Oral Answers to Questions

John Healey Excerpts

Tuesday 10th March 2015 Commons Chamber

[Danny Alexander]

Investment in the transport infrastructure of the south-west has been a much higher priority for this Government than, I think, for any previous Government. We have committed £7.2 billion-worth of investment in the transport infrastructure of the south-west, including £2 billion in roads—for example, dualling the A303 and the new tunnel at Stonehenge, sorting out the A30 all the way to Camborne and the electrification of the Great Western main line with new inter-city express trains. I have recently asked the south-west peninsula rail task force to bring forward more proposals for investment in strategic rail schemes for the region.

[John Healey (Wentworth and Dearne) (Lab)]

Last month, a couple of hundred senior business figures gave a very warm welcome to the second stage of the review that Sir John Armitt has done on infrastructure for the Labour party, including plans for a new independent national infrastructure commission to identify the country’s long-term needs and monitor Governments’ plans to meet them. Business backs Labour plans; business organisations back Labour’s plans; will the right hon. Gentleman back them?

[Danny Alexander]

Of course, the Labour party’s belated conversion to long-term planning for infrastructure is welcome, although it was not the practice during its 13 years in office. I think that the national infrastructure plan and the architecture around it provides the right framework for delivering that long-term planning. I am not convinced that a new quango is the best way to solve the problem.

Oral Answers to Questions

John Healey Excerpts

Tuesday 10th December 2013 Commons Chamber

[Danny Alexander]

I certainly will. I know that my hon. Friend has campaigned assiduously for this, as has my hon. Friend the Member for Norwich South (Simon Wright) and many other Members in that part of the country, and the ambition that the taskforce has set out is a good one. It is very much in keeping with the direction of travel in our national infrastructure plan, so I look forward with interest to the proposals from the taskforce and to taking them forward in due course.

[John Healey (Wentworth and Dearne) (Lab)]

I refer the Chief Secretary to the graph on page 6 of his new infrastructure plan, which looks like one of those dodgy “Labour can’t win here” graphics on a Lib Dem “Focus” leaflet. The graph apparently shows, as he has boasted this morning, that annual infrastructure investment is up under the coalition, but in the footnote it says that the Treasury had “challenges” putting the graph together and that the data are “not comparable” with the rest of the document. Will he agree to submit the figures to independent scrutiny by the UK Statistics Authority or the Office for Budget Responsibility?

[Danny Alexander]

After the shadow Chancellor’s performance last week, “Labour can’t win here” is a good description of the Chamber of the House of Commons.

Any Member of this House can submit statistics to the UK Statistics Authority, but I think that those statistics present an accurate picture of the level of overall infrastructure investment in this country. I welcome the strong interest that the right hon. Gentleman has shown in infrastructure and the commitment that he has made to taking these proposals forward. I wish that other members of his party showed a similarly constructive attitude.

Finance Bill

John Healey Excerpts

Tuesday 2nd July 2013 Commons Chamber

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

I beg to move, That the clause be read a Second time.

New clause 7 makes changes to the procedure for the granting of interim payments in common law court claims relating to taxation matters. Its effect will be to limit the circumstances in which interim payments may be granted in the rare tax cases originating in a common law claim as opposed to appeal through the tax tribunal. The new clause will bring the treatment of tax cases under the two routes into closer alignment. It will simplify the process and lessen administrative burdens for the Revenue and for claimants.

I should like to set out some of the background to this change. It corrects a difference in treatment with respect to the granting of interim remedies on tax disputes that arise depending on whether the claim is appealed to the tax tribunal or originates before the High Court, or the Court of Session if in Scotland. Generally speaking, appeals against a decision by Her Majesty’s Revenue and Customs on a tax matter are appealed to the tax tribunal. This system is provided for in statutory tax legislation and is the standard route of appeal for a taxpayer who disagrees with a decision by HMRC.

There is no procedure for the granting of interim payments under this system. Instead, tax is paid or repaid as appropriate when a decision is made on the case. This is a sensible arrangement. The interim award procedure was not designed to be a remedy in a tax dispute. Its common application is to victims who have suffered serious injury to their health but the long-term prognosis leaves it unclear how much they should receive. An interim payment allows them to have enough money to make adaptation to their homes and to pay for care. Clearly, the complex adjudication of a tax dispute is a very different circumstance unsuited to the application of anticipatory payments in advance of final judgment. It is therefore right that the normal practice in tax disputes is not to grant an interim payment.

However, difficulty arises where a tax claim originates in common law. In such circumstances, it would currently fall outside the scope of the tribunal system and would therefore be appealed instead to the High Court. Here claimants may obtain interim payment before the matter is finally settled. Such payments may then need to be returned to the Revenue as the direction of jurisprudence changes at different stages of litigation. This back-and-forth process is administratively burdensome on both parties and adds to the cost of the litigation. Furthermore, it exposes the Revenue to a risk of non-recovery in the event that the taxpayer becomes insolvent after obtaining an interim payment that it is later required to hand back.

Let me set out a little more detail on the new clause. The measure will operate by limiting the power of a court to grant an interim payment to a claimant whose application for such payment is founded, at least in part, on a point of law which has yet to be finally determined. The court will, however, still be able to grant an interim payment to whatever extent is necessary to fund the ongoing litigation, as well as in some other defined circumstances where there is a strong case for granting such award. The measure relates only to those rare tax cases that fall outside the scope of the tribunal system. It is a procedural matter, not a change in tax policy.

[John Healey (Wentworth and Dearne) (Lab)]

The Minister said that such cases are rare. How many are there each year, and how quickly will they be dealt with under the system proposed in new clause 7 as compared with now?

[Mr Gauke]

How quickly a particular case will be dealt with depends on the length of time it takes to be resolved. The right hon. Gentleman will know from his considerable experience as a Treasury Minister that some of these cases can take a number of years. It is worth pointing out that, by and large, large corporates tend to be involved in this type of litigation. The length of time it will take for a case to be resolved is ultimately unaffected by these changes. Their only significance is that there will not be interim payments in these rare cases.

The right hon. Gentleman asked how many cases there are per year. I cannot give him the number straight away, but it is very low. In the vast majority of cases, disputes are taken through the tax tribunal. As I say, this is about making common law cases consistent with tax tribunal cases. It is difficult to give the precise number of cases per year, but we are talking about low numbers.

[Mr Gauke]

We have introduced it at this point because recent jurisprudence has crystallised our view in this regard. As I say, we want consistency between common law cases and tax tribunal cases. A degree of volatility has been created in terms of tax revenues that none of us should welcome. In short, the answer to the hon. Lady’s question is that the reason is recent jurisprudence.

Let me give the right hon. Gentleman a little more detail in response to his question about rare cases. HMRC is aware of fewer than 10 strands of litigation where tax issues are being handled through the High Court. That is not to say that they would necessarily all involve interim payments, but I hope that that gives some sense of the scale of the issue. As I say, it is a procedural matter.

[John Healey]

It is helpful of the Minister to give the House an indication of the scale in terms of the number of cases. Can he also indicate the scale in terms of the amount of tax at stake in such cases?

[Mr Gauke]

The first point to make is that this does not ultimately change the amount of tax at stake, because a litigant will either win or not win. If a litigant who ultimately wins has not had access to an interim payment as a consequence of this measure, that does not change what they will ultimately receive. Some of these cases involve large sums of money, sometimes many millions of pounds. In some cases, interim payments have been very significant. However, I stress that this does not ultimately change how much money will end up in the pocket of the litigant. It is a question of timing and ensuring that we have some consistency.

Turning to why we are doing this now, it follows recent jurisprudence of the Court relating to the application of the interim awards procedure. This jurisprudence has crystallised our view that the interim payment procedure is not suitable for complex tax disputes. There is also an element of risk management in this. HMRC is routinely involved in litigation where the tax at stake may be for very high sums of money. The granting of payments on an interim basis before a final decision has been reached contributes to the volatility of tax revenues. By limiting the application of the interim payment procedure in common law court claims relating to taxation matters, and bringing the system into better alignment with what is standard practice in the tax tribunal, the new clause will cut down on complex work associated with calculating claims on a contingent basis before matters relating to liability and quantum have been resolved by the judiciary.

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[Mr Raynsford]

My hon. Friend makes a very good point. The NAO made an absolutely damning comment—I am astonished that the Government have not looked at this one sentence and said that they clearly need to reconsider the scheme. It is, quite simply:

“We found no association between individual local authorities’ planning application approval rates and their numbers of homes qualifying for the Bonus.”

There we have it: the NAO can find no correlation between the granting of planning consent and the awarding of the bonus, yet that is what it is supposed to do—it is supposed to incentivise councils to improve their performance in granting planning consent. No wonder the Government are embarrassed.

Rather than doing what they ought to by carrying out a thorough and quick review of the scheme and winding it up if it is proved to be as ineffective as the NAO indicates, the Government have done another extraordinary thing and announced in the spending review last week that they will take £400 million of new homes bonus money and transfer it to local enterprise partnerships. It is not their own money—only £250 million is Government money, and the other £150 million would otherwise have been paid to local government. It will now go to the LEPs. Whatever happened to localism? I thought the Government’s mantra when they came into office was that they would allow more decisions to be taken locally. This decision muddies the waters and it will be even more confusing to work out where the money goes.

As my hon. Friend the Member for Hyndburn (Graham Jones) pointed out, there is already gross inequality between different parts of the country, many of which are contributing to the new homes bonus and getting nothing out of it while others, which have done nothing to improve their housing performance because they already have a high demand for housing and because it is already been built in those areas, benefit from the scheme. It is a most extraordinary scheme and it will be made even more opaque and confusing. Clearly, such a scheme has no prospect of achieving the incentive effect it was supposed to achieve.

[John Healey]

My right hon. Friend has put his finger on it. There is not an economic rationale for the policy, but a political one. Essentially, it is a stealth redistribution from poor areas to wealthier ones with a more active, buoyant and successful housing market.

[Mr Raynsford]

My right hon. Friend, as always, is very acute and he realises that this is a political move. The change is being introduced with no analysis and no evidence base—it is a political move that will have significant redistributional consequences in favour of some areas at the expense of others, paying no regard whatever to the principles of localism that the Government used to proclaim.

--- Later in debate ---

[John Healey]

May I tempt my right hon. Friend to reflect on one other aspect of the subject he just touched on? If his figures are right—I am sure they are—by 2017-18 this will cost £7.5 billion in total. That cannot be described as a top-slice from local government as it represents almost a third of the total local government expenditure in England. The proposal will fundamentally destabilise the whole system of local government funding within five to six years.

[Mr Raynsford]

My right hon. Friend makes a valid point, and it is a further argument for the serious and thorough evidence-based review of the subject that the Government ought to be undertaking. It is shameful that they are continuing to tinker with this failed scheme at a time when there is such an urgent need for the limited funds that are available to be used to best effect to stimulate investment in housing and to have the beneficial economic effects that my hon. Friends and I have been talking about.

