Budget (North-East)

Baroness Chapman of Darlington Excerpts

Tuesday 17th April 2012 Westminster Hall

[Mr Stephen Hepburn (Jarrow) (Lab)]

This Budget has been drawn up by a Chancellor with no perception or idea of what it is like to live in the north-east of England, and to have to live on a day-to-day basis. On one hand, the Budget cuts the wages and pensions of people in the north-east, and cuts their public services; on the other hand, it turns round and gives a tax cut to the richest 1% of people in this country. It is a Budget that will condemn thousands of families in the north-east to poverty, while it makes a priority of giving tax cuts to business by way of corporation tax cuts. It is a Budget built not on fairness, but on privilege.

This is not the Budget that we wanted for the north-east. We wanted a Budget for growth, to create jobs and the necessary economic activity to make the north-east alive again. Instead, we have a Budget that lines the pockets of the rich by cutting income tax and corporation tax. The Government say that they have changed tax thresholds, and that people will be better off, but that is more than compensated for by the cuts in tax credits and benefits, the scanty increase in the minimum wage, and the increasing cost of travel and utility bills for people in the north-east.

The move to regional pay will be a disaster. As the Secretary of State for Business, Innovation and Skills said, it will stigmatise the north-east as a region of failure. It must not be allowed to go ahead. The Government justify the regional pay policy on the basis that public sector pay hurts the private sector and curtails job creation. What nonsense. How come we live in a region with the lowest wages in the country, yet we still have the highest unemployment, with nine people chasing every job vacancy? It is nonsense.

[Mrs Jenny Chapman (Darlington) (Lab)]

My hon. Friend is making a very good point about regional pay, but the situation is worse than he indicates because up to £1 billion could be taken out of the north-east economy, which would hit all sectors of industry in the north-east, particularly the service sector, cultural industries and retail.

[Mr Hepburn]

My hon. Friend makes a very good point. It is not just the pay of teachers and nurses that affects job growth in the north-east; it is lack of demand. The point that she rightly makes is that every 1% taken out of regional pay in the form of public sector pay cuts sucks an extra £80 million from the north-east economy, causing a spiral down and down.

I am pleased that the Budget is already beginning to implode daily, because people are catching on to the fact that because of tax cuts for the richest in society, charities will receive less, pensioners will receive less, and Greggs pasty eaters will have to pay more. The Budget will not help the people of the north-east. It is a Budget of the privileged, by the privileged, for the privileged. If we really are all in this together as a society, surely it is right that the better-off pay a little more and take the burden off working-class people in the north-east.

Amendment of the Law

Baroness Chapman of Darlington Excerpts

Monday 26th March 2012 Commons Chamber

[Mrs Jenny Chapman (Darlington) (Lab)]

I want to use the brief time that I have to talk about the effect that regional pay will have on my constituency in the north-east.

Regional pay fixes the wrong problem and addresses the symptom, not the cause, of some of the problems in our region. The pay gap in the north-east is not the result of a thriving public sector but the legacy of industrial decline and the loss of high-wage jobs in recent decades. The biggest employer in Middlesbrough now is not the steel industry or the chemical industry but the university, which is investing in skills and the future of our young people. That is the right balance for us at the moment. We need to improve skills and build new enterprise, and we cannot do that by cutting public sector pay.

What the Government are doing is classic policy wonkery. They have found an idea from a think-tank and are going to implement it with no research, no investigation and no long-term consideration of its impact.

[Jonathan Edwards]

Will the hon. Lady give way?

[Mrs Chapman]

I am afraid I will not.

The Government have managed to do something quite staggering in the north-east—they have united our business community with the trade unions in Darlington and across the region. James Ramsbotham, the head of the north-east chamber of commerce, agrees with the trade unions and says of regional pay:

“The major issue with this is that the Government should be working towards making the economy more equal across the regions and not entrenching further disparity by reducing spending power in the North East.”

He hits the nail on the head. The fact is, regional or localised pay just will not work. It will not even fix the problem that the Government think they have identified. Why would a private sector company benefit from cuts to the pay of public sector workers in the north-east, who are their customers and the people from whom they gain their income? Where will the money come from to level up private sector pay to the level of the public sector? I notice that the hon. Member for Redcar (Ian Swales), who was so desperate to intervene earlier, is in his place and is now not attempting to intervene. I wonder whether he will vote to lower his constituents’ pay when he gets the opportunity.

Regional pay will take between £500 million and £1 billion out of the north-east each year. It fixes the wrong problem. The private sector does need to grow, with new enterprises, investments and skills, but regional pay will cause new problems. We already have recruitment difficulties in the north-east for senior public sector posts, and we have lost health services in Darlington because we have been unable to recruit consultants with the right skills mix for the town. That situation will only be made worse.

A graduate doctor coming out of university with considerable debts will want to maximise their income and locate themselves where they can earn the most money and get their debts paid off as quickly as they can. That will probably not be in my constituency in future. The mobility of public sector workers is often regarded as a problem. How will regional pay improve it?

This Budget provides tax cuts for the rich and pay cuts for the north, and it will cost more in tax credits and benefits to supplement the incomes of many workers in the public sector who are not well paid. Regional pay is also a bureaucratic nightmare, as the very policy think-tank that came up with it recognises. In the north-east, average pay is £19,000 a year. Just how low do the Government want it to be?

Oral Answers to Questions

Baroness Chapman of Darlington Excerpts

Tuesday 6th March 2012 Commons Chamber

[Mr Osborne]

Of course we will listen to any proposals put to us. Clauses 69 to 76 include a new requirement on both the new bodies we are creating—the prudential regulator and the financial conduct regulator—to make a report when a regulatory failure has occurred. That trigger will be set out in the legislation, so we are providing additional powers to require reports when things go so badly wrong, as they did a few years ago.

