Inheritance Tax

Jon Trickett Excerpts

Wednesday 17th January 2024 Westminster Hall

[Jon Trickett (Hemsworth) (Lab)]

I beg to move,

That this House has considered inheritance tax.

I am looking forward to your firm guidance from the Chair, Sir Robert. I am grateful to the House authorities for allowing us to have this important debate.

The whole British tax system is skewed in a very odd way. We simply do not tax wealth sufficiently, but we do tax income from work. Income from wealth is relatively untouched by the taxation system, but income from work is taxed and people feel the burden of it. If we were to redesign our whole tax system, I wonder whether that is the way we would structure it. My office wrote a report on this issue three years ago, suggesting a wealth tax. If there were to be a wealth tax, we might well be able to change the way we tax inheritance, but that is not the case; it is not a serious proposal for now, but it is something to think about in the longer term.

It is good to see so many Members here. I begin my reflections on inheritance tax with the following reflection: it is always interesting to look at the language politicians use, especially those from the governing party. When Labour proposes a spending commitment, the Government say that we have found a “magic money tree”. When the Tories find money to spend or give away in tax gifts, suddenly it is “wise”, “prudential” and “management of the economy”. Of course, it is no such thing; it is propaganda.

The right-wing papers are saying that there is some “fiscal headroom” in the Budget—in other words, the Treasury is sloshing around with money. But where has the money come from? It has come from hard-working people who are overtaxed on their income. There might be other ways to fund state services, but it is the working people who have created the additional money in the Treasury. That has been done through a cruel system, which is no longer quite as invisible as it was, called fiscal drag, whereby people’s wages and salaries are increasing but the threshold at which they pay tax is being held steady by a Conservative Government who have clearly set out to raise more money from working people. The fact that thresholds are being held steady while wages are rising means that people are paying more as a proportion of their income than they would have done if the thresholds had risen at the same rate.

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

Will the hon. Gentleman give way?

[Jon Trickett]

There are a lot of Members present, so I will give way only once—twice at the most.

[Mr Jayawardena]

Given that the hon. Gentleman is concerned about fiscal drag, as am I, would he concede that, given that the £325,000 threshold for inheritance tax has been fixed since 2007, it should be increased in order to avoid fiscal drag?

--- Later in debate ---

[Jon Trickett]

I find that a very interesting intervention. I am not opposed to considering that idea as part of the wider debate, but let me return to the point I was trying to develop.

It looks as though right-wing ideologues in newspapers and elsewhere are hinting that there is a significant amount of money available in the Treasury. Those papers are saying that we should end inheritance tax or perhaps cut it. It would cost £7 billion of the Treasury’s reserve of money to abolish inheritance tax completely. I guess that all Members present will have been around their constituencies in the recent Christmas and new year recess, and they will have seen people hungry and living on the streets, schools closed because the concrete problem has not been resolved, hospitals with cruel waiting lists, people unable to heat their homes, and even unfilled potholes.

What we have seen in our own constituencies is true for the whole nation. There are massive pressures on our civil society and the way we live our lives. If we were the Treasury and had £7 billion, would we really want to hand over money to some of the richest people in our society, when all those needs are still there, and when maybe we should be trying to help people on lower pay with some assistance on tax? I don’t think so. I do not think it is a rational decision and a proper way to spend money, and nor do the public. In two recent polls, 75% said they were against a cut in or the abolition of inheritance tax.

[Mr Jayawardena]

Will the hon. Gentleman give way?

[Jon Trickett]

I said I would give way twice. The right hon. Gentleman has already had one intervention, so I will only take another from somebody else; a lot of people want to speak.

I am sure we are all clear on this, but let us remind ourselves how the system works. One argument that might be made is, “Are you really saying that if you’ve worked hard all your life and managed to buy a house, your descendants can’t inherit that house?” Well, the rules are quite clear. It is not as people might imagine, because a person is allowed half a million pounds with no inheritance tax on the house value. With a couple, however—whether they are married or in a civil partnership—the partner left behind after the other has died inherits the house with no tax; we all know that. When the second person in the marriage or civil partnership dies, the first person’s £500,000 is accumulated to the second person’s £500,000, so that is effectively £1 million per house. Nobody in a couple who owns a house in that particular way would pay any inheritance tax on the house, so it is a specious and false argument to say that inheritance tax would somehow deprive people of their houses.

Look at the figures. In Yorkshire, only one in 300 properties is worth more than £1 million. All the rest are worth substantially less. In the whole of Yorkshire, there are 7,500 households worth more than £1 million. Across the whole country—of 60-odd million people—there are 700,000 properties worth more than £1 million. It is important to put that on the record, before we go any further into the debate.

If someone leaves more than £1 million, they may well be required to pay inheritance tax. Let me deal with what actually happens, based on figures provided by the Financial Times, which are based on Treasury figures. If someone leaves an estate worth more than £5 million, they will find that the amount of money they pay in inheritance tax declines. The people between £1 million and £5 million are probably paying 40%—unless they have made certain arrangements—but the really wealthy estates above £5 million, where the power and wealth in our society resides, pay less and less tax the more wealthy they are. Hon. Members can see the graphs; they are freely available on the internet. The richest estates in our country pay virtually nothing at all in inheritance tax. Can that really be right? I do not believe it is morally justifiable.

I do not want to name too many very wealthy people, but let me name one, because it has been in the newspapers. The Duke of Westminster, one of the richest men in the country, inherited well over £6 billion—I think, nearly £7 billion—through various trusts and other arrangements, but according to the right-wing newspapers—the Daily Mail, Daily Express and others—the estates more or less avoided any form of tax at all. How can it possibly be right that that kind of wealth should be handed on, while people who work hard and have maybe managed to accumulate more than £1 million in their lifetimes are paying 40% tax on the residual amount they arrive at?

