The Prime Minister:
I do not really understand what lies behind the hon. Gentleman’s question. It is intellectually coherent to argue that if countries want to be in the eurozone and to have a working single currency, they must take at least some of the steps that other single currencies, such as the dollar and the pound sterling, have taken. That means that they have to stand behind weaker parts of the union and that they need things such as joint debt issuance and a single banking system. That is just a fact of economic life. I see no contradiction in arguing that Britain should be outside the eurozone with a looser relationship with the European Union and that those inside the eurozone will have
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to take at least some of the steps that I have set out. If they do not, I think that the eurozone will have real difficulties.
Mr James Clappison (Hertsmere) (Con): Does not the history of our membership of the European Union demonstrate that there is not just an issue with the single market, but that there is more of an issue with the ever closer union that is enshrined in EU treaties? Will my right hon. Friend assure us that to be meaningful, a referendum must encompass the question of ever closer union?
The Prime Minister: That goes back to one of the problems with the referendum in the 1970s, when people did not receive a full explanation of all that was envisaged by the original treaty of Rome. I am clear that I do not support ever closer union. I do not want to see an ever greater transfer of powers from nation states to Brussels. However, I think that Britain and the European Union can work very well together to maximise the single market and our co-operation on matters such as foreign affairs, while ensuring that it is in our national interest.
Mr David Anderson (Blaydon) (Lab): Was the financial transactions tax spoken about at the weekend, whether formally or informally? Does the Prime Minister not realise that the people of this country would welcome that as a way of showing that bankers are being made accountable for their appalling behaviour?
The Prime Minister: The financial transactions tax was mentioned, because the growth compact says clearly that a number of eurozone members will go ahead with it. I do not support it and Britain will not take part, because unless there is agreement all over the world, the transactions will go to jurisdictions that do not have the tax. That would cut our jobs, our investment and our GDP. The people who would pay for such a tax would be not the bankers, but the pensioners, and I do not think that that is sensible.
Nigel Adams (Selby and Ainsty) (Con): How bad does the Prime Minister think the financial damage to the UK would have been had we not got ourselves out of the euro bail-out mechanism?
The Prime Minister: I am grateful for my hon. Friend’s question. We can start to count the cost, because with things such as the Spanish bank bail-out, we can work out what percentage we would have paid. We have saved Britain considerable amounts of money by ensuring that we are not involved in the bail-outs.
Mr William Bain (Glasgow North East) (Lab): Economic demand is continuing to fall across the eurozone, youth unemployment in Greece and Spain reached 52% today, and 5.5 million young people are unemployed across the EU. When will the Prime Minister finally acknowledge that the answer to such a chronic crisis of demand and jobs can never be harsher austerity?
The Prime Minister:
The point that I would make to the hon. Gentleman is that because we are outside the euro, as well as having tough fiscal targets, which frankly anyone in my position would have to deliver to deal with the debt and the deficit that we were left, we can
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have a very accommodating monetary policy, with ultra-low interest rates. Our monetary policy is our own to determine because we are outside the euro. That is the difference between the situation in Britain and the situation in countries that are inside the eurozone.
Jacob Rees-Mogg (North East Somerset) (Con): I completely support the Prime Minister in saying that the answer is less Europe, rather than more Europe. I wonder if I may bring his attention to part (j) of the communiqué, which states that the Commission will work on proposals for a
“common consolidated corporate tax base”.
Can I assume that Her Majesty’s Government will oppose those moves, as we are cutting corporation tax here, not trying to raise it to European levels?
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): It is clear that the type of referendum that the Prime Minister has in mind is one in which the choice is to vote in favour of whatever settlement we manage to extract or in favour of the status quo. Does he think such a referendum would satisfy the in/out zealots on his Back Benches?
The Prime Minister: For people who want to leave the European Union—that is a perfectly honourable, respectable political tradition and Members on both sides of the House, probably even Liberal Democrats, have held that position—campaigning for an in/out referendum is a perfectly sensible thing to do. It is just not my view or the Government’s policy, and I do not think it is the hon. Gentleman’s, either.
Mr Julian Brazier (Canterbury) (Con): I welcome the Prime Minister’s announcement of the progress in Russia’s views on Syria. Could we do more to persuade Russia that it is not in its interests to have a nuclear-armed Iran sitting on its border?
The Prime Minister: My hon. Friend is entirely right to make that point, and the Foreign Secretary has spent a lot of time with his Russian counterpart having exactly those discussions. There are great connections between resolving the situation in Syria and trying to get a resolution to the Iranian situation. It is worth noting that the oil sanctions have come in. They are tough and represent concerted action by the European Union, and I think they can make a difference.
Huw Irranca-Davies (Ogmore) (Lab): The Prime Minister’s position on an EU referendum seems to be summed up in that comedy catchphrase, “Yes but, no but, yes but, no but.” Is he likely to come to a decision and resolve his teenage dilemma before the next election?
The Prime Minister: I think I would let Vicky Pollard stick to her own work and think of something different.
As I have said, I think there are only two positions that do not make sense for Britain. One is an immediate in/out referendum, which I do not think would be right for us, and the other is somehow to rule out for ever and
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a day any way of forming a new consent with the British people. I want to see a new settlement, and I think we should then get a new consent. That seems to me an entirely sensible and logical position to take.
Mr David Nuttall (Bury North) (Con): At a time when EU countries are more indebted than ever before, why should the UK pay more so that the European Investment Bank can make yet more loans when there is an increasing risk that some of those loans will never be repaid? How much of the €10 billion increase in funding for the EIB will this country have to pay?
The Prime Minister: We account for about 14% of new loans made by the European Investment Bank. There is clearly weak lending by banks and there are problems in monetary policy right across the European Union, so the role of the EIB is helpful. It is important, though, that it maintains its very strong triple A credit rating.
Mr Speaker: Order. I am now looking for questions consisting of a single, short sentence. I am sure the hon. Member for Eltham (Clive Efford) will lead us in that exercise.
Clive Efford (Eltham) (Lab): With reference to the answer that the Prime Minister gave to the hon. Member for West Suffolk (Matthew Hancock), if he genuinely believes that some of the actions of Barclays bank bordered on the criminal, will he now call for the resignation of Mr Bob Diamond?
The Prime Minister: I do not think it is for Prime Ministers to hire and fire bank chiefs. Mr Diamond will have to make himself accountable to his shareholders, and to this House when he answers questions on Wednesday. As I have said, I think he has some serious questions to answer.
Dr Julian Lewis (New Forest East) (Con): Is it my right hon. Friend’s position that in any referendum on Europe while he is Prime Minister, the option of voting to leave the EU will not appear on the ballot paper?
The Prime Minister: No, that is not what I have said. What I have said is that I do not support an immediate in/out referendum. I believe that we should show strategic and tactical patience, and then I want to see a fresh settlement for which we seek fresh consent. The right time to determine questions about referendums and the rest of it will be after we have that fresh settlement. That is what we should do.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): The Prime Minister has repeatedly endorsed the United Kingdom’s membership of the EU this afternoon. Will he say something about the circumstances in which he would endorse withdrawal from the European Union?
The Prime Minister:
What I have always said is that we should act in the interests of the whole United Kingdom, and I do not think our best interests would be served by leaving the European Union. That does
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not mean that we meekly and lamely accept the status quo. We are not happy with the status quo, as the British public are not. I am not a defeatist who says that you have just got to take what you are given. We have already shown in a small way, by getting out of the bail-out fund, that we can do better, and I want Britain to do better.
Ian Swales (Redcar) (LD): Is the Prime Minister aware of any significant City institutions that want this country to leave the EU?
The Prime Minister: I am not aware of any City institutions that want that. On the whole, the City institutions want to ensure that our position in the single market is safeguarded. I am not a mercantilist, but it is worth noting that the one sector in which we have a massive current account surplus with Europe is financial services. It is therefore important that we ensure we safeguard the interests of that sector.
Mr David Evennett (Bexleyheath and Crayford) (Con): I welcome my right hon. Friend’s statement. Does he agree that we must continue to battle for radical and substantial reform of the EU and not be deflected from our national interests of trade and the single market?
The Prime Minister: My hon. Friend puts it extremely well. We should pursue the national interest. The key argument is membership of and influence over the single market. That lies at the heart of our case for being in the EU.
Mr Sam Gyimah (East Surrey) (Con): Does my right hon. Friend agree that a referendum is only a means to an end and not the end in itself, and that it is therefore important for us to work out what Europe we want to emerge from this crisis and what it means for the UK national interest, so that we give voters a meaningful choice in the matter?
The Prime Minister: My hon. Friend is absolutely right. Before we get to the referendum question, we must ask the prior questions of what exactly Britain wants in Europe, what we have at the moment, what we would like to change and how we can best change it. All those prior questions need to be asked before we get to the vital question of how to secure the full-hearted consent of the British people.
Dr Thérèse Coffey (Suffolk Coastal) (Con): More Eurocrats work in education and culture than on the internal market and services. Will my right hon. Friend stand up for hard-pressed British taxpayers and ensure that our scarce resources are directed towards jobs and growth by completing the internal market?
The Prime Minister: The depressing statistic my hon. Friend gives is important as we go into the budget negotiations. We must ensure that the EU budget is focused on things that are likely to help with growth, such as the single market, rather than on regulation. She makes a very good point.
James Morris (Halesowen and Rowley Regis) (Con):
There has been a lack of growth in Europe, but does the Prime Minister agree that, despite concerns about our
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future relationship with the EU, we should focus on policies that target growth, particularly in important sectors for British business, such as energy and the digital market?
The Prime Minister: My hon. Friend is entirely right. That is why our approach in Europe—the positive steps we have taken—is about building an alliance with other European countries to push forward the single market and free trade agenda. It has been heartening that in recent months, people such as Prime Monti of Italy and Prime Minister Rajoy of Spain have been involved in that. There is no longer a north-south divide in Europe: many countries are pushing for the growth agenda that has been championed by both parties in the coalition.
Gavin Barwell (Croydon Central) (Con): I welcome the Prime Minister’s stress on the importance of the single market and his statement that, in other areas, the EU status quo is not acceptable. Does he agree that this issue will be solved in the long-term only by giving the British people their say?
The Prime Minister: My hon. Friend is right that, in the end, as Europe changes and as we seek this fresh settlement, we will need to seek a fresh mandate. That is what the Conservative party at least has clearly recognised.
Henry Smith (Crawley) (Con): At last week’s meeting, the European Council president said it could take up to a decade to implement EU treaty change. Does my right hon. Friend agree that it is therefore more important that the Government passed a referendum lock in legislation?
The Prime Minister: My hon. Friend makes a very good point. Europe is changing rapidly and, as I have argued, quite fundamentally, but some of the institutional changes will take quite a long time to come through, because it is difficult for democratic states to achieve what the eurozone countries are engaged in. It will take time, which is why, as I have said, we need the tactical and strategic patience to maximise our national interest.
Robert Halfon (Harlow) (Con): I welcome the fact that my right hon. Friend has opened the door to a referendum on substantial renegotiation. Will he resist EU regulations on biofuels, which are pushing up prices at the pumps for hard-pressed motorists?
The Prime Minister: One question about biofuels is their sustainability—that might be what lies behind my hon. Friend’s question, but I will have a careful look at it.
