Bank of England (Appointment of Governor) Bill
Baroness Clark of Kilwinning Excerpts(12 years, 5 months ago)
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John McDonnell
The hon. Lady needs to recognise that the Treasury Committee has a veto over the appointment of senior members of the OBR, but I will come to that point, because it is a valid one and was also raised by the hon. Member for Watford (Richard Harrington).
Katy Clark (North Ayrshire and Arran) (Lab)
I am a member of the Business, Innovation and Skills Committee, where recently there was a political divide over whether to approve the appointment of the director of the Office for Fair Access for higher education. Does he agree that ideally we would have a political consensus over the appointment of the Governor, so that the person knows they have the full backing of Parliament, at least when they are appointed?
John McDonnell
If Members keep on intervening and reading parts of my speech, I will not get very far. I fully concur. It is exactly as my hon. Friend describes it; she makes an important point.
Let me press on. I want to return to the question of probity, because there are issues outside the House this morning that we need to take into account. Given the scale of the task facing the new Governor, the heightened political atmosphere and the banking reforms, now, more than ever, this appointment cannot be left in the hands of one Minister. Leaving it solely in the gift of the Executive in what is, unfortunately, a tense political context, runs the risk of allegations of a political appointment, a lack of independence and even cronyism.
In the cold light of day, after yesterday’s ferocious party political knockabout and, at times, unfortunately very personal debate, it is important that calmer judgments now prevail and that we seek a consensus, as far as possible, over the key decisions, such as this one, that the House needs to take in reforming our financial system. This is a time for consensus building and a display of magnanimous behaviour on all sides, if we are to get through this crisis and restore confidence in our financial system. Sharing responsibility for the appointment of the new Governor and seeking consensus on this appointment would ensure the credibility of the appointment process and the appointee themselves.
Jobs and Growth
Baroness Clark of Kilwinning Excerpts(12 years, 7 months ago)
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Katy Clark (North Ayrshire and Arran) (Lab)
It is a great pleasure to speak in this debate, which is definitely the most important debate on the Queen’s Speech as far as my constituents—and, I suspect, all of our constituents—are concerned.
The constituency where I live is considered to be in the top 10 unemployment blackspots in the country. In north Ayrshire, there are currently 5,555 claimants chasing 313 jobs. The position that my constituents face is similar to that faced by the constituents of many hon. Members, irrespective of which part of the country they live in, but if we listened to Government Members we might think we are living in a very different economic situation. Yet again, they have used the occasion to show their complacency on the economic situation and how out of touch they are with many of their constituents, who they well know are struggling.
I am disappointed by the Queen’s Speech. Like many, I was underwhelmed when I listened to the announcements by the lack of proposals for legislative measures to try to address the serious problems that our country faces. Many of the speeches have repeated the speeches on the Budget we heard not so long ago. The Government had an opportunity to offer a grand vision of how they will move us forward, but they have failed yet again to make any significant proposals that will help to get us out of this dire economic situation. My hon. Friend the Member for Leeds East (Mr Mudie) has already quoted the Business, Innovation and Skills Secretary, but I agree with the latter that something important is missing, namely a “compelling vision” of where the country is heading.
I shall not necessarily talk about specific proposals in the Bills included in the Queen’s Speech, because the point I am making is on the lack of necessary measures. The hon. Member for Northampton South (Mr Binley), with whom I sit on the Business, Innovation and Skills Committee, spoke about the concerns of businesses and the banks’ failure to lend to small businesses. Yet again, there are no significant measures in the Queen’s Speech to force banks to lend to small businesses. Small businesses come to MPs’ surgeries because they are having difficulty getting loans from banks, but some no longer see the point of contacting politicians because they have done so many times, and the Government’s attempts to get banks to lend, such as Operation Merlin, have completely failed.
There was a lengthy debate yesterday on the decrease in living standards up and down the country, the collapse in wages and the Government’s failure to address the problems that our constituents face. In almost every area of Government policy, there is a failure to focus policy to help businesses to survive and develop.
On green jobs, the Proven wind turbine factory, which operated until last autumn, was a success story for Ayrshire. There were technical problems with one of the wind turbines that the company operated, but the company was one of the first in that field and very much a success story for Scotland. However, its future is uncertain. It had to fold—an Irish company has taken it over, but it will not continue as substantially as before. Those who set up and ran Proven say that the problem that led to its demise was the failure to get funding from the banks, because the banks failed to accept that there was a long-term future for the business because of the Government’s feed-in tariff policy and their approach to solar power.
The Government need to do better. They need to come forward in every area of policy with a plan that will get this country on its feet again.
Oral Answers to Questions
Baroness Clark of Kilwinning Excerpts(12 years, 7 months ago)
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Danny Alexander
Tax increment financing has great potential in helping local areas to develop infrastructure projects and supporting economic growth across the country. As I said to the hon. Member for Coventry South (Mr Cunningham), the main tax increment financing scheme will be available to all local authorities in England from April 2013. That will apply to the kind of local authorities that my hon. Friend described.
Katy Clark (North Ayrshire and Arran) (Lab)
15. What assessment he has made of the effect of changes to working tax credit on couples in households where one person is retired.
The Economic Secretary to the Treasury (Miss Chloe Smith)
Working tax credit is a payment for working households that was introduced by the previous Government to improve work incentives. Retirement is not recognised in the tax credit system. However, there are separate eligibility rules for those over 60, and a level of income for those in retirement is guaranteed by pension credit.
Katy Clark
My constituent, Mrs Orr, is losing £290 a month as a result of the tax credit changes. She lives with her husband, who is retired, and her 13-year-old daughter. She works for 20 hours a week at Crosshouse hospital and has tried to increase her contractual hours, but has been unable to do so. She works any overtime that is available. How do you suggest that she makes ends meet?
Financial Services Bill
Baroness Clark of Kilwinning Excerpts(12 years, 7 months ago)
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Mr Hoban
I do not have that information on me, but I will endeavour to have it by the time I wind up the debate. It is important that there is evidence, that we do not respond on a knee-jerk basis and that we ensure that we protect vulnerable consumers. That includes ensuring that the right protection is in place for those who wish to borrow money to meet their needs and we should also ensure that we do not push them into the arms of illegal money lenders. One change we are making in this group of amendments includes ensuring that the work of the illegal money lending teams out in the regions can continue when we shift the regulation of consumer credit to the FCA.
