Finance (No. 2) Bill
Angus Brendan MacNeil Excerpts(10 years, 7 months ago)
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Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I note the hon. Gentleman’s points about the Silk commission and about how the principal parties reneged on it. That also happened in Scotland with the Calman commission, which was set up by the Conservatives, Liberals and the friends of Labour, who then reneged on the Calman proposal to devolve ADP to Scotland.
Jonathan Edwards
That is an interesting point. I am sure that the people of Scotland are watching these developments intently, as they will be voting in a referendum on independence in September. The issue is, can they trust anything that the no campaign says in advance of that referendum? I am sure that that will become a growing theme as we approach the closing stages. I wish the hon. Gentleman and his colleagues well in the forthcoming months.
As I was saying, the Government have sought to water down the financial powers recommended by the commission by constraining them through a lockstep, essentially making it impossible to vary income tax in Wales. Meanwhile, the Labour party says that it will block any income tax powers via its Government in Cardiff unless the Barnett formula—the way in which Wales is funded—is reformed. That is despite having 13 years to do so while it was in government.
Labour also now supports the lockstep principle, despite the protestations of the First Minister. There is of course the added twist that the bands can only be moved upwards, which is why I have labelled Labour’s policy “lockstep plus”.
Needless to say, the agreement that was the Silk commission’s recommendations fell far short of what Plaid Cymru was advocating as a party, to which my hon. Friend the Member for Arfon (Hywel Williams) alluded earlier. We wanted a more comprehensive list of job-creating and economy-boosting powers including VAT, corporation tax, resource taxes and capital gains tax. However, in the interests of compromise, we settled on the final recommendations.
The Silk commission argued that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. I follow with interest the unanimous support in Northern Ireland, among all parties, pressure groups and interest groups, for the devolution of corporation tax—[Interruption.] Exactly, that is a very interesting point: the Unionists in Northern Ireland want corporation tax and a whole range of job-creating powers for their devolved Government, yet we have unionists representing Welsh constituencies trying to block any move towards further powers for our country.
The Silk commission argued that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. The fiscal powers recommended by Paul Silk and his team in the commission’s report are still desperately needed for the sake of the Welsh economy. The ability to vary some taxes and to borrow for investment would enable us in Wales better to deliver job-creating and economy-boosting measures and policies to help turn around the continuing bad performance of the economy.
It was also interesting to hear the Secretary of State sing the praises of the lockstep income tax provision of the Wales Bill in a TV interview. He said that it could be used to vary rates and would put Wales at a competitive advantage, but that the devolution of long-haul air passenger duty would put Bristol airport at a competitive disadvantage. That incoherence shows that the cherry-picking of the Silk recommendations falls apart unless they are introduced as a comprehensive and whole package.
Long-haul APD was devolved to Northern Ireland in last year’s Finance Bill, and the Silk commission has recommended the devolution of long-haul APD to Wales. It is clear therefore that today’s debate is the appropriate legislative vehicle to move this issue forward. Although I failed to do so last year, I live in hope that I might succeed today, but given that all the Labour MPs have disappeared home—AWOL again when the interests of Wales are under discussion—I am not holding my breath.
Jonathan Edwards
As usual, the right hon. Gentleman makes a reasoned argument. Northern Ireland has a land border with the Republic, of course, but we would argue that we have a sea border. I normally find myself making the case for equality with Scotland in this place, but in this instance I am calling for equality with Northern Ireland. What is good enough for Northern Ireland is certainly good enough for Wales.
Just over a year ago, the Labour Welsh Government acquired the national airport of Wales, located just outside Cardiff near Barry in the Vale of Glamorgan. The ability to attract long-haul flights to the airport would significantly improve its competitiveness. It has more than 1.5 million people within its catchment area, and long-haul flights could attract people from even further afield given that that is the only airport in Wales or the west of England with a runway large enough to accommodate transatlantic aircraft. The development of the airport could act as a spur to growth in the south Wales economy, bringing in greater foreign direct investment through better business links, which would in turn bring jobs and growth. Quite frankly, I am amazed that the Labour party has not proposed its own amendment to the Finance Bill and that only goes to show that the First Minister has absolutely no influence over his bosses down here in London or, at least, over Labour MPs based in Wales.
In response to the UK Government’s proposals for the Wales Bill last November, the Labour First Minister said that he was “disappointed” that air passenger duty on long-haul flights would not be devolved. I am not surprised, given that his Government had brought the airport under public ownership only a year earlier. In a lecture at the London School of Economics, the First Minister said:
“Air passenger duty is another tax that should, in my view be devolved. While London struggles with where to build additional airport capacity, we in Wales face a very different problem. Our national airport in Cardiff has not enjoyed the growth in passenger numbers and destinations that we need to help drive economic growth. Devolution of air passenger duty would give us a useful tool to incentivise the growth of Cardiff airport and other smaller facilities, such as Anglesey in north Wales. APD has already been devolved to Northern Ireland for long-haul flights; at a minimum, I believe Wales should have parity.”
The First Minister makes my case for me, but where are his MPs? Where are they? It is just a shame that he could not get his MPs to the Committee to vote when he has the opportunity to do what he keeps preaching to the people of Wales in the Western Mail and on the BBC.
MPs representing Welsh constituencies who fail to vote in favour of devolving air passenger duty do not only ignore the economic needs of Wales, the First Minister of Wales and the overwhelming majority of Welsh public opinion.
Mr MacNeil
I am intrigued by the behaviour of Welsh Labour MPs. Does the hon. Gentleman think that Welsh Labour MPs hold their First Minister, Mr Carwyn Jones, in contempt deliberately or accidentally?
Jonathan Edwards
The key point is that if the First Minister cannot persuade his own MPs and those on his own Front Bench in Westminster to propose policies that he is promising to the people of Wales, why should the people of Wales listen to a single word he says to them in the media? It is a test of his credibility and authority and, based on tonight’s and last year’s evidence, I would argue that the First Minister has no credibility or authority whatsoever.
Henry Smith
Indeed. The simplification of the upper bands of APD, as announced in the Budget, will help small and medium-sized companies in particular to export. I pay tribute to UK Trade & Investment under this Government, which has been making a fantastic effort to give SMEs the tools to maximise exports. The simplification of APD is of great help to small and medium-sized companies not only in England, but in Wales and Scotland.
My remarks are brief this evening. I congratulate the Government on a Budget that is good for business and good for individuals, with the income tax threshold being raised, corporation tax being lowered, fuel duty being frozen and the simplification of APD. I put in a bid once again for the abolition of APD in the future, but I recognise that it is only this Government who are tackling our economic problems in a fiscally responsible way. Charging APD on a Great Britain-wide basis is the most appropriate approach; I would not support the regionalisation of APD. Let us focus on getting APD ultimately abolished, but welcome the simplification that is good for individuals and for business in this country as a whole.
Mr MacNeil
I rise to speak in support of new clauses 6 and 7, in my name and the names of my Scottish National party colleagues, and I intend to press new clause 7 to a vote.
Unfortunately, air passenger duty has become yet another of the Westminster Government’s damaging interventions in the Scottish economy. It is a tax whose time has passed, if indeed it was ever fitting for Scotland, and it is at best only a demand management tool for Heathrow, needed because of the dithering and prevarication at Westminster about doing anything there. As London lost its advantage in sea-going transport to Rotterdam for reasons of dithering and prevarication, it seems that it is now losing its advantage at Heathrow as well, as the world No. 1 slot goes to Dubai. If Schiphol sorts out a few minor irritants for travellers, it will do to Heathrow what Rotterdam did to the docks.
Since 2007, APD has increased markedly: by between 160% and a staggering 360%. This tax—this demand management tool for Heathrow—is definitely damaging the Scottish economy. I object to it not because Westminster wants to slap it on to flyers owing to its dithering and prevarication—it should be free to tax and spend as it wants, regardless of the stupidity and myopia of its actions—but because of what it is doing to Scotland. The damage is obvious. PricewaterhouseCoopers says that its reduction would increase tax receipts in other areas, especially VAT, and create jobs. In short, Westminster is costing us jobs, certainly jobs in Scotland, through this tax.
Let us have a quick glance at tables that compare APD in the UK with that in some other countries in Europe. According to the Airport Operators Association, the next highest rate on short-haul economy flights is that of Austria, which charges a hefty €8. This sum increases markedly—by 100%—in the UK, which charges €16. On the medium-haul rate, Germany is the leader with €23, but that is trebled, and more, in the UK, where it is €89. On long-haul, Germany, again, leads with €42, but the UK is well out in front with €113—double to treble the rate in other countries. On the maximum-rate charge, France manages to pick up the crown with €47, but steaming out in front, yet again, is the UK with €226. While this demand management tool might be good enough for Heathrow, it is certainly not good for Scotland. It is a gate-keeper tax. I compare it to a high street shop that demands a fee of shoppers before they come into the shop and then wonders why sales have gone down.
There are many ways to approach this, and I think I am going to have to resort to poetry to advance my case. Given the Government’s intransigence, I wonder whether this may be the last untried key to unlocking their obstinacy. I turn to Mary Howitt’s poem of 1829—nearly 200 years ago. It is salient to this issue, because despite its being written before the Wright brothers and the first manned flight, it does make reference to a form of aviation. It is “The Spider and the Fly”:
“‘Will you walk into my parlour?’ said the Spider to the Fly,
‘’Tis the prettiest little parlour that ever you did spy’”.
Scotland, as we know, is one of the prettiest parlours; it is famed for its scenery. Indeed, the website TripAdvisor has named Lewis and Harris, the main island in the north of my constituency, as Europe’s No. 1 island to visit, and fifth in the world overall. Indeed, I would encourage anybody watching this debate or reading it later in Hansard to go to Google Earth and have a look at the scenery. Whether it is the beaches of Harris at Luskentyre, or Uig of the Lewis chessmen fame on the west side, or over at Gress and Tolsta or Port of Ness in the far north, they will see what TripAdvisor is talking about. Anybody visiting will find fine hotels in Tarbert, Harris or Stornoway, Lewis, and many bed and breakfasts, dotted throughout the islands. Stornoway is probably one of the best-connected towns in all of Scotland, with direct daily flights to Scotland’s principal cities of Aberdeen, Inverness, Glasgow and Edinburgh, and sometimes several times daily. There is more. Other islands to the south include North Uist, Benbecula, South Uist, and of course my own native Barra.
But despite our advantages, with standing stones older than Stonehenge and a visitor record going back to the Greeks in 325 BC, the London Government’s attitude is, “Walk into my parlour if you like. We’re not too bothered if you do or you don’t, but if you do we’ll have our highwayman mask on and we’re out to charge you a king’s ransom”—and this is just to reach Scotland in the first place.
That is a pity, because those who do discover the beauty of Scotland and especially its islands—from Islay to Unst in Shetland—find, rather like the fly at the end of Mary Howitt’s poem, that those who go up the winding stair can ne’er come down again. Similarly, those from overseas who discover Scotland are very likely to return. The damage is huge. It is not quite cataclysmic, but it is big. We are not quite in the territory of Lord George Robertson, who killed the word “cataclysmic” stone dead after he took a flight recently to make a speech in the United States of America. I am sure he is well aware of how much APD he paid.
Moving on to more serious voices on this issue than that of Lord George Robertson, a range of industry figures have lined up against this self-defeating tax. Amanda McMillan, the respected managing director of Glasgow airport, has said:
“Aviation plays a critical role in supporting the growth of the UK economy and this role is even more profound in Scotland given the country’s location on the periphery of Europe. Travelling by air is not a luxury but an essential element of business and family life, yet we continue to have the highest levels of taxation in the EU. It was extremely disappointing, therefore, that despite repeated representations to the UK Government the Chancellor in his Autumn statement opted to further increase levels of APD. APD is already proving a significant barrier to attracting new routes and unless there is a fundamental re-think, I have no doubt that Scotland’s domestic and international connectivity will suffer. Thankfully, there is broad cross party support in Scotland for action on APD and we welcome any moves which would address the issue and stimulate further growth.”
I hope to see evidence of that broad cross-party consensus in Scotland when we press the new clause to a vote tonight—or is it similar to the hollow words of Labour in Wales?
Gordon Dewar, chief executive of Edinburgh airport, has said of the White Paper:
“We welcome this policy from the Scottish Government and we would like to see APD not only halved but abolished completely. We’ve had a successful year at Edinburgh Airport but it is clear from our discussions with our airlines that Scotland could be far better connected without the iniquitous yoke of APD. It puts our country and importantly our vital tourism industry at risk. People and airlines will go elsewhere. We reiterate our call for governments to support our economy and abolish this unfair tax.”
The managing director of Aberdeen airport, Carol Benzie, has said:
“What is becoming increasingly clear are the implications of this tax on UK businesses. Put simply APD adds to the burden of running a successful company. 65% of our passengers in Aberdeen are travelling in a professional capacity and ultimately the responsibility for paying APD in each and every one of these cases is being passed back to their employer. Firms in Aberdeen are connected globally with links in emerging and existing markets. These businesses are paying APD twice if they chose to use a hub airport in the UK, and are taking their business elsewhere in increasing numbers to avoid this tax.”
It is self-defeating.
Commenting on the Irish Government’s decision to abolish air travel tax, which came into force on 1 April, Scottish Transport Minister Keith Brown, a former veteran of the Falklands war, said:
“Scrapping Air Travel Tax in Ireland has had an immediate impact and shows what could be achieved in Scotland if we had control over Air Passenger Duty…After the Irish Government outlined its plans to abolish the tax last year, Ryanair stated that it will deliver an additional 1 million passengers to and from Ireland as a direct result of that decision, with 20 new routes into Dublin, Shannon and Cork launching this summer.”
When I spoke about this last year I warned that the UK Government had been ignoring the industry, the people and the Scottish Government for far too long and that it was no wonder that support for independence was growing. We now know that support for independence has grown far more in the past year than I could have imagined. Are the UK Government going to continue with their intransigence? A year on, what do we have? The gap in the polls has closed, tightening to 6% within the margin of error, which is almost a swing, and the head of British Airways, Willie Walsh, and Ryanair’s Michael O’Leary are supportive of Scottish independence because they see the opportunities. I am sure that Members of this place will be supportive of independence after the event, but why do they have to be so slow and so late to the party? Michael O’Leary and Willie Walsh are right on the money, as we will see on 18 September.
The Scottish Government, in their White Paper on the best-planned independence process of any country in the world, aim to reduce APD by 50% within the first term of an independent Parliament, and to abolish it completely when circumstances allow, with a proposal for a straight reduction in bands. Independence is gaining support because of such straightforward, common-sense approaches.
Mr MacNeil
In the light of the events of the past few days, does the hon. Gentleman think that Irish independence is a good idea?
Mr MacNeil
The hon. Gentleman may have heard me say in my speech a few moments ago that the Irish have reduced APD to zero. The President of Ireland has been here on a state visit this week, showing how warm relations are, and we are looking for such warm relations. We are looking to control our APD, and to have very friendly and very warm relations, especially with the people of Macclesfield.
David Rutley
I am a regular visitor to Scotland—I normally drive—but I think we should move on to wider issues.
As they stand, the changes to air passenger duty from April 2015 will save business-class, long-haul passengers more than £100. It makes sense to abolish the very high bands of APD. They have caused understandable concerns, with the widespread perception that they were just another example of the unfair tax changes that we inherited from the Labour party. It is right that, as a result of the Government’s decisions, all long-haul flights will carry the same lower band-B tax rate that is paid to travel to the United States, for example. A family of four flying economy to visit relatives or communities in the Caribbean or south Asia will pay £56 less in APD. It is also right and fair that the Government have brought private jets into the scope of APD and that the share of the burden is more easily spread across air passengers.
Government Members believe in tax fairness, and we believe in reducing the burden of tax wherever possible. As my hon. Friend the Member for Crawley (Henry Smith) pointed out, however, it must be a fiscally responsible approach, although that seems to have been completely ignored in the comments of some Opposition Members.
By cutting APD, the Chancellor is again helping to support British exporters, not least first-time exporters looking to make their first steps into high-growth export markets, perhaps by attending international trade fairs or visiting prospective clients and customers abroad. Virgin Atlantic says:
“The Government has rightly recognised the damage APD is having on exporters and the travelling public alike.”
There is a real need to encourage more exports and exporters. As I indicated in my earlier intervention, Lord Livingston recently pointed out that
“only 17% of UK mid-sized businesses generate revenues outside of the EU compared to 25% in Germany and 30% in Italy.”
I am delighted that action is being taken across Government to meet that challenge. Our small and medium-sized businesses have the potential to be economic powerhouses for our economy and to create more wealth and more jobs across all regions of the UK, including Wales and Scotland. To realise that potential, we need to rediscover our great trading heritage and embrace the global opportunities for Great British services and manufactured goods. By cutting APD, we are underlining the commitment of the Department for Business, Innovation and Skills, the Foreign Office and UK Trade & Investment to provide support. Those are positive steps.
International aviation links are not merely important for exporting goods and services from the UK to other countries, or to make more sales missions feasible; lower APD will support UK tourism and help to improve our competitive position in the market for inbound tourists, be they leisure tourists or business travellers in the meetings, incentives, conferences and events sector.
According to Kurt Janson, the Tourism Alliance’s policy director, the Bill’s proposed savings
“will be a benefit for attracting visitors from the growth markets of China, India and Brazil as well as the traditional market of New Zealand and Australia.”
Indeed, PricewaterhouseCoopers suggests that the studies it reviewed for its research
“all point to a link between whole economy productivity and airline sector output.”
By encouraging greater connectivity between the UK and the global economy, reductions in APD can add to the mix of supply-side measures introduced by this Government since 2010. APD is another barrier to productive growth that the Government seek to remove.
This Government believe in long-term thinking. Difficult decisions have had to be made to save us from the appalling legacy that we inherited from the previous Government, but we are now seeing the results of that approach. It has become affordable and fiscally responsible to cut APD and other taxes that have been holding back this country’s businesses and people from realising their ambitions. The Government are helping people to realise their ambitions and objectives in life by working progressively to de-risk entrepreneurialism and support the export industry. For that reason, the measures have my full support.
Mr MacNeil
Is aviation not about more than competition? It is also about growth. When Governments get their head around that, we will surely see a sea change in their approach to APD. They should focus on growth, not just competition.
Catherine McKinnell
The hon. Gentleman makes an important point, and I entirely agree that the Government should be absolutely focused on economic growth. The debate about APD is part of that discussion, and the regional air connectivity fund must also be part of the conversation. The Government need to provide clarity on those issues in this Finance Bill and in the future.
As I said, Labour remains to be convinced of the merits of devolving air passenger duty. The Calman commission proposed that it be considered, and the Labour Government committed to keep it under review.
Mr Gauke
In 2010, the Government inherited an air passenger duty system that needed to be fixed. The changes that the previous Government made in late 2009 caused aggravation to the UK’s overseas friends and frustrated diaspora communities. Clauses 72 to 74 will fix the system by implementing air passenger duty rates for this year and by reform of the rates for next year.
I will address new clause 2 and new schedule 1, tabled by Plaid Cymru Members, and new clauses 6 and 7, tabled by Scottish National party Members. The Plaid Cymru proposal broadly follows the form that was taken to devolve the duty on direct long-haul flights from Northern Ireland, and requests a similar devolution for direct long-haul flights from Wales. The SNP proposals seek the devolution of duty on flights to all destinations.
I remind hon. Members that the devolution of duty for Northern Ireland was in specific response to Northern Ireland’s unique circumstances. It shares a land border with Ireland, leading to a risk of flights relocating from one part of the shared land mass to another. We recognised that risk and acted to ensure that Northern Ireland was not disadvantaged.
The current situation is that airports on the Great Britain mainland face the same APD rates, but the SNP and Plaid Cymru proposals could well lead to the introduction of the same market distortions that our devolution to Northern Ireland sought to prevent, namely the reallocation of flights from one part of the UK to another, leading to distortion in competition, and winners and losers across the UK.
Regional airports are doing well: 2013 was the third consecutive year of passenger growth and our APD banding reform is another confidence boost for the air travel market. Relevant examples include Cardiff airport, which in 2013 saw a 4% increase, equating to around 44,000 extra passengers, with new routes announced to Germany and the Caribbean. In Scotland, there has been 3% growth at Glasgow airport, with almost 206,000 additional passengers. New routes have been announced for this summer to Croatia and Greece. Edinburgh airport has grown 6%, equating to more than 580,000 additional passengers. In the past six months, new routes to Qatar, the USA and Norway have been announced.
Mr MacNeil
Is the Minister happy, or does he agree with industry figures in Scotland, particularly the managing directors of airports, who believe that that growth has been constrained by APD?
Mr Gauke
I am not sure that I can add much, other than to say that if the hon. Lady is concerned about uncertainty she might want to look at some of the anti-business policies pursued by her party.
We also recognise that air services in some of the more remote parts of the UK represent a vital connection to the rest of the country. That is why there is an air passenger duty exemption for flights from the highlands and islands of Scotland.
Mr MacNeil
I am grateful for the exemptions for the highlands and islands of Scotland, but does the Minister think that the devolution of APD to Scotland and Wales would result in an increase in the number of routes, flights, passengers, commerce, tourism and eventually revenue to the public purse? Does he see any advantage to the devolution of APD?
Mr Gauke
I wish to avoid running the risk of repeating myself, but I make the point that I made earlier: the devolution of APD within Great Britain would create unfortunate market distortions. As we said in our November 2013 response to the Silk commission, we are not convinced of the case for devolving air passenger duty to Wales, given the potential effects across the country as a whole. In the case of Scotland, the distortive effects across the country as a whole are harder to diagnose, given that it has more major airports with significant route connectivity. Our opinion remains that this requires careful evaluation if we are to be confident of its potential effects, so I ask hon. Members to withdraw their amendments.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
Does Mr MacNeil wish to move new clause 6 formally?
The Second Deputy Chairman
No? Okay. [Interruption.] It is very generous of Members to assist Mr MacNeil, but he can manage it by himself and I believe that the new clause is not moved.
Clauses 72 to 74 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill (Clauses 1, 5 to 7, 11, 72 to 74 and 112 and schedule 1) reported, without amendment (Standing Order No. 83D(6), and ordered to lie on the Table.
Charter for Budget Responsibility
Angus Brendan MacNeil Excerpts(10 years, 8 months ago)
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Dr Eilidh Whiteford (Banff and Buchan) (SNP)
This welfare cap is a reprehensible and regressive measure that once again puts the most disadvantaged people in our communities on the front line. The cap that has been proposed is a crude blunt instrument. It is arbitrary and it simply will not be flexible enough to respond if the economy or our changing democracy drive greater structural need.
The Government recognise implicitly that the drivers of welfare spending are largely structural and they have excluded the most obviously cyclical benefits from the cap, notably jobseeker’s allowance and pensions. Other benefits also have a cyclical component, however, and the Government persist instead in pursuing an agenda that victimises and stigmatises people on low incomes and punishes them for the shortcomings of Government economic policy.
In the short time we have to debate the motion today, I want to address the impact of the welfare cap on sections of our society that are likely to be affected. State pensions have been excluded from the cap, but it does not exclude pension and savings credits. The very poorest pensioners, those who have spent their working lives in low-paid private sector jobs or who have spent years caring for others, will potentially be hit. That could affect 300,000 pensioners in Scotland, most of them women.
The second group I want to mention is children. We already know that as a consequence of the UK Government’s welfare cuts 100,000 more children in Scotland will be growing up in poverty by 2020. We also know that the majority are the children of parents in low-paid work. The cuts to tax credits and the below-inflation uprating of child benefit, housing benefit and other forms of support for families are already expected to drive up child poverty, and the arbitrary welfare cap just puts a tin lid on it.
The Child Poverty Action Group points out that child poverty places a huge burden on our economy, not least through the £15 billion spent on addressing its consequences through social services and extra educational support. The group makes the point that in the medium to longer term, the Government’s approach will hinder deficit reduction and we will all pay for the costly long-term legacy of low skills and poor health associated with childhood deprivation.
