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8 Nov 2010 : Column 85

The Prime Minister will be attending the G20 summit in Seoul this week. Looking back at the G20 summit in April 2009, I believe that we as a country can be proud that we hosted that summit, and that it resulted in a package of measures that had a major effect on the way in which the financial services sector operates. Lord Turner introduced proposals on remuneration in the industry, which were tabled to all the G20 countries. Many of those proposals were adopted. The tax havens that had been operating around the world were clamped down on, and I believe that the banking levy was first proposed in an international context at that summit. Will the Minister tell us what leadership we can expect from the Prime Minister at Seoul this week? What measures will he argue for, and what can we expect to come out of that G20 summit that will make the financial services sector cease the reckless behaviour that led to the global financial crisis and, above all, contribute to paying down the deficit, on which the Chancellor is so fixated?

Nic Dakin (Scunthorpe) (Lab): My right hon. and hon. Friends have asked a number of questions that deserve detailed answers. The new clause calls for a review of the total level of taxation on the banks and the financial services sector before the setting of the 2011 Budget, and at its heart is the simple question of accountability, transparency and openness. It must be made clear to the people of this country that the banks are paying their fair share. It was, after all, the banks that got us into this situation. At a time when this Government are taking so much away from honest, working people-particularly those with families-it is crucial to demonstrate that we are all in this together and that the banks are paying their fair share.

People are facing an increase in VAT, students are facing a trebling of tuition fees, the education maintenance allowance is being taken away, and child benefit is being capped, frozen and even taken away from many people. With all those massive cuts in public spending, it is crucial that we should know for certain that the banks are paying their fair share. That is all that the new clause endeavours to achieve. We want to make it clear that the banks are not continuing with their present bonus culture, and that they are making a fair contribution to the country. After all, it was the taxpayers who delved into their pockets to keep the banks afloat. This is a simple proposal, simply put, about openness, transparency and accountability, and I can see no good reason not to support it. It would give the people of this country great confidence in the Government if they were to accept this proposal tonight.

Justine Greening: The new clause relates to the taxation of the banking and financial services industry, and proposes that the Treasury publish a report before the 2011 Budget examining the level of taxation on those sectors. Before I discuss the new clause directly, I think it would be helpful to set out some of the background and context relating to the Government's approach to taxation of the banking sector. The Chancellor set out clearly in the recent spending review the Government's objective in taxing the banking industry. We inherited the largest peacetime deficit in UK history, and, during these difficult times it is only right that steps are taken to ensure that the banks pay a full and fair contribution.


8 Nov 2010 : Column 86

I listened with interest to Opposition Members, who appear to have a very blinkered perspective of regulatory issues. They skimmed over their own Government's part in the regulatory failures that led to the banking sector crisis. It is worth going back to some comments made by the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). I know he is now making speeches in the House again, but it might have been helpful if he had participated in this debate, given his own involvement in these matters. When opening Lehman Brothers' new European headquarters in 2004, he said:

He also said that Lehman Brothers

The last Government clearly had a huge role to play in that the regulatory system they brought in during their term in power absolutely failed the British public.

Several hon. Members rose -

Justine Greening: I will give way. I see that Labour Members have now perked up from when they were skimming over their past, as they were so clearly intent on doing. It is more difficult for them, is it not, to hear the failures of their Government being set out so clearly? Let us not forget that the last Prime Minister, back in 2007, described this as a golden age. He obviously felt that the regulatory system he had put in place was a great one, but that was subsequently proved not to be the case.

Mr Umunna: Does the Minister not accept that there was a move towards a light-touch regulatory model across the entire political system? I am well aware of this because I used to work in the industry myself, and I do not recall the Economic Secretary or any of her colleagues jumping up and down when the Financial Services and Markets Bill went through this House, complaining that it did not introduce stronger regulation. Secondly, did she, like me, hear the comments of the Governor of the Bank of England, Mervyn King, at the Treasury Committee this summer? He was asked whether, if the new regulatory model championed by the Minister had been adopted, the global financial crisis would have been averted-and he said no.

Justine Greening: If the hon. Gentleman checked the Hansard of our debates on the original tripartite regulatory system, he would see that we did raise concerns about the nature of that system. We were told that our warnings were wrong. It is not acceptable for Labour Members simply to wash their hands of the regulatory system that they now clearly feel absolutely failed.

In fact, we have to respond to the regulatory failures of the past by returning the role of supervising the banks to the body charged with the overall monitoring of the economy-the Bank of England. That is why we have also set up the Independent Commission on Banking to advise on the reforms necessary to ensure that we are better protected against another banking meltdown in the future.


8 Nov 2010 : Column 87

Stewart Hosie: On that point, I entirely agree with the Minister. A fundamental part of this is the new capital requirements under Basel III-some 7% higher for at-risk banks. Does she not agree, however, that a review of bank taxation, along with the Bank commission and the new Basel III regulations, would be sensible to ensure that we have the balance in the round between taxation and capitalisation, risk and regulation, and supervision both at the UK level and with respect to this rather complicated European structure?

Justine Greening: The hon. Gentleman is right that the bank levy itself needs to be viewed in the context of overall policy. He is right that it is not just about the bank levy; we have to look at it in the light of the broader changes around regulatory reform and the work of the Independent Commission on Banking. I will shortly come on to explain what that means for new clause 3.

We know that we have to tackle the regulatory failures of the past. We also know that it is right that banks make a contribution in respect of the risks they pose to the UK economy, but there is no benefit in taking action that would simply drive banks abroad. As the hon. Member for Islwyn (Chris Evans) pointed out, hundreds of thousands of jobs across the UK depend on Britain being competitive in this industry. For the financial services sector as a whole, as of June 2009, it had 1 million employees. The jobs are not just in London and the south-east, as there are nearly 100,000 people employed within the financial services industry in the north-west, while there are between 69,000 and 70,000 people employed by that industry in the east of England and about 90,000 in Scotland. Although there have been serious failures in the past, we also have to remember that many of the jobs that are part of this overall sector do not bring in high incomes, as the hon. Gentleman pointed out.

Chris Leslie: I am following the hon. Lady's logic. She is saying that we do not want to do anything that would drive the banks away-that old chestnut again-but is she seriously saying that the proposal in the new clause to have a review of the level of taxation would be enough to frighten them all offshore? Is she really saying that?

6.45 pm

Justine Greening: I am sure that the hon. Gentleman is following my comments closely. I was setting out the context for the situation in which we find ourselves. I have pointed to serious regulatory failure, which needs to be sorted out, and the fact that we have inherited a huge fiscal deficit, which also needs to be sorted out. In that context, we should recall that the previous Government had said that they would not introduce a bank levy at the national level and that they wanted international agreement before any such levy were put into place. At that time, we argued that we should get on with that, as a Government, and not necessarily wait for international agreement. The Labour Government rejected that.

In our first Budget, we decided to introduce a permanent levy on banks, which we expect to generate about £2.5 billion of revenue each year. The levy reflects the potential risks that banks pose to the UK's financial system and the wider economy, and it will ensure that banks make
8 Nov 2010 : Column 88
an appropriate contribution to deficit reduction that balances fairness with the competitiveness of the UK banking sector. It is also intended to encourage banks to move away from risky funding models that threaten the stability of the financial sector.

We were the first country in the G20 to take such action-the hon. Member for Streatham (Mr Umunna) talked about leadership, and I think this is leadership-and we have been joined by France and Germany, which made announcements on bank levies in June. Germany's plans for its bank levy have been before Parliament there, while France outlined the details of its bank levy at its budget in September. Hungary, Portugal and Austria have since also outlined plans to introduce bank levies, while Sweden has already introduced a levy. Our bank levy is a permanent one and a regular source of revenue-unlike the one-off bonus tax of the previous Administration.

Mr Umunna: What does the Minister say to the International Monetary Fund? I have already mentioned the IMF's views on the level at which this levy should be imposed. Conservative Members are fond of quoting the IMF to us time and again, yet the IMF takes the view that at least £6 billion a year can be raised from this levy. Does she agree with the IMF and, if not, why does she think it is wrong?

Justine Greening: The IMF has expressed its own views around levels of taxation. In the broader international context, which the hon. Member for Nottingham East (Chris Leslie) mentioned, there are questions about the introduction of a financial transaction tax and a financial activities tax. Unlike the hon. Gentleman's party, we were prepared to introduce a bank levy nationally, but there are also discussions taking place about international measures that might be taken.

In fact, over and above the bank levy, the Government are taking a tougher approach to tackling tax avoidance by the banks. Prior to the spending review, only four of the top 15 banks had adopted the previous Government's code of practice. We have asked Her Majesty's Revenue and Customs to work with banks to make sure they adopt and implement the code by the end of this month, thereby making the commitment to comply with both the letter and the spirit of the law, and not to engage in or promote tax avoidance.

New clause 3 provides:

We have had some sort of rationale for it, but I have to say that I see little merit in making such a report in isolation. The report itself would be no substitute for the overall strategy for improved regulation and the complementary bank levy ensuring banks make a contribution in respect of the risk they pose to the financial system and wider economy. As set out in the spending review, the Government will continue to monitor tax receipts from the banking sector to ensure that banks make a fair and growing contribution to the public finances as the economy recovers.

In addition, there are, of course, already statistics available on the amount of tax revenue derived from the financial services sector. Historical figures for corporation tax receipts paid by several broadly defined business
8 Nov 2010 : Column 89
sectors are regularly updated and published on the HMRC national statistics website. To improve predictability, it is important that the Government provide clarity on the direction of tax policy, and the vehicle through which that is best delivered is the Budget itself. The new clause would require the Government to produce a superfluous report in advance of the Budget and therefore in advance of any announcements that the Chancellor might wish to make about tax policy generally that might impact on the banking and financial services industries.

The Opposition want a report on the banking industry. What the Government want, and what we have, is a strategy to ensure that the financial services sector pays its fair share. We have been clear about what we want to achieve, not only through the bank levy but through the code of practice, and by fixing the banks' ineffective regulatory system-the system established by the last Government, who let our country down so badly. The new clause does nothing to support those aims, and I ask the hon. Member for Nottingham East to withdraw it. If he is not willing to do so, an apology to the British people for the mess of a regulatory scheme that he left behind would not go amiss.

Chris Leslie: What cheek the Minister has to start claiming, in that revisionist way, that her party was always saying that it wanted heavier regulation of the banks in the 1980s and 1990s, and that the Labour party was always advocating the lightest of light touches.

The Minister has completely failed to address the substance of the new clause. We were not even arguing for a change of policy, although I think that we may deal with that on another occasion; we were simply asking for a review of the levels of tax paid by the banks. The Minister did not address that. Nor did she address the issue of bankability. My hon. Friend the Member for Islwyn (Chris Evans) rightly distinguished between lower-paid employees in the banking sector and the high-rolling, highly paid bonus recipients who are in a league of their own.