I am aware of these issues and it is important to the constituents of my hon. Friend the Member for Enfield North (Nick de Bois) and to mine that we get the right answer. A lot of work has gone on in the past to consider the cost of credit, and we need to proceed on the basis of evidence rather than closing our minds to what solutions there might be. Let us have some evidence to inform the debates so that we can give our constituents the right answer, rather than something that happens to be convenient to some political whim or desire. I believe that we should have evidence-based policy making and that that is the right approach. All the stakeholders would also agree that we need to support this work with some evidence, rather than proceeding without a firm evidential base.
New clause 12 concerns the important issue of how consumers who take part in prepayment schemes are protected and how they are treated if the provider of such a scheme becomes insolvent. I suspect that many members of the House will have dealt with this matter over recent years, given how many people were affected by the collapse of Farepak just before Christmas 2006. The Government have great sympathy for those who have lost money in such schemes and are aware of the frustration they feel. One problem with the Farepak insolvency has been the fact that it has taken so long for the customers to get their money back. Work with the liquidators is continuing.
The challenge is whether the Bill is the appropriate place for regulating such a function. Prepayment schemes are advance payments by a consumer for goods and services that are not supplied immediately; they are not financial services. It is not clear whether they are an issue for any of the bodies provided for in the Bill to consider and I do not think they will be a matter for the Financial Policy Committee, with its remit of considering threats to financial stability.
Since the collapse of Farepak, a considerable amount of work has been done to consider how best to protect consumers who enter into prepayment schemes and how best to deal with situations where companies collapse. Following the collapse of Farepak, the then Department of Trade and Industry worked with the remaining hamper companies to put in place effective protection for customers’ prepayments, including oversight by a new body, the Christmas Prepayment Association. The Government also supported the OFT to deliver a consumer awareness and education campaign to empower consumers to make decisions that are right for their circumstances. The Money Advice Service also provides advice on its website about what protection is offered for various ways of saving money, including prepayment schemes. I would encourage hon. Members who are aware of constituents who continue to engage with such schemes to point them in the direction of the Money Advice Service.
Katy Clark (North Ayrshire and Arran) (Lab)
If the Minister does not feel that this Bill is the appropriate vehicle for dealing with that matter through regulation, when he sums up could he outline where it should be dealt with? There is a strong view that the current legislative framework is not sufficient.
Mr Hoban
Part of the challenge is that such schemes are part of a subset of advance payment schemes that are not necessarily covered by the Bill. These issues are consumer issues and I shall certainly raise with my hon. Friend the Minister with responsibility for consumer affairs where he feels that the best opportunity might be to do that and whether there are some non-statutory alternatives to regulation that will help protect the customers of such schemes.
Before I speak to Government amendment 3, I can let my hon. Friend the Member for Enfield North know when the research will be published. The research project will conclude this summer, and given that the transfer of consumer credit to the FCA will not take place until 2014, that gives us time to act. That is not to say that nothing is happening in the meantime in the regulation of consumer credit: the OFT is doing a great deal of work in that area. I am as keen as he and others are to ensure that the matter is brought to a head as soon as possible, so that the right protections are put in place for our constituents.
Government amendment 3 aims to improve the drafting, following the close and valuable scrutiny in the Public Bill Committee. In Committee, questions were raised about the appropriateness of “supply”, and the amendment clarifies the Money Advice Service financial education function so that it should include the promotion of awareness of the financial advantages and disadvantages relating to issues that may arise over the lifetime of the product, not just to the initial purchase or supply of a particular good and service. The function might include, for example, promoting awareness of the financial advantages and disadvantages of a person exercising the right to receive part of their pension savings as a lump sum, or the financial advantages or disadvantages of the various options open to a person who is having difficulty paying their mortgage.
I am confident that the Bill as it stands already provides for such matters to be covered by the Money Advice Service financial education function, but the amendment helpfully clarifies the scope of the MAS’s specific duty to promote awareness of the advantages and disadvantages of particular goods and services. I am grateful to the Members who raised the matter in the Committee, and I hope that the amendment addresses their concerns.
Amendments 37 and 55 would affect the functions of the MAS. Amendment 55 would require the MAS to support the provision of legal advice in relation to personal debt, with funding received from the Ministry of Justice to support that work. The amendment would reinstate changes to legal aid in the Legal Aid, Sentencing and Punishment of Offenders Bill. For the reasons clearly set out by my right hon. and learned Friend the Justice Secretary, we cannot use the Financial Services Bill to compensate for reforms to legal aid in the other Bill as a roundabout way of maintaining funding for not-for-profit bodies; moreover, effectively reinstating those categories in the scope of legal aid means reinstating legal aid for all legal advice, not just for those in not-for-profit organisations.
Amendment 55 is not required because the Money Advice Service already has sufficient responsibility and funding to assist members of the public with debt management. The MAS and other organisations provide debt advice directly, including by advising people who are facing difficulties with debt on the options available to them and the possible legal ramifications. For example, they provide advice to people who are at risk of losing their home and advice on options to resolve their financial difficulties. Any debt adviser trained to intermediate level can give advice on such matters as a matter of course. In contentious areas of law, such as the impact of insolvency or immigration status, an adviser could seek external advice. Similarly, if a non-debt issue arose, or substantive legal advice was required, an adviser could refer the client to a specialist solicitor. I therefore do not think the amendment is necessary, as the MAS and other organisations, through their debt advice services, already advise people facing difficulties with debt on the impact of the law on their situation.
Amendment 37 would require the MAS to provide
“targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
I am sympathetic to the intention behind the amendment: clearly, the service provided by the MAS should encompass such groups of people. However, as I said in Committee, one of the key features of the Money Advice Service is the breadth of consumers it is there to serve. Millions of people can be vulnerable to poor money management at any point in their lives, especially as they experience key life events. Similarly, many people, regardless of their financial circumstances, may not know where to turn for impartial financial advice, or may not know that they need information and advice in the first place. I therefore do not think it appropriate for the legislation to prescribe which groups are in most need of the service. By focusing the Money Advice Service on particular groups, we risk neglecting others who may be equally in need.