In Scotland—I have no doubt my hon. Friend the Member for Glasgow East (David Linden) from the SNP may well mention this—500 families own half of all the land. That is barely touched through the way we deal with inheritance. I do not think that is justifiable, when the half the land of a whole nation is held by 500 families.

I discovered something quite extraordinary in my constituency while researching this issue. I will not name anyone, because this case has not been in the papers. There is an estate of more than 3,000 acres in my area, with 5,000 acres elsewhere and a further 3,000 somewhere else. That large estate, in place since the 16th century, has been barely touched by any form of inheritance or wealth tax over the centuries. That estate remains in place. What is extraordinary is that there is an agreement between the Treasury and the people who leave these large estates that if they cannot pay the inheritance tax, they can donate a work of art. I will be interested to hear the Minister defend that.

It was extraordinary to find that the owners of that property in my constituency avoided inheritance tax on one of the largest estates in the country, which has been left untouched for four centuries, because they were able to gift to the nation a bookshelf—okay, it was a valuable bookshelf. That bookshelf was given in place of paying inheritance tax. How can that possibly be correct?

What is even more extraordinary is: where is that bookshelf now? It is in the very stately home where that particular family still has some residential rights. Of course, it is available for the public to see if they visit. None the less, it is extraordinary that someone earning £10,000 or £15,000 a year—struggling—is paying bloomin’ tax, but a multimillionaire with hundreds of millions of pounds and an estate can avoid tax by handing over a bookshelf that remains in the very house where their family have lived for centuries.

The senior economist at the Institute for Fiscal Studies, which is hardly a hotbed of Marxist thinking, said overnight that it is not in favour of changing inheritance tax, except to say that we should avoid all of the reliefs and the systems by which people can escape inheritance tax, which makes it unfair and skews the taxation system as a whole. It wants to see the loopholes that some of these richer families use closed. For example, it is possible to put money in a trust. If it is agricultural land that is being farmed, there is no inheritance tax on it. Such estates remain there—a blight on our system and a way of securing the continued existence of the British class system, which has caused so many problems for our country.

Let me turn from the very wealthy to other people who pay inheritance tax. Less than one in 25 people who die leave an estate that is subject to inheritance tax; that is under 4%. More than half the constituencies in the country pay no inheritance tax at all, or none that can be measured. That figure is from the Financial Times. Ending inheritance tax would not put a single penny into all those constituencies. There would be no benefit to them whatsoever, as far as I can see, from the relief of inheritance tax.

[Mr Jayawardena]

rose—

[Jon Trickett]

No, I will not give way—the right hon. Gentleman will have a chance to speak in a moment.

I want to illustrate what is happening. I think I am right in saying that, if inheritance tax were abolished, it would put £12 million back into the Minister’s constituency, which makes £60 million in a five-year Parliament. In all the 42 red wall seats in the north of England, which went from Labour to Tory, that sum is hardly more. All those seats together would raise £15 million a year in inheritance tax. Abolishing inheritance tax would put a fraction of the amount of wealth in our country back into those constituencies, and then only into the hands of the richest in our society.

[Peter Gibson (Darlington) (Con)]

Will the hon. Member give way?

[Jon Trickett]

I will give way, but briefly, because I want to make progress.

[Peter Gibson]

I am grateful to the hon. Gentleman for giving way. I am following his logic about money staying in a constituency where inheritance tax falls, but that presupposes that all beneficiaries of that deceased’s estate live and reside in that constituency, which is not the case. Beneficiaries often live throughout the country.

[Jon Trickett]

The hon. Gentleman raises an important issue, because I think there is £800 billion of wealth in our country that nobody—not even the Treasury—knows the owners of. That is a colossal, unimaginable amount of untaxed wealth, which has simply disappeared because the Treasury cannot find out who owns it. It is true that people can reside in one place and own property in another, but I am talking about someone’s place of residence when they died.

Let me remind Members of the figures, because I do not want to lose the argument. In all of the red wall seats that Labour lost to the Tories, £15 million in inheritance tax was paid; only in three of those seats did anyone pay any inheritance tax. However, in the 42 blue wall seats that I have looked at, £1.5 billion was paid in inheritance tax. So in Tory seats in the south and south-east, and to some extent in London, £1.5 billion was paid, while only £15 million was paid in all of the so-called northern red wall. That is a completely extraordinary set of figures.

I think Ministers and right-wing commentators really fail to understand the way in which our society is structured, with the inequalities and all the other problems that we face on a daily basis. If it were to happen, the abolition of inheritance tax would be one of the largest shifts of wealth that has ever taken place under any Chancellor, certainly in recent history. I have been in Parliament for 28 years and I do not remember anything as large. Here is the central point: this is not a fiscal strategy, and it is not about justice, or fairness, or responding to what the people of the country want. It is a political strategy to move money into those areas where the Tories are now extremely worried that they are going to lose their seats. This is about pumping money into blue wall seats. It is a political strategy rather than a fiscal one.

That is where we are. The Government think that they can bung people, whether with contracts or honours or by putting money back into the pockets of the richest people in our society, in order to secure their own continuance in office. But the British people do not like this stuff. It is grossly unfair and it should not be happening. I hope that the Minister can say, “Well, we might have had a look at it, but we’re not going to do it, because—you’re correct—it would be unfair.”

--- Later in debate ---

[Ian Lavery (Wansbeck) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Robert. I thank my hon. Friend the Member for Hemsworth (Jon Trickett) for bringing this debate to this Chamber; it has been interesting to listen to the contributions that have been made. My hon. Friend the Member for Easington (Grahame Morris) gave some alarming statistics about widening inequalities. He spoke about the entrenched wealth and privilege that is rampant in this country.

