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Written Ministerial Statements

Tuesday 21 July 2009

Business, Innovation and Skills

Learning and Skills Council for England

The Minister for Further Education, Skills, Apprenticeships and Consumer Affairs (Kevin Brennan): I would inform the House that the Learning and Skills Council for England has today published its annual report and accounts for the period to 31 March 2009. Copies will be placed in the Libraries of both Houses.


Banking Act 2009

The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): The Government are today publishing two consultation documents on implementation of aspects of the Banking Act 2009, as part of their programme to protect depositors and maintain financial stability.

The Banking Act established a permanent special resolution regime (SRR) to provide the authorities with the tools to deal with banks and building societies that fail. Many of the detailed provisions are set out in statutory instruments, and the Government have committed to consulting on a number of these. The consultation documents that have been published today are:

Some of the secondary legislation included in these two documents has already been made on an urgent basis to enable the effective resolution of the Dunfermline Building Society. For these statutory instruments, the Government will consider whether to bring forward amending instruments in the light of consultation responses. The other instruments will be revised as appropriate in the light of consultation responses before being made.

The first document, "Consultation on the Building Societies (Insolvency and Special Administration) Order 2009 and related insolvency rules, and on financial assistance to building societies", sets out detailed proposals for supporting building societies and protecting their customers in the event of failure.

The first part of the consultation concerns applying the bank insolvency procedure and the bank administration procedure to building societies UK-wide. The bank insolvency procedure is designed to ensure that in the event of a bank failure depositors eligible for compensation under the Financial Services Compensation Scheme (FSCS) receive their payments quickly, or have their accounts transferred to another institution, and that
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the affairs of the failed institution are wound up in the interests of creditors as a whole. The bank administration procedure is designed to support a partial transfer, which is an important tool available to the authorities under the SRR to enable them to split up a failing bank by transferring part of its property to a commercial purchaser or a Bank of England-controlled bridge bank. Applying these procedures to building societies will ensure that building societies, their members and creditors are treated in the appropriate way corresponding to the treatment of banks, their depositors and other creditors in the event of insolvency or administration.

The second aspect of the consultation deals with the provision of financial assistance to building societies. Section 9B of the Building Societies Act prohibits building societies from creating floating charges on the whole or part of their undertaking or property. This may make it difficult for societies to offer appropriate security to the Bank of England, or any other provider of necessary financial assistance. An interim measure, made under the Banking (Special Provisions) Act 2008, enables societies to grant floating charges to the Bank of England in connection with the provision of financial assistance. The Government are now consulting on legislation to replace this interim measure and on a further measure that would make it easier for building societies to convert financial assistance given in the form of Treasury bills or other securities into cash.

The second document is entitled "Consultation on the FSMA 2000 (Contribution to Costs of Special Resolution Regime) Regulations 2009". A principle of the SRR is that the FSCS should contribute to the costs of the operation of the SRR. This contribution is capped at the amount of compensation the FSCS would have paid, less the recoveries it would have made if the institution were in default and the FSCS were engaged in the normal way under FSMA. The regulations were made on 29 March 2009 in order to enable the Treasury to require the FSCS to make payments in connection with the resolution of the Dunfermline Building Society. The consultation document seeks views on the regulations.

Debt Relief (Poor Countries)

The Economic Secretary to the Treasury (Ian Pearson): The Government remain determined to lead global efforts to tackle poverty in the world's poorest countries. As part of that, they are fully committed to delivering on their international debt relief commitments to ensure the poorest countries are not faced with an unsustainable debt burden.

To support these efforts, I am today publishing a consultation on legislation designed to tackle creditor non-participation in the "Heavily Indebted Poor Countries Initiative". By opting out of international debt relief efforts, and pursuing the full value of claims through the courts, this minority of private creditors can negate the benefits of debt relief. This is at the expense of poor countries and British taxpayers. The proposed legislation would limit the scope for creditors to recover their debts above a set level, unless the courts consider it just and equitable for them to do otherwise.

Copies of the consultation have been deposited in the Libraries of both Houses.

