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Written Ministerial Statements

Thursday 21 May 2009



The Chancellor of the Exchequer (Mr. Alistair Darling): The Economic and Financial Affairs Council was held in Brussels on 5 May 2009. The Financial Secretary to the Treasury represented the UK. The following items were discussed:

Economic and financial situation

Following the publication of the European Commission’s forecasts on 4 May, Ministers exchanged views on the economic situation. The Government believe there is a continued need for member states to work together in ensuring a co-ordinated response to the crisis.

Lending to member states in financial difficulty

Ministers discussed and agreed a draft regulation, raising the ceiling for lending from €25 billion to €50 billion for medium-term support to the balance of payments for non euro-area member states under the EU’s support facility. The Council also agreed to provide medium-term assistance to Romania. ECOFIN will adopt the regulation at a forthcoming meeting without further discussion, following finalisation of the text. The Government strongly welcome the measures, which are in line with our policy of supporting the principle of ensuring that member states facing balance of payments difficulties have access to financial assistance.

Quality and sustainability of public finances

Ministers took note of a report by the Commission on age-related economic and budgetary projections for EU member states and adopted a set of conclusions on structural reforms to enhance the long-term sustainability and quality of public finances. The Government believe in the importance of sustainability and quality of public finances, particularly in the current juncture.

Dialogue with third countries on economic and financial issues

The Commission updated the Council on progress in its dialogues with the EU’s main international partners, mainly the United States, Japan, China and Russia, regarding macro-economic issues and financial services. Ministers discussed the priorities for the near future. The Government welcome these ongoing dialogues, which reflect the discussions under-way in the G20.


(a) Tobacco Directive

Ministers discussed the terms of the Tobacco Directive, aimed at updating EU rules on the structure and rates of excise duties on tobacco products. A revised draft was tabled at the meeting, but a number of Ministers expressed unhappiness with it. The Council requested that officials continue to examine the draft directive so that it may be revisited at a later meeting of ECOFIN.

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(b) Communication on promoting good governance in tax matters

The Council took note of the Commission’s presentation of its communication on the promotion of good governance in tax matters. The Commission also briefed Ministers on progress in the negotiation of an agreement with Liechtenstein on measures to combat tax fraud. Preparatory committees will further examine the communication before it is discussed at ECOFIN in June. The Government support efforts by the Commission on good governance in tax matters which complement existing work by the G20.

General budget of the European Union - preliminary draft budget 2010

The Commission presented the proposed EC Budget for 2010 to the Council, marking the beginning of the 2010 Annual Budget negotiations, which will run until December. The UK supports a realistic budget which promotes sound financial management. This item will return to the ECOFIN agenda in July, after further work by the COREPER.

Other business

The presidency updated ECOFIN on the state of play of four financial services dossiers: Solvency II, the e-money directive, the cross-border payments regulation and the regulation on credit rating agencies. On all four dossiers, the presidency reached agreement with the European Parliament in first reading, enabling adoption by the Council at a forthcoming meeting, once the texts have been finalised.

Finance Bill (Anti-avoidance Measure)

The Financial Secretary to the Treasury (Mr. Stephen Timms): An avoidance scheme has been notified to HM Revenue and Customs (HMRC) that exploits the fact that Corporation Tax (CT) rules provide that losses, arising in a trade in the 12 months prior to its cessation, may be carried back and set off against profits made in the previous three years (‘Terminal Loss Relief’).

The scheme works by artificially engineering a deemed cessation of trading. The deemed cessation of trading means that the company gains access to relief for the losses much earlier than Parliament intended and undermines Clause 23 in the current Bill.

HMRC believe that the scheme is capable of being used by a large number of companies with the consequent risk of a significant loss of revenue. Therefore, in order to protect the Exchequer, the Government will introduce legislation by Government Amendment to Finance Bill 2009, to stop companies exploiting these rules for the purposes of tax avoidance. The legislation, which will be effective in relation to reorganisations taking place on or after today, is today being published on HMRC’s website.

The new clause will address situations where there has not been, in any real sense, a cessation of the trade but it is claimed that a cessation occurs as a result of the trade being transferred to a person or persons outside the scope of CT and it can be established that this is part of a scheme or arrangement, one of the main purposes of which is to access ‘terminal loss relief’.

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In such circumstances ‘terminal loss relief’ will not be available to the transferring entity. As a consequence of the scheme, carried forward losses relating to the trade will not be transferred to the receiving person(s) for set off against future profits.

Communities and Local Government

Local Government

The Minister for Local Government (John Healey): On 8 May 2008 we introduced through the Standards Committee (England) Regulations 2008 (SI 2008/1085) the new, devolved conduct regime for local authority members, in which responsibility for standards of conduct and dealing with allegations of misconduct by members is largely for each council’s independently chaired standards committee with the Standards Board for England having the role of a strategic regulator.

