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Written Statements

Volume 506: debated on Wednesday 24 February 2010

Written Ministerial Statements

Wednesday 24 February 2010


Capital Distributions

There is, at the moment, considerable uncertainty in relation to the corporation tax treatment of distributions. This uncertainty is causing significant problems to UK business and this statement is intended to establish with certainty a result that will be consistent with established expectations of HMRC practice.

In the Finance Act 2009, the Government introduced a new distribution exemption regime. Since then most income distributions received by UK companies are exempt from corporation tax unless they are linked to tax avoidance. The rules ensure that the UK corporate tax regime remains competitive and represent a significant reduction in the compliance burden faced by UK companies.

As intended, the exemption regime excludes distributions of a capital nature, which are subject to the chargeable gains rules where other exemptions may apply. However, the introduction of the new legislation has prompted HMRC to look more closely at the issue of whether a distribution is of a capital nature.

Before 2005 it was possible to interpret the law as saying that all UK distributions were income in nature unless a specific rule said otherwise—for example, distributions in a winding up. In 2005 a Tax Law Rewrite Act, in clarifying the law, made that view impossible to sustain. Despite this, prevailing practice remained unaltered and so UK distributions have generally been regarded until recently as income in nature and potentially exempt from corporation tax.

In the absence of a rule treating distributions as income, companies in receipt of capital distributions may now face an unexpected tax charge. In some cases, it has become clear that commercial transactions have been put on hold until the tax consequences become clear, with a corresponding effect on the normal business of those companies.

In order to resolve the issue, the Government will introduce legislation in the Finance Bill with a view to restoring previous expectations about the way that distributions are taxed. The changes will apply retrospectively where appropriate and will be subject to an opt out to ensure that UK retrospective application of the new legislation does not increase tax liabilities. These new rules will give UK companies the clarity they need to carry on their normal business.


The Economic and Financial Affairs Council was held in Brussels on 16 February 2010. The following items were discussed:

Implementation of the Stability and Growth Pact

ECOFIN issued new recommendations to Malta, Romania and Lithuania, extending the deadlines for correcting their excessive deficits on account of the worse than expected deterioration of their economies. The Council also established that Latvia, Hungary and Poland had taken effective action on their Council recommendations.

The Council also adopted an opinion on Greece’s updated stability programme, which sets out plans to reduce its deficit to under 3 per cent. of GDP by 2012; a further decision which sets out budgetary consolidation measures with a timetable; a recommendation with a view to bringing Greece’s economic policies in line with the EU’s broad economic guidelines; and a decision to make this recommendation public.

The Government believe that Greece must act swiftly to implement these recommendations in line with the given timetable, and welcome the evaluation by the European Commission and ECB as well as the technical assistance being provided by the IMF, which has the experience to play an important supportive role. ECOFIN will return to this issue in March, where it will review progress made, including the further measures the Greek Government have agreed to take.

Single market—Services Directive

ECOFIN discussed and agreed a set of conclusions on the EU single market and the services directive, which called for comprehensive and ambitious implementation of the Directive. The Council also heard a presentation by Mario Monti ahead of his proposals in April for the re-launch of the single market. The Government support the conclusions and the work by Mario Monti, particularly his focus on open markets. It is important ECOFIN takes a view on strategic economic issues for the single market agenda.

Appointment of the Vice-President of the European Central Bank

The Council adopted a recommendation on the nomination of Vítor Constâncioas as Vice-President of the European Central Bank, to succeed Lucas Papademos, whose term of office expires on 31 May. This recommendation will now be submitted to the European Council for approval.

Discharge procedure in respect of the implementation of the budget for 2008

On the basis of a report from the Court of Auditors, the Council approved a recommendation to the European Parliament on the discharge to be given to the Commission for implementation of the EU’s general budget for 2008.

Financial Stability Update

Following the successful legal and capital restructuring of Northern Rock, which took effect on 1 January 2010, the Government, in conjunction with the Financial Services Authority, have reviewed the guarantee arrangements applying to retail deposits held with Northern Rock.

The restructuring has resulted in the formation of a strong, well-capitalised, highly liquid bank that remains in Government ownership. The bank is authorised and regulated by the FSA and customers’ deposits are secure. The Government, in consultation with the FSA, have therefore assessed that it is now appropriate to give notice to remove the guarantee covering retail deposits in Northern Rock plc.

