Women and the Cost of Living

Baroness Morgan of Cotes Excerpts

Tuesday 19th November 2013 Commons Chamber

[The Economic Secretary to the Treasury (Nicky Morgan)]

It is a privilege to speak in this debate. My favourite quote is from the UK’s first female Prime Minister:

“If you want something said, ask a man; if you want something done, ask a woman.”

I am not sure whether today’s debate is a landmark because all the opening and closing speeches will be made by women Ministers and shadow Ministers, but I would hope that we could make it a bit different by having a proper discussion rather than just talking at each other.

The Government recognise that both women and men up and down the country have been through a difficult economic period because our economy has been through, and is now recovering from, the most damaging financial crisis in a generation.

[Seema Malhotra]

Does the hon. Lady agree, however, that women have been hit three times as much as men by the Government’s deficit reduction steps?

[Nicky Morgan]

I am afraid that I cannot agree with the hon. Lady. I will come on to talk a little bit more about this, but the difficulty with the Opposition’s figures is that they assume that income is not shared throughout a household but that it is held on to by one parent in a two-parent household. The Labour figures also do not take into account self-employment, the correct inflation figures and any benefits or tax cuts. Therefore, the figure that was stated of £1,600 does not actually stack up at all.

[Seema Malhotra]

rose—

[Nicky Morgan]

I am going to carry on for now.

As I said, we are now recovering from the most damaging financial crisis in a generation. I am afraid that the hon. Member for Ashfield (Gloria De Piero) did not mention that financial crisis at all, but it was overseen by the Labour party—although I appreciate that she was not a Member of this House at that time. It was overseen by the last Government, who built a decade of growth on unsustainable debt. When our country is trying to overturn the largest deficit since the second world war at the same time as our largest trading partner, the EU, has been in recession, it is unfortunately highly likely that women and men will feel the pinch.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does the Minister agree that in her view of the world the last Labour Government must have had tremendous power as they apparently brought about a financial crash not just in Britain but across the world? The situation would not have been any different whichever party was in government—and we must remember that the current Government do not want to regulate anything any more and said we regulated too much.

[Nicky Morgan]

That intervention shows the extent of the collective amnesia on the Opposition Benches. First, on the banking crisis the point is that the necessary reserves to deal with the unforeseen consequences were not set aside. Secondly, the last Government systematically over many years spent more than they were raising in taxes, so there were not the reserves to deal with this.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will the Minister confirm two facts: first, that SME investment in Britain has fallen by £30 billion since 2011, and, secondly, that the Government are accruing more debt in the five years from 2010 to 2015 than the Labour Government did in 13 years?

[Nicky Morgan]

I do not agree on either point. The point about the borrowing is that it is called the automatic stabiliser, and it works. When the economy is in the situation it is in, it is helping out the very families the hon. Member for Ashfield was talking about.

[George Hollingbery]

The shadow Minister was intent on not taking an intervention from me earlier. Would my hon. Friend the Minister acknowledge that the Government have looked at how households work, and at how income comes into them, and recognised that there is a real cliff edge at 16 hours of work? That means that incomes drop away at that point, and that for every pound earned, 95p is taken away in reduced benefits. We are introducing a fundamental change that will alter the position of women and allow them to take on full-time work. That is something that Labour failed to deal with in the entire 13 years it was in government.

[Nicky Morgan]

I could not believe that the hon. Member for Ashfield did not want to hear from my hon. Friend, but, having heard his excellent intervention, I now understand why she did not do so.

[Mel Stride (Central Devon) (Con)]

Does my hon. Friend agree that it was unfortunate that the shadow Minister did not mention council tax? It is a major contributor to the cost of living but, due to the actions of this Government, it has fallen by 9.5% since 2010, having doubled during the time her party was in office.

[Nicky Morgan]

The shadow Minister also failed to mention fuel duty and the cut in income tax but, strangely enough, I am going to talk about those things in my speech.

This Government know full well that the best way for us to raise the living standards of both women and men in this country, and the best way to put money back into the pockets of hard-working people, is to create an environment in which our economy can grow and in which everyone can feel the benefit. That is exactly what we have spent the past three years doing: reducing the deficit, improving our tax system, investing in our skills and infrastructure and ensuring that all schools are good schools.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

The Minister brushed aside the question from my hon. Friend the Member for Feltham and Heston (Seema Malhotra) about the impact of the Government’s changes on women’s pockets and purses, offering instead a presumption that households share their incomes equally. Has she actually read the research into domestic violence and financial control? Does she really think that a simple transfer is made between men and women in every household in this country? Does she think that our concerns about the direct impact of Government policy on women’s purses are not well founded?

[Nicky Morgan]

I would never want to downplay the effects of domestic violence. Sadly, I see cases in my constituency surgery on a regular basis, as we all do. The point is, however, that that is not happening in every household. Similarly, not every household is made up of two parents or just one parent; there are all sorts of different families. That is what this Government recognise: the situation is not uniform.

Thanks to the changes that we have made, and thanks, most importantly, to the hard work of women and men across the UK, our economy is turning a corner. The UK is now on the path to prosperity. The deficit is down by a third, gross domestic product is rising, and more people—including women—are in work than ever before. The more men and women who are taking home wages at the end of the month—especially when 25 million people’s wages are being boosted by our increase in the tax-free personal allowance—the higher will be the standard of living that we can expect to see in households across the country.

[Jim Shannon (Strangford) (DUP)]

The Chartered Management Institute confirmed today that the bonuses paid to men are double the size of those paid to women doing the same job. Would the Minister consider closing the loophole in the law to ensure that ladies get the same pay and bonuses as men when they are doing the same job equally well?

[Nicky Morgan]

Actually, we have had equal pay for 40 years. I shall talk in a moment about the pay gap having narrowed. Men and women should of course be paid the same amount for doing the same job. The Government have introduced a provision that, if a successful pay claim is brought, an automatic audit is triggered of the pay structure of the employer who has been caught falling foul of the law. That is something that the hon. Gentleman should welcome.

[Lilian Greenwood (Nottingham South) (Lab)]

Will the Minister give way?

[Nicky Morgan]

I want to make a little progress, but I will give way to the hon. Lady in a bit.

The Opposition have thrown a barrage of statistics on female employment at us across the Dispatch Box this afternoon. I should like your permission to throw just one back, Madam Deputy Speaker. As I have said, there are now more women in work than ever before. If I am allowed one more, I shall tell the House that there are nearly 450,000 more women in employment since the Government came to power, and nearly 300,000 fewer economically inactive women. We should be celebrating the fact that there are now so many women in the labour market. Not only are there more women in the workplace, but the pay gap is shrinking, having fallen by nearly 1% last year. It now sits at just 9.6%.

[Alison McGovern]

Will the Minister answer a question that the Prime Minister could not answer last week? She has said that more women are in work now than ever before, but how many of them are on zero-hours contracts?

[Nicky Morgan]

I recall that the Prime Minister is going to write to the hon. Lady with that information, so I shall have to wait to see the letter. On the point about zero-hours contracts, first, the Government have announced that they are launching a review on the issue, and secondly, she ought to be looking at the number of Labour councils that employ people on those contracts first.

[Harriett Baldwin (West Worcestershire) (Con)]

My hon. Friend will appreciate, as a Treasury Minister, that the fact that more women are in work than ever before will also help the Exchequer’s revenues. In the last full tax year, men paid more than £90 billion in income tax whereas women paid only £36 billion, so she can see how helping more women work up the income scale really helps the revenues.

[Nicky Morgan]

My hon. Friend is, of course, right, but we also need to consider the wider argument: it is good for women to have the choice about whether working is the right thing for them to do given their family circumstances and any other responsibilities they may have. We want to make it as easy as possible for women to work, and I will come on to discuss child care.

[Dame Angela Watkinson (Hornchurch and Upminster) (Con)]

I am sure that the Minister will agree that half the population are women and the vast majority of them are successful and contributing, not victims, as the Labour party would have us believe. Does she agree that local businesses employing only a small number of people will benefit from more deregulation, which would enable them to offer jobs to even more women, which they can fit in with having children at school?