Charlie Elphicke (Dover) (Con): Although I welcome the Prime Minister’s setting up the banking review, does he agree that the real crime is that there is any doubt at all that interest rate rigging is a criminal offence? If we are to have truth and reconciliation, should we not see a bit more responsibility and a bit less of the buck-passing that we have seen from former Labour Cabinet Ministers today?
The Prime Minister:
My hon. Friend makes an important point, but although there has been silence from the Labour party in this House, in the other place its Whip
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stood up and said, “Absolutely, this is squarely Labour’s fault.” It is a pity we do not hear a bit of that from the party here.
Andrew Bridgen (North West Leicestershire) (Con): Given that the UK is running a large trade deficit with the rest—[Interruption.]
Mr Speaker: Order. We must hear Mr Bridgen.
Andrew Bridgen: Given that the UK is running a large trade deficit with the rest of the EU, does my right hon. Friend agree that our European partners would have much to lose from erecting trade barriers with this country, if the British people decided to leave the EU?
The Prime Minister: My hon. Friend makes a good point. Britain is not only a huge market for other EU goods but a large net contributor to the EU budget. For that reason, as I often say, our membership entitles us to just as strong a view as those who have joined other parts of the EU, such as the single currency. We should never be frightened of making our voice heard.
Jason McCartney (Colne Valley) (Con): Does the Prime Minister agree that the Leader of the Opposition is wrong to criticise those who bang on about Europe, because by doing so he is criticising my constituents who bang on about the EU directives, whether on fish discards, animal experiments on stray cats and dogs or the levying of VAT on aviation fuel for the Yorkshire air ambulance?
The Prime Minister: As ever, my hon. Friend speaks up robustly for his constituents. Some of the issues that we face in our constituencies relate to the extra regulation, extra cost and extra bureaucracy coming from the EU, so he is absolutely right to make that point.
Mr Speaker: Last but not least, we must hear the voice of Kettering, Mr Philip Hollobone.
Mr Philip Hollobone (Kettering) (Con): Given that my right hon. Friend is now not ruling out a future referendum on our membership of the EU, is it not time for Her Majesty’s Government to commission an official, full-scale, independent, comprehensive audit of the costs and benefits of our membership in order better to inform that referendum when it comes?
The Prime Minister: When my hon. Friend sees the balance of competences review, he will find that a lot of what he seeks is in it. The idea is to look through the competences exercised by the EU and nation states, and to work out the costs and benefits, so that we have a proper and informed debate. Where he and I will differ, I suspect, is here: I think we benefit from having access to, and a say over, these markets, and that is a powerful argument for remaining in the EU. Like him, however, I am not happy with the status quo, and I want us to seek to change it and then get consent for it.
Mr Speaker: Order. I thank the Prime Minister, the Leader of the Opposition and the 74 Back Benchers who have questioned the Prime Minister in 62 minutes of exclusively Back-Bench time.
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LIBOR (FSA Investigation)
4.52 pm
The Chancellor of the Exchequer (Mr George Osborne): On Thursday I updated the House on the Financial Services Authority’s investigation into Barclays and the attempted manipulation of the LIBOR market in the years running up to and during the crisis. The House has just heard from the Prime Minister, and I would like to give more details of the steps we are taking.
This morning I spoke to Marcus Agius, who confirmed that he was resigning as chairman of Barclays because of the unacceptable standards of behaviour within the bank. The Treasury Select Committee has called the chief executive of Barclays to account for himself and his bank on Wednesday, and I, like many people here, look forward to hearing his answers.
As I also said last week, every avenue for the possible criminal investigation of individuals involved in the attempted manipulation of LIBOR is being explored, but in the view of its chairman, Lord Turner, the powers given to the FSA do not allow it to pursue criminal sanctions. People in the country rightly ask why it does not have the necessary powers, and those who set up the tripartite system can answer.
People also ask whether the gaping holes in the existing law mean that no action at all is possible. After all, fraud is a crime in ordinary business, so why should it not be in banking? I agree with that sentiment, and I welcome the Serious Fraud Office’s confirmation that it is actively and urgently considering the evidence to see whether criminal charges can be brought, particularly in relation to the Fraud Act 2006 and false accounting. It expects to come to a conclusion by the end of the month, and we encourage it to use every legal option available.
I should like to address three further issues today: what happens to the money we get from the fines; what urgent changes are needed in the regulation of LIBOR and other markets to prevent such abuse occurring again and to ensure that the UK authorities have the powers they need to hold those responsible to account; and the wider issue of what went so badly wrong in the culture of our banking system and the way it was regulated, allowing such fundamental failures of basic standards of conduct to go unchecked and unchallenged. Let me take each issue in turn.
Last week, I said that we wanted to ensure that all future fines paid by the financial services industry should go to the taxpayer. Today, I can confirm that we will propose amendments to the Financial Services Bill in the autumn to make that happen. The new arrangement will apply to fines received from 1 April 2012, so the measure will include the Barclays penalty. From now on, the multi-million pound fines paid by banks and others who break the rules will go to the benefit of the public and not to other banks.
That brings me to the urgent changes needed to the regulation of LIBOR to prevent this from ever happening again and to ensure that in future the authorities have the appropriate powers to prosecute those who engage in market abuse and manipulation. I have today asked Martin Wheatley, the chief executive designate of the Financial Conduct Authority, to review what reforms are required to the current framework for setting and
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governing LIBOR. This will include looking at whether participation in the setting of LIBOR should become a regulated activity, at the feasibility of using actual trade data to set the benchmark, and at making initial recommendations on the transparency of the processes surrounding the setting and governance of LIBOR.
The review will also look at the adequacy of the UK’s current civil and criminal sanctioning powers, with respect to financial misconduct and market abuse with regard to LIBOR. It will also assess whether those considerations apply to other price-setting mechanisms in financial markets, to ensure that these kinds of abuses cannot occur elsewhere in our financial system. We need to get on with this, and not spend years navel-gazing when we know what has gone wrong. I am therefore pleased to tell the House that Mr Wheatley has agreed to report this summer so that the Financial Services Bill currently before Parliament—or, if necessary, the future legislation on banking reform—can be amended to give our regulators the powers they clearly need.
The review is essential to ensuring that we mend the broken regulatory system—introduced by the last Government—that allowed these abuses to happen, but the manipulation of the most used benchmark interest rate reveals the broader issue of the professional standards and of the culture in some parts of the financial services industry that was allowed to grow up in the years before the crisis and which still needs to change. I do not think that a long, costly public inquiry is the right answer. It would take months to set up and years to report. We know what went wrong, and we cannot wait until 2015 or 2016 to fix it.
In just six months’ time, we will bring forward the banking reform Bill, which will implement the recommendations of Sir John Vickers’ independent commission on banking. The Bill will bring far-reaching, lasting change to the structure of British banks by ring-fencing retail banks from their investment banking arms. Let us see whether we can use that Bill to make any further changes needed to the standards of the banking industry, and to the criminal and civil powers needed to regulate it and hold people to account for their behaviour.
As the Prime Minister said, we propose that Parliament establish an enquiry into professional standards in the banking industry. The Government will in the coming days lay before both Houses a motion to establish a Joint Committee, drawn from the Commons and the Lords. It should be chaired by the Chair of the Treasury Select Committee, my hon. Friend the Member for Chichester (Mr Tyrie). He and his Committee have already been quick off the mark in investigating the issue, and we certainly want their hearings this week to proceed.
I propose that the Joint Committee’s terms of reference should be as follows. Building on the Treasury Select Committee’s work and drawing on the conclusions of UK and international regulatory and competition investigations into the LIBOR rate-setting process, we should consider what lessons are to be learned from them in relation to transparency, conflicts of interest, culture and the professional standards of the banking industry. I propose that the Committee should be able to call witnesses under oath, including current Members of Parliament and of the House of Lords. I can confirm that we will provide the Committee with the resources that it needs to do the job.
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I would suggest to the House that we ask the Joint Committee to report by the end of this year. That is enough time to do the job—and do it well—but not so long that it drags on for years. It means, in very practical terms, that we can amend our banking Bill to take on board its recommendations at the beginning of next year. I hope all parties will reflect on this and support the motion we put forward.
The failure to regulate the banks in the boom years cost this country billions of pounds. The behaviour of some in the financial services industry has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to the economic prosperity of the country. We are changing the failed regulation and are reforming the banks; now it is time to deal with the culture that flourished in the age of irresponsibility and to hold those who allowed it to flourish to account. I commend this statement to the House.
5 pm
Ed Balls (Morley and Outwood) (Lab/Co-op): The systematic lying—[Interruption.]
Mr Speaker: Order. Everything will be slowed up, the more noise there is. I do not care what the exhortation is for people to create a wall of noise. That should not and must not happen in this Chamber. If we end up being much slower because people are mindlessly bawling their heads off from either side of the House, we will be slower. I do not think the public will be much impressed by that sort of behaviour from either side of the House.
Ed Balls: The systematic lying, concealment and arrogant abuse of power revealed by the FSA report into LIBOR market fixing at Barclays bank is truly shocking. As one member of the Vickers commission said this morning:
“Today’s banks represent the incarnation of profit-seeking behaviour taken to its logical limits, in which the only question asked by senior staff is not what is their duty or their responsibility, but what they can get away with.”
Set against the depths of that malpractice, which has now been revealed, and the scale of the challenge we face in reforming and rebuilding trust in British banking, I am afraid that the Government’s decision to reject Labour’s call for an independent and judge-led public inquiry into the culture and practice of banking in our country just will not do. Just as in phone hacking or the Iraq war, so in banking: only with an independent, forensic and open public inquiry—not politicians investigating bankers—can we rebuild trust for the future.
Banks play a vital role in our economy—they lend to businesses, small and large; they help people to save and borrow for mortgages; and many hundreds of thousands of jobs across the UK are dependent on our retail and our global wholesale banking industries—but banking is a profession that depends on trust, and that trust is currently in tatters. The public are rightly baffled and angry about what they learned was happening at Barclays. We have learned that senior bank executives knew about and covered up deliberate market fixing and manipulation of key interest rates. When ordinary people break the law and defraud the taxpayer or the benefit system, they face criminal penalties and jail sentences; the same should apply to bank executives. The public are now rightly asking who they can trust to clear up this mess and sort this industry out.
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First, on the issue of criminal penalties, the Chancellor says he will bring forward amendments to the Bill in the House of Lords—amendments that he did not introduce in the House of Commons. Will he confirm that the powers he needs for an FSA investigation to be followed by a criminal investigation are actually on the statute book and that it is the job of the Serious Fraud Office to take forward those investigations, using the powers in the Fraud Act 2006? Will he confirm that section 2 of the 2006 Act already makes it a criminal offence to make “false representation” for personal gain and that it is an offence under section 4 to “abuse” a position of trust for financial gain? Will the Chancellor explain whether such investigations are already under way, and whether it is true that the Serious Fraud Office initially refused to act because of inadequate resources? There is now a real suspicion that the Chancellor’s new conversion to law making is just a smokescreen for the failure of prosecutors to get a grip.
Secondly, on the LIBOR market, we welcome the limited investigation that the Chancellor rather belatedly announced at the weekend. Self-regulation of this market goes back to the 1980s, but will the Chancellor explain why in March, as this scandal started to emerge, the Financial Secretary denied there was an issue and dismissed our calls for investigation and tougher regulation? When he was asked in the Committee whether he had a view on what needed to be done, he replied with one word: “No.” Given how much the Chancellor is now placing his faith in the Bank of England as the leading financial regulator in the future, will he assure us that the Bank did not turn a blind eye to the manipulation of the LIBOR survey?
