal’s, but market rates in the UK are similar to those of Germany. That reinforces the fact that it is right to pursue the course that we set last year to tackle the deficit.

My hon. Friend the Member for Stone (Mr Cash) has also raised questions about the European stability mechanism. A strong and stable euro area is important for British business. Over 40% of our exports go to the euro area, but we are not a member of the monetary union, and it is not our responsibility to deal with the euro area’s problems. That is why we have welcomed the progress that has been made on the European stability mechanism. In the design of the ESM, we had to ensure that there was no transfer of powers from the UK to the EU. We would never have accepted that.

The treaty change applies only to euro area member states. There is no transfer of power or competence from the UK to Brussels. The ESM puts no obligation, legal or political, on the UK to contribute. That is why we have supported the agreement, which makes the euro area’s responsibilities absolutely clear. In 2013, the European stability mechanism will come into effect. Also in 2013, the European financial stability mechanism will come to an end, and the UK will not be part of it.

Several countries, including Germany, have strong views about how the ESM should be designed, but that cannot change the fundamental aspects of the mechanism, because the ESM will be developed under article 136 of the treaty and it can apply only to member states whose currency is the euro. The UK cannot join the ESM without joining the euro. As my hon. Friends know, that will not happen in the lifetime of this Parliament.

Furthermore, we have ensured that the recitals—the preamble—to the draft decision by the Heads of State and Government at the December Council meeting stated that article 122, which was used to create the temporary funding mechanism,

“will no longer be needed”

and “should not be used” to ensure financial stability for the euro area as a whole once the permanent mechanism is in place.

Should there be any suggestion of amending the draft decision at the European Council, the Prime Minister could not legally agree to it without first coming back to the House for additional approval after a further debate. The House and the other place would have to ratify any change to the treaty.

[Mr Cash]

I asked the question, first, because the existing European financial stability mechanism, to which we are potentially exposed in respect of Portugal, was described in the report of the European Scrutiny Committee, which I have the honour to chair, as “legally unsound”; and, secondly, because it involves the United Kingdom underwriting approximately €8 billion to eurozone countries until 2013.

The motion for a treaty change to create the new mechanism, which was passed yesterday, provides for amending article 136 of the European treaty without a referendum, but the amendment prescribes strict conditionality. What are those conditions? The motion that was passed yesterday now appears to be vitiated. Will the Government renegotiate the decision so that the European stability mechanism, if proceeded with at all, is agreed by the British Government with unanimity only if the legally unsound existing European financial stability mechanism, to which we are wrongly exposed, is repealed? The United Kingdom would thus not be required to contribute to the bail-out of other eurozone countries such as Portugal, which would amount to approximately €4 billion. That course of action is open to the Prime Minister in his negotiations at the summit today, and it would relieve the hard-pressed British taxpayer.

If my proposal were accepted, I feel sure that the Government would have an improved chance of obtaining the European Scrutiny Committee’s clearance for any new decision and the passage of any subsequent Bill required under the House’s procedures. Will my proposal be accepted?

[Mr Hoban]

My hon. Friend and I have debated this subject before, and my right hon. Friend the Minister for Europe opened a lengthy debate on it on 16 March. The Government are clear that the European stability mechanism is an important tool, but it is for the euro area to fund it. The ESM will lead to the extinction, as it were, of the EFSM. I do not feel it appropriate to engage in further speculation on events elsewhere.

Budget Responsibility and National Audit Bill [Lords]

William Cash Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Chris Leslie]

Perhaps this is where I differ from the hon. Gentleman. I think that a slightly dry and narrow focus on the accountancy issues in the draft charter for budget responsibility, as well as a monetary policy focus at the Bank of England and in the charter, with no or scant focus on the real economy—economic growth, employment and some of those very important issues that affect all our constituents—would be a deficiency in the role of the OBR.

[Mr William Cash (Stone) (Con)]

The shadow Minister and I took part in a debate the other day that goes to the heart of these questions. Does he not agree that although fiscal policy is regarded—with qualifications as the result of the motion the Government put before the House the other day—as exclusively a matter for the House of Commons, unfortunately and disastrously, European economic governance affects the question of growth and the issues that go with it? Does he not agree that his proposals would be overtaken by the proposals that are going through the European Union?

