Royal Bank of Scotland

Baroness Ritchie of Downpatrick Excerpts

Thursday 13th June 2013 Commons Chamber

[Sajid Javid]

The Government decided that a statement should be made today because the issue is important to the population at large. Given the Government’s stake of over 80% in RBS, and given that the last Government pumped in £45 billion, I think it important for the Government to set out their strategy on RBS.

[Ms Margaret Ritchie (South Down) (SDLP)]

This time last year, RBS was subject to a major technical problem. As a result, one of its constituent parts, Ulster bank in Northern Ireland, lost some customers, and many customers did not benefit from full transparency. Only recently, I was told by the Financial Conduct Authority that it could not obtain answers. Will privatisation be the next stage in the rescue package?

[Sajid Javid]

The hon. Lady has made a good point overall about the importance of RBS’s operations in Northern Ireland and also in the Republic, which involve lending to both small businesses and consumers. RBS takes those operations seriously, and I know that it has been thinking carefully about how it can improve them further.

The Economy

Baroness Ritchie of Downpatrick Excerpts

Tuesday 11th December 2012 Commons Chamber

[Ms Margaret Ritchie (South Down) (SDLP)]

I begin by congratulating my hon. Friends the Members for Rotherham (Sarah Champion), for Croydon North (Steve Reed) and for Middlesbrough (Andy McDonald) on making their maiden speeches today.

I commend the Treasury for coming to its senses and cancelling the proposed increase in fuel duty. It seems there is at least some acknowledgement of the need to encourage growth in the economy rather than cut a path to perpetual stagnation. The move will put money back in people’s pockets, encourage local businesses and hopefully spur growth in the local economy, particularly in rural areas. Social Democratic and Labour party Members called for that measure, like many of our colleagues from other parties who take their seats in the House of Commons.

However, that was a brief moment of hope in an otherwise dismal autumn statement. Statistics show that this is the slowest recovery from a financial crisis in history. The OBR downgraded growth to minus 0.1%. Since the statement, the City of London has cast doubt on the Chancellor’s assertions that the economy will return to growth next year, stating that falling revenues from North sea oil and poor manufacturing figures could push the UK into an unprecedented triple-dip recession.

In the light of that, the only commitment the Chancellor will have no problem meeting is his promise to extend austerity until 2017-18. The only reason the borrowing figures look slightly healthier than expected is the sleight-of-hand, last-minute inclusion of the 4G spectrum auction windfall. On that topic, will the Chancellor or the appropriate Minister confirm, as I was told in response to a written question recently, why Northern Ireland will not receive Barnett consequential funding as a result of that sale?

Against such a backdrop, it is hard to see how anyone could argue that the Chancellor’s economic strategy is bringing the economy back to a position of strength. Quite simply, austerity is not working, including for people in Northern Ireland.

[David Simpson (Upper Bann) (DUP)]

At the beginning of the hon. Lady’s speech, she mentioned the cancellation of the 3p increase—it is a good thing the Chancellor did not go ahead with that because it would have had a detrimental effect on the domestic user. Does she agree that one way to help the Northern Ireland economy would be for the Government to get to grips with smuggled fuel from the Irish Republic, which loses them tens of millions of pounds?

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. Like him, I believe that fuel laundering and smuggling is a major problem. It needs to be addressed by the Treasury, and by the Department of Finance and the Revenue Commissioners in the south of Ireland.

We have record youth unemployment in Northern Ireland, and local businesses face a climate of extremely low consumer confidence and no prospect of growth. We had the highest rate of youth unemployment in the last quarter for which figures are available—some 18%. More recently, we heard the terrible news of the closure of Patton, a major construction firm, with the loss of more than 150 jobs.

The Government have spoken repeatedly of rebalancing the economy, but talk of their flagship policy—the devolution of corporation tax—was notable only by its absence from the Chancellor’s statement last week. It is critical that the Northern Ireland Assembly and Executive are granted more economic levers that we can use to rebuild our economy. The Government’s decision has been a long time coming, but it is crucial for our medium and long-term planning that they make it as soon as possible.

The Chancellor listened to our concerns about the adverse impact of the carbon floor price and the exemption will deliver a degree of much-needed support to local business. However, such news does not remove the reality of the broader economic picture. As the Northern Ireland Finance Minister has indicated, the result will likely be more cuts being implemented by the Northern Ireland Executive, particularly with regard to welfare payments.

[Dr William McCrea (South Antrim) (DUP)]

I commend the hon. Lady for her speech. Does she agree that banks need to be more sympathetic in lending to small and medium-sized businesses if they are to prosper, because of the challenges they face?

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. I agree that the banking regime in Northern Ireland is stringent at the moment. We have a unique situation in Northern Ireland. Some of the banking institutions are owned by the south of Ireland, but some have direct links to the Royal Bank of Scotland and Danske Bank. So there is that sort of mix as well. Suffice it to say that small and medium-sized enterprises are facing difficult economic challenges, and to have banks unwilling to lend or provide the necessary credit at this difficult time is not helping economic growth. That needs to be explored by the Treasury and, in the case of Northern Ireland, in some instances, directly with the Department of Finance in Dublin.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Lady think that one way of boosting the economy would be to encourage the construction industry, which, as all Members know, has had particular problems? Does she think that the banks should be more sympathetic to the construction industry in particular?

[Ms Ritchie]

I agree that the construction industry, along with agriculture and tourism, is a vital economic lever in Northern Ireland, but, owing to the economic challenges of the recession, many people employed in the construction industry have found themselves without work and many businesses have gone to the wall. They did not meet with a sympathetic reception from the banking institutions, but they need assistance because they are necessary to pump-prime our local economy.

The Chancellor’s welfare plans will remove more than £4 billion from the welfare budget by uprating benefits by just 1% a year until 2015. With a legacy of physical and social neglect from the troubles, this will remove the necessary level of support from many of our people and a substantial sum of money from the local economy. Instead of addressing their own shortcomings, the Government are vilifying the poor and those on welfare as a smokescreen for their own appalling economic record. That will place those most needy and vulnerable in the current economic climate in an even more precarious situation and will hurt not just the unemployed, but those who rely on in-work benefits. It is nothing more than a real-terms cut for those most in need by the same Chancellor who handed out a tax cut for the wealthiest in society at the last Budget. It would seem that some of us are more “all in this together” than others.

The autumn statement might have been politically more surefooted than the Chancellor’s last Budget, but I fail to see what it will do to address the core problems facing the economy. It might reassure some Tory voters here, but I do not think that my constituents or the people of Northern Ireland will find much to cheer about. I fear that we will be having this same debate, with similarly poor economic figures, come the next Budget.

Oral Answers to Questions

Baroness Ritchie of Downpatrick Excerpts

Tuesday 6th November 2012 Commons Chamber

[Danny Alexander]

The hon. Gentleman mentions finance in Wales, so I would have thought he might have started by welcoming the announcement I made two weeks ago on a new funding settlement for Wales and the commitment, in principle, for the first time ever—this was never made by the Labour party when it was in government—to borrowing powers for the Welsh Government. That is a major step forward. We will hear shortly from the Silk commission, which is examining revenue-raising powers. I will certainly consider the matter the hon. Gentleman raises in response to the Silk commission.

[Ms Margaret Ritchie (South Down) (SDLP)]

The Chief Secretary to the Treasury will be aware of ongoing ministerial discussions about setting the rate for corporation tax in Northern Ireland. Can he advise on the recommendation the Treasury will make to the Prime Minister, who will be setting that level and making a determination shortly?

[Danny Alexander]

I am not going to prejudge the work of the joint ministerial working group, which includes Ministers from the Northern Irish Government, my colleague the Exchequer Secretary, who is there on behalf of the Treasury, and the Northern Ireland Secretary. That group will soon produce a report, which will come to the Treasury and to the Prime Minister. We look forward to considering it and responding in due course.

Oral Answers to Questions

Baroness Ritchie of Downpatrick Excerpts

Tuesday 11th September 2012 Commons Chamber

[Naomi Long (Belfast East) (Alliance)]

11. If he will commission research to determine the effect of air passenger duty on UK holidaymakers, employment and economic growth.

[Ms Margaret Ritchie (South Down) (SDLP)]

12. What assessment he has made of the effect of air passenger duty on tourism and the regional economy.

[The Economic Secretary to the Treasury (Sajid Javid)]

The Government undertook an extensive consultation on air passenger duty last year. The consultation gathered views and evidence from stakeholders—more than 500 responses were received from all sectors. The Government published our response to the consultation on 6 December 2011 and we have no plans to commission further research.

[Sajid Javid]

The hon. Lady is passionate about this issue, and I thought she would welcome the measures that the Government have taken, which have made a significant contribution. I hope she joins me in realising that the Government have made substantial progress. He also knows that the Chancellor announced in the previous Budget that the Government are looking at other things that can be done to boost the Northern Ireland economy.