The amendment specifically calls for a review of the operation of REITs and their interaction with the housing market. That is important because the scale of investment necessary to secure the level of house building and home improvement we need will require a combination of public and private investment. We must therefore have measures that encourage more private investment in both private and social rented housing. Institutional investment in private renting has been a bit of a holy grail for many years for people who saw it as a way of ensuring an improved private rented sector driven by responsible investors who would be keen to see high standards of investment and management.

Infrastructure

John Healey Excerpts

Tuesday 12th February 2013 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

It is very important to realise that investment in infrastructure works in boosting the economy. I want to give an example from Scotland that is about investment in housing, and I will start, but not necessarily finish, by praising something that the current Scottish Government did. At the beginning of the UK Government’s term of office, they took a decision to bring forward capital spending in order to boost the economy. They put some of that spending into housing, particularly affordable housing. As a result, for a brief period, they were able to increase the proportion of spending on affordable housing.

[John Healey (Wentworth and Dearne) (Lab)]

In the spirit of generosity to other parties, will my hon. Friend also commend the coalition Government for introducing the borrowing guarantees and earmarking £10 billion for housing, classifying it categorically as infrastructure for the first time? To make her point, I should say that every £1 million of public money that goes into house building generates 11 jobs.

[Sheila Gilmore]

My right hon. Friend makes an important point. The spending in Scotland enabled the Scottish Government to announce that unemployment was not rising as fast as in the rest of the UK, and they took great pleasure in that. Sadly, the situation has not been maintained, and we are hearing less of how wonderful the Scottish Government are at dealing with unemployment; at present, the opposite is happening. I would argue that one of the reasons is that the investment in infrastructure, particularly in housing, has not been sustained. The figures are stark. In Scotland, there were 7,915 new affordable housing starts in 2009-10; in 2010-11, the figure fell slightly to 6,460; and in 2011-12, it fell to 3,405—a halving in less than two years.

There is a consequence for the construction industry, its employees and unemployment in Scotland. The Scottish Government showed that such investment worked, but they have not been able to sustain it. They would probably argue that that is solely because of what has been happening at the UK level—investment in housing and in capital has been falling. They would be right to some extent, although I would add that they are not particularly interested in showing that the situation can be overcome. I suggest two ways in which they could overcome it.

First, the Scottish Government could use the tax-raising powers given in 1999 as part of devolution. They have not chosen to use those, although I think people in Scotland would be prepared for them to be used if they thought that the money could be invested as it was previously. They have also put a stranglehold on local government by having a five-year council tax freeze, which has meant that local government cannot make the choice to say to its local population, “We desperately need more housing. We will put up council tax so that we can borrow”—that is perfectly possible—“and build that much-needed housing.”

So there are ways in which the Scottish Government could continue with policies that for a brief period showed that investment in infrastructure boosts the economy and employment. I urge them to go back to doing that, rather than allowing things to deteriorate so that they can always blame London; that, I am afraid, is what they tend to do.

Some of the discussion is fascinating. If someone had fallen asleep in 1997 and woken up watching this debate, they would have wondered which party was talking. Government Members want to argue, “The last Government didn’t do anything on infrastructure and when they did, it was all this horrible PFI.” I seem to recall that PFI was not a Labour Government invention, but was enthusiastically put forward by the preceding Conservative Government. I am interested to know when that conversion happened. We can get that sort of investment better, but my city is a lot better for some of the public-private partnerships that we put in place—the schools that were built and the investment that was taking place.

A lot of things seem to happen in Scotland first these days, which are then followed, not always for the better, here. In 2007 a Scottish Government of a nationalist persuasion took over, and in my city a Lib Dem-Scottish National party council took over. They both decided that they did not like public-private partnerships and so would instead come up with some magic way of creating these investments. As a result, not one new school was started in the five years of that Lib Dem-SNP administration—not one. Several were finished, and councillors were very pleased to go and open them and have their name put on the opening plaque, but those schools had been planned and funded through PPPs. We seem to have undergone a miraculous conversion at some point—I am not quite sure when—but we have not come up with anything that really works in its place.

I call in support of this argument none other than the Mayor of London, who is quoted in tonight’s edition of The Evening Standard as calling for a £1.3 billion investment in housing in London. Perhaps the Government would like to listen to a mayor of their own political persuasion.

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[Sajid Javid]

I direct the hon. Lady to read the OBR report, which mentions a number of reasons, not least the eurozone crisis. She might like to read that report for herself.

I should respond to the points hon. Members have raised in the debate. Many accusations were made by Opposition Members. They said that, had they won the election, they would have miraculously invested more. The reality is that, had they won the election, they would have continued borrowing recklessly, which would have led to much higher interest rates. They would probably have led this country into the hands of the International Monetary Fund once again, which seems to be their speciality.

Let us look at Labour’s March 2010 Budget. It shows that the previous Government planned to cut capital spending by 6% compared with our latest plans. In fact, in nominal terms, they planned to cut capital spending by 22% between 2010 and 2014. My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) made a good point, which the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) dismissed. Let me read to her the words of the right hon. Member for South Shields (David Miliband). In July 2010, he said the previous Government would have halved the share of national income going into capital spending. That is the truth, and Labour Members want to deny it.

Meanwhile, this Government have overseen an increase in total investment in infrastructure from £29 billion a year, which was the level between 2005 and 2010, to £33 billion a year between 2010 and 2012. In the autumn statement, the Chancellor unveiled a further £5.5 billion of investment, including £1.5 billion for the strategic road network.

Hon. Members are aware that the vast majority of spending needs to come from the private sector. That is why we have taken measures to target and support investment—measures such as the UK guarantee scheme, which will provide up to £40 billion of support to critical infrastructure.

[John Healey]

In an answer last month on the guarantee scheme, the Financial Secretary told me:

“No project has been guaranteed under the UK Guarantee Scheme at this stage.”—[Official Report, 18 January 2013; Vol. 556, c. 981W.]

However, in the autumn statement, the Chancellor said:

“I can today confirm a £1 billion loan and a guarantee to extend the Northern line to Battersea power station and support a new development on a similar scale to the Olympic park.”—[Official Report, 5 December 2012; Vol. 554, c. 876.]

Does that not show the uncertainty and confusion at the heart of the Government’s infrastructure failures? Who is right: the Financial Secretary or the Chancellor?

[Sajid Javid]

The right hon. Gentleman rightly made a point earlier about the action the Government have taken to implement the guarantee scheme. Of the £40 billion of guarantees available, about £10 billion have pre-qualified but are not yet issued, and there has been an offer of a £1 billion guarantee for the Northern line extension project to Battersea. That is substantial progress since Royal Assent to the Infrastructure (Financial Assistance) Act 2012 in October 2012.

The Government are working tirelessly to encourage further investment, not just from overseas, but from pension funds. However, the debate should not focus solely on the amount of money we secure for projects. We should also focus on how to ensure the best possible return on those investments—a point made well by my hon. Friend the Member for St Albans (Mrs Main). That is why the Government are running a cost review to reduce infrastructure costs by a target 15%, and why we have reviewed and reformed PF1 and launched PF2. The Government are investing wisely, collaboratively and efficiently.

Some Labour Members would have us believe that our investment is resulting in no action. I found it strange to hear the criticism that our investment has resulted in no spades in the ground. As the Financial Secretary told us earlier, a number of projects are already up and running. For example, major flood risk infrastructure projects have been completed in Nottingham, Truro and Keswick, and four new major road projects and 16 local transport schemes are under construction.

This is a Government with a long-term strategy for infrastructure. Our national infrastructure plan—the first time a Government have set out such a plan—identifies 550 projects with a value of more than £310 billion. It has seen us publish an investment pipeline that gives certainty to investors, which is absolutely key; prioritise projects through the creation of a top 40 list; and utilise a dedicated Cabinet Committee to ensure infrastructure delivery. The Opposition motion alludes to Sir John Armitt’s review into long-term infrastructure. Given the important and valuable role he played in the Olympics, I am sure it will be an interesting read and I will look at his recommendations. I am also sure that his advice will be considered, balanced and politically neutral. I would be very surprised if it were influenced by the shadow Chancellor in any way.

We have recently appointed our own Olympic expert to the role of Commercial Secretary. Lord Deighton is overseeing a review of Whitehall’s ability to deliver infrastructure, to increase commercial expertise across Government. We are enhancing the mandate of Infrastructure UK, increasing its capability to make sure that projects are delivered. Those steps show that this is a Government committed to investing in infrastructure projects and a Government committed to delivering infrastructure projects.

Let me turn briefly to two points raised by my hon. Friends the Members for Halesowen and Rowley Regis (James Morris) and for Rochester and Strood (Mark Reckless). They talked about the importance of rail investment and alluded to making greater investment in regional aviation. They made powerful cases and that is something the Government will look at. My hon. Friend the Member for Rochester and Strood asked whether I would be happy to meet him to discuss the matter further—I would be very pleased to do so.

In conclusion, I thank all hon. Members for their contributions this afternoon. I am sure we all want to see improved infrastructure in our constituencies and in the UK as a whole. While the Opposition have no answers for the challenges our country faces, this Government are getting on with the job. I therefore urge Members to reject the Opposition’s motion and to back the Government’s amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Oral Answers to Questions

John Healey Excerpts

Tuesday 29th January 2013 Commons Chamber

[Mr Osborne]

I do agree. The seed enterprise investment scheme has succeeded in getting money into start-up businesses and we currently have the fastest rate of business creation in our history. I take this opportunity to thank my hon. Friend for all the work he has done, going around the country promoting the scheme.

[John Healey (Wentworth and Dearne) (Lab)]

If everything is going so well in the jobs market, why is the number of people on the dole long term the highest for 15 years? Why has the number of young people in Rotherham out of work for more than 12 months tripled over the past year? When is the Chancellor finally going to act to give people real help with jobs?

[Mr Osborne]

Of course, we are clearing up the mess that Labour left behind. As we do that, the private sector has created over a million new jobs, unemployment has been falling, employment is at a record high, and female employment is at a record high. I would have thought the right hon. Gentleman should celebrate that, rather than talking it down.

Public Service Pensions Bill

John Healey Excerpts

Tuesday 4th December 2012 Commons Chamber

[Chris Leslie]

The situation now is different because of the level of trust on which public service employees feel tested when looking at significant changes by the Government. Employee contributions were unilaterally increased by 3% without consultation or discussion—that was simply imposed, even though Lord Hutton was putting measures through. The evaluation arrangement was unilaterally changed from the retail prices index to the consumer prices index. A typical public service employee must have said, “Hold on a minute. Are we supposed to just take this on faith? We are glad that the Government are in negotiations, but as we know, Ministers are here today and gone tomorrow.” In no way do I cast aspersion on the Economic Secretary who I am sure will remain on the Front Bench in days to come. However, we cannot simply rely on statements from particular Ministers at a particular point in time.