Accordingly, HM Treasury has today given three months’ notice that the Government’s retail savings guarantee for Northern Rock plc will no longer apply from 5 pm on 24 May 2010. This excludes guarantee arrangements for fixed-term deposits in existing accounts, which will terminate on maturity on the relevant fixed term. For fixed-term products, renewed or extended after today’s announcement, the guarantee arrangements in respect of that deposit, will terminate on the date of maturity existing prior to its renewal or extension. The guarantee for wholesale borrowings of Northern Rock plc, to the extent it relates to sums which are attributable to retail deposits made with Northern Rock (Guernsey) Limited, will be also lifted at the same time.

Following lifting of the guarantee, every Northern Rock retail customer will continue to have the first £50,000 of their total deposit protected by the Financial Services Compensation Scheme, whether their deposit is fixed term, non-fixed term or a combination of both. This is the same level of protection that is provided for retail customers of all banks and building societies in the UK. Customers of Northern Rock (Guernsey) will continue to benefit from the Guernsey banking deposit compensation scheme.

The guarantee applying to Northern Rock’s retail deposits was put in place as a temporary measure during a period of unprecedented instability in the financial markets. It was never intended to be permanent. Today’s announcement affirms the strength of the new Northern Rock plc, and is a positive step in the bank’s progression towards independence. Removal of the specific Northern Rock plc retail guarantee more closely aligns Northern Rock’s retail depositor protection arrangements with those of all other UK banks, an important step in the normalisation of the UK retail banking market.

Counter-terrorism Act 2008 (Schedule 7)

As outlined in schedule 7 to the Counter-terrorism Act 2008, the Treasury has undertaken to report to Parliament following the end of each calendar year in which a direction under the powers has been issued. This is the first of these reports, and covers the 2009 calendar year.

The Schedule 7 powers

Schedule 7 provides the Treasury with powers to implement a graduated range of financial restrictions in response to certain risks to the UK’s national interests. The risks it addresses are those posed by money laundering, terrorist financing, and the proliferation of chemical, biological, radiological and nuclear (CBRN) weapons.

Direction issued under the powers in Schedule 7

The Treasury issued a direction under schedule 7 powers on 12 October 2009, designating two Iranian companies: Bank Mellat and the Islamic Republic of Iran Shipping Lines (IRISL). The direction was issued on the basis that activity in Iran that facilitates the development or production of nuclear weapons poses a significant risk to the national interests of the UK. Vessels of IRISL have transported goods for both Iran’s ballistic missile and nuclear programmes. Bank Mellat has provided banking services to a UN listed organisation connected to Iran’s proliferation sensitive activities, and been involved in transactions related to financing Iran’s nuclear and ballistic missile programmes.

The direction requires all UK financial and credit institutions to cease business relationships and transactions with Bank Mellat and IRISL.

The direction was approved by the House of Commons on 28 October 2009 and by the House of Lords on 2 November 2009.

Bank Mellat challenged the direction in 2009, and the judicial review will be heard in 2010. IRISL also challenged the direction in early 2010.


Licensing is the means by which the Treasury can exempt business relationships or transactions between designated entities and UK financial and credit institutions from the requirements of the direction. The licensing regime in place for the direction against Bank Mellat and IRISL allows the Treasury to minimise the impact of the restrictions upon innocent third parties, without compromising the objective of the direction. Licences are considered on a case-by-case basis.

Between 12 October and 31 December 2009, 120 licence applications were received. Of these, 90 had been processed by 31 December 2009, 87 licences had been issued, and three licences rejected.

Children, Schools and Families

Special Educational Needs

I am publishing today the Government’s implementation plan in response to the Lamb inquiry on parental confidence in the special educational needs—SEN—system.

The inquiry, under the chairmanship of Brian Lamb, the chair of the Special Educational Consortium, was tasked with investigating a range of ways in which parental confidence in the SEN assessment process might be improved. The inquiry’s final report was published on 16 December 2009.

The inquiry found that, while the SEN framework functions well for the majority of parents, within the same legislative framework there are parents who have been poorly served and have had to battle to get the needs of their child identified and met. This varied picture must be redrawn so that it is common practice to have access to skilled professionals who understand the needs of children and who have high expectations of what children can achieve.

