Infrastructure (Financial Assistance) Act 2012: Annual Report

Greg Hands Excerpts

Thursday 7th July 2016 Written Statements

[The Chief Secretary to the Treasury (Greg Hands)]

The Annual Report to Parliament under the Infrastructure (Financial Assistance) Act 2012 for the period 1 April 2015 to 31 March 2016 has today been laid before Parliament.

The report is prepared in line with the requirements set out in the Infrastructure (Financial Assistance) Act 2012 that the Government report annually to Parliament on the financial assistance given under the act.

[HCWS73]

UK Economy

Greg Hands Excerpts

Wednesday 29th June 2016 Commons Chamber

[The Chief Secretary to the Treasury (Greg Hands)]

I thank the Opposition for tabling this motion and giving the House the opportunity to reflect on the momentous events of the past week. I also congratulate the hon. Member for Salford and Eccles (Rebecca Long Bailey) on her meteoric promotion to the shadow Cabinet. My right hon. Friend the Chancellor has already congratulated her, but I thought it worth repeating in case there have been any further changes in the past three hours. In all seriousness, I welcome her to her role, and I wish her good fortune in what could be a difficult time in the Labour party.

It is two weeks to the day since we last gathered in the Chamber to debate whether it was in our best interest to stay in the EU, or whether to plot our own course ahead—indeed, I had the last word for the Government in that debate, but we have seen what can happen in two weeks. I said that although I believed the EU needed reform we were better off in. Many hon. Members on both sides of the House spoke in support of that view, just as others—again, on both sides of the House—put the case to leave. That is the mark of a good democracy. With such a big decision about our future, it was right that the ultimate choice was for the people who make this country what it is. In the past few months and years, this has not been a question confined to the halls of Westminster. It is one that has been debated in homes and streets, on the way to school and on the way to work.

Last Thursday, we braved a typical British summer in large numbers to each have our own say on the question. That is the mark of a healthy democracy. Now we have made the collective choice to leave the European Union, countries around the world will see at least that Britain has a Government who listen to the direction its people set and plot their course accordingly. I am sure my hon. Friends will agree that that is the mark of a true democracy.

[Stephen Gethins]

On the mark of a true democracy—I made this point earlier—does the Minister agree that we should have a timetable to scrap the House of Lords, given the vote about democracy?

[Greg Hands]

This may come as news to the hon. Gentleman—he was not here in the previous Parliament, although some of his SNP colleagues were—but we had a very extensive set of debates, including a number of votes, on the future of the House of Lords. I do not think that, at this time of great interest in the nation’s constitutional affairs, another debate about the future of the House of Lords would be sensible.

We heard some very good speeches, including from my hon. Friend the Member for South Suffolk (James Cartlidge). I agree with him that it is no use going back to what might have happened. We need to move forward in reasserting our strengths as a nation and as an economy. I could not agree with him more that we need to continue with a fiscally prudent regime and build a surplus before the end of this Parliament.

[George Kerevan]

Is the Minister therefore saying that the Treasury is still committed to running a budget surplus in 2019, come what may?

[Greg Hands]

The fiscal rules provide for action in the event of particular eventualities. I do not see a need to revise the rules at the moment. We move forward from here. The most important thing is for all of us to unite in moving forward and to make the best possible case for our renegotiation in the European Union.

We heard from the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), who is a predecessor of mine in this role. I totally agree with him about being loud and clear on the rights of existing EU nationals in this country. I can tell him that my own wife, Frau Hands, would very much agree with him as well.

[Stewart Hosie]

Will the Minister give way?

[Greg Hands]

I am going to talk a little more about the debate.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made a very powerful speech, referring to his very strong business background. Like me, he strongly supported the remain campaign. He made strong points about business and the importance of making sure we secure business and trade in our new arrangements.

The hon. Member for Ilford North (Wes Streeting) said he is one of the youngest Members of this House and that he had not been alive when the country had been outside the European Union, which is food for thought. All the years he has been alive, the country has been in the European Union. He was right to say that if an economy goes wrong, it is very likely to be the poor who suffer most. That would also apply in London, which we both represent. He issued a warning to the skeleton Front Bench of his own party. It is not appropriate for me to reflect too much on that, but I am sure his points landed with those he wished to make them to.

My hon. Friend the Member for Bexhill and Battle (Huw Merriman) made a strong contribution. He made an interesting observation at the beginning of it, when he said he hosted debates with high-quality speakers in his constituency and came away thinking that they did not seem to sway voters either way. He also said that the economy will bounce back if we act with resolve, which was an important point.

We then heard three speeches from Scottish National party Members—the hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin), for Ross, Skye and Lochaber (Ian Blackford) and for North East Fife (Stephen Gethins)—and I have taken a couple of interventions from them. They made impassioned speeches and some pretty familiar points.

[Ian Blackford]

Will the Minister give way?

[Greg Hands]

No, I will carry on.

The result may not have been what some of us wanted, hoped for or even expected, but that does not mean that the Government were unprepared for it. In the past six years, we have been working hard to bring our economy back from the brink and get our public finances back under control. We said we needed to fix the roof for any economic storms ahead, and that is what we have done. We have brought down the deficit, and we have steady growth, record employment and a resilient financial system, which we spent the past six years strengthening.

We have done the analysis on what leaving the EU might mean, and considered the potential impacts on our economy in both the short and the long term. There was general consensus in the House a fortnight ago on the risks we might face, so hon. Members recognise that it will not be plain sailing and that there are challenges ahead, but thanks to the measures we have taken over the past six years our economy is as well prepared as it could be to face whatever comes our way.

We anticipated that there would be an immediate impact on the value of our currency and the stability of the financial markets. The Treasury, the Bank of England and the Financial Conduct Authority have extensive contingency plans in place and we are watching the markets closely. Although we have seen volatility, the markets nevertheless continue to function effectively.

The Prudential Regulation Authority has worked closely with major financial institutions to prepare extensively for the consequences of a vote to leave. The Bank of England stress tests show that UK banks have enough capital and liquidity reserves to withstand a scenario more severe than the country currently faces. Thanks to our work to strengthen our financial stability, banks in the UK have raised more than £130 billion of additional capital in the past six years, and have more than £600 billion in liquid assets to ensure that they can keep lending to UK businesses and households during challenging times. The Bank of England can provide more than £250 billion of additional funds to support the banks and the smooth functioning of the markets. It can also provide liquidity in foreign currency if required. The authorities have all the necessary tools in place to protect financial stability. They are monitoring developments closely and will not hesitate to take further measures as required.

As we embark upon the renegotiation of our relationship with the EU, I reiterate the reassurances of the Prime Minister that the result does not mean that everything changes overnight. For British subjects living in the EU and EU citizens living in this country, there will be no immediate changes. People can still travel across the EU, businesses can trade as they did and our services can be sold as before.

The Prime Minister has been clear that there will be no immediate triggering of article 50, the procedure by which a member state can leave the EU. That gives us time to plan the new arrangements we are seeking with our European friends and neighbours. It also gives the Prime Minister’s successor the opportunity to make any adjustments to economic policy and our public spending, informed by an assessment of our economic situation from the independent Office for Budget Responsibility this autumn. In the meantime, we will continue to work hard to maintain the fiscal stability we have always worked so hard to deliver. A new unit will be set up in Whitehall bringing together experts from across the civil service, and in answer to the right hon. Member for Birmingham, Hodge Hill I can say that it will extend right across Whitehall, including all Departments likely to be affected, and that it will be given the resources it needs.

[Liam Byrne]

The Home Office?

[Greg Hands]

Yes, it will include the Home Office, and it will advise on the many options we face as we determine our future relationship with the EU. As Chief Secretary to the Treasury, I expect to play my own part in that task over the coming months.

[Danny Kinahan]

Does the Minister agree that the unit needs to consider how we hold the Union together and build the relationships between Scotland, England, Wales and Northern Ireland, given the direction in which Scotland seems to want to move and the need to maintain our relationship and trade with Ireland?

