House of Commons
Monday 18 March 2013
The House met at half-past Two o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
Communities and Local Government
The Secretary of State was asked—
13. What steps he has taken to increase powers of local authorities to tackle unauthorised development. (148149)
We have previously made it absolutely clear that Traveller sites are inappropriate development in the green belt. We are also considering responses to our recent consultation on proposals to give councils more freedom to use temporary stop notices to take swift and effective action against unauthorised caravans in the green belt and elsewhere. This builds on our earlier reforms to strengthen councils' enforcement powers, increase protection for the green belt, and ensure fair play throughout planning.
We are very grateful locally to the Government for their help during the clearance of the illegal Dale Farm Traveller site. I know that the Government are considering a series of further measures to tackle unauthorised development, which is grossly unfair on local communities, but may I urge the Secretary of State to go further than he is considering at the moment? For example, will he consider whether illegal development should become a criminal offence, always bearing in mind what is reasonable?
My hon. Friend has been a doughty defender of his constituents and was instrumental in finding a solution to Dale Farm. Should we decide to give councils more freedom to use temporary stop notices, subject to consultation, they would allow an unlimited fine, which may give people pause for thought. The Government are reluctant to make it a criminal offence.
In the immediate Romsey area there have been several instances of retrospective planning applications involving Traveller sites. What reassurance can my right hon. Friend give my constituents that planning law is a level playing field that applies equally to everyone and that local authorities will have more robust powers to deal with the problem?
My hon. Friend raises an important point. The Localism Act 2011 gives applicants a chance to appeal either the enforcement notice or retrospective planning. The problem with the previous regime was that it was possible to appeal both and thereby prolong occupation of land where it was inappropriate.
A developer in Lydiate in my constituency has made clear his plans to build in the green belt, despite the existing urban development plan making it clear that it is against the policies. Is not the best way to protect the green belt and valuable urban green space to go back to a system with a more regional approach so that there is not this push for development in the green belt?
There is a real problem in Telford, not just with illegal Traveller encroachment on green space but on industrial estates, which is really bad for businesses. When companies come to visit Telford, they do not want to see Traveller encampments all over our industrial estates. There is a mixed land ownership pattern, with some owned by the local authority, some privately owned and some Homes and Communities Agency land. Will the Secretary of State meet representatives and me to see whether we can toughen the law to get these people moved on so that businesses can operate effectively in Telford?
It is always a pleasure to meet the hon. Gentleman. As he knows, I have a soft spot for Telford. I spent a lot of time during the last election trying to unseat him, without any success. The point about industrial land is a good one. Telford is clearly a key strategic location and, subject to the consultations, the announcement that we may or may not be about to make will help with that process. We have issued guidance to local authorities, but if my sitting down with him and local authorities to try to work something out would help, I am happy to do so.
Council Tax Benefit
An assessment of the impact of the Government’s policy framework for localising council tax support is available on the Department’s website. Local authorities are responsible for the design of local schemes and the assessment of their impact.
In Bolton, 3,200 families will have to find up to £15 a week to cover the Government’s cut in housing benefit, and they might also be affected by the bedroom tax and tax credit and disability benefit cuts. Does the Minister agree with Lord Jenkin that for my families in Bolton West that is a “poll tax mark 2”?
Council tax doubled under the previous Labour Government and it was necessary to take action. I am pleased that the hon. Lady’s local authority has developed a scheme that protects the most vulnerable and ensures that work pays and that, as a result, it has an additional £500,000 in the transitional grant.
The Government have stated that all schemes must contain measures that incentivise local authorities to ensure that recipients either stay in work or find work. Does that not show that the reforms are based on ensuring that all those who are willing to and can work do work?
Why do Ministers keep claiming that they are freezing council tax when they are actually increasing it for 700,000 of the poorest working people in this country? Does it not say everything about the Government’s priorities that a low-paid couple with children will have to find between £96 and £304 a year, and a single working parent will have to find up to £577, while they are giving a tax cut to millionaires? Is not the truth about this Government that, despite their rhetoric, they are giving a slap in the face to hard-working people while putting out a bowl of cream for the fat cats?
May I give the hon. Lady two basic facts? First, the reduction we have made in council tax benefit represents less than half of 1% of a council’s budget. Secondly, as a result of the pressure we have put on local councils, the average reduction in council tax since we took office is now nearly 10%.
Will my right hon. Friend join me in congratulating Conservative-controlled Lancashire county council on its decision not to freeze council tax but to give hard-working families a 2% cut, which will benefit all families whether or not they receive benefit?
I am more than happy to praise my hon. Friend’s local council and all those that have done their utmost in difficult times to protect working families through a real-terms reduction in council tax, which makes a huge difference to working people, and at the same time introducing schemes that will protect the most vulnerable and ensure that work pays.
Local Government Finance
I recognise the case that has been made for funding for rural authorities. In February we made some adjustments to the financial settlement for 2013-14 and confirmed changes to sparsity top-ups.
I thank my hon. Friend for that answer, but does he agree that rural authorities are due to receive, on average, a 5.58% reduction in formula grant, which is more than two percentage points greater than urban authorities, which are due to receive, on average, a 3.54% reduction? Is not that actually extremely unfair and not a sensible way to encourage growth in the rural economy?
This year we changed the sparsity levels within the banding so that the reduction for rural areas is not as great as that for urban areas, thereby slightly narrowing the gap. I appreciate that Members who represent rural areas have made a strong case this year for going even further, which is why we brought in £9 million-odd in extra finance to help local authorities servicing those rural communities with deprivation.
I am grateful to the Minister for that response, but surely if he will applaud Cornwall council, for example, for freezing its council tax this year, he must accept that it has been persistently underfunded despite being the poorest region of the UK. When will Cornwall and places like it get a fair share of the available money?
The hon. Gentleman is absolutely right: Cornwall has frozen its council tax this year. That is good news for residents across Cornwall, and I am pleased that the council decided to do it. Throughout the finance-setting debate we discussed the difference between rural and urban areas, and that is why we put in the extra money to help to narrow the gap. Over the course of the year, before next year’s settlement, we will continue to discuss the situation with Members representing rural areas, although I must be clear that only in exceptional circumstances would we reopen the settlement.
One of the reasons for the gap is that urban areas have to deal with the influx of European workers who come here under freedom of movement, and cities such as Bradford have to bear the brunt of that. Has the Department looked at this issue in relation to the concentration of new workers coming to areas such as Bradford?
When we do the setting every year we look at all the developments in different communities. People are also moving into rural areas. In Norfolk we would class ourselves as rural, but we have a population coming from overseas as well. It is something that we consider across the board.
I am proud to be from Wirral, not least because we are the perfect mix of rural and urban together, but people in Wirral are suffering from the severity of the Government’s cuts, which are linked to deprivation levels. When will the Government say what they will do to tackle deprivation, especially in areas such as Merseyside where it has hit councils so hard?
It is sometimes easy to forget, and I remind the hon. Lady, that an area such as Liverpool has a much higher base start in the first place. A constituency such as mine, which has some very high deprivation, has a spending power of £2,200 per dwelling, whereas Liverpool’s is up at about £3,000. There is a big difference in the first place, and we have to bear that in mind when we are trying to make comparisons between different authorities.
Councils are in the process of setting their budgets for the coming financial year, and we will, as a Department, publish official figures in due course. As well as recognising areas such as Lancashire that have done superb work in cutting council tax, as has Dorset by 5% this year, I can confirm that Northamptonshire county council currently has the lowest council tax of any county without a separate fire authority.