[Mrs Jenny Chapman (Darlington) (Lab)]

The financial service from which my constituents most need protection is high-cost lending. The Chancellor’s remarks so far go nowhere near far enough in protecting consumers. We need a range of caps and we need some properly enforced regulation of advertising. When is the Chancellor going to do something about this?

[Mr Osborne]

I completely understand the concern about excessive and very high interest charges, which have been a problem for many years. I think it is better to tackle the specific abuses. The Government are conducting a review of the cost of credit to consumers, but by tackling very specific abuses such as the roll-over of loans and the use of continuous authority, we think we are getting to the really hard cases and abuses that we want to see ended. I have to say—this was certainly the view of the previous Government, too—that although it could be worth looking at, simply introducing a cap might have the effect of pushing a lot of people into a completely unregulated black economy. I am not sure that any of us would want to see that.

The Economy

Baroness Chapman of Darlington Excerpts

Tuesday 6th December 2011 Commons Chamber

[Phil Wilson (Sedgefield) (Lab)]

I would like to discuss the part of the autumn statement dealing with local public sector pay and the relationship with local labour markets—in other words, regional pay. As a Member of Parliament for the north-east of England, I know that unemployment in the north-east is 11.6%—the highest in the country—the average wage is just over £19,000 a year, and the average house price is £144,000. A 25% deposit on a mortgage will cost £36,000, and to obtain a mortgage for the remaining 75% someone would need an income of £31,000 a year. A house in the rural north-east costs 8.1 times income, whereas in the urban areas of the north-east it averages 7.3 times income. Average incomes in the north-east are 12% below the national average and are the lowest in England. Given those facts, introducing a regional wage structure in the public sector is the wrong thing to do, because it is short-sighted and it belies the facts on regional pay disparities. If the Chancellor were really serious about pay, he would join me, and many of my colleagues in the north-east of England, in calling for a living wage, not a regional wage.

I do not believe that national pay bargaining in the public sector suppresses pay in the private sector. Although regional pay does exist in the way allowances are paid, for example, for people who work in London and the south-east, the main differential is not between regions, but between London and the south-east and the rest of the country. Pay disparity between the regions is about £2,000, according to Incomes Data Services, and there is very little difference in the cost of living between regions. The largest disparity is between the north-east and London, where the cost of living varies by 10%. The Office for National Statistics states that the cost of living in the remaining regions varies by between 1.5% and 2.8%, depending on the goods compared. However, the wages of commuters in the London commuter belt are higher than those of the people living and working in the commuter towns.

The ONS and IDS believe that the only distinct labour market in the UK is in London and the commuter belt area around the city. Is that not another reason for investing in transport infrastructure projects, which will shrink distances between London and the rest of the UK, rather than encouraging a rush to the bottom in pay rates between the public and private sectors, and between regions?

[Mrs Jenny Chapman (Darlington) (Lab)]

My hon. Friend is making a superb point. I do not know whether he has served on the governing body of a school or on a board of a health trust, but I can tell him that recruiting good, able, ambitious and talented people in the public sector can be a real challenge in the north-east. As someone who lives there, I do not understand why that is, but it seems to be the case. We need to be able to attract those quality people, and enable them to move around the country and pursue their careers as they need to.

[Phil Wilson]

That is absolutely right. If a regional pay structure went ahead, in whatever variety it may take, it would just exacerbate that situation. The regions would become silos, and people would not be able to move around the country.

It is also a myth that there are major variations in the cost of living around the country. The reason why the variation is less explicit outside London is because major retailers have national pricing policies, and internet shopping is having a similar effect in ensuring that the cost of living is more convergent around the UK than it would otherwise seem to be. In addition, major private sector companies—BT, British Gas, Waterstone’s, First Great Western and Santander, to name but a few—have national pay structures, although they have, for example, allowances for workers in London. When the previous Government examined this issue they came out against regional pay bargaining for the following reasons, which were quoted in a Treasury guidance note in 2003. It said:

“At the extreme, local pay in theory could mean devolved pay…to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

That illustrates the point that has just been made by my hon. Friend the Member for Darlington (Mrs Chapman).

The wage disparities do not arise from an overactive public sector displacing private sector jobs; that cannot be so, given that 700,000 public sector jobs are to be lost in the coming years. I want to see a vibrant private sector, with skilled jobs that are well paid and full time, but to achieve that we need growth.

--- Later in debate ---

[Tom Blenkinsop]

My hon. Friend will know the consequences of the policies so far. We have seen massive job haemorrhages at Scunthorpe steelworks, and there was the recent announcement about Llanwern, where nearly 200 steelworkers face unemployment as a result of the mothballing of that site. Another site in Scunthorpe, next door to the steelworks, has decided to move to a short-time working agreement. Those are the consequences of these economic policies.

Culturally and economically, these policies are counter-intuitive to the needs of the economy. We need not just to rebalance the economy per se, but to rebalance structural unemployment, which requires as large an investment as that proposed for the infrastructure. For example, in the steel industry, becoming a waterman—probably the most important job on a blast furnace, involving as it does ensuring that water does not mix with molten steel—requires a minimum of two years’ training. That is a considerable cost for the industry.

