Finance (No. 2) Bill
Kelvin Hopkins Excerpts(11 years, 2 months ago)
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Catherine McKinnell (Newcastle upon Tyne North) (Lab)
It is a pleasure to serve under your chairmanship, Ms Primarolo. I rise to speak in support of the Opposition amendments to clauses 203 to 212, which relate to the Government’s proposed general anti-abuse rule and the wider issue of corporate tax avoidance and its impact. I stress “abuse” because people use the terms “avoidance” and “abuse” interchangeably. However, we need to be clear that this is about an anti-abuse rule, rather than a general anti-avoidance rule.
Before turning to the clauses and our amendments, I want to put on the record our deep concern at the delay in the publication of the final guidance notes on how the general anti-abuse rule, or GAAR, will operate. The guidance was initially expected to be published alongside the Finance Bill on 28 March but was published only on Monday—two hours before Second Reading and just two days before we consider the GAAR-related clauses in the Bill this evening. It is clearly important that the recently formed GAAR advisory panel sought to get the guidance right and to amend and improve it appropriately. That is a view backed up by the Economic Affairs Committee in the other place, whose report last month on the draft Finance Bill stated:
“Our witnesses stressed the importance of the guidance from HMRC and the Advisory Panel on how the GAAR would apply so as to minimise uncertainty. We wholly agree. We recognise that progress is being made in drafting this guidance but are concerned that our witnesses felt it was far from acceptable as it stands.”
We therefore welcome the fact that amendments were made, but surely it is vital that Members have sufficient time properly to consider the final guidance, in advance of the GAAR provisions being considered in this House. The Treasury Committee has already raised directly with the Chancellor the question of Members’ ability properly to scrutinise the Bill within the timetable provided by the Government. It described it as
“an important issue of principle going to the heart of Treasury Ministers’ accountability to Parliament.”
I am therefore keen to put my deep concerns about this issue on the record. Sufficient time has not been provided for Members to consider the guidance and any amendments required to the primary legislation as a result.
At a time when living standards are being squeezed, Government borrowing is up, growth forecasts have been downgraded again, the public services upon which people rely are being cut or threatened across the country, and ordinary people are being asked to pay the price of the Chancellor’s economic failure, there is understandable anger about the unfairness and injustice of people working hard and paying their fair share of taxes, while they hear almost daily about the complex lengths to which a small but significant number of multinational corporations will go in order not to do so.
Kelvin Hopkins (Luton North) (Lab)
My hon. Friend will have noticed that The Times reported today that the International Monetary Fund is so worried about the direction of Government economic policy that it fears for the long-term future of our economy. The Government are wrong and they have to change.
Catherine McKinnell
I am pleased that my hon. Friend has raised that issue and reiterated the difficulty the Chancellor faces in pursuing, with such a one-direction approach, his clearly failing economic policies. He refuses to change course, even though the economy clearly shows that his approach is not working, as does the impact on ordinary people up and down the country. Instead, he is ploughing on for political reasons—because he simply cannot lose face by changing direction.
Let me return to the principal issue. It is right to raise the impact of tax avoidance on public services, which are suffering as a result of the tax gap.
Kelvin Hopkins
Richard Murphy, in particular, has estimated that the tax gap is at least £120 billion and according to some estimates it is much larger than that. The official figures really show only a fraction of the truth.
Catherine McKinnell
There are varying views on the tax gap and how it is calculated. Clearly, it is difficult to calculate accurately, because we are effectively calculating something that does not exist. It is tax that HMRC has been unable to collect, so it will always be an estimate. I use the HMRC figure because it is the minimum—it is what it believes and it is a conservative estimate. The Tax Justice Network calculates the gap at £120 billion. Whatever the actual sum, the GAAR and the £60 million and £85 million that it is intended to bring in are simply a drop in the ocean, and many people have described it as that. It is tinkering around the edges of what is legal.
There has been extensive discussion about the proposed GAAR’s strengths and weaknesses, both in this House and elsewhere. I acknowledge that the Government have taken steps in response to consultation submissions to reduce some of the ambiguity of the earlier GAAR proposals. For example, they have attempted to define the so-called “double reasonableness test” so that we can have a better understanding of how to assess, in HMRC’s words, whether arrangements can
“reasonably be regarded as a reasonable course of action”.
Again, the word “reasonable” is highly subjective and open to interpretation. Many, including the Opposition, still believe that the GAAR is too narrow and that, as it tackles only the most egregious schemes, cannot be regarded as general at all.
Other concerns have been raised about the chair, the panel and the manner in which they will be appointed. The chair has been appointed and will appoint his panel, and it is they who will interpret what they believe to be reasonable. What a tax expert considers to be reasonable might be regarded differently in the eyes of a member of the public. Indeed, many tax experts will differ on what they believe to be reasonable tax planning, as opposed to something egregious that would fall under the GAAR. The concern is that the GAAR is so narrow in tackling only the most egregious schemes that it could hardly be considered general at all and should perhaps be called the AAR instead. As has been mentioned, it also risks tacitly legitimising any tax planning or avoidance that does not fall within its remit, making it even harder to tackle the avoidance problem. Those arguments should be seriously considered. The problem was neatly summed up by the former president of the Association of Revenue and Customs, Graham Black, who stated that the GAAR is a
“Trojan horse, which suggests tough action whilst actually facilitating avoidance.”
A further issue, raised by the Institute of Chartered Accountants in England and Wales, is the international legality of the GAAR in relation to the UK’s double tax treaties, particularly with about 100 non-OECD countries where the GAAR could effectively and unilaterally override the UK’s international obligations. There remain serious concerns that there is no specific penalty regime for the GAAR, so it would be helpful if the Minister, in addition to addressing the concerns I have already set out, could tell us how he intends to ensure that this GAAR is not just a toothless tiger.
I am keen to emphasise that we are willing to support the Government in introducing the GAAR, but for the reasons I outlined we are not convinced that this version is up to the job. One of our key concerns should surely be the fact that there appear to be no arrangements to monitor, determine or measure whether the GAAR is actually working as intended or whether, as we fear, it fails in its aims. HMRC’s recently updated impact note on the GAAR simply states:
“Consideration will be given to evaluating how effective the GAAR has been at discouraging as well as stopping abusive avoidance schemes.”
However, the Select Committee on Economic Affairs in the other place made a clear recommendation for an independent post-implementation review after five years. The Committee stated:
“It would be for consideration whether such a requirement should be built into the legislation, or failing that, a firm Ministerial commitment should be made in the House of Commons at the time the legislation is being considered.”
That time is now, I suggest to the Minister.
Like the Association of Accounting Technicians, the Opposition agree that there should be such a requirement, but like the Chartered Institute of Taxation we believe the review should take place before the five years suggested by the Economic Affairs Committee. Given the seriousness of the problem, the ever-increasing pressure on the Government’s finances and the result of the Chancellor’s failing economic plan, we believe we need an earlier review of the success or otherwise of the Government’s key policy for tackling tax avoidance. Our amendment 8 proposes a maximum two-year gap between Royal Assent to the Bill and the review. I look forward to hearing from the Minister whether he is prepared to commit to such a review, particularly in light of the concerns expressed at the beginning of my submission about the lack of time afforded by the Government’s publishing the guidance so late for proper scrutiny of the legislation.
Perhaps the key concern about the GAAR relates not to its implementation but to the Government’s tendency to promote its provisions as some sort of panacea for dealing with the problem of tax avoidance. My right hon. Friend the Member for Oldham West and Royton (Mr Meacher) raised that concern. I spoke earlier of the justifiable anger about the impact of the problem, particularly of corporate tax avoidance, both on the UK and on developing countries. In continuing to talk up the potential impact of the GAAR, the Government are failing to communicate that it will not deal with many of the issues that members of the public are concerned about. Indeed, the Economic Affairs Committee, which provided valuable scrutiny of the Bill and the GAAR, stated in its report that
“Ministers should make every effort to explain the aims of the GAAR and the reasons why it cannot apply in many of the ways public opinion would prefer, so that unrealistic expectations are banished.”
The Chartered Institute of Taxation commented:
“The Government should be careful not to overstate the effects of the GAAR, raising expectations which will later be disappointed. Many of the examples of ‘tax dodging’ highlighted by the media and campaigners would not be caught by the GAAR. It is important to be clear from the outset what the GAAR will, and will not, achieve.”
The ICAEW stated that
“the GAAR is aimed at countering abusive arrangements and will not fix everything. There remains also uncertainty as to what it will and will not catch.”
The Association of Accounting Technicians remarked:
“We do not see the GAAR as a bulwark against the perceived and real abuse of the UK tax system by multinational corporations. The only way to tackle the growing concern that the UK and many Governments have is by bringing international law up to date, making it fit-for-purpose for the 21st century…The AAT supports Lord MacGregor (Chair of the Economic Affairs Committee) in his demand that the Government make it clear to the public that the GAAR is ‘narrowly focused’ and will not meet ‘public expectations’ of bigger levies on international firms.”
The impact note supports that view in terms of the revenue that the Government expect from the measure.
The Opposition agree with all those comments. Indeed, we think the Government should go further on this critical and pressing issue, which is why we have tabled further amendments. The time for tough talk on tax avoidance is over. We and particularly the developing world need real concrete action now.
Earlier, I outlined the impact of tax avoidance on ordinary UK taxpayers and good British businesses who are paying their fair share but see others going to great lengths to avoid doing so—thus contributing to the tax gap and undermining a level playing field for firms. I briefly touched on the devastating impact of tax avoidance overseas, and I welcome the Chancellor’s confirmation in this year’s Budget that he intends to build on Labour’s legacy by meeting the target of spending 0.7% of gross national income on overseas aid. However, we know that aid alone will not be enough.
