Westminster Hall
(3 months, 3 weeks ago)
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HS2 Cancellation and Network North
(3 months, 3 weeks 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
Jack Brereton (Stoke-on-Trent South) (Con)
I beg to move,
That this House has considered Network North and the cancellation of HS2 Phase 2a.
It is a pleasure to serve with you in the Chair, Mr Davies. I am delighted to have secured this debate. The cancellation of High Speed 2 phase 2a is an important topic for consideration, as is the transfer of funding to what has been dubbed Network North. I will start by making my position crystal clear. I welcome the cancellation of HS2 phase 2a because the reality is that it would have caused great pain to Staffordshire, and I welcome the Network North initiative because it promises great gains for Staffordshire. Because Staffordshire is the heart of the country, and is increasingly a national base for north-south and east-west logistic operations, its gains will be gains for the whole United Kingdom economy.
There is of course a big “but”. Network North is greatly encouraging—but it must not merely illustrate projects; it must deliver them in a coherent programme of transport improvements that get the country moving and deliver productivity gains.
Michael Fabricant (Lichfield) (Con)
I congratulate my hon. Friend on securing this debate on an issue that is very important for Staffordshire, as he rightly points out. Does he know—perhaps the Minister can clarify this later if he does not—where the money will be allocated in the west midlands region? In Lichfield, we are very keen to extend the cross-city line, which runs through Birmingham and Lichfield to Burton. There will be a station to serve the National Memorial Arboretum. Does he think funding might be available for that?
Jack Brereton
My hon. Friend has been a long advocate of restoring the important cross-city line. I very much hope that such local considerations will be taken on board and that funding will be directed locally to make a difference. I am sure the Minister will clarify the position and expand on what my hon. Friend said.
When we can see the wood for the trees, the important point is this: there are localised projects that will help knit together our national transport network for the benefit of a far wider range of people than the elite who want to get in and out of London on business expenses as quickly as possible regardless of the consequences for local communities in Staffordshire, like those in Yarnfield and Swynnerton in the constituency of my hon. Friend the Member for Stone (Sir William Cash). We have already experienced that in north Staffordshire, even before HS2 phase 2a. I am not just talking about the Beeching axe, which was bad enough and of course did not exclusively affect the Potteries; I am talking about the last Labour Government’s decision to make it quicker to get between Manchester and London via the west coast mainline Potteries arc by annihilating three local stations that had survived the Beeching cuts of the 1960s.
Sir William Cash (Stone) (Con)
Is my hon. Friend aware that we led a massive campaign to reopen Stone station, and that the footfall there has been absolutely phenomenal since it was opened, which demonstrates the need to get these stations back in line?
Jack Brereton
Absolutely. I entirely agree with my hon. Friend. Stone station was a victim of the west coast upgrade changes, but thanks to his work and that of those who campaigned for its reopening, it has reopened and been extremely successful. I hope we continue to see those types of station reopen.
The west coast upgrade meant that in Stoke-on-Trent, for marginal time gains between Manchester and London, Etruria station—the very place where the fist sod was cut for the North Staffordshire railway in September 1846—was closed by the Labour Government in September 2005. To the south of the city, Wedgwood and Barlaston stations were suspended in 2004 and neither has subsequently reopened or been maintained in a good state of repair. I understand from Network Rail that neither can now be reopened to passenger services without significant investment and potentially being completely rebuilt, which means that there is now no intermediate local station between Stoke-on-Trent and Stone.
As my hon. Friend the Member for Stone illustrated, the same happened with Stone station, but thanks to his efforts and those of the community, it was reopened in December 2008 and now has some services for that town. So much for Labour’s Strategic Rail Authority! That experience has made us determined that HS2 would either have to work for Stoke-on-Trent and Staffordshire, or we would have to drop it entirely. Unfortunately, it had become clearer and clearer that HS2 would not bring benefits to Staffordshire, certainly not the net benefit that we would need to see to justify the horrendous disruption, painful compulsory purchases and the disruption of ancient woodland.
A constituent attended my surgery recently whose business has been and continues to be affected. Unbelievably, he has recently been asked by HS2 Ltd to commission further thousands of pounds of costly reports to prove the value of his business, despite the 2a route no longer even going ahead. He is not alone: many businesses and property owners throughout Staffordshire continue to be hounded by HS2 Ltd and forced to give up their businesses or sell their land, despite phase 2a being cancelled. A line must be drawn under the compulsory purchase order process. I am sure we will hear more about that tomorrow in the Backbench Business debate on HS2 compensation that is being led by my hon. Friend the Member for Stafford (Theo Clarke). Ultimately, however, it is essential that the Government keep to their word and urgently lift the safeguards on the 2a route, and that efforts are made to rapidly extricate HS2 from the lives of people in those communities and elsewhere in Staffordshire.
Every day that goes by costs the public purse considerably in extortionate security costs and wasteful legal processes for sites that are no longer even needed. If further clarity were needed that HS2 would not bring benefits to Staffordshire or indeed nationally, it was striking to hear from Trevor Parkin and Trevor Gould from the Stone Railway Campaign Group at the oral evidence session of the Transport Committee in Birmingham on 30 November last year. Trevor Gould said:
“I was a great advocate of the HS2 project. I fully support the idea in principle and I still think that it is important that high-speed trains are segregated from freight and slower passenger trains, but unfortunately this HS2 is not the way to do it; it does not do what it says on the tin. It does not release capacity north of Birmingham, it does not improve connectivity because of that”.
As we know, the three fast trains an hour currently serving Staffordshire—one via Stafford and two via Stoke-on-Trent—were set to be replaced by one HS2 service calling at both, which would have terminated at Macclesfield. That is a major reduction on what we currently enjoy, so it is not at all clear that there would have been extra capacity or connectivity, which is what HS2 was supposed to address. In fact, according to HS2 Ltd’s updated 2022 strategic outline business case, the only places north of Birmingham that would have received a higher number of services than they do today would have been Runcorn and Liverpool.
In the meantime, there is a pressing list of other projects that need to be delivered to ensure local services and connectivity into the hub stations are maximised. The reason for that is the major constraints at Crewe, particularly Crewe North junction, which were made worse post phase 2. HS2 had no plans to increase the number of platforms or address the constraints at Crewe North junction, which means the only possible way to run HS2 services would have been to take out what already exists, removing local and regional connectivity. I am not even convinced that HS2 intended to run any meaningful service to Stafford, Stoke-on-Trent and Macclesfield.
On 10 January, the executive chair of HS2 Ltd, Sir Jon Thompson, appeared before the Transport Committee and I asked him to clarify some striking comments that he had made to the Public Accounts Committee on 16 November. I put it to him that he had said to the PAC that if HS2 phase 2a had indeed been built,
“HS2 trains would never have gone on to the west coast main line”
at Handsacre and that “they would have joined” the west coast main line only “north of Manchester.” To that he replied: “Yes.” Of course, I pressed him on that because it would mean that the proposed services to Stafford, Stoke-on-Trent and Macclesfield were never actually going to materialise, even on completion of phase 2a. Sir Jon said that
“if 2a had been constructed, the advice to me, which I have got written down here, is that we would not have used that junction.”
That is Handsacre junction. I await further clarity in writing, but that does, at face value, confirm my worst fears about what HS2 Ltd was actually planning at Handsacre, which is a fait accompli of connections that would not have carried HS2 trains up the Potteries arc—and it would have all been too late by then to do anything about it.
Macclesfield—always a very odd choice of terminus, fine though that market town undoubtedly is—appears to have been a fig leaf to quieten Staffordshire down during the construction phase. Originally, under the hybrid Bill of 2013, it was proposed to create a full connection at Handsacre for HS2 by connecting the new track into the existing fast lines, enabling HS2 services to join on to the west coast main line. Then, in 2019—Trevor Parkin of the Stone Railway Campaign Group made this point very well at the Transport Committee on 30 November—HS2 redrew its intentions at Handsacre in order to join the slow lines of the west coast main line and not the fast lines. The options analysis for that extraordinary move has never been published, and we still do not know why that bizarre decision was taken.
With the cancellation of phase 2, it is clearly essential that we now revert to the original design for the Handsacre junction, to enable a proper connection with the fast lines to maximise capacity and allow services to run beyond. As I said, we await further clarification in writing about the reasons behind the changes, which are unlikely to be to do with cost, as people have attempted to claim. It seems unlikely that HS2 had intended any real, meaningful Stafford-Stoke-Macclesfield services to run at all.
Michael Fabricant
I am sorry to intervene on my hon. Friend again, but he mentions Handsacre, which of course is in my Lichfield constituency, and I am fascinated by what he says. I know, for example, that the Mayor of the West Midlands, Andy Street, is banking on the service from Curzon Street in Birmingham providing an HS2 service, albeit not necessarily at high speed, up to Manchester. That would be impossible if the Handsacre link were now not to go ahead. My constituents need clarity on this and I hope that the Minister, in his reply, will be very clear about whether the Handsacre link is going ahead—we all assume that it is.
Jack Brereton
I thank my hon. Friend for that point. It is essential that the Handsacre link goes ahead, otherwise there is no way to connect those services back on to the west coast main line to provide that service into Manchester, Liverpool, the rest of the north-west and ultimately up to Scotland. It is vital that the Handsacre link is done right and that we see HS2 connect not just on to the slow lines at Handsacre, but on to the fast lines. If we connected it on to the slow lines, that would severely constrain the capacity of the west coast main line in that location, so it is essential that we revert to the original design and that HS2 connects on to the fast lines at Handsacre to maximise the potential of that capacity release.
The issues that we have been raising about Handsacre are things that we have long feared. In January 2020, I wrote—with my hon. Friends the Members for Stoke-on-Trent Central (Jo Gideon), for Stoke-on-Trent North (Jonathan Gullis) and for Newcastle-under-Lyme (Aaron Bell) and my right hon. Friend the Member for Staffordshire Moorlands (Dame Karen Bradley)—to the then Prime Minister, Boris Johnson, to make it clear that our support for HS2 was conditional on realising the Handsacre link in full, with services to Stoke-on-Trent and on to Manchester, and not just Macclesfield. Then, of course, the whole world changed for two years because of the covid pandemic.
It became increasingly clear that the costs of HS2 were going to balloon and that the focus on whether to deliver on it at all had changed. Further, given the many failings of the project and the few solutions it offered to the problems of capacity and connectivity, with costs spiralling out of control, it is right that it was paused for a period of reflection and that ultimately phase 2 was dropped.
That decision frees up huge amounts of funding for other pressing projects that are better suited to the post-covid reality of the trend of working from home, and more flexible and online working. Few of us had heard of Zoom or Teams before covid, but their use is now commonplace, including for entire conferences. At the same time, leisure travel by train has been very strong. We need to see a network that meets today’s challenges and consumer demands, and I think Network North can help us to achieve that.
For a start, unlike HS2, Network North recognises that the transport network is not rail alone and nor is it just about getting to and from Euston. Got right, the national transport network improvements focused on the midlands and the north, with enhancements such as junction 15 of the M6, which I hope will be completely upgraded, will facilitate much more seamless travel, faster journeys, more destinations and considerable freight gains, including reduced carbon miles and greater connectivity north-south and east-west that will benefit the midlands and the north. Even projects undertaken outside the midlands and the north will benefit those areas.
I particularly highlight the proposed rail upgrade at Ely junction, which will drive the momentum we need to see towards re-establishing a proper east-west freight route, with options to increase freight from Immingham and Felixstowe to Liverpool via the Potteries. Much of that currently takes a significantly elongated route down to the north London line, across and then up the west coast main line. That could also include reuse of the North Staffordshire line. That would facilitate the reopening of a station at Keele University, which was one of the aims of the restoring your railway bid sponsored by my hon. Friend the Member for Newcastle-under-Lyme. Its time will come, and probably sooner if the result of dropping phase 2a is to closely look at east-west links just as much as at north-south. The advantage of that would be a significantly increased capacity on the west coast main line by moving more freight on to other lines and significantly reducing journey lengths for freight. That would deliver major cost and environmental savings. Indeed, there is now an amazing opportunity to look not just at linking up our big cities with even quicker rail links than they already enjoy, but at transport connections within city regions.
That brings me nicely to the major area of my speech today, which is the use of capital release from HS2 phase 2a to fund restoring your railway projects. Restoring your railway is a very good scheme. It has been hugely popular among colleagues across the House and the communities we represent. Its flaw has been that it runs to only £500 million and that it expects some of the poorest areas of the country to stump up 25% of the funding for any projects taken to delivery. That local contribution hurdle has threatened to be insurmountable for a number of schemes, so I am completely delighted that that is no longer necessarily the case. Suddenly, it becomes possible to get 100% funding for the delivery stage of transformational projects, such as the reopening of Meir station in my constituency and the reopening of the Stoke to Leek line, which includes a station at Fenton Manor, which is also in my constituency. That is hugely welcome and we will continue to press the case for that funding in order to achieve the national objectives of levelling up: increased productivity, better connectivity, improved life chances, carbon reductions and much more.
The misery of HS2 was going to be fully funded, so it is only right that its successor projects are fully funded too. As I am always keen to say, I fully support levelling up, but we cannot simply level ourselves up after years of having so much taken away from us by Beeching and the Strategic Rail Authority. Much of our transport planning has been focused on making north Staffordshire an easy place to get to and for outsiders to travel through, but it is harder for local people to travel around. Meir in my constituency, which has the A50 running through it, has some of the worst traffic congestion. Despite 40% or more of households in Meir North being without a car, there are still major traffic issues there. Similar issues are seen in communities such as Blyth Bridge, where local roads often take the brunt of congestion, especially when anything goes wrong on the A50 or the A500. Further consideration needs to be given to addressing reliability problems on the A500 and A50 corridor, and it is positive to see that corridor listed for improvements as part of Network North.
In north Staffordshire, public transport—where it exists—is based mainly on buses that often do not go to where people need them or at a time when people want them. We have secured major investment to improve our local bus services—there is £31 million of planned bus service improvement funding—but the time has come to restore our rail services as well. We should reverse the Beeching axe, so that skills, training and employment opportunities are opened up to communities such as Meir that are deprived on multiple measures.
I am delighted that Meir station is now at the advanced project stage of RYR, and very advanced in that stage. I want shovels in the ground as soon as possible. A station will put Meir within 10 minutes’ direct train journey from the heart of the university quarter in Stoke-on-Trent, whereas the bus journey can take over an hour in traffic. I hope that, following the opening of Meir station, we might also see a doubling of passenger services on the line from Crewe, through Stoke and Derby, to Nottingham, and go from one train an hour to two.
Meir is not alone in needing rail connectivity to Stoke town and the university quarter—connectivity not provided by bus—so I am delighted to see that restoring your railway has taken the Stoke-to-Leek line project forward to the feasibility stage, our strategic outline business case having been accepted. This line was closed to passenger traffic in 1956, except for a few football specials, and to freight in 1989, and has never served some of the biggest post-war estates in Stoke-on-Trent. Even when it ran, in the 1950s, there was no station for inter-war estates such as Abbey Hulton, which has many of the same challenges as Meir. Fenton Manor in my constituency will reopen under the Stoke-to-Leek line proposals. That opens up a major centre for leisure, employment and secondary education—St Peter’s Academy —to more of our city’s residents, while reconnecting residents of Fenton to the rail network.
Sadly, my right hon. Friend the Member for Staffordshire Moorlands is unable to be with us today, but she very ably chaired the Stoke-to-Leek line project. It would be remiss of me not to plug the benefits of visiting her beautiful constituency, which more of our constituents will be able to do with ease once the Stoke-to-Leek line is rebuilt. It can easily take longer to get from Leek to Stoke-on-Trent station by road—especially by bus—than it takes to get from Stoke-on-Trent to London by train. Again, that makes the point that getting to and from London and big cities such as Manchester slightly faster is not as pressing a priority for people in Staffordshire as getting around and across our county and its sub-regions more easily and quickly.
To make that work, we really need Stoke-on-Trent City Council and Network Rail finally to deliver the funded and promised packages of the transforming cities fund. The city’s MPs have had to watch with horror as delay upon delay has been announced in delivering the package, although we busted a gut to secure the funding, as the city council repeatedly seeks to redefine schemes that should already have been delivered. I am particularly concerned about the promised improvements to Longton station and the environments of public realm around Times Square, with its iconic railway bridge. Covid has too long been an excuse for the delays to these projects. Longton needs a properly accessible station with lifts. The Victorian ticket hall could also be restored. The station needs to look and act like a station, rather than being just a backwater of the town.
The Department has shown great patience, and I am grateful for that. I hope it will consider all the options available to get the transforming cities fund package over the line and delivered in Stoke-on-Trent. I note that paragraph 69 of the Network North document makes an explicit commitment to improving the accessibility of our train stations, with £350 million more having been provided for 100 stations. Funding released from HS2 can easily rescue aspects of TCF from further downgrading and delay. Further improvements are needed at Stoke station to increase its capacity, in terms of both platform and concourse space.
The cancellation of phase 2 means that it is more likely that high-speed services will run through Stoke to Manchester, so it is essential that Stoke station be properly equipped to accommodate those additional services. That is alongside the Stoke-to-Leek services, the upgrade to two trains per hour that we need on the Crewe to Derby line, and the potential for additional freight. A lot of mothballed railway infrastructure in north Staffordshire needs to be brought back into play, including not only the Stoke-to-Leek line, which is still a statutory railway that is owned by Network Rail, but a number of other parts of the network.
On the Crewe-to-Derby line, we also need a redoubling of the track between Crewe and Alsager, which would help to release significant capacity and allow for increased services through that part of the network. I would like to see track re-laid around the back of Stoke station and new platforms to the west of the station, which is currently a car park but was formerly full of freight lines that ran around the back of the station to the goods yard. The goods yard is now a major levelling-up project; it is time for the station and its capacity to be levelled up as well.
Given the tens of billions in funding released from HS2, there will now be many hands in the air for projects across the country, either those already included in the “Network North” document or projects elsewhere. I have already mentioned junction 15, which was part of the road investment strategy 3 pipeline, the A500 and A50 corridor, Meir station, and the Stoke-to-Leek line. There are also existing RNEP—rail network enhancements pipeline—projects that would be useful. I hope that the Minister can say whether the Department intends to reallocate HS2 money to any of those projects, or add in HS2-ready works that we need on parts of the west coast main line to upgrade it to take phase 1 services.
When the RNEP was first introduced in 2018, the Rail Industry Association welcomed it as an open and transparent way of sharing the forward pipeline of potential works. It was updated in October 2019, in what was intended to be the first annual update, but there have been no updates published since, despite repeated requests. It may be another casualty of covid, but the time is right to revisit the RNEP and publish an updated list that takes account of the changed focus following the cancellation of HS2 phase 2 and other, more recent publications. That will help to prioritise schemes that will have the greatest impact on connectivity, levelling up and productivity. I am confident that Meir and the Stoke-to-Leek proposals will be important additions.
A new station to serve Trentham or Barlaston, which I have been campaigning for, would also be welcome. I am actively engaging with Network Rail and the West Midlands Rail Executive on how they could deliver that. It would restore the rail connectivity that was lost with the suspension and demise of Wedgwood and Barlaston in 2004, and to the Beeching axe, which closed Trentham station in the 1960s. I have been on site with Network Rail at the former location of Trentham station, and I look forward to seeing Network Rail’s plans for how restored rail connectivity at either Trentham or Barlaston could best serve communities between Stoke and Stone.
Our transport problems in Stoke-on-Trent and north Staffordshire cannot be solved by buses alone. We have tried that. Cross-city journeys that were once reliably fast on our local train network are now painfully slow on multiple buses that are extremely unreliable because of severe road congestion. It is not that buses have no place—they absolutely do—but they solve different transport problems. They are not always the most viable alternative to the car, or the most effective at cutting road congestion, but that does not stop them being a valued part of the public transport mix.
I welcome the extension of the £2 fare until the end of this year; that will help get people back on buses. Passenger numbers were in steep decline even before covid, and costs were certainly a factor. I hope that the bus service improvement plan for Stoke-on-Trent, which provides all-day bus travel for £3.50, will galvanise that effect. However, if cross-city bus services are to be restored, much rests on delivering a seamless bus-rail transport interchange at Stoke station, which was promised under TCF. Even then, they will not cover the cross-city journeys that could easily be completed with a restored Potteries rail network. Ultimately, we need an Oyster-style system that will allow passengers to travel by both local bus and rail across the Potteries. That might eventually also apply to a tram network—something we are keen to see delivered in north Staffordshire. To work up those proposals to the required level of detail and engineering feasibility, some of the released HS2 moneys might need to be set aside for development funds. That worked in the case of the restoring your railway fund, where the initial hurdle is to prove that a transport problem exists, and that a public transport solution needs to be explored—although I repeat that a 25% local funding requirement is a major barrier to achieving that.
I want to mention briefly the improvements that might be needed on the west coast main line to make the network HS2-ready. In addition to Handsacre reverting to the original design, we must see action to address the issues at Colwich and create a properly grade-separated junction there. Consideration should also be given to what could be done to achieve four tracks at Shugborough. At Shugborough tunnel, there is a section where there are only two tracks. If that were addressed, there could then be four tracks all the way to Crewe. As with Stoke station, we need to look again at how best to optimise Crewe station. I have already mentioned the need to redouble the Crewe-Alsager section of the Crewe-Derby line, and the opportunity to reuse old sidings at Longport to relieve congestion on that line.
We also need to look at the capacity constraints at Crewe that HS2 Ltd failed to address, not least by drawing on Network Rail’s 2016 report, “Crewe Hub: improving capacity and connectivity for our customers”. That report noted that services have to cross over and share tracks at the Crewe North and South junctions, which cannot fit any more crossing train movements. There is an opportunity with the cancellation of phase 2 to focus on Crewe station to help address some of those constraints.
In particular, we should seriously consider delivering the bi-facing island platform on the Manchester independent lines to the west of Crewe station. That was envisaged in the hybrid Bill but subsequently scrapped by HS2 Ltd. I hope the Minister will revisit that, because using those independent lines with a bi-facing island platform will solve a lot of the conflicting movements and congestion issues at Crewe, especially for the Cardiff-Manchester train, and open up possibilities for more frequent local services and new services, and for restoring lines to Crewe. There can also be freight gains, and we need to remember that our transport network is not just for passengers but for goods and logistics.
Finally, I want to mention Northern Powerhouse Rail, which is obviously impacted by the decision on phase 2, given that it was proposed that it would share some of the track. However, I have recently seen alternative proposals for upgrading to a different, shorter route, which could offer a much more viable solution to NPR. I will share those proposals with the Minister, and I hope that he will give them serious consideration, as they could mean delivering NPR sooner, with greater benefits, and at a third of the cost of what is being proposed.
In conclusion, the cancellation of HS2 phase 2a promises to release resources that can make Staffordshire a place of great transport gain, instead of a place of great transport pain, which is what HS2 was likely to make it. For the many people who have had their properties compulsorily purchased, the pain has already been incurred, and that pain needs to be drawn to a final close, and properly compensated and addressed. At the end of the day, HS2 phase 2a just did not add up, or rather its costs kept mounting, but its benefits kept diminishing. We have an opportunity to focus on local benefits that will add up to a more coherent, productive and well-connected transport system across road and rail, for the benefit of more than just those elite travellers moving between our biggest cities. Meir station and the Stoke-Leek line must be among the local schemes that are delivered. I look forward to the Minister’s reply.
Wera Hobhouse (Bath) (LD)
It is a pleasure to serve under your chairship, Mr Davies. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on bringing this debate to the Chamber. It continues to be important to talk about HS2.
Rail should be a lifeline for our communities, connecting every part of the country through green public transport. After months and years of defending HS2 and spending millions of pounds preparing for it to go ahead, we are left with nothing but a missed opportunity, now that an essential part of it has been scrapped. I have long supported HS2. High-speed rail should modernise our railways, connect more of the country and increase capacity. Our rail network struggles with constant delays, cancellations and crowded trains. HS2 going all the way should have been an important step forward for all our communities.
