House of Commons
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Prayers
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
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Co-operative Schools
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
I beg to move,
That leave be given to bring in a Bill to enable schools to register as Industrial Provident Societies; to amend the Education Act 2006 to enable nursery schools to be established as school trusts; and for connected purposes.
The Department for Education’s vision, which is shared on both sides of the House, is for a highly educated society in which opportunity is more equal for children and young people, no matter what their background or family circumstances. I am presenting a Bill to take forward that vision, and part of that is about a society that values self-help, self-responsibility, democracy, equality, equity and solidarity. These are the values of the co-operative movement and the Co-operative party, which I am proud to represent in Parliament, and of the Schools Co-operative Society, which is the co-ordinating body of co-operative schools.
Those values are also evident in co-operative trust schools, where everyone—teachers, parents, pupils and the local community—work together for their mutual benefit. Performance improves, pupils learn and are more engaged in the life of the school, and the best possible environment for young people to learn and develop is created. Everyone is encouraged to take responsibility for themselves, while the local community has a say in how the school is run. With a commitment to equality and equity, everyone is helped to be the best they can.
In 2008, Reddish Vale technology school in Stockport became the first co-operative trust school in England. Working with the co-operative college, it developed a co-operative model for foundation schools with a trust, following the enactment of the Education and Inspections Act 2006. In 2008, the Prime Minister, then Leader of the Opposition, spoke of the desire to see a
“new generation of cooperative schools...funded by the taxpayer but owned by parents and the local community.”
There is no sign, however, that this has been attempted. Academies have become the centrepiece of education policy. Nor has the free schools policy led to a new generation of parent-owned co-operatives. To date, just one of the free schools is expected to operate as a co-operative. Much is said about choice in education, but if this is to become a reality, we need to allow co-operative school trusts to flourish and remove the hurdles that make that difficult.
At the moment, the legal forms of co-operatives are determined as industrial and provident societies, or co-operative or community benefit societies, and there is no provision in the relevant Acts for co-operative schools. They have to work around the existing legislation in a clumsy and confusing way. Clause 1 of my very short Bill would therefore seek to amend Education Acts to include those legal forms and so ensure a level playing field with other school structures.
Despite the legal difficulties, in just five years, co-operative schools have become the third-largest grouping within the English education system, with currently more than 450 operating. Thirty have become co-operative converter academies, a few are co-operative sponsor academies and we have seen the creation of the first co-operative multi-academy trust. Those that have led the process are confident that growth will continue. So far, numbers have doubled every year, and with many more schools adopting this model, we can expect more than 1,000 schools to be using co-operative models by the time of the next general election.
The Co-operative college provides an effective support system, and the Schools Co-operative Society has been established as the national network of co-operative schools in England. Through the extensive network they have built, co-operative schools have access to mutual and targeted support to achieve the highest standards. They have developed a distinct model that enables schools to embed co-operative values into the ethos of the school. This also includes ethical values in keeping with those of the founders of the co-operative movement—openness, honesty, social responsibility and caring for others.
In Cornwall, a group of schools have joined together to protect their sense of community. The head teachers from Sir James Smith’s school, Helston community college and Upton Cross primary school have all spoken about the importance of solidarity and letting local people work towards a shared vision and mutual solutions in education. The newly formed Multi-Academy Trust in Barnsley works with three other schools and, through the establishment of the Pioneer Academies Co-operative Trust, has ensured that the community is at the heart of all it does. Lipson community college in Plymouth was an early co-operative trust school and is now a co-operative academy. Its arrangements for involving parents—Parent Voice—was recognised as outstanding in an Ofsted survey on parental and community engagement. Student Voice at da Vinci college in Derby gives pupils a real role in school decisions, allowing them to sit in on interview panels and join the staff on training sessions.
As the Secretary of State for Education has recognised, when extending the academies programme to primary schools, it is vital that children get the best foundation at primary level to realise their potential at secondary level. I agree, and I think we also need to get it right at nursery level. Many co-operative networks and co-operative trusts are based on strong geographical clusters. They wish to raise achievement by supporting young people from nursery to school-leaving age, yet the Education and Inspections Act 2006 prevents nurseries from setting up as school trusts. Nursery schools are in many ways the most naturally co-operative part of the education sector, with their engagement with parents and carers. Enabling nursery schools to become full members of trusts would strengthen that engagement in early years and help to develop the nursery-to-secondary vision of education that best enables young people to realise their potential. Consequently, clause 2 of my Bill would remove the relevant provisions in the 2006 Act and would enable nursery schools to be established as school trusts.
I believe that co-operative schools are well placed not only to ensure high standards of education, but to teach children that the values of co-operation have a great deal to offer. Pooling resources across schools is something to be welcomed at a time of austerity, but doing so at any time ensures a productive, collaborative approach and the most effective use of resources. For young people, the experience of supporting each other in school, along with seeing the support that the community and other co-operatives give, helps to shape character and inculcate a positive approach towards others. There is evidence that young people brought up in that environment continue to contribute to their communities long after they have left school. In the words of Pat McGovern, head teacher at Helston community college,
“The last thing the people of Cornwall want is to see a big education chain coming in to run school services and take money out of the area…Our co-operative is about a mutual solution to local needs.”
The education system should always be based on support, collaboration and co-operation at every level.
Question put and agreed to.
Ordered,
That Meg Munn, Mike Gapes, Mrs Louise Ellman, Mr Andrew Love, Meg Hillier, Mr Steve Reed, Seema Malhotra, Mr Barry Sheerman, Mr Gareth Thomas, Dan Rogerson and Andy Sawford present the Bill.
Meg Munn accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 26 April, and to be printed (Bill 160).
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
On a point of order, Mr Speaker. My hon. Friend the Member for Cardiff West (Kevin Brennan) and I would be interested to know whether you had notice of a statement from the Minister for Sport on the remarkable news that was confirmed last night that, as of next season, as a result of Cardiff City’s promotion to the premier league last night, 10% of the clubs in the English premier league will in fact be Welsh.
Mr Speaker
I have received no notification of any such ministerial statement, but the statement, albeit one not of an official character and not by a Minister, has just been delivered by the hon. Gentleman.
Finance (No. 2) Bill
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
16:44 - The Committee divided: - Ayes: 234 / Noes: 304 - Question accordingly negatived.
19:14 - The Committee divided: - Ayes: 234 / Noes: 294 - Question accordingly negatived.
21:44 - The House divided: - Ayes: 0 / Noes: 0 - Question accordingly negatived.
21:58 - divided: - Ayes: 223 / Noes: 276 - Question accordingly negatived.
Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss new clause 5 —Mansion tax
‘The Chancellor shall review the possibility of bringing forward a mansion tax on properties worth over £2 million and publish a report, within six months of the passing of this Act, on how the revenue could be used to fund a tax cut for millions of people on middle and low incomes as part of a fair tax system.’.
Chris Leslie
This first group of new clauses to this year’s Finance (No. 2) Bill relates broadly to issues of housing policy. Sadly, new clause 6, which urged the Chancellor to focus on the availability of affordable housing particularly in the wake of the bedroom tax, has not been selected for debate. My hon. Friends will be delighted to know, however, that new clause 5 seeks the support of Parliament for a review of a mansion tax on properties worth over £2 million and the earmarking of revenues for a tax cut for low and middle-income households.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
My hon. Friend has just referred to the bedroom tax, and we all know that this has huge implications for the future finance of our country. Does he think that those implications are reflected in the Bill?
The Chairman of Ways and Means
Order. Much as that issue might be in Members’ minds, we are unfortunately not going to discuss it. I allowed a little bit of sailing earlier in the opening comments, but we must now deal with what is on the Order Paper.
Chris Leslie
You are of course entirely correct, Mr Hoyle, as we are debating new clauses 1 and 5. New clause 1, however, talks about the Government’s approach to the housing market more broadly and, in the context of taxpayer support for the housing market, it would be remiss of any hon. Member not to recognise the volatility created by consequential changes in other areas of departmental policy, particularly those of the Department for Work and Pensions, as they affect the availability of housing supply. After all, in most of our constituencies and particularly the least well-off ones across the country, there is a sense of foreboding about the potential displacement of many constituents who are being told that they should look for other housing market options when it is, in fact, quite clear that there are no suitable social housing options to fit the circumstances of nine out of 10 of them. You are completely correct, Mr Hoyle, about the nature of new clause 1.
Jack Dromey (Birmingham, Erdington) (Lab)
On that point and before my hon. Friend moves on, does he agree that the impact of the totality of the welfare changes, including universal credit and the factoring in of housing associations’ bad debts, will have a very serious impact on housing supply—including with respect to the recent profoundly disturbing calculation by the G15 group of housing associations in London that as a consequence of the Government’s welfare reforms, they will build 1,200 fewer badly needed affordable homes next year?
The Chairman of Ways and Means
Order. We need to stick to where we are. I know that Members are being tempted, but much as we might like to go down that route, I know that we are not going to do so.
Chris Leslie
New clause 1 talks about the way in which the Government’s approach may target help on those who want to buy a second home. In tabling new clause, we were concerned that we should prioritise those who need their first home—a primary residence. That is an important part of our argument in new clause 1.
Chris Leslie
No one knows more about housing issues than my hon. Friend the Member for Birmingham, Erdington (Jack Dromey)—with, perhaps, the exception of my hon. Friend, the Member for Clwyd South (Susan Elan Jones), to whom I am happy to give way.
Susan Elan Jones
I am sure that I do not know more than the first-named hon. Friend.
Does my hon. Friend think that what could effectively become a holiday-home subsidy will end up having a disproportionate effect in rural communities? We know what has happened in north and west Wales in the past, but could not the same apply to the Lake District, Cornwall and other rural areas? Will my hon. Friend be asking the Minister whether any impact assessment has been carried out in relation to the potential cost of rural housing? This move is an absolute disgrace.
Chris Leslie
My hon. Friend ought to know by now that this particular Treasury does not go in for assessments based on evidence. In fact, we are lucky that there was a fag packet on which the Chancellor could draw up his plan.
My hon. Friend needs to recognise that the Budget was not designed to deal with the needs of the economy, the housing market or the rural communities to which she has referred. It was designed entirely to save the Chancellor’s skin, and to support his ideological approach and the extreme austerity agenda that he has been pursuing. Because he had been failing on the deficit and borrowing, he decided to design a housing market intervention that fell below the line—that added up in terms of national debt, but did not affect his borrowing figures. The convoluted scheme that he created may have a series of perverse consequences, because it was not designed to meet the needs of housing or of the communities that we represent. It was designed merely for the Chancellor’s own convenience, in the light of his disappearing and diminishing personal prospects.
We all know, or at least Labour Members know, that housing is the bedrock of a stable community, strong families and economic progress, and that the adequacy of housing availability is crucial to our economic recovery. There should be a cross-party consensus on the need to help families to get a foot on the housing ladder and helping people to fulfil their aspirations and provide a decent foundation for the future. However, despite the warm words about housing that we have heard for the past three years, the Government’s record is poor, and the housing investment measures in this Budget—like those in previous Budgets—fall well short of what is needed and what Labour Members would advocate. What hope can there be for hard-working families who are struggling to get on to the housing ladder, given the current mismatch between supply and demand? House building has fallen, rents are rising, home ownership is becoming harder rather than easier so that the goal for young families is becoming less and less achievable, and homelessness has risen.
Andy Sawford (Corby) (Lab/Co-op)
I agree with my hon. Friend’s assessment of the likelihood that the Government’s latest measures in the Bill will significantly improve people’s opportunities to buy their own homes or gain access to housing on the rental market. Are we right to take account of the Government’s track record over those three years when making such an assessment, and am I right in thinking that the Government have announced 300 housing measures which have caused the situation to become worse rather than better?
Chris Leslie
It could almost be said that there have been more announcements than new homes constructed under the present Administration. Let us consider a few of the schemes that they have announced.
My hon. Friend will recall the new homes bonus, which was part of the Government’s so-called localism agenda, because he and I have spent some time examining that particular set of policy options. The scheme, which the Government announced in 2010, was supposed to unleash growth and build at least 400,000 additional homes, but it has totally failed to deliver. The number of housing starts fell by 11% last year, to below 100,000—less than half the number required to meet housing need.
Andrew Gwynne (Denton and Reddish) (Lab)
How confident can we be that this new initiative will be any more successful than the others that my hon. Friend is beginning to outline? He will remember, as we do, the NewBuy scheme, which the Prime Minister promised would make 100,000 new properties available to people. In fact, only 1,500 people have secured new properties as a result of that initiative.
Chris Leslie
My hon. Friend has hit the nail on the head. Imagine announcing such a scheme, and then delivering only 1.5% of the goal that the Government set out so confidently at the inception of that project, which has clearly failed. We want to see the careful and detailed thought, piloting, workings and evidence that the Government have put into this latest venture.
Chris Leslie
I am sure that the hon. Gentleman is now going to assure us that all that careful and thorough work has been done.
Mr Jackson
The hon. Gentleman is being most generous in giving way. We would take his critique a little more seriously, had not his Government’s regional spatial strategy delivered the lowest number of homes since 1923, doubled the number of homeless families and built 117,000 homes on flood plains between 1997 and 2005. Is that not the reality of the Government he supported between 1997 and 2010?
Chris Leslie
Setting aside the fact that there is probably the lowest number of Conservative MPs here in the Chamber today since 1923, they do not have room to criticise any previous Government on these issues, let alone the last Labour Government. We believe that there is a crying need for housing, which is one of the crucial foundations for future economic prosperity. It is about time Government Members recognised that they have had three years in power, and have their own record to defend. They have to take some responsibility for the decisions they have been supporting.
I do not know whether my hon. Friends recall the infrastructure guarantee scheme, a key feature of the summer before last. It was part of the Government’s emergency legislation, and they rushed it through Parliament. It was supposed to enable guarantees to underpin £40 billion of investment in infrastructure and £10 billion-worth of new homes, including 15,000 new affordable homes. However, so far as I can see—I am sure the Minister will intervene if I am wrong—not a single tangible penny of support from that scheme has been allocated for house building. I am happy to give way to the Minister if he wants to correct me.
Chris Leslie
I am just waiting to see whether the Minister wants to intervene. [Interruption.] It seems that he does not, so I give way to my hon. Friend.
Andy Sawford
My hon. Friend questions the confidence we can have in voting on the measures in the Finance Bill, given the Government’s performance in the last three years, and rightly mentions their infrastructure guarantee scheme. According to my assessment, they have begun 15% of the 576 projects in the national infrastructure plan, so we have no reason to have any confidence in the measures in the Bill.
Chris Leslie
I know that the Minister pursues his duty to this House with great diligence and that, in responding to the debate, he will want to update us in detail on the number of extra houses that have been forthcoming as a result of the vital emergency legislation that the Government put through. It would be extremely helpful if he did so. However, it is clear to us that the overwhelming barrier for the housing market to overcome has been the 60% cut in the affordable housing budget made in the 2010 spending review, and of course, matters have been made worse by the subsequent lack of growth in the economy. It is therefore no wonder that the Chancellor felt the need to reboot his various schemes back in March. That is why we come now to the Government’s Help to Buy scheme, the detail of which I want to spend a little time considering.
Mr Stewart Jackson
I pay tribute to the Minister, who does indeed know what he is talking about, having been, like me, a member of the board of management of the New Local Government Network. If there is a Labour Government within the next year or so, will the hon. Gentleman abolish the affordable rent model and put funding directly back into social rent—yes or no?
Chris Leslie
I will come to some of those details because I think it important that we look at the contrasting policy options for housing support. My hon. Friend the Member for Birmingham, Erdington has been developing our plans for house building and housing supply in a number of different ways, and I will touch on those, if I may, after having looked at the Government’s approach: the Help to Buy scheme, which consists of two parts, the first being an equity loan element. The Government have said that they want to extend what was known as the First Buy scheme—there are so many names that it is sometimes difficult to keep track—whereby people would purchase new build homes up to a value of £600,000 and could borrow 20% of the value of the property interest free for five years in return for the Government taking a stake in the equity. The fee for that would increase annually, but only in line with inflation, so the Government are essentially committing, they say, up to £3.5 billion over the next three years to this shared equity loan scheme.
Sheila Gilmore (Edinburgh East) (Lab)
In many parts of the country, although perhaps not in London, the property value being suggested is extremely high. Instead of concentrating on people in the lower income bracket looking for property of lower value, the scheme will be open to people who arguably do not need help to get on to the housing ladder.
Chris Leslie
It comes down to whether the Government have designed the scheme adequately. Is it best to have a broad-brush approach, or should we be targeting help at those who need it most? The Opposition favour the latter.
Alison McGovern (Wirral South) (Lab)
My hon. Friend has made an important point about the action the Government have already taken. Does he agree that their action has failed to work because of their mismanagement of the macro-economic system? In a world where people see food prices going up and do not have enough money in their pocket for a weekly shop, the idea that we can have a housing market that works well is not at all realistic.
Chris Leslie
The economic background is absolutely key. If we had seen a continuation of the recovery that was beginning to get under way back in 2010, we might have been in a different position. But no, the Government pulled the rug from under the confidence felt by consumers or businesses and in the housing market, too. We have seen a series of consequences as a result. Let us face it: the main problem, particularly for first-time home buyers, is the supply of housing and its cost.
Jack Dromey
On that point, was it not folly for the Government to cut £4 billion from affordable housing investment in 2010, leading to a 68% collapse in affordable house building? Would it not be more prudent now to endorse the shadow Chancellor’s proposal that the 4G moneys should be spent on building 100,000 affordable homes as much the quickest way of getting the housing market moving and, in turn, of getting our economy moving?
Chris Leslie
It is absolutely true. We have to face facts. We have to put direct support into housing supply. These rather opaque and indirect attempts to manipulate the public accounts with complicated and convoluted guarantees and underwriting arrangements do not communicate to the wider public who might be consumers of housing—looking to buy their first home or to rent differently. The Government must be far more direct about this approach.
It is clear that the Government’s ideological aversion to supporting the construction of affordable housing still inhibits recovery of the broader housing market. That is why housing starts fell 11% over the last year to 98,000 and why the number of private and local authority home starts was down, and the number of housing association home starts, at just over 19,000, was the lowest for eight years. There are 136,000 fewer home owners than when the Government came to power, and of course the youngest are hardest hit. Apparently, the average age of a first-time buyer is now 37.
We have doubts and questions about whether this Help to Buy scheme will work. Have the Government thought it through sufficiently? There are plenty of organisations focusing on housing policy. The first-time buyers pressure group PricedOut said that the Government should assist construction of more houses where there are chronic shortages. That is absolutely true. However, there is a point about whether help should no longer be targeted at lower and middle-income families, with the cap of £60,000, and used to support first-time buyers. We need from Ministers a thorough analysis of what is happening, particularly how many higher rate, or additional rate taxpayers will be taking advantage of the new scheme. What analysis have they made of that?
Mr David Hanson (Delyn) (Lab)
May I add a further inconsistency to those that my hon. Friend has mentioned? Under the current scheme, a single person could buy a three-bedroom house with a taxpayer subsidy for the mortgage, yet at the same time a social tenant who is single and wants a three-bedroom house is being penalised.
Chris Leslie
Never let it be said that this Government have any consistency whatsoever, but perhaps that is where we should turn to the Liberal Democrats—or the Liberal Democrat as I will henceforth call the hon. Member for Bristol West (Stephen Williams).
There is another part of the Help to Buy scheme. We have talked about the equity loan aspect. The second part is the mortgage guarantee, supposedly designed to help individuals without a large deposit; they may have only 5% and are looking for a 95% mortgage from participating lenders. The Government say they will guarantee up to 15% of the mortgage in an attempt to encourage banks and building societies to offer loans to borrowers with small deposits.
Interestingly, the scheme is not starting in April; it will not start until January 2014. I hope Ministers can explain why they picked that date, because there is a potential risk of forestalling. We may have constituents who are wondering whether they should get on the housing ladder to help their family, or who are in the construction sector wanting to supply new homes. Is there not an incentive for many potential home purchasers to wait—to hold off and not enter the housing market until January next year? Paradoxically, further problems might emerge as a result of the scheme.
Mr John Redwood (Wokingham) (Con)
Does the shadow Minister agree that since the crash of 2008 there has been a chronic shortage of mortgage finance and of new homes being built? Do we not need some way around the problem that RBS and HBOS are so damaged that they cannot supply the normal amount of mortgage credit?
Chris Leslie
The Opposition are not opposed to schemes that are well targeted and well designed to increase affordability for people who want to buy their own home, and we want people to get that first step on the housing ladder, but the way in which the Government are going about these things is shocking.
The funding for lending scheme has shown some signs of altering mortgage affordability at the margins, but it was predominantly designed to boost lending to small and medium-sized enterprises, and in that respect it has not worked at all. In fact, yesterday the Bank of England started talking about doing what the Chancellor should have done in his Budget and properly getting a grip on funding for lending—splitting the scheme in two, to ensure that it provides not only housing support, but particularly SME support.
Alison McGovern
The right hon. Member for Wokingham (Mr Redwood) alluded to a much larger debate that we have had in this place, about banking and banking regulation, but does not that entirely miss the point—that actually the Budget, and this Finance Bill, should be about resetting the recovery from that crash: not about the failure that is still there in the banks, but about the economic management of the country, which this Bill demonstrates above all the Chancellor has got wrong?
Chris Leslie
I do not think it is because the Chancellor does not realise, or is ignorant about the policy options available to him; it is a deliberate choice not to pull those particular levers, and we need to debate that in a wider context.
However, for the purpose of completing some analysis of the Help to Buy scheme, the specific question that we have anxieties about is whether the underwrite scheme will provide unintended support for those wishing to buy second homes—in other words the taxpayer, the hard-pressed taxpayer, subsidising an element of activity that really should not be a priority for the taxpayer at this moment. If people want to take equity out of their property or remortgage, they may do so using traditional solutions provided in the market at large; we have nothing against home owners remortgaging in the traditional way. But the scheme seeks to extend taxpayer guarantees unnecessarily. Effectively, Ministers are saying that if people have a spare room in a social home, they must pay the bedroom tax, but if they want a spare home and can afford it, the Government will help them to buy one. No wonder people are calling this the spare home subsidy.
Mr Andrew Love (Edmonton) (Lab/Co-op)
When the Chancellor was asked to clarify whether help would be available to second home owners, he chose not to do so. Is it not incumbent on Ministers here today to tell the House very clearly whether the scheme can be used for the purchase of second homes?
Chris Leslie
It is absolutely incumbent on Ministers, but this is a Government who just cannot think things through properly. They have set off down the road with a particular design. We have been asking questions for weeks and weeks. My hon. Friends will remember that the Chief Secretary to the Treasury astonished the House when he still could not rule out that the scheme would be used for supporting second home purchase, and there might be a number of reasons for that. For example, if the scheme is supporting remortgages, and a household decides to remortgage, how can the Government have a covenant on how any equity withdrawn from that remortgage process will be used by that home purchaser? That is presumably the obstacle that Ministers are banging their heads against now, and they probably have to look at various covenants and all sorts of legal arrangements for those participating in the schemes.
There are other anomalies in the process. Perhaps the Minister would elaborate on this point: can foreign buyers be subsidised by the UK taxpayer for the purchase of second homes—not just other EU residents, but non-EU residents as well? What is the exclusion in the scheme? Will he clarify that?
Alison Seabeck (Plymouth, Moor View) (Lab)
I declare an interest in the interests of my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), as usual. Does my hon. Friend have concerns that although ostensibly the scheme may say that there can be no foreign investment, there will be means and mechanisms for foreign investors to set up companies in the UK in order to cover their tracks? Does he have any confidence that the Government are looking at whether there are potential loopholes?
Chris Leslie
I live in hope that if not Ministers, the Minister’s officials will try to apply sticking plasters to bodge the thing together, but it is a real mess. Ministers need to go back to the drawing board and think more directly about the support that can be provided for affordable housing.
Mr Hanson
As I understand it, the scheme in question is administered by the Department for Communities and Local Government, so it might even be possible for a resident of, say, Chester to buy a second home in Wales under the scheme; for a resident of Berwick to buy a second home in Edinburgh; or for a resident of Liverpool to buy one in Belfast. Has that been thought through by the Government?
Chris Leslie
I doubt that very much. I know that will shock my hon. Friends, but I suspect the Government have not thought about that.
Susan Elan Jones
We hear a great deal about Mr Lynton Crosby and his influence on the Conservative party. He is probably rubbing his hands with glee today, thinking, “Goodness, they haven’t worked out the fact that this is a tax break for me when I buy my second home,” if he does not already have one.
Chris Leslie
It had not occurred to me that the scheme could be the entrée for Lynton Crosby into a permanent residence. Who knows whether he will take up the scheme, but I am sure he will be very inventive about the matter.
Mr Love
Normally, when Ministers are silent, one can trust the Treasury to clarify matters. In this case the Treasury has not clarified matters. I read in the newspapers that buy-to-let investors will be excluded, but in other newspapers there seems to be ambiguity about that. Can we not have a clear statement from Ministers this afternoon about who is in and who is out of the scheme?
Chris Leslie
In, out, in, out, shake it all about—who knows what is going on in the minds of Treasury Ministers? It is impossible to tell, sometimes, just by looking at them.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Further to the intervention from my right hon. Friend the Member for Delyn (Mr Hanson), the scheme could have an important impact on the devolved Administrations. Perhaps in the course of the afternoon the Minister could get a message from the civil servants to help him on that. I understood that although the Help to Buy scheme applied only to England, the mortgage guarantee scheme applied certainly throughout Great Britain, and probably throughout the entire UK. That needs to be clarified. Constituents have already asked me about the scheme and whether they would be able to apply for it.
Chris Leslie
The Minister’s pen will run out of ink as a result of the number of specific questions about the scheme that he will have to reply to, but he is diligent and I know he will address them all. I would be grateful if he could confirm that he has thought through the consequences of the design of the scheme for the devolved Administrations. [Interruption.] His gaze has not lifted for the past 15 minutes or so.
I do not wish to take up too much more time, but there are other anomalies. For example, I think the Government have said that home owners will be able to remortgage, but they will not be able to remortgage with their own bank or building society; they have to go elsewhere. Ministers need to think that through a little more carefully. If there is a genuine case for remortgaging, are they, in effect, going to create a whole set of exit fees for those consumers to have to bear and a set of new application fees? What is wrong, in the circumstances of remortgaging, with someone continuing the relationship with their existing bank or building society?
We have a number of concerns about the Help to Buy scheme. Let us leave the last word on the matter to the Office for Budget Responsibility. What was its assessment when it looked at the scheme? What view did it take about the impact that it would have on the housing market? The OBR revised down its forecasts for property transactions, despite the two new schemes that have been announced. It says, I think on page 88 of its report, that
“we have reduced our forecast relative to December to a level which is more consistent with other outside forecasters.”
There we have it. For all the announcements, the spin and the press releases about the scheme, the Treasury could not convince the OBR, which is only just down the corridor from where Ministers reside.
Alison McGovern
Is not that particularly disappointing given that the Government have not exactly met the OBR’s forecasts to date?
Chris Leslie
The OBR is still bedding in. It has had a difficult time because on every autumn statement and Budget it has had to downgrade and revise its forecasts, upgrading the forecast for the deficit along the way, so one has to feel slightly sorry for it. There were some signs that its chairman was keen to chastise the Prime Minister and the Chancellor for overstating what was happening to public finances, so we wish it well for the future.
New clause 5 concerns the introduction of a 10p starting rate of income tax, funded by a mansion tax on properties worth more than £2 million, a policy that used to be advocated by the Liberal Democrat—
Chris Leslie
Apparently, it is still advocated by the Liberal Democrat, but Liberal Democrats tend to have a habit of voting against it whenever the opportunity presents itself. Those on low incomes have had their tax credits cut, their child benefit has been affected, and their wages and living standards have fallen, but millionaires on average benefit from a £100,000 tax cut. Surely it is time to help lower and middle-income households with an extra level of tax support, directed from revenues raised from a mansion tax on properties worth more than £2 million.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
As the hon. Gentleman will be aware, we had a Labour Opposition day debate on this issue before the Easter recess, following which the shadow Secretary of State for Wales said that productive agricultural land would not be included in estates for the purposes of the Labour party’s mansion tax proposal. Is that the case? Will farms be excluded or included in Labour’s proposed mansion tax?
Chris Leslie
We hoped that the Liberal Democrats’ plan relating to property values of £2 million was a well-worked-through basis on which we could build and develop a policy. We even tabled a suggestion that the OBR should have some options for how this mansion tax would work in detail. There are bound to be issues on the margins that need to be resolved, and I accept we should definitely be talking about those, but the principle could be established. The Bill has 50 or 60 clauses relating to what are known as enveloped dwellings. The Government do not dare call it a mansion tax because Conservatives do not like it, but they have introduced a scheme to enforce a certain number of stamp duty requirements where an annual charge can be placed on properties worth more than £2 million, but only if they are owned by a company in a corporate tax wrapper. It is therefore entirely feasible and plausible to consider whether that scheme could be extended into a mansion tax proper, and the Government have well-worked-through plans on the books, on which they have been consulting, which could be the basis for a mansion tax. This is not something that has not been thought through by the Government.
The Opposition believe that any revenues from this need to be given back to lower and middle-income households through a 10p starting rate of tax. When the economy is flatlining and tax rates are rising in so many other ways, particularly VAT, we must do more to help those 25 million basic rate taxpayers. It is incredibly important that we do that, and we will be giving this Liberal Democrat, and any others who happen to be in the building, the opportunity to express their views on it when we finish this debate. I commend new clauses 1 and 5 to the Committee.
Alison Seabeck
In speaking to new clause 1, I wish to pursue issues that have been touched on by my hon. Friend the Member for Nottingham East (Chris Leslie) and other Opposition Members and to highlight my concern that the Help to Buy scheme might well become a second home subsidy, rather than a scheme, as was intended, to help many first and second-time buyers on to the housing ladder.
In housing, as in so many other areas of policy, the Government have been found badly wanting. I remember the chutzpah the right hon. Member for Welwyn Hatfield (Grant Shapps) displayed on entering government, saying repeatedly that he would outperform the previous Labour Government when it came to house building and getting first-time buyers into the market. As Housing Minister, he failed rather magnificently. He seemed to ignore the fact that Labour built 210,000 new homes before the market crashed. We started to see an increase in the number of homes being built in the run-up to the 2010 general election as a direct result of measures taken by the Labour Government. Indeed, some of the homes that this Government have taken credit for building in 2011 are in fact the hangover from Labour’s new-build programme. We are now seeing a slump in house building.
Jack Dromey
The former Housing Minister claimed that the Government would build 170,000 affordable homes. The National Audit Office then produced a report stating that 70,000 of those homes had been commissioned and paid for by the previous Labour Government.
Alison Seabeck
My hon. Friend is right. I think we have to take the figures offered by the Government with a huge pinch of salt. Although I support any measure, as I am sure he would, to kick-start the housing market and enable young people, such as my daughter, to get on the housing ladder, I, like my Front-Bench colleagues, have serious concerns about the scheme.
Andy Sawford
My hon. Friend makes the point that we need to kick-start the housing market, and I think that all Labour Members agree. She talked about the chutzpah of the Government’s first Housing Minister, whom she challenged at the time, when she led for the Opposition. Is there not a contrast between the urgency of the measures that were rushed through Parliament when the coalition Government took office and the delay in the measures that they now say will make some kind of difference, which will take us through to January?
Alison Seabeck
My hon. Friend is right. There is a significant gap that will lead to a further trough in house building. It will certainly not lead to the boost that the Government expect as a result of introducing the scheme. Frankly, the scheme looks like another idea drawn up on the back of a cigarette packet, and we have seen too many of those. I think that this one, like others, whether in welfare, education or health, will have a number of unforeseen consequences.
Following the Budget, we now know that the Government’s mortgage scheme will not exclude people buying second homes. Although it might get some movement into the market, it will not solve the underlying problem and could well be abused. In areas such as the south-west, where we have a glut of second homes and where affordable homes are a rarity in some areas, introducing measures that could increase the opportunity for people to purchase second homes, as well as risking pushing up prices, is extremely dangerous. That could create severe price volatility in those areas and lead to the exact opposite of the intended outcome.
In Plymouth and the South Hams, we have the prospect of around 5,000 new homes in Sherford, all close to some of the most beautiful countryside and coast in the country. Many people will want to buy those homes, which opens the door to second home ownership. How many of those purchasers will want to buy to let? The Government say that they do not plan on the scheme being used by people who want to buy to let, but by using subterfuge it will be entirely possible for them to do exactly that. Will the Minister explain exactly what type of bureaucracy will need to be set up fully to ensure that the scheme is not abused by people who want to buy to let?
Jack Dromey
Is my hon. Friend aware of anything in the Bill that would prevent Russian billionaires, Greek tax exiles or dubious Australian spin doctors from buying homes on the back of the scheme?
Alison Seabeck
That was wonderfully well put, as usual. No, I am aware of no such thing, and that bothers me hugely. It ought to worry Ministers; it will be interesting to hear what they have to say on the matter.
My constituents are struggling under the pressure of the spare room subsidy. They rightly want to know why it is fair for the Government potentially to offer a spare house subsidy of up to £600,000 to people who already have a home. That sum would buy a mansion in Plymouth.
Graham Jones (Hyndburn) (Lab)
Startlingly, the previous scheme had a limit of £280,000. Why have the Government increased the ceiling to £600,000? Surely homes of £600,000 are not affordable.
Alison Seabeck
No, indeed. Someone looking at the issue from the outside, rather than from the Government Benches, could cynically suggest that the Government are seeking to build houses and support house building in the south-east rather than in the rest of the country. The figure has far more resonance in terms of trying to get people into the market in the south-east. The issue is not clear.
Sheila Gilmore
The figure might be more consistent with house prices in the south-east, but even there someone still has to have a very substantial income to afford a mortgage, even if it is discounted by a shared equity or mortgage guarantee scheme.
Alison Seabeck
My hon. Friend is right and has flagged up yet another unfairness about what is proposed.
We have an example of the Government bearing down on the less well-off—those who are suffering because of the bedroom tax. Those people could probably never afford a mortgage, however desirable an ideal that might be. The Government are effectively expecting those people on low incomes to fund and support other people to buy new homes.
Jim Shannon (Strangford) (DUP)
I thank the hon. Lady for being gracious enough to give way to everyone who has wanted to intervene. Does she feel that there should be an incentive for parents or grandparents who either have savings or could remortgage their homes to provide a deposit for their children or grandchildren? Could that not enable first-time buyers to get on to the ladder in their 20s rather than at 37, as was mentioned earlier?
Alison Seabeck
The hon. Gentleman makes an interesting point, and I will briefly touch on it later. I suspect that it could be possible for parents to buy for children.
People struggling to get a mortgage and those who want to own their first home must be a priority for help, not the small number of people who can afford to buy a second home. What checks will be introduced to prevent abuse of the scheme, so that people are prevented from applying in the names of their sons and daughters, cats and dogs?
The key fact is that not enough homes are being built. The Government must focus on that issue and on listening to the voices of those who understand the market. They should not simply dismiss out of hand the Opposition’s new clause, which would enable the public to have a better understanding of who benefits from the scheme. Is it foreign investors, parents buying second homes for their children or people seeking to rent the property in the long term?
What checks will be put in place if somebody applies to the scheme saying that they are not going to let the property, then sits on it for a time and subsequently opts to rent it out? Perhaps people could use the scheme for a straightforward holiday home purchase, as I mentioned in relation to Plymouth and the South Hams. Where are first-time buyers in the process? For me, they are singularly missing.
Alison Seabeck
My hon. Friend is right. He reinforces a point I made about not only the potential for price volatility but the inability of certain people to access the housing that is so desperately needed, and the clear need to build more homes, which this Government are singularly failing to do.
Jack Dromey
Does my hon. Friend agree with the hon. Member for Spelthorne (Kwasi Kwarteng), who said in a recent interview, commenting on the Government’s proposed scheme, that
“giving mortgages without increasing the supply will lead to asset price inflation”?
Alison Seabeck
That is a very interesting comment, is it not? In quoting it, my hon. Friend makes the point very clearly.
House building is falling, rents are rising, home ownership is becoming a harder goal for young families to achieve, and homelessness has risen. That, frankly, is not a record to write home about. This Budget measure, first, needs to be fully explained; secondly, needs to be fully scrutinised, which is why the new clause is important; and thirdly, shows that the Government have got their priorities wrong, because they need to be building more homes.
Stephen Williams
Thank you for calling me, Mr Hoyle. I am being called rather sooner than I imagined; indeed, I did not even necessarily imagine that I would be making a speech in full detail, but making use of my House of Commons Library notes I have hastily prepared something, particularly on new clause 5, which is a welcome innovation in many ways.
Andy Sawford
As the hon. Gentleman is not quite prepared to speak at the moment, perhaps I could help to give him some material for his response to the new clauses. Will he enlighten us on whether the Liberal Democrats might take this opportunity to support us in pushing forward a mansion tax, given that they did not do so last time?
Stephen Williams
I am happy to enlighten the hon. Gentleman, whose intervention falls into the category of a nice try. I think he is referring to the Opposition motion on this issue that we debated five or so weeks ago. The Government amendment to that motion made it crystal clear that, in the context of the coalition, my Conservative Front-Bench colleagues do not support the introduction of a mansion tax in this Parliament; indeed, it is not in the coalition agreement because we could not agree on it at that point. However, the Liberal Democrat part of the coalition does believe that a mansion tax should be introduced. We are happy to do the workings on it and happy to espouse it at every opportunity. It will be in our manifesto at the next general election, and subject to what happens in that election, when I am sure that negotiations may well take place again, perhaps we will have a different outcome. I welcome the fact that the Labour party, which emphatically rejected the principle of a mansion tax in the negotiations in 2010, now seems to be on the way towards conversion to the long-term Liberal Democrat train of thought on this issue.
I also hope that Conservative coalition colleagues might have a conversion between now and 2015. Some of them—in fact, a lot of them; we talk to each other rather more than we used to—whisper in my ear that they wished the Conservative party that embraced this policy. That applies particularly to Conservative MPs from the north of England—north of the line from the Severn to the Wash. Perhaps there are not very many £2 million properties in those constituencies. Nevertheless, a lot of Conservative MPs from outside the south-east of England have privately said to me that they wish the coalition would adopt this principle.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Order. I know that the hon. Gentleman’s Library notes have been helpful, but I am not quite sure that the journey he is trying to take the Chamber on is relevant to this debate. I am sure that he wants to come back into order with his good Library notes.
Stephen Williams
Thank you, Mr Hoyle. Your advice is always given with good heart and accepted freely.
New clause 5 highlights the Labour party’s conversion to the principle of a mansion tax. I said that the new clause was an innovation. Unfortunately, I am a veteran of Finance Bills. I have obviously insulted my Whips Office on several occasions in the past and keep being put on to Finance Bills as a punishment. I remember from last year’s Bill that, time after time, Opposition new clauses and amendments called for studies of the impact of Government policy, while the Opposition proposed no new policies of their own. Now, finally, after three years, they have suggested a new policy, albeit one pinched from my party, but they are still asking the Treasury to do a study of it—even though it is they, not the Government, who proposed it—because the Labour party cannot be bothered to explain how this new policy that it has suddenly converted itself to will actually work.
The Opposition have not provided any clues as to how their approach might work, even though they have had plenty of opportunities to do so. The hon. Member for Corby (Andy Sawford) referred to the Opposition day debate five weeks ago, and the Labour party has since had plenty of opportunities to flesh out how its version of the mansion tax would work in practice. I had hoped that Labour Members would explain it to us today, but they have not.
New clause 5 does not provide many clues. Let me give those on the Opposition Front Bench a piece of advice: if they want to ask somebody else to assess the impact of their own policy, they really ought to give them a bit more detail to work on. I am sure that the Minister will confirm that those who work at the Treasury are very clever people. Among them are a lot of economists and accountants with good qualifications and excellent degrees from top universities, but the Labour party should not think that it can present them with an almost blank piece of paper, which new clause 5 is, and then expect them to be able to explain within a few months how its policy will work without their having been given the barest of details.
Chris Leslie
This is the thing with the Liberal Democrats—the hon. Gentleman is taking the biscuit. He is whipping himself up into a sense of righteous anger about his own policy, which we want to put on to the statute book. He is picking holes in a policy that he supposedly supported, but which he now cannot bring himself to vote for. Talk about a “push me, pull you” approach from the Liberal Democrats.
Stephen Williams
I assure the hon. Gentleman that I have righteous enthusiasm for the policy, because it is a Liberal Democrat policy that I have enthusiastically supported for the past three and a half years. How many weeks has he been an enthusiastic proponent of the mansion tax—10, 12, nine? How many weeks has the Labour party believed in this policy? When did he experience his conversion and accept the wisdom of the Secretary of State for Business, Innovation and Skills, who first proposed this policy several months before the 2010 general election? I know that the hon. Gentleman was not a Member of Parliament at that time, but I assure him that his colleagues who were in government rubbished the policy during the general election and the coalition negotiations. For the first three years of this coalition Parliament, Labour did not support it, but now—lo and behold—it does. When was he converted?
Chris Leslie
I am intrigued by the hon. Gentleman’s line of argument. He is attacking us for agreeing with him. We might not have agreed with him several years ago, but now we feel that a mansion tax is necessary to help with a tax break for lower and middle-income families. Is it his argument that we are wrong for supporting a mansion tax? Is that really what he is saying?
Stephen Williams
My argument is straightforward: I do not know what the Labour party’s variant of the mansion tax would be. Moreover, the Labour party does not seem to know, either; otherwise, why on earth would it frame new clause 5 in a way that asks the Treasury to explain how it might work? We are in an extraordinary position. I know what my party’s policy is and am about to tell the hon. Gentleman exactly how a mansion tax would work, but I had hoped to hear from him a little more detail on how his version would work, so that the clever people at the Treasury could produce the study that he wants.
Jack Dromey
I want to ask the hon. Gentleman about something that he did vote for. In a week when the International Monetary Fund has said that the politics of austerity, of which his party is a strong supporter, are clearly not working, does he now regret voting in 2010 for a £4 billion cut in affordable housing investment, which led to a 68% collapse in affordable house-building and threw tens of thousands of building workers out of a job?
Stephen Williams
To answer the hon. Gentleman directly, when the coalition Government came to office they had to make some quick decisions about what was essentially an economic emergency. We were left with a situation in which the last Government were borrowing £1 for every £4 that they were spending. We simply could not go on in that way, so we had to put forward an emergency Budget to gain the confidence of the markets so that people would continue to lend us enough money, on the triple A rating that we had at the time, to keep all Government programmes going. It has been acknowledged by the Chief Secretary to the Treasury and, I think, by the Deputy Prime Minister that some of the cuts in capital expenditure that the coalition implemented in its first two years in office perhaps should not have been made, in hindsight. But those cuts in the capital programme were in the last Budget of the last Government and were seen through by this Government. The Government have had the wisdom to say that investment in capital expenditure is a good way of getting growth going in the economy, and that is why we have had the wealth of initiatives that the shadow Minister mentioned earlier, and that is why we have had the new package of proposals to help the housing market.
Jonathan Edwards
I could not get an answer from the Labour Front Bench, but under the Lib Dem proposal would productive agricultural land be included in the estate for mansion tax purposes?
Stephen Williams
The mansion tax, as the name suggests, is a tax on mansions. If a farmhouse on agricultural land was of mansion proportions and, whether it was in Carmarthen or elsewhere, was valued at more than £2 million, it would fall within the scope of a mansion tax, but the agricultural land itself—whether it is in the curtilage of the house or in the wider area of the farm—would not fall within the remit of a mansion tax. However, my party is currently reviewing all its tax policies, including the taxation of land. I do not want to be diverted too far down this route, although it is an issue on which my party has campaigned since the days of Lloyd George, who, as I am sure hon. Members will agree, was probably the most significant Prime Minister of the 20th century. I will say no more on that on this particular day.
I will do my best to help the Labour party with some of the other details of how the Liberal Democrats think that the mansion tax should work. A criticism that is made of the mansion tax is what happens if a pensioner or someone on a low income is living in a house valued at more than £2 million—the so-called asset rich, but income poor. Our answer is straightforward. Someone in those circumstances would defer payment of the tax until the property was sold or their income rose to a level at which they were able to pay it. The most likely scenario is that when the property was sold, the deferred, rolled-up tax liabilities would crystallise and be met out of the proceeds of sale. That is the answer to the asset rich, income poor conundrum.
Another major principle, which might help the Labour party, is that we see the mansion tax as a national tax. There is a debate to be had about what we do with our only existing property tax—the council tax—such as introducing higher bands, but that is a debate for another day. In any event, the council tax is a local tax and we are clear that the mansion tax, as the Liberal Democrats propose it, should be a national tax and form part of the rebalancing of the tax system away from taxes on work and enterprise and on to income from wealth speculation and pollution.
Our principles on the mansion tax are well thought through. Unfortunately, they are not currently shared by enough of our Conservative coalition colleagues. Some share our enthusiasm for a mansion tax, but a majority—certainly ministerial colleagues—do not.
Daniel Kawczynski
The point made by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is important, and I was worried that the hon. Member for Bristol West (Stephen Williams) could not answer it as clearly as I would like. Farming is an essential part of many estates in Shropshire, and the land and agricultural buildings could tip them over the limit. Shropshire farmers are struggling already with prices from supermarkets, and I am very concerned that, if this tax were introduced under those circumstances, they would be adversely affected.
Stephen Williams
The hon. Gentleman is essentially asking me a variant of the question asked by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). He mentions agricultural buildings. Clearly, a mansion tax is a residential property tax: a tax on the building that the landowner—the farmer, the rich individual or whoever—lives in. It would not include barns, pigsties and the other agricultural buildings to which he referred, even if they have a high value. This would simply be a tax on residential property occupied by a person, not farm animals or anyone else: only the farmhouse itself, or the estate house, would fall into the ambit of a mansion tax.
Coming directly to the problem with new clause 5, the poor clever people in the Treasury simply do not have enough detail to go on to produce this study within six months of the passage of the Bill. This is the opportunity for Labour Front Benchers to answer these questions. They can intervene as many times as they like. [Interruption.] If they are listening, of course. This is an opportunity for them to tell us how the Treasury is going to conduct this study. It really does need some more detail. Is Labour’s variant on the mansion tax a tax on the whole of the £2 million, or is it a tax on the excess of the £2 million? That is completely unclear from any of the speeches made by shadow Ministers, or from the motion. What is the base of the tax?
Chris Leslie
We based our proposal on the Liberal Democrat analysis that a mansion tax could be on the excess of £2 million of value, raising, I think the hon. Gentleman said, £2 billion. That was the basis on which we assume he has some deeper calculations, and I hope he can produce them and share them with the Committee, because it seems a sensible proposal.
Stephen Williams
That is very helpful, because that is the first time we have heard it. It is nice, too, to have an acknowledgement that the Opposition have based whatever they have said so far on statements from my party. I am grateful for that acknowledgement. They have been giving the impression that it is their policy, rather than a magpie policy stolen from the Liberal Democrat policy nest.
Chris Leslie
Given that I have helped to clarify that for the hon. Gentleman, will he now do the right thing and support his own policy in the Division Lobby today? It is very simple.
Stephen Williams
I always strive to do the right things; I am sure all hon. Members do. In the Opposition day debate five or six weeks ago, the Government amendment was so beautifully crafted by the people in the Liberal Democrat Whips Office and the Conservative Whips Office that I was able to vote for it. It said that the Liberal Democrats in the coalition support the principle of a mansion tax, but acknowledged the fact that the Conservatives in the coalition do not. When I voted for that motion, therefore, I was indeed voting to endorse the Liberal Democrat policy of a mansion tax.
John Mann (Bassetlaw) (Lab)
I thank the hon. Gentleman for giving way, because I am little perplexed. Is this not the first opportunity for the Liberals to have one of their policies adopted by a major party? It has not happened in the past two and a half years. Should he not be thinking that his best bet is to throw more things the Labour way, because the way things are going, that will be his only chance in the future?
Stephen Williams
The hon. Gentleman, whom I quite like and respect—a feeling not shared universally among his colleagues—tempts me to comment on what might happen in the 2015 general election, on what discussions might take place in its aftermath and on what we might say during it. In 2015, the Liberal Democrats will say that we favour a mansion tax, with all the details we have already put on the table. I intend to publish a short paper that might help—it might do the Treasury’s job for it, making the new clause unnecessary—and which will flesh out what I am talking about. He said that Labour might benefit from taking more policies from the Liberal Democrats. We are all in politics to see our ideals, principles and policies put into practice, and if Labour wants to adopt more Liberal Democrat positions, instead of always saying we are wrong, the public might welcome that more grown-up attempt at consensus politics.
Andy Sawford
I do not understand something about the hon. Gentleman’s remarks. He has justified not voting for his own policy five weeks ago on the basis of an artfully crafted—I think he used those words—Government amendment that allowed the Liberal Democrats to wriggle out of it. But today there is no such amendment. He has challenged, very assertively, the depth of our new clause. If he is so confident in the depth of his own policies, why have the Liberal Democrats not tabled a new clause that he could vote for today?
Stephen Williams
I am happy to reveal now that I will not be supporting new clause 5 in the Division Lobby. That should not surprise the hon. Gentleman. I will not be supporting it, because it is not about the principle of introducing a mansion tax. It asks for a study. It asks the Treasury to do some work. These are busy people, with important work to do, and I do not want to waste their time. We do not want them to waste their time finessing badly thought-through Labour party proposals.
Chris Leslie
On a point of order, Mr Hoyle. Is it not the case that only Government Members can table amendments to a Finance Bill that would increase a charge or a tax, and therefore, under the rules of the House, these sorts of reviews are the only device the Opposition have to suggest such a tax change?
Stephen Williams
Of course, that is broadly correct, but I repeat that if the shadow Minister wishes new clause 5 to be implemented, he needs to provide more detail, so that the House can consider whether it is worthy of support. I do not think it worthy of support, because it is so full of holes. It would waste the time of the mandarins in the Treasury to ask them to come forward with a study for which they do not have the right brief. We have not been told at what rate the Labour party wants to set the mansion tax. Here is another opportunity for the Opposition to help the Treasury. Would the rate be 1%, 2%, 2.5%, 3%?
Stephen Williams
The shadow Minister says that it would raise £2 billion. [Hon. Members: “That’s your answer.”] Well, it is an answer, but it is not what is in the new clause. Why does the new clause not say, “Can we have a study from the Treasury on the best way to raise £2 billion?” It would be in order, would it not, Mr Hoyle, to put down a new clause asking the Treasury, “What is the best way to raise £2 billion?” The Labour party wants to raise £2 billion, but wants someone else to tell it how to do it.
Chris Leslie
I confess. Perhaps we could have mentioned the £2 billion. Will the hon. Gentleman forgive us to the point of at least abstaining on the new clause? Perhaps that is a compromise we can offer.
Stephen Williams
Abstention on certain issues is sometimes unfairly pooh-poohed by all parties. I have done it on certain issues. Indeed, abstention on a Bill that has a range of measures, some of which one likes and some of which one does not, is an entirely honourable thing to do, and Members from all parties will have done it. Although we would like to think that the Labour party has had plenty of time to craft a motion that might appeal to Liberal Democrats, I am afraid that in new clause 5 the Opposition have failed. They have again not managed to tell us how they think a mansion tax would work.
Mark Lazarowicz
The hon. Gentleman should stop digging and just say that the reason he will not support new clause 5 is that the Tories will not let him. If his position is that our proposal is not good enough, why does he not give an assurance that Lib Dem Ministers will work to bring forward more detailed proposals? They can do that now; after all, the Chief Secretary to the Treasury is a Liberal Democrat.
Stephen Williams
The Chief Secretary to the Treasury is indeed a Liberal Democrat. I am sure my right hon. Friend has given this policy issue a great deal of careful thought with his advisers and I am sure that if he were standing where I am standing today, he would be making similar points to those that I am making.
There are two parts to new clause 5. As well as calling for a study of—we now know—how to raise £2 billion through a mansion tax, however ill defined the composition of that tax would be, it is also meant to fund a tax cut for millions of people on middle and low incomes, as part of a fair tax system. Again, that is simply not specific enough. We do not know what it means. I am guessing—I can guess, but it would not be fair for those in the Treasury to have to guess how they would have to do such a study—that the purpose is to fund the reintroduction of a 10p rate of income tax. That is my guess, but it is a well informed guess, because the Opposition’s amendment 4 to clause 3, which we will come to tomorrow, suggests that they want to reintroduce a 10p rate of income tax. Again, however, neither that amendment nor new clause 5 gives us any detail for how that would work or, for instance, to what income band it would apply.
