Financial Services Bill

Baroness Burt of Solihull Excerpts

Monday 23rd April 2012 Commons Chamber

Worse, the charges on the consumers can often be made up front, so those customers who make payments to a debt management consolidator that is renegotiating their loans and credit often find that those payments can first go to pay the company’s charges before even a penny goes towards paying down some of the individuals’ debts. There have been numerous stories over a number of years of many consumers who, while thinking that they are doing the right thing by consolidating their debt and getting the situation sorted out, find many months later that all they have done is feed the profits of those companies who were taking advantage at that time. That is why the Opposition say that enough if enough. The time has come to bring forward proposals to phase out the practice of fee-charging for the provision of debt management plans to customers. We have framed the new clause in such a way that it is in no way unreasonable. We have not insisted on a particular way in which this is done or a particular date. We have asked the FCA simply to bring forward recommendations about how this could be facilitated.

[Lorely Burt (Solihull) (LD)]

I have a huge amount of sympathy with the hon. Gentleman’s points about some companies that prey on some of the most vulnerable in our society who are in fear of the debt collector knocking on the door. However, would he tar every debt management company with the same brush? I have experience of companies that behave responsibly and extend a great deal of help to people to manage their financial affairs.

[Chris Leslie]

That is a fair intervention. No, I would not say that they are all the same. There are companies, even those that may for some reason be using this fee charging process, that want to do the right thing, but my point is that that business model has had its time and needs to go. There is a better way, whether it is a for-profit or a non-profit avenue, for debt management consolidation to take place, and that is to tell the creditor that this is a way for them to get some money back, albeit not necessarily the full amount, from those heavily indebted customers who may owe them something, and in exchange for getting something back they have a duty as a creditor to stump up some of the cost for the administration of that consolidation. It is time to end the business model that has a propensity to cause hardship, not in every single case, but in too many cases, and that is why the Opposition believe that this is a perfectly reasonable new clause to bring forward.

New clause 10 concerns mortgages. People may well ask where the problem is at the time being when mortgage rates are at a low level, partly because the Bank of England is printing so much money that we end up with a low base rate. But the Governor of the Bank of England has been warning in a number of reports that this is an unsustainable situation and that over the medium term he expects interest rates to normalise. From the Bank of England’s point of view, whether the normalised interest rate is 4% or 5% is moot, but it is certainly much higher than the current rate.

My anxiety is that many consumers up and down the country might be under the false impression that this is a normal period, but it is not. If the mark-ups that the retail banks charge on the wholesale cost of borrowing are maintained as base rates or LIBOR rise to a more normal level, the mortgage rates that our constituents pay could end up being significantly higher, at 6%, 7% or 8%. I suspect that the difference between the price the banks pay wholesale for their money and the amount they charge customers upfront has been growing and is too wide. As soon as LIBOR creeps up, if that mark-up is maintained, we could be in serious difficulties, which is why the new clause is essential at this time.

This is a stitch-in-time new clause. We have tabled the proposal because we believe that now is a good time to require all the banks to forewarn their customers about a number of possible scenarios so that home owners with mortgages have the information necessary to prepare for them. Often when those of us with mortgages get information from lenders it is a set of retrospective information, for example on how much we have paid to defray the cost of our mortgage. We believe that it is now essential to forewarn customers about what could come in future, because we have to find a way of ending shocks to consumers, especially when changes to standard variable rates can sometimes be made with as little as two weeks’ notice.

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[Katy Clark]

I am grateful to the hon. Gentleman for his intervention. He has shown that he has a full grasp of the issues. Many of those who saved through Farepak for Christmas 2006 believed that there was some form of protection for the money that they put in. They were of the opinion that they were being responsible by saving in that way. My view is that they were being responsible. We have a duty, as legislators, to put protections in statute to enable people to continue to save using such models. I think that those people had a reasonable expectation that there was regulation in place to protect the money that they put in. Many of them presumed that there was such regulation.

Five years ago, a voluntary body called the Christmas Prepayment Association was set up. However, many prepayment companies are not members of that organisation and there is no requirement for them to belong to it. Some of the biggest players in the market, such as Tesco and Asda, are not members. The association covers only Christmas schemes and not the wider prepayment sector.

I believe that the prepayment sector has not been regulated because, over time, different forms of prepayment have developed. Mechanisms have been put in place to provide protection for the earliest types of prepayment, such as those used in the travel industry. The Farepak case highlights important failings in the regulation of the prepayment industry. It has become clear that that lack of regulation extends not just to the Christmas hamper sector, but to a wide range of prepayment situations in which consumers pay in advance of receiving goods. I have already mentioned the holiday sector, in which the Association of British Travel Agents operates, and there are many other situations in which a customer pays for something by way of instalments.

That practice is usually undertaken by those of limited means, who are at risk of losing both their money and the product if the fund goes bust before they take delivery. Such a form of payment is used by such large organisations as Tesco and Asda, but also by small organisations in all our communities. Some people pay over a period for goods for a celebration, for example, perhaps paying a butcher instalments of £10 a week. We should provide a statutory framework so that such people get some type of preference if the organisation in question no longer exists.

One reason why it is important to have regulation is that it tends to be people from poorer communities who pay in advance by instalment. They are exactly the people who can least afford to lose out, and I do not believe that they should carry the risk when they choose that model of payment for goods. Many of them honestly assume that their money will be ring-fenced in some way.

We need to move to a model whereby moneys that are prepaid are effectively held in trust, and any organisation that can no longer deliver the goods because of a collapse gives those moneys priority. I therefore believe that it is appropriate that an organisation such as the Financial Policy Committee examines the issue. Prepayment exists in a wide range of scenarios, with people paying over a period in advance of receiving the goods. I therefore ask the Government to look sympathetically on new clause 12 and consider pursuing the course of action that it suggests.

[Lorely Burt]

I begin by warmly welcoming the Government amendments that provide further clarity on the intention to transfer the regulation of all consumer credit businesses currently regulated by the Office of Fair Trading to the Financial Conduct Authority, while retaining all the protections that consumers currently enjoy under the Consumer Credit Act 1974.

New clause 9 would commit the Government to phasing out charges for debt management plans. Whatever the hon. Member for Nottingham East (Chris Leslie) thinks, businesses providing those plans are in the main legitimate. He talked about the scandalous behaviour in which certain debt management companies have indulged, but a number of companies look after their customers effectively and caringly.

[Katy Clark]

Does the hon. Lady agree that one cause for concern must be the fact that organisations profit from debt management? The charging of fees by profit-making organisations seems inappropriate. Does she agree that we should encourage voluntary and non-profit making organisations in the sector?

[Lorely Burt]

Of course I would encourage such organisations, and as my hon. Friend the Member for North Swindon (Justin Tomlinson) said, we need to give people financial education. There is an image of companies profiting from others’ misery, but there are companies that act responsibly and ethically, so I do not support new clause 9. It is a shame that all companies have to be tarred with the same brush, and the new clause would remove an element of choice from the consumer. Of course, many consumers would not choose a debt management company over a free service given the choice.

[Yvonne Fovargue (Makerfield) (Lab)]

Does the hon. Lady agree that one problem is that consumers making a distress purchase do not know which companies are reputable? Unfortunately, the ones at the top of the Google list tend to be the least reputable.

[Lorely Burt]

I agree that the companies that spend money on unsolicited calls to people who may have a financial problem are the ones that need to make the most profit, to cover the cost of doing so. However, responsibility for debt management is moving to the new FCA, and new guidelines are being issued. As long as those guidelines are strong and properly enforced, part of the market may still be able to benefit from providing debt management advice.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the hon. Lady consider the fact that it is not necessarily about whether there are charges so much as it is about who pays them? The intention behind the new clause is to protect consumers from being the ones who pay. Is it not possible that debt management companies can find another way of funding their work rather than having consumers pay the price?

[Lorely Burt]

That should ideally be the situation, and when the new regulations are produced there should be a careful consideration of whether any up-front fees should be paid to debt management companies.

New clause 10 would require mortgage lenders to inform existing customers about potential interest rate changes. I have to declare an interest: I was a mortgage adviser in one of my past lives, so I know a little bit about the matter, and I suggest that any reputable mortgage company should do that anyway. It is not in their interests to encourage people to take on mortgages that they will not be able to repay should financial circumstances worsen. The new clause may therefore be superfluous. I completely understand and appreciate the sentiment behind it, but the matter will probably fall within the FCA rules and within the ethical behaviour that one should expect from any mortgage lender.

