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The arguments against borrowing are pathetic. Borrowing has become the fig leaf of the Tory party; it covers any failure, and the failures have been fairly substantial. The Government are obsessed; they have a piggy-banking fear of borrowing. We cannot, however, pay off debt and deflate the economy at the same time.

Where else are we to get this stimulus if not from Government borrowing? Individuals and families are burdened with debt, as are companies. They are not spending; they are trying to pay off debt. Spending and stimulus will come only if the Government borrow more, therefore. There is no problem with that. Interest rates are at record lows, and our credit is good at present, so we can borrow, and we should borrow to spend.

We should borrow to build housing. We should have a big housing drive, and most of it should be public housing for rent. That is what we need, because people cannot afford to buy. We should subsidise jobs if necessary, too. We must borrow, spend and stimulate. That is the only way out.

We need more quantitative easing, which I hope will bring the pound down. The pound is now up 8%. When the Governor of the Bank of England starts saying in his speeches that the pound is too high, it must be horrendously overvalued because no Governor of the Bank of England has said that before. The value of the pound needs to fall, to boost exporting industry.

The Government have been very clever at apportioning blame for the situation the country is in. First, they blamed Labour, although our borrowing was essentially to save the banks, and I am sure the current Government would not have wanted us not to save the banks, would they? If they did not want that, Government Members should say so now. The Government then blamed scroungers lying in bed as the strivers go off to work—that is a very touching picture. They then blamed the size of the benefit bill, which we now gather must be cut still further—although not until 2015, after the election, it should be noted. Now they are blaming the eurozone. It certainly has problems but it must be pointed out that the deflation here and the deflation in the eurozone are both being done for ideological reasons. The ideological reason in Europe is that people do not want to give up on the euro. They cannot afford it to break up, so they have to keep trying to make the unworkable work. That is depressing the European economy, because it is producing deflation in all the Mediterranean economies. That deflation in those weaker economies—the uncompetitive economies—in turn produces a fall in demand for German goods; they cannot afford the BMWs and the Mercs any longer, so Germany becomes depressed. We perhaps feel a touch of schadenfreude about that, but it spreads depression right round Europe.

Our depression is caused by the Chancellor’s ideology and his horror of borrowing. We know how to get out of this recession but for ideological reasons no Government are doing what they should do to get of it. The same is true in the United States, where President Obama is being held back from giving any stimulus and cutting taxes for the mass of the population by the Republican desire to cut taxes only for the wealthy. That has produced the fiscal cliff on which the American economy is now hanging.

So there is no prospect anywhere—no certainty—of expansion, and if there is no possibility of growth and expansion, people and companies are not going to

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invest. All the pious hopes that the hon. Member for Mid Norfolk (George Freeman) has just given us about a resurgence of companies are in vain, because companies will not invest as there is no prospect of profit and no prospect of success. That is the trap we are all in, and we are there because of piggy-banking ideology, ignorance about real economics and simple bad economics in practice, which is killing growth and blighting the lives of our young people.

What do the Government have to offer at the end of this debate? It is pathetic to see that Government Members have not even bothered to turn up to defend the Government; Labour Members have had to do all the attacking and the speaking, because Government Members have had to be dragged in. All the Government have to offer is more debt, more misery, more cuts—£10 billion to £15 billion of them—and more fracking. This Government are one of the best fracking Governments in the world, holding out great hopes that it will provide a new regenerative miracle. That is all they can offer. What they cannot offer is hope, prospects, improvement, growth.

6.27 pm

Mr William Bain (Glasgow North East) (Lab): Regrettably, the economy is on course for a lost decade under this most paradoxical of Chancellors: reckless on one hand, but complacent on the other; a historian, but with precious little grasp of learning its most obvious lessons; and a tactician, but now pursuing the basest strategy of all in politics—attempting to divide and rule by separating those on middle incomes from low-wage Britain, and the poorly paid from the unemployed. His Conservative predecessors, people such as Winston Churchill, Harold Macmillan and Iain Macleod, would surely recoil in horror if they could they see what this Chancellor is doing to the reputation of the party that once proudly stood for the principle of one nation, but does no longer.

There is no social group that this Chancellor will not exploit for perceived political gain, but he stands exposed in this debate: he has no idea of how to regenerate the missing growth in the UK economy; he has no clue on how to undo the damage he is doing to ordinary families’ living standards and slumping real wages; and he has no concept that his policies on welfare represent no more than a throwback to the worst excesses of harsh Victorian Toryism.

Mr Jim Cunningham (Coventry South) (Lab): Does my hon. Friend not recall that when Government Members were in opposition, in the good years, as we might call them, they took the credit, but they will not take the credit for getting us into this mess in the bad years?

Mr Bain: I thank my hon. Friend for that. What I do remember is that when the right hon. Gentleman was shadow Chancellor he backed every single penny of the public spending plans of the Labour Government until the financial crisis hit. Indeed, he had the sauce to call them “eye-wateringly tight” on occasion in this House.

What we see is a Chancellor with a plan aimed at winning marginal seats at the next general election at any cost, but bringing in the cruellest sequence of

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benefit cuts since those of the national Government in 1931 and aiming his harshest measures at the most vulnerable in our society.

Our economy is suffering from the slowest journey out of recession since the 1870s. As a result of the extreme austerity measures that the Chancellor has introduced, it will now take nearly seven years to repair the lost output from this recession, compared with just four years during the great depression in the 1930s. We were told two and a half years ago that a policy of expansionary fiscal contraction would restore confidence, but instead nearly 4% of output has gone, the Chancellor’s supplementary target on debt falling as a share of GDP by the end of this Parliament has gone, and many economists, including at Citigroup, expect the loss of Britain’s triple A credit rating within the next 18 months, the retention of which the Chancellor made his principal criterion of credibility.