[Chris Leslie]

I understand where the hon. Gentleman is coming from. I hope that he would acknowledge that we have tried to table a constructive set of amendments because we do not believe that a purely fiscal mandate for the Treasury or the OBR is wide enough. His view is that growth and fiscal policy will also be influenced from beyond these shores and especially by European Union policy. That may well be true.

[Mr Cash]

I do not wish to correct so much as to advise the hon. Gentleman that my position is exactly the opposite. Fiscal policy remains in this House and should do so, despite what the Government did the other day, and economic growth should also be determined here and not in other arenas. In the Public Bill Committee, he referred to judicial authority as a result of the interpretation of the statutory duties imposed in this place. Does he really want the Supreme Court to apply its determination of its ultimate supremacy over both fiscal policy and economic growth?

[Chris Leslie]

No, I do not. That was one reason why we raised this issue in Committee. The Bill sets out tests on the responsibilities of the OBR and the Treasury yet there was not really an adequate response from the Minister about the justiciability of those tests. For example, the Minister gave no cut-and-dried answer to the question of a member of the public who might wish to sue the OBR on its efficiency or effectiveness, what sort of legal process that might entail and where it would eventually go. The hon. Gentleman makes an important point.

In a cynical moment in Committee, I raised an eyebrow about the fact that 10 clauses are necessary to establish the OBR. I queried whether we needed 10 clauses to do that. The Bill contains a number of embellishments that, in a more sceptical moment, made me suspect that it was slightly padded out to make it appear to be a grander piece of legislation when a couple of clauses and a schedule would probably have done the trick. Perhaps I was unfairly cynical.

--- Later in debate ---

[Chris Leslie]

I would recommend that all hon. Members take a look at the draft charter for budget responsibility, which has several interesting facets. I have no doubt that the Minister will explain, in layman’s terms, what is meant by a

“rolling, five-year forecast period”

in relation to the cyclically adjusted current balance. Some hon. Members might find it difficult to envisage how that rolling forecast will operate in principle. Many of us can understand the concept of a fixed year or a fixed date against which a set of targets are to be judged, but if the horizon shifts continually, that is different. It would be interesting to hear the Minister explain that when she responds.

[Mr Cash]

I am sure that the hon. Gentleman also has in mind clause 6(3), which imposes the following obligation:

“The Office must, in the performance of its duty…act consistently with any guidance included in the Charter”.

As he well knows, I am rather particular about the words used in legislation. I like to know, first, what they mean and, secondly, what their consequence would be; I do not think that is unreasonable. I worry about the extent to which he would effectively be taking away from this House or, for that matter, from the Minister, any responsibility whatsoever for any aspect of the running of the macro economy. I have sympathy with his objective, but I am worried about how it fits into the framework of these provisions.

[Chris Leslie]

I would not want the hon. Gentleman to misunderstand the point of our amendment. It would, in essence, ensure that the charter for budget responsibility had a wide enough definition to give the new Office for Budget Responsibility, if it is indeed an independent body, more latitude to look across the wider set of economic indices and make its analysis and assessment of the impact of the Treasury’s policy on the ground—in the real world and the real economy—instead of looking merely at the desiccated issue of deficit reduction.

--- Later in debate ---

[Chris Leslie]

I look forward very much to those pre-appointment hearings and the reports of them. It is important to have people who understand the real economy. That is the gist of our amendments. We are worried about these matters.

[Mr Cash]

rose—

--- Later in debate ---

[Chris Leslie]

I suspect that the Economic Secretary will make that point in her retort, when she eloquently resists all amendments, as is her usual pattern of behaviour. However, it is not clear enough that growth and employment are matters that the OBR can comment on and analyse. I absolutely would not want to give it the power to determine the mandate, but the Treasury should be big enough and ugly enough to withstand commentary from such an independent body.

[Mr Cash]

May we park that matter for now, without in any way undermining the hon. Gentleman’s main point about judicial authority? What he said in the Public Bill Committee was completely right—if we impose a statutory duty, we have to accept that the courts will adjudicate.

