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Andrew Stephenson (Pendle) (Con): On Sunday, I was present for the unveiling of a new defibrillator on the outside wall of the Bay Horse Inn, a pub in the village of Roughlee. May we have a debate on the excellent North West ambulance service “Cardiac Smart” campaign, which aims to improve survival rates among those who experience out-of-hospital cardiac arrests?
Chris Grayling: I pay tribute to my hon. Friend, who is one of two Members who are volunteer responders. I commend him for his role in that extremely important work. I also commend his local ambulance service for what it is doing, which is enormously important. Effective first response and the presence of defibrillators can make the difference between life and death. The Government take it very seriously, and we are therefore providing additional funds for more defibrillators around the country to try to save lives.
Andrew Gwynne (Denton and Reddish) (Lab): In the early hours of Sunday morning, 21-year-old Dominic Doyle was stabbed in Denton. So far, five people have been arrested and charged. May we have a statement from the Home Secretary on what more the Government can do to tackle the scourge of knife crime?
Chris Grayling: Any stabbing is both unacceptable and tragic for those involved. It would not be right for me to comment on the specific case because it is under investigation, but, by chance, the Home Secretary is sitting on the Bench near me and will have heard the hon. Gentleman’s comments. I know that she will choose to respond in due course when she can, given that the matter is currently being investigated.
Mark Spencer (Sherwood) (Con): The loss of a family pet is a painful process, but it is amplified when the loss of that pet is caused by malicious poisoning by a neighbour. May we have an urgent debate on sentencing for the crime of poisoning animals and on animal welfare issues?
Chris Grayling: My hon. Friend has obviously experienced a shocking circumstance in his constituency. These are dreadful acts, and of course it is right and proper for them to be dealt with by the full force of the law. As I said earlier, the Home Secretary is sitting next to me, and I am sure that she heard what my hon. Friend has said.
Bob Blackman (Harrow East) (Con): In the last Parliament, the other place passed unwanted, ill-thought-out laws on caste discrimination, causing a great deal of concern in the Hindu community. The Government have said that they do not intend to enact those unwanted laws. May we have a statement on when the Government will repeal them?
Chris Grayling: I understand my hon. Friend’s concern, and I know that the matter has greatly concerned the community in his constituency. I will ensure that those concerns are drawn to the attention of the Department for Communities and Local Government, and I will ask the Department to respond to him.
Mr David Burrowes (Enfield, Southgate) (Con):
Enfield’s Labour council is putting our green belt at risk by buying up farmland such as Sloemans Farm. May we
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have a statement that will make it clear that Enfield’s green belt is safe in the Conservative Government’s hands?
Chris Grayling: During the general election campaign, the Prime Minister made some strong commitments in relation to the green belt. I can reassure the hon. Gentleman that, regardless of who owns the land, green belt provisions will still apply. The fact that his local council has decided to buy land does not mean that its decision will be given the go-ahead by the Planning Inspectorate or that it will be able legally to develop the land unless it is appropriate for it to do so.
Jason McCartney (Colne Valley) (Con): Will the Leader of the House join me in passing his best wishes to those who were injured in Monday’s horrific crash on the M62, which closed part of the motorway for 20 hours? May we have an urgent debate on trans-Pennine motorway links, so that we can discuss congestion, alternative routes and new exits for the M62?
Chris Grayling: Our sympathies go out to everyone involved. We wish those who were injured a speedy recovery and commend all the members of the emergency services. Our firefighters cut people out of crashed cars, and our paramedics save lives. They do a fantastic job for all of us, as they clearly did in this instance. I will ensure that my hon. Friend’s concerns are drawn to the attention of the Transport Secretary, but he may also wish to consider applying for an Adjournment debate.
Craig Williams (Cardiff North) (Con): Will the Leader of the House afford the House a statement on the Cardiff city deal? The Secretary of State for Wales is meeting 10 local authority leaders today to bring a consensus together in south Wales, and this is very important for the south Wales economy.
Chris Grayling: A lot of work has been put into this, and I hope a successful resolution will be reached. I encourage my hon. Friend to talk directly to the Secretary of State about this matter, but I will make sure his concerns and wishes are passed on.
Stephen Phillips (Sleaford and North Hykeham) (Con): The sustainable development goals are due to be adopted in New York in September and the House has not yet had a proper opportunity to debate them. Will the Leader of the House make time available on 25 June, when the Government have extra time, to permit that debate to take place?
Chris Grayling: I am very concerned to ensure the House has a proper opportunity to debate matters related not simply to aid and international development but to the challenges we face around the world, and I give my hon. and learned Friend a commitment that I will work to ensure there is an early chance to do so.
Rehman Chishti (Gillingham and Rainham) (Con): Neuroblastoma is a rare aggressive cancer affecting just 100 children a year in the United Kingdom, including Ruby Laura Young in my constituency, a two-year-old who is battling to save her life. May we have an urgent debate on the assistance available to all those suffering from this disease?
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Chris Grayling: I absolutely understand the concerns my hon. Friend raises; a little boy in my constituency, Adam Bird, died four years ago as a result of this dreadful disease. There is an opportunity next week in Westminster Hall to raise and debate this issue. I know the Health Secretary will be listening carefully because when children are affected in this terrible way it is a matter of concern to us all.
James Morris (Halesowen and Rowley Regis) (Con): May we have a debate into the damning Ofsted report into the inadequacies of Sandwell children’s services, which was published last week and points to failures of leadership over a long period of time and a failure to protect the most vulnerable children in Sandwell? May we have a debate to see what the Government can do?
Chris Grayling: My hon. Friend is right to be concerned when a local authority appears unable to address properly child safeguarding issues. As we all know, we have seen terrible events in other parts of the country where this has happened. One would not wish to see it happen in Sandwell. My hon. Friend is absolutely right to raise the issue. I suggest that he come to the House on Monday to raise it directly with the Education Secretary and he may also, depending on the context of the debate, have an opportunity the following week to do the same in the debate on the Education and Adoption Bill.
Andrew Bridgen (North West Leicestershire) (Con): May we have a statement from the Government on the progress of the Perry review into the decriminalisation of non-payment of the TV licence and any indication of when the review will be completed and available to this House?
Chris Grayling: The review is due to be completed in the next few weeks. I know my right hon. Friend the Culture Secretary will wish to update the House as soon as possible after that.
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Jeremy Lefroy (Stafford) (Con): May we have a debate on the difficult situation many people, including in my constituency, find themselves in when county court judgments laid against them for non-payment of costs are made if solicitors offering no win, no fee arrangements and their insurers go bust?
Chris Grayling: I have not previously come across that issue even in my previous role in the Justice Department. It is clearly worth raising directly with Ministers. I suggest my hon. Friend looks to bring it up in an Adjournment debate.
Mr David Nuttall (Bury North) (Con): May we have a debate on what the Government can do to make life easier for small businesses by cutting red tape? In the last Parliament, we had the one-in, one-out rule, then the one-in, two-out rule. Now that the Government are not constrained by the Liberal Democrats, surely we can have one in, three out, four out or even five out?
Chris Grayling: I absolutely agree with my hon. Friend. I cannot promise whether it will be one in, three out, four out or five out, but I can promise him that my right hon. Friend the Business Secretary has plans to save £10 billion in costs by reducing red tape during this Parliament, which will make a real difference to business.
Martin Vickers (Cleethorpes) (Con): The Leader of the House will recall his recent visit to my constituency, when we met an active neighbourhood watch group. These are vital organisations up and down the country. May I suggest this might be a useful topic for discussion in the general debate he has planned for a fortnight today?
Chris Grayling: I was very impressed by the work I saw when I visited my hon. Friend’s constituency. Our country depends on people who are prepared to get involved in their communities. They can make a real difference. That is clearly what is happening in his constituency. I note his request.
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Anderson Report
11.39 am
The Secretary of State for the Home Department (Mrs Theresa May): With permission, Mr Speaker, I would like to make a statement on the publication of the Anderson report and the parliamentary consideration of investigatory powers. As the House will know, it is this Government’s intention to bring forward legislation relating to the security, intelligence and law enforcement agencies’ use of investigatory powers and to have that legislation enacted before the sunset provision in the Data Retention and Investigatory Powers Act 2014 takes effect on 31 December 2016.
In 2014, the Government asked the independent reviewer of terrorism legislation, David Anderson QC, to conduct a review of the operation and regulation of law enforcement and agency investigatory powers, with specific reference to the interception of communications and the separate issue of communications data. David Anderson has completed that review, and this morning my right hon. Friend the Prime Minister made a written ministerial statement to lay that report before the House.
The report makes 124 recommendations, covering sensitive intelligence capabilities, and it extends to more than 300 pages. Following careful consideration by the Government and the security and intelligence agencies, I can confirm that no redactions have been made to the report prior to publication. I would like to put on record my, and the Government’s, thanks to David Anderson for his thoroughness and dedication in undertaking this important work.
As the report highlights, there is a range of threats against the UK and its interests from terrorism, both at home and overseas, to cyber-attacks from criminals. Many groups, not just the Government, have a role to play in ensuring that the right capabilities are in place to tackle those threats. We will continue to work closely with all partners, including the intelligence agencies, law enforcement and industry, to take all these issues forward and to continue to keep us safe from those who would do us harm.
David Anderson’s report is complemented by two further independent reviews in this area. In March, the Intelligence and Security Committee published its “Privacy and Security” report. This set out a comprehensive review of the intelligence agencies’ capabilities and the legal and privacy frameworks that govern their use. Later this summer, a panel co-ordinated by the Royal United Services Institute and established by the former Deputy Prime Minister, the right hon. Member for Sheffield, Hallam (Mr Clegg), will report on the legality, effectiveness and privacy implications of the UK’s surveillance programmes and assess how law enforcement and intelligence capability can be maintained in the face of technological change. These independent reviews are each important and valuable contributions to the continuing debate about the role of our security, intelligence and law enforcement agencies, their use of investigatory powers and their oversight. The Government will need to give proper consideration to their recommendations, but I believe that collectively they will provide a firm basis for consultation on legislation.
I would now like to turn to the parliamentary handling of this legislation. The operation and regulation of the investigatory powers used by the police and the intelligence
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and security agencies is a matter of great importance to the security of this country and, I know, an issue of great interest to many Members. As David Anderson makes clear, it is imperative that the use of sensitive powers is overseen and fully declared under arrangements set by Parliament. It is therefore entirely right that Parliament should have the opportunity to debate those arrangements in full.
The Anderson review was undertaken with cross-party support and I believe that it provides a sound basis for taking this issue forward in the same manner. To ensure that that is the case, the Government will publish a draft Bill in the autumn for pre-legislative scrutiny by a Joint Committee of Parliament, with the intention of introducing a Bill early in the new year. Given the sunset clause in the Data Retention and Investigatory Powers Act 2014, the new legislation will need to be in place by the end of December 2016.
I have said many times before that it is impossible to debate the balance between privacy and security—including the rights and wrongs of intrusive powers and the oversight arrangements that govern them—without also considering the threats that we face as a country. Those threats remain considerable, and they are evolving. They include not only terrorism—from overseas and home-grown in the UK—but industrial, military and state espionage. They include not only organised criminality but the proliferation of once-physical crimes online, such as child sexual exploitation, and the technological challenges that that brings. In the face of such threats, we have a duty to ensure that the agencies whose job it is to keep us safe have the powers they need to do the job.
I would like to finish by paying tribute to the vital work of the men and women of the intelligence and law enforcement community, whose work is not always known, whose successes often go unrecognised and whose efforts day in and day out are fundamental to keeping everyone in this country safe. I commend this statement to the House.
11.44 am
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab): I thank the Home Secretary for her statement and join her in paying tribute to the agencies and police and the vital work that they do to keep us safe. Because their work is so important, they need a robust and up-to-date legal framework for that work, and that is what they want as well. Their job is to protect our liberty as well as our security in a democracy.