[Ms Ritchie]

I thank the Minister for his answer, but could he advise the House on what discussions he has held with the Northern Ireland Executive on the need to scrap APD for short-haul flights between Northern Ireland and Britain and Europe?

[Sajid Javid]

I have not had any such discussions since I was appointed, but I look forward to having them in future and will report to the hon. Lady when I do.

Business and the Economy

Baroness Ritchie of Downpatrick Excerpts

Monday 14th May 2012 Commons Chamber

[Ms Margaret Ritchie (South Down) (SDLP)]

This is a minimalist programme for government from a Front-Bench team that has delivered little more than a double-dip recession and a spiralling cost of living, with people facing record fuel and energy prices. This is a Government who give tax cuts to the rich while punishing hard-working families. This legislative programme follows on directly from the Budget, in which the priorities of the millionaires were again put above the interests of the millions.

We cannot underestimate the corrosive effect for a society in which the richest 1,000 individuals’ wealth amounts to £414 billion or, put another way, to more than a third of the UK’s gross domestic product. These people seem to be immune from the hardships faced in the wake of the economic crash. Indeed, their wealth has increased by £155 billion since 2008, yet this Government seem intent on delivering more handouts. We have always stood against social inequality and we stand up against the economic inequality that is accelerating under this Government. The dislocation and associated social problems brought about by such disparity are perhaps the most pressing problems that we face, and they are felt throughout our society.

Although I commend the moves to implement the Vickers report by ring-fencing investment banks from retail banking as a step in the right direction, there is nothing here that will deal with the problem of spiralling top-level pay that the Prime Minister was apparently so adamantly opposed to only weeks ago. This is not about restricting entrepreneurialism or penalising successful business people, but about creating a fair economy that works for all in society.

Looking at what is not included in this legislative agenda is as instructive as considering what is included. As hard-working families across Northern Ireland face up to record fuel prices and home heating costs, they may well ask where this Government’s priorities lie. One might ask where was the legislation to lower fuel prices, to restrict excessive executive pay, to promote growth and to tackle the youth unemployment that blights our society. There was nothing in the Queen’s Speech that suggested any remedy for these problems. The Government are simply sitting on their hands at a time when nearly one in five of our young people in Northern Ireland cannot find work.

As fuel prices in Northern Ireland reach 144p for unleaded petrol and 148p for diesel, people are asking what the Government are doing to mitigate this. These are highest prices in Europe, with a standard bill of more than £70 for refilling a 50 litre tank leaving many people paying more for their fuel than for their rent or mortgage. This impacts on everyone, but it must be acknowledged that the effects are most debilitating in rural areas, with young people cut off from jobs and elderly people cut off from friends and family.

I accept that while we are tethered to a volatile, imported commodity such as oil, we will always be susceptible to external events, but the Government could certainly do more to protect the consumer from the worst effects. The recent Centre for Economics and Business Research report showed clearly, using the Treasury’s own figures, that lowering fuel duty would create jobs, grow the economy and, most importantly, be revenue-neutral. But we do not see a Government prepared to protect the consumer, the family, the worker or the jobseeker. Instead, we hear of a Government preparing to increase the burden of public sector workers’ pension contributions and introducing measures that will make it easier for firms to fire people.

Although I have been critical thus far, there are certain aspects to be cautiously welcomed in the programme for government, such as the establishment of a green investment bank and the introduction of a supermarket adjudicator, but it is crucial that we scrutinise the details of these proposals to ensure that they are not merely token gestures. The green investment bank must be properly funded and accessible to firms in Northern Ireland, rather than just in the south of England. Likewise, the supermarket adjudicator must have teeth and must deliver for our local suppliers and producers to rebalance their relationship with the large supermarkets, on which they rely so heavily.

If the Government continue down the path they have taken thus far, they will lead us to recession, not recovery. People being asked to make sacrifices and facing increasingly tough living conditions are left with the question: what is the sacrifice achieving? The pattern is clear. This is a Government who care more about what is happening on Fleet street and Threadneedle street than about what is happening on the high street in Northern Ireland.

Amendment of the Law

Baroness Ritchie of Downpatrick Excerpts

Monday 26th March 2012 Commons Chamber

[Ms Margaret Ritchie (South Down) (SDLP)]

This Budget will not deliver on growth and it will not deliver on fairness, and it does not surprise me that it has been met with such a degree of concern and resentment. It has demonstrated missed opportunities, misplaced priorities, and a distinct lack of imagination. Ultimately it may hinder, not help, the families and businesses right across Northern Ireland who are struggling at this difficult time.

Now is the time to stimulate growth in our economy, not the time to hand a £42,000 a year tax cut to millionaires through the 45p rate. Aside from that, my party has three primary concerns about the Budget—the refusal to act on fuel prices, the attack on pensioners’ incomes—

[Jim Shannon (Strangford) (DUP)]

With the prices of diesel and petrol in Northern Ireland at the highest ever level and rising even higher, as they are across the United Kingdom, does the hon. Lady feel that the Chancellor and the Government have missed an opportunity, for example with the VAT increase, to help those who are under pressure because of fuel prices?

[Ms Ritchie]

I thank the hon. Gentleman for that useful intervention. I agree with him and will come on to that.

The other area that concerns me is the proposal on regional rates of pay. All these measures will hurt low and middle income earners and do nothing to stimulate and grow our economy.

Rather than handing out a massive subsidy to the wealthiest in our society, the Chancellor should have focused on growing the real economy, starting with mitigation measures against record fuel prices. As the hon. Member for Strangford (Jim Shannon) stated, the problem of high fuel prices is striking in Northern Ireland where, since the turn of the year, we have had the highest diesel prices in Europe and higher overall prices than in any comparable region in the UK or the south of Ireland. Duty prices must be lowered to mitigate the rising cost of imported fuel. Ultimately, while we rely on such a volatile imported commodity, we will always face such pressures. However, short-term measures are necessary to help those who are in need now. High fuel prices are hurting our people and are hurting our economy by restricting growth.

I will now turn to the so-called “granny tax”. The elderly should not be forced to pay for the systemic problems in our economy—problems that were in part brought about by the same high-salaried workers who have benefited from the Chancellor’s tax cut. The impact of this proposal will be widespread across Northern Ireland, with almost 100,000 people affected and many new pensioners potentially losing more than £200 a year. It represents a further blow to the elderly, who have been particularly affected by inflation, which has effectively wiped out years of savings and pushed up food prices, while high fuel costs have put a severe strain on the affordability of home heating.

Finally, I will address the issue of regional pay that has been put forward for consideration. The Government are saying that people can do the same job in the public sector, but that those who live in the devolved jurisdictions or the northern reaches of England will be paid less. That is a scandal. Public sector workers in what are already the most disadvantaged regions will earn less and those same disadvantaged regions will suffer the loss of spending power that follows. Things may be different in the world of big donations, but in the area of public sector pay for workers doing the same job, whether in England, Scotland, Wales or Northern Ireland, there should be no premier league. I put the Chancellor on notice that my party will oppose, both in this place and in the Northern Ireland Assembly, regional pay proposals that would further impoverish Northern Ireland and other less well-off regions.

The Budget will not deliver the necessary growth in Northern Ireland and will leave those who are most vulnerable in the current economic conditions, namely the young, the unemployed and the elderly, even more vulnerable. Those people did not get us into this situation and the Budget provides no signal that the Chancellor will steer the economy out of it.

Amendment of the Law

Baroness Ritchie of Downpatrick Excerpts

Wednesday 21st March 2012 Commons Chamber

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I congratulate my right hon. Friend the Member for Tottenham (Mr Lammy) on the comments he made. For all the Budget figures that we talk about, real people are at the heart. I echo his comments, but I want to talk about the small businesses in my constituency, which I hope, and we all hope, will help to create some of the jobs that my constituents, like my right hon. Friend’s, so desperately need and want.

Hackney is very much a picture of small businesses, with more than 90% of them across the borough as a whole employing fewer than six people—and many of them even fewer than that. The vast bulk of small businesses are located in Shoreditch, in the southern part of my constituency. It is very much the heart of the creative industries and the tech city hub, with nearly 39,000 people employed there. In the Shoreditch town centre area as a whole, there are more than 4,000 in the tech area and more than 5,000 in the creative industries, with about 15,000 people overall. Shoreditch has 77% of the total town centre employment and 93% of all the technical employment.

The growth and dynamism of that area have been going on for some time—before, I have to say, the Prime Minister got interested in it. Of course I welcome any interest shown by the Government in my constituency, but I have to say that some local businesses worry that the increase in rents is partly a result of the talking up in government of the area. Many of the businesses have been there for a long time, as I shall touch on shortly.

