House of Commons
BUSINESS BEFORE QUESTIONS
New Writ
Ordered,
That the Speaker do issue his Warrant to the Clerk of the Crown to make out a new Writ for the electing of a Member to serve in this present Parliament for the Borough constituency of South Shields in the room of David Wright Miliband, who since his election for the said Borough constituency has accepted the Office of Steward of Her Majesty’s Manor of Northstead in the County of York.—(Ms Winterton.)
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Oral Answers to Questions
(11 years, 7 months ago)
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Chi Onwurah (Newcastle upon Tyne Central) (Lab)
1. What steps he is taking to ensure veterans have access to appropriate mental health support.
The Minister of State, Ministry of Defence (Mr Mark Francois)
Before I answer the question, I am sure that the whole House will wish to join me in paying tribute to Lance Corporal Jamie Webb of the 1st Battalion The Mercian Regiment, who died in hospital in Kandahar on Tuesday 26 March 2013 from wounds received in Afghanistan on Monday 25 March. He died in the service of his country and our thoughts, and those of the whole House, are with his family and friends.
The Government are committed to ensuring that each and every one of the roughly one in 10 adults in this country who are veterans receive the support they require from across the whole of Government. Responsibility for delivering mental health support lies with the Department of Health, with which the Ministry of Defence works closely. Together we are providing greater access to mental health care for the first six months after discharge, an increase in the number of veterans mental health professionals, a 24-hour helpline in partnership with Combat Stress, and an online mental health support and advice website called the Big White Wall.
Chi Onwurah
The north-east provides more servicemen and women, proportionally, than any other region in the country, so I am pleased to say that we have award-winning mental health services such as a veterans well-being assessment and liaison pilot, in partnership with Combat Stress and the Royal British Legion. They expect a surge in referrals as our troops withdraw from Afghanistan next year, but the pilot ends in March. What plans does the Minister have to meet the expected increase in demand for mental health services?
Mr Francois
As I say, this will partly be a responsibility for the Department of Health, with which we work closely, but I take the whole issue very seriously, and I have tried personally to meet as many people as I can who are involved in this issue, for instance Sir Simon Wessely at King’s, Andrew Cameron at Combat Stress and Dr Hugh Milroy at Veterans Aid. The Government will continue to reach out to these and other experts to provide the right care for those to whom we owe such a debt of gratitude.
Mr James Gray (North Wiltshire) (Con)
Some great work has been done on mental health care for veterans since the seminal report by the Under-Secretary of State for Defence, my hon. Friend the Member for South West Wiltshire (Dr Murrison), some years ago. Does the Minister agree that there is a particular problem associated with members of the Territorial Army and other reservists who have come back from active service and who may not know that they have a mental problem? It may be many years later, when they have left the regimental family, that the problems become apparent. What extra can be done to help members of the Territorial Army who have been dispersed around the country?
Mr Francois
I understand the issue that my hon. Friend raises. Like him, I pay tribute to the excellent “Fighting Fit” report, which addressed mental health for both serving personnel and veterans. He may be aware that there was a lacuna a few years ago in that reservists returning from theatre were not subject to the same decompression package as regulars and did not necessarily receive the same mental health briefings as regular troops. We have changed that so that reservists coming back from theatre get the same decompression package and mental health briefings as their regular counterparts, which helps to alleviate problems later on.
Nick Smith (Blaenau Gwent) (Lab)
Will the Minister tell us what problems the Government have experienced in transferring medical records of former service personnel from Defence Medical Services to GPs?
Mr Francois
There has been an issue, partly compounded by difficulties relating to the matter of consent. The FMed 133, as the form is known, provides a summary of a person’s medical history while in the services, and is given to members of the services when they leave. They are encouraged to present it to their GP when they resettle in the civilian community, so that the GP knows that they served and are now a veteran. The form provides information to the GP on how to receive more detailed medical records from Defence Medical Services if the GP decides that that is appropriate.
Andrew Bridgen (North West Leicestershire) (Con)
Will my right hon. Friend outline to the House what specific help the Government are giving to Combat Stress in its valiant efforts to help the whole of the military services family with regard to mental health?
Mr Francois
We work very closely with Combat Stress, which is a valuable charity. As I intimated earlier, I recently met Andrew Cameron, who helps to run that charity so effectively. As my hon. Friend may know, it has a number of residential centres where people who suffer from such conditions as post-traumatic stress disorder can receive help over a period of weeks or months if necessary. I hope to visit one of these centres in the near future.
Chris Skidmore (Kingswood) (Con)
2. What steps he is taking to promote economic growth by encouraging defence exports.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
This Ministry of Defence is fully committed to the Government’s growth agenda by supporting responsible defence exports. From the Prime Minister down, ministerial colleagues and senior officials are actively supporting the British defence industry in international markets. For example, already this year my right hon. Friend the Secretary of State for Defence has promoted defence exports during his visits to Australia and Indonesia. I have visited India, United Arab Emirates, Qatar and Malaysia in support of exports and to lead delegations at defence exhibitions, and the Under-Secretary of State for Defence, my hon. Friend the Member for South West Wiltshire (Dr Murrison), who has responsibility for international security strategy, has just returned from supporting defence exports in Libya and Brazil.
Chris Skidmore
The production of the wings for the new Airbus A400M at Filton is progressing so well that Airbus has announced that it is increasing the number of skilled aircraft fitters. Once the first aircraft is delivered to the French air force this summer, and to the RAF next year, I believe that the A400M will be the jewel in the crown of the British aerospace industry. Will the Minister outline what action the Government are taking to support exports of this aircraft to markets overseas?
Mr Dunne
The A400M Atlas will provide both tactical and strategic airlift capability from its first delivery to the RAF next year. We agree that this world-class capability has the potential to become the tactical lift aircraft of choice for air forces around the world once the hugely successful C-130 Hercules, which has had this role for many years, is withdrawn from service. The UK is fully behind the efforts of Airbus Military to export the Atlas military transport aircraft, which will support skilled jobs in the aerospace hub around Bristol and across the UK.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
The Defence ministerial team will have had a number of representations on the challenges faced by small and medium-sized enterprises in being able to compete adequately. What support will the ministerial team be extending to SMEs in the defence sector so that they can compete and export internationally?
Mr Dunne
As I have said at the Dispatch Box previously, we have a strong commitment to support SME penetration of our own procurement chain and to help them export overseas. Early next month, in support of the UK Trade & Investment Defence & Security Organisation, I am attending a symposium at which there will be more than 350 SMEs, precisely to help them with their defence exports.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
20. I thank my hon. Friend for his earlier answer. Will he explain to those who do not necessarily understand the merit of defence exports the incredible benefit they deliver, not only for our armed forces but for the wider British economy?
Mr Dunne
Our armed forces benefit directly from responsible defence exports. Not only do they help build bilateral relationships and defence co-operation with our key allies, but they raise capability, enhance the interoperability of allies and partner nations, and contribute to regional security around the globe. As far as the contribution to the UK economy is concerned, defence exports have a vital role to play in sustaining UK jobs, generating UK tax revenues and helping to ensure the long-term viability and cutting edge of our defence industrial base.
Alison Seabeck (Plymouth, Moor View) (Lab)
I would like to associate the Opposition with the Minister’s condolences to the family and friends of Lance Corporal Webb for their loss.
The Minister will be aware that the Brazilian navy is looking to acquire at least one, possibly two, new aircraft carriers, so there will be significant potential for export opportunities. French companies are already on the case, supported by the French Government, looking to procure the design work. Given that we are building two of the world’s most advanced aircraft carriers, as a result of which we will have the skills and a dip in ship-building orders between the end of the carrier build and the start of the Type 26—which, incidentally, we are looking to sell to the Brazilians—what discussions has his Department, including the Under-Secretary of State for Defence, the hon. Member for South West Wiltshire (Dr Murrison), during his recent visit, had with the Brazilians specifically to promote British interests in the design and build of those carriers?
Mr Dunne
As the hon. Lady knows, Brazil and the UK entered into a maritime co-operation agreement as a result of the Prime Minister’s visit in recent months. As I said earlier, the Under-Secretary of State, my hon. Friend the Member for South West Wiltshire, visited Brazil only last week, when he discussed maritime co-operation, particularly in the offshore patrol vessel area. It is clear that the Brazilians wish to construct the aircraft carriers in their own shipyards, which means that there is no prospect of a direct export order for an entire ship; but as regards many of the systems, components and weapons systems, we will be seeking to provide opportunities for companies in this country supplying our aircraft carriers, which are currently under construction in Rosyth, to bid into the Brazilian and other nations’ programmes.
Andrew Selous (South West Bedfordshire) (Con)
3. What recent discussions he has had with employers to encourage their support for the expansion of reserve forces.
The Minister of State, Ministry of Defence (Mr Mark Francois)
Reserve forces have a central role to play in delivering national defence and security—what they do matters to our nation. My right hon. Friend the Secretary of State attended two national workshops in January with a range of employers to discuss our vision of a transformed relationship based on mutual benefits. I am very pleased that at these workshops and in other responses from employers to November’s Green Paper consultation, there has been broad and constructive support for our proposals. In the lead-up to the planned publication of the future reserves 2020 White Paper later in the spring, we will continue to engage with employers and employer groups such as the CBI and the Federation of Small Businesses.
Andrew Selous
Will the Minister confirm that our target for additional reserve recruitment could be met by less than one third of 1% of the younger working-age population and that the employers in question would benefit enormously from the positive attitude, outlook and determination of employees who take up reserve training?
Mr Francois
My hon. Friend knows something about this matter personally, because he himself served in the Territorial Army some years ago, and is absolutely right about the benefit that reservists can offer to their employers. I am pleased to say that a number of employers recognised that in their response to the consultation. On his good point about numbers, I would just say that when I served as a TA infantry officer in the 1980s—[Hon. Members: “Hear, hear!] Thank you—employer support was an issue then too. We managed then to get to 75,000 trained soldiers in the TA with a smaller population than we have now, so I have to believe that we can get to 30,000 now.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
Will the Government introduce legislation to deal with employers who discriminate against reservists, especially in relation to hiring procedures?
Mr Francois
I am aware of the issue that the hon. Gentleman raises. Our instinct is to try and garner employer support voluntarily, as it were, but we are aware of the issue and intend to address it in our response in the White Paper.
Mr John Baron (Basildon and Billericay) (Con)
I suggest that expressions of support and troops and boots on the ground are two different things. Given the widespread concerns about defence cuts and force generation factors, how confident is the Minister that the plan to plug the gap left by the loss of 20,000 regular troops will not prove to be a false economy?
Mr Francois
As I think I have already said, I am confident that we can do this, based not least on my own experience and that of my hon. Friend the Member for South West Bedfordshire (Andrew Selous), who, as my hon. Friend will know, was a Territorial Army officer in the Royal Regiment of Fusiliers—the same regiment to which he belonged.
Mr Jim Murphy (East Renfrewshire) (Lab)
We all wish the Government’s reservist White Paper to be a success. Within existing competition rules, would the Minister consider MOD procurement processes that take into account whether companies support reservists? I wish to return to the point made by my hon. Friend the Member for Motherwell and Wishaw (Mr Roy). Current legislation protects reservists returning from the front line, but no equivalent employment legislation protects them from the minority of employers who discriminate against reservists in their hiring processes. Although the Minister has held out against such legislation in the consultation, will he at least consult employers large and small to see whether there is an appetite to prevent that small number of employers from discriminating against those who protect our nation?
Mr Francois
In some ways the right hon. Gentleman has, for honourable reasons, asked a similar question to his hon. Friend the Member for Motherwell and Wishaw (Mr Roy), who sits on the Benches behind him. We are aware of the issue and intend to address it directly when we publish the White Paper later in the spring. I am glad that the right hon. Gentleman has offered bipartisan support in principle for the White Paper and the process of growing our reserves, which clearly we welcome.
Sir Bob Russell (Colchester) (LD)
Leading by example, will the Minister say how many civilians employed by the Ministry of Defence have joined the reserve forces since 1 January?
Mr Francois
I am not sure I can give my hon. Friend a precise number for how many have joined since 1 January, but I am willing to write and give him a number for how many in the Ministry of Defence are serving in the reserve forces. I am also happy to provide that information to the hon. Member for North Durham (Mr Jones). I am sure that, like me, he will agree with the remarks of the chairman of Durham county council, Councillor Linda Marshall, who said:
“Reservist employees are better at problem solving, they are good negotiators…their confidence grows throughout their training.”
If we can do it in Durham with the support of the county council, we can do it elsewhere.
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
4. If he will provide an update on progress on the arms trade treaty.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
As the hon. Lady will now know, on Tuesday 2 April the arms trade treaty was adopted by an overwhelming majority vote, with 154 states voting in favour at the United Nations General Assembly. Once implemented, this robust and effective legally binding treaty will establish a common baseline for the regulation of arms transfers.
Sandra Osborne
I very much welcome the work that the Government have done on the treaty, and I am sure that the Minister will want to acknowledge the central role played by the previous Labour Government in promoting it. Will he confirm that the agreed terms of the treaty will be implemented in full in the UK at the earliest opportunity and also say when we can expect legislation on this matter?
Mr Dunne
I am grateful to the hon. Lady for her congratulations, which we should pass on to colleagues in the Foreign Office who led on this issue. We welcome the treaty wholeheartedly. The arms export licensing regime operating under this Government and the previous Government is one of the most rigorous in the world and ensures that we will comply with the treaty’s obligations. It is good for British defence contractors, as it establishes a level playing field at a higher standard. We will have no difficulty implementing the treaty. It does not become effective until 50 states have signed it, and we will work hard to encourage that to happen as soon as possible.
Mr Russell Brown (Dumfries and Galloway) (Lab)
The outcome of the talks has been broadly welcomed, as the Minister recognises. Labour has always argued that “conventional arms” should include ammunition, munitions, parts and components. Can the Minister confirm that the Government’s interpretation of “conventional arms”, as it will apply to the UK arms trade in implementing the treaty, will also cover those elements?
John Pugh (Southport) (LD)
5. What plans he has for the commercial or community use of RAF facilities; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
It is Ministry of Defence policy to encourage commercial, social or community use of RAF facilities, consistent with operational, security and safety considerations. We are encouraging civil aviation use of certain military airfields, such as RAF Northolt, within agreed operating hours. We regularly hold air shows at military airfields and encourage community use of sporting or other leisure facilities on RAF bases wherever possible.
John Pugh
I thank the Minister for that response. In my constituency, RAF Woodvale is in danger of forfeiting good will and much needed revenue by stopping the popular Woodvale rally because of asbestos risks. What can he do to make my constituents happier and the Ministry of Defence a little better off?
Mr Dunne
I am aware that the hon. Gentleman was concerned last year when the Woodvale rally could not take place as a result of the discovery of fragments of asbestos following burrowing activities by, I believe, rabbits and moles in the grassy areas of the airfield. They have been fenced off and we are undertaking a land quality assessment exercise this year to see whether the asbestos can be safely contained, for public health and the health of the servicemen and women who work there.
Jenny Chapman (Darlington) (Lab)
How much are the Government planning to save through the rationalisation of the defence estate by the end of this Parliament?
Mr Dunne
The Government’s estate has been the subject of one announcement so far on Army basing, and there will be a subsequent announcement on reserve basing. As part of that exercise, the Government are intending to make savings that are baked into the efficiency targets agreed with Her Majesty’s Treasury, and I would be happy to write to the hon. Lady with more details in due course.
Gareth Johnson (Dartford) (Con)
6. What the timetable is for implementation of the defence engagement strategy.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
The international defence engagement strategy, published in February 2013 and now very much in play, provides a sharp focus to our defence engagement activities in support of wider Government objectives, in line with the vision set out in the strategic defence and security review. Defence is making a contribution to UK influence worldwide on a daily basis, with the Defence Engagement Board overseeing the rolling out of our defence engagement strategy. Since publishing the strategy, we have accredited a non-resident defence attaché for Burma and advanced our preparations for new defence sections in Libya and Somalia.
Gareth Johnson
I am grateful to the Minister for that answer. Given that maritime security is vital for shipping off the horn of Africa, will he tell the House how the defence engagement strategy will specifically target that important region?
Dr Murrison
My hon. Friend is absolutely right to highlight this matter. He will be aware of the success of Operation Atalanta under British command; that operation has really got to grips with piracy off the horn of Africa. In addition, we engage with the European Union through EUTM—EU training mission—Somalia and EUCAP NESTOR, which is involved in training indigenous assets for littoral operations. He will also be aware of the work of AMISOM, the African Union Mission in Somalia, in which we are involved with training, and of the British Peace Support Team Eastern Africa, based in Kenya, which is heavily involved in peace support operations. Later this year, I hope that we will be able to open a defence section in Mogadishu, when security conditions allow.
Angus Robertson (Moray) (SNP)
Does the Minister agree with the value of joint international training as part of the defence engagement strategy? Will he take this opportunity to commend the thousands of personnel from 10 different states who are currently taking part in the Joint Warrior exercise, as well as all the communities that are hosting them?
Dr Murrison
I certainly commend our engagement in training. I have spent some time in Libya and Brazil recently, and it is clear that our international partners really want British training. It is an important part of their ask of us, and it is a first-rate part of our defence engagement activity.
Sir Gerald Howarth (Aldershot) (Con)
I congratulate my hon. Friend and successor on his work on the defence engagement strategy. Does he agree that nothing leverages influence in the world more than defence, particularly in areas such as training, mentoring and providing advice? Has he been able to secure any extra funds, particularly from the Department for International Development, given that money spent on the defence engagement strategy is much more effective than some of the money that is being spent on overseas aid?
Dr Murrison
My hon. Friend is right in many respects, especially on the quality of the men and women of our armed forces and the high regard in which they are held. This country is absolutely peerless in that regard, and it is a great joy for me to go around the world—as I now inevitably do, and as he used to do during his excellent tenure of the post that I now hold—and see that the reason that others want to engage with us is that we are very good at what we do. It will therefore continue to be the case that the UK will be a partner of choice in defence engagement.
Nic Dakin (Scunthorpe) (Lab)
7. What recent steps the Government have taken to uphold the armed forces covenant.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
14. What recent steps the Government have taken to uphold the armed forces covenant.
The Minister of State, Ministry of Defence (Mr Mark Francois)
The full extent of the Government’s work to support the armed forces covenant was set out in the armed forces covenant annual report, which was laid before the House in December 2012. Since then, new measures have included the introduction of the armed forces independence payment, which is not taxable or means tested, as well as the introduction of the new defence discount service and the recent Budget announcement of further LIBOR fines funding for service charities. The Cabinet Sub-Committee on the Armed Forces Covenant, on which I sit, was established to ensure that momentum is maintained, and it continues to provide a forum in which Ministers can propose commitments from their respective Departments to assist in honouring the covenant.
Mr Francois
I seem to recall that the hon. Gentleman has asked me questions on related matters before. Local councils have some discretion in the money they can use for assisting particular cases, and I hope they will use it wisely, including when military families are affected. I am encouraged by the fact that more than 250 local authorities across Great Britain have signed community covenants—more than half the local authorities in Great Britain—so I particularly expect them to do their best to make the right decision.
Tom Blenkinsop
I am interested in the Minister’s response, because the devolution of blame for the policy overlaps with how the Government have behaved over the Armed Forces Pay Review Body recommendation for a 1.5% increase in pay for the armed forces. The Budget said that it would be paid, but the detail shows that it will start on 1 May not 1 April, and will therefore run for only 11 months, not 12. This means our forces are getting £2.6 million less than was promised, or intended by the Armed Forces Pay Review Body. Could the Minister explain how that is in line with the principles of the military covenant?
Mr Francois
The announcement in the Budget was indeed that it would come in from May, and not in April, so there is no surprise in what the hon. Gentleman announced. It was made plain in the Budget at the time. When Labour Members have raised these types of question in the past, they sometimes found that their criticism was ill-founded. I refer to the hon. Gentleman’s colleague, the hon. Member for Scunthorpe (Nic Dakin). He will remember that a few months ago he asked me how reforms to housing benefit would affect service families. He will know, following the announcement made by the Secretary of State for Work and Pensions, that we changed the system so that where an adult child living at home is serving on operations, the child will be treated as continuing to live at home and is therefore exempt. The point I make to the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) is that when these issues have been raised in the past we have listened, and we have funds for local authorities to address the issue as well.
Mr Speaker
Order. I always enjoy the Minister’s answers and I listen to them very attentively, but today they are somewhat longer than were his speeches to Conservative student conferences, which we both attended together in 1985.
Jack Lopresti (Filton and Bradley Stoke) (Con)
The two local authorities in my area, South Gloucestershire council and Bristol city council, have yet to sign up to the community covenant scheme. What more can the Government do to ensure that local authorities sign up to the covenant as a matter of priority?
Mr Francois
The decision to sign a community covenant is a matter for individual local authorities, but we obviously encourage all local authorities across the country to sign up to a community covenant to show their support for the armed forces family—the wider armed forces community. I hope that will apply to the local authorities in my hon. Friend’s constituency.
I make that about 23 seconds.
Caroline Dinenage (Gosport) (Con)
Will my hon. Friend join me in congratulating Gosport borough council, which adopted its version of the military covenant at the tail end of last year? Will he update the House on the progress that has been made in the take-up of community covenants?
Mr Francois
As I said, more than half the local authorities in Great Britain have signed the community covenant, and I am pleased to say that they are coming in all the time. I am really encouraged by the number of local authorities at all tiers of local government that have been signing community covenants to demonstrate their support for the armed forces community, and I am very pleased to hear that that spirit is alive and well in Gosport.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
The Service Complaints Commissioner and the Defence Select Committee both back the creation of a services ombudsman, as do we. On 31 January, we held a Westminster Hall debate on the military justice system, and I hope the Minister will review the remarks he made in that debate. I am concerned that he may have inadvertently overstated the powers being given to the Service Complaints Commissioner. Could he confirm that it is his intention that the commissioner should have all the powers he outlined in that debate, and does he therefore agree that it is time for an ombudsman?
Mr Francois
I have a great deal of time for Dr Susan Atkins, the Service Complaints Commissioner. I have met her twice since my appointment to this post and my ministerial colleagues and I remain in dialogue with her. We are looking at the whole operation of the service complaints system, not least in light of some of the points raised in that debate. We continue that dialogue with her and we may have more to say about the matter in the future.
Mr Philip Hollobone (Kettering) (Con)
8. What assessment he has made of the ability of North Korea to deliver a ballistic nuclear warhead and the extent to which such technology is being shared with Iran.
The Secretary of State for Defence (Mr Philip Hammond)
It is clear that North Korea is undertaking programmes to develop nuclear weapons and a range of missile systems. It has successfully flight-tested ballistic missiles capable of reaching South Korea, Japan and US bases in the region. It has paraded a long-range missile with a claimed range of 12,000 km, which is highly likely to be intended to be nuclear-armed. Those developments are in breach of international law and threaten the stability of the region.
As for links with Iran, North Korea is known to have sold ballistic missile technology to Iran. Any sharing of nuclear technologies would be a matter of grave concern and would breach UN sanctions.
Mr Hollobone
The attempted development of nuclear weapons by North Korea and Iran surely underlines the importance of maintaining our own independent nuclear deterrent, but does my right hon. Friend agree that perhaps the greatest risk to world peace is a miscalculation or mistake on behalf of either Iran or North Korea at this time when tensions are rising?
Mr Hammond
I completely agree that there are huge risks at a time of heightened tension and a huge potential for miscalculation, which is why I welcome the initiative in which the United States is engaged to try to calm tensions around the Korean peninsula. The developments in Korea, and indeed Iran, show us primarily that the world is a very dangerous and unpredictable place, and that a credible nuclear deterrent is the ultimate protection against the threat of nuclear aggression or blackmail.
Steve McCabe (Birmingham, Selly Oak) (Lab)
What assessment has the Secretary of State made of the time frame in which the North Koreans will have the capability to strike mainland Europe with a nuclear missile?
Mr Hammond
It is impossible for us to make with any accuracy a prediction of the time scale involved. As I said, the North Koreans have tested shorter-range ballistic missiles and paraded a ballistic missile with sufficient range to reach Europe and the continental United States. We can only assume—I would be prepared to bet my bottom dollar on it—that they are seeking to integrate their nuclear technology with that ballistic missile technology.
Mr Julian Brazier (Canterbury) (Con)
I welcome my right hon. Friend’s robust earlier reply, but does he agree that the links to which he and my hon. Friend the Member for Kettering (Mr Hollobone) referred—not only with Iran but, to a lesser extent, with other potentially extreme regimes—emphasise once more that, in a world with huge uncertainty, our nuclear deterrent is critical?
Mr Hammond
I agree with my hon. Friend, and I would go further and say this: the life expectancy of the replacement ballistic missile submarines will be about 35 to 40 years, and it would be a very brave man who would claim now that he could see, 40 years ahead from the 2020s, that there will be no need for that capability.
Mr Jim Murphy (East Renfrewshire) (Lab)
It is in all our interests that the situation in North Korea is resolved not only peacefully but meaningfully so as the US deploys military assets to the Korean peninsula, what discussions has the Secretary of State had with his US counterparts about the provision of any UK logistical support? Should the US move any military assets out of Afghanistan to that region, has he confirmed to the US that the UK would be willing to fill any of the gaps created by that redeployment?
Mr Hammond
I am grateful to the right hon. Gentleman for his question. There have been no discussions with and no requests from the US, as far as I am aware—certainly at ministerial level—regarding any form of logistical support in relation to the tensions on the Korean peninsula. Again, as far as I am aware, there is no proposal by the US to move any assets from the Afghanistan theatre in response to this crisis.
Diana Johnson (Kingston upon Hull North) (Lab)
10. What recent progress he has made on balancing the defence budget.
Mrs Mary Glindon (North Tyneside) (Lab)
17. What recent progress he has made on balancing the defence budget.
The Secretary of State for Defence (Mr Philip Hammond)
I announced to the House last May that we had eliminated the black hole in the finances of the Ministry of Defence that we inherited from the Labour party, and had brought the Defence budget into balance. Since then, on the one hand, we have been required to make further budget reductions in 2013-14 and 2014-15 of £1.2 billion in total as a result of the Chancellor’s announcements at autumn statement 2012 and Budget 2013; on the other hand, we have made further savings through efficiency and renegotiation of contracts and have been granted exceptional levels of end-year flexibility by the Treasury to carry forward 100% of our 2012-13 underspend, including unneeded contingency provisions, into 2013-14 and 2014-15. In consequence, we are confident that we can absorb the budget reductions announced without any significant impact on core defence output in those years.
Diana Johnson
Ministers frequently say that they have a defence review and then budget according to the security needs of the country, so I am a little confused as to why No. 10 and the Treasury say that there will be defence cuts post 2015. Is it because the Government’s priority is Treasury accountants, rather than the security needs of this country?
Mr Hammond
The Government have announced that there will be a spending review—spending review ’13 —which will set the budgets for non-ring-fenced Departments, including Defence, for 2015-16. There has been an announcement confirming that the equipment programme will be protected in the defence budget, with a real-terms increase of 1% per annum between 2015-16 and 2020-21.
Mrs Glindon
Ministers have pledged an annual real-terms 1% increase in defence equipment spending post 2015, but in what year, under current plans, does the Secretary of State forecast the whole defence budget rising in real terms?
Mr Hammond
I am not going to pre-empt the outcome of SR 13; nor am I going to conduct the spending review in public. My Department is engaged in analysis with the Treasury and the Cabinet Office, in search of genuine efficiency savings. Where we can find such savings, for example in the equipment support programme, the Ministry of Defence will willingly do its bit to contribute to fiscal consolidation. I will, as you would expect, Mr Speaker, argue vigorously for the resources that Defence needs to deliver Future Force 2020 in accordance with the strategic defence and security review 2010.
Mr James Arbuthnot (North East Hampshire) (Con)
A few weeks ago, the Prime Minister told the House that he continued to hold the “strong view” that the overall defence budget should rise in real terms from 2015 onwards. When will that prime ministerial wish become Government policy?
Mr Hammond
I can confidently predict that the Prime Minister will be involved and will be a key player in the end game of the SR 13 discussion.
Sir Menzies Campbell (North East Fife) (LD)
Does my right hon. Friend realise that he struck a chord with many in the House of Commons when he recently expressed reservations about the possibility of further cuts in the defence budget? Does he agree with me that it is not the immediate availability of capability that is important but the resilience that our armed forces possess in the event that the United Kingdom found itself engaged in a protracted engagement? Is he satisfied that all three services possess that resilience?
Mr Hammond
My right hon. and learned Friend is of course correct: it is resilience, both in the sense of an ability to sustain an enduring operation, and in the sense of an ability to regenerate capability and force levels should the global security situation change, which is crucial. One can always have more resilience, and one would always like more reserve, but I am confident that the stance or posture that we set out in SDSR 2010 will enable us to deliver appropriate levels of national security in 2020.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Does the Secretary of State realise that if he wants a defence manufacturing sector to remain in our country—I have David Brown Gear Systems, an important defence contractor, in my constituency—and if he wants it to survive and thrive as a sector, it is absolutely vital that we have procurement over a long period to enable the necessary investment? Is he aware that there is uncertainty in the industry about these defence cuts?
Mr Hammond
Of course, cuts in defence budgets, not only in the UK but in the United States and, in fact, in nearly all developed countries, have presented huge challenges to defence industries. At the same time, many of their traditional export customers have developed their own defence manufacturing and even design and development capabilities. We are trying to work with the defence industry to give it greater visibility of our forward intentions, and to work with it to design greater export ability into its projects.
Peter Luff (Mid Worcestershire) (Con)
I congratulate my right hon. Friend unreservedly on his success in the herculean task of balancing the defence budget, but does he agree that if we are to keep that budget balanced, one of the things that has to change is the status of Defence Equipment and Support? Can he share with the House any clear indication of when he will announce his intentions in respect of that organisation?
Mr Hammond
My hon. Friend is right. [Interruption.] The right hon. Member for East Renfrewshire (Mr Murphy) correctly guesses that the announcement will be made shortly; “in the spring” and “before the summer recess” also spring to mind. My hon. Friend is right that if we are to deal effectively, and in a way that protects the best interests of the taxpayer, with large corporate entities which are able to scour the world for the top talent, we must be able to match them man for man across the negotiating table.
Dr Alan Whitehead (Southampton, Test) (Lab)
11. What recent discussions he has had with representatives of the renewables industry regarding onshore wind turbine planning applications; and if he will make a statement.
The Minister for the Armed Forces (Mr Andrew Robathan)
Perhaps it is a matter of keeping the best for last, or there is nothing in my portfolio, or it may be an attempt to keep me away from the Dispatch Box—the House will decide.
Regarding the question, Ministry of Defence officials and my colleague the Minister with responsibility for defence personnel, welfare and veterans met the chief executive of RenewableUK in November to discuss matters relating to both offshore and onshore wind turbine applications. MOD officials also attend the aviation management board made up of key wind energy stakeholders, chaired by the Department of Energy and Climate Change. My Department routinely engages with developers and consenting authorities in its consideration of onshore wind turbine planning applications.
Dr Whitehead
I am sure the Minister is aware that despite the installation over the past few years of a number of radar systems that can distinguish between turbines and planes, the number of MOD objections to turbine applications doubled between the first part of 2012 and the last part of 2012 as a percentage of applications. Can the Minister assure me that his Department continues to honour the memorandum of understanding between the wind energy industry and the MOD in 2008?
Mr Robathan
The hon. Gentleman and I share a deep commitment to renewable energy, including wind energy onshore, going back to the days of the parliamentary renewable and sustainable energy group, when I was the vice-chairman and he was the chairman. There are two reasons, as I understand it, for the increase in the number of objections. The first is that there has been a plethora of applications for wind turbines onshore, and many of those are pretty close to airfields and other radar installations. The second is that, because of the plethora of applications, we are no longer able to provide the pre-application advice as we did before—there are so many of them.
Miss Anne McIntosh (Thirsk and Malton) (Con)
RAF Staxton Wold in my constituency is within an 8-mile radius of a raft of onshore planning applications. Surely the MOD must have a view as to possible interference with and collision between radar and these obstructions.
Mr Robathan
I am not aware of the individual circumstances surrounding those applications. However, I do not think we are particularly concerned about collision with turbines—I hope I am not being unduly optimistic about that. Each application is judged on its merits, and the MOD will object only if it believes that a wind turbine will interfere with the radar or flying activities.
Neil Carmichael (Stroud) (Con)
13. What assessment he has made of China’s planned expansion of its aircraft carrier capacity.
The Minister for the Armed Forces (Mr Andrew Robathan)
China’s aircraft carrier capability remains at an early stage of development and the building of new indigenous vessels will take it some time. The Government closely watch developments in the Asia-Pacific region as they may affect our interests and our allies.
Neil Carmichael
What discussions has the Minister had with our allies in that region and elsewhere about the possible implications for the stability of the Asia-Pacific region?
Mr Robathan
We have regular discussions with allies across the region, including major talks such as AUKMIN, where the Foreign and Defence Secretaries visited their counterparts in Australia in January and where a variety of strategic issues were discussed. I went to New Zealand and Tonga at the end of last year to promote defence co-operation. I passed on my thanks for their troop contributions to Afghanistan and presented some medals to the Tongans who defend Camp Bastion.
Kerry McCarthy (Bristol East) (Lab)
16. What recent assessment he has made of the effectiveness of the armed forces and reserve forces compensation scheme in compensating injured service personnel; and if he will make a statement.
The Minister of State, Ministry of Defence (Mr Mark Francois)
The armed forces compensation scheme was last reviewed in 2009-10 under the independent chairmanship of the former Chief of the Defence Staff, Admiral Lord Boyce. The review found that the scheme was fundamentally sound but adjustments were required in some areas. The MOD implemented all recommendations from the review through legislation laid in August 2010 and February 2011. The changes became operative on 9 May 2011.
Kerry McCarthy
I thank the Minister for that response. Will he undertake to look into the case of my constituent former Royal Marine Thomas Nicoll, who was medically discharged after suffering permanent injuries to the tendons in his knee? Had he suffered ligament injuries, he would have been entitled to the highest rate of compensation under the scheme but, because there is no mention of tendons in the guidelines, he is not entitled to that. Will the Minister promise to rectify that bureaucratic absurdity so that my constituent will be entitled to the compensation?
Mr Francois
In the interests of brevity, I give the hon. Lady my word that, if she would like to write to me directly about the details of the case, I will look into it and place a copy of the letter in the Library of the House.
Graham Evans (Weaver Vale) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Defence (Mr Philip Hammond)
My priority remains the success of operations in Afghanistan. Beyond that, my priorities are to deliver the transformation of the MOD, maintain budgets in balance and deliver equipment programmes so that our armed forces can be confident of being properly equipped and trained. We have set out plans to restructure the Army, to re-base it from Germany, to expand the reserves and integrate them with regular forces, and to restructure the Defence Infrastructure Organisation and Defence Equipment and Support within a slimmed-down MOD that is focused on providing support to the armed forces.
Graham Evans
Has my right hon. Friend seen the recommendation of the House of Lords Economic Affairs Committee’s report on the implications of Scottish separation that the Government should provide assurance that plans are in place to maintain the UK’s nuclear deterrent in the event of the Scottish people voting for separation? Does he agree with the recommendation?
Mr Hammond
I am grateful to my hon. Friend and disappointed that the sole representative of Scottish separatism in the Chamber today had disappeared before we reached this point in proceedings. I have indeed seen the recommendations of the House of Lords report. As my hon. Friend will know, the Government’s position is clear: Scotland benefits from being part of the United Kingdom and the United Kingdom benefits from having Scotland in it. We are confident that the Scottish people will agree. However, in the event that they voted to leave the United Kingdom, the referendum, rather than being the point at which Scotland would leave the Union, would mark the beginning of a lengthy and extremely complex set of negotiations between the Scottish and UK Governments on the terms of independence. If an independent Scotland wanted to change the arrangements for the UK’s nuclear deterrent, the considerable costs, complexity and time scale involved in delivering alternative arrangements would inevitably be a major feature of the negotiations. It is therefore incorrect to suggest the need for an immediately deliverable contingency plan for the deterrent. However, the House will be aware that the MOD plans for a huge range of contingencies. For reasons of national security, we do not comment publicly on plans relating to the nuclear deterrent.
Mr Kevan Jones (North Durham) (Lab)
The MOD underspent its budget by £3 billion last year: a total of £1.6 billion is being carried forward, and there is now a shortfall of £1.4 billion up to 2015. Further to the question asked earlier by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), can the Secretary of State tell the House why the MOD is not using some of that money to backdate the pay increase from May to April announced in the Budget?
Mr Hammond
A significant proportion of the underspend in 2012-13 is, in fact, the result of delayed spending on equipment programmes and will be needed to be spent in 2013-14 and 2014-15. As the hon. Gentleman will also know, part of the underspend is being used to meet the additional reductions in the budget announced by the Chancellor in the autumn statement and the Budget, which is why we are able to meet those requirements without cutting into the delivery of our core outputs in 2013-14 and 2014-15. To amplify the point about the pay settlement that is effective from 1 May, I will say this: the practical reality is that the MOD’s pay system is quite fragile, and the possibility of making a retrospective change was considered significantly high-risk. It would introduce a significant risk of a catastrophic breakdown in the pay system. We therefore—
Mr Speaker
Order. We have a lot of questions to get through and I intend to get through them. Frankly, the answer to the first supplementary question was an abuse of the procedure at topical questions. Answers should be brief. [Interruption.] The Secretary of State can look at me quizzically, but I am telling him that the answer was simply too long for me, too long for the House and it delayed us unnecessarily. It must not happen again.
Pauline Latham (Mid Derbyshire) (Con)
T4. Does my right hon. Friend agree with the conclusion of the Defence Committee that it is ultimately up to the Afghan people to determine their future? What assurances can he give that the UK will continue to give substantial support to the Afghan Government and institutions once ISAF combat operations conclude by the end of next year?
The Minister for the Armed Forces (Mr Andrew Robathan)
I agree with the Defence Committee that it is for the people of Afghanistan, not people abroad, to determine their future. We certainly intend to continue to support the Afghan people. We intend to support the Afghan national army officer academy post-2014 and in other ways. I also understand that the Government will be supporting Afghanistan through the Department for International Development.
Ann McKechin (Glasgow North) (Lab)
T3. Given that the security situation in Syria is deteriorating by the day and that there is growing concern about the possible use of chemical weapons, will the Minister update the House on what discussions he has had with EU partners and NATO allies about the risk of escalation of the conflict—in particular, the risks of arming the opposition groups in Syria?
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
The hon. Lady is absolutely right to raise the issue. She will be aware that under UN Security Council resolution 1540, responsibility for the securing of those terrible weapons lies with the Assad regime. That regime should be under no illusion but we will hold Bashar al-Assad to account in the event that he deploys them. The hon. Lady will also be aware that the United Nations Secretary-General will investigate both sides of the issue to determine whether there is any evidence of use of these terrible weapons. We will offer our technical assistance in that matter.
Christopher Pincher (Tamworth) (Con)
T5. As the anniversary is now little more than a year away, what help can my right hon. Friend give, with colleagues in other Departments, to Normandy veterans, along with their families and carers, to make what may well be their final trip to Normandy to commemorate the 70th anniversary of their arrival on those beaches in 1944?
The Minister of State, Ministry of Defence (Mr Mark Francois)
I regard commemorating D-day as particularly important, not least because my own father, Reginald Francois, served on that historic occasion. I am aware that the Normandy veterans are considering how best to contribute to the 70th anniversary next year. The Heroes Return 2 scheme was launched on 1 April 2009 and provided funding to help second world war veterans who saw active service to take part in commemorative visits to mark the anniversaries of important events in that conflict. We hope that the scheme, which is provided by the Big Lottery Fund, will also be able to assist in a material way next year.
Dan Jarvis (Barnsley Central) (Lab)
T9. The Secretary of State may have seen a recent interview, given by the Foreign Secretary to The Times, in which the Foreign Secretary said that what we increasingly need is more capability in surveillance, specialist capabilities and cyber skills. May I ask the Secretary of State whether his Department is cutting, or has plans to cut, any of those capabilities of which the Foreign Secretary says we need more?