It is clear to me, from discussions I have had with the management of the Money Advice Service, that they recognise the need to provide support across a wide range of people. They also recognise the importance of face-to-face debt and money advice and the importance of ensuring the right channels of support are there to help those in need of financial advice—for example, those who need guidance on how to get out of debt or how to protect their families in the long term. I believe the MAS is acutely aware of its broader social obligation.
The group of amendments before us raises important issues that impact on many in our constituencies. The action that we have taken to tighten the consumer credit regime by moving consumer credit from the OFT to the FCA is the right way to proceed. This is a dynamic and changing market, and one of the great advantages that the FCA brings is the opportunity to keep issues such as the cost of credit under review and to make sure that it responds in a timely manner to help protect our constituents in these difficult areas.
Justin Tomlinson
My hon. Friend makes an important point. In previous debates, I focused my anger on the techniques of doorstep lenders, who build up a relationship with the consumer, pop by once a month and, over a cup of tea, suggest items for which they might want to borrow money, trapping them in a lifetime of expensive, high-cost debt. For example, they might pop round at Christmas to ask, “Have you organised your Christmas presents for your children?” The householder says, “No, I’m not sure I can afford it,” to which the lender replies, “No problem. We’re here. We can lend you that. It’s only £3 a week. I’m sure you’re going to be having relatives to visit, so why don’t you get your carpet sorted at the same time.” Those nudge-nudge techniques, which encourage people to take on high-cost debt, need to be looked at.
Amendments 37 and 55 seek to empower consumers, and there are important factors, such as the need to access impartial advice, that need to be looked at. I found through my work as chair of the all-party group on financial education that 91% of people who got into financial difficulty would have made a different decision had they known otherwise. Hindsight is a wonderful thing, but through our casework as MPs we see that some people make the wrong decisions and get themselves into difficulty. Of the three ways I would like to see that tackled, one is by the provision of easy access to advice through organisations such as the Consumer Credit Counselling Service, Citizens Advice and the Money Advice Service. To my mind, if a debt management service offers a high-cost loan, it should provide links to those organisations, just as when somebody buys a packet of cigarettes, there is a health warning on it. There is then no excuse. It relies on consumer choice, but if somebody chooses to, they can take up the advice.
It will also help if all consumers have financial education in the first place so that they understand the advice. In the case of the Money Advice Service, one needs to know something about the products in the first place. Obviously, face-to-face advice would be ideal. I would also like all loans to be displayed in pure and simple cash terms, so that every consumer can make an informed decision. I am sure that even Treasury Ministers would struggle to work out what is meant by an APR. I will not embarrass individual MPs by carrying out a test, as I have in previous debates.
Finally, I deal with clause 10. I was interested in the Minister’s comments about advice being given to consumers six months in advance. As we all recognise, that presents a challenge, because if somebody could predict what will happen in six months’ time, they would be very wealthy. The principle is right: we need to protect consumers from sudden changes. The evidence shows that the majority of people who fall into financial difficulties do so because of a change of circumstances such as the loss of a job, a family bereavement or a divorce. One could extend that to a sudden change in the cost of a loan because of the interest rates.
Although this is often derided, I think that we need to encourage a savings culture. If one has money in reserve, one is better equipped to deal with a sudden shock to one’s circumstances. I welcome the moves of the Nationwide building society for first-time buyers, because they are among those most at risk from a change in circumstances owing to a change in their job or in their interest rates, because they extend their borrowing to the absolute limit to get themselves on the housing ladder. Nationwide has introduced a linked savings account into which people have to put regular savings for the six months to a year that they are trying to get their first mortgage. It encourages them to carry on doing so, so that if interest rates and the cost of their loan go up suddenly, they have a financial buffer. More could be done to encourage the industry to promote such products.
Katy Clark
It is a pleasure to speak to new clause 12, which I tabled along with many other hon. Members. It would require the Financial Policy Committee to
“carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.”
It would require the report to include
“an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets…in the event of insolvency.”
I come to this issue as a result of the experiences of my constituents when the Farepak Christmas savings club collapsed on 13 October 2006. Many hon. Members will be well aware of the background to the Farepak issue, which has been raised in this Chamber on a number of occasions. More than five years after the collapse of the company, almost none of the 120,000 people who lost out have received a penny of their money back. Those 120,000 savers lost about £38 million. Some money was distributed as a result of a response fund, which was set up in the lead-up to Christmas 2006, but the people who lost out have not received any money from those who are dealing with Farepak’s assets.
In my constituency, hundreds of families were affected. I pay tribute to my constituents Louise McDaid and Jean McLardy, who, along with many others, set up the Farepak victims committee, which continues to campaign for justice for those who lost out as a result of Farepak’s collapse.
Jessica Morden (Newport East) (Lab)
Will my hon. Friend add to that list my constituent Deborah Harvey, who was a Farepak agent and who has campaigned tirelessly with the Farepak victims committee? The committee recently contacted a raft of companies that run prepayment schemes to seek assurances about the future protection of people’s money, but it has not had a welcoming response. Does my hon. Friend agree that we owe it to Farepak’s victims to ensure that this sort of thing never happens again and that such people are protected in legislation?
Katy Clark
I congratulate my hon. Friend on her work on this issue. She led an Adjournment debate about it shortly before Christmas to commemorate the fifth anniversary of Farepak’s collapse.
I, too, pay tribute to Deborah Harvey, who is the current secretary of the Farepak victims committee and who has done a tremendous amount of work on this issue. The Farepak victims committee is unusual in that it has continued, in an organised way, to bring people together on this issue over a long period. One problem is that the type of people who tend to be affected when such things happen are not organised. The work done by Louise McDaid, Jean McLardy, Deborah Harvey and many others has helped to keep the issue in the spotlight. It is important to look at the situation again today, because it is a disgrace that, five years on, it has not been brought to a conclusion and people still do not know for sure how much money they will get back.
One reason for the huge problems was that the Farepak victims were unsecured creditors. That meant that when the company went bust, the money that they had paid in was not protected, as it is secured creditors who get preference. We need to look at the model whereby people pay money in and effectively save up for goods that they have not received.