[Nicky Morgan]

My hon. Friend rightly says that 50% of the population are female—it would be nice if we saw a few more women in the House of Commons to represent that, but all parties are working on it. She is also right about deregulation. I am sure that she welcomes, as I do, the National Insurance Contributions Bill, which the Exchequer Secretary is taking through the Public Bill Committee at the moment. It will give all small businesses a £2,000 employment allowance so that they can recruit more people.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

Is it not concerning that more and more women are being sacked while they are pregnant because they are pregnant, yet this Government are making it harder for those women to challenge rogue employers and to take cases to employment tribunals?

[Nicky Morgan]

I, like all other hon. Members, would be concerned if any constituent came to me to say that they had been sacked as a result of being pregnant. I would support someone in that position. The research that we have is from 2005. The hon. Lady may have more up-to-date figures, and we are launching a new consultation to look into the rate and scale of the things she has mentioned.

[Lilian Greenwood]

How many women who potentially face maternity discrimination at work will not be able to take their claim to a tribunal because they are being asked to pay £1,200 just to launch a claim for maternity discrimination?

[Nicky Morgan]

I am sorry that the hon. Lady, whom I regard as a good neighbourly MP in so many ways, is scaremongering. People have to pay the fee only if they actually go to a tribunal, and there are many stages before that in an employment claim.

Let me talk about women and the workplace. As I said, we want to see not only more women in the workplace, but more women rising to the top of their workplaces. I am delighted that the Minister for Women and Equalities is on the Benches today, as she has been doing so much work to promote women in the workplace. I was also delighted to see Fiona Woolf, the second ever female Lord Mayor of London, coming into post earlier this month. I am sure that she will be an excellent role model for women in the City of London. But we need to do what we can to help more women to reach these senior positions and play an even more prominent role in our recovery. As many hon. Members will know, last month we published a Government action plan specifically designed to help women start out, get on and stay on in our workplaces by taking steps on things such as training, skills and flexible working.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

There is no doubt that we have been through a very difficult time, and that will have affected both sexes—men and women alike. Is not growth the best way out of a lot of these problems? Is it not irresponsible of a Government not to tackle the problems they are presented with, leaving them to be tackled by our children and our grandchildren?

[Nicky Morgan]

My hon. Friend is, of course, right about that. The best way to address living standards is by dealing with the economic crisis, so that families can find work in a growing economy. He is absolutely right to say that it is not fair to burden future generations with debt, which is why this Government have taken the tough actions they have.

I shall now discuss child care. For any mothers and fathers to succeed in the workplace, we need to have the right policy in place to support them. The Labour party is right to draw attention to the importance of parental leave and child care, but let me remind the Opposition that we were the Government who recognised the current system of leave and pay for parents as being not only old-fashioned and inflexible, but as playing a role in reinforcing the idea that women are the primary carers of children. Our new system will give real choice to families, and, from 2015, will allow working parents to share leave once the mother feels ready to end her maternity leave.

I remind the Opposition that we were the party that made sweeping changes on flexible leave and that they were the party that presided over child-care costs rising to the second highest level in the developed world. We are working hard to address that and to make child care more affordable for parents across the United Kingdom. A recent survey showed that 2012-13 was the second successive year in which the price of full day care and nurseries stayed flat in real terms

[Kate Green (Stretford and Urmston) (Lab)]

The Minister is right to draw attention to concerns about the cost of child care. Will she look carefully at what a group of organisations have recommended, which is that instead of giving a tax break to better off parents to pay for their child care, the proportion of child care costs that is covered by tax credits should be raised from 70% to 80%? That would have a significantly more beneficial effect for low-earning mothers.

[Nicky Morgan]

I am always happy to receive submissions on this issue from Members from across the House. We have already committed an extra £200 million for people on universal credit so that coverage of their care costs will go up from 70% to 85%.

Let me remind the House that we are increasing free early education places for three and four-year-olds to 15 hours a week. We are enabling low-income families to recover their child care costs and providing all families with support for 20% of their child care costs from autumn 2015.

[Mr Brooks Newmark (Braintree) (Con)]

It is also worth noting that it is this Government who have taken 2.5 million people out of tax entirely, including many women.

[Nicky Morgan]

My hon. Friend is absolutely right. The increase in the personal tax threshold meant that 57% of those who benefited and who were taken out of tax were women. That is 145,000 women who are no longer paying income tax. That money is staying in their households and they are able to spend it on themselves and their families, which should be welcomed.

[Lilian Greenwood]

rose—

[Nicky Morgan]

I will make some progress. There will be an additional 100,000 families who will eligible for child care support under universal credit. We have also ensured that our changes help the record number of women who have entered self-employment under this Government. That is a critical step. If women started businesses at the same rate as men, we could have an extra 1 million female entrepreneurs and a million more entrepreneurs, which would mean a million more people creating wealth, jobs and growth for our economy.

[Stephen McPartland (Stevenage) (Con)]

Does the Minister agree that things are very positive in my constituency of Stevenage? More than 30% of local start-ups are by women, which is something that we need to encourage further.

[Nicky Morgan]

My hon. Friend is absolutely right, and it is a critical point. The tax-free child care policy that we have announced will, for the first time, benefit self-employed women, and that is something that the current voucher system does not do.

In conclusion, it is clear that, despite some of the claims put forward by the Opposition, the Government’s plan for recovery is the only plan that will create sustainable long-term growth for our country. It is the only plan that will support employment. It is also the only plan that not only puts faith in the abilities of the women and men of this country to help us work our way back into prosperity, but puts money, through our rise in the personal allowance, back into their pockets. I, like the hon. Member for Ashfield, want to see even more women working, setting up businesses and rising to the top of businesses. The Government want to make that happen, so I ask the House to reject the motion before us.

Several hon. Members rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before I call the next Member to speak, I must tell the House that, as there has been a large amount of interest in this debate and there is only a limited time available, I have had to impose a seven-minute limit on speeches from the Back Benches.

Oral Answers to Questions

Baroness Morgan of Cotes Excerpts

Tuesday 5th November 2013 Commons Chamber

[Huw Irranca-Davies (Ogmore) (Lab)]

1. What assessment the Office for Budget Responsibility has made of the effects on the economy of recent changes in energy prices.

[The Economic Secretary to the Treasury (Nicky Morgan)]

The Office for Budget Responsibility has not published any assessment of the effects of the recent energy price increases on the economy. The OBR’s last published forecast, “Economic and fiscal outlook” was issued in March 2013, and an updated forecast will be provided alongside the autumn statement. The Government are committed to doing all we can to keep energy bills down to support hard-working families.

[Huw Irranca-Davies]

I welcome the hon. Lady to her post. Is she aware that last year wholesale energy prices rose by 1.7%, but energy bills by 9.1%? Is it not time that the Government stopped defending the big six energy companies and actually called for a freeze on prices while we reset the energy market?

[Nicky Morgan]

It is very interesting to hear what the hon. Gentleman says, but the first thing he needs to do is explain to his constituents why he voted for the decarbonisation target, which is going to add £125 to energy bills. Secondly, it was the last Labour Government who created the big six. We started off with 20; they left us with the big six. Thirdly, this Government have set out very clearly how they will help households—by reviewing green levies, by encouraging switching, which I am pleased to see the Leader of the Opposition has taken up, and by increasing competition.

[Harriett Baldwin (West Worcestershire) (Con)]

I, too, welcome the Minister to her post. She will know that one of the energy bills that my rural constituents have to struggle with is for petrol. Will she tell us whether the Office for Budget Responsibility has done an assessment of how much families are saving by our avoidance of the 13p fuel hike planned by the Labour party?

[Nicky Morgan]

I thank my hon. Friend for her question. The OBR does an assessment of all taxes and their impact on the economy. The policies that this Government are pursuing in recognition of the pressures on household budgets mean that filling up the average car is costing families £7 less at the moment, and by the end of this Parliament it will cost them £10 less.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Does the Minister accept that the best answer to this question is to freeze energy prices? Surely that is the answer.