Mr Philip Hammond
No. We are very much aware of all those needs and I endorse the comments that my right hon. Friend made. He was probably making an oblique reference to press speculation about special forces. I can confirm that front-line special forces numbers will remain at current levels and will not be cut below the 2010 level.
Henry Smith (Crawley) (Con)
T6. I very much welcome the increase in UK defence exports, which employ hundreds of thousands of people around the country, many of whom are in my constituency. Will my hon. Friend update the House on progress on exports of the Typhoon fighter?
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
The Government have been at the forefront of export campaigns for Eurofighter Typhoon. Following success in securing export orders in Oman last December, we have been actively working with industry, the UK Trade & Investment Defence & Security Organisation and the Eurofighter partner nations to support potential Typhoon sales to a number of countries in the middle east, Europe and Asia—including Malaysia, where I led a delegation of 25 companies in the week before Easter. Typhoon exports help to sustain highly skilled jobs and engineering capability in the air sector, including that of the facility in my hon. Friend’s constituency which produces vital, full-mission simulators for Typhoon pilot training.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
Ministers will be aware that subcontracted work on the aircraft carrier on the Clyde is drawing towards a close. What steps are being taken to ensure that work is found for those shipyards before steel starts to get cut on the Type 26?
Mr Dunne
As the hon. Gentleman knows, because we have discussed this directly in recent months, the Aircraft Carrier Alliance is continuing work on the programme for the construction of the existing Queen Elizabeth-class aircraft carrier and its successor, Prince of Wales. Discussions with the company on how to mitigate the work gap prior to the order being given for the Type 26 frigate are continuing.
Anne Marie Morris (Newton Abbot) (Con)
T7. I am sure that the Minister agrees that the new centre for the Devon Army cadet force in Newton Abbot is a demonstration of this Government’s continued support in maintaining strong local links with the armed forces. Will he consider a visit to my constituency to see for himself the valuable contribution that the corps provides to young people in our community?
Mr Francois
I thank my hon. Friend for highlighting the excellent work that our cadet forces do for young people in all parts of the United Kingdom. I am delighted that the Army cadet force and the air training corps in Newton Abbot are making full use of their new joint centre. Only last week, the Secretary of State visited two cadet units in Glastonbury, and before Easter I visited a cadet unit at Kinnegar in Northern Ireland. Later in the year I hope to visit the commando training centre in Lympstone, and I will look into visiting the Newton Abbot cadets on the same trip.
Toby Perkins (Chesterfield) (Lab)
The people of Chesterfield have tremendous affection and respect for 575 Field Squadron Royal Engineers reserve forces, based in Chesterfield. Notwithstanding the success of that squadron, which was given the freedom of the borough of Chesterfield last year, there will be considerable concern at recent reports that the level of reservists needs to increase by 66% for the Government to hit their targets. Are the Government confident that those targets will be hit?
Mr Francois
As I have already made plain to the House, I am confident that we can meet those targets, but taking nothing for granted, this Friday I am going down to the new Army recruiting centre at Upavon to see the recruiting process at work for myself. I think that I will be even more confident when I get back.
Roger Williams (Brecon and Radnorshire) (LD)
T8. In drawing up plans for the return of military equipment from Afghanistan, what account has the Ministry of Defence taken of the equipment that the Afghan army will need to carry out its challenging duties in the future?
Mr Robathan
We have yet to decide on any gifting to the Afghan army, but obviously the Afghan army is our ally. We are proceeding on withdrawing equipment from Afghanistan as we withdraw numbers of personnel from the country, but we have yet to decide on anything about gifting.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Next year HMS Illustrious will be taken out of service. The Minister will know just how fond memories are of the work that was done at Rosyth dockyard. Will he meet me to discuss how we can best commemorate her withdrawal?
Mr Francois
I hope that we can do better than to commemorate the withdrawal of HMS Illustrious and that it will be possible to come up with a scheme to save her for the nation. She is representative of a historic class of aircraft carrier, and we need, one way or another, to preserve her for generations to come.
Mr Crispin Blunt (Reigate) (Con)
One of the reasons the previous Government were able to run up a £38 billion gap between their budget and their forecast expenditure was the doing away with the annual defence review White Papers in 1997. What measures does my right hon. Friend have in place to make sure that the forthcoming defence budget stays honest in the light of his decade-long promise on defence expenditure?
Mr Philip Hammond
I am grateful to my hon. Friend. We have implemented a number of measures internally, including a very tight control on new commitments, constant monitoring of budgets, and attention to this issue at the highest levels of the Department, including ministerial oversight. I am very confident that the defence budget, having been got into balance, will be kept in balance, however difficult the decisions that have to be made to ensure that.
Bob Stewart (Beckenham) (Con)
Does my right hon. Friend agree that the only guaranteed nuclear deterrent is one that is carried by a submarine, launched by a ballistic missile, and on duty 24 hours a day, every day of the year?
Mr Hammond
There is no doubt in my mind that the most cost-effective way of delivering a credible and effective nuclear deterrent is through continuous, at sea, submarine-based deterrence.
Penny Mordaunt (Portsmouth North) (Con)
What consideration has been given to making the Service Complaints Commissioner an ombudsman?
Mr Francois
As I intimated in response to an earlier question, I have met Dr Susan Atkins twice and we discussed her view of the operation of the service complaints system. As I said earlier, we are looking at how to improve our service complaints system and we hope to have more to say in the future. I hope that that will satisfy sub-lieutenant Mordaunt.
Speaker’s Statement
(11 years, 7 months ago)
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Mr Speaker
I would like to make a short statement about the arrangements for Lady Thatcher’s funeral on Wednesday. I have received a number of representations—direct and indirect, formal and informal—concerning how the House and Parliament as an institution might best mark this occasion. I have considered all of these, but concluded that the most appropriate means of indicating our sentiments would be for the chimes of Big Ben and the chimes of the Great Clock to be silent for the duration of the funeral proceedings. I have, therefore, made the necessary arrangements to achieve this. I believe that there can be a profound dignity and deep respect expressed in, and through, silence and I am sure that the House will agree.
The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)
On a point of order, Mr Speaker. As you know, Lady Thatcher held Parliament in great reverence in her time both in this House and in the other place. I am confident that this will be seen as a dignified and respectful gesture on the part of Parliament. I am grateful to you, Mr Speaker, and I am confident that Lady Thatcher’s family will take it very much in that spirit and be hugely appreciative of what you have decided.
Mr Speaker
No, I am not taking further points of order at this stage. We have an urgent question and a statement, and there will no doubt be other points of order.
Heart Surgery (Leeds)
(11 years, 7 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Stuart Andrew (Pudsey) (Con)
(Urgent Question): To ask my right hon. Friend the Secretary of State for Health if he will make a statement on Leeds children’s heart surgery unit.
The Secretary of State for Health (Mr Jeremy Hunt)
Following the deaths of 30 to 35 children at the Bristol royal infirmary between 1991 and 1995 and the subsequent inquiry, children’s heart surgery is rightly the subject of great public concern.
With respect to Leeds general infirmary, there are three issues that the House will want to be updated on: was it right to suspend children’s heart services at Leeds on 28 March; was the decision handled in the best way possible; and, given his public comments, is it appropriate for Professor Sir Roger Boyle to have a continuing role in the Safe and Sustainable review of children’s heart surgery?
First, was the right decision made? The answer is categorically yes. The principle of “first do no harm” must run through the very heart of the NHS. If there is evidence that patient safety is at risk, it is absolutely right that the NHS acts quickly and decisively to prevent harm to patients. However difficult or controversial, we must never repeat the mistakes made at both Mid Staffs and Bristol, where arguments over the quality of data prevented action that could have saved patients’ lives.
Secondly, was the decision handled properly? On 26 and 27 March, Sir Bruce Keogh, NHS England’s medical director, was given a range of critical information about the quality of care at Leeds: statistical data that indicated higher than expected mortality rates; concerns about staffing rotas; and further concerns from parents and a national charity about the way the most complex cases were referred. With the agreement of the LGI, Sir Bruce took the entirely appropriate decision to suspend children’s heart surgery while further investigations were made. The families were informed on the day the decision was taken to suspend services, 28 March.
On 29 March—Good Friday—the day that decision became public, I spoke with the right hon. Member for Leeds Central (Hilary Benn) and my hon. Friends the Members for Pudsey (Stuart Andrew) and for Leeds North West (Greg Mulholland) to inform them of the situation. My conclusion is that, on the basis of the information available to him, Sir Bruce behaved entirely properly. He was also right to authorise the restarting of surgery from 10 April for low-risk patients on the basis of more complete data and assurances from the trust.
The third question is whether, in the light of his recent comments, Professor Sir Roger Boyle can have a continuing role in the Safe and Sustainable process. Sir Roger is one of our leading heart surgeons. He did the right thing in informing Sir Bruce of his concerns over Leeds’ mortality data. He has also played an important role as an adviser to the Safe and Sustainable review of children’s heart services. However, it is the view of Sir Bruce Keogh, with which I concur fully, that Sir Roger’s comments to the media on 11 April could be seen as prejudging any future conclusions of that review. It is therefore right that Sir Roger plays no further role in its deliberations.
Stuart Andrew
I am grateful to my right hon. Friend for his answers. No one would disagree with the point that information that is provided about the safety of a unit should be investigated. However, the quality of the information and the source of the complaints raise serious questions about the proportionality of the action that was taken and, more importantly, about the motives of the complainants. Sir Roger Boyle was a key adviser to the Safe and Sustainable review, which proposed an illogical outcome for northern England. His recent actions and comments surely prove that the decision to close the Leeds unit was predetermined.
Sir Roger leaked data that were unverified to argue for the suspension of surgery—an action that was described as “appalling” by their author. The information was inaccurate and, when corrected, demonstrated that the Leeds unit was safe. In fact, it showed that it is in a similar position to the units at Guy’s and Alder Hey. Why did Sir Roger not recommend the suspension of surgery at those units? Is it because those are the ones that he and the Safe and Sustainable review recommended as designated centres?
Furthermore, on Friday, despite detailed scrutiny that proved that Leeds was safe, Sir Roger claimed that it was on the edge of acceptability and that he would not send his daughter there. Those comments demonstrated a clear bias against Leeds and were irresponsible in respect of parents whose children are facing surgery. In addition, one of the whistleblowers has been identified as a surgeon from the Newcastle unit, which is another example of vested interests.
The suspension of surgery and Sir Roger’s comments have caused huge anxiety and concern among patients and staff, and have hurt the reputation of the hospital, which it has taken years to build. I therefore ask the following questions of my right hon. Friend.
How can we have faith in the Safe and Sustainable review, given that its key adviser has behaved in such an appalling and biased manner? Despite the fact that he will no longer take any part in the review, the decisions remain. Does this matter not prove that Sir Roger acted in a predetermined manner? Is it not vital to put the patient’s interests first, rather than NHS politics? Does my right hon. Friend agree that Leeds has been treated disproportionately when compared with other units that have similar figures? Is he aware that there are reports of surgeons being anxious about providing data for fear of reprisals? Is there not an urgent need for the Independent Reconfiguration Panel to report to resolve the uncertainty that exists across the country with regard to children’s heart surgery? Is it not time to give serious consideration to the proposal that both Leeds and Newcastle should stay open, which is supported by clinicians and patients as it is in their best interests? Finally, will he pay tribute to the staff and patients at Leeds, who have acted with great dignity in the face of hostile criticism?
Mr Hunt
I do pay tribute to the staff at Leeds and to the families of patients. I recognise that this is an issue of huge concern. As my hon. Friend rightly says, they have behaved with great dignity in a difficult situation. I also pay tribute to him for the responsible way in which he has behaved in this difficult situation, as have many Leeds MPs.
My hon. Friend will understand, given that the NHS nationally was provided with data that suggested that mortality could be up to 2.75 times greater at that unit and given that there was a potentially busy holiday weekend ahead, when it did not know how complex the cases would be and when there were locums on the staff rota who may or may not have been up to the standard of the permanent staff, that Professor Sir Bruce Keogh had genuine concerns that led to his decision. But I hope the fact that surgery was restarted on 10 April will assuage my hon. Friend’s worry that the initial decision was linked to the Safe and Sustainable review—it was not; it was a concern about patient safety and because that concern has been addressed, surgery has restarted.
There were, however, issues about the quality of the data, which at least in part was because the hospital was not supplying data properly in the way it needed to. That was one reason why the mortality data were not as accurate and good as they should have been. Although I entirely agree that patient safety must always come first, and not NHS or national politics or whatever it may be, that also means that sometimes difficult decisions have to be taken. What happened at Mid Staffs, where we had a big argument about data that meant nothing happened for too long, and what happened originally at Bristol, where up to 35 children may have lost their lives, is a warning about the dangers of inaction. On this occasion, I think that overall the NHS got it right.
Andrew Gwynne (Denton and Reddish) (Lab)
First, let me apologise to the House on behalf of my right hon. Friend the Member for Leigh (Andy Burnham) who cannot be here today because he is in Liverpool attending the memorial service for victims of the Hillsborough disaster.
This situation has descended into yet another trademark Government shambles. Just 24 hours after the High Court announced that the decision to close the children’s cardiac unit at Leeds was “legally flawed”, Leeds Teaching Hospitals NHS Trust was effectively instructed to stop surgery. The timing of the decision was strange to say the least, but to quote the head of the central cardiac audit database:
“It rings of politics rather than proper process.”
We now know that the instruction was based on incomplete and unverified data, and that Dr Tony Salmon, president of the British Congenital Cardiac Association, was “very concerned” at the way the data were being used, and that any conclusions drawn from the data were “premature”. The Opposition are therefore pleased that this urgent question has been granted as the House clearly deserves some answers.
First, the Secretary of State needs to outline to the House exactly when he was informed that NHS England had concerns about the centre, and say whether he gave his approval to suspend surgery there. If so, was he satisfied that the data presented were accurate and had clinical support? On the issue of data, why did it take this recent episode at Leeds for the information to be released into the public domain—information that my hon. Friend the Member for Leicester West (Liz Kendall), and others, had asked to be released for some time?
Secondly, does the Secretary of State accept that the suspension of surgery, with all the consequent anxiety that it caused patients and staff, was at best a mistake and at worst an irresponsible and disproportionate action? Thirdly, does he accept that the timing of the decision to suspend surgery so soon after the High Court’s ruling caused a great deal of suspicion in Leeds and gave the distinct impression that it was a political decision and not based on clinical evidence? Finally—this point goes beyond Leeds—the Health Secretary’s record so far has failed to inspire confidence in the process of reconfiguration. Will he therefore conduct an urgent investigation into Leeds and how this happened, and consider what lessons can be learned from this unedifying episode for the children’s cardiac review and future reviews?
We owe it to the dedicated staff who work in our NHS to ensure that whatever disagreements we may have in Westminster, and whatever our politics, we do not hinder their ability to provide high-quality care to patients. We also owe it to patients and their families not to add to the anxiety and stress of undergoing treatment. On both those counts the Government have failed, and I hope that when the Secretary of State returns to the Dispatch Box, he will have the decency to apologise and start answering these very serious questions.
Mr Hunt
I am afraid the hon. Gentleman has let the Labour party down with the total inadequacy of that response. He spoke of an irresponsible and disproportionate decision, but I ask him to reflect on that as someone who would like to be a Health Minister. Would he seriously have wanted anything different to happen? If the NHS nationally is informed of data that show that mortality rates at a particular hospital could be up to three times higher than they should be, would he sanction the continuation of surgery, or would he say, “We need to get to the bottom of the statistics before deciding whether there will be any more operations”? If he is saying that he would have wanted surgery to continue, I put it to him that he and his party have learned nothing from the lessons of Bristol and nothing from the lessons of Mid Staffs. I did not authorise the decision, but wholeheartedly supported it because it was an operational decision made by NHS England. It is right that such decisions are made by clinicians, who understand such things better than we politicians do.
On reconfigurations, the hon. Gentleman’s party closed or downgraded 12 A and Es and nine maternity units in its period in office. The shadow Health Minister, the hon. Member for Leicester West (Liz Kendall), has said that Labour would not fall into the “easy politics” of opposing every single reconfiguration, but that is exactly what the Opposition are doing. It is not just easy politics; it is what Tony Blair last week called the “comfort zone” of being a “repository for people’s anger” rather than having the courage to argue for difficult reforms.
Sir Edward Garnier (Harborough) (Con)
My right hon. Friend mentioned at the outset of his response three principles, the first of which was to do no harm. Following discussions that he and I have had—I am sure he has had such discussions with our hon. Friend the Member for Loughborough (Nicky Morgan) and no doubt other Leicester and Leicestershire MPs—does he agree that there is a read-across from Leeds to Glenfield, where we have the Leicester children’s heart unit? It is unquestionably a unit of international repute and certainly one of national repute. The death rates for that hospital, which deals with particularly difficult patients and highly complicated operations, are right at the top. I urge him to learn from the Leeds fiasco—I do not put the fiasco at his door—that the Glenfield hospital should be preserved for the good of the nation and of the people of the east midlands, so that we do no harm.
Mr Hunt
I am grateful to my hon. and learned Friend for his question. I am waiting to hear advice from the Independent Reconfiguration Panel on its assessment of the Safe and Sustainable review. I will wait until I get that advice before making any decisions, and in particular before making any decisions on Glenfield, Leeds or any other hospital involved.
It is important to recognise, however, that there two separate issues: the first is the mortality rates at particular hospitals, but the second is whether we can improve mortality rates overall by concentrating surgery in fewer hospitals. I will wait to hear from the IRP on both before making any decisions.
Hilary Benn (Leeds Central) (Lab)
The Secretary of State will be well aware of the deep disquiet in Leeds about what has happened to the children’s heart surgery unit in my constituency, and I am grateful to him for the conversation we had on Good Friday. Given that the High Court has decided that the decision to close Leeds is unlawful, and given that we have now had it confirmed that the Leeds unit was safe before and is safe still, when will he be able to reassure worried parents of very sick children that the future of the Leeds unit is safe?
Mr Hunt
I thank the right hon. Gentleman for the constructive conversation we had on Good Friday about what I entirely agree is an extremely difficult issue for the families and for the staff at the LGI. My intention is to try to resolve the matter as quickly as possible. I obviously cannot comment on what view I will take while legal proceedings are under way and while I wait for advice from the IRP, but I agree with him about the uncertainty, which I would like to resolve as quickly as possible. He would want me to be guided by what is in the best interests of his constituents and people across the country who need children’s heart surgery.
Greg Mulholland (Leeds North West) (LD)
I, too, thank the Secretary of State for his private phone call to me, but we should have heard from him on this fiasco before today in response to an urgent question. I have to say that his response has simply not been good enough, considering what has happened. To correct one thing that he said, it was not with the agreement of the LGI that services were suspended. Clearly, Sir Bruce Keogh marched into the LGI at 8 o’clock in the morning and said that if surgery was not suspended, people would be sacked. That was no way to behave even if the data were accurate, but Sir Bruce has now backtracked and admitted the data passed to him by his friend Sir Roger Boyle were not accurate.
The decision to close children’s heart surgery in a safe unit, which is what we now know Leeds always was, puts children at greater risk. To make a decision of that nature that is incorrect is simply unacceptable. Will the Secretary of State do what is now clearly necessary and have a full investigation of this fiasco, including the conduct, judgment and motivations of senior NHS officials involved?
Mr Hunt
I simply say to the hon. Gentleman that if, as he has alleged consistently in the media, this was some kind of political ploy linked to Safe and Sustainable, we would not have reopened children’s heart surgery in Leeds on 10 April as we did. I spoke to him at the time and told him that it was my hope that operations would be able to resume as soon as possible and that we would get to the bottom of the data to find that the concerns were unnecessary because the unit was safe. In the end, that is what happened.
It would have been utterly irresponsible for Professor Sir Bruce Keogh, in view of the evidence he was faced with—including incomplete data that the hospital had not supplied in the way that it should have done—not to ask the hospital to suspend surgery. That would have been taking a risk with the lives of the hon. Gentleman’s constituents and the people of Leeds in a way that would have been wholly inappropriate. The NHS needs to move in a totally different direction on patient safety, and this is a good example of the NHS medical director behaving promptly and properly in exactly the way he should.
Fabian Hamilton (Leeds North East) (Lab)
In his opening statement, the Secretary of State mentioned that one of Sir Bruce Keogh’s concerns was the complaints made by families in Yorkshire about the treatment their children had received at Leeds children’s heart surgery unit. If there had been those concerns, does the Secretary of State not think that over the three years of the Safe and Sustainable review at least one complaint would have been made via Members of Parliament in Yorkshire or local media outlets? The fact that no complaints were received over three years surely tells him that generally the families were very satisfied with the way their children were treated. Will he now apologise to the families of Yorkshire for the closure between 28 March and 10 April?
Mr Hunt
The apology would have been due to those families if Sir Bruce Keogh had not acted promptly in the face of data that showed the possibility of a serious problem at that hospital. He was right to react promptly and to get to the bottom of those data. I put it to the hon. Gentleman that if he had been a Health Minister at the time he would not have wanted the NHS medical director to do anything other than give absolute priority to patient safety. That is what happened. Like the hon. Gentleman, I am delighted that it was possible for operations to resume on 10 April.
Julian Smith (Skipton and Ripon) (Con)
However we got to this point, I urge my right hon. Friend—on behalf of one of the leading campaigners for Leeds heart surgery, my constituent Lois Brown—to do everything he can to ensure that we move as quickly as possible to a decision on Leeds, based on the full facts and made in a transparent manner.
Mr Hunt
I can absolutely assure my hon. Friend that that is my intention. There is legal due process—legal proceedings are under way—and he would want that to be respected. I am also anxious to read and digest the report of the Independent Reconfiguration Panel. I would like that all to happen as quickly as possible within the law, so that we can conclude this matter and remove the great uncertainty that I know is unsettling so many people.
Mr George Mudie (Leeds East) (Lab)
Does the Secretary of State not accept that Sir Roger’s unacceptable remarks, which came 24 hours after the court decision confirmed the review as flawed, unfair and unlawful, have dented severely the credibility of the Safe and Sustainable review in the eyes of the public? The Secretary of State has suggested that he will wait until the configuration board comes back with a recommendation, but does he not think that it would have been better if he had come to the Chamber to tell hon. Members and the public what steps he would be taking to restore credibility to the Safe and Sustainable review?
Mr Hunt
I think that NHS England has taken firm action: it has said that Professor Boyle will not take any further part in Safe and Sustainable. However, the hon. Gentleman will understand that as the review is currently subject to legal proceedings, I cannot comment any further. As the final decision will end up on my desk, I want to wait until the legal proceedings are complete and I have the report of the IRP to consider before I make that decision. I stress what I said to my hon. Friend the Member for Skipton and Ripon (Julian Smith): I would like it to conclude as quickly as possible. I know that is in the best interests of the people of Leeds.
Andrew Jones (Harrogate and Knaresborough) (Con)
I thank my right hon. Friend for his statement. NHS bosses are right to take seriously any concerns regarding patient safety, particularly in the light of the Mid Staffs crisis. There has been significant anger and confusion locally surrounding the chaos of the decision to close the unit. Does my right hon. Friend agree that the use of data, which are incomplete and described by the doctors that produced them as not fit for purpose, has led to precipitate and disproportionate actions that have worried patients and their families? We have, after all, a culture in which NHS managers are extremely familiar with handling data. They must have known that precipitate actions would come from looking at leaked partial data.
Mr Hunt
I entirely understand the concern of families, staff and doctors at the LGI. I simply say to my hon. Friend that the reason the data were not complete was because the hospital had failed to supply them. There is, therefore, an important warning to all hospitals to ensure that they supply accurate and timely information on their surgery survival rates.
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
Does the Secretary of State still accept the underlying premise of the Safe and Sustainable review, which is that there should be a smaller number of centres of excellence for children’s specialist heart surgery? If he still accepts that premise, will he say something to the House today about his timetable for bringing the issue, which has gone on for 12 years, to a conclusion?
Mr Hunt
I certainly accept the premise, on the basis of considerable clinical evidence, that for complex surgery greater specialisation leads to higher survival rates. On whether that is the right thing to do in this particular case, I would like to wait for the outcome of the legal process and the advice of the Independent Reconfiguration Panel, but I will just say this: I would like to conclude this as quickly as possible. I am subject, rightly, to legal due process. Families who feel strongly want this to be concluded quickly, but they also want to know that it has been concluded fairly, and I think that that underlies a lot of the concerns raised by Members this afternoon. The timetable is not within my gift but what is within my gift in terms of timings I will try to expedite as quickly as possible.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
Does my right hon. Friend recognise that whatever challenge there may be to the evidence relating to Leeds, there has been no challenge to the evidence of the successful outcomes in Newcastle? Can he assure me that clinical evidence will predominate in his final decision?
Mr Hunt
I can absolutely give my right hon. Friend that assurance. It is very important, when dealing with very difficult decisions of this nature, that we are led by clinical evidence on what will save the most lives. We have an absolute responsibility to all of our constituents to ensure that clinical evidence informs the final decision.
Mr Kevin Barron (Rother Valley) (Lab)
I was contacted by a mother whose son’s operation was cancelled, and it had also been delayed on two previous occasions for other reasons. Given this unedifying situation, in which the two leading clinicians who advise on these areas for the NHS have lowered themselves to saying whether they would send their child to this unit for an operation, what advice should I give to my constituent?
Mr Hunt
I am certain that the right hon. Gentleman’s constituent would not want surgery to proceed anywhere in the NHS if there are question marks over its safety. Of course, when such decisions are made in a very short period of time, it is greatly discomfiting and worrying for the many families involved, who have enough to worry about anyway—I completely understand that. He should remember, however, how we in the NHS let down the families in Bristol and Mid Staffs by not acting when data suggested that there might be a problem. It is better to act quickly and decisively and then, if possible, to resume surgery, as happened on this occasion, than not to act at all and to find out later that we have been responsible for much, much worse outcomes.
Nigel Adams (Selby and Ainsty) (Con)
On behalf of right hon. and hon. Members across Yorkshire, may I use this opportunity to thank my hon. Friend the Member for Pudsey (Stuart Andrew) for how he has worked in a consensual, cross-party and non-political way on this issue?
Did the Secretary of State not find it at least odd that the concerns about the Leeds unit came to light within hours of the High Court’s ruling against the decision to close the Leeds unit?
Karl Turner (Kingston upon Hull East) (Lab)
Come on Jeremy, answer the question.
Mr Hunt
Whenever he receives information, the medical director is under an absolute obligation to act. What he did was absolutely correct: he said that he would look at the data and get to the bottom of them and that if it turned out that the data were not as accurate as they should have been, surgery would resume. That is exactly what happened.
Mr Speaker
The hon. Member for Kingston upon Hull East (Karl Turner) is a very excitable fellow—he might remind some people of his predecessor in the House in that respect.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
A baby born with a heart condition in Sheffield who needs a complex intervention would normally go to Leeds. One of the concerns about the Safe and Sustainable review was that children from my constituency would have had to travel further. The decision to suspend the Leeds unit created that very situation. The Secretary of State needs to acknowledge that children could, as it turns out, have been put at risk unnecessarily by closing a unit that was in fact safe, because they would have had to travel further, which for very ill babies is a risk in itself. At the heart of this has been a lack of transparency and a failure to put information into the public domain. I have had to table parliamentary questions to try to get information about what is happening. Nobody wants an unsafe situation. Will the Secretary of State now commit to complete transparency in respect of all the information?
Mr Hunt
This situation arose because of the much greater data transparency and because the Government have been encouraging people to come forward if they have concerns about things going wrong. As a result, we were presented with data on the basis of which the NHS director decided that the safe and sensible thing to do was to suspend surgery while we got to the bottom of these data, which could have demonstrated some very serious outcomes. We need to take good advice from clinicians about the balance of risk. Yes, there might be some risks with people having to travel further for the surgery, but surely the risks are much greater if potentially unsafe operations are allowed to continue. That was why, on that balance of risk, it was decided to suspend surgery at Leeds until we could get to the bottom of whether the data were right.
Alec Shelbrooke (Elmet and Rothwell) (Con)
In the week after surgery at the heart unit was suspended, my wife and I met a constituent in Rothwell whose child was due to go in for surgery. She was completely and utterly exhausted and overwrought with worry and concern. Many people were concerned not just about the suspension, but about the distances that they would have had to travel if Leeds had not reopened. That possibility, which we had previously mentioned, became a reality. Sir Roger has now been suspended from the review, but he had already reported. In order that we can take one positive out of what has happened in the past couple of weeks, will the Secretary of State ensure that the distances people have to travel are now taken seriously in the review?
Mr Hunt
That is exactly the purpose of a review. Let me reassure my hon. Friend that before I make any decision, I will be getting on my desk independent advice from the Independent Reconfiguration Panel. One thing that that advice does is weigh up the balance of advantage between the greater distances that people have to travel and the advantages of specialisation for complex surgery. My heart goes out, as I know his does, to people who were made extremely worried by what happened over Easter at Leeds. However, he will also understand that if there are concerns, the last thing his constituents would want is an NHS that did nothing because of an argument about data. The right thing to do was to get to the bottom of the data, and I am sure that his constituents are as delighted as he and I are that surgery has now resumed.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
What does the Secretary of State think of the opinion of one of my constituents, who said to me over the weekend, “What a right old mess all this has been”? The fact is that it has been a mess. I have supported the all-party campaign on the basis that we go for the best clinically safe outcomes for all my constituents. My constituents have gone to Leeds general infirmary, as have my children. It is a hospital of great renown, in which the people of Yorkshire have tremendous faith, but in today’s statement the Secretary of State has two or three times put us in the same frame as Mid Staffordshire and Bristol. There is no question but that Leeds general infirmary is a fine institution. Will he put it on the record today that this is not the same sort of case? This is a fine hospital struggling to deliver under a cloud that has been over it for three or four years.
Mr Hunt
What I say to the hon. Gentleman is that it is a fine hospital and a safe hospital, but data were presented to the NHS medical director that said that mortality rates there for children’s heart surgery were two and three quarter times higher than should be expected. In that situation, there is of course a great deal of inconvenience and worry caused by a decision to suspend surgery, but I would rather have that inconvenience and worry than continue with surgery when we have not got to the bottom of whether there is any truth in those data. That must be the right thing to do for the people who are due to have operations at that hospital.
Martin Vickers (Cleethorpes) (Con)
Parents whose children face major surgery are already particularly anxious and distressed, and that is before an unseemly public dispute breaks out between the medical experts that they rely on. This also highlights the fact that the investigation has been going on for far too long. The uncertainty is unacceptable. May I urge my right hon. Friend to do everything possible to bring the matter to a speedy conclusion?
Mr Gerry Sutcliffe (Bradford South) (Lab)
I know the Secretary of State likes dancing, but his fancy footsteps today are doing him no favours. The position in Leeds is that the public have lost confidence after what has taken place. Sir Roger Boyle has condemned the hospital and the Secretary of State has not condemned him for the comments he has made. Can he do that now?
Mr Hunt
Let me be clear: I do not want anyone in the NHS who has concerns about mortality to sit on those concerns, so if Sir Roger had concerns, he was right to raise them with Professor Sir Bruce Keogh. Sir Roger also made comments that suggested that he might have prejudged the outcome of Safe and Sustainable, so I think it is right that he does not take any further role in that, and we will be getting independent advice on whether Safe and Sustainable made the right recommendations, which I shall consider before making any decision. I have to say to the hon. Gentleman that there is no fancy footwork. I am absolutely clear that if anyone, anywhere in the NHS, has concerns about safety and if the view of the NHS medical director is that we need to investigate those concerns and, in the meantime, suspend surgery at that institution, I will support the NHS medical director. That is the right thing to do and I think the hon. Gentleman would do exactly the same if he were in my shoes.
Mr David Ward (Bradford East) (LD)
This whole thing stinks; it really does. We now know that the unit is perfectly safe, which means that, for a period of time, children’s health was put at risk while it was closed. That is the seriousness of the situation. The decision was not made after careful, thoughtful consideration of authoritative, verified data; it was a kneejerk reaction to what must, in all probability, have been malicious allegations made against the unit. We have been told over and over again to ask ourselves what Sir Roger could have done, other than close the unit, but what did he actually do? That is what we need to find out, and the matter needs to be investigated. We know what the context was, following the court case, and we need to find out what follow-up work he did in that context to verify the allegations before he took that risk with the health of young children.
Mr Hunt
There are some risks, of course, in suspending surgery, but when we have mortality data such as those that Professor Sir Bruce Keogh was faced with, there are also considerable risks involved in doing nothing in response. The decision was taken not to close the children’s heart unit but to suspend surgery until he could get to the bottom of whether there was any truth in the data. He had a very difficult decision to make, given that situation, but I think he made the right decision.
Nic Dakin (Scunthorpe) (Lab)
Parents of very poorly children in the Scunthorpe area who have been very effectively supported by the Leeds unit have been dismayed to hear what has been happening over the past month or so. The Secretary of State has given us clear answers this afternoon, and I thank him for that. He has said that there will be a resolution to the Safe and Sustainable review as soon as possible. Will that be in 2013 or at some point beyond that?
Mr Hunt
I very much hope that this does not go beyond 2013, but I am afraid that that is not in my hands, because of legal due process. Legal proceedings are under way at the moment and I have to consider the advice of the Independent Reconfiguration Panel, but I want to stress to the hon. Gentleman, as I have to many hon. Members, my determination to resolve the situation as quickly as possible.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Children living in Thirsk and Malton will be operated on either at Leeds hospital or at Newcastle hospital. What is becoming apparent in this and other debates on the health service is the desire of parents and other family members to have their loved ones—young children in this case—operated on as close as possible to where they live, whereas clinicians and the Government seem, at every stage of the NHS reforms, to be making decisions based on clinical excellence. This is a debate that needs to be had.
Mr Hunt
I agree with my hon. Friend. There are two types of reason for people going into hospital. With geriatric care, for example, there are clear advantages in someone being treated as near as possible to their home. All other things being equal, it makes sense for people to be treated where it is easy for friends and family to visit them, as that can aid recuperation and convalescence. When more complex surgery is required, however, there is clinical evidence that mortality rates are better if we specialise surgery in a fewer number of centres. That is the debate that we are having about children’s heart surgery, and I hope to resolve the matter as quickly as possible.
Diana Johnson (Kingston upon Hull North) (Lab)
Given that the Safe and Sustainable review is being dogged by so many problems, and given the inaccuracies and the prejudice against Leeds in particular, has the Secretary of State thought about scrapping the whole process?
Mr Hunt
That is the subject of legal proceedings at the moment, and I want to ensure that we have a process that is fair and that is recognised to be fair by all the people who are affected by this possible decision. I therefore want to ensure that the decision will be judicially robust, but I also want to get independent advice from the IRP before I make my final decision. If that means that it takes longer to get to a decision, then I am afraid that that might be the case, but the most important thing is to get to a decision that is fair and that is recognised to be so.
Jenny Chapman (Darlington) (Lab)
It is right that such decisions should be made on the basis of data, but those data must be more reliable. Such decisions are made in this way up and down the country on maternity and accident and emergency units, for example. How will the Secretary of State ensure that such data are reliable and robust, that they can be challenged, and that such situations can be dealt with far more quickly than has been the case in Leeds?
Mr Hunt
The hon. Lady makes an important point. At the heart of this is a change happening in the NHS, where heart surgery is leading the way and we are discovering that we can make dramatic improvements to mortality rates. It has happened in heart surgery, where we have moved from being one of the worst performers in Europe to one of the best, because of the collection of risk-adjusted data. That has now been extended to cancer outcomes and to a total of 10 specialities. We shall gradually collect those data over the next two years, which will allow peer review in a way that cannot normally happen. It is a big change and part of the issue was that the hospital in Leeds did not realise how seriously the data would be taken, which may have meant that it did not supply as complete data as it should have, and that led to the problem. There is a big change, but also a big opportunity for the NHS to improve its outcomes.
Jonathan Ashworth (Leicester South) (Lab)
I want to reinforce entirely the point put to the Secretary of State by the hon. and learned Member for Harborough (Sir Edward Garnier) a few moments ago. Safe and Sustainable made recommendations about Leeds and about closing children’s heart surgery at Leicester, but in recent days published data show that Leicester has one of the lowest mortality rates. Can the Secretary of State guarantee that the Independent Reconfiguration Panel will fully take into account those data published just a few days ago?
Paul Blomfield (Sheffield Central) (Lab)
We have seen an extraordinary sequence of events that have unnecessarily tarnished the reputation of what the Secretary of State described as a fine hospital, and caused enormous anxiety to families across Yorkshire and the wider region. Does the Secretary of State not agree therefore that we need a full inquiry into how the decision was taken?
Mr Hunt
I think the most important thing is properly to establish the truth of the data and then to make sure that any lessons learned from that are reflected in decisions made about the Safe and Sustainable Review, so that the influence of mortality data on any decisions in Safe and Sustainable is based on proper analysis of those data. That is certainly something we will learn from.
G8 Foreign Ministers
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
With permission, Mr Speaker, I will make a statement on the meeting of G8 Foreign Ministers in London last week, which also allows me to update the House on international events over the recess.
The theme of the meeting was preventing and resolving conflict, and dealing with its consequences. There were important agreements in five areas that the UK had established as priorities.
The G8 agreed to support the re-engagement of international financial institutions, such as the International Monetary Fund, with Somalia, so it can invest in its economy, and welcomed the Somalia conference, which will be held in London on 7 May. The Ministers endorsed the Burmese Government’s proposals for responsible investment to support political and economic progress, while urging peace and reconciliation to end ethnic and religious conflicts. On cyberspace, we agreed to share best practice and build up the capacity of other countries to secure their networks effectively. The UK’s G8 presidency this year is being used to help create economic opportunities in countries in transition in the middle east and north Africa, particularly for women and young people. The Ministers endorsed our programme to promote investment, support enterprise, and work with Arab countries on the return of stolen assets. The G8 agreed a landmark declaration on preventing sexual violence in conflict, which I will return to shortly.
We also had extensive talks on pressing international issues. In Syria, we face worsening conflict and extreme humanitarian suffering. Well over 70,000 people have died, a truly horrific number; 5.5 million people are in desperate humanitarian need, and there are now 1.3 million refugees in neighbouring countries—a quarter of a million more than when I last spoke to the House on the subject only last month. The UK is deeply concerned that the UN relief effort is critically underfunded, and that only 34% of the $1.5 billion humanitarian appeal has so far been provided, even though the need will become far worse if the conflict continues. The G8 agreed immediate priorities of increasing humanitarian access inside Syria, ensuring that donors provide the funding they have promised, and the need to support stability in host countries.
The G8 Ministers reaffirmed the view that the use of chemical weapons in Syria would demand a serious international response. The UK is increasingly concerned that there is evidence of the use of chemical weapons in Syria. These allegations must be fully and urgently investigated. We welcome the UN Secretary-General’s announcement of an investigation into the allegations, and call again on the Syrian regime to co-operate fully and allow the investigation unfettered access to all areas. They should take heed that the world is watching, and those who order the use of chemical weapons, or who participate in their use, must be held to account.
We also agreed that a Syrian-led political transition is urgently needed, based on the principles of the Geneva communiqué. The opposition has stated that it is open to dialogue and we are supporting its efforts to prepare for political transition. The Syrian Government must demonstrate that they are ready to enter negotiations in good faith. We are calling on Russia to work with us to establish a genuine political effort on that basis.
I, along with my American and French counterparts, held talks with the Prime Minister designate and two vice-presidents of the Syrian National Coalition ahead of the G8. We discussed how the coalition can best represent the interests of all Syria’s communities and uphold human rights, and how we can work together to increase services and humanitarian assistance inside Syria.
The UK is determined to do more to support the Syrian National Coalition. Our aim is to bring about a political transition by building the credibility and capability of the moderate opposition and increasing pressure on the regime. The package of non-lethal assistance, including protected vehicles and body armour, that I announced last month is now being shipped to the region. As I said during my previous statement to the House, we have to be prepared to do even more to help to save lives. Our policy on Syria cannot be static in the face of this growing calamity.