Mr Robert Buckland (South Swindon) (Con)
The hon. Lady is outlining the gap between the perceptions of those who were saving with Farepak, which was based in my constituency, and the reality of the regulatory framework. The gap was between people’s belief that they were saving into a pot that they would be able to reclaim from and the reality, which was that they were unsecured creditors. That must never be allowed to happen again. This is a chance for change so that we do not again see the abuse that we saw with Farepak .
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.
Katy Clark
What is different about this situation, however, is that often the reason for prepayment is that the person buying the product wants to purchase in that way because of their financial situation, and the person selling the product gets the financial advantage of holding that money for a period of time. I therefore cannot understand the Minister’s point, in that at present the advantage is with the organisation selling the product. Does the Minister agree that we should be considering how to move towards a situation in which the consumer is able to pay in this way and get protection for the funds they have paid out?
Mr Hoban
The hon. Lady makes an important point. It is my understanding that some of these prepayment schemes get their income from being able to negotiate a discount with the supplier of the goods, as well as, perhaps, from the interest they earn on the prepayments. The question then arises whether the revenue the prepayment scheme gets is sufficient to outweigh the cost of enhancing customer protection. Some of these schemes are administratively expensive, and the cost of protection may exceed the income generated, which would lead to that service being withdrawn from the consumer.
As this exchange demonstrates, some complex issues are involved. The hon. Lady is right to raise them, and it is right that the Government should continue to address them. Many people rely on these schemes and it is important that they are well protected. We should make sure that there are alternative sources of information for them, in order to enable them to judge where they might get best protection and, perhaps, earn some interest themselves on the prepayment they are making, rather than the supplier making that money.
Finance (No. 4) Bill
Baroness Clark of Kilwinning Excerpts(12 years, 8 months ago)
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Rachel Reeves
I thank the hon. Gentleman. His constituents have had a hard time in the past few days. Older people will be hit by the changes to pensioners’ tax allowances, and of course the pasty industry in Cornwall and the south-west will be hit hard, so there is a double hit for his region.
We need to remember the situation that most pensioners face. They do not have ways of making up for a loss of income by going out and finding work. That is what it means to be retired. They are therefore particularly vulnerable to rises in the cost of living and to unanticipated changes in their financial circumstances. The Office of Tax Simplification report notes that the current age-related allowance was
“introduced to reflect potentially higher costs of living of older people.”
That was why Winston Churchill introduced it in 1925. As the OTS has stated:
“Older people can struggle to meet living costs. They are often on a fixed income once they have retired, or perhaps on a declining income in real terms where flat annuities have been purchased”.
Katy Clark (North Ayrshire and Arran) (Lab)
I understand that one reason why the age-related allowance was originally introduced was the higher cost of heating when people are older. Does my hon. Friend agree that that is particularly important now given the rising cost of fuel, and even more so in parts of the country where the weather is worse, such as the north and Scotland?
Rachel Reeves
It has been pretty cold in my constituency in Leeds this winter, as well. My hon. Friend is right to make that point, because people face many extra costs as they get older, such as in heating their home.
Katy Clark
If the hon. Gentleman believes that the allowance is such a glaring anomaly, why was there not something about it in his party’s manifesto?
Ben Gummer
The hon. Lady asks about the party manifesto. I had hoped to discuss the broader issues and great challenges facing us. Manifestos are, by their nature, broad brush, and this is such a tiny change to the tax system in the grand scheme of what the Treasury has to deal with. It is entirely right that the Government are, bravely, addressing it now. In all honesty, would either party go down to such detail in any future manifesto? It is entirely right that the Government are saying, “This is an anomaly. It is incorrect and unfair, and what is more, it is one of the many anomalies that are unaffordable in the long term.”
Ben Gummer
I will, but before I do, let me say in response to that intervention that there are many pensioners in my constituency who are on very low incomes. They are suffering considerably at the moment. Most of them do not have incomes anywhere close to the current allowance. What we are trying to do—in improving their lot through the triple lock guarantee, as well as protecting the pension credit, the winter fuel payments, the cold weather payments and the free TV licences—is protect the benefits of those who are least able to look after themselves.
My hon. Friend the Member for Broxtowe (Anna Soubry) is right in another sense. It is not just today’s vulnerable pensioners whom we must look after and seek to help, but the vulnerable pensioners in 20 and 30 years’ time. If we do not make changes now and try to protect the state’s income to some degree, we will not be in a position even to afford the benefits and pensions that we promise people now, let alone to anything like that degree in 20 or 30 years’ time, and that will be a problem for both parties.
Dr Whiteford
I will try to keep my remarks short. I have listened to today’s debate with great interest. First and foremost, it is important that we take proper account of the long-term erosion of pensioners’ incomes over the past three decades, since the link between earnings and the state pension was broken, and of the more recent pressures in the wake of the financial crisis.
The changes to age-related allowances that we are discussing will not affect the poorest pensioners or those who are comfortably off. They will, however, affect the 40% of pensioners who have modest incomes. Those people have saved for their retirement, and 4.4 million older people will be worse off as a result of the changes.
Katy Clark
I agree with everything that the hon. Lady has said so far. Does she agree that a subject that we do not discuss often enough is that of pensioners who rely on their savings? Low interest rates mean that they are currently getting a far lower income from their savings than they had envisaged.
Dr Whiteford
I absolutely agree. In fact, that was one of the points that I wanted to make, because that subject has been eclipsed in the debate about the changes.
The Government have made great play of the recent increases to the state pension, and seem to suggest that they will somehow offset the changes to the tax allowances. As the hon. Member for Leeds West (Rachel Reeves) pointed out, however, we must remember that that is simply an inflationary rise. It will only keep pace with prices; it is not an increase. It is only a small step in the right direction towards restoring pensioners’ incomes to a level that most of us would recognise as providing a decent standard of living.
I have mentioned in the House before that the way in which pensioners experience inflation can differ markedly from the way in which the general population as a whole experiences it. One of the most obvious and significant examples of that relates to heating and domestic fuel costs. Retired people are more likely to have to heat their homes during the day, while the rest of us enjoy the benefit of our workplace heating systems. Many pensioners also find it harder to keep warm because of their age and the fact that they are not moving about so much. So any inflation in the cost of energy is felt disproportionately by pensioners, and nowhere more so than in those parts of these islands that experience consistently colder weather.
