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Written Ministerial Statements

Tuesday 26 June 2007


Travel Insurance Review

The Economic Secretary to the Treasury (Ed Balls): On implementing the EU's Insurance Mediation Directive, the Government gave the Financial Services Authority responsibility for regulating the selling of all general insurance, save for a few exemptions allowed by the Directive. Sales of travel insurance sold along with a holiday or related travel were exempt from regulation, but given concerns with this market, the Government committed to review their decision in early 2007.

In August 2006 the Treasury announced that it would conduct an investigation into the selling of travel insurance sold along with a holiday or related travel, thereby fulfilling the commitment made in 2003 to return to this area. A call for evidence was published in November 2006 to inform the review. This document set out the issues and put forward a number of options for the future regulation of the sector. The Treasury Committee also held a hearing into the scope of FSA regulation and has since produced a report calling for travel insurance sold along with a holiday to be regulated by the FSA (so long as it can be done in a proportionate way) and for the Government to work with the FSA and industry to produce policies that are better summarised in plain English. On the second of these recommendations HM Treasury is taking forward work with the Association of British Insurers.

The Government believe that there is a clear weight of evidence pointing to a gap in consumers' understanding of travel insurance as a product and the cover it provides. In particular:

Whilst all firms selling travel insurance could do more to explain to customers what the policy does and does not cover, there is clear evidence to suggest that FSA regulated firms do a better job in terms of product disclosure and navigating the consumer through the sales procedure. Furthermore, customers of FSA firms have access to statutory redress and compensation mechanisms if things go wrong. Also, from a principled viewpoint, there is no case for the distribution of travel insurance through this channel to sit outside the regulatory framework when direct sales through insurers or brokers are within it.

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The Government take a risk-based approach to financial services regulation, by balancing the need for proper consumer protection with the need to minimise the regulatory burden on firms. After a careful consideration of the arguments and assessment of the balance in this case, the Government believe that it is in the public interest to extend FSA regulation to cover travel insurance sold alongside a holiday. Further details of this assessment are set out in the partial Regulatory Impact Assessment accompanying the proposal. There will now be a further period of consultation on the Government's preferred approach.

HM Treasury is responsible for the overarching regulatory framework under the Financial Services and Markets Act 2000 and the scope of activities to be regulated by the FSA. Once a decision has been made on scope, the FSA is responsible for the details of the regulatory framework that firms must operate under.

The Government are confident that the FSA operates within a framework that offers it the opportunity and flexibility to regulate in a risk-based and proportionate way. In line with Better Regulation principles the Government will also look to undertake a post implementation review after a reasonable period of time, three to four years after regulation comes into effect.

HM Treasury is today publishing the document: “Travel Insurance Review - summary of responses and next steps”, copies of which are available in the Vote Office and the Libraries of both Houses.

Public Expenditure Provisional Outturn

The Chief Secretary to the Treasury (Mr. Stephen Timms): The Treasury will publish the 2006-07 Public Expenditure Provisional Outturn White Paper on Thursday 19 July.

The White Paper is an annual report to Parliament on the provisional outturn for public expenditure. It focuses on spending within Departmental Expenditure Limits (DEL) and Annually Managed Expenditure (AME), including information on individual Supply Estimates, and administration costs and near-cash limits.

The outturn figures are described as provisional because they may be revised when Department's final accounts are published.

A copy of the White Paper will be available in the Libraries of both Houses and will be accessible on the Treasury website.

Economic and Financial Affairs Council (ECOFIN)

The Chancellor of the Exchequer (Mr. Gordon Brown): The Economic and Financial Affairs Council was held on 5 June in Luxembourg. The UK was represented by the Economic Secretary to the Treasury. The items discussed were as follows:

Implementation of the Stability and Growth Pact: Excessive Deficit Procedures

The Commission presented its proposal to abrogate the Excessive Deficit Procedures on Malta, Germany and Greece. Ministers agreed Conclusions supporting the abrogation of the EDPs.

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Convergence Reports by the Commission and the European Central Bank

The Commission and the European Central Bank presented their Convergence Reports on Cyprus and Malta, which conclude that both countries have met the Maastricht criteria for joining the euro. Ministers welcomed the Commission and ECB's conclusions, and agreed a letter to be sent to Heads of State and Government at the European Council on 21-22 June. The final decision on whether both countries will join the euro as planned on 1 January 2008 will be taken at ECOFIN on 10 July.

Quality of Public Finances

Ministers were presented a report on the efficiency and effectiveness of public finances, focusing in particular on the need to improve the measurement of public sector output. The Council adopted Conclusions supporting the report.


(a) Combating Tax Fraud

Ministers agreed Council Conclusions on a range of measures to combat tax fraud, particularly in the field of VAT. The Conclusions covered work on conventional measures and more radical approaches, including a Commission study into the impact of a possible wide reverse charge. The UK supports efforts to combat VAT fraud, particularly work to improve current arrangements such as exchange of information and mutual assistance.