[Greg Hands]

I thank the hon. Gentleman for his intervention. Of course, we have to keep on board all the devolved Administrations and make sure we get the right deal for all the nations of this country and, indeed, for Gibraltar. I know that different parts of the UK voted different ways—my constituency voted 70% to remain—but we must come together and ask for, and get, the best possible deal for the UK as a whole in the negotiations. That is absolutely the key point. This is not a time for division between our nations and communities.

Now is also the time to heal divisions in the country and in our communities. I was one of the first to condemn the disgraceful attack this weekend on the Polski Osrodek Spoleczno-Kulturalny—POSK—which is in what used to be my constituency in Hammersmith. I was delighted that—people have commented on this—perhaps for the first time in 20 years the hon. Member for Hammersmith (Andy Slaughter) and I have found something to agree on. We were retweeting each other in condemnation of the attack. It was an absolutely disgraceful attack on the Polish community in particular and on EU nationals and foreigners in general.

There was some irony there. I am not sure that the people responsible had any sense of what POSK did. POSK was set up in the 1960s. It had nothing to do with EU freedom of movement and labour or our joining the EU in 1973—even if it did, of course, the attack would still not have been correct. POSK was founded back in the 1960s, as a focal centre for the local Polish community, many of whom fought shoulder to shoulder with British servicemen in the second world war, fighting for our values and protecting our way of life. Never has the word “solidarity” felt more appropriate in how we reach out to the Polish community and other EU communities in this country. Sadly, that attack was not the only incident of xenophobia across the country, but every right-thinking person, on both sides of the House and the referendum debate will see them for what they are: ignorant and unwelcome displays of hatred, which have no part to play in the future of this country.

Both professionally, as the representative of a constituency where about 17% of local people are EU nationals and which benefits from their contribution, and personally, as the husband of a German wife and father of half-German children—they were in tears on Friday morning after hearing the referendum result—I want to send the message loud and clear from this Chamber that our fellow Europeans are still welcome in the UK, as are those from beyond the continent.

[Lyn Brown (West Ham) (Lab)]

I had an Italian constituent in tears on Saturday—she had been here for 30 years and had raised her family here—asking whether we were going to deport her and her children. We need to get a grip and the Government need to get a plan.

[Greg Hands]

The Government have been loud and clear in condemning these events, and a statement was made earlier on what the Government are doing in response. A vote to leave the EU is not a vote for hatred and intolerance; it is not a vote to turn our backs on our European friends; and it is not a vote to pull up the drawbridge and turn away from the world. At the same time as we find the best way forward for this country, we must uphold the very best values.

This debate has moved on from a fortnight ago. It is no longer a question of whether we should leave the EU, but how. We have got our decision; now is the time for all of us to roll up our sleeves, get on with the job and keep building the best future for this country. I have every confidence that this is precisely what our hard-working people will do; it is precisely what our businesses will do; and it is precisely what this Government will do. Investors across the world will see that our economy is fundamentally strong and that we are still very much open for business. In government, we will continue to build on those foundations to seek the best opportunities for people across the UK. That has always been our aim, and it will remain our aim as we plan the way ahead.

Question put and agreed to.

Resolved,

That this House recognises the risks posed to the UK economy following the decision to leave the European Union; notes with concern the loss of the UK’s triple A credit rating, the potential output cut, potential job losses, risks to investment and the volatility in the equity and currency markets; and calls on the Government to bring forward measures to protect jobs and support businesses in the nations and regions in relation to the short, medium and long-term potential consequences of the referendum decision, and to address the current threats to community cohesion.

Oral Answers to Questions

Greg Hands Excerpts

Tuesday 7th June 2016 Commons Chamber

[Nick Thomas-Symonds (Torfaen) (Lab)]

4. What steps he is taking to ensure that young people are not disproportionately affected by reductions in government expenditure.

[The Chief Secretary to the Treasury (Greg Hands)]

The Government have a long-term economic plan designed to help young people, which includes 3 million new apprenticeship starts, a 10-year low in youth unemployment, the lifetime individual savings account to help first-time buyers, 360,000 16-year-olds doing National Citizen Service and record numbers going to university.

[Helen Hayes]

The Chancellor has claimed that the Government

“put the next generation first.”—[Official Report, 16 March 2016; Vol. 607, c. 951.]

However, the Equality and Human Rights Commission’s “Is Britain Fairer?” report, which was published last year, found that younger people in the UK faced the worst economic prospects for generations. Young people in my constituency are bearing a disproportionate burden of the Government’s cuts. The abolition of the education maintenance allowance has made it harder for 16 and 17-year-olds to pursue educational opportunities; university tuition fees have trebled and are set to rise again; changes to the schools funding formula will see—

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[Greg Hands]

That was an extraordinary question. It ignored all the announcements that I made about what the Government have been doing for young people. Let us not forget the situation we inherited in 2010, when youth unemployment had gone up by 45% under Labour. The facts are these: a record number of young people are going to university, including a record number from disadvantaged backgrounds, and the proportion of young people struggling financially has almost halved since the hon. Lady’s days in 2010.

[Nick Thomas-Symonds]

The wages of 18 to 21-year-olds fell by about £1,000 a year during the last Parliament, yet under-25s are excluded from the national living wage. Will the Chief Secretary to the Treasury condemn what the Minister for the Cabinet Office said: that that is because people under 25 are simply not productive enough?

[Greg Hands]

The hon. Gentleman is ignoring our amazing record on youth unemployment since we took office six years ago. Youth unemployment has fallen by 102,000 this year. Youth employment is up 94,000 over the year and is close to the highest proportion on record. On why the national living wage does not apply to those who are under 25, I remind him that the national minimum wage does apply to those who are under 25 and is increasing under this Government. For younger workers, the priority is to secure work and gain experience. Youth unemployment remains higher than the unemployment rate for those aged over 25.

[Mr Alan Mak (Havant) (Con)]

Since 2010, nearly half a million fewer children and young people are in households where there is worklessness. Will the Chief Secretary confirm that the Government will continue to help households into work and to cut poverty?

[Greg Hands]

My hon. Friend is quite right, and we will continue to take action in this space. The number of households where nobody had ever worked doubled under Labour. Thanks to us, youth employment is up 94,000 over the year and continues to rise.

[Huw Merriman (Bexhill and Battle) (Con)]

Does my right hon. Friend agree that the way to give a fairer deal to younger people is to make sure that they are not saddled with the debts of reckless spending? Will he assure me that he will do everything he can to ensure that this Government balance the books?

[Greg Hands]

My hon. Friend is quite right that it is future generations who would have to repay the debt that the last Labour Government left us and the even greater debt that the current Labour team want to give us with their reckless spending pledges. Household debt as a proportion of income has fallen since Labour’s financial crisis. We are in a much healthier condition in 2016 than we were in 2010.

[Mr Speaker]

Order. I must advise colleagues that we are today visited by Mr Kadri Veseli, the Speaker of the Parliament of Kosovo, who is visiting the UK in the year in which that independent nation celebrates eight years of independence. My colleague and his team are warmly welcome in the House.

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[Diana Johnson (Kingston upon Hull North) (Lab)]

13. In what circumstances the use of his Department’s Contingencies Fund is authorised.

[The Chief Secretary to the Treasury (Greg Hands)]

The Government seek parliamentary authority for their spending plans through supply procedure. Occasionally, expenditure on some services is so urgent that it cannot await normal procedure. The Contingencies Fund enables the Treasury to make repayable cash advances to Departments for urgent services, and Treasury officials assess cases on the basis of criteria set out in Treasury guidance.

[Diana Johnson]

Extra support being consulted on for contaminated blood victims is coming from the Department of Health’s budget, where there is simply not enough money, yet previously central contingency funds have been used to deal with national scandals such as Equitable Life. Before the spending review, 18 MPs, from six parties, wrote to the Chancellor suggesting that the £230 million the Treasury was getting from the sale of the blood products company could fund a fair settlement for contaminated blood victims. We have had no reply, so will the Minister look at this again?