However, HS2 faced death by a thousands cuts. Its delivery was characterised by Government mismanagement. It was hollowed out, costs were allowed to spiral out of control and the Government turned their back on Manchester and Leeds. Without additional capacity, any plans to improve our railways will be limited, and we will be left with a rail system that cannot effectively connect the whole country.
Public transport will be crucial to our meeting our net zero targets. It is a clean, green alternative to cars, and it showcases the benefits of net zero to our communities. Transport is the largest emitting sector in the UK. Rail produces over 70% less carbon dioxide emissions than the equivalent road journey. We must encourage a modal shift away from polluting transport modes towards greener public transport such as trains. The Government know that, yet Network North contains plans to move £8 billion meant for the railway to supporting road use. We need to win hearts and minds for net zero, and demonstrate to people that the green transition brings opportunities. However, at no point have the Government attempted to bring the public with them. Before cancelling the northern leg of HS2, they put a huge amount of doubt in people’s minds about cost and impact.
We should be positive about public transport as a solution. HS2 and phase 2 should have been sold as a great improvement to our rail infrastructure, rather than an expensive inconvenience. Each train unlocked by HS2’s extra capacity could have removed over 120 lorries from the roads. Britain’s highways are already among the most congested in Europe. The decision to scrap the northern leg of HS2 will lead to up to half a million more lorry journeys up and down the country, and a lot more congestion in our towns and cities.
Tens of thousands of jobs and a great economic opportunity have been lost. Why should anybody invest in the UK when the Government do not provide long-term investment opportunities? The Institution of Civil Engineers was clear that delaying HS2 would mean that construction firms shifted their focus to other countries. Our global trade is also affected, and the British Chambers of Commerce emphasised that we need more capacity for that reason. One in four sea containers arriving or departing from a port is carried by rail. Our global partners need to be able to trust that we can move at speed and with capacity. Now businesses have been left with a gap in their strategic plans, and where is the plan to establish Great British Railways? Why is the transport Bill delayed?
The whole HS2 debacle has exposed the lack of an industrial strategy. The Government should consider giving a statutory underpinning to the publication of a national infrastructure strategy every five years. We need certainty, and the scrapping of the northern leg of HS2 just shows that when we dither and delay about long-term strategic plans, all we have is loss and absolutely no gain.
Sir Gavin Williamson (South Staffordshire) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) on securing this debate.
I congratulate the Minister on making the right decision to cancel HS2 phases 2a and 2b. HS2 is absorbing £1 in every £3 spent on transport in this country. Many of my constituents and many people right around the country feel that that is the wrong priority. Mr Davies, I know that you have long campaigned for the bypass around Shipley. The cancellation gives us the opportunity to spend the money in areas where it is required. I will touch on a number of those areas.
A couple of decades ago, we saw the reopening of the Chase line, which serves not just Cannock and Rugeley but Landywood station in South Staffordshire. We have seen a transformation in communities. With the electrification of the line, passenger numbers have grown. That has also resulted from the change of timetable on the Birmingham to Shrewsbury line, with a large increase in the number of passengers. By getting investment right in local services, as opposed to white elephants such as HS2, we can transform communities and transform people’s lives.
I ask the Minister to take the opportunity to look at some recent changes that have been detrimental to communities. An example is the Birmingham-Stoke-Crewe line, where there has been a cut in services because of timetable changes. I would appreciate the Minister looking at that, because it is having a detrimental impact on many local stations along the line. With the money that will be freed up from the cancellation of this service, there are opportunities to make further improvements to our network. We could see the extension of the Manchester-Stoke service all the way to Stafford, which would have a real benefit for many stations across north Staffordshire.
My hon. Friend the Member for Stoke-on-Trent South mentioned the north Staffordshire railway link. Improving east-west connectivity is absolutely vital for moving freight transport off the busy west coast main line, to ensure it goes to places it needs to and gets more freight on rail and off our roads. It would be wrong not to mention our roads; I am delighted to see that, as a result of the cancellation of HS2, Staffordshire has benefited by an extra £4.4 million.
Let us be clear: the people of Kinver, Codsall, Wombourne, Great Wyrley, Brewood and every place across south Staffordshire want to see the potholes eradicated. That extra £4.4 million will go a long way towards blitzing some of those problems. I appreciate that it is not in his portfolio, but I ask the Minister to go back to the Secretary of State for Transport and say that we want more money to deal with those potholes right across Staffordshire. This cancellation can make a real impact, delivering better services in every community across Staffordshire, but let us make sure that that money is well spent.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
Diolch yn fawr iawn, Cadeirydd; it is a pleasure to serve under your chairmanship, Mr Davies.
I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing this debate. He mentioned the slogan “gain or pain”. The slogan for HS2 in Wales has become “The great Welsh train robbery”: it is a rip-off. It will be interesting to see what the scrapping of the Manchester leg of HS2 means for Wales. Scotland and Northern Ireland will continue to receive billions of pounds in Barnett consequentials from the remnant of the HS2 project from London to the English midlands; Wales, of course, will not see a single penny in direct consequentials from this project.
We recently heard the HS2 executive chair’s jaw-dropping admission that the cost of HS2 has ballooned to £66 billion. That means that Wales is now losing out on £3.9 billion in much-needed funds. I ask the Minister directly to outline why he thinks there is any argument for cross-UK equality while Wales is short-changed to the tune of £3.9 billion. What reasons can he give for not treating Wales in the same way as Scotland and Northern Ireland? Just think what £4 billion could do for Wales’s transport infrastructure, particularly in rural areas where bus services have been run into the ground for years.
Extra funding within Wales, managed within Wales, would not just benefit passenger services but allow us to develop freight opportunities, which would in turn strengthen our economy—just as the original railways did in 1804, with Richard Trevithick’s pioneering locomotive in Merthyr Tydfil and the slate exports from my own county of Gwynedd.
There is also the matter of the £36 billion that has been reallocated from the scrapped phase 2 of HS2 to Network North projects. Again, there is no clear indication whether Wales will receive full Barnett consequentials for money that is spent on services in England through Network North. There can be no excuse for denying Wales full funding on those. Will the Minister outline exactly what compatibility factors and quantum of consequential funding Wales will receive from English Network North projects?
The Government promised, with great fanfare, to pursue the electrification of the north Wales main line, yet the current £1 billion pledge is, at the very least, 50% below what is now estimated to be needed. The figure is based on a business case made nearly 10 years ago; costs now are likely to be north of £1.5 billion.
I ask Opposition Front Benchers whether they are content with Welsh rail being permanently underfunded in this way. If they form the next Government, will they commit to fixing this broken funding mechanism? Do they accept the principle that HS2 is an England-only project, and that Wales is owed full consequential funding? The Welsh Labour Government already do, and there is cross-party agreement on this in the Senedd. Will Opposition Front Benchers here be at odds with their colleagues in Wales?
The billions owed to Wales could be invested to reverse some of the savage cuts made to bus services, which of course also result from Westminster austerity. Over the past 15 years, rural bus services in Wales and England dropped by 52%. In my county of Gwynedd, bus service frequency has dropped dramatically, with change in service frequency measured in trips per hours between 2010 and 2023 dropping by 50.5%. The Confederation of Passenger Transport has estimated that a further 15% to 25% of all bus routes in Wales will be at risk of cuts or significant amendment over the coming year.
It is clear that the UK Government’s boastful rhetoric on transport funding is at odds with people’s real life experiences in our communities. The Government must match their rhetoric with action and commit to full funding from HS2 to Wales.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
It is a pleasure to contribute today, Mr Davies. I was a member of the Cabinet when the decision was made to change the investment and reinvest the £36 billion to drive economic growth across parts of the United Kingdom.
It may seem odd that I am here, but Felixstowe is actually part of Network North, which recognises the fact that the port of Felixstowe is the primary port of the United Kingdom. The connections that need to be made, particularly on the rail networks, are part of what will be financed at that point. That is the primary reason why I am here today. In particular, the document recognised the importance of the Ely and Haughley junctions. That investment will lead to six more freight trains per day from the port of Felixstowe, which is the principal route for the northern powerhouse and a lot of the work that will be done up there.
I completely understand that the Ely junction is rather complicated and has had a variety of costings over the years, as plans get more and more detailed. However, I call on the Minister to really push ahead and give the all-clear to Network Rail to re-form the team specifically on the Haughley junction. This is a much more modest project, which was estimated to cost about £20 million. I recognise that, with inflation, that may now be slightly higher. Nevertheless, there is an opportunity to get the team back together, get that work going, and to get spades in the ground, even if only on preparatory work this year. That will help our resilience, both with freight trains and with the passenger trains that link London to Norwich through the counties of Essex and Suffolk. On the project team being disbanded, I know that the Treasury has a part in this, but I am confident that the green light from officials or Ministers in the Department for Transport to Network Rail will enable us to get that together. It is a modest project that does not need much investment to get going.
I turn to the wider consequences of the cancellation of HS2. It is important that where farming land has been purchased, we seek for that land to go back into farming, recognising aspects of food security. I also welcome the fact that the £2 bus fare has been kept until the end of this year, without the anticipated rise. That is a good investment in local public transport. I am conscious that there has been significant investment through the major road network on the A12, for which Suffolk County Council has been granted funds that will help with the traffic and congestion problems that arise in the area. Those problems are anticipated to increase as a result of the construction of Sizewell C, which is now under way after the development consent order was triggered on Monday; I was pleased to be in Sizewell for the recognition of that.
There are other elements of the A14 that really need looking at. I encourage the Minister, as part of this wider investment, to ask the roads Minister—the Under-Secretary of State for Transport, the hon. Member for Hexham (Guy Opperman)—to look at this carefully. I know that there was a hugely successful project in Cambridge: it was brilliant and was done on time, and it might even have been done under budget. However, that should not be the end of the story for one of the most important parts of the major road network in terms of economic productivity.
My right hon. Friend the Member for South Staffordshire (Sir Gavin Williamson) talked about potholes. It is critical that the funds for potholes are ringfenced. There have been some shocking situations with potholes in my own constituency in Suffolk. I met the leader of Suffolk County Council last Friday to discuss some of them, and this Friday I am meeting the council’s cabinet member with responsibility for roads. There are issues with the thoroughfare in Woodbridge, aspects of Aldeburgh and parts of the main A12, and many other places are struggling, too.
I know that the weather has been a challenge and that there have been other issues. Suffolk County Council appointed a new contractor, which started in October; it is not doing the job that it should be doing. I am pleased that the council has recognised that: the contractor is being hauled in front of the council leader. It is important that we keep that scrutiny and that the Government continue to ensure that taxpayers’ money is delivered for the benefit of taxpayers, quickly, promptly and effectively.
Rob Butler (Aylesbury) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) on securing this debate.
I stood for election in 2019 in complete opposition to HS2. As soon as I arrived in Parliament, I worked hard with colleagues in the HS2 review group to try to get the entire project scrapped by the then Prime Minister Boris Johnson, but sadly we were unsuccessful. Since the approval of phase 1, I have been tireless in trying to secure better mitigation for my constituents and in holding HS2 Ltd to account when things go wrong, which I am afraid to say they do regularly.
My Aylesbury constituency has been perpetually, permanently blighted by the construction of phase 1 of HS2. I am very pleased that many colleagues here in Westminster Hall today will not suffer such blight with the construction of phase 2. From Fairford Leys to Walton Court, and from Stoke Mandeville to Wendover, construction is causing untold misery for residents, with noise, traffic and daily disruption to everyday life.
At last, in October, we were given a glimmer of hope that we would finally receive some tangible benefit from HS2 through the cancellation of phase 2. Two projects in my constituency appeared on the list of 80 projects that were part of the Network North plan: the south-east Aylesbury link road and the eastern link road. Those two projects are critical to the future success of the town. They will ease congestion, reduce air pollution and help to spur economic prosperity, which are all things that we can all agree are good for our communities. They are essential to support the huge amount of house building that we have already seen in and around Aylesbury and the thousands more houses that will be constructed in the coming years. I am very grateful to the roads Minister, who met me to discuss the roads projects and promised to help me get them over the line.
However, recent communication from the Department for Transport has caused me alarm and made me think that in fact the money for those projects may not be given to my area in the way that we were led to believe, if it is given at all. That would be wholly unfair and profoundly wrong, given the blight that we have suffered and continue to suffer.
Today I seek reassurance from the Minister present, who knows Aylesbury well, that he will do everything in his power to make sure that the two original projects in Aylesbury outlined on that list of 80 projects for Network North will indeed be delivered in their entirety in the Aylesbury constituency. Ultimately, the simple fact of the matter is that the longer we delay unlocking those funds for what are essential projects that will one day have to be delivered, the more the costs will escalate and the bigger the final bill will be. That would benefit absolutely no one. My town is absolutely gridlocked because of this white elephant of a project. We desperately need our share of the money that is being saved by the decision to cancel phase 2A of HS2. The people of Aylesbury deserve absolutely nothing less.
I would just say that we are not opposed to infrastructure at all in Buckinghamshire. Indeed, many people locally support the Aylesbury link of East West Rail. That is the railway that we want in Buckinghamshire, but it always seems to be just out of our grasp. I remind the Minister that we are very keen to see it getting the go-ahead; I seek any undertaking on that that he might be able to give me. We want railways that are right for our communities, right for our society and right for our economy.
Several hon. Members rose—
Philip Davies (in the Chair)
Order. I am afraid that for our final two speakers, I will have to drop the time limit to three minutes.
Sir William Cash (Stone) (Con)
Having voted against this and argued against it for the best part of a decade, I was delighted by the Prime Minister’s decision and by the Minister’s engagement. I have had many, many meetings with Ministers and so forth about the issue over a very long time.
I congratulate my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) on his extremely powerful speech and on using his experience as a member of the Transport Committee to amplify the issue. That is in addition to the work of Trevor Parkin in my constituency, who has done the most remarkable work on this area.
The line was due to pass straight through my constituency, from top to bottom, and we are thoroughly relieved that it has been stopped after all this time. It is still causing misery for many of my constituents, however, and we are in the midst of negotiations with HS2 over the sale of their property and land. Communication has been slow or non-existent and, in the meantime, the works and the spending of public money have continued. I urge the Government to closely monitor the winding-up of HS2, intervening when necessary, and to make sure that compensation is paid. We will debate this issue in Westminster Hall again tomorrow.
Finally, I will simply add that, along with the money that is earmarked for improvements in transport projects, I agree with everything that has been said in this debate about how regional, national and east-west networks must be improved. Levelling-up has been a tremendous opportunity, but that has to be delivered. I am grateful to my constituents for the support that they have given to me and to the Minister for the meetings that we have had and for coming to the right decision.
James Grundy (Leigh) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies.
Like my hon. Friend the Member for Aylesbury (Rob Butler), I was an anti-HS2 campaigner long before I became a Member of Parliament. I declare an interest: phase 2b of HS2 did run through the Grundy family farm. I recognise many of the issues raised by colleagues—communities paralysed for a decade by uncertainty, businesses unable to invest, people unable to sell their homes.
We were successful in getting HS2 scrapped. I am delighted about that and would like to pay tribute to two colleagues. One of them, who is sitting here, is my hon. Friend the Member for Warrington South (Andy Carter). He fought manfully for his constituents in trying to stop HS2. The other is my right hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady), who consistently stood against this project for a very long time.
There was a real issue with what was proposed. The people of Greater Manchester wanted better connections between Manchester and Liverpool, because those are their commuting patterns. My hon. Friend the Member for Warrington South has said to me that when his constituents get on the train in the morning, half go to Manchester and half go to Liverpool. The idea that people in constituencies such as ours would suddenly all decide to commute to London from central Manchester because the journey is 15 minutes faster was slightly optimistic.
The other problem was that the changes would have meant that places such as Warrington Bank Quay in my hon. Friend’s constituency would have become regional backwaters. If constituents of mine who would previously have gone via Warrington—as I do when I travel down here—had wanted to travel on the new HS2 line running through our constituencies and connecting with part of my hon. Friend’s constituency, they would have had to travel 30 miles north, through heavy traffic, to Preston. They could not have travelled on the line that went through our constituency unless they went to Preston to catch the train. I thought that was profoundly silly.
My final words—the most telling, I think—are these: “We will get all of the disruption with none of the benefits in an area with the worst railway accessibility in the country. Why should we accept that?” Those are not my words, ladies and gentlemen, but those of Andy Burnham when he was the MP for the Leigh constituency and expressed his concerns about the project to his constituents.
On Network North, I am delighted that the money is being redistributed to more popular transport projects such as the bypass, which I raised at Prime Minister’s questions last week. I look forward to meeting the Minister to discuss bringing forward those projects.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
It is a pleasure to serve under your chairship, Mr Davies. I congratulate my Transport Committee compatriot, the hon. Member for Stoke-on-Trent South (Jack Brereton), on setting out the issues so comprehensively. I disagree with most of his conclusions, but that will not come as a surprise to him. He described Network North as a coherent programme, which I thought was stretching the truth a little. Nevertheless, he led the debate very well.
The hon. Member for Lichfield (Michael Fabricant) spoke about the money spent in the west midlands with regard to Network North, which highlights how ridiculous Network North is; that spread means the money is being redirected from the north. The hon. Member for Stone (Sir William Cash) spoke about the reopening of Stone station, but he missed the opportunity to talk about high-speed rail to Rwanda. Perhaps he will bring up that issue later. It is much more likely to get to Rwanda than to the Scottish border.
The hon. Member for Bath (Wera Hobhouse) spoke of death by a thousand cuts, and the fact that the Government have turned their back on Manchester and Leeds. I wholeheartedly agree, but they have also turned their back on all the areas north of Manchester and Leeds that are served by the west coast mainline. The right hon. Member for South Staffordshire (Sir Gavin Williamson) called HS2 a white elephant. It is certainly becoming one, but that need not have been the case.
The right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts)—I am sorry if I have butchered the pronunciation of her constituency—was absolutely right that Wales has missed out on Barnett consequentials from this project. I have raised that issue many times myself. If it is good enough for Scotland and Northern Ireland, it is good enough for Wales.
The right hon. Member for Suffolk Coastal (Dr Coffey) understandably focused on the potential benefits of Network North for her local area, and spoke of the return of any farmland purchased for phase 2 delivery. The hon. Member for Aylesbury (Rob Butler) spoke of the benefits of the local roads that may now be built as a result of HS2 cuts. Finally, the hon. Member for Leigh (James Grundy) understandably spoke of the desire for better rail links between Manchester and Liverpool.
It is absolutely right that the GB rail network is expanded. It is ludicrous that HS2 is the first mainline railway to be built on this island for more than a century. That it has taken until now for it to happen is a damning indictment of decades of short-termism, penny pinching and blinkered policies. In less than 50 years, France has built nearly 1,800 miles of TGV lines. If we are lucky, it will take the UK 20 years to build less than 8% of that length of track.
Gavin Newlands
I will if the hon. Gentleman is very brief, which is not in his nature.
Michael Fabricant
I will try to be on this occasion. Does the hon. Gentleman accept that in France commuter lines run a lot slower than in the United Kingdom? France has half the density of population and does not go through the same procedures as us on planning permission—it literally railroads the trains through.
Gavin Newlands
I recognise some aspects of what the hon. Gentleman said, but I disagree with other conclusions that he has drawn. It is obviously up to the Government to change planning regulations if they wish, but they have got themselves into a bit of a nightmare with HS2 land purchases.
We have done all that for the bargain price of £60 billion. I have said many times here and in the main Chamber that in the UK we are often too timid in taking on big infrastructure projects. Incremental change is good, but sometimes a big bang is the only thing that will change things fundamentally for the better. Many of us supported HS2 because behind the headline of a new supercharged branch line south of Birmingham was a substantial increase in capacity on the west coast mainline, and the broader rail network would be freed up when traffic was switched on to the new lines.
Gavin Newlands
I will come back to the hon. Gentleman if I have time. He gave quite a long speech at the start, although I appreciate that he led the debate.
HS2 would not just have helped with the projected increase in passenger numbers, but would have freed up freight paths that could have played a huge part in modal shift by getting freight that is currently on the back of heavy goods vehicles on to rail. The cancellation of everything but phase 1 means that there are no capacity gains north of Birmingham, and any new services that were supposed to result from its capacity extension will somehow have to fit into the already full-to-bursting track—again, all for the bargain price of £60 billion. Only Great Britain could chuck more than £60 billion at a new cutting-edge, gold-plated railway line and end up with slow services to the majority of the country. At £8,000 per inch, it will cost a monstrous sum of money, delivering nothing to the north of England and Scotland, but downgrading services.
Last week at the Select Committee, we heard from the chairman of HS2, who confirmed to the hon. Member for Easington (Grahame Morris) that capacity between Manchester and London will be reduced as a result of the Government’s decision. Prior to that, we heard from the rolling-stock companies, which outlined how the use of classic compatible HS2 rolling stock currently planned by the Department for Transport could result in a 24-minute deterioration in journey times between Glasgow and London—so there would be high-speed rail for those in Birmingham, less so for those north of Manchester. Prior to that, the Committee heard from the former head of the Strategic Rail Authority—someone I hope the Government would accept knows his onions—that the decision to cancel everything bar phase 1 means that
“there is no material increase in capacity north of Lichfield”.
We are left with a shuttle service between two cities in the south of England that already have nearly 180 daily services between the stations, all for the bargain price of £60 billion.
Thirty years ago, the channel tunnel was meant to herald direct services from all parts of this island to the continent. Those of us outside the M25 were promised those services, adding to the links enjoyed by London and Kent. Of course, those regional services never happened. At least some of the trains that cost the taxpayer over £200 million—£400 million at today’s prices—got some use, later finding service on the French national railway in a happy bonus for those passengers at the expense of those of us who did without. Meanwhile, the Nightstar sleeper trains were flogged at rock-bottom prices to VIA Rail in Canada at a third of the price they were worth, and the promised link between the original high-speed line leading from the channel tunnel to the rest of the inter-city network never materialised—and it is extremely unlikely that it ever will.
To recap, trains meant for Manchester, Glasgow, Cardiff and Edinburgh ended up in Paris, Brussels, Toronto and Montreal. Those trains were paid for by the UK taxpayer but flogged overseas for a huge loss. The infrastructure promised by Government to improve regional connectivity failed to materialise, all while the rest of the UK—including Wales, with no benefit—paid tax into a Treasury that is only happy signing blank cheques for infrastructure that benefits London and the south-east. In other words, the HS2 debacle is not the first time Westminster and the UK Government have promised and failed to deliver for this island outside the M25. It will absolutely not be the last.
In contrast, the SNP Scottish Government have delivered 217 km of electrified track in the last decade. That is a 32% increase, including the Paisley Canal line, the Glasgow and Edinburgh to Stirling, Dunblane and Alloa line, Edinburgh to Glasgow via Falkirk High, Cumbernauld and Whifflet, Glasgow to Barrhead—with a new electrified services between Glasgow and Barrhead just starting in the last few weeks—and the East Kilbride line currently under way, with the preparatory work for the next project ongoing. We have new stations at Inverness airport, Reston, Robroyston, Kintore, East Linton and Laurencekirk. We have reopened the Stirling-Alloa and Airdrie-Bathgate lines, along with the hugely successful Borders Railway, and the Levenmouth link in Fife is nearly complete. We have the biggest rolling-stock order in ScotRail history, pre-covid passenger numbers were up 19% since 2011-12, the peak fare removal pilot has been extended and, of course, latterly ScotRail has been nationalised.
Only yesterday, we saw the real issues with the privatised model, given the reports about the Avanti presentation. That highlighted all that is wrong and the inherent waste of passengers’ and taxpayers’ money in the current privatised model. Avanti and other operators, including foreign state-owned rail operators, are laughing at us. One slide was headed:
“Roll-up, roll-up get your free money here!”
The presentation described how the Government asked the company to deliver good customer service and projects before sneering,
“then they pay for it…nearly all of it!”
Performance-related payments for staff were
“too good to be true”.
In the case of Avanti management, I think most of us would certainly agree that that is an understatement.
