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House of Commons

Tuesday 24 January 2012

The House met at half-past Two o’clock


[Mr Speaker in the Chair]

Business Before Questions

London Local Authorities and Transport for London (No. 2) Bill [Lords] (By Order )

Transport for London (Supplemental Toll Provisions) Bill [Lords] (By Order )

Second Readings opposed and deferred until Tuesday 31 January (Standing Order No. 20).

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Economic Growth

1. Mr Robert Buckland (South Swindon) (Con): What fiscal steps he plans to take to promote economic growth. [91192]

The Chief Secretary to the Treasury (Danny Alexander): The Chancellor is at ECOFIN today.

As the experience of many European countries has demonstrated, loss of control of the public finances is catastrophic for growth. That was why, in the autumn statement, we set out plans to maintain the credibility of our fiscal stance while innovatively using the money that we do have to support home buyers, small firms and infrastructure and to tackle youth unemployment.

Mr Buckland: I was pleased to see in the autumn statement the proposed introduction of the new seed enterprise investment scheme, which will encourage investment in small and high-risk early-growth businesses. What other measures does my right hon. Friend propose to take to encourage equity investment and support for growing businesses?

Danny Alexander: As my hon. Friend knows, at the Budget last year we announced reforms to the enterprise investment scheme and the venture capital trusts scheme, which are subject to state aid approval. The Government are committed to finding innovative ways to invest in new firms, such as the seed enterprise investment scheme, and we will consider further ideas in the future.

John Healey (Wentworth and Dearne) (Lab): The economy has flatlined for more than 12 months since the Chancellor’s spending review, unemployment has hit a 17-year high and the national debt has now topped £1 trillion. What has gone wrong?

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Danny Alexander: I would have thought that the day on which it has been announced that the national debt has broken the £1 trillion mark would provide a good opportunity for the Labour party to apologise for its catastrophic economic mismanagement that led the country into the mess that the coalition Government are cleaning up.

Mr Andrew Tyrie (Chichester) (Con): The Redknapp case and the public interest in it illustrate the need to reform taxation to ensure that top earners pay what is due. The Chief Secretary will not want to comment on an individual case, but what steps are the Government taking, consistent with the Treasury Committee’s report on the principles of tax reform, to ensure that all taxpayers, including top earners, pay the correct amount of tax?

Danny Alexander: Of course, as the hon. Gentleman says, I cannot and will not comment on ongoing individual cases, but he is right to say that the wealthiest need to pay their fair share. That was why we announced in the spending review an extra £900 million of funding for tackling tax avoidance and evasion, which has helped to set up a new specialist unit, which became operational last year, targeting offshore evasion. High-profile tax evasion cases could become more commonplace in future, and our message to tax dodgers is: “No matter how well known you are, how clever you think your accounts are or how far away you hide your money, we are coming to get you.”

Rachel Reeves (Leeds West) (Lab): The Chief Secretary says that the Government’s fiscal plans are working and that only the eurozone has thrown them off course. Tomorrow, we will know by how much the UK economy grew in 2011, so let me ask him a simple question. In its last forecast, did the Office for Budget Responsibility revise up or down its estimate for growth in the eurozone in 2011?

Danny Alexander: The Office for Budget Responsibility made significant changes to its forecasts for the UK and for other countries. It made a significant change to its forecast for how much damage was done to the UK economy during the time when the hon. Lady’s party was in government, suggesting that our economy is now about 13% smaller than it otherwise would have been.

Yesterday was the eighth anniversary of the shadow Chancellor’s now infamous Ken Dixon lecture, when he rightly said that long-term interest rates were

“the simplest measure of monetary and fiscal policy credibility”.

Then, 10-year gilt rates were 4.76%. Yesterday, they were 2.16%. Case closed.

Rachel Reeves: Given that the Government went to the trouble of setting up the Office for Budget Responsibility, one would expect that the Chief Secretary would read its forecasts. The reality is that it revised up its forecast for growth in the eurozone in 2011 and revised down its forecast for growth in the United Kingdom. The Government like to blame everybody except themselves for the economic troubles. First they blamed the snow, then they blamed the royal wedding, now they are blaming the eurozone. When will they take responsibility for their own actions, which choked off the economic

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recovery a year ago by cutting too far and too fast? As a result, they are borrowing an extra £158 billion. That is the cost of this Government’s economic failure.

Danny Alexander: Once again, the hon. Lady is wrong in her economic policy pronouncements. The Office for Budget Responsibility has the UK growing more slowly this year, but faster than countries in the eurozone in the next few years. That is a testament to the Government’s economic policies. If she wants to know who is at least partly responsible for the mess that the country is in, she should just look immediately to her left. It has come to something when Katie Price’s tweets make more sense about the economy than Labour Front Benchers.

Mr Alan Reid (Argyll and Bute) (LD): The economy in our islands will be greatly helped by the reduction in fuel duty that the Government are introducing. Will my right hon. Friend update the House on progress towards introducing that fuel duty discount?

Danny Alexander: I am grateful for the opportunity to do that. The fuel duty discount will come into force for customers, including on the islands in my hon. Friend’s constituency, from 1 March. That will reduce the cost of fuel by 5p a litre in the most remote island communities, reflecting the fact that they have the highest cost. The scheme has been open to retailers to register for it since 1 January, and I am pleased to report that almost every retailer has already signed up.

Taxation Changes (Families with Children)

2. Roberta Blackman-Woods (City of Durham) (Lab): What assessment he has made of the effects on families with children of taxation changes coming into force in 2012-13. [91193]

The Exchequer Secretary to the Treasury (Mr David Gauke): The Government have taken unprecedented steps to increase the transparency of decision making, publishing detailed analysis of the impacts of individual measures in tax impact notes and presenting the overall impact of tax benefit reforms at fiscal events. The analysis shows that all but the top decile gain from direct tax changes, and that the Government continue to help protect the most vulnerable.

Roberta Blackman-Woods: Research by House of Commons Library and other independent sources shows that, of the £8.1 billion of tax rises and benefit cuts, women are paying £5.8 billion. That is a massive 72%. A further £2.4 billion of cuts will affect families with children. Why are the Government targeting the cuts on women and families? Does not that give the lie to the notion of our all being in this together?

Mr Gauke: We do not accept that. I must point out, for example, that of the 1.1 million people taken out of income tax because of policies that the Government have pursued, the majority are women.

George Freeman (Mid Norfolk) (Con): Will the Minister also confirm that, as well as the 1.1 million people taken out of tax, we are reducing the tax bill of 20 million of the poorest families?

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Mr Gauke: Absolutely. It is important to point out that it is not just those who are taken out of income tax altogether who benefit, but the approximately 25 million people overall who receive an increase in personal allowance. That should be supported by hon. Members of all parties.

Yvonne Fovargue (Makerfield) (Lab): The Treasury has admitted that cutting tax credits will lead to an increase in child poverty. Rather than trying to change the definition of child poverty, was not the Prime Minister right in 2006 when he said:

“We need to think of poverty in relative terms”?

Mr Gauke: It is also important not just to think of poverty in terms of moving someone from one side of an arbitrary line based on a percentage of median income to another, but to look more widely. That includes improving poor children’s opportunities. The Government, through the pupil premium and other measures, are concentrating on opening up those opportunities.

Charlie Elphicke (Dover) (Con): Will the Minister tell the House how families can have a greater option of part-time working under the taxation changes, and whether they will have more encouragement to work with the introduction of the benefits cap?

Mr Gauke: With the work that my right hon. Friend the Secretary of State for Work and Pensions has undertaken, the Government are determined to ensure that work will always pay and that we do not have people trapped on benefits.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Yesterday, we heard the Prime Minister say that jobs in retail are a vital part of the economy. Why are the Government making changes to working tax credits that will hit part-time workers in the retail sector hard? Is that a fair deal for parents who are trying to do the right thing? Can the Minister tell us how many couples who work between 16 and 24 hours a week will lose out, and by how much?

Mr Gauke: We are taking measures to ensure that work will always pay. On the Labour party’s complaints, I point out that its flagship policy at the last election to increase national insurance contributions for employers would have hit the retail and other sectors very hard.

COP26 Process

3. Mr Mike Weir (Angus) (SNP): What recent discussions he has had with Her Majesty’s Revenue and Customs on the operation of the COP26 process. [91194]

The Exchequer Secretary to the Treasury (Mr David Gauke): Ministers have regular meetings to oversee and challenge HMRC business, including the administration of tax credits and the recovery of overpayments.

Mr Weir: I am grateful for the Minister’s answer, but does he understand the intense frustration and anger of many of my constituents who repeatedly tell HMRC about errors in tax credits that HMRC does not correct, which subsequently give rise to overpayments? How often can HMRC be allowed to make mistakes and hide behind COP26 to evade any responsibility?

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Mr Gauke: I understand the hon. Gentleman’s concern—he has raised this matter on behalf of his constituents a number of times. The Treasury and HMRC are always seeking to improve the system. It is in a better place than it was four or five years ago, but none the less, there are still issues. I constantly tell HMRC that we need to find ways to address problems when information is provided but not taken up and used.

National Infrastructure Plan

4. John Howell (Henley) (Con): What progress he has made on implementation of the national infrastructure plan 2011. [91195]

The Chief Secretary to the Treasury (Danny Alexander): Work on the implementation of the national infrastructure plan is now under way across Government, led by the Treasury. This month, for example, the Government have approved High Speed 2 to Birmingham and are working to resolve radar interference issues that are holding up wind farm developments. We will update the House on progress at the Budget on 21 March.

John Howell: Does my right hon. Friend agree that the national infrastructure plan is welcome and timely because it is about real investment in our infrastructure and because it shows that the Government are thinking for the long term, both of which will encourage co-investment in those projects?

Danny Alexander: My hon. Friend is absolutely right. The national infrastructure plan sets out a medium-term plan for £250 billion of much needed investment in this country’s infrastructure. Alongside that, we brought forward plans at the autumn statement for £6 billion of further investment in capital projects in this Parliament and announced a scheme working with pension funds to get £20 billion-worth of pension fund investment into infrastructure. Those are all the right things to ensure that in the long term, we rebalance our economy and make our infrastructure stronger.

Mr Andrew Love (Edmonton) (Lab/Co-op): With unemployment at 2.7 million and rising rapidly, what contribution will the national infrastructure plan make to reducing unemployment this year and next year?

Danny Alexander: As I said in my answer to my hon. Friend the Member for Henley (John Howell), alongside the national infrastructure plan, we announced in the autumn statement significant new investment in infrastructure projects this year, next year and the year after that, all of which will both contribute to growth in the immediate term and help to build the better infrastructure we need to ensure that our growth is stronger in the medium term.


5. Seema Malhotra (Feltham and Heston) (Lab/Co-op): What assessment he has made of the Office for Budget Responsibility’s most recent forecast of levels of unemployment in 2012. [91196]

The Financial Secretary to the Treasury (Mr Mark Hoban): In line with the weaker outlook for gross domestic product growth, the OBR has revised up the

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projected level of unemployment over the near term, peaking at the end of this year before falling. In the autumn statement, the Government committed to important new steps to support private sector job creation and reduce unemployment, such as nearly £1 billion for the youth contract; an initial £1 billion for the regional growth fund; and a £21 billion package of credit easing to support firms and encourage job creation.

Seema Malhotra: I thank the Minister for his answer. The youth claimant count last year in my constituency of Feltham and Heston rose 25.2%. The long-term claimant count for over-50s rose 48%. Both statistics are more than twice the UK average. What measures have the Government taken to tackle unemployment in Feltham and Heston, and when does he expect the number of unemployed to fall?

