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House of Commons

Wednesday 7 December 2011

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions

International Development

The Secretary of State was asked—

St Helena

1. Bob Russell (Colchester) (LD): What progress his Department has made on the proposals for an airport on St Helena. [85117]

The Secretary of State for International Development (Mr Andrew Mitchell): A contract has now been signed for the design, construction and operation of the new airport in St Helena. We expect it to open towards the end of 2015, in time for the 200th anniversary of Napoleon’s exile to the island.

Bob Russell: I thank my right hon. Friend for that excellent news. I also thank my hon. Friend the Member for Milton Keynes North (Mark Lancaster), whose visit to the island helped to pave the way. Does the Secretary of State agree that the islanders will rejoice at this decision by the coalition Government, which contrasts with the failure of the last Labour Government who, at the last moment, cancelled the contract?

Mr Mitchell: My hon. Friend is right to say that this is the right decision. It underlines our commitment to the overseas territories—they are British. He is also right to tease the Opposition about the fact that they dilly-dallied over this decision for nearly 13 years.

Meg Munn (Sheffield, Heeley) (Lab/Co-op): I welcome the decision to go ahead with the airport, which I argued for long and hard, as the Secretary of State is aware. What does the decision to go ahead with the airport, which will ensure that the people of St Helena can stand on their own two feet, mean for the ship and for the continuing contact that is needed with the island? Will that be able to continue until 2015 and will extra repairs be needed?

Mr Mitchell: I acknowledge that the hon. Lady played a strenuous and forceful part in the decision today. She argued strongly for the airport when she was in government. The ship will be able to continue until the airport is largely able to take over its necessary role. She is right to underline the importance of this decision in getting the island off aid and off the British taxpayers’ books, and looking after itself.

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2. Alun Michael (Cardiff South and Penarth) (Lab/Co-op): What assessment he has made of the development needs of the Republic of Moldova. [85118]

The Parliamentary Under-Secretary of State for International Development (Mr Stephen O’Brien): The Department for International Development’s bilateral programme in Moldova came to a planned end in March 2011. Moldova has made progress in reducing poverty since it gained independence in 1991. It benefits from significant support from the international community. DFID continues to monitor development progress in Moldova through UK representation on the European neighbourhood programme management committee.

Alun Michael: On a visit to Moldova a while ago, we had the opportunity to go to Transnistria and to see the courage of the women working with non-governmental organisations to combat the scourge of people trafficking, which has implications for us and for the whole of Europe. What can the Minister tell us about the approach of the British Government, and will he do more to help those non-governmental organisations?

Mr O’Brien: I pay tribute to the right hon. Gentleman’s continued interest and support through the all-party parliamentary group for Moldova. Although there are now formal talks to seek to resolve the protracted Transnistrian conflict, he is right to draw the House’s attention to the continuing concern about trafficked women. He will know that across Government there is a series of initiatives focusing not only on identifying and supporting such women, but on stopping the sources of those who peddle this heinous practice.

Mr Gary Streeter (South West Devon) (Con): Will the Minister commend the work of the Westminster Foundation for Democracy in Moldova, both on a party-to-party basis and in parliamentary strengthening, particularly in the run-up to the presidential election on 16 December? Is not good governance the fastest way to tackle poverty?

Mr O’Brien: My hon. Friend is right to demonstrate, through the work of the Westminster Foundation for Democracy in Moldova, how important good governance is in alleviating poverty and in creating the conditions that all countries need to have the greatest possible opportunity for wealth creation and security. Of course, we all look forward to the Moldovan Parliament being able to elect a President soon, which will allow the Parliament to focus on the reform agenda that is necessary to bring Moldova closer to the EU. I am happy to pay tribute to the work of the WFD.

Global Health Fund

3. Julie Hilling (Bolton West) (Lab): What recent assessment he has made of the work of the global fund on HIV/AIDS, tuberculosis and malaria in developing countries. [85119]

The Secretary of State for International Development (Mr Andrew Mitchell): The multilateral aid review assessed the global fund as providing very good value for money,

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but also concluded that it could do more to maximise its potential and impact in developing countries. We are working closely with it to ensure that that happens.

Julie Hilling: In view of the current concern about the global fund, will the Secretary of State clarify the UK’s current and future financial commitment to the organisation?

Mr Mitchell: We have made it clear that we are willing, subject to the improvements that we have set out, to spend up to £1 billion by 2015. We are currently spending about £128 million a year on achieving very specific results under the global fund, and I am considering whether additional funding would be warranted. I shall make that decision on the basis of value for money for the British taxpayer.

Oliver Heald (North East Hertfordshire) (Con): Many of the 2,000 a day who die of malaria are children. Will the Secretary of State and his Department take a particular interest and show particular determination in tackling childhood mortality, particularly in developing countries? Will he extend that to rotavirus and the other conditions that kill so many children?

Mr Mitchell: My hon. Friend is absolutely right. It is a scandal that 25,000 children will die today, needlessly, of diseases that we have the power to prevent. Tackling child mortality is absolutely at the heart of the policies being pursued by the Government.

Mr Gregory Campbell (East Londonderry) (DUP): Will the global fund actively target the countries where the HIV problem is prevalent and worsening?

Mr Mitchell: My answer is yes. We will be working in the most difficult countries. The aim of the review currently being undertaken under the chairmanship of an excellent British official, Simon Bland of the global fund, is to ensure that over the next four years we save 10 million lives and prevent something like 180 million new AIDS, malaria and TB infections.

Andrew George (St Ives) (LD): Given that more than two thirds of TB and malaria programmes and more than half of all antiretroviral drugs are delivered through the global fund, what does the Secretary of State say about the crisis in the talks on that programme and its cancellation until 2014? What interim measures can be put in place?

Mr Mitchell: It is true that the 11th round has been converted into a new funding approach, but we will sign grants between now and 2013 of something like $10 billion, so long as we can ensure that our priorities of securing lower prices and good value for money, focusing on the poorest and most vulnerable and considering the longer-term sustainability of programmes, are met.

Tony Cunningham (Workington) (Lab): Given that the global fund contributes half of spending on HIV/AIDS, 80% of spending on malaria and 75% of spending on TB, what steps has the Secretary of State taken to ensure that all international donors play their part? Does he see any possibility that the global fund will start distributing resources before 2014?

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Mr Mitchell: The hon. Gentleman is exactly right to focus on the importance of getting others to meet the commitments that Britain is meeting. I can tell him that I spend a lot of my time ensuring that that happens. We will disburse something like $10 billion before 2014 and, as I have said, we are looking to secure funding after that date so that these programmes continue and are sustainable.

Tax Evasion

4. Diana Johnson (Kingston upon Hull North) (Lab): What steps his Department is taking to support developing countries to deal with tax evasion. [85120]

The Parliamentary Under-Secretary of State for International Development (Mr Stephen O’Brien): The Department for International Development and Her Majesty’s Revenue and Customs support developing country tax authorities in a range of reform and capacity-building projects to help them to collect the tax that they are owed. We particularly wish to promote developing countries’ participation in international exchange of tax information, which is a powerful weapon against tax evasion.

Diana Johnson: Developing countries lose more money through tax dodgers than they receive in aid. Will the Minister explain exactly what was said at the G20 summit to get the issue moved up the agenda?

Mr O’Brien: The hon. Lady is absolutely right to say it is vital that we address uncollected tax, particularly in certain countries that have been identified. We are encouraging international partners to join in that, and our own Treasury has been very much in the lead. The G20 has agreed to the multilateral convention on mutual assistance in tax matters, and that is what it is now focusing on in trying to get an exchange of tax information, which will help us to support countries in collecting the tax that they are owed.


5. Eric Ollerenshaw (Lancaster and Fleetwood) (Con): What recent assessment he has made of the priorities for development in Bangladesh. [85121]

The Secretary of State for International Development (Mr Andrew Mitchell): British development in Bangladesh promotes resilience to national disasters, gets girls into school, tackles maternal mortality and helps the Government to raise their own revenue through support for fair and transparent taxation. I plan to visit Bangladesh shortly to ensure that British taxpayers’ money is well spent.

Eric Ollerenshaw: Having seen some of that work that the Secretary of State’s Department is doing in Bangladesh, may I first congratulate him on it? More specifically, what help does he think his Department could provide, perhaps alongside other Departments, to ease the political logjam that seems to bedevil Bangladeshi society from top to bottom?

Mr Mitchell: My hon. Friend has seen for himself why the issue he raises is so important. A key part of our work is helping ordinary people to hold their political leaders to account, which we do through strengthening accountability and the Government’s ability to raise

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taxes, and through strengthening local media. I have recently given a significant accountability grant to the BBC World Service Trust to do just that.

Mr Russell Brown (Dumfries and Galloway) (Lab): Climate change is having a serious impact on food security and production in Bangladesh—the production of rice and wheat is forecast to fall by around a third by 2050. What additional resources or funding will be made available to help some of the poorest in the world, given the effect of climate change on their food production?

Mr Mitchell: The hon. Gentleman is entirely accurate about the effects of climate change on very vulnerable people in Bangladesh, where only a fairly small rise in the water level could wipe out hundreds of thousands of homes. We are directly involved in protecting 15 million vulnerable people from those effects of climate change, and we will continue—through, for example, the development of scuba rice, which grows in very difficult circumstances—to target malnutrition.

Climate Change Projects

6. Toby Perkins (Chesterfield) (Lab): What steps he plans to take to assess the value for money of aid expenditure on climate change projects. [85122]

The Parliamentary Under-Secretary of State for International Development (Mr Stephen O’Brien): Value for money is a process, not a one-off event. The value for money of climate change projects is assessed during design and appraisal, during implementation and, for a sample of completed projects, through evaluation.

Toby Perkins: It is vital at this time that we get absolute value for every penny we spend, but the Minister will be aware that 70% of CO2 emissions come from developed countries, whereas the World Bank estimates that 80% of the damage will be suffered by the developing world. After the Durban climate change conference, what steps will be taken to ensure that new and additional clauses are not dropped from climate change financing?

Mr O’Brien: The hon. Gentleman is absolutely right to imply that the effects of climate change have a continually damaging effect on the poorest people of the world. Therefore, we hope that the discussions that have taken place in Durban will produce the success and the architecture that are required. However, there have been some announcements, particularly as part of Fast Start, to help people from developing countries around the world to adapt to the effects of climate change. That will be through the UN adaptation fund or the least-developed countries fund, and will be particularly for climate resilience programmes in both Ethiopia and Kenya. There is therefore a significant focus on the poorest.

Rushanara Ali (Bethnal Green and Bow) (Lab): With the Durban climate change conference coming to a close this week, will the Minister tell the House what impact he and his Department have had on shaping Britain’s negotiating position, and whether the Government will live up to the commitment to help to fund the additional $100 billion needed for climate finance for developing countries?

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Mr O’Brien: I thank the hon. Lady for drawing attention to that key aspect, but in focusing totally on results and achieving the genuinely transformational climate change effects that we want, this Government have absolutely stood by our promise to meet the requirements to fulfil the international climate fund— the responsibility is split between the Department for International Development, the Department of Energy and Climate Change, and the Department for Environment, Food and Rural Affairs. There has been a series of announcements. We are now two thirds of the way through the Fast Start commitment, so the answer is yes, our commitments are in place.

Equatorial Guinea

7. Nadine Dorries (Mid Bedfordshire) (Con): What estimate his Department has made of the number of people living in poverty in Equatorial Guinea. [85123]

The Secretary of State for International Development (Mr Andrew Mitchell): Although Equatorial Guinea has one of the highest per capita incomes in Africa, nearly 70% of the population live in deep poverty. Most of that per capita income goes to the President and his family and cronies.