Developing countries desperately need to be able to raise more tax revenues to invest in reducing hunger and becoming more self-reliant. Aggressive tax avoidance activity is so significantly reducing the ability of developing country Governments to tackle issues such as hunger, and to invest in the vital infrastructure that we all take for granted, that the OECD estimates those countries lose three times more to tax havens than they receive in aid each year.
Kelvin Hopkins
It is a pleasure to follow my hon. Friend the Member for Bolton West (Julie Hilling), who made a superb speech and hit lots of buttons.
I am speaking briefly at the end of this debate basically to support my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and his comprehensive, substantial proposals for an alternative scheme. I have also signed his new clauses. I am not a tax lawyer—I am not a lawyer—or a tax expert, but I am angry about the fact that for decades we have failed to collect taxes that should go into the Exchequer and help those in our community and our society who need proper support, allowing the corporate world and the millionaires to get away with vast amounts of money that should rightfully be given to the Treasury.
The hon. Member for Amber Valley (Nigel Mills) said that HMRC would in effect be making its own laws. What about getting rid of a lot of the tax allowances, which are nonsense in any case, and making some of the things that are currently regarded as tax avoidance illegal by calling them tax evasion? Some of the things that are done should be regarded not just as neat ways of avoiding tax, but as crimes that should rightfully be prosecuted through HMRC and the courts. I take a much fiercer view. It is pathetic that successive Governments —and I mean successive Governments—have failed to grasp what needs to be done.
I will tell you some anecdotes, Mr Crausby. When I first entered the House, I went along to my local VAT office. The VAT officials there told me that they needed more staff and every extra member of staff collected five times more than their own salary, and that was just for VAT. I therefore wrote to the Chancellor of the Exchequer and said, “We just need more staff in our VAT offices. There would be a net benefit to the Treasury because all the new members of staff would collect more than their salaries.” I got a letter back from an official—not from the Chancellor—that said, “We are trying to cut costs by reducing staffing,” which is utterly illogical. Reducing staffing means a net loss to the Treasury, not a net gain, and we have been going down that route ever since.
The savage staffing cuts in HMRC are quite appalling. Those in the tax offices that deal with the corporates—the big money—collect hundreds and possibly thousands of times more than their own salaries, if they are allowed to do the job and if they are properly supported and paid. I know from my connections with their union that they are constantly under stress and pressure, and in many cases they are not adequately remunerated. We want to give our tax offices enough staff to do the job, pay them properly and ensure that they have morale, so that they do the job on behalf of us all.
Fiona O'Donnell
Does my hon. Friend agree that that also goes for working tax credits? When a family notify HMRC of a change in circumstances, their benefits—their working tax credits—are stopped and can be suspended for several weeks while they are reassessed, causing incredible hardship for families that are doing the right thing.
Kelvin Hopkins
My hon. Friend is absolutely right. Of course, people are now losing their jobs in all areas of the public services. The public services are suffering great stress and the people working in them are being demoralised, and I think that goes even for the senior civil service—I know that certain people at the end of the Chamber would possibly agree with me in that respect.
I must say that the Treasury’s attitude over some decades has been so lax that one has to suspect that it really believes that allowing all the corporates and millionaires to have their money will somehow trickle down and help the economy. That is the sort of economic nonsense that has got us into the mess we are in at the moment. What we should be doing is collecting the taxes and spending in the areas where it is needed.
Sheila Gilmore
It has also been argued that despite the harm done to developing countries by the controlled foreign company rules, their application would bring more companies into this country and the wealth would trickle down to the rest of us.
Kelvin Hopkins
Those are feeble arguments put by people who might have vested interests.
It was interesting to hear the hon. Member for Redcar (Ian Swales), who seems to know a lot about these matters, saying the other day, “What about a few prison sentences for people who fiddle their taxes?” That would concentrate a few minds, and I think that is what we should do, as I think it is criminal for people to rip off the public purse as they do to the detriment of us all. The great majority of my constituents, of course, are working-class people who have to pay their taxes through PAYE—they cannot escape, avoid or evade—so I feel angry on their behalf as well.
It is a matter of political will. If we had the will, we could do these things. We would not need to invent schemes that seem designed to fail. If they were not designed to fail, I am sure the Minister would not be frightened of the amendment proposed by my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) to have a review in two years’ time. If the scheme were to be successful, the review would show its success; if we collected half of what had been evaded through the Government’s proposed scheme—£16.5 billion or whatever, amounting to 4p on the standard rate of income tax—the review would approve of what the Government had done. If the Government refuse to accept the amendment, they are obviously nervous that their scheme will not be a success. I suspect that they have brought something up that is designed to fail and will help the wealthy and the corporates to continue to avoid and evade taxes.
I do not believe that the Government are genuinely concerned about these matters. If they were, they would take effective action, ensure that it happened through stronger laws and possibly prison sentences for those who break these laws, and collect billions more in taxes. The sort of figures described by Richard Murphy and others are enormous—equivalent to each year’s deficit, about which the Government say they are so concerned. They are cutting spending to solve their deficit problems, but the real problem is not spending—it is that their revenue is too low because they are failing to collect all the due taxes. If the Government were successful in enforcing tax laws so that all due taxes were paid, there would not even be a deficit. They would have enough money to cover it. Let us see the Government take effective action: only then will I take them seriously. Until that time, I shall continue to say what I have said this evening.
Finance (No. 2) Bill
Kelvin Hopkins Excerpts(11 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
It is a great pleasure to present this year’s Finance Bill—a Bill that further demonstrates the Government’s commitment to creating a tax system that is fairer, simpler and more transparent, and one that will promote growth and reward work. Unlike the Opposition, those of us on the Government Benches recognise that we have to address the fiscal mess left us. That means that we have to resist the voices of those wanting to engage in a further splurge in borrowing. But we can take steps to make ourselves more competitive and help people with the cost of living, and that is what we will do in the Bill. I will happily take interventions this afternoon, but to give some structure to my speech it is perhaps worth while my laying out to the Chamber the order in which I intend to discuss the Bill. First, I will talk about the measures that will support growth and enterprise, then the measures that will tackle avoidance and evasion, and then the measures that will increase fairness. Finally, I will talk about the way in which the Bill will help to deliver a simpler tax system.
Kelvin Hopkins (Luton North) (Lab)
On the issue of avoidance and evasion, the press reported over the weekend that Britain and its dependencies have more tax havens than almost any other country. Will the Government tackle evasion and avoidance seriously, and save us an awful lot of money?
Mr Gauke
As I was trying to make clear a moment ago, I will turn to the subject of evasion and avoidance later on in my speech. The Government have a proud record of taking steps to reduce evasion and avoidance, with legislative measures, support for Her Majesty’s Revenue and Customs and what we are doing at an international level to encourage greater co-operation between jurisdictions to ensure that the net is closing in on those who wish to evade their responsibilities. We will continue to take positive steps on that front.
Mr Gauke
Where there is an element of dishonesty, it is clearly tax evasion, and Her Majesty’s Revenue and Customs has indeed been successful in bringing prosecutions in a number of high-profile cases. Under this Government we have seen the number of prosecutions by HMRC increase fivefold, which is a reflection of how seriously we consider tax evasion and of our determination to assist HMRC in addressing it as much as possible.
Kelvin Hopkins
A theme I have raised many times in the Chamber is the number of staff in HMRC. I am sure the Minister knows that every additional tax officer collects many times their own salary, and in the case of business taxation, it can sometimes be hundreds or even thousands of times their salary. Do we not simply need a substantial increase in the number of professional staff in HMRC to make sure we collect all the tax?
Mr Gauke
The hon. Gentleman and I have debated that point on a number of occasions. The important thing is to ensure that HMRC has the right expertise and skills, and the right people doing the job. In truth, there has been a significant reduction in HMRC staff over recent years, the vast majority of which occurred under the previous Government. We are increasing the numbers working in the enforcement and compliance area, but a lot of the answer is about ensuring that HMRC can work in the most effective way. I was struck by the increase in the number of tax professionals being trained by HMRC. We do want to invest in skills within HMRC. This is not simply a numbers game but, as it happens, the number of people working for HMRC in enforcement and compliance is going up, not down.
Mark Field (Cities of London and Westminster) (Con)
If there is one small area where I would agree somewhat with the hon. Member for Nottingham East (Chris Leslie), it is that the Chancellor’s room for manoeuvre was incredibly limited as he delivered the Budget four weeks ago. There is no doubt that many of those constraints come as a result of global events. The latest stage in the eurozone debacle as Cypriot banks have been underpinned is a contemporary case in point, and we see ongoing problems in Portugal that I fear will deteriorate as the weeks and months go by.
However, it has become ever clearer that in the coalition Government’s first Budget in June 2010, they were, I accept, complacent about growth. The short pre-election boom following the 2009 VAT reduction and the very large early rounds of quantitative easing lulled the coalition, on assuming office, into believing that the growth that had come about in the two or three quarters before the 2010 election was baked into the system and would somehow do the heavy lifting when it came to deficit reduction. The coalition’s plans to eliminate the structural deficit required the gap between revenue and expenditure to be narrowed by some £159 billion by 2014-15. Tax rises were expected to contribute £31 billion and spending cuts £44 billion, and the remaining £84 billion was meant to come from compound growth of 2.7% throughout the Parliament.
Unfortunately, however, as we now know, the coalition ended up with possibly the worst of all worlds. It has received unwarrantedly relentless criticism from Labour Members for so-called harsh austerity measures when, in reality, it has too often lacked the political will to execute the levels of savings required. For all the rhetoric, we are still overspending by some £300 million every day. We are borrowing, not spending, that amount each and every day, and that means that we will continue to have to borrow to the tune of some £120 billion year on year.