When the former Transport Secretary, the right hon. Member for Welwyn Hatfield (Grant Shapps), announced the creation of GBR, the plan was for it to take over the development of rail strategies from the DFT. That is desperately needed because the omnishambles of HS2 has shown how catastrophically bad rail policy and management has become. We still do not know when legislation will be introduced to establish GBR, but whatever the shape of the post-election Administration, it has to be one of their transport priorities. We cannot end up waiting another century for network expansion to be on the agenda again and we cannot afford another £60-billion disaster.
Stephen Morgan (Portsmouth South) (Lab)
It is a pleasure to serve with you in the Chair, Mr Davies. I thank the hon. Member for Stoke-on-Trent South (Jack Brereton) for opening this important debate with a very thorough contribution on the issues affecting his constituency. We have had a range of contributions this morning, with speeches and interventions from right hon. and hon. Members.
The hon. Member for Stoke-on-Trent South was right to flag the huge waste and financial costs of the decisions by the Government and the need for clarity and transparency on future plans. He was also right to say that we need to make sure that we have a strategy for rail that meets the demands of the future, improving connectivity and addressing capacity needs as well as the strategic value of freight.
The hon. Member for Bath (Wera Hobhouse) said that the Government had turned their back on the north. She talked about the need to be positive about the contribution of rail to our communities and she set out the need for investment in jobs for our economy. Right hon. and hon. Members also spoke about the need for clarity on future plans for rail, for both passengers and freight.
Whatever we think of the decision, it is hard to put into words how much of a mess the Government have made of HS2. It is easier to identify who is responsible for this fiasco. As Chief Secretary to the Treasury and then Chancellor, the right hon. Member for Richmond (Yorks) (Rishi Sunak) allowed costs to soar and public money to go down the drain. As Prime Minister, his weak leadership and mismanagement are what led to the chaotic decision made in Manchester in October and the fallout that has happened since—a decision that two former Tory Chancellors have warned is an act of huge economic self-harm; which the Tory Mayor of the West Midlands has described as “cancelling the future”; and which the new Foreign Secretary said shows:
“We can no longer think or act for the long-term as a country”.
It was a decision that the Prime Minister made without consulting our metro Mayors or any of the communities and businesses that depend on the project. The decision means that the Government’s flagship levelling-up project reaches neither central London nor the north of England, and it ensures that a now staggering £65-billion high-speed train moves off the motorway on to a gridlocked road the second it hits the north.
As we heard earlier, last week the chair of HS2 revealed that the Government’s solution, cooked up in a conference hotel room in Manchester, to send HS2 trains on the west coast mainline north of Birmingham will mean fewer seats and longer journeys. What a result after 14 years and £65 billion spent! To make matters worse, in its place the Government announced Network North—
Stephen Morgan
We have limited time, so I need to make progress. The Government announced a plan so rushed and ill-thought through that it included an extension of Manchester’s tram link to the airport, a project that opened nine years ago; an upgrade to the A259 to Southampton, a route that does not exist; and a
“brand new rail station…for Bradford”,
a project that has been scrapped and reinstated by three Tory Prime Ministers in a row.
On investigation, it has quickly become clear that the vast majority of Network North announcements relate to projects that have already been built, have already been announced, or do not exist. Just when we thought the fiasco could not become any more laughable, just a week after the announcement, the Prime Minister revealed that the Network North plans were only “illustrative”.
Do Ministers really think that people will fall for that? They will not, because they have had enough of the delays, cancellations, rising fares and overcrowded trains that they have to endure under this Government’s broken rail system, and enough of being told that Network North is going to transform transport in their community, and then seeing the money spent on potholes in London. They have had enough of the broken promises by a broken Government. Labour knows how vital infrastructure is for economic growth, connectivity and attracting investment. After this fiasco, we know that the north and the midlands—the entire country—cannot afford to repeat the same mistakes that we have had to ensure over the past decade.
Stephen Morgan
No, I will carry on because I am conscious of time. The hon. Member had plenty of time to speak earlier. We have launched an independent expert review of transport infrastructure, headed up by Jürgen Maier, so that we learn lessons from this mess, ensure that we deliver transport infrastructure faster and more effectively, and ensure that communities across the country can see the benefits.
When a Government make huge decisions on the fly without bothering to consult experts or the communities that they will affect, the consequences are vast. I have heard from many small and medium-sized enterprises whose long-term business plans were built around HS2—businesses across the country that will now be letting people go because of the chaos of the last few months. People’s homes, land and businesses have been sold off, and they will now be asking why. Three months on, the Government still have many questions to answer.
Michael Fabricant
On a point of order, Mr Davies. The whole nation is dying to know whether Labour will reinstate HS2 phase 2a. Is it in order for the hon. Gentleman to refuse to take any questions?
Philip Davies (in the Chair)
Having been here as long as he has, the hon. Member for Lichfield knows that whether to take an intervention is entirely down to the person speaking; it is not for anybody else to decide.
Stephen Morgan
Thank you, Mr Davies. I am happy to answer the question from the hon. Member for Lichfield: the Government have blown such a huge hole in the HS2 project that, until we know what situation we will inherit, it would not be right for me to set out what we would do. The Government have created this mess.
I would like to put some questions to the Minister. Has an economic assessment been made of the impact of the decision? How much more taxpayers’ money will he spend on phase 1 through rescoping, and how high should the public expect that bill to be? What is the impact of the decision on rolling-stock orders, and how many supply chain businesses does he expect to go under as a result? What plan do the Government have to tackle congestion on the west coast main line, which leads to many cancellations and delays across the midlands and north, and which Network North does nothing to resolve? How much more congestion does he expect to see on our roads, given that the Government have spent 14 years focusing on this transport project, which they have now failed to deliver?
I look forward to the Minister’s remarks, and I again thank the hon. Member for Stoke-on-Trent South for securing the debate.
The Minister of State, Department for Transport (Huw Merriman)
It is a pleasure, as always, to see you in the Chair, Mr Davies. I thank my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) for securing this important debate on HS2 phase 2a and Network North, and for the manner in which he set out his case.
As has been mentioned, on 4 October last year, the Prime Minister announced that phase 2a of HS2, along with phase 2b—the western leg—and HS2 east, would be cancelled, and that funding would be redirected towards alternative transport projects in the north and midlands through Network North. Let me give a bit of the background and rationale. The HS2 programme accounted for over one third of all Government transport investment. That prevented us from spending money on other genuine priorities, and it could be argued that, if we were not investing in the areas that matter to people, we were doing little to improve the journeys that people make the most.
Network North will drive better connectivity across the north and midlands, with faster journeys, increased capacity, and more frequent and reliable services across rail, bus and road. Rather than delivering phase 2a, the phase 2b western leg and HS2 east, the Government are redirecting £36 billion to hundreds of transport projects across the country, one of which, of course, is in Shipley.
Huw Merriman
I will come to the hon. Member shortly.
Every region is now set to receive the same or more transport investment, on an unprecedented scale. We will still deliver HS2 between Euston and the west midlands as planned: 140 miles of new railway and new stations at Old Oak Common and Birmingham interchange. HS2 tracks will end with two branches in the north: one to Curzon Street station in central Birmingham and one to Handsacre, near Lichfield, where HS2 trains for Manchester, Liverpool and Scotland will join the west coast main line.
Delivery is well under way, and there are 350 active sites. Initial high speed services will start between 2029 and 2033, and will run between Old Oak Common in west London and Birmingham Curzon Street. We will appoint a development corporation, separate from HS2 Ltd, to manage the delivery of the project at Euston, and create a transformed Euston quarter that will potentially offer up to 10,000 homes.
I turn now to land and property safeguarding with regards to the disposal that will come into effect now that phase 2a is not being completed, and I will then come to point made by the hon. Member for Portsmouth South (Stephen Morgan)—that it is not possible at the moment for the Labour party to determine what it will do. If he listens to this part, he will realise it is entirely possible. We know it is just a smokescreen: the Labour party cannot make a decision because it does not know what to do.
Safeguarding on the former phase 2a of HS2 between the west midlands and Crewe will be lifted very shortly. The lifting of safeguarding does not in any way trigger the start of a sell-off of property already acquired. HS2 Ltd has ceased the issuing of any new compulsory purchase notices on phase 2a and is now working to close out all transactions across phase 2 that were outstanding on 4 October. Where we can agree with property owners to withdraw from an agreed acquisition, we will do so, but in many cases we are under a legal commitment to proceed. In others, we have discretion and we are examining those on a case-by-case basis, considering the circumstances of the claimant and the implications for the taxpayer to identify the right way forward.
We are currently developing the programme for selling land acquired for HS2 that is no longer needed, and we will set out more details in due course. We will take the time to develop this programme carefully to ensure that it delivers value for money for the taxpayer and does not disrupt local property markets. Under what are known as the Crichel Down rules, land and property acquired through compulsory purchase or under statutory blight, and which is no longer required, should in certain circumstances be offered back to its former owner at its current market value. We will of course engage with all affected communities throughout this process.
Therefore, the choice will be quite clear for the Labour party. As I said, the safeguarding will shortly be lifted, and the land is not owned by the Secretary of State; it is owned by other property owners who are stymied at the moment from doing what they may want to do with it because safeguarding is imposed. No land will be sold off until we are ready. It is perfectly feasible for the Labour party, if it supports HS2 going ahead, to say that it will put the safeguarding back on, which would be relatively straightforward. As none of the land will have been sold, it can just continue.
However, the Labour party will not say that because it does not know whether it wants it to go ahead. The hon. Member for Portsmouth South mentioned going to Manchester and not committing to HS2 phase 2a or 2b, but that is exactly what the Leader of the Opposition did last week. He went to Manchester and said, “We will not proceed with that project.” Even worse, I am going talk to all these projects, and hon. Members are here to talk them up, but where are the Labour MPs to talk up these projects across the north and the midlands? Nowhere to be seen. Those projects have not been committed to, so where will the £36 billion that we have committed to these projects go? The silence is deafening.
Huw Merriman
I am not going to give way because I am going to come to the hon. Lady shortly. I want to refer to the points that my hon. Friend the Member for Stoke-on-Trent South raised on the local causes. He said that he is delighted with the decision on Meir station—I was delighted to join him up at Meir to see the site— and since then, he has been really successful in his campaign. That project aims to provide a new station in the town of Meir on the existing Crewe-Derby line, and it was awarded initial funding to develop a strategic outline business case as part of the first round of the restoring your railway ideas fund. The full business case is expected to be submitted in July of this year, and decisions on further funding for the project will be made within the context of the broader programme. As he knows, his station is mentioned in Network North; we are committed to it.
My hon. Friend mentioned Stoke and Leek, and a bid to reinstate the railway line between Stoke-on-Trent and Leek has been made to the restoring your railway programme. The proposal examines the potential for six intermediate stations on the route, and the Network North announcement included the intention to progress the Stoke-Leek restore your railway scheme to delivery. I am grateful to him for all his work on that.
Longton station is another that I visited with my hon. Friend. That original station project includes public realm, cycle hub, waiting shelters and accessibility improvements. The council has faced a number of challenges in relation to cost pressures, delays and technical issues. The estimated cost of the Longton project is now forecast at £3.5 million to £4 million, compared to £1.1 million at the time the funding was awarded. We are committed to working with Stoke-on-Trent City Council—Network Rail has entered into a development services agreement, and the council has indicated that the project is forecast to complete by September 2025. On junction 15, which my hon. Friend mentioned, improvements are being developed and delivery would be on a similar timeline as improvements to the A50. Those are all subject to a supportive business case.
On a point mentioned by my hon. Friend the Member for Lichfield (Michael Fabricant), I can assure him and my hon. Friend the Member for Stoke-on-Trent South that HS2 will be delivered with a branch to Handsacre near Lichfield. In the absence of phase 2a, Handsacre remains the only connection between the high-speed infrastructure and conventional rail. I can confirm that work is being undertaken to assess the options to enhance the railway in the Handsacre area, to support train services and capacity, making use of the £500 million set aside in Network North. I can give my hon. Friend the Member for Lichfield that reassurance, which he can pass on to our fantastic Mayor of the West Midlands, Andy Street.
I will turn to the other contributions—none from Labour MPs because they did not make any. I will start with my right hon. Friend the Member for Suffolk Coastal (Dr Coffey) and thank her for again championing the Ely and Haughley capacity enhancement project. That will increase freight trains from 36 to 42 trains a day from the port of Felixstowe, allowing trains to go into the midlands, rather than further south. Network North has confirmed its support. It is a project that I have long championed but we have been unable to put on the list due to HS2 spend. Because of this decision, we now can. The next steps are for a full business case, and we are engaging with the Treasury. I take my right hon. Friend’s point about getting back the Network Rail team on the Haughley preparation work project. That is something that we are looking at in the Department, and I thank her for her points.
I will turn to other contributions. My hon. Friend the Member for Lichfield, in addition to his other intervention, referred to funding for the cross-city line. Perhaps I can point him towards the city region sustainable transport settlements and the local integrated transport settlements, which are two funds from Network North. As well as the list of projects we have committed to deliver, we are also committed to deliver money on a devolved basis, so that local transport authorities can determine on which projects they want to spend their money.
For example, an extra £1 billion has been put into the city region sustainable transport settlements fund for the west midlands, which takes it up to £2.64 billion, allowing the west midlands to make its own choices, because there is devolution within this programme. My hon. Friend the Member for Stone (Sir William Cash) mentioned the case for new stations, showing their business case worth. He is absolutely right regarding Stone, and we hope that will be the case for Meir. I also want to thank him for his work with Trevor Parkin, and for the time he took to drive me through his constituency, so that I could see the impacts that he talked about.
My right hon. Friend the Member for South Staffordshire (Sir Gavin Williamson) asked me to go away—in the most polite terms, I am sure—and assess the west coast main line timetable. I am happy to do so and will write to him. I hear his call for more pothole funding for his roads. Every hon. Member will have seen money given to them for pothole funding. It is essential that it is spent well, and I hear his call that more should be spent.
I now come to the contribution from the hon. Member for Bath (Wera Hobhouse), which I found extraordinary. She made the case for HS2, and, of course, I agree. That is why we are delivering 140 miles of it. I find it extraordinary that I was delivering leaflets in Chesham and Amersham for the Conservative party, talking up the project on similar lines to hers, yet the entire Liberal Democrat campaign in Chesham and Amersham was to run down HS2 and call for it to be cancelled. I have no issue with individual Members campaigning against HS2 because they always have done, but for a party in a by-election to focus its entire campaign on cancelling a project only to then stand here and talk it up—sorry, only a Liberal Democrat could do that.
The leader of Plaid Cymru asked what HS2 does for Wales. The reality is that it was always an England and Wales project, which is why with Network North we are allocating £1 billion to the electrification—
Huw Merriman
I will not give way. We are allocating £1 billion to electrification in north Wales, and we will now further that business case.
I will give my hon. Friend the Member for Aylesbury (Rob Butler) the assurance he sought. We spoke about the two road projects, and I will take that back for consideration. He has my commitment. I drove through Aylesbury last Saturday, and he knows I know it well.
I am also looking forward to visiting my hon. Friend the Member for Leigh (James Grundy) next week.
We have a plan and we know what the plan is, though people may disagree with it. My challenge to the Labour party is: what is its plan? Will it go ahead with HS2? If not, will it commit to some of these amazing projects across the country that the HS2 funding will deliver?
Jack Brereton
I thank the Minister for his response and all those Members who contributed to a full debate. I do not necessarily agree with all the Opposition Members, but I thank them for their contributions. I hope we can continue to work with the Minister and the Government to deliver on many of the Network North projects we have now seen come forward, because they will make a huge difference, far more than could ever have been realised through HS2.
Question put and agreed to.
Resolved,
That this House has considered Network North and the cancellation of HS2 Phase 2a.
Defined-Benefit Pension Schemes
(3 months, 3 weeks ago)
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Mr Alistair Carmichael (Orkney and Shetland) (LD)
I beg to move,
That this House has considered the regulation of defined benefit pension schemes.
After the heat of the debate on High Speed 2 that has just ended, I hope that we might be able to generate a little more light. The subject of defined-benefit pension schemes and their regulation does not always lead to that sort of excitement, important though it undoubtedly is. I suppose that in speaking about defined-benefit pension schemes I should declare an interest. Defined-benefit pension schemes, many of which are of course final salary schemes, were what people like me were part of when we were first elected to serve here. Then, in about 2011 or 2012, I think, we moved to a career average earnings scheme.
The Institute and Faculty of Actuaries, in a briefing provided ahead of today, says:
“This is a particularly broad and complex topic”—
a warning that I think we should all be willing to take. I am not much given to dealing with broad and complex topics, especially where hard sums are involved. I always take a fairly simple view of these things, and when it comes to pensions, some things are worth bearing in mind and never losing sight of. The first of those—I will come back to this point in a minute—is that a pension is in effect a matter of contract between an employer and an employee. It is, in other words, simply salary paid at a later stage in the employee’s life. The relevance of that is that when we anticipate changes in the way in which pensions are to be provided, we have to make allowance for the fact that people will have made decisions in their life about how they are going to provide for themselves at a later stage in their life.
Thirty years ago, I was a part of the established civil service. I was a prosecutor, a procurator fiscal depute, working at the Crown Office in Edinburgh. I worked with many talented lawyers who were able to do remarkable things as prosecutors, and most of them would have been able to command much higher salaries had they worked in private practice. They did not do so for a variety of reasons. Some had a particular commitment to prosecution and to public service, but they also had an understanding that as members of the civil service with a final salary scheme, a defined-benefit scheme, they would trade that off against the higher salary that they could have got when they were working. It is worth noting in passing in relation to the BP pension scheme, about which I will speak later, that when BP closed its scheme to new entrants, it compensated for that with a 20% increase in salary for those who were still in employment.
When we anticipate a change, we always recognise that there is a greater importance of maintaining benefits for those who are in a later stage of their career. This is currently coming to my attention and to the attention of many right hon. and hon. Members. Indeed, the Select Committee on Work and Pensions has recently taken an interest in it, because of the experience of pensioners who are beneficiaries of schemes such as BP’s, and Shell’s scheme is another. Although there are differences in the terms of the trust deed for the Shell scheme, the outcome in terms of the beneficiaries is that they are actually in lockstep with each other.
Justin Madders (Ellesmere Port and Neston) (Lab)
The right hon. Gentleman will not be surprised to learn that there are many Shell pensioners in my constituency. I have been in correspondence with Shell about its decision last year not to award an inflation-matching increase in the pension, and it told me that it did not have to do that. When it was pointed out that it had given a similar inflation-matching rise to Dutch pensioners, Shell’s response was that there are different rules and regulations for managing the Dutch schemes. That highlights the essence of the problem that we are trying to deal with.
Mr Carmichael
It absolutely does. Representing a constituency that had the Sullom Voe oil terminal managed by BP for many years, I suspect that the reasons why the hon. Gentleman has Shell pensioners in his constituency and I have BP pensioners in mine are very similar.
Jim Shannon (Strangford) (DUP)
I commend the right hon. Gentleman for bringing forward this debate. It is a critical issue, and it goes beyond the two pensions that he has referred to. Does he agree that the Government—I say this with great respect to them—have had adequate warning that we are heading towards a UK-wide pension crisis if we do not make changes to pension schemes soon? Will he join me in asking the Department for Work and Pensions to begin, today, to take adequate steps to rectify the precarious position we are currently in, on behalf of our constituents?
Mr Carmichael
The hon. Gentleman strikes at the reasons why I brought forward this debate. We might benefit from a wider and longer ventilation of the issues at some later stage, but we have 30 minutes today, so let us use it. I had the opportunity to discuss the issues yesterday with the Minister, and he is alive to the concerns.
When it comes to regulating pensions, and indeed other similar financial provisions, the law of unintended consequences is never far away. The Government are right to be cautious, but they have to be alive to the fact that this is an emerging crisis. What happens to the beneficiaries of the BP and Shell pension schemes today could happen to just about any pensioner the future. As those pension funds come to a point of greater maturity, the concern that we hear from BP, Shell and other pensioners is that decisions are being taken not in relation to their best interests, which is the primary fiduciary duty of the trustees, but because of other concerns. There is a significant number of significant issues for the Government to look at in relation to pension regulation, not least of which is the balance between the companies that have created these pension funds in the first place and the independence of the trustees.
Wendy Chamberlain (North East Fife) (LD)
With 60,000 BP pensioners impacted, it is unsurprising that I too have been contacted by constituents. There is a wider debate about the fact that if multinational companies such as BP and Shell are making these decisions, smaller companies will end up making similar decisions if something is not done. My right hon. Friend mentioned appointed trustees. Does he agree that BP has a duty to take the advice of its appointed trustees to prevent real-terms cuts to pensions? Otherwise, what is the point in having trustees at all?
Mr Carmichael
I almost entirely agree with my hon. Friend. The way in which the BP pension fund works is that the trustees have virtually no discretion up to 5%, and then from 5% to 9% there is a discretionary level. In the last year, the BP trustees recommended 9% but the company refused to pay it. I can see that there might be good reasons why a company does not want to be tied to that discretionary level, but there must be a reason for refusing to pay it. As far as I can see, the BP and Shell response has been, “No, we don’t need to give you a reason.” They play off defined benefit against defined contribution; they play off against pensioners in other parts of the world because they are transnational corporations; and they come up with other points.
That is why it is so important that when we talk about this issue, we hold right at the top of our minds that this is a matter of contract between the employer and the employee. If they were still working and receiving this money instead of receiving it as a pension, we would not tolerate it. If it is not a good enough way of dealing with somebody’s salary, it is not a good enough way of dealing with somebody’s pension.
When Nick Coleman from the BP Pensioner Group, who provided me with an invaluable briefing in the last few weeks, gave evidence to the Work and Pensions Committee, he touched on the point about the relationship between the trustees and the company, and the independence of the trustees. He produced something that, frankly, shocked me and shocked Committee members as well. He said:
“We checked the pension fund company’s annual returns to Companies House the other day and found that for the first time ever, they had added some words saying the duty of the directors, among the normal things you would expect, was also to maximise BP’s long-term shareholder value.”
As a trustee, that is a quite remarkable addition to the trust’s purposes, because the fiduciary duty is the duty of utmost good faith to the beneficiaries. If there is a conflict between the beneficiaries and the company, the trustees’ duty is to protect the interests of the beneficiaries. Nick Coleman went on:
“We are saying that the solution here is to somehow reinforce the requirement that trustee boards are demonstrably and fully independent. For example, the majority of members should be demonstrably independent rather than, in our case, the majority being company employees. They also need to be expert. Some of them have only been hired by BP two years ago and they are now trustees of the Pension Fund. They know very little about pensions, whereas they replaced people with 12 years’ experience. Expertise is a very big deal.”
It is pretty clear that these problems and pressures will become more acute. It is widely believed by BP’s beneficiaries that it wants to reduce the level of outgoings from the pension fund so that it will be a more attractive prospect for being hived off, perhaps to an insurance company or others. Such things are legally possible, but it comes back to the relationship between the employer or former employer and the employee or pensioner. If the pension fund is owned and administered by an insurance company, for argument’s sake, where will that relationship be and how will that impact on the outcome for the beneficiaries?
I raised that question in discussion with BP yesterday. Incidentally, BP has eventually come to talk to me about this, but it is still not talking to its pensioners. If BP is to avoid the reputational damage that could come from this, it would be well advised to spend time talking to its pensioners and employees in a meaningful and serious way, which it has failed to do thus far.
The BP pension fund was established 95 years ago. It has 58,000 members and 42,000 pensioners in payment, 30,000 of whom are more than 70 years old. BP closed access to the defined-benefit scheme in 2010 and closed it to new accruals by existing members in 2021. Over the years, however, BP has made significant undertakings to its employees and pensioners, a number of which I have had the benefit of considering. As far back as 1996, there was a Pensions News for BP’s pensioners, which stated:
“It is important to remember that the BP Scheme guarantees pension increases equivalent to the annual increase in the Retail Prices Index (RPI) up to 5% and the Trustees, with the agreement of the Company have stated that they intend to follow a policy of increasing pensions in line with RPI wherever possible even when this exceeds 5%, so long as the BP Pension Fund has sufficient resources to permit this.”