[Greg Hands]

I thank the hon. Lady for that question. I will ensure that she gets a reply, which she deserves, because this is a deeply distressing issue and the Government take it very seriously indeed. I do not believe it is appropriate to use the Contingencies Fund in this particular case. She will know that the consultation on the reform of financial support to those affected closed on 15 April, and we will be replying in due course. Meanwhile, the Department of Health has identified additional money—£100 million from its budget—for these purposes. This is in addition to the £22.5 million that it spends on this annually, as well as the further £25 million announced in March 2015. These steps will more than double the support.

[Owen Thompson (Midlothian) (SNP)]

14. What steps he is taking to improve tax transparency.

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[The Chief Secretary to the Treasury (Greg Hands)]

I totally agree with the hon. Gentleman that we need to get on with income tax devolution. I will be having further meetings with the Welsh Government to ensure that we do that. At the same time, we need to look at questions such as how to adjust the block grant, which of course will depend on what is devolved and when. We have also set the funding floor at 115% for the duration of this Parliament.

[James Morris (Halesowen and Rowley Regis) (Con)]

The black country economy in the west midlands has been one of the fastest growing sub-regions in the UK over the past few years, with new jobs and investment. Does the Chancellor agree that we need to continue to focus on investing in growth in the black country and avoid the economic risk that would come from us leaving the European Union?

National Infrastructure Commission

Greg Hands Excerpts

Thursday 19th May 2016 Written Statements

[The Chief Secretary to the Treasury (Greg Hands)]

Yesterday, I laid the response to the National Infrastructure Commission consultation [CM 9289]. This reconfirms the Government’s plans to establish the Commission via primary legislation, and sets out a number of areas where policy has developed following public consultation.

On 5 October 2015, the Chancellor announced the creation of the National Infrastructure Commission to provide expert independent analysis of the long-term infrastructure needs of the country. The Commission has been operating in interim form since then.

The Government held a 10-week public consultation between 7 January and 17 March on the governance, structure and operation of the Commission. The public consultation attracted 136 responses, primarily from industry associations, companies, lobby groups, local authorities and research bodies. The majority were very supportive of the concept, and of the Government’s proposals for fully establishing the Commission.

The response confirms that the Commission will produce a national infrastructure assessment once in every Parliament, setting out its analysis of the UK’s infrastructure needs over a 10 to 30-year time horizon. The Commission will also examine pressing and significant infrastructure challenges in studies set by the Government. The Government will be obliged formally to respond to the Commission’s recommendations.

To fulfil its objectives, the Commission will be able to request information and analysis from Government Departments. The Commission will work within a remit to ensure that it recommends infrastructure that is sustainable and affordable and offers real economic benefits.

The Government intend to introduce legislation to place the Commission on a permanent, independent footing as soon as parliamentary time allows.

Copies of the response are available in the Vote Office, Printed Paper Office and on the gov.uk website.

[HCWS2]

Countesswells Development Limited: UK Guarantee

Greg Hands Excerpts

Tuesday 26th April 2016 Written Statements

[The Chief Secretary to the Treasury (Greg Hands)]

The UK Guarantees scheme was announced in July 2012 with spending cover provided through the Infrastructure (Financial Assistance) Act 2012, receiving Royal Assent on 31 October 2012. The scheme provides a sovereign-backed guarantee to help infrastructure projects raise debt finance. Guarantees for up to £40 billion in aggregate can be offered under the initiative.

The Government are confirming that they have approved the provision of a guarantee for up to £86 million to the Countesswells project for the construction of over 3,000 homes on the Countesswells site in Aberdeen.

The Government will report to Parliament on the financial assistance given in line with the requirements set out in the Infrastructure (Financial Assistance) Act 2012.

[HCWS703]

Oral Answers to Questions

Greg Hands Excerpts

Tuesday 19th April 2016 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

3. What assessment he has made of recent trends in the level of productivity; and what steps he is taking to increase productivity.

[The Chief Secretary to the Treasury (Greg Hands)]

Productivity performance in the UK has been weak since the financial crisis, as it has been in all developed countries. The Government published their productivity plan “Fixing the foundations” last year. At the Budget, we announced additional reductions in corporation tax and business rates to incentivise investment, and gave the green light to infrastructure projects such as Crossrail 2 and High Speed 3.

[Kirsty Blackman]

The Scottish National party has continually argued that the UK economy is in dire need of investment to stimulate productivity. Despite the productivity plan, the Chancellor seems determined to persevere with policies that stifle productivity. What policies have the UK Government enacted that will encourage an increase in productivity?

[Greg Hands]

The hon. Lady is right in saying that there is an issue in relation to productivity in this country, but there is an issue across all major developed economies. Over the past year, productivity growth in this country was about 1%, which compares with 0.9% across the G7. On specific measures, we have established the National Infrastructure Commission, protected science funding at the Budget and spending review, introduced the Housing and Planning Bill, announced the apprenticeship levy, which is coming in, and announced a £100 billion infrastructure programme over the course of this Parliament.

[Neil Carmichael (Stroud) (Con)]

Does the Chief Secretary to the Treasury agree that, by being a member of the European Union, this country benefits hugely from a cross-fertilisation of good ideas across the European Union, the supply chain, and foreign direct investment at 50%? Our trade, too, also benefits from our being in the single market—[Interruption.]

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

May I press the Minister? He cannot just hide behind what he claims to be happening in all advanced economies. We are performing worse than most, particularly France. Is the reason for that not to do with the lack of skills of our workers and the lack of good education in our country? Will the Chancellor’s silly policy on forced academisation help or hinder?

[Greg Hands]

We recognise that there is an issue with productivity, which is why we published the productivity plan, but in terms of growth, the UK was the fastest-growing major economy in 2014. Last year, we were in second place; this year we are also projected to be in second place, growing at a healthy rate. Therefore, with regard to growth, this country is doing very well indeed.

[Damian Collins (Folkestone and Hythe) (Con)]

Does the Chief Secretary to the Treasury agree that £540 billion invested by foreign businesses in the UK over the past decade is vital to our future productivity, and that, if we left the EU, the uncertainty of our trading relationship with Europe and the world would put that investment in jeopardy?

[Greg Hands]

I agree with my hon. Friend. Leaving the EU would damage UK productivity. It has the potential to deny access, or to make access more difficult, to markets and investment. It is worth noting that the UK, with 28%, is the No.1 EU destination for foreign direct investment, and a large part of that is to do with our status as an EU member.

[Rob Marris (Wolverhampton South West) (Lab)]

It was five years in office before we saw a productivity plan, and what happened last year? Productivity in the UK was 18 percentage points below the average for the rest of the G7. One sector that needs help is the UK steel industry. It needs more capital investment to be more competitive. How much money will the Government invest in steel in the next 12 months to improve productivity and save British jobs?

[Greg Hands]

The hon. Gentleman mentions the figure of 18 percentage points, and I refer him to an earlier answer in which I said productivity has been a long-standing issue in the UK. In fact, the figure was 17 percentage points back in the 1990s. As he well knows, the action we have taken on steel includes securing state aid to compensate for energy costs, securing flexibility over EU emissions regulations, ensuring that the procurement rules can also allow social and economic factors to be taken into account, and continuing to tackle unfair trading practices. The Government have been very active on steel, and that has not ended today.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

4. What steps he has taken to reduce the number of tax havens worldwide.

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[Scott Mann (North Cornwall) (Con)]

9. What assessment he has made of the effectiveness of measures to support the economy in the south-west announced in the Budget 2016.