The Government have taken no action on banker bonuses, despite all their rhetoric. As my hon. Friend the Member for Streatham (Mr Umunna) pointed out, although the Government had claimed earlier that they wanted to see the banks paying their fair share, they were quite happy to set the banking levy at a puny level. It was interesting to note that the Minister body-swerved the point about the IMF's suggestion that the levy should be higher, and I think that we should examine that methodology on another occasion.

My hon. Friend the Member for Scunthorpe (Nic Dakin) rightly observed that new clause 3 simply seeks transparency and accountability, which must be an important part of proving that we are genuinely all in it together, as the Government like to claim. The Government are going to hit the public generally, cutting services, abolishing education maintenance allowances, taxing child benefit and raising VAT; yet they are unable to do anything about the banks.

We accept that the Independent Commission on Banking is investigating the matter and that regulatory reform is needed, but why can we not have a review of the level of taxes? That is all that we are asking for. What are the Government scared of? They have not given us an answer, and I think that we should divide the House.


8 Nov 2010 : Column 90

Chris Bryant (Rhondda) (Lab): On a point of order, Mr Deputy Speaker. I have never seen you in the gym, although you may visit it regularly, but when I was there earlier this evening, the Division Bell did not ring. I do not know whether it did not ring in other parts of the estate, but I hope that it will ring on this occasion-although I am here now.

Mr Deputy Speaker (Mr Nigel Evans): Funnily enough, that is a point of order for me. It may be the first that I have taken.

I do go to the gym, although I do not go to the one to which the hon. Gentleman has referred. I thank him for giving me notice of his point of order. I have asked for someone to be in the gym in time for the next Division in order to ascertain whether the bells are working normally. The hon. Gentleman should be reassured that the matter is being investigated as we speak.

Question put, That the clause be read a Second time.

The House proceeded to a Division.

Mr Deputy Speaker: Order. It has been brought to my attention that there is a problem with the Division bells not only in the gym, but in other parts of the parliamentary estate. I am therefore giving Members a further two minutes to vote in the current Division. In the meantime, may I ask that the bells be investigated in Norman Shaw North as well as in the gym? I also advise all Members to be attentive to the monitors as well as the Division bells, because there may be more Divisions this evening.


The House having divided: Ayes 213, Noes 306.
Division No. 112]
[6.54 pm



AYES


Abbott, Ms Diane
Ainsworth, rh Mr Bob
Alexander, Heidi
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Banks, Gordon
Barron, rh Mr Kevin
Bayley, Hugh
Begg, Miss Anne
Bell, Sir Stuart
Benn, rh Hilary
Berger, Luciana
Betts, Mr Clive
Blackman-Woods, Roberta
Blears, rh Hazel
Blenkinsop, Tom
Blomfield, Paul
Bradshaw, rh Mr Ben
Brennan, Kevin
Brown, rh Mr Gordon
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Byrne, rh Mr Liam
Cairns, David
Campbell, Mr Alan
Campbell, Mr Ronnie
Chapman, Mrs Jenny
Clark, Katy
Clarke, rh Mr Tom
Coaker, Vernon
Coffey, Ann
Connarty, Michael
Cooper, Rosie
Crausby, Mr David
Creagh, Mary
Creasy, Stella
Cruddas, Jon
Cunningham, Alex
Cunningham, Mr Jim
Cunningham, Tony
Curran, Margaret
Dakin, Nic
Danczuk, Simon
Darling, rh Mr Alistair
David, Mr Wayne
Davidson, Mr Ian
Davies, Geraint
De Piero, Gloria
Denham, rh Mr John
Dobbin, Jim
Docherty, Thomas
Donaldson, rh Mr Jeffrey M.
Donohoe, Mr Brian H.
Doyle, Gemma
Dromey, Jack
Dugher, Michael
Eagle, Ms Angela
Eagle, Maria
Edwards, Jonathan
Efford, Clive

Elliott, Julie
Ellman, Mrs Louise
Engel, Natascha
Esterson, Bill
Evans, Chris
Farrelly, Paul
Field, rh Mr Frank
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Gardiner, Barry
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Goggins, rh Paul
Goodman, Helen
Greatrex, Tom
Green, Kate
Griffith, Nia
Gwynne, Andrew
Hamilton, Mr David
Hanson, rh Mr David
Healey, rh John
Hendrick, Mark
Heyes, David
Hillier, Meg
Hilling, Julie
Hodge, rh Margaret
Hodgson, Mrs Sharon
Hood, Mr Jim
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Hunt, Tristram
Illsley, Mr Eric
Irranca-Davies, Huw
James, Mrs Siân C.
Jamieson, Cathy
Johnson, Diana
Jones, Graham
Jones, Mr Kevan
Jones, Susan Elan
Joyce, Eric
Kaufman, rh Sir Gerald
Keeley, Barbara
Keen, Alan
Kendall, Liz
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lloyd, Tony
Llwyd, Mr Elfyn
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
Mahmood, Shabana
Marsden, Mr Gordon
McCabe, Steve
McCann, Mr Michael
McCarthy, Kerry
McClymont, Gregg
McDonagh, Siobhain
McFadden, rh Mr Pat
McGovern, Alison
McGovern, Jim
McGuire, rh Mrs Anne
McKechin, Ann
McKinnell, Catherine
Meacher, rh Mr Michael
Mearns, Ian
Michael, rh Alun
Miller, Andrew
Mitchell, Austin
Moon, Mrs Madeleine
Morden, Jessica
Morrice, Graeme (Livingston)
Morris, Grahame M. (Easington)
Mudie, Mr George
Munn, Meg
Murphy, rh Mr Jim
Murphy, rh Paul
Murray, Ian
Nandy, Lisa
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Osborne, Sandra
Owen, Albert
Pearce, Teresa
Perkins, Toby
Phillipson, Bridget
Qureshi, Yasmin
Raynsford, rh Mr Nick
Reeves, Rachel
Reynolds, Emma
Reynolds, Jonathan
Riordan, Mrs Linda
Robertson, Angus
Robinson, Mr Geoffrey
Rotheram, Steve
Roy, Mr Frank
Roy, Lindsay
Ruane, Chris
Ruddock, rh Joan
Sarwar, Anas
Seabeck, Alison
Sharma, Mr Virendra
Sheerman, Mr Barry
Sheridan, Jim
Shuker, Gavin
Skinner, Mr Dennis
Smith, rh Mr Andrew
Smith, Angela
Smith, Owen
Soulsby, Sir Peter
Spellar, rh Mr John
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr Gerry
Thomas, Mr Gareth
Thornberry, Emily
Timms, rh Stephen
Turner, Karl
Twigg, Derek
Twigg, Stephen
Umunna, Mr Chuka
Vaz, rh Keith
Vaz, Valerie
Watson, Mr Tom
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Williams, Hywel
Williamson, Chris
Wilson, Phil
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Wood, Mike

Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:

Stephen Pound and
Lilian Greenwood
NOES


Adams, Nigel
Afriyie, Adam
Aldous, Peter
Alexander, rh Danny
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Bagshawe, Ms Louise
Baker, Norman
Baker, Steve
Baldry, Tony
Baldwin, Harriett
Barker, Gregory
Baron, Mr John
Barwell, Gavin
Bebb, Guto
Beith, rh Sir Alan
Bellingham, Mr Henry
Benyon, Richard
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Binley, Mr Brian
Birtwistle, Gordon
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Boles, Nick
Bone, Mr Peter
Bradley, Karen
Brady, Mr Graham
Brake, Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Mr Steve
Brooke, Annette
Browne, Mr Jeremy
Bruce, Fiona
Bruce, rh Malcolm
Buckland, Mr Robert
Burley, Mr Aidan
Burns, Conor
Burns, Mr Simon
Burstow, Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cairns, Alun
Campbell, rh Sir Menzies
Carmichael, Mr Alistair
Carmichael, Neil
Carswell, Mr Douglas
Cash, Mr William
Chishti, Rehman
Clappison, Mr James
Clark, rh Greg
Coffey, Dr Thérèse
Cox, Mr Geoffrey
Crabb, Stephen
Crockart, Mike
Crouch, Tracey
Davey, Mr Edward
Davies, David T. C. (Monmouth)
Davies, Glyn
Davies, Philip
Davis, rh Mr David
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Dorrell, rh Mr Stephen
Dorries, Nadine
Doyle-Price, Jackie
Drax, Richard
Duddridge, James
Duncan Smith, rh Mr Iain
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Fallon, Michael
Farron, Tim
Featherstone, Lynne
Field, Mr Mark
Foster, Mr Don
Fox, rh Dr Liam
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Fuller, Richard
Gale, Mr Roger
Garnier, Mark
Gauke, Mr David
George, Andrew
Gilbert, Stephen
Gillan, rh Mrs Cheryl
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Grayling, rh Chris
Green, Damian
Greening, Justine
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Halfon, Robert
Hames, Duncan
Hammond, rh Mr Philip
Hammond, Stephen
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Harvey, Nick
Haselhurst, rh Sir Alan
Hayes, Mr John
Heald, Mr Oliver

Heath, Mr David
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Hendry, Charles
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Holloway, Mr Adam
Hopkins, Kris
Horwood, Martin
Howarth, Mr Gerald
Howell, John
Hughes, Simon
Hunt, rh Mr Jeremy
Huppert, Dr Julian
Hurd, Mr Nick
James, Margot
Javid, Sajid
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kennedy, rh Mr Charles
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lamb, Norman
Lancaster, Mark
Latham, Pauline
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Lefroy, Jeremy
Leigh, Mr Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Lewis, Dr Julian
Liddell-Grainger, Mr Ian
Lidington, Mr David
Lilley, rh Mr Peter
Lloyd, Stephen
Lord, Jonathan
Luff, Peter
Macleod, Mary
Main, Mrs Anne
Maude, rh Mr Francis
Maynard, Paul
McCartney, Jason
McCartney, Karl
McIntosh, Miss Anne
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, Maria
Mills, Nigel
Milton, Anne
Moore, rh Michael
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Morris, James
Mosley, Stephen
Mowat, David
Mulholland, Greg
Mundell, rh David
Munt, Tessa
Murray, Sheryll
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
O'Brien, Mr Stephen
Offord, Mr Matthew
Ollerenshaw, Eric
Ottaway, Richard
Paice, Mr James
Parish, Neil
Patel, Priti
Pawsey, Mark
Penning, Mike
Penrose, John
Percy, Andrew
Perry, Claire
Phillips, Stephen
Pickles, rh Mr Eric
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pugh, Dr John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reid, Mr Alan
Robathan, Mr Andrew
Robertson, Hugh
Rogerson, Dan
Rudd, Amber
Ruffley, Mr David
Russell, Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Shapps, rh Grant
Sharma, Alok
Shelbrooke, Alec
Simmonds, Mark
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Smith, Sir Robert
Soames, Nicholas
Soubry, Anna
Spelman, rh Mrs Caroline
Spencer, Mr Mark
Stanley, rh Sir John
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Iain
Stewart, Rory
Streeter, Mr Gary
Stunell, Andrew
Sturdy, Julian
Swales, Ian
Swayne, Mr Desmond

Swinson, Jo
Swire, Mr Hugo
Syms, Mr Robert
Tapsell, Sir Peter
Teather, Sarah
Timpson, Mr Edward
Tomlinson, Justin
Tredinnick, David
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Uppal, Paul
Vara, Mr Shailesh
Vickers, Martin
Villiers, rh Mrs Theresa
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Ward, Mr David
Watkinson, Angela
Webb, Steve
Wharton, James
Wheeler, Heather
White, Chris
Whittaker, Craig
Williams, Roger
Williams, Stephen
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wright, Jeremy
Wright, Simon
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:

Bill Wiggin and
Mark Hunter
Question accordingly negatived.
8 Nov 2010 : Column 91

8 Nov 2010 : Column 92

8 Nov 2010 : Column 93

8 Nov 2010 : Column 94

New Clause 5


Definition of 'incapacitated person'

'(1) The Taxes Management Act 1970, section 118 is amended as follows.