I am not surprised that, at this stage in this Conservative Government, the Tories are looking to halve or abolish inheritance tax. Is it a pre-election giveaway? Is it red meat for the blue wall areas? Is it red meat for the rich? I think so, I really do. The impact of halving or getting rid of inheritance tax will fall upon only one section of society, and that is the less well-off. The richest people are where this policy is focused. The richest people in society will benefit from the abolition of inheritance tax.

As my hon. Friend the Member for Hemsworth said, if we get rid of inheritance tax, we are talking about a loss to the Treasury of £7 billion. What could any MP in this debate do with £7 billion in their constituency? How many hospitals could we build nationally for £7 billion? Forget about repairing schools; how many could we build with £7 billion? How many youth clubs could be built with £7 billion? It could be used to look after ordinary people, in ordinary communities. Seven billion pounds—it is a lot of money to lose.

Inheritance tax has a long history. Contrary to what many people believe, it is not a modern tax created by crazy lefties. The first tax on the administration of a deceased person’s estate was the probate duty imposed by the Stamp Act of 1664. The roots of the modern version of inheritance tax can be traced to the estate duty created by Chancellor William Harcourt’s Budget of 1894. There has long been an acceptance that, when the wealthiest in our society die, the transfer of their wealth should not benefit only their heirs—as has already been said, they have done nothing at all to earn that wealth. Part of that wealth should also benefit communities and the country as a whole.

Inheritance tax is paid on estates worth more than £325,000. I think each speaker has mentioned this—forgive me for repeating it, but it is important—but if the main residence of the deceased is left to a descendant child, the value of that home is not included in the value of the estate and, when the entire estate is left to a spouse, no inheritance tax is paid.

Very few people pay this tax. In the tax year 2022-23, 3.73% of estates paid inheritance tax—3.73%—and only 1.9% of those estates that had to pay inheritance tax were in the north-east of England.

[Jon Trickett]

Out of the 29 constituencies in the north-east of England, only three paid a penny of inheritance tax in that last tax year. Does my hon. Friend think that cutting inheritance tax will put massive amounts of additional resources into his region?

[Ian Lavery]

I will come on to that, but as ever, my hon. Friend makes an extremely important point.

After Northern Ireland, the north-east of England pays the least, but have a guess where 42% of the estates that attract inheritance tax are located—have a guess, Sir Robert. They are here in London and the south-east —the blue areas. [Interruption.] I am sorry; if the hon. Member for Broadland (Jerome Mayhew) wants to intervene, I am happy to accept an intervention. Does he want to intervene?

--- Later in debate ---

[Jon Trickett]

I will be very brief. “The politics of envy”—talk about predictable. What we have actually heard from Government Members is a politics of wealth, privilege and greed. We have a tax system that simply reinforces the gross inequalities in our society, as we have heard from almost every Member, including the hon. Member for Strangford (Jim Shannon) and a couple of Members on the Government Benches. We have a system that is grossly unequal, deeply unfair and unjust, and the system of so-called inheritance tax reinforces all that. The Minister has refused to deny that the Government are looking at inheritance tax. We look forward to the announcement on 6 March, and we hope that the Government will listen to the points that we have made.

The Minister did not respond to the two central points that I was trying to make. First, inheritance tax is paid by a tiny minority of people who are based largely in Conservative-voting seats; that tells us exactly what fears are in the bellies of the Ministers who are trying to pump money into Tory areas to try to protect their majorities. It will not work. Secondly, to respond to the hon. Member for Strangford, who is no longer in his place, this issue is about the big estates. It is not about somebody who has built wealth through hard work with their hands; it is about entrenched estates that have been there for centuries, right back to the Domesday Book—estates that the Minister’s party protects and that presumably fund his party, too.

Let me finish with the words of a man who was alive at the time of Christ, the philosopher Seneca: “A kingdom founded on injustice will not survive”. This year, whenever the election is, we will see what exactly will happen to the kingdom of injustice that the Conservatives have created.

Question put and agreed to.

Resolved,

That this House has considered inheritance tax.

Autumn Statement Resolutions

Jon Trickett Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Jon Trickett (Hemsworth) (Lab)]

Thank you for your guidance, Mr Deputy Speaker, and I will try to be brief.

The first point I want to make is that the Chancellor and the Chief Secretary, who spoke at the beginning of this debate, seem to have omitted certain important facts. I do not want to suggest that they deliberately misled the House—that would be totally inappropriate—but perhaps they had memory problems, so I will try to assist those on the Government Front Bench with some things that seem to have been forgotten, but are quite important. First, right hon. and hon. Members on the other side have suggested that Labour has a problem with borrowing, but look at the figures. Since 2010, the Government have borrowed £1.5 trillion, and they seem to be heading towards borrowing of £3 trillion, an increase of 28% of GDP since Labour left office: they are the borrowers.

Look around: where has the money gone? Our services have collapsed in many cases, including schools, hospitals and the police force. Our people are living in increasingly difficult times. There is an increase in poverty and the necessity to use food banks. Our growth is more or less static. Okay, there is a small percentage increase, but over the medium term we are not looking at any growth at all. Where has all this money and all this borrowing gone? It has been spent by a profligate Government who do not have any sense of the country’s priorities, and that worries me. One section of the population has done well—the big corporations and the wealthy—and I might return to that if I have time.

The Government forgot to mention that the OBR has said that the plans published today require £19 billion worth of expenditure to maintain our public services, but the Government have provided only £4 billion. A spokesperson for one of the larger well-known think-tanks has said that the cuts that the Government are proposing are “completely implausible”. I looked at the figures. Schools are looking at a cut in real terms. There is no attempt to match inflation. The Government are going to reduce the amount of money going into schools. How will those cuts be made? Services, after 13 years, are almost beyond repair without a new Government.