Disabled people and their unpaid carers are also in the firing line, again. We need to understand the structural challenge as the baby boomer generation develop more health problems and disabilities associated with old age. We need to support family carers, who are the backbone of our community care system. It is a wholly false economy to subject the benefits paid to carers to the welfare cap.
Underpinning the circumstances of all those people is the UK’s pernicious combination of low pay, wide labour market inequality and high housing costs. Housing benefit remains one of the biggest ticket items in welfare expenditure. Increases are driven by chronic shortages of affordable homes, soaring private sector rents in areas of high demand—most notably in London and the south-east—and the failure of Governments to address that. The welfare cap will not address those underlying structural problems and the scandal is that people in good jobs cannot afford to pay rent.
Dr Whiteford
I will not, because other people need to speak.
The best way to reduce and manage welfare spending is to restore the economy to a state of health and that is exactly what the Government are failing to do quickly enough. If the Government were serious about reducing welfare spending, they would be creating more job opportunities in sectors that pay a living wage, investing in child care to enable parents to work or increase their hours, and building more affordable homes and taking action on housing costs.
In Scotland, we spend a lower proportion of revenue and GDP on social protection than the UK as a whole. We have invested heavily in affordable housing and in child care and we have increased apprenticeships. That has enabled more people to work full time, which is why our child poverty rates have fallen more quickly. Those long-term efforts to address the drivers of welfare spending, not just the symptoms, stand in sharp contrast to the Government’s ill-conceived, punitive and counter-productive approach.
I intend to vote against this measure today and I hope that Scottish MPs from all parties will do so too. To acquiesce in this nasty Tory nonsense that piles yet more pain on our poorest pensioners, carers, disabled people and low-income families would be an abject failure of leadership and a betrayal of the people of Scotland who elected us and who, frankly, deserve better.
Danny Alexander
I will not give way.
When we came into office, only 53.8% of public expenditure was under a direct mechanism of control—departmental expenditure limits. That means that nearly half of public expenditure was simply beyond control—it was so-called annually managed expenditure, which in practice meant annually unmanaged expenditure. Progressively, over the course of this Parliament, we have put in place additional mechanisms to control an ever-rising amount of public expenditure. The pension reforms, which mean that in future the state pension age will be linked to life expectancy, bring greater control over the costs of the basic state pension. The reforms of public service pensions, which include a cap on the costs within public sector pension schemes, bring that source of expenditure, which had ballooned out of control under Labour, much more directly under the control of Government.
In total, when the measures in the welfare cap are included, we will have increased the amount of expenditure under direct control and directly accountable and transparent to this House from around 50% at the start of the Parliament to 77% at the end of it. From the perspective of every Member in the House, that ought to be a welcome change, because it means that this House has more say and more ability to scrutinise and hold accountable the Government for changes in public expenditure that take place on their watch.
A number of hon. Members mentioned unemployment benefits and jobseeker’s allowance. The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) referred to his experience in receipt of unemployment benefits. He is right that most people in that situation are not there through any fault of their own. That is precisely why jobseeker’s allowance is excluded from the scope of the cap. The benefits that are the so-called automatic stabilisers that fluctuate with the state of the economy—jobseeker’s allowance and the benefits that are passported from it and, in due course, those elements of universal credit, too—will not be in the scope of the cap, precisely for the reasons that he described in his speech. That perhaps ought to reassure him and encourage him to vote for the measure.
Fundamentally in the end, I think those people who are speaking against the cap betray their own lack of confidence in their ability, should they wish to, to come to the House transparently and accountably and persuade the House—
Danny Alexander
I have one minute left. No, I am not going to take any interventions; I am going to make progress.
Those people who speak against the cap betray an enormous lack of confidence in the ability of those who think that, in response to circumstances, welfare spending should be increased above the cap, to come here and persuade the House that that increase in expenditure would be necessary. The truth, over many years, has been that where there have been changes in forecasts, and where decisions have been made that have led to increased costs, they have been sneaked in through the back door, through the forecast, without any direct accountability to this House.
The people who say that the cap involves expenditure cuts are also wrong. The cap starts at around £120 billion and rises over five years to £127 billion, in line with inflation, so we have set it at a reasonable level. In this House, we should never again go back to the situation we had under the previous Government, where public expenditure was uncontrolled, and where debt and the deficit were allowed to balloon uncontrollably. This is part of clearing up the mess that was made of the public finances, and I commend the motion to the House.
Question put.
Budget Resolutions and Economic Situation
Angus Brendan MacNeil Excerpts(10 years, 8 months ago)
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Stewart Hosie
It is extremely convenient that, once again, we have a “North sea oil price crash” story on Budget day, some six months before the referendum. If the right hon. Gentleman keeps saying it, I am sure someone somewhere will finally believe him. I am not dreadfully convinced.
The bottom line is that—just like the right hon. Gentleman’s intervention—the Chancellor’s speech was hugely political. He did not tell us about recovery; he did not tell us that he is trying to lift the burden from hard-working families; he did not apologise for trying to rebalance the economy on the backs of the poor. This Budget speech was a political platform for the next election, and if it was supposed to be a vindication of his policies, then it failed, because the policies have failed.
The Chancellor did of course have a deal to say about tax. He is right to increase the basic rate threshold to £10,000, and then to £10,500. Raising the threshold from £6,500 to £10,000, resulting in savings this year of £700 for the average person, is sensible, but of course, that is only part of the personal tax story. This Government have pushed ahead with a tax cut for millionaires and have continued to squeeze the middle—the genuine middle class. The threshold for those paying the 40% rate of tax has come down from £37,500 to under £32,000, so for every penny saved at the bottom, they have had to pay more than a penny at 40%. I therefore welcome the fact that the 40% threshold is going to be increased, but that is not until 2014-15. It will not change the fact that the proportion of people paying the 40% tax rate has doubled over the past two decades, and there are now 2.1 million more people paying a rate of tax that was previously only for the rich.
It is not just the middle: it is the poorest in society who have been hit hardest. We know—the right hon. Member for Wokingham (Mr Redwood) told us—that the proportion of tax cuts to tax rises is 4:1. We knew from previous Budgets that the impact of the discretionary consolidation would be £155 billion. Interestingly, the Government have removed that figure from the Red Book: they have removed the year 2016-17 from the forecast, and are now telling us that the discretionary consolidation will be only £126 billion. However, that forecast goes only to 2015-16, and I am concerned that they are not making a longer forecast, so we can see the real scale of the damage they are trying to do.
We in the SNP know where the pain of this Budget and of this Government’s policy direction will be felt. It will be the 144,000 households in Scotland who are losing some £3,500 each through changes to incapacity benefit. It will be the 372,000 Scottish households who have seen tax credits reduced to the tune of £800 a year. It will be the 620,000 families hit by changes to child benefit, who have lost an average of £360 a year. It will be felt by the 55,000 people who are losing an average of £3,000 a year as disability living allowance is removed. Those are the people whom we should be thinking about and who should be helped. Instead, the Government continue to try to balance the books on the back of the poor.
I welcome the fact that the Budget forecast at least says that there will be some growth, but it is once again heavily predicated on business investment growth. In Budget after Budget, the Government have produced five-year growth forecasts. In 2010, growth was predicted to be between 8% and 10% a year, but by the time we got to 2011 it had turned negative and they had to set yet more ambitious targets for the next five years. So it went on, and we find in the Red Book that the forecast business investment growth for last year turned negative again. I am desperate to see positive business investment growth, and the jobs that come with it, but we keep seeing the same story from the Government. They keep failing.
What should the Government have done? There are any number of policies that they might have adopted. Instead of tinkering with air passenger duty, they might have cut it properly or acted sensibly to boost international connectivity. Instead of simply freezing fuel duty, they might have introduced a real fuel duty regulator to smooth out future spikes. They might have cancelled some of their austerity measures, or at least removed the cap on discretionary housing payments to help the poorest. There are so many things that they might have done.
In the North sea, the Government announced that they would implement the Wood review in full. That will save the industry some £45 million, and it is to be welcomed. However, they are keeping the offshore chartering regime that they announced last year, which will cost the industry £600 million. They keep getting it wrong every single time.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Should the Government not acknowledge that the North sea is booming, and that the drop in revenues is due to investment being tax deductible? What we are seeing is a healthy North sea for the years to come.
Stewart Hosie
I am sure that we all support £14 billion-worth of investment this year and £100 billion in the plans, and the drilling of 133 oil and gas wells to invest for the future. We would all be far less happy if that investment was not taking place. The problem is that all the good things that the Government could and should have done would have required them to change their policy fundamentally, away from billions more in austerity cuts and away from the policies that have stifled growth and recovery over the past few years.
I am not at all convinced that this was a Budget for recovery. It was a political Budget from an all-too-political Chancellor. I saw Tory Back Benchers waving their Order Papers not only after the Budget statement but before it was even made, and I suspect that such hubris will come back to haunt them. I hope that with a yes vote in this year’s referendum, this will be the last Tory Budget ever to affect Scotland.
Mr MacNeil
The hon. Lady says that no Members complained when schools were built in their constituencies, but they did. I remember writing long letters about the private finance initiative and the false comparison with the public sector, which was based on a false equation. I think they were built expensively under the Labour Government. I am sorry to have to bring that up after she was so generous in giving way.
Yasmin Qureshi
I agree that there were some problems with PFI. I am not one of those who say that everything was perfect. However, to suggest that spending on our country’s infrastructure, which created jobs, made people better off and led to between £80 billion and £90 billion being spent on the national health service, was somehow a waste of money is, I think, a real insult to the people of this country.
If my memory serves me correctly, the Opposition at the time agreed fully with the Government’s spending analysis. They did not object to any of it and said that they would carry on spending at the same rate. Therefore, to try to suggest that somehow money was spent recklessly is absolute rubbish. The myths that Government Members have been peddling for the past four years should stop. The Government parties should recognise that they have been in power for four years and should start thinking about what they have done.
We know that on average families are £1,600 worse off. Energy prices have gone up and up. We have said that there should be an energy price freeze until 2017. If the Government really want to help ordinary people, why do they not do that and reform the energy sector? The education maintenance allowance, which helped 16 to 18-year-olds from poor families to stay in school, was abolished, which again hit the poorest in our society the hardest. The Chancellor today announced a new garden city, but it has taken him four years. We have been arguing for four years that more house building projects are needed. It is great that something is now happening, but we have had to wait too long for it.
I would like the Chancellor to have frozen energy bills until 2017, which would have been really helpful. Young people should have been put back to work with a jobs guarantee scheme, which we have said would be funded by a tax on bankers’ bonuses. Free child care should be extended to 24 hours for three to four-year-olds, and we should also cut taxes for 24 million people on lower incomes, with a lower 10p starting rate of income tax. That would help a lot of ordinary working people. The Government should also cut business rates for small firms so that we can create more jobs. That, too, would help ordinary people and small businesses.
Finally, we should consider the issue of equality, pay gaps and wealth distribution. It is said that things are better now than 28 years ago, but recently there have been various articles and a lot of discussion about the fact that the pay gap is too large. Even the International Monetary Fund, hardly a hotbed of communism, has said that countries with a great deal of inequality have economic as well as social problems as a result. Steps should be taken to narrow the gap even more. There should have been real measures to tax the really wealthy in our society, especially their homes, so that we can reduce the gap.
Even Her Majesty, who is not known for getting involved in the political issues of the day, has expressed concern about the level of poverty and the situation of the poor. If the Queen starts getting involved in these issues, that is a wake-up call for everybody—not just for the Government, but for my party. However, the coalition is in power and it should be looking at the issue of inequality.
Apart from the fact that it is only right that society should be more equal and fair, addressing inequality makes economic sense. Problems with mental and physical health often arise from financial difficulties and cost the economy about £40 billion. Addressing inequality makes sense, but there was nothing in the Chancellor’s speech that helps the ordinary working poor person.
George Freeman
I am delighted that the Chancellor has been able to support the Cambridge city deal, which will play a key part in our innovation economy.
We should take time to remember the mess that we inherited four years ago, and the causes of it. The truth is that between 1997 and 2010, we saw the largest increase in public spending as a percentage of national income of any industrialised country. During that period, we rose from 22nd to sixth in the world league table for public spending as a percentage of national income. Before Opposition Members try to argue that that was a result of the global crash—indeed, after they have tried to do that—I should say that if we take the date of 2007, before the crash, we see that our position on the table had risen from 22nd to 10th. That is the second largest increase in history.
That legacy was created by a wilful overspend by the Labour party. It left us, in 2010, with the biggest peacetime budget deficit in our history—a £157 billion deficit and a £1 trillion debt. If we pay off that debt at £1 million a minute, it will take us 30 years. The truth is that everybody in this country is now paying for that. We inherited a situation in which debt interest alone was set to rise to £70 billion a year. When we started, debt interest alone was, in effect, the fourth biggest Department of State, and we were borrowing £1 for every £4 spent. It was an absolute disgrace for the outgoing Labour Government’s Chief Secretary to have left a note with an exclamation mark saying that he thought it was funny that there was no money left. We should remember that. I do not think it is a joke, because we are all paying the price.
That is why I welcome the Chancellor’s announcement of the OBR’s reporting on the progress that we are making in our deficit reduction plan through the 80:20 rule—80% from spending and 20% from tax. These were tough decisions—all of which, we should remember, were opposed by Labour—and they are now beginning to lead to sustained long-term growth. Growth is up to its highest level for 30 years, and we are now the fastest growing economy in the G8. Some 1.5 million private sector jobs have been created—three for every one regrettably lost in the public sector. There has been a 24% fall in unemployment, with the fastest fall in youth unemployment for 20 years. As a result, we are now on track to eradicate the deficit by 2018 and we are paying off debt quicker than any other western economy. That is a record of which we should be proud and a record to which this Budget stands testament.
I want to highlight the important work that the Government are doing from that platform to support our innovation economy. Today’s announcements on science and technology and the knowledge economy included £42 million for a new Alan Turing institute of big data, in which Britain is leading the world; £74 million for the cell therapy manufacturing centre and the graphene innovation centre, putting Britain at the cutting edge of new technologies that will turbo-charge new industries and new business creation; and £106 million for 20 doctoral training centres across the country.
We have an enormous opportunity to trade our way out of the debt crisis by plugging into the fastest growing emerging markets around the world, particularly in the life sciences, in food, in medicine, and in energy. In 30 years, those economies will go through the same industrial and agricultural revolution that we started and went through in 300 years. They represent vast markets for our knowledge economy. That is why I particularly welcome the support for export finance. As a trade envoy and a former business man myself, I know how important it is to support our small companies. We are starting from a woefully and shamefully low base. After 13 years, Labour left us very weakly linked into those emerging markets. We still export more to Luxembourg and Belgium than we do to China. I am delighted that the Government are making such progress.
You do not need to take this from me, Mr Speaker—take it from the business community. The Institute of Directors has said:
“This is a responsible and imaginative budget which should promote growth, exports and investment. It will be widely welcomed.”
The British Chambers of Commerce said this afternoon that the Budget was
“disciplined, focused, and geared toward the creation of wealth and jobs”
and that it “passes the business test”. The CBI has said:
“The Budget will put wind in the sails of business investment, especially for manufacturers.”
I turn to the historic announcements on savings and pensions, with the pensioner bond, the new ISA, the abolition of the 10p rate on savings, the child trust fund, and the increase in the amount that can be invested in the junior ISA.
Mr MacNeil
There is often a problem with the governance of ISAs when the banks attract savers into ISAs and then change their rules and boundaries so that within a year they are no longer selling that ISA but have moved on to the next ISA pot. Sometimes savers may be ripped off by banks that have not been responsible in managing their ISAs properly in moving the vehicle that the money is in and lowering the interest rate after a year or two.
George Freeman
The hon. Gentleman makes an interesting point. The bigger point is that in the 1980s the Conservative party launched a historic renaissance of saving and wealth creation whereby more and more people, through ISAs and PEPs, were able to own shares and save. That was wilfully destroyed by the former Labour Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), through his stealth taxes. It has long been necessary for us to restore a culture and a set of incentives for a genuine renaissance in savings, and that is key to the resilience that the Chancellor set out today. That was the most important set of measures in today’s Budget, and it will stand the test of time.
What did we hear from Labour Members? I came here genuinely wanting to hear the Opposition’s response to this package. I wanted to hear the alternative economic policy that Labour is going to put to the British people next spring. For all the noise we hear on the Government side of the House, the real test, as we know, is the silence from the Opposition Benches. What we heard today was an embarrassing descent into business bashing and class war. If that is what the Leader of the Opposition defines as his “new socialism”, I wish him luck. I will be sending a copy of his speech to all the businesses in my constituency, because it fails the business test in spades, and it is the business test that will drive the growth and investment on which the public sector always depends.
Currency in Scotland after 2014
Angus Brendan MacNeil Excerpts(10 years, 9 months ago)
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Ian Murray
My hon. Friend has hit the nail on the head. A currency union is a question not only for Scotland, but for the rest of the United Kingdom, because the stabilisers that require a currency union would be stabilisers that England or the rest of the United Kingdom would have to use, as well as Scotland. It is a question for the rest of the United Kingdom, and that is a very valuable intervention from my hon. Friend, who is from an English constituency. [Interruption.] I can hear SNP Members chuntering, “Scaremongering”. Well, I hope that they go back and tell their constituents that the SNP disregards what they are saying as scaremongering rather than as raising legitimate issues about the currency and jobs.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Will the hon. Gentleman give way?
Ian Murray
I will make some progress, then I will give way. I was talking about the euro. Let us reflect on what is happening now with the euro area: it is seeking very significant steps to expand the sharing of risks and pooling of resources to create a more homogenous currency union to make it work properly—exactly what the UK in its current state now provides for the pound sterling.
I know that the First Minister said that we should ignore experts, but John Cridland, the director general of the CBI, emphasised last week:
“As the Governor highlighted, successful currency unions need strong fiscal agreements and a banking union, with common supervisory standards and resolution mechanisms. The negative effects”—
this point is critical—
“of not having these structures in place have been starkly illustrated by the Eurozone crisis.”
There is a very positive case for staying with the United Kingdom as part of this currency debate and I would like to run through three points that are particularly relevant to the currency and the economy.
First, Scotland benefits from being part of the UK economy, which is the third largest economy in Europe and the sixth largest in the world. Being part of the larger, more diverse UK economy brings strength, stability and security, not only to Scotland’s finances, but to those of the United Kingdom.
Secondly, being part of the UK offers us protection from financial shocks. During the financial crisis, banks based in Scotland took advantage of the protection offered to UK banks. Since 2007, the UK has committed £1.2 trillion to bailing out the banks. At its peak, the Edinburgh-based Royal Bank of Scotland received £254 billion in support from the UK Government. That pooling and sharing is critical.
Thirdly, the rest of the UK is Scotland’s biggest trading partner. Scottish businesses buy and sell more products and services from the rest of the UK than every other country in the world combined. In 2010, 70% of Scotland’s exported goods and services went to England, Wales and Northern Ireland, accounting for a massive 35% of Scottish GDP. Likewise, 70% of Scotland’s imports are estimated to come from the rest of the United Kingdom.
Ian Murray
Let me make a little progress. I know that other hon. Members want to speak, but I will allow hon. Members to intervene.
It is not just an issue for Scotland. The rest of the UK—this is an important point, which other hon. Members have made in interventions—would have to agree. It appears from speculation in the press today—perhaps the Treasury Minister can indicate whether it is speculation—that there will not be an agreement on currency union, as it is undeliverable. If an agreement is not possible or is ruled out by the Treasury, what will be the Scottish Government’s plan B? [Interruption.] The nationalists are chuntering away about what they would do. I am happy to take an intervention if they want to tell the people of Scotland now what the Scottish nationalists’ plan B is for the currency should Scotland vote yes for independence. [Interruption.]
Mr MacNeil
I am very glad that the hon. Gentleman has given way; he promised to give way. Has he informed the people of England of what his policy would mean for them if he managed to go hand in hand with Osborne and keep Scotland out of sterling? What would it mean for the balance of payments? What would it mean for the value of sterling? What would be the price of holidays for English people going abroad without Scotland’s contribution to sterling? The hon. Gentleman knows full well that Labour keeping Scotland out of sterling would make things far more expensive for English people.
Ian Murray
I apologise to everyone in the debate. I allowed the hon. Member for the Western Isles to intervene to tell us what the SNP’s plan B is, and he chuntered on about something to do with holidays that I could barely hear because his colleagues were chuntering over him. I have no idea what he said. [Interruption.]
Ian Murray
Thank you, Mrs Riordan. I will give the nationalists one more opportunity if they want to intervene to tell us what the SNP’s plan B would be should people vote yes for an independent Scotland and there is no currency union. No?
Mr MacNeil
The hon. Gentleman did not hear because of the chuntering beside him, but the point is that we know full well what we are doing—we are keeping sterling. But if his policy was—[Laughter.] If his policy was put in place, what would happen to people in England as the balance of payments worsened and sterling weakened? Imports would be more expensive. Holidays would be more expensive. Labour’s policy is irresponsible to the people of England as it is to the people of Wales.
Ian Murray
Mrs Riordan, I apologise again for wasting another intervention through the nationalists not telling us what plan B would be. Let me tell them what the currency will be in England and Wales. It will be the pound sterling. That is what they will keep.
Ian Murray
I will not give way again to the hon. Gentleman, because he refused to answer my last question. To summarise, losing the pound would result in a higher cost of living, with higher mortgage repayments, higher credit card and store card bills, and more costly car loans. Scotland would start out as a separate state with no credit rating, or one that had been hugely damaged by threats of default. There would be fewer jobs, because of the cost of changing money every time Scottish firms bought or sold from our biggest customer, which is the rest of the United Kingdom. There would be deeper cuts or higher taxes because the Scottish Government would pay more to borrow money, which would result in more debt and lower public spending. There would be risks to benefits and pensions as payments were converted from sterling to a different currency.
There would be risks to the economy. Without the back-up of the rest of the UK, Scottish banks would have gone under during the financial crisis, and families and businesses across the country would have lost everything. Scotland would have an unproven and weak currency with a poor credit rating and high borrowing costs. The SNP’s proposition may be summed up as this: we should go from a proven and respected single currency backed by a strong lender of last resort as part of the United Kingdom to a promise from Alex Salmond that he is simply not in a position to deliver. That is not good enough for the Scottish people or Scottish business.
I can say this afternoon without doubt, argument or contradiction that the currency of Scotland post 2014 will be the pound, but only if we stay in the United Kingdom. It is now clear that the most positive case that we can make for the Union is the pound in our pockets. We must do all we can, today and for the next seven months, to protect it for future generations.
Stewart Hosie
No. I do not have time.
The hon. Member for Edinburgh South rightly and understandably prayed in aid Dr Carney’s recent speech, which he said did not pass judgment on the relative merits of the different currency options for Scotland, but instead drew attention to the key issues. However, Dr Carney did point out that any arrangement would be negotiated and that the Bank of England would implement whatever monetary arrangements were put in place. That is to be welcomed, not just by me, but by the 71% of people in the rest of the UK who support the continued use of sterling after Scottish independence. The same proportion—71%—of Labour voters in Scotland also support the continued use of sterling after independence.
The hon. Member for Edinburgh South and the no campaign seem to fail to understand what Scotland brings to the table. Of course we recognise the constraints—I will come on to them—but we bring export revenue receipted in sterling. The impact on the sterling balance of trade would be immediate and significant were Scotland somehow—impossibly—forced not to be able to use sterling. The same applies to trade—the rest of the UK sells £60 billion into Scotland. If we were forced to use a foreign currency and transaction costs were applied, that would imply a catastrophic loss to English businesses: additional costs that the no campaign never mentioned.
Let us put the matter into context. In 2012, the rest of the UK sold into Scotland more than it did into Brazil, South Africa, Turkey, Russia, India, South Korea, China, and Japan combined, yet we hear from the no campaign that they do not want us to use sterling, even though that is impossible, which would imply massive transaction costs and the loss of jobs in the rest of the UK. I am sure that is not something they intend to do.
Stewart Hosie
No, I do not have time. So where would independence while keeping sterling leave us? It would not imply a foreign currency controlling our economy, because the central bank does not control the economy. It works to a single 2% inflation target, which we think is sensible.