(2) In subsection (1), the definition of "incapacitated person" is substituted as follows:

"'incapacitated person' means any person under the age of 18 years or who, within the meaning of section 2(1) of the Mental Capacity Act 2005, lacks capacity in relation to tax or financial matters.".'.- (Chris Leslie.)

Brought up, and read the First time.

Chris Leslie: I beg to move, That the clause be read a Second time.

New clause 5 takes us into completely different territory from that of the previous debate, and it picks up on a discussion we had in Committee about the legal definition of incapacitated persons. Committee members were concerned by the outdated nature of some of our tax law, under which antiquated terminology can often still find its way into our tax regime through extracts from statutes simply being cut and pasted into today's legislation.

One such anomaly concerns a definition in the Taxes Management Act 1970, which I am told is still very much a cornerstone of our tax law. It defines an "incapacitated person" as

Those terms of reference are clearly insulting and demeaning to people who would be regarded as incapacitated. Not only is it out of date for those terms of reference to be extant in our legislation, but it is hurtful to those individuals who may suffer from incapacitation to be categorised and described in such derogatory terms. That definition derives from the 19th-century lunacy Acts and today appears grotesquely at odds with modern terminology, and this insulting state of affairs ought to have been reformed many years ago. That definition relates to section 72 of the 1970 Act, which says that an incapacitated person's tax liabilities should apply to their

as if to a non-incapacitated person.


8 Nov 2010 : Column 95

In Committee, we pressed Ministers to concede this small and surely non-controversial reform. We did not feel that it was a matter of party politicking; after all, it should not be a dividing line between the parties. The new clause is simply and straightforwardly about replacing and modernising the definition of an "incapacitated person" and aligning it with the meaning in the more modern and more appropriate Mental Capacity Act 2005, whose far more flexible and sophisticated definition is less hurtful in tone and more precise in its interpretation. It states:

That is a far more appropriate definition.

By updating the definition, we would also update provisions to encompass new arrangements relating to trusteeships. For example, the new arrangements would also modernise those of donees of powers of attorney, who would be properly included in the legal definitions, as well as those of Department for Work and Pensions appointees. I should like to thank the Chartered Institute of Taxation's low incomes tax reform group-LITRG-for highlighting the issue consistently. It has been championing this minor technical change in the law for at least seven years and has been promised on numerous occasions that, "A tax law rewrite is just around the corner", "More time is needed for consultation" and so on. I gather that it has been having discussions with officials, following our discussion in Committee. Although LITRG may have cause to trust the Minister's officials, I believe that time is running out for this change to be made. When the Minister was unable to concede on this point in Committee, I said that we would try to have this debate on the Floor of the House because of the importance and urgency of making this reform.

It is a pity that the Minister has not tabled a Government new clause on Report, but I shall wait to hear what he has to say. We did try to reflect on the points that he raised in Committee. The provision that we had tabled then did not refer specifically to children and we have rectified that by making the appropriate change for the Report stage. As far as I can see, this new clause has no revenue implications and there is no clear reason for any Member to dispute the need to modernise this terminology. There is clear evidence that people are hurt and insulted by the terminology from a bygone age. It therefore seemed sensible to put this point again on Report, and I urge the Minister to accept the new clause.

Mr Gauke: As we have heard, new clause 5 seeks to change the definition in the Taxes Management Act 1970 of an "incapacitated person". I appreciate that the purpose of the new clause is not to change the scope of the definition, but to ensure that it better reflects the modern understanding of an "incapacitated person". Members of the Committee will recall that we debated a similar proposal at the end of the Committee stage. As I explained then, a definition is required to ensure that the obligations of the 1970 Act properly fall to those acting for children or for those with mental health problems. The existing definition can be traced back to at least 1880, and I reiterate that I agree that the
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wording used, such as "lunatic" or "idiot", no longer feels appropriate, belonging as it does to the Victorian age, rather than to today's times.

7.15 pm

Before I address the wording used in this new clause, I wish to reiterate to Opposition Members that I welcome this issue having been raised and am willing to take action. That is not an empty promise: I asked my officials to explore quickly what they thought was possible with the low incomes tax reform group. We now better understand what that group wants to achieve and the complexities involved. My officials are working with LITRG and are willing to listen to it and to others about how best to achieve these objectives.

LITRG thought that it should be feasible to change the definition in the next year or two, and I am confident that the Government can work to that timetable in a carefully considered way. In contrast, I do not think that the new clause achieves its objective, nor do I think it is the most appropriate way to make this change. It, like its predecessor debated in Committee, seeks to link the 1970 Act definition of an "incapacitated person" to the Mental Capacity Act 2005.

The provision debated in Committee failed to take into account the fact that children were also included within the existing legal definition of an "incapacitated person". The revised new clause seeks to remedy that position by including

Once again, I point out that the provision remains deficient, as the definition would inadvertently include Scottish people between the ages of 16 and 18, who are not included within the current definition for most purposes of the 1970 Act. I do not think that the reclassification of that group in a way that is contrary to the position in Scotland is the intention of Labour Members.

In addition, our preliminary discussions have revealed that the reference to the 2005 Act may well create a different definition in practice. The current definition refers to a person's general mental condition, whereas this provision would depend upon an analysis of a person's capability at a specific point in time, and the implications of such a change may be significant. It would be irresponsible to make such a change without considering these potential differences thoroughly with the appropriate representative bodies.

The repeated technical difficulties demonstrated in the new clauses serve only to reinforce the point I made in Committee that such changes should not be made in haste, for fear of inadvertently moving groups of persons in or out of the definition. As hon. Members will be aware, the Treasury launched a new approach to tax policy making alongside the June Budget.

Sheila Gilmore: Earlier today I made the point, on another matter, that it may be unwise to reform in haste and repent at leisure. I am very pleased that the Minister has now decided to agree with me.

Mr Gauke: I am delighted if that is how the hon. Lady interprets my remarks, and if that pleases her, it pleases me.


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In June, we produced our paper on the making of tax policy and we believe that it is very important to adopt a deliberative and consultative approach and, wherever possible, to consult thoroughly. We wish to avoid the experience of making reactive and piecemeal policy announcements that have been insufficiently thought through and result in unexpected consequences-we saw too much of that under the previous Government. Instead, we believe that appropriate consideration should be given to changes, thus providing an opportunity for those affected to comment and have certainty about our decisions. Any change on this matter should go through that process to ensure that we can come to this House with legislation that will work as intended.

Let me be clear that I agree that the wording in the current definition is outdated and that I am committed to delivering change. As I have said, my officials have already started to work with LITRG and will work with other groups that have the expertise to ensure that we get this right. The hon. Member for Nottingham East (Chris Leslie) has alluded to the fact that LITRG is happy to work with Treasury officials and accepts the need to get this right. I believe that it will be possible to deliver change to the definition in the next couple of years along the timetable that LITRG accepts.

I ask the hon. Gentleman not to press his new clause to a vote, but I hope that he will engage with us on how to make the change behind the clause that we both agree is necessary. I am grateful to him for raising the issue in Committee and today. I agree that this should not be a matter of party political dividing lines and we will seek to address it. It has been of long-standing concern, but the Government are determined to address it, so I ask him to withdraw the clause.

Chris Leslie: I am impressed that the Minister has taken the time to encourage his officials to meet LITRG. I am pleased that he agrees about the outdated nature of some of these archaic terms: "idiot", "lunatic", "insane" and so on should not be part of our modern legislative lexicon. I am interested that yet again he manages to find a flaw in the drafting. It is almost like one of those circular nightmares: no matter what point any Opposition party makes to any Government, there is always a desire to resist by pointing out drafting and terminological problems. I think that the Minister accepts the spirit in which we have been trying to raise this issue.

I agree entirely that it is important to take whatever time is necessary to frame the definitions correctly in law, but we are not talking about designing a whole new regulatory regime for financial services or some convoluted way of taxing child benefit. We are simply talking about a minor change to modernise the terminology in tax law. I am still slightly sceptical about the argument that we need to take another couple of years to do so.

Dr Eilidh Whiteford (Banff and Buchan) (SNP): Does the hon. Gentleman agree that it is important that any proposals work for the whole of the UK and not just for one or two parts of it?

Chris Leslie: Indeed, and that is probably why on this occasion I am happy to accede to the Minister's request that Treasury officials be given more time to frame the change. However, I think that the patience of the House will be tested if we go for another seven years with these
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terms still in statute as we go through Finance Bill after Finance Bill after Finance Bill-we are going to have three, after all, this year, with another possibly coming shortly, although it is up to the Minister when that happens. I do not want to be back here tabling similar amendments. I hope that during the Minister's tenure, before he is promoted to even higher office-I accept that that is probably imminent, whenever the reshuffle might come-he will make a commitment, at least, to show that this was one reform that he was able to champion. I would be grateful for that. On that basis and in that hope, I am happy to beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Clause 4


Seafarers' earnings

Chris Leslie: I beg to move amendment 1, in page 7, line 40, leave out clause 4.

In Committee, we discussed the implications of clause 4, which I am happy to discuss again. It seeks to extend to seafarers resident in the European economic area the same 100% deduction from income tax of their earnings from employment as a seafarer wholly or partly outside the UK during an eligible period. I know that this is something about which many Members of the House will be very concerned.

At present the tax relief is available only to those seafarers who are ordinarily resident in the UK, but there are clearly seafarers resident in other EEA states yet not ordinarily resident in the UK who might also warrant the seafarers' earnings deduction. The measure is listed in the Budget Red Book as costing the Exchequer £5 million annually and we debated the technical details of the clause, such as the navigation of waters beyond the UK continental shelf, how long would be spent away from the UK and how many seafarers are involved in the concession. The Minister said that it was in the order of 16,000.

