Banking Reform
Andrew Bridgen Excerpts(14 years, 2 months ago)
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Mr Mudie
The hon. Gentleman makes a very powerful point which links with a point I was about to make. I have described the regulatory structure. There are differences between regulators throughout the western world, but the fact that they were all caught out shows that structure is secondary and that changes to structure alone will not prevent another crisis. We have all been affected despite those different structures, so one cannot attack regulatory structures or see them as a salvation. I regard such restructuring as simply rebuilding the Maginot line: it shows the public that we are doing something, that we are hard at work and that there is something concrete, but when it comes to effectiveness, it would suffer from the same deficiencies as the original Maginot line, so I do not think that structure matters.
If the banks, the bankers and their shareholders do not accept that they have to change their practices then what do we have? We have no regret from the banks and no acceptance that they played a part in events. Let us consider their behaviour over bonuses.
Mr Mudie
Let me finish my point and I certainly will. The behaviour of the banks over bonuses at the senior level is obscene and offensive to every one of our constituents. At a meeting on Saturday morning, I spoke to someone whose wife works for Halifax. She is going to lose her job. If one speaks to people in every part of the community one finds that they are looking forward to 2011 with great worry and concern because more than 100,000 of them are going to lose their job in the public services alone.
Andrea Leadsom (South Northamptonshire) (Con)
It is always a great pleasure to speak after the hon. Member for Leeds East (Mr Mudie), who is a colleague on the Treasury Committee. He always talks a lot of sense and has explained clearly how frustrated people in Britain feel about bankers’ bonuses.
I am amazed at the wording of the motion. To suggest that no action has been taken so far to prevent a recurrence of the financial crash is quite bizarre.
Andrew Bridgen
The hon. Member for Leeds East (Mr Mudie) talked about no regrets, no contrition and no admission of guilt for taking bonuses. Does my hon. Friend think he was talking about the bankers or former Labour Front-Bench Members?
Andrea Leadsom
To give a cautious answer, I think there was an element of both.
Last week, I had a meeting with senior bankers and the chief counsel of one bank. They certainly have the sense that the world has changed dramatically for them since the financial crash. As we would expect, both internal and external forces have combined to change things significantly. Tier 1 capital ratios are already significantly higher—from the 2% core at the time of the crisis to about 7% now, which is after all what Basel III will require. Leverage is significantly lower, at an average of 20 times, from about 38 times pre-crash—a considerable change. Many banks welcome the existing proposals to establish a clearing house for over-the-counter derivatives.
According to Hector Sants, the Financial Services Authority has quadrupled the extent of its regulatory investigations. He has even made comments about how afraid banks should be of him. The Bank of England special liquidity scheme still provides about £130 billion of liquidity to banks, enabling them to switch illiquid but good assets for Government bills. All those things are important changes, and they are only a few of the steps taken so far.
Still to come, in 2011 and 2012, are the new regulatory structures in the UK and Europe that will radically improve regulatory accountability. Instead of the FSA looking to the Bank of England and the Treasury for solutions—as in the case of Northern Rock—we will in future have a far stronger Bank of England. It will not just have responsibility for monetary policy and as lender of last resort; the Governor will also be ultimately responsible for individual bank supervisions and, critically, through the Financial Policy Committee, for the overall health of the financial system.
To speak of no action is completely wrong, but that is not to say that a lot more could not be done. It certainly could, and especially about two things: accountability and competition. Specifically, the competition issue worries me at all levels of banking. If we go back to Adam Smith and “The Wealth of Nations”, we see that to have successful free enterprise, we must have free entry and free exit for market players, but looking over the past 20 years, we see that consolidation in banking and the increasing costs of regulation have helped to create an industry where there are huge barriers to entry.
Andrew Bridgen (North West Leicestershire) (Con)
Thank you, Mr Deputy Speaker, for letting me catch your eye in this debate; this is a little different from the last time that I spoke. I remind you, Mr Deputy Speaker, that it is not the size of the dog, but the size of the fight in the dog that decides who wins.
This is an important debate because we need a vibrant, strong and confident banking sector if we are to see the essential growth that all hon. Members desire for our economy. Before we look to the future, it is important that we should address the problems of the past, including the very recent past.
Many Labour Members seem to be keen simply to bash the bankers and blame them for the financial crisis and recession rather than look at the causal and contributory parts played by their own former Treasury Front Benchers, including the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). He has much to answer for, and I wish that he were in the Chamber more often so that he could do so.
Mr Umunna
In fairness to many hon. Members who have spoken from both sides of the House, I should say that there has been a recognition that although the crisis was not 100% the fault of the bankers, they bear a huge part of the responsibility. As I said when I spoke, I think that before the crash there was a consensus around the world that tended towards a light-touch regulatory regime. That is something for which everybody, on both sides of the House and in legislatures throughout the western world, has to take responsibility. That has been acknowledged in the Chamber. Will the hon. Gentleman acknowledge that that sentiment has been expressed during this debate?