The implementation plan builds on the significant progress that the Government have already made in improving work force skills, and services for children with special educational needs and disabilities—SEND—and their families:

A clear focus on outcomes

The Lamb inquiry report was clear that parental confidence depended on seeing that the needs of their children with SEND were being met by skilled professionals. The Government have already strengthened the status and role of the SEN co-ordinator—SENCO—in schools. All SENCOs are required to be qualified teachers and those new to the role must undertake nationally accredited training and gain a national award. We are investing £10 million per annum to deliver this. We are also investing £12 million over 2008-11 to improve the skills and confidence of trainee and existing teachers, which includes new SEN and disability units in initial teacher training and the inclusion development programme for serving teachers. Our response to Sir Jim Rose’s review into teaching children with dyslexia included funding course places for an additional 4,000 specialist dyslexia teachers. The implementation plan builds on this existing investment with up to £4 million for the Training and Development Agency for Schools, including for starting to deliver on the Lamb inquiry recommendation for advanced-level training around the five main SEN areas—learning difficulties; behavioural, emotional and social difficulties; dyslexia; autism spectrum disorders; and speech, language and communication needs.

In addition to improved achievement for children with SEND, parents want to be assured that children are safe from bullying. The Government’s pupil and parent guarantees make a commitment to all pupils and their parents, including those with SEND, that their schools will have effective policies in place to prevent and tackle all forms of bullying. We have started work with the Anti-Bullying Alliance to review the most effective approaches to anti-bullying.

Strengthening the voice of parents

The implementation plan explains how we will enhance the service offered to parents through parent partnership services with better trained advisors, and launch a dedicated national helpline in April to provide information and advice to parents of children with SEND.

Establishing a local system in tune with children’s needs

The inquiry concluded that the system works best where schools, local authorities and parents operate in a true partnership. We want to build on this good practice through incorporating SEN and disability in the training that leaders of children’s services receive. The plan also details the training for local authority SEN officers in how to work well with parents, which will start in March, and guidance and training for those drawing up statements of SEN will be issued this July.

Building accountability around children’s progress

The inquiry’s final report placed a great deal of emphasis on effective accountability, throughout the system, to ensure parental confidence. We will strengthen training on SEND for school governors, with improved legal resources available for all governors in December and the national training programme for new governors will reflect the conclusions of the inquiry. School improvement partners—SIP—play an increasingly important role in providing high-quality challenge and support to school leaders and, this summer, the national strategies will roll out SEND training to all local authority SIP managers.

My Department has already implemented the inquiry recommendation to route parental complaints to the local government ombudsman. The first-tier tribunal—SEN and Disability— also has already launched enhanced training for tribunal chairs; will issue guidelines on the provision of professional and expert evidence in March and launch revised information for parents, including online materials and a DVD, in May.

A number of recommendations in the inquiry were for Ofsted to take forward and it will be publishing its implementation plan in March. The Children, Schools and Families Bill, currently before Parliament, places an explicit duty on Ofsted to report on how well schools are meeting the needs of children with SEND as part of school inspections.

A responsive national framework

My Department has invited local authorities, working with parents and voluntary organisations, to undertake innovative projects to improve parental confidence. These will be launched in April, one in each region, and will include testing greater independence in assessment.

The inquiry recommended remedying the exclusion of schools from the duty in the Disability Discrimination Act to provide auxiliary aids and services. The Government have already acted on this through an amendment to the Equality Bill, currently before Parliament.

I have asked Brian Lamb to report on progress against the actions in the implementation plan in the summer, rather than in April as originally planned. This will provide him with sufficient time to see the impact of the actions already undertaken and those set out in the plan before reporting.

The implementation plan responds fully to the challenge set in the inquiry report and takes action in those areas that will make a lasting impact on parental confidence: a higher-skilled work force able to respond to children’s needs; more accessible information and advice for parents; training for those in key positions throughout the system, and enhanced accountability and redress mechanisms.

I am placing a copy of the implementation plan in the Libraries of both Houses.

Communities and Local Government

General GLA Grant (2010-11)

The General GLA Grant for 2010-11 has been determined by the Secretary of State for Communities and Local Government at £48,136,000, after consultation with the Mayor of London. The grant is a block grant paid for the purposes of the Greater London Authority and its functional bodies under section 100 of the Greater London Authority Act 1999. The grant for 2010-11 is based on the three-year settlement for the grant following the outcome of the 2007 comprehensive spending review.