Perhaps that it is because the history of the 10p rate is such a miserable memory for Labour Members. I remember the 2007 Budget, which was the last one the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) introduced, when he scrapped the 10p rate of income tax specifically to fund a reduction of the rate of income tax from 22% to 20%. However, the coalition Government have made the principle of the 10p rate of income tax completely redundant, because we have introduced not a 10p rate on people with very low incomes, but a zero rate. I am sure that most of our constituents, whether in Chorley or Bristol West, would much prefer to pay a round tax rate of zero on their low earnings than 10%, which appears to be—although we are not sure—what the Labour party is proposing.
I will therefore not be supporting new clause 5 in the Division Lobby and I would invite all my Liberal Democrat colleagues not to support it either. We are completely clear as a party. We support the introduction of a mansion tax. We are clear about how it should be contrived, on whom it should be levied and how the proceeds from it should be spent. We do not need anybody else to do a study for us—whether the Labour party or the Treasury—to tell us how it might work. It is a great shame that after three years in opposition, at the first opportunity that Labour has taken to say, just tentatively, what it is in favour of—rather than talking about the long list of things that this Government have done that it is against—and just a few weeks after converting to a mansion tax, the Opposition need somebody else to tell them how it will work.
Stewart Hosie (Dundee East) (SNP)
That was an interesting half hour. It has changed entirely what I had planned to say, such is the power of the hon. Member for Bristol West (Stephen Williams), although I suspect not necessarily in a way he would like.
A review of the workings of the support given to the housing market, which new clause 1 would provide, is necessary to ensure that there are no abuses, but perhaps also to make it clear to all sides that the support being provided is not necessarily for affordable homes, but for the building sector—although it would be better if it were primarily for affordable homes. I think it would be quite useful to have a report on that.
On new clause 5, I was initially intending to ask the hon. Member for Nottingham East (Chris Leslie) to provide a little more detail, in the way that the hon. Member for Bristol West did. There are a number of reasons for that, but mainly it is because it might direct the Treasury towards where it might want to look. If, for example, the mansion tax were to be based on council tax banding, then, as we saw in Cardiff where a re-banding took place, it was not necessarily the wealthiest who ended up paying more; 64% of households ended up paying more, which was not a very good outcome. Secondly, if it is paid on the basis of stamp duty land tax, as currently configured, the Exchequer yield would be received only on the sale of the property. Quite clearly, it would not capture all the excess wealth from every property valued at over £2 million. If the mansion tax is to be a new tax, duty or levy, it would have been useful to have it explained.
There may well be a perfectly sensible case to make for a mansion tax, and I thought that that was what the hon. Member for Bristol West was trying to do at the beginning of his speech. As he went on, however, things became rather more confused. I paraphrase, but I think quite accurately, that the hon. Gentleman said that the mansion tax would apply only to a mansion or big house where a person or people lived. If this mansion or big house has one or two rooms that are put out to let, but perhaps not advertised particularly well, it could become a bed and breakfast or a hotel—no longer necessarily remaining a residential property where a person lives.
A number of interventions and discussions took place about farm houses or estates that might breach the threshold. Again, a house where people lived seemed to be the criterion, but one could easily imagine an associated outbuilding converted to house a few chickens, which could change the building from being a residential property. It was interesting to hear that. The hon. Member for Bristol West also referred to the building being the key, even within the curtilage of land on which crops were grown. If an ornamental garden with fruit trees that could be harvested lies inside the curtilage of land but the property is worth £3 million or £4 million, it could, according to the hon. Gentleman, be exempt.
Stewart Hosie
Before I go on, I will happily take the hon. Gentleman’s intervention.
Stephen Williams
I am glad that the hon. Member for Dundee East (Stewart Hosie) is phrasing his questions in this way, but I suggest that he direct them to Labour Front Benchers, as it is, after all, their new clause and they have failed to provide the detail. I provided more detail in my speech in order to be helpful. I can answer all the hon. Gentleman’s questions, but I think he should wait for my pamphlet, which I can assure him will knock on the head all those anti-avoidance issues that he raises.
Stewart Hosie
I am almost at a loss for words at the suggestion that anyone could imagine that the world will hold its breath waiting on a Liberal Democrat pamphlet! [Interruption.] I do not want to digress, Mr Hoyle, but that is a mind-boggling proposition.
The confusion in the hon. Gentleman’s contribution was far from saying that new clause 5 does not make sense; rather, it confirmed why the new clause was necessary. There are so many flaws, omissions and potential avoidance mechanisms in the Liberal Democrats’ proposals—and we had all assumed that they were worked up to some extent when they went into this miserable Government—that it makes perfect sense for the Treasury to investigate them with all their flaws to determine whether they, or another version of them, are even workable. If the hon. Member for Nottingham East chooses to press new clause 5 to a vote, we will be happy to support it.
Sammy Wilson (East Antrim) (DUP)
One of the common themes that has emerged on the Opposition Benches throughout the debates on the Budget is that the Government can and should do something to stimulate the economy by means of additional capital spending. One way of doing that—and one way of rapidly stimulating the construction industry—is to build houses; and, of course, many other social benefits arise from house building.
The Government have chosen a particular path towards the stimulation of house building, and I am not sure whether they have chosen it simply in order to avoid the registration of additional borrowing as part of Government debt. The means by which they have decided to stimulate the housing market—this is significant, because it is stated in the Red Book—will have no implications for central Government public sector net borrowing; it will have an impact only on the central Government net cash requirement. It seems that the Government may be engaging in the contortions described by the hon. Member for Nottingham East (Chris Leslie) in order to avoid certain Treasury accounting arrangements, rather than considering what policy will prove effective.
That is the first thing that we should consider. The second was alluded to by the hon. Member for Dundee East (Stewart Hosie). If the sole intention is to stimulate the housing market and the construction industry and it does not really matter who buys the houses or benefits from the policies, the Government ought to make that clear. Such a move would have various side effects, perhaps benefiting people who, in the opinion of many Members, do not need help with housing. If the policy is to provide a general stimulus across the board which is not relevant to the size of people’s incomes, to whether they are first-time or second-time buyers or to whether they are buying to let or buying to live in their houses, that should be made clear to us.
I do not think that the Government should be afraid of new clause 1. One of its two policy schemes, the guarantee scheme, does not involve any expenditure, because it will come into operation only if a house has to be sold at less than the price that was paid for it. There is evidence that such schemes work. In the Irish Republic, the National Asset Management Agency introduced its 80-20 scheme in an attempt to stimulate demand for some of the properties that it had taken over, and I hope that it will introduce the scheme in Northern Ireland as well. It owns property there, and is currently putting it on the market. There is evidence that the guarantee enabled people to secure loans that would not normally have been available to them, because the lenders had been relieved of some of the risk.
The right hon. Member for Delyn (Mr Hanson) asked whether such schemes would apply throughout the United Kingdom and in all the devolved Administrations. He mentioned the potential for distortion in the housing market, suggesting that people might move from one country in the UK to another in order to take advantage of them. I understand that the guarantee scheme will apply throughout the United Kingdom.
The second scheme involves equity loans. I do not think that the Government should be worried about scrutiny of its likely effectiveness. For some time, Northern Ireland has operated a co-ownership scheme which enables people to rent half a property and buy the other half. We were able to negotiate that with the banks because all the risk was being taken by Co-ownership Housing and the public purse, which would be responsible for the first 50% of any loss. The banks have actually dropped the requirement for a 20% deposit. The good thing is that there has been no cost to the public purse; it has simply been borne by the banks not requiring the deposit, because the risk has been taken out of the house purchase.
Mr Steve Reed (Croydon North) (Lab)
Does the hon. Gentleman also see scope for more stimulation of co-operative housing schemes in the mix in the United Kingdom? In Germany and Canada, some 10% of housing is co-operative. In parts of Scandinavia, the figure is 18%. The figure is higher in those countries because their Governments act to promote the development of co-operative housing. In the United Kingdom, it accounts for just 0.6% of all housing. It offers a way for people to get their foot on the housing ladder, without the need for unaffordable deposits.
Sammy Wilson
It does indeed. Let me illustrate the success of co-ownership in Northern Ireland, which is similar to the co-operative housing that the hon. Gentleman describes. More than 50% of new houses in Northern Ireland are being sold through the co-ownership arrangement. Importantly, because it is targeted at first-time buyers, it has enabled them to get their foot on the housing market ladder, stimulated demand in the economy and created the jobs in the construction industry that are so sorely needed.
Be it the mortgage equity scheme or the mortgage loan scheme, the Government should have no fear of new clause 1. If they have confidence in the schemes they propose, they should not fear scrutiny of them. Indeed, all the evidence from the Northern Ireland market and the Irish Republic market shows that the schemes will work.
Bill Esterson (Sefton Central) (Lab)
Does the hon. Gentleman agree that there is a particular need across the country for affordable housing to rent and to buy, and that, on striking the balance that he referred to earlier, there is a grave danger, as the Royal Institution of Chartered Surveyors has said, of creating another housing bubble if the wrong level is set? Is that the point he is driving at?
Stewart Hosie
Before the hon. Gentleman moves on, he is making a number of very serious points about the financial transaction part of housing support, but I hope he agrees that the one downside is that it does not allow that cash—such as it is—to be used for capital spending in any way apart from housing, and that it is being paid for by a real-terms cut in the Revenue departmental expenditure limit over the next two years.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Order. I hope that the hon. Gentleman is coming to the end. I know he has a lot to say, but other Members want to contribute and I want to make sure that the Minister can reply.
Sammy Wilson
Thank you, Mr Hoyle; I will finish, then.
What, therefore, are the reservations about this scheme? The first concerns the way in which the spend will be dealt with. Of course, loans have to be repaid, and the scheme has been financed through a DEL cut across Departments of 1%. Secondly, it amounts to £4 billion over the next three years. The question is, could that money, if it is spent on housing, target the most needy, rather than being spent across the board with no restriction on income, meaning that people can buy second homes? Is there a better way of spending that £4 billion? Or, as the hon. Member for Dundee East suggested, if the approach were less prescriptive, are there other capital areas it could be spent on, leading to a far greater multiplier effect and impact on the infrastructure of the United Kingdom? Those are questions about the scheme that need to be asked.
My last point is that although the dynamics of the housing market would suggest that if someone moves from their home to a more expensive, bigger home—I am sure that the Minister will make this argument—it releases houses further down and starts the market moving. My main priority for constituents who come to see me is those who are not even in the housing market at all. Even though the dynamics of getting people to move up the housing chain are important, it seems to me that the priority ought to be those who cannot get social houses and who cannot afford privately rented housing as rents, certainly in Northern Ireland, are going up at a rate that prices many people out of the market. The opportunity should be provided for them to get in at the low end of the market through affordable housing. That is why we need a much more targeted scheme. One reason why I think it would be useful to examine the scheme within a short period of time is that it would show whether the real objectives and priorities in the housing market are being addressed by these schemes.
Stephen McPartland (Stevenage) (Con)
I appreciate the opportunity to speak in this debate, Mr Hoyle, and I shall make my speech very short as I appreciate that two Opposition Members wish to speak. I will speak for about three minutes tops and will rattle off my points as fast as I can.
The first issue I want to raise on new clause 5 is the fact that it refers to property and does not distinguish between residential property and business property. That concerned me greatly when I first looked at the new clause, as it would create huge concerns in the business community. In my constituency of Stevenage, we have some large business interests. GlaxoSmithKline has a huge operation employing 4,000 scientists in Stevenage—[Interruption.] Although the new clause mentions the “mansion tax”, it just states that it would be on “property”.
How would that property be valued? There seem to be two values in property at the moment: the value one thinks one’s property is worth and the value at which someone would buy it. There is always a big disparity between those values. Such a change would lead to a large revaluation exercise across the UK and my concern is that once we have that revaluation exercise, council tax revaluation will be a real problem across the country. A huge number of people will be very concerned about council tax increases if all their properties have been revalued. Council tax more than doubled under the previous Government and I am pleased to say that under this Government it has been frozen for the past three years—[Interruption.] I see the annunciator has just changed to show my name, although I will sit down in about one minute.
My other point is that the new clause also refers to a tax cut for low-income and middle-income earners, and I am proud that this Government have introduced a tax cut that will be worth more than £700 next year for those low earners on up to £10,000. I am sure that the Opposition would agree with the Government that the best way to introduce a tax cut is to have a tax rate of zero rather than the 10p tax rate on which my colleague the hon. Member for Bristol West (Stephen Williams) had a very robust exchange with Opposition Members.
I shall now sit down as you are gesturing for me to do so, Mr Hoyle.
Sheila Gilmore
The test of what is happening is whether the economy will be stimulated. That is the real test that we should keep under review. If we want collectively to stimulate the economy, the most direct way of doing that would be to fund socially rented houses. That would get people into jobs, who would then help to stimulate the rest of the local economy. I do not know whether an ideological aversion to that has brought about the proposals we have before us; perhaps it has, because all the affordable housing the Government seem to want to fund directly is not even affordable.
In this very week, when we are remembering the 1980s and the Prime Minister of that time, we are in grave danger of repeating what happened then. The Government chose to allow housing benefit to take the strain rather than investing directly in housing, which resulted in the problem that we now have a large housing benefit bill. The way this Government are going about even the affordable housing they say they will build, which will not of course truly be affordable, again runs the risk of increasing the housing benefit bill.
We are looking to stimulate the economy with something for which there will probably be no take-up, judging from experience, and it will not benefit the people we should really help. If we do not review this policy quickly, we could be going down a very dangerous road.
Mark Lazarowicz
As time is limited, I take this opportunity to pursue with the Minister some of the issues raised earlier by colleagues on the Opposition Benches about how the schemes will operate in Scotland and Wales—outside England. I hope the Minister can answer these questions.
Will the Minister confirm that the mortgage guarantee scheme will apply to Scotland, Wales and Northern Ireland as well as to England? If that is the case, will he indicate which Department will operate it for Scotland and the other devolved areas? If it is to be the Department for Communities and Local Government, I suggest that it would be more appropriate for the scheme to be operated by the Scottish Government or the relevant devolved Administrations.
Would it be possible for the Scottish Government and the other devolved Administrations to amend the scheme to take account of the objections raised, which will no doubt be shared by all of them, that it would benefit the buyers of second homes and people on relatively high incomes? In most parts of Scotland, Wales and Northern Ireland, prices of £600,000 are very much at the higher end of the housing market.
If someone in one of the devolved areas defaulted under the mortgage guarantee, would the cost be borne by the Treasury or the devolved Administration? I appreciate that these are technical questions but I am sure that, as the Minister has thought through the policy in great detail, he will be able to answer them.
The Economic Secretary to the Treasury (Sajid Javid)
I thank all Members for their contributions. This has been a thoughtful and engaging debate.
Both new clauses are about housing. New clause 1 would require the Government, within three months of Royal Assent, to provide a report to Parliament on how the tax system supports those seeking to purchase a second new home and how the Government plan to prevent it. New clause 5 suggests introducing a mansion tax on properties worth more than £2 million, with a view to using the revenue to fund a tax cut for those on low or middle incomes.
The Government oppose both new clauses. I will elaborate on the reasons, but first allow me to make a few points about the significant steps the Government have already taken and about our overall housing strategy, as many issues relating to it were raised this afternoon. I shall also respond to some of the other issues that were raised.
The new clauses centre on the housing measures in the Budget. The Government announced a major new package to support new development and affordable housing, alongside reforms to the planning system. The measures included the Help to Buy equity loan scheme and the Help to Buy mortgage guarantee scheme. They will give a much needed boost to housing supply, and equip those who aspire to own their home with the tools to do so.
John Mann
Would the Minister accept that, with the affordable housing levy the Government have brought in on single properties, those who build their own home now face a minimum £40,000 tax per property? In Hertfordshire, it is £187,000. That will kill off aspiration for those who wish to build their own home.
Sajid Javid
What the Minister will accept is that this Government have done more than any other in recent times to help those who aspire to purchase their own home. The Budget announced financial support of £5.4 billion for housing, which builds on the £11 billion of support already committed during the spending review period. The Government are also taking significant action through our build to rent and affordable homes guarantees programme.
Alongside those measures, the Government are reforming the planning system to ensure that reforms will increase housing supply. Planning constraints have depressed the supply of new homes. The Budget announced that the Government will take further steps to make the vital planning reforms that are needed to ensure that we have a regime that is simple to access, supports growth and is responsive to housing need. As hon. Members will see, this Government have a comprehensive strategy for housing, we have taken significant action, and those measures will give a much needed boost to both the demand and the supply side of housing.
I shall now discuss the new clauses. New clause 1 proposes that the Government provide a report to Parliament, three months after the passing of the Bill, to ensure that the tax measures do not benefit those who are purchasing a second home. The Government have already taken steps, through the tax system, on the issue of second homes. We have changed the discounts on council tax for second homes, through the Local Government Finance Act 2012. From 1 April 2013, billing authorities in England will be able to charge up to 100% council tax, instead of between 50% and 90%, on properties that they consider to be second homes. That corrects an imbalance permitted by the previous Government, which allowed second home owners to pay less than those with a single property.
The report suggested is wholly unnecessary, but in today’s debate issues have been raised about the Help to Buy scheme, particularly whether it will support those who wish to purchase a second home. We have already made it very clear that second homes will not be eligible for the Help to Buy equity loan scheme. The scheme builds on the existing successful First Buy scheme, and is able to use existing processes. In the new scheme the Government, through the Homes and Communities Agency, have a more direct relationship with the purchaser, and require a legal declaration by the purchaser’s solicitor that the property will be the purchaser’s only and main residence. The Chancellor has also been very clear that the intention of the Help to Buy mortgage guarantee scheme is to help people buy their first home, or to move up the property ladder as their family grows. But the mortgage guarantee scheme represents a major new intervention, and we must ensure that we get it right.
Chris Leslie
May I clarify the announcement that I think the Minister is making? Is he saying that there will be a requirement, as a covenant within the mortgage deed arrangements, to exclude the use of any equity from remortgages and so on for second home purposes? That, essentially, is what he has announced.
Sajid Javid
What I am saying is that, at the Budget, we set out a scheme outline. Now we need to work, with lenders and other stakeholders, on the detail. We want to ensure that we avoid any unexpected adverse consequences of the scheme, such as attempts to use it to purchase second homes. We want to look at this carefully, and we want to ensure that we discuss the details with industry. We have already started this process, and we will report back to Parliament in due course. Therefore the report suggested by new clause 1 is wholly unnecessary.
Bill Esterson
This is a really important point. What the Minister has not announced is that, if somebody is moving up to a second home, they must sell their first home. Can he confirm that they will not be able to keep that first home, because otherwise it will mean that people will be able to get a second home by using the scheme?
Sajid Javid
The hon. Gentleman raises a good point, which is that it is the Government’s duty to carefully consider what is meant by a second home. He has given as an example the situation in which someone has no intention of owning two homes, but is in the process of moving home. Let me share another example. There are couples who unfortunately get divorced, and there may be a need for another home as the family splits. The question then arises, is that a second home or not? It is sensible for the Government to examine such issues carefully as we flesh out the details.
Sajid Javid
In the interests of time, I must press on and answer some of the questions that were raised, including by the hon. Gentleman.
The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) and others asked about the devolved authorities, in particular Scotland. The mortgage guarantee scheme is a UK-wide scheme and will be available to all UK residents, including of course those in Scotland and other devolved areas. The mortgage equity scheme is an England-only scheme as housing is a reserved issue among the devolved authorities.
Sajid Javid
The right hon. Gentleman asks a good question. Those are some of the details that we will flesh out. If he will allow me, I will look into the question further. I hope it is clear to him that the intention is that the mortgage guarantee scheme is a UK-wide scheme.
In the time that I have left, I shall turn to new clause 5. We have always been clear that the proposed mansion tax is an issue on which the two parties of the coalition have differing views. Our Liberal Democrat colleagues have supported the principle for some time, as we heard today so eloquently from my hon. Friend the Member for Bristol West (Stephen Williams). In contrast, Conservative Ministers have very real concerns about such a proposal.
We have concerns that a third of properties in London worth more than £2 million have been in the same ownership for 10 years, and that a mansion tax could hit asset-rich but potentially income-poor households. We have concerns that a family could live in a £2 million house, but have a very large mortgage. That would mean that their net wealth was a lot lower than the actual value of the home. We have concerns that any mansion tax would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected. But Opposition Members should be aware that we are taxing anyone purchasing a new home at this high value through the stamp duty land tax of 7% on residential properties costing £2 million or more. That is a policy that is easy to administer and it will not impact on existing home owners.
The Opposition have proposed that a mansion tax could pay for a tax cut for millions of people on low and middle incomes. The Government have already introduced tax cuts for those who need it most. We are increasing the personal allowance to £9,440 from April—the largest ever cash increase. That will be increased by a further £560 to reach £10,000 in 2014-15, meeting the Government’s commitment a whole year early. That is a tax cut for 24 million people and together takes 2.7 million people out of income taxation altogether.
Budget 2013 also announced that the fuel duty increase planned for September will be cancelled. The Finance Bill keeps fuel duty frozen at current levels, resulting in the longest freeze in fuel duty for 20 years, helping households and businesses with the cost of motoring.
Meanwhile, those with the highest incomes continue to contribute the most. This year the top 1% of taxpayers—those with an income of more than £150,000 a year—will pay approximately a quarter of all income tax. The top 5% of taxpayers—those on incomes of £68,000 or more—will pay nearly half of total income tax. As part of the Government’s commitment to create a fairer tax system, since 2010 the Government have raised taxes on the rich in every Budget. Budget 2010 introduced a higher rate of capital gains tax, Budget 2011 tackled avoidance through disguised remuneration, and Budget 2012 raised stamp duty land tax on high value homes and announced a cap on income tax reliefs. The autumn statement of 2012 took action to reduce the cost of pensions tax relief.
In Budget 2013 we announced further significant measures to tackle aggressive tax avoidance and offshore tax evasion by high earners. The richest now pay a higher percentage of income tax than they did under the previous Government. No doubt those on the Opposition Benches think a better approach would be to introduce a new starting rate of income tax, but let us not forget that the 10% rate is a policy that they introduced and then scrapped once before, to the cost of many further down the income scale—the people whom they claim they want to help. Fortunately, the Government have a more coherent income tax policy, as we heard from my hon. Friends the Members for Stevenage (Stephen McPartland) and for Bristol West. Our increases to the personal allowance have replaced the 10p rate, which Labour doubled; there have been successive increases to the tax free personal allowance. Effectively, we have introduced a 0% band.
Geraint Davies (Swansea West) (Lab/Co-op)
On a point of order, Mr Amess. The Minister is not addressing new clause 5. Surely this is not in order.
The Temporary Chair (Mr David Amess)
I am sure that the Minister has heard the point of order and now perhaps will address his remarks more precisely to the new clauses that we are debating.
Sajid Javid
I do think that it is relevant because the issue came up during the debate, but I take your guidance, Mr Amess.
The Government are committed to making the aspiration of home ownership a reality for as many households as possible. The housing measures introduced in this Budget will tackle long-term problems in the housing market, giving a much needed boost to housing supply and supporting those who want to get on or move up the housing ladder. Introducing a mansion tax would create real fairness issues by hitting asset rich but potentially income-poor households. It would serve to create only complexity and uncertainty. The Government have already made huge strides towards a fairer society and a stronger economy, and new clause 5 will not further that. I ask hon. Members not to press the new clauses.
Chris Leslie
Given the constrained time available under the Government’s programme motion and the need to move on to other issues, I do not wish to press new clause 1 to a vote, but it is important that we continue to press Ministers for some firmer answers on their Help to Buy scheme, which gives the impression of having been written on the back of an envelope without much thought and without looking in sufficient detail at some of the questions that have arisen in the course of the last few hours, whether with regard to devolved Administrations or second home purchases. Therefore, it is necessary to consider this further during the Bill’s passage.
However, it is important to test the view of the House on new clause 5, particularly given the speech of the hon. Member for Bristol West (Stephen Williams), who, in an acrobatic display of contortions that tests even the most adept of Liberal Democrats, managed to find a way to oppose a policy that he has supposedly advocated for a long time. Even when we agreed that the policy was the same, raising £2 billion on mansions worth over £2 million and using that money for a tax cut for low and middle-income households, he could not bring himself to abstain on the issue but will vote against the new clause. Therefore, we must test the view of the Committee.
Stephen Williams
New clause 5 calls for a study to be done by the Treasury; it is not about the principle of the policy. The Labour party gets £13 million of public money, Short money, to spend on policy development. Why does it not use some of that money to do its own studies?
Chris Leslie
When the Liberal Democrats are in a hole they really should stop digging. Is the reason for the hon. Gentleman voting against his own policy that he does not want us to look into the very details that he could not answer when challenged on his policy? Of course, if we are to implement a mansion tax we want to make sure that we get it right. We do not want the unthought-through approach taken by the Treasury. We want to make sure that we have taxes that are fair and will be sustainable for the population as a whole. Therefore, it is important that we test the principle of a mansion tax. Lower and middle-income households need that extra help and it is important that we put this question to the test. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 5
Mansion tax
‘The Chancellor shall review the possibility of bringing forward a mansion tax on properties worth over £2 million and publish a report, within six months of the passing of this Act, on how the revenue could be used to fund a tax cut for millions of people on middle and low incomes as part of a fair tax system.’.—(Chris Leslie.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Chris Leslie
I beg to move amendment 2, page 118, line 22, at end add—
‘(14) The Chancellor of the Exchequer shall review the possibility of incorporating a bank payroll tax within the bank levy and publish a report, within six months of the passing of this Act, on how additional revenue raised would be invested to create new jobs and tackle unemployment.’.
The Temporary Chairman (Mr David Amess): With this it will be convenient to discuss clauses 200 to 202 stand part.
Chris Leslie
We now turn to the issue of bank taxation. Amendment 2 seeks to commission from the Chancellor a review of the possibility of incorporating a bank payroll tax within the bank levy and the publishing of a report, within six months of the passing of the Finance Act, on how additional revenue raised would be invested—in particular, to create new jobs and tackle unemployment.
Our approach to bank taxation cannot be looked at in isolation from the economic consequences caused by the banking crisis or from the deficit left for the taxpayer as a result of the failures of the UK banking system. Despite signs in 2012 that the recovery was under way, the extreme-austerity path pursued by the Chancellor has led to stagnation and falling living standards, as well as to growth of only 0.8%, compared with the 5.3% that was promised at the 2010 spending review, and to downgraded forecasts for this year and next year. On top of that, wage levels are flatlining at a time of inflation, resulting in real-terms wage cuts for millions of people, and millions more are struggling to find work in the first place. The typical family is worse off by £891 a year as a result of the cumulative effect of the decisions taken since 2010.
Andrew Gwynne
Was my hon. Friend as amazed as I was at the corporation tax figures produced by Her Majesty’s Revenue and Customs? We were told—indeed, the Chancellor informed the House—that the corporation tax cut would be offset by the Government and that there would be no benefit to the banks.
Chris Leslie
This is the curious thing about the Government’s approach to the bank levy. They have consistently said, “Don’t worry, we’ll set the rate”—let us bear in mind that the levy is a charge on the balance sheets and a proportion of a certain set of liabilities—and said that it was designed to yield £2.5 billion, so it has taken some doing for the Treasury to have managed to net only £1.6 billion in the past year and to get the bank levy so wrong. If it had been my hon. Friend’s constituents who were due to pay a certain level of tax through PAYE or national insurance, does he imagine that the taxman or Treasury would have been so lax and said, “Oh, don’t worry, we’ll let you off that massive liability for the time being”? That is essentially what the Minister and his colleagues in the Treasury have been doing and saying to the banks.
Andrew Gwynne
My hon. Friend is absolutely right. Had it been my constituents who owed HMRC any sum of money, HMRC would have been down on them like a ton of bricks, whether they were businesses or individuals. Is not that the inherent unfairness? The Government say that the banks will not prosper from these changes, but clearly that is not the case.
Chris Leslie
I am afraid that the situation is even worse than my hon. Friend thinks. It is not only the past financial year in which the Minister and his colleagues took their eye off the ball on the bank levy: they did so in the financial year before that, too. In 2011-12, the combined shortfall from the bank levy, netting in £1.8 billion or so and added to the corporation tax cut, was £800 million less than Ministers promised. It is not good enough to say, “Oh well, this is an aberration, and it is something that we can tweak and correct.” Ministers are not going back as far as they should and correcting that shortfall in the steps they are taking in the Budget. It is just not good enough. They have not thought through the design of the bank levy carefully enough.
It is not as though Ministers were not warned. I am sorry that the Exchequer Secretary is not in his place, as I warned him in a debate in July 2010—it seems like only yesterday, but it was nearly three years ago—when I said, “The bank levy is too weak. It will not work and it will not have those yields.” It does not give me any satisfaction to say, “I told you so”, but I did tell them so, and Ministers cannot therefore claim that it was something that happened by chance.
Jonathan Edwards
I have much sympathy with what the hon. Gentleman is saying, but rather than introducing a new tax, what consideration has he given to just increasing the levy?
Chris Leslie
That is an option, and we certainly need to go back to the drawing board and make sure that we design the bank levy in a way that actually works. The proposition we have made in the amendment is to repeat the bank bonus tax that worked very successfully in 2009. That could be incorporated into the bank levy process—that is one option—to ensure that we get a fair share for the taxpayer, who has suffered as a consequence of the requirement to bail out the banks.
The Financial Secretary to the Treasury (Greg Clark)
Will the hon. Gentleman clarify whether his policy is for a one-off payroll tax or a permanent one?
Chris Leslie
This is where we need to look at the interplay with the bank levy. Clearly the levy should be a permanent way of ensuring that we net the right level of resource for the Treasury in recompense for the deficit that the banks created. It is possible to have a bank bonus tax that is more sustainable, but I am open to discussion with the Treasury about how that might work. Even if we netted less than the £3.5 billion that the first bank bonus tax brought in, it would still be considerably more on top of the bank levy, which clearly needs to be topped up. It is important that we look at that—
Greg Clark
Given that the hon. Gentleman clearly does not know whether it would be permanent or temporary, can he at least give an assurance to the Committee that he will not commit any spending to be funded by that levy that goes beyond any particular year?
Chris Leslie
I can tell the Minister that in this financial year it would be necessary for us to repeat that bank bonus tax. We will set out our tax and spending proposals when we write the manifesto for the general election. Heaven knows what kind of mess we will have to untangle after a further two years. It would be invidious to make decisions at this point in the cycle when the Minister will not tell us what is in the spending review in just two months’ time. We will make an assessment in two years’ time. I can certainly tell him that, from our point of view—this is a serious policy distinction—a bank bonus tax would be necessary now, particularly to help fund a compulsory jobs guarantee for young people. That is a necessity, given the unemployment figures we saw earlier today.
Charlie Elphicke (Dover) (Con)
Can the hon. Gentleman tell the Committee exactly how much extra he wants his proposal to raise?
Chris Leslie
We feel that £2 billion could be raised this year from a repetition of the bank bonus tax. That would be an important contribution from those who are doing particularly well. I do not know whether the hon. Gentleman moves in those circles and whether he has seen, as though nothing much has changed in the world, how high bonuses continue to be. Yes, changes from the European Union and elsewhere are being forced on to the bonus culture, but bonuses are still excessively generous to the very lucky few. There are a number of reasons why the bank bonus tax would be good not just for the taxpayer, but in changing the culture in the sector itself. The tax raised £3.5 billion when it was last tried in 2009.
Greg Clark
At what rate would the bonus tax be to raise that amount of money this year?
Chris Leslie
I was anticipating that question from the Minister. This is the Minister who has tweaked and changed the rate, I think, five or six times in various Finance Bills, all to fit the £2.5 billion figure that he has totally failed to address. We need to go back to the drawing board on the bank levy and find a way of calculating it so that it properly yields the sums that we envisage. Of course, the bank levy has to be thought through, so that we get that resource in. It is totally unacceptable to have lost nearly £2 billion for the taxpayer in the past two financial years. Just think what that £2 billion could have achieved in that period. This is not small money. There is the classic chancellorial phrase, “A billion here, a billion there and very soon it starts to add up to real money”, but this is significant resource. It is to the great shame of Ministers that they have allowed that money to slip away from them.
Charlie Elphicke
I thank the hon. Gentleman for giving way again; he is being generous with his time. I just want to understand one thing. If, say, he raised £2 billion in the way he proposes, what would he say to the person who finds it harder to get finance for the borrowing that they need, because of the regulatory requirements on banks and because he had taken a whole load of money out of the banking system, reducing the ability of the banks to lend money?
Chris Leslie
Why should a constraint on the bonus pool have a constraint on the lending capacity of banks? The hon. Gentleman seems to be suggesting—this is the classic Conservative attitude to banking—that the one inviolate part of a bank’s balance sheet is remuneration, or “compensation” as they sometimes like to call it: “Do what you like to the banks, but for goodness’ sake don’t affect that bonus pool and don’t change that compensation pool.” Well, I am sorry, but we take a totally different point of view. In fact, if there is one area of bank finance that needs a culture change, and which proves that stronger capital adequacy is not anathema to bank lending, it is management remuneration. It is too bloated and needs to change.
Geraint Davies
My hon. Friend has been thinking creatively about how banks can make a contribution to getting people back to work. In light of the previous debate, has any consideration been given to the idea of banks being guided into investing in social housing, which could then become part of their assets? Rather than just taking money from banks, which then complain they do not have any money left, their assets could be interwoven with job creation, asset generation and a lowering of the housing benefit bill. We all know that the 17% rise in housing benefit is due to the private sector and a lack of public housing.
Chris Leslie
There is a debate to be had—possibly a separate one—about how we can make a certain kind of socially useful asset class more attractive to private investment. If we as a society want to boost housing investment, we need to attract investors to make those decisions. That would certainly be a more sophisticated way of devising public policy, instead of the dreamed-up approaches in the Help to Buy scheme and the NewBuy scheme, which, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, delivered only 1.5% of the expected additional housing.
Mark Lazarowicz
It is useful of my hon. Friend to remind us of the coincidence of Budget day, which meant misery for many ordinary people, and millions of pounds of bonuses announced by that bank. That indicates another reason why the bank bonus tax is so important: we have to do right by the public, who cannot understand how, in spite of all that has happened, some bankers get multi-million-pound bonuses at a time when most other people are having to tighten their belts in a big way.
Chris Leslie
As I was saying, Barclays has talked about confronting some of the necessary culture changes. It commissioned the Salz report after its involvement in the LIBOR scandal and the fines it received as a result, yet still that oil tanker of bonuses continued to float on, even in that particularly difficult year.
Mike Thornton (Eastleigh) (LD)
I sympathise, obviously, with the point about the overpayment of bonuses. I have three quick questions. First, how does the hon. Gentleman propose to prevent the banks from passing on the cost to their customers? Secondly, at what level of bonus would the tax start? I hope it would not affect ordinary retail staff earning their £50 bonus. And thirdly —no two will do!
Chris Leslie
Well, that is still more than we normally get in one intervention. You are very generous in the Chair, Mr Amess. I do not think there was any evidence of the bonus tax being passed on to customers before, because regulation can ensure constraints on how the remuneration pool works. The Bank of England itself, through the Financial Policy Committee, is now sending the strong message that banks should stop prioritising that bonus pool and level of compensation. The world has changed, and the banks have to recognise that their behaviour also has to change.
We want specifically to target the highest-paid individuals in the banks, not the clerks or ordinary staff. The tax would be aimed at large, discretionary bonuses above £25,000, which continue to be paid out even in the state-owned banking sector. RBS and NatWest paid out bonuses worth £607 million in 2012, despite making a £5 billion loss. Of course, it was the Prime Minister who promised to ensure that any state-owned bank did not pay out a bonus of more than £2,000.
Chris Leslie
I am sure that the hon. Gentleman remembers that promise from his great leader.
Charlie Elphicke
The hon. Gentleman is right: we all want to see pay restraint on the part of banks and the banking system. However, that is a separate argument from the issue of imposing taxation. If he took £2 billion out of the banking system at this time, it would mean less finance or pricier finance, which would be bad for the economy and bad for the recovery.
Chris Leslie
We are repeating the intervention and the response I gave earlier. I just disagree with the hon. Gentleman. I do not think it is an inalienable right of bankers to continue to receive multi-million pound bonuses. The world has changed, as even many Government Members recognise. Defending the indefensible will not do him any good.
Huw Irranca-Davies (Ogmore) (Lab)
May I suggest an alternative hypothesis to my hon. Friend? The runaway bonus inflation that we are seeing once again suggests that the top earners are almost anticipating a bonus tax, in which case we may as well give it to them and fund jobs for the young unemployed.
Chris Leslie
That is the other crucial part. We are often criticised by the Government, who ask, “Where are your policies? What are you proposing to do about the economic situation?” but here is a pretty good suggestion for them. Let us learn from their mistake of scrapping the new deal and the future jobs fund, which my hon. Friends will remember, and do something to help to get young people in particular back to work. There is a separate issue with the long-term unemployed. We have talked separately about changes to the highest rate of pension relief, which could help to fund something for the long-term unemployed, but we could use the bank bonus tax to help to get young people back into work. It is essential that we get people back into the habit of working and paying taxes, and if they turn down those job opportunities, they should forfeit benefits as a result. The proposal has to be part of a tough policy, to ensure that we always focus on work as the best antidote to an inflated welfare budget, but to get our economy moving again too.
Alison Seabeck
Picking up on the point made from the Government Benches about some of our measures taking money out of the economy, is my hon. Friend concerned that the local economy in Plymouth, for example, is losing £16 million because of the Government’s benefit changes? Does he not see some contradiction in that?
Chris Leslie
The study commissioned by the Financial Times which showed the massive impact of the extreme austerity being pursued by the Government will bring home to many communities where some of the poorest people live the fact that that money and those resources are being taken out of their local economies.
Greg Clark
I am sorry to press the hon. Gentleman on this point, but can he answer a conundrum for me? He has helpfully said that he wants to raise £2 billion this year through his payroll tax. The Centre for Economics and Business Research estimates that this year’s bonus pool would be £1.6 billion in total. How will he raise £2 billion from that?
Chris Leslie
I do not recognise that figure. [Interruption.] The Minister is making various projections about the bonus pool, but even if the changes meant that we did not manage in years to come to yield what we now feel we can yield—he could equally make the argument that said, “Well, the European Union is making changes to limit bonuses,” which would obviously mean changes to salaries and elsewhere—what we are proposing would add considerably to the bank levy revenues that he has managed to generate. As we have set out in the amendment before the Committee, we need to incorporate a repeat of the bank payroll tax. It is important to recognise that, although I am happy for the Treasury to commission further research on the issue. If the Government are interested in this agenda and are starting to move in that direction, that might be useful.
Mark Garnier (Wyre Forest) (Con)
I am slightly confused about one thing. Is the hon. Gentleman trying to reduce profligacy and excesses in bankers’ bonuses or is he trying to raise revenue? The problem is that if he gets rid of bonuses or drives them down—a great many of us, and certainly the Parliamentary Commission on Banking Standards, have said that we do not like this at all—he will not get the payroll taxes, namely national insurance and income tax, on those bonuses, so the revenue will go down. I am not too sure what position he is trying to get to.
Chris Leslie
Of course that argument could be made about any demerit activity or level of taxation. People have been making that argument about cigarette taxes over the years, saying “Well, if people give up smoking, will the Treasury not lose a lot of money from it?” I do not want to divert too much into the wider principle, but I would say that a very considerable tax cut has been given to bankers by reducing the 50p rate of income tax to 45p—a cut that is providing a very significant bonus to those individuals in this year. The hon. Gentleman need not worry too much about these poor maligned executives in the banking system. I know that things must be very difficult for them—they may even have to defer the purchase of their yachts for that little bit longer—but we must start capturing and getting a grip on this issue in a way that the bank levy has not worked to achieve so far.
Mark Lazarowicz
On my hon. Friend’s last point, given that many of the banks are substantially owned by the public sector, what does not go in bonuses to the top bankers might come back to the taxpayer in other ways. On the question of the European dimension, we often hear that a bankers’ bonus tax could not be introduced only in the UK because all the top bankers would flee to Luxembourg, France, Germany or wherever. Is that not a good reason why a Europe-wide policy should be considered—precisely because there would be less opportunity for people to get away from UK taxation, which is sometimes used as an objection to a bankers’ bonus tax?
Chris Leslie
I know that Members of the European Parliament have debated some of these issues earlier this week; indeed, they have this week instituted a cap on the bonus level. We will need to reassess behaviour under that new arrangement, but I reiterate that we are confident that the revenue could be used for the purpose of helping the young unemployed.
Chris Leslie
I want the Government to do the same, and I challenge the hon. Gentleman to support us.
Mr Newmark
That will never happen.
I apologise for missing the Minister’s opening remarks, but I was so excited by the shadow Minister’s remarks that I wanted to intervene. I understand that mathematics is not a strong point when it comes to Labour party policy. We have heard from the Minister that bonuses have come down from approximately £11 billion to £1.6 billion. He is proposing a 130% tax on people who receive bonuses, in respect of the current statistics. We have heard from my hon. Friend the Member for Wyre Forest (Mark Garnier) that the shadow Minister has not thought about the implications for the reduction in take-home from achieving the changes he wants to bankers’ bonuses, which will reduce the money coming in for the Exchequer, which I suspect means that his numbers will not add up. The question I really want to put to him, however, is whether his proposed reduction in bonuses relates purely to cash. If not, is he saying that if employees are given shares, which might have a vesting period of more than five years, the vest for that period will be taxed? Is it about cash, or is it about cash plus shares?
Chris Leslie
I get the sense that the hon. Gentleman is starting an accountancy line, perhaps thinking how best to advise these bankers of ways around that nasty Labour Government’s bankers’ bonus tax. I am sure that whether it be in Bitcoins, gold or shares, bankers will be ingenious in how they pay and reward themselves. We have to get a grip of it, though, because however much they lavish rewards on themselves, the Exchequer needs to keep pace with the arrangement. I accept that this is a fluid situation, with policy and banker remuneration changing at the European level, but we must capture this particular issue and not adopt the lackadaisical attitude that the Treasury has adopted so far.
Bill Esterson
A number of figures have been bandied around in the debate, and it is difficult to know exactly which ones are right. Surely that is why we need the review that the amendment proposes. Such a review will, using the resources available to the Treasury, show how the scheme would work. That is surely the best way of answering the questions. We are hearing too many different arguments and different figures—even from the Members who have spoken over the last few minutes.
Chris Leslie
My hon. Friend is correct. However, even if we assume that, as the Minister will no doubt say when I give way to him in a moment, cash bonuses have been changing and the revenue yield will not be the same as it was in 2009, the fact remains that in 2009 we brought in £3.5 billion, and we calculate that this year we could bring in £2 billion. I have not seen any figures to the contrary. As for the Minister’s predictions of what may happen to bonus arrangements in the future, we can come to that in time.
Greg Clark
I thank the hon. Gentleman for giving way; he said earlier that he would do so.
The hon. Gentleman said that he had based his assumption on calculations. The authoritative source on these matters is the CBI, which has published figures consistently over time. It says that the bonus pool was £6.5 billion in 2010 and is £1.6 billion in 2013. Will he share with the Committee the calculations on which he has based his assumption about the bonus pool, and the source that he used? If he cannot do that, I hope he will desist, both in this debate and in future, from making any spending commitments that rely on a source that is fanciful.
Chris Leslie
I would be happy to enter into correspondence with the Minister about the matter. However, we feel that, according to a conservative estimate —I use the term, on this occasion, in a relatively pleasant way—£2 billion could be netted for the Exchequer, as opposed to the £3.5 billion that was netted in 2009.
Our amendment would require the Chancellor to
“review the possibility of incorporating a bank payroll tax within the bank levy”.
I am delighted that the Treasury has conceded that it wishes to engage in such a review. I am delighted that there has been a bit of movement in that regard. I would quite like to ask where the Liberal Democrats are on the issue, but then I would quite like to ask where the Liberal Democrats are generally—although I shall not dwell on that.
Greg Clark
I would like the hon. Gentleman to be more precise about the figures. He said that last time the payroll tax raised £3.4 billion—
Greg Clark
The hon. Gentleman says that it was £3.5 billion. I am sure he will confirm that he has read the analysis published last year by Her Majesty’s Revenue and Customs, which clearly states that £3.4 billion is a gross receipts figure and that the net yield was £2.3 billion. He will agree with that, I am sure.
Chris Leslie
No. The figures given in the HMRC study were estimates—and, incidentally, it was not a study by the Office for Budget Responsibility. For “HMRC”, read “Ministers”. They may well pooh-pooh the payroll levy and the bank bonus tax, but we feel that there is ample evidence to demonstrate how it operated before and how it could and should operate again. If only Ministers would adopt a more “can do” attitude, rather than trying to deflect attention from the massive embarrassment of having promised to raise £2.5 billion from a bank levy and having brought in only £1.6 billion in the last financial year. Although we said year after year that the levy would not be strong enough, they turned a blind eye, and indeed they have turned a blind eye to their banker friends for far too long.
The Government have provided tax cuts amounting to £19 million in the last week by reducing the 50p rate to 45p. A massive number of bank executives are earning more than £1 million this year. A cursory study of the annual reports and accounts of some of the banks concerned—Opposition Members may wish to listen to this rather than talking among themselves—reveals that this year’s bonus results created a staggering number of millionaires. In the Royal Bank of Scotland, 93 bankers were given bonuses of more than £1 million. Given the tax cut, they will benefit to the tune of more than £6 million in the current financial year. Barclays originally reported that it had 428 millionaires, given bonuses. I have been told that only a third are UK-based, but that would still mean that 140 Barclays executives are benefiting from nearly £23 million in tax cuts granted by the Minister because of the reduction in the top band of income tax. Seventy-eight millionaires at HSBC have received a combined tax cut of £3.3 million. Nineteen individuals at Santander are receiving a giveaway of more than £800,000. Twenty-five millionaires at Lloyds are receiving from the Treasury a combined tax giveaway in this financial year of £1.3 million. So they are doing very well, thank you very much, from this Government.
Mike Thornton
The hon. Gentleman is discussing banks paying this tax. Why limit it to banks? Many other organisations, such as hedge funds and insurance companies, pay very large bonuses. I understand that at one point, we perhaps needed to punish them; by why not tax extra anyone that has a bonus of £25,000 or above?
Chris Leslie
Perhaps the hon. Gentleman will have a chapter in the pamphlet that the hon. Member for Bristol West (Stephen Williams) is writing; we would all be interested to read it. [Interruption.] From a sedentary position, I am offered a signed copy of that pamphlet. We are all interested in political memorabilia, and it would certainly be an historic document.
We wanted to retain the 50p top rate of income tax for this year. It should not have been cut, and we think that doing so is unfair. I know—well, I think I know—that in their heart of hearts, the Liberal Democrats do not really agree with the cut, which will of course apply to those earning £150,000 or more. We have to recognise the special responsibility that banks and banking executives have to wider society, given the massive cost to the taxpayer of the banking crisis and the resulting deficit, the consequences of which many of our constituents are still suffering. We still have not got justice for what happened in 2008, which is one reason why we think it important to take this step now.
Mr Newmark
Does the hon. Gentleman distinguish at all between those financial institutions over which the Government have some sense of control—a sense of public ownership—and which the taxpayer had to bail out, and those that did not need taxpayer support? Following that logic, if he really wants to have complete control of compensation and bonuses, does he therefore want to nationalise RBS?
Chris Leslie
No—that is a preposterous suggestion. The hon. Gentleman also needs to recognise that all banks have benefited from the implied guarantee of the taxpayer, even if they did not need to be bailed out. He knows very well that the whole banking sector has benefited for a long time, and continues to benefit, from the market expectation that, should a retail bank get into difficulty or become insolvent, the taxpayer will come to its rescue. That is an implied subsidy, for which the banks ought to compensate the taxpayer. That is part of the argument I am happy to make.
Andrew Gwynne
My hon. Friend is incisively highlighting that the Government have effectively given the banks a tax cut, because of the levy’s failure to bring in the resources they initially said it would. Moreover, bankers themselves are still receiving these eye-watering bonuses, while at the same time the Government are giving them a tax cut—the tax cut for millionaires. Is that not absolutely why we need this bank bonus tax to sit alongside the bank levy, so that we can reinvest that revenue in a jobs programme? Have we not shown that a bank bonus tax works?
Chris Leslie
Exactly, and never let Government Members claim again that we do not have a positive approach that would get young people off the dole and back into employment. This is the route that needs to be taken, and the choice presented to the public which they can see most starkly, particularly on a day when unemployment is rising.
Chris Leslie
I will not give way to the hon. Gentleman, as he has only recently come into the Chamber, but we will see—[Interruption.] Oh, go on then, as he is one of my favourites.
Neil Carmichael
I am grateful to the shadow Minister for giving way; I thought there was a compliment coming along there, too. Not all banks have a bonus system; Handelsbanken is a good example. If we are to have such a separation between banks, with all the difficulties that that would bring about, what would the shadow Minister say to the suggestion that his proposal is a huge complication that will cause more difficulties than it will solve?
Chris Leslie
I would like nothing more than for our banking sector to move to a more enlightened and responsible approach to remuneration. I would not want to see a bloated and unfair bonus arrangement continuing in perpetuity simply as a result of a function of the tax system. For the time being, we need to start to send a signal on behalf of public policy makers that the current arrangements, which have not changed sufficiently since before the financial crash or during it, continue to be difficult. The banks often say that they want catharsis and that they want to move on, and I do not want to spend the rest of my life in banking legislation, for goodness’ sake, but we are still not there and the bonus levy is part of that process.
I do not want to talk for much longer, but I want to challenge the Minister specifically on the bank levy arrangements as we are debating stand part for clauses 200 to 202. We have had six different bank levy rates and they have failed to raise the right amount. We have talked about this time and time again, and I do not want to keep coming back in our debates on the autumn statement next year or on the 2014 Budget to a similar discussion on retrospectively tweaking the bank levy. I want to hear from the Minister when he replies that he can guarantee that in this financial year £2.5 billion will be netted in by the bank levy. If he cannot guarantee that, he must admit that we must reconsider the policy, which is haemorrhaging money when it should be boosting the Exchequer far more significantly.
As I said before, parliamentary rules prevent the Opposition from tabling amendments that would tweak the bank levy upwards. There is a convention of the House that only Governments can table amendments to a Finance Bill that would increase a charge on individuals or companies. The process is incredibly frustrating, as we need to ensure that we get into the detail of how the bank levy should work and what the rates should be. For the time being, we feel that tabling amendment 2 so that we can consider a review of how a bank bonus tax could help the young unemployed, in particular, and of how to incorporate it into a bank levy that nets the amount it should is the right way forward. I commend the amendment to my hon. Friends.
Geraint Davies
I make my comments in light of the fact that today’s unemployment figures showed an increase of 42% in the number of people on jobseeker’s allowance in my constituency of Swansea West. That comes in the aftermath of the financial tsunami of sub-prime debt that hit our shores in 2008, which was largely a result of the banking world taking unhealthy risks in the knowledge that the state would ultimately stand behind it. On the upside, people can take enormous gambles and make tremendous bonuses in the knowledge that if it all goes wrong, the taxpayer will cough up. The net impact of all that is that we are now doddering along on the bottom of the sea of growth and people do not have opportunities.
The strategic challenges for the Government are how to ensure that money is focused on job creation and that the banking community pays its fair share. We know that from this April, the top rate of tax was reduced by 5 points—from 50p to 45p. I realise that the Prime Minister gets up on his hind legs and says, “Oh, but we will raise more from the 45p rate than was going to be raised from the 50p rate,” but we all know that the reason for that is that people with large amounts of money can move their income between tax years. Bankers and others will simply move money to a different tax year when the rate was 45p instead of 50p and avoid the tax. If the 50p rate had been sustained, we would have generated a lot more money, particularly from the banking community. My hon. Friend the Member for Nottingham East (Chris Leslie) did a great job of highlighting the multi-million pound giveaway to the richest in our communities from the reduction. Our modest proposal would deal with people who are being shielded by the taxpayer from proper competition.
Mark Garnier
The hon. Gentleman speaks from the heart about the 50p tax rate and I can understand why Labour Members do so, because during 13 years they spent 12 years and 11 months thinking deeply about introducing it.
Mark Garnier
It would have been wonderful if it had been brought it in earlier because it would have shown more resolve from the Labour party.
Will the hon. Gentleman enlighten the Committee about what is behind the proposal? Is the intention of the levy to reduce the risk of perverse incentives through what can be an obscene bonus system, or is it to generate revenue? One or the other, which is it?