[John Healey (Wentworth and Dearne) (Lab)]

My hon. Friend is absolutely right about trust, which is critical following the experience of many public service workers and Government decisions on pensions. Does he not underplay the importance of the fair deal? He described it as a positive development in the negotiations, but for many public service workers and their unions it was not just a positive development but a deal maker that allowed them to accept a package which, as he said, was detrimental in other areas. It was important that people took that provision as a clear guarantee, but doubt has now been cast on it, which underlines the importance of including it in the Bill and therefore the importance of new clause 3.

[Chris Leslie]

My right hon. Friend is correct. When we get a sense of the Government pulling the odd thread here or there or watering down elements of the provision—if I may mix my metaphors—it is no wonder that people start to question whether the words of Ministers at a particular point in time will carry through into what should be a 25-year commitment as set out in legislation. The provision was part of those negotiations but it has not found its way into the Bill.

Even more worryingly, the Economic Secretary made some peculiar statements in Committee about something that we thought was a done deal. He said:

“it is important that we consider in full the views of all stakeholders, including of course those who will be affected, through further consultation before making a final decision on the issue. It would therefore be inappropriate to include the fair deal policy in the Bill.”––[Official Report, Public Service Pensions Public Bill Committee, 22 November 2012; c. 459.]

It is as though negotiations had not been completed or decisions reached. Indeed, it sounded very much as if the Government were reneging on their commitment.

The Government need to lay to rest any suggestion that they are going back on their promise, and the only way to do that is to accept new clause 3. Failure to do so risks reopening debates and potential disputes with public service workers who will—justifiably—feel they have been misled.

[Chris Leslie]

Indeed; we will debate some of the worst aspects of clause 3 later. It feels as though when writing the Bill Ministers did not consider it as enshrining an arrangement involving give and take on both sides. They have included certain things to the advantage of the employer, but there are scant—if any—safeguards of sufficiency and longevity for the employee, and that is causing anxiety.

[John Healey]

My hon. Friend is making an important argument in response to the intervention by my hon. Friend the Member for Hayes and Harlington (John McDonnell). It is not just that the Bill includes certain things that advantage employers; the measures are principally to the advantage of the Treasury, which is given the whip hand and ultimate say over schemes that should be run by their members and managers accountable to them.

My hon. Friend quoted the Economic Secretary in Committee. When the Minister rises to his feet, is it not important that he explain the discrepancy between what he said in Committee and what the Chief Secretary to the Treasury said to this House in December last year? He said:

“Because we have agreed to establish new schemes on a career average basis, I can tell the House that we have agreed to retain the fair deal provision and extend access for transferring staff.”—[Official Report, 20 December 2011; Vol. 537, c. 1203.]

There is a big difference between those two statements and the Economic Secretary needs to explain himself on that point.

[Mr Speaker]

Order. Before the hon. Member for Nottingham East (Chris Leslie) replies, let me say that although I have indulged the right hon. Member for Wentworth and Dearne (John Healey) on this occasion I hope he will not repeat such a long intervention. I do not want him to induce the hon. Member for Corby (Andy Sawford) into following bad habits. That would be a very undesirable state of affairs.

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[Mr Gibb]

Alas, I no longer speak on behalf of the Government, but that is a commitment given by Ministers of this coalition Government. The hon. Gentleman is trying to create a division between the Conservative party and the Liberal Democrats in our approach to public service pension reform, and there is no such division. There is no such difference in attitude between the two parties on public service reform.

[John Healey]

I rise to support the hon. Gentleman. Unlike my hon. Friend the Member for Nottingham East, the House and the public have a right to take at face value the words of a Chief Secretary—a Chief Secretary is a Chief Secretary is a Chief Secretary. That is a statement of Government policy and of coalition Government intent. Therefore, I think the onus is not on the hon. Gentleman, but on the Economic Secretary to the Treasury to explain why his statement is different from the Chief Secretary’s statement.

[Mr Gibb]

I listened carefully to my hon. Friend and to the Chief Secretary and I did not find any difference. My hon. Friend was addressing whether particular matters should be in primary legislation; the Chief Secretary was setting out the case for the policy.

On teachers’ pensions, there was anxiety that the current arrangements, under which teachers in the independent sector can be members of the teachers’ pension scheme if their employer signs up to the scheme, might be put in jeopardy by the words of Lord Hutton’s interim report, so the Chief Secretary’s statement was welcome news to teachers. Paragraph 8 of the proposed final agreement states:

“the Government agrees to retain Fair Deal provision and extend access to public service pension schemes for transferring staff. This means that all staff whose employment is compulsorily transferred from maintained schools (including academies)…under TUPE…will…be able to retain membership of the Teachers’ Pension Scheme when transferred.”

That is welcome news. The agreement goes on to state:

“The Government’s decision on Fair deal means that…independent schools which already have access to the Teachers’ Pension Scheme will continue to do so (for existing and new teachers); and new teachers and independent schools will continue to be able to join the scheme under the existing qualifying criteria.”

When we debated the issue in Committee, the hon. Member for Nottingham East conceded that the new fair deal

“is an improvement on the current fair deal arrangements”,

but, as he has just now, he complained that

“the promise does not appear in the Bill.”––[Official Report, Public Services Pensions Public Bill Committee, 22 November 2012; c. 458.]

He will be aware, however, that the fair deal arrangements were non-statutory when they were introduced in 1999, and that they remained non-statutory when they were revised in 2004. Notwithstanding the fact that the new fair deal arrangements are an improvement on the old ones, if it is good enough for a Labour Government for the policy to be non-statutory, it ought to be good enough for the hon. Gentleman. As my hon. Friend the Minister made clear in Committee, the recently published Government response to the fair deal consultation included draft guidance setting out how the new policy would work in practice. Given all the public statements by my hon. Friend the Chief Secretary and the published guidance and consultation documents, the hon. Gentleman should be assured by the commitments given.

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[Robert Neill]

I have worked it out; it must be well over 30 years in chambers of one kind or another around London. We do not always come to the same conclusions, but I take on board the expertise that he brings to this topic. I agree with his point that it is important, when dealing with the schemes that he and I have been involved with, to give the members of the schemes an assurance that they will have a secure pension in future.

I have spent most of my life dealing with the local government pension scheme, and I am going to talk about that today. Indeed, I should declare an interest as a member of that scheme. I recognise that change often raises concern and creates a measure of insecurity, and it is the job of those of us who have governance of these schemes, locally and nationally, to deal with that. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) pointed out, however, the biggest cause of insecurity and the biggest risk to scheme members would be the lack of a secure financial basis for the future of the scheme. That is why the Government’s reforms are necessary; that is the most important reassurance that we can give to people.

There are other important points that we can take on board in the context of the amendments, and I want to talk about the local government schemes in particular. It has already been recognised in the House that they fall into a different category because of their substantially funded nature, which places them in a different position, and because of the considerable diversity within the sector. There are a number of schemes involved, and they generally have a good management track record and a system of management that creates transparency and democratic accountability. I hope that we can ensure that the regulations that will finally embody the schemes will recognise those differences.

I agree with the right hon. Member for Wentworth and Dearne (John Healey) that we should take at face value the assurances given by those on the Treasury Bench, and I have no hesitation in doing so. I put it as gently as possible when I say that there has been a degree of needless raising of concern among scheme members, perhaps—dare I say it?—for partisan reasons. That is unhelpful.

[John Healey]

The hon. Gentleman is urging us to take at face value the statements from those on his Front Bench. Let me tell him what the Economic Secretary to the Treasury said in Committee about the concerns over the fair deal. He said that

“it is important that we consider in full the views of all stakeholders, including of course those who will be affected, through further consultation before making a final decision on the issue.”––[Official Report, Public Services Pensions Public Bill Committee, 22 November 2012; c. 459.]

I put it to the hon. Gentleman that, taken at face value, that suggests that the final decision has not yet been taken, contrary to the agreements reached with the trade unions on pensions reform.

[Robert Neill]

The right hon. Gentleman will know, as a former local government Minister, that there has already been considerable consultation and discussion on the shape of the local government schemes. In any event, there is to be a formal consultation as well. I do not read the same connotations into the Minister’s words as the right hon. Gentleman does. That is not my reading of the discussions to which I was party when I was a Minister. However, the right hon. Gentleman is right to suggest that we should be as transparent and upfront as possible in our discussions with scheme members.

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[Dr Whiteford]

I will not give way to my hon. Friend at the moment because I want to make some short remarks in this part of the debate, and save my fuller comments for later.

The Scottish Government also require explicit consent from the Treasury for any cost-sensitive changes to the NHS or teachers schemes.

Will the Minister accept my amendment and recognise how tight the time scales are, given the complex range of responsibilities—varying responsibilities relating to different schemes—and how tough the negotiations are? Not all partners to the negotiations even accept the need for this set of reforms. In 28 months’ time, when the provisions would otherwise commence, the Scottish Government would have had not only to complete the negotiations and prepare and pass legislation, but ensure that the employers and scheme administrators could prepare their systems and processes before the 2015 deadline.

This is a very technical amendment in some respects, but it is a very important one. I hope that the Minister will have listened carefully and will be pragmatic in his response to it later.

[John Healey]

I rise to support my hon. Friend the Member for Nottingham East (Chris Leslie) in the amendments he has tabled. Each and every one of them is important. Given that we are having a reflective debate on Report, I hope we will get a reflective response from the Economic Secretary at the end of our debate on this group.

Let me start where it seems to me that there has been a strong measure of agreement across the House—on the importance of having good, regular and accurate pensions information for scheme members. I think we could all agree that what should underpin our pension schemes—this relates to new clause 2—are higher standards of governance, openness and administration. Such underpinning, then, should be provided in this Bill’s provisions for those public service pension schemes in the future. There is bound to be greater confidence and trust in the schemes, along with better understanding of them, if members are given more information.

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[Andy Sawford]

One of my worries about the pension scheme changes relates to the different impacts that they will have on different communities. Sadly, as my right hon. Friend may know, Corby has one of the 10 lowest life expectancy rates in the country. As we review the schemes, and, in particular, as we seek to give people information about the future benefits that they may expect, we should recognise that there are huge regional variations in life expectancy, and that it is important for people and their families to be able to plan for their future.

[John Healey]

My hon. Friend’s constituency is in Northamptonshire and mine is in south Yorkshire, but we share an industrial heritage and a strong tradition of steel-making, and I entirely understand the point that he has made. It is as relevant to Corby and to east Northamptonshire as it is to Wentworth and Dearne and parts of Rotherham and Barnsley.

New clause 3 is simply intended to ensure that the undertaking given to the House by the Chief Secretary to the Treasury, and given to the unions that have been negotiating about pension schemes changes on behalf of their members, is guaranteed, and that Ministers will not be able to change their minds and change the schemes in the future. This must be legislation for a 25-year deal, which is what the Government originally promised us.

The question of access to public service pension schemes for public service workers who may face compulsory transfer to non-public service employers and organisations is critical. As has already been pointed out, the Government’s commitment to an extension was a deal-maker for many unions and for many of their members, particularly on the local government side. It would have been a deal-breaker for those unions and members if the guarantee had not been in place, or if what the Economic Secretary said in Committee—which I have quoted—had been on the table instead. We had a clear and principled commitment. That commitment ought to be included in the Bill, and then, as is appropriate in the case of enabling legislation of this sort, the details of the mechanism for how it is to be implemented can be provided in further regulation or scheme rules.