[Nicky Morgan]

I thank the hon. Gentleman very much indeed for his question, but the energy price freeze suggested by the Leader of the Opposition is actually an energy price con. It has been made very clear that the prices will go up beforehand and up afterwards, and the Leader of the Opposition has made it clear that if wholesale prices go up, he will have to stop the freeze. That is a price con; it is not sustainable; we are fixing the problem.

[Mike Thornton (Eastleigh) (LD)]

Will the Chancellor of the Exchequer join me in congratulating the Eastleigh Liberal Democrat borough council on the large part it has played in bringing the local unemployment rate down below 1,000?

--- Later in debate ---

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

4. If he will introduce a time-limited exemption from air passenger duty on new long-haul routes from uncongested airports.

[The Economic Secretary to the Treasury (Nicky Morgan)]

The Government are always open to ideas that promote regional growth. The Airports Commission will shortly publish a report on the best use of existing airport capacity in the short to medium term and the Government will take its findings into account in our response.

[Paul Goggins]

I am grateful to the Minister for her answer, and I welcome her to her position. As part of the growing links between the north-west and China, Manchester airport is seeking to develop a new route to Beijing, but one of the major obstacles is the very high level of UK APD. Will she take a careful look at new research by York Aviation, which has concluded that a time-limited exemption from APD on new long-haul routes from regional airports would make the Manchester-Beijing route immediately viable?

[Nicky Morgan]

I thank the right hon. Gentleman for his question. The Government will always take a look at the evidence. In fact, we debated APD in the House only the week before last. In October 2012, Her Majesty’s Revenue and Customs published modelling on price differentials at UK airports, and it showed that even large price changes have a relatively small impact on total passenger demand, but I am sure he will welcome my right hon. Friend the Chancellor of the Exchequer’s announcement of the £800 million investment in Airport City in Manchester, which will create over 16,000 jobs. The involvement of Beijing Construction Engineering Group as a partner in this project is the latest in a line of new partnerships being forged between the UK and China.

[Mr Nigel Evans (Ribble Valley) (Ind)]

Manchester airport is second only to Heathrow in terms of airport capacity, but it is operating at under half capacity, yet Heathrow is full. Boris Johnson talked yesterday to the CBI about getting these new routes out to China and Asia, but instead of forcing people from the north-west to fly down to London in order to fly to China, why cannot we get people to come from London up to Manchester to fly out on all these new routes that we need?

[Nicky Morgan]

I thank the hon. Gentleman for his question. As I said, we will always look at any evidence that people want to send us. We want to encourage new links between the UK and China, and the Mayor of London made some interesting points. The point is that we have to change prices a lot in order to change passenger behaviour, and we would need to look at that further.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Is the Minister aware of the success of Barcelona airport in gaining more than 20 international routes in the past year because of a 100% APD reduction? Does she think that such a reduction would help Scotland to regain the millions of passengers it has lost owing to this Government’s APD costs?

[Nicky Morgan]

The hon. Gentleman will be aware that there is no APD charge from airports in his constituency. As he knows from our recent debate, APD makes an important contribution to the deficit reduction plans; we will always keep it under review, but it is a very important part of this Government’s attempts to rebalance the economy.

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

APD can also have a disproportionate effect on regional airports operating lifeline routes with modest passenger numbers, such as Newquay’s. Will the Minister factor that into the discussions she is having with colleagues on the future of APD?

[Nicky Morgan]

I thank the hon. Gentleman for his question. We will always look at the evidence, and if cares to write to me, we will certainly take that into account.

[Graham Evans (Weaver Vale) (Con)]

5. What estimate he has made of the number of jobs created in the private sector in the last 12 months; and if he will make a statement.

--- Later in debate ---

[Mr Dave Watts (St Helens North) (Lab)]

10. What assessment he has made of the effect of his spending plans on the cost of in-work benefits.

[The Economic Secretary to the Treasury (Nicky Morgan)]

The latest forecasts of benefits and tax credits are available online via the website of the Department for Work and Pensions. They are consistent with the Office for Budget Responsibility forecasts and reflect the Government’s wider policy.

[Mr Watts]

Will the Minister explain why she is allowing companies that are making massive profits to pay poverty wages that need a subsidy from the taxpayer through in-work benefits? Why does she not stop those companies sponging off the taxpayer and adopt a Labour policy of requiring companies that can well afford it to pay a living wage?

[Nicky Morgan]

It seems that even the shadow Chancellor has questions about a living wage policy, saying in 2010 that he was not sure about it. I am surprised that the hon. Gentleman did not talk about the fact that in the north-west and Merseyside 306,000 people have been taken out of paying income tax altogether as a result of this Government’s policies.

[Mr James Clappison (Hertsmere) (Con)]

It was the case, was it not, that under the previous Government work simply did not pay because people who got into work found that a huge proportion of their extra income and, in some cases, all their extra income was clawed back by the complex benefits system? Will my hon. Friends redouble their efforts to make sure that work pays?

[Nicky Morgan]

I thank my hon. Friend for his question. He is absolutely right. This Government believe that work should always pay. By 2010, nine out of 10 working families had been made dependent on the state by the previous Government. This Government believe that families should keep more of their hard-earned money to spend on the things that are important to them.

--- Later in debate ---

[The Economic Secretary to the Treasury (Nicky Morgan)]

This Government recognise the pressure on households, but the fall in living standards is a consequence of the economic crisis left to us by Labour. The only way to raise living standards is to stick to our economic plans and deliver a recovery that works for all. Britain has turned a corner: the economy is growing, the deficit is falling, and jobs are being created. Last year, UK take-home pay was the highest in the G7 and the third highest in the OECD.

[Steve McCabe]

That is a very interesting answer. Why does the Minister think that the 15% cut in wages suffered by British workers over the past five years is more than in any comparable five-year period and the second biggest in the G20?

[Nicky Morgan]

It is interesting to note that the main fall in wages and salaries came in 2007-09, when growth fell from 5.7% to less than 1%. Of course the Government understand that the situation is very difficult, but I am surprised that the hon. Gentleman has not welcomed the fact that the claimant count in his constituency has fallen by 11% under this Government, whereas it went up by 75% under the previous Government.

[Andrew Bridgen (North West Leicestershire) (Con)]

Will my hon. Friend tell the House by how much those on low and middle incomes are going to be better off because of this Government’s decision to raise the personal allowance to £10,000 from April 2014?

[Nicky Morgan]

I thank my hon. Friend for his question. The average taxpayer will be better off by £700 a year as a result of these changes.

[Sir Tony Baldry (Banbury) (Con)]

15. What recent steps he has taken to increase competitiveness in the banking sector.

National Insurance Contributions Bill

Baroness Morgan of Cotes Excerpts

Monday 4th November 2013 Commons Chamber

[The Economic Secretary to the Treasury (Nicky Morgan)]

This has been a wide-ranging debate and I am grateful to have heard all the thoughtful contributions that have been made. It is noticeable that we heard seven contributions from this side, but only one from Opposition Back Benchers—[Interruption.] I welcome the Opposition’s support for the Bill, but as the shadow Minister said, the Bill is wide ranging, and Opposition Members could have talked about businesses, employment and the living wage. They have not taken the opportunity to do so and clearly had nothing to say about the Bill.

Before I respond to the points raised by hon. Members, it is worth reiterating the four key points of the Bill. First, from next April, all businesses, charities and community amateur sports clubs will benefit. They will receive a £2,000 employment allowance every year to set against their employer national insurance contributions liability. This is a measure specifically set out to support jobs. If I run a small firm employing four members of staff on the average private sector wage, I would see my national insurance contributions bill cut by more than a fifth. If I start a brand-new business and want to give up to 10 18 to 20-year-olds their first chance of full-time employment, paying the minimum wage, I would pay no national insurance contributions at all.

We have previously had time-limited allowances targeted at some businesses, but this is a universal allowance that will help all businesses. It is easy to understand and administer and, most importantly, it will make it easier for businesses in all our constituencies to create jobs. I am sure that that is something that all hon. Members want to see.