[Ms Margaret Ritchie (South Down) (SDLP)]

Does my hon. Friend agree that today’s Budget simply imperils working families and particularly small businesses because it has no measures to mitigate the effects of fuel prices, which are already high in urban and rural areas?

[Meg Hillier]

My hon. Friend makes an important point. The fuel issue is not such a big one in my constituency because of our public transport links, but it is different in areas such as Northern Ireland. I recall having a conversation with a man in Carlisle. He said, “Tell them back in London”—I thought that was illustrative in itself—“that I spend more on fuel in a month than I do on food.” He was just an ordinary working man. It is important for the Government to understand the pressures on household incomes; there are important issues there.

The economy in Hackney South and Shoreditch is dominated by small businesses. It is very creative; we have a big fashion industry, and a digital industry at silicon roundabout. We are seeking to improve and increase that economy all the time. A lot of the small and micro-businesses are struggling. They are not getting the lending that they need from banks, because banks refuse to understand their business models, which are often innovative. They are not even able to get the working capital through overdrafts. That is a real issue. Overdrafts are treated in the same way as loans on the balance sheet. Many of the businesses that I deal with, especially those that are growing and have got to a certain stable point, simply need that facility; they are not seeking a loan. The interest rate cut makes no difference to them. They are seeking an overdraft facility, not a loan.

The interest rate cut announced yesterday makes no difference to those seeking a loan, either, if they have a business model that makes banks nervous about lending to them. One person said to me, “We lend only to vanilla companies”—that is, safe bets with well worn business models. We are talking about an area of bursting creativity, an area that is growing enormously and will and does create jobs, so we need a solution. Merlin was a damp squib; the magic wand did not work. I am not hopeful that the Chancellor’s announcement will make any difference to the small local businesses to which I speak.

There is another key issue for small start-ups. We need 600 desk spaces. For those who do not know the area, if they wander around it, they will see, in cafés, hotels and specially designed work hubs, people sitting with their laptop or iPad; they will be doing business in that fashion. Across the area, a few thousand desk spaces are rented out for about £350 a month. That is how a lot of people do business; they grow that way. In the Trampery, a shared desk space area in my constituency, one business has grown to the point of renting 13 desk spaces. It has decided to stay there because of the creative input, but also because it is a big risk to move from that fluid way of working to permanent premises. That is a type of business that Government and this Budget do not really understand.

As I say, rents have gone up enormously, which is a real challenge. As businesses improve and seek to stay in the area—crucially, they may employ local people if they are in the area for a long time—that causes problems. I do not want my constituency to be the nursery of businesses that move elsewhere simply because they cannot afford to stay. If they move elsewhere for good reasons, that is a different matter, but some of them are being forced out.

I want to give examples of what the Budget really means on the ground. Somethin’ Else is a media production company employing about 70 members of staff in Shoreditch. It has an annual turnover of approximately £8 million. Under Project Merlin, it was not able to get the borrowing facility that it wanted. It simply wanted an overdraft, but that was withdrawn from it overnight during the economic crisis. The company is quite interesting, because it produced a film called “somewhere to”, an Olympic-funded project run by Livity. It featured young people performing in No. 10 Downing street. The Prime Minister was so impressed by the work of the company that, as some Government Members will know, the film was played at the Conservative party conference before his speech in October last year. The very company that was paraded by the Conservative party as a success is struggling precisely because of Government policies.

Not Just a Label is an international business, an online fashion promotion platform. It is the only online fashion design platform in the world. It is present in 93 countries and represents 8,000 fashion businesses, including 1,000 in east London alone. It currently employs 15 people in very small offices tucked away in the back streets of Shoreditch. It is looking to expand and develop: it wants a design showroom to complement its virtual presence. That would involve the company doubling in size within six to 12 months, but traditional banks are not willing to fund that expansion, because they simply do not understand that business model. The “vanilla financing” line was used to that group.

Another business, Image Line, is owned by Sue Terpilowski, who is involved with the Federation of Small Businesses, so she knows a lot about what other businesses are putting up with. She told me that her business rates, for 2,200 square feet, went up by £8,000 this year. Rate increases have a big impact on businesses, and on the face of it, we can see nothing in the Budget on that issue.

There are other pressures on London businesses across the board—I am not talking just about Shoreditch now. London members of the Federation of Small Businesses are taking out loans or overdrafts at interest rates that are very high compared to those available nationally. Some 21% of London members of the FSB have loans or overdrafts at interest rates above 15%, compared with 9% of its members nationally. The 1% in question is merely a drop in the ocean in the context of interest rates that are that high. That issue must be tackled.

Has the Chancellor had any conversations with businesses about more innovative ways of providing working capital, such as the next generation funding models, including funding circles and crowd-funding? Such models might work for the new tech businesses in my constituency, but they need to be regulated. There is a lot of talk of one in and one out, but if we are to have innovative funding models, we need Government support to ensure that they are legitimate forms of funding and that scams do not happen.

The Chancellor has announced his seven short-listed funds. I have my doubts as to whether they will lend to the businesses I am talking about, especially when we consider the much vaunted Green investment bank. We hoped it would support new businesses, but we feel sure that it will be controlled by the Treasury and the available capital will go into some of the bigger known providers.

My constituents want to find work in the job-creating new tech businesses in Hackney, so skills is a key area. We have good support from Hackney community college, which has set up an apprenticeship scheme, working with the tech city hub. Thanks to Government funding, we in Hackney will have a university technical college, under principal Annie Blackmore, opening in September at the HCC. She and Ian Ashman, principal of the HCC, have been working closely to try to ensure that we develop the necessary skills through our schools and colleges so that young people in Hackney can secure these jobs. We must make a link with the people who live just north of Hoxton square and in the rest of my constituency, many of whom do not have access to these jobs because they do not have the necessary skills.

I cautiously support the Sunday trading proposals for the Olympic period, as I recognise that that is a welcome global event coming to my constituency. However, I am also concerned that the move could be a trial run for a permanent change in the law. The leaks about today’s Budget announcements were broadly accurate, and I worry that the leaks about the Sunday trading proposals, suggesting that the Chancellor has a secret mission to take on the low paid and families and to ensure that people will have to work long hours, might also be accurate. My local smaller businesses are also nervous about the proposal. The benefit of longer trading hours is very small for them, but it gives more succour to the big retailers, who are already putting a lot of pressure on such small businesses.

High broadband speeds are much needed, and Hackney council is already seeking to increase speeds, first in Shoreditch and then in Dalston. I do not know the timetable for that scheme. However, although the Chancellor says he is funding it, I want to know whether it is new funding and how quickly it can be drawn down. We certainly need these developments in Hackney.

The Chancellor has, through sleight of hand, suggested that the Government greatly support business. The small and medium-sized businesses in my constituency have yet to benefit, however, so there is a great deal of scepticism about the Budget. I want the businesses in my constituency to grow and the jobs to be created, but I am very worried that this Budget will not deliver.

Northern Ireland Economy

Baroness Ritchie of Downpatrick Excerpts

Thursday 1st March 2012 Westminster Hall

[Ms Margaret Ritchie (South Down) (SDLP)]

I welcome the opportunity to debate the rebalancing of the Northern Ireland economy here in Westminster today. The Chair of the Select Committee on Northern Ireland Affairs has already referred to the report on corporation tax in Northern Ireland and the Government’s response to it. The report, which was fairly far-reaching, set the course on which we should look again at our economy, to rebalance it between the public and private sectors. We fully accept that the public sector forms more than 70% of the Northern Ireland economy, but we also caution, from a party perspective, that we should not throw the baby out with the bath water. We are dealing with the legacy of conflict, and we must take all those various issues into account.

It is important to give an overview of the economic situation in Northern Ireland. According to research produced by the Northern bank, the economy’s growth rate will struggle to reach 1.1% this year, compared with the UK average of 1.7%. The Northern bank’s survey, which lowered the chances of falling back into a deeper recession, warned that growth and recovery were still fragile in Northern Ireland.

Seasonally adjusted data for Northern Ireland estimated that 784,000 people aged between 16 and 24 are in employment. That figure has increased by 2.9% in the past year and is now higher than the pre-recession employment level, recorded three years ago.

The research indicates that the unemployment rate in Northern Ireland is below the UK average and the fourth lowest rate among the twelve UK regions. The seasonally adjusted Northern Ireland unemployment rate showed a quarterly increase of 0.1%. However, the Northern Ireland rate, which is around 7.3%, remained below the UK average and was the fourth lowest of all UK regions. It is interesting to note the high youth unemployment, with some 18% of people aged 18 to 24 not in work. Northern Ireland is experiencing a sevenfold increase in long-term unemployment among 18 to 24-year-olds since the recession.