I must say to the Economic Secretary—as some of my hon. Friends have already said—that trust is a problem for the Government in the public services, particularly when it comes to public service pensions. That should come as no surprise to them. After all, they commissioned Hutton to produce the report, and before the publication of the final version, they hit public service workers with a 3% tax surcharge on their pension payments, and with not just a temporary but a permanent switching of the link with pensions from the retail to the consumer prices index. A commitment in the Bill will serve as a confirmation and a reassurance for public service workers that the Government do indeed mean what they say in this regard.

Let me say something about amendments 19 and 20, and about the Bill’s use of the concept of “closure”. During this debate and in Committee, the terms “closure” and “winding up” have been used almost synonymously, but they are not, of course, synonymous. The winding-up provisions in the Pensions Act 1995 apply principally to occupational pension schemes. Those schemes are different from local government pension schemes, which are funded and have the quasi-constitutional backing of local government.

As my hon. Friend the Member for Nottingham East pointed out, the Economic Secretary has said that that it is not the intention to close local government pension schemes. If, as the Government seem to be arguing, closure does not mean closure and there is no intention to legislate for closure of any of the funds, this change should be straightforward. It is evidently needed, especially given that the concern of employers, scheme members, trustees, and unions representing many of the members has been consistent and clear. Why risk uncertainty, why risk a legal challenge, why risk financial jeopardy for some funds, by allowing debts to be triggered in the particular circumstances of a funded scheme for local government?

It may not be the Government’s intention at present to reduce people’s benefits that they have already accrued. It may not be their intention to end any flexibility in the link between the normal pension age and the state pension age. It may not be their intention to make further and sweeping radical changes or cuts in people’s pension provision. As it stands, however, the Bill allows all those things to happen. That is why the new clauses and amendments are so important. They will reassure pension scheme members, now and in the future, that this is a settlement for the long term, that the Government mean what they say, and that the Government can, in the longer run, be trusted with public service pensions. Scheme members have seen little evidence since 2010 that that is really the case.

[Mike Freer]

Members have discussed the technical definition of “closure”, and I ask the Economic Secretary to make it clear in his response that closure does not mean closure, but instead means the scheme is frozen while a new scheme is run alongside and in parallel. Members have talked about the effects of closing a scheme and the crystallisation of outstanding liabilities. In respect of the local government pension scheme, the council tax payer would then be forced to meet those liabilities in one fell swoop. That runs contrary to all the other efforts the Treasury is making to keep council taxes down, so if closure is, indeed, what is intended, there would appear to be a lack of joined-up thinking in the Treasury.

[John Healey]

I support the hon. Gentleman’s remarks, and I hope the Economic Secretary will, too. For clarity’s sake, will the hon. Gentleman confirm that this does not only affect local councils, as schools that are academies, charities and a number of non-government organisations also use the local government pension scheme?

[Mike Freer]

The right hon. Gentleman makes a good point. Having chaired the London borough of Barnet pension fund committee for several years, I know that while the council is by far the largest fund, there are also many admitted bodies for which it administers funds, such as Middlesex university, academies and various charities. The crystallisation of debt that may arise if there is any vagueness in the legislation could therefore have massive impacts not only on councils, which could, perhaps, withstand the financial shock by using reserves and spreading the effects over many years, but on smaller admitted bodies, who certainly could not do that.

As we have seen in respect of Equitable Life, once a fund closes and becomes a zombie fund, all the good fund managers flee. No decent fund manager worth their salt wants to manage a zombie fund. Therefore, because of the performance of the zombie fund, the liability grows still further. The implications of crystallisation of liabilities in this context must be taken into account. I urge the Economic Secretary to explain precisely what he means when referring to closing a fund. I believe he means that one fund would remain but would have no new contributions and no new members, and a new fund would run in parallel. I urge him to make that clear.

On the issues addressed in new clause 2, I urge the Government to go further, because best practice in the public sector in respect of providing information is not enough. It is my hon. Friend the Economic Secretary’s birthday tomorrow; I think he will turn 43 years of age. I calculate that by the time he reaches the normal pensionable age of the parliamentary scheme he will have contributed some 24 years of accrued service, presuming that he is in a one fortieth, one fiftieth or one sixtieth scheme with the various contribution rates that attach to them. My hon. Friend the Economic Secretary is a man of finance and has a head for figures, so I have no doubt that he understands the pension choices he has made, but I spend a surprisingly large amount of my time explaining to teachers and others—on Saturday I spoke to a police officer—exactly how their pension works, because they do not know and do not understand.

Further requirements in terms of transparency and quantity of information are needed, therefore, because people need to make rational decisions. If we want to defuse the pension time bomb, people have to make a rational decision based on information, not supposition. A constituent of mine who is a doctor has been trying for six months to get information from the NHS about his pension contributions and likely benefits. That is simply not good enough. The Government must go further in this regard.

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[Sheila Gilmore]

At least with regard to new clause 2 and the need for good communication and good information, it appears that there is a fair degree of cross-House agreement. Members may have different motives for wanting such information to be given, and may hold different views about what behavioural change that might drive. Some Members might also hint that they want this information to be given so that public sector workers are properly and humbly grateful for retaining better pensions than the absolutely dreadful pensions of many in the private sector. I hope the Economic Secretary will respond positively, however, and agree that this is an important step. It will be deeply ironic if better and more thorough information is given to people with private sector pensions than to those with public sector pensions.

We all want to avoid too much information being given, of course, with people receiving many pages of information, much of it hard to understand. We do not want to over-egg that pudding. There is a parallel debate happening in the world of private sector pensions on giving good, accurate but still efficient information, so that people can look at a single page of information—that is preferable—and understand what their likely pensions are going to be. On that matter I hope that the Minister, having heard the debate in Committee and again today, will be happy to make some changes to the provisions. I cannot see why new clause 2 should not be in the Bill, as it deals with such a major issue.

I wish briefly to discuss new clause 3, which deals with the issue of a fair deal. Again, there would appear to be a substantial degree of agreement across the House on the substance of the issue. Nobody is saying, “We don’t think these should be the provisions.” The question that has been raised is whether they should be in the Bill. Some Government Members have suggested that accepting what the clearly stated view of Ministers has been at various points should be good enough, because it is on the record and we should be confident that that is sufficient. However, as far as I am aware, it is not possible to litigate on the basis of what people simply said, rather than what is in legislation. People have attempted to say in the past, “But that was the intention”, even doing so in respect of debates in this House. However, legal disputes about rights or obligations turn on the much narrower construction of what is written in the Bill.

I am not suggesting, in any way, that those who have spoken during our consideration of the Bill do not intend what they have said, but many public sector workers are genuinely concerned. As I said in my earlier intervention, the matter becomes a great deal more important if the Government continue, as they presumably will, over the next two years to do what they say they want to do: outsource more of what we would regard, or have traditionally regarded, as public sector activities. That has already happened to some extent. Some people have explained how this could be very positive, with employee mutuals and all kinds of social enterprises springing up to provide public services. If the Government are genuinely serious about wanting current public sector employees not just to have to do this, but to be enthusiastic about doing it, these safeguards have to be in place. If this is the road that is to be pursued, it is even more important to have these provisions than it may have been in the past. Saying, “You didn’t do it before so we don’t need to do it now” is not a particularly good argument; some of us might disagree about what had been done previously. Even if we do not, the argument is still not particularly good, as we have also to learn from experience. I hope that the Government will seriously consider legislation on this matter, because if they genuinely have no intention of departing from the promised arrangement I cannot see what the problem is. When people begin to say there is a problem, that is when those paying into these schemes—the employees likely to be affected—begin to smell a rat. There may be no rat there, but why not make things absolutely clear?

That is also true of what we are trying to achieve in amendment 12, which deals with an apparent possibility arising from clause 7. Again we were given assurances in Committee that we should not be reading into this something that the Government do not intend. Clause 7 says:

“Scheme regulations may establish a scheme…as

(a) a defined benefits scheme”.

It then goes on to talk about

“a scheme of any other description”.

It is not at all clear what is actually meant. We were told that one or two specialist defined contribution schemes are in existence, but people are clear that the promise that was made as part of this negotiation is that the defined benefits schemes would remain in place. They will, however, be changed, and during the negotiation employees in various parts of the public sector accepted substantial changes in the kind of pension because they accepted the imperatives. In moving from final salary pension schemes to career average schemes, changes are being made in accrual rates. All sorts of changes have been made—for example, the forthcoming changes to pension age—but they were made on the basis that the scheme will remain as a defined benefit scheme.

[John Healey]

My hon. Friend is making a powerful case and sounding a clear warning. She mentions that clause 7(1) refers to

“a defined contributions scheme, or

( c) a scheme of any other description.”

Would she like to point out to the House that this potential change in clause 7 could in theory, under subsection (5), be brought in by way of a negative resolution—by a statutory instrument that would not allow a debate in this Chamber or even a 90-minute debate in a Committee upstairs?

[Sheila Gilmore]

I thank my right hon. Friend for his intervention, because that is an important point. If the rest of the clause did not give rise to the possibility of substantial changes, that provision might be acceptable. However, where we are talking about much greater changes, it is particularly important that the full debate takes place.

Again, there appears to be a difference between giving an assurance and a reluctance to see that assurance embedded in the Bill. Various people have mentioned that the whole debate we have had, particularly since 2010, has eroded some of the public sector workers’ trust. I do not generally seek to be overly alarmist in these matters, but even in Committee—I am pleased to say that this has not happened today—there were points when we could see exactly why many public sector workers are apprehensive, There were those, admittedly not at ministerial level but on the Government Back Benches, who clearly still feel that public sector pensions are too generous. The underlying thinking is that at some point, perhaps in the not-too-distant future, further attempts will be made in that regard.

I fully accept that even with the changes that come through this Bill and through other negotiations that have taken place, public sector pensions remain far better than private sector pensions. However, we always have to remember that the comparator we now have is absolutely dreadful private sector pensions, regardless of where we place the blame and how that has happened. One thing that politicians should be doing in the next few months and years is trying to improve private sector pensions.

Finally, I wish to discuss amendment 11, which relates to the local government scheme in Scotland. Generally, the arrangements for many public sector schemes in Scotland have been that Scottish Ministers could make regulations, but that they were subject to Treasury approval. For the most part, whether because of that need for Treasury approval or because until relatively recently there has been no reason to depart from the UK-wide arrangements as doing so might create various anomalies that would not always be helpful, the regulations for schemes—all those that are not funded, at least—have lain with Scottish Ministers but have been made in the same way.

The exception is the local government pension scheme and the difference is that that is a funded scheme. It has been regulated in a way that has not normally had Treasury approval. The purpose of our amendment is to exclude the Scottish local government pension scheme from the Bill, which would enable matters relating to that scheme to be dealt with by Scottish Ministers. The amendment would perhaps add clarity to the devolution of power, but, more importantly, it would embed the practice as regards that scheme and safeguard it. Otherwise, the Bill would mean that the Treasury would be involved in setting aspects of the Scottish local government scheme and, for the first time, local government workers in Scotland might find that changes can be made to their pensions by the UK Government.