Mr Hoban: The hon. Lady makes an important point, but let me be clear: as she will know, youth unemployment in her constituency peaked in December 2009—it is actually lower today than it was then. No one should be complacent about youth unemployment, but she should recognise, as the right hon. Member for South Shields (David Miliband) did, that youth unemployment is not a problem that this Government created, and that it is a long-term challenge and grew even when the economy was booming. We are taking steps—such as the youth contract and boosting the number of apprenticeship places—that will benefit every constituency in the country, including hers.

Mr John Redwood (Wokingham) (Con): When will we see more of the details of the credit easing scheme and what is the Minister’s forecast of the monthly draw-down for the rest of this year?

Mr Hoban: We are working with banks on the details behind the national loan guarantee scheme. We have set aside £20 billion to enable the rates that are charged to small businesses to fall by up to 1%. The utilisation of the scheme will very much be driven by the demand from businesses for debt finance.

Owen Smith (Pontypridd) (Lab): Yesterday the Chief Secretary appeared not to know too much about what the Work programme was going to do to deal with unemployment. This morning, the National Audit Office tells us that the programme will fail to get a third of the people the Government are targeting back into work. Can Ministers now tell us how much extra this latest failure to tackle unemployment will cost the Exchequer?

Mr Hoban: The NAO’s report this morning was based on guesswork. The scheme has not been fully implemented and there are no published figures as yet on the out-turn for the scheme. Let me just say that private sector providers expect that this scheme will be more effective than the schemes put in place by previous Governments.

Matthew Hancock (West Suffolk) (Con): Given the increasing private sector employment levels, have the Government made any assessment of the impact on those levels if we lost all credibility of economic policy by having the sort of incoherence proposed by the Opposition?

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Mr Hoban: The levels of interest that businesses in this country pay are determined by the credibility of our fiscal policy. If interest rates rose as a consequence of diverting from the fiscal plan the Government have set out, we would see higher interest rates and that would have a huge impact on families and businesses across the country.

Child Poverty

6. Sheila Gilmore (Edinburgh East) (Lab): What estimate he has made of the likely effect on the level of child poverty of the fiscal measures in his autumn statement. [91197]

8. Kate Green (Stretford and Urmston) (Lab): What estimate he has made of the likely effect on the level of child poverty of the fiscal measures in his autumn statement. [91199]

The Economic Secretary to the Treasury (Miss Chloe Smith): When measured against previously announced policies, there will be an estimated increase of 100,00 in children living in households with less than 60% of median income in 2012-13.

Sheila Gilmore: We are constantly told by the Government that the way out of poverty is work and that work must pay. Is the Minister prepared to reconsider the decision not to uprate working tax credits this year in terms of inflation while at the same time uprating out-of-work benefits by inflation?

Miss Smith: The reason for that decision was to prioritise the resources we have available on those perhaps least able to deal with the difficulties of the cost of living.

Kate Green: The Chancellor announced in the autumn statement an increase in the number of child care places for disadvantaged two-year-olds, but at the same time we are hearing of cuts to local authority funding for child care, and places are closing. How will the Government guarantee that these new places for disadvantaged children will be additional places and not simply a matter of money being moved out of one pot to pay for another?

Miss Smith: We expect that that policy will be additional in the sense that it is extending it to disadvantaged two-year-olds. We expect 130,000 disadvantaged two-year-olds to be assisted by the 15 hours of free child care, and we certainly expect local authorities to take sensible decisions with the limited resources that they also have.

Harriett Baldwin (West Worcestershire) (Con): With 2 million children living in workless households, does the Minister agree that the essential steps include not only the additional child care places, but the universal credit and the fact that every hour of work will count towards increased reward for the household? That is an essential part of those fiscal measures.

Miss Smith: I certainly do agree with my hon. Friend, and on a couple of counts. First, poverty is not about income: it is about work. I am sure that she will agree that it is a crying shame that under the previous Government

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the number of children in workless households reached one in every six. I also agree with the chief executive of

The Big Issue

, who says in

The Times

today that

“You don’t help the poor by making them dependent on handouts”.

Duncan Hames (Chippenham) (LD): Grandparents often play an important role in supporting their children’s children. So why is it that the Government’s welcome commitment to a more generous state pension bizarrely has the effect of increasing the number of children statistically said to be living in poverty? What is the sense in that?

Miss Smith: My hon. Friend is absolutely right. If I can, I would be happy to provide him with the workings that create that situation. That measure can have perverse effects, but we believe in measures that genuinely take children out of poverty, such as early intervention policies, rather than moving them over an imaginary line.

Bank Lending

7. Neil Parish (Tiverton and Honiton) (Con): What steps he is taking to encourage banks to charge competitive rates for loans to small and medium-sized businesses. [91198]

The Financial Secretary to the Treasury (Mr Mark Hoban): At the autumn statement the Government announced the launch of the national loan guarantee scheme. The scheme will provide up to £20 billion of Government guarantees for bank funding, which will lead to a reduction in loan interest rates to smaller businesses of up to 1%.

Neil Parish: I thank the Minister very much for that statement, but businesses in my constituency of Tiverton and Honiton are being held back by the banking sector, which is charging interest rates of up to 20% to financially sound businesses. When and how are we going to get much more competition into the banking sector?

Mr Hoban: My hon. Friend makes an important point. We need to see a more competitive banking system. At the moment we are seeing, for example, the acquisition by Santander of businesses from RBS, which will create a challenger. We have also seen the outline decision by the Co-op to buy branches from Lloyds bank. Those measures, together with the sale of Northern Rock to Virgin Money, point towards a more competitive landscape for banking and will lead to better outcomes for consumers and businesses.

Stewart Hosie (Dundee East) (SNP): It is not only the cost and availability of bank lending that is the problem; it is what the nationalised banks are doing with that debt. They are selling it to private equity firms for discounts of 40% to 50%, which reflects a net loss to the taxpayer-shareholder and fundamentally changes the relationship between the business and the bank. Let me ask the Minister, first, whether he is aware of that; and, more importantly, whether he has any information that would tell him that equity funds have had access to bank records on individual companies that would allow them to cherry-pick the assets they are buying.

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Mr Hoban: As the hon. Gentleman will know, the responsibility for commercial decisions is a matter for the management of RBS and Lloyds. He has flagged up a concern, and if he brings forward details of those matters, I will raise them with the chief executives concerned.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): Following on from that question. Given that banks can lend only if they have capital and that 80% of financial transactions take place within the financial services industry, so that only 20% result in an end user, can the Minister say what steps the Government are taking to look at the marginal utility of the financial services industry, or what Lord Turner described as its “social usefulness”?

Mr Hoban: My hon. Friend makes an important point. It is vital that banks and other participants in the financial services sector play their full role in supporting growth across the economy and meeting the aspirations of families across the country. It is vital when banks are faced with difficult decisions about how to use their capital that they should focus their efforts on securing lending and boosting economic growth.

Chris Bryant (Rhondda) (Lab): The thing that my constituents who work for Peacocks do not understand is why there seems to be plenty of money in the banks, including RBS, to pay exorbitant bonuses to senior executives, when there is not enough money to keep the company afloat. What will the Government do to try to ensure that those jobs, in a company that is still making money, are protected?

Mr Hoban: I do not want to comment on particular decisions. I am well aware of the concerns that people in the hon. Gentleman’s constituency have about the prospect of Peacocks closing. It is vital that banks are in a position to lend to viable businesses. That is why we entered into Project Merlin, which has led to an increase in bank lending compared with last year. That is the right thing to do, and I would encourage the management of Peacocks to engage with the banks and other investors to get the right outcome for them and for their business.

Distribution of Tax Burden

9. Annette Brooke (Mid Dorset and North Poole) (LD): What steps he plans to take to ensure that the burden of taxation is fairly distributed. [91200]

The Chief Secretary to the Treasury (Danny Alexander): We are significantly shifting the burden of taxation away from people on lower incomes and on to those with broader shoulders. The bank levy, the increase in capital gains tax, changes to pensions tax relief and the maintenance of the 50p rate all help to enable us to meet our commitment to increase the income tax personal allowance to £10,000, cutting taxes for millions of hard-pressed, hard-working families.

Annette Brooke: I thank my right hon. Friend for that answer. However, the Institute for Fiscal Studies said of the autumn statement:

“New tax and benefit measures are, on average, a takeaway from lower-income families with children, and giveaway to middle and top of income distribution”.

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What further approaches will he take in the forthcoming Budget to ensure that we are all in it together, be it a demonstrable crackdown on tax avoidance, perhaps a mansion tax, and certainly more progressive tax measures?

Danny Alexander: Of course, the burden of the deficit reduction is fair overall, and we know that the burden falls most highly on the richest 20% of the population. However, with spending cuts needing to continue for longer—another two years—we need to redouble our efforts, both to tackle tax avoidance and to deliver the income tax cuts that we have promised, by lifting the personal allowance as rapidly as the nation can afford. Those are, of course, issues that we shall be considering in the run-up to the Budget.

Mr Dave Watts (St Helens North) (Lab): Why does the Minister not look at employing more tax inspectors, given that billions of pounds are going unpaid because there are not enough tax inspectors to do the job?

Danny Alexander: Not only have we looked at that; we are doing it. In the spending review, we announced an extra £900 million for HMRC, which is creating an extra 2,000 specialist posts to tackle tax avoidance and tax evasion. It took the hon. Gentleman’s party 12 years just to set up a specialist unit at HMRC to deal with high net worth individuals. We have extended that to ensure that there is a specialist unit to deal with the tax affairs of all those who pay, or should pay, the 50p rate.

Executive Pay

10. Andrea Leadsom (South Northamptonshire) (Con): What steps he is taking to tackle excessive executive pay. [91201]

14. Henry Smith (Crawley) (Con): What steps he is taking to tackle excessive executive pay. [91205]

17. Nadhim Zahawi (Stratford-on-Avon) (Con): What steps he is taking to tackle excessive executive pay. [91208]

The Chief Secretary to the Treasury (Danny Alexander): The Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for Twickenham (Vince Cable), yesterday announced a package of proposals designed to address the market failure in setting executive pay. The proposals represent a major step forward in empowering shareholders, reforming remuneration committees and improving transparency in order to give shareholders the tools that they need in order to control unacceptable rewards for failure.

Andrea Leadsom: What consideration has my right hon. Friend given to a system of three-year rolling executive pay, in which the worsening of performance in one year would lead to a claw-back of remuneration from previous years? Does he think that putting pressure on companies to adopt such a system would be sufficient, or would it be necessary to legislate?

Danny Alexander: My hon. Friend makes a good point. That is already part of the Financial Services Authority’s code of practice for banking remuneration. It is particularly important to end the distorting effect

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of those kinds of incentives in the financial sector, but the additional powers that we are giving to shareholders, which my right hon. Friend the Business Secretary announced yesterday, will allow companies in other sectors to adopt that kind of practice, should they wish to do so.

Henry Smith: I welcome yesterday’s announcement by the Government on mitigating excessive executive pay. With regard to the UK honours system, may I seek an assurance from my right hon. Friend that the Government will be more circumspect in regard to the honours that are suggested, unlike the—

Mr Speaker: Order. I think that the hon. Gentleman might have been groping his way towards order, but he had not quite arrived. We will have to leave it there for today. We are specifically talking about excessive executive pay.

Nadhim Zahawi: In the forthcoming Financial Services Bill, should we not introduce criminal sanctions for gross negligence at the helm of a systemically important bank, to ensure that no rewards for failure would be forthcoming for those who are masters of nothing?