I will come back to the resources question. It continues:
“In times of high inflation, this would be a valuable underpinning to the purchasing power of your pension.”
This material was given to BP pensioners then. Underneath those words, the benefits of scheme membership are listed:
“The security of a large well funded arrangement…A pension linked to your earnings at, or close to retirement, part of which can be taken as a lump sum…Guaranteed increases to protect the value of your pension over the years of your retirement”.
It was on the basis of undertakings such as those given by BP to its employees that many of them made the decisions they did for their future provision. That is why, when I questioned the Minister on this in the Chamber last month, I said that BP was effectively dealing from the bottom of the pack. I hold very much to that view, which is why I think this House is right to highlight what BP has done. As I said, it could happen to others.
Fast forward to 18 months ago when BP first withheld consent for a pension increase according to the retail prices index: inflation then was at 7.5%, but it agreed to a 5% increase only six months ago when inflation was at 13.4%. The net effect of that was a 11% decrease in the pension value received by the beneficiaries.
The oil industry obviously has a reputation for high salaries, but it is worth bearing in mind that the average pension paid out by the BP pension fund is only £18,000. BP’s defence is quite revealing. It has referred me to the funds made available for payment from its Helios fund, which is effectively a lump sum payment of £2,500 for people in receipt of a household income of less than £30,000. Again, we are breaking the link between the former employer, the salary and the pension recipient. Pensions are not charitable hand-outs; this is money that people have earned in the course of their working life.
BP seeks every step of the way to play one group off against the other. It plays the defined-benefit recipients off against the defined-contribution recipients. It says, “We are a multinational company and we have liabilities to pensioners in other parts of the world.” It absolutely does, of course, but it pays people different salaries in different parts of the world. If it pays something during a person’s working life, it should be prepared to accept the logic that it should pay that at the end of a person’s working life and into retirement.
The funding ratio of the BP pension fund at the moment stands at 132%. If it were to meet the extra 4% this year, the funding ratio would still stand at 129%. There is no reason, from the position of the fund, why that should be regarded as an unsustainable payment, but of course it would make an enormous difference to the beneficiaries—the pensioners themselves.
BP has generally had a well-funded and well-managed pension fund. From 1990 to 2020, it made virtually no extra payments to the pension fund at all. It is worth reflecting on the fact that BP has announced that its new chief executive will be Murray Auchincloss, who, as chief financial officer, was the author of many of these decisions. Mr Auchincloss will enjoy a salary of £1.4 million plus a variety of other benefits in kind. I have not had the time to work out exactly what those other benefits will be, but when BP sacked his predecessor, it clawed back £32 million, never mind what it paid him. It is fair to say that Mr Auchincloss, and probably Mr Looney too, will have to go some way before they are eligible for universal credit.
The final word in this debate should go to the BP pensioners themselves. Some truly heart-rending contributions have been quoted to me. One came from a pensioner who said:
“In the 1990s, BP introduced an option for staff to put 15% of their salary into accruing pension at a faster rate which I did because my wife had no pension of her own. It was not an easy decision as we had just started a family and money was very tight.”
The other one that really jumped off the page for me was from a pensioner who had 20 years’ service with BP working in IT. They said:
“I am dying from cancer and emphysema, suddenly I am informed by bp that my widow and family will no longer be protected from inflation in the way I had always believed. Now please tell me how you would react if your loved ones came under attack in this way. And how would you feel when the man responsible for this assault is claiming to be a champion of mental health and to care about people?”
That is the human cost of the decisions that BP has taken and continues to take.
BP and Shell are just the canary in the coalmine; what happens to them can happen to others. That is why this is a matter to which the Government must now pay the most urgent attention.
The Parliamentary Under-Secretary of State for Work and Pensions (Paul Maynard)
It is a pleasure to serve under your chairmanship, Mr Davies. I am grateful to the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing this debate. We had a good discussion on this matter yesterday, but I hope I can say a bit more today.
First and foremost, I am very pleased that people are showing more interest in pension schemes more generally and the pensions they receive. I always think that we, as a nation, do not show enough interest in our pensions at the right time in our lives. I have heard very clearly the points made about individual schemes. Today I will not talk about specific schemes but will comment in more general terms about how these pension schemes are supposed to work. I recognise that many people depend on these schemes for their retirement income, but let me talk about the issues more broadly.
I understand the upset caused by schemes when pension scheme members no longer receive the discretionary increases that they had received previously. It is important to stress that legislation does not seek to set out exactly what every scheme must do in every conceivable circumstance; rather, legislation sets out minimum standards for indexation. That does not prevent more generous arrangements, which may be brought into a scheme through its rules or provided on a discretionary basis.
It is quite right that there should be some minimum standards—statutory requirements for DB indexation that all schemes must follow. These requirements are in place for all schemes, and they try to achieve a balance between providing members with some measure of protection against inflation without increasing a scheme’s costs beyond what most schemes can generally afford. That is a critical balance to strike.
It is important to provide a measure of protection for members, but we also need to have an eye to the future viability of a scheme, which could be compromised by creating significant additional liabilities. We also have to consider employer affordability. The best possible protection for the members’ future benefits is a strong and profitable employer, and we must remember that not all DB schemes are sponsored by monolithic employers with deep pockets. The setting of a statutory minimum is therefore a delicate balance to strike.
Some pension schemes go beyond the legal requirements and do indeed provide more generous indexation. Of course, if higher levels of indexation are set out in scheme rules, those levels of indexation must be paid. The scheme rules set out the pension package that the members have the right to receive.
Mr Carmichael
I agree with most of what the Minister is saying, but there is something more that comes into play here, which is the question of light-touch regulation. Light-touch regulation only works if it is possible to proceed on the basis of good-faith acting by both parties, particularly the companies. Where there is evidence of the lack of good-faith acting, as we have with BP and Shell, is it not necessary to adjust the system to ensure that at the end of the day the beneficiaries are not suffering as a consequence?
Paul Maynard
I note the right hon. Gentleman’s point. I am also conscious of time, so I do not think that I will be able to make my entire legal presentation. He very kindly said in his speech that I was alive to the issues, which I hope I can demonstrate towards the end of my speech by setting out where my thinking is moving to.
As the right hon. Gentleman rightly said, the Government’s role is to ensure that the fundamental promise of a DB scheme, as set out in its rules, is met. Whether discretionary payments are made must be a matter for the trustees and the sponsoring employer. The Government have no power to intervene to require a scheme to pay an annual increase above that required by the law or to go beyond the rules of the scheme.
It is up to trustees and sponsors to agree how their specific scheme should be run in the best long-term interests of all parties. It would not be appropriate for the Government to interfere in decisions made by individual schemes, beyond setting clear and reasonable minimum standards that apply to all schemes, including through regulation.
Justin Madders
I am grateful to the Minister for giving way; I will just pick up on the point made by the right hon. Member for Orkney and Shetland (Mr Carmichael). This issue is about good faith and promises being kept. If we look not just at the schemes that have been mentioned today but at others—I am thinking of the FOSPEN, the Midland Bank clawback issue, and of course the WASPI women—we see that there is a whole generation of pensioners out there who feel that they have not been delivered what they were entitled to. What kind of message does that send to the pensioners of tomorrow? We really need to toughen up on this, don’t we?
Paul Maynard
I agree entirely. Since coming into this job, I met representatives of the Pensions Action Group— an organisation that covers employees of a number of companies that went into liquidation many years ago. Differing rules around indexation have caused very different outcomes for those individuals, so I am very conscious of the issue. I made a point of meeting them because I believe predecessors have not met them; I wanted to make sure that I heard their case and could reflect on it, and I have commissioned further work from officials. They are aware that that is ongoing, and I look forward to hearing what my officials have to say.
Key to the points I have heard in this debate is the role of trustees. No matter whether they are employer-nominated or member-nominated, they have first to comply with the rules of the scheme and, secondly and crucially, to act in what they regard as the best interests of their members now and in the future. That includes investment decisions that they may choose to make. It also includes decisions on indexation. The trustees will sometimes need to make difficult decisions; that is the nature of trusteeship. The needs of different parties, today and in the future, have to be balanced. They have to ensure that funding problems do not emerge in the future. Trustees and sponsors must work together to seek the best way forward, taking account of a whole range of issues including the long-term health of the scheme.
Depending on the circumstances of the scheme, different models of trusteeship may be more or less appropriate. The type of trustee best for appointment to a scheme will depend upon the characteristics of the scheme. The governance and trusteeship of a scheme is best handled by the scheme and its sponsors. They will know better than anyone else what the scheme’s long-term future looks like and how best to get there, but trustees, regardless of whether they are appointed by members or by sponsors, do not and cannot act to represent any particular group. There are safeguards, however. The Pensions Regulator has powers to remove and replace trustees with an independent trustee or add an independent trustee to a trustee board should it have concerns about the capability or behaviour of a trustee.
A defined-benefit pension is a promise to pay the person concerned a certain amount of pension income every month in retirement for the rest of their life. That means that while the sponsor remains solvent, a person’s retirement income cannot decline below a set amount, regardless of the value of the pension fund or the wider economic situation. In addition, a proportion of the DB pension may also be inherited by a spouse after the pension holder’s death—again, guaranteed in value for life.
Rights in a defined-benefit pension scheme are extremely valuable and we should be rightly proud that such schemes exist for the bulk of today’s pensioners, but ensuring that these rights are protected for all scheme members involves many different parties: trustees, employers, and current and future individual scheme members. The governance of defined-benefit pension schemes must therefore balance the needs of all those different parties. It has to work for today, and in the short and long term. Our priority is to ensure that schemes pay out the full value of the promised pension to each member when it falls due, as set out in the scheme and in line with the relevant legislation. When it comes to indexation, legislation sets out the minimum standard that tries to ensure there is a measure of protection against inflation.
Having listened to the debate today, as well as to other individuals I have met in recent days, it is difficult not to have sympathy with pensioners who have planned on the assumption of receiving certain increases, no matter how discretionary they may be, but then find that their income is not increasing as they had expected or planned on. As much as I can do, I will look closely again at the situation regarding the scheme that I have heard about in this debate—and others that I am sure other Members might have covered had they been able to attend—and try to understand fully what has happened and whether the arrangements currently in place in regulation are working as intended. I will do this by discussing it with the Pensions Regulator in particular.
I will also look at the proposals we made in the autumn statement on improving the quality of trustees. I am not saying that all trustees are awful or anything like that; we have excellent trustees in many pension schemes, but we also have to bear in mind that, as I and the hon. Member for North East Fife (Wendy Chamberlain) said, many large and monolithic employers have a different ability to absorb rapid changes in the pensions landscape compared with much smaller schemes. I do not want smaller schemes pushed into administration under the Pension Protection Fund, which would then lead to reduced pensions for those scheme members. Both must be kept in balance.
I thank the right hon. Member for Orkney and Shetland.
Philip Davies (in the Chair)
Order.
Motion lapsed (Standing Order No. 10(6)).
Inheritance Tax
(3 months, 3 weeks ago)
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Jon Trickett (Hemsworth) (Lab)
I beg to move,
That this House has considered inheritance tax.
I am looking forward to your firm guidance from the Chair, Sir Robert. I am grateful to the House authorities for allowing us to have this important debate.
The whole British tax system is skewed in a very odd way. We simply do not tax wealth sufficiently, but we do tax income from work. Income from wealth is relatively untouched by the taxation system, but income from work is taxed and people feel the burden of it. If we were to redesign our whole tax system, I wonder whether that is the way we would structure it. My office wrote a report on this issue three years ago, suggesting a wealth tax. If there were to be a wealth tax, we might well be able to change the way we tax inheritance, but that is not the case; it is not a serious proposal for now, but it is something to think about in the longer term.
It is good to see so many Members here. I begin my reflections on inheritance tax with the following reflection: it is always interesting to look at the language politicians use, especially those from the governing party. When Labour proposes a spending commitment, the Government say that we have found a “magic money tree”. When the Tories find money to spend or give away in tax gifts, suddenly it is “wise”, “prudential” and “management of the economy”. Of course, it is no such thing; it is propaganda.
The right-wing papers are saying that there is some “fiscal headroom” in the Budget—in other words, the Treasury is sloshing around with money. But where has the money come from? It has come from hard-working people who are overtaxed on their income. There might be other ways to fund state services, but it is the working people who have created the additional money in the Treasury. That has been done through a cruel system, which is no longer quite as invisible as it was, called fiscal drag, whereby people’s wages and salaries are increasing but the threshold at which they pay tax is being held steady by a Conservative Government who have clearly set out to raise more money from working people. The fact that thresholds are being held steady while wages are rising means that people are paying more as a proportion of their income than they would have done if the thresholds had risen at the same rate.
Mr Ranil Jayawardena (North East Hampshire) (Con)
Will the hon. Gentleman give way?
Jon Trickett
There are a lot of Members present, so I will give way only once—twice at the most.
Mr Jayawardena
Given that the hon. Gentleman is concerned about fiscal drag, as am I, would he concede that, given that the £325,000 threshold for inheritance tax has been fixed since 2007, it should be increased in order to avoid fiscal drag?
Jon Trickett
I find that a very interesting intervention. I am not opposed to considering that idea as part of the wider debate, but let me return to the point I was trying to develop.
It looks as though right-wing ideologues in newspapers and elsewhere are hinting that there is a significant amount of money available in the Treasury. Those papers are saying that we should end inheritance tax or perhaps cut it. It would cost £7 billion of the Treasury’s reserve of money to abolish inheritance tax completely. I guess that all Members present will have been around their constituencies in the recent Christmas and new year recess, and they will have seen people hungry and living on the streets, schools closed because the concrete problem has not been resolved, hospitals with cruel waiting lists, people unable to heat their homes, and even unfilled potholes.
What we have seen in our own constituencies is true for the whole nation. There are massive pressures on our civil society and the way we live our lives. If we were the Treasury and had £7 billion, would we really want to hand over money to some of the richest people in our society, when all those needs are still there, and when maybe we should be trying to help people on lower pay with some assistance on tax? I don’t think so. I do not think it is a rational decision and a proper way to spend money, and nor do the public. In two recent polls, 75% said they were against a cut in or the abolition of inheritance tax.
Jon Trickett
I said I would give way twice. The right hon. Gentleman has already had one intervention, so I will only take another from somebody else; a lot of people want to speak.
I am sure we are all clear on this, but let us remind ourselves how the system works. One argument that might be made is, “Are you really saying that if you’ve worked hard all your life and managed to buy a house, your descendants can’t inherit that house?” Well, the rules are quite clear. It is not as people might imagine, because a person is allowed half a million pounds with no inheritance tax on the house value. With a couple, however—whether they are married or in a civil partnership—the partner left behind after the other has died inherits the house with no tax; we all know that. When the second person in the marriage or civil partnership dies, the first person’s £500,000 is accumulated to the second person’s £500,000, so that is effectively £1 million per house. Nobody in a couple who owns a house in that particular way would pay any inheritance tax on the house, so it is a specious and false argument to say that inheritance tax would somehow deprive people of their houses.
Look at the figures. In Yorkshire, only one in 300 properties is worth more than £1 million. All the rest are worth substantially less. In the whole of Yorkshire, there are 7,500 households worth more than £1 million. Across the whole country—of 60-odd million people—there are 700,000 properties worth more than £1 million. It is important to put that on the record, before we go any further into the debate.
If someone leaves more than £1 million, they may well be required to pay inheritance tax. Let me deal with what actually happens, based on figures provided by the Financial Times, which are based on Treasury figures. If someone leaves an estate worth more than £5 million, they will find that the amount of money they pay in inheritance tax declines. The people between £1 million and £5 million are probably paying 40%—unless they have made certain arrangements—but the really wealthy estates above £5 million, where the power and wealth in our society resides, pay less and less tax the more wealthy they are. Hon. Members can see the graphs; they are freely available on the internet. The richest estates in our country pay virtually nothing at all in inheritance tax. Can that really be right? I do not believe it is morally justifiable.
I do not want to name too many very wealthy people, but let me name one, because it has been in the newspapers. The Duke of Westminster, one of the richest men in the country, inherited well over £6 billion—I think, nearly £7 billion—through various trusts and other arrangements, but according to the right-wing newspapers—the Daily Mail, Daily Express and others—the estates more or less avoided any form of tax at all. How can it possibly be right that that kind of wealth should be handed on, while people who work hard and have maybe managed to accumulate more than £1 million in their lifetimes are paying 40% tax on the residual amount they arrive at?
In Scotland—I have no doubt my hon. Friend the Member for Glasgow East (David Linden) from the SNP may well mention this—500 families own half of all the land. That is barely touched through the way we deal with inheritance. I do not think that is justifiable, when the half the land of a whole nation is held by 500 families.
I discovered something quite extraordinary in my constituency while researching this issue. I will not name anyone, because this case has not been in the papers. There is an estate of more than 3,000 acres in my area, with 5,000 acres elsewhere and a further 3,000 somewhere else. That large estate, in place since the 16th century, has been barely touched by any form of inheritance or wealth tax over the centuries. That estate remains in place. What is extraordinary is that there is an agreement between the Treasury and the people who leave these large estates that if they cannot pay the inheritance tax, they can donate a work of art. I will be interested to hear the Minister defend that.
It was extraordinary to find that the owners of that property in my constituency avoided inheritance tax on one of the largest estates in the country, which has been left untouched for four centuries, because they were able to gift to the nation a bookshelf—okay, it was a valuable bookshelf. That bookshelf was given in place of paying inheritance tax. How can that possibly be correct?
What is even more extraordinary is: where is that bookshelf now? It is in the very stately home where that particular family still has some residential rights. Of course, it is available for the public to see if they visit. None the less, it is extraordinary that someone earning £10,000 or £15,000 a year—struggling—is paying bloomin’ tax, but a multimillionaire with hundreds of millions of pounds and an estate can avoid tax by handing over a bookshelf that remains in the very house where their family have lived for centuries.
The senior economist at the Institute for Fiscal Studies, which is hardly a hotbed of Marxist thinking, said overnight that it is not in favour of changing inheritance tax, except to say that we should avoid all of the reliefs and the systems by which people can escape inheritance tax, which makes it unfair and skews the taxation system as a whole. It wants to see the loopholes that some of these richer families use closed. For example, it is possible to put money in a trust. If it is agricultural land that is being farmed, there is no inheritance tax on it. Such estates remain there—a blight on our system and a way of securing the continued existence of the British class system, which has caused so many problems for our country.
Let me turn from the very wealthy to other people who pay inheritance tax. Less than one in 25 people who die leave an estate that is subject to inheritance tax; that is under 4%. More than half the constituencies in the country pay no inheritance tax at all, or none that can be measured. That figure is from the Financial Times. Ending inheritance tax would not put a single penny into all those constituencies. There would be no benefit to them whatsoever, as far as I can see, from the relief of inheritance tax.
Jon Trickett
No, I will not give way—the right hon. Gentleman will have a chance to speak in a moment.
I want to illustrate what is happening. I think I am right in saying that, if inheritance tax were abolished, it would put £12 million back into the Minister’s constituency, which makes £60 million in a five-year Parliament. In all the 42 red wall seats in the north of England, which went from Labour to Tory, that sum is hardly more. All those seats together would raise £15 million a year in inheritance tax. Abolishing inheritance tax would put a fraction of the amount of wealth in our country back into those constituencies, and then only into the hands of the richest in our society.
Jon Trickett
I will give way, but briefly, because I want to make progress.
Peter Gibson
I am grateful to the hon. Gentleman for giving way. I am following his logic about money staying in a constituency where inheritance tax falls, but that presupposes that all beneficiaries of that deceased’s estate live and reside in that constituency, which is not the case. Beneficiaries often live throughout the country.
Jon Trickett
The hon. Gentleman raises an important issue, because I think there is £800 billion of wealth in our country that nobody—not even the Treasury—knows the owners of. That is a colossal, unimaginable amount of untaxed wealth, which has simply disappeared because the Treasury cannot find out who owns it. It is true that people can reside in one place and own property in another, but I am talking about someone’s place of residence when they died.
Let me remind Members of the figures, because I do not want to lose the argument. In all of the red wall seats that Labour lost to the Tories, £15 million in inheritance tax was paid; only in three of those seats did anyone pay any inheritance tax. However, in the 42 blue wall seats that I have looked at, £1.5 billion was paid in inheritance tax. So in Tory seats in the south and south-east, and to some extent in London, £1.5 billion was paid, while only £15 million was paid in all of the so-called northern red wall. That is a completely extraordinary set of figures.
I think Ministers and right-wing commentators really fail to understand the way in which our society is structured, with the inequalities and all the other problems that we face on a daily basis. If it were to happen, the abolition of inheritance tax would be one of the largest shifts of wealth that has ever taken place under any Chancellor, certainly in recent history. I have been in Parliament for 28 years and I do not remember anything as large. Here is the central point: this is not a fiscal strategy, and it is not about justice, or fairness, or responding to what the people of the country want. It is a political strategy to move money into those areas where the Tories are now extremely worried that they are going to lose their seats. This is about pumping money into blue wall seats. It is a political strategy rather than a fiscal one.
That is where we are. The Government think that they can bung people, whether with contracts or honours or by putting money back into the pockets of the richest people in our society, in order to secure their own continuance in office. But the British people do not like this stuff. It is grossly unfair and it should not be happening. I hope that the Minister can say, “Well, we might have had a look at it, but we’re not going to do it, because—you’re correct—it would be unfair.”
Peter Gibson (Darlington) (Con)
It is a pleasure to serve under your chairmanship, Sir Robert, and I congratulate the hon. Member for Hemsworth (Jon Trickett) on securing this important debate.
As a practising solicitor—I draw the House’s attention to my entry in the Register of Members’ Financial Interests—it was common for me to provide advice to clients while they were planning for later life. While I was drafting wills and preparing powers of attorney, the dreaded subject of inheritance tax often came up. It is indeed a much-feared tax and a real motivator for many people to consider estate planning.
As house values have increased, many more families who never before would have considered themselves to be wealthy are brought into the scope of inheritance tax. For many, however, through proper planning and structures, it can be very much avoided. Indeed, it is often said that inheritance tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue. As a Conservative, I believe that families should be able to keep as much of their money as possible and, ultimately, I would like to see the complete abolition of inheritance tax, when the time is right.
I only have a very short speech; I really only have one suggestion to put to the Minister. A number of years ago, additional nil-rate bands were introduced to enable a joint estate to leave up to £1 million free of inheritance tax. However, that privilege only extends to those who have children, either naturally or by adoption. It seems unfair that those who have children can be given a significant tax advantage that does not benefit those who either do not choose to have children or are unable to have children. To my mind, a much fairer approach would be to equalise the inheritance tax threshold at £500,000 for everyone, enabling even childless couples to leave an estate of up to £1 million free of tax.
Mr Jayawardena
I thank my hon. Friend for what he has said. Does he agree that by doing those sorts of things—lifting thresholds, taking people out of fiscal drag and giving more people the opportunity to benefit from a nil-rate band—we would actually be able to grow the economy? As the Swedish equivalent of the CBI has said,
“if you abolish a stupid tax that is complicated and forces wealthy people to leave the country”—
or, by extension, reduce the amount that people pay—
“you get more tax revenue…That is the Swedish experience.”
Peter Gibson
I completely agree with my right hon. Friend. We know that when we reduce a tax, the effect has the potential to cascade throughout families—and throughout the country, because not all beneficiaries of estates necessarily live in the constituency where the house that is left behind is situated.
I will conclude on that point. Will the Minister respond specifically to my point about the equalisation of rates for all individuals?
Sir Robert Syms (in the Chair)
Thank you for the short speech. If we stick to about five minutes each, I think that we will get everybody in.
Grahame Morris (Easington) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I congratulate my hon. Friend the Member for Hemsworth (Jon Trickett) on securing the debate, which is an opportunity for us as Members of Parliament to think about the sort of society that we wish to create. It is interesting that Conservative Members intervened on my hon. Friend to talk about raising thresholds, fairness and so on. I say to any of my constituents who have tuned into the debate: let us not lose sight of the fact that currently only 5% of people pay inheritance tax. That means that 95% do not pay it. If we are talking about fairness and the type of society that we want to create, we should look at the implications of either abolishing or providing further concessions to those currently liable for inheritance tax.