Kelvin Hopkins
The hon. Gentleman seems to be saying that the Conservative coalition Government had the benefit of Labour’s reflationary strategy, which was implemented before the election, but then reversed it so that things have got worse ever since. Should they not simply have carried on with Labour’s strategy?
Mark Field
The hon. Gentleman makes a good case, I suppose, but we all know that the reality was that the short-term boost of VAT reduction and the early batches of QE was unsustainable. They were a pre-election boomlet, but, as I have said, the entire political class became rather complacent and thought, somehow, that the worst was behind us after the crash of 2008. We now know that that simply was not the case.
In 2010 the entire political class should have looked the electorate in the eye and been clear about the magnitude of the task that lay and, I am afraid, still lies ahead to rectify the public finances, but we are where we are. I personally take the view that talk of radical tax cuts from some on the Government Benches is perhaps unrealistic. I fear, for a start, that confidence is so low that until it is restored almost any tax give-aways are more likely to be squirreled away by individuals and companies than pumped back into the economy.
I also think we would run the serious risk of the markets losing faith if we were to play even faster and looser with public borrowing. In spite of the recent loss of our triple A rating from Moody’s, the Chancellor’s great achievement—it should not be underestimated—is that we are still able to borrow in international markets at such low interest rates. The lesson of both 1931 and 1976 is that once the markets turn, all is lost.
My main hope for the Budget and this Bill was that the coalition would take some of the longer-term decisions that the British economy requires. I am pleased that resource is being set aside for key, shovel-ready infrastructure projects. I had hoped that cash would be accompanied by decisions and leadership on aviation and energy infrastructure. We cannot let these sensitive political footballs be kicked once again into the next Parliament. I think that the UK, as a trading nation, requires certainty on those issues, not an endless parade of commissions and reviews.
I am pleased, however, that the Treasury has helped out small business. The march towards ever lower rates of corporation tax, as the Exchequer Secretary has pointed out, is highly welcome, as are assurances that small firms will be given a chance to bid for Government contracts under the small business research initiative.
The extent of capital gains tax relief to attract start-up capital for new limited companies is also very good news. Best of all, however, is the knocking off of the first £2,000 of employer national insurance contributions for small and micro-sized businesses. That will, I hope, begin to chip away at the worryingly high levels of youth unemployment by lifting some of the obvious disincentives to taking on new staff.
I am afraid that I am a little less sanguine about the Chancellor’s flagship Help to Buy plan. I appreciate its raw politics, underpinned as it is by a desire to help struggling younger people on to the housing ladder, many of whom are paying much more in rent than they would as part of a mortgage, if only they had a deposit. Nevertheless, I ask the Treasury to give considerable thought in the consultation period to what we are trying to achieve. Let us look carefully at supply rather than just finance, since I suspect that the latter will simply help keep prices out of the reach of the very people whom we wish to serve, as the hon. Member for Edmonton (Mr Love) has said. I do not wish the taxpayer to be on the hook for the consequences of a reinflated property bubble. Let us not forget the US experience that lay at the heart of the financial crisis.
I, like many other Members, am also disappointed that the Office for Budget Responsibility’s predictions for our economy as recently as the autumn statement on 10 December 2012 were proved, only 14 weeks later in the March Budget, to have been so considerably off beam. Few doubt that economic forecasting is an especially dismal science. However, the OBR’s intervention in December proved essential in buying the Chancellor crucial breathing space at a time when many commentators had assumed that we were about to flunk our plan to reduce the deficit year on year. To that extent I accept what the hon. Member for Nottingham East has said. Many even-handed people will regard that as a sleight of hand, but, more importantly, the scene was set for cynicism and deep disappointment when aggregate borrowing for the next four years was projected at some £49 billion higher only 14 weeks after the autumn statement.
It is worth saying, however, that that is part of a tradition during all my 12 years in this House. Every single Budget between 2001 and 2007 forecast that public finances would move back into surplus in about three or four years’ time. Instead, as the hon. Gentleman will remember, debt and the annual deficit rose inexorably while the Treasury conjured the illusion of fiscal stability. Similarly, at every autumn statement since June 2010, the OBR has, I fear, been forced to downgrade growth out-turns while continuing to hold somewhat optimistically to the notion that the public finances will be transformed by robust growth in two years’ time.
The establishment of the OBR was meant to herald a fresh era of forecasting credibility, but it now seems all too reminiscent of the previous Administration’s discredited financial projection. I think that observers are beginning to wonder whether we should have any regard for the OBR’s latest set of predictions or, indeed, take with anything more than a pinch of salt assurances that recovery is only around the corner.
Frank Dobson
I never said for a minute that it started recently. It has been going on for donkey’s years. I am not sure about the Lib Dems, but I cannot remember an organisation when Labour was in government called Tories in Favour of Stopping Tax Avoidance. Perhaps the minutes will be produced by someone, but it seems extremely unlikely, because everything the Tories ever said when they were in opposition was about Labour being too nasty to the finance industry and proposing things that might damage it. So we trundled on, until the finance industry damaged the rest of us. It is worth remembering that the banks’ wrongdoing has cost us £700 billion in lost production since the crash. That is what we have all lost.
These British banks and firms of accountants are not just organising tax avoidance in the tax havens for all the swindlers. We now know—from prosecutions and from agreements that they have come to with the American authorities—that they have been organising money laundering from massive drug dealing, gun running, people trafficking and busting sanctions on places such as Burma.
I think the British banks should be doing something a bit different. I think they might possibly have done a bit of investing in this country. In the past, small businesses all over the country could go and see their local bank managers at one of the big banks and talk to them about their problems. They knew one another and knew what their prospects were. People could borrow money that way, and it worked. Then the banks started centralising all the funds, so nothing is left with the local bank manager and local firms now have to be interrogated by an algorithm—that is what it boils down to—in the banks’ headquarters. They have not been investing in this country. We have to ask ourselves why a large proportion of the industries that were privatised are now owned by foreign owners, such as Électricité de France or the Australian outfit that owns Thames Water. Could the British banks not have invested in British businesses? Was there not enough profit for them? Does that mean that the profits in the tax havens and from all sorts of derivatives activities were going to raise them more money? That may be so, but what has happened demonstrates just how awful the performance of the British banks and finance industry has been.
I do not think this Finance Bill, any of the proposals the Government have put forward or even the one or two they have started implementing reflect the scale of wrongdoing that needs to be put right—the swindling that involved British companies and the damage that does to us as a trading nation with, until recently, a reputation for honesty and fair dealing. At its core—I say this with some care—this is a corrupt set-up. We have a banking industry and an accountancy industry that are involved in criminal and semi-criminal activity all over the world, yet we say to countries such as Bangladesh, “There’s too much corruption in your country.” If we are going to start trying to sort out corruption in other places, it is about time we did it here and where British companies are operating. We need transparency, and we certainly do not need tax havens, especially those that fly the British flag. Their objective is not transparency but the complete opposite: it is to be as obscure as is humanly possible in order to keep the tax authorities out.
Another point that is constantly made is that, if we were to change the rules on banking and accountancy, the very clever people in the City would simply get round them. That is unacceptable. Why should such behaviour be acceptable in the finance industry? We would regard it as totally unacceptable if the building industry said, “You can rely on us to get round the building regulations,” if the aviation industry said, “We can get round the safety rules,” or if the pharmaceutical industry said, “We won’t carry out the proper checks that are required. We can get round those rules.” We ought to regard it as totally unacceptable when people representing the finance industry say, “Whatever you do in the House of Commons, we’ll get round your rules.”
Kelvin Hopkins
The hon. Member for Redcar (Ian Swales) suggested that some people ought to go to prison for such behaviour. Does my right hon. Friend agree that that might concentrate a few minds?
Frank Dobson
It certainly should. I am astonished that no one in this country has yet been prosecuted for the fraud involved in the LIBOR rate-rigging, including the British Bankers Association, which was, after all, running the LIBOR system. People were defrauded, so why has no one been prosecuted? I do not know, but someone should be.
Another excuse for not sorting out the problems in our banking industry is that we must not go it alone because that would put the industry at a disadvantage compared with others. We are told, for instance, that we cannot possibly be the first country to introduce a financial transaction tax—a Tobin tax, a Robin Hood tax—because to do so would put our banks at a disadvantage. However, Germany and France have now proposed an EU-wide financial transaction tax, yet our Government still say no. What are they frightened of? The rate of tax proposed on derivatives transactions that the 11 countries led by Germany are establishing in Europe is 0.01%. Apparently, our financial services industry is so pathetic that it would be driven to ruin by a transaction tax rate of 0.01%.
In fact, we already have a transaction tax in this country: it is called VAT. Nearly every other business in this country is paying a transaction tax of 20%. If everyone else is deemed capable of paying 20%, why should the financial services industry be deemed incapable of paying 0.01% on its transactions, 85% of which are carried out within the industry, between its various constituent parts, rather than with anyone else. That is pathetic, and it is about time that we recognised that a substantial amount of money could be raised for the taxpayer in this country, even at a rate of 0.01%.
Kelvin Hopkins (Luton North) (Lab)
I cannot resist commenting on one of the points made by the hon. Member for Macclesfield (David Rutley). He suggested that businesses are somehow more competitive because we have a better tax regime, yet our trade deficit is in a terrible state, and getting worse. If everything is so brilliant, we should be doing better on international trade.
Frank Dobson
While my hon. Friend is commenting on the speech made by the hon. Member for Macclesfield (David Rutley), was he somewhat taken aback to discover that nurses, doctors, firefighters and police in Macclesfield are apparently not occupying real jobs?
Kelvin Hopkins
My right hon. Friend makes a good point: when we go to a hospital, we find that no one is there, because those in such jobs are not real people. Indeed, I might add Members of Parliament to that list.