Danny Alexander: That was mentioned explicitly in the Financial Services Authority’s report on the failures of the Royal Bank of Scotland. Lord Turner suggested three options for changing the law, and the Joint Committee that has scrutinised the draft Financial Services Bill has recommended that the Government give consideration to the report’s recommendations. We agree with that, and we will be publishing a joint consultation document with the FSA later this spring, which will consider a range of possible measures.

Mr George Mudie (Leeds East) (Lab): John Hourican of RBS is expected to get in excess of £4.3 million in his remuneration package in share options alone. When RBS was asked about this, it said that he had met his performance targets, but refused to say what those targets were. On the ground of transparency, will the Chief Secretary agree to put in the Library a copy of the performance targets of the chief executive of RBS and of Mr Hourican?

Danny Alexander: I will certainly look into the matter that the hon. Gentleman has raised, but it was his party that set up the contracts for many of the executives at RBS, and his party that allowed the bonuses to be paid out. It was also his party that awarded Fred Goodwin a knighthood that he should never have been given, so I do not think that we are going to take any lessons on this from him. We have certainly been looking hard at the remuneration proposals for this year, and I can assure him that bonuses will be far, far lower than they were last year.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): May I remind the Minister that, when in opposition, the present Chancellor and the present Prime Minister promised a really tough regime to reduce the gap between the high earners and the rest of the people in this country. Yesterday’s announcement showed that they have backed away from that promise, but the people in my constituency want a fair society in the so-called big society.

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Danny Alexander: I am certainly not going to attempt to take responsibility for things the Chancellor and the Prime Minister said in opposition, but I can take responsibility for what the coalition Government are doing. The announcements made yesterday by the Business Secretary on tackling executive pay went far further than anything the hon. Gentleman’s party did during 13 years in government. That alone should give him pause for thought.

Mark Durkan (Foyle) (SDLP): Giving more powers to shareholders sounds welcome, but we know that their existing powers on executive pay have not been readily used. Should institutional investors not be made more accountable to the millions of ordinary savers whose money is at stake, and does the Chief Secretary believe that the Chancellor would be ready to exercise his reserve powers to make them disclose to their savers how they vote?

Danny Alexander: One of the striking things about how the climate of opinion on this subject is changing in recent times has been the change in attitude of institutional investors. The comments of Otto Thoresen, the head of the Association of British Insurers, for example, to the banks in this remuneration round suggests that such investors are interested in and seized of the importance of ensuring that proper levels of remuneration are paid, not unfair rewards for failure.

Stephen Williams (Bristol West) (LD): The Business Secretary’s announcements will give more power to non-exec directors and shareholders to control pay in the private sector. The Government effectively discharge those roles in the public sector, so what measures is my right hon. Friend undertaking to control high pay in the public sector?

Danny Alexander: Ministerial salaries were cut by 5% and then frozen for the whole of this Parliament. As Chief Secretary, I now personally sign off any new pay above £142,000, the equivalent of the Prime Minister’s pay. That is a vital deterrent to the cycle of ever higher pay at the top of the public sector—so much so that in central Government alone the number of people paid more than £150,000 has dropped by 55 since May last year. When applications come in, I can and do reject them if I think they are too high. In fact, since May 2010 83 like-for-like cases have sought my approval. Pay was lowered in 45 of those cases and frozen in a further 23, saving more than £1 million a year for the taxpayer, including a £100,000 cut in the pay for the new chief executive of Royal Mail.

Budget Deficit

11. Mr Virendra Sharma (Ealing, Southall) (Lab): What assessment he has made of the Office for Budget Responsibility’s most recent estimate of the size of the deficit in 2015. [91202]

The Economic Secretary to the Treasury (Miss Chloe Smith): The OBR forecast in November that borrowing in 2015-16 would be £53 billion, which is 2.9% of gross domestic product. That compares with £156 billion last year and £127 billion this financial year.

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Mr Sharma: I thank the Economic Secretary for answering the question. Can she tell us why the Government are now forecast to borrow £37 billion more than the more balanced plan Labour set out before the election, despite the pain of £40 billion more spending cuts and tax rises?

Miss Smith: This Government are engaged in a credible deficit reduction plan. I would like to hear the hon. Gentleman and his colleagues tell us what their plan is and whether it veers towards credibility or the policies of the delusional left.

Michael Fallon (Sevenoaks) (Con): What lesson should we draw from Standard & Poor’s warning that the UK’s rating could come under downward pressure if, against its expectation, the commitment to fiscal consolidation wavers? Should not that warning be addressed to those who want us to cut more slowly and to borrow even more as a result?

Miss Smith: My hon. Friend is absolutely correct. Our policies have kept the UK ahead of the curve. He and others in our House need only look to the French downgrade last week to see the value of the credibility we have restored to the UK economy.

Mr Geoffrey Robinson (Coventry North West) (Lab): Is not the Minister aware that the figures show the total failure of the Government’s economic policy—not only on the deficit, but on all the contributory factors? Employment is down, way below their target, and so are growth and private sector employment. On every key index, their policies have failed. They own this policy, they are failing—when will they change it?

Miss Smith: We have a plan A, to which we are sticking because it is working—unlike the policies proposed by the Opposition, which have yet to emerge in any credible detail whatsoever.

UK Current Account Balance

12. Mr Peter Bone (Wellingborough) (Con): What recent estimate he has made of the level of the UK’s current account balance with the EU. [91203]

The Financial Secretary to the Treasury (Mr Mark Hoban): In 2010, the UK had a current account deficit of £49 billion. That deficit results from a deficits of £48 billion with the EU and of £1 billion with non-EU countries.

Mr Bone: That was a most incredible figure of a deficit of nearly £50 billion to the EU. Does the Minister agree that the Deputy Prime Minister is quite wrong to go around to the television studios claiming that the EU creates 3 million jobs for British workers when it is quite clear from those figures that the EU costs millions of British jobs?

Mr Hoban: My hon. Friend should bear in mind that the deficit on traded goods between the UK and the EU is £43.9 billion but that the deficit outside the EU is even larger at £54.7 billion. We should be encouraging businesses across the UK to invest more and to export more to places in the EU, as well as to Brazil, Russia,

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India and China. I encourage him to talk to businesses in his constituency and encourage them to export more to close that gap.

Geraint Davies (Swansea West) (Lab/Co-op): Does the Minister accept that, unlike some other EU members, we have flexible exchange rates, flexible interest rates, market access and very limited exposure to the euro bail-out? Is it not time that we invested in a growth strategy to take advantage of those opportunities and build Britain so that it is strong again, getting rid of the deficit to growth and not cutting?

Mr Hoban: The key thing is to have a credible fiscal and economic policy. The Conservative party and this Government have that credible economic policy, whereas the Labour party has no idea where it wants to take the economy. The measures we are taking to tackle the deficit which keep interests rates low are providing the biggest benefit we can give to businesses to help them grow in future.

Economic Growth

13. Mr David Hanson (Delyn) (Lab): What assessment he has made of the likely level of economic growth in 2012. [91204]

The Economic Secretary to the Treasury (Miss Chloe Smith): The Office for Budget Responsibility forecast 0.7% economic growth in 2012 and that the economy would grow every year after that within the forecast.

Mr Hanson: With unemployment at a 17-year high, with growth having flatlined over the past 12 months, and with targets for future growth having been missed in every month so far to date, may I gently suggest to the Minister that she should look positively at some of the alternative suggestions that have been made, such as for a cut in VAT on construction, which is supported by the Federation of Small Businesses, to help growth in the next 12 months?

Miss Smith: Like recoveries from all deep recessions, this one has been choppy, and we are facing subdued growth, as the Office for Budget Responsibility has laid out. There are many reasons for that, one of which is that the Labour party simply turned on the taps when it came to spending and left them running. What the right hon. Gentleman has to recognise is that in policies that deal with business we do not pick ones that have an extra £20 billion price tag that cannot be sourced. Perhaps it is his leader who needs to take a lesson in understanding business, as his adviser has said that he

“doesn’t understand business…there was always something missing.”

Christopher Pincher (Tamworth) (Con): Will my hon. Friend congratulate Jaguar Land Rover, BMW, B&Q and John Lewis, among others, on driving down long-term unemployment in Tamworth by a whacking 22%? Does not that demonstrate that it is through the private sector’s developing sustainable jobs that we will build sustainable economic growth?

Miss Smith: I certainly will join my hon. Friend in congratulating those firms. It is exactly through the private sector that we will find a more balanced recovery.

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I would also like to place on record my interest in the record numbers of apprenticeships in which such firms are participating, such as 440,000 more this year—up by half on the year before.

Credit Card Surcharges

15. Naomi Long (Belfast East) (Alliance): On what basis HM Revenue and Customs calculates surcharges levied for handling payments made by credit cards. [91206]

The Financial Secretary to the Treasury (Mr Mark Hoban): Her Majesty’s Revenue and Customs is able to levy a reasonable charge for the use of credit cards for payments. There are many other ways in which people can pay their tax bill without paying a surcharge. HMRC also flagged up quite early in the process how much it would cost to pay by credit card. HMRC adopts best practice, and that is why we have decided to extend these practices across business. We are launching a consultation paper later this year on banning unreasonable credit card surcharges.

Naomi Long: I thank the Minister for his answer. We know that the amount charged by different credit card companies varies depending on the transaction amount and the size of the institution receiving the money. Will he undertake to keep this issue under review to ensure that individuals pay only the charge that is levied by the company, and that there is no benefit to HMRC from its making additional charges?

Mr Hoban: The hon. Lady makes an important point. It is absolutely vital that HMRC looks carefully at the costs it incurs in processing credit card transactions and that it charges taxpayers only what are reasonable costs. We want that same approach to be adopted in the private sector as well, as that would bring huge benefit to consumers.

UK’s Credit Rating

16. Mr Stewart Jackson (Peterborough) (Con): What steps he is taking to maintain the UK’s triple A credit rating. [91207]

The Financial Secretary to the Treasury (Mr Mark Hoban): The Government’s macro-economic strategy is designed to protect the economy through this period of instability, and to lay the foundations for a stronger, more balanced economy in the future. The autumn statement set out a comprehensive plan to return the public finances to a sustainable position and meet the Government’s fiscal targets. In recent months, the major credit rating agencies have reaffirmed the UK’s sovereign credit triple A rating, with a stable outlook.

Mr Jackson: Does the Minister agree that the systemic risk to our triple A credit rating is unlikely to be ameliorated by a form of state-sponsored laundering of UK taxpayers’ money through the International Monetary Fund to the failed eurozone, which hitherto has not received the confidence of the bond markets?

Mr Hoban: My hon. Friend raises an issue about resources for the IMF. It is absolutely vital that the IMF has the resources it needs to play its part in ensuring that there is a stable global economy, which is in our economic interest. My right hon. Friend the Chancellor

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has said that if there is a request from the IMF for more resources, he will look at it carefully. If he agrees to the request, and the amount requested exceeds the limit in place at the moment, we shall seek parliamentary approval, but it is absolutely vital, and in our interest, to ensure that there is a stable global economy, because that is of benefit to the UK economy. I hope that the Opposition have changed the approach they adopted last year of opposing increases in the IMF subscription.

Steve McCabe (Birmingham, Selly Oak) (Lab): With borrowing set to grow by £158 billion more than the Government planned, how many more miscalculations can the Minister afford before the precious credit rating goes the same way as all the other economic indicators?