Secondly, as well as making it easier for employers to take on staff, the Bill will make it harder for companies to avoid taxes. It will give effect to the general anti-abuse rule, or GAAR, for NICs. As such, it is indicative of the Government’s intention to take a robust line in tackling all forms of tax avoidance. Thirdly, it will allow the Treasury to make regulations to bring in a certification scheme for the oil and gas industry when someone other than the deemed employer for national insurance is undertaking those duties on their behalf. This is part of the Government’s wider measure to address schemes involving employers setting up outside the UK and providing workers to the UK in order to avoid paying employment taxes.

Finally, the Bill will make changes to tackle disguised employment and to address the tax issue arising from the UK implementation of the alternative investment fund managers directive, which the Exchequer Secretary described in some detail earlier. The importance of those last three measures should not be underestimated. With the associated tax changes they will contribute towards raising £265 million for the Exchequer in the 2014-15 tax year.

As I have said, we heard some excellent contributions to the debate. I am sorry to say that the Labour contributions did not extend to any great insight into the Labour party policy on support for businesses. First, Opposition Members tried to take credit for this Bill, if hon. Members can imagine such a thing. The shadow Chief Secretary said that we should say sorry. If sorry is the hardest word, we have never heard it from the Labour party, which left us—as my hon. Friend the Member for Macclesfield (David Rutley) said—with the legacy of a huge deficit and enormous debt that we are having to pay off. This Government are having to make the tough choices.

The hon. Member for Birmingham, Ladywood (Shabana Mahmood) was wrong about the Labour party’s national insurance contributions scheme, because it would have applied only to small businesses. Our scheme will apply to all businesses. She also said that administration of the previous scheme cost £12 million. In fact, the estimated administration costs from the start of the national insurance contributions scheme that finished in September were £770,000—nowhere near millions of pounds. There was tight control on its administration.

We will not take a history lesson from the Opposition about the regional national insurance contributions holiday. My hon. Friend the Exchequer Secretary made it clear at the start of the debate that this was a temporary, targeted measure that helped 26,000 businesses and created 90,000 jobs. That is 90,000 people who have employment as a result of that scheme. That is something that we should be proud of, while recognising that there is scope for a new scheme, and that is what the Bill will introduce.

On the GAAR, the Opposition had 13 years to introduce it, but they failed to do so. They can pick holes in the scheme as much as they want, but the point is that this Government have taken the tough decisions. The rule will act as a deterrent to those tempted to engage in abusive avoidance schemes. It will take time to bed in, and we will keep it under review.

In answer to the specific questions asked by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), the GAAR is expected to raise some £235 million over the next five years and it will also protect revenue that would otherwise be lost. We are confident that the GAAR will change the avoidance landscape as its impact starts to be recognised. The hon. Lady also asked about the Bill not being published in draft, but she then said that we had taken a long time to get round to making the Bill happen. She cannot have it both ways, although that is a position the Labour party always likes to be in.

The employment allowance will be introduced from 6 April next year. If we had had time for formal consultation, it would have delayed the implementation date, which is something that none of us wants to see. However, I can tell the hon. Lady that HMRC has held discussions with various stakeholders over the summer on the detailed implementation of the employment allowance, and those discussions have helped to inform the design of the new system.

[Catherine McKinnell]

I thank the Minister for responding to some of the questions that I raised. She seems to be moving away from the subject of the GAAR, but I wonder if she could address the questions relating to the advisory panel and the member who was dismissed from it in disgrace. What will the Government do to ensure that that does not happen again and that the credibility of the GAAR advisory panel, which was dented by those events, is restored?

[Nicky Morgan]

Perhaps I should repeat my comments. This Government should get enormous credit for introducing a GAAR in the first place. The last Government had 13 years to introduce one and failed to do so. The important point about the panel is that it is independent. It was recommended by Graham Aaronson, and its members are independent from the Government. The gentleman in question has resigned. It is an important safeguard in the operation of the system that the panel’s independence is maintained.

I turn now to the excellent contributions from Back Benchers, especially on this side of the House. My hon. Friend the Member for Stourbridge (Margot James) talked about charities benefiting from the Bill. It is very welcome that they will benefit as they employ 800,000 people. She also talked about the huge step of taking on the responsibility for that first employee. She is absolutely right about that and I am sure that all hon. Members will wish the very best to the lady who is opening the new floristry business in my hon. Friend’s constituency.

My hon. Friend the Member for Redcar (Ian Swales) was right to say the Bill offers real help to small businesses, and that taking on the first employee and worrying about how to pay their national insurance puts firms off growing. This is an important measure to support the next step on the employment journey.

The hon. Member for Edinburgh East (Sheila Gilmore) found it strange that we were looking at the Labour party’s national insurance policy. First, her party wants to be the next Government, so it should not be a surprise that we scrutinise its policies. Secondly, we are still having to deal with the legacy of the previous Government. All the tough decisions we take are framed by having to deal with that legacy. I should, however, congratulate her on being the only Labour Back Bencher to speak in the debate. She asked whether the employment allowance would create jobs. The Federation of Small Businesses expects 29% of small businesses to use it to boost staff wages, 28% to use it to employ additional staff and 24% to use it to invest in resources—it is welcomed by business organisations. It is estimated that 90% of businesses that employ people will take up the employment allowance. I am sure the hon. Lady will welcome businesses in her constituency taking up the employment allowance.

My hon. Friend the Member for Bedford (Richard Fuller) asked whether tax credits had been factored into the system. We do not believe that tax credits have been factored into this calculation, but the Office for Budget Responsibility considers the net impact of all Government policies on the economy. This policy has been subject to that scrutiny and I am sure we can discuss any further questions he has. He made a thoughtful contribution on the price of labour and the affordability of the living wage. I am sure that that is something we want to consider further. He is right to say that the employment allowance is a small but important start along the road of getting more people into employment. He was right about the encouragement of welfare dependency by the previous Government. By 2010, nine out of 10 families with children were reliant on the state. We want to make work pay. For example, our policy of raising the income tax threshold is all about ensuring that work pays and that people keep more of their earnings so they can spend them in a way that is right for them and their families.

[Sheila Gilmore]

Will the Minister reflect on the fact that many households are worse off as a result of the Government’s policies on tax and tax credits? Many families are not seeing any benefit—quite the reverse.

[Nicky Morgan]

Of course the Government recognise that living standards are under pressure and that household budgets are being squeezed, but it is interesting that the Labour party’s calculations on household income and wages and earnings never factor in tax cuts. We are factoring in tax cuts and ensuring that people keep more of their own money.

My hon. Friend the Member for Gosport (Caroline Dinenage) made a characteristically excellent speech. She talked about the support the Bill will give by extending the employment allowance to small businesses and charities, and mentioned that she had been a small business owner herself. It is noticeable that many Government Members have run their own businesses. She rightly said that we want to make Britain business-friendly.

My hon. Friend the Member for Skipton and Ripon (Julian Smith), who also ran his own business before entering this House, did a sterling job in delivering his speech despite having lost a contact lens—none of us noticed. He made an important point about communicating with small businesses via Her Majesty’s Revenue and Customs, something I am sure Ministers will bear in mind. He also talked about making the employment allowance simple to administer. As my hon. Friend the Exchequer Secretary said in his opening remarks, the employment allowance will be delivered through employers’ standard payroll software and HMRC’s real-time information system. There will be no need for a separate application form or an annual return to report deductions. There will, I hope, be no extra forms, which is good news for small businesses.

[Ian Swales]

I warmly welcome that simplicity. Does the Minister regret, as I do, the previous Government’s practice of announcing measures that were so complicated that they then asked the Treasury to calculate the savings that would accrue from non-take-up?

[Nicky Morgan]

My hon. Friend’s intervention says it all. Government Members have run small businesses and know that we need to keep paperwork, in all its forms, as simple as possible. People who run businesses do not want to spend their evenings and weekends filling in forms. They want to spend that time growing their businesses and taking on their next employee.

[Catherine McKinnell]

The Minister is making a powerful argument, but it leads to the question: why did the Government introduce a national insurance holiday scheme in 2011 that was so complicated they could reach only 6% of the businesses it was targeted at?

