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Written Ministerial Statements

Tuesday 10 March 2009


EU Financial Affairs Council

The Chancellor of the Exchequer (Mr. Alistair Darling): The Economic and Financial Affairs Council will be held in Brussels on 10 March 2009. The following items are on the agenda:

Implementation of the Stability and Growth Pact - Stability and Convergence programmes

Ministers will adopt Council opinions on stability and convergence programmes of 21 EU member states. The UK supports a prudent interpretation of the Stability and Growth Pact (SGP) which takes into account the economic cycle, sustainability and the important role of public investment.

Preparation of the Spring European Council

a) Key Issues Paper

After discussion in February, ECOFIN will adopt the Key Issues Paper on economic and financial matters, which will be its main contribution to the spring European Council. The Government support the presidency’s paper, which emphasises the challenges in 2009, and the remaining need for action to stabilise financial markets and facilitate a speedy economic recovery.

b) Common messages to the G20 summit

Ministers will hold a discussion with a view to establishing the EU’s position on economic and finance matters to feed in to the G20 London summit in April. The Government believe that the EU should take a leading role in laying the foundations for a sustainable economic recovery.

c) Country-Specific Integrated Recommendations

ECOFIN will adopt a report to the European Council regarding broad guidelines for economic policy, which will include an assessment of the first year of the Lisbon Strategy’s second three-year cycle. The report will focus on country-specific integrated recommendations to be made to individual member states within the framework of the European economic recovery plan.

d) Reduced VAT rates

The presidency will seek political agreement on reduced rates of VAT. The Government will look carefully at the presidency’s draft compromise proposal and continue discussions with other member states at ECOFIN.

e) International financing of climate change

After discussion by Finance Ministers in January, the Council will agree a set of conclusions representing a joint EU position on the financing of climate change.

General budget of the European Union - Council priorities for the 2010 budget

The Council will be asked to adopt guidelines on its budgetary priorities for EU financial year 2010. The Government welcome these Council conclusions, which provide a useful base for ensuring a realistic and budget-disciplined 2010 EC budget.

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Northern Rock

The Economic Secretary to the Treasury (Ian Pearson): The Office of Fair Trading (OFT) is today publishing a report assessing the competitive implications of Government support to Northern Rock. When Northern Rock was taken into a period of temporary public ownership in February 2008, the commitment was given that the OFT would produce an annual report considering the competitive effects of public support to the company.

Given the turbulence in the financial markets and increase in Government support to the banking sector, as reported in PBR 08, the OFT has announced that it will publish a Financial Services Strategy for consultation in March 2009. Following this, the OFT will develop a Financial Services Plan. It is anticipated that work conducted within the plan will examine consumer and competition issues across the financial services sector including consideration of competition issues relating to public support to banks, including Northern Rock.

I have placed copies of the report in the Libraries of both Houses.

Tax Appeals

The Financial Secretary to the Treasury (Mr. Stephen Timms): From 1 April 2009, tax appeals will be heard by the First-tier Tax Chamber within the tribunal set up under the Tribunals, Courts and Enforcement Act 2007. The First-tier Tax Chamber will operate under a common set of procedural rules for all tax appeals.

For appeals made but not heard before 1 April 2009, the procedural rules of the First-tier Tax Chamber will apply. However, the new tribunal has the discretion to continue to apply the rules of the existing tribunals—General and Special Commissioners for Income Tax and the VAT and Duties Tribunal—on a transitional basis.

For indirect tax appeals made before 1 April 2009 this means the tribunal may continue to operate the existing costs rules in the VAT and Duties Tribunal. Where this happens the practice set out by the right hon. Robert Sheldon, now Lord Sheldon of Ashton-under-Lyne, on 13 November 1978—and restated on 24 July 1986 by the right hon. Peter Brooke, now Lord Brooke of Sutton Mandeville—will also continue to apply on a transitional basis, and HMRC will not seek costs from appellants in most cases. HMRC has today placed on its website guidance about these transitional arrangements.

As the Government said in “Transforming Tribunals: Implementing Part 1 of the Tribunals, Courts and Enforcement Act 2007—The Government’s Response”, published on 19 May 2008 by the Ministry of Justice, HMRC will cease to operate the Sheldon practice in relation to appeals made on or after 1 April 2009.