Fairness and Inequality
Angus Brendan MacNeil Excerpts(10 years, 9 months ago)
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Jonathan Edwards
Plaid Cymru has certainly prioritised apprenticeships in Wales. We struck a budget deal with the Welsh Government to secure more of them.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The aim of the motion is to ensure that a commission is established to investigate inequality and poverty. The commission would deal with the details to which the hon. Member for South West Bedfordshire (Andrew Selous) has referred, and I hope that he will support the motion on that basis.
Jonathan Edwards
I am grateful to my colleague for making a very valid point on my behalf.
I was talking about the inequality that exists in the United Kingdom. Why is this so, how is it so, and why has it been allowed to happen under successive Labour and Tory Governments? I am sure that many Members will be able to cite numerous facts and figures that amply demonstrate the inequality and lack of fairness that exist in the UK; indeed, we have already heard several interventions to that effect.
Jonathan Edwards
I believe that the House of Commons would be far better if we had such a system, rather than a system that bases its politics on preserving the power of two political parties.
Economic development has become radically distorted as inequality has risen. My constituency predecessor pointed out last year in an economic study entitled “Offa’s Gap” that the Welsh economy had been growing more slowly in relation to its historical trend growth and to that of the UK economy for the past two decades. He and Plaid Cymru’s other noted economics adviser, Eurfyl ap Gwilym, concluded that Wales needed the kind of defined economic and export development strategy that is sadly lacking under the current Labour Welsh Government. Similarly, the economic policies of the current Westminster Government are woefully inadequate and ignore the requirements of my country.
Mr MacNeil
Given the lag in growth in the Welsh economy, is it not all the more perplexing that the Government in Cardiff—who must know far more about the situation there than I do—are choosing not to take the powers to do anything about it? It is like a man on a ship that is heading for the rocks refusing to put his hand on the tiller and instead letting it carry on merrily towards the rocks. It is a scandal that Labour has chosen that route.
Jonathan Edwards
The people of Wales might want to ask themselves what is behind that decision. Are the Welsh Government afraid of their own ability to use those powers effectively, or do they have a vested interest in our communities remaining poor and disadvantaged?
The legacy of de-industrialisation in places such as Wales is well known. Levels of poverty, disability, and ill health are high. There is a lack of economic opportunities, and the flight of the many young ambitious people understandably wanting to make something of themselves is invariably known as the brain drain. That creates a vicious circle of its own. A Centre for Cities report at the end of last month noted that 80% of private sector job growth since 2010 was in London, that one in three young people now move here for work, and that power should ultimately be devolved in order to allow greater freedom for areas outside London to develop.
Historically, vast areas of the British state have been economically depressed, with most political efforts concentrated on the south-east. Today, GDP per person in inner London is almost 10 times that of many parts of Wales, including the communities I represent. Many areas of northern England are in the same boat as Wales. Great inequalities exist within London itself, and we must not forget that challenge, but there is an overwhelming concentration of wealth in that region—70% higher than the UK average. It is the current political structures and policy priorities of the Labour-Tory tag team that have allowed this to happen.
One would hope that when one part of the state is the richest in the European Union and others are the poorest, there would be a clarion call for action. Alas, the Westminster elite seem oblivious to the matter, pursuing the same old failed policies of the past. Indeed, who could forget Lord Mandelson, the man who so epitomised Labour in office, saying that he was
“intensely relaxed about people getting filthy rich”?
It is no wonder that wealth inequalities gathered pace under the last Labour Government. Incredibly, west Wales and the valleys now find themselves below parts of Bulgaria and Romania in the EU wealth league.
There are many indicators of rising inequality, besides individual and geographical disparity. Over the past decade, the number of households in fuel poverty in Wales has risen from around 140,000 to 386,000 at the last count in 2012. That is 30% of the Welsh total. I strongly suspect that the total will have risen since then, given the combination of oil price inflation and a real-terms reduction in wages.
Jonathan Edwards
That is a very useful intervention, and I think the answer depends on the progress on the desalination plants. I am following the debate in Scotland with great interest, because we will be having the same debate in Wales within the next couple of decades and we will have the “Project Fear” manifesto off the bookshelf ready to read.
Mr MacNeil
I just want to tell the hon. Gentleman that the “Project Fear” manual has a short lifespan. It is almost as Robert Burns said, in that it is a snowflake in a river:
“A moment white—then melts for ever”.
The fears fall apart on a daily basis; they last only for about 48 hours, but that does not stop them being reheated.
Jonathan Edwards
I am grateful for those insightful remarks. In Scotland, we are seeing the same stories as were used in other parts of the British empire when they endeavoured to seek their political independence. That approach will fail in Scotland and it will fail in Wales when our turn comes.
By the end of Labour’s time in office, child poverty had increased, with 32% of children in Wales living in poverty, according to the Joseph Rowntree Foundation. The number fell in 2012, but only because wages had fallen across the board. That technicality in the way child poverty is calculated ignores the fact that falling wages mean even less resources with which to feed hungry young mouths. The recent rapid rise of food banks is yet another symptom of growing inequality. The Labour Welsh Government had set the target of eradicating child poverty by 2020, but they cannot and will never achieve that if they do not stand up for Wales. It cannot be achieved while their masters in London refuse to confront the widening gulf in equality that has been emerging over the past 30 years and even accelerated under their watch.
Jonathan Edwards
I have been totally clear in my comments about the constitutional journey of my country: we are not in a position to fight for independence at this very moment, which is why Wales needs the economic powers to build up its economy to be in a position to do so. We are in a different situation to Scotland. We will not get anywhere if we continue with the policies of the Labour party, which aims to keep economic control in London and to keep our communities impoverished. It is in its vested interest to do so, which is why it is opposed to all the measures being put forward by the Silk commission.
Mr MacNeil
People who say that Wales’ tax take is not equivalent to its expenditure are quite short-sighted. They fail to realise that they are living in the United Kingdom, the tax take of which has not matched expenditure since 2001, and is not likely to do so until 2018. This is a UK that records a deficit year after year, and has a debt that grows year after year.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Obviously, Mr MacNeil will want to catch my eye to make his speech. I would not like him to use it all up now, so shorter interventions.
Stephen Crabb
The hon. Lady talks about inappropriate sanctions on benefits. I recall hearing one of her Front-Bench colleagues say only a few weeks ago that the Labour party would be even tougher on benefits than this Government have been. I think that she needs to get some consistency with her Front Benchers on whether they support sanctions.
The best way to reduce economic inequality is to have a growing economy and to ensure that people are in work. Today, more people in Wales have gone out to work than at any time before, with economic inactivity at its lowest level since records began. However, the tragedy is that there are still 200,000 people in our country who have never worked a day in their lives. I hope that the hon. Member for Carmarthen East and Dinefwr agrees wholeheartedly that that represents an enormous waste of talent, potential and skill and that a small nation such as ours cannot afford to lose that potential. I hope that he shares my ambition for welfare reform to see those people who have been locked in worklessness brought back into the labour market to achieve their full economic and social contribution.
Mr MacNeil
Does the Minister think that the situation he describes is the result of something inherent in those people or the result of the circumstances and structures they are living in?
Stephen Crabb
That question probably warrants a separate debate. I firmly believe that the vast majority of people want to work. I believe that human beings are hard-wired to want to make an economic and social contribution, but the welfare system, which too often the Opposition parties run to the barricades to defend, blunted that inherent instinct that people have to want to better themselves and to choose work over dependency.
Mr MacNeil
The Minister has accepted that it is not the result of something inherent in those people, so why do they not work, and why can they not work? I contend that it is the structure of the United Kingdom that leaves them in that situation.
Stephen Crabb
I think that I answered the hon. Gentleman’s question the first time.
More than 1.6 million private sector jobs have been created since 2010, and the way to ensure that that number keeps growing is to maintain this Government’s economic discipline and not to follow the discredited plan-B economics of the Opposition parties, which would see growth slow down and inequality widen.
We recognise that the economic situation is still challenging for many people across the UK, but we are committed to reducing the burden on the cost of living where we can. Inflation is at its lowest for four years, benefiting families and businesses across the UK. The Government recognise the impact that persistently high pump prices have on the cost of living and on business costs. We have taken action to support the motorist by freezing duty for almost four years. Had we continued on the path set by the previous Government and followed their taxation plans in full, petrol would be 13p higher per litre than it is today and the average motorist would be paying more than £7 extra for a tank of fuel.
Under the previous Government, energy prices escalated, with the average domestic gas bill doubling between 1997 and 2010. It is this Government who have brought forward changes to help reduce energy bills. We are ensuring that the most vulnerable get direct help with their bills: 230,000 homes will be warmer this year by getting energy efficiency measures installed under the energy company obligation; and 2 million households will get help under the warm home discount, including more than 1 million of the poorest pensioners.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Thank you very much, Mr Deputy Speaker. [Interruption.] I also thank the hon. Member for North East Somerset (Jacob Rees-Mogg) for his usual cheer as I start to speak.
We are having an important debate today. In recent months we have had a number of debates on subjects such as the minimum wage, the bedroom tax, and gender issues. Those are all important debates in themselves, but they are also, if I might be so bold, symptoms of a bigger issue that is afflicting our society and other societies—inequality and unfairness. In many ways, this debate has been screaming out to be had, especially in recent times as people are waking up to how things are arranged in our society or societies.
Yesterday, a commission headed by Church of England bishop, Dr John Sentamu, published a thoughtful report on the problem of working for poverty wages in the UK. Much has been written on this subject by eminent Nobel-winning academics and economists. Last week, when we realised that this debate was going to happen, my hon. Friend the Member for Moray (Angus Robertson) said that he was going to play word bingo during my speech and had chosen the word “Stiglitz”. I suppose that many of my thoughts and much of my further outrage on this issue have been ignited by Joe Stiglitz, and that propelled the idea for this debate. I would hope to do him justice, but I know I will not, so I recommend reading his book, “The Price of Inequality”, available on anybody’s Kindle app for £5—or, indeed, Paul Krugman’s “End This Depression Now!” Another interesting book I have seen but not read is “The Cost of Inequality: Why Economic Equality is Essential for Recovery” by Stewart Lansley. Perhaps the aim of economic equality is too far away, but certainly the aim of reducing inequality should be uppermost in all our minds; indeed, I think we shall see that it is becoming so.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
Can the hon. Gentleman enlighten the House on how his proposal to cut corporation tax for the biggest businesses in Scotland will reduce inequality?
Mr MacNeil
It is quite simple—if we start to create jobs and opportunities for people, we will reduce inequality. I would certainly not be in the position of one of the hon. Gentleman’s colleagues who said last week:
“If the Scottish people are going to be better off economically and so on, I would still be against breaking away from the Union.”—[Official Report, 6 February 2014; Vol. 575, c. 467.]
It does not seem to matter whether we can cure poverty—Labour Members would still be against independence because they have made careers talking about it, and handsome careers at that.
Jacob Rees-Mogg
I am interested in the hon. Gentleman’s call for lower tax rates. Has he now become a tartan Tory?
Mr MacNeil
Devil the fear, as my old Irish mother would have said, devil the fear—no chance at all. I think the hon. Gentleman will see, as he pays more attention to the words to come, that the only Tories on this side of the House are probably the red Tories.
I listed the books I mentioned earlier for a reason. We must be aware that we do not have to reinvent the wheel to get people more opportunities and chances in life. Much of the research and science has been done, and the information has been gathered. Perhaps if we stopped, looked and learned from what is around us we would stop falling into the same traps that different generations have fallen into. Why should inequality matter—why is it important? Is it merely because a number of influential professors with Nobel prizes have written books? I would contend that they have put intellectual bones on our instinctive emotions of sympathy and empathy for our fellow people when we see them in situations that disturb us and we think are wrong. This is why nations have international aid budgets and why we give to charity. Sometimes it can be argued that the money is not always best directed, but nevertheless it is useful in the main. It shows an underlying striving for fairness and is a reproach against inequality within the broad set of people.
My first engagement with the idea of inequality was in the religious education class in Craigston primary school at the age of seven or eight, or perhaps even six, with Mrs MacCormick, God bless her. Looking back, I often think that we were really doing philosophy classes rather than RE classes. The example given was this: “If you’re given a box of chocolates at home would it be best to eat them all yourself or share them with your brothers and sisters who have not been given any chocolates?” I have to say that this scenario created a tension in my mind given my great love of chocolates. As you can see, Mr Deputy Speaker, I do not have so much a sweet tooth as a whole set of sweet teeth. I was caught in the tension between doing what was manifestly right and what I really wanted to do on another level. The consensus quickly grew in the class that it was best to share—even among six, seven or eight-year-olds. I am pleased to see you nodding in agreement, Mr Deputy Speaker.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I assure the hon. Gentleman that I was not nodding in agreement; I was just wondering whether there were inequalities within the chocolates.
Mr MacNeil
Very good, Mr Deputy Speaker.
It is a slight concern of mine, however, that the captains of industry, as they get called, or the high-bonus City bankers or hedge fund managers, have never had that experience at a young age and have not engaged meaningfully with sympathy for the situation that others may be in as they gobble all the chocolates of productivity that our economy has produced, believing instead that they are self-made men and self-made women who worship their own creators.
Richard Fuller
Before the hon. Gentleman moves on from his Milk Tray doctrine of equality, will he accept that very many of us do learn those lessons in school and do not necessarily need the Government to act for us to fulfil our responsibilities as individuals? What would he say about considering ways to exhort people who have wealth, regardless of the taxes they pay, to give more to others?
Mr MacNeil
The hon. Gentleman’s intervention is laudable, and I understand what he says, but I disagree. The consensus post the great depression of the 1930s showed the importance of regulation, and that lesson was probably forgotten by the 1980s in the era of the Reagan-Thatcher deregulation that led up to the precipitous problems that finally exploded six years ago. In the absence of regulation, people have to look into their own hearts, but sometimes we can spend far too long doing that. The rule of politics, Parliament and Government is to ensure that we have the structures whereby all can benefit and they are not just dependent on the whim of some well-meaning individuals who may be a minority among the wealthy and could direct their contribution in the wrong way.
Before I get to the body of my speech, I have a final example of something that I think informs the human condition, namely the observations of anthropologists on hunter-gatherer societies. I hope this will also inform the debate, because I think that inequality is essentially about human choices—perhaps even bias—whether they be conscious or subconscious.
Anthropologists note that hunter-gatherer bands did two main things: they hunted and they gathered, hence, of course, the name—there is no need to be a Nobel prize winner to spot that. The crucial observation is that they treated the products of the hunt and the gather very differently. The products of the hunt were shared out almost instinctively, with many people who might not even have been on the hunt getting a share. Anthropologists explain this as the sharing of luck and good fortune, with those on the hunt realising that they might not have had a successful hunt in different circumstances and that, given the way in which the society of the day was arranged, they might earn the good will of others who might be lucky on another day.
That sharing, however, was not mirrored in the gather, and anthropologists reckon that that was due to the labour and endeavours of the individual graft and application of the gather.
Caroline Lucas
I am enjoying the hon. Gentleman’s exposition of hunters and gatherers. I wonder whether it could lead us to a discussion about access to ownership of land. Does he share my concern that very little has been done by successive Governments to address the inequality that arises from the fact that the richest 0.6% of the population own 46% of the UK’s land? Will he join me and others—indeed, this applied to Winston Churchill—who support a system of progressive land value taxation as a much fairer way of taxing land than council tax and business rates?
Mr MacNeil
I hear what the hon. Lady says. I am tempted to go down the route of the argument about the taxation of land and labour. I hope the hon. Member for North East Somerset agrees that it has many merits and that he will move a little closer to me on the left wing as a result.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
On taxation, does the hon. Gentleman agree that the 50p tax rate should be brought back, and would he support it in a separate Scotland?
Mr MacNeil
I have two points to make in response to that. First, when the 50p tax rate was abolished, Members from Plaid Cymru, the Scottish National party and a number of other minority parties—as they are termed in this place, even though we, of course, are the only majority Government on these islands—went through the Lobby to oppose the cut. If memory serves me right, Labour Members sat on their hands and did not do so.
Secondly, I would support the return of the 50p rate on the basis of need and argument. I understand that the UK Labour party is suggesting an increase to 50p for a short fixed term, probably because of the level of the UK deficit, but the Scottish deficit is at a different level. Is the increase necessary in the UK because of economic circumstances—that is one argument—or is the hon. Lady saying that a 50p rate is Labour policy for ever?
Gemma Doyle
I am happy to clarify that the question was whether the hon. Gentleman supports the 50p tax rate.
Mr MacNeil
We voted against its abolition. It would not have gone—we would have the 50p tax rate right now—if the hon. Lady and many others had joined us in the Lobby. The question is: why did she and her colleagues not go through the Lobby to vote against the cut? Where were Labour Members that night? There was no sign of them. Would anybody from the Labour party care to tell me why they did not vote against the cut to the 50p tax rate? I would be very pleased to hear why not. Will one of the about 20 Members on the Labour Benches please stand and explain why Labour did not oppose the cut to the 50p tax rate? Going once, going twice, gone: Labour has refused to explain.
Pete Wishart (Perth and North Perthshire) (SNP)
I remember that evening very well. To call Labour Members headless chickens would be an affront to headless chickenry, given the way they were running around. Does my hon. Friend agree that perhaps it was a principled abstention that the Labour party pursued that evening on the 50p tax rate?
Mr MacNeil
Well, a principled abstention by the Labour party is news to me, but I take on board what my hon. Friend says.
I was talking about hunter-gathering. I was not so much hunting Labour Members as asking why they did not go through the Lobby on the 50p tax rate. I was discussing why people have certain outlooks in life. I think that when people view the fruits of their success as being the result of a hunt that involved a great deal of good fortune and support, they might have a tendency to be slightly more left wing, whereas those who think the fruits are the result of their own individual hard graft might have a tendency to be more right wing and view their gains as a gather. I will make no further judgment on that idea—I just want to put it out there and let people chew it over—but I think there is something deep-seated in our own personal biases as to why we arrive at certain points of view.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Will the hon. Gentleman give way?
Mr MacNeil
It would be a great pleasure to give way to the hon. Gentleman. Perhaps he will tell us why Labour did not vote against the cut to the 50p tax rate.
Michael Connarty
I would be quite willing to brief the hon. Gentleman later about the technicalities of why the vote was not called on that particular night.
The hon. Gentleman is talking about a sociological analysis, but some people have moved on since then and done a socialist analysis. When society is divided into those who support capital and those who support labour, what happens is that the forces of those who have the power in the land—the landed classes—join with the merchant class to support capital, and they have succeeded in increasing the value of capital by driving down the cost of labour. That is why we have the inequality we have, and that is the structure of the society we—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. It is very good to have a lecture, but not during an intervention. If the hon. Gentleman wants to catch my eye later, I am sure he will be able to do so and give me a lecture then.
Mr MacNeil
I thank the hon. Gentleman for that interesting intervention. As an MP for a left-of-centre party—sadly, the hon. Member for North East Somerset is no longer in his place to hear this—I am asking how it is possible that our society and, indeed, many other societies, particularly in the English-speaking world, can tolerate inequality, which has now grown to levels beyond those of the 1920s. Has something primitive been transmitted to our minds through the media? The belief that the poor are poor because they are undeserving and have not worked hard enough is a primitive thought. People have to be helped, because we are complex creatures living together in society. People have deep psychological needs and some can suffer from the paralysis of feeling swamped or depressed when they feel stuck or trapped.
Yesterday’s report by the Living Wage Commission, “Working for Poverty”, looked into the scale and problem of low pay and working poverty in the UK. The first shocking statistic I stumbled on came from the work of the Resolution Foundation, which had tracked low-paid workers for a decade between 2002 and 2012. Despite working for a decade, only 18% of those people had managed to escape low pay in that 10-year stretch. In other words, people in low pay had a four in five chance of remaining there.
The report further notes:
“1.3 million employees remained stuck in low pay for the subsequent decade, and a further 2.2 million workers held higher paid jobs but returned to low paid jobs by the end of the decade.”
That is and should be depressing. Imagine the feelings of the people we eyeball who have been living with that reality on a daily basis for a decade.
There is good news and bad news. Over the past decades, the wealth of this and other countries in the west has grown as productivity has increased. The bad news is that the fruits of that productivity have been disproportionately distributed. According to the BBC’s wealth gap analysis, as the wealth pie grew and there was more to slice up, many people got roughly the same slice of the pie while others took a share that would embarrass a lion.
Between 1997 and 2007, the income of the top 0.1% grew by 82% to an average of £1.179 million annually; the top 0.5% saw an increase of 66.5% to an average of £452,000 annually; and the top 1%, which, of course, includes the previous two groups, saw their income rise by 60%, but their rise was only about a quarter of that of the 0.1%.
Meanwhile, between 1997 and 2007—the happy decade, as some in financial circles call it, before the crash of six years ago—the bottom 90%, which includes most of society, saw their wages rise by only 17%, a disproportionate slice of the economic pie. Another way of looking at it is that the fraction of pay the bottom 90% were getting in comparison with the top 1% had fallen by a fifth over that decade. As Professor Stiglitz says:
“A corporate CEO will not exert less effort to make the company work well simply because his take-home pay is $10 million a year rather than $12 million.”
The “Working for Poverty” report contains a series of nuggets and goes fearlessly into some thought-provoking factors.
Mr McKenzie
The hon. Gentleman has mentioned poverty and how to tackle it, which is welcome, but can he explain why the SNP Government in Edinburgh have taken £1.2 billion out of anti-poverty programmes since 2008?
Mr MacNeil
The hon. Gentleman will find that the efforts of the SNP have been very laudable in Scotland, with unemployment and youth unemployment lower than in the rest of the UK. The SNP Government have done all they can. He should realise that the Government in Edinburgh are in a financial straitjacket set by the philosophies of the Chancellor of the Exchequer and the Secretary of State for Work and Pensions in London. If the hon. Gentleman really wanted to tackle such issues, he would free himself from that straitjacket, and the SNP or whichever party was in government in Edinburgh would be fully accountable, rather than held within the straitjacket of another Government’s philosophy with which we disagree. Does he want to intervene again?
Gregg McClymont
Can the Scottish Government not spend the block grant in any way they see fit?
Mr MacNeil
The hon. Gentleman is absolutely correct: the Scottish Government can do so, but they have to balance the budget. In fact, although John Swinney, the Finance Secretary, balances it every year, the Chancellor of the Exchequer does not. If the hon. Gentleman wants extra expenditure, he knows full well that, under the devolution settlement, he must explain what he will cut. It is, “Want, want, want,” but he has not made any suggestions about what he will cut.
Mr Weir
Will my hon. Friend acknowledge that although funds for fuel poverty programmes have all been slashed down here, they have continued to be invested in Scotland; that child poverty in Scotland is now lower than in the UK as a whole; and that, worst of all from the Scottish Parliament’s point of view, one of the drivers of poverty is the welfare changes controlled by this Parliament, not by the Scottish Parliament?
Mr MacNeil
My hon. Friend is absolutely correct. We can see that again in the philosophy behind the bedroom tax, which is not one that I subscribe to in any way. Last night, I stumbled across a Channel 4 programme on Walsall and Glasgow housing authorities. It talked about having to demolish houses in Walsall, due to their being left empty: people cannot stay in them because of their cost and what people have lost in welfare. Glasgow housing authority has demand for 1,500 more one-bedroom properties—people want them so that they will not be penalised—but it does not have them. It is, inefficiently, trying to build them so that people can avoid the bedroom tax, but the costs are colossal.
Pete Wishart
I am loth to interrupt my hon. Friend’s fantastic speech, but perhaps I can help him a little. We know a bit about what the Labour party proposes to do with the Scottish budget because of the cuts commission. It intends to do away with universal benefits and it does not like free bus passes and free prescriptions. That is what it would do if it gets control of the levers of power in the Scottish Parliament. We know exactly where it is going with its cuts commission.
Mr MacNeil
My hon. Friend is absolutely correct. Johann Lamont has a cuts commission. [Interruption.] I hear from the Labour Front Bench that she does not have a cuts commission, which is another example of how Labour Scottish Members say one thing while Labour in Scotland says another. If Labour Front Benchers want to tell us what Johann Lamont is doing—if she has told them—they are more than welcome to intervene.