As the Prime Minister said last month, we have taken no decision that we would like to send arms to the Syrian opposition, but the UK and France argue that we will need further amendments to the EU arms embargo, or even to lift it altogether. As things stand, we need greater flexibility if we decide that urgent action is necessary, for example in response to a specific incident or continued grave deterioration on the ground, or to create the conditions for a successful political transition. I will discuss that with the Foreign Ministers of other key countries in the Friends of Syria Group in Istanbul on Saturday, with EU Foreign Ministers in Luxembourg on Monday, and in further international meetings next month.
The G8 Ministers also reviewed the threat to international security from North Korea. We condemned its aggressive rhetoric, the announcement that it would reopen the nuclear facility at Yongbyon, and its development of nuclear and ballistic missile programmes, breaching its international obligations. We urged North Korea to engage in credible and authentic multilateral talks on denuclearisation, to abide by its obligations under all relevant UN Security Council resolutions, to abandon all its weapons programmes and to refrain from further provocative acts.
All G8 Ministers were clear that North Korea’s current posture will lead only to further isolation. We emphasised our willingness to take further significant measures if North Korea conducts another missile launch or nuclear test. I discussed North Korea in detail with the Japanese Foreign Minister in the margins of the G8 and spoke to the South Korean Foreign Minister this morning. I also welcome Secretary Kerry’s visit to the region at the weekend. I have laid a written ministerial statement today on these developments and the action that the Government are taking.
The G8 also discussed the recent E3 plus 3 talks on Iran’s nuclear programme and the disappointing outcome. Tehran’s position falls short of what is needed for a diplomatic breakthrough. We will continue the twin-track approach of sanctions and negotiations, but the G8 was clear that the window for diplomacy will not remain open for ever.
We also had very good discussions on the middle east peace process, strongly welcoming Secretary Kerry’s recent visits to the region and the US commitment to finding a just, lasting and comprehensive peace. Both sides must show bold political leadership and refrain from actions that threaten the viability of a two-state solution.
I was delighted that the G8 Foreign Ministers agreed a major declaration on preventing sexual violence in conflict, which is the first of its kind and the result of a year of effort and negotiations by the United Kingdom. I pay tribute to the special representative of the UN Secretary-General on sexual violence, Zainab Bangura, and to UN special envoy for refugees, Angelina Jolie, who has worked with me to develop this initiative from the beginning—[Interruption.] And very good work it has been.
The G8 has declared, for the first time, that rape and serious sexual violence in conflict constitute grave breaches of the Geneva convention. G8 members have the responsibility to search for, prosecute or transfer for trial individuals accused of such crimes, regardless of their nationality and wherever they are in the world. The G8 committed itself to the development of a comprehensive international protocol on the investigation and documentation of rape and sexual violence in conflict to increase the number of successful prosecutions. We will now take the lead on developing this protocol with experts from all over the world.
We declared that there should never be any amnesty for sexual violence in peace agreements and pledged to review the doctrine and training that we provide to our own national military and police, and to peacekeeping troops of other nations. The declaration also includes vital commitments on women and children’s rights, and the protection of women human rights defenders.
The G8 endorsed the deployment of international experts to help build up the judicial, investigative and legal capacity of other countries, which the United Kingdom is already doing. Our team of over 70 experts has been deployed to Bosnia, the Syria border and Libya, and will carry out further deployments this year to those three countries, as well as to South Sudan, Mali and the Democratic Republic of the Congo. The G8 Ministers announced £23 million in new funding to back these efforts, including £10 million from the UK.
Taken together, that was an historic step, marking a wholly new international effort to shatter the myths about sexual violence in conflict and end the culture of impunity. We will now take this campaign to the United Nations. I will lead a debate at the UN Security Council during our presidency in June, and it will be one of my top priorities for the UN General Assembly in September. In all these areas, the G8 Foreign Ministers addressed the crises of today, but also, as I believe strongly we must always do, addressed ourselves to improving the condition of humanity.
Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)
I thank the Foreign Secretary for his statement and for advance sight of it. The G8 Foreign Ministers meeting covered a range of subjects, as the Foreign Secretary made clear in his statement, but I will focus on Syria and North Korea.
First, however, it would be remiss of me to do anything other than express my personal congratulations to the Foreign Secretary on his leadership on the issue of sexual violence in conflict zones. His steps to bring the international community together to tackle the horrific use of sexual violence in conflict have rightly received warm support from Members in all parts of the House. I also pay tribute to the civil society groups that have campaigned tirelessly on the issue, and on whose significant efforts the Foreign Secretary’s engagement has been built.
The Foreign Secretary and the Prime Minister have speculated in recent weeks about the need to ensure that the Syrian rebels are armed and trained. The Foreign Secretary will be aware that the G8 communiqué made no reference to international efforts to stem the flow of arms into Syria, but did he raise the transfer of weapons at the meeting or, indeed, in any bilateral meetings with G8 Foreign Ministers in attendance, in particular with Russian Foreign Minister Lavrov? In his statement, the Foreign Secretary stated that the UK has “taken no decision” on arming the Syrian rebels, but in the Liaison Committee on 12 March the Prime Minister struck a rather different tone, as he was keen to stress that the UK
“might have to do things in our own way.”
He added that the UK was “still an independent country”.
Will the Foreign Secretary clarify those earlier remarks from the Prime Minister, and will he further clarify whether the Government’s approach to arming the rebels has altered in any way in the light of recent evidence of radical Islamist militants operating on the ground? That includes the al-Nusra Front, which only last week confirmed its affiliation to al-Qaeda. Indeed, the Foreign Secretary will be aware of a letter that I sent to him on 20 March raising questions about the British Government’s decision to
“fund training to help armed groups understand their responsibilities and obligations under international law”.—[Official Report, 6 March 2013; Vol. 559, c. 963.]
I have not yet received a reply from the Foreign Secretary, so in the light of the upcoming deadline for the renewal of the EU arms embargo, will he kindly confirm his intention to reply to that letter?
I also welcome the fact that the Foreign Secretary said that one of the immediate priorities arising from the meeting was ensuring that donors provide the funding that they have promised for Syria. Will he confirm whether all the states represented at the G8 Foreign Ministers meeting last week have provided all the funding that they have promised?
A key priority on Syria as we approach the G8 summit must be to build influence with Russia, and encourage it to stop its continued sponsorship of the Assad regime. Given that, I found it a little curious that the Foreign Secretary restricted his observations about discussions with Russia to a single line in a statement of six pages. Will he clarify what, in the light of the final communiqué from the Foreign Ministers meeting, is the British Government’s strategy to help to bring an end to the violence in Syria? If it is the Geneva accords, what practical steps have been taken to secure the anticipated negotiations?
Finally, I should like to turn to the points made by the Foreign Secretary on the ongoing situation in the Korean peninsula. We support the agreement reached by Foreign Ministers following the G8 meeting to condemn the continued aggressive and provocative actions of the North Korean regime. Does the Foreign Secretary agree that China’s role as an historic supporter of North Korea is key to defusing the crisis, so will he join me in welcoming its constructive engagement on the issue to date?
The efforts of others will not absolve the North Koreans of their own responsibilities, so does the Foreign Secretary agree that the responsibility is now on the North Korean leadership to accept an open offer that has been extended from the international community to initiate meaningful negotiations in relation to this troubling and dangerous situation?
Mr Hague
I am grateful to the right hon. Gentleman for his questions and for his strong endorsement of the initiative that I have been pursuing on preventing sexual violence in conflict. This is a cross-party issue that is of concern to people in all parties in the UK, and we can all enthusiastically get behind it. We are, as he said, building on the efforts of people in civil society, many NGOs and people who have already worked at the United Nations for some years, but it is time for the most powerful, active Governments of the world to get behind the initiative, make major international diplomatic progress, and show that we can change the situation on the ground. I will keep the House updated throughout the year on our efforts.
On Syria, the right hon. Gentleman asked about discussions on the transfer of weapons. We had a long discussion about Syria at the G8 and with the Russian Foreign and Defence Ministers when they made a bilateral visit here on 13 March. So in the past month we have had two substantial rounds of discussions with Russian Ministers—indeed, three rounds in just over a month. Of course we discussed the continued flow of weapons to the regime in Syria. Part of the problem is that the regime can continue to receive weapons, but many moderate figures in opposition groups say that they cannot obtain them.
What the Prime Minister said last month about the possibility that we might have to do more is very much what I am saying here and what I said in my last statement—that our policy cannot be static. He said, and I repeated in the statement, that we have not taken any decision about arming the opposition ourselves. There are legitimate arguments against that. They have sometimes been put in the House, and the right hon. Gentleman has raised some of them. If we were to take that step, we would have to assure ourselves to the maximum degree possible not only of the international legal position, but that the weapons could not be misused by others for whom they were not intended. Those are major considerations.
It must also be a major consideration that we currently face a humanitarian catastrophe, with tens of thousands of people being killed and millions in desperate need. A regime that is not bringing the conflict to an end can get weapons and extremists can get weapons, but people who are in favour of a free, democratic and moderate Syria find it very difficult to do so. We all have to ask ourselves how long we can go on with that situation if the conflict continues and if it continues to get worse. Of course, what we need most of all is a diplomatic and political settlement. Giving additional assistance to the National Coalition is part of putting pressure on the regime to come to a political settlement.
To expand on our discussions with Russia about that, we have discussed with our Russian colleagues several times in the past month how to try to come together to bring about the Geneva communiqué—a transitional Government drawn from regime and opposition, with full executive authority—but no one in other western or Arab nations, nor the UK, has yet succeeded in agreeing with Russia the mechanism to bring that about. A United Nations Security Council resolution would, in our view, be the appropriate mechanism, but Russia and China have vetoed that in the past and would do so again under current circumstances. It could come about through each of the countries involved—through us, the United States, the Russians and others—putting pressure on all the parties involved to negotiate that. We are ready to do so. We are always doing that with the national coalition, but sufficient pressure has not been put on the regime to do that, so we will always work hard on a diplomatic and negotiated way forward. In the absence of that, we have to do what we can to save lives and to try to make a resolution of the conflict more likely.
I agree with the thrust of the right hon. Gentleman’s questions about China and the Democratic People’s Republic of Korea. China’s position of agreeing to UN Security Council resolution 2094, which put additional sanctions on North Korea, is welcome. I will discuss that with the new Chinese leadership over the next couple of days to see how we can work together on it. The message should be clear, as it is from the whole House and from the whole UN Security Council: North Korea has a choice, and with the choice it is making at the moment it will end up with a country that is even more broken and even more isolated, even from China. It is not too late to make an alternative choice; the path of multilateral negotiations and greater engagement with the international community is still open.
Mr John Redwood (Wokingham) (Con)
I share the Foreign Secretary’s loathing of the violence of the Syrian regime, but will he comment briefly on the opposition forces? To what extent do they believe in democracy, freedom and human rights, and how well armed are they already?
Mr Hague
The answer, of course, is a mixture. I believe that the National Coalition, which we met last week—we met the Prime Minister designate, two of the Vice-Presidents and, indeed, the President, Mr al-Khatib, whom I talked with on the phone—is sincere in its commitment to democracy and human rights and to the inclusion of Syria’s very varied communities in the country’s future. I have met them and discussed that a sufficient number of times to be sure of that answer. There are extremist groups, however, and the longer this goes on the greater the risk that they will gain more support. Estimates of the number of fighters in the al-Nusra Front, which the shadow Foreign Secretary referred to, are in the low thousands, but that is still thousands. The number of fighters supporting various opposition groups is likely to be in six figures—more than 100,000. Although that is proportionately small, we must nevertheless take that seriously, which is why we argue that we have to give more practical support to the moderate democratic opposition so that the focus of opposition in Syria does not become the more extreme groups.
Angus Robertson (Moray) (SNP)
I thank the Foreign Secretary for his statement and commend all the efforts for peace in Korea and Syria and the progress that has been made in combating sexual violence in conflict. I think that all Members on both sides of the House will be absolutely horrified that 66% of pledged UN aid, which is vital for UN agencies and the Red Crescent, has not been provided. Will he outline for Members, perhaps by placing a paper in the Library, which of the countries that have pledged amounts have provided it and which have not?
Mr Hague
I will consider that. The hon. Gentleman will understand that sometimes there is a delicate diplomacy in naming and shaming on pledges. It is necessary first to get the facts absolutely straight, because there are countries that have disbursed money, countries that have allocated money but are awaiting the details of the projects they will spend it on, and other countries that have done neither, so the picture is quite complex. However, I will look at the idea. After all, we should be as transparent as we can about the data.
I neglected to answer the question the shadow Foreign Secretary asked on whether all G8 nations have disbursed all the money they pledged. The answer is no, although they are better than most at delivering the money. I think that in the main they have allocated it to particular countries and projects. I will consider how best I can provide the House will more information, although my right hon. Friend the International Development Secretary can provide the House with more information on that that is consistent with delivering on the pledges made.
Sir Menzies Campbell (North East Fife) (LD)
I am sure that the whole House would wish to express its appreciation to my right hon. Friend for finding space in his busy diary to spend time with Angelina Jolie, and to good effect, as we have heard.
Returning to the question of Syria, I maintain my reservations about arms supplies, as my right hon. Friend would expect, but I recently met a senior Jordanian official who went to great lengths to express to me the impact of the refugee problem on Jordan. When there is a country that is fragile politically and even more fragile economically, a failure on the part of those who have made pledges to provide assistance for the refugee problem becomes more acute. The truth is that their failure is nothing short of disgraceful. Does my right hon. Friend agree?
Mr Hague
Yes, I do. The official number of refugees now in Jordan is 424,000. To put that into perspective, that would, on a rough calculation, be equivalent to about 8 million or 9 million people arriving in the United Kingdom—that is the scale of the addition to the population there. We can all imagine the strain that that would impose on any country.
The House is clear, strong and united on the subject of countries’ meeting pledges. The additional dimension to this matter is that if it is so difficult to come up with the $1.5 billion agreed in January at Kuwait, how difficult will it be to come up with the $1.5 billion every few weeks or couple of months that we are going to need if the crisis goes on and the numbers get much bigger? That is why I say again that our policy cannot be static. There is only a choice between the lesser of evils in how we pursue our policy on this subject, but that underlines the fact that we cannot ignore the crisis.
Mike Gapes (Ilford South) (Lab/Co-op)
The Governments of Margaret Thatcher and Ronald Reagan armed the mujaheddin in Afghanistan, with unforeseen and terrible long-term consequences. Rather than giving to elements of the Syrian opposition surface-to-air missiles that can shoot down civilian aircraft, would it not be better to consider again whether a no-fly zone, controlled by us, is a better option?
Mr Hague
All options have to be considered. The hon. Gentleman has asked about the issue several times and has been pursuing it wholly legitimately. My answer is quite similar to the one I gave him last time. To enforce a no-fly zone, there are, again, international legal considerations. It would also require the participation of aircraft on a very large scale, so the decision would essentially be one for the United States, given the scale required. No such decision by the United States has been taken. We are working in an environment where we do not have a no-fly zone and we have to consider the options available to us in the light of that.
Richard Ottaway (Croydon South) (Con)
I congratulate the Foreign Secretary on a successful conference, which obviously entailed a lot of hard work behind the scenes. On Syria, he said, “As things stand, we need greater flexibility if we decide that urgent action is necessary”. Does he accept that any further action in Syria must be lawful and have a legal basis if it is to have international support?
Mr Hague
Yes, absolutely. It is a fundamental principle for British Governments that the action that we take must be lawful. My hon. Friend will know that when, for instance, we took action ourselves in Libya, based on UN resolution 1973, the Cabinet collectively considered the legal advice before that took place. We were able to be clear about it in the House.
Yes, international law is of paramount importance for us. Due regard must be given in international law, of course, to extreme humanitarian suffering. There comes a point where trying to ameliorate extreme humanitarian suffering becomes the prime consideration. However, I assure my hon. Friend that such legal considerations will never be absent from our minds.
Keith Vaz (Leicester East) (Lab)
I welcome the decisions taken by the summit in respect of the Roma-Lyon group and the fight against international terrorism. Last week, I visited Interpol and was briefed on the work of its Fusion Task Force. Does the Foreign Secretary agree that there seems to be a synergy between the work of the taskforce and the Roma-Lyon group? Will he undertake to try to bring those initiatives together while we hold the presidency of the G8, so that there is no duplication in the fight against international terrorism?
Mr Hague
I will certainly look at the point that the right hon. Gentleman makes. The G8 Ministers strongly and unanimously reinforced our commitment to countering terrorism effectively; that was a major part of our discussion. There is the kind of synergy to which he refers, and I will look at what we can do in that regard.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Will my right hon. Friend cast his mind back to the first G8 summit that he attended as Foreign Secretary? Was anybody forecasting that we would be facing a horrendous conflagration in Syria and the threat of thermonuclear war in North Korea? Does not that underline how unpredictable our current international security situation is and the fact that it is impossible for us to predict that we will not require nuclear weapons for our protection within the next 50 or 60 years?
Mr Hague
Yes, my hon. Friend is absolutely right, particularly with regard to the attempts of the DPRK to develop nuclear weapons and ballistic missile technology. The effects of the decisions that we are making about a successor to Trident will last for decades. We have to provide for the security of this country over several decades to come, and we must therefore, absolutely, have at the forefront of our minds the fact that we cannot predict—even a few years out, as he says—the threats that we might face. We can imagine that anyone in 1913, rather than 2013, who was trying to predict the threats they would face into the 1940s would have struggled very seriously to do so.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
I congratulate the Foreign Secretary and all those involved in securing the declaration on preventing sexual violence in conflict. Will he say a little more about the development of the protocol that the UK will be leading on? Does he envisage any role at all for parliamentarians? If so, will he agree to seek a debate in Government time on this very important issue?
Mr Hague
Yes, there is absolutely a role for parliamentarians. Indeed, as we work on the protocol over the next few months and take it to the United Nations, I would welcome informal meetings and informal consultation with hon. Members of all parties. Of course, we would have to speak to the business managers about debates. We did have a short debate that covered the subject on 14 February, and there was enthusiastic support for this measure across the House. However, I am sure that as the year goes on—indeed, during the forthcoming debate on the Gracious Speech—there may be opportunities for us to look at this together.
Dr Julian Lewis (New Forest East) (Con)
Even if the Assad regime fell tomorrow, the Government could give us no guarantee at all that their chemical weapon stocks would not fall into the hands of the thousands of al-Qaeda fighters who are fighting alongside the opposition—and it took just a couple of dozen people to organise 9/11. Would not a more sensible strategy be to work with the Russians and to try to get a ceasefire rather than to remain obsessed with overthrowing the regime?
Mr Hague
My hon. Friend must not misunderstand this. We are working on a political solution and endlessly debating and discussing it with Russia. We are not advocating, nor do we believe in, a military solution in any direction in Syria. The additional support that we give to the National Coalition is part of our effort to promote a political solution to show the regime that the National Coalition is not going to go away—and of course to save lives, which is another reason we give that assistance. We are not advocating the destruction of the institutions of the state. Whatever happens in Syria—if, as my hon. Friend says, Assad fell tomorrow—we do not want the same situation as arose in Iraq, when entire institutions and armies were disbanded. Therefore, a political settlement is absolutely what we should be looking for. Of course, we must also have contingency plans, and we must be discussing with other nations what we can do in emergencies about the security of chemical weapons. We do indeed discuss all those contingencies and we are preparing for them.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
What message does the Foreign Secretary give to journalists who endanger students by travelling with them secretly to film in North Korea?
Mr Hague
This is really a matter for the BBC and the London School of Economics, and the BBC will have to look at it. I think that I have enough matters to decide on with regard to the DPRK and all the international events we are describing without my intervening in that particular row.
Mark Pritchard (The Wrekin) (Con)
I congratulate my right hon. Friend on the protocol on sexual violence in conflict and wish him success at the United Nations. He might recall that I was one of the first Government Members to back the army of the Libyan freedom fighters, but I have grave reservations about any army of Syrian rebel freedom fighters. Would their arms be subject—whether this is done unilaterally or multilaterally —to the new arms treaty regime, which, of course, the Foreign Office ably led on in New York over the past few weeks?
Mr Hague
I am aware of my hon. Friend’s long-held views on this. In any debate we have or decisions we make on this matter, the views of this House are, of course, of paramount importance. There are a variety of views across the House in the current circumstances. We strongly believe in the arms trade treaty and in applying its provisions. We also apply the consolidated guidance that applies to arms exports from this country, although we can choose to exempt some items from that in emergencies. Of course, having fought so hard for the arms trade treaty, we will uphold it.
Dr William McCrea (South Antrim) (DUP)
May I express appreciation to the Foreign Secretary for his efforts in seeking to resolve many of the international challenges that he has outlined today? Will he assure the House that, should the present North Korean aggressive posturing be found to be more than rhetoric, he will endeavour to reach an agreed international response?
Mr Hague
Yes, absolutely. We do that, of course, at the United Nations Security Council, successfully so far. We have agreed with China, Russia and the United States on resolution 2094, the most recent resolution. The G8, including Russia, was completely unanimous, which was an important statement by many of the world’s leading nations. We concert closely on this subject with the United States, Japan and the Republic of Korea, so whatever we do on it we will do in very close partnership with those other leading nations.
Martin Horwood (Cheltenham) (LD)
The bombs of Korea and Syria understandably dominate many of the headlines, but the G8 is absolutely right to focus also on the more subtle dangers of cyber attack, not only to the digital realm, but to wider economies, societies and infrastructure. Is the Foreign Secretary confident that the UK and the G8 are devoting sufficient resources to countering this growing global threat?
Mr Hague
We in the UK are certainly devoting substantially increased resources. As my hon. Friend will know, we allocated in the strategic defence and security review an additional £650 million to developing our capabilities in the cyber area. One of the things that I discussed with my G8 colleagues is the setting up of our own cyber capability centre, which they can take part in and contribute to. I am satisfied that we are devoting the necessary resources. I think that, around the world, countries are in different stages of waking up to the scale of this threat. I discussed it with the South Korean Foreign Minister this morning and I welcome the fact that, later this year, they will hold the next international cyber conference, following on from the series that I started in 2011, to raise our awareness and co-operation on the issue.
Chris Bryant (Rhondda) (Lab)
I congratulate the Foreign Secretary on the great progress made this year on the arms trade treaty, but implementation is often even more difficult than getting the agreement in the first place. Eighty-one countries have now signed up to banning cluster munitions and we are committed to trying to get other countries to ban them as well. Did the Foreign Secretary get a chance to mention the issue to the Americans or the Russians at the meeting the other day?
Mr Hague
That was not part of this meeting, but it is a regular part of our bilateral discussions with many countries. The hon. Gentleman is right that we have to maintain our efforts to increase that number. We are committed to it—again, on a cross-party basis—in this House and across Government, and support what the previous Government did and achieved on the issue. Although it did not figure in the G8 discussions, I assure the hon. Gentleman that it will continue to be part of our diplomatic effort around the world.
Robert Halfon (Harlow) (Con)
On Saturday, The Times reported that the Ministry of Defence has evidence of chemical weapons being fired in Syria. What assessment has the EU made of reports that Assad has made efforts to transfer advanced chemical and biological weapons to Hezbollah in Lebanon? Is that factored into the EU’s efforts to proscribe Hezbollah?
Mr Hague
I cannot comment on intelligence matters. However, my hon. Friend will have heard me say in the statement how important it is that the UN Secretary-General’s investigation into the use of chemical weapons has access to all the areas involved in the allegations of chemical weapons use. We would be gravely concerned, as would most nations, about the transfer of such weapons to any other nation or entity. Indeed, the transfer of weapons to Hezbollah, let alone chemical weapons, would be a direct contravention of UN resolution 1701. We and many other countries would take that extremely seriously. However, I do not have any information to give my hon. Friend about that.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Further to the Foreign Secretary’s answer to my hon. Friend the Member for Motherwell and Wishaw (Mr Roy), surely he has had a chance to form an opinion on whether the BBC’s “Panorama” programme and the manner in which the footage was obtained will help or hinder diplomatic processes.
Mr Hague
I honestly think that that is a matter for the BBC and the LSE to pursue. Since I have spent the day talking to the South Korean Foreign Minister, hosting the Moroccan Foreign Minister, launching our human rights and democracy report, preparing for this statement and overseeing the diplomatic arrangements for the funeral of Baroness Thatcher, I have not formed a view. It is for the BBC and the LSE to take the matter forward.
Neil Carmichael (Stroud) (Con)
The Foreign Secretary has correctly noted that North Korea should be encouraged to participate in a multilateral framework. Following Secretary Kerry’s visit to the region and the encouraging signs that emanated from his talks with the Chinese, what can the Foreign Secretary tell the House that would encourage us to think that North Korea will move in the right direction at the appropriate speed?
Mr Hague
I have no immediate good news for my hon. Friend and the House on that matter, except for the clear unity in the G8 to which I referred. That unity extends beyond the G8 to our working closely with China. My hon. Friend referred to Secretary Kerry’s visit, during which he agreed that the United States would work with the Chinese Government. China has more leverage and influence over North Korea than any of the other nations to which we have referred. The extent of Chinese concern and determination that North Korea should not go down the path that it is on is one encouraging piece of information in an otherwise very difficult situation.
Mark Hendrick (Preston) (Lab/Co-op)
The Foreign Secretary has commended the Chinese and referred to Secretary Kerry’s visit to China. That is positive and is in stark contrast to the position a couple of weeks ago, when the Americans, and to some extent our country, were saying that the Chinese were not doing enough with regard to North Korea. I am sure that the Foreign Secretary accepts the co-operation that is now taking place, but does he accept that if there was a major conflict on the Korean peninsula, the Chinese Government would have to deal with millions of refugees and the scale of the humanitarian disaster would make Syria look like a fairly small-scale operation?
Mr Hague
Of course, the prospect of any conflict on the Korean peninsula would be deeply alarming to the whole world. China, as a close neighbour, would be particularly concerned. That is always a factor in China’s foreign policy calculations in such matters. I welcome China’s agreement to UN resolution 2094, because it is evidence that it sees that the avoidance of such conflict involves additional pressure on the DPRK, although in a graduated way in its view. I welcome China’s position and we will continue to work with it, including through direct discussions in the coming days.
Mr Philip Hollobone (Kettering) (Con)
How far are the United Kingdom and the international community prepared to go to prevent North Korea and Iran from getting nuclear weapons, and is the Foreign Secretary confident of success?
Mr Hague
We heard from our hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who is no longer in his place, about how unpredictable world events are, and it is not wise for Foreign Secretaries to express complete confidence in a happy outcome for every single situation. I am confident, however, that the international community is united on both those issues, and given that unity it would be wholly irrational on the part of North Korea or Iran to continue down the path they are following at the moment. One cannot, of course, rule out miscalculations and sometimes irrationality, but I am at least confident that all countries that should be working together are doing so. I mentioned the unity on North Korea, and on Iran we work as the E3 plus 3, which includes all five permanent members of the Security Council, including Russia and China. There could not be stronger international unity on those subjects.
Hugh Bayley (York Central) (Lab)
Humanitarian needs arising from Syria and work on violence against women both require aid. The last time the G8 met at a Heads of Government meeting in the UK, they came to an historic Make Poverty History deal to increase aid. The new Government support that decision but some G8 countries are backsliding from the commitments they made at Gleneagles. Will that be discussed when the Heads of Government meet in G8 format later this year?
Mr Hague
That was an important agreement and across parties we should be proud that this year we are hitting the 0.7% UN target on overseas aid. The hon. Gentleman is right to say that not all G8 members have done that—not all are even increasing their aid, let alone hitting the target. My right hon. Friend the Prime Minister will be chairing the Heads of Government meeting, and he is of course passionate about this subject. I will put the hon. Gentleman’s point to him.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I was a strong supporter of the arms trade treaty and I congratulate the Foreign Secretary on the work done by his office in ensuring that it became a reality. The world will be watching how that is engaged with in the situation in Syria. I wish to highlight to the House and the country something important that the Foreign Secretary said, which was that time is not unlimited in finding a diplomatic solution to Iran. I urge him to ensure that in E3 plus 3 meetings he takes the opportunity to encourage Russia and China to ensure that a proper strategy is in place to engage effectively and as ruthlessly as can be done with the new President of Iran who will arrive later this year.
Mr Hague
Absolutely. The E3 plus 3 group has been united in its approach in its negotiations so far, and I hope that will continue in any negotiations that take place after 14 June and the Iranian presidential election. My hon. Friend is right to say that that will be an important period, and if there is no diplomatic breakthrough with Iran before then, it will be seen across the world as crucial. When the elections are over and there is a new President of Iran, that period will be seen as the test as to whether Iran is going to engage seriously with the rest of the world.
Sheila Gilmore (Edinburgh East) (Lab)
I sincerely commend the work done by the Foreign Secretary on sexual violence in conflict areas, and I know he is committed to that. I hope however, at the risk of being put down as a humourless feminist, that the kind of frisson that went round the Chamber at the mention of Ms Jolie was not intended to detract from the great seriousness of the issue. Are women’s rights organisations involved in this initiative, and does the Foreign Secretary have any proposals to give them funding?
Mr Hague
Yes, of course many organisations are involved and the steering board of my initiative includes many NGOs. It would be best for me to write to the hon. Lady with details of all organisations involved. The funding we deliver generally goes to overseas organisations such as those I saw on the ground when I visited the Democratic Republic of the Congo three weeks ago. I announced support for women’s groups that are active on the ground in the DRC and working to document cases of sexual violence in conflict so that prosecutions can take place. They need equipment that helps to gather and preserve the necessary evidence. I therefore announced a series of grants for those projects. I will send the hon. Lady a list of those things for completeness and to save time in the Chamber.
Rehman Chishti (Gillingham and Rainham) (Con)
The Secretary of State will be aware that the Syrian regime has asked the UN to list Jabhat al-Nusra as a terrorist organisation. What will be the UK position on that?
Mr Hague
Of course, we will consider anything that is put to the UN Security Council and look at all the facts about Jabhat al-Nusra, but we must bear in mind that it suits the Syrian regime’s narrative to portray the opposition as a collection of extremist groups, whereas, as I pointed out earlier, the vast majority of the opposition are not. We will discuss that with other nations on the UN Security Council—the matter has not yet come to the Security Council—and I will keep the House informed.
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
I, too, welcome the protocol on preventing sexual violence in conflict and congratulate the Foreign Secretary on his work in that regard. As all hon. Members know, sexual violence in conflict has been a serious problem for a long time, and there are known perpetrators of it throughout the world. What can be done to pursue those people and bring them to justice?
Mr Hague
I am glad to say that some prosecutions are in prospect for such crimes. The recent arrest and transport to the International Criminal Court in The Hague of General Bosco Ntaganda for alleged crimes committed in the Democratic Republic of the Congo is one such case. I hope the initiative I am pursuing will lead to a sharp increase over several years in the number of prosecutions. That is the objective of the team of experts I have mentioned—we have already deployed it to several conflict-affected areas and will deploy it to several more this year. The team will help to gather the evidence, which means that prosecutions of both big offenders and individuals can take place so that the culture of impunity is shattered, and so that it is known all over the world that sexual violence in conflict is not something that people get away with any more. That is very much the purpose of the initiative.
Jonathan Ashworth (Leicester South) (Lab)
I was grateful that the Foreign Secretary in his statement and the G8 communiqué referred to Burma and to the need to end religious and ethnic tensions there. I am sure he is aware that, in recent weeks, there have been more reports of sectarian violence against the Rohingya community and other Muslim communities. The root of much of it is Rohingya citizenship. What pressure, through the G8 discussions, can he bring to bear on Burma both to recognise Rohingya citizenship and to safeguard the human rights of all religious minorities in Burma?
Mr Hague
The focus of what we did on Burma at the G8 was supporting responsible investment in the country—responsible with regard to the population of Burma—but we are active in any case in pursuing the hon. Gentleman’s point. I met last month the Burmese Foreign Minister and made very strongly the point about sectarian violence in Burma and the need for the state to ensure that it comes to an end. I also discussed the matter by telephone last week with Aung San Suu Kyi, because it is important to pursue the matter with both the Government and the opposition in Burma. We will absolutely maintain our efforts on that.
Mr Andrew Love (Edmonton) (Lab/Co-op)
I return at the end of the statement to the questions at the beginning on the growing humanitarian catastrophe that is overtaking Syria, the need for action, and the lamentable lack of action by the international community. You mentioned that some of the G8 had not lived up to expectations on UN aid, but you did not speak of the other nations. You have been very clear with us, but can you be clear what action the G8 proposed to deal with the matter, and what further discussions you will be having to ensure that everyone lives up to that commitment?
Mr Speaker
Order. I cannot be clear on any of those matters and will be having no such discussions, but the Foreign Secretary may be able to oblige.
Mr Hague
I am sure we would enjoy you being clear on this issue, Mr Speaker, but I will try to be clear on it. The G8 nations do not do badly in this regard, although everyone has to make sure that they deliver on their commitments. Most of the problems of not meeting commitments are outside the G8. Of course, we are working very hard, and my colleagues in the Department for International Development are working hard bilaterally with individual Governments, to say that amounts, adding up to $1.5 billion, that were pledged in Kuwait at the end of January—nearly three months ago—must be delivered if there is to be any hope of meeting the needs of the huge numbers of refugees that I have described. The Government are very active in trying to bring that about. Suggestions have been made by hon. Members during our exchanges about publishing some of the information, and I undertook to have a look at doing that.
Point of Order
Toby Perkins (Chesterfield) (Lab)
On a point of order, Mr Speaker. You will remember that on 9 January the House unanimously passed a motion in favour of supporting the Government to regulate the pub companies industry. Consultees were expecting an announcement from the Government on 5 April, but that did not happen. On 7 April, The Mail on Sunday carried a piece saying that the Chancellor had overridden the Secretary of State for Business, Innovation and Skills and that that Government policy would no longer be followed. I have written to the Secretary of State to ask whether the Government have changed their policy, but I have had no reply. I wonder whether you might be able to advise me on how to ensure that the House is kept informed. If the Government’s policy has been changed, it seems most unsatisfactory that the readers of The Mail on Sunday should be better informed than Members of Parliament.
Mr Speaker
I note the hon. Gentleman’s point of order. In respect of his latter point, I simply make the observation at the outset that it does not necessarily follow that the readers of the organ in question are, as he puts it, better informed. That said, Ministers will of course be conscious of their responsibilities to the House. It is not a matter for the Chair, but the hon. Gentleman has placed on the record his real concern and it will have been heard on the Treasury Bench. He is a doughty campaigner and I feel sure that he will return to the theme if he remains less than satisfied.
Finance (No. 2) Bill
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
22:13 - The House divided: - Ayes: 321 / Noes: 249 - Question accordingly agreed to.
The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
It is a great pleasure to present this year’s Finance Bill—a Bill that further demonstrates the Government’s commitment to creating a tax system that is fairer, simpler and more transparent, and one that will promote growth and reward work. Unlike the Opposition, those of us on the Government Benches recognise that we have to address the fiscal mess left us. That means that we have to resist the voices of those wanting to engage in a further splurge in borrowing. But we can take steps to make ourselves more competitive and help people with the cost of living, and that is what we will do in the Bill. I will happily take interventions this afternoon, but to give some structure to my speech it is perhaps worth while my laying out to the Chamber the order in which I intend to discuss the Bill. First, I will talk about the measures that will support growth and enterprise, then the measures that will tackle avoidance and evasion, and then the measures that will increase fairness. Finally, I will talk about the way in which the Bill will help to deliver a simpler tax system.
Kelvin Hopkins (Luton North) (Lab)
On the issue of avoidance and evasion, the press reported over the weekend that Britain and its dependencies have more tax havens than almost any other country. Will the Government tackle evasion and avoidance seriously, and save us an awful lot of money?
Mr Gauke
As I was trying to make clear a moment ago, I will turn to the subject of evasion and avoidance later on in my speech. The Government have a proud record of taking steps to reduce evasion and avoidance, with legislative measures, support for Her Majesty’s Revenue and Customs and what we are doing at an international level to encourage greater co-operation between jurisdictions to ensure that the net is closing in on those who wish to evade their responsibilities. We will continue to take positive steps on that front.
Mr John Redwood (Wokingham) (Con)
The Labour Government set capital gains tax at 18%, which is somewhere near the revenue-maximising rate. This Government put CGT up to 28% and, predictably, their own figures show that revenue is lower. When will they promote enterprise with a lower rate that will generate far more revenue, something we clearly need?
Mr Gauke
One has to look at the tax system as a whole, including capital gains tax, and I am not sure that I necessarily agree with my right hon. Friend’s interpretation of the period as a whole in relation to CGT revenues. In the year in question, there was certainly a reduction in deals done and transactions completed after the increase in the rate of CGT, but subsequent CGT revenues have picked up. We also have to bear in mind the relationship between CGT and income tax. I agree strongly with my right hon. Friend that it is important to have a competitive tax system that encourages enterprise and growth—indeed, I will turn to that now.
One of the most important questions facing the country is this: at a time when much of the world is still coming to terms with the consequences of the financial crash, when many of our export markets face significant difficulties, and when international competition is becoming greater, and, because of the recklessness of the previous Government, we cannot afford to borrow more, how do we put in place the conditions for growth? In the specific context of the Bill, how do we ensure that we have a tax system that helps us to achieve growth and encourages businesses to locate and invest in the United Kingdom? As the Chancellor has made clear, our objective is to have the most competitive tax system in the G20.
Sheila Gilmore (Edinburgh East) (Lab)
How can the Minister square the statement he has just made with the fact that all his predictions for borrowing are on the way up? Three years ago, we were assured that the Government’s policies would resolve this problem. If we are borrowing, would it not be better to borrow to invest, rather than to deal with failed economic policy?
Mr Gauke
Borrowing is down by a third from the position it was in when we came into office—that is the reality of the situation. We have to remember that if we had the policies advocated by the previous Government, borrowing in this Parliament would be £200 billion higher than it is going to be.
Chris Leslie (Nottingham East) (Lab/Co-op)
I do not know whether the Minister did not get the memo, but the Office for Budget Responsibility confirmed that, compared with the Government’s predictions for the 2010 spending review, borrowing is predicted to be £245 billion more. The Minister needs to get a grip on the fact that borrowing is getting higher. I dare him to say that the deficit is being reduced in this financial year as compared with the previous financial year, because that is just not happening.
Mr Gauke
The hon. Gentleman is right to say that borrowing levels are higher than predicted by the OBR three years ago, but that is not the same thing as saying that borrowing is higher now than it was. The fact is that at the last Budget the OBR forecast that the deficit was going to be lower this year than it was last year.
Mr Gauke
The reality is that, had we pursued the policies the Opposition advocated at the last general election, let alone now, the deficit would be much, much higher. In fact, the Opposition are not standing behind any of the deficit-reduction policies they advocated at the last general election. For example, I think they support what we are doing on the fuel duty—it was one of the few measures the previous Government had in order to reduce the deficit.
Chris Leslie
I thank the Minister for giving way so generously, but I just want him to answer my question. He is not claiming that the deficit is still being reduced, is he? It is not falling this year compared with the last financial year, is it?
Mr Gauke
That is not actually what the OBR numbers at the last Budget showed, but clearly we are faced with difficult economic conditions. It is striking, however, that whereas, when the previous Government faced difficult economic conditions, the deficit ballooned, we have taken tough action to ensure that we continue to reduce it. Would we like to be reducing it more? Of course we would. Why is that not happening? The difficult economic conditions clearly apply. But is the right approach to these difficult economic conditions to go on a borrowing splurge, as the Labour party consistently advocates? The answer is clearly no.
Mr William Bain (Glasgow North East) (Lab)
If the Finance Bill is such a success in stimulating additional growth, will the Exchequer Secretary explain the statistics on page 103 of the OBR’s fiscal outlook, which reveals that since its December forecasts, forecast income tax revenues are £6.5 billion lower for 2014-15, £6.9 billion lower for 2013-14 and £7.1 billion for 2015-16? Not much of a success, is it?