The Government seem also to have forgotten that the OBR has said that working people are facing the worst cut in living standards since records began. That is shocking, when we reflect on the levels of difficulty that we see in our constituencies. The other thing that the Government seem to have forgotten, while they have been claiming that inflation is going in the right direction, is that inflation as a whole is one figure, but the cost of food is increasing by 10%. I looked at the figures to see where we are with food poverty. The bottom four deciles—that is, two fifths of the population—spend more than 40% of their total household income on food and housing. Food prices going up are driving people further and further into destitution and poverty. All those facts seem to have been forgotten by those on the Government Front Bench.

I will not speak for too long, but I will make a couple of other points. Ministers have said that this is a Budget for working people. I represent large numbers of working people—we all do, I guess—and the average salary or income in my constituency is £29,200, which is way below the national average. With wage increases needing to match food inflation, I calculated the result of today’s announcements for people on £29,200. The amount of income tax they pay will increase by £456, because the Government have not increased the thresholds. That is £9 a week. Okay, the Chancellor announced a reduction in national insurance of 2p, but that will still leave people in my constituency on the average salary more than £2 a week worse off. What the Government pretend they are giving with one hand with a cut to national insurance is then taken with the other hand, as they have not increased the thresholds. Effectively, people are falling further into poverty.

The people I represent and the people of Britain as a whole are not fools. We might see tomorrow’s right-wing newspapers bellowing out a great triumph for the Conservative Government, but people will look at their pay packets, and they will see that the Treasury is still taking £100 more than it would have had thresholds changed. That is an unfortunate situation to be in. It is what the economists call fiscal drag, and it is estimated that next year alone, the Treasury will take back £8 billion from working people, which is £270 a person a week. The faulty memory of Government Ministers—let us put it no stronger—has resulted in a rather rosy picture of what will happen to our country, but the people will see what has happened to their families, their households and their neighbours, and they will understand that this Government are simply for the rich rather than for the rest of society.

I return to inflation. The right hon. Member for North Somerset (Dr Fox), who is not in his seat, talked about how we should explain inflation and said it was produced purely by external forces. Of course, external forces have made a difference. But I have covered 40 separate financial statements since I was first elected 28 years ago, and I remember sitting here and seeing the faces of Conservative Members when the Budget was introduced—they started off rosy and finished up pale, even white and ashen—but what did they do? They voted for it—all of them, I think. We know what the consequences have been since.

Was there another option for the Government to try to protect working people? I think there was. Spain, for example, with the same spending pressures from oil costs, harvests, the wars and so on, has managed to keep inflation down to 2% while ours was roaring away at up to 11%. What did Spain do? It removed VAT from basic foodstuffs, capped prices, made payments to households, and reduced VAT on electricity and gas. The thing is, we left the European Union in part because we supposedly wanted to be free to adjust our VAT rates, but we have done none of those things, really. We let inflation rip.

My final point—again, this was not mentioned in the statement—is about the asymmetric way we deal with income. As we have heard, we tax earnings from work to a significant amount—part of that is just to pay for the debt that we have incurred while this lot have been in government—so someone who earns £50,000 will receive £38,400 after tax and national insurance. Someone who earns £50,000 from dividends will take home another £8,000 and receive £46,250. If we were a Parliament for working people—one that valued work and labour as a way of contributing to our society—we would not tax work more heavily than income from wealth. I will leave the House with that point. There is money in our society that could be used for public services and to help working people, which the Government pretend they are trying to do but have failed to do.

Public Sector Pay

Jon Trickett Excerpts

Thursday 13th July 2023 Commons Chamber

[John Glen]

As ever, my hon. Friend is spot on. Everything that he said is absolutely correct. This is a significant pay settlement for teachers, and I hope that in due course we will learn that striking workforces will end their action and we can look forward with confidence to the autumn term.

[Jon Trickett (Hemsworth) (Lab)]

The Minister’s statement proposes that the pay rises offered, which are less than the rate of inflation for every single one of the millions of people who work hard for our public services, will be paid for effectively by what he calls a productivity drive. Is it not the case that productivity in Tory hands means cuts to services and reductions in staff? Why did the OBR say this morning that, on our present track, we will finish up with a debt 300% of our GDP? When he talks about sound money, it simply is not true, is it?

[John Glen]

I do not accept the hon. Member’s characterisation of the long-term fiscal risk to the economy. What I do accept is that we need to take tough decisions. It seems to me that he is saying what a significant tranche of the Labour party still believes: we can borrow, borrow, borrow and, in due course, if Labour ever gets into government, it will raise taxes sequentially, as happened previously.

Bankers’ Bonuses

Jon Trickett Excerpts

Tuesday 8th November 2022 Westminster Hall

[Judith Cummins (in the Chair)]

I will call Jon Trickett to move the motion, and then the Minister to respond. There will not be an opportunity for the Member in charge to wind up, as is the convention for 30-minute debates.

[Jon Trickett (Hemsworth) (Lab)]

I beg to move,

That this House has considered the Government policy on bankers’ bonuses.

It is a pleasure to serve under your chairpersonship, Mrs Cummins. It is good to hear somebody from the old West Riding, as we would call it, in charge of the sitting this afternoon. I look forward to fair but firm chairpersonship.

It was the great German playwright Bertolt Brecht who once said that, to make money from banking, set up a bank rather than rob one. People make more money that way. It is clear that there needs to be a wider debate about the role of the financial sector in the British economy, but it is good to start with the remuneration structures in the finance sector. That is what this debate is about.

The previous Chancellor’s deplorable mini-Budget, as I would insist it is called, contained a series of clearly mistaken policy shifts. Following the change in Chancellor and then in Prime Minister, almost the whole of that mini-Budget disappeared, except for one thing: the idea that we should lift or remove the cap on bankers’ bonuses. I hope that the Minister will be able to change Government policy this afternoon, following my persuasion, but we will see what he says.