[Chris Leslie]

I appreciate the hon. Lady’s comments, but if she cannot support the new clause, will she at least join me in encouraging the regulator to ensure that all banks think about informing customers of potential interest rate changes as a matter of course? One bank doing it would not be enough; we need them all to engage in that forward planning.

[Lorely Burt]

I agree entirely, and we already have a provision to enable that to happen.

My hon. Friend said that one building society requires customers to save with it before getting a mortgage there. When I had my first mortgage, more years ago than I care to admit to, that was the norm. People were expected to be a customer of a building society before getting a mortgage from it, which encouraged a way of saving that we seem to have lost in many areas of our society. I support the sentiment behind the new clause, but I do not believe we need it.

New clause 12 calls for a review of prepayment schemes, including an analysis of whether customers should be preferential creditors in the event of insolvency. The Farepak issue, and the tragedy of its customers, is emblazoned on our minds. Victims of other financial schemes such as Equitable Life still write to me virtually every week, but the new clause relates particularly to prepayment. Many structural issues contributed to Farepak’s demise and they need to be addressed. Many unsecured creditors suffer when such a company collapses. I am attracted to the idea of giving prepayment scheme customers a form of secured creditor status, as the hon. Member for North Ayrshire and Arran (Katy Clark) suggests. The Minister has advised that such a measure is not appropriate within the remit of the Bill, because a prepayment company is not a financial services company, but perhaps he could advise us on an appropriate route for looking at the proposal in a little more depth.

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[Yvonne Fovargue]

I rise to support several of the amendments. I will speak first to new clause 9 on the phasing out of debt management companies. I accept that some of them might act ethically, but a great number do not, and the voluntary code of practice has simply not worked. We are talking about a distress purchase. People who buy a debt management plan will often have been worrying about it for months and months. They are looking on the internet at 3 o’clock in the morning and going to the first name they see. They do not know whether it is a member of a reputable trade body. They simply see, with relief, that someone can help them with their debts. It is no wonder that the number of complaints to the Financial Ombudsman Service about these companies’ practices has rocketed in recent years. The cost of policing and dealing with these organisations is disproportionate. It would be much easier to phase them out and put that money into the free sector so that it can ensure that creditors, via the fair share scheme or the financial inclusion fund, pay for such advice.

I would also like to speak to new clause 12 and the prepayment issue, which was so eloquently outlined by my hon. Friend the Member for Walthamstow (Stella Creasy). The people who invested in Farepak honestly thought that it was a savings scheme, which should be regulated. My experience of working for a citizens advice bureau is that one of the most difficult things to explain to people is the difference between a deposit and a prepayment. People do not understand the difference; they believe that they are equally protected whether a payment to a scheme is classed as a deposit or a prepayment. Indeed, I have seen people in my constituency surgery who have had problems with funeral prepayment schemes, most of which are covered, but some of which are not. I have had grieving relatives come to me and even people who have paid for their funeral, thinking that their family were covered and would not have to worry anymore, who have lost their money.

The voluntary Christmas prepayment scheme is simply not sufficient. As my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) said, the big supermarkets are not taking part. I wrote to every supermarket, and they said, “There’s no need for us to take part.” However, if they will not take a lead, how can we expect the smaller companies to follow? The scheme needs to be expanded. We need to ensure that people do not fall through the gaps, such as when the Government say, “It’s not this regulation; it’s that regulation,” or, “It’s not in this area; it’s a consumer matter.” The people who suffered because of Farepak do not care where it is regulated; what they need is some regulation.

Amendment 55, which deals with the money for specialist debt advice, is extremely important. We have heard on a number of occasions that the Money Advice Service does not provide debt advice, and nor should it. It should not be providing people with advice on debt, but putting the matter to the agencies that specialise in it. It is quite understandable, with face-to-face money advice and the financial inclusion fund, that the Money Advice Service should want more cases dealt with. However, there is a perverse incentive, because in being able to deal with one-off cases, the agencies are seeing more people, but giving less advice. The intractable cases, where people really need advice—those involving people who cannot deal with their debts, but need to keep coming back because their creditors keep asking them to—are not being seen. One-off advice is fine for those who can help themselves; indeed, there are a number of people who can be directed to the internet or telephone. My concern is that the removal of legal aid for debt and the Money Advice Service’s inclusion of one-off cases in the financial inclusion fund mean that the people who need ongoing support for long, complex cases are not being seen by the agencies. If amendment 55 is not accepted, therefore, I would urge that those people be considered when debt advice is reviewed.

Let me turn to amendment 40, which was so eloquently spoken to by my hon. Friend the Member for Walthamstow. I agree that capping the total cost of credit is simply one measure. However, we face an urgent situation. There are many other measures to consider, and I agree with the hon. Member for North Swindon (Justin Tomlinson): roll-overs indeed cause detriment. I have one constituent who has taken out 17 payday loans in one day alone—that is the highest so far; I am still waiting for an improvement on that. As companies have no way of checking in real time whether somebody has taken out any more payday loans, we need a database, run by the regulator so whether somebody has taken out any further loans can be checked, and a limit, whether monetary or numerical. We need to consider that, so I welcome the fact that the Office of Fair Trading is conducting a review. I hope that it will widen that review to include doorstep lenders, such as Provident, which have for so long caused detriment to consumers.

I would like to mention a case that would be solved by capping the total cost of credit. I had a constituent come to me because she had borrowed £300 from Toothfairy. She was a hairdresser. Unfortunately her washer had broken down and she had borrowed that £300 so as not to have to go to BrightHouse and pay its extortionate costs. Unfortunately, however, the hairdressers closed before her next payday—no notice; she lost her job. Over 12 months she had offered instalments to Toothfairy, but the company would not listen to her or accept any instalments. Twelve months on, she went to the citizens advice bureau. She owed £2,570 at that stage, from a debt of £300. She had also received threats from the debt collection agency, which purported to be a bailiff. The company refused to negotiate with the citizens advice bureau, and although the OFT is investigating, there is no action yet. The OFT does not have the power to suspend the company. It is investigating the case, but if it finds that there was consumer detriment, it cannot suspend the company’s licence, and it knows very well that the company will appeal. I cannot believe that there is no consumer detriment in that case, or in the number of similar cases. The OFT or the new regulator must look at the power to suspend. However, capping the total cost of credit would also be a way of doing something urgently to prevent people such as my constituent from getting into such situations.

[Lorely Burt]

The hon. Lady talks about the OFT not having the power to suspend, but does she agree that the new powers, which the FCA will have, will make it possible to address that?

[Yvonne Fovargue]

I do not believe that it has yet been confirmed that they will include the power to suspend a company. I would like the Minister to address that. If the FCA has that power and has the resources to act, that would help in cases where the company is breaking all the voluntary codes—it has been proved again that a voluntary code is not working. Again, however, consumers do not look to see whether such companies are regulated; they just need the money. They simply go to the nearest company—possibly the one at the top of the internet or possibly the person or company that sends them an unsolicited text. Consumers do not shop around for such loans.

Consumers need a robust regulator, and although I welcome the move from the OFT to the FCA in new clause 4, the Government need to clarify what that means for consumer protection. There needs to be a robust deterrent for firms entering the market. The bar needs to be set much higher. There also needs to be a real deterrent. I was therefore pleased to hear the Minister say that the £50,000 limit did not apply and that there could be an unlimited fine, because I believe that £50,000 will quite often be written into the business plan as a write-off. There needs to be the power and, as importantly, the resources to supervise and to stop bad practice at an early stage. Two years down the line is too late for the innocent people who have walked into the trap. We need a real consumer champion. As Which? has often said, what we want is a watchdog, not a lapdog.

[Neil Parish (Tiverton and Honiton) (Con)]

I apologise to the House for not being here at the start of the debate.

I congratulate the hon. Member for Walthamstow (Stella Creasy) on her amendment 40, because payday loans and doorstep lending are a huge problem. There are many loan sharks out there and they need to be put back in their boxes. We need serious financial health warnings about their conduct, so that our constituents have some idea of how much they are borrowing and how much they will have to repay. For instance, anyone borrowing £100 at 2000% will have to pay back up to £2,000. That needs to be clearly laid out when people are taking out such loans. As has been pointed out, APRs—annual percentage rates—are not always understood by our constituents. Therefore, if they could see exactly what they had to repay, they would be much less likely to take out such loans.