War Pensions (Uprating)

The new rates of war pensions and allowances proposed from April 2010 are set out in the tables below. The annual uprating of war pensions and allowances for 2010 will take place from the week beginning 12 April. To provide additional support to households during the early stages of economic recovery, the 2009 pre-Budget report announced that the Government will bring forward a proportion of the increases expected in April 2011 a year earlier, thereby providing a 1.5 per cent. increase for those benefits normally uprated by RPI.

War Pensions Rates

(Weekly rates unless otherwise shown)





War Pensions

Disablement Pension (100% rates)

officer (£ per annum)



other ranks



Age allowances payable from age 65

40% -50%



over 50% but not over 70%



over 70% but not over 90%



over 90%



Disablement gratuity (one-off payment)

specified minor injury (min.)



specified minor injury (max.)



1-5% gratuity



6-14% gratuity



15%-19% gratuity



Supplementary Allowances

Unemployability allowance




adult dependency increase



increase for first child



increase for subsequent children



Invalidity allowance

higher rate



middle rate



lower rate



Constant attendance allowance

exceptional rate



intermediate rate



full-day rate



part-day rate



Comforts allowance

higher rate



lower rate



Mobility supplement



Allowance for lowered standard of occupation (maximum)



Therapeutic earnings limit (annual rate)



Exceptionally severe disablement allowance



Severe disablement occupational allowance



Clothing allowance (£ per annum)



Education allowance (£ per annum) (max)




Widow(er)s’ - other ranks (basic with children)



Widow(er) - Officer (basic with children) (£ per annum)



Childless widow(er)s’ u-40 (other ranks)



Childless widow(er)s’ u-40 (Officer highest rate both wars) (£ per annum)



Supplementary Pension



Age allowance

(a) age 65 to 69



(b) age 70 to 79



(c) age 80 and over



Children’s allowance

Increase for first child



Increase for subsequent children



Orphan’s pension

Increase for first child



Increase for subsequent children



Unmarried dependant living as spouse (max)



Rent allowance (maximum)



Adult orphan’s pension (maximum)



Home Department

Justice and Home Affairs Council

The Justice and Home Affairs Council is due to be held on 25 and 26 February 2010 in Brussels. My noble Friend, the Parliamentary Under-Secretary of State for Justice, Lord Bach and I, intend to attend on behalf of the United Kingdom. As the provisional agenda stands, the following items will be discussed:

The Council will begin by agreeing the text on the internal security strategy which was discussed at the January Informal Council in Toledo. The Government support the internal security strategy as currently drafted, in particular the reference to an EU organised crime strategy.

The presidency will then update Ministers on plans to establish the Standing Committee on operational co-operation on internal security—COSI—setting out its legal basis and outlining the next steps for the committee. The Government have supported the creation of COSI and look forward to its first meeting.

The Council will have an orientation debate on a proposal for a European pact against drug trafficking designed to co-ordinate member state activity in this field. The pact focuses on three thematic areas; the “cocaine route” from Latin America via West Africa to Europe; the “heroin route” through Turkey and the Western Balkans; and money-laundering. The Government support this proposal which is in line with UK objectives on drug trafficking.

The presidency will update Ministers on EU-US relations following its high level meeting with US officials in January, which focused on data protection, child protection and terrorism.

There will also be a discussion for Interior Ministers on what the next steps should be for the EU-US agreement on the processing and transfer of financial messaging data for the purposes of the terrorist tracking finance programme—the so-called SWIFT agreement—following the European Parliament’s decision to reject the Council decision intended to conclude it.

After lunch, the presidency will update the Mixed Committee, with non-EU Schengen states, on the results of the evaluation of the first milestone test of the second-generation Schengen information system—SIS II —which took place at the end of January. The Government support the need for a thorough evaluation of the first milestone test and will seek to ensure that the remaining milestone tests are conducted in a timely fashion.

The Council will then discuss the official Canadian response to the Commission’s October 2009 report which criticised the Canadian Government for its decision to re-introduce visas for Czech nationals. The Government have maintained a neutral position so far and will continue to urge a proportionate solution to this issue, either resolved bilaterally or brokered by the Commission.