[John Healey]

My hon. Friend is making another powerful point about amendment 11. She is right that the Scottish Government are not normally backward in coming forward to demand new powers and for decisions to be taken in Scotland for Scotland. Would she care to speculate about why they have not chosen to apply for a legislative consent motion that would allow them to make these decisions in Scotland? Could it be that they are looking to allow the broad shoulders of the Economic Secretary to take the blame and responsibility for the changes to the local government pension scheme in Scotland?

[Sheila Gilmore]

I was going to come to that point, because I am surprised that that opportunity has not been taken, given the context. As my right hon. Friend will know, this is a difficult and sensitive subject, but—this point might well be speculative and I am sure that people will wish to deny that it is the case—it is no secret that we are in a particular stage of politics in Scotland, and it would—

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[Sajid Javid]

My hon. Friend makes a good point and I hope that he is also reassured by the commitment I have just given.

I also want to thank my hon. Friends the Members for Finchley and Golders Green and for Bedford (Richard Fuller) for their input on this issue in Committee.

[John Healey]

I welcome that commitment. The Minister said that the information should be provided “to some scheme members”. May I urge him to take a maximalist approach and make sure that the maximum reasonable number of members get the most regular and at least annual information that will allow them to understand the scheme better and to plan for retirement and manage it better as well?

[Sajid Javid]

I agree. All scheme members, one way or the other, should receive annual information. That is the type of amendment we will table in the other place. However, there are different types of members of schemes, such as deferred members and active members. That needs to be taken into account when they receive that information.

Public Service Pensions Bill

John Healey Excerpts

Monday 29th October 2012 Commons Chamber

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

rose—

[John Healey (Wentworth and Dearne) (Lab)]

rose—

[Danny Alexander]

I give way to the former Secretary of State.

[John Healey]

The Chief Secretary lays great stress on the Hutton report, so why did not the Chancellor wait until Hutton reported before hitting public service workers with a 3% surcharge on their pension payments?

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[Danny Alexander]

We will conduct a regular review, as Lord Hutton suggested, which will enable issues such as those the hon. Gentleman has raised to be taken into account. They were raised and discussed in the scheme talks. In the end, employee and employer representatives both agreed that the modelling we are using—which is similar to that used in the deal struck under his Government—is the right, fair and balanced way to take such matters forward across the whole work force.

[John Healey]

The Chief Secretary will be aware that there is a working longer review in the NHS that is looking into the question of working longer in particular disciplines in the health service. Will the provisions in the Bill allow flexibility in the link between the normal pension age and the state pension age, depending on the conclusions of that review?

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[Danny Alexander]

The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born, and it has been used by a number of Governments to make adjustments to public service pensions. We have set out in the Bill certain elements of the scheme, particularly the pension age link, and the fact that the schemes need to be CARE schemes and certainly cannot be final salary schemes in future. The provisions to which the hon. Gentleman refers are in fact more limited than those in the 1972 Act. It is appropriate that we continue in broadly the same way, because that has stood the test of time. I hope that, by setting out the Government’s intentions here and in Committee and by undertaking detailed negotiations with work forces, we will have ensured that people know precisely how we intend to use these powers. I think it is clause 23—I might have got that number wrong—that refers directly to the 25-year guarantee that I mentioned earlier. I hope that that will give people some assurance that our scheme designs will stand the test of time.

[John Healey]

With respect, intentions are one thing but the terms of the legislation are another. Is my reading of it wrong? As I understand it, the provisions will not allow flexibility for some groups of NHS workers in the link between the normal pension age and the state pension age. Clause 9(3) states:

“The deferred pension age of a person under a scheme under section 1”—

including NHS workers—

“must be…the same as the person’s state pension age”.

That suggests that there will be no flexibility. Am I right or wrong?

[Danny Alexander]

The right hon. Gentleman is absolutely right to say that the link between the state pension age and the normal pension age is fixed in the legislation. That is a matter that was discussed in the negotiations, including the detailed negotiations with health service unions. The point I was seeking to make was that, as Lord Hutton recommended, we have agreed to review how that link operates at each stage at which the state pension age is increased, to enable those issues to be debated.

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[Danny Alexander]

I am going to make some progress, if I may.

The second and third tests of Lord Hutton were fairness to public servants and fairness to taxpayers. The Government have worked hard to ensure that the reformed pensions are fair and continue to provide a generous level of retirement income for public servants as a fair reward for a career spent serving the public. The Government made a commitment that these schemes would be at least as generous at retirement for those on low and middle-income earnings. We have delivered that commitment in a number of ways.

First, clause 16 allows transitional protection to be provided for those who have already had a long career in public service and are approaching retirement. I said in November last year that the offer provided that those within 10 years of their normal pension age on 1 April this year would not see any changes to their pension, nor the date at which they can draw it. The Bill ensures that the current final salary schemes will remain open to people who are covered by the transitional protection criteria in those schemes. Most of the proposed final scheme designs include the transitional offer as we set it out; however, the local government scheme in England and Wales has chosen alternative arrangements as sought by their trade unions and employers.

Secondly, we have honoured our commitment to retain the final salary link for people who have already built up some service in final salary schemes, as the provisions in schedule 7 make clear. Although these people will move on to CARE schemes by 6 April 2015 at the latest, their accrued years of final salary benefits will be calculated and paid at their final retirement salary—not their 2015 salary.

Most importantly for low and middle-income earners, we are putting the fairness back into public service pensions. Clause 7 provides that the new default for public schemes will be based on career average earnings, rather than on final salary. Final salary schemes are unfair to the majority of the work force as they disproportionately reward those who progress to senior roles compared with the majority of staff who have more consistent career paths. These outmoded schemes provide lower effective benefit rates to the people that carry out the core front-line work in our public services—the nurses, police officers and our armed forces whose work is so valuable to everyone here.

Career average schemes are fairer to the members and to taxpayers alike. Under final salary schemes, it is the taxpayer that picks up the cost of those high flyers who attain high salaries by the time they leave public service. Such members can receive twice as much in benefits per £1 of contributions that they have paid towards their pension. This is clearly unfair, which is why this Bill will not allow final salary schemes to continue after 2015. For members, pension benefits will be based on the amount that they earn over their career. That means their pension benefits will directly reflect the contributions that they and their employer make over their career.

The Bill ensures that these pensions remain among the very best available—and rightly so, if we are to continue to be able to recruit and retain the right people to undertake these crucially important roles. A key objective of the reforms is to ensure a fair balance of risks between scheme members and the taxpayer. To achieve this, Lord Hutton recommended that the Government establish a mechanism to control the future costs of pensions.

Clauses 10 and 11 establish an employer cost cap in the public service schemes. This will provide backstop protection to the taxpayer to ensure that any unexpected risks associated with pension provision are shared between employers and scheme members. With foreseeable longevity risk controlled through the pension age link, this really is a backstop, which under normal circumstances should not need to be used. Everyone in a public service pension scheme will see their pensions reformed along the same lines. I do not believe in special cases at a time when we are reforming the pension arrangements of those who provide essential services to the public.

[John Healey]

I promise not to intervene on the Chief Secretary again, but I want to ask about the employer cost cap in clause 11. On the front of the Bill, the Chancellor has signed a declaration that the provisions of the Bill

“are compatible with the Convention”.

It is clear from clause 11(7), however, that the Bill allows schemes to provide for reduction of accrued benefits as part of the employer cost cap. This would be a fundamental breach of scheme members’ rights under article 1 of protocol 1 of the convention, so how can the Chancellor’s statement on the front of the Bill be true?

[Danny Alexander]

I do not think that the right hon. Gentleman is right in this instance. In fact, had the “cap and share” arrangements introduced by the last Government been allowed to operate, they could have manifested themselves—[Interruption.] No, the right hon. Gentleman is wrong. They could have manifested themselves in both a reduction in benefits and an increase in costs to members. The right hon. Gentleman is free to explore the matter in Committee, and I am sure that he will.

I should add that I have some further information relating to the right hon. Gentleman’s earlier intervention. The working longer review is acknowledged in the proposed final agreement on the NHS pension scheme, which specifically states that early retirement factors allowing retirement before the state pension may be considered should the review suggest that that is necessary.

As we have established, public body pension schemes and public service schemes operated by the devolved Administrations are required to make equivalent changes to their schemes as swiftly as possible. In the case of public body schemes, it has not been possible in all cases to complete the reform process according to the same timetable. As I said in a written ministerial statement on 16 July, reform is definitely on the cards for these organisations, and the Government aim to complete the work by 2018.

Speaking of special cases, the House should note that the Bill will also close the generous and outdated “great offices of state” pension schemes. They have outlived their usefulness in the modern world. I am glad that the Bill will close them to new office holders and will ensure that people in such roles are given the same pensions as Ministers. As I am sure Members are aware, the Prime Minister waived his entitlement to such a pension when he took office. The current Lord Chancellor is making arrangements to do likewise, as did his predecessor. Mr Speaker announced on the day that we published this Bill that he would retain the pension, but would take it only when he reached the age of 65 rather than drawing it as soon as he left office.

Lord Hutton’s fourth key test related to governance and transparency. The reformed schemes should be widely understood, both by scheme members and by taxpayers. People understand what is in their pay packet each month, and it should be just as easy to understand how their pension works. Under the Bill, the schemes will have robust and transparent management arrangements.

Clause 5 provides for each scheme to have a pension board which will work to ensure that the scheme is administered effectively and efficiently. There will be local pension boards in the case of the locally administered police, fire and local authority schemes. The boards will consist of member representatives, employer representatives and officials. They will operate in a similar way to boards of trustees, holding scheme administrators to account and providing scheme members and the public with more information about the pensions. The board members will be identified publicly, and their duties will be made clear to scheme members. I welcome the greater transparency that the Bill will bring to this area of public pension administration.

Clause 15 and schedule 4 provide for an extension of the role of the pensions regulator, who will improve and police the management and administration of all the new schemes. The regulator is independent of Government, and will be able to utilise its full range of powers to ensure that the public schemes are managed properly and to consistently high standards. Clauses 12 and 13 will ensure that all schemes collate and publish information to improve transparency and enable comparisons to be made between them.

Since the Bill was published, I have received a number of questions about its design. It establishes a common framework of delegated powers which enable schemes to be made in respect of the public service work forces. The common framework constrains the use of those powers on core parts of pension scheme design, such as the link between state pension age and normal pension age, the career average pension structure, and the abolition of the final salary link. Those core elements are fixed in this legislation in order to create fairness and an even degree of cost control across the work forces.

At the same time, the Bill allows flexibility when that is appropriate, enabling the secondary detail of the pension schemes to be adjusted in recognition of the differences between different areas of public service work. Members will know that the final scheme designs agreed vary significantly from work force to work force, properly reflecting differing priorities and concerns within the cost ceilings that I established. The approach builds on that taken in the Superannuation Act 1972, which set out a framework of delegated powers some 40 years ago.

