Management of the Economy and Ministerial Severance Payments
(Limited Text - Ministerial Extracts only)
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The Minister of State, Department for Levelling Up, Housing and Communities (Lucy Frazer)
I would like to start by recognising, as the Prime Minister has done, that mistakes have been made. No Government are immune from mistakes, but to suggest, as the Opposition have done, that these mistakes are the cause of a particular average increase in monthly mortgage rates is wholly inaccurate. Moreover, to say so is simply failing to be honest with the British people.
As the shadow Secretary of State, the hon. Member for Wigan (Lisa Nandy), knows and ought to acknowledge, the economic downturn and the consequent rise in interest rates have been caused by two major global events: the pandemic and the war in Ukraine. She knows that countries across the globe are grappling with the same issues as us. She will know that the US Federal Reserve has been raising its base rate since March 2022. She will know that the economic situation affecting the UK is not unique to this country. Indeed, the International Monetary Fund has stated that a third of the world’s economy will be in recession this year or next as the impacts of the pandemic and Putin’s illegal war in Ukraine are felt across the world.
David Linden
May I bring the Minister back to this planet and back to reality for a little minute? Does she not understand that after the mini-Budget there was a run on pensions and the Bank of England had to step in? Will she not just accept that it was her Government who crashed the economy, leading to the pain that many of my constituents are experiencing?
Lucy Frazer
I do not accept that there was a run on pensions. I do accept that mistakes were made, but the Prime Minister is focusing on putting the economy on a strong fiscal path and taking the necessary decisions, which I am sure we will hear more about on Thursday.
The shadow Secretary of State will know that in these globally challenging times—in these difficult periods that are affecting people across the country—the former Chancellor, now the Prime Minister, has always been on the side of those who are most vulnerable and need support. He has remained committed to that with the Chancellor as he brings forward the fiscal statement later this week. As a result of the economic challenges, he and the Chancellor are now focusing on restoring stability, sorting out the public finances and getting debt falling so that interest rate rises are kept as low as possible. I welcome this opportunity to remind the shadow Secretary of State and the House of the Prime Minister’s record, of what we are doing to support people in all our constituencies who cannot manage, and of our absolute commitment to continuing to do so.
Fleur Anderson (Putney) (Lab)
The people I talked to on the doorsteps of Southfields on Saturday were not blaming Putin; they were blaming the Government for crashing the economy and for London’s rising mortgage rates, which mean that they are paying an average of £835 more a month. How does the Minister expect hard-working families to cope with that increase?
Lucy Frazer
The Government absolutely acknowledge that people are in challenging circumstances across the country. We want to support those people, and in fact we have provided support to help the hon. Member’s constituents and help those on the lowest incomes—that has been our priority for some time. I do not know whether she will remember that we have already provided £37 billion by way of a support package to help people with the cost of living. We are helping millions of households and businesses with rising energy costs through the energy price guarantee and the energy bill relief scheme, saving a typical householder—those people in her constituency—£700 this winter. Indeed, nearly one in four families across the UK will be receiving a £324 cost of living payment, from last week, as part of our £1,200 package for the 8 million most vulnerable families.
We also recognise that one of the best ways to support people is helping them into work. Unemployment is at 3.6%, up from 3.5%, which was the lowest level since 1974. I am proud that we have helped more than half a million universal credit and jobseeker’s allowance claimants into jobs through our Way to Work scheme.
Christian Wakeford (Bury South) (Lab)
The Minister speaks about helping those on the lowest incomes. What part of removing the caps on bankers’ bonuses or removing the 45% tax rate will help those people?
Lucy Frazer
The hon. Member is cherry-picking—and, of course, that particular announcement was of measures that will help the economy. He will know that, to help the most vulnerable, we have cut fuel duty and increased the personal threshold for national insurance contributions, raising it from £9,500 to £12,500. We are providing the cold weather payment, the warm home discount and the increase in the national living wage. For those with young children, we are providing £200 million a year to support the holiday activities and food programme. To help people into jobs, we have the kickstart and restart schemes and the skills bootcamps. We are helping vulnerable people across the board. Moreover, we have been doing so over the past year as these challenging circumstances have manifested themselves. [Interruption.]