Northamptonshire county council is proud to have the lowest county-council council tax in the whole of England, and it has frozen its council tax for the past three years. Will my hon. Friend the Minister congratulate Councillor Jim Harker and his team of Conservative councillors on Conservative-controlled Northamptonshire county council on delivering the most affordable county-council council tax in the whole country?
I am absolutely delighted to give those congratulations. It is superb to see Conservative county councils across the country, of which my hon. Friend’s is a particularly good example, working hard to deliver cost-effective services for their residents. It is also appropriate to say, while I am at the Dispatch Box, that his district council should be commended for the excellent work it is doing on freezing council tax. It is taking this financial settlement in the right way and looking to the future in terms of how it can deliver growth for its area and thereby create real benefit for its residents locally.
Council Tax: Pensioner Assistance
Under Labour, council tax more than doubled, hitting pensioners the hardest. We have worked with councils to freeze council tax, cutting bills by almost 10% in real terms. This April, taxpayers will also have the new right to pay their bills over 12 months if they wish to do so, helping those on fixed incomes, such as pensioners, to manage their monthly outgoings.
My right hon. Friend is totally correct that the doubling of council tax under Labour hit those on fixed incomes, such as pensioners, the hardest. May I welcome the work he has done on this over the past three years? Will he endeavour to make sure that the council tax freeze programme continues until, and beyond, the next general election?
That will of course largely be up to the willingness of local authorities to take the freeze or not. We managed to stop and to reverse the bill that just kept on rising, and that is an important milestone that will have enormous effects in putting more money back into people’s pockets.
This year North Lincolnshire council has frozen council tax for the third year. In this year’s budget-setting meeting, the opposition Labour group made proposals to cut social care to 25% of those in receipt of it, and that was voted down by the Conservatives. Will the Secretary of State congratulate North Lincolnshire council on protecting social care for elderly and vulnerable residents in these tough times?
I have to say that I am shocked at the very thought that the Labour party would cut help to the most vulnerable, but I am afraid that that has been the pattern throughout the land. Labour has been hitting the poor and its Members would also have hit pensioners if it had been up to them.
Local Government: Savings
We have published “50 ways to save”, a practical guide to councils on how they can save money and still protect front-line services. We are also supporting councils with more detailed guidance, including how to save money by scrapping taxpayer funding of trade unions and sacking town hall pilgrims.
My own Hastings borough council has recently entered into a shared recycling and waste service with three other local councils, saving up to £600,000 for Hastings alone. Does the Secretary of State have any other suggestions for shared services that councils can enter into in order to make greater savings?
My hon. Friend will recall that Hastings was the council that the previous Labour Administration forgot, in that they abandoned it with regard to the level of grant and we had to put in transitional measures to help it. I recently met the leader of Hastings council, who suggested his willingness to work alongside us to increase the council’s efficiency. Adur and Worthing councils are not far away and have saved more than £9 million by forming a single senior officer structure and by sharing services. I urge my hon. Friend to urge her council to adopt a similar approach.
21. Is the closure of children’s centres one of the Secretary of State’s top 50 ways to save money? Many local authorities are closing them because of the economic situation they find themselves in and the lack of Government support. (148157)
Conservative councils throughout the country are doing exactly the opposite. It is about time that Labour councils stopped shroud waving and accepted that they do these things under their own decision. If they want additional resources, there is nothing to prevent them from applying for an increase in council tax. The only problem, of course, is that they have to persuade their population of that, so I suggest that the hon. Gentleman become slightly more silver tongued with his population than he is with me.
20. Central Bedfordshire council has managed to reduce its costs by £52 million while maintaining and, in some cases, even improving standards. Does the Secretary of State agree that where Central Bedfordshire leads, other councils could usefully follow? (148156)
That is, of course, true of many things that Central Bedfordshire does. I urge my hon. Friends to be careful about making such points because of the pain they are causing Labour Members, whose stress levels are enormous. They obviously feel desperately ashamed of their own Labour councils.
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
Lancashire county council has just produced a 12-page, full-colour newspaper of propaganda on the rates, which the Secretary of State has criticised in the past. Does he agree with 12-page, full-colour propaganda being put out just before an election, wasting ratepayers’ money?
I tell you what: if every council cuts its council tax by 2%, I might re-look at some of the unpleasant things I have talked about. I will look carefully at what the hon. Gentleman has mentioned, but I suspect that it is an honest assessment of the current situation, that it gives information to people and that we will not find horoscopes or TV listings in it. Lancashire has a vibrant local press.
I draw attention to my interests in the register.
I remind the Minister that the number of new starts in 2012 was fewer than 100,000. The latest figures from the National House-Building Council show that private sector housing starts were down 13% in the three months to the end of January 2013, and those for affordable housing starts for the same period showed an annual fall of 19%. Do not those figures show a terrible story of the failure of the Government’s housing policy?
I am sorry to disappoint the right hon. Gentleman, who was an experienced Minister performing my role in the last Government, but if we look at completions—homes that families can actually move into —we see that there has been a rise of 8% over the past two years. I would have thought that the Labour party welcomed that.
19. Does the Minister agree that one problem is that developers buy large quantities of land and get planning permission for it, but do not build on it? That means that when the next lot come along and ask for planning permission for more land, they get it because not enough houses are being built. Surely it is time that we had time-limited constraints on planning permission so that developers are required to build on land before the planning permission runs out of time. (148155)
The key issue is that by getting rid of regional spatial strategies and moving towards local plans, under this Government local people and their representatives will have the opportunity to set that agenda. I take my hon. Friend’s point. We want to ensure that planning permissions are used properly.
With the toxic combination of the biggest housing crisis in a generation and a flatlining economy, Britain badly needs a Budget for jobs, homes and growth. We are now told that there is to be the fourth “get Britain building” launch. Will the Minister confirm that the third launch last September of a £10 billion guarantee fund has seen not one brick laid and not one house built? Will he explain why, if his policies are working, housing starts fell by 11% in 2012 to just 98,000? Has the time not come for the Government to stop talking and start building?
As always, the hon. Gentleman provides entertaining rhetoric, but the facts are wrong. The net addition to the housing stock, taking into account new homes and our work on empty homes, which we rarely hear about from the Labour party, is 11%. He needs to rehearse his rhetoric more often.
22. I was going to stand on the next Question. Will the Minister for Housing consider a mechanism by which the borrowing capacity of an authority that has chosen not to use or is unable to use all its borrowing facilities can be passed to an authority that, in turn, could facilitate arm’s length management organisations to build housing when there is capacity to do so? (148158)
A recent report by Shelter, “The Rent Trap”, shows that rents are rising across the country by an average of £300, but that people are struggling to pay them because of stagnating wages. Does the Minister accept that the housing shortage is putting up rents?
I accept that the sad loss of 421,000 social homes under the last Labour Government has created, to use the words of the hon. Member for Birmingham, Erdington (Jack Dromey), a deep-seated housing crisis. However, the picture on rents is more mixed than the hon. Lady suggests. In some areas, rents have risen, but the overall evidence suggests that over the past 12 months they have been static.
The coalition Government’s reforms of council housing finance have given local authorities direct control of their rental income. That has given them the freedom to borrow nearly £30 billion, of which £2.8 billion remains available to use for new housing.