I know that this debate is narrowly defined. On previous occasions, I have asked whether we are serious about providing additional support for ordinary working people—not the 5%, but the 95%. Why are we not considering a proportional property tax to replace council tax? That would boost the income of every household in Easington on average by more than £750 per year, not 5%. There are levers that can be pulled, and that one would be revenue neutral. It would not involve levying any additional taxes; it would be a simple matter of applying a proportional property tax at a fixed percentage of the value of a property.
Peter Gibson
I am grateful to the hon. Gentleman, who I consider a friend, for giving way. I am interested in his points on a proportional property tax. We know from research that northern constituencies like ours would benefit significantly from that. Does Labour propose to include it in its manifesto?
Grahame Morris
Regrettably, at this point, no. As the hon. Gentleman is well aware, I am not a Front-Bench spokesperson for the Opposition. Irrespective of which political party grasps this nettle, it will bring enormous electoral dividends. There have been academic studies about the benefits of a proportional property tax. My constituency, the hon. Gentleman’s constituency of Darlington and virtually every constituency in the north and the midlands would be better off. [Interruption.] I apologise, Sir Robert: we are talking about inheritance tax. I was tempted off the subject—it was my own fault, and I am sorry.
The fundamental question is: are we going to champion equality, fairness and social justice, or are we going to perpetuate wealth inequality? Are we a democracy or a plutocracy? The current system is already generous. As my hon. Friend the Member for Hemsworth said, it allows £325,000 to be passed on tax free, and where a child or grandchild inherits an estate including a home, the threshold is £500,000. Above those thresholds, a 40% tax rate is applied, which means that a £1 million estate would pass on £800,000 to the beneficiaries.
As my hon. Friend indicated, there is chronic tax avoidance. In 2016, the Duke of Westminster inherited a huge estate that estimates suggest was worth about £9 billion. Reasonably, the Exchequer would anticipate a tax liability of about £3.5 billion at 40%, but sadly, by employing tax avoidance, using very clever lawyers and getting the best advice on trust laws, the aristocracy and the richest in our society regularly avoid paying their fair share of tax. We should be outraged at that. I suspect that in other countries there would be riots and demonstrations, but that is not our way.
Part of the problem is that the issues are not aired objectively through the mainstream media. This abuse of privilege not only entrenches economic inequality but places a larger tax burden on the vast majority—the 95% who do not inherit large family assets and are struggling in this cost of living crisis with stagnating wages and the highest tax burden in modern history. Tory plans to cut inheritance tax will not help my constituents. Instead of funding tax cuts for the richest on the backs of the poor, the Government should be looking to close the inheritance tax loopholes exploited by the wealthiest.
The sixth Duke of Westminster, Gerald Grosvenor, who passed away in 2016, outlined his advice to entrepreneurs on how to be successful. He was speaking at some sort of conference or event, and he suggested that the best way was to have an ancestor who was good friends with William the Conqueror. As with many tongue-in-cheek comments, there is a grain of truth in that advice.
Inheritance tax is meant to address widening inequality in society by taxing those with the greatest assets. However, wealth and privilege are entrenched in this country. Elite schools dominate our politics: we have had Prime Ministers from Winchester and Eton. The majority of our leaders went to elite universities. Perhaps I should correct that by saying “a single elite university”, since 13 out of 17 post-war Prime Ministers—more than 75%—attended Oxford University. Given that our leaders are entrenched in wealth and privilege, we should not be surprised that the Conservative party seeks to maintain a status quo that sustains that existence. Our society is dysfunctional when the richest 50 families in the UK have more wealth than half the population. Just think about that: they have more wealth than 33.5 million people. Recent analysis by Ben Tippet and Rafael Wildauer from the University of Greenwich found that if the wealth of the super-rich continues to grow at the current rate, by 2035—not too far away—the wealth of the richest 200 families in the UK will be larger than the whole of the UK’s GDP.
There is immense wealth in our society. Most people do not realise that there is sufficient wealth in society to address the range of economic, social and investment challenges that we face. The accumulation of wealth, concentrated in the hands of a few, is detrimental to a fair society. Those with immense wealth are not using it for the good of society. My constituency—no surprise here, Sir Robert—is devoid of benevolent billionaires; I wish we had a few. I am not a believer in trickle-down economics. However, my constituents look to the Government to create an economy and society that uses the wealth that they have generated to improve the quality of life for all. That is a task that this Government are failing to deliver on, not through neglect but through a deliberate policy that entrenches and expands pre-existing economic inequalities.
Ian Lavery (Wansbeck) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I thank my hon. Friend the Member for Hemsworth (Jon Trickett) for bringing this debate to this Chamber; it has been interesting to listen to the contributions that have been made. My hon. Friend the Member for Easington (Grahame Morris) gave some alarming statistics about widening inequalities. He spoke about the entrenched wealth and privilege that is rampant in this country.
I am not surprised that, at this stage in this Conservative Government, the Tories are looking to halve or abolish inheritance tax. Is it a pre-election giveaway? Is it red meat for the blue wall areas? Is it red meat for the rich? I think so, I really do. The impact of halving or getting rid of inheritance tax will fall upon only one section of society, and that is the less well-off. The richest people are where this policy is focused. The richest people in society will benefit from the abolition of inheritance tax.
As my hon. Friend the Member for Hemsworth said, if we get rid of inheritance tax, we are talking about a loss to the Treasury of £7 billion. What could any MP in this debate do with £7 billion in their constituency? How many hospitals could we build nationally for £7 billion? Forget about repairing schools; how many could we build with £7 billion? How many youth clubs could be built with £7 billion? It could be used to look after ordinary people, in ordinary communities. Seven billion pounds—it is a lot of money to lose.
Inheritance tax has a long history. Contrary to what many people believe, it is not a modern tax created by crazy lefties. The first tax on the administration of a deceased person’s estate was the probate duty imposed by the Stamp Act of 1664. The roots of the modern version of inheritance tax can be traced to the estate duty created by Chancellor William Harcourt’s Budget of 1894. There has long been an acceptance that, when the wealthiest in our society die, the transfer of their wealth should not benefit only their heirs—as has already been said, they have done nothing at all to earn that wealth. Part of that wealth should also benefit communities and the country as a whole.
Inheritance tax is paid on estates worth more than £325,000. I think each speaker has mentioned this—forgive me for repeating it, but it is important—but if the main residence of the deceased is left to a descendant child, the value of that home is not included in the value of the estate and, when the entire estate is left to a spouse, no inheritance tax is paid.
Very few people pay this tax. In the tax year 2022-23, 3.73% of estates paid inheritance tax—3.73%—and only 1.9% of those estates that had to pay inheritance tax were in the north-east of England.
Jon Trickett
Out of the 29 constituencies in the north-east of England, only three paid a penny of inheritance tax in that last tax year. Does my hon. Friend think that cutting inheritance tax will put massive amounts of additional resources into his region?
Ian Lavery
I will come on to that, but as ever, my hon. Friend makes an extremely important point.
After Northern Ireland, the north-east of England pays the least, but have a guess where 42% of the estates that attract inheritance tax are located—have a guess, Sir Robert. They are here in London and the south-east —the blue areas. [Interruption.] I am sorry; if the hon. Member for Broadland (Jerome Mayhew) wants to intervene, I am happy to accept an intervention. Does he want to intervene?
Ian Lavery
He is chuntering away, so I just wondered whether he wanted to come in.
It is amazing how inheritance tax can be avoided. The biggest exemption, of course, is the nil rate on leaving everything to a spouse. Other exemptions include transfers to qualifying charities or registered clubs, and lifetime gifts given within seven years before death—this one is interesting: wealthy grandparents use it as tax relief on paying their grandchildren’s private school fees. Another exemption is business property relief, which allows no inheritance to be paid on the transfer on death of shares in a business that is not quoted on the stock exchange. Many of those shares are in valuable family firms. Agricultural land also often passes tax-free. Debts owed by the deceased can be deducted from the tax bill.
Ian Lavery
I will in a minute.
This one is absolutely unreal: the largest landowner in Northumberland donated a painting in lieu of tax. In 2015, the largest landowner in Northumberland avoided a £2.8 million inheritance tax bill by leaving a Van Dyck to the Bowes Museum. In that family’s property—it is not a terraced house, you know—they now have one less picture hanging on the wall for his heirs, but there is also almost £3 million less that could have gone to help poorer families in my constituency. I divvent care what anybody thinks; that’s not fair, man. It is not fair at all.
It is unreal to think that the wealthiest can avoid inheritance tax by giving a painting instead. How many people who have personal tax issues can say, “Look, if I give you a book, is that all right?” Of course it is not all right, man. It is one rule for the rich and another for ordinary working people who work hard and pay their taxes.
Peter Gibson
I am grateful to the hon. Gentleman for giving way. I particularly wanted to intervene when he was talking about business and agricultural property relief. Does he agree that the survival of many farms and family businesses relies on the fact that they are not taxed at the point of death?
Ian Lavery
I would not dispute that that is the case.
But let me get back to the political issue. This is pure politics. It is simple: it is about red meat. The Conservatives, through the press, support the myth that abolishing inheritance tax will somehow have an impact on ordinary people in communities because some people have their own houses. I have already explained that very few working-class people in communities right across the country will actually be impacted if we continue with this. Leaving properties to children, especially in areas with high property values such as London, makes a huge difference.
This will benefit wealthy people in electorally vulnerable blue wall seats. Seventy-five per cent of the top 60 seats in which inheritance tax has been paid are held by Conservative MPs, mostly here in the south. It will help the families of the wealthy Conservatives, such as the Prime Minister. That is why I oppose this measure. Inheritance tax is a means of lessening inequalities and mitigates against gross amounts of unearned wealth going to the children of the wealthy—children who did absolutely nothing to create that wealth. Most of the money saved from cutting or abolishing the tax will go to benefit wealthy areas in the south. It will do nothing to help people in Wansbeck, Hemsworth, Easington or Coventry —nothing at all. There would be less money for their health, less money for their education and less investment in the infrastructure that all the areas I have mentioned badly need. Our social mobility statistics in Wansbeck are some of the lowest in England, but instead of doing something to increase my constituents’ life prospects, the Conservatives are spending their time planning on how to give more money to the already wealthy.
The few very rich families in Northumberland, with all their large agricultural assets, pay less inheritance tax than they should now, while thousands are still using food banks and claiming benefits just to survive. Instead of cutting or abolishing inheritance tax, the rate should be increased and the exemptions eliminated to help to alleviate the current obscene gap between the rich and the poor. Public services are in tatters and councils are going bust left, right and centre. Taxing those who can afford it most is one means of alleviating the horrendous damage that this Government are doing to the social fabric of communities like mine up and down the UK.
Zarah Sultana (Coventry South) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I congratulate my hon. Friend the Member for Hemsworth (Jon Trickett) on securing this important debate.
For the vast majority, the past few years have been a time of unprecedented economic pain. Bills have rocketed, the supermarket shop is getting more and more expensive and, for so many, keeping their houses warm is unaffordable. Families are struggling to keep a roof over their heads and food on the table. Constituents in Coventry South and across the country are having to choose between heating and eating. The Office for Budget Responsibility says it is the biggest hit to living standards since records began. Yet while it is a cost of living crisis for many, things have never been so good for the wealthy few.
In the past decade, Britain’s billionaires have seen their wealth go up threefold. It now stands at £684 billion. The 50 richest families in the UK have more wealth than the bottom half of the population. As I have said many times before, the problem is not that there is not enough wealth in this country; it is that the super-rich have hoarded all the wealth.
That brings me to today’s topic. While the majority are struggling like never before, the wealthy few have never had it so good. It is reported that the Conservative Government want to introduce a tax cut that would overwhelmingly benefit the very richest. Roughly 5% of deaths result in inheritance tax being paid, and according to the Institute for Fiscal Studies, abolishing this tax would hand the richest 1% of estates more than £1 million each. Another study found that it would disproportionately help people in Conservative-held constituencies, particularly in the south-east and London. It is therefore little surprise why that is the tax Tories want to slash, in a move that would cost the public purse almost £15 billion by 2030.
Slashing taxes for the richest and squeezing incomes for the rest is the opposite of what we should be doing, but there is another way to go about it. We could tax the richest and fund our schools and hospitals. An annual wealth tax of just 1.5% on assets over £10 million, for example, would raise about £12 billion a year. Equalising capital gains tax with income tax rates would raise another £15 billion a year. Introducing a windfall tax on bank profits could raise £20 billion in a year—I hope the Minister is making notes; these are good suggestions. Ending the nom-dom tax break for the super-rich would raise a further £3 billion. That is money that could be invested in our communities, reversing Tory austerity and rebuilding our crumbling services. This failed Tory Government have failed to do this and will not do it for the remainder their time, but it must be the mission of the next Labour Government.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairship, Sir Robert. I first thank the hon. Member for Hemsworth (Jon Trickett) for securing this debate and giving us all the chance to participate. It is no secret that my politics are left of centre, and I very much have a social conscience about these things, but I have to say honestly to Opposition Members that perhaps it is time we disagree. Hopefully, they can appreciate my point of view, which I will explain. The hon. Member for Darlington (Peter Gibson) made it very clear in his contribution where he stands, and that is where I also stand. Opposition Members always have been and always will be good friends of mine, but I am on a different page to theirs on this one.
I welcome the opportunity today to make a strong case for why inheritance tax should be abolished in the United Kingdom of Great Britain and Northern Ireland. Inheritance tax is a levy imposed on the estates of people when they die, and I believe it is one of the most unfair taxes in existence. That is my opinion, and I hope others will respect it. Inheritance tax punishes a lifetime of hard work, discourages saving and creates inequality. It goes against the very principles of meritocracy, aspiration and family, and I believe it needs to go.
I will tell a story, and it is not because I want to boast in any way. My dad will be dead nine years this March, and when my mummy and daddy got married, he started with £5. My dad was very talented; he was very good with his hands and he could turn them to anything. He fixed a cartwheel and sold it for £5, and that £5 got mum and dad married—my mum is 92, by the way, so this was a long time ago. My point is that dad then progressed, through four or five shops, from western Tyrone right through to Ballywalter, Millisle, Newtownards and back down to where we now have farm. I can tell hon. Members that mum and dad got that farm through hard work, through the sweat of their brow, and through their efforts to try and do something, starting with £5. That story is gospel truth, and perhaps it illustrates where I come from. I think it is about working hard and having a hard-working ethic.
I say this with great respect to Opposition Members, because I know that they have a work ethic as well—it is not about that. I just want to explain that my dad did what he did, and got to where he was, through those efforts. My father is now dead and gone, but that effort has been replicated by hundreds of thousands of people across this great United Kingdom of Great Britain and Northern Ireland. I believe we must address the fundamental principles that underpin our economic system. The accumulation of personal wealth through hard work, dedication and innovation is the basis of a thriving economy. In its current form, inheritance tax undermines that very principle by placing a significant burden on individuals who wish to pass on their accumulated assets to their loved ones.
I am not sure when I will pass away—it may be soon or it may be some time away, but whenever it is, I am ready to go, and I know where I am going—but I will wish to pass on what I have to my three boys. My will has already been made and that decision is done, because that is what I have worked hard for over all these years. Abolishing inheritance tax would allow families to retain the fruits of their hard labour, enabling the transfer of their hard-earned property from one generation to the next without any undue interference from the state.
I come from a farming background. I live in the farmhouse on my farm, and I will quote the old saying, “A father farms for his sons” or his daughters. A father does so in order to pass to the next generation a work ethic and whatever has rightly been earned from that work. If there is one reason to work hard and save wisely, surely it is doing so for one’s own family. I believe that inheritance tax punishes people, and many hundreds of thousands of others have the same opinion.
Inheritance tax is ineffective and inefficient. It raises a small amount of revenue for the Government but imposes a high administrative and compliance burden on taxpayers and their families. According to the Institute for Fiscal Studies, inheritance tax currently raises £7 billion per annum and will reach some £15 billion by 2032-33. However, that is only 0.5% of GDP, and it comes at the cost of complex rules, loopholes and avoidance schemes.
My mum and dad had a clear work ethic. I remember my mum taking me down to Northern Bank with £10 when I was 16, so that I could open a bank account. I am still with the bank, having received a £10 contribution from my mum to get me started. She instilled in me and my family a willingness to save for what we want and for what we need to get for our houses on so on.
Inheritance tax distorts economic behaviour, as it discourages people from saving and investing. Instead, it encourages them to spend or give away their possessions before they die, which I think is not entirely correct. Critics argue that abolishing inheritance tax may increase wealth inequality, but I do not believe that. It is essential to recognise that the tax affects not only the wealthy but many middle-class families, who may be asset rich but cash poor. That is the way I see it. In the area where I live, most families are middle class, and they express the same concerns that I am expressing today on their behalf.
Forcing families to liquidate assets to pay inheritance tax can result in the sale of family businesses or properties, leading to economic instability and job losses. Abolishing the tax would protect family-owned enterprises and allow for the preservation of businesses that contribute to local communities. Inheritance tax is unfair and inequitable. It hits people with different levels of wealth and different types of assets in different ways. The very wealthy effectively pay a lower rate of tax than the moderately wealthy, as they can use trusts, gifts and other legal devices to reduce their liability. I understand that and, to be fair, the hon. Member for Hemsworth referred to it earlier. I cannot say that people are abusing the system because, by its very nature, the system lets people find loopholes.
Inheritance tax violates the principle of double taxation, because it taxes people on income or savings on which they have already paid tax during their lifetime. They have already paid tax, and then they have to pay it again. That is not right. Inheritance tax also violates the principle of autonomy, as it restricts a person’s freedom to dispose of their property as they wish—the freedom to give what they own to their children or grandchildren, or to a charity.
I honestly see the tax as wholly un-British because it goes against the values of the British people who have traditionally believed in rewarding hard work, supporting family and achieving social mobility for the next generation. That is what I believe in my heart. We should always work to make the next generation better off than the previous one. That is why I have a social conscience. I am not saying that nobody else has a social conscience, but that is why my politics lie left of centre. I will always fight for the wee man and the wee woman to make sure that they have rights.
However, I cannot go along with what was proposed in the debate. Inheritance tax is consistently rated as the most hated tax in the country. There is a strong public demand for its abolition. I have no idea what the Minister will say, but if he says that inheritance tax will be abolished, I will cheer and I suspect the hon. Member for Darlington will do likewise. There might be others of the same opinion. It is 330 years since its inception in 1694—a long time to have a tax in place. There have been many changes in how we look at things today and differences in wealth dispersion, not just among those who are very wealthy but among the middle classes. My daddy and mum started off with £5 when they got married.
It is time to re-evaluate the tax. It seems to penalise success and undermine the family. I am a great believer in the family being the core of society. It is time to respect the wishes of the people who have worked hard to earn what they have and let them decide how to use it for the benefit of themselves and their loved ones.
David Linden (Glasgow East) (SNP)
It is, as ever, a great pleasure to serve under your chairmanship, Sir Robert. I thank the hon. Member for Hemsworth (Jon Trickett) for securing the debate, which has been quite informative and good-mannered. I pay tribute to my colleague and comrade, the right hon. Member for North East Hampshire (Mr Jayawardena), who I am sure was here to advocate a 5% inheritance tax.
I also pay tribute to the hon. Members for Darlington (Peter Gibson), for Easington (Grahame Morris), for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon). It is not often that I disagree with the hon. Member for Strangford. He knows that I hold him in high esteem. But to gently push back on his argument, I suggest that perhaps his parents started with only £5 because of the inequality that exists. Perhaps if inheritance tax was properly in place, his parents might have had more money.
Jim Shannon
Perhaps I did not make my point in the right way. My mum and dad started with £5. They worked hard, developed all those shops and the farm that they owned through hard work and effort. What I am trying to say—I hope I can convey it in a sensible way—is that with that hard work ethic they made their £5 go far. It is like the story in the Bible of the 10 talents. They got 10 talents and a whole lot more.
David Linden
I appreciate that. Anyone watching this debate will know that, given how we are debating this, some of which is based on Bible principles, this is just something that we will disagree on. I none the less appreciate how the hon. Member put his point and I respect it.
I have listened with great interest to the points made by Members today. As we approach the spring Budget, I suspect it will not be the last fiscal event of the year if we are heading for an autumn election. As with last year’s autumn statement, I am sure that the issue of inheritance tax—we got to the crux of this with the contributions from the hon. Members for Darlington and for North East Hampshire—or more specifically the issue of scrapping inheritance tax, will feature heavily in the debate leading up to the Chancellor’s announcement this spring.
As we debate this issue it is important to be cautious and take stock of who this debate favours and at what cost. Who are the winners and losers? I appreciate that, in the cosy consensus of Westminster, talking about the royal family is not often appreciated, but there is an elephant in the room here: there is no inheritance tax for the royal family. Indeed, recently, the King, following his mother’s passing away, benefited enormously from inheriting the Duchy of Lancaster, and his son benefited enormously from inheriting the Duchy of Cornwall. Neither of them paid any inheritance tax—we are talking about hundreds of millions of pounds being inherited by the King and the Prince of Wales, and not a single penny of inheritance tax being paid on that. I am at risk of upsetting either the Clerk or you, Sir Robert, so I will not make any more comment on that, but simply leave it on the record that my constituents and I find the situation deeply unacceptable.
Just last week, I stood in this Chamber outlining the dire situation that people currently face as a result of the cost of living crisis—a crisis that shows no real signs of improving any time soon. As I go around my constituency of Glasgow East and people talk, quite rightly, about the impact of the cost of living crisis and the upcoming Budget, not a single constituent who has spoken to me in person, emailed me or come to my surgeries has said, “Do you know what, David? The biggest solution to the cost of living crisis is to abolish inheritance tax.”
I suspect that if we challenge people on the issue of polling and go out there—whether to Westminster tube station, Hemsworth or Worcestershire—abolishing inheritance tax will be so low down in people’s priorities. That is why, in the midst of this cost of living crisis, debating whether to scrap inheritance tax—which less than 5% of people pay, despite bringing in nearly £7 billion to His Majesty’s Revenue and Customs—seems ludicrous. Against the backdrop of a British Government intent on bringing forward draconian measures to force ill and disabled people into work in order to balance the books, it is ludicrous that they are floating the idea of scrapping an inheritance tax that is paid by only the wealthiest households on these islands.
However, the British Government’s commitment to reducing taxes for the most well-off is a timely reminder of just how out of touch they are. As people struggle to turn on the heating this week in -4° conditions, it is simply absurd that the British Government should be even considering getting rid of a tax that goes at least some way, albeit a very small way, to alleviating the entrenched wealth inequality that is so prevalent in our society. The UK has one of the highest levels of income inequality in Europe, so scrapping or even reducing inheritance tax only deepens further the chasm of inequality that no modern or fair society should have.
Fuelling speculation around the scrapping of inheritance tax, the Chancellor has previously stated:
“I think that inheritance tax is a pernicious tax because one of the main reasons people invest is because they want to pass on savings to their children”.
Inheritance is an emotive subject of debate. It makes us consider life after we are no longer here and what that may look like for the generations after us. This is where my friend the hon. Member for Strangford and I entirely agree: we both know where we are going after we have been here, because of our belief in Jesus. I also happen to believe that people should not have a removal van or a bank van following them to their grave, but that is a separate issue.
As a parent myself, I understand the logic of wanting to be able to provide for our children, even from beyond the grave, but here is why I take that statement and the Chancellor’s line of argument with a degree of incredulity. I recently—in fact, only yesterday—spoke with Daniella Jenkins, a senior lecturer at the University of Bristol, who made an important point about recognising the existing inequality of intergenerational wealth. Like the hon. Member for Darlington, the Chancellor made a sweeping statement without giving any consideration to what I would argue are the huge disparities in intergenerational wealth that exist across these islands.