No wonder that on The New Yorker website last week, the Chancellor’s policies were dismissed as an example of what the US should avoid—a commitment to the deflationary economics of the 1930s, with the Reaganite trickle-down economics of the 1980s and the even harsher Benthamite economics of the 1830s. Instead of uniting this country in a crusade against long-term and youth unemployment and what Beveridge called the social evil of idleness, this Chancellor wants to divide society by demonising the unemployed in a way that no Government have done since the time of the Poor Law in 1834.

Despite the Bank of England running the loosest monetary policy in several generations and owning three tenths of our national debt through the use of its asset purchase facility, the OBR predicts that joblessness will rise by as much as 340,000 over its forecast period. So we can see that the US economy, having adopted a different policy from the austerity of this Government, yet described by the Nobel laureate Paul Krugman in The New York Times yesterday as

“still, by most measures, deeply depressed”,

has grown nearly three times as fast as the UK, and according to the Congressional Budget Office, will have a deficit next year of 4%, compared with a deficit of 6.1% in this country, and UK debt will be nearly 18% higher in 2015-16 as a share of GDP than that forecast by the OBR in 2010 on the EUROSTAT measure.

Make no mistake, this Chancellor’s policies on taxation, benefits and spending are cutting the incomes of the poorest tenth of households by 2.7%, at a time when the OECD forecasts that we will see barely half the rise in economic demand that will be seen in America next year, and barely a third of that the year after, despite the looming fiscal cliff. Despite the stream of measures unveiled in the autumn statement, the OBR’s verdict on their usefulness was as unerring as it was deadly for the Chancellor’s reputation—just a 0.1% rise in GDP over the next two years, at the same time as the OBR downgraded growth by 1.7% over the same period.

Increasingly, we see that this Chancellor’s legacy will be to turn the long-term prospects of the UK economy into those of a low-wage, low-skill, low-investment and low-productivity economy. On wages, this Government cannot answer positively the question posed by millions of ordinary people across the country: am I better off now than I was four years ago? The Government cannot

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answer positively the question: am I better off now than I was eight years ago? The reality is that with the median wage across the UK having fallen by a shocking 7.9% in real terms in this Chancellor’s first two years in office, and by 7.4% in Scotland, people are worse off now than they were 10 years ago. The Resolution Foundation, in evaluating the effects of the autumn statement, predicted that real wages in 2017 will be no higher than they were in 1999. This Government have made the wrong choices on who to help at a time of poor consumer confidence and weak demand. When they could have helped households with the cost of child care, which is rising in Scotland by 6% a year, boosted female employment and cut inequality, they decided to hurt the poorest 40% of the public harder, as a share of their income, than they will hurt the richest 10%. Lone parents who are in work and on tax credits, of whom there are 115,000 in Scotland, will be worse off by an average of £300 a year by 2015, according to the Resolution Foundation. Three quarters of the cuts in tax credits will hurt precisely the strivers the Chancellor purports to back.

The Chancellor’s legacy on investment is equally dire. Business investment is now lower than the Office for Budget Responsibility forecast a year ago, with manufacturing investment having dropped by 6.7% in the last quarter compared with a year ago. Despite funding for lending, there is precious little evidence that demand for lending in the economy is rising. Net lending by the banks to small and medium-sized businesses fell by a further £2.4 billion in the three months to August this year, according to the Bank of England.

The Government could have changed course in the autumn statement and acted to stem the £20 billion rise in the benefits bill during this Parliament by getting more of the 1,320 long-term jobless in my constituency back to work by cutting VAT and adopting more active labour market policies than their failing Work programme. They could have bolstered construction and housing by building as many as 100,000 homes across the UK by allocating the 4G proceeds to productive use rather than simply trying to cook the books with them. They could have done that, but they did not. They have let the country down, and that is the legacy not only of the Chancellor, but, sadly, of the entire Government.

6.36 pm

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): I start by thanking my hon. Friends who made their maiden speeches. We heard some excellent contributions, which gives the Opposition hope that when we return to government we will have some extremely good people representing their constituencies. In particular, my hon. Friend the Member for Rotherham (Sarah Champion), who made a very dignified speech, brings a wealth of experience from her background in the children’s hospice movement and will be a great asset to Parliament. My hon. Friend the Member for Croydon North (Steve Reed), who has direct experience of local government, and indeed of a co-operative council, will also bring us experience. We heard a passionate speech on the plight of the unemployed from my hon. Friend the Member for Middlesbrough (Andy McDonald), who talked about his home town and the people he represents. I was

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particularly interested in his speech because he mentioned two things that are close to my heart: football and art. It sounds as though I ought to visit Middlesbrough in the not-too-distant future.

I should also mention the speeches made by other right hon. and hon. Members, particularly my right hon. Friends the Members for Edinburgh South West (Mr Darling), for Holborn and St Pancras (Frank Dobson) and for Oldham West and Royton (Mr Meacher), my hon. Friends the Members for Islington South and Finsbury (Emily Thornberry), for Stalybridge and Hyde (Jonathan Reynolds), for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Great Grimsby (Austin Mitchell) and for Glasgow North East (Mr Bain) and the hon. Member for South Down (Ms Ritchie). They all demonstrated why there are problems with what the Chancellor did in the autumn statement, and every one of them took the opportunity to make suggestions, to pick up on the problems and to represent their constituents.

When the Chancellor came to the House last Wednesday to deliver his autumn statement, he was clearly determined to have no repeat of the omnishambles Budget that unravelled last time around. He was determined this time to avoid pasties, churches and caravans. There was a bit of hilarity and laughter on the Government Benches while he delivered his statement, but I must say to the Minister and to Government Members that many millions of people across the UK do not feel much like celebrating or laughing because of the bad news the autumn statement brought them.

The hon. Member for Spelthorne (Kwasi Kwarteng), who is now back in his place, having been removed to the naughty step for a period of time, talked about the gravity of the situation. I am not sure that he really understands the gravity of the situation facing families in my constituency who are struggling on part-time hours and who have seen their working tax credits cut. Nor do I think that Government Members really understand the problems faced by the woman with chronic health problems whom I met recently, who is panicking that she is going to be forced to move house because of the bedroom tax, or the plight of young people desperate to get a start in a real job.