The Minister and his colleagues know how keen I am to help restructure Gloucester’s social housing arm’s length management organisation, Gloucester City Homes, which is one of The Sunday Times top 100 employers, so that it can play a significant role in providing homes in Gloucester without adding to the public sector borrowing requirement. My hon. Friend the Minister for Housing sees the importance of that to Gloucester’s growth and regeneration. Will he agree to see me before the Easter recess to discuss where the talks have got to and how we can make things happen?
My hon. Friend is right to give huge praise to Gloucester City Homes, which is an excellent arm’s length management organisation. I congratulate him on the pressure he is putting on my Department to ensure that we bring forward as quickly as possible a new scheme to support housing transfers. While the Minister for Housing will be keen to meet him beforehand, I am sure that we will make an announcement later in the spring.
Is the Minister aware that some housing associations are excluding poorer people from tenancies because of concern over their ability to pay in the face of Government welfare cuts? Southern Housing Group, for example, has said that reluctantly it tends to let affordable homes in new schemes only to working households. Will the Minister tell the House who exactly will house vulnerable people who are being excluded by housing associations as a result of this Government’s so-called reforms?
Many Liberal Democrat councillors around England would like to see more council housing and housing association property built in their areas. What can the Government do to encourage and support both those initiatives?
My right hon. Friend has long championed the importance of local councils being able to do more in developing further housing for people in their areas, and he must wait just a few days for a further announcement on that issue. As I have already said, given the changes that the Government have made to the housing revenue account system, £2.8 billion is still available for local councils to spend on housing.
Planning: Rural Areas
I receive representations from all sorts of people, and most of them—I am glad to say—recognise that local authorities are making excellent progress preparing local plans, and that the framework is helping those deciding planning applications to strike a balance between the protection of our environment and support for sustainable development.
My hon. Friend will be aware that the Minister of State, Department of Energy and Climate Change, our hon. Friend the Member for South Holland and The Deepings (Mr Hayes), has issued a call for evidence on the role of communities in helping decide applications for wind farms. That evidence is now being considered and the Minister and I will meet soon to discuss what implications it should have for local plans. The national planning policy framework is clear about the importance of taking flood plains into account when preparing local plans and making decisions on appropriate development.
Last year while considering the national planning policy framework, the then Planning Minister failed to listen to Labour Members and the many campaign groups who said that, with no assistance, 12 months would not be long enough to get all areas covered by local plans. We now learn that 52% of local authorities do not have a local plan in place. Will the current Minister learn from his predecessor’s mistakes and act now to ensure that those areas unprotected by a new local plan are not inundated with inappropriate development when transitional arrangements end in nine days’ time, or is that part of his scheme to replace planning with chaos?
The hon. Lady would be arguing on stronger ground if she admitted that, under the previous Government, by May 2010 only 17% of local authorities had a local plan adopted, and 32% had one published. Now, 48% of local authorities have plans adopted and 71% have plans published. Progress has been excellent and we will keep the pressure on local authorities to produce those plans.
I hope that in 30 years’ time my enthusiasm will be equivalent.
The national planning policy framework is clear that planning should encourage the effective use of land by reusing brownfield land if it is not of high environmental value.
I thank the wise, intelligent and helpful Minister for that answer. In my constituency, we have a derelict brownfield site at Rushden Lakes Skew Bridge. The local Conservative-controlled council has given planning permission for a large retail and leisure development, which will create 2,000 new jobs. Does the Minister agree that that is exactly the sort of project the economy needs?
My hon. Friend is aware that that application has been called in by the Secretary of State. I therefore cannot comment on it specifically, but I can reassure him that the Secretary of State, in all planning decisions, takes into account economic benefits, and all other impacts on the economy and the environment.
Les Sturch, the head of planning and development at Sheffield city council, has drawn to my attention what I assume is an unintended consequence of chapter 6, paragraph 47 of the national planning policy framework, which requires local authorities to identify in their local plans a five-year supply of sites that are deliverable and viable. The problem is that developers say that, in the current circumstances, most brownfield sites are not viable. That forces the local authority to go back and identify far more greenfield sites for development than the local community wants. That is happening all around the country. Will the Minister meet me and officers from Sheffield to discuss how that situation could risk completely undermining the Government’s “brownfield first” policy?
I would be happy to meet the hon. Gentleman, who is Chair of the Select Committee on Communities and Local Government and very knowledgeable on the subject. There is no point putting into a plan sites that have no chance of being developed. A balance needs to be struck on whether they are potentially viable.
In north Oxfordshire, we want to build new houses on former Ministry of Defence brownfield land; we want new social housing, new self-build housing and new housing; and we want a new garden city in Bicester. Will Ministers assist us in our endeavours?
I was astonished but delighted to hear the caveat that the Minister inserted in his initial response to the question—that brownfield developments should be environmentally suitable. Does he acknowledge that many brownfield sites have specific value for what is often unique biodiversity on previous industrial and chemical sites?
I thank the hon. Gentleman for making that point, because it is an extremely important one. That is why we changed the policy from the one adopted by the previous Government, under which there was a strong, blanket nudge to use brownfield land. We are saying that if the brownfield land is of high environmental value, it should not be a priority for development.
The Government monitor the rate of house building very closely. For example, we have completed 58,000 affordable homes in 2011-12. We assess that to be one third higher than the average delivery of affordable homes in the 10 years before the last general election.
But the Prime Minister over-hyped his NewBuy guarantee by saying that it would help around 100,000 families to access affordable mortgages—so far, only 1,500 households have benefited from that initiative. Will the Minister pull his finger out and help the 98,500 families that were promised access to affordable mortgages by the Prime Minister?
In the Leeds city council area, developers are exploiting the planning framework to build expensive housing on greenfield land. At the same time, there is an acute shortage of social housing, and there are empty homes, in Headingly and Hyde Park. Will the Minister join me in encouraging Leeds city council to use its powers to buy some of those homes for social housing, which they can do under new powers?
In answer to the question from my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell), the Minister seemed to suggest that the cost of rent is a mixed picture across the country. Let me be clear: research from Shelter shows that rents have gone up in 83% of areas. In my community alone, families are spending 60% to 70% of their monthly income on housing. Can I again press the Minister to say whether he thinks that the shortage of housing is causing a cost of living crisis, and what is he going to do to ensure that families keeping a roof above their heads do not have to go without food on their tables?
Let us look at the figures. Shelter’s numbers relate solely to new rental and not to the whole market—a very small proportion. Have we inherited a crisis? We have taken on difficult circumstances. Unlike the previous Government, under whom 421,000 affordable homes were lost, we are committed to ensuring that there are 170,000 more. We are committed to building more rented, social and owner-occupied housing.
Following Upper Eden’s resounding yes vote in the first neighbourhood planning referendum on 7 March, the Under-Secretary of State for Communities and Local Government, my right hon. Friend the Member for Bath (Mr Foster), announced a £9.5 million support programme for the next two years. This will offer direct support and grants of up to £7,000 to help more communities follow in Eden’s footsteps.
Communities in Sandwich, Ramsgate, Broadstairs and Margate are keen to take up local neighbourhood planning. What would you say are the critical success factors, and what are you giving local authorities to support these communities develop exciting new planning?
Indeed we are. In 2013-14, we are offering local authorities £30,000 per neighbourhood plan to help communities defray the costs of achieving their plan. The most important success factor is to involve local people, consult them throughout the process, and then remind them that an adopted neighbourhood plan will bring 25% of future revenues from the community infrastructure levy, which can be spent by the community on its priority.
Energy Efficiency: New Homes
It is vital that new homes achieve the levels of energy performance expected, and not all are. The industry has put together a programme of work led by the zero carbon hub to identify problems and put in place solutions. The Department is pleased to be able to support, through a grant, the hub’s work.