Andrew Bridgen
The hon. Gentleman makes that point, but the previous Government encouraged and took part in an orgy of credit: in fact, they led it, and invited individuals and corporations to join in, safe in the knowledge that the former Prime Minister said that he had ended boom and bust, which now sounds as ridiculous as King Canute claiming he could turn back the tide. The taxpayer now has the hangover from that 10-year orgy of credit.
Under the former Prime Minister’s watch, the Bank of England deliberately stoked a consumer boom that led to spiralling house price inflation and massive levels of personal debt. This is not just my opinion, but that of the previous Governor of the Bank of England, the late Lord George, who said of that period:
“We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term.”
That approach led to 20% house price inflation when the consumer prices index was running at 2%, led to financial institutions such as Northern Rock offering 120% mortgages, and ultimately led to a run on a British bank and the financial crisis of 2007. Opposition Members might blame America, global markets, or even the fact that we are not in the euro, as ridiculous as that sounds, but this misguided belief, and the hubris of the previous Prime Minister in believing that he had ended boom and bust, helped to contribute to the banking collapse. It is fascinating that the shadow Home Secretary—or perhaps I should say the shadow shadow Chancellor—stated that the cause of the deficit was not the previous Government’s borrowing, but rather the collapse of tax revenues. He failed to recognise that tax revenues based on rapid house inflation and excessive consumer credit are totally unsustainable.
The failure of the previous Prime Minister’s regulatory regime also contributed to the problem. It was clear in the early part of the decade that the UK had an unsustainable consumer credit funding gap: the IMF said so, as did the previous Governor of the Bank of England. The power to regulate had been transferred from the Bank of England to the Financial Services Authority and the Treasury, with an inadequate definition of roles and responsibilities. It was an absolute disaster, as was shown at the height of the Northern Rock crash, when Mervyn King was asked, “Who is in control?” and his answer was, “That depends on how you define ‘in control’.” The answer was that nobody was in control, and no one could see who was in control. One cannot have a third of a problem—one wants all of the problem or none of it. That was part of the difficulty.
So where do we go from here? I am a firm believer in sound money. A sustainable banking system is one where lending policies are closely in sync with the projected economic activity of the people it serves, not driving them.
Alison McGovern
Does the hon. Gentleman recall, as I do, that the previous Conservative Government left the country with a deficit of 3.4% which was going towards ongoing spending, unlike the debt in 2008, which accorded with the “borrow to invest” rule? In relation to sound money, what does he think about that?
Andrew Bridgen
I thank the hon. Lady for her point. She, like me, was not in this place at that time. I was in business running a corporation. I fixed the roof while the sun was shining, and I put my company into net credit three months before the banking crash happened.
We need a Government—and a regulator—who do not deliberately go to sleep at the wheel for political advantage, as the previous Government did. We must never let a bubble like the one that built up under the previous Government build up again. Our plan for growth depends on a sensible and sustainable banking system alongside more powerful incentives from Government. We must never return to the bubble that ended in the financial crisis and allowed banks to lend unsustainably under a tick-box regulatory system and a short-termist, feckless Government concerned more with political advantage than with the long-term interests of the country. In short, we need to look at creating a body that is solely in charge of financial stability and has responsibility for macro-economic supervision.
Chris Evans (Islwyn) (Lab/Co-op)
I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on introducing this debate. I do not know whether he remembers it, but five years ago he spoke in Gloucester about the economy—I was the Labour party candidate in Cheltenham—and warned that the banks were out of control. A lot of people looked on that uncharitably, but, sadly, he was proved right, which is why we are having this debate.
The debate is important because there is great anger out there about bankers. No matter what Government Members say, people blame bankers. When I first came to the House, BBC Wales ran a profile of me, the last sentence of which was:
“Since leaving university he’s worked in bookmaking and in banking, which contrary to widespread belief are different professions.”
Yes, there is a difference. I come from a family of bookmakers —my father and my mother were both bookmakers—and the one thing that was drummed into me as I was growing up was risk. As bookmakers, we understood risks, which is why we had odds. We always knew what would happen if we could not cover our losses.
When I joined the bank, naively I thought that I was joining an institution that I could be proud of and that set standards to which other industries could aspire. Unfortunately, I discovered that it was completely and utterly different from that. I was told to lend to whomever I could. I still do not understand the logic of saying to somebody who cannot afford to pay their bills every month, “Mr Customer, you need a £10,000 loan to get you through.”