I strongly welcome the publication of David Anderson’s report, which we all need to consider in detail. We called for the report in our amendment to the emergency legislation last summer, and we did so because we believed that the existing framework was no longer fit for purpose. The Intelligence and Security Committee has also called for a new framework. Technology has moved on, but neither the law nor the oversight has done so. The law is, in David Anderson’s words,
“incomprehensible to all but a tiny band of initiates...and—in the long run—intolerable.”
Reforms are needed. First, as the report confirms, it is clear that proportionate surveillance and interception are vital to saving lives and to averting and disrupting dreadful attacks. The Home Secretary is right to highlight the changing threats, and communications data have
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been used to tackle some awful crimes. The report refers to a case in which the US authorities found a movie file of a woman sexually abusing a four-month-old girl. Communications data were used to track the source of an email to a man in Northampton and, as a result, he and his girlfriend were convicted of serious sexual abuse of three children, all less than four years old. There is no doubt therefore that powers are needed and that they need to keep up with new technology. We cannot allow the sunset clause to let existing powers lapse without new legislation in their place.
Secondly, we have argued that, alongside strong powers, we need strong checks and balances and significantly stronger oversight of how the system works. I welcome the report’s proposals to strengthen oversight by introducing a new, stronger independent surveillance and intelligence commission, merging the existing system of commissioners, which I have long argued is not strong or transparent enough, and by introducing judicial authorisation of warrants. Both would be important steps, but their detail needs to be right, so that they do not add delays to urgent processes or detract from the Home Secretary’s wider responsibility to assess risks to national security and be answerable to Parliament. I believe that those reforms would strengthen the legitimacy of a long-term framework, and I urge the Home Secretary to consider and agree to them.
Thirdly, the report confirms some of the problems with the original draft Communications Data Bill, which the Joint Committee that scrutinised it at the time stated was too widely drawn—we agreed. David Anderson says:
“There should be no question of progressing proposals for the compulsory retention of third party data before a compelling operational case for it has been made out (as it has not been to date)”.
I agree with David Anderson and, again, I urge the Home Secretary to accept that recommendation.
I welcome the points that the Home Secretary made about a future investigatory powers Bill based in large part on David Anderson’s report being subject to pre-legislative scrutiny by a Joint Committee of both Houses and about how we will have the opportunity for cross-party debate. I also urge her to ask the business managers to schedule a day’s debate on the Anderson report, so that Members of all parties may discuss it fully and to foster a wider public debate to get the widest possible consent and legitimacy for the new framework. There has been a wider public debate in other countries, including the US, than there has so far been here.
Finally, David Anderson’s report calls for greater public avowal and transparency of capabilities and legal powers. Everyone understands that many national security operations need to be secret to be effective, but I urge the Home Secretary to consider that recommendation closely, too, as there needs to be sufficient transparency for us in Parliament to take responsible decisions on getting the legislation right.
We need freedom and security in our democracy, the powers to keep people safe and the checks and balances to protect people’s privacy and to ensure that the powers are not abused. The digital age is a wonderful source of freedom and opportunity, but it also brings new challenges from new crimes and new threats to our
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security. David Anderson’s report helps us to face both. We in this House now need to ensure that the report helps us to navigate both the opportunities and the challenges to sustain and to strengthen our democracy in a digital age.
Mrs May: I thank the shadow Secretary of State for the tone and approach she has adopted on these matters, which—as we all accept across the House—are incredibly serious. It is important that we have full debates about them, as we will be able to do. In the timetable I have set out, people will have an opportunity to reflect fully on the David Anderson report, and other reports that have already been published or will be published, so that when they come to look at the Government’s proposals, they will be able to do so against that firm background.
It is important to draw to the House’s attention the fact that David Anderson looked into all investigatory powers and techniques. He recognised the necessity of the powers and techniques. The issue he was looking at was whether the legislative framework we have is the right one. He has made the point that the current legislative framework is found in a number of different Acts of Parliament, so it is sometimes difficult for people to see the complete picture. Obviously, one of his purposes in his recommendations is to bring that picture together, and to look at the questions of authorisation and oversight.
The right hon. Lady mentioned two particular issues, one of which was access to third party data. David Anderson does not say that this should not be permissible or possible; he says that he would like to see a better case made for it than has been made in the past, but he does not reject the use of access to third party data. On judicial authorisations, he has come down with a particular point of view in that area, and it happens that the ISC took a different view. In looking at this carefully, the point that we will want to reach is ensuring that any decision taken in this area does not adversely affect the relationship between the Executive and the judiciary in relation to other aspects of Government powers and what they need to do, and where any arrangements made are seen to have clear legitimacy and also reflect the issue that the shadow Home Secretary referred to—that the individual who bears the risk, regardless of who takes the authorisation, is of course the Home Secretary. So we have to look at those proposals in the context of that complex mix of areas that we need to consider.
Mr David Davis (Haltemprice and Howden) (Con): Mr Anderson said in the preamble to his excellent report:
“The current law is fragmented, obscure, under constant challenge and variable in the protections that it affords the innocent.”
“A multitude of alternative powers, some of them without statutory safeguards, confuse the picture further. This state of affairs is undemocratic, unnecessary and—in the long run—intolerable.”
Of his 124 recommendations, the shadow Home Secretary picked up on perhaps the most important—the one relating to this issue of judicial authorisation. This country relies on ministerial authorisation more than any other country in the world, with the possible exception of Zimbabwe. Will the Home Secretary please
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look hard at this recommendation, with a strong recommendation that it is carried out and the transfer of power from ministerial authority to proper judicial authority takes place as soon as possible?
Mrs May: As I indicated in my response to the shadow Home Secretary, we will look at that recommendation carefully, as indeed we will look at all 124 recommendations. Obviously, we will reflect on what David Anderson has said and on any further debate that takes place in relation to this. As I said to her, it is important that we recognise that the question of the relationship between the Executive and the judiciary is not just one that relates to the powers that David Anderson has been looking at, and we need to think carefully about this issue. I recognise the force with which my right hon. Friend encourages me to go down that route, but today I am not in a position, and do not intend, to say that the Government are going to do one thing or another. I think it is right that we reflect more fully on these aspects and make our proposals in the draft Bill that we will publish in the autumn.
Joanna Cherry (Edinburgh South West) (SNP): The Scottish National party also welcomes the publication of this report, but we will oppose any plans to introduce what is sometimes referred to as a snoopers charter, that being a charter that would sanction the mass collection of data and mass spying on people’s private communications. Although the SNP is supportive of law enforcement and security services having appropriate access to the information they require, the appropriate checks and safeguards must be in place to ensure that the requirement to keep our community safe is balanced against the civil liberties to which we are all entitled.
This report seems to urge much stronger oversight of the activities of the police and the security services, which we welcome and, like others, I wish to single out the recommendation that warrants be authorised by senior judges. However, the new legislation is required to be more than just a change of name. There must be substantial changes in substance from the previous draft Bill, which threatened to impinge on civil liberties.
Cross-party co-operation in this Parliament has already forced the Government to backtrack on their plans to repeal the Human Rights Act—at least for the time being. In reaching out across the Chamber to MPs with concerns about civil liberties, my party will also seek to defeat any Government plans to curb civil liberties in the Bill. However, we wish to take a constructive approach, and I have four specific questions for the Secretary of State. First, will she confirm that the new legislation, which is to be introduced this autumn, will be more than just a name change and that it will contain substantial safeguards for civil liberties?
Secondly, under the summary of proposals, paragraph 10 says:
“A comprehensive and comprehensible new law should be drafted from scratch, replacing the multitude of current powers and providing for clear limits and safeguards on any intrusive power that it may be necessary for public authorities to use.”
Will the Home Secretary commit to implementing that proposal?
Thirdly, will the Home Secretary commit to engaging fully with her Scottish Government counterparts in so far as measures in any legislation impinge on the devolved
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competences? Finally, she has announced plans for pre-legislative scrutiny by a Joint Committee of Parliament. Will she confirm that representatives of the SNP will be invited to be part of that scrutiny?
Mrs May: I welcome the hon. and learned Member for Edinburgh South West (Joanna Cherry) to the House and to her Front-Bench role. I was not able to do that when she spoke in the Queen’s Speech debate, and I am pleased to have the opportunity to do it now. I have to say, however, that she is wrong to refer to the snoopers charter. There was never any proposal for such a charter. The Government wish to ensure that our law enforcement and security and intelligence agencies continue to have the capabilities that they need to keep us safe as people’s activities in communications increasingly move from the physical to the digital. It is about ensuring that the law and the powers are up to date.
The hon. and learned Lady asked me four specific questions. I have already said in my response to the shadow Home Secretary that one of the issues, as David Anderson has also said, is that legislation is spread over several different Acts, and it is necessary to bring it together in a single law. We intend to look very carefully at David Anderson’s proposals in relation to increased or changed oversight arrangements. We are talking about not simply rebranding an existing law but looking to see what legislation is necessary to ensure that these powers continue to be available with the right regulatory framework, the right oversight and the right authorisation arrangements into the future.
We have had to introduce two new pieces of legislation in the data and counter-terrorism area in the past 18 months. I hope that we can establish a law that can stand for some time, and that we will not have to come back to Parliament repeatedly with new legislation. When matters are devolved, we will hold discussions with the Scottish Government. As the hon. and learned Lady will be aware, national security is a reserved matter. She referred to pre-legislative scrutiny. I understand that discussions are taking place about the nature of the Joint Committee, and that is a matter for the business managers.
Mr Dominic Grieve (Beaconsfield) (Con): Speaking as somebody who during my four years in office was supposed to be an initiate of the regulatory framework under which our agencies are supposed to work, I heartily endorse what David Anderson has said about its comprehensibility. For that reason, I greatly welcome the Government’s move towards a new legislative framework. Does my right hon. Friend agree that it is important that that framework should carry with it clarity and a degree of predictability and understanding, because without that the public will not be reassured that it might not sed? Equally, she might also agree that if we put together such a framework it is right and proper that we should give our agencies the powers they need to protect us, and not simply allow this to be an opportunity to prevent them from doing the job of protecting us, which in my experience they have been doing very well and ethically.
Mrs May:
I thank my right hon. and learned Friend for his comments and, in particular, for his last point. It is absolutely the case that our agencies have been and are working lawfully and ethically in everything they do.
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They have a difficult job to do and it is important, as he says, that we give them the powers they need. It is in everyone’s interests that the legislation is as clear as possible, but I am tempted to say that although I start off thinking that it will be simple to provide a clear piece of legislation, once parliamentary counsel and the lawyers in this House and in the other place get hold of it, the clarity tends to get a little lost. We shall see what happens.
My right hon. and learned Friend raises another important issue, which is the question of foreseeability. People should be able to understand not just how powers might be being used but how they might be used in future, and that is of course an issue that would need to be considered.
Keith Vaz (Leicester East) (Lab): I join the Home Secretary and the shadow Home Secretary in thanking Mr Anderson for this excellent report. It is right that we should consider judicial scrutiny, and the approach of the Home Secretary to give this to a Joint Committee is the right one. It cannot be handled by one Committee. She will note that Committees in the previous Parliament—and individual Members—have talked about the fact that the Regulation of Investigatory Powers Act was introduced in 2000 and needs to be updated. Does she agree that that is also on the agenda and that, as she consolidates these pieces of legislation, it is important that we consider that Act to ensure that our agencies have the right powers and that there is also a proper balance?
Mrs May: The right hon. Gentleman is right and, of course, under his chairmanship the Home Affairs Committee touched on some of those issues. Some of the powers that David Anderson is talking about relate to RIPA and how it operates, and of course they will be considered as part of the new legislation.