Danny Kruger (Devizes) (Con)
My right hon. and learned Friend is reciting a list of all the generous support packages that are in place while facing a barrage of chuntering from the Opposition. Does she think they are aware that global energy prices have risen eightfold in the last year thanks to Putin’s invasion? That is causing the inflation that the whole world is suffering. European countries have higher inflation than the UK, and the Government are doing what they can to help households.
Lucy Frazer
I am grateful to my hon. Friend for that intervention, because I think it is really important to be honest with the British people about the challenges we face, why we are facing them and, therefore, how we can deal with them. To suggest that they are simply being caused by an event that happened two months ago is simply wrong, and Opposition Members know that.
As well as providing immediate support, we have focused on doing everything we can to get our finances in order domestically, because the risk of higher inflation becoming entrenched is the greatest danger. Sound money and a stable economy are the best ways to deliver what the hon. Member for Wigan asked for: lower mortgage rates, more jobs and long-term growth. We have taken every opportunity to do that in the first weeks of this Government—to restore credibility to the public finances, being up front about the enormous task ahead—and the markets have responded positively to what we have done and the direction in which we are going.
Let me now deal with a specific issue raised by the hon. Member for Wigan, that of interest rates. It is important to point out that the pricing and availability of mortgages are not decided by the Government; they are commercial decisions for lenders in which this Government—indeed, any Government—do not seek to intervene. However, let me highlight four points that I am sure Opposition Members would like to hear.
First, as I mentioned earlier, we have already taken immediate action to secure the UK’s economic stability, demonstrating our commitment to fiscal discipline. That has provided stability for the markets, including mortgages. Secondly, although I recognise that many people are concerned about their mortgage payments and do not want in any way to diminish their real and legitimate concerns about the cost of living, about 75% of residential mortgages are on a fixed rate and are therefore shielded from rate rises in the near term. Moreover, because of changes that have been made to the regulatory regime introduced by the coalition Government applying the lessons of the last financial crash, the mortgage application process has been more rigorous, ensuring that borrowers will be able to continue to afford to make repayments. Today’s mortgage holders are therefore better placed to weather the changes.
Thirdly, the Government have some lines of support available aimed at helping people to avoid repossession, including support for mortgage interest loans for those in receipt of an income-related benefit. As I am sure the hon. Member for Wigan heard, the Government announced earlier this year that they would allow homeowners to access support for mortgage interest earlier than the current nine-month wait time. The details on that will follow shortly.
Lucy Frazer
I will give way shortly.
Furthermore, there is some protection in the courts through the pre-action protocol, which makes it clear that repossession must always be the last resort for lenders. Fourthly, if mortgage holders do fall into financial difficulty, guidance from the Financial Conduct Authority requires firms to provide support through tailored forbearance options, which could include a range of measures depending on individual circumstances. We continue to work with the FCA and the financial services sector to explore what additional measures may support efforts to help people facing rising mortgage costs.
Alex Cunningham
I am surprised by the Minister’s rewriting of history, particularly in relation to the Prime Minister’s role in failing our economy over many years. She has talked about fiscal rules. Can she tell me why many of the fiscal tables show Britain at the bottom end of the economic league?
Lucy Frazer
I think the hon. Member is forgetting that the UK is projected to have the highest growth rate in the G7 in 2023. I think he is forgetting—or is not aware—that we are seeing inflation across the globe. Germany’s inflation rate is 11.6%, Italy’s is 12.8%, and the eurozone’s is 10.7%. These are obviously issues that are affecting people across the globe. This Government are committed to supporting vulnerable people who need the support that we are providing.