In the middle of what one journalist described last week as “jiggery-pokery” and the hon. Member for South Down spoke of earlier as “sleight of hand”, the harsh reality is that the economy is set to shrink and growth forecasts are downgraded yet again. Over the past two years, the economy has grown by just 0.6% compared with the 4.6% that the Government promised. Nearly 1 million young people are out of work. Prices are forecast to carry on rising faster than wages for at least another year, until 2014. Debt figures are revised upwards this year and for future years. The Government are set to borrow £212 billion more than they planned. The Chancellor has failed on his own fiscal rule and the Prime Minister’s pledge to balance the books by 2015. So much for the Chancellor claiming to be healing the economy.

Last Wednesday the Chancellor made a big song and dance about how borrowing is forecast to fall. As we have heard repeatedly since then—indeed, several hon. Members commented on it today—the only reason he has been able to claim this is that the Government have added the 4G mobile spectrum auction to this year’s

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figures even though Government delays mean that the auction has not happened yet. Without the receipts pencilled in from the 4G sale, borrowing would be forecast to be £2 billion higher this year than last year. Government Front Benchers may try to brush off those figures, but Labour Members are not going to let the Chancellor get away so easily, because they are the real figures that expose the reality behind his failed economic plan. As we have heard in speech after speech, the fact is—I hope that Ministers are listening to this—that the Government’s policies have failed to bring growth back to the economy.

The Chancellor claimed that he would cut the welfare bill, yet it is forecast to be some £13.6 billion higher in this Parliament than he boasted two and a half years ago. Again, rather than face up to reality and change course, he has decided to carry on regardless and instead make hard-working families shoulder the cost of his failure. Speaker after speaker has highlighted how the impact falls on precisely the people the Government say they want to support. Most working-age benefits, including child tax credit and maternity pay, will rise by only 1% for the next three years—a real-terms cut. Child benefit is to go up by only 1% for two years from 2014—another real-terms cut.

We do need to reform and modernise our welfare system. People who can work should work if the jobs are available for them; there should be no ifs or buts about that. However, that is not what the Chancellor is about. He is trying to characterise this as the workers versus the workshy and trying to get the public to believe that it is about the strivers versus the shirkers. That might make for some soundbites but it does not do anything to help the decent people who are out of work through no fault of their own, who are desperate to get a job, who want to pay their way, and who will do everything they possibly can to do so.

As we have heard, six out of 10 households who will be hit by these real-terms cuts to tax credits and benefits are actually in work. The House of Commons Library has shown that the decisions in the autumn statement, together with all the other changes to tax and benefits that take effect in April, mean that a one-earner family on £20,000 a year with two children will lose £279 a year. The Chief Secretary to the Treasury did not seem to recognise those figures when my hon. Friend the Member for Leeds West (Rachel Reeves) spoke earlier, but perhaps the Exchequer Secretary will have something more to say about them.

Not only is this hitting hard-working people and families who are striving to do the right thing, but research from the Library shows that 81% of the revenue from the key additional direct tax, tax credit and benefit changes in the autumn statement will come from women—£867 million of over £1 billion raised. The Chancellor has added a mummy tax to his granny tax. Women are being hit three times harder than men by a Cabinet with three times more men than women—perhaps no surprise there.

We heard a number of excellent contributions this afternoon. Opposition Members spoke about the true cost of the Government’s failed economic policies and the reality behind the measures announced in the autumn statement. The Prime Minister may have once promised that we are all in this together, but given that hard-working, striving families and workers were singled out on the

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same day that the Government gave a £3 billion handout to the richest people in the country, it is clear that his promise has been broken.

Constituents across the length and breadth of the UK may well have given the Chancellor the benefit of the doubt, but many of them are now coming to realise that he is more interested in tax breaks for millionaires than in getting people into real jobs. I suspect that the 6,000-odd people in each Tory constituency who will be affected by that will wake up to the reality and that many of them will not repeat their vote for the Conservative party or, indeed, vote for the Liberal Democrats come the next election.

While the Chancellor is playing games and making the worst-paid workers pay for the costs of his failure, Labour will continue to fight to make sure that the voices of those whom he is hitting hard are heard. Opposition Members are proud to represent the voices of those people—the workers and the strivers. We will keep pushing the Chancellor to change course, to cut VAT temporarily, to bring in a bank bonus tax to fund a job guarantee for young people, genuinely to bring forward infrastructure investment, properly to reform the banking system, to introduce a national insurance contributions holiday scheme for small businesses, and to come up with a real strategy for growth, not just a strategy to cover the cost of failure.

To repeat the words of my right hon. Friend the shadow Chancellor earlier today—I say this to my right hon. Friend the Member for Holborn and St Pancras and others who raised this point—we will look at the Government’s proposed legislation, but if they intend to go ahead with such an unfair hit on middle and lower-income working families while giving a £3 billion top-rate tax cut, we will oppose it.

6.47 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): This has been a passionate and thoughtful debate. I begin by congratulating the three hon. Members who made their maiden speeches this afternoon—all three were of the highest standards. The hon. Member for Rotherham (Sarah Champion) spoke with great pride and passion for her constituency. The hon. Member for Croydon North (Steve Reed) brought his local government expertise to the debate, and his understanding of the area he represents was most impressive. He also spoke movingly about his predecessor, Malcolm Wicks. The hon. Member for Middlesbrough (Andy McDonald), who is the first Middlesbrough-born Labour MP, spoke with great pride about his constituency. I imagine that being the MP for one’s home town must bring a particular pleasure to delivering a maiden speech and representing one’s constituency. He also spoke warmly of his predecessor, Sir Stuart Bell. I congratulate them all and wish them well in the House of Commons. I am sure they will make many further eloquent and passionate speeches from the Opposition Benches over the years ahead.

I also thank a number of my hon. Friends for their contributions. My hon. Friend the Member for Macclesfield (David Rutley) spoke about how it is necessary to get growth in the economy and discussed ways of achieving that. My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) made a strong and persuasive critique of the previous Government’s record and, indeed, of the level of borrowing under them.