However, the problems of culture and ethics that have now been uncovered are wider than the LIBOR market. The public are angry, and they rightly ask whether this generation of politicians, regulators and banks can put right the wrongs for which they are paying a heavy price. I say “this generation of politicians” because we must all admit that regulation should have been tougher, and we should all learn the lessons of an open and independent judicial inquiry. For my part—[Interruption.] For my part, I regret—[Interruption.]
Mr Speaker: Order. What we cannot have are individual Members who feel that their contributions from a sedentary position are somehow in a different category from the sedentary interventions of other Members. We do not need them. What we need is a bit of respectful listening to what is said by the Chancellor and the shadow Chancellor.
Ed Balls: For my part, I regret—as do Ministers and central bankers around the world—that we did not see the financial crisis building and take action, but let me ask the Chancellor this question: do he and the Prime Minister regret consistently attacking us in the Labour Government for being too tough in our approach to regulation, saying that it would undermine City effectiveness? That is what they said.
As for the future of regulation more widely, let me ask the Chancellor another question. Having rightly commissioned the Vickers report, does he now regret coming to the House a few weeks ago and saying that he
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was watering down its recommendations and weakening leverage ratios, and arguing, shockingly in the light of recent events, that complex derivatives—the very derivatives that led to the appalling mis-selling of interest rate swaps to small firms—should be inside the retail bank ring fence, contrary to the recommendation of Sir John Vickers? Surely that is one U-turn that we need from the Chancellor.
We all have a responsibility to do better in future, to reform our banking industry and to rebuild trust, but we do not believe that another parliamentary inquiry can do the job, just as we rejected that approach in relation to phone-hacking. The Chancellor said today that we did not need more “navel-gazing when we know what has gone wrong.”
How complacent is that? If the Chancellor and the Prime Minister are so confident that their approach is right, why do they not put two options to a vote, and let the House decide? Labour Members will vote for an independent and open public inquiry, not an inadequate and weak plan cobbled together over the course of this morning. The independent inquiry is what our constituents want, and it is the only way to achieve a lasting consensus on reforms for the future.
Mr Osborne: There was one question that dared not speak its name: who was the City Minister when the LIBOR scandal happened? Who? Put your hand up if you were the City Minister when the LIBOR scandal happened.
The shadow Chancellor was not here on Thursday, so he has had days to think about it, but there was not one word of apology for what happened when he was in charge of regulating the City. He blamed central bankers around the world and he blamed the Opposition of the day, but he did not take personal responsibility for the time he was regulating the City when the LIBOR scandal started, and that is why he will not be listened to seriously until he does. Indeed, we need to know whether he knew anything of what was going on. Did he express any concern about the LIBOR rate? When he was in the Cabinet and Gordon Brown, the right hon. Member for wherever it is, was Prime Minister, was he concerned about the LIBOR rate and Barclays? We shall find out in due course.
Let me now deal with the specific questions asked by the shadow Chancellor. He said that the criminal penalties exist in legislation. As I said, the Serious Fraud Office—which is totally independent of politicians, and rightly so—is looking at the law and seeing what it can do, but Lord Turner himself has said that the Financial Services Authority does not have adequate criminal powers. [Interruption.] Opposition Members are shouting, but let me read to them something a member of their own Front-Bench team has said. Lord Tunnicliffe said this:
“Criminal sanctions are extraordinarily difficult to bring about because of the burden of criminal law. It is fair to say though that you can’t find them in the current legislation. And, yes, OK, it’s our fault. I hope my leaders don’t hear me say that.”
That is a member of the Labour Front-Bench team clearly placing the blame on the late Labour Government, of which the shadow Chancellor was the principal economic adviser. That is the problem with the current law, and we are seeking an urgent review in order to amend it and make sure we can deal with the problem.
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The shadow Chancellor talks about our acting belatedly in respect of regulation. He had 13 years in which to regulate properly, yet in the space of two years we are changing the entire system of regulation by getting rid of the FSA and introducing a change to the structure of banking. That is happening because of the recommendations from the committee that we set up under John Vickers, and we have still not heard from the shadow Chancellor whether he supports John Vickers’ proposals. He often gets up and says what is wrong with them—[Interruption.] Well, if he has just welcomed them for the first time, that is very welcome, but he goes out of his way not to do so on other occasions.
The shadow Chancellor then said that, somehow, a parliamentary inquiry would be wrong and that I was complacent to say we knew what had gone wrong. This is what my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), said at the weekend, however:
“We know what went wrong and we don’t need a costly inquiry to tell us”,
so that is not just the view of the current Chancellor.
I hope the shadow Chancellor reconsiders his position. We will have good people from both sides of this House and the House of Lords to consider the matter. We will put the motion to the House. Let us have a serious inquiry, but let us have an inquiry that comes to a conclusion within a measurably short period so that we can amend the law that will be going before the House next year. That is the sensible step to take. In the meantime, the shadow Chancellor should reflect on his role and his responsibility, as the City Minister who let Northern Rock sell those dodgy mortgages, as the City Minister who let RBS explode, and as the City Minister who presided when the LIBOR scandal began.
Sir Peter Tapsell (Louth and Horncastle) (Con): Unlike the shadow Chancellor, I strongly opposed the tripartite regulation of the banks when that was brought forward by the then Labour Chancellor, as I said in a speech I made in the House in 1997. May I now revert to questions that I put to both the Prime Minister and the Attorney-General—who is still with us in the Chamber—suggesting we should urgently consider introducing the concept of the directing mind as defined in the Dodd-Frank Act in the United States, which would enable English commercial law to be strengthened so that the heads of banks can be held answerable for the actions of rogue subordinates?
Mr Osborne: My right hon. Friend reminds us that he was absolutely right about the problems that would emerge with the creation of the tripartite regime, and, sadly, his predictions have been borne out by events. He also makes a specific proposal about legal changes and the introduction of the directing mind. We are aware of that idea, and we will look into it. The House can look at it, too, in the inquiry over the next few months.
Mr Alistair Darling (Edinburgh South West) (Lab): The Chancellor referred to my quote in a newspaper yesterday. I should just tell him that I was asked specifically about the investigation of individuals, and I made the point that there are authorities, such as the Serious Fraud Office and the Financial Services Authority, who are supposed to be doing that.
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On the Chancellor’s broader point, let me say that this inquiry will work only if it is a genuine examination of what went wrong. As I have said before, it went wrong under successive Governments over quite a long period, as well as in the City itself. If the inquiry looks like a partisan exercise in settling scores between the political parties, it will not work. The public may not like bankers, but they do not care much for politicians either. I therefore hope the Chancellor can give us an assurance that this inquiry will not be that sort of exercise, and that it will instead be a genuine inquiry into what went wrong and what needs to be put right.
Mr Osborne: First, the inquiry should be genuinely cross-party and it will, of course, be up to the Labour party to choose whom it would wish to be on the Committee, both in the Commons and in the Lords. So there will be a choice for the Labour leadership in that respect. Of course, I hope that they would consult my hon. Friend the Chair of the Treasury Committee, but it is ultimately their choice.
Secondly, the Treasury Committee, under its previous Chair, Lord McFall, did some very good work on investigating what went wrong. So the idea that the Select Committee or a Joint Committee is unable to do this work is nonsense. “The run on the Rock” was a very good report, as I think the right hon. Gentleman would concede, and it provided the basis for some of the changes in the Financial Services Bill. I think we can draw also on the expertise in the House of Lords in this area and have a Joint Committee. As I say, I hope that once tempers have cooled today, we will be able to reflect on that and have a joint-party consensus on it.
Mr Andrew Tyrie (Chichester) (Con): First, may I assure the House that I will not countenance a partisan inquiry and I would not be prepared to chair one either? I do believe that Parliament—both MPs and the other place—has something to contribute to clearing this mess up; they cannot do it all on their own.
By any standards, the LIBOR scandal, for which 20 banks around the world are now being investigated, is shocking. It has corroded trust in the UK financial services industry and it is a shameful affair. I find it particularly sad that it will have unfairly damaged the reputations of hundreds of thousands of our constituents who work hard and honestly in the financial services industry. The UK’s reputation has been tarnished, but it can be restored and enhanced if we draw the right lessons. The Treasury Committee will continue with its inquiry into what exactly happened. We will be holding the inquiry on Wednesday with the chief executive of Barclays, and we will also probably call the British Bankers Association and the regulators to find out exactly how this all happened.
None the less, the immediate task to be conducted by the Financial Services Authority must be to ensure that we have appropriate sanctions for wrongdoing and a regulator strong enough to give us confidence that wrongdoers will be caught. Does the Chancellor agree that another task, on which the Joint Committee will and should concentrate, must be to learn the lessons of the LIBOR scandal for corporate governance and standards in the banking industry?
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Mr Osborne: I completely agree with all the sentiments exposed by my hon. Friend. He is right to say that this is an incredibly important industry. In many constituencies represented in this House, across the United Kingdom, financial services will be the largest private sector employer. We want to ensure that this industry has a high reputation that Britain can be very proud of. Of course these activities have damaged the credibility of the industry, and that is what the work that we have begun here, and which I hope he continues, will put right.
Mr Speaker: Order. There is a lot of interest but not much time. I am keen to accommodate as many as possible, but extreme brevity is required. So questions, please, without preamble.
Frank Dobson (Holborn and St Pancras) (Lab): Would the Chancellor of the Exchequer authorise Her Majesty’s Revenue and Customs to examine the personal taxation position of all the people involved in this scandal, because if they are willing to swindle everybody, the chances are that they are trying to swindle the Revenue?
Mr Osborne: The Chancellor of the Exchequer, hon. Members will be glad to know, under any Government, cannot direct the Revenue towards any individual. It would be a very sorry state in this country if I could direct the Revenue to the tax affairs of individuals, so I am not proposing to do that. However, as I have said at this Dispatch Box, and as others have said, this Government are introducing a general anti-avoidance rule, we are clamping down on stamp duty evasion and we have increased the resources from the budget we inherited from Labour when it comes to tackling tax evasion, and the Revenue is therefore well resourced to do its work.
Mr David Ruffley (Bury St Edmunds) (Con): Last year, the then director of the Serious Fraud Office, Mr Richard Alderman, declined to investigate possible breaches of the Fraud Act 2006 arising from allegations of LIBOR rigging. In the light of that, does the Chancellor of the Exchequer think that the SFO is still fit for purpose?
Mr Osborne: Yes, I do. My understanding, although I have not spoken to him directly, is that the director of the Serious Fraud Office feels that he is well resourced to undertake the investigations he is undertaking.
Mr Peter Hain (Neath) (Lab): Does the Chancellor accept that public confidence in his Government, the Crown Prosecution Service and the police will be totally destroyed if no prosecution results for the bankers who rigged the LIBOR rate? Whatever the specifics of banking legislation, an offence has been committed—conspiracy to defraud—and that is what the police should be investigating in a criminal investigation.