Let me now address some of the points made by the hon. Member for Wigan about homes, home ownership and the shattering of dreams. It will not surprise Opposition Members to learn that we believe home ownership to be an essential component of any long-term issues in our economy. This Government are proud of their track record of helping first-time buyers on to the housing ladder, and we have just expanded first-time buyer relief by raising the level at which first-time buyers start paying stamp duty, from £300,000 to £425,000. I seem to remember that the Opposition voted against that. As the hon. Member mentioned, we are also investing £11.5 billion in affordable homes. She will be aware, I hope, that since 2010 we have delivered 598,000 new affordable homes, and Government-backed schemes have helped more than 800,000 households to purchase a home since 2010.
Anthony Browne (South Cambridgeshire) (Con)
I welcome the fact that Labour is joining the Conservatives in championing the desire to own homes, which has traditionally been a strong Conservative party position. Is my right hon. and learned Friend aware that the rate of home ownership in the UK rose throughout the second half of the 20th century, reached a peak just as the last Labour Government came to power, and fell throughout almost the entire period of that Government? It was only as a result of a range of measures introduced by the Conservative Government, on their election in 2010, that home ownership rates started to rise again. Labour may say things, but after its 13 years in power it left home ownership rates plummeting throughout the UK.
Lucy Frazer
I am grateful for my hon. Friend and neighbour’s intervention. He is knowledgeable on all these matters and makes an important point about rhetoric and not action, because I also know, as I am sure hon. Members across the House do, that the Labour party did not deliver the building of the same number of affordable houses—social houses—as this Government did.
On house building, the hon. Member for Wigan seemed to suggest that she was not aware that the Levelling Up Secretary had committed to our plans to work towards 300,000 homes a year—[Interruption.] I have heard him commit to that several times since I have been in the Department. To that end, we have already announced £10 billion-worth of investment in housing supply since the start of this Parliament, with those supply interventions ultimately due to unlock over 1 million new homes over the course of this Parliament and beyond.
Lucy Frazer
I am going to continue for a moment.
Let us be clear about this. There has been a lot of criticism from the Opposition about what we on this side of the House would do, but what is Labour’s record of delivery? This Government have always been clear that it is difficult to solve everyone’s problems all the time, but let us consider what solutions a Labour Government would have come up with in this challenging time and their record of delivery. Our Prime Minister’s approach is one of fiscal responsibility and sound money. Does anyone across this House know what Labour’s annual fiscal black hole is? Labour has racked up £147.8 billion— [Interruption.] I am happy to provide the details. Labour has racked up £159.8 billion of annual spending commitments and only £11.2 billion of annual revenue raisers across a five-year Parliament. Does the hon. Member for Wigan know what that would cost every household? It would be £5,474—
Lucy Frazer
I am just going to finish this point.
We recognise that work is the best way out of poverty, and our approach is to support the most vulnerable to get into work. Under a Labour Government in 2010, benefits were the largest source of income for the poorest working-age households. Under the Conservatives now, it is their earnings. We have low unemployment, yet every single time Labour has left office, the unemployment figures have been higher than when it took office. It is Conservative Governments time after time who have managed the economy in a stable and responsible manner to secure our public finances.
Lisa Nandy
Can I just gently say this to the Minister? I have heard her blame the Labour party, although her party has been in office for 12 years. I have heard Conservative Members blame the Bank of England. I have heard them blame the bond markets and I have heard them blame society. What I have not heard is a single one of them have the humility to come here and say sorry to the people whose mortgage payments have gone through the roof and whose hopes and dreams have gone up in smoke. She knows, Conservative Members know, we know and most of all the public know who is responsible for this crisis. It is a crisis made in Downing Street by a Tory Government who still cannot bring themselves to say sorry. She can blame us all she likes, but they have had 12 years. Say sorry!