Mr Hoban: Let me just tell the hon. Gentleman what Moody’s said in December last year:

“The currently stable outlook on the government’s Aaa rating depends in part on the assumption that the government will stay on track with its fiscal consolidation programme.”

We will stay on track. The Opposition, with their policies on debt and borrowing, would throw this country off course, leading to higher interest rates that would hit families and businesses. We will stick to our course.

Topical Questions

T1. [91218] Nicky Morgan (Loughborough) (Con): If he will make a statement on his departmental responsibilities.

The Chief Secretary to the Treasury (Danny Alexander): The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform banking, and manage the public finances so that Britain lives within her means. I am pleased to tell the House that the Chancellor has decided to reappoint David Miles as external member of the Monetary Policy Committee of the Bank of England. This morning, the Chancellor wrote to the Chair of the Treasury Committee to make the Committee aware of the reappointment, and it will decide whether to hold reconfirmation hearings. Mr Miles’s knowledge of the UK economy and his background in the financial sector will be invaluable to the Monetary Policy Committee through this challenging period.

Nicky Morgan: The Government’s plans to index-link public sector pensions to the consumer prices index rather than the retail prices index have been the subject of much debate in the House. Has the Treasury received any representations or support for that approach from private sector organisations that are planning to make changes to their pensions?

Danny Alexander: It is a very good question. We made that change, which has had an effect on public service pensions, for good reasons. The change has been made in many private sector organisations—most recently, I read, in the Labour party’s pension scheme. The Opposition’s attacks on the move being ideologically driven are belied by the decisions they have had to make because of the deficit their party is running.

Ed Balls (Morley and Outwood) (Lab/Co-op): With the Chancellor away in Brussels in his new role as an observer at European Finance Ministers meetings, it is nice to welcome the Chief Secretary to his new starring

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role at Treasury questions. I am sure he will know, although he has not told the House, that in the last 15 minutes the International Monetary Fund has announced that it is once again downgrading its growth forecast for the UK economy, saying that action is now needed to support economic activity in Britain. With unemployment rising too, continued pay restraint is now inevitable, but it must be done fairly, so let me ask the Chief Secretary this. In 2010, he promised a £250 rise for every one of the 1.7 million public sector workers paid less than £21,000 a year. Can he tell the House how many of those low-paid public sector workers actually got the £250 rise?

Danny Alexander: It is good to see the shadow Chancellor after the Christmas recess. Many of us who missed the chance to go to a panto over Christmas have enjoyed the Opposition’s pantomime economic policy changes. It is not clear whether today the right hon. Gentleman supports cuts or opposes them, but this is one show that will run and run. On the point about public sector pay, for all work forces under central Government control, the £250 was paid in full.

Ed Balls: Bluster. The right hon. Gentleman is worse than the Chancellor of the Exchequer, and there was no mention of the IMF growth downgrade. The answer is that less than half of those low-paid public sector workers got the rise. Almost a million did not get the £250 increase that they were promised by the Treasury. Last week, we urged the Chancellor to ask the pay review bodies to make the 1% cap fair this time, with restraint at the top, so that we can have pay rises at the bottom. Have the Chief Secretary or the Chancellor written to the pay review bodies? Will they guarantee a fair way forward on pay restraint, or will we just get more broken promises from this Chief Secretary to the Treasury?

Danny Alexander: Of course, the people to whom the right hon. Gentleman refers are local authority employees. Many local authorities did pay the £250, including some Liberal Democrat-controlled local authorities. I am not aware of any Labour local authorities paying the £250, so perhaps he should look within his party before deciding which side of the House was most effective at ensuring that the benefit was paid directly to the lowest-paid. Of course, we have had to take the difficult decision to continue pay restraint, with a 1% cap for the following two years. The pay review bodies will be very involved in making recommendations for those two years, starting, of course, in the parts of the civil service that come out of the pay freeze earliest. The IMF has repeatedly made the point that the Government are right to stick to their fiscal consolidation strategy, and we will.

T2. [91219] Michael Ellis (Northampton North) (Con): Does my right hon. Friend by any chance agree with the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), who said:

“promising no cuts, no jobs losses and continued levels of public expenditure...is the policy of the delusional left who will never gain the public’s trust”?

Danny Alexander: That is a very wise quote. Of course, the policy of the Labour party is in increased confusion since the shadow Chancellor made his speech.

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It is a little-known fact that when he made it, he also signalled his opposition to more than £20 billion of this Government’s deficit reduction measures, and since he made that announcement, his party in the House of Lords has opposed a further £2 billion of welfare reforms, which rather suggests that the conversion to fiscal credibility is skin-deep at best.

T6. [91223] Rushanara Ali (Bethnal Green and Bow) (Lab): My constituency now has one of the highest youth unemployment rates in the country, and the highest level of child poverty at 51%; that is compared with 7% in the Prime Minister’s constituency. Will the Minister admit that his Government are not serious about child poverty, and have completely failed to tackle youth unemployment?

Danny Alexander: No, I will certainly not say that, not least because youth unemployment rose by 40% when the Labour party was in government. I hope that the hon. Lady will welcome the youth contract that we announced, which is a great deal more ambitious than the package put forward by her Front Benchers; the Work programme, which is delivering real results for people up and down the country; and the investment in child care that will help women to go out to work, as well as men. Those are all things that help people to find work in these very difficult times.

T3. [91220] Andrew Jones (Harrogate and Knaresborough) (Con): I warmly welcome the work being done by the Office of Tax Simplification, but does the Exchequer Secretary agree that we can do more to boost tax transparency, for example by providing all taxpayers with an annual statement on how their hard-earned tax pounds are spent?

The Exchequer Secretary to the Treasury (Mr David Gauke): My hon. Friend raises an interesting point. In November, the Government and Her Majesty’s Revenue and Customs published a consultation paper on exactly those lines, and I very much look forward to the ten-minute rule Bill that my hon. Friend the Member for Ipswich (Ben Gummer) will introduce tomorrow, which makes that proposal. We should all agree that we should do everything that we can to make tax and spending as transparent to the public as possible.

T8. [91225] Kerry McCarthy (Bristol East) (Lab): The Public Accounts Committee has

“serious concerns that large companies are treated more favourably than other taxpayers”

by HMRC.

That once again gives the lie to the Government’s claims that we are all in this together. What action will the Chancellor or the Minister take to ensure greater transparency and accountability in HMRC, and to assure ordinary taxpayers who are struggling to pay their bills this month that companies will also pay their full share?

Mr Gauke: The Government will respond in detail to the PAC report shortly, but it is only fair to point out that, in recent years, HMRC’s yield from large companies has increased substantially. Indeed, we have provided, as part of the spending review settlement for HMRC, additional resources to get more out of large businesses, so that we ensure that they pay their fair share.

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T4. [91221] John Glen (Salisbury) (Con): How much revenue does the Treasury expect HMRC to receive as a result of recent measures to reduce tax avoidance, and how much does the Minister estimate could be accrued from tax exiles who make £100 million in this country, clear off to Switzerland for five years, and then come back and advise the Leader of the Opposition?

Mr Gauke: As a consequence of the measures that we announced last year to tackle avoidance, we believe that something like £1 billion will be raised, £750 million of that relating to disguised remuneration, a policy that was opposed by Labour. I cannot talk about individual advisers to the leader of the Labour party and their tax affairs, but if such a person is advising the Labour leader, as far as we are concerned he is doing a great job and should carry on.

Jonathan Ashworth (Leicester South) (Lab): Can the Chief Secretary confirm, so that we are clear, that the Chancellor is set to borrow more and debt is set to be larger than it would have been, had the Government followed the path of my right hon. Friend the Member for Edinburgh South West (Mr Darling)?

Danny Alexander: I certainly cannot confirm that debt is higher than it would have been if we had followed the path advocated by the Opposition. That path was leading to lack of economic credibility. When this coalition Government came into office, our credit rating was on negative watch from one credit rating agency, and it is only because we have taken tough action to deal with the deficit that we have got our spending under control, we are reducing our deficit and we have established this country’s credibility on the international markets, which was in considerable doubt under Labour.

T5. [91222] Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Can the Minister update the House on lessons learned from the Fiscal Forum on how to maximise investment in jobs in UK oil and gas production?

The Economic Secretary to the Treasury (Miss Chloe Smith): I certainly can, and I welcome my hon. Friend’s interest in this policy area, based on his constituency experience. The Government have been clear that they want to see the oil and gas industry thrive, given its importance for jobs and growth around the country. Ministerial colleagues, officials and I continue to engage the industry in ongoing constructive dialogue to understand the challenges facing it.

Huw Irranca-Davies (Ogmore) (Lab): The Minister confirmed today that 100,000 more children will be put into poverty as a result of the changes to tax credit. Can the Minister explain to the House, the country and my constituency why it is fair that three times as much will be taken from tax credits as will be raised in additional taxes on the banks?

Miss Smith: What the hon. Gentleman needs to acknowledge is that we have a sustainable way of including the banks in our public spending and public taxation plans; under his party’s plan, that revenue would have been spent five times over, if not more, and that is if it were done over multiple years, as ours is.

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T7. [91224] Mel Stride (Central Devon) (Con): Youth unemployment under the previous Government grew by more than 40%. That is 277,000 more young people out of work from the time they first came to office. Does my right hon. Friend agree that the best way to tackle youth unemployment is not to invest in wasteful schemes such as the future jobs fund, but to invest in skills for young people, which means apprenticeships, which this Government are delivering?

Danny Alexander: My hon. Friend is right to point out that youth unemployment has been rising since 2004, which suggests that it is a deep-rooted structural issue in our economy, not just the subject of political knockabout at the Dispatch Box. That is why we are, as a Government, investing far more in apprenticeships. That is a very good way to give young people the skills that they need to survive and thrive in today’s labour market. That is why, in relation to youth unemployment, we will not be deflected from the path that we are on.

Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): The Government’s national insurance holiday for new companies to employ new workers has been acknowledged by the Prime Minister to be a flop. So far just £6 million has been spent on supporting jobs and £12 million in administering them, out of a budget of £1 billion. Will the Minister consider taking the advice of the Federation of Small Businesses and extending that support to all small businesses prepared to take on new staff?

Mr Gauke: The take-up has indeed been disappointing, but there have been 12,000 successful applications and we estimate that about 40,000 jobs have been supported in total. There are 17 participating businesses in the hon. Gentleman’s constituency. If I may correct him on one thing, the administration costs are not £12 million, but £325,000. As for extending the scheme further, we have to bear in mind the cost. We are concerned about that, even if the Opposition are not.

T9. [91226] Sir Alan Beith (Berwick-upon-Tweed) (LD): I thank the Chief Secretary to the Treasury for his help in securing the extension of the north-east enterprise zone into Northumberland, which could bring jobs to my constituents in south-east Northumberland. Will enhanced capital allowances be available within the extended area?

Danny Alexander: My right hon. Friend has worked assiduously on behalf of his constituents to ensure that the enterprise zone includes the port of Blyth and the land at East Sleekburn, which will enable private sector firms to come into the area blighted by the problems at Alcan. Capital allowances will of course be available within the enterprise zone, and that will certainly include this territory.

Caroline Lucas (Brighton, Pavilion) (Green): The huge reserves of coal, oil and gas held by companies listed in the City of London have been called a sub-prime asset, because the global drive to reduce emissions is likely to cause fossil fuel reserves to lose value. Has the Minister any plans to ask the Financial Policy Committee to examine the impact of over-exposure to high-carbon assets by London listed companies, and what other plans has he to remove the carbon bubble from our financial system?