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My hon. Friend the Member for Dudley South (Chris Kelly) set out some of the benefits for businesses in the autumn statement, highlighting in particular the corporation tax cuts and the annual investment allowance, which will benefit many west midlands businesses. My hon. Friend the Member for Bristol West (Stephen Williams) made the point that it is right to reduce the deficit, even though it is taking longer than we had envisaged.

My hon. Friend the Member for North Swindon (Justin Tomlinson) welcomed the cancellation of the fuel duty rise, which was due in January, and set out the case for greater tax transparency. He was absolutely right to raise that and this Government are taking steps to ensure that people understand the tax they pay.

My hon. Friend the Member for Burnley (Gordon Birtwistle) spoke about apprenticeships, of which there are 1 million more as a consequence of the Government’s actions. He talked about help for businesses in the north-west, including in the aerospace industry. He also spoke about the annual investment allowance.

My hon. Friend the Member for South Dorset (Richard Drax) made a strong and passionate speech calling for lower taxes. My hon. Friend the Member for Mid Norfolk (George Freeman) set out the steps that the Government are taking to turn around the economy, and drew a parallel with the steps taken by Margaret Thatcher’s Government in the 1970s and 1980s.

I will not go through the list of all the right hon. and hon. Members who contributed to the debate, but I thank them all. In particular, I acknowledge the speech by the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling). As ever, he brought great expertise to these matters. I did not agree with everything he said, but I thought that his was a far better response to the autumn statement than some that we have heard from Opposition Members, not least the shadow Chancellor.

The right hon. Member for Edinburgh South West said that we live in difficult times. When there is clearly major disagreement between the parties in government and the Opposition about the correct response to the difficulties, we should all acknowledge that growth is lower than we would like it to be and lower than the independent Office for Budget Responsibility anticipated, but we should also acknowledge that there are encouraging factors in the economy. We should all welcome the fact that private sector employment has grown significantly in recent months. The fact that the deficit is falling in every year of this Parliament is to be welcomed. It would be regrettable if the Labour party sought to undermine the Office for Budget Responsibility in making its independent assessment of the public finances.

These are clearly difficult times, not just for the UK economy, but elsewhere. Growth in the UK economy next year has been revised down from where we had hoped it would be, but it is still likely to be greater than the growth in Germany, France and the eurozone. The key question is why growth is lower. The analysis of the Office for Budget Responsibility is very clear: it is because of the uncertainties created by the crisis in the eurozone, because commodity prices are rising more than we would have liked and because the damage done to the economy by the crash of 2007-08 was greater than had been realised.

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The answer from the Labour party, essentially, is that we could solve all those problems simply by borrowing more. Very few Labour Members say that explicitly, although the hon. Member for Great Grimsby (Austin Mitchell) was happy to say that that is the right approach. The Labour party says that borrowing is higher than we would like, which it is, but its solution is to borrow more. That makes no sense at all.

It is also not the case that the high level of borrowing that we inherited—a record amount outside wartime—was purely to do with bailing out the banking sector. The shadow Chancellor may not accept this, but the International Monetary Fund tells us that the structural deficit before the crash was 5.2% of GDP—a hugely dangerous level. Any Government who ignored that and failed to address it would be taking the most enormous risk with the country. It is vital that we have fiscal credibility. We could not have gone on as we were. Had we not taken action and gone further than was set out in the plans of the right hon. Member for Edinburgh South West, we would have faced great difficulties. We could not dismiss the risk of the UK being sucked into a sovereign debt crisis, and it would have been complacent of us if we had done so.

The Government have acted to bring the deficit down, but at every step we have been opposed by the Labour party. Most of us did not come into politics to raise VAT, but it was necessary to do that and we also had to take steps to reduce departmental spending—again, that was opposed by the Labour party. We had to reform the welfare system and find £18 billion of cuts, including the introduction of a welfare cap, and we had to make changes to the child benefit system that hit the top 10% or 15% of households. The Labour party opposed all that and, as far as we can see, will not touch a penny of the welfare budget. That is not a great surprise given its record in office. In real terms, the welfare bill increased by 40% in 13 years. Before Labour Members say that that was a response to the crash in 2007-08, half of that increase—20%—occurred before the crash. In the good times the welfare bill was rising out of control.

Kwasi Kwarteng: What does my hon. Friend think about the fact that spending between 1997 and 2007 doubled in nominal terms—it went up more than 50% in real terms—and that the welfare bill more than doubled in that time?

Mr Gauke: My point is that we could not continue in that way. The difficulty with the Labour party’s record is that it believes most problems can be solved by throwing money at them. We have run out of money and cannot afford to do that. That is why we are taking difficult decisions and the welfare uprating will be 1%—we now know that the Labour party will oppose that. We must get welfare spending under control. That measure will save £2 billion, and if one looks at other measures introduced in the autumn statement, one sees that working households—including those in the lowest decile—will gain in 2013.

Sheila Gilmore: Will the Minister give way?

Mr Gauke: I will press on because we are running out of time. If all measures to be introduced next April are taken into account, all working families gain, including

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those in the lowest decile. It is the right thing to do. We have raised the personal allowance yet further and cancelled Labour’s increase in fuel duty next January. Each time the average car is filled up, the motorist will pay £5 less fuel duty than they would have done had we implemented the Labour party’s plans.

As the Prime Minister and Chancellor have said, we face a global race and must make ourselves more competitive. That means moving from current spending to capital spending, which is why we will be spending £9 billion more on capital in this Parliament than the Labour party would have done. Do Labour Members support that switch from current spending to capital spending? That is why we can afford—and why it is necessary—to reduce corporation tax from 28% to 21%. The Labour party allowed our tax position to become uncompetitive.

There is competition for investment. Businesses can choose where they locate and invest. To ensure they choose this country, we need improved infrastructure and to control public spending. We must reform welfare and public services and we need competitive taxes. The Government are prepared to take difficult decisions but the Labour party consistently ducks those decisions and opposes every spending cut and reform. It opposes getting to grips with welfare spending and panders to every group, and the country will recognise that at the next election.