Last year, we saw sharp and dramatic increases in home energy costs, which played a big part in driving inflation up to over 5%. Energy prices have come down since that peak, but I heard on the news this morning that some economic commentators believe that inflation this year is going to be well above the Bank of England forecasts that the Government are using, and that we could experience inflation of over 3% this year as well. The welcome increases in the state pension have only kept it in line with inflation and might not keep it in line with inflation as it is experienced by people of pensionable age. That is why the Government’s argument that the changes to age-related tax allowances are compensated for by the increases in the state pension is somewhat spurious. In real terms, this tax grab squeezes the incomes of pensioners on modest incomes.
It is also all too easy to forget that pensioners have already paid a heavy price for the financial crisis. Those pensioners affected by these new changes to age-related allowances are in many cases the same people who saw the value of their savings and investments plummet in the wake of the financial crisis. Since then, they have had to contend with record low interest rates, coupled with high inflation. As the Treasury Committee reminded us earlier this week, quantitative easing, whatever its intended consequences, has had some very nasty side effects for those reaching retirement age and looking to buy an annuity in the last few years.
Margot James (Stourbridge) (Con)
I welcome the Budget, which has been a Budget for enterprise and growth, and I would defend the reduction in the top rate of tax, which seems to be the Opposition’s main bone of contention. I think older people have a stake in the future of our economy just as great as everybody else. There is no doubt in my mind that the introduction of that 50p top rate of tax by the last Government—right in the last throes of the last Government—was extremely damaging to our country’s image as a place of business, growth and prosperity. I am glad that the Chancellor has taken the brave step of reversing it in part.
Katy Clark
The hon. Lady will be aware that the income of the very rich has increased by 20% over the last two years since her Government came to power. Politics is, of course, a question of choices. Does she not think that our choice should be to try to get money from those people rather than from pensioners on modest incomes?
Margot James
I thank the hon. Lady for her intervention. I notice that she cited the last two years over which the incomes of the very wealthy have increased, but she might equally well have quoted the last 12 years of the Labour Government, during which I believe top earners did extremely well. It is a question of choices, and I feel that the Chancellor has made the right choice. In fact, it is a set of choices: it is not just a choice between one thing and another. I think it essential for this country not to be out of kilter with the rest of the world in terms of its top rate of income tax.
Graham Evans
I have given away several times. I am bringing my speech to a conclusion.
Finally, I welcome the Chancellor’s announcement that people will now receive a personal tax statement detailing exactly how much tax they have paid and what it has been spent on by the Government. This is a great move for transparency. I know that Labour are nervous about what will happen when people see, in black and white, how much of their taxes go on paying interest on the last Government’s debt.
This is an excellent Bill. It is a radical and reforming Bill. It comes from a Government firmly on the side of business, working people and pensioners, and it tells the world that Britain is open for business.
Katy Clark
Thank you, Mr Williams, for giving me the opportunity to follow on from that Second Reading speech by the hon. Member for Weaver Vale (Graham Evans). I will resist the temptation of talking about the Budget because I had that opportunity in Monday’s Second Reading debate.
Katy Clark
I think that many Government Members must feel ashamed of this policy, particularly given that it was not in the Conservative party’s manifesto. Many people who voted for the Conservatives, particularly pensioners, will be disappointed that they have introduced this policy.
We have heard numerous comments from Government Members giving the impression that the policy would affect super-rich pensioners, but, in reality, pensioners on modest incomes will be affected. It is pensioners on incomes between £10,500 and £29,400 who will be affected by the change. I do not think that anyone in this House can really believe that these are rich people; rather, we are talking about people on modest or middle incomes.
Alun Cairns
Does the hon. Lady accept that when the last Chancellor froze the age allowance and the personal allowance at the same time, pensioners on much lower incomes were affected?
Katy Clark
That was done as part of a range of measures. We have been talking about a package of measures today, and what we know is that pensioners will be disproportionately affected by the range of measures that this Government are steamrollering through. I will return to that later, but the hon. Gentleman’s point also highlights the fact that the changes proposed at that time treated everybody, of all ages, in the same way. In this debate we are trying to focus on the impact on pensioners of the freeze in what is an age-related benefit. We have heard a number of contributions that have highlighted how pensioners are struggling as a result of many of the Government’s policies, as well as the economic situation we are in, which the Government are not trying to alleviate.
My hon. Friend the Member for Leeds West (Rachel Reeves) put this debate in the bigger picture by highlighting the fact that the £3 billion that the Government will save as a result of the proposed change will be used to help some of the richest people in the country. The big picture is that the richest in this country are getting richer, at a time when the living standards of those on modest or low incomes are going down. We have heard a number of attacks on the last Labour Government in this debate, but the reality is that the figures show that the living standards of those on low, modest or middle incomes went up. There was also an increase in the living standards of the wealthiest in the country, but we are now seeing the living standards of ordinary people—people on low or modest incomes—plummeting, while at the same time we see huge and escalating increases in the incomes of rich individuals and many corporations.
Mr McKenzie
We hear much from Government Members about the message that this Budget is sending the world—that Britain is open for business, and so on. What message does my hon. Friend think the Budget is sending to our pensioners up and down the country, and particularly those on incomes that they have worked hard for, by setting money aside and preparing for their pensions?
Katy Clark
The word “dignity” has been used a number of times in this debate. It is an important word, particularly given the proposed change, which has been put forward at short notice. We have had debates about pensioner income over many years in this place. We have heard a number of proposals, from parties in all parts of the House, that would change the financial position of those reaching retirement. However, a common theme has been the importance of giving as much notice as possible of any change, particularly when dealing with people’s incomes in retirement, so that people can make the changes necessary to cope with the changing world.
One of the problems with the proposed change, which will come into effect in 2013-14, is that it represents not a minor or technical change, as many Government Members have said, but quite a substantial drop in income at short notice for people on modest or medium incomes. My hon. Friend the Member for Livingston (Graeme Morrice) highlighted the impact on those who turn 65 in 2013-14, who could lose £323 a year, which represents a significant amount, not a technical change. Therefore, to answer my hon. Friend the Member for Inverclyde (Mr McKenzie), people in those income brackets will be very disappointed by the change. That is one reason I have highlighted the fact that the measure was not in the manifesto. If the Government think that it is an important part of their long-term pension reform, it should have been in the manifesto. It should have been consulted on and thought through, and a great deal more notice should have been given to the individuals affected.