Unemployment is predicted to pass 9% next year, according to the “optimistic” estimate of the Office for Budget Responsibility—and at what cost to the Exchequer? Such estimates actually predate the autumn statement, which increased public sector unemployment by 200,000—from 500,000 to more than 710,000. My major concern, as the son of a British expatriate family that sought a future in Qatar during the early 1980s, when the previous Tory Government ratcheted up unemployment on Teesside, is another diaspora of British skilled manufacturing labour moving to other, far-flung nations. The promise of warmer climes and job certainty will be hard to resist for many, especially as a recent Experian study for BBC’s “Newsnight” showed that Redcar and Cleveland, and Middlesbrough are among the top three areas hardest hit by the Chancellor’s autumn statement.

It is not just the public sector cuts. The proximity of the north-east, which has no regional development agency, to Scotland is having severe consequences for our regional economy, as Scotland, which has its own RDA, is absorbing that manufacturing.

Women are losing their jobs at twice the rate that men are, and the Chancellor’s decision to freeze the working tax credit will hit women hard, especially working single mothers. That move, coupled with his decision to claw back money that would have been spent on the child tax credit, will have a significant impact on the well-being of the 36% of single mothers who claim working tax credit, and their families. What will happen to their incentive to work?

[Mrs Chapman]

My hon. Friend is making a fantastic speech.

[Tom Blenkinsop]

I thank my hon. Friend for that lovely intervention; it is an early Christmas present, in many ways.

What will be the consequences in benefit payouts to the Exchequer? The OBR tells us that by 2017, we can expect to have lost 710,000 public sector jobs. With 40% of women working in the public sector, making up 65% of the public sector work force, it is not unreasonable to assume that they will bear the brunt of these cuts, which could have potentially disastrous effects on the unemployment rate for women, with private sector growth not providing enough employment to compensate for these job losses.

Currently, 2,133 out of 6,622 Care to Learn claimants are aged 19 or over, including seven claimants each in the boroughs of Middlesbrough, and Redcar and Cleveland. As if young women in further education were not already facing massive financial challenges due to the education maintenance allowance being scrapped, I hear that the Government have recently consulted on the future of Care to Learn funding. These are the social consequences of counter-intuitive economic policies, which only beget further social consequences, further fiscal strain and spiralling social breakdown, without addressing any of the necessary economic rebalancing requirements.

--- Later in debate ---

[David Rutley]

It is good to hear that, and the hon. Lady makes an important point. Of course vocational skills are important and, as my hon. Friend the Member for Dover (Charlie Elphicke) was saying, the Government have taken important steps on vocational training. But it is also important to raise academic standards across the board in education, which is why it is vital that the English baccalaureate is being put in place.

To return to the theme that I was discussing, it is vital that employers get confidence in the education being given to our young people; in a recent survey, 70% said that not enough business awareness was demonstrated by school leavers. In June an Ofsted report on business education went further, saying that students taking part in business-related education often had

“only vague ideas about the economy, interest rates and their impact”.

That is clearly concerning and it will be an important spur to addressing business-related subjects in the much-needed national curriculum review in the months and years ahead.

The focus on business education needs to be improved in universities as well. Management, economics and accounting were much less popular than media studies and sociology in 2010, and the growth in media studies—15% over the past five years—continues to outstrip the growth in both management science and economics, the figures for which were 5% and 12% respectively. At a time when companies are crying out for commercial talent, it is troubling that the upcoming generation is not demonstrating an interest in business education, which is clearly growing in other countries.

So how can we begin to address those long-standing trends? Much can be done back at school. That same Ofsted report highlighted the fact that more than a third of schools failed to provide sufficient opportunities for students to engage directly with businesses.

[Mrs Chapman]

How can the hon. Gentleman possibly square that point with the dramatic nose-dive this year in applications for education from kids in the north-east post-16? What does he put that down to?

[David Rutley]

I am not familiar with circumstances in the north-east; I am making the point that too few students want a career in business because until now they have not had the right education, and we need to get them back on to a better path. [Interruption.] Apprenticeships are clearly one of the ways forward.

One of the key things we have to do is expose young people to more local business leaders. We have to get those people into the classroom to make the case for business, and we have to make sure that they provide positive role models. Work experience programmes go further, acting as an important way of helping children to apply and develop skills learned in school. In Cheshire, Bentley has created a successful work experience scheme with local schools; more than 850 pupils have gone through the programme over the last five years. We need more such schemes. KPMG, Tesco, Morrisons and others are starting to sponsor students at university. More needs to be done to engage businesses at university level.

As my hon. Friend the Member for Dover pointed out, it is vital to look at alternative ways for young people to get business skills. Apprenticeships are one of those ways, and we are seeing real success not just in shop floor disciplines but across a wider range of business skills, such as accounting apprenticeships. Macclesfield college is working with Elior, a French catering group, achieving real success not just for the business but for the young people involved. The Government are doing well in putting forward the case for apprenticeships, and I commend them.

Although it is vital to rebalance the economy and our skills base, the most important thing we need to do in the long term is to rebalance and raise the ambitions of future generations. I encourage the Government in those efforts.

Jobs and Growth

Baroness Chapman of Darlington Excerpts

Wednesday 12th October 2011 Commons Chamber

[Ian Mearns (Gateshead) (Lab)]

In March, the Government launched their much-heralded plan for growth, and in a document signed off by the Business Secretary and the Chancellor of the Exchequer, the foreword read:

“This Plan for Growth is an urgent call for action. Britain has lost ground in the world’s economy, and needs to catch up. If we do not act now, jobs will be lost, our country will become poorer and we will find it difficult to afford the public services we all want. If we do not wake up to the world around us, our standard of living will fall, not rise.”