Mr Russell Brown
Will the hon. Gentleman tell us why £1 billion has been removed from anti-poverty programmes since 2008 under his Government? Perhaps that might paint a clearer picture.
Mr MacNeil
I thought the hon. Gentleman was going to stand at the Dispatch Box to tell us what Johann Lamont is thinking about the cuts commission, but he failed to do that.
Stewart Hosie (Dundee East) (SNP)
There is a lot of deflection going on. The Labour party has said that nothing is off the table, which might mean £9,000 per child per year to go to university, a return to a tax on ill health with charge-free prescriptions going and all that. In his heart, does my hon. Friend not agree that this is ideological: the British Labour party thinks that we are part of a something-for-nothing society, when all we are doing is caring for those most in need?
Mr MacNeil
My hon. Friend puts it very well: we are caring for those in need. Our hearts should go out to those needing help, and we should not be thought of as part of a something-for-nothing society.
Gemma Doyle
Will the hon. Gentleman tell us how much less money there would be to spend on public services in Scotland if his party gets its way and cuts tax for big business?
Mr MacNeil
If my party gets its way, there will be more money for services in Scotland, because our fiscal position is far better than the UK’s and our deficit per capita is lower. If we become independent, we can do a lot more to help. I hope that the hon. Lady does not hold the position of the hon. Member for Lanark and Hamilton East (Mr Hood). Last Thursday, he told us:
“If the Scottish people are going to be better off economically and so on, I would still be against breaking away from the Union.”—[Official Report, 6 February 2014; Vol. 575, c. 467.]
If by becoming independent we can fight poverty, will the hon. Lady support independence?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I think the hon. Gentleman has got the message across.
Mr MacNeil
I am pleased that the hon. Gentleman has intervened, but I am surprised that he says he is against nationalism, because we live in nations. That is why we have the United Nations of about 193 nations. I am not sure exactly what structure he favours. Is he is in favour of the abolition of the Parliament in Westminster and of the UK state?
Mr Deputy Speaker
Order. The hon. Gentleman must sit down. I will be helpful: we have had a good debate about chocolates, and I want to get back to inequality. I certainly do not want to get bogged down in the rights and wrongs of abolition. I know that he is desperate to finish his speech on inequalities, and I am desperate to hear it.
Mr MacNeil
My speech is about making lives better for people wherever they are from and wherever they are worldwide. That is the important point to bear in mind.
The “Working for Poverty” report even touches on the untouchables of our society—football clubs. It states:
“Research from Citizens UK shows it would take a full-time cleaner 13 years to earn what top footballers earn in a week. Football clubs are important institutions in communities across the UK. They should be setting an example to employers nationwide.”
I must praise the columnist for The Observer Kevin McKenna who, like me, is a supporter of Celtic football club in Glasgow, the richest team in Scotland. Sadly, a few months ago, Celtic refused to pay the living wage to all its staff at the ground. It turned Mr McKenna’s stomach that those subject to such wage inequality could rub along, shoulder to shoulder, with people earning tens of thousands of pounds a week. That has also turned the stomachs of many football fans, especially given that Celtic had cashed in on the story of Brother Walfrid, a Marist brother who now lies at rest in Dumfries, who started Celtic as a means to help the poor of the Glasgow east end in the 1880s. I do not mean to single out Celtic, but to give an example of the toleration of those in even rich organisations for the shocking pay levels given to people the whites of whose eyes they see daily. Frankly, it removes the shine, lustre and glitz from the big football clubs of our land when we realise that gritty reality and see it up close.
Lorely Burt (Solihull) (LD)
I have every sympathy for what the hon. Gentleman is saying, but what is his party’s policy on tackling the scourge of overpaid football players?
Mr MacNeil
I must tell the hon. Lady that, to be absolutely honest, I have not considered that question politically. [Interruption.] Labour Members are mocking, but they would, because they probably have no response. If they have one, they are more than welcome to intervene. If the hon. Member for Ochil and South Perthshire (Gordon Banks) wants to limit the pay of top footballers, he can jump up to the Dispatch Box and tell us how. The hon. Member for Solihull (Lorely Burt) addresses a point that we should look at and think about in our society, since it is one of the jarring unfairnesses and inequalities. People working together shoulder to shoulder with such massive disparities sums up what is happening in our society.
In the report “Working for Poverty”, Dr John Sentamu’s foreword starts with a nugget from the CBI director-general John Cridland, who said that there are
“still far too many people stuck in minimum wage jobs without routes to progression…and that’s a serious challenge that business and government must address.”
I again praise the Archbishop of York for saying elsewhere in his report that business itself has to step up to the plate and make sure that people are getting a fair day’s pay for a fair day’s work, but praise is due to John Cridland also, for his remarks at the outset of the report.
Making work pay is important—very important. The UK taxpayer is paying a staggering £3 billion to £6 billion to cover the costs of inadequate pay, which affects a colossal 5.24 million workers—an increase of 400,000 in the past 12 months alone. That is welfare on a sadly grand scale, for which we should not be asking the taxpayer to foot the bill.
The report notes that the prices of everyday items have risen faster than prices of other goods. Food costs 44% more than in 2005 and energy costs have more than doubled. On the bright side, it notes that vehicle costs have remained stable and the cost of audiovisual equipment has halved. In more serious terms, the report notes that children of parents on low pay are less likely to achieve in school compared with their peers at every stage of their childhood education. A living wage employee gets nearly double the amount of family time in a typical working week as someone on the national minimum wage—a subject I shall return to later in my speech.
The report lays out more correctly the problem in the gains of productivity and their distribution, noting that the arrangements are such that economic growth alone will not necessarily solve Britain’s low pay crisis. Unlike the hon. Member for Bedford (Richard Fuller), I think the Government have a role to play; it is not just a matter for well-meaning individuals. Paul Krugman and Joe Stiglitz observe that low pay takes demand out of the economy, as the people circulating money in the economy are those who are on low pay. There is even an argument that higher unemployment benefit is an economic multiplier, in that the money that goes into recipients’ pockets circulates more quickly.
Gemma Doyle
The hon. Gentleman is being generous. He mentions the opinions of Professor Joseph Stiglitz. Is he aware of another of Professor Stiglitz’s comments:
“Some of you have been told that lowering tax rates on corporations will lead to more investment. The fact is that’s not true. It is just a gift to the corporations increasing inequality in our society.”?
Will he reconsider his position on corporation tax?
Mr MacNeil
Had the hon. Lady been in Parliament when Labour were in power and seen what her party did in that period, she might be less bold. We have to look at what is good for Scotland and what we can do to create opportunity and employment in Scotland, and I will not resile or shy away from that in any way, shape or form.
The contention is that money is not circulating. That is why some years ago we had a fiscal stimulus and why we have had quantitative easing. My problem with QE is that it has not been aimed at the demand recovery for which Stiglitz and Krugman would look; instead, in the opinion of many, it is propping up financial institutions. I note that, at one time, Ben Bernanke suggested that the way to return demand to Japan 20 years ago, when the country was experiencing stagflation, was to take a helicopter full of yen notes and fly above Japanese cities shovelling them out. That is certainly one way to return demand to the economy, but of course serious voices would recoil at the idea and not allow it to happen. There are some answers in economics, however, that are counter-intuitive to many of the things we naturally feel and do daily. We should not be afraid of looking at some of the other, more grounded, ideas, but I fear that a Government who have chosen the cult of austerity over the pursuit of growth are unlikely to look imaginatively at what they can do for the economy—they certainly have not done so in the past three years.
Growth in productivity has not been matched by growth in wages. The “Working for Poverty” report notes that
“Wages and economic output began to decouple in 2003, five years before the onset of the financial crisis. Real average wages have grown by 13% since 1999, whereas economic output”—
that is, productivity—
“has risen by four times this rate.”
That means again that economic growth alone will not solve Britain’s low pay crisis. The Government should set up a commission of inquiry into poverty and inequality, as we call for in the motion, to look at how we can improve the lives of citizens—people we see daily; people we perhaps knew in school, or relatives; people who live in our communities. They should not be left behind, with only 18% escaping low pay over a decade, as we heard earlier. In a further example, the report notes that
“Productivity growth and median pay began to decouple in the 1980s and median hourly earnings have failed to keep pace with the average value of output that workers produce.”
I am heartened to know that even the Prime Minister supports the living wage, saying that where companies can afford to pay the living wage, they should. A living wage is only £7.65 an hour—that is the figure mentioned in the White Paper for independence and in the “Working for Poverty” report. That is only £306 for a 40-hour week or about £16,000 per annum—not a king’s ransom by any means. We should remember that the minimum wage is £6.31 an hour, so it takes an increase of only £1.34 an hour to get to the living wage. I praise the Prime Minister for what he said, but while he apparently sees the justice and wisdom of the measure, as a politician in charge of a Government, he is doing nothing about it. We should realise that life is short, life in politics is shorter, and life in power is shortest of all, so Governments should take the opportunity when they have power to do a lot to improve the lives of the people they govern.
Some of this debate is mere dry statistics. We should look at some of the human stories in the “Working for Poverty” report—the accounts of normal, decent people across the countries who are trying to earn an honest living in a state, the UK, that does not value all its citizens fairly. Their stories should be heard and understood; they inform the debate and help to remove the dryness of the statistics.
Stewart Hosie
Very generously indeed, my hon. Friend has praised the Prime Minister, who at least wants to do something about the minimum wage, but is it not disappointing when the hon. Member for East Dunbartonshire (Jo Swinson) was answering questions about the living wage, she said, even though it is £7.65 in Scotland and £8.80 in London, that it was “too difficult to calculate”? Is not that a rather bizarre position for the UK Government to take, given that we already know what the figures are?
Mr MacNeil
My hon. Friend puts it very well indeed. I do not think any more needs to be said.
Case study 1 in the interim report from the Living Wage Commission is Paul’s story. The report tells us that
“Paul is a support worker in the care sector in the North West of England. His partner is a youth worker in the youth justice sector for the local Borough Council. They have a sixteen year old daughter and are both paid below the Living Wage.”
Paul says:
“I started work for my current employer in 2009 and have never been given a pay rise. During this time I have experienced a palpable leap in the cost of living. My wife started her employment in 2010 and she has witnessed a drop in the amount of money she is paid for her considerable and anti-social working hours.
We are both working full-time, living in local housing association rented accommodation and we are always struggling to pay our way. We have no luxuries, we have not been on holiday and we do not socialise. We work, eat and sleep. There are no extra benefits we can claim to help us. There is little we can hope to do but keep on working in the hope that we will eventually see some ‘light at the end of the tunnel’.
I have juggled our debt as best as I am able to. I have moved some debt onto zero interest credit cards which have given us an 18 month window to clear some debt without accruing the hefty interest charges which would be crippling.
We are substantially in arrears with the rental of our home. The landlord is attempting to negotiate a payment plan to help us to manage this debt. We avoid doing so to enable us to more flexibly manage our debt. One week we can pay a little off our rental debt but the next we must buy food and fuel, pay outstanding vets bills, and more besides.
We often spend days apart. This is due to my low pay and the need for me to do sleep-in duties as a carer to garner something like a liveable income. We can often only communicate through rushed text messages and leaving voicemails for each other. Our sixteen year old daughter misses us both greatly. We did not even have a day out together as a family in 2013.”
That one story crystallises in many ways the nub of today’s debate. I am grateful to the Archbishop of York for his report and for setting out people’s experiences. Perhaps the saddest line in that quotation is:
“We work, eat and sleep”.
It is shocking that the citizens of a first-world, G7 country are living in that way.
Government Members often talk about the importance of family as a building block of society. I would argue that the living wage benefits and reinforces families. To take home the same wage that an employee on the living wage would receive for a typical 37.5 hour week, minimum wage earners would have to work 52.3 hours a week in London or 45.5 hours a week outside London. In a typical Monday-to-Friday working week, that is equivalent to working 10.5 hours a day in London or 9.1 hours a day outside London. That rises to 11.5 hours for London or 10.1 hours outside London if we include an hour’s lunch break.
A worker who does a Monday-to-Friday job in London on the national minimum wage, who gets the Government’s recommended amount of sleep each night and who has an average commute therefore gets only three hours and 45 minutes to spend as they wish in each week day. The same employee would get six hours and 45 minutes of time each day if they were paid the living wage. That is an extra three hours a day or almost double the time that a minimum wage worker has to spend with their family or to do anything else that they want to do. That shows how those in low-paid jobs have little work-life balance and have to sacrifice the time that they spend with their children or on social engagement. That can lead to other problems further down the line. If ever there was an example of what an additional £1.43 an hour could bring, that is it.
When we hear people using the family as a political argument in future, it must be backed up by some economic and legislative muscle in order that people have a decent wage and a decent start in life. The most important point to make is that the people we are discussing are working—they are the working poor. They work long hours to do what they can for themselves and their families, yet they are unable to participate properly in society.
It is a damning indictment of all of us in this House that we have tolerated the emergence of such a reality in our midst over the past few decades. Although I am only 43, all of us have a responsibility for that. We have a responsibility to speak out about it. That is why we are having this debate. I hope that the Government will listen and will bring forward a commission of inquiry on inequality and poverty, because those issues blight the lives of far too many people. It should simply be stopped.
Jonathan Edwards
Does my hon. Friend share my concern at the lack of interest in this policy agenda, which is demonstrated by the number of Members who have put their names forward to speak in this debate? The Westminster parties do not care and just do not get it.
Mr MacNeil
It is disappointing that more Members have not engaged in the issues of poverty and inequality. Cynics would say that if this were a debate on Members’ pay, conditions and benefits or any other reform of the House of Commons, the Benches would be full. Alas, we are debating a topic far removed from that. That is why I have tried to humanise the debate.
I was not going to read Becca’s story from the Living Wage Commission, but it is a cracker of a story. The report states that she
“lives in Leeds and has worked in minimum wage jobs since she was a teenager. Now in her thirties, she has a degree and wants to start up her own business, but she can not find the money or the time.”
She says:
“I have pretty much always worked for minimum wage. I worked in an office photocopying for two years, I have worked in customer service, I once sat watching a TV screen and counting cars on clickers. I’ve done all sorts.”
That is another example of a person who is trying to better herself, but who is—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I have a good feel for the examples, as, I am sure, does the House. This should be the hon. Gentleman’s speech, not just a speech full of examples from other people. I have allowed a few examples to go, but I have heard enough for now. I want to hear from the hon. Gentleman, rather than other people.
Mr MacNeil
Thank you, Mr Deputy Speaker. It is because of my modesty and kindness that I want to share the wisdom of others. I do not see myself as the sole well of wisdom. [Interruption.] “Thankfully,” say my SNP colleagues.
We have to consider how poverty and inequality are affecting young people. I spoke to a young person recently who said, “It’s difficult being young. Houses are expensive. We have tons of student debt. The costs of living are rising and wages don’t go up. It’s sort of tough being young at the moment.” That young person was right. I was at university when student loans came in. I followed a demonstration against student loans that was led by a student who later became an MP. I later saw him on television backing Labour’s introduction of tuition fees in 1998. I cannot remember his constituency.
There has been a sharp rise in the number of 24 to 34-year-olds who are living at home with their parents. As Joe Stiglitz said, that is not due to a rush of filial devotion, but because they have no choice. The economic cards are stacked against them. Youth unemployment is high in many countries. It is too high in Scotland and higher still in the UK as a whole. Instead of getting on with their lives, the young find themselves in a holding pattern.
The SNP has done what it can in Scotland by keeping tuition fees at zero, which is saving families from paying £36,000 for a four-year degree. Families risk having to pay that if we vote no to independence. We know that there are cuts down the line and some people think that this is a something-for-nothing society and that certain things should be taken off the table. We do what we can with the powers that we have, but we want to do so much more.
An exciting proposal in the White Paper that will tackle inequality is to follow Sweden’s example on child care. Parents of early-years children in the UK face the highest child care costs in Europe. Parents in Scotland spend about 27% of household income on child care, compared with the OECD average of 12%. Independence would give us the opportunity to make transformational changes to the way in which Scotland provides child care services. That will allow women, in particular, to work without worrying about the cost of looking after their children. With independence, the benefits of their work, such as economic growth and tax revenue, will stay in Scotland and contribute to the costs of child care provision.
The Scottish Government plan to have a universal system of high-quality early learning and child care from the age of one up to school entry. At the end of the first year of an independent Scottish Parliament, every three and four-year-old and vulnerable two-year-old will be entitled to 1,140 hours of child care. That is the same amount of time as children spend in primary school each year and is equivalent to 30 hours per week over 38 weeks. That is an important aspiration. It demonstrates one way in which we should be moving our society forward. It would certainly be a way to reduce inequality.
It has been argued that inequality has caused the rise in household debt because people try to keep up with the Joneses. There are more pernicious examples of what inequality can do. Professor Paul Krugman states:
“Before the financial crisis of 2008 struck, I would often give talks to lay audiences about income inequality, in which I would point out that top income shares had risen to levels not seen since 1929. Invariably there would be questions about whether that meant that we were on the verge of another Great Depression—and I would declare that this wasn’t necessarily so”.
In the end, it turned out that that was the case. Once again, we are not arresting the growth in inequality. Are we on the verge of repeating the same mistake? I wish that we would learn, but we seem not to be doing so.
Some voices in the world are talking about inequality. Yesterday, the mayor of New York, Bill de Blasio, made a speech about tackling inequality in New York. My only criticism is that, when one looks at the detail, it is quite timid. The Pope has said:
“The promise was that when the glass was full, it would overflow, benefiting the poor. But what happens instead, is that when the glass is full, it magically gets bigger nothing ever comes out for the poor.”
The church and nation committee of the Church of Scotland addresses that issue frequently and, as I said, the Church of England’s Archbishop of York has also done great work. A number of US Senators are aware of the problems and what is happening.
In my view, Governments should concentrate on growth and jobs. The deficit obsession and austerity cult has taken demand from the economy and probably led to a slower recovery—we have probably lost years as a result of the policies that were followed. We cannot fully prove that because we do not have a controlled environment in which to do so scientifically, but the feeling among many economists is that growth has not returned as strongly as it should have done, and that when it did come back it was three years delayed.
We are in food-bank Britain; we have the bedroom tax hammering people. VAT, one of the most regressive taxes, has been increased to 20% in this Parliament. That is a real shame and something that hits people disproportionately. We have had the cut to the 50p tax rate. That probably cost £4 billion to £5 billion in revenues, although the Commons Library has stated that behaviour alteration should mean that it will cost only £0.5 billion. Only £0.5 billion? That means that the cut to the 50p rate of tax has cost the Exchequer and not raised any extra revenue.
In the debate last Thursday—I am coming to a conclusion, Mr Deputy Speaker—it was sad that many of those Members who had the opportunity to speak in a very time-limited debate made no real mention of the future, and there was no mention at all of poverty. Unfortunately, we seem to have made a god of money, and we treat those who do not get hold of it as somehow inferior beings. In fact, as somebody once remarked, the cure for cancer might well be found in a child living in a poor household. They should be given a helping hand and an opportunity for their future because—who knows?—they could help us some day.
I have a couple of final reflections. It was said of Nelson Mandela that he not only liberated the blacks in South Africa, but also the oppressors. When I look at inequality I see, of course, great insecurity at the bottom, but I also see insecurity at the top. People realise that when the safety nets are removed, they themselves are a step or an accident or two away from going down. If those people do not have a society with safety nets in place for their own security, they can never fully relax. They need to get more and gather more because—who knows?—they, a relative or a friend might need it.
That struck me very strongly when I was at Alabama state university on an exchange programme with a US Congressman and we went to see a game of American football. We were taken to the president’s box of the university, and there were people who had made it in life. I met a man from Leeds, but it struck me that despite having made it, the talk was all about health insurance, health care, and what sort of plan people had—conversations we do not have in this country. In reality, there was deep insecurity because the social nets were not there to help everybody. When the nets are not there for the poorest and most vulnerable, we, our friends, our relatives, the relatives of relatives and friends of friends, are all but one step away. It is not a nice situation to be in, and I could see the fear in the whites of their eyes. Even though they personally had made it in society, there was massive insecurity around them.
Just as Nelson Mandela liberated the blacks and the oppressors, so too does the arresting of inequality liberate the poor and the rich—not quite in equal measure, but it certainly liberates them both from the insecurity that inequality brings to us all. We should work to get rid of inequality, and I hope that when we have independence, we can prove that one of the best ways of fighting inequality and poverty is through the prosperity that I expect we shall bring to Scotland.
Guto Bebb (Aberconwy) (Con)
It is a pleasure to follow the hon. Member for Na h-Eileanan an Iar (Mr MacNeil). In 1979 I spent a fantastic summer holiday on the Isle of Barra—something that I have promised my children I will repeat at some point.
Guto Bebb
Thank you.
This has been an interesting and passionate debate thus far, but I would like to pick up on a few points made by the hon. Gentleman about the minimum wage. Members across the House will share the aspiration to increase the minimum wage, but to accuse the Prime Minister of inaction when he has simply stated a need to consider the facts is slightly unfair. On Friday, I met a number of constituents who run small hotels in my constituency. Not a single one of those six businesses had posted a profit in excess of £15,000 for the past three years, yet they all employed people and each paid slightly above the minimum wage. They want to do the right thing and retain their staff, but when talking about prosperity and creating jobs, we must ensure that anything we do with the minimum wage does not destroy the very thing that helps people out of poverty, which is having a job.
Guto Bebb
I am responding to the initial comments that proportional representation leads to a more involved electorate. I would challenge that because, as I was about to say, in my constituency 70% of constituents turned out in 2010 on a first-past-the-post race, but under a PR system in 2011, the turnout was only 40%. If we want democratic engagement, I argue that the evidence for the hon. Gentleman’s point is not clear.
Finally, I agree with the hon. Gentleman that when trying to ensure full employment in Wales and supporting businesses—all part and parcel of improving equality and job opportunities—we must support our small businesses and ensure that our banks are lending. My right hon. Friend the Chancellor of the Exchequer has made huge strides in trying to ensure that the banks support small businesses, but I accept the arguments about the need for further intervention to support small businesses in Wales.
I take from the comments of the hon. Member for Carmarthen East and Dinefwr an implied rejection of the work of Finance Wales, an organisation which has existed in Wales for a long time and has the purpose of supporting small businesses. In my view, it is a Government-supported way of supporting small businesses. On Friday, however, in my constituency I met a small hi-tech IT company employing 23 people, which had been asked to pay 9% above base to be lent money by Finance Wales. That is the type of behaviour that, if undertaken by the banks, we would be criticising openly. The initiative is supported by the Welsh Labour Government, and they should ask themselves serious questions when small businesses trying to create employment opportunities in my constituency are offered penal rates to borrow money.
I have some sympathy with the comments made by the hon. Member for Carmarthen East and Dinefwr. I share his surprise at the behaviour of the Labour party in the Welsh Grand Committee last week. Democratic engagement is part and parcel of the process through which we engage people and tackle inequality. However, the Labour party’s rejection of the entirety of the Silk commission report, with the exception of borrowing powers, should concern us greatly. If we are to create equality, in Wales and in the United Kingdom as a whole, we should avoid spending more money on debt repayment than we do on education. The only part of the Silk commission report that the Labour party seemed willing to support was more borrowing powers—no surprise, perhaps—but that is a betrayal of the aspirations that those of us on the Government Benches have for the people of Wales.
Mr MacNeil
I have been hearing quite a bit about the Welsh Labour Government’s rejection of more powers going to Wales, but I still cannot find the reason for that. Do they doubt their own abilities of stewardship and governance? Does the hon. Gentleman know why they do not want them?
Guto Bebb
It is not for me to correct the hon. Gentleman, but I am not sure whether the proposals were rejected by the Welsh Government. They were certainly rejected by the Labour Front-Bench team in Westminster—a significant difference. Perhaps Labour Members can enlighten us on whether there is a lack of trust between the Westminster team and the Assembly team.
The motion is wrong-headed in many ways, but its key failure is highlighted in the final sentence, which
“calls on the Government to halt its further spending and welfare cuts”.