I got a warning for refusing to lend someone £25,000 in an unsecured loan, because—I was told—I was not thinking about the shareholders. That is the major problem. When I said to my manager, “This can’t go on. This is madness—we’re just writing people off,” he replied, “Son, it’s a sign of the times. You wouldn’t go into a shoe shop and expect not to buy shoes.” However, there is a difference. A person who goes into a shoe shop and buys the wrong shoes will get blisters; a person who goes into the bank and buys the wrong loan loses their house. The people at the bank did not understand that we were dealing with people’s lives. They were arrogant and blasé—“We can’t fail; we’re great banking institutions”—regardless of the Barings bank failure in 1991. I well remember the chief executive of Barings at the time saying, “It isn’t terribly difficult to make money in the City, old boy,” but the bankers ought to have learned that it is terribly difficult for builders and plumbers to earn money.
The essential truth is that banking is simple—a bank lends money to someone and makes money through the agreed interest rate—but the banks made it complicated. In the debate this afternoon, I have heard about derivatives and arbitrage, but the average person who walks into their bank will think, “What relevance do derivatives and arbitrage have in my life?” The banks made lending into mathematical equations—someone mentioned a biology graduate—and sold debt on, so the money came from several different sources. Eventually, that massive tower block collapsed when the person at the bottom failed. I have been reading Ha Joon-Chang’s “23 Things They Don’t Tell You About Capitalism”, in which he argues that we should ban complex financial instruments. That is an outrageous thing to say, but if bankers and economists do not understand such instruments, how can anybody else be expected to do so?
Before I finish, I want to return to the anger that people feel. In an article in The Sun today headlined, “Bank chiefs grab £15 million bonus”, I read that Stephen Hester of RBS will receive £2.4 million, that Eric Daniels of Lloyds Banking Group will receive £2.3 million, that John Varley of Barclays will receive £3 million and that Peter Sands of Standard Chartered will receive £3.2 million. What message does that send to people? That money is absolutely obscene, including to people who work for those banks. I go back to my experience of working in a high street bank. We were kept on deliberately low wages. The only thing that kept us going was the promise of a bonus. They would say, “We want you to bring in so many leads so stay till 7 o’clock at night. Forget about your family. You’ve got to earn money and put some bread on the table boy.”
That is still going on. Someone came to my surgery the other day and said, “I have to work till 8 o’clock every night because I’ve got to speak to the people I did not speak to in the day. I’ve got to get leads.” No amount of Government legislation or regulation will change that.
Andrew Bridgen
Does the hon. Gentleman not agree, however, that it is
“the hope of reward that sweetens labour”
for us all?
Chris Evans
For people earning £12,000 a year and struggling to pay the bills, the pressure is on to stay after work and phone up leads to earn a quarterly bonus just to get through. That is not right. They should be paid a living, decent wage, which is what the Opposition support. I hope that everyone else will eventually do likewise.
Finally, as I said, no amount of Government regulation or legislation will change that culture. We need to say to the bankers, who were to blame for the economic crisis, “Either you change your culture, or the crisis will happen all over again.” We had better start opening our eyes to that.
Matthew Hancock
That is a valid and important point. Central to that point is the judgment of people who look forward and have a broad view, looking after the health not only of the banking system, but of the macro-economy, while also having the ability to change the way they regulate according to changes in the economy, so as to take into account new developments, which is critical. Far from being the simple renaming of the institutions, bringing together macro-prudential regulation with regulation of the economy and monetary policy more broadly is central to restoring the ability to prevent the build-up of credit, as happened over the past 15 years.
Andrew Bridgen
Does my hon. Friend agree that it is better to have a regulator who is fleet of foot than a clunking fist?
National Insurance Contributions Bill
Andrew Bridgen Excerpts(14 years, 2 months ago)
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Mr Hanson
I am grateful to my hon. Friend. The question that the Minister needs to reflect on, here or in Committee, is how we should split the national insurance holiday cake. There are many ways of doing that, but his way is unfair to the areas of greatest need, to the areas with the highest public sector employment, and to areas that contain seas of prosperity as well as deprivation.
The Minister has mentioned areas of high public sector employment, but I have already shown him the fallacy behind his argument as it affects many of our constituents throughout the country. Figures for jobseeker’s allowance show that the rate of unemployment is currently higher in London than in the south-west, part of which is represented by the hon. Member for Central Devon, in North Wales, where my constituency is, or in Scotland, where it is 3.8%. Unemployment is also higher in London than in the east midlands or the north-west—[Interruption.] The Economic Secretary to the Treasury did not take your strictures to heart, Madam Deputy Speaker. She is continuing to heckle from a sedentary position. I would be happy to give way to her if she wants to intervene.
However we measure unemployment, the levels of jobseeker’s allowance claims in London are higher than in the south-west, Wales, Scotland, the east midlands and the north-west. Indeed, they are above the UK average. That is a key point when we are thinking about how to divide the cake up.
