House of Commons
Tuesday 19 April 2016
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Chancellor of the Exchequer was asked—
National Insurance Numbers (Other EU Nationals)
1. When HM Revenue and Customs plans to publish data on the number of active national insurance numbers used by people from other EU countries. 
The Government are committed to providing data on active national insurance numbers used by people from other EU countries. HMRC is currently compiling that information and is working closely with the Office for National Statistics, which is reconciling the four main sources of international migration data. The data on active national insurance numbers will be published as part of, or alongside, the ONS’s publication. It is up to that independent statistics authority to decide when it is ready to make public the information.
I have been asking HMRC for the figures since January. The British people have a right to know such facts, particularly in the context of the UK’s EU referendum debate. Will we know before 23 June how many foreign nationals from other EU countries have national insurance numbers?
It does take some time for HMRC to combine and match multiple datasets and hundreds of millions of lines of its own and the Department for Work and Pensions’ data. The intention is to publish the information alongside the ONS analysis. I note that according to its website the ONS plans to publish in May a note on migration incorporating the latest available migration data, and helping to explain further why the two datasets show different trends.
What about the 3.3 million people—one in 10 of the existing workforce—who pay their national insurance and tax and whose jobs are linked to UK exports to the EU? Does the Minister agree that leave campaigners should not just cross their fingers and dismiss reality and that Members on both sides of the House have a duty to spell out the fact that leaving the EU would put real jobs at real risk?
The hon. Gentleman will be aware of the Treasury analysis published yesterday that shows the various models and the consequences were we to leave the EU, including a permanent reduction in our GDP compared with what it otherwise would be and significant damage to productivity growth. The hon. Gentleman is right to highlight that point.
Do the Government welcome the opportunity to bring forward actual data without the need to project forward 14 years using techniques that have proved to be inaccurate every six months?
As I said, HMRC has gone through the data and will provide them to the ONS. It is for the ONS to decide the timing, but I have drawn the House’s attention to what it has said.
Returning to the Treasury analysis, it compares one scenario with other scenarios, and all three possible scenarios for leaving the EU would leave this country poorer than we otherwise would be.
The impact of EU membership on jobs is obviously significant. Will the Minister pass on my congratulations to the officials who did the useful analysis that was published yesterday? A regional breakdown on page 65 of the document suggests that 100,000 jobs in the north-east are dependent on EU exports. I had thought that the figure would be 140,000, so will he ask the officials to look at it again with a view to revising it up?
I will certainly take that representation on board. Of course, the north-east of England has the very large Nissan plant, which provides a significant number of jobs. The argument in the Treasury analysis is that we benefit from an open economy. If we leave the single market, we become a less open economy, which will have a cost to the British people in their living standards.
The disgracefully dodgy document published by the Treasury yesterday is, frankly, worthy of the children’s programme “Jackanory”. The immigration figures suggest that there will be 3 million more immigrants in this country by 2030, placing my hon. Friend in clear breach of the Conservative manifesto commitment to reduce immigration to tens of thousands a year. What is his response to that accusation?
The numbers are based on the ONS projection that was used at the last Budget. No account is taken of the achievements of the renegotiation secured by the Prime Minister. On the Treasury analysis, a large number of independent economic commentators have argued that it is broadly in the right direction. My hon. Friends who advocate that we should leave the EU should come forward with their own analysis, setting out exactly what model they would follow and what the economic consequences would be.
2. What steps he is taking to help first-time homebuyers. 
We are both building more houses and helping young families afford those homes. Some 400,000 new homes are being built over the years of this Parliament, half of them starter homes for first-time buyers. In the Budget I also launched the new lifetime ISA, so that young people no longer have to choose between saving for a home and saving for their retirement—we are going to help them do both. All this from a Conservative Government who support people’s aspirations to buy their own home and, in time, pass that on to their children.
Following the promise of an extra £19 million from the Treasury to help make Bicester garden town a reality, will the Chancellor update the House on the other means he is using to encourage house building, particularly for first-time buyers?
I am delighted that we can support the community that my hon. Friend so ably represents in Parliament, and provide money for the upgrade of the M40 junction and a new secondary school to go with the new homes being built in Bicester. Of course that comes as part of a suite: we are investing in new starter homes and in shared equity products for people; our help to buy ISA has been used by hundreds of thousands of people; and the new lifetime ISA will also help young people. Those are all things we are doing to make sure this a home-owning democracy.
But there is a problem, because the Office for Budget Responsibility says that lifetime ISAs will increase house prices, as they will increase demand and there is relatively restricted supply. Is the Chancellor confident that his measures to increase the supply of housing will mean that the OBR is able to revise that analysis—yes or no?
I agree that it is vital that we not only help people afford homes, particularly young first-time buyers, but build more homes. That is the plan we set out in the spending review; a big priority of the capital budget was the additional billions we will be spending on building homes—much more than was spent under the last Labour Government.
How is having net migration of an additional 3 million people going to help first-time buyers find a home?
As I say, we have the products to help first-time buyers in this country afford housing, but I make this observation on migration: you cannot have access to the single market without accepting the free movement of people. That is an absolutely clear principle, which has been made very starkly clear to this country by Germany and France, and is internationally accepted. If we want access to the single market, we have to accept the free movement of people.
Will the Chancellor confirm that the number of under-35s who own their own home has fallen by a fifth since he came to office?
Under this Government the number of first-time buyers is up by 57%, whereas under the last Labour Government in the last Parliament it fell by 50%.
Perhaps the Chancellor will be hearing for the first time that the number of under-35s heading homes they own has fallen by more than 280,000 since 2010. Indeed, the number of affordable homes available to buy has halved since then. Private rental prices rose by 2.6% in the year to February, with incomes failing to keep pace. In September, the Government spoke of a “national crusade” to get 1 million homes built by 2020, but in November that figure was more than halved. Shelter says the Government’s starter homes scheme takes away homes that people on typical wages could afford. Is it not true that home ownership is in freefall because of the housing crisis, with young people who are aspiring to own being the hardest hit?
I have already said that the number of first-time buyers is actually up by 57% under this Government, and I would make this observation: we cannot have a strong and successful housing market, and people getting on the housing ladder, unless we have a strong and successful economy. If we followed the prescription of the Labour Front-Bench team, of nationalising half the economy and imposing punitive tax rates, there would not be anyone able to afford any home in this country.
23. Is it not the case that this Government’s lifetime ISA could help to produce, at maximum rates, a home deposit of up to £50,000, and, even at lower rates of savings, a deposit enough for a terraced home in Norwich costing £120,000? 
The lifetime ISA will be a very popular and successful new saving product precisely because it does not require people to choose between saving for a home or saving for their retirement; they can do both. We are also now looking at ways for people to draw on their savings during their lifetime for particular emergencies, or for when they need bits of money, like they do in the United States with the 401(k) scheme. The lifetime ISA will be a radically new savings product, and it will do what we need to do in this country, which is build a savings culture.
3. What assessment he has made of recent trends in the level of productivity; and what steps he is taking to increase productivity. 
Productivity performance in the UK has been weak since the financial crisis, as it has been in all developed countries. The Government published their productivity plan “Fixing the foundations” last year. At the Budget, we announced additional reductions in corporation tax and business rates to incentivise investment, and gave the green light to infrastructure projects such as Crossrail 2 and High Speed 3.
The Scottish National party has continually argued that the UK economy is in dire need of investment to stimulate productivity. Despite the productivity plan, the Chancellor seems determined to persevere with policies that stifle productivity. What policies have the UK Government enacted that will encourage an increase in productivity?
The hon. Lady is right in saying that there is an issue in relation to productivity in this country, but there is an issue across all major developed economies. Over the past year, productivity growth in this country was about 1%, which compares with 0.9% across the G7. On specific measures, we have established the National Infrastructure Commission, protected science funding at the Budget and spending review, introduced the Housing and Planning Bill, announced the apprenticeship levy, which is coming in, and announced a £100 billion infrastructure programme over the course of this Parliament.
Does the Chief Secretary to the Treasury agree that, by being a member of the European Union, this country benefits hugely from a cross-fertilisation of good ideas across the European Union, the supply chain, and foreign direct investment at 50%? Our trade, too, also benefits from our being in the single market—[Interruption.]
Order. No! The hon. Gentleman is very, very wide of the question. I have great respect for him. He has put his thoughts on the record, but they have absolutely nothing to do with the question on the Order Paper, to which the Chief Secretary will not therefore reply.
May I press the Minister? He cannot just hide behind what he claims to be happening in all advanced economies. We are performing worse than most, particularly France. Is the reason for that not to do with the lack of skills of our workers and the lack of good education in our country? Will the Chancellor’s silly policy on forced academisation help or hinder?
We recognise that there is an issue with productivity, which is why we published the productivity plan, but in terms of growth, the UK was the fastest-growing major economy in 2014. Last year, we were in second place; this year we are also projected to be in second place, growing at a healthy rate. Therefore, with regard to growth, this country is doing very well indeed.
Does the Chief Secretary to the Treasury agree that £540 billion invested by foreign businesses in the UK over the past decade is vital to our future productivity, and that, if we left the EU, the uncertainty of our trading relationship with Europe and the world would put that investment in jeopardy?
I agree with my hon. Friend. Leaving the EU would damage UK productivity. It has the potential to deny access, or to make access more difficult, to markets and investment. It is worth noting that the UK, with 28%, is the No.1 EU destination for foreign direct investment, and a large part of that is to do with our status as an EU member.
It was five years in office before we saw a productivity plan, and what happened last year? Productivity in the UK was 18 percentage points below the average for the rest of the G7. One sector that needs help is the UK steel industry. It needs more capital investment to be more competitive. How much money will the Government invest in steel in the next 12 months to improve productivity and save British jobs?
The hon. Gentleman mentions the figure of 18 percentage points, and I refer him to an earlier answer in which I said productivity has been a long-standing issue in the UK. In fact, the figure was 17 percentage points back in the 1990s. As he well knows, the action we have taken on steel includes securing state aid to compensate for energy costs, securing flexibility over EU emissions regulations, ensuring that the procurement rules can also allow social and economic factors to be taken into account, and continuing to tackle unfair trading practices. The Government have been very active on steel, and that has not ended today.
4. What steps he has taken to reduce the number of tax havens worldwide. 
5. What his policy is on requiring multinational companies to disclose to the public the profits they hold in tax havens (a) in British overseas territories and Crown dependencies and (b) elsewhere. 
7. What steps he has taken to reduce the number of tax havens worldwide. 
12. What his policy is on requiring multinational companies to disclose to the public the profits they hold in tax havens (a) in British overseas territories and Crown dependencies and (b) elsewhere. 
The Government are leading the world in the fight against tax evasion and it was Britain that first demanded that multinationals publish, country by country, where they pay tax. Thanks to our leadership, that is now being taken up at a European level. Multinationals selling into Europe will be required to report the tax they pay, including in ultra-low tax locations. Britain has also got its leading allies to agree to share information on the beneficial ownership of companies. We are now seeking international leadership on a blacklist of tax havens, with punitive action against the jurisdictions on that blacklist. We want the rest of the world to follow our example; where we lead, others should follow.
I thank the Chancellor for that answer, but Conservative MEPs have voted six times on instruction from the Treasury to block EU-wide measures against tax avoidance. What action will the Chancellor take to get all Crown dependencies to establish a public register of beneficial ownership?
At a European level, we are now getting agreement to ensure that multinationals should disclose where they pay tax around the world, including in ultra-low tax jurisdictions. We have just agreed with our leading European allies, France, Germany, Italy and Spain, that we will exchange information on beneficial ownership. In terms of public registries, we are literally one of the very few countries in the world—one of only two or three countries in the entire world—to have committed to a public register, but we want all jurisdictions, not just our overseas territories but all the other advanced economies of the world, to follow our lead.
Last month, I tabled a series of written questions about the tax gap resulting from individuals and businesses using overseas territories and Crown dependencies. All seven questions were grouped into one answer from the Financial Secretary, which basically said, “We have no idea.” Now that the Government have been shamed by the Panama papers into hasty action, will they finally rectify the extraordinary situation whereby the Government have no idea how much is lost to the Treasury in this way each year? Would a public register of beneficial ownership not help in this regard?
We have published more detail on the tax gap than the previous Government and we have shown that it is at one of its lowest levels in our history. This Government have collected £26 billion more than was being collected by a Labour Government in extra compliance.
Tax havens are merely a symptom of a much wider problem, which is that too often the wrong values are at the heart of our financial system. There is too much greed. There is insufficient reciprocity. There is still too great a disconnection between the real economy and the needs of our society. Eight years on from the financial crisis, what is the Chancellor’s genuine assessment of how much has changed for the better?
That is a perfectly reasonable question, and it was well put. A huge amount has changed. There is much tougher regulation of the financial system, and we have better regulators. Banks are more on the case of bad action in their areas, but it is true that more needs to be done to create a proper culture in the banking system in which they treat customers fairly and seek to do the right thing. That is happening, and the banks that do it will get rewards from customers in the marketplace. Like other professions, the industry is seeking to improve its standards of conduct.
The Chancellor will be aware that the reporting requirements for private companies are a lot less stringent than those for publicly listed companies. Although the register of beneficial ownership is an improvement, we need to know not just who owns a particular company but how much tax they are avoiding. If a company gets away with not publishing income, turnover or profit, that will not do. May I ask him what steps he will take with our overseas territories to ensure that this is rectified?
Of course, all companies have to pay their correct taxes, and we have taken action to ensure that. Country-by-country reporting is designed precisely so that people can see in particular where multinational businesses pay tax.
The recent information-sharing agreement that the Chancellor has just referred to could turn out to be a very significant step in the fight against tax evasion, and I support it. The public are right to be upset when businesses or individuals do not pay their fair share of tax. Evasion needs to be rigorously pursued, but does the Chancellor agree that when that is caused by tax avoidance, it is the job of Government to simplify the tax code and close the loopholes exploited by the avoiders?
I broadly agree with my right hon. Friend. I welcome the welcome that he gives to the agreement that we have with four other European countries on the exchange of information on beneficial ownership. We hope that will set an example that not just the rest of Europe, but the rest of the world will follow.
On tax avoidance, of course it is the responsibility of the House of Commons and the Government to try to make sure that the tax code and tax law are simple and do what is intended, but we are in a constant race, as has always been the case, against highly paid accountancy firms and the like, who design very contrived systems to avoid tax and avoid the intention of Parliament. There has been a significant development in our jurisprudence whereby the Supreme Court now takes into account the intention of Parliament, as well as the letter of the law. I think that is right, because as I say, there is sometimes a bit of an arms race in relation to the tax code, and the wishes of Parliament should be taken into account by our courts.
I congratulate my right hon. Friend on the agreement that he has just reached. Is it not the case that HMRC employs 26,000 investigators who work to stop tax evasion and avoidance, and that they have brought in more than £2 billion over the past six years from offshore tax avoidance? Does he agree that we should congratulate HMRC on doing the good job that its investigators are doing, and thank them for their work, and that anyone who criticises HMRC in that respect is just plain wrong?
My hon. Friend is right to highlight the good work that HMRC does. It has never been popular to be a tax collector in any country at any point in history. HMRC is doing a good job in that respect. We are putting more resources in so that it can target particularly wealthy individuals who are evading tax. We now have 26,000 people employed by the Government to ensure that people comply with our tax laws.
I congratulate the Chancellor on the work that he has done to close loopholes—more than any previous Chancellor—but does he recognise that a low-tax economy will attract wealthy people from all over the world to invest in our economy, create jobs and pay more tax, so the Exchequer draws more tax in the end?
I entirely agree. We as Conservatives believe that there should be low taxes, but taxes that are paid. That is the right approach. That is why we have reduced corporation tax, and why we are reducing income tax by raising the tax-free personal allowance. When we cut the top rate of tax, we collected more income for the Exchequer.
With the tax gap now at its lowest level on record, does the Chancellor agree that this Government have done much more to ensure that the taxes that are owed are paid than the Labour Government ever achieved?
My hon. Friend, who is an excellent Member of Parliament in the west of England, is right. We get lots of suggestions from the Labour party about what we should do about tax. Labour was in office for 13 years and had Treasury Ministers answering questions for 13 years. Not a single one of these things happened when they were in charge, and no one believes that if Labour were ever back in charge, it would be tough and take action.
Shall we bring the discussion back to today? In the Panama revelations about the behaviour of offshore companies, the Chancellor could not fail to notice the key role played in many of those deals by UK-headquartered banks and UK-based intermediaries. For example, HSBC and its affiliates created more offshore companies through Mossack Fonseca than any other bank. In view of the significant role played by UK banks, will the Chancellor support the new clause tabled by Labour to today’s Bank of England and Financial Services Bill, requiring British financial institutions to record the true owners of any companies or trusts that they work for? Will he also, like me, welcome the proposal from my right hon. Friend the Member for Birkenhead (Frank Field) for a register of the beneficial owners of property in the UK to tackle money laundering, often linked to tax evasion?
First, we are introducing a register of the beneficial ownership of companies and trusts that need to pay tax, and of course banks must therefore comply with it. Secondly, we are introducing—this will be in the Queen’s Speech—a new criminal offence of facilitating tax evasion, which will apply to the corporate sector in Britain as well. That is in addition to the criminal offence we have introduced that says ignorance is no defence when someone comes before the courts if it is found that they have been evading taxes.
Tax havens lead to a loss of revenue here as individuals can hide through opaque structures and businesses simply do not pay UK tax in respect of where economic activity takes place. Given the revelations from Mossack Fonseca, has the Treasury carried out a new assessment to calculate the scale and size of the revenue lost to the UK?
There are already a large number of ongoing investigations in respect of Panama, which we hope will lead to prosecutions, and the Government already had data on Mossack Fonseca. If there is additional information available in the Panama papers—despite our requests, the media organisations have not yet handed all that information over to us—we will act on it.
