Finance Bill

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Mr. Hammond: I take your guidance, Sir Nicholas, that it would be improper for the Minister to refer to another Bill but what I asked her was why the Government do not consider it appropriate to treat these residual stranded assets in National Savings and Investments in the same way that they are proposing to treat similar assets in banks and building societies?
I am sorry to press the point but it is not good enough to have Ministers saying the reason we are doing this is because of equality of treatment with regard to interest and then when it is pointed out that the products in question do not bear interest not to have an explanation as to why they are proceeding in this way. Surely the code to which the Minister referred, admirable as I am sure it is, cannot have any relevance to a product that has no interest payable on it.
The Chairman: If I can help the Committee and perhaps give the Minister a little time to sort out an answer for the hon. Gentleman, this clause is not about stranded assets. That is my advice and I believe it is correct. Perhaps the Minister will seek to respond to the hon. Gentleman as far as the question relates to this clause.
Kitty Ussher: Thank you, as ever, for your clarification, Sir Nicholas. It does of course relate to assets held by National Savings and Investments as a result of the savings schemes which have not been claimed. We are not discussing what they should be spent on, which will come under future legislation. It is simply an accounting change. It moves them from one bit of the Government estate, to use that phrase broadly, to the national loans fund. It updates, modernises and consolidates such pots within the national loans fund, as opposed to their being administered by the Commissioners for the Reduction of National Debt, which tends to involve portfolio management services. I hope that that provides clarification. I seem to have caused some discussion among my advisers regarding the hon. Gentleman’s point about the interest rate, so perhaps he will permit me to write to the Committee at a later date.
5.30 pm
Mr. Hammond: I will pay those who are not in the room the compliment of saying that none of them looks old enough to remember national saving stamps, so they might not know off hand whether they bore interest or not.
The Minister has not addressed the question of what ultimately happens to the money. I accept that this is an accounting transfer and I had hoped that she would have felt able to explain what the ultimate treatment would be. I am advised by my hon. Friend the Member for Fareham, who has been closely involved with the other Bill, which we shall not mention, that national savings are not included within it. If I may say so, I think the Minister is being a tad disingenuous in suggesting that this has nothing to do with that issue, because it is still unclear to us why national savings are treated differently. If it is more appropriate, I am happy for my hon. Friend to pursue that question when that other Bill, in due course, comes before the House.
Question put and agreed to.
Clause 157 ordered to stand part of the Bill.

Clause 158

EU emissions trading: criminal offences
Question proposed, That the clause stand part of the Bill.
Mr. Hammond: It is perhaps unusual to have something so controversial so near the chronological end of a Bill of such a size, although, of course, we still have to deal with clauses that have been taken out of chronological order. Unless the Minister gives us some concrete assurances on this issue, we could have the last vote that we need to press in the chronological sequence of the Bill’s text.
The clause enables the Treasury to create, by regulation, criminal offences in relation to the allocation for payment of EU emissions trading scheme allowances. The background to the measure is that, in August 2006, the UK submitted to the European Commission its national allocation plan for phase 2 of the EU emissions trading scheme, which runs from 2008 to 2012. That plan sets out the basis by which allowances are allocated by the Government to firms participating in the scheme. The national allocation plan committed the Government to allocating 93 per cent. of the total available without charge, and to auctioning 7 per cent. The scheme is expected to continue after 2012 with a third phase, and I understand that the Government would like a higher level of auctioning in future allocation rounds.
The Government apparently envisage the need for provisions to create criminal offences relating to wrongful disclosure of confidential information in allocations for payment—that is, I assume, the disclosure of bid information at auctions. One is bound to ask, “Why now?” We are amending a provision that was passed only in the Finance Act 2007. What has changed in the meantime to lead the Government to think that criminal offences are required when they were not introduced in the 2007 Act or the draft regulations published under it? On the surface, this might seem like a tidying-up exercise, and the tucking away of the clause at the end of the Bill tends to reinforce that view. However, we know that we always have to read the small print, and we are 100 per cent. with the Government about trying to ensure that the emissions trading process operates well and that the allocation mechanism is effective.