The hon. Member for Cities of London and Westminster (Mark Field) was desperately trying to be positive about the Budget, but in the process he effectively damned the Chancellor with faint praise. If we had pressed him hard enough, I think he would have conceded most of our points.
The Bill will clearly do nothing to transform our economy. We are in a desperate state—an ongoing recession. The Chancellor says that his Budget is fiscally neutral, but when 2.5 million people are unemployed and we have low or negative growth, we do not want a fiscally neutral Budget. We should have had an expansionary Budget to promote growth, but of course even a fiscally neutral Budget could inject growth into the economy by raising taxes and spending more, rather than doing the opposite. If taxes on businesses and the wealthy are reduced, they tend to save their money—indeed, they put it in tax havens—whereas if ordinary people are given jobs, the first thing they do is to spend their money, and that money goes directly back into the economy and starts to generate demand through the multiplier.
The hon. Member for Cities of London and Westminster was right that forecasting is difficult. I remember that in 1990—I am older than everybody else in the Chamber—when The Sunday Times carried out a survey of forecasting organisations, it found that the London Business School was bottom of the league, scoring nought out of 10 for its forecasts, although of course that was the forecasting body adored by the Conservative Government under Mrs Thatcher. The best forecasts were by the Cambridge Economic Policy Group, a left-leaning Keynesian group, which got six out of 10 to come top of the league. The then Government were so annoyed by the Cambridge group that they took away its Government grant because they did not like people telling them that they were wrong, although they were.
Demand for the things that people produce is a crucial factor if an economy is to succeed, because although Governments can cut taxes for businesses and introduce all sorts of supply-side measures, if no one is buying anything, the economy will not grow. An equally crucial factor for sustaining that demand is an appropriate exchange rate. Successive Governments have ignored the exchange rate at their peril, but there have been times when the depreciation of our currency has had dramatic results, and I can cite three examples under a Conservative Government. Following Golden Wednesday and the collapse of the exchange rate mechanism, the economy grew strongly after a substantial depreciation. By the time that 1997 came along, the Conservatives were still being condemned for the collapse of the housing market and the people voted Labour—thank goodness for that—yet the Labour Government benefited from the strong demand generated by that depreciation. In 1979 Mrs Thatcher was praised for her economic policies, but the 1979 Budget, masterminded, if I can describe it like that, by Geoffrey Howe, resulted in a catastrophic collapse in demand. A fifth of manufacturing disappeared and unemployment soared to 3 million. It was only when those policies were reversed that there was a recovery, and on Nigel Lawson’s watch—I do not necessarily agree with everything he did—the pound depreciated by over 30%. Again, the economy grew strongly and unemployment came down.
Going back even further into history, in the 1931 crisis, a Labour Government mistakenly tried to sustain sterling on the gold standard, and tried to keep its parity up. The Government fell apart, and effectively a Conservative Government with a nominally Labour Prime Minister came in straight afterwards. The first thing they did was take the pound off the gold standard and depreciate, and the recovery began. That was only part of it; other factors were necessary to sustain recovery in the 1930s. We had to spend a lot of money, and towards the end of the ’30s the country built thousands—indeed, millions—of houses, and that was how we recovered. That is what we ought to do now.
In other countries, Germany built arms and autobahns; in America, there was the new deal—spending money on all sorts of public works, which created the demand in the economy that brought about recovery. It was not fiddling around with tax rates and supply-side measures. That did not work then, and it will not work now. The exchange rate is therefore absolutely crucial, and the exchange rate at this time is too high. Part of our recovery should depend on a significant depreciation. An erudite and informed book by my friend John Mills has been written about this, and I have quoted from it in the Chamber. It makes a detailed case for such measures.
The trade statistics are disastrous, and some of us have been worried about manufacturing for a long time. Our manufacturing sector is about half the size of the German manufacturing sector as a proportion of our economy, which is disastrous. We should be a similar economy to Germany in many ways. Historically, we have been very similar in all sorts of ways, but our manufacturing has collapsed. That was partly because in 1997, when Labour came to office, there was at the same time a substantial appreciation of the pound, which began to damage manufacturing. We were sustained by an asset price bubble, which carried on, and thank goodness, we had a relatively strong economy for some time. However, manufacturing did not do well, because of the relatively strong pound. It was only the crisis of 2008, when there was a significant depreciation, that saved us. Had we been stuck in the euro, we would be like Spain now—it would be absolutely disastrous—so we must applaud my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) for keeping us out of the euro, despite pressure from the then Prime Minister. I was one of those who supported my right hon. Friend very strongly at the time.
Jonathan Edwards
I agree with a number of the hon. Gentleman’s points. The Government talk a good game about rebalancing the economy geographically and sectorally, and about an export-led recovery, but they will not achieve those objectives unless they tackle the exchange rate.
Kelvin Hopkins
Indeed. We have to use all the weapons and measures of macro-economic policy to make sure that we recover. Fiddling around with supply-side measures is no doubt the sort of thing that the London Business School talked about in 1990, but it will not solve our problems.
The macro-economic measures that we must take include, first, tackling the exchange rate. Secondly, we must inject demand through additional public spending, and we can pay for that in various ways without necessarily increasing the deficit. We could raise taxes on the rich very substantially. For example, we could begin seriously to close the tax gap and collect the tax that has been avoided or evaded, perhaps sending a few corrupt bankers to prison in the process. That would concentrate their minds, as I said earlier.
We need to begin to spend in areas of high labour intensity. If we can get people back to work quickly by spending in those sectors—construction and the public services, which have been cut by the Government—we can bring down unemployment. People pay tax when they are in jobs, they do not claim benefits, and the economy begins to recover. At the same time, we can build millions of houses that we need, particularly local authority houses, and we can provide all the nurses we need in hospitals. Hospitals are under stress because of a lack of staff on the wards. We can develop other areas too: local authority services, children’s services, and social services for the elderly, all of which are under stress and are things on which we should spend to generate more employment. We generate employment directly by spending money on areas with high labour intensity.
There is another great advantage of spending money in such areas. As my hon. Friend the Member for Swansea West (Geraint Davies), who has left the Chamber, said, the rich do not spend money: they put it in banks and tax havens. But ordinary people, especially if they have been unemployed, spend every single penny of their money on supporting their families, dealing with their debts and so on. They spend their money. They have what the economists call a high marginal propensity to consume. We should give as much money as possible to those who have that high marginal propensity to consume, not to those who stuff it in banks and foreign tax havens. That would help to regenerate the economy.
Another great thing about public services and construction is that they put demand into the domestic economy, not into the foreign economy. If I were given extra cash, which I do not need—I think I should pay a bit more tax—what would I do? I would have another foreign holiday. I might buy another case of French wine. That does not help our economy at all. But if construction workers have extra cash, they go out and spend it in the shops on food, their homes and their family. They spend it in the domestic economy. They do not, as far as I know, buy large quantities of French wine or have fancy foreign holidays, especially when they are just coming out of unemployment. They would spend their money in the domestic economy.
The great thing about construction is that it has a low import content. Most of what is used in construction comes from the domestic economy. Again, the demand goes into the domestic economy so the spending by construction workers in their new jobs becomes someone else’s income within the domestic economy. We get the multiplier effect of one person’s spending becoming another person’s income going around in a big circle and the economy is regenerated.
That is what we need—pure Keynesian reflation, but we have other measures to deal with that. If it necessitates some serious tax increases, so be it. The majority of the population have said in opinion polls, I understand, that they would prefer tax hikes to spending cuts. That is absolutely right. We are frightened of saying that we should have higher taxes. Francois Hollande in France decided to introduce a significantly higher tax rate for a substantial proportion of the population. Some people will squeal about it and no doubt the right-wing media in Britain would squeal about it, but there should be a bit more tax, even on MPs such as myself. I have suggested that the first tax rise should be the 50% rate not at £150,000, but at £60,000, so that I would pay a little more tax. I am talking about me as well as about other people. It is easy for us to make changes that affect other people, not ourselves.
Such a change could be made, if need be, but in the short term we do not need to do that. We need to collect the taxes that should be paid and which are the subject of tax avoidance and tax evasion. We need a radical economic strategy, including all the components that I have suggested, to get us out of the mess we are in—and we are in a mess. In his Budget speech, the Chancellor looked like a frightened man. He looked very worried. Clearly, his strategy is not working. He does not know what to do without doing a complete U-turn and adopting a completely different strategy—the kind of strategy that I am talking about—which would mean political humiliation for him. He should worry less about political humiliation than about doing the right thing by the country.
Cyprus
Kelvin Hopkins Excerpts(11 years, 3 months ago)
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Greg Clark
My hon. Friend raises an important point. I have made a commitment to the House to provide further statements once we have more detailed information on how all these arrangements are likely to apply.
Kelvin Hopkins (Luton North) (Lab)
This is clearly deeply worrying for the people of Cyprus, and we have to condemn what is being done to them, but it is also worrying for millions of working people across the whole eurozone. Is this not just the beginning of a situation in which Cyprus and other countries withdraw from the eurozone and, indeed, the euro itself may be wound up? Are the Treasury, the Government and the Bank of England making preparations for that eventuality?
Greg Clark
The Treasury and the Government always make contingency plans for many eventualities. It is important to reflect on the statements made by the German Government and by the ECB that the situation in Cyprus is very dissimilar to that prevailing in other countries. It would not be right to draw a parallel between what is happening in Cyprus and the situation that exists elsewhere.
Tax Fairness
Kelvin Hopkins Excerpts(11 years, 3 months ago)
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Alex Cunningham (Stockton North) (Lab)
This is a debate about fairness, as well as a mansion tax. Unemployment in my constituency has been higher every single month compared with the previous year since the coalition Government came to power. There are 4,293 on jobseeker’s allowance, and many more want to work. My local authority, Stockton-on-Tees—we do not have many £2 million mansions—will shed 1,000 jobs before the current massive cuts are fully implemented. Councillors are working hard, but problems persist.