[Nicky Morgan]

We heard earlier on that that was a time for a temporary target. We were dealing with the deficit and coping with the legacy left to us by the previous Government. We now have the opportunity to introduce a wider employment allowance. The hon. Lady should not try to teach us lessons about schemes, given the complexity of their scheme, which thankfully, they did not have the opportunity to introduce. How can the fact that 26,000 businesses have benefited and 90,000 jobs have been created be a failure?

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend find it as amazing as I do that Opposition Members can only snipe at schemes that are clearly designed to appeal to existing small businesses and will incentivise the starting up of new small businesses, which is what our economy desperately needs?

[Nicky Morgan]

My hon. Friend is right: that is exactly what our economy needs. I have been at the Dispatch Box only a few times, but, sadly, I am not surprised to see the Opposition sniping. That is exactly what we expect. The parties on the Government Benches are about action and putting in place measures to help businesses to take on their next employee.

My hon. Friend the Member for Macclesfield talked about a culture of entrepreneurialism. I am glad that he had a slightly larger audience than the one he had on Friday, but his remarks have been heard and noted—he should have no fear on that score.

My hon. Friend the Member for Folkestone and Hythe (Damian Collins) made a thoughtful contribution, in which he spoke of the Government having put in place a package of measures to support businesses. He mentioned the regional growth fund, which is making a difference in our constituencies to businesses large and small, and the investment culture. Hon. Members rightly paid tribute to his work to support start-up businesses through all manner of schemes.

I am grateful to have had the opportunity to respond to most of the issues raised. The Bill will help to continue to support a stronger economy in the United Kingdom. It will make avoiding tax harder and make creating jobs easier. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

NATIONAL INSURANCE CONTRIBUTIONS BILL (PROGRAMME)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the National Insurance Contributions Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 28 November 2013.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Anne Milton.)

Question agreed to.

NATIONAL INSURANCE CONTRIBUTIONS BILL (WAYS AND MEANS)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the National Insurance Contributions Bill, it is expedient to authorise—

(1) provision for, and in connection with, the application of the general anti-abuse rule in relation to national insurance contributions;

(2) the payment into the Consolidated Fund of any increase attributable to the Act in the sums payable into that Fund under any other Act.—(Anne Milton.)

Question agreed to.

Air Passenger Duty

Baroness Morgan of Cotes Excerpts

Wednesday 23rd October 2013 Commons Chamber

[The Economic Secretary to the Treasury (Nicky Morgan)]

Madam Deputy Speaker, it is a real pleasure to speak in this debate, particularly given that you are in the Chair. It does not seem that long ago that we were meeting on the Terrace and you were giving me advice on how to become a Member of Parliament—and now look at where we both are.

It is a pleasure to respond to the hon. Member for East Antrim (Sammy Wilson). I thank him for raising the issues, which relate to the two greatest challenges facing the Government and Britain today—rebuilding the British economy and restoring the public finances. The House well knows the state of both challenges when the Government came into office. The economy was still reeling from the impact of the recent banking crisis and Britain had the largest fiscal deficit in our peacetime history.

The hon. Gentleman started talking about zealousness, particularly in respect of green taxes. I thought he was going to talk about zealousness in tackling the fiscal deficit, although I am not sure that I heard that from him. The Government have had to face up to those challenges and take tough choices. My right hon. Friend the Chancellor committed to tackling our budget deficit and getting our national debt under control. Fixing the public finances is vital to maintain confidence in Britain and the stability that is an essential condition of growth, as the hon. Gentleman mentioned, and recovery.

In recent months, the statistics on gross domestic product, employment, business investment and consumer confidence have all shown that our efforts are beginning to bear fruit. The process of recovery is, of course, far from complete, but, building on the stable foundations that the Government put in place, the economy is now healing. I am sure that the whole House welcomes the signs of recovery so far and looks forward to seeing them continue.

In particular, I am sure that the hon. Gentleman will join me in welcoming the recent good economic news from Northern Ireland. This year, Northern Ireland’s exports have risen by 4% in the second quarter of the year and in September they rose at the fastest rate in nearly six years. September also saw the third consecutive month of growth in Northern Ireland’s GDP, with activity rising in the manufacturing, retail and services sectors. It also saw the third consecutive month of rising private sector employment, while total jobs have grown by more than 5,000 over the course of the year. That has kept unemployment in Northern Ireland well below the UK average and the fourth lowest of the 12 UK regions. Just as Northern Ireland makes a key contribution to the UK economy overall, growth and recovery in Northern Ireland are making a key contribution to the UK’s wider recovery.

Supporting strong transport links is a key part of building our economic recovery. The Government are therefore bringing forward record investment in transport infrastructure, which the hon. Gentleman mentioned, to ensure the connectivity of all parts of the United Kingdom, including Northern Ireland. That is why in this year’s spending review we announced a £20 million fund to improve air connectivity between London and the rest of the United Kingdom. Where the case is made for a public service obligation, the Government will use this fund to support regional air links. Northern Ireland will be able to bid for that support. This would build on existing support for the Northern Irish economy—for example, the additional £94 million of capital spending power for the Northern Ireland Executive announced in this year’s Budget and the action plan set out in the Northern Ireland economic pact published this June.

Ensuring sound public finances is indispensable to economic recovery. With forecast revenues of £2.9 billion in 2013-14, air passenger duty—APD—makes an essential contribution to the Government’s strategy for tackling the current budget deficit and getting debt under control.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I welcome the Minister to her post on the Treasury Front Bench. She will be aware that this time last year the Silk commission in Wales argued strongly that minor taxes such as airport duty should be devolved to the National Assembly and the Welsh Government with more or less immediate effect, to be implemented in the most recent Finance Bill. We are still waiting for the UK Government to respond to the first part of the Silk commission’s report. Is she able to enlighten us on when we are likely to have that response?

[Nicky Morgan]

I am afraid that I cannot give the hon. Gentleman a specific date. All I can say is that Ministers are continuing to evaluate all this and ask for his patience for a little longer. I do appreciate that this matter is part of those discussions.

Despite these challenges, the Government have frozen APD in real terms since 2010, and since then APD rates have risen by only £1 for the vast majority of flights. Given the fiscal challenges we face, no responsible Government would simply relinquish nearly £3 billion of revenue.

[Ms Abbott]

The whole House understands the fiscal challenges, but given the particular problems that APD zoning is causing in the Caribbean, why are Treasury Ministers not prepared even to consider a change in the arrangements that would maintain their total tax take, as I appreciate they want to do, but be fairer to millions of people in the Caribbean and millions of people who live here, who are British voters, and who are having to pay this tax to go backwards and forwards?

[Nicky Morgan]

First, I am not sure that all hon. Members do understand the fiscal challenges facing the Government, but I will assume that the hon. Lady does, very much so. I listened carefully to what she said about the Caribbean. I know that Ministers, including my predecessor, have engaged with representatives. I could be wrong, although I do not think the hon. Lady will be surprised if I said that I know more about air passenger duty today than I did this time last week, but I think that zoning for the Caribbean was introduced by the previous Government. All Ministers keep all taxes under review. However, I heard what she said, and we will listen to the representations that are made.

[Mr MacNeil]

I, too, welcome the hon. Lady to her new position. What are these fiscal challenges that the Westminster Government face? The hon. Member for East Antrim (Sammy Wilson), as Finance Minister in Northern Ireland, has to balance his books. The UK has not paid its way since 2001; in fact, in the past year it has borrowed £120 billion. There is a good argument that says that changing the management of APD will increase GDP and tax revenues. With that body of evidence behind it, is it not worth listening to the wise words on APD rather than ploughing on regardless?

[Nicky Morgan]

I thank the hon. Gentleman for his comments. I think that the fiscal challenges are very apparent. We still have a large debt and a deficit run up under the previous Government which this Government have said we need to tackle. Later in my speech I will talk about the PricewaterhouseCoopers report, the impact on GDP, and the assumptions that are made.