Andrew Bridgen (North West Leicestershire) (Con)
I must say that the enthusiasm being shown by the right hon. Gentleman, and by so many Opposition Members for this fantastic Conservative policy, or coalition policy, on national insurance holidays is absolutely heart-warming.
Mr Hanson
If the scheme were applied to Greater London, the east and the south-east, and taken up at the level that the Minister expects, it would—according to figures that he gave me only last night—cost about £660 million. He says that there are about 1,000 interested companies to date, but I do not know what the take-up would be.
The cost could be offset by new employment and new taxes, because let us remember that the scheme under discussion is for new businesses, so the holiday period offset will be a cost to the Treasury, but it could be offset by increased growth, increased taxation paid by individuals who are employed and by the increased growth of businesses. The cost of the scheme downstream, at the end of the three years, is debatable, but, equally, there are ways in which we could divvy up the money that the Minister has allocated to the regions of Wales—one of which the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) represents—and all others. We could think about whether to divvy them up differently, so as to tackle areas of high unemployment in London or—if the Minister’s criterion is high public sector employment—areas with high public sector employment, such as those that I mentioned. They are in the 10% of areas with the highest such employment, and include seats that the current scheme will not cover.
Andrew Bridgen
Will the right hon. Gentleman clarify his statement? Did he just suggest that we cut taxes to increase growth in order to increase the tax take overall? If so, I welcome the right hon. Gentleman as a believer in the Laffer curve.
Mr Hanson
The hon. Gentleman knows that the Opposition have a growth strategy. We had one prior to the election.
The measure under discussion has been proposed to give new businesses a national insurance holiday to help them with their costs for three years. The Minister estimates the costs for the three regions as £650 million to £660 million, based on the scheme’s anticipated roll-out in those regions. My simple point is that these are new employment jobs and new businesses, so they will presumably entail new employment areas and new people employed to fill them, who will pay new taxes. All that is part of the growth strategy, which will be hit hard by VAT increases and public spending cuts. That is a separate issue.
If we are thinking about a payment holiday, the question for me is whether it will achieve its objectives by being available in the areas of the highest public sector employment, or whether it will go to areas such as Tatton, Richmond or other wealthy areas of the north and midlands. In those areas jobs will be created, but the people who most need them will not be able to get them. That is the crucial issue for debate.
Without making a party political point of it, I would argue that Government Members have participated constructively both in previous debates on this subject and in today’s debate. John Walker, the chairman of the Federation of Small Businesses has said:
“With small firms in the South East most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday for start-up businesses.”
I have already said that we are not going to vote against the Bill—although if the reasoned amendment had been selected we would have voted for that. However, it is important both to consider the issue in the round and for the Minister to reflect on the concerns expressed, by his hon. Friends as well as by Labour Members, about the application of the national insurance holiday.
At the same time as implementing this Bill, the Minister is scrapping completely the regional growth strategy for different departments, and scrapping the regional development agencies and replacing them with local enterprise partnerships, which in my view will not help with regional development to the extent that we would want. The Under-Secretary of State for Defence, the hon. Member for Mid Worcestershire (Peter Luff) has said that that sends out the wrong message about the work that has been done.
We need to look towards a better application of this policy, and the Minister needs to reflect further on the concerns expressed in our debate. Although we will disagree politically, I am most interested in ensuring that any national insurance holiday is of benefit to the people who most need it. Sadly, the Bill misses the mark in that respect, and fails to address those key issues.
I repeat that we will give the Bill a fair passage and not vote against it this evening. We welcome the rise in national insurance, which we too would have implemented. We welcome the holiday provisions as far as they go, but they need further reflection, so we will take every opportunity in Committee to try to persuade the Minister to look at more imaginative schemes, which might use the same amount of money in different ways, or extend the holiday to areas where it would be a valued resource and help reduce unemployment in the constituencies in the south-east, London and the east that most need that.
I hope that what I have said is helpful to the Minister. I look forward to spending the next few weeks in Committee with him, just as I have spent the last few weeks in Committee with him and his colleagues on various other Bills. To make a wholly non-partisan point, the Treasury appears to be one of the busiest Departments at the moment, and we are all having fun. I am sure that our discussions will shortly continue elsewhere.
Finance Ministers’ Meeting (Ireland)
Andrew Bridgen Excerpts(14 years, 2 months ago)
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Andrew Bridgen (North West Leicestershire) (Con)
Does the Minister agree that the test of any currency is in the tough times, not just the good ones? That was explained to all the countries that joined the euro, many of which, in my view, did so with their eyes wide shut. Is it not abhorrent that this liability, and the failure of the euro, should become a liability to the UK taxpayer at this time?
Mr Hoban
I do think that we have an interest in having a strong, stable eurozone and eurozone economy. Member states will reflect on the measures that need to be taken to strengthen the eurozone; that is part of the thinking behind some of the measures in the economic governance paper proposed by Herman Von Rompuy just a few months ago.