That tells us that the motion is not serious. It talks about the importance of creating equality and opportunities and supporting people and communities, yet it does not recognise that to have a successful, sustainable economy we cannot carry on borrowing at rates that are unsustainable in the long term. There is nothing moral, fair or reasonable about asking our children and grandchildren to pay for our mistakes. We have a responsibility to future generations not to saddle them with unsustainable debts. We have an ageing population and a demographic problem, nowhere more so than in parts of north Wales that I represent. We face a real challenge to care for the elderly and to ensure that we have a fair pension system. Future generations will have to meet those obligations. In asking them also to meet our inability to take hard decisions, the motion is not a serious one, and it deserves to be rejected.
Guto Bebb
I fully accept and endorse my hon. Friend’s comments. It is important, when we debate public spending and the level of so-called cuts, to bear in mind that we are running a state that is not meeting its obligations. Even in this financial year, we are borrowing £110 billion. We are not out of the woods by any stretch of the imagination. It would be an irresponsible Government who would damage the opportunity for people to have more equality through a willingness to borrow more without any plan to reduce the country’s level of debt.
Mr MacNeil
Is the problem for the Government not that the rush and the desire to attack the deficit has taken the focus away from what they should be doing: returning demand and growth to the economy? To make an equivalence between the national economy and a household budget is wrong-headed in the extreme and has led to the three-year delay in growth. It is leading to the wrong policies and—
Guto Bebb
Let me finish this point.
Back in 2000, when the decision was made to apply for objective 1 funding it was argued that this was a once-in-a-lifetime opportunity for Wales as the GDP of west Wales and the valleys as a percentage of the European average was roughly 74%. As hon. Members will be aware, once that percentage is above 75% the highest level of EU intervention is not available. It was also described as a once-in-a-lifetime opportunity because in 2004 all the accession countries from eastern Europe, which had been behind the iron curtain for decades, would become part of the European Union. Lo and behold, in two rounds since 2001 Wales not only has qualified for such funding but has qualified because we are going backwards rather than forwards. Those Members who argue that public spending, Government intervention and the “Government know best” mentality are the way forward for the Welsh economy should seriously consider the impact of public spending on west Wales and the valleys.
I shall now take a final intervention from the hon. Member for Na h-Eileanan an Iar.
Mr MacNeil
What the hon. Gentleman is describing in Wales is a symptom of picking winners; things cannot happen there organically. What is the difference between the EU accession states and Wales? What is the difference between Wales and the Republic Ireland, which used to be behind, but is now well ahead of Wales? The difference is that they have Governments who can make things happen organically within their nations, instead of having to join the “picking winners” line because of policies from another country’s capital that do not fit their needs.
Guto Bebb
Obviously, I do not accept most of the hon. Gentleman’s arguments; certainly, we should be careful about taking lessons from the Irish implosion. Ireland is probably one of the few countries to have a banking crisis even greater than ours. Many of the eastern European accession countries have managed to create vibrant economies by imposing low-tax regimes, and the whole of the UK should look carefully at those countries’ performance.
In the debate about whether we have a 50p, a 45p or a 40p tax rate, I remind Labour that it found the 40p tax rate completely acceptable for the vast majority of its 13 years in government. What is the purpose of income tax? That is a question that is often forgotten. Its purpose is not to bring down and punish the successful. If we believe in a more equal society, we want more money coming into the Exchequer, because that means we can do more to support the less well-off in society, but we have lost sight of that argument. If we reduce taxes and get more money coming into the Exchequer, that is something that should be welcomed. Time and again, it has been shown that when taxes are reduced, more often than not, the result is more economic activity and a greater success story.
Mr MacNeil
How much does the hon. Gentleman want to raise council tax by and what else is on the agenda for the cuts commission of Johann Lamont?
Mr Brown
That really is a naive question, but it is not unexpected. I am not asking for a council tax increase; I am asking for local government in Scotland to be properly funded. It has to be properly funded. To do otherwise is a false idea, especially when it falls on the shoulders of the poorest.
If the SNP was serious about tackling inequality in Scotland, it would be using the tools of the Scottish Government, like our colleagues in Wales, to protect people from the worst of the Tories. Instead, it would rather not let Westminster, in the words of its Finance Secretary, off the hook. At no point in the debate have SNP Members explained why they think this is acceptable for the people of Scotland. I would only hope that if there are to be further contributions from their Benches, they will explain away some of the inaccuracies that they think are in my contribution.
Lorely Burt (Solihull) (LD)
As a Member of Parliament from Solihull, I would not dream of presuming to talk about the very specialised problems of other parts of the UK, but I hope that I have a word or two to say about fairness and inequality. What was unfair was inheriting a £160 billion deficit from the Labour party. I appreciate that it was not all the fault of Labour. The banking crash all started with a company called Lehman Brothers, which makes one wonder what might have happened if it had been called Lehman Sisters. I can blame Labour for failing to regulate banks properly for 13 years, and then having to bail them out with a £500 billion rescue package. I can also blame Labour for allowing welfare spending to spiral up by 20% when the economy was growing. That has made circumstances difficult for our coalition Government.
I am proud of what the coalition Government have succeeded in doing. We have cut the deficit by a third, with more coming from the better-off, I hasten to say. Our flagship policy of raising the tax threshold at which people start to pay tax to £10,000 has taken 2.7 million people out of tax altogether, of which 60% will be women.
Mr MacNeil
The hon. Lady says that more tax is coming from the better-off, which is true, but are the better-off not getting a far larger slice of the productivity pie than they have in years and decades past?
Lorely Burt
I am not entirely sure what the hon. Gentleman means by the productivity pie, but over the same period of time a millionaire would have paid over £300,000 more in tax under the coalition Government than under the previous Labour Government. In addition, 24 million people have had a tax cut of £700 or more. Those are good things. In addressing unfairness, we seek to ensure that those with the broadest shoulders bear the greatest burden of the tax. The coalition helped 900,000 people out of poverty altogether between 2010 and 2012, so when Labour Members talk about increasingly harmful circumstances, it should be pointed out that poverty increased under the Labour Government and has decreased under this Liberal Democrat and Conservative Government.
We have also helped the rich to be relieved of more than their fair share of tax by increasing capital gains tax and closing pension loopholes. No company now will review its tax arrangements without considering the general anti-avoidance rule that we have introduced, which helps focus the mind because it concentrates on the spirit in which tax is paid, as well the fact. Sticking strictly to the law is no longer an excuse for not paying a fair share of tax. Under Labour, capital gains tax was 18%. We have increased that to 28%.
We fully appreciate that households are under great pressure and we have taken steps to remedy that—for example, by abolishing Labour’s fuel duty escalator, so that when the average motorist fills up their tank, they are paying £7 less to do that. No one denies that it is still expensive, but we are doing what we can to help.
Liberal Democrats have made a big contribution on fairness. There is now free child care for all three and four-year-olds, as well as for 260,000 two-year-olds. For parents who have children in child care, we have a £1,200 tax break coming down the line. We have frozen council tax and helped local authorities to achieve that. The average family will be paying around £600 less today in council tax than would otherwise have been the case. There are now 494,000 more women in employment and 100,000 more women in self-employment, which is an encouraging step. We will be introducing free schools meals for five, six and seven-year-olds, and as I have already mentioned, 60% of the 2.7 million women on low pay will be taken out of tax altogether.
Mr Weir
The hon. Gentleman is like a broken record. I have explained already, and have done so on numerous occasions, our objections to the energy price freeze. It is easy for Labour to say, “Let’s have an energy price freeze.” It sounds great and I am sure many people love to hear it; unfortunately, it simply will not happen. It will not lead to lower bills, it will freeze in the inequalities already in the system, and it will leave people with higher bills, while his party leader flails about trying to find some flesh to put on the bones of that policy.
Mr MacNeil
When Labour Members talk about an energy price freeze, are they not basically saying to the people, “Do you want your energy bills to go up before we announce the freeze and to go up again afterwards?” It is a total con, and they know that full well. It was done one weekend for a headline in a Sunday newspaper and they are sticking with it now. That is the long and the short of it.
Jacob Rees-Mogg (North East Somerset) (Con)
I am glad, as an Englishman, finally to be allowed to enter into this debate, because the motion refers to the United Kingdom. It is a great honour to speak in this debate, because the nationalists appear to have a very clever plot, whereby they send their best and brightest people down to Westminster to make us realise how much we would miss them if they went independent. Since entering this House in 2010, I have become more and more pro-Union, simply because of the fantastic speeches we hear from nationalist Members.
Today was a model of its kind. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) gave an absolutely brilliant speech that started with the ancient history of Wales and had the House gripped by his every word. I was sorry that I could not hear the whole speech by the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), as I had to go to European Committee A for a moment, but I was relieved that he was not too brief because there was so much to be said, and he was almost still speaking by the time the Committee ended.
The motion itself, however, though presented with panache and oratory, is fundamentally misplaced. It goes completely the wrong way about tackling issues of inequality because it argues fundamentally that we should all be impoverished. It is an argument that says that inequality is the important issue, not how prosperous people ought to be. It mentions the
“underlying trend of rising income inequality”
but the problem is that the point at which income inequality has been reduced has coincided with the recession. Yes, it is easy to reduce income inequality if we ruin the economy. If we make everybody poorer, we can all be poor—and perhaps happy—together. Actually, I think the British people will not be happy if they get poorer; they will be happier if they get richer. It is of no pleasure to me that during the recession, the income of the top decile of income receivers in the United Kingdom fell by 9%, and that of the bottom decile by 2.4%. Although it could be argued that the better off are making a bigger contribution than the worse off, I do not want to see anybody’s income decline. I want everybody’s income to increase, and that requires the economic policies that this Government have followed.
Mr MacNeil
As our state is getting wealthier and productivity is growing, does the hon. Gentleman agree that all should share in that, and that the rent seekers at the top end should not abuse their positions as CEOs or hedge fund managers and see their wealth grow by 60% to 80%, while over a decade the equivalent bottom 90% will see their wealth grow by only 17%?
Jacob Rees-Mogg
Where I disagree with the hon. Gentleman is when he fails to recognise what those very wealthy people do. By and large, hedge fund managers and corporate tycoons spend their money, and if they do not spend it they save it.
Jacob Rees-Mogg
If they spent it on wine, that would help the French, rather more perhaps than the English, but that is slightly beside the point. They might spend it on whisky, which will help the hon. Gentleman’s constituency. If they spend money, they create employment and economic activity, and if they save it and put it in a bank, they provide the deposits against which banks can lend. One of the great problems of the banking crisis was that the loan-to-deposit ratio went way above 100%—I think the Royal Bank of Scotland got up to 135%. It is not practical for banks to lend when they are not taking in deposits, because they then become dependent on overnight money, which can be withdrawn much more easily, and has a tendency to be withdrawn more quickly than long-term stable deposits. When the income of the wealthy is saved, it is an economic good.
Mr MacNeil
Is the hon. Gentleman saying that before the crash the wealthy were not saving enough of their money and were perhaps squandering it in various ways, and that one of the main reasons for the crash was that the banks did not have enough deposits from the wealthy? Surely if it had been in everybody’s hands, it would have been in the banks.
Jacob Rees-Mogg
The hon. Gentleman has taken one bit of what I have said and applied it incorrectly. It is uncharacteristic of him not to listen more carefully, and I will come on to the issue of spending cuts.
Jacob Rees-Mogg
The IMF is not full of well-known leftists, but it does seem to be run, by and large, by the French, who have a very different understanding of economics, an absolutely rotten economy, and are the last people from whom I would take lessons. We will not in this Chamber go into the behaviour of the previous managing director—it would shock the viewers of the Parliament channel if they were to consider how Monsieur Strauss-Kahn had behaved. Anyway, I will not be told what to do by people who cannot behave.
I want to come back to the economic benefits of the spending and saving of the wealthy. That is what provides the employment and investment that leads to economic growth, and leads to the rising of living standards for the poorest in society. That is not done by the state. The state can indeed pass money around—it can reallocate money from pot A to pot B—but that does not increase the fundamental size of the pot. It merely reallocates what is already there, whereas the expenditure, saving and investment of individuals in the private sector grows the total amount that is available and therefore leads to cascading wealth.
This is where I must come on to the specific point in the motion calling on the Government
“to halt its further spending and welfare cuts”.
The spending cuts have been essential. The Government and the Chancellor of the Exchequer have been a model to other countries in how they have behaved. In a cross-partisan moment, I thank the Liberal Democrats for the role they have played. It must have been particularly difficult for them to take these tough decisions, having not been in government for so many generations and facing up to more serious responsibilities than parties in opposition sometimes have to deal with. I think they deserve a huge amount of credit for the support they have given to the Conservatives. Lots of economists, some of them quoted by the hon. Member for Na h-Eileanan an Iar, were saying that it was the wrong thing to do. Even the IMF had to eat its words a year after saying that austerity was not the right thing to do. The IMF was wrong and the Government were right. Why was that?
First, when the Government came into office there was a risk that there would be a funding crisis. There was a risk that the Government would simply not be able to raise the money in the gilt market that they needed to pay for the services that the British people wished to receive. That was the first problem. The second problem was that Government expenditure and very high debt crowd out private sector activity. If the Government had not reduced spending, businesses would not have been able to have access to the capital they needed to begin the recovery. The third problem was that by taking money out of the economy, there was a general depression of economic activity as individuals and their families had less to spend throughout the economic spectrum. It was being taken out of productive capacity and used unproductively merely on a money merry-go-round of the state.
This is, again, where I like the fact that the coalition has raised the basic threshold of income tax. I share the ambition of my hon. Friend the Member for Solihull (Lorely Burt) that this should be increased. It is absolutely barmy to tax people on low incomes and then give them their own money back in benefits. Not only do we want to get it to £10,000, we want to get it to the point where people on the minimum wage are neither paying national insurance nor income tax.
Mr MacNeil
The hon. Gentleman is mainly making points about redistribution and I disagree with him on that. In one of the longest parts of my speech, I made a point on the living wage and the number of people who are now working poor. He mentioned the billionaires and rich people that we have in apparent abundance around the place. Should we not be seeing people at least earning a wage that means that they do not need to benefit from state welfare to top up the lack in their wages?
Jacob Rees-Mogg
The wages that people are paid in this country are set on an economically competitive basis, not just against what goes on in this country but on what goes on in the rest of the world. As a nation, we need to produce goods and services that people will buy. Then, when we have profitability and successful businesses that grow, there will be money to pay people more. We want more billionaires, because billionaires spend money. Who do we think are buying all these Rolls-Royces, Bentleys and Jaguars? In Portugal, the people buying them might be quite poor, because it has a special scheme where one can win a car if one buys a cup of coffee and makes the person selling the cup of coffee promise to pay tax, but outside Portugal—in China, India, America and the United Kingdom itself—the people who buy these luxury goods are those who are well off. We need those people to provide the good jobs.
I want to move on to the dead hand of welfare, as it appears that the feeling expressed by those on the Opposition Benches—particularly by the nationalists, although Labour is not a million miles away—is that if a Government take money and dish it out that helps people. I fundamentally disagree. I do not think that it is fair that people who do not work should be better off than people who do. Indeed, I think that is wrong. I do not think that it is fair that people should be trapped in poverty by decisions that the state makes.
One of the noblest things that this Government are doing is the reform of the welfare state. I agree with my hon. Friend the Member for Aberconwy (Guto Bebb) that if people are lifted out of state dependency, they can take charge of their lives and become prosperous. They can then contribute to the overall economy. If benefits are set too high and the percentage of its withdrawal is so high that there is no incentive to work, people are trapped.
Mr MacNeil
The hon. Gentleman will be aware of yesterday’s report on working poverty by the Archbishop of York. It showed that most of the people in receipt of benefits are working and the efforts people are making to earn a decent wage are not having an effect because they are not being paid properly. Let me ask the hon. Gentleman again: does he support efforts to ensure that people are paid properly so that companies are not subsidised by the state? In the United States of America, one of the biggest recipients of welfare is Walmart and we have different examples in this country.
Jacob Rees-Mogg
Once again, I am sorry to say that I disagree with the hon. Gentleman on that specific point. It is much preferable that the state should pay benefits to people who are working and being paid the economic rate for their job.
Jacob Rees-Mogg
My hon. Friend makes a good point. There must be fears that if the Bank of England goes on printing money, the printing presses will eventually wear out in an inflationary burst.
There is hope from the Opposition Benches. We heard that the hon. Member for Na h-Eileanan an Iar supported the reduction in corporation tax in Scotland because he thought that it would produce more revenue, more business and more prosperity for Scotland. That is the vision of fairness and of reducing inequality that we should have. It is a vision in which people succeed through their own efforts rather than being trapped by the state; in which people prosper through their own efforts, rather than being held down by the state; and in which people contribute through their own efforts to the growth of the rest of society and the economy, rather than being prevented from doing so by the state and being left unproductive .
Mr MacNeil
The hon. Gentleman talks about the state as a malign influence, but does he accept that markets have their flaws and do not work properly? Influences and biases in the markets can conspire so that the CEO gets far more, in ratio with the pay at the bottom end, than at one time he used to whereas the people at the bottom end cannot even make a living wage. There are huge iniquities in the private sector and it is not all “State bad”. The hon. Gentleman should realise that the state can be good as well and there can be big problems in the private sector.
Jacob Rees-Mogg
The hon. Gentleman and I are co-religionists, and if we are not careful we will start talking about original sin and the imperfectability of mankind. It is true, of course, that there is no perfect man-made system, and that would be an interesting debate for another day, but by and large the markets work better than state direction, which essentially re-circulates money that is created in the private sector. We need a flourishing private sector if we are to help people to improve their standard of living, their lives and their livelihoods, and if we are to take them out of this awful poverty trap. There is great nobility in what the Government are doing. They do not want unfairness; they want fairness for those people and families doing their bit for society, working hard and getting on, and they want to take away the clamping down, the closing down, the almost bankrupting of the country that was being done before.
For those reasons, I oppose the motion. It is fundamentally wrong-headed in all it seeks to do, and I hope the Government stick to their guns and carry on with economic and welfare policies that enable people to become better off through their own efforts.
Debbie Abrahams
I will indeed. I also want to pay tribute to Oldham college, which has introduced its own system to ensure that people from the poorest backgrounds can still attend college without being financially penalised.
The Government are restricting access to justice through their legal aid changes. Inequalities are also being created through job insecurity resulting from zero-hours contracts. The swathe of policies that the Government have introduced have done nothing to reduce inequalities. On the Government’s so-called welfare reforms, I absolutely detest the divide and rule narrative that has been deliberately introduced in an attempt to vilify people receiving social security as the new undeserving poor. The pejorative language of “shirkers” and “scroungers” has been really disingenuous, and the Government are distorting statistics to try to prop up their welfare reforms. That is absolutely shameful.
Collectively, the impact of public spending cuts is significantly greater in deprived areas. Academic studies also show the relationship between public spending and, for example, life expectancy at birth. The immediate impact of these socio-economic inequalities on health inequalities is already showing. Following the 2008 recession, there was an increase in male suicides, with an additional 437 suicides registered in the UK in 2011, roughly mirroring the increase in unemployment. It will take time for health conditions such as cancer and heart disease to develop. There is always a time lag between such conditions and their immediate precursors. We also know that the protective, positive factors that can mitigate these negatives are being eroded.
Mr MacNeil
The hon. Lady is making a clear, thoughtful speech. She has touched on regulation, and on positive factors. Does she agree that one of the malign aspects of state regulation is the excessive regulation of trade unions, especially when the OECD has shown that strong trade unions can help to reduce inequalities? Does she also agree that this is one area in which the UK has definitely gone too far?
Debbie Abrahams
I am a trade unionist and I fully support trade unions.
On the current policy trajectory, the social pattern of health inequalities will continue. For example, the gap in life expectancy is set to increase, rather than decrease. In England, there is now a nine-year difference for men and a seven year difference for women. The Government’s indifference to inequality reflects their belief in the dated theory that reducing inequality reduces incentives and slows growth. That theory has had a number of iterations, but the converse has been shown to be the case. For example, Stiglitz produced evidence last year to show that inequality caused financial instability, undermined productivity and retarded growth.
The previous Labour Government did not get everything right, but I am proud that we achieved our targets on health inequalities. Our key successes were in achieving our objectives, first, to reduce health inequalities by 10% as measured by life expectancy at birth for men in spearhead areas, and, secondly, to narrow the gap in infant mortality by at least 10% between routine and manual socio-economic groups and the England average. That was quite a feat, and it has not been acknowledged by this Government. I am sure that the Minister will take an opportunity to mention it in his closing remarks. We did not get it right, but we are definitely moving in the right direction with the policy initiatives we have announced: strengthening the minimum wage; increasing support on child care; freezing energy bills; repealing the bedroom tax; providing support on business rates; and improving the quality of jobs.
Richard Fuller (Bedford) (Con)
The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) brings to this House a wealth of experience and understanding from her previous work in the area of health, and I hope that the House listened carefully, as I did, to her comments about the interaction between differences in health and the perpetuation of inequality in our country. However, I did disagree with some points in her critique, which I shall discuss later; most importantly, there was an absence of a full understanding of the context in which this Government are taking actions to address fairness and inequality.
I, like many people, get somewhat concerned and uneasy when I hear politicians bandying around words such as “fairness”, “equality” or “inequality”. History has taught people that when politicians profess themselves in favour of fairness, they too often end up enriching themselves and those politicians who would rally people to the banner of equality too often end up repressing those same people once power has been given to them. So it was with some trepidation that I came to this debate, but the prospect of being able to listen to perspectives on those issues from Members of this Parliament from different parts of the UK attracted me, and I have not been disappointed, either by the opening speech or by those of other hon. Members.
Judgments about what is fair or not fair, or about the balance between equality and inequality, are best left to individuals and families. People are perfectly capable of making those decisions based on what they have learned from their parents and grandparents, on what they have been taught in school or, perhaps, on the lessons they have learned in their church, synagogue, mosque or temple. Politicians fall rather low down the list of people who can be persuasive on those topics. Nevertheless, we shall battle forth.
Mr MacNeil
I do not disagree in any way, shape or form that people can make assessments about what is iniquitous or unfair, but the hon. Gentleman needs to go further down the road, because when people see inequity and unfairness they do not have the power to do anything about it. That is when this place and national Parliaments around the world have to regulate, reform things and so on to make sure we have the situation we had after world war two: a better settlement for the greatest breadth of citizenry.
Richard Fuller
I am grateful to the hon. Gentleman for that helpful intervention. Let us assess the ability of Government today to fulfil that positive role. One of the most important aspects of fairness is the future that we bequeath to our children and grandchildren. It is a natural aspect of human behaviour to want to give the best start in life to our children and grandchildren. One of the worst aspects of the context in which we are operating today, as a Government and as a Parliament, is that under the previous Government, we built up the most significant amount of debt to pass on to our children and grandchildren. One of the most important aspects of what the Opposition call the cost of living crisis—my constituents think of it as trying to meet the family budget—is the debt that was left by the previous Government for this Government to deal with.
The Opposition like to talk about the level of Government debt at that time, but a Chancellor of the Exchequer is custodian not just of part of the economy but of the entire economy, and, before he makes a decision, he has to look at the strength of the economy. It is an incontrovertible fact that the level of indebtedness of this country in 1995—Government debt, household debt and corporate debt—was about two times the size of the economy, and when the Labour party left office, it was five times the size of the economy. We do not need to have a credit card to know that we have to pay off all that debt, and not just part of it.
Jim Shannon (Strangford) (DUP)
I certainly understand the motion’s sentiments. When I looked through it, several things came to my attention—income inequality, the impact on low and middle income families, the number of workers on the minimum wage and zero-hours contracts, people in working poverty, the sharp rise in the number of people using food banks, and welfare cuts. I very much understand and would want to speak about all those points in the motion.
At the same time, I do not totally agree with my colleagues in Plaid Cymru and the Scottish National party about their wish to break up the Union. As a committed Unionist who sees the importance of the United Kingdom of Great Britain and Northern Ireland, I want the four regions of England, Wales, Scotland and Northern Ireland to be together as one nation—one nationhood together—under the Union flag. I cannot agree with them about that, but I honestly have real affection, as they know, for each and every one of them. I want to see them in this Chamber after the referendum in Scotland and the one, whenever it is—perhaps a decade or two away—in Wales.