Charlie Elphicke
A key concern of mine is to understand why there should be a higher personal allowance for senior citizens than for hard-pressed families who are struggling to get by. Why does the hon. Lady think that that is justified?
Katy Clark
I mentioned this in an intervention. At the time of the allowance’s introduction, a number of reasons were given, one of which was pensioners’ higher heating costs. A full explanation was given during those debates of the higher and additional costs that are associated with retirement. Those higher costs of living have a disproportionate impact on pensioners. In the debates on pensions that we have had over the past few months, a great deal has been said about the higher costs that pensioners face, and about the possibility of having a different form of indexation for pensions, given that pensioners tend to have different living costs from the rest of the population.
Karen Bradley (Staffordshire Moorlands) (Con)
I have listened carefully to the hon. Lady’s point about pensioners’ higher living costs, but does she not accept that allowances such as the winter fuel allowance reflect the Government’s acknowledgement of their different costs? A young mum at home with her baby, who would also need to heat her home, would not get that allowance.
Katy Clark
Many pensioners, and many among the general population, are disappointed that the Government have not lived up to their election promises on that allowance.
The point that I was making is that pensioners need more time to adjust. I welcome the increase in the personal allowance—I believe that there should be higher personal allowances for everyone—but if the Government are going ahead with this particular kind of proposal, they should give people many years’ notice so that they can prepare for the changes. Given the situation that pensions are now in, which I will go into in more detail if I have time, this is the wrong time to be clobbering pensioners in this way.
Elizabeth Truss (South West Norfolk) (Con)
Are we not in this situation partly because of the failure of reform over the past 30 years? Despite the fact that people are living longer and longer, nothing has been done. We have now abolished the compulsory retirement age, which will enable many older people to carry on working and earning more income. Why was that not done under the previous Government?
Katy Clark
The hon. Lady is attempting to rewrite history. She will know that the previous Labour Government brought in a whole range of reforms to take account of the increase in the living age. My hon. Friend the Member for Wirral South (Alison McGovern) highlighted the fact that that increase is far from uniform, owing to health inequalities. Life expectancy has not increased so much among people on lower incomes and from lower socio-economic groups, for example.
Ian Swales
The hon. Lady mentions the need to give notice of the changes. Does she know how much notice was given of the freezing of the age-related allowance in 2010-11?
Katy Clark
Government Members keep trying to return to that point. As I have said, the freeze applied to all allowances, and it is not comparable to what we are debating. This is a specific debate about long-term Government policy towards pensioners and the long-term cumulative effect that this change will have.
As I say, this is the wrong time to come forward with changes of this nature. We heard a well-informed contribution from the hon. Member for Banff and Buchan (Dr Whiteford) on the situation faced by pensioners who rely on private savings. I suspect that many of us as constituency MPs have had a considerable number of representations from individuals who have planned their pension and retirement savings over many years on the assumption that higher rates of interest would apply, enabling them to live off the savings they had made over a long period. I very much hope that in 2013, when these changes come into force, the economic situation will be different, but I suspect that those pensioners will be in a similar position. That is another powerful reason why now is an incredibly bad time to make changes of this kind. In my view, they should have been introduced with far greater notice.
The Government should know that pensioners are being disproportionately affected by the policies they are pursuing. We hear a great deal from Government Members about their ambitious deficit reduction plan—so far, of course, we have only seen the deficit increase. What we are seeing locally, and I suspect they will be seeing it, too—[Interruption.] Government Members are well aware that they are borrowing more and that the deficit is going up. In their constituencies as well as mine, however, local people will be experiencing the start of draconian cuts in public services, which will have and are already having a disproportionate effect on those in retirement. Even before the current economic difficulties, we were all aware of the struggle councils were having in trying to provide the social services required for our changing demographic and our ageing population.
Mark Garnier
The hon. Lady really must get the point about the deficit right. The deficit has been reduced from more than £150 billion when this Government first came to power to, I think, £132 billion this year. She may be getting confused between deficit and debt, and Government debt is going up, but it is going up because we have such catastrophic public finances as a result of the previous Government.
Katy Clark
The hon. Gentleman is well aware that borrowing is going up. As I was saying, despite the fact that the Government are failing and have consistently failed to meet their own targets, the reality is that the cuts in public spending they have already made—and they propose more for the coming years—are having a disproportionate effect on the pensioner community.
Katy Clark
I hope to come to a conclusion shortly, but I will give way for the last time.
Stephen Williams
The hon. Lady has twice said that pensioners are disproportionately affected by the collection of measures the Government are introducing to reduce the deficit. May I quote what Paul Johnson, the director of the Institute for Fiscal Studies, said about this particular measure? He said:
“Despite this morning’s headlines, this looks like a relatively modest tax increase on a group hitherto well sheltered from tax and benefit changes. From this Budget we calculate that pensioners will lose on average one quarter of one per cent of their income in 2014”.
How does she square that—the Opposition often like quoting the IFS—with pensioners being disproportionately affected by what the Government are doing?
Katy Clark
I think that the hon. Gentleman’s constituents will be very interested by his complacent approach. I suspect that he is well aware of the impact that the Government’s cuts are having on his constituents as well as mine, and well aware of the pain that his constituents are suffering. I am sure that he is also aware that pensioners rely disproportionately on social services and the public sector, and that the forthcoming cuts will make life particularly difficult for them.
Finance (No. 4) Bill
Baroness Clark of Kilwinning Excerpts(12 years, 8 months ago)
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Mark Field
My hon. Friend is absolutely right, particularly in respect of the German model for the micro-sized businesses that are in the growth phase. There is no doubt in my mind that our recovery phase will commence only when we are able to have that sort of readjustment.
Katy Clark (North Ayrshire and Arran) (Lab)
We heard those arguments in the 1980s and they have been looked at many times. Does the hon. Gentleman not know that there is no connection whatever between economic growth, and the economic competence of a country, and employment protection?