Can I ask the Chancellor to be more assertive and to go much further? Mossack Fonseca is the fourth biggest such firm in Panama, and I presume that there are dozens, scores or hundreds of smaller ones, and there will be many, many more in other countries. The scale and scope of this are likely to be astronomical. He and the Government need to go much further. We need to have a much clearer understanding of the scale of this. I ask him to make all the representations he can to the Panamanian authorities and other jurisdictions where similar activities are taking place.
To be frank, representations are not going to be enough with some of these jurisdictions. That is why we want international agreement to a blacklist that jurisdictions will go on if they do not comply with the norms that we are establishing on transparency, exchange of information and the like. Once they are on the blacklist, they are subject to penalties and punitive action—sanctions, if you like—so that it is clear that they cannot carry on doing business in the way they have been. If the whole world comes around on that—there was welcome support for this British-promoted concept at the G20 last week in Washington—so that we get that blacklist and that punitive action, I think that we will help to solve this problem.
We have to move on—far too slow.
6. What assessment he has made of which groups within the UK population will benefit from planned changes to corporation tax. 
13. What assessment he has made of which groups within the UK population will benefit from planned changes to corporation tax. 
Corporation tax cuts have been a central part of the Government’s economic strategy, and that strategy is working; there are 2.3 million more people in employment since 2010. The further cuts in the main rate announced at the Budget, which will bring it down to 17% by 2020, will benefit over 1 million companies, large and small. Lower corporation tax rates will support UK companies to invest and grow, creating jobs as they do so.
One of the justifications for the corporation tax cut was that businesses would pass it on to workers through the increase in the living wage. Evidence is now emerging that some companies intend to pocket the tax cut and squeeze conditions for their employees, so what steps do the Government intend to take to monitor that?
The cuts in corporation tax will result in greater investment in this country, and greater investment drives productivity growth, and productivity growth is what will drive higher living standards. Let us remember that it is this Government who have brought in the national living wage, and we have seen very large numbers of people see increases in their wages and salaries.
Owing to changes in personal independence payments, people with disabilities are set to lose £1 billion at the same time as corporation tax is being cut, so can the Minister honestly say that he is comfortable with prioritising big business over disabled people?
We are providing more support to help the disabled get into employment, but let me just make this point to the hon. Gentleman, and to the House: the way this country is going to be prosperous and able to afford good public services and support for the most vulnerable is by having a strong, growing economy, and competitive business taxes help us to have that strong, growing economy.
Is my hon. Friend aware that the Federation of Small Businesses has said that the decision to further lower corporation tax to 17% is an important statement of intent and will provide a boost for the affected firms? Does he agree that that will help to further underpin the enterprising economy that we need?
I completely agree, and my hon. Friend is absolutely right to highlight the comments of the FSB. The reductions in corporation tax will help small businesses and large businesses, and they will help to drive a competitive and dynamic economy.
Does my hon. Friend agree that it is easy to trot out phrases such as “tax cuts for companies”, but it is vital that we have low corporation tax to attract investment into this country and to ensure that we have jobs here? The Chancellor has repeatedly encouraged companies to pass on tax cuts to workers, which is where they should go.
My hon. Friend is absolutely right to highlight that. All taxes are ultimately paid by people, but business taxes that discourage investment discourage the economic growth we need in this country, and that growth is what this Government are determined to deliver.
General Anti-tax Avoidance Principle
8. For what reasons the Government have not introduced a general anti-tax avoidance principle. 
A general anti-avoidance rule was considered by an independent study group led by Graham Aaronson QC in 2011. The group recommended an anti-abuse rule for the UK because it felt strongly that it would strengthen and complement existing tools available to HMRC. The Government accepted the recommendation and introduced a general anti-abuse rule in 2013, striking the right balance between protection against avoidance and certainty for taxpayers.
One way to put an end to aggressive tax avoidance is a general principle—a principle, not a rule. I am sure the Minister understands there is a difference: people can find a way around a rule, but it is not easy to do that with a principle. Will the Government therefore back their public statements about tackling aggressive tax avoidance and legislate for a general principle of tax avoidance?
I remind the hon. Gentleman that the last Labour Government looked at this issue and declined either a general anti-abuse rule or a general anti-abuse principle because of fears of uncertainty. We believe we have got the balance right. However, alongside the introduction of the anti-abuse rule, we have brought in measures to deal with accelerated payments and promoters, we closed 40 tax loopholes in the last Parliament and we have announced 25 closures in this Parliament already. It is worth pointing out that avoidance is coming down.
Support for the Economy (South-west)
9. What assessment he has made of the effectiveness of measures to support the economy in the south-west announced in the Budget 2016. 
We announced at the Budget an extensive package for the south-west covering both rail and road: a new marine hub enterprise zone in Cornwall, a £4.5 million boost for ultra-fast broadband across the region and, to top it off, a £900 million devolution deal with the west of England. The south-west will also benefit from the income tax cuts and business rate reductions announced in the Budget.
One item that went largely unnoticed in the Budget was the £19 million for community land trusts in the south-west to mitigate the impact of second home ownership. How will that money be allocated? Will my right hon. Friend work with me and fellow Conservative MPs in the south-west to ensure that that money is put aside to help people to purchase plots and to help working people to get on?
My hon. Friend is right that we will be releasing £19 million for community-led housing in the south-west. I look forward to discussing with him how we might best approach that issue. We are also introducing a new right to build and reforms to planning, which will boost the custom-build sector in Cornwall and beyond.
Does my right hon. Friend agree that the Labour Government underfunded infrastructure projects in the south-west, resulting in lower productivity in the region and hence less of a contribution to the national economy than we should have had, but that it is this Government who are turning that around with their huge £7.6 billion commitment to infrastructure and connectivity?
Just as long as the Chief Secretary focuses on what this Government are doing. He does not need to burble on about the past.
I welcome the opportunity to say something about what this Government are doing on infrastructure in the south-west. We have 35 projects in the infrastructure pipeline in the south-west with a value of £23.2 billion. At the Budget alone, we announced improvements to Exeter St David’s station, at Weston-super-Mare and at Cheltenham Spa station. I have already mentioned community housing. There is also a fund to provide more and better roads in the south-west.
10. What fiscal steps he is taking to support the development of solar power. 
We are continuing our support for solar, keeping the small-scale feed-in tariff scheme open beyond January 2016, setting tariffs on a path to help transition the industry to a sustainable, subsidy-free future.
I thank the Exchequer Secretary for that very short answer. Given that the EU’s VAT reform action plan will give Governments discretion in applying rates of VAT, including on solar power, will he confirm categorically to solar installers in my constituency that the UK has officially and permanently dropped the proposal to hike solar VAT to 20%?
The reduced rate of VAT remains in place on all 11 of the categories of energy saving materials. Following the decision by the European Court, we have consulted interested parties on the issue and, given the complexities involved, we are still considering the responses.
Does my hon. Friend agree that about 90% or more of the solar-powered energy available in Britain has been put in place under this Government? Does he also agree that, in order for intermittent renewable power to provide a steady baseload, the investment with which the Government are supporting battery technology is absolutely key?
My hon. and learned Friend is, of course, right on multiple counts. Solar has been a great British success story: more than 99% of the installed solar PV capacity has happened since May 2010. He is also correct to say that the development of battery technology here and elsewhere is incredibly important for the future.
I am sure that the Exchequer Secretary will welcome the report published today by the Environmental Audit Committee, which finds that membership of the European Union has been overwhelmingly positive for the UK’s environment. Our Committee is also conducting an inquiry into the Treasury’s approach to sustainability and the environment. Will he encourage his colleague the Chancellor to come before the Committee to discuss the Treasury’s approach to solar power, offshore wind, waste and recycling policy?
I look forward to reading the hon. Lady’s report. The Treasury takes a balanced approach to making sure that we stay on target to meet our commitments. We are on target to meet our commitment of 15% of renewable energy by 2020, but we must do so in a cost-effective way, recognising that the subsidies to early stage technologies can only be paid for by taxpayers.
Will the Exchequer Secretary join me in congratulating the UK solar power industry on being one of the top 10 in the world? It is larger than that in Australia and slightly smaller than that in Spain, despite having a rather less advantageous climate.
Indeed. Were it only the case that the sun would always shine. Under Labour, we had the highest dependency on fossil fuels in the G8 and the lowest contribution from renewable energy of any major EU country. As I said earlier, the deployment of solar power has been a great success story since 2010.
One of the big things this Government could do to help solar and, indeed, all renewables is to remove the double charge on storage, whereby storage is charged when it takes on the power and charged again when it gets rid of the power and puts it back in the grid. Will the Treasury consider changing its approach and helping storage? It could do so with a stroke of a pen and it would make a huge difference. I urge the Treasury to stroke that pen and make sure that that change happens.
The tariffs are designed to make sure that there is a reasonable and appropriate return to investors. They have to be adjusted periodically when costs come down. Of course, one of the great parts of the success story of solar is the fact that costs have come down by about two thirds since 2010.
According to the Solar Trade Association:
“Government will be spending just 1% of new expenditure under the Levy Control Framework supporting solar power…yet mainstream analysts expect solar power to dominate future energy supply.”
With that in mind, will the Chancellor promise to do much more to ensure that Britain becomes a market leader in the industry, or are we going to let China take the lead yet again?
Britain does have a leadership position in the industry, but we need a balance. We need a portfolio of energy sources and to recognise the importance of baseload power. That is why the development of new nuclear is also so important.
UK-Iran Financial Transactions
11. What steps he is taking to facilitate transactions between UK and Iranian financial institutions. 
The Government fully support expanding the UK’s trade relationship with Iran. The Treasury is actively liaising with UK banks and industry bodies, to understand concerns and help re-establish financial channels between the UK and Iran.
Despite the improving diplomatic relations between the British and Iranian Governments, UK businesses still face significant barriers to completing legitimate banking transactions for trade purposes. Will the Minister look at what more can be done to help to facilitate financial transactions between UK and Iranian banks, so that the UK economy can begin to benefit from this new market?
I thank my hon. Friend for her question. She is right that the situation with the payment channels between the UK and Iran is quite challenging, particularly because the US still has its primary sanctions in place. We have been speaking to banks at the highest levels. We have also been liaising with the US authorities to push for further clarity for UK banks. It is worth pointing out that some banks have a more extensive US business than others do, and that therefore it might be worth companies in my hon. Friend’s constituency and elsewhere considering switching to banks that have less exposure in the US.
Given the opportunities for British businesses in Iran as a result of the relaxation of sanctions, could the Treasury have a word with our friends the Americans to make sure that they do not seek to use their banking regulations to prevent some of the commercial deals that may flow to British companies as a result of that relaxation of sanctions?
My right hon. Friend is right to highlight one of the key issues. I assure him that we are working at all levels in discussions with the US authorities to ensure that British companies selling to Iran are able to put that money into UK bank accounts.
14. What recent fiscal steps his Department has taken to support manufacturing exports. 
It is Export Week, and I can announce that UK Export Finance has provided more than £15 billion of support to exporters since 2010 and UK Trade & Investment has more than doubled the number of businesses that it helps to more than 54,000.
UK industrial production and manufacturing output suffered sharp falls in February, and they remain well below 2008 levels. Meanwhile, the Office for National Statistics reported that house prices in London have reached an average of £524,000, which is 49% higher than their pre-recession peak and out of the reach of all but those who are on six-figure salaries or who have benefited from a trust fund inheritance. When will my constituents see the Britain held aloft by the march of the makers, and the economy rebalanced towards the north of England, as the Chancellor promised?
I encourage the hon. Lady to seek an Adjournment debate to elaborate further on her question. I am sure that she and her constituents will welcome the fact that employment in the north-west is at the highest level on record; that more than 89,000 businesses in the north-west will not pay business rates; and that 360,000 people in the north-west will now benefit from the living wage.
British exports to China have more than doubled since 2010, led by Havant-based manufacturers such as Colt and Lewmar. Will the Minister join me in congratulating those businesses, and will she encourage others to follow their lead by supporting and maintaining the Government’s pro-export policies?
It is wonderful to hear during Export Week about Colt and Lewmar, and their fantastic work exporting overseas. It is a key priority of the Government to continue to encourage more firms to export. In fact, we have ambitious aims to have another 100,000 businesses exporting over the life of this Parliament.
The current account deficit is at a post-war high of more than 5% of GDP, and 44% of our exports go to the European Union. It took Canada seven years to negotiate a free trade agreement with the European Union. Does the Minister agree that the last thing that exporters need, and the last thing that the one in 10 jobs that depend on our exports to the EU need, is the uncertainty that the referendum is bringing—and, indeed, that Brexit would bring—to them and to those jobs?
The last time I looked, I thought it was also Labour policy to have such a referendum, but I agree with the hon. Lady that it is very important that she and others get out the message about the value of exports and the importance for manufacturing of the UK’s membership of the single market. That is why I shall vote in the same way as her on 23 June.
T1. If he will make a statement on his departmental responsibilities. 
The core purpose of the Treasury is to ensure the stability and prosperity of the economy.
The innovative Claims Consortium Group in Taunton Deane has just received an Investors in People gold standard award, one of only 300 companies in the UK to have done so. It began in a back bedroom in Milverton just a few years ago, and it now employs 300 people. Does my right hon. Friend agree that not only is Taunton Deane an excellent place to do business, as this company demonstrates, but so is the whole of the wider south-west, thanks to the infrastructure and connectivity injections this Government are giving it?
Let me join my hon. Friend in congratulating the Claims Consortium Group on its award. I am glad that it has been recognised for its hard work. She is absolutely right that Taunton, and indeed the whole of the south-west, is a great place to do business. We are now investing huge sums in the roads and railways, broadband and housing. Of course, without her I do not think we would be having the A358 upgrade. There is a general lesson, which is that when the south-west votes blue, the voice of the south-west is heard in Parliament.
It is not just on tax that people are concerned about the behaviour of the super-rich and its impact on the economy. I hope that the Chancellor will join me in welcoming the action taken by shareholders at BP’s annual general meeting against the excessive pay awards recommended by the company’s remuneration committee. The chief executive’s pay in FTSE 100 companies has risen from 50 times the average employee’s in the 1990s to 150 times today. Will he support measures to tackle the remuneration racket? To many, an old boys’ network appears to operate to set each other’s pay. In particular, will he support the widening of shareholder representation and employee representation on remuneration committees?
It is absolutely right that companies and the shareholders who own those companies think about their pay policy, act responsibly and do not pay excessive amounts to chief executives who do not deserve them. It is this Government who introduced those shareholder votes—they did not exist under previous Labour Governments—and I am glad that shareholders are using the opportunity we have given them. I do not think, if this is what the hon. Gentleman is hinting at, that we should be putting trade unions on company boards, but I do agree that we should make sure that shareholders use all the tools available to them.
T5. Will the Chancellor update the House on any discussions he has had for a potential city deal for the Swansea Bay city region, and on what he can do to drive growth and create jobs in south-west Wales, particularly in my Gower constituency? 
First, we are now in conversation with Swansea about what we can do for the city deal. We are of course acutely aware that we need to help the steelworkers in Port Talbot. We are working to achieve a sale of the site, but we are also helping those who have already been made redundant. We are also looking very closely at the tidal bay lagoon scheme and at whether we can make that fly as well.
T3. Analysis by the House of Commons Library, including that on the 2016 Budget, shows that, cumulatively, 86% of savings in the period between 2010 and 2020 will come from women’s pockets. What has the Chancellor got against women? 
The analysis by the House of Commons Library is fundamentally flawed. First, it assumes that every pound of Government borrowing benefits people. It also does not highlight the fact that it is higher rate taxpaying women such as me, whose child benefit has been ended, who form the largest part of that group. Is the hon. Lady saying that her party wants to reinstate child benefit for higher rate taxpayers?
T6. Last year when I held a small business breakfast in Wimbledon, the level of business rates was the biggest issue, so my constituents are understandably delighted with the Chancellor’s permanent doubling of small business rate relief. Will my right hon. Friend say what else he is doing and what else the Government can do to support small businesses to ensure that they invest for growth and further jobs? 
Small business is absolutely fundamental to the economy and to job creation. That is why we had such a big package in the Budget to help ease the burden of business rates and why we reduced corporation tax, which is paid by small companies that are in profit. We have also increased the annual investment allowance so that small businesses can invest in the future. To help them with the burden of the national living wage we have increased the employment allowance so that they can employ four people on the national living wage and pay no national insurance at all.
T4. The Panama papers unearthed an array of revelations, amid which was the exposure of the relationship between tax and land ownership. What steps are the Government taking to ensure transparency of land ownership across the UK? 
This Government are bringing in a register so that we will know the beneficial ownership of people or structures holding property in this country. We have not had that before, and we are making progress on it.
T7. In the Budget, the Chancellor outlined measures on tax avoidance and evasion to bring in about £12 billion. How much more does he expect to bring in from the measures announced since, which we all welcome, to make every business in this land pay its fair share?
The Office for Budget Responsibility assesses and puts on the scorecard the estimated revenue that we will raise from tax avoidance, but it will be around an extra £1 billion a year just from the measures in the Budget. In last year’s Budget after the election, we had measures to raise £5 billion from clamping down on aggressive tax avoidance and evasion. The fight continues.
T8. Following reports in this morning’s Daily Mail that energy firms overcharged customers by £130 for their energy this winter, does the Chancellor agree that Treasury cuts to incentives for building new renewable energy sources were another one of his bad ideas? 
As we covered earlier, the tariff system in place to encourage renewable energy has to deliver a balanced portfolio of energy, and it does so. Of course, we encourage energy firms always to pass price cuts that they benefit from on to their customers.