Nadine Dorries: I declare an interest. My visit to Equatorial Guinea in the summer was paid for by the Equatorial Guinea Government.

The Secretary of State is quite right to say that one family control the wealth of Equatorial Guinea and are amassing an unimaginably vast fortune from drilling rights and oil revenue. Will he use his good offices to press upon the Obiang family the fact that the wealth of a nation belongs to its people, and that they should be using that money to alleviate poverty, particularly among children in Equatorial Guinea?

Mr Mitchell: My hon. Friend makes a very good point. She has been there and so is in a good position to speak out about what she has seen. I should say to her that we do not have any bilateral links with Equatorial Guinea, but she is right: it is a disgrace that its high level of oil wealth is stolen for the corrupt and personal use of an unaccountable and self-serving elite.

Martin Horwood (Cheltenham) (LD): The Secretary of State rightly draws attention to the risk of corruption in Equatorial Guinea. Is it not the kind of country that could benefit from the legislation that is currently being proposed at European level to make extractive companies publish what they pay in developing countries along the lines of the Dodd-Frank Act in the United States?

Mr Mitchell: My hon. Friend makes a very good point, although he, like me, will be sceptical about our ability to persuade a country to do that. We have, however, raised the issue of Equatorial Guinea’s abusive human rights with the Human Rights Council in Geneva, in particular the lack of an independent judiciary, the use of torture and the death penalty and the constraints on the media.

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Horn of Africa

8. Mr Laurence Robertson (Tewkesbury) (Con): What recent assessment he has made of the humanitarian situation in the horn of Africa; and if he will make a statement. [85124]

The Secretary of State for International Development (Mr Andrew Mitchell): In spite of significant British-led support, the position in the horn of Africa remains extremely difficult. The coming of the rains has brought some improvement, not least because of British-funded vaccination programmes for more than 916,000 children. I am gravely concerned by recent reports that al-Shabab has ordered 16 humanitarian organisations to cease operations in Somalia.

Mr Robertson: I thank the Secretary of State for that response. Does he agree that quite often the conflict, particularly in countries such as Somalia, is the root of the problem, and what can he do to remedy that?

Mr Mitchell: My hon. Friend rightly points to the fact that the Government are focusing on countries that are mired in fragility and conflict. It is one of the reasons why the Prime Minister has decided that Britain should host a conference on Somalia to try to ensure that we tackle the causes of state failure as well as the symptoms of it.

Mr David Crausby (Bolton North East) (Lab): Is the Secretary of State satisfied that the Kenyan invasion of Somalia will not hinder the distribution of aid?

Mr Mitchell: It is clear that there are a large number of difficulties, including the disposition of forces in Somalia, which hinders the distribution of aid. The biggest hindrance of all is the work of al-Shabab, which has kicked out 16 aid agencies. We are now very reliant on the International Committee of the Red Cross and two British non-governmental organisations, Save the Children and Oxfam, for getting relief through to an enormous number of very malnourished children who are in danger of dying as a result of this famine.

Sri Lanka

9. Tom Brake (Carshalton and Wallington) (LD): What recent assessment he has made of the humanitarian situation in refugee camps in Sri Lanka. [85125]

The Parliamentary Under-Secretary of State for International Development (Mr Stephen O’Brien): About 7,500 displaced people remain in camps in Sri Lanka, out of about 300,000 at the end of the conflict in 2009. British humanitarian aid for displaced people in Sri Lanka ended in March 2011, except for demining work which will continue until 2013.

Tom Brake: I thank the Minister for his response. May I ask him to intervene on behalf of the refugees who are still left in the Menik Farm refugee camp to ensure that they are allowed to return to their homes rather than to a 600-acre plot of newly cleared jungle?

Mr O’Brien: I greatly appreciate the importance of that issue. The work being done through the conflict

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prevention pool to help to bring peace in Sri Lanka includes assisting with police reforms and strengthening Sri Lanka’s diasporic communities—some of which are in my hon. Friend’s constituency—to drive economic development and reconciliation to help former combatants to integrate back into their communities, which are precisely the things that my right hon. Friend is looking for. We also supported the EU position over the removal of what is called the GSP-plus as a means to press the Sri Lankan Government to meet their human rights obligations.

Topical Questions

T1. [85132] Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): If he will make a statement on his departmental responsibilities.

The Secretary of State for International Development (Mr Andrew Mitchell): I attended last week’s high-level forum on aid effectiveness in Busan. The United Kingdom was instrumental in securing an international agreement that, for the first time, includes new providers of development co-operation such as China and Brazil. I have also recently visited Burma for talks with the Government and with Aung San Suu Kyi. It appears that the political tectonic plates in Burma are shifting.

Tom Greatrex: The Secretary of State will I am sure be aware that 2013 is the bicentenary of the birth of David Livingstone, from Blantyre in my constituency. Will he undertake to work with the Scotland Office and other Departments of the UK Government to ensure that they contribute to the celebrations and commemoration of the work of David Livingstone in 2013?

Mr Mitchell: The hon. Gentleman raises the important issue of development in Malawi, which is challenged by the failure of the Government there to recognise the importance of taking the necessary steps to support very vulnerable people. The Scottish Government are doing a good job of supporting what is happening in Malawi. We are now working in an environment where Britain no longer gives the Government there direct budget support, but ensures that our support gets through by other mechanisms.

T6. [85137] Stephen Barclay (North East Cambridgeshire) (Con): Given the Department’s focus on giving aid to countries that are considered fragile, will my right hon. Friend update the House on the current estimates for fraud and corruption losses this year, and confirm that resources are being reallocated to tackle those, so that aid gets to those most in need?

Mr Mitchell: My hon. Friend makes the most important point: the Department for International Development has zero tolerance of corruption. The independent watchdog reported last week that although there was no evidence of corruption in this year’s programme, it was necessary to take new measures when we work in very difficult areas. I have instructed the civil service to implement all the independent watchdog’s recommendations, lock, stock and barrel. [ Interruption. ]

Mr Speaker: Order. The House really must come to order. The Secretary of State is having some difficulty being heard, and that should not be the case.

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Mr Ivan Lewis (Bury South) (Lab): Last week the Chancellor announced that, partially as a result of the Government’s failed economic plan, DFID will have over £1 billion less to spend than previously planned. The Secretary of State has rightly focused on transparency and predictability of funding. In that spirit, will he make it clear which budgets that £1 billion will be taken from? In that context, will he reassure the House that he continues to enjoy the support of his party in pressing ahead with legislation to enshrine the 0.7% target in law?

Mr Mitchell: Even for a Labour spokesman, the hon. Gentleman has a neck the length of a giraffe’s. Let me make it clear to him that the Chancellor of the Exchequer took action last week to ensure that we did not exceed the Government’s 0.7% promise. Personally, I am enormously proud to be a member of a Government who, in spite of the difficult economic circumstances that we face, have stuck by their commitments to the poorest of the world.

T7. [85138] Jesse Norman (Hereford and South Herefordshire) (Con): My right hon. Friend will be aware of the excellent work done in Africa by Concern Universal, which is based in Hereford. Can he outline the measures taken to improve resilience against humanitarian disaster in Malawi?

Mr Mitchell: My hon. Friend again identifies the difficulties of operating in Malawi when Britain has stopped giving direct budget support. However, we are finding other mechanisms, particularly to address food security issues, and in the last 10 days we have approved additional funding for fertiliser to ensure that the next harvest has the best possible chance of succeeding.

T2. [85133] Thomas Docherty (Dunfermline and West Fife) (Lab): Although the famine in the horn of Africa is obviously the top priority there, future drought management is equally important. Will the Secretary of State tell us what aid his Department is giving to address this issue?

Mr Mitchell: The hon. Gentleman identifies the importance of having a wide set of measures to tackle famine and drought. We have given strong support to the Food and Agriculture Organisation to support livestock, and we are actively looking at ways to ensure that the crops do not fail next year. All the measures that we take are designed to boost resilience. It is an interesting fact that, as a result of the changes made in Ethiopia, the prevalence of malnutrition in that country has dropped by 50% in the last 10 years.

T9. [85140] Karl McCartney (Lincoln) (Con): In these times of austerity and hardship for so many of my constituents in Lincoln, how can my right hon. Friend justify his reported desire to legislate to force successive Governments to continue funding projects in 27 other countries, including India?

Mr Mitchell: My hon. Friend will be aware that the coalition Government looked at our bilateral programmes and reduced by 16 the number of countries in which we have country-to-country programmes precisely to ensure that we champion value for money. For example, on the

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first day we stopped aid to China and Russia. His constituents can be reassured that we are focusing on results and ensuring that every pound of taxpayers’ hard-earned money delivers 100p of results on the ground.

T3. [85134] Barbara Keeley (Worsley and Eccles South) (Lab): Following the postponement of the election results in the Democratic Republic of the Congo, does the Secretary of State feel that the UK and the international community could have done more to ensure better oversight of those elections, and does he support the call for election results to be published polling district by polling district?

Mr Mitchell: We have had 89% of the votes counted. We are pressing the Electoral Commission to publish the results on a polling station by polling station basis so that any necessary appeals by those taking part can take place. Britain spent more than £30 million ensuring that registration and other things went ahead before the election. We must wait to see what the commission says about the credibility of these elections shortly. [Interruption.]

Mr Speaker: Order. Let us have a bit of order for the former Chairman of the International Development Select Committee, Mr Tony Baldry.

Tony Baldry (Banbury) (Con): My right hon. Friend is the first UK Minister to have visited Burma for a very long time. Will he please take this opportunity to update the House on the outcome of that visit, particularly on his discussions with Aung San Suu Kyi?

Mr Mitchell: It does appear that the political tectonic plates are moving in Burma. The Government of Burma have made it clear that they are committed to releasing the political prisoners—in particular, Min Ko Naing, one of the leaders of the students of 1988—and also committed to the 48 by-elections proceeding. Aung San Suu Kyi and her party have said that they will stand in those elections. We await credible elections with fair and open results.

Prime Minister

The Prime Minister was asked—


Q1. [85102] Andrew Rosindell (Romford) (Con): If he will list his official engagements for Wednesday 7 December.

The Prime Minister (Mr David Cameron): This morning I had meetings with ministerial colleagues and others, and in addition to my duties in this House, I shall have further such meetings later today.

Andrew Rosindell: The British people want to see two things from this week’s European summit: first, a resolute and uncompromising defence of Britain’s national interests; and, secondly, an end to the disastrous crisis of the euro—a currency that the Labour party still want us to join. Will the Prime Minister do Britain proud on Friday and show some bulldog spirit in Brussels?

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The Prime Minister: I can guarantee to my hon. Friend that that is exactly what I will do. The British national interest means absolutely that we need to help resolve this crisis in the eurozone. It is freezing the British economy, just as it is freezing economies right across Europe. Resolving this crisis is about jobs, growth, business and investment right here in the UK. At the same time we must seek safeguards for Britain. That is the right thing to do. I can absolutely guarantee that as long as I am here there is absolutely no prospect of us joining the euro—something on which the Leader of the Opposition takes a different view.

Edward Miliband (Doncaster North) (Lab): Six weeks ago the Prime Minister said that

“the idea of some limited treaty change in the future might give us”

the opportunity

“to repatriate powers back to Britain”.

At the European summit, what powers will he be arguing to repatriate?

The Prime Minister: As I explained, at the summit—[Interruption.] Let me explain—[Interruption.]

Mr Speaker: Order. We are all interested in hearing the answer. Let us hear it.