[Lorely Burt]

The point of payday lending is that it should be for a very short period. Such issues arise when there are innumerable roll-overs, as outlined by the hon. Member for Walthamstow (Stella Creasy). What we hope the industry will do and the review will achieve is either to confine roll-overs to a small number or to abolish them altogether, which would address the problem of the £2,000, which no one in this Chamber wants to see.

[Neil Parish]

The hon. Lady is absolutely right. It needs to be clearly set out when people take out a loan that such sums could be the result if they are unable to repay it. Let us consider the analogy of tobacco. We no longer allow tobacco advertising, and shops cannot even display packets of cigarettes any more, yet people can ring up Wonga on their mobile phone and take out a loan for which they will be charged 4,214% interest.

Finance (No. 4) Bill

Baroness Burt of Solihull Excerpts

Monday 16th April 2012 Commons Chamber

[Mr Howarth]

The hon. Gentleman makes a useful point. I said that the system would be complex to administer, and complex things cost more, so the hon. Gentleman is right to say that. I had not intended to cover the point, but he is also right to express concerns, as did my Front-Bench colleague, my hon. Friend the Member for Leeds West (Rachel Reeves), about the effect of these changes on charities. I happily endorse the sentiment behind the hon. Gentleman’s comments..

I mentioned the maximum pension credit, which is being cut by £1.98 a week for single pensioners and £3.36 a week for couples. The threshold at which people qualify for pension credit has increased by 8.4% to £111.80 for single pensioners and £178.35 for couples. That means that 27,500 pensioners in Knowsley could be affected by these changes. One important characteristic of the previous Government—I do not think it is open to dispute—is that the lot of pensioners steadily increased during the period in which they were in office. What we seem to be confronted with here is the potential for pensioners to get poorer and poorer, as happened under previous Conservative Governments. That is a real concern in my constituency. These changes, taken in conjunction with other changes to the benefit system, will mean real hardship in my constituency, which is one of the poorest in the country.

Let me say a few words about minimum unit pricing for alcoholic beverages. I shall quote a constituent who wrote to me. I shall not name them, as I do not have permission to do so. My constituent wrote:

“The reality is that minimum pricing will affect those less well-off and have little impact on those with a poor relationship with alcohol. It will enrich retailers without creating jobs, reduce investment and damage producers leading to the loss of jobs. The treasury will recover less duty and tax from the sector as a whole.”

I will give my view in a few minutes, but I think that when people write to Members of Parliament expressing such concerns, it is important for us to raise and address the issues.

I have also received some briefing from a company in my constituency, Halewood International. It employs 500 people in the north-west of England, most of whom are in my constituency. It produces some products of which Members may have heard—one is Crabbie’s Ginger Beer, which is a very popular drink; another is Red Square Vodka—and, as well as producing some important brands, it distributes brands for a large number of other companies.

Halewood has made a number of points, to which I hope Ministers will consider responding. First, it says:

“Alcohol consumption has declined since 2004 and more people are drinking responsibly.”

I think that there is evidence to support that assertion. Secondly, it says:

“There is no evidence that minimum pricing will reduce alcohol misuse. It will affect all consumers and punish the majority who drink responsibly.”

That is clearly true: it will affect everyone. The company adds:

“It will hit people on the lowest incomes hardest.”

That, too, is clearly true.

Thirdly, Halewood says:

“Minimum unit pricing is likely to be illegal under European Law. It is inconsistent with the operation of the free market for the state to intervene on price.”

The company is not alone in that view. The Economic Secretary to the Treasury has said:

“the Scottish Government have recently introduced a Bill that seeks to bring in a 45p per unit minimum price… we believe that it could be incompatible with article 34 of the treaty of the functioning of the European Union… That is the position.”—[Official Report, 14 December 2011; Vol. 537, c. 341WH.]

So it is not just companies with an interest in the matter that believe that minimum pricing is likely to be problematic in terms of European law. In December last year, the Government thought the same.

Fourthly, Halewood says:

“The UK alcohol industry already pays some of the highest rates of alcohol tax in Europe. The Budget delivered a 5% increase in duty.”

Finally, it says:

“The drinks industry is committed to helping to tackle alcohol misuse. It is delivering a range of initiatives to encourage responsible drinking, such as through the Public Health Responsibility Deal.”

That is the case being put by the industry, and by some of my constituents. Personally, I have an open mind on the introduction of minimum unit pricing. I recognise that problematic drinking exists throughout the country—not just in urban areas, but in every constituency—and that there is a growing problem of young people drinking too much, too often, and ending up with serious health problems as a result. If I could be convinced that these measures would address that adequately, I could be persuaded to support them, but I do need to be convinced.

[Lorely Burt (Solihull) (LD)]

I cannot agree with the right hon. Gentleman about minimum pricing, because I think there is a lot of evidence to suggest that the most responsible drinking goes on in our public houses. Although the alcohol manufacturers may have some reservations about minimum pricing, does the right hon. Gentleman agree that low charging by supermarkets, whereby our young people buy alcohol in them and get tanked up before going out, is detrimental both to our society in general and to our pub industry, which I am sure all Members cherish and are keen to see survive?

[Mr Howarth]

The hon. Lady makes an effective point. I am tempted to enter into a debate about what has happened to the pub industry over the last decade, but I doubt whether that would be in order. I will say, however, that people’s habits have changed, including in respect of the places they go to for entertainment. That is particularly the case for young people. Many of them no longer go to pubs for entertainment. Some of the new places they go to serve alcohol, but others do not. More is going on here than the hon. Lady suggests, therefore. She is right, however, that some young people buy alcohol from supermarkets and drink it at home, so that they are already half-filled up, as it were, when they later go out to a nightclub. One of the reasons they do so is that the drink prices in nightclubs are so expensive. I hasten to add, however, that I am not an expert on young people’s drinking habits.

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[Charlie Elphicke]

The law requires change. The avoidance might be legal, but HMRC is understood to be investigating a number of those companies. Because of taxpayer confidentiality, we will not know for sure until such time as a case comes before a court.

Let us take the case of eBay. Tax of some £50 million should have been paid on UK profits before avoidance, but eBay actually paid £3.4 million. Facebook should have paid £14 million, but actually paid £400,000. That level of avoidance is unacceptable. This poisoned legacy—the total failure to reform our tax system—left to us by the previous Labour Government is unacceptable. I might, if I am generous, put it down to their obsession with pursuing the prawn cocktail circuit for so many years, in the fear that if they took on business and ensured that it paid its fair share of tax, they would be less friendly with business and have less credibility.

[Lorely Burt]

I totally agree with every word that the hon. Gentleman has said so far. Does he share my concern that companies operating in developing countries should consider how they pay tax through transfer payments? Developing countries pay more—suffer worse—through not getting those payments from companies that extract their wealth than we get from our ability to tax.

[Charlie Elphicke]

I thank my hon. Friend for her point. My point, in this case, is that we should widen the anti-avoidance measures in the Bill for our own UK territory to ensure that taxes are paid on trading profits made here. I am not making a case for an extension by proxy of the UK’s substantial international aid budget, which is 0.7% of gross domestic product. If one wants to make the case that it should be more than 0.7%, as ActionAid does, I am sure that they will make it, but I do not want to focus on that issue. I am much more interested in securing our own tax base so that we can get our deficit down by widening the tax avoidance measures in the Bill and extending them to a wider and greater reform.

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[Mrs McGuire]

My hon. Friend the Member for Leeds West (Rachel Reeves) dealt ably with that point earlier today, and I am delighted that my hon. Friend the Member for Brent North (Barry Gardiner) has echoed her comments.

[Lorely Burt]

Will the right hon. Lady give way?

[Mrs McGuire]

I want to make some progress.

The test of a Budget is not the easy headlines on the day of the announcements, but how quickly and radically it unravels in the days and weeks after the initial statement. In the case of the 2012 Budget, we did not have to wait long. It was full of political symbolism but it had little substance. The Chancellor said:

“We will…consult on the introduction of a large annual charge on…£2 million residential properties”.—[Official Report, 21 March 2012; Vol. 542, c. 804.]