Sir Eric Pickles (Brentwood and Ongar) (Con): May I draw the Home Secretary’s attention to recommendation 66, which appears in paragraph 14.82? The report recommends the abandonment of judicial approval for local authorities seeking to obtain communications data. My right hon. Friend will remember the abuses by local authorities and the reasons we introduced these safeguards. I do not think that the public would mind local authorities using those powers on matters to do with Prevent, but they would rather object to them being used in relation to a person applying for a school place.
Mrs May: My right hon. Friend makes a pertinent point and I was pleased to work with him to ensure that we could introduce those extra safeguards in the operation of access to communications data and ending the intrusive use of these powers by local authorities. He is absolutely right. People will not want us to go backwards in how local authorities might use these powers. When intrusive powers are being used, it is essential that their use is necessary and proportionate, and I think that everybody would agree that their use in whether people were getting the right school places was neither of those.
Mr George Howarth (Knowsley) (Lab):
I, too, welcome the work that David Anderson has carried out on this important issue. Does the Home Secretary accept that
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there are many complications in all this, not least administratively, judicially, ethically and procedurally? As a former member of the Intelligence and Security Committee, may I ask her whether she will accept that the timetable she has laid down for the consideration of a draft Bill might be too tight? Will she give some consideration to whether it might be possible to renew the existing legislation if pre-legislative scrutiny needs to take more time?
Mrs May: I understand the point that the right hon. Gentleman makes. We have the deadline of December 2016, which was put in consciously by the previous Parliament because it believed that it was necessary to look again at the legislative framework and that that should be done within a limited timetable. So I hesitate to suggest that we should at this stage say that that timetable should be changed. We should do what we can to ensure that we meet the timetable. I fully recognise that these matters are complex, and they raise issues in relation not just to what David Anderson has put in his report, but to other circumstances. It always behoves Government to make sure there are no unintended adverse consequences of any decisions that are taken in relation to that, and we will try to ensure that the maximum amount of time is available. At this stage, we should retain that December 2016 deadline because Parliament set it for very good reason.
Mark Field (Cities of London and Westminster) (Con): This is a first-rate and comprehensive report, but I accept what the Home Secretary said; this should not be the last word on the matter. There are other reports and we will want to try to get this consolidated. Despite my involvement on the Intelligence and Security Committee, I am increasingly of the view that we need to get public trust to ensure that judicial involvement is not simply a matter of oversight in relation to warrants. I very much agree with the comments of the right hon. Member for Knowsley (Mr Howarth). We need to get this right. We need consolidating legislation. It will be difficult, but we need to get it right both in this House and in the other place. That may take a little longer than the very ambitious timetable that my right hon. Friend has put in place, and I am glad that she is turning her mind to it in this way. Above all, we need consolidating legislation that does not potentially lead to what we have had in the past—a sense that arbitrage has been used because one piece of legislation is easier than another for the security services.
Mrs May: I thank my right hon. Friend for his comments. I thank him and the right hon. Member for Knowsley (Mr Howarth) for the contribution they made on the Intelligence and Security Committee, which produced its own report in relation to these matters. My right hon. Friend is right about ensuring that there is public confidence and public trust. Some interesting figures are quoted in the David Anderson report from a poll taken of the public, which shows the significant trust and confidence that they have in our agencies, and the belief of the overwhelming majority that the agencies should have the powers they need to keep us safe. It is a feature of the British public that they have a more sanguine approach to the necessity of powers being held by the authorities than we may see reported elsewhere. But he is right: we need to look at these issues very carefully and ensure that that confidence is there.
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Mr Speaker: Order. These are extremely sensitive and often complicated matters of which the House is treating with great care. I point out that we have another statement to follow. I want to accommodate colleagues, but somewhat greater succinctness is required.
Mr David Winnick (Walsall North) (Lab): The overwhelming majority of the population at the time would no doubt have supported 90 days pre-charge detention. It is the job of the House of Commons to determine what is right—to get the right balance between the acute danger of terrorism and civil liberties, not to talk about what the large majority of the public may or may not want. We are elected to make the decision that we consider to be correct. Is it not the case that the Home Secretary intends to bring in a measure—rightly, in my view, described as the snoopers charter—which the previous Government could not introduce in the last Parliament because their coalition partner would not agree? As far as I am concerned—obviously, there will be a good deal of controversy about this—the snoopers charter is a greater affront to civil liberties than any measure that has been introduced or proposed in recent years.
Mrs May: The response I give on that misnomer of a piece of legislation is the same as I gave the hon. and learned Member for Edinburgh South West (Joanna Cherry): it is no such thing as it has been described. It is about ensuring merely that, as matters increasingly move into the digital age, the agencies are able to have access to the same sort of data as they have had access to in the past, which is used in the vast majority of serious crime cases—not just in investigation, but in bringing prosecutions of serious criminals—and in counter-terrorism investigations.
The hon. Gentleman refers to the 90 days of pre-charge detention. I point out to him that the Conservative party opposed that measure, and I remind him that it was his Labour Government who introduced 28 days of pre-charge detention, and the coalition Government who reduced it to 14 days.
Mr Speaker: For a pithy inquiry from the Government Back Benches, I think it wise now to look to a non-lawyer. I call Mr Mark Pritchard.[Laughter.]
Mark Pritchard (The Wrekin) (Con): Good luck on both fronts, Mr Speaker, but thank you.
Is it not the case that the greatest civil liberty of all is the right to life? The Home Secretary is absolutely right that to call extra investigatory and surveillance powers for the intelligence services, with the right to legal oversights, a snooper’s a misnomer. Would the measure not be better termed a security charter?
Mrs May: My hon. Friend makes an important point. As I have said previously in this House, the issue of security and privacy is not a zero-sum game. One can only enjoy one’s privacy if one has one’s security.
Fiona Mactaggart (Slough) (Lab):
The Home Secretary has, in a welcome move, promised the House pre-legislative scrutiny of the legislation that will follow from Anderson’s
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excellent report. She says that it will include consideration not only of that report, but of the ISC’s recent report and the forthcoming report from the Royal United Services Institute. There is another report, however, which is still secret: Sir Nigel Sheinwald’s report. Although I understand that some of the details of that report are commercially confidential and cannot be released, can she make sure that Sir Nigel’s conclusions are available to those conducting the pre-legislative scrutiny?
Mrs May: I will look at that. The Prime Minister’s written statement today refers to the work that Sir Nigel Sheinwald undertook as the Prime Minister’s data envoy. As my right hon. Friend makes clear—I did not refer to this—in parallel to the new legislation, we will be taking forward Sir Nigel’s advice, including pursuing a strengthened UK-US mutual legal assistance treaty process and a new international framework. Sir Nigel was looking particularly at the question of the powers and capabilities in relation to cross-border matters and the international framework needed for that.
Mr Jonathan Djanogly (Huntingdon) (Con): In welcoming the report, I note that electronic communications and social media are powerful tools for the terrorist and their use and sophistication have been expanding very rapidly, but there remain concerns that the machinery within Government, and even more so within Parliament, to monitor and regulate through legislation is unable to keep up with that pace of change, which leads to concerns about safeguarding civil liberties. How does my right hon. Friend intend to use the opportunity of the report to address the mechanisms of reporting and oversight?
Mrs May: The previous Government acted to improve the mechanisms of parliamentary oversight by giving extra powers to the Intelligence and Security Committee. The ISC’s report on its consideration of matters surrounding the terrible murder of Drummer Lee Rigby showed a step change in the sort of information available and investigation of the operations of the agencies by the ISC and gave Parliament a much greater ability to look at such matters. However, I will reflect on my hon. Friend’s comment on the mechanisms overall and whether anything is needed in that respect.
Tom Brake (Carshalton and Wallington) (LD): In coalition, the Liberal Democrats were right to block the snooper’s charter and in government the Conservatives are wrong to forge ahead with it.
On the subject of web logs, of which only Russia of the liberal democracies mandates the retention, will the Home Secretary allow proposals to track the browsing habits of 40 million UK citizens every week to be brought forward only if there is, as set out in paragraph 13b of the executive summary:
“a detailed operational case…and…rigorous assessment conducted of the lawfulness, likely effectiveness, intrusiveness and cost”
of the measures? Will she also confirm that, as David Anderson urges, no progress at all will be made on the question of third-party data until a compelling operational case has been made?
Mrs May:
The right hon. Gentleman will not be surprised to hear that I take a different view from him on the communications data capabilities of the security
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and intelligence agencies and of law enforcement. These are important powers and it is clear that those powers are degrading, so the ability of law enforcement to catch paedophiles and serious criminals has been reduced, as has the ability of our agencies to deal with the matters they deal with.
The right hon. Gentleman refers to web logs. In the Counter-Terrorism and Security Act 2015, we took one step to increase the capabilities of the agencies in respect of IP addresses, but it remains the case that not all those IP addresses can be recognised and reconciled because of the inability to introduce the further legislation that his party blocked when we were in coalition.
Finally, it is not the case that that legislation was about investigating, mapping or monitoring the web browsing habits of 40 million citizens every week of the year. That is a complete misdescription of what was proposed, and I suggest that if the right hon. Gentleman wants a proper debate, he stops using those terms.
Victoria Atkins (Louth and Horncastle) (Con): In my previous life, I prosecuted criminals for a living and I relied on evidence obtained under RIPA to convict the guilty. What assessment has my right hon. Friend made of the importance of communications data in the fight against terrorism and serious organised crime, including helping those who prosecute criminals to bring them to justice in court?
Mrs May: I thank my hon. Friend for bringing her experience to this House. It is important that people recognise that this is not just a debate about what this House puts into legislation; it is a debate about the powers that our agencies have and the ability prosecutors then have to bring people to justice. Some 95% of serious and organised crime investigations make use of communications data, and such information is essential for prosecution in many of those cases. I am sorry that the hon. and learned Member for Holborn and St Pancras (Keir Starmer) is not in the Chamber today, because in his former incarnation as Director of Public Prosecutions, he was clear about the importance of communications data not only in investigating but in prosecuting criminals.
Emily Thornberry (Islington South and Finsbury) (Lab): As one of those who have struggled with the legislation for some time, I join in the welcome for David Anderson’s recommendation that the new legislation be written in non-technical language that can be understood by intelligent readers across the world. I also welcome his recommendations that RIPA parts 1 and 4 be replaced and for increased judicial oversight—something that I think RIPA lacked, so I am glad that it will be looked at again. Also, I will read with great care what is said about the bulk collection of data.
This is an important measure, which needs to be debated much more widely than is currently the case. I support the calls for a day’s debate in this Chamber, so that we all have an opportunity to debate the many issues relating to it. This is too important to be captured by a few voices. We need to have a more profound debate.
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Mrs May: I am tempted to ask the hon. Lady that if she, a lawyer, could not understand the legislation, how does she think the rest of us managed? She will have seen the Leader of the House in the Chamber when the shadow Home Secretary called for a day’s debate, and I am sure that my right hon. Friend will reflect on that point.
Sir Edward Garnier (Harborough) (Con): We are all concerned about getting the balance correct between security and civil and human rights, and I have absolutely no doubt that the Home Secretary will devote her time to ensuring that, but is she concerned about reports that the social media websites in the United States are threatening to refuse to co-operate with legitimate requests for the provision of information about suspected terrorists and other serious criminals? If the reports are true, what conversations will she have with her American counterparts to ensure that that does not happen, and will she remind them during the course of those discussions that there is still a great deal of concern in this House and elsewhere about the lack of balance in the United Kingdom-United States extradition treaty?
Mrs May: On my right hon. and learned Friend’s last point, we did make changes to the extradition arrangements between the United Kingdom and the United States when we brought in the forum bar—I think that it has been an important addition—which ensures the balance between the UK and the US in the extradition treaty. We of course talk regularly with communication service providers and social media platforms, and I talk about these measures with my counterparts in the Department of Homeland Security and the Department of Justice in the United States. Of course, it is precisely those sorts of issues that the Prime Minister asked Sir Nigel Sheinwald to look at. As I indicated in response to the right hon. Member for Slough (Fiona Mactaggart), as a result of that work we will be taking forward work to enhance the mutual legal assistance treaty with the United States, but we will also be looking at a broader international framework within which the companies will operate in order to enable access to the data.