The Minister also helpfully explained that the clause was brought forward as a result of the European Commission's decision to challenge the compatibility of seafarers' earnings deductions with the UK's treaty obligations and to comply with our EU and EEA associations. It is welcome that the Conservative party is rushing to legislate to comply with these European arrangements. I know that some hon. Members-including the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne), who is sitting on the Front Bench opposite-will be more pro-European than others, but he seems to be persuading the Conservative party towards the pro-European stance. It is interesting that there is no dissent from that interpretation.

In Committee I raised in particular a specific and contemporary issue that has been a subject of some controversy: the impact on the mackerel fishing dispute between UK and Icelandic fishermen. The clause is highly relevant and might have a significant bearing on that dispute, because if enacted it would grant to the Icelandic fishermen-and the Norwegians for that matter-a set of tax relief arrangements that would be very useful to them. I asked the Minister a series of
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questions on that, but he merely asserted in his indomitable way that the clause was "not relevant" to those discussions. So, I want to try again.

Will the Minister say what discussions have taken place between the Government and the Governments of Norway and Iceland in the drafting of the provisions and in what respect they will be reciprocated for UK-resident seafarers in those countries? Has the Minister spoken with his counterparts in the Department for Environment, Food and Rural Affairs, the Scottish Executive-I know that some hon. Members will be interested to learn about that-and the FCO regarding the impact that the change might have on the sensitive negotiations between the EU, Norway and Iceland over the mackerel quota? I gather that the practice of the Icelandic fishing community unilaterally to declare a larger catch quota for valuable fish, risking the sustainability of fish stocks and disrupting previously settled agreements, has caused consternation in some quarters. Is it therefore appropriate for the Treasury to grant this tax concession to Icelandic fishermen while there is such great sensitivity?

On Friday, I understand that the Icelandic ambassador to the UK, Benedikt Jonsson, met the chief executive of the Scottish Fishermen's Federation and others to discuss the mackerel dispute at a meeting in Aberdeen organised by the Icelandic consulate. I gather that "frank views", as they are often called, were exchanged about what constitutes responsible management of that mackerel quota. Iceland continues to assert its right to catch a significantly increased quota this year outside the bounds of the international agreements. What are the UK Government doing to bring the dispute to a sensible conclusion? Would it not be wise to pause on the gifting of the seafarers' earnings deduction to the Icelandic fishing community until such time that the question over the fair fishing of mackerel stocks is resolved?

Other issues might be relevant, too. Are we, for instance, still confident that the relationships between the UK and Iceland are ensuring that our fiscal position is protected? For example, the UK ought to be getting money back from the collapse of Icesave and other Icelandic banks, but there have been recent suggestions, particularly resulting from protests in Iceland, that there might be some delay in repaying foreign creditors with the priority that is deserved. Is it sensible to be offering tax concessions to Iceland when such negotiations are going on? I understand that there are also some question marks over whether the EEA treaty arrangements necessarily require such a tax concession to be ceded to the Icelanders.

I have asked a number of questions and I wonder whether the Minister can address them. They are not necessarily at the top of people's minds in every constituency in this country, but there are some corners of the country where this is a big issue. I would be grateful for the Minister's attention to it.

Mr Gauke: As we have heard, amendment 1 seeks to remove clause 4 on the seafarers' earnings deduction from the Bill. Doing so would prevent the extension of seafarers' earnings deductions to EEA resident seafarers. By way of background, it is worth pointing out that in November 2008 the European Commission sent a pre-infraction letter on this matter. The Commission stated
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that the rules for seafarers' earnings deductions are incompatible with the EU rules because the deduction is available only to seafarers who are ordinarily resident in the United Kingdom. After due consideration of the Commission's letter, the previous Government decided to respond by enacting a change in the law. Consequently, last year they said that they would legislate to extend the rules for this deduction, enabling European economic area resident seafarers from outside the UK to claim. The previous Government committed to implementing the change from April 2011.

7.30 pm

Given the expectations that were set by the previous Government, we decided that it was better to enact the changes this year. After the election, we decided to follow the same approach as the previous Government in response to the Commission's letter, although we postponed legislating until this second Finance Bill of the Session. In July, the draft clause and explanatory notes were published along with the rest of this Bill. Only one response was received, from a professional body, and it did not raise any concerns about competition effects on UK seafarers. Other discussions with interest groups exposed no objections to the extension of the rules because it was felt that it would not have a significant impact on UK resident seafarers.

Opposition Members are concerned that making such a change will benefit Icelandic and Norwegian fishermen, who compete with UK fishermen for their catch. In particular, the hon. Member for Nottingham East (Chris Leslie) raised the matter of the so-called mackerel war. Although I understand such a position, the clause will make no significant difference. The Government estimate that a maximum of 1,500 EEA resident seafarers will become entitled to claim seafarers' earnings deduction, at a potential cost of £5 million per annum. The numbers and amounts involved are relatively low because few non-UK resident seafarers pay income tax on their earnings in the United Kingdom. Non-resident seafarers are liable to UK tax on earnings in UK waters-that is within 12 miles of the shore-or if they visit a UK port. In reality, that means that they would probably be working in the UK or for UK businesses. Even if there were a liability to UK tax for such individuals, most double taxation agreements would give primary taxing rights to the home state, making the application of the deduction redundant.

In practice, we estimate that about 4,000 non-UK resident seafarers pay income tax in the UK. As many of those are not EEA residents, we estimate that the extension of the entitlement to EEA residents would enable a maximum of 1,500 non-resident seafarers to claim the deduction.

The Icelandic mackerel fishermen are most unlikely to be subject to United Kingdom taxation. First, many fishermen are self-employed, and so outside any entitlement to the deduction. Secondly, Icelandic fishermen would be entitled to claim the deduction only if they were employed to fish in UK waters or if they visited a UK port. It is unlikely that there are many Icelandic fishing vessels operating within 12 miles of the UK or landing their catch at our ports. Even if they did so, such individuals would still be subject to the double taxation agreement, which in almost all cases gives Iceland primary taxing rights over its resident seafarers.


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This Government take the mackerel fishing issue extremely seriously. The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon) has been engaging with his counterparts on this matter across Europe. We are disappointed that no agreement has yet been reached and we find the continuing action by Iceland unacceptable. We will consider further action in due course.

The hon. Member for Nottingham East seems to have forgotten why this measure is being put in place and what the consequences are of not enacting it. If we passed amendment 1, the Commission would certainly take a significant and immediate interest, which could result in substantial uncertainty for UK seafarers. If we lose before the European Court of Justice, the result could be a fine from the European Commission of at least €11 million, and we would still have to enact the measure. To reject the amendment will mean an estimated cost of no more than £5 million per annum, with few -if any-consequences for the UK fishing fleet. I therefore ask the hon. Gentleman to withdraw his amendment.

Chris Leslie: I am grateful to the Minister for his comments, which, given that he addressed some of the issues pertinent to the mackerel wars question in respect of arrangements for Icelandic fishermen-that was probably the biggest reason for the question mark over this clause-were certainly more thorough than those we had in Committee. He mentioned a couple of reasons why he did not feel that the measure would bite on that issue-if I may use that fishing pun. I am glad that he did not repeat his red herring claim against the amendment. The self-employment point was a fair one. He also said that the measure would hit only if there was a claim when Icelandic fishermen were landing their catches at UK ports and so forth. In particular, he talked about the European Court of Justice situation and the requirement that would fall on the UK and the consequences that would come from that. I know how much Members on the Government Benches are keen to abide by their European obligations. Given those strictures, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

7.36 pm

Mr Gauke: I beg to move, That the Bill be now read the Third time.

We find ourselves in the unusual situation of having considered three Finance Bills this year. The first, as usual, was introduced following the May Budget, but was curtailed by the election. The second allowed this Government to enact measures that were deemed necessary to address the financial mess that was left to us. This third Bill has allowed this Government to take forward those technical and uncontroversial measures set out by the previous Administration. The nature and timing of this third Bill are a product of both the economic position and our commitment to improving future Finance Bills.

The enormity of the challenges facing Britain was one of the catalysts for a brief, focused Finance Bill in the summer. As my right Hon. Friend the Prime Minister set out, private sector-led growth is at the centre of the changes that this Government need to make to avoid the mistakes of the previous Government. The first part
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of providing that must be macro-economic stability, which is why it was necessary to enact in the summer those policies that would quickly tackle Labour's deficit. Doing so restored the confidence in the economy of both the financial markets and the British people. Stable public finances are the only way in which to prevent higher interest rates, rising inflation and more taxes.

Alongside such policies was the need to show that Britain is, once again, open for business. We have taken such steps and committed ourselves to more. In so doing, we have been opposed by Members on the Opposition Benches, particularly on our measures for growth. I am sure that many hon. Members will remember the hon. Member for Wallasey (Ms Eagle) invoking Lord Kitchener on Second Reading. I am more drawn to the words of Churchill, who contended that a people taxing themselves into prosperity is like a man standing in a bucket and trying to lift himself by the handle. That is why we are reducing the rates of corporation tax for large and small companies and removing nearly 1 million people from tax, and why we did not go ahead with Labour's jobs tax.

It was because of the need to take such steps in the summer that a short, focused Bill was required, which meant that an additional Bill was needed in the autumn. However, this Bill has also been an opportunity for the Government to demonstrate how we will improve tax policy making. On 12 July, the clauses in the Bill were published in draft for consultation. More than 60 comments were received and resulted in changes to nine clauses. The publication of the clauses in draft followed the commitments set out in the June Budget. The changes will ensure greater predictability, fewer changes and better consultation. We have already made a good start on the first of those. Last week, my right hon. Friend the Chancellor announced the date of the Budget, four and a half months ahead of time. This evening, I can confirm that we will be publishing the majority of the clauses for the Finance Bill 2011 later this year. We will set out the draft clauses on 9 December.

I have discussed the foundations of the Bill and the process that we will undertake for future Bills, but we should not forget the important measures before us. Clauses 1, 2, 3 and 16 will provide for fairer tax treatment for carers. Clauses 5 and 6 will assure the future of venture capital schemes, which have supported more than £10 billion of investment. The support to real estate investment trusts under clause 10 will allow them to meet their regulatory requirements more easily. The changes in clauses 19 to 22 ensure EU compliance on several technical but necessary issues. I shall not press this point, but I remind hon. Members of the important action that we are taking against long cigarettes and the tax avoidance connected with them.

The Bill is a result of necessary action that was taken earlier in the year and of the greater scrutiny and consultation to which all future Bills will be subjected. Although it is not packed with headline measures, it will help many groups. It assists businesses and individuals, supports investment and benefits those in need. The Bill will make a real difference in the real world and I commend it to the House.

7.41 pm

Mr Hanson: The Labour party predominantly supports the Bill. It had its genesis under the previous Labour Government when my right hon. Friend the Member
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for Edinburgh South West (Mr Darling) brought forward many of its measures. We give the Bill a warm reception, although we scrutinised it in Committee, as was our duty, as the Opposition.