We have been here before on the question of bankers’ bonuses. I want quickly to recall what happened in the 2008 banking crash. As it happened, I was working in Downing Street at the time and saw clearly that we were on an economic precipice, in part because bankers’ remuneration had been allowed to let rip. The crash almost brought down our whole economic system.

When it came time to review how the crash happened, a significant part of it was attributed to the reckless culture of greed in the banking sector, which had exposed the banks to unacceptable levels of risk. Adair Turner, the then chair of the Financial Services Authority, said that

“inappropriate incentive structures played a role in encouraging behaviour which contributed to the financial crisis”.

He is hardly a man of the left, and therefore I think his words might be regarded as authoritative.

In 2009, the all-party Treasury Committee returned to the question of remuneration. It said that remuneration in the banking industry had played a role in causing the banking crisis. It questioned whether Turner’s response was strong enough and whether

“the Financial Services Authority has attached sufficient priority to tackling remuneration in the City.”

As we know, although bankers played a major role in bringing the system to its knees, in the immediate aftermath of the crash no banker was charged with any offence, in spite of their reckless behaviour. Many people in the country, in my constituency and elsewhere—perhaps in yours, Mrs Cummins—thought that at least some of them should have served time at Her Majesty’s pleasure.

It was the European Union that eventually instituted control of bankers’ bonuses. The EU said that no banker should receive a bonus of more than 100% of their salary—though where that figure came from I do not know—or 200% if shareholders had voted in agreement. It is that cap that the Government appear to now be intent on removing.

I want to use this short debate to ask three questions. First, how much is remuneration for bankers now, 14 years after the crash? Secondly, who is suggesting that the bankers’ cap be removed and why? Thirdly, how do we justify an ethos of greed as a determining factor guiding so many decision makers in a strategically important sector of the British economy?

[Beth Winter (Cynon Valley) (Lab)]

My hon. Friend is making a very important speech, particularly in terms of who is advocating this policy. When the previous Chancellor made the fiscal statement announcing the policy, I tabled a written question asking how many people in my constituency of Cynon Valley were going to benefit from lifting the bankers’ bonus. The response was as expected and inadequate, in that the Government said that they did not know. I wonder whether that was because nobody in Cynon Valley is going to benefit from it. Does my hon. Friend agree that the reason nobody in places such as Cynon Valley will benefit is that the ban is being lifted to benefit financiers and others in the City, when the people who should be benefitting are those in the regions of Wales, the north of England and Scotland and our essential key workers—nurses, teachers and so on?

[Jon Trickett]

I am grateful to my hon. Friend for that intervention. I agree with every point she made and I will develop some of those arguments as I speak.

First, I will address the question of where we are now with remuneration in the banking sector. We know quite a lot about it. The chief executive officer and chief financial officer of Britain’s largest bank, HSBC, were paid $2.2 million and $1.3 million, respectively, for 2021. The truth is that bankers’ bonuses have doubled in spite of the cap since the 2008 financial crash. According to the most recently available data, there are 3,500 bankers working in our country who made more than €1 million—£880,000—in a single year. That information comes from the European Banking Authority. Seven out of 10 of all the bankers who made more than €1 million in the whole of Europe are located in the United Kingdom. Meanwhile, 27 bankers in the UK were paid more than €10 million in a year. Two UK-based asset managers received between €38 million and €39 million in a year—I think that clearly makes the point referred to by my hon. Friend—and at the top of the pops, one merchant banker was paid €64.8 million in a single year, and almost all of that was a bonus.

Those are absolutely outrageous figures. They make me wonder why the Government feel it is necessary to lift the bonus cap at all, given the outrageous sums that are being paid.

That brings me to my second question, which was an attempt to discover who is actually pressing for a lifting of the cap on bonuses. Given the rates of remuneration I have just indicated, it would take a colossal amount of unrestricted greed for bosses in the banking sector to propose such a thing. However, according to The Guardian, sources in some of the City’s largest banks are saying, “Not me, guv. I didn’t ask for the cap to be raised.” Those bankers admitted that they were baffled by the then Chancellor’s plan, and I think that they are equally baffled by the current Chancellor’s decision to continue with the plan to lift the EU-imposed cap. The bankers said that they had not lobbied for the move, so it begins to look like this was an ideological move by the Conservative Government, who believe as a matter of faith in rewarding the super-rich with additional wealth.

[Ms Anum Qaisar (Airdrie and Shotts) (SNP)]

The hon. Member is making an excellent speech. In my constituency of Airdrie and Shotts, 68% of people are cutting back on their essential groceries, and 65% are worried about not being able to pay their energy bills. Is it not simply the case that under the Tories the poor get poorer and the rich get richer, whether they be bankers or oil giants not paying windfall tax? Does the hon. Gentleman agree that the UK Government would do well to adopt the Scottish Government’s approach of implementing policies designed to alleviate the cost of living crisis, such as freezing rent and rail fares, expanding access to free school meals and increasing the Scottish child payment to £25 a week, rather than looking after their rich banker friends?

[Jon Trickett]

The hon. Lady makes a number of important points, and I agree with most of them.

I was asking whether the Government are ideologically committed to this policy, since no banker is prepared to admit that they had lobbied for it. If that is the case, and it looks like it is, there is not a single shred of empirical evidence that money can trickle down from the most wealthy to the rest of society—quite the reverse. Beyond a certain point, it has been argued that the further growth of the finance sector hampers rather than supports the real economy. One study estimated that the excessive size of the UK’s financial sector may well have cost our economy £4.5 trillion in lost growth over a 20-year period.