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[John Healey (Wentworth and Dearne) (Lab)]

It is a pleasure to follow the hon. Member for Bristol West (Stephen Williams), who made a very balanced speech. He is right that reform is required. That is accepted and supported by hon. Members on both sides of the House.

I start from a simple principle: pensions are pay deferred. They are part of people’s terms and conditions, often part of their contract of employment, and, in the public sector, part of the deal for public service workers who often give a lifetime’s commitment to the service in which they work. Two things follow from that: first, pensions are principally the property of the scheme members, who defer their pay and put that pay in the hands of managers and trustees; and, secondly, changes to people’s pension terms should involve those members—those whose money it is—through consultation, negotiation and agreement.

That is what the Labour party did with the far-reaching reforms we put in place in government. We agreed and established changes to reflect the increasing age of the population, to manage the changes effectively, to control the costs to taxpayers and to increase contributions overall from scheme members. We did that with the armed forces in 2005, the police, firefighters and local government workers in 2006, and teachers, the NHS and civil servants in 2007. Across all areas, we introduced increases in the pension age, changes to the contribution rates from members—especially the higher paid—and a “cap and share” arrangement that limited absolutely the liability of taxpayers to future increases in costs. As a local government Minister, I was responsible for the local government pension scheme, which we radically reformed not just for new members but for existing members. Furthermore, we did so without closing the scheme, and there is no need to accept what is provided for in clause 16 and do that this time around either.

The reforms recognised the pressures of cost, population and life expectancy. They also recognised that pensions were deferred pay, that changes to contribution rates and benefits should be consulted on and agreed, that most public sector workers were low-paid and that their pensions were far from gold-plated. The average pension for NHS workers last year was a little over £7,500, while the average for a local government worker this year is just £4,406. After our changes, in 2010 the National Audit Office concluded:

“As a result of the changes, which are on course to deliver substantial savings, long-term costs are projected to stabilise around their current levels as a proportion of GDP. The changes are also set to manage one of the most significant risks to those costs, by transferring from taxpayers to employees additional costs arising if pensioners live longer than is currently projected.”

The Government have failed to build on those reforms. They did not even wait until the Hutton review, which they commissioned, had fully reported before in October 2010 the Chancellor hit public service workers with a 3p in the pound surcharge—a public service pensions tax that had nothing to do with long-term pension reform and everything to do with a short-term cash grab to try to deal with the deficit; and this from a set of workers that, at the same time, was being squeezed by a public sector pay freeze, hit by a VAT increase, subject to rising energy bills and suffering from deep cuts in tax credits. That is where the Government lost the moral authority to claim we were all in it together and to be a one-nation party. Furthermore, changes such as the switch from the retail prices index to the consumer prices index were imposed without warning, consultation or agreement.

The Government are legislating after losing the trust of public service workers, who simply do not trust them with their pensions or with this pensions legislation. It might not be the Government’s intention to reduce benefits already accrued, to prevent the flexibility to link the normal pension age with the state pension age, or to make further sweeping and radical changes or reforms without proper scrutiny or consultation, but the legislation, as it stands, can be used in that way, whatever the intention of Ministers. That is why it is important to get this legislation right. It is even more important because this is a broad, sweeping framework Bill in which many of the detailed changes will lie in the regulations and scheme rules.

As both a former local government Minister, like the hon. Member for Bromley and Chislehurst (Robert Neill), and a former Treasury Minister, let me say that my main concern is about the local government pension scheme. The Treasury has never really recognised the difference between the local government pension scheme and other public service pension schemes. Unlike other main schemes, the local government scheme is a funded scheme. It has £150 billion in assets, it raises an annual income significantly greater than its expenditure each year and it has seen its investment income cover at least a third of its expenditure on benefits in each of the last few years. Unlike all the other main schemes, employer contributions in the local government pension scheme are set locally by 89 separate funds, each with its own investment strategies, its own member demographics and its own range of employers—in other words, the flexibility to match the responsibilities and pressures that those funds face.

Unlike in other main schemes, the governance of the local government pension scheme reflects local municipal roots, while the respective roles and responsibilities of those managing and overseeing the scheme are different from those for the national schemes. Finally, unlike in all the other main schemes, simply meeting the liabilities is not the only concern of those managers. Stability is a vital element, as is the participation rate. The reforms that we put in place—those now being negotiated—reflect those concerns. This is a broad-brush Bill, and the same centralised powers, controls and restrictions over the unfunded schemes do not fit well with the local government pension scheme. As the shadow Chief Secretary said, some significant debates and amendments are required in Committee.

There are some serious flaws in the Bill. I will offer the Minister four for starters. First, the Chief Secretary confirmed in response to interventions from me and the hon. Member for Foyle (Mark Durkan) that clauses 3 and 11 allow scheme regulations to make retrospective changes to the benefits that people have already worked for and paid for. As such, they threaten one of the central tenets of pension saving: that what one has accrued is safe and that the terms on which it was accrued will be honoured, which is as true for the private sector as it should be for the public sector. Secondly, a running theme throughout all 38 clauses is a Treasury power grab—the centralisation of control over all elements of schemes, from valuations to scheme regulations, with no requirement to consult even the scheme members, who are most directly affected.

Thirdly, there is a legislative lock in clause 9 between the normal pension age and the state pension age for all but firefighters, the police and the armed forces. Therefore, even if there is a strong case, which is now being looked at, for that link to be made flexible for some workers in the NHS, the legislation does not permit it. Fourthly, last December the Chief Secretary made an important commitment to the House on behalf of the Government on the retention of current protections for public sector workers who are outsourced and the extension of fair-deal provisions for all staff transferring employers. Schedule 9 enables that to occur in the civil service, but it does not ensure that it will occur, and it must.

Finally, let me say this to the Treasury Minister and his colleagues. There are many excellent minds among the civil servants in the Treasury, but frankly they do not know everything. They sometimes make mistakes and sometimes others know more than they do. I shall give a couple of examples. The dates for the so-called closure of the local government scheme in clause 13 are wrong, as is the date for ensuring that transitional protection, as promised, is in place. As the Minister prepares for the debates and the amendments in Committee, I hope he will take seriously the points and concerns raised tonight. I hope he will be ready to make amendments where there is a good case for doing so, because in the end that is how we get a public pensions system that is fair to taxpayers for the long term, but remains fair to those public service workers who give so much of their time—their whole lives—to support others.

--- Later in debate ---

[Richard Graham]

I have no idea whether the word “guarantee” is in the Bill. In life, only two things are guaranteed as far as I know: taxation and death. We are talking about not guarantees as such, but a defined-benefit scheme in which the entire risk is taken by the taxpayer and the certainty that gives people the chance to budget in their retirement is with the scheme’s beneficiary. In fact, it is even better than that. As the hon. Gentleman will know, because he has studied these things carefully, the advantage of a career average defined-benefit scheme is that it benefits precisely those workers whom I would have imagined he would be most in favour of protecting.

The Pensions Policy Institute, which the hon. Member for Hayes and Harlington referred to, says:

“The Coalition’s proposed reforms will remove the different outcomes for high-flyers and low-flyers which exist in final salary schemes.”

It goes on to estimate that, under the current scheme, a high flyer

“would have had a pension benefit of 29% of salary, compared to 11% of salary for the low-flyer.”

Under the reforms proposed by this Government, both high and low flyers will have

“the average value of the pension offered being worth 15% of salary”.

That is a significant improvement for the low flyers. I would be astonished if all Members of the House were not in favour of that reform.

The hon. Member for Leeds West recognised that something had to be done, but tellingly, she made no reference at all to three of Lord Hutton’s four tests—affordability, fairness to the taxpayer and governance and transparency. Did she not think they mattered? Should they not be at the heart of what any Government do? That was a disappointing series of omissions.

[John Healey]

The hon. Gentleman said a moment ago that the total risk of the schemes was borne by the taxpayer. Does he not realise that he is making the same mistake as Ministers in not recognising that the local government pension scheme is a funded scheme? The income from its investments last year topped £3 billion, and there is also a strong contribution from employees alongside that of employers. That makes it a case apart from his general argument.

[Richard Graham]

The right hon. Gentleman makes half a good point. I know local government pension schemes very well, as many of them are my former clients. The reality is that they have never been as separate from the public sector balance sheet as he might be implying. One of his predecessors as Economic Secretary, Ruth Kelly, tried to amalgamate the whole lot, recognising their fragility. As the National Audit Office has revealed, the schemes are significantly underfunded, and I think I am right in saying that 20% of all money paid in council tax now goes towards paying the pensions of scheme members. He is right to say that local government schemes are different from others, but they are not quite as different as he suggests.

The hon. Member for Leeds West mentioned the fear that public sector workers would opt out of schemes altogether, because they might become unaffordable, and thereby become a burden on the state in a different way. I think it is fair to say that she did not recognise that opt-out rates have not altered. There is good reason for that, because although contributions are higher than they were, the value of a defined-benefit scheme is still considerable. In case her concern becomes real and there are large numbers of opt-outs, the Government have built into the Bill a provision for regular reviews to address the situation if and when it arises.

Several Opposition Members have expressed the concern that the Government are trying to set the private sector against the public sector. I have already totally rejected that point. All Government Members are as committed as anyone to helping every worker get some form of pension as quickly as possible. The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) missed the crucial point that the Government are trying not only to make defined-benefit schemes sustainable for the public sector, but to get millions of workers in the business sector to have a pension at all through the auto-enrolment scheme. It is disappointing to me, and I think to others, that she did not understand that.

Several Members have claimed that the real scandal is the lack of pension provision in the private sector, but it is a curious fact that one legacy of the previous Government is that 13.5 million workers in the private sector have no pension at all. Some Ministers in the Labour Government did good work, including the late Member for Croydon North, to whom I pay tribute for his work in the pensions sector. However, as with so many things, it has fallen to the current Government to seek an agreement and to implement reforms that will give people without pensions the chance to have something to retire on for the first time in their lives.

Today’s debate has covered many aspects of the Bill. As I said, it is a good thing that its Second Reading will not be opposed today, but I can see that there will be many arguments ahead in Committee.

Let me leave with hon. Members the points that I make to everyone in my constituency who is employed in the public sector and is in a defined-benefit scheme, whether they are teachers, nurses or other workers. First, the defined-benefit pension has fabulous benefits for all those involved, especially lower-paid workers; secondly, the increase in accrual rates means an improvement of some 8% for public sector workers; thirdly, anyone within 10 years of retirement is completely protected; and finally, I hope that the Opposition will drop their instinctively tribal approach, and recognise that the Bill tries to reform public sector pensions in a way that will, above all, be sustainable. Should our children and grandchildren work in the public sector, they will receive a career average defined-benefit pension, as will today’s workers, should the Bill go through successfully.