Question put and agreed to.


That this House has considered the matter of the economy.

Business without Debate

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),


That the Machine Games Duty (Exemptions) Order 2012 (S.I., 2012, No. 2898), dated 19 November 2012, a copy of which was laid before this House on 19 November, be approved.—(Mr Swayne.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Prevention of Nuclear Proliferation

That the Financial Restrictions (Iran) Order 2012 (S.I., 2012, No. 2904), dated 20 November 2012, a copy of which was laid before this House on 20 November, be approved.—(Mr Swayne.)

Question agreed to.

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Parliamentary Commission on Banking Standards


That, notwithstanding the Order of this House of 16 July 2012, it be an instruction to the Parliamentary Commission on Banking Standards that it should report on legislative action no later than 19 December 2012.—(Mr Swayne.)

Business of the House


That, at the sitting on Thursday 13 December, notwithstanding paragraph (4) of Standing Order No. 14, the Motion in the name of Mr Andrew Lansley relating to Lay members of the Committee on Standards shall have precedence over the business determined by the Backbench Business Committee.—(Mr Swayne.)


“Innocence of Muslims”

7.1 pm

Alex Cunningham (Stockton North) (Lab): I should like to present a petition on behalf of the chairman of Stockton mosque, Councillor Mohammed Javed. It declares that the petitioners are profoundly concerned about the portrayal of the Islamic faith in the online video “Innocence of Muslims” and calls for it to be banned. The petition is accompanied by a larger one that was presented to my hon. Friend the Member for Hartlepool (Mr Wright) and I at a meeting last month, which was attended by hundreds of local community members from mosques across Teesside. The petition is signed by some 4,000 Teesside residents, mostly Muslims, who are shocked and upset about how their proudly held faith has been affronted in that way—their shock is shared by my hon. Friends the Members for Middlesbrough South and East Cleveland (Tom Blenkinsop) and for Middlesbrough (Andy McDonald). I hope the House will take the strength of feeling into account and stand with the hundreds of thousands of Muslims up and down the country who are calling for the Government to ban this appalling film.

Following is the full text of the petition:

[The Petition of Cllr Mohammed Javed,

Declares that the Petitioner believes that the film, “The Innoncence of Muslims” is disrespectful, offensive and untruthful, and could incite hatred towards Muslims.

The Petitioner therefore requests that the House of Commons urges the Government to take necessary measure to ban the film, and introduce new legislation to prevent Islamophobia and the incitement of religious hatred against Muslims.

And the Petitioners remain, etc.]


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Israel and Palestine

Motion made, and Question proposed, That this House do now adjourn.—(Mr Swayne.)

7.2 pm

Mark Hendrick (Preston) (Lab/Co-op): On 29 November, the United Nations General Assembly voted to upgrade Palestine’s status to non-member observer. The Assembly voted 138 to 9 in favour, with 41 nations abstaining, including the UK. The USA supported Israel and voted against upgrading Palestine’s UN status.

The vote should be welcomed as a symbolic milestone in Palestine’s ambition for statehood, rather than as “unfortunate and counter-productive”, as the US Secretary of State has chosen to describe it. Enhanced UN status brings Palestine closer to the international community, its organisations and values. The Palestinians can now take part in UN debates and potentially join bodies such as the International Criminal Court.

By abstaining in the vote, Britain has made itself less relevant to meaningful engagement in the search for peace. As my right hon. Friend the Member for Paisley and Renfrewshire South (Mr Alexander) warned the Foreign Secretary before the vote:

“Abstention tomorrow would be an abdication of Britain’s responsibilities.”—[Official Report, 28 November 2012; Vol. 554, c. 231.]

The UK did not stand on the side of progress but instead chose the politically expedient option. I would be interested to know what the Minister believes was achieved by the UK abstaining from the vote and how that strengthens the goal of a two-state solution.

In response to the vote, Israel announced on 30 November that it will build 3,000 new housing units in the west bank and East Jerusalem and withhold more than £75 million in customs duties. Israel’s response to the perfectly legal move of upgrading Palestine’s UN status is an illegal move to try and ruin a two-state solution and withhold Palestinian money. The proposed housing units would be built in the Ariel, Elkana, Efrat and Karnei Shomron settlements in the west bank, and in the settlements of Pisgat Ze’ev and Gilo in occupied East Jerusalem, according to the Ministry of Housing and Construction. In the words of the Foreign Secretary, if implemented the plans would make the two-state solution “almost inconceivable”, because in effect they would largely cut off occupied East Jerusalem from the rest of the occupied territories.

Jim Shannon (Strangford) (DUP): It might come as no surprise that I have a slightly different opinion. Does the hon. Gentleman feel that if there is to be peace in the middle east between Palestine and Israel, recognition of the state of Israel has to come first?

Mark Hendrick: Yes, I do. It is important that Hamas recognises Israel and that Israel is there to stay.

Andrew Percy (Brigg and Goole) (Con): It is not just Hamas. In August 2010, the Palestinian Authority’s Minister for Tourism said that the Palestinian goal was to bring about an end to Israel, so senior members of the PA also need to come clean and recognise the state of Israel’s right to exist, do they not?

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Mark Hendrick: I think the hon. Gentleman is referring to one member, not members, of the PA, and it is not the majority view among Palestinians. The majority view is that Israel should exist alongside them, and a two-state solution is what most people would want in Israel and Palestine.

The negative impacts of the E1 plan on the prospects of a viable and independent Palestinian state, with East Jerusalem as its capital, cannot be overestimated. If fully implemented, E1 would deny East Jerusalem its last remaining area for future growth and economic development. In addition, the location of E1 and its massive size would assure Israeli control over the key junction area connecting the northern part of the west bank to the south.

Israeli ambassadors to the UK, France, Sweden, Spain and Denmark were summoned to hear condemnation of the plans, but no further action has been taken, unless the Minister can give me an update.