Oral Answers to Questions
Andrew Bridgen Excerpts(14 years, 2 months ago)
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Mr Hoban
Of course there are areas where more work needs to be done, and the hon. Gentleman is right that Michel Barnier has made further proposals, in a consultation paper that he published earlier this year. They included looking at the business models for credit rating agencies. However, I question whether taxpayers in Europe would feel it right that their money should be going to fund credit rating agencies.
Andrew Bridgen (North West Leicestershire) (Con)
Is it not a cause for cautious optimism that agencies such as Fitch, Moody’s and Standard & Poor’s have now given the UK such an excellent credit rating?
Mr Hoban
My hon. Friend is absolutely right, and it just goes to show that credit rating agencies do not get it wrong all the time. In May, Standard & Poor’s put the UK’s credit rating on a “negative outlook”, as a consequence of the previous Government’s policies. However, in October it said that
“the coalition parties have shown a high degree of cohesion in putting the U.K.’s public finances onto what we view to be a more sustainable footing.”
We welcome those comments.
Comprehensive Spending Review
Andrew Bridgen Excerpts(14 years, 3 months ago)
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Mr Osborne
There is a very substantial increase, of about 37%, in DFID’s budget. There are parts of international development work that the Foreign and Commonwealth Office carries out too—conflict stabilisation and the like. It is, of course, perfectly within the rules set on the UN commitment, which are internationally policed and so we cannot fudge them, and perfectly reasonable to count that expenditure towards the 0.7% target. However, the large bulk will be delivered through DFID, whose budget has a substantial increase. I suggest that it is a task for this House—all parties—to ensure that that development aid is well spent on the poorest people and on conflict prevention.
Andrew Bridgen (North West Leicestershire) (Con)
Does my right hon. Friend agree that the reason why the previous Labour Government failed to hold a spending review was because they bottled their responsibilities? Does he also agree that Labour Members are still running away from those now and that the cuts that we are seeing are no more than the butcher’s bill for 13 years of Labour profligacy and waste?
Mr Osborne
I completely agree with my hon. Friend. It is striking that in all the responses and everything that we have heard today from Labour Front Benchers and Back Benchers there has not been a single positive proposal as to how to reduce the deficit that they all sat there and allowed to grow.
Oral Answers to Questions
Andrew Bridgen Excerpts(14 years, 3 months ago)
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Mr Gauke
I congratulate the hon. Lady on her appointment to her shadow ministerial position, but I point out what her former colleague Alan Milburn has said:
“In times of plenty, giving child benefit to high earners is a luxury the country can afford; in times of want I don’t think it is. We would be wrong to oppose it. I can’t see it having an adverse impact on social mobility.”
I know Alan Milburn belongs to the centre ground, but the Opposition really should not abandon it.
Andrew Bridgen (North West Leicestershire) (Con)
16. What recent estimate he has made of the proportion of the central Government tax take from residents of the east midlands which is spent on that region.
The Chief Secretary to the Treasury (Danny Alexander)
We cannot accurately disaggregate tax revenue by individual regions, but we publish regionally disaggregated public spending tables each year. Total identifiable expenditure in the east midlands was £35.4 billion in 2009-10.
Andrew Bridgen
I thank the Minister for that answer, but as he is well aware, Leicestershire is historically one of the lowest-funded parts of the UK for education, the police and the fire services. Can he assure me that that historically low funding settlement will be taken into account in the comprehensive spending review?
Danny Alexander
The hon. Gentleman will have to wait until the statement on 20 October to hear the details of our spending decisions, but as I have made clear in answer to earlier questions, of course we consider it important to understand and manage the regional impact of spending cuts. We have established a regional growth fund, the details of which will be in the spending review statement, which will enable areas such as his to win support for projects that help economic growth in difficult times.
Mr Osborne
The Government have introduced a triple lock on the basic state pension, which means that it rises by earnings, or by CPI or RPI—whichever is higher. The previous Government had 13 years to do that, and they did not.
Andrew Bridgen (North West Leicestershire) (Con)
T5. In my constituency, more than 7,000 jobs are directly linked to east midlands airport. I believe that it has been shown that there would be no environmental or fiscal gain from the introduction of a per plane tax, as flights would simply divert to other European hubs. Is the Economic Secretary willing to reconsider any plans for a per plane tax, and will she meet me as a matter of urgency to discuss that?
Finance (No. 2) Bill
Andrew Bridgen Excerpts(14 years, 3 months ago)
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Andrew Bridgen (North West Leicestershire) (Con)
Does the hon. Lady agree that the main thing that we can learn from the economy of the Republic of Ireland is that we were right not to join the euro and should never do so?
Ms Eagle
I look forward to the debate that will take place within the Government on that, as I can see that Liberal Democrat Members are not exactly enamoured with the hon. Gentleman’s point.