The Prime Minister: As I explained, we will have the key aim of helping to resolve the eurozone crisis, and we believe that means European eurozone countries coming together and doing more things together. If they choose to do that through a treaty at 27 in which we are involved, we will insist on some safeguards for Britain—and, yes, that means making sure we are stronger and better able to do things in the UK to protect our own national interests. Obviously, the more countries in the eurozone ask for, the more we will ask for in return, but we will judge that on the basis of what matters most to Britain.

Edward Miliband: The more the Prime Minister talked, the more confusing his position became, quite frankly. Let me remind him that on the eve of the biggest post-war rebellion against a Prime Minister on Europe, he was telling his Back Benchers that the opportunity of treaty change would mean in the future the repatriation of powers. That was his position six weeks ago. Today he writes a 1,000-word article in The Times, but there is not one mention of the phrase “repatriation of powers”. Why does the Prime Minister think it is in the national interest to tell his Back Benchers one thing to quell a rebellion on Europe, and to tell his European partners another thing?

The Prime Minister: I do not resile from a single word that I said in that debate. Let me tell the right hon. Gentleman what we want to do, specifically and particularly in the area of financial services, in which this country has a massive national interest. Let me remind him that it represents 10% of GDP, 3% of our trade surplus, and 7% of UK employment. I want to ensure that we have more power and control here in the UK to determine these matters, in complete contrast to the Labour Government, who gave away power after power. They gave up our power and they made us join the bail-out fund; we have had to get out of the bail-out fund. They

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gave up our rebate and received nothing in return; we managed to freeze the European budget. There is one party—one Government—that defends Britain’s interest, and another that always surrenders it.

Edward Miliband: I think the short answer is— [Interruption.]

Mr Speaker: Order. Let me say to the usual, predictable noisy tendency what I said to those on the other side a moment ago. People must be heard, and that is what will happen, however long it takes.

Edward Miliband: I think the short answer is that six weeks ago the Prime Minister was promising his Back Benchers a handbagging for Europe, but now he is reduced to hand wringing. That is the reality of this Prime Minister. The problem for Britain is that at the most important European summit for a generation, which matters hugely to families and businesses up and down the country, he is simply left on the sidelines. Is not the truth that we have a Prime Minister who is caught between his promises in opposition and the reality of government? That is why Britain is losing out in Europe.

The Prime Minister: I am afraid that even the best-scripted joke about handbags will not save the right hon. Gentleman’s leadership. He talks about being isolated. Let me explain to him where we would be if we adopted Labour’s policies. If we adopted your spending and your deficit policies, and if we were in the euro, I would not be going to Brussels to fight for Britain; I would be going to Brussels to get a bail-out. By implementing the proposals that it is advancing, Labour would put Britain in such a bad position that the tax changes would be written not by the shadow Chancellor, but by the German Chancellor.

Mr Andrew Tyrie (Chichester) (Con): There is a wide spectrum of views on Europe throughout the House. [Interruption.] One can sense that even from the response to my remark. Will the Prime Minister take to the European Council the straightforward message that the one thing most likely to unite the House of Commons would be the perception of a calculated assault from Brussels—not even in its own interests—on the well-being of the UK financial services industry, and on the 1.3 million people in all our constituencies who work in it?

The Prime Minister: My hon. Friend is entirely right. Of course we want to see a greater rebalancing of our economy and more jobs in manufacturing, aerospace and technology; however, the economy that we inherited is very dependent on financial services. I think we should celebrate the fact that it is a world-class industry, not just for Britain but for Europe—but it is absolutely vital for us to safeguard it. We are currently seeing it under continued regulatory attack from Brussels. I think that there will be an opportunity, particularly if there is a treaty at 27, to ensure that there are some safeguards—not just for the industry, but to give us greater power and control in terms of regulation here in the House of Commons. I think that that is in the interests of the entire country, and it is something that I will be fighting for on Friday.

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Q2. [85103] Ms Margaret Ritchie (South Down) (SDLP): Does the Prime Minister agree that the recent escalation of industrial action in the public sector—which, incidentally, was not a “damp squib” in my part of the world—was a result of genuine anger about the sheer unfairness of Government action to deal with pension contributions, which is making people on low and middle incomes pay for the horrendous mistakes made at the top?

The Prime Minister: I am afraid that the hon. Lady is plain wrong, because the lowest-paid workers are not being asked to contribute more to their pensions. On fairness, let me make one point: under our offer, a primary school teacher earning £32,000 a year could receive a pension worth £20,000 a year, but private sector workers, who, let us remember, are the people putting their money into these pensions, would have to pay 38% of their salary—almost half—to get an equivalent pension. Of course there is an issue of fairness, and we must play fair by public sector workers, but we must also be fair to private sector workers, who are putting their money into these pensions.

Steve Baker (Wycombe) (Con): Does my right hon. Friend agree that it is time for this country to lead Europe into the hope and potential of a new post-bureaucratic age?

The Prime Minister: I think that there are opportunities for Britain in Europe, and we should start from the premise that it is in Britain’s interest to be in the single market. We are a trading nation, so we need those markets open, and to be able to determine the rules of those markets. As Europe changes, of course there will be opportunities, but the first priority at the end of this week must be to ensure that the eurozone crisis, which is having such a bad effect on our economy, is resolved. At the same time, however, we should be very clear about the British national interest: safeguarding the single markets and the financial services, and looking out for the interests of UK plc.

Q3. [85104] Mark Tami (Alyn and Deeside) (Lab): Will the Prime Minister be having his usual Christmas bash with Rebekah Brooks and Jeremy Clarkson? If so, will they be talking about just how out of touch they all are with British public opinion?

The Prime Minister: I seem to remember that the annual sleepover was with the former Labour Prime Minister. I shall be having a quiet family Christmas.

Mark Pritchard (The Wrekin) (Con): May I offer the Prime Minister my full support as he promises to stand up for the British national interest at the EU summit on Friday? Is it not the case, however, that Europe and the eurozone will be saved not by bail-out after bail-out of the eurozone but by making Europe more competitive, reducing its high unit costs and cutting regulation and red tape on business?

The Prime Minister: My hon. Friend is entirely right. I understand why leading members of the eurozone, such as the Germans, want tougher fiscal rules on budget deficits for eurozone members, but it is right to point out that the heart of the crisis was caused by

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current account deficits in some countries and large current account surpluses in others. Unless we solve the competitiveness problem at the heart of the euro crisis, the crisis will keep recurring. Our argument throughout has been that not only do we need tough rules on budget deficits and to see euro institutions, including the European Central Bank, acting in concert and acting strongly, but that we need to resolve the competitiveness problem at the heart of the single currency to deal with the crisis. I shall continue to make those points on Thursday and Friday.

Edward Miliband: Will the Prime Minister confirm that according to the Institute for Fiscal Studies, next year the poorest third of families will lose three times as much as the richest third, as a result of his economic policy?

The Prime Minister: No, the right hon. Gentleman’s figures are wrong. If we take all the things that the Government have done—that is the right way to measure this—we find that the top 10% will see losses nearly 10 times greater than the bottom 10% will. I believe that that is fair. One point that has not been properly understood, but which is important, is that the richest 10% in our country will experience the biggest reduction in income, not only in cash terms but proportionately. So we are being fair. It is incredibly difficult to deal with the debts and the deficit that he and his party left behind, but we are determined to do it fairly.

Edward Miliband: The Prime Minister is simply wrong again. The figures are there, and the poorest third are losing far more than the richest third. He used to say, “I’m not going to balance the budget on the backs of the poor.” [Hon. Members: “He’s not!”] No, that is right: he is not balancing the budget—there is £158 billion more of borrowing—but he is hitting the poor. To give him credit, though, there is one group for which he is easing the pain; this has not got the publicity that it deserves. He is delaying for one year the tax on private jets, at the same time as hitting the poorest families in this country. Will he confirm that a working mother earning £300 a week is seeing rising VAT, her tax credits cut, child benefit frozen and her maternity grant cut?

The Prime Minister: The right hon. Gentleman had 13 years in which to tax private jets—and now former Labour leaders are jetting around in them! In two years we will have taxed them. He quotes the Institute for Fiscal Studies. Let me remind him of what it said about Labour’s plans. It said that Labour’s policies would lead to

“even higher debt levels over this Parliament”—[Interruption.]

Labour Members do not like to hear their own policies being taken apart. [Interruption.] Calm down. [Interruption.]

Mr Speaker: Order. What I simply say to everybody is that I want to get down the Order Paper. If the Prime Minister wants to give a brief answer, let us hear it.

The Prime Minister: Let me just explain what the IFS said. It said that the right hon. Gentleman’s plans implied

“even higher debt levels over this Parliament than those we will in fact see.”

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That is the truth of it. If we want the stimulus we are giving the economy through low interest rates, we have to stick to the plans we have set out. There is not a party in Europe, apart from the Moldovan communists, that backs his plans.

Edward Miliband: Now I have heard everything. The Prime Minister is talking about a stimulus, but he does not understand: he is cutting too far and too fast. That is why we have problems in our economy. Of course he does not want to tell us what the IFS says about his plans; he is the Prime Minister, after all. It says:

“New tax and benefit measures are, on average, a takeaway from lower-income families with children”.

The figures speak for themselves. His changes are hitting women twice as hard as men. Is not the truth that he is the first Prime Minister in modern times to say, “It’s the women and children first”?

The Prime Minister: The right hon. Gentleman’s soundbites get weaker and weaker as his leadership gets weaker and weaker; that is the truth of it. If we look at what we have done in lifting 1.1 million people out of tax, it is mostly women who benefit. If we look at the increase in the pension—£5.35 starting next April—that will benefit mostly women. If we consider the issue of public sector pensions, we are helping the lowest-paid in the public sector, and that will help women. Yes, we are giving the economy a stimulus by keeping our interest rates low. We have interest rates at 2%, while they are at 5% in Italy, 5% in Spain and 30% in Greece. If we followed his advice we would have interest rates rocketing, businesses going bust and more people out of work. That is what Labour offers, and that is why it will never be trusted on our economy again.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): Small and medium-sized enterprises in my constituency are still having grave difficulty in accessing reasonable finance. A major contributory factor in that is lack of competition. Will the Government consider breaking up the nationalised banks to create more competition on the high street?

The Prime Minister: I do think we have opportunities to increase competition on the high street, and obviously, as we look to return the state banks to the private sector we will have further opportunities. We have already managed to take one important step forward by getting Northern Rock back out there lending to businesses and households, properly established in the north-east of England.

Mr Speaker: We now come to a closed question from Mr Jeremy Corbyn. He is not here. I call Mr John Baron.

Mr John Baron (Basildon and Billericay) (Con): Our history of repatriating powers from the European Union is not a happy one. May I therefore suggest a fundamental renegotiation of our relationship with the EU based on free trade, growth and competitiveness, which other countries enjoy, not on political union and dead-weight regulation? This EU summit is a defining moment—a once-in-a-lifetime opportunity. Will the Prime Minister seize the moment?

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The Prime Minister: I am a little more optimistic than my hon. Friend. On the bail-out power that the last Government gave away, we are returning it to the United Kingdom via the European stability mechanism treaty, so we have returned a power. More recently, we have just won an exemption from all EU legislation to make sure that from January 2012 micro-enterprises will not face any new EU regulation at all.

In answer to the question of whether we will go in there and fight for British interests on Thursday and Friday—yes, absolutely we will. But let us be clear: there is the option of a treaty at 27, where we have the ability to say yes or no and as a result get a price for that, but there is also always the possibility that the eurozone members at 17 will go ahead and form a treaty of their own. Again, we have some leverage in that situation, because they need the use of EU institutions, but we should recognise exactly what our leverage is and make the most of it.

