New Clause 1 — Payment practices: retention of monies

Part of Oral Answers to Questions — Attorney-General – in the House of Commons at 4:30 pm on 18th November 2014.

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Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion 4:30 pm, 18th November 2014

I hope I am right in thinking that I can speak about any of the amendments in the new clause 1 basket. That seems be the case, and I am delighted, because it means that I can speak about my amendments 91 and 92.

The Bill contains important provisions to help United Kingdom firms to export, which is, of course, welcome news for many of them. However, UK export finance is, in the Government’s own words,

“not presently legally able to discriminate between classes or types of exports”.

Amendment 91 would alter the Export and Investment Guarantees Act 1991 to give the Secretary of State power to create a prohibitions list, thereby allowing the Government to ensure that UK export finance was not available to projects overseas that undermined other Government policies—specifically, policies on human rights and arms exports, and the 2010 coalition pledge to

“ensure that UK Trade and Investment and ECGD become champions for British companies that develop and export innovative green technologies around the world, instead of supporting investment in dirty fossil-fuel energy production.”

The amendment would not bind a Secretary of State, now or in the future, to introduce such a prohibitions list, nor would it prescribe what should be included in the list. It would merely allow the Secretary of State to create such a list if he or she chose.

Given that the amendment is so moderate, I find the Government’s arguments against a prohibitions list very unconvincing. First, they argue that it is better to consider projects on a case-by-case basis, but the case-by-case approach is not working, even when measured against the coalition’s own pledge to support “innovative green technologies”. In 2012-13, UK Export Finance gave a £147 million guarantee to support oil and gas exploration by Petrobras in Brazil, and £15 million in guarantees for a loan for a gas power project in the Philippines. In March 2014, support worth US$215 million was announced for a major petrochemical project in Vietnam. Nor is the current approach working when it comes to military exports to repressive regimes. Many of the deals that have been underwritten by UK export credit support are controversial, including sales of military aircraft to Saudi Arabia and Oman, armoured vehicles to Turkey, and intelligence equipment to Indonesia.

Secondly, the Government argue that the UK would be less likely to be effective in achieving change through multilateral routes if we acted unilaterally in this way. If that is the case, why do other countries have prohibitions lists? The Export-Import Bank of the United States, for instance, prohibits

“loans, guarantees, and insurance as to sales of defense articles or services”.

In June 2014, the German Finance Ministry announced that Germany’s official export credit agency would be prohibited from supporting nuclear contracts.

I simply do not think it credible to argue that if the UK showed some leadership and led by example, that would somehow hinder multilateral action to the same end. Indeed, the reverse is the case, as John Ashton, the UK’s top climate diplomat in former years, has pointed out. In his view,

“our influence has always depended on the credibility of our domestic policies. How can we expect to persuade others if we are not doing ourselves what we ask of them?”

Thirdly, the Government say that there is not a problem with coal, because UKEF has not funded a coal-fired power station overseas since 2002. However, there is clearly a loophole in the UK’s policy on export finance for coal projects abroad. Mr Umunna highlighted that loophole in a speech in April this year. He said that he would take action to close the loophole; I hope that he will follow through, and vote for my amendment today.

A change in export credits could also offer a boost to UK low-carbon industries seeking to expand overseas, as the chief executive of a British solar company operating in a number of African countries has explained. It is not just about stopping export finance in one area; it is about expanding it in others, so this is a pro-business proposition. Finally, I reiterate that this amendment does not specify what goes on the prohibitions list; it simply gives the Secretary of State the power to create one, in recognition of the fact that the current approach is failing on both human rights and environmental grounds, even measured on the Government’s own terms.

Amendment 92 would remove the clauses that impose a deregulation or business impact target on future Parliaments. In effect, the Secretary of State is trying to lock future Governments into continuing their obsession with deregulation. This provision was not subject to any public consultation. The regulatory reform factsheet published alongside the Bill gives some indication of the thinking behind the target, which is:

“To entrench in law the setting of a deregulation target—similar to the ‘One-in, Two-out’ approach—and transparent reporting of new regulatory burdens on business.”

One-in, two-out is a current Government policy which requires that for every £1 of additional cost imposed on business by new regulations, the Government must save businesses £2 by removing or modifying existing regulations. That policy is supported by the publication of statements of new regulation which are published every six months. This is not a good place to start. Nobody supports regulation for its own sake, but it is equally facile to oppose all regulation in a similar manner. The deregulatory zeal of this Government, which the new duty will entrench, is premised on just that: on the assumption that all regulation is bad and is something we should seek to minimise. This is a worrying example of the “market knows best” mindset and of the “Government’s role is to get out of the way” mantra, which is implicated in the banking crisis, air pollution, food safety scares, higher energy bills for householders and sky-high rents, to name just some examples.

I have to say that I am a little surprised that the Labour Front-Bench team has essentially just nodded along with the coalition on this. Its leader says he has learned that relying on a deregulated market economy will not be enough to tackle social injustice or deliver an efficient, sustainable economy.. He is right—I suspect many of his Back Benchers might agree—and that is because there is a fundamental problem with such a simplistic approach. A deregulation target, an arbitrary cap on business costs associated with regulations, or even a one-in, one-out approach all completely fail to recognise the benefits of regulation, not just for incredibly important social and environmental reasons, but for their economic benefits as well.

A report for the Department for Business, Innovation and Skills, for example, on product market and labour market regulation found:

“Regulations can have a positive impact on growth by removing certain market failures and improving economic efficiency.”

Just last week, the London School of Economics said that its new research on environmental regulation

“exposes myth that green regulations inflict major harm on business competitiveness and economic growth.”

Contrary to the apparent assumptions behind these clauses, environmental regulations in particular can boost the economy by encouraging business innovation and technological development. That same report also states:

“The costs of environmental regulations need to be weighed up against the benefits they provide and which justify the regulations in the first place. The benefits are often important and severely underestimated.”

It is not just in the environmental field either, as the Parliamentary Commission on Banking Standards found that

“the financial crisis demonstrated, particularly in view of the position of banks that proved too big to fail, the need for strong regulation to protect the public interest,”

I could go on, but I shall not. I shall begin to bring my comments to a close, but there are plenty of examples of business groups themselves saying that this approach to regulation, which is very simplistic, simply does not make economic sense.

Many people and many businesses are crying out for politicians to act in the public interest, not simply to shore up short-term corporate profit and business as usual, whatever the societal or environmental costs. I think we should remove our fingers from our ears and look again at whether this new deregulation duty will help or hinder. Of course it is important to focus, making sure regulations that are introduced are well-drafted and have a clear purpose—a topical example of which is new clause 2 on pubs, which I am delighted has just been passed. It is important to look specifically at the impact of regulation, or lack thereof, on the ability of SMEs to flourish, especially in markets dominated by a small number of large players, and it is important to remove outdated or unnecessary regulations, especially where, inadvertently or by design, they protect incumbents and get in the way of innovation, progress and consumer protection, which is what we are seeing in the energy and banking sectors. We do not need these provisions to do that, however. It is ironic that the imposition of this business impact target on future Governments fails on the tests one might hope are applied to good regulation: meeting a clear public interest objective and being based on strong evidence of need. At best it is a bureaucratic faff; at worst it is economically, socially and environmentally harmful, and I would like the Government, and maybe even the official Opposition, to think again.