Lucy Frazer
I am grateful for the hon. Member’s very short intervention. I think she will have noticed that, throughout this speech, I have recognised that this Government, like every Government across many years, have made some mistakes. I have also stated the important point that the Prime Minister has shown, throughout his time as Cabinet Minister—as Chancellor and as Prime Minister—that he cares very deeply, as I and my Front-Bench colleagues do, about ensuring that vulnerable people get the support that they need.
I would like to turn to the issue of the severance pay. Payments connected to the loss of ministerial office are defined in legislation that has been passed by Parliament and been in effect for successive Administrations. Ministerial changes and departures are part of the fabric of government. All Administrations experience them and they are a routine part of the operation of government.
Lucy Frazer
I am going to continue; I think I have been very generous with interventions.
The payments being discussed today exist because of the unpredictable nature of ministerial office. Unlike in other employment contexts, there are no periods of notice, no consultations and no redundancy arrangements. The statutory entitlement has existed for several decades and been implemented by all Governments over that period. Payments on ceasing office were made and accepted by outgoing Labour Ministers in the Blair and Brown years and by Liberal Democrat Ministers during the coalition Government.
The hon. Member for Wigan was asked a question by my hon. Friend the Member for Orpington (Gareth Bacon) about the level of those payments, and she either did not know the answer or decided not to respond. So I will tell her—[Interruption.]
Mr Deputy Speaker (Mr Nigel Evans)
Order. Lisa, please would you allow the Minister to give her speech in silence? I can hear you more than I can hear the Minister.
Lucy Frazer
As an example of the previous operation of this provision, the data published in 2010 indicated that severance payments made to Labour Ministers in that year amounted to £1 million. To ensure transparency, the details of these payments are published in the annual reports and accounts of Government Departments. It is important to point out that a Minister will be entitled to a payment on ceasing to hold office only when they in effect step away from Government and are not reappointed for a period of at least three weeks. Periods of continuous employment, where a Minister might move between roles during the same Administration, do not result in multiple payments.
In this context, I would like to draw Opposition Members’ attention to the fact that my right hon. Friends the Members for South West Norfolk (Elizabeth Truss) and for Spelthorne (Kwasi Kwarteng) served as Ministers for considerable amounts of time before they were made Prime Minister and Chancellor of the Exchequer, and that they therefore have a statutory entitlement. Let me be clear that, although this is a statutory entitlement, that is not to say that Ministers are unable to waive such payments. That is not a matter for the Government; it is entirely a discretionary matter for the individuals concerned. The Government do not regard it as appropriate to make arbitrary demands of individuals in relation to their entitlements. While the Labour party seeks to make cheap political points by denigrating the former Prime Minister and Chancellor, from these Benches I would like to pay tribute to the public service of Ministers of the Crown across the board and as long-standing Members of Parliament.
Anthony Browne
I would like to thank my right hon. and learned Friend for making an excellent speech. The Opposition are trying to link economic performance with severance pay. I recall that, back in 2010, the last act of the last Labour Chief Secretary to the Treasury was to leave a note saying:
“Dear Chief Secretary, I’m afraid there is no money.”
And what happened to severance pay then? As my right hon. and learned Friend has said, Labour Ministers took £1 million in severance pay. Also, the four leadership candidates for the Labour party, Ed Miliband, David Miliband, Ed Balls and Andy Burnham all took—
Lucy Frazer
As we approach the autumn statement, the Chancellor has made it clear that there is a tough road ahead that will require extremely tough decisions to restore confidence and economic stability. As he has set out, if we are in a recession we will take the decisions needed to make it as short and shallow as possible. The fundamentals of the UK economy remain strong. The International Monetary Fund has forecast that the UK will have the highest GDP growth in the G7 this year, outstripping Germany, the US and Japan. We will continue to support the most vulnerable, to stabilise the economy by taking tough decisions to put our finances on a sustainable footing and to help the Bank of England to bring inflation under control.
The Parliamentary Secretary, Cabinet Office (Alex Burghart)
It is a pleasure to follow the hon. Member for Luton North (Sarah Owen). This afternoon’s debate has been very interesting, but at times we have strayed quite a long way from the motion. During my summing up, I will try to bring us back a bit.