Those are fine words, but the Government’s actions since have only inflicted more damage. Since May last year, they have systematically dismantled and reduced the UK economy’s capacity. Ideologically driven by a quest to reduce the public sector, they have relentlessly pressed one single policy button—deficit reduction. In the northern region and my constituency, the Government’s policy is looking very much like a scorched-earth strategy.

While imposing draconian and disproportionate spending cuts, which this year alone have reduced grants to the 12 local authorities in the north-east of England by an average of £84 per head of population—compared with only £5 per head of population in the 12 least-deprived local authorities in the south of England—the Government have reduced resources for regional development in our region by at least two thirds. Before the election, the Prime Minister identified the northern region, along with Northern Ireland, as an area that would require special support to rebalance its economy—we all know what that “special support” really resembles. From my perspective, it looks like the support given to a hanged man—a rope.

[Mrs Jenny Chapman (Darlington) (Lab)]

I must correct my hon. Friend. The Prime Minister said—on “Newsnight”, I think—that the north-east was over-dependent on the public sector and would be hit the hardest.

[Ian Mearns]

I was being kind to the Prime Minister, but he did actually use the words “rebalance the economy”. One North East, the regional development agency set up by the previous Government, is being abolished and replaced by as-yet-unfunded and as-yet-totally-impotent local enterprise partnerships in the north, including in Teesside.

Finance (No. 3) Bill

Baroness Chapman of Darlington Excerpts

Monday 4th July 2011 Commons Chamber

[Mrs Jenny Chapman (Darlington) (Lab)]

I congratulate my hon. Friend the Member for Walthamstow (Stella Creasy) on initiating and devising this new clause. The UK is a long way behind other countries in its regulation of this sector. Action is being taken in the United States and elsewhere in Europe, and therefore increasing numbers of companies are seeing the UK as the ideal place to operate because they know we are behind in respect of regulation. Indeed, as they do not anticipate regulation any time soon, they also do not anticipate leaving the UK in the near future, and they consider now to be a good time to invest in the UK market. Therefore, BrightHouse says it will triple its number of high street shops here in the UK. That is not only a worry for consumers, who are, by and large, exploited by these companies; it is also a threat to our high streets, because I for one do not want my high street to have signs saying “Cash for gold” and shops such as BrightHouse; I do not want what I would call unscrupulous companies populating our high streets.

The high-cost lender lobby is lobbying within an inch of its life. It is inundating those of us who are speaking out on these issues with documents, offers to meet, conversations and phone calls about why it is right and we are wrong. However, Members who represent places such as Darlington see the effects week in, week out in our surgeries, so we know the impact that these companies are having. They are not doing what they do for the benefit of the consumer, as they would lead us to believe; they are doing it because it is a pretty good business for them. I do not have an issue with their having a good business and making money, but I do have an issue with people who are least able to make such financial decisions being exploited in this way, and that is what is happening.

I am not a big fan of Jeremy Kyle, but in the interests of research I have sat through a bit of morning television, and I was disgusted at what I saw on our screens. Such companies are deliberately targeting people who are at home during the day and who they know are on low incomes. They are making their products look affordable, easy and cheap, which they are certainly not, and, most disturbingly, they are making them look the norm. They are making these products appear to be an everyday solution of which people from all walks of life throughout the country are taking advantage. That is the single most concerning aspect of this market.

[Lorely Burt]

I must confess, somewhat ashamedly, that I have also seen Jeremy Kyle’s show and the advertisements that accompany it. I want to pick up on the fact that Labour Members do not feel it appropriate to meet short-term loan companies. I do not tweet, but it is my understanding that the hon. Member for Walthamstow (Stella Creasy) says that Wonga has refused to meet her. That is not the case, however. [Interruption.] This is my understanding; I am just going on a letter from Wonga, and I do not want to get involved in the dispute. My point is that we must fully understand the situation. The hon. Lady knows it intimately; I do not deny that.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. This is supposed to be an intervention, not a speech. I call Jenny Chapman.

[Mrs Chapman]

I am unclear as to the point that was being made, but I recommend that the hon. Lady follows my hon. Friend the Member for Walthamstow on Twitter, as she might therefore become more familiar with my hon. Friend’s efforts to secure meetings with senior officials at Wonga and might also understand the frustration felt by Labour Members. It is frustration not only with the high-cost lenders, but with the Government too. Five months ago, the Backbench Business Committee initiated a positive debate on this issue, but there has been no movement since then—no announcements and no indication that something is in the pipeline. That fosters a great deal of frustration and a lack of trust among Opposition Members.

[Neil Carmichael]

The hon. Lady is expressing her case very well, and I sympathise with everything she is saying. However, is she not impressed by the work of, for example, the Office of Fair Trading in issuing its guidelines, and does she not recognise that it has the power to withdraw licences if the guidelines are not respected? I could also draw her attention to a number of other possible actions that have been put in place to enable movement in the direction in which she rightly wishes to proceed.

[Mrs Chapman]

All those steps are very welcome, but they do not go very far at all in addressing the fundamental issue. The Competition Commission says that what the OFT wants to do is nothing like enough. I understand the hon. Gentleman’s intention: it is to give the Government a background against which they can decide not to support this new clause, but we are trying to force this issue to the fore and get something done about it. We are all for cross-party consensus—that is wonderful when it can be achieved—but what we actually want is something to be done. I hope the hon. Gentleman will therefore forgive Opposition Members if we are sometimes slightly intemperate in the way we express our views on this issue.