That was no doubt a sop to the Business Secretary, but the reality is that only 3,000 houses a year, at most, will be covered by the charge, and it will be easy to avoid. A property valued at £2,000,010 might be made available at a bargain price of £1,999,999.99. A gentleman such as the hon. Member for Dover could drive a coach and horses through such an arrangement. It was a policy that sounded good on the day but it will be no more than warm words when it comes to raising revenue or catching those who seek to avoid paying tax.

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[Mrs McGuire]

No, I have been generous enough with the hon. Gentleman.

Also hidden in the statement was the announcement that there would be a further cut in the DWP’s welfare budget. I do not know how many people heard the Chancellor slide over the fact that there was going to be a £10 billion cut in the DWP budget. He did not say where it was coming from; it was left hanging in the air. He made a passing reference to his colleague, the Secretary of State for Work and Pensions, and to what a wonderful job he would do in cutting £10 billion. Where is that £10 billion going to come from? Will Ministers cut the carer’s allowance? Will they make further reductions in housing benefit for those in work as well as those who are out of work? Will there be a further erosion of support for disabled people, including disabled children? Will the Treasury freeze state pensions? Ten billion pounds will not come out of thin air. It will have to be paid for, but so far we have been given no details, or even a broad-brush indication of where it will come from.

My hon. Friend the Member for Llanelli (Nia Griffith) made some valuable points about the stimulation of growth. It is worth comparing what the present Government have done with some of the steps taken by our Government when we were faced with a recession—a global recession, not a recession manufactured in this country. [Interruption.] Did I hear a voice from somewhere?

[Lorely Burt]

I was reflecting, perhaps a little more vocally than I should have from a sedentary position, on the suggestion that the recession was not of the right hon. Lady’s making, and was not fuelled by debt or anything else of that kind. She seemed to be entirely confident that her party had played no part in the creation of the circumstances in which we now find ourselves, although the former Chief Secretary left the message “There is no money.”

[Mrs McGuire]

I almost wish that I had not heard the comment that the hon. Lady made from a sedentary position. What I said was that it was a global recession that we faced in 2007-08, not—as the Government would have us believe—a recession that had been manufactured in this country. It spread across the whole of the western world, and I hope that the hon. Lady will reflect on her comments.

As my hon. Friend the Member for Llanelli pointed out, during that dire time the car industry was helped by the scrappage scheme, there were changes in stamp duty and reductions in VAT, there was a future jobs fund, payment of tax was deferred for small businesses, and there were changes in mortgage support for those who became unemployed. The purpose of all that was to ensure that people stayed in their jobs, or, if they faced unemployment, were given the support that would enable them to obtain other jobs. This, however, was a Budget of ill-considered consequences. We have a granny tax that will make some pensioners poorer. We have a charities tax that is so badly thought out that Conservative Back Benchers are holding up their hands in horror. We now have a panicked consultation. We have tax proposals that may ruin the caravan industry, which involves manufacturers in the north of England. Hairdressers face paying VAT on their chairs that they hire for their salons. We have tax proposals that cannot be implemented.

One of the Treasury Ministers must explain to me what an “ambient temperature” is when it comes to assessing the imposition of VAT on savouries, which is almost impossible to implement. Is a pasty or a steak bake or a pie cooling down after it has been baked liable for VAT, or is one warmed up so that it can be sold also liable for VAT? That is a nonsense of a policy, and I hope that Ministers will reflect on it as well.

The Budget on 21 March was a weak attempt to highlight the coalition’s mantra that “we’re all in this together”, but has shown that nothing could be further from the truth. It was the Budget of a complacent and cynical Chancellor who feels that he has nothing more to do to stimulate growth. A Budget worked out by an out-of-touch Chancellor is now being finessed daily as it unravels in the light of scrutiny and analysis. In other words, this Budget was a lost opportunity.

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

After that version of what the Budget holds, it is worth quoting another, as today’s editorial in The Times was not nearly as enthusiastic as the hon. Member for North East Somerset (Jacob Rees-Mogg). In its words:

“When the Budget speech is still leading the news three weeks after delivery, something has gone awry.”

It is rather strange, because in the beginning people thought that so much had been spun out to the press in advance that there could not be much controversy left. It all seemed to have been massaged and put out in advance, so people would not be too surprised. Three weeks after the Budget, however, as The Times says, something has gone awry. Clearly, that view is not shared by the hon. Gentleman, but it is widely held throughout this country. Behind all the jokes about pasties, granny tax, stamp duty and caravans, the biggest thing that has gone awry is the fact that there is very little in this Budget to help grow the economy. That is the serious part of all this.

This morning—I think it must have been on the “Today” programme—I heard the commentator say that the Government have handed over the responsibility for economic recovery to business. The problem is that the OBR does not expect business to step up to the plate any time soon, so it appears that nobody will be responsible for the recovery. This is what the OBR had to say in its March report:

“Relative to our November EFO”

report,

“we have made a further downward revision to business investment, as we believe that non-financial companies’ balance sheets may be weaker than official statistics suggest. Set against this, we expect a boost to the level of business investment of 1 per cent from the corporation tax rate cut announced in the Budget.”

The reduction in the forecast for business investment for 2012-13 is 6.9% off the November forecast and the increase that is expected this year in business investment is only 0.7%, so it appears that business will not be stepping up to the plate.

We have heard a lot about corporation tax and Opposition Members have been accused of not being interested in that, but when one looks at the detail, one sees that the corporation tax cut that people have made so much of is expected to lead to an increase of only 1% in business investment over the whole forecast period. If a reduction in corporation tax is so important to the Government, it seems a rather modest step. In striving above all to create what he feels is a fiscally neutral Budget the Chancellor is constraining his Government’s apparent remedies to our economic situation. We have seen the same thing with the national loan guarantee scheme and the credit easing we were promised in November which was finally announced to be alive and kicking the day before the Budget. That is really an acknowledgement that previous measures to encourage business to invest have not worked.

What does the OBR say? It says:

“Under current funding market conditions, the Government guarantee on the first tranche should lead to lower funding costs and some additional net lending. The scale of the initial tranche is not large enough to have a material impact on our aggregate business investment forecast”.

It goes on to say that the

“benefits associated with further tranches are less certain.”

Again, one of the tools that the Government say they have to aid economic recovery appears to be exceptionally modest, so it is not surprising that the OBR does not expect a recovery in growth to the historical average before 2014.

The rise of the tax threshold is something that the Liberal Democrats are very proud of. They waved their Order Papers frantically at the time of the Budget.

[Lorely Burt]

Yes, we did.

[Sheila Gilmore]

And we heard a great deal about it from the hon. Member for Bristol West (Stephen Williams). I would be more interested in listening to their view on this if they acknowledged how many other measures have not helped many of the low-paid. Raising the tax threshold is not in itself a bad thing—[Interruption]—but when people have suffered other losses, the net effect is not what the hon. Member for Solihull (Lorely Burt) appears, from a sedentary position, to think it is. Someone who is now out of tax as a result of this year’s tax threshold increase will find that it is not worth as much to them as they might have thought because while they are gaining with one hand they are losing with the other. If they are entitled to housing benefit or council tax benefit, they will get less because of the changes in tax so the net effect will be that they receive less. Over the period since 2010, families in particular have taken a big hit with more than £500 a year being lost through changes in tax credit and other benefits. The hon. Member for Solihull laughs and perhaps she does not care about that because the tax threshold seems to be such an important mantra for her party but it is not enough if at the same time people are suffering losses. If we want to talk about the real position for families, particularly those with children, we have to look at the whole picture. Those who face the loss of tax credits this year know exactly what that means for their families. As I said earlier, I am very disappointed that the Government were willing to listen to some critics, and make changes for those on the higher rate of tax who are about to lose child benefit, but were not prepared to look at the much bigger working tax credit losses that will be suffered by people on much lower rates. If they were listening, they should have made the change for both, not simply for those on higher rates of tax.

We have heard a lot about tax simplification—indeed, it was the reason for the so-called granny tax—but it appeared to go out of the window when it came to child benefit changes for higher rate taxpayers. The Finance Bill will give us a complicated set of arrangements that will involve making decisions about whether two people are a couple, whether or not they are regarded as living together and when a relationship has sufficient permanency to affect the provisions. All those issues are extremely complicated and, as even some Government Members have said, they will involve employing more people to work them out. As we said, there will be administration costs.