Graham Jones (Hyndburn) (Lab): Does my hon. Friend agree that it should not be a surprise that the E1 development is going ahead, given that all the infrastructure was in place for quite a while and that this announcement comes on the back of all the roads and other infrastructure that already exists in that area, which is problematic in itself?

Mark Hendrick: The fact is that that infrastructure should not be in place and that Israeli settlements should not be on Palestinian land—full stop. To say that it is a result of previous illegal development, and that there should therefore be future development, is illogical.

Bob Blackman (Harrow East) (Con): Will the hon. Gentleman give way?

Mark Hendrick: I shall give way one final time.

Bob Blackman: I think the key issue of settlements is one of the concerns. Does the hon. Gentleman not accept that Israel has habitually given land for peace in a series of settlement destructions to enable a peaceful solution to take place, and that the biggest obstruction to peace is the failure of the Palestinians to sit down and negotiate with the Israeli Government on a proper peaceful solution for the whole region?

Mark Hendrick: The hon. Gentleman talks about giving land for peace, but the land Israel has given did not belong to it in the first place. The only land of any size that has been given is Gaza, but the Israelis have made it plain that they do not want Gaza; they want as much of the west bank as they can take. While the building of settlements by stealth is going on, Israel claims to want peace but in the meantime does everything it can to build these settlements, which we know will be an obstacle to peace.

Michael Ellis (Northampton North) (Con): Will the hon. Gentleman give way?

Mark Hendrick: I will not, because I want the Minister to have time to respond and I still have quite a bit to say.

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Despite vigorous efforts to win over European countries, only the Czech Republic supported Israel on 29 November. The move signals a widening gulf, not just between Israel and Europe but between Europe and the United States. Israel’s response might well be a bluff, given that bellicose rhetoric will play well with the settlement wing of Likud ahead of the elections on the 22 January. It has been reported that President Obama secured a commitment from Israel not to construct any units in E1 back in May 2009. However, whether or not this announcement is sabre rattling, it remains another chapter in an intractable dispute that is at the heart of geopolitical instability in the region. It is also a further clear sign that Israel is not committed to securing a two-state solution. Israel is continually changing the facts on the ground, which is an obstacle to peace, and at the same time blames the Palestinians for not entering into talks.

Let us remember that settlements are not residential enclaves, but virtual military barracks—fortified castles that separate Palestinians from their schools, places of business and extended communities. They threaten the safety of Palestinians who venture near, consume the lion’s share of the region’s water and prevent normal movement of people and goods. The result is ethnic segregation and discrimination, with Palestinians treated as second-class citizens in the occupied territories that belong to them. There are also more than 1.25 million forgotten non-Jewish citizens of Israel—principally Muslims and Christians—who are treated as third-class citizens. Indeed, both Desmond Tutu and Nelson Mandela have compared Israel’s segregation of Palestine to apartheid.

Michael Ellis: Will the hon. Gentleman give way?

Mark Hendrick: I will not, because I have very little time.

Michael Ellis: Just me.

Mark Hendrick: Everybody says that, but then there are lots of people.

According to the UN Office for the Co-ordination of Humanitarian Affairs, Israeli settlers in the west bank consume approximately six times the water used by Palestinians. There has been a threefold increase in the number of settler housing units in 2012 compared with 2011. The settler population was estimated at more than 520,000 last year. When I first visited Palestine in 2002 the population was 50,000, so there has been a tenfold increase. The UN also estimates that there are around 540 internal checkpoints, roadblocks and other physical obstacles that impede Palestinian movement in the west bank. The demolition of Palestinian structures is on the rise, displacing more than 1,000 people in 2011. The Palestinian economy is also severely constrained by Israeli restrictions on access to markets and natural resources. The annual cost of this has been estimated at €5.2 billion, or 85% of total Palestinian GDP, which has led to the Palestinian Authority being dependent on large amounts of funds from the EU and other foreign donors. Between 1994 and 2011, the EU gave €5 billion to Palestine. However, the impact of Israel’s paralysing constraints on Palestinian access to markets and resources is too great to be covered by aid alone. The PA currently faces an acute budget crisis.

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The real tragedy of this tit-for-tat conflict is the human collateral. The continued loss of lives on both sides is truly appalling. I am concerned that inertia has set in and that the international community has become an observer of a tragedy that is regularly broadcast across the world, with hope of finding a viable resolution lost. Last month Israel launched a major offensive on Gaza —Operation Pillar of Defence, so-called—killing the military commander of Hamas in an air strike. After continuous bombardment, a ceasefire was negotiated between the two sides. The UN confirmed that 158 Palestinians and six Israelis were killed. The fatalities included a pregnant woman carrying twins, an 11-month-old boy and two infants. The reality of these statistics on the ground is truly appalling. The UN Office for the Co-ordination of Humanitarian Affairs reported:

“On 4 November, Israeli forces stationed in an observatory tower shot and killed a 23 year-old mentally-challenged Palestinian…It was not until two hours later, following coordination with the Israeli military, that a Palestinian ambulance was permitted to reach the area”.

The fact remains that this is an uneven conflict. Some 1,377 Palestinians were killed in the Gaza war from 27 December 2008 to 18 January 2009, while 13 Israelis died in the same period. More recently, statistics from the OCHA for casualties and fatalities prior to 6 November show that 71 Palestinians were killed by Israel in the Gaza strip in 2012, with 291 injured. In the same period, 19 Israelis were injured by Palestinian fire from Gaza and none were killed.

I call on the Minister to press the European Union and the Israelis to secure an end to the siege of Gaza. Even our Prime Minister once described Gaza as a prison, so it is incumbent on our Government to demand the freedom of the prisoners who are being subjected to collective punishment because of the sins of a minority. When I questioned the Foreign Secretary on a statement last month, he refused to comment on what he regarded as proportionate. I can only take from that the embarrassment that he might feel if he tried to explain away Israel’s grossly disproportionate response to terrorist rockets fired from Gaza.