[The Chief Secretary to the Treasury (Greg Hands)]

We announced at the Budget an extensive package for the south-west covering both rail and road: a new marine hub enterprise zone in Cornwall, a £4.5 million boost for ultra-fast broadband across the region and, to top it off, a £900 million devolution deal with the west of England. The south-west will also benefit from the income tax cuts and business rate reductions announced in the Budget.

[Scott Mann]

One item that went largely unnoticed in the Budget was the £19 million for community land trusts in the south-west to mitigate the impact of second home ownership. How will that money be allocated? Will my right hon. Friend work with me and fellow Conservative MPs in the south-west to ensure that that money is put aside to help people to purchase plots and to help working people to get on?

[Greg Hands]

My hon. Friend is right that we will be releasing £19 million for community-led housing in the south-west. I look forward to discussing with him how we might best approach that issue. We are also introducing a new right to build and reforms to planning, which will boost the custom-build sector in Cornwall and beyond.

[Rebecca Pow (Taunton Deane) (Con)]

Does my right hon. Friend agree that the Labour Government underfunded infrastructure projects in the south-west, resulting in lower productivity in the region and hence less of a contribution to the national economy than we should have had, but that it is this Government who are turning that around with their huge £7.6 billion commitment to infrastructure and connectivity?

[Mr Speaker]

Just as long as the Chief Secretary focuses on what this Government are doing. He does not need to burble on about the past.

[Greg Hands]

I welcome the opportunity to say something about what this Government are doing on infrastructure in the south-west. We have 35 projects in the infrastructure pipeline in the south-west with a value of £23.2 billion. At the Budget alone, we announced improvements to Exeter St David’s station, at Weston-super-Mare and at Cheltenham Spa station. I have already mentioned community housing. There is also a fund to provide more and better roads in the south-west.

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[Tom Elliott (Fermanagh and South Tyrone) (UUP)]

Nobody has ever accused me of a lack of stamina, Mr Speaker. Am I right and accurate in my assessment that LIBOR funds can be used only for charitable purposes and will not go to a Department?

[The Chief Secretary to the Treasury (Greg Hands)]

The question is, I hope, about Air Ambulance Northern Ireland, and I confirm that we are working with the charity and the Northern Ireland Executive on how those funds are delivered. They will go to the air ambulance charity, which I know will be broadly welcomed across all communities in Northern Ireland.

[Sir Gerald Howarth (Aldershot) (Con)]

In his document published yesterday, the Chancellor posed the question:

“Is our national security best served by retreating from the world?”

I hope that he is not foolish enough to suggest that those of us who wish the United Kingdom to leave the European Union want to retreat from the world, because the truth is far from that. We want the United Kingdom to break free from the sclerotic shackles of the EU and its superstate, and embrace the exciting world out there that befits the world’s fifth largest economy, a nuclear power, and a permanent member of the United Nations Security Council.

National Infrastructure Commission Reports

Greg Hands Excerpts

Wednesday 13th April 2016 Written Statements

[The Chief Secretary to the Treasury (Greg Hands)]

Today I announce the publication of the Government’s response to three reports by the National Infrastructure Commission on pressing infrastructure challenges facing the country.

“Smart Power”, published on 4 March, sets out a plan to ensure that supply and demand are balanced as efficiently as possible in the energy system, and the Government welcome the report as an opportunity to transform the future of the UK’s electricity sector:

https://www.gov.uk/government/publications/smart-power-government-response-to-the-national-infrastructure-commissions-report

“Transport for a World City”, published on 10 March, sets out priorities for future large-scale investment in London’s public transport infrastructure, and the Government welcome the report as an opportunity to support London’s continued growth through strategic, long-term investment in infrastructure:

https://www.gov.uk/government/publications/transport-for-a-world-city-government-response-to-the-national-infrastructure-commissions-report

“High Speed North”, published on 15 March, is a plan to transform the connectivity of the northern cities, and the Government welcome the report as an opportunity to help drive forward the Northern Powerhouse:

https://www.gov.uk/government/publications/high-speed-north-government-response-to-the-national-infrastructure-commissions-report

The National Infrastructure Commission was announced in October 2015, to provide expert independent analysis of the long-term infrastructure needs of the country. The commission has been operating in shadow form since then.

At Budget 2016, the Chancellor confirmed that the Government have accepted the commission’s recommendations in its recently published reports. Copies of the documents will be deposited in the Libraries of both Houses.

The Government have recently consulted on the structure, governance and operation of the commission, and propose to introduce legislation to put the commission on a statutory footing.

[HCWS671]

Budget Resolutions and Economic Situation

Greg Hands Excerpts

Tuesday 22nd March 2016 Commons Chamber

[The Chief Secretary to the Treasury (Greg Hands)]

May I associate myself with the comments made by the Chancellor, Members on both Front Benches and many Back Benchers about the terrible terrorist outrages in Brussels this morning? I remind everybody that we stand shoulder to shoulder with the people of Belgium, as we in this country have done many times before against the scourge of terrorism.

The past four days of this debate have certainly been lively. I want to look back not just four days, but more than six years. Let us cast our minds back to six years ago, in 2010, when the whole world doubted the UK’s ability to pay its way. Now the UK is forecast to grow faster than any other major advanced economy in the world.

Six years ago, we were borrowing 25p out of every £1 that we spent—almost £6,000 per household per annum. Now that figure is down to 10p, and will be 7p next year. Six years ago our deficit was more than 10% of GDP. Now we are three years away from building that surplus. Our economy is a full 12.6% bigger than it was in 2010 when my right hon. Friend delivered his first Budget. Our foreign exchange reserves have doubled, and every day has seen an average of 1,000 jobs created. Inflation is low, poverty and inequality are falling, and wages are rising. Yes, that is due to our long-term economic plan.

We can only have a fair and compassionate society on the back of a strong economy. That is what the British electorate asked us to do in May, and that is what we are doing. We are proud of the jobs created over the past six years, proud of having lifted more than 1 million low-paid people out of income tax, proud of having introduced the national living wage, and proud of our record as a compassionate one-nation Conservative Government.

Let me respond to some of the points raised today, partly because the shadow First Secretary of State failed to mention any of them. The hon. Member for Dewsbury (Paula Sherriff) and my right hon. Friend the Member for Basingstoke (Mrs Miller) raised a technical detail and asked, with reference to the tampon tax, what will happen to the money now allocated for that in the Budget. That was a one-year bidding process, and all the organisations will get the money that we announced on Wednesday. The relevant clause for that will be in the Finance Bill, which will be published on Thursday.

Various Conservative Members, including my hon. Friends the Members for Warwick and Leamington (Chris White), for South Dorset (Richard Drax), for Richmond (Yorks) (Rishi Sunak), for Croydon South (Chris Philp) and for Dudley South (Mike Wood), my right hon. Friend the Member for Basingstoke, and others, praised the wealth creators and business, and this is very much a Budget for business, wealth creators and enterprise. My hon. Friends the Members for Harrow East (Bob Blackman) and for Peterborough (Mr Jackson), the hon. Members for Clwyd South (Susan Elan Jones) and for City of Durham (Dr Blackman-Woods), and the right hon. Member for Delyn (Mr Hanson) all mentioned infrastructure spending—albeit with slightly differing views—and individual projects.

The Government remain on course to deliver £100 billion in infrastructure projects this Parliament. The Budget announced more for flood defences, and for transport projects in the north, London and right the way across England. My hon. Friend the Member for Harrow East raised a point about rough sleeping, and we are committing £110 million extra for that. No allocations have yet been made, but London is very much a focus of that additional money.

When the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) spoke I had to stop and check that I had heard him correctly, because he spoke about a risk “in relation to the price of oil”. I can tell him something about a risk “in relation to the price of oil”, because if Scotland were to have separated on the SNP’s proposed date of this Thursday, it would now be facing a fiscal black hole of £19 billion, largely caused by a 98% collapse in oil revenue.

My hon. Friend the Member for Norwich North (Chloe Smith) called this a Budget for savers and the next generation. She is absolutely right, and the Lifetime ISA will apply even to those who do not put in the full £4,000 a year. We have also launched the Help to Save initiative, which will help lower-paid savers who are on universal credit or tax credits.