T9. All 31 local firms that have reached the final of my Havant small business awards will benefit from the Government’s corporation tax cut. Will the Chancellor join me in congratulating all the finalists and confirm that the Government will continue to support small businesses across the country? 
I join my hon. Friend, who is such an excellent voice for Havant in this Parliament, in congratulating the small businesses in the Havant constituency. They are thriving, and we are helping them with major improvements to roads and infrastructure in the area.
T10. Ministers will have heard the concerns of small business organisations about the change to quarterly tax returns. What are they doing now that that change is in place to monitor its operation and ensure that it does not become unnecessarily burdensome to small businesses? 
Let me be absolutely clear with the House that we are not talking about quarterly tax returns. This is not about having to do a full tax return but about reporting; indeed, the purpose of the changes is ultimately to reduce the burden on businesses. It will start to be introduced in 2018. I hope that we will set out further information about the plans in the coming weeks. The intention is to ensure that we reduce the tax gap and, ultimately, help businesses to comply with the tax system.
I thank the Chancellor and the Economic Secretary for their good humour in their dealings with me over the past few days. This afternoon I will be moving new clause 9 to the Bank of England and Financial Services Bill. Are the Government now minded to accept new clause 9?
It is quite right that we take action against money laundering. That cannot only be done in this country—it needs to be done internationally. We should focus our effort, our resources and the force of the law where the risks are greatest. Like other Members of Parliament, I have been concerned that banks are at risk of going too far and being disproportionate when applying their rules to politically exposed persons in Britain, and their families in particular. I have written to the chief executives of the individual banks. My hon. Friend has worked with us on this issue and has tabled his new clause. We are happy to accept it because we are all trying to achieve the same goal.
The Public Accounts Committee report issued last week highlighted the £16 billion of the tax gap that is tax fraud. The money brought into the Treasury for that has stayed pretty static, at 3% of total tax liability. Does the Chancellor think that there is more to be done, and does the fact that the number of the wealthiest individuals being investigated will increase from 35 to 100 by 2020 not demonstrate that he has missed an opportunity?
We are taking strong action on tax evasion and significantly increasing the number of criminal investigations—I understand that around 90 investigations into offshore tax evasion are currently ongoing. We announced in the Budget last summer an additional £800 million for Her Majesty’s Revenue and Customs to support its activities, and through the common reporting standard—and ultimately through registers of beneficial interest—we are now getting access to much more information so that we can take on offshore tax evaders.
Several hon. Members rose—
Order. Quite a lot of people whom I would have called have toddled out of the Chamber. There seems to be a bit of a lack of stamina—very unfortunate—although not from Lucy Frazer.
I welcome the fairer funding consultation that has just closed. When taking into account figures for growth in pupil numbers, will the Minister consider the actual numbers for the new school year, rather than the previous one, to ensure that we have a truly fairer funding formula?
The national funding formula will address historical unfairness. As now, school budgets will be set on the basis of the pupil census in the October prior to the start of the funding year, giving schools the certainty they need. The Department’s consultation also proposes to include a new factor to recognise in-year growth, targeting funding to schools with significant increases in pupil numbers.
Nobody has ever accused me of a lack of stamina, Mr Speaker. Am I right and accurate in my assessment that LIBOR funds can be used only for charitable purposes and will not go to a Department?
The question is, I hope, about Air Ambulance Northern Ireland, and I confirm that we are working with the charity and the Northern Ireland Executive on how those funds are delivered. They will go to the air ambulance charity, which I know will be broadly welcomed across all communities in Northern Ireland.
In his document published yesterday, the Chancellor posed the question:
“Is our national security best served by retreating from the world?”
I hope that he is not foolish enough to suggest that those of us who wish the United Kingdom to leave the European Union want to retreat from the world, because the truth is far from that. We want the United Kingdom to break free from the sclerotic shackles of the EU and its superstate, and embrace the exciting world out there that befits the world’s fifth largest economy, a nuclear power, and a permanent member of the United Nations Security Council.
Of course I respect my hon. Friend’s views. We are having a referendum, and his vote and my vote count equally. I would make the point that our membership of the European Union enhances our national security—that point was also raised by the Secretary-General of NATO last week. Not one of this country’s allies or friends abroad are recommending that we leave the EU.
The number of people sleeping rough on our streets has doubled since 2010 and increased by 30% in the past year alone, which is a shocking indictment of Government policy and society as a whole. Will the Chancellor step in and intervene in the shambles that is the Housing and Planning Bill, and ensure that support for homeless people such as hostels and specialist accommodation is protected?
In the Budget we provided more than £100 million extra to help with the problem of homelessness and the particular problem of rough sleeping. We have provided money for second-stage accommodation for people as they leave hostels, to ensure that they have secure accommodation to go to. I am always happy to listen to further representations or ideas from the hon. Gentleman or any other Member.
The Treasury cannot even get its forecast for growth and the deficit correct for next year. Does the Chancellor realise that instructing his officials to produce a speculative report based on thoroughly tendentious figures about what might or might not happen in the event of Brexit simply belittles the reputation of the Treasury for economic competence and forecasting? Instead of relying on fear, why does he not give us his vision, compared with our vision of a free people in a free Parliament, controlling our own borders and leading the world towards free trade?
Our positive vision is that by being part of a reformed EU we can raise living standards, create more jobs and make sure that consumers have access to lower prices. We have set out in the Treasury analysis a range of possibilities for the alternatives that might happen if Britain leaves the European Union. All of them would make Britain permanently poorer, but if my hon. Friend and the leave campaign want to produce their own plan and their own analysis, then be my guest.
Last week, the Financial Secretary confirmed to me that details obtained from Crown dependencies and overseas territories and shared with the UK would not be passed on to other tax jurisdictions. If that remains the case, there is a real chance that the UK would be complicit in tax evasion. Will the Chancellor urgently review the situation to ensure that tax is paid where it is due?
It is the case that the Crown dependencies and overseas territories are, at our prompting, ensuring that they have got registers of beneficial interests. It is also the case that the UK is co-operating, as my right hon. Friend the Chancellor has made clear, with other jurisdictions. I hope we move to a position whereby public registers are the norm, but even before we get to that point, clearly we will look at the opportunities for the information on the central registers to be shared among co-operative economies and jurisdictions.
I remember the good old days when the Chancellor regarded Treasury predictions as so discredited that he established the Office for Budget Responsibility instead. I cannot think what could have changed. The GDP projections in his dodgy dossier are predicated on breaking our manifesto commitment on immigration, while the cost implications of his new policy of mass migration for school places, housing, health and transport are not made explicit in the document. Why is that?
We are having a referendum, and people are going to take different views on the prospects of the United Kingdom as we go forward, but the public want facts and information. We have set out in the analysis produced by the Treasury what we think the likely impacts on the economy will be, and this analysis has now been supported by the London School of Economics. It gives out a similar message to that provided by the Bank of England on the economic shock that would come if we leave. Then there are bodies such as the International Monetary Fund and others saying a similar thing. The weight of evidence and the weight of opinion is clear: there would be an economic price if we left the EU. Some regard that as a price worth paying, which is a perfectly respectable argument, but it is not one that I agree with.
Several hon. Members rose—
Order. I am sorry to disappoint colleagues, but we must now move on to the statement.
With permission, I shall update the House on the current situation in Libya and on what the Government are doing to support the new Libyan Government of national accord.
Yesterday, I visited Tripoli; it was the first time that a British Foreign Secretary had done so since 2011. The fact that the visit was able to take place is a positive sign of the progress made in recent weeks, including in the security situation in and around the capital. During my visit, I met Prime Minister Sarraj and members of the Presidency Council in the naval base that has been the headquarters of the Government of national accord since they relocated to Tripoli on 30 March. I welcomed their commitment to representing all the Libyan people and the progress they have made in establishing the GNA as a Government of the whole of Libya.
I underlined to Prime Minister Sarraj the UK’s support for the GNA as the only legitimate Government of Libya. They have the endorsement of the Libyan political dialogue and the majority of members of the House of Representatives. I believe the Libyan people want them to succeed. We look forward to the House of Representatives completing its formal vote of endorsement in line with its obligations under the Libyan political agreement.
I was encouraged to hear from Prime Minister Sarraj and his Ministers about the steps they are taking to assume control of Government Ministries in Tripoli. After five years of conflict following the overthrow of Gaddafi, the Libyan people are weary of fighting and eager for peace. They want a Government who will start to address the many challenges Libya faces. It is important that the international community works in partnership with the GNA as they continue to consolidate their position and take forward their work to meet the needs of Libyan citizens across the country.
In my meetings, I emphasised the need to keep up momentum on the political process and to deliver practical progress on the ground. I was encouraged to hear that a clear plan was being developed to address some of the immediate challenges: delivering security, tackling Daesh, restoring basic public services, countering people-trafficking, restarting oil production, and getting the economy back on track.
We agreed that delivering security was fundamental to improving the day-to-day lives of the Libyan people and creating an environment for economic reactivation. The security agenda must, of course, be owned and led by the GNA, but the UK, along with other European nations, stands ready to respond to requests from the Libyan Government for assistance in training the Libyan armed forces in order to improve their effectiveness in providing security and in the fight against Daesh. Prime Minister Sarraj and I agreed that we should continue to work closely to establish what those training and technical support requirements were, and what role, if any, the international community could play in helping to meet them.
A number of Members have speculated in recent days that the Government might be on the cusp of committing British troops to Libya in a combat, or combat support, role. I am pleased to have the opportunity to clarify the situation. I am clear about the fact that there is no appetite in Libya for foreign combat troops on the ground. We do not anticipate any requests from the GNA for ground combat forces to take on Daesh or any other armed groups, and we have no plans to deploy troops in such a role. I will, of course, keep the House informed of any plans that we develop in the future in response to requests from the Libyan Government, but the type of mission that we currently envisage would be focused on providing training and technical support, away from any front-line operations.
The Libyan economy is suffering from the effects of years of conflict and the impact of low oil prices. It is clear that the Presidency Council is focused on the immediate need to alleviate the pressures on ordinary Libyans, including those arising from the current squeeze on liquidity in the banking system, the shortfall in power generation and the shortage of basic commodities, as well as the slightly longer-term challenge of ensuring the effective functioning of the key state financial institutions—the Central Bank of Libya, the National Oil Corporation and the Libyan Investment Authority—and the challenge of rebuilding oil production and export capacity. As I said to Prime Minister Sarraj, the UK stands ready to provide whatever technical assistance it can with those issues, in all of which British companies have relevant experience and expertise to share.
As for the migration threat, there is clearly an urgent need to tackle the challenges arising from irregular migration and the organised criminal and terrorist networks that facilitate so much of it. In my discussions, I highlighted our desire to work in close partnership with the GNA to make progress on that issue, including progress in tackling the people-smugglers and traffickers. As part of that initiative, we should look at creating a package of support that could include extending the EU’s naval Operation Sophia and building the capacity of the Libyan coastguard to support, and eventually take over, the operation, but clearly such a package would be implemented only at the invitation of the Libyan Government.
Yesterday I announced that Britain would allocate £10 million for technical support to the GNA in this financial year, to be delivered through the conflict, security and stability fund. The package will support the strengthening of political participation, economic development, and the delivery of capacity in security, justice and defence. We will work closely with the GNA to ensure that that support is channelled into the areas where it can have the greatest effect.
After years of conflict in Libya, the formation of the Government of national accord and their arrival in Tripoli have the potential to mark a real turning point in Libya’s fortunes. The challenges facing the GNA should not be underestimated, and delivering the security and economic development that will allow the Libyan people to realise their country’s huge potential will not be an easy task to fulfil, but the UK, together with many of our international partners, stands ready to assist. It is in all our interests that Prime Minister Sarraj and his Government are able to re-establish security, reactivate the economy, and defeat Daesh in Libya as quickly as possible. I commend this statement to the House.
I thank the Foreign Secretary for giving me advance sight of his statement. The situation in Libya over the past five years has been bloody and dangerous, and it is important to recall that it was Colonel Gaddafi’s brutal and violent response to the protests that erupted early in 2011 that triggered a civil war and United Nations Security Council resolution 1973, which authorised a no-fly zone and action to protect civilians. This House voted to support that action, but since Gaddafi’s fall, Libya has become a land of rival governments awash with rival militias. There is also the growing presence of Daesh and insecurity. Questions have been raised about the focus of this Government, and indeed of the international community, on what followed.
I join the Foreign Secretary in praising the enormous efforts of Libyan politicians, of the United Nations and of Special Representative Martin Kobler to reconcile the competing institutions and encourage them to form a single Government of national unity. I also join him in supporting UN resolution 2259, which has recognised the progress that has been made and called on member states to provide support to the new Government as requested .
We on this side of the House welcome the establishment of the Libyan Government of national accord led by Prime Minister Fayez Sarraj. As the Foreign Secretary said, they face a formidable task in ensuring security, restoring public services, building up the economy and tackling the threat from Daesh, but does he agree that their ability to do so will be determined by the extent to which they can gain support and consent right across Libya as they face the task of re-establishing governance in all parts of the country? Will he set out what assessment he has made of their capacity to do that, particularly in respect of the rival militias? Can he say anything more about the conversations he is having with our allies, including other EU Foreign Ministers, about what further steps could be taken to support stability and peace in Libya? Does he expect there to be a further UN Security Council resolution?
The United Kingdom Government indicated previously that they were not contemplating a British combat mission in Libya. Given the circumstances there, I think that that is the right approach to take, and I am grateful to the Foreign Secretary for confirming again today that the Government have no plans to deploy British troops in such a role. Can he therefore give us a categorical assurance that, were that view to change, any proposal to deploy forces in a combat role would come before this House for a vote?
The Foreign Secretary has, however, spoken about the possibility of providing training for the Libyan military. Did Prime Minister Sarraj ask for specific types of technical or training support during their recent discussions? Does the Foreign Secretary envisage that any such deployment, should it happen, would take place in Libya, or might it involve providing training in a neighbouring country? Will he give an undertaking that he will come to the House before any such deployment takes place and seek its approval as appropriate?
On economic development, we support all efforts by the international community to assist the new Government in improving the lives of their citizens and getting the economy moving again, including through oil production. On migration, is further support being requested by the new Prime Minister, or is that being considered through the EU naval operation in the Mediterranean, Operation Sophia, to enhance Libya’s ability to disrupt criminal human smuggling and people trafficking? The people of Libya have suffered a great deal in recent years, and this moment is enormously important for their future. It is the responsibility of the world community to do all that it can to help the new Government to succeed.
I thank the right hon. Gentleman for his response. Let me join in his praise of UN Special Representative Martin Kobler—it was remiss of me not to give that praise myself—who is an absolute dynamo. Since he was appointed, he has literally been shuttling between the parties, groups and power brokers in Libya. It is very much due to his energy and effort that we have got where we are today.
There is a Government of national unity, but we should be clear about Libya’s historical context: it is a country that has traditionally had a high degree of devolution in its governance structure, which is often held together by a strong man at the centre. We now need to find a new model, under which the Government of national accord will be a national umbrella organisation, but Prime Minister Sarraj has made it clear that that will work only if municipalities are empowered and prepared to take on a significant degree of devolution. A devolved model is the only model that will work.
I also need to make it clear that the Libyan Government are in a very early stage of operation. At the moment, the Prime Minister and his Ministers are sitting in a naval base, physically separated from the civil servants who could support them. Yesterday, they retook operational control of three Ministries, which is a good step forward, but it will only be as they are able to re-enter the Ministries and regain working contact with civil servants that they can start to do some of the detailed work. That situation underpins and shapes my answers to some of the right hon. Gentleman’s questions, because he is absolutely right that the GNA can succeed only with the support and consent of the various factions in Libya.
Let me say one other thing by way of scene-setting. When I went to Tripoli yesterday, I was expecting to find the Government incarcerated in a heavily fortified military base, defending against all comers, but that is not the situation. The base is relatively lightly defended, and it was clear that the Prime Minister’s ability to operate there is based on the consent and acquiescence of the militias operating in that part of the capital. He is acutely conscious of the need to build a bottom-up consensus around his activities.
The right hon. Gentleman asked me about the European Union. I returned from Tripoli to Luxembourg last night, where there was a discussion at 28, including Defence Minister colleagues, about future support to Libya, looking at the possibility of extending Operation Sophia in a counter-migration role. No decisions were taken, but the matter is clearly high on the European Union’s agenda. The key will be to develop a package that also addresses Libyan top priorities. The Libyans are focused on migration, but it is in all honesty not their top priority. We have to create an environment in which delivering on Europe’s top priorities also addresses those of the Libyan people.
The right hon. Gentleman asked about a UN Security Council resolution. I have not heard anyone suggest that there is an immediate need for a further resolution. The next moves at the UN will be the granting of some exemptions to the arms embargo, and possibly the unfreezing of some assets to allow the Government to function properly.
The House would of course be consulted were the UK Government to decide at any point that they wanted to insert ground forces, or any forces, in Libya in a combat role. We do not envisage that happening in the current circumstances.
The right hon. Gentleman referred to the situation in which a training deployment is contemplated, and asked me whether we would seek the House’s approval for a training deployment. I should be clear that it is a question not of approval, but of consulting the House and allowing it to express an opinion through a vote, and the history of the past three years shows that the Government will take great notice of that. However, that would not be the case in the event of a training deployment. We have training deployments around the world. In fact, my Ministry of Defence colleagues informed me just before I came to the House that we currently have 16 permanent training deployments. It is not appropriate for the House to be consulted on such a deployment as if it were a combat deployment.
Did the Libyan Prime Minister ask for training support? Not explicitly, but he did indicate that the Libyan Government may well ask the international community for some form of support as they develop their plans. I gained the personal impression that his instinct is very much at the lighter end of the scale. He clearly does not want to be seen to be dependent on foreign support and wants to do as much as possible internally, using Libyan capabilities. Of course, if there is any question of training, we would want to look at the options for training outside Libya, as well as the permissibility of training inside Libya.