The Cleveland fire authority, which I met on Friday, faces tough decisions that could reduce the number of firefighters in the highest risk area in Europe because of the cuts and a funding formula that does not recognise the risk we face on Teesside. Other hon. Members have mentioned the unfairness of energy prices, train fares and payday loan sharks, and all are unfair, but it is the tax cut for millionaires that sticks in the craw. People see millionaires getting a tax cut at a time when working mothers face a £160 loss in their income. I could go on at much greater length about unfairness.
I hear from a friend of mine up on Tyneside, Ian Wilson, that Champagne Fever won the first race at the Cheltenham festival today. The partner of the horse’s owner earned £44 million in pay and bonuses last year. He is a banker. I am sure he can afford the mansion tax.
Kelvin Hopkins (Luton North) (Lab)
I have some suspicion about anyone who earns £44 million. They may have received £44 million a year, but they did not earn it.
Alex Cunningham
My hon. Friend is much skilled in these debates and I take his point entirely.
Time and again, Government Members have challenged us to make clear what tax changes we would make to rebalance the unfairness in the tax system. I am delighted, therefore, that the Labour Front-Bench team has backed the Lib Dem policy of a mansion tax, while going further by saying that the money could be used to fund a 10p tax rate, which would bring immense benefit to the lowest-paid in our communities. It would be a tremendous boost to many of the lowest-paid people across Teesside and the rest of the country, including all the people who have landed one of these low-paid, part-time jobs that the Government gleefully boast about. Those people are to be praised and helped. Their pay is derisory, yet they want to work hard and be in a job, so we should do something to help them. They already face the prospect of a cut in income from the changes to tax credits from the end of this month, and today the Lib Dems, and others, could join us in helping to correct that unfair tax change and in recognising their commitment to hard work.
We need action to tackle the unfairness in the system, to sort out the big six energy companies, to stop the rip-off rail fares condoned by the Government and to stop the poorest people—the most vulnerable in our society—being ripped off by payday loan companies and loan sharks. Let more of those with the assets, rather than those with none, pay the taxes. There is real poverty in our communities. One illustration is the increasing number of food banks. I will be opening another one on Monday at the New Life church in Billingham in my constituency. We should not have to be doing such things. We should not need food banks. I know that their use increased even when we were in government, but they should not be necessary.If we had a fair income tax system, we would not need food banks.
The mansion tax might mean £5 a week for some families. That would not buy a small glass of wine in a Canary Wharf bar, but it could make a huge difference to the people at the bottom of the earning scales. It would buy enough bread from Asda for a family of four for several days, yet the Tories—and, more shamefully, the Lib Dems—would miss the opportunity to put bread in the mouths of poor families by failing to send a message to the Chancellor that he should adopt this mansion tax in next week’s Budget. I am sure that people who own property worth more than £2 million could afford the extra charge to help the poor. If not, they can move to a less expensive property and dodge the tax. Like my hon. Friend the Member for Edinburgh East (Sheila Gilmore), I see a parallel with the bedroom tax. Thousands of people in my area are facing a cut in their income. The answer, apparently, is to move to a smaller property. Those with homes valued at more than £2 million but who cannot afford a mansion tax should do what the poor have to do and downsize.
I am one of those who supports higher taxes, particularly when people can afford to pay, so I plead guilty as charged. Earlier today, a Minister said that the Government were focused on the causes of poverty, but all the time cash is being shifted from the poorest to the wealthiest, just as the funds available to local authorities in the north of England are being shifted to the richer areas in the south. I said that unemployment was not falling in my constituency, but in some parts of the south it has fallen, albeit owing to part-time, low-paid jobs. The Government’s austerity measures have devastated local authorities in the north-east, and the contractors who build roads and houses and promote and deliver other services are the losers, being forced to pay off skilled workers who want to work and support their families.
Next Wednesday, the Chancellor will deliver his Budget for 2013-14. It is probably his last chance before the general election in 2015 to come up with a set of policies that could make a real difference to people’s lives. The biggest difference he could make would be to abandon his plan A, under which growth has stagnated, unemployment in areas such as mine has grown and deficit and debt reduction has become even harder, but we know he will not do it. He is tied to his ruinous plan A because he has staked his credibility on it—but there is no credibility in it. The Tories still talk about what will happen if the economy turns around, but if we return to growth, will ordinary people suddenly stop feeling the strain of higher costs and less money in their pockets? I very much doubt it.
This ignores the fact that the Chancellor’s plan has already failed on its own terms. Not only is the national debt far higher than it was when he took office, but he has failed, and failed again, on growth. The reason is that without a good level of growth it is difficult to reduce deficits and debt, and as the Chancellor’s own Office for Budget Responsibility pointed out last week, cutting spending and hiking up taxes for ordinary people has slowed and stopped economic growth. As the ratings agency Moody’s pointed out when it downgraded the UK’s credit rating, the country’s lack of growth has made it nearly impossible for the Government to meet the only real goal they set themselves, which was eradicating the structural deficit.
Although a return to growth would be welcome, only strong growth would be enough to make up for the lost years of economic stagnation under this Government and to keep up with the growing and ageing population. Unless economic growth is above population growth, we are all getting poorer. Add to that the fact that the Government are redistributing from the bottom to the top by cutting the top rate of tax for millionaires while capping welfare, increasing VAT and cutting public services, and the scale of their failure becomes all the more apparent.
In Stockton North, we know all too well the impact of the Government’s policies. Long-term unemployment has more than doubled in the past 12 months and youth unemployment remains stubbornly high. Next Wednesday, the Chancellor has a chance to change course, cut spending less quickly and focus on taxing obscene wealth in order to invest in young people. He is very keen to point to the past and the failures—as he sees it—of the Labour Government, but he has been in his role for nearly three years and has failed abysmally. There will be much for a Labour Government to do in 2015 to address the unfairness built into our country by the Conservative-Lib Dem alliance. I have talked about energy, rail fares and housing, and we are already making clear some of the things we would do. Today, Government Members can help us get our fairness agenda under way by backing a mansion tax and helping to fund lower taxes for those who need them most—I hope they will.
Kelvin Hopkins (Luton North) (Lab)
First, I apologise for arriving late for the debate. I had another commitment that was inescapable, but I want to make a contribution to this important discussion. I also congratulate the hon. Member for Eastleigh (Mike Thornton) on his election victory. I heard his maiden speech yesterday, and a very fine speech it was, too. Unfortunately, he left the Chamber—no doubt for a celebratory drink—before I had a chance to congratulate him, as it was my turn to speak. I remember that, on the day of the election, I was knocking on doors for the Labour party, as he would expect. We were delivering leaflets that said that it was a two-horse race. Sadly, Labour was not one of the two horses, but I was slightly comforted by the fact that the Conservative party was not one of them either.
Tax fairness is the subject of this debate, and I very much welcome the moves that our leadership is making in that direction. The decisions on the mansion tax and the 10p rate are important. They might be straws in the wind, but the wind is blowing in the right direction. The mansion tax is perhaps something of a slogan—an eye-catching, or thought-catching, idea—but I believe that property taxes are appropriate in a civilised society. Property has the advantage that it does not move, so we can always find it. As long as we can also find the owner, we can collect the taxes.
Property taxes, as with all taxes, have to be carefully designed. As the hon. Member for Broxbourne (Mr Walker) said, we have to be careful to ensure that such taxes are equitable. If there is inequity between regions, that should be looked at. The taxes have to be carefully designed to ensure that equity. Personally, I would like to go further and talk about a wealth tax. My party used to talk about that some years ago, and I would like to see a more general tax on wealth in order to do something about the grotesque inequalities in our society. Those inequalities have grown enormously during the time I have been active in politics. Had I been told when I was first active in my party in the late ’50s and early ’60s that we would be in this position now, I would not have believed it. We have moved in this direction, however, and it has been a retrograde step.
No doubt some hon. Members will have read a book entitled “The Spirit Level”, which identifies a strong correlation between income inequality and a whole range of social ills. I want to see a society that is much more equal in income terms, in order to reduce those social ills and because it is right in principle. It is interesting to note that that correlation applies in all societies, whatever the income levels. It does not just apply in rich societies or poor ones. In any society, income inequality correlates with greater social ills. I hope that when my party gets into office at the next election—that is when, not if—we will seriously address that question and try to make Britain a much more equal society again.
Tax has to be progressive. We have to tax the better-off, and we should tax the less well-off either very little or not at all. I have to say that I was disappointed in the previous Government. I was one of a small number of Labour Members—I think there were six of us—who voted against the abolition of the 10p rate, and I am delighted that our leadership has now chosen to reverse that decision and to put us back onside when it comes to looking after the less well-off. That decision is very welcome indeed.
Income tax is the most progressive form of tax. It is adjustable and, in the case of most people, it is collectable. Most of us are on PAYE, so there is no problem with collection. There is a problem, however, with collecting taxes from those who try to evade or avoid paying what is rightly due from them. We have heard from the tax justice movement, and from Richard Murphy in particular, an assessment that the tax gap is something like £120 billion. Some suggest that it could be even more than that. Even the Government accept that the figure is in the tens of billions. Small advances have been made in collecting that tax, but if were really to make inroads in that area, we would not need to look at changes in the tax rate because there would be so much more income to enable us to solve our problems.
Sheila Gilmore
We have heard a lot of the language around dealing with tax avoidance and with high-income earners. Does my hon. Friend not find it disappointing that, at almost the first opportunity to take action, the Chancellor went to Europe to argue against a cap on bonuses?
Kelvin Hopkins
Yes, that was absolutely regrettable. I know that my party will commit to introducing a cap on bonuses in our first few days in power after the next election.