My hon. Friend the Member for Erewash (Maggie Throup) highlighted our income tax cuts, which deliver on our manifesto commitment—we are accelerating them for the low-paid, the lower-paid and the medium-paid.

We heard opposing speeches on the merits of the soft drinks industry levy from my hon. Friend the Member for Bedford (Richard Fuller), the hon. Member for Falkirk (John Mc Nally) and others. My hon. Friend raised a number of technical objections to the levy. We are consulting on the details and are keen to work with the industry on it, but hon. Members should make no mistake: we think it is the right thing to do to help to deal with the UK’s £27 billion per annum obesity problem.

The hon. Member for Foyle (Mark Durkan) thanked us on behalf of Northern Ireland for launching funding for the new air ambulance, which I know has been very well received. We are open to ideas on UK city deals coming from Northern Ireland, but I should say to him that the Stormont House agreement committed more than £2.5 billion to the Executive, which I think was very generous.

We heard from many former members of the Labour Treasury team—the shadow shadow Treasury team, as they have been called—including the right hon. Member for Delyn, and the hon. Members for Birmingham, Ladywood (Shabana Mahmood) and for Leeds West (Rachel Reeves). All protested at the policies and initiatives launched by the Government. I have two things to say to them. First of all, in all of the last Parliament, I do not recall any of them coming up with a single proposal to save money or cut spending, or to back any tax rise. More interestingly, not one of the shadow shadow Treasury team had a word of praise for their actual shadow Treasury team, which was absolutely compelling evidence of where they are going wrong.

It is because we have faced up to the facts and because we have taken the difficult decisions that our economy is fundamentally stronger, more resilient and better able to protect our families and households in uncertain times. Uncertain times are what we must currently deal with. Growth worldwide is slowing, commodity prices have fallen and productivity growth has been sluggish, particularly in the most advanced economies. The middle east remains unstable and global markets have experienced worrying turbulence. The UK is immune to none of that. Responsible government means preparing our economy for the challenges that lie ahead. It means ensuring that we never again find ourselves in the position we found ourselves in six years ago. It means that, when problems come up, we deal with them in full and early on.

[Rachel Reeves]

Many Labour Members have asked about the £4.4 billion black hole. Will the Chief Secretary to the Treasury please confirm whether that £4.4 billion will be plugged by further cuts to welfare, tax increases, spending cuts or more borrowing? It has to be one. Which is it?

[Greg Hands]

It is always good to hear from the shadow shadow Treasury team. I can tell the hon. Lady that more will be outlined in the course of this year in the autumn statement. However, we remain on course—[Interruption.]

[Mr Speaker]

Order. Members are becoming a little over-excitable. The Chief Secretary must be heard.

[Greg Hands]

We remain on course to deliver our budget surplus in 2019-20, which is far more than Labour ever achieved. I would have thought that the hon. Lady would take the opportunity to congratulate the Government on the new commitment to flood defences in Leeds, which she did not mention.

I will be working to find a further £3.5 billion of efficiencies by 2019-20 so that we deliver that surplus by the end of this Parliament. That means that we keep our economy on course, and we refuse to pass on the burden to our children and grandchildren.

At the same time, we will continue to reward aspiration, back growth, invest in education and help people get on in life—because this is a Budget that backs Britain’s businesses. It cuts the burden of business rates by £6.7 billion over the next five years, taking 600,000 of our smallest firms out of business rates altogether. It cuts the rate of corporation tax even further, to 17% in 2020, giving us the most competitive rate in the G7 and benefiting more than 1 million businesses. Through a £1 billion North sea oil and gas package, it is a Budget that helps Britain’s largest industry succeed in difficult economic times; through cuts to both the higher and basic rates of capital gains tax, it encourages investment—the lifeblood of Britain’s businesses; and, through the abolition of class 2 national insurance contributions, it creates a simpler tax system and a tax cut of more than £130 for the 3 million-plus self-employed people in Britain—this Government stand squarely behind them.

This is a Budget that puts cash into people’s pockets. It raises the tax-free personal allowance to £11,500 from next year, and the higher rate threshold to £45,000. We recognise that money should be in savings accounts as well as in pockets, so this is also the Budget that creates the lifetime ISA, helping people to buy their first home or save for their retirement. This is a Budget that freezes fuel duty, helping people every time they fill up their tank. It is a Budget that supports responsible drinkers; helps the nation’s pubs and gives a further boost to the Scotch whisky industry.

I recall seeing on the morning of the Budget the Scottish National party’s lead spokesman saying that he had three asks in this Budget, and he listed them on Twitter. They were to freeze fuel duty, to keep down duty on Scotch and to have a fiscal package for oil and gas. We have met all three of his asks and much more, and this is a very good Budget for Scotland, too.

It is a Budget that strengthens our tax base, through reforming the tax system so that it is in line with the realities of global, 21st-century economics. As I said, in this Budget we take action on the scourge of obesity, which, as well as putting unsustainable pressures on the NHS, ruins people’s health and quality of life, and costs the country about £27 billion a year.

[Catherine McKinnell]

rose—

[Greg Hands]

I do not have time to give way. Because we continue to get the public finances under control, our Budget—[Interruption.] I am sorry, but all the Labour MPs elected in 2010 and 2015 do not remember the last Labour Government, and that is part of their problem. Because we get the public finances under control, our Budget gives this country a stable base from which to support those in need of support. That is a point that too many on the Opposition Benches still do not get: there can only be true social justice on the back of a functioning economy. Had we not taken action in 2010, borrowing would have been £930 billion more by the end of the decade than it is now forecast to be. On a serious point, one more downturn and we could have lost control altogether in this country, and when that happens it is the poorest and the most vulnerable who are hit the hardest. So we say: never again. That is why we take action now, so we do not pay later.

To conclude, I am sure that some on the Opposition Benches will vote against the Budget tonight, but they will be voting against more money going to our schools. They will be voting against 600,000 small businesses being taken out of paying business rates altogether. They will be voting against support for our North sea oil and gas industry. They will be voting against increases for children’s healthcare. They will be voting against helping working people save for their future. They will be voting against lower taxes for the lowest paid. They will be voting against a better future for Britain.

I say that Members should vote for this Budget. Stability, security, prosperity is what the electorate asked us to provide last May and it is that which this Budget provides, and I ask the House to support it tonight.

Amendment (b) agreed to.

Amendment made: (a), after ‘importation’ in paragraph 2(a), insert—

‘other than in respect of value added tax on women’s sanitary products’.—(Paula Sherriff.)

Main Question, as amended, put.

Budget Resolutions and Economic Situation

Greg Hands Excerpts

Wednesday 16th March 2016 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I welcome the Chancellor’s steps today to discourage child sugar consumption. As there is a cross-party consensus on the need to take measures to prevent ill health, it is important that we welcome those steps.

As the stir in the media begins to dissolve over the next few hours, I suspect that many members of the public will spot some of the uglier measures and scarier facts in the Office for Budget Responsibility’s analysis and in the Red Book. The Chancellor clouded many of his announcements in jargon—he goes a little bit faster over some passages in his Budgets. It is the downgrading of economic growth, though, that will be of the most profound importance to many of those commenting on the Budget today. To downgrade expected growth this year from 2.4% to just 2% is a real blow to the Chancellor’s credibility when it comes to delivering economic performance. He has downgraded those figures not only for this year, but for every single year of this Parliament, which has a major effect on a whole series of Budget assumptions.

We already know that the Chancellor took a gamble in the spending review before Christmas. He found £27 billion down the back of a sofa through a series of ONS reclassifications, and he banked on that money, spent a lot of it and committed it in a number of different ways. Now that the money has not materialised, he has had to make a series of adjustments, which we are only just managing to spot in the fine print of the Red Book. I have not had a chance to go through the full details, but it is interesting to make a note of those adjustments.