I welcome my right hon. Friend’s words. I draw his attention to the Prime Minister’s speech on 4 February to the Royal Society, in which he set out the Government’s intention to be the most energy efficient country in Europe. Will my right hon. Friend take that as strong encouragement to publish the revisions to part L and the improvement in building energy efficiency, which are somewhat overdue?
I thank my right hon. Friend. I am always happy to take advice from my right hon. Friend the Prime Minister, but I can assure both my right hon. Friend and the Prime Minister that I hope to make an announcement before the summer about improvements in the energy efficiency of buildings in part L of the building regulations.
I hope that the Government will honour their zero carbon home commitments. Yesterday I was at the Ideal Home exhibition, and I understand the housing Minister will be visiting it on Wednesday. In the exhibition is a home on which the Government have spent thousands of pounds to promote their green deal energy efficiency scheme. Do the Minister and the Department share my serious concern that there is no one on hand to explain to the public what the green deal scheme is, or to answer any questions they may have?
We will certainly have a look at attendance at the exhibition, but already 1,803 green deal assessments have been lodged and 77 green deal assessor organisations are in place. We are making significant progress, but I will look at the point raised by the hon. Lady.
Fire and Rescue Services
The short answer is none. The Labour party’s claim that the Government are privatising, or seeking to privatise, the fire service is completely untrue. Rather, we are supporting locally led mutuals and co-operatives, which I would have thought the Labour party would have backed, given that its coalition partner is the Co-operative party.
The fire service Minister has written to the Chair of the House of Commons Regulatory Reform Committee outlining plans that could lead to 112 fire stations across Greater London being run by a private company. Why is he planning to take such risks? I do not agree that there is no plan. We know already that companies such as AssetCo have cost taxpayers millions of pounds. Will he give a straight answer?
I just did. The Labour party is giving out information that is simply not correct. We are looking to work with an area such as Cleveland, for example, where the Labour-led fire authority wants to mutualise. We think that mutualisation is good and the right thing to do, so I am disappointed that the Labour party seems to be turning away from co-operatives and mutuals. I would have thought it supported them, given the discussion in a recent publication by the Co-operative party containing a foreword endorsed by the leader of the Labour party.
Nobody believes the housing Minister—the fire Minister, I mean, although I do not believe the housing Minister either, given his answers to previous questions. Nobody believes the fire Minister when he says he has no plans to privatise the fire and rescue service. After all, the Conservative party has form on this. If he does not want to privatise it, why did he write to the Regulatory Reform Committee seeking its views
“on our proposals for a Legislative Reform Order that would enable fire and rescue authorities in England to contract out their full range of services to a suitable provider, including a public service mutual...or other appointed contractor?”
I have to congratulate the hon. Gentleman, who spoke about this last week at the Local Government Association’s fire conference, on his ability to start a campaign to stop something that was never started in the first place. As I have outlined, the simple fact is that Labour-led Cleveland fire authority wants to consider mutualising. Unlike the Labour party, it seems, we are happy to support employee ownership in mutuals, and will continue to do so. I hope that the Labour party will go back to supporting co-operatives.
Council Tax Benefit
Council tax benefit was abolished and replaced by local council tax support schemes in the financial settlement and will take effect from 1 April. We must remember that council tax benefit spending more than doubled under the previous Administration. Our reforms mean that local authorities will have control over what they do locally and an incentive to drive local economic growth.
Thousands of the poorest families in my constituency are facing huge council tax rises as a result of the changes to council tax benefits. Will the Minister try to justify on the one hand slapping down poor people—people who live from hand to mouth day after day—while on the other hand giving millionaires tax cuts?
I call on the hon. Gentleman to put pressure on his local authority to come up with a really good scheme that delivers good local growth and protects people. The Government have put in place support to protect the most vulnerable, as well as setting out guidelines to protect pensioners. I am disappointed that he could not persuade his local authority to do the right thing, like many Conservative authorities are doing.
The Government today published their response to Lord Heseltine’s comprehensive report, which reinforces the Government’s local approach to growth and the economy and would give more powers to councils and local enterprise partnerships. I have also announced today the revocation of the regional strategies for the east midlands and the north-east, showing that we are transferring power down to local communities from Whitehall and unelected regional quangos. Also, as religion comes within my Department, I would like to take this opportunity to wish His Holiness the Pope a long and fruitful ministry.
I thank the Secretary of State for his response, but may I suggest that a bit more clarity about the duty, set out by the Government, to co-operate with neighbouring authorities when identifying land for development would be helpful for local councillors? For example, if one council asks another for help or co-operation, but that council refuses, has the box been ticked or is there further recourse?
We will be issuing further guidance on the duty to co-operate. My hon. Friend makes an important point, because this is a new thing. This and other adjoining measures are designed to ensure that local authorities, in co-operation with their local enterprise partnerships, start to think strategically, and from small beginnings I expect this to grow.
All round the country, hundreds of thousands of low-income households are starting to receive letters from their councils telling them that they will be hit by the Secretary of State’s new poll tax, so taking money out of their pockets. Can the right hon. Gentleman tell the House how many people in his local authority of Brentwood are being affected?
I was giddy with excitement, along with my constituents, to learn that the right hon. Gentleman paid us a visit last Thursday to see the Labour group. There are two members on the Labour group; they are called Mike and Julie. We have to point out that each local authority has to come to its own decision and publish its own facts. We do not do this centrally anymore. We also need to understand that each local authority is responsible for its schemes.
The Secretary of State has imposed the tax, but he does not even know what is going on in his own local authority. I will tell him the answer to the question: Brentwood council says that 2,000 households will be affected. Last week on my visit I did indeed meet one of those affected. She was a woman who will be hit by the bedroom tax and by his new poll tax. She cannot afford it. She will probably have to move out of the area with her son, taking her away from friends, family, neighbours and the support that she relies on. She does not think it is fair, and I do not think it is fair. What has he got to say to her?
In the town hall, the Labour party has a very small room, and everybody heard what she had to say and everybody heard him planning this particular question. The figures he has produced are approximate, because nobody entirely knows yet. He knows that any figure with a nought at the end is an approximate figure—or he should know that. It is about time that he and the Labour party woke up to their responsibilities. If they are imposing a tax on the poor, it is entirely up to the local authorities to act. They have the power—indeed, a number of authorities have the power—to remove this completely, but they hide behind and seek to persecute and to tax the poor.
I know that the right hon. Gentleman knows plenty about a bedroom tax, because he has got plenty of spare bedrooms himself.
I thank my hon. Friend; she is absolutely right. She knows that the Government are keen to see building on brownfield land where it is not of environmental value. We have provided a number of separate funds to help to unlock that. The Residential Landlords Association is now coming forward with some other interesting, additional ideas for ways to move forward and we look forward to hearing those proposals.
T4. Oldham council estimates that more than 2,500 households will be affected by the bedroom tax, yet there are only 500 one-bedroom flats that families are able to move into. Knowing that, why did the Government make funding available for only 100 new affordable homes to be built last year? (148164)
T6. May I ask my dear chum the Secretary of State for his advice on the help available from his Department for community projects such as the Pickering “Slow the flow” defence project and the Filey swimming pool? Will he give me a teach-in on how we can apply for such help and the criteria that we would have to meet? (148166)
T5. West Lancashire borough council has just entered into an agreement with One Connect, a joint venture between Lancashire county council and BT to provide specified services. What steps is the Secretary of State taking to ensure that all councillors on both authorities will not be prevented from exercising their fiduciary duty to their council tax payers under the guise of commercial confidentiality? Will he investigate the openness and transparency of those arrangements in relation to the use of public moneys? (148165)
I think I have actually visited that site and that venture of co-operation. It is a very good thing, and I think it will help out the process. If the hon. Lady has a particular problem about a lack of transparency in relation to the importance of councillors ensuring that their constituents are treated fairly, I will happily look into it.