I was going to give the Minister a much warmer welcome than I might now do, but he raised several points that strayed beyond the Bill, even though they are important for the House to consider. There is a clear difference between the Government and the Opposition on public spending and taxation regimes over the next few years. Even during today's consideration of the Bill, we saw the clear differences between us on child benefit, taxation on banks and video game tax relief. We will return to such important issues in due course. They will frame the economic debate between the Government and the Opposition over the next 12 to 18 months, and we will watch closely how the backdrop to the Bill meets the needs of my constituents and those of my right hon. and hon. Friends in relation to employment, prosperity, taxation and the economic health of the United Kingdom, because we remain of the view that the Government are cutting too far, too fast, and that they will therefore damage the economy. However, let us put those matters to one side because they are not in the Bill.

As I said, my right hon. Friend the Member for Edinburgh South West developed many of the policies in the Bill. The uncontroversial nature of the Bill is attested by the fact that there were only two Divisions in Committee. One was on the sittings motion, following a disagreement about a clash of business in Committee and on the Floor of the House-as a matter of good practice, we should try to avoid that in future. The other Division was on a matter of more significant principle: the definition of "incapacitated person". We had a rerun of that debate today.

We support many of the detailed provisions in this technical Bill. It includes important measures on foster care relief and relief for adopters. It contains provisions to simplify value added tax and to address film tax credit. As the Minister said, it includes important measures to tackle the smuggling of cigarettes through its consideration of taxation regimes for long cigarettes. We support those measures, which were the subject of discussion in Committee. The Bill puts in place important and welcome green allowances as a kick-start for zero-emission goods vehicles. When we discussed those measures in Committee, there was broad support for their implementation.

The Bill gives welcome support for asbestos-related trusts through taxation measures, including on capital gains tax. After we tested the Minister on those measures, we reached the conclusion that they were worthy of general support. We also support the clarification in the Bill on landfill tax.

Try as I might in Committee, I could not find much in the Bill with which to disagree. However, our sittings allowed us to tease out the Government's thinking on a range of issues and to reflect the concerns of a number of outside bodies about the implementation of policy, rather than the policy itself.

As hon. Members can see, Labour Members are so content with the Bill-and have such trust and faith in my ability-that they have left it to me to bring our proceedings on it to a close. Although we welcome the
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Bill, we will consider real differences between us regarding the economy of the United Kingdom on future days, and I look forward to those debates in due course.

7.46 pm

Charlie Elphicke: As a member of the new intake, it was a privilege to serve on the Government side of the Pubic Bill Committee. I congratulate Ministers on ably putting forward the Government's case in Committee.

This important Bill is one of the three key pieces of the Government's programme for the finances of the country-the first was the emergency Budget and the second was the comprehensive spending review. It forms part of the way in which we will start righting the finances of the nation. Only today we heard a lot of deficit denial from Labour Members, yet the nation needs its finances sorted out. We in Dover are trying to help to do that, in our small way, through the prospective sale of our port. We say, "Don't wait two years to flog it off overseas like Cadbury; let's get on and do it now, with a community mutual purchasing the port, to ensure that the Government get their money by the end of the financial year." Understandably, the harbour board is not pleased about that. Under its plans, it hopes to get millions for management, but I want millions for the people of Dover and the betterment of the community, just as the Government, through the Bill, seek the betterment of the nation as a whole.

Our finances are in a bad state. We have a structural deficit of £109 billion a year. By the end of the Parliament, even after we have reined in the deficit, our debt will have increased by £292 billion, and that is before we get on to asking how we pay down the national debt. The key message of the Bill, the Budget and the comprehensive spending review is that we must stop debts mounting before we can pay down the mortgage. We must get the finances of the nation back under proper control and on a level keel.

Just as I was privileged to be a member of the Public Bill Committee, I am privileged to support the Bill, and I congratulate Ministers on their excellent work.

7.48 pm

Penny Mordaunt (Portsmouth North) (Con): I wish to start by briefly mentioning the public consultation on the Bill. During our discussions about the Bill and the comprehensive spending review, much was said about the previous Government's mismanagement of the economy and the behaviours that led them to spend £5 for every £4 that they brought in, but the systems that they put in place did not help either. The Minister has referred to the failure of regulation, but the previous Government's other practices-the prime example is their failure to hold a comprehensive spending review-hindered public and parliamentary scrutiny of their ability to manage the economy. That enabled a bad situation to escalate, with a scandalous overspend, as well as allowing them to adopt the shocking scorched earth policy in their death throes with which we are all familiar.

I therefore welcome any move towards more transparency and public consultation. We have heard that Departments will publish business plans, and we were given reassurances in the summer that the clear line of sight project would allow us to see not just what Departments were spending,
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but what they were raising. In addition, consultation on Finance Bills is an extremely good innovation in the interests of quality and transparent Government. I hope that in future consultations, a broad audience beyond the usual tax practitioners will let their views be known to the Treasury. That will help to hold Governments to account, and it will certainly give us something interesting to talk about in Committee.

With reference to the Bill, I welcome the amendment to collection procedures for income tax for individuals and the harmonisation of administration regimes for different taxes, which is a further advance towards simplification and transparency. I have received assurances on the issues that I raised on clauses 26 and 27 about the failure to make returns and late payment. I sought assurances that those measures would not overburden taxpayers or impose disproportionate penalties.

I applaud first-year allowances for zero-emission goods vehicles, a genuine incentive for logistics firms to pursue a green agenda, and a sign of the Government's determination to reward green behaviour. In Committee, there was some discussion about what constituted a vehicle, which at the time I thought might be rather a waste of time, but given that earlier today, at Defence questions, an hon. Member managed to ask a question about aircraft carriers under the topic of vehicles, perhaps the discussion in Committee was not a waste of time at all.

The clause that will be of most interest to my constituents is clause 31, because many people in Portsmouth North are suffering from asbestos-related illnesses. The clause will facilitate compensation payments and is a proper response to the tax liability to which many well intentioned trusts have found themselves exposed. Many of our constituents will suffer from asbestos-related industrial illnesses. The long period from exposure to presentation of symptoms, as well as lack of awareness, means that we will see new cases for decades to come.

Currently, the trusts established to pay compensation to asbestos illness sufferers can be liable for inheritance tax, capital gains tax and income tax on their assets. Clause 31 will introduce a retrospective exemption for trusts established between 6 April 2006 and 23 March this year. Ultimately, that means more money going to victims, and it will be warmly welcomed in Portsmouth. I was reassured to learn during the debate in Committee that other trusts that do not fall into that time frame will not miss out. No trusts that might be affected have been set up since 23 March, and in future the problem can be avoided if new trusts fully consult the Charity Commission and HMRC. This is an extremely important clause in an important Bill, and I urge all hon. Members to support it.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Business without Debate

delegated legislation

Mr Deputy Speaker (Mr Lindsay Hoyle): With the leave of the House, we shall take motions 3 to 12 together.


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


Health Care and Associated Professions


European Union


Value Added Tax


Taxes


Capital Gains Tax

Political and Constitutional Reform

Ordered,

FINANCE AND SERVICES

Ordered,

Mr Deputy Speaker: Nominations closed at 5 pm today for the by-election for the two Labour members of the Backbench Business Committee. Two nominations were received. A ballot will therefore not be held tomorrow. I congratulate Ian Mearns and Mr George Mudie on their election as members of the said Committee.


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Reconstructing Gaza

Motion made, and Question proposed, That this House do now adjourn. -(Jeremy Wright.)

7.54 pm

Dr Julian Huppert (Cambridge) (LD): Thank you, Mr Deputy Speaker, for granting me this debate, and particularly for granting it to me so early in the evening. Before I start, I refer Members to my entry in the register and the fact that I was funded by Sir Joseph Houghton trust for a recent three-day visit to Gaza. I was joined by my hon. Friends the Members for Bradford East (Mr Ward) and for Gloucester (Richard Graham), whom I hope to see shortly in their places. We were also joined by Lord Warner. I would like to thank Graham Bambrough and Ed Parsons from the Council for Arab-British Understanding, and all those whom we met in Gaza.

It is entirely as a result of that trip that I requested this debate, to feed back in a public venue the thoughts and reflections that I and my colleagues had while we were there. I should say that I also had other private meetings ahead of this debate, with the Minister and with the deputy Israeli ambassador, Mr Roth-Snir, for which I thank them both.

It is worth noting that our delegation was not allowed to cross between Gaza and Israel, and as a result it was, sadly, not possible to talk to people on both sides of the blockade, which we would very much have liked to do. May I, through the Minister, suggest to Israel that its interests may be better served by facilitating people to visit it, as well as Gaza?

My purpose in this debate is not to explore the history of the conflict, which has been done extensively elsewhere, and which, I think, does not do any participant proud. Sadly, discussions of the past were all too prevalent in our visit, with discussions going back as far as 1286. Instead, I want to focus on the present and on the future. But first, I believe that we do have shared goals that we all wish to see. Israel has a clear right to exist, and for its citizens to live in peace and security. The Palestinians have a clear right to have a fully potent state, with self-determination and autonomy.

Currently, Palestine does not have a truly functioning state or security, and Israel is concerned that it does not have the safety that it needs. Unfortunately, despite the ever ongoing peace talks, I fear that both sides are headed away from those goals.

One cycle of recent events began when Hamas won the elections in both Gaza and the west bank, under the banner, "Reform and Change". Although I am no supporter of Hamas, it was poorly served by the west, which told it that it could stand in those elections only if it agreed to change its name and its platform. It did so and, in what seem to have been legitimate elections, won but was not recognised either in its own right or as part of a joint Government with Fatah. We need to learn the lessons, and consider more carefully how to respond when people whom we do not like win elections.

Kerry McCarthy (Bristol East) (Lab): I was out in the west bank as an election observer during the very elections that the hon. Gentleman has mentioned. He said that they were seen to be fair and impartial. It goes a little further than that, in that although people from
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the Carter and EU delegations and the British MPs who visited found minor things wrong with the way in which the elections were conducted, generally speaking there was an incredible turnout and there was very little on which we could challenge the elections.

Dr Huppert: I thank the hon. Lady for commenting. It is great to have the vision of somebody who was there and saw what happened. Whatever we think of the election result, Hamas clearly won it.

That led to the situation that we see now-a Fatah takeover in the west bank, and a Hamas takeover in Gaza, and to the events with which we are all too familiar: the rockets fired into Israel; Operation Cast Lead, with Israel killing 1,300 Palestinians, including 352 children; brutal repression of Hamas by Fatah and of Fatah by Hamas; the kidnapping of Gilad Shalit; the illegal blockade and siege of Gaza by Israel and Egypt; and the assault on the flotilla bringing aid to Gaza.