[The Chief Secretary to the Treasury (Greg Hands)]

I thank the former shadow Chancellor for giving way. I wonder whether he is remembering his days as a senior adviser to Gordon Brown. Surely he must know that the forecasts are now all done independently by the OBR. It is only sensible for the Treasury and the Chancellor to react to those independent forecasts, but to try to shoot the forecaster is fundamentally to misunderstand the nature of the Office for Budget Responsibility.

[Chris Leslie]

Oh dear, oh dear—a bad workman always blames his tools. It is interesting that the Chief Secretary to the Treasury does not fess up to the big changes that have been made with the raids on public sector pensions. Some £2 billion will be taken from public service workers across this country—that was not really emphasised in the Chancellor’s speech. A whopping £6 billion, or 60% of the £10 billion surplus that the Chancellor is still claiming will be achieved, will go on all sorts of shuffles in when corporation tax is paid. That will potentially be very disruptive to businesses and firms across the country.

On the economic forecast, there is a problem not just with growth but with productivity. Despite the fact that the Chancellor has published productivity plans, it is stark to see how productivity has been significantly downgraded in the OBR document. On page 46, we see that, whereas in 2010 real productivity had 21.9% of potential, it has now fallen to 14.4% of potential—a massive faltering of Britain’s performance on productivity. Although the Chancellor has paid lip service to that issue, he has consistently failed to orientate his Budget measures around those economic necessities.

We also need to look at what has been happening to earnings in this country. Again, the growth in average earnings is downgraded not just this year but for every year of this Parliament. Page 91 of the OBR document paints a gory picture of what is happening to average earnings. Of course, that economic outlook has an effect on the numbers in the tax and spending decisions that the Chancellor has to make.

Let us look at what the Chancellor has had to do to try to keep his promises. He is trying his best to stay on course to deliver a surplus at end of this Parliament, but he has already had to admit that he has broken his promise on the welfare cap, and today he has admitted that he is breaking his promise on the national debt. Public sector net debt is up every year in the forecast for this Parliament—a theme that runs through the whole Budget statement. The heroic assumption that the Chancellor is still going to get that £10 billion surplus at the end of the Parliament feels implausible not just to me but to many of the economic commentators who are analysing the Budget statement. As I have said, that surplus is predicated on a £2 billion raid on public service pensions and the £6 billion shuffle in when corporation tax will be realised.

Then we get to some of the other changes that the Chancellor has decided to make. He did not really dwell on this very much, but cutting capital gains tax from 28% to 20% is a phenomenal giveaway to the very wealthiest people in this country. It applies not to residential properties but to those who have an accretion of capital wealth. Their tax will come down significantly, with a giveaway next year of £630 million. In the same year, he will take £590 million—from where? From the disabled—from the personal independence payment section of the social security budget. That is a straight transfer from those in most need to the very wealthiest in society—a tycoon tax cut, as I think it will be known as the days go by and people realise what has been announced in the Budget.

There are other spending cuts in the small print of the Red Book. Poor old local government services, particularly in areas where not a lot of Conservative party members reside—you might be surprised at my cynicism, Madam Deputy Speaker. Local government services received £10.8 billion of funding this year, but that will be cut by a third to just £6.2 billion in the last year of this Parliament. Just imagine the effect on libraries, leisure services, housing, social services and social care. Of course the Government will say that local councils can put up council tax, but they should not think that local residents will not place that council tax increase entirely on the Chancellor’s shoulders. They are the ones who have to pay the price for the cut in local services.

The transport budget will be cut from £2 billion to £1.8 billion by the end of this Parliament. How on earth will that help with the productivity issues we have to address? I have talked about the clear problems that emerge from the OBR Blue Book, and transport is one of the most important areas of infrastructure spend, ensuring that people can get from A to B and that goods and services can flow to markets. All those obstacles and impediments to business will be made worse by the Chancellor’s attitude to transport.

The OBR goes on to say that this era of cuts and Tory austerity will continue not only for this Parliament—never mind the previous Parliament—but will bleed well into the next Parliament. The OBR says that to achieve the surplus they want, the Government need a much bigger cut in current departmental spending of £8.1 billion in 2020-21, compared with the £1.8 billion that they have to cut in 2019-20. There are all sorts of statistical shifts and shuffles going on, all revolving around the Chancellor’s target, and what is that about? Not just the Chancellor’s European referendum anxieties but the leadership challenge from the Mayor of London. Everything in this Budget has revolved around the Chancellor’s political predicament.

We have a Budget that exposes many of the anxieties people have had about this Chancellor’s attitude. It is eminently political, with all sorts of shuffles that do not really have anything to do with the best interests of the economy. With growth down, debt up, productivity faltering, implausible surplus forecasts and a tycoon tax cut—a capital gains tax giveaway paid for by disability independence payments—it is not a Budget of which Government Members should be proud.

Draft Public Service Pensions Revaluation (Prices) Order 2016

Greg Hands Excerpts

Wednesday 2nd March 2016 General Committees

[The Chief Secretary to the Treasury (Greg Hands)]

I beg to move,

That the Committee has considered the draft Public Service Pensions Revaluation (Prices) Order 2016.

It is a great pleasure to serve under your chairmanship today, Mr Bailey—for the first time, I believe. Allow me to go through the background and the purpose of the order, which I will do in a little detail, if I may beg your forbearance.

In the previous Parliament, the coalition Government took the Public Service Pensions Act 2013 through the House. That was a very important Bill that provided the necessary legislative framework to implement Lord Hutton’s recommendations following his independent review of public service pensions.

Lord Hutton’s report set out recommendations for public service employees to continue to have access to good quality, sustainable and fairer defined benefit pension schemes. One of his key recommendations was that the Government should replace the existing final salary pension schemes with a new career-average scheme and then, when everything was ready, move existing members to the new scheme for future accruals.

The Government accepted Lord Hutton’s recommendations as a basis for discussion with trade unions and employers. Following those discussions, the Government entered into proposed final agreements with the unions, all of which required the introduction of new career-average pension schemes. With the exception of the new career-average section of the local government pension scheme, which had been introduced a year earlier—an important detail I will come to—those new schemes were introduced in April 2015, with most members moving from the final salary schemes to the career-average schemes.

Although I am sure members of the Committee are well aware of the differences between final salary and career average, I will briefly explain them for the record. Under a final salary scheme, a member is paid a pension that reflects their salary towards the end of their career and their length of service. Under the new career-average schemes, a member of the scheme is paid a pension that reflects their earnings over their whole career.

Each year, members earn a pension amount calculated as a proportion of their salary. The rate at which that builds up annually is driven by the accrual rate. The better the accrual rate, the higher the proportion of their salary that builds up each month. Those new pension amounts are added to those built up in earlier years and all are then revalued to ensure that the total of those pension pots maintains a value relative to a particular metric.

The particular rate of revaluation in each scheme is carried out in line with the revaluation metric set out in the scheme design and delivered in scheme regulations. Those metrics were finalised in the published agreements, reached following discussion between schemes and the relevant trade unions. It is the metric of prices revaluation that we are here to discuss today.

Some schemes have regulations that require the accrued pension pots to be revalued in line with earnings, such as the schemes for the armed forces and firefighters. With the rest, their regulations requires them to be revalued in line with prices, or prices plus some percentage.

It is worth setting out some of the background to explain why there are such differences. The Government’s starting offer for the scheme design, called the reference scheme, was an accrual rate of one sixtieth, with earnings revaluation. The uniformed services received better starting accrual rates, to reflect the younger normal pension age of their schemes.

The Government agreed, with the TUC, to enter into scheme-specific discussions with the unions representing the respective workforces, to ensure that the final designs reflected the unique nature of those workforces. However, to maintain control of costs and to protect taxpayers, the Treasury set out a cost ceiling process, whereby a scheme improvement in one area of design would result in a compensatory reduction in value of another area of scheme design; in other words, they are all designed to balance out the different considerations to arrive at something that would be within the cost ceiling.