I should like briefly to talk about the Quartet’s road map for peace, which was first announced in 2002. My first visit to Israel and Palestine was in 2002, when the road map was a source of hope for peace. At that time there were 50,000 settlers in the Palestine territories; there are now more than 500,000, and peace seems much further away. Ten foreign ministers of the European Union’s Mediterranean states—Bulgaria, Cyprus, Spain, France, Greece, Italy, Malta, Portugal, Romania and Slovenia—sent an open letter to the then Prime Minister, Tony Blair, in 2007, in which they stated unequivocally and without any diplomatic nuance that they believed the road map had failed. The letter stated:

“We might as well admit it straight away”.

It went on to say that this was

“the recognition of a shared failure we can no longer ignore: the ‘road map’ has failed.”

It is clear that there is no credible plan on the table to achieve a two-state solution or peace, and I believe that the UK has a responsibility to work with our European partners to create a credible plan and to use all the instruments at our disposal to bring pressure to bear on Israel. The settlements are illegal under international law, specifically article 49 of the fourth Geneva convention

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and United Nations Security Council resolutions 242 and 338. The United Nations, the International Court of Justice and the overwhelming majority of states share this view. Israel controls the borders, airspace and coastline and has overwhelming control of life in the area.

The establishment of settlements has created a discriminatory two-tier system in the west bank, with settlers enjoying the rights and benefits of Israeli citizenship while the Palestinians are subjected to Israeli military law. This year, I had an opportunity to visit a prison in the west bank, where I observed children as young as 14 being tried by a military court for throwing stones at an Israeli defence force vehicle. One of the children received a two-year prison sentence from military officers who should not have been in a court in Palestine; indeed, that court should not have been on Palestinian land in the west bank.

In a recent report, the former EU Commissioner for External Relations, Hans van den Broek, gives evidence of how EU member states have helped to sustain the Israeli settlements. He stated:

“As settlement construction has continued and accelerated, however, we Europeans have failed to move from words to action. So far we have refrained from deploying our considerable political and economic leverage”.

Will the Minister tell us what the UK Government are doing to apply pressure on Israel to cease settlement building, either bilaterally or multilaterally through the European Union? The Foreign Secretary has made it plain that it is impossible for an EU of 27 countries unanimously to agree to economic sanctions against Israel, but he has yet to say whether he would be in favour of sanctions against Israel in principle if agreement on sanctions could be found across the EU at some stage in the future. I invite the Minister to comment on that point.

The most recent estimate of the value of EU imports from the settlements, provided by the Israeli Government to the World Bank, is €230 million a year. That is approximately 15 times the annual value of EU imports from Palestinians. With more than 4 million Palestinians and over 500,000 Israeli settlers living in the occupied territory, that means that the EU imports over 100 times more per settler than per Palestinian. The most common settlement products sold in Europe are agricultural products such as dates, citrus fruits and herbs, and manufactured products including cosmetics, carbonation devices, plastics, textile products and toys. Despite its firm position that the settlements are not part of Israel, Europe has been accepting imports of those settlements’ products with the origin designated as Israel. I believe that the UK Government should lobby the EU member states to adopt our own policy of consumer labelling for all settlement products and also for manufactured goods. Beyond the trade in settlement goods, some European-owned companies have invested in settlements and related infrastructure or are providing services to them. Examples that have been reported include G4S.

Adding to the contradictions at the heart of the EU’s policy towards Israel’s illegal settlements, the EU has failed fully to exclude settlements from the benefits of its co-operation programmes and bilateral agreements with Israel. In several cases, EU public funds for research and development have been used directly to support

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activities in settlements. The newly ratified EU-Israel agreement on conformity assessment and acceptance of industrial products is an example of the EU’s failure to insist on a firm distinction between Israel and the illegal settlements. The Government need to raise this with the European Commission. At the heart of the UK’s policy towards Israel is the contradiction between recognising that the settlements are illegal, running counter to achieving a two-state solution, and our continuing to trade with the region through the EU. I would be grateful if the Minister could share with the House any updates on recent developments in the political situation in Israel and Palestine.

I also want to press the Minister to assure me that his Department will consider the following proposals for action against inertia: the suspension of appropriate strategic dialogue meetings with Israel to show that the UK is prepared to act in opposition to Israel’s settlement policy; the use of Government advice to discourage businesses from purchasing settlement goods and from all other commercial and investment links with settlements; a ban on the imports of settlement products, as called for by Ireland; the championing of the exclusion of all settlement products in the EU and European Free Trade Association from preferential market access by insisting that Israel starts designating the origin of settlement products other than by “Israel”; the exclusion of settlements from bilateral agreements and co-operation instruments with Israel by means of explicit legal provisions and safeguards; the removal of organisations’ funding settlements from tax deduction systems, as happens in Norway; the prevention of financial transactions to settlements and related activities by means of applying restrictive measures as a more comprehensive approach; the issuing of guidelines for European tour operators to prevent support for settlement businesses; and no longer selling UK-supplied components that can be used in the conflict.

As I have said, there is tragic complacency in the international community and the UK about the latest developments in the Palestine-Israel conflict and an observable lack of commitment from the key players towards securing a two-state solution. I believe that the UK has an important role to play and we should not underestimate our influence, particularly in Europe, in leveraging more political and, more important, economic pressure on Israel. That will require moral and political leadership and action, but we should not shy away from that and I urge the Minister to use his office to promote peace in the region by pushing for a two-state solution.

7.21 pm

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mark Simmonds): I congratulate the hon. Member for Preston (Mark Hendrick) on securing this important debate and apologise on behalf of my colleague the Under-Secretary of State for Foreign and Commonwealth Affairs, the hon. Member for North East Bedfordshire (Alistair Burt), who has responsibility for the middle east and is, I am afraid, out of the country on Foreign Office business.

Right at the beginning of my speech, I want to contradict the hon. Gentleman’s view that there is complacency at the heart of the international community and in the UK Government. I can assure him that there is no complacency at all. Indeed, the UK worked intensively

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to support Egypt and the United States in facilitating the negotiations to stop the conflict. The UK is continuing to provide international development support both to the Palestinian Authority and in Gaza, where it is providing health and social services to the population. That help is available for as long as it is required.