Q5. [85106] Mr Pat McFadden (Wolverhampton South East) (Lab): Last year the Prime Minister’s manifesto promised to repatriate legal rights, criminal justice, and employment and social legislation. His article in The Times this morning is silent on all those issues, and the Justice Secretary has said that this agenda is not realistic anyway. Does the Prime Minister regret leading his party up the garden path and forcing himself into a choice between ditching his manifesto and potentially vetoing a treaty that may be essential to avoid huge damage to the UK economy?

The Prime Minister: What I regret is that the Labour party gave away so many powers. It is going to take a while to get some of them back, but we are making progress. When the right hon. Gentleman was in government there were repeated increases in the EU budget, whereas this year we have achieved an EU budget freeze. When he was in government he gave away the bail-out power and we had to pour billions of pounds into other countries. We have got that power back, and I believe that with strong negotiation, standing up for Britain, we can help to clear up the mess that Labour left us.

Andrew Percy (Brigg and Goole) (Con): Over the past decade and a half there has been an explosion of personal debt levels in this country, yet we allow our young people to leave school without the proper skills to make informed decisions. Next week the all-party group on financial education for young people will report on where we feel this can fit into the curriculum. Will the Prime Minister read that report and meet a small group of MPs to discuss how we can ensure that young people are more financially literate in the future?

The Prime Minister: I shall be very happy to meet my hon. Friend, who knows a great deal about this, having been a supply teacher for many years in the constituency that he now represents.

Andrew Percy: I was a teacher.

The Prime Minister: He was a permanent teacher as well; excuse me. Financial education is important for our young people, and I look forward to seeing the report of his all-party group.

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Q6. [85107] Lilian Greenwood (Nottingham South) (Lab): The Prime Minister once said that he wanted to lead the most family-friendly Government ever, so is it not a disgrace that of nearly £19 billion of cuts that his Government have announced so far, more than £13 billion have fallen on women?

The Prime Minister: What I say to the hon. Lady is that it was this Government who introduced 15 hours of free nursery care for three and four-year-olds—something that the Labour party never managed to do in government —and despite the appalling mess that we were left, in this autumn statement we put in an extra £380 million to double the number of disadvantaged two-year-olds whose parents will get free nursery care. That is real progress and real help for families—something Labour never delivered.

Ian Swales (Redcar) (LD): What would the Prime Minister say to a council such as Redcar and Cleveland borough council, which is considering rejecting Government funding for a council tax freeze next year, and instead charging my hard-pressed constituents 3.5% more?

The Prime Minister: I very much hope that all councils will take up the offer of a council tax freeze, because in this year of all years, when people face economic hardship, it is important that we help where we can. That is why we have cut the petrol tax. That is why we have allowed the council tax freeze to go ahead. So my advice to people in the hon. Gentleman’s constituency would be to support parties that back a council tax freeze.

Q7. [85108] Jim Dobbin (Heywood and Middleton) (Lab/Co-op): Since the Education Act 1944, successive Governments have supported subsidised travel for students who live 3 miles or more from the faith school of their choice. Some local authorities are beginning to cut back on that financial support, and I do not think any Member in this House wants to see that happen. Can the Prime Minister encourage local authorities to embrace the spirit of the 1944 Act on this particular issue?

The Prime Minister: The hon. Gentleman asks a very important question. I support school choice—parents having the ability to choose between schools—and I also support faith schools. Indeed, I have chosen a faith school for my own children. So I will look very carefully at what he says and at what local authorities are doing, discuss it with the Education Secretary and see what we can do to enhance not only choice, but the faith-based education that many of our constituents choose.

Mr Andrew Turner (Isle of Wight) (Con): Does the Prime Minister agree that in exchange for supporting the euro countries in dealing with their crisis, we should be seeking changes in the law of immigration, employment and fishing rights, in order to support our economy?

The Prime Minister: As I have said, if they choose a treaty at 27, that treaty requires our consent. We should therefore think of what are the things most in our national interests; I have talked about keeping the single market open and the importance of financial services. Clearly, the more that eurozone countries want to do in a treaty of 27, and the more changes they want to make,

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the greater ability we will have to ask for sensible things that make sense for Britain. I am very keen that we should exercise the leverage we have to do a good deal for Britain, and that is exactly what I will be doing in Brussels this Thursday and Friday.

Q8. [85109] Mike Gapes (Ilford South) (Lab/Co-op): The Prime Minister promised:

“I’ll cut the deficit, not the NHS”.

Why are his Government closing the accident and emergency and maternity services at King George hospital, Ilford, cutting front-line NHS staff and borrowing £158 billion extra? Should he not have said, “I’ll cut the NHS, not the deficit”?

The Prime Minister: The hon. Gentleman is just wrong, because the deficit is coming down and NHS spending is going up throughout this Parliament. I note that his own party’s health spokesman says that it is “irresponsible” to increase spending on the NHS. We do not think it is irresponsible; we think it is the right thing to do. As the hon. Gentleman knows, the Health Secretary has set out the criteria for all local changes, including those in the hon. Gentleman’s constituency. There has to be proper public and patient engagement, sound clinical evidence, support from GP commissioners and proper support for patient choice.

Andrea Leadsom (South Northamptonshire) (Con): The Prime Minister has taken a strong interest in the incredible work of the Oxford parent infant project in helping families that are struggling to form a strong attachment with their babies. Two months ago I started a new sister charity in Northamptonshire. Given the Prime Minister’s interest in strengthening families, will he commit to looking again at the incredible work that can be done in early intervention, which saves a fortune in the criminal and care services later on?

The Prime Minister: My hon. Friend is entirely right. I know about OXPIP and I am delighted that she is expanding the project into her own constituency. All the evidence shows that the more we can do to help children and their parents between the ages of nought and two—the key time at which so much disadvantage, which can have such a bad impact later on in life, can set in—the better. That is why her work, and that of Members across the House, in prioritising early intervention is so important for our country.

Q9. [85110] Bill Esterson (Sefton Central) (Lab): The Prime Minister was asked by his constituent Phillip Hall, who runs his own construction company, to cut VAT on home repairs and improvements. Cutting VAT on home improvements has the support of more than 50 business organisations, including the Federation of Small Businesses. Will the Prime Minister support that cut in VAT, which would help jobs, growth and business?

The Prime Minister: The hon. Gentleman’s problem is that the Opposition have a huge list of extra spending and tax cuts that they want, but as we have heard again today in Question Time, they oppose every single spending reduction we are making and every single fundamental reform to get better value for money. One can only

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conclude that spending would go up, borrowing would rocket, interest rates would increase and the economy would be left in very dire straits.

Dr Julian Lewis (New Forest East) (Con): Why is my right hon. Friend supporting a policy of fiscal unification for the eurozone states that, if it happens, will undoubtedly lead to the creation of a dangerously undemocratic single Government for those countries?

The Prime Minister: The point that I would make to my hon. Friend is that I do not want Britain to join the euro—I think Britain is better off outside the euro—but the countries that have chosen to join the euro have to make that system work. In order to do that, they need not just stronger fiscal rules, which is clear, but greater competitiveness. It is for them to decide how to go ahead and do those things. We should maintain Britain’s position outside the euro, and ensure that we safeguard our interests at the same time. That is exactly what I will be doing in Brussels.

Q10. [85111] Alun Michael (Cardiff South and Penarth) (Lab/Co-op): Ten thousand service personnel will have heard of their real-terms cut in pay while serving on the front line in Afghanistan. What does the Prime Minister think that disgraceful cut will do for the morale of those who are risking their lives for us?

The Prime Minister: What we have done is double the operational allowance that people in Afghanistan receive. They are extremely brave people and we should be doing right by them; that is why we doubled that allowance. We have also increased the council tax disregard and made sure that the pupil premium is available not just to children on free school meals but to all service families’ children. We have put the military covenant into the law of our land and we will go on defending, promoting and protecting our brilliant armed services personnel and their families.

Q11. [85112] Mark Lancaster (Milton Keynes North) (Con): The Nun Wood wind farm application spans three local authorities, each of which independently assessed it against their local plans and rejected it. Subsequently a distant, unelected planning inspector overruled them and even moved his decision forward by three months so that it could be made the day before the Localism Bill got Royal Assent. The Prime Minister will understand my constituents’ anger. Will he look into what appears to be a blatant slap in the face for localism?

The Prime Minister: My hon. Friend makes an important point. As he knows, as a result of the changes we are making it will not be possible in future to overrule such decisions so as to meet a regional target, because we have now got rid of those regional targets. We are giving much more authority and many more decision-making powers to those local bodies. Our planning reforms will ensure that local people and their councils decide what people need, and how to meet that need.

Mr Nigel Dodds (Belfast North) (DUP): Is the Prime Minister worried that the scandal of mis-selling in this country has just got a lot worse, given the previous broken guarantees to the public? He is now rejecting a vote on the latest European changes. He has mis-sold the issue to the public at large. Will he give a guarantee

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to the House that there will be an opportunity for the British people to deliver their verdict on the changes that are happening in Europe?

The Prime Minister: What this Government have given is something that no previous Government have done in this country. We have passed a law that means that if ever this Government, any future Government, or any future House of Commons, try to pass powers from Westminster to Brussels they will have to ask the British people in a referendum first. That means that there would have to have been a referendum on the Lisbon, Amsterdam and Nice treaties, and other treaties. People feel betrayed by what happened under the previous Government, but that cannot happen again.

Q12. [85113] Fiona Bruce (Congleton) (Con): Small and medium-sized enterprises are the engine of the economy in my constituency and will play a very important part in our economic recovery. Will the Prime Minister acknowledge that a key factor in achieving growth, as well as in resolving the eurozone crisis, is to take action in Britain’s interests to tackle and reduce the huge regulatory burdens on small companies, so many of which come from Europe?

The Prime Minister: My hon. Friend makes an important point. We have to start here, in our own backyard as it were, and stop the gold-plating and over-regulation that has happened in the past. That is why we have the red tape challenge, with every rule being put up on the internet so that people can show how little we need to keep. That is why we have the one-in, one-out rule that applies to every Minister: no one can introduce a regulation without getting rid of a regulation. We have just achieved a major breakthrough in Europe: micro-businesses employing fewer than 10 people will not be subject to European regulation from 2012 onwards. That is a big breakthrough, and it is something that has not happened before in Europe. It shows that if we make the arguments for growth, jobs and enterprise, we can win them.

Q13. [85114] Fiona O'Donnell (East Lothian) (Lab): The Prime Minister has today refused to accept that women and children will bear the brunt of his failed economic policy. No wonder he continues to turn women off. Will he accept the Treasury’s own figures showing that 100,000 more children will be living in poverty as a result of his policies?

The Prime Minister: How on earth does it advantage women and children to pile them up with debt after debt that they will then have to pay back? We have been standing here for 33 minutes and all we have heard from Opposition Members is proposals for tax reductions and spending increases, about reforms they would not go ahead with, and about scrapping the changes to public sector pensions. They would take those women and children whom we are concerned about, pile them high with debt and let them live under that burden for the rest of their days.

Sir Peter Tapsell (Louth and Horncastle) (Con): May I hark back a month to 7 November, when, as is recorded at column 28 of that day’s Hansard, I put three suggestions to my right hon. Friend for containing the euro crisis, with which he appeared to agree? None of

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them, as he will have noticed, has been acted upon by the European Central Bank, so may I now express to him my belief that the alternative policy of a fiscal union will, as my hon. Friend the Member for New Forest East (Dr Lewis) has just said, pose a great threat to the liberty of Europe, because it would inevitably make Germany still more dominant? Can the Germans be persuaded to study the reason for the Boston tea party? “No taxation without representation” is the bastion of freedom.

