The Chancellor of the Exchequer (Mr. Alistair Darling): The Economic and Financial Affairs Council was held in Brussels on 2 December 2009. The following items were discussed:
Regulations establishing three European supervisory authorities
Ministers agreed general approaches on draft regulations establishing three European Supervisory Authorities (ESAs): the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.
The UK secured significant additional safeguards for both crisis and mediation decision-making by the ESAs, including language in line with the June European Council conclusions that decisions taken would not impinge in any way on the fiscal responsibilities of member states.
Ministers agreed that ECOFIN would retain the power to call a crisis and therefore activate any ESA powers. Ministers will vote by simple majority on safeguard clauses applying to crisis powers of a member state seeking an opt-out as well as any ESA decisions on mediation. Member states seeking an opt-out would have the option to refer the matter to the European Council.
The Government welcome the outcome, which complements existing national regulation and should tighten up the European regulatory system. The presidency will now start negotiations with the European Parliament with a view to enabling adoption of the texts at first reading.
a) VAT: Draft Directive on reverse charge on emission allowances and certain goods.
The Council agreed a general approach on the draft directive that would allow member states to implement, on an optional and temporary basis, a reversal of liability for the payment of VAT on greenhouse gas emission allowances. The Council will continue to work on other elements of the proposal as regards the application of the reverse charge mechanism to mobile phones and electronic circuit devices, with a view to reaching an agreement as soon as possible.
b) VAT treatment of postal services
ECOFIN agreed to discuss the VAT treatment of postal services further before the implementation of the third postal directive enters into force on 1 January 2011 (1 January 2013 in some member states). The forthcoming Spanish and Belgian presidencies were invited to explore all options and report back to Council by December 2010 at the latest.
Implementation of the Stability and Growth Pact
ECOFIN agreed Council recommendations calling on Belgium and Italy to reduce their deficits below the 3 per cent. of GDP threshold by 2012, the Czech
Republic, Germany, Spain, France, the Netherlands, Austria, Portugal, Slovakia and Slovenia to do so by 2013, Ireland by 2014 and the UK by the 2014-15 financial year. It also adopted a decision acknowledging that Greece's response to its April 2009 recommendation has been insufficient. These recommendations are in line with recent agreements at ECOFIN and the European Council on the EU's framework for fiscal exit strategies.
Preparations for the 10-11 December European Council
a) Financial supervision
The Council took stock of progress made on the legislative proposals aimed at reforming the EU framework for the supervision of financial services following the global financial crisis. The Swedish presidency will report on progress to the December European Council, taking into account the results of the Council deliberations on both the micro and macro-supervisory elements of the package, enabling Heads to sign off the complete package as planned.
b) Contribution from ECOFIN to the discussion on the post-2010 Lisbon agenda
Ministers agreed a set of conclusions on the direction of a successor to the Lisbon strategy. The Government support the conclusions, which help build momentum towards the December European Council, where EU Heads will discuss a set of principles for a new European strategy for jobs and growth.
c) Exit strategies
Ministers agreed conclusions on exit strategies from support to the financial sector. The UK is content with the conclusions, which recognise the importance of starting to design the strategy for the phasing out of support schemes, but emphasised that implementation should wait until markets have fully recovered. ECOFIN will return to this issue in February 2010.
Financial stability and crisis management
ECOFIN agreed conclusions on financial stability, focusing on improvements in cross-border crisis management in the banking sector. The conclusions recognised the value of co-ordination among member states and with external partners, and endorsed the principles of firm-specific recovery and resolution plans.
The Chief Secretary to the Treasury (Mr. Liam Byrne): I can today provide an update to the House on the progress of Sir John Chadwick's work in advising the Government on the establishment of an exgratia payment scheme for Equitable Life policyholders.
Sir John published his first interim report on 18 August 2009. He has since received a range of representations on the questions he has raised, and is today publishing a second interim report, which sets out:
The scope of the work that will be required following his revised terms of reference, which were issued on 27 November.