I am delighted to be able to tell my hon. Friend that the Department is having discussions with the National Farmers Union and with local authorities on ways of developing the scheme further. A number of neighbourhood plans have already produced some exciting ways of addressing the problem, and he can look forward to hearing further announcements on the issue in the near future.
T7. The Government talk about localism, but they still set the caps for the licensing of various shops in town centres, including bookmakers and sex shops. Will they consider abolishing those caps and allowing local people and local authorities to set the levels? (148167)
As the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Grantham and Stamford (Nick Boles), has said, some 500 communities are already availing themselves of the opportunities provided by neighbourhood planning. We have made additional funds available to take the scheme forward, and he will be aware of the exciting developments that are really putting communities back in control of what is happening in their local areas.
T9. Contrary to the Minister’s answer, the national planning policy framework is proving to be an all-too-predictable fiasco—not least because we predicted it would be. The lack of sequential planning has put greenfield sites above brownfield regeneration, endangering cities and countryside alike. When will Ministers rethink this disastrous strategy, stop the sprawl, revive our cities and promote affordable homes? (148169)
The hon. Gentleman can use as much purple prose as he likes—his books are full of it, and very good they are, too—but that will not change the fact that the national planning policy framework is succeeding far better than any previous planning regime in getting local authorities to draw up local plans that put them in charge of making decisions about development in their areas. That is the truth, and he knows it.
I know that the Minister will want to avoid unnecessary job losses in front-line local government services, so what guidance will he give to local authorities on the retention of marriage registrars once the Marriage (Same Sex Couples) Bill becomes law?
I am very happy to look at this matter. The hon. Gentleman asks a fair question and I am happy to have a discussion with him about it once the Bill becomes law.
The Secretary of State is on record as saying that councils that flout the law in the Regulation of Investigatory Powers Act 2000 should face justice, so why have 27 local authorities spent millions of pounds of taxpayers’ money on flouting the law by employing private investigators to conduct unauthorised surveillance operations?
I spent Sunday afternoon at the launch of the Heseltine review under the auspices of the Greater Birmingham and Solihull local enterprise partnership, chaired by Andy Street, whom I know you know, Mr Speaker. It was a real pleasure to see the leader of Birmingham city council, whose name I have temporarily forgotten—no, it is Sir Albert Bore—a Labour councillor, support this. Does my right hon. Friend agree that this is a real step forward for the midlands, and will he soon go up to the midlands to help with this exciting project?
Obviously, I regret that my hon. Friend forgot the name of Sir Albert Bore—an important man in local government who I am pleased to say seems to have changed his tune. He was predicting disaster; he was predicting that all kinds of things would go terribly wrong—yet here we are, with him co-operating with the Government. That is a marvellous sign for the future.
I can confirm that we are looking at how to work with Cleveland to deliver a mutual fire service, if it wants to do it that way. We are working through this at the moment and may be looking at consultation. We will go through that process and look at the feedback we get from it.
Will the Planning Minister instruct the planning inspectorate not to sanction on appeal entirely inappropriate housing development outside town and village envelopes using the five-year rolling housing supply targets where the local authority concerned is doing all it can and more to meet Government guidelines on the development of local plans?
What I can confirm is that the planning inspectorate will interpret the national planning policy framework and the policies contained in local plans and arrive at decisions that reflect the policies in both those documents. What I cannot do is give any particular instruction not to do something in a particular place, but national policy and local plans will be followed.
I noticed on Twitter that the Secretary of State shares my concern about the libel case brought by the chief executive of Carmarthenshire county council against a local blogger, which was paid for by public funds. Now that the trial has concluded, will the right hon. Gentleman consider amending the guidance and, if necessary, legislating to ensure that senior public officials do not use public money to fund such actions?
This is a matter for the Welsh Assembly. We have taken regulations within England that say basically that the use by senior officers of libel provisions should be a shield and not a sword and that, should a chief executive or senior member seek to initiate an action, the full permission of the council is needed before embarking on such an event. The case also illustrates the need to ensure that new technology should be allowed in the council chamber.
I have been contacted by a Rochdale retailer who has just two instalments to pay on his business rates and should get until the end of the month to pay them. The council has involved the courts and the bailiffs are banging on the door, threatening to close the business down. Is this any way for a council to act to improve the high streets? Will the Minister have a look at this?
I will happily have a look at it. I have to say that the local authority should do what it can to help deliver further economic growth locally by working with businesses, but if the business rates were due, the authority would obviously have to go through proper due process. I will be happy to talk to the hon. Gentleman outside the Chamber about this matter.
With your permission, Mr Speaker, I shall make a statement about banks in Cyprus.
In the light of the financial difficulties faced by the Republic of Cyprus, that country’s Government have requested a programme of financial assistance from its fellow members of the eurozone. Britain is obviously not part of the eurozone and was not party to the negotiations, and there is no contribution from the United Kingdom, either through the European financial stabilisation mechanism or bilaterally.
At the end of a meeting of eurozone Finance Ministers at the weekend, it was announced that it had been agreed with the Cypriot Government that a programme of assistance worth up to €10 billion would be provided, subject to the following measures: a fiscal consolidation amounting to 4.5% of Cyprus’s gross domestic product over four years; a privatisation programme to raise €1.4 billion, or 8% of GDP; an increase in corporation tax from 10% to 12.5%; a gold and assets swap from the reserves of €1.5 billion, or 8.5% of GDP; a withholding tax on interest of €1 billion, or 6% of GDP; and a levy on deposits of €5.8 billion, worth 33% of Cyprus’s GDP, which, it has been reported, will consist of a 6.75% levy on deposits below €100,000 and a levy of 9.9% on deposits above €100,000. In return, the assistance package will allow €5 billion-worth of bond redemptions, excluding the Russian loan which will mature in 2016; €2 billion-worth of deficit financing, less privatisation proceeds; and an injection of €4.5 billion into the banks’ balance sheets.
The agreement established terms of reference for an independent evaluation of the implementation of the anti-money-laundering framework in Cypriot financial institutions.
Those are the main features of the agreement, but parts of it, including the deposit levy, require legislation in the Cypriot Parliament, and that is expected to be considered tomorrow. Accordingly, the situation in Cyprus remains uncertain and is subject to change. What is clear from the proposal so far is that the levy will not apply to foreign branches and subsidiaries of Cypriot banks, including those operating in the UK. Indeed, the two Cypriot banks in the UK, the Cyprus Popular Bank and Bank of Cyprus UK, have been open for business today.
Of course, there are British nationals who have accounts with Cyprus-based branches of Cypriot banks and who would be affected by the proposed levy if it were agreed by the Cypriot Parliament. They include serving British servicemen and women who are required to be based on the island and so, in order to go about their day-to-day activities, maintain local bank accounts. Approximately 3,000 members of the armed forces are on overseas postings serving our country in Cyprus. The Defence Secretary and the Foreign Secretary have made clear that, should these measures be approved, the British Government, as their employer, will compensate those personnel for reasonable losses incurred as a result of the situation.