Geraint Davies
I will come to that point. In his preliminary commentary, the hon. Gentleman asked why the Labour party failed to bring in the 50p tax rate, and indeed the Prime Minister boasts that he is taxing the rich more than Labour ever did, and that is great. The Labour party does not exist to introduce high taxes; it exists to give people opportunity and employment. Higher levels of employment bring prosperity and opportunity, so there is enough tax yield from a lower tax rate to fund public services. Between 1997 and 2008, the economy grew by 40%.
If one is concerned, as I am—as we all are—about the debt to GDP ratio, which is the total debt divided by the value of the economy, there are two ways to get it down. The first is to cut the debt directly, cutting most from the poorest as the Tories do. The other is to increase the size of the economy. In 2010, after we had gone through the financial tsunami, but luckily on the back of 10 years of unparalleled increase in growth under Labour, the debt to GDP ratio was 55%; now the forecast is 85%. The reason is not just that the Tories are keen on cutting money for the poorest and getting money from people who do not have it, but that they cannot get their act together strategically to generate a growth strategy that reduces the ratio so that we do not need higher tax rates. We do not want people who are making obscene bonuses to pay higher taxes for the sake of it; we want people in work.
Mark Garnier
Is not the biggest inequity that it is not Government debt that is the real problem, but household debt? In the period from 1997 to 2008, household debt as a percentage of household income went from 80% to 140%, and the boom in the economy was paid for by a colossal bubble of household debt. That is the real problem.
Geraint Davies
That simply is not the case. I was at the Bank of England relatively recently looking at the profile of debt in the run-up to 2008 and from 2010. From 2010, the ratio of the debt between the Government and the banking community was 1:2. Two thirds of the debt was that of the banking community. Do not misunderstand me: there has been a problem with the general public ratcheting up more private debt through the availability of low interest rates, which in themselves are a good thing, thanks to the fact that my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) introduced Bank of England independence and all the rest of it, and thanks to a feeling that there would be a continuation of growth. People were investing in houses and they were growing in price and so on.
Since 2010, when the Chancellor said, “We will have half a million people unemployed in the public services” and did not say who they were or when they would lose their jobs, there has been a sharp rise in savings rates and a fall-off in consumer demand. We have seen consumer demand basically flatlining, which underlines the reason why we do not have growth, which is why we do not have a reduction in the debt to GDP ratio.
We need confidence to get back on a growth path so that people can spend in the knowledge that they will have jobs in the future. Part of that is to re-engineer the financial world in such a way that money is channelled into productive capacity. Although, allegedly, we have an extra million people in work, overall output is the same. Average production has fallen and average productivity is down, which is very worrying. So we need to think how to ensure that the banking community pays its fair share and how to direct money, in a meaningful way, into job creation and public and private assets.
I was not in the Chamber for the previous debate, but part of that thought process would be, how to encourage the banking community, not in a high-risk way, to start helping people to build desperately needed housing—to get people who have been out of work, many of them in the construction industry, back into work to provide social houses.
Geraint Davies
I will give way in a moment.
After all, one of the big issues that is waved around by the Government is, “We must get the welfare bill down and Labour will not do anything about it.” The flagship of that proposition is, “Housing benefit has doubled to £20 billion in the past 10 years. What is the Labour party going to do about that? We are going to introduce the empty bedroom tax.” In fact, 70% of that increase has come about through escalating private sector rents, and local councils being forced to use the private sector for people in need of housing, because not enough social housing is being built.
If we could somehow get the banks to build social houses, perhaps by allowing them to own partly some of those assets, and by doing so create jobs for people who would pay tax, people would have houses and the housing benefit bill per household would go down because rents would go down—housing benefit is linked to rent levels. We need to think about how to put this together, and part of that debate clearly relates to the banks. When there are obscene bonuses and the recipients are receiving tax cuts, it is not fair, certainly from where I stand, when I am seeing local unemployment up 42%.
Geraint Davies
I will give way to my hon. Friend the Member for Sefton Central (Bill Esterson) first.
Bill Esterson
My hon. Friend is conducting a very thorough examination of the causes of the financial problems that we face. He mentioned housing. Does he agree that the housing bubble is part of the cause of the problem, because people borrowed against the value of their property, which is not a long-term, sustainable way of producing growth in the economy? One reason why the proposal that we are debating is so important is that we need a sustainable model of taxation to underpin the growth in the economy with the type of investment that my hon. Friend is talking about, rather than using assets as a way of investing, which is not sustainable. Actually, there is some evidence that that problem is recurring now.
Geraint Davies
I agree that part of the previous problem was the false assumption that the value of property would continue to escalate. Lenders would grant 110% mortgages on the presumption that, within a couple of years, the equity would catch up and there would not be negative equity. Therefore, borrowers would start with negative equity. The issue of sub-prime debt is a big problem.
One of the flagship proposals of the current Budget is for the state to come in and subsidise deposits by lending up to four fifths of the 25% deposit. There are people in the financial community who are thinking, quite reasonably, “Hold on; this could be the start of another sub-prime debt problem.” The problem we have is that people cannot afford to save the deposit that would enable them to become an owner-occupier. They are paying a rent that is too high because there are not enough houses, so they cannot save the deposit. There is a logic that asks, “Can we help them with that deposit?” I agree with that logic that far, but we must be very careful. People have said, “Oh well, no one is taking up the offer,” but if this suddenly becomes a very significant amount of money and it is not properly balanced as a risk, we could be going down the path that started the problem in the first place.
That said, ultimately communities are desperately in need of houses. Historically, council houses were invented because the marketplace was failing to deliver affordable, quality housing for very large parts of the community, and we had Rachmanism. I fear, actually, that we are witnessing the start of its re-emergence. So investing in assets in which people can have stable family lives, as a platform to get jobs, is good. We will not solve the problem today, but part of this debate is clearly about reviewing whether we can do some extraction from the banking community. That community have just been given back a lot of money, they have been causing many of the problems and there is a risk premium. They should be paying back to the taxpayers who are covering their back. Then we can think creatively about how to engage the banking community in small business development, housing development and so on.
Huw Irranca-Davies
Conservative Members have asked whether this is a tax-raising scheme or a scheme to create jobs and homes. I put it to my hon. Friend that I am bemused as to why it cannot be both. Surely a scheme that takes from where there is disproportionate wealth and redistributes, not simply in terms of cash in pocket, but into jobs, and taxes paid by people in those jobs, has such a glorious splendour about it that I struggle to see the dilemma.
Geraint Davies
That is precisely right, because the creative challenge is how to get the banking community to invest in jobs and small business, and one way is to take some money from them and create some jobs and small businesses. If they cannot work out how to do it, that seems a reasonable thing to do.
Greg Clark
Through the hon. Gentleman, perhaps I may express the dilemma that was raised by his hon. Friend the Member for Ogmore (Huw Irranca-Davies). I fear that a cruel deception is being perpetrated on the unemployed. They feel that a sum of money will be available to them, but it simply is not possible to raise £2 billion when the total bonus pool is less than that. I think they should know that.
Geraint Davies
Yes. Well, obviously, we clearly need to look at aggregate sums, but what is being debated here is—[Interruption.] What is being debated here is, is whether it is right that a community of people—I am talking particularly about people in the upper echelons of the banking community—who are making obscene bonuses should be given more and more money for doing no more work and having the taxpayers covering their backs in terms of risk, at a time when we are seeing an escalation of unemployment in various communities, including some that I represent, and when the very poorest are being asked to deal with obscene levels of pain in order to reduce the deficit problem.
Huw Irranca-Davies
May I suggest, through my hon. Friend, by way of riposte, that the cruel deception that is being perpetrated is that there is a lack of ingenuity within the Treasury that could extricate some of the undeserved wealth and redistribute it to put people in jobs? I fail to agree that there is a lack of expertise or resourcefulness there; that is an admission of supineness, of surrender. We should be looking for imaginative ways, like the amendment before us, to get people back to work, by taxing those who are disproportionately wealthy and undeserving.
Geraint Davies
That is right, and there would be widespread support for that across our communities and probably in the banking community. People are taking home an extra £1 million and asking themselves whether they should be paying income tax at 45p or 50p, at a time when we hear cases of people earning, say, £20 a week. As I mentioned at Prime Minister’s Question Time, a constituent who recently came to me was a chronically ill man who had £20 a week after paying his utility bills and his bus fare. This month he is down to about £14 a week due to benefit cuts. If such cases were brought to the attention of some of those wondering whether to buy their second yacht, I do not think they would mind paying a little more.
It has been insinuated that a 50p rate would discourage such people and be so painful for them that they would all get in their yachts and go off and live somewhere else, but in Britain today many people already pay more than 50p. Anyone who is earning more than £32,000 and less than £42,000 is paying 40% tax plus 12% national insurance. That is 52%. The only reason that they have to pay more than 50p and the millionaires do not is that they do not have their own personal accountants. That is not fair, is it?
These are sustainable levels of marginal taxation and it is right that they should be paid. It is right that members of the banking community, who have their backs covered, should pay more than their fair share. It is also right that the Government should get their act together to stop abuse by many members of that community who are taking the mickey.
Yesterday I had a meeting with a lawyer who specialises in giving advice to people facing charges of insider dealing and the like from the Financial Services Authority, which is now the Financial Conduct Authority. We were talking enormous amounts of money that people are trying to avoid paying. The point that she made to me is that the people in the FSA, now the FCA, do not have the resources and the clout, and have to deal with dozens of cases, while the defence lawyers deal with only a few cases because the amounts of money are so great. What is more—the Minister might want to do something about this—there is no system of precedent.
If the FSA says to a bank, “You have committed this offence and we are going to charge you £1 million”, which is small change for a bank, the FSA cannot set a precedent. The banking community knows that, if they do it, they will be charged; the FSA has to rehearse the same action again and again. I hope the Minister will look into this as it comes from the horse’s mouth—from people who are giving advice to people who are being defended. They also poach staff from the FSA or the FCA to work for them. They say, “We’ll give you three times as much. You’ve been charging us and you’re very good at it. You’re not paid enough for your success. Come over to our side. Have some of our bonus and we can do some insider dealing. The people at the Exchequer are making cuts at the tax office to save money, so we can have more.”
Andrew Gwynne
My hon. Friend should be a little more charitable towards the Government. There has been a thread of consistency in their approach. Had he been present for the first debate, he would have heard my hon. Friend the Member for Nottingham East (Chris Leslie) say from the Front Bench that the Prime Minister promised that under the Government’s New Buy scheme, 100,000 families would be helped and only 1,500 families were eventually helped through that scheme. In this debate we heard that the Prime Minister said that £2.5 billion would be raised by the bank levy, whereas we heard from my hon. Friend on the Front Bench that £1.1 billion was raised. Is there not a degree of consistency here? The Government are consistently incompetent.
Geraint Davies
That certainly would be a charitable way of putting it. If financial targets are set and are under-achieved, the Government clearly need to redouble their efforts to deliver those targets. We need to continue to focus on generating joined-up systems to ensure that the money that is available delivers economic outcomes such as opportunity and jobs. The amendment is designed to create imaginative ways of generating opportunity and jobs for the future by using the money that is recovered. We should join together to do that. It is a modest amendment that we should all agree on. We should work together to build a stronger Britain.
I fear that the Government will say, “Oh no, we can’t possibly consider that.” That, alongside their failure to raise the money, would show that they do not have the focus to ensure that those with the broadest shoulders pay their way towards a more prosperous Britain. I fear that the Government will go back to the old Tory ways and say, “Let’s use this as an opportunity to crush the so-called undeserving poor” and pretend that there are workers and shirkers, whereas people just want to get out and get a job. Let us move forward and create a united Britain—a one nation Britain, dare I say—to create a future that works and a future that cares.
Mr Newmark
I apologise, Mr Amess, for popping out. I wanted to make sure that we had the right statistics at hand. I agree with the hon. Member for Swansea West (Geraint Davies) that those with the broadest shoulders should pay the largest amount of taxation. After the last Budget, notwithstanding the 5% cut, the top percentage of earners are paying more because of the other tax rises that we have brought in for them.
Unemployment is a tragedy for anyone who loses their job, and I am sorry for the individuals in the hon. Gentleman’s constituency who have in the past month lost their jobs. He spoke about the productivity puzzle, and I agree that that is a challenge. What is important to each of our constituents is surely that they have a job. The facts are that, year over year, unemployment is down by 71,000. Employment nationally is up 488,000 year over year. On jobseeker’s allowance, the figure that he looked to, year over year it is down by 60 people. That is not many, but the figure is down year over year in Swansea West.
Geraint Davies
In Swansea West jobseeker’s allowance numbers have grown by 40%. We have heard of employment levels going up and we have seen that overall output has not gone up, so there is the productivity puzzle, which is a kind way of saying that productivity—production per head—has gone down. All I am saying is that we should look at ways of giving people the tools to do the job, be it skills, building houses, or super-connectivity.
In the run-up to the Budget I got the business community in Swansea together to lobby the Chancellor to invest in a wi-fi cloud and super-connectivity for Swansea. Why should an inward investor come to the congestion and cost of London when they could hook up to the worldwide web in superfast time overlooking the wonderful Gower and the sun and sands of Swansea? That was worth while doing. We were not successful, and subsequently the biggest company in Wales, Admiral, wrote to the Chancellor pointing out that it is a global company and wants super-connectivity on a global basis to its clients and suppliers. That is the sort of investment that we want to make from the extraction from the excess profiteering of certain individuals in the banking community. The modest amendment would enable us to continue that dialogue with a view to taking action to deliver positive change for people who currently do not have enough opportunity.
Barbara Keeley (Worsley and Eccles South) (Lab)
Is my hon. Friend as concerned as I am—I hope that Government Members are concerned—about the increase in the number of people who have been unemployed for 12 months? In my constituency, the figures today show that the number of those unemployed for more than 12 months has gone up by 17%. Tragically, the number of young people unemployed for more than 12 months has gone up by 40%. Having talked to other hon. Members here this afternoon, I know that they have similar if not higher figures. That is the real tragedy. Here is a generation of young people who will be scarred by unemployment. We need, and we need soon, proper measures, which the amendment addresses— innovative and different measures, not the Work programme, which is not working for people. That generation will be scarred if we do not find them work soon.
Geraint Davies
That is completely right. Clearly, the economic model that must work is to have people making a contribution by being in work. There has been some debate about tax thresholds—with everyone saying how great they were—versus working families tax credit. Let us put ourselves in the position of someone starting a business who can only afford to employ someone for £10,000—£15,000 would not be viable; that is just the way that business works. Along comes working families tax credit, and a single mother, for example, can afford to work for £15,000, but not for £10,000. If the state makes up that difference, we end up with someone who can afford to work and make a contribution, and a business that is now viable. That is good. If that is simply stripped away and the tax threshold is increased to make it more worth while, it does not add up. That is one explanation for why we had such considerable job growth under the Labour party from 1997 to 2008.
Most people do not really understand working families tax credit. It is a way of integrating tax and benefits so that we cannot divide people into those in receipt of benefit and the workers, which is what Conservatives want to do for political reasons. They want to say that there are the workers and the shirkers and they are for the workers and the Labour party simply wants to support people sitting at home. That is the opposite of the truth. The Labour party is about enabling people to have pathways to prosperity through jobs. We should be using the fruits of engaging with the banking community, who make obscene amounts of money, and investing in skills and in communications, whether it be electrification of the railways or high speed rail, in wi-fi clouds, or in creating a global infrastructure in terms of R and D and our universities.
We have heard a lot of talk about the reduction in corporation tax from 21% to 20%, but that makes no difference to multinationals if the comparators are France at 33%, Germany at 29% and the USA at 40%. We are already competitive. But that 1% reduction is a 5% reduction in our tax yield from corporation tax. Would it not be better to spend that on helping universities to grow with industry? There is a good example of that in Swansea, which could be the fruits of what we are talking about today, where the second campus is being underpinned by £250 million from the European Investment Bank, and where Tata Steel, BP, other multinationals and the Welsh Government are engaged. Research shows that that sort of cluster of R and D attracts more and more big business and jobs, rather than just a marginal bit of corporation tax. We need to think cleverly about how to generate R and D engines. Brazil, for example, is spending £5.3 billion from development banks on getting into the global field of biotech. China and other countries are making similar investments. That is the way to organise ourselves in a joined-up way, rather than the laissez faire social and economic Darwinism of the Tories, where we see the weakest die and the greediest become more bloated as they exploit the world.
Geraint Davies
On that point, I will take an intervention from the hon. Gentleman.
Mr Newmark
I am enjoying the hon. Gentleman’s fascinating speech, and a philosophical divide is clearly developing. Does he really believe that it is best for a company to pay an extra 1% to Government, because they know how best to spend that money to create jobs? Or is it best to leave it with the company? Let us leave bankers aside, because I know that one is obsessed with those. Let us talk about the Tatas of the world, the manufacturers who historically have done a great job in Wales in creating jobs. Does the hon. Gentleman believe that it is best that that 1% extra goes to Government, because they are in a better position to create those jobs, than a company such as Tata, which would take that extra 1% and use it efficiently for R and D or job creation?
Geraint Davies
You, Mr Amess, probably have one of these sophisticated iPhones. I bring it out of my pocket because all the heavy lifting of the technology in this phone, which is a multi-billion pound product in a global marketplace, has been done by the public sector. We invented the internet, but GPS, touch sensitivity, voice sensitivity and most of those things were done by the institute of technology in California, which is why the Californian government are suing Apple for £26 billion to try to recover some of the money earned. Apple did a bit of packaging and marketing, produced the goods in a lower cost place, and paid tax somewhere else. We have global companies, which we all know about, which do not pay tax where the economic activity takes place. The answer to the hon. Gentleman’s question whether it would be better to give money back to companies for R and D is that companies want to do a bit of R and D, but they want to do it on the back of the heavy lifting of the public sector. That is the reality. Part of our challenge is to attract those companies to where we have public sector activity, to engage in partnership, and to ensure that we tax where the economic activity and marketplaces are, so that we get our fair share of the added value and a return from our taxpayer investment. So the answer is yes, yes, yes.
Bill Esterson
With regard to why Government have to intervene, my hon. Friend mentioned Swansea, but around the country there are regions with big problems, particularly youth unemployment—Merseyside is a key area where that is a problem—where we need such intervention. We are talking about a levy on banks, not on Tata, and we need that money to be directed where the job shortages are for young people. A small number of my constituents who have not been able to find work locally travel to London to obtain work, with all the inherent problems of high housing costs. It is not an attractive option. It is not what they want to do, but they have no choice. However, the vast majority are not in a position to do that, and that is why youth unemployment in the regions is going up, and that is why we need the kind of intervention that my hon. Friend is talking about.
Geraint Davies
Yes, and my hon. Friend makes an important point about the growing regional imbalance in the British economy. I realise that the Government have paid lip service to that issue, but if the only place to get a good job is London, that inflates costs, and young people come to London to live in squalid conditions in the hope that they can get the experience to go home at some point. There is a brain-drain as well, so this policy does not make any sense. One of the first things the Government did was to get rid of the regional development agencies. They said that they were no use and cost too much.
Geraint Davies
I will give way in a moment.
I went to visit UK Trade & Investment, which has 83 offices around the world. Its mission is to market Britain for trade and inward investment. I was in its office in Dusseldorf and it told me that typically it would market Britain as a great place to come to—a low-tax, stable society with a platform into various markets, a skills base and great universities.
For example, a German distiller might come along and say that it wanted to set up a factory in Britain. That would go on to UKTI’s computer platform and the RDAs would then bid for it, saying, “We want that in Yorkshire” or “We want that in Lancashire” and setting out their case. Immediately after the RDAs were destroyed, there was a queue of companies looking to invest in Britain through UKTI, but there was no one to bid for that investment. It was crazy to destroy them, especially at a time when we want growth and regional balance.
The Government said the RDAs were too expensive, but now they ask why we have growing unemployment, zero growth and increased housing benefit costs in London. It is because rents are going up, we are not building houses and we do not have regional balance. Therefore, the amendment is partly about thinking of creative ways to move forward and engage the banking community in a sustainable growth plan that has a regional dimension.
Huw Irranca-Davies
Does my hon. Friend agree that the life sciences cluster at Swansea university, which brings together the best of the private sector, with micro-businesses, small and medium-sized enterprises and technological innovation, is working also because the project is supported by local and national Government in Wales? It is not about one or the other; it is about both. I have visited a company in Maesteg, at the top of the Llynfi valley, a former coal mining area, which is investing in life sciences. Does he also agree that the sort of intervention that that company would love to see is in a jobs guarantee to help it increase its manufacturing base? That is the sort of clever intervention the state can make to grow SMEs and micro-businesses, not just the Tatas of this world.
Geraint Davies
I completely agree. There are clearly certain growth markets within the global market environment, and life sciences is one that is of great interest in Swansea, as are biotech and green technologies and all the rest of it. What the public sector can allow is a critical mass of research that benefits from economies of scale and a shared risk that would not be taken by individual operators, and that can attract inward investors. What we want is a benign partnership, as we have in Wales, with a Labour Government and local authorities working with universities, perhaps on a city-region basis, which is the future, to deliver benefits for all. That is what we want, rather than the laissez-faire approach.
I will have to bring my comments to a close in a moment, because obviously other Members wish to speak, but I promised first to give way to the hon. Member for Stroud (Neil Carmichael).
Neil Carmichael
I have listened carefully to the hon. Gentleman. Does he welcome the fact that in the long term Hitachi has invested £6 billion in some of the regions he has referred to, such as the north-east, where trains will be made, and in my area, where nuclear power stations will be built? He refers to “heavy lifting”. Does he not agree that through his industrial strategy the Secretary of State for Business, Innovation and Skills has introduced the aerospace centre, which will be a massive investment, essentially in the public sector, to promote the development of aviation? That will also be repeated for the automotive sector. That is precisely what he is talking about, so the Government are doing that already.
Geraint Davies
I certainly welcome those things. The trouble is that it is very much a U-turn—although that is fine. One moment the Government were withdrawing and saying, “We don’t have to do anything, because the market will spontaneously grow.” Then nothing was growing in the garden, so they go and put in some pot plants and that sort of thing, which is great. Hitachi is very welcome, and Tata has been mentioned. Some of those big companies, such as Tata, will make strategic investments, particularly because of the quality of the coal and the history of skills and the innovation, such as the partnership with Swansea university, where they are developing a new type of steel that has six layers, generates its own electricity and, when used to clad buildings, lowers the carbon footprint. It is the future.
With regard to aerospace, we of course have Airbus in Wales and, again, a supportive Welsh Government. Any support from the UK Government for strategic investment to boost our export and manufacturing base in modern and growing markets is very welcome. That is something we can certainly support. The more active the intervention from the Government with regard to an industrial strategy, the better. We want to see jobs, rather than people sitting on their hands—that is how the Government see it—and rather than watching bankers take loads of money for doing very little while people in Swansea and elsewhere who want to work are blamed for being unemployed but are not given a hand-up.
Geraint Davies
I will take one final intervention before bringing my remarks to a close, because I know that other Members wish to speak.
Richard Graham
I am grateful to the hon. Gentleman for giving way at this stage in his long and fascinating peroration. He made several references to the fact that bankers are obscenely overpaid and that they should pay more tax. Does he think that people who earn up to £250,000 a week are underpaid, reasonably paid or significantly overpaid, and should they be making a greater contribution to the sort of problem he has been discussing? I am talking, of course, about premier league footballers. I look forward to his comments.
Geraint Davies
I do not want to be drawn into talking about football, because there is a rivalry between Swansea and Cardiff, and Cardiff, to be fair to them, have just been promoted. I feel that people who earn more should pay more towards the public good. Whether or not the cut-off point is £250,000, we all have a contribution to make and those with the widest shoulders should pay more and at a greater rate. There is a debate about what that rate should be, but certainly those people who advocate a poll tax that would mean the poor paying the same as the richest for local services are at the far extreme of reasonableness. Most of us, I would like to think, want the rich to pay more.
Sadly, what we saw in the Budget was the poorest paying most to pay for the bankers’ recklessness, so that a certain amount of money could be thrown to the squeezed middle in order to buy votes. That is not the way forward. We need a unity of purpose to grow in prosperity for a future that cares and a future that works. On that point, I must sit down, because I know that colleagues and others want to speak. Thank you, Mr Amess, for indulging me.
Alison Seabeck
It is a pleasure to follow my hon. Friend the Member for Swansea West (Geraint Davies), who gave an absolute tour de force. I rise to support amendment 2. We have heard it said repeatedly, both in interventions and in my hon. Friend’s speech, that bankers who earn large sums of money in this country continue to receive huge bonuses, irrespective of whether the institutions they work for have improved their performance, and meanwhile unemployment persists and the Government attempt to create full-time jobs. It has failed.
Indeed, in a week when we saw low-paid working families affected by the bedroom tax—or spare room subsidy—we also saw large numbers of top bankers awarded obscenely large bonus payments and, in some cases, benefiting from the tax cut for millionaires. Some have deferred paying income tax until this financial year to avoid paying at the 50% rate, thereby making additional gains on the back of the poor, a point that was terribly well made by my hon. Friend the Member for Swansea West.
That is yet another Government economic plan that has been poorly evidenced. It is part of an endless package of ill-thought-through policies. The Government had 13 years to work up those policies. We expected them to have worked up deliverable policies, but clearly they have failed miserably. They do not even have a plan B for the economy—the one that the International Monetary Fund now suggests they switch to—which is shocking.
In the financial year 2010-11, the bankers’ bonus tax introduced by the Labour Government raised around £3.5 billion. It was a sensible tax on the country’s top earners. It was scrapped within weeks of the coalition Government taking office and replaced by a bank levy, which the Prime Minister has consistently claimed would raise £2.5 billion a year. The simple truth is that it has not done that, so one could say that the Prime Minister’s accuracy at the Dispatch Box has been found wanting. Members should not take my word for it—the Office for Budget Responsibility evidence, published alongside the Budget, confirmed the figures. The OBR has said that the coalition’s bank levy will bring in just £1.6 billion from the last financial year—almost £1 billion less than the Prime Minister said it would, and less than half that raised under Labour’s bank bonus.
Andrew Gwynne
My hon. Friend is right to highlight the differences between the Prime Minister’s statements and reality. May I give her a third example: the cut to corporation tax. We were told by the Prime Minister and Chancellor of the Exchequer that the banks would not benefit from that cut and that there would be some offsetting arrangements. Yet we now learn from Her Majesty’s Revenue and Customs that the banks have benefited to the tune of £200 million.
Alison Seabeck
I thank my hon. Friend for flagging up what is factually correct and can be substantiated, rather than something resulting from living in some fantasy land of figures, as Government Members seem to do.
The amendment seeks simply to have a review in six months’ time on whether a bank bonus tax within the bank levy would raise significant additional income that could then be reinvested in creating jobs—especially among young people, who have been so hard hit by the Government’s economic failure.
Richard Graham
The hon. Lady will have heard the hon. Member for Swansea West (Geraint Davies), her colleague, refer at the end of his very long speech to his belief that people in his constituency are paying more tax as a result of the recent Budget. First, does the hon. Lady believe that her constituents are paying more tax? Secondly, does she know how many people in her constituency are now paying less tax as a result of the changes made in Budgets since 2010? The figure for my constituency is 43,969; I am sure that she knows the figure for hers. Thirdly, how many people in her constituency have been taken out of income tax altogether as a result of the Budget? The figure for Gloucester is 5,000 people; the one for Plymouth will be similar.
Alison Seabeck
That is an interesting question and I am delighted that the hon. Gentleman is so well informed about his constituents. However, he seems conveniently to forget that my constituents, like his, are also being hit by increases to VAT, which takes a significant chunk out of their incomes. Furthermore, particularly if they are low-paid workers, they are being hit by a flat-rate pay freeze and in turn by housing benefit changes. I am talking about working members of my constituency. If someone was to knock on the doors of Plymouth, Moor View, that person would find that people said they were significantly worse off and finding life very hard indeed.
Geraint Davies
I had better intervene, because the rendition given by the hon. Member for Gloucester (Richard Graham) of what I was meant to have said was completely inaccurate. I did not say that tax had increased for people but that the working families tax credit had been massively cut, as well as other opportunities.
The average person would lose £14 a week under the bedroom tax because their children had grown up and they had an empty bedroom. That is the same as the £13.50 that somebody might get from the raising of the tax threshold to £10,000. There are swings and roundabouts. Only £400 million will be saved from crushing the poor but it will cost £12 billion to put up the tax threshold. The judgments are difficult, but the Tory instinct is to crush the poor and help the squeezed middle, while ours is to help everybody. However, I made no insinuation that tax was being increased.
Alison Seabeck
My hon. Friend has put his position on the record, so I will not take further interventions on that point.
I come back to the amendment and its call for a review.
Huw Irranca-Davies
My hon. Friend has raised the issue of the disparity between the £2.5 billion that the Prime Minister said on repeated occasions would be raised by the bank levy and the nearly £1 billion that is now missing. Does she share my hope that when he responds the Minister will identify where that £1 billion a year is? If we could find it, it could go towards the job creation schemes that we are talking about. Some £1 billion is being nicked from the Treasury every year.
Alison Seabeck
My hon. Friend is absolutely right in suggesting that if there is a £1 billion gap, it should be explained. I am sure that the Prime Minister would like to know, given that he has repeatedly stood at the Dispatch Box using that figure, which seems to have been plucked from the sky.
Huw Irranca-Davies
It would be completely remiss of anybody in the House even to suggest that the Prime Minister was in any way misleading the House when on repeated occasions he cited the figure of £2.5 billion a year. But could it be possible that he has been misled inadvertently by Treasury officials or other Ministers?
Alison Seabeck
That is exactly my point. Has the Prime Minister been given duff information? If he has, that is pretty shocking. Ministers should take responsibility if that is the case.
I come back again to my point. The amendment is calling for a review, which is absolutely right. The hon. Member for Bristol West (Stephen Williams), who spoke in the previous debate, is not in his place, but I hope that this time the Liberal Democrats will not pursue the line taken by the hon. Gentleman, which was that it is unreasonable for the Treasury to carry out a review—of a mansion tax, in the context of the previous debate. He seemed to have forgotten that the Government are carrying out a review, at taxpayers’ expense, into the future of Trident. Obviously, that is basically a review for future Lib Dem policy. As I said, it is a shame that the hon. Gentleman is not here, because there was a bit of a contradiction between the two positions from the Liberal Democrats.
In Plymouth and the rest of the south-west, we are still lagging behind the rest of the country when it comes to finding the full-time jobs that young people desperately need. The number of unemployed is still higher than in 2010 and the number of long-term unemployed is growing. Although the Government keep telling us that more people are employed—the mantra has come from them again today—their figures hide the simple fact of the contrast with the position in 2008.
Then, when people were asked whether they felt they were working excessive hours, the answer came back as a resounding yes; people felt that they were working more hours than was reasonable. Now that figure is different—in large numbers, people are seeking more hours to work. It is estimated that there is a shortfall of 20 million working hours, which equates to a real unemployment figure that runs closer to 3 million. Questions have also been asked of people who work part-time and want to work full-time. The number who want to switch from part-time to full-time is 1.5 million—that is just in the three months running up to February.
There is clearly a problem. People are working part-time; indeed, some are trying to hold down two or three part-time jobs, as was evidenced during a street surgery that I held in Whitleigh a couple of weeks ago. Some people have used their redundancy money to set up as self-employed, and those figures are slightly skewing the evidence on what is happening on the ground. Some people have been transferred from the public sector to the private sector, often on reduced hours. That shift partly explains the rise in the number of jobs in the private sector; they are not new jobs but simply transferred jobs.
The tax proposal in the new clause would fund a job for every young person who had been out of work for a year or more. That number is up, year on year, by 37%. They would have to take up that job or risk losing their benefits. This is no soft touch but a serious attempt to give hope to young people and to help them get a foot on the ladder and contribute to society. Unemployment among young people is higher in this country under this coalition Government than it was at any time under Labour. The number of people claiming jobseeker’s allowance in my constituency remains above the national and regional average. Reinstating Labour’s bank bonus is therefore the right thing to do.
Mike Thornton
The hon. Lady seems to be saying that one of the problems is that there are no jobs in the economy while at the same time proposing a policy to find jobs for people—jobs that are presumably not there. How does she reconcile talking about finding a job for somebody with saying there are no jobs?
Alison Seabeck
The hon. Gentleman has completely misconstrued my remarks.
We need to invest to grow jobs. We need to grow our economy, and as we do that, there will be more jobs. People want to work, but the evidence is that the jobs are not there. People are having to work part-time, even to have multiple part-time jobs, in order to keep body and soul together. We need an economy that is growing, and we are not getting that from this Government. We need Labour’s bank bonus to invest in jobs, to tackle unemployment across the country, and to help young people.
Sammy Wilson
Although we have not heard many speeches by Government Members, I am a bit surprised by the attitude they have adopted to this proposal in view of one of the Government’s declared objectives in the Budget book. Under the heading, “Fairness”, it states:
“The Government’s economic and fiscal strategy is underpinned by its commitment to fairness”.
I would have thought that anyone looking at the proposal would find it very difficult to say that it does not have a core of fairness within it. It is directed towards an industry, the banking industry, which was partly responsible for the economic crisis we face, the impetus for which was people in that industry being given incentives to behave in a reckless way that led to the kind of borrowing and lending that created our current difficulties. They were bailed out by the taxpayer, with bonuses then being paid out of that bail-out. I would have thought that on the grounds of fairness alone, Government Members would see at least some merit in the arguments for the proposal which have been advanced.
I have often heard it said, not only by Labour Members, but particularly by Government Members who are close to small businesses—perhaps many of their supporters are small business owners—that the banking industry has strangled those businesses in the middle of the recession, refusing to lend to them even when there are good, viable propositions and putting the squeeze on them when they most needed liquidity. I would have thought that Government Members would have some sympathy for a proposal that said to them, “We cannot reward people at the top of an industry who are destroying, squeezing and making it difficult for the businesses that many of you would regard as your supporters”, yet they seem to be opposed to it.
Huw Irranca-Davies
The hon. Gentleman is making a very powerful speech. Has he had the same conversations as I have with lower-paid bank clerks and bank staff who are equally appalled by the excesses of their extremely well-remunerated paymasters right at the top of the organisation? They would look at this amendment and think that it is completely fair and should be delivered for them, as well as for us.
Sammy Wilson
The hon. Gentleman brings me to my next point. Even some within the banking industry would say that there is no economic rationale for the obscene bonuses that are given at the top of the industry, and that there is no necessity for those bonuses to make it work efficiently. On a weekly basis, businesses and individuals come to me and say that if anything is strangling growth and the potential for it, in the economy today, it is the performance of the banking industry. When I hear about of some of these bonuses, I wonder what they are being paid for. They are certainly not being paid because the banking industry is performing well in helping to grow the economy and lift us out of recession.
Mark Garnier
The hon. Gentleman is making a very powerful point. However, that is exactly why some of us have spent the past nine months on the Parliamentary Commission on Banking Standards examining the problems he is talking about. It is why the Government introduced the Financial Services Act 2012 in order to repair the regulatory environment and to establish the Financial Policy Committee to look at the instability in the system that can come about as a result of perverse incentives from bonuses. It is why the Government are currently taking the Financial Services (Banking Reform) Bill through Parliament. A huge amount is being done for exactly the reasons he mentions.
Sammy Wilson
Yet the situation continues. Despite all that, we do not see any change.
Some of the arguments advanced by Government Members, mainly through interventions, as to why the proposal is a bad idea, have become increasingly desperate as the debate has progressed. I believe that this should be done, first, on the basis of fairness, and secondly, because it has some potential for changing behaviour, and that ought to be given serious consideration.
The first argument was to say, “If we do this, we will be taking money out of the economy.” What do these people who get the bonuses do with them? Are they generating additional expenditure in the economy? If someone gets a bonus of £1 million, are they likely to spend it? We all know, and it is well evidenced in economic theory, that the more money we get, the higher the proportion of that additional income we tend to save—it does not contribute to the economy. During the Budget, the Chancellor said that the poor performance in the economy was because consumer spending had been suppressed and was not what had been anticipated. When I hear the argument that discouraging these bonuses, or taking them back in the form of tax, removes spending power from the economy, I find it rather bizarre.
Alison Seabeck
The hon. Gentleman is reinforcing a point that I touched on earlier. In Plymouth, we are losing £16 million a year in benefits, and the people who usually get those benefits are poor and would spend the money in their local areas, not on foreign holidays or by putting it into bank accounts.
Sammy Wilson
Although saving is, of course, good in any economy, the important question at the moment is: how do we generate spending? The hon. Lady has reinforced the point that if money goes to unemployed people they are likely to spend 100% of that income, but someone who gets a £1 million bonus is likely to save 90% of it—perhaps more—so it will not be injected into the economy. I do not think that the argument that the amendment would remove money from the economy and, somehow or other, deflate it stands up to scrutiny.
The second argument, which was made by the hon. Member for Dover (Charlie Elphicke)—he tried to promote it in a couple of interventions on the hon. Member for Nottingham East (Chris Leslie)—is that all this levy would do is make finance either pricier or less available. As has been said, that implies that the only part of bank spending that is sacrosanct is the amount of money spent on bonuses. Making an activity more expensive tends to direct people away from it, and I cannot see how the banks would be any different. If we make it more expensive and more costly for them to give bonuses, they will be driven away from using those funds in that way and it would create a behavioural change. If that change did not happen, however, and bonuses continued to be paid and the tax on them recouped from customers, the alternative would be regulation. The customer should not have to pay for them—if banks do not change their behaviour, we should ensure that the taxes cannot be passed on to customers.
The third argument—I found this one bizarre, especially with regard to the bank levy—is that since we cannot be sure how much money will be raised, we should not pursue it. If that were true, we probably would not tax anything. How often do we hear the Government predict the amount that will be raised in tax revenue, only then to revise the figure within six months, either because behaviours have changed and the expected amount has not been raised, or because the economy performed in a different way than expected?
The hon. Member for Wyre Forest (Mark Garnier) made that argument, but on that basis we would not have the bank levy, which was supposed to raise £2.5 billion this year, and raised only £1.1 billion. I do not know why that revenue was not raised—perhaps there was some change in the economy—but whatever the reason the bank levy did not raise the money intended. Moreover, the Government made spending plans on the assumption that that revenue would be available. I do not think that the amendment can be argued down on the basis that it may not raise the money and therefore no commitment should be made.
Mark Garnier
On that point, the hon. Gentleman does not seem to have read the amendment, the whole point of which is to raise money specifically to be invested in creating new jobs and tackling unemployment. If the Opposition want to invest a specific amount, they need to know how much money they will raise.
Sammy Wilson
The hon. Gentleman has missed my point; perhaps I did not make it very well. When the Chancellor declares what taxes he intends to levy in the Budget, that announcement is accompanied by what he intends to spend that tax revenue on. Sometimes that revenue materialises and sometimes it does not.
The only requirement that I would make of an amendment of this nature is that it does not throw out a reckless figure and say, “We will make £x billion from this provision and spend it.” The Minister was right to ask on what basis the amendment’s calculation was made, but it cannot be argued that, because there is a degree of uncertainty, this is not a good proposition. I would have been very unhappy had the amendment said, “Let’s raise the money and then we’ll see what we will do with it.” It is much easier to make an argument on the grounds of fairness: “Let’s raise the money and this is what we will do with it.” Knowing where the money comes from, the purposes for which it was being used and the purposes for which it will be used once collected would enable us to judge whether the proposition is fair. It is not possible to divorce how the money is raised from what will be done with it.
Neil Carmichael
Does not this line of argument represent the thin end of the wedge with regard to hypothecation? Raising taxes is a general activity and the decision on how they should be allocated for expenditure purposes has to be made on other grounds. The obvious example is the health service.
Sammy Wilson
I agree that a general proposition that every specific tax raised should be hypothecated for a certain purpose would be very dangerous, but this is not a general proposition; it relates to one specific case and that case has to be made.
Geraint Davies
In following the logic of the hon. Gentleman’s eloquent argument, am I right in saying that he agrees that what banks should really be doing is supporting small businesses that have large order books and successful products and that want to upsize and build their business, but that do not have a lot of collateral and houses? That is what the banks should be focusing on in our local communities and economies, not on massive bets against share price changes and derivative bundles, which will develop multi-billion pound bonuses in an almost virtual world. What we want is a real economy supported by banks, not a bonus culture backed up by the state.
Sammy Wilson
That is one of the arguments for separating retail banking from the riskier banking activities described by the hon. Gentleman.
The fourth argument is totally different from the others, but I think that Government Members were getting increasingly desperate as they clawed for arguments against what is a reasonable proposition. One Member asked several times whether the amendment was designed to change behaviour, to act against perverse incentives or to raise revenue. All taxes tend to have behavioural consequences anyway; it is in their nature to change behaviour. Some are specifically designed to do so, while some are more genuinely revenue-raising because they do not affect behaviour as much. If the revenue from the tax goes down because fewer bonuses are paid, that does not necessarily mean that it is bad for the economy. For example, if banks decide not to pay bonuses and to keep the money as profits, corporation tax revenue will go up; or if they decide to put the money back into the bank and thereby increase liquidity, that will have a beneficial effect on the economy, because banks will be able to make more loans to businesses. Just because it may change behaviour does not necessarily make it a bad proposition. In fact, the proposition stands, as it could have other tax revenue-raising consequences or induce changes in bank behaviour that mean they have more money to do what the public expect them to do, rather than simply giving huge bonuses to their top-ranking employees.
Richard Graham
The hon. Gentleman is contributing to the anti-bank ranting that we have had for the past couple of hours. What about the second part of the amendment, which provides that the levy shall be used to create jobs and employment? As a former economics examiner, does he believe that it is the business of the Government to create jobs? If so, what sort of jobs—Government jobs or state aid that would fall foul of EU rules? What does he think of the Government’s performance on employment? Is he surprised that unemployment is not higher?
Sammy Wilson
I hope that my speech has not been interpreted as an anti-bank rant. Indeed, I made the point at the beginning that banks are essential to the working of the economy. They provide the oil for the economy, and we want to find ways to make them do the job they are meant to do. If a bank bonus tax is one of the ways in which we could get them back on track and away from providing perverse incentives for particular employees to behave in certain ways that have not been helpful to the economy, that would be beneficial.
A properly functioning banking system is important for the economy. Rather than this proposal being anti-bank—[Interruption.] From a sedentary position, the hon. Gentleman says, “Answer the question.” He asked me two questions and I am answering the first. Banks are an essential part of the economy and we want to ensure that our proposals address that.
The hon. Gentleman also asked whether it is the role of the Government to create jobs. It is the role of the Government and the private sector to create an environment for jobs and in which economic growth can take place. In some cases, that will mean direct involvement by the Government in job creation. Even some of the most right-wing members of the hon. Gentleman’s party, who are adherents of supply-side economics, would accept that it is the role of Government, for example, to provide opportunities for people to train. That creates jobs. It increases the skills base of the economy, which makes it easier for the private sector to create jobs. It is a question of co-operation. It is not a case of either/or. It is a simplistic view of the economy to suggest that only the private sector creates jobs and the Government sit on their hands—
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
Order. May I remind the hon. Gentleman that this is a timed debate that will end at 7.15 pm. I hope that he will forgive me for interrupting, but it would be good to hear what the Minister has to say.
Sammy Wilson
I will conclude on that basis. I hope that I have addressed some of the points made by coalition Members. The amendment should be supported on grounds of fairness, of improving the banking system and of ensuring that the money that the Government raise from this provision could be used to help to stimulate the economy.
Greg Clark
I am grateful to you, Ms Primarolo, for allowing me to get a word in edgeways in this debate. It has been a most illuminating debate. We have discovered that it is the policy of the Opposition to raise £2 billion from a bank bonus tax when the pool of bank bonuses this year is forecast to be £1.6 billion. The Opposition Front-Bench team was commended for proposing an imaginative measure. It certainly is imaginative. Indeed, it is the stuff of fantasy that more could be raised in revenue through a tax than is contained in the tax base to which it applies.
The Opposition have done this before, as I shall say later, and this is a familiar debate. We had this debate in 2011 and in 2012, and now the Opposition have tabled a more or less identical amendment on a policy that was introduced in the dying days of the last Labour Government for one year only—a payroll tax on banks. When the then Chancellor introduced it in December 2009, he insisted that it would be a one-off tax. Indeed, it was not even for a full year, but from December 2009 to April 2010. But in the Finance Bill Committee of the whole House almost exactly a year ago, the hon. Member for Pontypridd (Owen Smith) revealed:
“If Labour had won the election, it may have changed its view and continued the bank bonus tax.”
On reflection, he said,
“I think a Labour Government would have continued it”.—[Official Report, 18 April 2012; Vol. 543, c. 391.]
The annual reappearance of this temporary Labour tax should remind us all that whenever Labour proposes a temporary tax, it is best to assume that it is for life—
Greg Clark
The hon. Gentleman spoke for 45 minutes and I have about seven or eight minutes. I shall make some progress and try to give him an opportunity later.
The bonus tax raised a net amount of £2.3 billion for the Exchequer, and that was supposed to be that. Amazingly, the Labour party had no other plans to make the banks make any further contribution to the costs they imposed on taxpayers. I agree with the hon. Member for East Antrim (Sammy Wilson) on that point. After that £2.3 billion, it appeared that the banks had discharged their responsibility to the taxpayers. To be fair and to acknowledge the consistency of the Labour Government, they showed no indication during their 13 years in office that they wanted to extract a contribution from the banks, even when the Centre for Economics and Business Research estimated that bonuses amounted to £11.5 billion in 2007.
As we know, the Labour party was “intensely relaxed” about people getting filthy rich. We have taken a different view. We believed from the outset that it was right for banks to contribute more to the taxpayer than other companies which did not pose a risk to the Exchequer and to the taxpayer. We agree with the point about fairness, and that is why the Government introduced a permanent levy—not a one-off—on the balance sheets of banks in the first Finance Bill of the new Government.
As we intended that it should be permanent, rather than—as Labour preferred—for a single year, it was important to design it in a way that would raise money every year. The trouble with a bonus tax, as the former Chancellor eloquently put it, was that
“frankly, the very people you are after here are very good at getting out of these things and...will find all sorts of imaginative ways of avoiding it.”
That was why it could work only for a single year.
Huw Irranca-Davies
Has the Minister looked down the back of the Treasury sofas to find the £900 million a year that is missing? What has gone wrong?
Greg Clark
I will come on to that point, and the hon. Gentleman will be satisfied with my answer, as I hope he will acknowledge.
Balance sheets, unlike bonuses, cannot be hidden. They are more stable than bonus pools and so offer a far better way to collect a levy to benefit the public. Moreover, balance sheets are a better reflection of the risks, to the banking sector and to taxpayers, than remuneration, as set out by the International Monetary Fund in its 2010 report to the G20. That is why France and Germany quickly joined us in applying bank levies. They have subsequently been joined by Austria, Belgium, the Netherlands, Portugal and others. It is fair to say that those countries have not chosen to charge as much as we have. Relative to the size of our financial sector, our levy raises five times that raised by the French levy and two and a half times that raised by the German levy, but not one of these countries has thought fit to introduce a permanent bonus tax.
A permanent bonus tax would, of course, have been a catastrophically unreliable source of revenue, which is why I am very concerned that the spending commitments proposed by the hon. Member for Nottingham East (Chris Leslie) seem to be based on it. When the Labour tax was imposed, the Centre for Economics and Business Research estimated that the total pool of City bonuses was £6.7 billion. As I said earlier, it estimated that last year bonuses were £1.6 billion—less than a quarter of the 2010 level. With regard to the proposals from Europe, there might be some expectation that the levels will fall further.
A balance sheet tax is obviously a more stable, sustainable and sensible revenue base. However, to address the points made by the hon. Member for Nottingham East, balance sheets are not entirely invariable, which is why we have introduced a second element to the policy. We have specified that the bank levy should raise at least £2.5 billion a year, which is why we have clauses 200 and 201. The clauses increase the bank levy from 0.088% to 0.142% from 5 January 2014. The reason for these increases is simple: the forecast published by the independent Office for Budget Responsibility in December implied that without amendment receipts for future years would fall short of the £2.5 billion required and to which we are committed.
We announced in the autumn statement, as soon as these forecasts were published, an increase in the rate, which the Bill implements, to correct the shortfall. The March 2013 forecasts made by the OBR show that the levy is now forecast to raise more than £2.5 billion this year, and in all subsequent years. When the bank levy was first set, in Budget 2010, it took account of the planned reductions to corporation tax that were announced at the same time. Since then, as hon. Members know, the Government have been able to make further cuts to corporation tax. We have taken the view that this should not be passed on to the banks. Accordingly, clause 201 increases the bank levy to recover the benefit that would have been received from the cut in corporation tax.
To answer the point made by the hon. Member for Ogmore (Huw Irranca-Davies), the effect of these changes would be to cause the bank levy to yield not £2.5 billion in future, but £2.7 billion this year, and £2.9 billion for every year into the future. This extra revenue more than makes up for the shortfall in revenues experienced during the first two years.
Let me say something about clause 202, the other measure in the Bill relating to the bank levy. The clause removes an anomaly that would have been exploited, whereby banks could have claimed both a tax credit and a deduction for the same foreign bank levy. The view of Her Majesty’s Revenue and Customs is that the existing corporate tax rules prevent such a deduction, but the case law is old and we saw fit to put the matter beyond doubt.
I fear the Opposition have made a mistake in preferring a payroll tax to a bank levy. As countries across the world demonstrate, a bank levy is a better reflection of systemic risk: it is permanent, it raises more money and it is sustainable, not being undermined by avoidance. If the Opposition persist in basing their spending plans on such a flimsy source of revenue as the bonus tax, which actually exceeds what is paid in bonuses this year, then I fear that they have not learned the lesson that they surely must: jeopardising our public finances would take this country back to the edge of ruin from which this Government have hauled it back. If the hon. Member for Nottingham East had any embarrassment or rigour, he would withdraw this ridiculous amendment. I commend clauses 200, 201 and 202.
Chris Leslie
The Minister’s smile could not be stifled by the ridiculousness of his last comments. This is déjà vu all over again. We have heard it before from this Minister time after time, year after year. “Our bank levy,” he said, and the Prime Minister has said from the Dispatch Box, “will always raise £2.5 billion.” Last year, however, it was £1.6 billion; this year it is £1.8 billion. The amount of money lost is staggering. We will, therefore, want to test the view of the Committee. The Minister has to get a grip on this issue. He has been haemorrhaging money, and the £2 billion that has been lost should have been put to the better purpose of helping young people get off the dole and back into work. That is what we on the Labour Benches believe.
Question put, That the amendment be made.
Mr Michael Meacher (Oldham West and Royton) (Lab)
I beg to move, That the clause be read a Second time.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to discuss the following:
New clause 8—Meaning of ‘tax arrangements’—
‘(1) Arrangements are “tax arrangements” if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage as a result of tax avoidance was the main purpose, or one of the main purposes, of the arrangements.
(2) Arrangements are not tax arrangements if:
(a) the arrangement was specifically permitted by legislation or regulation relating to any of the taxes referred to in section [General anti tax-avoidance principle] (3) or is clearly consistent with principles on which the taxes referred to in section [General anti-tax-avoidance principle] (3) are based whether express or implied,
(b) the advantaged party shows that the arrangement was neither designed nor carried out with the intention of achieving a tax advantage and that no step or feature was included in or omitted from it with that intention.’.
New clause 9—Meaning of ‘tax avoidance’—
‘(1) Arrangements represent “tax avoidance” if, having regard to all the circumstances, it would be reasonable to conclude that tax is not paid—
(a) by the right person, or
(b) at the right time, or
(c) in the right place, or
(d) under the charging provisions of the right tax, or
(e) at all when it would appear right that it was due, or
(f) in any combination of the circumstances noted in (a) to (e).
(2) In subsection (1) an arrangement is considered “right” when the economic substance of that arrangement giving rise to a potential charge to tax under any one or more of the taxes referred to in section [General anti-tax-avoidance principle] (3) of this Part accords with the form in which that arrangement is declared for assessment for taxation purposes whether in the United Kingdom or elsewhere with non-declaration of a potential charge to tax on the economic substance of a transaction in the United Kingdom as a result of the form adopted for its completion being considered a tax declaration for the purposes of this section.