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Danny Alexander: The hon. Lady asks a good question. The Government’s priority in this regard is precisely to support the expansion of renewable energy, which is a vital part of our future energy strategy. That is why it is a key priority in the national infrastructure plan and why we are investing £3 billion through the green investment bank to stimulate investment. The high price of oil and fuel at the forecourt suggests that that asset is not declining as quickly as she suggests.

Jessica Lee (Erewash) (Con): Does my hon. Friend agree that local enterprise partnerships, such as Erewash Partnership in my constituency, play a vital role in advising SMEs on the difficulties with the availability of credit and can provide an overview for banks and the Government on the current concerns?

The Financial Secretary to the Treasury (Mr Mark Hoban): My hon. Friend makes an important point. It is absolutely vital that businesses and banks engage together to understand the challenges businesses face. We have taken a number of measures through the seed enterprise investment scheme, relaxing the rules on venture capital trusts and enterprise investment schemes, to encourage more equity funding for business. We are working closely with the banks to ensure that we do all we can to reduce the cost of funding to SMEs.

Jim McGovern (Dundee West) (Lab): Yesterday I found myself again agreeing with a Government Minister, at least in part, when the Under-Secretary of State for

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Work and Pensions, the hon. Member for Basingstoke (Maria Miller) said in answer to a question from my hon. Friend the Member for Midlothian (Mr Hamilton) that the most sustainable way to reduce child poverty is through parents going to work. GMB, my old trade union, today published a study showing figures suggesting that, on average, eight jobseekers are chasing every vacancy in Scotland, and unfortunately in Dundee the figure rises to 12 jobseekers for every vacancy. What are the Government doing to address this scandal, and are they working with the Scottish Executive on the matter?

Danny Alexander: I am sorry if agreeing with a Government Minister makes the hon. Gentleman uncomfortable, but he is of course right that work is the best route out of poverty. That is the driving force behind our welfare reforms, the Work programme, which is the most extensive initiative ever undertaken to help people off benefits and into work, and our youth contract. Of course the country is in very difficult economic circumstances, but the Government are doing everything we can to support people off benefits and into work for precisely the reason he gives.

Mr Speaker: Order. I am sorry to disappoint colleagues, but questions to the Treasury team, rather analogous to questions to the Foreign Secretary and his colleagues, tend to beat the box office records. We must now move on.

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EU Sanctions (Iran)

3.33 pm

Robert Halfon (Harlow) (Con): (Urgent Question): To ask the Foreign Secretary if he will make a statement on EU sanctions relating to Iran and the threat from Iran to close the strait of Hormuz.

The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague): Yesterday I attended the EU Foreign Affairs Council in Brussels, where member states agreed a new and unprecedented set of sanctions against Iran. These include a phased oil embargo, a partial asset freeze of the central bank of Iran, measures against Iran’s petrochemical sector and a ban on Iranian transactions involving gold. This is a major increase in the peaceful, legitimate pressure on Iran to return to negotiations over its nuclear programme. It follows the financial measures that the United Kingdom imposed on 21 November and the widening of EU measures on 1 December. Sanction measures, often close to those of the EU, have been adopted by the United States, Canada, South Korea, Norway, Switzerland and Japan. These are in addition to the sanctions imposed by the United Nations Security Council. At our joint press conference this morning, the Australian Foreign Minister announced that his country will replicate these new EU sanctions, and we will urge other nations to do the same.

Iran is in defiance of six United Nations Security Council resolutions, which call on it to suspend its uranium enrichment programme and to enter negotiations. Its recent decision to enrich uranium to 20% at an underground site in Qom demonstrates the urgent need to intensify diplomatic pressure on Iran to return to negotiations. The programme has no plausible civilian use, and Iran tried to keep it secret.

The International Atomic Energy Agency has expressed serious concerns about the possible military dimensions of Iran’s nuclear programme, and Iran is now in breach of 11 resolutions of the IAEA board of governors.

Sanctions are a means to an end, not an end in themselves. Our objective remains a diplomatic solution that gives the world the confidence that Iran’s nuclear programme is for purely peaceful purposes. We are ready to talk at any point if Iran puts aside its preconditions and returns to negotiations.

Iranian Vice-President Rahimi was reported as saying in December:

“If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz.”

It must be borne in mind, however, that 95% of Iran’s oil exports, representing more than 80% of its foreign earnings, transit the strait of Hormuz, so it is very much against Iran’s interests to close the strait to oil exports.

Britain maintains a constant presence in the region as part of our enduring contribution to Gulf security, and the Royal Navy has been conducting such patrols since 1980. At the weekend, HMS Argyll and a French vessel joined a United States carrier group transiting through the strait of Hormuz. This was a routine movement, but it underlined the unwavering international commitment to maintaining rights of passage under international law. Any attempt by Iran to block the strait would be both illegal and unsuccessful.

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We call on Iran to answer the questions raised by the International Atomic Energy Agency, to adhere to the UN’s Security Council resolutions, to suspend its enrichment programme and to return to the negotiations that are the only way of reaching a peaceful and long-term settlement in its dispute with the international community.

Robert Halfon: I am grateful to you, Mr Speaker, for granting this urgent question, and to the Foreign Secretary.

Iran is at crisis point. It is the new Soviet Union, of the middle east. It supports terrorism, undermines democracy and is trying to stop the Arab spring in Syria, but now we are threatened by an Iranian nuclear bomb, which risks the security of the Gulf states, Israel and the whole region.

Two weeks ago, Iran admitted that it had begun enriching high-grade uranium, and the regime is now threatening to close the strait of Hormuz, which deals with more than 20% of internationally traded oil. The UK Government could not have done more to try to contain the problem, with unprecedented action to isolate Iran’s financial sector by the Chancellor, and the extra EU sanctions imposed this week by the Foreign Secretary, but the question must now be asked: are we facing the prospect of a nuclear dictatorship in the middle east?

In the past, nuclear deterrents worked because of mutually assured destruction, but for MAD to work one has to be sane, and the Iranians have said that they would be happy to use nuclear weapons. Will my right hon. Friend set out to the House what military action Britain and the allies are planning in the strait of Hormuz? Will he explain what will happen if the latest economic sanctions do not work? What more is being done to bring Russia and China to the UN table?

Most people would accept that Britain has shouldered its fair share of the burden in tackling dictators, but it seems clear that the free world must send a message to Iran that, if it continues with its nuclear plans, it will lead to military action. No one wants war, but tragically it is looking increasingly possible. As The Times says today:

“One of the greatest civilisations in history has been superseded for a generation by an extremist regime perpetrating repression at home and aggression beyond its borders.”

Mr Hague: I am grateful to my hon. Friend, who pointed out at the beginning of his contribution that there are many grounds for quarrels with the Iranian Government, although I stress that this is not a quarrel with the Iranian people. The human rights record and much of the international behaviour of the Iranian Government, such as the recent plot to assassinate the Saudi ambassador in Washington—in addition to the nuclear programme—give grave cause for concern to the international community. But it is because there is a very serious danger of the wider proliferation of nuclear weapons across the middle east if Iran were to develop nuclear weapons capability, that this issue must be confronted and that we and our European partners, and so many other allies, take the strong stance that we do. I stress that we do so very much in the interests of avoiding conflict; this set of actions is not designed to lead to conflict, but to lead us away from it by increasing the pressure for a peaceful settlement of these disputes.

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I say to my hon. Friend that we have contingency plans for many contingencies—including, as my right hon. Friend the Defence Secretary said at our press conference this morning, for sending any further naval forces to that area. But we are not planning to take military action in the Gulf. We call on Iran to return to the negotiations that are, at all times, available to it.

Mr John Spellar (Warley) (Lab): May we welcome the Foreign Secretary’s comments? I apologise for the absence of my right hon. Friend the shadow Secretary of State, who is in Brussels today. We also welcome the extensive international engagement in this policy—not only from our European partners but, as the Foreign Secretary said, from our long-standing friends and allies from Australia, whose Defence Minister, Stephen Smith, and Foreign Minister, Kevin Rudd, are in town today to show their support.

Will the Foreign Secretary outline the reaction from the main oil consuming countries in Asia, which have a higher dependence on Iranian oil, to the policy of a ban on crude oil imports from Iran and, equally importantly, on the export of refined products back to Iran? Given the effect that these necessary sanctions will have on already vulnerable economies in southern Europe, will he indicate what measures are being taken to protect those economies?

In the wider context, will the Foreign Secretary outline how much support this policy has managed to garner at international level—particularly from Russia, China, India and Japan? The ban by Russia and China on supplying military equipment, as well as training and maintenance, is most welcome, but what assurances are they giving that that will be continued and what influence are they exerting on Tehran to ensure a more responsible attitude from the regime?

In that context, on the diplomatic front we have seen reports that, at a meeting in Moscow on 18 January, Russian officials presented the Iranians with a proposed framework for negotiations with the P5 plus one, possibly based on Russian proposals made in August. Will the Foreign Secretary report to us any feedback that he has had from the Russians?

The right hon. Gentleman rightly stressed that we have no quarrel with the Iranian people. Before the Arab spring, there was the green movement in Iran, where we saw huge numbers on the streets of Tehran and other Iranian cities seeking reform. Although it was barbarically repressed, it showed the very considerable public alienation from the regime. What assessment has he made of the state of public opinion in Iran and of divisions in the political elite?

What weight do the Government give to the threat by Iran to attempt to close the strait of Hormuz? Do they intend to participate in any international naval taskforce to keep the strait open? Given the defence cuts, can the right hon. Gentleman guarantee that vessels could be made available? What agreement have the Government obtained from other P5 countries for such action, as well as from those in the Gulf?

Finally, although we support the steps being taken to bring pressure to bear on the Iranian regime, all of us recognise the fragility of growth in the European economy at the moment. Given the importance of oil imports to that growth, will the Foreign Secretary assure us that

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the economic impact of the steps taken have been discussed with the Chancellor and that contingency plans are in place?

Mr Hague: I am grateful to the right hon. Gentleman for his supportive remarks and welcome for the broader international engagement and endorsement of our policy. He is right to draw attention to the visit of the Australian Foreign and Defence Ministers, which, as in so many ways, has been very helpful in this regard.

I shall not necessarily take the right hon. Gentleman’s questions in the order in which he asked them. On the question about the political situation in Iran, of course that can sometimes be difficult to interpret from the outside. There are many reports of deep divisions within the Iranian Administration—sometimes, of such divisions between the supreme leader and the President, although not necessarily about this issue. As the right hon. Gentleman said, at the time of the last presidential elections in Iran, we saw signs of deep discontent among the ordinary people of Iran. Sadly, such is the repression and the appalling human rights record of the Iranian Government that the people of Iran do not have much opportunity to voice their discontent. The principal opposition leaders are under house arrest. Iran, alongside China, conducts one of the largest numbers of executions in the world, with 50 executions already so far this year. It is an appalling human rights record that does not help anybody in giving voice to their real opinions.

The right hon. Gentleman asked about Asian countries. Japan has indicated over the past few weeks that it would not increase its oil imports from Iran and has mirrored some of the sanctions that the European Union has taken before. China has expressed its concern about recent developments within Iran, including during Premier Wen’s visit to the Gulf in recent days. In Qatar, he particularly remarked on China’s growing concern when he said that it

“adamantly opposes Iran developing and possessing nuclear weapons.”

Indeed, last month China approximately halved its oil imports from Iran, although I must point out that that is not because China necessarily agrees with this approach. Moreover, given its dispute with Iran about credit terms, it is expected to continue its halving of oil imports through February. In general, the demand for Iranian oil from the main Asian economies is down over recent weeks and is not replacing revenue that Iran will lose from the European Union.