Several thousand UK pensioners are resident in Cyprus. Today is a bank holiday there, and, to ensure that any payments made by Her Majesty’s Government to banks in the country reach the intended recipients, all future pension payments made by the Government to British citizens there will be temporarily put on hold until at least tomorrow. That will allow us to take stock of developments in Cyprus. All UK pensioners in the country can be assured that their future pension payments are being held safely, and that a normal payments service will resume as soon as the situation has become clear. However, recipients of these payments can switch the bank account into which payments are made with immediate effect by contacting the international pensions centre, the details of which are available on the website of the Department for Work and Pensions.
As soon as more information on the final measures taken is available, I will arrange a briefing for Members whose constituents have been caught up in the situation. I understand that this is a worrying time for other British nationals who have deposits in banks in Cyprus, but, as Members will be aware, deposits in Cypriot banks are subject to the laws and regulations of the Republic. Ministers from the Foreign Office, the Ministry of Defence and the Department for Work and Pensions will update the House as soon as they have information that is relevant to their areas, and will keep the House updated.
This is a worrying situation, not only for the people of Cyprus but for many of our constituents. It is a situation that is uncertain and subject to change, and I will return to the House with updates as events become clearer. However, I wanted Members to have the opportunity to be informed from the outset of what is known so far.
The terms of the Cypriot bank bail-out are extremely concerning, and the market reaction today may be only the beginning of the fallout. While it is, of course, important for the Cypriot banks to be put on a secure footing, it is extremely dangerous to wider economic confidence for the fundamental trust of retail depositors to be undermined in such a way. This was a very risky decision, and we would expect the British Government to caution against such a sequestering of the funds of ordinary bank customers.
The so-called bail-in of banks in jeopardy does not always need to punish savers and depositors in this way. It is essential that the trust and confidence of ordinary bank customers across the European Union is immediately restored, with guarantees that no future bail-in arrangements will operate in this way. Surely one of the lessons from recent history is that rock-solid guarantees for depositors are a prerequisite to stability and recovery. EU Finance Ministers would not have countenanced a move such as this in larger members of the EU, yet somehow it is acceptable for smaller ones. It is never a good message to send to the public in any country that they would have been better off keeping their life savings under a mattress than in a bank.
It is particularly concerning that international institutions with UK input, including the EU and the International Monetary Fund, have adopted this precarious strategy, so I have to ask the Minister some specific questions. First, were the UK Government made aware of this proposal beforehand and, if so, when? Was the Chancellor consulted and, if so, what view was expressed? The UK may not be able to attend the meetings of the Eurogroup of Finance Ministers in a non-voting, observer capacity, but any informal decisions taken there still need referring to ECOFIN, so would it not be sensible, in future, to secure a right for observers, including the UK, to attend such crucial decision-making meetings, given the ramifications of eurozone decisions for the whole of the EU?
The Opposition welcome the decision to compensate UK armed forces personnel stationed in Cyprus who are affected, but can the Minister set out the estimated cost to the Exchequer of that policy? Are British consular officials providing assistance to other affected UK nationals? What is the Government’s estimate of the number of UK nationals affected by this decision in Cyprus? What will happen if the Cypriot Government and Parliament do not actually go along with this proposal? They are obviously between a rock and a hard place, as the further two days of impromptu bank holidays go to show, but surely such public brinkmanship by the EU and the IMF just creates even more uncertainty. What is the extent of British banking exposure and British business exposure to the Cypriot banks? How much does the Treasury estimate that UK investors will lose under this arrangement?
Many EU citizens expected that their deposits were guaranteed up to €100,000, or £85,000, under the deposit guarantee scheme directive, but we now learn that there was a caveat excluding special taxes such as this one. Should consumers be aware of any other aspects of the small print in the deposit guarantee scheme? Does this whole episode not show that we should clarify our own banking bail-in rules in this country as soon as possible, rather than, as Ministers are saying in the Banking Reform Bill process, waiting for the European Union to draw up the bail-in directive in several years’ time? Waiting years for the EU to tell us how a bail-in arrangement might operate suddenly looks like an unwise course to take. Surely we should get these issues sorted out here at home as soon as possible. This is not a matter where the UK Government can just sit on the sidelines, because issues that could fundamentally affect our own stability, growth and prosperity are involved, and we expect Ministers to take firm steps within the EU to reduce these risks now.
I am grateful for the hon. Gentleman’s points and questions. Let me say at the outset that we will have the chance to discuss these things in more detail, but the situation is very fluid; we understand that tonight there will be a meeting of the Eurogroup members—a video conference—to discuss some aspects of it, and the Cypriot Parliament is meeting tomorrow, so I think it would be unwise to assume that the information that has come out over the weekend will necessarily represent the shape of things to come. However, I will make sure that the hon. Gentleman and, indeed, all hon. Members are kept abreast of things.
The hon. Gentleman’s point about fundamental trust needing to be established in the banking system goes to the heart of the matter. It is crucial that that applies not just in this country, but across the eurozone. It is one of the reasons why we have been supportive of the efforts being made by the eurozone to stabilise the financial system there, including by the introduction of a single supervisory mechanism. Cyprus, as I think he would acknowledge, is in a particularly acute situation, as a very large proportion of its GDP is exposed to international financial transactions and its domestic fiscal situation also leaves a lot to be desired. I think all hon. Members would recognise that the importance of maintaining fiscal discipline as well as adequate supervision of the banking system is exemplified by what has happened.
In terms of the negotiations so far and the parties to them, the hon. Gentleman should know and is, I think, aware that the discussions are among the members of the eurozone, who bear financial responsibility for bailing out Cyprus, and the Cypriot Government. They have negotiated with each other and the plan can be approved only if the Cypriot Parliament endorses it. The UK understands and has intelligence about what went on in those discussions, but was not part of them and had no influence and no votes. Ultimately, this is a matter for the Cypriots and the eurozone.
The cost of the protection that my right hon. Friends have offered to UK serving servicemen and women will depend on the final state of the arrangements, which, as I say, are not certain at this stage. I mentioned in my statement that about 3,000 UK military personnel and their support staff are employed, which gives us a limited ability to estimate the context.
On the question of the supervision of UK banks and any potential exposure, the Bank of England, as the hon. Gentleman would expect, maintains close involvement and is supervising all the banks that might have any exposure to the Cypriot authorities. The hon. Gentleman is quite right that it is necessary at both a European and domestic level to agree a means of bailing in the contributions of holders of capital so that the banks can be resolved without the types of problems we are seeing in Cyprus. We have been very clear that we want to see that and the Irish presidency is making good progress with the recovery and resolution directive. We have said that if that progress does not proceed at the pace we hope and expect to see, we can use the banking Bill to make the necessary amendments.
This looks to be very poorly thought through, possibly dangerously so, not least because it risks triggering a run on the banks of other indebted countries. Is it not also the case that this could be a breach of EU deposit regulation, which requires a full guarantee of up to €100,000? It is not supported entirely by a tax but by shares—which clearly and demonstrably are not a tax. A minute ago, the Minister described the situation as fluid, but a fluid bail-out does not sound like a very robust policy to me. Does that not illustrate the gulf between the rhetoric and reality of the so-called banking union? Does it not illustrate that the eurozone’s problems are unresolved and blighting the UK economy?
I agree with my hon. Friend to the extent that I think that it underlines the importance of having arrangements across the eurozone to anticipate and provide robust measures to ensure that resolution plans for such problems are agreed in advance so that there will not be this fluidity of negotiation. I completely agree with that. The measures that are being taken for banking union are designed to resolve precisely that set of circumstances. As for the legality of the situation, we will need to be assured that the arrangements proceed in accordance with the treaty.