Turning to my third question, there is no evidence to suggest that individualised reward systems for key decision makers are necessarily for the corporate good of the institution for which they work, let alone the common good of the country as a whole. An argument that the Government have developed is that if banks pay more bonuses, they will attract more bankers who will pay more tax. A better argument would be to pay those who are on the lowest pay more money because they will spend it in the local economy and contribute to income for the Treasury.

A Government who set out public policy to raise the incomes of the wealthiest while holding down the wages and salaries of working people are totally at variance with the values of the overwhelming majority of people in this country. How can they justify the multimillion remuneration packages for a handful of people at the top when the number of food banks for working communities is growing? In any event, it seems that avarice in the financial sector is simply piling up the material for the next crash, which will come if we do not change direction fast. The Government need to abandon this policy. That is just plain Yorkshire common sense.

I want to make one further point, and I will be careful how I express it—the House will understand why. The Code of Conduct for Members states:

“Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their official duties.”

I quote that because 10% of all MPs have disclosed in the Register of Members’ Financial Interests that they have monetary ties with for-profit companies or individuals in the financial sector. The same is true of one fifth of all peers. I worry about how embedded the financial sector is in this very building. Financial institutions and individuals closely tied to the banking and finance sector donated a total of £15.3 million to political parties throughout 2020 and 2021.

Returning to bankers’ bonuses, the Government need to take three steps. First, they should immediately announce that they will not lift the cap on bonuses. Secondly, they should appoint an independent commission to examine the whole remuneration structure in the UK, starting with the financial sector. Thirdly, they should make an interim announcement that there will be a suspension of all bonus payments in the City during the current financial crisis, until the independent commission that I have recommended reports.

[Beth Winter]

In addition, does my hon. Friend agree that a windfall tax on the profits of the banks should be introduced as an alternative to a future round of austerity, as stated by the previous deputy governor of the Bank of England?

[Jon Trickett]

My hon. Friend has caught my next point. In the interest of social justice, the country feels that a 2% cap on the salaries of public sector employees and the lifting of the cap on already over-remunerated bankers is the wrong way for the Government to go. I agree with the statement made last week by the former deputy governor of the Bank of England, who my hon. Friend has just referred to. He said:

“The British government should raid the banks for tens of billions of pounds to fill a black hole in the public finances”.

He argued that the combination of rising interest rates and the money printed as part of quantitative easing has handed banks windfall profits. Those profits are going towards increased bonuses, which is totally unacceptable. Surely the banks and the financial sector should work for the common good, rather than for the private interests of a handful of very wealthy people. I will now make way for the Minister, and I look forward to him attempting to defend the indefensible.

[Judith Cummins (in the Chair)]

Just so Members are aware, the debate will finish by 4.40 pm.

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Mrs Cummins, and I congratulate the hon. Member for Hemsworth (Jon Trickett) on securing the debate. I accept that he is sincere in bringing forward his concern and that of his constituents, but we on this side of the House believe that he is sadly wrong.

In responding for the Government, I am grateful for the opportunity to lift the lid on what is an important but often misrepresented issue. Let me be unequivocal from the outset that the Government are unapologetic about our commitment to the financial services industry, which stretches across the whole of this great nation. If the hon. Gentleman cares to talk to his Front-Bench colleagues, he will find that the policy of both Front-Bench teams is to support the sector in order to help grow our economy and create the prosperity from which we all benefit.

[Jon Trickett]

Will the Minister give way?

[Andrew Griffith]

I will happily do so. Perhaps we will hear more about the policy of those on the Opposition Front Bench.

[Jon Trickett]

Does the Minister accept that I am not speaking on behalf of my Front-Bench colleagues? I am speaking about the views of my constituents and others across the country, and in the interests of what I believe the country should be doing. The Government are clearly wrong, whatever those on the two Front Benches are proposing.

[Andrew Griffith]

It is always a pleasure to hear a Member of this House speak on behalf of their constituents, which is indeed what we are here to do. I stand corrected by the hon. Gentleman: this debate is not about the policy of Opposition Front Benchers. I just thought it was worth setting that in context, because where there is consensus, we should build on it. I understand his views, but the scale of the sector’s contribution to the United Kingdom is truly massive.

Financial and related professional services, and all those that are engaged in the support functions, make up 12% of the UK’s gross value added—12% of the economy. That is millions of jobs, and not just in the City. Indeed, I actively push back against the idea that I am the City Minister, because that is not the case. The financial sector has to build bridges and reach into every household across the country. To that point, the hon. Gentleman is probably aware from talking to his constituents that there are 145,000 jobs in the financial sector and related industries in Yorkshire and the Humber, and long may that continue. Those are the sorts of high-quality, high-skilled jobs that I am sure he seeks for his constituents, for our generation and for generations to come.

The sector produces prodigious amounts of tax revenues—billions of pounds—without which our public services would be in peril. Because of the financial services sector, I can look our hospitals, schools, police, fire services and all of our brilliant, fabulous public servants in the eye. The hon. Gentleman might tell us that they do not get enough revenues, but one of the ways in which we can continue to make sure that they are sustainably well financed is on the back of the very bankers he decries, and my mission is to continue to grow this wonderful sector.

I return to the subject of the debate: the bonus cap. Although many people are confused about what the bonus cap is, I know that the hon. Gentleman has followed this topic and is not confused. It is not a cap on bonus pay. If he would like to introduce such a measure, Parliament offers many wonderful opportunities for him to do so, including ten-minute rule Bills and Backbench Business debates. If he would like to propose a cap on bonuses, I am sure that the House would be keen to hear more about how such a cap would work.