The Prime Minister: As ever—[Interruption.]

Mr Speaker: Order. We have heard the question. We now want to hear the Prime Minister’s answer.

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The Prime Minister: As ever, the Father of the House speaks with great knowledge, wisdom and foresight. The reason why he and I do not want to join the single currency is that we would not be prepared to put up with a supra-national power that would tell us what our debt, our deficit and everything else should be. That is why we do not want to join. If the countries of the eurozone want to make their system work, it is clear to me that fiscal rules are one thing that they may need, but that will not be enough without proper competitiveness, and—this is the third point that my right hon. Friend made—the full-hearted intervention and support of the institutions of the eurozone, including the European Central Bank. But it is a decision that those eurozone countries have to make themselves.

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Point of Order

12.36 pm

Mr Matthew Offord (Hendon) (Con): On a point of order, Mr Speaker. Members of the House are aware of their responsibilities in relation to the rules about not abusing their position in the House and about their personal and financial business interests. Therefore is it appropriate—

Mr Speaker: Order. The hon. Gentleman should resume his seat. I am grateful to him for what he has said so far, but an allegation of improper use of House resources, which I understand to be the kernel of his point, is not a matter for the Chair. I thank him for giving me notice of his proposed point of order, but I should tell him that any complaint about alleged misuse of such resources should be made to the Parliamentary Commissioner for Standards. Very simply, it is not a matter that should be raised on the Floor of the House. I hope that is helpful to the hon. Gentleman and to other right hon. and hon. Members.

If there are no more points of order, we come now to the ten-minute rule Bill. I call Mike Freer. May I appeal to right hon. and hon. Members who are leaving the Chamber to do so quickly and courteously, affording to the hon. Gentleman the same courtesy as they would wish to be extended to themselves in such circumstances?

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Tax Refunds Regulation (Review)

Motion for leave to bring in a Bill (Standing Order No. 23)

12.38 pm

Mike Freer (Finchley and Golders Green) (Con): I beg to move,

That leave be given to bring in a Bill to require the Chancellor of the Exchequer to commission a review of the timelines with which tax refunds owed to taxpayers by Her Majesty’s Revenue and Customs are made; as part of that review to consider the merits of making such refunds payable on the day they are calculated and applying interest and penalties to such refunds 30 days after they are payable; and for connected purposes.

I realise that I may be tempting fate, as I will be submitting my own tax return to HMRC within the next few weeks.

HMRC does pay interest, but the late payment rate is six times the unpaid refunds rate. Currently, with record lows in interest rates, the late payment rate is 3%, but the unpaid refunds rate is just 0.5%. When we look at penalties, the inequality is starker. Yes, there are a wide range of penalties applying to virtually every tax. For instance, if a taxpayer has not received a self-assessment notification, has not realised that they may need one and so does not ask for one, they may have to pay a penalty of up to 30% of additional tax due, even if they did not know the process they had to follow. A taxpayer, whether personal or business, who makes an inaccurate return through carelessness, not deliberate error, may also have to pay a penalty of up to 30% of the extra tax due. I am not aware of HMRC being penalised if it makes a mistake or its systems and processes contribute to late or unpaid refunds, yet that happens for the taxpayer.

The system is designed to push unpaid refunds into a suspense account. Errors can easily be made. For example, section 4 of the online form asks who will receive some or all of the overpayment. If a taxpayer does not provide bank details, rather than the Revenue simply issuing a cheque, the moneys are not issued and are held in a suspense account. The Revenue states that no repayment will be made automatically until the taxpayer contacts it. It could be argued that the taxpayer could and should provide accurate details and that the Revenue is right to withhold payment, but that would not prevent the Revenue from issuing a cheque. It simply chooses to withhold the money.

The key issue before us is the discrepancy between the penalties and interest rates levied by HMRC and the interest rates and lack of penalties levied on it. This is particularly relevant when the taxpayer has followed the rules but it has taken months for refunds to be paid. The Chartered Institute of Taxation has advised me that the catch-all reason for late payments is the security checks used to validate the identity of taxpayers, which appear to cause delays of up to several months. HMRC is right to combat fraud by undertaking such checks, but they are left to the very end of the refund process and are deliberately designed to delay the refund. Taxpayers and tax advisers often think that that is more to do with cash management by the Treasury than combating fraud.

Organisations assisting low-income groups have told me that delays in receiving expected refunds can cause disproportionate financial hardship for low-income taxpayers. Having coped with the delays in the onset of

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the process, when routine correspondence can take up to 12 weeks, the problem is then compounded in some cases by further delays of up to eight weeks for security checks to be made. For example, a pensioner I know of waited four months for a refund of just £70. That might not sound like a lot of money, but it is for a pensioner living on the basic state pension. The pensioner said, “We have always been prompt in settling our dues and expect the same in return.” The pensioner was living in the west midlands. The tax that was erroneously collected was paid to the Cardiff office, an apology for the mistake was received from the Portsmouth office and the cheque eventually arrived from the Glasgow office. No doubt the Revenue has reasons for handling different parts of the process in different parts of the UK, but a multi-part process handled in multiple offices cannot be conducive to efficiency.

How can we focus the Revenue on improving its customer service? In my experience of dealing with the public sector, if we grab them by the budgets, minds will follow. If the Revenue had to pay real rates of interest and penalties, it might be motivated to streamline its processes and issue refunds promptly. It fulfils an important role. The taxes it collects fund our essential services, and I have no issue with that. Being rigorous in collecting overdue tax is fair, but it seems oblivious to the scale and impact of tardy refunds.

My hon. Friend the Exchequer Secretary to the Treasury confirmed in a written answer to my hon. Friend the Member for Sevenoaks (Michael Fallon) that the Revenue does not hold information on the average length of time taken to process a repayment. It is simply not important enough to it. In my business experience, what gets measured gets done.

The Treasury Committee agrees. In its report in July, it commented on HMRC service standards, and one of its recommendations was that the HMRC work closely with professional bodies, charities and businesses to develop a series of performance indicators that credibly reflect customers’ end-to-end experience of dealing with the Revenue. Those indicators should be regularly published. If the interest paid on late payments and the penalties on those were published, I suspect that we would see a shift in the relationship between the HMRC and the taxpayer.

The issue of fairness is paramount in this Bill. Taxpayers should be entitled to the same level of interest and penalties on late refunds as the Revenue expects to levy on late payments. In this place, we often say that we govern only with the consent of the people. We have allowed the relationship between the Revenue and the taxpayer to deteriorate to that of master and slave. It is time to rebalance that relationship.

Question put and agreed to.


That Mike Freer, Mr Matthew Offord, Andrew Percy, Justin Tomlinson, Priti Patel, Andrew Bingham, Jesse Norman, Jane Ellison and Simon Hart present the Bill.

Mike Freer accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 30 March 2012, and to be printed (Bill 259).

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Appointment of the Chair of the National Audit Office

Agreement of the Chair of the Committee of Public Accounts signified.

12.47 pm

The Prime Minister (Mr David Cameron): I beg to move,

That an humble Address be presented to Her Majesty, praying that Her Majesty will appoint Professor Sir Andrew Likierman to the Office of Chair of the National Audit Office.

This is the first time that a Prime Minister has moved a motion to appoint the chair of the National Audit Office, and it is a direct result of the legislation that we have brought forward to implement the Public Accounts Commission’s recommendations on strengthening the governance of the National Audit Office, including through new board arrangements and an independent chair.

At a time when we are getting to grips with a record budget deficit, and when families and businesses up and down the country are working hard to make ends meet, it is more important than ever that we get the best possible value for money in public service delivery. That is why, for example, this Government have delivered £3.7 billion of savings in just 10 months—enough to pay the salaries of 200,000 junior nurses or 150,000 secondary school teachers.

The National Audit Office has a vital role to play in holding the Government to account and in ensuring that we achieve the greatest possible value for money. The proposed chair is Professor Sir Andrew Likierman, currently the NAO’s acting chairman. He was appointed following an open competition by my predecessor the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and the former Chair of the Committee of Public Accounts, my hon. Friend the Member for Gainsborough (Mr Leigh). The intention was that Professor Likierman should become the chair of the new NAO in due course, and he has indicated his willingness to continue in the role for a further three years.

Professor Likierman is a distinguished public servant with extensive knowledge and experience of business and public service. Since taking up the acting chair role, he has established the NAO’s board as an effective governance body, providing support and independent challenge to the NAO’s decision-making process. He has also provided counsel and advice to the Comptroller and Auditor General at a time of change for both the NAO and the central Government bodies that it audits.

I believe it is desirable for Professor Likierman to be appointed under the new legislation in order to provide continuity as the NAO formally adopts its new governance arrangements, and I have no hesitation in commending this motion to the House.

12.49 pm

Margaret Hodge (Barking) (Lab): I am pleased briefly to take part in the debate and to confirm the appointment of Andrew Likierman as chair of the National Audit Office.

In my role as Chair of the Committee of Public Accounts, may I take this opportunity to endorse what the Prime Minister has said about the suitability of Sir Andrew? Although it was my predecessor, the hon. Member for Gainsborough (Mr Leigh), who was involved

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in the appointment of Sir Andrew as acting chairman of the NAO, it is clear that in any field of open competition Sir Andrew’s qualifications are outstanding. He brings with him a wide breadth and depth of experience in financial reporting, Government finance and issues of governance. His distinguished career has encompassed both the public and private sectors in an academic and a professional capacity. He is a past managing director of the Treasury and head of the Government Accountancy Service. He has advised the Treasury Committee and is currently dean of the London Business School. His suitability for this role is unquestionable.

As the Prime Minister said, Sir Andrew has already played an important role at the NAO. He has been instrumental in establishing the new governance arrangements and providing the leadership to form an effective board during a time of organisational change. He has already contributed to enhancing the credibility, reputation and influence of the National Audit Office in supporting both Government and Parliament to secure better value for money, particularly in the current fiscal environment. I have no doubt that Sir Andrew has had a great and positive impact since he was first appointed in 2009 and that he will continue to do so in future. I wish him well.

12.51 pm

Mr Edward Leigh (Gainsborough) (Con): I support the motion moved by the Prime Minister. I remember that his predecessor was a bit cross about having to come to this rather quiet little affair, with all his other very heavy responsibilities, especially as he had already appointed the previous Comptroller and Auditor General as an acting Comptroller and Auditor General.

It is worth emphasising that the reason it is important that the Prime Minister is here is that this is the one job—in fact, there are two jobs, the Comptroller and Auditor General and the chair of the National Audit Office—that is not in the sole gift of the Prime Minister. At least there is one job he does not appoint; I am sure that he is prepared to concede this one. It is very important that he is not in sole control and that he appoints the heads of both these bodies—the chairman of the NAO and the CAG—with the Chairman of the Public Accounts Committee. By definition, my right hon. Friend is a member of the Government—that is obvious—and, by changing the rules of this House to create a unique rule, we have ensured that the Chairman of the Public Accounts Committee is always a member of the Opposition. The two people who run the National Audit Office are therefore appointed on a genuinely all-party basis. That is essential.