The case for adopting a "flexible" approach to calculating policyholders' relative loss. Sir John considers that this approach is fairer, easier to calculate, and quicker to deliver than other potential approaches.
The list of questions that he will need to address in his final advice.
Sir John would welcome further representations and comments from all parties on the issues raised in his latest report by 29 January 2010.
The Government are committed to establishing a fair payment scheme as quickly as possible. We expect Sir John to submit his final report in spring 2010, and will announce details of a payment scheme to follow, also in spring 2010.
I will update the House further in due course.
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): Today the Government are publishing a consultation document on investment bank resolution. Copies of the document entitled, "Establishing resolution arrangements for investment banks" have been deposited in the Libraries of the House and will be available on the HM Treasury website at: www.hm-treasury.gov.uk.
The Chancellor of the Exchequer (Mr. Alistair Darling): The Government are today publishing their response to the House of Lords Select Committee report on the Barnett formula (CM 7772). This paper and the evidence referred to in it also meet the Government's commitment to produce a factual paper on the Barnett formula.
The Financial Secretary to the Treasury (Mr. Stephen Timms): I am announcing today the Government's intention to present to Parliament proposed changes to the capital gains tax rules which will be legislated as part of Finance Bill 2010. These changes prevent the creation of capital gains tax losses which arise in certain circumstances from transactions of foreign currency bank accounts and will be effective from 16 December 2009. HM Revenue and Customs will publish on their website at: www.hmrc.gov.uk, precise details of the changes as soon as possible.
The changes affect individuals who are liable to tax on their foreign income and gains on the remittance basis. These individuals are liable to income tax on the sterling value of the amount remitted at the time of remittance. If the remittance takes the form of a transfer from a bank account in a foreign currency, they will simultaneously dispose of a corresponding part of that account and a capital gain or loss might arise as a consequence.
Associated with this change, I can confirm that HM Revenue and Customs accept that an existing capital gains tax rule in section 37 of the Taxation of Chargeable Gains Act 1992 removes any element of double tax charge in this situation. The income remitted is fully taxable (subject to any exemption which might apply), but a double charge to tax is avoided by this rule which excludes the income amount from the disposal proceeds used to calculate the capital gain or loss.
It is now clear that the rule goes beyond preventing a charge to capital gains tax and does not produce a fair outcome. Where the remittance is all treated as income, the rule creates capital gains tax losses that are far in excess of any real loss which the individual incurs.
Where the remittance is partly income, the rule either creates an excessively large loss or reduces the taxable gain below the real level of gain.
The proposed legislative change will correct this defect in the current rules. Where a remittance comprises wholly income, the change will eliminate the loss arising under the current rule. Where a remittance comprises only partly income, the loss attributable to the income element of the remittance will again be eliminated. In addition, the allowable cost attributable to the non-income element of the remittance will be adjusted to ensure it corresponds to the amount of that part of the remittance. Where necessary, the allowable cost of the bank account will also be adjusted to ensure it corresponds to the amount remaining in the bank account after the remittance.
The result of these changes will be that a double tax charge will be avoided and no relief will be given where no actual loss has been incurred.
The Minister of State, Cabinet Office (Angela E. Smith): I am pleased to announce that the refreshed Compact, which outlines how the Government will work together with the third sector, has been launched today. The new Compact is clearer, shorter and easier to use and is a clear symbol of the Government's continued commitment to working with the third sector. It will be a valuable tool in helping to build partnerships in the years to come.
Copies of the Compact have been placed in the Library and on the Cabinet Office website: www.cabinetoffice. gov.uk/third_sector.aspx
The Minister for Schools and Learners (Mr. Vernon Coaker): Jane Hutt, Minister for Children, Education, Lifelong Learning and Skills in the Welsh Assembly Government, represented the UK at the Education and Youth Councils, on behalf of DCSF and BIS.
Ministers adopted conclusions on the professional development of teachers and school leaders; the role of education in a fully-functioning knowledge triangle; and the education of children with a migrant background. All three sets of conclusions are consistent with UK domestic policy, and we were able to support them.