[Mr Andy Slaughter (Hammersmith) (Lab)]

I welcome the Minister to her post. She is at least the sixth Minister whom my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) and I have approached on this subject and I think she may have slightly misunderstood the point made by my hon. Friend, which is that it is possible to be fiscally neutral while also being fairer. Will she go away and consider issues related to the Caribbean in particular, although this does affect other countries as well? Before the last election, the then shadow Treasury Ministers were very eloquent in advocating per-plane taxes and readjusting banding so that many of my Caribbean constituents, as well as those of many of the other Members present, would not be disadvantaged. Will the Minister at least give an undertaking to look at the issue with a fresh pair of eyes?

[Nicky Morgan]

I assure the hon. Gentleman that I am keeping a very fresh pair of eyes on all areas of my Treasury brief. I look forward to meeting him and the hon. Member for Hackney North and Stoke Newington (Ms Abbott) to discuss the issue further. We will certainly keep it under review.

As I have said, we must continue to work hard to reduce the deficit, so if we were to abolish APD, an alternative source for the revenue would need to be found. We never seem to hear any suggestions, but if we hear any today my hon. Friend the Exchequer Secretary will respond to them in his winding-up speech.

Some have argued that, in the case of APD, no such off-setting measures would be necessary and that abolishing the tax would pay for itself by increasing economic activity overall and thus receipts from other taxes. The motion cites the report by PricewaterhouseCoopers arguing exactly that. I will turn to the report shortly, but first let me address the general question of the impact of the tax system on the UK economy and the UK’s international competitiveness.

[Ian Paisley (North Antrim) (DUP)]

I welcome the Minister to her place and congratulate her on her new post.

May I suggest that one way in which the Government could make money out of this and increase productivity would be to incentivise the 50,000 Australians who visit Northern Ireland every year to fly through Heathrow and use that as their hub, instead of flying to Dublin before travelling up to Northern Ireland and then leaving via Dublin and spending their money there?

[Nicky Morgan]

I welcome the hon. Gentleman’s suggestion and I will certainly think about it. My earlier remarks hinted at the existence of the Airports Commission, which will look at all the UK’s airports, the role they play for travellers and how we deal with those who come here by whichever means.

[Mr Lammy]

On the Minister’s broader point, it is incredibly interesting to hear a Conservative arguing at the Dispatch Box that the highest taxation of this sort in the world is necessary. Is that consistent with the hon. Lady’s position in Loughborough?

[Nicky Morgan]

I thank the right hon. Gentleman for his remarks. As a Conservative, I believe in the lowest tax possible, but I also believe in running the economy as responsibly as possible, meaning that what we get in, we spend out. That was put out of kilter by the legacy of the previous Government. We have been very clear about the reason for APD and the role it plays. We cannot choose to ignore £3 billion when we have to deal with the deficit and legacy left to us by the previous Government, of which the right hon. Gentleman was at times a member.

[Mr MacNeil]

On balancing the books and spending what we raise, if that were the case the UK would raise income tax by 8p to 10p in the pound, such is the size of the UK deficit in a country that has not paid its own way since 2001.

[Nicky Morgan]

This Government are making progress in making sure that we do pay our way. We also believe that people should keep as much as possible of the income they earn. I will come on to talk about household income and the impact APD has on it, but for now I want to address UK competitiveness.

When comparing different countries’ tax regimes, it is important to view the system as a whole. Comparisons between individual elements can be misleading, especially if companies’ decisions about where to invest are driven by the impact of the system as a whole, not its individual parts. As my right hon. Friend the Chancellor has made clear many times, the Government are committed to ensuring that the UK has the most competitive tax system of all advanced economies. We want to have a tax regime that supports the attractiveness of all parts of the UK as places to invest in and that ensures that the whole of the UK is open for business.

[Graham Stringer]

I welcome the hon. Lady to her position. What she is saying about inward investment may or may not be true. As the hon. Member for East Antrim (Sammy Wilson) said, if we reduced this tax, the Revenue would not lose any income. However, what she is saying cannot possibly apply to tourism. Tourists from all over the world are flying to Charles de Gaulle and Schiphol rather than to Heathrow because of air passenger duty, and certain routes are not coming to regional airports in this country because of air passenger duty. Routes such as Bangkok, Hong Kong, Delhi, Mumbai and Beijing could be coming into Manchester if we did not have air passenger duty.

[Nicky Morgan]

I return to my original point, which is that if we were to abolish air passenger duty, as is called for in the motion, it would have to be replaced by something else to meet the Government’s commitment to put the nation’s finances on a sound footing and reduce the deficit. Although the hon. Gentleman makes an interesting point, I have not heard from him—indeed, I have heard from only one hon. Member—a suggestion as to how that revenue could be replaced.

I will come on to talk about investment and the PWC report. The hon. Member for East Antrim will not be surprised to hear that the Government have some questions about the assumptions that are made in that report.

[Nigel Mills]

I welcome my hon. Friend to her new post. I accept that the Government cannot fully abolish air passenger duty, but will she consider a short holiday for new long-haul routes, especially at regional airports? For example, if there was a new route from East Midlands airport to India, it could be spared APD for the first three to five years to give it a chance to bed in and to become viable. That would have no immediate cost to the Exchequer, but it may well help to generate the growth that we need.

[Nicky Morgan]

I thank my hon. Friend for that suggestion. Like him, I know East Midlands airport very well as an east midlands Member of Parliament. The difficulty with regional holidays or variations is that they must be quite substantial to change passenger behaviour. That takes us back to my original point that the £3 billion that is raised by APD is a significant contribution to the Exchequer when we are tackling the deficit.

[Mr Nigel Evans]

I congratulate my hon. Friend on her new position. She said that the changes would have to be significant to alter passenger behaviour. Is not the fact that we have the most expensive APD in the world changing passenger behaviour, because people are taking short-haul flights to Schiphol, Charles de Gaulle, Dublin or even Belfast in order to take longer-haul flights, saving several hundreds of pounds for their families?

[Nicky Morgan]

I thank my hon. Friend for his remarks. The previous question was about regional variations within the United Kingdom. That is why I was talking about changing behaviour. As I said, this all goes back to my original point that air passenger duty raises £3 billion a year, which is a sum that cannot be ignored if we want to do what this Government were elected to do, which is to repair the nation’s finances. Obviously, my interest in this area is growing as every second of this debate passes.

[Graham Stringer]

The hon. Lady is being very generous with her time. I appreciate her difficulties because, as she says, she is a new pair of eyes on these issues. Will she meet an all-party delegation on behalf of regional airports to discuss these matters in more detail away from the heat of the Chamber?

[Nicky Morgan]

I am always happy to meet hon. Members to discuss these matters. That sounds like an interesting idea. It might help me to learn more about these issues, as I am doing in this debate.

In order to make our tax system more competitive, we plan to reduce the rate of corporation tax to 20% from April 2015. At that point, the UK will have the joint lowest corporation tax rate in the G20 and by far the lowest rate in the G7. Increased rate relief on research and development, combined with the patent box, will make the UK one of the most attractive places to innovate. As a result, the latest KPMG annual survey of tax competitiveness rated the UK as the No. 1 most competitive tax regime internationally.

As well as supporting UK competitiveness, within the constraints of the need to repair the public finances, the Government are also supporting households to meet the cost of living. By April 2014 the Government will have increased the personal allowance to £10,000, which will take 2.7 million people out of income tax altogether. In Northern Ireland, since 2010 the rising personal allowance has already taken 75,000 people out of tax. In recognition of the impact of persistently high pump prices, the fuel duty increase that was planned for 1 September this year was cancelled, and the Chancellor has also announced his intention to cancel the September 2014 duty increase.

On aviation taxes, the House will recognise that the UK is one of only four EU countries that does not charge VAT on domestic flights. That stands in contrast to rates of VAT on those flights of 19% in Germany and 20% in the Netherlands. There is also no duty charged on the fuel used in international, and virtually all domestic, flights. Finally, as I have already said, despite the fiscal challenges, the Government have ensured that APD rates have been frozen in real terms since 2010, rising by just £1 for the vast majority of passengers since then. The Government therefore reject the suggestion that we have pushed taxes on aviation too high.