Almost all schemes, with the exception of those for the armed forces and for firefighters, agreed to move away from the Government’s preferred revaluation metric of earnings and towards a prices metric. Some schemes went for plain prices, others went for prices plus a constant—prices plus x%. At that time, the Government’s preferred prices metric—this is what we are debating—for welfare and public service pensions uprating was the September consumer prices index, as it is today. In exchange for a lower value revaluation metric linked to prices, those schemes gained a faster, or better, accrual rate. This means that schemes, in discussion with the unions, agreed to have less annual uprating of pension pots in exchange for earning more pension each year. I will come back to the practical impacts of this shortly.

For the avoidance of doubt, pensions that are in payment and that are not subject to the revaluation orders we are debating today will continue to be indexed in line with the September CPI figure, although that will mean that those pensions in payment will be frozen this year. What is the purpose of today’s debate? The Public Service Pensions Act 2013 requires the Treasury to choose prices and earnings figures on an annual basis. On 2 February the Government announced that those public service schemes that rely on the measure of prices will continue to use September’s consumer prices index as the measure of prices revaluation. This means that a figure of minus 0.1% is to be used for the prices element of revaluation. At the same time the Government announced that the earnings measure would be the annual change in whole-economy average weekly earnings, non-seasonally adjusted and including bonuses and arrears, up to September 2015. This means that a figure of 2.0% is to be used for the earnings element of revaluation.

Where a negative figure is to be used for revaluation, as is the case here, the Public Service Pensions Act 2013 requires the order to be subject to the affirmative regulation procedure. As the prices order is negative, it is therefore the purpose of today’s debate to agree this draft order so that it can come into effect from 1 April 2016. In many ways, I view this debate as being about not whether the prices figure should be negative or positive, and whether that change is minus 0.1% or, indeed, some positive figure, but whether the Government have chosen the right prices metric for revaluation.

As I said, the metric we have chosen is the September consumer prices index. September CPI, as we all know, is the Government’s preferred measure of prices and is used for the indexation of public service pensions in payment, for the uprating of benefits and for the additional state pension. The September CPI figure was the measure used to revalue the career-average local government pension scheme last year when it was introduced a year earlier than the other schemes, setting an important precedent. Members may ask whether we could have chosen another measure, because CPI in September was negative this past year. It is true that we could have chosen another month’s CPI figure. We could, for instance, have chosen June’s or August’s CPI, which would have meant that the revaluation figure was 0%. However, that would create significant uncertainty for members, for schemes and for taxpayers. I will explain this in a bit more detail.

I shall talk first about creating certainty for members. Choosing September’s annual CPI figure is in line with the provisions that were agreed on behalf of members by their unions. It provides certainty for members by continuing to choose the Government’s preferred measure of prices, rather than picking and choosing a different month based on the view of the Government of the day. Although I cannot commit future Governments to a decision, our decision sets a clear precedent that September CPI will be the figure used for prices revaluation, whether that figure is high, low or negative.

[Mr David Winnick (Walsall North) (Lab)]

Would it be right to come to the conclusion that the people who are adversely affected by what is being proposed are low paid and, therefore, on very small incomes?

[Greg Hands]

That is not uniformly the case. I will go on to explain the three schemes that are affected: the local government pension scheme, many of whose members have been high earners in their careers; the civil service pension scheme; and the judiciary pension scheme. Although there are low-paid workers in some of those schemes, I do not accept that they are uniformly lower-paid workers; indeed, there will be some fairly high-paid workers in those schemes.

Returning to my point, scheme members want to be treated fairly and consistently, and the order we are debating today delivers that. There should also be certainty for schemes themselves. Not choosing September’s CPI figure would create uncertainty for schemes. If a consistent measure of CPI was not used, schemes would find it difficult to determine what the correct measure of prices revaluation should be, both when assessing the cost of the scheme and when setting employer contribution rates.

It would not be unusual for a scheme actuary to place an uncertainty figure in the valuation if we decided not to use the standard September figure, particularly if it was considered that there was doubt about whether a consistent prices metric would be used. That would have the potential to put upward pressure on employer contribution rates, and affect the amount of money that employers have available to employ staff.

Furthermore, choosing a correct and stable measure of prices ensures fairness across schemes. That is a crucial detail. It would be unfair for those schemes that chose faster revaluation, instead of a better revaluation rate, to benefit from both fast accrual and a more generous revaluation metric than the one that they decided upon. That goes back to my point about the balance in each of the schemes that was arrived at after consultation and negotiations with the relevant trade unions.

[Graham Stuart (Beverley and Holderness) (Con)]

Does my right hon. Friend agree that those who are tempted to suggest that we should give flexibility to the Government so that we can have a more generous position in this year should bear in mind that overall it would be unwise to trust Government to choose between various measures? Ultimately, we would expect their choice to be at the expense of the people, rather than that of the Treasury. Therefore, I applaud him for suggesting that we have total consistency and accept that consistency will apply even if the September figure goes peculiarly upward in future.

[Greg Hands]

Although I cannot go down the same road as my hon. Friend does about trusting the Government, I can say that his point about consistency is right. If there is any sense that the Government were able to move around between different months, according to political whim or motivation, that would introduce a huge amount of uncertainty into the schemes and open up the Government to lobbying. It would also probably open up all of us to being lobbied to choose one month or another. That might end up coming at the cost of the general taxpayer as well as creating instability in the scheme. Consistency is extremely important.

That leads me to the third area: certainty for taxpayers. To depart from what was agreed would also be unfair on the taxpayer. It is possible to argue that revaluing by 0% does not cost much, and that would be right. It would not cost that much, for now. But what about the future? If in the far future there were to be significant deflation, the cost of not revaluing negatively could be far greater. It is unfair in principle that members should be able to benefit only from the upside of inflation, while being shielded from the downside.

To illustrate my argument, I can share with Members a quote from page 72 of the report from the independent review of public service pensions undertaken by Lord Hutton:

“If there is no mechanism for reducing pensions in payment to maintain their real value then there is asymmetric sharing of risk between members and government, since government bears the risk of high inflation and members benefit from periods of deflation”.

Furthermore, many other taxpayers are in defined contribution schemes. The value of defined contribution schemes, of course, goes up and down based on the prevailing economic circumstances at that time and the valuation of bonds, stocks and whatever else might be put into that scheme. Members of the public who are not lucky enough to be in one of the highly valuable public service pension schemes for our highly valued public sector workers, but who face uncertainty from their own defined contribution schemes, should not be expected to subsidise public servants in this way from a potential negative revaluation drawn on by deflation. the arguments for continuing to use existing Government policy on the preferred measure of inflation for this order are clear and compelling.

I want to move on briefly to the effect the measure has on particular workers, perhaps answering some of the points raised by the hon. Member for Walsall North. The only schemes which will actually be negatively revalued directly under the terms of the Public Service Pensions Act 2013 are those for the civil service, local government and the judiciary. However, you will be interested to know, Mr Bailey, that as the ministerial pension scheme relies on the provisions of this revaluation order, a Minister’s career average pension pot will also be negatively revalued. I am not looking for sympathy for myself and the Treasury Whip, but it is worth pointing out that there are knock-on effects beyond this immediate order.

I now return to the main question about the three pension schemes. To give a worked-out example, a local government worker who earns £21,000 a year will earn around £530 of pension this year. That pension pot will be revalued by minus 0.1%, which means a reduction in the nominal value of that pension pot of less than 50p. Even with a comparable pension pot from the previous year—remember that the local government pension scheme was introduced a year early—the total reduction would be less than £1. A civil servant earning £26,000 a year will earn around £600 of pension this year. That pension pot will be revalued by minus 0.1%, which means a reduction in the pension pot of around 60p. So this is not an attack on public sector pensions or on lower paid public sector workers, nor should it be portrayed as one.