Mr Stewart Jackson
The hon. Gentleman always makes a powerful point. Having served on the Public Accounts Committee and on the ongoing inquiries into tax avoidance, I concur with him. I am a defender not of crony capitalism but of popular capitalism. He might not agree with me on that, being slightly on the left. In order to tackle corporate tax avoidance, we need to look at multilateral, bilateral, international and domestic legislation, but would he acknowledge that the previous Government flunked every opportunity to look at those issues over 13 years?
Kelvin Hopkins
We have seen successive Governments going in for what is called light-touch regulation on all fronts. I have never believed in light-touch regulation; I believe in tough regulation. I believe in employing thousands more tax officers to ensure that we collect the taxes. At the beginning of my time in Parliament, I visited our local VAT office, and the inspectors there told me that if they had more tax inspectors, they could collect billions more in tax. Each of those VAT inspectors collected more than five times their salary. I wrote about this to the Chancellor of the Exchequer at the time, and got a letter back from a civil servant saying that the Treasury was trying to reduce costs by reducing staffing levels. That was a completely illogical non sequitur; it was complete nonsense. Reducing the number of tax officers will reduce income by more than the amount of their salaries.
I have made the point many times—and I shall continue to make it—that we need more tax officers and more rigorous regulation. We need more control over what the corporates and the fat cats get away with. The reality is that ordinary working-class people have to pay tax through PAYE. They cannot escape paying their tax, but the corporates and the fat cats can. So, I have agreed with the hon. Member for Peterborough (Mr Jackson) on one or two issues, and I am pleased about that, although we have different philosophical views when it comes to economics.
I want to talk about the deficit problem, because that is what taxation is about. I do not think that we actually have a deficit problem. We do not even have a spending problem. We have a revenue collection problem. That can be addressed either by collecting tax in the way that we do now, or by changing tax rates, as proposed in today’s motion.
Tax collection is a serious problem, and we could make serious changes there, but I want to look back to a time when taxes were more progressive. During the previous Parliament, I made suggestions in this Chamber about the kind of tax changes that I wanted to see. I went beyond what our leadership is now suggesting, although I welcome its proposals. I think we should go further, however. In the 1970s, Denis Healey was Chancellor of the Exchequer. He said that he wanted to
“tax the rich until the pips squeak”.
I cheered him for that, and we did not lose any votes because of his statement. In fact, a lot ordinary working-class people said, “Quite right too! We want those who can afford to pay more to do so. Those who can only afford to pay less should pay less.”
Mel Stride
Was Denis Healey the same Chancellor who had to go cap in hand to the International Monetary Fund in the 1970s because this country was bankrupt?
Kelvin Hopkins
He did indeed go to the IMF, but I think it has now been recognised that that was unnecessary. We did not need to kowtow to the IMF or to impose those strictures. In fact, remarkably, the economy survived quite well during that time, although a mistake was made at the end. I shall not go into that now, Mr Deputy Speaker, because you would call me to order if I did, but it was the reason why things went wrong in 1979. Nevertheless, we survived the 1970s, although the oil price rose by five times in a very short period, which affected the whole world including Britain.
At that time, I was working for the Trades Union Congress and then in the trade union movement. I was an economist, and was lobbying the Government. I was at the TUC General Council when the £6 pay policy was agreed to. That was an historic moment. I thought it amazing that the trade unions had agreed to a cap on pay increases for everyone, but the reason they agreed to it was that it was fair. Everyone would receive a £6 pay rise. For someone with a low income that was a big rise, while for someone with a high income it was not very much, but it was fair, and was seen to be fair across the board.
Other Members are too young to remember this, but in those days the top rate of tax was 83p in the pound, and there was also a 15% surcharge on unearned income. Some of those whose income was entirely unearned, perhaps in property, were paying a 98% rate on the top part of their income. I thought that was pretty fair, but of course we cannot go back to those days.
Sheila Gilmore
My hon. Friend has been revisiting the 1970s. A remarkable statistic is that in 1979, the inequality gap in this country was at its narrowest since the second world war. Perhaps, if we think that reducing inequality is a good thing, something was right at that time.
Kelvin Hopkins
Absolutely. I remember writing papers about the massive increase in inequality that occurred subsequently, during the 1980s, when there were big tax cuts for the rich along with rapidly rising unemployment. That resulted in the inequality for which we have not really been compensated since.
Mark Reckless
The hon. Gentleman has spoken of persuading Labour Front Benchers to adopt his policy on the 10p tax rate. Does he have similar hopes in respect of the 98% rate?
Kelvin Hopkins
No, no. I live in the real world, and I suspect that even my hon. Friends on the Front Bench will not start considering 98% marginal tax rates.
George Bernard Shaw, a witty man but a socialist, who was paying 98%, said, “I consider myself to be a tax collector for the Government, in return for which I receive a 2% premium.” I thought that that was one way of putting it. Shaw was, as I said, a socialist, who no doubt accepted that wealthy people such as himself should pay substantially more than the poor.
I realise that we will not return to that rate, but I will say that during a Budget debate in the last Parliament, on a cold Thursday afternoon when it was raining and there were about six people in the Chamber, I suggested that we could consider a 50% rate for those on £60,000 a year—this was then!—a 60% rate for those on £100,000, and a 70% rate for those on £200,000. That would have taken us nowhere near where we had been in the 1970s, but it would have been a substantial change from where we were then.
I did not get much of a reaction in the Chamber, but the Deputy Speaker spoke to me privately afterwards. I am giving away no secrets, because she is no longer a Member of Parliament. She said, “I do so agree with you. Why do the Government not just do as you say?” Well, if only; but I had said what I thought, and I thought that would be a reasonable move. I suggested the 50% rate for those on £60,000 because at least it would mean Members of Parliament paying a tiny bit extra on the top part of their income. I thought that was right then, and I still think it is right.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I fear that the hon. Gentleman has run out of time. Much as I was enjoying his speech, I must now call Catherine McKinnell.
Financial Services (Banking Reform) Bill
Kelvin Hopkins Excerpts(11 years, 3 months ago)
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Greg Clark
I should have thought that the hon. Gentleman would reflect on the fact that the Chancellor has many serious responsibilities and he is discharging them at the moment.
Let me talk about the process that we have followed, then I will address in some detail the particular aspects of content. The process that we have followed has sought to come up with the best possible way to address the dilemma that I described, and to do so by building, as far as possible, a broad consensus. That may not be there—yet—on every particular, but I think most Members would concede that Sir John Vickers’ commission has come closer to achieving that than many people thought possible.
The Independent Commission on Banking was established as soon as possible after the general election, in June 2010. It took extensive evidence before publishing an issues paper in September 2010 and an interim report in April 2011, on which it consulted, before publishing its final report in September 2011. The Government gave, and consulted on, an initial response in December 2011, before issuing a White Paper for consultation in June 2012. In the light of the responses to the consultation, a draft Bill was published last October and the Parliamentary Commission on Banking Standards was asked to subject it to pre-legislative scrutiny. The parliamentary commission’s report was published on 21 December last year and many of its recommendations were accepted in the Bill published in February and laid before the House.
At the time of introduction, I made it clear from the Dispatch Box that we would table further amendments in response to the commission’s future recommendations as the Bill proceeds through both Houses. I hope that Members on all sides would agree that this has been an exceptionally extensive process of both policy development and scrutiny of emerging proposals, and I repeat what I said to the right hon. Member for Wolverhampton South East (Mr McFadden) last month, that I will personally insist on taking a constructive and open-minded approach to the views of this House throughout the Bill’s passage. To the extent that the Bill reflects the unanimous views of Parliament, it is immeasurably strengthened.
Kelvin Hopkins (Luton North) (Lab)
Does the Minister accept that one of the major factors in the 2008 crisis was the complete failure of the auditing sector to get a grip on what banks were doing? Will he be putting forward proposals for strengthening audit for the future?
Greg Clark
That was not a set of particular recommendations in the reports that were commissioned, but I know that it is of some interest to members of the parliamentary commission and, as I will go on to say, we stand ready to consider their further recommendations, and I dare say they might have something to say in that respect.
Mr McFadden
The hon. Gentleman neglects to mention RBS, a universal bank, which needed major intervention to bail it out.
The Minister has said that he does not want wider separation because the Bank of England does not want it. It is true that the Bank of England has expressed some reservations about the power if it were to be wielded by the regulator. I took the opportunity to ask the Governor about it last week when he appeared before the commission. He replied that
“a provision so important that it affects the entire sector is one that both de facto and de jure will and should be taken by Parliament.”
When I explained to him that it had never been the commission’s recommendation that this be a policy decision taken purely by the regulator, and that all along we had been clear that it was a decision for Government, he said:
“As long as the decision is taken by Government, we would have no objection to that.”
I hope that we will no longer hear Ministers saying that they are rejecting this power because the Bank of England is opposed to it. This should of course be a decision taken by Government. As for the Chancellor’s point that it would be “undemocratic”, what is undemocratic about holding a proper review into legislation passed by this House as the Banking Commission suggests, or about taking a reserve power the exercise of which would involve the parliamentary process of debate and approval? The truth is that it would not be undemocratic at all.
Mr McFadden
I am afraid that I want to make some more progress.
This is not, as the Minister argued, about introducing two policies at once; it is about introducing a policy and making sure that it is adhered to. As the hon. Member for Wyre Forest (Mark Garnier) said in this House a few weeks ago, the banks have nothing to fear if they adhere to the spirit and letter of the Bill. It need not introduce uncertainty, as some have argued; in fact, it ought to provide certainty that we are serious about the ring fence.