(3) For the purposes of subsection (2) the economic substance of an arrangement does not accord with the economic form in which that arrangement is declared for taxation purposes if having regard to all the circumstances:
(a) one or more of the parties to the arrangement cannot reasonably have been included as a party to it without the securing of a tax advantage having been an objective,
(b) the contractual form of the arrangement cannot reasonably have been adopted without the securing of a tax advantage having been an objective,
(c) the location in which the arrangement is recorded as having occurred cannot reasonably have been decided upon without the securing of a tax advantage having been an objective;
(d) the timing of the arrangement cannot reasonably have been decided upon without the securing of a tax advantage having been an objective;
(e) the arrangement has as one or more of its objectives the declaration of a transaction for assessment under the provisions of one of the taxes referred to in section [General anti-tax-avoidance principle] (3), or none of them, when declaration under the provisions of another of those taxes would seem more appropriate,
(f) the arrangement represents a transaction as relating to capital when it would appear to related to income,
(g) the arrangement represents a transaction as being income derived from capital when it would appear to be derived from the profits of a trade or employment,
(h) the arrangement appears to be without economic substance,
(i) the arrangement cannot be regarded as a reasonable course of action having taken into consideration—
(i) any relevant tax provisions,
(ii) the substantive results of the arrangements, and
(iii) any other arrangements of which the arrangements form a part.
(j) Any party to the arrangement has stated that an objective of structuring the arrangement in the form adopted was the securing of a tax advantage.
(4) In subsection (3) “taxation purposes” includes—
(a) any action required to comply with the obligations of any legislation or regulation relating to any of the taxes referred to in section [General anti-tax-avoidance principle] (3) or their administration or assessment notwithstanding any deficiency or shortcoming in them that the arrangement is meant to exploit,
(b) any principles on which the taxes referred to in section [General anti-tax-avoidance principle] (3) are based whether express or implied,
(c) the policy objectives of the taxes referred to in section [General anti tax-avoidance principle] (3).’.
New clause 10—Meaning of ‘tax advantage’—
‘(1) A “tax advantage” may be considered to have arisen for the purposes of this Part if:
(a) the arrangement results in an amount of income, profits or gains for tax purposes that is significantly less than the amount for economic purposes,
(b) the arrangement results in deductions or losses of an amount for tax purposes that is significantly greater than the amount for economic purposes,
(c) the arrangement results in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid,
(d) the arrangements involve a transaction or agreement the consideration for which is an amount or value significantly different from market value or which otherwise contains non-commercial terms,
(e) the arrangement results in an amount of income, profits or gains tax purposes being assessed for tax purposes upon a person who appears to have less economic claim upon that income, profit or gain than another person who would have greater taxation liability due upon it if they were assessed to that income, profit or gain for tax purposes,
(f) the arrangement results in an amount of income, profit or gain being subject to a tax other than that which the economic substance of the arrangement would suggest appropriate with less tax being due as a result,
(g) the arrangements results in an amount of income, profit or gain being subject to tax assessment in a jurisdiction other than the United Kingdom when the economic substance of the arrangement would suggest that inappropriate whether or not more or less tax is due in that other place or not,
(h) the arrangement results in a lower rate of tax being applied to the income, profit or gain than might otherwise have been the case,
(i) the arrangement results in tax being paid later than might otherwise have been the case,
(j) any combination of the circumstances referred to in subsection (a) to (i).’.
(2) Subsection (1) is not to be read as limiting in any way the cases in which tax arrangements might give rise to a tax advantage.
(3) A tax advantage may, without limitation, be indicated to have arisen by the existence of:
(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) avoidance or a reduction of a charge to tax or an assessment to tax,
(d) avoidance of a possible assessment to tax,
(e) a deferral of a payment of tax or an advancement of a repayment of tax, and
(f) avoidance of an obligation to deduct or account for tax,
(g) the passing of an obligation to make declaration of a liability to be assessed to tax to another party.’.
New clause 11—Counteracting tax advantages—
‘(1) If tax arrangements meeting the definition of section [Meaning of “tax arrangements”](1) of the Part are identified then the tax advantages arising from the arrangements are to be counteracted on a just and reasonable basis.
(2) The counteraction may be made in respect of each or any tax to which the general anti-tax-avoidance principle applies.
(3) An officer of Revenue and Customs must make, on a just and reasonable basis, such consequential adjustments in respect of any tax to which the general anti-abuse rule applies as are appropriate.
(4) These consequential adjustments:
(a) may be made in respect of any period, and
(b) may affect any person (whether or not a party to the arrangements) so long as they are connected to the party that has enjoyed the benefit of a tax advantage, such connection being as defined in section 993 of the Income Tax Act 2007.’.
New clause 12—Proceedings before a court or tribunal—
‘(1) In proceedings before a court or tribunal in connection with the general anti-tax-avoidance principle, HMRC must show—
(a) that there are tax arrangements that give rise to a tax advantage as a result of tax avoidance, and
(b) that the counteraction of the tax advantages arising from the arrangements is just and reasonable.
(2) In determining any issue in connection with the general anti-tax avoidance principle, a court or tribunal must take into account—
(a) explanatory notes that cast light on the objective setting or contextual scene of the specific Taxing Act or this Part of this Act.
(b) the clear statements by a Minister or other promoter of the specific Taxing Act or this Part of this Act together if necessary with such other parliamentary material as was necessary to understand such statements and their effect.
(c) HMRC’s guidance about the general anti-tax-avoidance principle,
(d) guidance, statements or other material (whether of HMRC, a Minister of the Crown or anyone else) that is in the public domain at the time the arrangements were entered into as to the principles on which the taxes referred to in section [General anti tax-avoidance principle] (3) are based whether express or implied, the nature of tax avoidance, and those matters considered to fall within section [Meaning of “tax arrangements”] (2)(a) of this Part (on which matter HMRC shall issue periodic guidance),
(e) evidence of established practice at that time,
(f) evidence as to the intent of the parties, irrespective of the outcome of the arrangements.’.
New clause 13—Application for clearance of transactions—
‘(1) A person may provide the Commissioners for Her Majesty’s Revenue and Customs with particulars of a transaction or transactions effected or to be effected by the person in order to obtain a notification about them under this section.
(2) If the Commissioners consider that the particulars, or any further information provided under this subsection, are insufficient for the purposes of this section, they must notify the person what further information they require for those purposes within 30 days of receiving the particulars or further information.
(3) If any such further information is not provided within 30 days from the notification, or such further time as the Commissioners allow, they need not proceed further under this section.
(4) The Commissioners must notify the person whether they are satisfied that the transaction or transactions, as described in the particulars, were or will be such that no counteraction notice ought to be served about the transaction or transactions under the provisions of section [Counteracting the tax advantages] of this Act.
(5) The notification must be given within 30 days of receipt of the particulars, or, if subsection (2) applies, of all further information required but subject to the conditions of subsection (6) having been met.
(6) The person making application for a notification under this section shall specify—
(a) the amount of tax that they estimate might be due as a result of making the arrangement, or
(b) if that arrangement shall be continuing within the two-year period following its commencement, and
(c) shall pay a fee in respect of the notification to be supplied under section (4) prior to that notification being supplied of not less than—
(i) £1,000, or
(ii) five per cent of the estimated tax due as a result of making this arrangement, whichever shall be the greater,
such charge to be subject to value added tax and to be due whether or not the requested notification can be supplied or not,
(d) HMRC shall have power to substitute such other sum that it thinks appropriate for those sums notified under subsections (a) and (b) if it thinks those estimates unrealistic,
(e) if HMRC makes use of the powers in subsection (d) it shall notify the person within 30 days of its intent to do so and provide its estimate of the tax that might be due under the arrangement with reasons stated, with the person having 30 days thereafter to appeal against the same or let their applications lapse.
(f) HMRC may publish its notifications issued under this section so long as the taxpayer’s identity is anonymised.’.
New clause 14—Effect of clearance notification under section [Application for clearance of transactions]—
‘(1) This section applies if the Commissioners for Her Majesty’s Revenue and Customs notify a person under section [Application for clearance of transactions] that they are satisfied that a transaction or transactions, as described in the particulars provided under that section, were or will be such that no counteraction notice under the provisions of section [Counteracting tax advantages] of this Act ought to be served about the transaction or transactions.
(2) No such notice may then be served on the person in respect of the transaction or transactions.
(3) But the notification does not prevent such a notice being served on the person in respect of transactions including not only the ones to which the notification relates but also others.
(4) The notification is void if the particulars and any further information given under section [Application for clearance of transactions] about the transaction or transactions do not fully and accurately disclose all facts and considerations which are material for the purposes of that section.’.
New clause 15—Power to obtain information—
‘(1) This section applies if it appears to an officer of Her Majesty’s Revenue and Customs that a person may be a person to whom section [Counteracting tax advantages] applies in respect of one or more transactions.
(2) The officer may serve a notice on the person requiring the person to give the officer information in the person’s possession about the transaction or, if there are two or more, about any of them.
(3) That information must be information about matters that are relevant to the question whether a counteraction notice should be served on the person.
(4) Those matters must be specified in the notice under subsection (2).
(5) That notice must require the information to be given within such period as is specified in it.
(6) That period must be at least 30 days.’.
New clause 16—Interpretation—
‘In this Part of this Act—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“connected” is defined by section 993 of the Income Tax Act 2007,
“the general anti-tax avoidance principle” has the meaning given by section [General anti tax-avoidance principle],
“HMRC” means Her Majesty’s Revenue and Customs,
“notification” has the meaning given by section [Application for clearance of transactions] (1),
“tax advantage” has the meaning given by section [Meaning of “tax advantage”],
“tax arrangements” has the meaning given by section [Meaning of “tax arrangements”] (1),
“tax avoidance” has the meaning given by section [Meaning of “tax avoidance”], and
“taxes” has the meaning given to it by section [General anti-tax-avoidance principle] (3).’.
Amendment 11, in clause 203, page 120, line 1, after ‘taxes, insert
‘provided the de minimis test in subsection (4) is satisfied.’.
Amendment 3, page 120, line 9, at end add—
‘(4) Her Majesty’s Revenue and Customs shall review the possibility of bringing forward measures to work in conjunction with other G8 countries to require multi-national companies to publish a single easily comparable figure for the amount of corporation tax they pay in the UK, and within six months of the passage of this Act, place a copy of the review in the House of Commons Library.
(5) The Chancellor of the Exchequer shall review the effects of incorporating measures into the general anti-abuse rule to require multi-national companies to publish a single easily comparable figure for the amount of corporation tax they pay in the UK on Treasury tax receipts within six months of the passage of this Act and consult with G8 countries on their effectiveness, and place a copy of the review in the House of Commons Library.’.
Amendment 6, page 120, line 9, at end add—
‘(4) The Chancellor shall review the possibility of bringing forward a requirement for UK companies to report their use of tax schemes which have an impact on developing countries, including a review of the possibility of bringing forward proposals to require that when such schemes are identified under those rules, Her Majesty’s Government shall take steps to notify developing countries’ tax authorities and assist in the recovery of that tax. A copy of the report shall be placed in the House of Commons Library within six months of Royal Assent.’.
Amendment 7, page 120, line 9, at end add—
‘(4) The Chancellor shall make an assessment of the impact of changes to Controlled Foreign Company Rules in the Finance Act 2012 and as a result of this Part of this Act on the overall tax take of developing countries. A copy of the report shall be placed in the House of Commons Library within six months of Royal Assent.’.
Amendment 8, page 120, line 9, at end add—
‘(4) The Chancellor shall provide a report to Parliament within two years of the passing of this Act, as part of a wider post-implementation review, into the scope of GAAR, the application of the double reasonableness test and its deterrent effect.’.
Amendment 12, page 120, line 9, at end add—
‘(4) The amount of the tax advantage arising from the tax arrangement must be equal to or exceed the following amount for the relevant tax:
(a) for income tax the amount is £100,000,
(b) for corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax, the amount is £250,000,
(c) for capital gains tax the amount is £100,000,
(d) for petroleum revenue tax the amount is £250,000,
(e) for inheritance tax the amount is £100,000
(f) for stamp duty land tax the amount is £40,000,
(g) for the annual tax on enveloped dwelling the amount is £40,000.
(5) For the purposes of subsection (4) the amount of the tax advantage shall be the greatest of:
(a) the total tax advantage for all tax years in which it is reasonable to assume that the tax arrangement was anticipated to be effective at the time the arrangements were entered into;
(b) the total tax advantage for all tax years that would have arisen from the tax arrangement other than for the provisions of this Part;
(c) the total tax advantage arising from all tax arrangements of the taxpayer that were anticipated to be effective in the relevant tax year.
(6) For the purposes of subsection (5) the amount of the tax advantage shall include any tax advantage obtained by the taxpayer or a related party of the taxpayer.’.
Clauses 203 to 212 stand part.
That Schedule 41 be the Forty-first schedule to the Bill.
Mr Meacher
The purpose of new clause 7 and new clauses 8 to 16, which are connected and which stand in my name and those of my hon. Friends, is to replace the Government’s anti-tax avoidance measure, the GAAR or the general anti-avoidance rule, as set out in clauses 203 to 212, with an alternative, much fairer, more effective and more comprehensive measure, the GAntiP or general anti-avoidance principle—I apologise for all the acronyms. In practice, the latter would mean that where a court could establish, having taken account of all the relevant circumstances, that the primary purpose of an arrangement was the avoidance of tax rather than any economically substantive transaction, it could strike it down.
Let me say immediately to the Exchequer Secretary that I appreciate that although UK tax avoidance for the last 70 or so years has been considered on the basis of four UK court decisions—and notably the Duke of Westminster case of 1936—the GAAR guidelines, which were published a couple of days ago, now override that position. I understand that they are, in effect, legal precedent in their own right, which any court has to take into account. That is certainly a significant advance. However, the Government’s GAAR, as set out in this Bill, is still fatally flawed.
First and most importantly, the GAAR advisory panel is riddled through and through with a blatant conflict of interest. It will be drawn almost exclusively from highly paid City lawyers who have spent their careers, and made their fortunes from, giving expensive advice to companies on how to avoid tax. It is like putting the poachers in charge of the gamekeepers. Surely it would be right for independent experts—some drawn from Her Majesty’s Revenue and Customs—to form the main body of what should obviously be an impartial membership.
Secondly, it is proposed that the application of the GAAR will be determined on the basis of a highly subjective and partisan criterion, namely whether the arrangement at issue
“cannot reasonably be regarded as a reasonable course of action”.
From the point of view of HMRC and the poor innocent taxpayers who are penalised if the corporate tax abusers are allowed to get away with it, there is a double jeopardy at work. First, what most people might regard as unreasonable might well be regarded by highly paid City lawyers who make their money out of promoting tax avoidance as perfectly reasonable.
Secondly, what is a “reasonable course of action” is heavily dependent on a subjective view of the role of taxation in society. Whatever else it is, it is not an objective test at all. The point is surely that the GAAR advisory panel has been inserted only as a filter, in order to give the tax avoidance industry a veto on which of its practices shall be called to account. That is clearly prejudicial and indefensible. If City lawyers employed in defending corporate tax abuse are asked whether it is reasonable to hold the view that an arrangement is a “reasonable course of action”, it is a virtual certainty that, except in the most egregious cases, they will agree that it is—at which point many highly controversial and artificial devices will not even get near an independent judge in a court. For that reason alone, I believe that the GAAR should be thrown out, although it has other serious flaws.
Nigel Mills (Amber Valley) (Con)
Does the right hon. Gentleman not accept that one reason why we have got this far is that Graham Aaronson, who probably meets the right hon. Gentleman’s definition of someone who has made his living from selling tax-avoidance schemes or at least advising on them, recommended that the Government go ahead with the GAAR?
Mr Meacher
I did not catch what the hon. Gentleman said. Can he say it a little more loudly and clearly, or can we have a conversation afterwards?
Nigel Mills
I will say it more loudly. Does the right hon. Gentleman accept that one reason why we have got this far is that Graham Aaronson, who arguably meets his criterion as someone who has made a living out of at least advising on such schemes, recommended that the Government go ahead with the GAAR?
Mr Meacher
Yes, I appreciate that. It seems that Graham Aaronson, whom I have criticised pretty strongly in the House in the past, has for reasons best known to himself—although I am very appreciative that he has done this—changed his mind in the important respect that the hon. Gentleman described and which I tried to set out at the beginning. There is more joy in heaven over one sinner who repents than over 100 just men.
Mark Field (Cities of London and Westminster) (Con)
The right hon. Gentleman will appreciate that I have grave concerns about going down the route of even a general anti-avoidance rule, but surely he must recognise that if his new clauses were agreed and we took a principled, rather than a rules-based approach, that would lead to ever more uncertainty and, dare I say it, even larger fees for the lawyers and accountants whom he wishes to clamp down on in this regard.
Mr Meacher
I will come to that point. I know that the hon. Gentleman, who has spent enough time in this Chamber, as I have, might think that I am kicking it into the long grass, but I will come to it at the end. I think I have an effective answer to it, but I prefer to give it at that point.
There are other problems with the GAAR. For the reasons given, it is far too narrowly drawn, tackling only the most aggressive forms of tax avoidance. It would not, for example, tackle Google or Amazon—which have had enormous publicity over the last weeks and months—because the channelling of profits from genuine sales through tax havens would still be permitted. That is just one example. The implication—dare I say it one that was probably intended by the Government; I hope that is not unreasonable—is no doubt that a veneer of respectability is thereby cast over everything else, which might well include artificial contrivances designed to avoid tax. They will somehow be seen to be okay.
There is also no clear penalty regime in the GAAR, which is certainly needed if others are to be deterred from exploiting every opportunity to go down the tax avoidance route. Contrary to all other tax logic, where the burden of proof has always fallen on the taxpayer, uniquely in the case of the GAAR, the burden of proof that an arrangement is abusive has unaccountably been placed on HMRC. Despite the one improvement, which I am glad to mention—
Mr Meacher
I would rather get on, if I may, as many others wish to speak and it is a very short debate.
Despite the improvement I mentioned at the beginning, the net accumulated effect of all these flaws makes it reasonable to argue that the GAAR is a step backward for two particular reasons. One is that while the most heinous cases will certainly be caught—we are all agreed about that—the impression given is that virtually everything else is somehow okay and everything else goes. The other is the outrageous fact that HMRC cannot commence GAAR action on its own initiative. That is rather like forbidding the courts to take action against a thief until the honorary city guild for thieves has given permission.
The alternative is the general anti-tax avoidance principle—the GAntiP—as set out in new clauses 7 to 16. It was drafted by Richard Murphy, one of our foremost tax accountants, as the Minister knows only too well as a sparring partner, and a founding member of the Tax Justice Network. What are the advantages of GAntiP? I will set them out briefly.
First, tax avoidance is currently estimated to cost this country and its other taxpayers £25 billion or up to £25 billion—I know the figure is much disputed, but it is certainly a very substantial sum. It would be significantly reduced, so that many services now under threat because of Government cuts could be saved and more money would be available to help promote jobs, which the Government want, and economic recovery.
Secondly, to deal with the point raised by the hon. Member for Cities of London and Westminster (Mark Field), the UK tax system would be made considerably more certain if HMRC were for a small sum to provide prior indication, which I would strongly support, about whether or not an arrangement would fall within the scope of tax avoidance. No one is trying to trick companies; we want certainty, and this would be a very good way to achieve it.
Mark Field
On this matter, I entirely agree with the right hon. Gentleman. I have said on a number of occasions that if we are to go down this route, whether it be a general anti-avoidance rule or on the basis of the principles that the right hon. Gentleman prefers, it must be done hand in glove with a proper pre-clearance process. It needs to be a swift process and it may be that a fee is to be paid as well, but it must be done on the basis that before any new scheme is marketed it must get the thumbs up from HMRC that it is a legitimate one. That would provide a sensible way forward taking into account the certainty reasons that I pointed out earlier.
Mr Meacher
I am glad to have the hon. Gentleman’s agreement on that. I hope that he will also agree with me that what the Government are proposing—that the criterion should be whether a certain arrangement amounts to a “reasonable view” or a reasonable course of action—is an extremely vague, subjective and uncertain way of deciding this matter.
Mark Field
The right hon. Gentleman referred earlier to egregious schemes, and I think we all recognise that there are some, as highlighted by The Times and other newspapers in recent months. Which particular schemes does the right hon. Gentleman, who is obviously in close contact with Richard Murphy among others, think would not fall foul of the reasonableness test? Which schemes would be regarded as highly egregious yet would fail to be caught?
Mr Meacher
I have already mentioned two that have had a great deal of publicity—Google and Amazon—but there are many, many others. Only a very narrow and small proportion of the most “aggressive”—the Chancellor’s phrase—or abusive tax-avoidance schemes would be caught. What worries me is the impression given that everything else is somehow okay with the Government. I think that is a very unwise position to adopt.
Briefly, the third advantage of GAntiP is that the incentive for accountants, lawyers and bankers to sell tax-avoidance schemes would be curtailed. That would be a thoroughly good thing, because they and their clients would know that most of those schemes would fail in future.
Lastly, my fourth advantage might be the single most important one. GAntiP really could help to change the rancid culture in British society today whereby the top 1%—whether it be super-rich individuals or the big corporations—are widely perceived to be ripping off the honest remainder of the population.
Caroline Lucas
That is very kind of the right hon. Gentleman, who is making a compelling case. Does he agree that it would be helpful to have a clear commitment from the Opposition Front-Bench team that, if it were to form the next Government, it would introduce the sort of principle that he describes so compellingly? For all the reasons the right hon. Gentleman has outlined, the principle is simpler, it provides greater certainty and it will catch far more of the kind of things we are trying to rule out than the rule approach that we have at the moment.
Mr Meacher
As always, the hon. Lady has a similar mindset to mine. That is what I hope, too. Discussions are, of course, going on within the party, and we are yet to hear from my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) who speaks from the Front Bench. I am certainly very keen to try to ensure that before the general election, for all the reasons I have given, the Labour party signs up to GAntiP. I am thus pleased to commend to the Committee new clauses 7 to 16.
Nigel Mills
It is a pleasure to speak in this debate, and I rise to speak to amendments 11 and 12, which stand in my name.
I have said this before, but I have concerns about Parliament agreeing overwhelmingly with a principle that effectively says, “We as a Parliament, even with all the specialist advice we get, cannot draft the law sufficiently well to leave our taxpayers to try to apply and follow it, and leave HMRC and the courts to determine whether that is the case.” The proposals of the Government and of the right hon. Member for Oldham West and Royton (Mr Meacher) would in effect create a power for HMRC to say, “While the law actually says that, what we really meant was something a little bit different, so while the taxpayer has complied with the letter of the law, they have not complied with the letter of the law as we wish it had been written.”
That is a real power for Parliament to give away. We are saying to an executive agency of the state, “Your job is no longer to apply the law; your job is to rewrite it as you wish it had been written by Parliament in the first place.” I think we should be very careful before going taking such a line. We need to know exactly what we are doing and we need to be happy with setting that principle. If the Government tried to apply such a principle to criminal justice law, we could end up arresting people for something that was not a legal offence but we wished had been a criminal offence. If we applied it to immigration law, for example, there would be howls of outrage saying that the state had gone mad with excessive power, and that it was the end of the rule of law and not the way for a sensible Government to behave.
Mark Field
I entirely agree. That sense of arbitrariness will potentially do great damage to the UK as a place that has always been welcoming to business internationally, benefiting our economy as a whole. He is absolutely right to draw a direct comparison between issues relating to the Finance Bill—after all, we have one every year, so we can try to tighten up any problems—and issues relating to the criminal justice system. As he says, if the same principle were applied to criminal justice, it would rightly lead to outrage.
Nigel Mills
I am grateful to my hon. Friend and I would like to expand a little on this theme. It has been said before that there are various ways of interpreting what the rule of law means. One version from the 17th century is that the rule of law is the
“supremacy of regular power as opposed to arbitrary power”.
In the case before us, rather than saying “Here is the law that applies to everyone,” we are giving the Revenue the right to rewrite the law only for certain people subject to certain permissions. That sounds like arbitrary power to me.
As a classics graduate, I thought I would dip back into history and finally find some use in having done a classics degree. Plato said:
“Where the law is subject to some other authority and has none of its own, the collapse of the state in my view is not far off; but if the law is the master of the government and the government is its slave, then the situation is full of promise.”
What we are doing here is saying that the law now has no authority, as we are giving somebody else the power to change the law, and that rather than the Government having to follow the law, the Government and its agencies can change the law retrospectively. We need to be clear that we are weighing up whether the real sin of the existing excessive, outrageous and truly abominable level of complex tax avoidance by people who should know better and should not be doing it is enough for us to risk weakening the rule of law.
Jacob Rees-Mogg (North East Somerset) (Con)
I entirely agree with my hon. Friend on the issue of the rule of law. However, I wonder whether the outrageous examples that have caused such scandal over tax avoidance were actually examples of tax evasion, and whether HMRC has in fact been very weak about enforcing the tax law as it exists now.
Nigel Mills
I agree with my hon. Friend that tax evasion is a crime that should be prosecuted to the fullest possible extent, but in this instance we are talking about tax avoidance.
We should be clear about the principle of what we are doing. We are saying to HMRC, “You can enforce something that is not in law.” If we are to pursue that line, we must be certain that safeguards are in place so that we do not see—metaphorically, of course—tax inspectors turning up with baseball bats, banging down the door of the taxpayer and saying “Give us money or else.” The “or else” would mean, of course, HMRC making the assessment and taking the money in any event, and the other party having to go through expensive court proceedings to try to get it back. I have worked with many tax inspectors, and clearly I do not think that any of them would literally pick up a baseball bat, but there is a risk that in any difficult situation in which there is some doubt about the application of the law, tax inspectors will start writing letters saying, “Unless you agree with my analysis, I reserve the right to apply the general anti-abuse rule, in which case”—effectively—“you will be in deep trouble.”
I think it would be very generous of Members to assume that, in all circumstances and for ever, HMRC would apply this power only to the largest, most abusive and most complicated taxpayers. I suspect that, in the experience of most Members, the Revenue has at times been a little weaker when tackling the very large taxpayers with very big pockets, and a little stronger when tackling those who are a bit smaller and a bit less sophisticated, and who may not be able to fight back as effectively. There is a real risk here. If we give the Revenue a power amounting to complete discretion in regard to whether it applies this rule to individual taxpayers, what is to prevent a large organisation from buying its tax inspector a nice lunch, and an application to apply the rule perhaps never actually being made?
I am not suggesting that that would ever happen. I have certainly never known such things to happen; tax inspectors are usually very law-abiding, and very committed to their role. However, there have been instances in which we as a Parliament have been concerned that the Revenue has not treated the largest and the smallest taxpayers equally. In this instance, we are giving the Revenue a discretionary power, and allowing it to choose when to try to use it. Are we sure that the Revenue will use that power against the people against whom we think it should be used, and not against our constituents who have not done anything particularly wrong?
It has been suggested that we are introducing too many safeguards, and questions have just been asked as to why we are imposing the burden of proof on the Revenue rather than on the taxpayer, as in every other situation. This is plainly not a normal piece of tax law. We are saying, “You may have complied with the law but we still think that you are in the wrong, so we will retrospectively pretend that the law said something different from what it actually said.” In such circumstances it must be right for the Revenue to have a duty to demonstrate that that is appropriate, rather than saying to the taxpayer, “You must prove somehow that you acted within a law that had not actually been published.” That would be nonsensical. It would be equally nonsensical to make the penalties for contravening the GAAR higher than the penalties for contravening the published law. If I flout the law and am defeated in my claim on the basis of the published law, I will rightly be subject to penalties, but for me to be subject to higher penalties when I have not actually broken the published law, which I can read, would certainly be nonsense.
I accept that the Government have undertaken long and detailed consultation and have tried to find a way of introducing a power to tackle the most aggressive, egregious and outrageous tax avoidance without creating some of the pitfalls that would worry me and, I think, my hon. Friend the Member for Cities of London and Westminster (Mark Field). We do not want to create a tax system that is based not on law, but on random interpretations of various transactions by HMRC at some point in the future. I also accept that the Government have made the safeguards as reasonable as is commensurate with ensuring that the law retains some teeth.
I shall ask some questions about the drafting of the Bill later, but let me first explain why I tabled my amendments. I wanted to try to ensure that the power focused on the large, complex, aggressive, expensive schemes peddled by naughty solicitors and accountants, rather than being used as a general threat against ordinary taxpayers who had tried to structure their affairs sensibly and had chosen to conduct a transaction in a way that we could accept.
There are many innocent ways of trying to reduce a tax bill. It is possible to make a pension contribution rather than taking income as taxed earnings. I do not think any of us would object to that. The law clearly identifies it as a choice that we can all make. The owner of a company can choose whether to take a dividend, a salary or a bonus, or whether to leave the cash in the company and to be taxed on a capital gain when he leaves. I do not think many of us would say that someone who chose not to take a bonus in the year in which he sold his company but instead to allow the cash to be deemed a capital gain in order to secure a lower tax rate would be perpetrating an outrageously aggressive tax abuse arrangement of the kind that we should prevent by rewriting the law. We must be careful not to allow the Revenue to apply this power to every piece of innocent, sensible tax planning, when the only fallback will be the definition of a reasonable use of the rules.
Some people might consider it reasonable for Parliament to intend what it says it intends. When we pass a law, it is reasonable to assume that we mean what we put in that law. If we meant something different, we probably ought to have said that something different, and if it turns out that we have got it slightly wrong, we should amend the law. I accept that we have been doing that in various situations for the last God knows how many years, and have ended up with a hugely complex tax code. Every time we build in more complexity, we create more loopholes, and then we have to create even more complex rules to try to close those loopholes—and then we create more and more. Perhaps the answer is to have much shorter, simpler tax codes. I hope that, once the Government have put the GAAR on to the statute book—as I fully expect them to do—we can attempt a wholesale simplification of our tax regimes.
Mark Field
My hon. Friend has identified the nub of the problem. The complications and the sheer size of the tax code have become the godfather of much of the tax avoidance with which many Members in all parts of the House want us to deal.
Nigel Mills
Am I right in thinking that the second sign of madness is to keep doing the same thing and expecting a different result? I think that that applies to introducing more and more complexity and assuming that the outcome will eventually be different.
Sheila Gilmore
Surely the problem with this line of argument is that it does not establish what is cause and what is effect. The assumption seems to be that the fault lies with the fact that tax is too complicated and that there is too much of it, which somehow encourages people to avoid it. Perhaps a complicated tax system, and many of the regulations that exist, have been made necessary by the very fact that people try to avoid tax.
Nigel Mills
The hon. Lady is right. I have not sought to defend those who peddle tax avoidance schemes. It is probably human nature for us all to try to minimise our liabilities. I personally think that we should try to adjust our tax regimes so that they get much closer to taxing the real profit that is declared, rather than allowing a collection of reliefs, allowances, incentives and so forth to provide scope for manipulation of the various circumstances in which people find themselves. However, I accept that people would still try to get round the simplest tax code in the world, and that we would need provisions to stop them.
My amendments are designed to ensure that, if the Revenue uses this power, it uses it to deal with the largest, most outrageous schemes. We do not want it to go around threatening all the small taxpayers who are simply trying to go about their way of life. I was not convinced that the wording of the Bill, and certainly not the wording proposed by the right hon. Member for Oldham West and Royton, would meet those concerns. I tried to provide a de minimis: the tax at stake would have to be above a certain amount before the rules could be applied. That would provide certainty, ensuring that the vast majority of taxpayers would not be subject to some retrospective, random rewriting of the law.
Stephen Phillips (Sleaford and North Hykeham) (Con)
My hon. Friend is making a powerful speech, and is advancing a compelling argument for his de minimis principle. The problem is, in my view, that it is a compelling argument for the exclusion of part 5 of the Bill, and that the de minimis principle that he seeks to introduce ignores the other principles that he has advocated. Does he agree with that?
Nigel Mills
Yes, I do. Various Members have expressed concern about the principle before. I think we must accept that the House has concluded that the only way of tackling the problem of excessive outrageous tax avoidance is to risk the principle of the reading of the rule of law, and to be satisfied that a relatively minor version is what is needed to tackle tax avoidance. I am not sure I would have come to the same conclusion. The previous Government looked at a general anti-avoidance rule about a decade ago, and having consulted for quite a while and made various drafts, they decided not to proceed, probably because of the same concerns that my hon. and learned Friend has set out. You perhaps remember those days and that consultation, Ms Primarolo.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
It is a pleasure to serve under your chairmanship, Ms Primarolo. I rise to speak in support of the Opposition amendments to clauses 203 to 212, which relate to the Government’s proposed general anti-abuse rule and the wider issue of corporate tax avoidance and its impact. I stress “abuse” because people use the terms “avoidance” and “abuse” interchangeably. However, we need to be clear that this is about an anti-abuse rule, rather than a general anti-avoidance rule.
Before turning to the clauses and our amendments, I want to put on the record our deep concern at the delay in the publication of the final guidance notes on how the general anti-abuse rule, or GAAR, will operate. The guidance was initially expected to be published alongside the Finance Bill on 28 March but was published only on Monday—two hours before Second Reading and just two days before we consider the GAAR-related clauses in the Bill this evening. It is clearly important that the recently formed GAAR advisory panel sought to get the guidance right and to amend and improve it appropriately. That is a view backed up by the Economic Affairs Committee in the other place, whose report last month on the draft Finance Bill stated:
“Our witnesses stressed the importance of the guidance from HMRC and the Advisory Panel on how the GAAR would apply so as to minimise uncertainty. We wholly agree. We recognise that progress is being made in drafting this guidance but are concerned that our witnesses felt it was far from acceptable as it stands.”
We therefore welcome the fact that amendments were made, but surely it is vital that Members have sufficient time properly to consider the final guidance, in advance of the GAAR provisions being considered in this House. The Treasury Committee has already raised directly with the Chancellor the question of Members’ ability properly to scrutinise the Bill within the timetable provided by the Government. It described it as
“an important issue of principle going to the heart of Treasury Ministers’ accountability to Parliament.”
I am therefore keen to put my deep concerns about this issue on the record. Sufficient time has not been provided for Members to consider the guidance and any amendments required to the primary legislation as a result.
At a time when living standards are being squeezed, Government borrowing is up, growth forecasts have been downgraded again, the public services upon which people rely are being cut or threatened across the country, and ordinary people are being asked to pay the price of the Chancellor’s economic failure, there is understandable anger about the unfairness and injustice of people working hard and paying their fair share of taxes, while they hear almost daily about the complex lengths to which a small but significant number of multinational corporations will go in order not to do so.
Kelvin Hopkins (Luton North) (Lab)
My hon. Friend will have noticed that The Times reported today that the International Monetary Fund is so worried about the direction of Government economic policy that it fears for the long-term future of our economy. The Government are wrong and they have to change.
Catherine McKinnell
I am pleased that my hon. Friend has raised that issue and reiterated the difficulty the Chancellor faces in pursuing, with such a one-direction approach, his clearly failing economic policies. He refuses to change course, even though the economy clearly shows that his approach is not working, as does the impact on ordinary people up and down the country. Instead, he is ploughing on for political reasons—because he simply cannot lose face by changing direction.
Let me return to the principal issue. It is right to raise the impact of tax avoidance on public services, which are suffering as a result of the tax gap.
Stephen Phillips
If it is so important to impose an anti-abuse rule such as that which the Government propose to introduce, can the hon. Lady explain to the House why the Labour Government, who were in power for 13 years, did absolutely nothing in that regard?
Catherine McKinnell
That is clearly untrue. The Labour Government had a proud record of tackling tax avoidance at every level. We introduced endless targeted measures that brought in an additional £16 billion of revenue. We introduced the disclosure scheme, which, as the Minister will say, has been highly successful, which this Government are building on and which brought in an additional £12 billion of revenue. I shall take no lessons from those on the Government Benches about tackling tax avoidance, because although the Government talk tough the action is yet to be seen on the ground.
Clearly it is unfair and wrong that companies can avoid tax on profits that have been generated from economic activity in the UK. I am sure that we can all agree on that. The profits have been generated by hard-working UK tax-paying consumers and businesses with what appears to be one rule for those at the top and another for everybody else.
There will sometimes be good reasons for companies to pay little or less tax. Some firms invest large sums in research and development, assets and infrastructure. That must be celebrated and acknowledged, but people are rightly entitled to ask what is going wrong when a company can make sales of £1.2 billion and describe itself to investors as profitable yet report no profit in the UK. It totally undermines the concept of a level playing field when good British companies pay their fair share on profits generated in this country whereas others seem to get away with not doing so.
As we all know from our constituency postbags, people are angry about the devastating consequences of tax avoidance not just on the UK and our public services but on developing countries, with multinational giants using tax havens and artificial corporate structures to shift profits offshore and away from the places where they were generated.
We have heard much tough talk from the Government about their apparent determination to tackle tax avoidance. Before us today we have the coalition’s flagship policy on this issue, the general anti-abuse rule. Announced in the 2012 Budget and building on the 2011 report by Graham Aaronson, QC, the GAAR will apply to income tax, national insurance contributions, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty land tax and the new annual tax on enveloped dwellings. I welcome the statement on page 4 of the guidance that was finally published, which suggests that the GAAR
“rejects the approach taken by the Courts in a number of old cases to the effect that taxpayers are free to use their ingenuity to reduce their tax bills by any lawful means, however contrived those means might be and however far the tax consequences might diverge from the real economic position.”
That is a significant advance on the current situation, but, in the Treasury’s words, the GAAR is intended to address
“artificial and abusive avoidance schemes but without creating uncertainty for business investment”
and will attack
“only those schemes that are the intended target and not a broader spread of business arrangements.”
The Budget 2013 policy costings documents suggested that the GAAR
“would be highly targeted on abusive avoidance that has abnormal features”
and goes on to suggest that the people affected are likely to be those involved in “highly contrived tax avoidance”. Mr Aaronson believes that the GAAR is
“clearly intended to apply only to egregious, or very aggressive, tax avoidance schemes”.
Indeed, clause 204(2)(b) refers to the use of “contrived or abnormal steps” to obtain a tax advantage. Those are definitions that I would say—many would agree with me—are highly subjective and require greater clarity in the final guidance. As the Chartered Institute of Taxation pointed out before the guidance was published, how does one interpret “abnormal” and to what extend does the term “contrived” cover what many tax experts would think—rightly or even wrongly, in many people’s view—is simply tax planning? Page 23 of the final guidance, published on Monday, simply states:
“The words “contrived” and “abnormal” are not defined, and therefore will be applied in their normal sense.”
Kelvin Hopkins
Richard Murphy, in particular, has estimated that the tax gap is at least £120 billion and according to some estimates it is much larger than that. The official figures really show only a fraction of the truth.
Catherine McKinnell
There are varying views on the tax gap and how it is calculated. Clearly, it is difficult to calculate accurately, because we are effectively calculating something that does not exist. It is tax that HMRC has been unable to collect, so it will always be an estimate. I use the HMRC figure because it is the minimum—it is what it believes and it is a conservative estimate. The Tax Justice Network calculates the gap at £120 billion. Whatever the actual sum, the GAAR and the £60 million and £85 million that it is intended to bring in are simply a drop in the ocean, and many people have described it as that. It is tinkering around the edges of what is legal.
There has been extensive discussion about the proposed GAAR’s strengths and weaknesses, both in this House and elsewhere. I acknowledge that the Government have taken steps in response to consultation submissions to reduce some of the ambiguity of the earlier GAAR proposals. For example, they have attempted to define the so-called “double reasonableness test” so that we can have a better understanding of how to assess, in HMRC’s words, whether arrangements can
“reasonably be regarded as a reasonable course of action”.
Again, the word “reasonable” is highly subjective and open to interpretation. Many, including the Opposition, still believe that the GAAR is too narrow and that, as it tackles only the most egregious schemes, cannot be regarded as general at all.
Other concerns have been raised about the chair, the panel and the manner in which they will be appointed. The chair has been appointed and will appoint his panel, and it is they who will interpret what they believe to be reasonable. What a tax expert considers to be reasonable might be regarded differently in the eyes of a member of the public. Indeed, many tax experts will differ on what they believe to be reasonable tax planning, as opposed to something egregious that would fall under the GAAR. The concern is that the GAAR is so narrow in tackling only the most egregious schemes that it could hardly be considered general at all and should perhaps be called the AAR instead. As has been mentioned, it also risks tacitly legitimising any tax planning or avoidance that does not fall within its remit, making it even harder to tackle the avoidance problem. Those arguments should be seriously considered. The problem was neatly summed up by the former president of the Association of Revenue and Customs, Graham Black, who stated that the GAAR is a
“Trojan horse, which suggests tough action whilst actually facilitating avoidance.”
A further issue, raised by the Institute of Chartered Accountants in England and Wales, is the international legality of the GAAR in relation to the UK’s double tax treaties, particularly with about 100 non-OECD countries where the GAAR could effectively and unilaterally override the UK’s international obligations. There remain serious concerns that there is no specific penalty regime for the GAAR, so it would be helpful if the Minister, in addition to addressing the concerns I have already set out, could tell us how he intends to ensure that this GAAR is not just a toothless tiger.
I am keen to emphasise that we are willing to support the Government in introducing the GAAR, but for the reasons I outlined we are not convinced that this version is up to the job. One of our key concerns should surely be the fact that there appear to be no arrangements to monitor, determine or measure whether the GAAR is actually working as intended or whether, as we fear, it fails in its aims. HMRC’s recently updated impact note on the GAAR simply states:
“Consideration will be given to evaluating how effective the GAAR has been at discouraging as well as stopping abusive avoidance schemes.”
However, the Select Committee on Economic Affairs in the other place made a clear recommendation for an independent post-implementation review after five years. The Committee stated:
“It would be for consideration whether such a requirement should be built into the legislation, or failing that, a firm Ministerial commitment should be made in the House of Commons at the time the legislation is being considered.”
That time is now, I suggest to the Minister.
Like the Association of Accounting Technicians, the Opposition agree that there should be such a requirement, but like the Chartered Institute of Taxation we believe the review should take place before the five years suggested by the Economic Affairs Committee. Given the seriousness of the problem, the ever-increasing pressure on the Government’s finances and the result of the Chancellor’s failing economic plan, we believe we need an earlier review of the success or otherwise of the Government’s key policy for tackling tax avoidance. Our amendment 8 proposes a maximum two-year gap between Royal Assent to the Bill and the review. I look forward to hearing from the Minister whether he is prepared to commit to such a review, particularly in light of the concerns expressed at the beginning of my submission about the lack of time afforded by the Government’s publishing the guidance so late for proper scrutiny of the legislation.
Perhaps the key concern about the GAAR relates not to its implementation but to the Government’s tendency to promote its provisions as some sort of panacea for dealing with the problem of tax avoidance. My right hon. Friend the Member for Oldham West and Royton (Mr Meacher) raised that concern. I spoke earlier of the justifiable anger about the impact of the problem, particularly of corporate tax avoidance, both on the UK and on developing countries. In continuing to talk up the potential impact of the GAAR, the Government are failing to communicate that it will not deal with many of the issues that members of the public are concerned about. Indeed, the Economic Affairs Committee, which provided valuable scrutiny of the Bill and the GAAR, stated in its report that
“Ministers should make every effort to explain the aims of the GAAR and the reasons why it cannot apply in many of the ways public opinion would prefer, so that unrealistic expectations are banished.”
The Chartered Institute of Taxation commented:
“The Government should be careful not to overstate the effects of the GAAR, raising expectations which will later be disappointed. Many of the examples of ‘tax dodging’ highlighted by the media and campaigners would not be caught by the GAAR. It is important to be clear from the outset what the GAAR will, and will not, achieve.”
The ICAEW stated that
“the GAAR is aimed at countering abusive arrangements and will not fix everything. There remains also uncertainty as to what it will and will not catch.”
The Association of Accounting Technicians remarked:
“We do not see the GAAR as a bulwark against the perceived and real abuse of the UK tax system by multinational corporations. The only way to tackle the growing concern that the UK and many Governments have is by bringing international law up to date, making it fit-for-purpose for the 21st century…The AAT supports Lord MacGregor (Chair of the Economic Affairs Committee) in his demand that the Government make it clear to the public that the GAAR is ‘narrowly focused’ and will not meet ‘public expectations’ of bigger levies on international firms.”
The impact note supports that view in terms of the revenue that the Government expect from the measure.
The Opposition agree with all those comments. Indeed, we think the Government should go further on this critical and pressing issue, which is why we have tabled further amendments. The time for tough talk on tax avoidance is over. We and particularly the developing world need real concrete action now.
Earlier, I outlined the impact of tax avoidance on ordinary UK taxpayers and good British businesses who are paying their fair share but see others going to great lengths to avoid doing so—thus contributing to the tax gap and undermining a level playing field for firms. I briefly touched on the devastating impact of tax avoidance overseas, and I welcome the Chancellor’s confirmation in this year’s Budget that he intends to build on Labour’s legacy by meeting the target of spending 0.7% of gross national income on overseas aid. However, we know that aid alone will not be enough.
Developing countries desperately need to be able to raise more tax revenues to invest in reducing hunger and becoming more self-reliant. Aggressive tax avoidance activity is so significantly reducing the ability of developing country Governments to tackle issues such as hunger, and to invest in the vital infrastructure that we all take for granted, that the OECD estimates those countries lose three times more to tax havens than they receive in aid each year.
Fiona O'Donnell (East Lothian) (Lab)
Does my hon. Friend agree that the measure is a gift for the Chancellor to satisfy the lack of enthusiasm among many of his Back Benchers for 0.7%?
Catherine McKinnell
Indeed. That very thought was going through my head. We must be serious about the impact we can make as a country to support developing countries. We should do everything we can, not just giving aid and making sure that it is utilised in the best way, but enabling developing countries to support themselves as best they can. The Enough Food for Everyone IF campaign states that
“dealing with developing countries’ corporation tax alone could raise enough public revenues to save the lives of 230 children under the age of five every day.”
That is a powerful statement and a powerful tool is within our reach.
The Opposition believe that the first step to tackling the issue, and to creating a fair taxation system, is to put an end to tax secrecy. We need concrete proposals from the Government to demonstrate how they intend to put the issue at the top of the G8 agenda, starting with the requirement suggested by our amendment that HMRC should work in conjunction with other G8 countries to bring forward measures to require multinational groups to publish a simple, single figure for the amount of corporation tax they pay. That is the purpose of our amendment 4. Yet, while the issue of tax avoidance and tax transparency can clearly only be properly dealt with at an international level, we believe the UK should be leading the way, demonstrating its determination to take meaningful action on tax transparency here at home. Therefore our amendment 5 would ensure that commitment was there, regardless of progress at an international level.
Tax transparency should not be restricted to the UK and other G8 or OECD countries; it is needed now, more than ever, in the developing world. The Prime Minister and the Chancellor have frequently stated their commitment to championing tax transparency during the UK’s presidency of the G8. They are on record as being committed to ensuring that developing countries also benefit from any reforms, yet with the exception of a relatively small pot of money for capacity-building work, the measures to combat tax avoidance in the Bill before us do nothing to assist poorer countries. So although the Government are determined that Labour’s disclosure of tax avoidance scheme requirements cannot be extended to include subsidiaries of UK companies operating in developing countries, the Opposition believe that the Government should at least commit to reviewing how a requirement for UK companies to report their use of tax schemes that have an impact on developing countries could be enacted. Surely it is the least that the Government can do.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
My hon. Friend has made very strong arguments. Will she join me in commending the work of organisations such as ActionAid, Global Witness and the Tax Justice Network, who have done excellent work in exposing a number of examples of corporate tax avoidance in countries such as Zambia, particularly resource-rich countries, and the devastating impacts those are having? If we did not have those stories out there, we would not be aware of the scale of the avoidance that is going on and the impact that it is having in those very poor countries.
Catherine McKinnell
I thank my hon. Friend for that intervention, which is powerful in itself, but very much reinforces the argument that we on the Front Bench are making today: we have the means within our grasp to make a difference to that situation. I hope that the Minister will provide some reassurance today, and that we shall get some Liberal Democrat support for our amendments, which seek to make a real difference on the ground. [Interruption.]
Returning once again to an amendment tabled by the Opposition last year—and I might say amendments tabled by Liberal Democrat representatives last year but which were withdrawn at the last minute—we believe that changes to the controlled foreign company rules introduced by the Finance Act 2012 should be properly monitored for their impact on developing countries. Many charities have been concerned that the CFC rule changes will make it easier for UK companies to avoid paying tax in developing countries in which they own subsidiaries. While the Government have estimated the potential loss to developing countries at £1 billion, which one would think would be enough, ActionAid believed it could be as high as £4 billion a year. So what we really need is for the Government to undertake a proper assessment of the impact of the changes on the overall tax take of developing countries since last year, and our amendment asks for that to take place.
In conclusion, we will support the Government’s legislation, brought forward today, to introduce a GAAR. However, we believe, along with my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), who has tabled his amendments as a suggested alternative to the GAAR, that the Government’s GAAR has many potential flaws.
The Exchequer Secretary to the Treasury (Mr David Gauke)
Does the hon. Lady support the new clauses tabled by her right hon. Friend the Member for Oldham West and Royton (Mr Meacher)?
Catherine McKinnell
We support our amendments that we have tabled, and I have presented very clearly the reasons why we support them. I will go on to say why. We support the GAAR and we welcome its being put in place, but we want to see how effective it will be and we will continue to monitor it. We hope that the Government will accept our proposal to come back and report on progress within two years, so that we can continue to monitor its effectiveness and rectify, hopefully, some of the flaws that we see will hinder its effectiveness in tackling this problem. So we call on all—
Stephen Doughty
In terms of who will be supporting which amendments, was my hon. Friend not surprised a moment ago to hear comments from a sedentary position from one of the Liberal Democrat Ministers—in fact an International Development Minister—saying that she doubted their support? Having read previous Liberal Democrat policies on this area, I have to say that over the years they have been fairly progressive and very extensive. Was my hon. Friend not surprised to hear those comments?
Catherine McKinnell
I am very shocked to hear of those comments. I missed them at the time. If the Minister wants to explain her position or the Liberal Democrat Front-Bench position on these amendments, I will be glad to hear it.
Catherine McKinnell
Does the right hon. Member for Hazel Grove (Andrew Stunell) wish to intervene?
Andrew Stunell
With the permission of the Chair, in a minute or two I hope to be able to tell the Committee fully.
Catherine McKinnell
Excellent. I am grateful for the right hon. Gentleman’s intervention. We look forward to clarification of the Liberal Democrats’ position on the issue, and we hope it does not go the same way as their mansion tax vote went earlier, when they voted against their own policy for the second time.
I call on all right hon. and hon. Members to support our amendment 8, which would monitor the impact of the GAAR and ensure that the Government take genuine action towards securing the tax transparency and fairness that the world needs in this 21st century. We also seek to test the will of the House by pressing our amendment 6 to a vote, to determine whether the House will commit to ensuring that we do all we can in our power to tackle tax avoidance that is damaging not just to the UK, but to developing countries.
I finish by reiterating briefly concerns that I have expressed on several occasions in the Chamber and elsewhere about the huge number of challenges facing HMRC, highlighted recently by yet another scathing report from the Public Accounts Committee. The very body on which the Government rely to tackle tax avoidance is being seriously undermined by devastating budget cuts of £2 billion over this Parliament and the loss of 10,000 staff. These cuts will be a false economy if they hamper HMRC’s ability to collect the billions of pounds in avoided tax, and all the tough talk, strategies and moral indignation in the world will not deal with the problem of tax avoidance if HMRC simply does not have the capacity and resources it requires to do the job.
Andrew Stunell
I strongly support the general anti-avoidance rule and its introduction. Some would say that it is long overdue. Bearing in mind what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) has just said, how important and urgent it is and how long-standing the problem has been, one has to say that it was overdue in 2010, so it is good that it is in place now. I commend Ministers on the Front Bench for including it in the proposals coming to the Committee now.
I shall spend a minute or two commenting on what my hon. Friend the Member for Amber Valley (Nigel Mills) said in his speech a little while ago, making it clear that there are some risks and some dangers, particularly of retrospection. The Minister will know that we have been in correspondence about one particular series of events which has left constituents of mine at a severe disadvantage, as they see it, because of the retrospective application of an HMRC ruling to them.
What I want to say to my hon. Friend is that one thing that the general anti-avoidance rule will do is put everybody in this country on notice about their tax affairs so that they cannot be caught by surprise, or perhaps even subterfuge or a recycling of policy, in the way that my constituents have been. I will continue to write to the Minister about the case facing my constituents, but a general anti-avoidance rule puts everybody on notice and makes any possibility of an excuse disappear. We should welcome that.
Nigel Mills
Does my right hon. Friend agree that it is preferable that only people who engage in aggressive tax abuse should be put on notice, and that people innocently going about trying to structure their affairs normally within the law should not be scared of the provision at all?