I think the hon. Gentleman knows that what we are talking about is not a cap on bonuses whereby fixed pay is inflated and bankers are paid the egregious amounts that he talks about. This did no such thing. It was simply about the composition of pay and how much of it is geared to performance versus a mere entitlement or fact of contractual law. It has never been a cap. The EU directive that the hon. Gentleman talked about relates to the ratio of fixed pay to bonuses. At no point has there been a cap. To be in favour of the status quo is actually to be in favour of higher basic salaries for bankers. Perhaps we should have renamed this debate, “The debate about higher basic salaries for bankers.” We may have got more bankers to come and watch, but I am not sure how many hon. Members would have clamoured to support a debate about higher basic pay for bankers. This is a really important point. The hon. Gentleman himself raised the fact that since this so-called cap was introduced, we have actually seen an increase in pay. If it was a cap, by its own definition it has failed.

The consequence of all this is that by removing restrictions, more of bankers’ pay can be performance-based. If they do not perform, perhaps their salaries will go down and perhaps the hon. Member’s objectives would be achieved by the very measure the Government have advocated. We would be removing the insistence on higher fixed pay, and more of it would be based on performance. If they do not perform or grow the economy, and if they do not contribute the near 50% share that the bankers will typically be paying in tax to our nation, then their salaries will go down. I would offer that to the hon. Gentleman as a reframing of how he thinks about this.

This is a common remuneration structure, not just in this sector but elsewhere in the economy. It is how many industries align performance and incentives in a sensible way. I have heard the argument that removing what we have now established as a so-called bonus cap will see a return to the bad behaviour and perverse incentives that led to the global financial crisis. The hon. Gentleman was there at the heart of that in No. 10, and I can understand that experience, but things have moved on—not just in respect of this cap, but the fourth European directive.

At that point there was no broader remuneration framework for bankers. They could get their entire variable pay on the day it was awarded. There was no element of deferral or additional regulatory requirements, such as those imposed by the Prudential Regulation Authority and the Financial Conduct Authority, to require a significant proportion of variable remuneration to be deferred for a number of years. In those years, firms are able to revisit performance and material events or misconduct and then take account of those within the remuneration framework. Since the hon. Gentleman’s service in No. 10, we have seen the introduction of the senior managers regime, which has even greater accountability.

The point is that the regulatory structures have evolved. They were right to evolve in the aftermath of the global financial crisis, but the reforms that work do not include this arbitrary and variable remuneration ratio.

--- Later in debate ---

[Jon Trickett]

The Minister will have heard me talking about a person in the City being remunerated £68 million in a single year. Of that, £200,000 was the basic pay, and the rest was bonus. I think the Minister is resting his case on the expansion of basic salaries, but that is not the case for that person. It would take the average person in my constituency 2,260 years on an average salary to achieve what that person achieved in a year. Is that possibly morally justifiable?

[Andrew Griffith]

The hon. Gentleman needs to make peace with the benefits of a capitalist, free-enterprise, private, risk-taking economy. I understand that that is a certain distance for the hon. Gentleman to travel. Perhaps we do not have enough time this afternoon for the hon. Gentleman to travel all that distance. By his own admission, he chose the most extreme of the most extreme cases. I celebrate, because in that example, his, mine and your constituents, Mrs Cummins, would be better off to the tune of £34 million, from that single, most productive of financial services employees in that year putting that money back into the Exchequer. I sincerely hope that is absolutely the case, because the Government have made a great endeavour to collect all the tax revenues owed.

I will shortly conclude, but earlier the hon. Gentleman seemed to decry the fact that seven out of 10 of the most highly paid bankers in Europe were based in London in the United Kingdom. I think the very opposite. The Government’s view is that, if not seven, it should be eight, and that we should seek to obtain those revenues and grow our economy, reinvesting in the productive and public services.

At the beginning, the hon. Gentleman made great play that this was one of the few surviving measures of the mini-Budget, the then growth plan. I cannot leave that lying on file, because the biggest single measure, which all our constituents benefit from right now, as the nights grow colder and the temperatures plummet, was the £60 million—

[Jon Trickett]

Billion—let me help the Minister.

[Andrew Griffith]

Sixty billion pounds—a little more than bankers’ pay. That is now flowing into individuals’ heating, fuel and energy bills, protecting every one of our constituents, up and down the United Kingdom. This was not the sole surviving measure that the hon. Gentleman talked about. This was a sensible measure, part of taking an inherited European rulebook that never fitted the fact pattern of the United Kingdom. That is why the Bank of England and the Liberal Democrat part of the coalition all made great protestations at the time that the fourth European capital requirements directive was introduced, because it did not fit the unique fact pattern of the United Kingdom.

Let me conclude. I pay tribute to the hon. Gentleman for bringing these matters to the House. It is absolutely right that we talk about this and understand how we are going to drive our economy forward in the fairest possible way. The City, I hasten to remind him, has a significant duty to society, and must be connected to every part of the United Kingdom, even our wonderful Administration north of the border. The Government’s position is that the measure is the right one. The hon. Gentleman asked whether the Government stood by that. It is the case, because we want a productive economy and people to be paid what they earn, but no more than is warranted. That is why we continue to stand by the measure.

Question put and agreed to.

The Growth Plan

Jon Trickett Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

I pay tribute to my right hon. Friend’s tenure in the Department for Business, Energy and Industrial Strategy. He was a great Secretary of State who really championed science. I tried to do the same in that post. I look forward to engaging with him on the science agenda going forward.

[Jon Trickett (Hemsworth) (Lab)]

Is it not clear that the Chancellor’s growth plan only grows one part of the economy: the bankers’ bonuses and the incomes of the richest in our society? If he really wants to cut through the cycle of low pay, poor productivity and low economic growth, should he not be abandoning his ideological commitment to trickle-down economics and finally announce a massive public programme of investment in England and Britain’s regions and nations?

[Kwasi Kwarteng]

We do have a massive programme of investment: it is called business and the private sector being able to mobilise capital to act in institutions such as investment zones. That is a really radical plan, and I was delighted to announce it this morning.