When the changes were announced with a great flourish at the Tory conference, we pointed out the anomalies, difficulties and expense that would arise. I suspect that there will be further changes yet, because there is no point in pretending that the measure is not difficult.

On the higher tax rate issue, it was far too soon to jump to the conclusion that the 50p rate was not bringing in the revenues one might have hoped for. It was hardly given the opportunity to start. In effect, people on high incomes were using a form of blackmail on the rest of us: “If you put up taxes, we’ll find ways of avoiding them.” What did the Government do? They rolled over and said, “Oh all right then, we’ll lower the rate of tax.” If low-paid workers or people who lost their working tax credit when they could not find enough hours decided that sensible tax planning for them would be to stop work, because they would better off, they would be regarded as people who would rather stay at home watching daytime television than work hard. There is one rule for one set of people and one rule for another.

Tax avoidance should be tackled, but it is not a good sign when at the first whimper from higher rate taxpayers—the first effort to avoid the tax—the Government say, “Okay, we’ll change the tax rate for you.” That is what the Government stand for. It has been clear in this and previous Budgets that there is gross inequality in the way people are treated. People at the bottom who have been suffering from the changes in tax and benefits and are struggling to keep their heads above water find that even the new jobs supposedly created over the past two years—most of which were created in 2010—are part time and do not give them a higher standard of living. I urge Government Members to rethink their support for the Budget and to vote with us tonight.

--- Later in debate ---

[Owen Smith]

All that we know is what is written on page 52 of the review by Her Majesty’s Revenue and Customs of the 50p rate, in table A2. It states in black and white that £3 billion a year will be forgone as a result of the changes, not the £100 million figure that is arrived at with smoke and mirrors about the taxable income elasticity calculation that Treasury Ministers signed off. What does the Office for Budget Responsibility say about that? As the hon. Gentleman said, it says that there is huge uncertainty about that calculation. We contend that we should rely on the absolute numbers, as revealed this morning—that £1 billion was raised from the 50p rate last year, not the nonsense £100 million figure.

That situation reveals the priorities of the Government, who are taking £3 billion from pensioners. On average, £83 is being taken from them, and £285 is being taken from those turning 65 this year, to pay for a tax cut of an average of £40,000 for 14,000 millionaires. That is the Government’s priority. We cannot pretend to understand it, but it is unfortunately the priority that working people will pay for.

[Lorely Burt]

The hon. Gentleman talks about the 50p tax rate, which his party’s Government introduced. I cannot remember how many days before the general election at which the coalition Government came into office that that happened—was it 48 days? May I invite him to speculate as to why the former Prime Minister had 13 years in government but brought in the 50p tax rate only such a short time before his Government left office?

Amendment of the Law

Baroness Burt of Solihull Excerpts

Monday 26th March 2012 Commons Chamber

[Paul Blomfield]

No, I will not give way—any more than the right hon. Member for Bath (Mr Foster) did when I tried to intervene on him on that point.

When that letter was written, Lord Newby, the Liberal Democrat tax spokesperson, was quick to reject the appeal, but unfortunately the orange book clique that now runs the party won the day, and we should not be surprised. Back in March 2010, before the general election, the now Deputy Prime Minister boasted to The Spectator that his politics were defined by his belief in “freedom from tax” and in a smaller state.

[Lorely Burt (Solihull) (LD)]

Will the hon. Gentleman give way?

[Paul Blomfield]

No, I will not give way.

What happened to the party of Paddy Ashdown, whom I remember celebrating taxation as

“the subscription we pay to live in a civilised society”?

The Liberal Democrats are hiding their shame for backing the tax handout for the rich behind the fig leaf of the rise in the tax threshold. They claim, as the right hon. Member for Bath did earlier, that it helps the poorest—

Budget Leak Inquiry

Baroness Burt of Solihull Excerpts

Thursday 22nd March 2012 Commons Chamber

[Mr Gauke]

I am not sure that there was a question there, but I thank the hon. Gentleman for his views. The Government clearly authorised some information to be put out in advance of the Budget. For example, there was a speech by the Prime Minister. The Prime Minister makes speeches from time to time; I am not sure that people should be getting upset about that.

[Lorely Burt (Solihull) (LD)]

Does my hon. Friend agree that it is rank hypocrisy on the part of Opposition Members to accuse this Government of leaking? Can my hon. Friend remember how many times the Labour Government held inquiries into leaks about their Budgets?

[Mr Speaker]

Order. Let us be absolutely clear about this. The hon. Lady can make a general charge. She cannot and will not make a personal charge against an individual Member in any part of the House. I trust that the hon. Lady is not accusing the hon. Member for Nottingham East (Chris Leslie) on the Opposition Front Bench of hypocrisy.

[Lorely Burt]

indicated dissent.

[Mr Gauke]

I, too, want to be very careful and not accuse the hon. Gentleman of hypocrisy, but there are dangers of inconsistency.

Amendment of the Law

Baroness Burt of Solihull Excerpts

Thursday 22nd March 2012 Commons Chamber

[Lorely Burt (Solihull) (LD)]

As a Liberal Democrat, I am as delighted as any of my colleagues or, indeed, any of our coalition colleagues by the further and faster move yesterday towards the realisation of our flagship tax policy—raising to £10,000 the threshold at which people start to pay tax. It was something that the shadow Chancellor would not acknowledge, and that was a little churlish. As the Liberal Democrat spokesperson for business, innovation and skills, however, I want, in the short time at my disposal, to focus on a small number of highlights and what the Budget means for business.

Much of the good news for business was announced in the autumn pre-Budget statement, and that is a good thing, because what business needs as much as anything is predictability, stability and simplicity. We knew that corporation tax was due to be cut to 25% this April, but I am sure the news that we will now cut it by a further 1 percentage point is good news that business will be able to deal with.

I also welcome simplifying on the basis of cash turnover the tax on our smallest businesses. What a difference that is going to make for them, as will integrating income tax and national insurance. Business has other things to worry about without collecting tax through two separate systems for the Government.

Despite the tough decisions that we had to take because of the “no money” legacy of the previous Government, we have managed to create an environment of low interest rates, and that has been vital to business. We only have to look over the channel at our European neighbours to see what a shocking state we could have been in if we had not been as tough and as firm as we have.

So, despite the tough going, we have been getting going and literally rebuilding our economy. The building trade has suffered badly during the recession, despite historically low mortgage rates, but we are helping, through the NewBuy system, by expanding the get Britain building fund to provide up-front finance to construction companies and by reforming planning.

For small businesses, the national loan guarantee scheme started operating this week, making £20 billion of guarantees available. That is all well and good as long as banks are prepared to lend, so it is important that their seeming intransigence is challenged by competition from alternative sources of finance, such as the £1 billion that we have made available to funds that lend directly to mid-cap businesses. We are also increasing funding to the business finance partnership by 20%.

The Green investment bank opens for business next month—a step towards our aspiration to become the greenest Government ever; greener business cars will get a series of tax breaks; and hauliers’ vehicle excise duty has been frozen. But most importantly, there will be £4.5 billion less in burdens on the motorist with the cancellation of the fuel duty escalator and the confirmation of the fair fuel stabiliser.

Business needs support in many ways. We are very clever and inventive—[Interruption]—all of us, as a nation, and we need to do much more on patent protection, but I welcome the cut in taxes on patents and was delighted to hear the news this morning that GlaxoSmithKline will now invest heavily in the UK and, as a result of that announcement, continue its valuable and lucrative life sciences work here.

The support for science announced yesterday was also very well received. The extension of tax credits to the creative industries, as well as to films, is also welcome. There was some banter yesterday when the Conservatives were compared to “Downton Abbey”, and perhaps the Labour party does include Wallace and Gromit, although which one out of the shadow Chancellor and the Leader of the Opposition is Wallace and which one is Gromit is something on which we have been speculating. As for the Liberal Democrats, let us not be left out. I fear that our signature film will be “Four Weddings and a Funeral” if we are not careful. [Laughter.] But these tax credits, joking apart, are most welcome.