On vulnerable economies, it is largely because of Greek concerns and Greece’s importation of large quantities of oil that we are phasing in this embargo, which will come into full effect on 1 July. We and many other countries would have preferred an earlier date, but we were happy to settle for that to give Greece time to adjust. If there are any difficulties for Greece and its energy supplies after that, we will of course all try to assist.

Russia has been promoting what it calls a “step-by-step” approach to negotiation. It is true that it has been pushing Iran hard to return to talks. Like the rest of the E3 plus 3 countries, Russia wants a diplomatic breakthrough. In discussion with us—also one of the E3 plus 3—it has not been able to confirm that Iran is serious about negotiations, but I am sure that Russia and China will continue to press Iran, in a different way

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from us, to return to negotiations. In the meantime, we, like so many nations of Europe, the United States and, as I have pointed out, many other parts of the world will increase the pressure on Iran to do so.

Sir Menzies Campbell (North East Fife) (LD): I am sure that my right hon. Friend would have no difficulty in agreeing that the environment of the strait of Hormuz is potentially extremely dangerous. Having regard to the nature of our relations with Iran at the moment, what steps has he been taking to enlist the support of countries that have better relations with Iran than ourselves to ensure that it exercises restraint in the strait of Hormuz and does not, to put it rather dramatically, cause a conflagration?

Mr Hague: We certainly talk a great deal to countries that have excellent relations with us and better relations with Iran than we have. That is one of the ways we try to understand the Iranians’ position and to make clear to them our position and our resolve on these issues. We do that with countries such as Oman and, in particular, Turkey. I discussed the situation at length with the Turkish Foreign Minister last week. All those countries use their good offices on Iran to say that it should exercise restraint, and I know that they will continue to do so. Moreover, all common sense goes in the direction of exercising restraint because, as I have pointed out, 95% of Iran’s oil exports go through the strait of Hormuz, and it has to factor that into any calculation that it makes about what to do there.

Mr Jack Straw (Blackburn) (Lab): I chair the all-party group on Iran with the hon. Member for Wyre and Preston North (Mr Wallace).

While I understand the decisions that have been made by the European Union, may I press the Foreign Secretary on what action he is taking to reinvigorate the E3 plus 3 formation, which was absolutely critical in getting the six Security Council resolutions to which he refers? My anxiety about these sanctions is that without China and Russia on board there will be the most substantial leakages.

Secondly, I want to press the Foreign Secretary on the issue of military action. We know that there are strong demands in parts of the Israeli Administration for unilateral action, and that is running into the United States’ presidential election. Does the Foreign Secretary accept that the United Kingdom has to set out a policy on this matter? Does he also agree that we should not in any way, including through Diego Garcia, participate in any kind of military action without the clearest legal basis from the Security Council?

Mr Hague: The E3 plus 3 is indeed the basis on which to take forward negotiations and it is still available to do so. Last year, there were negotiations between Baroness Ashton, the EU High Representative, on behalf of the E3 plus 3, and Iranian representatives. Those did not get anywhere because of the preconditions that Iran attaches to any discussion of these matters, which amount to the dropping of all sanctions at the beginning and the recognition of Iran’s right to enrichment at the beginning. That is not much of a basis on which to

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negotiate about those things. It has not been possible, despite the best efforts of all six countries and the European Union, to have a successful negotiation. The door remains entirely open to that, as Baroness Ashton stressed again and as I stressed yesterday. That remains the framework in which we would like to have these discussions. China and Russia are continuing, rightly, to press Iran on this. That process remains very much alive. It does not require reinvigoration, but it does require Iranian engagement.

The right hon. Gentleman asked about military action. I stress that we are not calling for, or advocating, military action. It is the job of our armed forces to prepare for many contingencies, but we are not calling for that. We have successfully called for and introduced what I hope will be effective sanctions because we do not want a military conflict. He knows that when we became engaged in a conflict under a UN resolution in Libya last year, we came to the House of Commons for the authority to do so. That is how we will approach any conflict anywhere in the world.

Several hon. Members rose

Mr Speaker: Order. Accommodating the level of interest in this matter will require brevity, which will be exemplified, I am sure, by the Chairman of the Foreign Affairs Committee.

Richard Ottaway (Croydon South) (Con): I welcome the Foreign Secretary’s approach. The challenge is how to tighten our grip on the Iranian economy without damaging our own. Has he received assurances from other oil producers, such as Saudi Arabia, that they can up production to replace the oil that will not be coming to Europe?

Mr Hague: No. It is a matter for each country to decide whether to change its oil production. This and many other factors affect the oil market. The price of oil is very similar today to what it has been over the past few months. Yesterday, the main benchmark price was $110 per barrel. That is a couple of dollars different from the price in December, which covers the period in which the discussion about sanctions and the strait of Hormuz has been going on. Many other factors affect the oil market. Some countries are increasing their oil production anyway. Iraq is planning huge increases in oil production and some Libyan oil production is coming back on stream. There are many forces at work, both positive and negative, in the oil market. We should not, therefore, exaggerate the effect of this measure.

Keith Vaz (Leicester East) (Lab): I fully support what the Foreign Secretary has said today. When he last addressed the House on this question, I asked about the effect of this diplomatic crisis on the 75,000 British Iranians who live in this country and on those who wish to visit them from Iran. He said that he would name a third country to which applications could be made. What is the name of that third country?

Mr Hague: That issue remains a concern. The right hon. Gentleman is right to suggest that an unwanted side effect of the Iranian invasion of our embassy compound, the closing of our embassy there and the consequent closing of the Iranian embassy here is that

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it is harder for Iranians to visit this country and to get a visa to visit this country. Of course, British nationals in Iran can seek assistance from other EU embassies in Iran. We do propose to name a third country. We have identified that country and it has, in turn, approached Iran for permission to act. However, Iran has not yet given that country permission to act on behalf of the United Kingdom. The delay is with Tehran, not with London.

Tony Baldry (Banbury) (Con): Given the recent international behaviour of the Iranian Government, is not one of the sad truths that we cannot trust any of the undertakings that they give? We therefore need two things from them—not simply an unconditional return to negotiations but preparedness to give unfettered access to International Atomic Energy Agency inspectors to go wherever in Iran they want to. That would give them the competence to find out whether Iran was complying with whatever it told the international community it was doing.

Mr Hague: Yes, my hon. Friend is absolutely right. The verification of any agreement with Iran would be very important, and the presence of IAEA inspectors there is crucial. I referred earlier to the enrichment of uranium to 20% at the underground facility that Iran has built in Qom, which my hon. Friend will remember Iran kept secret for a long time. It was exposed by western nations including the United Kingdom, and if that had not happened, Iran would probably have kept it secret to this day. The level of trust is not very high.

Jeremy Corbyn (Islington North) (Lab): Iran remains a member of the nuclear non-proliferation treaty, and the last review conference called for a nuclear-free middle east. There is, however, one nation in the middle east that does have nuclear weapons, and that is Israel. Does the Foreign Secretary not think that it would be useful if we took up the suggestion of the NPT review conference to convene a denuclearisation conference of all nations in the region, in order that there could be direct talks? Iran would then be in a position to give assurances that it had no intention or wish to develop nuclear weapons.

Mr Hague: Indeed, the commitment to have such a conference in 2012 was given at the NPT review conference in 2010, and plans are going ahead for that conference. Of course, it does not help anyone trying to persuade Israel not to have nuclear weapons if Iran continues a nuclear weapons programme that would have the effect, if it were brought to fruition, of many other nations in the middle east pursuing a nuclear weapons programme. That is absolutely the wrong way to go about trying to persuade Israel to adhere to the non-proliferation treaty.

Mr Ben Wallace (Wyre and Preston North) (Con): I, too, declare that I am a co-chairman of the all-party group on Iran.

If an ordinary Iranian looks out from the inside, he will see that he is surrounded by Israel, Pakistan and India, all countries that developed a nuclear weapon illegally without any UN checks and still refuse to sign any UN undertaking. What message does the Foreign Secretary have for ordinary Iranians that the reason for

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what we are doing is that something different is going on in this case and that the rewards and the outcome are worth it?

Mr Hague: That is a very important question. The reason something different is happening is partly because of one of the factors to which I was just referring—we can be fairly confident that if Iran develops a nuclear weapons capability, other nations will seek to do so. That will not help the security of the people of Iran; it will simply mean that the world’s most unstable region starts to have a large number of the world’s most destructive weapons. That is not in the interests of the people of any of the countries there. Secondly, Iran’s record of concealment, which we have just discussed, and statements by the President of Iran that have included his saying at one stage that Iran would like to wipe Israel off the map, create a focus of attention on Iran’s nuclear plans to an even greater degree than on those of any other country.

Mr Denis MacShane (Rotherham) (Lab): The Foreign Secretary referred to our oldest D-class frigate, which was in the flotilla that just went through the strait of Hormuz and displaces less than 5,000 tonnes, but without aircraft carrier power Britain can have no maritime power projection. I wish our Foreign Secretary well, and I do not want him to go into the conference chamber naked, so will he talk to Brazil, Argentina and Thailand, which have had the good sense to keep their aircraft carriers, and see whether we can borrow or sub-let one while the crisis unfolds?

Mr Hague: Our frigate sailed through the strait of Hormuz in the company of the USS Abraham Lincoln, one of the most powerful aircraft carriers on earth.

Mr John Baron (Basildon and Billericay) (Con): Given that Iran is a state in transition, with multiple centres of authority, I suggest to the Foreign Secretary that the west’s policy of sabre rattling and sanctions has not only been unsuccessful, but serves to reinforce the hardliners in the country at the expense of ordinary Iranians. Has the time not come for a fundamental reappraisal of our relationship with Iran, similar to what President Nixon did with China when he recognised that country’s new status in the 1960s?

Mr Hague: If there were a reasonable hope of any such policy succeeding, of course there would be a case for it. In the Foreign Office, I regularly review our overall policy and the alternatives to it. However, at every stage, I and my colleagues on the National Security Council reached the view that this is the right policy—as have the Governments, as my hon. Friend can gather from what I am saying, of the entire western world. We have come to that conclusion because Iran has resisted or rebuffed efforts to create a better relationship. We offered substantive and serious help with the development of civil nuclear power in Iran, provided there was no nuclear weapons programme. I often point out that one of my predecessors, the right hon. Member for Blackburn (Mr Straw), made heroic efforts to improve relations with Iran on several visits there, and attempted the rapprochement for which my hon. Friend calls. None of that has worked, despite the best efforts of all involved. The policy choices are whether to do what I have set out

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to increase the peaceful pressure on Iran, to leave a situation in which military conflict is more likely, or to do nothing. The latter two options are not very attractive.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): What steps are being taken to prevent third countries from trading on behalf of Iran, thereby circumventing sanctions?

Mr Hague: As the hon. Lady can gather, many nations are joining in the measures and similar measures. Of course, we will talk to other nations around the world about their own policies. For instance, we have discussions with the Gulf states, which are also deeply concerned about Iran’s nuclear programme. It is also worth pointing out that the United States Congress has adopted sanctions with extra-territorial effect. They have a major effect on transactions from the financial institutions of other nations and trading in oil by other nations.

Mark Pritchard (The Wrekin) (Con): Although we all want diplomacy to work, the nuclear clock is ticking, and if sanctions do not work will the Foreign Secretary put it on the record that all options remain open to stop Iran becoming a nuclear-weaponised state?