Mr Osborne:
The Serious Fraud Office is absolutely independent of Government, but it will be in no doubt that this House and the Government want to ensure that the law is properly enforced and that if there are legal avenues that it can explore, it should use them. We must accept that the Financial Services Authority, which is also a prosecuting authority in respect of financial
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crime, does not feel that it was given enough powers to undertake a criminal prosecution, as Lord Turner has said very clearly. That is why I want to give the regulators the powers they need. Instead of spending two or three years getting to that point—a long public inquiry would take a year or two, after which the Government would go away, consult, publish a White Paper and introduce legislation, and it would be 2015 or 2016 before we did anything—I propose that we use the Financial Services Bill that is already before the House and next year’s banking Bill to put things right.
Stephen Williams (Bristol West) (LD): The Chancellor mentioned new legislation on the destination of fines on the banking industry and other financial services providers. I raised the issue with our hon. Friend the Financial Secretary in January and got the answer that in the past 10 years, £377,734,373 was levied in fines across the banking sector—a staggering amount. Does the Chancellor agree that a suitable destination for future fines might be the not-for-profit sector and the debt advice agencies that do such valuable work in all our constituencies?
Mr Osborne: My hon. Friend is right to point out that under the current arrangements, these fines, including the one that Barclays is paying, will be used to reduce the levy that the rest of the banking industry pays to the Financial Services Authority, so the rest of the banking industry will be the beneficiary of the fines. I do not think that that is right and that is why we are making the changes. We are making them retrospective from the beginning of April to ensure that the fine paid by Barclays will be available to be used for the benefit for the public, and I am sure that we will have a lively debate about how that money should be spent.
Glenda Jackson (Hampstead and Kilburn) (Lab): I welcome the Chancellor’s commitment to broad-ranging and hard regulation for the British banking system—a position eschewed like the plague by his colleagues when they were in opposition. Will he guarantee that the powers given to the FCA will ensure that it is genuinely what many of my constituents have campaigned for for some time: a banking watchdog, not a lapdog?
Mr Osborne: I can certainly tell the hon. Lady what we want the new regulators to be. We want them to be tough, independent regulators who hold the banking industry to account. However, it is frankly pretty pathetic for Labour MPs, including former Ministers in the Labour Government, to get up and blame the then Conservative Opposition for what happened when they were in office. Why do they not take some responsibility for what they did?
Mr Speaker: Order. I repeat that we need brief questions and although I know—[Interruption.] Order. Although I know that the Chancellor is seeking to assist the House, pithy replies would also help.
Penny Mordaunt (Portsmouth North) (Con): Does the Chancellor find it odd that the Opposition are calling for Barclays to face a criminal investigation, given that when they were in office they set up a regime that did not make this abuse a criminal offence?
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Mr Osborne: To give a pithy reply, I certainly do find it odd.
Mr Andrew Love (Edmonton) (Lab/Co-op): Does the right hon. Gentleman regret diluting the Vickers proposals, under pressure from the banks? In the light of revelations in recent days, will he ensure that the ring fence is strengthened, so that this does not happen again?
Mr Osborne: We are not diluting the Vickers proposals; we are putting them into law. The House will have the opportunity next year to ring-fence retail banking and separate it from banks’ investment banking arms. When I was the shadow Chancellor, I proposed changes to the structure of banking, and they were completely rejected by the former Prime Minister at this Dispatch Box. We now have an opportunity to change the structure of banking, and I hope that I will have the hon. Gentleman’s support when the law comes before us.
Andrea Leadsom (South Northamptonshire) (Con): In the early 1990s, we had around 45 major banks; we now have about five. One of the key reasons why there is so little new competition is the lack of ability to switch. Does my right hon. Friend agree that now is the time to look again at the proposals that the Vickers commission made on switching, and to think again about moving to account portability?
Mr Osborne: My hon. Friend will know, as we discussed this in the Treasury Committee, that the Vickers commission specifically recommended—indeed, insisted on—the ability to change bank account easily, and that from 2013, the banks should have in place a mechanism that enables people to do that within a week. As Vickers said—I agree with him—let us see that that happens; if it does not, we can take alternative measures, but we have in place plans to make it much easier to switch bank accounts from next year.
Stewart Hosie (Dundee East) (SNP): I welcome what the Chancellor said about the Serious Fraud Office and the responsibility that he has given Martin Wheatley in relation to governance and the setting of LIBOR, and what he said about potentially putting criminal sanctions in the banking reform Bill. I am disappointed that he has not ordered a full public inquiry, but I wish the investigation that he has set up well. Will he confirm to the House that the hon. Member for Chichester (Mr Tyrie) will not be restricted in any way in calling for evidence, under oath, from witnesses from the commercial banks, the central Bank, the regulators, or Ministers at the Treasury at the time of the LIBOR rigging scandal?
Mr Osborne: I can confirm to the hon. Gentleman that the Committee will not be restricted in any way. It will call whomever it wants. I suggested—but this, of course, will be a matter for the House—that it should call people to give evidence under oath. [Interruption.] As we are getting a question from an Opposition Front Bencher, let me say that the Committee will also be able to call former Government Ministers.
Joseph Johnson (Orpington) (Con):
The shadow Chancellor seemed to suggest that the Chancellor was passing the buck to the Bank of England, and that the Bank was somehow conniving in LIBOR lying. Will the
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Chancellor confirm that the Financial Services Authority, in its investigation, found no evidence to suggest that the Bank of England at any point encouraged banks to low-ball their LIBOR rate?
Mr Osborne: The FSA’s report is very clear about the interaction between the Bank of England and Barclays. Paragraph 176 says:
“No instruction for Barclays to lower its LIBOR submissions was given”
during the telephone conversation that caused the press interest.
Mr George Mudie (Leeds East) (Lab): Will the Chancellor confirm that there will be no Government majority on the Joint Committee?
Mr Osborne: The Committee will be set up in the normal way.
Jason McCartney (Colne Valley) (Con): Will the Chancellor once again confirm that progress is being made towards a more responsible banking system, with the separation of high street domestic banking and banks’ so-called casino operations?
Mr Osborne: My hon. Friend is right: we are proceeding with a change to the structure of British banking, in which we will ring-fence the retail banks from their investment banking arms. [Interruption.] There will be plenty of opportunity for Labour ex-Ministers such as the shadow Chancellor to appear before the Committee, if he is worried about that. We will introduce a Bill, which will go through Parliament next year. In answer to the point about a public inquiry, why spend three or four years before getting to legislation? Why do we not use the opportunity to get it right now, and amend the Bill that will be before Parliament?
Mr Dennis Skinner (Bolsover) (Lab): With hedge funds providing up to 50% of all the money that goes into the Tory party political coffers, can we be sure that those criminal penalties that are referred to can extend to any or all of those Tory MPs mentioned in The Independent on Sunday yesterday?
Mr Osborne: I do not think that that question deserves an answer. The inquiry will do its job, and I hope it will do so on a cross-party basis.
Ian Swales (Redcar) (LD): With Friday’s FSA report into the inappropriate selling of base rate swap products, does the Chancellor believe that the culture behind that latest scandal should also be part of the inquiry?
Mr Osborne: The Joint Committee will look more broadly at the culture in the banking industry, but the very specific point that my hon. Friend makes is about a mis-sold retail product. What I want to do, and what I am sure our constituents would want us to do, is make sure that the compensation is paid out as quickly as possible. I do not want any inquiry to delay that. We want to make sure that small businesses, in particular, which are having cash-flow problems because of the products that they were mis-sold, get the compensation they need. I do not want to impede that process.
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Mr Nicholas Brown (Newcastle upon Tyne East) (Lab): Does the Chancellor identify shortcomings in existing anti-fraud legislation, apart from the costs of pursuing an investigation and a prosecution? Will he confirm to the House that there will be no constraints on either investigation or prosecution costs?
Mr Osborne: There will be no constraints because of cost.
David Rutley (Macclesfield) (Con): Does my right hon. Friend agree with the view expressed a few years ago that
“nothing should be done to put at risk a light-touch, risk-based regulatory regime”?
Is this not further evidence of the wishful thinking that is all too prevalent on the Opposition Benches?
Mr Osborne: My hon. Friend is right. I remember sitting at the Mansion House listening to the former Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), telling us in 2007 about the golden age of the City, just before the City imploded.
Mark Durkan (Foyle) (SDLP): Does the Chancellor recognise that many of us observed for a number of years that the competition between the Front Benches in the House seemed to be based on saying, “Our touch is lighter than yours”? The public believe that Parliament and parties have indulged the banksterism that is now all too apparent. The failure and inadequacy of legislation were a failure by Parliament, not just of Government. Is an inquiry that will be a Whips’ stitch-up, with fairly narrow terms of reference, really an adequate response to the public concerns out there?
Mr Osborne: In the end, the conclusion of the inquiry will command the confidence of the House only if it is a unanimous report. The Labour party will be able to choose its members. If it is a divided report along partisan lines, people will see that. I hope the joint inquiry comes forward with a unanimous report. As I say, that would be the way to proceed. A public inquiry would take months to establish and a year or two years to report; in Northern Ireland we have had inquiries that have gone on even longer. There would then be a Government response, a Government White Paper and Government legislation. We would be standing here in 2016 or 2017 dealing with a scandal that had happened a decade earlier.
Conor Burns (Bournemouth West) (Con): As my right hon. Friend sets out the task of restoring trust and integrity to the banking system in the light of the appalling revelations at Barclays, he will be aware that we all have constituents who are decent people working in those institutions, who have been badly let down by some of the leaders in the sector, not least the 4,000 people who work for JP Morgan in Bournemouth. May I invite my right hon. Friend the Chancellor to use this opportunity at the Dispatch Box today to recommit the position of this Government—that we are committed to a vibrant banking sector that contributes so much to the economy of the United Kingdom?
Mr Osborne:
I can tell my hon. Friend that we are absolutely committed to a vibrant banking sector. I have gone out of my way in these exchanges to draw
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attention to the fact that this is an incredibly important sector to the British economy. The fact that an American bank employs 4,000 people in Bournemouth reminds us that this sector is not just in the square mile of the City of London or in Canary Wharf. This industry employs many hundreds of thousands of people around the country. It is the largest private sector employer in the country, and of course it has a huge impact on the rest of the economy, which is why it must now be properly regulated.
Caroline Lucas (Brighton, Pavilion) (Green): The Chancellor keeps repeating his intention to follow the Vickers recommendation of ring-fencing retail and investment banking, but in the light of this scandal will he not accept that simple ring-fencing is not enough because any firewalls will soon be circumvented, which is why we need nothing less than the full legal separation of retail and investment banking?
Mr George Osborne: There are people who share the hon. Lady’s view, but we specifically asked John Vickers and his commission, whose membership was drawn from people who had expertise in the consumer industry, banking and elsewhere, to consider whether we should physically separate the banks as she suggests. They explicitly addressed that issue and came to the conclusion that ring-fencing was a better approach, and one of the reasons why they did so is that ring-fencing might provide more stability for the retail arm, as it would be able to draw on the resources of the investment bank. They specifically looked at that and came to the conclusion that having a retail ring fence was better than separating the banks.
Madam Deputy Speaker (Dawn Primarolo): Order. I inform hon. Members that there is very important business after this statement and I will therefore be unable to fit everyone in. I plan to let the statement run for another 10 minutes or so, so short questions and short, direct answers would help enormously.