Caroline Lucas (Brighton, Pavilion) (Green): The report is a powerful vindication of the excellent work of human rights campaigners in this country who have long argued for greater proportionality in our surveillance laws. EU courts and now David Anderson have made it clear that the blanket retention of my constituents’ data is unlawful—it is against human rights laws—so will the Home Secretary confirm that she accepts that principle and will use it in future legislation?
Mrs May: David Anderson has been very clear that the powers that the agencies have are powers that they need. His questions are these: what is the appropriate oversight of, and authorisation for, the use of those powers; and what is the appropriate regulatory framework? That is what we will be looking at.
Crispin Blunt (Reigate) (Con):
Consolidation of the law in a non-controversial area is an immensely difficult and technical task that is normally handed over to the Law Commission for years. The right hon. Member for Knowsley (Mr Howarth) is concerned about the amount of time we have for scrutiny after the autumn. If this
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law is being drafted from scratch, I do not think that my right hon. Friend has a cat in hell’s chance of producing it in the autumn. Just how advanced is the internal work on drafting the Bill?
Mrs May: As I said in response to the right hon. Member for Knowsley (Mr Howarth), we have a timetable that was set by Parliament, because it believed that it was important that the powers in the Data Retention and Investigatory Powers Act 2014 should not be allowed to continue for a significant period of time, so it was decided that the right end point should be the end of 2016. Of course, some of the issues that the report deals with have been looked at by the Home Office previously, notably in relation to communications data.
Robert Neill (Bromley and Chislehurst) (Con): I am grateful that the importance of thorough pre-legislative scrutiny has been recognised, but may I ask the Home Secretary to consider the recommendations relating to broader parliamentary scrutiny? In relation to recommendation 120, will she be wary of anything that might dilute the focus currently provided by the Intelligence and Security Committee? In relation to recommendation 122, will she ensure not only that public bodies, where appropriate and subject to the proper safeguards, provide the information to Parliament, but that Parliament has a proper means of testing and scrutinising that information?
Mrs May: I thank my hon. Friend for his points about the recommendations. Of course, as I indicated in response to my right hon. Friend the Member for Cities of London and Westminster (Mark Field), we have already increased Parliament’s power to look at those issues through the enhanced capabilities we have given to the Intelligence and Security Committee. I think that it is important that the Committee retains a clear focus so that we can be confident that it is able to bring the correct oversight to these matters, which is important and has been enhanced.
Chris Davies (Brecon and Radnorshire) (Con): Does the Home Secretary agree with the Prime Minister that there should be no safe spaces on the internet for terrorists and paedophiles to communicate?
Mrs May: My hon. Friend raises an important point that my right hon. Friend the Prime Minister made. We should ensure that our law enforcement agencies have the powers they need to ensure that there is no safe space for terrorists, paedophiles and other serious criminals to operate.
Bob Stewart (Beckenham) (Con): Having been involved in covert surveillance operations, I was always surprised by how many men and women it took to carry them out. Do our security agencies have enough people to do the job as well as it can be done?
Mrs May:
Obviously we regularly look at the resources available to the security and intelligence agencies. As my right hon. Friend the Prime Minister announced before Christmas, the security and intelligence agencies and the police received a budget injection to cover a variety
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of issues. We look at that regularly and will continue to do so, most notably in the upcoming comprehensive spending review.
Mr Ranil Jayawardena (North East Hampshire) (Con): My right hon. Friend referred a moment ago to IP addresses. Will she set out the work that the Government will do with communication service providers in taking forward the agenda she has set out?
Mrs May: My hon. Friend is right to raise that issue, because of course, as I mentioned in my statement, it is not just a question of the Government working with the police and law enforcement agencies; we also need to work with industry. We meet the communication service providers regularly to discuss the use of the powers that the various agencies have, to ensure that the legislation is appropriate, and to look at the technological changes taking place.
Alex Chalk (Cheltenham) (Con): Striking the right balance between liberty and security is essential in a free society, but on the issue of a snoopers charter, I invite the Home Secretary to give real weight to the opinion of David Anderson’s distinguished predecessor as independent reviewer, Lord Carlile, who said that the Communications Data Bill was
“a proportionate response to enable law enforcement and prosecutors to keep pace with the ever more connected world in which we live.”
Mrs May: My hon. Friend is right to mention Lord Carlile’s point about the previous Communications Data Bill. I believe that it was a necessary and proportionate response to the need to ensure that the agencies and the police continue to have the powers to keep us safe, to catch paedophiles, to prevent terrorism and to catch and prosecute serious and organised criminals. Those powers have degraded as people use digital communications more, so we need to update the legislation to ensure that the agencies and the police can continue to do their job.
Nicola Blackwood (Oxford West and Abingdon) (Con): David Anderson rightly identifies trust as the issue at the heart of the matter. These powers obviously have a wider application, but in all the evidence to the Home Affairs Committee on Islamist radicalisation it was mistrust of the state that was used to manipulate and radicalise young Britons. While I add my voice to those welcome recommendations to strengthen judicial oversight, does the Home Secretary agree that it is essential to strengthen our counter-narrative efforts so that we can put the lie to those terror recruiters on our shores who are selling a glamorised and dishonest version of jihad, and so that we can reduce our need for these powers in the first place?
Mrs May:
My hon. Friend makes a very important point. In the fight against those terrorists who are led by Islamist radicalisation to take action, and indeed those doing the radicalisation, we need to look very carefully at that issue. She is absolutely right about that. The Government have a commitment to bring forward a counter-extremism strategy. The strategy will be about promoting the values we share in this country; the values that make our pluralistic society what it is, and that make it a society that many people wish to live in
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and enjoy. We must ensure that our narrative against those plying a distorted view of Islam is strong so that we can encourage people to recognise that Islam is a peaceful religion, not a religion that is leading to acts of terrorism.
Rehman Chishti (Gillingham and Rainham) (Con): Robert Hannigan, the new head of the Government Communications Headquarters, has recently said that some technology companies are the command and control centres of terrorism because they positively fail to comply with Government requests to take material down in the post-Snowden era. Will these new measures help address that?
Mrs May: My hon. Friend is right. There is a very real responsibility for the communications service providers—the internet providers—in relation to the access that the authorities need for these powers. We need to make sure that the legislation is appropriate so that there can be confidence in it. The counter-terrorism internet referral unit has been, and is now, taking down about 1,000 pieces of terrorist material per week from the internet.
Bob Blackman (Harrow East) (Con): Technology moves on apace, and criminals are very quick to use new technology. However, the legislative process is much slower, and the Home Secretary has set out plans for detailed pre-scrutiny. What plans does she have to try to ensure that, as far as possible, the legislation is future-proofed so that we do not have to go through the process time and again?
Mrs May: My hon. Friend raises a very important point. In fact, David Anderson himself has referred to the need to try to ensure that legislation can be technology-neutral so that it is, as it were, future-proofed. As I said in response to the hon. and learned Member for Edinburgh South West (Joanna Cherry), I hope that the legislation we will introduce is able to stand the test of time so that we are not constantly having to come back to this House with new proposals.
Matt Warman (Boston and Skegness) (Con):
Writing about technology over the past 10 years, I saw a huge number of changes. I commend this report for trying to establish principles so that the legislation does not go out of date. Does the Home Secretary believe it is right
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that, as a nation, we have the same powers in the age of Snapchat and WhatsApp as we had in the age of the telephone?
Mrs May: My hon. Friend makes the very important point that as people move on to new means of communication, we need to make sure that powers and the regulatory framework for those powers has kept up. That is what we wanted to do in the Communications Data Bill, but we were prevented by our coalition partners. We will obviously be looking to introduce the necessary requirements in the new legislation.
Byron Davies (Gower) (Con) rose—
Mr Speaker: Ah, good—Mr Byron Davies.
Byron Davies: Thank you very much, Mr Speaker.
In a previous life, having worked considerably in operational terms with RIPA, one of the difficulties I found was with the communications providers. What are the Home Secretary’s ideas for the legislation to make sure that it does not create problems in future?
Mrs May: My hon. Friend raises an important point. This is partly to do with the legislation and partly to do with ensuring that we maintain relationships with the communications service providers, to whom we talk to regularly about these matters. It is also about ensuring that this is the right legislation to give people the confidence that the powers are being used appropriately and where they are necessary and proportionate.
Mr Speaker: I am most grateful to the Home Secretary and to colleagues. It has been a huge pleasure, both in the exchanges on the business question and in the exchanges that we have just enjoyed, to accommodate a very large number of new Members. I say in the gentlest terms, as a source of encouragement to new Members, that if they decide that they no longer wish to ask a question because it has already been asked—although that would set a dangerous precedent in the House of Commons—or for any other reason, that is fine, but if they are genuinely interested in being called, then, as old hands will be able to testify, persistence is a very important principle in the operation of the affairs of the House. In short, if you really want to get called—I cannot promise you will, but I think the record shows that I do try to accommodate most people most of the time—keep standing, and the chances are that you will get there in the end. Thank you very much.
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Royal Bank of Scotland
12.33 pm
The Economic Secretary to the Treasury (Harriett Baldwin): With permission, Mr Speaker, I would like to make a statement regarding the Chancellor’s speech at Mansion House last night.
First, I turn to the Royal Bank of Scotland. The £45 billion that the previous Government paid for the Royal Bank of Scotland represents the largest single bank bail-out in the world. The bank employs over 60,000 people in Britain and provides over a quarter of all small business lending in Britain. Its problems and its slow recovery have been one of the biggest drags on our economy, as many smaller firms know all too painfully. The restructuring of the Royal Bank of Scotland and the work that Ross McEwan and his team have done since have brought us to a decision point. This Government were not responsible for the bail-out of the Royal Bank of Scotland or the price paid then for shares bought by the taxpayer, but we are responsible for getting the best deal now for the taxpayer and doing whatever we can to support the British economy.
As the Chancellor set out, there is no doubt that starting to sell the Government’s stake in RBS is the right thing to do on both counts. That is not just our judgment—it is the judgment of the Governor of the Bank of England, whose views the Chancellor sought and whose letter on this issue we published last night. In the Governor’s words, “it is in the public interest for the government to begin now to return RBS to private ownership.”
“would promote financial stability, a more competitive banking sector, and the interests of the wider economy.”
“there could be considerable net costs to taxpayers of further delaying the start of a sale.”
That is also the conclusion of the independent review that we commissioned from Rothschild and that was published last night. It says that beginning sales now, and increasing the free float, will improve the marketability of our remaining stake, and it means that we can expect to see larger sales on better terms in the future—but only if we start now. This independent report confirms that taking into account all the sales we have authorised of our bank assets, and the fees we have received, at the current valuations taxpayers can expect to make £14 billion more than they paid out.
In the coming months we will therefore begin to sell our stake in RBS. It is the right thing to do for British businesses, British taxpayers and the British economy. Taking all the bank interventions in total—Lloyds, Northern Rock, and the scheme fees—we are making sure that taxpayers get back billions of pounds more than they were forced to put in. Of course, given the size of our stake in RBS, the sales will take some years and are likely to involve all types of investors. With such a complex investment case, we have to start with institutions, but, as the Chancellor said, there is no reason why ordinary investors—in other words, members of the public—should not take part in due course.
I now turn to Royal Mail. As the Chancellor set out last night, the first sale of our remaining stake in Royal Mail has begun. The Government have today sold half
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of the 30% stake they retained in Royal Mail plc at a price of 500p per share. This sale has raised £750 million, and that money can be used to reduce public debt. We have said that we will dispose of all our shares in Royal Mail in this Parliament. We will continue to review the options in the light of our stated sale objectives, but there is no rigid timetable. Value for the taxpayer remains the priority. The Chancellor also announced last night that the Government intend to gift up to 1% of the shares of the company to Royal Mail’s UK employees, in recognition of their work in turning Royal Mail around.