The economic inactivity rate for all people aged 16 to 64 is 2.3% lower than the rate some five years ago, but it remains the highest of all UK regions. A higher proportion of economically inactive persons aged 16 to 64 identify sickness or disability as their main reason for not wanting or not being able to work. Northern Ireland is ranked fourth highest among UK regions in terms of self-employment rates from April to June 2011. The average for the UK was 13.6%.

Those figures characterise and set the scene for the economic situation in Northern Ireland. With that economic backcloth, it is important that we discuss today the need to rebalance the economy in Northern Ireland and that we do so here, notwithstanding the devolution of governmental powers to the north, because many economic levers that can deliver a step change in our local economy remain in the hands of the Treasury in London. For that reason, I am pleased to see the Exchequer Secretary to the Treasury here to respond to the debate. He was involved with us in the early days of the corporation tax issue and came to Belfast around the end of last March to launch an important consultation document, for which there was cross-party support and subscription, for want of a better word.

Devolution has given us one significant economic lever: public expenditure, for which the hon. Member for East Antrim (Sammy Wilson) has ministerial responsibility in Northern Ireland; we have had certain tours de force at certain times in another place with him. We can now determine how to allocate within the block grant ourselves. We therefore have the capacity, even though we may not have properly used it yet, to target more resources at economic priorities.

Naturally, moving resources into priority areas, such as tourism and agri-food, which can yield the best returns for jobs and economic growth, comes at a cost to other areas. We have been cautious and perhaps even—dare I say?—unimaginative to date. I hope that that will change. That is why my party has produced a comprehensive plan, called “Partnership and Economic Recovery”, which sets out in considerable detail how we could target more economic stimulus at priority areas.

We were unique for a political party in Northern Ireland in that we identified where the extra money could be found without looking to the Exchequer. However, while preparing “Partnership and Economic Recovery”, we realised how many economic levers were still in the hands of Westminster. For example, despite being the only part of the UK with a land border with the eurozone, Northern Ireland’s Government are powerless to intervene in the numerous situations that place Northern Ireland at a unique economic disadvantage. One of them—the vastly differential corporation tax regimes north and south of the border, to the advantage of the south and the disadvantage of the north—has clearly caught the attention of London, for which we are grateful.

The Secretary of State for Northern Ireland deserves some credit for advancing our quest for corporation tax-varying powers—we realise that there are different views about that—albeit at a price. We hope that we are somewhere near a positive end of the journey. The Exchequer Secretary is well aware of the cross-party support for latitude on corporation tax. Perhaps he can provide us with an update on the ministerial working group on the issue and advise us whether he and his group, of which others here are also members, have reached any conclusions. If so, what might they be?

There is a strong belief that that one lever can bring about a significant step change in the growth of our private sector. However, corporation tax is only the tip of the iceberg, as is passenger duty and the differential application of the EU aggregates levy and its impact on our construction sector. I questioned the hon. Member for East Antrim in another place the other day on that issue, but perhaps the Exchequer Secretary will provide us with an update about the European Commission and where exactly those negotiations are at. That exemption is very important to our local industry and could act as an important stimulus to the construction industry.

We have no powers in Northern Ireland to depart from the overall UK position on all sorts of other matters that adversely affect our economy. We have long suffered the competitive disadvantage of a much more favourable agriculture and food regime south of the border, while we have been tied to a UK policy broadly hostile to the common agricultural policy. I hope that the eventual reform of the common agricultural policy will accommodate the needs of not only the local farming community in Northern Ireland, but the wider agri-food industry.

We have no power to vary indirect taxation or such things as excise duty on fuel, alcohol or tobacco. Excise duty anomalies alone have led to a wave of filling station closures in the north and the resurgent problem of cross-border smuggling. The Chair of the Northern Ireland Affairs Committee has already referred to the forthcoming report on fuel smuggling. We look forward to that report. There is no doubt that fuel smuggling is a vexatious issue that needs to be redressed and resolved on behalf of the wider community in Northern Ireland.

We are also tied to UK rates of motor taxation, which is something that stops us from doing more to help ourselves. I have not even mentioned the differential economic impacts of a UK welfare reform programme that is designed around perceived norms in the south-east of England.

It would be right in the context of arriving at the right solution on corporation tax to look at all the areas where the rigidity of the overall UK position prevents Northern Ireland from helping itself in its own economic development. We are not afraid of further devolution or further devolution of tax-varying powers, but we acknowledge that that could have implications for the block grant. Other hon. Members present today have already referred to that. We would like to know the consequences, although we accept the point that the Office for Budget Responsibility will have an overall remit to undertake such calculations.

Of course rebalancing the economy goes beyond the vital task of growing the private sector. As the Chair of the Select Committee has already mentioned, we also need to right-size the public sector and make it perform better. For decades, public sector workers maintained normality in Northern Ireland, and we owe those unsung heroes a debt of enormous gratitude. However, with peace, there is an opportunity to redesign a public sector aligned to the precise services that citizens now need. We are prepared to be radical on public sector reform. The Northern Ireland Executive can do much more good for themselves, but they will need the co-operation of Westminster in that reforming endeavour.

In that context, I should like to pay tribute to the Environment Minister in the north—his work has already been referred to by the Chair of the Select Committee—because he has responsibility for planning and local government reform. He has blazed a trail in prioritising timely decisions for major planning applications. For example, the decision on the golf course announced last week, which was mentioned by the Chair of the Select Committee and the hon. Member for North Antrim (Ian Paisley), will have a significant economic and job creation impact.

[Ian Paisley]

Will the hon. Lady unite the House and call on the National Trust to support that magnificent project for Northern Ireland, because it will lead to more tourists in an area where it has an economic interest?

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. I am in no doubt that the planning application just approved, which took some 10 years to come to fruition, will have an economic impact on that part of North Antrim. I encourage my colleague the Environment Minister, who sits in another place, to try, subject to challenges and difficulties, to make similar decisions. It is important that all organisations act in the public interest for the people of Northern Ireland, so that there can be a sea change in terms of stimulants and economic development. There is no doubt that planning is playing its part as an improved public service that facilitates investment and growth. The tourist board can also make a contribution, as can Tourism Ireland.

Rebalancing the Northern Ireland economy is a necessary and worthwhile endeavour, but it will require a collective effort by not only the devolved Administration, but London, too. We need to develop an economic agenda that will empower rather than alienate our work force. Some of us might have different views about the degree to which corporation tax should be lowered to attract foreign direct investment. No doubt, the Scottish agenda and the English regional agenda will play their part in bringing influences to bear upon on the Treasury.

Small indigenous businesses must be encouraged as well to provide opportunities for all. Perhaps the Government should consider the establishment of another working group with the Northern Ireland Executive to examine other areas where Northern Ireland could profitably be released from the UK system to further rebalance the economy.

It would be remiss of me not to mention the high priority that I attach to tourism development in the overall task of rebalancing our economy and stimulating job creation. Two out of our five signature tourism projects in Northern Ireland—the Mournes and St Patrick’s—are centred in my constituency. Our open invitation to come to Downpatrick and walk in the footsteps of St Patrick is particularly relevant to both Britain and north America. In fact, the shadow Secretary of State, the hon. Member for Gedling (Vernon Coaker), will do just that next Friday. We very much welcome his visitation on that occasion.

That is why we were right to press for relief on the air transport duty issue. I note that that will be subject to provisions in the Finance Bill. We acknowledge that there will be reference to transatlantic flights and the Continental Airlines flight between Belfast International and Newark, New Jersey. What about flights that deal with the domestic market between Belfast City and Belfast International to airports in Britain?

To return to my original point about tourism development, I have often said that St Patrick was probably our greatest ever import and has the potential to be our greatest ever export. Our unique heritage can even help to rebalance our economy. May I say in the month of St Patrick’s festival that our invitation—and my invitation to all hon. Members—to visit St Patrick’s country remains open to all?

In conclusion, we very much welcome our participation in the debate today about rebalancing the Northern Ireland economy. We in the Social Democratic and Labour party want to play our part, along with the Government and the Northern Ireland Executive, to help to rebalance the economy. It is vital that we provide the necessary stimulus, seek to rebalance the economy and provide hope and expectation for this generation and future generations in Northern Ireland.

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[Sammy Wilson]

No, I do not think I have adopted any of them. The only one that was adopted was then condemned; namely, that we could get some money from housing associations by cutting their grant and making them borrow more in the market. When that was adopted, the first party to condemn it was the party sitting to my left. Even when we adopt some of that party’s ideas, it suddenly decides that they are not good ideas.