Let me turn to the report on APD published earlier this year by PricewaterhouseCoopers and to which today’s motion refers. The report claims that abolishing APD would give such a boost to the wider economy that it would make other tax receipts increase by enough to offset the loss of APD revenue—the £3 billion I referred to a moment ago. The report’s conclusions, however, are based on economic models that rely on a series of significant assumptions. In particular, the report makes a series of assumptions about the behavioural impact of scrapping APD—how much business air travel would increase by—and the resulting increase in overall UK productivity.

The Government have reviewed the report, its modelling and the underlying assumptions carefully. We do not agree with the assumptions needed to justify the claim that abolishing APD would be revenue neutral overall, and, in our view, abolishing APD would have a significantly smaller impact on UK economic activity than PWC has estimated. There would therefore be a smaller increase in other taxes than PWC predicted, with overall tax revenues falling as a result. We also note that under some of the less optimistic assumptions that PWC considered in its report, its models predicted a net loss of revenue in the longer term. As I have said, any revenue loss would either need to be made good by increased revenues from other sources, or would need to be compensated for by further reductions in public spending.

The Government dispute the claim by PWC that APD is a regressive tax—I am sorry that the right hon. Member for Tottenham (Mr Lammy) is no longer in his place, as this goes to the heart of what he was talking about. PWC compared APD rates with average weekly household expenditure of different income groups, but its analysis took no account of the fact that not all households pay APD at all. A better measure of fairness would be to compare what households spend on APD, relative to their incomes. Using that measure, statistics from the Office for National Statistics show that lower-income households spend a lower proportion of their disposable income on APD than higher income households.

[Sammy Wilson]

I am amazed at the way the Minister is trying to deal with this issue. Surely we only measure the impact of a tax on someone who consumes a service. The PWC report looked at various income groups and found that the tax fell far more heavily on those with lowest income levels—that is 45% of travellers— compared with those with the highest levels. We are already comparing travellers. Indeed, the tax represented 28% of their average weekly income. If that is not regressive, I do not know what is.

[Nicky Morgan]

ONS statistics show that lower-income households spend a lower proportion of their disposable income on APD than higher-income households. We are looking at what people actually spend.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

How would the Minister explain that to my Caribbean constituents, many of whom come from Jamaica or other Caribbean islands and have lived here for 40 or 50 years on low incomes? They now find themselves being excessively taxed in order to stay in contact with their family and friends in their home countries.

[Nicky Morgan]

I do not know whether the hon. Lady has just arrived in this debate, but we have already discussed Caribbean issues [Interruption.] Well, I think I have dealt with that issue. [Interruption.] I am sorry—I had not appreciated that the hon. Lady was present, but there were questions on this matter from the hon. Member for Hackney North and Stoke Newington and the right hon. Member for Tottenham, and I have addressed the issue of the Caribbean. ONS statistics show that lower-income households spend a lower proportion of their disposable income on APD than higher-income households. In relation to the Caribbean, APD must adhere to international rules on aviation tax, specifically the Chicago convention. The capital city convention on APD ensures that our APD complies with those rules.

The hon. Member for East Antrim spoke of the impact of APD on Northern Ireland in the context of recently announced changes to the rate of air travel tax in the Republic of Ireland. I thank him for saying that this is a listening Government and for his recognition of the moves we have made in that regard. We recognise the position of Northern Ireland as the only part of the UK that shares a land border with another EU member state with a different rate of aviation tax, which is why we have devolved to the Northern Ireland Assembly the power to set APD rates for direct long-haul flights. The Government and the Northern Ireland Executive recognise that decisions on further fiscal devolution of any taxes require careful consideration. We expect recommendations on further devolution to be put to the Government and Northern Ireland Executive by autumn 2014.

The debate highlights some of the most important issues facing Britain today, including repairing the public finances and bringing debt under control, thus ensuring the stability on which economic recovery depends. APD makes a vital contribution to the Government’s fiscal strategy—it would be irresponsible of us to abandon it—and forms part of the wider tax system that we are making into one of the most competitive in the world. I thank the hon. Gentleman for giving us the opportunity to debate those important issues, but I cannot agree with his proposal that the tax should be abolished.

[Several hon. Members]

rose—

Balance of Competences (Review)

Baroness Morgan of Cotes Excerpts

Monday 21st October 2013 Written Statements

[The Economic Secretary to the Treasury (Nicky Morgan)]

HM Treasury has today published two calls for evidence as part of the Government’s review of the balance of competences, which is looking at what the EU does and how it affects the UK.

The first call for evidence looks at the balance of competence between the EU and the UK on the EU budget. The second looks at the balance of competence between the EU and the UK on financial services and the free movement of capital.

Both documents explain the historical development and legal background to the EU’s competence and ask a number of questions about how the EU’s competence works in practice.

HM Treasury is seeking evidence from a range of stakeholders who have an interest or experience in these areas, including individuals, groups, Parliament and its Committees, think-tanks, businesses and institutions.

The public call for evidence for both reports will run from 21 October 2013 until 17 January 2014. The final reports on the current balance of competence and what this means for the national interest will be published by the summer of 2014.

Copies of the documents have been deposited in the Libraries of both Houses and are available on the gov.uk website at: www.gov.uk/government/consultations /balance-of-competences-review-eu-budget

and

www.gov.uk/government/consultations/balance-of-competences-review-single-market-financial-services-and-the-free-movement-of-capital.

Interest Rate Swap Products

Baroness Morgan of Cotes Excerpts

Thursday 21st June 2012 Commons Chamber

[Guto Bebb]

I am aware that the FSA has promised to provide a progress report, and I sincerely hope that that will be with us before the end of July, if not sooner. My concern is that businesses are being put into administration as we speak—we have seen examples of that this week alone—and in the current economic climate we should not accept the loss of any businesses or jobs as a result of mis-selling.

[Nicky Morgan (Loughborough) (Con)]

Do we not also need to get on with it because lots of claims are time-limited? Some of my constituents have only until October this year to launch a claim, and they need to know the position of the FSA and the Financial Ombudsman Service so that they can decide whether to have recourse to the law.

[Guto Bebb]

That is an important point. As many of these products were sold from 2006 onwards, many affected businesses are now watching the clock run down on their opportunity to take action. That crucial point should resonate within the Chamber and outside.

In addition to the two duties I have mentioned, advisers must also take reasonable steps to show that the client understands the product and the risks involved. The bank must also take steps to ensure that the product is suitable. Mr Jones was sold a product by RBS. I wrote to RBS on his behalf, and was shocked that, in one transaction, I could highlight seven breaches of conduct of business sourcebook regulations. I cannot take the time to go through all seven examples, but I shall give a few. For one, RBS never sought to quantify the termination costs for the swap, which is a pretty severe piece of negligence, in my view. Neither did it take reasonable steps to ensure that it was in possession of sufficient personal financial information about Mr and Mrs Jones, which is also a big issue. It did not take reasonable steps to ensure that they understood the nature of the risks involved or provide a suitability letter. These are breaches of COBS rules and should be taken very seriously. To break seven such rules in one case raises the question: what were the banks doing?

I can highlight a number of general mis-selling examples. In some cases, businesses have been provided with a product not suitable for them and products have been described as similar to fixed rate mortgages, as I have already mentioned. There are also numerous examples of no opinion analysis being provided, meaning that a business was offered one product alone. I challenge the banks to state that that was not because of commission issues.

Oral Answers to Questions

Baroness Morgan of Cotes Excerpts

Tuesday 24th January 2012 Commons Chamber

[Mr Hoban]

Let me just tell the hon. Gentleman what Moody’s said in December last year:

“The currently stable outlook on the government’s Aaa rating depends in part on the assumption that the government will stay on track with its fiscal consolidation programme.”

We will stay on track. The Opposition, with their policies on debt and borrowing, would throw this country off course, leading to higher interest rates that would hit families and businesses. We will stick to our course.

[Nicky Morgan (Loughborough) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chief Secretary to the Treasury (Danny Alexander)]

The core purpose of the Treasury is to ensure the stability of the economy, promote growth and employment, reform banking, and manage the public finances so that Britain lives within her means. I am pleased to tell the House that the Chancellor has decided to reappoint David Miles as external member of the Monetary Policy Committee of the Bank of England. This morning, the Chancellor wrote to the Chair of the Treasury Committee to make the Committee aware of the reappointment, and it will decide whether to hold reconfirmation hearings. Mr Miles’s knowledge of the UK economy and his background in the financial sector will be invaluable to the Monetary Policy Committee through this challenging period.