Mark Field
I am making a comparison over the limited phase of the past two or three years. Why have we seen the recovery in the USA, to which I referred, and recovery and economic stability in Germany? Given the fiscal stimulus, there is not all that much between the countries, but those employment rights measures have the impact of allowing recovery among small and medium-sized enterprises.
Katy Clark
Is the hon. Gentleman not aware that the USA has pursued different economic policies from the UK? It has not pursued the policies of austerity that the Government and other countries in Europe have pursued. There is no connection between attempts to restrict trade union and employment rights and growth.
Mark Field
The important thing that the hon. Lady needs to recognise is that there is a distinction, as I said in the early part of my speech, between the rhetoric and the reality of austerity. We have not really had much in the way of fiscal tightening in this country. We are still borrowing and living miles beyond our means—this is a lesson, I am afraid, for the entire political class—and we will face a huge problem. We continue to pass that burden on to our children and grandchildren, not in any meaningful way for investment, but for today’s consumption, which is not sustainable.
Katy Clark (North Ayrshire and Arran) (Lab)
It is a pleasure to follow the hon. Member for Watford (Richard Harrington). He made an interesting speech on an issue that we shall no doubt hear a great deal about in the near future.
The Finance Bill and the Budget are a huge wasted opportunity. So much needs to be done now, with more than 1 million young people out of work and a manufacturing base that is continuing to decline. We are continuing not to see the growth figures that we need if we want even to start talking about paying back the deficit. Many of the contributions from the Government Benches today have shown yet again that the Government’s policies are simply not going to get us out of this mess.
I believe that the Government’s position is ideologically driven. Many of their Members would believe in their policies irrespective of the economic position that we were in—for example, the comments about the need to get rid of employment protections in the workplace and to get rid of red tape would be made irrespective of whether we had 10% growth or negative growth in this country. The debates that we are having here are similar to those taking place across Europe, the United States and the west generally. We face massive challenges, but the answers being provided by Opposition Members, from whatever political party, are very different from those coming from Government Members.
Jonathan Edwards
Does the hon. Lady agree that what we are hearing from the Government Benches proves that the political right never lets a good crisis go to waste? Following the downturn in the economy, the Government are looking for further erosions of workers’ rights, which is extremely worrying and typical of right-wing politics.
Katy Clark
When we look at history, we see that, during economic crises, those on the right argue for policies that they would not get away with in other circumstances. We have seen that happen time and again. Perhaps the most comparable economic situation is that of the 1930s, and history shows that the policies that worked then were not those of tax cuts, of huge public spending cuts or of rolling back the state; they were the kind of Keynesian policies to which many Opposition Members are now sympathetic.
The policies of austerity that we are seeing not only here but across Europe are simply not working. We require very different policies from those in the Finance Bill and those being implemented across a range of Government measures. My party’s Front Bench has already mentioned the figures from the Institute for Fiscal Studies, which show that the average family is losing between £530 and £551 a year as a result of the measures being brought in now. The changes to tax credits being implemented are a central plank of the policies that will take away money from not only the poorest people, but those on modest incomes as well.
My right hon. Friend the Member for Knowsley (Mr Howarth) has already talked about the impact of the measures on his constituents. My constituents, too, are coming to see me to talk about these issues. For example, last week a nurse came to see me: she works 16 hours a week, her husband is retired, and she has a 13-year-old child, and she is losing £3,700 a year as a result of the changes to tax credits. She works 16 hours a week at Crosshouse hospital, and she has asked to increase her hours to 24 a week, but the hospital has not agreed to that. That is the reality of the situation for the many families who are going to be affected by the tax credit changes, including more than 11,000 families in Scotland alone. Unfortunately, in the present economic circumstances, many employers will not be in a position to offer more hours, even if they wish to do so. That is just one example of the way in which the Government’s changes are affecting people.
As I have said, I believe that the Budget is a missed opportunity. We have heard about the Government’s radical proposals for deficit reduction, and indeed we are seeing the impact of those policies in all our constituencies. We are seeing what were considered to be essential public services being cut. We are seeing services being taken away that individuals and communities fought for, generation after generation, and that did not come easily. The incomes of the richest people in this country have increased by about 20% over the past two years, but the incomes and living standards of most people, including the poorest people, are going down.
The Finance Bill does nothing to address any of those issues. It does nothing to address the inequalities in wealth in this country. The Government’s policies simply exacerbate problems that we already have. The Bill will do nothing to bring about the essential increase in jobs and growth that we need. We will start to pay off the deficit only when the economy starts to grow, but the Government are taking money out of the economy and out of communities such as North Ayrshire, which is disproportionately reliant on the public sector because the manufacturing sector that we relied on in previous decades no longer exists. We are seeing money being taken out through cuts in the welfare sector and the welfare state, and through cuts in benefits and tax credits. The measures that are now being implemented are taking money out of the pockets of some of the people who need it most.
I say to the Government that we need policies that will stimulate growth. They should use every financial lever at their disposal for that purpose, rather than introduce tax cuts for the wealthy in the form of a rate reduction from 50p to 45p, and a cut in corporation tax, which is an ideologically driven measure that will have no impact on jobs and growth. My hon. Friend the Member for Leeds West (Rachel Reeves) mentioned the figures from Ernst and Young which suggest that the Government’s measures could lead to negligible growth of 0.1% and have all sorts of other ramifications.
The Government have talked about being a Government for families and about us all being in this together, but the reality is that the Finance Bill, like many of the other measures that they are introducing in this place, week in, week out, will simply make Britain a less fair country, a less equal country, in which the gap between rich and poor, and between north and south, will become greater as time goes on. Furthermore, this Budget will not help the country to start to reverse its industrial decline. For much of my adult political life, I have been able to talk about us being the fourth richest country in the world; now we are the seventh richest, as we have failed to keep up with other countries that are advancing, failed to value our industrial base and failed to value our manufacturing. The Bill will do nothing to address any of these things. Frankly, this Government should be ashamed of coming forward with these proposals at this time. To a large extent, they are a political fix between two political parties in coalition, and they will do nothing to address the real problems that our constituents are facing.
Youth Unemployment and Bank Bonuses
Baroness Clark of Kilwinning Excerpts(12 years, 10 months ago)
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Danny Alexander
I have already given way to the hon. Gentleman and to the hon. Lady, and I want to make some progress.