That is important enough, but how would the hon. Gentleman reconcile clause 6(3), which states:

“The Office must, in the performance of its duty…act consistently with any guidance”

under the charter with, for example, European directives that will emerge under the 2020 strategy? Under his proposals, which would prevail?

[Chris Leslie]

The growth mandate that we are suggesting would be a responsibility of the Treasury, not of the OBR, but it would give the OBR a duty to have regard to whatever else was in the charter. Simply inserting the fact that the Treasury had to follow a growth mandate would give the OBR the right to comment on the Treasury’s performance in respect of that mandate. Whether there are European or other influences on the Treasury’s policies and performance is a debate for another time, I suspect.

[Mr Cash]

There are.

[Chris Leslie]

I am quite sure that there are influences, but we tabled the amendment to draw out answers to some of these questions.

--- Later in debate ---

[Chris Leslie]

If my hon. Friend will allow me, I will not give way. I have been speaking for rather a long time and I want to stop, but hon. Members may wish to make their own comments individually.

Clearly we need a proper growth strategy, but a growth mandate would also help. We need to start focusing on future growth industries and maximising our comparative advantage. We need to cast forward with a growth strategy not just for a decade, but for several decades. We need to focus on skills and, yes, a fiscal strategy, but we also need to focus on job creation, and a growth mandate with the clarity for the OBR to make its own assessments would certainly be a step in the right direction.

[Mr Cash]

Some time before the general election, as the financial crisis was developing—particularly in relation to the banks—there was a certain amount of talk about the idea being put forward by the then Opposition for an office for budget responsibility. I remember participating in some of those debates, and saying that I thought that it was an extremely good idea to have a much clearer picture of how we organised our finances. However, at that time the true level of debt was not being revealed by the then Government. We had reason to believe that the actual amount of debt was very different from what was being put forward. That had significant repercussions for the question of how we should deal with it. The OBR, or whatever else was going to be put in place, would have had to deal with the reality of the debt.

--- Later in debate ---

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman knows what I am going to say. I do not want to spoil what he is going to say on Third Reading, so it might be better if he stuck to the subject of the amendments. That would be more useful to us at this stage.

[Mr Cash]

I am very glad to be able to follow that advice. In order for the provisions contained in the amendments to be inserted in the Bill, it is essential for the House to be aware of the implications of judicial authority, the assertions of the Supreme Court in that context, and the sovereignty of Parliament. There is, for example, the question of fiscal policy and the charter, which is set out in clause 1(2) and to which the question of economic growth and job creation would be added by the amendments. Clause 6(3) states:

“The Office must, in the performance of its duty under section 4, act consistently with any guidance included in the Charter by virtue of this section.”

I am deeply worried about the legal status of the charter in this context.

As for fiscal policy, I remind the House that the other day, probably for the first time since 1640—Pym and Hampden and all that—the Government passed a motion saying that we were only primarily responsible for it. I voted against the motion—as did my hon. Friend the Member for Bury North (Mr Nuttall) and a number of others—but the whole House should have voted against it, because in fact we are exclusively responsible for fiscal policy, and that is what the Bill is supposed to be based on.

What worries me particularly is the inconsistency with fundamental questions that are in the background, involving the primacy of European law, sovereignty and judicial authority. I need make no further points, because in a nutshell, if those issues cannot be reconciled with what is in the Bill, and if the duties of the Office for Budget Responsibility are to examine and report on the sustainability of the public finances, to prepare “fiscal and economic forecasts”, to make assessments and analyse sustainability, and to act consistently with the charter as a matter of law, we are surely entitled to ask: which law will prevail?

Obviously, I agree with all the ideas that are being presented. We all want an efficient economy, we all want jobs and we all want growth. We cannot survive without growth, and we cannot generate the revenues to pay for the public sector without that growth in the private sector. What worries me is that all those ideas are being imposed through a Bill, rather than through the judgment of Ministers who are accountable to the House of Commons, and should not be required to refer back to the judicial authority of the courts or the alleged primacy of the European Union.