Andrew Stunell
I was very attracted to one point that my hon. Friend made in his speech, which was that he thought there was a tendency not to go for the biggest fish with the sharpest teeth and the most expensive lawyers, but to go for the little people or at least the middle-sized people. That is a powerful point and I hope those on the Front Bench are listening carefully. A general anti-avoidance rule needs to be general—that is to say, applicable to even the biggest fish with the sharpest teeth and the most expensive lawyers.
In amendment 6 and several others, some of which were debated earlier today and some more of which will be debated tomorrow, the Labour Front-Bench team has given us a very pretty set of trinkets. They all start with the phraseology
“The Chancellor shall review the possibility of”
doing this, that and the other. They have all obviously been produced by Labour’s amnesia factory, which has forgotten entirely that, on general election day in 2010, the country, the public purse, borrowed £428 million. The day before it borrowed £428 million, and the day after it borrowed £428 million. I commend Government Front Benchers again for reducing that figure by a quarter—a substantial amount. It is surprising that the range of amendments and the speeches made by Labour Members in the Budget debate, including today, have all said that the right solution to the problem is to borrow more. That is not the right solution, and, as I say, the amnesia factory is churning them out.
Steve McCabe (Birmingham, Selly Oak) (Lab)
For the sake of accuracy, would the right hon. Gentleman care to mention one single Labour Member who has advocated borrowing in the course of their speech?
Andrew Stunell
I heard the shadow Chancellor of the Exchequer, in his reply to the Budget debate, make exactly that point.
I want to ask not just about the result of this Chancellor’s potential review of the possibility of doing various things, but the result of the previous Chancellor’s review of all these attractive propositions. None of the things in these propositions is novel. The mansion tax in particular was not even invented by the Opposition. Yet it would seem that the right course of action now is to “review the possibility of”. What was the result of the last Chancellor’s review of the possibility of increasing tax transparency internationally? What action did he take? What report did he leave in the pigeonhole for the incoming Chancellor? I suppose that Opposition Front Benchers’ proper line of defence is to say that they cannot recall.
Whatever the parentage of amendment 6, I want to spend a few moments talking about it. I just say in passing that, whatever else it does, it certainly does not do what the hon. Member for Newcastle upon Tyne North claimed, which is to take a grasp of this key issue. It says that it wants a review of the possibility of. That is not taking a grasp of anything.
I am proud that in the Budget the Chancellor confirmed the UK Government’s promise to meet the 0.7% GNI target for overseas aid. These are not easy times, and as my constituency mailbag shows, it is not a universally popular decision. But it is the right decision, and it is one that I am proud to see the Government have been ready to take. It channels vital resources from the richest nations, of which we are definitely still one, to those that need it most. But it is also the case that those countries need not only our aid, but the tax revenue to support public services in their countries on their own, so that health there, education there, water supply there—all the aspects of development—can be paid for out of the tax that they should be receiving, supported of course by our continuing aid programme.
The Enough Food for Everyone IF campaign—I think that I am the only Member in the Chamber who is wearing the lapel badge, which is also available in other colours—is an important initiative, which I hope will be powerful and effective, as the Drop the Debt and the Jubilee Debt campaigns were, in convincing politicians of all political stripes that further action on this is needed urgently. The UN, the IMF, the OECD and the World Bank, not to mention our own International Development Committee, have all strongly made the point that when we plan our tax affairs we should be aware of the impact that can have, and should have, on improving the tax income of developing nations.
Fiona O'Donnell
On that point, may I press the right hon. Gentleman to address amendment 7, which expresses the view of not only Opposition Front Benchers, but the International Development Committee, which recommended an impact assessment of the controlled foreign company rules, and that Committee is chaired by a member of his own party?
Andrew Stunell
Indeed, it is. There are many propositions made here that are highly desirable, and I would not be at all disappointed if the Front-Bench team agreed to accept amendment 7 and a number of others. The point I am making is that what we need across all political parties in the House, and beyond, is strong consensus in favour of not only continuing our achievement of the aid target, but ensuring that we assist developing nations by getting our tax affairs straight and helping them to do likewise.
Sheila Gilmore
The right hon. Gentleman correctly says that we need to keep up our efforts on aid, but if the controlled foreign company rules have potentially lost £1 billion to developing countries, as Government Front Benchers appear to accept, that affects our ability to give aid. Would it not make sense to review whether that is correct, because it might ever be more?
Andrew Stunell
Indeed, and I will move on to that shortly. Based on all that has gone before, I think that the Minister will say that the Government have every intention of ensuring that those things happen and that the work being promoted by the IF campaign becomes mainstream in this House and the outcome we all wish to see. I support that campaign and its objectives and am keen for the Government to adopt them and be supportive as well. Indeed, my hon. Friend the Under-Secretary of State for International Development is sitting just in front of me on the Front Bench, and I know that she works very hard on those matters as well.
I do not think that the trinket presented to us in amendment 6 is the core of what we need. I challenge the Government to give an undertaking that the proposals in the Finance Bill will be moved on so that multinationals are required to reveal the tax avoidance schemes they are using in the developing world and developing countries are helped to collect more of the tax they are owed. I pay tribute to the work, which I think was initially promoted by the International Development Committee in the previous Parliament, and which I know this Government have taken up with some enthusiasm, of supporting developing countries to create effective tax systems of their own. I know that the work that has been done in Zambia is seen as a template for other countries around the world. I encourage the Government to move forward in that direction.
Jim Shannon
The right hon. Gentleman is bringing to the Committee’s attention the issue of large multinational companies avoiding tax in other countries around the world. Does he agree that it is an issue not only for this House, but for other investment countries, such as the United States, and that together we can address the problem of big companies trying to avoid tax in third-world countries?
Andrew Stunell
Yes, I very much agree. Indeed, I have heard Ministers say that they agree. It is why it is important to work through the G8, the OECD and even the UN to get some level of international engagement on that. As is so often the case, those necessary and important international outcomes cannot be achieved by one country taking an initiative on its own. That does not deter me from arguing that the United Kingdom should be giving the necessary leadership, but I think that we have to be realistic about how we can achieve those outcomes.
Stephen Doughty
The right hon. Gentleman made a significant point about the importance of supporting developing countries in developing their tax systems and revenue collection capacity. Was he not surprised, as I was, to see the 8% underspend in the Department for International Development budget this year, given that the Department has given significant support to such projects in the past? Perhaps less support will be going to such activity in future because of that underspend.
Andrew Stunell
In all honesty, I was not surprised because that rule has always been in place. I do not have to hand figures on any similar underspend before 2010, but if I did I am absolutely certain that the Chancellor of the time would have repossessed it. That is part of the system of central Government control of our expenditure. I can understand that the hon. Gentleman is perhaps not in favour of strict control of public expenditure, but it is important that we do not lose sight of the overall objectives.
I shall conclude. I very much support the Government’s direction of travel on the issue. I am delighted that the general anti-avoidance rule is coming into place. The Government will know that I support the IF campaign and therefore I do not think they have gone far enough or yet fast enough. I look forward to the Minister’s giving me some words of comfort when he replies.
Mr Iain McKenzie (Inverclyde) (Lab)
It is abhorrent that large companies up and down the country should be avoiding paying their taxes while our constituents are squeezed by the Government at every opportunity. We call on the Government to take vigorous action on tax avoidance. To date, however, despite the Government’s rhetoric, they have consistently failed to deliver.
Quite simply, the cuts to HMRC go too far. With more than 10,000 additional job losses, they will prove to have been a false economy if the Government hamper HMRC’s ability to collect billions of pounds in avoided tax. It is not right and cannot be fair that, while families and small businesses are paying their fair share and feeling the squeeze, large enterprises are allowed to practise “if we can afford it, we can avoid it” tactics.
We believe that the best means of tackling tax avoidance is through not only principle but proper targeted measures and greater capacity in HMRC. If the Government are relying only on the general anti-avoidance rule to do the job, we fear it will not be sufficient. As my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) has said, we are willing to support the Government’s introduction of GAAR, but we remain unconvinced that the current version is up to the job.
Let me give but one example of how my constituents are feeling the axe while big companies avoid the tax. A group of women attended my surgery last Friday asking, “Why have we been hit while some big businesses seem to escape?” My constituent Mrs Christine Houston of Port Glasgow was made redundant as demand fell and her company experienced economic hardship. She managed to find a part-time job but she works unsociable hours. Her benefits, which acted as a safety net to allow her to live, have now also been cut. Now she has been unfairly affected by the Government’s pension reforms; she was born in October ’53, so she will receive less pension than her two best friends, who were born in March that year. Despite having started work when she was 16 and having paid her share of taxes ever since, she cannot plan for her future as a direct result of the Government’s actions. “Why,” she and her friends ask, “are multinationals plying their trade in this country and getting off lightly on tax while we are being hit hard? Where is the fairness in that?”
HMRC’s most recent estimate, for the period 2010-11, of tax difference—that is, between the tax actually collected and what would have been collected if everybody had complied with the letter and spirit of the law—stands at a staggering £32 billion-plus, and some regard that estimate as low. Serious concerns exist that the Government’s proposed GAAR is too narrow and that they have failed to clarify that it will not cover most of the tax-avoidance activity undertaken by multinational corporations about which the general public are so concerned. HMRC must have the capacity and resources it requires to tackle tax avoidance properly. The Government are undermining its ability to do so with the budget cuts of over £2 billion in this Parliament, leading to 10,000 job losses. While we all agree that making genuine efficiencies is important, there has to be a limit to its capacity to do more with less. The current scale of cuts risks being a false economy if the Government reduce HMRC’s tax yield.
In these tough times, when the Government are cutting spending and raising taxes, it is even more important that everyone plays their part and pays their fair share of tax. Good British firms and millions of families are paying their fair share, but it is not right that some firms do not, and I think we all agree that that needs to change. We must put an end to the era of tax secrecy, because the reason some companies behave like this is that they believe there is little chance of their being found out. We need to reform the rules that allow companies that make profits in Britain but avoid paying tax in Britain to ensure that they do pay their tax.
Recent cases of companies that have manipulated the tax rules to reduce the tax they pay in the UK to virtually nothing have rightly outraged all those people and businesses who do pay their fair share of tax. My constituents in Inverclyde, and hard-working families and businesses, rightly ask why some seem to think that the rules do not apply to them. It is clearly unfair and further undermines companies that do pay their tax, expecting a level playing field. Over the Easter recess, I visited many small and medium-sized companies, and time and again they talked about no growth in the economy, low demand, and larger businesses avoiding paying their taxes while they were expected to pay theirs, and on time. Sometimes, yes, there will be good reasons why companies pay little tax. Some companies invest large sums in research and development, assets and infrastructure, and we should, and do, celebrate and welcome that. However, we also need to know when companies are stripping their profits out of the UK through artificial schemes.
The Government are undermining HMRC’s ability to administer and collect tax by cutting resources too far and too fast—a familiar, failing theme of this Government. HMRC now has more staff working on administering the Government’s child benefit cut than it employs, combined, to tackle tax evasion and avoidance. The people of this country are demanding reform of the current rules that allow companies to make profits in Britain but pay no tax. That also requires reform of our corporation tax system. In the 21st century, value is now often in brands and intellectual property, customer loyalty and ideas that can be traded globally between different parts of the company group. The rules need to be clearer, tighter and properly enforced.
The Government are failing to show the leadership we need to tackle tax avoidance, yet are vigorously pursuing others to help to fill the Treasury’s coffers. The Conservatives and their coalition partners are failing to convince constituents such as Mrs Houston of Port Glasgow that we are all in it together, or that, with their many references to fairness in both their manifestos, they are living up to that fairness. I ask the Minister to explain to Mrs Houston why the Government seem reluctant to tackle tax avoidance and to give her back her pension.
Fiona O'Donnell
It is a pleasure to speak under your chairmanship, Mr Crausby. I am particularly pleased today to support amendments 3, 6, 7 and 8 in the name of the shadow Chancellor of the Exchequer and others. I see him in the role of Robin Hood, and I will leave my hon. Friends the Members for Newcastle upon Tyne North (Catherine McKinnell) and for Kilmarnock and Loudoun (Cathy Jamieson) to fight it out as to who is Maid Marian. While the Government may be able to find a Robin Hood on the Treasury Bench, they will of course have to resort to the old public schoolboy tradition of one of them dressing up as a woman if they are to have a Maid Marian.
I do not want the Government to be too precious about what they are doing today. I have a feeling that we have been here before—with the Groceries Code Adjudicator Bill perhaps—in that we are all agreed on the general direction of travel but the Government seem resistant to transparent proposals that can be monitored, so that we can see whether they work and achieve what we want them to achieve, or whether they have any adverse impacts. Those on the Treasury Bench have heard concerns raised by Members on both sides of the Committee. They need to give the Bill the teeth to ensure that it is enforceable.
Fiona O'Donnell
I found the right hon. Gentleman’s reticence in that regard particularly difficult, but I hope he will now redeem himself.
Andrew Stunell
I am happy to agree with the hon. Lady: it is true that the previous Government took the issue seriously and I was happy to serve on the International Development Committee during that time. I say to her, however, that we have taken the issue further.
Fiona O'Donnell
Exactly. We have passed on the torch of 0.7% and I pay credit to the Government. It must be a lot harder for them to take that direction of travel than it was for us, because our Back Benchers were supportive of it. It is not enough, however, for Lib Dems to be warmly supportive of the Government and hope that they will not be disappointed. They have to start voting for what they believe in, what they put in their manifesto and what their conference told them it wants them to do. That is why I intervened earlier on the right hon. Gentleman on the subject of the CFC and its effect. I hope that the Minister will say that he is listening not only to the Opposition but to the Select Committee and its report. The Committee has asked for an impact assessment, and we need to be clear about that. Much as I often disagree with coalition Members, I cannot believe that they intended the CFC to have that effect. An impact assessment would show whether it will damage developing countries.
The right hon. Gentleman also spoke about the IF campaign. It is clear that an essential part of tackling poverty and hunger is having a fair and transparent tax system. It is not surprising that people in this democracy should be outraged by large corporations not paying their fair dues, but we sometimes seem to think that it is all right for developing countries. Do they have to expect their natural resources to be plundered?
The Parliamentary Under-Secretary of State for International Development (Lynne Featherstone)
indicated dissent.
Fiona O’Donnell
I am glad that the Minister shakes her head and I give her credit for much of the good work that she has done in office. However, it is time for action. I repeatedly asked the Secretary of State, when she appeared before the Select Committee, whether she would act and whether she was pressing the Treasury for more transparency. She said that it really was not a matter for her; it was a matter for the Treasury—but it absolutely is for the Department for International Development and for the Secretary of State and her Ministers to address this issue. The people in those developing countries have as much right as people in this country to be outraged, but unless they have access to the information about whether tax has been paid, they will not be able to feel that sense of outrage. I hope that we will see some movement on that issue.
If we are ever to see a situation in which aid does not have to be stuck at 0.7%, as I am sure developing countries and many of us want, it will be by ensuring that tax is paid. We have had estimates from the OECD, as my hon. Friend the Member for Newcastle upon Tyne North said in her opening remarks, that developing countries lose three times as much money as they receive in aid. We have a chance now to do something not just for developing countries, but for our own country, by easing that burden.
I give credit to the right hon. Member for Gordon (Sir Malcolm Bruce), the Chair of the International Development Committee for the work he has done and I thank recently joined members of the Committee for their support. The Chairman does not put his party or the coalition first: he genuinely works in the interests of developing countries and the UK in ensuring that tax is spent well. I just wish that we could see Committees in the Scottish Parliament following that good example.
I believe that I may have the honour of serving on the Bill Committee, and I hope that we will not have the same experience as I have had all too often in Committee, with the Government continually refusing to accept amendments, followed by a climbdown. The amendments make genuinely helpful suggestions without asking the Government to alter direction. They would strengthen the measures on which we agree about the direction of travel to ensure that we carefully assess the impact of the policies and that they achieve what we want them to achieve. People have marched in support of the Robin Hood tax and want to see a fairer, more progressive form of capitalism in this country, so the Minister needs to step up to the mark—as well as to the Dispatch Box—and accept the amendments.
Steve McCabe
The Government repeatedly promise to crack down on tax avoidance. Of course, I welcome any efforts in that direction, but as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) pointed out, the prospect of between £60 million and £85 million projected extra revenue against a tax gap of £32.2 billion is hardly the stuff of ground-breaking flagship policies. I am curious to know just who will be pursued under the Government’s plans. As we heard, GAAR will be targeted at abusive avoidance that has abnormal features, and on those involved in highly contrived tax avoidance. Does that mean that normal, low-key, run-of-the-mill, common or garden tax avoidance is going to carry on as normal, with very little activity directed at it at all? Like others, it is not clear to me that GAAR is focused on the tax avoidance of the multinational corporations we have heard so much about lately.
I am pleased that the Government are planning to put tax avoidance on the agenda at the G8 summit, but it would be better if we had a clear indication tonight on what they intend to achieve. For example, I want to know whether the Prime Minister plans to follow up Chancellor Merkel’s concerns about the lack of monitoring of British sovereign territories, which are increasingly used as tax havens. I would love to know how a place such as Jersey became the world’s largest exporter of bananas. Will the G8 be considering guideline prices to help countries in the developing world? Will there be any discussion on an international tax inspector operation to help the countries that are being sucked dry by international lawyers, accountants and financiers?
At the very least, the Government could announce that they are ending tax secrecy by accepting amendment 3 and insisting that multinational groups publish a simple, single figure for the amount of corporation tax they pay in this country, instead of the current arrangements where they parcel the tax paid in a variety of ways that permits avoidance. The Government might also say that they intend to take some action against law firms in this country who all too readily set up shell companies, no questions asked, in the full knowledge that they are aiding and abetting tax avoidance and other corrupt practices.
The Prime Minster might also follow up on his promise that members of his Government publish details of their own tax affairs. Why not lead by example? This is not France. We have nothing to fear here—I think—unlike in France, where the man charged with fighting tax evasion turns out to be a tax fraud himself. At least the French President is now going to force his Ministers to publish details of their tax affairs. Why does our Prime Minister not do the same? He said that he would.
I welcome measures to tighten the rules on companies that arrange loans for their directors or shareholders, in place of taxable salaries or dividends. That particular activity sounds remarkably close to the tax arrangements that brought down Glasgow Rangers football club, and may be widespread in football. I therefore welcome what the Minister is doing on that.
Finally, why has the Chancellor backtracked on retrospective legislation restricting the right of companies to bid for Government work where they have lost disputes with Her Majesty’s Revenue and Customs over tax avoidance? The Government are not frightened of retrospective legislation, as we saw in the case of the jobseeker’s allowance claimants who won their appeal over dodgy back-to-work schemes. Why is it okay to protect tax avoiders, but punish the unemployed?
The Temporary Chair (Mr David Crausby)
For the information of the Committee, I intend to call the Minister at 9.30 pm.
Julie Hilling (Bolton West) (Lab)
Today has graphically demonstrated to me one of the real differences between the haves and have-nots in our society. I will not go into the rights and wrongs, but today we spent millions on Baroness Thatcher’s funeral, yet Jade Lomas-Anderson, the 14-year-old child killed by dogs in my constituency, still has not had her funeral, because her parents and the community are still frantically trying to raise enough money to pay for it.
Kelvin Hopkins
It is a pleasure to follow my hon. Friend the Member for Bolton West (Julie Hilling), who made a superb speech and hit lots of buttons.
I am speaking briefly at the end of this debate basically to support my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and his comprehensive, substantial proposals for an alternative scheme. I have also signed his new clauses. I am not a tax lawyer—I am not a lawyer—or a tax expert, but I am angry about the fact that for decades we have failed to collect taxes that should go into the Exchequer and help those in our community and our society who need proper support, allowing the corporate world and the millionaires to get away with vast amounts of money that should rightfully be given to the Treasury.
The hon. Member for Amber Valley (Nigel Mills) said that HMRC would in effect be making its own laws. What about getting rid of a lot of the tax allowances, which are nonsense in any case, and making some of the things that are currently regarded as tax avoidance illegal by calling them tax evasion? Some of the things that are done should be regarded not just as neat ways of avoiding tax, but as crimes that should rightfully be prosecuted through HMRC and the courts. I take a much fiercer view. It is pathetic that successive Governments —and I mean successive Governments—have failed to grasp what needs to be done.
I will tell you some anecdotes, Mr Crausby. When I first entered the House, I went along to my local VAT office. The VAT officials there told me that they needed more staff and every extra member of staff collected five times more than their own salary, and that was just for VAT. I therefore wrote to the Chancellor of the Exchequer and said, “We just need more staff in our VAT offices. There would be a net benefit to the Treasury because all the new members of staff would collect more than their salaries.” I got a letter back from an official—not from the Chancellor—that said, “We are trying to cut costs by reducing staffing,” which is utterly illogical. Reducing staffing means a net loss to the Treasury, not a net gain, and we have been going down that route ever since.
The savage staffing cuts in HMRC are quite appalling. Those in the tax offices that deal with the corporates—the big money—collect hundreds and possibly thousands of times more than their own salaries, if they are allowed to do the job and if they are properly supported and paid. I know from my connections with their union that they are constantly under stress and pressure, and in many cases they are not adequately remunerated. We want to give our tax offices enough staff to do the job, pay them properly and ensure that they have morale, so that they do the job on behalf of us all.
Fiona O'Donnell
Does my hon. Friend agree that that also goes for working tax credits? When a family notify HMRC of a change in circumstances, their benefits—their working tax credits—are stopped and can be suspended for several weeks while they are reassessed, causing incredible hardship for families that are doing the right thing.
Kelvin Hopkins
My hon. Friend is absolutely right. Of course, people are now losing their jobs in all areas of the public services. The public services are suffering great stress and the people working in them are being demoralised, and I think that goes even for the senior civil service—I know that certain people at the end of the Chamber would possibly agree with me in that respect.
I must say that the Treasury’s attitude over some decades has been so lax that one has to suspect that it really believes that allowing all the corporates and millionaires to have their money will somehow trickle down and help the economy. That is the sort of economic nonsense that has got us into the mess we are in at the moment. What we should be doing is collecting the taxes and spending in the areas where it is needed.
Sheila Gilmore
It has also been argued that despite the harm done to developing countries by the controlled foreign company rules, their application would bring more companies into this country and the wealth would trickle down to the rest of us.
Kelvin Hopkins
Those are feeble arguments put by people who might have vested interests.
It was interesting to hear the hon. Member for Redcar (Ian Swales), who seems to know a lot about these matters, saying the other day, “What about a few prison sentences for people who fiddle their taxes?” That would concentrate a few minds, and I think that is what we should do, as I think it is criminal for people to rip off the public purse as they do to the detriment of us all. The great majority of my constituents, of course, are working-class people who have to pay their taxes through PAYE—they cannot escape, avoid or evade—so I feel angry on their behalf as well.
It is a matter of political will. If we had the will, we could do these things. We would not need to invent schemes that seem designed to fail. If they were not designed to fail, I am sure the Minister would not be frightened of the amendment proposed by my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) to have a review in two years’ time. If the scheme were to be successful, the review would show its success; if we collected half of what had been evaded through the Government’s proposed scheme—£16.5 billion or whatever, amounting to 4p on the standard rate of income tax—the review would approve of what the Government had done. If the Government refuse to accept the amendment, they are obviously nervous that their scheme will not be a success. I suspect that they have brought something up that is designed to fail and will help the wealthy and the corporates to continue to avoid and evade taxes.
I do not believe that the Government are genuinely concerned about these matters. If they were, they would take effective action, ensure that it happened through stronger laws and possibly prison sentences for those who break these laws, and collect billions more in taxes. The sort of figures described by Richard Murphy and others are enormous—equivalent to each year’s deficit, about which the Government say they are so concerned. They are cutting spending to solve their deficit problems, but the real problem is not spending—it is that their revenue is too low because they are failing to collect all the due taxes. If the Government were successful in enforcing tax laws so that all due taxes were paid, there would not even be a deficit. They would have enough money to cover it. Let us see the Government take effective action: only then will I take them seriously. Until that time, I shall continue to say what I have said this evening.
Sheila Gilmore
Let me touch on a couple of points, partly arising from last year’s debate on the Finance Bill—particularly about the controlled foreign companies regulations and what happened to them. We are often accused of tabling similar amendments to those tabled before, and we did indeed table amendments asking for a review of the impact of those regulations, particularly on developing countries. We were told that the amendments were not needed because the Government would, of course, constantly review these matters. We were told that asking for a specific review would somehow put extra onus on civil servants and that we should simply have trust in what would happen.
On that basis, I ask the Minister—perhaps in his reply now or at some later time—to tell us whether that review has indeed been carried out and what information is already available to assure us that the reassurances given previously have been brought into play. Otherwise, we are simply being told that we are asking for unnecessary reviews and that all will be done. Let us see if it is done, as many organisations were very concerned about what the impact of those changes would be.
It would also be helpful—we asked about this last year—to know whether many companies have returned to this country and made their headquarters here, as we were promised. We were told that that would produce more income for our Government. We need to know not just what the impact has been on developing countries, but how many companies have relocated, how much tax they have paid, and how many jobs they have created.
I see that you are looking at the clock and at me, Mr Crausby, so, on that note, I shall sit down.
Mr Gauke
We have had an interesting and thorough debate during which a number of points have been raised. I shall address as many of those points as I can, as quickly as possible.
Clauses 203 to 212 and schedule 41 introduce the general anti-abuse rule, which is a major new development in UK tax law and a key part of the Government’s drive to tackle tax avoidance. Its role is to tackle abusive tax-avoidance schemes. I shall explain what I mean by that shortly, but let me first say a little about how we ended up in our present position.
We declared in 2010 that we would explore the area of tax abuse, and we commissioned Graham Aaronson QC to lead a study group. I pay tribute to the work undertaken by him and by other members of the group. Their report, published at the end of 2011, recommended that we should consider not a general anti-avoidance rule, but a general anti-abuse rule to tackle abusive avoidance schemes that were not being defeated by the current law.
Previous Governments have considered general anti-avoidance rules, but their proposals encountered the problem of how taxpayers, and businesses in particular, could easily distinguish between an activity that clearly constitutes tax avoidance and one that constitutes legitimate tax planning. If I may use the phrase employed by my hon. Friend the Member for Amber Valley (Nigel Mills), we need to find a way of ensuring that we do not take a baseball bat to legitimate commercial behaviour. We need to identify the boundary between tax avoidance and tax planning.
Contrary to some of the claims that we have heard tonight, HMRC has a good record in dealing with tax avoidance when it occurs. It has been very successful in taking taxpayers to court, and has won a great many cases, especially in recent months. However, we must ensure that we do not encounter the difficulty posed by a broadly based general anti-avoidance rule, namely that taxpayers and their advisers would have to consider how the rule might operate in a large number of circumstances in which it might be applied. That would not just stop avoidance where it existed, but cast a long shadow on legitimate arrangements.
We believe—and some Government Members have said this evening—that that would be bad for the country, damaging growth by causing some transactions to be delayed or cancelled because of the lack of clarity. I therefore urge the right hon. Member for Oldham West and Royton (Mr Meacher) not to press new clause 7 to a Division. I assume that Labour Front Benchers do not support the new clause for the same reason, although they did not make their position entirely clear.
I believe that the general anti-abuse rule proposed by the Aaronson group strikes the right balance between dealing with aggressive, egregious, abusive tax avoidance and not creating uncertainty. It targets only avoidance schemes that are clearly abusive. By “abusive schemes”, we mean schemes that can be seen from the outset to be simply highly contrived and artificial arrangements designed to enable people to get around the tax law and avoid paying tax. Those who do become involved with such schemes know very well what they are doing. If the general anti-abuse rule that we are considering today makes them think again and deters them from engaging in such avoidance, I for one will consider that to be a good outcome.
We have consulted widely, and have received a large number of representations, including some 150 substantive responses to our consultation. Interim guidance has been produced by the interim guidance advisory panel. I accept, to respond to the point made by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), that that was only published on Monday, but it was important that the panel had the opportunity to get this right. It has put in a considerable amount of time on this issue and, as I think all Members will accept, it is very broad-based and includes representatives from various organisations. Although it has taken a little longer than we might have hoped, I congratulate and thank the panel for its work. It has received an excellent response and will provide much help to taxpayers wanting to know where they stand. For example, on the question of what is contrived and what is abusive—a point raised in the debate—the guidance produced by the panel, as well as setting out the overall principles and descriptions, contains a number of examples demonstrating how these terms can be applied in specific cases.
On the penalty regime, we have not ruled out future action to strengthen the deterrent impact of the general anti-abuse rule by attaching penalties if necessary, and we will keep the matter under review. However, the Aaronson report recommended against providing penalties or special rates of interest, and we believe the GAAR should be allowed to bed in before we take any further action.
Mr Meacher
Before the Minister leaves the issue of the GAAR advisory panel, does he really think it right that most of its members are City lawyers who have hitherto spent their careers advising companies how to avoid tax? Will he also deal with the question of the “double reasonableness” test—whether it is reasonable to take the view that the course of action in question is a reasonable one? Is that seriously the criterion for deciding on the application of the GAAR?
Mr Gauke
The “double reasonableness” test was the one we came to after the lengthy process following the Aaronson review. We believe that it focuses attention on aggressive, abusive tax avoidance. Let me be clear: this is an additional tool that HMRC can use; it does not necessarily mean that for those outside the GAAR, everything is fine. I want to make it explicitly clear that that is not what we are saying. There is avoidance that will not fall within the GAAR, but which HMRC would none the less take action against.
The panel will be broad-based, but I see nothing wrong whatsoever in its having commercial expertise to provide reassurance and ensure that the GAAR will not be abused in the way that some Members have expressed concern about this evening, with too much power being placed in the hands of a part of the Executive. It will be broad-based, in just the way the interim panel has been.
The GAAR does not override UK tax treaties. Given the lack of time, I will not go into further detail, but it acts in much the same way as GAARs do for other countries that respect OECD and UN model tax treaties.
John McDonnell
The Minister said that there will be a review of the penalties. When, and will it look at criminal activity as well?
Mr Gauke
Let me deal with that in the context of amendment 8, which looks at the general issue of post-implementation evaluation and seeks to establish a review within two years of Royal Assent. We and HMRC have made it clear that we will manage and monitor the GAAR’s operation centrally, so that all cases and potential cases will be scrutinised and recorded. The deterrent effect, which we will see immediately, will be important, but we must also remember the issues of getting the tax returns in and being able to make a full assessment of the implications. We believe that a two-year period would not be practical for a general evaluation. It will take longer properly to evaluate how the GAAR is working, just because of how our tax system operates, so I will not accept amendment 8.
Amendments 3, 6 and 7, which deal with tax avoidance by multinationals and the impact on developing countries, raise a number of important points. The hon. Member for Birmingham, Selly Oak (Steve McCabe) wanted me to set out the Government’s objectives for the G8. I am sorry that I am not in a position to do that this evening; it will be left to the Prime Minister, who will make the UK Government’s position very clear.
The point about transparency is important and the Government have a good record of encouraging transparency in a number of areas, particularly among extractive industries through the extractive industries transparency initiative. We play a leading role internationally through the global forum. We ensure that jurisdictions comply with the international standard on tax transparency and work with the G20 to maintain pressure on non-co-operative jurisdictions. We have been making a lot of progress in the Crown dependencies, particularly as regards the exchange of information, and in ensuring that the US Foreign Account Tax Compliance Act, or FATCA, arrangements on the exchange of information become the international norm. I can assure the Committee that that will continue to be a key part of what we do and part of our G8 agenda.
Amendment 6 asks the Government to require UK companies to report their use of tax-avoidance schemes that affect developing countries and for HMRC to notify those countries and assist them in recovering the tax owed. Amendment 7 asks the Government to carry out an impact assessment on the effect of the changes to the controlled foreign companies, or CFC, rules on developing countries’ tax revenues. The answer to both points is that as a matter of practicality it is difficult for HMRC to perform the roles required by the amendments as they require assessments not of our tax rules but of the tax rules of developing countries. That takes us outside what HMRC can realistically do. The point was raised that amendment 7 largely repeats the debate we had during last year’s Finance Bill, when a similar, if not identical, amendment was tabled. I refer hon. Members to the speech I gave a year or so ago, in which I stated that simply as a matter of practicality that is not something that HMRC can do.
On amendments 11 and 12, tabled by my hon. Friend the Member for Amber Valley, I do not believe that a de minimis rule would be appropriate as regards the general anti-abuse rule as it would miss the point. We do not want anyone involved in abusive schemes to make use of them, and even if only £100,000 was at stake as a de minimis, that could have a significant effect on a number of people. We believe that that would be unfair.
As I said at the outset, I believe that the general anti-abuse rule is a major new development. It sends a message to those who persist with abusive avoidance schemes that even if they try to dance around the tax law, they will face the tough but plain question, “Is it reasonable?” That is a question that we all understand. Those who think about using the schemes will all understand it and, I hope, those who create the schemes will come to understand it. The GAAR will ensure that the time for their clever games, paid at the expense of the tax-paying public, is at an end. I therefore recommend that clauses 203 to 212 and schedule 41 stand part of the Bill.
Mr Meacher
In view of the commitment by my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) to carry out a review of the GAAR, and given the double reasonableness test and its deterrent effect, even though it is less than I should recommend, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Amendment proposed: 6, in clause 203, page 120, line 9, at end add—
‘(4) The Chancellor shall review the possibility of bringing forward a requirement for UK companies to report their use of tax schemes which have an impact on developing countries, including a review of the possibility of bringing forward proposals to require that when such schemes are identified under those rules, Her Majesty’s Government shall take steps to notify developing countries’ tax authorities and assist in the recovery of that tax. A copy of the report shall be placed in the House of Commons Library within six months of Royal Assent.’.—(Catherine McKinnell.)
Question put, That the amendment be made.
The Committee divided: Ayes 223, Noes 275.
Business without Debate
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Alloa Crown Post Office (Franchising)
(11 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gordon Banks (Ochil and South Perthshire) (Lab)
I am pleased to have secured this debate on an important issue in my constituency and in the context of the whole UK. I am delighted to see the Minister here tonight. Given her previous position on post office franchising, to which I will return in greater detail, her remarks will be eagerly awaited by many up and down the country.
I asked for this debate because I am very concerned about the proposed franchising of Alloa Crown post office and the changes that that will lead to, including the removal of the post office from its current central location. I am also firmly of the belief that the franchising of the Crown post office in Alloa will lead to the loss of staff and services—in time, perhaps even to the loss of the Crown post office in its entirety.
The Crown post office provides a dedicated specialist service to my constituents and is seen by many, including myself, as representing a vital part of the community. It is an important resource to small businesses in the area, which rely heavily on its services. Furthermore, its current central location is ideal and easily accessible for the majority of residents.
On the issue of location, I believe that to constitute part of the town centre in Alloa, a building has to be in the high street, Mar street, Primrose street, Mill street, Shillinghill or Drysdale street; those will not be familiar to you, Mr Deputy Speaker, but if you ever want to come to Alloa, you will be very welcome. That is where the current post office is located, so it acts as a feeder and magnet to the town centre, benefiting the wider community and economic activity in the town centre. No one but Post Office Ltd and the Minister wants that to change, so why will the Minister not listen to the voices of the people of Alloa and Clackmannanshire?
To put it bluntly, Alloa requires a strong local Crown post office in a central location to provide the services that its residents need. We are lucky enough to have that currently, and we want to keep it. The move to change the set-up in Alloa has its roots in the Postal Services Act 2011, which I opposed as a shadow Minister in this place and in Committee. Now, after I have fought the Minister’s predecessor, the right hon. Member for Kingston and Surbiton (Mr Davey), with his overzealous approach, the Minister, with her history, is left to pick up the pieces and deliver his plans.
The Minister will argue against this, I am sure, but—mark my words—I have absolutely no doubt that franchising will, over time, result in a significant reduction of the services offered by the post office. As a result, it will also limit access to important financial services to those on low incomes, who cannot get a bank account with a high street bank, and reduced services mean reduced staffing levels.
The franchising of Alloa Crown post office would also result in longer queues and waiting times, as a post office franchised to a local retailer would cease to be the core business of the outlet and, frankly, would lead to people doing the business they currently place with the post office in Alloa either elsewhere or with different businesses altogether. Short-term queues will lead to long-term decline, job losses and service erosion.
This represents the human cost that such a decision would entail. That is why I am standing side by side with the staff in the post office in Alloa in opposing these proposals. Moreover, if the franchisee were to cease trading, as has been the case with many high street retailers, the community could be at risk of losing its post office entirely.
I recently held a very well-attended and—shall we say—vibrant meeting in Alloa to discuss the post office plans. Indeed, the Government were invited to send a Minister to defend their position, but sadly we are still waiting for a response. I was, however, delighted that my hon. Friend the Member for Edinburgh South (Ian Murray), the shadow Minister for postal affairs, was prepared to visit Alloa during the recess to add his knowledge and support to the campaign to keep Alloa Crown post office in its current location and unfranchised. I thank Connie Hewitt and Tom Moran from Post Office Ltd for coming along and putting their side forward, but I have to say that their arguments did nothing to change the views of my constituents who were present and vocal on the night. I need to say to them again tonight, and to the Minister, “Don’t try to change our minds—change yours.”
At the public meeting, we heard about windows of opportunity for expressions of interest and thereafter consultation processes, but I must say to the Minister that no one has faith in her consultation processes, and if it gets that far people believe that it will be a done deal; indeed, some people believe that now. We heard Post Office Ltd claim that it costs £1.43 in spending for every £1 of revenue at Alloa post office, but if the Minister had been in Alloa that night she would have heard that claim disputed by staff of the post office who have accessed the same cost build-up figures. On top of this, Post Office Ltd is paying the staff in Alloa post office bonuses for exceeding their performance targets. I have to say to the Minister that these are targets set by the Post Office, so what else can the staff do other than out-perform them as they currently are?
While the staff of Alloa post office and I want to see the Post Office on a long-term sustainable footing, I question the actions currently being taken regarding franchising. While franchising may—although it is not a given—lead to savings, it will do so only at the expense of quality and services. This franchising proposal is a step towards mutualisation of Post Office Ltd, but from my view in Alloa, it looks more like mutilation.
The Government are failing by their own measure to live up to the words in their own document, “Securing The Post Office Network In The Digital Age”; failing to recognise that the post office is more than a commercial entity and serves a distinct social purpose; and failing to protect against closures through a policy of closure by stealth. Proposals to franchise 70 Crown post offices throughout the UK, including in Alloa, would represent a substantial reduction in services by stealth while threatening the distinct social purpose of the post office. It would appear that the post office is no longer the front office for Government, as was once claimed.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
One of the 70 post offices across the UK which is proposed to be franchised is Cumbernauld Crown post office. Cumbernauld is one of the largest towns in Scotland, and the post office is in a central location in Cumbernauld town centre. To echo my hon. Friend, there is no doubt that wherever such a franchise was placed in a supermarket or a shop around Cumbernauld town centre, the location would be poorer and the quality of service would no doubt be diminished. Is this good enough when the post office plays such a central role in our community, in Alloa’s community, and in the communities across Scotland and the UK?
Gordon Banks
I agree with my hon. Friend. His analysis of what will happen in Cumbernauld is a mirror of what will happen in Alloa. I support his viewpoint and I am glad he is here tonight to express not only his support but his understanding of the damage that these changes would do to Cumbernauld.
“I would have thought the Government would be looking to engage with local communities. Instead it appears that the public will be treated with contempt and denied a genuine say.”
Those are not my words but those of the Minister when she was campaigning vigorously against the franchising of Kirkintilloch post office to WH Smith in 2007. I hope that the Minister will explain why she is now in favour of the hiving off of post offices to, in her own words,
“a large chain where the threat of mass closures will always hang over them”.
What has changed her mind?
The Government have also turned a blind eye to many of the concerns raised about the changes and ignored the Consumer Focus report, which showed that post offices franchised to WH Smith were the worst performing on queue times and scored badly on quality of service and accessibility.
The Minister once said that many of her constituents
“are deeply concerned about the plan to move Kirkintilloch post office to WH Smith. Given that communities have lost out in the past when Tesco and Morrisons suddenly decided to close many post offices in their stores, would it not be far better to invest in a post office network that would increase the profitability of branches than to hive them off to a large chain where the threat of mass closures will always hang over them?” —[Official Report, 17 May 2007; Vol. 460, c. 762.]
Does she, therefore, support my efforts tonight and still agree with her own words?
I am also concerned about the lack of consultation on franchising so far. The public who receive these services in Alloa have had no opportunity to voice their opinions other than in the public meeting arranged by me. This means that decisions are being made based on a partial and potentially flawed understanding of local customer needs. Will the Minister support a petition
“to reconsider the decision to move”
this post office,
“and instead to guarantee a secure future for this busy and well-used local service”?
I will take an intervention from her, if she would like to respond.
It is not surprising that the Minister does not wish to respond, because the words I quoted are hers, not mine —I thank her for writing half of my speech—and she used them in a 2007 petition on the franchising of Kirkintilloch post office in her constituency.
The public care about post offices. A Crown post office offers a full range of services at professional standards and can attract people into the town to the benefit of other retailers. My constituents do not want to see their Crown post office franchised and believe that it should remain where it is and continue to provide an excellent service. I encourage all of my constituents who are concerned about this issue to add their names to the petition, which already has in excess of 2,000 signatures, calling for Post Office Ltd and the Government to rethink their proposals.
I thank the House for the opportunity to raise this important issue and look forward to hearing the Minister’s comments. I hope that she will focus on the issue and the Post Office under her Government’s control and that she will remember her words when she called franchising contemptible; I assume she believed what she said when she argued that the hiving off of post offices to large chains leads to the threat of mass closures. Anything less than a change of mind will be seen by my constituents and hers as her saying one thing from the Back Benches and another from her seat in a ministerial car.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
Perhaps it is worth starting by pointing out that the previous Labour Government’s regime of ministerial cars is not how things are run these days. I get the bus to the Department and occasionally walk, depending on the weather. My motivation is certainly not as the hon. Gentleman suggests. I am keen to make sure that the post office network is sustainable and am a passionate believer in the importance of post offices as the hubs of many of our communities. They play a vital role in our society. Despite our differences of opinion on this issue, which I will come to, I recognise that the hon. Gentleman is standing up for and championing an issue about which his constituents care deeply and it is right that we discuss such matters in this House. I am very happy to have the opportunity to do so this evening and congratulate the hon. Gentleman on securing this debate.
The hon. Gentleman has eloquently set out his concerns and we have also heard an intervention by my parliamentary neighbour, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), who is concerned about a similar issue in Cumbernauld. I fully recognise the concerns that they and all our constituents have about any changes to local post offices, particularly against the background of the two major closure programmes in 2003 and 2008, which were inflicted on our communities by the previous Labour Government.
It is true to say that, as a constituency MP and as a candidate, I campaigned vigorously against those closure programmes under the previous Administration, and it is important to recognise that there is no closure programme under this Government. In fact, we are investing £1.34 billion to ensure that the post office network is sustainable for the future, and that is what we are determined to see.
It is also important to recognise—and as the hon. Gentleman’s constituents will want to know—that in each of the locations that have been outlined as potential areas for franchising, these are still proposals and we are at a very early stage. It is right for him and other MPs to engage in that process of determining how those decisions will ultimately be reached. Until more detail becomes available, and the processes for seeking and assessing prospective retail partners have made further progress, it is not possible to take a proper and fully objective view of all of Post Office Ltd’s franchising proposals in individual locations.
Location is one of the issues that the hon. Gentleman mentioned as being key to the success of his local post office, and the judgment about each franchising proposal will depend on such details. I cannot remember the full list of the streets that he mentioned, but certain streets will obviously be more appropriate locations than others, and that will be one of the factors that will need to be taken into consideration and that will be examined during the consultation.
Gordon Banks
I extend the same offer to the Minister as I made to you, Mr Deputy Speaker. The Government have had an invitation to come to the meeting in Alloa, but I invite the Minister to come so that I can show her the streets and the reasons why Alloa Crown post office must stay where it is.
Jo Swinson
I thank the hon. Gentleman for his kind invitation. I thought I heard you suggest that we could go together, Mr Deputy Speaker, but who knows whether our diaries will permit that to happen.
Decisions on the franchising of individual Crown office services are commercial and operational matters for Post Office management and the Government play no specific role in them. However, I recognise that the hon. Gentleman rightly wishes to use this opportunity to raise these issues in Parliament and I am happy to respond. It is important to remember that before any changes are made to the existing Crown post office service provision, there will be a six-week local public consultation under the terms of a code of practice that has been agreed between the Post Office and Consumer Focus. The public consultation will focus on a specific and detailed proposal to relocate the service, and responses will be carefully considered by the Post Office before a final decision is reached.
Before addressing the specific issues that have been raised about the Post Office’s proposals to franchise 70 Crown post offices and to merge or relocate a small number of other Crown branches, it is essential to set them in their wider context. The 2010 spending review after the last election saw a funding package of £1.34 billion, up to 2015, earmarked for significant investment in the post office network. That funding provides for the network and Crown transformation programmes, and for investment more widely across the post office network, together with ongoing support of the many non-commercial branches that fulfil an important social and economic role in the communities they serve. Clearly, this support is particularly relevant in Scotland in view of its geography and demographic spread.
Our funding package also requires Post Office Ltd to continue to maintain a network of at least 11,500 branches and to comply fully with the access criteria, set by the Government in 2007, with no programme of closures. Significant elements of the Government funding are supporting investment in and improvements to the directly owned and managed Crown office segment of the network, with £70 million being spent on modernising some 300 Crown branches and investing in new technology in town centre and high street locations. We made it clear in the 2010 network strategy statement that we are fully committed to modernising the post office network and safeguarding its future.
We also have to face economic reality. There are substantial losses incurred by the 373 branches that make up the Crown segment of the network. In 2011-12, £46 million was lost just by those 373 branches. Eliminating those losses has to be key element of the Post Office strategy to make the network sustainable in the long term. That is something we all want to see, and the Government, of course, support Post Office Ltd in delivering that strategy.
Gordon Banks
Will the Minister confirm that the driver for this is mutualisation?
Jo Swinson
We are committed to mutualisation and I will come on to that point, but I imagine that the hon. Gentleman also wants to ensure that we have a sustainable post office network. Hundreds of millions of pounds worth of subsidy is not, ultimately, sustainable. In any kind of business case, any business would say that 373 Crown post office branches losing £46 million, often in central locations and doing a huge amount of business, needs to be dealt with.
Gordon Banks
The Minister is talking about subsidy. While she is telling us about the subsidy her Government have put in place, I ask her to pay due respect to the fact that in the past 10 years of the Labour Government, we provided more than £3.3 billion in support of the post office network and introduced an annual £150 million subsidy to support otherwise loss-making post offices in urban and rural areas. Her own Government’s report recognises the social need in communities that is met by post offices, and the people of Alloa and Cumbernauld are not seeing this Government live up to that commitment.
Jo Swinson
I absolutely recognise that need, and I also think that there will always be some need for Government subsidy for those types of offices where they cannot become commercially viable, but where the service provided is of such benefit to those particular locations that it makes sense for the Government to pay for it. However, I question whether that type of argument should be made for city centre busy post offices. I think any reasonable person would recognise that they ought to at least be able to break even, rather than incur the kind of losses that are currently happening. That is why we have, in the post office strategy, a determination to ensure that we can get the Crown office network on to a much more sustainable footing.
A third of the losses of the post office network as a whole come from those 373 Crown branches. There are 11,818 post offices, and a third of the losses in the whole network are from just those 373 branches. I put it to the House that no business can continue with that kind of situation, where some branches cost significantly more to run than they bring in.
Within the broader strategy for eliminating unsustainable losses and achieving break-even for the Crown network by 2015, the Post Office has identified 70 branches where it sees no prospect of eliminating the losses at local level under the current operating cost structure. The precise reasons vary from location to location, but commonly include factors such as high property costs and sub-optimal location, which means that they are not able to attract increased custom and business. As the hon. Gentleman mentioned, in the Alloa branch it costs £1.43 to earn £1 of income. That creates an annual loss, just for that branch, of £50,000.
Gordon Banks
I have to correct the Minister. I said that Post Office Ltd said that it cost £1.43. That figure is disputed.
Jo Swinson
The hon. Gentleman has put his dispute on the record, but I note that he has not offered an alternative figure that he believes to be right. Post Office Ltd clearly has the information at its disposal to know exactly what its branches are making. I hope he is now going to give a figure that he believes is evidence-based.
Gordon Banks
If the Minister had been at the public meeting in Alloa, she would have heard that the figure was nowhere near £1.43—it was nearer £1.19.
Jo Swinson
For the record, I did not receive an invitation to the public meeting on 3 April, but Post Office Ltd obviously did attend, as the hon. Gentleman mentioned. He also accused me of not replying to a letter. I received a letter from a local Member of the Scottish Parliament, to which I replied at the end of last week.
Jo Swinson
I will be generous and allow the hon. Gentleman to intervene once again, although I have some further remarks to get to.
Gordon Banks
I never accused the Minister of not replying to any letter. I do not know where she got that from. It is purely a figment of her imagination. I have no knowledge of a letter from an MSP that either was or was not replied to. I repeat, however, that the Government were invited to attend the meeting in Alloa, and I am still waiting for a yes or no.
Jo Swinson
I do not know who in the Government the hon. Gentleman invited, but I never received an invitation. It would be ironic if the invitation got lost in the post.
The £50,000 being lost every year is currently being met by taxpayers, and that is absorbing funds that could otherwise be spent elsewhere. I know—because Post Office Ltd sent representatives—that members of the public expressed concerns at the meeting about whether there could be a suitably sited potential franchise partner in Alloa with premises that could accommodate the addition of post office services. As I mentioned, it is important to recognise that no decisions have been made on a franchise partner for any of the branches, but in assessing the 70 post offices proposed for franchising, Post Office Ltd considered a range of factors, and it believes that there are a number of opportunities and potential retail partners in those locations that could accommodate the post office services currently provided by the Crown office. The hon. Gentleman has considerable local knowledge, and although I recognise that he opposes the move in general, if he has views about where might be more appropriate, if the move goes ahead, POL would certainly welcome that information and I would encourage him to engage with the consultation.
The hon. Gentleman mentioned that he thought that services would automatically be worse under a franchise system, but his point about queues is not borne out by the facts. In Crown offices, queues lasted longer than five minutes in 36% of visits, whereas in the franchises, of which there are about 420, that figure is just 25%, so the figure for the franchises tends to be lower. The average queue length in Crown offices in 2011 was three minutes 51 seconds, whereas in franchise offices it was two minutes 54 seconds. The suggestion, therefore, that automatically a franchise system would lead to longer queues is not borne out by the facts.
The hon. Gentleman remarked on the issues in Kirkintilloch in 2007. In particular, he asked about when I previously expressed concern about the threat of mass closures if franchises were given to large chains. He asked what changed my mind. In 2007, the previous Labour Government went on a closure rampage that resulted in more than 7,000 post offices closing across the United Kingdom. That was Labour’s record. In my constituency, Auchinairn, Killermont, Courthill, Westerton and Kessington lost their post offices, and Alloa was not exempt from the closure programme either, because Fairyburn post office closed down in his constituency, with eight further post offices placed on mobile outreach, some of them losing a post office only to gain an outreach service for two hours a week.
That was Labour’s shameful record on post office closures and why I had no confidence that, if chains suddenly decided they no longer wanted to offer post office services, it would not necessarily mean that a post office would continue in an area. Under this Government, we are investing £1.34 billion in the post office network and have committed to putting the Post Office on to a sustainable footing. And yes, that means working towards mutualisation so that the businesses can be owned by those involved, the key stakeholders. That is the kind of sustainable future for the Post Office that the previous Labour Government never achieved. That is the key reason I changed my mind about whether this makes sense.
Our approach will eliminate losses from the Crown post office network, which is an essential part of ensuring that we can have a post office network fit for the 21st century.
Jo Swinson
I will give way to the hon. Gentleman, because he is being so persistent.
Gordon Banks
The Minister recognised earlier Labour’s £3.3 billion of support to the Post Office over its last 10 years in office and the £150 million annual subsidy. I am intrigued by the reasons for her change of mind, so—
Ministerial Correction
(11 years, 7 months ago)
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Radioactive Waste
(11 years, 7 months ago)
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Ms Ritchie
To ask the Secretary of State for Energy and Climate Change what assessment he has made of the selection of a site for the storage of radioactive waste from existing and former nuclear sites; and if he will make a statement.
[Official Report, 26 March 2013, Vol. 560, c. 1063W.]