New Wealth Taxes

Jon Trickett Excerpts

Tuesday 14th June 2022 Westminster Hall

[Jon Trickett (Hemsworth) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate my hon. Friend the Member for Leeds East (Richard Burgon) on securing this important debate.

I will not reproduce figures already mentioned, but there has been an explosion of wealth, certainly since the banking crash, and before that, alongside a growth in poverty. The two things are interconnected, because the growth in wealth is a function of the increase in poverty. It reminds me of Victor Hugo’s statement:

“The paradise of the rich is made out of the hell of the poor.”

That is the truth of the matter, but it is not simply about poverty. It is also about remuneration for middle and upper-income earners as well as lower-income earners. The truth is that there is a long-term secular decline in the proportion of GDP that goes into wages and salaries. That is the central problem with which we need to wrestle, if we intend to tackle the fiscal crisis that state services are now facing. There are four sources of tax. There is income tax, which is more or less half of all tax raised. There is tax on consumption, which is VAT. There is tax on household property, the council tax. There is tax on capital. The tax on capital is one twelfth of the amount raised from income taxes, and is imbalanced as a consequence.

It is even worse than that. If the amount of money going into the salaries and wages of the 33 million working people in our country is correct—it is, because a graph shows it clearly—the capacity of income tax, which is the largest amount of tax we raise, will be limited and in long-term secular decline. We must do something about that, if we want to continue with public services and tackle inequality. Where is the money going to come from? I do not think for one second that we want to increase VAT in any event, but particularly given the cost of living crisis. Nor do I propose an increase in council tax.

Income tax is in long-term decline for the reasons I have given. Therefore, there is only one other place to go, which is to tax wealth. Two of my hon. Friends talked of a one-off tax on wealth. I am not convinced that that is the right way to do it. First, a very large amount of money, a proportion of individual wealth, would have to be raised on a one-off basis to make a significant contribution. In any event, there is a long-term fiscal crisis, for the reasons I have described. Therefore, we need a regular tax on capital.

I have a further point to make on that, and it has already been made. For some reason, we tax income from work much more than income from wealth. That is wrong, imbalanced, asymmetric and should end. There is scope to do that. I published a paper about a year ago, which is now in the Library, about wealth and a wealth tax. We looked at several different ways of taxing wealth, and there are many. We worked out the median of a reasonably balanced wealth tax, taking account of behavioural changes, because wealthy people will change how they behave. We thought we could raise about £100 billion a year. The document is in the Library for people to look at. That is the central argument that needs to be made. Of course, there is an ethical argument about whether one human can be worth millions of pounds more than another. There is also an argument about inequality, tackling poverty and all those issues, but the central question is how to deal with the long-term fiscal crisis.

I will make one final point before I sit down. The Conservative party will not resolve this. Why do I say that? Tory donors who are among the top 250 richest people in our country have donated to that party £57 million. We all know that whoever pays the piper calls the tune. The Tories are not going to resolve the problem; they are part of the issue. There has to be a debate about these long-term problems, and a wealth tax is part of the solution.

[Sir Edward Leigh (in the Chair)]

Dead on five minutes. Well done. I call Jim Shannon.

Covid-19

Jon Trickett Excerpts

Monday 11th May 2020 Commons Chamber

[Jon Trickett (Hemsworth) (Lab) [V]]

It is a pleasure to follow such a powerful speech. I want to make two interconnected points. The first is that in post-industrial communities, such as the mining villages I represent, many former workers suffer from chronic underlying conditions—years of damaged lungs. They and their families are entitled to compensation for these industrial diseases, but the virus attacks older men with pre-existing conditions. If, sadly, tragedy then occurs, it is essential that medics ensure the death certificate records both the virus and the underlying industrial disease. The miners and the workers in similar heavy industries created the wealth of our country—we owe them.

My second point is that covid has revealed how deeply divided our country has been and how damaging austerity was. It is clear that the people upon whom we depend the most, the nation’s heroes, its key workers, are those who suffered the most under austerity, yet they went to work every day, and still do, driven by selfless hard work and dedication, a sense of community and solidarity, and the ethos of care and responsibility. The average key worker is paid less in our country than other employees. I am thinking of the delivery drivers, posties, nurses, shopkeepers, teachers, lab technicians, food retailers, farmers, binmen, carers, police officers, doctors and all those others who have held our society together through this crisis. It is wrong that their incomes were held back, the services that they provide were cut and our social cohesion itself was damaged, leaving us exposed to risk from the pandemic. Yet when the crisis hit, they were there, without hesitation, ready for the challenge that the virus posed, just as the miners, steelworkers and shipbuilders were in another time.

Working-class people emerge as the heroes in this crisis, although they are often poorly paid, with mortality rates among the highest. Let us remember that men in low-skilled jobs are four times more likely to die from the virus than those in professional occupations. People are already talking about finding an exit strategy from the lockdown, and we do need to lift our eyes to the horizon, but it is not acceptable—the Government appeared to envisage this yesterday—to drive poorer people back to work in conditions dictated purely by their employers, perhaps risking their health while their white-collar neighbours in more professional occupations remain at home safe. Workers need to get back to work, but they need unions, working alongside managers, to determine whether the workplace is safe enough before they go back.

After the virus, we need a new economic and social settlement, one that puts health, not wealth, at the centre of our concerns and agrees that there should be no return to austerity. We need a rebuilt NHS, adequate care services, properly funded universal public services, fair wages and an end to grotesque inequality. The efforts of millions of people and the spirits of all those who fell during this crisis serving our country must hang over this House of Commons in quiet reproach for the shameless failures of the past decade. We must respond to their whispered demand for a better way, and we must resolve that their sacrifice will not have been for nothing.