Leaving aside the incompetence issue—why the Government are doing this now when the principal legislation was passed only last year—the clause actually gives rise to serious concerns of principle. How can it be acceptable for the Treasury to be given powers to create, by statutory instrument, a new category of criminal offence?
The explanatory notes talk in terms of a quite narrow category of offence:
“wrongful disclosure of...information in allocations for payment.”
However, that is not reflected in the open-ended power in the clause that we are being asked to consider. The Financial Secretary circulated a note to members of the Committee in which she said that the Government “currently intends” to use this power for an offence of wrongful disclosure. However, she very pointedly did not rule out using the power to create other offences. Nothing in the Bill limits the use of the power to the creation of an offence of wrongful disclosure.
The only limitation on the power to create new offences by statutory instrument relates to the maximum penalty that could be imposed in respect of such offences, which is the maximum penalty set out in the European Communities Act 1972. Incidentally, it would be interesting if the Minister could tell the Committee what those maximum penalties are. Are they turnover-related penalties?
Much as we have all appreciated the Financial Secretary’s guidance in the now significant number of letters and notes to members of the Committee during our consideration of the Bill, that does not limit in any way the Government’s ability to use the provision to create new offences at a later stage. We have, in fact, a catch-all clause, and there is no excuse for Parliament to sanction granting the Government such wide new powers to create new classes of criminal offence.
I have not been able to identify any safeguards, and we do need assurances about the provision’s scope. If the Minister reads into the record at this stage of the Bill’s progress that these powers will be used only in respect of offences related to unauthorised disclosure, we might be satisfied. However, we must have a clear commitment that these powers will be used in only that way. Perhaps the Government will be able to tell us that they are confident that they do not need to use these powers any more widely, in which case I will ask them to consider whether they could bring forward an amendment on Report to limit the scope of the powers to only the disclosure of information. If they do not do that, we will certainly want to do so.
Before I ask a question about the draft regulations, I draw my hon. Friends’ attention to the fact that the clause covers offences committed by not only companies—those in the marketplace will mainly be corporate players—but officers of companies or members of partnerships, including limited liability partnerships. Therefore, individuals could find themselves on the receiving end of this provision.
I have to admit to being slightly perplexed by the draft regulations that have been circulated. The Financial Secretary was kind enough to circulate draft emissions trading scheme regulations for 2008, which I take it have not been laid—I cannot find any record of them having been laid. We also have in front of us draft regulations amending those draft regulations. Why have the Government not simply withdrawn, or not laid, the initial draft regulations and incorporated into them the provisions of the second draft regulations? Instead, they have tabled the second draft regulations, which say:
“These Regulations may be cited as the Community Emissions Trading Scheme (Allocation of Allowances for Payment) Regulations”
and they go on to amend the first draft regulations.
I do not know of a precedent for presenting a statutory instrument, even in draft form, that amends an existing draft. Surely it would be more sensible—I will be very happy if the Minister is able to say that she will do this—to take both drafts away so that before the principal regulations are laid before the House, the provisions of the amending draft regulations are incorporated so that we have to deal with a single measure. Otherwise, as I understand it, the first substantive draft will be laid before the House and go through all the processes to become regulations, and immediately thereafter the Government will have to lay the second draft regulations to amend the first regulations. If it would help the Minister, I can probably find something else to say for a few moments—[Interruption.] I am trying to help the Committee.
Mr. Bone: Since I have served on the Joint Committee on Statutory Instruments, I have never seen such a procedure. Such a measure would normally be withdrawn, so I think that we do need clarification on that point.
Mr. Hammond: My hon. Friend reinforces my point. I have been a Member for only 11 years but I have never seen such a procedure. I was completely startled by it, so I look forward to the Minister’s clarification.