Research and development tax credits make a big difference to companies, especially when they are deciding where to locate their R and D functions, so I welcome in particular the movement to above-the-line credits—a simpler system, which ensures that tax implications can be more easily factored into the decision-making process.

In a global world we really need to brush up on our technology and, especially, on our broadband speeds, so the provision for ultra-fast broadband and wi-fi in 10 cities, including my own of Birmingham, is very welcome, as is the extra help for smaller cities.

Overall, I am very happy with this coalition Budget. However, there is an issue on which the Chancellor and I disagree—the belief that we need a new airport in the south-east. Clearly, we need to be able to service all passenger requirements, but there is a pledge in our coalition agreement that there will be no new runway at Heathrow. Why does the Chancellor not raise his eyes a little further north? Birmingham airport’s runway is currently being extended and will be easily accessible when High Speed 2 comes in. It has spare capacity of 40 million passengers a year. In the midlands, we have the answer to the need for an English airport hub.

Our business focus is paying off. We are now in the top 10 most competitive places in the world to do business. However, we need to change the culture in this country. I am so concerned that too many young people leave school unready and unprepared to earn a good living. We must tackle that issue. We must enthuse and open the eyes of our youngsters to the opportunities out there, including starting their own businesses. I fully back the idea of enterprise loans for young people. I started my first business venture at the age of 10, and I think that it is never too early to feel the excitement of doing it oneself. I commend the Budget to the House.

--- Later in debate ---

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

The hon. Member for East Surrey (Mr Gyimah) might be persuaded that plan A is working but I can tell him that, even if it is working in his constituency and the rest of Surrey, it certainly is not working in Scotland. I hope to demonstrate that in my remarks. The truth of the matter is that we appear to be living, even in this Chamber, in two different worlds. Let us ignore the fact that, despite all the efforts of the Government and all the leaks that we debated earlier, we face a Budget that represents the reality of what the coalition means. This Government and this Budget will be remembered for cutting the top rate of tax for the rich while putting the boot into pensioners. I have already spoken to a number of my constituents and I have absolutely no doubt that that is their view.

It might seem odd for me to refer to a Foreign Secretary during a Budget speech, but some hon. Members might recall that some years ago a young representative at the Conservative party conference—a 16-year-old by the name of William Hague—addressed the conference, saying:

“Half of you won’t be here in 30 or 40 years”.

That may well be true, but what are we seeing in the Budget for the half who are left? While £30,000 a year is freely given to millionaires, the Chancellor is seeking to end age-related tax allowances, despite the evidence from HMRC, which says that 4.4 million pensioners will be £83 a year worse off in the long term. How can anyone defend that and give us the kind of nonsense we have heard about the so-called class war?

Let me address the real economy in our constituencies, which I believe the Chancellor had a wonderful opportunity to address but missed. Unemployment is by far the biggest problem we are now facing, certainly in constituencies such as mine where there has been a 54% rise in long- term unemployment and an 80% increase in youth unemployment. A league table of every constituency in Britain was produced last week, relating alcohol abuse to mortality, and it is with great regret that I have to say that my constituency came out as No. 1. Almost every professional who was consulted on those figures made the point that we cannot ignore poverty and its implications; we cannot ignore unemployment and what it means; we cannot say to young people that there are no jobs for them, whatever educational qualifications they might have attained, and not expect the kind of reaction that I have just described. Nearly a quarter of 16 to 24-year-olds in the UK are unemployed. That is a wholly unacceptable statistic and I make the point that we are talking not just about statistics but about people.

We can see from the unemployment figures that are available that in the UK there was a 22,000 increase in unemployment among women in the last quarter alone. I am seeing that in my constituency. Women are the bedrock of our society, as we are rightly told. They are at the heart of our families, whom the Government in earlier days told us were one of their priorities. Well, there is little evidence for that.

We need to restore the future jobs fund—initiative after initiative has been annulled by this Government—and we need to look at new opportunities in fresh sunrise industries, which I am happy to say exist in my constituency, particularly in solar energy. I welcomed what my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) said a few moments ago, but I did not welcome the Government’s change to feed-in tariffs, which is frankly too deep and too fast. Home owners who seek to go along with developments in this sector now face soaring energy costs, and burgeoning industries such as AVC Sky in my constituency face enormous difficulties, which is bad for home owners, bad for jobs and bad for growth. The Government’s rhetoric is simply not matched by their actions, especially when the Government tell us that they are the greenest Government ever.

Mr Deputy Speaker—I beg your pardon, Mr Speaker; I welcome you to the Chair. We saw at points during the Budget speech yesterday Liberal Democrat Members waving their Order Papers. Were they waving them at the kind of measures that I describe?

[Lorely Burt]

We were waving our Order Papers with delight at the fact that our coalition Government are bringing the tax threshold towards our £10,000 target faster than we could ever have hoped.

[Mr Clarke]

They were waving their Order Papers at some of the most miserable measures that I have heard in the House. They reminded me of Jim Callaghan’s comment when he found that the Scottish National party—which is not even represented here today—was working with Mrs Thatcher to bring down his Government. He referred to SNP Members as “Turkeys voting for an early Christmas”, and deservedly in their case.

I wrote to the Prime Minister recently to draw his attention to the fact that Korean shipbuilders are given preferred bidder status for Royal Navy tankers, with almost £500 million involved. It simply cannot be right that, as we defend our country, as we should, defence orders exclude British and especially Scottish firms that are willing, able and skilled enough to respond to the task. I want to ensure that highly skilled workers are kept working for our nation’s security and for our people’s safety.

I finish with a reference to the Chancellor’s announcement of a £12 billion cut in welfare—a shameful figure that the Liberal Democrats were also cheering. That is added to the Remploy closures, which have never been fully explained. Hundreds of disabled people will be thrown straight on the dole. Two thirds of Remploy factories will close. We are seeing on top of that changes in benefits that are very much to the disadvantage of people with disabilities and their carers and families. We are seeing disadvantages even to disabled children and their families. It is not fair, not acceptable, and the Government deserve to be rejected and hounded by the British people.

--- Later in debate ---

[Jackie Doyle-Price (Thurrock) (Con)]

I am grateful for the opportunity to contribute to this debate and congratulate the Government on their increase of the personal tax allowance. I believe that a defining characteristic of the coalition Government is that we are taking so many more people who can least afford it out of paying tax altogether. It is an achievement of which we can be proud, and which reflects on both parties in the coalition. The measure also reflects the fact that Government Members have the right values when it comes to deciding who carries the burden of paying for public services. It should not be the lowest paid. We need to reward work and encourage aspiration.

The Opposition response has been predictable and disappointing. I was reminded why I got involved in politics in the first place many years ago when I heard the language of class war and envy being expressed by Opposition Members. They say, “Same old Tories,” but I say, “Same old socialists.” We have heard today the final nail going into the coffin of new Labour. The socialists are back in charge.

Let us be clear. The Government inherited an economy in which the state was borrowing more than it could afford. We certainly were not living within our means. The Chancellor’s achievement is that he has been able to reduce borrowing and establish credibility in the eyes of the markets, with the result that we retain confidence and continue to benefit from low interest rates. Our constituents benefit from lower mortgages.

I wholeheartedly welcome the Government’s decision to issue a statement to each taxpayer to explain how much of their tax is going on various areas of spending. It will strengthen the accountability of Government to the taxpayers. We on these Benches never forget that it is taxpayers’ money and we need to make sure that taxpayers have the opportunity to judge whether we are spending their money wisely and delivering the outcomes they wish to see.

What we really need now to move our economy on is a strategy for growth and job creation, and I wish to focus my remarks on those elements. I welcome the Government’s commitment to reviewing airport capacity in the south-east as that is clearly important for our international competitiveness. There has been a growing enthusiasm for a Thames estuary airport, most notably on the part of the Mayor of London. I have to put on notice my firm opposition to such a proposition. My objection is really that the Thames estuary reaches out to the rest of the world by ship and sea. In fact, the motto of the borough of Thurrock is “By Thames to all the Peoples of the World”. I want to retain the Thames estuary as a shipping centre, not as a centre for an airport.