The presidency will present a draft instrument establishing a European agency for the management of operational co-operation at the external borders of the member states of the European Union—Frontex. The Government will consider the draft regulation carefully as soon as it is published.

Finally, the Mixed Committee will discuss the ongoing issue of illegal migration on the southern border of the European Union. The Government recognise the significance of these flows and support strong, strategic and evidence-based EU collaboration on this issue through co-operation with countries of origin and transit, and practical action at, and beyond, the EU’s borders, including a strong focus on returns.

On the second day of the Council meeting, there will be a state-of-play report on the negotiations that have been taking place about a proposed directive on the European protection order. Ministers will then be given the opportunity to comment. This is a member state initiative, presented by the Spanish presidency, and it is designed to assist victims who have obtained a protection order in one member state who subsequently move to another.

The presidency will then provide Justice Ministers with information about the state of play of the negotiations on the proposed directive on interpretation and translation. This proposal was negotiated as a framework decision under the Swedish presidency and reached political agreement at the October JFIA Council. However, it lapsed when the Lisbon treaty came into force, and so has had to be retabled as a directive under the new treaty. The Government support this proposal.

There will be a presentation and debate on EU accession to the European convention of human rights. The Government fully support EU accession to the European convention on human rights, which will close the gap in judicial protection of fundamental rights in the EU by ensuring that the EU institutions, as well as the member states when implementing EU law, will clearly be subject to the convention.

The Council will be asked to agree a Council resolution proposing the creation of an updated model agreement to help in the establishment of, and participation in, joint investigation teams—JITs. The Government fully support this updated-model agreement which is based on practical experience and good practice.

In addition to the agenda items, Commissioner Viviane Reding will deliver a presentation of her work.


European Parliament

My hon. Friend the Minister for Europe and I wish to announce that following the treaty of Lisbon’s entry into force on 1 December 2009, the Government intend that the extra seat in the European Parliament which is assigned to the UK under the treaty will be filled in accordance with the results at the June 2009 European Parliamentary elections. The treaty of Lisbon establishes an overall cap on the size of the European Parliament and an adjustment of the distribution of MEPs between 12 EU member states. The number of UK MEPs increases from 72 to 73.

An agreement of a transitional protocol is required to permit those member states who gain MEPs under the treaty to elect their additional MEPs during the current European Parliamentary term rather than wait until the next round of European Parliamentary elections in 2014. At EU level, unanimous agreement is needed for such a protocol, as it will mean a temporary increase in the number of MEPs allowed by the treaty. At UK level, a Bill will be required after the general election to ratify the treaty change in the UK. Legislation will also be required to provide for the seat to be filled.

Should the seat be awarded to a European Parliamentary electoral region of Great Britain, the results from that region at the 2009 election will be used to determine which party would have been awarded the next seat had an additional seat been available. The system used in Northern Ireland to elect its MEPs—the single transferable vote—is different from that used in Great Britain. If the extra seat is allocated to Northern Ireland therefore, the seat would go to the highest ranking candidate not to have reached the quota at the 2009 election following completion of the count.

Advisory Panel on Judicial Diversity

In April 2009 I established an independent advisory panel on judicial diversity. I asked the panel to identify the barriers to progress on judicial diversity, and to make recommendations on how to make speedier and sustained progress to a more diverse judiciary. I invited Baroness Julia Neuberger DBE to chair the panel and Lord Justice Goldring, Professor Dame Hazel Germ, Andrew Holroyd CBE, Winston Hunter QC and Dr. Nicola Brewer CMG to serve as members of the panel.

The advisory panel were originally to have presented their final report to me by November 2009. However, at the panel’s request, I agreed to a deferral of the publication date to enable the panel to continue engaging with a wide range of contributors and developing their findings. Overall, the panel met, corresponded with, or received evidence from, over 180 individuals and organisations—including members of the judiciary, the Judicial Appointments Commission, members and representatives of the legal professions, and diversity and equality experts—during the course of their investigation.

The advisory panel has now completed its work and produced its final report. Copies of the “Report of Advisory Panel on Judicial Diversity 2010” have been placed in the Libraries of both Houses.