Mark Field (Cities of London and Westminster) (Con): For the reasons the Chancellor has set out, I very much agree that the long path back to trust in banking and financial services is served by a banking Bill, but will he take on board some of the concerns expressed just now by the hon. Member for Brighton, Pavilion (Caroline Lucas)? Many feel that the LIBOR scandal might be a turning point. In addition to looking at ring-fencing, is he open-minded enough at least to consider the prospect of a fully fledged separation of casino or investment banking from retail banking?
Mr Osborne: I say to my hon. Friend, whose constituency expertise and personal expertise I have a great deal of time and respect for, that one of the purposes of asking John Vickers to do this work was to resolve the issue for our country. We brought together a commission with broad experience. It specifically looked at this issue and came to the conclusion that a ring fence was better than actual separation. I think that we should stick with its recommendations in order to give the industry some stability.
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John Mann (Bassetlaw) (Lab): If tomorrow morning the elected Treasury Committee comes up with its own terms of reference, as it is appointed by Parliament to do, will the Chancellor accept them or ride roughshod over them?
Mr Osborne: It is for the House of Commons and the House of Lords to pass a motion, so ultimately it is a matter for the House.
John Thurso (Caithness, Sutherland and Easter Ross) (LD): At the heart of this matter is a culture that has seen bankers go from trusted advisers to salesmen and clients go from valued clients to marks. Given that culture, is it not right that the Committee be asked to interview the Vickers commission again to see whether, in its view, ring-fencing is adequate following these events?
Mr Osborne: It would be entirely up to the Committee to call whomever it would want to call, and it might well want to speak to John Vickers, who has enormous expertise in this area.
Mr Pat McFadden (Wolverhampton South East) (Lab): I think that the Chancellor has done his announcement a disservice by setting it up as a continuation of his obsession with placing every act of wrongdoing by every banker at the door of the previous Government. Does he not accept that what the public want is something that gets to the heart of the rotten culture exposed by the FSA report last week, rather than the partisan way in which he set out today’s announcement?
Mr Osborne: I agree with the right hon. Gentleman that we want to get to the heart of the cultural problems, but when the shadow Chancellor responds to a statement and blames it all on the party that was in opposition at the time, it is perfectly reasonable for me to point out who was in government. That is a perfectly reasonable response in the cut and thrust of this House, but I completely agree with the sentiment he expresses, which is that we should try to proceed on a cross-party basis. I hope that his Front Benchers will think about supporting the joint inquiry—they will of course be able to choose its Labour members—because I think that that it is the correct way forward to give us answers for next year.
Dr Phillip Lee (Bracknell) (Con): Does the Chancellor agree with me, and indeed with Plato, that good people do not need laws to tell them how to act responsibly, and that bad people will find a way around such laws? We really should bear that wisdom in mind when it comes to determining the outcome of the inquiry that has been announced.
Mr Osborne: I am tempted to say that we should find an Aristotelian mean, where we do not completely destroy the industry with one inquiry after another, but instead have a sensible inquiry that gets to the right answer, amends the law appropriately and enables us to have a sensible financial services industry that avoids the scandals that we are dealing with today.
Helen Goodman (Bishop Auckland) (Lab):
One of the most controversial episodes in the recent history of the City was big bang in 1986. Notwithstanding the
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many good qualities and good intentions of the hon. Member for Chichester (Mr Tyrie), the fact is that in 1986 he was a special adviser to the then Chancellor of the Exchequer, who was overseeing big bang. Does the Chancellor agree that the hon. Gentleman will find it difficult to demonstrate the necessary independence?
Mr Osborne: My hon. Friend the Member for Chichester (Mr Tyrie) is more than capable of demonstrating his independence, and I remind the House that thanks to the reforms of this Government he was elected to his post by the entire House of Commons.
Dr Sarah Wollaston (Totnes) (Con): I have just received a heartbreaking letter from a 72-year-old pensioner who is being pursued through the courts for a disputed and modest tax claim. How can it be right that those telling lies for eye-popping sums are not ending up in court?
Mr Osborne: The Serious Fraud Office is independent of the Government, but it is pursuing every avenue to see whether it can bring criminal prosecutions in this case. This is, however, a matter for the SFO, which is going to come back to us by the end of the month to tell us whether it can do so, and it will have heard what the House has said today. We also want to ensure that in future the regulators have the criminal sanctions that they need, and that is why we seek these investigations to change the law now, rather than waiting four or five years to do so.
Clive Efford (Eltham) (Lab): How can it be right, and in line with the Government’s credibility on wanting to clean up the banking system, when those who were responsible and in management at the time of these criminal activities—both the Prime Minister and the Chancellor have today accepted that criminal activities were going on—remain in post, such as Mr Bob Diamond?
Mr Osborne: As the Prime Minister said and I repeat, Mr Diamond has to account for himself before the Treasury Committee this week, and I congratulate the Committee on doing that. The chairman of Barclays has resigned, but it is not the job of the Chancellor of the Exchequer to hire and fire the bank chiefs at this Dispatch Box. I am not sure that we want to go down that path; it is much better for the shareholders to do it, the board to do it, and they will have the appearance before the Committee of Mr Diamond to go on.
Steve Baker (Wycombe) (Con): Further to the question from my hon. Friend the Member for Bracknell (Dr Lee), will the Chancellor look again at my Financial Institutions (Reform) Bill, which would transfer commercial risk back to the banking sector and end the incentives that have created the culture of recklessness and rule-breaking that is ruining the City?
Mr Osborne: I will certainly take a close look at my hon. Friend’s Bill and get back to him on it.
Mr Tom Watson (West Bromwich East) (Lab):
The Chancellor said in his statement that he had asked Mr Wheatley whether participation in the setting of LIBOR should become a regulated activity. Does the Chancellor accept that public confidence in the British
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Bankers Association has completely ruptured, and that for the public it is a question not of whether, but of when, we take that responsibility away from it?
Mr Osborne: I completely agree with the hon. Gentleman that confidence in the process of setting LIBOR has been damaged—of course—by these revelations. That is precisely why, if I may say to him, I want to get on with it: that is why I have asked Mr Wheatley to do his report in the next couple of months, not even by the end of the year—so that we have the opportunity in October of amending, just before it becomes law, the Financial Services Bill. The hon. Gentleman is an expert on public inquiries, and I am sure he will agree that a public inquiry would take years to get to that point. Let us get to that point this autumn.
Mark Pritchard (The Wrekin) (Con): I fully support greater transparency in banking and, in particular, punishing those who have done wrong, but can the Chancellor from the Dispatch Box today reassure my constituents who, as part of their pensions, hold shares in banks that the Government, or the inquiry, will take no action that unnecessarily undermines the value of those pensions?
Mr Osborne: We would not want to take actions that unnecessarily undermined the value of anything, so my hon. Friend has that assurance.
Mr Roger Godsiff (Birmingham, Hall Green) (Lab): After the nationwide disturbances last year, a student was given a six-month sentence for stealing a pack of water bottles. What punishment does the Chancellor believe would be appropriate for bankers who have stolen millions of pounds from investors through rigging interest rates?
Mr Osborne: I completely understand and sympathise with the sentiment that the hon. Gentleman is expressing: people suffer criminal penalties for offences involving much, much smaller sums of money—a fraction of the sums that we are talking about. The Serious Fraud Office, which is independent of the Government, is looking at the matter. Let us wait to hear what it has to say. It is looking at what laws are available to let it do that. I am sure that he would not want the Government of the day to undertake the criminal prosecutions themselves.
Stephen Mosley (City of Chester) (Con): What powers and sanctions will the parliamentary Committee of inquiry have should witnesses refuse to attend, refuse to answer questions or mislead the Committee?
Mr Osborne:
Parliamentary Committees have a whole set of powers available to them. Ultimately, as I understand it—the Parliamentary Secretary to the Treasury might correct me if I am wrong—the House itself can call witnesses to Parliament through a vote. That power is available to us—[Interruption.] That is absolutely the case. [Interruption.] What I find astonishing is Opposition Front Benchers’ lack of confidence in Parliament—in the House of Commons, in the House of Lords—to do this job. Looking at how they treated Parliament over
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13 years, perhaps that is not surprising. I have confidence in Members from both sides of the House to do the job being asked of them.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): Interest rate swaps have been mis-sold. They are complex derivatives. Does the Chancellor still think it right that they are inside the retail banking ring fence?
Mr Osborne: We are not proposing to put complex derivative products inside the retail ring fence; that is not part of our proposals. As I say, we are coming forward with plans to implement the Vickers reforms and I hope that the hon. Lady welcomes that.
Mr Robin Walker (Worcester) (Con): We have had regrets but no apology from Opposition Front Benchers. What our constituents really want is action. May I commend the Chancellor for taking action to set up a swift parliamentary inquiry? Will he make sure that the proceeds from any fines go to the taxpayer, not the banks?
Mr Osborne: I thank my hon. Friend. I say again that I came to the House just last Thursday and said that I would look to see what I could do on the fines. I have now come forward, a few days later, and said that we are going to take those fines—including the fines that Barclays will pay—and make sure that they are put to the public benefit, not to the benefit of the financial services industry. We are acting extremely swiftly on this. As I said, I would have thought that it was in everyone’s interests that we get on and deal with the matter in the coming months.
Mr Michael Meacher (Oldham West and Royton) (Lab): Since there is clear evidence of a conspiracy, going on for years, to defraud over LIBOR, will the Chancellor now transfer responsibility for the interest rate market away from the incestuous control of the British Bankers Association to the Financial Services Authority or the Bank of England, including the power to bring criminal charges on evidence of market abuse?
Mr Osborne: The right hon. Gentleman asks two very good questions, as did the hon. Member for West Bromwich East (Mr Watson), about who should oversee the setting of LIBOR and what criminal sanctions should exist for the manipulation of that market. That is precisely what we are going to investigate over the next couple of months in Mr Wheatley’s inquiry. That will enable us in September and October to change the law; the Bill has been going through Parliament and can become law this autumn. I hope that I have the right hon. Gentleman’s support for getting on with this and getting the powers on the statute book.
Mr Rob Wilson (Reading East) (Con): If it is found, following the Joint Committee inquiry, that manipulation of interest rates damaged small businesses or mortgage holders, will my right hon. Friend consider forcing the banks to reimburse fully those individual small businesses and mortgage holders?
Mr Osborne:
Of course, if harm is proved to individuals or to businesses the whole question of compensation will arise, and we have the compensation regime to
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address that. As I said in the House on Thursday, it is difficult to establish whether that is the case because people were trying to manipulate the rate up and down on different days to suit their derivative trading book, so there were times when the rate was too low and times when it was too high compared with the fair market rate, and so the question of how much people lost out will be difficult to establish.
Madam Deputy Speaker (Dawn Primarolo): Order. I am sorry that I am going to have to end the statement there. We have taken questions from 39 Back Benchers in 47 minutes. I appreciate that it is a very important issue, but we have very pressing business that we need to move on to, and of course this matter will come back to the House again.
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Points of Order
5.50 pm
Jeremy Lefroy (Stafford) (Con): On a point of order, Madam Deputy Speaker. In asking a question of the Chancellor regarding London commodity markets and their impact on smallholder farmers around the world following his statement last Thursday, I inadvertently failed to draw Members’ attention to my entry in the Register of Members’ Financial Interests. I wish to do so now and apologise for the oversight.
Madam Deputy Speaker (Dawn Primarolo): I am grateful to the hon. Gentleman for putting that information on the record. He has been quite ingenious in using a point of order to do so. I am sure that the House is grateful for that correction.