Mr Hague: Yes, I repeat what I and previous Governments have said: all options remain on the table. However, I also stress that the policy is important and that we are pursuing it because we do not want Iran to be armed with nuclear weapons and nuclear proliferation in the middle east, but we also do not want military conflict over that or any other issue in that region. We are pursuing that policy, but of course all options remain on the table for the future.

Caroline Lucas (Brighton, Pavilion) (Green): It seems likely that ordinary Iranian citizens will suffer from the sanctions, but far less clear that the regime itself will suffer. Indeed, some analysis suggests that sanctions will strengthen the regime. What assessment has been done of the impact of sanctions on ordinary Iranian people? What efforts have been made to ascertain their views?

Mr Hague: We are not in a position to conduct a referendum in Iran on the measures. I wish that there could be an open consultation with the people of Iran, or even that the Iranian Government would consult them on domestic issues. As I said earlier, free expression of opinion is not easily permitted in that country. Clearly, it is not possible to consult the Iranian people.

For a long time, the measures that we imposed were directed at the financing of the nuclear programme and the finances of the Iranian state. Of course, the measures that we are discussing are unprecedented and wide ranging, and can have a wider effect. However, I would argue that that is better than the alternatives of doing nothing or making a military conflict more likely. I think that they greatly concern the Iranian regime, and that is why we hear statements such as that from Vice-President Rahimi on 27 December, and why we have seen any flexibility about negotiations from Iran in the past 12 months only on each occasion when we are on the point of imposing additional sanctions. We have

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been through that several times and learned not to be deterred from imposing additional sanctions. The Iranian Government will now have to try to deal with the situation.

Martin Horwood (Cheltenham) (LD): I welcome the European Council’s robust stance, and the confirmation by the Council and the Foreign Secretary of the peaceful objectives of the process—the resumption of talks about the nuclear programme—but what active steps are the British Government or the European Union taking to facilitate the start of the talks and the de-escalation of this dangerous crisis?

Mr Hague: We are taking very active steps to facilitate that. Baroness Ashton wrote, I believe, from memory, in October—three months ago—to the Iranian negotiator Mr Jalili setting out the terms of a new round of negotiations and inviting Iran to them. The EU has not received a formal reply. The opportunity has been clearly set out on behalf of the E3 plus 3 and it will remain.

Mr Frank Roy (Motherwell and Wishaw) (Lab): Will the Foreign Secretary give an assurance that he will report to the House before there is any escalation of the conflict—armed or otherwise—with Iran, especially in the strait?

Mr Hague: Yes. I stress that the Government are not seeking an escalation of any conflict—we are seeking a resolution—but I will of course come back to the House as necessary.

Mr Julian Brazier (Canterbury) (Con): Does my right hon. Friend agree that more aircraft carrier capacity is not a huge priority in an area with plenty of available land bases? Much more important is the potential threat of terrorists sowing mines along the shallow waters of the western Gulf using fishing vessels, for which Britain’s naval contribution of mine-clearing vessels is pre-eminently central.

Mr Hague: My hon. Friend is absolutely right. Indeed, our principal military contribution in the Gulf is the minehunters based in Bahrain. They are enormously respected in the region and are extremely expert in what they do. They are a very important part of our presence there.

John McDonnell (Hayes and Harlington) (Lab): There have been reports and allegations that covert military operations have already taken place in Iran, with bombings and assassinations. Will the Foreign Secretary confirm that the UK Government and the UK are not involved in the operations and that they do not support such intervention by foreign forces?

Mr Hague: We are not involved in, and we do not support, assassinations. Beyond that I do not comment on intelligence matters.

Nadhim Zahawi (Stratford-on-Avon) (Con): As Iran begins to feel the squeeze, it may not be capable of closing the strait of Hormuz, but it is very good at using proxies to destabilise its neighbours—the fragile democracy in Baghdad and the Kurdish region. What steps are we taking to support those institutions and those parties that are working to bolster rather than break up that democracy?

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Mr Hague: We very much support democracy in Iraq. It is certainly right that Iran can often be a malign influence there. We also want stability in Lebanon and a resolution to the appalling situation in Syria. In all those situations, Iran has become a malign influence. Our direct leverage to alter events in Iraq is very limited now, but we will use our influence and our strong diplomatic presence to bolster democracy there.

Derek Twigg (Halton) (Lab): Given the increased pressure from sanctions and the increased military presence in the strait of Hormuz and the region, has the Foreign Secretary held discussions with the Secretary of State for Defence to satisfy himself that the chiefs of staff and any commanders in charge of our assets in the region are clear on the rules of engagement? I am thinking in particular of the Cornwall incident. What would happen should the Iranians try something like that or worse again?

Mr Hague: I believe that all of our vessels in the region are very clear about the rules of engagement and where they should or should not go. Such matters are clearly set out and agreed within government between the Ministry of Defence and the Foreign Office, so I do not think that there is any lack of clarity for anyone involved.

Patrick Mercer (Newark) (Con): I understand and fully support the economic sanctions that the EU is taking. Can the Foreign Secretary reveal whether anything else can be done directly and specifically to thwart Iran’s nuclear capability and the industry that surrounds it?

Mr Hague: I am reporting to the House on the European Union sanctions. As my hon. Friend will gather, I am not advocating military action, and if he is asking about other areas of activity, I cannot go into them in the House.

Steve McCabe (Birmingham, Selly Oak) (Lab): The Government have rightly gained credit for the support that they have shown opposition movements elsewhere during the Arab spring. Why do they set their face so implacably against opposition movements when it comes to Iran?

Mr Hague: I am not aware that that is our approach. Indeed, I deplored earlier the house arrest and imprisonment of opposition leaders in Iran, and the brutal and repressive treatment of opposition spokesmen and demonstrations. At the same time, the future of Iran is for the Iranian people—at least, we hope so. It is very important that opposition movements with which anyone in this country associates themselves are credible and likely to represent the Iranian people.

Dan Byles (North Warwickshire) (Con): What assessment has the Foreign Office made of the time frame within which Iran could develop a credible nuclear capability if it is allowed to continue down that path unchecked?

Mr Hague: My hon. Friend will see many estimates and much speculation, and it is best to take all of them with a pinch of salt. Iran is currently enriching uranium to 20%, which is not sufficiently high grade for a nuclear weapon but creates a larger amount of uranium that, at

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a later stage, could be enriched quite rapidly to 90% and more, which is a faster process. There are many different estimates of how long that could take, depending on the quantity involved and the number of centrifuges available. He will see estimates of numbers of months rather than years for how long it would take go beyond the 20% level to the higher enriched level. What we do know is that this has become a sufficiently urgent problem that we have to address, with the international community showing unity and resolve, and that is what we are doing with these measures.

Thomas Docherty (Dunfermline and West Fife) (Lab): I am sure Members on both sides of the House understand the need for a longer lead-in time so that our European neighbours can seek alternative sources of energy, but if they were able to do so quicker than anticipated would the sanctions be brought forward?

Mr Hague: I do not anticipate the sanctions being brought forward. This is the result of a long and complex negotiation over the last few weeks. But I do anticipate that purchasers of Iranian oil in the European Union will decline steadily. It is not a continuous amount and then a cliff-edge effect. The effect of the phasing and the coming into force on 1 July is that remaining purchases will be declining long before then.

Mr Philip Hollobone (Kettering) (Con): Is not the Iranian regime hellbent on developing a nuclear weapon? Nothing will stop it short of a breakdown in the developmental process or the overthrow of the regime either from inside Iran or by military action. If sanctions do not work, would not the response of the Iranian regime be to redouble its efforts to develop a nuclear weapon before effective sanctions bite?

Mr Hague: In many ways that is the case for wide-ranging sanctions policies that address the oil industry and the financial sector. If they are worth doing at all, given the gravity of the situation, sanctions are worth doing seriously. That was my argument at the Foreign Affairs Council yesterday. My hon. Friend is right that at the moment the Iranian leaders are clearly determined on the development of nuclear weapons capability. However, I do not think that one can speculate with certainty about what may happen over the coming year—about the effect of sanctions or any flexibility that may be shown in negotiations—so I am not prepared to say that there is no possibility of such a policy working and that one must therefore reach for other solutions. We want sanctions, coupled with negotiations, to work, and this is not the time to speculate about what might happen if they do not.

Jim Shannon (Strangford) (DUP): The Minister will be aware of the close relations—or perceived close relations—between Iran and Syria. Will he ensure that the sanctions bite, or will he have to consider widening them, perhaps against other countries and even the sanction breakers?

Mr Hague: We have already imposed an oil embargo on Syria and a wide range of other measures. Indeed, we widened the sanctions on Syria yesterday to include a further 22 individuals and eight entities. I think that we will be able to make the sanctions regime effective

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and that it will be well adhered to by members of the European Union and the other countries that are committing themselves to it. We will therefore concentrate on making the sanctions regime work, rather than imposing additional sanctions on people who might not support it.

Mr Matthew Offord (Hendon) (Con): Will the Foreign Secretary assert that Iran’s development of a nuclear weapon will be a red line issue for the United Kingdom?

Mr Hague: My hon. Friend can gather that it is indeed a red line issue; that is why we are addressing it in this way. The Prime Minister, along with other European leaders—Chancellor Merkel and President Sarkozy—has said that we will not permit the development of a nuclear capability by Iran. That is why we are adopting this policy.

Rehman Chishti (Gillingham and Rainham) (Con): To counter the threat from Iran, what steps are we taking to strengthen our strategic relationship with key regional powers such as Saudi Arabia? By way of a declaration, let me say that I am vice-chairman of the all-party parliamentary group on Saudi Arabia.

Mr Hague: We have strong relations with the Gulf states, many of which we have intensified over the past year, particularly our relationship with the United Arab Emirates, although we enjoy excellent relations with all those states. My hon. Friend will know about our long and historic relationship with Oman, and about the many difficulties faced in Bahrain, including by the people of Bahrain over the past year. My right hon. Friend the Prime Minister visited Saudi Arabia earlier this month. Saudi Arabia is an important ally and an important force for stability and peace in the region, so I salute my hon. Friend’s work with the all-party group.

Kris Hopkins (Keighley) (Con): What efforts have the UK Government and our allies made to communicate directly with the people of Iran? It is important that we demonstrate that our argument is not with them, but with the despotic leadership of that country.

Mr Hague: This is very important. Ten days ago I did an interview on BBC Persia to communicate directly with the people of Iran and make clear our arguments, and we have done that on many other occasions. The Under-Secretary of State, my hon. Friend the Member for North East Bedfordshire (Alistair Burt), has done the same on previous occasions, and we will keep up our efforts to communicate with the people of Iran. Needless to say, however, the Iranian authorities often attempt to block our attempts to do so.

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Points of Order

4.19 pm

Rachel Reeves (Leeds West) (Lab): On a point of order, Mr Speaker. The International Monetary Fund has today revised its growth forecast for 2012 downwards, from 1.6% to 0.6%, and asked the Government to reconsider the pace of their deficit reduction plans. Have you had any indication that the Chancellor plans to come to the House to give the Government’s response?

Mr Speaker: I have received no such indication, but I am sure that the hon. Lady will pursue these matters through the Order Paper and in other ways if she is dissatisfied with the position as it stands.

John Mann (Bassetlaw) (Lab): On a point of order, Mr Speaker. In answering a series of questions printed in Hansard on 19 January on 18 separate and current EU proposals on financial services, the Treasury Minister responded:

“When EU legislation is being reviewed or prepared, responses by the UK authorities to a public consultation will be made available on the Commission website.”—[Official Report, 19 January 2012; Vol. 538, c. 948W.]