The latter conclusions also formed the theme of a policy debate between delegations. While clear that there was a wide variation in the levels of migration in each member state, all were in close agreement on the approach set out in the conclusions.
There was a second policy debate on quality assurance in higher education. This was based on a Commission discussion paper which argued for early improvements in higher education quality assurance and further development of transparency tools. The UK supported the approach set out in the Leuven Communiqué of April 2009, stressing the need to embed current improvements before going further and that the issue should be reviewed at the Bologna HE summit in 2012.
This was supported by the majority of member states, who wanted a measured approach, working through the Bologna process.
Under any other business, the Commission presented the draft joint interim report on the education and training 2010 work programme, and the Spanish presidency briefly noted their upcoming presidency schedule.
The Council included a lunch debate on the role of education in the post-2010 Lisbon strategy. This discussion was informed by presidency questions, but also the recently released Barroso EU2020 paper.
Youth Council adopted a Council resolution on a renewed framework for European co-operation in the youth field (2010-2018). A policy debate followed on the short-term implementation and future aspirations for the framework. All member states supported the strategy, with the majority citing youth unemployment and disadvantaged youth as key issues. The UK pressed for member states commitment to the open method of co-ordination process at all levels, noting the need to avoid burdensome reporting structures.
The Secretary of State for Children, Schools and Families (Ed Balls): Today I welcome the publication of the final report of the Lamb inquiry on parental confidence in the special educational needs (SEN) system.
The Lamb inquiry was established as part of the Government's response to the House of Commons Education and Skills Committee report "Special Educational Needs: Assessment and Funding". The inquiry, under the chairmanship of Brian Lamb, the chair of the Special Educational Consortium, was tasked with investigating a range of ways in which parental confidence in the SEN assessment process might be improved. We specifically asked that the inquiry:
commission and evaluate innovative projects;
draw on the evidence of other work currently commissioned by the Department; and
take into account the evidence of the submissions to the two Select Committee reports in 2006 and 2007.
The inquiry began in March 2008, and has made a range of recommendations, which we have accepted and acted upon. In December 2008, in response to early findings calling for a greater focus on outcomes achieved by children with SEN and disabilities (SEND), we announced a £38 million package of measures aimed at addressing this. At the heart of that was Achievement for All pilots, which are now taking place in 10 areas, involving 460 schools to demonstrate how to: raise achievement for children with SEND; better engage their parents; and address issues such as bullying and participation in school life(1). In April, I committed to ensuring that our 21st Century Schools White Paper mainstreamed the needs of parents of children with SEND. Since the inquiry's two reports in August, the Children, Schools and Families Bill has been introduced to Parliament. It proposes a new duty on Ofsted to report on the progress of children with SEND in school inspections, now and in future, and gives parents who have had their child's statement reviewed but not amended, an additional right to appeal.
The Government welcome the inquiry's final report. The inquiry has found that, whilst the SEN framework functions well for the majority of parents, within the same legislative framework there are parents who have been poorly served and have had to battle to get the needs of their child identified and met. This varied picture must be redrawn so that it is common practice to have access to skilled professionals who understand the needs of children and who have high expectations of what children can achieve.
I have written to Brian Lamb today to thank him for the inquiry and to outline the Government's immediate response, which focuses on the concerns of parents who have least confidence in the present system:
Work will begin immediately on establishing a national special educational needs helpline which will provide independent, expert advice and information to parents directly over the phone and through dedicated online support.
The Government will move quickly to strengthen parent partnership services by ensuring all advisors are trained in SEN and disability law. We will work with the national parent partnership network, based at the Council for Disabled Children, to deliver this training in 2010.
We will work with professional bodies to make clear that the advice professionals provide to local authorities should not be fettered because of concerns about capacity to deliver.
Start-up funding will be provided to the local government ombudsman, to take on parental complaints on SEN about local authorities from January 2010.
Statutory guidance to governing bodies and independent appeals panels on exclusions will be strengthened to require a review of whether the head teacher had regard to the guidance on special educational needs and disability.
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