Chris Bryant (Rhondda) (Lab): On a point of order, Madam Deputy Speaker. You will know that when there is an equality of voices in this House, that is the only time when the Chair of a Committee or the Speaker is able to vote. In the other House, it is quite the reverse: the Speaker or the Chairperson of a Committee is able to vote twice, both in their own right and then if there is an equality of votes. If the new Committee that is to be set up is set up as a Joint Committee, traditionally that has meant that the rules of the House of Lords apply rather than those of the House of Commons. That would mean that the Chairman of the Committee, who is a Member of this House, would have two votes. Is that correct?
Madam Deputy Speaker: I am advised that the hon. Gentleman is correct in his analysis of the rules with regard to the requirements on voting and whether a situation would apply in the circumstances that he has described. I am grateful for his point of order. Perhaps I could ask him to leave it with me at this point so that I can take further advice from the Government and the Clerks as to whether that is the true intention of the Government.
Finance Bill (Ways and Means)
That provision (including provision having retrospective effect) may be made in the Finance Bill about face-value vouchers.—(Mr Gauke.)
Finance Bill (Ways and Means) (No. 2)
That provision may be made in the Finance Bill amending the descriptions of supplies which are zero-rated, exempt or subject to a reduced rate of value added tax.—(Mr Gauke.)
Finance Bill (Ways and Means) (No. 3)
That provision (including provision having retrospective effect) may be made in the Finance Bill about the treatment of arrangements involving settled property.—(Mr Gauke.)
2 July 2012 : Column 631
Finance Bill (Programme) (No. 2)
Motion made, and Question proposed,
That the following provisions shall apply to the Finance Bill for the purpose of supplementing the Order of 16 April 2012 (Finance (No. 4) Bill (Programme)):
1. Proceedings on consideration shall be taken on the days shown in the following Table and in the order so shown.
2. Each part of the proceedings shall (so far as not previously concluded) be brought to a conclusion at the time specified in relation to it in the second column of the Table.
2 July 2012 : Column 632
3. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at 11.00 pm on the second day.—(Mr Gauke.)
5.53 pm
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): I will speak very briefly because I am conscious of the time, but it would be remiss of me not to put on record the fact that we have some concerns about the lack of time available to discuss what is a very big Finance Bill. There are a number of serious issues that many Members will want to discuss during the course of this evening. Although we will not vote against the programme motion, I want it to be on the record that we regard this as an exceptional circumstance and we do not wish it to be seen as the way in which things will be automatically dealt with in future.
5.54 pm
The Exchequer Secretary to the Treasury (Mr David Gauke): Let me briefly respond to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). As hon. Members know, we have already scrutinised the Budget and the Finance Bill for eight weeks, including in Committee of the Whole House and in the Public Bill Committee, where our discussions were thorough and detailed. Indeed, the hon. Lady played a very large role in those discussions. Before that, in December 2011, the Government published over 400 pages of draft legislation and received about 450 comments on it. That demonstrates our commitment to improving the way in which policy is developed. In order to make progress with Government business in good time, we have agreed through the usual channels to programme this debate on Report. I commend the motion to the House.
2 July 2012 : Column 633
Finance Bill
Consideration of Bill, as amended in the Public Bill Committee
‘In relation to products charged with duty under HODA 1979 on or after 1 August 2012 but before 1 January 2013, that Act has effect as if the amendments made by section 20 of FA 2011 had never been made.’.—(Miss Chloe Smith.)
Brought up, and read the First time.
5.55 pm
The Economic Secretary to the Treasury (Miss Chloe Smith): I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dawn Primarolo): With this it will be convenient to discuss the following:
‘(1) With effect from 1 July 2012 the fuel duty payable under the Hydrocarbon Oil Duties Act 1979 on biodiesel produced from waste cooking oil shall be 10 pence per litre less than would be payable apart from this section.
(2) The Commissioners for Her Majesty’s Revenue and Customs may by order made by Statutory Instrument repeal subsection (1) on or after 1 January 2014 or when the Renewable Transport Fuel Obligation has come into effect, whichever is the earlier.’.
New clause 9—Taxes on road fuel—
‘The Chancellor of the Exchequer shall conduct a review into the relationship between fuel duty, other taxes charged on road fuel and the cost of road fuel, and lay a copy of the report before the House of Commons before 1 August 2012.’.
New clause 11—Fuel duties: rates—
‘(1) The Hydrocarbon Oil Duties Act 1979 shall have effect as if the amendments made to it by section 20 of the Finance Act 2011 (Fuel duties: rates of duty and rebates from 1 January 2012) had not been enacted.
(2) This section will have effect from 1 August 2012.
(3) The Treasury may by order made by Statutory Instrument repeal subsection (1), and any such order shall be subject to annulment in pursuance of a resolution of the House of Commons.’.
Miss Smith: I share the concerns that many have raised about driving, the cost of living, and the challenges of running a business. Although the cost of fuelling a vehicle has recently eased as global oil prices have fallen, it is still a very important part of the overall cost of living. That is why the Government have announced that we will provide further support to motorists regarding the cost of fuel by deferring the 3p per litre duty increase that was planned for this August until January next year. That will mean that this Government will have kept fuel duty frozen for a total of 21 months since our decision in the Budget 2011 to cut fuel duty by 1p per litre.
Robert Halfon (Harlow) (Con):
I am grateful to the Government for moving on this issue, as will be many motorists across the country. Will my hon. Friend confirm
2 July 2012 : Column 634
that, because of what the Government have done, fuel duty will be 10p lower than it would have been if we had followed Labour’s plans?
Miss Smith: I shall certainly confirm that. It is testament to the repeated action that this Government have taken to support motorists that that is indeed the case.
Sarah Newton (Truro and Falmouth) (Con): Does my hon. Friend agree that this reduction in fuel duty is vital not only for motorists but for small businesses such as those in Cornwall that have long distances to take their goods to market, and that it shows that this Government are listening and are on the side of hard-working families and small businesses?
Miss Smith: I am grateful to my hon. Friend. She is not only in fine fettle, as she is standing without crutches, but rightly points to the effect that we know this will have on households and businesses.
Mr Alan Reid (Argyll and Bute) (LD): I, too, welcome the decision. This Government are certainly on the side of rural motorists. Will my hon. Friend confirm that as well as fuel duty on the mainland being 10p a litre lower than it would have been under Labour’s plans, on the islands it is 15p a litre a lower thanks to the Government’s adopting the island fuel discount—a policy that Labour refused to adopt?
Miss Smith: I am pleased to confirm that. I am glad to hear my hon. Friend’s welcome for the scheme on behalf of his constituents and others in rural areas where we are piloting it.
Julie Hilling (Bolton West) (Lab): Like other Members, I welcome the Government’s U-turn on petrol tax—another U-turn on the omnishambles of the Budget—but does the hon. Lady recognise that the increase in VAT means that the cost of petrol has increased during the time of this Government, and not decreased as one might imagine?
Miss Smith: I shall say two things in response to that. First, as a result of all the actions that this Government have taken, including what we have had to do on VAT, the price of petrol and diesel at the pumps is still lower than it would have been under Labour—whose Members are, on the whole, absent today. Secondly, the decision that we are legislating for today combines our determination to help families with the necessity of keeping Britain safe in the global storm and with our credible plan to deal with the country’s debts.
Robert Halfon: Does my hon. Friend agree that the Opposition’s support for a cut in VAT is rather a misnomer, because not only would it cost £12 billion, but the vast majority of businesses who need to get their petrol prices down do not pay VAT?
6 pm
Miss Smith: My hon. Friend is an ardent voice on behalf of small businesses in his constituency and elsewhere. He is right to point to the nuances in the costs of running a business.
2 July 2012 : Column 635
Deferring the August rise will cost about £550 million this year. We will finance that through greater than expected savings in Government spending. That will avoid increasing the national debt, which is vital to our country’s well-being. That is our tough but fair plan to deal with Britain’s debts. Our actions to reduce the deficit and to rebuild the economy have secured interest rates at near record lows, benefiting businesses and families and keeping mortgage rates low.
Dr Thérèse Coffey (Suffolk Coastal) (Con): This morning, my hon. Friend and I were together on the train pressing the case for investment in rail. Are the Government, of whom she is a proud member, not showing the right example to the country by taking their foot off the accelerator and driving more economically? Will this measure bring the growth that the FairFuelUK campaign said it would?
Miss Smith: This morning, I was indeed speaking in my constituency capacity about my wish that our regional economy will not be left in the sidings. The same is true of our national economy. We must ensure that Britain remains competitive. Our actions, which are part of a credible national plan, have kept Britain safe from the global turmoil around us. It is within that plan that we have listened and acted.
New clause 1 will defer the fuel duty increase that was planned on 1 August this year to 1 January 2013. As the Chancellor said last week, and as my hon. Friend the Member for Harlow (Robert Halfon) has noted, this decision means that pump prices are 10p a litre cheaper than they would have been if we had not abolished the previous Government’s fuel duty escalator. It is a real help for families, businesses and motorists across the country. The AA has said that it is
“great news for all motorists”.
The RAC Foundation has said that it is
“good news for drivers and good news for the country.”
The Government have taken action upon action to support motorists and have done more than any other Government. We have avoided the two years’ worth of increases planned by the previous Government. More than that, last year we abolished Labour’s fuel duty escalator, which increased fuel duty by above inflation every year until 2013. We have successively cancelled and deferred duty to deliver the longest period of unchanged fuel duty for more than five years. As a result of that repeated action, average pump prices are now approximately 10p a litre lower than they would have been. To put that in context, a typical Ford Focus driver will be £159 better off and an average haulier £4,900 better off between 2011 and 2013 than they would have been under the plans left by the previous Government.
This support for motorists is part of our broader plan of helping with the cost of living and promoting business growth, while reducing the deficit and rebalancing the economy. That has included freezing council tax and raising the personal allowance.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC):
I, too, congratulate the Government on this decision, not least because it saves me from making a speech on an amendment that we had planned to table on this
2 July 2012 : Column 636
issue. Considering the gloating of the official Opposition last week, does the Minister recall the Labour party at any stage on Second Reading or in Committee making the case for this 3p cut?
Miss Smith: The hon. Gentleman has given me the perfect opportunity to note that, regrettably, the official Opposition’s Benches are astoundingly empty. The stance that they took last week showed astounding political opportunism, given that they had 13 years to support the motorists but did not, and that they left behind a depth charge of increases. I regret that I shall not be able to hear him put the case in his own words. Perhaps I may explain to him more of the actions that we are taking to support the motorist and businesses.
Businesses are seeing successive cuts in corporation tax, coupled with an extended business rates holiday for small businesses until April 2013. In passing, I should note that the high pump prices of recent years are causing real difficulties in ensuring that motoring remains affordable. However, pump prices have fallen by nearly 11p a litre since their peak in April. That said, at a time when money is tight, deferring the fuel duty increase from August to January will provide further support to motorists.
This is a Government who not only have a credible plan to support motorists, but are dealing with the debts created by the previous Government. A responsible Government are able to listen to, consider and respond to the concerns of motorists. Compared with the plans that we inherited, we have cut fuel duty, cancelled the previous Government’s escalator and introduced a fair fuel stabiliser.