I welcome the Foreign Secretary’s statement and last night’s European Council conclusions on Libya. The sanctioning of the Speaker of the House of Representatives is welcome, as he has been a particular obstacle to the formation of the GNA. Also welcome is the commitment that the EU—and, I therefore assume, the British—contribution will be coherent and co-ordinated with other international support under the overall co-ordination of the United Nations Support Mission in Libya. A coherent British contribution will be easier with the consent and understanding of this House. It might need to include, for example, airstrikes on Daesh targets in addition to the training mission to which he alludes.
I counsel the Foreign Secretary that he is dancing on pretty thin ice when it comes to differentiating between a training mission in a combat zone and other missions, and when he talks about not seeking to carry this House’s approval. I notice the language he has used in talking about being away from the frontline of operations. I wonder whether he can say anything more about that. I urge him to continue to try to carry this House with him.
I am grateful to my hon. Friend, who is right that any kind of international support will be more effective if it is properly co-ordinated. The work of the European Union, the Libya international assistance mission—LIAM—and the UNSMIL planning cell, which is already in operation, should be and will be co-ordinated.
Let me be clear that any proposal to carry out airstrikes in support of a counter-Daesh operation absolutely would trigger the convention that the Government consult the House and allow a vote, through which the House could express its view on the proposed intervention.
I understand my hon. Friend’s concern, which he has expressed several times both in the House and in various newspapers, that the lines between what is a combat mission and what is a training mission could be blurred in situations such as Libya’s, but we are clear that we can make that distinction. I draw his attention to Afghanistan, which is a kinetic theatre if ever there was one, yet our training mission has been successfully conducted there for the past 15 months with great effect. In Iraq, we carry out training activities in an active war zone. There is a big difference between training and advising troops and engaging in combat activities. The Government are extremely mindful of that distinction and of the obligations that they have entered into in respect of consulting the House.
I also praise the work of Martin Kobler and of the British ambassador to Libya, whom I met in Tunis and who has been making the best of a very difficult job. Libya has been an unmitigated disaster for this Government. We even had a sitting US President criticise a sitting UK Prime Minister. A UN official described the UK’s humanitarian efforts as
“paltry bone-throwing from a European country whose bombers reaped so much destruction”.
We do not have a good record on Libya.
Following the questions of the right hon. Member for Leeds Central (Hilary Benn) and the Chair of the Foreign Affairs Committee, who raised a good point as usual, will the Foreign Secretary tell us how much of the mission he envisages taking place on Libyan soil? As for what he calls a training mission, will any deployment of UK troops on Libyan soil be brought to this House for consideration? Given that he can only have meetings in the naval base, how does he envisage a training mission in Libya taking place at the moment? Finally, does he commend the US President’s candour in saying that Libya was his worst mistake, and what does he think has been the Prime Minister’s worst foreign policy mistake?
It is very easy to sit on the Opposition Benches hurling stones, but I am afraid that the world is not a neat and tidy place, and we have to deal with the situations that present themselves. The hon. Gentleman talks about the humanitarian work, but I remind him that, when we intervened in Libya in 2011, it was to prevent an imminent genocide in Benghazi and that that successful intervention saved countless thousands of lives. Libya is a rich country, and we should not forget that—$70-odd billion-worth of Libyan assets outside the country are currently frozen by a UN Security Council resolution. This is about getting the Government in place and then releasing those assets so that the Government can function. Libya is not a country that needs humanitarian assistance in the conventional sense. It needs technical support with good governance, and help to get into a position where we can release its assets to it to enable it to function.
The hon. Gentleman mentioned the British ambassador. I join him in paying tribute to the work of our ambassador, who is currently based in Tunis. He came with me yesterday to Tripoli and it is his fervent desire, as it is mine and Prime Minister Sarraj’s, to reopen the British embassy in Tripoli as soon as we are able to do so. Unfortunately, the location of our current buildings in Tripoli is in a rather less secure part of town, so I cannot promise that that will be imminent, but we will keep the matter under constant review and do it as soon as we can.
The hon. Gentleman asked whether any training mission to Libya would take place on Libyan soil, and I have to say to him, yet again, that there is no training mission, there is no putative training mission and there has been no request for a training mission. I speak as a former Defence Secretary when I say that, if there is a request for such a mission, the military will clearly want to ensure that it is undertaken with the minimum risk possible to UK personnel. Therefore, their first preference would be to do it here, their next preference would be to do it somewhere in the region and their third preference would be to do it in Libya, if it is safe to do so. I assure him that we will spare no effort in trying to ensure that any support we do give to the Libyans will be delivered in a way that represents the least possible risk to the British forces delivering it.
There can be no doubt that our intervention in Libya in 2011 has, as some in this House have suggested, been an unmitigated disaster resulting in many thousands of casualties, the establishment of Daesh and a vicious civil war. Looking forward, given that this country is at a tipping point of its involvement with Libya, given developments on the ground, what lessons can we learn?
My hon. Friend, as so often, asserts as fact that there “can be no doubt” on something that is deeply contentious, and I very much take issue with him. The situation in Libya is very difficult and the situation post-2011 was very messy, but countries in many parts of the world do not function as Britain or Switzerland do, and we have to deal with the real situation on the ground. We should look to the future. We should be positive about this potentially affluent country regaining stability and being able, once again, to function as an effective state, allowing the Libyan people to get on with their business. There is a weariness after five years and a growing sense that, if a properly devolved form of government can be established that co-opts the various militias and regional groupings, this can work.
What assessment has the Foreign Secretary made of the size of Daesh in Libya and its capability, and does he have any idea what its plan is? Is it going to sit tight or move outwards to try to expand into the rest of Libya?
Speaking from memory, I think that our current assessment—the last assessment I have seen—is that there are probably up to about 3,000 Daesh fighters in Libya, of whom a significant number would be foreign fighters. There is a generally accepted view that what Daesh is doing in Libya at the moment is very much a holding operation, seeking to hold an area of ground, possibly as a bolthole if it finds that its freedom of manoeuvre and freedom to operate is coming under intolerable pressure in Syria. There are many pointers to the fact that now is the time to move against Daesh in Libya, while its presence is still relatively thin on the ground and while its operation is very much in a holding phase.
One measure of success of the new Libyan Government will be the creation of a functioning economy and, as a step towards that, a functioning central bank. Can Britain play any role in helping them achieve that?
Yes, and yesterday I offered Prime Minister Sarraj technical support in relation to the central bank, the national oil company and the Libyan Investment Authority. It is a tribute to Libyan resilience and ingenuity that international partners recognise the figures who have continued to run those institutions throughout this period of chaos over the past few years as technically competent and well motivated—they have been doing a good job. Prime Minister Sarraj has now brought the competing appointees—the eastern and the western chairmen of each of those institutions—together to work together and to seek to forge consensus on how the institutions can go forward as truly national institutions on a collaborative basis.
I was interested in what the Foreign Secretary had to say about the current state of Daesh, and how it needs to be contained now and not allowed to spread further. Are we talking to other allies, such as Jordan, about working on training deployments and training up troops? If we do not contain Daesh now in north Africa, it will simply be an expanding problem.
Yes, we are talking to other partners, such as Jordan, about how we can provide support to the Libyan Government. Of course other actors are acting independently; Egypt has a recognised vital interest, because of its long land border with Libya, and some of the problems Egypt has been facing in the Western desert are directly attributable to penetration from Libya. The House will recall the continuing issue of General Haftar, the commander of the Libyan national army. He is an important figure who commands significant military forces in the east but is unacceptable as a command figure to many who are supporting the new Government. That is one of the big challenges Prime Minister Sarraj is facing.
I very much welcome the Foreign Secretary’s statement and, in particular, the reassurances it contains about the use of British troops exclusively in training and mentoring, if that becomes necessary. Does he recall the disaster that was the training of Libyans in the UK? Will he assure the House that those mistakes have been noted and lessons have been learnt, and that, if he does intend to train Libyans in the UK, as his statement suggested, we will not make those mistakes again?
Yes, and we are not the only ones who had a poor experience with seeking to train Libyans outside Libya—the Italians and Bulgarians had similar experiences. Prime Minister Sarraj referred to that yesterday and is acutely conscious of what was not a very glorious episode in Libyan history. The situation on the ground has changed, but clearly we would look for the most effective location for any training. It is probably the case that that would not be in the UK, for climatic reasons as much as for anything else; we need to train people in an environment as close as possible to the one in which they will be operating. As I have said, there has been no request and there is as yet no plan, so I am afraid I cannot impart to the House any more information.
May I welcome the progress that has been made but say that I am disappointed that more has not been offered to deal with the migration crisis? There has been an 80% increase in the number of crossings between Libya and Italy. This time last year, half a million people were waiting in Libya to get to Italy. As we know, the European Union is offering Turkey €3 billion to deal with the migration crisis and offering Libya nothing. What we need is permission to enter Libyan coastal waters in order to stop the people traffickers. Did the Foreign Secretary ask for that permission? When can we have that permission, so that we can deal robustly with people trafficking?
May I say to the right hon. Gentleman, whose question, I am sure, is well motivated, that he is approaching this in exactly the wrong way? We are not likely to get the buy-in we need if we, as a bunch of Europeans, go to Libya and say, “Here’s our priority agenda. What are you going to do about delivering it?” What we must do, and what I suggested to my European colleagues last night that we should do, is package the objectives that we want to achieve with the objectives that are priorities for the Libyans. That is the only way that Prime Minister Sarraj will be able to sell to the Libyan people a package that in any way questions Libya’s territorial sovereignty and that allows foreigners to operate in Libya’s waters. We must be acutely sensitive to the concerns in Libya about foreigners. I am in a rather strange position in that, on the one hand, I have one bunch of people in this House who are primarily concerned to ensure that we do not have any foreigners going into Libya, and, on the other, the right hon. Gentleman who is desperately keen to get some foreign naval forces into its territorial waters. The truth is that we must balance this very carefully and get a package that works for the Libyans as well as for the European agenda.
The Foreign Secretary and the shadow Foreign Secretary speak in grandiloquent terms of Prime Minister Sarraj, a Government of national accord and even a House of Representatives. Any member of the British public watching “News at Ten” last night would have seen our Foreign Secretary and the Prime Minister of national accord holed up in a naval base, unable to leave because they control none of the country. Apparently, they now control three ministerial buildings in a country the size of western Europe. Can we have a reality check, please? Can the Government at last realise that their bid to undermine authoritarian leaders such as Saddam Hussein, Gaddafi, who had a deal with the Italian Government to return migrants, and now Assad has just involved the region in death and destruction? Can we just learn the lessons, try and find a strongman, and do what the Chairman of the Home Affairs Committee wants—and what we all want—and find a way of creating some kind of safe haven for migrants to be returned to?
The Chinese have a saying that a journey of 1,000 miles starts with a single step. I urge my hon. Friend to view this process in that context. Self-evidently, I did manage to get out of the naval base in Tripoli yesterday and return to these shores.
My hon. Friend is being a little harsh on Prime Minister Sarraj and what he has achieved. There is a process going on whereby militias—who, only a couple of weeks ago, were threatening to shoot down any aircraft seeking to enter the airport in Tripoli bringing his Government back into the city—are now patrolling the streets outside that naval base and were present on the ground when I landed in Tripoli yesterday. They have recognised and given tentative consent to this Government process to go forward. Its success will depend on Prime Minister Sarraj making the right judgments and being patient enough to bring all the relevant parties with him as he develops a plan for his Government.
I thank the Foreign Secretary for an advance copy of his statement and congratulate him on his recent visit. Given the failure of the past two Labour Administrations to secure adequate compensation for victims of Libya-supplied Semtex in Scotland, England and Northern Ireland—at the same time America was able to get that compensation—will he now indicate that he will redeem this situation and place on the agenda of the Government of national accord and the Prime Minister that compensation will be a key issue that this Government will pursue with the new Administration?
I can confirm that it is already on the agenda. Prime Minister Sarraj is aware of our focus on this issue, but it is a question of timing. At the moment, the Government have not got access to the great majority of their ministries and civil servants. They do not have access to their assets, so it would be premature to make that the No.1 issue. However, this Government are focused on the need to raise and to resolve these issues at the right point in this progression, and Prime Minister Sarraj has already been notified that we will do so.
We have seen a very thoughtful exchange between the Foreign Secretary and his shadow. Although there are flickers of optimism, the atmosphere remains very sombre, not least because, as other Members have pointed out, we have responsibility to a large extent for what has happened in Libya over the past five years. I say to my right hon. Friend, who has dealt with this whole issue of technical and other expertise very skilfully, that the British public would be very reluctant if there were any sense that our expertise was going into helping one side rather than another in what could still be a very bloody civil war. Although I appreciate that these are difficult things and that there are often no good guys on either side, there must be an appreciation that that would be something that would cause angst to the public if we are to have a functioning Libya in the years ahead.
I am grateful to my right hon. Friend for that. If only it were so simple as there being two sides; there are about 120 sides as far as I can make out. He is absolutely right. Of course we must ensure that our support is targeted at the Government of national accord. We have to look for bright spots. One of the positive things that I take from the situation in Libya is that, by and large, the different factions are not motivated by ideology, particularly by extreme religious ideology, as they are in some of the other conflict zones. A lot of this is to do with traditional money and power interests. It is about people wanting to protect their local fiefdoms and making sure that they and their communities get their share of the wealth of the state. Prime Minister Sarraj is going about this in exactly the right way. He is going with the grain of Libyan society, recognising that reality and trying to build a consensus mechanism around it.
What guarantees can the Secretary of State offer that our key partners, particularly in Europe, have a coherent strategy on good governance and nation building as well as on the vital issues of migration and counter-terrorism? What reassurances did he get this week from the Government of national accord that they have a plan to broaden out what is essentially a UN-backed political deal, so it is not beholden, and therefore vulnerable, to the many rival regional factions?
The most effective step to broaden out the legitimacy of the Government will be the vote in the House of Representatives on the endorsement of the Government. The HOR is committed by the Libyan political agreement to do that, and we hope that it will happen very soon. On the question of our European partners, it is inevitably true that, for 26 of the other 27 EU states, excluding Ireland, migration is at the top of the agenda. It falls to me to urge them, as I urged the Chairman of the Home Affairs Committee, to accept that, if we want to make progress on the matter, we must try to set this in a context that makes sense not just to us, but to the Libyans.
I welcome the progress the Foreign Secretary has outlined and appreciate his point about the practical realities on the ground. With that in mind, the long-term prospects for Libya are clearly linked to its economic prospects, which are in turn largely linked to the prospects of its oil industry. What steps, at this early stage, are UK Trade & Investment and the British Government taking to ensure that UK industry can play its full part in bringing the Libyan oil industry back on to the global market?
My hon. Friend is absolutely right. Libya has Africa’s largest oil and gas reserves and a population of only 6 million, so, clearly, it is, in per capita terms, a potentially wealthy country. I am glad to report that British companies have traditionally played an important role in Libya’s oil and gas industry, and Prime Minister Sarraj specifically made the point yesterday that BP would be very welcome back in the country. I shall pass that on to BP’s management.
The Foreign Secretary has said that there is no appetite in Libya for foreign combat troops on the ground. Is there any appetite in the Libyan political system for foreign air forces or foreign naval forces operating in Libyan territorial waters?
On the latter point, we have already seen a clear wariness of any suggestion of foreign naval forces operating in Libyan territorial waters, even if the focus is counter-migration rather than counter-Daesh. I cannot rule out—it would be wrong to do so—any future requests for air or naval support for a counter-Daesh operation. I can envisage Prime Minister Sarraj, if his Government are successful, being able to muster enough ground forces to mount an attack on the Daesh stronghold around Sirte which, of course, is a coastal port. It is certainly the case that the Libyans will not be able to develop naval or air assets in any reasonable period of time to support such an operation, and it is quite possible that, from a military point of view, they would seek assistance from outside. Prime Minister Sarraj would have to balance that military imperative with the political issues that would arise if he were to request foreign assistance. There has been no such request and no discussion of such a request, but if it comes, we will consider it. If we think that the UK should participate in such action, we will come to the House and allow it to express an opinion through a vote.
Several hon. Members rose—
Order. A further 21 hon. and right hon. Members are seeking to catch my eye, and I am naturally keen to accommodate all of them. Brevity will assist me in doing so.
I thank my right hon. Friend for his statement. I know that I might be a lone voice, but I urge him to guard against parliamentary approval for every military intervention we undertake, which is out of keeping with an enemy that moves fast and that we need to go up against. May I ask the Foreign Secretary about a distinct strategy specifically to target Daesh, separate from but complementary to the wider diplomatic peace strategy? One can reinforce the other, but if we wait for the perfect political settlement before we start, we will be waiting forever.
I will treat my hon. Friend’s warning on the use of war powers with the importance it deserves. As he will know, my right hon. Friend the Defence Secretary published a written statement yesterday setting out the Government’s position. We must maintain the operational flexibility we need while ensuring that the House of Commons has proper involvement in any proposed combat deployment.
I am sorry; what else did my hon. Friend ask me?
About targeting Daesh.
Before the formation of the Government of national accord, there was discussion among the international community about how we would deal with Daesh if there was no solution on the ground in Libya. We concluded that it would be pretty much impossible for us to do so. I am very pleased that we now have a Government formed in Libya that we can support to do that job.
The UK’s past intervention in Libya has been an unmitigated disaster. The mess we have left behind has caused enormous reputational damage to the United Kingdom and that cannot happen again. Given that we are offering training and technical support to armed forces away from the front line, will the Secretary of State tell me what armed forces we will be training and supporting, given that Libya has myriad competing militias and groups?