Pre-existing parental wealth is often overlooked in this debate. It is worth noting that while some children are set to inherit from their parents, some stand to inherit absolutely nothing, either because they do not have any parents or because their parents themselves face dire levels of income inequality, meaning that they will have little to leave behind. Sadly, that issue is probably more the case in constituencies such as mine, Glasgow East; I respectfully suggest that perhaps that is why I bring to the debate a different view from that of my friends on the Conservative Benches.
Although the Chancellor frames his argument around the desire to transfer wealth to children, we cannot escape the fact that the national trends across the population show that parental wealth is very, very unequally distributed. We should also remember that the value of wealth being passed on has also increased over time. If that cycle continued, it would only further entrench wealth inequality among millennial children and younger children, because—frankly—the difference between having rich parents or poor parents is now shaping what economic resources are available to children. That is why it is so important that the discussion about inheritance is centred on fairness and equality.
In Scotland, the issue of taxation has been under intense scrutiny over the last few months, following the Scottish Government’s latest reforms to their progressive tax framework. Only today the Prime Minister spoke about Scotland being the highest-taxed part of the United Kingdom. I am afraid that is not something that keeps me awake at night. As a higher earner, I am quite happy to pay more tax, because the tax that I pay goes towards the education that my children receive at the local school; the tax that I pay goes towards the salary of my mother, who works in the national health service. As a higher earner, I have no issue whatever with paying more tax, although I know that view is not shared widely in this place.
Although the Scottish Government currently have no ability to introduce measures related to income tax, within their income tax framework they have been able to create a progressive tax system conducive to a fair and more prosperous Scotland. With the limited powers that they have, the Scottish Government have ensured that the tax and social security system is progressive and equitable, so that everybody in Scotland—regardless of their background—has the opportunity to thrive. It is within those guiding principles that progressive policies have resulted in Scottish households, particularly in the lower half of the income distribution bracket, being £400 better off a year than they would be in other parts of the UK.
While we are faced with these elevated levels of income inequality, scrapping or reducing inheritance tax would simply deepen and perpetuate the existing disparity. If the British Government are determined to make an already deeply unfair inheritance tax system more unfair, the only conclusion that I can draw is that they must transfer the necessary powers to legislate on inheritance tax to the Scottish Parliament, either through the means of further devolution or—my desired option—independence. Only then will Scotland be able to build a comprehensive and progressive tax system that puts fairness and equality at the centre, representing the values of a modern and equitable society and not those of a Westminster system that frankly does not have the confidence of the people of Scotland.
James Murray (Ealing North) (Lab/Co-op)
It is a pleasure to speak in this debate with you as the Chair, Sir Robert.
I begin by congratulating my hon. Friend the Member for Hemsworth (Jon Trickett) on securing this debate. I am pleased to respond to it on behalf of the Opposition, following the contributions of Members from right across the House, including those of my hon. Friends the Members for Easington (Grahame Morris), for Wansbeck (Ian Lavery) and for Coventry South (Zarah Sultana).
Any debate about tax in this country must begin by recognising that under the Conservatives the tax burden is set to be the highest since the second world war. We have seen 25 tax rises in this Parliament alone and the decisions taken by this Government will leave the average family £1,200 worse off. No wonder the Prime Minister and the Chancellor are feeling pressure to cut taxes. However, the problem for them is that the average family will still be £1,200 worse off even after the recent national insurance cuts. Indeed, the Conservatives have put up taxes so much that there is now nothing they can do to repair the damage they have done to the economy and to family finances.
The truth is that the personal tax rises introduced by this Government will far outweigh any relief arising from their recent change to national insurance. Even taking this year in isolation, many of those on lower incomes will see their taxes rise. Consequently, with a general election approaching, we can expect the Conservatives to get more and more desperate, and—frankly—more and more reckless, in what they are prepared to throw at holding on to power. The Opposition will always stand with working people; that is why we have made it clear that we want the tax burden on working people to come down. We are also always clear that, unlike what we have seen from the Conservatives during this Parliament, we will always set out exactly how we would pay for any tax cuts.
As the 6 March Budget approaches, we are again beginning to hear rumours that the Prime Minister and Chancellor are considering abolishing inheritance tax, as they feel growing pressure to assuage their Back Benchers and members. All parents have a natural desire to pass on to their children what they have worked hard for in life, but the truth is that an inheritance tax cut would benefit only the top few per cent. of estates. In the middle of a cost of living crisis, when families across Britain are struggling and our public services are on their knees, that cannot be the right priority.
According to figures from HMRC, in 2020-21 only 3.7% of estates paid inheritance tax, while the Institute for Fiscal Studies suggests that the cost of abolishing the tax would be £7 billion. The IFS also notes that about half the benefit of abolishing inheritance tax would go to those with estates of £2.1 million or more, who make up the top 1% of estates and would benefit by £1.1 million on average. Given the state of public finances and services, that simply cannot be justified as a priority when taxes for working people are already so high and set to keep rising.
Peter Gibson
I am very interested to hear what the hon. Gentleman has to say about hard-working families. Will he outline how much those hard-working families would be hit by his party’s plans to borrow an extra £28 billion each and every year?
James Murray
I thank the hon. Member for his intervention, but, as we have set out, all our plans are within our fiscal rules. Frankly, that was the hon. Member’s attempt to distract from the fact that he is a member of a party presiding over a Parliament that has put up taxes 25 times and is on track to have the highest tax burden since the second world war. There is simply no getting away from that record and from the burden that his party has increased on working people during this Parliament.
Peter Gibson
I am grateful to the hon. Gentleman for giving way again; he is being incredibly generous with his time. I am incredibly proud of my party and the track record of what it has delivered for our country over the past few years: the incredible support given throughout covid and to working families up and down the country through the cost of living crisis.
James Murray
Frankly, I think that an increasing number of people across Britain would disagree. The one question that they are going to be asking themselves as we approach the next general election is: am I and my family any better off than we were 14 years ago? Is anything working better or in a better state in this country than it was 14 years ago? The answer to that question is a resounding no.
James Murray
I see the hon. Gentleman gesturing, but I have given way twice; I am going to make a bit of progress before taking any more interventions.
We are not concerned just that inheritance tax would be the wrong priority; we are also concerned about the damage that the Government might do to our economy if the tax cut were unfunded. People across Britain will remember the chaos unleashed by the disastrous mini Budget, when the previous Prime Minister and Chancellor promised irresponsible unfunded tax cuts for the wealthiest. I ask the Minister: how would the Government pay for the £7 billion abolition of inheritance tax that it appears they are briefing the media about?
Which of our public services would see their funding reduced? What other taxes would the Government expect to increase? What investment in our future would they plan to cut and how much more do they want to push up debt? I would welcome it if the Minister were upfront about what the Government are considering. If they are not considering abolishing inheritance tax, they should say so now.
Perhaps, though, it is unfair to ask the Minister to be clear about what the Government are thinking, as the Prime Minister and Chancellor may, in all honesty, not know what to do. The Conservatives need to call an election in the next 12 months and they know that they are out of options when it comes to what to say. After 14 years of Conservative government, public services have been run into the ground, the economy has stagnated and the tax burden is set to be at its highest in generations. Yet what we hear from their briefings to the media is speculation that they want to cut inheritance tax—something that would benefit the top 4%, while taxes on working people keep rising. That is the wrong priority when both public and household finances are so stretched.
What the country needs is a Labour Government with fiscal responsibility at their heart and a plan to reform public services while growing the economy. That is the way to make people across Britain better off.
The Financial Secretary to the Treasury (Nigel Huddleston)
It is a pleasure to serve under your chairmanship, Sir Robert. I join others in congratulating the hon. Member for Hemsworth (Jon Trickett) on securing this debate. I also welcome the participation of other colleagues, in particular my hon. Friend the Member for Darlington (Peter Gibson), the hon. Member for Easington (Grahame Morris), my right hon. Friend the Member for North East Hampshire (Mr Jayawardena), the hon. Members for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon) and my opposite numbers.
We have had a wide-ranging debate. Everybody knows, and the Government certainly recognise, that individuals do work hard to build up assets over their lives, and it is a very human instinct to want to pass that on to their loved ones, when they pass away. Yes, there has recently been a great deal of speculation in the media and on Opposition Benches about potential future changes to inheritance tax.
I am sorry to disappoint hon. Members and colleagues, although they will not be surprised to hear that I am not going to announce Government policy here today. The Budget is on 6 March, when the Chancellor of the Exchequer will set out any changes to the tax system in the normal way. There is a great deal of speculation and it would be inappropriate for me to comment.
David Linden
Could the Minister confirm something for us? We hear the argument all the time that Ministers will not speculate and that the announcement will be made in the Budget. The blunt reality, however, is that, whether it is speeches at the Conservative party conference, op-eds in The Sun newspaper, or cosy sit-downs with political journalists, the Government do comment on what they are doing before the Budget, do they not?
Nigel Huddleston
The hon. Member will be aware from his own party and the Opposition that there is a wide range of views within parties on policy. I am not going to speculate on tax policy. We always keep tax policy under review and always welcome insights, evidence, information and views when developing tax policy, as do the Scottish Government. We have heard a wide variety of views today. As I said, announcements will be made at the appropriate time and place.
Peter Gibson
Does this not clearly illustrate the distinction between those of us on this side of the House who would love to see inheritance tax reduced and ultimately abolished, and those Members on the other side who only want to tax working people more?
Nigel Huddleston
My hon. Friend makes an important point. We saw that in the recent autumn statement with the national insurance cuts. Our instinct and wish as Conservatives is to lower taxes, wherever appropriate and possible. We are also responsible with public finances and recognise that every single penny of Government spending is paid for through taxation, either immediately or in the future as deferred taxation—that is, borrowing money. We need to, and do, respect every single penny, because it is the public’s money, not Government money, that we are spending. Taxation is an important issue, and I am glad we are talking about it today. I am confident that it will be a major topic in the run-up to the election.
The Government support wealth creation but also understand the importance of ensuring that wealthy individuals make a fair contribution and pay tax appropriately. We do not have a specific wealth tax, as some other countries do, but if we look at the facts, it is clear that the Government do tax wealth, in a number of ways that generate substantial revenue, while remaining fair. For example, OBR forecasts for 2023-24 indicate that we can expect inheritance tax revenues of about £7.6 billion, capital gains tax revenues of £16.5 billion and stamp duty tax revenues of about £13 billion.
We also have a progressive income tax system, so that the top 5% of income taxpayers pay about half of all income tax. The top 1% is projected to pay about 28% of all income tax. It is also important to stress that in 2010, under the previous Labour Government, the top 5% accounted for 43% of income tax and the top 1% for 25%. Therefore, the system under the Conservatives is more progressive.
Grahame Morris
The Minister is putting forward an interesting proposition about progressive policies and taxation. Has he had a chance to consider whether council tax is a progressive form of taxation, when a millionaire, living in a £20 million property in Belgravia, very close to this place, pays less in council tax than my mother in a terraced colliery house worth about £50,000 in Murton?
Nigel Huddleston
The hon. Member needs to recognise that tax needs to be taken in the round. There is a variety of taxations—on income, wealth and other areas. Taxation is a broad topic, and individual taxes affect people differently. The hon. Member for Glasgow East (David Linden) made the point about inequality as well, but it is important to remember that, on average, households in the lowest income decile receive over four times more in public spending than they pay in tax. Nobody doubts the importance of a progressive tax system; my point was that the Opposition often try to make out that the tax system was more progressive under them, but it was not. The facts make that incredibly clear.
Nigel Huddleston
If the hon. Member will give me a moment to proceed, I will allow him to come in later, because I have other points to make in response to some of his comments.
Inheritance tax is a wealth transfer tax and applies to the estate of the deceased. Transfers made in the seven years before death are also taken into account. The estates of all individuals benefit from a £325,000 nil-rate band, and the targeted residence nil-rate band is a further £175,000 available to those passing on a qualifying residence on death to their direct descendants such as children and grandchildren. That means that qualifying estates can pass on up to £500,000, but the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million without an inheritance tax liability. That is because any unused nil-rate band or residence nil-rate band is transferable to a surviving spouse or civil partner.
Peter Gibson
Could the Minister specifically address the point I made about the inherent unfairness to those who do not or are unable to have children, in respect of the nil-rate band that applies to them?
Nigel Huddleston
I thank my hon. Friend for his comments. Again, I cannot make any promises today, but I understand the important point he is making about the nil rate. Changes have been made over the years in that area, and I will come on to that point later.
The vast majority of estates pay no inheritance tax. The combination of nil-rate bands, exemptions and reliefs mean that only 5.1% of UK deaths are forecast to result in an inheritance tax liability in 2023-24. That is forecast to increase slightly to 6.3% in 2028-29: it is still a relatively small number, but it makes an important contribution to the public finances. It is forecast to raise £7.6 billion in 2023-24 and £9.9 billion in 2028-29. That revenue is important because it is spent on a whole variety of public services, levelling up and many other areas of Government policy.
The headline rate of inheritance tax is 40% but, as the hon. Member for Wansbeck acknowledged, a 36% rate is charged when at least 10% of the net estate is left to charity. That is an important point of this system as well. It is important to remember that the rate is charged on the part of the estate that is above the threshold and after the application of reliefs and exemptions.
The Government have made changes since 2010 that have increased the threshold to £1 million, made the system fairer and reduced administrative burdens. For example, in 2017 the Government introduced the residence nil-rate band, mentioned by my hon. Friend the Member for Darlington, to make it easier to pass on the family home to the next generation, but we restricted the residence nil-rate band for the wealthiest by tapering it away for estates over £2 million. More recently, we made changes so that for deaths from January 2022, over 90% of non-paying estates each tax year no longer need to complete inheritance tax forms when probate or confirmation is required. At the same time, we have tightened the rules to make sure that individuals make a fair contribution and pay the tax owed. For example, in 2017 we introduced new rules to limit abuses of the rules by people with non-domicile status who used complicated structures to make their UK homes look like offshore assets.
Several hon. Members talked about loopholes and avoidance. It is important to distinguish between the legitimate use of reliefs and those who engage in avoidance by bending the rules to gain a tax advantage that Parliament and none of us ever intended. It is not true that the wealthiest do not pay inheritance tax: national statistics for the tax year 2020-21 show that taxpaying estates valued at over £1 million accounted for 81% of the total inheritance liability.
David Linden
If it is not true that the wealthiest do not pay inheritance tax, can the Minister tell us how much the King paid upon inheriting the Duchy of Lancaster?
Nigel Huddleston
As I said, estates valued at over £1 million paid 81% of all inheritance tax.
I am aware of the time, and I need to leave a minute or two at the end for the wind-up, but I want to make a final point. We have had a very good discussion about inheritance tax, but we have had an inkling of the differences between the political parties. I am afraid that some Opposition Members started to delve into the politics of envy, which is a well-trodden path for the Labour party, by commenting on elitism, Oxford University and so on. Well, I can tell them that I went to Oxford, and that my Labour-voting trade unionist father, my mum, who worked on the tills at Asda, and the schoolteachers at my comprehensive, instead of being snide about the opportunities and aspiration that I had, actually applauded and supported social mobility. That is what we on the Conservative Benches do. It is disappointing to hear the tone of the Opposition.
The hon. Member for Ealing North, in another well-trodden argument, started trying to lecture us on responsible finances. We still have not had an answer to the question of where the £28 billion of spending promised by the Opposition would come from. We are more than happy to debate the issue, because we have a very clear plan for the economy: we had the very welcome and well-received national insurance cut at the autumn statement, which I do not believe the hon. Member opposed, and nor did he oppose the significant support that we gave during covid or the significant support that we have given households during the cost of living crisis. That all needs to be paid for, which is why we have higher taxes than we would like. But we are on a path to reducing them, because that is what Conservatives do. I thank hon. Members for their contributions; all their comments have been taken on board.
Sir Robert Syms (in the Chair)
I call Jon Trickett to make a brief winding-up speech.
Jon Trickett
I will be very brief. “The politics of envy”—talk about predictable. What we have actually heard from Government Members is a politics of wealth, privilege and greed. We have a tax system that simply reinforces the gross inequalities in our society, as we have heard from almost every Member, including the hon. Member for Strangford (Jim Shannon) and a couple of Members on the Government Benches. We have a system that is grossly unequal, deeply unfair and unjust, and the system of so-called inheritance tax reinforces all that. The Minister has refused to deny that the Government are looking at inheritance tax. We look forward to the announcement on 6 March, and we hope that the Government will listen to the points that we have made.
The Minister did not respond to the two central points that I was trying to make. First, inheritance tax is paid by a tiny minority of people who are based largely in Conservative-voting seats; that tells us exactly what fears are in the bellies of the Ministers who are trying to pump money into Tory areas to try to protect their majorities. It will not work. Secondly, to respond to the hon. Member for Strangford, who is no longer in his place, this issue is about the big estates. It is not about somebody who has built wealth through hard work with their hands; it is about entrenched estates that have been there for centuries, right back to the Domesday Book—estates that the Minister’s party protects and that presumably fund his party, too.
Let me finish with the words of a man who was alive at the time of Christ, the philosopher Seneca: “A kingdom founded on injustice will not survive”. This year, whenever the election is, we will see what exactly will happen to the kingdom of injustice that the Conservatives have created.
Question put and agreed to.
Resolved,
That this House has considered inheritance tax.
Morecambe Town Council Precepts
(3 months, 3 weeks ago)
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David Morris (Morecambe and Lunesdale) (Con)
I beg to move,
That this House has considered Morecambe Town Council precepts.
This debate is of huge current importance to my constituents. An immense parish council tax rise has been inflicted on them. Last year, it was reported to have risen by 231%—this is a parish council—which is believed to be the highest such increase in Britain last year, bearing in mind that the base precept for this town council increased by 66% in 2021-22 and 50% in 2022-23. I think I got that right.
Last year, the town’s parish council voted to increase the precept for Morecambe residents, which saw the town council’s share of council tax rise by an unprecedented 231%. The council raised £1 million to set up a community fund in the hope that that £1 million would be ringfenced to buy a parcel of land on the site of Frontierland, a former funfair. The land is already owned by the taxpayer. It is owned by Lancaster City Council, which purchased it for a reported £3 million. The land is not for sale, so it is highly unlikely in any event that it would be undersold. This is double taxation, plain and simple.
It has also been reported that Morecambe Town Council has already spent £48,000 on engaging architects for plans on the site, which is not for sale. That has also now been lost. The town council made a shocking U-turn in July 2023 after my last speech on this issue in mid-April last year. It decided to withdraw its expression of interest on the eyesore—the site of the former wild west-style theme park Frontierland—but the £1 million fund remains in its coffers.
The town council did not carry out a referendum; it carried out an afternoon stall survey on the local prom. It cannot be verified whether any local people were present. The following is from the town council: some 65 respondents, the highest bracket, were willing to give £100, followed by 55 respondents at £50, and 35 respondents at £10. Some 100 respondents were willing to give amounts that ranged between £2 and, in one case, £15,000, which was obviously someone having a laugh at the ludicrous proposals. That is 255 people, if the figure is even true and if they were local people.
I therefore decided to write to every household in the Morecambe Town Council area to ask whether they supported the increase and whether they were ever aware that the increase took place. The rate of return was staggering. Over a quarter of the people of Morecambe responded—26.8%, some 3,919 people—which shows my constituents’ strength of feeling on this issue. I asked people whether they were aware of the rise before their bill hit them: 3% of respondents said yes, and 97% said no.
This is just a snapshot of what they said:
“The whole situation appears ludicrous to me, and I hope you will do all in your power to reverse what has happened”;
“I support regeneration and development, but the timing of the increase, the amount and the lack of notification has taken the decision out of our hands”;
“I cannot believe they took money without consulting first”;
“What right do they have to make that decision on my behalf? It is hard enough paying Council Tax as a single pensioner as it is, and I hope that this extra money we have paid will be reimbursed”;
“I have no idea of how this has happened. Yes, I want my money back thank you”;
“It is terrible. No other provider can increase charges by such unopposed.”
That is just a snapshot of some of the photocopies I have of that survey.
I have been asking questions in Parliament about whether the 231% tax rise through the council tax precept last year for residents of Morecambe was lawful. Originally, councillors could be surcharged under the Audit Commission Act 1998 if the rise was deemed unlawful, but that was repealed, and responsibility for councillors’ misconduct now lies with the standards board and the adjudication panel. That seems toothless to me.
Last year, the town council was taken to court for non-payment of its auditor, and that was upheld—the auditor won. No one knows how much the legal bill cost taxpayers in Morecambe. Indeed, the town council recently released a statement saying that
“during the past two years the council has received challenges to its end of year audit”,
which caused
“substantial delays to the conclusion of the audit, and significantly increased the workload of officers, resulting in a backlog of day-to-day work”.
In plain English, their ineptitude led to more spending.
Last night, my local radio station released an update on the town council’s proposed figures, so I have only had the past few hours to scrutinise them, but they are woefully damning. The town council is now proposing to shift the £1 million community action fund into council reserves, which I believe it will use to borrow against increasing council tax further, using £150,000 towards cutting the council tax precept. The town council suggests a 33% reduction in the council tax precept, compared with last year—in effect giving back what appears to be one third of a massive increase in Morecambe taxpayers’ 2023-24 bills.
To be perfectly clear, I have no political interest in Morecambe Town Council. The Conservatives do not field candidates to it because it has historically been mired in controversy and accusations of financial impropriety. I do not receive a bill from the town council because thankfully I live one street outside the catchment area. I very rarely get involved in local politics, but I cannot be quiet on this issue.
To be fair, the Morecambe Bay Independents party, which made great gains in Morecambe town’s parish council elections last May, sweeping out some of the decision makers responsible for this embarrassing debacle, proposed giving back the money. The advice it received from Lancaster City Council, which collects the council tax, is that there is no mechanism for refunding the money, and an alternative mechanism must be sought. The biggest issue is whether the council can give the money back. I am not sure that it can, but if the Minister can signal whether any mechanisms are available to town councils to refund council tax, I would be very grateful, as would my constituents.
The Labour party, which chairs the town council, says that party policy is to freeze council tax. Well, examples begin at home. It has continually spanked the taxpayers of Morecambe with annual increases in council tax, including last year’s 231% tax rise and another massive rise this year. That contradicts the national council tax policy. What will Labour members say to justify that to my community when knocking on doors in Morecambe? Bear in mind that the council raises money directly from the local taxpayer, and there is no Government involvement, so the old chestnut of Government cuts will simply not wash.
The Liberal Democrats also co-chair the council. The leader of the town council last year wrote an open letter to me, which was naturally released to the press before I received it, stating:
“The Town Council street rangers along with dedicated volunteers of Morecambe Liberal Democrats, have now taken over the weeding service (funded by Lancashire County Council for the next 5 years) for the whole District”—
not just Morecambe. So the taxpayers of Morecambe are now subsidising the weeding service of the whole of Lancaster. That is hundreds of square miles outside Morecambe. It gets £63,295.67 from the county, but has spent £80,000 on equipment and £30,680 on casual staff—a loss of £48,385, or thereabouts.
The letter also challenges me:
“So I ask you Mr Morris, do you expect our street rangers, weeding service and events organisers”—
which I have found out cost £225,000—
“to provide their services for free”?
I expect value for money, and so does my community. Perhaps the Minister can ask for a list of who works at Morecambe Town Council in those and other categories, and whether they are politically aligned. Nobody seems to know, but if they are, this is potentially political parties being funded by the taxpayer, which is a potential electoral offence.
Having a special community action fund of £1 million last year, as I explained, on top of the precept itself is a clear breach of the precept rules. In plain speak, it is only supposed to be raised against a current service capacity of service provided. In this case, that has been expanded, with empire building on top of the running costs, which have come to a large amount, and a million quid on top of that. I challenge the town council to demonstrate to my community how it provides value for money when Morecambe now pays for the weeding service for literally hundreds of square miles outside the parameters of Morecambe.