At the weekend, the Cabinet seemed to send incoherent messages about the £83 billion cuts agenda that lies ahead. The Energy Secretary told The Daily Telegraph that spending cuts were not
“lashed to the mast with a particular set of numbers”
and could be scaled back if economic conditions deteriorated, but the Transport Secretary insisted that the Government would not deviate despite fears that the drastic cuts would damage the economy. The latter clearly regards himself as the real Chief Secretary—or perhaps it would be more accurate to say the Tory Chief Secretary—but which of the two is presenting the Cabinet’s real view? They both serve in it, so which of them is right? Perhaps when the Economic Secretary responds tonight, she would like to enlighten us about which of their positions is the real Government policy, at least for today.
Some things that I would have thought would be in the Bill, given the formidable economic challenge that now faces us, are conspicuously absent. Where is the plan for growth? We all know that growth is one of the most effective ways of dealing with a deficit. Thus, plans to get the deficit down need to be growth-friendly, but precious little in the Bill is intended to address that urgent requirement.
Since May there have been plenty of cuts that may well have a bad impact on our growth prospects, such as the abolition of regional development agencies and the savage cuts in the funding available to assist regional growth strategies. The decision to scrap the loan to Sheffield Forgemasters is another example. That company could have played a leading role in the developing global nuclear industry, but its chances of doing so have been set back significantly by that decision. The increase in VAT, which estimates suggest will cost each household in the country more than £500, will hardly boost demand, so where is the plan for growth? The Prime Minister claimed that his first Budget would be
“a Budget that goes for growth”,
but after the Chancellor’s theatrical efforts in June, the Government’s own forecaster, the Office for Budget Responsibility, downgraded its growth forecast for this year from 1.3% to 1.2%, and for next year from 2.6% to 2.3%. The CBI also decided to lower its growth forecast for next year from 2.5% to 2% to take account of the June Budget.
Equitable Life (Payments) Bill
Andrew Bridgen Excerpts(14 years, 4 months ago)
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David Rutley (Macclesfield) (Con)
Thank you for giving me the chance to speak in this important debate, Mr Deputy Speaker. I, too, congratulate my hon. Friend and neighbour, the Member for Congleton (Fiona Bruce), on her excellent maiden speech. I can assure the House that she has replaced Lady Ann Winterton—not Ann Widdecombe, as was asserted earlier—who is a real legend in this party. I would also like to join my hon. Friends in congratulating the Financial Secretary on the sheer speed and pace at which he is seeking to address the urgent matters before us. I knew him for many years before I came to the House and I would have expected nothing less than the positive approach that he is taking.
The story of Equitable Life policyholders is without doubt a tragic one. I believe it was my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) who suggested that it was like a Shakespearean tragedy. Well, I am half Danish and am more familiar with some of the Viking sagas. What the policyholders have been through would fit well into any epic tale. It is like the famous Njáls saga with its series of gruesome feuds. Similarly, today’s story involves hardship and heroic campaigning—in this case by EMAG—but this tale is now in desperate need of a fitting conclusion.
I have not followed this case as long as other longer-serving Members, and I do not claim to have the same level of expertise on all the details that they possess. What is clear, however, is that maladministration has occurred, policyholders have suffered and compensation is due. It is absolutely right that this new coalition Government should respond, as they will. Sadly, the issue is yet another part of Labour’s lamentable legacy—this time, not the cost of the record budget deficit, but the price of an unmet moral obligation that needed to be addressed.
I am sure that hon. Members will agree that policyholders have shown real courage and that EMAG has conducted a hard-fought and professional campaign. Like many other Members, I have met affected policyholders in my advice surgeries. I have heard about the hardships they had to endure. I have received well-argued letters and e-mails setting out their case both during the general election campaign and now as the Member for Macclesfield. It is the strength of their case and their campaign that has encouraged me to learn more about the situation, to sign the EMAG pledge, as many of us have, and actively to stand up for their cause. What I am even more proud of is the fact that the strength of their argument won the attention it deserved from the Conservative Front-Bench team and the Liberal Democrats’ leadership before the general election. I am delighted that, working together, the new coalition Government have honoured their commitment and urgently brought this legislation before the House.
I welcome the Bill. It provides parliamentary authority for the payments schedule and scheme. It is a vital step, which I am sure will be widely welcomed on both sides of the House, as it has been welcomed today, but policyholders in Macclesfield and throughout the country want answers to important outstanding questions. How much will be paid? How should the scheme be designed, and how will it be administered? These questions now need to be fully addressed to ensure that policyholders get the best possible outcomes for their cases.
On the size of the payment, it is, sadly, a reality that in this challenging economic climate, the level of compensation will have to take into account the demands on the public purse. Like others who have said it repeatedly today, I urge the Financial Secretary to continue to consider the views of the parliamentary ombudsman in determining the final figure.