Of course, I welcome this sealing of the appointment of Sir Andrew. I could hardly say anything else, as I appointed him in the first place. He is a superbly well qualified person for this job. The reason we created the new role of chairman of the board—I worked with Alan Williams, the former Father of the House, to whom, once again, I pay tribute for his many long years of service to this House—was that previously the Comptroller and Auditor General was, in effect, a dictator. He had sole control of the organisation; there was no board, and none of his judgments should be questioned. It is quite right that when the CAG looks at the accounts of Government— when he is holding the Government

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to account—he should be completely independent and act on his own, and nobody must be able to gainsay him. He must be able to look into every filing cabinet, summon every civil servant, and expose every scandal. However, in terms of running a modern organisation like the National Audit Office, it was right that we should modernise, move with the times, and create a proper board that could oversee the organisation as opposed to the policy, and that is what we did with the appointment of Sir Andrew. He is a good candidate and I welcome his appointment.

12.53 pm

Mr Richard Bacon (South Norfolk) (Con): I, too, rise to support the motion. Sir Andrew Likierman is a highly suitable candidate.

I must say that at first, I had doubts—not about Sir Andrew, but about the office of chairman of the National Audit Office and the suitability of having a board. I was concerned about maintaining the independence of the Comptroller and Auditor General and making sure that his independence was no way impinged on by any further statutory inhibitions of any kind. I am now satisfied, especially as Sir Andrew has served as the shadow chairman for the past 18 months to two years, that that will not happen and, moreover, that the arrangements between the National Audit Office and its chairman, and in relation to the statutory functions of the Comptroller and Auditor General, which must not be impeded, have been satisfactorily worked out.

Those functions include access, if required, to every filing cabinet. May I say to the Prime Minister that that includes, if required, access to Cabinet papers? That is not—because the Comptroller and Auditor General, as we all know, is statutorily prohibited from looking at policy questions—in order to question policy, but to see that the right judgments were arrived at in obtaining value for money. In the light of the recent discussions that have been held on this subject in relation to the Ministry of Defence, I am pleased that the system worked as it should and that, as in the past, the National Audit Office ultimately had access to Cabinet papers. This was not exceptional—the NAO has done it before—and the system worked as it should. That shows that the judgments that the National Audit Office reached, having had access to Cabinet papers, were the right ones. Because of that, and because of Andrew Likierman’s suitability, I am very happy to support the motion.

12.55 pm

The Economic Secretary to the Treasury (Miss Chloe Smith): It is an honour to support the Prime Minister and the right hon. Member for Barking (Margaret Hodge) on the motion to appoint Professor Sir Andrew Likierman as chair of the new National Audit Office. I should like to echo the tributes of other Members, including my hon. Friends the Members for Gainsborough (Mr Leigh) and for South Norfolk (Mr Bacon), regarding the fine contribution that Professor Likierman has already made as shadow chairman of the National Audit Office and his qualifications for the role.

Since becoming shadow chairman, Sir Andrew has done tremendous work to establish the shadow board as an effective and authoritative governance body. This has set the basis for the future as the NAO takes on its full responsibilities. As the House is aware, the new

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governance arrangements for the NAO were enacted following a report by the Public Accounts Commission in the previous Parliament. That report recommended that the NAO, led by the Comptroller and Auditor General, should remain the Government’s auditor, independent of Government and answerable directly to Parliament through the commission. The commission also recommended that the NAO should be a corporate body, with existence separate from, but providing resources and support to, the Comptroller and Auditor General.

The new NAO will have a board with a majority of non-executives, including an independent non-executive chair, who will be a Crown appointment, appointed by the Crown in the same way as the Comptroller and Auditor General. The Comptroller and Auditor General will have a fixed 10-year term—previously it was unlimited—and remuneration of the CAG will be agreed by the Prime Minister and the Chair of the Committee of Public Accounts, rather than being linked to permanent secretaries’ remuneration. The report also recommended that the NAO’s audit reports continue to be laid in Parliament, and that the Committee of Public Accounts should continue to hold scrutiny hearings on some of them.

The report’s recommendations were accepted by the previous Government, and provision was included in the Constitutional Reform and Governance Bill, which received cross-party support in the Commons. As the House will be aware, those clauses were lost in the other place during the wash-up stage before the general election, but this year the Government included the provisions in the Budget Responsibility and National Audit Act 2011. The governance reforms envisaged in the provisions strengthen the independence and accountability of the Comptroller and Auditor General in holding the Government to account.

These reforms are entirely in line with the coalition Government’s commitment to transparency and accountability in the public finances, including by implementing whole of Government accounts. As the right hon. Member for Barking noted, effective independent oversight of the efficiency of Government spending is especially important when public resources are under pressure, and these reforms are intended to ensure that the Comptroller and Auditor General and the NAO can fulfil that role.

I support the motion and Sir Andrew Likierman’s appointment as the first independent chairman of the new National Audit Office.

Question put and agreed to.

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Independent Parliamentary Standards Authority

12.58 pm

The Leader of the House of Commons (Sir George Young): I beg to move,

That Ms Angela Eagle be appointed to the Speaker’s Committee for the Independent Parliamentary Standards Authority in place of Hilary Benn, until the end of the present Parliament, in pursuance of Schedule 3 to the Parliamentary Standards Act 2009, as amended.

The Speaker’s Committee for IPSA is a statutory Committee set up under the Parliamentary Standards Act 2009, and its role and membership is determined by that statute. It has two key responsibilities: to consider the candidates proposed by the Speaker following fair and open competition for the posts of chair and members of IPSA, and to approve IPSA’s annual estimate of resources. The Speaker’s Committee’s current membership includes you, Mr Speaker, the Chair of the Standards and Privileges Committee, and me, by virtue of our offices. Its membership also includes five Members of Parliament appointed by the House and three lay members appointed by the House in January 2011.

The motion was tabled at the request of the Opposition. It will remove the right hon. Member for Leeds Central (Hilary Benn) from the Committee and add the shadow Leader of the House in his place. This is a matter for the Labour party and the Government are happy to facilitate it. As a member of SCIPSA, I would like to thank the right hon. Gentleman for his work on the Committee, including in some lively meetings under your chairmanship, Mr Speaker. I look forward to welcoming the hon. Member for Wallasey (Ms Eagle), should the House agree to the motion, to the Committee. I know that she will add great value to our proceedings.

I commend the motion to the House.

Question put and agreed to.

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Common European Sales Law

1 pm

The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt): I beg to move,

That this House considers that the Draft Regulation of the European Parliament and of the Council to introduce a Common European Sales Law (European Union Document No. 15429/11 and Addenda 1 and 2) does not comply with the principle of subsidiarity, for the reasons set out in Chapter 5 of the Forty-Seventh Report of the European Scrutiny Committee (HC 428-xlii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

I will start by making some general contextual comments. I am pleased that this debate has been called because the proposed common European sales law is important both politically and legally. I know that it is of interest to Parliament and the public.

This debate makes use of article 6 of protocol 2 to the Lisbon treaty, the subsidiarity protocol, which enables national Parliaments to put forward a reasoned opinion challenging a proposal by the European Commission on the grounds that they do not consider that it complies with the principle of subsidiarity. I believe that this is the fourth time that this House has considered such a motion. The first three related to financial services and this is the first in the area of justice. I note with interest that a debate on the same proposal was held in the German Bundestag last week, where it was accepted unanimously that the proposal for the common European sales law was contrary to the principle of subsidiarity. I am sure that fellow member states and their Parliaments will listen with interest to what is discussed and concluded here today.

I should make it clear at the outset that the drafting of a reasoned opinion is a matter for Parliament, not for the Government. The European Union treaties have given the role of the supervision of subsidiarity to national Parliaments. It is therefore Parliament’s task to decide whether to present such an opinion to the European Union institutions. I should also say that the Government are considering a report by the Procedure Committee relating to the handling of reasoned opinions such as this. I hope that the House will understand if I do not speculate on what the outcome of those considerations will be.

Subsidiarity is a word that we hear much about when dealing with European legislative proposals. It may assist the House if I say a few words about it. The concept is defined in article 5 of the treaty on European Union:

“in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.”

It follows that subsidiarity is a specific legal and political concept. In simple terms, it means that decisions should be taken as closely as possible to the citizens whom they affect, and that the European Union should act only when outcomes can be better achieved at European Union level. Subsidiarity is different from the principle

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of proportionality, under which any action taken by the European Union should not exceed what is necessary to achieve the stated objectives.

Successive Governments have supported the principle of subsidiarity. I am told that the United Kingdom pushed for it to be strengthened in the Lisbon treaty. The treaty includes a requirement that all legislative proposals should include a statement making it possible to appraise their compliance with the principles of subsidiarity and proportionality. It also introduced the power for national Parliaments to transmit reasoned opinions relating to subsidiarity, such as that which we are debating today. The European institutions—the Commission, the Council and the European Parliament—are obliged to take account of all such opinions.

Moreover, if one third of the national parliamentary chambers throughout the European Union submit such opinions, the Commission must review its proposal. I do not think that any proposal has yet been objected to by a third of the national parliamentary chambers. If that did happen, it would represent a powerful political signal, which the Commission would do well to heed. It cannot be denied that one third is a high threshold. To achieve it will require a great deal of co-ordination between national Parliaments. As I have said, this is a matter for Parliament and not for the Government. I can only encourage the European Scrutiny Committee and other interested parties in Parliament, both in this House and the other place, to make the best use of their contacts with other national Parliaments in this regard.

Stephen Phillips (Sleaford and North Hykeham) (Con): Will the Minister give way?

Mr Blunt: I would like to give my hon. and learned Friend the chance to make his substantive comments in the course of the debate and I will then reply. However, if it is a question on the point that I was making, I will of course give way.

Stephen Phillips: I am extremely grateful to the Minister for giving way. Will he indicate for the House how many Parliaments, apart from the Westminster Parliament, have asked for a reasoned opinion to date?

Mr Blunt: My hon. and learned Friend was unhappily absent at the beginning of my remarks, when I reported to the House that the Bundestag gave a unanimous opinion last week that this proposal was contrary to the principle of subsidiarity. I am not aware of any other parliamentary chambers that have undertaken to do so. To illustrate the difficulty of achieving the level of one third of chambers taking a view and reporting a reasoned opinion, the Bundesrat has not taken a view. Therefore, of the two German Chambers, only one, the Bundestag, has taken a view. Only half of the German Chambers have taken a view, whereas the hurdle that has to be achieved is a third of national parliamentary chambers. My hon. and learned Friend will understand that it is quite a hurdle in those circumstances. Of course, it is a matter for the other place whether it takes a view on this matter.

You will be aware, Mr Speaker, from reading the Government’s explanatory memorandum on this proposal that, provided that it is demonstrated that the difference

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in national contract laws is a genuine obstacle to cross-border trade, the Government’s view is that the subsidiarity test is likely to be met. The Government do, however, share the European Scrutiny Committee’s concerns about the necessity for this proposal in the first place. We question whether an optional common European sales law or one with such a wide scope is the right way to address this issue. These matters will form part of the consultation that the Government plan to hold. I shall therefore listen to Members’ views with great interest.

I will now turn to the substance of the proposed regulation. This proposal has a long history. The European Commission and the European Council have been engaged in the general issue of contract law for a decade or so. I believe that the European Parliament’s involvement stretches back even further. The European Union contract law project lay dormant for some time, but gained momentum again in July 2010 with the publication of a Commission green paper on options for progress towards an EU contract law for business and consumers.

The green paper set out various options for reform, including to continue with the development of a legislators’ toolbox. That would provide a common frame of reference, drawing together the most common concepts and terms used in contract law, which would be the commonly agreed basis to be used by the authors of future European Union laws relating to contract law. The aim of that would be to reduce or remove the current differences and the difficulties that they cause. The green paper invited views on seven options, from a specific directive or a regulation providing an optional European Union-level regime, right through to a mandatory black letter European code of contract law. The conclusion of the Commission green paper’s analysis, and of views received on a feasibility study published by the expert group in May, have culminated in the proposed regulation for a common European sales law.