Foreign Currency Transactions (Taxation)

The Financial Secretary to the Treasury (Mr. Stephen Timms): I am today announcing the Government’s intention to present to the House of Commons a change to tax rules designed to ensure that both businesses and the Exchequer are protected from the uncertainty of exchange rate movements during the period of a rights issue of shares.

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This measure will ensure that where a company is making a rights issue of shares to strengthen its capital base which is denominated in a different currency from its accounting currency it can protect the capital raised from exchange rate risk in a way that is tax neutral for the company and the Exchequer.

This objective will be achieved by ensuring that any exchange gain or loss on the hedging instrument in such situations will be disregarded, consistent with the tax treatment of other types of hedging transactions. This will remove the exchange rate tax risk posed to Exchequer under the current tax treatment of companies hedging against exchange rate movements on the proceeds of a rights issue.

To ensure that the full value of the rights issue will bolster the company’s capital position, any gain arising from the hedging transaction that is subsequently distributed to shareholders will be taxed in the normal way.

This measure will be introduced by statutory instrument. It will apply to hedging transactions undertaken on or after 1 January 2009 and still current at today’s date. The change will ensure that no company is disadvantaged for tax purposes in respect of exchange movements on existing transactions before today’s date.

Draft regulations and the accompanying explanatory memorandum will be published on HM Revenue and Customs’ website as soon as possible.

Children, Schools and Families

Ofsted (Contingency Fund Borrowing)

The Minister for Schools and Learners (Jim Knight): The Department for Children, Schools and Families has today requested parliamentary approval for additional resources of £20,000,000 for The Office for Standards in Education, Children’s Services and Skills (Ofsted) prior to funding of £20,000,000 from the Spring Supplementary estimate becoming available.

Ofsted requests a repayable cash advance from the contingencies fund as its Spring Supplementary estimate is not due to receive Royal Assent until late March 2009. This timing difference was not factored into cash flow projections. This cash advance is required to meet its contractual obligations to pay suppliers within the required 10 working days. Upon parliamentary approval of the Spring Supplementary, Ofsted will make immediate repayment of the advance to the contingencies fund.

Parliamentary approval for additional resources of £20,000,000 will be sought in a Supplementary estimate for Ofsted. Pending that approval, urgent expenditure estimated at £20,000,000 will be met by repayable cash advances from the contingencies fund.

Home Department

Migration Reform (Points-Based System)

The Minister for Borders and Immigration (Mr. Phil Woolas): The Government are continuing to deliver the biggest shake-up of the immigration system for over 45 years, delivering a stronger border that maximises the use of new technology, a selective Australian-style points system to control migration and a clear expectation that newcomers need to earn the right to stay.

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Last year we made key changes to our border protection, including checking fingerprints before we issue a visa, screening all travellers against watch-lists and introducing a single border force with police-like powers for frontline staff. We also introduced Tiers 1, 2 and 5 of the Points Based System for skilled and temporary workers and new rules for business and special visitors.

I have laid the immigration rules that will implement Tier 4 of the Points Based System (PBS) for international students.

The PBS is part of a robust system of controls that is designed to prevent illegal migration and to welcome only those migrants that the country needs. This Government are committed to encouraging people from overseas to study in the United Kingdom. We recognise the contribution that international students make to the UK economy and the benefits that encouraging overseas students brings in terms of diffusing British values and fostering a positive view of the UK overseas. At the same time it is also vital that we prevent abuse of our student migration rules by those who whose real intention is to work here without proper authorisation.

The new rules set stricter limits on courses involving work placements to ensure these are not used as a route for disguised employment and limit the amount of time those coming to the UK to study as adults can spend on low level courses.

In addition, the new rules will require those who come here to study to have a licensed sponsor before they can be admitted. In doing so, we will be ensuring that those who benefit from migration take responsibility for the migrants that they bring to the UK, and take more responsibility for their recruitment decisions.

These rules also make specific provision for child students coming to the UK under Tier 4, and clearly set out the care arrangements that must be in place to safeguard these children before they will be able to come to the UK for their education.