I have today laid before the House the Standards Committee (Further Provisions) (England) Regulations 2009, further developing the devolved conduct regime by allowing councils to set up joint standards committees and making clearer the rules for such committees to grant dispensation to members who would otherwise be excluded from an item of business on the grounds of conflict of interest. The regulations also strengthen the Standards Board’s regulatory role by enabling it to intervene in cases of poor performance by a council’s standards committee.

These regulations, which we have prepared in consultation with the local government sector, will come into force on 15 June. The next development of the regime will be a revision to the code of conduct in the light of our consultation last year and experience to date.

Home Department

Prevention of Terrorism Act 2005

The Secretary of State for the Home Department (Jacqui Smith): In accordance with section 14(3), 14(4) and 14(5) of the Prevention of Terrorism Act 2005, Lord Carlile of Berriew QC prepared a report on the operation of the Act in 2008, which I laid before the House on 3 February 2009.

I am grateful to Lord Carlile for another considered review. Following consultation within my Department and with other relevant agencies, I am pleased to lay before Parliament today my response to Lord Carlile’s recommendations. Copies are available in the Vote Office.

I am also laying before Parliament today my response to the report on the “Renewal of the Control Order Legislation” by the Joint Committee on Human Rights, published on 27 February 2009. Copies are available in the Vote Office.

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International Development

Sri Lanka

The Parliamentary Under-Secretary of State for International Development (Mr. Michael Foster): Thousands of people remain in desperate need. The priority is to get assistance to those that need it now. How quickly the international agencies are able to do this depends in significant part on the level of access granted by the Government of Sri Lanka for humanitarian agencies. I would like to assure the House that the humanitarian situation on the ground remains our priority and that we are fully focused on averting a humanitarian crisis. We remain particularly concerned about two groups of displaced people (IDPs).

There are more than 80,000 civilians and war wounded between Kilinochchi and Omanthai and onwards to the camps in Vavuniya. At present, there is no access to this area for any humanitarian agency. The International Committee of the Red Cross (ICRC) has raised its particular concern for the safety of the war wounded needing urgent medical care who have been left behind in the former conflict area. Our second concern is for the 200,000 plus IDPs who are currently in camps. Priority needs are shelter, food, water, medicine and immediate access to surgical treatment. Conditions in the camps are basic but they are improving, albeit slowly. It is vital that these IDPs are allowed to return home as soon as conditions allow.

There are, however, specific concerns which need to be addressed before humanitarian agencies can provide the support needed. Visa restrictions are still being imposed on agencies, including those with surgical teams on stand-by to assist the thousands of war wounded who await life saving treatment. Practical restrictions are also still being imposed on entry to the camps and on the supply of basic relief items like water and sanitation equipment. We encourage the Government of Sri Lanka to do everything possible to allow humanitarian agencies to operate effectively on the ground.

We continue to engage fully with international and multilateral partners. I spoke to Sir John Holmes, the UN emergency relief co-ordinator, yesterday about the humanitarian situation in Sri Lanka and the issues that lie ahead. Ban Ki-Moon, the UN Secretary General, is visiting Sri Lanka soon to focus on the immediate humanitarian relief effort and reintegration and reconstruction as well as the need for a sustainable and equitable political solution.

DFID continues to make financial contributions to the relief effort in Sri Lanka as the situation on the ground allows. Last week I approved £0.5 million for the International Organisation of Migration (IOM) to establish, equip and staff 10 emergency mobile health clinics in the camps in Vavuniya, Mannar and Jaffna. The Secretary of State recently announced a further £5 million of humanitarian funding to Sri Lanka which will be used for activities such as demining and livelihood recovery and we will provide further assistance as people are allowed to return to their homes. The total now stands at £12.5 million. All DFID funding is provided directly to impartial international agencies such as the International Organisation for Migration and United
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Nations High Commissioner for Refugees. None of the UK’s assistance is provided directly to the Government of Sri Lanka. DFID will continue to support the international agencies in their work.


Local Democracy, Economic Development and Construction Bill

The Secretary of State for Wales (Mr. Paul Murphy): I am pleased to inform the House that the explanatory memorandum setting out proposals for the framework powers in the Local Democracy, Economic Development and Construction Bill are available in the Library, the Vote Office and on the Wales Office website (www.walesoffice.gov.uk).

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Legislative Competence Order

The Secretary of State for Wales (Mr. Paul Murphy): I am pleased to inform the House that the proposed National Assembly for Wales (Legislative Competence) (Health and Health Services and Social Welfare) Order 2009 dealing with Mental Health has been laid today as Command Paper (Cm 7627). This order has been proposed by a backbench Member of the National Assembly for Wales (Jonathan Morgan) and has the support of the Welsh Assembly Government.

Copies of this Command Paper can be found in the Vote Office and will be placed in the Library from 12 noon. I have written to the Welsh Affairs Committee and to the House of Lords Constitutional Committee to request they undertake pre-legislative scrutiny.

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