--- Later in debate ---

[Sajid Javid]

I was expecting a lot more than that from the hon. Lady. I am proud that this Government have already cut the deficit her Government left behind by a quarter. That is a significant achievement. The shadow Chief Secretary, the hon. Member for Leeds West, said she was unable to commit to keeping the CPI change we have introduced to public sector pensions beyond the term of this Parliament. According to the Office for Budget Responsibility, that would leave a black hole in the public finances of up to £250 billion in current GDP terms over the next 50 years. I look forward to hearing how the Opposition plan to fill that black hole.

[John Healey]

The Minister spoke warmly about his father and trade unions. Which trade unions support this Bill as it currently stands? Can he name even one?

[Sajid Javid]

Since we received the first interim report from Lord Hutton, we have been in negotiations with trade union representatives from almost all the major trade unions. I am pleased to say that most of them have taken a very constructive approach. As I said, trade unions that represent two thirds of trade union members have accepted the schemes we have put forward.

These reforms are not easy, but they are the right thing to do for the long term because they are in everybody’s interests. We must stop the cost of these pensions spiralling out of control. I shall now turn to some of the issues raised today.

Several Members, including the hon. Members for Banff and Buchan (Dr Whiteford) and for Blaydon (Mr Anderson), mentioned the link between the normal pension age and the state pension age. The reality is that we are all living longer and enjoying healthier lives in retirement. The average 60-year-old is now expected to live 10 years longer than in the 1970s. Pension ages of 60 and 65 were set in times when people spent only a few years in retirement, but that is no longer the case. Some fortunate people spend more years drawing their pension than earning their salary. If everyone is living longer, it is only fair that people work a bit longer, too; otherwise we will be asking those in the private sector to work longer and pay more so that those in the public sector can retire earlier having paid less. We cannot ask those people to pay twice over—once for their own pensions and once for those of public servants.

Let me be clear, however: this Government are not forcing anybody to work for longer. As now, it will remain possible to retire earlier than the normal pension age and draw a reduced pension, subject to any minimum age rules that exist. Of course, any benefits from the current schemes can be assessed in full and reduced at the current pension age for those schemes.

Secondly, I must remind the House that the Government have honoured their commitment to protect the rights of those closest to retirement. The Chief Secretary has made it clear that people who were 10 years or less from their normal pension age on 1 April 2012 will see no change in their pension. The Bill delivers that in clause 16.

Infrastructure (Financial Assistance) Bill

John Healey Excerpts

Monday 15th October 2012 Commons Chamber

That brings me to my right hon. Friend’s second point. The type of projects that are intended to be considered under the Bill are private sector-led ones that are commercially viable and creditworthy in their own right. The Government will make an assessment of each project. Let me say a bit more about how that will be done, because it is important. The Government have already set up a team within the Treasury called Infrastructure UK, which retains commercial specialists with the financial skills needed to handle a scheme of this nature. The due diligence process will involve external advisers in the same way as a financial institution, for example, would involve external advisers, and the governance structure will include expert members drawn from the private sector. At the end of this process, Infrastructure UK will have to assure Ministers that the project is commercially viable and that the only impediment to its going ahead is that it does not have the usual access to debt markets that it would have had under normal market situations. Even then, the Government will charge for a guarantee and have to be satisfied that they will not make a loss on their support for the project.

[John Healey (Wentworth and Dearne) (Lab)]

What will be next year’s budget for consultants to support the work of Infrastructure UK in carrying out that due diligence and giving advice to Ministers?

--- Later in debate ---

[Sajid Javid]

I think that the hon. Gentleman will know that there is no way I can tell him that. I cannot predict the future; he may be able to do so, but I am not. I can tell him that there have already been expressions of interest from more than 50 project sponsors and that the Government have entered into negotiations with a number of them, but no final decisions have yet been made. He will also know that, in the national infrastructure plan published last year, the Government identified numerous key projects worth more than £200 billion, so there could be a substantial number of projects.

[John Healey]

I am grateful to the Minister for giving way on the point that he was good enough to respond to earlier. He said that there would be charges as part of the project costs and that, therefore, there would be no net cost for consultants to advise the Treasury’s Infrastructure UK team. Does that also apply to consultants who may be required to advise other Departments as part of this due diligence process? Will there be a net cost to those Departments for such advice?

[Sajid Javid]

Because of the charges that the Government will make for the guarantees, we anticipate that there will be no net cost. Of course, that cannot be absolutely guaranteed, because our current projected cost profile may change, but it is anticipated that the income will cover most of the costs.

--- Later in debate ---

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I wish to speak briefly to amendment 12 and new clause 3, which are both in my name. Both relate to the reports that the Government propose in clause 3 should be annually produced, and to the transparency of the companies involved in this support for infrastructure, which I welcome.

Both the amendment and the new clause follow discussions that I have had with my right hon. Friend the Chief Secretary, who is now in his place on the Front Bench with his new ministerial colleague, whom I also welcome. The amendment and new clause are prompted by the fact that we often do not know the identities of the beneficial owners of the companies with which the Government do business. Companies often have shares owned by trusts or other companies based in countries that do not require disclosure of ownership, and I shall give a few examples.

The M6 toll road is owned by Midland Expressway Ltd, which is owned in turn by the Macquarie Motorways Group Ltd, which is in turn owned by Macquarie Atlas Roads International Ltd of Bermuda. It is controlled by Macquarie Infrastructure Group, but the identity of its investors and therefore of the owners of MEL remains unknown and undisclosed. In 2006, however, they paid themselves a £392 million exceptional dividend, and over six years made a return on their investment of more than 150% a year. This sort of profit at the public’s expense by we know not whom is not an acceptable arrangement, and I want the Government to be warned against it and to ensure that all owners are in the public domain.

Arqiva, as a private sector monopoly, is regulated by Ofcom. It runs all the transmission services for all UK terrestrial television broadcasters and for BBC Radio and most commercial radio services, owns two of the four digital multiplexes, supplies the Government with mobile and wireless communications and supplies three quarters of all police forces. It receives annual revenues of about £1 billion and makes annual losses of about £250 million. The ultimate owners of the company appear to be based in Bermuda, although we do not know who they are, and Arqiva has paid no corporation tax for four years.

Thames Water, the UK’s largest water supplier and a monopoly private sector company providing a public service with which the public therefore has no option but to deal was bought by Macquarie European Infrastructure Fund in 2006. The long-term debt held by the company was £3.4 billion and is now £7.7 billion. When the company was bought, Thames Water took on all the debt taken out by its owners to buy the company, which was more than £3 billion. To do that, it set up a company in the Cayman islands, Thames Water Utilities Cayman Finance Ltd, which is registered at an address at which are registered 18,000 other companies.

Over the past four years, Thames Water has made profits after tax of £314 million, £331 million, £225 million and £247 million, and has paid dividends of £398 million, £291 million, £271 million and £480 million, but in the last tax year paid no tax. In the previous year, it paid £500,000 in tax, and the year before that £16 million, yet it has a stable operating profit of about £600 million a year. I could go on. There are health care companies, and the company currently negotiating with the London fire brigade over the water to buy the old fire brigade headquarters looks as if it is based in the British Virgin Islands and the Isle of Man.

[John Healey]

rose—

[Simon Hughes]

I shall make one short point and then give way.

The other really important thing—this is the purpose of new clause 3—is that we should require due diligence to be carried out in the same way as we require it for money-laundering prevention. The trouble is that it is not done properly and is not effective.

--- Later in debate ---

[Simon Hughes]

I give way to the right hon. Member for Wentworth and Dearne (John Healey)

[John Healey]

The right hon. Gentleman is making a powerful case against predatory capitalism and tax avoidance that ought to commend itself to the Treasury Front-Bench team. If they will not accept his argument and amendments, will he press them to a vote?

[Simon Hughes]

I am conscious that the first of my amendments is technically deficient—which was my fault, not anybody else’s—but I hope that Ministers will accept the point and amend the Bill in the other place. I will press them hard—I know that I have support from colleagues in both other parties in this place—to try to get the change made. I am hopeful that the Chief Secretary to the Treasury, who is in his place, has heard the proposition and will be able to respond.

--- Later in debate ---

[Sajid Javid]

My right hon. Friend makes a fair point, and I am more than happy to discuss this in further detail with him at a later stage.

[John Healey]

The Minister was boasting before the last interventions about near-record-low interest rates of 1.9%. What does he think about the judgment of that by the hon. Member for Wyre Forest (Mark Garnier), who was trusted and appointed by the Chancellor to be his party’s member of the LIBOR investigation committee? He said:

“The reason we have a low interest rate is because the economy is absolutely screwed.”

[Sajid Javid]

We have low interest rates because, for once, we have a Government who actually understand public finances. Less than an hour ago, the shadow Financial Secretary, in introducing his latest amendment, said that he was concerned about the use of taxpayers’ money—I had to have a little chuckle to myself, because what happened to that during 13 years of Labour government? Our national debt tripled. He also talked about clawbacks, and there is one clawback I would be interested to learn about. When the previous Government sold off our precious gold reserves, did they negotiate a clawback at that point? I do not think so.

--- Later in debate ---

[Chris Leslie]

If the Minister were talking on the basis of having made some progress or having reached some level of achievement as regards housing policy, perhaps he would have the right to start throwing accusations about. Of course, far more could and should have been done in the past, but after two and a half years under his party’s Administration, where are we going on housing construction? According to the Construction Products Association, it is going through the floor; “free-fall” is the phrase linked to the CPA in this morning’s Financial Times.

[John Healey]

My hon. Friend is absolutely right. In particular, social housing construction, which was the subject of the Minister’s intervention, has plummeted by 25% in the past year. That is the direction it is going in under this Government.

[Chris Leslie]

Exactly; my right hon. Friend is right. Official data show that construction output is down by 11.6% on the year before, and the Construction Products Association predicts a 13% fall in infrastructure investment this year. When one starts to look at what is actually happening in the real economy and the real world today, it is clearly not about the announcements that Ministers bring to the Chamber as though they represent reality. The Bill may well go on to the statute book after this debate, but if the Government are relying on it alone, we remain concerned that the infrastructure schemes for housing, schools, child care, transport and so forth which should be proceeding will not move forward as effectively as they should.

There are other concerns that the Minister has not addressed, perhaps because the Government do not have an implementation plan that they can allude to. For example, they have not talked about state aid clearance. The Bill says that financial assistance can be given to particular industries and private sector ventures in operations, in maintenance and in repairs, but perhaps to the exclusion of other companies. What is the Government’s approach to state aid clearance from the European Union? If they hit such a barrier in the EU, will they simply say, “Well, another month, another quarter, another year has gone by and we didn’t get state aid clearance”? How are they approaching those barriers, and when will they report to Parliament about how they are going to tackle these issues? Those are more obstacles that they do not appear to have addressed in any way.

--- Later in debate ---

[John Healey]

I had not planned to speak on Third Reading, but I have been moved to do so by how seriously the Committee stage was curtailed this afternoon. For the entire Committee stage on the Floor of the House, we have had less time than a single sitting of a Public Bill Committee. I put it to the Economic Secretary that proper scrutiny would have done a great service to the objectives of a Bill as important as this, on which the Government are rightly looking to build a consensus in the House and beyond. I say that not least because those with an interest, who will have to finance, plan, deliver and make decisions about the big infrastructure projects that our country needs, could have had the chance to give evidence to the Public Bill Committee. That would not have held the Government up for long, but it would have made the Bill and the debate on it a great deal better.