Full details of the changes appear in the explanatory memorandum that I laid with them. Policy guidance for those seeking admission under Tier 4 is also being made available today on the United Kingdom Border Agency’s website at http://www.ukba.homeoffice.gov.uk/studyingintheuk/

Other key changes made by this Statement of Changes are:

The new rules also make changes to Tier 1 of the Points Based System for highly skilled workers. Applicants under the Tier 1 (Post-Study Work) route will no longer receive points for postgraduate certificates and diplomas other than UK postgraduate certificates of education and those applying for their first period of leave under Tier 1 (General) will no longer receive points for bachelor’s degrees or for previous earnings of less than £20,000.

The amendments to Tier 1 (General) were announced by the Home Secretary on 22 February. At a time of rising unemployment it makes sense to control inflow and be more selective about the migrants who come to the UK. This more selective Tier 1 policy will give the most highly skilled migrants—the migrants who make the greatest economic contribution to the UK—access to the labour market while ensuring that other skilled migrants can only enter under Tier 2, which is designed to ensure that migrants are only admitted for skilled work where there is nobody available within the resident
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labour force to fill the post. An impact assessment for this change and an enhanced resident labour market test is available in the House Library.

The amendment to Tier 1 (Post Study) will also contribute towards this aim while ensuring that the UK remains an attractive destination for skilled migrants studying for a bachelor’s degree. The removal of the postgraduate certificates and diploma route from Tier 1 (Post Study Work) also responds to evidence of a high level of abuse of these provisions. However, we will continue to award points for UK postgraduate certificates of education as there is no evidence of abuse of the qualification and students must meet robust requirements including mandatory previous qualifications in order to gain this qualification.

We are also amending the Tier 2 and 5 rules introduced in November to enable overseas qualified nurses and midwives to switch from the Government authorised exchange sub-category of Tier 5 (Temporary Worker) into Tier 2 (General) on completion of their registration with the Nursing and Midwifery Council and to allow footballers who come to the UK in the creative and sporting sub-category of Tier 5 (Temporary Worker) to switch into Tier 2 (Sportsperson) category of the Points Based System (PBS). The new rules will also allow, subject to certain conditions, private servants in diplomatic households who have been working in the UK in the international agreement sub-category of Tier 5 for a continuous period of five years to be eligible to apply for settlement.

The new rules introduce further clarification of the activities in which business visitors are permitted to engage.

The new rules amend the existing knowledge of life provisions, deleting the provision under which applications for indefinite leave in categories that require the knowledge of language and life in the United Kingdom but do not meet this requirement are automatically considered for an extension of stay.

The new rules make provision for unmarried and same-sex partners of armed forces members who are exempt from immigration control to be granted limited leave and make provision for spouses, civil partners, unmarried and same-sex partners of members of HM Forces to be granted indefinite leave where their serving spouse-civil partner-unmarried or same-sex partner has completed at least five years continuous service.

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The new rules also amend the existing definition of public funds.

Immigration and Asylum (War Crimes)

The Minister for Borders and Immigration (Mr. Phil Woolas): The Race Relations (Immigration and Asylum) (War Crimes etc.) Authorisation 2007 and the Race Relations (Nationality) (War Crimes etc.) Arrangements 2007 enable the Secretary of State to subject certain applications to more rigorous scrutiny than she subjects like applications from persons of other nationalities to, for the purposes of determining whether the applicant has committed, or been complicit in the commission of, or otherwise been associated with the commission of war crimes, crimes against humanity or genocide. Copies of the authorisation have been placed in the Library.

The condition for subjecting these applications to more rigorous scrutiny is that the applicant is a national of a State specified on a list approved personally by the Minister for the purpose of the authorisation and arrangements. I have now reviewed and approved these lists in accordance with our commitment to do so annually.

The authorisation and arrangements will continue to be reviewed on an annual basis and will both remain in force until revoked.

Cabinet Office

Public Services

The Minister for the Cabinet Office (Mr. Liam Byrne): Today the Government publishes ‘Working Together: Public Services on Your Side’ which sets out a long term vision for public services and concrete measures for the year ahead. The paper sets out the Government’s belief that more power should be given to citizens to personalise and control their services; more freedom should be given to frontline public servants in the delivery of services; and central Government should be stronger in guaranteeing high quality services and also more efficient.

Copies of ‘Working Together: Public Services On Your Side’ have been placed in the Vote Office and the Libraries of both Houses.

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