Letter of correction from John Hayes:
An error has been identified in the written answer given to the hon. Member for South Down (Ms Ritchie) on 26 March 2013.
The full answer given was as follows:
Mr Hayes
The UK's higher activity radioactive waste is currently held in safe and secure storage facilities at various nuclear sites around the country. Government set out its approach to implementing a geological disposal facility (GDF) to dispose of the UK's higher activity radioactive waste in the 2008 White Paper “Managing Radioactive Waste Safely: A Framework for Implementing Geological Disposal”.
The Managing Radioactive Waste Safely (MRWS) process is based on the principles of voluntarism and partnership. It is a staged process, one in which potential host communities 'decide to participate' (without commitment) in site identification and assessment for a potential GDF. To date, no sites have been selected. The Managing Radioactive Waste Safely (MRWS) programme is a very long-term one, and Government remains confident that a suitable site for a GDF will be found.
The current invitation remains open for volunteer communities to express an interest, without commitment, in the MRWS process. At the same time, Government has been working to learn the lessons of the recent experience gained in west Cumbria—as the Secretary of State for Energy and Climate Change affirmed in his written ministerial statement earlier today, will launch in May a public call for evidence on the site selection process of the MRWS programme. The evidence provided in response to this call will inform a public consultation later this year on how this process might be improved.
With regards to the recent experience in west Cumbria, both Copeland and Allerdale borough councils decided to proceed to site identification and assessment, however, Cumbria county council did not. Since Government had given a specific commitment in west Cumbria that there should be agreement at both borough and county level before progressing to the next stage, this decision brought the existing site selection process to an end in west Cumbria.
The correct answer should have been:
Mr Hayes
The UK's higher activity radioactive waste is currently held in safe and secure storage facilities at various nuclear sites around the country. Government set out its approach to implementing a geological disposal facility (GDF) to dispose of the UK's higher activity radioactive waste in the 2008 White Paper “Managing Radioactive Waste Safely: A Framework for Implementing Geological Disposal”.
The Managing Radioactive Waste Safely (MRWS) process is based on the principles of voluntarism and partnership. It is a staged process, one in which potential host communities 'decide to participate' (without commitment) in site identification and assessment for a potential GDF. To date, no sites have been selected. The Managing Radioactive Waste Safely (MRWS) programme is a very long-term one, and Government remains confident that a suitable site for a GDF will be found.
The current invitation remains open for volunteer communities to express an interest, without commitment, in the MRWS process. At the same time, Government has been working to learn the lessons of the recent experience gained in west Cumbria.
With regards to the recent experience in west Cumbria, both Copeland and Allerdale borough councils decided to proceed to site identification and assessment, however, Cumbria county council did not. Since Government had given a specific commitment in west Cumbria that there should be agreement at both borough and county level before progressing to the next stage, this decision brought the existing site selection process to an end in west Cumbria.
Petitions
Reopening of Middlewich Station to Passengers
Post Office Services (Torphichen, West Lothian)
Westminster Hall
(11 years, 7 months ago)
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Bus Services (Yorkshire and Humber)
(11 years, 7 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Fabian Hamilton (Leeds North East) (Lab)
It is, as always, a pleasure to serve under your chairmanship, Mr Howarth. Before I start the debate, I should apologise for being unable to stay for the entire afternoon. The debate was originally scheduled for 9.30 this morning, but owing to the funeral of Baroness Thatcher, the business of the House begins at 2.30 this afternoon, as hon. Members are aware. However, because I have had a meeting, in Parliament, with two constituents arranged since January and because those constituents had purchased their rail tickets in advance, I could not put them off, so I hope that you, Mr Howarth, the Minister, the shadow Minister, my hon. Friend the Member for Makerfield (Yvonne Fovargue), and all other colleagues present will forgive me for leaving early in what I hope they agree are exceptional circumstances.
It is a pleasure to open this debate on a subject that at first glance might seem rather complex and perhaps a little esoteric, but what we are about to debate is very far from that. In fact, it is fundamental to the future of so many people, especially young people, who are desperate for work, education or training—not just in Yorkshire and the Humber, but throughout the country. I am absolutely certain of that. Why did I choose such a seemingly long title for the debate, as on the Order Paper? I am grateful to my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith), who has been extremely active, both in her constituency and throughout the region, in drawing attention to a matter that, unless it is resolved soon, could well make the difference between renewed economic growth and further decline. It really is that important. Like me, she felt that it was not possible to reduce the title of the debate any further, because it was essential to include all the issues that needed to be discussed.
It might be helpful to hon. Members if I first remind them of the background to bus services in England outside London. In October 1986, the late Baroness Thatcher’s Conservative Government first deregulated bus services, allowing private contractors to run registered routes commercially and in competition with one another, and to tender for registered routes that were deemed to be unprofitable and were therefore subsidised by local ratepayers, later to become council tax payers of course. Local authorities were no longer allowed to run their own not-for-profit bus services, so the famous Sheffield buses, which in the mid-’80s cost as little as 2p per journey across the city, were doomed.
Contrary to popular belief at the time, I understand that many business rate payers in the centre of Sheffield were angry, because although their rates were relatively high, the cheapness of bus fares from the outlying villages and suburbs of the great city of Sheffield meant that city centre shops were always busy and profitable for their owners. Once the subsidies stopped and the routes became commercialised, the fares went up sharply, often putting them beyond the reach of many in the city and its outlying areas. A measure that was intended to lower bus fares through competition increased them massively in some cases.
Angela Smith (Penistone and Stocksbridge) (Lab)
Does my hon. Friend agree that the other impact of deregulation in cities such as Sheffield was proportionately to increase the number of cars on the road and to decrease the number of people using local public transport?
Fabian Hamilton
I thank my hon. Friend for that important intervention. I remember clearly that in October 1986 the route that I used to travel from my then home in Armley, Leeds, to the city centre was via the Armley gyratory—a massive roundabout and huge junction on the western side of Leeds. Up to that point in October 1986, the traffic queue was not that great at 8.30 in the morning, but I remember that, immediately following deregulation, the queues trebled. Everyone had got on the buses, but they suddenly became much more expensive. That had been predicted by the Labour Opposition and by the local authority, of which I was about to become a member.
In my city of Leeds, the former City and the former West Yorkshire bus services became a commercial company—some may recall that it was called Yorkshire Rider—and it made a small number of former public servants very wealthy as they became managers of a cash-rich commercial service mandatorily divorced from the public service that they once received a salary to operate. Other commercial operators entered the field, but were soon swallowed up by Yorkshire Rider, which did not like the competition. Eventually, of course, Yorkshire Rider itself was swallowed up by an even larger concern, so that today there is a virtual monopoly in Leeds, with First Bus operating almost all commercial bus services not just in Leeds, but in Bradford, Wakefield and the surrounding districts of West Yorkshire. What was once a public service had become a cash generator, and the travelling public, so dependent on buses, were left to pay the cost of ever-increasing fares, caused by the need to make a profit and the sharply rising fuel prices that added to the misery.
I shall spare my colleagues the history of the fiasco of the Leeds Supertram during the past 10 years. Suffice it to say that the lack of any alternative public transport to the bus network in Leeds has made buses even more critical for non-car owners. The Labour Government, however, tried to do something for bus passengers—I will refrain from calling them customers—with the concept of quality bus contracts. In government, Labour legislated to enable local authorities to reverse bus deregulation in their area by introducing a quality contract—in effect, a move to tendered bus services.
Under a quality contract, the accountable transport authority sets the fares and plans the network, while private operators bid to run the services. That model exists in London, where deregulation of the bus network never took place. A number of Labour-run integrated transport authorities are consulting on introducing quality contracts for their local bus services. This Government claim that they will not block transport authorities from pursuing quality contracts, yet they are reforming bus funding in a way that creates a financial disincentive for councils to go down that route.
Department for Transport guidelines for local transport authorities applying for funding from the new better bus area fund state that only voluntary partnerships with bus operators, not quality contracts, will be eligible for funding:
“Bus services can thrive in areas where local authorities and bus operators work together to identify and solve problems, so proposals will only be considered if supported by key bus operator(s).”
The source for that quote is the Department for Transport’s “Better Bus Area Fund: Guidance for Bidders”, published in December 2011.
Labour published a paper containing a number of proposals to reform local transport, as part of the policy review entitled “Empowering communities to improve transport”. The proposals would enable transport authorities to improve local bus services through greater regulatory powers over fares and routes, and a new statutory power for the Secretary of State for Transport to designate bus deregulation exemption zones.
My hon. Friend the Member for Garston and Halewood (Maria Eagle), the shadow Secretary of State for Transport, said in her speech to the 2011 Labour party conference:
“Devolving funding and decision making over transport is making a real difference in our cities. But in government we didn’t go far enough. That’s why our policy review has been looking at how we can devolve more transport responsibilities.”
She referred, among other things, to local and regional rail services.
How, then, does all that relate to the support necessary for young people in our region and throughout the country to be able to access jobs, training or education? Perhaps the Yorkshire Post put it best, when on 28 February this year it said:
“SPENDING on buses could give Ministers a quicker and cheaper way to help the economy than investing in ‘big ticket’ transport infrastructure, according to a new report.
The research found bus services in England’s major urban areas outside London are responsible for economic benefits worth around £2.5bn.
The report from pteg”—
the Passenger Transport Executive Group—
“which represents passenger transport executives such as Metro and SYPTE”—
the South Yorkshire passenger transport executive—
“in Yorkshire, suggests grants to bus operators generate £2.80 for every £1 spent while every £1 used to support concessionary fares generates £1.50.
It also found that the majority of the bus industry’s £5bn turnover every year is ploughed back into the areas where operators work through their supply chains and because their staff live in the area.
Pteg chairman David Brown said: ‘This report suggests that whilst there is a great deal of focus on big transport infrastructure schemes as a way of generating growth, the urban bus also deserves more attention from policy makers.
Investing more in the bus could be one of the biggest bargains there is for government in supporting big city economies, in getting the jobless back to work and in addressing some deep rooted, and ultimately costly, social challenges.’
The report was published yesterday as councillors in Barnsley raised concerns over the impact of poor transport links on the town’s economy. Councillors on the authority’s economy and skills scrutiny commission warned transport issues were harming efforts to help the long term unemployed back into work. Young people, particularly in the west of the district, were finding it ‘almost impossible’ to access apprenticeships because of poorly served bus routes, the commission found.
Commission chairman coun Dick Wraith said: ‘The council and its partners are doing everything they can to bring new jobs to Barnsley, and that hard work needs to continue.
However, we need to make sure that local people can get to the jobs that are out there, especially young people, who can lose out to older competitors who have their own transport and don’t need to rely on bus services to get them to work.’”
I thank the Yorkshire Post for that article.
Chris Waterman, of the Rural Access to Learning Group, contacted me to tell me what his group, which is concentrating on the connection between transport in rural areas and access to learning, especially for young people, is considering. He said that it is trying to promote a wide-ranging discussion at national and local level on the future development and funding of student transport in rural areas. Although many parts of our region of Yorkshire and the Humber are highly urbanised, it also has huge rural areas dotted with many villages where huge numbers of residents, especially young people, find themselves completely stranded without decent and affordable bus services.
Chris told me about a female student who started an evening course that finishes at 9 pm. She lives on a bus route, 3 miles from the college, but the service has recently been reduced and the last bus now passes her home at 8.15 pm. During the winter months, the student was understandably nervous about having to walk home in the dark and, having no access to a car, decided that she could not stay the course. I am glad to say that Chris told me that the college made an exception and funded taxi services for that student for that course at that time. Not all students are that lucky. Many will have to ditch their courses because they simply cannot get to and from college in time. RALG will produce a report on the issue, which will significantly contribute to the debate and, I hope, offer helpful solutions. I am grateful to Chris Waterman for his assistance and look forward to reading the proposals that RALG makes.
I hope that many hon. Members will contribute to the debate, so I will not take up too much more time, but important points need to be made and, to conclude, I would like to mention a few of them. First, Ministers promised that funding cuts would not lead to the loss of local bus services, yet many communities have seen significant reductions in vital services and fares have risen, on average, by double the rate of inflation. Secondly, the most vulnerable are the most affected by the loss of local bus services, with 35% of the 5.2 billion bus journeys each year in Britain made by those eligible for concessionary travel.
Thirdly, transport authorities that seek to use the legislation passed by the Labour Government to re-regulate bus services, giving them control over fares and routes, have found themselves frustrated by the bus companies and, I am afraid, a lack of support from the Government.
Fourthly, according to the Department for Transport’s own figures—the annual bus user statistics—bus fares increased by 6.5% in England from June 2011 to June 2012. That is 5.4% in London, 6.8% in metropolitan areas and 7.6% in non-metropolitan areas, in just one year. That means that bus fares have gone up, on average, by twice the rate of inflation, which is 3.2%, using the retail prices index rate. The Department’s figures suggest that fares have gone up by a third in five years.
Finally, the largest five bus operating companies in the UK, which jointly control more than 71% of the bus market, made combined operating profits in 2011-12 of more than half a billion pounds.
I hope that the debate highlights some of the key issues frustrating so many of our young people in their attempts to get work, training or education, whether they live in cities, towns or rural areas, whether in the Yorkshire and the Humber region or anywhere else in England.
Sarah Champion (Rotherham) (Lab)
I congratulate my hon. Friend the Member for Leeds North East (Fabian Hamilton) on securing the debate.
I shall begin by speaking personally. When I first came to Sheffield as a student in the late ’80s, bus fares were 2p across town, and that was one of the deciding factors for choosing Sheffield over other places. We were outraged in 1989 when fares increased to 10p, because it put regular bus travel out of the reach for most of us. When I studied, I was lucky to have a full grant—it was before tuition fees were introduced—but the seemingly paltry increase in bus fares meant that I was forced to walk most journeys, because I could not afford to do otherwise.
A student ticket in Sheffield is now 80p. I appreciate that for many of us that does not seem like a lot of money, but students are now saddled with massive debts, so 80p is a considerable investment. As I did, many students choose not to travel by bus due to the cost, instead spending the money on other essentials. During the day, that is fine, and in fact I would probably encourage it, but at night, I am concerned. I worry about the safety of students and young people forced to walk in the dark across town or, as my hon. Friend said, a considerable distance on rural lanes because they cannot afford a bus fare or there is no bus for them to catch.
In Sheffield and most towns, walking is an option, but the situation is compounded if a young person has to travel any distance or be anywhere at a specific time. If an apprentice has to be in work at a set time for example, what are their options? Rely on friends and family for lifts; own, insure and pay exorbitant fuel costs for a car; or risk their life on a bike or scooter. Realistically, the only option is catching the bus. On £2.65 an hour, a daily commute by bus becomes a costly enterprise, and some young people I have spoken to have decided not to take up apprenticeships due to the financial burden, which horrifies me. They are turning down a future because they cannot afford the transport to get there.
In reality, is there even a bus that they can catch? Ministers promised that cuts in funding would not lead to a loss of local bus services, yet many communities have seen significant reductions in vital services. Fares have risen on average by double the rate of inflation. The Government have cut funding for local transport by 28% and direct subsidies to support local bus services by a fifth. As a consequence, local authorities have not been able to sustain the previous level of support for unprofitable but socially necessary bus services.
Research has shown that one in five local council-supported bus services were cut or reduced last year, and 41% of local authorities have reported cuts to timetables. Where services have been protected, bus companies have often increased fares to make up for the revenue lost through cuts to subsidies. It is the most vulnerable who are most affected by the loss of a local bus service, with 35% of the 5.2 billion journeys each year in Britain made by those eligible for concessionary travel. Young people have been particularly badly affected, with the loss of services and the rising prices making it harder for them to take up education or training opportunities. The pressure on funding faced by local authorities has seen concessionary travel schemes for young people, which are discretionary, withdrawn or scaled back.
In Rotherham, we are trying to tackle the injustice for young people head-on. The metropolitan borough council is actively pursuing ways to increase young user representation, so that the transport services are fit for purpose. As part of the last 11 million takeover day, when the Youth Parliament runs Rotherham council, the young people particularly wanted to address the matter of transport. Issues raised were primarily about safety and security, the reliability of services, and affordability. Recommendations were made for a more joined-up system, with concessionary tickets on all forms of public transport and better advertising of concessionary fares.
Young people in Rotherham have been invited to attend a number of upcoming boards and consultation meetings. All parties involved, including the council, South Yorkshire passenger transport executive, South Yorkshire police and the individual operators welcome young people’s input. Rotherham council has appointed young people to its transport liaison committee, and the Rotherham transport users group is actively recruiting young people, as they are the people who are aware of the specific issues facing them. In Rotherham, we are trying to make the bus companies apply the 70p fare for young people to through journeys. Currently, if someone gets off one bus and takes another to complete their trip, they are charged 70p for each part of the journey, which often makes the cost prohibitive. Such schemes need to be adopted across the country. Rotherham has shown that by including young people in the decision-making process, change can occur.
Finally, I urge the Government to consider Labour’s proposals to enable transport authorities to improve local bus services through greater regulatory powers over fares and routes, and to consider a new statutory power for the Secretary of State to designate bus deregulation exemption zones. Without those interventions, I am afraid that the future for young people looks bleak.
Angela Smith (Penistone and Stocksbridge) (Lab)
It is a pleasure to serve under your chairmanship, Mr Howarth, for what I believe is the first time. It is also a pleasure to respond to the contribution made by my hon. Friend the Member for Leeds North East (Fabian Hamilton). I noticed that on the Annunciator screen he was down as the Member for Midlothian—I did not know that Midlothian was in Yorkshire and Humber, but we learn something every day. My hon. Friend the Member for Rotherham (Sarah Champion) was eloquent in her exposition of the needs of young people, particularly in south Yorkshire, and of the need to include young people in the decision-making process on bus services, which is something to which I will return later.
For all of us here today, the question of whether to catch a bus is a matter of genuine choice, because every Member of the House of Commons has, I believe, the means to buy a car. For us, whether to use public transport can be an environmental choice. We have the luxury of that position, but for many the choice is to catch a bus or to stay put and not travel at all. The option of private transport still does not exist for many of the elderly, the young, the disabled and the unemployed, and for different reasons. For those people, the bus is essential for getting to the shops, to school, to training, to work or even to that important job interview.
In the plethora of cuts announced by the coalition Government, it is often the cuts least talked about that do the greatest damage. In 2010, the Government cut by 28% the funding to councils for local transport and removed the ring-fencing from funding passed to councils from the Department for Communities and Local Government. In addition, the bus service operators grant was cut by 20%. The combined cuts have resulted in the removal of £500 million from support for bus services. With that level of cuts, it is no surprise that many people who use bus services believe that services have deteriorated in vast swathes of the country. To make matters worse, the cost of catching a bus has increased by double the rate of inflation in the past year alone.
As things stand, and if the cuts continue, it will become harder and harder for many communities to sustain the social mix that is essential to maintaining the lifeblood of, in particular, our rural areas. If those who cannot afford private transport have to move out of their villages and hamlets, all we will have left is lifeless commuter belts. The problem exists not just in the rural south. My constituency is made up of isolated villages and towns on the edge of the two major urban areas of Barnsley and Sheffield. There is often a misunderstanding in the House about rural areas: they do not belong just to the leafy home counties, as metropolitan areas can be made up of significant expanses of rural landmass. South Yorkshire is a good example, and indeed parts of west Yorkshire still have that status. It is the poor and the young who feel the effects of worsening bus services the most, and in the context of high and rising unemployment the problem has become acute.
In my constituency, which is the second wealthiest— for want of a better word—in Sheffield, the rise in unemployment among the young has been very rapid over the past three years; indeed, I think that the figure has increased by 100%. The increase has been far higher elsewhere in south Yorkshire, particularly in areas such as Rotherham, the Dearne, Barnsley East and Barnsley Central. Unemployment is rising among the young in those places, as it is nationally, and it is not hard, therefore, to imagine the difficulties faced by youngsters in the villages in my constituency.
Young people in villages such as Silkstone, Ingbirchworth, Penistone town, Oughtibridge and High Green are increasingly feeling the pinch because of the cost of bus services—the frequency of service can also be a problem. To access most public services, and to go to work or college or to engage in training, young people in my constituency must travel either to Barnsley or Sheffield, or even perhaps Huddersfield, Wakefield or Leeds. If they have to go over the border, so to speak, into west Yorkshire, the problem becomes particularly acute because they then deal with services run by two different integrated transport authorities. A young person—a local scout leader—frequently contacts me to tell me about the problems he experiences getting to school in Wakefield from, believe it or not, Penistone.
Young people in my area face journeys of many miles on services that are often infrequent, which is not ideal for meeting their needs, and very costly. A good example of the issues faced by many young people in rural and semi-rural areas are those encountered by my ex-part-time caseworker, Alex Guest. He is an intelligent, well-qualified graduate and a great employee, but he lives in the small town of Penistone, which, although in the Barnsley metropolitan district, is 12 miles from Barnsley town centre and 20 miles from the centre of Sheffield. His appointment to the job meant that he had to travel from Penistone to my office in Stocksbridge, which is only four miles away as the crow flies. As my hon. Friend the Member for Leeds North East pointed out, Barnsley has done some work on the difficulties that its young people face in getting to work. Penistone was highlighted in the report it produced, and Alex is a real-life example of why that report has been so important.
The distance between Stocksbridge and Alex’s home in Penistone is only four miles, but the bus service between the two towns is so bad that he could not get to my office to begin work at the usual start time of 9 am. That is impossible on a bus. He could not start work before 10 am and had to leave by 4 pm or face not being able to get home. He could not take a job four miles away from his house with an employer in the next town—a major employer, as there is still a big steel industry there—unless the job was flexible enough to allow him to work between 10 am and 4 pm. Fortunately, I was able to offer him the flexibility to ensure that he could work his hours around the bus service. It was possible for me to do that because he was part-time, but had I offered him a full-time post, I am not sure that I could have allowed him to take up the job offer permanently.
Unfortunately for many other young people, the flexibility that I could offer Alex is not always there and the chance to work is therefore denied them, as is the chance to earn an income and to improve themselves and their skills and prospects. In Alex’s case, I could offer him only part-time work, but the job he did for me gave him the experience, confidence and knowledge to go elsewhere. He now works full-time for another MP—a traitor, I have to say—who is sitting not far away from me: she took my employee from me, but I wish him all the best in his new job. Alex Guest is now contributing and paying his way in society, but I am not sure that that would necessarily be the case if I had not been able to offer him such flexibility.
Some local authorities are doing their best to mitigate the impact of Government cuts on bus services, especially in relation to young people. Praise will be given where it is due. I know that the Minister is an advocate for public transport from our various discussions on panels and in other contexts before the general election, when the Liberal Democrats were not in coalition with the Conservatives. I will put it on the record that the Minister helped to get the Sheffield bus partnership up and running, and we are ready to pay tribute to that work. I am told that the new bus partnership in Sheffield has improved things—not massively, but it has improved the situation—but that work does not go far enough.
The South Yorkshire integrated transport authority, with the support of better bus area funding, has introduced a scheme under which apprentices aged between 16 and 24 who are claiming jobseeker’s allowance can have free travel for up to three months. Young people in the same age group who are starting work that is expected to last at least 13 weeks and who have claimed JSA for at least 13 weeks can have free travel for four weeks. It also intends to improve the service by reducing the qualification threshold, so that the service can be extended to more young apprentices.
The South Yorkshire integrated transport authority is working closely with the four youth councils in south Yorkshire, as my hon. Friend the Member for Rotherham said. It is holding a young people’s bus summit with 40 young people next week, on 27 April, in Sheffield. The themes to be discussed, which I think she mentioned, are affordability, accessibility, availability and acceptability, which is an important and often overlooked point about bus services. That event alone demonstrates just how important bus services are for young people in south Yorkshire, an area which outsiders often forget is largely rural or semi-rural, like large parts of the rest of Yorkshire.
However, for our every success and step forward, there always seems to me to be a retreat. Part of Barnsley council’s groundbreaking and innovative approach was the Mi card, which, among other things, allowed all under-18s free travel on buses in the borough. Unfortunately, because of the council’s need to make savings, a charge of 30p per journey now applies. That means that the very good principle that we have extended to elderly people and those over 60 has been withdrawn from a section of the population that, in my view, needs it more than others, as they desperately need to find work and opportunities to extend their education and skills.
Although the schemes and efforts of south Yorkshire local authorities are welcome, they are often being put in place despite the Government, not because of them, which is the key problem. The facts, which were mentioned earlier, are that a third of bus journeys are made by people who are eligible for a concessionary fare, and two thirds of all journeys on public transport are made by bus. Those two statistics alone show us why we need frequent and affordable bus services. It is no good having a bus pass if there is no bus to catch, and it is no good having a bus if it is too expensive to catch for those of us who rely on buses. For young people, the latter point is key.
As some Members may be aware—the Minister is well aware of what has long been my position—I am a big proponent of re-regulating the buses. He was a member of the Local Transport Public Bill Committee that discussed re-regulation. The Local Transport Act 2008 went some way towards re-regulation, but the quality contracts on offer have not particularly taken root, partly because of the risks involved in integrated transport authorities wanting to take up the option, and also because of the failure of the Government to underwrite some of those risks to get beyond that first hurdle.
Re-regulation would give the rest of the country, particularly metropolitan areas such as Sheffield, Barnsley and Leeds, what London already enjoys and has never had taken away from it. However, the Government are determined that any area that pursues a quality contract should be excluded from better bus area funding. There is therefore not only an unwillingness—I do not know whether it is ideological—to support integrated transport authorities that want to develop quality contracts, but a penalty for developing one. That is wrong and has put many integrated transport authorities, such as the one serving my area, in the impossible position of having to accept the terms and condition placed on them by the Department for Transport to access any extra funding.
We need more public control and accountability in relation to our bus services, and those services need to take into consideration the people who use them and the role of reliable, frequent bus services that are environmentally friendly, have full disabled access and are clean and warm for the people using them. We all know that such services can play a big role in helping local economies to grow and improve, not least because, to return to the focus of this debate, such services are critical in getting young people where they need to be.
Above all, we need to recognise that if we fail our young people by not providing them with the bus services they need, their general opportunities through life will be curtailed. The damage done to young people who cannot access the opportunities that they need when they are 16, 17 or 18—the limitation on their mobility at that age—might have lifelong impacts. I am part of the generation who suffered in the recessions of the late 1970s and early 1980s. Many people of my generation have never fully recovered from the damage done to them by the very high levels of unemployment in areas such as south Yorkshire in the early 1980s, when opportunities in the steel and coal industries disappeared.
If we do the same to this generation of young people, I would not blame them for turning round to those of us responsible for giving them opportunities, and saying, “You failed us.” I therefore look to the coalition Government and the Minister for a response and a positive affirmation not only that young people are expected to find work and to improve their chances by attending further education and training opportunities, but that the coalition Government recognise their responsibility in making sure that young people can access those opportunities.
Mr George Howarth (in the Chair)
We have just over 50 minutes available, but I remind the two Front-Bench speakers that it is not obligatory to take up all that time—I can suspend the sitting if necessary.
Yvonne Fovargue (Makerfield) (Lab)
It is a pleasure to serve under your chairmanship again, Mr Howarth. I congratulate my hon. Friend the Member for Leeds North East (Fabian Hamilton) on securing the debate. As we heard in his passionate and well-informed contributions, the Government have given young people a pretty rough ride, and not just in Yorkshire and Humberside. We hear a lot from Ministers about the importance of getting young people into work or full-time higher education, but, unfortunately, their actions seem to disprove their words.
The number of those who are not in education, employment or training has soared in recent years and is now more than 1 million. That is perhaps not surprising when we remember that the Government have trebled university tuition fees, scrapped the education maintenance allowance and taken an axe to the future jobs fund. However, there is another barrier: transport and, in particular, bus services.
As my hon. Friend the Member for Rotherham (Sarah Champion) said, transport is less prominent and less talked about, but it is equally important in the equation. Indeed, for many young people, the high cost of transport is the biggest challenge of all. The UK Youth Parliament, for example, voted to make “Make Public Transport Cheaper, Better and Accessible to All” its priority campaign for 2012. The Youth Select Committee, which is made up of young people, chose transport as its first topic for inquiry. Therefore, it is not only young people in Yorkshire and Humberside who see transport as vital, but young people throughout the country.
Some older people, such as myself, might be surprised by that, but it makes perfect sense. Young people need to be able to get to their place of work or college, and to get there in a cost-efficient and pleasant way. I agree with my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) about that. Without affordable bus services, young people are simply unable to take up opportunities in education, work or training in the first place.
I hope that you will forgive me, Mr Howarth, if I use an example from my constituency. A constituent came to me because she was worried about her sister, who had to make a journey of 11 miles to a sixth-form college. As a result of an increase in the bus fare, her sister had to choose between paying for a meal at lunch time or taking public transport to college—there are, of course, no free school meals in sixth-form colleges. That is not a decision any young person should be forced to make.
Young people throughout the country have seen the funding available to help with their travel costs taken away, and the bus services and routes that they so desperately need cut back. The Association of Colleges carried out a survey that found that 72% of students take a bus to college. The average journey is 9 miles, and young people cannot walk that distance there and back. The survey also found that 94% of colleges believe that the abolition of the EMA has affected students’ ability to travel to and from college. The cuts to bus services and the increases in fares are simply making matters worse.
The Campaign for Better Transport estimates that 70% of local authorities are looking to buses as an area in which to make cuts, with some councils planning to lose all their supported bus services. The situation has intensified as the 20% cut in the Government subsidy to bus operators—the bus service operators grant—takes effect on top of the 28% cut to local transport funding.
However, at the same time as thousands of people struggle with soaring bus fares, the big five bus companies —Arriva, FirstGroup, Stagecoach, National Express and Go-Ahead—are making record profits. They control more than 71% of the UK bus market and, between them, had operating profits in 2011-12 of more than half a billion pounds. That is perhaps not surprising when we consider that bus fares outside London have risen by more than twice the rate of inflation over the past year and by a third in just five years. At the same time, one in five supported services has been lost.
The bus companies need to work with the Government to deliver a concessionary fares scheme for young people aged 16 to 19 who are in education or training out of the not insubstantial profits that they are making in this heavily subsidised industry. That is the action we need to stop NEET rates spiralling out of control and to ensure that young people can continue in education and training post-16.
The cost of bus travel has increased by 24% since the industry was deregulated in 1987. The Government must accept that their reckless cuts to the UK’s public transport system are a false economy. Those cuts are clobbering young people and preventing them from getting on in life. As my hon. Friend the Member for Penistone and Stocksbridge said, we need only look at the problems that are caused when people are out of education, training or employment between the ages of 18 and 25, as well as the debt that leaves them in, which is often not recoverable, to see that the Government’s cuts are definitely a false economy. We are wasting lives and wasting potential.
The Government need to take action by introducing a concessionary fares scheme, and they need to do that immediately. They need to factor the views of young people into their plans, as we have heard is happening in Rotherham. I wish people in South Yorkshire all the best with their bus summit, which demonstrates how important this mode of transport is to them.
The Government need to talk to the UK Youth Parliament and the Youth Select Committee to hear at first hand what young people’s problems and solutions are. For many young people, as PTEG’s recent report “Moving on” said, the bus is public transport, yet young people have such a bad experience with buses that they turn their backs on the sector at the earliest opportunity. If we listen to them now, they might remain bus passengers by choice, not just by necessity. That would be the best outcome for us all.
The Parliamentary Under-Secretary of State for Transport (Norman Baker)
I will probably not require 44 minutes to respond to the debate, Mr Howarth. I welcome this topic, and I am grateful to the hon. Member for Leeds North East (Fabian Hamilton) for how he presented it. I am sorry that he is not here, but I fully accept his reasons. He is—not everybody in the House is, although perhaps I will get myself into difficulties—an honourable Member and a man of integrity, so I have no problem with the reason that he gave for not being here for the winding-up speeches. I thank him in his absence for securing time to discuss bus travel for young people in the Yorkshire and Humber region.
As I know from my constituency and from my role as a Minister, and as has been said this afternoon, buses are a lifeline for many people, including young people. They provide access to jobs, schools, health care and social activities. Good bus services contribute to both the Government’s key transport objectives: creating growth and cutting carbon. By providing an attractive alternative to the car, we can reduce not only harmful emissions, but, at the same time, the congestion that can choke off our local economies.
Buses are of particular importance to young people, as Members have indicated. More than half of students are frequent bus users and depend on the bus to get to education or training. Buses are used more frequently by young people, with the average 17 to 20-year-old making twice as many trips as people in other age groups.
In Yorkshire and Humber, two thirds of all bus trips by 11 to 15-year-olds involve travelling to or from school. Among 16 to 19-year-olds, 36% of all bus trips are for the purpose of education. A further 20% are for commuting. Young people in Yorkshire and Humber continue to use the bus when they start working. Some 37% of all bus trips by 20 to 25-year-olds are for the overall purpose of commuting. On average, young people in the Yorkshire and Humber areas make more bus trips per year than the average young person in England, which Members may not realise. Sixteen to 19-year-olds in the region make more than 200 bus trips per year, compared with 186 for England as a whole.
I fully recognise that the cost of young people’s travel can cause difficulty for those seeking employment, education or training. That is why, at last November’s UK bus awards, I urged the bus industry to be more innovative about the fare deals and discounts that it offers young people. I want the industry to build on initiatives such as the Confederation of Passenger Transport’s “BUSFORUS” web portal, which I encouraged the confederation to produce and which was launched last autumn. That interactive travel information website is designed with, and aimed precisely at, young people.
The Government appreciates that bus fares for young people vary a great deal across the country. In many cases, that is the result of operators responding to their local market. However, I am pleased to see that travel discounts are available to young people on many bus services in the Yorkshire and Humber areas, as has been mentioned this afternoon.
We have no immediate plans to legislate to set fares for young people or to introduce a statutory young person’s travel concession, but I think that a simpler fare structure would help, and in some areas bus operators could do more to offer discounted fares to young people. People who have decided to leave education and begin work—for example, as apprentices or in training schemes—may find the cost of bus fares a barrier. I am grateful to the hon. Member for Penistone and Stocksbridge (Angela Smith) for mentioning the offers that are available for some people coming off JSA into employment, particularly young apprentices. That is a good scheme and we are happy to endorse such schemes. Indeed, I have been promoting them through the local sustainable transport fund, as I imagine the hon. Lady knows.
It is worth pointing out, in response to the complaints of the hon. Member for Makerfield (Yvonne Fovargue) about lack of opportunities for young people, that the number of people in apprenticeships has risen by 88% since 2010. More than 1 million people have started apprenticeships since that time, so apprenticeships are a great success story for the coalition Government, and that point should not be neglected. There are of course issues that need to be dealt with sensibly, but some good things are happening and it is not fair to present a view of things as “woe, woe and thrice woe”, as I fear the hon. Lady tried to do.
Cheaper fares could make buses the mode of choice at an early age and lock in patronage for the future and help to reduce car travel. That is why, at the bus partnership forum in January, I asked the bus industry to consider offering travel discounts to all people aged 18 and under, not just those in education. A fares discount based on age seems far easier to administer than one relying on proof of education. I have encouraged the bus industry to do that because it is in its interest to identify people who want to use the bus and lock them in for future use for the rest of their lives. Potentially, they will be bus users for 50 or 60 years beyond their education time.
Interestingly enough, the legislation that regulates the bus industry, which we inherited in 2010, does not require bus operators to offer any reduced fares to young people. If Government intervened to enforce an age limit for charging an adult fare or legislated to create a national concessionary travel scheme for young people, local authorities would be obliged to reimburse bus operators for any revenue forgone; thus a financial burden would be imposed on local authorities, or, if that were reimbursed to them, there would be a further significant burden on the national taxpayer. In practice, bus fares are set at a commercial level by the operators. In general, despite the fact that there is no requirement to offer anyone below 18 a discount, operators offer free travel to under-fives and a reduced fare to those up to 15 or 16, although that varies considerably around the country.
Angela Smith
Does the Minister acknowledge that under the quality contracts introduced in the Local Transport Act 2008 integrated transport authorities could introduce requirements on fares, as well as on routes and frequency?
Norman Baker
Indeed they can, and they can get arrangements with bus companies through partnerships, as well. I shall return to quality contracts, because both the hon. Lady and the hon. Member for Leeds North East raised the point.
The Department for Transport carried out a survey of travel concession authorities in 2012. Those that responded said that about 40% of operators in their areas offered commercially discounted fares up to the age of 15 and a further 30% offered discounted fares up to the age of 18. Where operators offered concessions, they were mainly discounts of between a third and half the adult single fare. About a fifth of operators cut a quarter off the adult fare. That shows what an unfair and confusing patchwork of fares is available to young people. For the lucky minority, local bus operators will give a 50% discount to those under 18, but young people with access to a local bus service run by one of the 70% of bus operators who offer no discount to 16 to 19-year-olds are in an entirely different situation.
In a deregulated market, bus operators are in competition with each other, and if they were to agree specific fares for young people, it could be deemed anti-competitive. However, in principle, there seems to be nothing to prevent several operators in an area offering discounts to young people as a percentage of the adult commercial fare, whatever that may be. It will of course vary from service to service. That approach would offer young people a deal that is not universally available. There are areas where such an informal arrangement is already in place. In Norfolk, for example, there is a voluntary agreement between several bus operators to offer a standard discount to young people.
In addition to such informal arrangements, a local authority can decide on a discretionary basis to offer concessions to young people in its area. That is solely a matter for the local authority and such an enhancement would have to be funded locally. In Yorkshire and the Humber, all the local authorities have some form of local travel assistance for young people, and I am pleased about that. The integrated transport authority areas of South Yorkshire and West Yorkshire, as well as the city of York, issue travel cards that give young people discounted bus fares on the services of several local bus operators. The most rural authorities in the region, where there are fewer bus services, subscribe to the Wheels 2 Work scheme, which allows young people to hire a bicycle or a scooter for access to training and employment. In addition, all jobcentres in the country can provide jobseekers with discretionary support for travel costs, such as support for the cost of a bus fare to attend a job interview.
Therefore, while there is some support for 16 to 19-year-olds with transport costs, it is only ever offered on a commercial or discretionary basis, whereas the national scheme for older people gives free travel at off-peak times on any local bus service in England. The “BUSFORUS” web portal created by the industry—an initiative I welcome—has only further highlighted the disparity; a look at the bus operators’ web portal suggests that they have recognised that. We must do better for young people and give them more consistent and affordable bus fares. I am making that my top bus priority between now and the next election. Discussions are being held with the bus industry and colleagues across the Government to find a solution to the mess of patchwork concessions currently available to young people.
I mentioned the bus forum earlier, and hon. Members may know that it is an arrangement for interested parties to meet once every six months, under my chairmanship, for a round table to discuss bus issues. It may be of interest that, at my instigation, there is now a representative from the UK Youth Parliament, who attends regularly. I have engaged with members of the Youth Parliament and responded to a request to give evidence to their Select Committee hearing, and on behalf of the Government, I have responded formally to the recommendations. I assure hon. Members that we engage with young people, both directly in the Department for Transport, and through the UK Youth Parliament. It is important that young people’s voices should be heard, and I am determined that that will happen in our transport discussions.
As to the use of buses to get to education, all local authorities have a statutory duty to provide home-to-school travel where they consider it necessary to secure a child’s attendance at school. Legislation does not specify what the mode of transport must be, but it is generally a bus. Where transport is considered necessary, it must be provided free of charge. Transport must be free for those pupils attending their nearest suitable school, where that is beyond the statutory walking distances of two miles for pupils below the age of eight and three miles for those aged eight and above. There is also an additional entitlement to free home-to-school transport for children from low-income families. That provides additional support for attendance to those children who are entitled to free school meals or whose parents receive the maximum working tax credit.
Local authorities must make arrangements for children who are unable to walk to school because of special educational need, disability, or mobility problems, or who cannot reasonably be expected to walk because of an unsafe route. However, there are suggestions that some local authorities have reclassified, as safe, routes that were previously designated unsafe, to save money on providing school transport. Parents can appeal to their local authority about such a decision, but that is not always an independent process. Parents can complain to the local government ombudsman about the handling of such an appeal. However, that can be a lengthy process, and in the meantime, children could be walking potentially unsafe routes to school. I would expect local authorities to use the Department for Education’s guidance, which was published last month, to implement fairer and quicker processes for appeals. That, by the way, is an example of good cross-departmental co-operation between me and the hon. Member for East Worthing and Shoreham (Tim Loughton), when he was a Minister. He took the issue seriously and drove forward that agenda in the Department for Education.
Aside from their statutory obligations, local authorities have discretion to provide transport to all other pupils, for which a charge can be made. The increase in participation age will give more choice to young people who continue with education or training beyond the age of 16. They will have a range of options, including working full time alongside their studies or undertaking an apprenticeship.
Young people in work or on a waged apprenticeship will be able to pay for, or contribute towards, their transport costs. The £180 million bursary fund for 16 to 19-year-olds, which is administered by further education establishments, has the flexibility to meet transport costs for those in genuine need of support.
Local government finance continues to be challenging, but it is still disappointing that in a few areas, local councils have responded by taking the axe to local bus services, and I deplore that. I am naturally concerned when I hear that vulnerable people with few other transport choices have lost their only bus service, or that children have reduced public transport access to the school of their choice.
A few councils have taken an almost slash-and-burn approach, while others, I am happy to say, have been more considerate and careful in the decisions they have made. It is worth noting that 80% of services are commercially run and require no subsidy from local councils, so the services that some councils have cut have been from the 20% that are supported services.
Aside from the funding that Yorkshire and Humber receives through a Department for Communities and Local Government finance settlement, it has recently been awarded £20 million for the new bus rapid transit between Sheffield and Rotherham, almost £53 million for 11 local sustainable transport fund projects and £13 million for three better bus area 2012 bids.
In February, as part of the Sheffield city deal, to which the hon. Member for Penistone and Stocksbridge referred, we announced Sheffield’s designation as the first new better bus area. Sheffield’s deal will see devolution of bus service operators grant in the area to South Yorkshire PTE together with an immediate grant of £530,000 and further annual top-ups of just under £1.6 million a year. Those grants will better target bus subsidy in Sheffield. The package includes enhanced bus frequencies to major employment and education sites and reduced bus fares across bus operators.
The Department has also initially approved just over £173 million funding for the Leeds trolleybus. The outlook for buses in the Yorkshire and Humber area is rather more positive than Opposition Members might have concluded. The funding that my Department has allocated should see a marked improvement in bus services, which will encourage more young people on to the bus.
Let me deal briefly with the points that have been raised. The hon. Member for Leeds North East moaned about deregulation in 1986 and the impact that it has had on fares. I have to say to him gently, although he is no longer in the Chamber, that his Government did of course have 13 years to reverse that deregulation and failed to do so, so I take his enthusiasm now for reversing with some degree of scepticism.
The hon. Gentleman also talked about local authorities applying for quality contracts and being excluded from the BBA top-up. However, if he reads the guidance he will find that it says:
“Where a local authority can demonstrate that it has genuinely tried to engage in partnership working with local bus operators and this has been met with unreasonable resistance, should the local authority then decide to pursue a quality contract scheme, the Department will—upon request—exceptionally consider whether top-up funding could be provided when decisions are taken about the designation of any further tranche of BBAs.”
It is not true to say, therefore, that the two schemes are mutually exclusive.
Angela Smith
If I recall rightly, when the Minister was a member of the Bill Committee for the Local Transport Act 2008, he was much more positive about re-regulation than perhaps he is now. The whole point of quality contracts within the context of the 2008 Act was exactly that integrated transport authorities would be given the freedom to use quality contracts without having to jump over the hurdles that the Government seem to have reintroduced.
Norman Baker
I do not accept that. I repeat my earlier point: the hon. Lady’s Government had 13 years to reintroduce whatever it wanted, and did not do so, despite some cajoling from my colleagues and me at the time. However, the fact of the matter is that quality contracts remain on the statute book. The 2008 Act has not been changed in any shape or form. What we have done is to reintroduce further incentives for partnership working, which we think is right. After all, partnership working is the key to success. It is unlikely that we will see more people on buses in a local area if either the local authority or the transport operators are being difficult, so their working together is an essential prerequisite.
It is not true to say, as the hon. Lady claims, that there is a penalty for developing quality contracts. The quality contract regime has not changed at all. What we have is a reward for partnership working, which is an entirely different proposition. It is not true to say, as the hon. Member for Leeds North East has said, that BBAs and quality contracts are mutually exclusive; they are not, and I have just read out the relevant piece of the guidance that demonstrates that to be the case.
The hon. Member for Rotherham (Sarah Champion) talked about cuts in a way that made me feel that Armageddon had arrived. This is the fact of the matter: the overall bus mileage in England fell by just 1% between 2010-11 and 2011-12. I regret any fall in bus mileage, but 1% is not Armageddon. She might also want to know that, in 2011-12, there were 4.7 billion bus journeys in England, which is the highest figure since deregulation in 1986. Therefore, the suggestion that the bus industry is on its knees is perhaps not borne out by the statistics.
The hon. Member for Makerfield complained about the cut in bus service operators grant. I have to say again that, while I regret any cut in support for the bus industry, the fact of the matter is that we ensured that there was a soft landing by giving the bus industry around 18 months’ notice of the 20% cut. At the time—it is on the record—the industry said that it would be able to accommodate that because it had been given sufficient notice. That is in stark contrast to the lack of notice given by the Welsh Assembly Government, run by her party, which gave virtually no notice at all of changes to BSOG for operators in Wales.
The hon. Lady also complained about the profits of bus companies. As we are in a 1980s mood today in many shapes and forms, let me say that I detected a return to 1980s Labour-style theology, where profit is a dirty word and has to be removed from bus companies. That appeared to be the substance of what she was saying.
Yvonne Fovargue
In no way did I imply that profit is a dirty word. I merely said that some of the profit should be invested for the good of the passenger, to keep them as passengers in the future.
Norman Baker
The point the hon. Lady misses is this: it is in the interests of the bus companies themselves to invest for the future to generate more passenger traffic by having newer buses and a better service. That is indeed what they are doing. For example, the average age of the bus in this country is declining. We are seeing massive new investment in buses, not least of all through the Government’s green bus fund. The way to get more passengers is to provide the service that people want. Everybody in the bus industry understands that and they do it really quite well, as the figures on mileage and the number of bus journeys demonstrate very adequately.
Angela Smith
The Minister is being very generous with his time. May I ask him a simple question? In the 1980s, the whole bus system was regulated. London is still regulated. Why is it that what is good enough for London is not right for the rest of the country? Why cannot the rest of the country have the regulated bus service that London enjoys?
Norman Baker
The hon. Lady should have asked the Government in 1986 why it took that view and then her own Government why it did not reverse it in the 13 years between 1997 and 2010. However, there are advantages in both systems. Inside London, a plethora of empty buses can be seen, sometimes queuing up one behind another, which is not necessarily an efficient system. The cost of running that system is higher than it should be, so the London benefits are not as clear cut as she would have us believe.
Finally, let me pick up on the careless phrase that the hon. Member for Makerfield used when she talked about the coalition Government making “reckless” cuts to the UK transport system. I have to say to her that we are now seeing more people on the buses—4.7 billion bus journeys, which is higher than at any time since 1986. We have the biggest investment in the rail network since the Victorian era. We have 850 miles of electrification going on in the railway network, compared with 9 miles under her Government in 13 years. There are more people on the trains now than at any time since 1926. People who use public transport can be well pleased with what the Government is doing and I commend it to the House.
National Plan for Cultural Education
(11 years, 7 months ago)
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Fiona Mactaggart (Slough) (Lab)
It is a pleasure to see you in the Chair, Mr Howarth.
On 28 February 2012, the Government, in their response to Darren Henley’s excellent review of cultural education in England, identified 10 issues to be addressed immediately. The first three were a joint ministerial board; a national plan for cultural education, made together with the sponsored bodies; and work to improve the quality of cultural education in schools.
Progress seems to have been made on some items in the list—for example, the new national youth dance company—and many items, such as Saturday clubs, already existed on the day that the report and the Government’s response were published, but those initiatives are not universally available and they do not guarantee that all our young people get the rich cultural experience at school that they deserve. My purpose in initiating the debate is to demand what young people have been promised, which has not yet been delivered.
I served with the Minister on the Select Committee on Children, Schools and Families in the previous Parliament—he was one of the more sensible members of his party on that Committee—and I hope to learn from him whether there is a functioning joint ministerial board. The antecedents of that promise go back to a speech by the Under-Secretary of State for Culture, Media and Sport in November 2010 at the Big Link-Up. He announced that the measure would involve not only the Departments for Education and for Culture, Media and Sport, but the Department for Work and Pensions. More than two years later, does that board exist? Perhaps the Minister will tell us who the board is working with, how often it has met and, if it has met, who has attended. We were told in the response to the Henley review that the board would be established to work with the sponsored bodies to help them to deliver a vision for effective cultural education across the country, but when I talk to obvious candidates among the sponsored bodies, they report no such ministerial involvement.
The other important part of the response was a national plan for cultural education, and I initiated the debate to draw attention to the plan’s continuing absence. The promise of a national plan for cultural education had already been outlined by the Under-Secretary of State for Culture, Media and Sport, in a well argued speech to the Yehudi Menuhin school in 2010, where he described the need to bring national coherence to the plethora of local cultural education initiatives.
The promise was repeated in a Government response signed by two Secretaries of State and described as an immediate priority, yet five weeks after the first anniversary of that announcement, we are still waiting to see it. I am optimistic that the Minister, after nearly 60 weeks, might be able to promise to the Chamber today that the national plan is imminent. Frankly, it takes only nine months to make a baby, and the national plan has now been promised for 14 months.
The promise has been repeated since it was first made, so it is not as if the Government are trying to run away from it. The then Secretary of State for Culture, Olympics, Media and Sport, the right hon. Member for South West Surrey (Mr Hunt), promised in a speech on 26 June 2012 that the national plan would be published “later this year.” That would have been in 2012, and we are now four months into 2013.
Without a governing board or a plan—the plan has still not been formally created, detailed or properly consulted on—how do the Government expect to fill the vacuum in cultural learning that has grown since 2010?
We have seen a reduction in both uptake of creative subjects and funding for people seeking to teach them. An Ipsos MORI survey commissioned by the Department for Education found that 15% of schools have withdrawn one or more arts subjects, and it was suggested that that was a consequence of the debate we had on the EBacc. People reading and listening to this debate will know that one of the consequences of the EBacc’s description, which did not include those subjects, was a real fear that the school curriculum would continue to be constricted.
I am glad that the Department rowed back from the extreme end of those proposals—that was an improvement —but the consequence of the way that debate was conducted is that fewer schools are offering those subjects. Worse, because the retreat from those subjects is higher in schools in deprived areas, the survey found that 21% of schools with a high proportion of pupils on free school meals withdrew one or more arts subjects, compared with only 8% of schools with a low proportion of pupils on free school meals.
Things are going to get worse, because the number of funded teacher training places in creative subjects has fallen dramatically. Between 2010 and 2012, the number of places fell by 38% for art and by 33% for music, compared with, for example, 6% for geography. The number of places for history remained broadly the same.
The narrowing of the curriculum at the expense of creative subjects will lead to a loss of the leaders relied on by our creative industries, which will have consequences for our economy. The United Kingdom has the largest creative sector in the European Union. According to UNESCO, the sector is, in absolute terms, the most successful exporter of cultural goods and services in the world—we are the world leader in the field—ahead of even the US. The United Nations Conference on Trade and Development reports that the UK’s creative share of gross value added is 5.8%, compared with France’s 2.8% and the USA’s 3.3%. The export figures confirm the United Kingdom’s strength, but they also show that our competitors are catching up, which should be a cause for concern, yet companies in creative industries are unable to recruit the skilled staff that they require.
Arts Council England says that between 20% and 25% of employers in the UK’s creative industries are unable to recruit the staff they need who have the skills they need. The CBI knows that that is important, and it has urged the Government to push ahead with
“reforms to school ICT and ensure sufficient teacher training courses are in place to successfully roll out the new curriculum and deliver digital skills, alongside art training, that the UK’s creative industries need.”
New technology requires an emphasis on creating knowledge. We need strong academic foundations, but creative leaders need to be able to make products that deliver their ideas. If Britain does not maintain a focus on creativity in schools, we will risk our position as one of the leading creative industrial nations. James Dyson puts it well:
“Creativity is creating something that no one could have devised; something that hasn’t existed before and solves problems that haven’t been solved before. Making something work is a very creative thing to do.”
The previous Government understood that to a significant extent when they established the creative partnerships programme, which brought together artists, inventors and school pupils.