Mr Gauke
If the hon. Gentleman looks through the OBR’s analysis, he will see its explanation for growth being lower than it had anticipated, which has an impact on the fiscal numbers. It is more than explained by the disappointing performance of our export markets and the fact that we have not been able to export as much as the OBR had anticipated. The question is: how do we respond to that? Do we try to put in place a competitive tax system that makes businesses and industries want to locate and invest in the UK? We have heard nothing from Labour on that front, whereas this Government’s record is very strong.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
In passing, may I say how hypocritical it is of Opposition Members to say what they have been saying about debt levels? Had they not left us with the debt level we inherited, we would not have this problem.
Despite what my hon. Friend might be hearing from the banks, my constituents tell me that they are lending only when they can get copper-bottomed, personal guarantees and that the lending they are getting is becoming ever more expensive. Will he look into the cost of export credit finance, which is a great hindrance to small and medium-sized businesses exporting?
Mr Gauke
My hon. Friend is absolutely right that we need to do what we can to ensure access to finance for those strong, viable small businesses that want to expand. That is why we have taken measures such as the funding for lending scheme and why we want to ensure that we have a business-friendly environment. I am grateful for his observations on export guarantees. He will be aware of some of the measures that the Government have taken over the past two or three years to try and support those exporting businesses. I note his comments and calls for us to go further.
Mark Field (Cities of London and Westminster) (Con)
I appreciate that the Minister has to deal with an incredibly difficult situation that is not made any easier by this constant battling over borrowing figures. We all know how serious the situation is, and for my part I will not be spending my time blaming the last Government, which is unhelpful. We must look to the future.
My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) rightly pointed out the importance of export guarantees. If we are to get trade moving again, it is essential that we ensure a much more efficient export guarantee process, particularly with small and medium-sized enterprises. We must appreciate—I hope that the Minister does—that part and parcel of the guarantee is recognising that some of those guarantees will not come off and so will have to be paid for by the Government. If we are to break into developing markets, however, we need to do so with some aplomb.
Mr Gauke
I am grateful to my hon. Friend for his remarks. It is right to say that exporting is important. It is one area where, as an economy, we have not performed as well as we would have liked over many years, although we are making striking progress in some of the major developing economies. However, we face difficulties, in particular with the eurozone, which is our biggest export market.
Let me return to what we are doing as a Government to ensure that we meet our objective of having the most competitive tax system in the G20. We have already made considerable progress. As evidence, let us look at the KPMG annual survey of tax competitiveness, in which senior tax professionals were asked to name their three most competitive tax jurisdictions. In 2009, just 16% named the UK among their top three, but by 2012 the UK was named by 72% of respondents, ahead of every other jurisdiction. Since that survey was undertaken, the corporation tax rate has fallen from 24% to 23%, but we will not be complacent. Clause 4 will cut the main rate of corporation tax to 21% from April 2014. As we announced at the Budget, we will then reduce the corporation tax rate by an additional one percentage point from April 2015—a measure in clause 6 that will mean that the United Kingdom has the lowest business tax rate of any major economy in the world.
Geraint Davies (Swansea West) (Lab/Co-op)
Given that before and after the Budget the corporation tax rate in France was 33%, while in Germany it was 29% and in Britain it was 21%, why is it necessary to reduce it to 20% and in so doing to get rid of 5% of the corporation tax yield? How long will it take to get that 5% back? Will we produce 5% more inwardly investing businesses or will the size of the business community grow by 5% to make it up? We are already extremely competitive on that front, so how long will it take to make up that money, which the Minister has given away for no apparent reason?
Mr Gauke
I hope the reduction to 20% will have all-party support, but I am sorry if it does not. The advantage of 20% is that we will have a corporation tax rate that is consistent with the small profits rate. It is the lowest in the G20 and sends a clear signal to businesses around the world that the UK is open for business. That is something that we in this Government are proud of and that we believe is putting in place the conditions for growth. I hope that the Opposition will support this measure, although Labour in government did not make as much progress in reducing corporation tax rates as it might have done and we lost a competitive advantage. This Government are restoring that competitive advantage, which is something we are proud of.
It is not just corporation tax rates: clause 34 will introduce the new above-the-line credit for large company R and D investment from April 2013—a measure that will make the level of support more visible to those making investment decisions and thus more beneficial to foreign-parented multinationals looking to invest in R and D in the United Kingdom. This Government have also made a clear commitment to support the creative industries through the tax system. Building on the success of the film tax relief, which last year supported investment in more than 300 British films, clause 35 introduces new corporation tax reliefs for the animation, high-end television and video games sectors. The new reliefs will be among the most generous in the world, encouraging investment in these highly skilled and innovative parts of the creative economy. They are measures that will bring jobs to the United Kingdom and funds to the Exchequer.
This Government recognise the need for a broad industrial base, and measures in the Bill will support a wide variety of sectors. Clauses 77 to 90, for example, provide certainty over decommissioning relief on the UK continental shelf. Clause 7 supports small business by increasing the annual investment allowance for two years and clause 56 provides for an extension of the capital gains tax holiday. Those measures send the clear message to businesses, entrepreneurs and investors across the world that if they want to come to the UK, invest in the UK and employ people in the UK, they will be very welcome in the UK.
Mr Redwood
I strongly support the corporation tax move, which will be extremely helpful to Britain’s competitiveness, but when people are thinking about where to locate their businesses, they worry not only about profits tax but about personal tax. Does my hon. Friend agree that, given the current inherited income rates and capital gains tax rates, a lot of the high earners in those companies do not want to be anywhere near London because the taxation rates are still very heavy?
Mr Gauke
My right hon. Friend makes a valuable point. This underlines the fact that the Government were right to reduce the 50p rate of income tax, because it was out of line with the vast majority of our international competitors. We have to look at the tax system as a whole. I believe that we have made striking progress in delivering that, and in ensuring that we are open for business. It is also striking that, since we have embarked on our package of reforms, the flow of businesses leaving the country has already been stemmed. Indeed, we have seen many businesses either returning to the UK or coming here for the first time. They include WPP, Lancashire, AON, Rowan and Seadrill, and I believe that more will follow.
Mark Field
I give my hon. Friend credit for what he has done for the animation and video games industries in my constituency. As he will know, there has been a long-standing campaign for such provisions, and I am by no means the only Member of Parliament who has lobbied for them in recent years. Will he ensure that we will be able to act as nimbly as possible if our tax rates become uncompetitive, for whatever reason, for those internationally competitive businesses? Such action might need to be applied to a whole range of industries, well beyond the IT and animation industries. As he has rightly pointed out, it is very easy to lose such jobs nowadays, and we need to ensure that they come back to these shores at the earliest possible opportunity.
Mr Gauke
My hon. Friend makes an important point. The Government recognise that capital and investment can be very mobile, and that they are more mobile in some sectors than others. We have demonstrated a willingness to listen in this regard. Our principal policy in this area has been to adopt a lower rate, but we have recognised that in certain areas of considerable mobility, we need to respond to what is happening. We have done so through the measures in the Bill, and through the patent box in last year’s Finance Act, which was important in further ensuring that the UK is an attractive location for investment. I shall now give way to another Member of Parliament with a constituency interest in the video games industry.
Stewart Hosie
I welcome some of these targeted measures, particularly those relating to video games. I think that they are sensible. I also welcome the tenfold increase in the annual investment allowance, but does the Minister not think it odd that that increase will last for only two years? Given that certain capital investments will take some time, is it not ludicrous that in two years’ time, the general annual investment allowance will revert to £25,000 a year? Might not that create uncertainty? Would it not be better to maintain the general annual investment allowance rate at a higher level, to encourage medium-term investments not only for two years but for three, four and five years?
Mr Gauke
There is a balance to be struck, and we have rightly focused on bringing down the rate of corporation tax, not only for larger businesses but for smaller ones as well. Let us remember that the small profits rate was set to go to 22% when we came into office, and that it is now 20%. We have increased the annual investment allowance for that two-year period to try to stimulate investment at a time that is not necessarily the easiest for many businesses. That is part of what we have done to help small businesses during this difficult period. Taking steps to bring the rate down is important; it is a tradition, if you like. It has been our direction of travel in the UK over many years, and I think that we have now got the balance about right.
Geraint Davies
I have here a letter to the Chancellor from the Admiral group in Swansea—the biggest business in Wales. It expresses disappointment that Swansea was not included as a city with super-connected city status in the last Budget and asks that it continues to be considered in future. Will the Exchequer Secretary positively consider that request? Business is asking for the infrastructure tools to succeed, particularly so that large businesses can connect worldwide with suppliers and prospective clients. We obviously welcome the investment in the creative industry, which is also very important.
Mr Gauke
I shall certainly take that intervention as lobbying in support of the proposal. The hon. Gentleman is right to highlight our super-connected cities policy, which is further modernising our economy and further benefiting a number of cities. I appreciate the case he makes for Swansea, and I am sure that it will be properly considered.
Justin Tomlinson (North Swindon) (Con)
The tax breaks for the video games industry are a fantastic opportunity to create swathes of new jobs, but it is essential that the Minister continues to apply pressure to address the shortage of computer programming graduates or we shall miss out on a fantastic announcement.
Mr Gauke
I am grateful to my hon. Friend for putting that point on the record. He will be aware of the efforts made by the Government to strengthen our capacity in that respect, and I am sure his remarks will be noted carefully by my ministerial colleagues in the Department for Business, Innovation and Skills.
I turn to tax avoidance and evasion. Although we believe in a competitive tax landscape, we are not by any means a soft touch on tax. As a Government, we have made very clear our expectations of businesses. We expect businesses to pay tax in accordance with the law, but we also want to ensure that aggressive, artificial tax avoidance is dealt with, which brings me to the second key theme of the Bill.
The vast majority of individuals and businesses pay their fair share of tax, but the Bill takes determined action against those who choose not to do so, by introducing a further package of measures to tackle tax avoidance.
Ian Swales (Redcar) (LD)
When people engage in practices where assets are bought and sold for different prices—for example, film rights were headlined in a recent case—it is actually tax evasion, and prosecution should follow. Does the Minister agree with that analysis?
Mr Gauke
Where there is an element of dishonesty, it is clearly tax evasion, and Her Majesty’s Revenue and Customs has indeed been successful in bringing prosecutions in a number of high-profile cases. Under this Government we have seen the number of prosecutions by HMRC increase fivefold, which is a reflection of how seriously we consider tax evasion and of our determination to assist HMRC in addressing it as much as possible.
Kelvin Hopkins
A theme I have raised many times in the Chamber is the number of staff in HMRC. I am sure the Minister knows that every additional tax officer collects many times their own salary, and in the case of business taxation, it can sometimes be hundreds or even thousands of times their salary. Do we not simply need a substantial increase in the number of professional staff in HMRC to make sure we collect all the tax?
Mr Gauke
The hon. Gentleman and I have debated that point on a number of occasions. The important thing is to ensure that HMRC has the right expertise and skills, and the right people doing the job. In truth, there has been a significant reduction in HMRC staff over recent years, the vast majority of which occurred under the previous Government. We are increasing the numbers working in the enforcement and compliance area, but a lot of the answer is about ensuring that HMRC can work in the most effective way. I was struck by the increase in the number of tax professionals being trained by HMRC. We do want to invest in skills within HMRC. This is not simply a numbers game but, as it happens, the number of people working for HMRC in enforcement and compliance is going up, not down.
Geoffrey Clifton-Brown
While I strongly support the move in the Budget to reduce corporation tax, it is no good encouraging companies to come to this country if they then avoid paying corporation tax. Is it not important that big multinational companies pay corporation tax on the profits that they make in this country? Equally, is not my right hon. Friend the Prime Minister absolutely right to ensure that, through the G8, we have international agreements so that multinational companies cannot go around the world, especially to third world countries, and make profits without paying the relevant corporation tax?
Mr Gauke
My hon. Friend is absolutely right. We want an international tax system that ensures that economic activity is taxed where it occurs. That involves working internationally, and he is right to highlight the Prime Minister’s ambitions while we have the presidency of the G8, which will feed through to the G20 and the work that the OECD is already doing, which we support. It is right to have an international tax system that reflects the reality of how multinational businesses work.
Clauses 203 to 212 introduce the UK’s first general anti-abuse rule—GAAR—which will provide a significant new deterrent to abusive avoidance schemes and strengthen HMRC’s means of tackling them. On top of that, we are taking action to close a further 15 tax avoidance loopholes, which will increase tax revenues by almost £1 billion up to 2017-18, as well as protect future revenues. The Chancellor gave a clear warning in the 2012 Budget that the Government would take action on aggressive stamp duty avoidance. The Bill follows up on that warning by legislating against those who continue to avoid tax on property transactions. All these measures will stop people exploiting legislation to gain tax advantages that were never intended, and they will also encourage fairness.
Chris Leslie
While the Minister is on the subject of companies that might not pay their fair share of corporation tax, will he confirm that the banks received a substantial corporation tax cut in the past financial year and the one before that, yet he has done nothing to correct the situation?
Mr Gauke
No, I cannot confirm that, because it is not correct. The reality is that the reductions in corporation tax falling to banks have been more than offset by increases in the bank levy. We have sought on every occasion to offset the decreases in corporation tax through increases in the levy.
Chris Leslie
I had a feeling the Minister would say that the corporation tax reduction had been offset by the bank levy. However, although the Prime Minister promised that the levy would raise £2.5 billion, it raised only £1.8 billion in 2011-12—[Interruption.] Perhaps the hon. Gentleman is getting an answer to this point from the Economic Secretary. In the past financial year, the levy raised only £1.6 billion, so there is a massive shortfall compared with the amount that the Prime Minister said it would raise. How on earth does that offset the corporation tax cut for the banks?
Mr Gauke
We were clear that our objective was that the bank levy would collect £2.5 billion, on a permanent basis, which is more than the bank payroll tax ever collected. When the amount has fallen below our expectations, we have adjusted the levy, and the independent Office for Budget Responsibility anticipates that the bank levy will raise £2.5 billion this year. We have made adjustments largely because the banking sector has continued to be afflicted by economic difficulties throughout the world, as a consequence of the crash, so fragile global conditions have played a part. I am not going to be preached to by the Opposition on the taxation of banks. We have introduced a bank levy; the Opposition had 13 years in which to do something about that, but failed to do so.
Tim Loughton (East Worthing and Shoreham) (Con)
Perhaps the Minister will remind Opposition spokespeople that corporation tax is payable only on profits. Many banks that were forced into disastrous mergers by the previous Government are still turning in losses, which might account for the shortfall in the figures given by the hon. Member for Nottingham East (Chris Leslie).
Mr Gauke
I am grateful to my hon. Friend for making that helpful point.
Turning to the wider issue of fairness, in addition to the steps that we have taken on avoidance and evasion, the Bill builds on previous coalition policy by ensuring that individuals and businesses will make a fair contribution, while the Government continue to support those on the lowest incomes. We continue to reward work and help hard-working families with the cost of living, and the Bill therefore increases the income tax personal allowance to £9,440 from this month. That represents the biggest ever cash increase, and the Chancellor has announced that the threshold will rise again, to £10,000, from next year.
Justin Tomlinson
This announcement is extremely welcome, but most people simply do not know how much the changes will help them. Does the Minister agree that any changes, good or bad, should be displayed on payslips, in the same spirit that changes in council tax or business rates are displayed in the annual bill?
Mr Gauke
My hon. Friend makes an interesting point. He will be aware of the steps that the Government have taken to introduce personal tax statements that will make the tax system much more transparent. It will be clearer to people how much tax they are paying, and how that money is being spent. We believe that those are helpful steps, and those tax statements can demonstrate the way in which we have made great progress in increasing the personal allowance.
Andy Sawford (Corby) (Lab/Co-op)
The Minister may be reluctant to offer real transparency on the impact of the Government’s changes because of the findings of the Institute for Fiscal Studies that the average family will be £891 a year worse off as a result of the cumulative effect of the changes under his Budgets over the past three years.
Mr Gauke
I do not recognise those numbers. We have taken steps to try to get the country out of a significant fiscal hole. We have taken steps to reduce the amount of tax that millions of households will pay as a consequence of the increase in personal allowance. We have reduced income tax for 25 million people. That is something we are proud of, and something that we did not see when the Opposition were in power.
Sheila Gilmore
What the Minister fails to appreciate, in saying that he does not recognise those figures, is the fact that the increase in the tax threshold has been wiped out for many families, particularly those with children, by the changes in tax credits. At the same time, the cost of increasing the tax threshold is £9 billion, so it is not the best way of targeting help on the low paid.
Stewart Hosie
The Minister is keen to discuss the change in the basic rate allowance, but he is rather less keen to discuss the 40% threshold, which has gone from £37,000 to £34,000, then to £32,000. The Government have dragged an extra 670,000 people into the 40p tax rate, which used to be for the rich, and that is before this year’s changes. He is rather less keen to discuss that. I wonder why.
Mr Gauke
The vast majority of those people will pay less income tax in total as a consequence of the measures that we have introduced. As a result of the change in thresholds, most support has been focused on basic-rate taxpayers and people who have been taken out of income tax altogether. For the vast majority of people who now find themselves in the higher-rate band, the gains that they have made from the increase in the personal allowance more than outweigh the additional tax they will pay on the higher rate.
In that context, it is worth highlighting the steps that we have taken to ensure not only that we protect the poorest but that the wealthy pay their fair share of tax. Clause 16 will legislate to cap previously unlimited income tax reliefs at £50,000 or 25% of an individual’s income, whichever is greater. That will prevent those reliefs from being exploited unfairly, so that individuals, many with very high incomes, cannot use those reliefs to reduce their income tax bills to zero year after year. As announced in the Budget last year, clauses 91 and 172 will legislate for an annual tax on enveloped dwellings. That is a charge on residential properties valued at more than £2 million held by certain non-natural persons. To complement that measure, the Bill includes the extension of capital gains tax to certain non-natural persons disposing of UK residential property valued at over £2 million. For too long, the well-advised wealthy have found ways around paying stamp duty land tax. The Government have acted to address that.
Clauses 47 and 48 legislate for the further reduction of lifetime and annual allowances for pension contributions. That is not an easy measure to introduce, but it will leave the vast majority of those saving for retirement unaffected while curbing the rising cost of pensions tax relief. Other measures in the Bill will curb unwelcome rising costs. The Government understand the costs that have the biggest impacts on families and businesses every day, and as such, we have taken action in the Bill to help those individuals and businesses that have been impacted by persistently high pump prices. Under clause 177, fuel duty will be frozen at current levels, meaning that it will be 13p per litre cheaper than under the previous Government’s plans.
The Bill will cut the cost of the average pint of beer by 1p. Not only is that good news for the beer drinkers among us, but it represents excellent news for the brewing industry and for pubs. The reduced duty under the small breweries relief has helped to build a thriving brewing industry, which demonstrates that lower duty can lead to growth, investment and jobs. That 1p cut will be a further step to supporting a successful British industry.
It is the Government’s belief that the most effective tax policy is that which is devised in the most transparent fashion, and as such, the majority of measures in the Bill have been formulated following lengthy consultation with interest groups, business and the public. Thirty-six formal and eight informal consultations took place last summer. In December last year, over 400 pages of draft legislation for the Bill were published for technical consultation, alongside explanatory notes, tax information and impact notes. We received more than 400 comments on the technical consultation, which has helped to make sure that the measures in the Bill are as easy to understand as possible, and thus as easy to comply with as possible.
Geraint Davies
I am grateful for the Minister’s enormous generosity in giving way a third time. On the issue of transparency in pensions, does he accept that the people who are going to be hit hardest are the current young, who are the future old? They are also paying much higher student loans, they face debts, they will need much higher deposits for their mortgages, they will have to pay higher rents so they cannot save, and they face much greater uncertainty about job prospects. Downstream they will be hit again by the pension changes, which are not transparent to them, partly because they are not thinking about that now because they are young.
Mr Gauke
I will try not to digress too much. If I can be helpful to the hon. Gentleman, I do not think he is concerned about the proposals in the Bill, which will apply only to those who make the biggest contributions to their pension fund and receive tax relief for that. He makes a number of important points, but those are not necessarily relevant to the proposals on pension tax relief. If he is concerned about that, I look forward to hearing his concerns over the course of the many debates that we will have.
The Bill is substantial. Building on the invaluable work of Michael Jack and John Whiting at the Office of Tax Simplification, it delivers a number of important reforms to simplify the tax system, including the implementation of recommendations from their reviews of small business tax and tax-advantaged share schemes. This is a significant Bill. It is a clear statement of our ambition to secure a tax system that restores the competitiveness of our private sector, clamps down on avoidance and evasion, and helps to build a fairer society for those who want to work. It is a clear statement that we remain committed to reducing the deficit and building a prosperous economy in the United Kingdom once again. It is a Bill that will energise business and support hard-working people, and it is a Bill that I wholeheartedly commend to the House.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister’s job was clearly to drill down into the technical details, rather than focus on the big picture of the Budget and the Finance Bill. [Interruption.] There is heckling already. It would have been nice to see a bit of life from the Minister during the debate. How to draw the sting from a Finance Bill? Send for the Exchequer Secretary. It is true that he is less provocative than the Chief Secretary to the Treasury; I will give him that.
It is true that the Government wanted to kill off any interest in the Bill and put it on the back burner. Towards the end the Minister tried to arouse the enthusiasm of his colleagues on the Back Benches for the Bill by saying that it was about building a fairer society and energising Britain, but it is not a Bill for building a fairer society or energising business. It is not a Bill for the economy. It is not about what is best for the country at all. It is a Bill totally designed around what the Chancellor thinks is best for him. As the weight of evidence mounts that his plan is failing, he flails around desperately to justify his strategy, casting around constantly to blame everyone and everything else for the fact that everything is going so badly wrong.
The Bill gives us a glimpse of just how desperate things must be getting inside the Treasury. For the Treasury team, it is all about the politics, but what about the economics? Let us be clear. There is no positive impact on economic growth from the Bill. The Government’s own Office for Budget Responsibility on page 46 of its report on the Budget states that it will have
“no impact on the level of GDP at the end of the forecast horizon.”
The OBR also says that
“these measures reduce GDP growth”
in 2013. After all that effort by the Chancellor, culminating in the Budget and this weighty Finance Bill, what is the impact on economic growth in this calendar year? It is negative.
It is no wonder that the Treasury’s plans and the OBR forecasts are on a slippery slope, constantly and continuously downgrading their projections for the economy while upgrading the size of the deficit. Those grandiose plans and supposedly tough decisions that the Chancellor set out three years ago have seen economic growth of just 0.8%, compared with the 5.3% that they forecast and promised at the time. All the while, our international competitors are moving forward, leaving us behind. Only two other G20 countries have grown more slowly than the UK since the 2010 spending review—Japan and Italy.
Chris Leslie
Let us not forget the double-dip recession, together with the shrinking economy in the last quarter for which figures are available.
I give way on the double-dip recession.
David Rutley
I thank the hon. Gentleman for giving way. I am pleased to see that he has departed from the vaudeville act that we normally see from the shadow Chancellor, and instead adopted the posture of Eeyore. Has he failed to notice that the IMF has projected that the growth in the UK for this year and next will be greater than that in both France and Germany?
Chris Leslie
I am sorry if I am upsetting the hon. Gentleman by having to emphasise some of the things that are going wrong in the Government’s plan, but somebody has to wake up the Back Benchers after the scintillating comments that were made from the Government Front Bench. If the hon. Gentleman thinks he has the capability to stand up and defend his Government’s record on economic growth, we would all be impressed. He must surely accept that it has been a massive and total failure and a disappointment which has not only hurt all our constituents, but has made the public finances far worse than the Government were predicting.
The Government said that they wanted to rebalance the UK economy, but look at the latest trade statistics, which showed our trade deficit increasing by £1 billion between January and February, with the balance of payments deficit for our country now at £36 billion. Despite the depreciation of sterling, our exports are shrinking, and despite the problems in the eurozone, our exports to other non-eurozone countries, such as the United States, are getting worse as well, and all that from the Chancellor who two years ago promised he would deliver
“a Britain carried aloft by the march of the makers.”
Mark Field
The hon. Gentleman will appreciate that the global situation, particularly among the eurozone countries, makes it incredibly difficult for us to achieve the export-led growth that we would all have liked over the past three years. Will he give credit to the Government for the fact that more than 1 million private sector jobs have been created over the past three years? That should be welcomed and should counter some of the pessimism emanating from his speech.
Chris Leslie
If I can try to be optimistic, I hope that there will be a sustained increase in employment, but I am getting worried. The latest figures showed that unemployment is rising again. We must look at the underlying situation reflected in the productivity gap and the capacity problem in the economy, which the Treasury is worsening. The Minister spent a large part of his speech trumpeting the reductions in corporation tax that the Treasury have put into the Bill as the big solution to those problems. Of course we want the UK to be seen as a good place for investment, but the Treasury has not produced any analysis of how those further cuts in corporation tax will feed through into economic growth. We hope they will, but it is time we saw some clear proof that inward investment and business growth are flowing from that approach, and that we are not just stacking up corporate surpluses which are locked away because businesses fear that they will not be able to access bank credit.
Geraint Davies
My hon. Friend will know that the debt to GDP ratio will have grown from 55% in 2010 to 85% in 2015, and that the way to sort that out is by confronting the debt and/or confronting the GDP—namely, growth. Does he accept that even though 1 million more people are in jobs, overall production has not gone up, so their average productivity has gone down? Does he agree that it is time to invest in infrastructure, super-connectivity and skills, and to make Britain more productive and make it grow?
Chris Leslie
My hon. Friend makes a good point. It is not a good sign that it is taking more and more people to produce the same amount of output. In the long run that is not a sustainable strategy for our economy. Ministers need to look more seriously at that issue. The problem is not just the fact that the Bill neglects economic growth.
Tim Loughton
I am slightly puzzled that the shadow Minister cannot see the link between the reductions in corporation tax and attracting businesses to this country. He should get out more. Is he not aware of a number of companies which have relocated from the Republic of Ireland, for example? Bank of America has relocated £50 billion worth of its trading business to the City of London. Firms in my constituency are bringing business back from Denmark to this country because the corporation tax rates are much more beneficial for them. That sends out a clear message that this is the place to do business.
Chris Leslie
I am afraid that the former Minister’s suggestions are not borne out by the evidence. Ultimately, corporation tax benefits a company only if it is turning a profit. I am yet to see action being taken in the Bill to help businesses now, particularly those struggling to get back into the black. Those are the steps that are needed to help the businesses that are finding the current economic conditions very difficult indeed.
It is not just the failure on growth; the Bill does not contribute to deficit reduction either. The deficit is already set to be £245 billion larger than the Government planned. The OBR reacted to the Budget and the Finance Bill with some stark predictions. In fact, it stated on the first page of its Budget analysis that the deficit reduction plan has now stalled. The £121 billion deficit recorded in 2011 will turn out to be the same for 2012, and the OBR predicts that it will be the same for this financial year. I challenged the Minister earlier to stand up and say that the deficit is still falling. He tried to claim that the OBR figures pointed in that direction. Well, they point in that direction by less than one tenth of 1%—a fig leaf of £100 million. The claim that the Government still have a deficit reduction strategy is not credible. The deficit reduction strategy is gone.
The Deputy Prime Minister and the Chancellor of the Exchequer both promised that they would balance the books by 2015, so what has happened to that promise? Their explanations for the failure become more and more desperate. They blamed the snow, the royal wedding, Europe, the banks and the unemployed. The blame has been laid at everyone’s door except where is belongs—No. 11 Downing street. The time has come for Ministers to take some responsibility for their failings.
The OBR also predicts—these are pretty shocking figures—that real wage levels will fall by 2.4% over the course of this Parliament. Wages are forecast to fall most steeply this year, relative to prices. The cost of living it increasing, but it is getting harder and harder for people to keep pace.
Where are the measures in the Bill to create a fairer society? The Budget and the Bill are deeply unfair for millions of hard-working families who will be, as my hon. Friend the Member for Corby (Andy Sawford) said, on average £891 worse off this year because of the changes introduced since 2010. In fact, the Institute for Fiscal Studies statistics show that a lone-parent household in work will lose £1,206 this financial year, a couple with children where both parents are earners will lose £1,869 and—this is the most staggering statistic—a couple with children where only one parent is an earner will lose, typically, £3,995 this year as a result of the changes the Government have announced since 2010.
Tim Loughton
On that point about families in which one parent is an earner, will the hon. Gentleman therefore commit his party to supporting a transferable tax allowance for married couples, which, as well as sending out a strong message, would specifically help those couples where one person goes out to earn and the other looks after the children?
Chris Leslie
I understand that the hon. Gentleman will be tabling amendments on that issue and look forward to seeing how he will frame them. I know that Ministers are looking forward to seeing those amendments, because they will spark a useful debate within the Government ranks. Personally, I do not think that is the best strategy. I think that it would be better to look at the damage his hon. Friends have been doing to the tax credits system. It is women and families, in particular, who are paying the price for the Chancellor’s economic mistakes. In fact, the Government have cut support for parents by reducing statutory maternity and paternity pay so that by 2015 it will be worth £180 less than it would have been had it been uprated in line with inflation. I think that the hon. Gentleman needs to look at that point. The Prime Minister once promised—I know that this is something the hon. Gentleman feels keenly—that he would lead the most family-friendly Government ever, but it is ordinary families across the country who are paying the price for the Government’s failed economic strategy.
The Finance Bill will make Britain less fair. We are definitely not all in this together. For example, let us look at the Government’s “shares for rights” scheme, set out in clause 54, which I know we will be considering again in the Chamber. The Government’s view of a fairer society is one in which businesses are allowed to force new employees to give up their rights at work, including the right not to be sacked unfairly and the right to redundancy pay, something so unpopular that even former Conservative Ministers voted against it in the House of Lords. It is not even as if the business community is asking for that power. Of the 184 businesses that responded to the official consultation, only three said that they wanted to use the scheme. Ministers are totally out of touch with employees and employers on that issue.
Whatever rosy picture the Minister tries to paint, the public can tell that living standards are falling, not rising. The Government just do not seem to understand how extreme austerity has hit consumer confidence, how it is sapping business confidence and how precipitous cuts and tax rises have had the opposite of their intended effect. Let us take the study published only last week by the Financial Times showing that they are harming the prospects of recovery for some of our most fragile local economies, especially in poorer areas of the country, by removing £19 billion of spending power from their residents. It is the regions of the UK most in need of regeneration and private sector investment that are feeling the heaviest impact.
Andy Sawford
My hon. Friend is making an incredibly important point about the uneven effects of the Government’s policies. In some parts of the country people have been able to return to work, according to the much-vaunted statistics on unemployment in recent months, but across East Northamptonshire 126 more people this year are on employment and support allowance because of the Government’s failure to get our economy growing overall and their particular failure to help those communities that have suffered most in recent years.
Chris Leslie
Where is the regional economic strategy from the Government? Where is their attempt to revitalise those parts of the country that have suffered most of all? I am sorry if I sound a little like Eeyore to Government Members, but somebody has to say, as my hon. Friends have been saying, that Government policies are just going to harm those parts of the country that are in desperate need of regeneration and will make the situation worse for them. My hon. Friend makes that point well.
Geraint Davies
Does my hon. Friend accept that one of the Government’s biggest failures has been not to resuscitate consumer demand, which would stimulate growth? It is the poorest in our communities who spend the highest proportion of their income, because they cannot afford to save. By hitting the poorest the hardest the Government are hitting growth overall and making a more unbalanced economy and a more divided society.
Chris Leslie
It is the politics of shooting oneself in the foot. The difficulty is that the Chancellor does not even understand that his strategy is making his task far harder in the long run. It is not just the fact that people on lower and middle incomes are suffering as a result; it is the unfairness when they compare it with what the Government are doing for those parts of the economy and of society that they favour. The banks are still getting away with not paying their fair share. A tiny corner of the country is doing very well out of the Chancellor. The banks, whose actions created the deficit, are not contributing their fair share towards repairing it. In fact, astonishingly, they are benefiting from the Chancellor’s generosity. This Bill fails to get a grip on the contribution the banks ought to be making. It is still too weak on the very institutions that had to be bailed out by the taxpayer because of their perilous self-indulgence. We have debated in the past, and we will do so again, the fact that Ministers have failed lamentably when it comes to tackling bonuses. In opposition, the Prime Minister promised:
“Where the taxpayer owns a large stake in a bank, we are saying that no employee shall be paid a bonus of over £2,000”.
My hon. Friends probably remember that comment. However, when I express my dismay about the Bill’s weakness, I am not just talking about the lack of a bank bonuses tax. The Government said that the bank levy, as a charge on bank balance sheets, was their answer to clawing back some of the costs for the taxpayer.
The Prime Minister said in 2011 that once the levy was “fully up and running” it would raise £2.5 billion each year—in fact, he said that it would raise £9 billion over the spending review period. We now see that the Government have totally failed to live up to their promise and that the banks have swerved to avoid the bank levy; they have not paid anything like the amount mentioned. In fact, the Chancellor has raised nearly £2 billion less from the banks since the Prime Minister made that promise just two years ago. Those are not my figures, but the latest figures from the Office for Budget Responsibility and HMRC.
The Government repeatedly claim—the Minister did it again today—that the bank levy will raise £2.5 billion a year and that the cuts in corporation tax will not benefit the banks; the Minister said that those corporation tax cuts would be offset by increases in the levy. However, the OBR figures, published alongside the Budget, estimate that in the financial year that has just ended, 2012-13, the bank levy will raise just £1.6 billion—a massive shortfall. We have then to deduct a further £200 million because of the generous corporation tax cut. All in all, the banks have paid £1.1 billion less than Ministers promised. That is even worse than in the previous financial year of 2011-12, when the combined shortfall was £800 million less than the Minister promised.
What on earth is going on? Why cannot the Minister get a grip of the issue? The bank levy strategy is haemorrhaging money when it should be boosting the Exchequer far more significantly. I ask my hon. Friends to think of what that nearly £2 billion could have achieved in the past two years. This is the third or fourth attempt by the Government to get the issue right, but each time they have failed to raise what they promised. The Minister has to go back to the drawing board now and come up with a policy that will actually work, rather than something designed to pass a press release test.
The Chancellor is making bad decisions because he is getting deeper into difficulty, proving time and again that saving his own skin comes before getting the judgment right. It did not take long for the world to see, for example, that the Government had not properly thought through their flagship Help to Buy scheme after it was announced in the Budget. That was hailed as the boost that we needed for housing, but focusing only on demand without any corresponding action to supply more affordable homes is only a half-policy partially thought through.
I hope that the scheme succeeds, but why on earth cannot the Government ensure that funds are not siphoned off for second-home purchases? By contorting the scheme so that it does not count against the deficit figures, do they not realise that they have added complexity that might hinder take-up? After all, the Government promised that 100,000 people would have used last year’s NewBuy scheme by now, but only 1,500 people have become involved so far.
Chris Leslie
We will undoubtedly be able to judge the success of these issues, but there are some deeper flaws in the design of the Help to Buy scheme; we will debate that issue in more detail this week. It all reeks of a policy that has not been thought through properly—designed in haste and yet again not having the intended effect.
Understanding what the Government have put into the Finance Bill requires an understanding of what they have not put in. This was the Budget and the Finance Bill that were supposed to learn the lessons of the 2012 omnishambles Budget and Finance Bill—the pasty tax, the granny tax and the caravan tax. Here is the product of all the Government’s care and vigilance this year; I am sure that the Minister’s officials will be proud of him. The Government have painstakingly avoided anything that will have a positive and significant impact on growth, meticulously evaded any measures that might stimulate job creation and sidestepped anything that might repair the mess that they are making of the public finances.
In fact, the only real aspiration in the Bill is to get through it without any more U-turns. But by avoiding the bold action that we need to stimulate the economy, the Government have created a Bill bereft of the major reforms we need. So many measures are conspicuous by their absence. The Government have cut public investment, and now they are cutting back on policies, too.
I had hoped that the Chief Secretary to the Treasury would be here today; normally, he would open the debate on the Finance Bill. I do not know whether his not being here is a deliberate strategy or whether he has a decent reason; the shadow Chief Secretary has a decent reason for not being here, but that could not apply to the Chief Secretary.
We had hoped, before the Budget, that the Liberal Democrats would stick to one pledge—their pledge to support a mansion tax. We even tabled a one-line motion for Lib Dems to vote for, but they did not want to offend the Conservatives. But they should not worry because we will give them another chance to support their own policy later in the week—a mansion tax on properties worth over £2 million to deliver a tax cut for lower and middle-income households. We favour a 10p starting rate of income tax as the best way to do that and we think that should be in the Bill.
Why have the Government not legislated for their child care voucher extension, which has been pencilled in vaguely for some time after the general election? Where is the national insurance help for small businesses that we have been calling for and which the Chancellor should be acting on sooner? Why is that not in the Bill? It is not good enough for such provisions to be in black and white in a Budget book; it needs to be in the Bill. There have been so many promises in the media, but they have not been seen through in the Finance Bill.
The Finance Bill could be the moment when the Government change their mind on the bedroom tax, and it should be the legislation that repeals their lovely gift of an average £100,000 tax cut for Britain’s lucky millionaires through the cut to the 50p tax rate. As I have said before, it seems that with this Government there is one rule for the rich, but only one room for the poor.
Where do the Government get such a gratuitously unfair sense of priorities? The language used to validate a cruel, harsh, selfish approach is breathtaking—they insist on the caricature of the “spare room subsidy” and bristle at the term “bedroom tax” because they know that the public can see the policy for the disaster it is proving to be. The Chief Secretary to the Treasury, who is not here, wrote in The Sun on Easter weekend that he wanted to tackle the “bedroom blockers”—that from a Liberal Democrat Chief Secretary who could and should have blocked the bedroom tax in the first place.
Mark Field
Like me, the hon. Gentleman represents an inner-city seat. He will know from his own mailbag that the biggest housing issue is overcrowding. I find that in my constituency, and I cannot believe for one moment that the hon. Gentleman does not get similar letters from constituents. That is what is behind the so-called “bedroom tax”. We are trying to ensure that more vital social housing resource is made available to those in genuine need.
Chris Leslie
The Government are not putting any of those resources into building affordable social housing. Kicking people out of their homes will not help people in that way. We have already seen evidence that nine out of 10 of those affected by the bedroom tax have no option of going anywhere else at all. The Government have totally neglected the supply of affordable housing. They have not prioritised that.
Then we come to the grotesque spectacle of a Chancellor of the Exchequer demeaning his office—using the case of a multiple child killer to argue for his changes to the welfare system. We knew that Conservatives relish any opportunity to do down social insurance protections and that the Government’s policies are actually pushing more people into welfare—not helping them out, but pushing up the welfare bill to record levels. However, we did not know the depths to which the Chancellor would stoop. The nasty party is back.
The Chancellor certainly grabbed the headlines, but I say to Government Members that what he said diminished his standing in the eyes of millions who rely on benefits—those in work relying on tax credits as well as people looking for work, pensioners and the disabled. Those millions have absolutely nothing in common with Michael Philpott whatever and were all sickened by the evil behind those crimes. In his speech at the beginning of the month, the Chancellor had the audacity to castigate his critics for their “shrill, headline-seeking nonsense”—he said that without a hint of irony. He suggested that those who dared to criticise his plans
“always complain, with depressingly predictable outrage”
and are just another bunch of “vested interests”.
Let us just think about that accusation—“vested interests”. Putting to one side for a moment the fact that the Chancellor knows a thing or two about defending positions of privilege, is he really saying that those who care about defending the well-being of some of the most vulnerable in society are “vested interests”? Well, for the record, yes—we are interested in, and deeply concerned about, the impact that the bedroom tax, the withdrawal of council tax benefits and the changes to disability benefits will have. However, the more important question is why the Chancellor is not interested. Why does he think it makes sense to tell 660,000 people, most of whom have a disability, that they need to give up a spare room but leave nine out of 10 with no option of moving anywhere smaller? Why does he think that some of the poorest and most vulnerable can cope with significantly higher council tax bills as a result of the withdrawal of council tax benefit, the arrears from which could end up costing a fortune to collect? Why does he think it makes sense to penalise working people by cutting their tax credits at a time when we should be making work pay?
The Chancellor is not concerned because for him this is a political game. He is not serious about helping those on welfare; for him, and for the Conservatives’ new spin supremo, Lynton Crosby, this is all about ideology and tactics.