I welcome warmly the findings of the panel’s report and its recommendations. Some of these will be for individual organisations to deliver. The majority though will require co-operative working between the Government, the judiciary, the Judicial Appointments Commission and the legal professions. Accordingly, I have written today to invite them to join a new judicial diversity taskforce, which will be responsible for driving forward the comprehensive programme of reform identified by the panel.

I am very grateful to Baroness Neuberger and the members of her advisory panel for the work they have done in producing this report, and the thorough approach that they have taken to identifying and analysing the issues involved.

We know that improving the diversity of the judiciary is a long-term challenge. I hope that this excellent report will spur all those across the system to respond to this challenge with renewed vigour.

Northern Ireland

Bill of Rights

The need for an additional human rights framework that reflects the particular circumstances of Northern Ireland was recognised in the Belfast agreement and given shape through the commitment to set up a Bill of Rights forum as part of the St. Andrews agreement. Flowing from these commitments, the Government launched a public consultation on the next steps towards a Bill of Rights for Northern Ireland on 30 November 2009.

The Government believe that a Bill of Rights which has the support of the people of Northern Ireland could play an important role in underpinning the peace, prosperity and political progress of Northern Ireland, and we are committed to taking this work forward. The launch of the consultation marked another milestone on that path.

The Government have received a number of requests to extend the consultation deadline by organisations that are keen to participate. As we made clear in the consultation paper, we want a full debate on the issues involved, and it is important to hear the full range of views. With that in mind, I have decided to extend the consultation deadline by four weeks until the end of March to allow those individuals and organisations who wish to contribute to do so.

I encourage everyone in Northern Ireland to read the consultation paper carefully and to participate in the debate.



My right hon. and noble Friend the Secretary of State for Transport, Lord Adonis, has made the following ministerial statement:

The independent review looking into the collapse of Eurostar services before Christmas was published on Friday 12 February. This was a thorough review of the incident and I am pleased to say that all parties have committed to working on implementing the recommendations.

The incident occurred during some of the most prolonged adverse winter weather. Nevertheless, too many passengers were left to endure appalling conditions onboard trains and at stations with inadequate information and assistance. This did not reflect the level of service passengers had experienced over the last 15 years or had come to expect from Eurostar. The company now must win back the trust of the public by taking every step necessary to ensure that services return to their previous high levels of performance and reliability.

I have requested Eurostar and Eurotunnel to provide an update by the end of March on their progress in implementing the recommendations.

Urban Congestion Performance Fund

I am today announcing the third tranche of performance-related payments from the Urban Congestion Performance Fund that will see the 10 largest urban areas in England receive a further £19.7 million to study and address the causes of urban congestion.

The Department for Transport has a public service agreement indicator regarding person journey time on main roads into urban areas. The indicator states that by 2010-11 the 10 largest urban areas in England will meet the congestion targets set in their local transport plan relating to movement on main roads into city centres. The indicator will be deemed to have been met if, on target routes in these areas, an average increase in travel of 4.4 per cent. is accommodated with an average increase of 3.6 per cent. in person journey time per mile.

On 4 February the Department published statistics for 2008-09 for each urban area to replace the provisional estimates that were published in November 2009. These data showed that the average person journey time across all the target routes has improved by 5.5 per cent. between the baseline (which uses a mix of 2004-05 and 2005-06 data) and 2008-09. At the same time the average level of travel fell by 0.8 per cent. across all the target routes.

Based on this performance, the £19.7 million payment will now be shared between the participating areas as below:

Urban Area

Tranche 3 Payments



Greater Manchester


West Midlands


West Yorkshire


South Yorkshire


Tyne & Wear




West of England








In relation to the 2007-08 performance fund payments announced on 23 February 2009, an error was identified in the way that “statistical confidence” is determined. This meant that when London was awarded full funding under tranche 2 (£3.9 million) they should have only been awarded 90 per cent. (£3.51 million). After taking in to consideration the fact that the error was due to the Department and not Transport for London, that London had still only marginally missed the full payment threshold and as the priority of the fund is to identify and tackle the causes of congestion, it has been decided to retain London’s original performance fund allocation of £3.9 million under tranche 2. No other payments to the other urban areas were affected.

The performance fund is worth a total of £60 million over four years, and today’s announcement will have seen a total of £42.6 million paid to the 10 areas. A further £15 million is available in the next financial year, and will also be awarded on a performance basis.