In our visit to Gaza, we saw a population who felt under siege, trapped inside their own small strip of land, and overcrowded-an intelligent, peaceful population, desperate for education and opportunity.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Can the hon. Gentleman say a little more about what the young people told him and what message they sent about what they want us to do to ensure that they are assisted with their education?

Dr Huppert: I thank the hon. Lady for intervening on that issue, and I shall come on to develop some of those points.

I was struck by the tolerance. We attended a human rights lesson at one of the United Nations Relief and Works Agency-run schools, where the pupils were asked about tolerance. One of the questions was, "How should you respond to people who are not tolerant of you?" and I thought that the response from one young lady was fantastic. She said, "You should be tolerant of them to show them what they ought to be doing," and a lot of that is taking place, certainly in the UN schools. The message was, "We should be acting and listening. People should pay attention and help."

We did not see a huge humanitarian crisis while we were in Gaza, but that is largely down to the excellent work of UNRWA, which has been in place, providing housing, food and education since 1949, and its excellent director, John Ging, who has been in place for a rather shorter period. In that short time, however, he has already had to witness his own UN compound being shelled by Israel.

UNRWA does amazing work, and I think that I speak for all of us who went on the visit when I say that we were very impressed by the range and quality of provision, from housing for refugees to schooling for their children, from women's centres to summer camps. It was clear as we drove around in UNRWA vehicles that its work is well supported by the general public, with children cheering the cars as we drove by, but its ability to play that critical role is under threat.

Although the blockade around Gaza has been lifted somewhat, there are still great concerns, because the construction equipment that should be able to enter Gaza legitimately comes under a lot of scrutiny and is
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often not allowed in. The crossing at Sofa, which is intended for construction materials, has been closed since 2008, and, although some material is allowed in at other crossings, it is fairly minimal and unreliable. We were told of UNRWA-led housing schemes, which aim to deal with housing shortages and to replace refugee homes that have stood for too long and buildings that were destroyed or damaged during Operation Cast Lead. Those schemes are funded by the international community, including the European Union, but they either cannot go ahead or they go ahead very slowly, because Israel will not allow in the cement and steel bars to build them.

We heard of a crisis in UNRWA-led education, which is far more liberal than that in the Hamas-controlled Palestinian Authority schools and even includes a course on the holocaust. However, despite the fact that most UNRWA schools are double-shifted, with separate classes in the morning and the afternoon, there are about 40,000 refugee children who should be educated by UNRWA but are not, because of a lack of buildings. The money for eight much-needed new schools and two extensions has been obtained, the plans have been prepared and the contracts have been let, but the materials struggle to get in. While we were there, of the 48 trucks bringing in materials for the schools, 47 were turned back for no clear reason.

I raised the matter in International Development questions on 13 October, and the Minister of State, Department for International Development, agreed:

I hope that he and the question have had some effect, because on Friday I heard from the Israeli embassy that approval had been granted for the eight schools, the two extensions and for two clinic centres, and that building materials will be allowed into Gaza in accordance with the building work.

Richard Graham (Gloucester) (Con): My hon. Friend speaks eloquently about our visit, and I agree with all the points he has made. Does he agree that the slowness in building those schools, which Israel has already approved from a list of 13 projects, is partly due to the fact that the crossing in Karni is not properly open? Of the 404 trucks for which UNRWA requested permission to enter Gaza, only 70 have so far done so. Does he agree that that is a crucial issue, and one on which we would be grateful for the help of the Minister here tonight?

Dr Huppert: Indeed, and I thank my hon. Friend for going on the visit. It was a great pleasure to share many experiences while we were there. He is absolutely right. One can look at different time scales, and his figures date back to 3 October, if I recognise them correctly, but in general UNRWA says that only about 1.7% of the material that it requires is allowed in. Indeed, as he says, the Karni crossing is open only two days a week. It could be open six days a week. The Sofa crossing could be open, and we could allow for the transfer of construction materials at Kerem Shalom. I am delighted, however, that we seem to be making progress on those schools, because the materials for them were our No. 1 priority after the visit.


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Kerry McCarthy: It seems entirely counter-productive not to allow through those construction materials, when, as the hon. Gentleman says, the UNRWA schools are far more moderate in their teachings than the Hamas-led schools. I appreciate that he did not have a chance to visit Israel and hold meetings there, but did he receive any feedback on why there are delays, and why there is no real push or zeal on the part of the Israeli authorities to get those schools built?

Dr Huppert: That is a fascinating question. I thank the hon. Lady for raising it, and in a moment I shall refer to what I have heard about the situation.

I am delighted about the schools, but we should be cautious. Approvals have been given in the past and then withdrawn, and allowing such basic building materials in should be a standard right, not a long drawn-out victory, but I thank the embassy for its information and urge the Minister to monitor carefully the progress on those projects, and to make the strongest protests possible if the flow of materials for those projects is curtailed. I hope he will agree to that.

On the question the hon. Lady asked, the argument used by Israel for not allowing construction materials in for these and other projects is one of security. The argument is that such materials-and there is a relatively long banned list, although it is better than it used to be-could be used by Hamas for military purposes. That argument makes sense superficially, and Israel does of course have a legitimate reason for wanting to control materials that could be used to make rockets, but it falls apart on closer examination.

It is well known that there are hundreds of tunnels under the border with Egypt which are used for smuggling. At the peak of the blockade, there were 1,200, including some large enough to drive a car through. We went into one-not the whole way, I hasten to add-and they are impressively constructed. At its peak, we were told, the value of the tunnel economy was between $500 million and $700 million a year, although the relaxation of the blockade on food and similar consumer goods has reduced activity significantly. The taxes that Hamas levies on imports through the tunnels provide a significant income to that organisation, helping to fund its activities and to buy up land and businesses throughout Gaza. However, those tunnels provide a regular supply of building materials, and we saw trucks being loaded with large amounts of cement and steel bars, along with signs throughout Gaza of construction works.

We found it ironic and deeply concerning that Hamas and related private individuals can have all the materials they need to build anything, from apartment blocks to bunkers, while the only effective constraints appear to be on the UN, non-governmental organisations and legitimate businessmen. That is surely counter-productive to Israel's interests. It also serves to weaken UNRWA, which risks losing support through its inability to build while others are able to, because it is of course not prepared to use illegal materials. Given the flow of materials through the tunnels, Hamas can quite easily obtain any military equipment it requires, without having to try to acquire goods via the Israeli border.

Egypt plays an important role in the area. Indeed, we entered Gaza through Egypt. The press rarely highlights the fact that Egypt maintains a blockade on people movement in Gaza, just as Israel does, largely out of
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fear of the spread of Hamas ideology. However, Egypt could easily close down the tunnels if there was a desire to do so centrally, and if local military and police commanders were prepared to act-although that might go against their financial interests.

Mr David Ward (Bradford East) (LD): Was my hon. Friend as amused as I was by the secret, hidden tunnels from which one could wave at the Egyptian border guards who were apparently unaware of their existence?

Dr Huppert: I thank my hon. Friend for intervening. It was a great pleasure to have him on the trip as well, and yes, it is absolutely absurd to imagine that Egypt does not know about the tunnels, when one can drive along and see large tents. One has to speculate on how materials suddenly, magically appear out of them. Egypt could find those tunnels on the other side of the border as well, and the trucks that go backwards and forwards for supplies could surely be found, too. There is a considerable Egyptian presence of tourist police and other organisations, as anyone who has been there will know.

Egypt is concerned about Hamas ideology, and it was fascinating to discover how broad the Hamas support base is, along with the spectrum that it covers, from reformers to hard-liners. It was also interesting to see how some of the more extremist Islamic groups there consider Hamas to be far too moderate. Those groups have been involved in many recent attacks on Israel, and Hamas has where possible put them down brutally. The feeling is often reciprocated.

While I am on the subject of tunnels and imports of materials, let me mention the lack of exports and the effect that that has on the economy. Exports have been barred since June 2007, with minimal exceptions: there have been a few shipments of strawberries and carnations. This does not make for a serious export market or a way of earning income for a country. I was fascinated to find that some entrepreneurial Gazans use the internet to do paid work, but that is very much in its infancy and cannot be a substitute for a proper export economy. I note in passing that one of our party inadvertently left a medical device behind in Gaza, and we are still struggling to find a way to get it back again. Without exports, there is no hope of the Gazan economy starting to re-function. The collapse of the economy has led to 40% unemployment rates, and 60% youth unemployment. These are not good conditions for a transition to a more peaceful solution.

There are problems with the provision of fresh water and with sanitation, and we heard about the desperate struggle to undertake rebuilding projects of those kinds as well. On physical construction, we need to think ahead. When the next Operation Cast Lead happens-we all hope that it will not happen-what steps will the Minister be taking to ensure that any future assaults by Israel would not blow up the provisions that we in the international community paid to have built? We need to ensure that we are improving Gaza, not stuck in a cycle.

Reconstruction is not just about the economy or infrastructure; mental reconstruction is also an issue. We met a fascinating gentleman called Iyad Saraj from the Gaza community mental health programme, as well
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as people from other non-governmental organisations that operate there, who made it clear how much psychological harm is being done to Gazan residents, especially children. As well as the traumatic events of Operation Cast Lead and other Israeli assaults, there is a sense of imprisonment in what the Prime Minister has called a "prison camp". There are 800,000 under-18s in a population of 1.5 million, and more than half of them have never left Gaza.

Serious construction is needed in leadership. Time and again, we heard of the desperate shortage of leadership on all sides. The ongoing feud between Hamas and Fatah exemplifies the suggestions that they are each more interested in their own interests. There is a long history between the factions, and an urgent need for them to overcome their differences. Talks facilitated by Egypt have been ongoing for two years, but are still unresolved. At the intended signing of the deal recently, there were five remaining differences, which have now been reduced to one-security. However, the talks on this issue that were supposed to start on 20 October fell apart almost immediately, and it is now urgent for these two factions to unite if they are to be able to represent the Palestinian people.

We were told on several occasions that some exciting visitors from Britain had come to visit. Gerry Adams went to Gaza to give advice to Hamas. Of course, he is in a unique position to do so, with the benefit of detailed experience of armed uprising. In his comments, as reported to us, he said that there is a time to stop fighting, and that in Northern Ireland they had waited too long, increasing the death count for no benefit; and he argued that Hamas had gone beyond that point. I hope that he is heeded. Hamas has also been in talks with the African National Congress and with bodies around the world. It is not clear, however, that there is a Palestinian leader who can be Gerry Adams, Nelson Mandela, or anyone even close; it seems that there is no one who can take the dramatic steps required for peace to be serious. Hamas will not take steps to amend its founding, and outdated, charter. There is no one who will release Gilad Shalit, who has been held by Hamas for more than four years.