Another assertion. I can tell the hon. Gentleman that it was not the view of the people I met yesterday that the intervention in 2011 was an unmitigated disaster. It has rid the country of Gaddafi and averted a genocide. He talks in the present tense about training support, and I say yet again that we are delivering no training support in Libya at present. If any request from the Libyan Government for training support were made, it would be for militia groups that had signed up to the Government of national accord’s security plan and were being incorporated into the Libyan security forces that will be formed from them.
Like the right hon. Member for Birmingham, Edgbaston (Ms Stuart), I was struck by the Foreign Secretary’s correct comments that we need to continue to move against Daesh in Libya. What discussions have been held with Gulf state nations about helping that effort?
We do, of course, have continuing discussions with all Gulf states. It is a well-known fact that both Qatar and the UAE have in the past been active in Libya, but it is also fair to say that all Gulf states have been somewhat distracted by the war in Yemen and have not, perhaps, played as active a role recently as they did earlier in the conflict.
Given the turmoil in Libya in the five years and one month since the House of Commons authorised action, does the Secretary of State regret having the UK acquiesce to transferring a mission that was designed under the responsibility to protect to avoid a genocide to one focused on regime change?
This was a complicated situation on the ground and, having embarked on the mission to protect the population of Benghazi against genocide and having had to follow where that took us to protect the population from the retribution that the regime was seeking to vent on it, we did what we had to do. I think we should be proud of having rid Libya of the tyrant Gaddafi, who had effectively dismantled the structure of government in Libya. That is why Libya has had its problems of the past few years—there was no government structure in Libya.
Deploying British troops to Libya, even in a strictly non-combat role, would add significantly to the demands already placed on them. Can the Secretary of State provide any clarity about how many troops would be necessary and when we can expect to learn from the GNA whether British assistance is required?
I am afraid that I cannot, really. I can give a personal view: I would expect that we would be talking about a training mission of the sort of scale of those that we are carrying out in other countries around the world. I therefore would expect there to be between tens and hundreds of trainers, not thousands of trainers.
The Foreign Secretary says that we must tackle Daesh, but Prime Minister Sarraj only operates with the permission of the militia. Does not the Foreign Secretary think that in certain circumstances some of the militia are aligned with malevolent forces, particularly in other parts of the country, and is he not concerned that the militia are at the heart of the Government and of the future process of government? Where will that leave Libya in the future?
I think that there is a misunderstanding about what the militia are. After 2011, Libya fragmented. Every city, every town and every region had its armed forces—armed men who were protecting their communities. That does not make them bad people. They are not extreme Islamists in most cases; they are simply people who have formed home defence units, and they are the only force on the ground. It is not possible to talk about raising new Libyan armed forces that will then take on all the militias—that would be a completely unrealistic project. The only way forward is to co-opt militias into a nascent Libyan armed forces, backed by a political system that is highly devolved and that assures them of autonomy and fair shares of Libya’s wealth for the communities they seek to back.
Further to the point raised by the hon. Member for North Antrim (Ian Paisley) about Libyan-sponsored IRA murder, not only in Northern Ireland but in England, including in this city, while I understand the Foreign Secretary’s comments about timing, given that there is an emerging Government in Libya and that we will at some point be releasing between £7 billion and £8 billion of frozen assets from this country alone, will he and his ministerial team continue to do all they can to get compensation for people and their relatives who have suffered for far too long?
Yes, the assurance that I gave to the hon. Member for North Antrim (Ian Paisley) extends, of course, to the WPC Yvonne Fletcher case.
Last week, on the Floor of the House, with a note of urgent caution, the hon. Member for Beckenham (Bob Stewart) reminded us of how missions change and about the impact on our armed services, who might have to make decisions on the hoof. I urge the Secretary of State to reflect on that debate and the participation in it.
We are consistently told in this Parliament that NATO is our primary model of defence, yet all we heard about in the statement was the European Union and Europe’s role. I am grateful for the European Union naval deployment and other initiatives by our European partners, who are doing a great job, but if the Libyan Government of national accord makes a request, what role will NATO play in that, given the myriad other organisations and nations involved, from Jordan to Hungary?
May I gently suggest that the hon. Gentleman submits his academic treatise to his PhD adviser?
I thought that the hon. Gentleman was all in favour of the EU doing more. We are very clear. NATO is our principal war-fighting alliance, but we are not talking about war fighting here. We are talking about stabilisation, training and rebuilding, and the European Union and bilateral arrangements delivered by other European countries are absolutely the right way to go about achieving that. It is not a role of NATO.
My right hon. Friend and the whole House will recognise that a peaceful, stable and prosperous Libya is in the interests of the region and of Europe. Can my right hon. Friend flesh out for the House the timetable envisioned for EU discussions to continue and conclude, working closely with the Libyan Government to ensure a positive and proactive response?
That is a good question, but the timetable will have to be determined by what is happening on the Libyan side. At the discussion last night, we were clear that we needed to work up a European Union package. There was mention of Turkey earlier, and the way in which the EU has dealt with Turkey on migration has not escaped the Libyans’ notice, so there will need to be a comprehensive proposal. As soon as it is appropriate to make the Libyan Government aware of what such a package might look like, the ball will then be in their court to decide whether they wish to request support.
When does the Foreign Secretary expect to receive the invitation to provide the support that he mentions? Will he elaborate on the specific mutual objectives and especially the timescales involved? Clearly our troops cannot be involved in open-ended support.
There is a spectrum here. In respect of the hard training of troops at infantry level, I think that we are quite a long way from any request to do that, if such a request comes at all. With regard to structuring military command structures in a civilian-led Ministry of Defence, I think it is quite likely that we will be asked quite soon if we can give some advice about that, but we will probably give such advice from Whitehall.
As part of my role in the NATO Parliamentary Assembly, I was in Algeria last week. The Algerian parliamentarians I met have much experience of bringing a country together after the dark decade, and they made it clear that they would like to help the Libyan Government through diplomacy in bringing together, as my right hon. Friend said, perhaps 120 different factions. I think the Algerians have a lot to offer and I know that my right hon. Friend has met the President. Will he ensure that offers of help through non-military intervention are taken as far as possible with the new Libyan Government?
I would be very pleased to hear that the Algerians wanted to provide assistance, based on their own experience of rebuilding a country after a bitter civil war, and I am sure the Libyans would be pleased to receive such an offer.
I trust that the Algerian parliamentarians felt suitably privileged to meet the hon. Member for Elmet and Rothwell (Alec Shelbrooke).
I welcome the £10 million for technical support that the Foreign Secretary referred to, in particular for security, justice and defence. Will he consider that those who have served in the Royal Ulster Constabulary and the Police Service of Northern Ireland, who have demonstrated substantial knowledge, experience and ability in Afghanistan, Iraq, Serbia and Bosnia, should be part of the security training that will be offered?
The hon. Gentleman raises a good point. There has been an assumption across the House that any training that we give would have to be provided by UK military personnel. Some of what will be needed will be police training, and perhaps the PSNI in particular could make a contribution to that. It is also quite possible that some of the training—perhaps all training—will be delivered by contractors, and often ex-military personnel working for contractors, rather than by serving military personnel.
The main concern of my constituents in Kettering about Libya is that the country is the main and growing conduit for illegal immigration from safe and unsafe countries in Africa. If the Government of national accord in Libya are unwilling or unable to make this a national priority, and if my right hon. Friend the Foreign Secretary is unable or unwilling to press the case for how important that is for us, what is the EU plan to prevent this year from being one of a disastrous set of circumstances in which we are about to experience a mass wave of illegal immigration very dangerously across the Mediterranean towards Italy?
To reassure my hon. Friend, the Libyan Government do understand the importance of that issue. They understand the importance for Libya because having organised criminal traffic across its borders undermines Libya’s sovereignty. They also understand the importance of addressing the issue for Libya’s relations with the international community. The point that I was making is that we must put this agenda in the context of the many other immediate challenges facing the Libyan people.
In answer to my hon. Friend’s second question about what the EU is doing in the meantime, EUNAVFOR MED Operation Sophia—the European naval operation in the Mediterranean—is designed to intercept people seeking to migrate on an irregular basis into the European Union from Libya.
The Global Initiative Against Transnational Organised Crime estimated that the illegal migrant trade is worth $255 million to $323 million a year, so the £10 million is a hugely welcome contribution towards stopping that awful trade. Will the right hon. Gentleman confirm that it will also help to plug that gap in Libya’s economy so that its purpose will be positive?
As I have said before, Libya is potentially a rich country. It has significant oil and gas wealth and significant assets, so if the Government can get their assets unfrozen, they will not lack cash. The £10 million is a UK technical assistance fund. It will fund experts, the commissioning of studies and advice to the Libyan Government in the areas that I outlined.
My right hon. Friend will know that the entire region of the Fezzan to the south of Wadi al Shatti is something of a black hole. We do not have a good idea of what is going on there, but we do know that instability and the ready availability of arms have created a threat to the whole of sub-Saharan and west Africa, not only from Daesh, but from Boko Haram, who have armed themselves from the Gaddafi arsenals. Can my right hon. Friend update the House about what the Government are doing to tackle that threat to sub-Saharan and west Africa from Libya?
The Libyan Government are acutely aware of the threat to their sovereignty from the porosity of Libya’s borders to the south and south-west. I am speculating, but that could be one of the areas where the international community is asked for technical support in the future. This is a very, very long border in an unpopulated area that is ideally suited to policing by technical means, rather than by border guards on the ground. My hon. and learned Friend will be reassured to know that Prime Minister Sarraj stated to me very clearly yesterday that although his Government are in Tripoli and the world is focused on Tripoli, he is acutely conscious of the fact that this must be a Government for the east and south of the country, as well as a Government for the west.
May I press the Foreign Secretary further on the question of where Libyan personnel might be trained in future? He will recall the unhappy saga in 2014 when some 2,000 Libyan personnel were trained at the Bassingbourn barracks in Cambridgeshire. That ended very badly, with a series of violent sexual assaults in my city of Cambridge when they were left out unsupervised. Can the right hon. Gentleman reassure residents in Cambridge that there will be no further training of Libyan personnel in Cambridgeshire? Will he also update the House on attempts to get back the £15 million that is left owing from the Libyan authorities after that sad experience?
I was Defence Secretary at the time, so I well remember the plans for training at Bassingbourn. As the hon. Gentleman says, it did not end well, and the Libyans are acutely conscious of that. This would be a very different operation in very different circumstances. There are no plans yet, and there has been no request, so I am afraid that I cannot give the House any further information about what such a training programme might look like or where it would be conducted, but I can give him an assurance that the lessons of what happened at Bassingbourn have been taken on board by the Ministry of Defence and will be properly factored into any future plan.
If spending 13 times as much on bombing Libya as on reconstructing it is not one of the Prime Minister’s worst foreign policy decisions, I wonder whether the Foreign Secretary could tell us what is. Of the £10 million announced today for the conflict security fund, how much will be counted as official development assistance, how much will be counted towards the NATO 2% target, and how much will be counted towards both?
I do not think that Libya qualifies for ODA because of its GDP per capita, but if I am wrong about that I will write to the hon. Gentleman and place a copy of the letter in the Library.
The Foreign Secretary has spoken about the situation in Benghazi in the past, but the situation there remains extremely volatile and serious. Reuters was reporting over the weekend of extensive fighting and suicide attacks carried out by Daesh affiliates. I wonder what discussions he has had about the situation in and around Benghazi and whether he expects any requests for support to deal with operations in that region of Libya.
We did discuss that issue, and we did so in the context of General Haftar and the Libyan national army, which is active in that area. This is one of the challenges that Prime Minister Sarraj faces: one of the most effective military units available is under the command of General Haftar, who is a bête noire for many of the people who support the Government. But at the moment the Government do not have an alternative, and the effectiveness of the petroleum guard force and of the LNA in stemming Daesh attacks is an important part of the Government’s arsenal of defences. In the medium term, however, they will have to get all those units under some form of effective central control.
I am grateful to the Foreign Secretary for advance sight of his statement. We in Plaid Cymru agreed with the 2011 intervention to prevent an imminent large-scale murderous attack on civilians in Benghazi. Later on, in Benghazi itself, the Prime Minister said that we would
“stand with you as you build your democracy and build your country for the future.”
Will the Foreign Secretary guarantee that this time we will fulfil our promises?
That is exactly what we are doing. It has taken a regrettably long time to get from the end of the campaign in 2011 and the overthrow of Colonel Gaddafi to the point where the Libyan people are now seriously starting to seek to rebuild their democracy and their economy, but they are now looking to do so and we will be there to support them.
The idea of Daesh being present in Libya is worrying enough in its own right, but the prospect of them moving their operational headquarters from Iraq and Syria to Libya should be deeply worrying for us all, especially the Secretary of State. What discussions has he had with his Libyan counterparts and with those countries neighbouring Libya on stemming the flow of Islamic militants into the country?
I have had discussions with the Libyans and with the Egyptians and Tunisians, who are very concerned about this. The problem is that the principal route of access into Libya for Daesh militants appears to be by sea, and the Libyans are struggling to control that route with their current resources.
We know from experience elsewhere that in fledgling democracies and troubled states that are rife with armed groups, corruption and conflict often become drivers for each other. We also know that refuge routes are being sought through Libya. In that context, is the Foreign Secretary right to minimise the relevance of a humanitarian and civil contribution, at least in the medium term?
I simply say to the hon. Gentleman that Libya is not a poor country. There are tens of billions of dollars of Libyan assets owned by the Libyan people and available to the Libyan Government once the UN decides to unfreeze them, so I do not believe that Libya needs humanitarian support in the conventional sense. What it absolutely needs is technical support to build the governance structures that will allow the UN to release its own money to it.
Can the Foreign Secretary say something about the use of embedded troops in any future military operation? I appreciate that there is no immediate prospect of that—he has been very clear about that—but would the House be consulted on any British military personnel being embedded within the armed forces of other nations?
The statement that my right hon. Friend the Defence Secretary made yesterday clarified that point. Where troops or personnel are embedded in the military forces of other nations, they are treated as being part of those forces for operational purposes; they are not covered by the commitment we have made to come back to the House. It would be absurd if a British pilot embedded in the US navy, for example, maintaining our carrier base skills ahead of the commissioning of our own carriers in 2018, had to be the subject of a debate in the House of Commons because of some decision taken by the US Government.
In answer to a question last week, the Under-Secretary of State for Foreign and Commonwealth Affairs, the hon. Member for Bournemouth East (Mr Ellwood), said that the Government would facilitate a visit of UK victims of terrorism that involved Semtex to Libya in the near future. Now that the Foreign Secretary has gone there, is there any timescale for when we can expect such a visit?
I do not think that the conditions would be right for such a visit right now, and I cannot see exactly what the point would be at this stage. Once the Government of national accord are established in their Ministries, with access to their records and their competent civil servants, and once our ambassador is back in Tripoli, I will certainly be prepared to see what we can do to facilitate such a visit.
Point of Order
On a point of order, Mr Speaker. During Treasury questions earlier today, a Minister, whether advertently or inadvertently, besmirched the work of the House of Commons Library. Given that the researchers in the Library are independent and impartial and their work is greatly valued by Members on both sides of the House, and given that, as servants of the House, they cannot come into the Chamber to defend their work, how can we put on the record that Members of Parliament of all political persuasions value and respect their work?
I am grateful to the hon. Gentleman for his point of order. I would not seek to comment on the merits or demerits of a particular report. Suffice it to say, however, that I think the House of Commons Library service is held in universal esteem. I have always had the highest regard for the professionalism, competence, intellect and analytical skill of those who work in the Library service. Indeed, when I was first elected I was told, before employing researchers, first to see and realise the benefits that the Library service can bring. I was told that 19 years ago. It was true then, and it is true now. I am sure that nobody would want to suggest otherwise.
Farm Produce (Labelling Requirements)
Motion for leave to bring in a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to require the labelling of farm produce sold in the UK to include country of origin and whether produced in accordance with designated animal welfare standards; and for connected purposes.
Today I am arguing for more transparency—farm-to-fork traceability—to enable the British consumer to make a more informed decision about what they are buying. Currently we have a confusing mixture of voluntary standards bolted on to EU legislation, with some products offering greater clarity of origin and production standards than others. It took the Europe-wide scandal of horsemeat finding its way into our food chain to jolt the European Commission into action. That scandal was a big wake-up call for the meat industry EU-wide.
The UK is already implementing new EU rules on country-of-origin labelling for unprocessed pork, lamb and poultry. I stress that that meat is unprocessed, because there is a whole other confusion surrounding imported meat that is processed into, for example, sausages in the UK and then labelled as a British product. However, that is a can of worms for another day.
Although there are now better rules on labelling and the traceability of meat products, the same is not true for milk and milk used in dairy products, and that must change. Our British dairy farmers are having a tough time of it, and milk prices are very low. With Britain operating under current EU rules, we cannot unilaterally bring in mandatory country-of-origin labelling. To do that, we would need to get agreement from the Commission, but so far the Government have not been able to convince the Commission to agree, which is regrettable.
Currently the Commission favours only a voluntary code on dairy products. A May 2015 EU report covering dairy indicated that it was felt that introducing such a measure would prove costly and bureaucratic. However, our own Farming Minister has said:
“I do not accept the Commission’s argument that it would be too complicated and too difficult to do this on dairy products. It might on some dairy products, but on butter, on cheese, on some of the staple dairy products you could deliver country-of-origin labelling relatively inexpensively…The commission is very resistant to going this way, so we are not going anywhere fast on this agenda”.
Dr Judith Bryans, chief executive of Dairy UK, has said:
“There is obvious consumer demand for clearer information on the country of origin of food products as illustrated by the existing rules for fresh meat within the Food Information to Consumers Regulation…A mandatory labelling system would help the UK dairy industry showcase its products and reassure consumers on their provenance.”