[Ms Ritchie]

Further to the point made by my hon. Friend the Member for Belfast South (Dr McDonnell), I make the simple point that it is my clear understanding that the budget review group that sits in another place in Belfast has adopted a lot of the proposals contained in the SDLP document, “Partnership and Economic Recovery”. Perhaps the hon. Member for East Antrim might like to comment on that fact, rather than being disparaging.

[Sammy Wilson]

If I had anticipated the length of that intervention, I might have listed some of the things that had been adopted. I cannot think of too many, other than the one that has now been condemned by the party that first suggested it. I have to say that it is actually working quite well. We are getting more houses built for less money in the public sector, and of course that is a good idea.

[Ms Ritchie]

Will the hon. Gentleman give way?

[Sammy Wilson]

No, I will not give way. This debate is not about the internecine warfare that goes on in the Northern Ireland Assembly, much as I enjoy it. I am sure that hon. Members do not want a rehash of the kind of budget debates we have in that other place. I will make one point, however, because there has been a call for more devolution of tax-varying powers in Northern Ireland. There seems to be a contradiction. On the one hand, the idea is that if we had tax-varying powers we could use them to spend more money on public sector projects. On the other hand, when we get those tax-varying powers it is not to put taxes up, but to bring taxes down. I do not know how we bring taxes down and spend more money as a result, but that is the equation put forward by the hon. Member for South Down, which I think is part of her party’s policy. More recently, we have been told that if motor tax were devolved to Northern Ireland, we would be able to avoid all the changes that we do not want to introduce in welfare reform. From the devolution of motor tax we could find—according to the SDLP’s erroneous figure—£600 million. I would not like to be a motorist in Northern Ireland if we had to raise £600 million extra from a motor tax.

There are many issues I do not run away from. The Executive and the Assembly in Northern Ireland cannot run away from their responsibility for the things that they have to do to try to help to rebalance the economy. Some things are done well, some things are not being done so well, and some things still have not even been started. Those are internal matters, and the Minister may make reference to them later on. However, we are well aware that where we have responsibility, that responsibility should be taken. However, certain matters reside here at Westminster, and they are important if we are to rebalance the economy in Northern Ireland.

The first matter is the debate on devolution of corporation tax and tax-varying powers in relation to corporation tax. I would be cautious about that. It is not that I would be opposed to it, but if it is devolved it must be devolved at a price that does not put further pressure on an already pressurised public sector budget in Northern Ireland. We have lived with the cuts. I am not one of those who believes that because of Northern Ireland’s special circumstances we ought to be exempt from all of the financial difficulties that have to be faced by the rest of the people in the United Kingdom. I do not take that stance. It is an unreasonable stance for people from Northern Ireland to take.

We have lived with a £4 billion reduction in our budget in the next four years—a 40% reduction in the capital budget for expenditure in Northern Ireland in the four years. We have sought to ameliorate that by looking at what sources of revenue we could raise, what assets we could sell, how we could switch expenditure around, and where we could make savings. If, on top of that, as a result of the devolution of corporation tax, we were then hit with an additional burden—a burden that the Treasury estimates could be anything up to £500 million—that would not be either fair or sustainable. Given that the price would be paid immediately and the benefits would only be experienced in the medium term, that price would not be affordable. Nor would it produce, even in the medium term, the desired result of rebalancing the economy.

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[Sammy Wilson]

That is one reason why, when one looks at all the business surveys and the terms offered for loans, compared to the rest of the UK—I had the figures here somewhere, but I cannot dig them up at the moment—some 10% more businesses in Northern Ireland are saying that terms for loans have worsened between 2007 and 2011. Of course, on top of that many businesses have huge debts associated with property.

I listened to the chairman of RBS the other morning on Radio 4 saying how the bank had brought down its bad property debts. That is good from the point of view of the bank’s record, but I know what that means in places such as Northern Ireland: a good, strong business with a core operation, but with some bad land loan attached to it, is squeezed to bring down the debt on the land and, in doing so, people are being put out of work and businesses are finding it impossible to expand, even where they have good markets. The Government have to address the banking issue in the longer run.

I will mention only one more thing, so that other Members have a chance to get in, and that is VAT. I understand Government reluctance to reduce the rate when VAT brings in a lot of revenue, but to do so would of course have very beneficial effects in stimulating the economy. The Government do not have to reduce VAT rates generally; specific reductions in the tourist sector, as in the Irish Republic, or in the building sector, so that people could put extensions on their houses and so on, could stimulate a lot of labour-intensive employment not only in those particular industries but wider afield—I am not saying for Northern Ireland specifically. Come the Budget, the Government should look at that.

[Ms Ritchie]

Does the hon. Gentleman agree that the forthcoming Budget on 21 March is an opportunity for the Government and the Treasury to look at VAT? We are not coming from Northern Ireland with a begging bowl, but we would like to see some mitigation of VAT on tourism or general products. If that were possible, we would be extremely grateful.

[Sammy Wilson]

As I said, a reduction should be targeted, and not at Northern Ireland in particular. For example, we are looking to grow tourism in Northern Ireland; we have great opportunities to do so over the next number of years, because it is one of the growth areas we have identified, but any such VAT reduction could benefit the whole United Kingdom,

As someone who values the Union, I do not want to see lots of the fiscal ties broken. Equally, I understand and said earlier that, if the home nation is facing particular difficulties, we must face them along with the rest. Being part of the Union and the Union family, however, also means that there is an obligation on that family: if there are specific problems in a particular part of the kingdom and remedies are available, those remedies must be given serious consideration. As a Unionist and as someone who believes that the Union is stronger when specific problems are recognised and action taken, I hope that the Government will respond positively to some of the suggestions made by me and other contributors to this debate.

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[Mr Dodds]

The hon. Lady is absolutely right. She represents the constituency of Belfast East, and I represent Belfast North, which has more of the so-called peace walls than any other constituency. She and I share many of the challenges that come with representing a Belfast constituency and inner city areas, and I totally agree with what she said.

I was talking about tourism and the impact that violence on our TV screens has on attracting visitors. I believe, however, that the tourism industry has great potential to help grow the private sector. When the troubles—the violence—started in the late 1960s, the number of visitors coming to Northern Ireland, which had been growing very much during the ’60s, dropped off massively overnight and stayed at that very low base for 30 to 40 years. There is massive potential to grow the numbers back to what they were previously. We are not even back to that point yet.

[Ms Ritchie]

As the right hon. Gentleman says, there is further potential to be developed in relation to tourism. Does he agree that part of what is required is the development of the product assets themselves, as opposed to the marketing of them? If we develop the assets, we will ensure that marketing flows from that.

[Mr Dodds]

The hon. Lady has a point, but I think that it is a matter of doing both. We must have the product. That is why the number of signature projects that have been and are being developed in Northern Ireland is extremely important. Then, as everyone knows, we have to get out there and sell the product. We need a combination of both.

I congratulate the Executive on their aim to have, by the end of December 2013, 3.6 million visitors coming to Northern Ireland, with a revenue of £625 million. That will provide a major boost to employment. We are talking about investment in product. The Titanic signature project, which has been referred to and which opens on 31 March, is a very significant addition to the tourism product in Northern Ireland.

I am reflecting on the first meeting of the Northern Ireland Executive in 2007, after devolution was restored. The first item of major expenditure brought to the table was a proposal that I brought to invest and commit public funds, alongside private investment and European funds, to the Titanic signature project. I am delighted that that has come to fruition. Along with some other projects, it was derided, criticised and picked over at the time, but everyone now agrees that it will probably be the biggest tourist draw on the island of Ireland, apart from the natural attractions, such as the Giant’s Causeway. It will be a massive addition to the tourism product. That was a far-reaching and visionary decision of the Northern Ireland Executive, taken at one of their first meetings in 2007.

Fuel Duty (Northern Ireland)

Baroness Ritchie of Downpatrick Excerpts

Wednesday 22nd February 2012 Westminster Hall

[Ms Margaret Ritchie (South Down) (SDLP)]

I am pleased to have secured this important debate and I look forward to contributing under your chairmanship, Mrs Main. I am also pleased that the Minister is present, and I look forward to her response.

In the run-up to the Budget, it is more important than ever to bring into sharp focus the record high price of vehicle fuel, which has now reached a critical level. The increased cost of fuel, together with the correspondingly steep rise in inflation in the past year, has put individuals, families and businesses under increasing pressure. There is clearly an over-reliance on importing fossil fuels. Until that is cut, we will always be tethered to external forces. I note with great interest that the incoming Secretary of State for Energy and Climate Change placed an emphasis on energy production that is clean and green. I welcome him to the role, especially if he follows through with that commitment. My own party is committed to a green new deal in Northern Ireland providing jobs, investment and energy security. However, I recognise that that is a long-term goal and we must tackle directly the problems facing consumers and businesses now.