Finally, the fair and effective markets review yesterday published its final report. The report sets out 21 recommendations to help to restore trust in the wholesale fixed-income, currency and commodity markets. The review was established by the Chancellor of the Exchequer and the Governor of the Bank of England in June 2014 to help to restore trust in those markets in the wake of a number of recent high-profile abuses. The review is centred on four principles: first, individuals must be held to account for their own conduct; secondly, firms must take greater collective responsibility for market practices; thirdly, regulators should close gaps in regulatory coverage and broaden the regime holding senior management to account; and fourthly, given the global nature of these markets, co-ordinated international action should be taken wherever possible to improve fairness and effectiveness. As the Chancellor set out in his Mansion House speech last night, there is no trade-off between high standards of conduct and competitiveness. Implementing the reforms set out in the review will ensure trust in our markets and strengthen London’s global leadership position.
This Government have a long-term plan to make the UK economy the most prosperous of all the world’s major economies in the coming generation and for that prosperity to be shared widely across our one nation. The steps we are announcing today are a key part of achieving a new settlement for our public finances and for our financial services industry, and they will help us secure that bright future for all. I commend this statement to the House.
12.40 pm
Chris Leslie (Nottingham East) (Lab/Co-op): I welcome the new Minister to her role, but where is the Chancellor of the Exchequer? Should he not have the courtesy to come to House of Commons and answer questions on what might be one the most important financial decisions of this Parliament? Taxpayers deserve to know more about what is going on here. Why is it that when there are difficult questions, the Chancellor always blames someone else or sends someone else?
Taxpayers who bailed out RBS during the global financial crisis want their money back and will rightly be suspicious of any rush to sell. When RBS is still restructuring the business and awaiting a US settlement for the mis-selling of subprime mortgages, would a premature sale not pose a risk for the taxpayer? The Chancellor said two years ago that he would countenance a sale of RBS only when
“the bank is fully able to support our economy and when we get good value”.
Does the Minister really think that those tests have now been met?
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Although we have always supported the eventual return of RBS to the private sector, is it not essential that the Treasury get back as much money as possible to help pay down the national debt? Why the rush when the share price is so far below the break-even point? RBS had to be bailed out urgently, but it does not have to be sold off at the same speed. The Minister should not give the impression, either, that the Governor of the Bank of England is telling Ministers that the price is now right, because he makes it very clear in his letter that questions of valuation are entirely for the Government.
Before Government Members start pretending that the RBS rescue was somehow not a matter of consensus at the time, we are not going to let them re-write history. The truth is that the Chancellor did not oppose the urgent rescue of RBS at the market price back in 2008. The National Audit Office says that the rescue price was “justified” and the Institute for Fiscal Studies says it was
“not obviously unfavourable to taxpayers”.
They know full well what the consequences would have been if the bank had gone under.
On the specifics, will the Minister clarify for the record exactly what the Government accept the break-even share price for the bank to be? The figure of a potential £7.2 billion loss might be understating things, because the Rothschild calculation she mentioned nets off the fees the Government have received from the bank since 2008.
On Lloyds, the Treasury has already pledged that shares sold through the Government’s trading plan will not be sold for less than 73.6p—the price the Government paid for them. What is the equivalent red line below which the Treasury would not sell an RBS share? Why can the Minister not give us more detail about precisely when the sale will commence and what impact she predicts it will have on debt reduction?
As for the extremely dodgy claim that if we roll everything together, stand on one leg and squint a bit, losses at RBS do not really look that bad after all, is not that a bit like saying, “I’ve sold the house and lost a fortune, but don’t worry because I got a great deal on the car”? Come off it! The Government cannot pretend they are not making a loss on RBS just because they are making a gain on completely separate assets elsewhere. At a time when the Chancellor is reportedly on the brink of axing £5 billion from tax credits for children of working parents, should not the Government be far more careful not to lose billions more by rushing a sale on RBS? Everyone knows that when it comes to getting value for money, they have poor form: just look at the fire sale of Royal Mail.
We have to ask what the real reasons for this hasty sell-off are. We saw in the March Budget that the Chancellor rushed forward asset sales in order to just about meet the Treasury’s debt target. Is he repeating the same thing before the emergency Budget, regardless of the best price for the taxpayer? Or perhaps this is the Chancellor trying to prove his ideological credentials as part of his leadership bid, to impress all those new Conservative Back Benchers. Taxpayers need to know that there are sound reasons for this and that he is not doing it just to suit himself. We have a hidden Chancellor
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and a hidden agenda. It is now for the Government to justify the claim that they are putting taxpayers’ interests first.
Harriett Baldwin: Clearly, the Chancellor is not dodging any difficult questions because I did not hear any difficult questions from the hon. Gentleman. It is a bit rich that the new shadow Chancellor has chosen to make his first attack on the Government’s economic policy by drawing attention to his party’s woeful track record on bank regulation and by publicly disagreeing with the advice of the Governor of the Bank of England.
Last week the hon. Gentleman told this Chamber:
“I have had plenty of time to reflect on the result of the general election. Obviously, we are disappointed with it and we will review our policies accordingly”.—[Official Report, 4 June 2015; Vol. 596, c. 789.]
Clearly, that reflection does not include apologising for the lax regulation of our banking sector or realising that the British people do not want a Government who are committed to borrowing more, spending more and nationalising more. Above all, the hon. Gentleman’s reflection clearly does not include recognising that his mentors, Gordon Brown and Ed Balls, paid a high price for their intervention in the Royal Bank of Scotland. I will take no lectures on economic competence from an Opposition party that in office sold off the country’s gold reserves at an all-time low, crashed the banking system and the economy, and left us with the biggest peacetime deficit in our nation’s history.
I will answer the hon. Gentleman’s questions. He asked whether the Government will publish a break-even share price for RBS. I do not know whether he is Mystic Meg, but I do not know exactly at what price the sales will be made. The hon. Gentleman will have seen the Rothschild report that we have published today. Under his Government, it was forecast in 2009 that the bank interventions would result in a total loss of between £20 billion and £50 billion. We have turned the economy and the banking sector around, and as of this week the Rothschild report estimates that the overall sum total of the interventions will benefit the taxpayer by £14 billion.
Mr Andrew Tyrie (Chichester) (Con): First, may I warmly welcome the Minister to her new role? She has a great job and I congratulate her on obtaining it. May I also warmly welcome her statement? We need to grasp that the loss has already occurred: it took place in 2008. It was made possible by poor regulation and it was made certain by shocking incompetence by the RBS board.
The Rothschild report was made available in the Vote Office only a few minutes before the end of the previous statement, so I have had only a brief chance to look at it. The overall surplus identified from the total sales of financial sector interventions is £14 billion, but a footnote makes it clear that that excludes the cost of funding. I gave the Minister only a few moments’ notice that I would raise this issue, but I would be extremely grateful if she could say what the cost of funding is and what the number would be, were it included in the table.
Harriett Baldwin:
I congratulate my right hon. Friend on his unopposed re-election as Chair of the Treasury Committee. That he asks a question about the footnote illustrates his forensic reading of the published materials.
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As he knows, at the end of 2009 the estimate was that the cost of bank interventions would range between a £20 billion loss and a £50 billion loss. As of last week, the Rothschild report estimates that that situation has completely turned around, and that the overall recovery from the bank interventions is in the order of a £14 billion magnitude. The overall cost of funding on our Treasury issuance is at record lows thanks to the prudent economic management of my right hon. Friend the Chancellor.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP): I welcome early sight of the statement.
The Government are fond of talking about long-term economic plans—[Hon. Members: “Hear, hear!”] Absolutely. However, a sell-off is not a strategy, and a strategy for the banking sector is completely missing from the statement. My first question is this: is it not the case that there remains scope for a proper review of the options for the future of RBS, such as the consideration of creating challenger banks out of it? Secondly, yesterday I asked the Secretary of State for Scotland about the branch closures the length and breadth of the country that are being announced by RBS. Is that part of the price that people are expected to pay for this rushed sell-off? Thirdly, the statement mentioned concern about the drag on the economy and the poor performance in supporting small and medium-sized enterprises, so will the Minister explain precisely how the policy will further strengthen the SME sector?
Harriett Baldwin: I welcome the new hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin). What a refreshing change it is.
The hon. Gentleman asks about Royal Bank of Scotland in particular. I gently point out that if the Scottish National party had won the independence referendum, there would be no ability to intervene in the banking sector in the way that the UK Government intervened.
The role that Royal Bank of Scotland plays as the most significant lender in the SME sector is critical. It has not been able to play its full part because of public ownership. The Bank of England letter states that a phased return of RBS to private ownership would promote financial stability and lead to a more competitive banking sector, in the interests of the wider economy.
Dr Liam Fox (North Somerset) (Con): I welcome my hon. Friend to her long-overdue promotion. Will she confirm that any cost calculation will have to take into account the fact that the sale will reduce the deficit, and therefore prevent any extra debt interest that would otherwise be incurred by this country? Will she tell the House that putting the banks into the private sector is not a matter of ideology, but simply because, as previous privatisations have shown, when companies are free in the private sector they make more profit, pay more taxes and serve their customers better?
Harriett Baldwin:
My right hon. Friend is absolutely right, and I thank him for his kind words of welcome. He is correct to say that we are not doing this purely for price reasons. It is important to take into account the wider economic impact. That is why I am grateful to the Governor of the Bank of England for highlighting
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the ways in which a banking sector free of public ownership will allow more capital, more restructuring and more competitive characteristics in our economy.
Mr Pat McFadden (Wolverhampton South East) (Lab): I, too, welcome the Minister to her post. In her statement, she rightly draws attention to the scale of the bail-out of RBS. For the avoidance of doubt, will she give the House a quote from the Chancellor, who was shadow Chancellor at the time, criticising either the bail-out in principle or the share price paid by the Government of that time?
Harriett Baldwin: I thank the right hon. Gentleman for his kind words.
As the Chancellor made clear in his Mansion House speech last night, he was responsible for the decision point yesterday and for articulating a future path away from the situation he inherited. The right hon. Gentleman will remember that the Treasury predictions at the time of the interventions were that they would cost the taxpayer between £20 billion and £50 billion overall. The situation has moved on and the economy has recovered substantially from the largest recession in our peacetime history. It is time to put the banking sector into a new settlement, and to have a new settlement for our financial services.
Antoinette Sandbach (Eddisbury) (Con): Sir Mervyn King, the former Governor of the Bank of England, said:
“Why…did the Bank of England not do more to prevent the disaster? We should have. But the power to regulate banks had been taken away from us in 1997. Our power was limited to…preaching sermons.”
Will my hon. Friend confirm that the Bank of England now has the power to do more than just preach sermons?
Harriett Baldwin: I welcome my hon. Friend to the House and congratulate her on an excellent question. The tripartite arrangements for bank regulation put in place by the former Member for Kirkcaldy and Cowdenbeath let the country down. The work of the last Parliament was to reframe our financial services regulation, so that the Bank of England could take responsibility, and so that we have a single point of regulation for the financial sector overall, supplemented by the important work of the Financial Conduct Authority on behaviour, and by the Prudential Regulation Authority. It is incredibly important that we have moved on from the tripartite arrangement. We do not want another situation in which the British taxpayer has to bail out a bank.
Mr Dennis Skinner (Bolsover) (Lab): Is it not just conceivable that this mad rush is being perpetrated because the Government know that, with more than 50 rebels on the Back Benches, they are likely to lose their majority sooner rather than later, and lose credibility in the process? This is coming from a Chancellor who has added more in five years to the national debt than all the Labour Chancellors put together. He has been blaming Labour for bailing out the banks, but he supported it. He is now bailing out his friends in the City.