I also want to make it clear that the settlements that the Israelis have built and are proposing are condemned by us. Settlements are illegal under international law and undermine the possibility of a two-state solution to the Israel-Palestine conflict and those working for a sustainable peace. We look to Israel to take all necessary steps to prevent settlement construction.

The Government’s central objective is to ensure a rapid return to credible negotiations in order finally to achieve a two-state solution, which I believe all Members of this House want to see, irrespective of which side of the debate they are on. That has been and will continue to be the guiding principle that determines our policy on this issue. We firmly support a negotiated settlement leading to a safe and secure Israel alongside a viable and sovereign Palestinian state based on 1967 borders with agreed land swaps, Jerusalem as the shared capital of both states and a just, fair and agreed settlement for refugees. That is the only way to secure a sustainable end to the conflict and it has wide support in this House and across the international community. We strongly believe that achieving such a solution is firmly in the interests of the Israelis, the Palestinians and the wider region.

I have to acknowledge, however, that we are gravely concerned about the dangerous impasse in the peace process, particularly over the last two years. We believe that the window to a two-state solution is rapidly closing. That is why we took the stance we did on the Palestinian resolution at the UN General Assembly, which was guided by the principle of how to create the right environment for a swift return to talks and the strongest possible foundations for the peace process.

In support of that principle and objective, we sought a commitment from the Palestinian leadership immediately to return to negotiations—without preconditions. This was the essential answer to the charge that by moving the resolution, the Palestinians were taking a path away from negotiations. We also sought a reassurance from the Palestinian leadership that it would not immediately pursue action in the UN agencies and the International Criminal Court. Our country, the UK, is a strong supporter of international justice and the International Criminal Court, and we would ultimately like to see a Palestinian state represented throughout all the organs of the United Nations. However, we judge that if the Palestinians were to build on this resolution by pursuing ICC jurisdiction over the occupied territories at this stage, it could make virtually impossible a swift return to negotiations, which is what we all want to see.

Mark Hendrick: I thank the Minister for his generosity in giving way. First, what is the point of upgrading Palestine’s status if it does not get the benefits of an upgrade? Secondly, if settlements continue as they are, it is unlikely that there will ever be meaningful discussions. Thirdly—I have forgotten the third point.

Mark Simmonds: As this is the hon. Gentleman’s debate, I will allow him to intervene again if he remembers his third point.

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I understand the points he made. What we have to do is to look forward to try to bring together all the respective parties that are interested in trying to find a satisfactory two-state solution. As part of that, a Palestinian state will, I hope, be a full member of the United Nations at some point in the future.

Mark Hendrick: My third point is that a peace process has been mentioned, but there is not really a peace process to speak of at the moment. All we had were meetings convened by the Egyptians to try to stop the conflict in Gaza. We would all like to see a peace process continue and the Minister agrees with me about a two-state solution, but there is just nothing happening on the ground.

Mark Simmonds: If the hon. Gentleman will be patient, I will come on, time permitting, to exactly what we are doing to try to stimulate, encourage and facilitate the peace process and get it back on track. It is not true, however, to say that nothing is happening. There are, for example, ongoing talks chaired by the Egyptians between the Palestinians and the Israelis, albeit not directly as the two sides are in separate rooms. The two key elements coming out of that are, first, the need for Israel to ease the restrictions on Gaza, particularly so that economic activity can take place; and, secondly, the need for Egypt to tackle the arms smuggling into the Sinai, which is Israel’s main concern about the rockets that are going into it.

We engaged intensively with the Palestinians before the vote in the General Assembly, and in advance of it we urged Israel to avoid reacting in a way that would undermine the peace process and to return to the negotiations. We made it absolutely clear that we would not support a reaction that sidelined President Abbas or risked the collapse of the Palestinian Authority. We have made it very clear to the Israeli Government that their decision to build 3,000 new housing units on the west bank and in East Jerusalem, to unfreeze the development of the area known as E1 on the west bank and to withhold tax revenue from the Palestinian Authority is not acceptable. The settlements plan in particular has the potential to alter the situation on the ground on a scale that threatens the viability of a two-state solution.

Michael Ellis: Does the Minister agree with me that provocative actions on both sides is unhelpful in such a volatile situation, and that it is particularly provocative of the Palestinians to have involved or threatened to involve the ICC in this context because that is clearly not going to advance peace on both sides? Does he agree that Israel has a right to protect its citizens?

Mark Simmonds: I certainly agree that Israel has a right to peace and security, and a right to protect its citizens from rocket attacks, which were extremely prevalent during the fortnight leading up to the escalation of the conflict in Gaza. However, what the international community and the House need to focus on is how we are to get the Palestinians and the Israelis back around the negotiating table, without preconditions, to find a satisfactory, lasting solution to the conflict that has dogged that part of the world for so many years.

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Graham Jones: I am grateful to the Minister for giving way, as he has not much time left. When will we reach a point when the two-state solution is dead and a one-state solution becomes a viable option?

Mark Simmonds: I do not think that we are there yet, but, as I said earlier, I think that the door is beginning to close on the realistic possibility of a two-state solution. That is why it is essential for the international community to act now, and essential for the United States in particular to engage with the peace process following the vote in the UN General Assembly. My right hon. Friend the Foreign Secretary has had a series of discussions with the United States Administration in an attempt to persuade them to become seriously engaged with the peace process, and they are doing that.

The hon. Member for Preston asked what we were doing with our European Union partners. We have had

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a series of meetings in the European Union in which there has been collective agreement on the necessity to push further for EU concerted action to try to bring the parties together. We need to ensure that not only the EU but the UN is engaged in the process, alongside the United States. The UK’s position, however, has been absolutely clear. We will engage with any Palestinian Government who show, through their words and actions, that they are committed to the principles set out by President Abbas in Cairo.

I hope that Members will forgive me for not saying more. I am running out of time. I very much hope that the House will continue to engage with this—

7.32 pm

House adjourned without Question put (Standing Order No. 9(7)).