The lack of effective supervision of the Greek Cypriot banking system has been notorious for many years and it has become a haven for Russian money laundering. What steps, either through this package or through other measures, are being taken better to control the banking system in Cyprus?
Given the importance of the euro’s stability to the London banking system and the wider world, will the British Government be lobbying the European Central Bank to ensure that it provides sufficient liquidity at all times should a run develop in a weaker bank or a weaker country, given the invitation to people to withdraw their deposits from any difficult institution?
The pace of negotiations, thanks to the fact that today is a bank holiday in Cyprus and that that could potentially be extended, is meant to resolve the matter before a run on the banks is possible. My right hon. Friend is right that the situation is unsatisfactory and it is necessary to establish a more orderly system for anticipating or managing potential bank failures in the future. It is in everyone’s interest to ensure that there is no such collapse of the banking system in Cyprus.
Does the Minister realise that we have reached a sorry state of affairs when the eurozone—we are not members, thanks to the Labour Government last time round—[Interruption.] Oh yes; that is when it happened. I know Conservative Members like it, but we did it at the time. Is it not a sorry state of affairs that the eurozone can implement a poll tax, and that the Government were made aware of it at some point or other and have not told us at any time that they condemn this move? I am giving the Minister a chance now: condemn it!
It was the policy of the Labour party to be committed in principle to joining the euro, and it was our right hon. Friend the Member for Richmond (Yorks), now the Secretary of State for Foreign and Commonwealth Affairs, who was the first in the House to say that the Conservative party would campaign against the euro and would not join. As a result of being outside the eurozone, we are not responsible for the arrangements there. We are not part of those negotiations. This is a negotiation between the Government of Cyprus and members of the eurozone.
The amounts involved are eye-watering as a proportion of the Cypriot economy. We are used to bail-outs involving a haircut for creditors. This is the first time I have ever seen a complete scalping of depositors in order to finance a bail-in. Given that we are outside the various institutions of European decision making, how will the Government safeguard British depositors against future scalpings of this sort?
My hon. Friend makes an important point. To put it into context, the European Central Bank said this morning that the situation of Cyprus and the Cypriot banking sector is unique. I think Members will reflect that it has unique problems that have required a unique and very difficult solution.
Surely the Minister agrees that we have been in this situation before. Taking emergency measures that cause alarm is not the same as making fundamental reforms which are necessary. Will the Minister be pressing for more responsible tax and financial controls? For example, the corporation tax is to increase from 10% to 12.5%. Surely he would agree that a responsible financial policy would mean a much bigger increase.
I do not think anyone is suggesting that the measures that have been taken are not rigorous and exacting. The reaction in Cyprus and across the eurozone indicates that these are regarded as very tough measures, including on the transparency of the banking system, particularly to avoid the reputation for money laundering. However, this is a matter for the Cypriot Government. They have had to convince their partners in the eurozone that this programme represents a credible set of conditions which can give confidence to those who are helping to bail them out.
The Minister will no doubt appreciate that Mr Draghi’s comment that the European Central Bank will do whatever it takes clearly includes daylight robbery of British pensioners, among others. Does he agree that this is symptomatic of the dysfunctionality of the European Union? Will he also note that Germany has very much driven the measures itself, and furthermore that it has a surplus of £29 billion with the rest of the European Union, whereas we have a deficit of £48 billion?
Clearly, it is a matter of regret, and lessons should be learned from the situation that Cyprus finds itself in. One of the clear lessons is that it should not have been allowed to descend into this state of indebtedness, and the banks should not have been allowed to get into their present position of vulnerability. It is in our interests, as well as in the interests of other members of the eurozone, that we have a much more soundly based banking system right across Europe.
I welcome the action that has been taken to protect the deposits of members of our armed forces in Cyprus, but to follow on from what has just been said, is not the lesson of this whole episode to spell out very clearly to anyone who advocates in future any greater European integration or any joining of the euro, “Hands off our money”?
This is a truly shocking development, impacting very unfairly on savers who are already feeling the impact of the very low interest rates brought about by quantitative easing; it is acting as a real disincentive to save for one’s older age. I congratulate my right hon. Friend on protecting members of the armed forces, but will he clarify his intentions for British pensioners, having put on hold pension payments? Can anything more be done to reassure British pensioners living in Cyprus that they will not be affected?
It is open to British pensioners to have their pension paid into another account. They can nominate that account from now on through the Department for Work and Pensions’ website. Their pensions are safe; we will make sure of that. The Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), will update the House. Once the details of the final package become known, in so far as they have implications for the payment of pensions, we will update the House.
My Cypriot constituents are shocked and angered that the much-publicised deposit guarantee scheme appears to be worthless. They are further outraged that the reason given for that is that the banks have not gone bankrupt, therefore the deposit guarantee does not apply. What action will the Minister take to speak to his EU colleagues to see what can be done, even at this late stage, to repair the damage to trust and confidence in our banking system?
The hon. Gentleman and I had a conversation this morning. I know that he has many constituents who are very worried at this time, and I have said that I am happy to meet them so that we can understand their particular situation. It is clearly an unsatisfactory situation in which the Government of Cyprus, as I understand it, faced a choice between a measure such as this and contemplating the collapse of the banking system. That is a choice that no one would want to make. It is a choice that they made and that they are putting to the Cypriot Parliament, but just as this Parliament is sovereign, so that is true in Cyprus, and the debates that they will be having during the next two days will determine whether what has been proposed over the weekend is what pertains.
The Government are right to protect the position of members of our armed services, but the Minister knows that many pensioners are exposed and I hope that he will consider extending the guarantee to British pensioners living in Cyprus. On a practical note, I believe that the Cypriot Parliament is due to vote on Tuesday evening and that the bank holiday in Cyprus has been extended until Thursday in order to keep the banks shut. Does that apply to branches of Cypriot banks in other countries, and what will happen if the vote in Parliament on Tuesday does not go the way that the Cypriot Government wish it to go?
The public will be outraged that British nationals are having their money stolen from them on the orders, let us be frank, of the German Government. Can we now move forward with legislation in this Session of Parliament to put on the statute book the power to have a referendum in this country on our relationship with the European union?
The hon. Lady will know that these matters have been discussed in the House. The Prime Minister has made a speech in which he said that if he is re-elected there will be such a referendum. As to whether the legislation should come before the House before the general election, that is for others.
The Minister will no doubt sympathise with a new Government picking up an appalling financial legacy and having to make tough decisions, but the raid on deposits was extraordinary and unprecedented. Will he provide assurance to my constituents that not only are the Laiki bank branches and the Bank of Cyprus, the headquarters of which is in my constituency, open for business, but the deposits are guaranteed, and that that deposit guarantee scheme applies and will continue to apply whatever the decision of the Cypriot Parliament?
I applaud the work that my hon. Friend does as chairman of the all-party group on Cyprus. The proposal that has been made would certainly protect his constituents who have deposits in those banks, and the final terms are being discussed in the Cypriot Parliament. Certainly, those banks that have subsidiaries in the UK are governed by the UK regulators and subject to the UK financial compensation scheme.
The Minister has mentioned members of the armed forces, but clearly no scheme is yet in place. What advice is being given to members of the armed forces currently serving in Cyprus, and has the Ministry of Defence stopped the payment of wages and expenses into Cypriot bank accounts?