When a Member of the House asks questions of the British Government, is it sufficient for them to be answered by reference to potential statements being put up on the European Commission’s website? Is it not the responsibility of the Minister to give an answer to the Member of Parliament?

Mr Speaker: I am grateful to the hon. Gentleman for his point of order. There has been no breach of order in the method that the Minister chose for his reply to the hon. Gentleman. The hon. Gentleman’s point of order will have been heard by those on the Treasury Bench, however, and I hope that, when framing answers, Ministers will take account of the convenience of right hon. and hon. Members in being able to access information. I recall from my own experience as a Back Bencher that it was exceptionally irritating when a series of carefully crafted written questions was responded to in a desultory and, some might have thought, a discourteous manner. To do so to the hon. Gentleman is certainly a hazardous enterprise, because he is bound to raise the matter on the Floor of the House, as he has just eloquently demonstrated.

Mr Gordon Marsden (Blackpool South) (Lab): On a point of order of which I have given you notice, Mr Speaker. I tabled two named-day questions for answer on 13 December by the Department for Communities and Local Government. They were factual questions about the payment of money for regional projects under the European regional development fund. Despite polite follow-up questions from my office, no reply was received until yesterday. I was surprised and concerned that the Minister responsible, the right hon. Member for Welwyn Hatfield (Grant Shapps), had inserted into his reply a tendentious, partial and lengthy attack on the previous Government, including inaccurate comments about me. The argument that we shout like mad and protest too much might come to mind, but is it not an abuse of the conventions and courtesies of the House to pervert a factual written reply to a Member in that way? Given

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that the reply has now appeared in


in that form, what recourse is available to enable it to be amended so that it reflects only the factual information that I requested from the Minister, and represents a response suited to a Minister of the Crown rather than a boastful rant more suited to a timeshare salesman?

Mr Speaker: I thank the hon. Gentleman for giving me notice of his point of order. I do not feel comfortable about commenting now on his question about retrospective amendment, but I can respond to him on two points. First, the content of ministerial answers is not a matter for the Chair, and the hon. Gentleman might wish to write to the Procedure Committee if, as is obviously the case, he is dissatisfied. Secondly, I will say that, in my view, Ministers should avoid putting in their written answers to written parliamentary questions any polemical matter that would not be allowed in the questions themselves. The Table Office regulates the manner of the asking of the questions, and Ministers must exercise some responsibility and demonstrate some courtesy in the manner of their answers.

Jeremy Corbyn (Islington North) (Lab): On a point of order, Mr Speaker. You very generously allowed the debate on the urgent question to carry on for 49 minutes, and there is obviously enormous interest in the situation in Iran. The Leader of the House is in the Chamber. Would you accept a request for a much fuller debate on the situation facing Iran in the very near future? Clearly, the whole situation is extremely dangerous.

Mr Speaker: I am grateful to the hon. Gentleman for his point of order. A senior Government Whip, chuntering rather helpfully from a sedentary position, says that there will be a defence debate on Thursday. I do not think that he was saying it for my benefit, but I am grateful to him nevertheless. That debate might provide a suitable vehicle for the hon. Member for Islington North (Jeremy Corbyn) to air his concerns. I do not want to be pedantic, but when he asks me whether I would accept such a request, he will know that the scheduling of business is a matter for the usual channels. Those on the Treasury Bench will have heard his point of order, and he will know that I allowed the debate on the urgent question to run for a substantial time because I felt that it related to a matter of the highest importance, on which a statement could have been—but did not have to be—volunteered by the Government, and in which there was very substantial interest. I hope that that will be taken into account, and that the Government will realise that Members want to be updated on the matter on a regular basis.

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Housing (Amendment)

Motion for leave to bring in a Bill (Standing Order No. 23)

4.25 pm

Mr Frank Field (Birkenhead) (Lab): I beg to move,

That leave be given to bring in a Bill to require the Secretary of State to make provision for the system for social housing allocation to give priority of choice of social housing to those with an exemplary tenancy record; to place a duty on housing associations to inform potential tenants about conduct of existing tenants in neighbouring properties; and for connected purposes.

I seek leave to amend the Housing Acts with one simple objective in mind: to put the good citizen in pole position in the allocation of the most decent and best housing association homes. Hardly a statement from any of our senior politicians today does not mention that they are standing shoulder to shoulder with the hard-working families of this country. It is a sign of the times in which we live that senior politicians feel that they have to affirm what most people would consider an axiomatic position for all politicians to occupy.

The Bill would define what we mean by hard-working. It would obviously include people who work hard—those who gain work and pay their taxes—but it would also have a more generous definition. As we all know from our constituencies, hard-working families have an extraordinarily important roll-over effect as regards community benefits. For example, the hard work that families put into raising their children means that they are not only a credit to the families concerned but diligent in their concern for their neighbours. We are all aware of the importance of the hard work people put into building up strong neighbourhoods, so the Bill’s definition of hard-working is generous and not mean.

The Bill would, I hope, encourage the Government to be more radical and in a form that is more just. They recently put out a consultative paper on who should get the best housing and under what conditions. The paper keeps in key position the six most favoured groups, who have been there for a long time. Let me remind the House of them: the two homeless categories; those families who are threatened with homelessness; those families who live in overcrowded or insanitary conditions; those of our constituents who wish to move to better accommodation on medical grounds; and those who can make a case for a move for other reasons.

Those categories would remain, but those who were simply—I emphasise that word—good citizens would join them. The other six categories would also be judged in the first instance on whether they were also good citizens, so a premier league would be formed of those of our constituents who were in a position to have first choice of all the social housing—the best social housing—when it became available.

The Bill has a second objective, which is to protect those good citizens from neighbours from hell—those chaotic families who cause such misery. The aim of the Bill is to put decent tenants on a par with the position of owner-occupiers, which was changed by the previous Government. Owner-occupiers who wished to sell and who had been plagued by antisocial behaviour had to declare that that had occurred. If they did not do so and the sale went through, they could be open to legal challenge.

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The Bill would deal with the two somewhat underhand moves made by many housing associations, in my constituency, and, I would guess, elsewhere. The first is dumping neighbours from hell next to good tenants without any warning whatever. The second is moving unsuspecting good tenants next door to neighbours from hell without any warning. The Bill would give all tenants the right to be consulted in such circumstances, the right to object and the right to legal redress. It is about trying to legislate to bring about what most of our constituents would regard as fair—to bring housing legislation on side with their gut feeling of what is fair.

Let me end with one last comment. My life is very different from those of my parents and grandparents because of the changes that the Attlee Government brought in and I think that we as a group of politicians are worryingly relaxed about rebuilding support for our welfare state. Many of our constituents do not believe that all the rules governing entitlement are fair. This year will be the first in which income transfers in the welfare state will burst through the £200 billion mark. If now is not the time for us to think carefully about all our reforms, particularly our housing reforms, and about putting on the statute book measures that most of our constituents would regard as fair and just, I cannot think of any other.

Question put and agreed to.


That Mr Frank Field, John Mann, Siobhain McDonagh, Mr Roger Godsiff, Hazel Blears and Natascha Engel present the Bill.

Mr Frank Field accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 30 March, and to be printed (Bill 276).

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Local Government Finance Bill

(Clause 1, Schedule 1, Clause 2, Schedule 2, Clauses 3 to 5, Schedule 3, Clauses 6 and 7, new Clauses relating to non-domestic rates and new Schedules relating to non-domestic rates)

[2nd Allocated Day]

Further considered in Committee

[Mr Lindsay Hoyle in the Chair]

Schedule 1

Local retention of non-domestic rates

4.32 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill): I beg to move amendment 3, page 16, line 29, at end insert—

‘(6A) Where the original calculations did not show that a relevant authority was to make a payment to the Secretary of State, but the revised calculations show that the authority is to make a payment to the Secretary of State—

(a) the authority must make that payment to the Secretary of State, and

(b) the authority must make a payment to the Secretary of State of an amount equal to the amount of the payment shown by the original calculations as falling to be made by the Secretary of State to the authority.’.

The Chairman of Ways and Means (Mr Lindsay Hoyle): With this it will be convenient to discuss Government amendments 4 to 16.

Robert Neill: It is a pleasure to be back here under your chairmanship, Mr Hoyle, dealing with the next part of the Bill. The amendments make changes to paragraphs 12 and 15 of the schedule and some consequential changes to schedule 3. To make sense of how they operate, it is sensible to look at the scheme of how part 5 works as a whole, which I shall do as briefly as I can.

In earlier debates on the Bill, the Government have made it clear that we have always accepted there would be a need for some redistribution of business rates from resource-rich to resource-poor authorities. We intend that the redistribution should be done by way of tariffs and top-ups, which have been mentioned in earlier debates. Those will be set at a level that ensures that no authority will be worse off on day one of the scheme than they would have been under formula grant. That is a principle that we have already established. So tariffs and top-ups will be set on day one so that no authority will be worse off. Thereafter, the intention is that tariffs and top-ups will be index-linked to the retail prices index so that the value of protection provided to top-up authorities is maintained in real terms. Under paragraph 10, the basis on which tariffs and top-ups will be calculated will be set out each year in the local government finance report, which the Secretary of State must lay before the House, and will thus be subject to the same scrutiny as the report.

Once the local government finance report is approved by the House—the normal procedure—paragraph 11 requires the Secretary of State to make the necessary

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calculation of the tariffs and top-ups to be paid, or received by each authority, on the basis approved in the report. After the calculations have been notified to the authorities, paragraph 12 requires them and the Secretary of State to make payments in line with them.

Part 5 of the schedule also provides, purely on a precautionary basis, that the Secretary of State may at any time up to 12 months after the year to which the local government finance report relates make a further set of calculations, but with the proviso that they are made on the same basis as set out in the report. That will make sure that in the unlikely event that we later discover a mistake in the original calculations we can put it right.

Lyn Brown (West Ham) (Lab): I am listening to the hon. Gentleman with interest. Is it not true that as a result of the financial calculations that will be made under the Bill, the 10% most deprived areas will lose four times as much as the 10% best-off areas?

Robert Neill: I do not accept the hon. Lady’s proposition. The whole point is that we are not dealing with the individual circumstances of authorities; that will be done in the report. The provisions set out the methodology. That is the important thing. It is worth bearing in mind that under the existing formula grant arrangements, there is provision that in exceptional circumstances the Secretary of State can make an amending report. In effect, these provisions mirror the position for dealing with the situation now; we are operating with a baseline and top-ups and tariffs, with the protection that they are uprated in line with inflation.

Paragraph 13 makes further provision to allow us to put right a mistake in the basis for calculation set out in the original report, but it is important to stress that if we did so we would again need to seek the approval of the House of Commons. The principle exists in the current system, although it has not had to be used; it is a fail-safe arrangement.

Mr Robert Syms (Poole) (Con): Is it the Government’s intention that the tariff will always equal the top-up—that no money will be top-sliced by the Department for Communities and Local Government—or will a reserve be kept?

Robert Neill: We will talk later about what is described as the central share, which is the proportion that may, as necessary, be retained by central Government. That is to ensure that at all times the settlement fits into the envelope of the control totals, but even so we have indicated that anything allocated under the central share will be returned to local government through other grants. Just as at present local authorities receive grants that are outside the formula grant scheme, so too can money be recycled to local government in the same way.

Mr Kevan Jones (North Durham) (Lab): If the answer to the question put by the hon. Member for Poole (Mr Syms) is that, yes, the Government will retain that money, are they not, by that mechanism, substituting for central Government funding by making sure that local government pays for all grants that go to local authorities? That is not the case at the moment.