Mr MacNeil
I want to make sure that the hon. Gentleman fully understands that the hand of friendship is there: whenever he wants to visit Scotland after independence, I will personally make sure that he is made very welcome.
Jim Shannon
I knew that there would always be a welcome for me in the hillsides. It is a real pleasure to know that the hon. Gentleman would do that.
Any hon. Member who works in their constituency will have come across the problems that people face, but I know that a lot is being done to combat those problems in many Departments, as should be noted. Perhaps full credit has not been given to the Government of the day for the economic turnaround that we have had. It is only fair to say that, and I want to put it on the record. I know that much blame passes from side to side in this Chamber about why we are where we are. My friends on the Government Benches point to the legacy left by the previous Government that is still being felt, and my friends on the Opposition Benches mention the austerity cuts and decisions that have been taken, but we in the middle are simply saying, “Let’s forget the blame, and focus on how we can make things better for our constituents and our country.”
I am conscious that the debate is about fairness and inequality, which of course relate to many spheres of life. It was only fair, because the best team won, when Ireland beat Scotland 28-6. As for inequality, we saw an example of it when Ireland, the better team, beat Wales 26-3, an indication of skill and experience. Fairness and inequality therefore go into many things, and that is just one of them.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Inequality is one of the great political scandals of our age, and it is important that we have had a chance to debate the subject at length today. I have been somewhat disappointed, however, at how few speeches there have been from Government Members. Nevertheless, what we have lacked in quantity we have made up for in quality, with a number of substantial and considered speeches from both sides.
Over the past three decades, the gap between the rich and the poor in our society and elsewhere has grown exponentially. The rewards of economic growth have become increasingly concentrated in the hands of a small minority, while those in the lower half of the income spectrum are being increasingly deprived of the just rewards for their efforts. We on these Benches have made the case that inequality, on the scale that we see in the UK and internationally, is bad for all of us. It is in no one’s interest to have a society that is so divided by extremes of income and so damaged by social deprivation, but it is especially bad for those people who find themselves trapped on low incomes and who have seen their spending power and social mobility reduced dramatically over the past 25 years.
We have had a wide-ranging debate today. It has tackled issues as diverse as land ownership, fuel poverty, health inequalities, taxation and social policy, as well as a range of other disparate policy issues that would normally be debated separately. All those topics have been underpinned by the issue of economic inequality and the income gap that has grown so wide over recent decades. We have argued that inequality is not inevitable, and that it is a political choice. The Government have at their disposal the fiscal levers to enable progressive and more redistributive measures, but in recent times we have seen tax and benefit policies that have allowed the gulf between the haves and the have-nots to widen. A number of hon. Members have pointed out that the impact of the tax and benefit changes has fallen disproportionately on those in the lower half of the income distribution, particularly those in the lowest quintile, who have paid the highest price for economic austerity.
Mr MacNeil
It is important to bear in mind that redistribution applies not only after tax but before tax. In regard to productivity gains, we need to ensure that people get a fair day’s pay for a fair day’s work.
Dr Whiteford
My hon. Friend makes a useful point.
It is also important to note that those fiscal levers are not the only tools at the Government’s disposal for tackling inequality. Addressing the underlying drivers of wage inequality requires sustained effort and a fresh mindset about the policy choices that we can make to further a more equitable model of economic growth and to build a fairer, more inclusive and less divided society.
My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) outlined some of the positive ways in which equitable growth could be pursued in Wales. He opened the debate by drawing our attention to the geographical distribution of inequality across the UK, and argued convincingly that while much of Government policy was oriented towards the needs of London and its surrounds, the consequences of that for the other nations and regions of the UK could be dire. Many of us have paid a heavy price for London’s prosperity.
It is notable that, with a few honourable exceptions, the speakers in today’s debate have come from Wales, Scotland and Northern Ireland. Perhaps that shows how seriously the issue of inequality—which is distinct from, but related to, poverty—is taken in these islands. It is obviously a pertinent issue in the context of Scotland’s referendum later this year, as we weigh up the two futures that are opening up before us and consider not only the benefits of making policy decisions based on our own values and aspirations but the uncertain consequences of continuing along the path that the UK seems determined to follow, with wealth and opportunity being increasingly concentrated among a small elite.
Consumer Rights Bill
Angus Brendan MacNeil Excerpts(10 years, 10 months ago)
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Stella Creasy
I want to come on to precisely my hon. Friend’s question about trading standards, and about how to have stronger powers for consumers at local level, which is one issue that the Bill does not seem to understand or to address.
I am honoured that the Secretary of State made time this morning to read my article for PoliticsHome. I, too, took the time to read his speech last night, and I very much enjoyed his attempt to use Jedi mind tricks on the Government. In particular, he paraphrased one of my personal heroes, Obi-Wan Kenobi, in his attempt to claim that “This is not the recovery you are looking for”, which is recognition that consumers are bearing the burden of this Government’s economic policy as a result of their lopsided attempt to balance the budget. I am therefore glad that the Secretary of State has acknowledged that growth is being driven only by consumer spending, because many of us are concerned about the impact of that.
Although the Secretary of State celebrates the idea that consumers have dipped into savings that they hold for a rainy day, I have to tell him that he is mistaken to presume that they have done so only for long-term investments. His own Money Advice Service shows that a third of British people have no money put aside for rainy days, due to the everyday costs of living, and that those who have such savings have been forced to dip into them to cover those costs, with three quarters of the people surveyed having been hit by a bill that threw them off-budget in the course of the past year. Indeed, a third of people in our country who now have no savings at all have said that not having a high enough income is the problem causing them not to save. We agree that we should be extremely worried about an economy in which, every day, people get further and further into personal debt. We are also worried that when the Government are presented with an opportunity to do something about that, they stand aside. They talk strongly about national debt, but say nothing about personal debt.
I know that the Secretary of State will want to blame the Treasury for the National Audit Office’s damning indictment that Government failure to assess the impact on consumers of investment in infrastructure might lead to consumers facing financial hardship and unplanned taxpayer support being required. That damning report shows that Whitehall Departments are forgetting the needs of consumers, and therefore the cumulative impact of household bills. I know that some in the Government want to cast the Public Accounts Committee as the dark side, but I fear that consumers will feel the Sith inhabit the Treasury, not Committee Room 16. Why does the Secretary of State therefore not use the Bill to address that gap and to help such hard-pressed households, as well as to show that he gets the need to tackle the rip-off charges and broken markets in goods and services that they face?
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Does the hon. Lady agree that companies selling products often overlook the rights of consumers on islands and in some rural areas, saying that they will not deliver to them, and often overlook the best distribution network, which is the Royal Mail? Does she agree that the Bill should ensure that consumers who do not live on the mainland are given equal access to the market?
Stella Creasy
The hon. Gentleman makes some strong points about exactly the kind of contracts that consumers get into and the kind of service standards they should expect. That the Bill will simply consolidate existing rights, rather than address some of the challenges, shows that it could go much further on such issues.
It would not take much to make a real difference to households across this country. The Money Advice Service research shows that if consumers saved just £3 a day, it would be enough to cover their average unexpected bills in a year. That may not sound like much, but for millions of British consumers who have already used up their savings or are getting into debt in dealing with the cost of living crisis created by this Government, it is a stretch. For millions of people, reducing their outgoings would also make a real difference to their financial precariousness. The Centre for Social Justice has estimated that about 4 million British families do not have enough savings to cover their rent or mortgage for more than a month, and that more than 5,000 households became homeless in the past year alone because of arrears.
I hope that the Secretary of State will at least do better than his Cabinet colleague, the Prime Minister, who denies that living standards are falling as the public pay for the cost of this Government’s policies. The Prime Minister claims that it is a matter for statisticians to argue, but I hope that the Secretary of State agrees that it is a matter on which politicians should help out. It is not our role to make decisions for consumers, but it is our role to help to make decision making easier.
We could also help with the cost of living crisis, because it is about not just job creation, but every extortionate charge to which the Government turn a blind eye or every broken market they ignore, and that all adds to the struggles that people face. Every unfair service contract term and every bad decision that consumers are duped into making is more money down the drain.
Stella Creasy
Thank you, Madam Deputy Speaker. I would be delighted to take an intervention from the hon. Lady at any point if she would care to make one. I am sure that whatever she is chuntering from a sedentary position is absolutely fascinating.
It is not only in the energy market that we see such problems. My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and the hon. Member for South Derbyshire (Heather Wheeler) have highlighted similar problems for consumers in the pensions market. The current restrictions on the operations of the National Employment Savings Trust mean that it is impossible for it to compete with other providers, to the detriment of consumers. It is a market where hidden charges and fees create problems for people. There are penalty charges for people who want to change jobs and exit charges for savers who switch schemes. Which? found cases of consumers having up to 50% of their savings being absorbed by such charges and costs.
If the Secretary of State does not believe me on the energy and pensions markets, let us look at my passion, the payday lending market, in which a lack of competition is clearly causing problems for consumers. Not every consumer in that market gets into financial difficulty, but enough of them do because the way in which it operates causes huge detriment to the consumer and huge problems for our economy. The National Audit Office estimates that unscrupulous behaviour by firms in that market costs consumers at least £450 million a year. The lack of competition to provide services to the customers of those companies, as well as a barrier to accessing alternative services being created by borrowing from them in the first place, enables the exploitation of their customers.
If the Secretary of State is not interested in the impact of high-cost credit, perhaps he will look at the banking market. My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) and the hon. Member for South Northamptonshire (Andrea Leadsom) have again highlighted the raw deal that consumers get. The pricing power of big banks means that they dominate the market in key products such as mortgages. Banks are able to retain their dominance by making it hard for customers to move their custom. Some 1.3 million people have switched their current account in the past year, which is a churn rate of just 2% to 3%. Studies show that a truly competitive industry would have a switching rate nearer to 10%. It is not only in the dominance in the current account market that we see problems. When banks are able to set their own terms, they can set requirements such as those for buy-to-let mortgages that force borrowers to offer only short-term tenancies, which are causing problems in the housing market.
Given the Secretary of State’s speech last night and his commitment to competition, I would have thought that a healthy dose of competition across the sectors I have mentioned for the benefit of consumers is what the doctor would have ordered. However, we do not see that in the Bill.
The second question that I want to pose for the Bill is about the importance of information flows, which is linked to free markets. What are the Government doing in the Bill to address the information gaps and asymmetries that enable consumer detriment? We know that data are vital to ensuring that consumers may compare goods and services in order to make their own choices. We know that a lack of information helps providers to hide behind confusion and a lack of transparency. The Government’s own research shows that if consumers knew more about products, they would be able to gain £150 million to £240 million a year. However, only 13% of those who use price comparison sites get the lowest priced deal. The Government admit that one reason for that is that people do not have accurate information about their past usage and therefore find it difficult to predict future usage.
We are at the bottom of the European league for consumers being able to switch and shop around to get the deals that they want. The contrast with countries such as Australia is clear. Mass movement switching campaigns have led to one in four Australian citizens being part of schemes that get them better deals not just on energy, but on health insurance and financial services.
Consumers have legal rights to request access to personal data, but half the respondents to Which? were not even aware of that right and very few people have exercised it. I am sure that the Secretary of State will point to the midata project, which is a voluntary scheme to give consumers access to their energy, mobile and financial services data. However, that scheme has struggled to have any impact for a simple and obvious reason: companies have little incentive to release commercial data that could convince a customer to go elsewhere. We welcome the fact that the Government took an order-making power through the Enterprise and Regulatory Reform Act 2013 to compel certain businesses to release such data, but that affects only four core sectors and has not yet been applied. It could be applied more widely if secondary legislation were used. That is another missed opportunity in the Bill. Let us revise the Bill to unlock the capacity of information to improve outcomes for all consumers and citizens.
That capacity would help in many sectors. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) has run a tireless campaign, for example, on the lack of clarity in supermarket pricing. We have seen how some deals and special offers mislead shoppers when clear information is not provided. There are products that are more expensive than the original price when they are in a multi-buy offer; products that have been at a sale price for longer than the original price; and products whose prices are increased immediately before they go on offer, to make the discount appear more significant.
Supermarkets, like many other industries, hold a wealth of data about us as consumers that they use to design their pricing strategies. Making those data easily available—in principle, they are already public data—could transform consumers’ power to shop around and to know a good “buy one, get one free” deal from a dud one, unlike some coalition voters, I suspect.
Or the Secretary of State could learn from my hon. Friend the Member for Sefton Central (Bill Esterson) and the hon. Member for Edinburgh West (Mike Crockart) and use the Bill to help consumers protect their data and to deal with nuisance calls, which I know many Members are frustrated by. I know that the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Cardiff Central (Jenny Willott), who is in her place, has campaigned on that issue. We know that 71% of landline customers say that they have received a live marketing call and 63% a recorded marketing message. The Information Commissioner receives 2,500 complaints a month from people sent unsolicited text messages, usually for debt or payment protection insurance claims. With 75% of landlines being registered with the Telephone Preference Service, the number of complaints shows that something is going seriously wrong. Again, the Bill will do nothing to help consumers protect their own data, which will be to their detriment.
We know that it is not enough just to have data, because they are not a disinfectant if the curtains are closed to the sunlight. Helping people make the right decisions the first time is key to outcomes, yet many people, especially those with complex needs or a lack of confidence, struggle to get the information and advice that they require to make effective decisions. In turn, that generates cost to the public purse, including the costs of putting it right. I know that the hon. Member for Mid Norfolk (George Freeman), who is in his place, feels strongly about that subject.
We know that when good advice is provided, services are improved. Indeed, one study in Nottingham showed that 40% of the cases dealt with by a local advice service referred to poor decision making in the public sector—what was called “preventable failure in the system”. A project that piloted advice services working with the council showed that 60% of those issues were preventable. When we see such studies and the impact of good advice and good access to data, the question is why the Government are not truly empowering consumers and citizens to bring them the benefits of the right changes. Why does the Bill not offer any action on that?
Where the Bill does offer input is on contract terms. It sets minimum standards that supplied goods must meet, sets out that they should be fit for purpose and satisfactory, and provides a legal right to reject faulty goods within 30 days of receiving them. Again, however, consumers will ask whether that will deal with the real problems with terms and conditions that they face time and time again. That must be our third challenge for the Bill.
A lack of clarity about prices causes many of us to purchase products that are not suitable. It is about the most basic of consumer needs—to know the cost of the product that we are purchasing and what our money will buy us. Prominent pricing is not the same as transparent pricing. Hidden charges are a problem for too many in our society. One study found that buying insurance through a broker could push up premiums by £500 a year, and that the gulf was caused largely by the added expense of the broker’s fees.
Many consumers experience the frustration of signing up for services or goods and then finding that the terms and conditions are varied because the prices are not clear. A constituent wrote to me this week about a website called Tax Return Gateway, a copycat of a Government website that looks suspiciously like the real deal. My constituent was charged £500 for filling in her tax return, and only after she had paid it was she told that that was the fee for the service, not the tax return itself. Such sites exist for a whole range of public services, including passport applications, visa programmes and driving licences. It seems a simple principle that people should be told the price before they purchase something, but again, the Bill will do nothing to provide for that.
Mr MacNeil
The hon. Lady raises an important point. There are scam versions of Driver and Vehicle Licensing Agency sites, and many people do not understand what they are purchasing, far less the costs of it. They do not realise that they are only getting a form to apply for a road tax disc or whatever.
Stella Creasy
The hon. Gentleman is absolutely right, and if the Bill met the test of providing the best consumer rights framework that this country can have, such scams would be addressed. Again, we find the Bill wanting on that point, and we will look to address such challenges in Committee.
Stella Creasy
The Minister raises an interesting question about why, if the Bill will simply consolidate powers that she says are already effective, she does not use the opportunity to go further and deal with matters that she considers to be outside the legislation. She cannot have the argument both ways—either we need new consumer rights in this country, or we do not and she is wasting everybody’s time. Labour Members think there is a case for a new, stronger consumer rights legislative framework, which we are trying to set out, and part of that is about redress. I am delighted to hear that the Minister’s constituents have got redress for their mobile phone coverage, but I hope she will also consider how we can use the Bill for things such as nuisance calls, which she mentioned. This is about how we tackle such problems once and for all.
Mr MacNeil
There is a second problem with mobile phones as well as when a mast breaks down. There is also a lack of sharing and networks across the UK are incomplete. A customer of a certain network can travel to certain places and find no coverage at all. Mobile phone companies could share masts, but the renting and price structure around them militates against that and makes it an expensive thing to do. If something in some Bill somewhere were to tackle that, consumers who use mobile phones would have far better services in the UK than they do at present.
Stella Creasy
I thank the hon. Gentleman for his contribution, and I will come on to whether the voice of the consumer is strong enough with the regulators. That is the sort of issue a regulator could consider, because not all people access services in the same way.
With that in mind—I am conscious of time—I will press on to the final question that we will set for the Bill in Committee, which concerns whether it has a clear enough framework for when things go wrong. We know that absence of enforcement gives an advantage to firms that break the rules, whether in a local community or nationally. Consumers are getting a poor deal and providers are getting away with it because there is little accountability or likelihood of prosecution. Giving consumers a stronger voice in the regulation of goods and services would enable consideration of the consequences of the different way that services are managed among different groups in society.
Again, the Bill could have led on that and tackled the problem. The concept of an ombudsman is clear in principle, but confused in practice. There are at least 17 different ombudsman services including the Financial Ombudsman Service, the local government ombudsman, the housing ombudsman, the pensions ombudsman and the legal ombudsman, as well as the parliamentary ombudsman and the health service ombudsman. In addition, there are also 14 recognised complaints handling services, including the Advertising Standards Authority, the commissioner for young people, the Information Commissioner and the schools adjudicator. However, not all ombudsmen and adjudicators are the same. Some exist through European and UK statute, such as the housing ombudsman, but others have been set up by the industries as voluntary bodies.
Let me return to the point raised by my hon. Friend the Member for Bridgend (Mrs Moon), who has sadly left the Chamber, about the furniture industry where we see such problems at first hand. The furniture ombudsman was set up as part of the Furniture Industry Research Association and is the only profit-making ombudsman service in this country. Some sectors have one ombudsman, but others have many. Businesses can pick and choose which they sign up to, further complicating matters for consumers. The lack of clarity about what an ombudsman could do and what powers it has is a problem for all consumers, and I say to the Secretary of State that tweeting about the issue or using social media is not the way to address it. My hon. Friend the Member for Makerfield (Yvonne Fovargue) has been diligent in raising the case of Farepak consumers, which seems exactly the point at which a stronger and clearer ombudsman system would come into play.
George Freeman (Mid Norfolk) (Con)
Unlike the hon. Member for Barrow and Furness (John Woodcock), I believe this is an important subject, although I agree with his point. It is a pleasure to follow the Secretary of State and the hon. Member for Walthamstow (Stella Creasy), or should I call her the hon. Member for Alderaan, or my hon. Friend the Princess Leia, champion of consumer rights?
George Freeman
Perhaps the hon. Lady could explain that to the hon. Gentleman. I pay tribute to her commitment to the subject. We heard all too little of such commitment during the 13 years of the Labour Government. Her commitment is all the more welcome for that.
I strongly welcome the Bill. It is deregulatory, pro-consumer and pro-business. After saying something about some of the measures in it, I will turn to one or two points it is appropriate to think about on Second Reading, such as the changing pace of technology and how it is changing the landscape, and the way in which the debt crisis and the model of broken public finances we inherited from the previous Government demand that we embrace a more radical model of consumer empowerment and citizenship to drive the recovery all hon. Members want.
The truth is that consumer law is currently not clear enough. It is often out of date, and it is confusing and incomplete. The Bill sets out a simple modern framework of consumer rights. Twelve pieces of legislation currently govern them, and I welcome the fact that there will now be only one.
Banking
Angus Brendan MacNeil Excerpts(10 years, 10 months ago)
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Chris Leslie
I am not quite sure what planet the hon. Gentleman is living on, but we have been consistently tabling amendments to financial services legislation to encourage more competition and to have an inquiry into retail banking competition. At every stage, the Government have refused to go down that route.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Gentleman is probably aware that the respected Nobel prize winner Professor Joseph Stiglitz said in his book, “The Price of Inequality” that one of the ways forward is to
“curb the bonuses that encourage excessive risk-taking and short-sighted behaviour.”
The hon. Gentleman will see that we are back on that trajectory. We are heading for another crash and another period of excess in banking, as the monopolists’ rent-seeking behaviour continues in the City.
Chris Leslie
The hon. Gentleman makes a fair point. This morning the Chancellor gave his rationale for disagreeing with the European banker bonus cap. It is a shame that he did not take a lead in trying to construct something of his own to rein in this culture. After all, we would have had a repeat of the banker bonus tax. The Chancellor’s argument is, “Oh well, this is just going to move it all on to pay and on to ordinary salaries.” Surely one of the lessons of the banking crisis is that the excessive, short-termist risk and reward bonus culture was driving dysfunctional behaviour that got us into the mess in the first place. Frankly, I am sure those bankers will try to find all sorts of little dodges and weaves to get around the rules, but we have to make the system more transparent and we need to move towards a remuneration arrangement that is much more about sustainability, stability, professionalism and serving the customers. It would be foolish for the Government to try to sue Brussels on this point and hold out against public opinion, which has had enough of this excessive behaviour.
Sajid Javid
I will come to that later in my speech when I will deal with some of the issues that the hon. Gentleman raised.
Bringing back confidence to the economy will of course mean dealing with the banking sector to make it more stable, more resilient and more efficient. That is exactly what this Government have been doing for the last three years.
Mr MacNeil
Does the Minister agree that, as with the debate on the bedroom tax before Christmas, this debate is really one about the symptoms of inequality in our society. Since the 1970s, we have seen 80% of the gains in productivity going to the top 1%—an inequality level roughly equivalent to that of the 1920s. Governments all over Europe and in the United States are not getting to grips with inequality and the hampering of life chances that it is causing. What does the Minister think should happen? The bankers should not receive the bonuses they are getting and people should not have their life chances halted by the bedroom tax. Are this Government going to do anything serious on this issue?
Mr Speaker
I assume that the hon. Gentleman will not seek to make a speech in the debate, on the grounds that he has already done so.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
As many hon. Members have said, this has been an interesting debate. Surprisingly, some Members thought there had been a conspiracy to have this debate clash with the Treasury Select Committee, but that was perhaps a conspiracy theory too far, to coin a phrase.
It being the new year and the Financial Services (Banking Reform) Act having been passed, I had hoped we might be able to move on. I thought we might have been in a position to debate where to go next, but unfortunately, despite it being the new year, we did not hear anything new from the Minister, just the same tired old Tory lines, which was disappointing. The Minister boasts of his experience in the banking sector, so I had hoped he might have been able to throw some light on the debate, rather than simply trying to bolster his reputation as the Tories’ attack dog, which seems to be his role at the moment. Also, he seems to have a new middle name, because his response to every second question was, “I will come to that shortly”, but I am not sure he ever did. However, I am sure that we will hear more answers from him in due course.
We have heard some excellent contributions this afternoon from my hon. Friends the Members for Denton and Reddish (Andrew Gwynne), for Linlithgow and East Falkirk (Michael Connarty), for Wrexham (Ian Lucas) and for Sefton Central (Bill Esterson), my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and my hon. Friends the Members for Wirral South (Alison McGovern) and for Edinburgh East (Sheila Gilmore). We also heard interesting contributions from the hon. Member for East Antrim (Sammy Wilson), who highlighted several issues about bonuses, and from the hon. Member for Northampton South (Mr Binley), who did not quite stick to the Government line all the way through when he raised issues to do with funding for lending.
We had hoped to raise the tone and tenor of the debate and move on from the banking reform Bill. I think we would all agree that we need our banks to work for the whole economy—for individuals, small businesses and the large business sector—if we are to earn our way out of the cost of living crisis. As I highlighted when we were debating the banking reform Bill, the danger is assuming that the job is done and that no further reform is necessary. Now that that Bill has been passed, our concern, which was reflected by many of my hon. Friends, is that the banks will simply slide back into previous practices or wish to go back to business as usual. [Interruption.] I see some Government Members agreeing with this. That is why we have concerns about bonuses.