There we have it: clear mandatory labelling is what our Government want. It is in the interests of British farmers and the British consumer.
The Government have said there is great potential for significant long-term growth in the UK dairy sector, with the global market expected to grow at more than 2% a year for the next 10 years. Globally, in or out of the EU, our dairy farmers should therefore have a bright future.
In its farm gate prices report in March 2016, the Environment, Food and Rural Affairs Committee said:
“It is unacceptable that consumers cannot buy British in confidence and could be misled as to country of origin when they are buying food from their supermarket. It is essential that labelling on produce is improved.”
I wholly agree.
For consumers who care deeply about animal welfare, we also need clearer labelling covering animal-rearing processes. Consumers do care about how animals in the food chain are cared for during their short lives. There are specific EU requirements on the keeping of calves, pigs, laying hens and broilers. The EU banned conventional cramped cages for laying hens in 2012, and it specifically phased out the use of individual stalls for pregnant sows in 2013. Those appallingly stressful stalls keep pregnant sows caged, usually on concrete, so they cannot move about. Such stalls cut farmers’ costs, but they were banned for cruelty reasons in the UK in 1999. They were specifically banned in the rest of the EU from the start of 2013.
Shockingly, more than two years on from these stalls being banned on cruelty grounds, six EU countries are still officially non-compliant with their own key welfare standards. Such wilful non-compliance cuts costs for the farmers involved, but it perpetuates misery for animals. The consumer absolutely has a right to know that a cheap cut of pork on a supermarket shelf has been produced in banned conditions.
Dr Joyce D’Silva, ambassador for the campaign group Compassion in World Farming, has said she believes the countries failing to comply were France, Belgium, Cyprus, Greece, Finland and Slovenia. She has said:
“It is appalling that the European Commission has failed to enforce this law…The whole point of an EU-wide ban is to ensure it is a more level playing field”—
a level playing field on the cost of pork production and on animal welfare.
My hon. Friend the Member for Tiverton and Honiton (Neil Parish), who co-sponsored the Bill with other hon. Members, and who is Chairman of the Environment, Food and Rural Affairs Committee, accused the European Commission in October 2015 of “prevaricating” and of giving European farmers an “unfair advantage” by allowing them to flout an EU ban on sow stalls. That unfair advantage is bad for not only the pig but pig farmers, because it has led to 60% of our pork being imported, undercutting our farmers.
If the British consumer wants to be sure that the pork on their plate is cruelty-free, clearer mandatory labelling is the answer. Currently there is only one EU-wide system of compulsory labelling on animal welfare, and that is for table eggs. The EU has been slow in obliging other member states to adopt higher welfare standards. Perhaps that is why the EU strategy does not plan to extend welfare labelling beyond eggs. If it did, it would certainly shame some key EU countries over their unacceptable animal farming practices. The Conservative Animal Welfare Foundation has said,
“As demand for livestock products continues to surge, particularly in developing countries, the importance of ethically sourced food becomes more important than ever as more animals are farmed.”
This country already has a voluntary scheme that demonstrates clear labelling and animal welfare—the Red Tractor scheme. It demonstrates that food is high-quality British produce and that it has been farmed, processed and packed in the UK. It is the largest food-assurance scheme in Britain. It ensures that food is traceable and safe to eat and that it has been produced responsibly.
Our farmers are doing the right thing, and they deserve our support. It is not right or fair that other European countries can dodge important animal welfare issues, hide anonymously behind inadequate labelling and at the same time undercut our farming industry. If British consumers were made aware of the lower welfare standard operating in many European countries, I believe they would choose to buy British and buy compassionately.
By bringing in the Bill, we will know where our milk has come from and where an animal was reared. Importantly, we will also know how well it was treated in its life and, potentially, even how it was slaughtered. By championing a robust, sustainable, compassionate British farming industry, we are delivering jobs and prosperity and ensuring our own food security. I believe that that is what the British public want, and I would like our Government to bring in a Bill to do that.
Question put and agreed to.
That Mrs Anne Main, Martin Vickers, Andrew Percy, Mr Jacob Rees-Mogg, William Wragg, Mr David Nuttall, Stephen McPartland, Bill Wiggin, Neil Parish and Mr Nigel Evans present the Bill.
Mrs Anne Main accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 6 May, and to be printed (Bill 161).
Bank of England and Financial Services Bill [Lords]
Consideration of Bill, as amended in the Public Bill Committee
New Clause 12
Appointment of Financial Conduct authority chief executive
“In Schedule 1ZA to the Financial Services and Markets Act 2000 (the Financial Conduct Authority), after paragraph 2 insert—
2A (1) The term of office of a person appointed as chief executive under paragraph 2(2)(b) must not begin before—
(a) the person has, in connection with the appointment, appeared before the Treasury Committee of the House of Commons, or
(b) (if earlier) the end of the period of 3 months beginning with the day on which the appointment is made.
(2) Sub-paragraph (1) does not apply if the person is appointed as chief executive on an acting basis, pending a further appointment being made.
(3) The reference to the Treasury Committee of the House of Commons—
(a) if the name of that Committee is changed, is a reference to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable.
(4) Any question arising under sub-paragraph (3) is to be determined by the Speaker of the House of Commons.”—(Harriett Baldwin.)
This new clause provides that the term of office of a person appointed as chief executive of the Financial Conduct Authority (otherwise than on a temporary basis) must not begin before that person has appeared before the Treasury Committee of the House of Commons or, if earlier, three months from the date of his or her appointment.
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
With this it will be convenient to discuss the following:
Amendment (a) to new clause 12, after paragraph 2A(1)(b) insert—
“(1A) If, before the term of office has begun, the Treasury Committee reports to the House that the appointment should not be confirmed, the Treasury shall not continue with the appointment unless the House of Commons resolves that the appointment should be confirmed.”
Amendment (b) to new clause 12, at end insert—
“In Schedule 1ZA to the Financial Services and Markets Act 2000, in paragraph 3(1), at the end insert “, except in the case of the chief executive of the FCA, who shall be appointed for a reappointable term of five years”.”
New clause 1—Chief Executive of the Financial Conduct Authority—
‘(1) Schedule 1ZA of the Financial Services and Markets Act 2000 is amended as follows.
(2) After paragraph 2(2) insert—
“(2A) The Treasury shall not appoint a chief executive without the consent of the Treasury Committee of the House of Commons.”
(3) After paragraph 4(1) insert—
“(1A) But a chief executive appointed under paragraph 2(2)(b) is not to be removed from office without the consent of the Treasury Committee of the House of Commons.”
(4) After paragraph 27 insert—
“References to Treasury Committee
28 (1) Any reference in this Schedule to the Treasury Committee of the House of Commons—
(a) if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which those functions are exercisable.
(2) Any question arising under sub-paragraph (1) is to be determined by the Speaker of the House of Commons.””
New clause 2—Composition of the Court of Directors of the Bank of England—
“In making nominations to the Court of Directors of the Bank of England, the Chancellor of the Exchequer must have regard to the importance of ensuring a balanced representation from the nations and regions of the United Kingdom.”
New clause 3—Change in title of the Bank of England—
“The Bank of England shall be known as the Bank of England, Scotland, Wales and Northern Ireland; and any reference in any enactment to the Bank of England shall be taken as a reference to the Bank of England, Scotland, Wales and Northern Ireland.”
New clause 5—Sterling Central Bank—
“The Bank of England is renamed the Sterling Central Bank.”
This new clause would change the name of the Bank of England to reflect its position as the UK central bank and the UK’s shared currency.
New clause 6—Membership of the Monetary Policy Committee of the Bank of England—
“(1) Section 13 of the Bank of England Act 1998 is amended as follows.
(2) At the end of subsection 2(c), add “of whom one each must be nominated by the Scottish Government, the Welsh Assembly Government and the Northern Ireland Executive.”
This new clause seeks to ensure representation of the four nations of the United Kingdom on the Monetary Policy Committee.
New clause 7—Objectives of the Monetary Policy Committee—
“After subsection 11(a) of the Bank of England Act 1998 there is inserted—
“(b) maximum employment, and.””
This new clause would expand the mandated objectives of the Monetary Policy Committee to include maximum employment.
New clause 8—Bank of England Accountability and Devolved Legislatures—
“Within three months of the passing of this Act, the Chancellor of the Exchequer shall lay a report before both Houses of Parliament on the merits of ensuring that the members of the policy committees of the Bank of England, including the Governor, appear before the respective economy committees of the devolved legislatures of the UK at least once a year.”
New clause 13—Freedom of Information—
“(1) Schedule 1, Part VI to the Freedom of Information Act 2000 is amended as follows.
(2) In the entry relating to the Bank of England, leave out all the words after “England.””
Amendment 6, in clause 9, page 7, line 19, at end insert—
‘(6A) The Comptroller may enquire into the Bank’s success in achieving its stated policy objectives but shall not enquire into the desirability of such objectives having been set.
(6B) The Comptroller shall submit reports arising from the exercise of his powers under subsection (6A) to the Treasury Committee of the House of Commons (or any successor committee exercising the same or equivalent functions).
(6C) The Comptroller shall lay before Parliament, and publish, each report arising under subsection (6B) promptly unless, in the opinion of the Treasury Committee, publication of a particular report would be likely materially adversely to affect the stability or functioning of the UK’s financial or banking system.”
Amendment 7, in clause 11, page 12, line 2, at beginning insert
“Subject to section 7ZA(6A) of the Bank of England Act 1998,”
Government amendment 3.
I would like to start by emphasising that the Treasury Committee is an esteemed Committee of this House and provides exceptional scrutiny of the Government and their regulators. Through its programme of pre-commencement hearings, it questions appointees to several posts before they start work. After appointees have started, they can expect to appear regularly before the Committee, and the public can expect the Committee to hold appointees firmly to account.
The Government welcome that scrutiny of appointees—it is a critical democratic function. That is why we have tabled new clause 12 to ensure in statute that the Committee always has the chance to scrutinise a new Financial Conduct Authority chief executive before they start work.
Will this be setting a bit of a trend? For which other important posts—there will be a number of other important posts at not just regulators but other City institutions—does my hon. Friend think it would be appropriate for the Treasury Committee to have a similar approval process?
I am speaking very narrowly to new clause 12. I am sure the Treasury Committee and other Committees will look at the issue again. I expect it to be part of the ongoing discussions between Parliament and the Executive. However, I am speaking to the very narrow characteristics of new clause 12.
Since we tabled our new clause, there have been further discussions with the Chair of the Treasury Committee over its role in the appointment of FCA chief executives. I am pleased to announce that we have found a means of reinforcing its scrutiny role that goes further than the context of this Bill. Indeed, today the Chancellor has written to the Chair of the Treasury Committee, agreeing that the Government will make appointments to the role of chief executive of the FCA in such a way as to ensure that the Committee is able to hold a hearing before the appointment is formalised.
Is the letter in the Vote Office if it has already been penned?
The letter is in my binder and I would be happy to read it out, provided that the Chair of the Committee does not object. I will ensure that a copy is put in the House of Commons Library, if that has not already happened. I am sure that the Chair of the hon. Lady’s Committee will be more than happy to share it with her. Would she like me to read the letter out in full?
Read it out!
By popular demand, this is what the letter states:
During the passage of the Bank of England and Financial Services Bill, we have considered the role of the Treasury Select Committee (TSC) in scrutinising the appointment of the Chief Executive of the Financial Conduct Authority (FCA).
This scrutiny is important and welcome. I will therefore ensure that appointments to the Chief Executive of the FCA are made in such a way to ensure the TSC is able to hold a hearing, after the appointment is announced but before it is formalised. Should the TSC recommend”—
this is more exciting news—
“in its report that the appointment be put as a motion to the whole House, the government will make time for this motion and respect the decision of the House.
it does not stop there—
“I will seek, in a future Bill, to make a change to the legislation governing appointments to the FCA CEO to make the appointee subject to a fixed, renewable 5-year term. This would not apply to Andrew Bailey, who I recently announced as the new head of the FCA, but would first apply to his successor.
I believe that these changes will reinforce the Treasury Committee’s important scrutiny role.”
It would be helpful if the Economic Secretary could assure the House that that future Bill will be introduced sooner rather than later.
I am sure that the shadow Chancellor welcomes Government new clause 12 and the news that we will carefully consider the earliest possible opportunity for doing that, following today’s debate.
As the letter states, should the Treasury Committee follow the pre-commencement hearing with a report recommending that the appointment be put as a motion to the whole House, the Government will make time for that motion and, should it result in a vote, they will respect the decision of the House. We will also seek an opportunity to alter the legislation governing appointments to the FCA chief executive officer, to make the appointee subject to a fixed, renewable, five-year term. I can confirm that Andrew Bailey, the new CEO of the FCA, has been appointed to a five-year term that can be renewed, so the agreed process will first apply to his successor. The agreement is the right way to reinforce the crucial scrutiny role of the Treasury Committee.
I am grateful to the Economic Secretary, who is being extremely generous with her time. What she has said is extremely welcome and a significant step forward. Will she explain why the Chancellor thought it better not to insert it in the Bill, but to make the arrangement through an exchange of letters?
We tabled our new clause on Thursday and, as I have said, there have been further discussions with the Chair of the Treasury Committee. I am delighted to be able to announce the result of those discussions today.
I also want to take a moment to address the question of dismissals of the FCA chief executive. I can confirm that the Government do not have the power, except in very limited circumstances, to dismiss the chief executive of the FCA during his or her term of office. I refer the House to paragraph 4 of schedule 1ZA to the Financial Services and Markets Act 2000, which applies to the chair and the external members, as well as to the CEO, and states:
“The Treasury may remove an appointed member from office…on the grounds of incapacity or serious misconduct, or…on the grounds that in all the circumstances the member’s financial or other interests are such as to have a material effect on the extent of the functions as member that it would be proper for the person to discharge.”
The lawyers are clear that the only reasons the Treasury can dismiss an FCA chief executive are incapacity, serious misconduct and conflicts of interest. I hope that offers the House considerable reassurance.
It is worth saying a little about what happened in relation to Martin Wheatley. Although he was not technically dismissed, his term was not renewed. The situation was straightforward. In July 2015, it was announced that his term would not be renewed in March 2016. As a result, he left his office six months early. I accept that that may have been a mutual decision between the Treasury and Mr Wheatley, but it certainly gave the impression, at least, that, even if it was not a fully fledged dismissal, it was a non-renewal, and, ultimately, the exit from office came six months before the end of a fixed term.
My right hon. Friend has stated the facts about the term of office to which Martin Wheatley was appointed and the fact that the Government chose not to renew it. It is appropriate to pay what I hope is a cross-party tribute to the excellent work of the acting chief executive, Tracey McDermott, who stepped into the role at that time. She has carried out the role for almost a full year in an absolutely exemplary fashion.
Unless there any further questions on the new clause, I am going to move on to the amendments relating to devolution. I am inviting interventions, but there are none.
The next set of amendments, which stand in the names of the hon. Members for East Lothian (George Kerevan), for Carmarthen East and Dinefwr (Jonathan Edwards) and for Kirkcaldy and Cowdenbeath (Roger Mullin), force us to ask exactly who the Bank works for. The answer must be the entire United Kingdom. Indeed, that is emphasised in the Bank’s mission statement,
“to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.”
To fulfil that mandate, the Bank of England goes to great lengths to ensure that it has a comprehensive understanding of the economic and financial situation across all corners of the United Kingdom. The Bank has a network of 12 agencies, which are located across Scotland, Wales, Northern Ireland and the regions of England. Each year, those agents undertake some 5,500 company visits and participate in panel discussions with approximately a further 3,500 businesses. In that context, imposing a requirement to have regard to regional representation on the court is unnecessary. A comprehensive framework for regional information-gathering already exists.
Will the Economic Secretary inform me who the Welsh representative is, because I have absolutely no idea who represents Welsh interests at the Bank of England and I am Plaid Cymru’s Treasury spokesperson?
I will make sure that that person makes him or herself known to the hon. Gentleman with the greatest of speed. It is important to point out that the agents do not engage with us as politicians. The agent for the west midlands and Worcestershire is very engaged with my local businesses, but I as a politician have never had a meeting with them. That is how it should work.
I realise that the Economic Secretary is trying to be helpful, but does she not recognise that there is a strategic difference between the process of information-gathering through the agents and that of policy-making through the bodies of the Bank itself? That is where we are asking for representation.
I will get to that point later in my remarks. As always, I seek to be helpful to the hon. Gentleman, so I hope that he will enjoy those remarks when I get to them.
We believe that it is unnecessary to impose the requirement in new clause 2 to have regard to regional representation on the court, which is effectively the board of directors of the Bank of England, because of the comprehensive framework for regional information gathering that already exists. In addition, if we found a candidate with the perfect profile to serve on the court, but we insisted on downgrading them because they lived in an over-represented part of the country, that would not be the best way to produce an effective court.
I have been clear that in setting both monetary and financial stability policy, the Bank must take into account economic conditions in, and the impact of policy decisions on, every part of the UK. Monetary and financial stability policy must be set on a UK-wide basis. None of the 65 million people whom this House represents would be well served if, for example, different capital requirements applied to banks in different parts of the UK. Of course, monetary policy must be consistent. It is completely impossible to set different interest rates in different regions, so monetary and financial stability are, rightly, reserved policy areas.
The men and women who make up the Bank’s policy committees must have their decisions scrutinised, but since policy must be set UK-wide, this Parliament must hold them to account. This Parliament holds power over reserved matters, which these issues rightly are, and the Members of this Parliament represent people from every part of the country on an equal basis. Likewise, Ministers, who are accountable to the House and who hold their positions with the support of a majority of the House of Commons, must be responsible for making the external appointments to the Monetary Policy Committee, each member of which is responsible for considering the impact of their policy decisions on all 65 million people in the UK.