Let us look at the town council’s budget: £1,000,195.70 was carried forward from last year. The general reserve for 2024-25 is £850,195.70, and £150,000 was used to bring down the precept by the amount of the proposed new council tax bill. Here is the real issue: the predicted expenditure is over £1 million—it is £1,164,680. Those are mind-blowing amounts. That is what they are spending, but the budgeted income is £63,295—and 67p, to be pedantic. The council tax precept is £951,384.33 from the taxpayer. That is a loss of £150,003—mind-blowing. It equates to a loss of—I have lost track of all the figures. It is just completely off the Richter scale. In reality, the council is giving back £150,000 to the taxpayer, lowering the council tax bill and losing an extra £150,000. That is not value for money. It serves only those who run to serve themselves on the council—not the taxpayer.
I am sorry if I seem a bit flustered, Sir Robert, but you can imagine that, with the figures I have had to go through, it has been extremely challenging, not only for me but for my community. I ask the Minister whether we can, ideally, freeze the council tax at the rate from before the 2023-24 hike—which was very high at that time—so that the whole £1 million can be paid back to Morecambe residents. I urge the town council to stop empire building at the expense of Morecambe residents. I had assurances of a meeting to discuss the matter with the Prime Minister a few months ago, and I will be petitioning Parliament with nearly 4,000 responses and concerns from my constituents very soon.
I want to know what the Government are going to do to stop my community being ripped off, and to stop Morecambe Town Council’s behaviour of hiking parish council tax, which is testing the system to destruction. Are there any plans to cap the rate at which parish councils can increase their precept without requiring a referendum? If Morecambe Town Council had carried out a referendum, it would not have been able to do this in the first place. Given that the whole community is against it, why did the council do it? I have also called for an investigation into parish councils by the external auditor, PKF Littlejohn. However, I fear it has no teeth to act—so what are the Government going to do to help with this matter?
There has been considerable media interest in this issue from the national and local media. We in this House must act in any capacity we have to stop this excuse for raising public funding from my community in Morecambe, seemingly to no benefit whatsoever, except to serve those who run the council. I apologise for being emotive about this, but it is a very serious issue for my community.
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Simon Hoare)
It is a pleasure to serve under your chairmanship, Sir Robert. I will not begin my speech in the usual way, because it was announced in the last quarter of an hour or so that my very long-standing friend, the Member for Rochdale, Sir Tony Lloyd, has passed away. As, I think, the first Minister on his feet following that news, on behalf of the Government I want to extend to his very many friends, to his colleagues across the House and, of course, to his family our very deepest sympathy and condolences on Sir Tony's final loss of the battle against a cancer that dominated his life for the last 12 months.
I thank my hon. Friend the Member for Morecambe and Lunesdale (David Morris) for raising this important issue and for the way in which he has done it—with his customary thoughtfulness and attention to detail. Given that I have known him for eight and a half years, I would expect nothing less, and we heard it again this afternoon.
The backdrop to the debate is the increase in all the costs that families up and down the land face as a result of inflationary and other pressures, which have come to be known collectively as cost of living pressures. I am always keen to remind local government of its role in delivering important services to communities. The total burden of council tax—regardless of whether that includes a town or parish council precept, or is set by a district council—is used to pay for social care, police and so on, all of which comes to a considerable sum for very many people. Councils should always take into account its broader impact.
My hon. Friend has set out a scene in his town of Morecambe that certainly causes me concern. In broad terms, he raises several issues with regard to the overall governance of town and parish councils. We are very hot on governance with regard to this place, and very hot on governance issues when it comes to upper-tier authorities, boroughs and districts; historically, because town and parish councillors do not receive remuneration for their service, they are slightly off the grid. I have been considering the situation with representative bodies of the town and parish councils. He has given me food for thought, and I shall continue my deliberations.
My hon. Friend also raises a question to which I am afraid I do not have the answer, but I shall seek it back at the Department and, if he will allow me, write to him about the use of a precept for works outside the jurisdiction that is raising the precept as part of the council tax bill. I shall check on that and seek advice. Also, I do not believe that when a precept is raised by the considerable level that my hon. Friend has told the House about this afternoon, it can be used, by sleight of hand, to—I do not use this term in a pejorative sense—fill the coffers of a higher tax authority. The precept is the precept, as I understand it, and that precept belongs to the raising body, which in this case is Morecambe Town Council. I do not think that it can be transferred—that a vast sum of money raised for a specific reason in a one-off increase could suddenly be transposed into Lancaster City Council or Lancashire County Council’s budgets. I do not think that can be done, but I will check on that and revert on that point to my hon. Friend.
My hon. Friend has set out an issue of concern, but I would like to take this opportunity to acknowledge the work of the almost 9,000 town and parish councils across England, and the work that councillors do free, gratis and for nothing to improve the quality of life and wellbeing of their communities and to help create and maintain places where people are proud to live. They are often the unsung heroes of our local government family. They are close to the communities they serve, they know them and they play a vital role.
As my hon. Friend will be aware, council tax is set by local authorities, including town and parish councils, which will decide what level of council tax they need to raise, taking into account their individual circumstances. As he will know, the Government set referendum principles each year for principal authorities, to ensure that where they set excessive increases, they must be approved by local voters through a referendum, the rules of which are clearly set out. Those referendum principles strike a balance between giving councils flexibility to raise council tax to meet spending pressures without overburdening council tax payers.
For 2024-25, the Government have consulted on continuing our approach of not applying referendum principles to town and parish councils. That carve-out comes with a clear expectation that town and parish councils will take all available steps to mitigate the need for council tax increases, and that the Government will see clear evidence of that restraint. We would also expect authorities to take the resources that they already have available into account before setting increases.
None of that precludes a town or parish council raising money for a specific purpose. I can remember having served as a parish councillor in Oxfordshire. We had a one-off increase of some considerable percentage points to buy a parcel of land that had become available in order to extend a graveyard in the village. It was a one-off chance to do it and we grasped it. We consulted the village community, they saw the benefit of it, and that is what we did. We are not seeking to preclude or clamp down on initiatives by town and parish councils to help make their towns or parishes better.
The point that my hon. Friend has raised, as I understand the mathematics of it, is that last year Morecambe Town Council set a precept increase of £105.14 on the band D bill, which represents a fairly significant rise of 231% on the previous year. That was for the purpose of buying an asset, which my hon. Friend has advised was not on the market; whether it was on the market or not, however, the council has pulled away from that and decided not to buy it.
The question, therefore, has to be: what happens to the precept that the good burghers or Morecambe have paid, which is now sitting, at least notionally, on the balance sheet of Morecambe Town Council? Well, my hunch would be that, if it is not able to pay it back—I think that trying to work out each household’s bill and whether the person who paid the precept is still in the house, as they may have died or moved, could be extremely onerous administratively and possibly counterproductive —it does not take huge genius to think that one could bank that money and explain that the town council precept would be frozen to the point of zero, until that exceptional nest egg accrued from that large 231% increase had been spent.
David Morris
The precept was raised last year by a certain amount, but then there was the special amount as well; in other words, there were two precepts. That is what happened, and the £1 million precept has just been set to one side and carried forward this year. There was an increase in the precept itself, which is very hard to explain because it has all been mixed together, but there was a separate precept for this £1 million to buy the land that was not for sale.
Simon Hoare
I am grateful to my hon. Friend for that clarification. I think, given the fact that there now appears to have been two precept streams, one of which could be described as an extraordinary precept for a specific purpose, I would certainly be suggesting to Morecambe Town Council that the precept there—the element of the precept for the 2024-25 council tax year—be frozen to zero, because clearly it has significant resources still in the coffers. I will also tell my hon. Friend that I shall be writing to the town clerk of Morecambe Town Council to get a much clearer picture of the history of this activity and of what the council is proposing to do with what anybody would describe as a fairly large slug of money sitting in the accounts which was raised for a specific purpose that has become obsolete because the opportunity to purchase has been changed.
This case speaks to an important point about transparency and accountability. It is so important to ensure that all of our councils, irrespective of the level they are operating at, are accountable—principally and primarily accountable to their electorates and the communities they serve. There is no greater need for transparency than in the use of income raised from council tax. Town and parish councils must comply with the requirements of transparency legislation, just like the principal authorities. I highlight to my hon. Friend the local government transparency code 2015, which requires all local authorities with annual income or expenditure exceeding £200,000 to publish all payments exceeding £500 in value and all payments made via a government procurement card. It is also mandatory for parish councils with sufficient turnover to meet the requirements of the code. Of course, where there are concerns, we would recommend that the authority is contacted directly in the first instance. I know my hon. Friend has bent over backwards to try to secure some clarity regarding the numbers at hand.
We support, champion and applaud the work that town and parish councils do up and down the land. When setting council tax and precept, we expect the sector to show restraint and to be able to justify increases to those they expect to pay it. We reserve the right to introduce referenda principles for them should they breach that restraint. Our 2016 consultation on the topic made that position clear, as does our stipulation in the recent consultation on the provisional settlement. The Government and I will keep this under review, and action will be taken if necessary.
We believe that our current approach is the right one, but we are always open to change when or if the canon of evidence persuades us that that is the right thing to do. My hon. Friend the Member for Morecambe and Lunesdale has, if I may put it in these terms, shone a light on a rather cloudy story—one that requires further investigation. As I say, I shall revert to my hon. Friend on the two technical points. I shall contact the clerk of the town council with some degree of urgency—certainly before the precepts are set and the council tax bills are issued—to try to finally get to the bottom of this issue, which has clearly concerned my hon. Friend to the extent that he has raised this with the Prime Minister and also here this afternoon. It is also clearly causing much distress and concern to the many residents who have the great luck to live in Morecambe, but who are not so lucky to pay such an enormous town council precept.
Question put and agreed to.
Public Sector Pay 2024-25
(3 months, 3 weeks ago)
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Beth Winter (Cynon Valley) (Lab)
I beg to move,
That this House has considered the public sector pay round for financial year 2024-25.
It is a pleasure to serve under your chairmanship, Sir Robert.
I start today by putting on the record my condolences, which I am sure everybody here will echo, to the family and friends of our dear comrade Tony Lloyd, the Member for Rochdale, after it was just announced—in the last hour or so—that he has very sadly passed away. He was a wonderful parliamentarian. I got to know him a bit and he was very caring, kind and supportive, and I am sure that other Members will have other stories that they wish to share. He was also a strong advocate on behalf of public sector workers. His loss is a very sad one for us.
I will move on to the subject of the debate. I am very pleased to have secured it and to have so many colleagues join me to discuss the process for setting public sector pay for 2024-25. I am also pleased that we are able to do so very early on in the process, because this is a vital issue.
How we pay our 6 million public sector workers, who deliver essential public services, must be taken seriously. Today, the Prime Minister talked up real wages rising for the fifth month in a row, but what he did not refer to is the fact that real wages had fallen for the previous 18 months in a row. That is because the real issue is that the past two years have seen a significant fall in the real-terms value of public sector pay, which has been part of 14 years of brutal real-terms pay reductions that have driven down living standards for working people.
I will use this debate to focus on three points. First, I will set out the need for greater transparency, representation and independence of pay review bodies, while acknowledging the support within the trade union movement for greater collective bargaining arrangements. Secondly, I will make it clear that this year’s pay settlement must deliver at least an inflation-proof pay rise to ensure that it does not worsen the cost of living crisis. Thirdly, after more than a decade of real-terms pay decline for public sector workers under the Tories, I will set out the need for Government to commit to the principle of pay restoration.
To begin, I will comment on the letter that was sent to pay review body chairs to initiate the latest pay round before December and I will make some remarks on the pay review body process. In their letter, the Government stated that
“It is vital that the Pay Review Bodies consider the historic nature of the 2023-24 awards and the Government’s affordability position that will be set out further in written evidence.”
For me, that statement exposes the lack of independence of the pay review bodies. Why did the Government’s letter not say instead that it is vital that the pay review bodies cover the rises in the cost of living and secure staff retention?
The timing of that letter has also been condemned, because 20 December—the date it was sent—was more than a month later than the previous year’s remit letters. The schoolteachers’ remit letter has been condemned by the main education unions for being circulated a month late. NASUWT said the letter was a stunt that will delay publication of recommendations before the general election, while the National Education Union said that it showed contempt for the teaching profession.
With regard to the NHS letter, Unison said that the Secretary of State for Health and Social Care must hold proper pay talks early this year or risk a repeat of disruption, and the Royal College of Nursing said that the Government
“has not honoured its commitment to improve how the process works.”
Where pay review bodies exist, it is clear that there are serious concerns within the trade union movements about how they function, about their effectiveness at delivering fair pay and, related to that, about their independence from the Government. Significant questions remain about who is appointed to sit on pay review bodies, including who appoints them, what they are appointed to represent, who sets the terms of the review processes and what the terms of those review processes are. I was staggered to find that, of the 44 individuals listed on the register of interests of members of the pay bodies, only two declare themselves to be part of a trade union. Should there not be a minimum employer and employee representation on the pay review bodies, and should there not be consultation with trade unions on representation?
The letters from the Government ask the pay review bodies to consider the Government’s affordability position. This year, the TUC agreed that there is a need for review bodies to ensure that they have greater remits that give better weight to all the evidence presented to them, not just to the short-term affordability of Government.
I hope that the Minister can answer a number of questions, including why the remit letters took over a month to go out, why the remit letters want a report in May of this year rather than April, whether the Government will meet with the trade unions early in the process, as unions have requested, and whether the Government will commit to PRB reform in relation to appointments, terms of reference and multi-year deals.
Secondly, on the importance of inflation-proofed pay rises this year, the Government letters that were issued last month included a reference to the fact that, in 2023-24, the pay review bodies recommended historically high pay awards. The most historic issue to set out with regards to public sector pay, however, is the scale of the fall in value over the past two years. That is compounded; it has been a sustained fall over the past 14 years. Month on month, annual inflation ranged between 6% and 11%. Those were the consumer price index calculations for 2022 and most of 2023. If we were to use the retail price index—there is merit in doing that, and the trade union movement advocate for its use—inflation for the past two years is higher: between 8% and 14% for the past two years. Again, that is before the recent dip. There has been a month-on-month increase in food and beverage prices of between 5% and 20 since 2022, which remains at over 9% in the most recent statistics; if we take that into account as well, then people will inevitably be suffering.
That is why the TUC routinely refers to the longest pay crisis in the past 200 years. Last year, below-inflation pay was delivered by the pay review bodies of between 5% and 7%.
Apsana Begum (Poplar and Limehouse) (Lab)
The impact of the staffing crisis in the Department for Work and Pensions is creating an
“epidemic of mental ill health”.
That is according to emails received by the Public and Commercial Services Union, which represents civil servants. Does my hon. Friend agree that the situation requires urgent interventions from the Government and that one of those urgent interventions needs to be to raise the pay of the 25% of PCS union members in the DWP who are currently paid below the real living wage?
Beth Winter
I totally agree. The PCS union has produced a number of very comprehensive reports outlining the devastating impact that the cost of living crisis is having on the mental health and wellbeing of its staff. I recommend that the Minister and those on the Benches opposite read those reports.
This comes after a two-year pay freeze between 2011 and 2013 and the four-year pay cap of 1% from 2013 to 2017, which preceded the obliteration of pay awards by inflation over the past two years. The TUC has estimated that the average public sector worker is earning £177 a month less in real terms compared with 2010. That is based on ONS pay statistics. Unison and the NEU have briefed me on the real-terms reduction in the value of wages for their members. Teachers are getting £12,000 less in real terms since 2010; social workers £15,000 less; and paramedics £16,000 less. The key workers that keep this country going are being driven into poverty by this Government. Putting money in workers’ pockets is the way out of the cost of living crisis.
The Governor of the Bank of England repeatedly warned last year that pay rises were inflationary, but provided no evidence. Some organisations have challenged that statement. For instance, the Institute for Public Policy Research said,
“Tax-funded…public sector pay restoration…is not significantly inflationary”—
again, I recommend that the Government Minister reads the documents. That is why in the past two years we have seen the most significant period of industrial action in 40 years.
The ONS states that over 5 million days of work have been lost to industrial action since the start of the current cost of living crisis. The Government’s response has been not to address the retention and recruitment crisis, but to curtail trade union freedoms by bringing in the Strikes (Minimum Service Levels) Act 2023. In Wales we have seen junior doctors on strike this week because of public sector pay cuts. Yes, they are administered by the Welsh Government, but the purse strings remain here in Westminster, which is responsible. I joined those junior doctors this week, as I have joined all public sector workers, as have all Labour Members here. Our solidarity remains strong with those workers.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
I wish to declare an interest as a practising NHS doctor. I gently remind the hon. Lady that it is beholden on the devolved parts of the United Kingdom—Scotland and Wales—to come to their own pay settlements with the trade unions. In Scotland, under the SNP, a settlement was put in place, which averted a strike by doctors. Why does she believe that things are different in Wales, and why could the Welsh Government not have averted a strike had they wished to do so?
Beth Winter
I do not think the situation is different in Wales compared with Scotland. Both devolved nations have been starved of funds from the UK Government over the past 14 years. The Barnett formula does not work and we are owed in excess of £1 billion in Wales—I am sure it is far more in Scotland. I therefore beg to differ.
Hywel Williams (Arfon) (PC)
Just to answer that particular point, we are still waiting in Wales for the consequentials from the English settlements with junior doctors. Until we know how much money we are getting, it is difficult for us to decide on the rates of pay that we will award.
Beth Winter
I fully agree. I will conclude because I am conscious that lots of people want to speak today.
My final point regards pay restoration. The TUC’s position is clear. As agreed by its affiliated unions, it wishes to see a commitment to funding pay increases for public sector workers that at least match inflation. More than that, it wishes to see above inflation pay rises that provide for pay restoration, and the Welsh Government have committed to that if they have the funds to do so.
Richard Burgon (Leeds East) (Lab)
My hon. Friend is making an incredibly important speech on the need to pay our public sector workers properly. Does she agree that the crisis in our public services will not and cannot be solved unless the people who work in our public services are paid properly? For example, band 2 NHS staff—including nurses—outside London are paid less than the real living wage. While that continues, how can our public services deliver the kind of service that people across this country need and deserve?
Beth Winter
My hon. Friend makes a very strong point. I wholeheartedly agree. Pay restoration is the right thing to do. Last year’s IPPR report argued that restoring pay to 2010 levels would cost an additional £22 billion per year. How would we pay that? By increasing taxes. There was a debate earlier this afternoon on wealth tax. We have the funds to provide pay restoration and above-inflation pay awards if we choose to.
Before I wrap up, I have a few questions. Will the Government please commit to above-inflation pay rises for public sector workers? Will they commit to providing pay restoration over the long term? If not, how can they justify the permanent devaluation of the work carried out by public servants? Thank you very much—diolch yn fawr.
Several hon. Members rose—
Sir Robert Syms (in the Chair)
Order. I remind hon. Members that they should bob if they wish to be called in the debate. I think they are on about three minutes each.
Dawn Butler (Brent Central) (Lab)
I thank my hon. Friend the Member for Cynon Valley (Beth Winter) for securing this very important debate.
It is interesting, isn’t it, that there are people who claim to work in the public interest and can make millions of pounds of profit while the Government do not bat an eyelid, but public sector workers who have asked for a pay rise in line with inflation are called greedy or unreasonable? ONS figures show that the average public sector worker is earning £177 less a month, in real terms, than in 2010.
This Government consistently and constantly vilify trade unions. Why? Because they are the aspirational vehicle for the working class. I proudly stand on the picket lines to support workers who are fighting for fair pay and better working conditions. It is strange, isn’t it, that the Government do not want unions fighting for their members, but are more than okay with creating VIP lanes, through which Ministers can recommend mates and Tory donors, so they can fill their pockets with public cash?
Every day, people are finding it hard to live. In the past two years, workers have faced the steepest rise in the cost of living for more than 40 years. Since 2010, the cost of living has risen by 73.2%, and over the past year, mortgage interest rates have risen by 48.5%. The Resolution Foundation says that annual repayments for those who are re-mortgaging are set to rise by £2,900. Rents have gone up as a percentage of wages. Food prices have risen by 23%, electricity by 39.4%, gas by 58.7%—I could go on. The value of an average public sector worker’s wages has declined by 25%. We should all be ashamed that that is happening on our doorstep and people cannot afford to live.
In contrast, dividend payments to shareholders have increased by 8% to £94.3 billion. We are living in a topsy-turvy Alice in Wonderland world. I remember what it said on the wall of the trade union where I used to work: “To make the rich work harder, you pay them more. To make the poor work harder, you pay them less.” It is about time we turned the tables and started appreciating public sector workers.
Olivia Blake (Sheffield, Hallam) (Lab)
I thank my hon. Friend the Member for Cynon Valley (Beth Winter) for securing this debate. It is always brilliant to hear her talking about the important issue of low pay. I echo her comments about Tony Lloyd. He was a very principled public servant, not only as an MP for many years, but as a police and crime commissioner. My thoughts are with his family. He will be sadly missed.
The statistics on public sector pay and the associated graphs and figures all starkly outline the dire state of pay for those who dutifully work to serve our communities, but nothing paints a better picture than the experience of frontline workers themselves. I want to read an anonymised quote from a DWP worker. When they were asked about the conditions in their workplace, they said:
“Every day felt like drowning, getting upwards of 60 messages from claimants to deal with, on top of all the other work. I’ve been in my role for several years and this was the worst it has gotten. It worsened my mental health to the point of severe burnout, with constant headaches when I am at work and bad anxiety. At its worst, it pushed me to self–harm and heavy contemplation of suicide.”
That worker is not alone in those feelings. PCS recently published first-hand testimony from the workforce in the DWP. The reports in that document are shocking, and they almost all point to low pay as the source of the recruitment crisis in the DWP. No one wants to work for an employer that they feel undervalues them and the skilled job they do. It is ironic that we hear a lot about competition in the private sector, and yet do not see competitive pay in the public sector.
The link between poor recruitment and pay is also abundantly clear in the health service. Nursing, which has already been mentioned, has a vacancy rate of 10.36%. The number of district nurses has decreased by 44.4%. School nurses are down by 32.6%, learning disability nurses by 46%, and health visitors by 31.1%. Just the other day, I was in the Chamber debating provision and funding for special educational needs and disabilities. All the nursing staff I have listed are critical to delivering that service, so it is no wonder that SEND provision in the UK is broken. Pay is at the core of a lot of these recruitment crises.
It is the same story again and again. Last year, the TUC found that one in three public sector workers—1.8 million workers—has attempted to leave their profession and get a job in another field. As alluded to earlier, the crisis in health and social care is even worse; there, the proportion rises to 50%. Of all the workers the TUC asked, 52% cited low pay as a cause of their wanting to leave the sector.
The pay for our public servants reflects the esteem in which we hold our public services, and the value we place on supporting some of the most vulnerable members of our community. Given the Government’s measures on public services, those have clearly hit rock bottom. We should all reflect on that.
Ian Byrne (Liverpool, West Derby) (Lab)
It is an honour to serve under your chairship, Sir Robert. I thank my hon. Friend the Member for Cynon Valley (Beth Winter) for securing this important debate, and for her excellent speech.
Many public sector workers have, as a last resort, had to take industrial action over their pay, pensions and job security. I have been proud to stand on the picket lines in Liverpool with teachers, nurses, doctors, junior doctors, civil servants and many other public servants. The Government should not have put the workers in this position. The wave of strike action follows pay offers that amounted to real-terms pay cuts, and comes at the same time as high inflation and the worst cost of living crisis that many of us have ever known. Since 2009, the value of the average public sector worker’s wage has declined by 25%, and the total cash value lost as a result of wages failing to keep pace with inflation is £65,000. That figure is staggering. Just imagine the difference that £65,000 could have made to people’s lives, and their local economies.
The Government’s brutal and unrelenting austerity has cut our vital services to the bone, and declining real wages have forced many who deliver those services into poverty. Let us be clear: austerity was a political choice; it was the wrong one, and so it will always be. Analysis by Feeding Liverpool shows that one in three people in my great city are experiencing food insecurity and hunger, and I know from speaking to many constituents that this includes teachers, nurses, civil servants and many more public sector workers.