“This Much We Know”, published as a result of that programme, pointed out that educating and involving young people in the arts and culture is not just the mark of a civilised society, as research and experience in this country and abroad show that that benefits the economy and society by increasing employability, raising skill levels, improving motivation, cutting truancy, bringing the worlds of learning and business closer together, tackling social exclusion and helping young people to play a constructive role in their schools and society at large.
Some countries lead the UK in fact-based learning areas, but the UK’s international achievements set it apart from most industrial competitors. We are world leaders in the creative industries. Teaching creativity to our children will always be vital to that national success and to intellectual and industrial growth. The UK averages 19 Nobel prizes for every 10 million of its population. The USA averages 11 prizes per 10 million, and the EU just nine. We are leading the world because we combine excellent scientific education and a tradition of creativity and learning. We have done better than most competitor countries in securing new patents, although we are beginning to slip down the list.
When the Secretary of State for Education announced the Government response to the Henley report in 2012, he said—and I agree—this:
“Learning about our culture and playing an active part in the cultural life of the school and wider communities is as vital to developing our identity and self-esteem as understanding who we are through knowing our history and the origins of our society.”
When children can play such an active part, it makes a difference to what they can achieve.
The other day, I visited Mulberry school for girls, a comprehensive in Tower Hamlets that aims to develop confidence, creativity, leadership and a love of learning in young women. I saw a team from the National Theatre working with the girls in preparation to make a film of a piece they had developed with a National Theatre writer. Not every school can have access to such wonderful input, but every child deserves an opportunity to learn in that way. That is what a national plan for cultural education should guarantee. However, the direction of travel in curriculum reform is towards a narrower model of education.
In December, in response to a question that I asked, the Secretary of State said:
“The arts are mankind’s greatest achievement”,
a point that I support. However, he continued:
“Every child should be able to enjoy and appreciate great literature, music, drama and visual art.”—[Official Report, 3 December 2012; Vol. 554, c. 579.]
I do not believe that watching—not making—is all that a child needs to develop creatively. Learning to enjoy and appreciate is not sufficient; children should have the opportunity to make. The process of making is one of the most important ways to expand children’s thinking.
That is why I want to see a draft and to have a public debate and argument about a national plan for cultural education. If it is a good enough plan, it will challenge profoundly what is happening in much of education today. Ken Robinson, who has made the argument more profoundly than any other thinker, said in a speech in 2012:
“The dominant systems of education are based on three principles—or assumptions, at least—that are exactly opposite to how human lives are actually lived. Apart from that, they’re fine. First, they promote standardization and a narrow view of intelligence, when human talents are diverse and personal. Second, they promote compliance, when cultural progress and achievement depend on the cultivation of imagination and creativity. Third, they are linear and rigid, when the course of each human life, including yours, is organic and largely unpredictable.”
He summed up what I think all of us know: if education does not allow children to develop their creativity and give them a chance to understand and make things, we will continue to slide down the slope of international competitiveness in the creative industries, and we will deny our young people, particularly the most deprived, the wonderful opportunity to become creative, which ought to be given to them as an absolute entitlement within their education.
It has taken too long for a plan to be announced; I hope that the Minister will say that we shall have it immediately. I hope, too, that he can reassure me that it is not merely a “watch and hear” plan, but a “make and do” plan.
The Parliamentary Under-Secretary of State for Education (Mr Edward Timpson)
It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate the hon. Member for Slough (Fiona Mactaggart) on securing this important debate, and I acknowledge her strong advocacy over a long period for cultural education and the eloquent contribution that she has made to this debate. I am sure that she will agree that children in England—and elsewhere, but in England for the purposes of this debate—can lay claim to a rich cultural heritage. It should be our collective aim to ensure that they all have the chance to take part in it, supported by high-quality and engaging local opportunities that help to ignite the lifelong love of culture that we all want to engender in every young person.
We know that local authorities already provide extensive access to cultural activities through their investment in libraries, museums, galleries, arts centres, archives, public art and so on. Cornwall, for example, has a vibrant arts offering including 150 festivals, 300 private galleries, 10 theatre and dance companies, 72 museums and 1,000 village halls regularly used for cultural activities. There are many other examples across the country. Alongside that, the arm’s-length bodies of the Department for Culture, Media and Sport—the Arts Council England, English Heritage, the Heritage Lottery Fund and the British Film Institute, among many others—invest their grant in aid and national lottery funding in substantial educational activity.
Against that backdrop, we asked Darren Henley to conduct a review of cultural education. I understand the hon. Lady’s impatience and frustration. She has secured a debate a year on, and she wants to see the plan up and running. I am in a position to tell her that that plan will be published very soon indeed, and will set out our ambitious programmes to support the arts and recognise the huge contribution made by many charitable, philanthropic and voluntary organisations, local authorities and other arts and cultural organisations to the fantastic wealth of provision out there.
In the past 12 months, an enormous amount of work has been undertaken. The hon. Lady acknowledged in her contribution that the Government’s commitment was not a shallow one; we have set up new programmes and brokered new partnerships. It is an opportune time to reflect on progress thus far and make clear our expectations for the future. The plan will do so, and will affirm our commitment to ensuring that all pupils have access to a rich and fulfilling cultural education. That commitment is backed by £292 million in funding for cultural educational activity over the three years to 2015.
The plan will highlight the many examples of partnerships and initiatives supported by investment from schools, local authorities, voluntary organisations and bodies such as the Arts Council, and the Government also support a host of programmes designed to strengthen access and the take-up of provision, which will enhance the quality of the local and national cultural education available to schools and help to achieve greater opportunity for young people. I am afraid that the volume of those programmes does not allow me to go through the whole repertoire in the short time available for this debate, so I will draw attention to a core selection, some of which she referred to. Some are aimed at children with a special interest or promise in the arts; some are broader and focus on improving provision for all children.
In his review of cultural education in England, Darren Henley recognised that despite the magnificent talent that we are lucky to have in this country in both contemporary and classical dance, there was no centrally funded national youth dance company, so one has been set up, jointly funded and overseen by the new Arts Council England and managed by Sadler’s Wells Trust Ltd. The first annual company of talented performers aged 16 to 19 has been recruited, and its members are training and performing with the help of world-leading choreographers.
In art and design, together with Arts Council England, we are providing funding to scale up the Sorrell Foundation’s national Saturday art and design clubs. They are free and give young people aged 14 to 16 the opportunity to participate in inspiring classes every Saturday morning, with activities ranging from drawing to sculpture, printmaking, stop-frame animation and so on.
We have formed a unique partnership with the BFI, investing in the innovative BFI film academy, specifically for 16 to 19 year olds, which aims to give a diverse group of young people from all backgrounds the ability to be part of the film industry by providing them with opportunities to develop new skills and to build their career. It builds on the BFI’s existing education scheme for five to 19 year olds. We have the first fully integrated, nationally co-ordinated programme of developing young film talent ever established in the UK.
Since our response last April to Darren Henley’s review of cultural education in England, we have set up a museums and schools programme to increase the level of engagement in 10 regions of low participation. By January this year, more than 4,000 visits had been made as a result of the programme. In music, In Harmony is jointly funded by the Department for Education and the national lottery through Arts Council England. It aims to inspire and transform the lives of children through community-based orchestral music making. We continue to fund two original In Harmony projects in Lambeth and Liverpool, for three years from 2012 to 2015. In May 2012, an expansion of the scheme was agreed for four additional projects in areas of exceptional deprivation.
To celebrate and commemorate our culture and history, we are supporting the heritage schools programme. English Heritage is working with schools to help them to make effective use of their local historical environment and to bring the curriculum to life. Two thousand teachers will participate in training programmes to support their development in 190 schools. Additionally, we are planning a lasting educational legacy in remembrance of one of the most significant events in our history, the first world war. The flagship scheme announced by the Prime Minister at the Imperial War Museum at the end of last year—I was privileged to attend that event—will give thousands of schoolchildren and teachers the opportunity to visit the great war battlefields; pupils will learn first hand about the sacrifices made and the personal stories of those involved, with schools encouraged to establish commemoration projects such as collecting photographs and uncovering local stories.
To support teachers, we are funding a network of teaching school alliances that specialise in the cultural aspects of the curriculum. I am happy to provide the hon. Lady with more details, because I know she has a particular interest in that. The network will play a leading role in developing and disseminating professional development materials and resources for teachers. Those programmes are additional to the music education activity under way following the publication of “The Importance of Music: A National Plan for Music Education” in November 2011. On its publication, we announced funding for a national network of music education hubs, building on the existing music education provision and bringing together partnerships between music services, schools, education and arts organisations. A total of 123 hubs, managed by Arts Council England on our behalf, began work in September 2012 and they are already delivering innovative projects throughout the country, including access for all pupils, especially those from disadvantaged backgrounds, which is crucial, and they are working to augment and broaden the range of music activities on offer. That is just one example of the new partnerships that we are brokering in cultural education.
Darren Henley’s review concluded that, despite some excellent examples of collaboration between arts organisations and schools, a more systematic approach was necessary to develop a coherent and educationally sound cultural offer for young people. Some schools can be overwhelmed by the provision on offer, while some might struggle to find support that meets their needs. In response to the review’s recommendations, a strategic partnership between Arts Council England, the Heritage Lottery Fund, the British Film Institute and English Heritage has been brokered as the cultural education partnership group. The group is working to ensure that the priorities for cultural education are more than a sum of parts. It has identified three areas in which to test a shared approach, with a greater alignment of group members’ activities and resources: in the city of Bristol, in Barking and Dagenham, and in Great Yarmouth.
To reassure the hon. Lady about a joint ministerial board, a cross-Government group will start next month, with my Department and the Department for Culture, Media and Sport on the board, which will be chaired jointly by the Ministers; it will oversee progress in this complex field of activity. It will bring together Ministers from both Departments and include arm’s length body delivery partners and school representatives to support and challenge the development of the national cultural education offer. I am happy to write to her with more details of exactly how the group will operate and about the involvement of the various participants.
We support the Arts Council in extending the reach of its bridge organisations, whose role is to improve the delivery of arts opportunities for children and young people by bringing together schools and cultural organisations. That encourages consistency and coherence across an often complex arts and education landscape, helping young people and local communities to benefit from the wide range of high-quality creative and artistic experience on offer. With additional investment from my Department, bridge organisations will increase engagement with schools, in particular teaching schools, and partnerships, with a wider range of cultural organisations, encompassing the arts, museums, libraries, film centres and heritage sites.
Schools clearly have an essential role to play in introducing cultural experiences to their students as part of a broad and rich curriculum. The most successful schools put culture at the heart of their curriculum. Our aim is to enable all schools to match the achievement of the best. The new national curriculum has set out the essential knowledge that all children and young people should know between the ages of five and 16. As the hon. Lady knows, we have completed the consultation, and I am sure that she made her views known. It will ensure that all pupils have the chance to read books, sing, make music, film or animation, dance, draw, design and perform, and be given opportunities to attend art galleries, museums, cultural and world cinema, theatre and concert performances. Creativity is not an optional add-on but is fundamental to our whole approach to education. If we provide teachers with the freedom to innovate and design their own curriculum, rather than being over-prescriptive, schools will be able to provide a rich and creative experience for their pupils.
The hon. Lady has emphasised on the Floor of the House and elsewhere that she wishes to ensure clear accountability for schools on how they are delivering the creative element of their education through the measures to be put in place. According to recent announcements by the Secretary of State, the new accountability measures, on which we will be consulting, are to be broadened in range; the hon. Lady welcomed that and, I think, was slightly surprised at the time that she had been so successful in persuading the Secretary of State of the right approach. Those arts subjects and creative areas of education will form part of the accountability measures that schools will have to take into consideration when deciding on what to do to provide a rich and broad curriculum.
GCSEs will be comprehensively reformed, with more challenging subject content and more rigorous assessment structures. The changes will initially apply to subjects such as English language and literature, and changes to other subjects including cultural ones will follow as soon as possible. The aim is for the new qualifications to be in place for teaching from September 2016. Increasing numbers of pupils have chosen to study vocational arts, and we have already taken steps to improve vocational qualifications. Following the Wolf review, we have ensured proper assessment and tighter quality controls on vocational courses. We have recognised, too, concerns about the EBacc and, specifically, whether the accountability system includes the right incentives to encourage and recognise achievement in arts subjects. I hope that some of the movement in recent weeks has reassured the hon. Lady that we are not trying to remove the importance of a rich cultural curriculum; in many respects, we are trying to enhance it.
We are looking at how we can improve the way in which secondary schools are held accountable, and we are consulting on proposals. The proposed changes will mean a more balanced and meaningful accountability system that includes a progress measure based on eight qualifications, as opposed to the qualifications within the EBacc. That will enable arts subjects to receive full recognition in secondary school accountability, encouraging a broad and balanced curriculum at key stage 4. The cultural education plan will reflect those developments in accountability, qualifications and the new national curriculum, and that is one reason why we have taken time over it; we should see the plan very soon.
Fiona Mactaggart
If the reduction in the offer of arts and creative subjects reported in the MORI survey I referred to continues, what will the Minister do about it?
Mr Timpson
As the hon. Lady knows, that reduction goes back over a four-year period and it is not a new problem. It needs to be looked at in the context of the increase in the vocational take-up. We need to look at that in the round and consider whether we are providing the best possible offer in every educational and vocational setting available. I am happy to convey her concerns to the Minister responsible for seeing this through as the programme develops and the plan comes online to ensure that they are taken into consideration. Clearly, we are in the early stages of any new accountability measures, but they will be a helpful way of monitoring how schools are performing in fulfilling a curriculum that takes cultural education as seriously as we all want it to be. I look forward to the hon. Lady seeing the plan very soon, and I hope that she will be satisfied that it does what she wants it to do.
Energy Generation
(11 years, 7 months ago)
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Andrew George (St Ives) (LD)
It is a pleasure, Mr Howarth, to perform under your chairmanship for the first time. I understand that the debate in the House is winding down to a possible vote. I am well aware that this debate, which I am delighted to have secured, has attracted a lot of support across all parties. There is tremendous interest in the matter. The Energy Bill will return to the House for debate, and my concern is whether we will have sufficient opportunity to discuss the matter then. This debate is not so much an early skirmish, but an opportunity to ensure that we begin the process of opening a parliamentary dialogue on a matter that is clearly vital as we take forward an excellent Bill, on which I congratulate the Government. It includes some significant stepping stones in setting out a clear agenda for energy generation in this country to achieve energy security. I am sure many hon. Members will want to contribute to this debate on decarbonisation and lowering carbon emissions from this country’s energy sources.
The debate is timely, today of all days, partly because of last night’s vote in the European Parliament on the European trading scheme. I would be interested in the Minister’s comments on whether he believes that that enhances or makes it more difficult to advance the case for a decarbonisation agenda in the UK. I would argue that it makes it even more urgent for the UK to ensure that we press the agenda firmly.
The debate is also timely because of a matter partly related to the way in which we do business in the House. Yesterday, I was significantly frustrated that we were unable to debate or divide the House on the Government’s proposed abolition, which is shortly to be enacted, of the Agricultural Wages Board. We will have further debates on the Energy Bill and the failure to debate abolition of the Agricultural Wages Board may be an example of how, despite the issue being deeply significant to many hon. Members, including me, we were unable to debate the matter. There was no mechanism by which to divide the House to establish what support exists for that abolition, which was introduced in another place. That worries me, and to ensure that today is not our only opportunity to debate the decarbonisation agenda, will the Minister ensure that when the Energy Bill returns to the House there will be protected time in the Chamber for a proper debate and votes? That is important.
I congratulate the Government, the Minister and my right hon. Friend the Secretary of State for Energy and Climate Change on their significant progress in advancing the case. My intention today is primarily to advance the economic case for green jobs and investment as the fundamental justification and raison d’être for advancing as quickly as possible a decarbonisation agenda in the UK. If we are to corner a growing global market, we must lead the way and ensure that future investment in the manufacture and production of green and decarbonised energy generation. The UK needs to be at the forefront.
The pinch point in the debate on decarbonisation and the setting of targets is that the industry looks in the long term against a political cycle that, by its very nature, is relatively short term—often five years at the most. I congratulate the Government on rightly looking at this vital agenda decades ahead, but the worry is that the political agenda might drive the basis on which decarbonisation targets are met.
Mike Weatherley (Hove) (Con)
The aim of a decarbonisation target is laudable, but does my hon. Friend agree that we should not rush forward with increased proposals for the nuclear option, which might be seen to be an easy option in the long term?
Andrew George
I entirely agree with my hon. Friend. Indeed, I have raised the issue on the Floor of the House with my right hon. Friend the Secretary of State that, in advancing this policy, we should stick to the Government’s stated aim of ensuring no public subsidy for nuclear power. Hon. Members know that the Liberal Democrats have made it clear that their stated policy is to oppose nuclear power, but in coalition compromises and concessions must often be made. The concession on nuclear power, which is shared by both coalition parties, is that it is vital to ensure that no back-door public subsidy underwrites the future costs of nuclear power.
Caroline Lucas (Brighton, Pavilion) (Green)
I congratulate the hon. Gentleman on securing this important debate. I am pleased to follow the hon. Member for Hove (Mike Weatherley), with whom I do not often agree, but on nuclear, I certainly do.
Does the hon. Member for St Ives agree that, although there seems to be widespread consensus, one of the fastest, cheapest and most effective ways to reduce our emissions is through energy efficiency and conservation and that we are still not putting enough into that? There is a lot of talk about energy sources, but not enough about demand reduction and energy efficiency. Does he also agree that one way to put in more resources would be to ring-fence the taxes from, for example, a new carbon floor price or the EU emissions trading system and to invest that money in energy efficiency?
Andrew George
The hon. Lady makes an excellent point. This debate is primarily about the decarbonisation of energy supply; conservation and reducing energy demand is a separate debate. To be fair, the Government have established a strong case through the green deal and the establishment of the green investment bank, which will support many measures to address energy conservation. The hon. Lady makes an excellent point, but this debate is about energy generation and supply, and I do not want it to stray too far.
It is worth reminding ourselves that the Government have made a commitment to be the greenest Government ever, which does not set the bar very high. However, beyond that, as they said in the coalition agreement, they believe
“that climate change is one of the gravest threats we face”
and that
“We need to use a wide range of levers to cut carbon emissions, decarbonise the economy and support the creation of new green jobs and technologies. We will implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy.”
The coalition agreement then sets out how the Government intend to do so, but I will not have time to go through that.
Kerry McCarthy (Bristol East) (Lab)
Does the hon. Gentleman share my frustration that it is three years since the coalition came to power, and to drive the agenda forward, we need things such as targets to create the impetus for some of the measures to be put in place and to create a situation where investors have confidence? At the moment, so much is uncertain about the future of Government energy policy. We have the Treasury driving fracking forward, a lack of targets and the Secretary of State for Energy and Climate Change criticising the general thrust of energy policy that is being imposed on him by the Treasury. Does the hon. Gentleman agree that certainty is important and that decarbonisation targets are an essential part of that?
Andrew George
The hon. Lady is absolutely right. In fact, that is the nub of the debate. It has taken me 10 minutes to get to that point—perhaps I will get to it now—but it is fundamental to this debate. Investors are clear in the messages that they are sending out at present. This is not purely a green campaigning issue for non-governmental organisations. It is an area in which very substantial pension funds and other investors are looking to invest. Looking forward decades, they want certainty and confidence, and they see this as a sector where they believe that certainty can be demonstrated with a target set sooner rather than later. Not only has this part of the economy performed by generating a large number of jobs and significant growth—far higher growth than in almost all other sectors of the British economy—but it is an area in which significant investors in the British economy want investment to take place.
Mr Tim Yeo (South Suffolk) (Con)
I congratulate the hon. Gentleman on securing the debate, and I add my strong support for the intervention made by the hon. Member for Brighton, Pavilion (Caroline Lucas). On the point that the hon. Gentleman just mentioned, one of the most significant factors is that the need for a focus on reducing the carbon intensity of electricity generation is supported not only by what one might call the usual suspects from the green world, but very strongly by the business world, including a large number of industries that have no direct interest in the issue whatever. That concern is perhaps reinforced by last night’s vote in the European Parliament, which is clearly a setback for achieving more effectiveness in the EU emissions trading system.
Mr George Howarth (in the Chair)
Before the hon. Member for St Ives (Andrew George)resumes, I realise that there is a very strong temptation in such a debate, where a lot of people wish to get in, to make an intervention, but hon. Members need to be reminded that interventions must be short and not mini-speeches.
Andrew George
I am grateful for your guidance on that, Mr Howarth, and I am particularly grateful to the Chairman of the Select Committee on Energy and Climate Change, my hon. Friend the Member for South Suffolk (Mr Yeo), for his telling intervention. As he rightly said, this is an issue of hard-headed financial decision-making and not one that is driven purely by eco-warriors. This matter is all about ensuring that we have a strong economy, and in terms of the hundreds of thousands of jobs that will be created through the green economy, Britain must lead the world. It has an opportunity now, but that opportunity will not exist for many years, and if we miss it, we may be dragged behind other places. We will be importing their technologies into this country, and the cost to the economy will be very significant. My hon. Friend is engaged in an excellent campaign on that issue, and I congratulate him for his contribution.
I have written to the Secretary of State, as I know many others have in recent months as the debate has developed. He kindly responded to me this week, saying that he agrees that
“a decarbonisation target for the electricity sector could increase certainty for investors in large and long term low carbon energy projects like renewables, new nuclear and Carbon Capture and Storage. That is why, last year, I worked for and achieved Government agreement to set a 2030 decarbonisation target range”—
Andrew George
It is a pleasure to serve under your chairmanship, Mr Gray. I was reading from a letter that I received from the Secretary of State this week in which he also justifies the option of setting a target in 2016. He refers to the other decisions that the Government need to make. I am sure that the Minister will outline those in a moment, so I shall not take up time describing them. The Secretary of State says that
“a target would not be set in isolation but in the context of considering the pathway of the whole economy towards our 2050 target, and making sure we do that in a way that minimises costs both to the economy as a whole and to bill payers.”
The problem with that is that the bulk of industry interested in energy generation and the bulk of investors interested in the future of the energy generation economy do not take the same view. I, of course, have tremendous respect for my right hon. Friend the Secretary of State; he acknowledges that it is Liberal Democrat policy to set a decarbonisation target now, rather than in 2016. That target has to be the result of a compromise, and as in any coalition Government in the world, between two coalition parties, we sometimes do not get the outcome that we desire. That is why a large number of interested companies have written to the Chancellor, rather than the Secretary of State, to move the agenda forward, which indicates the target at which the debate needs to be directed.
Mr Mike Weir (Angus) (SNP)
Does the hon. Gentleman not accept that one reason why companies are doing so is that they are looking now at investments into the 2020s? They want to be sure that past 2016 there will be a target and that their investment will be secure.
Andrew George
Absolutely. We are talking about multi-billion-pound investors who, as the hon. Gentleman rightly says, are looking decades ahead.
The UK green economy has continued to grow, even while broader economic activity remains relatively subdued. The CBI has demonstrated that more than one third of UK economic growth last year is likely to have come from green businesses. Renewable and low-carbon energy businesses are the segment of the green economy with the most stake in the 2013 decarbonisation target. Cumulatively, they generate more than £98 billion in sales and employ more than 735,000 people—more jobs than the entire UK automotive and telecoms sectors combined.
Figures from the Department for Business, Innovation and Skills demonstrate an average growth rate of 6% each year for that portion of the economy, which equates to some £7 billion of additional sales for UK plc or 6,000 new jobs each year, based on today’s figures. That growth is now placed at risk by a lack of investor certainty and confidence, which a 2030 decarbonisation target would certainly remedy and remove. Setting the target sooner, rather than later, would provide the certainty and confidence that such investors require.
I have an inkling that I am preaching to the converted, including the Minister, who has to follow the Government’s policies as a whole. The fact is that the decision has to be made across the Government as a whole. People are looking at the challenges as we go forward, and I know that he is seized of the issue. The green economy is a significant source of growth in UK plc and it needs confidence and certainty going forward. The letter of 8 October 2012 to the Chancellor from 52 leading businesses in the sector sets out a strong case. They sought a meeting with Ministers, which they have not yet secured. They say:
“Failure to act at sufficient scale and pace will undermine our prosperity; and cause us to miss out on the huge commercial opportunities associated with the global shift to a low carbon, resource efficient economy.”
Although the Energy Bill makes significant advances, for which the Government should be congratulated, the difficult compromise that they have come to needs to be teased out and debated further than we have been able to so far. I do not know how we will do it, but we should have a debate with the Department of Energy and Climate Change that includes the Department for Business, Innovation and Skills and the Chancellor of the Exchequer and the Treasury. When we debate the Bill in the Commons in the coming weeks, it will be a pity that we will not have the opportunity for a full debate with all the Departments on which it will have an impact. I hope the Minister will address my earlier question on the impact of last night’s vote.
I shall add a couple of words on an exciting source of energy generation in my constituency and plug the west Cornwall wave hub, which I raised with the Minister in questions in the House on 14 March, when he gave me an encouraging response. He went to RenewableUK’s annual wave and tidal conference in February, where he told the industry:
“Now is the time for bold next steps—moving from individual projects to large-scale arrays.”
That is vital. I welcome that the Government are supporting the wave hub. The Department for Business, Innovation and Skills is clearly taking a significant role in the future management of the project, which has been handed on from the South West of England Regional Development Agency. It is difficult to scale up to a commercial level from the prototype machines at the demonstration project in Orkney. The Government need to provide the wave hub project with more certainty and address some of the long-term investment issues, some of which feed and bleed into the decarbonisation agenda. I hope that the Minister will visit the wave hub, talk to those involved and address the funding gap, which still exists, to bring the wave devices on to the site.
Dan Byles (North Warwickshire) (Con)
How does my hon. Friend respond to the statements that, in the 2050 target, the UK has the toughest legally binding emission reduction target in the world and that no other nation on the planet has a 2030 decarbonisation target?
Andrew George
The UK is setting the standard for the rest of the world, and the rest of the world will move in that direction in due course. It is important that there is cross-party agreement that we want to be the greenest Government ever, which is I think part of the coalition agreement that my hon. Friend signed up to. We also want to ensure that the decarbonisation targets that we set will put the UK economy at the forefront of green jobs and investment.
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
Just for the record, being the greenest Government ever is not part of the coalition agreement, but the personal pledge of the Prime Minister.
Andrew George
I am grateful to the Minister for that clarification. It is true; I looked through the coalition agreement and could not find a reference to the slogan. Nevertheless, it is a commitment of the Prime Minister on behalf of the Government that everyone who supports the Government is aware of and supports.
I am sorry that my hon. Friend the Member for Camborne and Redruth (George Eustice) is not here. He strongly supports the west Cornwall wave hub, which makes landfall in Hayle, a former part of my constituency. I hope that Ministers will come to look at the project and give it the additional support that it needs in terms of wave energy and floating offshore wind energy.
Andrew George
I am afraid that I will not give way, because I am coming to a close. The primary issue is that when the Energy Bill returns to the Floor of the House, I hope that the Minister will give us an opportunity to reflect properly on the economic case for the early setting of a decarbonisation target.
Barry Gardiner (Brent North) (Lab)
It is a great pleasure to follow the hon. Member for St Ives (Andrew George). I congratulate him on securing the debate, and even more on being absolutely true to his principles and honouring the pledge that he and a number of his colleagues made more than a year ago. It is absolutely right that he has raised the matter in this forum, where we can take some time to develop the arguments, because, as he suggests, during consideration on Report of the Energy Bill in the main Chamber it will perhaps be more difficult to go into the same detail and depth. I am, therefore, very grateful to him for introducing the debate in this way.
I pay tribute to the Government—and to the Secretary of State for Energy and Climate Change for his interlocutions and iterations with the Treasury—for their commitment of £7.6 billion under the levy control framework up to 2020. That is a significant achievement, which will be important for low-carbon generation in this country. It is £7.6 billion from people’s energy bills to pay for new low-carbon energy generation that will increase energy security, reduce the cost of energy bills in the long term and ensure that we meet our moral and legal obligations to reduce our greenhouse gas emissions. So far, so good; I am with the Minister and with the Government.
Industry has welcomed the commitment, but has also clearly said that it is not enough. The £7.6 billion is security for only seven years. In the words of DONG energy,
“it is a case of having a cliff edge at the moment; 2020 is a big milestone”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 58, Q175.]
Andrew Buglass from the Royal Bank of Scotland told the Energy Bill Committee that the cliff edge is making it very difficult for supply chain investors to invest in the UK. Overcoming the insecurity created by the 2020 cliff edge does not require more public money, or even the promise of more money; it requires coherence, in the form of a 2030 target that proves to industry that the demand for low-carbon energy will continue to rise beyond 2020. The shadow Minister, my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex), quoted Mr Buglass in a sitting of the Energy Bill Committee, saying that
“a 2030 target ‘is absolutely critical from the conversations I have with potential supply-chain investors because they quite rightly point out that it is very difficult for them to take investment to their board if they really only have visibility on three or four years-worth of work.’”––[Official Report, Energy Public Bill Committee, 7 February 2013; c. 570.]
It is clear that what we are facing in 2020 is a cliff edge—a milestone—and the Government, without necessarily committing considerable excess funding at this stage, somehow have to be able to give a signal to industry and investors that this is the direction of travel the Government are taking and that they can confidently lay down their investments in the knowledge that they will get a clear return.
David Mowat
I am listening carefully to the logic flow of the hon. Gentleman’s position. What puzzles me a little is that Germany has four times as many renewables as the UK, in spite of its much higher carbon emissions per capita and per unit of GDP. It would be a step in the right direction if we emulated Germany. Germany does not, however, have a target—how did that happen?
Barry Gardiner
If the hon. Gentleman reads the record of the written evidence that was given to the Energy Bill Committee, he will see that no less a figure than David Kennedy, chief executive of the Committee on Climate Change, which independently advises the Government, said that the context in Germany is different. A low-carbon trajectory has already been established there, precisely for the reasons the hon. Gentleman suggests—four times as many renewables are already in place. People in Germany are not in doubt about what their Government are going to do or about the direction of travel.
David Mowat
We often take Germany as an example of best in class in such matters, so it is right to make absolutely sure that on the record we have the point that Germany’s carbon emissions are 20% higher per head and 23% higher per unit of GDP than the UK’s, principally because of the amount of coal burnt, which makes the renewables activity irrelevant. I thank the hon. Gentleman for his answer.
Barry Gardiner
I am happy to allow the hon. Gentleman to get what he wishes on the record. He is at perfect liberty to make his own remarks later, and I trust he will do so, but I point out that Germany, by going away from nuclear generation, will see a significant rise in emissions—not only there, but in neighbouring countries. Germany has been a net exporter of low-carbon electricity to its neighbours, and that also is going and will create substantial problems for Europe as a whole in meeting its emissions reduction targets. It will also present severe problems for Europe’s response to the challenge of global warming. Ultimately, I think Germany will move through that transition, away from coal.
Ian Swales (Redcar) (LD)
Does the hon. Gentleman not think that the exchange we are having demonstrates the fallacy of counting carbon on a production basis? Germany is a heavy exporter of manufactured goods—cars, for example. Whose carbon is it? Is it Germany’s, or that of the person who buys the car?
Barry Gardiner
The hon. Gentleman makes a very interesting and worthwhile point, which I perfectly understand. I am sure that if I go into consumption emissions versus production emissions, you will call me to order from the Chair, Mr Gray, but we must not pat ourselves on the back for seeing our own production emissions drop if we are still driving the very consumption model that generates the emissions elsewhere around the globe.
The Committee on Climate Change estimates that in the absence of a 2030 target, offshore wind might cost as much as £140 per megawatt-hour. With such a target, the cost, under the committee’s scenario, drops to £100. The difference between the two costs is about the presence of a competitive supply chain in the UK. We do not have one, but what we do have is at risk.
Let us remember that the Government’s proposals are not that we should set a target in 2016, but that we may not set one until at least that date. Those are two very different propositions.
Dr Alan Whitehead (Southampton, Test) (Lab)
Would my hon. Friend also care to include the provision that not only can the Government not set a target before 2016, but that there is no level at which the target might be set after 2016?
Barry Gardiner
My hon. Friend is, as ever, thoroughly astute on these matters. He was a tremendous champion of the decarbonisation target when the Bill was in Committee, and he speaks with great knowledge on the subject. He is absolutely right. Only last night at a dinner, I heard the Secretary of State talking as if this was a great leap forward, that this would be the only Government who had legislated for a decarbonisation target. At that point I almost spluttered into my chicken, because we have not legislated for a decarbonisation target. [Interruption.] And it was beef anyway, says my hon. Friend the Member for Southampton, Test (Dr Whitehead). What we have done is make provision so that, at the appropriate moment, it would not be impossible to legislate.
Let me return to the key point that I wish to address, because I know that other Members want to enter the debate. Although it is good to have a debate and a real exchange of views through interventions, I fear that I must press on if other Members are to be able to speak. Siemens told us that if we wait till 2016 to set a decarbonisation target for 2030, it and many of its competitors are likely to delay or cancel planned investments in the UK.
In March, six of the largest supply chain investors wrote to the Chancellor, the Secretary of State for Business, Innovation and Skills and the Secretary of State for Energy and Climate Change to register their strong support for the decarbonisation amendment tabled by the hon. Member for South Suffolk (Mr Yeo) and me, which to date is supported by 41 Members from—I am pleased to say—all parties in the House. They wrote:
“Projects can take 4-6 years from investment decision to construction and operation. We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines. Supply chain investment decisions depend on reasonable assurance for manufacturers that a production facility to be constructed during this decade, costing hundreds of millions of pounds, will have an adequate market for its products well into the 2020s.
Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs. This is not in keeping with the Government’s aspirations for the UK to be the global leader in low carbon technologies such as offshore wind and marine.”
The amendment would require a 2030 decarbonisation target for the energy sector to be set by the Secretary of State, on the advice of the Committee on Climate Change, by next spring, which would ensure that the Energy Bill sent a coherent signal to investors. By securing investment in a competitive UK supply chain, the amendment would not only reduce the cost of decarbonising our energy infrastructure, but ensure that the investments that we are committed to make produced a significant growth multiplier and contributed to the essential rebalancing of the British economy.
Recent peer-reviewed studies from the London School of Economics and Berkeley have concluded that the fiscal multiplier for productive infrastructure investment in current economic conditions is likely to be about 2.5 in the UK. The amendment would ensure that the £7.6 billion produced secure investable propositions, creating significant numbers of construction jobs and long-term high-value jobs in communities around the UK, where both are scarce.
Caroline Lucas
I of course completely support the hon. Gentleman’s amendment, which he is understandably justifying in terms of economics and, no doubt, political expedients. Will he, however, acknowledge that we should set the targets in line with the science, rather than with what we think is politically possible, because the target of decarbonisation by 2030 gives us only a 37% chance of remaining below 2°, and if someone said that we had only a 37% chance of not falling out of the air, I suspect that we would not get on an aeroplane? The odds are very scary.
Barry Gardiner
I am not a gambling man, but I understand the position of seeking to look at climate change policy as a balance of risks, and the hon. Lady is absolutely right to make that point. In truth, whatever the UK does will not make a global difference to whether we reach 2°, as I am sure she would acknowledge. The aspiration required of the UK and the global leadership that it possesses, which the hon. Member for St Ives mentioned, mean that we have to drive this if we are to play our part in achieving the global reduction. I understand the percentage figures she gave, but it is perhaps illegitimate to conclude that if we hit the 2030 target we will have only a 36% chance of achieving the 2° target. The UK cannot achieve that on its own; it demands a similar effort across the globe.
Part of the problem is that, in considering electricity market reform, the Government have been like a phlebotomist looking at the body politic. They have been obsessed with the energy flow around the system, as a phlebotomist is obsessed with the blood flow around the body, but they have failed to consider the health of the whole organism. That makes for a very poor doctor; we would not want a GP who was simply a phlebotomist.
The Government’s approach has not taken enough cognisance of how the energy sector fits in with powering our economy as a whole. A good example is the ramping down of funds available for carbon capture and storage. Coal and CCS will be vital for us. There will be significant jobs, and if we invest in and develop CCS, it will become a major part of our exports in skills and technology around the world, from which we can benefit. It is part of our wider economy, and the same is true of the renewables industry the more we invest in it and adopt the position, as the hon. Gentleman said, of being the global leader.
I am afraid that we have already lost that position, because other countries have invested far more, including what we are prepared to do in CCS. Unless we invest, we will not develop the export capacity that we need to drive our economy as a whole. We cannot simply be what Gary Smith of the GMB often refers to as the Meccano men of Europe, who simply fit together a product made elsewhere. We must have supply chains in the UK, create the jobs and invest in companies here.
Gregory Barker
I am sorry to intervene, but I will be pressed for time when I am winding up. The hon. Gentleman has forgotten that the Chancellor announced in the Budget the two preferred bidders for the detailed planning and design stage of our CCS competition, including the CCS project in Peterhead that was canned under the Labour Government—two projects, real progress.
Barry Gardiner
I do not dispute what the Minister says about the two projects that are on line, but I do not think that he will dispute what I have said about the reduction in funds available for CCS.
If we build a competitive supply chain fast enough, we can expect significant investment in the UK almost immediately, which will mean that British companies are well placed to export to a renewable energy market that the International Energy Agency predicts will be worth at least $6.4 trillion by 2035. If we do not lay the foundations for a competitive supply chain, we will see the cost of decarbonisation rise, along with our trade deficit, as we hand over the growth benefits from public investment to countries that have already taken steps to remove the policy risk from low-carbon infrastructure investment. Businesses are calling for demand security beyond 2020, which the Energy Bill could provide at no cost.
The Committee on Climate Change is the body trusted by the industry to set the right target. The Minister will know only too well the letter written by the newly appointed chair of the CCC to the Secretary of State on 25 February. He described how the Government’s plans entail a
“high degree of uncertainty about sector development beyond 2020. This will adversely impact on supply chain investment decisions and project development, undermining implementation of the Bill and raising costs for consumers.”
He went further, however, and referred to
“the need to resolve uncertainties about the direction of travel for power system development”,
specifically the “dash for gas” and the danger that it presents to low-carbon generation. I trust that the Minister will reconsider the proposals on the decarbonisation target in the Department and that we may yet see some progress.
Mr James Gray (in the Chair)
Order. I intend to call the Front-Bench speakers at five minutes to 6 o’clock. There are five or six Members of Parliament who are trying to catch my eye, so, as a matter of courtesy, perhaps we could keep our remarks reasonably brief.
Mr Mike Weir (Angus) (SNP)
I am pleased to speak under your chairmanship, Mr Gray, and to make a short contribution to this debate.
In introducing the debate, the hon. Member for St Ives (Andrew George) said that he was concerned that there might not be enough time to discuss this matter when the Energy Bill returns to the House on Report. One of the problems that many of us who served on the Bill Committee faced was the lack of detail in many areas. We were promised the delivery document in May, and that document might contain a great deal of information. I suspect that there will be pressure to debate many issues on Report, which makes it even more important that we discuss decarbonisation now.
As has rightly been said, the Government made late amendments to the Bill on the decarbonisation target. However, they did not require it to be set, or to be set in 2016, which, according to the hon. Member for Brent North (Barry Gardiner), is the earliest date it can be set. They did not even say that it should be available for 2030, which is merely the earliest date to which it should apply. In essence, there is no provision for a decarbonisation target in the Bill. Even more worryingly, when the Bill was published, the Government announced their gas strategy, which clearly envisaged a substantial number of new gas generation stations. It seems to me that the emissions performance standard in the Bill would allow for the building of new unabated gas stations, even though Ofgem has warned that bills could rise substantially until 2016 should we have a heavy reliance on gas. There could also be a reduction in energy security, so we might have to rely increasingly on imported gas.
The current carbon budget might have to be amended—not downwards but upwards—to allow for the greater emissions that are to be created. Certainly, the Committee on Climate Change has been a strong proponent of the need for a decarbonisation target and is concerned about that very issue. As the hon. Member for Brighton, Pavilion (Caroline Lucas) rightly said, the main reason for a decarbonisation target is to reduce carbon emissions; we must do that if we are going to have any chance of keeping within 2°, as she said. The Committee on Climate Change has made it clear that decarbonising power is the cheapest way of meeting our overall carbon budget. It is important that we give a clear and unequivocal message that we must continue with decarbonisation. It is remarkable that those who are calling for the target include not only those who campaign on climate change but a wide range of industries, which wish to maintain progress on climate change not for political reasons but for hard-headed business reasons. They want to be sure of the future before making very substantial investments in new green energy, and they are looking at investments into the 2020s. Long lead-in periods are involved, and decisions taken now are for massive investments that will not come on stream for many years. They need to be sure that those investments are worth while. There are mixed signals from the Government, which makes business nervous that there will not be the same commitment to renewable energy in future.
Mr Weir
I have just explained the mixed signals through the carbon targets, the gas strategy and the failure to set a decarbonisation target. The hon. Gentleman has argued, as Ministers did in Committee, that we have a 2050 target, which no other country has but, as the hon. Member for Brent North rightly pointed out, there is a difference from the past. There is a strong movement towards renewable energy production in Germany and especially in Denmark, which is heavily into wind. In fact, Denmark took over leadership of the wind energy industry from the UK in the 1970s, and has invested heavily in it. It is much more advanced and is clearly going down the renewable route. Professor Mitchell from Exeter university said in our evidence session:
“If you look at what has been going on just in terms of the EMR over the last two years, we have a lobby full of nuclear industry, strong movements for renewables and now a gas strategy coming out of the Treasury. It is an incredibly uncertain world for those who wish to invest, going into the long term.”––[Official Report, Energy Public Bill Committee, 15 January 2013; c. 72, Q217.]
That is the message that industry is getting. Siemens appeared before the Committee, as did Gamesa, which has said publicly that it is concerned about the matter and fears that it might affect future investment.
The Government need to make it clear that they intend to proceed with the decarbonisation of energy, as those mixed messages are causing concern. If we are to have green energy for the future, it is crucial that a supply chain is established to help us reap the economic benefits and jobs that come with it. We must not end up, as we have in the past, importing kit—turbines and whatever else—to ensure that we can meet the energy challenges.
David Mowat
I have not been in the Chamber from the outset, but the hon. Gentleman was the first to use the word “nuclear” in the debate. France has some of the lowest carbon emissions in Europe. Would he support an expansion of our civil nuclear programme so that we can be like France and have much lower emissions than the average in Europe?
Mr Weir
The hon. Gentleman obviously was not here at the beginning of the debate, because we had quite a big discussion about nuclear. He knows perfectly well that I do not support nuclear power, but that is an entirely different argument, which I will not get into at this stage, Mr Gray, as I am sure that you would rule me out of order. I will just say in passing that negotiations with EDF over Hinkley and the costs of nuclear have raised huge concerns about its affordability—never mind the other concerns that have been raised over nuclear. We have been promised details on that matter, which we will hopefully receive before we discuss the Bill on Report. Certainly, some of the things that are being reported at the moment give us huge cause for concern.
I was saying that during our debates on the Energy Bill, Ministers made the point that other countries did not have decarbonisation targets, but those countries are further ahead in creating that supply chain, which is something that we are trying to do almost from scratch. In an evidence session, David Handley of Renewable Energy Systems said:
“The value of a 2030 decarbonisation target, as we heard earlier, is in providing that greater signal to the supply chain, to the entrepreneurs who are looking to invest in new businesses and to the people who are developing projects that there is going to be this long-term market for the products that they are delivering.”—[Official Report, Energy Public Bill Committee, 15 January 2013; c. 57, Q168.]
That point was also made by DONG Energy. As the hon. Member for Brent North said, it saw 2020 as a cliff edge for investment. Given the long-term commitment required, that is a serious drawback.
Offshore wind has, I believe, a strong and vibrant future. There are plans to install up to 10 GW of capacity in Scottish waters over the next decade, including three projects off the coast of Angus in my constituency. They promise not only employment in renewables but a boost for the port of Montrose, which has good prospects for supplying and maintaining wind farms in the future.
Many more sites are being looked at for deployment in the 2020s, alongside commercial wave and tidal generation. We must ensure that we send a clear and unambiguous message that we want those developments and will continue to push the decarbonisation of our energy sector. If we fail to do so, we will not reap the economic benefits that are available in the sector. As the hon. Member for St Ives noted, much of the growth at the moment, although low, is coming from green industry. If we fail in this area, we will limit even further our prospects for growth in future.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member for St Ives (Andrew George) on securing this debate and on bringing this important matter to Westminster Hall for our consideration at a very important time. I will keep strictly to my allotted time scale, Mr Gray, because I realise that other Members wish to contribute, I shall try to ensure that they can do so.
I recognise the importance of this critical debate and I want to try, if I can, to give the Northern Ireland perspective. At the same time, I want to put down a marker by offering some suggestions to which I hope the Minister can respond. Only last week, I had a meeting with local people in Portavogie, one of the villages in my constituency, and we discussed flooding issues. The guys from Northern Ireland Water were there and they told us that, as far as they were concerned, although people used to refer to “one in 50 years” or “one in 100 years” flooding—that was the way that people looked at it—flooding would be a regular occurrence for the next five to 10 years. Gone are the days of “one in 50 years” or “one in 100 years” flooding; floods will perhaps be an occurrence every week. I make that point because it is the reason why this debate is important—there is a change in world conditions and it is very clear how it will impact on us.
There is also the issue of cheap coal. The United States is putting a lot of cheap coal on the market, which power stations in the United Kingdom have used. However, by doing so over a period of time, power stations have increased the emissions that they produce. All those things underline the importance of this debate and the need for the decarbonisation of energy generation.
I will make a couple of quick points about wind farms. I also want to put down a marker, because while everyone is committed to green energy—ask anybody in the street or in a constituency and they will say that they are committed to green energy—when it comes to cost they sometimes draw back or have a question mark about it. We have to achieve a balance that can work for everyone. Wind farms on land can create energy, which is important, but what they can also do—if they are not sited in the correct way—is have an impact on people living near them, both visually and by creating noise. Wind farms need to be situated in the right location; perhaps the Minister can discuss that in relation to planning matters.
Wind farms have the potential to do great things, but at the same time they can be contentious. There are plans for an offshore wind farm off the coast of South Down in Northern Ireland in prime prawn and fishing areas, which will affect what fishermen can do at a time when they need to fish. The fishing industry is under pressure. The past six months have been critical for fishermen and fishing fleets in Northern Ireland. They have made no money in the past six months.
Jim Shannon
Absolutely—I accept that, Mr Gray. I just wanted to put a marker down about fishing.
There are alternatives that will allow us to reduce carbonisation. Willow mass is an alternative that farmers have been encouraged to consider. It is a method whereby they can reduce carbon while at the same time achieving an income. I will put down a quick marker on anaerobic digester systems. Germany has 2,500 of them, yet in the United Kingdom we have only 23. They are another alternative that allows us to reduce carbonisation.
Several hon. Members have referred to nuclear power and to the concerns expressed by the hon. Member for Brighton, Pavilion (Caroline Lucas). As far as a great many people in my party and I are concerned, nuclear power is the key factor in reducing emissions to ensure that targets are met. We believe that the new generation of UK nuclear plants, beginning with Hinkley, are welcome news. What we need is an overall strategy that delivers; one that is not contentious and that does not create division; and one that has achievable targets, with everyone committed to achieving the right balance. With those comments, Mr Gray, I have finished.
Nia Griffith (Llanelli) (Lab)
I congratulate the hon. Member for St Ives (Andrew George) on securing this debate.
When we served on the Joint Committee on the draft Climate Change Bill, we heard from manufacturers how much they wanted certainty. They said, “Well, whatever you decide, whatever you do, certainty is what we want. We want to have that message. We want to know exactly what we are doing.”
The decarbonisation of the power sector is vital, not only in its own right but as a contribution to decarbonisation in other sectors, such as transport, industry and buildings. If we delay setting decarbonisation targets, that will lead to an increased reliance on gas. We can all understand why we had North sea gas and why we then imported gas to take over from North sea gas, but can anybody understand why a country would wish to rely so much on imported gas now? First, importing gas contributes to greenhouse gases and the speeding-up of climate change, but secondly, following the oil crisis in the ’70s, surely we must understand the volatility of oil prices and, linked to them, gas prices. In addition, there is increased world demand and the volatility of some nations that supply gas to us. Furthermore, the versatility of gas means that when we do have it there are things that we should be using it for, such as piping it directly to industry or homes.
As for shale gas, it is highly controversial in a densely populated country such as our own, and costs will certainly escalate before it can be extracted, not to mention the carbon footprint that its extraction will leave behind. However, tacitly encouraging—
Nia Griffith
No, the hon. Gentleman has had many chances to talk; I will give way only to someone who has not yet had a turn.
Tacitly encouraging more reliance on imported gas looks even more bizarre when we have huge potential here for renewables, particularly—
Mark Reckless
Gas prices are linked to oil, but we have seen in the United States that the success of shale gas has detached gas prices from oil, and gas prices are now much lower. In addition, that has helped the US to reduce its carbon emissions.
Nia Griffith
Mr Gray, I will not digress to discuss that matter, as we want to keep—fairly strictly—to the matter of decarbonisation targets, and it is absolutely vital that we get those targets now. That is because the Government’s position is that no targets will be set until 2016 at the earliest, with no guarantee then as to what those targets might be. Targets are absolutely vital for industry, because we need absolute certainty to encourage investment in low or indeed zero-carbon technologies. We want to get ahead, rather than seeing big investment in green energy components go elsewhere.
I am secretary of the all-party group on steel and metal related industry, and we see huge opportunities for the steel industry in the production of turbines for offshore wind farms and of marine current turbines. Without targets, however, we will lose those opportunities to other countries. The steel industry in this country is facing a real crisis in demand, and certainty about decarbonisation targets now would bolster investment in renewable technologies and help that manufacturing to stay in the UK.
Research by the Institute for Public Policy Research puts paid to the myth that decarbonisation will increase fuel bills. Leaving aside all the disgraceful ways in which the big energy companies exploit the consumer as a result of weak regulation, excessive profits and now, we understand, dubious taxation practices, simply looking at the price of decarbonisation, the conclusions are that increased reliance on electricity generated from gas will cost the consumer more, and that is on conservative estimates of price rises without unpredictable events. Certainty on decarbonisation targets now would be good for the future of the planet, good for manufacturing and good for the consumer.
Dr Alan Whitehead (Southampton, Test) (Lab)
I, too, will try to be as brief as possible, because I know that other Members wish to contribute to this debate.
The hon. Member for North Warwickshire (Dan Byles) stated that we had some of the world’s toughest targets on climate change, but it is precisely because we have those targets that a target now for decarbonisation of the energy sector up to 2030 is vital. Essentially, that is the case that the Committee on Climate Change made on decarbonising the power sector, falling from 450 grams or so per kWh today to about 50 grams per kWh by 2030. That is because the power sector produces a large percentage of emissions, so we cannot decouple the question of decarbonisation of the power sector from overall targets. The suggestion by the Committee on Climate Change that, in order to stay in line with the overall targets that this country has set itself, the target should be about 50 grams per kWh by 2030 should be the basis for what we set as a target in the Energy Bill.
The Government tabled amendments to the Energy Bill after it was considered in Committee, stating that they “may” set a target. However, they cannot do it before 2016, and if they do so the Minister “may” set a target of—a level we know not what. In terms of building confidence for industry and knowing that we have to reach the position that I have suggested regarding the relationship of energy to overall climate change targets, that change in the Bill will be of very little comfort indeed to those people who know what they have to do as far as investment in the low-carbon economy is concerned.
I would go further than that. Between now and 2016 —we cannot set a target before then in the amendments—a number of events will occur, and I wish to ask hon. Members if they can spot the difference between two phrases. The paragraph in the energy White Paper dealing with what will happen in respect of emissions when the Government revise their view of EU emissions trajectories in 2014 says:
“The Government will review progress towards the EU emissions goal in early 2014. If at that point our domestic commitments place us on a different emissions trajectory than the EU ETS trajectory agreed by the EU, we will, as appropriate and consistent with the legal requirements of the Climate Change Act, revise up our budget to align it with the actual EU trajectory.”
That sounds good. The gas strategy, which came out shortly afterwards, states:
“We will review our progress in early 2014 and if, at that point, our domestic commitments place us on a different trajectory from the one agreed by our partners in the EU under the ETS, we will revise ... our budget as appropriate to align it with the actual EU trajectory.”