Harriett Baldwin:
What can I say? It is extraordinary. I do not suppose we heard that kind of rant when the former Member for Kirkcaldy and Cowdenbeath was
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intervening in the banking sector. Perhaps the hon. Gentleman has not noticed that, in the single vote on legislation on Second Reading we have had in this Parliament, the Government won by a majority of 491.
[
Interruption.
]
Mark Garnier (Wyre Forest) (Con): When the hon. Member for Bolsover (Mr Skinner) has finished, may I welcome the Minister to her place? She brings with her a great wealth of experience from the City. Part of that wealth of experience is a full knowledge of the sunk cost fallacy. Does she agree that it is completely ludicrous to say that an investment decision made in 2015 should be based solely on the information known in 2008, and that that view betrays a staggering lack of knowledge about the investment process among those opposed to selling the stake in RBS at potentially a loss?
Harriett Baldwin: I thank my hon. Friend and constituency neighbour for his question, which shows his depth of knowledge. He is right. In my years of managing portfolios, what I paid for investments in the first place was a fact, but managers also have to factor in the future. None of us has a crystal ball. My hon. Friend’s words are wisely taken.
Helen Goodman (Bishop Auckland) (Lab): I welcome the hon. Lady to her new role at the Dispatch Box. Everyone agrees and understands that the RBS shareholding needs to be transferred to the private sector. The Rothschild report states that if shares were sold at the current share price there would be a paper loss of £7.2 billion, which by anybody’s standards is a lot of money. What the report does not show, however, is why the public benefits add up to £7 billion. Could the Minister explain that please?
Harriett Baldwin: I thank the hon. Lady, who has great knowledge of these matters, for her question. Any estimate—and the one in the Rothschild report is no different—will be based on the current market conditions. The number that the report cites is, I think, as at 5 June. I note that the share price of RBS has performed well today; there will be different prices in the years to come. The Government have made it very clear that this will not be a quick process; it will take time. We can only project as at today’s prices the £7 billion figure, but it may or may not be a bigger number in the future.
Alan Mak (Havant) (Con): Does my hon. Friend agree that the only reason we can start selling off our stake in the bank is the growing demand in our economy thanks to our long-term economic plan?
Harriett Baldwin: I welcome my hon. Friend to his place. I know he has a great deal of experience in these matters. He is absolutely right that this is a key part of the long-term economic plan. We cannot have a healthy economic recovery without a healthy financial sector. I do not think that anyone in this place would argue that we can have a healthy banking sector when a large chunk of it, as my right hon. Friend the Chancellor has said, is in taxpayers’ hands.
Mr David Hanson (Delyn) (Lab):
Does the Minister think it would be prudent to have pre-scrutiny by Parliament, either through the National Audit Office or
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the Treasury Committee, of the Government’s objectives in the sale and the money they could be seeing? Will she also say a word about RBS’s liabilities? For example, there is currently a mis-selling inquiry into the enterprise finance guarantee scheme, which my constituents are facing. Who will ultimately be responsible for those liabilities?
Harriett Baldwin: The right hon. Gentleman asks a good question. I am sure the relevant Committees will take a close interest in this matter, because it is obviously a very large public investment. In terms of the liability side of the equation, he will be aware that there are a number of different pending regulatory matters that affect RBS. He will also be aware, as I think it says in the Rothschild report, that the market is aware of these things and will factor them into the price of the shares.
Mr Jacob Rees-Mogg (North East Somerset) (Con): May I, too, welcome my hon. Friend to her post? I also welcome the shadow Chancellor, although I think we rather miss the more rambunctious approach of his predecessor. My hon. Friend the Member for Wyre Forest (Mark Garnier) illustrated the fundamental investment fallacy of not selling things on the basis of an historic price. Does my hon. Friend the Minister agree that the only reason the Opposition can take this foolish position is that clause IV may be out of their rulebook but it remains within their hearts?
Harriett Baldwin: I thank my hon. Friend for a very good point, very well made. It is absolutely the case that we are responsible for ensuring that, as we go forward from this decision point, we get the best possible value irrespective of what the previous Government paid, which was, in retrospect, too high.
Mike Kane (Wythenshawe and Sale East) (Lab): I welcome the Minister to her post. One would expect that the duty of the Chancellor would be to sweat the assets as his disposal, but with the fire sale of Royal Mail and now RBS, the taxpayer is being let down, having had to endure all the pain of the worldwide economic crash caused by the banks with none of the gain in this case.
Harriett Baldwin: I really will not take any lectures on letting the country down in terms of economic management. The people who suffer the most when the banks fail, the regulatory system fails and the economy fails are the very poorest in our society. It is outrageous for the hon. Gentleman to suggest that the economic recovery, the clear turnaround in this portfolio of legacy assets and clearing up the mess that his party left behind is anything other than progress.
Mary Robinson (Cheadle) (Con): It is right for the shadow Chancellor to say that the taxpayers want their money back. It is also right, and I hope my hon. Friend agrees, that people should listen to the Governor of the Bank of England when he warns that delaying the sale of our stake in RBS would lead to a considerable net cost for the taxpayer.
Harriett Baldwin:
I welcome my hon. Friend to her place. I agree with her. She points out an important passage in the letter from the Governor of the Bank of
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England. He believes, for all sorts of reasons from where he sits as our overarching economic regulator, that it is important that we come to this decision point and staging post. I also emphasise that this process will take some time. It is not something that will happen today, tomorrow or the next day. The process of clearing up the mess left behind by the previous Government is a lengthy one.
Caroline Lucas (Brighton, Pavilion) (Green): I, too, welcome the hon. Lady to her post. Will she tell us whether the Chancellor intends to make a habit of announcing policy to a roomful of bankers, based on a secret review by an investment bank with no public consultation? Did he even consider the alternatives, such as turning RBS into a network of local stakeholder banks, like they have in so many other countries, as a perfect example of localism in practice?
Harriett Baldwin: I think my right hon. Friend was delighted to be invited back to the Mansion House to make a speech again this year. The question the hon. Lady asks about locally owned banks indicates that she favours a system of public ownership of our banking sector which, overall, the Government disagree with.
Jeremy Quin (Horsham) (Con): Having worked on the sale of Northern Rock—I refer the House to my entry in the Register of Members’ Financial Interests—may I congratulate the Government on their successful asset sale programme to date? As referenced in paragraph 2.2.2 of the Rothschild report, the benefits of these sales are not just direct for the taxpayer; they are indirect as well. They may result in increased lending and more mortgage approvals. Will my hon. Friend confirm that those indirect benefits will be taken into account when we judge the success of this programme?
Harriett Baldwin: I welcome my hon. Friend to his place, and also welcome his wealth of experience and knowledge in this matter, which he ably demonstrates in his question. The sale will bring wider benefits to the overall economy. It will help us to continue to make progress in making the banking sector more competitive, and may result in a more competitive financial services sector and mortgage sector. That position is echoed not only in the Rothschild report, but in the Governor of the Bank of England’s letter.
George Kerevan (East Lothian) (SNP): May I take the Minister back to page 11, table 2 and the footnote, because we did not get an answer when this was first asked? The table lays out not the forecast recoveries but just a statement of where we are at the moment, which could change. It does not include the cost of the funding of the interventions; in other words, the cost of the Treasury paper that was created to buy the assets in the first place and on which interest is being paid. Will the Minister please answer the question—what was the cost of funding the interventions?—so that we know the true cost, not the £14.3 billion?
Harriett Baldwin: The hon. Gentleman is absolutely right that the table is a snapshot of a moment in time. As time progresses, we will no doubt be able to pin down exactly the overall costs of clearing up the mess that Labour left behind.
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David Rutley (Macclesfield) (Con): I welcome today’s statement and the steps being taken to return RBS to private ownership. Will my hon. Friend confirm that the steps set out in the markets review will help to tackle what the Governor of the Bank of England has called a “culture of impunity”, which has been too prevalent in investment banking?
Harriett Baldwin: My hon. Friend is absolutely right to highlight a very important part of the Governor of the Bank of England’s announcement last night—the “Fair and Effective Markets Review”; bringing a range of fixed income, currency and commodity markets within the regulatory perimeter; and aspiring to be not only the most competitive country in the world in which to locate a financial services business, but the one with the best, cleanest and most competitive regulatory system.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): I join others in welcoming the hon. Lady to her new role. The sale price of Royal Mail shares last night— £5 per share—totally vindicates the cross-party conclusion of the former Business, Innovation and Skills Committee that Royal Mail shares were underpriced in the original sale. One reason was the over-reliance on institutional investors and the under-participation of the public. Will the Minister assure us that that lesson will be learned in the sale of RBS?
Harriett Baldwin: I have to disagree with the hon. Gentleman. A long time has passed since the initial flotation, during which the markets have done a lot better. The markets have welcomed the re-election of a strong Conservative Government who have turned the economy around and made huge improvements in our public finances. It is largely due to that that the price is so much higher.
Bob Blackman (Harrow East) (Con): As we return RBS to the private sector, there are three alternatives. One is for the Government to hold on to the shares for as long as possible in the hope that the share price increases. The second is to sell the whole lot in one go and hope that we get the right price. The third is a phased sale that maximises the income for the taxpayer. Which does my hon. Friend believe is the right option?
Harriett Baldwin: My hon. Friend ably summarises a range of options. Today’s statement clearly illustrates that we have rejected his first option of doing nothing. The Government have never shrunk from making difficult decisions that are in the right interests of the country’s economic future. On the second option of selling everything in one go, it is not our opinion, given the size of the holding and as the reports make clear, that the sale can be done in short order; it will take a period of time—which leaves us with the third option.
Peter Dowd (Bootle) (Lab): Has the Minister read, “Freeing Britain to Compete”, produced by her party in 2007 and endorsed by the Prime Minister and, I believe, the Chancellor, which called for a vast range of regulation in financial services to be abolished or watered down, including in relation to money laundering? In particular, has she read the part that says that the Labour Government
“claims that this regulation is all necessary. They seem to believe that without it banks could steal our money”?
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Harriett Baldwin: No, I have not read that report.
Robert Jenrick (Newark) (Con): Is not the reason it is difficult to get our money back from RBS that, other than the Greek banks, no other major bank in the world is in such a parlous, unprofitable state, the root causes of which go back to the last Labour Government—a poor loan book, terrible misconduct, resulting now in catastrophic fines, and ill-judged mergers? Even if we sell the shares at a loss, would that not merely be a tragic reminder to the British public of the failure and economic incompetence of Labour?
Harriett Baldwin: I could not put it better myself.
Kevin Brennan (Cardiff West) (Lab): As I understand it, the stake was originally acquired for £5 a share and the Government are selling them for about £3.50 a share and claiming that the taxpayer is making a profit. On that basis, with the weekend approaching, is the hon. Lady prepared to lend me £20? I will give her a tenner back next week.
Harriett Baldwin: I have just been informed by my hon. Friend the Member for Croydon Central (Gavin Barwell) that the hon. Member for Cardiff West (Kevin Brennan) still owes him a fiver, which he lent him last week.
Huw Merriman (Bexhill and Battle) (Con): Having spent the last seven years working on the Lehman Brothers unwind and repaying creditors in full, I pay tribute to the thousands of RBS staff across the nation, including those at Cotton Street, Bolsover, for returning the bank to health. Will the Minister confirm that selling the initial stake will make it much easier and more efficient to sell the remainder of the stake?
Harriett Baldwin: I welcome my hon. Friend, who has a wealth of experience in insolvency practice that he has clearly put to good use in his first question. Rothschild and the Bank of England Governor have said that one of the challenges facing this stake is the illiquidity of the float—the stock is not liquid enough to be in any of the major indices, for example—so there are liquidity benefits and potential price benefits from putting an initial float in the private sector.