On civil servants specifically, a PCS union survey of its members found that 35% had skipped meals because they had no food, 18% had to miss work because they could not afford transport or fuel to get there, 85% said the cost of living crisis had affected their physical and mental health, and 52% were worried about losing their home. What we are putting them through is staggering.
Declining public sector pay and conditions have also created a recruitment and retention crisis. It is utterly heartbreaking to hear from public sector workers in West Derby, such as teachers and nurses, who feel that they have no choice but to leave the career they have worked in their whole life, and care so much about, because of a combination of low pay, poor conditions, funding cuts, staff shortages and huge workloads.
Recent polling shows that two thirds of the public want the Government to invest any fiscal headroom in public services, such as schools and hospitals, and the people who serve in them. People have had enough of the Tory austerity programme. I completely agree with my hon. Friend the Member for Cynon Valley, who described so well the three key things that the Government must do next. First, there must be greater transparency around pay review bodies, along with greater collective bargaining arrangements in the trade union movement. Secondly, the upcoming pay settlement must deliver at least an inflation-proof pay rise. Thirdly, the Government must commit to a principle of pay restoration, and put right a decade of real-terms pay decline for public sector workers. They deserve nothing less, and our communities deserve nothing less.
Zarah Sultana (Coventry South) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I too pay tribute to our colleague Sir Tony Lloyd, the hon. Member for Rochdale, who has sadly passed away. He will be remembered for his kindness, and his tireless commitment to his community and the Labour movement. My thoughts go out to his loved ones. I congratulate my hon. Friend the Member for Cynon Valley (Beth Winter) on securing this important debate. Our NHS, our schools and all our public services are the backbone of our society. It is those 6 million workers, from hospital porters to teaching assistants, who keep services running. They keep the country running.
Public sector pay has been slashed in real terms since 2008. While costs have soared, wages have failed to keep up, leaving workers in Coventry South and across the country struggling to makes ends meet. Recent research by Unison shows that the average public sector worker’s wage in 2023 was worth £12,000 less than it was in 2009. The work of teachers, nurses, firefighters and social workers has not got easier in that time. In fact, workload, stress and burnout have only shot up. Why is a teacher today paid a quarter less than they were in 2010? Why have social workers, paramedics, housing officers and so many others had their pay slashed by more than 25%?
For more than a decade, the failure to pay public sector workers properly has pushed staff to breaking point. It has created workforce crises, dangerous understaffing and a wasteful reliance on agency staff. Last year, public sector increases of around 6% were eventually secured in most sectors, but with inflation still sky high, those once again amounted to real-terms cuts that have left workers worse off. It has to be stressed that those pay rises were not handed to workers by the Government; they were won by trade unions who campaigned tirelessly for many months, and who were forced to take days of industrial action to claw back pay in the face of huge real-terms cuts.
It does not have be like this. The Government could choose to remunerate workers fairly. They could commit to increasing pay, at least in line with inflation, for 2024-25. They could plan to restore pay to 2009 levels, so that all public sector workers can enjoy the same standard of living today, and tomorrow, as they did in the past. In the past decade, Britain’s billionaires have seen their wealth go up threefold. It now stands at an eye-watering £684 billion, so we know that there is enough wealth to go around, to fund our public services and to give workers a decent wage. Let us tax the rich. Let us get the very wealthiest to pay their fair share. Let us invest in our public services and give the public sector workers who we rely on the fair, inflation-proof pay rises that they rightly deserve.
Hywel Williams (Arfon) (PC)
The hon. Member for Cynon Valley (Beth Winter) made a very persuasive case, which I will add to. Public sector pay is crucial in Arfon and in Wales. According to a Bevan Foundation report on poverty in Arfon, which I commissioned and published last August, there were 11,300 public sector employees in Arfon in 2021—36.6% of all employees in the constituency. Public sector employment in the constituency is extremely important and is higher than elsewhere, and there have been many reasons for that. We have three major public health institutions—a local hospital, Bangor University and Gwynedd Council’s headquarters in Caernarfon—so that is why we have so many public sector workers. Arfon is twice as dependent on jobs in the public sector as the rest of Great Britain.
Public sector jobs have traditionally been seen as safer, better paid and pensionable. However, the median gross weekly pay of full-time workers living in Arfon is £20.10 a week less than a typical Welsh worker’s, and £58.80 a week less than the average worker’s in Great Britain. I would argue that this obviously has a bad effect on public services. There are particular issues in Wales, where, in many areas, we have a more dependent population because of age, illness, disability and the legacy of heavy industry. That is why we need proper funding to meet the needs of public services, and why the inadequacy of the Barnett formula is so acute.
To take the case of junior doctors’ pay, which I raised earlier, Plaid Cymru’s Health and Social Care spokesman, Mabon ap Gwynfor, said:
“The elephant in the room is that Wales is not fairly funded, meaning we’re unable to pay our public sector workers what they deserve.”
I have a question for the Minister, which I will repeat from earlier. Will there be a consequential effect on the settlement for Wales from the settlement with junior doctors in England, so that we have the wherewithal to pay the proper rate for the job? If there is to be a consequential, when will the Government tell us?
Jim Shannon (Strangford) (DUP)
It is a real pleasure to speak in this debate. I thank the hon. Member for Cynon Valley (Beth Winter) for securing it.
First, may I say how saddened I am to hear that Tony Lloyd has passed away? I knew him for all my time here of some 15 years. He used to sit behind me in the Chamber, or I sat in front of him—perhaps that would be a better way to say it. We had many chats and much fun together. Along with others in this Chamber, I pass on my sincere sympathies to his family. He was a very good friend to Northern Ireland. We might have had some differences in how we looked at things, but I tell you what: no one can ever take away his dedication and commitment to Northern Ireland. I will sadly miss him on the Northern Ireland Affairs Committee. I put on the record the burden of his passing.
This is certainly a timely debate. In Northern Ireland tomorrow, our schools will be closed because the teachers are on strike. Public transport workers will join them. Anyone who wishes to travel to work will do so on roads that are not gritted, while road gritters go on strike and temperatures fall today and tomorrow in Northern Ireland. More than 150,000 public sector workers, across 15 unions, are set to strike. If we took this to the nth degree and all public sector workers went on strike, we would find a total shutdown in Northern Ireland.
Some people here may be getting ready to chime, “Pay sector awards are devolved.” Yes, they are, but I will make my case. It has to be remembered that Northern Ireland is grossly underfunded, as has been acknowledged by the Secretary of State and by central Government. We need an appropriate uplift in Government funding. I am invested in this deal to ensure the Barnett consequentials. This has been discussed at the Northern Ireland Affairs Committee and is one of the issues that we have taken forward. All the officials who attend have acknowledged that the Welsh system of funding, with great respect to Welsh colleagues here, would make us better off in Northern Ireland. If that has been accepted on the Northern Ireland Affairs Committee, it is only right that we should see a reflection of any uplift and increase.
I cannot speak on this motion without highlighting the fact that, unlike in the English system, we have been held to ransom not by strikes but our own Secretary of State, who is on record as acknowledging that an enormous budget increase is required. He has sourced part of that funding but is withholding the money that would give the public pay sector increase required. He has tied the release of the extra £3.3 billion, which has been well bandied about and talked about. We have pushed him on the issue. The ham-fisted blackmail attempt has been highlighted by my party leader, my right hon. Friend the Member for Lagan Valley (Sir Jeffrey M. Donaldson), who has said about the pay rise:
“There’s nothing to stop that from happening—you don’t need to have a functioning Stormont in order for the Secretary of State to use the temporary powers that he has given himself for that purpose. He has the power to set the budget. He has the power to deal with this issue, and we’re saying to the Secretary of State that he should get on and do that.”
Why should the Secretary of State do that? Because the Government here have already done it on three occasions. They did it for sex and relationships education, they did it for the Irish language Bill and they did it for the abortion Bill. If they can do it three times, they can do it once more and create the money—the £3.3 billion, which would pay for the whole increase that the workers want. I support them. A number of unions have gone on the record, including on a television programme last week. They said, “Let’s focus on who can make this decision.” They went on record to say that this is not a matter for politics, but for leadership. Where does that leadership come from? It comes from the Secretary of State for Northern Ireland. He can make that decision.
I put on record my support to others here and to my constituents back home. I have supported decent pay sector increases for hard workers in this place. Northern Ireland deserves no less support and action. I conclude by asking Members here to voice their concerns to Government in support of public sector workers throughout the United Kingdom of Great Britain and Northern Ireland, without whom we would be completely lost and much worse off. I support them in what they are doing. The thing about it this time is that the Secretary of State has the money to do it.
Chris Stephens (Glasgow South West) (SNP)
It is a pleasure to see you in the Chair, Sir Robert. Like other Members, may I start by paying tribute to the great Tony Lloyd? He was a good friend, a great man and one of the characters of this place. We will all miss him. I am sure that in the coming days we will all be paying fuller tributes to a great man and a friend to many.
I refer to my entry in the Register of Members’ Financial Interests, particularly to my position as chair of the PCS parliamentary group and as a member of the City of Glasgow branch of Unison, of which I am a former treasurer. Indeed, in the old days I was the one responsible for signing the many strike pay cheques to workers at Glasgow City Council.
This has been an excellent debate. We are all waiting with great anticipation to hear the Minister’s response, but I am sure some of us could write his lines for him. I hope we will not be subjected to this notion that it is pay rises that contribute to inflation, when we know that it is prices. I am sure that we will not be told about the huge cost to the taxpayer from pay rises, as if there is some notion that public sector workers put their pay rises in a shoebox and hide them under the bed.
As the hon. Member for Liverpool, West Derby (Ian Byrne) correctly said, there is a good economic impact when we give public sector workers a pay rise. Before the pandemic, about 70p in every £1 of public money ended up in the private sector economy. If we give public sector workers a good pay rise, what do they do? They spend it, and they spend it in the private sector economy. I would have thought that the Government would welcome such behaviour by consumers.
Many Members, including the hon. Member for Poplar and Limehouse (Apsana Begum), have mentioned the PCS report. I have a copy in front of me; I know that I am not allowed to use props in this place, as Mr Speaker reminded us earlier today, but I have a copy for the Minister that he can read at his leisure. I have to say that it is a devastating report about the staffing crisis in the Department for Work and Pensions and how low the pay is for staff. The fact that huge numbers of staff in the Government Department that looks after social security have to rely on the very benefits of that system is something that the Government need to look at.
In this debate on public sector bodies, I hope the Minister will explain why there are so many bargaining units across Departments in the Westminster Government. There are 200 separate pay negotiations for the UK civil service. That is a completely and utterly ludicrous position. I would have thought that perhaps the party of small government would have one set of negotiations for civil servants across UK Government Departments. Can the Minister also explain why staff at the Pensions Regulator are currently taking industrial action? The Pensions Regulator is not complying with the Government’s own pay remit: it is offering less than the remit says.
Mercifully, there is a different story to tell for public sector workers in Scotland. We need only look at figures for the past year. Rail workers in Scotland are getting a pay rise of between 7% and 9%; in England, it is 4% to 6%. In the national health service last year, there was a 4% pay rise in England; in Scotland, it was anywhere between 7.5% and 11%. That is perhaps because we have a Government in Scotland who recognise Scotland’s values, recognise that public sector workers should be looked after during the cost of living crisis, and recognise that we should be thanking those workers in the public sector who kept the country’s wheels turning during the pandemic. I hope that the UK Government will respond positively to the many points that hon. Members have made this afternoon.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
It is a pleasure to serve under your chairmanship, Sir Robert. I congratulate my hon. Friend the Member for Cynon Valley (Beth Winter) on a passionate and well-argued debate, and I associate myself with her remarks about our friend Tony Lloyd. I first met Tony when I was an intern in Parliament nearly 22 years ago, I think. The way he was so nice to me sticks in my mind: he really showed the character of a public servant in being so nice to an unpaid, lowly intern. I am very sorry to hear that he has passed away. What a life he had—a real life of public service. My thoughts are with his family.
Working people have seen 14 years of low growth, stagnant wages and the highest tax burden in decades. What are they getting in return? On this Government’s watch, the average pay for workers is lower in value now than it was 14 years ago when the Government first came to power. The NHS, which we all love, is on its knees, with 7.5 million people waiting for treatment. Schools across the country face crumbling concrete as our children are forced into temporary classrooms.
My hon. Friend the Member for Liverpool, West Derby (Ian Byrne) and the hon. Member for Strangford (Jim Shannon) talked about how public services are broken but it is their constituents who are paying the price. My hon. Friend the Member for Liverpool, West Derby described how his constituents are facing food insecurity and skipping meals. I think you would agree, Sir Robert, that in 2024 in the United Kingdom, that is absolutely unacceptable for our constituents.
Call me old-fashioned, but I believe that it is the Government’s responsibility to ensure that quality public services are provided for the common good of the country. The sorry state of our public services and their recruitment and retention crisis are a result of 14 years of this Government. My neighbour and hon. Friend the Member for Brent Central (Dawn Butler) talked about the cost of living crisis in her constituency, the struggle that her constituents face, particularly in renting, and the fact that workers’ pay is now lower than in 2010. I believe that this is a direct result of the Government’s inability to grow the economy.
The Government like to talk about public service productivity, yet only yesterday the head of the National Audit Office, Gareth Davies, said:
“Parts of our infrastructure are crumbling…The public sector is finding it harder to retain staff…These factors and others have combined to leave public services with a productivity problem.”
Our constituents have suffered almost a decade and a half of stagnant public and private investment, and the cuts to public services are forcing them more and more into decline.
The Opposition would take a fresh approach to public services. We want to drive up standards in every state school, provide access to mental health support in every single school and recruit thousands of new teachers to ensure that their expertise is in every single classroom. We will get our NHS back on its feet with our plan to cut the waiting lists, and we will pay for it by removing the non-dom tax status. My hon. Friend the Member for Coventry South (Zarah Sultana) said that people who can afford to pay should be paying their fair share of tax; I fully agree. We will clear the backlog by offering 2 million more appointments every year, seven days a week.
We recognise that the current crisis in public services cannot be addressed through additional money alone. That is why the next Labour Government will fully transform the NHS. We need a health service that prevents illnesses and keeps people healthy and out of hospital in the first place. We will move care closer to our communities, guarantee mental health treatment where and when people need it and, most importantly, end the 8 am scramble to get a GP appointment. The next Labour Government will also use technology to overhaul every aspect of NHS delivery and deploy the power of artificial intelligence to spot diseases quickly.
We want to reform the outdated national curriculum to transform our schools with a greater focus on children’s creativity, speaking skills and the confidence to shatter the glass ceiling at source. Across our public sector, we want to provide a more dynamic, joined-up and strategic approach to government. We want to focus on Britain’s long-term national renewal. We understand that delivering fair and effective public sector pay and repairing and reforming our public services will require a strong and secure economy. That is why we set ourselves the ambitious mission of securing the highest growth in the G7.
Dr Poulter
The hon. Lady is making a number of points. On the specific issue of public sector pay, which is what this debate is actually about, could she please outline the Labour Front-Bench position? Does she agree with Opposition Back Benchers that public sector pay should go up this year by at least the rate of inflation, if not higher, and that there should be a long-term pay settlement of that type for the public sector?
Tulip Siddiq
I support the view that we have to make sure that we treat our public sector workers better. If we were in Government, Labour would ensure that the pay review bodies give greater weight to recruitment and retention issues. That is what we will consider when we are in Government—whenever the current Government decide that they want to call an election, so that we can put our views to the country. I notice that the hon. Gentleman is smiling, but the Government still have not given us a date; I will allow him another intervention if he can give me a date, but I do not think he will.
We will deliver a proper industrial strategy and higher investment, because we believe that if we can grow the economy, we can pay people properly. We want to cut planning red tape and get Britain building. We will transform our labour market with stronger workers’ rights. We want to get the economy growing again. We want to increase tax receipts and improve our public finances, so that we can invest in our public services and boost wages.
In contrast, the current broken economic model has driven down people’s wages and undermined their security. The Government have failed to deliver growth and have weakened our public services. My hon. Friend the Member for Sheffield, Hallam (Olivia Blake) made a powerful speech about the recruitment and retention crisis, and about how public services are in a state of collapse. That is not what we want to see in our constituencies. We want to get the economy firing on all cylinders; we want to repair our public services, so that they work for communities; and we want the public sector workforce across the country to work properly. I want to hear what the Minister has to say about the fact that the economy is broken. What is his plan to grow it, so that our constituents can have a better life in the future?
The Economic Secretary to the Treasury (Bim Afolami)
I thank the hon. Member for Cynon Valley (Beth Winter) for securing this debate and for her opening remarks. I echo her comments and those of many others about a dear friend of the House, Tony Lloyd, and his passing. As was evidently the case with so many other Members, ever since I came to the House, he was unfailingly kind to me. But he was not just kind; he was also knowledgeable and thoughtful, and he knew a huge amount about governance, about Manchester, and about this House and how it works. He will be sorely missed, particularly by Opposition Members.
I am grateful for this opportunity to set out the Government’s appreciation of our public sector workforces and the spirit of public service that lies behind the vital work that they do up and down the country.
Before I get to the meat of my remarks, let me say that many comments have been made in this debate about how, as a result of inflation, the real spending power of wages decreases. That is completely correct; it is true. That is why halving inflation has been the Prime Minister’s No.1 priority since he took office, and we have focused so strongly on doing that. Having more than halved inflation—although we have not yet finished the job—we are now able to pay our public sector workers more. I will explain that a bit further.
As Members know, pay for most frontline workers is set through an independent pay review body process. These independent bodies consider a range of evidence when forming their recommendations. It is important to note that the process is independent of the Government, but Members should be in no doubt that this Government wholeheartedly appreciate the public sector workers who play a vital role in delivering our world-class public services.
Richard Burgon
I am listening very carefully to what the Minister is saying. Why does he think that nursing staff are leaving the profession in droves? Does he agree that it is because they are underpaid and overworked, or does he think there is some other reason? If he thinks there is some other reason, could he enlighten the House on that now?
Bim Afolami
Although this a debate about public sector pay, I will say this in relation to nurses: we have more nurses now than we had at the beginning of the Parliament. There are problems with the retention and recruitment of nurses, which we are addressing, but those problems are receding and those who leave do so for a range of reasons. We are working with the Health Secretary and across Government to ensure that we retain high-quality staff across our public services. Pay is of course part of that consideration, as it is for us all.
The Government strongly believe that dedication to public service should be appropriately rewarded, which is why for the 2023-24 pay round we accepted the headline pay recommendations of the public sector review bodies in full—for the armed forces, teachers, prison officers, the police, the judiciary, medical workforces and senior civil servants. What precisely does that mean for those professions? To answer, I will give three clear examples.
First, it means that policemen and policewomen received a 7% uplift that rightly recognises the risk that those brave men and women take at work. Secondly, teachers, who have been mentioned today, have received a 6.5% uplift and an increase in starting salary for newly qualified teachers to £30,000—significantly above the median wage in this country—which helps to ensure that we can continue to attract the brightest and best to safeguard our children’s education. Thirdly, NHS consultants, doctors, dentists and GPs have received uplifts of 6%, with junior doctors receiving an enhanced pay increase that averaged 8.8%.
Alongside those headline pay awards, we have since agreed offers with the unions representing senior medical workforces, including consultants, which covered reforms to their pay structures. The junior doctors strike has come up in this debate, as one would expect. We were in talks with the British Medical Association’s junior doctors committee, but they unfortunately chose to walk away. I am saddened by the strike because, frankly, it is having an impact on all our constituents. Nobody in this House should want the strike to continue. We urge the junior doctors committee to reconsider its decision, call off the strikes and come back to the table so that we can make further progress. Its demand of a 35% salary increase is unreasonable, and I hope the committee is reflecting on that and will come back to the table as soon as possible.
The pay settlements I mentioned appropriately reward the key role that staff play in safeguarding public health and the health of our NHS.
Beth Winter
The Minister has spoken a lot about the pay increase, but in preparation for the debate we received a number of submissions from trade unions, including the RCN, Unison and the NEU, which made two points that the Minister has not addressed and on which I will table questions. The first was regarding the independent review bodies’ concerns about terms of appointments and reference terms for multi-year deals. I did raise that specific question, but the Minister failed to respond.
The unions’ second point was the pay restoration argument. The figures are staggering, but I will just pick out a couple: nurses have seen a 27% decline in the value of their pay since 2009; social workers have seen a decline of 28%; and all that the junior doctors—who the Minister just mentioned—are asking for is pay restoration back to those 2010 pay award levels. Surely they are entitled to that, and it is not too much to ask. The strikers I was with on the frontline on Monday were having to cut heating and food; they were struggling. They do not want to be on the picket line. All they want is pay restoration. I really hope the Minister addresses that issue.
Bim Afolami
Median pay in the public sector in 2023 was 9% greater than in the private sector, which is broadly in line with the gap between the two sectors over the past decade, so I do not fully accept the situation described by the hon. Lady. To repeat the point I made at the beginning of my remarks: inflation does erode the spending power of wages, which is why it is so important to focus on bringing down inflation.
Let me address another point that the hon. Lady made—as did the hon. Member for Liverpool, West Derby—about health in Wales. As everybody in the House knows, health is fully devolved in Wales; the Welsh Government set health worker pay in Wales, just as the Scottish Government do in Scotland.
Let me answer the question about when the devolved Governments will know their final budgets, which was asked by either the hon. Member for Glasgow South West (Chris Stephens) or the hon. Member for Strangford (Jim Shannon): they will do so following the conclusion of the supplementary documents process, which I believe is published after the Budget. That information will come.
Dr Poulter
The Minister might also remind the Chamber that the Welsh Parliament has had its own income tax-raising powers since 2019. I do not think that is on dividends or savings, but there are other mechanisms available in Wales to meet funding commitments that the Welsh Government may wish to make. Indeed, they may wish to make commitments with the unions to end the strikes in Wales.
I have one question for the Minister. I believe in the importance of the pay review body process, which, as he has rightly said, is independent. If the pay review bodies make a recommendation this year for public sector pay, will the Government adhere to that recommendation?
Bim Afolami
What I can say at the moment is that the Treasury will look at and seriously consider it. We hope to accept it in full, but I cannot make a commitment now. Obviously, I have not seen the recommendation.
Hywel Williams
I will be very brief on a slightly tangential point. The Tories here have already spent the extra income tax that Wales could raise many, many times over—this time on junior doctors’ pay.
Bim Afolami
I thank the hon. Member for his point.
Having described the commitments we have already undertaken on public sector pay, I will outline the next steps we plan to take on this important issue. The Government have now asked the independent pay review bodies to consider and make recommendations on the pay of the workforces for the 2024-25 financial year. The Government hope to strike a balance on pay awards this year. On one hand, those awards should provide a fair, reasonable and proportionate offer for our public sector workers. At the same time, it is paramount that they deliver value for the taxpayer, particularly given the wider economic situation and the implications for the public finances.
Members will be eager to know what the pay award is going to be. Additionally, I know that for many people beyond this Chamber, particularly public servants and those who work for unions, the decision is important and keenly anticipated. I hear them, as do the Government and the Treasury. Given the recent economic picture, we understand that the outcome of the pay review process is not just academic or intellectual; it has real-world impacts on real people, including through mortgage payments, rents, schooling and healthcare. It is about how people plan their lives and how they take care of their loved ones. We hear their concerns and are considering the pay award carefully. The pay review process is independent and will take time. At this early stage, I hope people grant us their patience while we allow the process to take its course.
In conclusion, I thank the hon. Member for Cynon Valley and all Members who have spoken for playing their part in this valuable, interesting and important exchange of views.
Beth Winter
I thank everybody who has contributed to the debate, our trade unions and, most importantly, all public sector workers. They do amazing work under very difficult circumstances, and they deserve proper pay awards. I will table parliamentary questions, because I do not think the Minister has answered one of the seven questions I asked today. I will follow up with a letter to him, and hope that he will address those questions. Diolch yn fawr.
Sir Robert Syms (in the Chair)
I thank all Members for being brief and succinct so that everybody could get in.
Question put and agreed to.
Resolved,
That this House has considered the public sector pay round for financial year 2024-25.