However, there is leadership in other places. I would highlight the leadership in human rights provided by Jaber Wishah of the Palestinian Centre for Human Rights. He was jailed by Israel for his part in fighting against the Israelis, and he spent many years in jail, but while he was there he decided to renounce violence, and he now dedicates himself to fighting fearlessly for human rights throughout Gaza, courageously reporting infringements by Palestinian and Israeli alike against people from any background. It was a privilege to meet him; we need more people like him in Gaza and elsewhere.

Richard Graham: Does my hon. Friend agree that in an environment in which the people have been so badly let down by their leaders and their neighbours, the best role that Britain can play in this difficult situation is to encourage the moderation and education that come through UNRWA's crucial work in Gaza, and that that is where our focus should be, while encouraging the Palestinians to try to create unity among themselves?

Dr Huppert: Indeed; we have to focus on what is there. I was struck by the fact that many of the younger generation are ready for something different. We met
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people who are ready to start thinking in another way, and they need our support. I hope that that Minister can comment on whether the British Government are in any way able to provide support and training to some of the up-and-coming young people in Palestine.

Israel is not acting like a partner for peace at the moment. Although it is clear that the vast majority of Israelis do seek peace, as indeed do the vast majority of Palestinians, the leadership in Israel is undermining the search for a lasting peace. Avigdor Lieberman's recent comments are inflammatory, as is the continued construction of illegal settlements on the west bank-only today, we heard of 1,300 more. The time available for peace is running out. There are currently Israelis and Palestinians who know each other, who have worked together, or who are friends, but this is fading. The younger generations on each side increasingly know each other only as enemies, and with every passing year this becomes worse.

We were told a chilling story, with which I will conclude. One woman we saw was given permission to travel to Israel to meet a colleague, and to take her daughter with her. Her daughter met her friend, and asked what she was. She was told that she was, inter alia, an Israeli. The daughter said, "That can't be right. Israelis are soldiers who wear masks and carry guns."

If we are to avoid a perpetual state of conflict, a perpetual siege of Gaza, and a pressure cooker that will eventually explode in furious violence, then Israel and Palestine must up their games. They must find leadership to overcome their differences-to act in the common interest and the long-term interest of their citizens. We in Britain must play a role in supporting and helping them to take these difficult steps. We must be prepared to criticise firmly and actively when needed, and to encourage and assist when required. We must not take our eyes off Gaza. We must not allow the people in Gaza to bear the brunt of collective punishment and bear the burdens of a long and sorry history. The siege has to end. Senior Members of Parliament, from the Foreign Secretary down, must go there to see for themselves what is happening.

I look forward to hearing the Minister explain how he will ensure that Britain is a more active participant in the region, how Britain will ensure that UN Security Council resolution 1860 and all the others are enforced, and how Britain will ensure that it is a force for peace, for human rights, for the rule of law and for the people.

8.18 pm

Yasmin Qureshi (Bolton South East) (Lab): I congratulate the hon. Member for Cambridge (Dr Huppert) on securing this Adjournment debate. It is an extremely important debate that needs to be had.

I went to Gaza this summer with two Members of the House of Lords. It was the first time that I had been to Gaza or anywhere in the middle east region. Like the hon. Gentleman and his colleagues, we travelled to the Rafah crossing from Egypt into Gaza, and we saw some of the tunnels as well. We spoke to people from UNRWA and saw the people living in the camps. It completely shocked me and, I think, the people with me to see almost three generations of people-grandparents, children and grandchildren: people of all different ages-who had lived in one room for more than 40 or 50 years.
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That surely cannot be acceptable in the 21st century. It does not matter about the rights and wrongs of Hamas, Israel and so on. We, the international community, have an obligation.

As Members probably know, under a settlement made a long time ago, people cannot extend their camps into any other space but must keep building on the land they have. There are therefore a number of layers of homes, with people in flats of up to eight floors. On each level there may be a room with a family of 10, 12 or 15 people living in it. Some 1.5 million people live in a space of 2.5 or 3 sq km of land.

I saw many people rushing off to the beaches, yet we were told that all those beaches were unsafe and polluted. They cannot be cleaned, because pipes would need to be sent out there, and no materials for reconstruction are allowed through. The only pastime that young people seem to have is going to the beach. In this country, we would never tolerate people going en masse to severely polluted beaches that were very bad for their health. A number of people in Gaza have suffered ill health precisely because they have disregarded advice, gone to the beach and gone swimming.

We spoke to people in Gaza and saw some of the schools that they have constructed. The tragedy of Gaza is that, as the hon. Gentleman said, there is money there. It is not like some parts of the world where there is no money and no finance, and nothing can be done. The money is there, but Israel has imposed embargoes that do not allow anything to be exported or imported properly. In some respects Israel is kicking itself, because if goods were allowed to come in properly and the money could be used to rebuild schools, hospitals and other institutions, it would create an enormous number of jobs and the economy would prosper. Trade with other people would be possible.

Historically, the best way for countries to negotiate or become friendly has often been through trade. That is often the most peaceful way for countries to build better relationships. By not allowing trade and reconstruction, Israel is hurting itself. It is important that the siege is lifted and reconstruction can start. That will be better for everyone concerned.

8.22 pm

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt): I congratulate the hon. Member for Cambridge (Dr Huppert)-my hon. Friend now-on securing the debate. I appreciate not only what he said but the way in which he said it, and I thoroughly enjoyed his contribution. It was made better by the fact that he did not have to squeeze it into the usual time and could extend it. I thank him for the great courtesy of giving me the outline of his speech earlier, because, at their best, Adjournment debates are not ambushes but an opportunity for colleagues who share many opinions and concerns to inform each other, the House, yourself, Mr Deputy Speaker, and the public of what we are about.

I also thank the hon. Member for Bolton South East (Yasmin Qureshi) for her contribution. Both contributions indicated the importance of travel. Occasionally, the House has to defend itself against those who think that every time we step outside our own shores, it is for purposes connected more with us than with what we are
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about. The descriptions that both colleagues gave of their personal experiences, and those of my hon. Friends the Members for Gloucester (Richard Graham) and for Bradford East (Mr Ward), who accompanied the hon. Member for Cambridge on his visit to Gaza, were good examples of how important it sometimes is to see things on the ground, so that we can report them faithfully to the House. I see my long-standing friend, my hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes), in his place. He will know of the many times that we went to South Africa together in the difficult days of the 1980s. We hope that our personal experience of going there when many others could not made a difference to discussions in the House.

Simon Hughes (Bermondsey and Old Southwark) (LD): I am grateful to my very good friend the Minister for that kindness.

In probably every constituency in the United Kingdom, and certainly every urban one, there are people who daily worry about the future of Palestine, Israel, Gaza and the middle east. We therefore have a particular responsibility to be informed. I have been twice to the west bank and Israel, although I have not been to Gaza. The faith groups want us to do that, and Britain has a historical responsibility to be as engaged as possible-not just Government but Parliament. My hon. Friend is absolutely right that we are right to go and right to put the matter on the agenda in the House.

Alistair Burt: Yes, indeed, and the number of letters that I deal with from colleagues expressing the concerns of their constituents certainly confirms what my hon. Friend says.

I applaud the aim of the hon. Member for Cambridge, following his recent visit and that of his colleagues, to ensure that eight new UNRWA schools are built in Gaza. Like him, I welcome the recent announcement that that will be done. The situation in Gaza continues to cause the Government concern, and it was high on the Foreign Secretary's agenda during his recent visit to Israel and the occupied territories. I hope to explain in my remarks what action the Government are taking to reconstruct and stabilise Gaza, and why that matters to the middle east peace process.

To begin with, I should like to set out the scale of the reconstruction challenge in Gaza and explain briefly how we got where we are. Although we agree with the hon. Gentleman that there is no longer a humanitarian crisis as such in Gaza, the situation there remains extremely fragile and could deteriorate very quickly. Despite Israel's welcome announcement on 20 June of measures to help ease access restrictions, we remain worried about what the UN has termed the "de-development" of Gaza, with the economy, institutions and skill base steadily eroding.

Although I am not tempted to go back to 1286, it is impossible to consider the current issues in Gaza without recognising the historical context and noting the tragedy of the people of Gaza, caught up in the generations-old dispute concerning Israel and Palestine. After years of occupation, and much international criticism, Israel withdrew from Gaza in 2005, pursuing its policy of swapping land for peace and evicting a number of
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settlers and settlements. The UK, along with international partners, welcomed the withdrawal as a positive step towards meeting Israel's road map commitments. We also pushed hard for Israel to co-ordinate with the Palestinian Authority on the aftermath of withdrawal.

However, far from being freed, Gaza's population found itself the battleground for a gradually intensifying dispute between Fatah and Hamas for the control of the land. Hamas's repressive control of Gaza gradually tightened. Israeli soldier Gilad Shalit was kidnapped in 2006, kept completely incommunicado for many years and denied Red Cross access, and he is still detained. Hamas violently ousted Fatah from the Gaza strip in 2007, leading Israel to declare Gaza a "hostile entity". A regular barrage of rockets directed towards southern Israel began. Israeli Government statistics claim that in 2005 Hamas and other Palestinian groups launched about 850 rockets and mortars at Israel from Gaza. By 2008 that figure had climbed past 2,000.

Although I heard and understood the hon. Gentleman's point about responding differently to those who win elections with policies that we may not like, equally, those who wish to play a serious part in deciding the future of a people need to know that an acceptance and encouragement of violence, and a refusal to accept the existence of the state of Israel, will result only in closed doors, and rightly so.

A downward spiral of restricted access, the cutting of fuel supplies and retaliatory violence prompted aid agencies to describe the situation in Gaza in early 2008 as the worst since the 1967 Yom Kippur war. As hon. Members know full well, a shaky ceasefire was not renewed towards the end of 2008. Militants in Gaza fired barrages of rockets at Israel, and Israel responded by launching Operation Cast Lead. The conduct of both sides in that war is the subject of a number of inquiries and is not for this debate. However, the consequences for the people of Gaza have been severe.

To prevent the rebuilding of supplies of arms, Israel ensured a tight blockade of Gaza. The UK Government understand and support Israel's right to protect itself. However, to come to one of the hon. Gentleman's key points, we were, and are, less persuaded that the economic blockade that was simultaneously imposed would be of any benefit to Israel, and we share the hon. Gentleman's assessment. The fact that the economy of Gaza has been so reduced that 80% of Gaza's population is in receipt of food aid, and that unemployment is calculated at 40% for adults and 60% for youth, has not produced serious political gain for Israel or ruin for Hamas, but simply added to the misery of the people. We do indeed call on Israel to rethink that part of its policy, which would not undercut its concern on security, and might indeed, for reasons that have been outlined, assist its security. We make that case regularly to Israel, and we will continue to do so.

Following Operation Cast Lead and resolution 1860, the international community lobbied Israel hard on the need to allow access for humanitarian and reconstruction relief to Gaza. However, it was not until after the flotilla incident earlier this year that international pressure made a difference, and Israel announced on 20 June measures to ease controls on goods entering Gaza. We welcomed that announcement and the Israelis' subsequent implementation on 5 July of a move from a list of permitted items to a list of banned and dual-use items.
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The latter step resulted in an increase in the variety and volume of goods entering Gaza.