Katy Clark (North Ayrshire and Arran) (Lab)
The right hon. Gentleman will be aware that while the living standards of those on low and medium incomes are going down, the wealth of the super-rich is going up. Will he give an undertaking that he will take action on this issue, and that the gap between rich and poor will be smaller by the next election?
Danny Alexander
The Government have taken on the issue of ensuring that the wealthiest pay a greater share, to ensure that there is fairness in our deficit reduction plans. For example, we have increased capital gains tax and put in place the new bank levy that I have mentioned. We have also maintained the 50p rate of income tax. We are making substantial changes to ensure that the wealthiest pay their fair share.
Business, Innovation and Skills
Baroness Clark of Kilwinning Excerpts(13 years ago)
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Katy Clark (North Ayrshire and Arran) (Lab)
It is a pleasure to follow the hon. Member for Fylde (Mark Menzies), who, of course, comes from my constituency.
I also welcome the opportunity to raise a very timely issue: the collapse of the Farepak Christmas savings club. It has been raised in this Chamber on many occasions, because more than five years ago, on 13 October 2006, the company collapsed and as a result 120,000 people lost some £38 million. Very few of those people have received a penny back from Farepak as yet, although the administration has continued.
Hon. Members will remember that a response fund was set up at the time of the collapse, to which the people of this country gave very generously and as a result of which some Farepak victims got some money. The reality is, however, that Farepak has still not paid out in any way to the 120,000 individuals or to their families. The Government are well aware of the background. Last week, the Minister for Further Education, Skills and Lifelong Learning responded to the debate on the subject secured by my hon. Friend the Member for Newport East (Jessica Morden), and said that the current situation was completely unacceptable and that the whole matter had taken far too long to sort out. Members on both sides of the House would accept that the length of time it has taken to resolve the matter is not acceptable. We must see whether there are lessons to be learned.
I would argue that the 120,000 people who saved with the Farepak Christmas savings club did so responsibly, so I ask the Government to look again at what they can do to ensure that those affected receive full compensation for what they lost. In my constituency, hundreds of families were affected and for many of them Christmas that year was destroyed. In particular, I pay tribute to my constituents, Louise McDaid and Jean McLardy, who both live in West Kilbride and who, along with others, set up the Farepak victims committee, which has been campaigning for the past five years for justice for the Farepak victims. It has become clear over those years that the sector is poorly regulated and that individuals who pay for items in instalments do so with very little protection. The Farepak victims are unsecured creditors, which meant that when the company went bust they went to the bottom of the pile.
The reaction five years ago was the setting up of a voluntary organisation, the Christmas Prepayment Association, which provides should a company that is a member go bust. Many prepayment companies, however, are not members of the scheme and there is no requirement for them to belong to it. Indeed, some of the biggest players in the sector, such as Tesco and Asda, are not regulated by the voluntary scheme and the association covers only Christmas clubs, whereas many prepayment organisations are not geared towards Christmas.
Many Farepak customers are very upset about how the administrators, BDO, have handled the administration, about the lack of information available to them as creditors and about the deal that I believe was done with some of the ex-directors of Farepak to pay a total of only £4 million in compensation of the £32 million that was due. As was widely reported recently in the press, BDO has incurred expenses in excess of £8.2 million in administration of the scheme, whereas it has managed to get only £5.5 million for the victims. I tell all hon. Members that there are serious issues about whether that mechanism should have been used to resolve the situation. Until recently, the victims were told they could expect 15p in the pound back, but now it is not clear whether they will receive even that limited amount. An application has been made for disqualification orders to be taken against the directors, but as yet we still have no indication of whether there are likely to be any prosecutions in the criminal courts.
I believe that the case of Farepak highlights important failings in the regulation of the prepayment industry. That applies not just to Christmas savings clubs but to many situations where individuals pay for things in instalments, and, of course, it is people on modest incomes who do that. Most people who pay up in this way often reasonably expect that the sums they pay will be ring-fenced and put in a separate account and that they will have priority if the organisation goes down. Today, I ask the Government, five years after Farepak, to look into what can be done for the Farepak victims as well as at the wider issues of the prepayment sector, and to come back with proposals to ensure that the sector is better regulated so that we can give proper protection in the future.
Public Service Pensions
Baroness Clark of Kilwinning Excerpts(13 years ago)
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Danny Alexander
The hon. Gentleman has described the position precisely. Over the next 20 or 30 years, the agreement will save taxpayers, including his constituents, tens of billions of pounds which it will be possible to use for other purposes. I recognise that many of his constituents in the private sector do not have access to pension provision, and I hope that that problem can be addressed, not least by means of the NEST scheme.
Katy Clark (North Ayrshire and Arran) (Lab)
Will the Government take steps to veto any agreements that may be made between the trade unions and the Scottish Government?
Danny Alexander
I hesitate to use the word “veto” at the Dispatch Box, even in answer to the hon. Lady’s tempting question. It is traditional for Scottish schemes to proceed by analogy with our United Kingdom schemes. I hope that that will continue, and that the intransigent opposition of the Scottish Government to any pension reform will cease. Of course, as with contributions, if the Scottish Government choose to proceed differently they will have to bear the cost.
Public Service Pensions
Baroness Clark of Kilwinning Excerpts(13 years, 1 month ago)
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Danny Alexander
My hon. Friend makes the point that public sector workers have traditionally considered the level of pension to be an important part of their reward package, and they are right to think that. I hope my hon. Friend agrees that the offer we have set out today constitutes a very fair reward for a career spent in precisely the sort of public service institutions he has described.
Katy Clark (North Ayrshire and Arran) (Lab)
The Chief Secretary will be aware that one of the concerns about increasing contributions is that that will lead to a rise in opt-out rates, particularly among low-paid and part-time workers, most of whom are women. In his answer to my hon. Friend the Member for Slough (Fiona Mactaggart), he mentioned an assumption of 1% of the pay bill, but the schemes and their memberships are very different. Will he ensure that opt-out rates are analysed on a scheme-by-scheme basis, as rising contributions could have a major effect on the viability of some schemes?
Danny Alexander
We have taken that on board through the proposals for a tiered increase in contributions. The hon. Lady will be aware that 80% of the public sector workers who earn less than £15,000 a year and will not have any contribution rate at all are women.