As many hon. Members have said today, there is a question mark over how it can be justifiable, in a time of austerity, when everyone else is being asked to do their bit, for bankers to seek excessive bonuses of over 100% of their annual salaries. I know the Minister said that nothing has been put forward by RBS yet and that he would consider it when the time came—I suppose that will be “shortly”. Members of the public watching the debate and the media, hearing the news and looking at the newspapers want to see a signal that the Government believe, as the Opposition believe, that taking forward these excessive bonuses is not the correct approach.
Mr MacNeil
What does the hon. Lady think could be done with the money currently put in the bonus pot? What else could the banks do with that money if their bonuses were curbed? How else could they spend it; what could they do with it?
Cathy Jamieson
The hon. Gentleman will know that Labour’s policy, which I am sure he will support, is to use the bankers bonus tax to fund a youth jobs guarantee. That would benefit Scotland, too, which I am sure he would approve of.
Our motion highlights the fact that we have not yet done enough to boost competition in the banking industry—by encouraging the challenger banks, for example. We have not looked at expanding the mutual sector either. Some hon. Members provided examples of new banks coming forward, but we should acknowledge that that has not yet challenged the main banking sector in the way that we would like.
We should recognise that public trust in the sector is still at a low level. I remain concerned that, during the course of the banking Bill, the Government rejected both the fully independent licensing system for bankers and the idea, raised again in today’s debate, of imposing a duty of care to customers and all those working in the banking sector—a fiduciary duty. Opposition Members have consistently argued that those two policies would help to reform banking to make it work in the interests of customers and the economy rather than of the bankers themselves. Despite the changes in the banking Bill, the original Vickers recommendations have been rather watered down, particularly in respect of competition.
A number of hon. Members discussed and provided examples of lower bank lending to business, with it falling far short of what we need to boost jobs and growth so that our economy can recover. It was mentioned that the Bank of England has reported a record £4.7 billion contraction in lending to business—the biggest drop in more than two years and nearly five times the recent average monthly decline of £1 billion. That follows the decreases in lending in the UK by 3% each year since the start of the financial crisis amidst the failure of the other schemes that the Government introduced such as Project Merlin and its business bank, which has not had the intended impact.
Little wonder, then, that the Government belatedly heeded Labour’s call to refocus on the funding for lending scheme—a point made by the hon. Member for Northampton South—and introduced change in an attempt to improve the supply of credit both to big business and to SMEs. Time after time, however, we have heard that small businesses in every constituency have been unable to access credit because of the lack of availability of loans and that the terms on which credit was offered often made it more difficult for them to take it. Many report that they simply do not ask for credit, believing either that they will not get it or that the terms will be prohibitive.
It was interesting to see a recent research report from the peer-to-business lending platform, rebuildingsociety.com, showing that SMEs have stated that more than 21% of SMEs continue to suffer those restrictions. That is why 1 million SMEs have seen the lending terms from their bank worsen over the past five years. It is all very well to say that the money is there, but the businesses are not applying for it and are not going to the banks to ask for it. The reality is that nearly half of those who responded in that particular survey have had their interest rate and their overdraft increase, while a third have had their lending facilities cut. More than one in 10 SMEs did not even approach their banks for a loan, because they believed that they would be unsuccessful.
We fear that things are sliding back to “business as usual”. We are concerned about the whole question of bankers’ bonuses and bankers’ pay. I know that during Prime Minister’s Question Time today the Prime Minister suggested that he did not want the overall cost to increase, but that failed to take account of the public’s concern about the fact that individuals in the banking sector who are already highly paid are able to receive bonuses amounting to twice their annual salaries.
Figures from the European Banking Authority, published at the end of 2013, reveal that the financial rewards handed to the City’s highest-paid bankers rose by a third last year, and that more than 2,000 bankers in the United Kingdom earned more than £1 million. That means that the UK contains 12 times as many high earners as any other country. Top bankers picked up bonuses averaging 3.7 times their basic salaries, a figure that has risen since 2011. The public want to know who is on their side rather than on the side of the bankers, so that they can be sure that that does not continue, which is why we initiated today’s debate.
My hon. Friend the Member for Nottingham East (Chris Leslie) pointed out that Labour had led calls for the Competition and Markets Authority to be forced to begin, immediately, a full market study of competition in the retail and SME banking sectors, and I hope that the Government will take that on board.
The public want to see a signal that the days of excessive bonuses are over, and they want to see it now. We do not believe that the present position is acceptable, but nothing that the Government have said today has sent that signal to the public. Perhaps the Exchequer Secretary is about to send it now.
Mr Gauke
No, I shall make some progress.
We did not hear anything about the bankers’ bonus tax from Labour today—at least we do not see much about it in its motion—although it is customary on these occasions for Labour to identify yet another spending programme to be funded by it. [Interruption.] I wonder whether there was no mention of it today because the Opposition are embarrassed by previous occasions when they have claimed that more would be paid—[Interruption.]
National Minimum Wage
Angus Brendan MacNeil Excerpts(10 years, 10 months ago)
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Vince Cable
I have given way a number of times, and I should now like to finish what I have to say.
Along with the element of its remit that relates to the impact on employment, one of the key concepts in the work of the Low Pay Commission is what it calls the “bite”. That terrible bit of jargon refers to the relationship between the minimum wage and the median. It may be technical, but it is very important, because the closer the minimum wage gets to the median, the more likely it is that a big increase will displace employment. When the minimum wage was first introduced in 1999, it was about 46% of the median; now it is 53%, and there have been successive increases.
Vince Cable
It did fall slightly last year—just slightly. However, the minimum wage is now significantly above that level.
That is a major issue for young workers and for apprenticeships. For young workers, particularly those aged 16 and 17, the so-called bite is close to 80%, which means that any significant increase in the minimum wage would have the unfortunate effect of displacing most of them from the labour force. That is a factor that has weighed very heavily with the Low Pay Commission when it has made its recommendations.
Vince Cable
I have already said in the House on several occasions that the Government are now engaged in a public conversation about how we deal with zero-hours contract abuses. I think the hon. Gentleman has to be careful as the research that has been carried out suggests that very large numbers of people on zero-hours contracts like that model, but we must deal with the abuses, of course.
Vince Cable
It would be remiss of me not to take at least one intervention from the Scottish nationalists, so I will do so.
Mr MacNeil
May I put in the right hon. Gentleman’s mind the words of Paul Krugman earlier this week? He spoke about unemployment insurance and how when money is in the hands of the poorest in society, that creates demand, which in turn creates jobs. The corollary of that is that the higher the minimum wage, the more money is put in people’s pockets and the more it circulates, and we return to a system, as in the 1950s, when inequality is reduced, rather than the situation now, when inequality is equivalent to what it was in the 1920s.
Vince Cable
Of course an increase in wages among other things increases demand, and that is one factor that has to be taken into account. That leads me on to the next point I want to make, which is how this year I have approached the issue of the mandate of the Low Pay Commission. Opposition Members have been questioning that and saying, “Why don’t you change the way we look at it?” I have done that, while respecting its independence. I have said the Government want a faster increase in the minimum wage, reflecting the fact we now have a real recovery, and in order to achieve that the LPC should look at a wider range of factors governing low pay. They include the fact that at the national economy level, the Governor of the Bank of England has now said that if unemployment falls to 7%, he would want there to be some tightening of monetary policy, as the environment will have changed. We would want to see what impact that will have on the cost of employment, which has been cushioned by the Chancellor’s decision to bring in the employment allowance—£2,000 for the first employee—as it significantly changes the cost of employment. We also need to look at the impact it would have on the Government, because there is an interaction with tax credits, tax yields and corporate taxation. There is the impact on take-home pay, too, and therefore we have to factor in our tax policy.
I have therefore asked the LPC to look at this problem in a much more holistic way. I do not know what it will conclude, and I will be respectful of its independent advice, but that is the way we are approaching this and we do now recognise that in a recovering economy low-paid workers should derive benefits, and that is how we are approaching this matter.
Chris Ruane
No, I will not.
More than 7,000 people have visited me in Parliament since I was elected in 1997. Many have been schoolchildren and sixth formers. I always allocate a good period of time for questions and one of the most common questions is, “What are you most proud of from your 16 years as an MP?” I am most proud of this piece of legislation, which Labour introduced in 1998. It is totemic. It was an indicator at that historical time of what Labour was about and what the Tories were about. We were for the many and they were for the few. I welcome the massive U-turn that the Conservatives have made on that, but it is too little too late.
Chris Ruane
I am afraid that I must make progress, as I am now using up my own time. I thank my hon. Friends the Members for Blaydon (Mr Anderson) and for North Ayrshire and Arran (Katy Clark) for their interventions as they gave me an extra two minutes, which I am eating into now.
The policy was resisted tooth and nail by the Tories. The House sat for two days in the Chamber and there were 70 hours of debate in Committee between 22 January and 17 February 1998. The Tories made the direst predictions about the introduction of the national minimum wage, predicting that 2 million jobs would be lost and every single person who received an increase would be sacked. That was absolute nonsense; an extra 2 million jobs were created.
The then Secretary of State for Wales, the right hon. Member for Richmond (Yorks) (Mr Hague), said:
“He is right: the adoption of a minimum wage and the social chapter would gravely inhibit employment opportunities in Wales. There is no question about that.”—[Official Report, 27 February 1997; Vol. 291, c. 461.]
What about when the Conservatives were closing down the steel mills and the coal mines in south Wales? Did that gravely inhibit employment opportunities in Wales? He said:
“Adoption of the social chapter and a minimum wage would price tens of thousands out of their jobs along with hundreds of thousands throughout the rest of the United Kingdom.”—[Official Report, 17 March 1997; Vol. 292, c. 609.]
He was on the mild side in referring to hundreds of thousands; the Conservative party nationally was predicting 2 million job losses. The Conservatives fought tooth and nail against the legislation, but it was passed. That is the proudest moment of my time here in the House.
In my constituency, we saw no job losses. We saw the number of people in employment go from 23,000 to 30,000. The St Asaph business park, which was built by the Conservatives in my constituency at the cost of £11 million, was empty for seven years. When Labour came to power, it was filled, and there are now more than 2,000 jobs on the park.
The national minimum wage legislation is fantastic, but we should not rest on our laurels. We need to move upwards and onwards to the next frontier, which, as has been mentioned by hon. Members, including shadow Ministers, is zero-hours contracts and a living wage. We need to push for better conditions and better payments for workers. That is in the best interests of those workers, their families and the economy.
Gordon Birtwistle
The very profitable companies, such as the big engineering companies and the major multinationals, invariably pay well over the minimum wage. Many minimum wage payments occur, for example, in the care industry and those industries where low pay is accepted. I agree that if a company is profitable and doing well, it should recognise that its employees are creating not only wealth for the chief executive but wealth and security for themselves and for the country. I agree that companies should recognise what employees do, and the vast majority that do so pay a lot more than the national minimum wage.
Mr MacNeil
The hon. Gentleman is actually referring to the productivity gains that have been made. Studies in the United States of America show that the productivity gains have gone to the top 1%. The federal wage in the United States is about $7.25. Had that kept pace with the minimum wage in the 1960s and had the productivity gains been distributed at that level, the federal wage would have been treble the present rate. It is a fair bet that the same would be happening in other western countries, this one included.
Mr Bain
I am grateful to the hon. Gentleman for his intervention, but that would simply mean that the maximum fine was only 40% of the maximum fine for fly-tipping in this country. Is he genuinely saying that there should not be an equivalence between the maximum fine for fly-tipping and the maximum fine for failing to pay the national minimum wage? I urge him to think again.
Mr MacNeil
Does the hon. Gentleman agree that minimum wages must have some link with productivity? Productivity is like a cake, with workers and CEOs each getting a slice, and that is what is making the difference to equality in this country.
Mr Bain
Unusually, I find myself in agreement with the hon. Gentleman; I will try not to make this a bad habit. He is right that industrial policy has a big part to play.
We need to be creating better-skilled jobs to replace those lost over the course of 30 years. We also need a transformation in skills in the workplace, because evidence from this country and from the OECD shows that an uplift in skills gives people the ability to progress in a job, to get new jobs, and to see a lasting increase in their wage levels across their career. That is what we need to be doing across our country in our industrial policy.
The scale of the crisis is being felt in every part of the United Kingdom. A written answer that I received from the Cabinet Office last Thursday, at column 250W of Hansard, shows that according to the most recent survey of wages and hours worked, conducted last April, over 16% of my constituents were paid less than the hourly rate for the living wage. Startlingly, in Chingford and Woodford Green, the constituency of the Work and Pensions Secretary, work is not paying under this Government, because 43% of workers are earning less than the living wage, including two in every three male part-time workers. That shows the scale of what is happening even in the constituencies of members of the Cabinet such as the Work and Pensions Secretary.
The case is clear: there has to be an increase in the minimum wage. We can work towards the living wage through Make Work Pay contracts, but the Government should be fulfilling their responsibilities in saying to the Low Pay Commission that low-wage Britain needs a pay rise, and needs it now.
Mr MacNeil
Is not this debate about the division of the spoils of productivity? We are looking for a division that is more like that of the 1950s, when those at the bottom were given a larger percentage than they get at the moment and those at the top got a smaller percentage. We now have a share-out of the spoils that is creating a level of inequality between sectors of society that we have not seen since the 1920s.
Alec Shelbrooke
I am grateful to the hon. Gentleman for giving me that extra minute. I will come to my own history lesson in a moment. He will of course welcome the fact that under this Government the gap between the poorest and the richest in society is the smallest it has been for 30 years, having grown under the previous Labour Government.
Let us talk about the problems of falsely increasing wages and go back to the 1970s. In 1975, my parents, who were young teachers, were given a 25% pay rise under Harold Wilson and were delighted with it. Twelve months later they suffered a 3% pay cut, because inflation had gone up to 28%. We also remember the then Labour Chancellor, Denis Healey, demanding wage restraint at the Labour party conference, only to be booed by the floor. Having listened to this afternoon’s speeches, I am sure that some Members present would boo him now, too.
Wage inflation creates a real problem for people on fixed incomes who have worked hard their entire lives and paid into private pension funds, only to then see them eroded by inflation running out of control. For example, in 1965 my great uncle retired at the age of 65 on what was then a very reasonable pension of £15 a week. By the mid-1970s it was absolutely worthless.
If we go ahead with wage inflation in the way suggested by the Labour party without linking it to cutting taxes for business and making sure that it is sustainable, we will end up, as Neil Kinnock said, with a Labour council running around the city in taxis, giving out redundancy notices.
Chris Williamson (Derby North) (Lab)
Last Wednesday was fat cat Wednesday—the day by which top executives in FTSE 100 companies had, two days after returning to work from the Christmas holidays, earned more money than the average worker, let alone someone on the minimum wage, will earn in the entire year.
Like my hon. Friend the Member for Vale of Clwyd (Chris Ruane), I undertook a job centre survey in 1996—in Derby—and I was absolutely shocked by the number of jobs on offer at £1 an hour or less. It had a hugely civilising effect on our country when the Labour Government, who were elected in 1997, introduced the national minimum wage and took millions of people up the income scale as a consequence.
We know that the national minimum wage was opposed by the Conservatives in this place and elsewhere in the country, and that the Liberal Democrats could not really make up their mind: some were in favour and some against. True to form, since returning to power, they have frozen the amount of resources available for its enforcement. That is utterly disgraceful, because the consequence of the freeze is to make it that much more difficult to bring to book exploitative employers who pay below the minimum wage.
I have to say that the Secretary of State for Business, Innovation and Skills was all over the place when he addressed the House. He said that the political process should not interfere with the Low Pay Commission, but he went on to say that he had interfered on some occasions, and let us remember that it was a political decision to bring in the national minimum wage in the first place. Given the Government’s parsimony in relation to ensuring that the necessary resources are available to the enforcement body, I want the Secretary of State to make a political intervention by conferring a formal third-party role on the trade union movement. Trade unions could help to monitor and enforce the minimum wage by ensuring, when they complain about non-compliance, that such complaints are investigated by HMRC as a matter of course, which would make a big impact.
Chris Williamson
I will not take any interventions, if the hon. Gentleman does not mind, because I know that some of my hon. Friends want to speak and they may run out of time.
We certainly need better enforcement. It annoys me that the Conservative party is quite happy to use taxpayers’ money to subsidise the well-heeled in our society. Not enforcing the minimum wage and, indeed, not supporting the living wage is a case in point, because taxpayers’ money goes to subsidise low pay in our country. We therefore need not just support for the living wage, but greater penalties to ensure that the national minimum wage is enforced. It is welcome that penalties are being increased, but that is still not enough; more needs to be done.
Let us be clear that, as my hon. Friends have already said, when people on low incomes have more money in their pockets, they spend that money, which creates economic activity and growth, and helps to sustain and create jobs in other industries and businesses. In my view, that is really important.
Having listened to the Conservatives today and knowing their record from history, it seems to me that one thing is pretty clear: we cannot trust them—or, indeed, the Liberal Democrats—with the national minimum wage. It will take a Labour Government coming to power in 2015 to ensure that the national minimum wage is enforced, that appropriate penalties are imposed on recalcitrant employers and that we can move rapidly towards a living wage to bring all citizens up to a decent standard of living. We owe that to the people of this country, but it will take a Labour Government to achieve it.
Steve McCabe
I am a fan of the living wage and I will mention it before I finish.
Forgive me, Mr Deputy Speaker, if I am a little cynical, but there is a consistent thread to Tory opposition. In 1983, they abolished the fair wage resolution. In 1993, they abolished wages councils. It took them until 2005 to give a manifesto commitment to retain the minimum wage. Of course, nobody told the hon. Member for Christchurch (Mr Chope), who has made successive efforts to sabotage it. All of that is probably why only 14% of people think the Tory party best represents low-paid, private sector workers. The sad truth is that the minimum wage has not kept pace with inflation and the early gains have been wiped out. In October, those on the minimum wage got a 12p rise while the Government were busy giving millionaire bankers a tax cut worth £100 million. It is funny how that poses so little threat to the economy. In fact, it apparently poses no threat at all, because they are about to give them another one.
Mr MacNeil
Given that the stories of doom about the minimum wage did not amount to anything, does the hon. Gentleman look back with hindsight, as openly and as honestly as he can, and think that the minimum wage could have started on a higher rate without any ill effects?
Oral Answers to Questions
Angus Brendan MacNeil Excerpts(11 years ago)
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Nicky Morgan
I thank the hon. Gentleman for his question. As I said, we will always look at any evidence that people want to send us. We want to encourage new links between the UK and China, and the Mayor of London made some interesting points. The point is that we have to change prices a lot in order to change passenger behaviour, and we would need to look at that further.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Is the Minister aware of the success of Barcelona airport in gaining more than 20 international routes in the past year because of a 100% APD reduction? Does she think that such a reduction would help Scotland to regain the millions of passengers it has lost owing to this Government’s APD costs?
Nicky Morgan
The hon. Gentleman will be aware that there is no APD charge from airports in his constituency. As he knows from our recent debate, APD makes an important contribution to the deficit reduction plans; we will always keep it under review, but it is a very important part of this Government’s attempts to rebalance the economy.
Air Passenger Duty
Angus Brendan MacNeil Excerpts(11 years, 1 month ago)
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Sammy Wilson
We in Northern Ireland, of course, feel that much more than anyone else because we share a land boundary with another country and are just 100 miles away from what is now a major international airport at which there is no air passenger duty. That places airports in Northern Ireland at a grave disadvantage.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I will glide over the hon. Gentleman’s advertising of Dublin airport. Is not his main point that this has nothing to do with climate, as it is really about demand management at Heathrow, where there is not enough capacity to deal with demand? That demand-management tool then damages other airports in Scotland, Northern Ireland or wherever.
Sammy Wilson
I do not know whether it is about demand management at Heathrow, but I do know that there has been an impact not only on the pattern of where and how people fly but, much more importantly, on economic growth in the United Kingdom and on the connectivity that many of the regions need if they are to develop markets elsewhere in the world.
Let us look at the facts. Since air passenger duty was introduced, it has increased by 160% for short-haul flights and by 225% for long-haul flights. The tax brings £2.8 billion into the Exchequer, and that is expected to rise to £3.8 billion by 2016-17. If we make a comparison with other EU countries, we can see where the problem lies. Many EU countries do not have any APD, while some introduced it but abandoned it because of its impact. The countries that have retained it have done so at a lower level than here in the United Kingdom. I shall not bore the House with all the percentages, but others might want to cite them to demonstrate the impact on airports in their areas.
I do not want to be parochial, although other Northern Ireland Members may wish to spell this out in much greater detail, but it would be remiss of me not to point out that air passenger duty has a significant impact on the economy in places such as Northern Ireland. We cannot transfer between air and train travel, so the only option for people who wish to travel to places outside Northern Ireland, whether in Great Britain or elsewhere, is to travel by aeroplane, and hence to pay the duty. The Irish Government abolished air passenger duty in the Republic, with which we share a land boundary, because they recognised the importance of air connectivity to the general well-being and growth of the economy, the promotion of jobs, the attraction of inward investment, and a range of other economic benefits.
Sammy Wilson
The right hon. Gentleman is right. One of the reasons why we in Northern Ireland sought devolution of the long-haul tax is that we could not have afforded to have all our passenger duty devolved, with the impact that that would have had on the block grant. Nevertheless, chipping away at APD as the right hon. Gentleman describes is important.
I will come later to the revenue that the Government currently make from APD, as I am sure that is the point that the Minister will make. It is one thing to rant about the unfairness and inequity of air passenger duty, but where will the Government get the money from otherwise?
Mr MacNeil
Does not all that the hon. Gentleman is highlighting show the mindset of the zero sum game? There is no concept that, if APD were devolved, that would cause growth in the economy and the Government doing that would be rewarded. All that happens is that devolved Governments are penalised, while another Department in London gets the extra revenue in the economy.
Sammy Wilson
I have dealt with the issue in Northern Ireland, so I shall deal with that as a general issue for the United Kingdom economy as a whole. Let us look at the Government’s present objectives. We wish to achieve economic growth. We have heard the Chancellor on many occasions in the House argue that growth cannot be achieved simply by injecting more public funds into the economy, although some of us would query whether a particular type of injection, especially in infrastructure, would not have benefits.
Leaving that aside, the Government’s main thrust is that, if industry in the United Kingdom became more productive and more export-oriented and sold goods abroad, we would be able to achieve economic growth. Yet if there is one tax militating against export-oriented growth, it is this tax. Businesses currently pay about £500 million per year in air passenger duty. That, according to all the reports that have been done, influences the willingness and the ability of businesses to go overseas to look for suppliers, markets, investment and opportunities, and the frequency with which they do so. Therefore, air passenger duty has a deflationary effect and reduces the incentive for businesses to do what the Government want them to do. It therefore impacts on the ability of firms to increase their markets, increase their productivity and bring in investment, which can create further competition and help to increase the health of the economy.
Sammy Wilson
The point was made earlier by my right hon. Friend the Member for Lagan Valley (Mr Donaldson) that APD must be seen in the context of an overall strategy. However, as has been pointed out by a number of Members, there are airports other than Heathrow and Gatwick which are capable of taking long-haul flights. Having those direct long-haul flights or even short-haul flights to other destinations would help many regional economies significantly, and there is excess capacity there. We should not always think in terms of only the main hub airports when we are talking about the industry’s capacity.
Studies have been done on the impact of removing air passenger duty and a report by PricewaterhouseCoopers went to the Chancellor. All economic models can be challenged. As an economist, I used to tell youngsters when I was teaching them in school that the model is only as good as the assumptions put into it, and those may change before the model has been run for sufficient time. We always have to be careful about economic modelling, and I am sure that the Minister will make the same point. The model used by the consultants took cautious views about elasticity of demand for tourism and elasticity of fiscal changes. It used a model that is used by the Treasury to measure the impact of policy changes. When the Chancellor comes to the House with Budget policies and tells us that behavioural changes will lead to this or that, he uses exactly the same kind of models that were used in this report. The outcome was that to remove air passenger duty altogether would lead to GDP growth in the first year of 0.45%, and in the next two years of 0.3%. During those three years, £16 billion would be added to GDP and there would be 60,000 jobs, an increase in exports of 5% and an increase in inward investment of 6%.