The west London advocates of such an airport seem to think that north Kent and south Essex are economic wastelands waiting to be transformed, but nothing could be further from the truth. While the docks in east London have gone, they have moved east to accommodate the ever-larger ships. The ports in Thurrock are thriving and growing. The investment by DP World at Shell Haven and by Forth Ports at Tilbury docks mean that this sector will go from strength to strength. Within a couple of years, Thurrock will be the port capital of this country and it will strengthen the port of London and cement Thurrock’s role as a major logistics hub.

The debate about the future of a hub airport would have severe implications for Heathrow, if the new airport were constructed. The economic dislocation caused by such a move would be seismic. It would cost jobs and shift business: it would be displacement, not new economic activity. I hope very much that the review will consider what more can be done for Heathrow.

[Lorely Burt]

I totally agree with my hon. Friend about the inadvisability of a further airport in her lovely constituency. Does she agree that we already have the capacity in the west midlands—Birmingham international airport has 40 million spare passenger places?

[Jackie Doyle-Price]

I thank my hon. Friend for that intervention and I think a lot could be done by just increasing connectivity between existing airport capacity.

In the little time I have left I wish to address the issue of energy. The Chancellor has given notice that he will bring forward an energy strategy to look at what can be done to encourage more gas-fired power generation. I want to put on record a plea for biomass-fuelled generation to be given greater prominence in our energy mix. As part of a shift to more energy generation from renewables, we have had considerable emphasis on solar and wind, but when it comes to generating serious quantities of energy, biomass is clearly a great way forward. We are heading towards a situation in which a number of coal-fired stations will need to close due to their non-compliance with the large combustion plants directive from the EU. These stations are sitting on top of connections to the national grid and we could do much more to encourage energy companies to look at whether they can replace the redundant coal-fired plants with new plants that generate from biomass. That is something that the power station in Tilbury, run by RWE npower, is determined to do.

Opposition Members have mentioned regional pay. We already have regional pay. I live but two miles away from the boundary with London so public sector workers in my constituency are less well off than their London counterparts as they do not receive London weighting. We do not struggle to fill those public sector jobs. Public sector wages lag far behind those in the private sector in my constituency, and we need to encourage that elsewhere because we need to ensure that we are attracting the best talent into private sector jobs.

--- Later in debate ---

[Kate Green]

It is of deep concern to me, as I am sure it is to you, Madam Deputy Speaker, that female unemployment is now the highest it has been in a quarter of a century and that it was female unemployment that rose most rapidly in the last quarter, considerably outstripping what is happening to men.

I find it difficult to understand the fairness or logic of introducing a higher tax threshold that lifts some low-paid workers out of tax while at the same time disincentivising many other low-paid workers who are seeing their tax credits frozen or lost altogether if they cannot reach sufficient hours, to the extent that work will become hardly worthwhile for them at all. I cannot see the logic of the Government telling pensioners that on the one hand they will give to them through the triple lock, which I welcome, but with the other hand they will take away from them by raising the threshold and bringing 230,000 of them into tax, while at the same time trying to take people in low-paid work out of tax.

I am struggling to understand how a Government who said that they wanted to be fair and to operate a system that was simple can have arrived at the decision they reached on child benefit, according to which a couple with an income just short of £100,000 will be able to keep all their child benefit but another couple where only one member of the household has an income, but it is in excess of £50,000, will not. How can that be fair? How can a system be simple when it starts to claw back at the rate of 1% for every £100? How will people know where they stand in relation to their child benefit entitlement, and where is the incentive to work more and earn more in such a context?

I am struggling to understand why a Government who want to be progressive, who say that that is their reason for moving away from universal child benefit, which I hugely regret—I want to put on record that I absolutely stand by universal child benefit—and who say that they think there needs to be more progressivity, as they see it, in the way they administer child benefit, then introduce less progressivity in income tax by cutting the top rate from 50p to 45p when, as the OBR has said, there is considerable uncertainty that such a measure will deliver the tax receipts that the Government seem to believe will be brought into the Exchequer. With respect, I think that the Chancellor was a little over-optimistic in his analysis of the OBR’s comments on the likely efficacy of that measure, and it is also unclear to business commentators that the measure will be good for our economy.

Let us be clear that our corporation tax, even before this Government took office, was by no means among the highest in the developed world. I am interested in how a Government who make great play of seeing small businesses as the future of increasing employment, who want to reduce corporation tax, who are on a downward trajectory in relation to it and who want to enable small businesses to employ more workers have failed to notice that the very smallest businesses are completely unaffected by the cut in corporation tax because they already have a tax rate of only 20%. What are the Government doing to support those businesses when what they would really like is effective measures on employers’ national insurance contributions, something that again the Government have managed to address only in a most limited way?

[Lorely Burt]

What we are doing for small businesses, which will alleviate many administrative difficulties, is introducing measures such as cash accounting on cash flow, so we are working hard to help them in every way we can. We are also amalgamating national insurance with the other forms of tax paid so that only one lot of tax is collected.

[Kate Green]

It is not that everything the Government are doing is necessarily bad, but overall it is woefully insufficient in relation to business and not what the smallest businesses have been talking to me—or I suspect to the hon. Lady in her constituency—about. They have been talking about employers’ national insurance contributions, business rates and their concerns about the rise in VAT, which means that there is pressure on their turnover, but in the Chancellor’s statement yesterday the Government had nothing to say about any of those issues.

I should like to say a little about welfare and pensions. On welfare, I share with many of my right hon. and hon. Friends the deep concern that, after £18 billion of social security and tax credit cuts already from this Government, the lowest-income households in this country now face a further £10 billion of cuts. That will mean a hit on disability benefits and on the benefits that enable people to reach basic living standards. When the Government publish on people’s tax statements, as they say they will, a breakdown of where their spending has gone, I hope that they show in great detail who the losers are from that welfare spending. A broad-brush statement, “This is what is spent on welfare,” will not tell people that carers, the disabled and people raising children are actually the losers, so I hope that such information appears on the tax statements that the Government produce.

Finally, the Government propose to keep the state pension age under review in line with rising longevity. That, too, is a measure that will deliver greater inequality, because it will penalise most of all the poorest, who already have poorer health outcomes and poorer life expectancy, and those doing manual and hard, physical jobs. So buried in the detail there is considerable injustice, unfairness and inconsistency, and I shall vote against the Budget on Monday.

Financial Services Bill

Baroness Burt of Solihull Excerpts

Monday 6th February 2012 Commons Chamber

[Stephen Gilbert (St Austell and Newquay) (LD)]

It is a pleasure to follow the eloquent contribution of the hon. Member for Leeds East (Mr Mudie). He declared to the House that he had dropped his speech, but I do not think that anyone noticed. I intend, for all our sakes, to hold on to my own speech.

I want to raise three issues. First, I want to speak about the enhancement of consumer protection that the Bill provides, and I hope that my comments about that will be echoed by the hon. Member for Walthamstow (Stella Creasy). Secondly, I want to discuss the relationship between the FCA and the PRA. Thirdly, I want to develop a theme introduced by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley): the representation of British interests overseas.

Let me say in passing, however, that I share the concerns of other hon. Members about the oversight of the new macro-prudential powers which may need to be handed to the Bank of England, and which I believe could fundamentally alter vast swathes of the UK economy. It has already been mentioned that the ratio of mortgage lending may be one of the macro-prudential powers that the Bank of England wants to take on. It may be necessary to regulate an individual’s debt levels, and to regulate the debt exposure of small and medium-sized enterprises. All that needs proper parliamentary scrutiny, and I was pleased with the Chancellor’s response to my intervention on that point.

Let me begin with consumer protection. As we know, the Bill will establish a new code of conduct business regulator, the Financial Conduct Authority, which aims to protect consumers, promote, competition, and ensure that there is integrity in markets. Many consumer groups, including Citizens Advice and Shelter, have welcomed the FCA’s proposed objective of promoting competition in the interests of consumers. It is welcome that the FCA will have additional tools to deal with business conduct that is causing, or is likely to cause, consumer harm, to take action on products, to promote greater regulatory transparency, to tackle misleading financial promotions and to enforce the requirement to satisfy the regulator that a business model is suitable.

[Lorely Burt (Solihull) (LD)]

Does my hon. Friend agree that short-term consumer credit, payday lenders and the managing of consumer debt companies will now be much more strongly regulated, as has been called for by Members on both sides of the House?

[Stephen Gilbert]

My hon. Friend is quite right; that is a welcome step forward, although there are some bits that still need to be tidied up. I shall come to those later.