More recently, the Commission’s proposal was published on 11 October. It contains a set of uniform contract law rules that parties to a contract could choose to govern their contract. The use of such rules would be optional, but that optional law would form part of the national law of each member state and could be used as an alternative to what is currently offered under national law. That alternative regime would be available for cross-border business-to-consumer and business-to-business contracts when at least one party was a small or medium-sized enterprise.

Although the Government intend to consult widely on the detailed policy implications of the proposed regulation, our initial assessment indicates that it would be neither simple nor easy to use. Although it is designed to be free-standing, it remains unclear what relationship it would have with other Union laws such as the Rome I regulation. It also seems that a range of matters that could affect the legal relationship between the parties have not been addressed in the proposed regulation. That has the potential to undermine the aim of removing the need for businesses to incur transaction costs on legal advice on another country’s law.

The scope of the proposal could prove difficult, with its wide application to business-to-business and business-to-consumer contracts whether they are concluded at a distance, away from business premises or on the premises. The Government are not sure whether such an all-

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encompassing regulation is the correct way to address the different problems that traders and consumers may experience. In addition, current arrangements already provide that any state’s law can be chosen as the law of contract. In that sense, a trader could already choose which law to apply to his or her contract, and in most cases that is likely to be their own. The anticipated net value of the regulation remains to be tested and quantified against the costs of introducing a new law.

The Government are also concerned about the treaty base used in bringing the regulation forward. The proposed legal basis is article 114 of the treaty on the functioning of the European Union. That basis is normally used for harmonising laws in order to further the establishment of the internal market. The Government have doubts about the appropriateness of that, particularly as most other optional instruments that operate in parallel to domestic law are brought forward on other legal bases.

The Government have been working closely with interested parties through the process leading to the proposed regulation. Indications so far are that opinion is divided. Some interested parties see an optional contract law for cross-border sales as a potentially useful tool for aiding the internal market, but others see such a new law as risky, over-complex and unnecessary.

The Government intend shortly to consult United Kingdom interests on the proposed regulation. The views received will be used to develop and inform the Government’s position on the likely impacts of such a regulation, as well as on any benefits or disadvantages that are likely to occur for the various sectors that it could affect. We will not form a concluded view on our approach to the proposal until after the consultation has been concluded and there has been proper time to analyse the results. For today, I am of course grateful for the chance offered by the debate to hear the specific concerns that Members may have.

1.13 pm

Mr William Cash (Stone) (Con): I am grateful to the Minister for his comments. As he knows, the European Scrutiny Committee’s conclusion is that the proposal does not respect the principle of subsidiarity. I heard what he said about the difference between the two chambers in Germany. We know that the Bundestag takes the same view as us, and the fact that the Bundesrat does not fails to alter the fact that there is a powerful reason for us to pursue the points that led to the reasoned opinion that we are submitting.

Many organisations have been consulted or have offered evidence on the matter, and their evidence is very powerful from a practical point of view. I have in mind the evidence of Which?, Consumer Focus, the Federation of Small Businesses and the Law Society. It would be invidious to go through each of the objections and arguments that they have made, but in general there are questions about whether there is clear evidence that the regulation is needed and about legal uncertainty, cost and potential confusion.

There is no doubt that throughout the whole business community, there is grave concern about the range and extent of such a provision. In a nutshell, the question whether there is compliance with the principle of subsidiarity is essentially one of practicality as much

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as of constitutional propriety. The whole object of subsidiarity is to determine whether a matter is better handled at national level than under the aegis of the European legal framework. It remains to be seen whether other national Parliaments enable us to reach the threshold necessary for the matter to be returned to the Commission, but all the evidence that we have received demonstrates that the UK should adopt the reasoned opinion and send it to the presidents of the Commission, the Council of the European Union and the European Parliament before 12 December.

All the arguments are set out in the papers that are in the Vote Office. As I said, I do not think it is necessary or desirable to take the House through every jot and tittle of them—they are so powerful that I really do not think there is any need for me to do so. I would, however, say that it is axiomatic that an optional sales law common to all member states is something that can be better achieved at EU level than at national level. However, that is to assume that the proposed common sales law is necessary and will produce clearer benefits by reason of its scale and effect than action by member states. Based on the evidence to which I have referred, the European Scrutiny Committee doubts whether either requirement has been met.

In addition, the Committee finds that the Commission has again failed to prepare a detailed assessment, in accordance with article 5 of protocol 2 to the Lisbon treaty. That is a very important point. It makes it exceedingly difficult for national Parliaments to determine whether there has been compliance with the principles of subsidiarity within the eight-week period. We were greatly assisted in this case by the submissions that we received from the organisations in the UK to which I have referred. Where their concerns overlapped, we found that there was a convergence of views. That was particularly instructive and helpful to the Committee, and we are grateful for that. In fact, I would go further and say that I wish more business organisations would make submissions more frequently on many such matters that come before my Committee. It is one thing for us to form a judgment, but it is also extremely important to know that it is based on firm practical considerations.

The Commission’s failure to provide a detailed statement amounts, in our view, to an infringement of the essential procedural requirements laid down in protocol 2. We therefore recommend that the House adopt a reasoned opinion to be sent to the Presidents of the Commission, the Council and the European Parliament before the deadline of 12 December. We retain the draft regulation under scrutiny pending a further update on the negotiations, and we are particularly interested to hear the outcome of the discussions on the appropriate legal base. As far as we are concerned, the communication itself can be cleared from scrutiny.

I therefore submit that the draft reasoned opinion of the House should be adhered to and submitted accordingly, and that we should do all in our power to get as much support as possible from other member states, because of the serious breaches of the procedural arrangements and because of the breach of the subsidiarity principle. I look to the Government to do that.

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1.19 pm

Tom Brake (Carshalton and Wallington) (LD): I rise briefly to highlight some concerns with the proposals. The perspective of Which? and Consumer Focus is that the different contract laws do not stop consumers or businesses from cross-border trading to any significant degree. It is not clear that the proposal would lead to an expansion of such trade, and it could lead to greater complexity and therefore increase business transaction costs.

There is no legal certainty that the measure would be applied uniformly across the EU. It therefore has the potential to create legal uncertainty and confusion for customers, and it would not provide them with choice, because they would continue to be limited to accepting the contract offered to them by the supplier.

There are grave reservations in relation to the potential for the measure to lead to back-door harmonisation of contract law. I am sure that if my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) had been in a position to stay for the whole debate, he too would have made those points.

I understand the Government’s perspective of subsidiarity, but the measure is an optional change, not an imposed one. Can subsidiarity in all cases overrule something that is optional and not mandated? The Minister rightly said that the regulation would not be simple to use and that complexity is involved, but have the Government assessed whether the proposal is more complex than the current legislation? Do they recognise that the Federation of Small Businesses says that small businesses need to be able to afford to compete in different markets in the EU?

The proposal raises many more questions than it resolves, and therefore a detailed and extensive consultation is required.

Mr Cash: I rise simply to say that the City of London corporation has also provided a method of objection and to add it to the other representative organisations I mentioned.

Mr Speaker: Order. There is some confusion here. I think the hon. Gentleman either thought or hoped he was intervening on the right hon. Member for Carshalton and Wallington (Tom Brake), but the latter is signalling that he has concluded his remarks. I am sure that that fact will be of close and abiding interest to the hon. Member for Stone (Mr Cash), knowing what a great interest he takes in the observations of other hon. Members.

1.23 pm

Stephen Phillips (Sleaford and North Hykeham) (Con): I rise to make a short contribution to the debate, and to make some of the points that were made to my hon. Friend the Member for Stone (Mr Cash) and others on the European Scrutiny Committee by the City remembrancer of the City of London, who has provided us with a briefing that contains a number of salient observations on the measure, which are important for the House to consider in deciding whether the motion should carry.

The first and most worrying of those observations—I attribute these views not at all to the City of London or the City remembrancer; these are my words—is that there is considerable concern that the measure is the

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thin end of a uniform contract wedge that is being deployed by the Commission in an attempt to undermine the universality of English contract law, which is used in transactions not only between businesses within the EU but across the world, where, alongside New York law, it is the predominant way in which international trade is regulated. I should like to hear more from the Minister on that.

Were there any doubt that the Commission has in mind that the proposed regulation is the thin end of a uniform contractual wedge, it would be removed by article 15, which makes clear that the Commission would be obliged to review the measure after five years,

“taking account of…the need to extend the scope in relation to business-to-business contracts, market and technological developments in respect of digital content and future developments of the Union acquis.”

Given that the Justice Commissioner has already indicated that he plans to announce consideration of a European common insurance law next year, there ought to be grave concern on both sides of the House that the measure is the first step in an attempt to impose upon this country a uniform European contract law. I suspect that many hon. Members would be extremely concerned about that.

The second concern to which it is worth drawing the House’s attention is the speed with which the draft regulation was drawn up. It was drawn up in a very short period of some 11 months by a so-called expert group which, I must tell the House, consisted predominantly of academics. It consisted for the most part not of those who actually practise law or indeed of those who would have the option to use this contract law were it to be introduced. In those circumstances, if the proposals were to go ahead, there would, in my respectful view, need to be a much greater consideration of what practitioners have to say on the subject of contract law and the draft regulation, and a much greater consideration of what business wants.

Those are two initial concerns about the regulation, but there are others. Essentially, the regulation would establish an optional contract law that would lie alongside national contract law, but that could cause conflict between almost identical contractual situations as they apply between those who are negotiating within the EU, and possibly even between those within member states. The position would essentially be that someone who selects the option of the EU contract law might gain greater rights than someone who does not do so—the latter, through the application of conflict of laws rules, would have the contract containing his rights and obligations subjected to some wholly different system of law. That must be a grave concern, because it could result—naturally—in different decisions being taken by national courts in relation to precisely the same facts, depending on which law applies. That might be acceptable when the laws that apply are of different nations, which would be selected pursuant to established conflict of laws rules, but it cannot, in my judgment, be acceptable when the laws in question are on the one hand common law, as in this country, and on the other hand an optional community contract law, both of which none the less hold sway in the same jurisdiction. That is therefore a very great reason why the measure is not in the interests of the City of London, or of this or any other European country.

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Establishing a new contract law—even one that has been written by a group of academics—is, moreover, destined to lead to much greater litigation, uncertainty, increased costs, and increased transactional costs, because there will be no established body of law and no binding juridical opinion by reference to which those who are obliged to be consulted on difficult legal problems arising out of contracts can form settled views as to the correct answer in respect of their clients’ rights, entitlements and obligations.

Growing that body of law—it could grow only in this country, where we have a system of precedents—could take several decades. If small and medium-sized enterprises, and perhaps even larger businesses, adopted the optional contract law, their rights and obligations would necessarily be unclear during that time. That is not only most unsatisfactory from the perspective of those who seek to do business in international markets, but wholly unsatisfactory from the perspective of the development of the law.

Mr Cash: On the question of legal base, does my hon. and learned Friend recall that originally the Secretary of State for Justice took the view that he had doubts over whether article 114 was appropriate? There was then the question of whether article 352 might not be more appropriate. Unfortunately, because of the enactment of the European Union Act 2011, primary legislation had to be passed before the Government could give their consent to the adoption of the proposal on article 352. Therefore, there is a serious question over whether there has been complete compliance not only with the principle of subsidiarity but with the legal base.

Mr Speaker: The principle of subsidiarity is important, but there is also a very important principle of interventions, and that is brevity.