Geraint Davies
My hon. Friend will be aware that housing benefit costs have doubled in the past 10 years, but is he also aware that 70% of that increase is due to private sector rents because rents have been inflating and we have not been building enough houses? Does he accept that if we built more houses we could lower average rents, sort out housing benefit and give people stable communities and more chance of getting a job as well?
Chris Leslie
Looking at the situation in the round, that is exactly the sort of welfare reform that we need. If we are going to get to the root of these problems, we must have serious reforms to our welfare system, and we need a Government who are serious about delivering them.
The Chancellor and his Ministers are not serious about solving these issues; all they want to do is to stoke up fear and prejudice, blame the unemployed and the welfare system, and deflect attention from their own woeful failures to repair public finances. Serious welfare reform has to be a continuous process to fit the modern circumstances of society. Reform is never just a “job done”, nor should it aim only at being headline-grabbing. We should crack down harder on fraud but also on tax evasion, we should better reflect the contributory principle, and above all, we should focus relentlessly on getting people back into work so that they are making a productive contribution while also paying taxes again to bring in those much needed revenues.
A Work programme where only 2% of participants find themselves in sustained employment is a humiliation for these Ministers. They should never have scrapped the new deal, and if they were genuine reformers they would immediately set out a compulsory jobs guarantee, using the repeat of the banker bonus tax to fund a minimum-wage job placement for all young people unemployed for a year, and using the money saved from reducing the pension tax relief for the richest 1% to fund a job for all adults who are long-term unemployed for two years or more. No excuses: if they turn down those decent and properly paid job opportunities, they should forfeit unemployment benefits. Languishing on the dole for the long term must end, but we need to treat those looking for work with respect and give them a decent and real job opportunity, not cast them aside.
Andy Sawford
My hon. Friend rightly highlights the importance of helping the long-term unemployed back to work and the new deal’s success relative to the Government’s Work programme, which is a contradiction in terms. Does he recognise that in my constituency, which, according to independent surveys, is the most difficult place in the country for young people to find work, we need approaches such as the future jobs fund, which the Government scrapped as one of their first acts of vandalism on coming into office? We need those programmes, which we have proposed.
Chris Leslie
This is the answer to Ministers who were saying earlier from a sedentary position, “Where are your policies?” The difference between the parties is that they do not understand that jobs, at the heart of welfare reform, are the way to get revenues flowing into the economy. If they neglect economic growth and do not recognise that growth has an effect on the wider prosperity of society as well as on public finances, they will never repair the deficit as they claimed they would, and they will never have the fairer society that the Minister had the cheek to mention when concluding his speech. Ministers talk about fairness: tell that to the families who are losing £891 this year—households who are in work—when at the same time they see these Ministers giving away £145 million in the Budget to hedge fund managers by abolishing stamp duty reserve tax on some unit trust investments; tell that to those who are forking out 20% VAT and losing hundreds of pounds through higher taxes while the banks are let off the hook; and tell that to our constituents who we see, all too frequently, left with only £60 per week to live on while Ministers lavish on millionaires an average £100,000 tax cut in this financial year by scrapping the 50p top rate.
The Chancellor either does not understand fairness or does not care that he is creating unfairness. The Finance Bill will make the rich richer but do nothing to help the vast majority to secure a better standard of living. Worse still, the Bill will harm the prospects for our economy this year. Just at the moment we need measures to stimulate growth, the Government have produced this misguided Bill. They give a little away with one hand but take away so much more with the other. Their tax rises and cuts more than offset what they have promised in several years’ time on child care or changes to the personal allowance. Taking a penny off a pint of beer does not go very far when they have added 5p a pint through higher VAT.
Why is this such an inappropriate Bill? It is because the Chancellor does not prioritise the British economy or the prosperity of the British people. His No. 1 priority is himself: his own political reputation. It is all about reviving his own fortunes and trying to shore up his ideological credentials. This Budget and this Finance Bill were not about anyone else’s job but the Chancellor’s. That explains the fudging of the public accounts to make it look as though the deficit was falling when it is plainly as high as the year before. It explains the Chancellor’s refusal to budge from a failing strategy in case he had to admit his mistakes and swallow his pride, it explains the ever-widening net of blame for why things have fallen so off course, and it explains why the country’s fortunes have been downgraded while he carries on regardless. It is time that the Chancellor’s reputation was not the be-all and end-all of Treasury policy. It is time that we put the boost that our economy needs at the heart of everything we do. This Bill is bereft of the bold steps we need to kick-start Britain’s economy. I urge my hon. Friends to oppose it because Britain deserves better.
Mr Deputy Speaker (Mr Nigel Evans)
Order. Although there is no time limit on speeches this evening, I hope that Members will be mindful of the fact that others wish to contribute to the debate when considering the length of their own contributions.
Mark Field (Cities of London and Westminster) (Con)
If there is one small area where I would agree somewhat with the hon. Member for Nottingham East (Chris Leslie), it is that the Chancellor’s room for manoeuvre was incredibly limited as he delivered the Budget four weeks ago. There is no doubt that many of those constraints come as a result of global events. The latest stage in the eurozone debacle as Cypriot banks have been underpinned is a contemporary case in point, and we see ongoing problems in Portugal that I fear will deteriorate as the weeks and months go by.
However, it has become ever clearer that in the coalition Government’s first Budget in June 2010, they were, I accept, complacent about growth. The short pre-election boom following the 2009 VAT reduction and the very large early rounds of quantitative easing lulled the coalition, on assuming office, into believing that the growth that had come about in the two or three quarters before the 2010 election was baked into the system and would somehow do the heavy lifting when it came to deficit reduction. The coalition’s plans to eliminate the structural deficit required the gap between revenue and expenditure to be narrowed by some £159 billion by 2014-15. Tax rises were expected to contribute £31 billion and spending cuts £44 billion, and the remaining £84 billion was meant to come from compound growth of 2.7% throughout the Parliament.
Unfortunately, however, as we now know, the coalition ended up with possibly the worst of all worlds. It has received unwarrantedly relentless criticism from Labour Members for so-called harsh austerity measures when, in reality, it has too often lacked the political will to execute the levels of savings required. For all the rhetoric, we are still overspending by some £300 million every day. We are borrowing, not spending, that amount each and every day, and that means that we will continue to have to borrow to the tune of some £120 billion year on year.
Kelvin Hopkins
The hon. Gentleman seems to be saying that the Conservative coalition Government had the benefit of Labour’s reflationary strategy, which was implemented before the election, but then reversed it so that things have got worse ever since. Should they not simply have carried on with Labour’s strategy?
Mark Field
The hon. Gentleman makes a good case, I suppose, but we all know that the reality was that the short-term boost of VAT reduction and the early batches of QE was unsustainable. They were a pre-election boomlet, but, as I have said, the entire political class became rather complacent and thought, somehow, that the worst was behind us after the crash of 2008. We now know that that simply was not the case.
In 2010 the entire political class should have looked the electorate in the eye and been clear about the magnitude of the task that lay and, I am afraid, still lies ahead to rectify the public finances, but we are where we are. I personally take the view that talk of radical tax cuts from some on the Government Benches is perhaps unrealistic. I fear, for a start, that confidence is so low that until it is restored almost any tax give-aways are more likely to be squirreled away by individuals and companies than pumped back into the economy.
I also think we would run the serious risk of the markets losing faith if we were to play even faster and looser with public borrowing. In spite of the recent loss of our triple A rating from Moody’s, the Chancellor’s great achievement—it should not be underestimated—is that we are still able to borrow in international markets at such low interest rates. The lesson of both 1931 and 1976 is that once the markets turn, all is lost.
My main hope for the Budget and this Bill was that the coalition would take some of the longer-term decisions that the British economy requires. I am pleased that resource is being set aside for key, shovel-ready infrastructure projects. I had hoped that cash would be accompanied by decisions and leadership on aviation and energy infrastructure. We cannot let these sensitive political footballs be kicked once again into the next Parliament. I think that the UK, as a trading nation, requires certainty on those issues, not an endless parade of commissions and reviews.
I am pleased, however, that the Treasury has helped out small business. The march towards ever lower rates of corporation tax, as the Exchequer Secretary has pointed out, is highly welcome, as are assurances that small firms will be given a chance to bid for Government contracts under the small business research initiative.
The extent of capital gains tax relief to attract start-up capital for new limited companies is also very good news. Best of all, however, is the knocking off of the first £2,000 of employer national insurance contributions for small and micro-sized businesses. That will, I hope, begin to chip away at the worryingly high levels of youth unemployment by lifting some of the obvious disincentives to taking on new staff.
I am afraid that I am a little less sanguine about the Chancellor’s flagship Help to Buy plan. I appreciate its raw politics, underpinned as it is by a desire to help struggling younger people on to the housing ladder, many of whom are paying much more in rent than they would as part of a mortgage, if only they had a deposit. Nevertheless, I ask the Treasury to give considerable thought in the consultation period to what we are trying to achieve. Let us look carefully at supply rather than just finance, since I suspect that the latter will simply help keep prices out of the reach of the very people whom we wish to serve, as the hon. Member for Edmonton (Mr Love) has said. I do not wish the taxpayer to be on the hook for the consequences of a reinflated property bubble. Let us not forget the US experience that lay at the heart of the financial crisis.
I, like many other Members, am also disappointed that the Office for Budget Responsibility’s predictions for our economy as recently as the autumn statement on 10 December 2012 were proved, only 14 weeks later in the March Budget, to have been so considerably off beam. Few doubt that economic forecasting is an especially dismal science. However, the OBR’s intervention in December proved essential in buying the Chancellor crucial breathing space at a time when many commentators had assumed that we were about to flunk our plan to reduce the deficit year on year. To that extent I accept what the hon. Member for Nottingham East has said. Many even-handed people will regard that as a sleight of hand, but, more importantly, the scene was set for cynicism and deep disappointment when aggregate borrowing for the next four years was projected at some £49 billion higher only 14 weeks after the autumn statement.
It is worth saying, however, that that is part of a tradition during all my 12 years in this House. Every single Budget between 2001 and 2007 forecast that public finances would move back into surplus in about three or four years’ time. Instead, as the hon. Gentleman will remember, debt and the annual deficit rose inexorably while the Treasury conjured the illusion of fiscal stability. Similarly, at every autumn statement since June 2010, the OBR has, I fear, been forced to downgrade growth out-turns while continuing to hold somewhat optimistically to the notion that the public finances will be transformed by robust growth in two years’ time.
The establishment of the OBR was meant to herald a fresh era of forecasting credibility, but it now seems all too reminiscent of the previous Administration’s discredited financial projection. I think that observers are beginning to wonder whether we should have any regard for the OBR’s latest set of predictions or, indeed, take with anything more than a pinch of salt assurances that recovery is only around the corner.
Sheila Gilmore
Will the hon. Gentleman clarify his position? Is he suggesting that the OBR—which was hailed as a great independent organisation that would keep us right—has somehow gone wrong, rather than that it is his Government’s policies that have lead the OBR constantly to downgrade its predictions?
Mark Field
I am expressing the concern that the OBR was somehow seen as a panacea of independence in a lot of its projections when it has got things uniformly wrong almost every time. As I have said, that is partly because of international events that one cannot exclude. We live in a global economy and are a great global trading nation. The problem is that we have not been able to get the export-led growth that we all want and as a result there has been constant downgrading.
There was some good news in the Budget, as the Exchequer Secretary has said, about the co-operation between the Treasury and our Crown dependencies of Jersey, Guernsey and the Isle of Man on new financial disclosure agreements. As an adviser to the law firm Cains, I am pleased that our Crown dependencies have led the way with the FATCA—Foreign Account Tax Compliance Act—arrangements. That is to the Treasury’s credit. We saw at ECOFIN only last weekend that we are also looking to bring on board the Cayman Islands and the British Virgin Islands to ensure that there is more transparency. It is very easy to berate a lot of the international financial centres—many of which have long-standing historical links with not just the City of London, but the UK—but the importance of the liquidity that they bring into play should not be underestimated. It made a big difference in the immediate aftermath of the crash of September 2008 and might yet do so at some point in the future.
I am a little more concerned that the Treasury is not making entirely clear what is considered abuse and avoidance when it comes to tax arrangements. The earlier exchange between the hon. Member for Burnley and the Exchequer Secretary brought that to mind. [Interruption.] I apologise: it was the hon. Member for Redcar (Ian Swales)—my view of the hon. Gentleman means that it was an all too easy mistake to make. Without clarity about what amounts to avoidance as opposed to abuse, we risk throwing a veil of uncertainty over the UK’s business environment.
I speak to firms large and small in my own constituency. I say to those on the Treasury Bench that, suddenly, for the first time ever, global corporations are beginning to consider the almost unthinkable prospect of a certain amount of political risk being attached to the UK. Foreign direct investors would be right to feel aggrieved if legitimate tax-planning activities suddenly were deemed by Her Majesty’s Revenue and Customs to be aggressive tax avoidance, with punitive fines and damaging public relations to follow.
On that note, I should like to raise a specific instance of retrospection that is causing financial hardship among some of my constituents. Section 58 of the Finance Act 2008, brought in by the previous Government, was designed to close down certain tax-planning arrangements with retrospective effect. I am afraid that it has left some residents in my constituency with demands for huge amounts of back tax, which in some extreme cases is leading to threats of bankruptcy.
The Exchequer Secretary is aware of those concerns, because he has responded to my correspondence on them. Unfortunately, however, some of those affected by section 58 are not convinced that he is properly listening to the argument. One constituent advised:
“The tax arrangements I used were not only legitimate and openly declared, but expressly considered, debated and approved by parliament back in 1987. This means that according to the HMRC’s declaration, I was not engaged in aggressive and abusive tax avoidance but simple, legitimate tax planning.”
Although I accept that HMRC wants to bring more money in and to close down aggressive tax avoidance schemes, if it has known that arrangements or schemes have been in place for 25 years and has made no move to close them down, it cannot be right for retrospective activity to take place. My constituents therefore request the repeal of section 58.
I would be grateful if the Treasury gave serious consideration not only to the arguments of the campaigners, but to the message that retrospective legislation sends to business people who are trying to act in a lawful and transparent way in planning their taxes. The Exchequer Secretary rightly pointed out that we should be proud of being a country that is open for business, but we must ensure that what we do and what we say in that regard coincide.
To conclude, if I have one message for the Treasury as we consider the Finance Bill in the days ahead, it is to forget about the pressure for quick fixes and transient boosts, and instead to focus relentlessly on delivery and longer-term measures to make the UK an ever more tempting prospect as a place in which to do business. If the UK economy is not to get substantial growth before the 2015 election, let the coalition at least get some credibility for doing the right thing for the nation and giving our people a genuine sense of hope for the future.
Chris Evans (Islwyn) (Lab/Co-op)
If there was one test that the Government put in place from the day that they got into power, it was reducing the deficit. Three years on, what do we see? Borrowing is increasing by £245 billion and there is no chance of the deficit being paid off by 2015. By 2016-17, debt as a ratio of GDP will be 85.4%. Those are damning figures.
On 23 April 2012, the Prime Minister said:
“We’re involved in an economic rescue mission, but we’re not just a bunch of accountants dealing with a deficit, there’s also a driving passion and vision to change this country and make it much more on the side of hard-working people who do the right thing.”
Unfortunately, those who work hard and play by the rules have seen the top earners in society get a tax cut of 5p. I will not denigrate success: there is nothing wrong with people striving to work hard and enjoy the fruits of their labour; aspiration is what the party I represent is about and it is something that we should believe in. However, if the Government could find a tax cut of 5p for the highest earners, why could they not do it for the middle-income earners, for the families who are worried about their jobs and for the people sitting around their kitchen tables today who see the price of their groceries going up all the time, inflation going up and real wages dropping by 2.4%? Who is standing up for them? Nobody.
We hear wonderful words and statistics from Government Members, but the simple fact is this: we are still stuck in the grip of an economic theory that failed. We were told that tax cuts for the very rich would trickle down through society. We were told that the highest earners would somehow create jobs. What did we see by the end of the ’80s? We saw a record recession in 1990, with more houses repossessed and more businesses going bust than ever before, all because of the belief that we should be on the side of those who ride in limousines, rather than those who go to work every day in their vans.
I believe in one thing. It may be old-fashioned, but I believe that work is the only way out of poverty and the only way to reduce the ills of this country. Having people in work and paying their taxes is the only way to reduce not only the deficit, but the national debt. It is up to this Government and to any Government, whether they be red, blue, yellow or whatever blue and yellow are when they come together, to create jobs and to reduce all the barriers to people getting into work.
What does the Bill do? We have heard Government Members lauding the right to buy scheme. We have heard them talk about getting more people on the property ladder, even though rents are through the roof and it is hard to get a deposit. The average age of a person buying their first house is now 37. At that age, my mother and father had already had two children and got divorced—they had already lived their life. Now, people of that age are still struggling to get on the ladder.
What is the problem? It is not home ownership or high rents, but the lack of housing in this country. Instead of following the pledge of the Labour party to build 100,000 new houses using the sell-off of the 4G spectrum, the Government have ignored the problem completely. How many people will take advantage of the right to buy scheme? Will it go on failing like it is? Only 1,500 people took advantage of it last year. That is not a scheme that will create a nation of home owners; all it does is provide warm words. Whether we are on the right or the left, we have to get to a point in this country where the best ideas are used. Surely, the best idea is to use the money from the 4G spectrum to invest in homes and thereby create jobs.
The next matter that I want to talk about is barriers to work. We can quote statistics all we want, but the simple fact, as Harold Wilson said, is that it does not matter what the employment rate is in the country; for an unemployed person, the unemployment rate is 100%. Most of the people with children whom I talk to in my surgery and around my constituency say that the biggest barrier to getting back to work is child care issues. That is the elephant in the room. We can talk about job creation schemes all we want, but if people have child care issues, their priority is to look after their child.
On 19 March, a Treasury press release lauded the
“New scheme to bring tax-free childcare for 2.5 million working families”.
When I saw that, I applauded it and thought that it was the way forward. However, I then found out that the scheme will not come in until 2015. That means that people who have child care issues now face cuts to their child tax credit. A family with two children have already seen a cut of £1,500 a year in their child care funding. There is not only a cut in child care funding; since 2010, there are 400 fewer Sure Start centres and early years budgets have been slashed. That affects the economy, because if parents cannot go back to work, whether they are mums or dads, it adds to the welfare bill. I genuinely believe that it is economic madness to cut jobs or not allow people to go back into work if it creates a welfare bill that adds more and more to the deficit.
I will move on to another barrier to work. Like many hon. Members, I am bombarded by e-mails and letters from the FairFuelUK campaign. That must be the campaign from which I have received the most e-mails, letters and communications. However, those communications are coming not from a national campaign, but from the ordinary motorist in work. He is struggling to get to work. Again, the Government laud their freezing of petrol duty in September and say that they are on the side of hard-working families and people who need their car for work.
Andy Sawford
Does my hon. Friend agree that if the Government had taken the sensible advice of shadow Treasury Ministers to cut VAT, that would have provided much more significant help with the price of fuel than their small offering?
Chris Evans
I thank my hon. Friend, because I was building up to that point.
The Conservatives like to tell people that they are the party of low taxation. They might have cut income tax in the ’80s, and cut it now from 50p to 45p, but the one thing they have used over and over again is value added tax. Under the Conservatives, VAT has risen from 15% to 17.5% to 20% as it is now. That is the tool they have always used. It is all very well someone being taxed on what they spend or buy, but everybody has to pay VAT, whether they are a struggling pensioner, a student who needs clothes or equipment for university, or a single parent. Everybody has to pay VAT, whether they are a duke or on the bins.
When VAT is put on petrol, it is instantly put up by 3p. The Government’s proposal means absolutely nothing. This Government could show some bravery and leadership by reducing VAT. I know they will say that once VAT has been put on some goods it has to stay, but that does not mean it has to stay at 20%. When the Labour party was in power in 1997, we reduced VAT on fuel bills to 5%. It has been done before; a precedent has been set and it can be done again.
When I look around my constituency I see so many hard-working people who are being squeezed. The most heinous thing, which I hear all the time, is people being demonised because they claim benefits, even though six out of 10 people who claim benefits are in work. That says one thing: work is not paying. What do the Government do? They make a tiny increase this week to the minimum wage. For me, the minimum wage is the cornerstone of welfare reform—a decent living wage. I am sick to death and tired of hearing my constituents be demonised and criminalised because they find themselves unemployed. They are all pushed together in sweeping statements; they are called scroungers, and being from the valleys that hurts me, because I know how proud is the tradition of working. That is the most heinous thing.
One thing the Government could do to prove that we are—to use a phrase that has not been heard for the past two years—“all in this together” is repeal the bedroom tax. That is close to my heart, because the average person in Islwyn will pay an extra £91 for having an extra bedroom. There will be pensioners who have lived in the same council house all their lives, brought up a family and made a home, but who are being kicked out because they have a three-bedroom house. What are they to do—bring in a lodger or someone they do not know? No. In my constituency of Islwyn in Caerphilly county borough, 80% of my constituents who are renting will be affected for the simple reason that in 1945 the Labour Government did not build council houses just to house people: we built family homes. We built two and three-bedroom houses in which families could grow and thrive in a safe environment. That was a cornerstone of Aneurin Bevan’s vision as Housing Minister—a contribution that people often forget.
I am concerned that ordinary people are getting squeezed all the time. The Finance Bill represents an opportunity for the Government to show that they can be caring and compassionate, but this opportunity has been wasted. It was not a steady-as-you-go, as-you-were Budget, and the figures bear out the situation. Growth in this country is anaemic; it is flatlining and needs investment. The Prime Minister’s mantra at Prime Minister’s questions every week is the same: “All Labour wants to do is borrow more money; it wants to go the same way as Greece and spend it all.” To me, however, it is an absolute no-brainer. We are already borrowing £245 billion, so what is wrong with trying to invest that in creating jobs and building new houses?
I oppose the Second Reading of this Bill because it does nothing for the people we seek to represent. This is not about steady-as-you-go; the Government have failed in their primary aim of reducing the deficit, and therefore the Bill does not deserve a Second Reading.
Ian Swales (Redcar) (LD)
I welcome most measures in this Bill, particularly the rise in the personal tax threshold to £9,440 this year. That is already cutting in half the tax bill of people on the minimum wage, and next year the threshold will rise to £10,000 and 24 million people will receive a tax cut. That is the No. 1 Liberal Democrat priority, and I am delighted to see that it is being delivered by this Government.
We hear a lot about millionaire tax cuts, but I think that when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) decided to raise taxes in the last month of his failing Government, he knew that it would be the gift that kept on giving in terms of headlines. Unfortunately, however, it was not the gift that kept on giving to Her Majesty’s Revenue and Customs, as figures have shown. Millionaires will pay £381,000 more in income tax and national insurance in five years of this Government than they paid in the last five years of the previous Government.
Julie Hilling (Bolton West) (Lab)
What does the hon. Gentleman think about HMRC saying that the tax would actually have brought in £1 billion? The problem is that we had it only for the first year when people prepaid it, and this year when people will postpone it, but we did not bother to watch what happened in that middle year.
Ian Swales
HMRC is well aware that people with those sorts of income levels have many choices about what they do with their money, and we have seen the effects of that. Once tax gets to 50%, people do other things, and that is what we have seen.
I wish to mention one or two relevant changes to pensions. I welcome the cut in allowances for pension savings. It is incredible that under the previous Government someone was allowed to save £255,000 a year for their pension and receive full tax relief worth £127,000. This Government have cut tax relief to £50,000, which will fall to £40,000, so the taxpayer cost of £127,000 will be £18,000 by next year—a huge change that will bring in, I believe, £4 billion. I also welcome the steps for 1992 Equitable Life annuitants. I have a number of constituents who felt very unfairly treated, and although the £5,000 they will receive does not go all the way to meeting their needs, it at least recognises the trauma they have experienced. I welcome the increase in the allowance for draw-down pensioners. That was also painful for some who took a big cut in their income when the Government Actuary changed the figures.
The Minister mentioned tax avoidance. I will not replay the debate in this Chamber from last January, but it had lots of content and I am pleased to see the Government acting on some of that. However, there is still a lot more to do on the internet and international businesses, and I look forward to seeing further measures. I also feel that the lines between avoidance and evasion are getting more blurred. Cases such as that of the bogus charity that was headlined in The Times only a couple of months ago are not just about avoidance and when HMRC should take people to court to get the tax—people need to end up in jail as a result of such schemes. It is high time that we were clear about schemes that are entirely fictitious, and things such as assets changing hands at different prices at the same time need to be viewed as criminal activity.
The Labour party has spoken a lot about the growth measures—or lack of them—in the Budget, and both I and the hon. Member for Cities of London and Westminster (Mark Field), who is no longer in his place, would like to see an export-boom recovery. One problem is that under the previous Government manufacturing went from 22% to 11% of our economy. That amazing fall means there are a lot fewer makers in the march—we all want to see the march of the makers. I welcome the steps the Government are taking to do something about that, including the regional growth fund, which has given out large amounts, mostly to manufacturing industry; the fact that the Government will act on the Heseltine review, which made many of the same points, such as the need to support regions such as mine in the Tees valley; and the tenfold increase in capital allowances from £25,000 to £250,000, which will encourage manufacturers to invest, which we badly need. The new employment allowance of £2,000 will help the smallest businesses to make a bit more money and encourage them to take on more people.
There are measures on infrastructure investment. The Budget plans contain a map of the country featuring the different infrastructure projects, so it is wrong to say that infrastructure investment is not happening. I welcome the Government’s targeting of strategic sectors that they have identified for success, such as automobiles and life sciences. A lot of work is being done on that, and along with the investment in supply chains, which seeks to get our supply chains back onshore after so many disappeared, it is already paying dividends—car parts manufacturers are coming back to the UK and so on. I believe that many of those steps are in the right direction.
On carbon taxes, all hon. Members understand the need to take care of climate change, but we must also ensure that our energy-intensive industries remain competitive. The Government are taking steps in that direction, but there is a lot more to do. We have increases in the climate change levy and the carbon price floor, both of which perhaps send the message to our heavier industry that it is not welcome here. We need to take steps to ensure that that is not the case.
The hon. Member for Cities of London and Westminster said that we do not want retrospective changes. One specific example is the climate change levy for combined heat and power organisations such as Sembcorp in my constituency, which invested millions in new equipment on the expectation that the regime would remain until 2027. The regime changed retrospectively and, all of a sudden, its investment case was gone. I have written to the Minister on that, and it needs considering specifically. It is no good expecting people to invest in green technology if we do not make the ground rules clear. If people start to believe that the ground rules will move, they will not invest.
I welcome the announcement in the Budget on the two areas that will benefit from carbon capture and storage. I would liked to have seen Teesside on the list, but I recognise that the decision was based on energy. I welcome the Government’s recent heat strategy, which specifically mentions the need for carbon capture and storage for industry. I hope that future Budgets cater for a project on Teesside to do exactly that. Teesside has an excellent business case for the Government if they take into account enhanced oil recovery and the revenue that will flow from petroleum revenue taxes as a result of the CCS projects. I hope the Treasury considers that carefully in future.
Generally, the Government are taking many steps towards encouraging green investment. I hope only that they can take the one extra step, which is to ensure that a lot of the investment that goes into new energy projects results in UK manufacturing and supply. Too much of the manufacturing has so far been offshore, including for a wind farm going up right outside my house in Redcar.
I have listened carefully to the speeches today, including those from Opposition Members. I understand some of their points but am confused by others. The hon. Member for Islwyn (Chris Evans), in one of his characteristically passionate speeches, mentioned VAT. I believe that this is the wrong time to introduce a measure that gives the most to those who spend the most—the richest get the most out of cuts in VAT. Most people at the lower end of the scale do not spend much on standard rate VAT items, so the measure he proposed would involve borrowing £12 billion to, for example, cut the price of a Ferrari by £4,000. This is the wrong time to do that. There are much better ways to spend £12 billion if that is what he wants to borrow.
Under the previous Government, three gaps widened: the gap between rich and poor, the gap between north and south, and the gap between the north and the south of the region where I live. That is a shameful record. I and the Liberal Democrats want a stronger economy and a fairer society, and I support the Budget.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
I should like to address the comments of the hon. Member for Redcar (Ian Swales) about capital allowances. I, too, welcome the Government’s capital allowance proposals, but they are a U-turn—the Government reduced pre-2010 Labour levels of capital allowances to 25% of what they were, but have since returned them to pre-2010 levels.
The north-east leads the way on exports. Government Members have said that the export recovery has not occurred, but the north-east already had very good exports from industry. Compared with other regions in the country, the north-east leads the way. For example, Cleveland Potash at Boulby in my constituency today announced a £300 million investment, which will create 120 new jobs and secure more than 1,000 existing jobs in the potash pit. That occurs on the one-year anniversary of the recommencement of iron and steel production at the Redcar blast furnace at the Teesside Cast Products site, which is under the joint operation of Sahaviriya Steel Industries and Tata. That is a victory for the campaign of local people on Teesside, of which I was proud to be a part, as was the hon. Member for Redcar. Success is now synonymous with Teesside, and people in Teesside are proud to say that they are a success. We look forward to a future built upon the industrial development and manufacturing legacy of the 13 years under Labour.
Organisations such as the North East of England Process Industry Cluster were created in conjunction with the Labour Government and One North East. NEPIC centred on the north-east’s assets, particularly in the chemical and steel industries, and the heritage of shipbuilding—TAG Energy uses the Haverton Hill site, formerly a shipyard and dock, to produce monopile construction units for the offshore wind turbine market.
By contrast, the words “double dip”, “double debt” and “credit rating downgrade” are synonymous with the Prime Minister, the Chancellor and the Government. Since the autumn statement, growth, which was estimated to be poor, has halved in just over three months from 1.2% to 0.6%. The accrual of debt by this downgraded Chancellor from 2010 to 2015 is more than the total debt accrued by the previous Labour Government in their entire 13 years. Despite that and the overwhelming evidence, the Chancellor affirmed in his Budget that borrowing is falling. Public borrowing shows that the Government books were in the red to the tune of £121 billion last year. They are forecast to improve only marginally to £120.9 billion in 2012-13.
Tax revenues have fallen £5.1 billion short of the predictions in the autumn statement, despite the hailed employment figures. That is largely owing to the fact that, despite increases in nominal employment, productivity has fallen massively. That is matched by a huge fall in tax take. The irony is that we have always been told that the private sector is more efficient. Supposedly, we have 1 million more private sector workers, and gross domestic product is falling, so more people are doing less. That is a re-unbalancing of the economy if I ever saw one.
Similarly, the increase in the number of employed women is largely due to the fact that fewer women between the ages of 60 and 64 have retired. Women are working to a later age because state old age pensions have changed. That has undoubtedly helped employment figures. The Chancellor was able to massage his borrowing down only by persuading the OBR that Government Departments would spend £3.4 billion less than their allocated budgets this year. Only three months after the previous forecast, the budget deficit is expected to be an average £11 billion worse throughout the five-year forecast period. In cash terms, the problem lies with poor tax receipts, which have been hit by disappointing revenues this year, and vastly reduced forecasts for nominal gross domestic product, which is now at one seventh of the original growth expectations set in June 2010.
On the other hand, Robert Chote and the OBR assume the economy has the scope for rapid catch-up growth of 2.3% of national income even after April 2018. But with so much slack in the economy to be assumed for the rest of this decade, it is strange that the OBR does not show inflation falling below its target level of 2% at any time. Are Ministers concerned by that? If the OBR admitted this to be the case, it could no longer live within the Chancellor’s demands and would probably have to admit not £9 billion, but something more in the region of £17 billion a year of tax rises or spending cuts, as a result of earlier Government inaction.
The nation’s debt and the Government’s borrowing are completely dependent upon the Chancellor’s “monetary activism”. However, minutes of the Bank of England’s latest meeting show that the new Governor, Mark Carney, failed to win any support for his case for further quantitative easing. Most of the MPC look worried about the potential damage of a run on sterling, and the effectiveness in any case of further asset purchases as banks and households look to clear debts. However, without further QE, the Chancellor cannot keep his borrowing rates down, as the borrowing at low rates to buy gilts in order to borrow at low rates is the true reason for low interest rates, not the heavily front-ended, growth-strangling cuts we have witnessed to date.
Furthermore, big businesses continual deleveraging will not be turned into sudden investment with further corporation tax cuts. Corporation tax cuts will just aid business to further deleverage debt. It has never been so cheap for the state to borrow, and the Chancellor is neither using this cheap accessible capital to pump-prime the economy nor persuading banks and big business to free up their substantial reserves and corporate funds. The Chancellor’s language and tone set the mood music for the economy, and his constant message of national deleveraging has sent everyone into a deleveraging frenzy. Banks are hoarding excess capital and large corporate companies are simultaneously paying out large dividends to shareholders while sitting on excess capital, with the explicit purpose of holding it in case they need to make future debt clearances rather than investments.
Ian Swales
The hon. Gentleman is making a powerful case. Does he not welcome the Infrastructure (Financial Assistance) Act 2012, which uses low Government interest rates to underwrite £50 billion of infrastructure spending?
Tom Blenkinsop
As the hon. Gentleman knows, certain programmes, such as the Government’s rebuilding schools programme—which has been delayed for a year in one school in Guisborough in my constituency—are dependent on PFI arrangements, which raise capital from the bond market. We had a slightly different arrangement for the Building Schools for the Future project. We now have the sudden realisation that the cancellation of such capital projects, in the first two years of this Government, has sent the economy into a spiral.
The real issue for me, especially in the north-east, is connectivity. We want to develop our economic base, but rail electrification will go only as far as York. What we want is access to capital funds to get electrification done as soon as possible. I hope that that will yield some results, but it is already too late. We have already had nigh on three years with little investment, and now the situation is desperate. Capital is still very slow in coming from Whitehall, exacerbated by the lack of agencies in the region to assist businesses, even given the regional growth fund. How we solve that, given that those agencies have been dismantled, I do not know, but we need to do more.
Added to the Chancellor’s mood music and the deleveraging frenzy, we have a Government delaying the payment of bills to hide borrowing. The delaying of these payments—largely to big businesses—leads to deleveraging big businesses, with vast sums under the corporate mattress, using smaller businesses as an extra line of credit. Current unpaid bills to small and medium-sized enterprises total £36.4 billion, with some small businesses writing off bills to the tune of £10,000. An illustration of this is the 7% year-on-year contraction in construction, which has its lowest growth rate since 1987.
The Chancellor is aware of this issue. In the north-east, according to the regional Federation of Small Businesses, banks cannot apparently give a regional figure for the take-up of the funding for lending scheme for business. We need to hold banks to account for that. The north-east has 134,000 businesses—I mentioned two of the larger ones earlier. A thousand employ more than 50 people, while 96,000 are sole traders, who by and large do not pay corporation tax. This April, real-time information will be introduced, but apparently only 25% of FSB members know what RTI is. I suggest to Ministers that small businesses should be given a proper period of slack on the introduction of RTI. The Government have allowed six months, but extending this to 12 months might be necessary so that businesses can adapt properly. However, the closure of local HMRC tax inquiry offices in the north-east—a region with a large sole trader community—means that we will be far more exposed to transitional difficulties.
The sole traders, market town traders and small businesses on our high streets will not only have RTI to contend with. The national minimum wage is lower now, in real terms, than it was in 2004. It was raised by 1.9% today, but the consumer prices index is at 2.8%, so it is a real-terms cut. Small businesses and their customers in the north-east will see working tax credit freezes from this April, meaning those working under 30 hours will lose between £303 and £428. That is £303 to £428 less to spend. Benefits being capped at 1% rather than CPI will mean that small businesses’ customers lose up to £150. That is £150 less to spend. The bedroom tax—a housing benefit cut of between 14% and 24%—will mean they lose between £624 and £1,144. That is £624 to £1,144 less to spend. The benefit cap, to be rolled out nationally from September, will mean small businesses’ customers will lose on average £4,836, which is an average of £93 a week. That is £93 less per week for their customers to spend. The council tax benefit cut—the Tories’ new poll tax—will mean that 700,000 people in employment will lose between £250 to £600 each, meaning small businesses’ regular customers will have between £250 and £600 less to spend. This will no doubt compound an already obvious demand crisis.
After the mummy tax and the granny tax, the end of the pregnancy grant, and VAT being increased again by a Tory Government, there will be obvious consequences for sole traders and small business in general. How do the Government think these reductions in the disposable income of small businesses’ most frequent and dependable customers will resolve this country’s economic growth problems? In the autumn statement, private consumption was expected to be a crucial driver of Britain’s growth in the years ahead. The OBR expected growth in 2012 to come from private consumption. Indeed, it revised it up to 37.5% of all growth after last year’s omnishambles Budget. Of course, it did not happen. The promised—albeit simultaneously derided—consumer growth was not delivered. Page 100 of the Red Book assumes a jump of 0.7%, from 0.5% this year to 1.2% next year, in household consumption, even though it simultaneously predicts unemployment increasing in 2013-14 and the claimant count increasing from 1.58 million to 1.63 million in the same period. The Chancellor also failed to inform the nation that 400,000 disabled people on severe or enhanced disabled benefits will now have to pay council tax for the first time ever.
In conjunction with what I illustrated earlier, these are demand-sapping policies on a monumental scale. Are they being taken because the Government fear that their other policies will bring about inflation? Are they attacking demand deliberately in order to control inflation? We know that Mark Carney, the new Governor of the Bank of England, will be constrained by a 2% inflation target. However, we also know that inflation crept up to between 2.5% and 3%—around the 2.8% mark between January and February—this year. That inflation rise, at the same time as pay freezes, local real-terms pay cuts and benefits reductions, has seen families subject to an unprecedented cost of living crisis. According to uSwitch, Britons collectively owe £637 million to energy firms— £159 million more than last year’s projections. Some 20% of all energy customers surveyed are in debt, a figure that has risen by 14% since last year.
In conclusion, with falling disposal income levels and increasing household outgoings, the temporary retail or consumer growth we are currently seeing is very small. As well as being derided in the first place by Government Members as the wrong type of growth, given the Government’s other policies, it is unsustainable in the medium and long term. The Budget is fundamentally unfair: it does not address growth, it doubles the debt and it does not deal with the deficit—it actually makes it worse. It fails on all the original criteria set out by the Chancellor in June 2010.
Stewart Hosie (Dundee East) (SNP)
May I start by making two observations? This ought to be the keynote debate on the Government’s annual flagship Finance Bill, but there are only five Government Members in the Chamber—two Ministers, a Whip, a Parliamentary Private Secretary and one solitary Liberal, who I suspect will leave at the earliest possible opportunity—none of whom is now standing to speak. It is a terrible indictment of the Government that even the normal cheerleaders are not here to back the Chancellor. That probably indicates that many Government Members consider the Budget to be as miserable as we do.
I was struck by the fact that the hon. Member for Redcar (Ian Swales) chose to defend the millionaire tax cut. One reason he gave rather explodes the “we’re all in it together” myth, which, as someone else has said, is rarely used by Government Members these days. Even if this year’s Red Book is right and the cost of the millionaires’ tax cut is only £500 million in the next five years, I think we would all argue that if £500 million is going spare it would be better to spend it on direct capital investment, capacity for the future, and job and GDP creation, rather than give it to people who are already wealthy.
The Finance Bill is a consequence of the March Budget. Apart from some measures I welcomed relating mainly to business tax, it was a pretty miserable Budget. It was miserable because, by and large, it merely continued with the Government’s failed policies. We know they have failed because the Chancellor told us that they have failed—they failed by every measure he set. The net borrowing requirement, which was due to fall to £92 billion, has gone up to £121 billion. The national debt, which was due to peak at 92.7% of GDP—£1.36 trillion—in 2014-15 on the treaty calculation, is now expected to peak, on the same calculation, at more than 100% of GDP. National debt on the treaty calculation is due to reach 100.8% of GDP, or £1.58 trillion, by 2016-17. Therefore, when we hear that the deficit is lower and debt will fall, it does not really bear any scrutiny, even by the Chancellor’s and the OBR’s own numbers. The Chancellor has failed to meet his own targets on his original time scale for his own fiscal rules: that the structural current deficit should be in balance in the final year of the five-year rolling programme, and that debt should fall as a share of GDP. Of course, according to the OBR those objectives were highly dependent on GDP growth, which, as we have seen in previous Red Books, was based on incredible, unbelievable, unmet and frankly unmeetable rates of business investment growth.