[Nicky Morgan]

The Government’s plans to index-link public sector pensions to the consumer prices index rather than the retail prices index have been the subject of much debate in the House. Has the Treasury received any representations or support for that approach from private sector organisations that are planning to make changes to their pensions?

[Danny Alexander]

It is a very good question. We made that change, which has had an effect on public service pensions, for good reasons. The change has been made in many private sector organisations—most recently, I read, in the Labour party’s pension scheme. The Opposition’s attacks on the move being ideologically driven are belied by the decisions they have had to make because of the deficit their party is running.

Banking Commission Report

Baroness Morgan of Cotes Excerpts

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

There will be clear definitions in the legislation. To be fair, what John Vickers recommended, and what we are proposing, is relatively straightforward. There are certain things that will have to be in the ring fence, such as the deposits of individuals and the overdrafts of small businesses. There are also certain things that cannot be in it, such as classic investment banking activities. There will then be a middle ground, which will essentially involve corporate lending, and that can either be in the ring fence or not. John Vickers thought that it would be wrong to prescribe that, because different banks have different models, so he has left the location of the ring fence flexible. However, the height of the fence will be high, and we are going to introduce it into legislation.

[Nicky Morgan (Loughborough) (Con)]

I welcome the emphasis in the Chancellor’s statement on more choice and competition, which will benefit businesses in my constituency and elsewhere. They often tell me that this is not just about bank lending, and that it is also about poor customer service and unexpected charges being imposed. Will my right hon. Friend confirm that this is just the start of a process, and that there will be continuous monitoring of the way in which banks treat their customers from now on?

[Mr Osborne]

There will be, and part of the new regime will involve a specific authority looking at competition and customer service. In that way, we shall avoid having one institution—namely, the FSA—trying to do both functions of a regulator, which are to look at the point-of-sale service that someone gets to ensure that they are being sold a product correctly, as well as ensuring that the bank itself is being properly managed and is not about to collapse. Separating those functions will be an essential part of our reforms.

Autumn Statement

Baroness Morgan of Cotes Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

Perhaps I can explain to the hon. Gentleman that taxes come from people working in the public and private sectors. Money spent on infrastructure is well spent. For every £1 spent on infrastructure we have made savings in current spending, so we are not adding to borrowing in order to fund it. It will help to create jobs and support the economy.

[Nicky Morgan (Loughborough) (Con)]

Did my right hon. Friend hear Opposition Members laughing when he initially mentioned help with the cost of living? Does he agree that that is backed up by the shadow Chancellor’s refusal to recognise that low interest rates have kept many families in their homes over the past couple of years, including the very women and children that he says he cares about?

[Mr Osborne]

My hon. Friend is right. Low interest rates are helping to keep people in their homes, mortgage payments down and businesses going. If hon. Members want to know what the alternative would be, they should look across the Channel to European countries in the middle of the debt storm, with interest rates going up. We can see that is a path that we must avoid, but we will only do so if we do not follow the policies advocated by that lot opposite.

Arch Cru Compensation Scheme

Baroness Morgan of Cotes Excerpts

Wednesday 19th October 2011 Westminster Hall

[Guy Opperman]

I accept that they have a role to a degree. The hon. Gentleman is being a little naive, because the provision of certain services by a perfectly reputable part of the company is satisfactory, and he is far too intelligent not to know that. However, we must deal with individual mismanagement by parts of the company, which happened in years gone by, and the hon. Gentleman knows that companies have obligations in relation to such matters. The matter can be pursued either as a civil obligation in the High Court or by way of criminal compensation arising out of a prosecution. Alternatively, it can be dealt with under section 14 of the Financial Services Act 2010. However, it is over-simplistic to say that just because the Government provide contracts to an organisation that is performing perfectly satisfactorily in some respects, they cannot be involved in seeking other compensation.

This debate is an opportunity for the Government to give a lead on what they will do, and they need to answer some questions. I want to discuss examples involving a couple of my constituents. The point has been fairly made that the losses have been suffered by people who are not wealthy. We are not standing up for toffs and fat cats, but for people who have lost £1,000, £2,000, £5,000, £10,000 or £15,000— people who have lost their life savings, and who were encouraged to put their money in.

[Nicky Morgan (Loughborough) (Con)]

My hon. Friend is making a powerful argument, building on some other powerful speeches. He is right about the people involved, and the same is true of my constituents, who are not wealthy but who were doing the right thing. Our party and all other parties have asked people to make provision for their pension and retirement. Those people were doing the responsible thing, and they had their fingers badly burned. Confidence has been mentioned, and the Government must address that.

[Guy Opperman]

I totally endorse that point, and that is where the Government definitely have a role. They can use the inadequacies of the present case to highlight their intention to come down hard on those who mismanage investments as in this instance, to give investors confidence in other investments in the future. Sadly, that should have been done previously, and such scams and difficulties have been bubbling over for the past 20 years.

My constituent, Mr Ian Robinson, transferred his entire pension pot of £90,000 into Arch Cru on the advice of an independent financial adviser. He thought it was a sensible policy. In 2009, his funds were revalued down to about £55,000; they were then frozen; and the remaining capital was eroded over the next two years. He will be lucky to get 40% back under the compensation package. Another constituent, who wants to remain nameless, worked all his life and built up a business. He sold it and thought that he and his wife had a successful pension pot of several hundred thousand pounds. They put all of it—savings and pension—into Arch Cru. After the devastating effects of what happened, he and his wife have been living off a state pension and with the current offer of recompense they will be forced to downsize to enable them to live from any capital that is released. They will have lost hundreds of thousands of pounds, which they thought was securely invested to provide a gentle but secure return, and they will be lucky to be able to leave anything to their dependants. If my constituent agrees to the package at this stage, he will have less than half the compensation needed to put him and his wife back in the position they were in prior to their investment. In the current climate, we should support such hard-working people.

Much could be said about the dilatoriness of the process, because, as other hon. Members have mentioned, nothing has really happened since suspension in March 2009. I shall briefly discuss Capita. Others have spoken eloquently and forcefully about its inadequacy in its role. One constituent told me:

“This is not just a case of an investment that has underperformed due to the Global Financial Crisis but one where there are serious misgivings in relation to the management and governance of the funds”.

That is certainly how I see the matter—it is potentially a criminal investigation. Capita was paid as trustees to oversee the management of the funds, which we all agree it simply did not do. Therefore why is Capita not fully accountable for the extent of the losses of the people whose money it was managing? Clearly it is vicariously liable and has an obligation.

Hugh Aldous has prepared a report on Capita, and I recommend that anyone who has not taken on board the full level of ineptitude should read it. It is clear from the report, in which Hugh Aldous makes multiple observations, that the net asset values of several of the cells that were invested in were overstated at least from 2007 onwards. He reported that the condition of the physical assets was far worse than

“we reasonably expected and, in some cases, frankly appalling.”

It seems inexplicable that small investors should suffer so severely with an inadequate package.

Several hon. Members have spoken about the compensation package, and the Minister must address two points. Why on earth has a closed offer been made, when it is also time-limited? That is wrong. The Minister must assist hon. Members by giving the reason for that and telling us whether the Government will do anything about it. Everything would change if the Minister were to say that it is an interim offer. If it were an interim offer, so that the victims of the scam could receive the £54 million paid down in the usual way, with the right to continue to take civil action if they wanted to pursue matters further, I would say, “So be it.” However, to tell them that it is a time-limited £54 million offer and they can take it or leave it is wrong.

The FSA has supposedly been making great efforts to ensure that companies can meet their commitments when they fall down. There are regulations to protect consumers. The FSA is a publicly funded body. It exists to protect investors, and it has not done so in this case. It should surely have launched a proper investigation. My hon. Friend the Member for Vale of Glamorgan has called for a proper investigation, and I repeat that call. The FSA seems reluctant to admit that Capita has failed in its duty as an authorised corporate director.