We did not reach some amendments and new clauses today, but I hope that the Economic Secretary and his colleagues in another place will seriously consider amendment 3, tabled by my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), about the frequency of reports; amendment 12 and new clause 3, tabled by the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), on transparency, due diligence and the tracing of beneficial owners; and new clause 1, tabled by my right hon. Friend the shadow Chancellor, on social and affordable housing. The Economic Secretary gave the House the impression that he cared about that matter, so I hope he will take that suggested provision seriously.

I do not just say, as my right hon. Friend the Member for Greenwich and Woolwich did, that I can find little to object to in the Bill; I positively welcome the aims behind it, and I will welcome action should it follow from the Bill’s provisions. It makes sound sense to make the private sector balance sheet support the public sector balance sheet and bring the two together, especially at a time when public finances are limited and normal lending is constrained.

The principles and aims of the Bill are sound, but the question remains whether the Government can put schemes in place in a way that is simple enough and speedy enough to ensure that the necessary action follows. The Economic Secretary will have to forgive me if I have a certain amount of scepticism about that. After all, it is almost a year since the Prime Minister promised

“an all-out mission to unblock the system and get projects under way”,

and almost two years since the Government published their first national infrastructure plan. It is almost two and a half years since they set up the Infrastructure UK unit in the Treasury, which the Economic Secretary has mentioned today, with its remit to

“provide a stronger focus on the UK’s long-term infrastructure priorities and meet the challenge of facilitating significant private sector investment”.

It has been so long, and there has been so little action, that business, investors and industry are all understandably losing confidence in the Government’s ability to act. That was reflected in the CBI’s annual infrastructure survey published recently, which concluded:

“The message to Government is a wake-up call that businesses in Britain are looking for action and we haven’t seen any yet.”

It found that business and industry were less confident about the Government’s ability to drive investment into crucial transport, energy, water and waste projects than they were a year ago.

I hope that the Bill will be part of a proper rebalancing of the British economy, and that the Economic Secretary will recognise that investment is currently heavily skewed towards London and the south-east. I hope he will take seriously his own interest in seeing a cross-party consensus because, in the end, long-term infrastructure projects do not correspond to our political cycle—they require cross-party consistency, confidence and consensus. If the Bill can contribute to that, it will build a sound basis for that consensus for the future.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Infrastructure (Financial Assistance) Bill

John Healey Excerpts

Monday 17th September 2012 Commons Chamber

[John Healey (Wentworth and Dearne) (Lab)]

I am glad that I was in my place to hear the hon. Member for Reigate (Mr Blunt) make his first speech from the Government Back Benches. He was a very serious Minister and brought a very serious mind to his brief, as he has done in this afternoon’s debate.

I see borrowing guarantees to help fund investment in Britain’s infrastructure as a good, if overdue, use of the power of government. It is creative, innovative and active government, if it works. Using the strength of the public balance sheet to underwrite private investment makes sense, especially at a time when public funding is limited and private bank lending is constrained. It should improve the credit rating of, and attract investors to, infrastructure projects, and I see those as two key tests for the policy and the legislation before us.

I welcome the Bill and want it to work. The country needs it to work. However, I say to the Minister and to the Chief Secretary, who is no longer in his place, that there are two big questions behind the Bill that, even after his long speech this afternoon, remain unanswered. They are about urgency and clarity. The value of the legislation and the Government’s borrowing and funding commitment will be felt when the first project is chosen, the guarantees are in place and the work begins. When will that be? As always with a new policy, the devil is in the detail. We have no detail and we have no idea how the arrangements allowed for in the Bill will work. The Government have already asked for expressions of interest for funding and borrowing guarantees but have published no guidance. When will that be done?

[Geraint Davies]

Will my right hon. Friend give way?

--- Later in debate ---

[Geraint Davies]

You have many very good points, Mr Deputy Speaker.

Does my right hon. Friend agree that, given that the Building Schools for the Future programme was in place and ready to go before the Government cancelled it, it would be a good idea to reinstate it and get productivity through our children as well as through the construction industry?

[John Healey]

My hon. Friend is right, and I hope that he gets a chance to make a speech. I will move on in a moment to some of the changes in policy and cuts since the general election that have made infrastructure projects and that sort of investment harder, not easier.

There are big causes for concern behind the two big questions I mentioned. First, there are questions and concerns about speed and how serious the Government are about getting infrastructure work going. It is almost a year since the Prime Minister promised

“an all-out mission to unblock the system and get projects underway”.

It is almost two years since the Government published their first national infrastructure plan and almost two and a half years since they set up Infrastructure UK in June 2010 in the Treasury. Most seriously, since the Government’s second infrastructure plan in November 2011 the economy has shrunk by nearly 1% and Britain has become one of only two G20 countries in a double-dip recession.

On the point of concern about clarity and simplicity, the Infrastructure Investor journal recently conducted a survey of 200 industry investors. Lack of finance, poor regulation and procurement weakness are all problems they face, but some 60% said that confusion and lack of clarity from the Government are a far greater disincentive. What matters most is confidence in the pipeline of projects, often based on clear Government policy decisions and commitments. The Government are failing that test over big projects and policies such as High Speed 2, aviation capacity and power generation. Their record on other policy decisions that at first sight have nothing to do with infrastructure is also making it harder to put in place the funding required. The abrupt change and then change again in the solar feed-in tariffs, the benefits reforms and cuts, the tripling of student tuition fees, creating “core and margin” university course places, and the rebanding of renewables obligation certificates have all changed the risks and the costs of long-term capital—so much so that a senior figure in the industry recently said to me: “Investors are now asking for the first time how you can price in public policy risk.” The guarantee scheme needs to be flexible and straightforward. The devil is in the detail, and Government revel in the detail. Is every Department going to introduce and run its own scheme with its own rules? Who in Government will be accountable for the programmes and the problems on the guarantees?

On housing, let me take issue with the hon. Member for Reigate, because the Chief Secretary and the Government are right and he is wrong. I welcome its definition as infrastructure. It is basic to people’s lives and to a good society, and central to wider economic growth and to productivity. Above all, it is a long-term good. We are still getting rent from Bevan’s post-war council housing a long time after the cost of the capital to build them has been paid.

I am looking to the Government for reassurances on four questions, especially in relation to housing. First, the Chief Secretary said that he did not want to prescribe and would not circumscribe the stages of projects that credit guarantees can support. The Treasury has said that guarantees can cover key project risks including construction, performance and revenue risk. Will that apply equally to housing as to the other categories set out in clause 1(2)? Secondly, some housing associations already have a presence in the capital markets and can raise finance in their own names, so will such organisations with significant project proposals be able to push ahead without the creation of any intermediary or aggregator?

Thirdly, the best housing developments are mixed and help to support mixed communities. The Government have said that the guarantees will support private and social housing. Will those building new homes be able to source guarantees for both sectors from the same fund scheme? Fourthly, I expect that security requirements will be part of the arrangements for the borrowing guarantees. Will developers building homes be able to provide the security on completion of those homes rather than in advance? If the Government want these guarantees to work, and to work rapidly, to boost housing, jobs and the economy, they need to provide answers and reassurance on all four points.

The Chief Secretary mentioned the 1932 Baldwin agreement, which emphasises that where financial liabilities that last beyond the term of one Government or one financial year are introduced, they should be backed by specific legislation. I believe very strongly that improved long-term infrastructure should be a shared endeavour of all parties, because infrastructure projects do not fit neatly within the political cycles and are damaged by the chopping and changing of Government policy.

[Kelvin Hopkins]

On my right hon. Friend’s point about infrastructure investment covering more than one Government and different parties, there was a time, when I was young, when Conservative and Labour Governments used to compete on the number of council houses they could build during their term of office. We should get back to that kind of arrangement.

[John Healey]

I do not think I have ever heard my hon. Friend advocate competition in any circumstance on any policy before, but I am happy to say that he is right, and I support him. I hope that we may get back to those days. Just before the election, when I introduced the local authority new-build scheme, which boosted and supported local council housing for the first time, we had very strong bids and very strong support from 73 councils, including many Conservative councils that wanted to build council homes but were not, until then, getting support from Government to do so. They are certainly not getting that support now.

Since the election, this Government have done too little for too long on new infrastructure. This Bill could make an important difference. It deserves all-party support, and the Government will get it if they get this right.

--- Later in debate ---

[John Healey]

Given the absence of Scottish and Welsh nationalists, may I ask the Minister whether decisions on projects in Scotland and Wales will be made in Scotland and Wales?

[Sajid Javid]

All decisions covered by the Bill will be made by the United Kingdom Government: by the UK Treasury, or by relevant Secretaries of State. However, when projects clearly relate to devolved regions, the Government will work very closely with the relevant Departments in those regions.

The hon. Member for Walthamstow (Stella Creasy) made a thoughtful speech containing some very good points, but I must take issue with one of her closing comments. I believe she said that one of the problems with the Bill was that it placed restrictions on spending. It does place restrictions on spending, because this Government are very keen on restrictions on spending. The previous Government lost sight of that, which is what got us into this mess in the first place.

--- Later in debate ---

[Sajid Javid]

The purpose of the Bill is to establish a structure to provide guarantees for credit-worthy projects in the private sector. Of course the Government will work very closely, step by step, with the private-sector promoters of each of the projects, and if one of the companies feels that it has a viable project that the Government should consider, it will be encouraged to discuss it with the Treasury. A specific Treasury team called Infrastructure UK, which was set up a couple of years ago, is full of specialists who understand infrastructure and have a great deal of experience. It will be keen to look at every single project, and if the hon. Gentleman has one in mind he should please present it as soon as possible.

The two myths that I heard from the Opposition—

[John Healey]

I am very grateful to the Minister for giving way; he is answering the questions that come up. Will Infrastructure UK look at every project and proposal for these borrowing guarantees?

[Sajid Javid]

It will consider every project that comes its way, but that does not mean it will agree to support every one. However, it is willing to look at every project and to come back with an answer on each.

Oral Answers to Questions

John Healey Excerpts

Tuesday 11th September 2012 Commons Chamber

[Danny Alexander]

My hon. Friend is right to say that transition status has benefited regions such as his—and, indeed, mine in the highlands and islands—during the current multiannual financial framework period. Our principal objective in relation to the budget negotiations is to bring down the total EU budget in recognition of what is going on around Europe, but we will happily discuss further with him his concerns about the issues that he has raised to ensure that we secure a fair deal for impoverished regions of this country as well.

[John Healey (Wentworth and Dearne) (Lab)]

Legislation for Government borrowing guarantees to help to fund infrastructure is due to be presented to the House next week. The Chancellor is right to try to use the power of government in this way, so why has it taken two and a half years, and nine months of double-dip recession, for him to decide to do it?

[Mr George Osborne]

Can I just say—