We also return to the question of the Bank’s 300-year-old name. It is important to recognise the reputation associated with a name built up over such a long period. During that time, the Bank has come to be globally renowned as a strong, independent central bank. We should not underestimate the importance of that. International confidence in the Bank of England helps to support international confidence in our economy and currency.
I turn to the monetary framework. The Government amendment in this group is modest. The Bill reduces the minimum frequency of Monetary Policy Committee meetings from monthly to at least eight times in every calendar year, and our amendment adjusts the reporting requirements of the Monetary Policy Committee to match.
The Minister moved on very quickly from the matter of the name. I just want to clarify whether the Government have a view on changing the name of the Bank of England to reflect the fact that it is the Bank for all the nations of the United Kingdom. Notwithstanding the fact that in normal, everyday parlance it will, I am sure, still be referred to as the Bank of England, its long and proper title surely should reflect all the nations of the United Kingdom.
I respect and pay tribute to the fact that the Bank of England was founded by someone from Scotland, so the hon. Gentleman is absolutely right to draw attention to the fact that this is an historical anomaly. I would be the first to accept that the monetary policy of the Bank of England is set for the whole United Kingdom. That does not mean to say that we will accept the new clauses that would change the name of the Bank of England, because we think that its name has been well established over 300 years.
I think that the Treasury is right, in this instance, not to change the name. The Bank of England has a brand. I do not need to give a history lesson to the nationalist Members, but the Bank of England was founded in 1694, which was before the 1707 and 1800 Acts of Union that might—for two of the three other parts of the United Kingdom, at least—otherwise have had an impact on its initial name. Its brand is important, and I hope that those from the other parts of the United Kingdom will not feel as though their interests are being downgraded simply because they do not appear in the headline name, not least for the reasons that have been set out. It is important that we recognise that the Bank acts for the entirety of the United Kingdom, and that it therefore pays great attention to the voices of those in all parts of the United Kingdom, not just England.
Yes, and on that point I hope that the support of the hon. Member for Edinburgh East (Tommy Sheppard) for the united nature of our kingdom means that the Scottish National party has moved on from the discussions of last year in which it wanted to break up the United Kingdom. I hope that the party will accept the settled will of the Scottish people to continue to benefit from monetary policy that applies right across the country.
Further to the points made by the Minister and the right hon. Member for Cities of London and Westminster (Mark Field), the new clause tabled by my colleague the hon. Member for East Lothian (George Kerevan) will address the issue that they spoke about. As a keen cricketer, I know that the official title of the governing body is the England and Wales Cricket Board, but it is named “England” for all promotional purposes. Even if we accept the well-intentioned new clause tabled by my colleague from the Scottish National party, the Bank of England will still be known, in promotional terms, as the Bank of England.
The hon. Gentleman tries to tempt me down the path of comparisons with sports teams, but I decline to be tempted. The Government amendment is modest: the Bill reduces the frequency of MPC meetings from monthly to at least eight times in every calendar year, and the amendment will simply adjust the reporting requirements of the MPC to match.
New clause 6, tabled by the hon. Member for Carmarthen East and Dinefwr, suggests that we give the MPC a second primary objective of maximising employment. We conducted a comprehensive review of the monetary policy framework in 2013 and concluded that a flexible inflation targeting framework offered the best approach. Employment is already explicitly part of the MPC’s objectives. Its secondary objective is
“to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment.”
The most recent MPC remit letter summarised the Government’s economic policy as being
“to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries”.
I thank the Minister for her forbearance in giving way again. She is taking refuge in the Bank of England’s existing mandate, a mandate that all Members, on both sides of the House, know has long since become redundant. The inflation target has been dead in the water for years and years, because inflation is nowhere near 2% and is not likely to be for a long time. Implicit in the new clause is the fact that we are questing about for other policy measures to replace the 2% inflation target. Will the Minister address the question of what future targets the Bank of England should have to address the needs of a deflationary era, rather than the inflationary era of the last 20 years?
The hon. Gentleman asks an important question. There are many opportunities in Parliament, in the scrutiny of the Bank of England by the Committee of which he is a member, to ask those important questions. The Government choose to use the mechanism of the letter process and the remit. The hon. Gentleman and I are both old enough to know how inflation has changed over the years—[Hon. Members: “Surely not!”] I know; surely we are not. We should all welcome the significant lowering of inflation expectations, and we should all remember how important it is that we continue to ask the Bank of England to keep inflation under control, so that we never return to the kinds of impoverishing inflationary policies that so harmed people—particularly the poorest and oldest in society—during the 1970s.
Price stability must have primacy, because we judge that having a single lever aimed primarily at a single objective is the best way to make sure that the inflation target is credible. That, in turn, anchors all-important inflation expectations and helps us to keep inflation under control. Our system has shown that it produces good labour market outcomes. Despite global uncertainty, we have record numbers of people in work, an unemployment rate that is at its lowest in a decade, and a claimant count that has not been lower for more than 40 years. Moreover, targeting low inflation ensures that hard-earned wages are not eroded by inflation.
I must confess that I entirely agree with what the Minister is saying about inflation. I, too, am old enough to remember what inflation was like, particularly in the 1970s. However, it seems to me that the Bank of England’s sole monetary policy lever is to say that we must keep the inflation rate down. Surely we must recognise that inflation has now been well below the 2% target for a long time. I accept that we should never believe that inflation, and all the distortions it makes in our economy, has been entirely vanquished, but should there be a different inflation target, or a different set of remits for the Bank of England, to recognise that it should pay attention to other aspects of the economy in its monetary policy?
My right hon. Friend, who is an extremely wise and knowledgeable person—I will not refer in any way to his age—highlights an important point. He also emphasises the behavioural characteristic of the recency effect. Inflation is well below the 2% target today, but only during the lifetime of the last Parliament it was above 5%. Even during the six years that I have been a Member, we have tested the parameters of the inflation target. I do not think there is any need for us to make any changes to that target this afternoon.
I will conclude by speaking briefly to amendments 6 and 7 and new clause 13. The first part of amendment 6 states:
“The Comptroller may enquire into the Bank’s success in achieving its stated policy objectives but shall not enquire into the desirability of such objectives having been set.”
The Bill, as drafted, will already have that exact effect.
The second part of amendment 6 directs how the Comptroller and Auditor General should submit his reports. Parliament has delegated to the Comptroller discretion over the content of National Audit Office reports and the timing of their publication, and it is important that this independent officer of Parliament is able to use his judgment on how Parliament and the public are best served. The National Audit Act 1983 provides that the Comptroller
“may report to the House of Commons the results of any examination”.
Once he has reported to the House, it is open to any Committee of this House to inquire into matters on which he has reported. There is an in-built incentive for prompt publication as it mitigates the risk of the report’s conclusions being overtaken by events.
Amendment 7 would disapply restrictions in the Financial Services and Markets Act 2000 on the disclosure of specially protected information in relation to reports by the Comptroller and Auditor General. Information is specially protected under these rules if it is held by the Bank for the purposes of monetary policy, for financial operations supporting financial institutions in maintaining financial stability, or for private banking purposes. Similarly, new clause 13, in the name of the hon. Member for Bishop Auckland (Helen Goodman), would remove three corresponding exclusions in the Freedom of Information Act 2000. I hope I can persuade the House that each of the three categories of protected information is entirely sensible.
The first category applies to the Bank’s monetary policy functions. How we communicate monetary policy is extremely important. It moves markets in substantial ways and every detail of the published minutes is scrutinised for predictions of future changes. Managing disclosure while making sure information is presented in a timely way is vital. That is why the original legislation creating the Monetary Policy Committee in 1998 set out the full range of disclosure requirements, including publication of the minutes and of a quarterly inflation report. Since then, the Bank has implemented the recommendations of Governor Warsh’s review of MPC transparency. Through the Bill, we are supporting full implementation of the recommendations of that review.
The second exclusion applies to
“financial operations intended to support financial institutions for the purposes of maintaining stability”.
Hon. Members will understand that if the Bank has to extend emergency liquidity assistance, very careful communication is a critical element of preserving stability. Any covert assistance will be reported privately to the Chairs of the Treasury and Public Accounts Committees, while broader liquidity schemes for institutions, such as the special liquidity scheme and the discount window facility, may be announced to the markets.
Finally, the Bank’s very limited private banking services are excluded from FOI requests. We often forget that the Bank of England also provides private banking to customers. As I am sure hon. Members will agree, it would be entirely inappropriate to subject ordinary bank customer information to disclosure.
I rise to speak to amendments 6 and 7 in my name and that of my hon. Friends, but I first want to turn to new clause 1 and Government new clause 12 on the appointment of the FCA chief executive.
I came to the House ready to speak in support of new clause 1, which seeks to give the Treasury Committee a formal role in the appointment of the chief executive of the FCA. In my view, new clause 1 is better placed to guarantee the competence and independence of the regulator than the new clause in the name of the Chancellor, which in our original reading of it did too little to change the status quo. New clause 12 was tabled in response to the new clause tabled by the Chair of the Treasury Committee, the right hon. Member for Chichester (Mr Tyrie). We had a similar debate in Committee on an amendment about the appointment process for the chief executive of the Prudential Regulation Authority.
Since 2008, Select Committees have routinely held pre-appointment hearings for a number of public appointments, and some candidates have not been approved. The coalition Government developed the scrutiny agenda when the Chancellor agreed in 2010 to the Treasury Committee having a power of veto over appointments to the Office for Budget Responsibility. The Public Accounts Committee has a veto over the appointment of the Comptroller and Auditor General. Appointments to the Monetary Policy Committee and the Financial Policy Committee of the Bank of England are made by the Chancellor of the Exchequer, and are then subject to a confirmation hearing by the Treasury Committee. The Treasury Committee has powers over the chair and board members of the Office for Budget Responsibility, an arrangement that the Chancellor told the Treasury Committee he would put in place
“because I want there to be absolutely no doubt that this is an independent body”.
The Minister will be aware that, when it examined the proposals for the future FCA in 2013, the Treasury Committee made a number of recommendations on the accountability of the new body to Parliament, including that the legislation should provide that the chief executive of the FCA be subject to pre-appointment scrutiny by the Treasury Committee. I recall that the Treasury Committee was disappointed by the Government response, particularly in view of the deficiencies in the accountability mechanisms for the Financial Services Authority.
As we have heard, the view of the Treasury Committee was set out in the Treasury Committee Chair’s letter to the Chancellor of the Exchequer on 26 January, following the appointment of the current PRA chief executive, Andrew Bailey, to be the next leader of the FCA. In that letter, the right hon. Gentleman set out his Committee’s view that it should have a veto over the appointment and dismissal of the chief executives of both the FCA and the PRA. Indeed, the letter said that the FCA’s chair, John Griffith-Jones, told the Committee, when he met its members on 20 January, that there was merit in that proposal.
In Committee, I flagged up this matter and said it would be helpful to know whether the Chancellor had shared his thinking on such calls to extend pre-appointment hearings and the power of veto to those two positions. Now we have had his reply. It was in the Minister’s ring binder. As she said, it was “exciting” to hear the contents of it, and we got a fantastic insight into the fireside exchanges within the Government. Labour Members believe that the Treasury Committee should have greater authority over the future of financial regulation in this country.
On Government new clause 12, it is unclear what would happen in the period between the appointment of the chief executive and him or her appearing before the Committee. Would they be left in limbo, or would they in fact be settling into their new post? Would we be disappointed—in practice, would it simply be business as usual, with the Treasury Committee not given the power that we all believe it deserves? We do not believe that simply requiring any new chief of the FCA to appear before the Committee within three months of appointment delivers anything particularly new. It is reasonable to expect that any new postholder would appear before the Committee within that timeframe in any event, whether or not that appearance was codified.
With regard to new clause 12, however, I am pleased to note the exciting news—the Minister herself has called it that, as have I—that by means of the Chancellor’s letter the Government have communicated that they accept the broad thrust of the proposals put forward by the Chair of the Treasury Committee. I also note and welcome the Minister’s commitment today to introduce the relevant legislation, in her own words, sooner rather than later. I politely suggest that the changes be introduced in the Finance Bill shortly—that is an opportunity not to be missed.
I turn to Labour’s amendments 6 and 7, containing measures that we have retabled after they were discussed in Committee, and new clause 13, in the name of my hon. Friend the Member for Bishop Auckland (Helen Goodman). Each of those measures, in its own way, addresses the crucial issue of the need for transparency and openness in the Bank of England. The National Audit Office’s power to investigate the Bank has been subject to discussion at each stage of the Bill in both this House and the other place. The Comptroller and Auditor General was clearly concerned about proposals in the Bill that would have allowed the court of directors a veto over the new powers for the NAO. I am pleased to say that there has been clear progress on the issue as the Bill has proceeded through both Houses; in particular, the veto was removed in the other place. As hon. Members will recall, in response the Government proposed a memorandum of understanding between the Bank and the National Audit Office; I understand the draft of that has been welcomed by both sides.
Opposition amendments 6 and 7 seek to extend and clarify the powers of the comptroller to inquire into the Bank’s success in achieving its policy objectives. We believe that that does not encroach beyond the boundaries of questioning the merits of policy decisions, but would assist the National Audit Office in ascertaining whether the Bank is delivering value for money.
I have a brief question on amendment 6. Although I accept that transparency and openness are the spirit of the age and we cannot necessarily move entirely against that—[Laughter.] We do our level best some of the time. I am sure that the Treasury will be at the vanguard of this. Does the hon. Gentleman accept that, at times of great difficulty, when there are issues about the stability or functioning of the UK’s financial banking system, it would be appropriate not just for the Treasury Committee but for the Treasury itself to have some say in suggesting when openness should not be fully fledged? The safeguards that he has put in place in the amendment refer only to the Treasury Committee; does he not see that there might be instances when Ministers rightly have concerns about issues of stability that should be protected from open transparency at least for a time, although there could then be a move to make the minutes and other things more open at some future point, once the particular threat had passed?
I thank the right hon. Gentleman for his intervention. It may be that transparency is the spirit not just of the age but of the future—we shall see. I draw his attention to the wording in the amendment:
“The Comptroller shall submit reports arising from the exercise of his powers under subsection (6A)”.
It is not a completely open-book policy.
On new clause 2, which is in the name of the hon. Member for East Lothian (George Kerevan), Labour sees merit in the proposal for wider geographical representation on the board. In Committee, we tabled an amendment making the case for amending the composition of the court to ensure that different stakeholders were represented, including having dedicated places for customers and practitioners.
Similarly, we support new clause 13 tabled by my hon. Friend the Member for Bishop Auckland. She has a long track record in campaigning for greater transparency in financial services, and her new clause sits well with our amendments, as it seeks to empower the National Audit Office further by making the case for greater powers for freedom of information requests.
I now turn to new clauses 3 and 5, put forward by the Scottish National party and Plaid Cymru respectively. Both new clauses would change the name of the Bank of England. In fact the SNP was so keen to discuss its proposal that it tabled it twice. We discussed that measure in Committee and it is before us again. It seeks specifically to have the name of Scotland, as well as those of Wales and Northern Ireland, as part of the title of the Bank. The SNP has now been joined by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who has taken a different tack and removed all national names; his new clause would mean that the name of the Bank referred solely to the currency—for the avoidance of doubt, that is sterling, not Stirling. We were happy to support the SNP’s proposal in Committee, recognising as it does the unifying role of the Bank—that has been expressed again today—as one which services all parts of the United Kingdom, and we will support it again.
New clauses 6, 7 and 8 and Government amendment 3 have a number of merits. New clause 7, in the name of the hon. Member for Carmarthen East and Dinefwr, sets out a new mandated objective for the Monetary Policy Committee to include maximum employment. New clause 6 proposes the nomination of representatives on the MPC from the devolved authorities of Scotland, Wales and Northern Ireland, and new clause 8 argues that the Bank should be more accountable for its decisions to those same bodies.
The Labour party has established a review into the mandate of the Monetary Policy Committee under former MPC member David Blanchflower. We have said previously that we will look at a wide range of ideas, including what can be learned from the US Federal Reserve. That will include considering the importance of growth, employment and earnings in the MPC’s deliberations. Indeed, on new clause 7, David Blanchflower has himself written in City A.M.—the favourite publication of the Labour Front-Bench team—that he will consider the issue of maximising employment in his review. He is also looking at the structure, size and, crucially, gender balance of the MPC, optimal policy rules, asymmetrical targeting and the relationship with fiscal policy, as well as the frequency of the MPC’s meetings.
Therefore, although we welcome the proposal for the Bank to report to the devolved authorities, we will not support the new clauses on the MPC today. We see merit in them as part of an ongoing debate, but look forward to considering and sharing the results of David Blanchflower’s review in due course. With that, I draw my comments on this group of measures to a conclusion.
First of all, that was a very good speech. I congratulate the hon. Member for Leeds East (Richard Burgon) on covering quite a lot of ground in a good deal of detail—and with a sense of humour, which I enjoyed. I was also pleased that he got in one or two points—it saves me the trouble—about the OBR and its importance as a precedent for what we are discussing today.
I will also say—although only in a sentence, otherwise I am sure that I will get told to be quiet by you, Madam Deputy Speaker—that this is a very good Bill. In many respects, it implements a good number of the wider objectives for Bank of England scrutiny and accountability for which the Treasury Committee has for many years been pushing. I thank members of the Treasury Committee in the previous Parliament and in this one who have pressed for these measures vigorously. It shows that things can be achieved if one persists.
I am grateful to the Minister for her assistance over a number of days, and to the Chancellor of the Exchequer, who followed up a telephone conversation last night with an exchange of letters. We have now reached an agreement on how to proceed, so I will not need to press new clause 1 to a Division.