Further steps have been taken by Israel, including procedures to allow the entry of dual-use items, such as building materials, into Gaza, and I will come to that key point a little later. The Government of Israel are also taking steps to improve access for Palestinian business people into and out of Gaza. We welcome those steps and acknowledge that the volume and range of goods entering Gaza has increased in recent months.

I spoke this morning to John Ging, and I very much echo the hon. Gentleman's appreciation of his work. I had the pleasure of meeting John during the summer to help me understand the area for which I now have responsibility. He tells me that the consumer goods picture is much improved. Indeed, he estimates that there is only 20% of the tunnel traffic that there was. Once again, we share the hon. Gentleman's perception. Tunnel traffic simply became a source of revenue to Hamas and to criminals and appears to have done little damage to Hamas politically.

However, John Ging also said that the situation in terms of construction material remains dire. He cannot find what he needs to tackle the under-resourcing of school building. We share his welcome, and that of the hon. Gentleman and other colleagues, for the eight school projects, but they will not satisfy the demand of 40,000 children. Once again, I echo the hon. Gentleman's point. If UNRWA, with the support of the international community, is not seen to, and cannot, provide the development that is needed, yet Hamas and its allies can provide it because of access to materials through routes other than the official crossing, who will get the blame and who will get the support?

It is possible that it is not any political ill will that is affecting the delivery of construction material specifically orientated towards UNRWA, and UNRWA must, rightly, be held responsible should any material go missing and assist Hamas. However, John Ging informs me that there is a significant capacity issue, which hon. Members have mentioned. I understand there are sheer logistical difficulties in getting more material through the existing crossing. To that extent, therefore, reopening other crossings may assist, and we certainly intend to take that up, although we appreciate that it requires serious consideration and cost to Israel. The gain, however, may make it well worth while.

It is not just schools. The sewerage system needs serious work to stop untreated sewage entering the Mediterranean. Some 90% of mains water is undrinkable. As I indicated, 80% of the population is dependent on food aid. It is also vital, therefore, to take steps to revive Gaza's economy, including allowing exports and the movement of people. That is key to ensuring Israel's long-term security interests. The empowerment of Gaza's legitimate, non-Hamas controlled business community will act as a counterweight to radicalisation.

Kerry McCarthy: Before the Minister moves on from aid deliveries to Gaza, will he give us the Government's view on the informal conveys? Those are certainly an issue in Bristol, where people have donated. Trucks have set off from Bristol, and constituents have gone to Gaza to try to deliver food and other aid, but they have been blocked. Is that useful, or would be it better to go through the official channels?


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Alistair Burt: The hon. Lady makes an important point, on which I have received a number of letters. Our position is: we do not advise unauthorised travel to Gaza. As we know, it is still a dangerous place, and we cannot guarantee the safety of British nationals who go there. For those who want to contribute aid to Gaza, there are recognised channels to go through, which include the United Nations. We encourage that. There are ways in which people can take aid directly and use existing channels to ensure that it gets through. However, as she will be aware, there are opportunities taken where the political point of breaking the blockade appears to be almost as important as any of the humanitarian aid behind it, with sometimes tragic consequences, so we are right to be cautious. We want to ensure that those who feel strongly have an opportunity to express it, and there are legitimate ways to do so. However, we do not encourage unauthorised activity, hard though it may be for some to accept. We advise people to use the official channels to support Gaza.

Dr Huppert: We had a number of interesting conversations about the convoys while there, and one concern expressed to us was that, in many instances, the goods being provided were not the things that were desired. Medical supplies have far too much of some things, and far too little of others. They do not need more Tamiflu, and they do not need old X-ray scanners; they would rather have some spare parts. Perhaps people considering sending convoys could first find out what is wanted and needed, and then go.

Alistair Burt: That makes a lot of sense. The aid agencies actively involved are very good and know what they are doing. However, I do not want this to be misconstrued. We do not want the aid agencies to be there at all. We want the economy to be working properly, and we want Gaza to be a fully functioning part of the middle east.

Julie Hilling (Bolton West) (Lab): Mine is a question raised often by constituents. Their belief is that the UN aid is not getting through. Can the Minister reassure me on the Government's view of whether that aid is getting through to Gaza?

Alistair Burt: As I indicated earlier, we know there are capacity problems, but in the main we believe that aid gets through. I do not think it is fair for people to feel that, if they send it through a recognised source, sometimes it all just sits there. There were more issues with that in the past, but we have found, since the flotilla incident, that the Israelis are genuinely moving more goods through, and have responded to the concerns. There might be individual instances of hold-up, and where that happens all pressure should be applied, However, there is a logistical problem with the amount of aid, to which I just referred, and the hon. Lady was right to pick up on that.

I made the point about ensuring that if the business elite in Gaza are given the opportunity to develop and grow, and handle things themselves, they can be a counterweight to radicalisation. John Ging made an interesting point to me this morning. He said that the closing of the tunnels, with more goods travelling through official routes, has not met with what might have been anticipated, which was an aggressive response from militants seeking to disrupt official traffic. They have
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gone along with it, partly because, we think, the business community and others have made it clear that they want to see the official channels open and will not accept the militants and extremists getting in the way of the development of the economy. That is good news for those who believe that the economy is the key to the future of Gaza.

There are issues on the Palestinian side, however, that also need improvement. The Department for International Development is working closely with the Palestinian Authority to help increase its co-ordination of goods into Gaza and to speed up the approvals process. I would like to reiterate the call for Hamas to release Gilad Shalit, because it is clearly unacceptable that he remains in captivity after four years. The Foreign Secretary met the Shalit family during his visit to Israel and heard their experiences at first hand. I also call on Hamas to end its interference in humanitarian operations in Gaza.

I am sure that hon. Members would agree, following the remarks of the hon. Member for Cambridge, that there are sobering facts on the ground, and that reconstructing Gaza will require vast amounts of reconstruction and development support. He concluded by asking what the British Government are doing and what more we intend to do to fulfil resolution 1860 and other requirements. The United Kingdom should play, and is playing, its part, primarily through aid provided by DFID. We are providing basic services to Palestinian refugees through funding for the United Nations Relief and Works Agency. Some 70% of Gazans are refugees who rely heavily on it. Last week the Minister of State for International Development, who was on a visit to the west bank, announced an additional £8 million for UNRWA, bringing our total support for 2010 to £27 million.

Turning to the Gazan economy, we have just announced a further £2 million in new funding to support the recovery of Gaza's dormant and damaged private sector, which was laid waste after Operation Cast Lead. That will help 300 existing businesses and four start-ups to generate an additional $5 million in revenue and employ an extra 2,200 people. Finally, we are funding the United Nations and Palestinian Authority teams working to facilitate access to imports in Gaza.

Simon Hughes: The Minister referred to the severe problems with good water supplies and the offshore pollution along the coastal strip. Will he say whether the Government are working with others to deal with what is both an environmental and a health crisis? Clearly we cannot deal with it on our own, but is that on the agenda of DFID or his Department? Clearly, not much has been satisfactorily achieved so far, so what more can we do?

Alistair Burt: So as not to flannel my hon. Friend, I should give a better response when I have spoken to colleagues in DFID. I know that the problem that he raises is a serious one, and it is also caught with the problem of construction materials, which are vital to do the work that is necessary for the sewerage system and the like.

Mr Ward: We were disturbed by the appalling situation -which we could smell as we drove along the beach-of sewage going into the sea. The terrible consequence is
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that the sewage is finding its way back into the land through the water table, which is serious for agricultural development as well.

Alistair Burt: My hon. Friend describes an unbearable situation. I know that colleagues are on to it, so rather than speak in generalities I will find some detail. Indeed, if he submits a written question, I can supply an answer, and that will disseminate the information more widely.

On the diplomatic side, we are working closely with the UN, the office of the Quartet representative- Mr Blair-and the European Union to co-ordinate the international community's demand for further progress. Mr Blair has played a very important role on Gaza, and was helpful in the period immediately following the flotilla incident. He did a great deal of work-and continues to do so-with the Government to deal with the authorities there. We are also working with the European Union to co-ordinate the international community's demand for further progress. Although we welcome the steps that Israel has taken so far, we need to see further progress. In particular, we want to see faster approvals for key UN reconstruction projects. The international community is listening closely to UNRWA's feedback. We urge Israel to work with UNRWA to expedite its reconstruction plans, particularly for schools. We want Israel also to show greater flexibility on the movement of people and exports, in order to increase employment, reduce aid dependency and allow the full movement of humanitarian workers.

There is a final point to make this evening. Sometimes I worry that a given situation remains unresolved because, in reality, it suits all parties, rather than those most affected, to leave it be. For Israel, Gaza is a heavy security risk-a dagger potentially pointing at its heart, through Hamas. It is a place of missed opportunities, following-Israel believes-the generosity of its withdrawal. For Hamas, Gaza is a counter to Fatah-an element in its war with Fatah, as much as in its role of resistance to Israel. For Egypt, Gaza is a conundrum too-part of the need to resolve the Palestinian situation, but where, in authority, it finds a political entity to which it is opposed, and in whose success it has no more vested interest than Israel. In the middle are the people-the children; those whose future could and should be so much better; those who, as my hon. Friend the Member for Cambridge said, are crying out for leadership, to take them out of this situation, and for a future.

The only path is that Gaza will be part of the ultimate settlement in the middle east. That is why we and other parties are urging those involved in the direct negotiations to keep at it. We are pressing both sides to stay with the talks, to overcome the difficulties on settlements. That is why the Foreign Secretary pressed the point in relation to Israel, and why all friends of both Israel and Palestine should keep the parties at it. Ultimately, Gaza's future salvation lies in a comprehensive peace settlement: the two-state solution, which is so important.

As my hon. Friend the Member for Cambridge said, time is running out. My story meets his in terms of those he spoke to. A couple of years ago, I was on Israel's northern border and talking to some of the young people-they are very young-who guard those border posts. I asked them whether their children and grandchildren would be doing the same thing, and they thought that they probably would be. That is as sad and depressing as my hon. Friend's story.


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We have lived through momentous times during our period in Parliament. We have seen the unresolvable dealt with, and we have seen all sorts of things change during the past 20 or 30 years. The most intractable political problems have been solved, and it is always possible that that can happen in the middle east. The time is now.

I hope to visit Israel and the occupied Palestinian territories early next year. I have been to the west bank and Israel, and I hope to have the opportunity to go to
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Gaza. I will take a message from this House that we are all determined to redouble our efforts to drive the peace process forward, and we look to all those in the region and beyond to join us for the sake of all those in Gaza we have spoken about tonight.

Question put and agreed to.

8.45 pm

House adjourned.


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