Alex Burghart
I will make just a little progress, but don’t worry—we have plenty of time.
In a debate like this, it is important to be clear and a bit careful. There are two things going on when we talk about the economy in general: the international situation and the effect of decisions made by the previous Administration. It is true that both have had an effect; Conservative Members accept that. The Opposition will know that, having heard what the Chancellor said in this House on 17 October and what the Prime Minister said on the steps of Downing Street on 25 October. Listening to many Opposition Members’ speeches this afternoon, however, one would be forgiven for thinking that they had either not heard those statements or completely chosen to ignore them.
The fact is that the Chancellor and the Prime Minister have accepted that mistakes were made in the previous Administration, but it is also the case that a very serious international situation is affecting all major economies. That is why the IMF expects one third of the world to go into recession. It does hon. Members on either side no credit not to acknowledge those facts.
The shadow Secretary of State, the hon. Member for Wigan (Lisa Nandy), talked about a £30 billion figure, but she was not able to identify the source of that analysis or how it was calculated. [Interruption.] From a sedentary position, the hon. Member for Luton North says, “Her brain.” No doubt the brain of the hon. Member for Wigan is very large, but it is not itself the source of the analysis. Were she to footnote her brain in a report, she would rightly be called up on it.
The motion, from which we have strayed repeatedly during the debate, is about severance pay, about mortgages and about an attempt to censure two Members of this House. As my right hon. and learned Friend the Minister of State made clear at the start, payments connected to the loss of ministerial office are defined in legislation that has been passed by Parliament and has been in effect for successive Administrations.
Clive Efford
The Minister asks where the figure of a £35 billion gap comes from. It comes from the Resolution Foundation, which states that £45 billion is attributable to the unfunded tax cuts. The higher interest rates account for £30 billion. Offset against the £29 billion for the mini-Budget U-turns and £11 billion for the lower interest rates, that leaves a £35 billion gap entirely attributable to the mini-Budget—a waste of £35 billion that taxpayers are going to be asked to pay for on Thursday.
Alex Burghart
I do not believe that the hon. Gentleman’s figures take account—
Alex Burghart
I certainly will, but I do not believe that the hon. Gentleman’s figures take account of the fact that many of the measures in that mini-Budget have now been reversed.
David Linden
Does the Minister understand that some of us see a hint of irony in how he chastises Opposition Members about where they are getting their figures? The disastrous mini-Budget was brought forward without a forecast from the OBR. The Government locked them in the boot.
Alex Burghart
The hon. Gentleman is an established and experienced debater in this Chamber. He will know that it is important for Members of this House to choose their figures wisely and get them right. If they intend to build a case, it is important that they do their analysis properly.
Ministerial pay arrangements have been in place for a number of Administrations. Ministerial changes and departures are part of the fabric of government; all Administrations experience them and they are a routine part of the operation of government.
Alex Burghart
I will come to the point that I am going to make and then give way to the hon. Gentleman.
The payments that are being discussed today exist because of the unpredictable nature of ministerial office. Unlike in other employment contexts, there are no periods of notice, no consultations and no redundancy arrangements. This statutory entitlement has existed for several decades, and has been implemented by all Governments during that period. Payments on ceasing office were accepted by outgoing Labour Ministers in the Blair and Brown years, and by Liberal Democrat Ministers during the coalition Government. As has been pointed out by a number of Members, data published in 2010 indicated that severance payments made to outgoing Labour Ministers in that year amounted to £1 million.
Rachel Hopkins
I thank the Minister for giving way at this point, because I value the opportunity to talk about figures that he has mentioned. The average mortgage-paying householder in Luton South will have to pay an extra £500 a month as a consequence of the failure of this Government. Let me return to the motion, however. Can the Minister confirm that if it is passed, the Government will either reduce the ministerial severance payments by £6,000—the equivalent of a year’s worth of increased mortgage payments for my constituents—or seek to recover the amounts from the Members concerned?