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Anti-Avoidance: Capital Allowances

The Financial Secretary to the Treasury (Mr. Stephen Timms): The Government are taking action today to counter tax avoidance schemes involving capital allowances on plant or machinery. Legislation will be introduced in the 2010 Finance Bill, to prevent tax avoidance through the transfer of an entitlement to benefit from capital allowances on plant or machinery, used for the purpose of a trade, where the tax written down value of the plant or machinery exceeds its balance sheet value ("latent capital allowances").

The proposed legislation will apply where there is a change of ownership of a company as part of arrangements, one of the main purposes of which, is to transfer to the purchasing group an entitlement to benefit from the latent capital allowances available to the company which is purchased.

The proposed legislation will also apply where there is a change in ownership or profit-shares of a consortium company, or partnership involving companies, as part of arrangements where one of the main purposes is to transfer the entitlement to benefit from the latent capital allowances. Draft legislation, which will take effect from today, 21 July 2009, will be published as soon as practicable.

A technical note explaining the material that will be contained in Finance Bill 2010 will be published on HMRC's website today.

Copies of today's HMRC technical note have been deposited in the Libraries of both Houses and are accessible on the HMRC website at: http://www.hmrc.gov.uk.

Equitable Life

The Chief Secretary to the Treasury (Mr. Liam Byrne): I can today provide an update to the House on the continuing progress of Sir John Chadwick's work in relation to Equitable Life.

On 16 June 2009, Sir John Chadwick issued a document that set out his proposed approach and issues to be addressed, alongside announcing his formal appointment of Towers Perrin as actuarial advisers and establishing a website, through which interested parties can keep informed of his work as it progresses and make representations to his Office.

The document intended to give interested parties an opportunity to comment on Sir John's proposed approach and Sir John requested that comments be returned in written form to his Office by 17 July 2009. I am pleased therefore to inform the House that Sir John has received a range of representations on his proposals, including from Equitable Life and an Equitable Life members group, a range of policyholders, and the Government. Sir John is in talks with these interested parties and he is now reviewing all representations with a view to identifying the next stages of his work.

Running concurrently with this work I can also inform the House that Towers Perrin, the appointed actuaries to Sir John, have already begun to thoroughly review and analyse the many hundreds of thousands of extensive policyholder records that have been provided by Equitable Life.

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Sir John intends to publish a further document in August. This interim report will contain a definitive statement of his approach for determining relative losses and a definitive list of the specific issues he will address.

Communities and Local Government

Local Democratic Renewal

The Secretary of State for Communities and Local Government (Mr. John Denham): I am today announcing a consultation on local democratic renewal. This follows the commitment set out in "Building Britain's Future" to explore ways of increasing both the powers and the accountability of councils and city regions. Local democratic renewal forms a major part of the Government's proposals for constitutional reform, alongside other strands for debate including reforming the House of Lords; considering a written constitution; reviewing the electoral system; and increasing public engagement in politics.

The founding principle of local government is that citizens have the right to influence the decisions that affect their lives and their communities. A key way in which local citizens are able to exercise that right is their ability to elect a strong local council which can lead and shape their area. That is why the role of councillors and councils, with their unique democratic mandate, is critical to making sure that local services are responsive to the needs of their local communities. Citizens have a right to have their voices heard, and to expect those delivering services to care what they think.

Citizens rightly expect that councils should be the centre of local decision making, and the one place that they can go in order to influence and challenge what local services are doing. In order to do this, councils must be fully equipped to act on behalf of local residents, with the powers to scrutinise and shape local public services, and respond to local need.

There is a large and untapped pool of people who would like more say in what happens in their area, and it is right that both central and local government do more to give them greater direct control over the decisions that affect their lives and their community. But we must also recognise that in today's time-poor society, citizens have only limited time to give.

There are other imperatives driving the need for stronger local government. First, it is to increase democratic accountability, since councils, uniquely among local services, have a direct democratic mandate from residents. Secondly, it is a way of promoting greater value for money. Local government has already saved £4.5 billion through efficiency measures since 2004. By giving them greater powers to oversee and co-ordinate all the money coming into their area, they will better be able to drive change and improvement, cutting out duplication and waste. Thirdly, councils have a vital role to play in promoting economic development. They are best placed to bring together partners from across their area to support residents and prepare for future prosperity. And finally, delivering personalised services. As the drive continues to deliver personalised services and enforceable entitlements it will become ever more important to ensure that local services are delivered flexibly and in response to local needs.