As I said when talking about my ten-minute rule Bill, for me the key issue is the advertising of these products, which is irresponsible. It might be argued that people are being given a choice, but people are not making that choice on value-for-money grounds. They are not shopping around. They are not thinking, “What’s the best product for me?” They are instead thinking, “What will get me an answer to my problem as quickly as possible, and who will say yes to me? I don’t want to go to the bank and be told ‘No’ or ‘You can’t have this but you can have something else and do you want to make an appointment to come back next week?’” These people have very immediate financial difficulties, and these products are deliberately targeted at them.

[Damian Hinds (East Hampshire) (Con)]

First, may I apologise for missing some of the earlier speeches?

I have a great deal of sympathy with much of what the hon. Lady has said, but the fact that these companies have high costs and in particular high marketing costs, and the fact that there is no evidence that consumers are making rational choices based on which is more or less expensive, suggests that taxation is not the answer to the problem. There may well be an answer to the problem, but hiking up taxes is almost certainly not it.

[Mrs Chapman]

The new clause does not only address taxation. The hon. Gentleman should read it thoroughly, as it talks about other measures too. I do not think there is any one measure alone that will address this problem; there will have to be a package of measures.

There is no real competition in this market, as there are only a few companies in it. On Friday my attention was drawn to a company operating in the north-east called Provident. I was very disturbed to hear that last Christmas Provident representatives were going door to door deliberately targeting single mothers—as members of political parties, we all know that can be done. Its representatives were knocking on doors just before Christmas, saying, “We can offer you £500 and you don’t have to pay it back until after Christmas.” They were saying it could be paid back in a number of easy payments, thus making it seem attractive and ordinary. That is completely exploitative, and it will happen again this year unless the Government do something about it; indeed, it will happen Christmas after Christmas after Christmas. This House should neither accept nor tolerate that.

All Opposition Members are big supporters of credit unions.

[Lorely Burt]

So are we.

[Mrs Chapman]

Yes, Members on both sides of the House are, of course. The people behind the credit union movement are hard-working and honourable. I work somewhere where everybody is honourable, but these people really are hard-working and dedicated—many of them are volunteers—and they work in our communities to promote low-cost credit to people who are left out of mainstream credit. However, even with the best will in the world credit unions are not going to be able to compete with Wonga and Uncle Buck and so forth, because they lack the high street and web presence.

[Mark Durkan (Foyle) (SDLP)]

rose—

[Mrs Chapman]

I understand that the experience is different in Northern Ireland, and I shall give way to the hon. Gentleman, whom I suspect will explain that further.

[Mark Durkan]

The low membership of credit unions in Great Britain has been mentioned. Credit unions in Northern Ireland have a high membership; well over a quarter of the population—in some constituencies the figure is more than 50%—are members of the very well-developed and well-funded credit unions. The credit union movement in Northern Ireland has made it very clear that it expects Parliament to take action against the predatory credit sector. The movement does not expect Parliament just to wave to credit unions; it says, “Tackle the sharks, don’t wave to the dolphins.”

--- Later in debate ---

[Mrs Chapman]

I am very grateful to my hon. Friend for that intervention, as he put it extremely well. I was aware that credit unions in Northern Ireland were incredibly advanced. I have found that although the fledgling credit unions in my constituency are doing a marvellous job, they are unable to do the very thing that he says is unable to be done in Northern Ireland. That strengthens the argument for accepting this new clause.

[Stella Creasy]

I wonder whether my hon. Friend would like to comment on the irony that credit unions have a cap on what they can charge, yet these legal loan sharks do not.

[Mrs Chapman]

That is an excellent point, with which I shall finish my remarks. I am aware that many colleagues would like to contribute and, having heard my hon. Friend’s comprehensive speech, I will allow others to do so.

[Justin Tomlinson (North Swindon) (Con)]

I welcome the opportunity to debate this new clause. I have worked with the hon. Member for Walthamstow (Stella Creasy) on a number of occasions to highlight the need to protect the most vulnerable people in society, and we have been supported by hon. Members from both sides of the House. Let us be clear that a consensus is essential, as has been said by the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friend the Member for Macclesfield (David Rutley). This is an extremely complex and challenging issue, and although we all agree that action must be taken, we need to be careful not to make the situation worse. I will set out a number of reasons why that could happen.

The new clause would require the Government to review how taxation could be used to penalise high-cost credit that is detrimental to consumers and competition. However, the current consumer credit review is examining all the options through which we can hope to secure a measured and effective response. I first wish to highlight the need to use credit reference companies, because it is unacceptable that so many of these loan companies do not even simply check whether the person borrowing the money can actually service the debt. We would all agree that we are not against people borrowing money if that is what they wish to do, but they should have the opportunity to be able to service that debt. Secondly, we need to limit the number of customer extensions and roll-overs, as a number of hon. Members have said. It is unacceptable that people can be trapped into a cycle of increasingly expensive debt. Thirdly, there needs to be a cut-off point, when fees and the interest stop being accumulated. Too often we have seen people borrow a relatively small sum that has built up over many years. Many horror stories have been related in previous debates.

--- Later in debate ---

It is therefore time that we looked at some form of regulation in this area. Indeed, the international experience that the hon. Member for Walthamstow spoke of sounded very interesting. We looked at some examples in a previous debate, and I note the example of Alabama in particular. It has come to something when we are looking to Alabama for examples of regulation, given that the southern US states are not exactly known for their love of regulation. I look forward to the Minister’s response to this debate. I said that I would approach it with an open mind, and I take on board the excellent speech that my hon. Friend the Member for Chatham and Aylesford made about taxation measures. Personally, I cannot see how taxation measures would have a great impact, although I note that sub-paragraph (d) in new clause 11 talks about looking at basically everything, so it will be interesting to see how the Minister responds to that.