Let us remind ourselves that in 2010 the Government suggested that business investment had to grow by between 8.1% and 10.9% a year for five years. By the time we got to the OBR’s fiscal outlook the next year, growth in business investment had actually turned negative, which was extraordinary, and so it went on year after year after year. They were at it again this year, forecasting future business investment rates of between 6.4% to 10.2% from 2013 onwards. I suspect that nobody, even in Government, believes that those targets will be met. The Chancellor, or some other poor Minister, will be back at the Dispatch Box at some point in the near future explaining why this was all somebody else’s fault.
The Chancellor also failed because the Budget and the Bill continue down the path of deep cuts and tax rises. I am sorry that the hon. Member for Cities of London and Westminster (Mark Field) is no longer in his place. He gave a customary thoughtful speech, in which he suggested that perhaps we had all not been honest and that the cuts should be deeper. However, last year’s Red Book told us that the total cost of fiscal consolidation—discretionary consolidation; that is, tax rises and cuts—would be £155 billion a year from 2016-17 onwards. As I pointed out on Budget day, that 2016-17 figure of £155 billion of discretionary consolidation, tax rises and cuts had somehow been deleted from the Red Book, and there was no forecast for 2017-18.
It is fair to say that the Government have made a U-turn and that the fiscal tightening will continue to be the equivalent of approximately 7.5% to 8% of GDP stripped out of the economy in tax rises and cuts. It is extraordinary that they think they can cut their way to growth at the best of times, but that they think they can do so while pursuing a policy which, according to their own numbers, will see fiscal consolidation, discretionary tax rises and cuts of the equivalent of between 7.5% and 8% of GDP in demand stripped out of the economy. If they can cut their way to growth on the back of that, they should be given a Nobel prize. The problem is that none of us believes it will happen. Of course, the overall impact of 4:1 cuts to tax rises tells us exactly who will bear the brunt of these austerity measures.
I said at the beginning that I do not want to be wholly negative—there were some measures to be welcomed. Earlier, we discussed briefly one of the most potentially significant measures, which is the tenfold increase in the annual investment allowance to £250,000. That is for two years only, however, and the Government need to understand that even at this level investment decisions may take some time to be agreed before businesses are able to use the benefit. I therefore ask the Government to look again at the temporary nature of the increase. While we would certainly argue that it makes sense to have targeted tax allowances such as this—it makes sense for businesses to be allowed to keep more of their own money to invest, particularly when banks are still refusing to take the full share of the risk they should take—the real problem with the Budget, the Red Book and the Bill is that the Government continue to set themselves against direct capital investment when the economy needs it most, which is right now.
To understand just how damaging that is, let me give one example: the UK Government argue that they have given Scotland an additional £279 million in capital over the next two years. It is debateable whether that is true, as I will come to, but even if it is, it would still imply a 20% real-terms cut to the Scottish capital budget over the four-year spending review period. But it is not real capital expenditure: £266.5 million is classified as a financial transaction, meaning that it can be used only to fund loans or equity investments. That is a straitjacket. It is accompanied by £103.5 million cut in hard cash from the resource budget, half of which— £56 million—will be cut this year from already agreed budgets. This is not just daft; it is economically really, really silly. I despair that the Government think it makes sense to be putting administrations—public bodies of one sort or another—into a straitjacket, while removing hard cash and discretionary spending.
Pamela Nash (Airdrie and Shotts) (Lab)
Before the hon. Gentleman moves too far on from capital spending, will he say why his party in Scotland is imposing even more draconian cuts on local government than the parties in government here, cutting public sector construction projects in Scotland and contributing to the 40,000 construction jobs lost in Scotland since his party took power?
Stewart Hosie
The problem with that question is that it comes straight from the Labour party central office briefing note. The Scottish Government quite rightly re-profiled revenue spending into capital to make up for the capital cuts from the UK Government. We did that because we recognised that—I think there is unanimity on this—direct capital investment had a 1:1 impact multiplier in terms of GDP growth. That is extremely important, because the problem is that we do not have enough economic growth, so the Scottish Government were right to re-profile revenue into capital spending.
As I said earlier, the 4:1 ratio of cuts to tax rises under this Government, plus their smoke-and-mirrors approach to direct capital investment, shows just where their priorities lie, and it is not with people, jobs or growth. We can all probably agree that plan A has failed, and with the UK still teetering on the brink of a triple-dip recession the Chancellor seems to want to continue to do the impossible, which is to cut his way to growth. It has not worked and it will not work; and this Finance Bill will not help.
The Bill does, however, make provision for personal tax changes, and the increase in the basic rate threshold to £9,440 is welcome. The Government are right to try to take as many people as possible on low and modest incomes out of tax, and the savings from that increase, added to the £326 of savings from basic rate taxpayers, whose personal allowance has risen from £6,475 in 2010 to £8,105 last year, makes sense, but that is only part of the personal tax story. As I have said, the Government are also foolishly ploughing on with a tax cut for millionaires, which at their own conservative estimate will cost £500 million.
It is those in the middle who are really being squeezed. The tax relief in terms of the 40% band used to be £37,400, but that was decreased to £34,300 last year, so for every £326 changed up in the Budget, at 20p in the pound, people have had to shell out an extra £560 at the 40p rate, before this year’s changes. So although the change in this year’s basic threshold is welcome, we must recognise that the Chancellor pulled the same trick in the middle again by pre-announcing another cut to the 40% threshold down to £32,010 last year. That means that in three years the Government have taken the proportion of taxpayers paying the 40% rate from 10% to 13% of the total taxpaying public—up 670,000 in three years. Over 25 years, the proportion has doubled to 2.1 million extra people now paying a tax rate that was previously only for the rich. With hundreds of thousands of people now paying a 40p tax rate that was never designed for low and middle incomes, it is safe to say that the middle is not so much being squeezed by the Government as garrotted.
Ian Swales
Does the hon. Gentleman recognise that the first two changes in the 40p band were to ensure that 40% taxpayers only got the same amount out of the threshold increase as a basic rate taxpayer? In other words, it was a measure of fairness across the spectrum.
Stewart Hosie
I recognise that an increase in the basic threshold from £6,400 to £9,400, which is a £3,000 rise, implies a saving of about £600, but a fall in the 40% threshold from £37,400 to £32,100, which is £5,000, implies a cost of £2,000. If one was paying 40% before, they still will be, while many hundreds of thousands more who were not, and who ought not to be, now will be. I do not see the fairness that the hon. Gentleman speaks of. I suspect that when we get to the next election, that might be part of the Liberal party’s campaign against their current Tory friends.
I want to turn to one of the most damaging small parts of the Finance Bill, which is the planned increase in air passenger duty. APD has become increasingly unpopular in the aviation industry and is now the most expensive in Europe. We know that standard rates vary from £13 for a short-haul flight to £94 for a long-haul flight. The rates were increased by RPI on 1 April this year, as announced in the 2012 Budget, and will be subject to a further increase by RPI next April, as announced in this Budget. We have consistently made the case for devolution as a means to improve connectivity and to give the aviation sector a competitive edge.
As the Minister will know, the Scottish Government Deputy First Minister wrote to the main airports in 2012 reaffirming our intention to press the UK Government to devolve APD as soon as possible. We do so because it makes economic sense. The study “The economic impact of Air Passenger Duty”, published only this February, confirmed that. It suggested that abolishing APD entirely could boost GDP by 0.46% in the first year, with benefits continuing to 2020, and that the GDP boost to the UK economy would amount to at least £16 billion in the first three years and result in almost 60,000 extra jobs over the longer term. We would argue, therefore, that the time for continually increasing APD has gone and that the time to devolve it is now.
We also welcome the support of Scotland’s four main airports for the devolution of APD. It is safe to say, however, that we have become increasingly frustrated with the UK Government’s continuing prevarication and the impact on Scotland and Wales of the further increases in rates from April this year and April 2014. To be fair, the Government have recognised, in devolving APD to Northern Ireland, that a one-size-fits-all policy might not be appropriate, but increasing APD throughout the rest of the UK and not devolving it demonstrates that the Government do not understand the differences in the UK aviation sector, the connectivity challenges faced by Scotland or the needs of passengers. This is a matter that we hope to return to in the Committee of the whole House.
The Finance Bill is utterly inadequate and ignores the pressing need for investment and growth. I am happy to say that the Scottish National party and Plaid Cymru will oppose it tonight.
Frank Dobson (Holborn and St Pancras) (Lab)
Whatever else can be said, it is quite clear that this Finance Bill will not sort out the public finances. As a result, we have got all sorts of efforts to distract people’s attention.
We have got the Work and Pensions Secretary going on about new punishments for people involved in benefit fraud. I am against benefit fraud, but I am against all fraud. Let us try to get things into perspective. In the last year for which figures are available, benefit fraud cost £1.2 billion. A recent study by Oxfam says that in the last year for which it has figures, tax fraud cost the taxpayer £5 billion. Needless to say, the Treasury said it did not recognise that figure, which is officialese for: “I can’t think what to say; I’ll have to find out what the boss says.” However, the Treasury has to acknowledge—because it produced this figure itself—that in the last year for which official figures are available, £4 billion was lost to tax fraud. It also produced figures for that year showing that tax avoidance—not tax evasion—cost the taxpayer £5 billion. There was a further loss of £4 billion for what is called “non-payment”—in other words, businesses making sure that when something went wrong, it was not the taxpayer who got any of the money. That makes a total of £13 billion lost in one year, mainly as a result of the desire and effective efforts by the rich and big businesses not to pay tax. That means that the taxpayer was swindled out of £13 billion in one year alone.
To be fair, that is partly because this House is notoriously bad at producing tax laws that actually work. That might be partly an effect of the fact that for years the Treasury has been advised on such matters by the very banks and accountancy firms that are doing the swindling in the first place. However, there is little real conviction in the idea that Her Majesty’s Revenue and Customs will do a good job of getting the money that we have voted should be taken. In fairness to HMRC, tax avoidance has become a major British industry. It is not a sideline of the big four banks or the big four firms of accountants; it is a major part of their industrial activity. They are not exactly big taxpayers themselves: in one year, Barclays paid just 1% of its profits in tax.
Then there is the massive and disgraceful involvement of the British financial sector in tax havens round the world, usually in British dependencies. When the British empire was at its zenith, the slogan was “Trade follows the flag”, and it still does, because the British dependencies, flying the British flag, are the major tax havens all over the world. The mighty British empire has been reduced to a scatter of sordid tax havens, where most of the fiddling is done by British banks and British firms of accountants. They are there helping the tax avoiders and helping the rich freeloaders to avoid the tax they should be paying here and in other countries. Let me give one or two examples. Barclays has just over 1,000 subsidiaries, 36% of which are located in tax havens. HSBC has 1,500 subsidiaries and, again, 36% are in tax havens. The Royal Bank of Scotland is slightly better—only 31% of its 1,300 subsidiaries are located in tax havens—while just 21% of Lloyds’s subsidiaries are located in tax havens.
Ian Swales
The right hon. Gentleman is making a powerful speech, but I am sure he is not suggesting that all this has arisen in the last three years. Can he remind the House of any steps that his Government took in this regard and does he welcome the steps that this Government are taking? They have resulted in, for example, Barclays closing down its structured capital markets department, which was basically about tax avoidance.
Frank Dobson
I never said for a minute that it started recently. It has been going on for donkey’s years. I am not sure about the Lib Dems, but I cannot remember an organisation when Labour was in government called Tories in Favour of Stopping Tax Avoidance. Perhaps the minutes will be produced by someone, but it seems extremely unlikely, because everything the Tories ever said when they were in opposition was about Labour being too nasty to the finance industry and proposing things that might damage it. So we trundled on, until the finance industry damaged the rest of us. It is worth remembering that the banks’ wrongdoing has cost us £700 billion in lost production since the crash. That is what we have all lost.
These British banks and firms of accountants are not just organising tax avoidance in the tax havens for all the swindlers. We now know—from prosecutions and from agreements that they have come to with the American authorities—that they have been organising money laundering from massive drug dealing, gun running, people trafficking and busting sanctions on places such as Burma.
I think the British banks should be doing something a bit different. I think they might possibly have done a bit of investing in this country. In the past, small businesses all over the country could go and see their local bank managers at one of the big banks and talk to them about their problems. They knew one another and knew what their prospects were. People could borrow money that way, and it worked. Then the banks started centralising all the funds, so nothing is left with the local bank manager and local firms now have to be interrogated by an algorithm—that is what it boils down to—in the banks’ headquarters. They have not been investing in this country. We have to ask ourselves why a large proportion of the industries that were privatised are now owned by foreign owners, such as Électricité de France or the Australian outfit that owns Thames Water. Could the British banks not have invested in British businesses? Was there not enough profit for them? Does that mean that the profits in the tax havens and from all sorts of derivatives activities were going to raise them more money? That may be so, but what has happened demonstrates just how awful the performance of the British banks and finance industry has been.
I do not think this Finance Bill, any of the proposals the Government have put forward or even the one or two they have started implementing reflect the scale of wrongdoing that needs to be put right—the swindling that involved British companies and the damage that does to us as a trading nation with, until recently, a reputation for honesty and fair dealing. At its core—I say this with some care—this is a corrupt set-up. We have a banking industry and an accountancy industry that are involved in criminal and semi-criminal activity all over the world, yet we say to countries such as Bangladesh, “There’s too much corruption in your country.” If we are going to start trying to sort out corruption in other places, it is about time we did it here and where British companies are operating. We need transparency, and we certainly do not need tax havens, especially those that fly the British flag. Their objective is not transparency but the complete opposite: it is to be as obscure as is humanly possible in order to keep the tax authorities out.
Another point that is constantly made is that, if we were to change the rules on banking and accountancy, the very clever people in the City would simply get round them. That is unacceptable. Why should such behaviour be acceptable in the finance industry? We would regard it as totally unacceptable if the building industry said, “You can rely on us to get round the building regulations,” if the aviation industry said, “We can get round the safety rules,” or if the pharmaceutical industry said, “We won’t carry out the proper checks that are required. We can get round those rules.” We ought to regard it as totally unacceptable when people representing the finance industry say, “Whatever you do in the House of Commons, we’ll get round your rules.”
Kelvin Hopkins
The hon. Member for Redcar (Ian Swales) suggested that some people ought to go to prison for such behaviour. Does my right hon. Friend agree that that might concentrate a few minds?
Frank Dobson
It certainly should. I am astonished that no one in this country has yet been prosecuted for the fraud involved in the LIBOR rate-rigging, including the British Bankers Association, which was, after all, running the LIBOR system. People were defrauded, so why has no one been prosecuted? I do not know, but someone should be.
Another excuse for not sorting out the problems in our banking industry is that we must not go it alone because that would put the industry at a disadvantage compared with others. We are told, for instance, that we cannot possibly be the first country to introduce a financial transaction tax—a Tobin tax, a Robin Hood tax—because to do so would put our banks at a disadvantage. However, Germany and France have now proposed an EU-wide financial transaction tax, yet our Government still say no. What are they frightened of? The rate of tax proposed on derivatives transactions that the 11 countries led by Germany are establishing in Europe is 0.01%. Apparently, our financial services industry is so pathetic that it would be driven to ruin by a transaction tax rate of 0.01%.
In fact, we already have a transaction tax in this country: it is called VAT. Nearly every other business in this country is paying a transaction tax of 20%. If everyone else is deemed capable of paying 20%, why should the financial services industry be deemed incapable of paying 0.01% on its transactions, 85% of which are carried out within the industry, between its various constituent parts, rather than with anyone else. That is pathetic, and it is about time that we recognised that a substantial amount of money could be raised for the taxpayer in this country, even at a rate of 0.01%.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the right hon. Gentleman remind the House what the Labour party’s policy is on the so-called Robin Hood tax? My understanding is that the shadow Chancellor is opposed to introducing one.
Chris Leslie
Let me make it absolutely clear that we should have a Government who are arguing for a financial transaction tax. We need to ensure that we get New York, in particular, on board, but we now have evidence of what will happen in the European Union, and there is no doubt that there is a very strong case for such a tax.
Frank Dobson
Yes, indeed. I have been advocating such a tax for some time, and I shall continue to do so.
I have asked Treasury Ministers several times how much money would be raised for the taxpayer by a 0.01% tax on financial transactions, but the great Treasury mandarins have always said that they have not worked out the figure. If that is the case, how can they possibly conclude that the money that would have to be paid out would damage the finance industry? If they do not know how much such a tax would raise, how can they know how much the industry would have to pay out?
We continue to find ourselves in the absurd situation in which the banks and their friends, and the big accountancy firms and their friends, are advising the Government on the taxation system that should be applied to them. We do not—as far as I know, anyway—have criminals advising the Home Office on criminal law, and I do not think that an industry with such a disreputable record should be advising the British Government on how it should be dealt with.
David Rutley (Macclesfield) (Con)
It is a pleasure to speak in today’s debate. This week, of all weeks, is an appropriate time to reflect on economic and fiscal policy, and particularly on the legacy of the free enterprise revolution led by the great Lady Thatcher. There is much in the Bill that will continue this Government’s work to revive the successes of Lady Thatcher’s approach to business, free enterprise and growth. I was fortunate enough to meet Lady Thatcher on the general election nights in 1983 and 1987. She inspired me and many others on this side of the House. She was a towering figure who was well respected across the world, and she richly deserved those election victories back in the 1980s. More than anything, she understood that individuals and Governments needed to live within their means, and that businesses were best placed to create jobs and deliver economic growth. She trusted them to do that, and created the right conditions for them to succeed. That is the proud legacy that the Bill seeks to build on. Indeed, there is a clear focus on freeing up small businesses from the burdens of tax.
Frank Dobson
Is the hon. Gentleman aware that the average economic growth during the time that Mrs Thatcher was Prime Minister was no higher than the average economic growth under Harold Wilson or Jim Callaghan?
David Rutley
The debate is about sustainable economic growth, and if we look at the record of the 13 years of the previous Labour Government and their promise of no return to boom and bust, the facts speak for themselves.
Andy Sawford
What is it about 63 consecutive quarters of economic growth that the hon. Gentleman does not recognise as a period of prosperity in this country?
David Rutley
As a member of the Treasury Select Committee, I have had the privilege of interviewing and putting to the test various former permanent secretaries. Lord Turnbull springs to mind. He worked in the Treasury under the Labour Government and supported Labour Ministers, and he is on record as saying that after those 63 successive quarters, what he called wishful thinking crept in—
David Rutley
According to the permanent secretary at the time, wishful thinking was prevalent across the Labour Government, and it led to the hyperbole that it was possible to bring about an end to boom and bust. Of course that did not come to pass; none of that Government’s work did. We are about sustainable growth and putting forward the positive action plan that was included in the Budget—[Interruption.] If the hon. Member for Airdrie and Shotts (Pamela Nash) wishes to intervene, she should please do so.
Pamela Nash
The hon. Gentleman says that my party is guilty of wishful thinking. At the moment, there is no growth in this country; we had 63 quarters of consecutive growth. How can he possibly compare the two?
David Rutley
If the hon. Lady had listened, she would know that I did not say that. The phrase about wishful thinking came from Lord Turnbull—one of Labour’s permanent secretaries, speaking for himself. The groupthink that pervaded the Treasury at the time led to the tragic results that we are having to clear up, and the Bill is taking steps to do that.
The Bill is a fitting tribute. It will promote competition and reduce barriers to entry for the ambitious and aspirational people of this country, who simply want the chance to work hard, compete and get on. The Chancellor’s Budget speech made it clear that the Bill will be followed by future measures that continue these efforts to free enterprise and remove the roadblocks to economic growth. That is a clear commitment from the Government.
It is worth reflecting on what enterprise actually means. It does not mean that people are on their own as some critics allege. As John Donne wrote:
“No man is an island, entire of itself.”
He could have written the same thing about enterprise, because free-market economics is not an atomistic pursuit, but recognition that we all advance by pooling our comparative advantages in a common free economy. We should remind ourselves of the common value and purpose of enterprise as we lay the foundations for future growth. It is not about state intervention, as Opposition Members suggest.
Business transactions must involve at least two parties—the supplier and the consumer—and the very word “enterprise” is derived from joint undertakings: enter from the French “entre”, meaning “between”, and “prise” from “prendre,” to take. It is suggested, perhaps rather dubiously, that President George Bush once said, “The problem with the French is that they have no word for entrepreneur.” Forgive my French, Mr Deputy Speaker, but although we do not have a word for entrepreneur, we on the Government Benches understand the meaning of enterprise, which is literally the joint seizure of opportunity for mutual advantage. The Bill sets out how the Government will encourage it.
Enterprise is voluntary, and therefore it carries for suppliers involved in business the element, and excitement, of risk that consumers for the service or product may not be found. Suppliers need to be flexible to survive and thrive in competitive markets where consumers, even usually loyal ones, are free at any time to say no. That is why the Government need to ensure that there is the freedom to be flexible and the confidence to be bold for enterprise to thrive and succeed.
Andy Sawford
What specific measures in the Budget will give enterprise in my constituency the confidence to be bold?
David Rutley
In 2014. [Interruption.] We have to take a stepped approach to rectify the changes Labour put through. The allowance is important and will be welcomed, and the other measures we are taking on the supply side, such as the reduction in corporation tax, will all help to create a platform for economic growth.
Sheila Gilmore
Is the hon. Gentleman aware that the enterprise allowance will be partly funded by the substantial increase in national insurance contributions that employers and employees will pay as a result of the flat-rate pension? That has been brought forward by a year—even though the Select Committee was told that it would be logistically difficult—to produce that extra income. In fact, the Government are just moving things around and a lot of people will find themselves a lot worse off when those higher national insurance contributions kick in.
David Rutley
It is sad to see such gloomy faces on the Opposition side of the Chamber. I accused the shadow Minister of being a bit Eeyore-like and I think it is catching on the Opposition Benches. Labour Members should cheer up a little and look at the reaction to the Budget. The Federation of Small Businesses says that it
“asked for a budget for small businesses and this is what has been delivered. This Budget opens the door for small firms to grow and create jobs.”
Andy Sawford
Would the hon. Gentleman write me a letter, which I could circulate among the young people in my constituency who are desperately trying to find work and the people hit by the bedroom tax who face poverty and homelessness, advising them to “cheer up a little”? Would he write to me in those terms? I would gladly circulate it and we could see what my constituents think.
David Rutley
In a spirit of co-operation I suggest that for a change the hon. Gentleman leaves Croydon—[Hon. Members: “ It is Corby.”] Wherever it may be —beginning with a C. The hon. Gentleman should come up to Macclesfield and see what we are doing with apprenticeships and our local college to encourage young people to get into work. It is about human endeavour and getting on with the job, not moaning and groaning as the Opposition are doing.
The Forum of Private Business speak of the Chancellor being “spot-on” with his “basic common sense” decision to freeze fuel duty. I hope Opposition Members at least welcome that. The Association of Convenience Stores welcomes measures that
“will benefit consumers and reduce some of the pressure on local shops.”
Barbara Keeley (Worsley and Eccles South) (Lab)
What would the hon. Gentleman say to the convenience stores in my constituency who are going to lose £4 million from our economy in Salford when the bedroom tax hits? That is £4 million less that people will have to spend in convenience stores and local shops. That is the real hit.
David Rutley
We have to tackle the deficit that faces this country. We know that welfare payments have spiralled out of control and we recognise that there is huge demand for scarce rooms. We have to address those things. I will give the hon. Lady a chance to say what she would do to tackle the welfare budget, but I have heard nothing. Does she want to stand up and tell us what Opposition policy will be?
Barbara Keeley
I will happily respond. We would actually bring some growth to the economy and get some of our young people back to work. We would use a levy on bankers, not in the way that the Government propose in the Bill, but to build houses and to get young people back to work. We would guarantee work for young people who have been unemployed for 12 months or more. Going back a few years—I do not think the hon. Gentleman had been elected at that point—we had the future jobs fund in my constituency and in Salford. That gave hundreds of jobs for young people. Then there was a future and they had hope; now they have nothing.
David Rutley
Much as I enjoy going to Salford and the hon. Lady’s constituency, some honesty is required about how growth should be funded in the north-west. I am sure Mr Deputy Speaker has a view on that too, but he cannot express it in the Chamber. Under the previous Government, in the 10-year period to 2010, 100,000 jobs were created in the public sector in the north-west. During the same period, there was a net reduction of 25,000 jobs in the private sector. That is completely unsustainable. What we are trying to do in the north-west and throughout the whole economy is to have a more sustainable approach to job creation, which has led to the creation of more than 1 million jobs in the private sector. That is a far better record than anything from Labour when it was in power.
David Rutley
No, I have given way enough. We have all enjoyed the debate, but I shall now finish my speech.
In Macclesfield, we have one of the highest rates of self-employment in the UK, and among women Macclesfield has the highest rate of self-employment in the north-west. This year, the Budget was above all for small businesses and entrepreneurs like them. The Bill is the first step to realising the series of measures that will be delivered by the Government, such as the widely welcomed—at least on the Government Benches—employment allowance.
Not just small businesses welcome the return to a solidly pro-enterprise, pro-competition, lower tax environment. The Institute of Directors and the CBI both welcomed the clear progress in the Chancellor’s continual, and continuing, efforts to lower corporation tax. Clause 4 of the Bill provides for a corporation tax rate of 21% in financial year 2014, which is the lowest in the G7. Perhaps it is part of Lady Thatcher’s legacy that these days clause 4 is something to be celebrated as useful to the economy and progressive for growth.
The Chancellor has gone one better. Under clause 6, we will see Britain’s main rate of corporation tax reduced to just 20% in financial year 2015, the lowest in the G20. This is a clear, determined agenda to incentivise business activity for jobs and growth. It is precisely that clarity and determination that gives businesses certainty and confidence that enterprise is worth conducting in the UK, and that, as the Chancellor said, Britain is once again open for business.
It is a mark of how vastly over-complicated our tax system has been allowed to become that there are far too many opportunities to avoid and even evade taxation, and that very complexity has made a general anti-abuse rule inevitable. Of course, the Government are well aware that they must take great care that such a rule does not undermine the certainty and confidence in the tax system that we need. It would be sad if the GAAR became an excuse for HMRC to become sloppy when drawing up future tax rules in the knowledge that, if it did not get the desired results, it could always apply the rule. I am sure that the Treasury is determined to avoid such a situation.
I am pleased by the Government’s commitment to simplifying the tax system at the same time that the anti-abuse rule is being planned. Fighting complexity with complexity is not a long-term solution, so I look forward to progress on simplification. It is encouraging, and to the Chancellor’s credit, that in just three years the Government have taken the UK from near the bottom of the KPMG league table of competitive tax regimes to the top. That is progress, and I applaud it. Ministers should also be praised for not only explicitly recognising that there is yet more to be done, but setting a path for getting that done, not least by increasing the personal allowance to £9,440 this tax year, with the clear target of hitting £10,000 next year.
The Bill includes a significant commitment under schedule 14 to research and development credits, even for those companies with no corporation tax liability. The Chancellor’s decision to increase to 10% the rate of credit for above-the-line R and D, as well as the new £700 million annual patent box, will help to tackle under-investment in knowledge-based industries. That is important for the life sciences sector, which is critical to Macclesfield’s local economy and vital for our national competitiveness. Those measures are in addition to the tenfold two-year increase in the annual investment allowance for qualifying investments in plant and machinery from £25,000 to £250,000, which will boost much needed business capital investment.
The global race is not a sprint, but a marathon, and the Government are wise to recognise that it will be easier for businesses to run without hurdles and barriers in their way. To be blunt, if we want businesses to thrive, we need to tax them less and minimise the bureaucratic burden. The result of that approach is real sustainable growth and new employment opportunities. This is not about Thatcherite dogma; it is actually happening and it is delivering positive results, such as by enabling private sector employment growth of more than 1 million jobs since 2010. That is a great achievement for the Government—
David Rutley
They are real jobs—not public sector jobs funded by taxpayers’ money, but ongoing and sustainable private sector jobs.
Glyn Davies (Montgomeryshire) (Con)
I congratulate my hon. Friend on making a positive speech and recognising that we have a coalition Government who are determined to clear up the mess made by the previous Government. All we hear from Opposition Members is whingeing and whining, and talk of more borrowing and debt, but that would exacerbate the problems that they created.
David Rutley
I thank my hon. Friend for those comments. We may be hearing Eeyore noises from Labour Members, but at least we have now had a sense of Tigger.
David Rutley
I cannot, because Mr Deputy Speaker is giving me dagger looks, so I need to make progress and finish my speech—[Interruption.] I know him well and he is not always like that.
The Bill meets the ambitions of those who want to work hard and get on. It cuts taxes and incentivises business to create jobs and economic growth. It is a plan of action and a signpost giving a clear direction of the work yet to be done. That work will be done by this Government, and I give the Bill my full support.
Kelvin Hopkins (Luton North) (Lab)
I cannot resist commenting on one of the points made by the hon. Member for Macclesfield (David Rutley). He suggested that businesses are somehow more competitive because we have a better tax regime, yet our trade deficit is in a terrible state, and getting worse. If everything is so brilliant, we should be doing better on international trade.
Frank Dobson
While my hon. Friend is commenting on the speech made by the hon. Member for Macclesfield (David Rutley), was he somewhat taken aback to discover that nurses, doctors, firefighters and police in Macclesfield are apparently not occupying real jobs?
Kelvin Hopkins
My right hon. Friend makes a good point: when we go to a hospital, we find that no one is there, because those in such jobs are not real people. Indeed, I might add Members of Parliament to that list.
The hon. Member for Cities of London and Westminster (Mark Field) was desperately trying to be positive about the Budget, but in the process he effectively damned the Chancellor with faint praise. If we had pressed him hard enough, I think he would have conceded most of our points.
The Bill will clearly do nothing to transform our economy. We are in a desperate state—an ongoing recession. The Chancellor says that his Budget is fiscally neutral, but when 2.5 million people are unemployed and we have low or negative growth, we do not want a fiscally neutral Budget. We should have had an expansionary Budget to promote growth, but of course even a fiscally neutral Budget could inject growth into the economy by raising taxes and spending more, rather than doing the opposite. If taxes on businesses and the wealthy are reduced, they tend to save their money—indeed, they put it in tax havens—whereas if ordinary people are given jobs, the first thing they do is to spend their money, and that money goes directly back into the economy and starts to generate demand through the multiplier.
The hon. Member for Cities of London and Westminster was right that forecasting is difficult. I remember that in 1990—I am older than everybody else in the Chamber—when The Sunday Times carried out a survey of forecasting organisations, it found that the London Business School was bottom of the league, scoring nought out of 10 for its forecasts, although of course that was the forecasting body adored by the Conservative Government under Mrs Thatcher. The best forecasts were by the Cambridge Economic Policy Group, a left-leaning Keynesian group, which got six out of 10 to come top of the league. The then Government were so annoyed by the Cambridge group that they took away its Government grant because they did not like people telling them that they were wrong, although they were.
Demand for the things that people produce is a crucial factor if an economy is to succeed, because although Governments can cut taxes for businesses and introduce all sorts of supply-side measures, if no one is buying anything, the economy will not grow. An equally crucial factor for sustaining that demand is an appropriate exchange rate. Successive Governments have ignored the exchange rate at their peril, but there have been times when the depreciation of our currency has had dramatic results, and I can cite three examples under a Conservative Government. Following Golden Wednesday and the collapse of the exchange rate mechanism, the economy grew strongly after a substantial depreciation. By the time that 1997 came along, the Conservatives were still being condemned for the collapse of the housing market and the people voted Labour—thank goodness for that—yet the Labour Government benefited from the strong demand generated by that depreciation. In 1979 Mrs Thatcher was praised for her economic policies, but the 1979 Budget, masterminded, if I can describe it like that, by Geoffrey Howe, resulted in a catastrophic collapse in demand. A fifth of manufacturing disappeared and unemployment soared to 3 million. It was only when those policies were reversed that there was a recovery, and on Nigel Lawson’s watch—I do not necessarily agree with everything he did—the pound depreciated by over 30%. Again, the economy grew strongly and unemployment came down.
Going back even further into history, in the 1931 crisis, a Labour Government mistakenly tried to sustain sterling on the gold standard, and tried to keep its parity up. The Government fell apart, and effectively a Conservative Government with a nominally Labour Prime Minister came in straight afterwards. The first thing they did was take the pound off the gold standard and depreciate, and the recovery began. That was only part of it; other factors were necessary to sustain recovery in the 1930s. We had to spend a lot of money, and towards the end of the ’30s the country built thousands—indeed, millions—of houses, and that was how we recovered. That is what we ought to do now.
In other countries, Germany built arms and autobahns; in America, there was the new deal—spending money on all sorts of public works, which created the demand in the economy that brought about recovery. It was not fiddling around with tax rates and supply-side measures. That did not work then, and it will not work now. The exchange rate is therefore absolutely crucial, and the exchange rate at this time is too high. Part of our recovery should depend on a significant depreciation. An erudite and informed book by my friend John Mills has been written about this, and I have quoted from it in the Chamber. It makes a detailed case for such measures.
The trade statistics are disastrous, and some of us have been worried about manufacturing for a long time. Our manufacturing sector is about half the size of the German manufacturing sector as a proportion of our economy, which is disastrous. We should be a similar economy to Germany in many ways. Historically, we have been very similar in all sorts of ways, but our manufacturing has collapsed. That was partly because in 1997, when Labour came to office, there was at the same time a substantial appreciation of the pound, which began to damage manufacturing. We were sustained by an asset price bubble, which carried on, and thank goodness, we had a relatively strong economy for some time. However, manufacturing did not do well, because of the relatively strong pound. It was only the crisis of 2008, when there was a significant depreciation, that saved us. Had we been stuck in the euro, we would be like Spain now—it would be absolutely disastrous—so we must applaud my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) for keeping us out of the euro, despite pressure from the then Prime Minister. I was one of those who supported my right hon. Friend very strongly at the time.
Jonathan Edwards
I agree with a number of the hon. Gentleman’s points. The Government talk a good game about rebalancing the economy geographically and sectorally, and about an export-led recovery, but they will not achieve those objectives unless they tackle the exchange rate.
Kelvin Hopkins
Indeed. We have to use all the weapons and measures of macro-economic policy to make sure that we recover. Fiddling around with supply-side measures is no doubt the sort of thing that the London Business School talked about in 1990, but it will not solve our problems.
The macro-economic measures that we must take include, first, tackling the exchange rate. Secondly, we must inject demand through additional public spending, and we can pay for that in various ways without necessarily increasing the deficit. We could raise taxes on the rich very substantially. For example, we could begin seriously to close the tax gap and collect the tax that has been avoided or evaded, perhaps sending a few corrupt bankers to prison in the process. That would concentrate their minds, as I said earlier.
We need to begin to spend in areas of high labour intensity. If we can get people back to work quickly by spending in those sectors—construction and the public services, which have been cut by the Government—we can bring down unemployment. People pay tax when they are in jobs, they do not claim benefits, and the economy begins to recover. At the same time, we can build millions of houses that we need, particularly local authority houses, and we can provide all the nurses we need in hospitals. Hospitals are under stress because of a lack of staff on the wards. We can develop other areas too: local authority services, children’s services, and social services for the elderly, all of which are under stress and are things on which we should spend to generate more employment. We generate employment directly by spending money on areas with high labour intensity.
There is another great advantage of spending money in such areas. As my hon. Friend the Member for Swansea West (Geraint Davies), who has left the Chamber, said, the rich do not spend money: they put it in banks and tax havens. But ordinary people, especially if they have been unemployed, spend every single penny of their money on supporting their families, dealing with their debts and so on. They spend their money. They have what the economists call a high marginal propensity to consume. We should give as much money as possible to those who have that high marginal propensity to consume, not to those who stuff it in banks and foreign tax havens. That would help to regenerate the economy.
Another great thing about public services and construction is that they put demand into the domestic economy, not into the foreign economy. If I were given extra cash, which I do not need—I think I should pay a bit more tax—what would I do? I would have another foreign holiday. I might buy another case of French wine. That does not help our economy at all. But if construction workers have extra cash, they go out and spend it in the shops on food, their homes and their family. They spend it in the domestic economy. They do not, as far as I know, buy large quantities of French wine or have fancy foreign holidays, especially when they are just coming out of unemployment. They would spend their money in the domestic economy.
The great thing about construction is that it has a low import content. Most of what is used in construction comes from the domestic economy. Again, the demand goes into the domestic economy so the spending by construction workers in their new jobs becomes someone else’s income within the domestic economy. We get the multiplier effect of one person’s spending becoming another person’s income going around in a big circle and the economy is regenerated.
That is what we need—pure Keynesian reflation, but we have other measures to deal with that. If it necessitates some serious tax increases, so be it. The majority of the population have said in opinion polls, I understand, that they would prefer tax hikes to spending cuts. That is absolutely right. We are frightened of saying that we should have higher taxes. Francois Hollande in France decided to introduce a significantly higher tax rate for a substantial proportion of the population. Some people will squeal about it and no doubt the right-wing media in Britain would squeal about it, but there should be a bit more tax, even on MPs such as myself. I have suggested that the first tax rise should be the 50% rate not at £150,000, but at £60,000, so that I would pay a little more tax. I am talking about me as well as about other people. It is easy for us to make changes that affect other people, not ourselves.
Such a change could be made, if need be, but in the short term we do not need to do that. We need to collect the taxes that should be paid and which are the subject of tax avoidance and tax evasion. We need a radical economic strategy, including all the components that I have suggested, to get us out of the mess we are in—and we are in a mess. In his Budget speech, the Chancellor looked like a frightened man. He looked very worried. Clearly, his strategy is not working. He does not know what to do without doing a complete U-turn and adopting a completely different strategy—the kind of strategy that I am talking about—which would mean political humiliation for him. He should worry less about political humiliation than about doing the right thing by the country.
Julie Hilling (Bolton West) (Lab)
It has felt like a very long four weeks since the Chancellor delivered the Budget, not least because of the terrible tragedy of the death of Jade Lomas-Anderson by a dog attack in my constituency, so when I came to write my speech today, I had to wrack my brains to remember what the Budget was all about. My overwhelming memory is of the Chancellor sitting on the Front Bench looking like a little boy lost, with no idea what to do about the flatlining economy, no idea what to do to stop a triple-dip recession, what to do about the loss of our triple A status, or what to do about the level of borrowing, and no idea how to balance the books. So he delivered a Budget that did none of those things, sitting on his hands, hoping that things will just happen.
Of course, things are just happening. Unemployment in my constituency, Bolton West, is up. One in 10 people in Greater Manchester skip meals so that other family members can eat. Nationally, homelessness and rough sleeping are up by a third. Shelter says that every 15 minutes another family is made homeless. The economy may be flatlining, but people’s income and spending are not. The OBR has said that in 2015 people will be worse off than they were in 2010. Wages are £1,200 lower than in May 2010. This year a family with two children and one earner earning £20,000 a year will be at least £381 worse off, and next year will be £600 worse off. Inflation, of course, is still running at 2.8%. Behind those figures are real people having a desperately hard time—people who are losing their homes, having to choose between heating and eating and relying on food banks to feed themselves and their children.
Tinkering at the edges will not solve the problem, and neither will blaming the poor for the situation they find themselves in. According to the Joseph Rowntree Foundation, 6.1 million people living in poverty are in working households, 6.4 million people lack the paid work they want and 1.4 million part-time workers want full-time work, the highest figure in 20 years, and 100,000 of the so-called new jobs pay no wages whatsoever. The churn of people in poverty or out of work is substantial. While 18% of people are on a low income at any one time, 33%—one in three of us—experience at least one period on a low income in a four-year period, and 11% of people are on a low income for more than half of those four years.
In 2012, 1.6 million people were claiming jobseeker’s allowance at any one time and 4.8 million had claimed it at least once in the previous two years. Those figures show that the Government’s desperate efforts to categorise people as skivers or strivers are a travesty of the truth. Some 2.5 million people, including 1 million young people, are not shirkers or skivers; they are people who need the Government to take action to create jobs. But there was no mention in the Chancellor’s Budget speech of what he would do and there has been no action; he simply hopes that something will happen.