Angela Eagle: The hon. Member for Runnymede and Weybridge implied that this was somehow a hidden clause. It is in the miscellaneous part of the Bill simply because there is not a large amount of the Finance Bill taken up with emissions trading at the moment, so it fitted in the miscellaneous section. Miscellaneous does not always mean not important. I suspect that the clause is towards the end of the Bill partly because of the novelty of the area that we are in. Finance Bills have been going on for years and have taken on particular forms, but emissions trading has not been going on for years. It is a new and developing area of Government policy both domestically and at EU level—and, soon, internationally. Given that emissions trading and the issues surrounding it, particularly when it comes to raising revenue, are relatively novel arrivals on the scene, I suspect that hon. Members on both sides of the Committee will have to get used to the evolution of this particular area of activity, because it is set to grow in importance in the future. Part of the issue with which we are dealing is the novelty of the circumstances that we are in. We are trying to design regulations and legislation for a trading system that is in the middle of developing and of being negotiated, so there has to be a certain amount of flexibility as the process develops.
This clause will amend the legislative framework for EU ETS auctions with regard to the creation of criminal offences for the wrongful disclosure of confidential information relating to bids. The Government will create the offence through secondary legislation. As the hon. Gentleman rightly said, draft regulations were sent to Committee members to assist today’s debate.
5.45 pm
The EU ETS was established with a strong lead from the UK, and it is the world’s most significant international emissions trading scheme. It is an important step towards establishing a price for carbon, with a view to ensuring that negative externalities are reflected in investment and consumption decisions. As the hon. Gentleman pointed out, the UK’s national allocation plan for phase 2 of the EU ETS set out the Government’s intention to auction 7 per cent. of UK emissions allowances. As set out in the UK Government’s vision for emissions trading, published on 30 October 2006, greater use of auctioning will help to strengthen the long-term integrity and efficiency of the EU ETS. It is essential to ensure that the auctions of EU emissions trading scheme allowances are robust and support the integrity of the scheme and the carbon market. It is essential to avoid windfall profits for power generators, which tend to make windfall profits if they do not have to pay for emissions. That is partly because we are trying to put in place a scheme in circumstances in which power generation has been going on before carbon trading or carbon prices were important. Those circumstances may not be ideal, but that is another novel part of what we have to do.
The hon. Gentleman is right that it is unusual to introduce criminal offences in this way, but it is not unprecedented. There are precedents for introducing criminal offences in the Finance Bill and in secondary legislation. The Finance Bill precedent is schedule 22 to the Finance Act 2000, which introduced such criminal offences with respect to the tonnage tax.
Mr. Hammond: I am not sure whether the hon. Lady is saying that the Finance Act 2000 introduced criminal offences or the power to make criminal offences by statutory instrument. Will she clarify the position?
Angela Eagle: The 2000 Act introduced the power to make criminal offences in secondary legislation, and that is the precedent for which the hon. Gentleman asked. That is not a usual thing to do, but it is not unprecedented in Finance Bills. There are precedents for introducing criminal offences by secondary legislation, which the hon. Gentleman should take into account, including section 47 of the Transport Act 2000 and section 468 of the Companies Act 2006. There are also precedents for introducing criminal offences for inappropriate disclosure of information, which is what we are dealing with, such as section 206 of the Water Industry Act 1991 and section 393 of the Communications Act 2003. A more recent precedent that more of us will remember is section 39 of the Statistics and Registration Service Act 2007. There are therefore precedents for the measure, which is unusual, but it is not unheard of.
Mr. Bone: I am grateful to the Exchequer Secretary for those examples. Do any of them apply to EU-wide provisions? What discussions have we had with our European colleagues to ensure that the penalties for disclosure are the same across the EU?
Angela Eagle: My understanding is that that is why the penalties for disclosure quote the EU legislation, which the hon. Member for Runnymede and Weybridge pointed out in his comments on the clause. As for the size of the penalties, I understand that the maximum allowed at the moment is a £5,000 fine, so we are not talking about huge amounts of money.
I want, however, to make the case for introducing criminal offences for the inappropriate disclosure of information. The auctioning of emissions and the robust nature of the carbon price will rely on confidentiality in respect of information in bids, especially if agents are used. The auctions are designed to allow the use of agents and intermediaries, and it is important, if the carbon price is not to be compromised or destabilised by the inappropriate disclosure of information, to introduce criminal offences, which act as effective deterrents to destabilising behaviour.
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