On capital and leverage, it is absolutely true that in the run-up to the crisis banks were over-leveraged, and that is because they held too little capital against the risks that they had. The Vickers commission was very clear about that. It recommended a future leverage ratio of 25:1, which is still quite high in historical terms, while the Government are recommending 33:1 because that is the internationally accepted Basel outcome. Without going into any more detail, I just say to the Minister that this goes back to the one-way trade to which I referred. It is a really important question running through all these reforms. If, every time we rub up against an issue, we say that we cannot damage the industry because it is so big here in the UK and we therefore have to stick to the lowest common denominator of international reforms, we will not be doing our duty to the UK economy or to UK taxpayers. If we have learned anything from the crisis of 2007 and 2008, it ought to be that there is a case for taking particular measures here in the UK precisely because of the size of the sector in relation to our wider economy. That is the basis on which we should judge the correct degree of leverage for the banks that operate in the UK.
Then there is the question of resolution and bail-in: in other words, what happens when a bank fails, and who is on the hook for that failure? In 2008, it was the taxpayers, not the bondholders, because a resolution mechanism was not in place in law that could allow for normal insolvency procedures were those to whom the banks owed money to take the risk. A very important part of the reforms is to change that situation. Bail-in is signed up to by the Government, but, like my hon. Friend the Member for Nottingham East (Chris Leslie), I am very curious as to why the Government are pursuing this through the European resolution and recovery directive. I would have thought, particularly after last week, that the Government might be somewhat nervous about pursuing a major financial services reform through a European directive. I return again to the one-way trade argument. Surely, because of the importance of this industry here in the UK, we should legislate to make sure that bondholders take a future risk and not UK taxpayers, and we should not leave it to the very uncertain process of a European directive negotiation. That might work out fine; there might be spontaneous agreement among the 27 member states. However, I am sure that the Minister agrees that that there is a very real possibility—this is not uncommon—that that would not be the case. I ask him to think again on the bail-in regime and to ensure that a proper UK decision is taken rather than leaving it all to a European directive. I would have thought that Government Members would support such a suggestion.
In conclusion, I want to reiterate the point about time. The parliamentary commission, which was set up by the Chancellor, has spent six months taking in—the chairman, the hon. Member for Chichester has done more totting up than me—60-odd oral evidence sessions and much written evidence. It is simply not good enough for the Minister to say that he will take the Bill out of Committee by the end of April, before we issue our final report. The Opposition supported the establishment of the parliamentary commission after the House had voted on the issue. We expect its recommendations to be properly considered by the Government, not swept out of the way by the timetable. I hope that the Minister will think again, because the structural issues under discussion are not the only issues. Important changes still need to be made to banking culture, standards and corporate governance, so that this very important industry contributes positively to the UK and does not put the economy and taxpayers at risk.
Frank Dobson
Yes, but if we are to get the changes we need, we also need to change the culture in both sectors.
The banks have never competed with one another, or at least not in trying to get customers. Rather, they have tended to compete by copying one another. When one bank comes up with a wheeze that swindles money, the bosses of the other banks say, “Why are they getting all this money in through this swindle? Can’t we do the swindle as well?” That is presumably how PPI started off at one bank and then went to all the others. Interest rate swap agreements certainly started at one bank and were then taken up by the others, because people in those banks felt they had to compete with the other swindlers down the road.
These people—this collection of money launderers, gun runners, drug money launderers, people who swindle small businesses and people who lose billions in their normal day-to-day business—are still paying themselves huge amounts of money. I know that the Prime Minister has a difficulty with facts, but I did not realise that he had a problem with adjectives, because when the Royal Bank of Scotland announced that it was paying £600 million in bonuses this year, he commended it—this bank of losers —for its restraint. That is not my definition of restraint. “Excess” is probably a better word in the circumstances. Restraint involves cutting the benefits of poor people and the pensions of the police, the nurses and the teachers. Restraint involves capping the pay of public employees. They have certainly been losing out. In 2009, I said that the two banks that were being semi-nationalised should have the normal public sector pay policies applied to them, and I think most people in this country would agree with that.
Kelvin Hopkins
I am greatly enjoying my right hon. Friend’s speech, and I agree with every word of it. Does he not find it interesting that Lord Lawson has recently suggested that the Royal Bank of Scotland should be brought completely into public ownership? That would involve only a small amount of money, and we would then have a bank that was publicly accountable and responsible.
Frank Dobson
I entirely agree with that. I also agree with my hon. Friend the Member for Bassetlaw that it would be good to see the Halifax building society separated out from Lloyds HBOS, so that what was the country’s leading firm could be relocated and its decisions could once again be made in Halifax, rather than in the City of London.
Let us remember that while the people who are nursing the sick and carrying out operations in hospitals, the people who are teaching our children, the people who are policing our streets and the people who are risking their lives to fight fires are being restricted, HSBC is paying 204 people more than £1 million a year, Barclays is paying 428 people more than £1 million a year and RBS is paying 95 people more than £1 million a year. They are being paid those sums to play with other people’s money. That is all they are doing; if they lose but cannot go broke, they are clearly not playing with their own money. But not everyone at Barclays is getting £1 million a year; 100,000 people working for that bank are paid at a level that entitles them to child tax credit. What is more, it is people such as them all around the country who have been losing their jobs while that collection of losers at the top carry on.
Then we have the Prime Minister and the Chancellor, whose top priority in Europe is to prevent those horrible Europeans from imposing a limit on bankers’ bonuses. We used to be told that if we imposed such limits, the bankers would go elsewhere. We were told that they would go to Switzerland. Well, they will not be doing that since the referendum in that country, because they would now be worse off there than they would be here. Would they perhaps go to the United States? Some of them would have to think very carefully about that, because money launderers can be locked up over there, and that has indeed happened, even to Brits.
What all this boils down to is that the banking industry does not need mild tinkering; it needs a total worldwide transformation. Instead of acting as the back marker in the convoy, we ought to be out there banging a drum and getting a grip on the world banking industry, for the benefit of ordinary people in virtually every part of the world.
Kelvin Hopkins (Luton North) (Lab)
That was a fascinating speech by my good friend the hon. Member for Wycombe (Steve Baker). I cannot compete with his erudition; I have a much smaller speech on a smaller issue.
In 1983, I stood for Parliament on a manifesto that called for the public ownership of large sections of the banking system. It is an irony that large sections of it are now in public ownership, having been put there by people who profoundly disagree with and disbelieve in that process, but who were forced to do so or to let the system collapse. That is interesting. I certainly wish to see public ownership go further, as well as public regulation and accountability, as the risk in banking is being underwritten not by the borrowers but by the Government, by the state and by the citizen, and if risk is not and cannot be transferred, the ownership and accountability should be in public hands as well.
During the Minister’s opening speech, I mentioned audit and the appalling failures of the audit industry during the banking crisis. The hon. Member for Chichester (Mr Tyrie) said that more needs to be done, and much more certainly needs to be done. I hope that some component of the Bill, when it is amended, might deal with audit.
There is a need for radical reform of the rules governing audit. The Financial Reporting Council is undertaking a consultation on the new rules that will compel auditors to write what is called a commentary, flagging problems, risks or disagreements with management at audited companies and institutions in clear and comprehensible language so that shareholders can understand. That will be seen as controversial by company management, but will be welcomed by shareholders and, by the same token, by bank depositors and customers.
We should of course remind ourselves that auditors, above all, represent shareholders—or at least they should. In reality, however, they are taken on by managers so power is effectively in the hands of managers and shareholders, or bank depositors, and customers simply have to trust them. When an audit contract comes to an end, auditors are unlikely to be critical of managers for fear of failing to be re-engaged. The inevitable cosy relationship between auditors and managers lies at the heart of what has gone wrong in the banking sector.
If auditors had been doing their job properly and their audit reports had not been so opaque and impenetrable, the financial crisis would not have happened as it did. The fact that banks were gambling with worthless bits of paper based on sub-prime mortgages was the fundamental cause of the banking crisis, and it is not over yet. Auditors did not do their job in relation to the practice of bankers such as those at Northern Rock before and until it collapsed. If they had, we might have prevented that catastrophe.
Frank Dobson
Does my hon. Friend agree that it is a trifle irksome to listen to the radio or watch television and to hear someone from PricewaterhouseCoopers telling us what we ought to do for the future when PricewaterhouseCoopers audited Northern Rock and did not spot anything going wrong, or to hear about the famous Ernst and Young ITEM Club when the biggest item in the firm’s history is that it did not spot that Lehman Brothers were broke?
Kelvin Hopkins
I thank my right hon. Friend for that intervention, and I am just about to mention those great companies.
As if to reinforce the case for radical reform, on 22 February the Competition Commission published a report that was deeply critical of PricewaterhouseCoopers, Ernst and Young, Deloitte and KPMG—the big four—for a deep “misalignment” with shareholder interests. The commission made it clear that auditors and company executives had acted as a cabal to their mutual benefit and to the exclusion of the interests of investors. Under the definition of investors, we can include depositors and retail customers in the banking sector.
The commission concluded that the relationship between auditors and management has been too cosy and must be overhauled. The big four audit nearly 90% of all blue chip companies. One suggested remedy has been for the mandatory rotation of tendering so that after, for example, five years or so an audit company would have to relocate to other companies and could not be re-engaged. The companies engaging auditors would then be required to ask new auditors to compete for business. That would go some way towards breaking the unhealthy link between auditors and the companies they are supposed to be auditing.
Whatever new rules might be introduced, it is vital that auditors are compelled to ensure that their loyalties are to shareholders, depositors and customers and not to banking and company managers. Auditors failed to raise the alarm before the financial crisis and that must never happen again.
John McDonnell
I most probably will not even take 10 minutes.