Kelvin Hopkins (Luton North) (Lab): May I welcome the hon. Lady to her post and say how much I agreed with the measured, sensible and absolutely correct points made by my hon. Friend the Member for Bolsover (Mr Skinner)? I can confirm to the hon. Member for North East Somerset (Mr Rees-Mogg) that the old clause IV is certainly alive in my heart. In 1983, I was pleased to stand for election on a manifesto that called for the nationalisation of the banks. Had the banks been nationalised—in public ownership and accountable to the public—all the profits would have accrued to the public purse and they might have been shielded from the world banking crisis. By giving RBS back to the private sector, are we not simply inviting more gambling, more greed, more irresponsibility and more crises in future?
Harriett Baldwin: May I express my thanks to the British people for ensuring that we have a Government focused on the economic future of this country, not on the failures of the past and the longest economic suicide note in history?
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Graham Evans (Weaver Vale) (Con): I am delighted to welcome my hon. Friend to her place. Will she remind the House who gave Fred “the Shred” Goodwin a knighthood for services to banking?
Harriett Baldwin: I thank my hon. Friend for a good question that reminds us not only of the failure of the banking regulatory system under the previous Government, but of the rewards for failure. Labour allowed Fred Goodwin to walk away with an enormous pension and a knighthood.
Debbie Abrahams (Oldham East and Saddleworth) (Lab): I welcome the hon. Lady to her new role, but gently remind her that the current debt to GDP ratio is 80%, which is 20% higher than it was after a global economic crisis and our recapitalisation of the banks. On the current RBS share price, there would be a loss to taxpayers of £13 billion, if all the shares were sold today. Is this not incredibly insensitive to the millions of disabled people waiting for personal independence payments and to the carers who have seen £3.5 billion cut from social care and who are really struggling in this, carers week, and will she confirm that the Government will sell RBS only at a profit to the taxpayer?
Harriett Baldwin: The hon. Lady’s question started off very well by acknowledging the risks of high public debt. It is incredibly important for those people whom she rightly draws our attention to that we have a strong and healthy economy, and a strong and healthy financial sector is part of the solution. I am not sure, however, whether she is arguing that we should borrow more for longer by holding on to the shares for longer.
Julian Knight (Solihull) (Con): Is my hon. Friend aware that just prior to the financial crash, the then Labour Government were running an underlying fiscal deficit equivalent to 6% of GDP—twice the level recommended for the EU? Is it not a bit rich, therefore, for Labour Members to dish out advice on both the management of the banks and government finances?
Harriett Baldwin: I welcome my hon. Friend to his place, and he is right that I am not prepared to take any lectures on bank regulation, fiscal responsibility or economic management from the Labour party.
Clive Efford (Eltham) (Lab): I welcome the hon. Lady to her position, but only the Conservative party could come here and say that this is a benefit to the taxpayer when it is selling this bank at a cost to the taxpayer. This may represent another cash injection, but on this occasion there is nothing left to get taxpayers’ money back further down the road. Can she recall any time when her party criticised the price paid for those shares at the time we bailed out HSBC?
Harriett Baldwin:
I simply do not accept the hon. Gentleman’s line of argument. If he is such a Mystic Meg, perhaps he will tell me the date on which the price of this bank, which has been completely restructured over the last few years, will change. Rothschild has provided an estimate of the current state of the overall portfolio of bank interventions. I remind the hon. Gentleman that while in 2009 everyone—including Her Majesty’s Treasury—expected that these interventions
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would cost the taxpayer between £20 billion and £50 billion, evidence today suggests that it will be of overall benefit to the taxpayer.
Mr Deputy Speaker (Mr Lindsay Hoyle): I remind Members that if they want to ask a question, they need to stand. I am not always sure whether Members have changed their minds when they sometimes stand and sometimes do not stand. It also helps if we have brief questions and shorter answers, which should allow everybody into the debate.
Heidi Allen (South Cambridgeshire) (Con): It strikes me that the concern is about the process at the beginning of the sale. All the advice—from the Bank of England and Rothschild—is about phasing, which is part of the journey to return to profitability. May I suggest a rebranding exercise? Perhaps we should call this something different—I know what: a long-term economic plan!
Harriett Baldwin: I welcome my hon. Friend and her excellent question. She is absolutely right that today’s statement announces a decision point on the journey of implementing our long-term economic plan. Part of that is returning the financial sector to its normal state of health.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): The £3.50 share float price relies on pension fund managers who run Abbey Life, Aberdeen Management, AXA, Clerical Medical, Scottish Widows, six councils, Whitbread, Lloyd’s of London, BAE, Boeing and, of course, Legal and General and the university superannuation schemes, which have already ruled out buying any RBS shares. What they all share is litigation with RBS. Why would they use their customers’ money to buy shares in a company or a bank such as RBS, against which they are taking litigation?
Harriett Baldwin: The hon. Gentleman points out something that appears in the Rothschild report—that the bank still faces a range of uncertainties, particularly regarding regulatory action from America. The price today therefore reflects that information.
Bill Wiggin (North Herefordshire) (Con): I welcome my friend and parliamentary neighbour to her new role—she has a tremendous wealth of City experience. My constituents would like to know whether the Government expect the share price to go up, in which case they ought to buy some, or whether it will go down, in which case we should sell considerably more.
Harriett Baldwin: I thank my constituency neighbour for his question. As he rightly acknowledges, neither he, his constituents, the Government or the market have perfect foresight into whether the shares will go up or down. They will go up or down, and it will be a phased programme for reducing the holdings. Today we are announcing the decision point and the potential for an initial sale.
Diana Johnson (Kingston upon Hull North) (Lab):
I, too, congratulate the Minister on her appointment. The Government have consistently talked about banking
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reform. I am particularly concerned about the small start-ups that find it difficult to access credit, especially in areas such as Hull where there is low private wealth. With the return to the institutional investors, will the Government now decide to have a national investment bank with a regional base that focuses specifically on small and medium-sized enterprises?
Harriett Baldwin: I thank the hon. Lady for her kind words. She is absolutely right to highlight this country’s challenge on access to finance, particularly for the small and fast-growing sector for which bank finance might be appropriate, but it might want to move on to something else. My right hon. Friend the Secretary of State for Business, Innovation and Skills is looking at a package of measures to make sure that businesses in Hull and elsewhere are able to have a wider range of choice in accessing finance.
David Mowat (Warrington South) (Con): As far as I can make out, the position of the Opposition is that if we delay this sale, the shares might go up by 35%, and they might break even, which would be a good thing. Of course, though, they might go down. Does the Minister agree that they have no right to speculate with other people’s money, particularly when financed by an overdraft? If they believe this, they should buy some shares themselves.
Harriett Baldwin: There seems to be no pleasing Opposition Members. They are not happy when Royal Mail shares go up and we sell them for more money; and they are not happy when the RBS share price is where it is today. They seem to argue that the best thing to do, in all these situations, is to borrow more, spend more and invest more in the banking sector.
Geraint Davies (Swansea West) (Lab/Co-op): I welcome the Minister to her post and offer a sobering thought to the Chancellor, who might need it after his Mansion House speech. Given that the nationalisation of RBS was in response to an unforeseen sub-prime debt crisis in America, does the Minister agree that changes to the law to require a budget surplus every year might reduce the fiscal flexibility we need to respond to such a crisis in the future—even by renationalising the banks, if necessary?
Harriett Baldwin: I am sorry that the hon. Gentleman’s invitation to yesterday’s dinner got lost in the post—or perhaps he was not invited. What I do not understand about his question is why he seems to argue for ongoing fiscal irresponsibility, which is what got us into this mess in the first place.
Henry Smith (Crawley) (Con): I congratulate my hon. Friend on her appointment as Economic Secretary, and I congratulate the Government on further recovering our economy on behalf of taxpayers. Mention has already been made of the Governor of the Bank of England saying that, for the sake of the taxpayer, we need to get on with the sale sooner rather than later. Mark Carney also mentioned the need for stricter custodial sentences for those convicted of financial mismanagement. Although this is not my hon. Friend’s brief, will the Government consider it?
Harriett Baldwin:
I welcome my hon. Friend’s question, and he is absolutely right that the Governor made a powerful speech yesterday, outlining the steps he and
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the regulators are taking to end the age of irresponsibility. The Government welcome the recommendations of the FEMA—fair and effective markets—review and hope that they will be taken forward internationally via the Bank for International Settlements and under the Governor’s leadership.
Kate Green (Stretford and Urmston) (Lab): I warmly welcome the Minister to her new post. In a week when he have heard that the Hong Kong and Shanghai Bank is planning to refocus its investment and attentions away from Europe to the far east, what implications does the Minister think this sell-off could have for the long-term headquartering of the Royal Bank of Scotland in Edinburgh?
Harriett Baldwin: I thank the hon. Lady for her warm words. The Government noted the points made by HSBC in its report this week. We are proud of the fact that the UK remains one of the most attractive and competitive places in which to locate a financial services company and a bank. It is essential, in making us fully competitive in that regard, that we take the steps we are announcing today.
Barry Gardiner (Brent North) (Lab): I, too, congratulate the hon. Lady on her appointment. She said in her statement that the Government were not responsible for the bail-out of RBS, but does she not agree with the Governor of the Bank of England that public ownership
“prevented enormous financial contagion at a time when the UK financial system was extremely fragile”?
Will she also confirm that the Chancellor is on record as insisting that the money spent on saving RBS from collapse would be recouped in full? Can she explain why he has changed his mind, by telling us how the perceived public benefit from the sale to which she referred will exceed the £7 billion quantified loss that has been calculated in her own report?
Harriett Baldwin: The hon. Gentleman has failed to apologise for the regulatory system that allowed us to get into this position in the first place. The letter from the Governor of the Bank of England is on the record. The hon. Gentleman must accept that this is part of the improvement in the overall long-term economic outlook—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Mr Gardiner, you must come back and wait for the next Member to speak. You know the courtesies of the House. Members must not do that. It is all about respect, and we must have tolerance as well, on all sides.
If the Minister has finished her answer, I will call David Nuttall.
Mr David Nuttall (Bury North) (Con): The Minister experienced the singular disadvantage of being my Whip in the last Parliament. I am pleased to welcome her to her new position.
I regard this share sale as a tremendous opportunity for the Government to widen share ownership, just as the Government of the late Lady Thatcher did in the 1980s. May I urge the Minister to make as many shares
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as possible available to small investors, to make the application process as simple as possible, and to set the minimum level as low as reasonably possible?
Harriett Baldwin: I welcome my hon. Friend back to this place. Let me say what a joy it was to be his Whip for so many years. One always knew where one stood with him, and that also applies to the very sensible question that he has just asked. I think, though, that he needs to hold his horses in relation to RBS. As he will know, the manifesto on which he stood committed us to a wide retail offer of Lloyds Bank shares at some time in the not too distant future, and we will be dealing with that sale first.
Craig Williams (Cardiff North) (Con): Will my hon. Friend assure me that we will never return to the system of light-touch regulation that was advocated and encouraged by the former shadow Chancellor when he was City Minister?
Harriett Baldwin: I welcome my hon. Friend to the House. He is right: over the past five years, we have taken painstaking steps to establish a system of regulation in the financial services industry that will ensure that never again will the taxpayer be forced to bail out a bank.
Richard Fuller (Bedford) (Con): As my hon. Friend will know, there is a direct connection between the tolerance of reckless and illegal activities in financial institutions and the destruction of valuable banks such as RBS. Will she confirm that she will allow the Government to give full force to any recommendations concerning the fair and effective markets reform that was announced by the Governor of the Bank of England yesterday? Will she also confirm that unlike the last Government, who showered honours on bankers who were reckless, this Government will bring the full force of the law to bear?
Harriett Baldwin: I am pleased to welcome my hon. Friend back to the House. He has made an important point. In his speech, the Governor said that it was right to fine many financial services organisations that had behaved badly in both the recent and the distant past, because such behaviour reduces banks’ capital. Responsibility needs to fall on the individuals who are culpable, and also on the management of those individuals. Reducing the capital that is available through regulatory actions contracts the supply of lending to small businesses.