I understand that we will also be discussing what the Opposition have planned for motorists, perhaps in some detail. I also look forward to hearing from my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) on biodiesels. I look forward to responding on those matters. This Government are on the side of motorists and our measures will support them when times are tight.
Sheila Gilmore (Edinburgh East) (Lab): On Second Reading, we were given to understand that the fuel duty rise was essential to the Government’s proposals and a key piece of the jigsaw in resolving the deficit. For many weeks, that has been the clear message from the Government. I understand that Government Back Benchers were exhorted to write to their constituents to tell them why—regrettably, no doubt—the rise would have to happen and there was no alternative. It therefore comes as rather a surprise to hear that it is not quite so essential to the Government’s plans after all, but is a dispensable piece of the jigsaw.
This is probably the most expensive of the U-turns that have been performed over the past few weeks. It dwarfs many of the others in terms of revenue forgone. It is all very well for the Minister to tell us that it has happened because we have a listening Government, but they must also listen to what they have been saying. On that basis, they must explain how they have come to this position.
Lyn Brown (West Ham) (Lab): Does my hon. Friend have any idea how much the U-turns have cost collectively so far?
2 July 2012 : Column 637
Sheila Gilmore: I understand that it is in the region of £725 million. That is quite a large hole in what was presented in March—it seems a long time ago now—as a balanced Budget. That was one of the Chancellor’s key themes in his Budget speech. We now appear to be faced with something of an unbalanced Budget.
Mr Reid: Because the Government have made savings in other areas, the Budget is still balanced. The hon. Lady was elected on a manifesto that supported the fuel duty escalator. When did she change her mind?
Sheila Gilmore: It is clear from the pattern of fuel duty rises under the last Government that such things were never set in stone and were not intended to be so. One has to look at the situation with which one is faced.
Miss Chloe Smith: The hon. Lady has a touching faith in the previous Government’s ability to stick to a course. Does she support Opposition new clause 11, which has a price tag of about three times as much as the new clause that she is attacking?
Sheila Gilmore: We have very different views about how to stimulate and boost the economy. The Government have run demand into the ground, for example by raising VAT to 20%, which has had an effect on fuel. Ministers are reluctant to talk about that in any detail. It has to be remembered that prior to the election, the Conservatives were going around telling us that there would be no increase in VAT, and their coalition partners liked to stand in front of huge billboards saying that they feared there would be a VAT bombshell but were completely against it.
Mr Jim Cunningham (Coventry South) (Lab): Has my hon. Friend noticed that oil and petrol prices have dropped by 28% over the past three months? That is not reflected at the petrol pumps, and surely the Government should do something about that.
Sheila Gilmore: My hon. Friend makes an important point. When the raw product goes up in price, the pump price goes up very quickly, but a downward turn seems to take a great deal longer to reach the consumer. We have made similar arguments about other energy price rises.
The hon. Member for Argyll and Bute (Mr Reid) suggested that it was all right for the Government to make U-turns such as this, because they had found savings elsewhere. That is nice to know, but if such savings could be found so easily, maybe the Government could have avoided some of the other things they have done. After all, we spent a lot of time in the Budget debate and before talking about the plight of couples who were losing tax credits because they were deemed not to be working enough hours. That change affects a small number of people—from memory, I believe it is about 500,000. We were told that if it were not implemented, it would cost the Treasury £500 million. We were told that it was impossible to go back on that decision, because money was so tight.
Like all Governments, the current Government are making choices. In the past two years, they have said that certain things have to be done and are not choices.
2 July 2012 : Column 638
They have said that they have been forced into them. However, all Governments make choices—that is part of governing.
Julie Hilling: Does my hon. Friend recognise that the Government have chosen not to do a U-turn on the granny tax, which is aimed at the people who are least able to pay, but continue to reduce the top rate of tax?
Sheila Gilmore: Indeed, and a lot of people would be glad to see the Government make U-turns in other areas, and in fact in their entire economic policy. It has been misguided, and the Opposition were clear from the start that it was the wrong way to reduce the deficit.
Lyn Brown: Does my hon. Friend agree that one of the biggest problems last week was that we were not told where the new money had come from to fund the Government’s U-turns? Does that not show the Conservative party’s economic incompetence? It is very worrying.
Sheila Gilmore: That is a very important point. We had a semi-answer from the Government saying that savings had been found, but they seem to be somewhat mysterious savings. We had not heard about them before, and we still do not really know where they have been found.
Miss Chloe Smith: Has the hon. Lady not read the Office for Budget Responsibility’s forecasts or the reports identifying about £4 billion of underspend in each of the past four years?
Sheila Gilmore: If the Economic Secretary is so clear that there is money to be used, I once again have to press her on some of the choices that the Government have chosen not to make. From what she has just said, it seems to me that there may be scope for her to reconsider some other matters.
I have a constituent whose employer, a big national department store, recently told her that she had to go completely flexible with her working hours. That meant that her shifts could vary from day to day. When she said that that could be very difficult for her, because she had child care arrangements to make and could not simply change things at short notice, she was told that she could reduce her current 18-hour week to a 12-hour week. We are told that such people should easily be able to find more hours of work to get around the problem of having their tax credits removed. If there is so much underspend, perhaps the Government should think beyond their proposals on fuel duty. It does not give us a great deal of confidence when they are adamant that they are not going to change things, but then do so before thinking about where they are going to find the money.
6.15 pm
Mr Iain McKenzie (Inverclyde) (Lab): My hon. Friend rightly identifies the fact that the Government have found additional money all of a sudden to fund their U-turns. Does she think that that money could have been used to create employment in areas with significant unemployment levels?
2 July 2012 : Column 639
Sheila Gilmore: It could, and there could also have been significant investment in the building of affordable housing, which is dear to my heart. That would not just give people houses but create jobs and apprenticeships and boost the local economy. The Government could have done that if they had really wanted a Budget for growth. Our criticism of the Budget was that however balanced it may have seemed—it now turns out not to have been quite so carefully balanced as we were told—it was not a Budget for growth. Very little was put into building up jobs and growth. Perhaps it was only a practice Budget, although I always thought that was what the autumn statement, which used to be called the pre-Budget report, was for.
David Rutley (Macclesfield) (Con): Fiscal responsibility is clearly an overriding priority, but does the hon. Lady agree with President Hollande, who recently said that
“national debt is the enemy of the left and the enemy of France”?
It is also the enemy of the United Kingdom.
Sheila Gilmore: National debt is sometimes essential. After all, I seem to recall that it was very much higher at the end of the second world war than it has been at any time since. There were reasons for that, and I believe we finished paying it down only a few years ago. Sometimes, we have debt because we have made essential or useful investment, and of course it is not the same as deficit.
Mr McKenzie: My hon. Friend is making a very good point. We have heard one of the comments of the new President of France, but does she think the Government will agree with his opposition to the austerity measures that have been put in place across Europe?
Sheila Gilmore: I do not dissent from my hon. Friend’s view. The new President’s general intention is indeed to break away from the fixation with austerity measures. That is not the same as saying that we do not want to deal with the deficit. The question is how to do that successfully and ultimately reduce borrowing.
The last Government have been misrepresented as having constantly increased the national debt. That is simply wrong. It was substantially reduced under the Labour Government, but what caused that process to go into reverse—I am not going to say it did not—was the recession and the economic stimulus that was put in to get us out of it. Our view remains that had the policies that were in force between 2008 and 2010 been continued, rather than going into a double-dip recession we would have begun to climb out of the recession.
Julie Hilling: Does my hon. Friend agree that we had growth in the British economy at the time of the general election, but we now have a recession made totally in Downing street? If the Government have such a big underspend, why on earth do we face a double-dip recession, and why are ordinary people suffering so much at their hands?
Madam Deputy Speaker (Dawn Primarolo): Order. In replying to that intervention, I hope the hon. Lady returns to the subject of the debate, which is fuel duties.
2 July 2012 : Column 640
Sheila Gilmore: I do not want to dissociate those things—they are linked in lots of ways. Initially, we were told that there were constraints on the Budget, including not postponing the increase in fuel duty. What happens in a few months’ time? The measure is a deferral—we are not forgetting about it for ever—but what financial complexities will that create?
It is heartening that the Government’s motivation seems to be their recognition that people are suffering from a general reduction in their standard of living. As many commentators have pointed out, many working families are experiencing real reductions in disposable incomes such that they have not experienced for many years. That is part of the serious position in which people find themselves. It is good that the Government have understood that and want to act on it, but I would like them to act on some of the other issues that Opposition Members have constantly raised. I want them to understand that people are suffering not just from fuel prices, but from a number of other measures. The Opposition’s five-point plan would have reduced VAT and enabled investment in job creation. Perhaps it is not too late even now for the Government to U-turn on that.
Simon Hughes (Bermondsey and Old Southwark) (LD): I am happy to speak in the debate on new clause 1, which was moved by the Economic Secretary on behalf of the Government; on new clauses 9 and 11, which are in the name of the Labour Opposition team; and on new clause 8, which is in my name.
I support new clause 1. I am not against responsive government—indeed, there is a duty to be responsive in government. I therefore welcome the fact that the Chancellor announced that the Government had heard the concerns of ordinary people, families and businesses that cost of living pressures continue to be difficult on them. The cost of fuel at the pumps affects people in rural areas, but it also affects people in suburban and urban areas, and people running both small businesses and larger firms. For some people, there is an inescapable obligation to drive—they drive for their families and businesses, and in emergencies. Therefore, the price at the pump is a hugely important part of their weekly budget.
People made the case, and the Government, including Treasury Ministers from both parties, first agreed to delay the increase scheduled for earlier in the year until August, and last week announced a further delay until the end of the year. That is welcome. It is fair to say that the announcement came slightly out of the blue and yellow last week—it took a few people by surprise—but it clearly has not been met with opposition from those on the Opposition Benches, because a grand total of six Labour Members, including the Whip, have been present in the Chamber for this debate. There is clearly no great furore at this concession to the needs of the consumers.
Sheila Gilmore: Will the right hon. Gentleman give way?
Simon Hughes: No, I will not give way. The hon. Lady spoke for a very long time, as she often does, and I will not concede. This is a short debate—it goes on only until 7 o’clock—and I want to allow other colleagues to speak.
2 July 2012 : Column 641
I want to make a specific plea on biodiesel. I should declare my interest: as some colleagues know, I sometimes drive a London taxi, which has often been powered by biodiesel bought from Uptown Oil, a firm in my constituency that collects used cooking oil from local firms—a chain of good environmental practice ends up in my cab and other vehicles in south London.
I have had discussions with the Economic Secretary and the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), and I asked colleagues—my hon. Friends the Members for Bristol West (Stephen Williams) and for Redcar (Ian Swales)—to argue the case in Committee last week. We have so far not persuaded the Government to change policy, but I wanted to put the case as to why the industry needs continuing Government attention and to ask that they do not turn their back on the industry, even if they are not willing to concede to my requests now.
Charlie Elphicke (Dover) (Con): I remember a case reported in the papers some while ago. A gentleman in Wales was arrested by customs officials for not paying duty on the cooking oil in his car. He was traced by the smell. Can the right hon. Gentleman confirm that cooking oil fuel no longer smells, and that customs officials should not arrest people found with it in their cars?