Alex Burghart
As I was about to make clear, it is not within the Government’s power to do that. This is a power set in law. It is a power set in the Ministerial and other Pensions and Salaries Act 1991.
Sarah Owen
The Minister has laid out the legalities behind severance pay for Ministers, but—we on the Labour Benches have already asked this question several times—does he feel that it is right for the former Prime Minister and the former Chancellor who crashed the economy to take that severance pay?
Alex Burghart
The House will be aware that my right hon. Friends the Members for South West Norfolk (Elizabeth Truss) and for Spelthorne (Kwasi Kwarteng) served continuously as Members of Parliament for long periods before taking up the offices of Prime Minister and Chancellor of the Exchequer—in the case of the former Prime Minister, for 10 years, and in the case of the former Chancellor, for four.
Let me be clear. The fact that this is a statutory entitlement does not mean that Ministers are not able to waive such payments. However, that is a matter not for the Government but for the individuals involved. I am not a Treasury Minister; I am a Minister for the Cabinet Office. This is one of the basic facts that the Opposition do not seem to have picked up on when they embarked on the motion.
Let me now address the points raised throughout the debate about mortgages and housing. I recognise the anxiety that people feel about mortgage payments, which obviously constitute one of the biggest bills that many people experience. There are a range of factors affecting mortgage and other interest rates, but this Government will do everything possible, under this Prime Minister and this Chancellor, to get a grip on the problem of inflation and seek to limit the impact that it has on mortgage rates.
The Government are providing unprecedented levels of support to tackle the rising cost of living. From last week, nearly one in four families across the UK will receive a £324 cost of living payment as part of our £1,200 package for the 8 million most vulnerable families. Our energy price guarantee will save a typical household £700 this winter, on top of the £400 through the energy bills discount.
Emma Hardy
In an intervention on my hon. Friend the Member for Luton North (Sarah Owen), I referred to evidence given to the Treasury Committee. Joanne Elson, the chief executive officer of the Money Advice Trust, said that the Prime Minister, when he was the Chancellor, had signed off changes regarding access to the mortgage interest rate relief scheme, but the trust was still waiting for them to be implemented. Those changes would mean that people need not have zero income to claim the relief. I recognise that the hon. Gentleman is a Cabinet Office Minister, but I wonder what pressure he could put on his Treasury colleagues to ensure that that promise made a month ago is realised today.
Alex Burghart
I am delighted to be able to tell the hon. Lady that on Thursday she will have an opportunity to ask the Chancellor about that issue.
Let me return to the motion, Mr Speaker. [Interruption.] Please forgive me, Madam Deputy Speaker! A thousand apologies. I am so sorry.
The motion claims that mortgage payments rose by £500 a month as a result of the mini-Budget. I think the Opposition will have noticed that on 12 October Full Fact rubbished this claim, pointing out that that figure comes from comparing mortgages available now with those available in August 2020, so it is not a comparison with those available immediately before the mini-Budget. While mortgage rates have risen sharply since the mini-Budget, much of the £500 estimated by Labour is due to rates climbing before it took place.
Once again during this debate we have seen that the Opposition do not have a grasp of the basic facts. Essentially, the facts must not be treated as an afterthought. They are not an afterthought on severance pay, on mortgages or to the international backdrop. The Prime Minister and the Chancellor are apprised of the facts and on Thursday they will bring a statement to this House that will look after the most vulnerable in our society and rebuild our economy.
Question put and agreed to.
Resolved,
That this House censures the former Prime Minister, the right hon. Member for South West Norfolk, and the former Chancellor of the Exchequer, the right hon. Member for Spelthorne, for their mismanagement of the economy while in office, which has resulted in an average increase of £500 per month in mortgage payments for families across the UK; and believes that, if they have not already done so, both right hon. Members should waive at least £6,000 of their ministerial severance payments.