I am very pleased that the plane of the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) did come in, because he always makes complex issues simple and entertaining. There is a consensus in the House around regulation as the approach to take towards resolving the banking crisis and ensuring that, if we do not prevent a future crisis, we at least stave it off for, as the hon. Gentleman suggested, possibly another 70 years. The degree of positioning is around Glass-Steagall-type full separation, a ring fence, and then, as he said, the novelty of an electrified ring fence. There must be different power levels of electricity on this ring fence, as well.
I stand outside that debate, because I do not think that regulation will work. I was the first Member to raise the issue of Northern Rock in this House. At that time, I completely underestimated what Northern Rock was up to. I thought that it was all about an offshore tax scam that was part of its link with the organisation that it called Granite; I had no idea of the scale of the problem that would be unravelled. I can remember the then Chief Secretary to the Treasury, I think, leaving the Chamber after I had talked about Northern Rock, to obtain a briefing about what I was talking about. I realised that what I was talking about was a crisis that was being created in the City by greed, primarily, and by speculation and casino banking. I remember being at the Labour party conference in the 1980s, around the time of big bang, and organising the launch of a book called “Big bang: the launch of a casino economy”, authored by the then Member for Hackney and my hon. Friend the Member for Bolsover (Mr Skinner), which predicted some of the outrageous potential that there was for speculation as a result of big bang.
When I raised Northern Rock, I completely underestimated the levels of casino banking and the corruption that was taking place. In the previous debate a few weeks ago, I described the City as a “cesspool of corruption”, which it was. However, what was also revealed was the absolute incompetence. It was like “The Wizard of Oz”—when the curtain was pulled back, there was not a wizard but someone scrambling with various levers. We discovered then that the hierarchy of British banking did not even understand the instruments with which they were working because they were so complex. Then it all started to unravel, and we discovered scales of greed, incompetence and corruption that none of us expected.
At that time, we were assured that the regulatory system was not at fault, but we soon discovered how inoperable it was. The result, as we all know, is that the then Government intervened to borrow and they used taxpayers’ money to bail out the system. At its peak, taxpayers’ exposure to the bank collapse was on the scale of £1.2 trillion. I understand that so far we have retrieved only £14 billion of that taxpayers’ money. The second wave was the austerity programme introduced to pay for the Government intervention to save the banking system. Mervyn King estimated the cost of that to be £1 trillion. Anthony Haldane, who is probably more accurate in his assessment, estimates that we have lost the equivalent of between one and five years’ GDP. Those absolutely staggering sums are the result of a crisis brought about by incompetence and greed. The majority of people are 7% poorer than in 2007, and their living standards have fallen, according to the latest estimate, by 13.2% since 2008. The median household income in 2015-16 will be the equivalent of that in 2002-03. These are the implications of what this wealth of greed brought about: mass unemployment, welfare benefit cuts, food banks, and parents missing meals so that children can eat. It is absolutely staggering.
I find it extremely difficult to come to terms with an issue that was raised by my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson). Since the crisis occurred—since I first stood up in this House and mentioned Northern Rock—and we went on to the nationalisation of banks, and then to quantitative easing on a scale that we had never seen before or could even comprehend, the scandalous practices have not gone away: they have continued. As my right hon. Friend said, the bonuses have continued, fraud has continued, LIBOR interest rate fixing has been investigated, and we have seen tax evasion and money laundering. This is happening even when the bankers are in full public sight. At a time when the eyes of the country are on them, they are still manipulating the system.
I find it astounding—I have raised this in the House three times, and 10 days ago I received a letter from the Minister about it—that when quantitative easing was introduced, we discovered through press reports that bankers even then sought to profiteer from it. The letter from the Minister confirmed that at one point the Bank of England had to intervene and withdraw from the market because there were suspicions of price fixing and manipulation of the market during quantitative easing.
Kelvin Hopkins
I am very interested in and admire what my hon. Friend is saying. There is a suggestion that the recent surge in share prices is simply the effect of quantitative easing and that it bears no relation to what is happening in the real economy.
John McDonnell
Exactly. I accept that point, but the relatively simple point that I am trying to make is that a group of people who have, in effect, been caught with their hands in the till are trying to use the money that has been used to bail them out to profiteer at the taxpayers’ expense. That is staggering and it says to me that regulation will not work with these institutions. Even when they are absolutely shamed, subject to public opprobrium and under the acute gaze of the public eye, they still try to profiteer.
Infrastructure
Kelvin Hopkins Excerpts(11 years, 4 months ago)
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Rachel Reeves
Close to 1 million young people are out of work, and one third of them are now long-term unemployed—a waste of their potential and a waste to our economy, as we are losing out on their skills. We so desperately need that economic recovery.
There is still no sign of the Government sharing the country’s sense of urgency. Only 14% of the 576 projects listed in the Government’s infrastructure pipeline have started and just 1% of those are said to be operational. The Government’s record on infrastructure is a complete and utter shambles. Wherever we look, the strategy is failing to deliver—a perfect storm of uncertainty, incompetence and delay.
Kelvin Hopkins (Luton North) (Lab)
My hon. Friend is making an excellent speech. She is talking about projects. One project that might be considered seriously is the GB freight route—the building of a dedicated rail freight line from the channel tunnel to Glasgow, linking all the industrial areas of Britain and able to take lorries on trains. Will she give that serious consideration?
Oral Answers to Questions
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Danny Alexander
As my hon. Friend will know, when we took office we found a situation in which sixth-form colleges were considerably less well funded for that group of pupils than schools. We are taking steps, year by year, to equalise the funding arrangements, and we will look again at that in the spending round in the first half of this year.
Kelvin Hopkins (Luton North) (Lab)
As a governor of Luton sixth-form college for 20 years and a former teacher of A-levels, I am convinced that sixth-form colleges are the most successful institutions in our education system. Is it not time for the Government to stop punishing them for their success?
Danny Alexander
I dare say that the hon. Gentleman’s comments on sixth-form colleges will be echoed by many Members of the House. That is why, as I said in answer to the earlier question, the Government are taking steps year by year to equalise the funding arrangements. I am sure he will welcome that.
Public Service Pensions Bill
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Sajid Javid
We discussed that earlier. Transfers from local government are currently covered by an equivalent policy to fair deal. The Government are considering how most appropriately to apply the principles of the new fair deal policy to the LGPS, but our commitment on fair access to transferred staff stands and applies, including to members of the LGPS.
People are now expected to live significantly longer than the generation that went before them—an average of 10 years more than someone retiring in the 1970s. The increasing numbers of people with public service pensions and improvements in longevity have led to significant increases in the number of pensions that are being paid. Consequently, the cost of paying pensions has increased to £32 billion per year—an increase of a third in the past decade.
Kelvin Hopkins (Luton North) (Lab)
Other, similar European countries have a younger retirement age and more generous pensions. Why are we so different?
Sajid Javid
The hon. Gentleman perhaps has Greece in mind. Many countries that fit his description are suffering significant problems. To take another example, retirement ages in Germany, which is one of the largest countries in Europe, are in many cases higher than those in Britain.
The employer, and therefore the taxpayer, has borne nearly all the additional cost, which has led to an imbalance in the sharing of costs between members and other taxpayers. The imbalance will be corrected only by the reforms we have introduced.
Bank of England
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Mr Osborne
The very short answer is yes. Paul Tucker has been an excellent deputy governor, and I hope he continues to do his excellent job at the Bank of England.
Kelvin Hopkins (Luton North) (Lab)
Mervyn King’s predecessor Eddie George said that the single currency should be kicked into the long grass and left there. Will the new Governor continue to support the independence of Britain’s currency?
Mr Osborne
I will not speak for the new Governor, but I am sure he could be asked that question. I am pretty clear that he would support the pound, because he has seen at first hand through the Financial Stability Board some of the problems that have arisen in the euro. I reassure the hon. Gentleman that any decision to ditch the pound would be one for the Government of the day and the House of Commons, and while this Government are in office we will keep the pound.
Banking Union and Economic and Monetary Union
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Kelvin Hopkins (Luton North) (Lab)
I wish to speak briefly in support of the amendment, which I have signed, and to applaud everything the hon. Member for Stone (Mr Cash) said, apart from his comments about the Labour party. I believe strongly that banking regulation should be determined by national Governments and Parliaments and that, if there are to be international agreements, they should be bilateral or multilateral agreements between Governments and not determined by the European Union.
I am certain that my views on banking regulation are very different from those of Government Members, but I agree that we should determine what it is, not the European Union. The most damaging change for Britain was when Mrs Thatcher abandoned exchange controls in 1979, which was the most serious act taken by the Conservative Government in those years. Since then, we have seen all the crises arising from globalisation. We cannot put the genie back in the bottle, although I think that in time we might have to try, but it would take another massive crisis before that happens.
With regard to the euro, I have always been wholly opposed to economic and monetary union and wrote my first paper about it in 1979, when I opposed the European monetary system. I wrote another paper about the exchange rate mechanism and predicted its crash, and I opposed Maastricht. I have written and spoken thousands of words on these matters over many years, and I am afraid that I have been proved right. The crisis now affecting us is quite appalling. In Greece there is now a fascist party infiltrating the police and threatening to undermine democracy while the Greek economy disappears into a black hole, and that is the result of a mad economic policy and strategy. Countries should have their own currencies and should be able to determine their own parities relative to other countries.
The Government ought to go into the negotiating room at any time feeling strong, because the European Union needs Britain much more than we need it. We buy vastly more from the EU than it buys from us. With Germany and France now predicted to be going into recession, they will need our trade even more. Our exports, compared with our imports, are tiny. The German economy is heavily dependent on massive exports to Britain, so we can negotiate from a position of strength and say, “If you make life very difficult for Britain, we could make life very difficult for you as well.” We do not want to do that; we want to be comradely and internationalist. But let us not think of ourselves as a weak country, because we are very strong.