(b) VAT Package

Ministers agreed a package of VAT measures, subject to work on some technical issues which are to be resolved before the end of the forthcoming Portuguese Presidency. The UK welcomes this important work to modernise and simplify the existing VAT rules, particularly for cross border supplies of services.

(c) Common Consolidated Corporate Tax Base

Ministers held an exchange of views on the Commission's technical work on a CCCTB. The UK does not believe that the competitiveness of the EU would be helped by a harmonised company tax base and remains sceptical about both the principles and the practicalities.

(d) Code of Conduct on Business Taxation

The Council took note of a report from the Code Group on its work under the German Presidency to combat harmful tax competition. The UK supports the work of the Group.

(e) Joint Transfer Pricing Forum

Ministers agreed Conclusions welcoming the work of the Joint Transfer Pricing Forum. The UK agrees that the report's recommendations represent best practice, and broadly follows these standards already.


Agency Key Targets

The Minister of State, Ministry of Defence (Mr. Adam Ingram): Key targets for the financial year 2007-08 for the following Ministry of Defence agencies and trading funds have been placed in the Library of the House.

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Environment, Food and Rural Affairs

Carbon Reduction Commitment Consultation Publication

The Minister for Climate Change and the Environment (Ian Pearson): I am pleased to announce that today the Government have launched a 15-week consultation on the detailed implementation proposals of the Carbon Reduction Commitment (CRC). Copies of the consultation document, updated partial RIA and the Government response to the previous consultation have been placed in the Libraries of both Houses.

The CRC is a new mandatory cap-and-trade scheme which will place an emissions cap on up to 5,000 large business and public sector organisations responsible for around 14 million tonnes of carbon (MtC) emissions each year.

The UK is committed to meeting ambitious carbon reduction targets and requires a robust package of policies to deliver emissions savings. This new scheme, announced in the Energy White Paper, together with the provisions of the Energy Performance of Buildings Directive will deliver emissions reductions of 1.2 MtC per year by 2020, from organisations such as large retailers and supermarkets, hotel chains, universities, hospitals and central Government Departments.

The CRC is a scheme that we believe is, so far, unique for this type of organisation, designed to drive emissions reductions by providing organisations with financial incentives through emissions trading and combining this with reputational incentives through publishing performance in the form of a league table. CRC will auction 100 per cent. of allowances to participants and will recycle the revenue raised from the auction back to participants on the basis of their performance.

This new consultation, ending on 9 October, seeks stakeholders’ views on the detailed implementation and operational proposals of the CRC, with the aim of deciding how CRC can best be implemented. Government intend to bring CRC into force in 2010 beginning with a three-year introductory phase, with a fixed price sale of allowances, in which Government will not set a cap.

Voluntary Modulation Money (Livestock Sector)

The Secretary of State for Environment, Food and Rural Affairs (David Miliband): In my written parliamentary statement of 29 March 2007 on voluntary modulation (VM) and the new rural development programme for England, I said that I would make a further announcement about the use of VM receipts under axis 1 to assist the livestock industry in tackling some of the particular challenges it faces.

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Purpose of Axis 1 Livestock-Related Measures

Voluntary modulation receipts amounting to £98 million at current exchange rates over the lifetime of the new programme will be used to support three main objectives:

All the main livestock sectors (dairy, beef, sheep, pigs, poultrymeat and eggs) will be eligible for this extra funding.

Formula for the Division of Axis 1 VM Funding

The livestock package of funding will be delivered by the Regional Development Agencies (RDAs) alongside the core funding for axis 1. The RDAs will work with a number of delivery partners in their management of the axis 1 VM funding, including the Levy Boards.

The VM resources will be divided between the eight RDAs responsible according to a new specific formula based on numbers of livestock (using standard livestock units or LSUs), but with a weighting towards the density of dairy cattle because of the particular burdens that nutrient management issues will cause for the dairy industry. This results in a distribution between the regions as follows:

Weighted DistributionApproximate Allocation (£m)

North East



North West and Merseyside



Yorkshire and the Humber



East Midlands



West Midlands






South East and London



South West (excluding Cornwall)(1)



England (without Cornwall)



(1) Separate funding arrangements will apply in Cornwall and the Isles of Scilly through the convergence element of the Rural Development Programme for England

Next Steps

The RDAs have initiated detailed discussions with the principal livestock industry stakeholders in their regions with a view to putting together a detailed programme of options to meet the three objectives described above, and taking account of particular regional priorities.

Pesticides Safety Directorate (Annual Report and Accounts)

The Minister for Climate Change and the Environment (Ian Pearson): The 2006-07 annual report and accounts for the Pesticides Safety Directorate will be laid before Parliament today. Copies will be placed in the Libraries of both Houses.

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