The arrangements for advice on implementation of the commitment to compensate members of the armed forces cannot proceed until the Cypriots have decided on the final arrangements, which will be in the next few days. Having made the commitment to ensure that pensions are not paid into bank accounts to which access might be questionable, I will discuss the hon. Gentleman’s point with my right hon. and hon. Friends to ensure that similar arrangements are considered for the MOD.
The Minister is presumably unable to say how many of the 3,000 members of the armed forces serving in Cyprus will be affected, but does he agree that serving military personnel who have Cypriot bank accounts, even if they are not in Cyprus, should also be included in the scheme? Also, why will the Government be compensating only for “reasonable” losses and not full losses?
I know that many of my hon. Friend’s constituents will be in that situation and will have bank accounts in Cyprus. We have made a commitment, but these are very early days—we learned only over the weekend that these matters are being discussed. I think it is appropriate for the Government to make an immediate commitment of reassurance to those members of the armed forces. They have no choice about being sent to Cyprus, and when they go on this country’s business it seems to me to be reasonable to make that commitment.
Does the Financial Secretary have a view on how it looks to the world that ordinary savers are losing proportionately more of their deposits than institutional investors are? Is there not a strong case for the eurozone to get on and complete arrangements to create a single resolution mechanism so that banks can be resolved in an orderly way?
As the EU has now arbitrarily abandoned its £85,000 deposit insurance scheme, what advice would my right hon. Friend give British subjects in other European countries, such as Ireland, Portugal, Spain, Greece and Italy, whose deposits might also be at risk in future? Would it be best for them to repatriate their funds?
The ECB action was supposed to create stability, but it has created instability. The Minister has made it clear that the Chancellor was not consulted on that beforehand, but has the Chancellor made it clear to the ECB that, although this particular deal may be renegotiated, the instability will linger in precisely the way the hon. Member for North East Somerset (Jacob Rees-Mogg) suggests?
The whole House has an interest in ensuring that right across Europe, in countries that are members of the eurozone or those that are not, there is confidence in the banking system. This period of several days of uncertainty is undesirable. We need to get arrangements in place, as the hon. Member for Nottingham East (Chris Leslie) said, to have clear resolution plans in advance. It needs to be sorted out quickly, because the situation is undesirable. I think that it is in everyone’s interests that it is resolved very soon.
I am grateful to the Minister for the conversation he and I had about the issue earlier today. I am also grateful to Councillor Andreas Tambourides, who has discussed it with me, and to my constituent Wayne Boothroyd, who e-mailed me to ask specifically about British service personnel on the island. What assurances can the Minister give me to pass on to my constituent that members of the armed forces will be compensated for their total losses, not their “reasonable” losses, as the Minister said in his statement?
The Defence Secretary and the Foreign Secretary have given a voluntary commitment to making sure that we do right by our armed forces, and their intentions are absolutely clear—that we should not be putting at a disadvantage the men and women who serve our country overseas, in this case in Cyprus.
I am a bit surprised by the lack of moral outrage from the Minister on behalf of the people who live in Cyprus. He calls the measures vigorous and exacting, but are they not actually immoral and unfair? Will he simply say that it is wrong for the Cypriot authorities to pilfer the savings of ordinary people living in Cyprus?
Not having been part of the negotiations, it is difficult for any Member of this House to know what the alternative was. The elected representatives of the Cypriot Government clearly accepted what was proposed in contemplation of a fate that they considered to be worse, which was the collapse of the Cypriot banking system. This is a situation that none of us wants to be in. Thank goodness that in this country, as a result of being outside the eurozone and having introduced discipline into our finances, we are not going to be.
We may well find that some of the biggest British losers are people who are in the process of buying or selling property in Cyprus. Can the Minister offer any reassurance to people who may have lodged money with a solicitor in an escrow account, for example, that the solicitor will be responsible for the losses and not the person who is trying to buy a property?
This is clearly deeply worrying for the people of Cyprus, and we have to condemn what is being done to them, but it is also worrying for millions of working people across the whole eurozone. Is this not just the beginning of a situation in which Cyprus and other countries withdraw from the eurozone and, indeed, the euro itself may be wound up? Are the Treasury, the Government and the Bank of England making preparations for that eventuality?
The Treasury and the Government always make contingency plans for many eventualities. It is important to reflect on the statements made by the German Government and by the ECB that the situation in Cyprus is very dissimilar to that prevailing in other countries. It would not be right to draw a parallel between what is happening in Cyprus and the situation that exists elsewhere.
Many British citizens who move themselves or their assets to Cyprus will have done so believing that going to another EU country offered them some protection. This theft clearly shows what a pup we have been sold on Europe over the years. Will my right hon. Friend take up the point made by my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) and ensure that proper advice is offered to British pensioners in other eurozone nations on how they can protect their pensions or return their deposits to this country?
The agreement that was reached at the weekend was an agreement between the Government of Cyprus and the eurozone members. The ECB has said clearly:
“It’s the Cyprus government’s adjustment programme. If Cyprus’ president wants to change something regarding the levy on bank deposits, that’s in his hands. He must just make sure that the financing is intact.”
The Cypriot Parliament will, quite properly, be discussing and debating this matter. It has some influence, and indeed some control, over how these measures are levied.
As the Minister made clear, whether in the eurozone or not, what affects one country in Europe affects us all. Will he therefore answer the question asked by my hon. Friend the Member for Bolsover (Mr Skinner) and give us his view on this levy on deposits?
The Government of Cyprus agreed to this proposal. The spokesman for the German Government was very clear that how Cyprus makes its contribution—how it makes the payments—is up to Cyprus. If the Government of Cyprus, recently elected by their people, make this decision, it is for them to justify it to the Cypriot Parliament.
One of the fundamental rules of banking has been broken, in that the deposits and savings of ordinary people have been, in effect, taken over in part by the state. That is a fundamental breach. What assurances can the Government give us that this precedent will not be followed by other countries in the near future?
As I said, we need to get resolution arrangements in place, but the ECB and the spokesmen for different members of the eurozone have been clear that the decision to impose this kind of levy was taken by the Cypriot Government with the eurozone. They could have done it in different ways, but that is the mechanism they chose.
Although it is absolutely right that the Government should support our armed forces personnel, I share the sense of moral outrage expressed by the hon. Member for Brighton, Pavilion (Caroline Lucas) that ordinary pensioners who have retired to Cyprus, who are citizens of ours and who do not think of themselves as members of the eurozone but as British citizens, will feel abandoned. Will the Minister assure me that he will fight hard, particularly for those pensioners who have less than €100,000 on deposit, to try to protect their money?
Yes, but discussions and negotiations are taking place between Cyprus and the eurozone—and, indeed, in the Cypriot Parliament—on whether the proposals that were agreed over the weekend will be enacted. We have some way to go before we get to that stage and I will, of course, update the House if and when we get to that final stage.
I am amazed that the Minister is not more scandalised that thousands of ordinary Cypriots, in this country and in Cyprus, are going to lose money. Money will be filched from them when, frankly, the people who caused the problems—the Government of and the bankers in Cyprus—will not lose anything. Leaving that aside, how much British Government money from the Ministry of Defence and the Foreign and Commonwealth Office will be lost in Cypriot banks?
I am scandalised that the situation in Cyprus was allowed to happen in this way. It should not have happened in terms of the supervision of the banking system or the country’s fiscal performance. We will not be able to make an assessment of our guarantee to the armed services until we see the final shape of the negotiations, but when we do I will make sure that the House knows about it.