Biofuel is produced from waste vegetable oil and collected locally. This has been going on for a century or more—the first diesel engine ran on peanut oil. Colleagues may not know this, but the idea was that biodiesel vehicles would be used by farmers, who could use their crops effectively. The Department for Environment, Food and Rural Affairs is clear that the huge numbers of blockages caused by pouring oil down drains are not a good thing—it is better to put it somewhere else, which costs money for companies and local authorities.
Biodiesel also means that such waste does not go into landfill sites, which produce 40% of our methane emissions and 3% of our country’s greenhouse gas emissions. The product therefore helps us to meet our renewable energy targets. We produced something like 35 million litres of biodiesel from used cooking oil sourced in the UK for road transport two years ago, which meant a carbon saving of 82 million kilograms of CO2.
There are about 30 to 40 producers—not just Uptown Oil in my constituency, but companies all over the UK. They are generally small firms, employing about five to 20 employees. They are confronted by a severely difficult economic situation. We could lose them, which would mean a loss of employment, a loss of revenue to the Government because they pay their taxes, and a loss of the source of the product, which would be a very bad thing.
In April 2012, following a decision by the previous Government, the differential fuel duty on biodiesel was taken away—it was put in place to support the industry—as the system of support across the EU changed to a new one. The derogation was originally meant to end in 2010, but it was extended by two years by the previous Government, because the implementation of the renewable energy directive was delayed—perfectly legally. There was therefore an attempt to ensure that the industry in the UK had continuing support on the basis that when
2 July 2012 : Column 642
such support ended—it was planned to end in spring 2012 —the new renewable transport fuel obligation certificate system would bring in the revenue.
Sadly, that was delayed—it was due to be implemented in December 2010, but in the end, it was implemented in December 2011. The new system has therefore had only a few months to bed in. The problem—bluntly—is that the price of the certificates is nothing like what the industry expected. Let me give a couple of quotes from people on the front line. This is from a firm in Feltham:
“I have found biodiesel road sales fall through the floor since the removal of the tax differential. 80% of my biodiesel sales now are for use as heating oil at a considerably reduced margin and overall volume of sales. I have had to lay-off my production manager and am working 7 days a week just to try to keep the business going.”
Edible Oil Direct Ltd of Rye, East Sussex says:
“We had to keep our prices at the pre budget price. Our On-Road customers who most makeup ‘saves money’ as opposed to the ‘green impact’ stated that if the price was increased in line with mineral they will switch back to mineral.”
Convert2Green of Middlewich, Cheshire says:
“"On average Convert2Green…received last year 20p tax differential and 17p Renewable Transport Fuel Certificate…revenue per certificate i.e. 37 pence per litre. With this, the company made an operating profit of £290k. Currently, the best offer we have for RTFCs up to April 2012 is 7 pence per litre and from April 2012 onwards 10 pence per certificate. At two certificates per litre”—
“we estimate we will get 9 pence per certificate or 18 pence per litre on average. This is a reduction of 19 pence per litre. We sell approximately 3.75 million litres of road fuel per annum. Our profit reduction is £712,500 per annum or £59k per month. This takes us into significant loss. We will have to consider our future.”
Finally, the firm from which I bought my biodiesel, Uptown Oil, just over the bridge in Southwark, says:
“So far it has had a disastrous effect on our sales of Biodiesel for road use....Down 75%. Before the change we were receiving…around 17 pence…and 20p from the government. Now we receive 7p x 2 RTFC so 14 pence. So having increased our price we are worse off by 13 pence a litre. If we were to increase our price by 13 pence our fuel would be marginally more expensive than fossil fuel and sales would virtually cease.”
Those figures speak for themselves.
6.30 pm
According to the Government, the problem is that the estimate of the industry—that the differential will cost the Treasury only about £10 million—is an underestimate, because it has been proved to be so in the past, and that it could be used to subsidise imports and so have an unpredictable outcome and not support business in this country. I hear what the Government say, but compared with the freezing of the general fuel duty this August, which will cost about £500 million, this plea is for a very small subsidy indeed.
I am concerned that if the Government do not respond to the industry’s plight, by the end of the year we might lose it—or most of it—and the revenue from it; there might be a net loss to the Exchequer, because the differentials I want extended for one more period would be far less than the loss; green fuel will lose out; a good recycling product will lose out; and we will regret it. I ask the Minister and her colleagues in the Department for Transport not to let this happen. If it cannot be implemented in this Finance Bill, as I would like, something might need to be done quite soon in this financial year.
2 July 2012 : Column 643
They will accept, I hope, that it would not be good for part of this valuable industry to be lost. We need green jobs, and the Government are promoting them, but they must continue to do so for the road industry.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): It is a pleasure to speak on this important issue. Notwithstanding the fact that few Opposition Members are present, I hope that Government Members will recognise the quality of the contributions, if not their weight in numbers. Neither should anyone believe that the fact that there are relatively few Labour Members in the Chamber suggests a lack of interest or concern about this issue, which matters to every one of our constituents.
Two weeks ago, on 20 June, an article in The Daily Telegraph reported the Prime Minister as warning motorists that there was
“no bottomless pit of money”
to fund a fuel duty cut. We were led to believe that this was dampening speculation that the Treasury would be able to afford the £1.5 billion needed to cancel the extra duty for one year. On 24 June, the Transport Secretary, also in an interview in The Daily Telegraph interestingly, indicated that she was not prepared to lobby the Treasury to delay or abandon the 3p increase in fuel duty due this August. She was also reported as saying that her focus was instead on “challenging” petrol firms to cut the cost of fuel at the pumps to reflect the falling cost of oil globally.
We have no problem with that. Many people are concerned that prices at the pump do not change as the oil price drops, although we know that it is difficult for small independent petrol retailers who have to buy at a particular price and might not have the same volume going through as some of the large supermarkets. We have to understand that. However, the Transport Secretary’s comments chimed perfectly with the words of the Economic Secretary in a recent Westminster Hall debate:
“Calls for the August increase to be scrapped raise an important question, because we would need to consider how to replace the £1.5 billion it would cost. That money would need to come from higher taxes or lower spending elsewhere.”—[Official Report, 23 May 2012; Vol. 545, c. 143WH.]
Every time the issue was raised, then, Ministers made it absolutely clear that if they were to do it, they would have to come up with a way of paying for it—stating the obvious, perhaps, but I shall return to that point later, if I have the opportunity.
It might be a cliché to talk about a week being a long time in politics, but a week after the 20 June article, the shadow Chancellor, in an article for The Sun—that newspaper, like FairFuelUK, had campaigned on the issue—called for the August duty increase to be dropped, and made it clear that he wanted it to be dropped at least until next January. Government Members seemed to suggest that this was opportunistic and done on the spur of the moment or for purely political reasons. Nothing could be further from the truth. We have consistently made it clear that action needs to be taken, especially given that times are tough, with higher VAT generally and prices rising faster than wages.
Everyone knows from their constituents—I am sure that Government Members receive the same representations as Labour Members—that filling up the car is now a big drag on family budgets. Indeed, a nurse in my constituency
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who was not on a high salary told me that filling up her car to get to work cost her so much that it was like having another mortgage.
Charlie Elphicke: The hon. Lady is making heavy weather over who should take the credit and whose idea it was. Is it not great news, first, that prices at the pump are falling, and have been falling in recent weeks, and secondly that the Chancellor has been able to freeze fuel duty?
Cathy Jamieson: I welcome the fact that it will make a difference for constituents, but once again, unfortunately, the way it was done did not suggest a Government who were organised or knew that they were going to make the announcement at that particular time. That is important in the context of how it will be paid for, but I shall come to that.
At the time, we expressed concern that the Chancellor’s Budget plan would mean a 3p hike in fuel duty in just five weeks. Previously, we had called for the Government to cut VAT, which would have knocked 3p a litre off fuel prices, as well as helping hard-pressed household budgets in other ways. We called for the August rise to be dropped because we believed that increasing the fuel duty at this time would have sent the wrong signal to retailers, who would have had to pass every penny on to drivers and put prices up just when they should have been cutting them.
We also made the point that with Britain now in a double-dip recession, the last thing our economy needed was another tax rise adding to the squeeze on household budgets and to the difficulties faced by many small businesses. The Government’s priority should have been to boost the economy, rather than to clobber families, businesses and pensioners just when they were feeling the squeeze the most. That is why we called on the Chancellor to stop the August fuel duty rise, at least until next January. We said that we would put that issue to a vote in Parliament, and that is why we tabled new clause 11.
Mr Jim Cunningham: One question that has never been answered is why the fuel duty decision was not taken in the Budget. Does my hon. Friend agree that the Government rushed into this without thinking about the consequences?
Cathy Jamieson: Indeed; my hon. Friend makes a good point. The way in which the decision was announced, and the aftermath of that announcement, does perhaps suggest that the Government were rushed into this. Also, many Government Back Benchers agreed that the fuel duty increase should be dropped. A number of them made that clear in a good Westminster Hall debate, and others publicly signed up to support the FairFuelUK campaign.
We tried to be helpful. We suspected that Ministers might say—as, indeed, they did—that they could not afford to stop the increase, even though they had found the money to give a tax cut to millionaires. As has been suggested, if there is money available, it ought to go to those whose household budgets are being squeezed the most. It is still astonishing to me that the Government seem intent on punishing families—especially those with children—while at the same time giving a massive tax
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cut to millionaires.
[
Interruption.
]
Government Back Benchers can shake their heads and look at the ceiling, but real people are being affected by this Government’s Budget, and those who are benefiting are the best off.
We suggested some ways of raising the necessary funds. We said that the Government could perhaps consider closing the tax loopholes that the Prime Minister had been condemning, and stopping hundreds of millions of pounds being lost through offshore tax havens. We also suggested that they might want to reverse the pension tax relief boost that they have given to people who are already well off—namely, those earning more than £150,000—and that they might want to use the £500 million underspent in the Olympics budget.
We were not being opportunistic. We understand that difficult decisions have to be made if we are to get the deficit down, and as a responsible Opposition we looked at the figures. We also recognised that, at difficult times in the past, Labour had put up fuel duty. On many occasions, however, we also delayed or cancelled planned fuel duty rises in the light of the circumstances at the time—including at the height of the global financial crisis —because it was the right thing to do to give assistance to the people who needed it most and to ensure that we balanced and grew the economy.
We know—and more and more commentators are agreeing with us—that raising taxes and cutting spending too far and too fast have backfired. Britain has been pushed into a double-dip recession, more people are out of work, and the result is a bigger benefits bill and £150 billion of extra borrowing. That is why we need a fairer and more balanced plan for our economy that will get people back to work, and why we are calling again for the Government to change course and put their efforts into tackling youth unemployment, as well as using the skills of people who have been made redundant, and who have something to give back, to support young people into the jobs market.
We agree with the Government that stopping August’s 3p rise in fuel duty is the right thing to do for British businesses and families. I do not know whether the Prime Minister and the Chancellor have ever had to worry about the cost of filling up their cars in the way that the nurse in my constituency does. She works night shifts, and she does not know whether she will have enough money left at the end of the month to fill up her car so that she can get to work. In response to the hon. Member for Dover (Charlie Elphicke), we are glad that the Government have at last started listening to those who face those difficulties, and we will therefore be supporting the Government tonight on this issue. As I said earlier, however, the manner in which the announcement was made raises a number of questions. It looked as though the issue had brought about the quickest U-turn in politics. The new benchmark for “a long time” in politics is no longer a week but overnight, with changes being made 24 hours after the initial announcement.