What do we get from the Government parties? We get a tax cut for millionaires, paid for by the poor. What excuse have they given for cutting tax for millionaires? They say that the millionaires were not paying it. If only we could all get a tax cut just because we did not want to pay tax. The Government failed to tell people that they do not actually know how much money the 50% tax rate would raise, because in the first year people brought forward their income and this year people will delay it, but HMRC has said that it could raise £1 billion. If people are avoiding paying tax, surely we need to shut down the avoidance schemes, not cut the tax rate in the hope that they will stop using the schemes now that they have found them. It is a shame that the Government have not shown the same concern for people earning £41,000, who, without any pay rise, will now find themselves in the 40% tax bracket. Hundreds of thousands of hard-pressed families will now be paying more tax, without a thought from the Government.
There were one or two promises of jam tomorrow, such as help with child care in two years’ time, a single-tier pension in 2016 and capped care costs in 2016. I was interested to read Age UK’s briefing after the Budget. It welcomed the earlier implementation of the care costs cap and the higher upper means-tested threshold from April 2016, but it said that that would do nothing to help the 800,000 older people who need help with everyday tasks but receive no formal state support. Since the Government came to power, £700 million in real terms has been cut from social care funding.
Age UK also stated:
“The Chancellor may have confused”—
people—
“in his speech by referring to raising ‘the threshold of the means test on residential care from just over £23,000 to £118,000’. He was in fact referring to the upper means test threshold and older people will have to make contributions based on a sliding scale towards the cost of their social care if they have assets between the two amounts.”
It went on to say that the Budget offered no proposals to improve pensions for current pensioners or to reduce pensioner poverty, which currently stands at 1.7 million people. It was also disappointed that the Government are not doing nearly enough to help tens of thousands of older people whose income, health and well-being are being affected by the cold weather.
Barbara Keeley
My hon. Friend is making some great points about social care. Before she moves on, would she like to comment on the fact that, according to Carers UK, 1 million people in this country have given up work or cut the hours they work because of their caring responsibilities, which can have a real impact on the economy? She has laid out that social care has been cut and that that means a real struggle for many older people, with 800,000 people not even having enough care, but it is also a real hit for the economy. Some carers might still be struggling to keep employed, but does she agree that, as services disappear, life is getting much harder for them, too.
Julie Hilling
I absolutely agree. On Saturday, I met a couple; the husband was the carer, looking after his wife. They, of course, are about to be hit by the bedroom tax as well. He said to me on the street, “I’d love to be working. I gave up my job to look after my wife.” If he had not done that, the cost to the economy of residential care would have been far higher than the benefits that that couple are getting. We have to do much more for carers rather than keeping on punishing them as the Government seem to.
I go back to Age UK’s response to the Budget. It had much more to say, but on the question of whether the Chancellor had delivered for older people, its answer seemed to be a resounding no.
The Government did reduce tax on beer by 1p, which, of course, is welcome for the pub industry, although it probably would have preferred action on the tie, which the Government appear to have shelved. The Government’s increase in VAT actually put 5p on a pint, and I hope it will take a long time for beer drinkers to sup the 300-odd pints before they get their free one.
It is also good that the Government cancelled the planned rise in fuel duty, but again the VAT increase wiped out any benefit that that may bring. I get annoyed when Government Members talk about how much they have “saved” the motorist, given that fuel has gone up by at least 10% on their watch. They also ignore the truth that the previous Labour Government cancelled or postponed planned fuel duty rises on 13 occasions, depending on the cost of fuel at the time. They also cancelled any rises at the height of the global financial crash—note that it was a “global” financial crash, not one made in Downing street where recessions now appear to be made.
However, tinkering at the edges will not give my constituents a job or increase their incomes. The Government made great claims about their proposals to help people buy a home and the Prime Minister claimed last year that their NewBuy scheme would assist 100,000 people to buy their own homes. What happened? Instead of 100,000 people, just 1,500 people benefited.
What about this year’s proposals? Instead of welcoming them, experts believe that they will simply lead to house price inflation. The Government cannot say whether people will be able to use the scheme to buy a second home. Someone in social housing with a so-called spare room will pay the bedroom tax, but the state will help someone who wants a spare house to buy one—not a cheap one either, but one costing up to £600,000. I do not see too many people on the minimum wage being able to service that sort of loan, even with the paltry increase announced today.
Why do the Government not get on and build homes? House building would do more for the economy than any of the gimmicks that they announced in their so-called Budget. Even their grandly announced increase in infrastructure spending of £2.5 billion does nothing to restore the cut of £7.7 billion to infrastructure spending that they have made over the past three years. Let us hope that they make progress this time by building something rather than making announcements that never seem to come to fruition.
The people of Bolton West are struggling. Many are more than struggling; they are finding it hard to survive day to day. The Government blame them and are hellbent on making the situation worse. They say that they have to cut the welfare budget but neglect to say that the majority of that budget is made up of pensions and in-work benefits. That does not fit the picture that they try to portray of the skivers who are ruining the economy. They forget to say that jobseeker’s allowance accounts for less than 5% of the budget and to tell us that cutting benefit not only forces people to food banks but harms the economy. They forget to tell us that the private rented sector is far more costly than social housing. They will do nothing to introduce fair rents and nothing to curb the cost of private rented accommodation—they simply cap benefits in the hope that that might just bring down those rents.
I am no economist, but even I know that if we cut jobs and benefits, we get into a downward spiral of more business failure, more people out of work and less money in the economy—on and on downwards. The only way to reverse that spiral is to invest in jobs and pay a living wage, to build houses for people to live in, and to take action to rebuild our economy. Instead, what do we get? A double-dip—thank heavens for the Olympics, because otherwise it would have been a triple-dip—recession, a doubling of debt, and a deficit that is not reducing. Instead of blaming the poor and giving a tax cut to millionaires, this Government—instead of sitting on their hands—should take action and not give us the non-Budget that they have given us this time.
Andy Sawford (Corby) (Lab/Co-op)
Members have been addressing two questions in this debate: first, where we find ourselves and why; and, secondly, what we should do about it. In 2008, 63 consecutive quarters of economic growth in this country came to an end with the onset of a global recession that started in America and spread quickly across the world. The Conservatives and their supporters at the Daily Mail like to blame the previous Labour Government for the global crash. Was it Labour that was selling the sub-prime mortgages in America? Of course not.
The response to that unprecedented crisis was to take very significant action, first to arrest it and then to bring some relative stability. Crucially, the previous Government chose to invest in our economy to keep businesses growing and to keep people in work.
Jonathan Edwards
Does the hon. Gentleman acknowledge that economic performance prior to the crash was based on unsustainable personal debt bubbles and asset price bubbles, with personal debt in the UK equivalent to 100% of gross value added—far higher than in any other modern democracy?
Andy Sawford
The previous Labour Government’s record of 63 consecutive quarters of growth is absolutely unarguable. Of course, lessons must be learned by Members in all parts of the House, including those in my own party, about the economy at the time, and I will go on to say a little more about that.
The alternative to investing in our economy to keep businesses going and to keep people in work was to go back to the experiences of the recessions in the early 1980s and early 1990s. Twice, 3 million people were unemployed, with the country being told that unemployment was a price worth paying. My own family know that it was not. They were impacted when the steelworks at Corby closed in 1980 and 10,000 people were put on the dole. People from communities such as mine, where the films “Brassed Off” and “Billy Elliot” seem more like documentaries, know the effects of unemployment and know that it is a personal tragedy for families and communities and is never a price worth paying. This year alone, 126 more people in my constituency are claiming employment and support allowance.
Let us not forget that the Tories supported the measures that we took in the recession—the same Tories who had warned against more regulation of the banks. Now they want to rewrite history. They are convincing people that our investment and the borrowing that underpinned it was more like a credit card debt than a mortgage. One of those is short term, bad debt and irresponsible; the other is about investing in our future. It is about the decisions that responsible businesses make to borrow to invest—the decisions that responsible Governments all around the world, and the UK Government, made in the depths of that last recession.
To win an election, the Prime Minister claimed that he would “balance the books” by 2015. In 2010 he told the CBI that his Government had a plan that would secure the credit rating. So what has happened— what did they do? They cancelled the future jobs fund, which was really helping to get people back to work in my constituency. I know that was happening in Northamptonshire because I was close to that work. They stopped the Building Schools for the Future project, scrapping plans for 715 schools to have improvements, including Lodge Park in my own constituency. That affected not only the students and their parents and families, and future opportunities to develop skills in the town, but the people who were going to build the new unit at the school. The children are now in mobile classrooms, which I am ashamed to see in one of the wealthiest countries in the world.
This Government took all the life and confidence out of an economy that was growing when they inherited it from the previous Labour Government. They stopped housing developments such as Priors Hall in my constituency, on which a lot of our economic future rested. Tata Steel laid off people in my constituency in 2011, and when I asked why I was told not only that it was about operating in a challenging global environment and about energy prices, but that all of the tubes from Corby went into infrastructure projects around the country which had been hugely affected by the stopping of road-building programmes and Building Schools for the Future.
Pamela Nash
My hon. Friend may know that we had a similar problem in my area, north Lanarkshire, with our Tata Steel site and public sector projects, so the steel was bought from abroad.
Andy Sawford
My hon. Friend is absolutely right. The story of the decision to close the steelworks in Corby in 1980 has now come full circle and been shown to be short-sighted, given that the steel is now coming from Port Talbot. Some of Tata’s steel is now coming from abroad, because it is so difficult for it to compete in this country. I called for measures in the Budget—I spoke about this in a recent Adjournment debate—to support the steel industry in the UK in order to mitigate the impact of high energy prices around the world. The contrast between this country and others is stark and instructive of this Government’s approach. Germany, where the economy is growing—it now has more than 3% growth—has a £5 billion mitigation package for energy intensive companies, while this country has a £250 million mitigation package and we are not even clear about its details.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
My hon. Friend led a strong Adjournment debate recently and I was proud to join him in it. Does he not find it extraordinary that the Business Secretary admitted in the New Statesman in March that
“the fiscal consolidation achieved through reduced capital spending has had economic consequences”?
The Government’s lack of coherence is extraordinary: one side is arguing, like us, for increased infrastructure spending, while the others are doing little about it.
Andy Sawford
My hon. Friend is absolutely right and I will say more later about capital spending in this country.
It was not just Tata Steel that shed jobs in my constituency; Argos also did so and Aquascutum closed. Those companies were affected because nobody had any confidence and nobody was spending. That happened because the Government chose—they made a deliberate political choice—to talk our economy down. It was a political strategy without any real regard for the damaging effects it would have on our economy. When they got hold of the levers of power, they revealed their real purpose: an ideological attack on the state and on the poorest in our society.
The accumulative impact of the Government’s Budgets, including this one, will have an effect on individuals. The Institute for Fiscal Studies tells us that the average family will be £891 a year worse off, but that figure tells only part of the story. The other part is how the cuts to services will impact on all residents, particularly those who most rely on public services. Buses have been cut in my constituency, the ambulance station in Corby is due to close and children’s services, particularly for those with special educational needs and their families, have been decimated. Respite care has been lost and there are fewer police and police community support officers than when this Government came to office, and there is a real threat of cuts to my local hospital. The huge impact of those cuts to services on families means that they are worse off.
The Government’s policies have impacted on those who most needed their help—the children plunged into poverty and the disabled people hit by the bedroom tax and the pernicious Atos reviews that this Government have failed to intervene in and stop. Those out of work and unemployed in my constituency have been stigmatised by this Government and left desperately chasing the few vacancies that exist.
The Government say that there are more people in work, but that is not true in my constituency. Moreover, what sorts of jobs are being created? They are part-time, low-paid jobs for underemployed people in my constituency —fragile employment for people working through agencies on zero-hour contracts and on the margins of the labour market, there to be exploited. And the Government say that that is okay.
Mr Russell Brown (Dumfries and Galloway) (Lab)
In the last couple of weeks, I received an answer from the Cabinet Office on the private sector jobs that have been created. The Government now talk about 1.25 million private sector jobs and for a long time spoke about 1 million. Is my hon. Friend surprised to learn that, in fact, between June 2010 and September 2012, the figure is only 750,000?
Andy Sawford
I thank my hon. Friend for bringing the real figures to the House. He is right that the Government are grossly exaggerating the total number of private sector jobs that have been created and, crucially, the nature of those jobs.
Mel Stride (Central Devon) (Con)
The hon. Gentleman is right to raise the huge problem of unemployment under all Governments. Is he aware that in his constituency, between 2005 and 2010—that is, under the last Government —the number of jobseeker’s allowance claimants rose by 103%, whereas the number has risen by just 8% for the duration of this Government?
Andy Sawford
If the hon. Gentleman is being honest, he knows that the figures that he is quoting reflect the impact of a huge global economic crash in 2008, which had a big impact on my constituency, not least because it is a manufacturing constituency. [Interruption.] The Economic Secretary is suggesting that because the figures go from 2005 to 2010, they reflect the Government’s record across the whole period. Government Members fail to say that the economy was growing for much of that time. We all acknowledge that a global crash happened in 2008 and that that caused unemployment. The critical thing is what we do about it.
Pamela Nash
Is the key point not that unemployment in this country is now higher than when the Government took office?
Andy Sawford
My hon. Friend is right. Of course, unemployment is also higher in Corby. My constituents will think that Government Members have a cheek to raise those figures in the way they have today.
My constituents will be appalled by the comments of the hon. Member for Macclesfield (David Rutley) and others, who have told them to stop whingeing and moaning. They are talking about people who are trying desperately to find work and whose situation has been made worse, not better, by this Government. The Tories do not understand the lives of those people. They do not understand the margins of the labour market or the margins that many of the poorest in our society live on. They understand the marginal impact of their millionaires’ tax cut, which is about £100,000—after all, many of them will get it—but they do not understand the marginal impact of their policies on people who have very little to live on. Fourteen pounds may be half a bottle of claret to the Chancellor, but for people in my constituency, it means choices about food, heating, fuel and new shoes for the kids.
The Government’s Budget was a chance to get back on track after three wasted years in which the UK went back into recession and lost its credit rating. The best that the Chancellor could do was to say that he hoped that we would not have another quarter of negative growth. He has his fingers crossed that he does not become the triple-dip Chancellor. Borrowing is going up not just this year, but next year and the year after. We are now told that there will be deeper cuts to services and the living standards of people in this country. While George and his friends get a tax cut, my constituents are told that things will get worse. Since the Chancellor’s spending review in 2010, the UK has been 18th out of the G20 countries in terms of growth. It is worse than the USA, Germany, France and Turkey, but the Government refuse to change course and recognise that we will get on track only if we get our economy growing.
I was incredibly disappointed that in the Finance Bill the Government rejected our proposals to use the 4G receipts to fund house building, for a proper tax on bankers’ bonuses to fund a jobs guarantee for young people and to bring forward infrastructure investment. Only 14% of the 576 projects in the Government’s national infrastructure plan have started.
In their first three years, the Government spent £12.8 billion less on infrastructure than the previous Government had planned to spend. The Chancellor has been told by the International Monetary Fund, the CBI, Sir John Armitt, some of his Back Benchers and Lord Heseltine that the Government should boost the economy with greater infrastructure spending. They make announcements such as that about the A14—part of which runs through my constituency—which is now not set to start until 2018. The electrification of east midlands trains to Corby was announced with great fanfare. What will fund it? It is the same amount of money in the next Parliament that the Government cut from what we would have spent on infrastructure in this Parliament to upgrade our railways.
In the previous Government’s plan for 2012-13, we were due to spend £48.4 billion this year on infrastructure. This Government say they will spend £41.7 billion on infrastructure. We were planning to halve the deficit during this Parliament, but this Government said that they wanted to go further and eliminate the structural deficit. What is the effect of that? They are spending £13 billion less on infrastructure—precisely what we need to get our economy growing—and £13 billion more on social security. It all sounds familiar to people in my constituency who remember that when Margaret Thatcher, the architect of this kind of trickle-down Reaganomics, came to office, 2 million people were on out-of-work benefits. When she left office, 6 million people were on out-of-work benefits and we see it all again. The rich are getting richer, the poor poorer, and many are paying the price of economic and social failure. Meanwhile, in countries such as America, which should be instructive to the Government if only they would raise their sights, the stimulus has been maintained and there has been growth of more than 4%.
What do I want now? If the Government will not listen to my hon. Friends as they present the way forward for our economy nationally, I want action locally. The south east midlands local enterprise partnership bid in my constituency is focused on housing, and at last money from the Government’s Get Britain Building fund has gone to meet some of the infrastructure gap, particularly as the council and others have had to renegotiate section 106 agreements, which became too expensive for developers to move forward. After three years, some of that money has just begun to trickle to my constituency. If the Government support the SEMLEP bid, there is a real opportunity to substantially reduce the gap in budgets for infrastructure, which we need now that we are renegotiating the section 106 agreements. We are not asking for additional money; we are asking for flexibility such as an increase in the borrowing cap.
I want help for local firms—I mentioned Tata Steel and I have invited the Minister to come and help—and I want targeted help for young unemployed people in my constituency. The City Minister, the right hon. Member for Tunbridge Wells (Greg Clark), for whom I have a great deal of time, has shown that, relative to his colleagues across Government, he is willing to take action and listen to local areas. He has taken action in cities around the UK to help fund social innovation. I would like the Government to talk to people in Corby about how we can help young people in the most difficult place in the country in which to get back to work.
I hope that the Government will listen and stop telling my constituents to stop whingeing. They must stop stigmatising those most affected by their wasted three years, and stop trying to divide people at a time when we need the country to come together with a Government who are backing our workers and businesses to get Britain growing again.
Mr William Bain (Glasgow North East) (Lab)
The Bill is a weak Finance Bill that matches the current depressed state of the UK economy. It fails the test of promoting increased demand now for cash-strapped households. It does not promote additional demand for Britain’s retail and services sectors, comprising three-quarters of our economic output, and neither does it sufficiently boost output in construction by adopting more immediate measures to increase the supply of housing—or any new infrastructure investment—now, rather than having to wait until 2015.
The Bill fails to reverse the impact of previous Finance Acts from this Parliament on the incomes of ordinary people, with the cumulative impact in Scotland of the Government’s prior measures on pay, tax and benefits being the removal of £1,488 a year by 2015 in the spending power of the average household. That is at a time when the Office for Budget Responsibility is expecting private and Government consumption to make up a larger share of GDP than it forecast in December. The pound is a fifth lower in value than in 2008, and exports are down by 7%. That is the scale of the failure over which this Government have presided .
The Government have not only presided over that failure, but the Bill fails the even greater test of rebalancing the economy more in favour of skilled service and manufacturing output. It also fails to recast the welfare state around pro-employment and growth-friendly policies such as extending child care provision or a jobs guarantee for the long-term jobless. That is badly needed in Scotland, where the employment rate is 3.2% below its pre-crisis peak of 2007, and 1.6% below the rate between October 2008 and September 2009. It is estimated that a further 850,000 jobs need to be created in the UK to match the employment rate of 2008.
The Bill does little to address the growing crisis of falling living standards, which are faced by millions of people across the country. The median wage is some £3,200 a year lower than it was in 2009. Real wages will fall more quickly this year than the OBR predicted just five months ago and will be stagnant next year. Business investment is forecast to be 1.5% lower on average than the December 2012 OBR forecast, despite the Exchequer Secretary lauding the effect of the corporation tax proposals earlier in the debate.
The truth is that the Bill is less than the sum of its parts, and even the OBR does not believe that its overall impact will be an increase in UK growth this year, next year or any year to the end of its current forecast period. The new US Treasury Secretary last week recommended that eurozone countries should ease fiscal policy to boost demand if they can. That call should resound in the UK Treasury too. The Obama Administration tackle wage stagnation and declining living standards, so we should not put up with the defeatism we have heard from the Government and, this morning, from the Secretary of State for Business, Innovation and Skills.
Before developing those points, let me address the individual clauses and schedules that deserve some degree of welcome—overall, the Bill is a deep disappointment to Scotland and the UK. I welcome the fact that the Treasury has listened to the strong campaign launched by the city of Glasgow council, Members of the House representing Glasgow constituencies, and the organisers of the 2014 Commonwealth games. Clause 9 provides that Glasgow’s Commonwealth games will have the same taxation treatment as the Olympic games in London and other major sporting occasions held in the UK. That concession will mean that the organisers can attract the very best athletes from the Commonwealth to participate, and make the games the sporting and economic success for Scotland and the UK that they will undoubtedly be. Procurement contracts already decided and in the process of being awarded are likely to benefit the economy in Scotland to the tune of £350 million.
The above-the-line R and D tax credits are strengthened by clause 34 and schedule 14, which is welcome, but it is revealing that UK R and D expenditure rates are still way below those of our international trading partners. According to the World Bank, the UK’s 2011 R and D expenditure, at 1.79% of GDP, and Scotland’s, at 1.56% of GDP, are way below the most recent OECD average of 2.44% and the 2011 EU average of 2.03%. We spend less than half the share of GDP that Finland or Sweden spend on R and D. That is a particular problem in Scotland, where business R and D spending is only 0.56% of national income, which is half that of the pathetic UK total. The Scottish Parliament could use powers in that area of policy for the benefit of Scottish business and the Scottish people. I also give a guarded welcome to the provisions on tax relief for television production and video games development in clause 35 and schedules 15 and 16, which will provide some boost to these industries in Glasgow, Dundee, and other parts of Scotland.
On living standards, the Bill will do nothing to counter the regressive effects of the Welfare Benefits Up-rating Act 2013 or previous Finance Acts, which have devastated household incomes among the working poor, who receive nearly 21% of the entire welfare budget. The poorest four deciles of the population in Scotland were hit three and a half times harder than the wealthiest two deciles by the introduction of the 1% benefit and tax credits cap last Monday. This measure alone will take £47 million out of the Glasgow economy every year, and will cost working-age adults in the city an average of £114 a year. Overall, 55,700 working-age households in Glasgow will lose on average £109 a year through the cumulative cuts to tax credits made during this Parliament, and nearly 16,000 Glaswegians will lose on average £24 a week because of the Government’s wicked and iniquitous bedroom tax.
By cutting tax credits, which sustained family living standards through financial crisis—with the UK spending the joint third highest share of GDP on family benefits in 2009—the Government will further reduce economic demand. The effects on the Glasgow economy alone will be to take away £269 million in demand a year, or £647 from the average household in the city. In terms of clause 1, four times as much will be taken away by higher VAT during this Parliament from the poorest people than will be handed back through raising the personal tax allowance, three quarters of the benefit of which will go to people in the upper half of the income scale. With the introduction of universal credit, two thirds of any benefit from a higher personal tax allowance will be lost through deductions in credit, which will be assessed on the basis of net income, not gross. The further squeeze on real wages in 2013, down by a further £200 on average over the course of the year, will cost ordinary families on average four times as much as the Government will hand back through the increase in personal allowance to £10,000 from next year.
The Government have been guilty of another offence in the preparation of the Bill. They have attempted to conduct a debate on welfare by arguing that a majority of benefit recipients are scroungers or layabouts, in a way that is deeply irresponsible, divisive, and corrosive of the social solidarity that exists in Glasgow, Scotland and communities the length and breadth of the United Kingdom. Some psychologists, such as Cass Sunstein, have referred to this phenomenon as an availability cascade, whereby a simple idea takes root and goes viral, quickly becoming the new received wisdom. One wonders whether the Chancellor had that at the heart of his thinking when he began his campaign against the poor. Others may be reminded of the work of George Lakoff when he said that framing an argument in the lived experiences of others is critical. One part of the coalition seemingly wants to turn neighbour against neighbour, and shift their focus away from the skyrocketing wealth of the super-rich, or from the role that the Government should legitimately fulfil in ensuring the conditions for greater equality in society, which is now seen in studies by the IMF as critical to lasting economic growth in any democracy. But the recent study by YouGov and Cambridge university shows that this campaign of vilification of welfare recipients is not having the desired outcome for the Chancellor, because it found that people in the UK were more likely to empathise with the suffering being inflicted on the poorest by these most regressive welfare cuts than voters in Germany, France or the US. We need facts to drive this debate, not simply assertion from the Treasury Bench or the peddling of prejudice. The constituents I meet, who struggle with low paid, part-time work in a weak jobs market, are being forced on to housing benefit because of high rental costs and declining real wages. That, and the fact that we have 2.5 million people officially unemployed but more than 6 million people desperately seeking full-time work, are the reasons why the benefits bill remains stubbornly high.
According to the OECD only last week, the UK is spending 5.9% of GDP on cash benefits, but we spent more in 1980—6.4% of GDP. In comparison with other major countries, the UK is neither a particularly large nor low spender on welfare. Only three of 19 major OECD states spent less than the UK on cash benefits in 2009 in the depths of the downturn.
We need to recast the debate on the welfare state, a debate that should have been recast in the Bill, in three main areas: full employment, higher pay and stronger family services. Simply to restore the employment rate to its pre-crisis levels, we need to create 850,000 additional jobs now. To reduce structural unemployment to 3%, we need active labour market policies, such as the jobs guarantee policy being promoted by Opposition Members, to help the long-term jobless—a plan that put Sweden back to work in the 1990s, at the same time as cutting its deficit too. A jobs guarantee, paid for by restricting pensions tax relief for higher rate taxpayers, would help 600 long-term jobless people in my constituency who have been out of work for two years or more to get the right to employment now. It would also begin to boost tax receipts, which are forecast by the OBR to be £55.2 billion lower between now and the end of its forecast period since its December projections, with £2.8 billion of that shortfall directly attributable to the Budget that the Bill seeks to enact. It is only by increasing the levels of participation in the jobs market that we will be able to generate the growth and the tax revenues required to restore our public finances.
The key to achieving that is to raise the number of women in employment. The biggest barrier to becoming economically active that as many as 1 million women face is the poor availability of affordable child care. Shifting resources into providing households with more extensive child care or early years education at an affordable cost should be a priority for a pro-growth and pro-equality welfare reform and finance Bill. We know that child care costs take up as much as a third of families’ after-tax income in the UK, compared with just 9% in Denmark. In 2009, the UK, under the previous Government, was spending the joint third highest amounts in the OECD as a share of GDP in terms of cash benefits to families, but the Nordic countries were spending much more on supporting child care. That is where policy on welfare will need to change.
On pay, nearly a third of my constituents earn less than the level for a living wage, leading nearly 10,000 households to need subsidies through the tax credit and housing benefit systems to reach any kind of an acceptable standard of living. The median wage is £3,200 lower in real terms now than it was in 2009. Welcome though the announcement today on the increase of the national minimum wage in October by 12p to £6.31 an hour is, that will represent the fourth successive year of a real-terms fall in the level of the national minimum wage. It will be returning to levels it was last at in real terms in 2004, and comes at a time when the coalition appears severely divided in its commitment to the national minimum wage. According to a study published by the Resolution Foundation this morning, the top 1% in our society are earning on average £60 a hour, taking home at least £123,000 a year on a 40-hour working week. Someone on the minimum wage would need to work 24 hours a day for 830 days in order to match the annual earnings of a person in the wealthiest 1% of our society. The failure to deal with that surging inequality under this Government means that the Finance Bill has to be opposed tonight.
In response to this growing crisis of low pay, the Bill could have considered giving the Low Pay Commission a wider remit to consider an affordable wage, sector by sector, bringing the living wage into those parts of the economy where it will work. The benefit would have been a boost to demand and reduced staff turnover. Our focus has to be on welfare and fiscal policies that reduce joblessness and inequality, not a politics of division peddled by the Chancellor and pitched at the very worst sentiments of human nature. As the Social Market Foundation reported just last week, cutting in-work benefits again and again impedes the operation of the automatic stabilisers, which is something the Chancellor promised he would not do in his early months in office.
This should have been a Finance Bill that properly taxed the bonuses and profits of the banks, instead of perpetuating the nearly £2 billion windfall they have received under this Government through corporation tax cuts. It should have been the Finance Bill that reversed the millionaires’ tax cut, which is handing 643 bank employees a tax cut of £54,000 a year, while 5.1 million working-age people are struggling with a 1% cap on in-work social security. It should have kick-started growth and increased demand, but it has instead cemented the reputation of this Government as the no-growth Government, setting a course for a lost decade in the British economy. There is another way, and Opposition Members will not rest until we have put it with conviction to the British people at the general election that this country so badly needs.
Sheila Gilmore (Edinburgh East) (Lab)
The hon. Member for Macclesfield (David Rutley), who is no longer in his place, will be rather disappointed, because I cannot share his view that we have the best of all possible worlds. Perhaps his name is really Dr Pangloss. I hear an awful lot of Panglossian politics in Scotland, where it takes the form of, “If we were only independent and we waved our magic independence wand, everything would be wonderful,” but to get it here is astonishing.
The other surreal aspect of today’s debate, which would astonish anyone listening who cannot see the Chamber, is that we have heard from a grand total of three Government Back Benchers prepared to speak up for their own Government’s Budget. They were not so shy about coming forward last week to recall what were to them the glory days of Lady Thatcher’s Government. They were all very keen to come down here especially to talk about it. Many of my constituents thought we should have talked about that today, and perhaps we should have, since Government Back Benchers clearly did not think it worth debating the Finance Bill. Much effort and money could probably have been saved.
I was not one of those who came last week, because I spent most of the recess talking to my constituents. If this were the Government’s first Budget, not their fourth, we would be better placed to believe the words they keep using. We were told in 2010 that this would work—that we had a terrible financial crisis and that we all had to tighten our belts and get through it together, but that it would be worth it. Just how long do we have to wait? These Budgets and these Budget debates and debates on the Finance Bill are turning into groundhog day. The Government say all the same things and, I have to admit, they will no doubt say that Opposition Members all say the same things, but that is because the debate has not moved on. On this, the Government’s fourth Budget, we are indeed saying the same things. Perhaps that is why Government Back Benchers did not feel it worth coming—because they know perfectly well that there is no point in saying the same things because the Government’s approach is not working.
The Government’s answer to many of the criticisms of their policies—particularly their policies to reduce tax credits and benefits—is that people can get around those cuts by working more hours. In fact, they even defend a lot of their measures by saying that they will put a rod into people’s backs and get them out there working those extra hours. The assumption seems to be not just that unemployment is, as they allege, a lifestyle choice, but that under-employment is apparently a lifestyle choice too and that, really, people have to get up and go out there, and everything will be fine.
My constituent Joe—one of the many people I talked to in the recent recess—is affected by the bedroom tax because he was housed by the council in a two-bedroom house. It was not his choice; that is where he was given a house. He went to his supermarket employer to ask whether it would increase the 15 hours a week he works in his job to help to pay the extra amount. His employer said no. That might have been partly because, at 15 hours a week at the minimum wage, he is nicely underneath the threshold for paying national insurance. Doubtless his employer prefers to have another part-time employee at that level. However, even if his employer offered him more hours, at whose expense would that be? Would it mean that another employee got fewer hours or, if Joe was given full-time work, that somebody else would not have a job at all? Unless the supermarket wants to employ people to stand around doing nothing, one has to presume that it has calibrated its work force according to the work that needs to be done. It is not a charity. His employer is not there to give him a few extra hours so that he can pay his bedroom tax. It needs only the workers it needs. It is therefore a myth to assume that people such as Joe just have to get out there and everything will be fine. That sums up exactly what is wrong with this Government’s economic policy. Austerity reduces demand. Indeed, it has reduced demand all over Europe, which is one reason why we are not coming out of this recession through exports—one of the promises made to us in 2010—because everybody is in the same boat.
As Joe’s current employer will not give him the extra hours, he could, I suppose, find out whether there is another job out there. Perhaps he should see who else is hiring for his type of work in the city. I would stress that, compared with many other areas—such as that represented by my hon. Friend the Member for Glasgow North East (Mr Bain)—Edinburgh does not have high unemployment. In fact, the unemployment rate in my constituency is only 4.8%, which in a lot of people’s terms would be very low. I thought, “I’ll look at the Government’s great new innovation,” which is a website called Universal Jobmatch. I do not know whether any Member present has looked at Universal Jobmatch—I have, on several occasions—but I put in “shop assistant, Edinburgh area” to see what would come out the other end. If I had been Joe, things would have looked quite hopeful at first, because there appeared to be four pages of jobs. There were 25 on each page—I counted—so I thought, “Well that’s 100 jobs. That’s not bad.”
In fact, there turned out to be 76 job entries, because the last page had only one entry, so things were not quite as healthy as I thought, but when I looked, I saw that 57 of those 76 entries were for a firm offering jobs taking out catalogues and trying to sell things door to door—the archetypal job that people often have to take during a recession. In fact, we can read all about that from the 1930s, which is where we are again—it is not the 1980s; in fact, it is the 1930s. Most of those 57 entries were not even for jobs in Edinburgh, and in my view they were not proper jobs. Maybe Joe should see whether he can make the extra hours by selling whatever it is he would have to sell. It is absolutely extraordinary, however, that 57 of the 76 job vacancies advertised in the Edinburgh area—which, by the way, stretches to Fife and to Falkirk—were what most of us would probably describe as non-jobs. Of the others, only six were actually in the city. If Joe were to apply for a job just outside the city, he would have to take on board the fact that it would cost him money to get there, and that that might negate all or part of any extra income he might earn. So there were six jobs in retail in Edinburgh, a city in which, we are told, unemployment is really not too bad and we should not worry too much about the state of the economy. That is not a growing economy. It is not a healthy economy. It is, however, the reality for Joe and many others like him.
I also spoke yesterday to a constituent who clearly understood how economics should work. She told me that she and her husband had already lost £85 a month in tax credits; their income had gone down. Her husband is a self-employed taxi driver, and she told me that because people were pulling in their horns, spending less and having fewer nights out, he was getting less business. His earnings were dropping. He was out driving on Monday and Tuesday nights last week, for five or six hours each night, yet he took in only £55 a night, from which he would have to take off his costs. She reckoned that people were not spending because they did not have sufficient income, either because they had lost their jobs or because they were on shorter hours. That is what low demand means. It has a ripple effect through a local economy, and people like that taxi driver who are working and who want to earn more cannot do so. He cannot make people take his taxi if they do not want to.
Sheila Gilmore
I will not give way to the hon. Gentleman, because he has not been here through all these hours or taken part in this important debate.
We have heard a lot about extra jobs being created in the economy. The Economic Secretary, who I understand is going to respond to the debate, tweeted during the recess that job creation in the three years of this Government was running higher than during 10 years of the Labour Government by a factor of 2:1. Those figures just are not true. They seem to have been plucked from a work of fiction. People are being told over and over again that that is what is happening, yet their own personal experience is very different. Joe cannot get extra hours in his job, and if he looked on Universal Jobmatch, which is where people are told to go to find jobs, he would find only six jobs in his field in his city. The numbers simply do not add up.
We know that some of the so-called jobs are unpaid jobs, and that some are jobs that have been translated from the public sector to the private sector. The real world is one of no growth. All the commentators have clearly stated that this Budget will not create more growth, as has the Office for Budget Responsibility, the organisation that we were told would be totally independent and correct. A Conservative Member even said earlier that he no longer believed in it. Actually, it is telling the truth.
Geraint Davies (Swansea West) (Lab/Co-op)
As you know, Mr Speaker, I took the time to pay my tribute to Baroness Thatcher last week. I asked whether she had lived up to her own terms of reference and brought harmony where there was discord and hope where there was despair. I came to the conclusion that she had not, and that she had created a more divided and unequal Britain. Given the contents of the latest Budget, I fear that that is the kind of Britain we are now hurtling towards again.
A man who came to my surgery on Friday told me that he had £20 a week to spend after paying his utility bills and bus fares. At that rate of disposable income, he could take 10,000 years to get to the alleged cost of Margaret Thatcher’s funeral. When the empty bedroom tax hits, he will be down to £2 a day, so he would have to keep going for 15,000 years. In the Budget, the very poorest are being squeezed hardest to give some money to the squeezed middle to encourage them to vote Conservative, while millionaires are being given tax breaks when the top 10% in Britain have seen their average income go up by 11% over the last two years alone, simply through the machinery of the marketplace.
There were a few bright spots in the Budget. There were the mortgage deposit schemes, but according to people in the financial world, there is a real risk that they will generate the sort of sub-prime debt and irresponsible lending that banks are not supposed to be engaged in if we are not to encounter a problem, as we did in 2008. There was the 1p beer give-away. There was rejoicing in Swansea, because outside one pub, a sign said, “Buy 299 pints of beer and get one free.” People were very excited about that. However, the general situation is that we have no growth, as people have mentioned. The problem is the debt to GDP ratio. Debt as a proportion of the value of the economy was 55% in 2010, and it will be 85% in 2015. There are two ways of sorting that out: to increase GDP—the size of the economy—as Labour did in the 11 years from 1997 to 2008 when it went up by about 40%; and/or to attack the debt.
The total focus is on attacking the debt. In 2010, when the Chancellor announced that he was cutting half a million jobs, what happened? People, particularly in the public service, stopped spending. The savings rate went up, consumer demand went down, growth was flattened, so debt as a proportion of GDP is rising, and more and more people are doing less work. We hear about the extra million jobs, but they are producing no overall extra output, so average productivity is down.
We need to invest. People make a big joke about that. They say, “You’ve got to borrow to pay off your loans,” but there is a difference between investing in productive capability—in skills, infrastructure and marketing and in super-connectivity; I mentioned earlier that Swansea had put in a bid for super-connected city status—which would help the economy to grow, and simply spending and borrowing to pay people to do nothing and keep them on the dole. That was the old problem for the Tories pre-1997 and we are going back to that situation.
In other countries, there is enormous investment in research and development, particularly in emerging economies such as Brazil, China and India. When we study the behaviour of multinational companies, we see that they are drawn to R and D clusters, not just to ever-decreasing levels of corporation tax. Obviously that is one of the criteria, but reducing corporation tax from 21% to 20% and reducing the yield by 5% does not make much sense. The money would be better spent on super-connectivity for all our smaller cities, including Swansea. In Swansea, there is massive investment by the European Investment Bank in a second campus, which is creating an R and D cluster that is attracting the involvement of companies such as BP, Tata and Boots. That will create real international global value.
Aside from that, the focus has been on clobbering the poor. If money is cut for people who are already poor, growth will be cut overall. If cuts affect better-off people who are saving, they are not investing their earnings in the local economy either.
The bedroom tax is a cruel inefficiency. Housing benefit has doubled in the last 10 years, but 70% of the increase was caused by private sector rent growth. People are being put into the private sector because not enough council and social housing is being built. In Wales, 29,000 families are affected, but there are only 400 empty single-bedroom units of accommodation, so there is nowhere for them to go. Two thirds of the people affected are disabled. In Swansea, moving someone from a three-bedroom council house to a two-bedroom private sector house would cost 50% more, so housing benefit will go up again. A lot of these measures are counter-productive and destructive, but that particular one encourages people to have more children, even if they were not going to, to fill up the rooms. Meanwhile, the overall benefit cap encourages families to break up so that there are two units that can come up to the £400 threshold. The policy has not been thought out, and we are seeing an awful return to a Dickensian view of the worthy and unworthy poor, the shirkers and the workers, and the strivers and the skivers.
We need to refocus on growth, capacity, exports and jobs. Jobs and growth are the only things that are going to pull us back on the right track to balance the books and make Britain strong again. We want a Britain that cares and a future that works—a one nation strong and united, not a weak nation divided by the Conservatives.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
We have had a surprisingly good debate despite what was, frankly, a disappointing and lacklustre Budget. I use the word “surprisingly”, because the lacklustre nature of the Budget was no more evident than in the opening speech made by the Exchequer Secretary to the Treasury.
Hon. Members on both sides of the House have powerfully put the case for securing growth in our economy, and I especially want to commend several of the contributions made by Labour Members. My hon. Friend the Member for Islwyn (Chris Evans) made a powerful speech about aspiration that included a poignant reminder of the words of Harold Wilson that it does not matter what the rate of employment is because to a person who is unemployed, that rate is 100%.
My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made a characteristically forceful and insightful speech about the impact of the Chancellor’s failing plan on economic development in the north-east, which is a region close to my heart. He reflected on the double-dip, double-debt and double-downgraded Chancellor.