It is particularly welcome that the FCA will have a super-complaint power. This will allow Citizens Advice and other consumer bodies to use their evidence of widespread consumer harm to make complaints on behalf of all consumers, including those who might not know how to complain, and those who do not understand that their rights have been infringed. To make this new era of consumer protection effective, however, the Bill should require the FCA to respond quickly and effectively to super-complaints concerning widespread consumer harm, and I ask the Minister to consider what improvements could be made to the Bill in that regard when it goes into Committee.

As we know, the Bill sets out a framework for moving the regulation of consumer credit lending to the FCA. That, too, is welcome. But it is vital that not only lenders but debt collectors, brokers, debt managers and retail lenders that sell insurance products are regulated by a single, strong regulator. I believe that the responsibility for all that regulation should go to the FCA. In recent years, we have seen a succession of widespread consumer problems with financial products and services, including the mis-selling of payment protection insurance, poor lending and arrears collection practices in sub-prime mortgage markets, unacceptable debt collection practices by major credit providers, irresponsible lending of unsecured credit, and the ongoing saga of bank charges. It is clear that a change in the way in which consumer credit is regulated is necessary to protect consumers better in the future. I am looking at the hon. Member for Walthamstow as I say that.

Under the Consumer Credit Act 2006, the Office of Fair Trading has too little power or policy autonomy to respond quickly to emerging consumer harm, particularly when it concerns new products, services and business practices. That makes it easy for firms engaged in bad practices to target vulnerable consumers. It also undermines attempts by the sector to police itself, and makes the task of regulatory enforcement much harder. The level of financial penalties is also too low to act as a deterrent.

The OFT does not have the power or resources proactively to supervise regulated firms, or to identify and stop bad practice at an early stage. OFT guidance does not have the quality of rules, the breach of which could lead to a sanction, so enforcement is also slow. In respect of payday lending problems, for example, the OFT appears unable to make a specific rule limiting the number of times a loan is rolled over, or binding provisions on how a payday loan firm should ensure that it is lending responsibly, or to require a firm to deal with borrowers in financial difficulty in a specific way.

The Consumer Credit Act conduct regime is highly enforcement focused. There are few powers to pre-empt causes of consumer harm, or even to require firms to compensate consumers who have suffered harm. I think that all Members would agree that the consumer credit market needs a regulator that can regulate products and prevent consumer harm before it becomes widespread.

Tax Avoidance (Public Servants)

Baroness Burt of Solihull Excerpts

Thursday 2nd February 2012 Commons Chamber

[Danny Alexander]

First, I am grateful for the right hon. Lady’s welcome for the action we are taking on this issue. As I said in answer to the original question, I will certainly make available to the House, and indeed to the Public Accounts Committee, if she is interested to follow the issue through that route, too, the results of the inquiry that we have set out and the information on the number of individuals—if there are any others—who are paid under similar arrangements. As I have also said, if there are such arrangements in other places, Departments have actively and urgently to consider unwinding them and making sure that proper arrangements are put in place so that people pay their full share of tax.

There will be opportunities for the right hon. Lady’s Committee to scrutinise the role of HMRC and the Cabinet Secretary in these issues, if it wishes to. It is a matter of public record that the Cabinet Secretary signed off these arrangements. The original arrangements were put in place before I was appointed Chief Secretary, but the salary was brought to me when the appointment was turned from an interim one into a temporary one for two years, which is what the arrangements now are. I am delighted that my right hon. Friend the Minister for Universities and Science has decided, through the Student Loans Company, to make sure that these arrangements apply no further in this case.

[Lorely Burt (Solihull) (LD)]

Will my hon. Friend confirm that the urgent review will also investigate the terms of appointments made by the previous Government?

[Danny Alexander]

Yes, I said that in answer to the original question. The cases that are brought to me are cases in which the level of pay is in excess of £142,500. Of course, the review will look not just at those cases, but, potentially, at the cases of people on lower salary levels. Appointments that are currently in operation may well have been put in place under the previous Government. I do not know that there are any; that is why I have instituted a review, and we will see in due course what that brings forward. As I say, I will be happy to share that information with the House.

Public Service Pensions

Baroness Burt of Solihull Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

It is a matter for the trade unions to discuss their individual processes of engagement with their members. We have worked well with many of the trade unions in this process, but that does not extend to my being able to describe their internal processes to the right hon. Gentleman.

[Lorely Burt (Solihull) (LD)]

I congratulate everyone who has been involved in reaching the heads of agreement. This will give hard-working public sector workers the certainty that their pensions will remain among some of the very best available. Will my right hon. Friend explain how the move to career-average earnings will benefit women and low-paid workers in particular?

[Danny Alexander]

I am grateful to my hon. Friend for her comments. It is an important point, on which I am glad to have the chance to expand. At the moment, final salary schemes in the public sector work disproportionately to the advantage of people who are highly paid or who see a big increase in their salary at the end of their careers, and the contributions of lower-paid workers subsidise the pensions of the highest paid. On a career average basis, each year’s earnings is what it is and the contribution to be made is treated as what it is; pension is built up year by year on the basis of what people have earned and contributed. That means that each individual’s contributions are valued in a more similar way than they are in the inequitable schemes in place at the moment.

Banking Commission Report

Baroness Burt of Solihull Excerpts

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

A key part of the Vickers report was that the location of the ring fence would be flexible. Certain things would have to be in the ring fence, such as small and medium-sized business overdrafts and deposits and the overdrafts and deposits of individuals, and certain things definitely could not be in the ring fence, such as investment banking activity. However, corporate deposits could either be in the ring fence or not in the ring fence; that would be a decision for individual institutions, although of course they sit under the regulatory regime. That is what John Vickers recommended, having looked at this very carefully, and that is the plan that we are now implementing.

[Lorely Burt (Solihull) (LD)]

I welcome the coalition Government’s commitment to implementing the recommendations of the Vickers report. What difference, practically, will it make to people in Solihull and elsewhere in the country, and by when will they start to feel that difference?

[Mr Osborne]

The intention is to make sure that the taxpayers of Solihull are better protected against the failure of banks in future in a way that they were not in recent years when banks such as RBS failed. That is the overall intention of the report, but it has a very important component that does not get nearly the same media attention as the ring-fencing element that we have all been talking about—namely, the promotion of competition. The report has a specific recommendation whereby, from 2013, customers in Solihull will be able to switch their bank account within seven days, at no cost, and all their direct debits and credits will follow them to their new bank account. That is a very practical benefit to the people of Solihull and, indeed, the entire country.

The Economy

Baroness Burt of Solihull Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr Anderson]

I am very clear that the Chancellor is trying to pretend that nobody else in the world wants what we want. The whole world is crying out for a change to a system that has let it down.

The people of this country—the nurses, the doctors, the care workers—are carrying the can for the failure of global capitalism. We now know that 98 of the top 100 FTSE-listed companies are avoiding £20 billion-plus of tax by putting their money into offshore tax havens.

[Lorely Burt (Solihull) (LD)]

I am very sympathetic to what the hon. Gentleman is saying about high pay and tax evasion; we are trying to do all we can about that. As regards stimulating the economy, what would he say about the situation in America, where that stimulus has been tried and it is now £15 trillion in debt?

[Mr Anderson]

I will come to what the hon. Lady’s party has had to say and pick up her point then.

It is little wonder that we are in a mess. We are told that even in the City of London—the heart of capitalism—job vacancies have fallen by 16% in a single month. In the past month alone, retail sales have dropped by 1.7% despite huge pre-Christmas discounts. The Engineering Employers Federation says that it expects a drop in its production from 2.2% to 0.9% next year. But do not worry—the Deputy Prime Minister, the leader of the hon. Lady’s party, tells us that he is going to crack down on top corporate pay. Does that mean that he will do what he and his friends in the Conservative party are doing to public sector workers—to nurses, doctors, firefighters and policemen—by putting a two-year pay freeze and a 1% cap on to private sector pay and the fat cats? Of course not. The Deputy Prime Minister tells us:

“I don’t mean the government starts going around setting pay rates in the private sector...I believe that people should be well paid if they succeed.”

Can he tell me where the nurses, the doctors, the firefighters, the police, the home care workers, the child care workers, and millions of others are failing?