Andrew Bridgen (North West Leicestershire) (Con)
Does my hon. Friend agree that the majority of Members and the majority of the public out on the streets will not believe that a 10% payout even on a £5 billion liability is either a fair or equitable result for policyholders?
David Rutley
My hon. Friend makes an excellent point. It is vital for Ministers to take that into consideration and find the right level of payment in this difficult situation.
I also urge the Financial Secretary to continue to take a transparent approach to explaining the rationale used to calculate the final compensation figures. Such transparency is critical and I am sure that my hon. Friend will agree that it should not be allowed to get lost in the detail of the wider spending review as it gets reported.
I also congratulate my hon. Friend on creating an independent commission to advise on the allocation and the design of the payment scheme. It is another positive step forward and—like many others, I am sure—I am pleased to hear that the Select Committee on Public Administration will fully review the commission’s conclusion when it reports in January. It is a vital step.
I am keen to seek further assurances from my hon. Friend that his officials will provide the necessary action for the administration of the scheme when payments are made in the middle of next year. Given the likelihood of a large number of appeals, this will not be a simple task. The scheme must be designed to accommodate the needs of these particular policyholders, whose average age is, I think, 78. It must be clearly communicated—not just on websites or via e-mails, but via well-written, high-standard communications and effective, well-manned telephone contact centres.
As I have discussed with the Financial Secretary, the administrator must learn from the launches of other Government schemes. Many will remember the agonies associated with the Rural Payments Agency and, more recently, HMRC’s problems with new PAYE systems, which are fresh in our minds. We need to ensure that the Equitable Life scheme does not become another example of the administrative chaos that was the trademark of the previous Government.
Frankly, I am disappointed not to have heard an apology from Labour Members, but I am not surprised, as they have failed to apologise for the huge budget deficit and now it is the turn of Equitable Life policyholders. It is all part of a depressing pattern of denial.
I conclude by congratulating the Financial Secretary once again on the speed with which he has tackled this long-running saga. I hope that in addressing the concerns of the policyholders, he will help those in real need and—just as at the end of Njáls saga—bring about a meaningful reconciliation. It is what the policyholders deserve after the epic trials they have had to endure.
Finance Bill
Andrew Bridgen Excerpts(14 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie
Indeed. There are liquidity problems across the economy and they remain. There are rumours in the air about the return of quantitative easing and that we might be entering into double-dip recession territory. All these things prove that the so-called independent Office for Budget Responsibility’s downgrading of growth predictions as a result of the measures in the Budget suggests that the Government had a choice in their hands to steer the economy in a particular direction and that they have chosen not the pro-growth path that the Liberal Democrats and the Labour party advocated before the election but, because of the damascene conversion of the Secretary of State for Business, Innovation and Skills the day after the general election, the anti-growth path. They will take a whole chunk of money out of the economy by cutting public services so steeply and so massively in such a short space of time.
Andrew Bridgen (North West Leicestershire) (Con)
Does the hon. Gentleman not appreciate that there is no money for the private sector from the banks because of the legacy of the last Labour Government? The Government are borrowing £3 billion a week—there is no money left for the private sector.
Chris Leslie
I do not agree that the private sector is crowded out in that way. I do not think that there is quite the evidence to suggest that. However, I am not sure that the hon. Gentleman, had he been in government during the crisis that the credit crunch provoked, would have done anything massively different to underpin and insure some of the banks against their losses at that time, purchasing shares in various banking institutions in order to keep the banking system going. I understand the partisan nature of his point, but all parties would have had to create that safety net for the banks at that time. I do not want to dwell on these matters, because time is limited and it is important to make my speech as brief as I can.
I want to ask the Minister specific questions about the absence of the small profits rate cut from the Bill, a matter on which I tabled an amendment. It is important to know why on earth it is not included. Typically, large corporations with their multi-million pound profits are at the front of the queue as far as this Government are concerned, but the real engine of growth in this economy is small firms. When I asked the Federation of Small Businesses about this, Stephen Alambritis, the head of public affairs, said that he was surprised at the signal sent to small businesses by the way in which the Bill is framed. He told me:
“It is important that small business is recognised in discussions about the Finance Bill. There should be a reduction in the tax rate for small business as there is for larger companies. There seems to be some discrimination from the coalition government, in that they are favouring large companies at the expense of small business”.
The Minister might say, “Of course they will get their cut,” but can we really trust the Government to deliver that if they are not putting such a measure in the Bill, particularly if they are not putting in the future years of the main rate cut, too?
A number of questions on this clause are exceptionally important. I obviously do not want to talk for too long, so I shall let the Minister respond.