In conclusion, the Public Service Pensions Revaluation (Prices) Order 2016 is an important aspect of the move towards more sustainable and fairer pension schemes for public service workers and for taxpayers. As Lord Hutton has said, these recommendations provide a balanced deal. It will ensure that public service workers continue to have good pensions and that taxpayers can have confidence that the costs are controlled. Revaluing in line with scheme agreements that have already been made is an important part of the deal and I look forward to the debate.

--- Later in debate ---

[Greg Hands]

Let me see whether I can respond to the large number of reasonable questions that the shadow Minister asked me. The first thing to say is that she is right that this matter was debated during the passage of the 2013 Act, and it was pointed out that CPI could go negative in exceptional circumstances. Negative inflation is certainly not totally without precedent. It was useful that that debate was had and that Parliament approved the Act and many of the measures, including those that are now in the order. It approved the idea that if there were to be a negative revaluation, it would have to be brought to the House under the exceptional procedure, recognising that it would be an exceptional event.

[Seema Malhotra]

The words that were used were that it would also allow for parliamentary scrutiny, but the Minister has introduced the order without any impact assessment. What extra information will he provide?

[Greg Hands]

It is clear that today’s debate allows for parliamentary scrutiny, but the hon. Lady asks about an impact assessment. The impact will be fairly clear, and I will give some more examples.

To illustrate the amounts that we are talking about, let us compare workers in two different schemes, the local government scheme and the NHS scheme, both earning £26,000 a year. The local government worker will have earned about £40 more in their annual pension than the NHS worker, because of the trade-off between the revaluation and accrual rates. Because the revaluation rate will lead to a less favourable calculation for the local government worker but a more favourable one for the NHS worker, the local government worker’s pot will be reduced by 50p next year, whereas the NHS worker will get £7 more. Someone in the teachers’ scheme who is on £26,000 will also get about £7 per annum based on the revaluation. On the question of pensions in payment, there is a statutory link, so public sector pensions in payment will be frozen for the year without the need for new legislation or a further order.

The hon. Lady asked about the three months of negative CPI. I come back to the five main reasons why we have chosen to use the September CPI figure. First, we should set a precedent of using the CPI month that is most frequently used across Government. Secondly, in terms of the risk sharing, not only should scheme members benefit from the upside risk of revaluation but they should not be shielded from the downside risk. The third reason is consistency. Choosing a figure that is different from the September CPI figure would introduce the idea of significant policy discretion, going back to the point raised by my hon. Friend the Member for Beverley and Holderness, which would open up scope for lobbying and negotiations in an area where one wants a long-term degree of certainty. I think that would be a very unhelpful and unfavourable development.

The fourth reason is that this figure honours the pension settlement. Many of the schemes reached agreement through negotiations with the unions on the basis of CPI-linked revaluation. Choosing the correct CPI figure helps to deliver on that settlement. The final point is about fairness across the schemes. Schemes that choose faster revaluation instead of a better revaluation rate should not be able to benefit from both fast accrual and a more generous revaluation.

[Mr Winnick]

The Minister has been telling us that it does not make that much difference and that the impact will be minimal. He said in an aside that ministerial pensions would also be affected. As he said, we will not be in great tears about that. Is it not a fact that in practice the CPI does not take into account housing costs, while RPI, which was used previously, did? Although the Minister minimises the impact through the figures he has given, the fact is that those on low income will undoubtedly find their income that much less, taking into account housing costs and the rest. I am not satisfied by any means that this measure is neutral and that it does not matter at all to the people to whom I have referred.

[Greg Hands]

Let me seek to answer that point. The Government announced in June 2010 that CPI would be used as the most appropriate measure of general level of prices for most benefits and the indexation of public service pensions. There was a legal challenge to that and the decisions of both the High Court and Court of Appeal ruled in the Government’s favour, finding that CPI was appropriate for both benefits and pensions uprating.

The third point I would make—

[Mr Winnick]

rose—

[Greg Hands]

Let me answer the first question. The hon. Gentleman will have a longer memory than I have, but RPI has also gone negative in the past. It is not impossible that exactly same phenomenon could happen with RPI, his preferred measure of inflation.

[Richard Graham (Gloucester) (Con)]

I think I am right in saying that RPI was negative in 2008, during the great recession. It is a constant hazard of recessions that there will be those negative indicators. Am I not also right in thinking that the main reason why CPI was chosen over RPI was precisely that the vast majority of pensioners are not still paying off their mortgages, whereas those people who are have predominantly not retired?

[Greg Hands]

My hon. Friend is right. For all kinds of good reasons the Government made the decision to move this whole sector of public pensions and benefits from RPI to CPI. I think he is right that at that time RPI had gone negative.

If I could answer the final couple of points from the hon. Member for Feltham and Heston—

[Seema Malhotra]

rose—

[Greg Hands]

Shall I deal with these two and come back to the hon. Lady if I have not answered satisfactorily?

[The Chair]

It is your prerogative.

[Greg Hands]

Thank you. All scheme members will receive annual benefit statements setting out the revaluation amount. I am confident that members will understand that, where the unions and Government agreed the terms of the scheme, this agreement must be upheld.

In terms of the savings accrued by Government Departments, if I understood the question correctly, no savings have been assumed, as is consistent with the scheme rules, whatever the prices are. The majority of these pensions will not come into payment, of course, for many years. This is about consistency with the proposed final agreement so that they are fair to workforces, schemes and the taxpayers. I will give way and, if I have not answered all the hon. Lady’s questions, I will come back.

[Seema Malhotra]

I want to probe the Minister further on a few points that he missed or on which I am not completely clear. I understand that pensions in payment are frozen but may I check that in the particular circumstance of those who retire in-year in any month from April onwards, they will not be subject to a reduction? The implications are clear, because that means that any pension paid to members who had retired in-year would be reduced effectively and may have resulted in an overpayment—an unauthorised payment, with tax implications. In this particular circumstance, which may be a slight anomaly, can the Minister provide an absolute guarantee that no legislative change is required and that those who have retired in-year will not be adversely affected? Have any of those who have retired taken any lump sum payments and, if so, are they potential overpayments or not subject to such overpayment under the current law? When will the Government send out statements? Will it be possible to respond to queries that will inevitably be sent to the mailboxes of Opposition Members and to the Minister and others about statements that appear to show that members’ accrued pension rights have gone down? Where will those queries be answered? Who will constituents call, and will there be capacity to respond?

[Greg Hands]

Let me try to answer those further questions. The annual benefits statements will be sent out in the usual way. I am confident that members of schemes will understand what has happened and they will be told about the September CPI figure. I am confident that such inquiries will be dealt with in the usual way. In terms of pensions in payment, I am prepared to reassure hon. Members that we will deal with this complex matter. It is a slightly anomalous matter, which may require a legislative amendment or a small change to the schemes, but I assure the Committee that members will not be adversely affected in the particular case of an in-year withdrawal from the scheme.

Detailed impact assessments were prepared for the new scheme designs and were published by each Department. They will have taken into account prices impacts. The order implements the prices elements of those schemes designs and therefore there is no need to conduct a separate impact assessment for the technical implementation of what has already been decided and laid out.

To revalue using the September CPI figure, which is the subject of the order, is a very important step for the Government to take to be consistent and to set a consistent precedent that will be easily understood. It was for the Government to choose a measure of prices for the purposes of revaluing the prices element of the new career-average public sector pension schemes. The Government have chosen the measure that was agreed with the schemes after negotiation with the unions, following the precedent set by last year’s revaluation of the local government pension scheme and also the measure used for indexation of public services pension in payment. I should also re-emphasise that it maintains the real value of these pensions, ensures that there is an appropriate sharing of risk between members and Government and, importantly, that it sets the right precedent for the future. I therefore urge the Committee to support the order.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Public Service Pensions Revaluation (Prices) Order 2016.