Following the exchange of letters, most of the objectives that we sought through new clause 1 are provided for, and it is worth going through the key points, which the Minister effectively clarified by reading out the Chancellor’s letter. First, appointments will be made in a way that ensures that the Treasury Committee can hold a hearing in good time. Before the appointment is formalised, the question of whether there is a pre-commencement or pre-appointment hearing is, in my view, a distinction without a difference. Secondly, if the Committee disagrees with the appointment, it will report that to the House, and if they choose, the Government must find time for a debate on the Treasury Committee’s report. That debate will be on a motion to accept the conclusion of the Committee. The Government will then have to vote it down. The Government further agree that they will respect the decision of the House once that vote has been taken.
Thirdly—this point has already been raised—at the earliest opportunity, the Government will amend legislation to ensure that future appointments of the chief executive of the FCA are made on a fixed renewable five-year term. I expect that legislative change to take place in the next parliamentary Session. I am not sure that the provision would satisfy the long title of a Finance Bill but, if it does, I would expect the Government to include it in that Bill. I also recognise that the Chancellor could not fully commit over the phone that the change would take place in the next Session, since he will have had no opportunity to secure an agreement on the legislative time from his Cabinet colleagues. I expect, however, that he will do that as soon as possible. It will be a pretty small, self-contained Bill. The fourth point, which has not been mentioned so far, is that it is the Chancellor’s clear view—I am not in any way misrepresenting him—that the arrangements that are being put in place should be the permanent method of appointment, rather than something that will just disappear with this Chancellor or, indeed, the helpful Minister at the Dispatch Box, however supportive she may be of the proposals.
Why has the Treasury Committee devoted so much time to this issue? I have a specific and a general answer to that. On the specifics, there have been widespread concerns that the independence of the FCA has been compromised by the circumstances of Martin Wheatley’s departure, and by other apparent interference in the FCA’s work by senior Treasury officials, and perhaps Ministers. We explored those circumstances through cross-examination in Committee and found no such evidence. However, my right hon. Friend the Member for Cities of London and Westminster (Mark Field) got right to the point when he said that the appearance or perception of interference none the less remains. That perception makes it harder for regulators to do their job, so it had to be addressed. Bolstering the perceived independence of this key appointment, and ensuring that the individual cannot easily be removed by the Treasury, seemed crucial to the Committee.
For the record, I do not think there was any undue interference from the Treasury, and I am happy that Andrew Bailey is taking over—he will be a good chief executive. None the less, there was that perception within the square mile and we must hold that fairly close to our hearts.
May I also say how much I approve of the Treasury accepting the guts of new clauses 1 and 9? It is greatly to its credit that we have not had to go through the House of Lords, because it does a discourtesy to this House when such changes are made through amendments in the House of Lords, rather than being part and parcel of discussions in advance of Report.
One other issue is the apparent statutory protection against dismissal, which came into question as a result of Martin Wheatley’s departure. Whatever the reality, the current statutory protection appeared inadequate, which was perhaps because he was appointed only for a three-year term. Five years—a goodly and longer term—will provide more protection. To put it even more simply, the changes rectify in another way the risk of arbitrary dismissal. For example, if the Treasury Committee strongly supports keeping the incumbent after four and a half years, it can make that abundantly clear in a report and recommend to the House of Commons that any other candidate is voted down. So in practice, with the letter, we already have the protection that we wanted.
The FCA needs a strong and demonstrably independent chief executive, accountable to Parliament. It endured a difficult birth and struggled to emerge from the rubble of the failed FSA. Some of its best staff have been poached by the Prudential Regulation Authority, the Bank and the private sector, and it has been hitting the headlines for all the wrong reasons, not least with the breach of its own listing rules, which wiped 20% off the share value of the life assurance sector. With what will amount to a requirement for parliamentary approval of future appointments or dismissals of the FCA chief executive, the incumbent will now be in a strong position to resist pressure from Ministers and officials, and their authority will be bolstered.
The fact that this is a non-statutory change—unlike new clause 1, which would have been in the Bill—does not perturb me a great deal. Any attempt by the current or future Chancellor to circumvent these arrangements is likely to lead to a complete collapse of trust between the Treasury Committee and the Government, and I do not foresee that happening.
Does my right hon. Friend have some small concern that if a measure is not included in the Bill, no precedent will be set? To return to an earlier exchange that I tried to have with the Minister, that might give the Treasury licence to take this as a sui generis case, rather than recognising that the Treasury Committee should perhaps have a more important role in approving the appointments of a number of senior figures in the financial services firmament.
That argument can be turned on its head. One can argue that this sets a precedent that is more easily rolled out, without the need for statutory change, to other bodies. In the Treasury field, we now have a statutory double lock for the appointment and dismissal of the head of the Office for Budget Responsibility, which was recently found to be of some use following controversy about alleged interference in the production of the forecast—again, we did not find any evidence of that, but the perception of it might have weakened the OBR. We have a requirement for a resolution of the House prior to the appointment of the chairman of the Office for National Statistics, and now we also have these arrangements. So we have a battery of different arrangements on which to draw.
I congratulate my right hon. Friend on achieving this great success for parliamentary scrutiny, and I suggest that it is better to proceed in a non-statutory way. Bringing statute into the proceedings of the House always presents longer term problems, and setting a non-statutory precedent has lots of advantages.
I always like listening to my hon. Friend, who is a member of the Treasury Committee and, of course, a constitutional expert. It is certainly true in this place that a good deal of quasi-constitutional change, which is what we have here, tends to take place gradually and often due to the development of informal arrangements. I think that that is all to the good, which is what I think my hon. Friend is saying.
Everyone is trying to pile in, whereas I am trying to get to the end of my speech. I was almost there a minute ago, but I give way.
Does the right hon. Gentleman not feel the slightest hint of disappointment in the intervention by the hon. Member for North East Somerset (Mr Rees-Mogg) because it was surely a historic first that he signed a new clause to amend the British constitution?
Of course my hon. Friend the Member for North East Somerset (Mr Rees-Mogg), as a great and learned constitutional expert, will explain this apparent contradiction to the House in, I hope, a lengthy disquisition in a few minutes’ time.
I really am trying to conclude, but I have just one more point. It is essential in a 21st-century democracy that appointees to an increasing number of quango positions—this was the general point I said I would refer to earlier—should be forced to explain their actions before Parliament and also should feel accountable to Parliament. To achieve that, the means of their appointment and their protection from dismissal are relevant, and that is why a change such as this can offer us something.
Over decades, successive Governments have offloaded their responsibilities to quangos, leaving the public with the sense that nobody is ultimately democratically accountable for anything. I believe that accountability for decisions that were formerly taken directly by Ministers, but now sit with unelected appointees in quangos, needs thorough scrutiny and cross-examination, and that is what we have been trying to do in the Treasury Committee over the past few years.
The agreement with the Chancellor is a sizeable step in the right direction. Of course, in an ideal world, I would like access to the statute book to write exactly what, on behalf of the Treasury Committee, I feel should be on it. However, we live in the real world, and I am very happy with this exchange of letters and grateful to Ministers for their agreement. I shall not press new clause 1 to a Division today.
I agree with the right hon. Member for Chichester (Mr Tyrie) that there is a lot to be commended in the Bill, although some of the good things, as with new clause 12, were pushed on the Government. I also think that there are still some negative aspects to the Bill, which brings me to a conclusion—[Interruption.] As usual, it will be quite a long conclusion!
The Bill began as a tidying-up operation, which is why it was launched in the House of Lords. It was seen to be about just tidying up a few things, making a few additions and changes to the Financial Services Act 2012. As the Bill proceeded through its various stages, however, the more it became apparent that it exposed a whole series of issues in the financial regulatory system that were not fit for purpose.
We have convinced ourselves—or at least the Government have convinced themselves—that bar a little tidying up, all has been done to resolve the crisis of 2007, but that is not true. What we discovered time and again as the Bill proceeded were issues with the operation of the Bank of England and issues with the functioning of the regulatory bodies and how fit for purpose they are. Furthermore, new issues have emerged only in the last few weeks regarding tax havens. All those problems have appeared. I do not see this Bill putting the problems away and putting the issues to bed. Rather, we are seeing the start of a whole series of pieces of legislation coming into force until we get it right. Far from it being a tidying-up operation, we have started something new.
I am speaking to new clauses 2 and 3, which stand in my name and those of my SNP colleagues. I believe they get to the nub of the issues we are facing as a result of what has been uncovered. In the last 20 years, and more particularly in the last 10, the Bank of England has acquired an extraordinary range of new powers. I do not mean just forecasting or supervising powers over banks, because fundamental policy levers for running the whole economy have been transferred from this House and the Executive to the Bank of England itself. This began with the transfer of powers over interest rates to the Bank of England in 1997, along with the power to set the exchange rates, which no one seemed to notice at the time. This gave the Bank de facto control over our external sector. More recently, of course, with quantitative easing, the Bank has forced interest rates down to the zero band. If monetary policy cannot be manipulated, what else can be done? Gradually, the Bank has been given powers over large swathes of fiscal policy.
Nowadays, the Bank of England even operates our housing policy, as housing determines the whole direction of economic growth. In recent weeks, the Bank has been deciding between buy for let or buy for homeowners. Micro-decisions have been transferred, and my worry is that we have crossed a line of accountability with respect to the Bank of England. This is not a criticism of individuals working for it or indeed of the Governor of the Bank of England, for whom I have high regard. Gradually, however, we have allowed it to take over from this House far too much of the operational policy that directs the economy.
That is why I am happy to support new clause 12 as a step forward in beginning to redress the balance of accountability. New clause 12 and the Government’s acceptance of the general line of march from the Treasury Select Committee means that we are beginning to move to the point where key members of the regulatory regime can be confirmed in their appointments by this House.
We now have two precedents in that direction, with the Treasury Committee as a servant of the House confirming the appointment of the director of the Office for Budget Responsibility and now the head of the Financial Conduct Authority. That is the line of march, but I want to put on record, however, that SNP Members view this as a down payment. We are moving in a direction where the Governor of the Bank of England and all the key members of the regulatory agencies have to be confirmed by this House. I know that will take a long time and that there is always a struggle—sometimes gentle, sometimes not—between the Executive and the House over who has the real say. What we are seeing is a move towards more democratic accountability being held by the House, which I welcome.
Let me move on briefly to new clause 2, which takes this process a little further. Given the policy direction and powers that now lie with the Bank of England, we have to make sure that its committees and, above all, its ruling court of directors are democratically accountable. That is why we tabled this simple new clause, stating:
“In making nominations to the Court of Directors of the Bank of England, the Chancellor of the Exchequer must have regard to the importance of ensuring a balanced representation from the nations and regions of the United Kingdom.”
That new clause was carefully written. There is no suggestion that the court should be a federal body. Our suggestion is that in the balance of its make-up, there should be representation for the whole nation. Rightly or wrongly—much more rightly than wrongly in my opinion—there is a perception that the City of London and its major banks and financial institutions have historically had too big a sway over the court and the Bank.
The hon. Gentleman is making a powerful point. Does he agree that it must be significant that the economic performance of the peripheral areas of these nations is also peripheral?
I could not agree more. In fact, if we look at the long history of the regions and nations of the United Kingdom—Scotland, Wales, the north of England and Northern Ireland—we see that they have suffered a deflationary cycle since the second world war, because from 1945 onwards, by and large, interest rates were set to control inflation that was triggered by the City of London and over-lending by the City of London. As a result, the north-south divide became a deflationary line, with the nations of the north, and the regions of the north of England, suffering high interest rates. Although those rates were not germane to their economic problems, for most of the post-war period UK interest rates have, on average, been set at a higher level than those in the rest of Europe, simply in order to control and curb over-lending by the City of London, which has resulted in deflation in the industrial regions.
I consider that that might have been mitigated to some extent if there had been broader representation of the nations and their industries on the leading bodies of the Bank of England, and, although I know that the Executive will challenge my proposal, I think we need to move in that direction. I remind Members that the court of directors is not the institution of the Bank that actually makes monetary or fiscal policy. It has oversight over the whole of the Bank’s operations, in the sense of giving value for money, and, above all, ensuring that there is no group-think between the different committees that make operational policy. I therefore think that, at that level, we need to begin the process. At that level, we need wider representation on the court.
Surprisingly—and I raised this in Committee—such representation already exists to a small degree. Since world war 2, traditionally, there has always been a trade union representative on the court of the Bank of England, and there still is, to this day. Even the Government—indeed, successive Governments—have recognised that there can be wider representation on the court, including wider social representation. However, when I asked Ministers whether, if they were rejecting the notion of a court with a wider representation of the economy and the community, they were going to remove trade union representation, there was a deafening silence, and that is why I am putting the question again today. Those who accept the principle that there should be trade union representation—and there should—ought to widen that principle, and that is what I am asking for now.
We tabled the new clause carefully in order not to suggest that the court should be federal or too detailed, with someone representing this and someone else representing that, but simply to suggest that a balance was needed. As anyone who has sat on the board of a company will know, the first thing that one must do when creating a board is ensure that there is some representation of different skills and different interests, so that the board’s members can act as a collective. My point is that the court, and to some extent, I think, the new policy committees of the Bank of England, do not act as collectives. They are in danger of adopting silo thinking, and, ultimately—because of the power that we have given to the Bank of England—they are also in danger of beginning to act with the kind of hubris that central banks begin to wield when they are given too much power. They begin to think that they know everything when they do not. We need democratic accountability in the Bank of England, and we need it not in the sense in which the Bank understands it, but in the sense in which the nation, and the nations of the UK, understand it. That is why I will press the new clause to a vote later on.
We have made some progress with the Bill. I fear that that progress has consisted mostly of discovering more about what we need to do to improve the regulatory structures of the economy, but at least more is out in the open, and the debate is more open. Where do we go next? Where we go next is towards more accountability. The Bill makes a down payment on that accountability, but it does not finally deliver it. That is where we go next.
Obviously, in the new landscape of the City, the head of the Financial Conduct Authority holds an extremely important post, and the question of who fills that post is therefore vital. I am extremely pleased about the change that was agreed this afternoon and announced by the Minister at the Dispatch Box. It opens up the process, it gives the Treasury Committee a proper role, and it will, we hope, reinforce the independence of the person concerned.
Another person with considerable independence is, of course, the Comptroller and Auditor General. I am pleased, too, that we have moved away from the idea that the court should decide which part of the Bank’s homework the Comptroller and Auditor General should be allowed to mark. There is clearly a parallel with the CAG’s role in respect of the BBC. On Second Reading, we asked Treasury Ministers to publish the memorandum of understanding. They have now published it, and it is an extremely useful document, which sets out, in advance, an agreed framework for the CAG’s remit. That will prevent ad hockery, and will also prevent both the reality and the possible perception of political interference, or inappropriate avoidance of scrutiny of certain areas of the Bank’s work.
New clause 13, which stands in my name, would make the Bank of England subject to the Freedom of Information Act 2000. It seems to me that, as the Bank is a public authority which is fulfilling public policy purposes, the case for covering it does not really need to be made; it is the case against its being covered that needs to be made. The Minister made some important points about why she was not minded to accept the new clause, and I want to respond to what she said. She singled out three areas in particular: monetary policy, financial operations, and private banking.
I am not entirely sure of all the details of the 2000 Act, but we all know that local authorities are FOI-able. Equally, we all know that when we submit freedom of information requests to local authorities, we are not able to see the personal reports on individual members of staff in those authorities. The Act does not give access to that kind of personal information, and I should have thought that the same approach would exempt the private banking work of the Bank of England.
As for monetary policy and financial operations, I do not believe that my new clause would run into those parts of the Bank’s work, because they would still be protected by section 29(1) of the Act. That section states:
“Information is exempt information if its disclosure under this Act would, or would be likely to, prejudice…the economic interests of the United Kingdom or any part of the United Kingdom, or…the financial interests of any administration in the United Kingdom, as defined”,
blah blah blah. I should have thought that as long as we were not amending section 29, we would be able to protect the areas about which the Minister was particularly concerned.
I was alerted to this matter by a letter from the Governor, which the Minister herself waved at us in the Chamber last June, about the sale of shares in the Royal Bank of Scotland. I am sure that the Minister remembers the occasion well. In his letter, the Governor said that
“it is in the public interest for the government to begin now to return RBS to private ownership”.
Writing that letter was not part of the Governor’s role on monetary policy, financial policy or prudential policy; it was an intervention in Government policy at the Chancellor’s request on the issue of a share sale.
When the Governor appeared before the Treasury Committee, I asked him whether he would share the analysis that underlay the letter that he had written. He refused point blank to do so. I am not going to read out the full exchange that I had with the Governor on that occasion, because I went into the matter in detail on Second Reading and it has now been placed on the record twice. However, I really feel that in refusing to provide that underlying analysis, the Governor is evading public scrutiny of what is a perfectly proper matter for the public to understand.
The Governor also said in his letter that
“a phased return of RBS to private ownership would promote financial stability, a more competitive banking sector, and the interests of the wider economy.”
In fact, none of that is true. It will not promote a more competitive banking sector. We are hoping that the Comptroller and Auditor General will, in his separate audit of the RBS share sale, secure that analysis. However, there should be a more straightforward way of dealing with this. The share sale is a particular issue and the Comptroller and Auditor General always looks into share sales, so we might get at the truth on this one occasion, but I am sure that there will be other similar loopholes.
The topicality of seeing this analysis was further underlined last week by the interview in the Financial Times given by Sir Nicholas Macpherson on the occasion of his retirement from the Treasury, in which he described the sale of more RBS shares as “tricky”. He went on to say that there was a judgment to be made over whether to sell further shares below the 2008 purchase price. These are not straightforward matters; they do not fall within the normal remit of the Bank of England and they are of public policy significance. They are but one example of why it is appropriate for the Bank of England to be subject to the Freedom of Information Act.