When people asked me for money, I would ask where it was to come from. If they wanted me to spend money on this, I would ask where we would spend less. If they wanted taxes on business reduced, I would ask where we were to get the money from. There must always be a counterbalance, but the good thing about this proposal is that it is fiscally neutral. If anything, given its impact on exports, investment and growth, the £4 billion that would be lost by 2016-17 would be more than compensated for by the increase in tax revenues and the reduction in benefit payments. That is most unusual for any fiscal change. The reasons for it are, first, that the level of taxation is so high in the UK compared with elsewhere that there would be a positive impact. Secondly, there is the importance of transport. This is borne out not just by the model but by the Department for Transport. The importance of transport to the economy is such that there is a huge multiplier effect. Lastly, because of the connectivity that this gives to other markets, there would be a positive impact.
The coalition Government promised to look at a replacement for air passenger duty and said that the revenue raised—they did not say that more would be raised—would be used to offset income tax changes. If the Government changed the method of taxation for air travel, they did not see that money as going into the general pot, either to reduce borrowing or to facilitate spending on other Departments, but as something that would be given away anyway to taxpayers. Therefore, as for how we pay for it, all the work that has been done indicates that it should be revenue-neutral. However, I assume—perhaps I am just being naive—that if the Government had made a promise that the revenue from taxing air travel would be given in income taxes and that had been factored in already, they did not actually need it for their fiscal reduction plans anyway.
I was going to talk about the environmental concerns. Members might have gathered that the impact of CO2 emissions, or whatever other emissions there might be from air travel, on the world environment does not feature very high on my list of priorities. I am one of those who believe that there is a big orange globe up in the sky that has influenced the Earth’s climate for billions of years and will continue to do so and that the impact humans have on that is very limited. We should certainly not be strangling our economy in order to try to change the climate, especially when countries around the world that emit far more CO2 than we ever will, do not give two hoots about emissions, so anything we do strangles our economy and is likely to have very little impact anyway.
Another reason why I do not believe that we should spend too much time on the environmental concerns is that air passenger duty, as a number of Members have pointed out, is not a green tax anyway. In that case, I am sure that Members will not be using arguments about polar bears sinking to the bottom of the Arctic ocean, or whatever other emotive arguments and blackmail they might wish to use, during this debate. Actually, it also means that I do not even have to deal with the environmental concerns.
Sammy Wilson
There probably is a sigh of relief from hon. Friends behind me, because they do not all share my views on that.
Nicky Morgan
First, I am not sure that all hon. Members do understand the fiscal challenges facing the Government, but I will assume that the hon. Lady does, very much so. I listened carefully to what she said about the Caribbean. I know that Ministers, including my predecessor, have engaged with representatives. I could be wrong, although I do not think the hon. Lady will be surprised if I said that I know more about air passenger duty today than I did this time last week, but I think that zoning for the Caribbean was introduced by the previous Government. All Ministers keep all taxes under review. However, I heard what she said, and we will listen to the representations that are made.
Mr MacNeil
I, too, welcome the hon. Lady to her new position. What are these fiscal challenges that the Westminster Government face? The hon. Member for East Antrim (Sammy Wilson), as Finance Minister in Northern Ireland, has to balance his books. The UK has not paid its way since 2001; in fact, in the past year it has borrowed £120 billion. There is a good argument that says that changing the management of APD will increase GDP and tax revenues. With that body of evidence behind it, is it not worth listening to the wise words on APD rather than ploughing on regardless?
Nicky Morgan
I thank the hon. Gentleman for his comments. I think that the fiscal challenges are very apparent. We still have a large debt and a deficit run up under the previous Government which this Government have said we need to tackle. Later in my speech I will talk about the PricewaterhouseCoopers report, the impact on GDP, and the assumptions that are made.
Nicky Morgan
I thank the right hon. Gentleman for his remarks. As a Conservative, I believe in the lowest tax possible, but I also believe in running the economy as responsibly as possible, meaning that what we get in, we spend out. That was put out of kilter by the legacy of the previous Government. We have been very clear about the reason for APD and the role it plays. We cannot choose to ignore £3 billion when we have to deal with the deficit and legacy left to us by the previous Government, of which the right hon. Gentleman was at times a member.
Mr MacNeil
On balancing the books and spending what we raise, if that were the case the UK would raise income tax by 8p to 10p in the pound, such is the size of the UK deficit in a country that has not paid its own way since 2001.
Nicky Morgan
This Government are making progress in making sure that we do pay our way. We also believe that people should keep as much as possible of the income they earn. I will come on to talk about household income and the impact APD has on it, but for now I want to address UK competitiveness.
When comparing different countries’ tax regimes, it is important to view the system as a whole. Comparisons between individual elements can be misleading, especially if companies’ decisions about where to invest are driven by the impact of the system as a whole, not its individual parts. As my right hon. Friend the Chancellor has made clear many times, the Government are committed to ensuring that the UK has the most competitive tax system of all advanced economies. We want to have a tax regime that supports the attractiveness of all parts of the UK as places to invest in and that ensures that the whole of the UK is open for business.
Catherine McKinnell
I thank the hon. Gentleman for his kind wishes. The companies commissioned the report, but it is for the Government to set out their position and their own findings. I would like to focus on the Government’s statistical analysis and assessment of APD. I know the value added to the north-east economy by Newcastle airport. I know how critical certainty and stability on issues such as APD are for the airport and the businesses that rely on it, and for the export-led recovery that the hon. Member for East Antrim referred to on a number of occasions. Newcastle airport alone supports 7,800 jobs across the north-east region, with 3,200 on site, and more than £250 million of UK exports were shipped through the airport in the last year—facts that speak for themselves. It is therefore little wonder that the Government’s dither and lack of direction has caused significant frustration for passengers, the travel and tourism sector, and the industry as a whole.
What have we heard so far from the Government on APD? The Conservative 2010 election manifesto pledged to:
“Reform Air Passenger Duty to encourage a switch to fuller and cleaner planes”.
The Liberal Democrats went further, suggesting that they would ensure that pollution was “properly taxed” by replacing the per-passenger APD with a per-plane duty and that air freight would be taxed for the first time. They also said that they would introduce an additional, higher rate of PPD on domestic flights if realistic, alternative and less-polluting travel was available.
Mr MacNeil
The hon. Lady makes a good point about the views of the Liberal Democrats. The Liberal Democrats held a multitude of views in opposition and hold another multitude of views now they find themselves in government, so her words do not surprise me at all.
Catherine McKinnell
The hon. Gentleman anticipates my next comment. It is important not to take a Liberal Democrat election manifesto at face value, but one might reasonably have expected to see some action from Ministers given that the coalition agreement promised that the Government would:
“reform the taxation of air travel by switching from a per-passenger to a per-plane duty.”
and
“ensure that a proportion of any increased revenues over time will be used to help fund increases in the personal allowance.”
The Chancellor then announced in the 2010 Budget that major changes to APD, including switching to a per-plane duty, would be subjected to public consultation, but nothing happened, and almost one year later, at Budget 2011, he announced that the Government would consult on simplifying the structure of APD. In between, the fair tax on flying campaign was launched not only to raise concerns about this issue, but to elicit a modicum of action or at least certainty or clarity from the Government. Budget 2011, however, saw the Chancellor U-turn on the coalition agreement pledge made less than 12 months earlier to switch to a per-plane duty, informing the House:
“we had hoped that we could replace the per passenger tax with a per plane tax. We have tried every possible option, but have reluctantly had to accept that all are currently illegal under international law. So we will work with others to try to get that law changed.”
Will the Minister update the House on how that work on changing the law is going?
At Budget 2011, the Chancellor went on to state:
“In the meantime, we are consulting today on how to improve the existing and rather arbitrary bands that appear to believe that the Caribbean is further away than California. We will also seek to bring private jets, which pay no duty at all, into the scope of taxation.”—[Official Report, 23 March 2011; Vol. 525, c. 963.]
The APD rate rise due in April 2011 was deferred to April 2012.
Kwasi Kwarteng (Spelthorne) (Con)
I intervened during the speech made by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) to ask what the Labour party’s policy on this issue actually was. The hon. Lady made a good speech, but she did not answer my question. She spoke for 17 minutes without providing any clarity on the Labour party’s position, and I remain unsure about the nature of her objections—if they are objections—to this tax.
It is important to review the tax’s history. It was introduced in 1994 by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), and at that time it was not a green tax. Like most taxes, it was brought in as a revenue-raising exercise and there was no mention whatever of its environmental impact. It was only under the previous Labour Government that the tax mutated into a green tax. It was doubled in 2007, and the banding was introduced in 2008. The right hon. Member for Tottenham (Mr Lammy) and the hon. Member for Hackney North and Stoke Newington (Ms Abbott) have spoken of how their constituents who travel to the Caribbean are particularly affected by the banding, but we did not hear any mention that that banding was introduced by the Labour Government. It seems peculiar that the hon. Member for Newcastle upon Tyne North has not mentioned that Government’s contribution to the development of the tax and nor has she set out the Labour party’s current position on it—that remains perfectly obscure.
We need to consider the deficit. As a free-market Conservative, I do not like taxation, and I yield to no one in my desire and enthusiasm to cut taxes and to stimulate the economy through reducing the burden of taxation to promote growth and enterprise, and to encourage risk-taking and other forms of business enterprise. However, I recognise that we have a deficit, and that deficit completely shapes the nature of our debates on taxation—[Interruption.] I sense an intervention coming on.
Mr MacNeil
I was trying to resist the urge to intervene, but the deficit in the UK has been in existence since 2001. The UK has been in a fiscal black hole since then, which was seven years before the economic crisis; it has not been able to pay its way since that time.
Kwasi Kwarteng
The hon. Gentleman shows an admirable grasp of our recent economic history; he is absolutely right. From 2001 to today, we have consistently run a deficit. Conservative Members have always been struck by the fact that, although the economy was actually growing during the first six of those years, between 2001 and 2007, the Government of the time saw fit to run a deficit in every one of those years. The present Government inherited a deficit of £160 billion—12% of our gross domestic product—and the fact that it has now been reduced by a third represents a remarkable success. It now stands at somewhere between £110 billion and £115 billion, depending on how the figure is calculated. In the context of deficit reduction, any Government would be reluctant to abolish air passenger duty in a peremptory way, as it brings in more than £3 billion a year. We all recognise that the deficit is a real thing—it is an ongoing annual sum that we have to close—and the £3 billion a year raised by APD makes a real contribution to its reduction.
I fully understand all the supply-side arguments. I understand that, if we were to abolish the tax, we could perhaps reap economic rewards at some future date. However, those who promote reducing or abolishing it must tell us how they would replace that revenue from day one. Where would they find the £3 billion that APD currently brings in? Conservative Members are familiar with general tax-cutting arguments. One could argue for the abolition of most taxes on the basis that that would stimulate growth, and that the money would be recouped in the long run through increased tax revenues. However, we have to face the fact of a real deficit, which is something that Opposition Members never seem to acknowledge in their speeches.
I was entertained by the speech made by the hon. Member for East Antrim (Sammy Wilson), who put forward in a typically trenchant way his views on green taxes, the environment and all the rest of it. I have often heard such arguments in the pub in Staines among my constituents and others, so I am familiar with them, but I shall not touch on green taxes, because what I am concerned about is the deficit.
If we were balancing our books and if we had succeeded a fiscally responsible Government, I would be among the first to say that this APD tax should be abolished. I would absolutely recognise the compelling argument that lowering taxes increases business enterprise. However, because we run a deficit, I feel that the £3 billion coming into the Exchequer is too high an amount simply to discard and forget about.
We need to look at the effects of such taxation on the aviation industry. I think it was my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) who made the point that although APD is quite high, the industry is expanding and more people are flying. From the Government’s point of view, as a revenue collector, the tax is not impeding the growth of the industry, so it would be irresponsible for them to forgo such tax revenue, especially given our record deficit.
Going forward to a time when we are balancing the books under the next Conservative Government, I will be at the forefront of those arguing to abolish APD. Earlier in this Parliament, I wrote and often said that while, in principle, the tax might not be the best thing, there are specific budgetary requirements and conditions of the moment that make APD essential.
We have to consider corporation tax and taxation generally in the round. I congratulate my hon. Friend the Member for Loughborough (Nicky Morgan) on her appointment as Economic Secretary. She cited the fact that our corporation tax rates are extremely competitive. The rate of 20% is among the lowest, if not the lowest, in the OECD. In that context, general taxation on companies and business has been reduced, and we are seeing flickerings of growth—we expect encouraging growth figures at the end of this week. In the round, we can therefore say that the Government’s policy is working. The deficit reduction is happening and growth is beginning to return to Britain. Now is not the time to slacken the deficit reduction plan, so I fully understand why APD is necessary: to further our principal aim of deficit reduction.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Indeed you are right, Mr Speaker. To reciprocate your acknowledgement that I am a sensitive and caring fellow, I shall try to be as quick, brief and short as possible.
At the outset, I want to express a short apology because I might have to leave the Chamber to fulfil a previous engagement. If that happens, it is absolutely no comment on the debate, which has been riveting in the extreme. I am sure that those watching the monitors in their offices, as well as people at home, will be enjoying the debate and waiting for the next gripping instalment after mine.
Air passenger duty is one of the most damaging of the Westminster interventions in the Scottish economy. We should remember that, for the past 30 years, Scotland has on average paid more tax per person than the UK. This year, Scotland will pay 9.9% of all UK taxes, while it has only 8.4% of the total UK population. That is the situation without a tax system that is designed for Scotland’s needs.
Just about all those in Scotland who have been closely associated with the APD issue see the wisdom of devolving APD to Scotland. We know from our internal party points of view that the people who are better informed about the independence process in Scotland are those who are more likely to support it, so the Westminster Government need to understand that this policy supports arguments for independence. Of course, I welcome that, in a way, but the Government should bear in mind the downside: in the meantime, the policy is damaging Scotland’s economy, as well as the economies of other areas under centralised Westminster control. I am sure that an independent Scotland would run an air passenger duty regime if it were more in sympathy with Scotland’s needs.
As I suggested, we do not have taxes that are designed for Scotland, and if ever something crystallised that point, it is the issue of APD. Scotland is being fleeced by APD. It is estimated that, in each of the four years between 2012 and 2016, 2.1 million fewer passengers will go through Scottish airports as a result of it. APD is a demand-management tax. Heathrow and other London airports benefited from preferential treatment by successive UK Governments for decades because bilateral air agreements with a host of other countries stipulated that London airports must be used. That policy has come back to haunt those Governments. There is now a shortage of runways in the south-east of England, because the hub that was put in place cannot cope with the demand that was deliberately created, and the solution has been this congestion tax of the skies to slow traffic into Heathrow and other London airports.
In some ways, the Government’s demand-management tool has indeed been successful. The London airports are nearing full capacity, and APD has succeeded in controlling the pressing demand that has resulted from the lack of runways in London. However, London is losing passengers and commerce to other parts of the current United Kingdom, such as Scotland, Northern Ireland and the north of England. The solution is surely to devolve the policy and leave it in the hands of those who could manage it better because they are closer to the problem. Those who are distant from it advance all sorts of odd arguments, as we have heard today.
It would even benefit the Treasury if APD—the gatekeeper tax—were removed, because an increased number of people visiting the country would be likely to increase commerce. The Prime Minister has said that the UK has a lopsided economy—he is right—but will his Government act? Will they help by taking the one step for which a host of parties across the House have called? Will they right the wrong that was caused by lopsided international bilateral air agreements favouring one area of the UK by devolving APD and giving control of it to other areas? Unfortunately, they will not, but I am sure that those who are listening to the debate will understand why I argue for an independent Scotland, even if other Members in the Chamber may choose not to do so. I should add, in fairness, that there are a few Members here who do choose to, but they are keeping their heads down at the moment.
It need not be like this, however. Friends in Catalonia tell me that while Madrid may be notoriously intransigent and knuckle-headed on many issues—a sentiment that friends in Gibraltar would share—it has shown some sense in one respect, on which London should follow suit, by abolishing APD, or reducing it by 100%, on new routes. Barcelona alone has gained 37 new routes this year: to Islamabad and Karachi in Pakistan, Lebanon, Iceland, Kos in Greece, Bucharest, Kiev, Oslo, Helsinki, Luxembourg, Bergen, Pristina, Kristiansand and Hamburg, to name but a few. Such is the growth of Barcelona as a result of that more intelligent approach. Reductions in APD have been shown to benefit a number of other countries.
The hon. Member for East Antrim (Sammy Wilson) advanced some tremendous arguments, to which the Treasury ought to listen. As a former Treasury Minister, he ran the Treasury in Northern Ireland by balancing the books. The UK Treasury does not balance its books and has not done so since 2001.
Prestwick, the Scottish airport that has been most affected by APD, lost 14% of its traffic in 2012, and just the other week it had to be nationalised by the Scottish Government because the alternatives were unfortunately unthinkable. The Scottish Government feel that Scotland is a high-quality aviation market. It has a record of establishing successive intercontinental air routes with high load factors, including business-class traffic. They believe that there is considerable potential for improving Scotland’s international air connections, but the UK Government’s punitive APD rates are seriously hampering that process. York Aviation has pointed out that APD rates have rocketed since 2007, with short-haul travellers being hit by a rise of about 160%. The price paid by a family of four travelling to Spain has increased from £20 to £52 since 2007, and the price that they would pay to travel to the United States has increased from £80 to £268—a shocking rise.
PricewaterhouseCoopers says that the reduction or abolition of APD could bring about immediate and permanent increases in UK GDP worth around £16 billion in the first three years alone, which backs up the point made by the hon. Member for East Antrim. Increased revenue from other taxes would more than compensate the Exchequer for the revenue forgone by the abolition of APD. Indeed, the dividend in the first year alone would be half a billion pounds.
Passengers are losing out as a result of opaque methods of ticketing. Fully flexible tickets mean that people get back the entire cost of the ticket and the taxes if they do not fly, but there is a question for those travelling on restricted tickets who would lose their ticket price, because they also seem to be losing the taxes they have paid. The penalties imposed by airlines seem exactly to match the amount of APD taxation, so I would like the Government to look into this opaque process.
What do these penal levels of APD mean for Scotland? York Aviation says that by 2016 Edinburgh airport would be losing 1 million passengers due to high APD rates each year for four years, while Glasgow would lose 700,000 a year and Aberdeen about 200,000 a year. That shows the economic damage that is being done to Scotland’s economy.
Disappointingly, we have seen no significant difference between Labour and the Conservatives today, so the message to Scots is, “Business as usual, regardless of who gets into office in Westminster.” That is why, on 18 September next year, we will vote for independence in Scotland.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had an interesting and wide-ranging debate, given that it has focused on one particular tax, and I thank hon. Members for their contributions. We began with the hon. Member for East Antrim (Sammy Wilson), who delivered a wide-ranging speech in which he made it clear that APD did not constitute a green tax but that, even if it did, he would be against it. He was described by various hon. Members as “trenchant”, “outspoken” and even “abrasive”—and those were the comments from his hon. Friends. However, he set out a strong case on behalf of Northern Ireland and, indeed, the UK more widely. Interestingly, the motion applies to APD across the UK; it is not specifically a Northern Irish issue.
We heard from the new Economic Secretary—I add my words of welcome to the many warm words already offered—who has already demonstrated that she will be a formidable Treasury Minister. We then heard from the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), whom I also congratulate on her move to the post of shadow Economic Secretary, although I am saddened that she is no longer the shadow Exchequer Secretary. I am pleased, however, that we have had the opportunity to debate again so soon, and I am sure that we have many happy hours together in Finance Bill Committees ahead of us. She was very critical of Government policy although, as her history of APD pointed out, the regime in place is largely the one that we inherited from the previous Government. Despite her criticisms, she did not give us any examples of what she would change, but we were grateful for her contribution none the less.
My hon. Friend the Member for Spelthorne (Kwasi Kwarteng), who has a strong interest both in aviation and in lower taxes, made the point very strongly that we have to reduce the deficit. His injunction that we should not slacken on deficit reduction was sensible advice.
The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) raised Scottish concerns, citing criticism that APD rates had rocketed since 2007. I should point out that, since 2010, APD has risen in line with inflation—it has been frozen in real terms. That means, for example, that since 2010, the price of an economy ticket for a short-haul flight—such tickets apply to the majority of passenger flights—has risen from £12 to £13. It is worth pointing out that that is an increase of £1. He also raised concerns about the impact of APD on Scotland, but the most recent figures I have—for 2010-11—show that passenger numbers at Scottish airports grew by 5.5%, so they are not being slashed by any means.
Mr MacNeil
I do not need to take the credit for the Scottish Government, because the Minister has already given the credit to them, for which I thank him. Can he discern any real difference between his position and that of the Opposition, because I cannot?
Mr Gauke
Is the implication of the hon. Gentleman’s question that he managed to identify the position of Labour Front Benchers, because I could not particularly?
My hon. Friend the Member for Brigg and Goole (Andrew Percy) delivered a thoughtful speech in which he set out the evolution of his own thinking and made the case for regional airports. The hon. Member for Mitcham and Morden (Siobhain McDonagh) raised a point on behalf of her constituents who originally come from the Caribbean. Such a point was also made in interventions, so let me reiterate that APD must adhere to international rules on aviation tax—a point that she acknowledged—specifically the Chicago convention. The capital city convention in APD ensures that the duty complies with the rules. She asked why we could not reform the bands. We could move to having two bands, and we did examine that as part of the 2011 consultation, but no banding structure can be entirely free of anomalies, and a revenue-neutral move to two bands would require an increase in APD for about 90% of passengers, including those flying to Europe and the United States. We were not attracted to that approach.
The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) raised a point about Scotland, following on from the contribution by the hon. Member for Na h-Eileanan an Iar. He rightly said that there would be an implication if the tax were devolved to Scotland and then abolished, because the cost of that would have to be found from the block grant. We have not estimated what that would be, but such a decision would have consequences to comply with EU state aid rules. It is also worth pointing out that we would need to take into account any market distortions that would be created and that the cost would have to take into account any lost revenue for neighbouring English airports, for example. That is not an insignificant point.
The hon. Member for South Down (Ms Ritchie) spoke about domestic flights. It is worth pointing out that several European countries put VAT on domestic flights, whereas the UK does not—the rate is 19% in Germany, 21% in the Netherlands and 27% in Hungary. My hon. Friend the Member for Mid Norfolk (George Freeman) made the point that we would like to get rid of most taxes, but we are not in a position to do so. He also highlighted the fact that rates have increased with inflation. The hon. Member for Strangford (Jim Shannon) argued that there would be a net gain for the Exchequer if APD were abolished, but we do not agree—I shall set out the reasons why in a moment.
The hon. Member for North Antrim (Ian Paisley) spoke against the tax and also hoped that we could all unite behind the motion. I am terribly sorry to say that I have to disappoint him on both fronts. The hon. Member for South Antrim (Dr McCrea) summed up the debate, arguing that we should perhaps follow the example of the Republic of Ireland, which is not always an argument that I hear from him.
As I have made clear, APD makes a crucial contribution to tackling our fiscal challenges. The tax raises nearly £3 billion in annual revenue. Contrary to the claims of the PricewaterhouseCoopers report, which has been cited frequently, scrapping APD would not be costless; it would result in a significant loss to the Exchequer. Unless we were to give up on our fiscal goals—my hon. Friends have been absolutely right to highlight the need for us to maintain discipline on reducing the deficit—the lost revenue would therefore need to be found elsewhere, either by increasing other taxes or by further reducing our public spending. In the course of the debate, I have heard few realistic proposals as to how that could be done. Not only would scrapping APD create substantial costs to the Exchequer, but the benefits of such a step would be small compared with those of the policies that the Government have already put in place.
We are not persuaded by the case that has been put before us. We cannot take risks with the public finances, so we will not be supporting the motion.
Question put.
The House proceeded to a Division.