[Mrs Chapman]

I have found myself wondering who the hon. Gentleman disagrees with in this debate.

[Andrew Percy]

I am feeling the love in the Chamber today, which is a good thing—there must have been something in the water in Goole this morning. However, the serious point is that that hopefully proves that although there are concerns, and although lots of Members who will vote differently from each other this evening have made incredibly passionate speeches, they clearly all want to see the same thing. We might disagree on how to get to there, but the fact that I am agreeing with so many people is perhaps a sign that there is consensus on this issue, which is a good thing.

The Economy

Baroness Chapman of Darlington Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Richard Graham]

No, we have had enough of the hon. Lady’s discussion of the past.

I welcome this Government’s commitment to redouble the Swindon-to-Kemble line, which will be an important infrastructure improvement for our railways. I welcome the transfer of assets from the former regional development agency to our city, which will make a difference to our regeneration. I also welcome the funding that the Secretary of State for Education has given for a new-build Gloucester academy, which will help some of our young in their education. I am proud to have worked with my constituents to organise the Gloucestershire apprenticeship fair, the women for engineering seminar and, last week, the Barton jobs fair, alongside Linking Communities and Black South West Network, from which some of our young unemployed black and minority ethnic constituents have found new jobs. There are jobs available if only we can help our constituents to find them. All of us in this fragile situation have options.

[Mrs Jenny Chapman (Darlington) (Lab)]

rose—

[Richard Graham]

All of us including the hon. Lady. We can do nothing, we can say, “It won’t work,” and we can let our constituents down; or, we can get stuck in and work with our businesses to help our constituents back into work. These things have other fruits as well, such as the prizes that I gave at the Gloucestershire Wildlife Trust half an hour ago to those companies that are supporting environmental good causes.

I agree that we need to do more to boost growth. I have been asking the Government to do more to help small businesses take up apprenticeships. I believe that the return of business rates to councils will incentivise them to drive up support for our businesses. I believe strongly in enterprise zones, and I hope that the Government will look carefully at the enterprise zone for my constituency.

I also believe that the Treasury is correct to sort out the banks and manage the risks to the taxpayer. However, today’s Opposition plan is not a plan at all; it is simply an unfunded, undiscussed and unsupported VAT cut. It would simply increase spending, push up debt and lead to higher interest rates, with more to be paid every month on mortgages by our constituents. It is not so much jam tomorrow as enormous pain tomorrow and for many years, which is why I will have no hesitation in rejecting the motion.

Finance (No. 3) Bill

Baroness Chapman of Darlington Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Mr Kevan Jones]

It is a pleasure to follow my hon. Friend the Member for Hayes and Harlington (John McDonnell), who summed up the anger that is still out there among many of our constituents, who do not understand why neither of the parties that now form this push-me, pull-you coalition is following through on their rhetoric in the general election.

I support the amendment, which stands in the name of my right hon. Friend the Member for Delyn (Mr Hanson) and those of my hon. Friends the Members for Bristol East (Kerry McCarthy), for Wallasey (Ms Eagle) and for Nottingham East (Chris Leslie). The amendment addresses clause 72 and schedule 19, which deal with the bank levy. The explanatory notes say:

“Clause 72 and Schedule 19 impose a new tax”—

the point that my hon. Friend the Member for Hayes and Harlington emphasised—

“the bank levy, which applies in relation to periods of account ending on or after 1 January 2011. The Schedule identifies who will be liable to pay the tax and how the tax is to be administered.”

The complexities have been referred to, some of which I will cover later.

I have already referred to the rhetoric that we heard in the lead-up to the general election. My hon. Friend the Member for Ealing North (Stephen Pound) has referred to the hobby of bashing bankers, which was certainly the sport of the day for the future Prime Minister and the Deputy Prime Minister. In every TV studio that we saw them in, they talked about who would be tougher on the bankers, arguing that if they were elected, they would be as tough as possible on the bankers—who, as everyone recognised, got us into the mess whose economic consequences this country and our constituents are now facing.

[Mrs Jenny Chapman (Darlington) (Lab)]

This is not just about banker bashing, as my hon. Friend will know; this is about an opportunity cost, particularly in regions such as ours in the north-east. My constituency did not succeed in securing any grants from the regional growth fund. It is that lack of opportunity, too, that makes people so angry.

[Mr Jones]

It does, and my hon. Friend makes a good point. The rhetoric from Conservative central office, now joined by the Liberal Democrats, is that we are in this economic mess because of the recklessness of the Labour Government, somehow forgetting both the international economic climate and the effects of the irresponsible lending by banks, on which the levy will now be imposed. My hon. Friend is quite right: I know that her constituency is facing a tough time at the moment, and not just in the public sector. A number of private sector companies are closing in Darlington as a direct result of the fiscal straitjacket that this coalition Government have put on the north-east region. Before the election the Prime Minister said that there would be a “day of reckoning” for bankers, but if this is a “day of reckoning”—[Interruption.]

--- Later in debate ---

[Mr Love]

Absolutely. The merit of the amendment is that it would give Parliament, and particularly the Government, the opportunity to review the operation of the levy, as well as providing the banking sector with other opportunities to make a contribution to sorting out some of the deep-seated economic problems in our country. I hope that the Liberal Democrat part of the coalition will be sympathetic to our arguments and speak up where it matters, to try to get the Government to recognise that there is an alternative that would be good for the economy and good for our society.