[Ian Paisley (North Antrim) (DUP)]

I thank the hon. Lady for giving way and say that that is the one green deal that my party would support alongside her party. [Laughter.] My hon. Friend the Member for Strangford (Jim Shannon) says, “The only green deal”, but it is a worthwhile point.

The hon. Lady will be aware that since we became Members of Parliament two years ago, the one issue we have debated most is fuel duty and the implications of its constantly rising cost. I am sure that, like me, she understands that the little piece of water between the mainland and Northern Ireland—those 17 miles—is the most expensive stretch of water in these islands, as it inflates prices of fuel disproportionately. For our rural constituencies, the smack is double, because rural areas suffer more. The luxury of car transport is a necessity to get kids to school, and people to work and into employment.

[Mrs Anne Main (in the Chair)]

Order. Will hon. Members please ensure that interventions are brief?

[Ms Ritchie]

Thank you, Mrs Main. I thank the hon. Member for North Antrim (Ian Paisley) for his long intervention. I could not agree more—rural communities, particularly in Northern Ireland, are more deeply affected because they rely totally on car transportation. There has been insufficient investment in public means of transportation—a matter for the Northern Ireland Executive—and no doubt the Minister will take care to pass that on. We will no doubt pass that point on as individual Members of Parliament from Northern Ireland.

I will highlight specifically the problems faced by businesses and consumers in Northern Ireland, but those problems do not exist in a vacuum. We must consider the scale of the problem confronting consumers across these islands. The Automobile Association’s latest data, from industry price trackers Experian Catalist, showed that the latest average pump prices for petrol are 134p, compared with 128p a year ago, and 111p in mid-January 2010. That is within sight of the record prices witnessed last May. Indeed, the average price of diesel has just hit an all-time high at an average price of 143p. The AA reported that in Northern Ireland the price of diesel is the highest of any region in the European Union.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Lady share my concerns? The fuel that comes in through the ports of Belfast and Londonderry, and is then dispersed across the whole of Northern Ireland, is the same as the fuel in Great Britain, so why is it so much dearer in Northern Ireland? It is an unfair penalty towards those in the rural community.

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. I agree that it is the same fuel type, which is imported directly from the middle east and wherever it is refined before it reaches the ports of Belfast and Derry. I also agree that rural communities are more deeply affected as a result of fuel duty increases. We find little reassurance in the current global situation. Just this week, Iran suspended the sale of crude oil to the UK, and the strait of Hormuz, through which 35% of all traded oil travels, is in a state of great uncertainty. It is not my intention to turn this into a debate on Iran and the middle east, but the point remains that while we rely so heavily on imported fossil fuels we will be somewhat captive to external events. Set against that, the Treasury is not doing enough to ameliorate the consequences of these events for consumers and businesses alike.

Consumers and business are caught in a pincer between the volatile price of a critical commodity and an inflexible Treasury duty regime. With the current instability in Iran, combined with the suspension of the refinery at Coryton, we would be naive to think that there will be no more inflationary pressures on the price of petrol. While the Minister has little control over an uncertain world, I would like to know what plans she has to protect people from the worst effects of those circumstances. Put more bluntly, in the short-term the Chancellor must extend the freeze on fuel duty hikes that was announced in the autumn statement. The measures announced in the autumn statement—the deferral of the 3p increase in duty and the cancellation of the escalator—were welcome short-term measures, but they will do little to mitigate the increased long-term rise in fuel prices. According to Consumer Focus back in March 2011, the 1p reduction in fuel duty was wiped out within days by rising oil prices. There is not the feeling that the Treasury is shouldering its share of the rise in the same way that motorists and businesses are.

[James Wharton (Stockton South) (Con)]

I congratulate the hon. Lady on securing this important debate. I represent a constituency in the north-east of England, which in many ways faces similar economic challenges to Northern Ireland. One issue—

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[James Wharton]

Absolutely. As the relative income is lower compared with some English regions, as it is in Northern Ireland, the effect of fuel prices is felt more acutely. Will the hon. Lady clarify whether she is looking for Government measures that are specific to Northern Ireland, or a nationally applicable measure that would benefit everybody in the UK?

[Ms Ritchie]

Naturally, I will be looking for measures that are specific to Northern Ireland because I represent a constituency in Northern Ireland. I understand the difficulties of other regions. As Mrs Main has directed, this debate is specific to Northern Ireland. If the hon. Gentleman will let me progress a little, I will explain where I am coming from.

While we rely on imported oil, fuel prices will always be vulnerable to exogenous pressures and external shocks, but the Treasury has levers at its disposal with which it could mitigate the worst of those effects for consumers. The 3p increase in fuel duty is still approaching in August and the Chancellor’s remedy would seem to be palliative rather than curative. It is a market in which price rises are passed on with alarming rapidity to the consumer, while decreases are notable mainly by their absence. It is like a seesaw with a very heavy weight at one end—a lot of jumping up and down at the other end seems to make very little difference.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Is the hon. Lady suggesting that it would be helpful if VAT rates were set by the Northern Ireland Assembly? Of course, the reaction to that would be ensuring that the block grant also suffered.

[Ms Ritchie]

The hon. Gentleman brings me into an interesting debate about the devolution of tax-varying powers to Northern Ireland, which my party supports. He raises the other important issue of the block. No doubt, as with corporation tax, that matter will be decided by the Office for Budget Responsibility. Naturally, we in Northern Ireland would say, collectively across parties, that we are a special region within the UK, notwithstanding our political or identity differences. We are coming out of a legacy of conflict and that needs to be addressed for the people who live there.

[Stephen Pound (Ealing North) (Lab)]

Surely, the point is that Northern Ireland is the only part of the United Kingdom with a contiguous land border with another European country. Just as in Europe, there are variable tax rates on borders—between Luxembourg and Belgium, for example—so surely there is a case for recognising that the problem is not solely part of the rural differential, although that is significant. It is a cross-border issue. We must look to that as well. Surely, Her Majesty’s Government should be working in that direction.

[Ms Ritchie]

I thank my hon. Friend for his intervention. I wish to progress to the issue he mentioned, because we share a land border with the south of Ireland. There are differential tax rates and we in the north of Ireland need to be given a certain degree of comfort.

With specific reference to Northern Ireland, having brought attention to the general problem besetting the market, I now turn to our own constituencies and Northern Ireland in particular, where the situation is even more severe. I have already highlighted the general point in relation to Britain, but I emphasise that from January to December last year petrol and diesel prices in Northern Ireland were the most expensive, and in January this year the price of diesel was the most expensive in the European Union. The AA has recently demonstrated that Northern Ireland has higher fuel prices than any other region and that on average we pay 134.6p at the pump, while the average price in the UK is 133.5p.

Prices continue to rise in Northern Ireland. In December 2011, it cost £66 to fill a standard 50-litre engine—£70 for diesel—and within a year this has gone up to £70, a 6% increase. A family in my constituency that owned a Ford Galaxy car with a 70-litre engine recently told me they are faced with a £100 bill every time they refill their car. Such families will be faced with paying hundreds of pounds more than they used to every year, an amount that I guarantee the Minister is not insignificant for the vast proportion of people, at a time when they are already suffering, with welfare reform proposals coming down the line and with the cost of motor car insurance much higher in Northern Ireland, particularly in rural areas, compared with comparable regions in Britain.

The average family sends £680 a year to the Treasury in London just to cover fuel duty. Many families will be affected by the public sector pay freeze enacted by the very same Treasury. The high cost of fuel is particularly problematic for the poorest in society, for whom such an amount represents a significant proportion of income and for whom the use of a car is most important to remain economically active.

There is a discrepancy not just between regions but within them, with rural areas in Northern Ireland, including my constituency, particularly prone to high prices. Indeed, this problem is exacerbated by large retailers operating across many sites, charging different premiums by location, a practice that drives up prices in certain areas, particularly in rural locations, where the dependence on fuel is often the greatest.

The problem in rural areas can be compounded by the absence of large supermarkets to drive down the prices. For example, the AA cited the lack of Asda forecourts in Northern Ireland as a key contributory factor, meaning that price competition is not as keen as in the UK. I urge the Minister to review how location-specific pricing and the absence of large supermarkets distort the market and create an unfair playing field.

We cannot separate this problem from our investment in public transport services. It may interest the Minister to know that, historically, Northern Ireland has received the lowest spend per capita on transport infrastructure, leaving the car as king and often the only viable choice. A perfect example of this is the atrocious management of the rail link between our two biggest cities, Belfast and Derry, which has been compounded by the legacy of blinding ignorance to organising the network on an all-Ireland/island basis.