Stephen Phillips: I am extremely grateful to my hon. Friend for his intervention, brief or not. I will not fall into his elephant trap of discussing what precisely is necessary under the European Union Act 2011, but I will say that I agree with him. It is right that there is no justifiable legal base under article 114, not least because the European Court of Justice has itself made it clear that that article cannot be used for the harmonisation of laws within the European Union.

I was on the point of saying that there is a real problem with running in parallel two systems of contract law, particularly where that might lead to different results and where one has not been the subject of extensive judicial consideration. In such a case, it is inevitable that there would be differences of opinion among those who are called on to provide advice on the rights, obligations and entitlements of parties to contracts, and they are the ones who are subject to this new system of optional contract law were it to be in place. For those reasons, it must be entirely right that we should not seek to accommodate the Commission’s proposals to have in place two parallel systems of contract law in this country. That would be detrimental to the interests of the United Kingdom and consumers and businesses all over the European Union. For those reasons, I urge the Minister to make those points as strongly as he can to his colleagues in Europe, and I make those points, albeit

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through you, Mr Deputy Speaker, to the other national Parliaments who really need to require the Commission to justify its proposals.

1.32 pm

Robert Flello (Stoke-on-Trent South) (Lab): This is not a new matter. In European Committee B, which met on 24 May, the Under-Secretary of State for Justice, the hon. Member for Huntingdon (Mr Djanogly) noted that European contract law had been more than 10 years in its formation. Indeed the Minister has referred to that again today. Despite the length of that period, the actual draft law has been put together in some haste.

In the Committee, I raised a number of concerns and expressed the view that the Commission had not come up with any reliable evidence for its proposals; that many other barriers to trade need to be addressed as more of a priority than this issue; and that adopting another set of contract rules was unnecessary and possibly harmful.

The Committee was supportive of the toolbox approach, but not more. According to the Hansard report of that Committee, I said that I was concerned that the exercise on the Commission’s part, namely the green paper and the whole thrust of things, seemed to be a way of trying to push through option 4 instead of doing what it should be doing, which was putting together the toolbox. I therefore urged the Under-Secretary of State to go back to the Commission and make representations in the strongest terms to get things back on track and promote the toolbox and not the draft contract law. What has changed since May? Sadly, I think nothing positive has changed and so the Opposition agree that a reasoned opinion should be sent to the presidents of the European institutions, in effect, to reject the draft regulation.

The draft European sales law has caused a great deal of concern for many individuals and organisations and little support appears forthcoming from any quarter. Let me be gently mischievous here and suggest that other than the Lord Chancellor—whose generally Europhile stance accords with that of his party—I am not aware of any quarter where this particular proposal has received any positive comments at all.

The aim of the proposed regulation seems laudable enough. It is to reduce what the EU perceives as barriers to cross-border trade and thereby improve the ability of traders to exploit the common market and help consumers gain access to products across member states. That is all very laudable in theory, but let me explore that aim.

The evidence base from the European Union seems flimsy to say the least. Evidence from UK representative organisations shows just how weak the EU research appears to be. The survey of the Federation of Small Businesses demonstrated that just 18% of its members thought that a European Union sales law would make their life easier, but that seems to me to be a very low figure given the aims of the regulation.

The consumer organisation Which? opposes the regulation, saying that the proposed law would not contain a satisfactory level of consumer protection, that there would be a risk to consumer protection both cross-border and domestically, and that there would not be a resultant increase in cross-border trade to benefit consumers.

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That view is supported by various Eurobarometer and Flash Eurobarometer surveys that show fairly comprehensively that the problem is not the absence of a common EU sales contract. Consumer Focus does not support the Commission’s proposals because of insufficient evidence of need, legal uncertainty and cost. We know, therefore, that there is no proven case for bringing in this regulation.

Let me now turn to the issue that has vexed many commentators and is the basis of the reasoned opinion—subsidiarity. Subsidiarity is crucial, and I will not repeat the Minister’s explanation of this term, which was very good. As I have said, the evidence from the Commission is poor, and that lack of evidence in itself breaches the requirements of article 5 of protocol 2 of the treaty on the functioning of the European Union. As well as breaching the procedural requirements, the proposed regulation breaches the principle of subsidiarity. We are clearly on unsound foundations when looking at this proposed regulation and we all know what happens, especially in a European context, when things are built on insufficient foundations.

I hope that other Parliaments take a similar view and that they hear the views expressed today. Will the Minister assure the House that the Government will actively seek to persuade other European Union member Parliaments that they too should approach this matter in a similar way?

I could explore the issues around legal complexity and legal uncertainty. I could elaborate on the impact on domestic contract law where cross-border trading puts domestic traders at a competitive disadvantage. I could raise the damage that may arise to consumer rights from bringing in this proposed EU sales law, which would actually set back the improvements that we have seen. However, given that the House seems to be unanimous in wishing to see this draft regulation sent back to the European institutions with the reasoned opinion opposing it, I am content to draw my remarks to a conclusion.

In closing, may I commend those who have served on European Committee B and urge the Government to apply pressure at a European level—perhaps with the support of others in Europe—to ensure that we do not have to consider poorly evidenced proposals again? On that basis, let me say I do not wish to delay the House any further or object to this motion.

1.38 pm

The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt): With the leave of the House, Mr Deputy Speaker, let me reply to the points raised in the course of this debate. I have taken careful note of all the points raised and they will of course further guide our work as we consult on this proposal in the next phase. As the House is aware we will have a proper public consultation on the proposed regulation in the new year. I know, however, that our general approach to this dossier has to date been supported by the scrutiny Committees in both Houses.

Let me pick up the particular points that have been made this afternoon. I commend my hon. Friend the Member for Stone (Mr Cash) and his Committee for the work that they have done on this instrument. I particularly welcome his contribution to the debate

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today. He drew attention to the contributions that have already been made by Consumer Focus, the Federation of Small Businesses and the Law Society. I want to answer the Opposition spokesman’s characterisation of the position—he said that absolutely no one out there thinks there is any merit in this measure apart from the Lord Chancellor—which is wrong on both counts. However, I will return to that and correct him.

My hon. Friend the Member for Stone made a substantive point in an intervention on my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips), who confirmed that he was entirely right to say that if article 352 were used, the European Union Act 2011 would require an Act of Parliament before a Minister could agree to it. The legal base is therefore important, and I have made clear the Government’s views, including our doubts about whether article 114 applies, which is an entirely open question.

My right hon. Friend the Member for Carshalton and Wallington (Tom Brake) asked whether the Government had assessed whether the new law would be more complex than that which currently exists, whether businesses could choose to opt into the process and whether that would leave them in a better position. There is a concern that having two alternative regimes could lead to confusion. It might also be too complex for many consumer transactions. The existing common law emphasises certainty—a point made by my hon. and learned Friend the Member for Sleaford and North Hykeham—but the law proposed in this case does not appear to have that emphasis. Again, this is an area where we need detailed legal analysis, which is ongoing. We will consider the views of interested parties, many of whom have significant expertise in this area.

That is an appropriate note on which to turn to my hon. and learned Friend. He drew on the remarks of the remembrancer of the City of London, who has suggested that the proposed measure might be the thin end of a wedge intended to introduce European contract law, thereby undermining the universality of English contract law. It is important to draw attention today—when Her Majesty is opening the Rolls building, a new and impressive commercial court—to the extremely extensive service that the legal profession in London provides to the entire world of commerce. That point ought to be given importance in our consideration of this matter.

As to whether this measure is the thin end of the contract wedge, I should point out that the scope of the draft regulation has been narrowed since the initial discussions began some years ago. The proposal that we are discussing covers the sale of goods and does not extend more widely into contract law. We would have to address any such proposals carefully, and will watch extremely closely if any proposals are made to widen the scope. Each will be considered on its merits. I can also reassure the hon. Member for Stoke-on-Trent South (Robert Flello), who spoke for the Opposition, that my right hon. and learned Friend the Lord Chancellor and I—and, indeed, the whole of Her Majesty’s Government—see no need for a general system of European contract law.

The tenor of the argument produced by my hon. and learned Friend the Member for Sleaford and North Hykeham was extremely clear, as was the expertise that he used to make it. He made a powerful point about the potential for increased transactional costs, not least

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because lawyers would face considerable difficulties in giving clear advice to small and medium-sized enterprises. He very properly pointed out to the House that if the measure were introduced, the cost of growing case law in this area to provide the necessary certainty would lead to a process that might take decades. The businesses using this form of law would bear the costs, as they would find out—either to their cost or otherwise—through the legal process of testing its bounds.

Finally, let me repeat, so as to make it perfectly clear, that the hon. Member for Stoke-on-Trent South wholly misrepresented the views of the Lord Chancellor. [ Interruption. ] I am grateful to hear the hon. Gentleman’s sedentary reassurances on that point, but it would be a service to the House if in future he did not seek to misrepresent positions that he plainly does not appreciate or understand. He then said that absolutely nobody was in any way positive about this measure. He was wrong about that as well.

Robert Flello: I am sure that the Minister normally follows every word I say very closely, but sadly he must have been distracted when I said that there was very little support outside. I did not say that there was no support, because the Federation of Small Businesses has said that it supports the measure. However, I reiterate the point that only 18% of people think that it would make a difference.

Mr Blunt: I am grateful for that intervention, because I had misheard the hon. Gentleman and would not want to mischaracterise his arguments. He makes the point that I was coming to, which is that the Federation of Small Businesses says in its submission that it sees an argument in principle for the measure, a point that was reflected in what my hon. Friend the Member for Stone said. In a sense, it is axiomatic that, at the European level, there would be a case for such a measure. The FSB has made it clear that its support for a common European sales law is dependent on its being clear and simple for small and medium-sized enterprises to use, without placing unreasonable burdens on business. We will look closely at those details in the consultation.

I can assure right hon. and hon. Members that any development in the Government’s position on the dossier will be made on the basis of good evidence of need and a robust analysis of the impacts. The Government will pay particular consideration to whether the proposed regulation is a proportionate response to the problems envisaged by the Commission, whether that response complies with subsidiarity and whether the treaty base is appropriate for the measures proposed. We will work with all those most affected by the change, engaging with business and consumer groups in particular. I hope and expect that we will incorporate contributions from Governments in other member states and from the European Parliament.

Let me answer the point made by the hon. Member for Stoke-on-Trent South, who suggested that Her Majesty’s Government should go around trying to encourage Parliaments in other member states to take an interest. We do not think it proper for Her Majesty’s Government to do that. Indeed, he will have heard the suggestion in my opening remarks to the effect that parliamentary groups and authorities should take up the challenge that he has thrown down to them. Given the law of

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unintended consequences, I fear that if the Government tried to do that, it might be less convincing than fellow parliamentarians trying to act on other national Parliaments, which might be rather more effective.

Henry Smith (Crawley) (Con): It is indeed important that our Parliament should liaise with EU Parliaments on that point. Last week I had the pleasure of meeting some Danish parliamentarians—my counterparts on their equivalent to the European Scrutiny Committee—who are also opposed to this European measure. It is important that those representations are made through you, Mr Deputy Speaker, to other European Assemblies.

Mr Blunt: I think you have just had a request for action, Mr Deputy Speaker, from my hon. Friend the Member for Crawley (Henry Smith). I commend the work done by members of the European Scrutiny Committee, who have done a particularly good job here. We are going to work with Members here and in the other place and, of course, with the European Scrutiny Committee in taking forward work in this area.

Question put and agreed to.


That this House considers that the Draft Regulation of the European Parliament and of the Council to introduce a Common European Sales Law (European Union Document No. 15429/11 and Addenda 1 and 2) does not comply with the principle of subsidiarity, for the reasons set out in Chapter 5 of the Forty-Seventh Report of the European Scrutiny Committee (HC 428-xlii); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.