A second issue is house construction. In my local authority area we have the fourth worst housing stress in the country. Things are difficult, and they are going to get significantly worse. I mentioned earlier the Government’s incoherent construction policy, with its homes bonus that is not a bonus, and its planning system that is so riddled with inconsistency and lack of certainty that major construction is now off the agenda. It is a system that allows local considerations to dominate and outweigh much-needed construction in different parts of the country. I can see only a bleak future for public and private housing construction—but our proposal provides one small, modest way in which the Government could improve the situation.

[Mrs Chapman]

Does my hon. Friend agree that it is not only the house builders who have a hard time when the construction industry suffers? In Darlington last week, we heard the announcement of the loss of almost 200 manufacturing jobs in a company that builds conservatories. Obviously, that is a difficult business to be in with the construction sector in its present state.

[Mr Love]

I agree entirely with my hon. Friend, and I hope that someone on the Government Front Bench is listening. These are urgent problems.

Let me mention two other brief points about a growth strategy. We do not have a Sheffield Forgemasters contributing to growth. I remind Government Members of that because a viable, well-thought-through and supportable project was put forward, yet it has still not received any funding—

Comprehensive Spending Review

Baroness Chapman of Darlington Excerpts

Thursday 28th October 2010 Commons Chamber

[Ian Swales (Redcar) (LD)]

I am a member of the Public Accounts Committee. Sadly, the Chair left the Chamber a few minutes ago, but we still have some other members here. It is the Committee’s task, usually twice a week, to listen to a saga of Government mismanagement and overspending: some of the cases that we hear about are quite breathtaking, running into billions of pounds. I could give lots of examples, but those who are interested should take a look at the National Audit Office reports. It is absolutely clear from those reports that there is massive potential to save money in the operation of government.

I would like specifically to talk about the report on the previous comprehensive spending review in 2007, which required sustainable value-for-money savings of £35 billion over three years, a period which ends next April. That illustrates the phoniness of saying that everything was fine before the credit crunch. The previous Government clearly knew that spending was getting out of hand, and a year before the credit crunch they looked for £35 billion of savings. It is interesting that that is nearly half of what is proposed in the current CSR.

So how is it going, judged against the 2007 review? Some £15 billion of savings have so far been identified, but when the National Audit Office examined the matter it said that 18% of that did not represent improvements in value for money, and it rejected 44% on the basis that the Departments did not have the cost and performance information to underwrite their claims, so only 38%—£6 billion—has actually been saved. It is clear that the current spending review has to be tougher because of the failure to deliver the previous spending review. As the report that we agreed just yesterday in the Public Accounts Committee states, if Departments had been successful in making real savings of 3%, fewer painful cuts would be necessary now.

[Mrs Jenny Chapman (Darlington) (Lab)]

I thank my colleague from the north-east for giving way. Does he have any idea how much it will cost the taxpayer to clear up the social consequences of the Government’s decisions in the north-east?

[Ian Swales]

Clearly the north-east has already suffered, and no doubt there will be more cuts there. The decisions about how much it will cost will come out in the overall review, and I do not have a specific figure, but I do know that the 2007 comprehensive spending review showed a litany of management failure. There were no baselines against which to measure, so we did not even know whether savings were being made. There was no radical thinking, with few of the savings representing major departures from current thinking. That was because the Labour Government did not allow input from civil servants, so it was a top-down exercise. They did not listen to the people who were actually doing the work, and I am sure the current Government will do better than that. There was no proper reporting framework to review progress and there were no milestones—things that would be taken as read in the private sector. There was no personal accountability. We ask questions about that time after time in the PAC—did anybody lose their job as a result of some fiasco? The answer is almost always no.

In the NAO’s July report, the Treasury admitted that it did not have the capability to deliver value-for-money programmes in full, and that needs to be addressed urgently. I hope that my hon. Friends on the Front Bench will learn the lessons of that report and ensure that the comprehensive spending review is driven effectively in the new environment. We need a better framework, clear personal accountability, proper baselines, clear milestones of progress and detailed monitoring. As the NAO stated, the Treasury cannot just reduce budgets and then walk away. I hope that there will be a hands-on approach and that we will deliver the savings that have been set out.

I deplore the fact that the manufacturing industry went from representing 22% of the economy to 11% under the previous Government, and that a recent BBC Experian study showed that my area was 319th of 324 in the country economically; that Hartlepool, across the river, was 314th, and Middlesbrough, next to mine, 324th. I see my fellow local MP, the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), in his place. We need take no lessons from the previous Government about economic development in the north-east.

I welcome today’s announcements on the Tees valley local enterprise partnership, the regional growth fund and the green investment bank, and I look forward to a revival of the local economy under this Government.

VAT (Charities)

Baroness Chapman of Darlington Excerpts

Tuesday 19th October 2010 Commons Chamber

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

May I first congratulate the hon. Member for Wrexham (Ian Lucas) on securing this debate? I am pleased to have this opportunity to explain and discuss the Government’s policy on VAT and charities. Charities, voluntary organisations and social enterprises do so much for our country, and the Government are grateful for the significant contributions that these organisations make to our communities. The Government continue to support charities in a number of ways, and I will talk about our direct support for the sector a little later, although Members will appreciate that there is a limit to what I can say about that, ahead of tomorrow’s spending review.

It might help if I first put on record something about the VAT system and charities. A basic feature of the VAT system is that if VAT is not charged on outputs, it cannot be recovered on inputs. The implication of this for charities is that when no charge is made, as is generally the case, any VAT that has been incurred will not be recoverable. Of course, when a charity is registered for VAT and engaged in taxable business activities, this will enable that charity to recover its VAT costs in the normal way. We are not in a position to change the structure of VAT to protect charities fully from its impact, but we provide support for charities through the tax system, including some VAT reliefs.