I fear that we are embarking on one of those Lewis Carroll-type situations. I am reminded of “The Hunting of the Snark”. Members may recall the phraseology. We know that we want it, we know it is there, but the question is, what is it going to do? I have a serious problem with the Bill for that reason. I fear that we are engaged in a process of wishful thinking rather than achievement, and that we are being locked into a withdrawal from parliamentary accountability—and, as some Members may know by now, I regard that as the ultimate test of our democratic system.

[Ian Murray]

It is a pleasure to follow the hon. Member for Stone (Mr Cash). At the end of his contribution he referred to wishful thinking. Labour Members certainly think the Chancellor’s gamble with the UK economy is wishful thinking. The recent reduction in GDP came as a shock to everyone, and serves to highlight some of the wishful thinking indulged in by those on the Treasury Bench.

I think that everyone supports the establishment of the Office for Budget Responsibility. One of the best measures taken by the Labour Government was the courageous step of making the Bank of England independent. We have all seen the benefits of that, in good times as well as bad, as it can now make decisions for the benefit of the economy, rather than the benefit of the Government.

In the establishment in law of the OBR, the Bill should focus on more than just deficit and debt issues. Clause 1(1) states that the Treasury must look at

“the formulation and implementation of fiscal policy and policy for the management of the National Debt.”

That narrow focus takes us away from what we need most, which is economic growth. It does not even give the OBR the ability to take account of various specific objectives the Government may want to achieve, such as on child poverty or unemployment, or in terms of the impact on the economy of decisions made by the Chancellor and his team.

--- Later in debate ---

[Justine Greening]

Ultimately, a key clause—I think clause 5—sets out that it is at the OBR’s discretion to decide how to carry out its duty. A fundamental building block of the OBR’s credibility is its independence. I assure the hon. Gentleman that the risks he mentions, such as the concern that the OBR might not carry out robust analysis, are mitigated by other safeguards in the Bill. For example, one duty of the OBR will be to produce a report on the accuracy and robustness of its forecasting. As he will be aware, there are also non-executive directors who will be there on a day-to-day basis to challenge how effectively the OBR works and every five years, at a minimum, there will have to be a completely external peer review of the OBR’s workings.

I think we have managed to strike a balance by setting up the OBR in the way I have described—on the one hand by giving it independence, so it has that key element of credibility, and on the other by including some safeguards, in terms of its structure, its management and the review, so that, if for some reason it does not produce the quality of forecast that we need, those safeguards will be in place to ensure that we tackle the issue. Let us not forget that the OBR is accountable not just to Parliament, but to the Chancellor, because it produces the official forecasts.

Finally, amendment 4 suggests another new related role for the OBR, which as we have heard would be to assess the Government’s growth mandate. As I said in response to amendment 1, the Government seek to achieve their economic policy objectives through a range of policy tools and frameworks, not just through fiscal policy, but the OBR has been established to increase the credibility of the Government’s economic and fiscal forecasts and to hold the Government to account for their economic and fiscal policies.

That highly valuable role is recognised by a wide range of domestic and international commentators. The hon. Member for Swansea West mentioned the Institute for Fiscal Studies, and it warmly welcomed the establishment of the OBR, which, through its role, has already provided forecasts of key economic variables. In its November report, the OBR set out forecasts for the next five years, covering a range of key macro-economic variables, such as GDP and its forecast growth, inflation, employment, average earnings, unemployment and the output gap. In addition, the OBR will have the freedom to consider the impact of Government policy on economic growth and employment within our regions and nations, and in line with its main duty. I therefore consider all the amendments to be unnecessary, and I hope I have addressed the issues that hon. Members have raised.

[Mr Cash]

I do not want to put my hon. Friend on the spot, but I am troubled by a motion that the Government tabled in relation to a European document. I have an idea that they did not really mean to do so, but I just want to make the situation completely clear. The motion said that the Government and the House of Commons were only primarily responsible for fiscal matters and direct taxation. Will the Minister be kind enough to get that out of the way, so that we might now know that they are exclusively and solely, not merely primarily, responsible?

Budget Responsibility and National Audit Bill [Lords]

William Cash Excerpts

Monday 14th February 2011 Commons Chamber

[Justine Greening]

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

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

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

[Mr William Cash (Stone) (Con)]

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

[Justine Greening]

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