Simply put, people have no option but to get in their car. Those who are priced out of the market by high fuel prices are often left economically isolated and socially disfranchised. Indeed, there needs to be joined-up thinking on a north-south basis regarding the fuel duty regime to avoid striking disparities, particularly around the border, as my hon. Friend the Member for Ealing North (Stephen Pound) mentioned. This problem distorts the local market for fuel and leaves local retailers and consumers at a marked disadvantage.

These problems are faced not only by our people but by our businesses. We hear the Secretary of State for Northern Ireland and Treasury Ministers talk about rebalancing and growing the Northern Ireland economy. This seems to be rhetoric in search of a policy at the minute. Does the Minister not agree that one of the main things holding back business growth in Northern Ireland is the punitive price of petrol? Action here would be the ideal way for the Treasury to demonstrate its commitment to growing the Northern Ireland economy.

The Minister does not need to tell me the problems faced by small and medium-sized businesses in the current climate. Does she not agree that a cut in fuel duty would act as an immediate stimulus to the economy in Northern Ireland?

I do not want to create the impression, by focusing on these immediate measures, that I am ignoring the big picture. As a society, we must wean ourselves off dependence on oil. Without doing so we will have the same debate in the House year after year. Doing this will take foresight rather than expediency, and ambition rather than an “as you were” mentality, but until we reach that point, the Government must do more to help those in need; they must shoulder a fair share of the burden and not simply pass on price rises to consumers and local businesses. The Government must commit to their pledge to consult on a fuel duty stabiliser and cancel the planned duty increases scheduled for August.

In Northern Ireland this problem is particularly striking. We must address the basic problem, which is that our people pay more at the pump than in any region in the UK and, indeed, in the EU. There are clearly issues surrounding the operation of large retailers, which bring price competition, but not evenly across the board. As other hon. Members have clearly articulated, rural areas are often most vulnerable and often people and businesses in rural areas are most dependent on their cars. If the Treasury is serious about growing our local economy, would this not be an obvious place to start? I acknowledge that the Northern Ireland Executive at Stormont also have a major role to play.

These immediate measures must be buttressed by a sustainable approach to our energy future and transport infrastructure. My party and I are committed to proper investment in new, green energy technologies in Northern Ireland. I look forward to the Minister’s response.

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

I congratulate the hon. Member for South Down (Ms Ritchie) on securing the debate and on presenting her case so eloquently. The debate is clearly well attended, with members of the Select Committee on Northern Ireland Affairs present, which puts me in mind of an extensive session that we had in the past few weeks discussing fuel fraud in Northern Ireland. I wonder whether that serious economic issue in Northern Ireland, which we all recognise, will also occupy the hon. Lady, if she has any spare time.

The first issue raised by today’s debate is what the Government have done to assist motorists and businesses in a time of high oil prices. Secondly, I will go on to what we intend to do, before returning, as requested by the hon. Lady, to some details about the fair fuel stabiliser. Before dealing with those two areas, I acknowledge what she said about the difficulties of living, working and running businesses in a rural economy, in particular given the absence of other large businesses whose decisions might be able to bring about cheaper fuel points of purchase. I live in Norwich and am conscious that I can access cheap fuel partly because of the availability of a number of large supermarkets competing with each other on price. She might not be in that position.

I note also what the hon. Lady says about public transport, although I regret that I am not a Transport Minister and cannot assist her directly today, and that she might be floating the idea of co-operation on tax matters between north and south on the whole island of Ireland. I do not know whether she is suggesting that and I hear what she is saying, but that is not something that we think that the British Treasury should necessarily do, and I am not entirely sure that the Republic would wish to do so either.

[Ms Ritchie]

I was referring to a discussion between the British and Irish Governments about harmonisation on fuel duty and about the problems encountered by people on both sides of the border, living in close proximity and able to travel with great speed from north to south, and vice versa. At the minute, prices in the south are lower than they are in the north. What amelioration can be brought to the people?

[Miss Smith]

I understand that point. The topic could be on a long list of what the two Governments discuss, and I note positive aspects of those discussions in the realm of transport, such as acknowledgement of the importance of the land border in setting air passenger duty rates, of which the hon. Lady must be aware. We also acknowledge the significance of the land border to fuel fraud—returning to that important subject—but there is a point to stop short of in harmonising tax rates.

I shall plough on swiftly with some helpful points. First, there is absolutely no doubt that the cost of fuel remains difficult for families and businesses up and down the country, as demonstrated in the debate. I am also sure that many of the hon. Lady’s constituents joined the 100,000-signature petition delivered to the Government last autumn and to which we responded in the House. Our response—indeed, I personally responded —recognised that the price of petrol, which is different from the rate of duty, is extraordinarily high in many people’s eyes. The price is the result of a combination of the duty and various global factors, which she has already mentioned, so it is not fully in the control of the Government to say, “The total cost of your litre of fuel shall be this.” What a responsible Government must do, however, is listen, consider and respond.

The Government have eased the burden on motorists by £2.5 billion up to 2012-13. We started by cutting fuel duty by a penny per litre from 6 pm on Budget day. We cancelled the previous Government’s fuel duty escalator and introduced the fair fuel stabiliser, which I shall come on to shortly. Our response also includes the deferment of last month’s duty increase to August and the cancellation of the original increase planned for August, ensuring genuine help for motorists through only one inflation increase this year. The fuel duty changes support motorists throughout the country, including Northern Ireland—I do not see a distinction—because any motorist can be approximately 10p per litre better off as a result of our Government’s actions. The hon. Lady asked me to acknowledge businesses. An average haulier will be better off by £4,400 because of our fuel duty and vehicle excise duty actions, which I am sure she will welcome in her part of the world, as everyone else does.

Car Insurance (Northern Ireland)

Baroness Ritchie of Downpatrick Excerpts

Wednesday 19th October 2011 Commons Chamber

[Ms Margaret Ritchie (South Down) (SDLP)]

I am pleased to have secured this debate on an issue that severely impacts on my constituents and others across Northern Ireland. I welcome the fact that the Financial Secretary to the Treasury is here to respond to the debate.

There are considerable problems in the motor insurance market at present, especially in Northern Ireland, where drivers are subject to excessively high insurance costs that are rising rapidly year on year. The problems are not unique to Northern Ireland, but they are particularly striking in our case. We have also found in our research that consumers in Northern Ireland have less choice of insurance providers, with three times fewer companies offering car insurance.

I also welcome the introduction of the Motor Insurance Regulation Bill, promoted by my right hon. Friend the Member for Blackburn (Mr Straw). My right hon. Friend, quite rightly, shone a light on troublesome referral practices and the Bill promises to make much-needed changes to the regulation of the insurance market in England and Wales. Although referrals operate in a different manner in Northern Ireland, the purpose of my speech this evening is to cast light and call for action on many of the issues that plague the operation of the car insurance industry in Northern Ireland. These issues are not entirely commensurate with those raised by my right hon. Friend in relation to England, but must be dealt with in the same direct and purposeful manner. I call on the Minister, where possible, to ensure that that is the case and to use his good influence to press the Northern Ireland Executive to act on the issue.

In August the Consumer Council for Northern Ireland launched a campaign to highlight the cost of car insurance, which I fully support. The Minister will no doubt be aware that the Office of Fair Trading subsequently agreed to undertake an investigation into the car insurance market with a specific focus on Northern Ireland. We must robustly establish why premiums have increased by a reported 40% in the 12 months to March 2011, and why insurance costs are significantly higher in Northern Ireland than in other regions. Indeed, we need not only to assess that, but to redress it. The findings must be robust and the resulting measures must have teeth.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Lady on introducing this debate on an issue that is very important to us all in Northern Ireland. The concern about the insurance premiums is clear, and one reason for those insurance premiums, and the difference in price between Northern Ireland and the UK mainland, is the Compensation Act 2006. Is the hon. Lady aware that in the past year the number of claims notified to the compensation recovery unit in Northern Ireland fell by 23%, whereas in England and Wales it rose by 17%? Is she also aware that last year some 30,000 claims for compensation were made, but that in the past year only 768 were made and their value in the county court is less than £5,000—far below the equivalent figure in England and Wales? Does she feel that, for those reasons alone, insurance premiums in Northern Ireland should be reduced? It is quite obvious that the drivers and vehicle users in Northern Ireland are being disadvantaged financially.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. That intervention was a tad long, Mr Shannon.

[Ms Ritchie]

Thank you, Mr Deputy Speaker. I thank the hon. Gentleman for his rather long intervention. I none the less agree with him, and I will come to that point later in my speech.

The extent of the problem is stark. The Consumer Council report, “The Cost of Insurance in Northern Ireland”, published in March 2009, indicated that consumers in Northern Ireland were paying 84% more on average than those in the rest of the UK. Furthermore, five Northern Irish cities ranked among the top 10 most expensive areas in the UK. Relatively expensive car insurance premiums prevail throughout Northern Ireland.