Finance Bill
Andrew Bridgen Excerpts(14 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Helen Jones
My hon. Friend is right. If families have to be split up, put into emergency accommodation or are trapped in the cycle of worklessness and poverty, because not having a home makes it much harder to get a job, that not only inflicts appalling circumstances on them, but costs the taxpayer far more money in the long run.
Andrew Bridgen (North West Leicestershire) (Con)
I hate to bring the hon. Lady back to reality, but the previous Government halved the amount of manufacturing in our economy, from 22% to 11%. Under them, we built the least number of houses since 1922 in order to support the construction industry, and history will view many of their so-called investments rather harshly and, perhaps, as the biggest Ponzi scheme ever, because they did not stand up for long once the economic winds shifted against them. Will she please remember that? She will be pleased that one thing that we are not cutting is the health budget. As for those suffering from mental health problems, especially selective amnesia, I can see plenty in this Chamber.
Helen Jones
The hon. Gentleman ought to be wary of making jokes about mental health. I entered this House from a constituency where children growing up in 1997 had never known what it was to see someone in their household go to work. A Labour Government changed that and invested in decent homes, but Liberal and Tory councils constantly sold the pass on affordable homes by allowing developers to buy themselves out of their obligations, so we will take no lectures from him on employment or housing.
The National Housing Federation states that the Government’s planned housing benefit cuts alone will put 200,000 more people at risk of homelessness and concentrate social and economic problems in the more deprived areas. It is the ultimate Tory nimbyism to want to move people out of city centres. They used to say, “Get on your bike and look for work.” They now say, “Get on your bike and get out of my sight, because we don’t want to know anymore.”
Someone in London with rent of £350 a week would lose £35 in housing benefit if they were unemployed for 12 months. I ask Government Members what is the jobseeker’s allowance for a single person? Anyone? No, I thought not. It is £65.45 a week. If those people meet the shortfall in their rent, they will be left with £30.45 to live on, to buy food and clothes and to pay for utilities and the increased VAT rate that this Government will impose on them. Not only is that not the mark of a civilised society, but it leaves those people with less money to live on in a week than many Government Members would spend on a meal—a lot less in some cases.
Mr Meacher
I think I must move on—and we must move on—from debating poverty between the parties. Since I have the privilege of speaking, however, I have the last word. The fact is that the Thatcher Government tripled poverty to more than 3 million over the period between the early 1980s and the end of the 1990s; Labour reduced that significantly, but did not, in my view, do as much as it could have done to reduce the enormous gains of the wealthy.
As always, it is the dog that did not bark in the night to which we should give most attention. There is nothing in the Bill about a financial activities tax on financial speculation, which is a domestic version of the Tobin tax. Considering that the banks’ recklessness was a major contributor to the crash, that would have a significant reforming potential as well as being a major revenue earner. There is nothing for a really tough crackdown on tax avoidance, which is still estimated to cost the Exchequer some £25 billion a year, nor is any action being taken on the indefensible non-dom loophole. Nor is there any reference to a wealth tax, which might have seemed reasonable when, according to The Sunday Times rich list—not a trendy-lefty organisation—the top 1,000 richest multimillionaires, a minuscule proportion of the population, have nearly quadrupled their wealth over the last decade and a half by no less than £335 billion. This was all in The Sunday Times rich list two or three months ago. In the last year alone, their wealth increased by £77 billion. The fact that they are not being required to make any significant sacrifice at all, when everyone else is—
Mr Meacher
No, time is going on and I want to conclude.
The fact that those people make no sacrifice while everyone else is being hit extremely hard makes an utter mockery of any idea of fairness in the Budget. This is not an honest Budget or an honest Bill. It was born of an ideological fixation to shrink the state well below 40%. The facts and arguments have been massaged to fit around this preconceived idea, and the methods used—draconian cuts to produce a balanced Budget—remain a throwback to the reactionary and ultimately disastrous economics of the 1930s. It will fail, but the risk is that it will drag down Britain with it.
Mr Lammy
My hon. Friend is absolutely right. That is why Members on the Government Benches should be reminded that employment in my constituency was running at 20% in the recession of the 1980s and at 28% shortly before we cane to power in 1997, and that although my constituency now has the highest unemployment rate in London, it is currently running at 9%. I say “currently” because it will surely rise as a result of this Finance Bill. The consequences—the social consequences —of what we are debating today, and what we will vote on in a few hours’ time, will be so significant that it is hard to put words to them, but they will be real and stark.
Andrew Bridgen
The right hon. Gentleman is speaking passionately about his opposition to unemployment. Surely he must be ashamed to be a member of a party that has formed Governments many times over the past 70 years and that, every time it has left office, has left unemployment higher than when it came to office.
Andrew Bridgen
The hon. Gentleman seems to have the impression that the world has an insatiable appetite to buy UK Government debt. If that is the case, why did at least one Treasury gilt sale fail to be fully taken up?