Scott Mann (North Cornwall) (Con): May I draw attention to my entry in the Register of Members’ Financial Interests? I am a former Royal Mail employee, and a small shareholder.
How does my hon. Friend think posties up and down our great country will have responded today to the announcement of a 1% gift in shares, and the announcement of the continuation of our universal service obligation?
Harriett Baldwin: I welcome my hon. Friend to the House. He speaks with great knowledge and eloquence about the real experience of the hundreds and thousands of men and women up and down the land on whom we rely every day for our post. I am delighted to be part of a Government who have enabled them to own shares in the organisation for which they work.
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European Union (Finance) Bill
1.35 pm
The Financial Secretary to the Treasury (Mr David Gauke): I beg to move, That the Bill be now read a Second time.
This is a short but important Bill. Let me begin by explaining the background to it. A little over two years ago, at the February 2013 European Council in Brussels, the Prime Minister secured an historic deal. On the expenditure side, it meant that the EU budget was cut in real terms for the first time, and on the revenue side, it protected our rebate.
As Members will recall, under the financing arrangement that was agreed in 2005 and is currently in force, the then United Kingdom Government gave away part of the UK rebate. That has had, and will continue to have, an impact on the UK’s contribution to the EU budget. The European Commission estimated the cost at £6.6 billion over the previous seven-year financial framework, and in future it will cost us about £2 billion a year.
Kelvin Hopkins (Luton North) (Lab): I was one of those who complained bitterly about the supposed renegotiation of the British rebate, which was actually a giveaway. What is the cumulative cost, and will the Government seek to reverse the position that was negotiated in 2005?
Mr Gauke: As I have said, the estimated cost over the previous seven years was £6.6 billion, and in future it will be about £2 billion a year. I understand the point that the hon. Gentleman is making: he want us to clear up yet another mess that was created by the last Government, although I acknowledge that he was as disappointed by his Government as we were. As for what the UK Government can do about the financial position, let me explain what we did in the 2013 negotiations. Whereas the last Government had agreed to an 8% increase in the spending ceiling, we proceeded with an agenda that was in the UK’s interests. This time, the two sensible things that we could do to protect the British taxpayer were to get the overall budget down and to protect our rebate, and that is precisely what we achieved.
The agreement that the Prime Minister secured back in 2013 was good for Europe and good for the United Kingdom. At the time, some argued that it was not possible, and that the interests of the UK were in some way incompatible with the wider aims of the European Union, but the Government showed them that they were wrong.
John Redwood (Wokingham) (Con): Does the Bill not endorse a system that takes £12 billion of our taxpayers’ money and spends it elsewhere on the continent, while we receive not a penny of benefit? If the British people voted “out”, they could presumably be given a £12 billion tax cut to celebrate our leaving the European Union.
Mr Gauke:
My right hon. Friend has taken me in the direction of the wider issue of our EU membership. As became clear this week, the people of the United Kingdom will have an opportunity to vote on that, but this is the system that applies while we are members of the
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European Union. My right hon. Friend may wish to present his argument during a future debate, but what cannot be in doubt is that the Prime Minister’s achievement during the 2013 negotiations constituted a huge improvement on the record of the last Government. It protected the rebate, and it ensured, for the first time, that we were able to reduce the overall expenditure of the EU over the multi-annual financial framework period.
Barbara Keeley (Worsley and Eccles South) (Lab) rose—
Mr Gauke: Before I give way to the hon. Lady, may I welcome her to her position in the shadow Front-Bench team?
Barbara Keeley: The hon. Gentleman is very kind. I just wonder whether he intends to mention the debate in the House and the votes, particularly by Labour Members, that gave the Prime Minister such a strong negotiating position and played an important part in strengthening his hand at that time. Will the hon. Gentleman acknowledge that?
Mr Gauke: It would be a bit rich for the Labour party to claim this success as its own. We have a record of a Conservative Prime Minister who was able to protect the rebate in full as it stood, and also managed to reduce EU expenditure. That is in stark contrast to the record the previous time this process was undertaken in 2005, when part of our rebate was surrendered at significant cost, as I have already set out.
Mr Peter Bone (Wellingborough) (Con): Does my hon. Friend remember that at that time the House was sold a pup on the basis that Mr Blair said reform of the common agricultural policy would mean it would be cost-neutral, which turned out to be completely false?
Mr Gauke: As usual, my hon. Friend’s memory is correct. That was the argument; we were told this was part of some wider deal, but we did not see the benefits of that, as he rightly highlights.
Stephen Gethins (North East Fife) (SNP): The issue of the CAP has just been raised. By 2019 Scotland’s pillar one per hectare payment rate will be the lowest in the EU. Will the Minister ask the Secretary of State for the full pillar one convergence uplift that was received, as was called for by the Scottish Government and supported across the parties in the Scottish Parliament?
Mr Gauke: The Conservative-led Government have a very good record in protecting the interests of all parts of the United Kingdom. Indeed, in terms of some of the changes we might have seen in the structural funds, we ensured all parts of the UK were treated fairly, which would not otherwise have been the case. So all I would say to the hon. Gentleman is that of course the Government are determined to protect the interests of all parts of the UK, and, looking at the longer term future of the EU, the CAP does need the type of reform that was once promised and not properly delivered by the last Labour Government.
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Mr Gauke: Let me make a little progress.
This Bill relates only to agreement reached on the revenue side of the EU budget. This is an area that receives much less interest, but is no less important—nor any less of a success for the UK—than the cut to the EU budget. I would like, however, to first remind hon. Members of the details of the deal reached on expenditure, before moving on to revenue, the nub of the Bill.
When others argued that the EU would never reform, and certainly would not cut its budget, we argued that a cut in the EU budget was the right thing to do, especially at a time when so many countries had had to make difficult decisions in their own budgets. We argued that EU spending should be focused on where it could provide real growth, in areas such as high-value research and development, and tertiary education—from which Britain’s universities are particularly well-placed to benefit. We made sure that the UK would not be overly disadvantaged by reductions in spending: so, for instance, we ensured that structural funds would continue to flow to our less well-off regions. Above all, we argued from the point of the view of the British taxpayer, who expects and deserves good value for money—and I should add that the British taxpayer is not unique in this respect. So the seven-year EU budget deal—2014 to 2020—secured by the Prime Minister represents a real-terms cut to the payments limit to €908 billion in 2011 prices. Overall spending on the CAP over this period will fall by 13% compared with the 2007-13 EU budget period. At the same time, spending on research and development and other pro-growth investment will now account for 13%, a 4% increase on the previous budget. That is a good deal for Britain, a good deal for the taxpayer, and very different from the previous time round.
Kelvin Hopkins: Returning to the issue of the structural fund income to Britain, would it not be easier if we had control of those funds? We could allocate them better, and we would be better off by not having to contribute to the budget. Would it not be more sensible to have regional funds repatriated to Britain, so our Government can decide what and where to spend?
Mr Gauke: The hon. Gentleman makes a reasonable point and I think there is a case for particularly some of the wealthier countries in the EU determining their own priorities with the structural funds. Indeed, that has been looked at in the past.
Stephen Gethins: Since the Minister struggled with my first question, I will ask him another, this time on pillar two. If Scotland is getting such a fair deal, why will Scotland’s pillar two per hectare rate remain the lowest in the EU at about €12?
Mr Gauke: The deal Scotland gets includes support from the structural funds which have been protected as a consequence of decisions made by the UK Government in the last Parliament.
Turning to the deal secured on the revenue side, as hon. Members may be aware, the system by which EU member states finance the annual EU budget is set out in EU legislation known as the own resources decision—ORD for short. At the 2013 February Council, there was strong pressure from some member states, the Commission and the European Parliament to reform
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the way member states finance the EU budget. These included proposals to introduce a financial transaction tax and do away with the UK rebate, or at least change the way it works.
The Prime Minister stood his ground and made it clear that the UK would not agree to such proposals, nor agree to anything that changed the way our rebate worked. It was a specific objective for the UK that this new financing system would require no new own resources or EU-wide taxes to finance EU expenditure, and no change to the UK rebate, and that is precisely what we achieved.
The political agreement at the 2013 February European Council was accurately reflected in the financing arrangements which all EU member states agreed unanimously at a meeting of the Council of Ministers in May 2014. Under the agreement, which this Bill will implement, the Prime Minister protected what is left of the UK rebate, and this is maintained without any change throughout the life of this agreement.
The agreement also ensures there will be no new types of member state contributions and no new taxes to finance EU spending over this period. The new ORD does not make any changes to the way that the EU budget is financed. There are some changes in the detail of the ORD compared with the previous one, however. For example, it reintroduces reductions in the GNI-based contributions of the Netherlands and Sweden, and introduces small reductions in these contributions for Denmark and Austria. The UK will contribute to these small corrections, which will mean an additional £16 million in contributions from the UK per year compared to the last ORD; that is around 0.1% of our total gross contribution in 2014. Moreover, this will be largely offset by changes in other corrections.
John Redwood: I congratulate the Prime Minister and the Minister on defending Britain’s interests against a far worse settlement, but is it not also the case that under the pre-existing agreements if Britain grows more quickly than the euroland, which it is doing and appears that it will carry on doing, we will get caned by having to pay more tax?
Mr Gauke: Part of the calculation of member states’ contributions is based on the size of their economy. That means that bigger economies pay more and smaller ones pay less. As an economy becomes relatively bigger, it makes a bigger contribution. That is the factual situation; that is how it works.
I referred earlier to the corrections and the small reductions in the contributions from Denmark and Austria. The UK has always supported the principle of budgetary corrections set out at the 1984 Fontainebleau European Council, which gave us our rebate. In the absence of any meaningful reform on the expenditure side of the budget, we believe that those member states that make disproportionately large net contributions to the budget in relation to their prosperity, such as the UK, should receive corrections.
Mr Jacob Rees-Mogg (North East Somerset) (Con):
Further to the point raised by my right hon. Friend the Member for Wokingham (John Redwood), will the Minister explain whether there has been any change as a result of the recalculation of gross national income as the European
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Union has moved from the European system of accounts known as ESA95 to the later ESA2010, which I believe includes more of the black market? Has that move had the effect of making our economy bigger?
Mr Gauke: That is not a matter that is related to the Bill. The own resources decision uses the same formula for this financial framework as it did for the previous one. The revisions to GNI to which my hon. Friend refers are a separate matter. The element relating to the hidden economy has on occasions been somewhat overstated in this debate, but yes, there was a correction of our GNI estimates and that did require an additional sum. He will be aware of how this Government negotiated to ensure that we did not have to pay that sum up front—we were given much more time—and that the rebate applied to it.
Mr Rees-Mogg: I would be grateful if the Minister could clarify that this own resources decision is based on ESA95, as the last one was, rather than on ESA2010, which has been adopted for other purposes.
Mr Gauke: The own resources decision—the ORD—contains an element that is based on GNI. There may be different ways of calculating the GNI as it is updated. This is not related to the Bill, however. The formula remains essentially the same, and the element that comes from GNI has not changed, although there may be changes to the way in which the GNI works. Indeed, there are changes on an annual basis, because there are revisions to the number.
This new ORD requires the approval of each member state, in accordance with their own constitutional requirements, before it can come into force. The Bill will therefore give UK approval to the Council decision. The passing of the Bill will be the final action necessary in delivering the deal secured by the Prime Minister in 2013. As a result of the deal, EU spending was cut in real terms and UK contributions are forecast to be lower in every year compared with the final year of the Government’s seven-year deal, by on average around £1.3 billion. In addition, our rebate, which is worth around £5 billion per year, is protected. This agreement is in our national interest. It represents a good deal for the taxpayer now and over the coming years.
I would like to draw the House’s attention to what the Prime Minister said in 2013. After the EU budget negotiations, he said: