Finance (No. 2) Bill
Angus Brendan MacNeil Excerpts(11 years, 7 months ago)
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Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I beg to move, That the clause be read a Second time.
The Temporary Chairman (Sir Roger Gale)
With this it will be convenient to discuss the following:
New clause 4—Air passenger duty: Wales
‘Schedule (Air Passenger Duty: Wales) has effect’.
New schedule 1—‘Air Passenger Duty: Wales
‘Air Passenger Duty: Wales
Part 1
Rates of Duty from 1 April 2013
1 Section 30 of FA 1994 (air passenger duty: rates of duty) is amended as follows.
After subsection 4D insert—
“(4DA) Subsection (4DA) applies if—
(a) the passenger’s journey is a relevant Wales journey, and
(b) apart from subsection (4C), subsection (2) would not apply to the journey.
(4DB) The applicable rate in subsection (2) applies to the journey instead of the applicable rate in subsection (3), (4) or (4A) (as the case may be).
(4DC) A passenger’s journey is a “relevant Wales journey”—
(a) in the case of a journey which has only one flight, if the flight begins in Wales, and
(b) in any other case, if the first flight of the journey—
(i) begins in Wales, and
(ii) is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.”
The amendments made by this Part of this Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2013.
Part 2
Devolution of Wales Long Haul Rates of Duty
2 Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.
3 (1) Section 30 (rates of duty) is amended as follows.
(2) After subsection (1) insert—
“(1B) Subsection (1) does not apply to the carriage of a chargeable passenger to which section 30B below (Wales long haul rates of duty) applies.”
(3) Omit subsections (4DA) to (4DC) (as inserted by paragraph 1 above).
(4) The amendments made by this paragraph have effect in relation to the carriage of passengers beginning on or after the relevant day as defined in section 30B of FA 1994 (as inserted by paragraph 4 below).
4 After section 30A insert—
30B Wales long haul rates of duty
“(1) This section applies to the carriage of a chargeable passenger if—
(a) the carriage begins on or after the relevant day,
(b) the only flight, or the first flight, of the passenger’s journey begins at a place in Wales,
(c) the passenger’s journey does not end at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A, and
(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.
(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.
(3) If the passenger’s journey ends at a place in a territory specified in Part 2 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(4) If the passenger’s journey ends at a place in a territory specified in Part 3 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales with the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(5) If the passenger’s journey ends at any other place—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(6) The rate of £0 may be set for the purposes of any paragraph.
(7) The same rate may be set for the purposes of two or more paragraphs.
(8) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.
(9) “The relevant day” means the day appointed as such by an order.
(10) Section 42(4) and (5) does not apply to an order under subsection (9).
(11) A Bill containing provision authorised by this section may not be passed by the National Wales Assembly except in pursuance of a recommendation which—
(a) is made by the Minister of Finance, and
(b) is signified to the Assembly by the Minister or on the Minister’s behalf.
(12) “Passed”, in relation to a Bill, means passed at the final stage (at which the Bill can be passed or rejected but not amended).
(13) Duty paid to the Commissioners in respect of the carriage of chargeable passengers to which this section applies must be paid by the Commissioners into the Consolidated Fund of Wales.”
5 (1) Section 33 (registration of aircraft operators) is amended as follows.
(2) After subsection (2A) insert—
“(2B) If the Commissioners decide to keep a register under section 33B below, an operator of a chargeable aircraft does not become liable to be registered under this section just because the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.”
(3) In subsection (3)(b) after “applies” insert “or, if the Commissioners have decided to keep a register under section 33B below, that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers apart from the carriage of chargeable passengers to which section 30B above applies.
(4) In subsection (7) after “section 33A” insert “or section 33B below.
6 After section 33A insert—
33B (1) The Commissioners may under this section keep a register of aircraft operators.
(2) If the Commissioners decide to keep a register under this section, the operator of a chargeable aircraft becomes liable to be registered under this section if the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.
(3) A person who has become liable to be registered under this section ceases to be so liable if the Commissioners are satisfied at any time—
(a) the he no longer operates any chargeable aircraft, or
(b) that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers to which section 30B above applies.
(4) A person who is not registered under this section and has not given notice under this subsection shall, if he becomes liable to be registered under this section at any time, give written notice of that fact to the Commissioners not later than the end of the prescribed period beginning with that time.
(5) Notice under subsection (4) above shall be in such form, be given in such manner and contain such information as the Commissioners may direct.”
7 In section 34 (fiscal representatives) in subsection (5)—
(a) in paragraph (a) after “33A” insert “or 33B”.
8 After section 41B insert—
41C (1) An officer of Revenue and Customs may disclose to the Secretary of State, the Treasury or the Department of Finance in Wales any information for purposes connected with the setting of rates of duty under section 30B above, including (in particular) to enable the setting of rates under that section to be taken into account (payments by Secretary of State into Consolidated Fund of Wales).
(2) Information disclosed under subsection (1) above may not be further disclosed without the consent of the Commissioners (which may be general or specific).
(3) In section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) references to section 18(1) of that Act are to be read as including a reference to subsection (2) above.”
9 In section 44 of CRCA 2005 (payment into Consolidated Fund) after subsection (2)(cb) insert—
(cc) sums required by section 30A(15) of the Finance Act 1994 (air passenger duty: Wales long haul rates of duty) to be paid into the Consolidated Fund of Wales,”.
10 In column 2 of the Table in paragraph 1 of Schedule 41 to FA 2008 (penalties for failure to notify), in the entry relating to air passenger duty, after “33A(4) “insert “or 33B(4)”.
11 The amendments made by this Part of the Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2013.
12 The rate of duty in force under this Schedule shall not be greater than the rate which would be in force if the Schedule had not been enacted.’.
Clause 183 stand part.
Clause 184 stand part.
Mr MacNeil
I shall speak to new clause 3 and against clause 183 stand part.
Air passenger duty is fast becoming one of the most damaging interventions by the Westminster Government in the Scottish economy, which over the past 30 years has provided more tax per person per year than across the United Kingdom as a whole. The chairman of VisitScotland, Mike Cantlay, says he is “extremely fearful” of the long-term impact of air passenger duty levies on the long-haul market to Scotland, which have left the country at a competitive disadvantage compared with countries such as Ireland. He added:
“To say to a potential visitor to Scotland from Australia, for example, that before you even book you will be paying hundreds of pounds extra for the sake of coming here, because the UK has a deficit to fund, is not an easy sell. It is lunacy for our industry.”
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
How many journeys would be affected by the new clause?
Mr MacNeil
I am sure that the hon. Gentleman knows the answer to that question better than I do. It will affect thousands, if not hundreds of thousands, of journeys. It is estimated that the present arrangements have cost Scotland about 2.1 million visitors since the introduction of air passenger duty a few years ago, and the effect of that on the Scottish economy is mammoth.
Mr Donohoe
May I draw the hon. Gentleman’s attention to the wording of new clause 3? Does it not in fact cover only long-haul flights? It does not cover connecting flights through Heathrow or any other airports. How many actual journeys will it therefore cover? I understand that there are only two such long-haul journeys per week to Northern Ireland, for example.
Mr MacNeil
The hon. Gentleman will understand that this covers all aspects of journeys feeding into Scotland, and he will know full well that air passenger duty is adversely affecting the Scottish economy. Does he take a contrary view?
Mr Donohoe
As the chairman of the all-party parliamentary aviation group, may I remind the hon. Gentleman that we have reported on this matter? The duty has a great effect on everyone in the United Kingdom, not just those in Scotland.
Mr MacNeil
I do not dispute that it has a great effect on everyone in the United Kingdom, but Scotland is currently in the United Kingdom and it therefore affects Scotland. I look forward to hearing the hon. Gentleman’s speech. I am sure that the points he raises will be very welcome.
Pete Wishart (Perth and North Perthshire) (SNP)
My hon. Friend referred to numbers, and I am sure that he, like me, will have noted that the hon. Member for Central Ayrshire (Mr Donohoe) is the only Scottish Labour Member who has bothered to turn up for this debate, such is their concern about the issue we are addressing.
Mr MacNeil
My hon. Friend is right—[Interruption.] Yes, there is, of course, a Scottish Labour Member on the Front Bench, but the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) is present because of duty, rather than will, which is why the hon. Member for Central Ayrshire is here.
Mr MacNeil
If the hon. Gentleman will be patient, I will make some progress before giving way to him.
Mr MacNeil
I am sure the hon. Gentleman will be patient. He is usually a patient man, and I am sure he can display some patience now.
The chief executive of the UK Airport Operators Association, Darren Caplan, recently said:
“Our eye-wateringly high levels of APD already mean we pay the highest passenger tax on flying in the world—and this is not disputed by anyone in Government.”
The truth is that APD rates are having a devastating effect on the UK, and especially on Scotland. Let me pass on the views of some key people in Scotland. Jim O’Sullivan, managing director of Edinburgh airport, said on the BBC news on 6 December 2011:
“APD is already costing Scotland passengers and having an impact on tourism revenues. We know from discussions with our airline partners that it is a major factor in their decision to connect further routes to Scotland. We would urge the Westminster Government to see Scotland as it does Northern Ireland and understand the need to both reduce and devolve this unfair and damaging tax.”
Amanda McMillan, managing director of Glasgow airport, said:
“On the question of devolution of APD, Glasgow Airport has always been supportive of this proposal given the Scottish Government’s more progressive approach to aviation and its greater appreciation of the role the industry plays in supporting the growth of the Scottish economy.”
Scottish Government Transport Minister, Keith Brown, said:
“We need to be able to deal with the competitive and connectivity disadvantages that Scotland faces and if APD were devolved now we could provide the means to incentivise airlines to provide new direct international connections to Scotland, benefiting our aviation industry and our passengers and supporting the growth of the Scottish economy. The UK Government needs to listen to the many voices in Scotland who clearly want to see full devolution of the policy on APD.”
Phil Wilson (Sedgefield) (Lab)
Is it not true that APD was devolved to Northern Ireland because of the flights that would have left Belfast airport and gone instead to Dublin? The specific APD problem for Northern Ireland is that there is an international border between Northern Ireland and Eire.
Mr MacNeil
The hon. Gentleman is making my case. Airports are joined by air, not by land or sea. I am sure Prestwick is about as far from Belfast airport as Dublin and Shannon are, so if this is good enough for Belfast and Northern Ireland, it is good enough for Scottish airports.
Mr Reid
The hon. Gentleman forgets one point: Northern Ireland is attached by land to the Irish Republic and Scotland is attached by land to England but is not attached by land to Ireland. The difference here is that people were driving from Belfast to Dublin to catch connecting flights, whereas, obviously, people cannot drive from Glasgow to Dublin to catch connecting flights.
Mr MacNeil
That is a very strange argument for a Member who, like me, represents islands. It also could be argued that a passenger travelling from Stranraer would have a far shorter journey to Northern Ireland than a person travelling overland from Cork to Northern Ireland. The hon. Gentleman may not be aware that aircraft travel through the air, not overland or across the sea.
Mr MacNeil
The hon. Gentleman is right about that to an extent. For some flights, however, APD is paid on one of the legs going into the islands, so he is not entirely correct, and the flights that are exempt are those capable of carrying under 20 passengers with a take-off load of less than 10 tonnes. He should know the details of what he is talking about.
May I ask the UK Government a simple question? Why are they not devolving APD to Scotland? Is it because the UK Government do not want to see Scotland doing better? Is it because the UK Government care only about collecting revenues from Scotland? Or is it that they think that once one tax goes, all taxes will go—and that the often peddled myth that Scotland receives extra money from the indebted UK will be seen for the lie it is? Is there a fear of APD today, oil revenue tomorrow, so the mantra is that it is better to keep taxes together at Westminster?
The Government refuse to listen to sensible voices in Scotland. Robert Kerr, the chairman of French Duncan and the Scottish accountant of the year, said:
“More helpful would be a reduction in the rate of air passenger duty (instead, the Chancellor announced in his Budget that it would increase at the highest level of inflation for two years)”.
He continued:
“Scotland is preparing to welcome the world in 2014, when it hosts the second Year of Homecoming, the Commonwealth Games and the Ryder Cup. If we are to maximise the economic opportunities such events present, then we need more help from our governments rather than hindrance.”
I would add that when the referendum is won, Scotland will be in the world’s focus and many more people will want to travel to it. We do not want them to be penalised by the outgoing UK Government in Scotland.
APD should clearly be devolved. The UK Government have had enough time to think about the matter. Even the Calman commission, which was set up by the Tory-Labour tag team and their Liberal friends, recommended the devolution of APD. The UK Government’s response was to refuse to devolve it on the grounds that they were exploring whether to replace it with a per-plane tax. That decision has been made and the per-plane tax has been rejected, so what is the excuse now? I say that looking at the hon. Member for Argyll and Bute (Mr Reid). We look forward—if that is the right expression—to hearing the latest excuse from the Government.
Pete Wishart
My hon. Friend is correct that the Calman commission recommended the devolution of APD, but so does the jam-tomorrow Labour commission. At its conference in Inverness this weekend, Scottish Labour will be discussing the devolution of APD. I would be interested to hear whether the two Scottish Labour Members present will boycott that conference.
Mr MacNeil
I am sure that the hon. Member for Central Ayrshire will be on his feet presently to confirm his attendance in Inverness.
Mr Donohoe
That has nothing to do with this debate. The hon. Gentleman should know that his proposal, which is what we are discussing, does not constitute the devolution of APD. What he is talking about is the equivalent of what happens in Northern Ireland, which affects one flight a day. What I and the all-party aviation group are suggesting is that APD be taken away completely. If he proposed that, I would support him. Is the SNP likely to consider that?
Mr MacNeil
I am sure that the hon. Gentleman has investigated the level of APD on flights from London airports to Inverness. Doubtless, he will be flying to the happy band that is the Labour conference this weekend. [Interruption.] As my hon. Friend the Member for Perth and North Perthshire (Pete Wishart) says, he will no doubt do so with enthusiasm.
Not only does APD receive a lot of criticism in Scotland and the UK; it has attracted international derision. Two days ago, at a conference in Trinidad and Tobago, it was not only criticised by Caribbean countries as discriminating against the region, but was described as
“a clear market distortion and barrier”
to tourism worldwide by a senior UN tourism official, Carlos Vogeler, the UN World Tourism Organisation’s regional director for the Americas. He added that APD
“can actually produce a net damage to the economy, particularly in those destinations which are so dependent on air travel, such as the Caribbean”.
Surely, on a social union basis, we should treat other Commonwealth countries, such as the beautiful Bahamas, on a fairer basis. At £332 for a family of four flying economy, its air tax is higher than the £268 in tax when flying to Hawaii.
I will give four reasons why APD should be devolved to Scotland. First, APD is making Scottish airports uncompetitive in their efforts to attract new direct international routes. It is needlessly restricting Scotland’s ability to realise the economic and business benefits that direct air connections bring.
Secondly, APD is designed for the circumstances in the south-east of England, not the rest of the UK. It is, at best, a demand-management tool for Heathrow—a stretched airport that will have no further runways until one is built in a panic in a few years’ time, as Ryanair’s Michael O’Leary predicts. Heathrow needs demand to be limited because it is at capacity and the Chancellor therefore has a coincidental fiscal cash cow. Scottish airports have the capacity for growth and this tax blocks it. Independent control over APD through devolved powers would give Scotland the ability to meet its own needs rather than Heathrow’s. My view of demand management is supported by the chief executive of the Scottish Chambers of Commerce, Liz Cameron, who said:
“Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports, and devolution of this tax would afford the Scottish Government the opportunity to create an air transport package for Scotland designed to improve our direct international connectivity.”
Thirdly, a Scottish aviation tax regime would incentivise the introduction of new direct international services, which is important for business connectivity and in-bound tourism. We could do that by reducing the rate of duty, or indeed exempting it, in the early years of a new service—the most challenging financial period—until a route is established.
Fourthly, the Treasury said that it is devolving “aspects” of APD in Northern Ireland, making great play of the “unique” commercial challenges it faces—that was perhaps mentioned earlier by the hon. Member for Argyll and Bute. Scotland’s aviation sector also has specific and long-running competitive disadvantages that need to be addressed, and only the devolution of APD will do that. It is unacceptable that the UK Government are still not prepared to commit to the devolution of APD to Scotland, and I warn that such intransigence angers people at first, but when they calm and look rationally at the situation, they see the need for independence, which will be voted for a year next autumn.
According to a report published in October 2012 by York Aviation,
“by 2016 Scotland’s airports will be handling around 2.1 million passengers per annum fewer than they might have been if the APD changes since 2007 had not been implemented.”
It concludes:
“Constraining the growth of Scotland’s airports via APD can ultimately only have a negative impact from this perspective. APD makes it harder for airports to attract new routes or improved levels of service. Over time this will impact on Scotland’s attractiveness as a place to invest and its competitiveness in international markets. This in turn will negatively impact on Scotland’s international economy, including key sectors such as banking and finance, oil and gas, creative industries, technology businesses and advanced manufacturing”.
By establishing the highest passenger tax on flying in the world, the UK Government have finally managed to become the best in the world at something: unfair taxation. They are blocking growth with a gatekeeper tax.
The SNP Government are building a better Scotland. Scottish GDP grew by 0.5% during the fourth quarter of 2012—[Interruption.] The hon. Member for Sedgefield (Phil Wilson), who is from north-east England, might laugh, but I am sure a successful Scotland on his border would benefit north-east England as well. Would he rather have an independent successful Norway on his border or a Scotland that at the moment is in hock to whatever decisions are made by the Tories at Westminster? “Better Together with the Tories” is the Labour mantra.
Phil Wilson
If air passenger duty is devolved to Scotland that will impact on the airports at Newcastle and Durham Tees Valley. To go further and say that independence will help north-east England is ridiculous.
Mr MacNeil
The hon. Gentleman should look to opportunities rather than scaring and fear-mongering. I imagine the opportunity that cheaper flights might afford his constituents would be welcomed, but he can answer to them on that. While Scottish GDP grew by 0.5%, that of the UK fell by 0.3% in the last quarter of 2012. Debt levels in Scotland are lower than in the UK as a whole, and just yesterday new figures revealed the largest rise in employment for 12 years, with unemployment below 200,000 for the first time since 2009. Unemployment in Scotland is 7.3% versus 7.9% in the UK.
Recent figures also show a new record that is very different from the UK Government’s record on APD. Ours is a record of the participation of young people in higher education—a rate that is considerably higher than in England thanks to a policy based on the ability to learn rather than the ability to pay. There is a different philosophy in Scotland. However, we do not measure ourselves against the rest of the UK; after independence we look to have a society and economy that in many aspects matches Norway, Switzerland, Iceland and Denmark, among many others. We know that we can do even better, but we must listen and do what industry is telling us. The message is clear: APD is too high and must be devolved so that the Scottish Government can deliver a better connected Scotland.
The UK Government have been ignoring industry, the people and the Scottish Government for far too long. That is why support for independence will grow, as more come to understand the continuing damage that Westminster does, whether by omission or commission. What is at the root of all the wrong-headedness? The fact is that the UK Government are caught in a trap with their devotion to the cult of austerity. That is seen in the bedroom tax, which will make matters worse pulling by pulling £1.6 billion from the Scottish economy, according to an article that I read, I think, in the Financial Times.
The focus is wrongly on austerity; the focus should be on growth and, as I have laid out, this tax is the enemy of growth. What matters is not debt itself, but debt to GDP ratio. There is then the issue of servicing that debt—the interest obligation, as Professor Robert Pollin said this morning on the “Today” programme when challenging the underpinning philosophy of austerity. With interest rates low, not only is the Government’s focus wrong, their understanding is wrong, and with the cost of borrowing low, the underpinning arithmetic is wrong. This tax is part of the wrong philosophy that the Government are following at Westminster and to which Labour bind us with the Better Together campaign.
I understand that the Labour party leader in Scotland, Johann Lamont, who is the boss of all Labour MPs in the Chamber, including the hon. Member for Central Ayrshire, is presenting a paper to the Labour conference in Inverness that, it is reported, includes the devolution of APD so that it is independently controlled in Scotland. My goodness! Labour is coming round to the independence agenda. Scottish National party Members are delighted with those steps. Surely Labour Members will come through the Lobby with SNP Members this evening rather than deliver a slap in the face to their leader by not attending the conference en masse, or by sitting on their hands today, now that they have lately left what has been known as the Bain principle, whereby Labour Members refuse to support anything the SNP does simply because it is done by the SNP. They could come through the Lobby with us this evening and display not only sound thinking, but their loyalty to, and support for, their leader and boss, Johann Lamont.
I extend the hand of welcome to the hon. Member for Central Ayrshire. I am sure Labour will not want to give anybody in the Committee the impression that Labour in Scotland is not a happy band.
Mr MacNeil
Mr Miliband will not be there long—do not worry about him.
Surely the SNP and Plaid Cymru will not be the only champions of economic growth and the travelling public, and particularly the less wealthy travelling public of Scotland, Wales, Northern Ireland and England. The travelling public seem to have no champions other than the SNP and Plaid Cymru for their businesses and holidays. I encourage other hon. Members to support the cut of the poll tax on our skies: businesses want it, hard-working families want it, and economic growth needs it.
Ian Paisley (North Antrim) (DUP)
When I arrived in the Chamber and listened to the speech of the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), I had to check that the debate was on the Bill and not on Scottish independence.
I am opposed to airport duty tax. It is a regressive tax and it is wrong. It is a tax on business and tourism, and on our skies and travel. It is wrong not just for little Northern Ireland and little Scotland; it is wrong for every citizen of the UK. I am certainly not taking the position that we should scrap it in parts of the UK. It should be scrapped for all of the UK—the UK Government need to get that message loud and clear.
Mr MacNeil
Given what the hon. Gentleman says, I assume he will support SNP Members in the Lobby when we try to strike down clause 183.
Ian Paisley
I will come to that in a wee minute. The hon. Gentleman will have to bide his time and be patient, or, as we would say, houl yer whisht. Perhaps he knows what I mean by that.
It is important to put on the record that Northern Ireland has an international connection and an international carrier from Aldergrove airport to Newark airport, which is just outside New York. It flies every day in peak season—one flight a day in, one flight a day out. We have no other international carrier. However, the same carrier operates from Dublin, which is 90 miles down the road, to Newark. In the last number of years, the business in Northern Ireland was put under threat for one reason only: the airport authority and the carrier had to subsidise one another to the tune of £1.5 million. Had they not done so, the business would not exist, and people would be forced to travel 90 miles down the road and pay a lesser tax.
The price difference was staggering—it meant that it was possible to travel 90 miles down the road. Filling a car with petrol or diesel and driving to Dublin costs about £50—there would also be a car park charge—but the APD for that international flight from Northern Ireland was £150. The duty in the Republic of Ireland was €3. The difference would have ruined that business. It was essential on those terms that we got rid of APD for that international flight. My position is that I want the duty removed for the whole UK. That is what the debate is about. The measure is about internal flights in the UK, including, of course, our glorious and noble Scotland.
I am concerned that there is an element, or even a huge big bit, of fudge, which we should avoid. The policy, which should be set out loud and clear, should be the scrapping of APD for all of the UK.
Jonathan Edwards
I am extremely grateful for my hon. Friend’s intervention, as we had a debate in the Welsh Grand Committee on this issue, and Labour speaker after Labour speaker lined up to say that they not only were in favour of the Silk recommendations on minor taxes, but wanted them devolved immediately. They went even further, saying that the Finance Bill was the appropriate vehicle for achieving that.
Mr MacNeil
I have a certain understanding of the word “immediately”, and I am sure that my hon. Friend does, too. Does he think that that understanding of the word is shared by Labour in Wales?
Jonathan Edwards
That is the exact point. This was said to be the appropriate legislative vehicle for devolving airport duty to Northern Ireland, and if it is good enough for Northern Ireland, it is certainly good enough for Scotland and Wales.
Needless to say, the proposed powers fell far short of what Plaid Cymru was advocating as a party. We wanted a more comprehensive list of job-creating and economy-boosting powers, including VAT, corporation tax, resource taxes and capital gains tax. In the interest of compromise, however, and not second-guessing Silk, we are happy to proceed as the commission recommended—not least because the fiscal powers recommended by Paul Silk and his team in the commission’s report are desperately needed for the sake of the Welsh economy. The minor tax powers, the income tax sharing arrangement and the borrowing powers that would be triggered as a result would enable us in Wales better to deliver job-creating and economy-boosting measures and policies to help turn around the continuing dire state of the economy.
Yesterday’s unemployment figures showed a small drop in unemployment in Wales, but the number of economically inactive people went up by 7,000. The rate is still 0.4% higher than in the UK, and there are still nearly 50,000 more people unemployed in Wales than there were before the recession began, and another 50,000 more people who are under-employed. That is on top of the extra 50,000 public sector jobs we expect to be lost in the coming years on top of the 24,000 that have already been lost.
Last week’s research by Sheffield Hallam university and the Financial Times, to which my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) referred, highlighted that more than £1 billion is due to be taken out of the Welsh economy over the next year by cuts to social security. This will have a devastating human cost, which is becoming all too clear.
The private sector is already on its knees in Wales due to the depression caused by the disastrous economic policies pursued by both Labour and Conservative Westminster Governments, which have destroyed the productive economies within the British state. It will deteriorate further as money is sucked out of local economies through further austerity. We are yet to see any realistic plan of how jobs and growth will come about in these depressed areas or any effort to counterbalance the austerity cuts, despite the high rhetoric of geographical rebalancing.
There are three important reasons why the Welsh Government should be empowered with fiscal powers as advocated by the Silk commission and as proposed in my new clause. First, it would make the Welsh Government more accountable. Secondly, it would incentivise the Welsh Government to concentrate on developing the economy to raise the necessary revenue to invest in public services. Lastly, an independent fiscal stream would enable the Welsh Government to access the borrowing powers they have agreed with the UK Government.
Labour’s proposals for substantial cuts in Welsh capital spending in the last Budget that it presented before losing office were supported in the Conservative-Liberal Democrat comprehensive spending review in October 2010, which cut the Welsh capital budget by 42%. Announcements in subsequent UK Budgets or autumn statements have meant that the final cut is about 39%. Although that is admittedly a smaller reduction than the one planned by Labour, it represents a huge hit for economic activity in Wales. The devolution of minor taxes and the triggering of borrowing powers would go some way towards filling the gap, enabling the Welsh Government to invest in infrastructure projects and generate economic momentum.
Jonathan Edwards
My right hon. Friend makes an excellent point, to which I shall return. Fifty million pounds of Welsh taxpayers’ money has been spent on buying an airport, and no Labour Member from Wales is present this evening to vote for a proposal that would enable the Welsh Government to make the most of that asset. It is a disgrace, and I hope that the Welsh media are listening to the debate and will report on it fully.
Mr MacNeil
Is the hon. Gentleman actually informing the House that Labour at Westminster does not want to give powers to Labour in Wales because it wants to leave those powers with the Tories in Westminster? Is that the situation with which we are dealing? Does Labour prefer to put power in the hands of the Tories rather than in the hands of Labour? Does Labour trust the Tories more than Labour trusts Labour? This is bizarre.
Jonathan Edwards
I believe that that is indeed the case.
Admittedly the revenue gathered from the minor taxes, although not insignificant, is relatively small in comparison with the revenue that would be available through the income tax-sharing arrangement recommended by the Silk commission. That would make the Welsh Government responsible for 10p in every pound of income tax raised in Wales. It would enable the Welsh Government to increase their borrowing capacity substantially, and would strengthen the accountability test. My intention is to return to that at a later stage of the Bill’s progress. It would also undoubtedly incentivise the Welsh Government to grow the economy in Wales and provide responsibility for its expenditure. It is also clear that fair funding and the proper resolution of the blatant inadequacies of the Barnett formula, whereby we estimate that Wales loses out on an average of £500 million a year, are desperately needed, but that resolution must not be used to block the partial devolution of income tax or the minor taxes.
Mr Reid
It is important to set out first of all what the debate is not about. It is not about whether air passenger duty is a sensible tax; it is about whether we should be devolving air passenger duty on long-haul flights to Scotland and Wales. I must admit that I was disappointed by the lack of preparedness of the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) for the debate, as he was not able to answer a simple question from the hon. Member for Central Ayrshire (Mr Donohoe). It must be remembered that the SNP has the whole Scottish civil service machine to back it up. I am extremely surprised that the hon. Gentleman did not come armed with an impact assessment produced by the Scottish Government to show the benefits of devolving the tax to Scotland. He had no impact assessment whatever.
Mr Reid
I am waiting for somebody to advance the case for that. The Scotland Act 2012 contains provisions whereby, if the Scottish Government make the case to the UK Government for any tax to be devolved, that tax can be devolved. I am waiting for the Scottish Government to make the case.
Mr MacNeil
The hon. Gentleman is a politician, a Member of Parliament elected to Westminster. Is he unable to advance the case himself to devolve APD to Scotland? That is a shocking state of affairs.
Mr Reid
What we are debating today is a proposal from the SNP and Plaid Cymru to devolve certain aspects of APD relating to long-haul flights from Scotland and Wales. I was expecting an analysis to be presented, but hon. Members could not even tell us the number of flights that would be affected. When the hon. Member for Na h-Eileanan an Iar moves amendments in future, he should present detailed analysis of the benefits and everything else that would be affected.
To compare the situation of Scotland with that of Northern Ireland is not accurate. As I said in an earlier intervention, the justification for devolving air passenger duty to Northern Ireland was the land border with the Irish Republic, which means that people from Northern Ireland would be attracted to travel to airports in the Irish Republic for long-haul flights to take advantage of the lower taxation. That situation clearly does not apply in the case of Scotland and Wales. People would not save money by travelling from Scotland to the Irish Republic in order to take a long-haul flight.
Mr MacNeil
Will the hon. Gentleman conduct a little thought experiment? Imagine that the Irish Republic had the same level of air passenger duty as the United Kingdom. What would the net effect be? It would be fewer people flying, which would dampen our economic growth. The point of having APD devolved is to enable economic growth. I hope the hon. Gentleman can grasp that fundamental point. I also hope that if the Liberal Democrats have a policy of devolution of APD, it is to devolve it to Scotland. If they do not have a policy, I would be very pleased to provide the SNP’s policy, which they can adopt free of charge.
Mr Reid
As the hon. Gentleman perfectly well knows, the SNP policy is clearly for independence, not for devolving particular taxes. He may put forward a good case for not having APD at all, but that is not what we are debating today. There are perfectly good arguments for abolishing APD or for a lesser rate of APD outside London and a higher rate of APD for the likes of Heathrow. The Heathrow tax was mentioned. Good arguments could be advanced but that is not the debate today. The debate today is on the specific proposal to devolve APD on long-haul flights from Scotland and Wales. I am disappointed that with all the back-up that the SNP has from the full Scottish civil service machine, it was not able to present a proper impact analysis today.
As I was saying, the Scotland Act contains provisions that allow the Scottish Government to request that extra taxes be devolved, so there is a system for doing that. I suggest that the way forward for the SNP is to request that the UK Government, under that Act, consider that. We could then have a proper, detailed debate with all the facts and figures at our disposal.
Mr MacNeil
One of the quotes I gave earlier mentioned the fear of the loss to Scotland of 2.1 million passengers before 2016. Would that information not at least encourage the hon. Gentleman, if he is going to develop a policy, to develop one in favour of the devolution of APD?
Mr MacNeil
Is the hon. Gentleman saying that there is a competitive disadvantage from APD only where there is a land border with another country or member state? Is that the position of the UK Government?
Sajid Javid
The hon. Gentleman knows the answer, but I shall provide it anyway. As he knows and as we heard from my hon. Friend the Member for Argyll and Bute, passengers who might go to Belfast have the opportunity to travel to Dublin by car. Clearly, that opportunity does not exist in Scotland.
We are working closely with the Northern Ireland Executive to consider options for rebalancing the Northern Ireland economy, and we are carefully considering the recommendations of the Silk commission in Wales. Any devolution of APD, however, must take into account the broad range of views on this subject. In response to the 2011 consultation on APD, a substantial number of stakeholders raised concerns about devolution complicating the APD system and creating distortions in the markets for flights. This concern was reinforced in a recent report by HMRC suggesting that the devolution of APD could lead to market distortion as a result of passenger redistributions between UK airports, without substantially increasing demand for aviation overall.
In considering whether to devolve APD, hon. Members will surely agree that we must assess the risk of replicating the same problems that Northern Ireland faced from lower aviation taxes in the Republic of Ireland. There is clearly a concern about an immediate cut in APD rates for direct long-haul flights from Wales. The Government therefore believe that the devolution of APD is a subject that requires continued and careful evaluation, if we are to be confident about its potential effects across the country as a whole. In undertaking this evaluation, we should take note of recent data showing that passenger numbers are growing at Scottish airports. Between 2010 and 2011, numbers grew by 5.5% and continued to grow last year as well. In fact, Glasgow airport achieved growth of 4% in 2012, Aberdeen airport recently achieved 24 months of consecutive growth and Edinburgh airport will provide more choice to passengers in 2013 than ever before.
Sajid Javid
I do not have the numbers to hand for Cardiff airport, but I am sure that the hon. Gentleman knows the answer. If he wants me to find out for him, however, I shall write to him with the numbers, if they are available.
Talking about Wales, we are considering the Silk commission’s recommendations, as I have said, but we must also take note of the concerns of Bristol airport, which has expressed deep concerns to me that devolution to Wales would have a significantly detrimental impact on its business. In presenting his amendments, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) referred to the report by the CBI in Wales. However, I have an extract from—I believe—the same report he referred to, which says that
“high mobility between Wales and the UK…is a reason for the rate to remain consistent between the countries.”
Our analysis needs to be based on a full examination of the evidence. We will not be rushed or pushed into making premature judgments. On that basis, I ask hon. Members not to press their new clauses.
Briefly, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) raised the issue of APD rates to the Caribbean. As she rightly said, I recently met a delegation of hon. Members to discuss that important topic. I am the first to accept the valuable contribution that British people of Caribbean heritage make to our country. I have promised to reflect on the important points raised by that delegation and many others that have brought up the same issue.
We have a plan to cut the deficit and we have already cut it by a third. Our country’s credibility comes from delivering that plan. APD revenues make an important contribution to the public finances and this year’s inflation-rate increase is necessary. The extension of APD to business jets makes the tax fairer overall. I therefore urge that both clauses in this group stand part of the Bill and ask hon. Members kindly to consider withdrawing their proposed new clauses.
Mr MacNeil
I can tell the Minister straight away that we will not be withdrawing our new clauses; we will be pressing them to a vote.
This has been an enjoyable debate. I certainly enjoyed the contribution from the hon. Member for Central Ayrshire (Mr Donohoe), who is not in his place at the moment. [Interruption.] I am told he is on a plane to Inverness. I wonder. I have found an exchange in Hansard between him and me from March this year, when I pointed out to him in an intervention that the UK’s tax
“is reputed to be the world’s most onerous tax on air travel, and I am sure the hon. Gentleman will agree that it is damaging Scottish airports terribly.”
From everything that he said today, we might be under the impression that a certain answer was given, but no. The answer he gave was:
“I do agree with the hon. Gentleman on this occasion; it is not very often I can say that. The Government are doing absolutely nothing for air passengers, the aviation industry and those who work in it. They continue with this tax, while our competitors throughout the world are laughing at us.”—[Official Report, 25 March 2013; Vol. 560, c. 1332.]
I just wish the hon. Gentleman was here now, to come through the Lobby with us and put some meaning into his words.
The hon. Member for North Antrim (Ian Paisley) made a very good speech when, as I see it, he described air passenger duty as a win-win situation. I welcome the fact that air passenger duty was devolved to Northern Ireland and I wish those in Northern Ireland well. I hope it succeeds and I hope the economy there grows from strength to strength. The devolution of air passenger duty to Northern Ireland will benefit us all, whether we live in Scotland, England, the Republic of Ireland or Wales. We have nothing to fear, only fear itself. In years to come, when the Northern Ireland economy—hopefully —develops with that, we will see the wisdom of devolving that power and the folly of not devolving it to other parts.
My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a very strong speech—a star speech, in fact. He mentioned the Silk commission and Labour’s immediate need to devolve APD—it was the other week, but of course there is no sign of Welsh Labour in this place today. The word “immediate” has a different meaning for Labour Welsh Members from its meaning for the rest of the English-speaking world. The hon. Gentleman certainly gave us a scary update of the economic situation in Wales, where people face the double whammy of Labour in Cardiff and the Tories in London, with their wee pals in Westminster, the Liberals, giving them a hand. He reminded my colleagues just how fortunate we are to have the SNP Government in Scotland, led by luminaries such as Michael Russell, Kenny MacAskill, Nicola Sturgeon, Alex Neil, John Swinney and, of course, Alex Salmond, the First Minister.
The hon. Gentleman reminded us that the Westminster branch of the Labour party does not want to give powers to the Labour Cardiff branch. Clearly, the Labour brothers in Wales are as happy a band as those in Scotland. We wonder whether they will send an ambassador to Inverness this weekend—I doubt it. They are probably having a punch-up, one with the other, in Cardiff.
Talking of punch-ups, that brings me to the hon. Member for Argyll and Bute (Mr Reid), who offered himself to the Chamber as a punch bag and was taken up on that offer. My hon. Friend the Member for Moray (Angus Robertson) repeatedly asked him what his policy was and he repeatedly failed to answer the question. He was even offered the policy free by the SNP, but he would not adopt it, just in case, such was the level of uncertainty. He is a nice fellow but his politics are sadly lacking. The arms are open—if he wants to cross the Floor and join the SNP, he will be welcome. It is his politics he has to change.
The hon. Gentleman said that the SNP had not made the case. Hang about. Any daft case the Conservatives make and the Liberals happily wander through the Lobbies, be it on tuition fees, the bedroom tax—whatever it is, it is yes, yes, yes from the Liberals. He seems to be unable to make the case himself for APD to be devolved to Scotland—that was sadly lacking. Will he vote tonight for clause 183? Will he come through with us on clause 183? Will he vote against the increase or will he vote for it?
Mr MacNeil
The hon. Gentleman has not said whether he is voting with us in the Lobby or voting for an increase in APD. On the fourth time of asking, he is still unable to tell us what the Liberal Democrat position in Scotland is on devolution of APD.
The hon. Member for Sedgefield (Phil Wilson) made me pause and think for a while. He wants to bring in differences in the UK, which I welcome, but sadly he carped at the SNP. I think he took the wrong approach there. I would be happy to see economic growth in the north-east of England. I would not feel diminished in any way if the economy of the north-east of England were to improve, and he should not feel diminished either by Scotland advancing. I suggested to the hon. Member for North Antrim earlier that it is a win-win situation. The view of the hon. Member for Sedgefield is that it is a lose-lose situation. I am pleased to say that that view was not shared by the hon. Member for Vauxhall (Kate Hoey), who could see the benefit of devolving APD to Scotland and Northern Ireland.
The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) certainly understands the need to devolve APD, but then argued against it. She said the proposal was piecemeal, but did not want to make a start on it anywhere. Cannot she see that with or without independence more growth in Scotland benefits us all, as more growth in the Republic of Ireland and France surely benefits us all? We should be moving with a big heart to ensure that that can happen everywhere and not be stifling growth. The hon. Lady is a sensible woman and in her heart of hearts she knows the wisdom of the proposal. Of course she strayed a little far and upset my hon. Friend the Member for Carmarthen East and Dinefwr, but I am sure that she will reflect that she possibly went too far.
Labour unfortunately is employing again the Bain principle: no matter what the SNP does, no matter how sensible or wise, Labour will not vote for it. If Labour has one other principle, it is the Kilbrandon principle, which it established in 1970, whereby it prefers a Tory Government to independence for Scotland. We have seen that time after time, particularly through the damaging 1980s.
The Minister mentioned inflation, but the Government have decided increase the duty at the highest level possible. I am glad that he is looking at what is happening to our friends in the Commonwealth and in the Caribbean in particular. Disappointingly, he was unable to say whether the duty caused a competitive disadvantage to the UK compared with other countries that we do not share a land border with. I hope that the finest minds in the Treasury can go and research that and perhaps in years to come we will have an answer. For Wales there were no figures.
The upshot of this is that the UK Government are continuing to hamper Scotland. At first, it was a policy of omission, but we can now see that they are clearly hampering Scotland by commission. That is why we must vote for independence in the autumn of 2014.
Question put, That the clause be read a Second time.
amendment of the law
Angus Brendan MacNeil Excerpts(11 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Pickles
The hon. Gentleman makes a reasonable point, and if that were a way in which Mrs Pickles and I could obtain a second home in Frinton, it would indeed be a scandal, but that is certainly not the Government’s intention. However, in our endeavours to ensure that I do not end up with a nice little flat in Frinton, we have to be careful not to rule out people whose marriage has just broken down, or situations in which parents are acting as part-guarantors. By September, we will be able to satisfy the hon. Gentleman on this issue.
We know that the demand is there, but it is also clear that for many individuals in very good jobs the housing ladder simply remains out of reach. Under Labour the number of first-time buyers plummeted to a 30-year low. Labour’s 2005 manifesto promised 1 million more home owners, but home ownership fell by a third of a million in the last Parliament. The industry is clear about what lies at the root of the problem. The British Property Federation says:
“Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy”.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
What does the Secretary of State think the mortgage guarantee scheme will do to house prices? Is there a danger of increased demand and no increase in supply, and prices going up?
Mr Pickles
The hon. Gentleman makes a reasonable point. However, housing prices are at a more reasonable level now, we will be increasing supply and of course there will be a check on the scheme, through the Bank of England, to see that it is renewed every three years. So the worries that he raises are not correct—
Mr Ruffley
My hon. Friend makes an interesting point.
There were no shock-and-awe measures in the Budget, because the Chancellor is probably right to believe that we are not approaching a lost Japanese decade. Nevertheless, I am concerned about the Office for Budget Responsibility growth projections; it forecasts growth of 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017. The forecast turns on one central OBR assumption that might be wrong. The OBR assumes that there is quite a large negative output gap—that, in simple terms, there is a lot of slack in the economy. Forecasting or estimating the output gap is very difficult. If its assumption is wrong, and if the output gap is smaller than it says, a huge amount of the £120 billion a year last year and the coming year is structural rather than cyclical. If that is the case, we will need shock-and-awe measures—deeper cuts than those implied in the spending envelope and, yes, a fiscal stimulus in deeper tax cuts.
Mr MacNeil
On the one hand the hon. Gentleman calls for deeper cuts, but on the other hand, he spoke a few moments ago of the importance of consumer spending. In an earlier intervention, the hon. Member for Stretford and Urmston (Kate Green) said that 90% of the money for which those who are being penalised by the bedroom tax are responsible circulates locally. Surely if the Government take money out of the economy, we will see not consumer-led spending, but further contraction in the economy and further gaps.
Mr Ruffley
Perhaps the hon. Gentleman did not hear the second part of my statement, when I mentioned deeper cuts in public spending and a fiscal stimulus with deeper tax cuts.
If we do not have the growth we want in the economy in the next 12 or 18 months, I would like capital gains tax holidays of the kind suggested by my right hon. Friend the Member for Wokingham (Mr Redwood), to get investment moneys circulating. I also believe there could be a case for deeper cuts in corporation tax to approximate more closely the Irish model; Ireland has 12.5% corporation tax, which makes it more of a magnet for foreign direct investment.
That said, the Conservative party has indicated that it has the technology should we need to go further and faster in fiscal consolidation. The Conservative economic affairs committee, which is chaired by my right hon. Friend the Member for Wokingham, has discussed proposals from colleagues for a suspension of the carbon price. A key cost that is undoubtedly hampering business confidence is that, in 2011, about one fifth of the energy bill paid by small and medium-sized enterprises was attributable to green, renewable policies. Considering whether we want a holiday from that, and certainly not going further than European countries, would seem sensible.
On Budget day, the Chancellor said two important things about monetary policy. First, he explicitly said that the Financial Policy Committee must co-ordinate better in future, under Mark Carney, with the Monetary Policy Committee. At the moment, the regulators are pulling in different directions. The MPC has pumped in £375 billion by printing electronic money in exchange for purchasing gilts from the commercial banks, but that credit is not flowing into the real economy. On the other hand, the Financial Services Authority, and its successor body the FPC, are telling the banks not to lend any of that money and to rebuild their capital position to de-leverage. Those two impulses fight against each other and it is entirely sensible for the Chancellor to say that the FPC and the MPC must co-ordinate better.
Secondly, the Chancellor talked about forward policy guidance via thresholds to commit to looser monetary policy for a set period. That has had a good effect in Canada and the United States, and it will give British business the confidence that interest rates will not be jacked up just as the recovery begins and that economic activity will not be choked off.
I support the Budget with qualifications.
Mr Darling
With due respect to the hon. Gentleman, I anticipated that predictable nonsense. I am grateful to him for intervening, however, not least because he has given me another minute in which to make my case.
As the Office for Budget Responsibility points out, the recession is taking far longer to come out of than any we have seen previously. The principal factor is that in 2007-08 we had a complete collapse of our GDP and that situation has not been recovered in the past five years. Frankly, on the evidence presented by the Chancellor last week, I see little evidence that it is going to happen. As a result, we are borrowing very large sums of money: £120 billion last year, this year and next year.
As I was saying before the hon. Gentleman interrupted, in the Chancellor’s forecasts, yet again in the back three years of the forecast period we see an expectation that growth will go from 2.7% to 2.8% in 2017. That is exactly the same profile that we have seen in each of the Chancellor’s Budgets and autumn statements. The problem is that these sunny uplands are moving to the right each time he stands up. I cannot for the life of me see why anything will be any different in 2017 from the bleak outlook we see today. The problem is that as long as we have low growth we will have high levels of borrowing, and debt is now expected to peak at 85% of our GDP. When we advocate a different approach, the Conservatives and the Liberals say that we are talking about borrowing more, but this Government are borrowing more than they ever imagined they would in 2010, and they are doing so not to invest in things such as infrastructure, but because of the price of their economic failure. That is what many of us have a problem with.
Mr MacNeil
Surely by boasting that he would cut harder and deeper than Thatcher, the right hon. Gentleman set the tone for the cult of austerity that we are now living through.
Mr Darling
I am grateful to the hon. Gentleman for his intervention, but not in the way he intended, because that is nonsense too. Incidentally, in the leaked document from John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, the Scottish Government too faced up to some difficult decisions. The difference is that I and—to give them credit—the coalition Government were open about the difficulties we faced, whereas the Scottish National party wanted to keep them secret from the Scottish people.
It seems that the Chancellor has given up on doing anything. As I said last week, we are in the middle of a lost decade—it happened to Japan and it is happening to us now—and there is no sign that the Government have any idea how to get out of it. The Government’s Budget response on infrastructure is fine, but it does not come along for two or three years. On housing, I agreed with everything that my right hon. Friend the Member for Leeds Central (Hilary Benn), the shadow Secretary of State, said. The problem is that last week’s announcement is more likely to create yet another housing bubble by driving up asset prices. Indeed, some of it might even sow the seeds that gave rise to the sub-prime mortgage problem we saw in the United States, because we are suffering from an acute lack of housing in just about every town and city in the country.
I was encouraged by what the planning Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), said over the summer. Unless we break through this logjam and get more housing built, prices will go up and up and people will face the same difficulties they did in the past. The irony is that we are not prepared to build houses, but we are prepared, it seems, to finance the inflation of a bubble in housing prices. That is absolutely the wrong thing to do. The bedroom tax illustrates the problem; there simply are not the houses for people whose income is being cut to move to. That illustrates the need to improve our housing infrastructure, although the problem applies to transport and energy as well. I do not object to some measures in the Budget, but nothing in it is likely to get our economy going.
The hon. Member for Bury St Edmunds referred to the Bank of England and said that the Chancellor of the Exchequer had effectively said, “I can’t do anything further in fiscal terms. It’s all up to the Bank of England now.” Most Members have warmly welcomed the appointment of Mark Carney. I think he will be a very good Governor, but with the best will in the world we cannot expect him to do everything the Government are supposed to be doing. It is useful that we can tell the markets what we think will happen to interest rates. I suspect that most people do not expect them to rise for the next two or three years, although they might rise in the United States, given that the US Government are following a different policy from that being followed here and in Europe.
I do not think, however, that the sort of measures the Chancellor has in mind and which the new Governor might announce in relation to forward guidance will do the trick and get our economy going. I have said before that quantitative easing has played its role and stabilised the banking system—I have supported what has been done so far—but there is little evidence of what additional QE would do for our economy. The risk is that the money simply goes into the bank vaults, not into the wider economy. The Bank will play its part, but monetary policy and fiscal policy have to be complementary, otherwise they simply will not work.
Time does not allow me to mention the eurozone, other than to say that the last week has confirmed my suspicion that the eurozone is almost psychologically incapable of sorting out its problems. Unless it does so, it will hold back growth not only in this country, but elsewhere. At the same time, I am committed to this country remaining part of the European Union—that is very important—although we need to use our influence. Governments can make a difference. In 2008-09, through the G20, Governments from across the world, from communist China to the Republican-led United States, came together and we did what was necessary to support our economies. And guess what? Our economy was growing in 2010. Look at it now.
Mr Cunningham
It was the previous Conservative Government, and that has never been acknowledged, so the hon. Gentleman should not rewrite history.
Another interesting aspect of the present economic situation is that local government has taken the brunt—33.3%—of the cuts. People talk about growth, without realising that it is only through local government that growth will happen. It is worth noting that in the west midlands, for example, unemployment is probably the highest in the country with about 8.5% unemployed, while for young people up and down the country it is as high as 21%. Given those levels of youth unemployment over which this Chancellor is presiding, I think it is offensive when he talks about aspiration and the aspiration nation. The UK has the third worst level of youth unemployment in the developed world; of the OECD countries, only Spain and Greece have higher levels. Since the recession started, the UK has experienced the fastest rise in youth unemployment of the G8 countries.
Speaking about aspiration, the Chancellor is dividing people into “aspirants” who aspire to prosperity and others. It is as though he does not know or does not care that there is a national lack of job opportunities available to young people. It is simply disgraceful for the Chancellor to talk about aspiration when one in five young people leaving school might not find work. The Government need an extensive programme to create jobs for young people and should support them in finding those jobs and training them.
Let me deal with manufacturing. I have often spoken about the west midlands and its success in manufacturing, and I strongly believe that the manufacturing sector can drive local economies and boost growth. I was therefore alarmed at the Budget’s lack of discussion of manufacturing industry. The Chancellor’s only mention of it was his claim that for the first time in 40 years we are manufacturing for export more cars than we import. Well, that started under the Labour Government and certainly not under the present Government. The Government try to take the credit for the success of Jaguar Land Rover, but Labour Members know that the previous Labour Government supported that industry.
Mr MacNeil
Will the hon. Gentleman take this opportunity to congratulate his old friend on these green Benches—Alex Salmond—on presiding over youth unemployment in Scotland that is at a 20-year low, recently going down from 25% to 17%?
Mr MacNeil
It is reputed to be the world’s most onerous tax on air travel, and I am sure the hon. Gentleman will agree that it is damaging Scottish airports terribly.
Mr Donohoe
I do agree with the hon. Gentleman on this occasion; it is not very often I can say that. The Government are doing absolutely nothing for air passengers, the aviation industry and those who work in it. They continue with this tax, while our competitors throughout the world are laughing at us. The Government are prepared to examine other measures, but not the tax that affects not only my constituency but others throughout the United Kingdom.
The Chancellor says that he wants to boost house building, but how is the bedroom tax going to help to do that? Surely it will add to the confusion about the sort of housing stock we require. I predict that it will be worse than the poll tax for people in my constituency; indeed, I am already seeing signs of that. It will prove to be the Government’s Achilles heel, just as the poll tax was for Margaret Thatcher.
Future growth forecasts have had to be revised, and the Office for Budget Responsibility says that in 2015 most people will be worse off. All in all, the Budget offers the British people nothing other than more of the same failed policies of the last three years. The approach simply is not working, and the Government should own up to that and change tack today, for the sake of the UK economy as a whole.
Reflecting on it, this is the worst Budget I have witnessed since being elected in 1992.
Alok Sharma
My hon. Friend is absolutely right about that proposal, which will help not only my local area, but other areas. It also advances the whole aspect of localism, on which this Government are very keen, as I am. As I was saying, companies in my constituency have decided that it is time to start investing, and I hope that many others up and down the country will follow suit.
Mr MacNeil
The hon. Gentleman says that some companies are starting to invest, but is that not related to what Keynes and, latterly, Paul Krugman have said: in the absence of government doing anything substantial, recessions will sort themselves out in the end, but years of unnecessary pain will have been experienced by many people because of government inaction or wrong policies?
Alok Sharma
Thanks to the measures taken by this Government, the deficit is coming down, we have record employment and interest rates are at record lows. I would have thought the hon. Gentleman would welcome all those things, just as businesses in my constituency do.
The Chancellor made the point in his Budget statement that for the first time in more than two decades we are exporting more goods to non-EU countries than to EU ones, and I welcome that. The right hon. Member for Edinburgh South West (Mr Darling), for whom I have huge respect, said that there is no growth, but, as he well knows, there is growth; we are expanding our exports to some of the world’s key economies, which is a result of the policies that this Government have put in place and of the good work being done by UK Trade & Investment and the Foreign and Commonwealth Office.
Small and medium-sized businesses still tell us that there is a fear factor when they are looking to enter new markets. UKTI and the FCO have been great at targeting high-growth nations and opening new offices, but we need to turbo-charge that expansion. We need not only to target three, four or five cities in these huge economies such as India and Indonesia, but to go into the 15 or 20 top tier 1 and tier 2 cities. In those economies it is not only the national Governments who make decisions; the state governments make many of the big decisions on investment, which is why we need to turbo-charge our approach and get these offices across these countries quickly. The Government, together with UKTI, should provide practical help by taking on office space in these key cities, basing sector experts from the UK Government and UKTI there, and working with local enterprise partnerships to get out there and allow SMEs low-cost desk and office space for three, six or 12 months. The synergies that will be created as a result of all these companies coming together in one location, with sector focus and where we can also get local advisers involved, will do a huge amount to boost our exports. We want to go from having one in five SMEs exporting to having one in four, which is the European average. That will add billions of GDP to our economy. UKTI is doing a great job with the headstart scheme, but we need to build on such initiatives.
The final point I wish to make is about the local Labour party in Reading—
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
I am grateful to follow the hon. Member for Coventry North West (Mr Robinson). I think it was the late Harold Macmillan who talked about economists telling people this and that, and about statistics. However, there are some realities in this Budget, which other Members have referred to, and I will also do so in terms of the impact on my constituency.
Let me begin with the general point about the £10,000 income tax threshold for next year. That is reality; that is not statistical. It means that next year, 4,000 individuals in my constituency will not be paying tax. More important for hon. Members to understand is the fact that the average total family income across Lancashire is approximately £26,600, and next year those people will pay no tax on their first £10,000 of income. To me, that is a huge selling point in increasing confidence. People will be able to go out to work and the Government will promise that we will not touch the first £10,000. It seems remarkable that we are in such a state that we can say that that is marvellous, but compared with what has gone on before it is extremely good news for constituents across Lancaster and Fleetwood.
Fuel duty has been frozen. In a huge rural area such as my constituency, where people have no choice, whatever their income, but to be dependent on their car to travel to work and to the shops, the ending of Labour’s plans to increase fuel duty provides massive support for the local economy.
There is the new employment allowance. Most businesses in my area are small, made up of two or three—if not six—people. The national insurance promises in the Budget will be a massive fillip to new employment and to encouraging people to get out there, set up their own business and start moving with the support of this Government.
Hon. Members will bear with me while I discuss a local theme that they would expect me to mention: shale gas. Many hon. Members have looked at shale gas as the great nirvana and something that will fill the energy gap, but that will affect Lancashire. Let me underline yet again that we in Lancashire are still not satisfied that the regulatory regime is right. We welcome the Chancellor’s commitment to an office for unconventional gas and the tightening up of those regulations, but people in Lancashire need to see that the regulations are thorough and tight. Given that farmers still take water directly from the water table through boreholes, Members will be able to imagine the worries in parts of my constituency.
More important than that is the question of who will earn money from shale gas. Lancashire people are quite generous, like me, in their commitment—[Interruption.] Well, we are far more generous than the people from the other side of the Pennines. We are generous in our commitment to the United Kingdom and in our willingness to support it, but as the law stands, the people who own the land, including the farmers on whose land this fracking might—I still say might—take place will earn precious little from it.
Mr MacNeil
Is the hon. Gentleman advocating an equivalent to a sovereign wealth fund for Lancashire? That was the source of the reason why all Norwegians feel they own the oil; is there a similar feeling in Lancashire towards this gas?
Eric Ollerenshaw
The hon. Gentleman anticipates me and for once—in fact, not for the first time—we agree. If Lancashire is to be used to fill the energy gap and if Lancashire will see fracking across the county, we need to understand that it is not Texas and landowners in Lancashire do not own the mineral rights. The Chancellor will gain through the tax system, companies will gain through their profits and, presumably, the Duchy of Lancaster or the Crown Estate will gain through the tax on mineral rights, but the local councils will gain precious little. I was pleased that the Chancellor said in his Budget that there would be specific proposals to allow local communities to benefit, but I tell the Ministers on the Front Bench that Lancashire expects more than one or two parish hall roofs to be fixed. We want to see something that will return money to Lancashire when the gas has been fracked, if that fracking is to go ahead. I need to make that clear.
Finally, on infrastructure, hon. Members talked about growth. For me, the key point was the Chancellor’s phrase about “clearing the economic arteries”. In the north-west, that means something substantial and we have had that from this Government. We have had the biggest investment in rail for the last 30, 40 or 50 years. It was all right Opposition Members saying that that would happen in future—it is happening now. I point to my own station in Lancaster, where £8.5 million is already being spent to vary the signalling so that trains can turn around in Lancaster and more platforms can be used. That is the small-scale work. Only last week, the Department for Transport finally agreed the M6 link road, which will be a bypass for Lancaster to the port of Heysham. It will bring thousands of jobs through a scheme for which the first plans were produced in 1948—that is perhaps a lesson to us all. It has taken this coalition Government to agree the money to get things moving and get the growth.
As the Secretary of State mentioned, there is still a great deal more for local councils to do. I am pleased that the Conservative councils in my area, Wyre borough council and Lancashire county council, have kept the council tax frozen. Not only that, but Lancashire has cut it by 2%—
Anas Sarwar (Glasgow Central) (Lab)
The Budget the Chancellor delivered was not the Budget that my constituents or the city of Glasgow needed. The Budget Glasgow needs is one that gets the economy moving, helps people back into work and looks after the most vulnerable in our society. Instead, the Government are willing to give millionaires a £40,000 tax cut at the same time as 17,000 Glaswegians will have to cope with the impact of the bedroom tax. Thousands more will have to mitigate the damage to their family budget of the cuts to child tax credits, cuts to working tax credits and drastic cuts to the local services that many people rely upon. Wages are falling, jobs are being lost, household budgets are being squeezed and there is still no sign of a rethink. Just when will the Chancellor wake up and smell the Starbucks coffee?
Anas Sarwar
I will give way to the hon. Gentleman. He has made many interventions, so let us hope that this one is sensible.
Mr MacNeil
Is the hon. Gentleman not disappointed, and should he not be ashamed, that he supports a Westminster Government over independence, so we have the bedroom tax imposed on Scotland? If he supported independence, we would not have the bedroom tax in Scotland at the moment.
Anas Sarwar
That shows us the myth of the Scottish National party. The hon. Gentleman says that the only way to stop the bedroom tax is independence; the bedroom tax will be introduced on 1 April 2013, but according to the SNP timetable, independence day will be 31 March 2016. Members can work it out for themselves.
Plan A clearly is not working. For some time, the Opposition have been calling for additional infrastructure investment to boost the construction sector and we have been urging the Government to act. The Chancellor could have used the funds from the 4G auction to build 100,000 affordable homes, stimulate the economy and help tackle the housing crisis, but instead he decided that public services and public sector workers should bear the burden. Not content with imposing a 1% pay freeze until 2015, he has extended it to 2016. Given the rate of inflation, that is an effective pay cut for hundreds of thousands of people across the country.
With 80,000 construction workers out of work, construction output has fallen by 8.2%. The Government announced an extra £225 million for affordable housing, but only £125 million of that will be spent before 2015 according to the OBR, and it is dwarfed by the £4 billion cut in funding for affordable housing that the Chancellor made in his first Budget. Even after that investment the coalition Government’s record will still be a cut of around £10 billion in infrastructure projects.
It says everything about the Government’s attitude that they cut real-terms pay for millions of public sector workers, while giving the green light to slash corporation tax for big business. Research by the House of Commons Library, published today, confirms that the reductions in corporation tax will cost £29 billion in total, £10 billion over the life of the current Parliament alone. That policy enjoys the full support of the Scottish nationalists, who want to see a future independent Scotland at the front of a race to the bottom, a low tax country with an economy like Iceland—or perhaps like Ireland. I have not seen the latest Scottish Government press release, so I do not know which country they are modelling their assessment on this week.
Anas Sarwar
No, I am suggesting that while people across the country—especially the most vulnerable—see their household income slashed and the poorest people are having to live in more difficult circumstances, the Government see their priority as giving millionaires a tax cut and cutting taxes for the biggest businesses in the country. I know whose side I am on. I am sad to say that I know whose side the hon. Gentleman is on, and I am sure people will punish him appropriately come the next general election.
Anas Sarwar
I have given way twice already, but if I have any spare time at the end of my speech I might let the hon. Gentleman entertain the House.
The Chancellor claimed the Budget showed he was on the side of people who want to get on; instead it has shown just how out of touch this Government really are. The low-paid workers the Government say will pay less income tax will still be worse off at the end of the month, when that saving is clawed back many times over—clawed back through VAT, clawed back through cuts to tax credits and clawed back from thousands of my constituents through the scandalous bedroom tax.
Yes, the Liberal Democrats can celebrate lifting the threshold to £10,000, but household income for many families in that bracket will fall as a result of the Government’s measures. At the same time, the value of an average worker’s pay has fallen by more than £1,000 and persistently high inflation continues.
In these difficult economic times, the Chancellor should certainly accept our proposals for the funding for lending scheme to be enhanced to target small and medium-sized enterprises better by rewarding banks that expand SME lending regardless of their mortgage book. Now is the time when our banks should be supporting SMEs, not hitting them harder. Throughout my constituency, whether I am speaking to small or large businesses, they all make the same complaint: the banking sector is holding back investment in this country, not promoting it. If we can get our banks lending again and get people investing, we will get more people back to work and see growth and regeneration in some of the hardest-hit communities.
The Chancellor should seriously explore our proposals for new regional banks that are committed to their regions and in touch with local business, making it easier for firms to secure the capital investment they require to create the growth and jobs Britain needs. Sadly, my constituents continue to suffer, trapped between this coalition Government, who continue to look out for the wrong people, and a Holyrood Government, who are distracted by their referendum obsession and happy to double Tory cuts and pass them on to local government, washing their hands of all responsibility and removing £250 million from Glasgow’s economy. We heard earlier from one of the SNP Members that we should recognise that the fall in unemployment was thanks to action taken by the Scottish Government. It is amazing that when unemployment goes up, it is all Westminster’s fault but when it goes down it is all thanks to the Scottish Government. It cannot be both.
The reason why I and countless others in the House went into politics was to help build stronger communities, not to use the poorest and most vulnerable people as electoral or political dividing lines, writing off millions of people as a drain on the economy for electoral advantage. We want to help to create a sustainable economy to fund world-class public services, ensure that society’s resources are distributed equitably and protect the most vulnerable people in our communities.
Last Wednesday I sat and listened to the Chancellor lay out his vision for the coming years. It is a vision that I and, I am confident, the majority of people in Britain reject.
Mr MacNeil
The hon. Gentleman said that we cannot have new homes unless there is a market for them, but the problem is not the market but price and affordability; it is the supply of homes.
Richard Graham
That is precisely why the help to buy scheme, which guarantees 20% of deposits on new homes, will make a significant difference.
There is one aspect on which I agree with the right hon. Member for Leeds Central and on which I hope the Government will be able to move faster: the need to restructure some of the arm’s length management organisations that provide social housing and enable them to use their balance sheets to build and regenerate, rather than just adding to the public sector borrowing requirement. My right hon. Friend the Financial Secretary to the Treasury knows well that I hope that that will move forward fast, and that discussions between the Homes and Communities Agency, the Department for Communities and Local Government and the Treasury, which have been ongoing on for almost 18 months, will move forward swiftly so that we can deliver new housing in the social sector to my constituents as soon as possible.
New housing worked in the 1930s and 1950s and it can work today, so let us get on with it and build those new homes as soon as possible so that the economic growth that the Centre for Cities research anticipates can happen as soon as possible. I will be supporting the Budget to achieve that.
Budget Resolutions and Economic Situation
Angus Brendan MacNeil Excerpts(11 years, 8 months ago)
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The Secretary of State for Business, Innovation and Skills (Vince Cable)
I am delighted to speak in support of the Budget and thank the shadow Chancellor for 35 minutes of pantomime. More worryingly for me, I occasionally read in the newspapers that we agree with each other; I am not sure whether he regards that as a bigger slander than I do. I have been trying to find out what it is that I am supposed to agree with and to understand what actually is his plan B. A quick search revealed seven different variants of plan B. In fact, that is almost certainly an understatement, because the shadow Chancellor has had more positions on the economy than there are positions in the “Kama Sutra”.
Let me run through some of the variations that we have heard from the shadow Chancellor over the past couple of years. He started with the big stimulus to the economy that was going to come from the bankers’ bonus tax, which would have imposed a £2 billion tax on a tax base—a bonus pool—of £1.6 billion. He had not realised that, since his time in charge of the City, the bonus pool had shrunk from £14 billion.
The shadow Chancellor then moved on to the five-point plan, which was mostly pretty sensible. It included apprenticeships, which we are already doing on a much bigger scale. He also wanted, I think, £200 million for the regional growth fund. Well, we have given it billions, not hundreds of millions. He then moved on to the reallocation of the money from the 4G auction sale, but it had already been allocated—I have already spent quite a lot of it.
We have now moved on to trying to understand what plan B actually means today. As far as I can fit it together, it consists of several elements, including a big stimulus from a value added tax cut, stopping Government spending cuts and, somehow out of the alchemy, reducing borrowing. I have tried to work out how this plan was created and am struck by its similarity to the economic strategy being developed by Nigel Farage, although I may be doing the UK Independence party a disservice.
The shadow Chancellor and I have a serious interest in economics. Before we discuss how to deal with this crisis, we have to try to understand how it originated. I think that most serious economists, whether they are in the Keynesian tradition or not, would acknowledge that this is not a cyclical recession. It is what is now called a balance sheet recession, and in order to understand how that happened we need to understand why the balance sheet got so big in the first place and why private sector deleveraging is now happening on such a massive and damaging scale.
This is an uncomfortable set of questions for the shadow Chancellor because, among other things, he has to explain the following. Why was it that in the 50 quarters of growth without inflation, nobody noticed the massive asset bubble in residential and commercial property, which has since burst? He has to explain why households in the UK, which have become heavily over-leveraged, managed in that period to acquire the highest level of personal debt in relation to income of any country in the developed world. He has to explain why a medium-sized bank in Scotland was encouraged and actively supported by his Government in trying to become the biggest bank in the world on the basis of dodgy acquisitions and gambling in its casino operations. He also has to explain why, when his former boss commissioned an excellent study on the banking system in 2000, which explained why there was a cartel operating that was squeezing the life out of small business, his Government did absolutely nothing about it.
We have a major economic crisis caused by balance sheet deleveraging, arising out of a major financial crisis. One would have thought that those on the left would want to talk about a crisis of financial capitalism, but they do not want to talk about it at all. In fact, the shadow Chancellor has a striking resemblance to the lead character in “Fawlty Towers”. Colleagues may remember the episode in which he goes around with great indignation, wanting to have an animated conversation about Germany, but nobody wants to talk about the war. The shadow Chancellor wants to talk about the economic crisis, but not the financial collapse that he presided over.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The right hon. Gentleman has talked about an asset bubble. What is the Chancellor’s mortgage scheme, other than the hope of an asset bubble to get him out of trouble? What growth or capacity would that add to the economy? The problems of this economy will not be answered by yet another asset bubble. What are the Government trying to do? All that their scheme will do is create another asset bubble.
Vince Cable
There are two elements to the Chancellor’s housing package. The first is the development of the FirstBuy scheme, which will provide £3.5 billion for shared ownership. That has been widely welcomed because it will increase the demand for housing and get the housing market going. The other, more ambitious scheme is a form of insurance for mortgages, which has been very successfully applied in Canada, for example, where it prevented a collapse of the market of the kind that occurred here and introduced greater stability. The Chancellor is now consulting on how that scheme should be designed, which is absolutely right.
Vince Cable
My colleague is absolutely right. He reminds us of two things that the Government have done. One is the freezing of petrol duty. The other is the allowance for remote communities, which he ably represents, as does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).
Mr MacNeil
Does the Secretary of State agree that the rural fuel derogation should be increased? A 5p cut is not enough; we really need a 10p cut. I am sure that the hon. Member for Argyll and Bute (Mr Reid) would agree with me.
Vince Cable
I am sure that we would have free petrol in a perfect world.
Let me deal with some of the points of economic substance that have been raised. The first was about job creation. It is true that in the last set of figures there was a very small increase in unemployment. However, that happened against the context of the last three months, in which 130,000 new jobs were created, vacancies rose and redundancies fell. In this Parliament, we have created 1.25 million new private sector jobs. It is difficult to understand why, if the economy is performing as badly as the shadow Chancellor claims, a large number of new private sector companies are creating jobs in that way. There are regions of the country, such as the west midlands, that in the boom periods saw a decline in private sector employment. That is now being comprehensively reversed.
The question put by my hon. Friend the Member for Portsmouth North (Penny Mordaunt) is apposite: why does the Labour party think that 600,000 jobs are being predicted by the OBR in the coming year? We got the ludicrous answer that it has something to do with immigration, but immigration is about the supply of labour, not the demand. Where is the demand coming from, other than a favourable business environment that encourages small companies to establish and grow jobs?
The Economy
Angus Brendan MacNeil Excerpts(11 years, 11 months ago)
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Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The right hon. Gentleman will know that the rebate scheme has been a success. When will mainland areas of Scotland be included? There are already such schemes in continental mainland areas, so why is there a delay in its introduction in mainland Scotland? Areas such as Caithness, Sutherland and Argyll need it—and need it quick.
Danny Alexander
I am grateful for the hon. Gentleman’s endorsement of the current scheme as a success. I hope he will spread the word to his constituents and ensure that the credit goes to the appropriate place.
To win the argument at European level for an extension of the scheme, we must pass the same test and provide the same evidence to justify including such remote areas. We are working with local authorities in various parts of the country to gather evidence to support our case. As the hon. Gentleman will recall, we must take that evidence to the European Commission. If it approves our proposal, it must in turn be approved by all 27 EU member states. There are a number of hurdles and a significant process to engage in to gather evidence.
Danny Alexander
If the hon. Gentleman will forgive me, I will make progress. Many hon. Members wish to speak in the debate.
There has been good engagement between the Treasury and the FairFuelUK campaign, which has pressed its case very strongly. I welcome its engagement.
The Government are on the road to cutting the deficit we inherited, but we are also building a fairer society. The distributional analysis that we publish shows that that continues to be the case, despite the tough choices we have made. It is worth pointing out that, under the previous Government, the Treasury never published detailed distributional analyses of its decisions, but under this Government the Treasury publishes them at every fiscal event. The analyses show that the top 20% of households continue to make the greatest contribution. In fact, the cumulative impact since the June 2010 Budget of tax, tax credit and benefit reforms shows that households in the top 10% see the greatest reduction in their income, both in cash terms and as a percentage of net income or expenditure.
Danny Alexander
I am grateful for the hon. Lady’s support—I take support from wherever it comes these days.
The Government have taken sensible further steps to restrict pensions tax relief. The decisions the Government are taking are not easy, but as a country we must live within our means. The scale of the problems this country faces means that the period of fiscal restraint must continue for longer. That is why the Government will shortly set out spending plans for the financial year 2015-16. I will carry out a spending round in the first six months of next year to set those budgets and ensure that we continue to build a sensible long-term plan for the country’s finances. We will need to find an extra £10 billion of savings from Departments in the spending round. That will mean more difficult choices, but they are also responsible choices as the coalition continues to work to restore stability to the UK economy.
We have heard this afternoon and in Question Time that some criticise the autumn statement. The division in British politics is very clear. Government Members live in the real world. We understand that times are tough and that there is no endless supply of money, and recognise that the right and responsible action is to take the difficult decisions to ensure we can live within our means. Labour Members appear to live in a fantasy world. They still believe that they ended boom and bust, despite the events of the past five years. They still refuse to apologise for the mess they created and fail to be honest with the British people about the tough decisions that any party in government would have to take.
It will come as no surprise to hon. Members that I will not take advice from the Labour party, which wrecked our economy because it allowed the country to become too dependent on revenues from the City of London and paid too little attention to the rest of the country. Labour insulted pensioners up and down the country by increasing the basic state pension by 75p, and insulted 5 million of the lowest-paid workers by increasing their income tax bill with the abolition of the 10p rate.
Danny Alexander
I will not give way—I will finish my speech shortly.
The Labour party thought it was right that private equity managers should pay a lower rate of tax on their earnings than the person who cleaned their office, and insulted hard-working people and businesses up and down the country by failing to crack down on tax avoidance and evasion in 13 years in office.
This Government face some of the most serious decisions we have had to make in our recent history. We are recovering from a decade of debt, we inherited the largest deficit since the second world war, and we have had to face a multitude of problems abroad. However, we continue to take simple, sensible steps towards recovery. We continue to build a strong, sustainable economy and to build a fair society. I commend the autumn statement to the House.
Rachel Reeves
Thank you, Madam Deputy Speaker. Perhaps the hon. Gentleman did not like the answer to his intervention. Fair enough—I would not be pleased to hear that my Government were spending an extra £14 billion on welfare because of their failure.
This year the economy will shrink by 0.1%. The Chancellor’s two gap years—two years of painful cuts, more borrowing and no growth—are a shocking indictment of a failed plan. He stands up and tells the nation that the British economy is healing and that he is equipping Britain to win in the global race, yet over the 24 months since the spending review the UK economy has grown by just 0.6%. In the same period, the US economy grew by 4.1% and the German economy by 3.6%. Helpfully, the International Monetary Fund’s world economic outlook data allow us to put together a league table of 184 countries based on total growth between 2010 and 2012, so we can now analyse our performance in the global race that he describes with this Government at the helm. Of those 184 countries, where do Members think Britain comes? We are 158th. It is a relegation battle. We are behind Togo and Namibia, Albania and Macedonia, but there is no need to worry—apparently we are hot on the heels of Mali, Samoa and Fiji! We are the worst performing G7 country, apart from Italy. In the global race, Britain is well and truly in the slow lane with this Chancellor at the helm.
Mr MacNeil
Does the hon. Lady agree that the context she has rightly given the House is the reason the Scottish referendum on independence will be won in 2014?
Rachel Reeves
I will let the good people of Scotland make their decision when the time comes, but I believe that we are stronger together—stronger united than divided.
The worst aspect of the Chancellor’s two wasted years is the long-term damage being done to our economy. Every month of inaction, every failed initiative and every growth forecast downgraded is another hammer blow to the work force, our businesses and our national infrastructure. The skills and motivation of British workers are going to waste, with one in three of our 2.5 million unemployed out of work for more than a year and 3 million of those with jobs wanting to work more hours, but unable to find the work. In reality, we are falling behind, and the Chancellor has nobody to blame—not the snow, not the royal wedding, not the eurozone.
I agree with the chief economist of UBS, George Magnus—[Interruption.] [Hon. Members: “He’s gone!”] Obviously the hon. Member for Spelthorne (Kwasi Kwarteng) does not want to hear what the chief economist of UBS has to say. I will send him a copy of Hansard. George Magnus said that the Chancellor’s excuse
“falls under the category of ‘Sorry Miss, the dog ate my homework’”.
He also said that
“the problem I think that the Chancellor has with the eurozone is that we are just like them. We have this single-minded focus on austerity and the lack of growth is basically crippling our ability to meet our fiscal targets.”
I agree that the Chancellor and his economic plan are to blame. Two and a half years of austerity, two and a half years of this Chancellor, and what do we have to show for it? We have no growth, more borrowing and a tragic waste of time. [Interruption.] It is good to see the hon. Member for Spelthorne in his place again.
A year ago the IMF warned:
“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example…the United Kingdom) should also consider delaying some of their planned consolidation.”
At that time the IMF was predicting 1.6% growth this year; now the OBR tells us that the economy is more likely to shrink by 1.6% this year.
Mr Darling
I will address that point later. It is an important point, and I do not believe we should just sit back and hope that growth returns. The shadow Chancellor and many others both inside and outside the House also do not believe that the Government’s approach is right.
We are heavily dependent on money that is coming in from a financial transaction. In addition, the OBR has now found that by 2016-17 our revenues will be £30 billion less than it forecast in March. That is a huge gap, which will have to be filled.
What should we do? Whenever the Opposition suggest that perhaps the Government could do a little more, the Government parties—the Conservatives and Liberal Democrats—always say, “That’s all about borrowing more.” This Government are borrowing £212 billion more than they said they would not because we are spending money on projects and so forth, but because of failure—because our revenues are down. That is why we have got this gap.
When we eventually have a recovery, this country will need infrastructure. Over many years, we spent a lot of money on transport and energy. That was the sort of spending the Government say should not have been made, but we now know it was desperately needed, and we need to invest more in infrastructure, as well as get debt and borrowing down. We must invest in education, too.
On energy, the Government’s policy is completely contradictory. We are getting different signals every day of the week. On transport, I say again that it is not good enough to have no airport policy until halfway through the next Parliament, when we will not be able to do anything as another election will be coming up. That is not the right signal to send to our country, let alone the outside world.
Investing more in infrastructure projects would be one way to get confidence back. Confidence was trashed two years ago. If anyone were running a business now, would they hire more people or open a new production facility? No, they would not, because it appears that the economy will be bumping along the ground for another five years or so. I again remind Members of what has happened to Japan. People say, “We would never be like that,” but Japan has had non-existent growth for 15 years.
Mr MacNeil
Some commentators—at one time Ben Bernanke, and lately notably Paul Krugman—have talked about higher inflation targets for Japan, and also for the UK and other countries that are suffering a downturn. What is the right hon. Gentleman’s opinion on that? Does he, too, support higher inflation targets as a way of stimulating recovery?
Mr Darling
There is a lot of debate about that issue. I do not have the time to address it in detail, but I have said—including in a programme that will be broadcast tonight—that I think the Bank of England needs to examine its role, because for a long time we have said its job is purely to target inflation, yet central banks across the world are now also targeting growth, and perhaps we should consider whether we should formalise that role. Mark Carney was an excellent choice as the next Governor, and I hope he will think about that.
Talking about Governors, the current Governor, Sir Mervyn King, made an important point in New York last night when he talked about the G20, which had done so much at the height of the crisis in 2009, showing the determination that people expected in order to prevent the entire world economy from going over a precipice, and said that that spirit was now dead. He is absolutely right about that. It is important that we in this country, along with President Obama, now that he has been re-elected, look again at what we can do collectively as part of the global community to try to get the world economy not only to resolve some of the problems we face, but get growth going again.
That inevitably takes me on to Europe and the eurozone, because it is a tragedy that a legal structure and an economic structure that could do something about getting growth going again is simply failing to do so. Greece is not sorted out yet; another attempt was made a couple of weeks ago, but as far as I can see it leaves Greece with even more debt than it had. Until the Spanish banks are bailed out, they will simply hold back the whole of the eurozone, and the sooner Spain goes to get the bail-out it needs, the better it will be. Then we need to deal with the question of austerity. Austerity on its own does not work. Those who are interested may wish to know that there is an interesting article by Olli Rehn, the economic Commissioner, in today’s Financial Times, in which he just asserts that it is going to work, in the same way as this Government assert that austerity is going to work—frankly, I do not see it. We need to use our engagement in relation to the eurozone and to the European Union to try to persuade countries that unless they act together, in the same way as we did three or four years ago, although in a slightly different context, we and the eurozone countries are simply going to bump along on the bottom for years. If that is the case, the human cost is that we are condemning tens of thousands, if not hundreds of thousands, of people in this country, and perhaps millions of people in the European Union, to unemployment and low standards of living. If we do that, future generations will never forgive us.
Kwasi Kwarteng
Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.
That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.
Mr MacNeil
Can the hon. Gentleman tell us for how many years since 2001 the UK has been able to pay its way?
Kwasi Kwarteng
I can answer the hon. Gentleman very directly. With reference to our public finances, we have been borrowing money every year—every single year. It is likely that even if we are able to eliminate the structural deficit by 2018, this country will have seen nearly 20 years of continual deficits. This is an appalling legacy that Labour has left the country. Since the end of the second world war, we have never run 20 years of continual deficits, which we will do as a consequence of Labour mismanagement and old-fashioned incompetence.
Mr Weir
The Scottish Government have been putting more and more money into capital investment. [Interruption.] It has not been decreasing. They have been putting money into capital investments that matter, despite the overall budget from Westminster having been cut.
The Scottish Government have been taking the action that the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), called for earlier. In June, they announced a £105 million package of investment for so-called shovel-ready projects. Conventional capital investment has been boosted by a £2.5 billion pipeline of infrastructure projects that is being delivered through the non-profit distributing model. The Scottish Government recognised long before the current Chancellor did that the model of private participation in infrastructure was fundamentally flawed, although Labour does not seem to have cottoned on to that yet. A total of £700 million has been switched from the resource to the capital budget to support capital investment. The Scottish Government are supporting a range of innovative finance initiatives such as the National Housing Trust.
It appears from what he said this afternoon that even the former Chancellor has changed his original views and now supports the increase in capital expenditure on infrastructure, although that has not prevented his Labour colleagues in Scotland from continually attacking it; such is the way of politics, I suppose. Indeed, their leader has announced a cuts commission—an initiative whose only backers appear to be their friends in the Better Together campaign, the Conservatives.
Mr MacNeil
Has my hon. Friend noticed, as I have, that the main cheerleaders for Labour in Scotland’s cuts are the Tories in Wales, who welcome them on board with the same ideological baggage?
Mr Weir
My hon. Friend makes a good point. The Conservatives in Scotland have also supported the cuts commission, so it appears that they are all cutters together rather than better together.
The SNP Government in Scotland have been very active in ensuring that we rebalance our economy with investment in new green initiatives. The Government down here often talk about that, but we have seen little evidence of it. Indeed, the proposals in the Energy Bill give cause for concern about the way in which this Government look at green investment and whether there is to be investment in new green energy or whether the Treasury is winning the battle and we are going down a different route.
This is important to Scotland because the renewables industries now support more than 11,000 jobs in Scotland, and that figure is growing. There have been significant investments in green energy. Gamesa chose Leith for its new UK offshore wind manufacturing plant, which will create up to 800 jobs. Burcote Wind has announced plans for a £l billion investment creating up to 600 new jobs. Global Energy Group has announced that Nigg skills academy will deliver training for up to 3,000 people over three years. Scottish Power has announced the creation of 300 skilled jobs as part of a £5 billion investment in Scotland’s grid, and it is also investing £6.5 million in grass-roots skills development.
Autumn Statement
Angus Brendan MacNeil Excerpts(11 years, 11 months ago)
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Mr Osborne
My hon. Friend has been a powerful advocate for a more competitive business tax system in this country, and we have reduced again the headline rate of corporation tax. That makes it even more of an advantage for companies to headquarter and pay their taxes here, and it is part of what we are doing to win the global race. I congratulate him on the advice and support he gives in this area.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
It is good to hear a UK Chancellor say that the private finance initiative is discredited—10 to 15 years after the Scottish National party did so. It is good, too, to hear of his belated conversion to some capital expenditure for shovel-ready projects—we wasted a couple of years by not listening to the SNP. We have had lost years of ever-growing debt paying for failure rather than growth, and that is projected to last until 2018. I wonder whether the Chancellor will introduce some competition to his job and perhaps return economic powers to Scotland, so that the Scottish Government can show him how it is done and get us out of the mess a little quicker.
Mr Osborne
The steps we have taken today, for example, to provide additional capital spending in Scotland, show the strengths of Scotland’s being part of a United Kingdom that is able to borrow money on world markets at exceptionally low rates. The SNP has still not answered the most basic questions about currency, about monetary policy management, and about the cost of debt and the like. Until the SNP can answer those fundamental questions about economic management, I do not think anyone is going to trust it with taking over control of that entire economic management through independence.
Public Service Pensions Bill
Angus Brendan MacNeil Excerpts(11 years, 11 months ago)
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Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Does the hon. Gentleman agree that, if the Scottish Government can find the ways and means to fund their pensions, they should be free from penalties from the Treasury at Westminster?
Chris Leslie
That comes down to how the legislation is drafted. There are different financial consequences for local government pension schemes than for other public service pension schemes. That is why we need clarity in the legislation. I am conscious that the Scottish National party Government in Scotland have argued that there is no need for a legislative consent motion to cover the matter because, in theory, the UK Parliament always had primary legislative power over the local government pension scheme in Scotland but has hitherto chosen not to use it. The Government in Scotland have been quick to accept the UK’s proposals, which is unusual, because they normally argue that more power should sit with Holyrood. The movement of the regulation-making powers means that the Scottish Government will not need to grapple with difficult decisions on the reform of certain pensions, but the Opposition feel it would be better for Members of the Scottish Parliament to have an opportunity to scrutinise and debate the application of the legislation to the local government pension scheme in Scotland. Amendment 11 to clause 3 would mean that the Bill would not apply to the local government pension scheme in Scotland unless that is explicitly approved by the Scottish Parliament. The hon. Member for Banff and Buchan (Dr Whiteford) and others have tabled parallel amendments—I gather they are in the third group, so we will probably return to this debate later.
Amendment 12, which is in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), relates to another key Government promise made to public service workers. It seeks to enshrine in the legislation another Government promise made to public service workers—the Government promised that their final salary schemes would be replaced with career-average revalued earnings schemes. That would ensure that public service workers continue to receive a defined benefit pension.
The Bill does not explicitly honour that promise, and clause 7 provides that schemes created under the Bill can be defined benefit or defined contribution schemes, or any scheme of any other description. That is fundamental to the arguments on the Bill, but it is also fundamental to the arguments that Hutton made and the agreements that were reached. All schemes were supposed to be succeeded by career-average defined benefit schemes. In some cases, the Government might like to continue small defined contribution schemes, but the amendment would not affect those; it would apply only to final salary schemes and ensure that they are replaced with another defined benefit arrangement. The amendment therefore simply seeks to put the Government’s promise to public service workers on a statutory footing.
A similar amendment was opposed in Committee, but the reasons given by the Minister were concerning. He claimed that the Government intended to replace the final salary schemes with career-average schemes, but that “the flexibility embedded in” the Bill
“could be helpful to scheme members in future.”
He added that
“it would not be appropriate for this Government to tie the hands of future generations and pension scheme members who might decide that, subject to the protection offered by the enhanced consultation and reporting obligations of clause 20, defined benefit schemes were no longer the most appropriate for public service workers.”––[Official Report, Public Service Pensions Public Bill Committee, 13 November 2012; c. 291-92.]
That is not the first time we have heard the Minister’s bizarre argument that legislation could bind the hands of future Governments. No Government can bind the hands of their successors in that way. Unless the Minister has an insight into changes in the democratic process of which we are unaware, that remains absolutely the case.
Therefore, the argument that clause 7 provides welcome flexibility to scheme members now or in future is, in the Opposition’s view, potentially misleading. In the rare circumstances that a defined contribution scheme is better than the defined benefit one, and scheme members and the Government wish to change schemes to defined contributions schemes, clauses 19 and 20 allow that to happen. Clause 7 provides no flexibility that does not exist in clauses 19 and 20. If we do not make the amendment, we allow the Government to go back on their promises. We seek to keep them to their word on those arrangements.
I know that many hon. Members wish to speak to proposals in this large group, so I shall make my final point on the question of closing local government pension schemes. My hon. Friend the Member for Corby (Andy Sawford) and the hon. Member for Finchley and Golders Green (Mike Freer), among others, have had extensive experience of local government schemes. In Committee, there was anxiety that the Bill mentions closing existing LGP schemes and beginning new ones. The problem with closing schemes is that there can be unintended and adverse consequences. We heard in Committee about triggering debts which might need to be crystallised on closure. Of course, not just big local authorities but small academies, charities and others are members of such schemes. They might find that they suddenly need to shell out one great lump of money simply because an existing scheme closes and the deficit needs to be dealt with there and then.
The Minister assured us that regulatory provisions did not require such crystallisation, and that there could be protections. The Opposition are not massively happy with that, but even if we accept the Minister’s word that closure does not mean closure, thousands of employers in the local government pension fund have individual admission agreements governing the terms of their participation—the agreements are not necessarily in a standard form, meaning that there could be thousands of different admissions contracts for the schemes. It is likely that at least some of the agreements will set out various powers for local authorities in the event of closure, including the power to collect a debt from the employer equal to its share of the scheme’s deficit. That would put a massive strain on participating employers and could put some of them out of business.
The Minister gave assurances on some of those points in Committee, but he missed the problem that the Bill allows local authorities to close their funds. The Government cannot prevent them from doing so under the Bill. The problem of triggering debts therefore remains substantive. There is also the question of whether closure means closure or continuing a scheme. The Opposition believe that a different approach is needed and that the Bill needs better drafting, which is why we have tabled amendments 20 to 28. We are not trying to add costs to the public purse and are keeping the Government’s proposals, but we are saying that it would be better to amend an existing scheme rather than to close and reopen it. They are in some ways technical proposals, but it would be better to err on the side of caution and provide that new regulations can amend scheme rules to ensure that all future benefits are accrued according to the provisions of the Bill and negotiated arrangements.
Those are essentially my comments on the Opposition’s proposals. My hon. Friends and others have tabled amendments in this group, but I shall let them make the case for them.
John McDonnell
Exactly, but I think it is across the piece. Whether or not we agreed with the last negotiations, or whether they were imposed or signed up to, at least some people felt there was some security for the future. People are becoming demoralised, which is why it is important that we insert in the Bill provisions for full consultation and agreement with organisations representing employees and for full openness and transparency. That is why new clause 3, moved by my hon. Friend the Member for Nottingham East, is critical. As has been said, at least in the private sector there is full display and transparency in what people sign up to, but there is no display or transparency in the public sector, particularly now that the Government have given themselves these powers.
Mr MacNeil
Given the comments about the police pension scheme, I am sure the hon. Gentleman understands the wish of the Scottish Police Federation that police pensions be controlled independently in Scotland. For England and Wales, however, does he feel that in future Governments should act more morally in relation to the terms of agreements that were made years before and under which police officers expect to retire, while also understanding, of course, that in Scotland they want clear of the system?
John McDonnell
I can fully understand the feelings of police officers in Scotland, as I can those of officers across England and Wales. People now just want safety and security in their pensions, which are theirs—they have paid for them and contributed to them. As my hon. Friend the Member for Nottingham East said from the Front Bench, they are nothing more than deferred wages.
John McDonnell
I fully agree. What concerns me is that the Henry VIII powers in clause 3 are retrospective. This is another reason why the valuation process is so critical: if there is not full openness, transparency and consultation, in particular with employee representatives, the Government could in future use the valuation process to withdraw some of the benefits of the scheme or increase the contributions retrospectively. People can sign up to a scheme and pay into it for 20 years, but then be told that the benefits are different—although I think that will be tested in law, because I believe that legally we are talking about accrued rights that are protected under European legislation. The Government do not accept that argument, but it is a critical point. That is why I have tabled my amendments. The Government underestimate the anxiety and fears out there—particularly among trade unions, but also in other organisations—which arise from the lack of confidence in the future management of the schemes in the best interests of employees and members.
Let me turn to my amendments 7 and 8. The Government’s reform was meant to change the nature of the schemes, so that they would be based on career averages, exactly as my hon. Friend the Member for Nottingham East said from the Front Bench. However, that is for a defined benefit scheme, not a defined contribution scheme, yet the Government have not committed themselves to that in the legislation. That is why I have tabled amendments 7 and 8, so that where a scheme is rearranged or staff are transferred into a new scheme, they must be defined benefit schemes, because that is what was promised in the negotiations with the trade unions. It is argued that we are binding future Governments, but all legislation is meant to bind future Governments, and any future Government could revisit this matter. At the same time, we need to try to give at least some security and ensure that the promises given by the present Government are adhered to. That is not much to ask, and it is all my amendments are designed to do.
Mr MacNeil
The hon. Gentleman puts his finger exactly on the issue: insecurity for future pensioners. That, combined with ever-growing inequality in our society and the economic multipliers that we might see operating, means that people who are now living quite comfortably might be facing penury in their old age, due to the root insecurity at the base of this Bill, which he is doing a good job of exposing.
John McDonnell
In part, this is linked to other reforms that the Government are introducing—my hon. Friend the shadow Minister touched on this. Where changes have been made to the delivery of public services—some of this relates to outsourcing, reorganising government or delivering direct services through new Government agencies or public bodies—people understood that there would be a commitment from the Government that they would be transferred into the same scheme they are in now, which would be a defined benefit scheme. That is not in this Bill, which is why I have tabled my amendments.
The amendments put the onus on whatever bodies are established—non-departmental public bodies or whatever—to ensure that they offer a defined benefit scheme. If they do not, they are breaking the commitment that the Government gave. In addition, it will create a disincentive. When staff transfer, they transfer into the new scheme that will be established. Many people now in a defined benefit scheme—whatever its nature, whether final or average salary, although we are moving towards average salary—fear that if at some stage they move, they will be offered only a defined contribution scheme. That is why I want more certainty in the legislation. The amendments propose that whatever happens in the future, whatever restructuring the Government bring in and whatever new schemes are established, the Government will adhere to their promise that there must be a defined benefit scheme. I do not want to be cataclysmic about this, but if that does not happen, the legislation could undermine the whole provision of public service pensions. People could start to withdraw from the schemes because they did not have the certainty that they thought they had when they entered them.
The amendments might seem relatively minor, but they are absolutely key. If we do not bring the employees with us, if we do not consult their representatives, if we do not involve them in the valuation process and if we do not stand by the guarantee of a defined benefit scheme that they have been given, we will break down people’s confidence in the public sector pensions system overall, and we will certainly break down their confidence in this Government’s ability to adhere to their promises. This is not the 25-year guarantee of no further reform that we were given from the Dispatch Box only a matter of weeks ago.
Robert Neill
I congratulate the hon. Gentleman on his arrival in the House. I have been dealing with him in the local government world for many years. I did my best to prevent him from coming here, but it clearly was not quite enough! He anticipates one of the technical issues that I was going to mention, and it is perhaps the most substantial one. Chronologically, it is not the first in relation to the Bill, but I might as well deal with it now for the sake of completeness.
I read with care the assurance that my hon. Friend the Minister gave in Committee. I entirely accept that it is not the Government’s intention to create crystallisation. However, I note that the finer details of the proposals are being considered, and we should look carefully at that. The Minister said that there was no requirement for the funds to be wound up, and I accept that, but I hope that he will consider the issues that have been raised by the Local Government Association about legal ambiguity.
I do not doubt that the Minister has no intention of creating a closure that would crystallise the debts of a scheme. That was always the basis on which I approached such negotiations when I was a Minister, and I am certain that nothing has changed in that regard. However, this was one area in which some of the nuttiest legal advice needed to be obtained—[Interruption.] I should have said “knottiest”. There is sometimes a risk of legal ambiguity, and that must be avoided at all costs. I would therefore urge my hon. Friend and his advisers at the Treasury to take on board the work that has been done in the DCLG and other Departments to find a means of resolving this issue. We all know where we want to end up, and I am sure that there is a means of achieving that. I know that the Minister’s skills and abilities will get us there. It is right to point out that some issues still need to be addressed, but they are not insurmountable in the context of where the Government want to get to. It is an important area to clarify to the maximum extent.
The other issue I want to touch on is governance. I hope that the Minister will consider the concerns raised by the Local Government Association and the unions about the lack of segregation between the scheme manager and the scheme board. Again, I do not think there is any dispute between us about where we want to end up, but it is a fact that the local government schemes have a good record in their management and a good record on transparency. When experienced representatives of local government employers raise concerns that the two functions of the scheme manager and the scheme board are difficult to reconcile within the same body, those concerns should not, in my judgment, be lightly dismissed. I note that the Minister sensibly and properly took on board the fact that there are still developments going on here and that proposals are still being developed. I hope that that will continue to be the case, and when he responds to the debate, he may be able to update us and reassure us that continuing discussions will take place with the experts in the local government sector to make sure that we get the best possible design for those matters.
Finally and more generally, I ask the Minister not to be deterred by undue reference to Henry VIII clauses. When I was taking the Localism Bill and the Local Government Finance Bill through the House, if I had £5 for every time I was criticised about Henry VIII clauses, I would have retired to some tax haven as a very rich man. [Interruption.] I probably would not have not done that actually as I enjoy being here so much. However, it is part of the knockabout banter we get here that Oppositions always say that there are excessive Henry VIII clauses, but when one looks back, one finds that when the Opposition move into government, they construct Bills with exactly the same sort of clauses. That is why I urge the Minister not to be put off by that; it is necessary to build in the flexibility that such clauses provide in any piece of legislation of this kind. What are important are the statements of intent about the manner in which those clauses should be used. I am sure that the Minister will be able to reassure us on that.
Mr MacNeil
What the hon. Gentleman said gives me the opportunity to peg in as a general point the fact that this debate is set against a backdrop of mood music that pensions are spiralling and are actually increasing, but the effect of the Bill is not to arrest pensions, but to cut them and to cut net contributions to pension schemes by 0.1% of gross domestic product, which is what the Government are saving. That, of course, is taken out of the pockets of many people who have worked hard for many years in our public services.
Robert Neill
The hon. Gentleman and I once worked out that we might have a very, very, very—however many “verys” we put into it—distant relative in common, but with every gentleness and respect, I would have to tell him that we do no good service at all to our public services by being unrealistic about the affordability of pension arrangements.
I talked about the intent with which we approach these matters and about honesty, transparency and being frank about the financial realities that underpin the schemes. This measure is a critical part of that. The most important service we can provide is to be frank and to produce a scheme, which I am satisfied the Bill does, that is financially sustainable for the future. We have talked about the technical issues, but the overall thrust of being financially honest about the affordability of our public sector pension schemes is absolutely critical—and the Government have got that right.
Dr Whiteford
I am afraid that I am not privy to the Scottish Government’s processes on this, so I cannot answer the hon. Lady’s question with any certainty whatever. What I can say is that the Scottish Government got clarity only a few weeks ago on the extent to which they can deviate from the proposals for England and Wales, and that the degree is quite limited indeed. I think the Scottish Government will have some flexibilities on accrual rates and some revaluation bases.
Dr Whiteford
I will not give way to my hon. Friend at the moment because I want to make some short remarks in this part of the debate, and save my fuller comments for later.
The Scottish Government also require explicit consent from the Treasury for any cost-sensitive changes to the NHS or teachers schemes.
Will the Minister accept my amendment and recognise how tight the time scales are, given the complex range of responsibilities—varying responsibilities relating to different schemes—and how tough the negotiations are? Not all partners to the negotiations even accept the need for this set of reforms. In 28 months’ time, when the provisions would otherwise commence, the Scottish Government would have had not only to complete the negotiations and prepare and pass legislation, but ensure that the employers and scheme administrators could prepare their systems and processes before the 2015 deadline.
This is a very technical amendment in some respects, but it is a very important one. I hope that the Minister will have listened carefully and will be pragmatic in his response to it later.
Mr MacNeil
In respect of this Bill and the commitment to public sector pensions, what change in GDP are we likely to see?
Mike Freer
I am not qualified to judge that. I am not an economist, so I do not have information about the impact on GDP. It might be appropriate to ask the Economic Secretary that question, however.
Mike Freer
My hon. Friend makes a good point. The pensions time bomb is not only to do with the fact that people are making insufficient provision; it is also about there being insufficient taxpayers to make up the gap between the contributions made by employer and employee and that gap having to be made up from general taxation. There are two parts of the time bomb, therefore. Unless accurate information is provided on pensions, people will not be able to make the appropriate decisions.
Mr MacNeil
In terms of the provisions in the Bill, the House of Commons Library informs us that this time bomb will be cut from 1.6% of GDP to 1.5% of GDP.
Mike Freer
I am not sure what point the hon. Gentleman is making. After our debate, I may have to check whether I have said something that I cannot remember saying, and I apologise that I cannot respond to that point at present.
The House spends a huge amount of time regulating. The Food Labelling (Nutrition Information) (England) Regulations 2009 spell out in considerable detail the information that must be on food labels. The labels specify for consumers the fibre content, edible carbohydrate polymers, synthetic carbohydrates, salt content, kilojoules and calories, sugar content, fatty acids of trans fatty acids, yet when we ask people to make choices about their pensions, which is one of the biggest decisions of their life, we give them no information at all. I urge the Economic Secretary to go further by ensuring accurate information is included in our pension statements.
Fuel Duty
Angus Brendan MacNeil Excerpts(12 years ago)
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Cathy Jamieson
I hope that when he goes back to his area, the hon. Gentleman is able to explain to his constituents why he has not backed the motion tonight.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Lady said at the outset that this is not the time to put up fuel duty. Will she tell us whether, each and every time Labour put up fuel duty over the past 13 years, it was the right thing to do, or do we have great joy in heaven with the repenting of the Labour hordes this evening?
Cathy Jamieson
Once again, I am rather disappointed with the hon. Gentleman’s approach. I should have thought that he, too, would want to be able to go back and tell his constituents that he had supported a motion to ensure that the rise did not go ahead. The tax on a tank of petrol at the general election was £37.60. It has now risen to £40.30, and if the 3p rise goes ahead on 1 January it will rise again to £42.20.
Sajid Javid
My boss is in Brussels on Government business. The hon. Lady’s boss is probably too busy cooking lasagne for someone. As usual, he is busy chasing the headlines and has left her to pick up the pieces.
Rising living costs have made life difficult for millions of households. I know that first hand. Like millions of others, I have lived under financial distress, so I know what it is like to worry about paying the bills and living within a tight budget, and the Government know about that, too. Times are tough. We inherited the biggest deficit in the developed world and the largest in our peacetime history, and international commodity prices continue to rise, raising the cost of living. Since May 2010, the price of wheat is up 72% and the price of Brent crude is up 31%. While talking about commodity prices, I note that the price of gold is up 40%. Had the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), not recklessly sold off the nation’s gold reserves, our country would be £10 billion richer. That is money we could have used to help hard-working families.
To clear up the mess left by the Labour party, we have had to make tough decisions, but we have prioritised the cost of living wherever we can. We have cut income tax, frozen council tax, capped rail fare increases and, moving on to the Opposition’s motion, we have delayed and cancelled the fuel duty rises that they supported.
Mr MacNeil
The Minister states that the price of wheat has gone up. Bread and butter prices have clearly increased dramatically. Is this not exactly the wrong time for the Government to put 3p on the price of a litre of fuel?
Sajid Javid
That is exactly why the Government have taken action on the cost of living, which I will move on to shortly. Let me first talk about the Labour party’s record. It will not admit that it delivered the biggest deficit in the developed world. The shadow Chancellor said only three weeks ago that under Labour
“there was not a structural deficit”.
In fact, there was a structural deficit of £71 billion in 2007-08—more than 5% of this country’s GDP. We should thank him. Whenever anyone might need reminding why the Labour party must never be allowed to run this country again, the shadow Chancellor steps up to the plate—and this motion is another reminder.
Air Passenger Duty
Angus Brendan MacNeil Excerpts(12 years ago)
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Priti Patel
The hon. Lady makes a valid point. I have no doubt that right hon. and hon. Members recognise the global trends and the direction of travel when they see the rise of super-hubs and big business destinations, such as Singapore, Dubai and Mumbai. There is certainty around their aviation and economic strategies, and we are competing against many big international centres. We must remain competitive to survive. Tax rates that are higher than those in other economic centres put businesses off when they are making investment choices and decisions. Attracting foreign direct investment is an essential component of the Government’s plan for growth, and current APD rates are a barrier to foreign investors who are looking to expand into the UK.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Lady is making a great speech. Does she agree that APD, as a gateway tax, sends a signal and puts down a marker, and leaves a bad taste in the mouth for many who are thinking of coming to the UK? Their first taste of the UK, and the first piece of information they have about it, is the very high-tax regime to get into the country.
Priti Patel
The hon. Gentleman makes a valid point on how counter-productive taxes such as APD are when it comes to inward investment and the attraction of Britain as a place to do business.
Martin Craigs, chief executive of the Pacific Asia Travel Association, has stated:
“The UK is an island trading nation, air services are the vital lifeblood of modern global commerce. The UK Air Passenger Duty is now the world’s highest by a wide margin. It is certainly turning away tourism and trade from the world’s fastest growing economic region”,
which, of course, is Asia-Pacific.
APD also acts as a deterrent to British businesses that are looking to exploit lucrative business opportunities elsewhere in the world, and particularly in emerging markets. Businesses in my constituency, including small and medium-sized enterprises, provide more than 80% of local jobs. They are hit hard by APD. They want to export more, but APD is a barrier.
Mr Brady
I do not always agree with the hon. Gentleman, but I am pleased to agree with him about that. This tax precisely targets investment and international trade, which are exactly the things that the United Kingdom needs to focus on if we are to grow our way out of the problems we face.
Mr MacNeil
The hon. Gentleman said that Northern Ireland is competing with the Republic of Ireland, but surely we are all competing with the Republic of Ireland and with each other. We had better make sure we have that mindset; otherwise we will be left very much in the slow lane.
Mr Brady
That is absolutely right. Unlike the hon. Gentleman, I hope we will not be competing internationally with Scotland in the near future, but if we are, I hope we have lower aviation duty. The regional effects—on Scotland and Northern Ireland, but also on airports in the north of England—are clear. There is a plain and unanswerable case.
Like my hon. Friend the Member for Witham (Priti Patel) and the right hon. Member for Wythenshawe and Sale East (Paul Goggins), I want to touch briefly on the impact on families. Air travel should not again become a luxury that only the rich can afford. It is not a luxury in the modern world. Air travel, whether for business or leisure, is an essential part of modern life. It has opened up the world, opened people’s minds and enhanced the quality of life for us all.
I have said that I am confident that my hon. Friend, being such a good Minister, will respond warmly to the case we are all making. The final reason for that is that the proposers of the motion have been so modest in their aspirations. The motion highlights some of the damage that we think is being done by this tax, but we do not call for it to be cut or axed altogether. We are asking only for the Treasury to look carefully at its effect before next spring’s Budget. All we want is a proper detailed review and economic assessment of whether this tax does more economic harm than good. I think that all who have spoken so far believe it does.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I congratulate the hon. Members for Witham (Priti Patel) and for Crawley (Henry Smith) on securing this debate. As a co-sponsor of the motion, as well as a seasoned and regular air traveller, I apologise to the House: because of the inclement weather coming in from the Atlantic, I shall try to rush back to Scotland this evening rather than waiting, or having my constituents wait until tomorrow afternoon before they see me.
I do not know whether I was targeted, but as chairman of the all-party aviation group I certainly received my fair share of correspondence on the petition connected with this debate. Indeed, I do not believe I have ever been contacted by as many constituents on any subject in my time in this place, and I have been here for some 20 years. As has been mentioned, the all-party group instigated an inquiry, not only into this tax but into the whole question of aviation and its future in the UK. It was clear from that work—a fairly major inquiry, with some 50 submissions and two oral evidence sessions—that we are likely to damage the whole UK economy unless we get this tax right. That was clear to me and the all-party group, with all conclusions supported by all parties in the House that were part of the inquiry, which is a first when it comes to the future of air traffic.
A report is available, and if hon. Members ping me an e-mail, I will send them a copy, if they have not already read it. The report has been sent to the Prime Minister and a fairly sizeable number of Treasury civil servants have asked for a copy, as a consequence of which I presume that the Minister is aware that the report is in existence. If he has not done so already, I would ask him to look at it, because we still await a response from Treasury officials and the Minister. There is overwhelming support from all sections of the House; indeed, we have already heard—as I am sure we will hear again this afternoon as we approach 5 o’clock—about the disadvantages of air passenger duty, as well as the evidence for those disadvantages. The vast majority of submissions received stated that the UK was being placed at a significant competitive disadvantage as a result of the tax. That applied to 43 of the 51 submissions, which I suggest is overwhelming.
But—and it is a big “but”—it is impossible to draw a comprehensive picture of the national economic impact of air passenger duty without Treasury support in looking at the issue far more closely. I am looking for that support from the Government this afternoon, and I also hope to see their response to the report sooner rather than later. The report also mentioned reports from the British Chambers of Commerce and from Oxera. They were good reports with credible data sources, but they were selective. We need a comprehensive assessment of the effects of the tax, and that is a task for the Treasury to undertake.
There are examples of air passenger duty leading to direct commercial loss. We have already heard my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) talk about Manchester airport, and say that AirAsia X cited ever-increasing taxes as its primary reason for abandoning its flights to UK destinations. I have been given other examples as well. It is a matter of public record that Continental Airlines, now part of United Airlines, would have abandoned flights from Belfast to the United States had the level of APD not been reduced in October 2011.
If only some thought could be given to the idea of regional variation, as my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) said. That would have the greatest effect on the regions in question. Only yesterday, Aberdeen, Glasgow and Edinburgh airports called for immediate action on the levy. They estimate that, by 2016, £210 million less will be spent each year in Scotland because of the tax. Glasgow airport’s managing director, Amanda McMillan, has said that APD
“will continue to damage Scottish aviation by making routes unviable and decimating Scotland’s links to the rest of the world.”
As my hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne) said, the problem is also affecting my own airport at Prestwick.
Mr MacNeil
Given the quote from the managing director of Glasgow airport that the hon. Gentleman has just read out, does he support the Calman commission’s recommendation that air passenger duty should be devolved to Scotland?
Mr Donohoe
The hon. Gentleman might well be shocked by this—indeed, I expect him to fall off his seat—but I do actually support that proposal. I would suggest, however, that any such duty should not be frittered away, as many of the tax receipts obtained by the Scottish Government are. I would suggest that, if it were devolved, it should be hypothecated so that the money could be put into the airports, rather than into some of the other high-falutin’ schemes that happen north of the border at present—[Interruption.] I do not know what the hon. Gentleman is saying from a sedentary position, but I will give way to him again if he wants to intervene.
Mr MacNeil
Surely the idea behind devolving APD would be to cut it to make Scotland more competitive.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I warned the hon. Member for Na h-Eileanan an Iar Mr MacNeil) that he would be at the bottom of the list, but there is a danger that he will fall off the list because the amount of time available is disappearing.
Dame Anne Begg (Aberdeen South) (Lab)
I support the motion in the name of the hon. Member for Witham (Priti Patel) and others. Aberdeen depends greatly on the airlines, and especially on connecting flights. If the hon. Lady thinks the situation is bad in Essex, she should consider what it must be like for my constituents. Her constituents—and others who live within easy reach of London—have some choice in how to get out of the country; they can travel by Eurostar, for instance. From Aberdeen, however, it is impossible to get out of the country without either flying or spending a very long time travelling.
APD’s great impact on my constituents’ lives is highlighted by the fact that I received more e-mails about the fair tax on flying campaign than any other MP. Although it is good that 800 or so constituents got in touch with me, I do not necessarily want to thank them, because I received half of those messages in a two-hour period one afternoon after British Airways sent out an e-mail to all its executive club members. I thought I was under cyber-attack because my computer went mad; it started constantly pinging. In all the years I have been an MP, this is the issue on which I have received the most e-mails.
Other Scottish Members have mentioned a report published today by York Aviation, which was commissioned by Scotland’s largest airports. Derek Provan, the managing director of Aberdeen airport, said:
“This report shows, quite simply, that APD is damaging Scotland. It is damaging our economy, our tourism potential and our ability as a nation to bounce back from the recession. It limits our opportunities for growth in the employment market, costing as much as £50 million in the process.
At Aberdeen Airport we run a real risk of losing around 200,000 passengers by 2016 through this damaging tax. Each recent increase in APD has had a dramatic impact upon what we, as airports, have achieved and could have achieved without APD. It is imperative that the UK government undertake a detailed and comprehensive review into APD with the utmost urgency, and at the very least freeze APD whilst that is taking place.”
So both Aberdeen airport and other airports in Scotland are being affected because of not only the level of APD, but its existence and the way it acts as a disincentive to those furthest from the hub airports.
Mr MacNeil
Does the hon. Lady agree with her colleague the hon. Member for Central Ayrshire (Mr Donohoe) that APD should be devolved to Scotland?
Dame Anne Begg
Whether or not APD is devolved to Scotland, the problem we face is the level of APD and the way it is operating. Just because a tax is devolved, does not necessarily mean it would be treated any differently in Scotland—
Dame Anne Begg
It might be, but it could be treated differently down here, too. The problem I have with devolving some of the taxation that the hon. Gentleman would want devolved is that, as we know, the Scottish Government have a huge hole in their budget. So in terms of their priorities and how they spend their money, there is a fear that they would see APD as an easy cash cow, as indeed the Westminster Government do. There is no guarantee that a devolved APD would be any different from the one we see here.
Dame Anne Begg
Mr Deputy Speaker is shaking his head, so perhaps I should not allow the hon. Gentleman to come back in, because we are getting away from the points I wish to make.
Most people who fly out of Aberdeen connect to other routes. Although lots of the flights from Aberdeen go to other domestic destinations, many of the people on the planes—the ones that the right hon. Member for Gordon (Sir Malcolm Bruce) and I are on every week—come to London to connect on to another route. I would like there to be a lot more direct flights from Aberdeen, but that, like the debate on the devolved nature of APD, is an issue for another day.
At the moment, most people in Aberdeen who want to travel abroad have to connect through one of the major hubs. The Government are making it particularly difficult to make Heathrow attractive as that hub. It is important for the British economy that Heathrow remains the main hub and that it is through Heathrow that all the traffic going out of the UK is filtered. There are two main reasons why Heathrow is becoming less and less attractive. The first is the system of APD, as anybody connecting through Heathrow is inevitably caught one way or the other. If they have booked their flights in separate lots they get a double-whammy, and if they have a through-flight, they still end up paying APD. Secondly, it would be remiss of me if I did not mention that part of the reason for Heathrow’s unattractiveness is the congestion there because of the lack of a third runway. People in north-east Scotland strongly support the building of a third runway at Heathrow.
Those two things, put together, mean that people in Aberdeen, and possibly in Edinburgh and elsewhere, are more attracted to using other airports as the hub through which to transfer. For people from Aberdeen that means going through Schiphol or Paris—and Lufthansa now has flights on to Frankfurt. Those who book the different parts of their journey separately pay only one part of APD—they do not pay APD on their full flight. So financially that approach becomes much more attractive. The consequence is business loss not only for Heathrow but for the UK carriers, who are suffering the most. That is a real problem and a shame.
We know that there is often no option other than to fly out of Aberdeen. We do not have an electrified rail service north of Edinburgh and we do not—and probably will never—have high-speed rail. It might get to Manchester, it might get to Scotland, but it is unlikely ever to get as far as Aberdeen. It takes too long for us to get a train to the Eurotunnel, so many people are affected by the rise in APD. This does not just affect business travellers. Aberdeen airport survives because we have a very buoyant economy in the north-east of Scotland because of the offshore oil and gas industry, but that economy will not be enough to support the airport if the Government are intent in undermining much of that travel through the increase in APD.
Many business travellers come through Aberdeen and they want to be connected to the whole world, not just part of it. They want to be able to fly through Heathrow and go on to some of the emerging markets, which often also have oil and gas. That is why it is important that the Government should listen to this afternoon’s debate.
Mike Crockart (Edinburgh West) (LD)
I add my congratulations to the Members who secured this debate, not least because the motion is supported by a large number of Members across the whole House. I should declare a particular interest, as Edinburgh airport—voted best European airport 2011 in the 5 million to 10 million- passenger category—lies within my constituency. As a result, I recently took part in the all-party aviation group’s inquiry, which was mentioned by the hon. Member for Central Ayrshire (Mr Donohoe). Its report made 15 recommendations, four of which related directly to air passenger duty and mirror the tone of the motion.
When APD was introduced in 1994, I do not think that anyone foresaw the likely levels that it would reach 18 years later. The problem is that in those intervening years insufficient notice has been taken of whether those levels were reaching what Gordon Dewar, the chief executive of Edinburgh airport, has described as a tipping point at which they have a detrimental impact on the economy as a whole.
As the hon. Members for Crawley (Henry Smith) and for Blackley and Broughton (Graham Stringer) said, it is sometimes argued that APD is an environmental tax. Perhaps before the inclusion of the aviation sector in the EU emissions trading scheme, that was a valid argument, but it is far more difficult to make it now. If the tax were levied on a per-plane basis to encourage higher occupancy, or if its levels reflected the fuel efficiency of the planes involved to encourage airlines to upgrade their stock, then perhaps that argument could be made again, but as it stands APD is simply a revenue raiser—and an attractive one to the Treasury, at that, because it is easy to administer, has low collection costs, and to a large extent it is hidden from the end consumer. Nevertheless, the Treasury must examine it to ensure that its overall impact on the UK’s tax take is positive, not negative, as seems to be the case.
Mr MacNeil
Would the hon. Gentleman support the devolution of air passenger duty to Scotland, as some Labour Members seem to do?
Mike Crockart
I almost thank the hon. Gentleman for his question, but it is a bit of a broken record and tangential to this debate. Devolution of this tax would merely recreate the problem that existed between Belfast and Dublin; my constituents would get in their cars and drive for two hours to use Newcastle instead. We have already heard the argument about regionalisation of APD, which is a far better and more efficient way of dealing with the problem.
Levels of increase in APD over the past five years stand at between 160%, for the bottom rate, and up to 360% for band D long-haul flights. Many submissions to the APPG’s inquiry, and others made since, including one that I received yesterday from the Federation of Small Businesses, make the case that levels of APD are now putting the UK at a competitive disadvantage in relation to other European and global destinations. The evidence is that that shows itself in a number of ways.
First, APD acts as a disincentive to foreign carriers using UK airports as destinations. A number of hon. Members have mentioned the report by the Scottish airports on their perceptions of the effects of APD. It shows that Scotland’s connectivity grew from servicing fewer than 40 destinations in 2001 to almost 150 in 2009, but the figure has slipped back in recent years to about 130. That hampers not only establishing new business markets, but bringing in new tourists to Scotland. The figure also compares poorly with other small European states. Of course, some of those states have major hubs, but Belgium has links to 220 international cities and Denmark has more than 150 such links.
If APD levels hold back local airports and their connectivity, they will also hold back the surrounding local economies. The Edinburgh airport campus employs 5,000 people and its activities support a further 2,000 across Scotland. It estimates that its contribution to the Scottish economy is £146 million, of which £118 million entered the Edinburgh city regional economy. The question must be: could it do more, if allowed?
One of the key debates on the impact of APD is about price elasticity, a phrase that takes me back to 1984, when I was studying economics at Edinburgh university. Different products have different elasticities—the rate at which demand is lessened by an increase in price. On the impact of APD rises, the report prepared by the three Scottish airports estimates that, accumulatively, by 2016 Edinburgh, Glasgow and Aberdeen will carry 2.1 million fewer passengers each year than if APD had not risen since 2007. Price elasticity is lower in Aberdeen, so the impact would be less, but it might still lose 200,000 passengers. Edinburgh’s higher number of low-cost carriers will result in a far higher potential impact—it might lose 1 million passengers per year.
Those are not just numbers; they are business men making connections and sales, and tourists spending money. The 2009 Civil Aviation Authority’s passenger survey suggests that about 36% of international passengers are visitors to Scotland and that 40% of domestic passengers are similarly inbound to Scotland. If we combine the drop in actual and projected numbers with the CAA figures and apply VisitScotland’s average tourist spend, we will see that the results are very worrying.
The 2007 drop in passenger numbers appears to have amounted to a £90 million per annum loss with regard to Scottish tourism. Following the 2009 APD rise, that figure has risen to £160 million and, if projections are correct, it will rise to £210 million per annum by 2016. This simply cannot continue.
Much of what I have said has come from the industry and some might say, “Well, they would say that, wouldn’t they?”, so I did a small internet survey last night via booking sites. I imagined myself as a business man trying to establish trade with some of the BRIC countries and looked at flying direct to Sao Paulo. A flight on 14 November from Heathrow would cost me a best direct price of £768, the APD for which is about £184. However, a direct flight from Paris, where the APD equivalent is €4, would cost £642—a saving of £126, which is more than enough to cover a Eurostar ticket. If I chose to start a business with Chennai, I could fly there with Gulf Air for £475, but the cost of a flight from Paris would be £240, which is almost half the price.
If I was a tourist heading to Las Vegas—this is the worst example—I could get the 11.20 Virgin Atlantic flight for £644, but if I travelled to Dublin for £17 I could get the exact same flight from there for £453. That is a saving of £191, for which, once I arrived in Las Vegas, would buy me the “hound dog” package, whereby Elvis would sing three songs to me and I could get a rose bouquet and be walked down the aisle. That would be an interesting use of £191. I think we can do better. When the taxation system causes such anomalies, it is not only Elvis who has left the building; common sense has left as well.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I note that no Member has spoken in favour of APD, which I think says a lot. In the midst of a recession, when the cult of austerity is starving the economy, taxes such as APD are bleeding the economy. That is not just my view; it is the view of those in the frustrated aviation and airport sector in Scotland, who see themselves as hostages of a Government policy here at Westminster that is damaging their sector and, by logical extension, the wider economy.
Amanda McMillan, the managing director of Glasgow airport, has said:
“Due to the size of the market in Scotland, we will always find it difficult to attain and sustain new routes, and this situation is compounded…further by APD which simply serves to artificially depress demand and dissuade airlines from basing aircraft here.
Unless APD is reformed, people travelling to and from Scotland—who must fly due to the lack of feasible alternatives—will continue to face some of the highest levels of taxation in Europe which is clearly a disincentive to travel.”
Jim Sheridan
If APD were devolved to Scotland, and Scotland then cut the tax, would there not be consequences for the Barnett formula?
Mr MacNeil
If APD were devolved to Scotland, the economy would grow. I should like all taxes to be devolved, so that the benefits of the policies introduced by the Scottish Government could go to the Scottish Exchequer. That is a logical extension, and it is what is happening in all the other countries. I am sure that, given the level of APD in the United Kingdom, no other country would be as foolish as the Government whom the hon. Gentleman supports at Westminster. He wants a Tory Government to have these powers over Scotland, and, given that he is a Labour MP, I find that quite shocking.
It is calculated that APD will have cost the Scottish economy £210 million in lost spending by 2016. So short-sighted is this policy that it will end up with our losing up to £50 million in other taxes through economic activity that will not take place. The Federation of Small Businesses has been damning of the UK policy on this tax:
“The Government’s determination to tax air passengers has resulted in a sustained negative impact on businesses as well as on leisure travel. IATA reported in June 2012 that UK passenger numbers have declined slightly over the past four years at a period when Germany, France and the Netherlands saw growth of between 2-4%.”
That must have damaged our economy.
The UK has embraced this tax in a helter-skelter fashion. It is regressive and it hits the poor disproportionately. It is a poll tax of the skies. It is felt less by millionaires in the Cabinet and elsewhere than it is by others.
Other countries have been wiser in their approach. Some countries that have introduced APD, such as Germany and Austria, have done so at a lower level. The Germans are economically canny, of course, and after they introduced it, they reduced it, rather than increasing it as the UK has done. We must welcome the fact that Aer Lingus is planning to fly to Edinburgh and therefore give us more choice, but there is still the handicap of high APD.
King Louis XIV of France was known as the sun king, and perhaps his sunny disposition was in part due to this quote from his Finance Minister, Jean-Baptiste Colbert:
“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest possible amount of hissing.”
For the benefit of Members, I have translated that passage from the French. We have not had much of a sunny disposition from the Treasury for the past two years, but there has been plenty of hissing—and booing—in its direction.
Since 2007, APD has risen by 160% on short-haul flights and between 225% and 360% on long-haul flights. The Aberdeen Airport managing director has said:
“At Aberdeen Airport we run a real risk of losing around 200,000 passengers by 2016 through this damaging tax. Each recent increase in APD has had a dramatic impact upon what we, as airports, have achieved and could have achieved without APD. It is imperative that the UK government undertake a detailed and comprehensive review into APD with the utmost urgency, and at the very least freeze APD whilst that is taking place.”
Gordon Dewar of Edinburgh Airport adds:
“This tax has now hit its tipping point where the damage it is doing to Scotland far outweighs the benefits. This cannot stand and must be reviewed as a matter of urgency.”
No wonder people are concerned, especially as the Calman commission recommended this policy be devolved in 2009 and the MSP representing the Edinburgh airport area, Colin Keir, says:
“APD hits tourism and business and we need to have the power at Holyrood to maintain competitiveness with other countries and fairness to those travellers who have to use our airports.”
The economic mismanagement from Westminster is frustrating people, especially as this Parliament and Government will not devolve this policy to Scotland. I tell Parliament and the wider country, however, that in 2014 people will have a chance to have APD devolved and to give Scotland a competitive edge. After the independence referendum of 2014, I look forward to the devolution of APD, along with everything else, by one means or another.
Sajid Javid
I thank my hon. Friend for her intervention. I am pleased to hear that she has been glued to her television set watching this debate. I take her point about the Caribbean. Several hon. Members have made a similar point, and I have listened carefully.
Mr MacNeil
The hon. Gentleman has spoken about having a revenue-neutral tax. When the Government cut taxation from 50% to 45% for millionaires, did the revenue-neutral consideration enter into that equation?
Sajid Javid
Absolutely. I can assure the hon. Gentleman that the effects on taxation were taken together and that the Government had determined that the extra 5% was raising hardly any tax whatsoever.
Given that we have recently completed a comprehensive consultation on the subject, we have no plans for further reform at this point.
Public Sector Pensions
Angus Brendan MacNeil Excerpts(12 years, 5 months ago)
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Richard Fuller (Bedford) (Con)
It is a great pleasure to serve under your chairmanship, Mr Leigh, for, I think, the first time, and it is a particular pleasure, if I may say so Sir, to have the Economic Secretary as the Treasury Minister responding to the debate.
We live in a time when nation after nation is being told: “You are not as rich as you thought you were.” As a result, nation after nation is facing cuts—sometimes mild, sometimes severe—in the services their Governments can provide, the real incomes that their labour can earn and the value of their assets, calculated as the debt that can be raised against their businesses and homes. We are living in such times because for more than a decade nation after nation rapidly increased the amount of its borrowings as a proportion of its economy—its national leverage. It was not just excessive Government borrowing, but an entire national pastime undertaken by millions of households, companies and banks in many nations. That beggaring of future generations is now—sometimes harshly but ultimately correctly—being brought to an end, and it is in that context that we review a future fund, including how it may help and how it might fit with current Government policies.
So, what is a future fund? A future fund is shorthand for moving the burden of paying for public sector pensions from the current tax-as-you-go model to a proceeds-from-invested-capital, or fully funded, model. It is fair to say, and I am sure that the Economic Secretary will confirm this, that Lord Hutton’s recent review of pensions ruled out a move to a future fund. Like you, Mr Leigh, I do not have any wish to be a champion for lost causes, but I hope that I am able to make some strong points about why the Treasury should reconsider Lord Hutton’s proposal to move on and not make a transition in the way in which public sector pensions are funded. This is not about public sector pension negotiations or about changing public sector pensions; it is about the process that the Government undertake to fund the pensions.
I encourage the Economic Secretary and the Treasury to reconsider a future fund for three main reasons. The first is that it promotes intergenerational fairness, and reinforces the Government’s view about long-term thinking for the security of our economy. Secondly, it offers an opportunity to rebalance the structure of earnings, to restore emphasis on pension provision—deferred income—rather than on immediate income and, thirdly, it enables the creation of a UK sovereign wealth fund, to stimulate investment in long-term projects.
I shall take each reason in turn. First, on a future fund promoting intergenerational fairness, those of us of a certain age look back on our lives and, being part of a bulge bracket of population—some of us at the latter end of it—perhaps realise that we have taken a lot for ourselves and that, as a generation, we have been somewhat greedy on the nation’s resources. That is one reason why this Government came into office at a time of such enormous debts, which future generations will need to repay. One thing that guides me as a Member of Parliament is looking for ways in which we can use fiscal probity to unburden future generations of some of those liabilities. Let us be under no illusion: it will not be easy for our children and grandchildren to compete in the future world economy. It will be tough. We have new competitors coming up all the time, so they will need every advantage, one of which is to bequeath them lower taxation rates than they otherwise would have.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Does the hon. Gentleman consider the Norwegians to have been a great example of setting up an oil fund for future generations to ensure that their oil wealth was not squandered in one generation?
Richard Fuller
The hon. Gentleman makes an extremely fair point. I was not in Parliament in the 1970s, and I am not sure whether such points were made at that time, but clearly countries that have received the beneficence of resources—Norway is one example, and Australia another—have seen the value of looking at the long-term investment of natural resources, and have set up future funds to provide for future pension liabilities. The hon. Gentleman makes an excellent point in support of my argument. Of course, we are not as endowed with natural resources as those countries are, but the fundamental point about fairness between the generations is still solid.
Let us remind ourselves that the current level of public sector debt—the debt that we all talk about and are so worried about—is £1 trillion. The public sector pensions liability, which we do not often talk about, is £1.1 trillion. All those obligations have to be paid by future generations and, as we have so significantly ramped up this first amount of debt, should we not look for ways to reduce the unfunded part of public sector pensions for future taxpayers? A future fund would, over time, eliminate that burden from taxpayers and transfer it to the returns that would be generated from a funded pension scheme.
The Intergenerational Foundation has noted some questions about public sector pensions, and also some of the risks, and this change would reduce risk. At the moment, Lord Hutton’s proposals manage risk by way of a view of a cost ceiling on total public sector pension liabilities, which is based on projections of economic growth. The projections show the liability as a steady share of gross domestic product, falling in the long term. I am not sure that history is littered with Governments who under-predict economic growth; in fact, I think that it is often the other way around, with Governments having a rather rosy view of future growth. So, inherently, as we consider the risk that will fall on future generations, there is a likelihood that the Government, under current systems, will underestimate the liability that they are passing on. As Lord Hutton said:
“What we’ve seen is how very quickly the assumptions which underpinned my assessments of the long-term sustainability of public services pensions have been shown to be too optimistic…That is going to affect the sustainability of public sector pensions in a negative way.”
The change in the pensions structure would considerably eliminate that risk.
I shall now talk a bit about the second point, which is the rebalancing of the structure of earnings, to restore the emphasis on pensions. Over the past few decades, the role that pensions have played in the round of the compensation offer made to potential employees has reduced considerably and, I would say, undesirably. There is much more emphasis today on the immediate levels of compensation, on “How much will I earn this year?” rather than on “How much of what I earn am I putting away for my long-term retirement needs?”.
House of Commons statistics have tracked the active membership of occupational pension schemes for private sector and public sector employees, and have compared 1995 with 2010. Over that period, the number of public sector workers in such pension schemes increased, from 4.1 million to 5.3 million, but the number of private sector workers halved, from 6.2 million to 3.1 million. That was a halving in the coverage of occupational pension schemes in a very short period—15 years—which is why I say that the change has been dramatic. Being conservative, I like to see things in the round of their consequences. We are now seeing that many people fear that they do not have enough money for their retirement, and the Government have rightly recognised the need to encourage pensions through auto-enrolment programmes. This would be another measure that would encourage people by, as I shall explain in a minute, creating a floor on public sector pensions that would enable the focus to turn back to how pensions will be provided for private sector workers.
The third point is the role of a future fund in creating a sovereign wealth fund. To create a future fund, we have to fund it—and, boy, does it take a lot of money. If we have £1 trillion of liabilities, that is a lot of money to save up, so a long period is needed. The Australian future fund set a period of 14 years before money could be taken out: the law was passed in 2006, and no disbursements can be made until 2020. For the UK, taking a 20-year period, it would require a minimum of at least £20 billion a year—probably significantly higher than that; somewhere between £20 billion and £30 billion a year—fully to fund all the Government pension schemes over those 20 years.
To put that in context, that figure is equivalent to 3% of total Government expenditure. It sounds a lot, but the Government spend a lot—it would be 3% of expenditure—and it would be only half the money that the Government are spending on the interest on their own debt. It is therefore a manageable amount of money, even though the amount is significant. In addition to looking to fund that out of annual public expenditure, it would also be possible to make asset sales into the fund. In fact, the Australian future fund started with an asset transfer, from the sale of part of the telecommunications company Telstra, for its seed investment. I have checked—with the Minister here, I wanted to be absolutely sure—and the Government’s deficit reduction targets would not be imperilled by any future sale of assets going into a future fund. Quite rightly, if I may say so, the deficit reduction targets are set absent of any funds from the proceeds of the disposal of certain assets, such as those of Royal Bank of Scotland.
Some may say that taking £20 billion out of public expenditure when we are trying to create demand is a very odd suggestion, but of course the £20 billion would not be lost from the economy. Essentially, £20 billion would be transferred from current expenditure to an investment fund for long-term investment. That money would become a fund of resources that could be used to invest in long-term projects. If we take the Ontario teachers’ pension fund—I hope you will look it up later, Mr Leigh—it involves patient capital that is invested in long-term investment projects. It is there to secure the pensions of those wonderful teachers in Ontario; they are not quite, but almost, as good as the teachers in Bedford. It is there to protect their pensions, which it does by looking for long-term investment returns. It is the fund that seeded the money for Birmingham airport. If we had our own infrastructure fund set up as a future fund for public sector pensions, we could provide resources to fund long-term investment projects.
Let me say something that I rarely say, which is that I agree with the comments made by the Secretary of State for Business, Innovation and Skills, who spoke yesterday about the need for a significant investment in housing construction. Of course, we need other construction projects, but we understand that we are under fiscal restraints because we must demonstrate that our deficit is being reduced. I ask the Treasury team to consider this very carefully: in current market conditions, particularly with the constraints of fiscal responsibility and the lenient conditions for monetary policy, a future fund would be uniquely placed to provide the long-term patient capital to fund such infrastructure investments, without there being any challenge to the probity of the Chancellor’s deficit and debt reduction policies. This environment provides an opportunity to fund and seed a future fund with the resources from the Government’s credit easing or quantitative easing programmes, and that would happen in such a way that markets would see that it was matching a reduction in the country’s long-term public liabilities for funding public sector pensions.
Petrol and Diesel
Angus Brendan MacNeil Excerpts(12 years, 6 months ago)
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Robert Halfon (Harlow) (Con)
It is a pleasure to serve under your chairmanship, Madam Chairman, and I appreciate what you have said. I have cut my speech down to allow for more interventions. The number of people here shows just how important the issue is, and I thank Members from both sides of the House for coming along.
I want to start by knocking something on the head. I welcome, as I am sure everyone here does, the fact that in the past few weeks petrol prices have come down a few pence, but families in my constituency still spend more on petrol than on food. The price of petrol is at an historic, all-time high. In Harlow, it costs more than 140p a litre, and that hits the poor twice as hard as the rich. People say that the price has come down, but it is a bit like a burglar taking £100 out of your pocket and giving you £5 back.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Does the hon. Gentleman agree that when a few pence comes off the price of a litre and the foot comes off the neck of the economy and of hard-working families, it is the wrong time for the Government to put that foot back again and squeeze the life blood out of the economy?
Robert Halfon
I am grateful to the hon. Gentleman. He supported me in the debate last year in which we managed to get the Government to postpone the January tax rise, and he will see from my remarks that I do not disagree with him.
Sir Terry Leahy of Tesco has said:
“Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.”
I and most fair-minded people recognise that the Government have made significant progress, abolishing the previous Government’s fuel duty escalator, scrapping the planned hikes in 2011 plus a 1p cut in duty, with a partial fuel stabiliser and the freeze in fuel duty that I mentioned, in January this year. I firmly believe that the Chancellor shows an understanding of the matter, and that the Government must get credit where they deserve it, but we face considerable problems.
The first problem is the planned tax rise in August, which I ask the Government to reconsider. Secondly, we need a serious inquiry into the lack of competitiveness in the oil market, and possibly even a windfall tax on oil firms, to cut prices. Thirdly, there is the problem of the banks speculating on the price of oil.
Miss Smith
The hon. Gentleman will have heard me explain over the past few minutes that the Government have done something and that there are many other ways in which this Government need to consider what they do through the economy.
On the recent Royal Automobile Club report, which has also been raised today and in which my hon. Friend the Member for Harlow is interested, the Government announced in the Budget that they will consider whether vehicle excise duty should be reformed to support the sustainability of public finances and to reflect the improvements in vehicle fuel efficiency. The Government will, of course, seek the views of motoring groups before taking any decisions.
My hon. Friend also asked questions about the competitiveness of the oil market. As I think he knows, the Office of Fair Trading is undertaking research on pump prices on the Scottish islands, which are no doubt of interest to the hon. Member for Dundee East (Stewart Hosie). That work will help inform what further action, if any, may be appropriate elsewhere in the UK.
Several Members have asked whether other island and mainland areas could be included in the rural fuel rebate pilot scheme. It is a pilot scheme and nothing beyond its boundaries has been ruled in or out, but I have listened to what Members have had to say.
Mr MacNeil
I want to put it on the record that the pilot scheme seems to be working well. Indeed, I hope that it will be rolled out further and be made a permanent scheme in the future.