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Recent reform has gone some way to giving councils the powers they need to play this stronger role. The three year financial settlement means that councils have much greater certainty to plan ahead. They have powers to promote the economic, social, and environmental wellbeing of their area. And they have powers of scrutiny to challenge and hold to account some of those who provide public services and serve their local communities.

This consultation sets out proposals to radically reform and strengthen local government so that it is even more able to take on a new role in serving residents by strengthening public service delivery.

It contains proposals to:

Put local authorities at the centre of local decision making. Our aspiration is that they should be the one place where citizens, through their councillors, can hold local services to account. This would mean that when citizens go to vote, they are electing someone who can act on their behalf in relation to every aspect of public spending in their area. We propose to achieve this by enhancing local authorities' power to scrutinise other bodies, and extending the range of bodies that these powers can be applied to. This builds on the concept of the total place initiative, which gives councils a unique role in scrutinising all the money that comes into their area.

Strengthen local government's ability to act in the local interest. We ask whether councils have the powers that they need to respond effectively to local challenges, or whether there are barriers which prevent them using the powers they already have. This will be essential to enable local authorities to deliver the minimum entitlements set out in Building Britain's Future. We also set out our response to the recent LAML judgement: proposing to introduce a specific power enabling councils to engage in mutual insurance and exploring what other arrangements councils may want to engage in but which may fall beyond the existing power to promote well being. We also ask whether more could be done to further reduce the burden of inspection and clarify when and where central Government should intervene in local government.

Strengthen local authorities' ability to tackle climate change. We propose to give councils more direct responsibility for fighting climate change, perhaps through introducing local carbon budgets.

Support sub-regional working. We set out a range of options to make sure that the greater powers being devolved to city-regions and other sub-regional partnerships are matched by greater transparency and accountability for local residents.

Achieve a clearer relationship between central and local government. We set out the principles in which central and local government broadly operate and ask whether these should be more formally articulated, in order to give citizens greater clarity and certainty about our respective roles and functions. We also explore the possibilities for overseeing these more formal arrangements-potentially through an ombudsman or a joint select committee, subject to the outcomes of the consultation and the views of Parliament.

The consultation seeks views on these proposals and will run from 21 July until 2 October 2009. Copies of the consultation document have been placed in the Libraries of both Houses.

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Reform of Council Housing Finance

The Minister for Housing (John Healey): On 30 June I announced my intention to publish a consultation document on reform of council housing finance before the summer recess. I said that this would contain proposals to dismantle the housing revenue account subsidy system and replace it with a devolved system of responsibility and funding which would devolve control from central to local government and increase local responsibility and accountability.

I am publishing the consultation document "Reform of Council Housing Finance" today. I am placing copies of this in the Library of the House. The document can also be downloaded from the consultations section of my Department's website at: www.communities.gov.uk and I am seeking responses by 27 October 2009.

A fully self-financing locally devolved system cannot be implemented in a single step, but I want to move as rapidly as possible to put these reforms in place. I will work with all those with an interest in improving council housing to deliver this major devolution of responsibility and accountability.

Business Growth Incentives Scheme

The Minister for Regional Economic Development and Co-ordination (Ms Rosie Winterton): I am today announcing the publication of the Government's response to our public consultation on "Reforming the Local Authority Business Growth Incentives Scheme", which sets out that we will distribute a total of £100 million to local authorities in 2009-10 and 2010-11.

The Government launched the consultation on 25 August 2008 and invited comments to help refine their thinking before a new scheme was introduced for 2009-10 and 2010-11. The consultation closed on 20 November 2008.

Given the broad support the Government's proposals have received, the revised scheme will largely be as proposed in the consultation, although with two significant changes made in response to the representations we received.

The decision on sub-regional mapping follows further consultation, in February 2009, further to which we invited all local authorities, including those that did not respond to the consultation, to enter into discussions with nearby authorities in an effort to reach a local consensus about the sub-regional mapping they wished the Government to consider.

In the consultation responses, the balance of opinion was that we should publish a provisional list of sub-regions for comment first rather than proceed directly to publish a final list, which we have done at annex A of our consultation response.

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