[Naomi Long (Belfast East) (Alliance)]

I thank the hon. Lady for giving way, and I appreciate the fact that she has brought this matter to the Floor of the House. Does she agree that the OFT investigation is crucial, because although the Consumer Council report is useful in highlighting particular issues, it is flawed in a number of respects? For example, it compared median rather than best available prices in the UK. It also compared only products available on comparison websites, which is restrictive when we consider the wider available market.

[Ms Ritchie]

I thank the hon. Lady for her intervention. Like her, I believe that the OFT report is vital in making critical recommendations that I hope will result in the lowering of insurance premiums. I hope that the report has the teeth to deal with this difficult and vexatious issue.

According to evidence, car insurance premiums in Northern Ireland have increased by almost 73% in the past two years. The situation is even worse for younger drivers, whose premiums, according to research, have increased by 112%. Young people face severe difficulties in entering the job market, and the prohibitively high cost of motor insurance is yet another barrier to their finding work.

The average yearly car insurance premium in Northern Ireland is now £923.90, compared with the national average of £525. I am concerned that that, with the increasing cost of fuel, will force some people off the road altogether, or that it will lead to an increase in motorists driving illegally without insurance. I am sure the Minister agrees that we must ensure that that does not happen.

Those problems are compounded by the restricted range of companies offering premiums in Northern Ireland, which limits competition and drives up prices. I urge the Minister to address, and where possible to remove, any barriers to companies that wish to enter the market in Northern Ireland.

Two fundamental arguments are put forward to justify the high costs of motor insurance in Northern Ireland. The first argument is that Northern Ireland is a case apart, because its demographics and road layouts bring an increased risk of incidents on our roads, and the second is that the Northern Ireland legal system places a higher burden on insurers.

To begin with, the evidence that Northern Ireland has a very young population is greatly exaggerated. Indeed, we have a proportion of young people similar to that found in English regions such as London. Likewise, a lack of motorway coverage has been cited as a reason for increased premiums, because statistically those are the safest road type. However, maps show that Northern Ireland has a relatively consistent motorway density compared with regions in the UK and Europe. Moreover, some of the fundamental actuarial evidence regarding the number of accidents, claims and casualties on our highways weighs against any of the debatable factors regarding demographics or road layout.

Those facts must be kept at the forefront of our mind when considering the claimed justification for the increased cost of premiums. They are rising at a time when Northern Ireland is experiencing a decline in the number of road traffic accidents: 2010—the most recent year on record—saw the lowest number of road deaths since records began in 1931. Naturally, every death on our roads is a tragedy, but we must commend the work done to improve safety.

There are some basic facts that are hard to reconcile with rising insurance costs. The number of road traffic accidents reported to the police service has dropped over the past decade from nearly 40,000 per year in 2000 to about 30,000 per year in 2009. The number of compensation claims is decreasing, whereas in England and Wales the numbers are rising. More specifically, according to a National Audit Office report published at the beginning of the year, the number of claims reported to the compensation recovery unit fell by 23% in the decade up to 2009. In short, the trend is clear: although accidents and claims are decreasing, the cost of insurance is increasing. I ask the Minister to give detailed consideration to that fundamental point.

[Naomi Long]

I am grateful to the hon. Lady for giving way a second time. Does she accept that one of the factors cited was the higher compensation paid out in Northern Ireland, which was attributed largely to the fact that juries have been involved in such decisions for much longer than in England and Wales? Critically, however, compensation levels did not increase but insurance premiums did, so it cannot be argued that that was what led to increased premiums.

[Ms Ritchie]

I thank the hon. Lady for her useful intervention.

All those facts weigh heavily against any argument that the specific demographic or topographical factors in Northern Ireland justify the increasing costs of insurance, and are extremely difficult to relate to the draconian rise in the cost of insurance premiums.

It has also been suggested, by the Association of British Insurers and others, that the legal system in Northern Ireland imposes increased costs on insurers. However, when compared with what happens in England and Wales, many of the factors in Northern Ireland would be expected to act in the opposite direction. My right hon. Friend the Member for Blackburn rightly highlighted the impact of referral fees on insurance premiums in England. It must be noted that a statutory prohibition is in force against solicitors paying referral fees in Northern Ireland. Given that the payment of referral fees to claims management companies has frequently been cited as a significant contributory factor to increasing premiums in England, its absence would be expected to drive down the costs of insurance in Northern Ireland. However, that does not appear to be the case.

I am certainly not claiming that the system in operation is perfect. Indeed, although referral fees are prohibited for solicitors, other agents, such as brokers, credit hire companies and repair garages, may receive them. Although credit hire companies offer a useful service for non-blame drivers, they also raise the cost for insurers, and we must have firm regulations to remove the potential for the exploitation of accidents or those involved in collisions. The claims advice service is an important step in doing that, and should be commended. Another factor cited as a reason for increasing insurance prices in England is the practice of “no win, no fee”. Such a regime does not operate in Northern Ireland. Indeed, the fact that any claimant would have to invest their own money, or else find a solicitor willing to fund the costs, is a powerful disincentive against speculative claimants.

[Jim Shannon]

I shall be very quick with this intervention, Mr Deputy Speaker. Does the hon. Lady think that specific consideration needs to be given to social need and the fact that Northern Ireland is clearly, as we all know, a rural community? There are special circumstances in Northern Ireland. Does she think that those should be considered as well?

[Ms Ritchie]

I take on board what the hon. Member for Strangford (Jim Shannon)—my neighbouring constituency—has said. Like him, I represent a rural constituency and am well aware of issues such as a lack of jobs, inaccessibility, and the economic burden on people. All those can place increasing burdens on people at a time when insurance premiums are increasing.

All that, taken together with the absence of referral fees for solicitors, suggests that Northern Ireland offers a legal system that should act to keep costs down and be at least as effective as the system in England and Wales, if not more so. I would like the Minister to note my concern that that is certainly not reflected in the cost of insurance. I accept that the cost of claims for minor injuries in Northern Ireland can be higher than in England and Wales, partially as a result of there being no recourse to the small claims court for such cases, but opening up the small claims court to such cases is not necessarily the remedy, as that will bring its own risks and problems. However, more needs to be done to ensure that spurious and over-inflated claims do not clog up the system and raise costs for honest motorists. We must increase the burden of medical evidence that is required before establishing cases of whiplash or other, similar injuries, not to penalise the vulnerable—those with genuine, medically verifiable injuries would in no way be affected—but to ensure that the police and medical authorities work together so that claims are paid only in cases involving genuine accidents and genuine injuries.

I have dealt at length with the figures and the legal issues, but behind the wealth of statistics are the everyday problems that the high cost of insurance represents. Those living on low incomes or in rural areas can simply no longer afford to keep a car on the road. Many young motorists and their parents in my constituency have told me of their struggles to secure affordable insurance. They are understandably concerned about the discrepancy in insurance prices between Northern Ireland and other regions in Britain. Through having to pay excessive insurance fees, households in Northern Ireland are being discriminated against. That unfair practice has been in place for too long, adversely affecting those, young and old, who depend on their cars for work, particularly in areas where public transport provision is limited.

The broader context is that the economy is suffering, with record numbers of young people out of work, and that is only exacerbated by restricting people’s use of motor vehicles. We need a dynamic, mobile work force, but making the cost of car insurance so expensive puts up a barrier to our economic success, especially for the young, among whom the unemployment rate is estimated at 18%—almost one in five cannot find a job—compared with an overall unemployment rate in Northern Ireland of 7.6%. Excessive insurance premiums adversely affect young people, preventing them from offering the skill of driving to potential employers. In these extremely challenging economic times, I would ask the Minister to consider any measures that would make insurance more affordable for young people, particularly when driving relates to their employment.

Insurance costs have a real impact on people, young and old, who need to be mobile for social and economic reasons. I hope that I have made clear the scale of the problem faced by our motorists. The insurance industry must stabilise its premiums so that hard-pressed motorists get a fair deal when they purchase their vehicle insurance. I seek assurances from the Minister that he recognises the problem and will act in unison with ministerial colleagues in the Northern Ireland Executive to address the problem in the light of any recommendations from the upcoming Office of Fair Trading report.

Day in, day out, my Northern Ireland colleagues and I face constituents who come to us about the rising cost of car insurance. I heard it again today when I participated in a BBC Northern Ireland debate. There were numerous calls from young people, as well as middle-aged to elderly people, all complaining about the lack of competition and the lack of insurance companies offering different insurance rates. However, the most abiding comments that I heard were about how people wanted insurance costs driven down so that they could drive their cars and access the employment market.

I thank you for your indulgence, Mr Deputy Speaker, and look forward to the Minister’s response.