My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) reflected on the banks simply not paying their fair share, while my hon. Friend the Member for Luton North (Kelvin Hopkins) gave a colourful insight into the Bill’s historical context. My hon. Friend the Member for Bolton West (Julie Hilling) reflected on her memory of Budget day and a Chancellor who simply looked lost as to what to do about his flatling economy and failing plan.
My hon. Friend the Member for Corby (Andy Sawford) made a passionate speech about the real impact of the Chancellor’s failure. The amounts involved under the bedroom tax might be worth just half a bottle of claret to the Chancellor, but to the people affected, they make the difference between heating and eating.
My hon. Friend the Member for Glasgow North East (Mr Bain), like other hon. Members, talked insightfully about the Chancellor’s campaign against the poor and the divisive nature of his economic policies. My hon. Friend the Member for Edinburgh East (Sheila Gilmore), with her insightful wit, put Government Members to shame for their failure even to show up today to defend their Chancellor’s Budget. We have just heard my hon. Friend the Member for Swansea West (Geraint Davies) reflecting on the divisive nature of the Chancellor’s failing plan.
We heard good speeches from the few Government Members who bothered to attend the debate—[Hon. Members: “Three.”] I am reminded that we heard three speeches from Government Members, and I was surprised by how few of them turned out to support their Chancellor’s Bill. The Exchequer Secretary claimed in his lacklustre speech that the Bill will inject energy into our economy, but it has not injected any energy into Government Back Benchers, so it is even less likely to inject any energy into our bumbling economy that is staggering under the weight of the Chancellor’s complacency.
The emptiness of the Government Benches has been stark. For most of the time, we have seen only the Minister, his Parliamentary Private Secretary and a token Liberal Democrat. Are Government Members too ashamed to defend their downgraded Chancellor? Even the Chief Secretary to the Treasury has not shown up today.
It is a shame that the hon. Member for Cities of London and Westminster (Mark Field) is not in the Chamber because he made a compelling speech in which even he lamented, to use his words, the Chancellor’s “sleight of hand” in manoeuvring to bring his borrowing down to just under £121 billion. That represents a rate of deficit reduction of not 1%, nor even 0.1%; at that rate, it would take 1,000 years to reduce the deficit. He acknowledged that debt will not fall in this Parliament, so the Chancellor should at least focus on the long term, instead of quick-fix gimmicks. That was sound advice.
The hon. Member for Redcar (Ian Swales) defended the Government’s failing plan, and suggested that a VAT cut would simply benefit the well-off. Has he even noticed the Chancellor’s tax giveaway to millionaires? The hon. Member for Macclesfield (David Rutley) proudly declared that the Chancellor’s plan was a continuation of Thatcher’s legacy, and told people to cheer up and stop moaning. He should try telling that to the 2.5 million people who are unemployed.
Deep down—perhaps it is evident from their poor attendance—even Government Members know that the Chancellor’s Budget failed to deliver what is needed to get us out of this economic mess. Let us consider the situation facing the Chancellor as he composed his Budget last month. What were the key economic indicators to which any genuinely in-touch Chancellor would want urgently to respond? Before we consider the current economic situation and this year’s Budget, let me take the House back briefly to the Chancellor’s first Budget—the June 2010 so-called emergency Budget—which, according to him, was necessary to deal decisively with the country’s record debts and produce a credible plan to deal with the record deficit. Right hon. and hon. Members may recall that the Chancellor used that emergency Budget speech to predict that the UK economy would grow by 1.2% in 2010, 2.8% in 2012, and 2.9% in 2013. He was dreaming. As a result of his failure, we have had a double-dip recession and the economy is stagnating, with just 0.8% growth since the 2010 spending review, compared with 5.3% forecast at the time. He consistently blames factors beyond his control, but only three G20 countries have grown more slowly than the UK in the same period.
The independent OBR has halved its predictions for 2013, anticipating growth of just 0.6% this year, compared with the 1.2% forecast in December, a mere four months ago. The most recently published figures suggest that industrial production in February was down 2.2% on the year before, while the UK’s trade deficit has widened to £9.4 billion following a worrying 4.7% fall in exports to non-EU countries. Indeed, over the past two and a half years, lack of confidence created by the Chancellor’s failing plan has seen business investment fall by £3 billion, compared with the OBR’s forecast of a £24 billion rise. Of the G20 nations, only Italy and Saudi Arabia have experienced a sharper fall in investment in that period. As a consequence of the Chancellor’s economic failure, Government borrowing has risen, not fallen, with the coalition set to borrow £245 billion more than the forecast in autumn 2010. [Interruption.] I am astounded that Ministers shout that we would be borrowing more; they are borrowing more.
The Chancellor’s promise to balance the books by 2015 will not be met, and the national debt will not fall until 2017-18 at the earliest, which has resulted in the downgrading of Britain’s triple A credit rating by Moody’s. More recently, Fitch has put the UK on negative watch—the very cover that the Chancellor used for his accelerated spending cuts in 2010. What does that economic failure mean for ordinary people up and down the country? Who is paying the price for the downgraded Chancellor’s economic plan, which lies in tatters? The most recent figures, published on Budget day, show that unemployment has risen again, and the trends behind the employment figures are increasingly worrying. Long-term unemployment remains far too high, and the risks have become dangerously entrenched while youth and female unemployment is up again.
Ministers regularly claim—and Government Members have done so again this afternoon—that the coalition has helped to create more than 1 million private sector jobs, but about 200,000 of those were created as a result of the reclassification of further education and sixth-form colleges in the private sector. Half the jobs that have been created since 2010 are part time, and almost 1.4 million people who want full-time work can only find part-time work. People who are in work have found that their wages have simply not kept pace with inflation. There is also the deeply worrying phenomenon of falling productivity, with more people apparently producing less. Is it any wonder that we have seen a disturbing rise in so-called zero-hours contracts, with recent media reports suggesting that almost a quarter of larger employers are recruiting staff in that way?
This is the reality for many people in this country—not for the Chancellor’s millionaire pals, but for the millions of ordinary people in this country who are facing the reality of unemployment and, for those in work, squeezed living standards, under-employment and increasing insecurity. The truly startling but unsurprising reality, confirmed by the OBR, is that people will be worse off in 2015 than they were when this Government came to power.
What was the Chancellor’s response to this dire situation on 20 March? A package of measures genuinely and urgently to kick-start our flatlining economy, boost confidence, stimulate investment and create jobs? No. A recognition that his plan has completely and demonstrably failed? Again, wrong. What this country urgently needed was a Budget with the X factor. Instead, we have a one-direction Chancellor who clearly believes that it is impossible to admit that he got it wrong and to change course. We got a more of the same Budget from a more of the same Chancellor, who would rather continue down the same path no matter what long-term damage it does to our economy and to local communities than come clean with the British public.
Of course, there were some welcome measures. The Opposition have consistently called for a tax break for small firms taking on new workers and the Chancellor is now set to introduce a scheme. Let us hope that it has a better success rate than his previous policy which, at the last count, has created 70,000 jobs, which is to be welcomed, but which is just a little shy of the original prediction of 800,000. On tax avoidance, the Government are consulting on how to clamp down on abusive payroll services based in tax havens, as well as confirming their intention to strengthen the tax disclosure provisions introduced back in 2004 by the Labour Government. Again, those are both areas where the Opposition have been calling for urgent action for some time.
Despite all the tough talk on tax avoidance, we continue to get a series of mixed messages from the coalition and a lack of real action. We repeatedly hear the Chancellor and the Prime Minister claiming to be leading on international tax avoidance action at the G8, yet days ahead of the meeting the Exchequer Secretary boasted that the UK has moved ahead of Ireland, the Netherlands and Switzerland in “tax competitiveness”. I wholeheartedly agree with the sentiments expressed by the hon. Member for The Cotswolds (Geoffrey Clifton-Brown), who is not in his place at present. He rightly pointed out that the UK needs to be careful of promising competitive tax rates if companies get away with not even paying them. He also rightly pointed out that we need to analyse what impact tax avoidance has on developing countries. We will introduce amendments to that effect.
Perhaps the most mixed message of all is the coalition’s incredible decision, announced in last year’s omnishambles of a Budget and confirmed in this year’s Budget document, to give some of the wealthiest people in this country an average £100,000 tax cut this month. A Chancellor who claims that he finds tax avoidance “morally repugnant” is determined to carry on with his game of “Who wants to bung a millionaire?”, reducing the 50p rate of income tax because the “behavioural response” was “larger than expected”. No doubt he will have phoned a few friends last weekend to remind them of his good news. This means, in effect, that top earners have been so nifty at shifting their income to minimise their tax liability that this Government, who talk tough on tax avoidance, are rewarding them by cutting the rate. Liberal Democrat colleagues will be telling themselves that this indefensible decision does not matter and that everything is okay because of the much-trumpeted increase to the personal allowance. But they have not quite owned up to the fact that families on average will be £891 worse off in this tax year, and cuts to tax credits and benefits have been introduced since 2010.
Indeed, the small rise in the personal allowance is hugely outweighed by the cuts to tax credits and child benefit, the bedroom tax, the granny tax and the increase in VAT, which the Liberal Democrats campaigned against so vociferously before it was announced in June 2010. The straight fact is that the dire economic situation in which we find ourselves is of the Chancellor’s making and that of the coalition Government, but the brunt is being borne by millions of ordinary people and local businesses—
Catherine McKinnell
The dire economic situation demanded an urgent response from the Chancellor. Indeed, the director general of the British Chambers of Commerce, John Longworth, said:
“We are at an unprecedented moment in our economic history, and the government should be doing everything in its power to get the economy moving. Many of the Chancellor’s measures are positive but may come too late, particularly for smaller and medium-sized companies. We need urgency, scale and delivery today.”
We agree, but what we got from the Chancellor and what we have before us this evening is a bit of tinkering around the edges and more of the same. It is just not good enough and Britain deserves better. That is why the Opposition will vote against this inadequate Budget from an inadequate Chancellor who is increasingly out of touch and totally out of his depth.
The Economic Secretary to the Treasury (Sajid Javid)
In debating the Finance Bill and the economy, one is reminded of the late noble Baroness Thatcher. As my hon. Friend the Member for Macclesfield (David Rutley) said, let us never forget that she rescued the country from a permanent sense of decline and restored economic strength and prosperity. She was our greatest peacetime Prime Minister. May she rest in peace.
We have had a lively and wide-ranging debate, with particularly thoughtful contributions from my hon. Friends the Members for Cities of London and Westminster (Mark Field), for Redcar (Ian Swales) and for Macclesfield. The best I can say about the contributions from the Opposition Benches is that we heard a lot of warm and fluffy talk about motherhood and apple pie but not a single idea on how to rescue our economy from the mess the Labour party created. This Government inherited a shocking legacy. The country will never forget the consequences of 13 years of Labour government: the largest deficit in the G20; the deepest recession since the second world war; and the world’s largest banking bail-out. We have taken action to cut the deficit, stimulate the economy and create a fairer and more efficient tax system. The Bill continues along that path.
Let me focus first on growth and competitiveness. The Bill builds on previous Bills by introducing a range of measures demonstrating the Government’s commitment to supporting growth and enterprise. Against the background of external challenges, such as the continuing crisis in the eurozone, it is vital that the UK tax system attracts investment to this country and does everything possible to ensure that UK businesses can compete in the global economy. The Government have already significantly reduced the tax burden on business. In 2013, corporation tax will be 23%, significantly lower than the 28% inherited from the previous Government.
Since we embarked on those reforms, we have seen a number of high-profile businesses returning to the UK or coming here for the first time, including WPP, Lancashire, Aon, Rowan and Seadrill. But we want to go further. The additional reductions set out in clauses 4 and 6 mean that the corporation tax rate will reach 21% in April 2014 and just 20% in April 2015, the lowest rate in the G20, and lower than any comparable EU member state.
But competitiveness is about more than just the rate of corporation tax. That is why the Bill also includes measures to give targeted support to the innovative sectors that will drive growth in the 21st century. Clause 34 delivers an above-the-line tax credit for large companies’ R and D expenditure, with an increased rate of support of 10%. That will provide a more visible and certain relief and greater cash flow support to the wide range of companies engaging in groundbreaking research in the UK.
Clause 35 legislates to bring in new tax reliefs for the UK’s world-leading creative industries, including animation and high-end TV. That will be among the most effective reliefs anywhere in the world.
The Bill also includes measures to support small and medium-sized businesses, which are the bedrock of our economy—points that were made very well by my hon. Friends the Members for Macclesfield and for Cities of London and Westminster (Mark Field). Clause 7 introduces a two-year increase to the annual investment allowance that has been in place since January. That will make it easier for firms to bring forward capital investment in plant and machinery, helping support businesses to grow and invest.
Clause 56 implements an extension of the successful capital gains tax holiday for the seed enterprise investment scheme, to support investment in new and early-stage firms to help give them the support they need to grow. Clause 63 enhances the tax advantages available under the enterprise management incentive, helping smaller, higher-risk companies to recruit and retain high-calibre employees. Low corporation taxes, support for innovation and help for small businesses—this Finance Bill sends the clearest possible signal that Britain is open for business.
We are also taking action to support the UK’s oil and gas industry. Clauses 77 to 90 support a new contractual approach to provide certainty over decommissioning relief on the UK continental shelf. The Government will sign contracts this year allowing the sector to unlock billions of pounds of additional investment, helping to create thousands of new jobs in Scotland and beyond.
Sir Malcolm Bruce (Gordon) (LD)
My hon. Friend is making an important point about the Government’s assistance to the oil and gas industry. Does he acknowledge that that has contributed this year to the biggest single investment in North sea oil and gas since they were discovered?
Sajid Javid
My right hon. Friend makes an excellent point. I am convinced that there will be further significant investment in that important industry because of the measures in the Bill.
I turn to fairness, which is at the heart of the Bill. The Bill helps families with the cost of living while making sure that the best off in our society pay their fair share. The increase in the personal allowance in clause 2, mentioned by my hon. Friend the Member for Redcar and others, will set the value at £9,440 for April this year, an increase of £1,335—the largest ever cash increase. It will save a typical basic-rate taxpayer £267 in cash terms and it is a tax cut for 24 million people. That is a major step towards the Government’s commitment to raise the personal allowance to £10,000 by the end of this Parliament. My right hon. Friend the Chancellor announced in the Budget that that goal will be reached next year, a whole year ahead of schedule.
Taken with previous increases in the personal allowance, the Government have taken 2.7 million people out of income tax altogether, providing real help for low and middle earners and rewarding work by enabling workers to keep a greater share of what they earn.
The Government also recognise the rising cost of fuel and the pressure that that puts on the finances of households and businesses. That is why we have decided to cancel the increase in fuel duty planned for September 2013. Clause 177 will freeze fuel duty at current levels, maintaining the longest freeze in fuel duty for 20 years. Under this Government, average pump prices are 13p per litre lower than if we had implemented the plans that we inherited from the previous Government.
When ordinary households are experiencing real pressure on their incomes, it is particularly important that tax reliefs are well targeted and cannot be used without limit by those on the highest incomes to reduce tax bills. Clause 16 legislates for a new cap on certain unlimited tax reliefs from this April to curtail excessive use of those reliefs. The cap will be set at £50,000 or 25% of the relevant person’s income, whichever is the greater, ensuring that the reliefs cannot be exploited unfairly. The cost of pensions tax relief is rising and has doubled in a decade since 2001. This Finance Bill therefore legislates to reduce pensions tax relief lifetime and annual allowances to £1.25 million and £40,000 respectively to limit the amount of relief available to the top 2% of pension savers.
Fairness is also about making sure that everyone plays by the same rules. The vast majority who pay their taxes will, rightly, not tolerate non-compliant individuals and businesses not paying the tax that they owe, and this Government agree. To that end, the Bill includes a major package of measures to crack down on tax avoidance by a small minority who refuse to pay their fair share. Clauses 203 to 212 and schedule 41 legislate for the UK’s first general anti-abuse rule, or GAAR. This is one of the most significant changes to UK tax law. It will have a strong deterrent effect on those concocting abusive tax avoidance schemes or considering using them, and where they persist it will give Her Majesty’s Revenue and Customs an effective new tool to tackle these schemes.
Simon Hughes (Bermondsey and Old Southwark) (LD)
Let me say to my hon. Friend and to those on the Treasury Bench that his announcement about a general anti-tax avoidance provision is hugely welcome, particularly in London, where people have seen companies get away with not paying taxes for many years—something that no previous Government have adequately dealt with. It is very welcome and we look forward to it becoming law as soon as possible.
Sajid Javid
I welcome my right hon. Friend’s support for the measure.
This Finance Bill includes measures to close 15 loopholes that have been used to avoid tax. Nine of these provisions have immediate effect from Budget day, and one—on tackling stamp duty avoidance—is backdated to the previous Budget, following the Chancellor's clear warning in 2012. This demonstrates the Government’s continuing commitment to fast, effective and targeted action to tackle avoidance. In addition, we are strengthening the successful disclosure of the tax avoidance schemes regime to increase the information that promoters of tax avoidance schemes have to provide about the users of their schemes. Together with the GAAR, these measures will increase tax revenues by almost £l billion by 2017-18, as well as protecting future revenues. In addition, the Government are investing almost £1 billion in HMRC’s compliance activities in order to raise additional revenues of £22 billion per annum by the end of 2014-15. This represents £9 billion more in compliance revenues—a 70% per cent increase since 2010-11.
This Finance Bill introduces a package of measures to ensure that owners of high-value properties cannot avoid paying their fair share of tax by placing their property in a corporate envelope. From April, residential properties held by certain non-natural persons that are worth more than £2 million will be subject to a new annual tax on enveloped dwellings. The Bill also introduces a new capital gains tax charge on these non-natural persons disposing of such high-value properties from April 2013.
Allow me, Mr Speaker, to draw my remarks to a close. [Hon. Members: “Hear, hear!”] I thought that that would bring a cheer. Finance Bill 2013 is a Bill for growth and fairness. It encourages investment, it supports innovation and entrepreneurs, it provides real help to families and working people, it tackles avoidance, and it asks those who are better off to pay more. I commend it to the House.
Question put, That the Bill be now read a Second time.
TABLE | |
Proceedings | Time for conclusion of proceedings |
First day | |
New Clauses and new Schedules relating to tax measures concerning housing. | Two hours after the commencement of proceedings on the Bill. |
New Clauses and new Schedules relating to the bank levy; Clauses 200 to 202. | Four and a half hours after the commencement of proceedings on the Bill. |
New Clauses and new Schedules relating to the subject matter of Clauses 203 to 212 and Schedule 41; Clauses 203 to 212; Schedule 41. | Seven hours after the commencement of proceedings on the Bill. |
Second day | |
New Clauses and new Schedules relating to the subject matter of Clauses 1 and 16 and Schedule 3; Clauses 1 and 16; Schedule 3. | Two hours after the commencement of proceedings on the Bill. |
New Clauses and new Schedules relating to value added tax or the subject matter of Clause 3; Clause 3. | Four and a half hours after the commencement of proceedings on the Bill. |
New Clauses and new Schedules relating to air passenger duty; Clauses 183 and 184. | Six and a half hours after the commencement of proceedings on the Bill. |
Hon. Members
Object.
Sittings of the House
Motion made,
That, on Wednesday 17 April—
(1) the House shall meet at 2.30 pm and the moment of interruption shall be at 10.00 pm;
(2) notwithstanding the provisions of Standing Order No. 21 (Time for taking questions), no questions shall be taken other than questions which are in the Speaker’s opinion of an urgent character and relate either to matters of public importance or to the arrangement of business;
(3) the sitting in Westminster Hall shall begin at 2.30 pm and continue for up to four and a half hours; and
(4) in calculating the period of four and a half hours in paragraph (3) no account shall be taken of any period during which the sitting in Westminster Hall may be suspended owing to a division being called in the House or in a committee of the whole House.—(Anne Milton.)
Community Pharmacies
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
Perhaps after waiting a moment for a suitably attentive and perhaps even respectful audience, the hon. Member for Ealing North (Stephen Pound) can rise from his seat to offer the House the benefit of his eloquence.
Stephen Pound (Ealing and North) (Lab)
: I am extremely grateful, Mr Speaker, for your generosity and for the way in which you slowed down through the gears. It is greatly appreciated. I am strangely gratified to see such a well attended House tonight, and delighted on behalf of both myself and the Minister that all our colleagues will be staying here rather than miss a word of this Adjournment debate.
There are many reasons why a humble, insignificant Back Bencher should raise an item on the Adjournment. One can seek the ventilation of an issue; one can seek the investigation of an issue. One can seek adumbration or agitation, and possibly even instigation. In my case, it is with some trepidation that I approach a subject that is originally to do with celebration, but that then moves into the dark world of prognostication and, in the case of the Minister, implication.
There has been a quiet but dramatic and extraordinary revolution in the world of the community pharmacist. The traditional model of the dispensing chemist is as outdated as the mediaeval apothecary. I urge all right hon. and hon. Members to visit the new world of the community pharmacist, which will exist in their constituencies as surely as it does in mine.
It would be invidious to mention individuals in the context of the miracle that is occurring in north-west London, but if I were so tempted, the names of Nilesh Morjaria of the Church pharmacy, of Mahendra Gokani of Mandeville road and of C.K. Nathwani of the Ravenor pharmacy would feature strongly, as would Usha and Dilip Shah of the Alpha pharmacy in Northolt. It was at a visit to that estimable emporium, kindly facilitated by the Royal Pharmaceutical Society in the person of the passionate Charles Willis, once an ornament of this House, that the full range of services now available from what we once called our “local chemist” became apparent.
The Minister will be well aware that the core role of the pharmacist—the dispensing of medicines—has grown from 556 million medicines in 2002 to 885 million medicines in 2011, an increase of 56%. I will return to the current figures. The patient or the customer will find the community pharmacist offering services such as home delivery of medicines and medicines use reviews, which ensure that patients gain optimal use from prescribed medicines—2.4 million people took advantage of such a review in the last year and the outcomes were staggering. Forty per cent. of asthma sufferers showed better asthma management and 55% of patients with chronic obstructive pulmonary disease demonstrated a reduction in symptoms following a medicines use review.
The consequential reduction in emergency visits to accident and emergency departments will bring a warm glow to the Minister’s heart and to the hearts of his Treasury colleagues, as will the new medicine service, which advises patients on the therapeutic use of newly prescribed medicines. Evidence already exists that shows that 31% of those who make use of this new medicines service adhere more fully to prescribed medicines, minimising waste and increasing their effectiveness.
Smoking cessation is one of the supreme achievements of the community pharmacists in my part of the world, and Usha and Dilip Shah have not only improved quality of life by their efforts, but actually saved lives, as theirs is one of the most successful smoking cessation services offered. As one who had his last gasper in February 2006, I can speak of the effectiveness of this service from a position of breathless authority.
There are more than 20 different services cited by the health and social care information centre, including the monitoring of anti-coagulant medicines, minor ailment schemes and supplementary prescribing services, but countless additional services are available, from flu vaccine provision to travel clinics. In the case of C.K. Nathwani, the Ravenor pharmacist, a mobility clinic supplies wheelchairs and dispenses walking frames and commodes, all in a friendly and familiar environment close to the patients’ homes and with no queuing up.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
I recognise that the hon. Gentleman is saying that pharmacists do an incredibly good job, and I agree, but does he agree that we should seek to decriminalise any dispensing errors that pharmacists might make? They can go to prison for such errors, but GPs are merely struck off.
Stephen Pound
Not for the first time, the hon. Gentleman raises an extraordinarily interesting point. I will discuss later the issue of the level playing field for pharmacists. Far be it from me to suggest that he might wish to seek his own Adjournment debate on that subject as it is one of great significance, but I do not disagree with the points that he makes. I look to the Minister for a similar statement.
The Minister will conclude that I have certainly ventilated the approbation and celebration I referred to earlier, but all is not well—all is not sweetness and light in the well-lit and warm world of the community pharmacy. I hope that the Minister and I can agree that the community pharmacist is the third pillar of the NHS and, just as general practice and hospital care defined the early days of the NHS and were labelled as the two great pillars on which the new creation stood, the changing role of the community pharmacist can come to define a third pillar.
The cruel tyranny of time prevents me from fully detailing this proposition, but I refer the Minister and the House to the excellent 2013 UCL school of pharmacy lecture “From making medicines to optimising health”, given by the chief executive of the Pharmaceutical Services Negotiating Committee, Sue Sharpe. Dr Sharpe identifies the intentions of the 2008 White Paper “Pharmacy in England”, while rightly deducing that even in the short time since then the nature of the community pharmacist has changed over and over again. She should also be credited with allowing me to remind the House of the marvellous quote from Auden to which she refers in her lecture:
“Health is the state about which medicine has nothing to say”.
At one level, the picture is one of rosy growth and rude good health. Diversification in over the counter sales has increased the profitability of the pharmacist, and a new form of health care and preventive medicine has emerged almost without notice and certainly without fanfare. The NHS is so effusively documented at every level that I am sure I could find the evidence of my birth in the first week of the NHS in Hammersmith in July 1948, when I was one of the first of what Aneurin Bevan identified as “bundles for Britain’s future”—I like to think that he looked down on me swinging in my white-painted metal bassinet in Queen Charlotte’s hospital and identified me as a class warrior of the future, although I would sadly disappoint him in that area. The fact that I am still alive, however, is a credit to the NHS. In such a system, it is extraordinary that there is a real paucity of documentation relating to the range of services and extent of outcomes of community pharmacy. Hopefully, this will not remain uncorrected, but I freely admit to my concerns about the place of the community pharmacist in the new NHS structures. I very much hope that the Minister will allow me to share these concerns with him tonight, and also allow me to look in gentle supplication to him for some positive suggestions.
The Minister is all too well aware that the Health and Social Care Act 2012 empowers clinical commissioning groups, led by GPs, and health and wellbeing boards to play the key role in shaping local health care services. I contend that commissioning public services on a localised basis may lead to variations in availability, quality and outcomes. I realise that we have discussed this at length, and I do not want to rehash the arguments that wracked the House during the passage of the Health and Social Care Act 2012, but one way in which this apparent deficit could be addressed is through pharmacy representation. There is currently no pharmacy representation on health and wellbeing boards. Such representation could be a catalyst for constructive change in primary care. Even the pharmaceutical needs assessments drawn up by the health and wellbeing boards may lack any input from pharmacists.
The sheer complexity of the arrangements under which the new commissioning arrangements operate can be a barrier to the provision of services. I am indebted to Benjamin Wheatley of Boots for confirmation that individual contracts now require pharmacy contractors to invoice either local authorities or clinical commissioning groups via the NHS shared business services. I have to say that my head aches when I try to contemplate the mechanism whereby one invoices through all these various groups and all the choices concerned. I am all in favour of choice, but sometimes it is ridiculous. In cases such as this, we are actually preventing good people from doing good work. The effect of this additional work load can be catastrophic.
I do not often praise, without reservation, coalition Ministers, with the obvious exception of the hon. Gentleman who adorns the Dispatch Box this evening, but I pray in evidence the words of the noble Lord the Earl Howe, speaking at the pharmacy business awards dinner in 2011—what a night that was—when he said:
“The Government sees pharmacy as integral to every aspect of our plans to modernise the NHS.”
He went on to say:
“there is still some way to go before our reforms are in place. This transition period is an opportunity for pharmacy to make its presence felt.”
I profoundly hope that the transition period does not follow distant historical, if not to say Trotskyist, precedent and aspire to a state of permanent revolution. I sincerely hope that the Government can allow the community pharmacists to do what they do best.
At the present time the playing field is not level, but opportunities there are aplenty. One of the five domains in the NHS outcomes framework—I have to say, Mr Speaker, that the Minister is a good and decent and honourable man, and I have had the pleasure of his company and his acquaintance for many years. I cannot believe that he would ever talk about the “five domains of the NHS outcomes framework.” There are those around us who do and it is to them that we must give credit tonight, but let them come out with this peculiar, strangulated syntax. I hope that the Minister will reply in honest, Norfolk talk.
The NHS outcomes framework refers directly to the quality of life for people with long-term conditions, and this is an excellent opportunity for the community pharmacy, in addition to other qualified health care practitioners, to deliver a key aspect of the Government’s new health care system in England. The pharmacist, as is so obvious when one comes to think of it, may often be the first person to spot a development in a patient’s condition. An early identification can be therapeutically priceless. It is often the community pharmacist who notes that someone has not come in for their medication or, when they are delivering to their home, that the person does not open the door, is looking more tired and pale, or occasionally has something more dramatic such as a nosebleed. This early identification is absolutely priceless, and this is where the role of the community pharmacist has changed beyond almost all recognition. I am seriously worried that such best practice, as recommended by Earl Howe, is threatened by the impact of changing priorities as commissioners change.
The funding passed to CCGs and local authorities is already being used to commission services from community pharmacies, so that for every new service there is a very real possibility that an existing one will be ended. Local authorities will, quite rightly, look to address their own priorities. I referred earlier to the additional pharmacy-led services in England and the huge growth in recent years, but 2012 actually saw a decrease of 5%. It is reasonable to assume that the transition period between commissioners in 2013 and 2014 will see that decline continue. It must be recorded that any diversion from existing services will have an immediate effect on patients. If there is one thing we can all agree on, it is how the community pharmacist has earned the trust of patients and the patient community. It has been so remarkable and beneficial that it cannot be threatened. If there is one thing that patients in long-term care plans in particular are terrified of, it is a change in the structure that could affect their medication and the ability of a community pharmacist to provide for their needs.
The General Pharmaceutical Council is the regulator of pharmacists, and as such pharmacists are not required to register with Monitor or even the Care Quality Commission. This lack of a registration number actually inhibits many pharmacists from applying to provide services under the “any qualified provider” scheme. I do not know why, but they cannot register. I have tried myself to operate the system for registering online. If someone wishes to provide a service, they have to give their registration number, and if they are not entitled to be allocated a number, the whole process stops. I hope that this small but significant and far-reaching improvement is one that, yet again, can be laid at the Minister’s feet, with the gratitude of the people, and that we can be delighted by another Lamb amendment.
Allied with the codification of a requirement for community pharmacist representation within NHS England and the resuscitation of the roles previously identified in SHAs and PCTs, a new model of integrated health care could relieve pressure on general practice, provide local and accessible services, manage long-term conditions and deliver healthy living advice. In my part of the world, we have a huge number of singlehanded GP practices. They are typically elderly men—occasionally women, but usually men—operating in terraced houses. It is most unlikely that they can be sacked—I am not altogether sure they should be sacked—but they need a complementary service, because the singlehanded GP model is simply not appropriate to the dizzying variety of illnesses and conditions that apply particularly in the urban environment at this the beginning of the 21st century. I would like to see a synergy between community pharmacists and general practitioners working together to the benefit of all patients.
Above all, pharmacies can work with the new health bodies, GPs and other health care professions to support a modernised, caring health care system that delivers high standards of patient care. The Minister blanched earlier when I referred to him as a good and decent man. I meant that sincerely. I think that everyone in the House holds the Minister in the same esteem. He is a good and decent man, and I hope that he will consider some, if not all, of the points I have raised tonight and agree with me that a fair following wind from the Government would be greeted with delight and relief by our greatly valued community pharmacists and would go a long way towards ensuring a happy, hale and hearty nation and safeguarding our future.
I have received three messages from parliamentary colleagues inquiring whether this debate is a tribute to that distinguished former chemist, the late Baroness Thatcher. She achieved a great deal in the world of chemistry, and certainly as a woman she was an extraordinary achiever, but community pharmacists perform great miracles every day. Let us hope that the Minister is as convinced of their good will and good work as I am and that tonight he will put his shoulder to that wheel and advance the cause of integrated health care and the role of the community pharmacist.
The Minister of State, Department of Health (Norman Lamb)
I congratulate the hon. Member for Ealing North (Stephen Pound) not only on securing this debate on community pharmacies, but on entertaining us. At the end of a long day, it has been appreciated by the gathering before me, small though it might be. I can assure him that I am not often found talking about domains and the outcomes framework. He and I are at one on that. He talked about the quiet revolution he has witnessed in his constituency and the several fine pharmacies there. They do incredibly valuable work, and I can assure him absolutely that I see a critical role for community pharmacies. He talked about integrated care. They can play a central role in an integrated service for patients, particularly those with the long-term, chronic conditions he referred to, so I am completely at one with him on that.
Today, more NHS community pharmacies than ever offer health care treatment and healthy lifestyle advice and support in England. As I think the hon. Gentleman said, they dispensed 885 million prescription items last year—up 56% from 10 years ago, with nine in every 10 items prescribed. Pharmacies are also involving accessible. Research has shown that 99% of people can get to a pharmacy with relative ease, especially in more deprived communities, perhaps including parts of his constituency. Because of that, many people use their local pharmacy team as the first port of call for all sorts of health problems, both minor and major. Indeed, that might be the first point at which a serious condition is identified. For that reason, pharmacies are incredibly important. For example, many pharmacies now offer services that help patients to get the best from their medicines or provide support for patients with long-term conditions such as asthma who are starting a new medicine.
However, this goes beyond mere statistics. A graph or chart cannot represent the relief of an elderly person who gets help with a niggling cold or cough, the comfort that a pharmacist can provide a young mother worried about her child’s health or the benefits that people with diabetes or heart disease get from good lifestyle advice. This is all because people trust the community pharmacist. That trust is a vital commodity that should be very much valued. As the hon. Gentleman said, community pharmacies help people to live healthier day-to-day lives. I know he saw that for himself when he visited a pharmacy in his constituency recently. Indeed, I visited a pharmacy in my constituency in Sheringham recently. For a photo opportunity, I had a blood pressure test done on my arm. It came out that I had high blood pressure, so I was immediately referred to my GP. It happens that my blood pressure is all right, but that kind of reminder or shock to the system—in this case experienced by me—is of enormous value to many people, and he was right to highlight that.
The pharmacy that the hon. Gentleman visited has, like many others, helped thousands of people to quit smoking. He talked about his own experience. I am not sure whether he got help from a pharmacy, but I remember as his next-door neighbour over in Norman Shaw North that he used to smoke like a chimney and he has now stopped. That is an admirable achievement. Nearly three quarters of all pharmacies in England gave out quit kits last year, many as part of the Stoptober campaign, which was an enormous success.
Our pharmacies show how they can be proactive, not reactive places, genuinely improving people’s health and well-being on a daily basis, so I welcome the endorsement that the hon. Gentleman gave to the pharmacy’s history of good service. Demand for health care will increase. An increasing population, with people living longer and needing more treatment, means that we must harness every available resource to meet those needs. We want to see pharmacy’s contribution flourish in the future, very much as a central part of local health provision.
Only a fortnight ago, far-reaching changes to transform commissioning health care in England came into effect. Clinicians, not managers, are now in the driving seat. The NHS Commissioning Board—now NHS England—has responsibility for commissioning all NHS primary care services, including pharmaceutical services. We expect NHS England to involve clinical commissioning groups where appropriate, because they know the needs of their local populations best. To meet those needs, CCGs are free to commission further services over and above what NHS England commissions. If they want to, and if it is appropriate, CCGs can commission those services from pharmacies. Local authorities now have the powers and funding to commission public health services, such as stopping smoking or sexual health services, and are free to commission from pharmacies. That provides an enormous opportunity to pharmacies. There is an increase in the public health budget this year and next. It is important for pharmacies to get stuck in and make their case to local authorities about the service they can provide—accessible to all, on the high street and trusted, as we have agreed.
These are far-reaching and necessary developments. It is therefore important that new commissioners are fully aware of pharmacy’s potential. That is why the pharmacy and public health forum, chaired by Professor Richard Parish, has been working on how pharmacy can best enhance its role in public health, with more research into pharmacy’s contribution.
Our goal is to allow the new commissioning arrangements to make people healthier. The hon. Gentleman referred to integrated care, which I also mentioned earlier. The Government intend to focus on trying to achieve an integrated care model across the country, moving away from the fragmented nature of health care delivery towards a much more integrated model, and pharmacies can play an absolutely central role in that approach. Pharmacy has an excellent reputation when it comes to integration. I know that pharmacies have a track record of providing quality services that people value, and that patients and consumers hold pharmacy in high regard, so all commissioners should recognise the potential of community pharmacies. It is also clear that the relationship should work the other way, too. Just as commissioners support pharmacies, pharmacies should also be ready to support commissioners by making available their professional experience and specialist clinical expertise. Pharmacies should make the case to commissioners as to why they should consider the role of community pharmacies.
The hon. Gentleman referred to community pharmacy’s concerns about the new commissioning arrangements, and I hope that I can address some of those concerns and reassure him. The first big concern involves the availability of senior pharmacy expertise and pharmacy’s role in commissioning. I want to assure the hon. Gentleman that the chief pharmaceutical officer for England is already part of the senior management team at NHS England. NHS England is looking at how its regional and area teams can make use of appropriate pharmaceutical advice.
The hon. Gentleman also pointed out that some pharmacists are concerned that they are not represented on CCGs. We deliberately did not prescribe set lists of other health professionals who should be on CCGs’ governing bodies. CCGs must be free to decide that for themselves, because it is they, not us, who know exactly what is suitable for their communities. If every single profession were represented on every single board, that would make for bloated and top-heavy organisations, which is exactly the opposite of what we want to achieve. However, CCGs have a duty to get advice from a broad range of health experts. CCGs can involve pharmacy, and I would expect that involvement to be commonplace, given the extent to which pharmacies are involved in people’s care. I am sure that the existing local pharmaceutical committees and the new local pharmacy networks will be more than willing to offer advice and support to commissioners. I hope that they will do so, and that they will make the case to the commissioners that they can improve care.
The second big concern involves the potential for pharmacy-led care to stop. I understand that concern—it is natural at a time of transition and significant change—but I do not share the apprehension. I see a potentially greater role for pharmacies, if they can make their case effectively. NHS England is legally required to commission pharmaceutical services that meet health care needs. It bases that on the assessments of pharmaceutical needs for which the health and wellbeing boards are now responsible. As I said, pharmacy’s reputation is well established. Commissioners are not going to stop effective and proven pharmacy services overnight. I can reassure the hon. Gentleman that, as CCGs have no power under the Health and Social Care Act 2012 to commission pharmaceutical services, they cannot cut or decommission those services either.
Will some things change? Yes, of course they will. We would not have embarked on our reforms of the NHS if there had been no need for change. For example, local authorities have already taken over responsibility for public health services such as smoking cessation services. Pharmacy absolutely has its place in the new NHS. Not only that, but in my view it must surely grow to meet the increasing needs of our communities. The reformed commissioning environment provides new opportunities for pharmacies. If they remain passive and do not seek to make their case, they will suffer, but if they go out and make the case for the central role that they can play, for their accessibility and for the trust that the community has in them, they will be able to thrive and prosper, particularly given the focus on a new integrated care model. They can demonstrate how they can improve health and improve people’s well-being.
The third big concern is that CCGs’ commissioning decisions will be unduly influenced by people with a vested interest in securing contracts and cutting pharmacies out of the equation. The Department’s view is that this is unlikely to happen. The idea that members of CCGs will secure all the profitable and lucrative services for themselves is a pretty negative view, and one that I do not share, but of course we have to be vigilant.
We will not allow a situation to develop where profits come before patient care or patient choice. That would be in direct contradiction of the founding principles of the NHS, and it must not happen. We have put robust governance arrangements in place and guidance was issued last year to all CCGs. Registers of interests must be maintained and available for public scrutiny. Members and employees must declare any conflict or potential conflict in relation to a decision to be made by the group, and there are effective sanctions if those principles are breached. In addition, the General Medical Council published updated guidance for doctors last month. It comes into effect a week from today, on 22 April. It includes a section on doctors’ financial and commercial arrangements and conflicts of interest. The GMC has provided supplementary guidance explaining how doctors can put those principles into practice.
I conclude by thanking the hon. Gentleman once again for the opportunity to discuss the crucial role of community pharmacies in the new health and care system. The new arrangements will allow commissioners and pharmacists to work closer together, not in opposition. There will be new opportunities for better and more flexible pharmaceutical care arrangements that are both relevant and accessible to local people. Underpinning these will be effective governance—