That is the problem of waiting until 2016. If, by that point, we have revised up our trajectory to deal with a gas strategy that suggests that, in at least one direction, we have more than 37 GW of new gas plant running at full tilt, rather than DECC’s previous suggestion of some 19 GW of gas—we need gas, but not that much, running at a much lower trajectory—we will irrevocably bust our climate change targets by that act alone. That is why it is important that there is a target in the Bill that locks us into a proper direction on the decarbonisation of energy and, at the same time, gives confidence in respect of future investment for those who wish to invest in that low-carbon economy.
I hope that I have done the Minister a favour by mentioning that he appears to have agreed, on behalf of his Department, to a different strategy from the one to which he is committed, and to which he thinks he is committed. I hope that, in the run-up to the end of the Energy Bill, he looks at the quote from the gas strategy—it is on page 22—and sees whether, among other things, he might agree with the amendment tabled by my hon. Friend the Member for Brent North (Barry Gardiner), which may be considered during the latter stages of the Bill, and excise that paragraph from the gas strategy, to make things really tidy for the future as far as our targets are concerned.
Ian Swales (Redcar) (LD)
I will cut my remarks short, Mr Gray. I was going to speak about the beneficial effects of all this for the Teesside economy and mention a number of projects, but I do not have time.
Although there is good news for the local economy, not everything in the garden is rosy. The bioethanol plant in my constituency, set up in February 2010, shut down for more than a year. Having restarted, it has recently shut again, because of Government dithering over renewable transport fuel. We do not have full clarity from the Department about a biomass power station at Teesport, which three Korean companies have formed a consortium to build. We are getting mixed messages from the Department on that.
As other hon. Members have said, we need local purchasing. A wind farm is being built offshore, literally outside my house. Although that is good news, I have seen the ships transporting all the materials coming past my house. We must act urgently to ensure that we have supply chain and local purchasing.
I heard this week for the first time that there are concerns in the north-east about the national grid capacity not being in line with the Department’s various energy generation plans. I hope that the Minister will provide clarity on that. Other hon. Members have spoken about the need for long-term certainty. That is not just about long-term targets, but about the grandfathering arrangements that the Department makes. The omens are not good. The retrospective change in combined heat and power has been bad for companies that thought they had a regime lasting until 2027.
There have been seven Energy Acts since 2003. I hope that we are getting to the end of this and that the Minister will think about standing down the policy factory, or at least part of it, that has been working for 10 years, so that we can get on with all the investment that is required.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for St Ives (Andrew George) on securing the debate. As is his habit, he gave a comprehensive account of the issues, many of which other hon. Members were seeking to add to the debate. He rightly made the point about the time pressure in respect of the Energy Bill. Members of the Bill Committee know that we need to return to a range of issues and it is important that we have adequate time on Report if we are ever to get to them. Even in this debate, a number of hon. Members have been unable to speak or have had to truncate their remarks on a fundamentally important issue.
It is always a pleasure to stand opposite the Minister, although I am slightly disappointed that the other, new, part-time Energy Minister—the third Energy Minister in six months—is not here, because his other part-time responsibility is in the Department for Business, Innovation and Skills, and publications coming out of that Department have highlighted the important role that decarbonisation and the green, low-carbon economy needs to play in having a target and a direction for the future.
Tom Greatrex
I am tempted not to, because the hon. Gentleman came into the debate late, but I will. I am more generous than I should be.
Mark Reckless
Some are concerned about the extent to which decarbonisation and the green agenda are pushing up electricity prices. The shadow Minister says that he is keen to have sufficient time to discuss all the issues on Report, so would he support having two days on Report?
Tom Greatrex
I am glad that I gave way, because the hon. Gentleman is right on that point. Significant time needs to be given to these matters, because a range of issues must be discussed, and this is just one. He has talked previously about other issues covered in aspects of the Energy Bill—not directly on this point—and I am sure that he would want to contribute. I hope that the Minister and the usual channels have heard his concern.
I have mentioned the other responsibilities of the new Energy Minister. The hon. Member for St Ives rightly focused on the business case, and the jobs and growth case, for the decarbonisation target, but there are other strong arguments. My hon. Friends the Members for Brent North (Barry Gardiner) and for Southampton, Test (Dr Whitehead) made the climate arguments. There are also important security-of-supply arguments about why this is sensible.
The hon. Member for St Austell and Newquay (Stephen Gilbert), the close geographical colleague of the hon. Member for St Ives, is sitting slightly apart from the rest of the Liberal Democrat Members today, and he is the only Liberal Democrat in the Chamber who had the opportunity to ensure that this target was in the Bill. We debated the matter in the Energy Bill Committee and he and another colleague chose not to vote for his party’s policy. I hope that the number of Liberal Democrats who are here this afternoon is indicative of the fact that those who are not encumbered by ministerial or Parliamentary Private Secretary posts will support that policy when the opportunity to support the cross-party amendment comes in due course, although their party’s policy was not in the manifesto, but was agreed at their party conference in October, when the Bill was under way and under discussion in pre-legislative scrutiny.
Andrew George
Neither was it in the Labour party manifesto. Rather than trading points, I want to speak on behalf of my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert), because he cannot speak in this debate, and say that we should ensure that this agenda is shared across all parties. It is led, as the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) knows, by a Conservative Member. Although I cannot speak for the Conservatives, there is an economic agenda in favour of decarbonisation. That needs to be emphasised at this stage and we need cross-party consensus for it.
Tom Greatrex
The hon. Gentleman is right to make that point, as he did in his speech and as other hon. Members have. My remark about his colleague was just to make it clear to those who were not on the Energy Bill Committee that there was an opportunity to put that target in the legislation, but sadly it was missed. That could have been done, but those with the opportunity chose not to do so. I hope that, on reflection, we will get to a better position and a better decision on Report.
Members of the Energy Bill Committee have dealt with a number of similar issues that the hon. Member for North Warwickshire (Dan Byles) touched on. He mentioned targets, including in other countries. I am sure that he is as aware as I am of the targets in Denmark—the 2035 target for all electricity and heating production to be fossil fuel free; in Austria, in relation to low-carbon energy by 2050; and in Germany, in relation to 50% of electricity generation in 2030.
It is not strictly accurate to suggest that there are not targets elsewhere in Europe and across the world, because those countries are seized of the growth and job opportunities that come with the imperative to decarbonise the power sector. Those of us on the Energy Bill Committee heard repeatedly—others will have heard this in subsequent letters—that business is seeking clarity of purpose beyond the scope of this Government and of this Parliament and the next, towards 2030.
My hon. Friend the Member for Brent North was right to address the levy control framework, but the hon. Member for Angus (Mr Weir) was also right to mention the time it takes to make some of those decisions. There are serious, big decisions that have not yet been made, such as on the memorandums of understanding that have been signed on siting offshore wind fabrication facilities in the UK. Part of the reason why the final decision has not yet been taken on that is the fact that the global companies involved, which have to make a case to their international boards, are not convinced that they have the clarity to be able to say that there will be a market. The only way we will bring down the cost of offshore wind is by having scale, and the way to do that is through manufacturing. There are strong business threads throughout the debate.
Ian Swales
Does the shadow Minister agree that it is not just climate that companies are interested in? Although climate is obviously an important overall consideration, the companies want their specific arrangements to be grandfathered when they decide to invest.
Tom Greatrex
I agree. We are grappling with the legislation because we do not know the detail of how that will operate. Again, in Committee we received assurance from the then Minister of State, Department of Energy and Climate Change, the right hon. Member for South Holland and The Deepings (Mr Hayes), that that will be forthcoming, but it has not yet emerged. Not only can we not scrutinise it, but the companies, to which the hon. Member for Redcar (Ian Swales) was going to refer before he had to truncate his speech, cannot.
Finally, Ministers speak about setting a decarbonisation target, as the Deputy Prime Minister did on the very afternoon that we moved amendments in Committee that the Liberal Democrats failed to support, but that is not to say that this is about setting a target. As others have said, it is about the power perhaps to set a target. The Government may set a target, but they might not. The longer this goes on, all we are doing is storing up lack of certainty, which means that the costs will not necessarily come down as fast as they might and that we cannot get the benefit of jobs and growth from the shift to the green economy that is happening—and it will have to happen in any case.
David Mowat
It is right that the costs need to come down, and, of course, activity will drive down the costs. There is a school of thought that says that excessive subsidies stop costs coming down, but I accept that costs need to come down. Does the shadow Minister accept that these are global industries and that global activity, not just UK activity, is what will drive down costs?
Tom Greatrex
There is activity in other parts of the globe, and these are global companies making global investment decisions. To get the costs down we need scale, and to get scale we need manufacturing. That manufacturing will not happen without the sense of a long-term trajectory in that part of the energy sector in this country.
I am conscious that I am about to run out of time, but I hope that we get the opportunity on Report to debate the issue fully. I am sure that the cross-party amendment will draw a degree of support from across all parties, as has been demonstrated this afternoon.
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
Having returned from St Paul’s, I may be feeling a little dewy-eyed and unduly romantic, but I think this was a really good debate on both sides of the Chamber. I do not agree with all the speeches and interventions, but the quality of the arguments deployed by both sides has been very high and I have listened carefully to the points made by the hon. Members for Brent North (Barry Gardiner), for Angus (Mr Weir), for Strangford (Jim Shannon), for Llanelli (Nia Griffith) and for Southampton, Test (Dr Whitehead) and by my hon. Friend the Member for Redcar (Ian Swales). I have also listened carefully to the powerful and pithy interventions by my hon. Friends the Members for North Warwickshire (Dan Byles), for Warrington South (David Mowat) and for Rochester and Strood (Mark Reckless).
Most of all, I congratulate my hon. Friend the Member for St Ives (Andrew George) on securing this debate and on opening with a tour d’horizon on the energy sector with a clear focus on decarbonisation. He is right in so many respects on the Government’s ambition and direction. In less than three years, we have put in place many of the key building blocks of a greener, cleaner energy economy of which both coalition partners can be rightly proud.
Year-on-year, offshore wind capacity was up 60% and solar PV capacity was up 500% in 2011-12. [Interruption.] The hon. Member for Brighton, Pavilion (Caroline Lucas) is chortling, but in the past six months we have added more than half a gigawatt of solar. That totally flies in the face of the Opposition’s doom-mongering and scaremongering. The Government have a record of deployment and real action of which we can be proud, but we are absolutely clear that we will always consider the interests of the consumer. We will always consider who is actually paying. We do not believe in going green at any price; we believe that there is a fair balance between value for money and achieving our vital climate goals.
Gregory Barker
I am afraid that I will not give way, because I have very little time to cover all the points.
It is interesting that I do not think that I have heard anyone in this debate refer to consumers, to consumer bills or to the ability of the British taxpayer to shoulder the subsidies that are necessary to pay for this agenda. As hon. Members know, I am a great champion of greening our economy. I am one of the few Members present who played a part in the passage of the Climate Change Act 2008, which is one of the proudest moments of my parliamentary life to date. I am absolutely committed to that, but we have to reconcile the difficult challenge of cost and delivery.
The Prime Minister has been emphatic. I am glad that my hon. Friend the Member for St Ives mentioned that we are the greenest Government ever. That was the Prime Minister’s pledge when he visited the Department of Energy and Climate Change on day four of the Government, and he reiterated the pledge only a matter of weeks ago to the Royal Society:
“we are in a global race and the countries that succeed in that race, the economies…that will prosper are those that are the greenest and the most energy-efficient… it is the countries that prioritise green energy that will secure the biggest share of jobs and growth.”
There is no fundamental difference between the two sides of the House in our direction, destination or determination to meet the goals that are embedded in the Climate Change Act. In fact, there is not so much between us on the decarbonisation target, either. We have tabled an amendment to the Energy Bill that will allow us to set a decarbonisation target alongside the fifth carbon budget, and I will go on to address that in detail.
My hon. Friend the Member for St Ives mentioned marine energy in his opening speech. I am extremely proud of the huge leaps forward we have made on that exciting technology over the past three years with the establishment of the UK’s first marine energy parks—first in the south-west and now in Scotland. I am extremely proud of that investment. Our commitment in the last review, despite all the pressure on public finance and energy bills, was to increase substantially the renewable obligations certificates that we are giving marine, to give it the investment punch that it needs.
My hon. Friend kindly invited me to visit Cornwall and see FaBTest. I will be there next week. I must admit that it was already in the pipeline, but he can take back the good news this weekend and tell every Cornishman good and true that the Energy Minister is coming.
Gregory Barker
Quite right. I stand corrected. Although I am blowing my own trumpet, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) chided my Department for its turnover in Energy Ministers. Coming from the Labour party, that is a bit bleeding rich. Under the previous Administration, there was a revolving door on the Department. I think I am now the longest-serving Energy Minister since the previous Conservative Administration—
Gregory Barker
No, I will not, I am afraid. I greatly welcome the closer alignment with the Department for Business, Innovation and Skills. I cheered the last Government when they created a separate Department of Energy and Climate Change. It is a good thing, but it must also be a good thing, as he pointed out, to have much closer alignment between BIS and DECC. The appointment of my right hon. Friend the Member for Sevenoaks (Michael Fallon) to the important job of Energy Minister, much as it will stretch him, sends a clear signal about the central importance of the low-carbon economy to British growth and our long-term growth prospects, as the Prime Minister said and every Member who has spoken in the debate has pointed out. The CBI supports the agenda, and there is wider support for the low-carbon economy that goes way beyond certain renewable energy technologies. It offers export and other business opportunities requiring little or no subsidy, and it has a great deal of its own momentum.
We will return to the decarbonisation target when the Bill returns to the Commons on Report after the Queen’s Speech. I know that some hon. Members have argued that we should go further and set a target now, to provide greater certainty to investors. I understand that argument—I listened carefully to the contributions made in the evidence session before the Bill Committee—and I see the strong merit of the argument for a decarbonisation target. That is why we are introducing measures in the Bill to create such a target. However, we must also resist the temptation to think that life is about targets. Surely, we learned our lesson under the last Government. Simply setting targets does not deliver results. If this Government are about anything, we are about deployment, results and driving real change in real time, and our record demonstrates that we are capable of doing that.
As we set out in the carbon plan in December 2011, it is likely that, as well as decarbonising electricity generation, meeting our 2050 target will require the electrification of a significant amount of heat and transport in the UK. In turn, that will not only affect overall demand for electricity but require us to take into account when that electricity is needed. For instance, when will people want to charge electric vehicles? Heat demand changes seasonally and over the course of a single day. All those things must be taken together when we consider the best way to decarbonise electricity as part of a least-cost route to meeting our obligations under the Climate Change Act 2008.
The second reason why I believe we should wait to set a target range is that we do not need to do so now. As I have said, we have provided clear signals to investors via a range of different initiatives, legally binding targets and the action that we are taking through the electricity market reforms in the Energy Bill. They have prompted the director of the CBI to say that the Bill sends
“a strong signal to investors that the Government is serious about providing firms with the certainty they need to invest in affordable secure low-carbon energy.”
That is what we are doing.
This must be seen in the context of the Government’s wider plans. The green investment bank is now investing billions of pounds in our green economy and catalysing billions more. I appreciate that hon. Members have focused on one element, but the wider package is extremely ambitious and encouraging.
Mr James Gray (in the Chair)
I am most grateful to the Minister for winding up precisely at 6.15. Can people from the last debate leave the Chamber quickly and quietly?
Police Cautions (Young People)
(11 years, 7 months ago)
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Steve Brine (Winchester) (Con)
You will be happy to know that I have prepared for this debate, Mr Gray. It is a pleasure to serve under your chairmanship for the first time and I am pleased to have secured the debate. I am still wearing a black tie after the events of this morning, but I think that this debate involves good news. I look forward to the Minister’s winding-up speech. The debate provides an opportunity for me to discuss an issue that can blight the lives of many hard-working young people in our constituencies and seek clarification from the Minister on recent developments in Government policy.
Police cautions can have a detrimental impact on the lives and employment prospects of young people. An e-mail from one of my constituents led me to initiate the debate, and I know that many other Members have received similar correspondence. My constituent, who is now in her final year at university, received a police caution in early 2007, when she was 15 years old, for a minor shoplifting offence while part of a dominant group of girls. Her e-mail explained to me that the huge peer pressure that she felt so as to be accepted as part of that group and coercion by her then friends were key reasons for her behaviour, which she admits was poor. I am sure that many of us have some sympathy with that.
Looking back, my constituent admits that she feels utterly embarrassed by and ashamed of her actions, which were completely unrepresentative of her character. She has not acted similarly before or since. She is not a dishonest person—I have seen several character references from employers and former teachers that she has provided to back that up—and in the years since the offence she has not kept in contact with any of the people involved and has gone on to achieve success in her exams and at university.
My constituent’s ambition is to pursue a career in law, and her academic success and involvement in voluntary and extracurricular activities make such a career possible, but that dream has been jeopardised by the police caution that she received more than six years ago. The Solicitors Regulation Authority has informed her that it is more likely than not that her application will be rejected due to her caution. She is understandably devastated that she may not be able to pursue her chosen career.
As the Minister will be aware, the Justice Committee, of which I am a member—I am pleased to see our Chairman, the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith), here today—published a wide-ranging report on youth justice on 14 March. Among our many recommendations, one is particularly relevant to this debate. Paragraph 21 of the conclusions and recommendations reads:
“We support the reduction in rehabilitation periods introduced via the Legal Aid, Sentencing and Punishment of Offenders Act, which means that many young offenders’ convictions will become spent sooner. We also agree with the Minister that employers, as well as schools, colleges and universities, should consider taking young people on despite their previous offences, as many do. Nevertheless, while we recognise that for very serious offending, disclosure of convictions will continue to be in the public interest, we consider there is potential to go further in relation to more minor convictions. We therefore recommend that, in addition to keeping the youth rehabilitation periods under review, the Government considers legislating to erase out-of-court disposals and convictions from the records of very early, minor and non-persistent offenders at the age of 18, so that they cannot be disclosed to employers under the Exceptions Order to the Rehabilitation of Offenders Act.”
Since 2008, more than 1 million child arrests have been made in England and Wales, about one third of which resulted in a police caution. Lest I am misunderstood —heaven forbid—by certain sections of the press or even the House, I want to be clear that I believe young people should be punished according to the rule of law, like anybody else, when they do wrong. How we respond to often low-level bad behaviour by youngsters, however, has the potential to blight the rest of their lives by further alienating them from society. Our country cannot afford and would not be right to put young people, in effect, on the scrap heap before they had ever had a chance. Those young people need support, not perpetual criminalisation, and this change would provide that.
The Justice Committee report’s recommendation aims to improve the prospects of young people who have received police cautions for minor offences and have not reoffended by wiping their records, thereby preventing cautions from being disclosed to certain potential employers during criminal record checks.
Mr John Spellar (Warley) (Lab)
Does the hon. Gentleman realise that the problem can be hugely discriminatory against youngsters in inner cities, many of whom receive cautions at an early age, blighting their lives? We are in danger of creating a perpetual underclass of people who can never escape due to minor offences for which Parliament never legislated such a disproportionate penalty.
Steve Brine
I very much agree. We are often talking about people who come from disadvantaged backgrounds. As a country, we are crazy to hold them down, as we do in some cases. They need support, not perpetual criminalisation.
Although not entirely down to the actions of our Committee—it would have been a swift move by the Minister if so—I am pleased that the Government plan to lay before Parliament a statutory instrument to amend the exceptions to the Rehabilitation of Offenders Act 1974, so that some spent convictions and cautions do not have to be disclosed and cannot be taken into account in employment decisions. Nevertheless, that development still leaves us with several questions.
On 29 January this year, the Court of Appeal ruled that the system of Criminal Records Bureau checks constituted a breach of article 8 of the European convention on human rights and of the Human Rights Act 1998, and that requiring the disclosure of all convictions and cautions relating to recordable offences is disproportionate to the aim of protecting children and vulnerable adults. Why, therefore, did the Government feel the need to seek leave to appeal to the Supreme Court?
The statutory instrument that the Government will lay before Parliament will help my constituent and many others, so I welcome it. It is proposed that cautions and equivalents administered to a young offender will not be subject to disclosure after two years, and that a conviction received as a young offender resulting in a non-custodial sentence will not be subject to disclosure after five and a half years. May I press the Minister, however, to implement the measure as quickly as possible? How long will it be before the order is laid before the House? Will he confirm that any changes will be applied retrospectively?
Finally, my constituent highlighted two other important issues, which concern other Members as well. First, on the role of local constabularies in removing or retaining a caution on a young person’s record, my constituent contacted Hampshire constabulary in the hope that it might be able to remove the caution from her record, but she was told that nothing could be done in that regard. However, in certain circumstances, do not chief constables have the discretion to prevent the disclosure of cautions? Where does the truth lie?
Rehman Chishti (Gillingham and Rainham) (Con)
I congratulate my hon. Friend on securing this important debate and the work that he does on these issues. He is talking about certain constabularies approaching the matter in certain ways. I understand that the Government have piloted initiatives to examine dealing with cautions in a different way, as he has discussed. Has he made any assessment of how effective the pilot scheme has been so far?
Steve Brine
No, is the honest answer, but I am aware of the pilot, so perhaps the Minister will be kind enough to refer to it. I am grateful for that point, made by a fellow member of the Justice Committee.
Other people want to get in to speak and we want to give the Minister time to respond, so I shall draw to a close. To make the second point, there is no requirement to consent to receiving a police caution for young people. Many of them do not appreciate the impact that a criminal record will have on their life and career prospects, which means that they can be burdened with a record without fully understanding the consequences. Can more be done, therefore, to ensure that young people are aware of the consequences of receiving a caution, which is more than just a ticking off or what used to be a clip around the ear?
In summary, many of the young people who receive cautions immediately regret their actions, but they soon discover that the consequences severely jeopardise their job prospects and opportunities. Many of those youngsters come from underprivileged and unstable backgrounds, so is it not counter-productive to criminalise them further and to destroy what opportunities they might have in our society?
I welcome the steps that the Government are taking to prevent disclosure of old and minor offences to potential employers. I hope that the reforms make a significant difference to the life of many constituents, such as mine and many others.
The Minister for Policing and Criminal Justice (Damian Green)
It is a pleasure to serve under your chairmanship, Mr Gray, I think for the first time. I congratulate my hon. Friend the Member for Winchester (Steve Brine) not only on securing the debate, but on his admirable and in my experience unprecedented brevity in not filling up the entire time available to him. I appreciate his interest not only generally, as a member of the Justice Committee, which has indeed pronounced on the matter recently, but particularly, in the individual case that brought the issue to his attention. I will deal with that later in my speech.
On the generalities, the youth justice system is focused on early intervention and on diversion of children and young people from formal disposals where that is appropriate. In recent times, there has been an increase in the use of informal disposals by the police and an adoption of restorative justice approaches, which I strongly support. All police forces now have trained restorative justice facilitators, and an on-the-spot restorative action can often provide the best disposal when a minor, usually first-time misdemeanour is committed. Such an approach can also be beneficial to the victim, who gets immediate reparation from the young person who has committed the offence. There has been a significant reduction in the use of formal disposals by the police over recent years. Since 2001-02, there has been a 57% fall in the number of reprimands, final warnings and conditional cautions given to young people in England and Wales: 40,757 were given in 2011-12, compared with 94,836 in 2001-02.
Jeremy Corbyn (Islington North) (Lab)
I congratulate the hon. Member for Winchester (Steve Brine) on his contribution. My right hon. Friend the Member for Warley (Mr Spellar) made a good intervention, which I support absolutely. People in inner city areas such as the one that I represent, and in particular minority ethnic youths in those areas, seem to have a disproportionately high chance of being stopped and searched, of getting formal cautions and therefore of being impeded in getting work in the future. Will the Minister look into the geographical breakdown of the cautions given and the operational guidance given to police forces? I, of course, support the much earlier write-off of cautions to preserve the career opportunities of all our young people.
Damian Green
The hon. Gentleman might be aware that we are conducting a cautions review at the moment, so feeding into that is important. As I am about to explain in detail, we are concerned to encourage the use of out-of-court disposals but to ensure that, first, the length of time for which they are active beyond the period of the commission of the offence is properly limited and that, at the same time, they provide confidence in the wider justice system and in particular a feeling among victims that appropriate reparation has been made. That is the balance to be struck.
Mr Spellar
The initiatives that the Minister is announcing are useful and heading in the right direction, but we might be getting away slightly from the core of the issue: misdemeanours or offences committed at a young age, whether leading to cautions or convictions and minor punishments, can blight people’s lives. We saw that, in particular, with the elections for police and crime commissioners, when a number of individuals of all political parties were prevented from standing 40 or 50 years after committing the offences. That should have highlighted the necessity of taking action, to prevent them from appearing on people’s records and their life being affected.
Damian Green
The right hon. Gentleman is right; that was certainly a vivid example of the long-lasting effect. I gently point out, however, that that legislation was passed by the House over the past couple of years entirely unopposed.
Damian Green
However, the time for which an offence should hang over a young person or anyone else is contentious, and we must be careful to strike a balance. Ensuring appropriate punishment and particularly appropriate reparation for victims, so that they have confidence in the system, form the other half of the balance that I am sure all hon. Members want to strike.
Gareth Johnson (Dartford) (Con)
The Minister makes a valid point about the public’s confidence being undermined by using cautions. Does he agree that confidence might also be lost when cautions are repetitively given to offenders with a view to improving the clear-up figures?
Damian Green
I would be interested to know whether my hon. Friend has evidence that cautions are used to improve clear-up figures. The answer to his general point is that, yes, I agree that the repetitive use of cautions may damage confidence in the system. One reason why we are looking at the whole system of cautions is precisely to avoid such damage to confidence.
A youth caution may be given for any offence that the young offender admits when there is sufficient evidence for a realistic prospect of conviction but it is not in the public interest to prosecute. The flexibility provided by the youth caution allows the police greater discretion to offer a disposal that is appropriate to the circumstances of the offence and offender, rather than being arbitrarily determined by previous disposals or convictions.
We have retained in the youth caution the critical elements of assessment and intervention inherent in the final warning scheme. The youth offending team will be obliged to assess and, unless considered inappropriate, to put a rehabilitation programme in place when a young person has received a second or subsequent youth caution. That reflects the current threshold of obligatory assessment following a warning and is designed to prevent a return to precisely the repeat cautioning to which my hon. Friend referred. Unlike reprimands and warnings, the youth caution does not have a fixed limit on the number that may be administered, and it may be used if a young person has previously been convicted. That allows the police to use discretion, in consultation with the youth offending team, and to avoid an unnecessary court process if that is not merited.
Introducing a flexible youth caution that can be used more than once should help young people when seeking future gainful employment despite a minor misdemeanour that is causing concern. The youth caution becomes spent immediately, so there is no requirement for the young person to disclose that they have received one, unless they are seeking employment in an occupation listed in the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975, such as working with children or other vulnerable people.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 revised the youth conditional caution. We reduced unnecessary bureaucracy by giving the police power to authorise youth conditional cautions without the need to seek the authorisation of a prosecutor. The police can now offer a youth conditional caution with input from a youth offending team as at present but without the need for agreement from the Crown Prosecution Service. The youth offending team’s role is now statutory to provide a check on the appropriateness of the disposal and will also allow the YOT to apply for a parenting order if necessary.
Conditional cautions require offenders to take responsibility for their actions, including agreement to conditions that require them to put things right or to seek help for their behaviour. It is important to recognise the role of the victim and to ensure that they have proper redress through such an out-of-court disposal. Since 8 April, the revised youth conditional caution has been available to all 10 to 17-year-olds throughout England and Wales. The youth conditional caution has a three-month rehabilitation period to allow for the conditions to be completed, but offers similar benefits to the youth caution in becoming spent rapidly and therefore not subject to disclosure for most purposes.
The third change to that sort of disposal in the 2012 Act was to abolish penalty notices for disorder for 10 to 17-year-olds. Penalty notices can be an effective deterrent and provide resolution of offences for adult offenders, but we believe they are less effective for young people. The principal aim of the youth justice system is to prevent offending by young people. For that age group, we believe it is more effective to use out-of-court disposals involving assessment and intervention by the local youth offending team than fixed penalties.
Other legislation that is centrally important to the matters that the debate gives rise to is the Rehabilitation of Offenders Act 1974, which has an important role in helping those who have a criminal conviction but have put criminality behind them. From the tone of the debate, it is clear that many hon. Members believe that it is important to provide individuals with the opportunity to leave behind mistakes that they made when they were young. Minor offending behaviour committed when the offender was immature should not blight their prospects. That is recognised in the fact that rehabilitation periods are generally shorter for under-eights than for adults. Most crime committed by young people is relatively minor and often results in the out-of-court disposals or fines that I am talking about. A significant proportion of the population have had a conviction at some point in their lives, but few of them pose a serious risk of harm to the public. I am sure that we all agree that it is in society’s interest that ex-offenders are given the chance to reintegrate into their communities and lead law-abiding lives.
My hon. Friend the Member for Winchester referred to a recent Court of Appeal judgment that found that both the current exceptions order to the Rehabilitation of Offenders Act 1974 and part V of the Police Act 1997 are unlawful. That is because they provide for blanket disclosure of all spent convictions and cautions regardless of how old or minor they may be. In response to that judgment—my hon. Friend raised this point specifically —we are amending the exceptions order. We are proposing that certain spent disposals will no longer be subject to disclosure under that order after a specified period, which will be shorter for young offenders than for adults.
Public protection and safeguarding obviously remain primary concerns, and for that reason disposals for specified sexual and violent offences and other offences relevant to safeguarding will always be subject to standard or enhanced disclosure. Any offence resulting in a custodial sentence will continue to be subject to disclosure. Those measures are necessary to maintain public protection, and I suspect that there is agreement on that on both sides of the Chamber.
For other offences, cautions and minor convictions will no longer be subject to disclosure, nor will they be able to be taken into account by an employer after a certain period. Cautions and equivalents administered to a young offender for a non-specified offence will no longer be subject to disclosure under the exceptions order after two years. Secondary legislation containing those provisions has been laid before Parliament and will be subject to the affirmative process. My hon. Friend wanted a detailed timetable, but he has been here long enough to know that such business management goes on behind closed doors.
Steve Brine
I have been here a while now and I cannot wait to be on another Committee. The Minister may be coming to this, but will he refer to retrospection of the order?
Damian Green
The changes to the Rehabilitation of Offenders Act 1974 will have retrospective effect. I will come to the case of my hon. Friend’s constituent, but I can give him that general reassurance.
Employers have a key role in how criminal record information is treated, and they should have a fair and objective policy on the recruitment of ex-offenders. It is important that they should consider the circumstances and relevance of a spent, or unspent, conviction where that is disclosed. That should include taking into account the age of the person at the time, the disposal received and what the person has done in the meantime. Of course, we encourage employers to adopt that fair approach, which is critical in assisting ex-offenders in obtaining gainful employment and, therefore, helping their rehabilitation. It ought to go without saying—but it is worth mentioning—that a minor youthful indiscretion should clearly not be a barrier to employment in later life.
Turning to my hon. Friend’s constituent, I understand that she received a caution for theft aged 15 but now wishes to pursue a career as a lawyer. That is an occupation listed on the exceptions order and therefore disclosure of spent cautions and convictions can be requested and an employer can take them into account. As he said, she has been advised that her caution means that she may not be accepted to practise law. However, I am pleased to say that, from his description of the case, it appears that she will benefit from our proposed amendment to the exceptions order. As I have said, under the proposals, a caution received as a young person for a non-specified offence, which includes theft, will no longer be subject to disclosure, nor will an employer be able to take it into account, after a period of two years. I should be clear that the caution will nevertheless remain on the record, but the changes to the exceptions order will specifically address his constituent’s case. Clearly, there are circumstances in which the disclosure of all cautions and convictions may still be required, such as in subsequent court proceedings.
Returning to the use of out-of-court disposals in general, we know that it is important to consider the need to provide assurance to the public that they are being used appropriately and proportionately. We very much recognise the concern of the public and that expressed in the recent Justice Committee report about the proper use of out-of-court disposals. The Chairman of the Committee, my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), is here, and I thank the Committee for contributing to a thought process that has led to our review of simple cautions. The Ministry of Justice, the Home Office and the Attorney-General’s office will be working closely with the police and the Crown Prosecution Service, as well as taking the views of practitioners across the criminal justice system.
The review is considering a number of issues: the existing guidance and practice relating to the use of simple cautions; whether there are some offence types for which the use of simply cautions is generally inappropriate—and if so, what procedures we should adopt; the reasons why multiple cautions have been given to some criminals; the difference in the use of cautions by different police forces and whether increased scrutiny is needed to ensure that they are used consistently; and the impact on individuals of accepting a caution, including any potential impact on future employment. I take the point that was raised by a couple of hon. Members in the debate on whether the use of such disposals may have a disproportionate impact on different communities.
I should make it clear that, although the review into cautions is focused on adult simple cautioning, it will consider aspects of youth cautioning and adult conditional cautioning, where there is good reason to do so. The Justice Committee expressed concern about the provision of oversight and scrutiny of how the police are using out-of-court disposals, so I hope that the various Committee members who are here at the moment will welcome our commitment to look into the matter further.
I make it clear that the Government believe that out-of-court disposals have an important part to play in the youth justice system, because they can provide a quick and effective resolution to a crime for the victim, which a court case might not. My hon. Friend the Member for Winchester asked a specific question about the Government seeking leave to appeal to the Supreme Court. We consider that the terms of the judgment are simply too broad, but, as I have mentioned, the orders that we laid before Parliament on 26 March can be taken as our response to the judgment, and the orders will come into force when they are approved by the House.
More generally, the provisions in the LASPO Act that came into effect earlier this month have significantly simplified the youth out-of-court disposals framework, by providing clearer and simpler decision-making for practitioners, a greater understanding for the public of how the disposals fit together and the circumstances in which they are used—
Mr James Gray (in the Chair)
Order. I apologise for interrupting the Minister, but the clock dictates that I should do so. We now come to the next debate.
Department for Education Offices (Runcorn)
(11 years, 7 months ago)
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Derek Twigg (Halton) (Lab)
It is a pleasure to serve under your chairmanship, Mr Gray. I do not intend to take all the time that would normally be taken in such debates, as the hon. Member for Weaver Vale (Graham Evans) has a key interest, because his constituency is affected. Therefore, I will cut down the time I have to speak.
Mr James Gray (in the Chair)
That will be quite in order with me, as long as the hon. Gentleman has the permission of the Minister to do so.
The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)
indicated assent.
Derek Twigg
The Department for Education announced on 13 November 2012 its intention to close Castle View house in Runcorn, which is owned by the Department as a freehold property. It proposes to transfer the work to Manchester. The Runcorn site accommodates 450 staff, including 222 Department for Education staff, private sector support staff, staff from other Departments—including the Department for Work and Pensions and the Department for Business, Innovation and Skills—and staff from the Children and Family Court Advisory and Support Service, and national health service procurement staff. Civil service jobs—originally with the Department of Employment—have been based at the site, and previously at the building next door, for more than 40 years, providing an important source of good-quality jobs in the borough of Halton.
The Department has identified the following key areas on which to test its proposal: cost and value for money, needs of the business, estates policy, the effect on staff and the wider socio-economic impact. I will address each area individually, but first, what about the overall handling of the issues by the Department for Education? There was no business case on which to justify a closure, and it was made clear to staff from the beginning that it was highly unlikely that the proposal would be changed, despite a consultation being launched later. Even when I, the hon. Member for Weaver Vale and David Parr, chief executive of Halton borough council, met the DFE permanent secretary to discuss the proposal, we came away with a view that the decision was a fait accompli.
I am sure that most independent-minded people would find it odd that there was no business case to base the proposal on. The key arguments made for closure and transfer of the work to Manchester do not remotely stand up to scrutiny, as I shall argue. It is fair to state that the staff and unions have believed for some years that there has been an agenda in the senior management to close down the Runcorn operation for reasons that we could never get to the bottom of. I think the DFE wants the closure now because it fits in with the image that it wants to project of being ahead of the game in Whitehall on how to cut costs, and, therefore, it will be held up as a template for other Departments. The problem for the Department for Education is that the change will not save the taxpayer anything.
In terms of cost and value for money, of the 12 DFE sites, Castle View house is the second least expensive. The cost per person for Castle View house is £2,545. The cost for Piccadilly Gate in Manchester—the building that it is proposed to move the jobs to—when comparing like for like is £4,583 per person. The Department suggests that the refurbishment of Castle View house would cost £500,000. A qualified property survey carried out by Halton borough council suggests that the figure would be nearer to £30,000 to £50,000, depending on whether decoration was undertaken. Castle View house is a modern building with excellent facilities and good IT infrastructure. The Department did not factor in the income from sub-tenants in the figures that it based its original closure proposals on.
I have also been informed today that the Public and Commercial Services Union met the Department on Monday in London to talk about staff relocation costs. The DFE has now accepted that it will have to support Runcorn staff with travel costs of up to £4,250 each year—a significant increase, I understand—to cover travel costs on other, longer routes than the very congested Runcorn East line.
We have not yet seen all the Department’s figures for relocation. The Manchester building that the Department is proposing to move staff to will be demolished as a result of High Speed 2, as I am sure the hon. Member for Weaver Vale will point out, incurring more cost for the taxpayer. Further, we can add to that the cost of running an empty building when a re-let is unlikely, according to Halton borough council, in the short to medium term. The DFE already has an empty site next door to Castle View house.
Let us consider the business need. The suggestion was that Manchester had a wider-ranging skills base, but that has not been evidenced or tested other than by the fact that a number of other Departments are based there. Similarly, the assertion by the DFE that Manchester would attract better staff is flawed—again, where is the evidence? The Runcorn site offers a range of skilled staff, holding degree-level and professional qualifications. The public communications unit at Runcorn offers a centre of excellence. A skills audit by the PCS of its members showed that, among the staff who responded, 139 professional qualifications were held.
It is accepted that Manchester has very good travel connections, but it is quicker to travel to London from Runcorn. There are also local lines to Liverpool, Manchester and Chester. The M56 is only a few minutes from Castle View house and also gives quick access to the M62 and the M6.
On being able to attract and retain good-quality staff at Runcorn, we have only to look back to the heyday of the Runcorn site in the 1980s and early ’90s, when nearly 1,000 staff were employed there. That is a clear indication that staff with good skills can be attracted.
I want to examine the effect on staff. It goes without saying that the morale of this loyal and hard-working work force has been badly affected by the proposal, but also by the way the Department has handled it. The closure of Castle View house will also impact more on the lowest-graded and lowest-paid staff, and those who are made redundant will find it hard to get another job, given the high unemployment in Halton.
The PCS union met departmental officials and representatives of Arriva Trains on 30 January. Arriva has confirmed that it cannot transport the required number of staff from Runcorn East station to Manchester at peak times. I understand that the Department has now accepted that and informed staff that it will explore “alternative options”. There are also few parking spaces at Runcorn East, where staff would travel from. That is a particular concern for disabled staff. A number of staff who live in Halton would have to make two bus journeys to get to the station.
On the socio-economic impacts, Halton is the 30th most deprived borough in the country and the areas that fall within the Halton Lea ward are some of the most deprived in England. Youth unemployment is particularly high in the area. There will be a wider impact on Halton through the largely retail-based employment in Halton Lea, which was known as Shopping City and which relies on the employee daytime population. Castle View house and those employed there are an important source of custom. Therefore, if employment is removed from the Halton Lea ward, wider employment in the ward will suffer. The wider impact on Halton will be worsened by the fact that a large proportion of Halton Lea’s work force live in Halton.
It is important not to forget that Halton Lea is a town centre, not just a shopping centre, and the Government have stated that they want to regenerate town centres. I hope that, when coming to a decision, the Minister will ensure that account is taken of wider Government policy on town centres.
It is important to highlight to the Minister the fact that support for retaining the DFE jobs from both the private sector and the public sector is very strong. That includes Halton borough council, the Liverpool City Region local enterprise partnership—I am pleased that my right hon. Friend the Member for Knowsley (Mr Howarth) is present for the debate—and Halton chamber of commerce.
To summarise, Castle View house is much cheaper to run than the Manchester Piccadilly Gate building. Closing the MPG building would save the DFE more money than closing Castle View house. Closing Castle View house would be an ongoing liability for the DFE. Staff at Castle View house would find it harder to find jobs in the locality. Closing Castle View house puts in jeopardy the other 200-plus non-DFE public sector jobs based there. The socio-economic impact on Runcorn and on the viability of Halton Lea shopping centre will be serious. There are serious issues about Runcorn staff being able to travel to Manchester and about the associated costs.
If, despite what is being said today, the Minister goes ahead and closes the DFE offices in Runcorn, I intend to write to the Chair of the Public Accounts Committee, my right hon. Friend the Member for Barking (Margaret Hodge), to ask whether her Committee will investigate a decision that is obviously a waste of public money.
I am pleased that the hon. Member for Weaver Vale and I had the chance to meet the Secretary of State on 15 January—I am grateful to him—so that he could hear our case against closing Castle View house. I hope that the Minister will now go back and discuss with him the facts of the situation, which are unarguably weighted against the Department’s proposal to shut Castle View house.
Graham Evans (Weaver Vale) (Con)
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Halton (Derek Twigg) oninitiating this important debate, which has far-reaching implications for both my constituency and his own. I thank my right hon. Friend the Secretary of State for Education and his Department for engaging with all concerned parties, including the hon. Gentleman and me, alongside the council and representatives of the PCS union.
I should like to make two key points. First, I shall address the need for savings across the Department—to position the real impact that the closure could have on the Department’s balance books. Secondly, I shall address the human and economic cost that it would have on an area that has the potential to thrive, at a time when we should be addressing unemployment issues, not adding to them.
I do not dispute the need to look for economies, and the Department for Education is no less bloated than other Departments that have ballooned in size to unsustainable proportions. However, those efficiencies need to be just that—the business case must be sound to justify the action. I am convinced that these proposals are not sound. Significantly, there are gaps in both the long and the short-term expectations of savings.
Castle View house has been portrayed as a low-quality building in need of significant redevelopment. That is simply not the case. I have visited the building on numerous occasions, and compared with the wildly varying conditions of other public sector buildings, it is in very good condition, with excellent facilities. Even if a full refurbishment were required, the cost, as set out by Halton council’s response, would be one tenth of the £500,000 suggested by the Department’s review. In reality, the building has the second-lowest overheads of all the Department’s offices and the cost per square metre is just over one quarter of that for the Manchester Piccadilly site.
It is clear that a withdrawal from the area would have a negative impact and make it less easy to re-let or sell in the near future. That is clear from a consideration of other nearby Government buildings that have previously been closed. The overhead costs of Castle View as an unused building are a staggering £382,000 a year. That would swiftly impact on the balance sheets that the Department so desperately wants to correct.
The long-term impact of the decision has also not been considered sufficiently. The High Speed 2 route, which will connect up the country, will have a major terminus in the centre of Manchester, in the location of the Department for Education’s building. Although the line will not reach the city for some time, it is obvious that the building work for such a significant station will take years and result in the vacation of the offices sooner rather than later. That will be hugely costly and would, were the Castle View staff to relocate there, cause significant instability and uncertainty once more. Closing one office in Runcorn, sending staff to Manchester Piccadilly and then moving them again makes no sense whatever. It is clear that the scrutiny that we expect from a detailed analysis is lacking, and I urge the Department to have more foresight.
I should like to draw attention to the impact that the proposal will have on Halton Lea. Although some steps have been taken to produce an action plan for relocating staff to the Manchester branch, it is clear that such a move will leave many behind. Half of Halton Lea falls within the most deprived 5% of the country; the other half is within the bottom 15% and unemployment has risen to 9.4% in the past year. When we talk about closure, we are not talking just about comfortable civil servants having a longer commute—an issue that I am sure that my hon. Friend the Minister will address—but about those at the bottom of the employment scale falling out of work entirely. Service workers at the site cannot relocate, and as I have said previously, the chances of an instant re-let of the building are remote. That is not to mention that the shops and services around the area do not just benefit from but rely heavily on trade from these offices. Footfall at Halton Lea’s retail centre could drop by 20%—a drop that I am sure hon. Members will agree is too significant to ignore.
To summarise, Castle View house is the second least expensive building of the 12 Department for Education sites identified. It has excellent public transport and road links and free car parking on site. Halton Lea’s Castle View house would be difficult to re-let or sell in the short to medium term. Halton Lea is one of the most deprived wards in one of the most deprived communities in the country. Some 85% of the work force are local and it is therefore the most sustainable solution. Most of the people employed there live in the borough. Closure will only add to the borough’s socio-economic challenges. The Manchester Piccadilly site has staff from the whole of Greater Manchester.
When a proposal will change not how a Department is run but how a town will survive, we must look harder and think more clearly. I therefore respectfully urge the Secretary of State to review the plans in the same way as the former Secretaries of State did—namely, the right hon. Members for Sheffield, Brightside and Hillsborough (Mr Blunkett) and for Morley and Outwood (Ed Balls) and the former Member for Norwich South. What is it that they saw in Castle View house that my right hon. Friend, at the moment, does not?
The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)
I thank the hon. Member for Halton (Derek Twigg) and my hon. Friend the Member for Weaver Vale (Graham Evans) for securing the debate and for their contributions. Both Members made excellent contributions, which reflected the impact on their constituencies of the future of the Department for Education offices. I am sure that they would join me in paying tribute to the excellence and professionalism of the staff in Runcorn. Indeed, the hon. Member for Halton made a point about the quality of those staff, and I absolutely agree with him.
The hon. Gentleman has always been a passionate advocate for his constituents. I understand that he was an employee of Castle View house when my Department was known as the Department for Education and Employment, so he has personal experience of working at the location and contributing to the work of the Department. I am grateful for the work he has undertaken with my hon. Friend the Member for Weaver Vale in making representations to the Secretary of State, along with Halton local authority and the local branch of the PCS.
I will return to this, but the information that we put out in the initial consultation has been significantly amended, and the information that the hon. Gentleman and my hon. Friend have provided has been very helpful in enabling us to reach a proper decision. Some of what they have discussed was initial information that was our best evidence at the time. In coming to its conclusions, the Department of course listens to representations from people who represent and understand the local area.
Derek Twigg
Is it not a real concern that the Department developed a proposal to close down a building and transfer staff to Manchester, based on a flawed case and best-guess estimates, when a local authority and MPs were later able to put together much clearer facts than the Department itself could? Does that not make the Minister worry about her civil service information?
Elizabeth Truss
I thank the hon. Gentleman for making his point. It is an open consultation; the decision has not yet been made. We wanted to listen to available evidence, but we put forward the evidence available at the time. His contributions, and those of others, have helped to develop our thinking.
The Secretary of State and I have often spoken in the House about our desire to see a better education system for our children and families, and we have made great strides in achieving that aim, by expanding the academies programme, rolling out free schools and introducing a rigorous new curriculum. Key to success is the hard work and dedication of civil servants in the Department for Education, who are tireless in their efforts to improve our schools and children’s services, but there is always more work to be done. The Department for Education can continue to build on the successes. We want to be the best Department in Government, a Department in which the best and brightest want to work.
We have launched the DFE review, which reported last November and laid out how we intend to achieve our aim. The review proposes fundamental changes to our ways of working, which are designed to make the Department the best it can be. We need to hold ourselves to account to the same standards of use of public money to which we hold schools and children’s services to account. That is important. As a result of the changes, there will be difficult decisions to make. We have a smaller work force, which needs to be more flexible, effective and responsive to future needs, which means that we have to reduce our office space. We currently occupy 12 sites across the country and the review recommended that we consolidate them into just six and move to cheaper accommodation. That is the issue we are discussing today. We do, however, value the regional presence of the Department. It provides an alternative perspective on policy to that of a single London-based office. It provides accessibility for external stakeholders.
Graham Evans
Is my hon. Friend aware that Halton borough council has suggested several alternatives to the existing building, based on the consultation? I do not agree with this, but it says that the proposal it is not economic; it is the most expensive option. There are various alternative locations in my constituency that have been put on the table—Rutland house, Vale house, Howard house, Clifton house—so there is no shortage of public sector properties available in Halton. It does not have to be shifted out of the community of Halton Lea to Manchester Piccadilly in Greater Manchester; it could be kept within the community, as there is no shortage of alternative buildings.
Mr James Gray (in the Chair)
Before the Minister replies, it might be helpful for hon. Members to know that we expect a Division in the main Chamber, possibly at 7.15 pm or earlier, so we might tailor our remarks to suit that probability.
Elizabeth Truss
I thank my hon. Friend the Member for Weaver Vale for his comments, and I am aware of his proposals. We are absolutely considering all available options in the north-west in relation to our package. I understand that both speakers have acknowledged that there is essentially a choice between Runcorn and Manchester. They have put forward a good case about why Runcorn has particular issues of staff quality, employment levels and local regeneration that need to be considered in the decision-making process.
The decision to close any Government site is never easy. I understand the worry and uncertainty of staff who might be affected by the decision. It is a difficult time across the Department when there is such uncertainty. I also understand the concerns of the local community in Runcorn about the site’s future. The consultation is open, but we wanted to be honest about our initial intentions, so that people have time to make representations and preparations.
I acknowledge the points made about the economic impact on the area. Among the factors that we will take into account in our decision are wider central Government policies—for example, the town centre policy that the hon. Member for Halton mentioned—and minimising costs for the Department, which is clearly important to the achievement of value for money. I note the point that both hon. Members made about the availability of more affordable sites in the Runcorn area.
Whichever site is selected for closure, we will put in place comprehensive support for affected staff to help them through the change. All staff will have the option to transfer to work from whichever site is chosen, and we will offer assistance with excess fares. However, for those who either cannot or do not want to make such a move, we have already made a commitment to allow staff to apply for voluntary terms, and we are working with local recruitment agencies and other Government employers in the region to identify alternative employment opportunities.
I shall respond to the specific issues raised in the debate. Following the further representations about cost, vis-à-vis Manchester and the local economic situation, I confirm that they will be taken into account in the final decision. I shall ensure that I discuss the important points made in today’s debate with the permanent secretary and the Secretary of State. The decision is being deliberated on and I alert hon. Members to the fact that we expect it within the next two weeks.
We did not say that Castle View house would cost £500,000 to refurbish. We were talking about bringing it up to the same standard as Manchester Piccadilly Gate. I completely understand the point that the hon. Member for Halton made about alternative accommodation being available in the Runcorn area. We are aware that High Speed 2 could mean that Manchester Piccadilly Gate will be demolished, but that is subject to consultation, and plans suggest that demolition would not be required before 2027, which is after the lease on the Manchester Piccadilly Gate building ends. We will consider the impact of High Speed 2 as part of our deliberations.
Derek Twigg
I welcome the fact that the Minister will have a discussion with the permanent secretary and the Secretary of State to consider the points that we have made. I have not heard any argument from her to refute the figures that the borough council and the PCS agree on, which are different from those that the Department put forward. Does she agree that our figures are accurate or does she stand by the Department’s figures?
Elizabeth Truss
We are taking into account all the submissions and we will continue to receive and analyse figures before making a decision. When a decision is made, we will release the business case, which will show which figures we ultimately adhered to when making the decision. We are taking account of the points made about other office space being available. I will reflect on the figures in my conversations with the permanent secretary and the Secretary of State. We certainly want to base the final decision on the best available evidence, which may not necessarily be the evidence we presented in the initial consultation.
Question put and agreed to.
Written Ministerial Statement
(11 years, 7 months ago)
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Intellectual Property Office
(11 years, 7 months ago)
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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
My noble Friend, the Parliamentary Under-Secretary of State for Business, Innovation and Skills, Viscount Younger of Leckie, has today made the following statement:
As an executive agency and trading fund of the Department for Business, Innovation and Skills, we set targets which are agreed by Ministers and laid before Parliament. During 2013-14 our targets are to:
Finalise secondary legislation to implement Hargreaves’ recommendations regarding copyright exceptions.
Achieve at least 90% delivery of the provision of an accelerated two-month turnaround for patent search, publication, and examination when needed by the applicant.
Introduce a secure identification system to facilitate the electronic management of rights by our customers.
Ensure customer satisfaction is at least 80%.
Working with police and industry, establish a specialist police IP crime unit capable of tackling infringement and counterfeits on the internet.
With partners, develop and deliver a campaign to build understanding of and respect for intellectual property among consumers and young people. In its first year, the campaign will secure media messaging which reaches at least 4 million people and drive a 5% increase in hits on campaign-related web pages.
Provide access to online training in IP issues for business advisors, at both a basic level free of charge, and an advanced level at a commercial rate, with the aim of reaching 500 advisors by 31 March 2014.
Support our people in developing their capability, such that 95% complete an agreed development objective by 31 March 2014.
Achieve a return on capital employed of at least 4%.
Deliver an efficiency gain of at least 3.5%.