Existing VAT zero rates for charities, which were introduced at the start of VAT, and which successive Governments have maintained, provide a benefit of more than £150 million to the sector. They include VAT zero rating on sales of donated goods, on medical and scientific equipment and on goods for use by disabled people for qualifying charities. Charities are not charged VAT on the costs of advertising in public media. In addition, they qualify for zero rating on the construction of certain buildings to be used for charitable purposes. All those zero rates are derogations from the normal EU VAT rules and represent benefits not enjoyed by charities elsewhere in Europe.

[Mrs Jenny Chapman (Darlington) (Lab)]

Will the Minister comment on the issues faced by charities when they charge one another for back-office functions, when we are trying to encourage them to become more efficient and deliver services in the most entrepreneurial and efficient way possible?

[Mr Gauke]

I am grateful to the hon. Lady for raising that specific point. I can assure her and other hon. Members that the Government will continue to look at options for cost sharing within the VAT system where these are available to us and where they represent an effective and efficient means of delivering support to the sector. We are currently looking at the implementation of the EU VAT exemption for cost sharing. The Government recognise efficiencies that can be achieved by organisations such as charities working together efficiently, but we also recognise the potential VAT barriers such organisations face when they share services in exactly the way the hon. Lady mentioned. We said in the Budget that we would work closely with charities and other affected sectors to consider options for implementing the exemption, which would help to remove some of the barriers ahead of a formal consultation that we will launch later in the autumn. I hope that that provides some reassurance to the hon. Lady.

Returning to the issue of zero rates, as the hon. Member for Wrexham will be aware it is not open to us under our European agreements to extend or amend the zero rates, but we recognise how valuable they are to charities, so we are committed to retaining the zero rates that we already have. Charities also benefit from certain specific VAT exemptions that apply to goods and services used in connection with fundraising events, providing further support for all charities.

VAT reliefs are just one element of the support that the Government provide through tax. Within the wider tax system, existing reliefs for charities are worth something like £3 billion a year, of which gift aid is the largest single relief. Gift aid is now worth nearly £1 billion a year to charities, and such payments to charities are increasing. Gross donations made under gift aid amounted to almost £4.6 billion in 2009-10—an increase of 6.5% over the previous year. We fully recognise the importance of improving gift aid. Charity representatives have been exploring proposals for reform with Treasury and HMRC officials on the gift aid forum. We will be exploring the forum’s recommendations before deciding on the best way forward.

The hon. Member for Wrexham wants us to go further and provide support for all charities to relieve them in respect of their irrecoverable VAT. As I have already explained, there is realistically very little that can be done within the VAT system itself. It is possible in principle to introduce a measure that would deliver refunds of VAT to charities in respect of their non-business activities. However, such refunds, which are a matter of Government expenditure rather than taxation, would represent a very significant cost to the Exchequer, especially given the current fiscal position.

We also have to consider that many charities are engaged in activities where they are in direct competition with private sector organisations, such as in the provision of care and welfare services, and it would be difficult to refund VAT that charities incurred in respect of those activities, as that would represent an unfair distortion of competition. Any scheme that could be devised might well be complex and administratively burdensome for charities to operate. In our view, it is far better for the Government, instead of introducing further complexities for charities, to focus on improving charities’ capabilities to improve their own affairs, and I will turn to this in more detail shortly.

--- Later in debate ---

[Mr Gauke]

I return to the central point. A refund system, whether for the recently announced increase in VAT or the irrecoverable VAT across the board—which, as the hon. Gentleman fairly pointed out, is a long-standing issue—would involve a considerable cost to the Exchequer. We must consider both the public finances and the most effective way in which we can help charities.

I want to say something about the Government’s support for the voluntary and charitable sector in addition to the generous tax relief provided, especially through gift aid. However, Members will appreciate that much of the detail is a matter for tomorrow’s spending review statement. The Government are proceeding with a new programme of activity to build the big society. The big society agenda requires the state not only to pull back when services can be provided more cost-effectively and successfully by charities, mutual organisations and co-operatives, but to help social entrepreneurs and voluntary groups to work in partnership with the state and gain access to the support and finance they need in order to provide innovative, bottom-up solutions where expensive state provision has failed.

[Mrs Chapman]

I wholeheartedly support the notion of the big society and encouraging charities to provide services. Among the key sources of income for those charities are philanthropic donations. Does the Minister not agree that people wishing to make donations are sometimes put off by the thought that some of the money they are giving is not being spent on the charitable objectives of the organisation concerned, but is finding its way back to the Treasury?

[Mr Gauke]

I imagine that exactly the same argument could apply if we increased national insurance contributions, which I understand is Labour party policy.

Ahead of tomorrow’s spending review statement, it is not possible for me to say how much of the overall Government budget will go to the sector, but we are providing structural support designed to make it more efficient and resilient, and reforming commissioning and procurement, which currently hamper its involvement in public service delivery.

During the spending review 2010 period, we want there to be more opportunities for the sector to be involved. We want to help the sector to access a wider range of funding to increase its strength and independence. We are establishing a big society bank to lever additional social investment into the sector, and we are reviewing ways to incentivise further philanthropy and charitable giving. The Government are keen to progress this project as quickly as possible. Any progress will, however, be subject to the availability of dormant account funds.

In conclusion, the Government are committed to making it easier for the sector to work with the state and to strengthening relations between the two. That will not happen overnight, but a stable, strong and independent voluntary sector is needed if we are to deliver on the big society and give power back to citizens and communities.

Question put and agreed to.